Fate Therapeutics Inc Q1 FY2023 Earnings Call

Welcome to the Fate Therapeutics First Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. This call is being webcast live on the Investors section of Fate’s website at fatetherapeutics.com. As a reminder, today's call is being recorded. I would now like to introduce Scott Wolchko, President and CEO of Fate Therapeutics.

Thank you. Good afternoon and thanks everyone for joining us for the Fate Therapeutics first quarter 2023 financial results call. Shortly after 04:00 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 March 31, 2023 was filed shortly thereafter and can be found on the Investors section of our website under Financial Information. Before we begin, I would like to remind everyone that except for statements of historical facts, the statements made by management and responses to questions on this conference call are forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that can cause actual results to differ materially from those in such forward-looking statements. Please see the forward-looking statement disclaimer on the company’s earnings press release issued after the close of market today, as well as the risk factors included in our Form 10-Q for the year ended March 31, 2022 that was filed with the SEC today. Undue reliance should not be placed on forward-looking statements, which speak only as of the date they are made as the facts and circumstances underlying these forward-looking statements may change. Except as required by law, Fate Therapeutics disclaims any obligation to update these forward-looking statements to reflect future information, events or circumstances. Joining me on today’s call are Dr. Wayne Chu, our Chief Medical Officer; Ed Dulac, our Chief Financial Officer; and Dr. Bob Valamehr, our Chief Research and Development Officer. We will focus today's discussion on the impact of our strategic pipeline prioritization and corporate restructuring, including the unwinding of our collaboration with Janssen, our significant reduction in operating expenses and the extension of our cash runway into the second half of 2025. In addition, we will highlight our sharpened clinical focus for our FT576 BCMA-targeted CAR NK cell program in multiple myeloma and our FT819 CD19-targeted CAR T-cell program in B-cell malignancies. Finally, we will share our progress in advancing our key 2023 program initiatives for our off-the-shelf iPSC-derived CAR NK and CAR T-cell product pipeline, including under our collaboration with ONO Pharmaceuticals. The first quarter of 2023 was a challenging period of transition for the company. The quarter was marked by the termination of our collaboration with Janssen where we completed an orderly wind down of all collaboration activities. This included discontinuing all research and preclinical development of collaboration candidates, halting ongoing GMP manufacturing campaigns in support of clinical development and withdrawing an IND application that had been allowed by the FDA for a first collaboration product. As of the first quarter's end, we were no longer incurring any costs in connection with the Janssen collaboration and all amounts owed by Janssen to Fate have now been fully paid. We also completed a strategic review of our iPSC-derived NK cell and T-cell programs, electing to focus operations on our most innovative and differentiated CAR NK-cell and CAR T-cell product candidates with the potential to address large unmet clinical needs. As a result, we decided to discontinue further development of our FT516, FT596, FT538, and FT536 NK cell programs. While we are committed to minimizing all operating costs across these discontinued programs, there are a number of patients that have been treated in our FT516 and FT596 Phase I studies for relapsed refractory B-cell lymphoma that remain on study and in response. And we have decided to continue post-treatment follow-up for these patients for up to one year to assess duration of response. As such, we expect clinical trial costs associated with our FT516 and FT596 programs to dissipate over the remainder of 2023. As a consequence of the termination of our Janssen collaboration and our strategic pipeline prioritization, we significantly reduced our workforce. In early January, we reduced our headcount by over 60% to approximately 220 employees, which we expect to remain flat at least through the remainder of 2023. In addition, we substantially curtailed our support of investigator-initiated clinical studies and sharpened the scope of our sponsored research agreement. Finally, we are working to reduce our overhead costs and consolidate our operations at our corporate headquarters. With the implementation of this restructuring, we are well-positioned to achieve key milestones across our programs with a cash runway that extends into the second half of 2025. Before we review our progress in advancing our key 2023 program initiatives, I would like to turn the call over to Ed to elaborate on our financial results for the first quarter of 2023.

