Fate Therapeutics, Inc.

Welcome to the Faith Therapeutics Third Quarter 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. This call is being webcast live on the Investors and Media section of Faith's website at faiththerapeutics.com. As a reminder, today's call is being recorded. I would now like to introduce Scott Walshko, President and CEO of Faith Therapeutics.

Thank you. Good afternoon and thanks everyone for joining us for the FATE Therapeutics Third Quarter 2020 Financial Results Call. Shortly after 4 p.m. Eastern Time today, we issued a press release with these results, which can be found on the Investors and Media section of our website under Press Releases. In addition, our Form 10-Q for the quarter ended September 30, 2020 was filed shortly thereafter and can be found on the Investors and Media section of our website under Financial Information. Before we begin, I would like to remind everyone that except for statements of historical facts, the statements made by management and responses to questions on this conference call are forward-looking statements under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that can cause actual results to differ materially from those in such forward-looking statements. Please see the forward-looking statement disclaimer on the company's earnings press release issued after the close of market today, as well as the risk factors in the company's SEC filings included in our Form 10-Q for the quarter ended September 30, 2020 that was filed with the SEC today. Undue reliance should not be placed on forward-looking statements which speak only as of the date they are made, as the facts and circumstances underlying these forward-looking statements may change. Except as required by law, Faith Therapeutics disclaims any obligation to update these forward-looking statements to reflect future information, events, or circumstances. Joining me on today's call are Dr. Dan Shoemaker, our Chief Scientific Officer, Dr. Bob Valamehr, our Chief Development Officer, Dr. Wayne Chu, our Senior Vice President of Clinical Development, and Ed Dulock, our Chief Financial Officer. Today, I will highlight several key clinical and regulatory successes we've achieved over the past quarter, and I will discuss certain presentations that we plan to make at the upcoming CITSE and ASH conferences. that feature our proprietary iPSC product platform, as well as our unique ability to bring off-the-shelf multiplexed engineered cell-based cancer immunotherapies to patients. The last several months have been very exciting for Faith Therapeutics. We have made substantial clinical progress across our engineered iPSC-derived NK cell product pipeline, including treating the first patients with FT-596 in combination with rituximab for B-cell lymphoma. We have also extended our clinical investigation of FT-516 to combine with PD-L1 targeted monoclonal antibody therapy for advanced solid tumors. And we have treated the first patient with FT-538, the first ever CRISPR-edited for acute myeloid leukemia and multiple myeloma. We have now treated over 35 patients with our iPSC-derived NK cell product candidates, and early clinical data have solidified our conviction that multiple doses of iPS-derived NK cells can be administered off the shelf in the outpatient setting, are well tolerated, and can drive anti-tumor activity, including in combination with monoclonal antibody therapy. We have also maintained our rapid pace of innovation and remain on track to submit in the fourth quarter our investigational new drug application for FT576, our IPSC-derived multi-antigen targeting CAR-BCMA NK cell product candidate for multiple myeloma. and I am pleased to announce that we have successfully completed GMP manufacturer of FT819, the first ever iPSC-derived CAR T-cell therapy as we currently prepare to initiate our landmark phase one clinical trial. Our off-the-shelf iPSC-derived CAR and K-cell product candidate FT596 is the first cellular immunotherapy that incorporates three active anti-tumor modalities, a proprietary CAR that targets CD19, a novel high-affinity non-cleavable CD16-FC receptor that enhances antibody-dependent cellular cytotoxicity, or ADCC, a potent anti-tumor mechanism by which NK cells recognize, bind, and kill antibody-coded tumor cells, and an IL-15 receptor fusion that augments NK cell activity. Made from a renewable multiplexed engineered clonal master IPS line, FT596 can be mass produced, cryopreserved, stored and made available off the shelf for broad patient accessibility. We are currently conducting a multi-center phase one clinical trial to assess the safety and activity of FT596 as a monotherapy and in combination with CD20 targeted monoclonal antibody therapy for relapsed refractory B cell malignancies. In