Scott Wolchko - President and CEO Chris Storgard - Chief Medical Officer Dan Shoemaker - Chief Scientific Officer.

David Nierengarten - Wedbush Securities Do Kim - BMO Capital Markets ED White - H.C. Wainwright.

Welcome to Fate Therapeutics Third Quarter 2017 Financial Results Conference Call. [Operator Instructions]. I would now like to introduce Scott Wolchko, President and Chief Executive Officer of Fate Therapeutics..

Thank you. Good afternoon and thanks everyone for joining us for the Fate Therapeutics third quarter 2017 financial results call. Shortly after 4 PM Eastern Time today, we issued a press release with these results, which can be found on the Investors & Media section of our website under Press Releases.

In addition, our Form 10-Q for the second quarter ended June 30, 2017 was filed shortly thereafter and can be found on the Investors & Media 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 in the Company’s SEC filings, included in our Form 10-Q for the third quarter ended September 30, 2017 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. Chris Storgard, our Chief Medical Officer; and Dr. Dan Shoemaker, our Chief Scientific Officer.

I will begin the call today by highlighting four data releases occurring over the next six weeks at prestigious scientific conferences. These include number one, initial clinical observations from our Voyage study of FATE-NK100 and subjects with relapsed refractory AML.

Number two, Day 100 efficacy data from the Phase 1 stage of our protect study of ProTmune for the Prevention of acute graft-versus-host disease in subjects undergoing allogeneic hematopoietic cell transplantation as a curative therapy for certain hematopoietic malignancies.

Number three, IND enabling data of our first of kind off the shelf and k-cell cancer immunotherapy product FT500 including it's production undersea CGMP compatible conditions from a clonal induced pluripotent stem cell or iPSC master cell line and number four breakthrough preclinical results under our off the shelf t-cell collaboration with Memorial Sloan Kettering led by Dr.

Michelle Sadelain where the group has now generated CDA alpha beta positive T-cells from a clobal iPSC seen master cell line engineered to express a chimeric antigen receptor.

Chris will then provide update on FATE-NK100 where two clinical studies are open and enrolling subjects and an additional clinical trial is being readied for launch for investigation of FATE-NK100 across more than eight different types of hematologic and solid tumor malignancies as well ProTmune where the first subject has been treated in a randomized controlled and blinded Phase 2 stage of PROTECT.

Dan will then discuss our proprietary iPSC product platform and progress on our off the shelf cancer immunotherapy product candidates emerging from this platform.

We currently remain on track to file in the first quarter of 2018 a landmark investigational new drug application with the FDA for the conduct of a first in human clinical trial of our IPS derived and K-cell product FT-500 in combination with FDA approved checkpoint inhibitors for the treatment of advanced solid tumors.

In addition, Dan will discuss the initiation of development of our first IPS derieved key cell product candidate FT-819 which is derived from a clonal iPSC master cell line engineered to express a CAR targeting CD-19 and edited to remove t-cell receptor expression.

I will conclude with a review of our financial results for the third quarter of 2017 before opening the call up to questions and further discussion.

At the upcoming Society of Immunotherapy of Cancer 32nd Annual Meeting, we will present our first clinical data of FATE-NK100 our first in class adaptive memory and k-cell cancer immunotherapy, the clinical data will include subjects from the first two dose cohorts in the Voyage study of FATE-NK100 for the treatment of refractory relapsed AML.

FATE-NK100 has now safely advanced through these first two doses cohorts. In AML patients were refractory to frontline therapy or relapse have a very poor prognosis and few clinical options.

Several recent clinical studies have shown that the adoptive transfer of NK cells from healthy donors to patients can selectively target and destroy leukemic blasts without calling causing graphers host disease or triggering significant side effects such as cytokine really syndrome.

Our pre-clinical findings suggest that dating FATE-NK100 has significantly enhanced anti-tumour activity compared to conventional NK cells. FATE-NK100 comprised of a highly specialized and functionally distinct subset of activated NK cells expressing the maturation marker CD57. CD57 is believed to be a key marker of NK cell potency.

In fact high frequencies of CD57 positive NK cells in the peripheral blood or tumor microenvironment in cancer patients have frequently been linked to less severe disease and better outcomes. Additionally our pre-clinical data suggests that FATE-NK100 exhibits in-vivo persistence.

Prior clinical studies of the conventional NK cells in AML have indicated that the presence of donor NK cells in the peripheral blood for at least seven days post-infusion is generally associated with improved clinical outcomes.

We will look to these first few subjects in the dose escalation stage of Voyage to demonstrate safety of FATE-NK100 and to gain initial clinical insights into the unique properties and enhanced functionality of FATE-NK100 that we have observed in preclinical studies.

At [indiscernible] we will report key cell product properties and biomarkers of anti-tumour activity including the cell surface expression of CD57, in-vitro potency and Day 7 persistence.

We will also report the anti-tumor activity of FATE-NK100 including reduction in the percentage of leukemic blasts in the peripheral blood and bone marrow as well as overall response rates.

