Greetings, and welcome to Atara Biotherapeutics Q2 2022 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Mr. Eric Hyllengren, Vice President, Investor Relations and Finance. Thank you, sir. You may begin.

Thank you, operator. Good afternoon, everyone, and welcome to Atara's second quarter 2022 results conference call. Earlier today, we issued a press release announcing our second quarter financial results and corporate update. This press release and an updated slide deck are available in the Investors and Media section at atarabio.com. On today's call, members from the Atara executive team will provide an update on our financial results, operational progress and strategy and also review our upcoming key milestones and objectives. Joining me on today's call are Dr. Pascal Touchon, President and Chief Executive Officer; Dr. Jakob Dupont, Executive Vice President and Global Head of Research and Development; Utpal Koppikar, Chief Financial Officer; and Dr. AJ Joshi, Chief Medical Officer. We will begin with prepared comments from Pascal and Jakob then open up the call for your questions. We would like to remind listeners that during the call, the company's management will be making forward-looking statements. Actual results could differ materially from those stated or implied by our forward-looking statements due to risks and uncertainties associated with the company's business. These forward-looking statements are qualified in their entirety by the cautionary statements contained in today's press release and the company's SEC filings. These statements are made as of today's date and the company undertakes no obligation to update these statements. Now I'd like to turn the call over to Pascal. Pascal?

Thank you, Eric, and thank you all for joining us this afternoon. Today, we announced plans to further focus our company's activity as a leaner research and development-centered organization designed to advance our innovative pipeline while at the same time, reducing of future cash burn. This includes a reduction of staff by approximately 20% across the organization and a reduction in planned annual cash burn of over 20% versus last year. These actions are expected to extend our cash runway into Q1 of 2024 while still delivering on key milestones for most advanced strategic assets in terms of potential value creation, tab-cel, ATA188 and ATA3219. Leveraging our differentiated allogeneic T-cell therapy platform and Atara unique clinical experience in more than 500 patients treated, we will prioritize R&D activities over the next 18 months on three core priorities: first, the clinical development of ATA188 or potentially transformative Phase 2 asset for progressive multiple sclerosis; second, the EU and potential U.S. regulatory filings and approval for tab-cel while seeking a commercial partner for tab-cel in the U.S., including all related activities and costs, which is expected to further extend the company cash runway; finally, the anticipated Q4 2022 IND filing for ATA3219, a potential best-in-class allogeneic CD19 CAR T, which could address a significant opportunity in this field for improving durable clinical response in hard to treat B-cell malignancies. We believe these three product candidates could have meaningful impact on patients in great need and could deliver significant value for Atara and our shareholders. These actions are part of a strategy to focus the organization on research and development and build on the previously announced strategic partnership on manufacturing with FUJIFILM Diosynth Biotechnologies and our commercialization collaboration with Pierre Fabre. The prioritization and actions announced today are a continuation of this strategy.…

Ladies and gentlemen, we do apologize for our technical difficulties. The event will resume momentarily. Again, please stand by. The event will resume momentarily.

Sorry for all this technical difficulty. We'd like to resume the call and just starting at tab-cel. As I said, another key strategic priority to create value with tab-cel. I would like now to give an update on tab-cel starting with our recent progress on the U.S. regulatory front. Following constructive discussions with the FDA, including senior leadership, the agency recommended a potential path to BLA submission without need for a new clinical trial. We are very pleased with this outcome. And following additional upcoming scheduled interactions with the FDA, we will give further guidance on progress to a BLA submission at our next earnings call. We believe that tab-cel can become a potentially life-saving options for those EBV+ PTLD patients in need with poor prognosis and no approved treatment options. We also believe tab-cel can deliver a compelling value proposition for payers and the health care system. We already knew that physicians have strong interest in tab-cel based upon the clinical data presented this year at ASH. More recently, our U.S. payer market research and payer advisory board have shown us that payers and treating institutions clearly see tab-cel as an important therapeutic improvement for the high need previously treated EBV+ PTLD patient population. Atara's belief in tab-cel value proposition, has been recently supported by the CMS decision in its newly released 2023 IPPS rule to formally assign tab-cel to DRG-18, which is a diagnosis-related group that links CAR T. Obtaining such assignment in advance of BLA filing is extremely rare and is based on compelling value arguments developed by our team for such a potentially life-saving therapy for patients with EBV+ PTLD. Once tab-cel is approved, this will improve access to reimbursement for patients in need. As we have said before, we believe that the tab-cell EBV+ PTLD…