our phase one study, we have observed early indications of clinical activity at the first dose level of 30 million cells. In June, We reported that the second patient at this first dose level achieved a partial response following administration of a single dose of FT596 as a monotherapy for treatment of diffuse large B cell lymphoma. Notably, the responding patient had received eight prior treatment regimens and was most recently refractory to an ex vivo expanded healthy donor derived peripheral blood and case cell therapy. Importantly, no dose-limiting toxicities, no FT596-related serious adverse events, and no events of cytokine release syndrome, neurotoxicity, or graft-first host disease were reported by investigators. Based on these encouraging clinical observations, we consulted with the FDA regarding the potential to administer a second treatment cycle to the patient. Following FDA consent, we administered a second treatment cycle of lymphoconditioning followed by a single dose of FT-596 as a monotherapy at the first dose level of 30 million cells. At the 62nd ASH annual meeting, we plan to provide a clinical update on this second treatment cycle where we are especially interested in comparing the patient's immunological response to the first and second dose of FT596, including tolerability and immunogenicity, as well as the form of kinetics, safety, and anti-tumor activity of the second treatment cycle. We are encouraged by the early indications of clinical safety and activity of FT596 at the first dose level of 30 million cells. We recognize that the administration of a single dose of 30 million cells is significantly below the dose level of cell therapies that have been historically administered to patients for the treatment of cancer, including donor-derived NK cell therapies as well as CAR T cell therapies. Additionally, the durability of partial responses in relapsed refractory DLBCL as seen with autologous CAR-19 T-cell therapies is only about two to three months. Therefore, under an amended protocol, we are continuing dose escalation of FT-596 as a monotherapy, and we are now enrolling patients at the second dose level of 90 million cells with the potential to dose escalate to 300 million cells and 900 million cells. I'm also pleased to announce that the first patients with relapsed refractory B-cell lymphoma have now been treated with a combination of FT-596 and the CD20 targeted monoclonal antibody rituximab at the first dose level of 30 million cells. Since the product candidate's high affinity non-cleavable CD16 FC receptor is specifically designed to promote ADCC, the combination of FT596 with CD20 targeted monoclonal antibody therapy enables dual antigen targeting of both CD19 and CD20 expressed on cancerous B cells. We believe this highly differentiated therapeutic strategy has the potential to drive deeper, more durable responses for patients and may enable FT-596 to be positioned in early-line therapy where CD20-targeted monoclonal antibody regimens are used as standard of care. Under the amended protocol, we have also extended the clinical footprint of the FT-596 Phase I clinical trial to include relapse refractory chronic lymphocytic leukemia and have now initiated enrollment of FT596 as a monotherapy at the first dose level of 30 million cells. We plan to begin enrollment of FT596 in combination with abinituzumab for the treatment of CLL upon dose-limiting toxicity clearance of the monotherapy regimen at the first dose level. We are excited about the expanded breadth of our FT596 Phase I clinical trial, which now includes dose escalation of FT596 as a monotherapy, and in combination with CD20-targeted monoclonal antibody therapy for the treatment of both B-cell lymphoma as well as CLL. We also continue to believe that more frequent multiple-dose schedules for IPS-derived NK cells will prove to be the most effective treatment course, and we look forward to continuing to work with the FDA to evolve the single-dose schedule for FT596 to support multi-dose administration. At the upcoming CITSE conference, we will present clinical results from the dose escalation stage of our Phase I clinical trial of FT500. the company's first off-the-shelf IPSC-derived NK cell product candidate for patients with advanced solid tumors. The FT500 Phase I clinical trial is the first-ever study in the U.S. to evaluate an IPS-derived cell product. Importantly, the FT500 Phase I study was designed to assess the safety and tolerability of a multi-dose treatment course. consisting of outpatient lymphoconditioning followed by administration of up to six doses of FT500 in the outpatient setting. Dose escalation includes nine patients that were administered FT500 as salvage therapy and six patients that were administered FT500 