Welcome to the Fate Therapeutics' Fourth Quarter 2015 Financial Results Conference Call. At this time, all participants are in a listen-only mode. This call is being webcast live on the Investors and Media section on Fate's website at fatetherapeutics.com. This call is the property of Fate Therapeutics and the recordings, reproduction or transmission of this call without the expressed written consent of Fate is strictly prohibited. As a reminder, today's call is being recorded. I'd now like to introduce your host for today's call Scott Wolchko, President and Chief Executive Officer of Fate Therapeutics. You may begin sir.

Thank you. Good afternoon and thanks everyone for joining us for the Fate Therapeutics fourth quarter 2015 earnings call. Shortly after 4:00 PM Eastern Time today, we issued a press release with our fourth quarter and full year 2015 financial results, which can be found on the Investors and Media section of our website under press releases. In addition, our 2015 10-K was filed shortly thereafter and can be found on the Investors and Media 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 in the Company's SEC filings, included in our Form 10-K for the year ended December 31, 2015 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 obligations to update these forward-looking statements to reflect future information, events, or circumstances. Joining me on the call today is Dr. Dan Shoemaker, our Chief Scientific Officer. I will begin the call by reflecting on 2015 and discussing the momentum we have carried into 2016. Dan will then discuss our clinical progress with ProTmune and provide some additional insights into our highly differentiated value proposition…

Thanks, Scott. So as Scott mentioned, we filed an IND in December 2015, for the conduct of our Phase 1/2 clinical trial of ProTmune for the prevention of acute GvHD and CMV infection in adult patients with hematologic malignancies undergoing matched unrelated mobilized peripheral blood HCT. The IND was cleared by the FDA in January 2016, and we submitted the Phase 1/2 protocol to the Western Institutional Review Board, and I'm pleased to report that the protocol is now been approved by the Western IRB. We're now actively engaging with multiple clinical sites that utilize the Western IRB in preparation for commencing subject enrollment in the most expeditious manner. We expect to enroll the first patient in the Phase 1/2 study in mid 2016. The design of the Phase 1/2 clinical trial for ProTmune is as follows. In the non-randomized open label single arm Phase 1 stage, 10 subjects are expected to undergo mobilized peripheral blood HCT with ProTmune. Importantly, each subject must be at high risk for CMV infection based on an antibody evidence of prior infection with CMV, with no evidence of detectable CMV replication at baseline. After the last subject, which is 30 days post HCT, an independent data monitoring committee is scheduled to convene to assess safety, subject to a positive safety assessment, the study is designed to progress the Phase 2 stage. In the open label Phase 2 stage, we intend to randomize 60 subjects one-to-one to undergo mobilized peripheral blood HCT with ProTmune or standard care mobilized peripheral blood HCT. Again, each subject must be at high risk for CMV infection based on antibody evidence with prior infection with CMV, again with no evidence of detectable CMV replication of baseline. The efficacy endpoints for the Phase 1/2 clinical trial are as follows: Cumulative incidence…

Thanks Dan. For the fourth quarter ended December 31, 2015, Fate Therapeutics reported a net loss of $7.4 million or $0.20 -- $0.06 per share as compared to a net loss of $6.2 million or $0.30 per share for the same period last year. Revenue was $1.1 million for the fourth quarter of 2015, which was generated from our strategic research collaboration with Juno Therapeutics. Research and development expenses for the fourth quarter of 2015, were $5.4 million compared to $3.9 million for the same period last year. The increase was primarily related to an increase in third-party professional consultant and service provider fees to support the clinical development of our product candidates, and an increase in personnel expenses including stock-based compensation expense resulting from additional headcount to support the conduct of our research activities. General and administrative expenses for the fourth quarter of 2015 were $2.6 million compared to $2.1 million for the same period last year. This increase was primarily related to an increase in personnel expenses, including stock-based compensation expense and an increase in cost related to our intellectual property portfolio. After adjusting for research funding from Juno of $500,000 and for stock based compensation expense of approximately $500,000; total operating expenses for the fourth quarter of 2015 were $7 million. At the end of the fourth quarter of 2015, cash and cash equivalents were $64.8 million, debt outstanding on our facility with Silicon Valley Bank was $18.5 million, and common stock outstanding was approximately 28.7 million shares. We expect 2016 net cash earned including the servicing of our debt facility to be between $38 million and $42 million without taking into account any future milestone payments, license fees, or other potential sources of cash. In closing, during 2015, we steered our clinical development focus toward programming…