Thank you, Scott, and good afternoon. Fate Therapeutics is in a strong financial position to achieve key inflection points across its pipeline. Our cash, cash equivalents and investments at the end of the first quarter were approximately $413 million. This amount did not include an additional $14 million in collaboration receivables, of which we received $12.5 million from Janssen in the second quarter. In the first quarter of this year, our revenue increased significantly to $59 million compared to $18.4 million for the same period last year. Most of our revenue in the quarter, or $58.6 million, was derived from three non-recurring sources: $41.2 million in deferred revenue recognition related to our former collaboration with Janssen, $11.1 million associated with Janssen wind down activities, and $6.2 million of R&D expense reimbursement under our ongoing collaboration with ONO, related to the completion of preclinical activities for FT825. Research and development expenses for the quarter decreased by $6.5 million to $65.6 million. The decrease in our R&D expenses was attributable primarily to the termination of the Janssen collaboration, a decrease in share-based compensation expense, and from lower demand for R&D supplies and materials. General and administrative expenses for the first quarter increased by $1.2 million to $21.9 million. The increase in our G&A expenses was attributable primarily to an increase in legal-related fees. Total operating expenses for the first quarter were $87.6 million, which includes $12.9 million of severance and other employee termination-related expenses, as well as $11 million in noncash share-based compensation expense. Note that in connection with the development of our off-the-shelf iPSC-derived CAR T-cell product candidate FT819, we previously achieved the clinical milestone set forth in our amended license agreement with Memorial Sloan Kettering Cancer Center, which triggered a first milestone payment to MSK in 2021. Up to two additional milestone payments may be owed to MSK based on subsequent trading values of the company's common stock ranging from $100 to $150 per share. We assessed the fair value of these contingent milestone payments currently valued at $2.1 million on a quarterly basis. In the first quarter, we recorded a noncash $1.7 million non-operating benefit associated with the change in fair value. Our net loss for the first quarter was $18.9 million or $0.19 per share. As we consider the remainder of this year, I want to highlight a few important factors that change the profile of the company's P&L. First, the company's revenue will be derived almost exclusively from our collaboration with ONO and specifically for research funding in connection 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 third quarter of 2024. Second, as a result of our decision in the fourth quarter of last year to opt into a co-development and co-commercialization arrangement with ONO for FT825 in the U.S. and Europe, ONO's portion of the program's expenses to be reimbursed to Fate, which were previously captured as revenue, will now be recognized as an offset to our research and development expense. Third, while the company did implement its restructuring in the first quarter, we expect the cost reductions and additional operating leverage to begin to materialize in the second quarter with additional benefits to accrue throughout the year as we complete the wind-down of our discontinued programs. Finally, we expect our GAAP operating expenses for the full year to be between $265 million and $285 million and that we will end the year with more than $300 million in cash and investments.

