Fate Therapeutics, Inc.
Q1 2022 Earnings Call Transcript

Published: 4 May 2022

[Operator:]

Welcome to the Fate Therapeutics First Quarter 2022 Financial Results Conference Call. At this time, all participants are in listen-only mode. This call is being webcasted live on Investors Section of Fate’s website at fatetherapeutics.com. After the speakers presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, today’s call is being recorded. I would now like to introduce Scott Wolchko, President and CEO of Fate Therapeutics.

[Scott Wolchko:]

Thank you. Good afternoon and thanks everyone for joining us for the Fate Therapeutics first quarter 2022 financial results call. Shortly after 4

[Ed Dulac:]

Thank you, Scott and good afternoon. Fate Therapeutics is in a strong financial position to advance our platform and pipeline. Our cash, cash equivalents and investments at the end of the first quarter of 2022 were approximately $642 million. In the first quarter of this year, our collaboration revenue derived from our partnerships with Janssen and Ono Pharmaceutical increased by $7.3 million to $18.4 million compared to $11.1 million for the same period last year. Research and development expenses for the first quarter increased by $27.3 million to $72.1 million compared to $44.9 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. The increase in our G&A expenses was attributable primarily to an increase in employee headcount and compensation, including share-based compensation and talent acquisition and facility-related fees. Total operating expenses for the first quarter were $92.9 million which includes $19.2 million of 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 may be owed to MSK based on subsequent trading values of the company's common stock ranging from $100 to $150 per share. We assess the fair value of these contingent milestone payments currently valued at $15.8 million on a quarterly basis. In the first quarter, we recorded a non-cash $8.4 million non-operating benefit associated with the change in fair value. Our net loss for the first quarter of the year was $65.7 million or $0.68 per share. Finally, our year-end cash guidance remains unchanged and we expect to end this year with at least $400 million in cash, cash equivalents and investments. This does not include potential success-based milestone payments from our collaborations with Janssen and Ono Pharmaceutical. I would now like to open the call up to questions.

[Operator:]

[Operator Instructions] Our first question comes from Tyler Van Buren with Cowen.

[Unidentified Analyst:]

This is Tara [ph] on for Tyler. I was just wondering if we can get an update on when we might expect initial data from the AML, multiple myeloma and potentially from the solid tumor clinical programs this year?

[Scott Wolchko:]

I think in our prepared remarks we made a statement that we plan on providing clinical updates across our four disease franchises in the second half of 2022.

[Unidentified Analyst:]

Well, can I actually ask one more. So one thing that you mentioned last quarter was that you -- for FT516, you were doing this R-Benda combination and I didn't hear you mention it here. So I was wondering if that was still in the plan? And for the FT596 plus R-CHOP will those patients that are now being treated, will they be included potentially in August update or at ASH?

[Scott Wolchko:]

So I mentioned with respect to the FT516 study, there are multiple dose expansion cohorts ongoing in the FT516 study which would include R-Benda. With the FT596 study, we are preparing the clinical protocol for FT596 plus R-CHOP to submit to the FDA. And I mentioned, I believe, that we plan on beginning -- subject to its clearance, we plan on beginning treating patients in the second half of 2022 with respect to FT596 plus R-CHOP.

[Operator:]

Our next question comes from Michael Yee of Jefferies.

[Michael Yee:]

Two questions for us. I thought your comments around 819, iPSC CAR T were pretty interesting and I guess, you started dosing patients. So maybe you could talk a little bit about how we should expect the bar for you, given other peers out there, I know you have -- maybe have some data at the end of this year. So how should we think about that data in comparison to others and the bar set there considering you're probably at low doses? And then second question is similar. In myeloma as well, there's obviously a bar out there for some pretty compelling drugs, particularly CAR T. You have a drug I think obviously with CD30 and BCMA. So maybe just talk a little bit about how we would expect that efficacy bar and whether patients would or would not have lost BCMA and would that still work, et cetera, et cetera?

