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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

 

For the quarterly period ended September 30, 2019

or

 

TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

 

For the transition period from                      to                      

Commission File Number: 001-36070

 

Five Prime Therapeutics, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

26-0038620

(State or other jurisdiction of

incorporation or organization)

 

(IRS Employer

Identification No.)

111 Oyster Point Boulevard

South San Francisco, California 94080

(415) 365-5600

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common Stock, par value $0.001 per share

FPRX

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

  

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

  

  

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)      Yes      No  

 

 

 

As of November 5, 2019, the number of outstanding shares of the registrant’s common stock was 36,391,851.

 

 

 

 

 


 

TABLE OF CONTENTS

 

 

PART I.

  

 

FINANCIAL INFORMATION

  

4

 

  

 

Item 1.

  

 

Unaudited Financial Statements

  

4

 

  

 

  

 

Balance Sheets as of September 30, 2019 and December 31, 2018

  

4

 

  

 

  

 

Statements of Operations for the Three and Nine Months Ended September 30, 2019 and 2018

  

5

 

  

 

  

 

Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2019 and 2018

  

6

 

  

 

  

 

Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2019 and 2018

  

7

 

 

 

 

 

Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018

 

8

 

  

 

  

 

Notes to Financial Statements

  

9

 

  

 

Item 2.

  

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

  

20

 

  

 

Item 3.

  

 

Quantitative and Qualitative Disclosures About Market Risk

  

32

 

  

 

Item 4.

  

 

Controls and Procedures

  

32

 

PART II.

  

 

OTHER INFORMATION

  

33

 

  

 

Item 1.

  

 

Legal Proceedings

  

33

 

  

 

Item 1A.

  

 

Risk Factors

  

33

 

  

 

Item 6.

  

 

Exhibits

  

64

 

Signatures

  

65

In this report, unless otherwise stated or the context otherwise indicates, references to “Five Prime,” “the company,” “we,” “us,” “our” and similar references refer to Five Prime Therapeutics, Inc. The Five Prime logo is our registered trademark. This report also contains registered marks, trademarks and trade names of other companies. All other trademarks, registered marks and trade names appearing in this report are the property of their respective holders.

 

 

 

2


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

This Quarterly Report on Form 10-Q, or this report, contains forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect,” or similar expressions, or the negative or plural of these words or expressions. These forward-looking statements include statements concerning the following:

 

our estimates regarding our expenses, revenues, anticipated capital requirements and our needs for additional financing;

 

our receipt of future milestone payments or royalties, and the timing of such payments;

 

our and our partners’ ability to timely advance drug candidates into and through clinical data readouts and successful completion of clinical trials;

 

the timing, progress and results of preclinical studies and research and development programs;

 

our expectations regarding the potential safety, efficacy or clinical utility of our product candidates;

 

the implementation, timing and likelihood of success of our plans to develop companion diagnostics for our product candidates;

 

our ability to establish and maintain collaborations and necessary licenses;

 

the implementation of our business model and strategic plans for our business, product candidates and technology;

 

the scope of protection we establish and maintain for intellectual property rights covering our product candidates and technology;

 

the size of patient populations targeted by products we or our partners develop and market adoption of such products by physicians and patients;

 

the extent of protein overexpression or gene amplification in certain patient populations;

 

the timing or likelihood of regulatory filings and approvals for products we or our partners develop;

 

the ability to negotiate adequate reimbursement and pricing for our drug candidates by third parties and government authorities;

 

developments relating to our competitors and our industry; and

 

our expectations regarding licensing, acquisitions and strategic operations.

These forward-looking statements are only current predictions and are subject to known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from those anticipated by such statements. We discuss many of these risks in greater detail under the heading “Risk Factors” and elsewhere in this report. You should not rely upon forward-looking statements as predictions of future events.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by law, we are under no duty to update or revise any of the forward-looking statements in this report, whether as a result of new information, future events or otherwise, after the date of this report.

We obtained the industry, market and competitive position data in this report from our own internal estimates and research as well as from industry and general publications and research surveys and studies conducted by third parties. While we believe that the information in each of these publications, surveys and studies is reliable, we have not independently verified market and industry data from third-party sources. While we believe our internal estimates and research are reliable and the market definitions we use are appropriate, such estimates, research and definitions have not been verified by any independent source.

 

 

 

3


 

PART I. FINANCIAL INFORMATION

 

Item 1. Unaudited Financial Statements

FIVE PRIME THERAPEUTICS, INC.

