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Fate Stock Tumbles 50% Amid Analyst Downgrades After Layoffs and Ending Collaboration With Janssen -- Barrons.com

Barron's · 01/06/2023 08:26
By Angela Palumbo

Fate Therapeutics was sinking Friday as analysts downgraded shares of the stem-cell company after it ended a collaboration agreement with Janssen Biotech and said it was reducing its work force.

Fate (ticker: FATE) said in a press release that it declined a proposal from Janssen for continuation of their agreement, and work between the two companies will wind down in the first quarter. Under the collaboration, two product candidates targeting hematology antigens were set to enter clinical development in 2023.

The company also announced that it will reduce its work force by about 220 employees and will refocus its research by discontinuing clinical development of several cell programs. Fate said the new operating plan should provide "significant financial resources to fund operations through 2025."

"In keeping with the company's commitment to develop disruptive product candidates, programs and technologies with the potential to address large, unmet clinical needs, we have prioritized our clinical programs and substantially reduced operating expenses, including taking the difficult and painful step of reducing our workforce, to ensure that we have a three-year cash runway," said Scott Wolchko, Fate's chief executive.

Shares of Fate tumbled 56.4% in premarket trading Friday to $4.80.

Wedbush analyst David Nierengarten downgraded the stock to Neutral from Outperform and wrote in a research note that "while we understand the re-focusing, we note that the remaining clinical-stage programs are both early stage and in highly competitive spaces." He said also believes it will be more than a year until he sees any "meaningful initial data," and slashed his price target to $7 from $42.

Stifel analyst Benjamin Burnett downgraded shares of Fate to Hold from Buy and cut his price target to $5.30 from $107. He believes that "the company's programs are in the early, signal-finding stage, and therefore recommend waiting for more concrete evidence of clinical efficacy before getting more constructive."

Cowen analyst Tyler Van Buren also downgraded Fate to Market Perform from Outperform with no price target. He commended management for making difficult decisions but "there are also no obvious catalysts in the near term that could cause shares to recover substantially."

Write to Angela Palumbo at angela.palumbo@dowjones.com

(END) Dow Jones Newswires

January 06, 2023 08:26 ET (13:26 GMT)

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