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Since my three previous articles on Fate Therapeutics (FATE), the stock has been falling consistently. The reason is the glacial movement of the company’s very early stage pipeline coupled with an untenably high valuation. The market cap used to be nearly $9bn; currently, it is just $3bn. However, outside of minor data announcements, nothing has changed with the pipeline. Hence, FATE continues to slog.
In a more upbeat market, no news could have been construed as good news, given the company’s obviously good science. However, this is a punishing market, and no news means bad news these days. That is also a related reason why Fate has kept falling.
For 15 years, Fate has been a pioneer in induced pluripotent stem cell research. It is a leading allogeneic (off-the-shelf) NK cell therapy developer with multiple products in trials across the entire immuno-oncology space. Using technology discovered at Scripps Institute, the company “uses small molecules to convert normal adult cells to an induced pluripotent state where they can create new cells, of any type, just like human embryonic cells.” Fate’s current focus is on developing CAR-T and NK cells through this technology; other companies like Gilead (NASDAQ:GILD) and Allogene (NASDAQ:ALLO) are using iPSCs for other things. Fate had a multibillion-dollar collaboration agreement with JNJ.
Fate has reported early data from at least three product candidates – FT516 (hnCD16) NK Cell Product Candidate in B-cell Lymphoma, FT596 (CAR19 + hnCD16 + IL-15RF) NK Cell Product Candidate in refractory DLBCL, and FT500 in refractory NHL. Early data consistently showed response to therapy, but like I said earlier, one persistent concern was durability of that response compared to donor-derived NK cell therapy. The other issue raised by analysts – I discussed all of this earlier, this is still just background – is that Fate has talked about a 30-35% Complete Response in AML, but, according to Michael Yee of Jefferies, donor-derived CAR-T has shown up to 50% CR rates. On that issue, Fate’s CEO Scott Wolchko said that it is not just about higher CR, but also the much lighter lymphodepletion necessary for Fate’s therapies versus donor-derived ones, requiring hospitalization. He also says that AML therapies have been approved on much lower bars, less than 35% CR; moreover, costs and associated expenses are also much less with iPSCs. One upshot of iPSC therapy is that because of its higher safety as well as its less expensive, more consistent supply, durability of response is not a major concern. The therapy can simply be given multiple times instead of just once, so response can be made more durable that way.
As a quick aside, note what I said in a follow-up article:
[FATE] fell nearly 30% on releasing interim data from its FT596 and FT516 off-the-shelf, iPSC-derived NK cell programs for B-cell Lymphoma. There were two issues which may have bothered the market – 2 cases of grade 1-2 cytokine release syndrome or CRS in two FT596 cohorts, and questions surrounding durability after 2 out of 7 per protocol patients relapsed after 5.2 months. The third patient – out of 8 total – was “forced” to take another cancer therapy.
I said how the grade 1-2 CRS is a non-issue; as for durability, we just have to wait and see how multiple interventions work. As to that, the company presented some relevant data at ASH 2021. Data for FT596 showed that patients responded well to a second dose, with 10 out of 11 patients having an ongoing response in the second cycle. Key data was:
5 of 6 Patients Achieve Objective Response, including 4 Patients with Complete Response, with Single Dose of FT596 at 900 Million Cells in Combination with Rituximab
13 of 19 Patients Achieve Objective Response with Single Dose of FT596 at 90 Million and 300 Million Cell Dose; 10 of 11 Patients Treated with a Second FT596 Cycle Continue in Ongoing Response, with 3 Patients in Ongoing Complete Response at ≥6 Months Follow-up; Additional 2 Patients Reach 6 Months in Complete Response
This was what I was talking about. Durability of response does not need to become an issue if multiple doses can be given. I think, however, that the company will need to explore how long and at what cost – financial and health-wise – multiple doses can be given to patients. That will be a drawn-out process. They will also need to process the therapeutic differences between a one-time higher dose like 900 million cells here versus the two smaller doses of 90 and 300 million cells given here. That’s a lot of work up ahead before a complete registrational filing can be done.
More details about the durability of response for the 13 evaluable patients are here:
The ASH presentation includes durability of response data from 13 responding patients in the second and third single-dose cohorts of 90 million cells and 300 million cells (n=9 in Monotherapy Arm; n=10 in Combination Arm). As of the data cutoff date of October 11, 2021, 10 patients continued in ongoing response, including three patients in ongoing complete response at least six months from initiation of treatment; two patients reached six months in complete response and subsequently had disease progression; and one patient had disease progression prior to six months. Of these 13 responding patients:
Monotherapy Arm (n=7 responding patients). Five patients, all of whom were treated with a second FT596 single-dose cycle with the consent of the U.S. Food and Drug Administration (FDA), continued in ongoing response at a median follow-up of 4.1 months, including one patient in ongoing complete response at 8.1 months; one patient, who was treated with only one FT596 single-dose cycle, reached six months in complete response and subsequently had disease progression at 6.5 months; and one patient, who was treated with only one FT596 single-dose cycle, had disease progression at 1.7 months.
Combination Arm (n=6 responding patients). Five patients, all of whom were treated with a second FT596 single-dose cycle with the consent of the FDA, continued in ongoing response at a median follow-up of 4.6 months, including two patients in ongoing complete response at 6.0 and 10.8 months; and one patient, who was treated with a second FT596 single-dose cycle with the consent of the FDA, reached six months in complete response and subsequently had disease progression at 6.7 months.
Financials
FATE has a market cap of $3.1bn, a short interest of 15.48%, and a cash reserve of $678mn. What I said last time still stands until their earnings update next week – “Research and development expenses were $53.1 million for the third quarter of 2021 while SG&E was $15.7mn. Given those figures and their strategic collaboration with Janssen which saves them considerably on trial costs, I believe they have a cash runway of no less than 8-10 quarters.”
Bottom line
Fate is quickly reaching a price point where I might become really interested in buying stocks of it. There’s a long way to go before they can really produce data that derisks their investment thesis. However, they seem to be slowly getting there, and I look forward to seeing more data from them in the coming months.
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