Fate Therapeutics, Inc.

Welcome to the Faith Therapeutics 4th 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 on 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. The floor is yours.

Thank you. Good afternoon, and thanks, everyone, for joining us for the Faith Therapeutics Fourth 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 section of our website under Press Releases. In addition, our Form 10-K for the year ended December 31, 2020 was filed shortly thereafter and can be found on the investor 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-K for the year ended December 31, 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. Wayne Chu, our Senior Vice President of Clinical Development, Ed Duloc, our Chief Financial Officer, Dr. Dan Shoemaker, our Chief Scientific Officer, and Dr. Bob Vallamer, our Chief Development Officer. Today we will review some of the clinical data for our FT-516 and FT-596 programs that we shared at the ASH Conference in December, highlight our clinical progress and plans for each of our disease franchises, and discuss our advancement toward clinical development of our next wave of multiplexed engineered IPS-derived cell product candidates for solid tumors. Over the past several years, FATE Therapeutics has pioneered an unprecedented vision for cell therapy, one where the significant limitations of patient and donor-derived cell therapies are overcome through induced pluripotent stem cell technology, clonal master-engineered IPSC lines, and off-the-shelf multiplex engineered cell products. Within the past several months, we have made great strides in delivering on this vision for the benefit of patients with cancer. We have demonstrated that iPSC-derived NK cells can be mass-produced, cryopreserved, and administered off-the-shelf to patients in the outpatient setting. We have demonstrated the clinical safety and the therapeutic activity of engineered iPSC-derived NK cells, having shown that our off-the-shelf cell product candidates can drive patient responses, including complete responses, in patients with relapsed refractory disease. We have demonstrated that treatment schedules consisting of multiple doses and multiple cycles of iPS-derived NK cells can be well tolerated without evidence of host rejection, and that patient responses can deepen through additional dosing. We have demonstrated that our proprietary, high-affinity, non-collievable CD16-FC receptor, a core functional component used in our IPS-derived NK cell product platform, can effectively synergize with and enhance the mechanism of action of tumor-targeted antibodies. And we have demonstrated that our IPS-derived NK cell product candidates can be engineered with multiple components of synthetic biology to attack cancer, and that we can successfully work with the FDA to bring these first-of-kind multiplexed engineered cell products to patients. We are very encouraged by the clinical progress we have made across our disease areas, and we look forward to a promising year ahead. In the disease area of B-cell malignancies, we are encouraged by the interim data we reported in December from our phase one study of FT516 in combination with rituximab for patients with relapsed refractory B-cell lymphoma. As of a November 16, 2020 data cutoff, three of four efficacy of valuable patients in dose cohorts two and three achieved an objective response. with two patients achieving a complete response. We believe these clinical data are compelling on multiple fronts. All four patients had been treated previously with at least two lines of rituximab-containing regimens, including one patient with diffuse large B-cell lymphoma who was most recently refractory to a rituximab-containing regimen and achieved a complete response following treatment with FT516. The outpatient treatment schedule consisting of two cycles of three weekly doses of FT-516 was well tolerated and there was clinical evidence to suggest that the second FT-516 treatment cycle conferred clinical benefit. One patient who achieved a partial response on an interim assessment following the first FT-516 treatment cycle achieved a complete response following the second FT516 treatment cycle. There were no events of any grade of CRS, neurotox, or GVHD, and there were no evidence of tier B cell mediated host rejection. Collectively, early clinical activity of FT516 suggests that the product candidate's high affinity non-cleavable CD16 receptor can effectively synergize with rituximab to drive complete responses in patients that have relapsed following or are refractory to rituximab-containing regimens. And the safety profile of FT516 suggests that multiple doses and multiple cycles can be administered in the outpatient setting. Dose escalation with FT516 is currently ongoing at 900 million cells per dose, and we are preparing to initiate dose expansion in relapsed refractory B-cell lymphoma upon clearance of this dose cohort. In addition, given the safety, activity, and mechanism of action of FT-516, we're currently considering earlier line