Financial Data and Key Metrics Changes - For Q1 2019, Fate Therapeutics reported a net loss of $19.8 million or $0.30 per share, compared to a net loss of $14.1 million or $0.27 per share in the same period last year [50] - Revenue for Q1 2019 was $2.6 million, up from $1 million in Q1 2018, primarily derived from collaborations with Ono Pharmaceutical and Juno Therapeutics [50] - Research and development expenses increased to $17.7 million from $11.5 million year-over-year, attributed to higher employee compensation and third-party expenses [52] - General and administrative expenses rose to $5.4 million from $3.6 million, mainly due to increased employee compensation [53] - Total operating expenses for Q1 2019 were $23.1 million, with adjusted operating expenses at $18.7 million after accounting for non-cash stock-based compensation [54] - Cash and cash equivalents at the end of Q1 2019 were approximately $183 million [55] Business Line Data and Key Metrics Changes - The company has made significant advancements in its iPSC product platform, focusing on off-the-shelf cellular immunotherapies [7][8] - FT500, the first iPSC-derived cell product cleared for clinical investigation in the U.S., is currently in a Phase 1 clinical trial for advanced solid tumors [16][18] - FT516, another product candidate, is engineered to express a novel high-affinity CD16 Fc receptor and is expected to enter clinical testing soon [27][34] - FT596, the first universal off-the-shelf CAR NK cell product candidate, is designed to target multiple tumor-associated antigens and is progressing towards IND submission [35][42] Market Data and Key Metrics Changes - The company is addressing limitations in current cellular immunotherapies, such as variability in patient-derived products, by utilizing clonal master iPSC lines for consistent manufacturing [10][12] - The clinical paradigm of administering multiple doses of iPSC-derived products aims to optimize therapeutic exposure and improve patient outcomes [25][24] Company Strategy and Development Direction - Fate Therapeutics is committed to developing off-the-shelf cellular immunotherapies using iPSC technology, aiming to provide consistent and effective treatments for cancer patients [7][8] - The company is focusing on building a robust pipeline of differentiated NK and T-cell product candidates, with an emphasis on multi-functional elements to enhance clinical activity [35][36] - The strategy includes leveraging collaborations with leading research centers and maintaining a strong intellectual property portfolio [8] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential of iPSC-derived therapies to overcome challenges faced by current immunotherapies, such as resistance to checkpoint inhibitors [20][21] - The company is encouraged by initial clinical observations from FT500, indicating well-tolerated treatment with no serious adverse events reported [22][23] - Management highlighted the importance of continuous therapeutic exposure and the ability to target multiple antigens as key factors for improving patient outcomes [25][36] Other Important Information - The company is expanding its organizational capabilities and has made several key leadership appointments to support its growth strategy [49] - The build-out of an in-house GMP manufacturing facility is on schedule, expected to initiate in fall 2019 [48] Q&A Session Summary Question: Inquiry about the combination of antibodies with FT516 - Management noted that the current clinical protocol allows for the administration of a single monoclonal antibody to engage the CD16 receptor, but preclinical studies have explored the use of multiple antibodies [58][59] Question: Future of NK and CAR T products - Management believes the future of cell therapy will involve multiple doses and the ability to engage multiple antigens, enhancing the therapeutic potential of these products [62][63] Question: Tumor types for FT596 - Initial clinical data for FT596 is expected to focus on lymphomas [71] Question: Efficacy data timeline for FT500 - A full clinical update on FT500 is targeted around the SITC ASH timeframe later in the year [74] Question: Conditioning regimen for FT500 - The conditioning regimen for FT500 is designed to balance optimal conditions for cell therapy while engaging the patient's immune response [78][80] Question: Shelf life of iPSC-derived products - Management indicated that iPSC-derived products have shown stability and functionality post-thaw, with master cell lines maintained for several years [91][92]