[Scott Wolchko:]

So let me start with the myeloma and then I can move to 819. So with myeloma, I think again, it's early but I'm not going to be -- I think I've said this before, I'm not going to be surprised if the strategy plays out similarly to how we're pursuing lymphoma. Meaning that, with FT576, we think obviously with its dual antigen targeting potential, it could potentially be used down line of patients who have received, for instance, CAR T-targeted BCMA therapy. And in fact, in our studies, both with respect to 538 as well as 576, I believe we are -- we have treated patients that are in fact have previous experience with the approved CAR BCMA cell therapies. So obviously, I have to look at the data. We're earlier on in myeloma compared to lymphoma. But I do think there are potentially in myeloma will be a similar fast-to-market strategy that may emerge initially down line of the FDA-approved CAR BCMA therapies. Does not mean that the totality of our development path. Obviously, we've developed product candidates that we believe can synergize with daratumumab and daratumumab is used early and often throughout multiple lines of therapy but I do think there will potentially be a fast-to-market strategy that evolves in myeloma much like lymphoma. And we're excited about those opportunities as a first opportunity, as a first chance to put a stake in the ground for our product candidates and begin to develop around that. With respect to 819, look, this is our first experience with an iPS-derived CAR T cell therapy. I mean, this has been long in development over the past. I think we entered into the collaboration with Memorial Sloan Kettering back in 2016 to develop the first ever iPS-derived CAR T cell therapy. We're here, we're treating patients. Interestingly enough, we started at 90 million cells per dose. And I think if you look at the approved CAR T cell therapies in DLBCL patients, aggressive lymphomas, the dose that is often given to those patients is probably in the 100 million to 200 million cell range. So in starting at 90 million cells per dose, I'm not suggesting by any means it's the most efficacious dose but we are starting at a dose that if we truly do make essentially alpha-beta T cells, we may be starting at dose levels that have the potential to show activity.

[Operator:]

Our next question is from Yigal Nochomovitz with Citigroup.

[Yigal Nochomovitz:]

I'm just wondering with regard to the RMAT meeting that's coming up, could you just clarify as to why FT596 does not appear to be part of that discussion? I would have thought that FT596 would also be a useful option in the post-CD19 CAR T setting for B-cell lymphoma.

[Scott Wolchko:]

So to be clear and clear up any confusion, I absolutely believe FT596 is applicable down line of CAR T cell therapy without a doubt. The RMAT designation is very specific for FT516. So the meeting that we're planning is specific to FT516. It was grant -- the RMAT designation was granted to FT516. That said, many of the topics we will be covering, whether it relates to clinical study design, endpoints, CMC are applicable to FT596. And so what we plan on discussing with respect to the RMAT discussion -- with the upcoming RMAT discussion really is more agnostic to product candidate. What is the clinical study design, what are end points. We have a proposed study design that we would like to review with the FDA. There are CMC issues that are unique to iPS-derived cell therapies that we also plan on discussing with the FDA. So while this meeting is specific for 516, we do believe the output of that meeting will be highly applicable to FT596. And ultimately, as we progress into the second half of 2022, we will make a decision with respect to FT516 or FT596 for conduct of the pivotal study.

[Yigal Nochomovitz:]

And then I just had a question on FT596 plus rituximab and the new dosing regimens that you're rolling out. So just curious, based on everything you know about 596 NK cell biology and NK cell persistence, just wondering and asking you to speculate which do you think would be more effective, the single-dose 1.8 billion or the multi-dose 900 million given twice which you believe is likely to be superior or do you think they could just end up being very similar?

[Scott Wolchko:]

So I think I've always been on record saying that I think the right schedule for treating patients with NK cells very likely includes multiple doses and I still believe that today. So I do believe when delivering an NK cell, given their relatively short persistence compared to a T cell and given they are significantly less prone to expand and proliferate as compared to a T cell, I fundamentally believe a multi-dose schedule for an NK cell is going to be the most efficacious path. And to be clear, we are delivering multiple doses at 900 million cells per dose. We're also delivering a single dose at 1.8 million -- sorry, 1.8 billion. Both pathways provide -- enable us -- the clearance of those pathways enable us to get to 1.8 billion times two, day one and day 15 and that's where we're headed.