opportunities for clinical investigation of FT-516 in B-cell lymphoma, where CD20-targeted monoclonal antibody therapy regimens are used as standard of care. At ASH, we're also pleased to share a clinical vignette of the second patient treated in our Phase 1 study of FT596. The case study described a heavily pretreated patient with diffuse large B-cell lymphoma who had previously received seven prior treatment regimens and was most recently refractory to an experimental NK cell regimen consisting of CyFlu lymphoconditioning, followed by ex vivo expanded donor-derived NK cells, IL-2, plus rituximab. The patient was administered a single-dose cycle of 30 million cells of FT596 as monotherapy and achieved a partial response at day 30 following administration. Notably, upon review of the patient's clinical course, the FDA consented to administration of a second single-dose cycle of FT596, which was administered on day 47 and resulted in a deepening response as evidenced by further decreases in both tumor size and metabolic activity. No DLTs, no FT596-related SAEs, and no events of any grade of CRS, ICANS, or GVHD were reported by the investigator. We believe this patient case study is significant on a few fronts. Since FT596 was administered as a monotherapy, this provides a first clinical demonstration that our proprietary CAR construct optimized for NK cell biology, which contains an NKG2D transmembrane domain, a 2B4 co-stimulatory domain, and a CD3 zeta signaling domain, is active. Additionally, the patient achieved a partial response without any events of any grade of CRS, ICANS, or GVHD, suggesting that CAR-NK cells may have a differentiated safety profile as compared to CAR-T cells. And the patient's response deepened with a second single-dose cycle of FT596, once again underscoring that follow-on doses and cycles of IPS-derived NK cells can be safely administered and confer clinical benefits. On this last point, we are encouraged by the patient's partial response at day 30. However, we continue to believe that relapsed refractory patients with aggressive cancers will be best served by administration of multiple doses during the first weeks of treatment. It is well documented that adoptively transferred NK cells persist for short duration, that adoptively transferred cells, including CAR T cells, can undergo significant changes in phenotype and function in the days and weeks following administration, and that the critical period for maximal anti-tumor activity is during the first days and weeks following administration. To this end, we plan to submit a protocol amendment to the FDA in the coming weeks to enable multi-dosing of FT596 within the first 30-day treatment cycle. Under the current clinical protocol, dose escalation with FT596 for the treatment of B-cell lymphoma is ongoing in the second dose cohorts of 90 million cells as monotherapy and in combination with rituximab for multi-antigen targeting. Additionally, the first patients with chronic lymphocytic leukemia have been treated in the first dose cohort of 30 million cells as monotherapy. and we plan to begin enrollment in combination with Ibinituzumab for multi-antigen targeting upon clearance of the first monotherapy dose cohort. We also continue to make great progress in pioneering the clinical development of IPS-derived CAR T-cells for cancer. Last year, we successfully worked with the FDA to clear the first-ever IND application for an IPS-derived CAR T-cell product candidate. and we are now preparing to initiate a multi-center phase one clinical trial for FT819 across three types of B-cell malignancies, chronic lymphocytic leukemia, acute lymphoblastic leukemia, and B-cell lymphoma. Notably, each disease type will enroll independently, and each indication will evaluate three treatment regimens, single dose of FT819, single dose of FT819 plus IL-2 cytokine support, and three fractionated doses of FT819. In preparation for study initiation, we have completed our first GMP manufacturing run and continue to conduct assay validation and product release testing for FT819. We also continue to innovate and optimize our manufacturing process, including under our collaborations with Ono and Janssen. And we have initiated a second GMP manufacturing run of FT819 to implement certain improvements. We expect to treat the first patients with FT819 in the middle of 2021. AML is our second disease area of interest and one where there is strong clinical precedent for donor-derived NK cell therapy. Most clinical studies in the donor-derived NK cell field, however, have been conducted as single-site investigator-initiated studies, as patient eligibility has been significantly limited by the requirement to use NK cells that are matched to the patient, that are manufactured solely for that patient, and that are delivered fresh as a single-dose therapy. We believe there is a significant therapeutic opportunity for off-the-shelf NK cell therapy for patients with relapsed refractory AML. one where multiple doses of a cryopreserved NK cell product can be thawed and infused to significantly reduce or eliminate leukemic burden, enabling patients to qualify for the potentially curative procedure of allogeneic stem cell transplant. In 2020, we made strong progress with our FT516 and FT538 programs for the treatment of relapsed refractory AML. Dose escalation with three weekly doses of FT516 is currently ongoing at 900 million cells per dose. Additionally, we successfully worked with the FDA to clear our IND application for FT538, the first-ever CRISPR-edited IPS-derived cell product to advance the clinical investigation in the U.S. 