Fate Therapeutics, Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; filed February 26, 2024. Fate is a clinical-stage biotechnology company developing off-the-shelf, iPSC-derived cellular immunotherapies for cancer and autoimmune diseases. It has no approved products and has not generated product-sales revenue.
Key financial metrics
| Metric | 2023 | 2022 |
|---|---|---|
| Collaboration revenue | $63.5 million | $96.3 million |
| Research and development expense | $172.6 million | $320.5 million |
| General and administrative expense | $81.4 million | $84.2 million |
| Operating loss | $190.5 million | $308.4 million |
| Net loss | $160.9 million | $281.7 million |
| Net loss per share | $1.64 | $2.91 |
| Net cash used in operating activities | $132.3 million | $248.2 million |
At December 31, 2023, cash, cash equivalents and investments totaled $316.2 million, down from approximately $441.2 million a year earlier. Current assets were $331.5 million and current liabilities $39.1 million. The balance sheet reports no debt balance. Total liabilities included $103.5 million of operating lease liabilities; undiscounted future lease payments were $162.9 million. Accumulated deficit was $1.2 billion. Gross margin is not meaningful because the company has no product sales.
Changes versus 2022
- Revenue fell 34%, primarily reflecting the termination of the Janssen collaboration, effective April 3, 2023. Fate recognized $52.3 million of Janssen revenue in 2023, including previously deferred amounts; Ono revenue was $11.2 million.
- R&D expense fell 46%, with lower employee compensation, laboratory and manufacturing supplies, and third-party/clinical-trial costs. The 2023 workforce reduction and program discontinuations contributed to lower spending.
- Net loss narrowed by $120.8 million. The improvement reflects lower expenses and other income, but is not evidence of product-level profitability.
- Operating cash use declined to $132.3 million. Cash, cash equivalents and investments nevertheless decreased by about $125.0 million year over year.
Outlook, developments and risks
- Management expects significant losses and expenses to continue and says additional capital will be required to develop candidates and pursue approvals. It reported no substantial doubt about the company’s ability to continue as a going concern for at least 12 months from issuance, but did not provide a specific cash-runway date or financial guidance.
- In January 2023, Fate discontinued FT516, FT596, FT538 and FT536, terminated the Janssen collaboration, and reduced its workforce by 60%; it recorded $12.9 million of severance and related costs. Year-end headcount was 181.
- Lead programs remain experimental: FT819 is in Phase 1 for B-cell malignancies, with a Phase 1 SLE study in start-up; FT522 is in Phase 1 for B-cell lymphoma; FT576 is in Phase 1 for multiple myeloma; and FT825 began Phase 1 enrollment for advanced solid tumors in January 2024. The clinical results cited for FT819 and FT576 are interim 2022 data, not current efficacy evidence.
- Ono collaboration revenue and funding support research activity, but future milestone and royalty amounts depend on development, regulatory and commercial success. Ono may terminate candidates under specified circumstances. A potential $7.9 million CIRM grant for the FT819 SLE study was awarded on February 22, 2024, after year-end.
- Other income included $17.2 million of interest income, $5.1 million of employee-retention credit income and $4.0 million from electing to treat a prior CIRM award as a grant. A $2.5 million gain arose from remeasurement of MSKCC stock-price milestones. These items affect comparability with operating performance.
- Key risks include clinical and regulatory uncertainty, complex manufacturing and supply dependencies, competition, the need for additional financing and potential dilution. A $300 million shelf registration, including a $100 million at-the-market program, was available; the filing says no securities had been sold under it as of the report.
- Litigation includes a securities class action concerning disclosures about Janssen and a related derivative action that was stayed. In a separate Shoreline patent case, the district court entered judgment for Shoreline; Fate and Whitehead appealed. Fate also has a separate Shoreline state-court action seeking damages.
Important facts for investors to verify
- Current unrestricted liquidity, actual cash burn and management’s updated runway assumptions; distinguish cash and investments from $15.2 million of restricted cash.
- Updated enrollment, safety, dose-escalation and efficacy data for FT819, FT522, FT576 and FT825, including the age and cutoff dates of previously reported interim results.
- Whether Ono continues funding and development, and the status of its Candidate 3 option and any associated milestones.
- Potential financing, dilution and preferred-stock conversion effects, including use of the shelf/ATM program.
- Developments in the Shoreline appeal and the securities and derivative litigation, as well as any resulting financial or operational exposure.