In addition to continuing to enrol subjects in the Voyage study, our multi-pronged clinical development strategy for FATE-NK100 continues to progress, the Apollo study of FATE-NK100 for the treatment of women with ovarian cancer resistance to or recurrent on platinum based treatments is open for enrolment.

Objective response rates in these patients are as low as 10% to 35% with current standard of care therapies and there remains a critical need for novel therapeutic strategies as current rates of progression free survival are less than six months.

Additionally we expect to initiate enrolment in the coming weeks in the dimension study of FATE-NK100 in combination with monoclonal antibody therapy for the treatment of advance solid tumors. We are particularly excited about the dimensions study as this would be to our knowledge the first clinical investigation in the U.S.

of donor NK cell therapy in combination with herceptin for advanced HER2 positive cancers including breast and gastric cancers and with [indiscernible] for advance EGFR1 positive cancers including colorectal and head and neck cancers.

We will continue to look to provide clinical updates on our FATE-NK100 program at relevant scientific conferences as these three studies progress.

Turning to ProTmune, I am pleased to announce that the first subject has been treated in the randomized controlled and blinded PROTECT Phase-2 clinical trial of ProTmune, our next generation hematopoietic cell graft for the prevention of acute graft-versus-host or GvHD.

PROTECT is a combined open label Phase-1 blinded Phase-2 clinical trial ProTmune in subjects undergoing allogeneic hematopoietic cell transplantation as curative therapy for certain hematologic malignancies.

The Phase-2 efficacy stage was opened in September following the completion of a safety review by the PROTECT studies four member independent Data Monitoring Committee.

Based on its review of all available Phase-1 data on seven subjects receiving ProTmune, the committee unanimously recommended initiation of the randomized controlled and blinded Phase-2 stage of PROTECT.

The primary objective of the PROTECT Phase-2 is to assess the incidence and severity of acute graft-versus-host disease by Day 100 following transplantation.

Acute GvHD is a severe immunological disease that commonly arise in patients during the first weeks following allogeneic HCT, when the newly transplanted donor immune cells attack the patient's tissue resulting in a potentially fatal immune system reaction.

Prospective clinical studies have shown that 40% to 80% of patients undergoing matched unrelated donor transplant experience acute GvHD with most incidents occurring by Day 60 post each HCT despite the widespread use of standard prophylaxis regimens.

Acute GvHD is the leading cause of early morbidity and mortality in matched unrelated donor transplant where death directly attributable to a actuve-GvHD or it's treatment occurs in 10% to 20% of patients.

Since HCT has performed with curative intent for patients with life-threatening hematologic malignancies, a hematopoietic cell graft such as ProTmune must also function to fight against cancer relapse to promote survival.

In this respect we believe that ProTmune is distinct from therapeutic approaches that aim to prevent acute GvHD by depleting or eliminating donor T-cells these types of approaches had been shown to result in unacceptably high rates of cancer relapse, severe infections and/or mortality therefore the PROTECT Phase-2 study will also evaluate additional key end points that reflect curative intent of HCT including rates of cancer relapse and survival.

At the 59th American Society of Hematology Annual Meeting in December we will present Day 100 clinical data on all seven subjects administrated ProTmune in the Phase-1 safety stage of PROTECT.

Key clinical outcomes on these seven subjects to be released at ASH include incidence and severity of acute GvHD, cancer relapse and survival at 100 days following a HCT. Additionally as we announced this morning, two of our IPS derived cancer immunotherapy product candidates, FT-500 and FT-819 have been selected for oral presentations at ASH.

This is terrific validation of our proprietary iPSC product platform which we have built over the past 10 years through our own internal initiatives of Fate Therapeutics and through collaborations with leading researchers and investigators.

Our platform is truly unique and has remarkable potential for the field of cell therapy, it enables precise multi-step genetic engineering, high throughput, single cell isolation and clonal selection of a single input human induced pluripotent cell from which we create clonal iPSC master cell lines.

Similar to master cell lines used for the manufacture of monoclonal antibodies iPSC master cell lines can serve as a renewable cell-source for the consistent and repeated manufacture of homogeneous cell products with the potential to treat many different diseases and many thousands of patients in an off-shelf manner.

We're very excited for the opportunity to highlight its potential in the field of NK and t-cell cancer immunotherapy at ASH. One oral presentation at ASH will feature FT-500, the company's first of kind NK cell product candidate derived from a clonal iPSC master cell line. Fate Therapeutics has been developing FT-500 in collaboration with Dr.

Jeffrey Miller, Deputy Director of the Masonic Cancer Center at University of Minnesota. Our presentation will highlight the achievement of a significant milestone for IND enablement, the efficient production of FT-500 from a clonal iPSC master cell line using a GMP compatible process.

The process is capable of yielding in a single manufacturing run thousands of doses of homogeneous drug product for off-shelf delivery to patients and since the drug product is derived from a clonal iPSC master cell line that is renewable manufacturing runs can be consistently and reproducibly repeated.

