Fate Therapeutics Joins Biotech IPO Conga Line, Reaching for $69M

8/14/13Follow @xconomy

San Diego-based Fate Therapeutics, the company that made a big splash a few years ago when it rounded up some big-name scientists with aspirations to do big things with stem cells, is the latest biotech startup to fix its gaze on IPO riches.

The company filed an initial public offering prospectus today with the Securities and Exchange Commission, outlining a plan to raise as much as $69 million from public investors. The proposed offering is being underwritten by Cowen & Company, BMO Capital Markets, and Wedbush PacGrow Life Sciences. The company aims to be listed on the Nasdaq under the ticker symbol “FATE.” Already this year, 30 life sciences companies have successfully gone public, more than double the annual rate of biotech IPOs seen in the wake of the 2008 financial crisis.

Fate, founded in 2007, generated lots of hope and hype when it rallied stem cell leaders from Harvard University, the University of Washington, Stanford University, and The Scripps Research Institute. The company, backed by several prominent VC firms, at various times has talked of using its knowledge of stem cell biology to create models of human disease that pharma researchers can use to test drugs. Researchers have also thought that if they could reprogram an adult cell so that it can become almost any other cell type, it might pave the way for regenerative medicine—the thing that put stem cells into the popular imagination over the past decade.

While those ideas generated attention in scientific circles, Fate’s business these days hinges on a more straightforward product candidate it calls Prohema (FT1050), which is derived from umbilical cord blood. The product comes from a 2-hour lab process that seeks to optimize a patient’s blood-forming adult stem cells so they migrate, integrate, and engraft into the right tissues following a hematopoietic stem cell transplant. More than 1 million of these stem cell transplants have been performed in blood cancer patients, and Fate says it can improve the process because adult stem cells typically “have not been pharmacologically optimized to improve patient outcomes.”

Although the company has begun a mid-stage clinical trial of its Prohema product candidate, it is not currently recruiting patients, according to Fate’s IPO prospectus. That’s because its scientists have come up with a new nutrient-rich media formulation for manufacturing, tested in animals, which it says is twice as good as fostering stem cell engraftment as its current formulation. The company sought FDA permission on Aug. 1 to incorporate the new formulation into the Prohema being used in clinical trials. If the FDA accepts the modification, “we expect to resume enrollment of our Phase 2 clinical trial in 2014,” Fate said in its prospectus.

The company clearly needs more cash if it’s going to go much further in clinical trials. Now in its sixth year, Fate has an accumulated deficit of about $75 million, and had about $3.4 million of cash left in the bank as of June 30, according to the IPO prospectus. Other than Prohema, all of its drug development programs are still at the preclinical stage.

Several leading venture capital firms stand to gain if Fate can complete an IPO. Arch Venture Partners, Polaris Partners, and Venrock all own 16.8 percent ownership stakes in the company, while OVP Venture Partners has a 15.4 percent ownership position, according to the filing. Christian Weyer, 44, a former executive at Amylin Pharmaceuticals, joined the company as CEO in October, when he took over for Bill Rastetter, who had been serving as interim CEO. The company said it had 33 full-time employees at the end of June.

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  • Nanostring Founder

    Smart move to file for IPO, after ditching the OVP director on the Board. $NSTG stock is getting killed because of the Waite-taint.