Fate Therapeutics, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; comparative period is Q1 2020. Amounts are in U.S. dollars. Fate is a clinical-stage biopharmaceutical company developing iPSC-derived, off-the-shelf cellular immunotherapies. It had no therapeutic product sales; reported revenue came from collaborations.
Financial results and liquidity
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Collaboration revenue | $11.1 million | $2.5 million |
| Research and development expense | $44.9 million | $29.3 million |
| General and administrative expense | $12.5 million | $7.7 million |
| Loss from operations | $46.2 million | $34.5 million |
| Net loss | $45.1 million | $33.5 million |
| Basic and diluted net loss per share | $0.48 | $0.44 |
| Cash used in operating activities | $27.1 million | $26.7 million |
Collaboration revenue increased $8.6 million year over year, primarily reflecting Janssen revenue. Q1 2021 revenue included $8.6 million from Janssen and $2.5 million from Ono. Research and development spending rose $15.6 million, mainly due to employee costs, including stock-based compensation, clinical and consultant costs, and laboratory supplies. General and administrative expense increased $4.8 million, primarily from employee costs. The company reported no gross margin measure.
At March 31, 2021, cash and cash equivalents were $106.4 million, short-term investments were $683.7 million, and long-term investments were $98.3 million, totaling $888.4 million in cash, cash equivalents and investments. Total assets were $1.046 billion; current assets were $804.3 million and current liabilities $94.6 million. Stockholders’ equity was $790.1 million. The filing reports no material contractual obligations outside those recorded or disclosed, and no off-balance-sheet arrangements. No funded debt is identified in the supplied filing text; operating lease liabilities totaled $110.9 million, with $194.1 million of undiscounted future lease payments.
Cash, cash equivalents and restricted cash declined $60.9 million during the quarter to $121.6 million. Investing activities used $471.9 million, mainly because the company purchased $529.9 million of investments; financing activities provided $438.1 million, including $432.4 million net proceeds from the January public offering. Operating cash use was broadly similar to the prior-year quarter.
Material changes and notable items
- In January 2021, the company sold common stock and issued pre-funded warrants for $460.0 million gross proceeds, or $432.4 million net proceeds after $27.6 million of offering costs. Common shares outstanding were 93.9 million at quarter-end, up from 87.7 million at December 31, 2020; 94.0 million were issued and outstanding as of May 3, 2021.
- Collaboration revenue rose from $2.5 million to $11.1 million. Janssen generated $8.6 million in Q1 2021 revenue; the company reported $57.6 million of Janssen deferred revenue at quarter-end. Ono revenue was $2.5 million in both periods.
- The company recognized a $0.7 million non-operating benefit from a decrease in the estimated fair value of MSK stock-price appreciation milestones. The recorded liability was $47.0 million, but no clinical milestone triggering payment had been achieved; potential payments total up to $75.0 million.
- Stock-based compensation increased to $13.0 million from $6.9 million. Accumulated deficit reached $602.0 million.
Outlook, commentary and risks
Management expects continued operating losses and increased research, development, clinical, manufacturing and infrastructure spending. The company said its March 31 cash, cash equivalents and investments should fund projected operating requirements for at least the next 12 months. This is a forward-looking estimate; management cautioned that development costs, timing, and funding needs are uncertain and that additional capital may be needed. No specific revenue, earnings or clinical milestone guidance was provided.
COVID-19 caused delays or disruptions to some research and development activities and clinical trial initiation or conduct, including through site constraints and prioritization of healthcare resources. The duration and ultimate impact were unknown. Other key risks include the early-stage and unproven nature of the iPSC cell-therapy platform; clinical, regulatory and manufacturing uncertainty; dependence on third-party suppliers and collaborators; and the possibility of needing additional capital on unfavorable terms. The company reported no material legal proceedings and concluded that its disclosure controls were effective as of March 31, 2021.
Key collaboration economics are contingent: Janssen funds research and may owe development, regulatory and sales milestones and royalties if candidates advance and commercialize; Ono retains an option over Candidate 2, with potential milestones and royalties. The company stated that no Janssen milestone or royalty payments had been received by quarter-end. The CIRM award liability was $4.0 million; depending on the company’s election, repayment or future royalties on FT516 sales may be required.
Important facts for investors to verify
- Whether clinical progress and COVID-related site or operational disruptions change trial timelines, spending, or the stated cash runway.
- How much of collaboration revenue and deferred revenue depends on continued research activity, and whether Janssen or Ono exercises options or achieves contingent milestones.
- The expected pace of cash use and investment maturities, particularly as the company expands internal manufacturing and moves to its new headquarters.
- The assumptions underlying the $47.0 million MSK milestone liability and the conditions that could trigger actual payments.
- Potential dilution from equity compensation, outstanding pre-funded warrants, future financing, and conversion of Class A preferred stock.