Fate Therapeutics, Inc.

Welcome to the FATE Therapeutics First Quarter 2024 Financial Results Conference Call. At this time, all participants are in listen-only mode. This call is being webcast live on the Investor Sections of FATE's website at FATEtherapeutics.com. As a reminder, today's call is also being recorded. I would now like to introduce Scott Walshko, President and CEO of FATE Therapeutics. Please go ahead.

Thank you. Good afternoon, and thanks, everyone, for joining us for the Faith Therapeutics first quarter 2024 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, 2024, 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 March 31, 2024, 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 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 Dr. Bob Ballamer, our Chief Research and Development Officer. We will focus today's remarks on the data presented today at the American Society of Gene and Cell Therapy annual meeting for our off-the-shelf FT819 CAR-T cell and FT522 CAR-NK cell programs and discuss key program initiatives that we are pursuing to achieve therapeutic differentiation and improve patient outcomes. In addition, we will highlight clinical readouts that we are projecting to achieve in 2024 across our IPSC product pipeline for the treatment of cancer and autoimmune diseases. Finally, we will review our financial position, where our first quarter capital raise and strong cash balance have created operating runway into the second half of 2026. Beginning with FT819, our off-the-shelf CD19-targeted CAR T-cell program, Today, at the ASTCT annual meeting, we presented translational data from our FT819 Phase 1 study in relapsed refractory B-cell malignancies, which show that a single dose of FT819 exhibited multiple mechanisms of action implicated in generating an immune reset in patients with B-cell-mediated autoimmune diseases. The translational data supporting these mechanisms included rapid, deep, and sustained CD19 positive B cell depletion in the peripheral blood, patient case studies of primary, secondary, and tertiary tissue trafficking, infiltration, and activity with CD19 positive B cell elimination in tissue, and patient case studies of plasma cell depletion and B-cell reconstitution with recovery of naive B-cells and little to no recovery of activated memory B-cells or plasma blasts. Notably, we also presented patient case studies demonstrating rapid, deep, and sustained B-cell depletion accompanied by clinical responses without the use of fludarabine as a conditioning agent. Collectively, we believe these data support the disease-modifying potential of FT819 for patients with B-cell-mediated autoimmune diseases. To that end, I am pleased to announce that the first lupus patient has been treated in our Phase I autoimmunity study of FT819. This first patient A 27-year-old woman with refractory disease, despite having previously been treated with multiple standard of care therapies, received conditioning chemotherapy, followed by a single dose of FT819 at 360 million cells. The patient was discharged after a three-day hospitalization stay without any notable adverse events. At ASGCT today, we also presented promising data from a first-of-kind translational assay using a sample of the patient's blood obtained prior to administration of conditioning chemotherapy, where we observed rapid and potent depletion of the patient's CD19 positive B cells in an ex vivo cytotoxicity assay with FT819. It is worthwhile to note that treatment of this first patient occurred within weeks of site activation. We believe this patient experience exemplifies the potential of an off-the-shelf cell therapy to overcome challenges that may hinder autologous cell therapies in reaching patients with autoimmune diseases. including the need for apheresis, complex manufacturing and treatment logistics, and extended patient hospitalization. Furthermore, since we have observed deep B-cell depletion and clinical responses without the use of fludarabine as a conditioning agent in our Phase I study of FT819 for B-cell malignancies, We believe FT819 may have disease-modifying potential in autoimmunity using alternative conditioning regimens. We plan to amend the current clinical protocol for our Phase I autoimmunity study in the second quarter of 2024 to enable FT819 administration with single-agent cytoxins at the same dose used by rheumatologists for treatment of patients with autoimmune disease. We believe that an off-the-shelf add-on of FT819 to commonly used treatment regimens may contribute to a highly differentiating patient experience. Dose escalation in our FT819 Phase 1 study in relapsed refractory B-cell malignancies has now completed. where 43 patients were treated with a single dose of FT819 at up to 1 billion cells without HLA matching. We observed clinical responses, including complete responses in heavily pretreated patients with aggressive disease, including in relapsed refractory large B-cell lymphoma patients that were previously treated with autologous