Dive Brief:

  • Johnson & Johnson will pay Fate Therapeutics $100 million to co-develop a group of allogeneic, or "off-the-shelf" cell therapies for cancer.
  • Per deal terms, J&J will buy $50 million Fate shares at $31 apiece, a roughly 47% premium to Fate's $21.07 closing price on Thursday. The two will work on cancer immunotherapies for blood cancers and solid tumors. 
  • The pact is the latest bet by a large drugmaker on allogeneic cell therapies, which could be cheaper to make and more convenient than the "autologous" CAR-T treatments that have won approval but struggled commercially.

Dive Insight:

First-generation autologous CAR-T therapies involve genetically edited immune cells taken directly from patients in a lengthy, logistically challenging and costly procedure. Fate is one of a group of companies advancing an "off-the-shelf" cell therapy approach, which utilizes cells taken from healthy donors. 

It's an emerging field of research that's still in its early stages. Only slivers of human data have been published thus far. These companies have yet to prove off-the-shelf approaches can match, or surpass, what has been seen with CAR-T without triggering serious or potentially deadly immune reactions. 

But pharma has made notable investments in the work, which could lead to treatments that are quicker and less costly to produce than their autologous counterparts. Among them: Pfizer's wide-ranging deal with Allogene Therapeutics in 2018 as well as Bayer's buyout of BlueRock Therapeutics and investment in Century Therapeutics last year. 

Entering this year, the allogeneic field looked set to take some steps forward. As analyst firm Jefferies noted in March, Precision, Allogene Therapeutics and CRISPR Therapeutics, which each use different off-the-shelf approaches, could all produce notable human data this year.

The coronavirus pandemic, however, has threatened clinical research timelines across the industry, disrupting study enrollment and treatment

Fate is in the mix, too, though it acknowledged COVID-19 could impact its plans. In announcing the J&J deal, Fate also warned of coronavirus-related "delays or disruptions in patient enrollment and site initiation" that will affect the timing of its clinical trials. It didn't provide specific details. 

The J&J partnership does give Fate some breathing room. The San Diego biotech is getting $100 million to produce up to four new therapies that J&J will have the option to license, while J&J covers the associated R&D costs. Fate could receive another $3 billion in various conditional payments tied to regulatory and sales milestones if all goes to plan, though those payments may never materialize.

"From speaking to management, we think this is exactly the type of deal [Fate] was looking for," wrote Cantor Fitzgerald analyst Alethia Young, referring to a back-loaded agreement that gives the company the chance to keep some rights to the programs in the alliance. 

Young wrote the deal is also "a strong validation" of Fate's approach, which draws from stem cell and CAR-T technologies. Fate turns cells from donors into induced pluripotent stem cells, which in turn can be re-engineered into a variety of different cells. In their partnership, for instance, Fate and J&J aim to create certain types of immune cells — natural killer, or NK cells, and T cells — that can hunt down tumors. 

The partnership doesn't include any of the other treatments currently in Fate's pipeline. Shares climbed about 20%, to around $25 apiece, in pre-market trading Friday. 

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