Fate Therapeutics Inc Q2 FY2022 Earnings Call

Welcome to the Fate Therapeutics Second Quarter 2022 Financial Results Conference Call. As a reminder, today's call is being recorded.

Thank you. Good afternoon, and thanks, everyone, for joining us for the Fate Therapeutics Second 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-Q for the quarter ended June 30, 2022, 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. 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 included in our Form 10-Q for the quarter ended June 30, 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. Today, we will highlight key objectives we are striving to achieve during the next 6 months with our off-the-shelf iPSC-derived NK and T cell programs for the treatment of cancer. Our top near-term focus remains our T cell malignancy franchise, where we are seeking to advance into late-stage development for relapsed/refractory aggressive lymphoma and to assess the feasibility of treating newly diagnosed patients in a community setting with FT596+R-CHOP without CY/FLU conditioning chemotherapy. We are also approaching key inflection points under our iPS-derived CAR NK and CAR T cell collaborations with Janssen and Ono where multiple programs are poised to advance towards IND submission. And with numerous hurdles continuing to challenge the manufacture and development of patient and donor-derived engineered cell therapies, we continue to believe iPSC technology is the winning platform for mass production of off-the-shelf multiplex engineered cell products. We look forward to sharing first-in-human clinical data from our engineered NK T cell cancer immunotherapy programs and to unveiling new multiplexed engineered IND candidates that further incorporate novel synthetic functionality for the treatment of cancer during the next 6 months. In our pursuit of pivotal readiness with our iPS-derived NK cell programs for relapsed refractory aggressive B-cell lymphoma, we continue to make great strides across our clinical, regulatory and manufacturing operations. Under our Phase I study of FT596 in combination with rituximab, we observed a favorable safety profile in our single dose and 2 dose escalation cohorts at up to 900 million cells per dose. And we are continuing to further evaluate dose and schedule to maximize therapeutic index. To that end, we have initiated enrollment in a single dose and 2 dose cohorts at 1.8 billion cells per dose. And upon clearance of dose-limiting toxicities, we are set to open a 3-dose cohort at 1.8 billion cells per dose to evaluate a further increase in cell load. Eligible patients are permitted to receive additional cycles of treatment. And the clinical protocol allows for further dose escalation and for the initiation of multiple expansion cohorts at any clear dosing schedule. On the regulatory front, our FT516 RMAT Type B multidisciplinary meeting with the FDA is scheduled for the third quarter. The agenda includes a discussion of multiple registrational pathways that may be available for our off-the-shelf iPS-derived NK cell programs for relapsed refractory aggressive B-cell lymphoma, including in patients whose disease is refractory to or have relapsed following prior treatment with FDA-approved CD19-targeted CAR T cell therapy. Importantly, no standard therapies are available for these patients, and real-world data continue to indicate that these patients have extremely poor treatment outcomes. With respect to manufacturing, our state-of-the-art multi-drug product manufacturing facility located in Poway, California has opened and is poised for GMP production with aseptic process validation now successfully completed and engineering runs ongoing. The facility is designed to supply drug products for the conduct of pivotal studies and initial commercial launch and is located on the campus of the company's corporate headquarters, allowing for full operational integration among the technical operations, regulatory quality, research and development and corporate teams. Across our clinical, regulatory and manufacturing operations, we remain well-positioned to optimize dosing schedules of FT596 to chart a regulatory pathway toward approval with input from the FDA and to mass produce drug products for pivotal study execution from our state-of-the-art GMP facility. We look forward to providing a comprehensive update for our IPS-derived NK cell programs in relapsed/refractory B-cell lymphoma as we continue to progress these 3 key franchise pillars over the coming months. In addition to delivering transformative outcomes to heavily pretreated patients with relapsed refractory B-cell lymphoma, we are also seeking to reach patients in the community setting who might benefit from earlier treatment with cell-based cancer immunotherapy. We believe the use of intense conditioning chemotherapy that accompanies the administration of both autologous and allogeneic cell-based cancer immunotherapies is a significant barrier to broader patient access. And that the delivery of off-the-shelf cell therapies in the community setting as an add-on to frontline immunochemotherapy regimens with CY/FLU conditioning chemotherapy may hold significant therapeutic value for many patients. To that end, we have worked with key opinion leaders and investigators to finalize a clinical protocol that brings FT596 to newly diagnosed patients with aggressive lymphoma in the community setting in combination with R-CHOP, the standard first-line treatment regimen. The clinical protocol assessing FT596+R-CHOP in patients with newly diagnosed aggressive lymphoma has been submitted to the FT596 IND. The treatment schema allows for the administration of up to 6 doses of FT596 with outsized flu conditioning chemotherapy. Each 1 dose of FT596 administered with each of 6 standard cycles for R-CHOP. Study start-up activities are ongoing at multiple sites, and we expect to begin treating patients with FT596+R-CHOP in the second half of 2022. In addition, as part of our quest to substantially reduce or eliminate their requirement for conditioning chemotherapy in the field of cell-based cancer immunotherapy and reach patients earlier in care, we continue to research new synthetic functional elements for integration into our product candidates that can harness a patient's intact immune system to potentiate the activity and persistence of adoptively transferred cells. At the American Association for Cancer Research in April, we unveiled our proprietary alloimmune defense receptor or ADR, which selectively targets 4-1BB expressing activated immune cells. In preclinical models, we showed that ADR armed iPSC-derived NK cells uniquely expand, persist and maintain antitumor activity in vitro in the presence of alloreactive T cells. These preclinical data provide proof of concept that ADR armed cell therapies have the potential to persist and induce potent antitumor activity without requiring a patient to undergo conditioning chemotherapy. During the second half of 2022, we