Thank you, Pascal. First, I want to provide an update on our mesothelin-directed CAR T-cell therapies. We have terminated with Bayer, the exclusive worldwide licensing agreement for our next-generation mesothelin-directed CAR T-cell therapies, ATA2271, an autologous version; and ATA3271, an armored allogeneic T-cell immunotherapy. The product rights for these differentiated and innovative mesothelin CAR T programs have now been returned and that are wholly owned by Atara. With respect to ATA2271, which is being currently developed by a partner, Memorial Sloan Kettering Cancer Center, we continue to be supportive of the Phase 1 dose escalation clinical study conducted by MSK. And I'd like to provide an update regarding the recent fatal serious adverse event in a patient treated in this study. Over the last several months, MSK has generated significant autopsy-based and correlative data analyses, which they have shared with us. The autopsy established a specific end organ adverse event as the cause of death. This AE is a rare but recognized complication associated independently with two of the non-CAR T therapies that this patient received. Based on the data that MSK has shared with us, we see no evidence in the tissues in question of on- or off-target toxicities from the CAR T. As such, our assessment is that the CAR T is not directly associated with the unfortunate adverse event. We appreciate the detailed correlative analyses performed by MSK to help shed light on this complex case of an unfortunate and very ill patient. We appreciate MSK will be communicating these assessments to the FDA along with their plan for resuming patient enrollment via protocol amendment per their policies. We intend to continue to support the development of 2271 through our collaboration with MSK once the study resumed. Additionally, for this program, we expect to provide a Phase…

Thanks, Jakob. Now on to our financials. For the second quarter of 2022, we reported license and collaboration revenue of $51.6 million, primarily consisting of deferred revenue recognized due to the termination of the Bayer collaboration agreements. We anticipate license -- that license and collaboration revenues will decrease substantially in the future quarters due to the termination of the Bayer agreements. We also reported a net gain of $18.9 million for the second quarter. This amount included a gain on the sale of the ATOM facility of $50.2 million. With regard to our cash position and runway, we ended the second quarter 2022 with approximately 331 million in cash. This includes the impact of net proceeds of approximately $95 million from the sale of the ATOM facility during the second quarter. We believe our second quarter cash balance, together with the expected benefit from reductions in operating cash burn, will be sufficient to fund our planned operations into the first quarter of 2024. Finally, while I believe the actions we announced today will best position Atara to be successful in advancing our pipeline of potentially innovative therapies, I also want to acknowledge that it is also a challenging day for Atarans. I would like to extend my sincere gratitude to all Ataran staff, including those departing as well as staying with Atara for their unwavering commitment to the patient lives we seek to transform and their significant contribution in advancing truly innovative medicines for patients in need. Thank you for all that you have done. I will now turn the call over to the operator for the Q&A part of the call. Operator?

[Operator Instructions] Our first question comes from the line of Salim Syed with Mizuho. You may proceed with your question.

Great. Good afternoon, guys. Thanks for the questions. Three for me, if I can, on ATA188. One, just for -- just because I think there's some confusion on this. Pascal and Jakob, can you guys just confirm for us if you guys actually saw the IA data and if that factored into your decision to continue the study, just a yes, no there would be great. Two, on the bare thesis that's sort of risen from post the data that perhaps it was actually the Phase 1, perhaps there were some EDSS baseline creep in the Phase 1 data, and that's why we saw a drop in the Phase 1. Could you give us any sense of comfort that -- or how do we get comfortable that there wasn't actually an EDSS baseline creep for the Phase 1? And then the last question just is on the predictability threshold. I don't know if you guys ever disclosed what predictability threshold you used in the -- for the IA. I know we were looking at 85% because that's what we saw in the Phase 1, but did you actually use 85% for the IA? Or did you use a lower number? And if you could tell us what that number was? Thank you.

Thank you, Salim. So I'll start answering the first question together with Jakob, and then AJ will answer the other two. So following the IDSMC recommendation and their detailed comment on that recommendation, a few people within Atara, including myself, Jakob and AJ have seen the top line data. And our decision has been based on that as much as on the IDSMC recommendation. So we've seen the top line data. AJ, do you want to address the second question, please?

