Fate Therapeutics, Inc.
Q4 2018 Earnings Call Transcript

Published: 6 Mar 2019

[Operator:]

Welcome to the Fate Therapeutics Fourth Quarter 2018 Financial Results Conference Call. At this time, all participants are in listen-only mode. This call is being webcast live on the Investors & Media 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.

[Scott Wolchko:]

Thank you. Good afternoon and thanks everyone for joining us for the Fate Therapeutics fourth quarter 2018 financial results call. Shortly after 4

[Operator:]

Thank you. [Operator Instructions] Our first question comes from Ted Tenthoff with Piper Jaffary. Your line is now open.

[Ted Tenthoff:]

Great. Thank you. Can you hear me okay?

[Scott Wolchko:]

Yes.

[Ted Tenthoff:]

Great. So, firstly, I love the history lesson upfront. I mean, this is amazing to see the progress you guys have made over that timeframe and really who you've been working with, and that's a testament to the progress. So, congratulations on dosing of first patient with the iPSC-derived cell therapy for cancer. One quick housekeeping and then one on the trial. I just want to double check. I know that you have the partnership with to Juno. Are you still recognizing any of that upfront amortization? I think it was supposed to run through May of 2019. So, I had [indiscernible] yet, but just want to see is there still any of that in there. And then, secondly, with respect to dosing in the study, what is sort of the dosing sequence? To dose a patient, wait a certain period of time, dose the next patient? How does that kind of work through with the Phase 1? Thanks.

[Scott Wolchko:]

Sure. So, housekeeping on revenue recognition, and this will also generally apply to Ono. There was -- in both collaborations, there's obviously an upfront, and we're being paid research and development fees. We essentially amortize the upfront, and the upfront is being recognized over the term of collaboration or the baseline term of the collaboration, which in both cases is estimated to be four years, and the research fees are being recognized as performed. So with respect to the Juno collaboration, in the fourth quarter as well as the first quarter of ‘19, we will recognize two pieces of revenue, $500,000 associated with the amortization over the collaboration of the upfront, plus $500,000 in research and development payments, so about $1 million a quarter. The Juno collaboration does end in May of 2019. Ono’s revenue pattern will be recognized in a similar way. There was $10 million, upfront that will be recognized over four years. In addition, Ono is paying us about $5 million a year in research funding. And so, that will be recognized as performed.

[Ted Tenthoff:]

Thank you.

[Scott Wolchko:]

Sure. With respect to -- and it should not vary too much quarter-to-quarter. With respect to sequence of dosing of the patients in the FT500 trial, yes, so, we are obviously in a dose escalation period. There are two arms of the study, there's a monotherapy arm; there's a checkpoint inhibitor arm. The monotherapy arm goes first in the first at the first dose level. And we are able to essentially treat the patients on the following schedule. The first patient can be treated let’s call it on day one; and then, a second and third patient can be treated beginning two weeks later. There's a safety assessment that occurs on day 28, and if safe, you can proceed to the next dose cohort.

[Ted Tenthoff:]

That's very, very helpful. Looking forward to getting some of that data at AACR and throughout the year. Thanks for the time.

[Scott Wolchko:]

Thanks.

[Operator:]

Our next question comes from Robyn Karnauskas with Citi. Your line is now open.

[Kripa Devarakonda:]

Hey, guys. Thank you so much for taking this question. This is Kripa on for Robyn. So, about the build out of the GMP manufacturing facility, I have a couple of questions. I know, you mentioned, Scott, that you could make thousands initially. I was just wondering how you expect it to grow as you expand out further and how many different products can you manufacture simultaneously? And also, when do you expect to switch over to products made in this facility for your trials.

[Scott Wolchko:]

Sorry. What was the last question.

[Kripa Devarakonda:]

When do you expect to switch over to the product? You said that you would start making product for your clinical trials in fall of 2019. So, when do you think you can actually start using the product that you make in your GMP facility in your clinical trials?

[Scott Wolchko:]

Sure. So, let's go backwards. So, the product that we plan to manufacture this year in our facility, we plan to use this year in clinical studies, just to be very clear about that. So, we think with launch we will be able to treat patients with product manufactured at Fate Therapeutics this year. That is certainly an objective well within our reach. We do have obviously manufacturing partners that are manufacturing FT500, FT516 and lined up for FT596. We have a strong relationship with MCT and the University of Minnesota, and they've been very successful at manufacturing at least initial batches of products for clinical study. With respect to how many products we can manufacture simultaneously. As I mentioned, this setup is very customized for using master cell lines to create universal cell products. And we can very likely stagger the way we manufacture product to potentially do three to four products in parallel.

