Welcome to the Fate Therapeutics Third Quarter 2016 Financial Results Conference Call. At this time all participants are in a listen only mode. This call is being webcast live on the investor and medial section of the website at fatetherapeutics.com. This call is the property of Fate Therapeutics and recording, reproductions and transmission of this call without the express written consent of Fate is strictly prohibited. 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 third quarter 2016 earnings call. Shortly after 4 PM Eastern Time today we issued a press release with our third quarter 2016 financial results which can be found on the investors and media section of our website under press releases, In addition our third quarter 2016 10-Q was filed shortly thereafter and can be found on the investors and 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 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 September 30, 2016 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 Scientific Officer. I will begin the call by highlighting the substantial progress we have made over the past three months across our business. Chris will then provide an update on our ProTmune PROTECT clinical…

Thanks Scott. Let me begin by showing an update on our lead clinical product, ProTmune. ProTmune is being developed as the next generation hematopoietic cell graft for patients undergoing mobilized peripheral blood hematopoietic cell transplantation or HCT. As you know, HCT can be curative for a number of hematologic malignancies such as AML, ALL and MDS and for over 50 genetic disorders, but unfortunately, all too often the curative potential of HCT is compromised by the development of graft-versus-host disease and severe infections in fact in the first 3 to 6 months immediately following the procedure acute GvHD occurs in up to 60% of patients and severe infections in up to 70% of patients. These are serious complications and are the leading causes of non-relapse mortality. The FDA has fast-tracked designation for ProTmune underscores the importance of developing effective therapeutics to address these complications. We believe that the potential of ProTmune to prevent these life-threatening complications of HCT by optimizing the therapeutic properties of the graft itself is therapeutically compelling and highly differentiating as compared to the administration of adjunctive therapies or treatments post HCT. Since coming onboard as the Chief Medical Officer I have the opportunity to thoroughly discuss the ProTmune study with our principal investigators and we have decided to implement a few important modifications to the study protocol. Our goals in implementing these changes were primarily twofold; one to facilitate the potential for accelerated registration of ProTmune, and two, to broaden ProTmune's potential product label. Let me take a few minutes to address each of these modifications and highlight some of the specifics. Let me begin with why we believe for several reasons that our clinical trial which we refer to as the PROTECT Study has the potential to support accelerated registration for ProTmune. First, ProTmune is…

Thanks Chris. As both Scott and Chris have mentioned FATE-NK100 is advancing towards a clinical development with the recent IND filing. I'd now like to discuss the exciting insights which inspired and which support our clinical development of this product candidate. FATE-NK100 is a first in class programmed natural killer cell cancer immunotherapy. The product candidate is produced through a seven day feeder free ex vivo pharmacologic modulation process which uses a cytokine and the small molecule FT1238 to preferentially expand donor source NK cells and to enrich a functionally unique subpopulation of NK cells known as adoptive NK cells. The adapted NK cell population has been identified by our collaborators at the University of Minnesota led by Dr. Jeff Miller. It is having several distinct features including enhanced persistence, increased production of potent immunostimulating cytokines and immune checkpoint resistance. Additionally, clinical experience from our collaborators has demonstrated that in the setting of allogeneic HCT increased numbers of adaptive NK cells correlated with lower disease relapse and improved disease-free survival. These intriguing preclinical and clinical findings highlighting the therapeutic potential of adaptive NK cells inspired the launch of our collaboration with the Miller group back in August 2015. Building off the Miller group's observations our pre-clinical studies have demonstrated that FATE-NK100 exhibits profound multifaceted antitumor as compared to NK cells therapies that are being clinically administered today. We have shown in preclinical studies that FATE-NK100 exhibits enhanced cytotoxicity, both against tumor cell lines associated with various cancer types as well patient derived blast AML samples. Additionally, we've demonstrated that FATE-NK100 is superior in its ability to control tumor growth up to at least one month in a [indiscernible] adoptive transfer model. We have also shown in preclinical studies that FATE-NK100 exhibits potent antitumor activity when using combination with therapeutic antibodies…

