Welcome to Fate Therapeutics Third Quarter 2017 Financial Results Conference Call. [Operator Instructions]. 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 2017 financial results call. Shortly after 4 PM Eastern Time today, we issued a press release with these results, which can be found on the Investors & Media section of our website under Press Releases. In addition, our Form 10-Q for the second quarter ended June 30, 2017 was filed shortly thereafter and can be found on the Investors & Media section of our website under Financial Information. Before we begin, I would like to remind everyone that except for statements of historical facts, the statements made by management and responses to questions on this conference call are forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that can cause actual results to differ materially from those in such forward-looking statements. Please see the forward-looking statement disclaimer on the Company’s earnings press release issued after the close of market today, as well as the risk factors in the Company’s SEC filings, included in our Form 10-Q for the third quarter ended September 30, 2017 that was filed with the SEC today. Undue reliance should not be placed on forward-looking statements which speak only as of the date they are made, as the facts and circumstances underlying these forward-looking statements may change. Except as required by law, Fate Therapeutics disclaims any obligation to update these forward-looking statements to reflect future information, events, or circumstances. Joining me on the call today are Dr. Chris Storgard, our Chief Medical Officer; and Dr. Dan Shoemaker, our Chief Scientific Officer. I will begin the call today by highlighting four data releases occurring over the next six weeks at prestigious scientific conferences. These include number one, initial…

Thanks, Scott. Over the past three months we have made noteworthy progress on our clinical programs. Let me update you on some of these advancements. First with respect to ProTmune the Phase 2 stage of PROTECT is now open and we have enrolled and treated the first subject, the primary endpoint at the PROTECT Phase-2 is the cumulative incidence of acute graft versus host disease or GvHD grades 2 through 4 by Day 100 following transplantation. In this Phase 2 stage, the efficacy of ProTmune is being evaluated in a randomized blinded and controlled study is 60 subjects. The study is enrolling adult patients undergoing allogeneic hematopoietic cell transplantation using a mobilized peripheral blood graft from a matched unrelated donor for the treatment underlying hematologic malignancies including AML, AOL and MDS. The subjects are being randomized in a 1 to 1 ratio to receive either ProTmune or conventional matched unrelated donor mobilized peripheral blood cell grafts. Currently 14 U.S. sites are open for enrolment and four addition sites are conducting study start-up activities. The Phase 2 efficacy stage was initiated in mid-September following a review by the PROTECT studies four member independent data monitoring committee. Of all available data from all seven subjects administered ProTmune in the Phase 1 stage of PROTECT. Based on it's review, the DMC was in unanimous agreements that ProTmune met the safety requirements to proceeds to Phase-2 efficacy testing. All subjects of Day 28 safety objectives of neutrophil engraftment and survival and reached Day 28 without any events of graft failure or serious adverse events related to ProTmune. The median sign [ph] to neutrophil engraftment was 18 days. ProTmune was successfully manufactured for all seven subjects in the Phase 1 stage of PROTECT. All ProTmune graft's maintained high-cell viability and CD34 cell recovery. Importantly we…

Thanks, Chris. I will now provide an update several of the exciting off the shelf cancer immunotherapy product candidates that are emerging from our proprietary iPSC product platform. I will start with FATE-NK100 which is our off-the-shelf NK cell product derived from a clonal iPSC master cell line. As Scott mentioned we remain on track to file a landmark IND with the FDA in the first quarter of 2018 and we've made significant progress over the past quarter towards achieving this important goal. First, we have now successfully generated and characterized a fully qualified clonal iPSC master cell line. This clonal iPSC master cell line serves as a starting material for generating FT-500 or planned for first in human study. Second, we successfully completed the transfer of our GMT compatible small molecule driven differentiation protocol for the generation of iPSC derived end k-cells to molecular and cellular therapeutics a state of the art GMP compliant manufacturing facility. I'm pleased to report the MCT has completed the first end to end pilot scale manufacturing run for FT-500 where the final drug product passed a rigorous panel of release test including product purity and potency. This test also included confirming that the final drug product did not contain any iPSC contaminants using a highly sensitive molecular assay which can detect a single iPSC cell in a background of over 1.25 million NK cells. MCT is now in the process of performing a full scale manufacturing run for FT-500 in preparation for our first in human clinical studies. Pre-clinical characterization studies on at FT-500 have continued to demonstrate enhanced cytotoxicity and cytokine production against cancer cell lines relative to conventional NK cells. We also observed robust resiliency to crowd preservation. We routinely achieved greater than 85% viability and 80% recovery at 24 hours…

