Fate Therapeutics, Inc.

Welcome to the FATE Therapeutics first quarter 2022 financial results conference call. At this time, all participants are in listen-only mode. This call is being webcasted live on the investor's section of FATE's website at fatetherapeutics.com. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. As a reminder, today's call is being recorded. I would now like to introduce Scott Walshco, President and CEO of Fate Therapeutics.

Scott Walshco Thank you. Good afternoon, and thanks, everyone, for joining us for the Fate Therapeutics First Quarter 2022 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-Q for the quarter ended March 31, 2022 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 the market today, as well as the risk factors included in our Form 10-Q for the quarter ended March 31, 2022 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, state 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 Chiu, our Chief Medical Officer, Ed Dulock, our Chief Financial Officer, and Dr. Bob Valimer, our Chief Research and Development Officer. Today, we will highlight the clinical progress we have made during the first few months of 2022 with our off-the-shelf iPSC-derived NK and T-cell programs for the treatment of cancer. as well as note several key milestones that we are striving to achieve over the next several months across our four disease franchises. In addition, we continue to advance our collaborations with Janssen and Ohno with strong momentum, and we will discuss the upcoming milestones that we have the potential to achieve during 2022 under these collaborations. And finally, we will touch on our continued leadership in innovation, and highlight certain preclinical programs and data that we featured at the American Association for Cancer Research in April and that we plan to unveil at the American Society of Gene and Cell Therapy in May. I would like to begin today by highlighting our recent progress in advancing our off-the-shelf iPSC-derived NK and T cell programs for patients with hematologic malignancies and solid tumors. In the setting of B-cell lymphoma, we continue to enroll patients with relapsed refractory disease in our FT516 and FT596 Phase I studies. With respect to our FT516 program in combination with rituximab, multiple disease-specific expansion cohorts are currently ongoing as we continue to assess a multi-dose, multi-cycle treatment schedule of three once-weekly doses at 900 million cells per dose. With respect to our FT596 program in combination with rituximab, based on the favorable safety profile we have observed in the single-dose multi-cycle cohort, I am pleased to announce that we have now dose escalated this single-dose multi-cycle cohort to 1.8 billion cells. In addition, we continue to enroll a two-dose multi-cycle cohort at 900 million cells per dose, with FT596 administered on days 1 and 15, and intend to dose escalate this two-dose multi-cycle cohort to 1.8 billion cells per dose. In addition, we are seeing investigator enthusiasm for our FT819 program, the first ever T-cell therapy manufactured from a clonal iPSC line to undergo clinical investigation. The clonal master iPSC line for FT819 is created from a single iPSC that has a novel CD19-targeted 1XX CAR construct integrated into the T-cell receptor alpha constant locus, ensuring complete biallelic disruption of T-cell receptor expression and promoting uniform CAR expression. We are pleased to announce that we have now dose escalated the single-dose cohort to 180 million cells from 90 million cells. We are continuing to backfill this single-dose cohort at 90 million cells, which cleared with no dose-limiting toxicities, and no FT819-related grade three or greater adverse events. In addition to the single-dose cohort, we are also enrolling a multi-dose cohort with FT819 administered on days one, three, and five, and the first patients have been treated in this multi-dose cohort at 30 million cells per dose. As we consider registrational pathways in relapsed refractory B-cell lymphoma, we continue to believe a critical unmet need exists for patients who have progressed on multiple lines of therapy, especially CD19-targeted CAR T-cell therapy. While autologous CD19-targeted CAR T-cell therapy has led to remarkable improvements in outcomes for relapsed refractory patients, it is important to remember that about 30% of patients are primary refractory to CAR T-cell therapy, and the majority of responding patients will ultimately experience disease progression. Under our FT516 RMAT designation, we plan to engage the FDA in the coming weeks and hold a multidisciplinary meeting to discuss our proposed pivotal study design in patients