Welcome to the Fate Therapeutics Second Quarter 2019 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's Web site at fatetherapeutics.com. As a reminder, today's call is being recorded.

I would now like to introduce Scott Wolchko, President and CEO of Fate Therapeutics..

Thank you. Good afternoon. And thanks everyone for joining us for the Fate Therapeutics second quarter 2019 financial results call. Shortly after 4 p.m. Eastern Time today, we issued a press release with these results, which can be found on the Investors & Media section of our Web site under Press Releases.

In addition, our Form 10-Q for the quarter ended June 30, 2019, was filed shortly thereafter and can be found on the Investors & Media section of our Web site under Financial Information.

Before we begin, I'd 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, 2019, 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 today's call is Dr. Dan Shoemaker, our Chief Scientific Officer.

In February 2019, Fate Therapeutics initiated the first ever clinical trial in the United States of a cell therapy derived from an induced pluripotent stem cells or iPSC technology. The clinical trial is a landmark study in the field of cell therapy.

It is the first to evaluate the safety and tolerability of a brand-new class of iPS derived cell products and it is the first to investigate a novel treatment paradigm or an iPS derived cell product is administered to a patient in multiple, multi-dose treatment cycles.

FT500 is the first in this brand-new class of cell products to begin clinical investigation in the United States, FT500 is a universal off the shelf NK cell cancer immunotherapy derived from a clonal master iPSC line.

The use of a clonal master iPSC line for the manufacture of cell product has the potential to overcome numerous limitations inherent in patient and donor source cell therapy, which require the repeated sourcing and engineering of cells, batch by batch for manufacture.

In contrast, clonal master iPSC lines are renewable cell source for manufacturing cell products which are well defined and uniform in composition, can be mass produced at significant scale in a cost-effective manner and can be delivered on demand to patients.

We believe the emerging class of iPS derived cell products has the potential to revolutionize the field of cell therapy. In this first ever clinical trial, we are investigating the feasibility of administrating FT500 on a multi-dose, multi-cycle treatment schedule.

Most patient and donor source cell therapies including CAR T-cell therapies are single administration treatments and the therapeutic benefit conveyed to patients can too often be short lived. Since iPS derived cell products can be mass produced at low cost per dose, cryo-preserved and delivered on demand, the opportunity exists for repeat dosing.

And such a multi-dose, multi cycle treatment paradigm may uniquely provide patients with continuous therapeutic exposure over weeks and months to optimize cell products.

In the field of cell-based cancer immunotherapy, we believe such a multi-dose, multi-cycle treatment paradigm has the potential to convey more durable responses including in combination with established therapeutic agents that have complementary and synergistic mechanisms of action.

The FT500 clinical trial is an open label dose escalating Phase 1 clinical trial for the treatment of advanced solid tumors in patients who have failed all approved therapies.

The study is designed to assess the safety and activity of three once weekly doses of FT500 as a monotherapy and as a combination with checkpoint inhibitor therapy in patients whose tumors failed to respond or progressed following initial response on checkpoint inhibitor therapy.

Patients who are clinically stable following the first cycle of FT500 treatment are eligible to receive a second treatment cycle of three additional once weekly doses.

In May 2019, at the American Society of Gene and Cell Therapy, we announced that the first three patients were treated with FT500 at the first dose level of 100 million cells per dose in the studies monotherapy arm.

All three patients each received three once weekly doses of FT500 in an outpatient setting in the first treatment cycle, which was well tolerated with no dose limiting toxicities and no FT500-related serious adverse events. All three patients were eligible to receive a second multi-dose treatment cycle of FT500 at 100 million cells per dose.

I am pleased to announce that we have now treated six additional patients with FT500, three of these patients were treated with FT500 at the second dose level of 300 million cells per dose in the studies monotherapy arm and three of these patients were treated with FT500 at the first dose level of 100 million cells per dose in the studies combination arm with immune checkpoint inhibitor.

All six additional patients each received three once weekly doses of FT500 in an outpatient setting in the first treatment cycle. In each of these six additional patients, FT500 was well tolerated with no dose limiting toxicities and no FT500 related serious adverse events.

All six additional patients were eligible to receive a second multi-dose treatment cycle. To-date no dose limiting toxicities and no FT500-related serious adverse events have been reported by investigators in patients receiving FT500.

We are very encouraged by these initial safety observations given that FT500 is the first in a brand-new class of iPS derived cell products and FT500 is being administered on a multi-dose, multi-cycle treatment schedule.

To further demonstrate the potential of iPS derived cell products administered on this cycle, we are conducting a robust assessment of the patient's immunological profile over the course of FT500 treatment as an integral part of our clinical development program.

This assessment includes profiling the patient's immune cells, including activation of CD8 T cells and K cells and regulatory T cells measuring changes in the patient's cytokine levels and evaluating FT500 dose durability including the potential for anti-cell immunogenicity mediated by the patient's T cells or B cells.

