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

Edward Tenthoff - Piper Jaffray David Nierengarten - Wedbush Securities Do Kim - BMO Capital Markets.

Welcome to Fate Therapeutics First Quarter 2018 Financial Results Conference Call. At this time all participants are in a listen-only mode. This call is being webcast live on the Investors & Media section of Fate webcast at fatetherapeutics.com. As a reminder, today’s call is being recorded.

I would now like to introduce Scott Wolchko, President and Chief Executive Officer of Fate Therapeutics. You may begin sir..

Thank you. Good afternoon and thanks everyone for joining us for the Fate Therapeutics first quarter 2018 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 year ended March 31, 2018 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 year ended March 31, 2018 that was being 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.

Today I will highlight progress against our key 2018 operational objectives and review our financial results for the first quarter, after which we will open the call up to questions and further discussion.

Our top operational objective for Fate Therapeutics in 2018 is to pioneer the clinical development of a new class of cell products for patients with cancer. We are seeking to initiate groundbreaking first in human clinical trials of cell products that are made using master induced pluripotent stem cell lines.

The use of master iPSC lines enables the manufacturer cell products that are uniformly engineered, well-characterized, and homogeneous in composition.

And these cell products can be delivered to patients in an off-the-shelf manner including a multidose combinations with other cancer treatments to achieve potentially safer and more effective responses. We believe this novel off-the-shelf product paradigm is disruptive to conventional autologous and allogeneic cell therapy.

In 2018, we plan to initiate a clinical trial of FT500, a universal off-the-shelf natural killer cell product manufactured from a clonal master iPSC line. We intend to initially develop FT500 as a rescue therapy for patients that are resistant to checkpoint inhibitors.

This represents a significant unmet medical need in oncology today since more than 60% of all patients treated with checkpoint inhibitors will either fail to respond or relapse on therapy.

Patient resistance to checkpoint inhibitor therapy can result from tumor cell evasion, as well as from defects in the patient's own immune cells which are often damaged, dysfunctional or present in insufficient numbers.

In the second quarter of 2018, we expect to submit an investigational new drug application with the FDA to initiate clinical investigation of FT500. We've made tremendous progress towards this goal over the past several months.

First we completed a GLP toxicity and tumorigenicity study which evaluated multidose administration of FT500 at two different dose levels in animals.

The results of the study demonstrated that FT500 was well tolerated specifically there were no adverse clinical observations related to the administration of FT500, there were no FT500 cell related changes in hematology or clinical chemistry, there were no palpable masses or evidence of tumor and there were no mortality events in animals administered FT500.

We also successfully completed multiple manufacturing runs at clinical scale for production of FT500 in a GMP manufacturing facility. Our characterization assessments on the final product from these runs indicate comparability.

In each of these runs, FT500 met the preestablished specifications for identity, purity and potency as set forth in our pre-IND meeting with the FDA. Lastly we finalized our proposed clinical protocol for FT500. We intend to enroll a monotherapy arm and a checkpoint inhibitor combination arm in subjects with advanced solid tumors.

In the checkpoint inhibitor combination arm, we plan to administer a cycle of FT500 consisting of three once weekly doses in combination with the specific checkpoint inhibitor on which the subject has progressed or failed.

Subjects with stable disease or better at the initial follow-up will be eligible for additional cycles of FT500 in combination with checkpoint inhibitor. We believe that we have generated a strong package of preclinical safety, efficacy and manufacturing data in support of an IND submission.

At this time we're waiting certain data from third-party vendors relating to the characterization of key ancillary reagents used in the manufacture of FT500 and we're in the process of finalizing the writing of behind it. We expect to submit the IND for FT500 in the second quarter and we are very excited to engage with the FDA in their formal review.

We want to reiterate that we believe our IND for FT500 may be the first IND for an IPS derived cancer immunotherapy to be reviewed by the FDA. As such our engagement with the FDA may extend beyond the standard 30 day review period as we work with the FDA to chart the course for this new class of cell products.