I am pleased to announce that we have now successfully completed technology transfer of our IPS derived NK cell product platform to molecular and cellular therapeutics, a state of the art GMP compliant facility and we have now completed at MCT, and end to end manufacturing run for FT-500 at pilot scale.

We are poised to begin GMP manufacture of FT-500 at MCT to support our first in human clinical studies.

We remain on track to file landmark IND application with the FDA in the fourth quarter of 2018 to initiate first in human clinical investigation of FT-500 in combination with FDA approved checkpoint inhibitors for the treatment of advanced solid tumors.

A second oral presentation at ASH will describe an extraordinary recent breakthrough for the development of off the shelf CAR t-cell cancer immunotherapy.

As previously announced in September of 2016 Fate Therapeutics partnered with Memorial Sloan Kettering Cancer Center for the development of off the shelf t-cell product candidates using engineered pluripotent cell lines. Research and development activities under the multi-year collaboration are led by Dr.

Michelle Sadelain, Director of the Center for Cell Engineering. Our collaboration has now resulted in the generation of CD8 alpha beta positive t-cells from a clonal IPS master cell line engineered to express chimeric antigen receptor.

To our knowledge this is the first demonstration of the creation of CD8 alpha beta positive CAR t-cells from a clonal iPSC master cell line.

As part of the collaboration, Fate Therapeutics has created clonal iPSC master cell lines that are engineered to express CARs and also modify to attenuate alloreactivity and enhance persistence for off the shelf CAR t-cell immunotherapy.

With the generation of CD8 alpha beta positive t-cells we have now initiated pre-clinical development of the company's first IPS derived CAR t-cell product candidate FT-819 derived from a clonal iPSC master cell engineered to express a CAR targeting CD19 and edited to remove t-cell receptor expression.

We expect to initiate technology transfer to the GMP facility of Memorial Sloan Kettering for the production of FT-819 in the first half of 2018. I will now turn the call over to Chris Storgard, our Chief Medical Officer who will provide further details of our clinical development of Fate NK100 and ProTmune..

Thanks, Scott. Over the past three months we have made noteworthy progress on our clinical programs. Let me update you on some of these advancements.

First with respect to ProTmune the Phase 2 stage of PROTECT is now open and we have enrolled and treated the first subject, the primary endpoint at the PROTECT Phase-2 is the cumulative incidence of acute graft versus host disease or GvHD grades 2 through 4 by Day 100 following transplantation.

In this Phase 2 stage, the efficacy of ProTmune is being evaluated in a randomized blinded and controlled study is 60 subjects.

The study is enrolling adult patients undergoing allogeneic hematopoietic cell transplantation using a mobilized peripheral blood graft from a matched unrelated donor for the treatment underlying hematologic malignancies including AML, AOL and MDS.

The subjects are being randomized in a 1 to 1 ratio to receive either ProTmune or conventional matched unrelated donor mobilized peripheral blood cell grafts. Currently 14 U.S. sites are open for enrolment and four addition sites are conducting study start-up activities.

The Phase 2 efficacy stage was initiated in mid-September following a review by the PROTECT studies four member independent data monitoring committee. Of all available data from all seven subjects administered ProTmune in the Phase 1 stage of PROTECT.

Based on it's review, the DMC was in unanimous agreements that ProTmune met the safety requirements to proceeds to Phase-2 efficacy testing. All subjects of Day 28 safety objectives of neutrophil engraftment and survival and reached Day 28 without any events of graft failure or serious adverse events related to ProTmune.

The median sign [ph] to neutrophil engraftment was 18 days. ProTmune was successfully manufactured for all seven subjects in the Phase 1 stage of PROTECT. All ProTmune graft's maintained high-cell viability and CD34 cell recovery.

Importantly we confirmed successful and robust pharmacologic modulation of every graft with a notable and significant increase and the expression of CXCR4, our potency marker. Premanufactured approximately 5% of CD54 cells staying positive for CXCR4 expression at a preset cut-off level.

However post-manufacturer the number of CD34 cells expressing CXCR4, increased to nearly 70%. This is clear and compelling evidence that the biologic properties and therapeutic potential of ProTmune have been pharmacologically enhanced.

An ASH abstract released today highlighted additional early clinical data on the first five of the seven Phase-1 subjects as of July 31, 2017 data cut-off data which was compiled to support the ASH abstract.

For these first five subjects as of the date of cut-off the median time on study was 53 days, ProTmune was well tolerated, ProTmune related adverse events were limited to two cases of grade one [indiscernible] on the day of administration and there were no reported ProTmune related serious adverse events.

There was one recorded event of acute GvHD by Day 100 which was fully responsive to steroid treatments. There were no reported events of cancer relapse by Day 100 and there were no reported events of mortality by Day 100.

