Fate Therapeutics, Inc.

Welcome to the FATE Therapeutics Second Quarter 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. This call is being webcast live on the Investors section of the FATE's website at fatetherapeutics.com. As a reminder, today's call is being recorded. I would now like to introduce Scott Walshko, President and CEO of FATE Therapeutics.

Thank you. Good afternoon and thanks everyone for joining us for the faint therapeutic second quarter 2022 financial results call shortly after 4pm Eastern time today we issued a press release with these results, which can be found on the investor section of our website under press releases. In addition, our form 10 Q for the quarter ended June 30 2022 was filed shortly thereafter. and can be found on the investor section of our website under financial information. Before we begin, I'd 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 included in our Form 10-Q for the quarter ended June 30, 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, 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 Chief Medical Officer, Ed Dulac, our Chief Financial Officer, and Dr. Bob Ballamer, our Chief Research and Development Officer. Today, we will highlight key objectives we are striving to achieve during the next six months with our off-the-shelf, iPSC-derived NK and T-cell programs for the treatment of cancer. Our top near-term focus remains our B-cell malignancy franchise, where we are seeking to advance into late-stage development for relapsed refractory aggressive lymphoma and to assess the feasibility of treating newly diagnosed patients in a community setting with FT596 plus ARDSHOP without PSY flu conditioning chemotherapy. We're also approaching key inflection points under our IPS-derived CAR-NK and CAR T-cell collaborations with Janssen and Ono, where multiple programs are poised to advance toward IND submission. And with numerous hurdles continuing to challenge the manufacture and development of patient and donor-derived engineered cell therapies, We continue to believe iPSC technology is the winning platform for mass production of off-the-shelf multiplex engineered cell products. We look forward to sharing first-in-human clinical data from our engineered NK and T cell cancer immunotherapy programs and to unveiling new multiplex engineered IND candidates that further incorporate novel synthetic functionality for the treatment of cancer during the next six months. In our pursuit of pivotal readiness with our IPS derived NK cell programs for relapse refractory aggressive B cell lymphoma, we continue to make great strides across our clinical, regulatory, and manufacturing operations. Under our phase one study of FT596 in combination with rituximab, we observed a favorable safety profile in our single dose and two-dose escalation cohorts at up to 900 million cells per dose. And we are continuing to further evaluate dose and schedule to maximize therapeutic index. To that end, we have initiated enrollment in a single dose and two-dose cohorts at 1.8 billion cells per dose. And upon clearance of dose-limiting toxicities, we are set to open a three dose cohort at 1.8 billion cells per dose to evaluate a further increase in cell load. Eligible patients are permitted to receive additional cycles of treatment and the clinical protocol allows for further dose escalation and for the initiation of multiple expansion cohorts at any cleared dose and schedule. On the regulatory front, Our FT516 RMAT type B multidisciplinary meeting with the FDA is scheduled for the third quarter. The agenda includes a discussion of multiple registrational pathways that may be available for our off-the-shelf IPS-derived NK cell programs for relapsed refractory aggressive B cell lymphoma, including in patients whose disease is refractory 2, or have relapsed following prior treatment with FDA-approved CD19-targeted CAR T-cell therapy. Importantly, no standard therapies are available for these patients, and real-world data continue to indicate that these patients have extremely poor treatment outcomes. With respect to manufacturing, our state-of-the-art, multi-drug product manufacturing facility located in Poway, California, has opened. and is poised for GMP production with aseptic process validation now successfully completed and engineering runs ongoing. The facility is designed to supply drug product for the conduct of pivotal studies and initial commercial launch and is located on the campus of the company's corporate headquarters, allowing for full operational integration among the technical operations, regulatory equality, research and development, and corporate teams. Across our clinical, regulatory, and manufacturing operations, we remain well positioned to optimize dose and schedule of FT-596, to chart a regulatory pathway toward approval with input from the FDA, and to mass produce drug product for pivotal study execution from our state-of-the-art GMP facility. We look forward to providing a comprehensive update for our IPS-derived NK cell programs in relapsed refractory B-cell lymphoma as we continue to progress these three key franchise pillars over the coming months. 