We’ve also made significant strides in advancing FT516, our second universal off-the-shelf NK cell product for IND submission. FT516 is produced from a clonal master iPSC line engineered to uniformly express a high affinity non-cleavable CD16 FC receptor.

CD16 combined antibody coated tumor cells enabling NK cell to actively lyse tumor cells through a mechanism known as ADCC or antibody dependent cellular cytotoxicity. Since CD16 combine the FC region of a tumor targeting antibody, the use of FT516 is not limited to a specific tumor antigen.

Rather FT516 can be combined with a broad spectrum of monoclonal antibodies and by specific engagers.

In fact, we have shown that FT516 exhibits potent and persistent antitumor activity in vitro and in vivo across a multitude of antigen specific recognition and killing assay's including in combination with monoclonal antibody therapies that target CD20, HER2 and EGFR.

We've now generated and assessed the engineered iPSC clone that we plan to use for the clinical production of FT516. The engineered iPSC clone has been characterized for genomic stability and copy number variation and we have mapped the exact integration site of the CD16 transgene in the Gino.

Obviously this degree of characterization and uniformity of engineering cannot be achieved with conventional autologous or allogeneic cell therapy. We believe our ability to conduct extensive characterization at the single cell level and produce homogeneous cell products are powerful advantages conveyed through the use of a master cell line.

Since the clinical manufacture of FT516 is intended to utilize the same production process that has already been developed and implemented for FT500, we believe to submit a substantial amount of leverage from our upcoming FT500 IND submission can be realized.

As a result, we believe we're well-positioned to submit an IND for FT516 in the second half of 2018. We intend to clinically investigate FT516 in multidose combinations with FDA approved monoclonal antibody therapy.

Toward that end, we recently secured a $4 million award from the California Institute for Regenerative Medicine to support the advancement of FT516 into a first in human clinical trial. In addition to our development of universal NK cell products, we're also developing universal Car T cell products.

At the American Association for Cancer Research in April we presented preclinical data on FT819 our first universal off-the-shelf CAR T-cell product. Like FT500 and FT516, FT819 is also produced from a clonal master iPSC line.

In the case of FT819, the line is engineered to completely eliminate the T-cell receptor and to insert a car targeting CD19 into the trap locus. We have demonstrated a T cells derived from this clonal master iPSC line uniformly express a CAR19 and are uniformly TCR negative.

We believe the ability to completely disrupt the endogenous TCR expression is a critical component for universality as failure to completely remove the alloreactive TCR has induced the life-threatening complication of graft-versus-host disease in allogeneic Car T-cell clinical trials conducted by other parties.

In preclinical studies, we have shown that FT819 exhibits a robust cytotoxic T cell response in vitro when challenged with CD19 positive tumor cells. This response was found to be target specific killing only CD19 positive tumor cells and sparing CD19 negative tumor cells.

Additionally, FT819 also displayed enhanced production of effector cytokines including interferon gamma and TNF alpha and cytolytic proteins including perforin and granzyme B. As a proof of concept we engineered the FT819 master iPS line with an additional transgene gene to uniformly express a high affinity non-cleavable CD16 FC receptor.

These dual targeted T cells demonstrated antitumor activity in vitro against CD19 positive tumor cells as well as against CD19 negative CD20 positive tumor cells in combination with rituximab.

This dual targeted approach can substantially broaden the cell products therapeutic reach and overcome CD19 antigen escape through combination with other improving cancer treatments. We believe this significantly differentiate FT819 from other CAR19 T-Cell products that are approved and undergoing development today.

We continue to work on FT819 with Dr. Michel Sadelain at Memorial Sloan Kettering under our exclusive collaboration for the research and development of iPS derived T-cell immunotherapies. And we are targeting mid-2019 to submit an IND for FT819. On May 16 at the American Society of Generate & Cell Therapy Dr.