Balance Sheets

(In thousands, except share and per share amounts)

 

 

September 30,

 

 

December 31,

 

 

2019

 

 

2018

 

 

(Unaudited)

 

 

(Note 1)

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

48,933

 

 

$

43,953

 

Marketable securities

 

137,054

 

 

 

226,185

 

Receivables from collaborative partners

 

3,664

 

 

 

5,096

 

Prepaid and other current assets

 

7,841

 

 

 

13,334

 

Total current assets

 

197,492

 

 

 

288,568

 

Restricted cash

 

1,543

 

 

 

1,543

 

Property and equipment, net

 

25,759

 

 

 

28,718

 

Operating lease, right-of-use assets

 

31,546

 

 

 

 

Other long-term assets

 

2,200

 

 

 

2,705

 

Total assets

$

258,540

 

 

$

321,534

 

 

 

 

 

 

 

 

 

Liabilities and stockholders' equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

4,234

 

 

$

1,972

 

Accrued personnel-related expenses

 

5,994

 

 

 

7,383

 

Other accrued liabilities

 

12,184

 

 

 

15,348

 

Operating lease obligations, current portion

 

3,944

 

 

 

 

Deferred revenue, current portion

 

2,153

 

 

 

1,428

 

Deferred rent, current portion

 

 

 

 

1,356

 

Total current liabilities

 

28,509

 

 

 

27,487

 

Deferred revenue, long-term portion

 

5,023

 

 

 

10,465

 

Operating lease obligations, long-term portion

 

46,574

 

 

 

 

Deferred rent, long-term portion

 

 

 

 

18,443

 

Stockholders' equity:

 

 

 

 

 

 

 

Common stock, $0.001 par value; 100,000,000 shares authorized, 36,421,709

   issued and 35,099,100 outstanding at September 30, 2019; 35,625,751 issued and

  34,745,721 outstanding at December 31, 2018.

 

34

 

 

 

34

 

Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued and

   outstanding

 

 

 

 

 

Additional paid-in capital

 

578,847

 

 

 

559,892

 

Accumulated other comprehensive income (loss)

 

79

 

 

 

(106

)

Accumulated deficit

 

(400,526

)

 

 

(294,681

)

Total stockholders' equity

 

178,434

 

 

 

265,139

 

Total liabilities and stockholders' equity

$

258,540

 

 

$

321,534

 

 

The accompanying notes are an integral part of these unaudited financial statements.

 

 

 

4


 

FIVE PRIME THERAPEUTICS, INC.

Statements of Operations

(In thousands, except per share amounts)

 (Unaudited)

 

 

Three Months Ended

 

 

 

Nine Months Ended

 

 

September 30,

 

 

 

September 30,

 

 

2019

 

 

2018

 

 

 

2019

 

 

2018

 

Collaboration revenue

$

2,984

 

 

$

5,771

 

 

 

$

11,664

 

 

$

45,837

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

26,948

 

 

 

44,687

 

 

 

 

88,126

 

 

 

121,619

 

General and administrative

 

13,206

 

 

 

9,832

 

 

 

 

33,377

 

 

 

30,092

 

Total operating expenses

 

40,154

 

 

 

54,519

 

 

 

 

121,503

 

 

 

151,711

 

Loss from operations

 

(37,170

)

 

 

(48,748

)

 

 

 

(109,839

)

 

 

(105,874

)

Interest income

 

1,100

 

 

 

1,531

 

 

 

 

3,996

 

 

 

4,212

 

Other expense, net

 

1

 

 

 

(27

)

 

 

 

(2

)

 

 

(32

)

Loss before income tax

 

(36,069

)

 

 

(47,244

)

 

 

 

(105,845

)

 

 

(101,694

)

Income tax provision

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

$

(36,069

)

 

$

(47,244

)

 

 

$

(105,845

)

 

$

(101,694

)

Basic and diluted net loss per common share

$

(1.03

)

 

$

(1.37

)

 

 

$

(3.03

)

 

$

(3.01

)

Weighted-average shares used to compute basic and diluted net loss per common share

 

34,996

 

 

 

34,482

 

 

 

 

34,901

 

 

 

33,740

 

 

The accompanying notes are an integral part of these unaudited financial statements.

 

 

 

5


 

FIVE PRIME THERAPEUTICS, INC.

Statements of Comprehensive Loss

(In thousands)

 (Unaudited)

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

September 30,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net loss

$

(36,069

)

 

$

(47,244

)

 

$

(105,845

)

 

$

(101,694

)

Other comprehensive gain:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain/(loss) on marketable securities

 

(63

)

 

 

128

 

 

 

185

 

 

 

226

 

Comprehensive loss

$

(36,132

)

 

$

(47,116

)

 

$

(105,660

)

 

$

(101,468

)

 

The accompanying notes are an integral part of these unaudited financial statements.

 

 

 

6


 

FIVE PRIME THERAPEUTICS, INC.