We expect to provide an update on the FT500 study including safety, immunological activity and efficacy data in the second half of 2019.

I am also pleased to announce that we are now initiating clinical investigation of FT516, our universal off the shelf targeted and K cell product candidate derived from a clonal master iPSC line engineered to express a novel high-affinity non-cleavable CD16 or hnCD16 Fc receptor.

FT516 is the first cell product in the world derived from a clonal master engineered iPSC line to be cleared for clinical investigation and it is our second product candidate emerging from our proprietary iPSC product platform. We have completed CGMP production and final product release testing of FT516 for clinical initiation.

Starting with a single cryo-preserved vial from a clonal master engineered iPSC bank hundreds of doses of FT516 were manufactured in a single GMP campaign.

The cell product was cryo-preserved in an infusion ready bag and the cryo-preserved cell product was tested against stringent post-thaw specifications including identity, purity, viability and functional activity.

The FT516 clinical trial is an open label dose escalating Phase 1 clinical trial in which FT516 is being investigated as a monotherapy for the treatment of relapsed refractory acute myeloid leukemia and as a combination with CD20 directed monoclonal antibody therapy for the treatment of relapsed refractory B cell lymphoma.

The study is designed to assess the safety and activity of three once weekly doses of FT516. Patients who are clinically stable following the first treatment cycle are eligible to receive a second treatment cycle of three additional once weekly doses.

Both arms of the study will enroll concurrently across three planned dose levels of 90 million, 300 million and 900 million cells per dose. Specific to combination with CD20 directed monoclonal antibody therapy, dose escalation will include an initial enrollment of a single patient at 30 million cells per dose.

We are currently working with five clinical sites in the United States to initiate patient enrollment. We believe there is compelling clinical precedent to support the therapeutic benefit of FT516. Additionally, we believe there are well-established clinical benchmarks against which we can assess the safety and efficacy of FT516.

In the setting of relapsed refractory AML, hundreds of patients have been treated with donor derived NK cell therapy. Notably donor derived NK cells have not been associated with cytokine release syndrome or graft-versus-host disease.

Additionally, leukemic blast in the bone marrow have been shown to be particularly susceptible to direct NK cell mediated killing with complete remission rates ranging from 20% to 35% having been reported in investigator-initiated studies.

We plan to perform post treatment bone marrow biopsies following the third dose of that FT516 in the first treatment cycle to gain additional insights into FT516 activity.

Additionally, numerous clinical studies of FDA approved tumor targeting monoclonal antibody therapy have demonstrated the importance of antibody dependent cellular cytotoxicity or ADCC, a potent anti-tumor mechanism by which NK cells expressing CD16 recognized, bind and kill antibody coated cancer cells.

Clinical studies have also shown that patients from homozygous for the CD16 high-affinity variant 158V, which is present only in about 15% of all patients have significantly improved clinical outcomes following treatment with monoclonal antibody therapy.

Consequently, because FT516 incorporates a novel hnCD16 Fc receptor, which maintains active levels of surface expression of the CD16 high-affinity variant 158V, we expect FT516 to augment binding to tumor-targeted antibodies for enhanced ADCC.

As a benchmark for enhanced ADCC and patients with relapsed refractory B-cell lymphoma, CD20 directed monoclonal antibody therapies have demonstrated single agent complete response rates of approximately 5% and overall response rates of approximately 30%.

We expect to provide an update on the FT516 study including safety, immunological activity and efficacy data from the first patients in the second half of 2019. The next wave of cell-based cancer immunotherapies that we are moving toward clinical development are specifically designed to engage multiple tumor associated antigens.

Clinical experience with first generation patient derived CAR T cells both in the case of single antigen targeted CAR T cells against CD19 in leukemia and lymphoma and against BCMA and myeloma have clearly demonstrated that not all patients respond.

And even for those patients that initially respond durability of response remains a significant limitation of therapy. Among the earliest identified mechanisms of relapse is down regulation or loss of target antigen from the tumor cells.

To mitigate this limitation, next generation cancer immunotherapies are incorporating strategies to simultaneously target more than one antigen and reduce the risk of disease relapse due to antigen escape. I am pleased to announce that within the last 30 days, we submitted an investigational new drug application to the U.S.

Food and Drug Administration for FT596, the third product candidate emerging from our proprietary iPSC product platform.

FT596 is the company's first universal off the shelf CAR NK cell product candidate and is derived from a clonal master iPSC line engineered with three distinct functional modalities, a potent CAR targeting CD19, a novel hnCD16 receptor for engagement of additional tumor associated antigens in combination with monoclonal antibody therapy and a unique IL-15 receptor fusion for improved NK cell proliferative capacity and functional [validity] [ph].