Thanks, Ed. After facing some significant challenges in the first quarter of 2023, we have emerged with a renewed sense of energy, commitment, and drive to bring off-the-shelf iPSC-derived cellular immunotherapy to patients with cancer and autoimmune disorders. We remain confident that our proprietary iPSC product platform is uniquely suited to create highly differentiated product candidates that incorporate novel synthetic controls of cell function, deliver multiple mechanisms of action to maximize clinical efficacy, and maintain a safety profile that permits broad accessibility to patients, including in community-based settings. During the first few months of this year, we have made great strides in positioning the company to reach key inflection points across our programs. The treatment landscape for multiple myeloma remains highly fragmented, with the majority of patients receiving multiple lines of combination regimens in community-based settings throughout the course of treatment. FT576 is our off-the-shelf BCMA-targeted CAR NK cell program for multiple myeloma that is uniquely designed to be administered with CD38-targeted monoclonal antibody therapy, which is widely used in combination regimens across lines of therapy. We believe the off-the-shelf combination of FT576 and CD38-targeted monoclonal antibody therapy may offer an attractive and differentiated therapeutic proposition by enabling antibody-dependent cellular cytotoxicity, multi-antigen targeting of myeloma cells, and patient reach into community-based studies. We have previously reported interim Phase I clinical data of the combination from the first single-dose treatment cohort at 100 million cells, which showed a favorable safety profile and clinical activity. Additionally, translational data from the cohort indicated rapid and selective depletion of activated CD38 positive host immune cells through the first month of therapy, suggesting that the combination may create a favorable and reconstituted profile to extend FT576 functional persistence. As we continue to enroll patients in the dose escalation stage of our Phase I study, we have prioritized enrollment of FT576 in combination with CD38-targeted monoclonal antibody therapy. We are currently enrolling a two-dose treatment cohort at 300 million cells per dose. Upon clearance, we expect to open and assess a three-dose treatment cohort at 1 billion cells per dose. In the area of B-cell lymphoma, where autologous CAR T-cell therapy has shown remarkable efficacy, the vast majority of patients do not receive autologous CAR T-cell therapy for numerous reasons, whether due to logistical barriers, disease aggressiveness requiring immediate intervention, or inability to combine with standard of care therapies that are commonly administered in community-based settings. FT522 is our off-the-shelf CD19-targeted CAR NK cell program for B-cell lymphoma that incorporates five novel synthetic controls of cell function designed to increase NK cell potency, enhance functional persistence, and reduce or eliminate the need to administer intense conditioning chemotherapy to patients. Notably, FT522 is the first product candidate to incorporate our proprietary alloimmune defense receptor, or ADR technology, which is designed to target 41BB expressing immune cells and induce NK cell activation. We have previously presented preclinical data demonstrating that ADR armed iPSC-derived CAR NK cells exhibit potent antitumor activity despite the presence of allo-reactive T-cells and we believe there is a significant opportunity for FT522 to be seamlessly combined with standard of care immunotherapies widely used in community-based settings. I am pleased to announce that we have recently submitted an investigational new drug application to the FDA to initiate clinical investigation of FT522. The proposed clinical schema is designed to assess a three-dose treatment schedule in combination with CD-targeted monoclonal antibody therapy, including without the administration of intensive conditioning chemotherapy to patients. We believe we are well positioned to initiate patient enrollment at a therapeutically relevant dose and dose schedule in the second half of 2023. We also continue to include patients in our landmark Phase 1 study of FT819, our off-the-shelf iPSC-derived CD19 targeted CAR T-cell product candidate for B-cell malignancies. FT819 incorporates several first-of-kind features, including the integration of a novel CAR construct into the track locus, which is intended to promote uniform CAR expression, balance key cell activation exhaustion, and prevent graft-versus-host disease. We have previously reported interim Phase I clinical data, which showed a favorable safety profile and demonstrated responses in heavily pretreated patients, including in patients who are not eligible for or have previously failed autologous CD19 targeted CAR T-cell therapy. The Phase I study is currently enrolling patients in a single-dose treatment cohort at 540 million cells in B-cell lymphoma, and we plan to initiate a dose expansion cohort in the middle of 2023. Additionally, we continue to enroll patients in a single-dose treatment cohort at 180 million cells in chronic lymphocytic leukemia, a disease that remains incurable and for which the utilization of autologous CAR T-cell therapy is limited due to the inherent dysfunction within the patient's immune system. We're excited to expand our iPSC-derived CAR T-cell product platform to solid tumors where effective therapeutic solutions may need to address cell trafficking, the immunosuppressive tumor microenvironment, and tumor heterogeneity. We believe our multiplex iPSC-derived CAR T-cell product platform is designed to specifically overcome these challenges and enable the safe and effective treatment of solid tumors. Under our collaboration with ONO, we are currently conducting IND enabling activities for FT825/ONO-8250, a multiplex engineered iPSC-derived CAR T-cell product candidate targeting human epidermal growth factor 2 or HER2 expressing solid tumors. The product candidate incorporates seven novel synthetic controls designed to enhance effector cell function, including by promoting cell trafficking to the tumor site, redirecting immunosuppressive signals in the tumor microenvironment, and supporting T-cell activation without eliciting exhaustion. In addition, we are currently engaged with the ONO clinical development team and are jointly developing our clinical strategy for FT825/ONO-8250. We remain on track to submit an IND application for FT825/ONO-8250 in the second half of 2023. Finally, I'm excited to report that we have engaged multiple key opinion leaders and investigators who have expressed keen interest in utilizing off-the-shelf cell therapy for the treatment of severe autoimmune disorders, where there is a significant need for therapeutic solutions that can effectively reset patients’ immune system and meaningfully improve patients' quality of life. In preclinical models, we are currently assessing the potential of FT819 to selectively target and durably deplete pathogenic B-cells as well as the potential of FT522 as monotherapy and in combination with CD20 and CD38 targeted monoclonal antibodies to selectively target and durably deplete pathogenic B-cells, plasma cells, and the auto-reactive T-cells. We believe the value proposition for an off-the-shelf cell therapy in autoimmune disease is compelling. Unlike autologous CAR T-cell therapies, off-the-shelf cell therapies avoid the need to taper a patient's immunosuppressive therapy prior to the harvest of key cells for manufacture. Additionally, as many autoimmune diseases are marked by moderate to severe disease flares which require timely intervention, the potential to treat on demand with an off-the-shelf cell therapy presents a significant therapeutic advantage. We are currently working to extend our iPSC product platform into autoimmunity in 2023, and we look forward to sharing our development plans and strategy as we generate additional preclinical data and further advance our first off-the-shelf product candidate toward clinical development. Before we close, I would like to sincerely thank our employees whose patience and perseverance have allowed us to emerge through this transition period with a strong foundation, a sharp clinical focus, and multiple pathways for value creation over the next 12 months. I would now like to open up the call to any questions.

