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

Ted Tenthoff - Piper Jaffray Robyn Karnauskas - Citigroup Do Kim - BMO Capital Markets Jim Birchenough - Wells Fargo Securities David Nierengarten - Wedbush Securities Reni Benjamin - Raymond James.

Welcome to the Fate Therapeutics Second 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..

Thank you. Good afternoon and thanks everyone for joining us for the Fate Therapeutics second 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 quarter ended June 30, 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 quarter ended June 30, 2018 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.

Today, I will highlight progress against our key 2018 operational objectives and review our financial results for the second quarter, after which we will open the call up to questions and further discussion. I am very pleased with our execution over the first six months of 2018 across the business.

We are well positioned to continue to read out clinical data in the next several months for both ProTmune, our next-generation hematopoietic cell graft, and for NK100. Our first in class adaptive memory NK cell cancer immunotherapy.

Additionally, with the submission of our landmark IND application to the FDA for FT500 of first-to-kind NK cell cancer immunotherapy derived from a master iPSC line, we are now poised to usher in a new era in the clinical development of cell therapies.

One that utilizes renewable master iPSC line for the mass production and off the shelf delivery of universal sell products. Overall, I believe we made important strategic and operational strides this past quarter toward achieving our mission of transforming the lives of patients with cancer immune disorders.

Turning first to ProTmune, we have seen significant acceleration of subject enrollment in our ongoing Phase 2 protect study, the randomized controlled and double blinded clinical trial of ProTmune and which we intend to treat up to 60 adult subjects with hematologic malignancies undergoing matched unrelated donor hematopoietic cell transplantation.

During the second of 2018, a total of 14 subjects were administered either ProTmune or a conventional mobilized peripheral blood graft, bringing the total number of subjects treated in the ongoing Phase 2 protect study to 20.

We attribute this acceleration to investigator enthusiasm following our presentation of initial clinical data from the Phase 1 stage of protect at the ASH Annual Meeting in December and at the ASBMT annual meeting in March. The Phase 1 data for ProTmune that we presented at these meetings on the protect studies primary endpoint.

The cumulative incidence of acute GvHD by day 100 as well as on cancer relapse has been encouraging. We're continuing to follow these Phase 1 subjects.

At the 2018, ASH Annual Meeting we intend to present additional clinical data from the 7 subjects administered ProTmune in the Phase 1 stage of PROTECT including data on the PROTECT study secondary endpoint. Freedom from moderate to severe chronic GvHD, cancer relapse and death and one year following HCT.

We believe the secondary endpoint best captures the ideal state at one year that defines a successful long -term outcome for patients undergoing HCT. That is alive without cancer relapse and without active GvHD.

We also achieved several clinical milestones within NK100, our first-in-class Allergenic donor-derived natural killer cell cancer immunotherapy comprised of adoptive memory and K-cells. We have treated subjects in all three clinical trials of NK100. Voyage for the treatment of refractory or relapsed AML.

APOLLO for the treatment of recurrent ovarian cancer and DIMENSION for the treatment of advanced solid tumors including in combination with FDA-approved monoclonal antibody therapy.

In each of these three studies of NK100, subjects have significant tumor burden at the time of enrollment are heavily pretreated including in some cases with experimental therapies and have no other approved treatment options.

At this time, looking across all three studies, there have been no reported dose limiting toxicities related to NK100 including no reported events of GvHD, cytokine release syndrome or neurotoxicity.

Additionally, anti-tumor activity of NK100 has been observed as we have previously disclosed that our second subject in the Voyage study achieved a morphologic leukemia free state at day 14 and that our subject in the APOLLO study achieved stable disease with evidence of tumor shrinkage at day 28, following a single administration of NK100.

I am also pleased to announce that we have added a second leading cancer research center for enrollment in the DIMENSION study. Baylor Charles A. Sammons Cancer Center in Dallas, and that this center has already enrolled its first subject.

At the Society for Immunotherapy of Cancer in November 2018, we planned to host an investor event along with our NK100 investigators to review initial clinical data and biological observations from the 3 Phase 1 studies of NK100.

A top operational objective for the company 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 mastered-induced pluripotent stem cell lines.

The use of master IPSC lines enables the manufacture of NK and T-cell products that are uniformly engineered extensively characterized and homogeneous in composition, and can be mass produced and delivered to patients in an off the shelf manner. Within the last 30 days, we submitted a landmark investigational new drug application to the U.S.