Thanks Dan. For the third quarter ended September 30, 2016 Fate Therapeutics reported a net loss of $8.7 million or $0.27 per share as compared to a net loss of $6.9 million or $0.24 per share for the same period last year. Revenue was $1 million for both the third quarter of 2016 and the third quarter of 2015. Revenue in both periods was generated from our strategic research collaboration with Juno Therapeutics. Research and development expenses for the third quarter of 2016 were $6.8 million compared to $5 million for the same period last year. The increase was primarily related to an increase in third-party service provider fees to support the clinical development of ProTmune and our research activities and an increase in personnel expenses resulting from additional employee headcount to support our research activities including activities under our collaboration with Juno. G&A expenses for the third quarter of 2016 were $2.6 million compared to $2.4 million for the same period last year this increase was primarily related to an increase in intellectual property -related expenses. After adjusting for research funding proceeds from Juno of $500,000 and for stock-based compensation expense of approximately $800,000 total operating expenses for the third quarter of 2016 were $8.1 million. At the end of the third quarter 2016 cash, cash equivalents and short-term investments were $46.6 million. Debt outstanding under our facility with Silicon Valley Bank was $12.6 million and common stock outstanding was approximately $34.1 million shares. Over the past several months we have made substantial progress and intensified our commitment toward accelerating the clinical development of our programs. We bolstered our ability to pursue accelerated registration for ProTmune and our PROTECT Study is now open at seven sites. We advanced our first in class NK cell cancer immunotherapy, FATE-NK100to IND filing in AML and have the potential to extend its clinical investigation in 2017 broadly across liquid and solid tumors, as a monotherapy, and as a combination therapy. We have a positive pre-IND meeting with the FDA for ToleraCyte which resulted in a clear path to initiate clinical investigation in type I diabetes. We are now using engineered pluripotent cell lines to generate clonal populations of NK cells and T cells with broad histocompatibility and enhanced effector functions. And we look forward to discussing with the FDA our path to become the first group to advance an engineered induced pluripotent cell line derived cancer immunotherapy into clinical development. I would like to thank our employees, collaborators and investigators for the progress we have achieved. The hard work and the pace at which we are innovating and turning the previously unimagined into first in class product opportunities is truly inspiring. And with that, I'd like to turn the call over to the operator for any questions.

Thank you. [Operator Instructions] And our first question comes from Do Kim with BMO Capital Markets. Your line is open.

Good afternoon. Thanks for taking my question. Congratulations on the progress. I just want to make sure that I understand, is it your intention that the randomized Phase 2 data you'll get from the PROTECT Study will be the basis for the filing and you don't expect to run another randomized trial?

I think we believe that's the potential for the study and enabling this course is the correct course. Making these changes provides us with a path to significantly accelerate value creation and time-to-market by making these changes to the ProTmune PROTECT protocol. I think when we were first designing the Phase 1/2 study we recognized there would be challenges, the blinding, given that we have a four-hour on-site manufacturing process for ProTmune and this is obviously not applicable to the control standard mobilized peripheral blood graft. So in working with the cell processing units and our investigators, we recently worked to overcome this challenge with respect to blinding and now are confident that we can blind both investigator an patient and so while the protocol amendment initially delayed, we've definitely believed that this randomized, controlled, blinded study can potentially support accelerated registration.

And have you gotten any feedback from the FDA on this revision of the study protocol and whether or not they would see it as a basis for approval?

We've not discussed that with the FDA, although I would say that we are running a randomized controlled, blinded study that typically is supportive of registration.

Right, right. Okay, and are you thinking about increasing the target enrollment of the study and adding more trial sites?

We are continuing to ramp trial sites, so we have seven open and we'd previously guided that we would like there to be about 14 centers in the Phase 2 portion of the PROTECT Study.

Okay. And my last question is on the adaptive NK cell drug, in your develop for AML and given that relapse refractory disease is pretty hard to treat. What won't be the bar for you to continue on to other tumor types if it is not completely effective at AML?

So it's a good question. So, two thoughts, I mean number one the experience that Jeff Miller has at the University of Minnesota suggests that complete response is in the range of 30% to 50% we would certainly expect to be that given our preclinical data compares FATE-NK100 directly head-to-head with what he's using in the clinic today. The key for us will not just efficacy and looking at patient outcomes but will be certainly looking at biomarkers closely we believe that FATE-NK100 has enhanced persistence which we think is important with respect to NK cells efficacy. And so yes, so they are some of the bars that we will be looking at in this study.