Thank you. Our first question comes from Tyler Bamburian with Cowen. Please go ahead.

Hi, guys. This is Tara on for Tyler today. And so, congrats on the progress so far. It's great to see you guys doing well these days. And so, I guess my question is around the trial that could be starting in the second half. So I'm hoping you could tell us more about your agreed upon study design and potentially what's left to do prior to initiation. And then, regarding the studies design, what cohorts do you plan to pursue? Like, will it be a high dose of over a billion cells or will you start much lower? And kind of what you expect to see there? Thanks.

So just to clarify, are you referring to the FT522 study? Okay, thank you. So happy to go through this, and I'll let Wayne walk through this. Keep in mind, this is address a draft clinical schema. And so we'll discuss it in proposed format.

Yes. So that's a good question, and the study design scheme for FT522 reflects our past experience with other NK cell therapies. And we're leveraging that experience to propose a schema whereby we administer multiple doses of FT522 in combination with rituximab on a dosing schedule whereby, following around the conditioning chemotherapy, we give up to three doses of FT522 on a fairly compressed dose schedule on days one, four, and eight, and then we give up to two treatment cycles overall. Similar to our prior NK cell trials where patients can receive up to a total of six doses of a cell product, we intend to do the same with FT522. And as Scott mentioned, we intend to look at the administration of FT522 with and without conditioning chemotherapy. So our Phase I dose escalation scheme reflects parallel assessments of both of those regimens in patients with relapsed/refractory lymphoma.

Thank you. One moment for our next question, please. And it comes from the line of Yigal Nochomovitz with Citi. Please go ahead.

Yes. Just to be clear, we are not starting with frontline patients. We do think that the potential regimen and the combination of FT522 and rituximab can seamlessly plug into regimens that are used in frontline. For instance, like R-CHOP, and with 596 historically, we've explored the potential to combine with, for instance, standard of care regimens like R-CHOP in the frontline or early line patients. However, we expect to start in patients that have at least progressed on at least one line of therapy and specifically rituximab regimen. Sure. I can share my experience regarding our interactions with the FDA concerning 596 and rituximab. As long as we are considering a regimen where rituximab is utilized in patients who have previously received CD20 monoclonal antibody therapy, we don't believe it is necessary to demonstrate the contribution of each component through a clinical study associated with rituximab. It's important to note that in the lymphoma setting, we are not administering rituximab at a standard dose or schedule, and we are not starting with it in tandem with a conventional rituximab regimen. Therefore, we are somewhat removed from what would be regarded as a standard rituximab protocol based on our initial clinical experience and potential areas for developing registration studies. I believe that as long as there is clinical data available for comparison regarding the monotherapy activity of those monoclonal antibodies in particular patient lines, it may not be required to conduct a study to demonstrate individual contributions. Additionally, the FDA has indicated that it might be considered unethical to administer a single dose of rituximab to patients in B-cell lymphoma.

Thank you. One moment for our next question, please. And it comes from the line of Tazeen Ahmad with Bank of America. Please proceed.

Hi, good afternoon guys and thank you for taking my question. Just maybe a couple of points of clarification if I could, Scott, for either FT576 or for 819. Should we be expecting any updates at some of the appropriate medical conferences, for example, ASH this year? And then for 576, again, do you have any sense of how many more dosing cohorts you want to complete before progressing into Phase 2?

