Fate Therapeutics, Inc.

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

Thank you. Good afternoon and thanks everyone for joining us for the FAPE Therapeutics third 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 September 30, 2023 was filed shortly thereafter and can be found on the Investors 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 included in our Form 10-Q for the quarter ended September 30, 2023 that was filed with the FCC 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 Ed Duloc, our Chief Financial Officer, and Dr. Bob Ballamer, our Chief Research and Development Officer. During today's discussion, we will cover several key milestones that we recently achieved for our iPSC product platform, including expanding the clinical reach of our iPSC-derived CAR T-cell platform to solid tumors, as well as beyond oncology and into autoimmunity. In reaching these milestones, We are now well positioned to achieve important clinical readouts in oncology and autoimmunity across multiple programs in 2024. We will also discuss our continued focus on controlling costs that has resulted in a significant decrease in cash utilization, which we believe enables us to extend our operating runway into the second half of 2025. Beginning with FT522, our off-the-shelf CD19-targeted CAR and K-cell program, I am pleased to announce that our phase one study is open for enrollment in patients with relapsed refractory B-cell lymphoma, where we intend to assess FT522 with and without conditioning chemotherapy. FT522 is the company's first product candidate to incorporate our proprietary alloimmune defense receptor, or ADR technology, which is comprised of a synthetic engineered receptor designed to target 401 expressed on allo-reactive immune cells and induce NK cell proliferation. In pre-clinical studies, we have shown that the engagement of ADR-armed CAR and K cells with allo-reactive immune cells mitigated rejection, promoted NK cell proliferation, and increased anti-tumor activity. These preclinical data suggest that 522 has the potential to drive clinical responses without administration of intense conditioning chemotherapy to patients. The phase one study includes two regimens. Regimen A, or the conditioning arm, which consists of three days of standard conditioning chemotherapy, one dose of rituximab, and three doses of FT522, and regimen B, or the no conditioning arm, which consists of one dose of rituximab and three doses of FT522 without conditioning chemotherapy. Enrollment into regimen A, or the conditioning arm, has now been opened at the first dose level of 300 million cells per dose, and upon clearance of dose-limiting toxicities at this first dose level, enrollment into regimen B, or the no conditioning arm, will commence at its first dose level of 300 million cells per dose. Each regimen may proceed with dose escalation independently. Today, Conditioning patients with intense chemotherapy is a necessary component of the treatment course for cell-based cancer immunotherapy, including for both autologous and allogeneic cell therapies. Conditioning chemotherapy induces toxicities, limits patient access, and prevents combination with standard of care immunotherapies widely used in the community-based setting. We believe we have the opportunity to establish clinical proof of concept for ADR technology and for FT522 program without conditioning chemotherapy early in dose escalation. Turning now to our T cell programs. We believe our multiplexed engineered IPFC derived CAR T cell product platform is uniquely suited to bring a constellation of anti-tumor mechanisms to the fight against solid tumors. I'm pleased to announce that we have established a new landmark in the field of cell-based cancer immunotherapy. Our IND application was cleared by the FDA to initiate clinical investigation of FT825 in patients with solid tumors. The multiplexed engineered IPFC-derived CAR T-cell program, which is being co-developed under our collaboration with Ono Pharmaceutical, incorporates seven novel synthetic controls of cell function that are designed to harness the potential of both innate and adaptive immunity and to overcome the unique challenges in treating solid tumors. These novel synthetic controls include a CXCR2 receptor to promote cell trafficking, a chimeric TGF beta receptor to redirect immunosuppressive signals in the tumor microenvironment, and a high affinity non-feverable CD16 receptor to promote antibody-dependent cellular cytotoxicity. At the 2023 Society for Immunotherapy of Cancer Annual Meeting, we unveiled that FTA25 incorporates a novel cancer-specific antigen binding domain targeting HER2. which was contributed by Ono to our collaboration. Pre-clinical studies presented at the meeting demonstrated that the binding profile of the cancer-specific CAR construct is unique and differentiated from that of Trastuzumab, exhibiting similar potency with greater specificity toward HER2-expressing malignant cells. In subcutaneous xenocraft models, FTA25 demonstrated robust anti-tumor efficacy against HER2 high, as well as HER2 low expressing tumor cells. Additionally, FTA25 resisted TGF-beta mediated suppression, maintaining robust cytolytic activity across multiple rounds of tumor challenge and suppressive levels of TGF-beta exposure, and showed potent migration to CXCR2 ligands, which are often expressed in solid tumors. With the clearance of our IMD by the FDA, phase one study startup activities are now ongoing at multiple sites. The dose escalation schema for the phase one study includes two treatment regimens. Regimen A, or the monotherapy arm, consists of a standard three-day preconditioning regimen, and a single dose of FTA25 as monotherapy. Enrollment into the monotherapy arm will commence at the first dose level of 100 million cells. Eligibility includes patients with advanced HER2-expressing solid tumors. Regimen B, or the combination arm, consists of a standard three-day preconditioning regimen, and a single dose of FT-825 in combination with cetuximab, where we seek to additionally exploit innate immunity by leveraging the product candidate's high-affinity non-collegial CD16 receptor to target EGFR expressed on solid tumor cells. Enrollment into Regimen B will commence at the first dose level of 100 million cells upon clearance of dose-limiting toxicity at the first dose level of regimen A. Eligibility includes patients with advanced EGFR expressing solid tumors. While we have made great strides