Five Prime Therapeutics, Inc. (FPRX) CEO William Ringo on Q3 2019 Results - Earnings Call Transcript

Nov. 06, 2019 8:36 PM ETFive Prime Therapeutics, Inc. (FPRX)
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Five Prime Therapeutics, Inc. (NASDAQ:FPRX)

Q3 2019 Earnings Conference Call

November 06, 2019, 16:30 PM ET

Company Participants

William Ringo - Chairman and interim CEO

David Smith - EVP and CFO

Helen Collins - EVP and CMO

Martin Forrest - VP, IR and Corporate Communications

Conference Call Participants

David Ruch - SVB Leerink

CJ Zopf - Cowen and Company

Timur Ivannikov - Raymond James

Ross Weinreb - Goldman Sachs

Operator

Welcome to the Five Prime Therapeutics Third Quarter 2019 Earnings Call. As a reminder, this conference call is being recorded.

I'd now like to introduce your host for today's conference, Martin Forrest, Vice President of Investor Relations and Corporate Communications. You may begin.

Martin Forrest

Thank you, Jimmy. Good afternoon, everyone, and thank you for joining us. A press release with the company's third quarter financial results was issued earlier today and can be found on our company Web site. Joining me today are Bill Ringo, our Chairman and interim Chief Executive Officer; Dr. Helen Collins, Chief Medical Officer; and David Smith, our Chief Financial Officer.

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.

I’ll now turn the call over to Bill.

William Ringo

Thank you, Martin. Good afternoon and thanks for joining us today to review our third quarter achievements and preview upcoming milestones. Since becoming interim CEO, I’ve had the chance to interact with a number of our analysts and investors and I look forward to interacting with you during the call today.

This has been a year of many clinical milestones for our wholly-controlled programs and we look forward to multiple data readouts in 2020. These readouts will allow us to make disciplined data-driven decisions to prioritize future pipeline investments.

We are expecting data readouts from several programs next year. We remain on track for a planned futility analysis from the FIGHT trial in mid-2020. The combination arm of pembro in FPA150 is enrolling ahead of schedule and we anticipate early efficacy data in the first half of 2020.

We are reporting initial safety data from the Phase 1 clinical trial of FPT155 in the poster presentation at SITC this coming Saturday, and expect to have additional FPT155 data in late 2020. For our partnered programs, the randomized Phase 2 trial of cabira and Opdivo in second-line pancreatic cancer has completed enrollment, and we expect BMS to have actionable data next year.

And finally, BMS-986258, a fully-human monoclonal antibody targeting TIM-3 continues to advance in a Phase 1/2 clinical trial that is now being studied by BMS in combination with Opdivo.

Since becoming the interim CEO, my first priority was to conduct a review of Five Prime’s operations with the goal of ensuring our long-term sustainability and value creation as a company.

My first action as CEO was to implement a restructuring plan that meaningfully extends our cash runway and enables us to prudently advance and prioritize our clinical programs, while evaluating long-term strategies to grow the pipeline.

As part of the process, I’ve engaged with the team and have been impressed by the caliber of the people in our organization as well as the professionalism and agility that the team has shown as we all work to become a more nimbler organization. Our team is passionate about the mission and the restructuring is well underway as planned.

Another priority of mine has been to start the search process to recruit a new CEO. We’ve engaged a search firm, formed a search committee composed of Board members and expect the search process to take approximately four to six months.

I will continue to serve as the interim CEO until a new CEO is appointed. And I look forward to working with the Five Prime team while the search progresses. I’m confident in our team, our pipeline and our ability to advance clinical programs through and beyond 2020 data events, which represent the important inflection points for our company.

I will now turn the call over to Helen who will provide an update on our clinical programs. Helen?

Helen Collins

Thank you, Bill. Let’s begin with bema and the FIGHT trial. We have paused pre-screening and have enrolled more than 140 patients with newly diagnosed advanced stage gastric cancer, representing approximately 25% of the projected total enrollment for the trial.

The prevalence of FGFR2b overexpression in this patient population is approximately 30% based on our global pre-screening data and we remain on track for a planned futility analysis in mid-2020.