Sadelain will present a 30 minute overview of our collaboration. In addition to progress, we've made in advancing our off-the-shelf NK and T-cell cancer immunotherapies toward clinical development. We are very pleased with the initial clinical data we continue to see from our two donor derived cell therapy programs.

At several leading scientific conferences over the past couple months we have highlighted initial clinical data from our PROTECT clinical trial of ProTmune. Our next-generation donor cell graft for patients with hematologic malignancies undergoing allogeneic hematopoietic cell transplantation.

In December, we first reported day 100 clinical data on the seven subjects administered ProTmune in the Phase 1 stage of PROTECT. Each of the three subjects that experienced acute graft-versus-host disease during the first 100 days following transplant promptly responded to standard of care steroid treatment.

This response is clinically important as extended use of immunosuppressive agents to treat acute GVHD compromises the anti-leukemia activity of the transplant procedure and significantly increases the risk of cancer relapse and mortality.

In February, we presented immune reconstitution data from the Phase 1 stage of PROTECT where we compare the kinetics of reconstitution of both the T and NK cell compartments in the seven subjects administered ProTmune as compared to matched historical controls.

The T-cell compartment of ProTmune showed comparable levels of reconstitution as compared to matched historical controls interestingly the NK cell compartment showed more robust levels of reconstitution. These data indicate that ProTmune is immunologically active graft with the capacity to fight infections and cancer.

In March, we presented additional clinical data from the Phase 1 stage of PROTECT as of February 26 data cutoff no serious adverse events related to ProTmune and no events of cancer relapse had been reported by investigators.

Additionally of the seven subjects administered ProTmune in the Protect Phase 1 study five of seven subjects remained alive and relapse free with a median time on study of 228 days for the two incidents of non-relapse mortality were deemed not attributable to ProTmune.

These initial clinical data have been well received by our investigators to advance the curative potential of allogeneic transplant, therapeutic solutions must address both severe GVHD and cancer relapse.

Collectively, these clinical data indicate that ProTmune may provide the critical immunological balance necessary to reduce the incidence and severity of GVHD and maintain the fight against cancer. Since sharing these data we've seen a market increase in subjects screening for enrollment in the ongoing Phase 2 stage of PROTECT.

The randomized controlled and double-blinded Phase 2 stage is currently open and 15 U.S. centers. We have also seen encouraging clinical data in the dose escalation stages of three ongoing clinical trials of NK100 our first in class allogeneic donor derived natural killer cell, cancer immunotherapy comprised of adaptive memory NK cells.

In March at the Third Annual Innate Killer Summit, we released initial clinical data from the ongoing APOLLO Phase 1 study of NK100 for the treatment of women with ovarian cancer resistant to or recurrent on platinum-based treatment.

Two heavily pretreated subjects each received a single intraperitoneal infusion of NK100 following outpatient lymphoconditioning. No dose limiting toxicities were reported in either subject and there were no reported NK100 related serious adverse events including no reported events of GVHD, cytokine release syndrome or neurotoxicity.

The day 28 response evaluation for subject to following a single intraperitoneal infusion showed stable disease with evidence of tumor reduction. The subject elected to receive a second infusion of NK100 which was also well-tolerated.

Following the second infusion and assessment of the cells in the cavity showed coexistence of NK100 with the subjects own T cells at day 14 subject to is now approximately three and a half months out from the first infusion of NK100 and remains on study.

Three clinical trials in NK100 are currently ongoing at the Masonic Cancer Center, Voyage for the treatment of relapsed refractory AML, APOLLO for the treatment of recurrent ovarian cancer and DIMENSION for the treatment of advanced solid tumors including combination with FDA approved monoclonal antibody therapy.

We are currently conducting study startup activities at for additional sites. We expect to continue to share clinical data from Voyage APOLLO and DIMENSION studies at scientific conferences throughout 2018 as these three studies progress through dose escalation and expansion.

Turning to our financial results for the first quarter ended March 31, 2018 Fate Therapeutics reported a net loss of $14.1 million or $0.27 per common share as compared to a net loss of $10.1 million or $0.24 per common share for the same period last year. Revenue was $1 million for the first quarter of 2018 as well as for the first quarter of 2017.

