Fate Therapeutics, Inc. — 2015 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2015. The filing also provides unaudited quarterly results; Q4 2015 revenue was $1.076 million and net loss was $7.446 million. The company is a clinical-stage biopharmaceutical developer of programmed cellular immunotherapies and had no therapeutic product sales.
Financial performance and position
| Metric | 2015 | 2014 |
|---|---|---|
| Total revenue | $2.431 million | $0 |
| Research and development expense | $19.861 million | $16.435 million |
| General and administrative expense | $10.352 million | $8.469 million |
| Operating loss | $27.782 million | $24.904 million |
| Net loss | $29.992 million | $25.883 million |
| Basic and diluted loss per share | $1.18 | $1.27 |
| Net cash used in operating activities | $18.397 million | $22.419 million |
| Cash and cash equivalents at year-end | $64.809 million | $49.101 million |
| Working capital at year-end | $52.211 million | $45.291 million |
| Long-term debt, including current portion, net | $18.238 million | $19.608 million |
Revenue in 2015 came from the Juno collaboration. Gross margin is not meaningfully presented because the company had no product sales and reported no cost-of-revenue line. Financing cash flow was $35.603 million, primarily reflecting $32.1 million net proceeds from a May 2015 stock offering and $4.6 million attributed to Juno’s stock purchase; investing cash outflow was $1.498 million. The company reported an accumulated deficit of $142.384 million. Management said available cash was expected to fund operations for at least 12 months from the filing’s assessment, while noting substantial additional capital would be needed.
Changes versus the prior period
- Revenue rose from zero to $2.431 million, reflecting the May 2015 Juno agreement; $7.3 million remained deferred at year-end.
- R&D expense increased $3.426 million and G&A expense increased $1.883 million. Net loss widened by $4.109 million, while loss per share declined from $1.27 to $1.18 as the weighted-average share count increased.
- Operating cash use decreased by $4.022 million, largely due to Juno-related deferred revenue, despite the larger net loss.
- Year-end cash increased $15.708 million, supported by equity financing and collaboration proceeds. Debt declined from $20.0 million principal at the end of 2014 to $18.454 million gross principal at year-end 2015 after repayments.
Outlook, developments and key risks
- ProTmune was the company’s lead clinical candidate for prevention of acute graft-versus-host disease and CMV infection following allogeneic hematopoietic cell transplantation. The FDA cleared its IND in January 2016, after the fiscal year; management planned a Phase 1/2 trial to begin in mid-2016.
- The company discontinued further ProHema development in umbilical cord blood transplantation in December 2015 and redirected resources to ProTmune. Interim PUMA results included earlier neutrophil engraftment and fewer severe viral infection-related adverse events versus concurrent controls, but the company cautioned that ProHema findings are not predictive of ProTmune outcomes.
- Other programs—including adaptive NK-cell, iPSC-derived NK- and T-cell, and CD34+ cell therapies—remained preclinical. Under its Juno collaboration, Fate could receive research funding, selection fees, contingent milestones and low-single-digit royalties; no selection fees, milestones or royalties had been received by year-end.
- Key risks include clinical and regulatory uncertainty, patient enrollment, consistency and regulatory compliance of decentralized cell manufacturing, reliance on third-party suppliers and donor blood sources, intellectual-property risks, and the need for additional financing. SVB debt is secured by substantially all assets except certain intellectual property, includes restrictive covenants and carries fixed stated rates of 6.94% and 7.07%, plus final payment fees.
- Contractual obligations at December 31, 2015 totaled $23.927 million, comprising $21.569 million of debt payments including interest and fees and $2.358 million of operating lease commitments. Potential license milestones and royalties were excluded because timing and achievement were uncertain.
Most important facts for investors to verify
- Whether ProTmune’s planned Phase 1/2 trial started on schedule and whether safety, engraftment, GvHD and CMV results support further development.
- How quickly cash is consumed relative to management’s at-least-12-month runway estimate, and whether additional financing is needed.
- Whether Juno research funding continues and whether target selections or development milestones generate further payments.
- Whether ProTmune manufacturing can be standardized across clinical sites and meet regulatory requirements; the filing notes dependence on third-party facilities and some sole-source suppliers.
- The debt repayment schedule, covenant compliance and effect of future equity issuance on existing shareholders.