Fate Therapeutics, Inc.

Welcome to the FATE Therapeutics second quarter 2023 financial results conference call. At this time, all participants are on listen-only mode. This call is being webcast live on the investor section of FATE's website at fatetherapeutics.com. As a reminder, today's call is being recorded. I would now like to introduce Scott Walshco, President and CEO of FATE Therapeutics.

Thank you. Good afternoon, and thanks, everyone, for joining us for the FATE Therapeutics second 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 Investors section of our website under Press Releases. In addition, our Form 10-Q for the quarter ended June 30, 2023, was filed shortly thereafter and can be found on the Investors 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, 2023, 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 Ed Duloc, our Chief Financial Officer, and Bob Vollumer, our Chief Research and Development Officer. During today's discussion, we will cover the recent IND allowance for our FT522 RNK cell program in B-cell lymphoma, which is our first product candidate to incorporate our proprietary allodefense receptor technology. The phase one clinical trial is designed to assess FT522 with and without administration of intensive conditioning chemotherapy to patients. Study startup activities are ongoing, and we plan to enroll the first patient in the second half of 2023. We will also highlight our continued investment in our multiplexed engineered iPSC-derived CAR T-cell franchise for solid tumors, where we are advancing our FT825 HER2-targeted CAR T-cell program in collaboration with Ono Pharmaceutical toward an IND submission in the second half of 2023. Finally, we will provide some additional guidance on our progress toward expanding the clinical reach of our iPSC product platform beyond oncology and into autoimmunity. Before we review our progress and the key milestones that we are striving to achieve in the second half of 2023, I would like to turn the call over to Ed to elaborate further on our financial results where, in the wake of our strategic pipeline prioritization and corporate restructuring in January, we have controlled our cost structure, posted a reduction in operating expenses and cash burn, and successfully created operating runway through multiple potential data readouts and into the second half of 2025.

Thank you, Scott, and good afternoon. Faith Therapeutics is in a solid financial position to advance our pipeline. Our cash, cash equivalents, and investments at the end of the second quarter were approximately $385 million. In the second quarter of this year, and consistent with our guidance, revenue declined significantly to $900,000, compared to $18.5 million for the same period last year. As we indicated last quarter, our revenue is now derived exclusively from our collaboration with Ono Pharmaceutical, and specifically reflects research funding associated 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. As a reminder, after opting into a U.S. and European co-development and co-commercialization arrangement with ONO for FT 825 in the fourth quarter of last year, we now account for that program's reimbursable expenses as an offset within our research and development costs. Research and development expenses for the quarter decreased by 50% compared to the same period last year to $40.9 million. The decrease in our R&D expenses was attributable primarily to a decrease in salaries and benefits, including share-based compensation expense following the companies restructuring the first quarter, and from lower demand for R&D supplies, materials, and equipment. General and administrative expenses for the second quarter increased by 11% compared to the same period last year to $22.6 million. The increase in our G&A expenses was attributable primarily to an increase in legal-related fees. Total operating expenses for the second quarter declined 25% compared to the same period last year to $63.5 million. which includes $12.9 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. We assessed the fair value of these contingent milestone payments, currently valued at $1.7 million on a quarterly basis. In the second quarter, we recorded a non-cash $390,000 non-operating benefit associated with the change in fair value. Our net loss for the quarter was $52.8 million or 54 cents per share. As we consider the remaining two quarters of the year, our demonstrated ability to wind down costs associated with our discontinued programs and additional ongoing cost rationalization efforts position us well to manage our balance sheet and advance our product candidate portfolio. As a result, we reiterate guidance for full-year GAAP operating expenses to be in the range of $265 to $285 million and expect that our year-end cash and investments will exceed $300 million. I will now turn the call back over to Scott to discuss our second half 2023 program milestones. Thanks, Ed.