expect to present new preclinical data for our ADR technology and highlight its integration into a next-generation NK cell product candidate. Turning to our collaborations with Janssen and Ono. We continue to show strong momentum in bringing multiplexed engineered IPS-derived CAR NK and CAR-T cell collaboration programs to patients for the treatment of hematologic malignancies and solid tumors. And we are reaching key inflection points where multiple candidates are poised to advance towards IND submission. Under our collaboration with Janssen, entered into in April 2020, Janssen designated and contributed novel binding domains targeting 4 tumor-associated antigen programs, two of which are directed to hematologic malignancies and two of which are directed to solid tumors. Janssen maintains the option, subject to its payment of an option exercise fee prior to IND submission to initiate worldwide clinical development of and to commercialize collaboration products under each antigen program. We maintain an opt-in right to co-commercialize and share equally in profits and losses of collaboration products in the U.S. under each antigen program. In May, Janssen exercised its option on a first antigen program, triggering a $10 million payment to fee, and we have now advanced a second antigen program to the stage of option exercise decision. We are currently working with Janssen to prepare and submit 2 IND applications: one for each of these two antigen programs for off-the-shelf iPS-derived CAR NK cell collaboration products. Under our collaboration with Ono, entered into September 2018, Ono has contributed novel binding domains targeting one solid tumor-associated antigen for the development of off-the-shelf iPS-derived CAR T-cell therapy. Upon the achievement of a specified preclinical milestone, Ono retains the option subject to its payment of an option exercise fee to conduct worldwide clinical development and commercialization. We maintain the right to co-develop and co-commercialize collaboration products in the U.S. and Europe. We have now initiated the generation of the master cell bank for a multiplexed engineered iPSC-derived CAR T cell collaboration candidate and are positioned to achieve the specified preclinical milestone and initiate IND-enabling activities later this year, at which time Ono has the right to exercise its option subject to its payment of the option exercise fee. Given the success we have achieved working together on a first solid tumor antigen program, we expanded our collaboration with Ono in the second quarter to add a second solid tumor antigen program and to include the development of both CAR NK and CAR-T cell collaboration candidates. We are very pleased with the success we've achieved with Janssen and Ono in developing multiplexed engineered IPS-derived CAR NK and CAR-T cell product candidates for both liquid and solid tumors. We are poised to achieve significant milestones in connection with option exercises by Janssen and Ono and advance multiple collaboration products toward IND submission over the next 6 months. During the second half of 2022, we will take the opportunity to showcase our leadership in the development of iPS-derived NK and T cell cancer immunotherapies, including for solid tumors at the Society for Immunotherapy of Cancer Annual Meeting in November and for hematologic malignancies at the American Society of Hematology Annual Meeting in December. At SITC, we look forward to highlighting our clinical progress and innovation under our solid tumor franchise where we continue to invest in building a deep pipeline of multiplexed engineered IPS-derived CAR NK and T cell product candidates, including through the development and incorporation of new synthetic elements designed to overcome critical barriers that limit the effectiveness of cell therapy, such as cell homing, tumor escape and immunosuppressive tumor microenvironment. In the second quarter, I am pleased to announce that we treated the first patient in our multicenter Phase I study of FT536, the company's first ever iPSC-derived CAR NK cell program for solid tumors. FT536 incorporates a novel CAR targeting the major histocompatibility complex Class I related proteins A and B. High expression of MICA and MICB proteins, which is induced by cellular stress, damage or transformation has been reported on many solid tumors. However, proteolytic shedding of the alpha-1 and alpha-2 domains of these proteins is a common mechanism of tumor escape. FT536 uniquely targets the alpha-3 domain of MICA and MICB, which is resistant to shedding and therefore represents a promising strategy to overcome tumor escape. We believe the product candidate's novel mechanism of action, including its ability to target other antigens in combination with monoclonal antibody therapy to advance our iPS-derived CAR-T cell product candidates for solid tumors that are advancing towards IND-enabling studies, which include an iPS-derived CAR T cell product candidate that incorporates 7 synthetic modalities to overcome tumor heterogeneity, promote trafficking and induce activation in response to repressive signaling in the tumor microenvironment. We believe we have one of the most novel, diverse and sophisticated cell-based cancer immunotherapy pipelines for solid tumors, which is uniquely enabled by our proprietary iPSC product platform. At ASH, we are also excited to share clinical data across our hematologic malignancy franchises. In addition to our NK cell franchise in lymphoma, we continue to see investigator enthusiasm for our off-the-shelf iPS-derived CAR T cell program, FT819. On multiple fronts, FT819 is truly a unique first-in-class product candidate. Not only is it the first-ever iPS-derived T cell therapy to undergo clinical investigation, FT819 incorporates a biolelic insertion of an anti-CD19 CAR transgene into the T-cell receptor alpha constant locus with complete disruption of T-cell receptor expression. And its CAR construct is comprised of a novel 1XX costimulatory domain that is designed to balance T-cell activation and exhaustion. In the setting of relapsed/refractory AML, we look forward to sharing clinical data with FT538, both as a monotherapy and in combination with daratumumab in the high dose, multi-dose cohorts, where we are now treating the first patients in 3 dose cohorts at 1.5 billion cells per dose. And finally, in the setting of relapsed/refractory multiple myeloma, while dose escalation with FT576 is ongoing in the low-dose cohorts and with single-dose treatment schedules, we look forward to seeing the initial activity profile of our novel BCMA binder and to assess the multiple potential benefits conferred in combining FT576 with daratumumab, including enabling multiantigen targeting of BCMA and CD38 as well as reducing competition from endogenous immune cells for cytokines to further potentiate the functional persistence of FT576. I would now like to turn the call over to Ed to highlight our second quarter financial results.

