Shooting F-stars

How BMS deal validates F-star's asset-centric spinout strategy

F-star Alpha Ltd.'s deal with Bristol-Myers Squibb Co. (NYSE:BMY) last week is the first validation of the parent platform company's strategy of speeding returns by packaging assets into corporations for buyer convenience and seller financial flexibility.

F-star Biotechnology Ltd., a subsidiary of F-star GmbH, launched F-star Alpha in October 2013 to develop oncology programs against 23 targets with €9.3 million ($12.9 million) from Atlas Venture, Aescap Venture, TVM Capital, SR One, MP Healthcare Venture Management and MS Ventures (see BioCentury, Oct. 28, 2013).

BMS will make up to $50 million in near-term payments for an option to acquire Alpha and an exclusive worldwide license to develop lead program FS102 during the option period. The figure also includes a potential milestone payment when BMS starts Phase I studies of the antibody fragment targeting HER2.

F-star Biotechnology CEO John Haurum said the license fee and early milestone would be paid to the Alpha company. Alpha shareholders will receive the undisclosed option fee, plus up to $425 million more if BMS exercises the option and FS102 meets milestones of beginning Phase III, U.S. approval and EU approval. He said BMS can exercise the option when it decides to begin a Phase IIb trial of FS102 or three-and-a-half years after the first patient is dosed, whichever comes first.

Atlas' Jean-François Formela said, "This first deal, I would say, is a very good start of the validation of this kind of structure."

He added, "Not only do we not have to spend money on that program anymore, but we were able to get significant cash up front to fund the company and distribute money back to investors."

Haurum said Alpha conducted IND-enabling and preclinical pharmacology studies of FS102 in various in vivo tumor models that responded better to the candidate than to standard of care.

"It binds to a different epitope than Herceptin and Perjeta, and we believe that's linked to the different mechanism of action of inducing tumor cell death," he said.

BMS told BioCentury it liked FS102's validated target and preclinical efficacy against tumors refractory to Herceptin trastuzumab plus Perjeta pertuzumab, and that FS102 could be used as monotherapy or in combinations using BMS's immuno-oncology portfolio. Roche (SIX:ROG; OTCQX:RHHBY) and its Genentech Inc. unit market Herceptin and Perjeta.

Haurum said BMS will study FS102 in HER2-overexpressing breast and gastric cancers and start Phase I in early 2015.

Formela said Alpha's other programs were returned to various F-star sub-entities, which Alpha's deal proceeds will help fund.

Tables

Earnings on deck
Arena Pharmaceuticals Inc. (NASDAQ:ARNA) 11/3 Pre -$0.12 -$0.08 NA
Becton Dickinson and Co. (NYSE:BDX) (A) 11/4 Pre $1.66 $1.54 8%
Regeneron Pharmaceuticals Inc. (NASDAQ:REGN) 11/4 Pre $2.57 $1.25 106%
Bio-Rad Laboratories Inc. (NYSE:BIO) 11/4 Post $0.86 $0.66 30%
Genomic Health Inc. (NASDAQ:GHDX)

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