in combination with checkpoint inhibitor on which the patient failed or progressed. The clinical results from the Phase I dose escalation stage, which we first previewed at the 2019 ASH Annual Meeting, provide strong clinical evidence that multiple doses of iPS-derived NK cells can be administered safely without patient matching. No dose-limiting toxicities and no FT500-related severe adverse events or Grade III or greater adverse events were observed. In addition, there were no reported cases of cytokine release syndrome, immune effector cell-associated neurotoxicity syndrome, or graft-first host disease. Importantly, with the administration of up to six doses of FT500, the patient's immunological response to FT500 was not suggestive of significant anti-product T-cell or B-cell-mediated alloreactivity. Despite immune reconstitution occurring during the first 30 days following lymphoconditioning. Among the 15 heavily pretreated patients, 10 of whom were refractory to last prior therapy, 11 patients had a best overall response of stable disease. We believe these are clinically significant findings for the field of IPS-derived NK cell therapy. In total, 81 doses of FT500 were administered to 15 patients in the outpatient setting. The treatment course was safe and well tolerated. No FT500-related treatment discontinuations occurred, and no robust signals of product rejection were observed. The data strongly suggests that up to six doses at up to 300 million cells per dose of an IPS-derived NK cell product can be administered off the shelf over the course of 45 days without requiring additional lymphoconditioning. We are currently enrolling the dose expansion stage of the FT500 clinical trial in up to 15 patients with either non-small cell lung cancer or classical Hodgkin lymphoma who are refractory to or have relapsed on checkpoint inhibitor therapy. Each patient in the dose expansion stage is to receive three once-weekly doses of FT500 at 300 million cells per dose, each with IL-2 cytokine support for each dose for up to two 30-day cycles in combination with the same checkpoint inhibitor on which the patient failed or relapsed. I'm also pleased to announce that we have treated the first patient with FT538, the first ever CRISPR-edited IPS-derived cell therapy. FT538 is our third-generation product candidate designed to promote innate immunity and is derived from a clonal master IPSC line uniformly engineered with three functional components. a novel HNCD16-FC receptor that enhances ADCC, an IL-15 receptor fusion that augments NK cell activity, and the deletion of the CD38 gene, which confers resistance to oxidative stress and promotes NK cell survival, including when combined with CD38 targeted monoclonal antibody therapy. We believe administration of FT-538 to patients can restore innate immunity and that the anti-cancer effect of certain standard of care treatments, including monoclonal antibody therapy, can be more effective when combined with the engineered functionality of FT-538. The multicenter dose escalation phase one clinical trial of FT-538 is designed to assess the safety and efficacy of three once-weekly doses of FT538 in up to four dose cohorts, starting at 100 million cells per dose. The study will assess two treatment regimens, regimen A as a monotherapy for patients with relapsed refractory AML, and regimen B in combination with daratumumab, an FDA-approved anti-CD38 monoclonal antibody for patients with relapsed refractory multiple myeloma. As we've previously discussed, one of the most profound advantages of our proprietary iPSC product platform is our ability to perform complex genetic engineering, including further engineering of an already established clonal master engineered iPSC line. This enables the stepwise building of multiplexed engineered cell products of increasing complexity. We have successfully applied this novel approach using a clonal master engineered iPSC line for FT538 to efficiently create a clonal master engineered iPSC line for FT576. Our off-the-shelf multi-antigen targeted CAR-BCMA-NK cell product candidate for multiple myeloma that incorporates four engineered components. We expect to submit an investigational new drug application for FT576 to the FDA in the fourth quarter of 2020. Analogous to FT596 in lymphoma, FT576 is uniquely designed to target multiple tumor-associated antigens expressed on myeloma cells for best-in-class potential. In the third quarter, we also achieved a groundbreaking milestone in the field of cell-based cancer immunotherapy, having submitted and cleared with the FDA our IND application for FT819, the first off-the-shelf IPS-derived CAR T-cell therapy. Under a collaboration with Memorial Sloan Kettering, we designed FT819 to specifically overcome several