Scott Wolchko - Chief Financial Officer and COO Dr. Christian Weyer - President and CEO Dr. Dan Shoemaker - Chief Research Officer.

Boris Peaker - Cowen And Co. David Nierengarten - Wedbush Securities Reni Benjamin - HC Wainwright.

Welcome to Fate Therapeutics’ Fourth Quarter 2014 Financial Results Conference Call. At this time, all participants are in a listen-only mode. This call is being webcast live on the Investors and Media section of Fate’s Web site at fatetherapeutics.com.

This call is a property of Fate Therapeutics and recordings, reproduction or transmission of this call without the expressed written consent of Fate is strictly prohibited. As a reminder, today’s conference is being recorded. I would now like to introduce Scott Wolchko, Chief Operating and Financial Officer of Fate Therapeutics. Sir, please begin..

Thank you. Good afternoon. And thanks everyone for joining us for the Fate Therapeutics fourth quarter 2014 earnings call. At 4:00 PM Eastern Time today, we issued a press release with our fourth quarter and full year 2014 financial results, which can be found on the Investors and Media section of our Web site under press releases.

In addition, our 2014 10-K will be filed shortly thereafter and can be found on the Investors and Media section of our Web site 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 in the company’s SEC filings, included in our Form 10-K for the quarter ended December 31 2014 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, Fate Therapeutics disclaims any obligation, to update these forward-looking statements to reflect future information, events or circumstances. Joining me on the call today are Dr. Christian Weyer, President and Chief Executive Officer, Dr. Dan Shoemaker, Chief Research Officer.

I will begin the call by reviewing our financial results for the fourth quarter of 2014. For the three months ended December 31 2014, Fate Therapeutics reported a net loss of $6.2 million as compared to a net loss of $5.7 million for the fourth quarter of 2013.

Research and development expenses for the fourth quarter of 2014 were $3.9 million compared to $3 million for the fourth quarter of 2013.

This increase was primarily driven by an increase in employee compensation expense including some additional headcount and by an increase in third-party professional consultant and service provider fees in connection with the conduct of our PUMA clinical study and the preparation for the commencement of our PROMPT and PROVIDE clinical studies.

G&A expenses for the fourth quarter of 2014 were $2.1 million compared to $1.9 million for the fourth quarter of 2013. This increase was primarily driven by an increase in employee compensation expense. Total operating expenses for the fourth quarter of 2014 were $5.9 million, compared to $4.9 million for the fourth quarter of 2013.

After adjusting for stock-based compensation expense of approximately $600,000, total operating expenses for the fourth quarter of 2014 were $5.3 million.

At the end of the fourth quarter of 2014, our cash and cash equivalents were $49.1 million, our debt outstanding under our facility with Silicon Valley Bank was $20 million and we had approximately 20.6 million shares outstanding. We believe we have sufficient cash resources to provide operating runway at least through the first quarter of 2016.

I will now turn the call over to Christian to provide an update on our key R&D programs and corporate priorities..

Thank you Scott and good afternoon everyone. Over the past three months we have made significant progress in demonstrating the broad potential of our innovative ex vivo cell programming approach for the development of first in kind hematopoetic cellular therapeutics.

First, in late December 2014, we reported a favorable neutrophil engraftment data from an interim analysis, interim safety review of the first 12 subject administered PROHEMA in our ongoing phase 2, PUMA study, are randomized controlled multicenter clinical trial in adult patients undergoing double umbilical cord blood transplantation for the treatment of hematologic malignancies.

These initial data where encouraging on several fronts. The studies independent data monitoring committee determined that PROHEMA had met established safety criteria and supported continuation of the PUMA study.

Additionally, time to achieve neutrophil engraftment was reduced for PROHEMA subjects receiving myeloablative or reduced intensity conditioning, the median times were reduced by six and seven days respectively as compared to pre-specified median times reported in the literature.

And furthermore, the incidence of early neutrophil engraftment was increased. Six of the nine engrafting subject administered PROHEMA achieve neutrophil engraftment prior to the prespecified historically confirmed medians.

In patients undergoing hematopoetic stem cell transplantation or HSCT, engraftment of donor derived neutrophils is one of the most crucial early milestones required for the successful reconstitution of new blood and immune system.