Thank you, Scott, and good afternoon. Fate Therapeutics is in a strong financial position to advance our pipeline. Our cash, cash equivalents and investments at the end of the second quarter of 2022 were approximately $581 million. In the second quarter of this year, our collaboration revenue derived from our partnerships with Janssen and Ono Pharmaceutical increased by $5.1 million to $18.5 million compared to $13.4 million for the same period last year. Research and development expenses for the second quarter increased by $33.3 million to $81.3 million compared to $48 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, investments made in equipment and materials and in expenses associated with R&D fees and third-party consultants. General and administrative expenses for the second quarter increased by $8.2 million to $20.4 million compared to $12.2 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 expenses. Total operating expenses for the second quarter were $101.7 million, which includes $20.5 million in noncash share-based compensation expense. Please note that in connection with the development of our off-the-shelf iPSC-derived CAR T-cell product candidate, FT819, we previously achieved the first clinical milestone set forth in our amended license agreement with Memorial Sloan Kettering Cancer Center, thereby triggering a first 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, ranging from $100 to $150 per share. We assess the fair value of these contingent milestone payments currently valued at $9.9 million on a quarterly basis. In the second quarter, we recorded a noncash $5.9 million nonoperating benefit associated with the change in fair value. Our net loss for the second quarter of 2022 was $76.1 million or $0.79 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.

