Welcome to the Fate Therapeutics Fourth Quarter 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. This call is being webcast live on the Investors section of Fate’s website at fatetherapeutics.com. As a reminder, today’s call is being recorded. I would now like to introduce Scott Wolchko, President and CEO of Fate Therapeutics.

Thank you. Good afternoon and thanks everyone for joining us for the Fate Therapeutics fourth quarter 2022 financial results call. Shortly after 4:00 p.m. Eastern Time today, we issued a press release with these results, which can be found on the Investors section of our website under Press Releases. In addition, our Form 10-K for the year ended December 31, 2022 was filed shortly thereafter and can be found on the Investors 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 including in our Form 10-K for the year ended December 31, 2022 that was filed with the SEC today. Undue reliance should not be placed on forward-looking statements, which speak only as of the date they are made as the facts and circumstances underlying these forward-looking statements may change. Except as required by law, Fate Therapeutics disclaims any obligation to update these forward-looking statements to reflect future information, events or circumstances. Joining me on today’s call are Dr. Wayne Chu, our Chief Medical Officer; Ed Dulac, our Chief Financial Officer; and Dr. Bob Valamehr, our Chief Research and Development Officer. We will focus today’s discussion on recent developments that have impacted the company and our employees, including the termination of our collaboration agreement with Janssen as well as our reduction…

Thank you, Scott and good afternoon. Fate Therapeutics is in a strong financial position to advance our prioritized IPSC-derived CAR NK and CAR T-cell pipeline. Our cash, cash equivalents and investments at the end of the year, including net receivables from success-based milestones achieved in the fourth quarter, were approximately $475 million. In the fourth quarter of 2022, our revenue derived from our partnerships with Janssen and ONO Pharmaceutical increased significantly to $44.4 million compared to $17.1 million for the same period last year. We achieved multiple success-based milestones within our collaborations, which resulted in non-recurring revenue in the amount of $25.5 million in the quarter. Research and development expenses for the fourth quarter increased by $17.7 million to $87.2 million compared to $69.5 million for the same period last year. The increase in our R&D expenses was attributable primarily to increases in employee headcount and compensation, including share-based compensation and expenses associated with sublicense fees and the use of third-party consultants. General and administrative expenses for the fourth quarter increased by $4.7 million to $21.6 million compared to $16.9 million for the same period last year. The increase in our G&A expenses was attributable primarily to an increase in employee headcount and compensation, including share-based compensation and legal fees. Total operating expenses for the fourth quarter are $108.8 million, which includes $19.4 million in non-cash share-based compensation expense. Note that in connection with the development of our off-the-shelf IPSC-derived CAR T-cell product candidate, FT819, we previously achieved the clinical milestone set forth in our amended license agreement with Memorial Sloan Kettering Cancer Center, which triggered a first milestone payment to MSK in 2021. Up to two additional milestone payments maybe owed to MSK based on subsequent trading values of the company’s common stock ranging from $100 to $150 per…

Thanks, Ed. As we look ahead to 2023, we have focused our operations on advancing our most innovative and differentiated IPS-derived CAR NK and CAR T-cell product candidates for patients with cancer and autoimmune disorders. And we have substantially reduced our expenses with the intent of providing the necessary cash runway to achieve key clinical milestones across our programs. We are now enrolling multi-dose treatment cohorts with FT576, our multiplex engineered CAR NK cell product candidate for multiple myeloma. In addition to its novel BCMA binder, FT576 also incorporates our proprietary high-affinity non-cleavable CD16 Fc receptor, which is designed to augment antibody dependent cellular cytotoxicity and enable combination with CD38 targeted monoclonal antibody therapy for dual antigen targeting of plasma cells. Importantly, the potential for enhanced clinical activity in combination with a CD38 targeted monoclonal antibody therapy is enabled through the knockout of CD38, which eliminates the possibility of CD38 mediated fratricide. Despite the recent launch of two FDA approved BCMA targeted autologous CAR T-cell therapies, we believe an off-the-shelf multi-antigen targeted product candidate that is uniquely designed to synergize with CD38 targeted monoclonal antibody therapy may offer an attractive and differentiated value proposition. At the 2022 ASH Annual Meeting in December, we presented interim Phase 1 clinical data from the first 9 patients treated with a single dose of FT576 as monotherapy and in combination with CD38 targeted monoclonal antibody. Clinical data from the single dose treatment cohorts in heavily pretreated patients showed encouraging clinical evidence of BCMA targeted activity and a favorable safety profile indicating the potential for administration in the outpatient setting. In particular, of the 3 patients treated with a single dose of FT576 in combination with CD38 targeted monoclonal antibody, at the first dose level of 100 million cells, 1 patient achieved a partial response.…