[Operator Instructions] And our first question comes from the line of Mark Breidenbach from H.C. Wainwright. Your line is now open.

Hi guys. Thanks for taking my questions. If it’s okay with you, I’ll keep them focused on the ProTmune program today. We've recently seen of course some really exciting pre-clinical data both at Orlando and in Hawaii, and it looks to us like you’re shooting for a goldy lock stone in HSCT with ProTmune where you're trying to import not too much GvHD and not too many opportunities to confection, while retaining - plan to your good amount of graft-versus-leukemia activity. So my question is in the upcoming Phase 1 2 study, can you clarify a little bit why the primary end points are really all focused more on transplant safety, on GvHD and CMV, with less emphasis in place on relapse rate?

Sure, absolutely. The protocol that we developed was actually developed in concert with discussions we had had with the FDA back in November 2015, as well as investigators that we expect and hope to participate in our Phase 1 2 study. I can tell you generally the feedback that we received and why our study is focused on both the acute GvHD and CMV infection and why day 100 are critical end points. I think based on the discussions we’ve had, GvHD as well as CMV infection are absolutely leading causes of morbidity and mortality in transplantation. Those events occur within the first 100 days of transplantation. There are no FDA approved therapies for those two immulogical conditions and so there is a high unmet need. I think that was the view that was shared by both the FDA as well as most but not all of our clinical investigators. We do believe relapse is important. Obviously this is intended to be a curative therapy for malignancy, and we intend to track relapse rates. But really what we are focused on, and we believe we can have a pretty profound affect is on a acute GvHD and CMV infection, and those events that occur within the first 100 days.

Okay, great. Understood. I was also wondering if you’re planning to hedge ProTmune in the context of haploidentical transplants, or GvHD can be even more of an issue, or is this mostly going to be used in matched unrelated donor scenarios?

Actually it’s a great question. And as you probably are well aware, haploidentical transplantation uses mobilize peripheral blood as the cell source for that transplantation paradigm. It’s something that we are absolutely looking at carefully and we are talking to investigators about the potential for us to expand into the haploidentical transplantation setting. And as you pointed out, GvHD is a terrific concern with that paradigm in particular. There is a lot of convenience associated with a haploidentical transplantation. Its adoption is increasing. It is still the vast minority of mobilized peripheral blood transplantation. Most mobilized peripheral blood transplantations use a related donor or an unrelated donor that is matched. Haploidentical is emerging now and it is something we are taking a very hard look at given that we think ProTmune will have a strong value proposition in that setting also.

And Mark, everything that we’ve seen in our pre-clinical models this past year would suggest that the haploidentical transplants would benefit from the ex vivo modulation procedure with ProTmune. So we are definitely excited about heading in that direction at the right time.

Okay. That's great. And one more follow up if I may. One of the lessons we have been learning from looking at haploidentical transplants is that high dose post-transplant cyclophosphamide actually can really help to overcome some of the obstacles associated with that procedure including acute GvHD. Can you comment on how ProTmune could offer some benefits better distinct from what could be achieved with post-transplant cyclophosphamide.

I think the use of post-transplant cyclophosphamide has shown to the effect of introducing GvHD. But let’s be clear that the cytotoxic events that is taking a hit to the T-cell compartment which in some level does reduce the ability of T-cell to fight against relapse as well to infection. So our hope would be by using the ProTmune pretreatment is that you could maybe enable a slightly lower dose to cyclophosphamide and enable a more robust and diverse T-cell repertoire to move forward which would be build-out clinically with lower relapse and lower infection. So the idea would be to build on the success that they have already achieved by enhancing the properties of graft that is administered to the patient.

