Welcome to Fate Therapeutics Fourth Quarter 2017 Financial Results Conference Call. At this time all participants are in a listen-only mode. This call is being webcast live on the Investors & Media section of Fate webcast at fatetherapeutics.com As a reminder, today’s conference 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 fourth 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-K for the year ended December 31, 2017 is being filed shortly today 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 the 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-K for the year ended December 31, 2017 that is being 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 today’s call by highlighting the key operational objectives for Fate Therapeutics during 2018 and our view on how these objectives will drive…

Thanks Scott. We have indeed made remarkable progress during this last quarter and we're looking forward to an exciting year ahead as we continue with groundbreaking advancements on all of our clinical programs. Let me update you on what we have achieved and where we're heading First, the day 100 clinical data from the Phase 1 stage of the PROTECT Study of ProTmune was presented at the American Society of Hematology Annual Meeting in December 2017. We are developing ProTmune as the next-generation donor cell graft to reduce the incidence and severity of graft versus host disease or GvHD and improve overall outcomes for patients undergoing hematopoietic cell transplantation or HCT. When successful HCT is a curative therapy for some of the most devastating cancers, including acute myeloid leukemia and acute lymphoblastic leukemia. Unfortunately, the mortality rate post-transplant is approximately 25% to 35% in six months and over 40% at one-year. The two-leading causes of morbidity and mortality are cancer relapse, which occurs in 25% to 35% of patients and acute GvHD, which occurs and 40% to 80% of patients. To advance the curative potential of HCT we believe therapeutic solutions must address both severe GvHD and cancer relapse. The Phase 1 day 100 clinical data demonstrated the ProTmune was well tolerated. No ProTmune related serious adverse events were reported by investigators. All seven subjects receiving ProTmune achieved neutrophil engraftment within the expected timeframe and there were no reports of graft failure. Additionally, there was no cancer relapse in any subject. And all seven subjects survived through Day 100. Three subjects experienced acute GvHD during the first 100 days. Importantly, each of these subjects responded rapidly to standard of care steroids. As Scott, mentioned this is significant as approximately half of patients who have developed acute GvHD are refractory to…

Thanks, Chris. I’ll now provide an update on our iPS off-the-shelf iPSC-derived cancer monotherapy platform, with a particular focus on the unique features that differentiate our universal CAR T-cell approach from other Autologous and Allogeneic CAR T cell therapies. This is than a transformative year [indiscernible] with FDA approvals for two Autologous CAR T cell therapies. These [indiscernible] Autologous products [indiscernible] clinical outcomes. However, broad commercial adoption of the Autologous CAR T cell therapies is challenged by multiple factors. Production time is several weeks, there are high level of product variabilities that may [indiscernible] manufacturing complexity to significance, creating cost and scalability challenges. Moreover, the requirement of using a patient’s own T-cell with a starting material for the manufacturer with CAR T-cell therapy is certainly less than a yield, as the patient cells as [indiscernible] dysfunctional or present in insufficient numbers, due to prior treatments with chemo therapy in other agents. To address these limitations, CAR T-cell therapies that use cells that use now [indiscernible] undergoing development. However, allogeneic approaches requires [indiscernible] genetic engineering to ensure that the T-cells are universal, safe and effective. One approach we are generating allogeneic Car T-cell s involves highly complex, multi-gene editing of large batches and primary T-cells isolated for [indiscernible]. However, genetic engineering of large batches of primary T-cell is spot with significant challenges. First, simultaneously performing multiple batches [indiscernible] to primary T-cells has the potential to generate a high degree of [indiscernible] and unwanted [indiscernible] which are known to occur with multiple [indiscernible] made in a cell. Second, [indiscernible] concurrently puts us [indiscernible] T-cell receptors, which can cause [indiscernible]. Therefore, complete elimination of the T-cell receptor in genetic engineering is required to ensure the safety of the product. In fact, incomplete [indiscernible] in the T-cell receptor, [indiscernible] 1% of the primary T-cell…