I’d like to remind you that the FIGHT trial is a double blind, placebo-controlled trial which means in order to maintain the integrity of the trial for the investigators and the study team, we have an independent data monitoring committee. And the only public announcement that we expect to make is whether the trial has passed or not passed futility.

Moving on to FPA150, which is our monoclonal antibody targeting tumors that overexpress B7-H4. At ESMO last month, we presented preliminary efficacy results from the Phase 1b monotherapy expansion portion of the trial.

As of the August 9 data cut-off date, there were 31 patients across ovarian, endometrial and breast cohorts who were evaluable for response. One patient in the ovarian cohort had a confirmed response, and an additional 11 patients had stable disease and remained on therapy.

Supporting B7-H4 as the potential target, we observed an increase in the infiltration of T cells and NK cells in the tumors of patients who either responded or had stable disease. On the poster, we also presented safety data from the first four patients in the Phase 1a combination arm of FPA150 with pembrolizumab which suggest that FPA150 could be combined with a full dose of 20 milligrams per kilogram every three weeks with standard full dose pembrolizumab.

Based on our preclinical data and the hypothesized mechanism of action of FPA150, we continue to believe that the most promising opportunity for FPA150 is in a combination. The FPA150 plus pembro expansion is enrolling ahead of schedule and we anticipate early efficacy data in the first half of 2020.

Turning to FPT155, our novel CD80-Fc fusion protein, dose escalation is proceeding according to plan and we will present the first available safety and pharmacokinetic data from the initial dose escalation cohorts at SITC this coming Saturday, November 9.

Clinical data showing this drug can be administrated without exhibiting cytokine release syndrome will be encouraging because of other antibodies activating T cells through CD28 have reported superagonism and severe cytokine release syndrome. FPT155 on the other hand is a CD80-Fc fusion protein that requires co-stimulation for T cell activation and therefore should not trigger superagonism.

For our partner programs, BMS has completed enrollment in the randomized Phase 2 trial of cabira and Opdivo in second-line pancreatic cancer. Accordingly, we expect BMS to have actual data early next year, but please recall BMS is the trial sponsor and will determine when it’s appropriate to disclose data and next steps for this program.

And finally, BMS-986258, a fully-human antibody targeting TIM-3, an immune checkpoint receptor continues to advance in the Phase 1/2 clinical trial and is now being studied by BMS in combination with Opdivo.

Before ending, I’d like to highlight the latest example of the productivity from Five Prime’s immuno-oncology research collaboration with BMS. The journal Nature recently published new research providing insights into the mechanism of action of VISTA, the first identified checkpoint that utilizes pH to function selectively in tumors. The work relating to this discovery was the result of a large collaborative effort led by BMS and Five Prime.

I will now turn the call over to David.

David Smith

Thank you, Helen. I want to begin with some comments on the restructuring before turning to third quarter financial results. Our decision to restructure is expected to extend our cash runway as we execute on our clinical programs and is aligned with the goal of focusing on our most promising programs based upon data readouts that we expect in 2020.

We expect the restructuring to result in $20 million of annualized savings from reduced headcount and facilities expenses. The company will incur approximately 4 million of pre-tax charges for severance costs related to the restructuring primarily during the fourth quarter of 2019.

As part of the restructuring and rightsizing of the organization, our cash runway will be meaningfully extended further into the future. The length of the cash runway will be determined by the prioritization of future pipeline investments that will be informed by the data events we have outlined for 2020.

As both Bill and Helen has mentioned, we will soon have the data needed to make a go, no go decision for FPA150 mono and combination therapy. Also, if bema passes the upcoming futility analysis, we may not resume enrollment in the FIGHT trial without a partner given the significant cost of running this global Phase 3 trial.

The key takeaway here is that we have the resources that will take us not just through but beyond go, no go decisions for the FIGHT trial, FPA150 and FPT155. We could potentially realize additional savings by not taking forward one or more clinical programs or we could potentially incur additional cost by decision to advance the program to the next milestone. We will know this at the next data readout for each of these three wholly-owned and controlled programs in 2020.

Now turning to the financial results for the quarter. Cash, cash equivalents and marketable securities totaled 186 million as of September 30, 2019 compared to 214.1 million on June 30, 2019.