Food and Drug Administration for FT500. The first universal off the shelf NK-cell product emerging from our iPSC product platform. We intend to initially develop FT500 as a rescue therapy for patients that are resistant to checkpoint inhibitors. We believe our IND package is strong. The CMC data supported by 3 successful pilot manufacturing runs.

The non-clinical data is supported by a GLP toxicity and tumorgenesity study which evaluated multi-dose administration of FT500 at two different dose levels in an animal model. 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 related --cell related changes in hematology or clinical chemistry parameters. There were no probably masses or evidence of tumors, and there were no mortality events in animals administered FT500.

To our knowledge, this is the first IND application submitted to the FDA that uses a master IPSC line as a renewable source for producing an off the shelf cell product. It is an original first of kind IND application.

Notably, it is certainly not uncommon for FDA allowance of first of kind IND applications to extend beyond the standard 30 day review period. Similarly, we are prepared for FDA allowance of our FT500 IND application to take longer than 30 days.

We believe allowance to initiate clinical investigation of an iPS drive cell therapy by the FDA, would be a transformative milestone for the company, as well as the entire fueled it cell therapy.

There are already several iPS derive cell therapies undergoing first in human clinical investigation in Japan, including two trials that were just allowed in the past couple months. One using iPS derived dopaminergic progenitors for Parkinson's disease and another using iPS derived cardiac muscle cells for heart failure.

The era of iPS derived cell therapy is upon us and we are excited and honored to be working with the FDA to pioneer the clinical investigation of this new paradigm in the United States. The knowledge gained through our engagement with the FDA, in the review of our FT500 at IND application is very powerful.

As it also provides a detailed roadmap for us to initiate clinical development of additional product candidates are emerging from our iPSC product platform.

In the second quarter of 2018, we successfully generated and selected the single iPSC clone for producing FT516, our second universal off-the-shelf NK cell product which uniformly express a high affinity non-cleavable CD16 FC receptor.

From this single iPSC clone, we made the master cell bank for FT516, which help in extensively characterized for genomics stability, copy number variation and the exact integration site of the CD16 transgene in the Gino. Additionally, we initiated GLP toxicity in tumorgenesity study for FT516.

We expect to receive a $1.1 million milestone payment from the California institute for regenerative medicine, during the third quarter of 2018, in connection with the achievement of these milestones.

We aim to submit an IND application for FT516 by the end of 2018 and expect that the specific timing of the FT516 IND submission will be guided by our current interactions with the FDA under our FT500 IND submission. I would also like to highlight our progress, in the preclinical development of FT819, under our exclusive collaboration with Dr.

Michel Sadelain at Memorial Sloan Kettering, for the research and development of iPS derived T-cell immunotherapies.

FT819 is our first of kind universal off-the shelf CAR T-cell product candidate, which is derived from a single iPSC clone engineer to completely eliminate the expression of the T-cell receptor and to precisely insert a car targeting CD19 into the TRAC locus.

We believe the engineering of a single iPSC clone, rather than the engineering of a large batch of primary T-cells is a best-in-class approach and ensures that each cell in the final drug product is completely free of its alloreactive TCR and has uniform CAR expression for enhanced T-cell potency.

During the second quarter of 2018, we expanded our existing license agreement with Memorial Sloan Kettering, to further enable the development of off the shelf CAR T-cell immunotherapies including FT819. The newly licensed portfolio of intellectual property covers certain recent inventions, made by Dr.

Sadelain, relating to novel CAR constructs, with improved therapeutic potency, as compared to conventional CAR constructs that are widely use today in CAR T-cell field.

We have evaluated these noble CAR constructs, assess the properties and functionality of iPS derived CAR T-Cells incorporating these novel CAR constructs and identified a specific CAR construct that significantly improves anti-tumor activity and target specificity in preclinical models.

During the second half of 2018, we expect to select the single iPSC clone and making characterize the master cell bank for FT819, and we plan to engage the FDA in a pre-INP meeting in partnership with Dr. Sadelain to discuss the clinical development of FDA 2019.

Finally, I'm pleased to announce that we, along with our collaborators submitted 6 abstracts covering our iPSC-derived cancer immunotherapy pipeline for presentation at the 2018 ASH Annual Meeting and we plan to hold an investor event at ASH to highlight our universal off-the-shelf and NK cell and T cell product candidates.

Turning to our financial results for the second quarter ended June 30, 2018. Fate Therapeutics reported a net loss of $19.7 million, or $0.37 per common share, as compared to a net loss of $9.6 million, or $0.23 per common share for the same period.