Okay thanks.

That said, I would add though, that as I indicated we will aggressively look to advance FATE-NK100 in two different settings of both solid and liquid tumors and we do not necessarily believe that the results in AML read on those particular settings.

Okay, great thanks for the answers.

Thank you. And our next question goes to Jim Birchenough with Wells Fargo. Your line is open.

Well, good afternoon. It is [indiscernible] for Jim this afternoon. Thanks for taking our questions and congratulations on lots of progress and fascinating set of abstracts at ASH, thank you.

Thanks.

In terms of the PROTECT trial so did you consider or is there a sham treatment for the control? And then I know previous question asked about patient numbers. You did not address that directly, Scott, but obviously when the trial was designed it was designed specifically to show in part at least the difference in CMV disease burden. Now you are broadening beyond CMV. Are you presuming you are going to stratify and balance between the arms and non-CMV, but you need to add additional CMV patients to meet the statistical criteria you used to set up the original trial design? And then I've got a follow up on the NK program.

Yes this is Chris here. Let me first address the last comment there. So yes we will be stratifying on CMV status, but we are also maintaining a minimum of 20 CMV positive patients per arm for the control and the ProTmune arm in order to get a good assessment of our impact on preventing CMV infection in the CMV positive population. So that will ensure that we have enough patients to look at what our assumed treatment effect will be. I believe the other question had to do with the sham control. We don't really need to have a sham control because what we're doing with ProTmune is the graft itself. So the control is the standard control that is used for hematopoietic stem cell therapy today. It's just the mobilized peripheral graft. But what we have done is we've implemented a way to ensure that the investigator and patient will not know whether or not the graft is being manipulated or whether it is the manipulative ProTmune graft. And so in that way we are ensuring the blind and we are using a control which is the standard of care today.

I think the other thing I would add just with respect to the number of patients and how it was designed. I mean as you know, our main focus has been and still continues to be GvHD and the additions that we have made to this protocol we do not believe affect the rates of GvHD in any meaningful way.

Okay, and then maybe just a quick follow up on of course you had opportunities with investigators. Presumably they were asking when you would move into the mismatched setting as opposed to the matched setting. So as you think about expanding ProTmune, what would be the next sort of trial or set of trials that you would consider, that taps the priority of them?

Yes, I mean it is something that we will obviously think of this is Scott, it is something we will think about as we look at the data. I mean one thing that I think is important to underscore is while we've instituted blinding with investigator and patient we do have limited access to the data still. So we can still make decisions with respect to development strategy as it relates to ProTmune. I think one of the obvious areas to move into as we think about it given it is a mobilized peripheral blood based product is the area of haploidentical transplantation. It is an area that is absolutely gaining an interest, both in the U.S. and in the EU. There are significant challenges associated with the T-cell compartment in a haploidentical transplantation and so rates of GvHD infection including chronic GvHD and relapse are significant. And certainly by optimizing the T-cell compartment in the matter in which we think we accomplish I think moving into that setting with some supportive data in the matched unrelated setting would be a interesting strategy for us going forward.

Okay and then just moving to the NK cell, the NK100, so how many products can you manufacture per donor and then in terms of the clinical protocol and the related you said there is a resistance a checkpoint, how durable is that and how many institutions are you planning to give sort of that DLI [ph] protocol?

Yes, so the first clinical experience with this will be a single donor, single patient paradigm. We will be exploring multiple different doses which I think will ultimately give us a sense as to how many potential doses we have ultimately give us a sense as to how many potential doses we have from a given donor. So that's how we are thinking about this first study. As we think it potentially having lots of different doses and how to address that paradigm, obviously we have our induced pluripotent cell platform and that platform is what we plan on leveraging and utilizing to create essentially an off-the-shelf strategy.

Then on the checkpoint resistance we've mostly focused in vitro so far on assessing the response of the NK100 to MBSEs [ph] and then had that comparison of the adaptive NK genotype with normal NK cells and this is what we're seeing the increased resistance and we're now setting these studies in the in vivo models.

