Bhavneesh Sharma

Top 20 Ranking (28.2% Avg Return) --TipRanks

Fate Therapeutics: Novel iPSC-Derived Cell Therapy Oncology Platform but Adequately Valued

Fate Therapeutics' (NASDAQ: FATE) Technology:

Clonal master iPSC lines:

Fibroblasts from healthy human donors can be engineered to produce human induced pluripotent stem cells (iPSCs), immature cells which can differentiate into any cell type (the discovery was awarded the Nobel Prize for Medicine/Physiology in 2012). iPSCs can be genetically modified at multiple sites, are uniform in composition, are capable of unlimited self-renewal and can differentiate into >200 cell types.

In the company's platform, Human iPSCs are genetically engineered and undergo clonal expansion outside the body (ex vivo) into master iPSC cell lines, which differentiate into the cells of the immune system like natural killer (NK) cells, T cells and myeloid-derived suppressor cells. The company’s iPSC platform can be used for mass production of homogeneous, cost-effective, universal, off-the-shelf NK cell and T cell based therapies.


(Fate Therapeutics’ proprietary iPSC platform)

The company’s iPSC platform has the promise to develop off-the-shelf immunotherapies in cancers which do not have the shortcomings associated with the currently available first generation, autologous CAR-T therapies like: high cost of production, heterogeneity, long (2-3 weeks) manufacturing time, complex manufacturing process and difficulty in repeat dosing. By allowing low cost, easy, faster manufacturing that makes repeat dosing possible, the company’s iPSC off-the-shelf platform has the ability to expand the access to effective cell-based cancer immunotherapies to a larger patient population. NK cells have advantages like no risk of graft vs. host disease, GvHD or cytokine release syndrome.

Off-the-shelf, iPSC derived NK and T cell pipeline: the third generation of anti-cancer cell therapy


Indication: solid tumors

It is an iPSC derived, NK cell product candidate has a multi-faceted innate immune function, high level of expression of potent activating receptors like NKG2D and NKp30/40/46, high level of secretion of cytolytic proteins like perforin and granzyme B, and low level of immune checkpoint receptor expression (PD-1, LAG-3, TIGIT). In preclinical studies, it increased ADCC against cancer in combination with antibodies against CD20, EGFR and HER2.

FT-500 is in a first ever U.S. clinical trial (phase 1) of an iPSC-derived cell therapy (weekly x 3 doses) in combination with checkpoint inhibitors in advanced solid tumor patients who have failed/progressed on checkpoint inhibitors (enrollment opened in April this year)). NK cells have the potential to overcome the resistance to checkpoint inhibitors (seen in 70%-80% advanced solid tumors) by loss/downregulation of MHC Class 1 including by beta-2 microglobulin gene mutation.
In the first part (regimen A, planned 10 subjects) as monotherapy, no toxicity was observed in 3 patients so far (low dose cohort, 100M cells/dose per week for 3 weeks). Cohort 2 (higher dose, 300M cells/dose per week for 3 weeks) subjects have been dosed. The second part (regimen B, planned 30 subjects) of this phase 1 study will test FT-500 in 100M/dose (patients have been dosed) and 300M/dose cohorts (both doses have been administered).



Indication: relapsed/refractory acute myeloid leukemia (AML) and diffuse B cell lymphoma (DLBCL)

It is an iPSC derived, engineered, NK cell that is engineered to attach a high-affinity (158V), non-cleavable, CD16 (hnCD16) on its surface. Downregulation or loss of 158V CD16 (seen in as high as 85% patients) has been associated with lower cytotoxic response to monoclonal antibodies used as cancer therapies like rituximab, trastuzumab and cetuximab. CD16 receptor can also target CD20 as well as CD22. In preclinical studies, it increased anti-tumor activity and survival in combination with rituximab in a lymphoma model, as well as in an ovarian cancer model in combination with trastuzumab.

FDA has approved an IND for FT516 and a phase 1 clinical trial is planned to start soon (cGMP manufacturing in place). This is the first human trial of engineered iPSC-derived cell therapy in the world. The study design
is: Regimen A (3 cohorts with increasing doses: 90M, 300M and 900M cells/dose given weekly for 3 weeks, planned 15 subjects) as monotherapy in relapsed/refractory AML, AML. Regimen B has 4 cohorts with increasing doses (30M, 90M, 300M, 900M cells/dose given weekly for 3 doses in combination with rituximab, planned 15 subjects) in relapsed/refractory DLBCL.