Note that as of the July 31, 2017 data cut-off three of these five [indiscernible] subjects had not yet reached the Day 100 time point. Additionally and additional two Phase-1 subjects have subsequently enrolled and being treated following this data cut off.

Now at the time of the ASH presentation in December, all seven Phase-1 subjects are expected to have reached the Day 100 time point. Key clinical outcomes of all seven Phase-1 subjects including the incidence of acute-GvHD, immune reconstitution, cancer relapse and survival at Day 100 post-transplant will be released.

I would like take a few more minutes to expand on the therapeutic potential and opportunity for ProTmune. As Scott mentioned acute GvHD is the leading cause of early morbidity and mortality in matched unrelated donor transplants and novel therapies that can reduce the incidence and severity of GvHD are clearly needed.

However it is important to recognise that the [indiscernible] community has previously identified methods that effectively reduce the incidence and severity of acute GvHD. These include administrating t-cell depleted grafts or the use of potent immunosuppressants such as ATG. Now in these cases significant attenuation of GvHD was in fact observed.

However severe infections, cancer relapse and mortality were all demonstrated to be unacceptably increased. This underscore's the key protective role that donor t-cells play in hematopoietic cell transplantation.

To advance the cure of potential of [indiscernible] we believe therapeutic solutions must reduce the potential of donor t-cells that cause GvHD yet maintain he capacity of t-cells to fight infections and cancer. We believe that ProTmune achieves this critical balance. Let me explain how.

Acute GvHD occurs when individual alloreactive donor t-cells present in the hematopoietic cell graft administrated at the patients become activated, logarithmically expand and then attack the patient's tissues and organs. This activation and expansion of donor t-cell often occur shortly following transplantation.

When the inflammatory cytokine that was in the patient are extremely high due to the tissue and organ damage from the myeloablative regimen used to condition the patients.

Our preclinical data indicate that through ex-vivo small molecule modulation, the t-cells in a ProTmune ground are less responsive to these inflammatory cytokines during the critical first weeks following transplantation when patients are at highest risk of GvHD.

Importantly since the t-cells and ProTmune graft can only [indiscernible] modulated they are not engineered or depleted. We expect these t-cells to retain their inherent capacity to protect against infections and fight cancer.

Thus we believe that the mechanism of action of ProTmune can provide that critical immunological balance necessary to reduce grafers as host disease and maintain graft versus leukemia effects that has alluded other therapeutic approaches.

To assess this potential we will also track a key composite end-point known as GRFS or GvHD free relapse free survival. GRFS is an end point that is well-recognized by the TransPac community.

The endpoint captures the two leading events that contribute to mortality, namely more talent namely grade 34 GvHD and cancer relapse in addition to all-cause mortality. In many ways the GRFS end point measures cure without hematopoietic cell transplantation.

Unfortunately currently only about a 40 to 45 patients at six months and only 25 to 30 patients at one year following transplantation are able to achieve GRFS. This highlights a significant unmet medical need.

I will turn now to FATE-NK100, our multi-pronged development strategy target specific tumor types and cancer settings where we believe NK cell therapy is biologically advantage where we can potentially drive a multi-faceted potent and durable immunologic response where we have the potential to demonstrate proof of concept and therapeutic differentiation in a small number of subjects and where we believe that early clinical success can translate into rapid registration studies.

As Scott mentioned FATE-NK100 has now safely advanced to the first two dose cohorts in the Voyage study for relapsed refractory AML. No dose limiting toxicities have been observed in the first two dose cohorts of one times 10th to the seven cells per kilograms, and two times 10th to the seven cells per kilogram.

Enrolment is currently ongoing in the third dose cohort which can dose upto one time [indiscernible] per kilogram. In addition enrolment is now open in the Apollo study of FATE-NK100 for the treatment of women with ovarian cancer resistant to or recurrent on a platinum based treatment.

Apollo is designed to evaluate the safety and determine the maximum dose of a single infusion of FATE-NK100 when administrated using a lympho conditioning regimen that allows for out-patient treatment.

What is also noteworthy about the Apollo study is the FATE-NK100 is being administered directly into the [indiscernible], this is expected to provide an enhanced opportunity for NK cell persistence and direct NK cell contact with tumor cells.

We're also preparing for the launch of the Dimension study, for the treatment of advanced solid tumor malignancies. In the Dimension study we will investigate FATE-NK100 in combination with the monoclonal anti-bodies Herceptin or Erbitux Erbitux in the outpatient setting.

It is well-recognized that NK cells are the key vector cells mediating anti-body dependent cellular cytotoxicity or ADCC which incurs when NK cells synergize with the monoclonal anti-bodies to tumor cells.

Dimension will enrol subjects with advance solid tumors with a focus on those who that have progressed on or failed Herceptin or Erbitux including subjects with HER2 positive breast cancer and gastric cancers and subjects with colorectal and head and neck cancers respectively. To our knowledge this is the first study in the U.S.

testing the clinical activity of allogeneic NK cells used in combination with Herceptin or with Erbitux. We're readying the launch of the Dimension study at the Masonic Cancer Center University of Minnesota. We're also actively working with an additional six clinical sites for expansion of each of these three FATE-NK100.