Thanks, Dan. Turning to our financial results for the third quarter ended September 30, 2017, Fate Therapeutics reported a net loss of $10.7 million or $0.26 per common share as compared to a net loss of $8.7 million or $0.27 per common share for the same period last year. Revenue was $1 million for the third quarter of 2017 as well as for the third quarter of 2016. Revenue in both periods was generated from our strategic research collaboration with Juno Therapeutics. Research and development expenses for the third quarter of 2017 were $8.6 million compared to $6.8 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 NK100 and the preclinical advancement of the Company’s off-the-shelf iPS derived cellular immunotherapy programs, as well as facility costs associated with the expansion of the Company’s laboratory space. General and administrative expenses for the third quarter of 2017 were $2.8 million compared to $2.6 million for the same period last year. This increase was primarily related to an increase in employee compensation and benefit expense including employee stock based compensation and in facility cost associated with the expansion of our office space. After adjusting for research funding proceeds from Juno of $500,000 and for stock-based compensation expense of approximately $900,000, total operating expenses for the third quarter of 2017 were approximately $10 million. At the end of the third quarter of 2017, cash, cash equivalents and short-term investments were $69.2 million. Common stock outstanding was approximately 41.5 million and preferred convertible stock outstanding was approximately 2.8 million shares, each of which is convertible into five shares of common stock under certain conditions. In closing I would like to express my sincere thanks to the 75 employees of Fate Therapeutics and our numerous collaborators. While our journey is ongoing and we will continue to face uncertain challenges that come with blazing a new path I am energized by the hard work, commitment, perseverance, creativity and agility that the group displays each and every day as we forge ahead in our development of first of kind products. As I turn the call over to the operator for any questions I would like to remind folks that data and results scheduled to be presented at upcoming scientific conferences are under embargo so please understand if we refrain from answering certain questions. Thank you.

[Operator Instructions]. Our first question comes from Michael Schmidt with Leerink Partners. Your line is now open.

This is Rich [indiscernible] dialing in for Michael. For FATE-NK100 in both AML and ovarian cancer, can you give us a bit more detail around the benchmarks and the respective settings you're looking at what kind of data would you want to see for these studies to be considered a success? Thanks.

So Rich what we will be looking at in the AML study is we're looking at 30% CR rate is something we get excited about and this is something which we think is achievable. There has been precedent with using adopted transferred NK cells looking at about 25% CR rates again we would expect to see something north of that and that I think is certainly enough to move that program forward given the unmet need in that population. Regarding ovarian cancer, again this is a relapse refractory population so really almost in this Phase-1 setting any type of objective response that would give us excitement in this area. What's typically seen here is maybe about 5%, 10% objective response rates to move things forward. I think again given the fact that we're administrating the NK-cells directly into the intraperitoneal cavity offers us some increased opportunities here to see some activity but in a Phase-1 advance solid tumor population any type of objective response rate is actually something to be excited about.

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

Thanks for taking my questions I've a couple. So first off maybe if you could -- is there any difference estimated persistence between the ovarian cancer and AML opportunity -- cells in those settings, I know its hard without maybe revealing some data but you know is there any clues on persistence from animal models or anything you can point to on any differences between the settings and persistence.

So intrinsically we shouldn't expect any difference in the persistence between these two tumors settings. However I'd like to point out that the administration of the NK cells is different, in the AML setting it's being administered intravenously, in the ovarian setting it's being administered intraperitoneal. So when we actually measure the circulating in NK cells we may see a difference in these two populations probably which may be a result of the different routes of administration.

And maybe if you could remind us -- we recall that they were NK cells are tested are looked in AML previously where they looked at ovarian cancer with intraperitoneal route or was it the delivery in solid tumors in the past with other constructs?

Sure. With respect to AML obviously there has been fairly rich in recent history with respect to NK cell experience and as Chris mentioned there has been 25% complete response were each reported. Typically response rates have been correlated and associated with persistence and preferably of at least seven days. With respect to ovarian there is actually very little experience in ovarian cancer with NK cell therapy so much like the Dimension study this will be a first true test of NK cell therapy in the ovarian settling. There has been anecdotal information with respect to patient treatment but this will be a really great test of FATE-NK100 in this setting.

And then maybe one final question on the modified I'm sorry I'm just blanked on the name but the uncleavable CD16 construct.

FT-516.