Your first question is coming from Tazeen Ahmad of Bank of America.

Maybe a point of clarification for this RMAT meeting that you scheduled this quarter for 516. Can you just give us a little bit more visibility on what you'll be discussing at the meeting? And when should we expect to hear back how that meeting went? I would have a follow-up after that.

Sure. I'm not going to get into the specifics of the regulatory discussion, but we plan to explore various registrational pathways for our iPS-derived cell product candidates. We believe these pathways are relevant for both FT516 and FT596. Specifically, we will concentrate on development pathways that are broadly applicable, particularly focusing on the patient population that has undergone CAR T cell therapy, which we see as a potential fast-to-market strategy. We also aim to confirm a study design with the FDA for that patient population. Regarding timing, you typically receive minutes from the FDA detailing the conversation and findings within about 30 days.

Okay. And then I guess you'll wait for the minutes to advise us of what's next?

Correct. I certainly don't want to jump the gun on an FDA discussion.

Yes, of course. Understood. And then as it relates to the 596 and rituximab studies, the 1.8 billion cell dose cohort, when do you think we can start to see data from that? And what type of data should we expect to be good data based on what you're looking for?

Sure. I'll turn it over to Wayne to comment on it. With respect to a little bit in terms of what we think would be good data, I think, again, feasibility that we can give FT596 in combination with R-CHOP and with CY/FLU would be interesting. And again, many of those validation sets of data will be based on translational. So for instance, we can continue to look at FT596 and how it performs in the first cycle versus the sixth cycle of R-CHOP. And certainly, we can compare that to how FT596 performs from a translational perspective versus CY/FLU, given the number of patients we've treated. I'll let Wayne talk about the study a little bit.

Yes. So with respect to the study, as was mentioned, the FT596 protocol allows for a lot of different options with respect to the dosing schedule, right? So currently we're initiating a dose cohort where we are administering FT596 at 1.8 billion cells per dose administered twice in the cycle. And once we clear that, then the plan will be to further go in different directions with respect to dose and schedule optimization, including the possibility of further dose escalation as well as giving more doses, i.e., 3 doses in a given treatment cycle, so.

That's in the relapsed/refractory setting.

In the frontline setting, it's a little bit different because we're giving a single dose of FT596 following a standard cycle of RCHOP. So as far as like data availability, it all depends on how quickly we can enroll just knowing the fact that getting initial responses will take some time just based on what we have per protocol. So as soon as we have that data, we will obviously be sharing that with you.

Your next question is coming from Michael Schmidt of Guggenheim Securities.

This is Kelsey on for Michael. I guess first, how do you think about the evolving post CAR-T landscape now that we're starting to see filings for the bispecific antibodies, which have shown pretty compelling post CAR-T activity. And then maybe building upon that last question, I guess, as you continue evaluating the higher cell dose as well as multiple cycles for 596, I guess what gives you confidence that you'll have enough data with enough follow-up by year-end to determine if this is the go-forward asset?

Yes, absolutely. I think your first question is very relevant. The landscape for treatments, whether it be lymphoma or post-CAR T cell therapies, is certainly dynamic. The public data on T cell engagers is very encouraging, particularly considering the current options where there is no standard of care and response rates are generally in the teens, with progression-free survival measured in just a couple of months. I believe T cell engagers could represent a significant advancement in this area. When considering the target product profile, we are definitely keeping T cell engagers in mind, both for late-line and earlier-line patients where we expect them to make progress. It's important to note that, for this patient group, we don't need extensive long-term durability data to assess our impact on durability of response in late-line patients post CAR T, especially since the current standard interventions typically allow for progression-free survival of 2 to 3 months and overall survival of 5 to 6 months.

Great. And then maybe the second one.

Sorry, what was your second question? I apologize.

