I covered Five Prime Therapeutics (FPRX) in July last year when it was languishing at slightly below $10. I then called it a good bet and a derisked investment. At that time, the company had just begun the FIGHT trial, a 155-patient phase 3 trial that was later made into a phase 2 because the company didn’t have a phase 2 trial before. As the months went by, and nothing good happened at Five Prime, the company languished further and stooped to below $2 territory at one point.
Then on Nov. 10 this year the company declared positive data in the gastric cancer FIGHT trial which took the stock up nearly 300% in a single day. Data showed that Five Prime’s anti-FGFR2b, FPA144 monoclonal antibody Bemarituzumab improved median overall survival or mOS in gastric cancer patients with overexpressed FGFR2b in the FIGHT trial, which is 30% of all HER2- patients. The FGFR2b Inhibition in Gastric and Gastroesophageal Junction Cancer Treatment (FIGHT) trial (NCT03694522) was designed to evaluate the efficacy and safety of bemarituzumab in combination with modified FOLFOX6 (mFOLFOX6; leucovorin calcium, fluorouracil, and oxaliplatin) vs. mFOLFOX6 plus placebo in the front-line setting of patients with newly diagnosed FGFR2b positive, locally advanced or metastatic gastric and GEJ cancer.
The reason this worked like magic for the stock is because gastric cancer is pretty difficult to treat. It’s the third most common cause of cancer death in the world. Globally, more than a million new patients are diagnosed with gastric cancer every year. That’s a very high incidence rate and the fifth most common cancer worldwide. Routine screening is not available in most countries, and here 90 percent of patients diagnosed come to the doctor too late for surgery. Worse, for HER2- patients, the target of the FIGHT trial, there’s very little development in frontline therapy, with the ones available today being the same systemic chemotherapy available since the 1990s.
The following is a list of drugs currently approved by the FDA for all types of gastric cancer:
Drugs Approved for Stomach (Gastric) Cancer
Drug Combinations Used in Stomach (Gastric) Cancer
Drugs Approved for Gastroenteropancreatic Neuroendocrine Tumors
As we note, all these are old approvals, with the latest approval (not the specific indication, but the first approval in any indication) being 2015 for Lonsurf and 2014 for Cymraza. Therefore, a novel, first-in-class molecule demonstrating strong data – despite some shortcomings/confusions on the p-value, we will come to that shortly – causes excitement in the market. What we now need to see is how realistic are some of the extreme price targets some Wall Street analysts are touting.
Design – This was a “global, randomized, double-blind placebo-controlled Phase 2 FIGHT trial. The trial compared mFOLFOX6 chemotherapy in combination with bemarituzumab (bema, FPA144), a first-in-class targeted therapy, in patients with fibroblast growth factor receptor 2b-positive (FGFR2b+), non HER2 positive (non HER2+) front-line advanced gastric or gastroesophageal junction (GEJ) cancer.”
Efficacy – All three efficacy endpoints in the FIGHT trial – PFS, OS and ORR – achieved pre-specified statistical significance at a 2-sided alpha of 0.20.
Median progression-free survival improved from 7.4 months to 9.5 months. Hazard ratio 0.68 (95% CI: 0.44-1.04) p=0.073
Median overall survival improved from 12.9 months to not reached. HR 0.58 (95% CI: 0.35-0.95) p=0.027
Overall response rate (ORR) improved by 13.1% (p=0.106)
Safety – The incidence of all grade adverse events was comparable in the treatment and control arms of the study (100% vs. 98.7%, respectively) as were serious adverse events (31.6% vs 36.4%) and deaths due to adverse events (6.6% vs 5.2%). Adverse events ≥ Grade 3 were reported more frequently in the treatment arm than in the placebo arm (82.9% vs 74.0%). Corneal and stomatitis adverse events were reported more frequently in the bemarituzumab arm, and more patients discontinued bemarituzumab (34.2%) compared to placebo (5.2%) due to an adverse event. Importantly, no adverse events of retinal detachment or hyperphosphatemia were reported in the bemarituzumab arm. Despite the higher frequency of discontinuation of bemarituzumab compared to placebo, all efficacy endpoints favored bemarituzumab.
