Why Five Prime Therapeutics Inc. Shares Surged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Five Prime Therapeutics (NASDAQ: FPRX  ) , a clinical-stage biopharmaceutical company focused on developing protein therapeutics to fight cancer and other inflammatory diseases, jumped as much as 22% after announcing a collaborative deal with Bristol-Myers Squibb (NYSE: BMY  ) before the opening bell.

So what: Under the terms of the deal, Bristol-Myers Squibb gets access to Five Prime Therapeutics' exclusive immuno-oncology platform and will decipher which therapies have the best chance of success based on two undisclosed immune checkpoint pathways. Bristol-Myers has the option of developing these cancer-fighting drugs as a single-agent therapies or can use them in combination with existing products in its own pipeline. Bristol-Myers will retain full worldwide rights to these therapies if approved.

For Five Prime, the company will receive a $20 million upfront payment from Bristol-Myers, is eligible to receive $9.5 million in researching funding over the course of its collaboration, and is getting a $21 million common equity investment from Bristol-Myers (representing a purchase of 4.9% of Five Prime's outstanding shares) at a 30% premium to Friday's closing price. In addition, it will also be eligible to receive milestone and development payments totaling as much as $300 million and tiered single-digit to double-digit royalties on any approved therapies.

Now what: Once again we see how incredibly hot cancer immunotherapies have become. A number of cancer-focused companies are realizing that it's easier to retrain the body's immune system to recognize cancer and attack it than to attempt to formulate a therapy designed to seek out cancer. It remains to be seen, of course, if this partnership will merit success, but Five Prime shareholders have to be pleased to have snagged an elephant in Bristol-Myers Squibb, which could go a long way to validating its proprietary drug discovery platform. From the standpoint of Bristol-Myers, it allows the company to potentially expand its immunotherapeutic research for a mere $50.5 million in costs, so it seems well worth the risk.

Five Prime shares may be soaring today, but it could have a difficult time keeping pace with this top stock in 2014
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2878713, ~/Articles/ArticleHandler.aspx, 10/25/2014 4:03:42 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement