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 … Next Page »
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