Statements of Stockholders’ Equity

(In thousands, except share amounts)

 (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

Retained

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

Earnings

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

(Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit)

 

 

Equity

 

Balances at December 31, 2017

 

 

28,178,639

 

 

$

28

 

 

$

421,257

 

 

$

(476

)

 

$

(155,607

)

 

$

265,202

 

Issuance of common stock upon follow-on public offering, net

   of issuance costs

 

 

5,897,435

 

 

 

6

 

 

 

114,994

 

 

 

 

 

 

 

 

 

115,000

 

Issuance costs related to the follow-on public offering

 

 

 

 

 

 

 

 

(7,387

)

 

 

 

 

 

 

 

 

(7,387

)

Issuance of common stock under equity incentive plans

 

 

311,179

 

 

 

 

 

 

1,704

 

 

 

 

 

 

 

 

 

1,704

 

Repurchase of shares to satisfy tax withholding obligations

 

 

(52,608

)

 

 

 

 

 

(997

)

 

 

 

 

 

 

 

 

(997

)

Effect of adoption of ASU 2014-09

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,374

 

 

 

1,374

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

7,820

 

 

 

 

 

 

 

 

 

7,820

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(110

)

 

 

 

 

 

(110

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(20,390

)

 

 

(20,390

)

Balances at March 31, 2018

 

 

34,334,645

 

 

 

34

 

 

 

537,391

 

 

 

(586

)

 

 

(174,623

)

 

 

362,216

 

Issuance of common stock under equity incentive plans

 

 

122,278

 

 

 

 

 

 

1,160

 

 

 

 

 

 

 

 

 

1,160

 

Repurchase of shares to satisfy tax withholding obligations

 

 

(5,766

)

 

 

 

 

 

(101

)

 

 

 

 

 

 

 

 

(101

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

7,435

 

 

 

 

 

 

 

 

 

7,435

 

In transit: issuance of common stock under equity incentive plans

 

 

3,661

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In transit: repurchase of shares to satisfy tax withholding

 

 

(4,365

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive gain

 

 

 

 

 

 

 

 

 

 

 

208

 

 

 

 

 

 

208

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(34,060

)

 

 

(34,060

)

Balances at June 30, 2018

 

 

34,450,453

 

 

 

34

 

 

 

545,885

 

 

 

(378

)

 

 

(208,683

)

 

 

336,858

 

Issuance of common stock under equity incentive plans

 

 

129,022

 

 

 

 

 

 

158

 

 

 

 

 

 

 

 

 

158

 

Repurchase of shares to satisfy tax withholding obligations

 

 

(47,658

)

 

 

 

 

 

(757

)

 

 

 

 

 

 

 

 

(757

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

7,634

 

 

 

 

 

 

 

 

 

7,634

 

In transit: issuance of common stock under equity incentive plans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In transit: repurchase of shares to satisfy tax withholding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive gain

 

 

 

 

 

 

 

 

 

 

 

128

 

 

 

 

 

 

128

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(47,244

)

 

 

(47,244

)

Balances at September 30, 2018

 

 

34,531,817

 

 

 

34

 

 

 

552,921

 

 

 

(250

)

 

 

(255,927

)

 

 

296,778

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

Retained

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

Earnings

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

(Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit)

 

 

Equity

 

Balances at December 31, 2018

 

 

34,745,721

 

 

$

34

 

 

$

559,892

 

 

$

(106

)

 

$

(294,681

)

 

$

265,139

 

Issuance of common stock under equity incentive plans

 

 

150,666

 

 

 

 

 

 

222

 

 

 

 

 

 

 

 

 

222

 

Repurchase of shares to satisfy tax withholding obligations

 

 

(57,703

)

 

 

 

 

 

(670

)

 

 

 

 

 

 

 

 

(670

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

4,872

 

 

 

 

 

 

 

 

 

4,872

 

Other comprehensive gain

 

 

 

 

 

 

 

 

 

 

 

148

 

 

 

 

 

 

148

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(35,385

)

 

 

(35,385

)

Balances at March 31, 2019

 

 

34,838,684

 

 

 

34

 

 

 

564,316

 

 

 

42

 

 

 

(330,066

)

 

 

234,326

 

Issuance of common stock under equity incentive plans

 

 

131,586

 

 

 

 

 

 

772

 

 

 

 

 

 

 

 

 

772

 

Repurchase of shares to satisfy tax withholding obligations

 

 

(5,957

)

 

 

 

 

 

(58

)

 

 

 

 

 

 

 

 

(58

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

5,863

 

 

 

 

 

 

 

 

 

5,863

 

Other comprehensive gain

 

 

 

 

 

 

 

 

 

 

 

100

 

 

 

 

 

 

100

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(34,391

)

 

 

(34,391

)

Balances at June 30, 2019

 

 

34,964,313

 

 

 

34

 

 

 

570,893

 

 

 

142

 

 

 

(364,457

)

 

 

206,612

 

Issuance of common stock under equity incentive plans

 

 

264,419

 

 

 

 

 

 

4

 

 

 

 

 

 

 

 

 

4

 

Repurchase of shares to satisfy tax withholding obligations

 

 

(129,632

)

 

 

 

 

 

(706

)

 

 

 

 

 

 

 

 

(706

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

8,656

 

 

 

 

 

 

 

 

 

8,656

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(63

)

 

 

 

 

 

(63

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(36,069

)

 

 

(36,069

)

Balances at September 30, 2019

 

 

35,099,100

 

 

 

34

 

 

 

578,847

 

 

 

79