Yes. That's okay. I had a long question. I guess just kind of as 596 continues to progress and you're evaluating the higher cell dose and the multiple cycles, I guess what kind of gives you the confidence that you'll have enough data with enough follow-up by year end to kind of make that go-forward decision with one or the other?

Yes. I believe we still support the idea that, particularly in aggressive lymphoma, responses occur rapidly. There is ample data to substantiate this in the autologous CAR T-cell area. We have data from our investigators as well as our own datasets that suggest and reinforce that responses happen quickly. Therefore, I think long-term durability is not necessarily required to assess whether we believe the assets are aligning with the appropriate product profile and will ultimately be very competitive.

Your next question is coming from Tyler Van Buren of Cowen.

As we think about the update on the year-end with FT516 and 596, can you give us a sense of how many patients will have 12 months of follow-up by the ASH cutoff? And when we think about potential denominator for assessing 12-month CR rate. And what do you believe is the minimum bar to be competitive with autologous CAR T bispecifics? And do you think this will be a relatively definitive observation of long-term durability for your platform, which I guess you just answered to some extent?

Yes. I mean there's 5 questions in there. I mean at some basic level, we do not necessarily expect that we're going to have long-term durability data on the high-dose cohorts, given that we're just initiating at 1.8 billion cells, whether that be 1 dose, 2 dose or 3 doses. So relatively speaking, at the high dose cohorts, we think the data will still be emerging at those higher doses. How we compete with T cell engagers or CAR T cell therapy, I think it really depends on the setting. I don't think patient-derived CAR T cell therapy is a line of therapy post CAR-T. So I don't think that is something you're competing with post CAR-T. T cell engagers, absolutely. I think T cell engagers will be used post CAR T. So I think that is a force of competition. In terms of earlier line usage, I do not believe that autologous CAR T cell therapy or even cell therapies that significantly rely on CY/FLU will be broadly utilized in early line therapy in the community. Although again, once again, I do think T cell engagers will be used there. So I think in the earlier line settings, I think T cell engagers are a competitive force. At Memorial Sloan Kettering and MD Anderson, absolutely autologous CAR T cell therapy is a bar. That said, I believe there still continues to be at, for instance, those specialized centers, a significant number of patients that do not receive autologous CAR T cell therapies for a number of reasons. And that I do think provides an opportunity even at those specialized centers for folks developing allogeneic and off-the-shelf solutions.

Your next question is coming from Yigal Nochomovitz from Citigroup.

This is Ashiq Mubarack representing Yigal. Looking at the bigger picture, with [Indiscernible] now advancing in the second line of BCL, considering the success of the TRANSFORM and ZUMA trials, has this influenced your commercial strategy? We understand you're beginning with the post CD19 CAR T setting. However, when contemplating the frontline setting, do you foresee the possibility of needing to conduct some form of head-to-head study comparing CAR Ts, either 516 or 596, as they become more prominent?

I think that in the long run, it's certainly a possibility. However, I believe that there will be significant challenges in moving post CAR T-cell therapy to the second line in the community setting. As we analyze the landscape, we typically categorize it into three groups: the community setting, specialized centers, and patients who are very late line after CAR T cell therapy. As I mentioned earlier, the outcomes for patients post CD19 CAR T cell therapy are generally poor. Nevertheless, we've recently observed some encouraging responses from T cell engagers after CAR T. I maintain that the standard chemotherapy and immunotherapy regimens, which have been used for years, will remain the primary treatment for patients early in the community setting. Our strategy is to integrate a cell therapy without CY/FLU into those regimens, which we believe is a superior approach compared to combining CY/FLU with CAR T.

Okay. Got it. And then maybe one follow-up. I know you'll be speaking with the FDA later this quarter, but do you still believe that you'll need to conduct a single-arm study in B-cell lymphoma for the post-CD19 CAR-T setting? Or do you think that is still really open to debate?

Well, we certainly know that with a more definitive view in the next couple of months, I believe if I look at the landscape generally of late-line cancer salvage setting, I do believe that the FDA will be open, albeit it may be an accelerated approval, I do believe the FDA will be open to a single-arm study.

Your next question is coming from Michael Yee of Jefferies.