who have progressed or relapsed following prior treatment with FDA-approved CD19-targeted CAR T-cell therapy. Importantly, no standard therapies are available for these patients, and recent retrospective analyses of real-world data presented at the 2021 Annual Meeting of the American Society of Hematology demonstrate extremely poor treatment outcomes. with complete response rates of administered therapies ranging from 5 to 25 percent, and overall survival ranging from 5 to 7 months. Under our FT516 RMAC designation, we also plan to discuss with the FDA key CMC topics applicable to our first-of-kind IPSC product platforms. With the operational launch of our second GMP manufacturing facility scheduled for mid-2022, we believe we are well equipped with the in-house expertise and capabilities to fulfill CMC requirements that are necessary for pivotal trial conduct, BLA submission, and initial commercial launch. We continue to believe that the post-CAR T cell setting represents a potential fast market development pathway based on the critical unmet need, and we are working to launch a pivotal study, whether that be with FT516 or FT596, by the end of 2022 for patients with aggressive lymphomas previously treated with autologous CD19-targeted CAR T cell therapies. In addition to delivering transformative outcomes to heavily pretreated patients with relapsed refractory B-cell lymphoma, we are also seeking to reach patients in the community setting who might benefit from earlier treatment with cell-based cancer immunotherapy. We believe the delivery of off-the-shelf cell therapies in the community setting without side flu chemotherapy conditionings as an add-on to frontline immunochemotherapy regimens, has the potential to transform outcomes for many patients with cancer. To that end, over the past several months, we have worked with investigators and key opinion leaders on a clinical protocol that brings FT596 into the community setting as an add-on to ARCHA, the standard first-line immunochemotherapy for patients with aggressive lymphomas. The proposed treatment schema in patients with newly diagnosed aggressive lymphomas includes administering up to six doses of FT596 without CyFlu chemotherapy conditioning, with one dose of FT596 administered twice. with each of six standard cycles of ARCHA. In the second quarter of 2022, we plan to submit the FT596 plus ARCHA protocol to the FT596 IND and expect to begin treating patients in the second half of 2022, subject to its allowance by the FDA. In the setting of multiple myeloma, We continue to enroll patients with relapsed refractory disease in the dose escalation stage of our FT538 and FT576 Phase 1 studies. With respect to our FT538 program in combination with daratumab, the multi-dose treatment schedule of three once-weekly doses at 100 million cells per dose, cleared with no dose-limiting toxicities, And enrollment is now ongoing at 300 million cells per dose. In addition, with respect to our FT576 program, the single-dose cohort as monotherapy at 100 million cells cleared with no dose left. And we have now treated the first patients in the single-dose cohort in combination with DAR2MAD at 100 million cells cleared. We are preparing to initiate multi-dose escalation cohorts with FT576 administered on days one and 15 as monotherapy and in combination with daratumum. In the setting of AML, the company's phase one study of FT538, which is designed to assess three once weekly doses of FT538 as monotherapy, in relapsed refractory patients is currently enrolling patients at one billion cells per dose. In addition, an investigator-initiated study of FT538 in combination with the CD38-targeted monoclonal antibody daratumab, which is designed to assess the therapeutic potential of targeting CD38-positive leukemic blasts, is also enrolling patients at one billion cells per dose. Both studies include the potential for further dose escalation. In the setting of solid tumors, I'm pleased to announce that we are poised to initiate a multicenter phase one clinical trial of FT536, the company's first iPSC-derived CAR and K-cell program for solid tumors. FT536 incorporates the company's high-affinity, non-cleavable CD16FC receptor to maximize antibody-dependent cellular cytotoxicity, as well as a CAR targeting the major histocompatibility complex class I-related proteins, MICA and MICB. High expression of MICA and MICB proteins, which is induced by cellular stress, damage, or transformation, has been reported on many solid tumors, although the protolytic shedding of the alpha-1 and alpha-2 domains of these proteins is recognized as a common tumor escape mechanism. The clonal master iPSC bank for FT536 was created from