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Edited Transcript of FPRX earnings conference call or presentation 6-Nov-19 9:30pm GMT

Q3 2019 Five Prime Therapeutics Inc Earnings Call

San Francisco Nov 12, 2019 (Thomson StreetEvents) -- Edited Transcript of Five Prime Therapeutics Inc earnings conference call or presentation Wednesday, November 6, 2019 at 9:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* David V. Smith

Five Prime Therapeutics, Inc. - Executive VP & CFO

* Helen Louise Collins

Five Prime Therapeutics, Inc. - Executive VP & Chief Medical Officer

* Martin Forrest

Five Prime Therapeutics, Inc. - VP of IR & Corporate Communications

* William R. Ringo

Five Prime Therapeutics, Inc. - Chairman of the Board & CEO

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Conference Call Participants

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* Christopher John Zopf

Cowen and Company, LLC, Research Division - Associate

* David Simms Ruch

SVB Leerink LLC, Research Division - Associate

* Ross Howard Weinreb

Goldman Sachs Group Inc., Research Division - Research Analyst

* Timur Ivannikov

Raymond James & Associates, Inc., Research Division - Senior Research Associate

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Presentation

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Operator [1]

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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.

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Martin Forrest, Five Prime Therapeutics, Inc. - VP of IR & Corporate Communications [2]

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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 website. 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 1999, regarding our research and development program and our 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 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.

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William R. Ringo, Five Prime Therapeutics, Inc. - Chairman of the Board & CEO [3]

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Thank you, Martin. And good afternoon and thanks for joining us today to review our third quarter achievements and review 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 and 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 I clinical trial of FPT155 in a poster presentation at SITC this coming Saturday, and expect to have additional FPT155 data in late 2020. For our partnered programs, the randomized Phase II 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 I-II 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 a 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 4 to 6 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 am confident in our team, our pipeline and our ability to advance clinical programs through and beyond 2020 data events, which represent 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?

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Helen Louise Collins, Five Prime Therapeutics, Inc. - Executive VP & Chief Medical Officer [4]

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Thank you, Bill. Let's begin with bema and the FIGHT trial. We 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 over-express B7-H4 at ESMO last month, we presented preliminary efficacy results from the Phase Ib monotherapy expansion portion of the trial. As of the August 9 cut-off date, there were 31 patients across ovarian endometrial and breast cohorts who were valuable for response. One patient in the ovarian cohort had a confirmed response and an additional 11 patients had stable disease and remain on therapy.

Supporting B7-H4 as a potential target we observed an increase in infiltration of T-cells and NK cells in the tumors of patients who'd either responded or its stable disease. On the poster, we also presented safety data from the first 4 patients in the Phase Ia combination arm of FPA150 with pembrolizumab which suggested FPA150 could be combined at a full dose of 20 milligrams per kilogram every 3 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 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 City this coming Saturday, November 9. Clinical data showing this drug can be administered without exhibiting cytokine release syndrome would be encouraging because other antibodies activating T cells through CD28 have reported super agonism and severe cytokines 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 super agonism.

For our partner programs, BMS has completed enrollment in the randomized Phase II trial Cabira and Opdivo in second line pancreatic cancer. Accordingly, we expect BMS to have actionable data early next year. But please recall BMS is a 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 I-II 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 leading to this discovery was a result of a large collaborative effort led by BMS and Five Prime.

I will now turn the call over to David.

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David V. Smith, Five Prime Therapeutics, Inc. - Executive VP & CFO [5]

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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 link 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 have 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 III 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 costs by deciding to advance the program to the next milestone. We will know this at the next data readout for each of this 3 wholly owned in control programs in 2020.

Now turning to the financial results for the quarter. Cash, cash equivalents and marketable securities totaled $186 million on 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 $1.3 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 was 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 to a onetime milestone payment in the third quarter of 2018 that was triggered by the dosing of the first patient in the Phase III FIGHT trial. Lower compensation costs, pre-clinical and research activities manufacturing and diagnostic expenses contributed to the decrease and were partially offset by increased clinical trial expenses 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.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Jonathan Chang with SVB Leerink.

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David Simms Ruch, SVB Leerink LLC, Research Division - Associate [2]

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This is David Ruch on for Jonathan. Congratulations on the progress. And thanks for taking my questions. I've got a few here and it 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 2020, which I don't know that that was in the press release. Could you just comment on the data expected in the first half 2020 and in terms of the patient population, and how much efficacy could be observed at that point versus ESMO?