CD19-targeted CAR T-cell therapy. The safety and tolerability profile of FT819 was favorable with no dose-limiting toxicities, no events of any grade of ICANS or graft-versus-host disease, and low incidence of only low-grade CRS. We believe the established clinical safety and tolerability profile of FT819 is differentiated and may also be of significant import for treatment of patients with autoimmune diseases. At this time, we intend to focus all further clinical development of FT819 exclusively in autoimmunity. Today, At the ASGCT annual meeting, we also presented data from our FT522 off-the-shelf CD19-targeted CAR-NK cell program, which is the first product candidate emerging from our IPSC product platform that incorporates alloimmune defense receptor technology. Today, the treatment course for administration of cell-based immunotherapies including both autologous and allogeneic cell therapies, requires conditioning patients with chemotherapy. Conditioning chemotherapy can induce toxicities, prevent combination with standard of care treatments widely used in the community-based settings, and limit patient access and reach. ADR technology incorporated into 522 is designed to enable effective treatment without administration of conditioning chemotherapy to patients, which we believe has the potential to redefine the cell therapy treatment paradigm. We have previously presented preclinical data using cancer cell lines, demonstrating that the co-culture of ADR-armed CAR-NK cells with alloreactive T cells promotes NK cell proliferation, enhances NK cell persistence, and increases anti-tumor activity, indicating that arming with ADR technology has the potential to enable effector cell function in the presence of an alloreactive system. Today, at the ASGCT annual meeting, We reported preclinical data using SLE-diseased cells. In a novel rechallenge assay using peripheral blood mononuclear cells from an unmatched SLE donor, FT522 uniquely drove rapid and deep depletion of CD19-positive donor B cells, eliminated alloreactive donor T cells, and maintained functional persistence with the ability to kill additional CD19 positive donor B cells upon re-challenge. In addition, we also presented initial translational data from the first two patients treated in our ongoing phase one study of FT522 in relapsed refractory B-cell lymphoma. These data show enhanced persistence of 522 in the periphery compared to clinical data observed with FT596, our prior generation CD19-targeted CAR-NK cell without ADR technology. Importantly, these data also show rapid, deep, and sustained B-cell depletion in the periphery throughout the one-month treatment cycle. We intend to submit an IND application to the FDA in the middle of 2024 to expand our clinical investigation of FD522 for treatment of various B-cell-mediated autoimmune diseases including without administration of conditioning chemotherapy to patients. I'm also pleased to report that the first three patients in the conditioning arm of our Phase I study of FT5224 relapsed refractory B-cell lymphoma have now completed safety assessment without any dose-limiting toxicities, and there were no events of any grade of CRS, ICANS, or GVHD. Dose escalation is now ongoing at 900 million cells per dose. In addition, patient enrollment has now been initiated in the no conditioning arm at 300 million cells per dose. And we are poised to clinically assess the safety and activity of our ADR-armed FT522 CAR and K-cell program without administration of conditioning chemotherapy to patients. Turning to our solid tumor initiatives, I'm also pleased to announce that under our collaboration with Ono Pharmaceutical, we have recently treated the first patient in our phase one study of FT825. Designed using the company's iPSC product platform, We believe FTA2.5 represents an exciting new frontier in the field of cell-based cancer immunotherapy. The multiplex engineered IPS-derived CAR T-cell program incorporates a constellation of synthetic anti-tumor mechanisms that are designed to harness the potential of both innate and adaptive immunity and to overcome unique challenges in treating solid tumors. These mechanisms include a CXCR2 receptor to promote cell trafficking, a chimeric TGF-beta receptor to redirect immunosuppressive signals in the tumor microenvironment, a high-affinity non-cleavable CD16A receptor to promote antibody-dependent cellular cytotoxicity, and a novel cancer-specific HER2-targeted antigen binding domain which has shown differentiated activity from that of trastuzumab in preclinical studies, including against HER2 low expressing tumor cells. The first patient in the phase one study was diagnosed with HER2 positive gastroesophageal junction adenocarcinoma, had progressed after receiving multiple lines of treatment, including HER2 targeted therapies, and was administered standard conditioning chemotherapy, followed by a single dose of FT825 as monotherapy at 100 million cells. As we consider our strategic direction, we believe there is a strong value