Sure. Thanks, Salim. And in terms of the EDSS for the Phase 1, the -- this concept of baseline creep, I think it's one -- there's two things I'd probably comment on there. One is that we know EDSS has some variability to it. So once you have an improvement, you've seen it maintain at every consecutive time point for all the way up to 39 months. That, in general, would argue a little bit against some kind of baseline creep giving you a random drop and then you're taking advantage of it later on. I think probably the second thing though that is just as important is the MTR data that correlates with that EDSS improvement we saw. So whatever measurement decrease you think may or may not happen, which we don't believe happens. But let's say, if you think something might have happened, ,there's no measurement creep that's going to happen on the MTR piece. And then you've also heard from Pascal that there's some other MRI data that we're going to be talking about that continue to support that whole notion that there's something happening in those patients that's different when they have the EDSS improvement. So those are all the reasons to really think that, that's not really an issue here. And in terms of -- we haven't really commented on any specific thresholds related to the IA apart from that rationale that you articulated about the 85% productivity, but we haven't commented on any specific thresholds that were used for the IA.

Got it. Super helpful. Thank you so much.

Our next question comes from the line of Tessa Romero with JPMorgan. You may proceed with your question.

Hi, guys. Thank you so much for taking our question. The first one is on the cash side. So you ended 2Q with about $331 million in cash and you are guiding to a runway to 1Q '24. So can you provide some further detail on what assumptions are in that runway including in terms of any milestones that you're expected to receive from your partnerships? And what are the levers that Atara could pull to further extend that runway, if necessary? And then I have one more on tab-cel, if I could.

First question, Utpal, do you want to address this?

Sure. Tessa, it's Utpal. Thanks for the question. I think one of the key things that Pascal mentioned is burn reduction. We mentioned 20% reduction versus what we had incurred last year. Now it's something that's going to take some time to occur. Some burn reduction has happened with the FDB deal. And as we reduce staff, the burn will continue to go down. And you can look forward as we get into 2023 when we wrap up all the filing and approval activities with Pierre Fabre in Europe, the burn will continue to decrease. So that's the first key thing you have to keep in mind. The second thing that you asked about in terms of how could we further extend the cash runway, we're continuing to look at other opportunities to do some nondilutive financing that we can talk a little bit more about, but particularly related to European and U.S. tab-cel is an opportunity for us.

Okay. And any milestones there that we should be reflecting?

Yes. There are milestones associated with Pierre Fabre in Europe, but we have not commented on them.

Okay. And then one more from me on tab-cel. Just can you provide any more detail on the scenarios that we should be considering for a possible path to a BLA submission here in the U.S. that has been recommended by the FDA or that you're discussing with the FDA? Thank you so much.

Yes. Jakob, you want to address that one?

Absolutely. So Tessa, thanks for the question. So as Pascal mentioned in our comment -- prepared comments, we've had constructive discussions with the FDA, and they do, as you allude to recommend a possible path to BLA submission without the need for new clinical trials. So that is an adjustment from their previous recommendation. This path is consistent with the proposal that we made, as you may recall from our previous quarterly call, leveraging patients currently treated with commercial product in the pivotal study. In terms of next steps, meetings are planned. There's one that's scheduled and there's one more to follow to align on the content of the potential BLA. So we do plan on giving additional color to this path towards a potential BLA at our next quarterly call.

Okay. Thanks so much for taking our questions.

Thank you, Tessa.

Our next question comes from the line of John Newman with Canaccord. You may proceed with your question.

Hi, guys. Thanks for taking my question. Congrats on the progress with the FDA and tab-cel. Just had a follow-up question on tab-cel. Assuming that the FDA be requesting some type of additional data, we believe that our ongoing clinical activities to be able to satisfy those types of requests without getting into sales what they are in a reasonable amount of time. Just curious, for example, if the agency looking for more clinical data [technical difficulty] patients like the existing clinical structure to pull that together in a long time. Thank you.

Jakob, do you want to address that one?

Yes. So I think as we're reporting today, I think the significant outcome is that the FDA recommends a possible path to BLA without the need for a new clinical trial. So -- and then in terms of negotiations, that's what we are involved in now. And I mentioned one scheduled meeting and another to follow after that. But that's where we're going to be speaking about the content of that potential BLA filing. But again, it's -- the expectation here is that, that data will not be coming from a new clinical trial.

Yes. I may add, John, as well that we are treating patients with a commercial product, not only in the pivotal study, the ALLELE study, but also in other studies and in particular, in the EAP program. So we are basically accumulating a number of clinical data, efficacy and safety using the commercial product and all that is really going to be important for the BLA submission.

Okay. Great. And then just one additional question on ATA3219. Actually really exciting to hear that planning on filing an IND there near term. I had a question on clinical design here. I'm curious, going forward, think about the patient population or the potential patient population, do you think that you'll be focusing on patients that were naive, the other CD19-focused therapies? Or would there be some types of CD19 therapies that you might think about allowing the study?