Sure. Fair question. So for the clinical programs 576 and 819, not committing to provide a clinical update at ASH this year. I do think both programs are well positioned where we can provide a clinical update within the next 12 months, but not necessarily this year at ASH. So I wouldn't, I'm not prepared to commit to an update at ASH for those clinical programs. With respect to 576, look, I think we're looking forward to starting the three-dose schedule at 1 billion cells. We think at three doses in 1 billion cells in combination with DARA does have the opportunity to provide what we at least our preclinical models would suggest significant clinical activity. And I think that dose cohort, if you will, that we plan to enroll in the beginning or the middle of this year, second half of this year will provide us a really good guide as to where we think we are with that program and the go-forward strategy.

Thank you. One moment for our next question, please. And it comes from the line of Mara Goldstein with Mizuho. Please proceed.

Thank you for answering the questions. Regarding FT522 in autoimmune disease, I'm interested in what translational markers you consider appropriate to understand the therapeutic window. Additionally, I have a question about cash. Can you clarify the difference between the guidance for operating expenses and the cash balance at the end of the year? Is that just a conversion from GAAP to non-GAAP, or should we anticipate something else in terms of top-line payments?

I'll let Ed deal with the latter, but I think the first quarter was obviously really heavy and contributing to the annual guidance. But I'll let Ed go through that in some detail. Go ahead. And then I'll come back to you for the first question.

Great. Thank you so much.

Yes. Hi, Mara. As I tried to indicate in my prepared remarks, there's a number of one-time items particularly in the first quarter impact sort of GAAP in cash somewhat differently. So clearly the termination of the Janssen collaboration required us to record a lot of deferred revenue, both in the form of the upfront payment that we received at the initiation of that collaboration back in 2020, as well as milestones, particularly one that we achieved in the second quarter of last year. So from a GAAP basis, there's a lot of revenue that's flowing through the P&L statement that largely will clear itself up after this quarter and you'll see a more predictable run rate beginning in the second quarter and through the rest of this year. On a cash basis, we have received almost all cash or paid out all cash associated with termination. We received early in the second quarter the amounts associated with the wind down of the Janssen collaboration. So that was received in the second quarter. So you'll see that impacting our balance there. And then going forward again, it will be very clean. So I think most of the delta between GAAP expenses and cash is a function of the first-quarter activity that we outlined at the onset of this call.

And then with respect to FT522, I mean, obviously, there's been some really exciting clinical data with autologous CD19 targeted therapy in certain severe autoimmune diseases where certainly KOLs and investigators we've talked to had looked at that data with intrigue. We have obviously been able to run certain preclinical models where, for instance, we have sourced peripheral blood from diseased patients, and we've looked at, for instance, the activity of FT522 plus or minus monoclonal antibody and compared that to donor-derived healthy CAR T-cell therapy in those models with respect to clearance for instance, durable clearance of B-cell populations. We also have some translational data from some of our studies with FT596, where some of those patients actually did have functional B-cell compartments at outset, and we've seen durable depletion of that compartment.

Thank you. One moment for our next question. And it comes from the line of Michael with Morgan Stanley. Please proceed.

Yes. Hey guys. Thanks for taking the question. Maybe just one on 522, you mentioned Scott being able to start at a sort of clinically relevant dose. That's your plan. But just curious if you could see FDA pushing back on that and maybe having to start at a lower dose than planned?

Yes, I believe we are entering this phase with an awareness of the significant and effective feature present in FT522, particularly the ADR functionality. We are enthusiastic about ADR because it may enable the cell to operate effectively within a competitive environment. We also acknowledge that ADR enhances the signal and fundamentally activates the cell, increasing NK cell potency. Therefore, we intend to proceed based on our observations with FT516 and FT596. We plan to initiate with a three-dose schedule, which is different from our previous experience with 596. We aim to start at a dose level of up to 300 million cells per dose, as we have noted activity with both 516 and 596 at this dose level, including with single doses. Thus, we believe three doses of 300 million cells is a reasonable starting point for our proposal to the FDA.

