Fresh from IPO, Five Prime Advances Arthritis and Cancer Drugs
Investors in healthcare’s big IPO class of 2013 have seen some wild swings in share values since the debuts of dozens of new public companies. Hot trading in the Cambridge, MA-based companies Foundation Medicine and Epizyme pushed their peak prices above $40 for a time, followed by declines that sent the stocks swooning below their initial closing prices. Redwood City-based Relypsa’s shares roughly doubled in value in less than a month. Others such as Five Prime Therapeutics sagged significantly after their IPO dates in the fall, and then recovered in a flurry of year-end trading.
Whatever the outcomes for individual investors making bets, at least 49 healthcare companies from the class of 2013 now have $8.8 billion more to grow on, according to a recent Ernst & Young report. For South San Francisco, CA-based Five Prime (NASDAQ: FPRX), its net $66 million haul means a chance to attempt what many other small drug discovery companies have tried to pull off. The company is now funded to profit from its discovery platform by advancing its own drug candidates into clinical trials, rather than partnering up early on all its therapeutic projects with a much richer collaborator. This can bring higher returns for a smaller company if its drugs prove successful.
Five Prime, founded in 2002, spent seven years compiling the most comprehensive inventory it could muster of the proteins that rest on the surface of human cells, or in the spaces between cells. Some portion of these proteins are disease risk factors, and they’re the ones that can be physically reached by potentially powerful biological drugs such as antibodies and other proteins, which are generally too big to get inside cells.
“This is the playing field for protein drugs,” says Five Prime founder and CEO Lewis “Rusty” Williams.
The company also developed methods to screen its library of compounds and identify the external proteins that actually contribute to disease, which include cell surface receptors and regulatory molecules such as growth factors. The Five Prime library now contains the DNA sequences for more than 5,600 human proteins, and the company hunts within the library for previously unknown disease triggers that could be blocked by novel drugs. Although dozens of approved biologic drugs, such as the anti-inflammatory remedy etanercept (Enbrel) and the cancer drug trastuzumab (Herceptin), together reaped $71 billion in global sales in 2012, Five Prime maintains that the entire drug class currently focuses on no more than about 30 disease targets.
Over the years, Five Prime’s drug discovery methods have attracted big pharmaceutical company partners, which have brought the company total funding of about $220 million through stock purchases and revenues flowing from collaborations. Most notably, British drug giant GlaxoSmithKline (NYSE: [[ticker: GSK]]) is now funding early stage clinical trials of the cancer drug candidate FP-1039 in a joint project that, if successful, could bring Five Prime as much as $435 million in milestone payments as wells as double-digit royalties. Glaxo is also pursuing two other drug discovery collaborations with Five Prime in muscle diseases and respiratory disorders.
In March, Five Prime also announced a collaboration with Brussels, Belgium-based drug company UCB to identify drug targets and drug candidates for central nervous system disorders and inflammatory diseases linked to fibrosis.
But in recent years, Five Prime has also focused on taking two of its internal drug candidates into clinical trials without relying on funding from partners. An early stage trial is under way for FPA008, an antibody designed to treat inflammatory diseases such as rheumatoid arthritis. Five Prime also plans to seek FDA approval to begin trials next year for FPA144, an antibody aimed at a cell surface receptor linked to gastric cancer. The company floated its IPO to pursue those goals.
“We needed that money to fund our clinical compounds,” Williams says. Five Prime, which expended $28 to $30 million in operating cash in 2013, estimates it will have a cash reserve of at least $73 million at the end of the year.
The company, with 107 employees and a new South San Francisco headquarters, has also beefed up its expertise in conducting clinical trials.
“Our company has been transformed since 2010,” Williams says.
Both of Five Prime’s cancer drug candidates arose from an exploration of the roles of cell surface receptors that are found in greater numbers on the tumor cells of patients with some types of cancer. Cancer growth can be stimulated when these receptors bind to certain regulatory molecules that circulate in the extracellular space.
Five Prime designed the drug candidate FP-1039 to bind to those extracellular growth factors before they have a chance to hook up with a troublesome cell surface receptor called FGFR1, or fibroblast growth factor receptor 1.
“It sops up the growth factors,” Williams says.
