Five Prime Therapeutics Inc
Q3 2014 Earnings Call Transcript

Published: 11 Nov 2014

[Operator:]

Good day, ladies and gentlemen. And welcome to the Five Prime Therapeutics, Inc. 2014 Q3 Quarterly Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions). As a reminder, this conference is being recorded. I would like to introduce host for today’s conference Mr. Aron Knickerbocker, Chief Business Officer. Sir, you may begin.

[Aron Knickerbocker:]

Good afternoon and thank you for joining us. On behalf of Five Prime Therapeutics, I’d like to welcome everyone to our conference call to discuss financial and operational results for the third quarter of 2014. Joining me today are Dr. Rusty Williams, Chief Executive Officer; Dr. Julie Hambleton, Chief Medical Officer; and Mr. Marc Belsky, Chief Financial Officer. During today’s call Rusty will begin with introductory remarks on our progress during third quarter. Julie will then give you an update on our clinical programs. I will provide an update on our research collaborations and then Marc will discuss our financial results. Finally we will conclude the call with a Q&A session. Today’s conference call will include forward-looking statements under the Private Securities Litigation Reform Act of 1995, including statements regarding our research and development programs and financial outlook. Actual results may differ from those indicated by these forward-looking statements due to numerous factors including those discussed in the Risk Factors section of our SEC filings. Our expectations and assumptions could change. While we may elect to update these forward-looking statements in the future, we specifically disclaim any obligation to do so, even if our views change. And with that, I’ll now turn the call over to Rusty.

[Dr. Rusty Williams:]

Thanks, Aron. Good afternoon, everyone and thanks for joining us. 2014 continues to be pretty remarkable year for Five Prime. We’ve made tremendous headway in development of our product candidates, Julie Hambleton will give you details around each of our programs shortly. But I’d like to share some highlights with you before that. I am excited to report that our IND just cleared for our third clinical product, FPA144. This is our anti- FGF receptor 2b antibody. As you remember, we’ve engineered this for enhanced ADCC and we’re in good shape to begin enrolling patients in a Phase 1 trial by the end of the year. Gastric cancer is the fourth most common form of cancer globally in the more than a million patients worldwide, it’s the number two cause of cancer death. An estimated 15% of gastric cancer patients overexpress FGF receptor 2b. This is a specific [supply theory] anti-FGF receptor 2, which is targeted by FPA144 selectively. These patients have been shown to have a substantially reduce survival compared to other gastric cancer patients and so having a highly targeted therapy could have a major impact for this population. We’ve also made significant progress with the development of FPA008, our anti-CSF1 receptor antibody. We’ve just finished the healthy volunteer part of the Phase 1 trial and now are beginning the next part of this trial, in which we’ll soon dose patients with rheumatoid arthritis. Throughout 2014, we’ve been saying that we’ll announce an second clinical indication and by the end of this year. And at this call, we’re disclosing that we’ll pursue clinical development of FPA008 in one or more solid tumors. For many of you this comes as no surprise, because significance of this pathway in tumors has been further validated in scientific and clinical literature throughout the year and especially increasingly in the last few months. Regarding FP-1039, that’s our FGF ligand trap. Our partner GSK continues to enroll squamous non-small cell lung cancer and mesothelioma in the three arms of the Phase 1b clinical trial of FP-1039. We’re close to completing dose escalation and selecting a dose expansion in two arms of the trial, Julie will tell you more about that in few minutes. I’m quite proud of the advancements we’ve made throughout the course of the year. I’m pleased that we now have three product candidates in clinical trials. With respect to our early phase research programs, we continue to make good progress in our internal discovery efforts on new detailed checkpoint targets for cancer. We presented a poster two days ago on our internal cancer immunotherapy program at the annual meeting of the Society for Immunotherapy of Cancer in National Harbor, Maryland. Now, I’d like to turn the call over to Julie who’ll give you a more in-depth update on clinical programs.