Thank you. [Operator Instructions] Our first question comes from Tyler Van Buren with Cowen. Your line is open.

Hi, guys. This is Cara on for Tyler. So just wondering if you guys can tell us when you plan to present the next dataset for 576 and 819. Would that be at ASH or you thinking an investor event? Thanks.

Thanks for the question. I think it’s a little too early us to commit to the data update around both of those programs. We are currently working with the modified team at Fate Therapeutics to target and focus our enrollment on the dose cohorts that I specifically mentioned during our call. I think in a couple months, we will be able to give a specific update with respect to the timeline for a data disclosure, whether that be at ASH or an investor event.

[Operator Instructions] Our next question comes from Yigal Nochomovitz with Citi. Your line is open. My apologies.

Hi, this is Carly on form Yigal. Thanks for taking our questions. We wanted to ask about FT576 as well. We just wanted to get your updated thoughts on the competitive positioning. I guess, should we be thinking about the BCMA bispecifics of the bar from an efficacy perspective. And you mentioned you started to enroll in the multi-dose cohorts and I know it’s still relatively early, but just curious when you think you may have enough data to really understand the profile and be able to make a go no-go decision on a registrational pathway? Thanks very much.

Sure. Sure. I think as we have seen with NK cells with our other programs, I think a three-dosed schedule of NK cells is going to be important to create the right area under the curve, if you will, with respect to cell load to most effectively attack the tumors. And so we are completing a two dose schedule right now with FT576 as a monotherapy and in combination with CD38 at 300 million cells. Once that dose – those dose cohorts clear, we will move to the three-dose schedule at 1 billion cells per dose. So this year, we certainly believe we will be dosing at a more optimized NK cell – optimized treatment schedule for NK cells using three doses and at higher doses. And importantly, we are assessing the potential to combine with daratumumab which we have seen released in early translational data that we have seen sort of the dampening if you will of the alloreactive T-cell compartments when delivered in combination with the monoclonal antibody. I think in terms of the competitive landscape, look, I think what we have seen so far is that unfortunately, in multiple myeloma, there are no curative therapies. There will continue to be patients that will progress through multiple lines of therapy. I think the BCMA is emerging. It appears to be a more durable target. So I do think there will be multiple lines of BCMA targeting therapy. That said, I think was an off-the-shelf platform, the whole promise of an off-the-shelf platform is to be able to reach patients early on care in the community setting, where most myeloma patients are treated and ideally to deliver and plug into a standard monoclonal antibody regimen with CD38 without intense chemotherapy conditioning. And so ultimately, our objective with 576 is to develop a highly differentiated product candidate that synergizes with CD38-targeted math that can be delivered early and often to patients as part of the standard chemotherapy regimen.

Thank you. [Operator Instructions] Our next question comes from Daina Graybosch from SVB Securities. Your line is now open.

Yes, I wonder if you could talk a little bit more about the 4-1BB targeted ADR for FT522, you say through several conferences last year published a lot of other interesting stealth edits, some passive, some active. And I wonder why go and prioritize the first clinical program with just ADR versus some of the other edits or a combination of edits?