Yes. FT-516, dosing that with anti-bodies have you seen evidence in the animal models for kind of quiescent cell [ph] and then it comes back when you dose the anti-body I'm just trying to think about dosing in combination studies with anti-bodies, will you think about redosing with the cells or do you think they will be persistent and then kind of reactivate when you had the anti-body in. Thanks.

Absolutely. So in that study what we're looking at and again we're are in the process of having discussions with the FDA and planning that first in human study for FT-516 but the concept is yes that will be a study given it is an IPS derived therapy, given we can create thousands of doses, given we can deliver it off the shelf is that we will in fact give multiple doses in combination with monoclonal anti-body.

And well I guess you're in discussion with the FDA but you haven't finalized any kind of dose combinations or how you would dose escalate us if necessary or things like that? I take it will way for that?

We had a pre-IND meeting with the FDA where we've discussed that but obviously we've not filed the IND yet with respect to FT-516 based on conversations to-date the FDA has seemed very comfortable with us dosing in combination and administering multiple doses.

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

This is Yenen [ph] in for Jim. I've few questions first could you remind me of the rationale why ProTmune could on the Y hand retain the anti-tumor activities but on the other hand will have an attenuated ability to attack the host when I think about it the tumor and the host cell have a lot of similarities obviously.

So we believe the mechanism is primarily based on making the donor t-cells resistant to the cytokine storm that is present in the patients that are receiving the donor grafts in that first week and we have extensive preclinical data showing that we sort of dampened the cytokine signaling for things like [indiscernible] for example and we believe that getting the cells through this first week through this cytokine storm and preventing the activation and expansion of the allo-reactive t-cells in the graft is a key strategy to the prevention of GvHD. Importantly though we have also spent a lot of time demonstrating that majority of the donor t-cells and the graft are healthy and they are only transiently affected by the small molecule modulation and this is critical because these donor t-cells provide an important role during the first six months of post-transplant while the new stem cell derived t-cells come online the ability to fight leukaemia and infection. So we also have extensive animal studies demonstrating that the ProTmune t-cells retain robust anti-tumour activity and now again as we start having more and more patient data from the Phase-1 portion of the study we've been able to do longitudinal analysis of the amino-constitution and we're able to show a healthy reconstitution of the donor t-cell graft in the ProTmune patients. So this again is the mechanism by which we think we're preventing GvHD while preserving the critical GVL activity.

So along the similar line could you mention the importance of the first week and how ProTmune could affect alter the t-cells activity. So the end point for the study is Day 100 GvHD and in your abstract we know 3 out of the 5 patient haven't reached the 100 day point yet you know they -- so they haven’t had any grade two or above GvHD but on the other hand they haven't reach 100 day yet. Is it reasonable to think that the acute GvHD is mainly concentrated on you know the beginning of the Day 100 or do we have any historic data historical data to triangulate this and have some influence regarding to when GvHD occurs?

Sure. The reason we picked Day 100 is because if you look at historical studies with respect to transplant and incidence of GvHD there is a rather steep incidence curve that occurs during the first 60 days post-transplant and begins to flatten out between Day 60 and call it Day 90, Day 100 although there still are incidents of GvHD that are reported post Day 60 and before Day 100, but really if you look at the historical curves there's a steep incidence ramp during the first 60 days it begins to tail-off during the next 30 days and by and large all acute GvHD occurs by Day 100.So we believe Day 100 is truly the appropriate horizon over which to measure potential efficacy.

And another question regarding the ProTmune program, you mentioned the importance of anti-tumor activity, did you have to amend the study protocol to add those endpoints?

Those endpoints were included in the original protocol to look at relapse as well as look at survival.

And so also are a question on the statistical assumptions when you sized the study to 70 patients what are the assumptions used in the two arms placebo versus ProTmune in terms of GvHD or anti-cancer activity?

So the initial assumptions were that the control rate of GvHD would be approximately 55% as Scott mentioned there are studies that have rate of acute GvHD in a similar population ranging from 40% to 80% so we choose approximately 55%, the estimated effective ProTmune was about 50% reduction. When we take a look at our power to observe the 50% reduction over across essentially a range of control rates of GvHD we're well powered for Phase-2 study to observe those kind of differences. So its somewhere at 50% reduction.

And then on the FT-819 congratulations for the achievement, its rather significant to engineer a t-cell. My question is what are the next hurdles before you can see a path to IND for example how do you engineer out the allogenecity that these cells might have so that the patient could accept these cell instead of rejecting them due to MHC mismatch.

It’s a terrific question and I think you're going to have to wait for ASH to learn more about that.

