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Fate Therapeutics (FATE) Down 17% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Fate Therapeutics (FATE - Free Report) . Shares have lost about 17% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Fate Therapeutics due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

FATE's Q2 Loss Narrower Than Expected, Pipeline in Focus

Fate reported a loss of 79 cents per share in the second quarter of 2022, narrower than the Zacks Consensus Estimate of a loss of 86 cents but wider than the year-ago loss of 58 cents.

Increased research & development (R&D) and general & administrative (G&A) expenses led to a wider year-over-year loss.

The company earned collaboration revenues of $18.5 million in the second quarter, which easily surpassed the Zacks Consensus Estimate of $13 million and were up from $13.4 million reported in the year-ago quarter.

Revenues are primarily derived from Fate’s collaborations with Janssen, a unit of Johnson & Johnson and Ono Pharmaceutical.

R&D expenses surged to $81.3 million from $48 million in the year-ago quarter.

G&A expenses jumped to $20.3 million from $12.2 million in the year-ago quarter.

Cash, cash equivalents and investments at the end of the second quarter were $580.8 million.

Pipeline Update

FATE is focused on the development and manufacture of universal, off-the-shelf cell products using its proprietary induced pluripotent stem cell (iPSC) product platform. Its immuno-oncology pipeline includes off-the-shelf, iPSC-derived natural killer (NK) cell and T-cell product candidates.  These candidates are designed to synergize with well-established cancer therapies, including immune checkpoint inhibitors and monoclonal antibodies, and to target tumor-associated antigens using chimeric antigen receptors (CARs).
FATE has submitted a new clinical protocol to the investigational new drug (IND) application for FT596. It has initiated a study start-up to assess the safety and activity of adding FT596 to R-CHOP, the standard first-line immunochemotherapy for patients with aggressive lymphomas.

In May, Johnson & Johnson’s Janssen exercised its commercial option for an iPSC-derived CAR NK cell collaboration product targeting an antigen expressed on certain hematologic malignancies, triggering a milestone payment to the company. FATE expects to submit its first IND application under the collaboration during the second half of 2022.

Fate also expanded its off-the-shelf, iPSC-derived, cell-based cancer immunotherapy collaboration with Ono Pharmaceutical to add a second solid tumor antigen program as well as include the development of both CAR NK and CAR T-cell candidates.

Enrollment is ongoing in the company’s multi-center phase I study of FT596 in combination with rituximab (FT596+R) for relapsed / refractory (r/r) B-cell lymphoma (BCL) in single- and two-dose cohorts at up to 1.8 billion cells per dose.

FATE is scheduled to hold its Regenerative Medicine Advanced Therapy (RMAT) Type B multi-disciplinary meeting with the FDA for FT516 in the ongoing quarter to discuss registrational pathways for the treatment of patients with aggressive lymphomas, including patients who have relapsed or are refractory to FDA-approved CD19-directed chimeric antigen receptor (CAR) T-cell therapy.



 

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

Currently, Fate Therapeutics has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Fate Therapeutics has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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