'Perfect Example' and 'Broader Utility:' Pieces of the Forty Seven-Gilead-California Stem Cell Story

The history of the stock price of Forty
Seven, Inc., since it went public in 2018.
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The stock price of Forty Seven, Inc., California's "don't eat me," cancer therapy firm, today closed at $$93.91 as the state's stem cell agency hailed the firm's performance as "perfect example" of the agency's value to the field and to the people of California. 

The closing price represented a stunning increase over the firm's record low of $5.53 last October. It came as Gilead Sciences, Inc., and Forty Seven announced this morning that the firm would be purchased by Gilead for $4.9 billion. 

Maria Bonneville, a spokeswoman for the agency, said, 

"Forty Seven, Inc., is the perfect example of CIRM’s value to the field of regenerative medicine.  We take pride in our ability to work with our grantees to make them as successful as possible and get them ready to partner in order to fulfill our mission."

Mathew Herper of Stat news interviewed Daniel O'Day, CEO of Gilead, today about the deal. Here is what Herper wrote, 

"So why purchase Forty Seven?

"'Because it’s novel,' O’Day said, referring to the company’s lead medicine, magrolimab, an antibody against CD47, a protein that cancer cells use to tell white blood cells 'don’t eat me.' The idea is that blocking this protein will allow the body’s immune system to attack cancer cells.

"'We had our eyes on Forty Seven for a while,' O’Day said. Data presented in two malignancies, myelodysplastic syndrome and acute myeloid leukemia, at last year’s annual meeting of the American Society of Hematology showed that the drug was doing 'some pretty special things,' he said. He said Gilead scientists believe that magrolimab could have 'broader utility' because it could be relatively safe and could be combined with other medicines relatively easily." 

The stem cell agency, formally known as the California Institute for Regenerative Medicine (CIRM), publishes anonymized summaries of what grant reviewers have to say about the applications from researchers. Here is the review summary for one application for $5 million in 2017. Here is the summary for a $10.2 million application in 2016.

$4.9 Billion Dollar Buyout of Firm Backed by California's Stem Cell Program; Good News for Agency Supporters

California's "eat-me," cancer-fighting firm Forty Seven, Inc., is being purchased in a $4.9 billion deal this morning that appears to validate the state's multimillion-dollar investment in the enterprise.

Forty Seven has received $15 million directly from the California stem cell agency. One of Forty Seven's co-founders, Irv Weissman of Stanford University, has received an additional $30 million for research, much of which underpins the company's approach. 

Gilead Sciences, Inc., of Foster City, Ca., is purchasing Forty Seven for $95.50 a share. Just last October, Forty Seven's stock was cratering at $5.53 a share. 

California will not benefit directly from the huge jump in the stock price. The state Constitution bars state agencies from holding stock in companies. However, if CIRM funded-research helps to create a profitable therapy, the state could receive royalties. See here for a look at the agency's intellectual property regulations.  

The purchase is good news for supporters of a proposed ballot initiative to give the agency an additional $5.5 billion, which would save CIRM from financial extinction. The backers of the proposal are currently gathering 600,000-plus signatures to place it on the Nov. 3 ballot. 

The agency was created in 2004 in a ballot campaign that provided $3 billion in state bond funding to help stimulate creation of stem cell therapies. So far the agency has not backed a stem cell therapy that is approved for use by the general public. But the Gilead purchase is a strong indicator that such a treatment is getting much closer. 

In its news release, Gilead highlighted Forty Seven's lead product candidate, magrolimab, and said, 

"The acquisition will strengthen Gilead’s immuno-oncology research and development portfolio. Magrolimab is a monoclonal antibody in clinical development for the treatment of several cancers for which new, transformative medicines are urgently needed, including myelodysplastic syndrome (MDS), acute myeloid leukemia (AML) and diffuse large B-cell lymphoma (DLBCL).

The stem cell agency, known formally as the California Institute for Regenerative Medicine(CIRM), has backed part of the work on magrolimab.  Last fall, Mark Chao, vice president of clinical development at Forty Seven, said, 

“CIRM’s support has been instrumental to our early successes and our ability to rapidly progress Forty Seven’s CD47 antibody targeting approach with magrolimab. CIRM was an early collaborator in our clinical programs, and will continue to be a valued partner as we move forward with our MDS/AML clinical trials.”

At the time, CIRM said the awards to Forty Seven and several other companies amounted to important deal-flow funding. CIRM quoted a USC study of the agency as saying, 

 “Deal-flow funding usually involves several waves or rounds of capital infusion over many years, and thus is it expected that CIRM’s past and current funding will attract increasing amounts of industry investment and lead to additional spending injections into the California economy in the years to come.”