Thank you. One moment for our next question, please. And it comes from the line of Peter Lawson with Barclays. Please proceed.

Hi. This is someone filling in for Peter Lawson. Thanks for taking our question. To start, could you clarify about 819 and 576? You mentioned we might see data in the next 12 months, but likely not at ASH. Should we expect an investor update around the end of 2023, or are you planning to wait for a medical meeting in 2024? Also, how should we approach balancing development efforts for CAR T and CAR NK? Will there be any changes in interest towards CAR T over the next year? Thank you.

Sure. No, I'm not prepared today to commit to when our clinical updates will be around 819 and 576. Obviously, we'll continue to enroll patients and as we generate what I consider to be meaningful and complete datasets that guide our path forward in a more definitive way, happy to show the data at that time. I think we will be able to provide that guidance within the next 12 months. Whether we'll be able to do that by the end of this year? TBD? I think it's unlikely. But certainly within the next 12 months.

With respect to the balance of NK cells and T-cells, I'm not sure we necessarily think of our portfolio that way, whether in competing NK versus T, whether we evaluate each of our programs on an individual basis, and that value that they can bring to patients and create for the company. We absolutely are strong believers in NK cells. We think NK cells provide wonderful activity in combination and synergize with monoclonal antibody therapy. They've obviously proven very safe and effective, the combinability seems to be unmatched. I mean, we do think NK cells can reach into community-based settings in combination with standard-of-care units in the therapy regimens. With respect to T-cells, our first T-cell program is a solid tumor, is obviously hematologic malignancies and solid tumors. We've done a lot of work with NK cells and T-cells in solid tumors. I think as we continue to build out our solid tumor pipeline, we will likely continue to develop an advanced T-cell program in solid tumors.

Does that answer your question?

Yes, thank you so much.

Thank you. One moment for our next question, please. And it comes from the line of Michael Yee with Jefferies. Please proceed.

Hi, this is Jenna filling in for Mike. Thank you for taking our question. Regarding 522, what gives you confidence that the ADR technology could potentially replace CIFU? What kind of preclinical evidence have you encountered to support this hypothesis, and does this suggest that you might be able to redose patients if chemotherapy is not administered?

Sure. I think in the interest of time, I'm happy to send you the entirety of our ASH presentation and poster on our ADR technology where we've done substantial work in allogeneic models, studying plus or minus ADR in the background of T-cell constructs with respect to their ability to functionally persist and increase activity in the background of allogeneic models. I mean, Bob, you can talk to it, but I'm happy to send you the poster. There's an entire presentation at ASH on ADR technology.

Yeah. Maybe you can follow-up after the post picture.

And does that mean you could potentially redose patients if you don't give them chemo?

Yes, we already redose patients with NK-cell.

Thank you. One moment for our next question, please. And it comes from the line of Daina Graybosch with SVB Securities. Please proceed.

Great. Thank you for the questions. I wonder if you could speak to the path both steps and timing to bring FT522 to autoimmune disease. In particular, do you anticipate any unique FDA requirements that differ from those in oncology? And with that in mind, how long till we might get some initial proof of concept data?

I'm glad to discuss this further. We're not ready to share detailed information as a company at this time. I mentioned in my earlier comments that we're open to providing more details as we acquire additional preclinical data for both FT819 and FT522. For FT819 specifically, we do have clinical experience and safety data, which currently shows a favorable safety profile. This suggests that advancing FT819 into autoimmunity could be a relatively straightforward process given the existing clinical data and safety information. However, regarding FT522, we lack clinical experience at this point, so moving it into autoimmunity may require initial safety data before we can proceed with patient trials. We believe that we can generate this initial safety data as we plan to begin dosing patients with FT522 in the latter half of this year. Sure.

Thank you. One moment for our next question, please. And it comes from the line of Andrea Tan with Goldman Sachs. Please proceed.

Hi, everyone. Thank you for taking my question. Scott or maybe Wayne just curious if you're thinking on the approach with FT576 has changed at all, given the strength of the Carditude 4 data? And then can you also remind us how your novel binder differs from that in the CAR constructs? And maybe just based on the early data from ASH, how derisked do you think that is?

