Fate Therapeutics, Inc.

Welcome to the Faith Therapeutics First Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. This call is being webcast live on the investor section of Faith's website at faiththerapeutics.com. As a reminder, today's call is being recorded. I would now like to introduce Scott Walshco, President and CEO of Faith Therapeutics.

Thank you. Good afternoon, and thanks, everyone, for joining us for the Faith Therapeutics first quarter 2023 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 investor section of our website under press releases. In addition, our form 10-Q for the quarter ended March 31, 2023, 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 Security 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 March 31, 2023, that was filed with the SEC today. Undue reliance should not be placed on forward-looking statements which speak only as 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 Delac, our Chief Financial Officer, and Dr. Bob Balliner, our Chief Research and Development Officer. We will focus today's discussion on the impact of our strategic pipeline prioritization and corporate restructuring, including the unwinding of our collaboration with Janssen, our significant reduction in operating expenses, and the extension of our cash runway into the second half of 2025. In addition, we will highlight our sharpened clinical focus, for our FT576 BCMA-targeted CAR-NK cell program in multiple myeloma, and our FT819 CD19-targeted CAR T-cell program in B-cell malignancies. Finally, we will share our progress in advancing our key 2023 program initiatives for our off-the-shelf iPSC-derived CAR-NK and CAR T-cell product pipeline, including under our collaboration with Ono Pharmaceutical. The first quarter of 2023 was a challenging period of transition for the company. The quarter was marked by the termination of our collaboration with Janssen, where we completed an orderly wind down of all collaboration activities. This included discontinuing all research and pre-clinical development of collaboration candidates, halting ongoing GMP manufacturing campaigns in support of clinical development, and withdrawing an IND application that had been allowed by the FDA for a first collaboration product. As of the first quarter's end, we were no longer incurring any costs in connection with the Janssen collaboration, and all amounts owed by Janssen to FAPE have now been fully paid. We also completed a strategic review of our IPSC-derived NK-cell and T-cell programs, electing to focus operations on our most innovative and differentiated CAR-NK cell and CAR-T cell product candidates with the potential to address large unmet clinical needs. As a result, we decided to discontinue further development of our FT516, FT596, FT538, and FT536 NK cell programs. While we are committed to minimizing all operating costs across these discontinued programs, There are a number of patients that have been treated in our FT516 and FT596 phase 1 studies for relapsed refractory B-cell lymphoma that remain on study and in response. And we have decided to continue post-treatment follow-up for these patients for up to one year to assess duration of response. As such, we expect clinical trial costs associated with our FT-516 and FT-596 programs to dissipate over the remainder of 2023. As a consequence of determination of our Janssen collaboration and our strategic pipeline prioritization, we significantly reduced our workforce. In early January, we reduced our headcount by over 60% to approximately 220 employees, which we expect to remain flat at least through the remainder of 2023. In addition, we substantially curtailed our support of investigator-initiated clinical studies and sharpened the scope of our sponsored research agreements. Finally, we are working to reduce our overhead costs and consolidate our operations at our corporate headquarters. With the implementation of this restructuring, we are well positioned to achieve key milestones across our programs. with a cash runway that extends into the second half of 2025. Before we review our progress in advancing our key 2023 program initiatives, I would like to turn the call over to Ed to elaborate on our financial results for the first quarter of 2023. Thank you, Scott, and good afternoon. Faith Therapeutics is in a strong financial position to achieve key inflection points across its pipeline. Our cash, Cash equivalents and investments at the end of the first quarter were approximately $413 million. This amount did not include an additional $14 million in collaboration receivables, of which we received $12.5 million from Janssen in the second quarter. In the first quarter of this year, our revenue increased significantly to $59 million. compared to $18.4 million for the same period last year. Most of our revenue in the quarter, or $58.6 million, was derived from three non-recurring sources. $41.2 million in deferred revenue recognition related to our former collaboration with Janssen, $11.1 million associated with Janssen wind-down activities, and $6.2 million of R&D expense reimbursement under our ongoing collaboration with ONO related to the completion of preclinical activities for FT-825. Research and development expenses for the quarter decreased by $6.5 million to $65.6 million. The decrease in our R&D expenses was attributable primarily to the termination of the Janssen collaboration, a decrease in share-based compensation expense, and from lower demand for R&D supplies and materials. General and