I think generally in the community, there is interest in haploidentical. I think it is only used by a few centers. And I think, generally speaking, longer term studies need to be performed using haploidentical transplantation with post-transplant cyclophosphamide to really understand the long term effects to this T-cell compartment for instance like infections and relapse.

Okay, fantastic. That’s very helpful. Thanks for the clarification and thanks again for taking my questions.

And our next question comes from the line of Paul Matteis from Leerink. Your line is now open. Q –Unidentified Analyst: Hi Scott and Dan. This is Jeff on for Paul. Thank you for taking my question. So I guess the very first question is, you’ve mentioned that we'll see some Phase 1 data at the ASH Presentation. Could you give us like the context of what types of data – what kind of data we will see?

Obviously we haven't enrolled our first patient yet. But the design of the study is to measure both safety and efficacy. The safety assessments are based on patient engraftment, and the efficacy assessments are based on, as we mentioned, acute GvHD and CMV at day 100. I expect we are going to be able to provide a view both on safety and efficacy late in 2016. I also expect, based on the work that we do internally, that we will also be performing and conducting immunophenotyping analysis of the T-cell compartment. So we should add some additional insights into the mechanism of ProTmune and the effects we are having on the T-cell compartment. Q –Unidentified Analyst: And the next question is, in terms of the mouse model, did you look at – do a mouse model for PROHEMA? How predictable was the mouse model for the clinical trial? And could we have that kind of reed to in terms of ProTmune?

So we have extensive experience with the mouse model. We are both looking at engrafting as well as with GvHD. Again we’ve included - as we are developing ProTmune with the two modulators, we routinely include an arm with PROHEMA only. And specifically, in the GvHD setting, we are very gratified to see a modest effect in the PROHEMA Arm and then that was really - it includes upon with the combination of modulators and that was a big part of our development of this - of ProTmune. We also study engrafting carefully. It’s a big part of this trial. And again, the ProTmune procedure further enhances the engrafting properties of the stem cell compartment immobilized peripheral blood. Q –Unidentified Analyst: Okay. And my final question is, given the guidance of your cash burn for 2016, do you have enough cash to finish the Phase 1 2? And are there any other leavers that you could pull?

Absolutely. We clearly have guided that we have sufficient amount of cash to absolutely take us through all of 2016, and certainly well into 2017. I think ultimately, whether we can finish the trial in full is going to depend on rates of enrollment. We have a lot of levers that we call pull to increase our cash position. I think I mentioned, obviously we have a collaboration with Juno Therapeutics and there is potential milestones that we can certainly achieve over the next six, 12, 18 months. And I also discussed I believe that our pipeline is completely unencumbered. We have built a deep pipeline of immunotherapies over the past 12 months and we think there is a lot of potential there to advance some of our programs with partnerships.

All right. Thank you very much.

And our next question comes from the line of Ren Benjamin from Raymond James. Your line is now open.

Hey guys, thanks for taking the questions. I guess maybe just starting off, can you talk to us a little bit about why it takes so long from the filing of the IND and getting Western, sort of IRB approval o you actually initiating enrolling the study? It seems like they may take about six months as you were saying. How many sites are -- will be onboard when everything is settled down?

Sure. To be clear we have guided that we would enroll the first patient in mid-2016. So that could be -- I will consider that to be May, I will consider that to be July. We are sitting here at the beginning of March and we cleared the Western IRB about two weeks ago. I think the work that we need to do in order to enroll our first patient, we obviously have to get clinical trial agreements and budgets agreed upon with clinical sites. We have to have to go through site training with an investigator training with these sites. But the regulatory risk has largely been taken out of this to treat the first patient. It is simply blocking and tackling now from our view. And it is a clear path to begin to treat the first patient. We engaged investigators at ASH and we held a investigator meeting at ASH where we discussed the ProTmune protocol. We had an additional meeting at ASBMT about three weeks ago where we met with many investigators again and discussed the commencement of the study. And so I think we are in a very good position to begin patient enrollment in the near term.