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 use of intense conditioning chemotherapy that accompanies the administration of both autologous and allogeneic cell-based cancer immunotherapies is a significant barrier to broader patient access. and that the delivery of off-the-shelf cell therapies in the community setting as an add-on to frontline immunochemotherapy regimens without side flu condition and chemotherapy may hold significant therapeutic value for many patients. To that end, we have worked with key opinion leaders and investigators to finalize a clinical protocol that brings FT596 to newly diagnosed patients with aggressive lymphomas in the community setting in combination with RCHOP, the standard first-line treatment regimen. The clinical protocol assessing FT596 plus RCHOP in patients with newly diagnosed aggressive lymphoma has been submitted to the FT596 IND. The treatment schema allows for the administration of up to six doses of FT596 Without side flu condition and chemotherapy, each one dose of FT-596 administered with each of six standard cycles of RCHOP. Study startup activities are ongoing at multiple sites, and we expect to begin treating patients with FT-596 plus RCHOP in the second half of 2022. In addition, as part of our quest to substantially reduce or eliminate the requirement for conditioning chemotherapy in the field of cell-based cancer immunotherapy and reach patients earlier in care, we continue to research new synthetic functional elements for integration into our product cannabis that can harness a patient's intact immune system to potentiate the activity and persistence of adoptively transferred cells. At the American Association for Cancer Research in April, we unveiled our proprietary alloimmune defense receptor, or ADR, which selectively targets 401 expressing activated immune cells. In preclinical models, we showed that ADR-armed, iPSC-derived NK cells uniquely expand, persist, and maintain anti-tumor activity in vitro in the presence of alloreactive T cells. These preclinical data provide proof of concept that ADR arm cell therapies have the potential to persist and induce potent anti-tumor activity without requiring a patient to undergo conditioning chemotherapy. During the second half of 2022, We expect to present new preclinical data for our ADR technology and highlight its integration into a next generation NK cell product candidate. Turning to our collaborations with Janssen and Ono, we continue to show strong momentum in bringing multiplex engineered IPS-derived CAR-NK and CAR-T cell collaboration programs to patients for the treatment of hematologic malignancies and solid tumors. and we are reaching key inflection points where multiple candidates are poised to advance toward IND submission. Under our collaboration with Janssen, entered into in April 2020, Janssen designated and contributed novel binding domains targeting four tumor-associated antigen programs, two of which are directed to hematologic malignancies and two of which are directed to solid tumors. Janssen maintains the option subject to its payment of an option exercise fee prior to IND submission to initiate worldwide clinical development of and to commercialize collaboration products under each antigen program. We maintain an opt-in right to co-commercialize and share equally in profits and losses of collaboration products in the U.S. under each antigen program. In May, Janssen exercised its option on a first antigen program, triggering a $10 million payment to FAPE, and we have now advanced a second antigen program to the stage of option exercise decision. We are currently working with Janssen to prepare and submit two IND applications, one for each of these two antigen programs, for off-the-shelf IPS-derived CAR-NK cell collaboration products. Under our collaboration with Ono, entered into in September 2018, Ono has contributed novel binding domains targeting one solid tumor-associated antigen for development of off-the-shelf IPS-derived CAR-T cell therapy. Upon the achievement of a specified preclinical milestone, OwnOath retains the option, subject to its payment of an option exercise fee, to conduct worldwide clinical development and commercialization, and we maintain the right to co-develop and co-commercialize collaboration products in the U.S. and Europe. We have now initiated the generation of the master cell bank for a multiplexed engineered, IPSC-derived CAR-T cell collaboration candidate and are positioned to achieve the specified preclinical milestone and initiate IND-enabling activities later this year, at which time ONO has the right to exercise its option subject to its payment of the option exercise fee. Given the success we have achieved working together on a first solid tumor antigen program, we expanded our collaboration with ONO in the second quarter to add a second solid tumor antigen program and to include the development of both CAR-NK and CAR T cell collaboration candidates. We are very pleased with the success we've 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. We are poised to achieve significant milestones in connection with option exercises by Janssen and Ono, and advance multiple collaboration products toward IND submission over the next six months. During the second half of 2022, we will take the opportunity to showcase our leadership in the development of iPS-derived NK and T-cell cancer immunotherapies, including for solid tumors at the Society for Immunotherapy of Cancer annual meeting in November. and for hematologic