The second quarter net loss included a onetime expense of $5.3 million associated with the in-license of additional intellectual property from Memorial Sloan Kettering. Excluding this onetime expense, net loss for the second quarter ended June 30, 2018, was $14.4 million, or $0.27 per common share.

Revenue was $1 million for the second quarter of 2018, as well as for the second quarter of 2017. Revenue in both periods was generated from our strategic research collaboration with Juno Therapeutics. Research and development expenses for the second quarter of 2018 were $16.8 million compared to $7.9 million for the same period last year.

The increase in our R&D expenses was attributable primarily to the onetime expense of $5.3 million associated with the in-license of additional intellectual property from Memorial Sloan Kettering, and an increase in expenses associated with the clinical development of NK100 and with regulatory and manufacturing activities to support the submission of our FT500 IND application.

General administrative expenses for the second quarter of 2018 were $3.8 million compared to $2.7 million for the same period last year.

The increase in our G&A expenses was attributable primarily to employee compensation, associated with growth in headcount and increased advisory fees, including general legal and intellectual property related expenses.

Total operating expenses for the second quarter of 2018 were approximately $13.3 million after adjusting for the onetime expense of $5.3 million, as well as for research funding proceeds from Juno Therapeutics of $500,000 and for stock based compensation expense of approximately $1.5 million.

Total operating expenses as adjusted for the second quarter of 2018 of $13.3 million represents an increase of approximately $0.1 million compared to the first quarter of 2018. At the end of the second quarter of 2018, cash, cash equivalents and short-term investments were approximately $78 million.

Common stock outstanding was approximately 53.4 million shares, 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'd like to thank each and every employee of Fate Therapeutics, as well as our collaborators.

Your creativity, innovative spirit and unrelenting commitment to our mission has progressed the field of cell therapy to a new era.

We are excited and honored to be working with the FDA to pioneer the clinical development of IPS derived cellular immuno therapies as an important part of our mission to transform the lives of patients with cancer and immune disorders. And with that, I'd like to open up the call to questions..

[Operator Instructions] Thank you. Our first question comes from Ted Tenthoff with Piper Jaffray. Your line is now open..

Great, thank you very much and congrats on all the progress and IND filing, very exciting. Two questions if I may. Firstly, Scott I think you're right to kind of caution for potential a little bit longer review with respect to the iPSC filing.

What do you think the FDA is going to take more time on? Is this going to be CMC issues, safety plans, what are you foreseeing as items in this first ever IND filing that may take a little bit longer, and then I have a quick follow up..

Sure, thanks, Ed. Yes, honestly it's hard for me to comment on that at this time. We feel like, we had two really good pre-IND meetings with the FDA with respect to iPS derived products. In the first meeting, we spent a lot of time focusing on the reprogramming and creation of an IPS cell line in a master cell bank.

And then our second pre-IND meeting, we have spent time discussing the creation of an off the shelf NK cell product from that Master cell bank. So I think in our two pre-IND meetings we did a good job of covering the totality of the products that we intend to generate from our IPSC product platform.

But as I mentioned, we are within the first 30 days of submission, it is an original first of kind of IND application. So we should know fairly shortly the FDA's views on this landmark IND submission..

Correct. And then a question for you and Dan. And it's just about kind of taking it to the next level with respect to CRISPR editing.

What's the latest there? And how are you guys going to use CRISPR through that new MSK partnership to potentially add these cell lines?.

Sure. I'll let Dan handle that..

Cool. Thanks Ted. Hey, there. Yes, it's been an interesting time in the gene editing field as we get a better idea on target and off target activities of these different platforms.

But as we like to highlight that, independent of what's approach you're taking, I think you're going to see significant challenges with the heterogeneity when you're editing batches of billions of cells. And this is especially true if you're going after multi-gene targets.

And thinking about these batches of billions of cells even low levels of incomplete edited tissues are, translocations or deletions can serve as a potential safety concern. And I'm really like the approach that we've taken here at FATE where we get around this heterogeneity problem by selecting individual clone iPS cell lines.

Again where we could extensively characterize and during the clone selection process, we're both on target and off-target activity. And easiness you end up with that homogeneous clonal master cell bank that again serves as the starting point for all of our manufacturer of our NK and IT products.

So anyway I think that our heterogeneity is something that to keep our eye on. And I think that our clonal approach really is a great solution for that very important problem..

Thank you. Our next question comes from Robyn Karnauskas with Citi. Your line is now open..

Hi guys. Thank you for taking the question. I guess can you help me just understand how you're going to disclose or what was the disclosed --the progress with the IND goals.

