Fate Therapeutics, Inc. — FY 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. Fate Therapeutics is a clinical-stage biopharmaceutical company developing programmed cellular immunotherapies, including off-the-shelf iPSC-derived NK- and T-cell candidates. It had no therapeutic product sales or royalties; revenue came from collaborations and grants.
Financial performance and position
| Metric | FY 2020 | FY 2019 | Change |
|---|---|---|---|
| Collaboration revenue | $31.4 million | $10.7 million | +$20.8 million |
| Research and development expense | $125.6 million | $87.8 million | +$37.9 million |
| General and administrative expense | $33.9 million | $23.6 million | +$10.3 million |
| Loss from operations | $128.1 million | $100.7 million | Loss widened |
| Net loss | $173.4 million | $98.1 million | Loss widened |
| Net loss per share, basic and diluted | $2.10 | $1.44 | Loss per share increased |
| Net cash used in operating activities | $39.2 million | $83.2 million | Cash use decreased |
- At year-end, cash and cash equivalents were $167.3 million and investments were $315.6 million, totaling $482.9 million. Restricted cash was an additional $15.2 million.
- Current assets were $494.3 million versus current liabilities of $85.6 million. Management said existing cash, cash equivalents and investments were expected to fund projected operating requirements for at least 12 months from the filing’s issuance, subject to significant development and financing uncertainties.
- The company reported no outstanding long-term debt; its Silicon Valley Bank facility was repaid in 2019. This does not include operating lease obligations: undiscounted future lease payments totaled approximately $194.0 million.
- No product gross margin was reported because the company had no product sales. Collaboration revenue covered only a portion of operating expenses.
Material changes and unusual items
- Revenue increased primarily from the Janssen collaboration and continued Ono collaboration work. FY 2020 included $16.8 million from Janssen and $14.6 million from Ono; the latter included a $10.0 million milestone payment following Ono’s nomination of a target for Candidate 2.
- Research and development costs rose with higher employee compensation, facility costs and laboratory materials and supplies, as the company expanded clinical, manufacturing and research activities. General and administrative expense also increased, largely from employee-related and facility costs.
- Net loss included $47.7 million of noncash expense from remeasurement of contingent stock-price appreciation milestones under the Memorial Sloan Kettering license. No clinical milestone triggering payment had been achieved by year-end; the recorded liability was based on fair value estimates and could fluctuate with the stock price and other assumptions.
- Financing provided $282.8 million in cash, including $188.8 million net proceeds from a June public offering, $50.0 million from a JJDC private placement, and proceeds related to the Janssen/JJDC investment. Common shares outstanding increased to 87.7 million at year-end from 75.7 million a year earlier.
- After year-end, a January 2021 offering generated approximately $432.1 million in estimated net proceeds. This is a subsequent event, not part of FY 2020 results.
Pipeline, outlook and risks
- Interim Phase 1 data were early and based on small patient groups. FT500’s reported dose-escalation data included 15 patients: investigators reported no dose-limiting toxicities or FT500-related serious adverse events, and 11 patients had stable disease. The company was enrolling an expansion cohort.
- For FT516, interim data in a small B-cell lymphoma group reported objective responses in three of four patients treated in specified higher dose cohorts, including two complete responses; no dose-limiting toxicities or FT516-related serious adverse events were reported in that group. These preliminary results are not proof of efficacy.
- FT596 had interim data for two patients at the first dose level: one had progressive disease and one had a partial response that deepened after a second dose, with a reported duration of response of 3.7 months. FT538 trials were ongoing; FT576’s IND had been allowed, with clinical initiation planned subject to manufacturing and regulatory conditions. FT536 remained preclinical, with an IND submission planned for the second half of 2021.
- Management expected to report the primary and secondary efficacy endpoint results from the Phase 2 PROTECT study of ProTmune in the first half of 2021. The trial was fully enrolled; no later result is reported in this filing.
- Management expects research, development, manufacturing and general expenses to increase. It does not expect meaningful product sales or royalty revenue until a candidate is developed and approved; timing and success are uncertain. No formal revenue or earnings guidance is provided.
- Key risks include clinical failure or delays, patient enrollment challenges, COVID-19-related disruption, complex cell manufacturing and supply dependencies, regulatory uncertainty, reliance on collaborators, substantial ongoing funding needs, intellectual-property risks, and competition. The company cautions that preliminary and interim clinical findings may change as more data accrue.
- The company reported no material legal proceedings. The financial statements received an unqualified audit opinion, and management and the auditor reported effective internal control over financial reporting as of year-end.
Important facts for investors to verify
- Review subsequent clinical updates, especially full and final datasets for FT500, FT516, FT596 and the PROTECT study; distinguish interim signals from controlled evidence.
- Track cash burn, collaboration receipts, equity issuance and actual cash runway, including the effect of the January 2021 offering and significant lease commitments.
- Monitor manufacturing scale-up, product release testing, supply availability, trial enrollment and any FDA requirements that could change development timelines or costs.
- Assess the assumptions and volatility behind the $47.7 million MSK stock-price milestone liability, and any future milestone, licensing or collaboration obligations.
- Check whether Janssen and Ono exercise options, advance candidates, or generate milestone or royalty payments; none had received milestone or royalty payments under Janssen as of year-end.