Indication: Relapsed/refractory CD19+ B cell malignancies

It is an iPSC derived engineered CAR-NK cell with three synthetic elements: hnCD16, NK CD-19 targeted chimeric antigen receptor (CAR), interleukin-15 receptor fusion (IL-15RF) (to increase NK cell expansion and persistence). In preclinical studies, it decreased tumor progression and improved survival in a B cell leukemia model. IND submission is planned in mid-2019 in treating r/r/ CD-19+ B cell malignancies.


Indication: Relapsed/refractory multiple myeloma

It is an iPSC derived engineered NK cell with four synthetic elements: hnCD16, IL-15RF, and knockout of CD38 (which is commonly expressed in multiple myeloma).

In preclinical studies, it increased ADCC mediated anti-tumor activity by Darzalex (anti-CD38 antibody) in a multiple myeloma model.



Indication: Relapsed/refractory CD19+ B cell malignancies

It is an iPSC derived gene-edited (using CRISPR), off-the-shelf CAR-T cell immunotherapy product with T cell receptor (TCR) knockout (to mitigate GvHD) and insertion of third generation CD-19 1XX CAR into the TRAC locus, (which mediates uniform and controlled T cell expression).
The technology behind it was acquired through a deal from the acclaimed Memorial Sloan Kettering Medical Center (MSK) in New York City. In a late-breaking abstract presented at AACR meeting this year, FT819 showed robust antitumor activity against CD-19 tumors. In preclinical studies, it also increased anti-tumor ADCC response by anti-CD20 antibody against CD-19 negative, CD-20 positive tumors.



Indication: Relapsed/refractory multiple myeloma

It is an iPSC-derived off-the-shelf CAR-NK cell product with the following synthetic elements: hnCD16, IL-15RF, CD38 knockout and insertion of anti-BCMA CAR. B-cell maturation antigen (BCMA) is commonly expressed in multiple myeloma. It is the potential to be a best-in-class product for treating r/r multiple myeloma by targeting multiple antigens like BCMA and CD38.


FT301: It is an iPSC-derived MDSC product candidate which could be tested in indications like GvHD, multiple sclerosis, ulcerative colitis, etc. In preclinical studies, it suppressed T cell activity (in vitro) and attenuated GvHD in vivo.


ProTmune: It is an allogeneic hematopoietic cell therapy derived from mobilized peripheral blood, mPB) and modified using FT4145 (dexamethasone) and FT1050 (16,16-dimethyl prostaglandin E2) to reduce the risk of GvHD (data is expected in 2020 (enrollment expected to end towards the end of 2019). It is in a Phase 2 PROTECT study in patients with hematological malignancies who need mPB HCT,



Fate Therapeutics signed a partnership with Ono Pharmaceuticals to develop two iPSC-derived, off-the-shelf CAR-T candidates which are engineered to knockout TCR, and insert CAR in the TRAC locus. The first CAR-T candidate is targeting lymphoblastic leukemias and the second one is targeting an undissclosed antigen expressed in some solid tumors. Fate could be eligible for up to $1.18 billion in potential milestone payments and royalties on net sales. It may be possible to attempt to create even 5-6 or more edits in NK or T cells under this partnership.

It also signed an agreement with Gladstone Institutes for in-licensing its novel technology to generate iPSCs using CRISPR-mediated gene activation. As mentioned earlier, Fate has in-licensed novel technology to create gene-edited, off-the-shelf T cells from MSK including new CAR constructs and use of CRISPR for gene editing (the first product candidate from the collaboration is FT819). It also has an agreement with Juno Therapeutics (now a part of Celgene) to identify small molecule modulators to enhance Juno’s CAR-T cells. It also has an agreement with the University of Minnesota for manufacturing FT500 and FT516.



At the recent annual ASGCT conference, the company showed its ability for cGMP manufacturing of FT500.  An in-house GMP manufacturing facility with monthly capacity of processing 200L of cells is scheduled to open in September 2019.
The company owns over 100 patents for its platform. Patents for iPSC technology extend till 2031 to 2038.