In a trial funded by Glaxo, FP-1039 is being tested on people with advanced squamous non-small cell lung cancer whose tumor cells contain higher than usual amounts of the receptor FGFR1, which indicates a poor prognosis. The experimental drug is being used in two different combinations with chemotherapy regimens. Early results are expected in the second half of 2014.
If FP-1039 proves to slow cancer growth, it might serve as a treatment for more than 60,000 patients with advanced squamous non-small cell lung cancer in the United States, Europe and Asia, says Five Prime’s chief business officer Aron Knickerbocker. An estimated 22 percent of patients with the disease have elevated levels of the FGFR1 receptor.
If approved, FP-1039 would compete with established chemotherapy drugs and Genentech/Roche’s erlotinib (Tarceva), according to Five Prime’s shareholder filings. The drug could also face competition from drugs now being developed by large pharmaceutical companies, including Novartis’s BGJ-398, AstraZeneca’s AZD-4547, Eli Lilly’s LY-2874455, and Janssen Pharmaceuticals’ JNJ-42756493.
The eventual market for FP-1039 could include patients with other major cancer types, including breast cancer and head and neck cancer, where the FGFR1 receptor is also overexpressed in some patients.
Five Prime’s internal cancer drug candidate, FPA144, is an antibody designed to prevent extracellular growth factors from binding to another overexpressed cell surface receptor, FGF Receptor 2b, that is linked to a poor prognosis in gastric cancer. The experimental drug binds directly to the receptor, blocking the space where the tumor-promoting growth factors usually dock.
If successful in gastric cancer trials, FPA144 would probably be developed as an orphan drug serving a relatively small population, according to a recent presentation by Five Prime. An estimated three to nine percent of patients with gastric cancer have elevated levels of FGF Receptor 2b. That amounts to 6,600 US patients or less, though the numbers outside the United States could be as high as 93,000, the company estimates.
FPA144 would compete with currently approved chemotherapy agents, and might have to vie for market share against drugs being developed by AstraZeneca (AZD-4547) and Bayer (BAY1179470).
For both of Five Prime’s cancer drug candidates, companion diagnostic tests are being refined to identify the patients who are most likely to respond to FPA 144 or FP-1039 because they have heightened levels of the relevant receptors, Williams says.
Five Prime’s most advanced internal drug candidate is FPA008, which it plans to begin testing on trial participants with rheumatoid arthritis by the end of 2014. FPA008 is also an antibody that blocks the binding site of a cell surface receptor. In this case, it’s the CSF1 Receptor on white blood cells called monocytes and macrophages. If that receptor binds with certain regulatory molecules, the white blood cells are activated to release inflammatory molecules called cytokines. This can lead to damage such as inflamed joints or bone deterioration.
Rheumatoid arthritis is already a competitive field occupied by approved products including adalimumab (Humira), infliximab (Remicade) and etanercept (Enbrel). Other companies also have experimental treatments in the works.
Five Prime’s competitive strategy is to design drugs that are better targeted against disease processes than their rivals’ products. For example, FPA008 is aimed at preventing the release of inflammatory signaling molecules called cytokines, while its established rival etanercept (Enbrel) is a receptor that sticks to the inflammatory cytokine TNF alpha and blocks its action—but only after it has been produced by activated white blood cells.
In the same vein, Williams says, FP-1039 is designed to be less toxic than other cancer drugs because it interferes only with growth factors that promote tumor proliferation, not with other growth factors that have different roles.
While Five Prime pursues its clinical-stage projects, it is also continuing basic discovery research on the mechanisms of extracellular proteins. A major focus is immuno-oncology—the tactic of empowering the immune system to better clear the body of cancer cells.
Company researchers have canvassed all the proteins found on or outside cancer cells and immune system cells, Williams says. They’re analyzing those proteins to see which they can “match up” as pairs or groups that might be working together to nurture tumors, or trying instead to destroy tumor cells. For example, Five Prime is looking at mutations that have allowed tumor cells to suppress the immune system.
“If you relieve that suppression, the tumors can be attacked,” Williams says.
Because fast-growing tumor cells often develop mutations that allow them to resist cancer therapies, Five Prime is looking for ways to attack them on two fronts using combination therapies. Drugs aimed at new molecular mechanisms would be part of that one-two punch.
“We have some exciting results about new pathways,” Williams says.