No, thank you. Our focus will be -- even though we are not giving details today about the first-in-human study, but we can say our focus will be around the medical need. And we see different type of medical need today that are not being fulfilled by the existing and even most of the therapy in development. One, in lymphoma is to have durability of clinical response. We see most of the other therapies, either CAR T autologous or allogeneic CAR T giving usually up to 40% complete remission at six months. And really in lymphoma, in particular, it's important to look at the CR rate at six months and beyond. So there is a need here to have a higher percentage of patients with good safety and improved safety compared with autologous CAR T in this type of regulation. So that's one type of clinical need. The other type of clinical need is, as you say, patients that have been relapsing, not being controlled after previous CD19 therapy. And we know that this is not only due to a particular issue, the target, but they're often used with lack of persistence of the therapy, the CAR T or other type of therapy that doesn't lead to this durable remission. Hence, they are relapsing. So there are these two type of medical needs that we plan to address somehow in our clinical development, but more detail about that at a later stage.

Okay. Great. Thank you.

Our next question comes from the line of Phil Nadeau with Cowen & Co. You may proceed with your question.

Hi, thanks for taking our question. This is Ernie for Phil. Two questions, if I may. The first one, just a clarification on ATA188. So as I understand now, your team, your executive team did see the data for the interim analysis after the decision was made. But it sounds from your prepared remarks that your internal assessment, I agree with that decision. And I was wondering if that interpretation is correct? And if so, was that agreement based on your assumptions -- initial assumptions going into the interim analysis? Thanks.

Thank you for your question. So what we have clarified today is that as planned by the charter of this interim analysis, a few individuals initially not myself, Jakob, were informed of the data to be able to put the data to the IDSMC that then we view the data fully independently full unblinded data. Then after they put their recommendation, a few of us, including Jakob and myself and AJ had access to the top line data, not the full and binding data, just the top line data to be able to see whether the recommendations is aligned with the best way to create value for this asset. And we do indeed confirm that in our assessment, this top line data has led us to confirm that we can follow the recommendation from the IDSMC and have no changes in the sample side of that study based on the data we've seen.

Thanks. And then on -- sorry.

No, go ahead, please.

Okay. And then on tab-cel, could you -- do you have an estimate on how long will the proposed pathway delayed the BLA filing? And also the decision to partner tab-cel, was the FDA feedback factor in that decision? Do they have something to do with it? Thanks.

Do you want to take the first part of the question, Jakob?

Yes. So -- as I mentioned, the next steps are clear from the perspective that we have, an upcoming meeting that is scheduled and then there will be another meeting after that. So these will occur in the not-too-distant future. And I think we'll be able to provide more detail on the time line for the BLA submission and the content of the BLA submission at our next quarterly call.

And on your second question, I think the decision to look for a commercial partner for tab-cel in the U.S. is really to make sure that we have greater financial flexibility that will position us well to fully realize the value and key catalysts and milestones for most advanced and promising assets, tab-cel, ATA188, ATA3219. So it's really around finding the possibility for partnering to have all the related activity and cost to prepare and launch the product, taken care by this partnering strategy and enabling us to potentially extend further our cash runway. And we think that -- we demonstrated that with the European deal that we can create very significant value in partnering and that allows us to focus on where we believe our resource allocation could create most value for our shareholders around creating -- reaching key milestones and catalysts for our priority assets.

Great. Very helpful. Thank you again for taking my question.

Our next question comes from the line of Michael DiFiore with Evercore ISI. You may proceed with your question.

Hi guys. Thanks so much for taking my question. A few for me. Both about tab-cel. You keep on referring to this registration as a potential path that was recommended by the FDA. That implies that it may not even happen. What needs to be discussed with the agency at this point? And what could possibly result in it not being -- not there being a potential path forward here? Are they expecting post-marketing studies on this as well? Because it does sound like -- from your comments, it does sound that they are willing to accept expanded access patients for this? And the second part of my question is just on the U.S. commercial partnership. Like it sounds like this has been fueled by a desire to extend cash runway. What led to this decision now? And how much additional runway could be achieved if a new partner opts into share costs? Thank you.