[Dr. Julie Hambleton:]

Thank you Rusty and good afternoon everyone. Starting with FPA144. As Rusty just said, we recently cleared our IND and initiated a Phase 1 study. We anticipate enrollment will begin before the end of the year. This trial will first enroll unselected patients with solid tumors to more rapidly identify the dose for expansion. We will then enroll gastric cancer patients whose tumors have evidenced of FGF receptor 2b over expression using our proprietary [ICSA]. We are really excited about this targeted program. Based on our preclinical work to-date, the antibody is very potent. We’ve seen two more regressions with single agent FPA144 in multiple models as FGFR2 gene amplified gastric cancer. As a result, our critical plan is to evaluate FPA144 initially as a monotherapy in gastric cancer, which may enable an accelerated development path. Now turning to FPA008. Earlier this year, we completed testing multiple ascending doses in Parts 1 and 2 of our Phase 1 study in healthy volunteers. And we’ll report pharmacokinetic, safety and biomarker data at the American College of Rheumatology Meeting in Boston next week. These healthy volunteer data are very important to us as they guide us in selecting doses for patients. We have also initiated Part 3 of the trial and we anticipate dosing will soon begin in moderate to severe RA patients who are on the methotrexate. Part 3 begins with open-label dose escalation before advancing into a small randomized, double-blind, placebo-controlled portion. While the primary endpoint of Part 3 is safety, key secondary endpoints include clinical signs and symptoms such as ACS quote as well as magnetic resonance imaging. Because FPA008 is an antibody that blocks the proliferation of monocytes in macrophages as well as the generation of cytokines, we’ve also been looking at tumors in which macrophages play a pivotal role. At AASCO this year, as well as at last week’s meeting, there was a lot of excitement around targeting this pathway as a potential treatment of a variety of solid tumors either as a single agent or in combination with other therapies. As Rusty mentioned, we plan to begin clinical development in one and more solid tumors in 2015. For competitive reasons, we aren’t disclosing details today but will update you more fully at a later time. As a reminder, we have all development and commercial rights to both FPA144 and FPA008. Now turning to our partner’s product FP-1039, GSK continuous to enroll patients in all three arms of the Phase 1b trial. This is a three arm trial in two different setting of lung cancer. Arms A and B are enrolling patients with newly diagnosed or recurrent squamous non-small cell lung cancer whose tumors have amplification of the FGF receptor 1 gene. Arm C of the trial is enrolling patients with newly diagnosed mesothelioma and two more associate with exceptionally high levels of the FGF2 ligand. At AACR earlier this year, we and GSK presented preclinical efficacy data that support development in this indication. While Arm C was added to the trial more recently, there is tremendous interest in the potential therapeutic for mesothelioma, (inaudible) are very excited about this program. For example, Dr. Hedy Kindler, Professor of Medicine and Director of Mesothelioma Program at the University of Chicago presented the Phase 1b design and rationale at the International Mesothelioma Interest Group meeting in Cape Town last month. Two of the three arms in this trial are nearing completion of the dose escalation phase, which will allow us to choose a dose expansion that is tolerable in combination of standard chemotherapy. In the expansion portion GSK will measure overall response and response duration at the target dose level. We hope to update you further around the JPMorgan conference in January and we and GSK plan to present data from this trial at a scientific meeting in 2015. At this point, I’d like to turn the call over to Aron to discuss our research collaborations.

[Aron Knickerbocker:]

Thanks, Julie. As you know, Five Prime has a track record of establishing and expanding important collaborations with the world class pharmaceutical companies. And earlier this year, we announced our new immune oncology discover collaboration with Bristol-Myers Squibb and we have sustained that momentum over the past few months. Turning to GSK, in the third quarter, GSK exercised adoption its option under our multiple disease collaboration to license an undisclosed targets that we’ve identified using our proprietary target discovery platform. In an exchange for an exclusive worldwide license, Five Prime received a payment of $1.5 million in connection with the option exercise and is entitled to receive up to $122.5 million in milestone payments, as well as low to mid single-digit royalties on net sales. Additionally, GSK expanded our respiratory disease collaboration from its original scope to include two new respiratory disease discovery programs. Five Prime will receive a total of $2 million in funding and would be eligible to receive up to $193.8 million per target in potential option exercise fees and milestone payments, as well as tiered royalties on global net sales. GSK is a leader in these areas of disease search and we’re pleased that our platform continues to demonstrate its ability to identify novel bouncing targets across therapeutic domains. At this point, I’ll turn the call over to Marc to discuss our financials.