How many sites will be up and running, Scott, when this is all done?

Yes. So our goal is to have three sites up and running for the Phase 1 portion of the study. The Phase 1 portion is only 10 patients. And given the prevalence of mobilized peripheral blood transplantation, we are comfortable with three sites participating in the phase 1. While the phase 1 is ongoing, we will recruit sites and investigators and have already begun recruiting sites and investigators, specifically to participate in the Phase 2 portion. And so our goal for the Phase 2 portion is to have 10 to 12 sites in the U.S. and one to two sites in the EU. We will recruit those sites and are now while the Phase 1 is ongoing, and have already begun that recruitment process.

Got it. Okay. And while we are talking about sites, can you help -- I mean given the mobilized peripheral blood market and given what you know about the trial progression with the umbilical cord market with PROHEMA, can you give us a good sense as to how the enrollments of -- I mean we know how Phase 1 will enroll, but how the enrollment of Phase 2 could enroll? Because if I take three months let's just say to enroll 10 patients from three sites, is it essentially three patients per site and entire 60 patients could be enrolled by 2017 or could it take longer?

I think our full expectation is based on the dynamics we had seen in core blood as compared to the dynamics when we studied mobilized peripheral blood studies. And there have been multiple companies that have run studies in mobilized peripheral blood transplantation. So there are metrics out there that have helped guide or thinking on how quickly the study can enroll. I think we feel very comfortable that this is a study we can enroll in 2016 and 2017. It's important to know when I make that comment and it will give you some visibility on how we are thinking about enrollment and timing. The Phase 1 study while we -- our goal is to read out data in 20016, late 2016, the Phase 1 study is a safety study. And we can begin enrolling Phase 2 study on day 30, following the last patient. So, the way that Phase 1 is designed, we enroll 10 patients, we wait 30 days past the last patient, we have an independent data safe during monitoring committee that makes, say, an assessment and recommendation, and assuming a successful recommendation we can begin moving directly into the Phase 2 portion. So, this is not linear in the sense, gosh, we'll complete the phase 1, we'll read out Phase 1 data and then we'll start the Phase 2. More than likely, we will have initiated the Phase 2 before we'll discuss any Phase 1 data publicly.

Got it, okay. Thanks for the clarification there. I guess regarding the two endpoints, right, the GvHD and CMV, what happens if you see an effect on GvHD but you don't see concurring effect in infection rate? How do you think about the program in that kind of a scenario?

Yes. I think both are clearly unmet needs. And there are -- and I think our solution has the potential to absolutely address both. But I don't think addressing one and not the other would be viewed as a deficiency in anyway. Severe infections are a huge problem. People die from severe infections. It cost the healthcare system a tremendous amount of money. GvHD is an alleges. I think what's really unique about what we do in programming the T-cell compartment is we are taking two shots on goal here in the Phase 1/2 study and we absolutely believe based on all the data we've seen preclinically and our understanding of GvHD and how that ties into infections with respect to T-cells, is that we have the chance I think to address both these issues through our PROTMUNE solution.

Got it, thanks a lot.

And our next question comes from the line of David Nierengarten from Wedbush. Your line is now open.

Thanks for taking my question. Most of mine on PROTMUNE have been asked and answered. So I'll take a stab at another question. When you talked about -- looking at the NK and adaptive immune cell space, obviously there are a lot of players out there and are in advanced clinical trials at the moment. When you think about your improvements on the process or potential improvements on the process, would you speculate on in alliance, potential alliance with one of the other companies being more in terms of changing the manufacturing process and improving that or in providing a new direction for the cells, thinking about FDA pathways on manufacturing changes and things like that? Where are your, I hate to use the term value add, would be in that scenario with these more advanced programs out there? Thanks.

So, is your question specifically about our adaptive NK cell as our therapeutic or how we might become partner ex vivo cell programming with other folks?