Observation – According to the CMO Helen Collins, they took this p-value instead of the typical 0.05 because this was a smaller phase 2 trial. “We had pre-specified the statistical significance at 0.2, which is typically what you do for a Phase II trial because it’s much smaller than a Phase III,” Collins said to Endpoints News. “And our goal of this trial was to get a greater understanding of exactly who benefits and who doesn’t benefit, so that’s the main thing. And this is in some other ways much better than a typical Phase II because it’s randomized, double-blind, placebo-controlled and that’s why we’re thrilled to see the benefit that we’re seeing.”
Also, CEO Tom Civik noted that overall survival for the standard of care is generally five to seven months in this indication, however they did not reach a figure in the drug arm by the end of the trial. That could be the primary endpoint in a phase 3, and here the p-value was 0.027, ie better than 0.05, standard for a phase 3 trial, and something the FDA will probably be asking for.
The trial had a lot of discontinuation in the drug arm, more than 30%, which means tolerability could be an issue.
Cowen analyst Boris Peaker said the following about the company on Nov. 12:
“We expect that a pivotal Ph3 trial could take ~2 years, with ~6 months for review, putting approval at ~3 years (YE23) as our base case scenario… We estimate approval in ~3 years with US/EU peak sales potential of ~$700M. This implies significant upside to the stock at current MCap of ~$200M.”
According to some research, over 84% of all Gastric cancer patients in the world are HER2-. That means 840,000 patients are HER2-. Out of these, 30% overexpress FGFR2B. That is 252,000 people. Coming to the US, where gastric cancer is relatively less prevalent, about 116,525 people in the US have this cancer (2017 figures). 27,600 new Americans will be diagnosed with this cancer in 2020. That means 23,000 new HER2- patients, and around 7000 FGFR2B overexpressed patients. This is the target market for the drug.
“Five Prime reckons it is well ahead of any rivals as there are currently no other FGFR2b-specific antibodies in clinical development. FGFR2b overexpression is also seen in lung, colorectal, pancreatic, liver and breast cancer, amongst other tumour types.”
Patent and licenses
The company says in its 10-K:
Our bemarituzumab patent portfolio includes patents and patent applications we exclusively licensed from Galaxy, as well as U.S. and foreign patents and patent applications wholly owned by us. The patent portfolio covers compositions of matter, methods of use, companion diagnostics, combination therapies and formulations relating to bemarituzumab. The issued U.S. patents and issued foreign patents, covering compositions of matter and methods of use, expire between 2029 and 2034. Patents that may issue from the pending U.S. and foreign applications would expire between 2029 and 2039.
So they have patent protection until at least 2029, and possibly 2039. In the former case, they will get a six-year window, while in the latter case that is 16 years.
As to licensing, they have a relevant inlicense from Galaxy:
Through December 31, 2019, we made milestone payments to Galaxy totaling $14.6 million. We are obligated to pay Galaxy additional milestone payments of up to $77.4 million, comprising aggregate intellectual property-related milestone payments of up to $3.0 million, aggregate development-related milestone payments of up to $17.5 million for development in two indications, aggregate regulatory-related milestone payments of up to $41.5 million for two indications and aggregate commercial-related milestone payments of up to $30.0 million. We are also obligated to pay tiered royalties on net sales of bemarituzumab from the high-single digits to the low-double digits.
As of September 2020, the company had about $111mn in cash and short-term investments. They burned around $15mn per quarter, but that will likely increase as they begin a phase 3 trial. They recently closed an upsized equity offering of nearly $142mn. If this is added to the coffers, they have indeed enough funds to complete a phase 3 trial in two years, and then go through another year of the approval process. That doesn’t rule out dilution – companies will dilute for absolutely no reason at all – but it makes it less probable. So, a dilution seems to be priced in despite the huge rise in stock price.
Risks and bottom line
The stock has gone up hugely after Nov. 11, so that risk always is there. The company has good cash, but there’s a small chance of dilution before approval. The p-value confusion exists among some investors. Patent expiry in 2029 will be a significant risk for the stock if it happens. Tolerability of the drug, as I noted earlier, may be a concern.
On the positive side, however, a $700mn peak US sales for a currently less than $1bn company is, basically, undervaluing the company. The data also is so strong that it gives confidence of approval, especially in an indication of high unmet need.
Given all that, I think FPRX presents a decent risk-reward opportunity even at these high prices. If price drops but there is no negative reason behind the drop, the risk-reward profile will improve significantly.
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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.