Yes. Let me address both questions here. I mean, on the -- as usual, you always talk about potential. We haven't had a pre-BLA meeting. We have not filed the BLA yet. So that's why we always talk about potential. We have now clearly a recommendation that allows us to work constructively as we've done over the last few months with the FDA to get the response of moving forward to a BLA submission, but we have some steps to achieve, and that's what are the planned interactions for before we can confirm the exact timing. And again, as Jakob has said, this particular path is fundamentally based on what we've discussed and -- with them and also what we propose to them, as we said at our previous quarterly call. So there is no major differences there. On the second aspect, it's always a decision to be made about resource allocation between investing in commercialization or partnering for commercialization. At this stage, we believe that with all the key value-creating assets that we have and we are developing at a clinical stage, it makes sense for us to look for partnering there because, again, partnering, when it is done in the right way, allows to have a significant share of the NPV that remains in the company, and that's where we can really create further value for our shareholders. So we think it makes sense to consider that right now and to be able to focus our activities, but also, again, to have a partnership that will create significant value for Atara and our shareholders.

Thanks so much.

Our next question comes from the line of Salveen Richter with Goldman Sachs. You may proceed with your question.

Thank you for taking our question. This is Tommie on for Salveen. I wanted to know about how the cadence of R&D updates is going to work for the mesothelin programs. So after we have the Phase 1 update for 2271, how would you plan out your timing for discussions and planning for their studies in the context that you're now focusing more on 3219? And can you just explain the rationale behind prioritizing 3219 given that 2271 is more advanced? Thank you.

So maybe just to clarify about that part. We still plan to continue development of 2271. As Jakob has explained, we are now expecting the -- our collaborators at MSK to make a proposal to the FDA about some amendment to the protocol, so the study can resume. That's what we do. And we are going to support that. What we have decided to pause is 3271 IND and just because the funding for that clinical study, the first-in-human study and for the clinical development was supposed to be done by Bayer. Now that we have terminated the program -- the collaboration with them, we are really in a situation where we have these fully owned assets 3271 that we certainly plan to bring to IND once we have the appropriate funding. And that would come from different sources. But certainly, we are -- we have a strong belief in the potential of this program to create value. And again, we are considering 2271. It's just the allogeneic versions. We need to have further funding to be able to bring these to the clinic and to start the clinical development.

And maybe just one other point. You asked about an update with mesothelin. So as we discussed today as well, we continue to see Q4 this year as an opportunity to provide updated data on that 2271 autologous program with our partners on Kettering.

Yes. And maybe also to add to your question about why giving some priority to 3219 instead of 3271 in IND and first-in-human study. This is mainly because we believe that 3219 has truly the potential rapidly to get a level of clinical data that could clarify what is the potential for best-in-class situation in terms of response rate, efficacy aspect and safety. And then at the same time, to create further confirmation that our differentiated allogeneic T-cell platform is indeed leading to benefit in patients. So in terms of speed to get clinical data it's certain that developing an allogeneic CD19 CAR T is getting to faster ability to evaluate responses than going into mesothelioma, lung cancer and other type of cancer. Again, this being said, we still plan to do that at the proper time. So we're all ready to go into this final IND steps and clinical development 3271. It's just a matter of resource allocation right now, but that will be really our strategy to be able to find funding to move forward with that asset, which we believe has potential value for patients and the company.

Our next question comes from the line of Yigal Nochomovitz with Citi. You may proceed with your question.

Hi, this is Carly on for Yigal. Thanks for taking our questions. Maybe just to follow up on the prior question. I guess, are you actively looking to repartner the mesothelin programs in order to advance the allogeneic version. And then maybe more generally, what's your level of interest in partnering additional CAR T targets beyond mesothelin?

Yes. So we have a platform that is extremely versatile and allows us to rapidly develop allogeneic CAR T on different targets. Now we have to make proper resource allocation. And at this stage, even though we could develop further additional CAR T, we have decided not to go to IND-enabling studies and clinical development for additional CAR T. We have an early pipeline that we are pursuing, by the way, with Memorial Sloan Kettering, with Cancer Centers and also with our collaborators at QIMR in Australia. And that allows to have some work done on new design, new constructs, new targets for allogeneic CAR Ts and other type of modalities. So that's really an exciting part that we're continuing at the early stage. Now investing into the IND-enabling studies and first in human is another level of investment. And at this stage, we have decided to focus our resources on the most advanced clinical asset, i.e., tab-cel, ATA188 and 3229. Now this being said, for 3271, we will be open to different possibilities, one being certainly a new partnering because this potential therapy could address a number of very significant indications in solid tumors. So while we are resuming soon, hopefully, the study on 2271, and we think that's a matter of a few months. We then can have more data coming from this clinical experience with the autologous, but the main focus will be the allogeneic which will be able to go to the clinic as soon as we have the funding available for that, either from partnering or some other ways to fund this development.

Okay, great. Thank you.

Ladies and gentlemen, we have reached the end of today's question-and-answer session. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation and enjoy the rest of your day.