We look forward to reporting our first clinical data on the first two subjects treated with FATE-NK100 Voyage study next week at Citi [ph] and we will continue to look to provide clinical updates on our FATE-NK100 program at relevant scientific conferences as these three studies progress.

I will now turn the call over to Dan to provide an update on our proprietary iPSC product platforms..

Thanks, Chris. I will now provide an update several of the exciting off the shelf cancer immunotherapy product candidates that are emerging from our proprietary iPSC product platform. I will start with FATE-NK100 which is our off-the-shelf NK cell product derived from a clonal iPSC master cell line.

As Scott mentioned we remain on track to file a landmark IND with the FDA in the first quarter of 2018 and we've made significant progress over the past quarter towards achieving this important goal. First, we have now successfully generated and characterized a fully qualified clonal iPSC master cell line.

This clonal iPSC master cell line serves as a starting material for generating FT-500 or planned for first in human study.

Second, we successfully completed the transfer of our GMT compatible small molecule driven differentiation protocol for the generation of iPSC derived end k-cells to molecular and cellular therapeutics a state of the art GMP compliant manufacturing facility.

I'm pleased to report the MCT has completed the first end to end pilot scale manufacturing run for FT-500 where the final drug product passed a rigorous panel of release test including product purity and potency.

This test also included confirming that the final drug product did not contain any iPSC contaminants using a highly sensitive molecular assay which can detect a single iPSC cell in a background of over 1.25 million NK cells.

MCT is now in the process of performing a full scale manufacturing run for FT-500 in preparation for our first in human clinical studies. Pre-clinical characterization studies on at FT-500 have continued to demonstrate enhanced cytotoxicity and cytokine production against cancer cell lines relative to conventional NK cells.

We also observed robust resiliency to crowd preservation. We routinely achieved greater than 85% viability and 80% recovery at 24 hours post-stop using a specially designed crowd preservation media formulation that can be directly infused into patients.

This is important as it enables a simple thought [ph] and infuse drug administration protocol for the off-shelf delivery to patients. Dr. Jeff Miller from the University of Minnesota will give an oral presentation at ASH describing the path to the clinic for FT-500.

We've also continued to make significant progress towards filing an IND, or FT-516 our second iPSC derived NK cell product candidate. FT-516 is derived from a clonal iPSC master cell line engineered to express a high affinity non-cleavable CD16 receptor.

Pre-clinical studies have demonstrated that NK cells containing this genetically modified CD16 receptor have enhanced Herceptin and Erbitux. We're in the final stages of creating a clonal iPSC master cell line for GMP manufacturer of FT-516.

Importantly the same NK cell differentiation protocol that is currently used by MCT to generate FT-500 will also be used by LCT to manufacture FT-516. The only difference being the starting iPSC clone.

This highlights the power of our iPSC platform which allows us to rapidly build and expand our pipeline of off the shelf NK cell cancer immunotherapies. Finally, I will give an update on our off-the-shelf iPSC derived CAR t-cell product pipeline that we are developing in collaboration with Memorial Sloan Kettering under the leadership of Dr.

Michelle Sadelain. Due to the transformative time for the field of cancer immunotherapy with the recent FDA approvals for the first [indiscernible] CAR t-cell therapies by Kite and Novartis along with the acquisition of Kite by Gilead for approximately $30 billion.

That said we're at the beginning stage of this revolution and innovation is rapidly emerging. Current CAR t-cell therapies are manufactured in batch to batch processes for each individual patient.

This presents significant manufacturing challenges including high cost, large infrastructure requirements, multi-week production processes, significant variance from batch to batch and heterogeneity of the final drug product.

In addition t-cell engineering with CAR constructs occurs at a batch level where each batch commonly consist of billions of t-cells essentially today's engineering of t-cells is not comprised of a single clonal engineering event or represents in a set billions of individual engineering events per batch.

The result is that t-cell engineering and CAR insertion is random and variable which could cause allogeneic transplantation and variable transgene expression. In fact a recent manuscript published in February by Dr.

Sadelain's group at Memorial Sloan Kettering highlighted the safety and efficacy challenges resulting from the use of randomly integrating vectors for t-cell engineering and CAR insertion.

The researchers demonstrated that an alternative approach which precisely engineered CAR construct into the TCR receptor alpha constant or TRAC locus resulted in uniform CAR expression and enhanced t-cell potency. We're building on these observations and developing our first iPSC derived CAR t-cell product candidate FT-819.

FT-819 originates from a single cell that has been number one precisely engineered to express a CAR targeting CD19 and to remove t-cell receptor expression and number two expanded to generate a clonal iPSC master cell bank.

We believe that the derivation of a clonal iPSC master cell line where the CAR has been inserted into the TCR locus will minimize the risk of insertion oncogenesis and variable CAR expression and will eliminate the potential for TCR induced alloreactivity.