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, our high-affinity non-cleavable CD16-FC receptor, an IL-15 receptor fusion that augments NK cell activity, and the deletion of the CD38 gene, which confers resistance to oxidative stress and prevents fratricide when combined with CD38-targeted monoclonal antibody therapy. Dose escalation with three weekly doses of FT538 is currently ongoing at 100 million cells per dose for the treatment of relapsed refractory AML. At the European Hematology Meeting in 2020, a presentation caught our attention that highlighted the potential therapeutic role of CD38-targeted monoclonal antibody therapy in treating elderly patients with AML. An assessment of bone marrow samples from newly diagnosed elderly AML patients showed CD38 expression on leukemic blasts in 239 out of 241 samples tested, strongly indicating the potential of CD38 as a therapeutic target for AML. To exploit this potential and to promote NK cell mediated ADCC, we are assessing FT538 in combination with daratumumab, an FDA approved CD38 targeted monoclonal antibody therapy. The phase one clinical trial, which is sponsored and managed by investigators from the Masonic Cancer Center University of Minnesota, is designed to assess three weekly doses of FT538 in combination with daratumab in patients with relapsed refractory AML. We expect this trial to initiate in mid-2021. Our third disease area of interest is multiple myeloma, and we are very excited about our potential to generate compelling clinical data over the next 12 months with both our FT538 and FT576 programs. In December, the FDA allowed our IND application for FT576, the first-ever cell therapy to incorporate four functional anti-tumor components, including a CAR-targeting B-cell maturation antigen. Importantly, our BCMA binding domain is novel, and in preclinical studies, it has shown greater killing of target cells with low expression levels of BCMA, in comparison to other BCMA binding domains. The clinical protocol for our Phase I clinical trial of FT576 includes dose escalation both as a monotherapy and in combination with daratumab to enable dual antigen targeting of BCMA and CD38 on myeloma cells, an approach that we believe is highly differentiated and holds best-in-class potential. Additionally, the protocol includes assessment of both single-dose and multi-dose treatment regimens to maximize the therapeutic index during the first 30 days following infusion. Similar to our approach in lymphoma, we are beginning clinical investigation of multiple myeloma by leveraging our high-affinity non-cleavable CD16 receptor. And we are combining FT538 with daratumumab to maximize ADCC. While daratumumab effectively targets CD38 expressed on multiple myeloma cells and induces cell death, it also induces NK cell fratricide, which may impair the effectiveness of ADCC. In addition, NK cell function is often impaired in patients with multiple myeloma, further reducing the potential therapeutic activity of daratumumab. Preclinical and clinical observations suggest a potential therapeutic benefit of maintaining NK cell numbers and function. In the second quarter, we expect to initiate enrollment of FT538 in combination with daratumab in the first dose cohort of three weekly doses of 100 million cells for patients with relapsed refractory multiple myeloma who have failed at least two lines of therapy. Over the next 12 months, we plan to substantially increase our clinical investigation in the area of solid tumors. We are certainly enthusiastic about the therapeutic potential of NK cells to address significant unmet needs across a wide range of solid tumors, and we are pursuing multiple avenues of investigation for clinical benefit. Since NK cells have the innate ability to recognize and directly kill cancer cells that lack MHC class one antigen presentation, we believe NK cells may play a unique role in attacking tumors that have evaded T cells and are resistant to checkpoint inhibitor therapy. We are currently enrolling the dose expansion stage of the FT500 phase one clinical trial for patients with non-small cell lung cancer or classical Hodgkin's lymphoma, who are refractory to or who have relapsed on checkpoint inhibitor therapy. We intend to treat up to 15 patients, administering up to six doses of FT500 at 300 million cells per dose, each with IL-2 cytokine support in combination with the checkpoint inhibitor on which the patient failed or relapsed. Additionally, we are