Sure. The data we've seen with Janssen's autologous CAR T cell products has been impressive. I believe we will all find the data set noteworthy. However, looking ahead, I anticipate that patients will continue to experience multiple lines of therapy throughout their care. This will remain true for myeloma, which is fragmented and complex, with most patients receiving treatment in community-based settings as part of monoclonal antibody-based regimens in many instances. I don’t expect this to change significantly. I don't think many patients will be cured by autologous CAR T cell therapy. There will still be a large number of patients treated both before and after this therapy. Regarding our binding domain, I’ll hand it over to Bob to discuss it further.

Sure. Similar to some other binders, our binder for BCMA has a very good specific activity in terms of high affinity in targeting the antigen BCMA. In the 2018 molecular therapy paper, it was shown that we can target cells that have on the order of 100 antigens per cell as opposed to most BCMA binders where they target about 1000 or over 1000 antigens per cell. So we have good affinity, good off rate. So we're very excited and confident about our BCMA binder itself specifically.

Great. Thanks so much.

Thank you. One moment for our next question. It comes from the line of Ben Burnett with Stifel. Please proceed.

Hi. Good afternoon. This is Carolina dialed in for Ben Burnett. Thank you for taking our question. I was wondering, Scott, if you could provide more color on your comment that the combination regimen prolongs the functional persistence of FT576? And if you also could quantify the observed extension there?

Sure. I mean, actually I'll let Bob talk to that. It's obviously comes from translational data in the study, but I'll let Bob speak to that with respect to the impact that DARA has with respect to their patients and immune constitution profile and how that potentially creates a favorable environment for expansion of persistence.

It sounds like Scott already answered it. But by adding the additional factors to our experimental setting, we're able to suppress the reconstitution of CD38 positive cells. So this is a majority of the NK cells and a subset of the T cell thing that activated most likely the out of the active T cells. So inherently the favorable condition that Scott is talking about associated with maintaining space and cytokine availability during that 30-day period, above and beyond that size will be on-going. So now you have the cell therapy that's in a more favorable space. Environment which leads to enhanced persistence.

Okay. Very interesting. If I'm probably asking me these, have you called out any of the autoimmune diseases that you think will be suitable for your cell therapies?

We've not done that yet, no.

Thank you. One moment for our next question. It comes from the line of an analyst with Wells Fargo. Please proceed.

Hi, thank you for taking our questions. I have a few inquiries regarding FT522. Has the IND been accepted since it was submitted? If it hasn’t been accepted yet, do you expect any questions from the agency? Additionally, I'm curious about the study design. It seems there are a few variables concerning depletion, and I'm uncertain if CD20 is also a factor. Given all of this, will the design be more sequential with lymphodepletion first followed by an evaluation of depletion, or will it be a parallel design? I also have a couple of follow-up questions about this program. Thank you.

Okay. So again, I'll speak in terms of it's a proposed clinical schema. The proposed clinical schema starts with multiple doses at 300 million cells per dose. That’s the proposed clinical scheme. The initial patient cohort would be with CYFLU. The clearance of that cohort, that initial patient cohort would allow for two things. Number one, continued dose escalation with CYFLU, as well as number two, the opening of a second arm where that second arm would not have CYFLU conditioning, and that second arm could then independently operate and dose escalate. That's the proposed scheme.

Very helpful. And then I'm wondering a key question or a key question of interest is how could this inform whether the ADR worked as intended. Could you share some potential biomarkers that you might be looking at to validate that? And also, when might we see the data on that? I'm assuming it's probably before we have the data for the clinical efficacy. So, yes, any thoughts on that? Thank you.

So certainly we're not going to commit to data disclosures on FT522 given the stage of where we are with that program at this point in time. I think Bob can you talk about sort of biomarkers associated with that, but obviously, we are comparing in this study in some respects head-to-head plus or minus FT522 plus rituximab plus or minus CYFLU. So I think there's a whole host of translational data that will help us elucidate the impact of the ADR construct.

Some of the obvious biomarkers will be elevated in pharmacokinetics. We will conclude with specific sites outside of fluids. This study has been very interesting, and I am eager to see the upcoming data. For instance, with CYFLU, constitution will emerge around the second week, and this will include the adverse drug reactions in place. We will observe activity increases throughout the 30-day treatment cycle, which wouldn't be achievable without the adverse drug reactions. On the other hand, without CYFLU, we will seek responses and also focus on persistence in a very saturated system filled with patients in need. There are many exciting aspects to monitor, including markers related to 41BB expression, CD38 expression, and CD20 expression, while tracking cell persistence over multiple dosing applications during the first two weeks and beyond.