Revenue in both periods was generated from our strategic research collaboration with JUNO THERAPEUTICS. Research and development expenses for the first quarter 2018 were $11.5 million compared to $8 million for the same period last year.

The increase in our R&D expenses was attributable primarily to the conduct of FT500 IND-enabling activities and NK100 clinical trials. Equipment and material expenditures associated with the preclinical development of our iPS derived NK and T-cell products and employee compensation associated with growth in headcount.

General and administrative expenses for the first quarter of 2018 were $3.6 million compared to $3 million for the same period last year.

The increase in our G&A expenses was attributable primarily to stock-based compensation expense and intellectual property and licensing costs after adjusting for research funding proceeds from Juno of $500,000 received in April and for stock-based compensation expense of approximately $1.4 million.

Total operating expenses for the first quarter 2018 were approximately $13.2 million.

At the end of the first quarter of 2018, cash, cash equivalents and short-term investments were approximately $89 million common stock outstanding was approximately 52.9 million shares and preferred convertible outstanding was approximately 2.8 million shares each of which is convertible into five shares of common stock under certain conditions.

At this time I’d like to open the call up to any questions..

[Operator Instructions] And our first question comes from the line of Tenthoff from Piper Jaffray. Your line is open..

Thanks for thorough updated and Scott running through the financials reminded me that you were a CFO once you did it so effectively, you done such a good job as CEO I always forgot that certainly finance diagram it’s a great job on that. Quick question if I may, tell us a little bit more about what Michel is going to presenting.

Is this really going to be more - overview of the platform and how iPSCs can used to develop therapeutics? Tell us just a little bit more of that and then also when should we be expecting additional clinical updates from the ongoing studies? Thanks for your time..

So Michel is really going to give an overview of the work we've been doing over the last several years.

He is developing the platform of how we create engineered iPSCs and then differentiate them through the 34 phase into CDA single positive alpha beta Car T cells and really going to highlight the recent advances we've made to refining the differentiation protocol which has been a major breakthrough in making really genuine alpha beta CD8 T Cells..

Chris regarding the question on clinical updates, starting first with ProTmune. We expect to be able to provide the one year update on all of the Phase 1 subjects that asked this year that's the plans for that.

As far as NK100 as those three studies continue to enroll, we’ll continue to provide updates scientific conferences that align with the availability of data..

Ted and I also like add back to Michel presentation we’re really going to highlight the advantages of removing the TCR completely and inserting the CAR into the TRAC locus and emerging some of the advantages that were described last year in Michel’s nature paper on.

And so just to really tie everything together and how we are working towards a really great off-the-shelf CD19 T-cell product..

And our next question comes from the line of David Nierengarten from Wedbush Securities. Your line is open..

I had a question you talked a little bit about obviously being the first in class - the NK 500 series being first in class for the FDA to take a look at.

And think about with the IND meeting is there any items that are particular getting particular attention with the FDA or anything you can point to that as maybe a little bit of a concern or just things they are looking at in particular? Thanks..

So we've had two different pre-IND meetings with the FDA one for FT500 and a second one for FT516. We focused one of the IND meetings really on the nature of the iPS cell platform, how do you create clonal master IPS cell lines and what's involved in that.

And the second IND meeting we have we really focused on how do you take clone and in an efficient manufacturing process turn that into our cells of interest, whether being NK cells or T cells. And so much we’ve had two different meetings, two different areas of focus.

I think we've done a really thorough job here over the past couple of months in carefully dissecting the two different pre-IND meetings and ensuring as best we can that we’re addressing all the FDA's questions.

Some of the things that we’ve talked about in the past that the FDA was concerned about obviously is are there any residual IPS cells for instance that remain in your final product.

And we've developed internally at Fate Therapeutics multiple different ways to characterize our final product including our final product not having any residual IPS cell. So I'm being absent of any IPS cells in the final product. And so we feel really comfortable with all the work that we've done in terms of characterizing the final product.

