What happened

Shares of Fate Therapeutics (NASDAQ:FATE) fell nearly 20% today after the company reported third-quarter 2019 operating results and announced it will make six presentations at the upcoming American Society of Hematology (ASH) annual meeting in December. The biopharma disclosed several notable updates and is clearly making progress, but there are certainly a lot of moving parts for investors to understand. 

Fate Therapeutics became the first entity to dose a patient with an engineered stem cell-derived cellular medicine in October, began enrolling a higher-dose cohort for a separate drug candidate, announced a new manufacturing facility, and presented several more updates. Therefore, it appears that today's sell-off is an attempt to buy time to digest the sudden increase in complexity, especially considering management decided to hold off important details until the ASH presentations next month. 

As of 2:22 p.m. EST, the small-cap stock had settled to a 9.4% loss.

A chart on a chalkboard showing a steady rise and then a sudden fall.

Image source: Getty Images.

So what

Fate Therapeutics was one of the first companies to jump into developing natural killer (NK) cells as therapeutic agents. NK cells offer several notable advantages compared to T cells, the first immune cells to be widely studied in immuno-oncology, including the ability to dose patients multiple times. But they've largely failed to live up to the hype in early clinical studies.

The company is hoping its unique approach can lead to success. Rather than engineering each individual patient's own NK cells, Fate Therapeutics is using a single master cell line -- an induced pluripotent stem cell (iPSC) line -- to engineer cellular medicines that can be given to any individual. That should smooth over manufacturing obstacles, lower costs, and potentially lead to more reproducible outcomes compared to the initial approach used in CAR-T cell therapies.

But there's a lot to digest as the pipeline matures. Fate Therapeutics announced clinical progress for three drug candidates, explained a highly complex phase 1 clinical trial for FT500 in advanced solid tumors, and opened a new manufacturing facility. To the dismay of Wall Street analysts, executives provided few specific details of drug candidates on the third-quarter 2019 earnings conference call and instead chose to wait until the updates at ASH next month.

Now what

Investors interested in Fate Therapeutics shouldn't necessarily be discouraged by any recent developments. The company's technology platform ultimately will be judged by clinical results. Given the lack of specific details and a sudden increase in complexity and competition -- including a partnership between Allogene and Notch Therapeutics yesterday and recent fundraising rounds by A2 Biotherapeutics, Nkarta Therapeutics, and Achilles Therapeutics -- Wall Street simply took the "show me" approach. Analysts may get their answers in December.

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