We continue to expect full year 2019 net cash used in operating activities to be in the range of 117 million to 122 million with cost savings from the restructuring beginning in 2020. We estimate ending 2019 with approximately 148 million to 153 million in cash, cash equivalents and marketable securities.

The net loss for the quarter was 36.1 million or $1.03 per basic and diluted share. This was a decrease from last year’s third quarter loss of 47.2 million and attributed to lower overall operating expenses. Collaboration and license revenue was 3 million for the quarter.

This is a decrease from last year’s third quarter revenue of 5.8 million and was expected. This decrease was primarily related to the completion of the research term under the immuno-oncology research collaboration in March of 2019 and from progress made towards our performance obligation under the BMS collaboration agreement.

Research and development expenses were 26.9 million for the third quarter of 2019 compared to 44.7 million in the third quarter of 2018. This decrease was primarily due a one-time milestone payment in the third quarter of 2018 that was triggered by the dosing of the first patient in the Phase 3 FIGHT trial.

Lower compensation costs, preclinical and research activities, manufacturing and diagnostic expenses contributed to the decrease and were partially offset by increased clinical trial expense for our clinical programs.

G&A expenses totaled 13.2 million compared to 9.8 million in the third quarter of 2018. The increase was primarily due to increased compensation costs offset by a decrease in the use of temporary resources.

In closing, we ended Q3 with a strong balance sheet and our strategic restructuring will meaningfully extend our cash runway, which will take us not just through but beyond go, no go decisions for the FIGHT trial, FPA150 and FPT155.

I’ll now turn the call back over to Jimmy for Q&A.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions]. Our first question comes from Jonathan Chang with SVB Leerink. Your line is now open.

David Ruch

Hi, guys. This is David Ruch on for Jonathan. Congratulations on the progress and thanks for taking my questions. I’ve got a few here and looks like there were a lot of updates. First on FPA150, you mentioned enrollment was progressing ahead of schedule and that there would be an update in first half of '20, which I don’t know that that was in the press release. Could you just comment on the data expected in first half '20 and in terms of the patient population and how much efficacy could be observed at that point versus ESMO? Thanks.

Helen Collins

Sure. Hi. This is Helen Collins. I want to be clear that we expect to get some data in the first half of 2020. We have not said when we would publicly talk about what that data is. And the updated data will be longer-term follow up on the monotherapy on patients of course, but more importantly a combination. So we are – what we’re enrolling right now is patients with ovarian cancers whose tumors overexpress B7-H4 and all of these patients are getting the full dose of FPA150 and full dose of pembrolizumab and we expect early efficacy from those patients in the first half next year.

David Ruch

Got it. Would it be safe to expect those data to be presented in 2020, mid-2020 or --?

Helen Collins

Yes. As you know ASCO abstracts are usually somewhere around February 1st. So right now, because again these patients have just enrolled, we haven’t seen any data. I don’t want to commit yet, but we’re having those conversations about --

David Ruch

Fair enough. The second one from me, another sort of timeline logistics question regarding cabiralizumab. Could you give any color on the timing of data in 2020? It looks like the BMY transcript says 2020 broadly, but I thought I heard you say early 2020.

Helen Collins

Thank you. I’m glad to clarify that. This is a BMS run trial and so BMS controls review of the data, release of the data and everything I should say I should be aligned with them. So I misspoke. It should be 2020 is all we know, which would make sense.

David Ruch

Got it. And then last one sort of another timeline refinement question. In regard to the FIGHT study, it looks like the timing has been adjusted to say mid-2020 versus first half of '20. Is this just sort of you guys refining the timeline here or should we take this as something else?

Helen Collins

Yes. I think earlier in the year when we very first said – earlier this year in 2019 when we said we were going to do an early futility, we said first half. As we get closer, we’re getting a lot of questions of people saying, hey, January. No. It’s going to be we think closer to the later part of that first half, so we thought it was probably better just to say mid at this point now being November so that people aren’t expecting us to have a read on January. But as you know, it’s event-driven and so it’s really going to depend on when the events occur. And although the trial started enrolling in September of 2018, the majority of these 140 patients enrolled over the summer and so of course it’s a little early right now for us to be precise about when the events will occur. Our statistician says give her another couple of months and she will be able to tell us and we should hope we get a little bit closer to when the readout would be. But I think your timeline questions are great. I think you’re highlighting something we’re trying to make clear, which is important data readouts all read out anticipating in the first half of next year at least internally, and again I think it speaks to the theme here that we’re really trying to make sure that we made data-based decisions on our portfolio.

