Fate Therapeutics collapses 55% after terminating Janssen deal, earns several downgrades

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By Senad Karaahmetovic 

Shares of Fate Therapeutics (NASDAQ:FATE) are down more than 56% in pre-market after the company said it has declined a proposal from Janssen Biotech, which is owned by Johnson & Johnson (NYSE:JNJ), for the continuation of the collaboration and option agreement between the parties.

As a result, the agreement has been terminated and the FT596 product candidate is discontinued. Instead, the company plans to focus on its CD19-targeted CAR NK cell program.

"We are disappointed that we were not able to align with Janssen on their proposal for continuation of our collaboration, where two product candidates targeting high-value, clinically-validated hematology antigens were set to enter clinical development in 2023," said Scott Wolchko, President and Chief Executive Officer of Fate Therapeutics.

Fate added that it ended the fourth quarter with about $475 million in cash and is expected to have sufficient financial resources through the end of 2025.

The massive selloff in FATE stock has been accelerated by at least 8 downgrades following the announcement. Truist analysts downgraded to Hold with a $7 per share price target (down from the prior $46).

"In the near-term we remain on the sidelines as we await greater clarity on strategy, FDA feedback on how to move forward and timelines for data readouts from next-gen assets… In the longer-term, we see focus on nextgen as a smart move, and believe company has been telegraphing that for a while," the analysts wrote in a note.

BMO analysts cut the rating to Market Perform from Outperform as the prior buy thesis on the stock has now been challenged.

"While FATE's actions will help extend cash runway through 2025, we see limited opportunities for value generation near and medium-term and lack sufficient data pointing to competitive profiles from ongoing programs (ASH takeaways). As a result, we're removing discontinued programs from our model and downgrading to Market Perform," they said.

As of 08:28 GMT (13:28 GMT), FATE stock trades 56.36% lower.