I guess pivoting away from lymphoma for a moment. Can you just remind us, since it sounds like you will give an update on solid tumors around SITC, whether that would be mostly 538 with the ongoing 3 antibodies and how to put that into context? And it feels like 536 MICA/B is just early. So I presume nothing there. So maybe just talk a little bit about 538 or what we would get there. And then with myeloma, you could understand that huge market and certainly similar to post-CAR CD19, there's a post-BCMA market. So with 53 and 576 ongoing, how do you think about what's needed there given that BCMA as a bar, but maybe also just post-BCMA what we have data there to give us some picture at the end of the year?

Sure. I'll address your last question first. I believe the multiple myeloma market and our strategy will closely resemble our experience in lymphoma. For both 538 and 576, we're engaging with patients who have already undergone treatment with BCMA-targeted therapies. I see a strong potential to swiftly advance a product candidate into a registrational pathway for patients post-CAR T cell therapy or post-BCMA targeted therapy, similar to our approach with lymphoma following CD19 T cell therapy. This opportunity is indeed present. Our strategy will likewise focus on leveraging FT576, as it is designed to work in combination with daratumumab, which is commonly used early in treatment. We see foundational synergies with daratumumab that will enable us to position this product candidate in early line therapy and to treat patients within the community. Regarding CAR T cell therapy, I understand that while studies have been conducted, there may be challenges in reaching large patient populations. Thus, I anticipate that our multiple myeloma strategy will mirror our approach in lymphoma, particularly in light of the current landscape. At SITC, we plan to broadly showcase our solid tumor franchise, including early clinical data for 538 as we continue dose escalation, and I can share insights on the early clinical data for FT536, which has a novel product and targeting strategy. We will also discuss innovative and collaborative product candidates that are emerging. I expect to provide a comprehensive update on our solid tumor franchise, covering clinical, preclinical, and collaboration candidates that are on the horizon. Perfect. And just to clarify your comment on myeloma. BCMA does set a high bar in the later line. So if you do have patients post-BCMA similar to what we're talking about in lymphoma, if you see CRs there or PRs, that would be compelling to you? Yes, absolutely. I believe that FT576, like FT596, stands out because we have developed products for lymphoma and myeloma that are intended to work alongside monoclonal antibody therapy and facilitate multiantigen targeting. In lymphoma, particularly with the 20 target, and CD38 in myeloma, these targets are generally expressed more durably.

Your next question is coming from Peter Lawson of Barclays.

This is Shian for Peter. Ahead of the ASH update you mentioned, should we still expect an update around summer, like in August, for 516 and 596? Will you also include an update on the RMAT meeting outcomes at that time, or is it too soon? I have a quick follow-up after that.

It would be very challenging for us to offer an RMAT discussion in August. The meeting is set for the third quarter, but we will definitely wait for the FDA's minutes before fully understanding that regulatory discussion. Our current plans include providing a comprehensive update on our development strategy in lymphoma regarding our NK cells. To give this comprehensive update, we really would prefer to have the regulatory feedback. We anticipate receiving data at higher dose levels across three dose cohorts and are preparing to launch production of a pivotal product. Therefore, we aim to provide a thorough update; however, it won't happen in August, but we are looking to accomplish this within the next six months.

Okay. Understood. So a more comprehensive picture maybe around ASH update time frame. And then given that meeting is in 3Q, how should we be thinking of whether the pivotal study in post CAR-T patients potentially could start by year-end? Or should we think that's more likely a first half event? And is 596 still on the table along with 516.

Yes, we will continue discussions with the FDA regarding the franchise. We will keep generating more data for 516 and 596. We expect to be in a position to decide on a product candidate, which I believe will be a multi-antigen targeted product candidate, specifically FT596, as we think it has wide relevance across various treatment lines in lymphoma.

Your next question is coming from Nick Abbott of Wells Fargo.

This is James Shin on for Nick. Just 2 quick ones from our end. Will there be an update for 538 AML program on top of the cellular treatment program by the end of this year? And then number two, I'm not sure how much you can say about the Shoreline lawsuit, but is there any idea when this could resolve or when we could hear an update?

