Fate Therapeutics Inc. (NASDAQ: FATE) shares should benefit from the company's expertise in both in-vivo and ex-vivo stem cell modulation that should be leveragable across multiple orphan indications, including stem cell transplant in cancer, lysosomal storage diseases, and muscular dystrophies.
Based in San Diego, California, Fate Therapeutics is an early-stage biotechnology company focused on stem cell therapy for cancer and orphan diseases. Their platform focuses on modulation of existing stem cells to optimize therapeutic effects for stem cell transplant in cancer and actual treatment of orphan disease.
There is potential for clinical proof-of-concept in 3 separate indications within 18-24 months (ProHema Cancer, ProHema Hurler's, Wnt7a muscular dystrophy).
"We believe that upside potential from current valuation levels exists from progress into clinical development with its Wnt7a protein analog in muscular dystrophy alone and that strong pre-clinical data should bode well for clinical proof-of-concept," BMO Capital Markets analyst Jim Birchenough said in a client note.
While further ahead in development, the ex-vivo modulated stem cell product ProHema in stem cell transplant (SCT) for hematologic malignancy is a more binary opportunity, which should be considered as option value beyond Wnt7a protein analogs.
ProHema is a pharmacologically modulated HSC (hematopoietic stem cell) therapeutic derived from umbilical cord blood. ProHema has the potential to address the limitations of allogenic HSCT (hematopoietic stem cell transplant) and enhance its curative potential across a broad range of hematologic malignancies and rare genetic disorders.
Modulation of HSCs with PGE2 (prostaglandin E2) has the potential to enhance the biological properties of HSCs from any source, including cord blood, peripheral blood and bone marrow.
"Modulation of HSCs with PGE2 could improve patient outcomes by increasing engraftment success rates, accelerating the time to reconstitu! tion, and improving the durability of engraftment," Birchenough said.
Because ProHema enhances the rate of engraftment, it may be possible to improve the feasibility of conducting HSCT under the less toxic RIC regimen, as opposed to MAC. This may help broaden the patient populations for allogeneic HSCT.
ProHema may significantly overcome the limitations associated with cord blood HSCT and expand its use. Cord blood has many benefits, such as increased likelihood of identifying a human leukocyte antigen-compatible HSC source and reduced incidence of GvHD and relapse.
"Given that there are currently more than 600,000 publicly-banked cord blood units available world-wide, it is possible to rapidly identify a well HLA-matched cord blood unit for most patients. By enhancing the biological properties of cord blood HSCs, ProHema could help reduce the number of cells needed in HSCT," Birchenough noted.
Over the past two decades, the number of HSCT procedures has increased steadily, and the growth is expected to continue. According to a global survey conducted by the Worldwide Network for Blood and Marrow Transplantation, a total of 56,739 HSCT procedures were performed worldwide in 2010, including 26,241 such procedures in the allogeneic setting.
In the US, more than 5,800 allogenic HSCT procedures were performed in 2012 according to the National Marrow Donor Program, and 20 percent of the procedures used cord blood as the cell source. It is estimated that approximately 95 percent of HSCT procedures are performed for the treatment of hematologic malignancies.
While the primary focus has been on phase 2 development of ex-vivo modulated stem cell product ProHema for stem cell transplant (SCT) in hematologic malignancy, that greater value may exist for earlier stage programs for ProHema in Hurler's Syndrome as well as Wnt7a protein analogs in Muscular Dystrophy.
"We believe that review of pre-clinical data for Fate's Wnt7a protein analog in models of muscular dystrophy dem! onstrates! unique benefits in increasing muscle mass, increasing force of muscle contraction independent of muscle mass and changing the muscle biology to a more disease resistant phenotype," Birchenough said.
Meanwhile, published data for umbilical cord blood stem cells in lysosomal storage diseases like Hurler's syndrome may provide validation for pre-clinical stage efforts for ProHema in this area.
Thus, while near-term attention may be on phase 2 development of ProHema in hematologic malignancy, this program as pure option value and would look to phase 1 initiation for the Wnt7a protein analog in Muscular Dystrophy and ProHema in Hurler's syndrome as greater value drivers.
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