And it is well-established that patients with delayed neutrophil engraftment have a several fold higher risk of transplant related mortality and also achieve early neutrophil engraftment.

Second, over the past three months we also expanded our HSCT therapeutics pipeline by adding a second development stage candidate that is based on the programming of hematopoetic cells from mobilized peripheral from blood.

Mobilized peripheral blood represents the most commonly used hematopoetic cells source for HSCT, and together umbilical cord blood mobilized peripheral blood account for approximately 80% of allogeneic HSCT procedures each year.

At the annual meeting of the American Society of Hematology in December we present a new scientific findings demonstrating that T cells and CD 34 cells for mobilized peripheral blood can be programmed ex vivo with preclinical evidence pointing to the programmed hematopoetic cells having improved therapeutic potential through internal combinatorial screening efforts we identified a combination of two small molecule modulators that synergize to induce supra-physiologic activation of genes implicated in the immune tolerance and antiviral properties of T cells as well as in the forming of engraftment potential of CD 34 cells.

Specifically the programmed CD 34 cells with this dual combination resulted in a 60-fold increase in CXCR4 gene expression levels and a statistically significant increase in engraftment as compared to unmodulated cells.

Additionally T-cells that were programmed with this dual combination were found to have a 66% reduction of cell-surface protein expression of ICOS, a key T-cell activation marker, and a statistically significant reduction in proliferation rates as compared to unmodulated cells.

Collectively these pre-clinical findings point to the therapeutic potential of ex vivo programmed hematopoetic cells to mitigate T-cell mediated complications such as viral infections, graft-versus-host disease, and delayed immune-reconstitution and improve overall outcomes in patients undergoing HSCT with mobilized peripheral blood as a sound source.

We are currently preparing fund IND application which we plan to submit to the FDA in 2015, to support the initiation of a clinical trial to assess the programmed mobilized peripheral blood candidate in adult subject undergoing allergenic HSCT for the treatment of hematologic malignancies.

And third, at the beginning of this year we unveiled a new resource initiative aimed at expanding our pipeline of programmed hematopoetic cellular therapeutics beyond the HSCT setting.

We maintain a strong conviction that our self programming approach is broadly applicable to the development of hematopoetic cellular therapeutics for the treatment of severe life-threatening diseases.

Today we are pleased to announce our first therapeutic program derived from this research initiative which is aimed at programming the immune-regulatory properties of CD 34 cells, an opportunity which we believe of as a novel approach for therapeutic intervention in various disorders of the immune system.

I will now turn the call over to Dan to provide you with further details on this exciting opportunity.

Thank you Christian. Since our founding, we have been dedicated to the programming of the therapeutic function of hematopoetic cells ex vivo.

We built a platform that enables us to identify small molecule or biologic modulators that promote rapid and super-physiologic activation or inhibition of therapeutically relevant gene and cell surface proteins such as those involved in homine [ph] proliferation and survival of CD34 cells, or those involved in persistence, proliferation and reactivity of T-cell.

We believe that this novel therapeutic paradigm which involves systematically and precisely programming the biological properties of cells ex vivo is an elegant cost-effective and scalable approach to maximize the safety and efficacy of cellular therapeutics.

And because of the programming that occurs ex vivo and is not until administration of pharmacological modulators directly to the patients, it is feasible to apply combinatorial programming approaches using multiple modulators to achieve profound biological stats without the complexities and safety concerns that are typically encountered with in vivo combinatorial treatments.

In the past several months, our internal research team has identified a novel combination of three pharmacologic modulators that synergized the programmed supraphysiological expression levels of PD-L1, a key immunosuppressive protein on CD 34 cells.

We intend to exploit PD-L1 expression on CD 34 positive cells as a mechanism to limit the alloreactivity of T-cells that have been activated, just part of an inflammatory or autoimmune response. In recent years, the PD-1 PD-L1 pathway has been clinically validated as a promising therapeutics target.

And data from large clinical trials where checkpoint inhibitors targeting this pathway provide compelling support for the prudent immunosuppressive role of PD-L1. Using our cell programming approach, we have achieved a greater than 100-fold upregulation of PD-L1 gene expression on CD34 cells during a 24 hour ex vivo treatment.