[Yigal Nochomovitz:]

And then, if I could just throw in one more on myeloma. So obviously, you've done a lot of great work building a cell therapy that can function in combination with DARZALEX given the CD38 knockout. Just wondering, how much consideration have you guys given to potential combinations with other standard of care agents in myeloma, for instance, IMiDs or proteasome inhibitors?

[Scott Wolchko:]

We've done some preclinical work in assessing other combinations but you are correct. I mean the driver with respect to the therapeutic design of both FT538 or FT576 was really about creating a cell type that could uniquely synergize with daratumumab given the concern with respect to fracture side. Obviously, activated NK cells, activated T cells express CD38. And so there was the potential for fracture side. We always thought there would be significant opportunity to synergize with DARZALEX which certainly done doing preclinical experiment to understand how our product candidate could plug into existing regimens. That includes DARZALEX which as you've alluded to, includes some of these IMiDs as an example. And so we don't think -- we haven't seen anything to suggest that those other agents that are part of combination therapies would be detrimental to cells in any way.

[Operator:]

Our next question is from Daina Graybosch of SVB Securities.

[Daina Graybosch:]

I think a couple for me. One, we're talking so much about dose, 900 million, 1.8 billion cells, I wonder whether you could help put that into context. How many NK cells are circulating in an average patient or healthy human? And how does that compare to, let's say, 900 or 1.8 billion cells?

[Scott Wolchko:]

Bob or Wayne, do you want to address that question, if you're -- we're not in the same room but either one of you?

[Wayne Chu:]

Sure, I can start. We typically have somewhere between 1 billion to 2 billion. So we're here with each dose at those high doses already constituting the NK compartment of a normal patient.

[Daina Graybosch:]

That's an easy answer. The second one for multiple myeloma. I wonder if you could talk a bit more about your binder for BCMA. I think you've called it avidity like? And I wonder if you could talk about what gives you confidence that your binder will give the same effect as avidity that's been used successfully in the -- from BCMA CAR T?

[Scott Wolchko:]

I think, again, either Bob or Wayne, Bob, do you want to address that question as I think you're most familiar with the unique characteristics of our particular binder.

[Bob Valamehr:]

So the binder was well characterized in a molecular therapy article back in 2018 by [Indiscernible]. And so there he showed that the affinity of the binder allows the preclinical studies to target cells that had less than 1,000 BCMA per cell. So he was able to target BCMA per cell in the 100 range. So that gave us confidence that this binder is going to be unique. We've compared it to the competitors where we have access to the sequence and it does outperform. So [Indiscernible] initial work and some of our preclinical work suggest that this binder is going to be of higher quality, higher avidity and hopefully it gives us better results and outcome.

[Operator:]

Our next question is from Nick Abbott with Wells Fargo.

[Nick Abbott:]

I do like to apologize if maybe you addressed that. But maybe starting off with 516 and RMAT. That IND was approved several years ago notwithstanding the fact you've had several INDs approved since, seems like FDA is getting more focus on safety. So do you think there could be any weaknesses in the manufacture of 516 and any weaknesses you think might be there to maybe address without affecting the timeline?

[Scott Wolchko:]

So it's a great question and your point is well taken. Yes, we did make the -- FT516 IND was cleared, I think back in 2019, if I'm remembering correctly. Look, I think certainly while it is an early generation product candidate, I think as you probably will appreciate, our manufacturing process is agnostic to the master cell line. So the methods we're using, for instance, to create FT596 or FT576 are really the same exact methods that we used to create FT516. So the manufacturing processes that we use today in taking a master cell bank and creating large quantities of NK cells really transcends the product candidate. And that's back to Yigal's question, this is why I think certainly while we're having a discussion around FT516 with respect to RMAT, I think many of the questions that we are intending to ask speak to the platform.

[Nick Abbott:]

And then on 516, I'm looking at the press release. I'm trying to pass the terms progressed or relapsed following prior FDA approved CAR T. They're almost seems same to me but I'm sure you pulled over this press release. What is the difference between some of those progressed or relapsed following prior CAR T?