[Kripa Devarakonda:]

Great, thank you. And if I may sneak in one more question about your NK100 program. Now that you have to two iPSC-based products having cleared IND, has your thinking or strategy changed towards the FATE-NK100 program in any way?

[Scott Wolchko:]

No. I mean, we're -- the studies are -- the three NK100 studies are all open, all enrolling patients. We have said before and we stand firm that those studies we will continue to run. They are important studies. We're learning a tremendous amount of that with respect to NK cell biology as well as conditioning regimens, multiple doses and both hematologic malignancies as well as solid tumors in combination with monoclonal antibody therapy. So, I think we are absolutely learning a tremendous amount. We remain committed to the FATE-NK100 studies. That said, if you look at the clinical footprint of the products that we're developing with respect to iPS-derived NK cell products, whether it’d be 500, 516 or 596, I suspect that almost every single patient that is eligible for enrollment in an NK100 study would qualify for enrollment in one of those three product candidates. In fact, as you probably picked up, FT516, while not -- the clinical study is not yet open for enrollment, FT516 does include a monotherapy arm where we can give multiple doses over multiple cycles to AML patients.

[Kripa Devarakonda:]

Thank you. And one quick housekeeping question. Have you given any -- I’m sorry, I apologize if you’ve already talked about it, but cash runway, can you provide us some color?

[Scott Wolchko:]

We’re slightly over $200 million in cash. As I went through, we're burning on a cash basis about $16 million a quarter. And so, I believe we have sufficient cash well into 2021.

[Operator:]

And next question comes from Jim Birchenough of Wells Fargo. Your line is now open.

[Yanan Zhu:]

This is Yanan in for Jim. So, the first question is how comparable are FT500 and the FATE-NK100 as NK cell therapeutics? And is there a reason to think that the iPSC-derived product might be superior?

[Scott Wolchko:]

Sure. I’m happy to take that question. Without denigrating FATE-NK100 in any way, NK100 is a donor-derived product. NK100, like all donor-derived products is challenged like all donor-derived products with a tremendous amount of heterogeneity from donor-to-donor from batch-to-batch manufacturing. And that is a limitation that exists with allogeneic cell therapy. And iPS-derived cell therapy approach is a clonal approach. You can literally select a single clone and race that single clone against other clones, as well as donor-derived products. You wind up with an incredibly potent homogeneous product that can be given in multiple doses to patients. So, I do not believe in any way, just this is a general statement, donor-derived cell therapy is comparable with an off-the-shelf approach.

[Yanan Zhu:]

So, another question on the NK program and then I have a follow-up on for the T-cell program. So, for FT516, you mentioned there -- the initial study will have combo with rituxan for example. So, just curious how to differentiate the effect of the combo versus rituxan alone?

[Scott Wolchko:]

To qualify for enrollment in that arm, they will have had to have failed rituxan.

[Yanan Zhu:]

And so, looking ahead for the first iPSC-derived CAR T product, would you expect FDA to take the same time as it did with the IND of FT500, or do you think the issue is addressed for the FT500 IND will be considered supportive of more rapid clearance of the iPSC-derived T-cell product? Thanks.

[Scott Wolchko:]

Yes. I think, it's a good question. I would tell you just based on our interactions and our understanding of obviously the interactions we've been having with the FDA, our belief is that part of the time period that it took to get FT500 cleared, which we filed in July of 2018 and cleared late November of 2018, a big piece of that was familiarizing the FDA with the platform itself. The nature of reprogramming cell, selecting clones, creating master cell banks, qualifying master cell banks and then ultimately differentiating to a product candidate. I would say, the process of creating master cell banks, whether it's an NK cell or a T-cell is fundamentally the same. And even a significant piece of the differentiation protocol, when you go from a master iPSC line to an NK cell or a T-cell, there are about 10 to 15 days of the first part of the creation of the products that are almost exactly similar. So, I think there are tremendous amounts of learnings that we've been able to leverage in creating NK cells and then following that with T-cells. And I do think we will have a lot of benefit from the work we're doing on our master iPS cells platform and with respect to creating off-the-shelf NK cell products as we look to file the first IND and clear that first IND with respect to an off-the-shelf T-cell product. So, I think there are a lot of synergies and a lot of learnings, and we benefit significantly from the work that we've done historically already in pioneering the first iPS-derived, in this case CAR T-cell product.