Moreover, FT596 naturally expresses other activating receptors such as NKG to D to convey additional innate immune function in recognizing and killing cancer cells. We believe that FT596 has the potential to significantly disrupt the alpha locus and allogeneic CAR 19 T cell landscape.

And to be a best-in-class cell-based cancer immunotherapy for the treatment of B-cell malignancies. FT596 is a universal off the shelf cell product candidate. It is specifically designed to engage multiple tumor associated antigens and it has the potential to be delivered in multiple doses over multiple treatment cycles.

Furthermore, supportive clinical data of CAR 19 NK cells have been reported by investigators from MD Anderson, which administered cord blood derived CAR 19 NK cells to patients with B-cell malignancies and showed 30-day clinical response rates comparable to currently approved CAR 19 T cell therapies with a substantially improved safety profile.

The clinical protocol submitted to the FDA for FT596 was developed in consultation with clinical investigators at several leading CAR T cell medical centers.

We intend to investigate FT596 as a monotherapy and as a combination with CD20 directed monoclonal antibody therapy for the treatment of relapsed refractory B-cell lymphomas and advanced chronic lymphocytic leukemia.

We plan to administer FT596 using a multi-dose, multi-cycle treatment schedule and to conduct initial response assessments at the conclusion of each treatment cycle.

Alongside the clinical development of our iPS derived NK cell cancer immunotherapy franchise, we continue to assert our leadership position in the research and development of off the shelf CAR T cell therapy under our exclusive IPS derived T cell collaboration with Memorial Sloan Kettering led by Dr. Michelle Sadelain.

Our first universal off the shelf CAR T cell product candidate FT819 is derived from a clonal master engineered iPSC line having complete elimination of T cell receptor expression and insertion of a CAR targeting CD19 into the T cell receptor alpha locus.

We believe FT819 incorporates best-in-class components and design attributes for CAR T cell products including the use of a novel 1xx car construct discovered by Dr. Sadelain.

We have now initiated technology transfer of our GMP compliant differentiation protocols to the production team at Memorial Sloan Kettering for initiation of pilot manufacturing in support of an investigational new drug application submission. We have also renewed the company's exclusive collaboration with Dr.

Sadelain for the research and development of iPS derived T cell product candidates for an additional three years. Additionally, I am pleased to note that the U.S. Patent and Trademark Office recently granted to the company a patent foundational to off the shelf iPS derived CAR T cell therapy. U.S.

Patent Number 10287606 entitled Genomic Engineering of Pluripotent Cells covers compositions of iPSCs having a CAR construct encoded into the track locus and an endogenous TCR alpha gene knocked out.

The complete elimination of the endogenous TCR gene is critical in allogeneic CAR T-cell therapy to ensure the prevention of graft-versus-host disease, a life-threatening disease that can occur when donor T-cells attack a patient's healthy tissue.

Importantly, the CAR construct encoded into the TRAC locus is not limited to a specific tumor associated antigen. Finally, I want to thank the manufacturing regulatory and quality teams at Fate Therapeutics, which have expanded significantly over the past 12 months as our proprietary iPSC product platform has advanced into clinical development.

In addition to their instrumental role in the on-time submission of our FT596 IND, the launch of our in-house GMP manufacturing facility remains on schedule and we anticipate initiation of in-house GMP production in the fall of 2019 for clinical supply of our off the shelf iPS derived cell product candidates.

Turning to our financial results, for the second quarter ended June 30, 2019, Fate Therapeutics incurred a net loss of $23.5 million or $0.36 per common share as compared to a net loss of $19.7 million or $0.37 per common share for the same period last year.

Revenue was $2.8 million for the second quarter of 2019 compared to $1 million for the second quarter of 2018. Revenue was primarily derived from the company's collaboration with ONO Pharmaceutical. Research and development expenses for the second quarter of 2019 were $21.6 million compared to $16.8 million for the same period last year.

The increase in our RD expenses was primarily attributable to an increase in employee compensation including share-based compensation associated with the growth in headcount to support the advancement of the company's product pipeline, expenses associated with the clinical development and manufacture of the company's product candidates and expenses associated with the conduct of our research activities under our collaboration with ONO Pharmaceutical.

G&A expenses for the second quarter of 2019 were $5.3 million compared to $3.8 million for the same period last year. The increase in our G&A expenses was primarily attributable to an increase in employee compensation, including share-based compensation.

Our total operating expenses were $22.5 million for the second quarter of 2019, net of non-cash stock-based compensation expense of approximately $4.4 million. At the end of the second quarter of 2019, cash, cash equivalents and short-term investments were $162 million.

Common stock outstanding was 65.3 million shares and preferred convertible stock outstanding was 2.8 million shares each of which is convertible into five shares of common stock under certain conditions. And with that, I'd like to open the call up to any questions..