Great. If I may ask is there any strategic thinking in terms of how to develop these iPSC derived modalities like FT-819 is partnering a path or are you preparing on developing it internally?

We're planning on developing it internally. We are very open to forming partnerships although we believe that Fate Therapeutics given our 10 years of history in developing the iPSC cell platform that we today are absolutely best positioned to move this forward on our own in collaboration with top medical centers and investigators and that was the thinking behind striking the partnership with the University of Minnesota on the NK cell side and Jeff Miller and Memorial Sloan Kettering and Michelle Sadelain on the t-cell side.

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

A couple on ProTmune, could you talk about the range of GvHD rates that you mentioned to the prior question that you believe achieves a balance of reducing the incidence of GvHD but also doesn't compromise GVL activity?

Sure. I can take a crack at that first. I think your question is getting to the heart of what we discussed with respect to the GRFS endpoint where you are essentially looking at the potential to reduce GvHD yet deal with the potential for cancer relapse and also the overall mortality that occurs in the transplant setting. So I think as Chris mentioned during his prepared remarks the GRFS rates that are seen in historical studies in this setting appear to be in the 40% to 45% success range. So more than half of patients do not meet the criteria of being GvHD free, relapse free and surviving at Day 180 and that continues to trend down to only about 30% of patients at one year. So really when we look at the totality of the transplant taking into consideration severe GvHD relapse and mortality what we see historically is depending on the timeframe only about 30% to 40% patients achieve that objective.

Okay. And historical rates what is the expected time to relapse or the percentage of patients that will relapse in these kind of transplants and would it be surprising to see one of the Phase-1 patients relapsed by the ASH data cut off?

So relapse has a slower sloping curve with respect to incidence than GvHD meaning relapse can occur and does occur more evenly during the first three, six, nine and 12 months following transplant. So GvHD is a phenomenon that occurs very early, occurs suddenly and does begin to flatten out with respect to incidence by Day 100. Relapse does occur more evenly throughout the 180 day period and begins to trail off call it from six months to one year. So the relapse window to really keep an eye on and that we keep an eye on certainly does extend from six to nine months still.

Okay. And when we think about the number of CD34 positive and CD3 positive cells that you're administering to the patient what should we consider and how does that affect patient outcome?

So we basically administer the entire graft, so we have aligned this closely to standard of care as possible where we'll just take the entire mobilized graft, model it for four hours with the two small molecules, wash it and then the entire graft is administered to the patient just like normal and then we adhere to all the minimum CD34 requirements and then again we have just aligned closely to standard of care as possible.

We're now, I mean if you're question is are we reducing the numbers of t-cells we're not doing that. We are accepting a mobile standard of care, mobilized preferable blood graft, we're modulating that graft and then we are administering that graft. So there is no cell separation or cell reduction that is going on with respect to 34s or the t-cells.

Okay. Thank you. One final question is -- are you still looking at CMV [ph] infection and activation or is that no longer a priority?

It's not one of the main objectives of the study although we will continue to track CMV as well as infection rates because infections are important and they do lead to mortality.

Our next question comes from ED White with H.C. Wainwright. Your line is open.

So just on FT-500 you had said and repeated that the IND is expected to be filed in the first quarter of '18. Can you give us any guidance on FT-516 and FT-819, should we expect the INDs for those we filed in 2018 as well?

So for FT-516 we have previously said in conversation that we expect an IND filing in the middle of 2018 and we're still very comfortable with that timeline. With respect to FT-819 the first IPS derived CAR t-cell product it's a little too early for us to give guidance on the IND filing although we are comfortable that we will certainly begin tech-transfer in the first half of 2018 to Memorial Sloan Kettering for manufacture.

And then the next questions I've you might not be able to answer due to the embargo but on the ProTmune does the one patient with the GvHD did that occurrence happen between Day 28 before the Day 53 at the end of as of the cut off time?

I think we're going to have to refrain from answering that question if your question is did the DMC review all Phase-1 data including Phase 1 data beyond Day 28 the answer to the question is yes they reviewed all available Phase-1 data at the time what was available at the time they reviewed the data obviously.

Okay. And then just you know is there a correlation or maybe it's just a coincidence that the patient with the latest neutrophil engraftment had the GvHD?

I would not read anything into that.

I'm showing no further questions. I would now like to turn the call back to Scott Wolchko for any further remarks.

Thank you very much everyone for participating in today's call and we look forward to seeing everyone in a week about a week and half at the end of couple weeks after that at ASH. Thank you.

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