[Operator:]

Thank you. And the next question comes from expression from Biren Amin with Jefferies with Jefferies. Your line is open.

[Biren Amin:]

Yes. Hi, guys. Thanks for taking my questions. Hey, Scott, on the 516 program, it seems you're dosing up to 900 million cells, whereas in the 500 trial, you’re dosing up to 300 million cells. So, what's the rationale that drives the higher dose level for 516?

[Scott Wolchko:]

Yes. When we put in the IND for FT500, we started with two dose levels. It's not intended to necessarily be restricted to two dose levels, then we certainly can go up to the higher dose level with FT500, like we with up to FT516. Keep in mind, when we put in FT500, it was the first iPS-derived cell therapy IND put in front of the FDA. We took a conservative approach with the protocol that we submitted initially with that IND application to the FDA. When based on the feedback and getting it cleared, when we put the FT516 IND in, we included a traditional three dose cohort, a 3 by 3 study design. And I suspect quite frankly with FT500 as we advance through these first dose cohorts, we very likely will amend to include a third and higher dose cohort that matches FT516.

[Biren Amin:]

And then, on the 516 program, you're also I think administering short course IL-2 after lympho depletion. Is there similar requirement with the 500 programs? And what's the scientific rationale in administering short course IL-2 with these cells?

[Scott Wolchko:]

Sure. So, obviously, cytokine support can be important and the literature in the space and clinical experience is a bit confounding. There certainly have been studies where NK cells have been given with cytokine support, for instance IL-2. There's been other studies where NK cells have been given without cytokine support and specifically IL-2. And so I don't think there is necessarily any compelling rationale one way or the other yet that's been firmly established in the clinic with respect to cytokine support. Interestingly enough, as you know, as you condition patients, there is -- there are obviously releases of cytokines in the body that can provide support for adopted transfer of cell therapy. And so, one of the learnings we're getting with respect to NK100, for instance, we have just three different conditioning regimens that are being used across the three NK100 studies. So, we are carefully looking, for instance, at the cytokines that are released simply through conditioning and how they support NK cells. One of the specific things that we’re interested with respect to FT500 is bridging both enate and adaptive immunity, and we are a bit sensitive based on the data that we're seeing with respect to administering IL-2, what that potentially could do to T regulatory cells.

[Biren Amin:]

Okay. And then, I guess, on 596 pre-clinically, have you compared this program to CD28 or 4-1BB CAR and how does it compare on potency and persistence today?

[Scott Wolchko:]

Yes. So, we've done that head-to-head in NK cell land and we are in the process of doing that with respect to comparing CAR NK cell versus CAR T-cell.

[Biren Amin:]

Okay. And then, just maybe a last question, on the 819. I think this is a CD8 T-cell driven program. So, do you believe, given its devoid of CD4 T-cells that that would impact long-term efficacy?

[Scott Wolchko:]

We have not seen any suggestion of that, including in vivo preclinical models.

[Operator:]

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

[Unidentified Analyst:]

Hi, guys. This is Neil [ph] filling in for Do. I had a first question about FT500 and the first patient that was dosed. And I was wondering if you're able to give any background on the patient's cancer type and prior therapies they had prior to being dosed? And then, as a follow-on to that, I just wanted to see if you could give us a little bit more clarity on how you're thinking about proceeding into the combination portion of the study. Is there a cutoff in terms of the number of patients that you need to treat with monotherapy prior to initiation a portion?

[Scott Wolchko:]

Certainly. So, I'm not going to disclose any patient data profiles with respect to FT500 at this time. With respect to how we transition into the combination arm, I mentioned that there are three patients at a dose level. The monotherapy arm goes first; there's a 14-day delay between the first and second patient, there's a -- the second and third patient can theoretically go in simultaneously; and there's a 28-day safety assessment. As soon as you clear the 28-day safety assessment in the monotherapy arm, both arms are open and operate independently. So, the start of the combination arm trails, absent DLT by 45 days.

[Unidentified Analyst:]

Great. Thank you. That's helpful. And then, one other quick question. I think you had mentioned when the first patient you expect to be dosed for FT516. And then as a follow-on, are you using the same clinical sites as you are for FT500?

[Scott Wolchko:]

We do not disclose that yet.

[Unidentified Analyst:]

Okay. Thank you very much. I appreciate it.

[Scott Wolchko:]

Sure.

[Operator:]

Thank you. Our next question comes from Dana Grayboss [ph] SVB Leerink. Your line is now open.