So the last question is easy. I'm not going to comment on intellectual property litigation other than to say we believe we have foundational intellectual property related to IPS cell technology that can be broadly applied in the field and more specifically to NK cell and T-cell cancer immunotherapy. With respect to FT538 in AML, we are dosing at the highest dose level least that is currently allowed under the protocol, 1.5 billion cells, multiple doses, 3 doses in a cycle. And yes, we believe we'll be in a position to provide an update on FT538 in relapsed/refractory AML ASH.

Your next question is coming from Matt Biegler from Oppenheimer.

Just a question on the CAR T cellular treatment setting. It sounds like you're defining it as both relapse and/or refractory. I know we've seen really good remissions induced in the relapse setting, but can you just kind of remind us where we're at with refractory, have we seen any efficacy there?

So I think the data that we've reported to date, in the patients that are more refractory, we have seen less success than the patients that for instance have previously responded. I think it's too swift still relatively speaking smaller data sets where we would make a clear distinction between relapse versus refractory. Obviously, most of our data sets to date that we've disclosed publicly have been at lower doses and using only a single dose regimen. Obviously we're now getting to the point where we're at higher doses, multi-dose regimens and significantly increasing the cell load during the first 2 weeks. I think it would be premature today for us to, for instance, solely select patients that are relapsed.

Your next question is coming from Daina Graybosch from SVB Securities.

I have two questions. First, can you discuss the unique biological effects of CHOP chemotherapy compared to CY/FLU and explain why you believe it is a suitable conditioning regimen for FT596 specifically, as opposed to other cell therapies? Second, why have you chosen to administer one dose of FT596 with R-CHOP before gathering all the data regarding multiple doses in the relapsed/refractory setting?

I will allow Wayne to add to my comments, as I may overlook some details. Regarding the last question, I want to clarify any misunderstandings. A CHOP cycle lasts 21 days, and we are administering a single dose in each cycle. Specifically, CHOP is typically given during the first five days, and we plan to introduce FT596 about three to four days later, around day eight to day ten. We are focusing on frontline patients, and I believe it is wise to start with a single dose for each cycle in this group. This doesn't mean we can't increase the cellular load through dose escalation or multiple doses in R-CHOP. However, considering the nature and history of these frontline patients, starting with a single dose in a cycle seems reasonable. Historically, we have observed that even at lower doses, FT596 has a persistence profile of approximately 14 days, which aligns well with fitting a single dose into the 21-day cycle. Regarding R-CHOP, it's quite intriguing. Traditionally, cell therapy has depended on CY/FLU as a conditioning regimen. The biological mechanism of action in CY/FLU seems to be multifaceted, likely due to a cytokine spike that enhances cell activity while decreasing competitive forces from other cells vying for those cytokines. The key question with R-CHOP is whether the cytokine spike it generates is similar to that of CY/FLU. I believe we will gain significant insights from the early translational data. Importantly, FT596 offers a unique advantage over other cell therapies that have attempted similar approaches. First, it features an IL-15 receptor fusion, providing its own fueling mechanism and reducing its reliance on CY/FLU. Second, it is intended to work synergistically with rituximab, which will serve as an additional potentiating signal. Wayne, do you have any thoughts on the comparison between R-CHOP and…

No, other than I think it's an important question to address, right, and which is why we feel it's an important study to conduct, right? And even with FLU/CY I would just point out that there's a lot of heterogeneity with respect to the doses of FLU and CY loans even in the multiply relapsed refractory setting. So I think the main question we want to address is are other chemotherapy regimens such as CHOP sufficient to support INK function and persistence. And that's what we aim to do in this study.

And I think there is not necessarily what R-CHOP do, I think has been demonstrated. But I think with, for instance, bendamustine, I think it's been clearly demonstrated that you can replace, for instance, CY/Flu with bendamustine in lymphoma. There's a lot of data out there, and there's data that I'm aware of that I don't believe is published yet, that is going to reinforce that, for instance, bendamustine can be used very effectively instead of CY/FLU. So I think the potential is to plug into standard immunochemotherapy regimens in early line in the community setting, I think is where the field of cell therapy needs to drive.

Your next question is coming from Robyn Kay Karnauskas from Truist Securities.