Forty Seven's "eat me" expression involves enabling a person's immune system to overcome and devour cancer stem cells. The company's web site says, 

"Blocking CD47 'don’t eat me' signals while releasing and boosting 'eat me' signals is the core focus of our research to enable the patient’s own immune system to attack and destroy their cancer."

Tentacles, Railroads and California Stem Cell Finances: Looking for Greater Returns

The tentacles of railroad greed were the subject of many a political
cartoon in 19th and early 20th century California. 

California's $3 billion stem cell agency owes a "debt," you might say, to the Golden State's railroad, robber barons of the 19th century. 

The railroads were regarded as an evil "octopus," preying on helpless Californians. And the long-ago, railroad power over the state and its economy was a key reason behind a provision in the state Constitution that bars the state and its stem cell agency from owning stock in companies. 

The rationale was that buying railroad stock with taxpayer dollars amounted to unnecessary and most likely corrupt financial assistance to the "octopus" -- the old quid-pro-quo thing. 

Today the prohibition on owning stock in companies rankles some directors of the California Institute for Regenerative Medicine (CIRM), as the stem cell agency is formally known.

The matter revolves around the desire to secure a better financial return on CIRM's investment in companies such as Forty Seven, Inc., whose stock has skyrocketed in the last four months. 

The agency has pumped many millions into Forty Seven, which is testing an "eat me" immune therapy aimed at destroying cancer cells. The state could realize a return on royalties at some point --  if an "eat me" treatment ever makes a profit. But meanwhile, other private investors in the company are enjoying a handsome return, if they bought Forty Seven stock at the right time and sell at the right time. 

CIRM Director Jeff Sheehy has long been concerned about finding a way to generate better financial returns on CIRM's financial support of stem cell companies, along with the basic research that that the agency backs. 

In response to a query last week, Sheehy said in an email to the California Stem Cell Report, 

"You're asking the right question...and a central one as voters consider more funding for CIRM. Clearly in this instance (Forty Seven's stock price hike), a lot of money will be made off research funded by CIRM. 

"What exactly is the state's cut?  Will the state see any money if (the purchase of Forty Seven by) Gilead goes through and if not, why?

 "If the problem is the inability of the state via CIRM to hold equity, why doesn't the new measure fix this so that the investment by state realizes a fair return to our taxpayers? 

"I note that Stanford will make out like a bandit on this deal, and it's ironic that the (stem cell agency) board had to force Stanford to fulfill its commitment to co-fund another project with a similar product, that btw, is also licensed to Forty Seven.  

"Stanford has received about 12.5% of CIRM's funds. With the next measure, the same percentage going to this institution will mean that Stanford will have received over $1 billion from the state.  Should we not guarantee that the state receives its full share so it can fund healthcare, schools, teachers, community colleges, mental health needs, ending homelessness etc?"

The new measure that Sheehy refers to is a proposed ballot initiative to give the agency an additional $5.5 billion. CIRM is running out of money and will begin closing its doors if voters do not approve the proposal next November. 

While the complex measure significantly broadens the scope of CIRM operations, it does not alter the state Constitution. Doing so would require more signatures to qualify the measure for the ballot (meaning more cost to the initiative backers). 

A major constitutional change could also open a significant, new opportunity to attack the stem cell program and imperil passage of the current proposal.

During its 15-year history, CIRM has not conducted a major public examination of removing the ban to generate a better payoff for the state. The fact that the ban has been around for a century may testify to the political difficulties of such a task.

As for Stanford, it is the No. 1 recipient of CIRM awards with a total of $338 million and has had a representative on the CIRM board since its inception, a situation not uncommon with other recipient institutions. The agency has rules in place to prevent legal conflicts of interest. But about 90 percent of CIRM funding has gone to institutions with board representation, according to an accounting by the California Stem Cell Report. 

Leland Stanford, Wikipedia image

A final note of irony: Stanford University was founded by Leland Stanford, one of the four robber barons of California. He and his colleagues initially earned their reputation by building the western half of the transcontinental railroad with government funding. They were paid for each mile of track they laid, generating a hasty process that did not encourage quality work. 

Wikipedia adds,

"In 1975 the student body of Stanford University voted to use 'Robber Barons' as the nickname for their sports teams. However, school administrators disallowed it, saying it was disrespectful to the school's founder."

Rich Day on the Stock Market for California "Eat Me" Cancer Therapy Firm

Forty Seven went public in June 2018. Here is how its stock has performed.
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The stock price of Forty Seven, Inc., the high-flying company with a $15 million link to the California stem cell agency, today closed nine times higher than its all-time low just last October. 