[Marc Belsky:]

Thank you, Aron. In third quarter of 2014, Five Prime had a net loss of $7.1 million or $0.33 per basic and diluted share compared to a net loss of $7.2 million or $2.74 per basic and diluted share for the third quarter of 2013. Collaboration revenue was $6.1 million for the third quarter of 2014 compared to $3.5 million for the third quarter of 2013. This increase of $2.6 million was primarily due to GSK’s payment of a $1.5 million option exercise fee to license an undisclosed muscle disease target and revenue from new collaborations that we established in the last two years. Research and development expenses were $9.8 million for the third quarter of 2014 compared to $8.2 million for the same period in 2013. This was primarily due to advancing of the FPA144 program toward a Phase 1 clinical trial and an increase in research costs related to Five Prime’s internal cancer immunotherapy program. General and administrative expenses were $3.4 million in the third quarter of 2014 compared to $2.6 million for the same period of 2013. This increase was primarily due to public company-related expenses and non-cash stock-based compensation. Cash, cash equivalents and marketable securities as of September 30, 2014 were $130 million compared to $75.7 million as of year-end 2013. Today, Five Prime filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission. The shelf registration statement will allow Five Prime the flexibility to offer and sell common stock from time-to-time in one or more offerings. The prices and terms would be determined at the time of any future offering. We expect full year 2014, net cash used in operating activities to be less than $30 million and to end 2014 with more than $100 million in cash, cash equivalents and marketable securities. We expect to have cash to fund operations into the fourth quarter of 2016 that does not include any additional collaboration agreements that we may enter into or receiving any future milestone payments. This provides us runway to several value inflection points for our key programs. And with that I’ll turn the call back over to Rusty.

[Dr. Rusty Williams:]

Thanks Marc. Again, we’ve made great progress this year with our three clinical programs; FPA144, just cleared it’s IND, we expect to begin dosing patients shortly. The FPA008, development program has been expanded to include solid tumors and FP-1039 continues to make progress and it’s on track in two types of lung cancers. We’re now happy to take your questions. In addition to the people you’ve heard from so far, we’ve also have Dr. Brian Wong, Vice President of Research and Head of our discovery program in Cancer Immunotherapy. He’s here with us as well. Operator, we can open up the call for question now.

[Operator:]

(Operator Instructions). Our first question comes from the line of Eun Yang of Jefferies. Your line is open.

[Dr. Rusty Williams:]

Hi Eun.

[Operator:]

If your phone is muted, please unmute it.

[Unidentified Analyst:]

Hi. Can you hear me now?

[Dr. Rusty Williams:]

We do.

[Unidentified Analyst:]

Okay. Thanks Rusty. So, this John in for Eun. Thanks for taking my questions. So first off, any color on the GSK partnership for 1039 and whether GSK is still going to develop 1039? And any kind of changes you might expect positive or negative upon GSK shedding some oncology assets to Novartis.

[Dr. Rusty Williams:]

Yes, as far as our project goes, if anything over the last few months, the intensity of the effort that GSK is putting into has increased, not decreased. So with respect to FP-1039, they’re really diligent and really pursuing this with a lot of interest and that is right and it’s been a terrific partnership. So from our microscopic point of view around our project, everything is on track. The Novartis transaction had to do with commercial assets. GSK retained their development stage projects. And so as far as we can tell, intend to fully develop the things that are in their pipeline; certainly they show no lack of interest and enthusiasm for our projects.

[Unidentified Analyst:]

Great. And any kind of color on the data update for the Phase 1b trial that was previously expected by year-end this year and then what specific data points we should expect?

[Dr. Rusty Williams:]

Julie will you comment on that.

[Dr. Julie Hambleton:]

Yes, thank you. We are currently in the dose escalation portion of the trial and this really is the slow part of the trial as you know, enrolling three patients, following those patients, making decisions on escalating to the next part of the dose. By the end of year, we expect the GSK will have completed dose escalation in one or two of the arms, which means that we selected a dose but saved in combination with chemotherapy to expand. And it’s the expansion part of this trial where we will then look at response rate and duration of response. In consultation with Five Prime, GSK will prefer that data more, vigorous data be presented as opposed to just small bits of data by end of year. So, our planning to disclose the data in 2015 and that would include safety PK data with the dose escalation as well as any preliminary efficacy data by the time that we do present at a major meeting in 2015.

[Unidentified Analyst:]

Okay. And you said basically by year-end ‘15 now we should expect it, the vigorous data?

[Dr. Julie Hambleton:]

Yes, our plan is sometime in 2015 and there are variety of meetings throughout the year that we have been looking at.

[Unidentified Analyst:]

Great. And then turning to FPA008, post the read out of the RA patients’ data, would you actively seek partnership opportunities?

[Dr. Rusty Williams:]

Our intent is to develop FPA008 at this time, where probably we’re getting our trials implemented and moving these forward. We currently don’t have a plan to partner this. I think it’s an asset; it’s a great interest of pharmaceutical companies for indications in oncology and in [pharmacokinetic disease], but we currently don’t have a plan. But if you look at rheumatoid arthritis for example, if we got into a big trial in rheumatoid arthritis, in that particular situation, we would likely have a partner. But for other indications, to pursue those as the leader indications, we think we can handle this for the foreseeable future, never know what’s going to come to your way.

