Fate Therapeutics Trims Chemistry Staff, Bets on Biotech Drugs

7/7/11Follow @xconomy

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biologic molecules should offer “a more linear path” through clinical development, which is important, he says, “given how complex the biology is in stem cell arena.”

Even while the shift is on toward biologics, Fate’s lead drug candidate remains a conventional small molecule known as FT1050. What makes this program different from other small molecules, Mendlein says, is that it is designed to work through a controlled process in the lab. In this case, umbilical cord blood is treated in a lab to increase the odds that a bone marrow transplant will be successful for lymphoma or leukemia patients.

Fate likes this particular use of a small molecule, Mendlein says, because it doesn’t have to be directly injected into the body, where some of those off-target effects can occur.

The company presented some preliminary results from the first clinical trial of FT1050 at a February meeting of the American Society for Blood and Marrow Transplantation in Honolulu, HI. Adding the experimental compound to the transplant regimen didn’t appear to raise any safety issues in the first 15 patients who enrolled, researchers said. Among six patients who were treated with a modified protocol to assess the effectiveness of the Fate drug, the study showed a successful engraftment of their transplants in an average of 18.5 days, compared with a historical average of 21 days, the company said in a statement. One patient developed a mild-to-moderate case of acute graft-versus-host-disease, a potentially dangerous complication of transplants. Ten of the first 15 patients were alive and disease-free at the time of presentation.

Fate hopes to present more detailed results from this trial later in the year at the American Society of Hematology meeting, Mendlein said in an interview late last month at the Biotechnology Industry Organization’s convention in Washington, D.C.

Cash, like with all startup biotechs, is always a critical issue. The company last raised a big amount of cash with its $30 million Series B financing in November 2009, which chief financial officer Scott Wolchko said at the time was enough to run the company for at least two years, without counting on government grants or pharma partnership dollars, Mendlein says.

Since then, Fate took on $1 million in debt, according to an April filing with the Securities & Exchange Commission. Fate also expanded the Series B equity round to $36 million, according to a separate regulatory filing that month. About a month later, the company identified Takeda Ventures, the investing unit of Japan-based Takeda Pharmaceuticals, as a new strategic investor. Fate has also secured investments from Astellas Venture Management, Genzyme Ventures, and one other unnamed pharmaceutical venture entity, along with its syndicate of traditional VC backers—Arch Venture Partners, Polaris Venture Partners, Venrock, and OVP Venture Partners.

There are no plans at the moment to raise another equity round, and the company is “always looking to be thrifty” in how it does its science, Mendlein says. Fate isn’t looking to hire a permanent CEO, which means that Mendlein is essentially the acting chief executive, through his capacity as half-time executive chairman. The company has brought in some more non-dilutive financing, through a contract with the U.S. Department of Defense to work on a regenerative medicine for combat injuries. The company currently has roughly enough cash on hand to last through late 2012, and it could extend its runway further with more non-dilutive financing and partnership dollars.

A company like Fate faces some definite headwinds. Big Pharma companies—most notably Pfizer and Roche—have been cutting back on R&D spending, not looking for adventurous and risky new areas of biology to explore. Some pharma companies have seen fit to try to develop their own induced pluripotent stem cell lines in house, Mendlein says.

While Fate has talked in the past about licensing out its induced pluripotent stem cell technology, Mendlein says the emphasis has long been on using either small molecules or biotech drugs to put adult stem cells in the body into a desired state, so that they act like a regenerative medicine. The company’s current pipeline, besides FT1050, consists of biologic molecules for cardiovascular disease, metabolic disease, and muscle regeneration. All of those biologics are at the discovery stage—a long way from entering clinical trials.

Cutting the small molecule drug programs was partly based on the need to prioritize, Mendlein says. “It’s difficult to focus on all these things at once. To build up everything at once, or to try to do things in stepwise manner, are two different strategies. We were probably working on a number of programs that needed more capital and more focus to really make them work,” he says.

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