The only thing I would add is that, from a clinical endpoint perspective, clearly the most definitive evidence that the ADR is working is the demonstration of an objective response in patients who are treated with FT522 plus rituximab without conditioning chemotherapy. I think we're all aware that sometimes state interpretation may be difficult because that could impart some degree of antitumor activity if you are able to see objective responses without that, that's pretty clear evidence that the ADR is working at least in terms of facilitating antitumor activity with FT522.

Got it. Very helpful. If I may have a quick final question. I'm just a little curious, by using 41BB as a CAR target, you probably also limit the 41BB expression on the NK cells themselves. On the current T-cells themselves. Would that impair NK function in any way?

Yes, it's a good question, we've looked at it. Obviously, we're confident there is no impairment. But we're not going to discuss it beyond that.

Got it. Thank you for taking all the questions.

Thank you. One moment for our next question, please. And it comes from Matthew Biegler from Oppenheimer. Please proceed.

Great. Thanks guys. So this is Matt Hagen on for Matt. Thanks for squeezing us in. Just curious if you could speak to or expand on maybe why you think the ADR technology could be a superior approach versus some of the other approaches out there for cloaking like HLA knockouts, for example, things like that? Thanks.

I'll turn that over to Bob and I'll start by asking Bob to limit his response to it in most two minutes because we have gone for an hour.

And my response is very biased particularly from that perspective. As we've talked about it in previous calls, we obviously appreciate how other folks are trying to move forward with their stealth technologies, but all the other technologies in our opinion are inferior because they avoid one situation and they embark on another situation. For example, Class 1 dilution results then obviously missing self and a target on the back of the cells for NK cell recognition elimination. We also have seen that with these cells also includes effects or function. So a lot of negative things come when we knock out HLA Class 1. But when you do so, you also have to think about that. We expressed things such as HLAE. That's not a very broad approach because a lot of NK cells have that which is an activating receptor upon engagement with HLAE. So you're actually provoking a stronger attack. Things like CD47 in our hands do not overcome the challenge of the T-cells because their alpha is not expressed on NK cells. So for us, ADR is the most comprehensive approach to replace CYFLU where other strategies just come up short in trying to get rid of all the parameters that CYFLU brings to the table. ADR in our opinion is the only one that can truly replace CYFLU.

And I think the other thing that I would add is, obviously, a lot of these knockout strategies, if you will, overexpression strategies are, I would call them sort of single mechanistic with respect to intent. They're intended to hide the cell which again may add value, I'm not suggesting that, but the ADR technology importantly is intended to also activate the cell. It is a potentiation signal as you mentioned. It is a CAR construct. And we do think in the field of allogeneic cell therapy, continuing to be able to potentiate T-cells is an important ingredient to being able to boost efficacy.

Got it. Very cool. Thanks guys.

Thank you. One moment for our next question. It comes from the line of Jack Allen with Baird. Please go ahead.

Hi, this is Benjamin dialing in for Jack. Thanks for taking the question. On FT522, wondering if you had any additional commentary as it relates to potential autoimmune conditions that you would be considering for development beyond BCL? We're aware of a CD19 CAR T investigator-led study for treating lupus and wondering if you had any thoughts on other studies that could provide proof of concept for a similar approach using NK cells.

Yes, we do. We have quite a bit of feedback from KOLs and some investigators with respect to different severe autoimmune diseases. We are not going to comment on this call at this time. As I mentioned in our prepared remarks, we're happy to provide at the appropriate time as we solidify our plans and advance towards clinical development more specificity.

Does that answer your question, sir? Yes, thank you.

Thank you. And with that, ladies and gentlemen, we conclude the Q&A session. I will turn the call back to Scott Wolchko for closing remarks.

Great. Thank you all for your participation in today's call. Appreciate all the good questions. We hope to speak to all of you soon. Be well.

Thank you. And this concludes today's conference call. Thank you for participating and you may now disconnect.