malignancies at the American Society of Hematology annual meeting in December. At CITC, we look forward to highlighting our clinical progress and innovation under our Solid Tumor Franchise, where we continue to invest in building a deep pipeline of multiplexed engineered IPS-derived CAR and KNT cell product cabinets, including through the development and incorporation of new synthetic elements designed to overcome critical barriers that limit the effectiveness of cell therapy, such as cell homing, tumor escape, and immunosuppressive tumor microenvironment. In the second quarter, I am pleased to announce that we treated the first patient in our multi-center phase one study of FT536, the company's first ever iPSC-derived CAR-NK cell program for solid tumors. FT536 incorporates a novel CAR targeting the major histocompatibility complex class 1 related proteins A and B. High expression of MgA and MgB proteins, which is induced by cellular stress damage or transformation, has been reported on many solid tumors. However, protolytic shedding of the alpha 1 and alpha 2 domains of these proteins is a common mechanism of tumor escape. FT536 uniquely targets the Alpha-3 domain of MycAmycB, which is resistant to shedding and therefore represents a promising strategy to overcome tumor escape. We believe the product candidates novel mechanism of action, including its ability to target other antigens in combination with monoclonal antibody therapy, IPS-derived CAR T-cell product candidates for solid tumors that are advancing toward IND-enabling studies, which include an IPS-derived CAR T-cell product candidate that incorporates seven synthetic modalities to overcome tumor heterogeneity, promote trafficking, and induce activation in response to repressive signaling in the tumor microenvironment. We believe we have one of the most novel, diverse, and sophisticated cell-based cancer immunotherapy pipelines for solid tumors, which is uniquely enabled by our proprietary IPFC product platform. At ASH, we are also excited to share clinical data across our hematologic malignancy franchises. In addition to our NK cell franchise in lymphoma, We continue to see investigator enthusiasm for off-the-shelf IPS-derived CAR T-cell program FT-819. On multiple fronts, FT-819 is truly a unique first-in-class product candidate. Not only is it the first-ever IPS-derived T-cell therapy to undergo clinical investigations, FT819 incorporates a biallelic insertion of an anti-CD19 CAR transgene into the T-cell receptor alpha constant locus with complete disruption of T-cell receptor expression. And its CAR construct is comprised of a novel 1XX co-stimulatory domain that is designed to balance T-cell activation and exhaustion. In the setting of relapsed refractory AML, we look forward to sharing clinical data with FT538, both as a monotherapy and in combination with daratumumab in the high-dose, multi-dose cohorts, where we are now treating the first patients in three-dose cohorts at 1.5 billion cells per dose. And finally, in setting of relapsed refractory multiple myeloma, While dose escalation with FT576 is ongoing in the low dose cohorts and with single dose treatment schedules, we look forward to seeing the initial activity profile of our novel BCMA binder and to assess the multiple potential benefits conferred in combining FT576 with DAR2MAP, including enabling multi-antigen targeting of BCMA and CD38 as well as reducing competition from endogenous immune cells for cytokines to further potentiate the functional persistence of FT576. I would now like to turn the call over to Ed to highlight our second quarter financial results.

Thank you, Scott, and good afternoon. Faith Therapeutics is in a strong financial position to advance our pipeline. Our cash, cash equivalents, and investments at the end of the second quarter of 2022 were approximately $581 million. In the second quarter of this year, our collaboration revenue derived from our partnerships with Janssen and Ono Pharmaceutical increased by $5.1 million to $18.5 million, compared to $13.4 million for the same period last year. Research and development expenses for the second quarter increased by $33.3 million to $81.3 million, compared to $48 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 consultants. General and administrative expenses for the second quarter increased by $8.2 million to $20.4 million, compared to $12.2 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 legal expenses. Total operating expenses for the second quarter are $101.7 million, which includes $20.5 million in non-cash share-based compensation expense. Please note that in connection with the development of our off-the-shelf IPSC-derived CAR T-cell product candidate FT819, we previously achieved the first clinical milestone set forth in our amended license agreement with Memorial Sloan Kettering Cancer Center, thereby triggering 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 assess the fair value of these contingent milestone payments currently valued at $9.9 million on a quarterly basis. In the second quarter, we recorded a non-cash $5.9 million non-operating benefit associated with the change in fair value. Our net loss for the second quarter of 2022 was $76.1 million, or 79 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 Pharmaceutical. I would now like to open the call to questions.