a single iPSC engineered with four functional elements, including the novel CAR, which uniquely targets the alpha-3 domain of MCA-MCB, and is designed to overcome tumor escape mechanisms mediated by loss of MHC Class I expression and protolytic shedding. We believe the product candidate's novel mechanisms of attack and ability to synergize with monoclonal antibody therapy can drive significantly improved outcomes for patients with solid tumors. We have successfully completed manufacture and are conducting final release testing of FT536. And we are working with the study's first clinical sites to initiate first patient enrollment by the end of May. The six-arm clinical study is designed to assess a multi-dose, multi-cycle treatment schedule of FT536 as monotherapy and in combination with monoclonal antibody therapy for advanced solid tumors. We look forward to providing clinical updates for our multiplexed engineered IPSC-derived NK and T-cell product candidates across our disease franchises in the second half of 2022. Turning to our collaborations with Janssen and Ono, we continue to show strong momentum in bringing multiplexed engineered IPS-derived CAR-NK and CAR T-cell product candidates to patients for the treatment of hematologic malignancies and solid tumors. Under our collaboration with Janssen, we have now initiated IND-enabling activities for two IPS-derived CAR and K-cell collaboration candidates. And we are actively working together with Janssen to prepare and submit IND applications for both of these candidates. For each of these collaboration candidates, Janssen maintains the option subject to its payment of an option fee prior to IND submission to initiate worldwide clinical development. We maintain the right in the U.S., alongside Janssen, to co-commercialize and share equally in profits and losses of each collaboration candidate. As a reminder, under our collaboration, Janssen has the right to designate and contribute novel binding domains targeting up to four tumor-associated antigens. Janssen has now designated and contributed novel binding domains targeting three antigens, and we have now successfully achieved preclinical milestones for collaboration candidates targeting all three antigens. Under our collaboration with Ono, Ono has contributed a novel binding domain targeting a solid tumor-associated antigen, and we have now initiated the generation of the master cell bank for a multiplexed engineered IPS-derived CAR-T cell collaboration candidate targeting the solid tumor-associated antigen. We are poised to initiate IND-enabling activities for this solid tumor CAR T-cell collaboration candidate during the third quarter of 2022, at which time ONO has the option, subject to its payment of an option fee, to exercise its rights for worldwide clinical development and commercialization, while we maintain the right to co-develop and co-commercialize the CAR T-cell collaboration candidate in the U.S. and Europe alongside Ono. We are very pleased with the success we have achieved with Janssen and Ono in developing multiplex engineered IPS-derived CAR-NK and CAR-T cell product candidates for both liquid and solid tumors, and we are now poised to achieve significant milestones in connection with option exercise by Janssen and Ono over the course of the next three to six months. Turning to our continued leadership and innovation, we continue to invest in building a first-in-class pipeline of multiplexed engineered product candidates for solid tumors, including through the development and incorporation of new functional elements designed to overcome critical barriers that limit cell therapy, such as the requirement for patient lymphoconditioning, tumor antigen escape, and the immunosuppressive tumor microenvironment. At the American Association for Cancer Research in April, we presented our synthetic alloimmune defense receptor, or ADR, which targets 401BB upregulated on host alloreactive immune cells and is designed to eliminate the need for patient conditioning in administering off-the-shelf cell-based cancer immunotherapy. In preclinical models, we showed that ADR-armed, IPS-derived NK cells demonstrate enhanced functional persistence in vitro in the presence of alloreactive NK and T cells and exhibit durable antitumor activity in vivo in the presence of alloreactive T cells. These preclinical data provide proof of concept that ADR-armed cell therapies have the potential to persist and induce potent anti-tumor activity without requiring a patient to undergo chemotherapy conditioning to deplete the host immune system. In addition, we showcased our novel chimeric CD3 fusion receptor, or CD3FR. which is designed to enable off-the-shelf