Sure. I mean, I can talk to at a high level, I mean, there is three different programs that we have looked at primarily with respect to, let’s just call it, sort of an ADR platform. There is the potential to target 4-1BB expressing alloreactive immune cells, which happened to include both T and NK cells, importantly. And so, with 4-1BB, we certainly think we are – have the potential to address the complement of host immune cells that may mitigate rejection. And importantly, with that specific ADR technology that sends a potentiation signal to the cell as well, which we also think is important and differentiated from the passive approaches. The other approaches we have looked at are certainly CD38 on developing a CAR against CD38, we think that’s a very interesting approach, again, similar to the 4-1BB strategy, CD38 will take out or be able to defend the cell against activated allo, allo-activated cells, whether they be NK cells or T cells expressing CD38. So we think that’s a similar type of strategy that we also like and obviously in the format of a CAR can activate and potentiate the cell a differentiated approach. The third strategy, I’ll let Bob talk about that is the CD54 CD58 knockout and we think that’s an interesting approach. So we think it’s primarily interesting in the context of the cell defending itself against an NK-cell therapy attack, which we do not think is sort of a prevalent mechanism of rejection. And importantly, it doesn’t provide an activating signal in its current form as well.

That’s right Scott. Just to follow-up what Scott is mentioning, 54/58 knockout comes into play when knocking out B2M and that was an experiment that we worked with our collaborator, [indiscernible], as the solution for our B2M knockout strategy where we feel strategies such as CD47 overexpression or HLAE come up short. So in this perspective, 54/58 does play a role, but just to echo what Scott said earlier about ADR and our current focus is I really, really believe as Scott outlined, ADR is a true replacement of Cy/Flu. It helps protect against an allorejection. It helps potentiate and also create space. And these are the steps that we believe Cy/Flu brings to the table. And so we feel that ADR is the focus, but other strategies are there and we will continue to pursue our self program in such a manner.

Thank you. [Operator Instructions] Our next question comes from Michael Yee with Jefferies. Your line is open.

Hi, good afternoon. It’s [indiscernible] on for Mike. Just two questions, one on the actual pipeline and the second on financials. On the pipeline, can you kind of let us know what the bar is or what the expectations are on efficacy for both 576 and 819, like, what are you looking for in terms of the bar? And then secondly, on the financials, is the $12 million to $16 million going to be just a one-time incurring expense for Q1 and then we expect expenses overall to drop, talk a little bit about that and the potential for combination or sequencing of therapies?

Yes. With respect to the 576 program and the bar we are looking for, obviously, it’s a competitive landscape. And we are trying to develop a differentiated therapy. Part of the differentiation that we are looking to seek is essentially a cellular therapy that can be given in combination with monoclonal antibody therapy, which is used across multiple lines in treating patients with multiple myeloma. The monoclonal CD38 targeted monoclonal antibody therapy may serve as a conditioning agent as well. And so we do believe that we can, number one, develop a cell therapy that can plug into standard of care regimen. Number two, because it is an off-the-shelf cell therapy, potentially reach patients earlier and in an outpatient setting. And number three potentially reduce the intensity of chemotherapy conditioning that is delivered to patients. So we do think we can have a very differentiated safety profile and deliver significant clinical benefit to patients. And again, I think that’s relevant across lines of therapy as there are no curative therapies for myeloma. With respect to financial, let’s turn it over to Ed.

Yes, the majority of the $16 million as I outlined in prepared remarks will occur in the first quarter with respect to severance and other employee termination-related costs. Some of that will be covered by the wind down of the Janssen collaboration as well. So that will also be occurring in the first quarter. What remains then is sort of the rhythm of the business afterwards. And as sort of we indicated, while we have this continued a number of programs or earlier generation iPSC derived NK-cell programs, we do have follow-up particularly for patients that are ongoing in response to both FT516 and FT596. And so we will follow those patients for up to an additional year that will require both human resources as well as financial resources to do that. So, a lot of that benefit from a financial leverage perspective, cost savings perspective will come in the second half of the year and work its way through the remainder of 2023.