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Helen Louise Collins, Five Prime Therapeutics, Inc. - Executive VP & Chief Medical Officer [3]

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Sure. This is Helen Collins. So I want to be clear that we will have -- 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 and patients, of course, but more importantly combination. So we are the -- what we're rolling right now is patients with ovarian cancers whose tumors over-express B7-H4 and then 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 of next year.

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David Simms Ruch, SVB Leerink LLC, Research Division - Associate [4]

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

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Helen Louise Collins, Five Prime Therapeutics, Inc. - Executive VP & Chief Medical Officer [5]

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Yes. I mean as you know ASCO abstracts or do you sort of somewhere around February 1. 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 when we might present data.

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David Simms Ruch, SVB Leerink LLC, Research Division - Associate [6]

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Fair enough. The second one from me another sort of time line logistics question regarding cabiralizumab, could you give any color on the timing of the data in 2020? It looks like the BMI transcripts has 2020 broadly, but I thought I heard you say early 2020.

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Helen Louise Collins, Five Prime Therapeutics, Inc. - Executive VP & Chief Medical Officer [7]

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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 should be aligned with them. So I misspoke. Just be 2020 is all we know which would make sense.

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David Simms Ruch, SVB Leerink LLC, Research Division - Associate [8]

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

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Helen Louise Collins, Five Prime Therapeutics, Inc. - Executive VP & Chief Medical Officer [9]

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I think early in the year when be 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 people saying, hey, January? No, it's going to be 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 readout in January. But as you know it's event-driven and so it's really going to depend on when the events occur. 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 another couple of months and should be able to tell us, and we should hope we get a bit closer to when that will be. But I think your time line questions are great. I think you're highlighting something we're trying to make clear, which is all of important data readout, all read out we're 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 make database decisions on our portfolio.

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Operator [10]

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Our next question comes from Chris Shibutani with Cowen and Company.

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Christopher John Zopf, Cowen and Company, LLC, Research Division - Associate [11]

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This is CJ Zopf on for Chris tonight. I 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 unblinded to the data? So that's something you can talk to you in your partnership discussions?

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William R. Ringo, Five Prime Therapeutics, Inc. - Chairman of the Board & CEO [12]

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This is Bill. Let me take a shot at and then Helen join in. There'll be a couple of people unblinded that there will not be a majority of people unblinded to the data. We will basically get information that allows us to make a decision of saying go forward or not go forward. And we'll see how that plays out when we think about partnership. And Helen do you want to add anything to that.

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Helen Louise Collins, Five Prime Therapeutics, Inc. - Executive VP & Chief Medical Officer [13]

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I think nothing has 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've got to pass utility and then there is always going to be a business decision and as we said, some of that decision to move forward with bema maybe related on how the other programs are going, where we want to spend our resources and of course partnering with bema will go into that as well. It's a Phase III trial. It's an expensive trial. And then also just the external landscape in gastric cancer. Right. So what else -- what's happening with other in terms of where this will fit in. But although I'm not aware of anything right now externally that would change this. So I realize it sounds a bit vague, but I think again the whole point is that it's going to be a -- the decision isn't just a go-no-go from futility, but then there is the business part of it.

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William R. Ringo, Five Prime Therapeutics, Inc. - Chairman of the Board & CEO [14]

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And did we answer your question?

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Christopher John Zopf, Cowen and Company, LLC, Research Division - Associate [15]

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

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William R. Ringo, Five Prime Therapeutics, Inc. - Chairman of the Board & CEO [16]

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No.

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Helen Louise Collins, Five Prime Therapeutics, Inc. - Executive VP & Chief Medical Officer [17]

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No. It's a go-no-go, a pass-no-pass.

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Operator [18]

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And our next question comes from Steve Seedhouse with Raymond James.

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Timur Ivannikov, Raymond James & Associates, Inc., Research Division - Senior Research Associate [19]

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

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David V. Smith, Five Prime Therapeutics, Inc. - Executive VP & CFO [20]

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So this is David. There would be a milestone payment with the initiation of a Phase III trial. We've not disclosed what the size of that milestone is though.