[Scott Wolchko:]

I don't have the press release in front of me. I can go back and look at it. But the idea in patients -- these are in patients that have been previously treated that have progressed and they may not have had a response or have relapsed following a response. That's the patient population we're targeting down line of CAR T.

[Nick Abbott:]

So does that include patients then who are primary refractory?

[Scott Wolchko:]

It could include patients that are primary refractory, that is correct.

[Nick Abbott:]

And then just in terms of the R-CHOP combo, these patients are going to be treated in the community. That's where they've been treated today. So is this a study that you can do in a sort of true community setting as opposed to in kind of outpatient setting of MGH, for example?

[Scott Wolchko:]

Yes, I think we're pretty confident in that. I mean, I'll turn it over to Wayne and he could talk about this a little bit more because he's done a lot of work here, working with the investigators and the KOLs that helped us develop the protocol.

[Wayne Chu:]

So yes, we've spoken quite a lot to investigators and key opinion leaders around the concept of this which at its most basic form, it's essentially standard dose and schedule of R-CHOP and then administration of FT596, a certain period of time after each cycle of R-CHOP. And we've demonstrated with our Phase 1 data of FT596 that from a safety perspective, FT596 at the doses we treated to date is quite safe in the sense that very little in the way of cytokine release syndrome, no ICANS, no GvHD. And so when we developed the protocol with -- in partnership with investigators, they were quite comfortable with the idea that, one, from a safety perspective, there doesn't seem to be anything that would be disqualifying in terms of starting the study. And then secondly, there is quite a degree of comfort that not only would they be able to get patients to be treated with this but also treat these patients in a way that's reasonably convenient, i.e., giving -- administering FT596 in an outpatient study. So we're very confident that we will be able to have quite robust enrollment into this trial.

[Nick Abbott:]

So if I can just follow-up on that. I mean, I can envisage a situation where the patient gets a R-CHOP in the oncology office. It sounds like then you might be sending the patients to the local CAR T treatment center?

[Scott Wolchko:]

No, that's not what's contemplated here. That's not what's contemplated. This is community setting outpatient treatment.

[Operator:]

Our next question is from Michael Schmidt with Guggenheim.

[Kelsey Goodwin:]

This is Kelsey on for Michael. For 596 plus rituximab, I guess, up to how many dose cycles can be administered? And can you just remind us what patients are eligible to receive additional cycles now that the protocol amendment I think is in place? And then just a quick follow-up on that. I guess, there was some competitor CAR NK cell data last week. And I think for them, at least, the data suggested that three doses per cycle was better than two doses. I guess, is this something that you guys would consider looking at your treatment schedules or are you pretty set on two doses per cycle for 596 at this time?

[Scott Wolchko:]

I guess, I'll address the last question first. Yes, I mean, we are giving two doses of FT596 on day one and day 15. In addition, 576 being delivered on day one and 15. The reality is we've seen responses from single doses. So I think -- and we've looked at a lot of translational data and feel very comfortable with the functional persistence profile extending for about two weeks. So we feel pretty comfortable with the two dose schedule given what we've seen on the translational side and given the fact that we've seen responses at with a single-dose. That said, our protocols have a tremendous amount of flexibility in them. And we certainly have the opportunity to backfill patients into a three dose cohort if we chose to do that. So we have a lot of flexibility under the existing protocols. I would say, similarly with respect to cycles, the protocols are set-up essentially as a first cycle, a second cycle. And then I think under the existing protocols and Wayne you can correct me if I'm wrong, I believe under the existing protocols, patients do have the ability to go on to additional cycles. I don't know, Wayne, do you want to comment on the cycles?

[Wayne Chu:]

Yes, that's absolutely correct. Right now because of the FDA allowing us to proceed directly to a second cycle, we consider an initial treatment course with FT596 is consisting up to two cycles. And then in addition to that, specifically in patients who have an initial response and then subsequently progress, we have the option for retreatment of those patients as well.

