Fate Therapeutics, Inc. — Q1 2016 Form 10-Q
Reporting period: Three months ended March 31, 2016; unaudited. Fate is a clinical-stage biopharmaceutical company developing programmed cellular immunotherapies. It had no therapeutic-product sales and has not been profitable.
Key financial metrics
| Metric | Q1 2016 | Q1 2015 / prior balance date |
|---|---|---|
| Collaboration revenue | $1.322 million | $0 |
| Research and development expense | $6.636 million | $4.568 million |
| General and administrative expense | $2.602 million | $2.756 million |
| Operating loss | $7.916 million | $7.324 million |
| Net loss | $8.377 million | $7.881 million |
| Net loss per share, basic and diluted | $0.29 | $0.38 |
| Cash used in operating activities | $7.252 million | $6.375 million |
| Cash and cash equivalents | $39.487 million | $64.809 million at Dec. 31, 2015 |
| Short-term investments | $16.125 million | None at Dec. 31, 2015 |
| Total assets | $58.705 million | $67.958 million at Dec. 31, 2015 |
| Long-term debt, net of current portion | $8.700 million | $10.688 million at Dec. 31, 2015 |
| Accumulated deficit | $150.761 million | $142.384 million at Dec. 31, 2015 |
Cash, cash equivalents and short-term investments totaled $55.612 million at quarter-end. Current assets were $56.567 million versus current liabilities of $13.886 million. The company reported no product sales, so product margins are not applicable.
Changes versus the comparable period
- Revenue rose from zero, principally reflecting the Juno collaboration; $1.3 million was recognized in Q1 2016.
- R&D expense increased $2.068 million, mainly from laboratory equipment and supplies, increased headcount and related compensation, and external clinical-development services.
- G&A expense declined $0.154 million. Net loss widened by $0.496 million.
- Operating cash use increased $0.877 million. Investing activities used $16.344 million, including $16.166 million to purchase U.S. Treasury securities; this largely shifted funds from cash into short-term investments.
- Financing activities used $1.726 million, including $1.873 million of debt principal payments, partly offset by equity-plan share issuance.
Outlook, agreements and risks
- Management said available cash and short-term investments were expected to fund projected operating requirements for at least the next 12 months. The company nevertheless expects continuing losses and higher spending as it advances research, preclinical work and clinical development; additional capital may be needed.
- Planned work includes advancing ProTmune toward Phase 1/2 development during 2016 and pursuing preclinical immuno-oncology and immuno-regulatory programs. Timing and costs are uncertain, and outcomes may differ materially from expectations.
- Under the Juno agreement, Juno funds research for an initial four-year term, with minimum annual research payments of $2 million. Fate reported $1.8 million received in research payments to date and $6.5 million of Juno-related deferred revenue at March 31, 2016. Juno may extend the term subject to specified fees and funding.
- Potential Juno target-selection fees, milestone payments and low-single-digit royalties depend on future selections, development, approvals and sales. No selection fees, milestones or royalties had been received by March 31, 2016. The filing describes milestone opportunities of up to approximately $51 million per therapy, with additional bonus milestones for the third and fifth therapies.
- Debt is under a Silicon Valley Bank facility secured by substantially all assets other than certain intellectual property. The loans carry fixed rates of 6.94% and 7.07%, mature in 2018, and require final payment fees. The filing notes restrictive covenants and potential acceleration upon default.
- Key risks include clinical and regulatory uncertainty, trial enrollment and execution, manufacturing consistency and third-party supply dependence, reliance on collaborators, intellectual-property challenges, and the possibility that further financing may be unavailable or dilutive.
- No material legal proceedings were reported. Management concluded disclosure controls were effective at the reasonable-assurance level and reported no material quarterly change in internal control over financial reporting.
Important facts for investors to verify
- Progress and timing of ProTmune’s planned clinical development, including regulatory requirements and trial enrollment.
- Cash burn and whether the stated minimum 12-month funding outlook remains supportable as development spending rises.
- Juno research funding, deferred-revenue recognition, and whether target selections or development milestones occur; contingent payments are not guaranteed revenue.
- Debt repayment schedule, final payment fees, collateral and compliance with loan covenants.
- Manufacturing readiness, supply availability and the ability of clinical-site facilities to meet regulatory standards.