cell-based cancer immunotherapies to combine and synergize with CD3 bispecific engagers. In developing off-the-shelf CAR T-cell therapies, TCR expression must be eliminated to prevent graft-first host disease. However, the absence of TCR expression leads to loss of surface CD3 expression. Similarly, NK cells naturally lack TCR expression and have no surface CD3 expression. In preclinical models, we showed that CD3FR-armed IPS-derived CAR T cells, in combination with a bispecific engager, demonstrate target-specific cytotoxicity in vitro through CD3FR engagement, and enable dual antigen targeting. These preclinical data provide proof of concept that, much like our HNCD16FC receptor that enables synergy with monoclonal antibody therapy, our CD3FR enables armed IPS-derived CAR and K and CAR T cells to effectively combine and synergize with CD3 bispecific engagers for a multi-pronged attack on heterogeneous solid tumors. Later this month, at the American Society of Gene and Cell Therapy, we plan to present nine abstracts covering our proprietary IPSC product platform, including the unveiling of our most sophisticated multiplexed engineered IPS-derived cell product to date. we are currently developing an off-the-shelf IPS-derived CAR T-cell product candidate for solid tumors. That incorporates seven functional modalities, including three modes of tumor targeting to overcome tumor heterogeneity, as well as a novel synthetic CXCR2 homing receptor to promote trafficking to solid tumors, and a novel synthetic TGF-beta redirector receptor to promote activation in response to repressive signaling in the tumor microenvironment. While we will not yet disclose the CAR construct solid tumor target, preclinical data will show that the novel binding domain exhibits unique antigen recognition and tumor selectivity, with the ability to discriminate between antigen expressed on tumor cells versus normal tissue. We look forward to advancing our first off-the-shelf IPS-derived CAR T-cell product candidate for solid tumors into IMD-enabling activities later this year. I would now like to turn the call over to Ed to highlight our first quarter financial results.

Thank you, Scott, and good afternoon. Faith Therapeutics is in a strong financial position to advance our platform and pipeline. Our cash, cash equivalents, and investments at the end of the first quarter of 2022 were approximately $642 million. In the first quarter of this year, our collaboration revenue derived from our partnerships with Janssen and Ono Pharmaceutical increased by $7.3 million to $18.4 million. compared to $11.1 million for the same period last year. Research and development expenses for the first quarter increased by $27.3 million to $72.1 million, compared to $44.9 million for the same period last year. The increase in our R&D expenses was attributable primarily to increases in employee headcount and compensation, including share-based compensation, investments made in equipment and materials, and in expenses associated with R&D fees and third-party professional consultants. General and administrative expenses for the first quarter of 2022 increased by $8.2 million to $20.7 million, compared to $12.5 million for the same period last year. The increase in our G&A expenses was attributable primarily to an increase in employee headcount and compensation, including share-based compensation, and talent acquisition and facility-related fees. Total operating expenses for the first quarter were $92.9 million, which includes $19.2 million of non-cash share-based compensation expense. Note that, in connection with the development of our off-the-shelf IPSC-derived CAR T-cell product candidate FT819, we previously achieved the clinical milestone set forth in our amended license agreement with Memorial Sloan Kettering Cancer Center, which triggered a first milestone payment to MSK in 2021. Up to two additional milestone payments may be owed to MSK based on subsequent trading values of the company's common stock, ranging from $100 to $150 per share. We assessed the fair value of these contingent milestone payments, currently valued at $15.8 million on a quarterly basis. In the first quarter, we recorded a non-cash $8.4 million non-operating benefit associated with the change in fair value. Our net loss for the first quarter of the year was $65.7 million, or 68 cents per share. Finally, our year-end cash guidance remains unchanged, and we expect to end this year with at least $400 million in cash, cash equivalents, and investments. This does not include potential success-based milestone payments from our collaborations with Janssen and Ono Pharmaceuticals. I would now like to open the call up to questions.