[Operator Instructions] The first question will come from Alethia Young with Cantor. Please go ahead..

Hey, guys. Thanks for taking my question and congrats on all the progress throughout the quarter. I just wanted to talk a little bit more about as we head into data readout for FT500 and 516.

How you guys think about what are the key core learnings there? I mean you talked a lot about safety and immunologic learnings, but also just want to talk about is there any expectation that we should think about as far as any efficacy could be seen in FT516? Thanks..

So, with respect to the questions, I'll answer with respect to FT500 versus FT516 because we have slightly different expectations with respect to at least initial clinical readouts. FT500 is the first product candidate, obviously, it's an on-engineered NK cell and we are studying at FT500 in patients with advanced solid tumors in the salvage setting.

We are primarily looking at the FT500 study at this early stage of patient enrollment. With respect to safety and looking at the immunological response of the patient receiving the cells. So, we're really looking at the FT500 first patient experience really as safety. With respect to FT516; FT516, now, obviously has been engineered.

It's an engineered product candidate and it's been engineered with a high-affinity non-cleavable CD16 receptor. And importantly, we're taking FT516 into a clinical setting where we actually believe there is strong clinical proof-of-concept for an NK cell and in particular CD16 engagement.

As I discussed in the AML setting, obviously, there's been hundreds of patients who have received donor derived NK cell and there's been clinical responses that have been seen. Additionally, there's all kinds of clinical data with monoclonal antibody therapy to underscore the importance of CD16 engagement and the role of NK cell mediated killing.

And so, I would say in the 500 study with these first few patients through dose escalation are r primarily looking at safety and proof-of-principle with respect to an iPS derived cell therapy being given over multiple doses and multiple cycles.

With FT516, we're now moving into the clinic with an engineered cell therapy where there is strong clinical precedent with respect to the indications that we were initially pursuing..

And can I ask follow-up, in 516, do you think that there's the potential to see any kind of efficacy, or do you think that you may need a dose higher maybe use a different product?.

I think certainly in the setting of the AML and in the setting of combination with monoclonal antibody therapy there's absolutely opportunity to see efficacy with FT516..

Great. Thank you..

The next question is from Yigal Nochomovitz with Citigroup. Please go ahead..

Hi. This is [indiscernible] for Yigal. Thanks for taking our question. Wondering if you could comment on the -- comment further on the AE profile overall on the FT500 monotherapy and combination arms. Thanks..

Sure. I think we've mentioned that for instance to-date there's been no dose limiting toxicities that have been observed with FT500 both as a monotherapy as well as in combination with Checkpoint inhibitor.

That includes patients that have been treated at the 300 million dose level in the monotherapy arm as well as patients treated at the 100 million dose level in the combination arm. The AE SAE profiles in total not related to FT500 have been quite modest..

Okay. Thank you. And a follow-up from us.

Have the patients in the FT500 trial consented to the second treatment cycle yet?.

Yes. As part of the clinical protocol patients that are clinically stable at the end of the first treatment cycle are eligible to receive a second treatment cycle and we have several patients in both arms that are in flight.

If you recall in the first dose level at 100 million cells in the monotherapy arm all three patients progressed through the first as well as the second treatment cycle with no DLTs and no SAEs..

Okay. Great. Thanks. And one last one from us. Could you be more quantitative on the cost savings for the doses of FT516, which you manufactured? Thanks..

Sure. I would say in our early clinical manufacturing runs, we are conducting these manufacturing runs to ensure success as opposed to drive for scale. I have said publicly both for FT500 and this is also true of FT516 that our clinical manufacturing campaigns have cost less than $1 million per campaign.

And we have yielded doses of about 300 doses per campaign. So roughly, again, driving for success not necessarily for scale, we've been able to produce product for less than $5000 per dose..

Okay. Thank you very much.

The next question is from Michael Schmidt with Guggenheim. Please go ahead..

Hi. This is Kelsey Goodwin on for Michael. Thanks for taking our questions. Two from us.

First, I guess how has your partnership strategy evolved now that you're in clinical trials and maybe kind of more specifically towards the ONO collaboration maybe how are you thinking about maximizing that longer term? And then, separately, in terms of the new manufacturing facility.

Can you just remind us of the capacity and kind of the quality assurance and control burden associated with [RPSE] [ph] versus maybe halo and auto cell therapies? Thank you..

Sure. With respect to partnerships, quite frankly, the company's partnership strategy has not really changed. I mean we think we have a terrific backbone with respect to the development of off the shelf cancer immunotherapies.

We think it's unrivaled with respect to our approach as compared to patient or even donor derived approaches to cell-based cancer immunotherapies. I mean I have said publicly that I think we are building the leading cell-based cancer immunotherapy company and I will stand by that.