in advancing our most innovative and differentiated clinical programs in oncology, we also remain committed to pursuing new therapeutic opportunities beyond oncology, where cell-based immunotherapies can have a profound clinical benefit for patients. Our initial clinical data are now emerging, indicating that CD19-targeted CAR-T cell therapy has the potential to durably deplete a patient's pathogenic immune cells, drive immune reset, and meaningfully improve quality of life across a wide spectrum of autoimmune diseases. We believe there is a very strong value proposition for off-the-shelf cell therapy and autoimmunity. where a relatively short-lived cell can deeply eradicate an aberrant B-cell population and enable rapid reconstitution of a healthy immune system, and where patient safety, convenience, accessibility, as well as cost and scale will be a differentiating factor. To this end, I'm pleased to announce the clinical expansion of our iPSC product platform into autoimmunity. In July, The FDA cleared our IND application for clinical investigation of FT819, our off-the-shelf CD19-targeted CAR T-cell program, in patients with SLE, including for patients with active lupus nephritis or active SLE without renal cell involvement. we have now initiated Phase I study startup activities at multiple sites. The Phase I study in SLE is designed to evaluate the safety, pharmacokinetics, anti-B cell activity of a single dose of FT819 administered following a standard conditioning regimen consisting of either CyFlu or Bendamustine. dose escalation will commence at the first dose level of 360 million cells. Importantly, we have previously presented clinical data of a single dose of FT819 at doses up to 360 million cells in the setting of relapsed refractory B-cell lymphoma, where we reported safety and clinical activity. Of the first 11 patients treated with a single dose of FT819 at up to 360 million cells, we observed a favorable safety profile with no immune effector cell associated neurotoxicity and mild cytokine release syndrome. We observed anti-tumor activity in heavily pretreated patients, including three complete responses. And we observed CAR T cell expansion that peaked in the peripheral blood between days eight and 11. The phase one study of FT819 SLE allows for assessment of higher dose levels, each up to three times the highest clear dose level, as well as for the opening of multiple dose expansion cohorts, each of which may be enrolled in parallel. We are pleased to receive a favorable review of our FT819 clinical protocol from the clinical experts of the Protocol Design Committee of Lupus Therapeutics and affiliate of the Lupus Research Alliance. We also continue to watch with keen interest the emergence of additional clinical data in autoimmunity, and we are currently evaluating additional clinical expansion opportunities for FT819 as well as for FT522 where we think the potential to reduce conditioning chemotherapy and to target in between B cells, plasma cells, and auto-reactive T cells with an off-the-shelf ADR-armed CD19-targeted CLRNK cell offers a highly differentiated therapeutic profile. We have remained resilient during these challenging times. and focused our attention on building a fully integrated operation that leads in the research, development, and manufacture of multiplexed engineered iPSC-derived cellular immunotherapies. As we look towards 2024, we are well positioned to achieve important clinical readouts in oncology and autoimmunity across multiple programs. Clinical activities are now ongoing for our two most innovative oncology programs, FT522 in B-cell lymphoma, and FTA25 in solid tumors, as well as for our first autoimmunity program, FT819 in SLE. We also continue to advance our phase one study of FT819 in B-cell malignancies, where we are enrolling patients in single-dose treatment cohorts at 540 million cells in BCL and at 360 million cells in CLL. as well as our phase one study of FT576 in multiple myeloma, where we are enrolling patients in three-dose treatment cohorts at one billion cells per dose as monotherapy, and in combination with CD38-targeted monoclonal antibody therapy. Finally, our investment in innovation continues, including under our solid tumor collaboration with Ono, as we continue to advance new, multi-flexed engineered CAR-2 cell programs toward clinical development. We remain confident in our belief that our proprietary iPSC product platform is uniquely suited to create highly differentiated product candidates with the potential to deliver multiple mechanisms of action and therapeutic benefits to patients with cancer and autoimmune diseases. I'd now like to turn the call over to Ed to review our financial results for the third quarter. 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 third quarter were approximately $350 million. In the third quarter of this year, our revenue declined to $1.9 million. compared to $15 million for the same period last year. As 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. 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. We recognized $2.1 million of Contra R&D expense in the quarter. Research and development expenses for the quarter decreased by 57% to $34.3 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 company's restructuring in the first quarter, and from lower clinical trial costs and lower demand for R&D materials and equipment. General and administrative expenses for the third quarter decreased by 12% to $18.9 million. The decline in our G&A expenses was attributable primarily to a decrease in salaries and benefits, including share-based compensation expense. Total operating expenses for the third quarter declined 47% to $53.2 million, which includes $10.1 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 $700,000 on a quarterly basis. In the third quarter, we recorded a non-cash $1 million non-operating benefit associated with the change in fair value. Our net loss for the quarter was $45.2 million, or 46 cents per share. Finally, we reiterate guidance for full-year GAAP operating expenses to be in the range of $265 to $285 million, and that our year-end cash and investments will exceed $300 million. I would now like to open the call for questions.

Thank you. If you'd like to ask a question, please press star 1-1. If your question has been answered and you'd like to remove yourself in the queue, please press star 1-1 again. Our first question comes from Yagal Nakamovitz with Citi. Your line is open.