(Fate Therapeutics: Product Pipeline)



CEO, Scot Wolchko has over 20 years of capital raising experience for emerging companies in the healthcare sector, including as an investment banker at Morgan Stanley. Chief Scientific Officer, Dan Shoemaker experience was the Director of Target Discovery at Merck. Chief Development Officer, Bob Valamehr has past experience at Amgen and Broad Stem cell research center. VP, Clinical development, Yu-Waye Chu worked on several projects in Project Development Oncology at Roche/Genentech, including leading the development of mosunetuzumab (CD20/CD3 bispecific antibody). SVP, Clinical Translation, Sarah Cooley is an expert in the field of NK cell therapies in oncology, and joined from the University of Minnesota where she was on the faculty as a hematologist/oncologist.

Financials and Valuation:

Cash reserves are expected as approx. $183M with $14.9M of long-term debt.
Operating cash burn rate is approx. $20M/quarter. The cash reserves are expected as enough for at least 12 months.


Target market assessment:

Multiple myeloma treatments market size forecast= $27.8 billion (2027), Global Data.

Peak consensus sales estimate for Darzalex (anti-CD38 antibody, JNJ/Genmab):$2 billion sales achieved in 2018, estimated to reach $5 billion in 2024, Evaluate Pharma.

Peak consensus sales estimate for isatuximab (anti-CD38 antibody, Sanofi):$1 billion

BCMA targeted therapies market size estimate: $10 billion by 2027 (Global Data).

Peak consensus sales estimate for Bluebird Bio’s BCMA CAR-T, BB121 in MM: $973M (2028), Evaluate Pharma.

CD-19 targeted CAR-T market size= $1.2 billion (2023).

Current liquidation value for Fate Therapeutics= $111.4M (using Graham’s net-net formula).

Fate Therapeutics’ current market cap= $1.4 billion.

Fate’s pipeline valuation= $1.28 billion


My estimate is peak $2 billion sales for Fate’s pipeline product candidates, $1B in B cell malignancies target and another $1B in multiple myeloma (2028), unadjusted.

My estimation for risk-adjusted NPV of the pipeline at 15% cost of capital is $1.13 billion (30% probability adjusted).

Fate Therapeutics’ common stock appears adequately valued at present. Rating Neutral.

In conclusion, Fate Therapeutics has a novel iPSC derived cell therapy platform which could be disruptive to the currently first generation CAR-T therapies. The stock however, is adequately valued at present according to my calculations. I am keeping it on my watchlist and will be looking to start a long position with 3-4 years time-frame on a pullback. I will post a follow-up note when I decide to enter a long position in the stock.

Key differentiating points:

  • Novel iPSC-derived cell therapy platform

  • Ability to give weekly dosing due to easier, faster and cheaper manufacturing, which is likely to increase efficacy in cancers, compared to give just one dose for autologous CAR-T.
  • Could be priced similarly to monoclonal antibodies ($120k-$150K/year), thus increasing accessibility.
  • Ability to perform multiple edits on NK or T cells to target multiple antigens, and overcome tumor resistance.


Risks in the investment:

Cell therapies in oncology is a very competitive field and several companies are testing different technologies including TILs, CRISPR edited T cells, and TALEN edited T cells. CD19 target in B cell malignancies and BCMA in multiple myeloma are crowded fields with several therapies like monoclonal antibodies, bispecific antibodies and CAR cell therapies being developed. Several companies like Gilead/Kite and Novartis/Juno (in CD19 CAR-T) and Bluebird Bio (BCMA CAR-T) have a significant time-lead over competitors, though their technology is autologous. Fate Therapeutics pipeline is at an early stage and the company is likely to need significant capital infusion before any product candidate reaches the market. Unexpected side effects may be seen in clinical trials though preclinical studies have shown safety.



This article represents my own opinion and is not a substitute for professional investment advice. It does not represent a solicitation to buy or sell any security. Investors should do their own research and consult their financial advisor before making any investment. Investing in equities, especially biotech stocks has the risk of significant losses and may not be suitable for all investors. While the sources of information and data in this article have been checked, their accuracy cannot be completely guaranteed.

I/we have no position in FATE. Long BLUE.




Bhavneesh Sharma covers biotech as one of the original contributing analysts at FATRADER. A market expert with a medical degree and MBA, he is ranked among the top 15 financial bloggers and top 100 overall financial experts (including Wall Street analysts) on TipRanks.
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