I think where we are looking for help in developing product candidates, or in part is, in-partnering with companies that are leaders in developing and -- discovering and developing novel engagement strategies.

So, for instance, we think we have the best iPS cell backbone; we think we're developing the best technologies with respect to how those cell therapies perform in a human being.

However, we are looking to partner with larger pharmaceutical companies that can bring and contribute to that novel targets for which we can direct our cell therapies against.

And so, the idea that there are pharmaceutical companies out there that are experts in developing monoclonal antibody therapies or discovering new antigens to target, where they have the capacity to contribute binding domains, which we can incorporate into our CAR product candidates.

They are the types of partnerships we are very interested in doing and are actually driving forward. With respect to our GMP manufacturing capabilities, we are in the process of getting final compliance with respect to launching the facility. Final validation and compliance of the facility.

We do and we have done based on the work that we've done to-date the differentiation protocols and looking at pilot manufacturing runs, we certainly believe that we have the opportunity to parallel process multiple product candidates and we think we have the capacity to produce anywhere between 500 to 1000 doses per month..

Okay. Great. Thank you..

Sure..

The next question is from Ted Tenthoff with Piper Jaffray. Please go ahead..

Great. Thanks. I'm still a little shocked that the 5000 per dose number, I think that's a real wake up call to the entire industry. So, I'm excited to come visit and see the new facility. I guess the question that I asked before and it's just going to ask again and kind of see if there is any update in your thinking.

As the cell products become more sophisticated and there's iteration. At a high level, how should we think about these cell products ultimately being commercialized and ultimately fitting into the treatment paradigm. I think there's a huge ramification [indiscernible] really real change so far in years.

But, I'm wondering how the different profiles of these products may fit in with different diseases? Thanks..

Sure. I mean we have started with what some might consider an overly conservative approach where we started with an on-engineered product candidate FT500. We've built in a single modality into 516.

However, as you probably are aware from our pipeline and using FT596 as the third product candidate, we certainly believe using engineering iPS cells gives you the unique capability to engineer in multiple different pieces of functional modalities into an iPS cell backbone.

FT596, obviously is a product candidate that has three different pieces of functionality engineered into it. We've talked about FT538 as a product candidate which, again, now will have four different pieces of functionality engineered into it. And so, we do have a platform that lends itself to rapid innovation.

And I think one of the things that we're very cognizant of is, how we are innovating and pushing our product candidates forward in a fairly aggressive way. We think it's important to show clinical safety and proof-of-concept with our first-generation product candidates like FT500, like FT516.

But, I certainly believe that the future does involve the delivery of highly engineered cell-based cancer immunotherapies in order to drive deep durable responses.

And now, that we have our first two product candidates in clinical studies, I think you will start to see us be very aggressive in how we're evolving our pipeline including the number of edits that we are incorporating into our iPSC backbone..

Very cool. And I was appreciative of the safety update. That's going to be a really start for FT500.

Is there a limit to the number of [indiscernible], obviously, there is accuracy rate to each and that's probably improve over time, but what is the limit to how many characteristics you could knock in, knock out in an engineered cell line?.

Yes. I think one of the things, I mean we're sort of testing those limits today quite frankly under our ONO collaboration where we are looking at certainly five and six edits within an iPSC backbone and we're actively doing that today at a research level.

I think one of the unique things about an iPSC approach is that you can start with for instance you can start with the Master Cell Bank and that Master Cell Bank may already be qualified and it may already for the sake of argument have two or three edits incorporated into it, right? And so, that Master Cell Bank can be tested it can be validated.

And quite frankly, now, if you want to make a new product candidate instead of going back to ground zero and starting from the beginning and reprogramming and editing from scratch, you can actually take an existing Master Cell Bank which may have three edits in it and then incorporate two or three more edits into that bank and create essentially a new bank.

So, there is the ability not only just to go back to the beginning and then restart the process if you will and introduce four, five, six edits, but we can also build off of Master Cell Banks that have already been edited to incorporate new features and functionality.

And quite frankly that is one of the really massive and exciting benefits associated with starting with a clonal master iPS cell line. You can essentially validate and characterize the edits that are already made, the bank has already made and then you can build functionality on top of that..

Very cool. Great update. Thank you so much Scott..

Sure..

The next question is from Matthew Biegler with Oppenheimer. Please go ahead..

Hey guys. Thanks for taking my questions. Congrats on the progress. So, I had two questions on dose. First for FT500 and 516, these are upper limits on the cell dose 300 and 900 respectively. Still quite a bit lower than what we've seen in other trials of adaptive NK cell therapies.

And I'm just wondering, if there's a reason why you wouldn't want to explore higher doses in those trials. That's my first question. And the second one is on FT596, I think I heard you mention that you'd be exploring a multi-dose regimen, and which is obviously different than what the cord blood derived NK product from MD Anderson is using.