In addition using the endogenous CCR promotor to drive uniform expression of the CAR has the potential to improve the safety, potency and persistence of CAR-T immunotherapy.

We believe this represent a transformative approach to enable off the shelf delivery of CAR t-cell immunotherapies that are uniformly engineered and identical in composition from dose to dose across patients. In an oral presentation at ASH we will present exciting preclinical data from our collaboration with Memorial Sloan Kettering led by Dr.

Michelle Sadelain demonstrating a recent breakthrough in the ex-vivo production of t-cells from a clonal iPSC master cell lines.

This development enables for the first time the generation of a large clonal population of CD8 alpha beta t-cells from a clonal master iPSC cell line engineered with a chimeric anti-gen receptor for off the shelf t-cell cancer immuno-therapy. I'll now turn the call back over to Scott for a review of our third quarter 2017 financial results..

Thanks, Dan. Turning to our financial results for the third quarter ended September 30, 2017, Fate Therapeutics reported a net loss of $10.7 million or $0.26 per common share as compared to a net loss of $8.7 million or $0.27 per common share for the same period last year.

Revenue was $1 million for the third quarter of 2017 as well as for the third quarter of 2016. Revenue in both periods was generated from our strategic research collaboration with Juno Therapeutics. Research and development expenses for the third quarter of 2017 were $8.6 million compared to $6.8 million for the same period last year.

The increase was primarily related to an increase in third-party service provider fees to support the clinical development of ProTmune and NK100 and the preclinical advancement of the Company’s off-the-shelf iPS derived cellular immunotherapy programs, as well as facility costs associated with the expansion of the Company’s laboratory space.

General and administrative expenses for the third quarter of 2017 were $2.8 million compared to $2.6 million for the same period last year. This increase was primarily related to an increase in employee compensation and benefit expense including employee stock based compensation and in facility cost associated with the expansion of our office space.

After adjusting for research funding proceeds from Juno of $500,000 and for stock-based compensation expense of approximately $900,000, total operating expenses for the third quarter of 2017 were approximately $10 million. At the end of the third quarter of 2017, cash, cash equivalents and short-term investments were $69.2 million.

Common stock outstanding was approximately 41.5 million and preferred convertible stock outstanding was approximately 2.8 million shares, each of which is convertible into five shares of common stock under certain conditions. In closing I would like to express my sincere thanks to the 75 employees of Fate Therapeutics and our numerous collaborators.

While our journey is ongoing and we will continue to face uncertain challenges that come with blazing a new path I am energized by the hard work, commitment, perseverance, creativity and agility that the group displays each and every day as we forge ahead in our development of first of kind products.

As I turn the call over to the operator for any questions I would like to remind folks that data and results scheduled to be presented at upcoming scientific conferences are under embargo so please understand if we refrain from answering certain questions. Thank you..

[Operator Instructions]. Our first question comes from Michael Schmidt with Leerink Partners. Your line is now open..

This is Rich [indiscernible] dialing in for Michael. For FATE-NK100 in both AML and ovarian cancer, can you give us a bit more detail around the benchmarks and the respective settings you're looking at what kind of data would you want to see for these studies to be considered a success? Thanks..

So Rich what we will be looking at in the AML study is we're looking at 30% CR rate is something we get excited about and this is something which we think is achievable.

There has been precedent with using adopted transferred NK cells looking at about 25% CR rates again we would expect to see something north of that and that I think is certainly enough to move that program forward given the unmet need in that population.

Regarding ovarian cancer, again this is a relapse refractory population so really almost in this Phase-1 setting any type of objective response that would give us excitement in this area. What's typically seen here is maybe about 5%, 10% objective response rates to move things forward.

I think again given the fact that we're administrating the NK-cells directly into the intraperitoneal cavity offers us some increased opportunities here to see some activity but in a Phase-1 advance solid tumor population any type of objective response rate is actually something to be excited about..

Our next question comes from David Nierengarten with Wedbush Securities. Your line is open..

Thanks for taking my questions I've a couple.

So first off maybe if you could -- is there any difference estimated persistence between the ovarian cancer and AML opportunity -- cells in those settings, I know its hard without maybe revealing some data but you know is there any clues on persistence from animal models or anything you can point to on any differences between the settings and persistence..

So intrinsically we shouldn't expect any difference in the persistence between these two tumors settings. However I'd like to point out that the administration of the NK cells is different, in the AML setting it's being administered intravenously, in the ovarian setting it's being administered intraperitoneal.

So when we actually measure the circulating in NK cells we may see a difference in these two populations probably which may be a result of the different routes of administration..

And maybe if you could remind us -- we recall that they were NK cells are tested are looked in AML previously where they looked at ovarian cancer with intraperitoneal route or was it the delivery in solid tumors in the past with other constructs?.

Sure. With respect to AML obviously there has been fairly rich in recent history with respect to NK cell experience and as Chris mentioned there has been 25% complete response were each reported. Typically response rates have been correlated and associated with persistence and preferably of at least seven days.

