How Five Prime's Bristol-Myers Partnership Helps Investors

• Five Prime Therapeutics Inc FPRX shares have been volatile in 2015, and are up 104 percent since October 12.
• Oppenheimer’s Christopher Marai maintained an Outperform rating on the company, while raising the price target from $45 to $48.
• The company’s partnership with Bristol-Myers is a positive move, Marai noted.

Five Prime has announced a $1.74 billion licensing agreement for FPA008 with Bristol-Myers Squibb Co BMY. As per the terms of the deal, Five Prime will receive an upfront cash payment of $350 million, besides being eligible for an additional $1.39 billion in development/regulatory milestone payments.

FPA008 is an anti-CSF1R that depletes tumor associated macrophages and is being evaluated in combination with nivolumab.

Analyst Christopher Marai wrote, “The $1.39B includes $505M for nivo/FPA008; $542.5M for FPA008 combinations using any other BMY/FPRX asset; and $340M for FPA008 outside of oncology (including PVNS). BMY will pay royalties in high-teens to low-20s%, unless FPRX opts in to US co-promote.”

Marai believes that targeted tumor associated macrophages could offer unique synergies with approved IO assets, which in turn would result in FPA008 becoming the backbone of immune-therapy for multiple solid tumors.

“We recommend owning FPRX as positive proof-of-concept data for CSF1R-targeted therapies (for FPA008 or competitors) in combo with PD1/PD-L1, expected in the next 12 months is likely to drive upside in FPRX shares. We note the multi-billion dollar valuation of similarly positioned IO-combo therapy IDO inhibitors, suggests FPA008 remains under-appreciated,” the Oppenheimer report mentioned.

Initial data for Five Prime’s lead wholly owned clinical asset FPA144 is expected in 1Q16. Marai said that positive results could lead to the initiation of registration-worthy studies.