So just curious of the rationale behind that? Thanks..

Sure. Yes. I think one of the things I'll touch on answering both your questions in my response I think one of the things that we are excited about and that it's a limitation of donor derived NK cell therapy in the past has essentially been a single dose paradigm.

And we've seen in the past including quite frankly in work that's been done with some of our collaborators at the University of Minnesota as well as the MD Anderson data that investigators have driven to a maximum dose because they're limited for instance in that, they're only administering a single dose.

And ultimately, what we're interested in creating is a PK/PD profile if you will that extends not just for a couple of days but can extend over weeks and potentially months. And we think that potentially that will require a different dosing schedule in terms of the absolute number of cells that are delivered.

I think from our perspective, again, you may -- someone may put forth that we're being a bit conservative on dose, but really as we're thinking about this we know we do have the ability to push dose. We know we have the ability at least so far, we believe we have the ability to give multiple doses. So, we certainly have the potential to scale dose.

I would also say to be fair most donor derived NK cells have not been engineered and they've been given as a monotherapy. Clearly part of the strategy we're pursuing with FT516 and FT596 is now to give multiple doses over multiple cycles in combination with other agents.

And that's a paradigm that has not really been explored with donor derived cell therapy. And therefore, lower doses may be much more appropriate for especially when given in multiple doses may be much more appropriate in that setting. Obviously, it's something that we will look at, we're doing dose escalation and we have the potential to push dose..

The next question will come from Biren Amin with Jefferies. Please go ahead..

Hi, Scott. Thanks for taking my questions and apologies for the background noise. So, I just want to get your perspectives on your plans for 500 longer term. Would you move this forward in certain solid tumors? And if so, when would we get a go/no-go decision.

Or should we look at the 500 as a derisking from platform sample in terms of safety?.

So, I would look at it as a derisking event in terms of safety. That said, I do think there is a subset of populations, a subset of patients in this study, which we could potentially enrich for that have the potential to lead to efficacy.

We are not enriching for that subset yet today, although I would expect us to begin to drive towards that in the near future.

The particular subset of patients that I am interested in and I think NK cells at least preclinically there is interesting proof-of-concept here, our patients that has failed Checkpoint inhibitor where for instance the reason of failure is the tumor has mutated in such a way that there is very low to no expression of MHC Class 1.

That occurs in about 30% to 40% of patients that fail Checkpoint inhibitor therapy. The mechanism of resistance is, or certain mutations in the tumor whereby MHC class 1 is significantly down regulated. Those types of tumors will not be recognized by T cells there is no antigen presentation.

However, those types of tumors can be exquisitely recognized and potentially killed by NK cells and folks have shown that preclinically.

And so, that subset of patients with FT500, I am very interested in looking and exploring at particular subset of patients further and I suspect we will begin to enrich for that subset of patients in the near future with FT500.

Initially the FT500 experience is a big basket study both in the monotherapy arm and the Checkpoint inhibitor therapy arm or where we're driving towards safety and proving the multi-dose, multi-cycle treatment paradigm..

So, just a follow-up on your response, is there a diagnostic assay that you can enroll for patients with MHC 1 down regulation?.

Yes. You can absolutely biopsy tumors in advance with respect to MHC class 1 expression levels. It's actually being done by certain investigators in the Checkpoint inhibitors space to determine whether or not actually a Checkpoint inhibitors should be administered to those patients..

Got it. And then, just a question on 516, I think previously the company planned to evaluate in combination with alemtuzumab in multiple myeloma.

So that still on plan to enroll this cohort?.

No. We decided not to enroll that cohort. And one of the reasons for that is quite frankly focusing on the resources and directing the product candidates and the portfolio of our product candidates in a way that we thought -- we think is most efficient and efficacious. So, for example, as you know we are developing a product candidate called FT538.

FT538 is a product candidate that we will likely file an IND on in the coming -- let's call the next six months. FT538 in particular has been designed for the myeloma space. FT538 we've actually knocked out in a master cell line, the ability of an iPS derived NK cells to express CD38.

And so, therefore, we think FT538 can be given in combination and synergistically with Daratumumab for the myeloma space.

So, in analyzing our entire pipeline and thinking about how to be most efficient in development and thinking about how to target our product candidates into indications where we think that product candidate has the best chance of success from an efficacy standpoint we looked at attacking the myeloma space with FT538..

Great. Thank you..

Sure..

The next question is from Mara Goldstein with Mizuho. Please go ahead..

Great. Thank you. Just a follow-up first on the down regulation of MHC.

Is there a specific prevalence in tumor types for that in either specific tumors or organ systems or tissues that we should be aware of?.

Sure. I can send you some papers offline and we can look at that. But, yes, in the lung cancer space, so when you look at the Checkpoint inhibitor data that's coming out of lump of lung cancer and melanoma.