[Unidentified Analyst:]

Okay, great. And then turning to FPA144, any further design details for Phase 1 number of patients and then endpoints? Then in your pivotal study, would you anticipate that you need to compare to recently approved drugs such as something like CYRAMZA, ramucirumab by Eli Lilly?

[Dr. Julie Hambleton:]

Yes. So, thank you for this question and let me take it in two parts. Starting with the Phase 1 that is just initiating, this is a standard first in human study. So, safety is the primary endpoint and then of course characterizing pharmacokinetics as all part of the dose escalation part, so we’re doing a standard three plus three design. So three patients follow them for a dose-limiting toxicity period et cetera and then make decisions around dose escalation. Once we’ve identified either the maximum tolerated dose or the target dose associated with an exposure that we believe will be an active exposure, we will expand into selected patients with gastric cancer whose tumors have evidenced FGFR2b overexpression. Now when we do expansion, we will be looking at response rate in that component of the trial and if we see compelling response rate we will speak with the FDA about a potential accelerated approval path. And that often times as you know in a refractory settings is a single arm Phase 2 trial with overall response rate as your primary endpoint generating also the safety database, while having discussions with FDA about what a pivotal trial would look like. We have not yet really disclosed what our subsequent plans would be, but we do have plans obviously to combine this therapeutic with chemotherapy, move it into earlier lines of therapy and then of course we’ll be looking at randomized trials against active control. So, we’ll be dependent on which line of therapy, what that access control arm would be. Does that answer your question?

[Unidentified Analyst:]

Yes. Thanks very much, Julie. And then last question in your cancer immunotherapy program, when you should we expect disclosure of a target in IND filing?

[Dr. Rusty Williams:]

The program is making great progress, it’s still early days and still early for us to put a date on that. If things take -- things slip sometimes you never know. It’s not likely to be in 2015 for an IND, but we do have multiple opportunities that look like we’re going to come out of this program. So, we’re hard at work doing that.

[Unidentified Analyst:]

Thank you.

[Operator:]

Thank you. Our next question comes from the line of Brian Abrahams of Wells Fargo Securities. Your line is open.

[Brian Abrahams:]

Hi, thanks very much for taking the questions and congratulations on all the progress on both the time charter and partner program.

[Dr. Rusty Williams:]

Thanks Brian.

[Brian Abrahams:]

I guess starting, -- a question for Julie on 008 recognizing competitive sensitivities, but I was just curious can you give us any general sense as to whether (inaudible) one receptor acquisition like PVNS or perhaps moving in the direction targeting combinations checkpoint?

[Dr. Julie Hambleton:]

Yes Brian, thank you for this question. As mentioned, we for competitive reasons aren’t going to disclose more details, but we have spoken post AASCO and afterwards the two general areas in solid tumors or oncology that are great interest to us. There are some solid tumors very much driven by this pathway such as PVNS as you mentioned that we have been considering, as well as the role that myeloid derived self play and contributing to depression of tumors. And so we’ve been examining whether this therapeutic could be combined with a checkpoint inhibitor. So, unfortunately at this point, we can’t disclose further detail, but this is the general area that we have been discussing for several months now.

[Dr. Rusty Williams:]

We will start that trial in 2015 in solid tumors. So, accordingly you’ll hear something about it as we get closer to that time.

[Brian Abrahams:]

Got it. And is there anything you will be able to learn from the activity you see emerging in the RA study that could potentially guide those selection in oncology or if those would be completely different?

[Dr. Julie Hambleton:]

Like our healthy volunteer part of the study some of the biomarkers I think will be very informative to us. Most notably we have looked at circulating monocytes and subsets of monocytes, most notably the CD16 inflammatory subset of monocytes modulation of those cells will likely inform adequate dosing in RA, as well as cancer. And then there maybe some cancer where you have asked -- so the impact on [osteoporosis] important. But really most driven by the monocytes sub-population.

[Brian Abrahams:]

Got it. And then just coincidently there was an interesting paper published in nature where they identified one of [CEM 3] receptors combining partners of the [PCEM 1]. I know you guys have talked about CEM 3 being one of the elements that you’re looking at through your immuno oncology program looking at combining partners more or so. I was just curious if you’ve also identified PCEM 1 with your platform and whether you can operate below their targeting CEM 1 and/or PCEM 1 might be an interesting approach in immuno oncology?