Okay, thank you.

Thank you. And our next question comes from Mark Breidenbach with Roth Capital. Your line is open.

Hey guys, thanks for taking the questions. Let me start with the PROTECT study, I was wondering if you could kind of help us understand a little bit how in a trial with GvHD incidence as an endpoint how much assessment bias really comes into play? You know [indiscernible] pretty obvious frame with cost of [indiscernible] is blinding really necessary to assess GvHD? And also a followup on that is are we still going to be seeing the same one we have from I guess it is going to be temptations sometime early in the first quarter?

Yes, Chris here. Let me first address the first question regarding the potential for bias in the GvHD assessment. There has been some recent publications on this especially when looking even at the standard of care methotrexate tacrolimus studies here and the concern for bias here has to do with two of the endpoints, one being the amount of skin involvement which is greater as a percentage and that is a very subjective way. So there with an investigator knowing what treatment there is, there is a potential for introducing bias into the skin assessment. The other is even as in the recording of the amount of diarrhea that's again a kind of a very subjective reporting. Obviously what's objective here is that the lab data, but there are some significant subjective components of the GvHD score which when people have looked especially when you have one or two patients at a site potentially there is a large potential for bias unintentionally to impact how things are looked at. And so we feel that the institution of blinding here really makes this a very robust assessment of the activity that we will see with ProTmune.

And with respect to the timing of the transition and the date on the Phase 1 we will report and discuss the Phase 1 data as we clear the safety hurdle and transition into Phase 2.

Okay. Understood. Second question if I may, in the ASH [indiscernible] there was some nice looking data from may be showing the initial proof of your collaboration with Juno. I am wondering if we're getting closer to a point where Juno might announce first target questions do we have any indication if that's near term or that's still in the distance?

I mean we do not have visibility ultimately into Juno's decision-making process with respect to incorporating small molecules into their product candidates. Let's say we do have a very active collaboration. Dan can speak to it in much more detail than I can. At this point we delivered them multiple different data packages demonstrating small molecule modulation and the ability to enhance the T-cell compartment, both in vitro as well as in vivo using card T cells.

Yes and then Scott at the [indiscernible] certainly it is a joint [indiscernible] we will presenting at the approach and some examples of the small molecules that we've identified and again as highlighting the screening strategy in vitro assays and in vivo models. You know that's part of what we will communicate. I can't speak for Juno on when they are going to make certain decisions.

Okay, thanks then. One follow up question if I may, the I was a little curious if any of the preclinical tumor control models that you've been running with NK100 is if you've also put the iPSC to drive NK self products, it does seem like that, preclinical assessment and [indiscernible] comparision has been the iPSC drive product and [indiscernible] .

Yes, so I mean Dan could speak to that as well as I. I mean we've done some limited experiments with that to date. I think it is too early to comment on fundamentally how different or similar these products are. At least in early in early in vitro experiments though. The iPSC derived NK so performed much more similarly to face NK 100 as compared to NK cells that are being clinically utilized today.

Okay, perfect. Thanks

Thank you. [Operator Instructions] Our next question comes from Ren Benjamin, with Raymond James. Your line is open.

Hey good afternoon guys, thanks for taking the questions. I guess, we've added primarily just one big change which is which is the blinding. It seems like the number of patients is still the same 60 patients and so you know if there is a chance for this to get or go down the accelerator approval pathway it seems that you have become more confident on what the difference is between the two randomization arms. So can you talk to us a little bit about what would cost you the statistically significant benefit in this case?

What it would cost it is that this is a significant benefit as the standard typically yield the p value is less than 0.05 between the two treatment arms. We've run various simulations but will it allow us to get there with the patient population that we have at hand and based upon nothing of the extrapolations we are seeing from preclinical models we think that we do have a chance to actually observe that. An example of that would be if we have a 50% GVHD rate which is currently roughly standard and in fact even lower than some standard observant studies and we were able to reduce hat down to 20% with ProTmune which again based upon our preclinical studies is something certainly that we would potentially expect to see. We do stand a better chance of observing that statistical significant than not. So we do feel that there is a potential to actually coming out of this study with albeit a small sample size with a large treatment effect to get to that statistical significance of p value less than .05.