[Unidentified Analyst:]

Hello. Thank you for the question. A couple of them. The first on the trial design for FT500 and FT516. You mentioned for FT500, you have some hypotheses on how you can select patients based on their type of resistance to an anti-PD-1. And I wonder when you'll start to collect that biomarker data, and whether you're collecting a biomarker data for FT516, and if we’ll see some of that cuts in the initial data coming out?

[Scott Wolchko:]

The answer is, yes. We’re collecting that biomarker from the get go. We actually think it's really important. We're not, to be clear, in reaching necessarily for these loss of function mutations to start, but we are collecting all that data from the get go and it will be certainly part of the data assessments that we conduct and the information that we share on the patient analyses. We’ll be doing very similar types of assessments with respect to the FT516 analyses in the arms in those studies. We -- as you probably know, Fate therapeutics recently was fortunate enough to hire Sarah Cooley. She has a tremendous -- she is from the University of Minnesota. She has, years and years of experience working with NK cells and running NK cells studies and prides herself in absolutely developing the best biomarker analyses that can be done in cancer -- cell-based cancer immunotherapy studies. So, we're absolutely ramping and committed to these types of analyses.

[Unidentified Analyst:]

Great. Thank you. Now, maybe a very theoretical question. When you have master cell line and clone for FT500 and FT16, can you use that clone indefinitely or at some point do you have to switch and pick a new clone, and a new master line?

[Scott Wolchko:]

So far, our experience in conversations with the FDA, our intent is to use these indefinitely. We don't have any reason to think we can't use them indefinitely. And in fact, we are potentially excited about using one master iPS cell line to create a master cell line from a -- for a different product. That is one of the unique advantages of what we do. We can, for instance, take a master cell line for FT500 and use that as a basis for creating a master cell line for FT516 as an example. We did not do that in that particular case. But, as we think about adding more and more functionality, and second, third, fourth edits, that type of approach becomes very attractive, especially if you've already qualified a master cell bank.

[Unidentified Analyst:]

Very helpful. Thank you. One last question, for your cytokines support, have you considered using any of the next generation cytokines of less toxicity, either the IL-15 or the IL-2 instead of…

[Scott Wolchko:]

Yes. I mean, we've looked at this certainly and we continue to look at this. I mean, the one thing that we are thinking about obviously is this is a platform. This is a first of kind approach. And certainly we want tocombine with -- use conditioning regimens and combined with agents initially that have a well-established profile. And so, I absolutely think there's potential there, but it's not some place we look to start.

[Operator:]

Thank you. Our next question comes from Matt Biegler with Oppenheimer. Your line is now open.

[Matt Biegler:]

Thanks for letting me sneak in some questions and congrats on the milestones. So, I wanted to ask about some of the emerging translational data from NK100. And I recognize, this is still very early. But, have you seen any evidence that NK100 is expanding into peripheral blood? And maybe a more theoretical follow-up is, do you believe that NK cell expansion is critical to achieving objective responses?

[Scott Wolchko:]

Yes. So, I mean, we're looking at this and we're not -- I wouldn't say we have seen, for instance, aggressive NK cell expansion, like you're probably accustomed to seeing in T-cell land. So, we have certainly looked at persistence of NK cells, which is different than -- which is potentially very different than expansion. But one of the things that we're excited about is trying to achieve essentially a drug-like profile for our cell therapy. So, when we think of, for instance, where we are going with cell therapy, and what we are interested in pursuing from a therapeutic strategy perspective, it is being able to create multiple doses including with other agents -- in combination with other agents over an extended period of time. I actually believe the best way to accomplish that is by giving multiple doses as opposed to giving a single dose and letting that single dose itself, then be sort of exposed to essentially whatever is going on in the body over that following period of time. So, for instance, a dose that you give and you intend to give it one time, certainly has the potential to -- of an autologous cell, certainly has the potential to expand or persist, but is going to be exposed and essentially be influenced by what's going on in the body a month later, 2 months later, 3 months later. We believe coming in with a wave of prime healthy cells and creating a PK/PD profile over a period of time is a better way to drive more durable and deeper responses.

[Dr. Dan Shoemaker:]

And Matt, one thing to add, this is Dan. In the 4 patients that received 2 doses, and the 100 study, the persistence profile, the second dose was similar and in some cases a little bit longer than the first dose. So, that was our first encouraging experience with a multi-dose format that bodes well for as we start dosing patients with FT500 and FT516.