Thank you. [Operator Instructions] Our next question comes from Tazeen Ahmad with Bank of America. Your line is open.

Hi. Good afternoon. Thanks so much for taking my question. Pretty simple one for me. Should we expect any clinical updates to be presented at medical conferences this year? And if so, which of the programs that you have spoken about could be up for updated data this year? Thanks.

I think the guidance that we will give with respect to data disclosures, we will probably give that guidance at the May call. We obviously are just getting our feet under us with respect to executing on our 576 and 892 studies. And so I think in the May call, we will be in a better position to outline the cadence with respect to the data updates for those clinical programs.

Thank you. [Operator Instructions] Our next question comes from Michael Schmidt with Guggenheim. Your line is open.

Hey, good afternoon. This is [indiscernible] on for Michael. Thanks for taking our questions. What clinical learnings did you gain from your experience in solid tumors with 538 and 536? What type of enhancements do you think will be necessary to be successful in solid tumors? And do you have more confidence in T-cell based therapies in solid tumors or NK-cells after your initial experience? Thank you.

So, unfortunately, our experience with NK-cells in solid tumors is fairly limited. We have dosed patients with both FT538 at low dose levels. We also in combination with monoclonal antibody, we also dosed patients with FT536, a CAR NK-cell product at very low dose levels. And we have limited patient experience. I do believe NK-cells will play a very important role in solid tumors. We have – in any solid tumor experience with our CAT NK-cell programs we have seen anti-tumor activity in the clinic, but as we have noted, if you look at for instance, the product candidate FT825, which is a T-cell product candidate. That product candidate, in addition to being a T-cell has additional synthetic controls built into that, which were specifically designed to overcome some of the challenges with solid tumors. Namely, for instance, homing and resisting the immunosuppressive signals in the tumor microenvironment. Those features were not built into FT538. They were not built into FT536. They are built into FT825. And we do think they are important features. As I mentioned, I do think that cell therapies can synergize with monoclonal antibodies in attacking solid tumors. And I would also note that our FT825 product dose include and is one of the first five candidates that I can think of does actually include while being a T-cell, it also includes our high affinity non-cleavable, CD16 receptor. So, we do have the potential with our 825 product candidate to actually through the CAR target HER2, but also leverage monoclonal antibody content to achieve dual antigen targeting with our T-cell product candidate. So, in making some of the hard decisions that we were confronted with, we felt like advancing FT825 in solid tumors was the right approach, given the specific and additional functionality built into FT825. It wasn’t necessarily a decision about NK-cells versus T-cells, it is about what we think is a multitude of functionality that is going to be required to successfully have profound impacts in solid tumor.

Thank you. [Operator Instructions] Our next question comes from Peter Lawson with Barclays. Your line is open.

Hey, good afternoon. This is Alex on for Peter. Thanks for taking our question. Just one on the 576 program here, do you plan to go to higher than a three-dose treatment regimen? And I am just trying to get a sense for how you are thinking about the dosing schedule. And if you feel that, the dosing schedule has been explored sufficiently here in this indication, multiple myeloma?

Well, certainly in some of the dosing – some of the learnings we are taking from our lymphoma programs where we have dosed and typically dosed three doses from patient one starting with 576, sorry, with 516 in lymphoma, and obviously, with 596, we progressed from one to two to three doses. I think given just sort of the biological sort of properties of NK-cells and how they are different from T-cells, including their relatively short half life, and their inability to expand like a T-cell, I think a more high dose treatment schedule is important. And I think in multiple myeloma, we are excited to start the three-dose treatment schedule. We are starting at 1 billion cells, the protocol certainly allows us to continue to dose escalate beyond 1 billion cells.

Thank you. [Operator Instructions] Our next question comes from Andrea Tan with Goldman Sachs. Your line is open.