Thanks, Dan. Turning to our financial results for the fourth quarter ended December 31, 2017, Fate Therapeutics reported a net loss of $12.5 million, or $0.29 per common share, as compared to a net loss of $7.9 million, or $0.21 per common share for the same period last year. Revenue was $1 million for the fourth quarter, as well as for the fourth quarter of 2016. Revenue in both periods was generated from our strategic research collaboration with Juno Therapeutics. Research and development expenses for the fourth quarter of 2017 were $9.9 million, compared to $6.2 million for the same period last year. The increase was attributable to increased third-party service provider fees for manufacture and clinical development of ProTmune and NK100 and for FT500 IND-enabling activities, as well as increased equipment in materials expenditures for the cheap advancement of the company’s IPS-derived cancer immunotherapy programs, increased headcount-related compensation expense and increased facility costs, due to the expansion of the company's laboratory space. General and administrative expenses for the fourth quarter of 2017 were $3.4 million, compared to $2.5 million for the same period last year. This increase was attributable to increased intellectual property expenses and licensing costs. After adjusting for research funding proceeds from the Juno Therapeutics collaboration of $500,000 and for stock-based compensation expense of approximately $900,000, total operating expenses for the fourth quarter of 2017 were approximately $11.9 million. At the end of the fourth quarter of 2017, cash, cash equivalents and short-term investments were approximately $101 million. Common stock outstanding was approximately 52.6 million shares and preferred convertible stock outstanding was approximately 2.8 million shares, each of which is convertible into five shares of common stock under certain conditions. We have an exciting year ahead of us at Fate Therapeutics. We're very pleased with the clinical progress we've made with Fate NK100 and ProTmune, and we look forward to sharing clinical updates at scientific conferences throughout the year. Additionally, we're at the doorstep of filing the first ever IND with the FDA for an IPS-derived cancer immunotherapy, with a deep pipeline of off-the-shelf IPS-derived cell products to follow towards clinical development. When we founded Fate Therapeutics about 10 years ago at the time IPS cell technology was just being invented, there was little understanding the field of how IPS cell technology would develop or even whether cell therapy applications would emerge through its use. Throughout this period and to date, we at Fate Therapeutics have held fast to the vision that IPS cell technology could play a foundational role in revolutionizing medicine. It is truly amazing to see this new era of cell therapy come to realization. I would like to express my sincere gratitude to those that have stood with Fate Therapeutics through this journey, sharing our faith and contributing over the years to enable the transformation that lies just ahead. Thank you. And with that, I'd like to open up the call to any questions.

Thank you. [Operator Instructions] Our first question comes from Michael Schmidt of Leerink. Your line is open.

Hey, guys, thanks for taking my question and congrats on a good year. A couple of questions on FT500. I think in the past, you talk about IND filing in the first quarter and I was just wondering what the remaining activities that are left to be done before you can actually file the IND? And then I have a of couple follow-ups.

Yes, absolutely, happy to talk about it. So, we're just giving ourselves just a little bit of extra room here to file the IND. It is the first ever IPS-derived cell therapy IND to be filed with the FDA. We are actively preparing the IND. We are finishing our second and third pilot manufacturing runs. We will do comparability across our first three-month manufacturing runs. The comparability assessment based on guidance from the FDA is necessary to file the IND. And so, with the completion of those activities and obviously a tremendous amount of rating and compilation of data, we expect to file the IND very shortly.

Great. Understood. And then I think, you did highlight on several occasions the potential advantages in terms of manufacturing cost and quality and timelines. And so, I was just wondering if you could help us understand what your expectations are for FT500 or other stem cell source immunotherapy in terms of cost of goods maybe compared to for additional product or even the - some of the gene-edited off-the-shelf product?

Yes. I think it’s too early to say exactly what the cost will be. I can tell you that at a research scale, which is essentially still what we're operating at with respect to manufacturing product for our clinical studies. At a research scale, we're able to produce hundreds of doses in a single manufacturing run. And so even at that type of level of expense or that level of yield with respect to manufacturing product, we are substantially below the costs associated with manufacturing autologous CAR T-cell therapy.