Additionally in our initial in vitro experiments we have shown that CD34 cells programmed with this triple modulator combination significantly reduce the proliferation rates of activated T cells, as compared to unmodulated CD34 cells.

We are currently investigating the in vivo therapeutic potential of PD-L1 programmed CD34 cells to preferentially home to sites of inflammation and to suppress T cell proliferation and cytokine production in various preclinical models of inflammatory and autoimmune disease.

We believe this intervention strategy offers a novel approach to harness this therapeutic potential of PD-L1 immunosuppressive mechanism and thus how to manage and leverage the clinical safety experience that already exist with CD 34-based cellular therapeutics for the treatment of disorders of the immune system.

So having reviewed our recent progress with the programming of cell function, but me next talk about the tremendous opportunity we see for the use of our proprietary iPSC technology to program cell fate.

We believe iPSC or induced pluripotent stem cell technology offers a disruptive approach to the development of next generation hematopoetic cellular therapeutics.

Over the past six years we have been dedicated to and have made significant strides in developing optimized and scalable methods for the highly efficient derivation and expansion of human iPSC for therapeutic use.

Today we are highly focused on applying our proprietary iPSC technology to isolate the genetically engineered and characterized human iPSCs at a single cell level which enable subsequent selection, clonal expansion and differentiation of the hematopoetic cell types such as human CD 34 positive cells, T cells and natural killer cells.

We have already generated definitive CD 34 positive cells from human iPSCs leaving differentiation protocols comprised of only small molecules and cytokines that are efficient, scalable and cGMP compatible.

We have administered these human iPSC derived CD 34 cells to immunodeficient mice and have demonstrated their ability to provide long-term engraftment of 18 weeks. Furthermore we've shown these human iPSC derived CD 34 cells give rise to hematopoetic cells of both myeloid and lymphoid lineages in vivo including CD3 positive T cells.

Building upon this progress we are now continued to develop our innovative small molecule-based differentiation protocols to further optimize the generation of human iPSC derived CD 34 positive cells, T cells and natural killer cells for therapeutic use.

And importantly in parallel with our technological and scientific advances we continue to strengthen our intellectual property estate to protect our iPSC technology. During the past three months, five US patents that are exclusively licensed for all therapeutic purchases by the company have been issued by the US Patent And Trademark Office.

These patents, several which have parity dates as early as November 2003, cover some additional compositions and methods critical to the derivation of the human iPSCs including issued claims relating to Oct4 which is considered the key pluripotency gene for cellular reprogramming sensitive to its expression as required for human iPSC derivation.

So, as you can see we are very excited about our ongoing research programs. And with that I will now turn the call over to Christian to summarize our 2015 direction and provide concluding comments..

Thank you, Dan.

Looking ahead in 2015, we believe we are well-positioned to validate the disease transforming potential of PROHEMA in patients across a wide range of ages and a broad spectrum of blood threatening malignant and rare genetic disorders and to further apply our cell programming approach in optimizing the therapeutic potential of CD 34 cells and T cells.

With respect to PROHEMA our ongoing phase 2 PUMA study is poised to generate a robust informative set of data on multiple clinical endpoints that continue based to the overall morbidity or mortality of HSCT.

We expect to report data on the primary endpoint which is based on the incidence of neutrophil engraftment prior to the prespecified historic median times in the second half of 2015.

Additionally we expect to see a data related to the therapeutic effect of ex vivo programming on donor derived T cells including rates about reactivation graft through the source disease and immune-reconstitution.

In particular with keeping a keen eye on the rates of reactivation of cytomegalovirus and Epstein-Barr virus which are major clinical challenges during the first hundred days following HSCT.

We call that, in our phase 1B study, subjects who receive PROHEMA shot in increased proportion of naïve and early memory T cells within the CD8 positive T cell compartment at day 100 following HSCT. And lower rates of CMV and EBV reactivation were observed as compared to the rates reported in the literature.

In addition to our content of the PUMA study, we continue to make progress in the clinical expansion of our PROHEMA franchise to pediatric patients undergoing single cord blood transplantation.