And next time we could hear about the status or will you be able to get some color around? If it is unfold what kind of conversations you are having? And will you press release when it's finally is accepted or would you wait until you have an earnings call or anything like that?.

Yes. I think it's too early to say. I don't want to speculate on what the nature of the feedback will be from the FDA as we work through this submission.

We have disclosed obviously that it is an original first of kind application, and it's not uncommon for FDA allowance of first of kind of applications to extend beyond the 30-day period especially in the cell therapy space. So we're certainly planning for that. Ultimately the allowance and clearance I believe is an important event for the company.

So we look forward to achieving that and certainly announcing that..

And then on ProTmune.

Do you have the accelerated enrollment? When will we learn about these additional patients, the 13 patient? How soon does that enrollment happen? Why don't we learn a little bit more ASH?.

Yes. So at the ASH update, the ASH update that we'll provide is from the Phase-- the 7 Phase 1 subjects that were administered ProTmune. And so we will give you an update all those subjects will have progressed. And obviously we will give a one year update on the Phase 1 subjects.

The Phase 2 subjects where we're intending to enroll up to 60 subjects where 20 have been enrolled as of the end of the second quarter. It's a randomized blinded and controlled study. So we are looking for a data in the Phase 2 study in 2019..

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

Thank you, good afternoon and thanks for taking my questions.

For the ProTmune Phase II study, can you say whether you have reached a stable rate of enrollment and provide sort of general timeframe for enrollment completion?.

Yes, so we have disclosed that enrollment in the second quarter were 14 subjects. It's hard for me to say whether or not that is a stable rate, it represents a significant acceleration. I mean as we discussed I believe that acceleration is based on the encouraging data that we presented both at ASH as well as ASBMT.

Obviously of that rate continues even at a flat pace we should be in a terrific position with respect to full enrollment early in 2019..

Very good, thank you. And when you think about what the important end points are for the Phase II portion from what you have learned from the Phase I, what are you focusing on and what would that mean for the Phase III trial design..

Yes, I'll comment on that then I let Chris comment on as well. I mean we continue to believe that the cumulative incidence of Grade 2 through Grade 4 acute GvHD is an important readout at day 100. We have fast track designation around the incidence and severity of acute GvHD at day 100.

It's an important readout absolutely since treatment of patients with acute GvHD is typically done with high dose immunosuppressive agents that are giving systemically. And that can certainly have an effect on rates of cancer relapse.

So from our perspective that day 100 end points, the rates of acute GvHD, the severity of GvHD can foretell ultimately what long-term outcomes are. That said, we are actively measuring our key secondary end point is how patients perform in their outcomes at one year. We're at - it is a curative procedure, it's performed within curative 10.

So from our perspective as we look at the totality of outcome, and certainly cancer relapse and survival is key..

Great, thank you. And one last question on FT516. The grand funding that you received.

What are the other milestones for the installments and what is the milestone that the last installment is dependant on it, is that Phase 1 start or Phase 1 completion?.

I believe the last milestone is based on submission of the IND..

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

Hi, guys, thanks for taking the call and congrats on all the progress. Just on the timelines for the IND clearance. When you think about other first-in-class novel products like this particularly in the cell therapy space.

What's the best precedent here and what's a frame of reference for timeline that you've seen previously and is FATE NK 100 a potential frame of reference here and then I have got follow-up. Thanks..

Yes, I think at least in our experience, I mean I would point to NK100. NK100 from submission to allowance was about three months. That was for the first submission which was relapse refractory AML. As you know we're in three studies so there were three different submissions with respect to NK100. The last submission being the dimension study.

The last submission for the dimension study of NK100 was allowed in 30 days..

And then Scott is there any chance to the extent that this is novel and first-in-class that FDA may want to see that the preclinical safety data for FT516 or do you - is there any suggestion you may want to look at that, before they allow the FT500 IND..

There has been no suggestion of that. I think they are completely unrelated..

And then I guess just finally in terms of expectations for NK100, whether that's kind of a leading indicator for 500? Do you expect FT500 to be as active as NK100 more active? How should we think about the data from NK100 as a leading indicator? What to expect for FT500?.

I think that I mean they're fundamentally different products. I mean, NK100 obviously is a donor derived products. So like all patients derived and donor derived products, there is heterogeneity associated with it. And I would also point out, quite frankly, that the studies that we're planning on pursuing are significantly different.

FT500 is intended to be from the get-go, a multi-dose paradigm in combination with checkpoint inhibitors, which is very different than the strategy we're pursuing with NK100 currently..