You can take either one, honestly. It's just -- there are other players out there, so -- essentially, how unique is your project product and would it be a whole new therapeutic direction for potential partner or again an improvement in the manufacturing in order to get a better cost of goods and get more straightforward FDA approval for potential partner?

Yes. Okay, so, the adaptive NK cell that we're developing with Jeff Miller, is a very unique phenotype of an NK cell. It was originally identified by Jeff Miller. This was not a candidate that Fate Therapeutics discovered in our hands. Jeff's been working in the NK cell field for probably 15 to 20 years and has seen and tested personally a lot of NK cell therapies. Jeff is very confident that this specific phenotype, which he had dug and published papers on, which he refers to as the adaptive NK cell, is a very unique subset of NK cells that has never clinically been tested before. It has very high level of expression in CD16 and it has very interesting properties with respect to persistence. Its epigenetic profile looks remarkably like a cytotoxic T-cell and so Jeff is very excited about testing this clinical candidate. We're very excited about testing this clinical candidate. And we believe our small molecule programming will absolutely enhance some of the features that Jeff is very excited about that are unique to this phenotype. So we do not view this as a run of the mill and NK cell therapy that's been tested previously. This is clearly a unique cell type and I think the FDA will view this as a unique cell type relative to what other cells that are being developed.

Got it. Thanks.

And our next question comes from the line of [Jim Burganov] [ph] from Wells Fargo. Your line is now open.

Good afternoon. It's Nick in for Jim this afternoon. Notwithstanding the progress for ProTmune malignant disease, are you considering benign disease and will we expect any data from the PROHEMA benign disease program and then I have a couple of follow-ups please?

Yes, at this time, we're not contemplating taking ProTmune today into non-malignancy. It does not mean that it would not potentially have application there. It's just not on as part of our current development strategy. With respect to PROHEMA we I think announced previously that we discontinued that study when we made the strategic decision to prioritize the clinical development of ProTmune.

Had any patients been treated been treated up to that point?

There was only -- I believe only one patient had been treated with PROHEMA and there was nothing of note with respect to engraftment on that patient.

And then engraftment was fine.

Yes, I think engraftment was fine, sorry.

Okay. And so the 30-day cut-off for the ProTmune Phase 1, what is the -- is that just engraftment as a safety or is there a threshold GvHD?

Simply engraftment, so engraftment assessment.

And then for the NK Program, so I am right in assuming that you have NK Cells you're going to derive as part of a phenotype using a small molecule.

Yes, so the activated -- this adaptive phenotype yes, will absolutely be small molecule program.

And then -- but you said, you take sort of stock in NK Cells. I know that a unique Jeff Miller population that you further enhance.

It's a population that you're able to absolutely identify. For instance we're looking at haploidentical donors for use -- for identifying the adaptive phenotype and then we'll absolutely enhance using small molecules.

Okay. And then will you be incorporating the use of monoclonal antibodies or are they simply just monotherapy?

So we've not -- we've not finalized the clinical protocol yet for the Phase -- the first in human study with the adaptive NK Cell, but given that it does have very high levels of expression through cell programming we continue to enhance CD16 expression. The combination with FDA-approved monoclonal antibody and in setting up a solid tumor where a patient has progressed -- disease has progressed on monoclonal antibody therapy or has not otherwise responded is a conceptual protocol that's on the table.

Okay. And then in terms of the broader programs, you said while we got 60 folks wavering away now, I guess 59 folks working hard in new scope…

We've taken it easy.

You got a lot on your plate, can you give us a sense of just what the resource allocation is beyond ProTmune and in terms of these various programs and do you have enough resources to do what you want to do in a reasonable timeframe?