Okay. And then one question regarding your activities in terms of the CAR T-cell application for this technology, you mentioned potentially being able to file an IND in 2019 on the CD19 CAR product. I was just wondering long-term, what the philosophy is for developing this technology for the CAR T application. Is it something that you'd be comfortable to being - to doing in-house or is it an area that you could fuse off partnering this for teaching with a larger company. How do you think about this asset in a more strategic way longer-term?

Yes, absolutely. I think, today, we're very comfortable moving it forward on our own given the collaboration that we have with Memorial Sloan Kettering and specifically Dr. Sadelain. As you are well aware, he's one of the pioneers in developing CAR T-cell therapy. So, we believe the collaboration will be very productive in translating a first-of-kind off-the-shelf CAR T-cell therapy into clinical development. It’s - our partnering strategy, generally, I have spoken about this, we are actively considering territorial partnerships. And so, we will consider those types of partnerships, where we can bring in a partner that will help us develop and expand development outside of the U.S. territory. And so, our view on FT819 is, we're very excited about it. Dr. Sadelain is very excited about the product. We will aggressively be pushing that product forward at Memorial Sloan Kettering just as we will be aggressively pushing three IPS-derived NK cell products in collaboration with the University of Minnesota.

Okay, great. Thanks, and congrats on a progress.

Thanks.

Thank you. Our next question comes from what kind of Edward Tenthoff of Piper Jaffray. Your line is open.

Hey, thank you very much for taking the question and my congrats on some really exciting process - some really exciting progress. I guess, my question has to do with respect to the data updates that we’ll be getting in the first-half of this year, excited to see that coming out so soon. What - how many patients could we anticipate at AACR? And I apologize if AACR is primarily a preclinical result, but also at the conference in San Diego. How robust could that data presentation be? Thanks.

Thanks, Ed. I think we should see - expected similar types of disclosures that we provided at 61 in the first couple of patient experience. The discussion at the Innate Killer Summit will specifically be around the ovarian trial, the APOLLO study. So that's, I think, what you should expect at the Innate Killer Summit in a couple of weeks, and we are actively looking to - for similar types of conferences throughout the year to provide a first update on the DIMENSION study when that's available. And as we get into the second-half of 2018, we will continue to provide additional data across all three studies as the trials mature. These - as you know, these are open label studies. So, we are in a position, where we can share the data with investigators, as well as with interested investors.

Excellent. I’m looking forward to the data updates, as well as the IND path to come [53:25].

Thanks.

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

Hey, guys, thanks for taking the question and congrats on all the progress. A few questions. I guess, just on PROTECT in the Phase 2, what’s the right composite to think about? And when do you think you’ll get some FDA guidance on that? Number one. The other question is just at a higher level maybe for Scott, if you've seen any change in the relationship with Juno now under Celgene, and if you anticipate that collaboration to go forward in a similar way? And then I guess, a final thing, maybe a question for Dan, and that is just on the comparability runs that are being done, what - I guess, what gives you the confidence that you'll get comparability shown between the different runs and that it will support FDA criteria for your I'D filing? Thanks.

Sure. This is Scott. And Chris and Chris can jump in, but I'll take them in reverse order. Number one, with respect to comparability, I mean, we've run this manufacturing process of Fate Therapeutics probably 10s if not upwards of 50 times. We had a great deal of confidence in the manufacturing process being conducted when we conducted in our hands at Fate Therapeutics. I will tell you, we have successfully completed a first pilot run at the University of Minnesota at MCT. Minnesota has also done research skill runs in their laboratories in a laboratory of Jeff Miller. So, we believe that, our manufacturing process can readily be tech transfer, which certainly manufacture the product lots of times at Fate Therapeutics. Jeff Miller has manufactured the product in his research laboratories and we've now successfully manufactured the product at MCT. So, the manufacturer runs two and three are looking good at this time. And we believe we will be able to show comparability between the three pilot runs, which are required to file the IND. As it relates to our Juno collaboration, I think, it’s too early to provide any commentary on how I expect the collaboration to evolve if and when the acquisition is completed by Celgene. It's just too early to say. As it relates to ProTmune and the data, I think, our expectation is that, we should view that - the PROTECT study. We’ll conduct the study throughout 2018. During that period of time and we've already started this discussion with investigators at ASH and then again at ASBMT and initiated discussions with the FDA. We are having discussions with respect to the right primary endpoint for ProTmune as a next-generation graft. As we've seen the Phase 1 data, we are very excited about the totality of the outcomes that we're seeing in patients receiving ProTmune. We've seen low and modest GvHD that has been promptly treated with steroid and we've not seen cancer relapse. And so, when you talk to investigators, what they're excited about is, there's very little cancer - there's no cancer relapse. All patients survived at day 100 and the GvHD is transient model. So, we believe we’re creating a better graft for patients. How we capture that in the right primary endpoint, we're having those discussions right now with investigators and the FDA.