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Timur Ivannikov, Raymond James & Associates, Inc., Research Division - Senior Research Associate [21]

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Okay. Got it. And then our next question is, just to clarify on FPA150. So you mentioned the Phase Ib 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 a certain threshold you're looking for?

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Helen Louise Collins, Five Prime Therapeutics, Inc. - Executive VP & Chief Medical Officer [22]

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Internally, we have a threshold and we haven't made that public. Well, the way that I think makes the most sense to answer it an ovarian cancer, although as single agents the checkpoint inhibitors are not improved. There is 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.

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Timur Ivannikov, Raymond James & Associates, Inc., Research Division - Senior Research Associate [23]

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Okay. Got it. And I guess also a clarification question on FPT155 development. So I think you're proposing a 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?

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Helen Louise Collins, Five Prime Therapeutics, Inc. - Executive VP & Chief Medical Officer [24]

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I think what you're talking about is based on the abstract that was submitted to SITC?

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Timur Ivannikov, Raymond James & Associates, Inc., Research Division - Senior Research Associate [25]

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Yes, correct.

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Helen Louise Collins, Five Prime Therapeutics, Inc. - Executive VP & Chief Medical Officer [26]

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Yeah. So I'm going to punt and say we will answer that on Saturday after we have our post-draft.

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Timur Ivannikov, Raymond James & Associates, Inc., Research Division - Senior Research Associate [27]

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

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William R. Ringo, Five Prime Therapeutics, Inc. - Chairman of the Board & CEO [28]

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

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Operator [29]

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And our next question comes from Salveen Richter with Goldman Sachs.

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Ross Howard Weinreb, Goldman Sachs Group Inc., Research Division - Research Analyst [30]

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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 passed the futility analysis, is it reasonable to assume that you have reached a hazard ratio of less than 1?

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Helen Louise Collins, Five Prime Therapeutics, Inc. - Executive VP & Chief Medical Officer [31]

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So, if we now -- this is, again, Helen. Yes, our plan is to still have a hazard ratio of less than 1. And if that passes that then that would be the announcement that we have passed utility. I think some of the questions have been about, then what? And I think that's where the decision about -- assuming we passed utility what we do next is based on a multitude of factors.

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Ross Howard Weinreb, Goldman Sachs Group Inc., Research Division - Research Analyst [32]

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Got it. And then secondly, the trial also uses it IHC 2 plus or 3 plus as the criterion for positivity per protein overexpression. Can you elaborate on what percent of patients in the trial having undergone using this asset here?

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Helen Louise Collins, Five Prime Therapeutics, Inc. - Executive VP & Chief Medical Officer [33]

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So the trial is being conducted in a selected patient population, meaning the patients all get -- anybody who enrolled have to test positive for 2 plus 3 plus. So a patient who is 1 plus or does not have FGFR2b overexpression does not enroll. So only patients who have that enrolling.

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Operator [34]

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And our next question comes from Michael Schmidt with Guggenheim Securities.

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Unidentified Analyst, [35]

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This is [Edgar] filling in for Michael. Just one question from me. You mentioned ensuring that the FIGHT trial was adequately powered on at full enrollment. I just wanted to know if you could remind us or maybe provide some color on what's the powering assumptions for the study is currently.

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Helen Louise Collins, Five Prime Therapeutics, Inc. - Executive VP & Chief Medical Officer [36]

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Again, this is Helen -- 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 saying, assuming that you know the benefit is X and your trial has been designed in a way that it's been trialed, is this particular version of the trial on -- like in other words, if the trial is powered at 80% and you assume there is a particular benefit if you ran this trial 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. Yes, this trial is demonstrating that the study will not be futile essentially or it will be futile. What 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 bemarituzumab.

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Operator [37]

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Thank you. And I am showing no further questions in the queue, I'd like to turn the call back to Bill Ringo for any closing remarks.

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William R. Ringo, Five Prime Therapeutics, Inc. - Chairman of the Board & CEO [38]

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Okay. Thank you. As I said at the beginning of the call, we made the decision to implement a restructuring plan that meaningfully extend our cash runway and enables us to prudently advance and prioritize our clinical programs while evaluating long-term strategies to grow the pipeline. In 2020 and we expect our clinical programs to read out 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 pipeline employees and our strategic collaborators, who all contribute to the continued advancement of our programs. Thank you.

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Operator [39]

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