With respect to ovarian there is actually very little experience in ovarian cancer with NK cell therapy so much like the Dimension study this will be a first true test of NK cell therapy in the ovarian settling. There has been anecdotal information with respect to patient treatment but this will be a really great test of FATE-NK100 in this setting..

And then maybe one final question on the modified I'm sorry I'm just blanked on the name but the uncleavable CD16 construct..

FT-516..

Yes.

FT-516, dosing that with anti-bodies have you seen evidence in the animal models for kind of quiescent cell [ph] and then it comes back when you dose the anti-body I'm just trying to think about dosing in combination studies with anti-bodies, will you think about redosing with the cells or do you think they will be persistent and then kind of reactivate when you had the anti-body in.

Thanks..

Absolutely.

So in that study what we're looking at and again we're are in the process of having discussions with the FDA and planning that first in human study for FT-516 but the concept is yes that will be a study given it is an IPS derived therapy, given we can create thousands of doses, given we can deliver it off the shelf is that we will in fact give multiple doses in combination with monoclonal anti-body..

And well I guess you're in discussion with the FDA but you haven't finalized any kind of dose combinations or how you would dose escalate us if necessary or things like that? I take it will way for that?.

We had a pre-IND meeting with the FDA where we've discussed that but obviously we've not filed the IND yet with respect to FT-516 based on conversations to-date the FDA has seemed very comfortable with us dosing in combination and administering multiple doses..

Our next question comes from Jim Birchenough with Wells Fargo Securities. Your line is open..

This is Yenen [ph] in for Jim. I've few questions first could you remind me of the rationale why ProTmune could on the Y hand retain the anti-tumor activities but on the other hand will have an attenuated ability to attack the host when I think about it the tumor and the host cell have a lot of similarities obviously..

So we believe the mechanism is primarily based on making the donor t-cells resistant to the cytokine storm that is present in the patients that are receiving the donor grafts in that first week and we have extensive preclinical data showing that we sort of dampened the cytokine signaling for things like [indiscernible] for example and we believe that getting the cells through this first week through this cytokine storm and preventing the activation and expansion of the allo-reactive t-cells in the graft is a key strategy to the prevention of GvHD.

Importantly though we have also spent a lot of time demonstrating that majority of the donor t-cells and the graft are healthy and they are only transiently affected by the small molecule modulation and this is critical because these donor t-cells provide an important role during the first six months of post-transplant while the new stem cell derived t-cells come online the ability to fight leukaemia and infection.

So we also have extensive animal studies demonstrating that the ProTmune t-cells retain robust anti-tumour activity and now again as we start having more and more patient data from the Phase-1 portion of the study we've been able to do longitudinal analysis of the amino-constitution and we're able to show a healthy reconstitution of the donor t-cell graft in the ProTmune patients.

So this again is the mechanism by which we think we're preventing GvHD while preserving the critical GVL activity..

So along the similar line could you mention the importance of the first week and how ProTmune could affect alter the t-cells activity.

So the end point for the study is Day 100 GvHD and in your abstract we know 3 out of the 5 patient haven't reached the 100 day point yet you know they -- so they haven’t had any grade two or above GvHD but on the other hand they haven't reach 100 day yet.

Is it reasonable to think that the acute GvHD is mainly concentrated on you know the beginning of the Day 100 or do we have any historic data historical data to triangulate this and have some influence regarding to when GvHD occurs?.

Sure.

The reason we picked Day 100 is because if you look at historical studies with respect to transplant and incidence of GvHD there is a rather steep incidence curve that occurs during the first 60 days post-transplant and begins to flatten out between Day 60 and call it Day 90, Day 100 although there still are incidents of GvHD that are reported post Day 60 and before Day 100, but really if you look at the historical curves there's a steep incidence ramp during the first 60 days it begins to tail-off during the next 30 days and by and large all acute GvHD occurs by Day 100.So we believe Day 100 is truly the appropriate horizon over which to measure potential efficacy.

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And another question regarding the ProTmune program, you mentioned the importance of anti-tumor activity, did you have to amend the study protocol to add those endpoints?.

Those endpoints were included in the original protocol to look at relapse as well as look at survival..

And so also are a question on the statistical assumptions when you sized the study to 70 patients what are the assumptions used in the two arms placebo versus ProTmune in terms of GvHD or anti-cancer activity?.

So the initial assumptions were that the control rate of GvHD would be approximately 55% as Scott mentioned there are studies that have rate of acute GvHD in a similar population ranging from 40% to 80% so we choose approximately 55%, the estimated effective ProTmune was about 50% reduction.

When we take a look at our power to observe the 50% reduction over across essentially a range of control rates of GvHD we're well powered for Phase-2 study to observe those kind of differences. So its somewhere at 50% reduction..