And Scott, if you could allow me one more question, just one of the advantages seems to be of your off-the-shelf product [57:35] potential for repeat dosing. I guess, the question is, give a sense of what the optimal dose frequency will be? And when do you think you’ll get some insights into how best optimally equal at repeat dosing? Thanks.

Yes. I think, we’re going to learn through a lot through these Phase 1 studies. And I think we’re going to hopefully give you some information from our experience with NK100. I can tell you that what we propose is to provide three doses during the first two weeks, while checkpoint inhibitor therapy is on board. If safe at the end of the month, we have the ability to repeat again for month two if safe at the end of the second month, at least as we have the ability to repeat again for the third month. That is the clinical scheme that we intend to file with the FDA. We’ve discussed that scheme as part of our pre-IND meeting. And so, we believe we will get an essentially a multi-dose combination regimen in combination with checkpoint inhibitor therapy and that has the ability to extend over several months.

Great. Thanks for taking the questions and appreciate all the details.

Thanks.

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

Hi. Thanks for taking the question. I just had a quick one on, you know what, I know it is always tricky to answer this, but what kind of data we could expect at the Innate Killer Conference, may be some and anti-tumor effects or are we going to see some cytokine profiles of the patients, just kind of thinking about expectations and what you are able to percent over the next month or two? Thanks.

Sure. I think as I mentioned, I think it should be similar to what you saw with respect to the VOYAGE Study at SITC. We will certainly share our manufacturing data. We will share phenotype data with respect to NK100, and expression levels of 57. We are actively looking at the persistence of NK100, and certainly we're looking for and looking at anti-tumor activity. The other thing I would say that we’re excited about is, and we’ve discussed this, the potential of NK cells upon engaging tumor to recruit T-cells. So, we will also look at the ability of the NK cells upon engagement of the tumor, cytokine release, and T-cell recruitment.

Thanks.

Thank you. Our next question comes from Ren Benjamin of Raymond James. Your line is open.

Good afternoon guys, thanks for taking the questions and congratulations on all the progress. Maybe, just talking about the three ongoing clinical studies, can you talk a little bit about maybe internally what the bogey is that you are trying to hit for, kind of go, no go, decision going forward, should we be thinking about it in terms of just response rates or is it for something else that you are looking for as you try to evaluate, which indications and how you decide to proceed going forward?

Sure. With respect to NK100 to be clear?

Correct.

Yes, I think right now we are obviously in the dose escalation period, so we are looking at, we are certainly looking at safety and we have been very encouraged by the safety profile so far as compared to what you typically see with the cells or you have the potential at least for a donor derived product to have GvHD. Even Autologous products have cytokine release in neurotox, so we're certainly not seeing that with NK100 and that’s providing us a lot of encouragement. I think what we are looking at is obviously you have to start in patients that are very sick, given it’s a first product and it’s a first in-human experience. Our view generally with respect to NK cells is that NK cells have an exclusive potential to synergize with other agents that are given early and often in care of cancer patients. So, for instance, while we’re in refractory relapsed AML, right now, I wouldn't expect us to for instance remain in relapse refractory AML, as long as we are seeing some degrees of safety, and some anti-tumor activity. There is plenty of opportunity in AML given a safe profile of NK100 to move upstream and combine earlier and often with other agents. It is our strategy for instance both in the monoclonal antibody, the dimension study. Certainly, we’ve started in patients that have progress or failed therapy, but obviously with safety and activity we have the ability to move upstream in care and synergize with those agents.