David Ruch

Got it. Thanks, Helen, for clarifying and I look forward to seeing what comes out of 2020.

William Ringo

So do we.

Helen Collins

Yes.

Operator

Thank you. Our next question comes from Chris Shibutani with Cowen and Company. Your line is now open.

CJ Zopf

Hi. Good evening. This is CJ Zopf on for Chris tonight. Just wanted to follow up on a few questions with the FIGHT trial. You mentioned that if the trial was successful, you may not continue without a partner. Is this outside of the Zai Lab partnership? And at that point of the futility analysis, would you be un-blinded to the data so that’s something you can talk to in your partnership discussions?

William Ringo

This is Bill. Let me take a shot at it and then Helen can join in. There would be a couple of people on blinded but there would not be a majority of people on blinded to the data. We’ll basically get information that allows us to make a decision that’s saying go forward or not go forward. And we’ll see how that plays out when we think about a partnership. And I don’t know, Helen, if you want to add anything to that?

Helen Collins

Yes. Nothing’s changed from our perspective. I think that in the sense that we haven’t publicly said what the bar is, but we have an independent DMC. They will look at all the data. They will be giving us in terms of the bar for futility a thumbs up, thumbs down. As Bill said, there will be a couple of management people who will know more than that. But as you know, the first step is that you got to pass futility and then there is always going to be a business decision. And as we said, some of that decision to move forward with bema may be related on how the other programs are going, where we want to spend our resources and of course partnering with bema would go into that as well. It’s a Phase 3 trial, it’s an expensive trial. And then also just the external landscape in gastric cancer, right, so what’s happening with other in terms of where this will fit in. But I’m not aware of anything right now externally that would change this. So I realize this sounds a bit vague but I think again the whole point is that it’s going to be – the decision isn’t just a go, no go from futility but then there’s the business part of it.

William Ringo

Right. Did we answer your question?

CJ Zopf

Yes. I think so. If the futility readout is successful, would you disclose what the criteria were that made that decision?

Helen Collins

No. It’s a go, no go; a pass, no pass.

CJ Zopf

Got it. Okay. Thank you.

Operator

Thank you. Our next question comes from Steve Seedhouse with Raymond James. Your line is now open.

Timur Ivannikov

Hi. This is Timur Ivannikov on for Steve Seedhouse. Our first question is regarding cabira. So you mentioned potential actionable data in 2020. And are there any milestone payments coming if Bristol decides to take it into Phase 3 assuming Phase 3 is actually needed? And if not, then what type of events would that trigger milestone payments? Thank you.

David Smith

This is David. There would be a milestone payment with the initiation of the Phase 3 trial. We’ve not disclosed what the size of that milestone is though.

Timur Ivannikov

Okay, got it. And then our next question is just to clarify on FPA150. So you mentioned the Phase 1b monotherapy cohort and the combination cohort. I guess could you talk about the types of responses you would need to see to make your go, no go decision? Is there certain thresholds you’re looking for?

Helen Collins

So yes, internally we have a threshold. We haven’t made that public. The way that I think makes the most to answer it in ovarian cancer although as single agents, the checkpoint inhibitors are not improved, there’s a couple of them have reported 10%, 15% response rate. I guess there isn’t a lot of various tumor types. So you can imagine that for a combination, we would want to see something that we think is statistically significantly higher than that for us to be interested in pursuing that.

Timur Ivannikov

Okay, got it. Thank you. And I guess also a clarification question on FPT155 development. So I think you’re proposing maximum dose of 70 milligrams. Is that based on some receptor coverage saturation that you’ve found in preclinical studies? What is that maximum level based on?

Helen Collins

So I think what you’re talking about is based on the abstract that we submitted to SITC?

Timur Ivannikov

Yes, correct.

