Fate Therapeutics Q2 2023 Earnings Call Transcript

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August 8, 2023

There are 9 speakers on the call.

Operator

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 I would now like to introduce Scott Washko, President and CEO of Fate Therapeutics.

Speaker 1

Thank you. Good afternoon, Thanks everyone for joining us for the Fate Therapeutics' 2nd quarter 2023 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 section of our website under Press Releases. In addition, our Form 10 Q for the quarter ended June 30, 2023 was filed shortly thereafter and can be found on the Investors section of our website under Financial Information. Before we begin, I'd 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.

Speaker 1

These statements involve risks and uncertainties that can cause actual results to differ On the company's earnings press release issued after the close of market today as well as the risk factors included in our Form 10 Q For the quarter ended June 30, 2023, 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 Ed Dulach, our Chief Financial Officer and Bob Volimer, Our Chief Research and Development Officer. During today's discussion, we will cover the recent IND allowance For our FT-five twenty two CAR NK cell program in B cell lymphoma, which is our first Product candidate to incorporate our proprietary allo defense receptor technology.

Speaker 1

The Phase 1 clinical trial is designed to assess T-five twenty two with and without administration of intensive conditioning chemotherapy to patients. Study start up activities are ongoing and we plan to enroll the first patient in the second half of twenty twenty three. We will also highlight our continued investment in our multiplex engineered iPSC derived CAR T cell franchise for solid tumors, Where we are advancing our FT825 HER2 targeted CAR T cell program in collaboration with Ono Pharmaceutical Toward an IND submission in the second half of twenty twenty three. Finally, we will provide some additional guidance On our progress toward expanding the clinical reach of our iPSC product platform beyond oncology and into autoimmunity. Before we review our progress and the key milestones that we are striving to achieve in the second half of twenty twenty three, I would like to turn the call over to Ed to elaborate further on our financial results where in the wake of our strategic Pipeline prioritization and corporate restructuring in January, we have controlled our cost structure, posted a reduction in operating expenses and cash burn and successfully created operating runway through multiple potential data readouts and into the second half of twenty twenty five.

Speaker 2

Thank you, Scott, and good afternoon. Fate Therapeutics is in a solid financial position to advance our pipeline. Our cash, cash equivalents and investments At the end of the Q2 were approximately $385,000,000 In the Q2 of this year And consistent with our guidance, revenue declined significantly to $900,000 compared to $18,500,000 for the same period last year. As we indicated last quarter, our revenue is now derived exclusively from our collaboration with Ono Pharmaceutical And specifically reflects research funding associated with the development of a second product candidate against an undisclosed target in solid tumors. We expect this amount to total about $800,000 per quarter through the Q3 of 2024.

Speaker 2

As a reminder, after opting into a U. S. And European co development and co commercialization arrangement with Ono For FT825 in the Q4 of last year, we now account for that program's reimbursable expenses As an offset within our research and development costs, research and development expenses for the quarter decreased by 50% Compared to the same period last year to $40,900,000 The decrease in our R and D expenses What's attributable primarily to a decrease in salaries and benefits, including share based compensation expense, following the company's restructuring in the Q1 and from lower demand for R and D supplies, materials and equipment. General and administrative expenses For the Q2 increased by 11% compared to the same period last year to $22,600,000 The increase in our G and A expenses was attributable primarily to an increase in legal related fees. Total operating expenses for the Q2 declined 25% compared to the same period last year to $63,500,000 which includes $12,900,000 in non cash share based compensation expense.

Speaker 2

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 1st milestone payment to MSK in 2021. Up to 2 additional milestone payments may be owed to MSK based on subsequent trading values of the company's common stock. We assess the fair value of these contingent milestone payments Currently valued at $1,700,000 on a quarterly basis. In the second quarter, we recorded a non cash $390,000 non operating benefit associated with the change in fair value. Our net loss for the quarter was $52,800,000 or $0.54 per share.

Speaker 2

As we consider the remaining two quarters of the year, our demonstrated ability to wind down costs associated with our discontinued programs And additional ongoing cost rationalization efforts position us well to manage our balance sheet and advance our product candidate portfolio. As a result, we reiterate guidance for full year GAAP operating expenses to be in the range of 265 to $285,000,000 and expect that our year end cash and investments will exceed $300,000,000 I will now turn the call back over to Scott to discuss our second half twenty twenty three program milestones.