We are in final preparations to initiate our phase 1B PROVIDE study which is designed to investigate the potential of PROHEMA to provide cellular enzyme replacement therapy for the treatment of inherited metabolic disorders.

We have also increased the number of study sites in our phase 1B PROMT study for the treatment of hematologic malignancies and we expect to report engraftment data from both pediatric studies in 2015.

Our programming of both cell function and fate underlies our long-term vision of developing first-in kind hematopoetic cellular therapeutics for the treatment of severe life-threatening diseases. 12 months ago our efforts were largely focused on programming CD 34 cells in umbilical cord blood.

Over the past 12 months we have demonstrated the therapeutic potential and broad applicability of our cell programming approach. We have identified additional modulators of hematopoetic cells including modulators of T cells.

We have applied moderators in combinatorial fashion that synergize to drive therapeutically relevant functional improvements to the biological properties of CD 34 cells and T cells.

And using those modulators we are now researching and developing programmed hematopoetic cellular therapeutics for more blood peripheral blood HSCT, the predominant cells were used in HSCT and in therapeutic areas beyond HSCT including for the treatment of disorders of the immune system.

We are excited about the substantial progress that we have made in 2014 and we believe there are significant opportunities on the horizon that we can continue to tap our cell programming approach including in collaboration with strategic partners to identify and develop programmed hematopoetic cellular therapeutics for severe life-threatening diseases.

And with that, I’d like to turn the call over to the operator for any questions..

[Operator Instructions] Our first question comes from the line of Boris Peaker with Cowen & Co. please go ahead Sir, your line is opened..

Thank you for taking my question.

I guess my first question is through the PD-L1 expression, CD 34 positive cells, and now based on what's known about PD-L1, is there a high level where the amounts of the cell ligand can cause just infection and if so just curious and just based on model you [indiscernible] so far, what is the kind of the margin of safety between the PD-L1 level you anticipate to expose patients to and these potentially infectious levels..

So first of, this obviously relatively still earlier states in the developmental program. So we do not have at this point extensive preclinical experiments to address some of the questions you are raising. We are taking great comfort out of critical data that already exists, right interventions in the PD-L1 Pathway.

Dan, anything you want to add?.

No, these the questions, that are currently underway in our preclinical models and we are certainly paying close attention to the level that PD-L 1 that we are achieving both pharmacologically as well as with genetic overexpression systems but this is definitely something we will keep a close eye on..

And Boris one more thing to add, just to keep in mind if you one with our therapeutic approach overall, the [indiscernible] changes we are driving on the self-service of this cells are transient in nature and so I think that is another important thing to consider..

Great and similar question is in the PROHEMA study, do you monitor CXCR4 gene expression or the [indiscernible] approaching expression levels and so, is that something that correlate with at least with the initial patients whether there is a correlation between engraftment time and expression of these markers or not?.

Another great question, we are in addition to collecting the [indiscernible] parameters, we are obviously characterizing both the cells that actually we administered to patients as well as taking extensive characterization following the actual PROHEMA transplant..

Okay and my last question, this is a more kind of a may be a kind of basic science question that take why does delay in neutrophil engraftment correlate with expression with GHD?.

Sorry, can I ask you to repeat that question one more time?.

Sure.

Are you mentioned that delayed in neutrophil engraftment in bone marrow transplant, is it correlates with high level of GHD? I am curious why that is so?.

No, I think what I wanted to convey here is that when you do an analysis of a time to engraftment and transplant recipients and you analyze the outcomes, the overall transplant related mortality and compared that late engrafters and early engrafters, it is a very clear based on the literature and there is multiple multicenter experiences that have been published that patient who engrafted late have a higher overall mortality risk, I did not refer to GVHD risk in that..

I appreciate the clarification, I was a little confused by that..

Just to complete this point, the major contributors to that excess risk than if include for instance, risk of serious bacterial and fungal infections.

So the longer the patient, it remains not fully engrafted the higher the risk of the bacterial infections among other things and that contributes to the clear association that one sees with time taking to feel engraftment of mortality. .

Thank you. And our next question comes from the line of David Nierengarten with Wedbush Securities, your line is open. Please go ahead..