[Operator:]

Our next question is from Mara Goldstein with Mizuho.

[Mara Goldstein:]

Scott, I want to be respectful obviously of trade secrets and the like but maybe you can talk a little bit about the CMC and what would be considered from your viewpoint a positive outcome from FDA with respect to the upcoming meeting? And really, maybe if you could just give us something to think about in terms of what are the types of questions that you might be asking? And then I just had a question on the 516 trial. I'm curious if the protocol allows for the individual set of relapsed patients versus refractory patients?

[Scott Wolchko:]

So can you just clarify the second question first? Do we treat refractory patients with relapsed -- refractory/relapsed therapy as opposed to relapsed/relapsed therapy? Is that the question, relapsed therapy?

[Mara Goldstein:]

Right. And if you are able to look at the outcomes within those buckets of -- within those different subgroups or it's just a global subgroup relapsed/refractory?

[Scott Wolchko:]

Currently, the cohorts are relapsed/refractory in the same cohort but that doesn't mean we can't segregate that on a go-forward basis if we chose to do so and treated them as unique populations. We would certainly be able to do that on a go-forward basis. But currently, the cohorts are relapsed/relapsed therapy as well as refractory/relapsed therapy. CMC, I guess -- and thank you for making a comment about respectful of trade secrets. I think one of the elements that has hung up cell therapy companies in the past, as I think you're well aware, is there are oftentimes potency assays. So you may suspect that one of the things that we certainly want to get ahead of in conversation with the FDA are for instance some of the potency assays that we've developed. And now you could say, for instance, whether it be CAR19 or CAR BCMA, there may not be a lot of trade secrets or a lot of innovation with respect to those potency assays but CD16 is a powerful mechanism here. And so we are suspecting, don't know but suspecting that we will require a potency assay for CD16. And so that's certainly something as an example that we would want to discuss with the FDA given the prevalence of CD16. That feature a high affinity non-cleavable CD16 receptor that we're using throughout our product candidates. Again, sort of harkening back to the comments that I made that many of the questions we're going to ask here are not just relevant for 516 but are relevant for 596 as well as our platform. I think the other thing that we want to have a conversation with FDA about is obviously not necessarily potency assay but there are a whole host of other release specifications that are relevant for cell therapies and beginning to reach agreement on release specifications for the conduct of a pivotal study I think again can apply universally to our product candidates.

[Mara Goldstein:]

And if I could just ask a question. I mean, clearly, you have a lot of resources. You end this year with $400 million. I understand not including any types of milestones or whatnot. But given the pipeline that you have and the plans to go into additional bigger and potentially more complex studies, I mean, how do you think about financing post-2022?

[Scott Wolchko:]

Look, I think we have two terrific collaborations with Ono and J&J that can provide meaningful streams. Do I think they're going to offset the entire burn of the company? No, I don't. But I do think the Ono and Janssen collaborations, we have strong momentum. We're seeing success. It's publicly out there, maybe not exactly with respect to timelines and milestones at each stage but it's publicly out there what the milestones can represent with respect to each and every product candidate. And currently, I alluded to the fact that we think we have three product candidates emerging from the two collaborations. And I do think there's the room for the company to do more collaborations. And I think we are actively in discussions to engage in more collaborations.

[Operator:]

Our next question is from Robyn Karnauskas from Truist Securities.

[Robyn Karnauskas:]

I could spend the whole day on your new technology but let me just ask a few. So on the dose, there's another question on the competitor data. That data used very high doses of 1 billion to 1.5 billion cells multiple times in AML and DLBCL. I was just curious your thoughts on the read here despite to your whole program in dosing that high. Like does the cell type matter, like ITC versus just either donor-derived or another form of an NK cell or does this tell you that high doses really might work the best? I mean, you may have to get up to that 1 billion to 1.5 billion dose. The second question is just how high for dose will you go? And then I had a follow-up on the RMAT trial.

