Why Is Fate Therapeutics (FATE) Down 21% Since Last Earnings Report?

a month has gone by since the last earnings report for Fate Therapeutics (FATE). Shares have lost about 21% 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 its most recent earnings report in order to get a better handle on the important catalysts.

FATE Reports Wider-Than-Expected Q2 Loss, Beats on Revenues

Fate reported a loss of 58 cents per share in the second quarter of 2021, wider than the year-ago loss of 35 cents and the Zacks Consensus Estimate of a loss of 52 cents.

Increased research & development (R&D) and general & administrative (G&A) expenses led to the wider loss.

The company earned collaboration revenues of $13.4 million in the second quarter, which easily beat the Zacks Consensus Estimate of $7 million, and were up from $5.4 million reported in the year-ago quarter. Revenues are primarily derived from the company’s collaborations with Janssen, a unit of Johnson & Johnson, and Ono Pharmaceutical.

R&D expenses surged to $48 million from $26.7 million in the year-ago quarter.
G&A expenses jumped to $12.2 million from $7.5 million in the year-ago quarter.

Cash, cash equivalents and investments at the end of the second quarter were $845.1 million.

Pipeline Update

The dose-escalating phase I study of FT596 for patients with relapsed / refractory B-cell lymphoma (BCL) has successfully cleared dose-limiting toxicity in dose Cohort 3 (single dose of 300 million cells) as monotherapy and in combination with Rituxan. Dose escalation of the single-dose treatment schedule is ongoing in both regimens with enrollment in dose Cohort 4 (900 million cells). Fate is also planning to initiate enrollment of a multi-dose treatment schedule in both regimens, with FT596 administered on day 1 and day 15 at 300 million cells / dose with the potential to dose escalate to 900 million cells / dose.

In July, the first patient was treated in the phase I study of FT819, the first-ever T-cell therapy derived from a clonal master induced pluripotent stem cell (iPSC) line to undergo clinical investigation. FT819 is an off-the-shelf, allogeneic CAR T-cell therapy targeting CD19 and the first patient received a single FT819 dose of 90 million cells for the treatment of relapsed / refractory acute lymphoblastic leukemia (ALL).

In June, Fate and Janssen elected to initiate IND-enabling activities for an iPSC-derived CAR NK cell product candidate incorporating a Janssen proprietary antigen binding domain that targets an antigen expressed on certain solid tumors. This move triggered the payment of a milestone fee to the company by Janssen under the collaboration.

Fate plans to submit an IND application to the FDA in the second half of 2021 to initiate a phase I study of FT536 for the treatment of solid tumors.

The company also plans to initiate enrollment at 100 million cells per dose upon clearance of the first dose cohort in its Phase 1 study of FT538 in relapsed / refractory AML.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -5.69% due to these changes.

HSE Scores

Currently, Fate Therapeutics has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

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

Outlook

Estimates have been 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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