Good afternoon. Thanks for taking my question. Scott, maybe just given the profiles you have seen to-date with your NK-cell programs and what’s been going on with your competitors. Can you help us understand your level of confidence in this modality? Do you see a scenario where you would become solely an iPSC derived T-cell company instead?

Yes. I think honestly, with respect to NK-cells, I think what we have learned is that if you again, I do think NK-cells have significant activity. We have certainly seen that across multiple NK-cell programs. I think if you really want to develop a highly differentiated product though, especially in the context of competitive landscapes, like lymphoma, like myeloma, you need a unique product offering and that unique product offering I think will require sophisticated and multiplexed engineering. I think you will have to include multiple functional elements. I think you will have to potentially develop, deliver multiple mechanisms of action. And I think you potentially will, ideally with an off the shelf cell therapy need to begin to differentiate one of the modes of differentiation as well as moving away from intense chemotherapy conditioning. To the off the shelf cell therapy, the promise of an off the shelf cell therapy is to reach patients only often in care. With an NK cell therapy, I do think it has unique and differentiated safety profile, which allows you to reach into the community setting. But I do think you need to – that will require a multiplexed engineered solution. And it will require the delivery of multiple mechanisms of action. And at the highest level, there are some of the decisions that we need to favor our multiplexed engineered product candidates that can synergize and combined with monoclonal antibody that can be given earlier in care, and that potentially do not require intense chemotherapy conditioning as part of the treatment regimen.

Thank you. [Operator Instructions] Our next question comes from Ben Burnett with Stifel. Your line is open.

Hi. Good afternoon. This is Karolina on for Ben Burnett. Thank you for taking our question. With regard to your next-gen CD19 CAR NK-cell program FT522 will give you confidence on the level of translation of the enhanced anti-tumor activity and persistence you have observed with your ADR technology and preclinical studies.

Yes. I mean the benefits – learner benefits that we have and again, it’s preclinical data. But one of the benefits we have is that an iPSC platform allows you to create very homogeneous consistent product. And so we are able to raise multi generation product candidates against each other for instance, 516, 596, 522. We can do literally head-to-head studies of multiple different product candidates against each other. And I think part of the confidence, as I mentioned, when we had to make the difficult decision with respect to 596, we had very limited clinical data with a three-dose schedule at higher dose levels. I think one of the – essentially what gave us confidence though, in addition to we think we need obviously to compete in a competitive landscape, you need a highly differentiated product candidate. And we think 522 has some very unique features that allow for that differentiation. But certainly all the preclinical experimentation we have done over the past 18 months, raising 516 against 596, against 522 in some very difficult and stringent models, including models that are designed to promote our reactivity, really gave us the confidence to make the decision in advancing 522. I don’t know Bob, if you have anything to add to that?

No. That’s right, Scott. I mean if you split it between potency and avoiding cell rejection. On the potency front 522 leverages the 538 backbone, which 596 did not. And then on the survival factor of an allo environment as Scott mentioned, ADR gives you it a unique ability that other NK cells don’t have.

Thank you. [Operator Instructions] Our next question comes from Robyn Karnauskas with Truist. Your line is open.

Hi, this is Bill on for Robin. Do you envision the possibility of bolstering your competitive edge in multiple myeloma in the near-term by using both 576 and 819 to clear up plasma cells and CD19 [ph] progenitor cells while harnessing the best in both?

So, we absolutely have preclinical models where we have combined NK-cells and T-cells. We are not prepared to discuss publicly our strategy for first launching combinations of NK-cells and T-cells. I do think there is significant value in being able to, let’s just say unite, I mean adaptive immunity. And it is the strategy for instance, that we have embedded into, for example, FT825, where we have combat – where we have engineered the high affinity CD16 receptor into the backbone of the T-cell. So, I would say based on our experimentation preclinically, we certainly are excited about the potential to unite and innovate an adaptive immunity. We think there is multiple ways to accomplish that. But certainly given the off the shelf nature of our product candidates, creating a defined composition of both cell types, we are delivering for instance, a T-cell followed by an NK-cell vice versa. Both are strategies that I think we can pursue.