administrative expenses for the first quarter increased by $1.2 million to $21.9 million. The increase in our G&A expenses was attributable primarily to an increase in legal-related fees. Total operating expenses for the first quarter were $87.6 million, which includes $12.9 million of severance and other employee termination-related expenses, as well as $11 million in 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 $100,000 to $150 per share. We assessed the fair value of these contingent milestone payments, currently valued at $2.1 million on a quarterly basis. In the first quarter, we recorded a non-cash $1.7 million non-operating benefit associated with the change in fair value. Our net loss for the first quarter was $18.9 million. or 19 cents per share. As we consider the remainder of this year, I want to highlight a few important factors that change the profile of the company's P&L. First, the company's revenue will be derived almost exclusively from our collaboration with Ono, and specifically for research funding in connection with the development of a second product candidate against an undisclosed target in solid tumors. We expect this amount to total about $800,000 per quarter through the third quarter of 2024. Second, as a result of our decision in the fourth quarter of last year to opt into a co-development and co-commercialization arrangement with ONO for FT-825 in the US and Europe, ONO's portion of the program's expenses could be reimbursed to FAPE which were previously captured as revenue, will now be recognized as an offset to our research and development expense. Third, while the company did implement its restructuring in the first quarter, we expect the cost reductions and additional operating leverage to begin to materialize in the second quarter, with additional benefits to accrue throughout the year as we complete the wind down of our discontinued programs. Finally, we expect our gap operating expenses for the full year to be between $265 and $285 million, and that we will end the year with more than $300 million in cash and investments. I would now like to turn the call back over to Scott to discuss our key 2023 program initiatives. Thanks, Ed. After staring down some significant challenges in the first quarter of 2023, We have emerged with a renewed sense of energy, commitment, and drive to bring off-the-shelf IPS-derived cellular immunotherapy to patients with cancer and autoimmune disorders. We remain confident that our proprietary IPSC product platform is uniquely suited to create highly differentiated product candidates that incorporate novel synthetic controls of cell function, deliver multiple mechanisms of action to maximize clinical efficacy, and maintain a safety profile that permits broad accessibility to patients, including in a community-based setting. During the first few months of this year, we have made great strides in positioning the company to reach key inflection points across our programs. The treatment landscape for multiple myeloma remains highly fragmented, with the vast majority of patients receiving multiple lines of combination regimens in community-based settings throughout the course of treatment. FT576 is our off-the-shelf BCMA targeted CAR-AK cell program for multiple myeloma that is uniquely designed to be administered with CD38 targeted monoclonal antibody therapy, which is widely used in combination regimens across lines of therapy. We believe the off-the-shelf combination of FT576 and CD38-targeted monoclonal antibody therapy may offer an attractive and differentiated therapeutic proposition by enabling antibody-dependent cellular cytotoxicity, multi-antigen targeting of myeloma cells, and patient reach into community-based settings. We have previously reported interim Phase I clinical data of the combination from the first single dose treatment cohort at 100 million cells, which showed a favorable safety profile and clinical activity. Additionally, translational data from the cohort indicated rapid and selective depletion of activated C38 positive host immune cells through the first month of therapy, suggesting that the combination may create a favorable immune reconstitution profile to extend FT576 functional persistence. As we continue to accrue patients in the dose escalation stage of our phase one study, we have prioritized enrollment of FT576 in combination with CD38-targeted monoclonal antibody therapy. We are currently enrolling a two-dose treatment cohort at 300 million cells per dose, and upon clearance, We expect to open and assess a three-dose treatment cohort at one billion cells per dose. In the area of B-cell lymphoma, where autologous CAR T-cell therapy has shown remarkable efficacy, the vast majority of patients do not receive autologous CAR T-cell therapy for numerous reasons, whether due to logistical barriers, disease aggressiveness requiring immediate intervention, or inability to combine with standard of care immunochemotherapies that are commonly administered in community-based settings. FT522 is our off-the-shelf CD19 targeted car NK cell program for B cell lymphoma that incorporates five novel synthetic controls of cell function designed to increase NK cell potency, enhance functional persistence, and reduce or eliminate the need to administer intense conditioning chemotherapy to patients. Notably, FT522 is the first product candidate to incorporate our proprietary Alloimmune Defense Receptor, or ADR technology, which is designed to target 401 expressing postimmune cells and induce NK