Speaker 1

Thanks, Ed. While we have successfully reduced our operating expenses and controlled our cost structure, our employees have shown great resilience In advancing our multiplex engineered iPSC derived CAR NK and CAR T cell programs. In the second quarter, We submitted and the FDA allowed our investigational new drug application for FT-five twenty two. Our off the shelf CD19 targeted CAR NK cell program for B cell lymphoma. Notably, FT-five twenty two is the company's 1st product candidate to incorporate our proprietary alloimmune defense receptor or ADR technology, which is designed to engage 4 1BB expressing host immune cells and induce NK cell activation And functional persistence.

Speaker 1

In preclinical studies, we've shown that ADR armed iPS derived CAR NK cells exhibit Potent anti tumor activity in the presence of alloreactive T cells. These data suggest that 5/22 Has the potential to drive clinical responses without administration of intense conditioning chemotherapy to patients, which may enable 522 to be therapeutically differentiated and seamlessly combined with standard of care immunotherapies Widely used in the community based settings. We are currently conducting study start up activities at multiple sites. The study is designed to assess a 3 dose treatment schedule of 5/22 in combination with CD20 targeted monoclonal antibody therapy, including with and without administration of conditioning chemotherapy to patients. The study includes 2 regimens.

Speaker 1

Regimen A, which consists of 3 days of standard conditioning chemotherapy, one dose of rituximab and 3 doses of 5/22 And regimen B, which consists of 1 dose of rituximab and 3 doses of FT-five twenty two Without conditioning chemotherapy, each 3 dose treatment regimen will commence At 300,000,000 cells per dose, patient enrollment in regimen A will open first. Subject to clearance of dose limiting toxicities, patient enrollment into regimen B We'll then open at 300,000,000 cells per dose. Dose escalation of each regimen will proceed independently With each regimen permitted to dose escalate at up to 3 times It's then current tolerated dose level. The study's eligibility criteria allow for enrollment of patients with relapsed refractory disease following at least one prior systemic regimen containing An anti CD20 monoclonal antibody and does not require that patients receive prior treatment with a T cell engager or with autologous CD19 targeted CAR T cell therapy. That said, we expect to initially enroll patients That are heavily pretreated, including patients that have previously been treated with autologous CD19 targeted CAR T cell therapy.

Speaker 1

We remain on track to enroll the first patient in the second half of twenty twenty three. We are also pleased with recent clinical progress in the conduct of our dose escalating Phase 1 studies of FT596 in multiple myeloma and of FT819 in B cell lymphoma. In our dose escalating Phase 1 study of FT596, we have now enrolled the first patient In the 3 dose treatment cohort at 1,000,000,000 cells per dose in combination with CD38 targeted monoclonal antibody No dose limiting toxicities were observed in the 2 dose treatment cohort at 300,000,000 cells per dose. Similarly, in our dose escalating Phase 1 study of FT819, We did not observe any dose limiting toxicities in the single dose treatment cohort at 540,000,000 cells And we have now expanded patient enrollment in that single dose cohort. Each Phase 1 study is now open for Patient enrollment at over 10 sites.

Speaker 1

During the second half of twenty twenty three, we believe we are well positioned to effectively drive Patient enrollment with FT596 in the 3 dose treatment cohort at 1,000,000,000 cells per dose And with FT819 in the single dose treatment cohort at 540,000,000 cells. We expect that the clinical and translational data from these cohorts will be sufficient to inform each program's therapeutic While the field of autologous CAR T cell therapy has delivered remarkable outcomes for patients with hematologic malignancies, significant hurdles have stifled the safety and effectiveness of CAR T cell therapy in treating solid We believe our multiplex engineered iPSC derived CAR T cell product platform is uniquely suited to bring a constellation of antitumor mechanisms to the fight against solid tumors. Our first product candidate emerging from our CAR T cell product platform for solid tumors is being co developed Under our collaboration with Ono Pharmaceutical, FTA25 incorporates 7 novel synthetic controls Designed to enhance effector cell function, including a novel CAR targeting HER2, A high affinity non cleavable CD16 Fc receptor, a synthetic TGF beta signal redirect receptor Endosynthetic CXCR2 receptor. In preclinical studies, FT825 demonstrated Potent and preferential targeting of HER2 expressing tumors across a range of expression levels.

Speaker 1

Additionally, FTA-twenty five resisted TGF beta mediated suppression, maintaining robust Activity across multiple rounds of tumor challenge and TGF beta exposure and also showed potent migration to CXCR2 ligands, which are often expressed on solid tumors. Robust antitumor efficacy in vivo has been observed In various subcutaneous HER2 positive xenograft models. Under our collaboration with Ono, We are currently conducting IND enabling activities and GMP manufacture. And alongside the Ono clinical development team, We are jointly finalizing the Phase 1 study design for clinical investigation. At this time, we plan to assess the Safety and activity of 825 as a monotherapy.