I just have a few, and these are really simple clarifications. So just regarding data readout. You said you want to have a comprehensive data readout in the next 6 months. But I think you also said we'll have it at ASH. Can you just give more clarity, are we for sure going to have data, I think, on 596 at least at higher doses like $900 million, maybe not the top dose at ASH? Or are you thinking that potentially well some data and then a more comprehensive read out a little bit later. I'm just trying to understand the cadence of data in the second half of the year.

Yes, our goal is to provide a comprehensive update, whether it happens at ASH during the formal conference, at an investor event at ASH, or in January. We want to give a thorough update on the program, which will cover regulatory, manufacturing, and clinical aspects. I believe this will occur within the next six months.

Okay. And then you are having your RMAT meeting this quarter. Would you still be on track for starting a trial by the end of the year? Or could that be pushed out to early next year?

Certainly going to depend on an RMAT discussion. It will depend what kind of feedback we get from the FDA with respect to our proposed design of a study. But I do think at least from a manufacturing perspective, we'll be well-positioned to produce pivotal material. The regulatory strategy will come into clarity within the next couple of months. And obviously, the clinical data will be further elucidated in the next couple of months.

Got it. That's really helpful. The last question is more broad. You presented the preclinical data from AACR and ADR. Considering the efforts to deliver a more potent cell therapy to navigate around and manage Flu/CY, is ADR sufficient? Or are additional strategies necessary to achieve that super high response rate with the initial dose of cell therapy? So, is ADR enough, or what additional actions do you think we need to take to reach that high response?

Yes, to clarify, we are investing in innovation. For instance, we recently discussed FT596 in combination with R-CHOP. We need to conduct experiments to determine if R-CHOP is effective in enhancing FT596. Nonetheless, our goal is to keep investing in innovation. I believe that with NK cells, the challenge is to consistently focus on the signals that activate these cells. Additionally, reducing or eliminating dependence on CY/FLU is crucial for broad patient use across lymphoma, myeloma, and solid tumors. As we focus on advancing technology, approaches like ADR could differentiate us significantly. If successful, that technology would enable cell therapies to be administered early and frequently for treating patients with lymphoma, myeloma, or solid tumors.

Your next question is coming from Mara Goldstein from Mizuho.

I have a question regarding the RMAT meeting. Will you discuss the CMC aspect of the product along with the clinical discussion? Additionally, depending on the meeting's outcome and the potential trial start, do you expect any changes in your financial outlook for 2023? I have a follow-up.

The RMAT discussion in the third quarter will include some CMC topics, and one of the benefits of RMAT is the opportunity for frequent engagement with the FDA. We may seek a rapid follow-on meeting with the FDA to explore some of the CMC questions in greater detail. Generally speaking, there are definitely some CMC questions we plan to investigate. For example, potency assays are often a point of discussion in cell therapies. However, it's important to note that we have been collaborating with the FDA for the past three years on the CMC manufacturing of iPS-derived cell therapy. During this time, we have had extensive interactions with the FDA regarding CMC, and we believe we are in a solid position concerning CMC for our IPS-derived NK and T cell product candidates, given the ongoing interaction and the multiple INDs we’ve cleared over these years. Regarding our burn rate, our current projections take into account our progress in two pivotal studies.

Got it. My second question is about the multiple myeloma study. It was mentioned briefly earlier, but I'm curious about the study involving 576, especially in relation to the combination with ZARA. What studies or agents should we consider as benchmarks? Should we compare this to the bispecific, for example? Can you provide some clarity on that?

Yes, I often mention that the comparison really depends on the context. Ultimately, what's important is the line of therapy being utilized and the type of intervention setting. Are we in an academic institution or a community environment? Are we considering a line of therapy after previous treatments have not worked? All these factors are significant. We're still in the early stages of dose escalation, focusing on the activity and synergy with daratumumab.

Right. And lastly, at ASH, do you anticipate having some form of in-person corporate meeting, or will it solely be a conference?

That's TBD.

Okay. We don't appear to have any further questions in the queue. I will now hand back for any closing remarks.

Perfect. Thank you, everyone, for your participation today. Appreciated all the great questions. Be following up very soon. Be well.

Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.