limitations of Memorial Sloan Kettering We designed FT819 to specifically overcome several limitations associated with the current generation of patient and donor-derived CAR T-cell therapies. We've incorporated several first-of-kind features into FT819 to improve safety and efficacy, including a novel 1XX CAR signaling domain, which has been shown to extend T-cell effector function without eliciting exhaustion, Insertion of the CAR transgene directly into the T-cell receptor alpha constant locus, which has been shown to promote uniform CAR expression. And complete biallelic disruption of T-cell receptor expression for the prevention of graft-first host disease. The multicenter phase one clinical trial is designed to assess the safety and activity of FT819 across three types of B-cell malignancies. Chronic Lymphocytic Leukemia, Acute Lymphoblastic Leukemia, and Non-Hodgkin Lymphoma. Notably, each disease type will enroll independently and each indication will evaluate three dose escalating treatment regimens. Regimen A as a single dose starting at 90 million cells, Regimen B as a single dose starting at 90 million cells with IL-2 cytokine support, and Regimen C as three fractionated doses starting at 30 million cells per dose. I'm pleased to announce that we have successfully completed GMP manufacturer of FT819 at Fate Therapeutics, and we are currently conducting product release testing to support initiation of our landmark Phase I clinical trial in the fourth quarter of this year. Finally, we are looking forward to the ASH Conference next month. In keeping with our tradition, we plan to host a virtual investor event to highlight the unique therapeutic features and functionality of our novel, high-affinity, non-cleavable CD16-FC receptor. CD16 is a potent activating receptor naturally expressed on NK cells that recognizes, binds, and kills antibody-coated tumor cells. However, CD16 expression on NK cells is often downregulated and cleaved in the tumor microenvironment, which can significantly impede NK cell functionality and cytotoxicity. We have engineered our novel CD16FC receptor to prevent its downregulation and cleavage and improved its binding affinity to antibodies for enhanced ADCC. We think there is significant promise in the off-the-shelf combination of engineered NK cells and standard-of-care monoclonal antibody therapy to restore innate immunity in patients with cancer. It is now my pleasure to introduce Ed Duloc, who joined Fate Therapeutics in August as our Chief Financial Officer. Ed comes to Fate from Celgene Corporation, where he was most recently served as VP, Business Development and Strategy, Welcome, Ed.

Thank you, Scott. Turning to our financial results, revenue was $7.6 million for the third quarter of 2020, compared to $2.4 million for the same period last year. Revenue in the current quarter was derived from our collaborations with Janssen and Ono Pharmaceuticals. Research and development expenses for the third quarter of 2020 were $30.7 million, compared to $23.2 million for the same period last year. The increase in our R&D expenses was attributable primarily to an increase in employee headcount and compensation, including share-based compensation, and in expenses associated with the facility lease for our new corporate headquarters. General and administrative expenses for the third quarter of 2020 were $8.4 million, compared to $6.3 million for the same period last year. The increase in our G&A expenses was attributable primarily to an increase in headcount and employee compensation, including share-based compensation. Total operating expenses for the third quarter of 2020 were $31.2 million, Net of $7.8 million in non-cash share-based compensation expense. In the third quarter, we recorded a non-cash $27.6 million non-operating expense associated with the fair value of contingent milestone payments under our license agreement with Memorial Sloan Kettering. In the event a certain clinical milestone is first achieved, Up to three milestone payments may be owed to MSK based on subsequent trading values of a company's common stock, ranging from $50 to $150 per share. These milestone payments, in the aggregate, total up to $75 million, and no amounts have been paid or are currently owed to MSK. We will remeasure this liability on a quarterly basis. and changes in the fair value will be recorded in our earnings as non-operating income or expense. The company ended the third quarter of 2020 with $502 million of cash, cash equivalents and investments. Common Stock Outstanding was 87 million shares, and Preferred Convertible Stock Outstanding was 2.8 million shares, each of which is convertible into five shares of common stock under certain conditions. I would now like to open the call up to any questions.