And with respect to enrollment obviously Chris was working very closely with the principal investigators in getting their feedback. So this - instituting this amendment certainly delayed the initiation of enrollment where we are now screening patients at seven sites.

Okay, so originally we were hoping for 10 patients, you are saying we've just started screening right now. So essentially behind?

We've been screening while the amendment was processing, but we did not enroll patients.

Got it, okay. And I guess just maybe just following up on what Chris mentioned, Chris if you go back to the to the ProHema is it possible for us to draw from the ProHema study what benefit we may see?

It is not, it is fundamentally different. I mean when we looked at even preclinical models when we looked at for instance ProHema versus ProTmune, ProHema is cord blood based, ProTmune is mobilized for blood based. ProHema used one small molecule modulator. We're using two small molecule modulators which had synergistic effects. It is really not, I really would not draw parallels between the two there, fundamentally different products and different settings of allogeneic transplant and the effect that we were having on the T cells with respect to the two small molecules and ProTmune is profoundly different.

Okay, good to know. Just switching gears to the NK100 Scott I thought I heard you mention that this is more of a single donor, single patient paradigm. Maybe actually the question, yes so just the question of how the Phase 1 study is going to be designed about how many patients you know you think you'll enroll and when we might see some data?

Sure and so initially it is being conducted with Jeff Miller, the University of Minnesota, Jeff Miller is not the principal investigator, Sarah Cooley University of Minnesota is the principal investigator. Initially we're looking at studies that will probably be somewhere between 10 and 20 patients. And Jeff is an active speaker at conferences throughout the year, so you know I suspect that this is the type of study that we will be providing updates on throughout the year as Jeff speaks at scientific offices.

And when we think about the NK100 as well the iPSC platform, you know how should we be thinking about the potential for combination with monoclonal antibodies that are already out and approved versus you know monotherapy studies going forward?

So I mean, I tend to think of this as in simple terms as a quadrant with both monotherapy and combination therapy and solid and liquid tumors. You know we've tested the NK100 in both solid and liquid tumors as a monotherapy and as a combination therapy. Certainly then in vitro and certainly in vivo settings and so we are incredibly encouraged by the data we're seeing and the potential for NK100 to be used broadly across those quadrants. Fate and iPSC derived CD6-16 engineered NK so very, very different paradigm. I mean of the things that is engineered into that cell is a high affinity CD16 receptor. That acts very complementary and synergistically with monoclonal antibodies and can be used with both bi- specific and tri-specific engagers that are currently making their way through clinical development. So that product for us as we think about it at least initially if we wanted to maximize the value of what we've engineered in on the iPSC side certainly we would explore look to explore early combination opportunities with FDA approved monoclonal antibodies as well as potentially engagers.

Got it and as you can probably hear the cops are catching up to me, just final question, the ToleraCyte IMD as well as when do you think you'll file the IND for [indiscernible] platforms?

I'll start from the [indiscernible] platform, I think scientifically we feel very confident and very encouraged where we are today. we want to have the conversation with the conversation with the FDA to understand the additional preclinical steps that we need to take both on the manufacturing side as well as potential additional preclinical studies that we might need to run. We intend to submit that briefing package to the FDA in the coming weeks. so I suspect that we should know probably sometime early next year what our path forward is in a more definitive fashion with respect to journey to the clinic with the IPS derived NK program. With ToleraCyte I think you know we were really encouraged with the discussion we had with the FDA. I think we think we actually have a clear path forward right now in type I diabetes to rapidly translate into the clinic. That said, there is some more work we want to do with respect to looking at other indications both on the inflammatory side and the autoimmune side and we're having discussions with the KOLs principal investigators and actually some potential partners to just get their feedback on what the right person human clinical study might be for that novel CD34 cell therapy.

Got it, thanks very much and congrats on the progress.

Sure, thanks.

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

Thank you everyone. I really appreciate your participation in today's call and we look forward to updating you again after seeing you at ASH and discussing progress on our program, especially FATE-NK100 at oral presentation.

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