Speaker 1

In addition, while antibody dependent cellular cytotoxicity or ADCC is commonly associated with innate immunity. We also plan to clinically assess the safety and activity of FTA-twenty five In combination with monoclonal antibody therapy, leveraging the potential of the product candidate's High affinity non cleavable CD16 receptor to exploit ADCC, enable dual antigen targeting and overcome solid tumor heterogeneity. We remain on track to submit an IND in the second half of twenty twenty three for FT825 in patients with HER2 expressing solid tumors. Finally, we continue to assess with keen interest the potential to bring off the shelf cell therapies to patients with severe autoimmune diseases, Where there is significant need for therapeutic solutions that can durably deplete a patient's pathogenic immune cells, drive immunologic reset and meaningfully improve quality of life. We are continuing our preclinical assessment with T819 as well as with FT522, including in combination with monoclonal antibody therapy To selectively target and durably deplete pathogenic B cells, plasma cells and auto reactive T cells.

Speaker 1

As part of our ongoing assessment, we have now reviewed Phase 1 clinical data From our FT819 CAR T cell and our FT596 CAR NK cell studies In patients with B cell malignancies, with the intent of assessing the kinetics and depth of B cell depletion Observed in the clinical setting during the 1st 30 days following treatment. We identified a cohort of 6 patients From our FT819 Phase 1 study and a cohort of 7 patients from our FT596 Phase 1 study That had measurable B cells prior to treatment. We were encouraged to observe through this translational analysis That most patients in these cohorts experienced rapid and complete B cell depletion following treatment, With the durability of depletion extending out for at least 3 to 4 weeks. We are in the process of reviewing these proof Concept clinical data with multiple key opinion leaders and potential investigators to support extending the clinical reach Based on our conversations to date, we believe that the value proposition for an off the shelf Cellular therapy in autoimmune diseases is compelling with the potential to afford a significant therapeutic advantage as compared to autologous CAR T cell therapy. In closing, we've made great strides during the 1st 6 months of this year in focusing our Operations on our most innovative and differentiated programs, reducing our cost structure and extending our operational runway to reach key inflection points across our pipeline.

Speaker 1

We remain confident in our belief that our proprietary iPSC product platform is uniquely suited to create highly differentiated multiplexed engineered product candidates and incorporate novel synthetic controls of cell function with the potential to deliver multiple mechanisms of action And therapeutic benefit to patients with cancer and autoimmune disorders. I would now like to open the call up to any questions. Thank

Operator

We do ask that you please limit yourself to one question. One moment for our first question. Our first question comes from the line of Yigal Nochomovitz of Citi, your line is open.

Speaker 3

Hi, team. This is Asha Babarik on for Yigal. Thanks for taking my questions. I guess, first on 522, congrats on getting that closer to entering the clinic. How are you thinking about the sort of threshold for engraftment with or without CyFlu?

Speaker 3

And what do you think you need to see Sort of choose between either of those regimens for future advancement. And then a similar question between regimen A and regimen B. How are you thinking maybe dose escalation may diverge as you go higher in dose? Or is your expectation that they should remain relatively similar at least in the early innings?

Speaker 1

Thanks. Yes. Starting with the last question first. Both arms Can escalate in parallel. So assuming there is patients for enrollment, I'd expect us to maximize Enrollment slots to maximize sort of the time frame under which we can enroll And also compare the 2 arms.

Speaker 1

So sitting here today, I would say that again, pending patient availability, we're very excited to enroll both arms In parallel, I would look to compare, including both clinically and translationally, the results from both arms To really inform the performance of the cells with and without CyFlu. Certainly, we have an entire battery of translational assessments That we are going to conduct to inform us with respect to the activity of the cells and the influence Of potential conditioning on how those cells perform. Okay.

Operator

Thank you. One moment please. Our next question comes from the line of Michael Yee of Jefferies. Your line is open.

Speaker 4

Hey, guys. Can you hear me okay?

Speaker 1

Yes.

Speaker 4

Great. Hey, Scott. We want to ask on the new CD19 NK program, can you talk a little bit about Two parts. One is, at what point do you feel like you would be convinced that efficacy and durability is, I guess, at least as good, obviously better than the prior first and second generation programs. I think that's something that we're we and investors are trying to understand.

Speaker 4

At what point would you know that? And then secondly is, can you remind us or walk us through the with and without the conditioning, how would that work in the Phase 1, because obviously the without conditioning is an important part. So the first there's just 2 questions are kind of related.