PART I. FINANCIAL INFORMATION [Condensed Consolidated Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20%28unaudited%29) This section presents the company's unaudited condensed consolidated financial statements, including balance sheets, statements of operations, cash flows, and detailed notes on accounting policies, agreements, debt, and equity [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20March%2031%2C%202019%20%28unaudited%29%20and%20December%2031%2C%202018) The balance sheets show increased total assets and liabilities, with decreased stockholders' equity due to an accumulated deficit Condensed Consolidated Balance Sheets (in thousands) | Metric | March 31, 2019 (in thousands) | December 31, 2018 (in thousands) | | :---------------------------------- | :------------------------------ | :------------------------------- | | Total Assets | $220,865 | $213,032 | | Total Current Assets | $186,430 | $205,196 | | Cash and Cash Equivalents | $183,033 | $190,514 | | Total Current Liabilities | $29,140 | $27,263 | | Total Stockholders' Equity | $145,837 | $160,469 | | Accumulated Deficit | $(305,156) | $(285,396) | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss%20for%20the%20three%20months%20ended%20March%2031%2C%202019%20and%202018%20%28unaudited%29) Increased collaboration revenue was offset by higher R&D and G&A expenses, resulting in an increased net loss for the period Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands) | Metric | Three Months Ended March 31, 2019 (in thousands) | Three Months Ended March 31, 2018 (in thousands) | Change (YoY) (in thousands) | | :-------------------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :-------------------------- | | Collaboration Revenue | $2,632 | $1,026 | $1,606 | | Research and Development Expenses | $17,728 | $11,476 | $6,252 | | General and Administrative Expenses | $5,350 | $3,604 | $1,746 | | Loss from Operations | $(20,446) | $(14,054) | $(6,392) | | Net Loss | $(19,760) | $(14,135) | $(5,625) | | Net Loss per Common Share, Basic and Diluted | $(0.30) | $(0.27) | $(0.03) | [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20three%20months%20ended%20March%2031%2C%202019%20and%202018%20%28unaudited%29) Operating cash usage increased due to higher net loss, but investing activities provided cash, leading to a smaller net decrease in cash and equivalents Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | Three Months Ended March 31, 2019 (in thousands) | Three Months Ended March 31, 2018 (in thousands) | | :-------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Net Cash Used in Operating Activities | $(17,493) | $(12,551) | | Net Cash Provided by (Used in) Investing Activities | $8,754 | $(43,844) | | Net Cash Provided by Financing Activities | $1,258 | $355 | | Net Change in Cash, Cash Equivalents and Restricted Cash | $(7,481) | $(56,040) | | Cash, Cash Equivalents and Restricted Cash at End of Period | $183,260 | $33,034 | [Notes to Condensed Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20%28unaudited%29) These notes detail the company's financial statements, covering organization, accounting policies, collaboration agreements, debt, equity, and recent accounting pronouncements [1. Organization and Summary of Significant Accounting Policies](index=6&type=section&id=1.%20Organization%20and%20Summary%20of%20Significant%20Accounting%20Policies) Fate Therapeutics is a clinical-stage biopharmaceutical company focused on cellular immunotherapies, with revenue from collaborations and grants, and key accounting policies including lease accounting adoption - Fate Therapeutics, Inc. is a clinical-stage biopharmaceutical company dedicated to developing programmed cellular immunotherapies for cancer and immune disorders, with principal operations in San Diego, California[21](index=21&type=chunk) - The company has not generated any revenues from sales of its therapeutic products to date; revenues are derived from collaboration agreements and government grants[21](index=21&type=chunk) - The company adopted ASU 2016-02 (Leases) effective January 1, 2019, resulting in a **$16.6 million** increase in operating right-of-use assets and an **$18.2 million** increase in total liabilities on the unaudited condensed consolidated balance sheet[43](index=43&type=chunk) [2. Collaboration and License Agreements](index=10&type=section&id=2.%20Collaboration%20and%20License%20Agreements) Significant collaboration and license agreements include the Ono Agreement for iPSC-derived CAR T-cell candidates, the concluded Juno Agreement, and intellectual property deals with MSK and Gladstone - Ono Agreement: Received an upfront, non-refundable payment of **$10.0 million** and expects **$20.0 million** in aggregate R&D fees over four years for joint development of two off-the-shelf iPSC-derived CAR T-cell product candidates[47](index=47&type=chunk) - Ono Agreement: Eligible to receive up to **$285.0 million** in milestone payments for Candidate 1 and up to **$895.0 million** for Candidate 2, plus tiered royalties[47](index=47&type=chunk) - Juno Agreement: The four-year initial research term concluded on May 4, 2019, with **$1.0 million** in collaboration revenue recognized for both the three months ended March 31, 2019 and 2018[50](index=50&type=chunk) - Amended MSK License: Granted additional licenses for CAR constructs and off-the-shelf CAR T cells, issued **500,000** common shares (valued at **$4.8 million**), and paid an upfront fee of **$0.5 million**[52](index=52&type=chunk)[54](index=54&type=chunk) - Gladstone License Agreement: Granted exclusive licenses for iPSC-derived human therapeutics using the CRISPRa system, issued **100,000** common shares (valued at **$1.3 million**), and paid an upfront fee of **$0.1 million**[56](index=56&type=chunk) [3. California Institute for Regenerative Medicine Award](index=13&type=section&id=3.