The stock hit $50.00, 19 percent above its close yesterday. Its low last fall was $5.53. The stock took off this morning on the basis of news reports that Gilead Sciences, Inc., was in talks with the company about a possible purchase. Forty Seven is one of the few companies showing gains today as the stock market continued to plummet. 

Forty Seven was identified as "pivotal" investment earlier this month by the stem cell agency. It is one of 60 companies whose clinical trials the $3 billion agency is supporting. Forty Seven aims at fighting cancer by triggering the body's immune system and is known for its "eat me" therapeutic approach.  

The company's web site says, 

"The therapeutic potential of the innate immune system, the first line of defense against cancer, was not well understood and appreciated when Irv Weissman and his colleagues at Stanford University identified CD47-SIRP-alpha as a novel immune pathway. This discovery has the potential to lead to new therapies and empower patients to fight cancer with their own immune cells, in the hopes of one day saving lives."

No new details have emerged as of this writing on a possible Gilead-Forty Seven deal. 

CIRM, as a state agency, cannot profit directly from an increase in the company's stock price. California's state constitution bars the state from owning stocks. However, the state could benefit from royalties from Forty Seven if the company's CIRM-financed work results in profits. 

So far, CIRM-backed investments have generated few royalties despite expectations raised by agency supporters. During the 2004 ballot campaign that created the agency a potential of more than $1 billion in royalties was bandied about. 

The stem cell agency, known formally as the California Institute for Regenerative Medicine (CIRM), declined to comment on the Forty Seven news. But the agency has previously touted the significance of its role in funding the firm with $15.2 million and also backing underlying research by Weissman, who has received $30 million from CIRM. Weissman sits on the company board. 

Also not commenting was Forty Seven and the campaign organization pushing a November ballot proposal that would give financially strapped CIRM an additional $5.5 billion. CIRM is running out of cash and will begin to shut down if the measure fails to make the ballot or win voter approval.  

CIRM points to companies like Forty Seven as evidence of the value that the agency has provided for the people of California and the state's business climate. Forty Seven and other CIRM success stories are likely be ballyhooed often in the upcoming campaign.  

Readers who are not familiar with northern California may be interested in how the stem cell geography works in the Golden State. 

• CIRM is headquartered in Oakland, It is only 42 driving minutes away from Gilead.
• Gilead is located in Foster City, only 20 minutes from Forty Seven.
• Forty Seven is located in Menlo Park, only 19 minutes from Irv Weissman's office at Stanford. 

One caveat on those times and distances: They are only good when the traffic is not too bad.  But the physical proximity does have something to do with the building of a "critical mass" of stem cell enterprises in the Golden State, something that researchers and CIRM find valuable. 

Here is a Forty Seven video discussing the company's "eat me" approach.

Booming Stock Price This Morning for Firm Backed by California Stem Cell Agency

Google chart

California's more than $15 million investment in a San Francisco Bay area company could be paying off more than handsomely this morning -- for the company.

The firm is called Forty Seven, Inc. Its stock skyrocketed overnight and was up 24 percent this morning at the time of this writing.  The jump occurred as the rest of the market continued its deep slump.

The trigger for Forty Seven was a report from Bloomberg News that Gilead Sciences, Inc., had approached the Menlo Park, Ca., company with a takeover bid.

This morning's stock price of $60,34, however, was still below the company's 52-week high of $65. That compares to the 52-week low of $5.53.

The hike in Forty Seven's stock price will not necessarily directly benefit the stem cell agency, which is formally known as the California Institute for Regenerative Medicine (CIRM).  The California state constitution bars the state from holding stock in companies, which has rankled some of CIRM's top officials.

Any financial return on the two CIRM awards made directly to Forty Seven would come through possible royalties from use of research that the agency has helped to finance. 

CIRM's support for the firm's research actually exceeds the $15.2 million in direct awards. The $3 billion agency, which is running out of cash, has financed other awards that laid the ground work for Forty Seven. They  went to Irv Weissman at Stanford University, who is on the company's board of directors and a co-founder of the firm. Weissman has received $30 million from CIRM.  

Last October the agency cited its investment with Forty Seven as part of the economic benefits chalked up by CIRM and provided this quote from the company.

"'CIRM’s support has been instrumental to our early successes and our ability to rapidly progress Forty Seven’s CD47 antibody targeting approach with magrolimab,” says Mark Chao, M.D., Ph.D., Founder and Vice President of Clinical Development at Forty Seven Inc. 'CIRM was an early collaborator in our clinical programs, and will continue to be a valued partner as we move forward with our MDS/AML clinical trials.'"

Earlier this month, CIRM President Maria Millan highlighted Forty Seven as a "pivotal" clinical trial in a briefing for CIRM directors, producing the slide below. 

Look for more coverage involving the Forty Seven-Gilead news later today right here on the California Stem Cell Report.