Speaker 1

Sure. We'll start with the first question and I'll try and answer your second question. And if I don't, feel free to sort of clarify. So I think we can see based on the data that's publicly disclosed, I think we might agree That the data sets we have seen historically with 516 and 596 have been more modest With respect to response, and potentially durability of response in specifically aggressive lymphoma. Conversely, I think we might agree that the response rates we have seen in indolent lymphomas, including durability of responses with indolent Lymphomas have been quite impressive, at least from our standpoint.

Speaker 1

And so I think part of our enrollment strategy and again, We have to balance this with navigating through dose escalation. But part of our enrollment strategy is with CyFlu To understand the product's therapeutic profile in aggressive lymphoma, are we seeing a different profile emerge With FT-five twenty two in aggressive lymphoma than we've seen historically with 516 and 596. Now without CyFlu, I think it would be very interesting to observe A continued high rate of response and durability of response in and as an example, indolent lymphoma. We've historically seen very high response rates, and I think it would be very compelling for us to continue to see high response rates in indolent lymphoma without And so at some level, I think we can have this conversation. I think that's initially how we're looking at these data sets, assuming we can target enrolled patients perfectly into those cohorts.

Speaker 1

I think that's how we're initially looking at this with respect to CyFlu In an aggressive lymphoma setting to see if we have a differentiated product profile from potentially what we've seen in the past. And with no CyFlu, Always continuing to see very high rates of response and durability without in indolent lymphoma without side flu. I think both of those early sort of experiments and data sets would potentially indicate Or lead to differentiating observations with respect to this product candidate versus 516 or 596.

Speaker 4

Perfect. So it's a different tune in Aggressive and Indolent and then we want to follow-up durability, which will take some time To get our answer and compare to 516 and 596.

Speaker 1

Correct. And obviously, we have a lot of historical data On both 516 and 596 with which we can make these comparisons both clinically as well as from a translational perspective.

Speaker 4

Got it. Thank you.

Speaker 1

I think ultimately, to be fair, if we in the no sci flu arm, we're able to substantially I've changed historical observations and have a competitive product profile with autologous coarct c cell therapy with With no CyFlu, I mean that is just obviously that's game changing across the entire lymphoma landscape, whether it's aggressive or indol.

Operator

Thank you.

Speaker 1

Sorry, your second question real quick and hopefully I addressed it. Your second question, We will start out the very first cohort starts out regimen A With CyFlu, we will it's a standard 3 by 3 design. So we will enroll the first three patients, Assuming no DLP in those first three patients, two things happen. We are able to dose escalate regimen A with CyFlu And we could go up to 900,000,000 cells. In addition, the other thing that happens is After those first three patients, assuming no DLT, regimen B opens and we begin dosing without size So for instance, the 4th patient as an example could be without CyFlu.

Speaker 1

And then that regimen B would dose escalate independently from regimen

Operator

Thank you. Our next question is from Peter Lawson of Barclays. Your line is open.

Speaker 5

Hi. This is Shay on for Peter. Thanks for taking our question. Apologies if I missed this from joining late, but I believe before we were thinking that we would see data for 819 and 576 potentially not at ASH, but maybe early 2024. Is there any other guidance, now that we're getting a little bit closer to when we might see data for both of these and how substantial that update might be?

Speaker 5

Thank you.

Speaker 6

I think at this point in time,

Speaker 1

I think we'd reiterate that guidance. I think with both 819 as well as 576, We've currently opened and enrolled cohorts that we are most interested in to define The therapeutic profile of the products and inform future development strategies, I think certainly we want to be able to assess Responses in these cohorts as well as a bit of durability of response. So I think we would reiterate our guidance With respect to data on those programs, early next year or in the first half of next year.

Speaker 5

Okay. Thank you so much.

Speaker 1

Sure.

Operator

Thank you. One moment please. Our next question comes from the line of Mara Goldstein of Mizuho. Your line is open.

Speaker 1

Hi. This is Jerry Gong Gong for Mara. Thanks for taking our question. Looking at FT596 and more broadly In the broader CAR NK Part D programs, when do you think you'll be done dosing? And If a final dose is not determined yet, do you think you will continue to increase the number of cells given or give a 4th dose as well?

Speaker 1

Thank you. Sure. So with 576, we are now at a dose and a dose schedule. And again, just to be clear, 3 doses of 1,000,000,000 cells per dose with FT596 And we are able to enroll monotherapy patients as well as patients in combination with daratumumab. We do believe that this dose and dose schedule is going to be sufficient to define the product candidates therapeutic profile Based on data we've seen with other NK cell programs as well as preclinical data.

