Nkarta Stock a Bargain Compared to Fate Therapeutics

Pharma consultant says the two companies are on an even par

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Jun 08, 2022
Summary
  • Both developing drugs to destroy cancer cells.
  • Treatments are in early testing, but show potential.
  • Share prices of the two seem to be heading in opposite directions.
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Investors who like Fate Therapeutics Inc. (

FATE, Financial) should love Nkarta Inc. (NKTX, Financial).

That is based on comments by pharma consultant Evaluate, which declared the latter is every bit as good as the former at a fraction of the price. As of the time of writing, San Diego-based Fate has a market valuation of more than $2.3 billion compared to Nkarta’s approximately $724 million.

The gap was even greater before San Francisco-based Nkarta announced test results from phase 1 studies last month showing that its Car-NK therapy works at least as good as Fate’s – and may be safer. That is certainly good news for shareholders, but keep in mind the drug has to jump through several hoops before it hits the market—if it ever does.

We will know more later this year when Nkarta presents additional data from clinical trials of its two Car-NK candidates.

According to MD Anderson, natural killer cells – or NK cells – are part of our immune system. They patrol our bodies for abnormal cells like cancer and destroy them. But cancer cells can make themselves invisible, making it much more difficult for NK cells to find them and do their job. Car-NK drugs are designed to strengthen the cancer-fighting effectiveness of NK cells.

Shares of Nkarta and Fate seem to be going in opposite directions. Nkarta’s shares are up nearly 24% since mid-May to just under $15. Its 52-week range is $7.55 to $40.64. Fate, which traded as high as $97 in the past year, has been in a death spiral, losing more than 75% of its value and now trades at just over $24.

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Just a day after reporting positive results from its clinical trial, Nkarta raised $230 million in a public offering of common stock, giving the company a bankroll that will sustain its operations through 2025, the company said in a news release. We should know well in advance of then whether the biopharma’s therapies are winners or not.

With more than $640 million in the bank, Fate’s balance sheet is solid. In the first quarter, the company took in more than $18 million from partnerships with Johnson & Johnson’s (

JNJ, Financial) Janssen unit and Ono Pharmaceutical Co. Ltd. (TSE:4528, Financial).

Both Nkarta and Fate have been mentioned in the past as potential takeover targets. Others developing NK cell therapy drugs that can be had for far less than Nkarta and Fate include Innate Pharma S.A. (

IPHA, Financial) and ImmunityBio Inc. (IBRX, Financial).

Disclosures

I am/we currently own positions in the stocks mentioned, and have NO plans to sell some or all of the positions in the stocks mentioned over the next 72 hours. Click for the complete disclosure
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