Thanks for taking my question. I was just wondering the study in rare diseases, where are you in terms of enrolling patient so you are screening them, you have your center set up, just that you get a progress report on that. Thanks..

Let me have to answer that question. So we are in, as we have set in our prepared remarks in the final status of activating and initiating this trial. As you might imagine, we are working with sites that have extensive experience and considered leaders in this field and we are excited to get those study up and running.

We are on the final things of getting the study activated starting with the patients..

And will you, sorry to be speaking about the details, but would you press release the first patient which you treat so we can have an idea when we could see the initial results?.

The exact, [indiscernible] prepared to disclosed by that, to talk about that. We will definitely keep everyone informed as we make progress on the two studies in pediatric patients, absolutely..

[Operator Instructions]. Our next question comes from the line of Reni Benjamin with HC Wainwright. Your line is open. Please go ahead..

Just jumping back to the provide study detailed and I know you mentioned you are in the final stages, can you comment a little bit about what is kind of taken the significant amount of time but very more importunately from patient enrollment perspective, is there already a backlog of patients, so during this whole setup time, have they been screening or looking for patients that might be lined up so that enrollment may occur faster?.

First of I mean we the team has said are highly focused and working with a great sense of urgency to advance all of our clinical trials and we just had an opportunity to meet with many of our clinical investigators at the annual meeting of the ASMBT here San Diego last month and I can tell you there was a shared excitement and commitment to advance these programs with the shared ultimate goal of improving patient outcomes.

As I said, there is administrative and just general like steps we need to take as far as start up activities.

As I mentioned, we are working with the sites that are highly specialized in this area do not have previous experience within our other clinical trials but we are very pleased with the progress we have been making recently and I as said we are very close to initiating that study we feel.

With respect to the line of our patients, I mean the thing of course that keep in mind with involvement and transplant, settings or studies is that you have a narrow window of opportunity from a timing perspective to actually once an indication for transplant is made, you have a narrow window of opportunity to get this patient consented and screened and then enrolled into a clinical trial.

So there per-say, if you will backlog, outpatients are waiting for the study to start that being said again the centers who are working our referral centers globally and so we are quite comfortable that once we got started enrollment will go according to plan.

Keep in mind and I think we have talked about this on a prior call that very nature, PROHEMA being and allogeneic cell, the cell therapeutics that is derived from a healthy donor derived cell we have the ability to include the several types of inherited metabolic disorders in fact there is 18 of those disorders that are actually eligible for our trials so that we hope and feel will eight enrollment..

Just switching gears to the new program regarding PD-L1 expression on these CD 34+ cells, can you talk a little bit about how long the expression does last, I think you answered that it's pretty transient and may be how you are thinking about moving this forward, would you look for additional modulators to extent the expression or would you prefer, cell therapies that you do multiple times in order to control, have more control over the process..

Great question.

Overall thing, I think we feel like when these cellular therapy including CD34 cellular therapies are administered to patients, there is a tremendous opportunity to, in the very early days after the administration or transplant of the cell to engage very important biological processes that are critical to long-term patient outcome and PD-L1, the program we just talk about and announced it is not similar from that, I’ll let Dan sort of talk about a little bit more about some of the underlying biology and science here..

We are definitely leveraging our pre-clinical models to explore this parameter. We typically believe ourselves would be in a [indiscernible] state for 48 hours to 72 hours.

Again a multiple dosing is one of the strategies we use to achieve the optimal dosing regimen but again it’s early and we are using [indiscernible] and pre-clinical model that they guide us on this one..

Okay and might we say data, from this program even the IPSC program this year and what conferences should we be targeting?.

We are not giving exact guidance as to when we would disclose further scientific information on the progress we are making in this clinical assessments, we might do this is critical to the future call on and then there's the obvious scientific meetings that we attend and have a scientific presence as being one of them..

Thanks very much. Good luck in 2015..

Thank you and I am showing no further question at this time and I would like to turn the call back to management for any further remark..

Thank you. I appreciate everyone's of participation in today’s call and we look forward to updating you again in the near future. Thank you,.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect, everyone have a great day..