Speaker 1

So we are looking at this next cohort of patients At this dose and dose schedule is defining the therapeutic profile.

Operator

Thank you. One moment please. Our next question comes from Andrea Tan Of Goldman Sachs, your line is open. Again, Andrea Tan of Goldman Sachs, your line is open.

Speaker 7

Hi. This is Rachel on for Andrea. What type of opportunity do you see in the post auto CAR T setting in relapsedrefractory BCL For 8/19, given Precision's move to partner their asset recently, rather than bring forward this pivotal trial themselves.

Speaker 1

Yes. I think I mean, I'll reserve my comments more generally. I tend to think whether it be 522, 819, a cell Therapy, post autologous CAR T cell therapy. Generally, I continue to believe and this is based on Conversation that Fate has also had with the FDA. I continue to believe that development, post autologous CAR T cell therapy It is an exciting opportunity with significant unmet need and I would extend that obviously also to myeloma.

Speaker 1

I tend to believe autologous CAR T cell therapy. There are multiple different autologous CAR T cell therapies that are approved both In lymphoma and myeloma, I tend to believe those programs will try and be utilized as Probably as possible. I think there absolutely are going to be challenges and limitations to reaching into the community. But I do think, generally speaking, that The availability of autologous CAR T cell therapy for patients will generally increase. I do think that that will afford a Tremendous development opportunity and unmet need for patients post CAR T cell therapy.

Speaker 1

And I think that's a very exciting area for development quite frankly.

Speaker 7

Thank you.

Operator

Thank you. One moment please. Our next question comes from the line of Jack Allen of Baird. Again, Jack Allen of Baird, your line is open.

Speaker 7

Great. Thank you so much for taking the question and congratulations on the progress this quarter. It sounds like we're expecting FT819 Data next year, I was hoping you could talk a little bit about what we should expect as it relates to the size of the cohort and potential follow-up. And I guess should we assume that the dose that you have here, the single dose of 540,000,000 cells is what you're going to plan to move forward potentially?

Speaker 1

Yes. I think right now with respect to both 576, where we're looking at 3 doses at 1,000,000,000 cells per dose As well as with FT819, where we are at 540,000,000 cells single dose, Look, I think our goal is to enroll somewhere in the neighborhood of, let's call it, 10 patients In the second half of this year and we like I sort of I've mentioned before, I do think that that cohort of patients on both

Operator

Thank you. One moment please. Our next question comes from the line of Bill Morgan of Canaccord Genuity. Your line is open.

Speaker 8

Hi, thanks. So if the ADR technology works exactly as intended in humans, How confident are you that that factor is sufficient to produce a clinically relevant duration of response From 5/22 or, I guess, stated differently, what are the chances that there are some other limiting factors that are going to have to be addressed? Thank you.

Speaker 1

Yes, sure. It's a great question. And honestly, we don't know the answer to that question yet. I think, Obviously, we have to see attractive response rates in order to have an opportunity to have an attractive durability of response. I'll turn it over to Bob and certainly he can give you a preclinical perspective with what we've seen with respect to durability of response When we've armed these cells with ADR, yes, I'll let Bob speak to it.

Speaker 6

Thanks. It's a really good question. I'll start off by saying replacing Slide Flu has multiple factors. Obviously, the antitumor factor associated with it in lymphoma, there is the creation of Space, availability of cytokine, as well as avoidance of rejection by the host immune compartment. So is ADR is the 5 Point edited CAR19 product going to overcome all those.

Speaker 6

We hope so. Preclinical model says that the CAR19 and the CD16 targeting anti CD20 or CD20 positive cells in combination is very robust. It's 522 has a stronger chassis that 596, so we expect And both potent response from the CAR and the CD16, the ADR technology appears to protect cells against the allo reactive attack. So we expect the cells to be there and protect themselves. So that part of FIFU may not be necessary.

Speaker 6

But as your question is great, it's also, as Scott mentioned, hard to answer until we see some of the clinical data. Pre clinically, we see Enhance portency, enhanced protection and enhanced activity. So we're hopeful that we'll seek good responses, but we'll need to wait for clinical data

Speaker 8

Great. I appreciate the commentary. Thank you.

Operator

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

Speaker 1

Great. Thank you all for participating in today's call. Be well. Look forward to seeing you all soon.

Operator

Thank you. Ladies and gentlemen, this does conclude today's conference. Thank you all for participating. You may now disconnect. Have a great day.

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