[Scott Wolchko:]

So I guess a couple of things. And I will say with respect to dose, again, there's a lot of literature and obviously clinical experience with NK cells versus T cells. And let's just stick in the lymphoma space because it's the easiest to compare and contrast. In the lymphoma space, obviously, with CAR T cells, in the approved CAR T cells, we've seen doses that are fairly modest compared to an NK cell. I mean, we've seen doses in the 100 million to 200 million range. Single-dose 100 million to 200 million cells with YESCARTA is the recommended dose, is the dose that's used today. I mean, that's exceptionally low compared to NK cell and the history of donor-derived NK cell. If you look at the history of donor-derived NK cell therapy and you go back and you look at the history, my gosh, people are giving not 900 million cells, they're giving like 5 billion, 6 billion, 7 billion, 8 billion cells. So back to Daina's question, I mean, the history of donor-derived NK cell therapy in order to try and drive even modest efficacy, folks have been delivering a multiple of the NK cell compartment that actually just exists within your body which obviously, now when we've always said and others in the industry will say the same thing, if you really want to make an NK cell efficacious, you're going to have to engineer in functional elements. And I think with those engineering in functional elements, whether it be a CAR or CD16 receptor or what have you, I do think you'll see dose levels of NK cells, lower dose levels of NK cells be more efficacious but clearly, they are going to be at dose levels I think that are higher than T cells. And I think that gets back to a little bit of the nature of a T versus an NK. When a T cell gets activated, it is quite capable of undergoing significant expansion and proliferation and they do persist longer compared to an NK cell which is not going to significantly expand as a T cell would and it's nowhere it is not going to functionally persist as long as a T cell. So I think we've always believed and I think it's playing out that the NK cell doses and schedules will be different than what you have typically seen with T cells. The good news, I would say, from -- with respect to the NK cell community, while it may require higher doses, while it may require multiple doses, safety profile I still think is significantly differentiated compared to a T cell.

[Robyn Karnauskas:]

And since you don't know how durable the chances are yet, would you dose higher than where your...

[Scott Wolchko:]

Yes, I mean, I think that's the feedback that we got at ASH at some basic level from our investigators. We don't know what the durability is of an NK cell versus a T cell. No one knows, I mean really. That question has not been answered in the community yet, what's the durability of an NK cell. And so given the safety profile, yes, we absolutely -- and we're at 1.8 billion cells. So we will continue to dose escalate. We think we certainly have a platform that allows for the delivery of high doses if that's necessary and multiple doses.

[Robyn Karnauskas:]

And then a follow-up question on the RMAT 516 meeting. Do you have a sense of for your clinical trial how far out you might have to follow patients? There's been a lot of discussion versus the early CAR T studies that you kind of knew like within six months that there was durability or deep response. Can you give any sense of that? And then I'm sorry, squeeze this one in for your ADR, how close to the market are you? And no more questions.

[Scott Wolchko:]

So let me discuss the clinical trial design obviously with the FDA and discuss potential endpoints. I think, again -- I think the one thing I would point out is at least in the post-CAR T cell patient population, I had some remarks with respect to the benchmarks that are out there with respect to therapies that are being at least trying to be deployed by physicians today. And I think we made a remark that the complete response rates are somewhere between 5% to 25% and overall survival is around six months. So I think you're potentially looking at a very difficult to treat patient populations where outcomes for better or for worse are determined very quickly. With respect to ADR, we have a lot of preclinical data with ADRs. We have not necessarily decided yet what product candidate to incorporate ADR technology into. That said, we think ADR technology and the idea of chemotherapy-free conditioning and delivery of cell therapy is the direction the field must go. We absolutely believe that Cy/Flu long-term is a barrier to cell therapy's ultimate potential and technologies will need to be developed and utilized to reduce the dependency and requirement on Cy/Flu. And I do think we are targeting a 2023 time period for the integration of ADR technology.

[Operator:]

And at this time, I would now like to turn the conference back to Scott Wolchko.

[Scott Wolchko:]

Thank you very much. I appreciate everyone's time this afternoon. Thank you all for participating. Be well and we look forward to catching up soon.

[Operator:]

This concludes today's conference call. Thank you for participating. You may now disconnect.