Got it. Okay. And then just related to, again just sticking with NK100, when you guys take a look at the patients that might not have responded even at these early doses, are there any learnings that you are - that you’ve picked up on that might help you from a bio-marker perspective or from a patient selection perspective as you move forward?

Yes, I think, I mean obviously we’re collecting all the data, I think it’s too early to comment on how we think about patient enrichment with respect to NK100, it really has to do with the underlying disease for instance looking at AML, there is a lot of heterogeneity in AML, but obviously as we think about for instance moving in combination with checkpoint inhibitors, you know B2M defects are tumor cells that express B2M or lack B2M expression. There is a perfect strategy for instance to think about patient enrichment for either NK100 going forward or for instance FT500.

Okay. And then just switching gears to PROTECT, I think I heard this right, but really 2018, we should be thinking about the second stage to primarily be enrolling, should we be thinking about the potential data update in 2019, or is that even too early?

No. I think, what you should expect in 2018 is for us to continue to file the seven patients in the Phase 1 stage of the study and obviously provide Day 1, 80 and for instance Day 3, 65 updates on those seven patients. The Phase 2 study is being conducted and our expectation is that it will take us some time to enroll that study, but 2019 I think is the right time frame for us to provide some type of clinical update on Phase 2 study given it is randomized blinded and controlled.

Excellent. And just one last one for me. The Car NK Cell, there are quite a few components here in the construct, and I was just hoping that you could just maybe go through each one - the NKG2D transmembrane domain, a 2B4 co-stimulatory domain, just provide us some color as to why those are chosen and how that’s going to move forward?

Right, I'm happy to send you the poster that we presented at ASH with respect to all the data around CAR NK products and specifically that construct. You should also expect an update in the next several weeks to months with respect to our CAR NK development efforts. So happy to send you a poster and we can take the question off-line, but this is something we will be talking about in the next weeks and months in particular.

Terrific. Thanks very much and congrats on the project.

Sure.

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

Hi, guys thanks for taking the follow-up. Just two quick ones. So, the first question is just MD Anderson has a cord blood derived NK Car T product and they are using IL-15 to really amp up the response I suppose, can you maybe compare and contrast your approach to a cord blood derived product and do you envision using IL-15 as well to get incremental response? And then, the second question is more a maintenance question, but what is the difference between a complete response and a morphologic leukemia-free state? Thanks.

Sure. With respect to MD Anderson’s program, I mean again, I actually don't view it any differently than editing that takes place for instance at the primary either NK or T-cell level. They are engineering at a CD-34 cell level and then differentiating into NK cells. So, again a tremendous amount of - as I understand the product a tremendous amount of heterogeneity with respect engineering, and then a differentiation process that again probably only yields a handful of doses at best. I would not view at least what I have seen of the MD Anderson program as an off-the-shelf strategy. As it relates to, I’m sorry, your other question was?

You know there was a [indiscernible].

Yes, sorry. Absolutely. The endpoint of the study as it relates to definition of complete remission in AML is typically a Day 42 with full immune reconstitution, reaching morphologic leukemia free-state is a necessary prerequisite for a complete response with this particular patient after only a single dose did relapse before Day 42.

Got it. Okay, thanks for the clarification and appreciate the detail again. Thanks a lot.

Sure.

Thank you. I’m showing no further questions. I would like to turn the conference back over to Scott Wolchko for any closing remarks.

Thank you all for participating in today's call and we look forward to seeing you at upcoming conferences in the next couple of weeks and providing more update on both clinical stage programs, as well as our IPS derived cancer immunotherapy pipeline. Thank you.

Ladies and gentlemen this does conclude today's conference. Thank you for your participation and have a wonderful day. You may all disconnect.