[Matt Biegler:]

And maybe a quick question on the strategy for FT516. So, there was some updated NK data from Dr. Miller's crew presented at Tandem or I guess it's called TCT meeting, a few weeks ago. They had some notable complete remissions in heavily pretreated follicular lymphomas, but less activity in DLBCL and myeloma. And I'm just wondering if you guys look at this data and in any way, it can maybe help you as you kind of hone the indications for the upcoming trial?

[Scott Wolchko:]

I mean, I think, it's interesting. We're certainly encouraged by that data because we're big believers in ADCC. I think, again, back to the earlier question of a donor-derived approach versus an off-the-shelf approach, I think, there's fundamentally some pretty significant differences in FT516 versus a donor-derived NK cell therapy, even if that NK cell therapy might have high expression of CD16. As we talked about, only 15% of patients have a high-affinity variant of CD16. So, I'm not -- I didn't look at the data that closely, but I wasn't aware for instance, whether they segregated the database, on whether the donor had a high versus a low variant. Obviously, with FT516, every single patient, we can bring a high-affinity experience to. In addition, one of the challenges with donor-derived cell therapy and CD16 in particular, CD16, while an activating receptor, CD16 can cleave and does cleave in the body upon engagement. And so with FT516, we've locked the receptor on. Essentially, we have a mutation whereby the receptor not only is a high-affinity variants but is non- cleavable. And so, therefore, this is a synthetic biology, if you will, with respect to FT516. So, certainly, we're out there scanning what's going on in the industry with respect to adoptive transfer of cell therapies, including engineered cell therapies. We're learning from that, including our own MK100 experience, but fundamentally believe that the products that we are building and will continue to build will have fundamentally enhanced functionality that cannot be recapitulated through just donor-derived cell therapy.

[Matt Biegler:]

Great, thanks. Congrats to you. And congrats to Dr. Cooley on her new role.

[Scott Wolchko:]

Thanks.

[Operator:]

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

[Reni Benjamin:]

Hey. Thanks for taking the questions and congratulations on the progress. Scott, can you talk a little bit about the new licensing agreement that you signed regarding the BCMA targets and just kind of when -- how you see that development occurring and when you might be in the clinic?

[Scott Wolchko:]

Sure. I think, we signed this agreement with the group over in Germany that has developed and has done a lot of work in developing novel binding domains to be BCMA as a target. In fact, they have done a lot of work in comparing some of their-- the ways that they bind BCMA, for instance, compared to other binding domains. And so, we were very intrigued by the data that we had seen from them. We are assessing those binding domains in our hands. We're not through that analysis yet. But, this is a program that we are very interested in, including the potential of combining, like we're doing for instance with FT596, combining a CAR BCMA with a CD16 receptor to be able to hit two targets at once. We're at I would say earlier stages of that preclinical assessment, but certainly it is program that we with data and with success we could potentially look to accelerate, given we already are developing FT538.

[Reni Benjamin:]

And given there are other players that are looking at BCMA constructs of T-cells, do you guys favor maybe more the NK cell approach, or are you evaluating both?

[Scott Wolchko:]

We're definitely evaluating both. I've said this I think before, maybe in certain circles, but allogeneic transplant to our knowledge, our belief is the only curative therapy out there. T-cells are given NK cells are given. There's other cells that are obviously given as part of a graft. And so we think, NK cells and T-cells play a pretty foundational role and very likely a complementary and synergistic role in attacking cancer. And so, from our perspective, part of our objective and where we think we are clearly positioned, we're the only company that can bring together NK-cell and T-cell therapy in an off-the-shelf manner.

[Reni Benjamin:]

Got it. And then, just one final one for me. Can you talk a little bit about the source of the iPSC cells for your master cell bank? And have you had any experience with how these master cells look from different sources, or are they all pretty much equivalent?

[Scott Wolchko:]

Now, they're definitely not -- I wouldn't say, they're equivalent by any means necessarily. And yes, I'm not going to get into sort of trade secrets about how we source cells and how we select donors and all that kind of good stuff. But, back to the fundamentals, no two donors are created equal. We absolutely assess the different donors from which we originally source cells, and we have an entire sort of history of efficiently reprogramming cells from various donors. And so, yes, I mean, there is a lot of trade secrets and knowledge there that goes into how do you select the right donor with respect to creating your master so line.

[Operator:]

Thank you. And I'm showing no further questions in the queue at this time. I’d like to turn the call back over the Scott Wolchko for any closing remarks.

[Scott Wolchko:]

Great. Thank you very much everyone for participating in today's call. And we look forward to speaking with you in next couple of weeks, see you at AACR most likely. So, take care.

[Operator:]

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