%20California%20Institute%20for%20Regenerative%20Medicine%20Award) A **$4.0 million** CIRM award for FT516 is suspended pending IND submission, with options for loan repayment or grant with royalties - CIRM awarded **$4.0 million** to advance the FT516 product candidate into a first-in-human clinical trial; **$3.5 million** has been received as of March 31, 2019[57](index=57&type=chunk) - The award is suspended until the company submits an IND application for FT516 in advanced solid tumors, with **$0.5 million** still available for funding[57](index=57&type=chunk) - The company has the option to treat the award as a loan (repayment rates from **60%** to **100%** plus interest) or a grant (royalty payments up to nine times the total awarded amount)[57](index=57&type=chunk) [4. Investments](index=14&type=section&id=4.%20Investments) The company invests excess cash in short-term U.S. treasuries, but held no investments as of March 31, 2019, a change from prior year - The company did not have any investments as of March 31, 2019[60](index=60&type=chunk) Investments (in thousands) | Investment Type | Maturity (in years) | Amortized Cost (in thousands) | Unrealized Losses (in thousands) | Unrealized Gains (in thousands) | Estimated Fair Value (in thousands) | | :---------------------- | :------------------ | :---------------------------- | :------------------------------- | :------------------------------ | :---------------------------------- | | U.S. Treasury debt securities | 1 or less | $10,495 | $(2) | $0 | $10,493 | [5. Fair Value Measurements](index=14&type=section&id=5.%20Fair%20Value%20Measurements) Financial assets are measured at fair value using a three-tier hierarchy, with all cash equivalents classified as Level 1 as of March 31, 2019 Fair Value Measurements (in thousands) | Asset Type | March 31, 2019 (in thousands) | December 31, 2018 (in thousands) | Fair Value Hierarchy Level | | :---------------------- | :---------------------------- | :------------------------------- | :------------------------- | | Cash equivalents | $183,033 | $190,514 | Level 1 | | U.S. Treasury debt securities | $0 | $10,493 | Level 1 | [6. Accrued Expenses and Long-Term Debt](index=15&type=section&id=6.%20Accrued%20Expenses%20and%20Long-Term%20Debt) Long-term debt primarily consists of a term loan from Silicon Valley Bank, maturing in 2022, alongside various current accrued expenses including payroll and clinical trial costs Long-term Debt (in thousands) | Metric | March 31, 2019 (in thousands) | December 31, 2018 (in thousands) | | :-------------------------------------------------- | :------------------------------ | :------------------------------- | | Long-term debt (gross) | $15,000 | $15,000 | | Long-term debt, net of current portion | $10,958 | $12,446 | | Current portion of long-term debt, net | $3,941 | $2,438 | Accrued Expenses (in thousands) | Accrued Expense Type | March 31, 2019 (in thousands) | December 31, 2018 (in thousands) | | :---------------------------------- | :------------------------------ | :------------------------------- | | Accrued payroll and other employee benefits | $1,901 | $2,938 | | Accrued clinical trial related costs | $4,462 | $4,729 | | Accrued other | $3,587 | $3,259 | | Total Current Accrued Expenses | $9,950 | $10,926 | - The **$15.0 million** 2017 Term Loan from Silicon Valley Bank matures on January 1, 2022, and bears interest at **8.25%** as of March 31, 2019[74](index=74&type=chunk) - The interest-only period for the 2017 Term Loan was extended from January 1, 2019, through July 31, 2019, following the achievement of a product development milestone[74](index=74&type=chunk) [7. Leases](index=16&type=section&id=7.%20Leases) The company leases office and laboratory space under an operating lease extended through 2028, with ASC 842 adoption increasing right-of-use assets and lease liabilities - The operating lease for office and laboratory space was amended in May 2018, extending the term through 2028 and adding additional space, resulting in a **$7.7 million** increase in operating right-of-use assets and a **$9.6 million** increase in aggregate lease liability in Q1 2019[76](index=76&type=chunk) - Future minimum payments under the non-cancelable operating lease total **$40.6 million** over a remaining term of **9.8 years**, with a discount rate of **8.0%**[78](index=78&type=chunk) Operating Lease Payments (in thousands) | Year | