Fate Therapeutics, Inc. — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; comparisons are with fiscal 2021. This is an annual filing, not a standalone fourth-quarter report. Fate is a clinical-stage biotechnology company developing off-the-shelf, iPSC-derived cellular immunotherapies. It had no therapeutic product sales; reported revenue came from collaborations.
Financial performance and liquidity
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Collaboration revenue | $96.3 million | $55.8 million | Up $40.5 million |
| Research and development expense | $320.5 million | $215.5 million | Up $104.9 million |
| General and administrative expense | $84.2 million | $57.3 million | Up $26.9 million |
| Operating loss | $308.4 million | $217.0 million | Loss widened $91.4 million |
| Net loss | $281.7 million | $212.2 million | Loss widened $69.6 million |
| Net loss per share, basic and diluted | $2.91 | $2.24 | Greater loss per share |
| Net cash used in operations | $248.2 million | $162.9 million | Use increased $85.3 million |
- Calculated operating loss and net loss were approximately 320% and 293% of collaboration revenue, respectively; these are loss-making, pre-commercial operations, not product gross margins.
- Year-end cash and cash equivalents were $61.3 million; short- and long-term investments were $379.8 million, for combined cash and investments of $441.2 million, versus $716.6 million a year earlier. Current assets were $502.1 million and current liabilities $114.1 million.
- Cash, cash equivalents and restricted cash decreased $72.3 million during 2022. Investing activities provided $166.8 million, primarily reflecting investment maturities exceeding purchases; financing provided $9.2 million, mainly employee option exercises. The company raised no public-offering proceeds in 2022.
- Accumulated deficit was $1.05 billion. No borrowings are shown on the balance sheet; substantial operating-lease commitments remain: $177.7 million of undiscounted future payments. The filing reports $109.3 million in lease liabilities.
- Management said year-end resources were sufficient for at least the next 12 months. Following the January 2023 restructuring, management expected cash runway into the second half of 2025; this is a forecast, not a guarantee.
Material changes and business developments
- Revenue rose to $96.3 million, including $79.7 million from Janssen and $16.6 million from Ono. R&D and G&A expenses increased substantially, reflecting staffing, clinical and consulting work, laboratory materials, and patent and legal costs.
- Other income, net, increased to $26.7 million, including a $20.3 million non-cash gain from remeasurement of MSK stock-price appreciation milestones. The related liability fell to $3.9 million from $24.2 million. Interest income was $5.8 million.
- At year-end, the principal clinical-stage programs were FT576, a Phase 1 CAR NK candidate for multiple myeloma, and FT819, a Phase 1 CAR T candidate for B-cell malignancies. FT522 and FT825 were preclinical; the company planned to seek IND clearance for each in 2023. Ono exercised its option for FT825 in November 2022; Fate elected to co-develop and co-commercialize in the U.S. and Europe and was due a $12.5 million option fee.
- In January 2023, Janssen gave notice terminating its collaboration, effective April 3, 2023. Fate planned to discontinue all Janssen collaboration products. Fate also discontinued FT516, FT596, FT538 and FT536, prioritizing other NK programs.
- Fate announced a workforce reduction of approximately 60%, from 551 employees at year-end 2022 to about 220. It expected $12–$16 million of severance and related costs in first-quarter 2023. The company anticipated recognizing $41.2 million of remaining Janssen deferred revenue in that quarter, along with additional wind-down payments that were not yet estimable.
Outlook, risks and contingencies
- Management expects continued losses and no meaningful product revenue until a candidate is developed and approved, a process expected to take years. Additional capital may be needed; future financing availability and terms are uncertain.
- FT576 interim Phase 1 data, available for nine heavily pretreated patients as of October 7, 2022, showed no dose-limiting toxicities, CRS, ICANS or graft-versus-host disease. Early responses were observed in small cohorts, including a very good partial response in monotherapy and a partial response and minor response in combination treatment. Dose escalation was ongoing; results are preliminary and may change.
- FT819 interim data, available for 15 patients as of September 8, 2022, included objective responses in some single-dose patients; two patients in the small fractionated-dose group did not respond at Day 30. Three patients had Grade 2 CRS; investigators reported no ICANS or GvHD. These early, uncontrolled results do not establish efficacy or predict later trial outcomes.
- Key risks include the early and unproven nature of iPSC and gene-edited cell therapies; clinical, safety and regulatory uncertainty; manufacturing scale, quality and supply constraints; patient enrollment and conditioning-agent availability; dependence on collaborators and suppliers; competition; and the need for additional funding. COVID-19 disruption, inflation and geopolitical instability were also cited.
- Fate is pursuing Shoreline-related contract and patent litigation. A stockholder securities lawsuit filed in January 2023 alleges misleading statements concerning Janssen; Fate says it intends to defend the case. Outcomes and potential financial effects are uncertain.
- The company reported $177.7 million of future undiscounted operating-lease payments and a $4.0 million CIRM award liability. The CIRM award may be repayable or may result in royalties on FT516 sales, depending on the company’s election and future circumstances.
- Ernst & Young issued an unqualified audit opinion on the financial statements and internal controls; management also concluded disclosure controls and internal control over financial reporting were effective at year-end.
Important facts for investors to verify
- Current cash, investments, operating burn and whether the revised second-half-2025 runway remains achievable after restructuring and collaboration changes.
- Janssen termination accounting: timing and collection of the $41.2 million deferred revenue, any wind-down payments, and the impact of losing future collaboration funding and product programs.
- Progress, enrollment, durability and safety in FT576 and FT819 trials, including whether preliminary response signals persist in larger cohorts.
- Whether planned FT522 and FT825 IND submissions occurred and whether manufacturing, supply and regulatory milestones support clinical entry.
- Ono collaboration funding and option milestones, including the $12.5 million FT825 fee, and the terms and economics of any co-development commitments.
- Future restructuring charges, lease and CIRM obligations, and any additional financing or dilution required to fund operations.