leveraging our high-affinity, non-clivable CD16 receptor in combination with FDA-approved monoclonal antibodies to promote ADC for solid tumors. We are currently enrolling patients in the second dose cohort of our Phase I study of FT516 in combination with Avelumab, an ADCC-competent anti-PD-L1 checkpoint inhibitor therapy. We are also actively considering additional settings to exploit the broad potential of ADCC, including with FT538 and other tumor-targeting antibodies in solid tumors. And finally, we believe our IPSC product platform represents the ideal framework for designing and developing multiplexed engineered CAR and K cell product candidates. And we currently have four novel IPS-derived CAR and K-cell programs for solid tumors undergoing preclinical development. These programs include three wholly-owned programs and one program under our collaboration with Janssen. During 2021, we expect to submit an IND for FT536, our proprietary CAR and K-cell program targeting the Alpha-3 domain of the pan-tumor-associated stress antigens, MCA and MCB, as well as for FT562, our first CAR-NK cell program targeting an undisclosed antigen under our collaboration with Janssen. And finally, I want to take a moment to note that data on the primary and secondary endpoints in our randomized, controlled, and double-blinded Phase II PROTECT clinical trial of protomune are scheduled to be available in the second quarter of 2021. Protomune is our investigational next-generation donor-derived cell graft for patients with hematologic malignancies undergoing allogeneic mobilized peripheral blood transplant. The primary efficacy endpoint of PROTECT is cumulative incidence of grades 2 through 4 acute GVHD by day 100 where clinical studies have shown that up to 60% of patients undergoing matched unrelated donor transplant experience grade two through four acute GVHD. The second efficacy endpoint of PROTECT is the proportion of subjects alive without relapse and without moderate or severe chronic GVHD or GRFS by day 365. where clinical studies have shown that only about 20% of patients successfully achieve GVHD-free, relapse-free survival at one year. The statistical analysis plan is designed to independently assess both primary and secondary endpoints. I would now like to turn the call over to Ed to highlight our fourth quarter financial results. Thank you, Scott.

Turning to our financial results, revenue was $15.9 million for the fourth quarter of 2020, compared to $2.8 million for the same period last year. Revenue in the current quarter was derived from our collaborations with Janssen and Ono Pharmaceutical. In December, we shared with Ono a preclinical data package for an IPSC-derived CAR-T cell product candidate incorporating Ono's proprietary antigen binding domain targeting a cancer-specific antigen expressed on certain solid tumors. Based on these data, Ono elected to continue preclinical development of the product candidate under the collaboration, and we received a $10 million milestone fee from Ono. As a reminder, Ono maintains an option to develop and commercialize the IPSC-derived CAR T-cell product candidate in all territories of the world, and we retain the right to co-develop and co-commercialize the product candidate in the United States and Europe under a joint arrangement where we are eligible to share at least 50% of the profits and losses. In the fourth quarter, we recognized $6.1 million of the $10 million milestone payment received from ONO. Research and development expenses for the fourth quarter of 2020 were $39 million, compared to $25.2 million for the same period last year. The increase in 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 fourth quarter of 2020 were $10.3 million, compared to $6.7 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 fourth quarter of 2020 were $40.5 million, net of $8.8 million in non-cash share-based compensation expense. In the fourth quarter, we recorded a non-cash $20.1 million non-operating expense associated with the fair value of contingent milestone payments under our IPSC-derived CAR T-cell collaboration with Memorial Sloan Kettering. In the event a certain clinical milestone is achieved with an IPSC-derived CAR T-cell product candidate, Up to three milestone payments may be owed to MSK based on subsequent trading values of the 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. currently valued in the aggregate at $47.7 million on a quarterly basis, and changes in the fair value will be recorded in our earnings as a non-operating income or expense. The company ended the fourth quarter of 2020 with $483 million of cash, cash equivalents, and investments. This does not include the aggregate net proceeds of approximately $432 million received from our January 2021 public equity offering. Common stock outstanding was 88 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. The common stock balance does not include the 5.1 million common shares issued as part of our January 2021 public equity offering. I would now like to open the call to questions.