[Dr. Rusty Williams:]

Brian Wong who head that program is going to take that.

[Brian Wong:]

Yes, thanks. So that’s a good question. So, as you were saying there was a recent publication of that PCEM 1 was another leg in [CEM 3]. We’re very aware of that and we have -- we are setting this by the end of this into others that we’re protecting with our platform. Again what we believe is that many of these checkpoints act in network and we have the ability to now start out what those networks look like, so we can design that therapeutic antibody.

[Brian Abrahams:]

Great. Thanks so much.

[Dr. Rusty Williams:]

Okay. Thank you, Brian.

[Operator:]

(Operator Instructions). Our next question comes from the line of Bret Holley of Guggenheim Securities. Your line is open.

[Bret Holley:]

Hi. Thanks for taking the questions, I really appreciate it. I guess just two follow-up on 1039. I’m just wondering obviously GSK’s definition of rigorous, might and fairy a little bit from yours. And I’m just -- just what level of confidence do you have they are going to kind of [hold that amount] so to speak in 2015, couldn’t they just say well kind of [prepare] and say well, probably be better if you had more robust Phase 2 data, I’ve just seen these kind of discussions between biotechs and pharmas be difficult before, I am wondering if you can give me a little bit more comfort on that front?

[Dr. Rusty Williams:]

Yes, I understand your point. We always can think about as what we’ve discussed with them and the plan that we have. We’re pretty tightly aligned with them in the sense that we have a Joint Steering Committee, we talk a lot. We’ve made an effort and they have too to really have the two companies work together. And so it certainly feels like we’re aligned, they acknowledge our interest more than theirs in disclosing information. Having said that, at the end of the day, it is their call as to what we disclose. But I am relatively optimistic that we’re going to be able to disclose data, so we talked about it explicitly, that in our plan, it’s in our trustier committee minutes et cetera. So we’ll have to wait to be sure, but seems likely.

[Bret Holley:]

Okay.

[Dr. Rusty Williams:]

That’s all we can say at this point.

[Bret Holley:]

No, I think that’s fair. And then for 144, I mean obviously you’re just starting the Phase 1, but there you can call the data. I am just wondering; it’s obviously very early but when might you expect to have first Phase 1 results, particularly from the gastric cancer cohort that you’re planning. And it’s going to depend a little bit on dose escalation, but can you kind of put a bracket on that timeline?

[Dr. Rusty Williams:]

I think you’ve answered the question for us. It depends on dose escalation. I wish I could, at this stage, it’s just really hard to commit to a timeline until we back to do the dose escalation, I will say that we’re really vigorous in getting sites planned up and get the plans for those in terms of getting our tests in order. And so, we’re going to -- I’m confident that we’re going to implement this, as well as anybody could. We will update you on that in 2015, of course as we get close. And so it’s not going to be a black and white just until the end, as soon as we get progress in this and it is in our control. So, we’ll keep you apprised of that, but it’s a just little early right now.

[Bret Holley:]

Okay. And I guess my final question is on 008, obviously it seems like a pretty exciting idea to combine 008 with checkpoint inhibitors in solid tumors. I’m just wondering are there clinical data at this point, but I’m just wondering if there are kind of preferred checkpoint approaches do you think would be better or worse given 008 mechanism.

[Dr. Rusty Williams:]

For strategic reasons we’re not going to disclose today what our specific plans are. However, a bunch just came from Society for Immunotherapy and Cancer meeting and we’re at ASCO, we know a lot of the chaos in this field, have been working with that. And the pathway is of great interest. And launching the CSFI receptor pathway in combination with checkpoint inhibitors was tremendous interest in that and data, published data during the last few months along these lines and more and more keeps coming out. So, I think there is excitement in that field and with that concept whether you look at anti-PD 1, there is most data with PD1, but there are also data with other, immunomodulators and I think that just looks very promising, it’s still early days.

[Bret Holley:]

Okay. Thanks very much for -- I had to questions, but thanks very much for the…

[Dr. Rusty Williams:]

Yes, thank you. Thanks for the questions.

[Operator:]

Thank you. I’m showing no further questions at this time. I would like to turn the call back over to Rusty Williams, CEO for any further remarks.

[Dr. Rusty Williams:]

Yes. Thank you very much for your interest and participation today. It has been exciting time for us and we look forward to updating you in the future and we will be speaking I hope when we report our year end results. So thanks again.

[Operator:]

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the program. You may now disconnect. Everyone, have a great day.

[Dr. Rusty Williams:]

Thank you.