Anywhere between probably 20% to 30% of patients that for instance has failed Checkpoint inhibitor when they've looked at that those particular patients and their particular tumors.

And they've looked at for instance MHC Class 1 expression levels and mutations for instance [B2 mutations] [ph] about 30% of the patients that fail therapy in those two settings for lung and melanoma have significant down regulation of MHC Class 1..

Okay.

And if I could just ask on FT500, the Checkpoint failures in the trial, how should we think about that in terms of sort of percent of patients who have been -- that you've enrolled so far in Checkpoint failures?.

Yes. So, far on the call, if I was not clear we've enrolled three patients in the Checkpoint inhibitor combination arm all three patients received were enrolled and treated at the 100 million dose level.

And those patients cleared the first treatment cycle with no DLT and no SAE and we have patients -- those patients are in flight in the second treatment cycle..

Okay. And if I could just ask one other question, as it relates to the differences obviously between FT500 which is non-engineered and FT516 which is engineered.

Are there any differences in safety protocol to be aware off between two programs?.

I mean there are different indications, obviously, one is advanced solid tumors and one is in a hematologic malignancy setting. But, in terms of safety, no, I mean generally the safety profile that we are looking for with those product candidates is very similar..

Okay. All right. Thank so much. I appreciate it..

Sure. Sure..

The next question is from Jim Birchenough with Wells Fargo. Please go ahead..

Good afternoon. It's Nick on for Jim this afternoon. Scott congratulations to you and your team on a outstanding quarter. This is breakthrough -- well, not breakthrough therapy, this was a breakthrough paradigm for sure. So, on 500, now you have the experience of repeat dosing, repeat cycles.

Can you comment on cell expansion, is it similar to what you have reported for NK100?.

Sure. Yes, absolutely. I mean this gets into the -- I made a comment about like us looking very closely at sort of the immunological profile that we're seeing in patients. So, this is -- I mean we are going very deep with respect to our assessment of the FT500 product and we will do this for FT516 of the product once it's delivered to the patient.

And we're looking directly at tracking not just the cells that are administered, but obviously the patient's response to those cells.

And so, we are looking at that across multiple different mechanisms of assessment, looking at for instance cytokine levels, looking at whether for instance there's anti-cell immunogenicity raised against the cells that are being delivered.

And so, one of the things that we are very focused on obviously is the durability of the dose and historically donor derived NK cells when given last about 7 days that's what you would normally expect for a NK cell. And NK cell has a very different behavior than for instance a T-cell.

We would not necessarily expect in NK cell to rapidly expand in vivo like a T-cell. It's sort of not what NK cells do. The half life of an NK cell in vivo is typically different than a T-cell, the turnover of endogenous NK cell much shorter than what you would see with respect to a T-cell.

So, it is one of the reasons that we for instance are giving NK cells in multi doses and being separated by about seven days because we would expect the natural turnover of an NK cell on-engineered for their half life to be about 7 days. So, therefore, we're giving a dose every 7 days.

I mean one of the things that we're really interested though in looking at is of course we are giving -- this is what we intend to be a universal cell product.

And so, we are looking essentially at what we believe to be the durability of -- for instance the first dose versus the third dose versus the sixth dose with respect to the patient's response to those cells.

Really this idea of being able to promote a multi-dose, multi-cycle treatment paradigm we think is going to be super important in the cell-based cancer immunotherapy space to drive deep durable responses. The single administration paradigm we just think is significantly limited.

If you give a single dose even if it's a persisting CAR T cell for the sake of argument. If you give that dose and you go fish the cells out from the patient 14, 21, 30 days later, the functionality of that persisting cell is substantially different than the functionality on day 1 when administered to the patient.

And so, we do believe a paradigm where you are giving essentially multiple day 1 experiences is ultimately going to prove out as the preferred paradigm to drive deep durable responses.

And we want to demonstrate that that paradigm in fact is safe and well tolerated not just from a clinical perspective but looking at the patient's response to those cell doses..

Okay. Thank you. So, for NK100, you've reported that the second dose actually had greater expansion than the first dose.

So, I guess do you have data in-house now that tells you that your iPSC NK cells for repeat dosing are behaving similarly to the NK100 cells?.

I mean we're doing a lot of that analysis right now and its part of what you should expect will be a significant feature of our presentations in the second half of 2019. What I'll essentially call the immunological activity of our cells..

Okay.

And then, as far as NK100 goes, you drawing that to a close or you're going to continue those studies?.

Yes. I think, and I've said this before, I think with respect to the AML and the ovarian studies of NK100, we will likely wind those down by the end of 2019.

In the solid tumors study, we will continue to look to keep that going and potentially target enrollment of those NK100 patients towards the patient population that we've talked about with respect to MHC Class 1 low expression levels to get the best read on how to move FT500 forward.