proposition for our iPSC product platform and off-the-shelf cell therapies in autoimmunity, where patient safety, convenience, and accessibility, as well as cost and scale, may be key differentiating factors. We believe our ADR technology can enable effective treatment with cell therapy without requiring administration of conditioning chemotherapy to patients, which has the potential to redefine the cell therapy treatment paradigm and patient experience for cancer and autoimmunity. And we believe our multiplexed engineered IPFC-derived CAR T-cell platform can deliver multiple synthetic mechanisms of antitumor activity, with the potential to overcome unique challenges in treating solid tumors. As we look ahead into the second half of 2024, we are well positioned to reach and report on five key clinical milestones across our iPSC product pipeline for cancer and autoimmune diseases. Number one, we seek to demonstrate the disease transforming potential of FT819 in B-cell mediated autoimmune diseases. Specifically, we expect to read out initial phase one clinical data for the first three to five patients treated with FT819 for moderate to severe SLA. Number two, we seek to administer FT819 without fludarabine and instead with commonly used treatment regimens for autoimmune diseases. Specifically, we intend to amend the current IND for our FT819 phase one autoimmunity study to include administration with single agent Cytoxan and expect to read out initial patient clinical data. Number three, we seek to demonstrate the potential of our proprietary ADR technology to enable effective treatment of patients without administration of conditioning chemotherapy. Specifically, we expect to read out the first five no conditioning patients treated with 522 in our phase one study for B-cell lymphoma. Number four, we seek to broadly investigate 522 without conditioning chemotherapy for treatment of various B-cell mediated autoimmune diseases. Specifically, we expect to submit an IND application and subject to IND allowance by the FDA initiate patient enrollment in a phase one multi-indication study of 522 for autoimmunity. And finally, we seek to establish initial clinical proof of concept for our multiplexed engineered IPS-derived CAR-T cell platform in treating solid tumors. Specifically, we expect to read out the first three to five patients treated with FTA25 in our phase one study for advanced solid tumors. I would now like to turn the call over to Ed to review our financial results for the first quarter.

Thank you, Scott, and good afternoon. Fate Therapeutics is in a strong financial position to advance our pipeline of iPSC-derived CAR-T and CAR-NK cell programs for autoimmune diseases and cancer. With the addition of net proceeds from the company's $80 million underwritten offering of common stock and $20 million concurrent private placement of pre-funded warrants in March, our cash, cash equivalents, and investments at the end of the first quarter were approximately $391 million. In the first quarter, our reported revenue of $1.9 million was consistent with the prior two quarters. and reflects the research funding associated with the development of a second product candidate against an undisclosed target in solid tumors under our collaboration with Ono Pharmaceutical. As a reminder, after opting into a US and European co-development and co-commercialization arrangement with Ono for FT825 in the fourth quarter of 2022, we account for that program's reimbursable expenses as an offset within our research and development costs. We recognized $800,000 of contra R&D expense in the quarter. Research and development expenses for the first quarter were $32.1 million, essentially flat versus the fourth quarter of last year. Our expenditures in R&D were driven primarily by salaries and benefits, including share-based compensation, and from clinical trial costs and demand for R&D materials. General and administrative expenses for the first quarter increased sequentially by 16% to $20.9 million. The increase in our G&A expenses was attributable primarily to increases in legal-related fees. Total operating expenses for the first quarter increased by 7% relative to the fourth quarter of 2023 to $53 million. which included $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 to $150 per share. We assessed the fair value of these contingent milestone payments, currently valued at $2.7 million on a quarterly basis. In the first quarter, we recorded a non-cash $1.4 million increase non-operating loss associated with the change in fair value. Our net loss for the quarter was $48 million, or 47 cents per share. Finally, as we consider the investments we plan to make this year, we expect our GAAP operating expenses, which includes non-cash items such as stock compensation expense and depreciation, for the full year to be between $215 and $230 million, and that we will end the year with more than $270 million in cash and cash equivalents and investments. I would now like to open the call for questions.