And then on the FT-819 congratulations for the achievement, its rather significant to engineer a t-cell. My question is what are the next hurdles before you can see a path to IND for example how do you engineer out the allogenecity that these cells might have so that the patient could accept these cell instead of rejecting them due to MHC mismatch..

It’s a terrific question and I think you're going to have to wait for ASH to learn more about that..

Great.

If I may ask is there any strategic thinking in terms of how to develop these iPSC derived modalities like FT-819 is partnering a path or are you preparing on developing it internally?.

We're planning on developing it internally.

We are very open to forming partnerships although we believe that Fate Therapeutics given our 10 years of history in developing the iPSC cell platform that we today are absolutely best positioned to move this forward on our own in collaboration with top medical centers and investigators and that was the thinking behind striking the partnership with the University of Minnesota on the NK cell side and Jeff Miller and Memorial Sloan Kettering and Michelle Sadelain on the t-cell side..

Our next question comes from Do Kim with BMO Capital Markets. Your line is open..

A couple on ProTmune, could you talk about the range of GvHD rates that you mentioned to the prior question that you believe achieves a balance of reducing the incidence of GvHD but also doesn't compromise GVL activity?.

Sure. I can take a crack at that first. I think your question is getting to the heart of what we discussed with respect to the GRFS endpoint where you are essentially looking at the potential to reduce GvHD yet deal with the potential for cancer relapse and also the overall mortality that occurs in the transplant setting.

So I think as Chris mentioned during his prepared remarks the GRFS rates that are seen in historical studies in this setting appear to be in the 40% to 45% success range.

So more than half of patients do not meet the criteria of being GvHD free, relapse free and surviving at Day 180 and that continues to trend down to only about 30% of patients at one year.

So really when we look at the totality of the transplant taking into consideration severe GvHD relapse and mortality what we see historically is depending on the timeframe only about 30% to 40% patients achieve that objective..

Okay.

And historical rates what is the expected time to relapse or the percentage of patients that will relapse in these kind of transplants and would it be surprising to see one of the Phase-1 patients relapsed by the ASH data cut off?.

So relapse has a slower sloping curve with respect to incidence than GvHD meaning relapse can occur and does occur more evenly during the first three, six, nine and 12 months following transplant. So GvHD is a phenomenon that occurs very early, occurs suddenly and does begin to flatten out with respect to incidence by Day 100.

Relapse does occur more evenly throughout the 180 day period and begins to trail off call it from six months to one year. So the relapse window to really keep an eye on and that we keep an eye on certainly does extend from six to nine months still..

Okay.

And when we think about the number of CD34 positive and CD3 positive cells that you're administering to the patient what should we consider and how does that affect patient outcome?.

So we basically administer the entire graft, so we have aligned this closely to standard of care as possible where we'll just take the entire mobilized graft, model it for four hours with the two small molecules, wash it and then the entire graft is administered to the patient just like normal and then we adhere to all the minimum CD34 requirements and then again we have just aligned closely to standard of care as possible..

We're now, I mean if you're question is are we reducing the numbers of t-cells we're not doing that. We are accepting a mobile standard of care, mobilized preferable blood graft, we're modulating that graft and then we are administering that graft. So there is no cell separation or cell reduction that is going on with respect to 34s or the t-cells..

Okay. Thank you.

One final question is -- are you still looking at CMV [ph] infection and activation or is that no longer a priority?.

It's not one of the main objectives of the study although we will continue to track CMV as well as infection rates because infections are important and they do lead to mortality..

Our next question comes from ED White with H.C. Wainwright. Your line is open..

So just on FT-500 you had said and repeated that the IND is expected to be filed in the first quarter of '18.

Can you give us any guidance on FT-516 and FT-819, should we expect the INDs for those we filed in 2018 as well?.

So for FT-516 we have previously said in conversation that we expect an IND filing in the middle of 2018 and we're still very comfortable with that timeline.

With respect to FT-819 the first IPS derived CAR t-cell product it's a little too early for us to give guidance on the IND filing although we are comfortable that we will certainly begin tech-transfer in the first half of 2018 to Memorial Sloan Kettering for manufacture..

And then the next questions I've you might not be able to answer due to the embargo but on the ProTmune does the one patient with the GvHD did that occurrence happen between Day 28 before the Day 53 at the end of as of the cut off time?.

I think we're going to have to refrain from answering that question if your question is did the DMC review all Phase-1 data including Phase 1 data beyond Day 28 the answer to the question is yes they reviewed all available Phase-1 data at the time what was available at the time they reviewed the data obviously..

Okay.

And then just you know is there a correlation or maybe it's just a coincidence that the patient with the latest neutrophil engraftment had the GvHD?.

I would not read anything into that..

I'm showing no further questions. I would now like to turn the call back to Scott Wolchko for any further remarks..

Thank you very much everyone for participating in today's call and we look forward to seeing everyone in a week about a week and half at the end of couple weeks after that at ASH. Thank you..

Ladies and gentlemen thank you for participating in today's conference. This concludes the program. You may all disconnect. Everyone have a wonderful day..