We think NK100 in that particular setting good proxy and a good learning playground for FT500..

Sure. That makes sense. And then, just the last one, Scott, with NK100 you had a different intense discipline for depletion regimens. And I can't recall whether you are doing repeated lympho-depletion between the cycles but given a competitive just reported some lympho-depletion related deaths.

Can you just quickly update us on lympho-depletion as it varies pass between these different tumors you are studying and also whether you intend to give lympho-depletion more than once? Thank you..

Sure. So, I'll start with FT500. So, I mean, and I'll just be really precise with my language. We're not lympho depleting any patients with FT500, FT516 or FT596. We are giving a conditioning regimen, but the conditioning regimen is essentially an outpatient conditioning regimen.

It consists of Cy/Flu and it's a relatively low dose of Cy/Flu than what you would normally give to lympho-deplete patient. In the NK100 setting, we had actually three different conditioning regimens, the AML setting of NK100, we in fact did lympho-deplete.

In the ovarian setting and in the advanced solid tumor setting, we used the lympho conditioning and that with lympho conditioning regimens we used are similar to the ones we're using with FT500 and FT516 as well as FT596. So, paradigm that we are pursuing is a paradigm or conditioning can be given safely in an outpatient setting..

And you can get that multiple times?.

We're actually only planning on giving that at the beginning of a treatment cycle..

Okay. Thank you very much..

Sure..

The final question is from Daina Graybosch with SVB Leerink. Please go ahead..

Hi. Thank you. Thanks Scott. I have two questions and I got to ask them separately. The first is you mentioned several times the investigator-initiated trials with NK cells in AML. And looking at that they typically used haplo-identical, halogenic NK cells and a lot of the authors concluded that KIR mismatch was necessary for their efficacy.

I wonder if you can talk more to the NK cell phenotype for FT516 specifically to their KIR ligands.

If the KIR ligands are educated in your process and for what percentage of patients do you expect to occur mismatch or killing through the lack of cells action?.

Yes. So, it's a great question. And a lot of the work we're actually doing under our collaboration with Karl Malmberg is investigating the importance of KIR mismatch and its role in killing. I mean there's been a lot of work that's been done in this area and I would agree with you.

Some investigators have concluded that KIR mismatch is important with respect to patient outcomes. There's been just as much work done by investigators that I think would challenge that assumption. So, this is something that we're certainly looking at with respect to KIR mismatch and the ability to drive patient responses.

It's Karl Malmberg one of our collaborators is probably one of the most esteemed investigators with respect to looking at KIR ligands and their importance in response. And so, it's something we are certainly looking at on a go forward basis as part of our research and potentially to incorporate it into our clinical studies..

And the profile, the phenotype of your cells, do you have KIR ligands on the cells?.

No. We don't..

Okay. Thank you. And then the second question sort of on a different track. We've seen recent announcements of other induced pluripotent stem cell companies coming forward, I think Century Therapeutics, out of Bayer and Versant, NC Sierra, which was a step up with Takeda.

I wonder if you can speak to how your platform compares to these competitors?.

I'll try and be kind. So, I mean, in all honesty, I can't speak to their platforms. I'm not aware of what their platforms are in much detail at all.

My understanding of their platforms and their approach to iPS cell technology, it's still very early in development compared to Fate Therapeutics, obviously, we've just filed our third IND for an iPS derived cell therapy. I will tell you generally I expect there to be multiple different approaches to iPS derived cell therapy.

I think one of the differentiating features of our platform will essentially be the clonality of -- for instance a Master Cell Bank.

We fundamentally believe that getting down to a single cell level with respect to engineering analysis preclinical essentially competition of essentially racing clones against each other and selecting that single clone from which you create your Master Cell Bank, that is very important.

I mean when we create a Master Cell Bank, we commonly compare for instance 20, 30, 40 clones that have already been selected from starting populations of 500, 600, 700 clones. And so, we systematically get down to a smaller set of clones that we actually think are advantaged.

And then, we take that a step further and we race those clones against each other and I can tell you that that step where you race clones against each other is absolutely super critical in figuring out essentially what clone you want to use to create your Master Cell Bank because that Master Cell Bank is intended to serve as the basis for production throughout your life cycle of your entire product.

And so, the know-how intellectual property experience, human resources, technology that all goes into selecting that single clone is absolutely critical. And I do actually believe given we're pioneering this that will become a regulatory hurdle in advancing iPS cell technology..

Awesome. Great. Thank you very much..

And at this time, are there any closing comments?.

Thank you everyone for attending today's call. Look forward to speaking with you shortly in the near future and giving you more updates on our iPS derived and [indiscernible] cell franchises. Thank you..

Ladies and gentlemen, thank you for participating in today's conference call. You may now disconnect..