As I mentioned in one of the FDA meetings, we actually set forth different criteria for the final product with respect to potency and purity and how to identify the final product, as well as any residuals in the final product.

And we've done I think a really thorough job now to get multiple different manufacturing runs in a GMP facility, producing a final product at clinical scale that actually met and/or exceeded our prespecified criteria.

So I think we’re in a really good position as it relates to pioneering this, but as you mentioned as I've mentioned it is a first of kind and we expect it may be a little bit of a journey with the FDA to navigate through it. And we're very excited about it and totally up looking forward to it..

And then just maybe a quick follow up. You mentioned leveraging the first in class nature to more rapidly bring next clinical candidates. Is that fair that the FDA will kind of say okay you made one iPSC, you made them all to not to joke about it but is that really what you’re hoping for then.

And has the FDA indicated at least a willingness to treat subsequent candidates as I don't want to say - I don’t want to say easy but you know what I’m getting at as you know straightforward?.

So the way we make and the way we select our IPS clone whether it's for FT500 or 516 is the same exact process. So that process of creating the clonal IPS cell line is the same exact process from product to product.

Just as importantly once you create that clonal master IPS cell line, the manufacturing process on how you turn that into large quantities of homogeneous NK cells in this case is exactly the same. We are not expecting to change our manufacturing process from 500 to 516.

So one of the things that we know is other than, it being a different essentially vial that we start with for manufacture of 500 versus 516, the process for all intents and purposes is exactly the same.

So, much of the work that we’re going through right now in terms of establishing the way we create the master IPS cell line, how we characterize our cell lines, how we bank our cell lines, how we differentiate our cell lines to create NK cell product, how we characterize our NK cell products, all of that is completely leverageable..

And then the real question…?.

And it’s now leverageable over the third product and the fourth product with respect to the NK Cell..

And then the real question and it sounds like you’ve answered that would be that on the - your purification side of thing for final product just having the specifications in place and then applying to every product on okay great..

Absolutely..

And the next question comes from the line of Jim Birchenough from Wells Fargo. Your line is open..

Its Nick in for Jim this afternoon. Thanks, gosh lots of moving parts here, hard to know where to start it. Let me start with ProTmune. You said that NK cell recovery was robust does that mean accelerated back to - so an accelerated recovery back to normal levels.

And then for the matched control was that including post-transplant cyclophosphamide as GVHD prophylaxis?.

So we saw both an acceleration, as well as a robust overall reconstitution of that NK compartment. The historical controls would match exactly to the types of conditioning regimens that were used in the ProTmune Phase 1 study. So we tried to - we aligned as many of the variables as possible to make an apples to apples comparison.

And so yes, I would say the NK cells came back faster and ended up just - looking at the time points of the 30 days and 90 days it just ended up with a nice robust immune constitution.

And we’re really excited as we link this towards the absence of relapse in this first seven patients and then we think that a lot of that can be tied to the robust immuno constitution..

And then the post-transplant cyclophosphamide was that some of those controls receive that?.

I do not believe so..

Okay..

The matched controls came from one of the centers that participated in the Phase 1 study. And it was direct comparison of matched unrelated donor transplant..

And then for FT500 Scott you explained the design for the combination what about the monotherapy on what are those patient going to be.

So the monotherapy arm is going to be a Phase 1 salvage population of all solid tumors for the dose escalation portion and the expansion..

That may or may not have received PD1?.

That is correct. They may or may not, not a requirement but certainly something we’re going to be looking for..

And then on F516, CD16 is that do you put the human [normally] for CD16 into the CD16 gene or safe harbor location?.

No we use a lengthy bio construct inserted it into the genome, but we did pick a clone that has a single insertion site and make sure that it inserted into a safe region of the genome not near any genes that were concerning to us.

So we were able to extensively characterize the clone that was selected for the master cell bank and I think that’s a big advantage of this approach compared to other patient derived engineered cell therapy strategies..

