Please ensure Javascript is enabled for purposes of website accessibility

Here's Why Fate Therapeutics Rose as Much as 18.7% Today

By Maxx Chatsko - Apr 3, 2020 at 11:59AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The cellular therapy developer announced an equity investment from and a partnership with Janssen, a subsidiary of Johnson & Johnson.

What happened

Shares of Fate Therapeutics (FATE 3.58%) gained over 18% today after the company announced an equity investment from and a partnership with Johnson & Johnson subsidiary Janssen. The pair will leverage their respective technology platforms in cellular medicine to develop immunotherapy drug candidates targeting cancers. 

Fate Therapeutics will receive an up-front cash payment of $50 million and a matching equity investment of $50 million. The development-stage company is eligible to receive up to $1.8 billion in development and regulatory milestone payments, up to $1.2 billion in commercial milestone payments, and double-digit royalties on future sales. Janssen will fund the development of drug candidates through the time investigational new drug (IND) applications are filed. The pair will likely announce funding commitments for clinical trials at that time.

As of 11:08 a.m. EDT, the pharma stock had settled to a 9.5% gain.

A red paper airplane leading a cluster of white paper airplanes higher.

Image source: Getty Images.

So what

Fate Therapeutics is developing next-generation immunotherapies. Most of the company's drug candidates and preclinical assets are designed from off-the-shelf cell lines, rather than harvested from individual patients as is standard for currently approved cellular medicines. The new approach should allow for simpler, lower-cost manufacturing and create more predictable health outcomes. 

The company lists an ambitious 13 unique clinical programs on its website, and investors might have wondered why it hadn't attracted the attention of a deep-pocketed partner to date. That's probably partly because there's a lack of robust data for its early-stage assets and partly because natural killer cells, which comprise a significant amount of the company's pipeline, are unproven as cellular therapies.

The collaboration with Janssen helps to relieve investors of some of those anxieties and de-risk development activities at Fate Therapeutics. It provides a quick cash injection for 2020 and offers the potential to provide significant milestone payments in the next several years, which can fund the development of wholly owned assets at Fate Therapeutics.

Now what

Fate Therapeutics has been a promising early-stage company in cellular medicine for the last year or so. While today's news is encouraging for investors with a long-term mindset, this biotech stock remains a relatively high-risk investment. And considering the 2020 coronavirus pandemic is likely to delay and disrupt clinical trials throughout the world, investors cannot be too sure when the first development milestones might be earned. 

Maxx Chatsko owns shares of Fate Therapeutics. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Fate Therapeutics, Inc. Stock Quote
Fate Therapeutics, Inc.
$33.82 (3.58%) $1.17

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/12/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.