Got it and maybe just one final one on ProTmune. When you think about the secondary endpoint of patients who are alive, relapse-free and without moderate to severe GvHD at day 100.

As we think about the update will get it ASH from the Phase I, what would you expect from standard of care? What's the benchmark for successful result and what do you expecting to see from the control group in the Phase II portion of the study?.

Sure. Unfortunately, like a lot of data points that are reported in the hematopoietic cell transplantation space, there is a fairly wide range with respect to this secondary endpoint. But somewhere approximately in the range of 25% to 35% of patients. Only that percent of patients successfully meet that hurdle.

It is a - unfortunately, most patients at one year have either died, relapsed or are living with active GvHD..

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

Hi, thanks for taking the question. I had one on thinking about dosing on 516. In other words, if your dosing 500 with checkpoint inhibitors, one, I presume you're using the standard checkpoint inhibitors dose and then going forward with 516, do you imagine given it slightly different or is more than slightly but different mechanism.

Are you planning to use against standard doses of Herceptin or other approved antibodies? Or do you anticipate needing to explore dosing on the antibodies side? Thanks..

Sure. With respect to both checkpoint inhibitors as well as monoclonal antibodies. The clinical trials that we have proposed or based on settings where those agents are approved and those agents will be given at approved doses..

Our next question comes from Reni Benjamin with Raymond James. Your line is now open..

Hi. Good afternoon guys. Thanks for taking the questions. A couple of them, I guess just starting off with NK100. Scott, you mentioned a couple of notable responses I think both in VOYAGE and APOLLO. Didn't mention anything from DIMENSION.

Does that mean that there just haven't been any responses yet in DIMENSION or its maybe too early to tell and will you be increasing doses in all three studies? And I guess just finally related to NK100. You mentioned that at an upcoming conference which I failed to write down, if you could remind me.

You're going to be reporting the data from all three studies about, how many patients do you think in each study you'll have?.

Okay. So a couple of questions in there. And I apologize, if I don't hit them also feel free to repeat them. So we did not disclose data in a DIMENSION study yet simply because historically we have not disclosed data. But the data points I mentioned, we've historically disclosed at medical conferences.

And so we've been committed as a company to releasing NK100 data as part of medical conferences. They're certainly is data already in the DIMENSION study. And we did commit to provide an update with respect to NK100 across all three studies at SITC in early November..

Got it.

And just can you give us a sense as to how many patients worth of data you think you'll have them?.

We'll provide an update at SITC in November.

Got it. Okay. Switching gears to FT500. Just assuming that let's say the IND gets updated.

What are the initial trials kinds of look like? Where are you guys are going to be evaluating this?.

Hi, Chris here. As I mentioned, the initial trial is in combination with checkpoint inhibitors in the population of patients who are using it for approved indications, and are either refractory to or have relapsed on the checkpoint inhibitor. So that's the initial population. It will be initial dose escalation; Phase 1 study powered by an expansion..

Got it. So an all- comer studies, so it's not necessarily focused on one indication or another..

That's correct. It's in populations where checkpoint inhibitors are currently approved..

Got it. And can you talk a little bit about your maybe ex-US regulatory or clinical development strategies and maybe any thoughts regarding potential partnerships either worldwide or ex-US..

Yes. So at this point in time, we have had meetings ex-US. With respect to pioneering our IPSC product platform with multiple different agencies outside the United States. We've not yet committed to pursue those opportunities. Although, we are open to pursuing those opportunities in collaboration with partners..

Okay. And then one final one for me, it's probably a key question so Dan made like this one.

Can you talk a little bit about genomic? I guess I've always kind of wondered about the genomics stability of when you're starting off with one clone and then expanding it to not just therapeutic doses, but batches that could treat multi - hundreds of not thousands of patients.

And how you guys monitor that genomic stability?.

Yes. It's a great question. And we do pay special attention to the passage number of our IPSC banks with respect to our characterization. And we have a variety of approaches where we look at genome stability.

Translocations, deletions and just have a fairly comprehensive characterization strategy which again developed in discussion with FDA over several pre IND meetings.

And it's one thing to perform these tests right after you selected your optimally edited IPSC clones but it's another question as you then passes these two sufficient degrees to create master cell bank, and working cell banks as well as the ultimate products.

And then this is been a very important dialogue that we've had with the FDA on when to perform which test. But I could just tell that you have to perform all the tests at the right relevant passage numbers relative to the master cell therapies that we're going to be taking forward into the clinic..

Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to Scott Wolchko for any closing remarks..

Thank you very much. Thank you all for participating in today's call. And we look forward to speaking with you again in the future..

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