cell activation. We have previously presented preclinical data demonstrating that ADR-armed, IPS-derived CAR and K cells exhibit potent anti-tumor activity in the presence of alloreactive T cells. And we believe there is a significant opportunity for FT522 to be seamlessly combined with standard of care immunotherapies widely used in community-based settings, including for the treatment of patients with newly diagnosed disease. I am pleased to announce that we have recently submitted an investigational new drug application to the FDA to initiate clinical investigation of FT522. The proposed clinical schema is designed to assess a three-dose treatment schedule in combination with CD-targeted monoclonal antibody therapy, including without administration of intensive conditioning chemotherapy to patients. We believe we are well-positioned to initiate patient enrollment at a therapeutically relevant dose and dose schedule in the second half of 2023. We also continue to recruit patients into our landmark phase one study of FT819, our off-the-shelf, ITSC-derived CD19-targeted CAR T-cell product candidate for B-cell malignancies. FTA-19 incorporates several first-of-kind features, including the integration of a novel 1XX CAR construct into the track locus, which is intended to promote uniform CAR expression, balance T-cell activation and exhaustion, and prevent graft-first hosting. We have previously reported interim Phase I clinical data, which showed a favorable safety profile and demonstrated responses in heavily pretreated patients, including in patients who were not eligible for or who had previously failed autologous CD19-targeted CAR-2 cell therapy. The Phase I study is currently enrolling patients in a single-dose treatment cohort at 540 million cells in B-cell lymphoma, and we plan to initiate a dose expansion cohort in the middle of 2023. We also continue to enroll patients in a single-dose treatment cohort at 180 million cells in chronic lymphocytic leukemia, a disease that remains incurable and for which utilization of autologous CAR-2 cell therapy is limited due to the inherent dysfunction within the patient's immune system. We're excited to expand our iPSC-derived CAR T-cell product platform to solid tumors, where effective therapeutic solutions may need to address cell trafficking, the immunosuppressive tumor microenvironment, and tumor heterogeneity. We believe our multiplexed IPS-derived CAR T-cell product platform is designed to specifically overcome these challenges and enable the safe and effective treatment of solid tumors. Under our collaboration with ONO, we are currently conducting IND-enabling activities for FT825, ONO8250, a multiplexed engineered, iPSC-derived CAR-T cell product candidate targeting human epidural growth factor 2, or HER2, expressing solid tumors. The product candidate incorporates seven novel synthetic controls designed to enhance effector cell function including by promoting cell trafficking to the tumor site, redirecting immunosuppressive signals in the tumor microenvironment, and supporting T cell activation without eliciting exhaustion. In addition, we are currently engaged with the ONO clinical development team and are jointly developing our clinical strategy for FTA25-ONO8250. We remain on track to submit an IND application for FTA25-ONO8250 in the second half of 2020 to break. Finally, I'm excited to report that we have engaged multiple key opinion leaders and investigators who have expressed keen interest in utilizing off-the-shelf cell therapy for the treatment of severe autoimmune disorders, where there is a significant need for therapeutic solutions that can effectively reset patients' immune system and meaningfully improve patients' quality of life. In preclinical models, we are currently assessing the potential of FT819 to selectively target and durably deplete pathogenic B cells, as well as for the potential of FT522 as monotherapy and in combination with CD20 and CD38 targeted monoclonal antibodies to selectively target and durably deplete pathogenic B cells, plasma cells, and autoreactive T cells. We believe the value proposition for an off-the-shelf cell therapy in autoimmune disease is compelling. Unlike autologous CAR T cell therapies, off-the-shelf cell therapies avoid the need to taper a patient's immunosuppressive therapy prior to the harvest of T cells from manufacture. Additionally, As many autoimmune diseases are marked by moderate to severe disease flares, which require timely intervention, the potential to treat on demand with an off-the-shelf cell therapy is a significant therapeutic advantage. We are currently working to extend our IPSC product platform into autoimmunity in 2023, and we look forward to sharing our development plans, and strategy as we generate additional preclinical data and further advance our first off-the-shelf product candidate toward clinical development. Before we close, I would like to sincerely thank our employees whose patience and perseverance have allowed us to emerge through this transition period with a strong foundation, a sharpened clinical focus, and multiple pathways for value creation over the next 12 months. I would now like to open up the call to any questions.

Thank you. And as a reminder, to ask a question, simply press star 11 on your telephone and wait for your name to be announced. To withdraw the question, simply press star 11 again. Please stand by while we compile the Q&A roster. And our first question comes from Tyler Van Buren with Cowan. Please go ahead.