Yes, there is a couple of things that are unique about ProTmune. So ProTmune is a clinical study that we can run very efficiently and we have elected to run the ProTmune study with a CRO -- working closely with the CRO. So our clinical team is absolutely focused on executing on the ProTmune study, but beyond that, most of the investment that we've made over the past 12 months, has been on the research side and we have significantly increased our headcount on the research side as well as bringing in folks who have expertise in translating cell therapies into first in human clinical studies. And so I think we are well resourced in the near term given what's on our plate. I would say we are getting a lot of leverage in a sense that and I did talk about on our call, many of the - several of the preclinical programs that we are developing, we are developing in collaboration with top research institutes and clinical investigators. And we are absolutely getting a lot of leverage from that type of relationship in order to move from preclinical into first inhuman studies.

Thanks. I'll jump back in the queue.

And our next question comes from the line of Ted Tenthoff from Piper Jaffray. Your line is now open.

Okay. Can you hear me okay? Hey, how are you? So a lot of good discussions here. I appreciate it. I guess my question really has to do with sort of how you prioritize the collaborative efforts on CAR T T-cell natural killers and even consider future partnering opportunities versus proprietary allogeneic efforts. I think probably the line is sort of drawn on auto, but I just wanted to kind of get a little bit more clarity on how you see the opportunities going forward?

Yes. I think one of the things that is really interesting and unique about the Juno collaboration for instance, and we have ramped headcount as part of the Juno collaboration was the way we structured the collaboration. So our job as part of that collaboration is really to discover small molecule modulators that can potentiate certain biological properties and functions. And yes, we are focused on that with respect to T-cell under the Juno collaboration. But a lot of the leverage that we get from that Juno collaboration is really understanding, what small molecules drive different biological function and we can -- the way the collaboration is structured with Juno, all the learnings with respect to those small molecules and the pathways that we can potentiate and the mechanisms that we can drive were absolutely able to leverage those small molecules across our programs. So for instance, I'll give you an example. If we are focusing on improving T-cell persistence with Juno, we know NK-cell persistence is something we are interested in. And so in understanding T-cell persistence, we obviously are gaining insights into small molecules that can drive that in different biological mechanisms that are in play and we can leverage that across our preclinical platform.

Very helpful.

So it's not as siloed as you might think with respect to this program versus this program versus this program or allo versus auto or T-cell versus NK. I mean fundamentally, the modulators and the small molecules in the pathways that we are looking at all are fundamentally important across all our programs.

Okay. That's actually really helpful. I appreciate that color.

And we have follow up from Jim Burganov from Wells Fargo. Your line is now open.

It's not a follow up. Scott, can you just remind me what the clinical timeline is for the activated NK-cell program? And then back to small molecules, obviously one of the problems you have with CAR T is that it's in [indiscernible] and it kind of release syndromes. You folks understand an awful lot about cells and how they react. Is there an area where do you think you might be able to help? I know these events were occurring, perhaps few weeks into the CAR T and that might be a little bit long for the pharmacodynamic effects of the small molecules. But I'm just intrigued if somebody has asked you about that. Thanks.

Yes, absolutely. And I think obviously the effects we are seeing T-cells as we think about introducing in allogeneic transplant donor T-cells into a patient that for all intense and purposes is also undergoing a cytokine storm. I think there is a complementary there with respect to allogeneic transplant as well as CAR T with respect to the environment that the T-cells are seeing. And so I think there is some opportunity there and understanding how we could program CAR T cells in that type of environment. Because I think its very similar to allogeneic transplantation. With respect to the adaptive NK-cell and the clinical timeline, we have not put a firm timeline on that. We are absolutely going through clinical translation right now. We are discussing protocols with the University of Minnesota in different investigators. It is something we are absolutely prioritizing and will give more of an update I believe at the NK Cell meeting in May. Q – Unidentified Analyst: Great. Thank you very much.

And I'm not showing any further questions. I would now like to turn the call back to Mr. Scott Wolchko for any further remarks.

Thank you very much everyone for participating in today's call. Obviously we have multiple conferences that we will be attending over the next three to four months where we will continue to provide scientific updates and visibility into our preclinical program. So look forward to seeing you'll and speaking with you over the next couple of months. Thank you.

Ladies and gentlemen thank you for participating in today's conference. This concludes today's program you may now all disconnect. Everyone have a great day.