And then just I have a last one I’ll hop in the queue. I think your patient in terms of manufacturing it seems like you're very heavily reliant on Minnesota Memorial.

I do have a plan to validate backup sites in case one of things floods or goes on fire or build your own?.

Yes, I mean we actually do have backup plans and we’re in the process of bringing pieces of manufacturing in-house. I think it’s really important to remember and people struggle with this concept. We are going to do one manufacturing run over 45 days and get enough doses for the Phase 1 study.

And then we will do a manufacturing run for FT516 and likely again get enough doses for our Phase 1 study. So this is not continuous patient by patient manufacturing.

This is extremely leverageable where in a single manufacturing campaign we can produce large quantities of cells and significant doses of cells such that we can conduct meaningful studies.

And that’s in one of the major advantages of what we do compared to a patient derived approach or even an allogeneic approach where allogeneic cell therapy literally has to find donors every time, engineer every time, and then manufacture their product every time.

And maybe 60% of the cells are engineered successfully certainly every cell is not engineered the same way.

And when you want to do another campaign and maybe you get I have seen research scale manufacturing from others that are doing allogeneic cell therapy and its gosh maybe I can get 50 doses, maybe I can get 100 doses and then I have to repeat again and go back to get new donors and engineer all again. This is a completely different paradigm.

That said totally agree, we believe strategically it is important to control manufacturing absolutely, and we do have backup plans and we are in the process of bringing pieces of the manufacturing in-house..

[Operator Instructions] And our next question comes from the line of Do Kim from BMO Capital Markets. Your line is open..

A question on the ovarian cancer APOLLO study.

What drove the decision to give a second infusion for subject, two and is that an option that you’ll provide to the other dose cores as you go forward?.

Yes, the protocol was written in a manner that if a subject was able to have stable disease with tumor shrinkage then they’re eligible for another dose. And we're looking to do that for a number of reasons.

One obviously to provide potential - additional benefit to the participating subject, but also to answer some really important questions as to whether or not repeat dosing with an allogeneic product can result in persistent.

And that we may able to address the second question we have had persistence of that second dose after 14 days so we’re very encouraged by that.

We’re still waiting to see how that patient does and we’re looking forward to further clinical data on that as far as all of our other studies yes, we built in place that option in the solid tumor studies for repeat dosing with evidence of clinical benefit..

And on ProTmune, could you tell us whether you saw CMV infections in the Phase 1 portion of the study and what that says compared to historical?.

So let me just talk a little bit about the CMV infections and actually with the approval of ProTmune we've actually had to amend our protocol to allow that prophylaxis to be allowed. And as a result CMV infection is something we really can't look at from a meaningful perspective on whether or not ProTmune will have any impact on that.

We have had CMV infections, but now with the allowance of the prophylactic therapy that is an end point has moved from a key endpoint now to an exploratory endpoint simply because it’s no longer something we can rigorously assess..

And we have a follow-up question from the line of Jim Birchenough from Wells Fargo. Your line is open..

Hi thanks for follow up and still Nick.

And just going back to NK100 have any of the trials reached the top dose or DLT?.

So we’ve not had any DLTs observed so far in any of the studies. We're actually expecting to be dosing our top cohort next week in one of the studies so we are very close to talk for dose in all studies, but no DLTs have been observed..

And then can you give us an update on PROTECT and when you think you’ll be able to complete enrollment?.

Certainly so as Scott mentioned the Phase 1 data has been very well received by investigators and enthusiasm is certainly on an upswing. So we do expect to continue enrollment through 2018 and we expect to have results available in 2019 on the randomized Phase 2.

As I mentioned we do have expect the one year data on the Phase 1 subjects to be presented at ASH this year..

And speakers, I'm not showing any questions at this time. I would now like to turn the call back over to Scott Wolchko, President and Chief Executive Officer for any closing remarks..

Thank you. Thank you everyone for your participation in today’s call. We look forward to speaking with you again in the near future..

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