Thank you. [Operator Instructions] Our next question comes from Mara Goldstein with Mizuho. Your line is open.

Great. Thanks so much for taking the question. Just, I have a question on FT819 and not so much on 819, but really kind of the state of the world right now. And given what we are seeing from data and registration, with respect to bispecifics, and how you think about advancing 819. And then just on FT522, can you talk a little bit about what the – with rate limiting issues that are there for getting – for initiating an autoimmune program?

So, with 819 to begin with, look, it’s the first iPSC derived for T-cells. I think it’s really important for us to advance that product candidate and understand its potential, are we truly making iPSC derived CAR T-cells, where does the activity level look like. Obviously, we have a very nimble and versatile platform, which we can improve upon shortcomings, whether that be for hematologic malignancies, or solid tumors. So, understanding the activity level of 819, I think it is really important. That said, like I said, I absolutely believe that there will continue to be room for efficacious CD19 targeted therapies, absolutely. Even in the phase of engagers, I mean we don’t fully appreciate the sequence of events, or sequencing of treatments, for instance, that will exist in the lymphoma space. We may find that there is already data coming out in other areas, that bispecific engagers, when delivered aggressively into progression, CAR is for instance, and exhaustion on the T-cell compartment over time. That may not bode well for an autologous CAR T-cell therapy, and off the shelf T-cell therapy may be required for those patients. We also know for instance that and we have seen as you know, I mean most of the patients we treated in our Phase 1 study are actually post CAR T-cell therapy. And we certainly have looked at those patients that baseline CD19 expression. And we have seen responses, down line of patients that have been previously treated with CAR T-cell therapy. So, I continue to believe that a safe and effective off the shelf CD19 targeted therapy will absolutely have its place. And we need to understand what the potential for FT819 is in that context, as well as inform the development of our platform and other product candidates, so definitely committed to 819 and that understanding. As it relates to 522, look our first commitment with FT522 is to file an IND in the space of B-cell lymphoma and combined with rituximab. I do not believe we will need to wait for significant clinical data in oncology to move into autoimmunity. And so from our perspective, it may be a pathway where we treated a couple of patients, established safety of the novel ADR receptor and its ability to function and then move into autoimmune.

Thank you.

I think there just to finish, I think there is a unique opportunity in autoimmunity with FT522. I think FT522 could provide three axes of attack essentially against the pathogenesis, we can absolutely target CD19. So, keep in mind 522 because it has the CD38 knockout, can be combined with daratumumab in order to target plasma cells. And then the 4-1BB ADR technology is actually really unique when it comes to the potential for autoimmunity, because it can target, it will target and it can actually eliminate alloreactive and T helper cells. So, we think there is potentially a really unique three-pronged attack with the FT522 products in autoimmunity.

Thank you. [Operator Instructions] Our next question comes from Matthew Biegler with Oppenheimer. Your line is open.

Oh, hey guys. Scott, any plans on disclosing the remaining 596 and/or 516 data because I think you mentioned in the past that you thought the data were either compelling or competitive? So, just kind of want to get your thoughts on that. Thanks.

Yes. I mean we are going to work with the investigators on the study. I think there is – I think there is desire for on the part of these investigators to complete the study and potentially publish the results. I think as Ed alluded to, we did make the decision to keep following patients in the 516 and 596 studies, because we do have patients that are continuing in response. And so yes, I do think we internally at Fate are not going to prioritize, essentially the 516 and 596 sort of data windup and then presentation, but we will absolutely work with investigators to enable that. I think it’s – I think we will wait until all patients have reached the 1 year follow-up since we have committed to follow patients for 1 year to get a sense of durability response.

Thank you. I am not showing any further questions at this time. I will turn the call back over to Scott Wolchko for any closing remarks.

Thank you all for your participation in today’s call. Do well.

Ladies and gentlemen, this does conclude today’s presentation. You may now disconnect and have a wonderful day.