Helen Collins

Yes. So I’m going to punt and say we’ll answer that on Saturday after we have our poster up.

Timur Ivannikov

Okay, got it. And I guess just one more clarifying question there. Are you planning to do any combinations with FPT155, like pembro or something else?

Helen Collins

Certainly. We’ve had internal discussions and it would make sense as it does for any I-O drug that even if you get single agent activity, which we certainly expect with this agent, that the way the world is right now, you’d want to also show even better activity with a combination. So right now that is not in our protocol but sitting in the parking lot right now.

Timur Ivannikov

Okay, got it. Thank you very much.

Operator

Thank you. Our next question comes from Salveen Richter with Goldman Sachs. Your line is now open.

Ross Weinreb

Hi. Thanks for taking the question. This is Ross on for Salveen. Just on the Fight trial here, so on the last earnings call you communicated that it was your intent to have a hazard ratio of less than 1. Is this still the case? And if you do indeed proceed past the futility analysis, is it reasonable to assume that you have reached a hazard ratio of less than 1?

Helen Collins

This is again, Helen. Yes, our plan is to still have a hazard ratio less than 1. And if that passes that, then that would be an announcement that we have passed futility. I think some of the questions have been about, okay, then what? And I think that’s where the decision about assuming we pass futility what we do next is based on the multitude of factors.

Ross Weinreb

Got it. And then secondly, the trial also uses IHC 2+ or 3+ as the criteria for positivity for protein overexpression. Can you elaborate on what percent of patients in the trial has undergone using this assay here?

Helen Collins

Yes. So the trial is being conducted and a selected patient population, meaning the patients all get – anybody who enrolls has to test positive for 2+, 3+. So a patient who’s 1+ or does not have FGFR2 overexpression does not enroll. So only patients who have that are enrolling.

Ross Weinreb

Got it. Thanks for the questions.

Operator

Thank you. Our next question comes from Michael Schmidt with Guggenheim Securities. Your line is now open.

Unidentified Analyst

Hi. Thanks for taking my question. This is [indiscernible] filling in for Mike. Just one question from me. You mentioned ensuring that the FIGHT trial was adequately powered for enrollment. I just wanted to know if you could remind us or maybe provide some color on what the powering assumptions for the study is currently. Thanks.

Helen Collins

Yes. Again, this is Helen. So I think what you’ve heard us talk about previously and what we should be talking about now is when you do a futility analysis from a statistical perspective, a futility analysis assuming that you know the benefit is X and your trial has been designed the way that it’s been trialed is this particular version of the trial, like another – if the trial is powered at 80% and you assume there’s a particular benefit, if you ran this trial a 100 times, 80 out of those 100 times the trial will show what truth is or demonstrate that truth. So when you’re doing a futility from a statistical perspective and I’m sure my statistician is somewhere cringing at my description of this, but what we’re doing is we’re making sure that this particular run of the trial is falling in one of those 80 times that it’s on track to show that benefit. I think what you heard Bill and I say is that – so that’s why you essentially get a go or no go. This trial is demonstrating that the study will not be futile essentially or it will be futile. But you heard Bill say is that there will be a couple of people on management team who will have more information than just did you pass, did you not pass. And certainly that would be information that will help us make a business decision about where to go with being on the FIGHT trial.

Unidentified Analyst

Thank you.

Operator

Thank you. I’m showing no further questions in the queue. I’d like to turn the call back to Bill Ringo for any closing remarks.

William Ringo

Thank you. As I said at the beginning of the call, we made a decision to implement a restructuring plan that meaningfully extends our cash runway and it enables us to prudently advance and prioritize our clinical programs, while evaluating long-term strategies to grow the pipeline.

In 2020, we expect our clinical programs to readout data that will allow us to prioritize future pipeline investments while taking into consideration cash on hand and business development opportunities.

We are focused on advancing our clinical programs through and beyond near-term data events, and as we execute on these important inflection points to maximize value for our stakeholders.

With that, I’d like to thank you all for joining us today. I’d also like to thank the patients and investigators participating in our clinical trials, our Five Prime employees and our strategic collaborators who all contribute to the continued advancement of our programs. Thank you.

Operator

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.

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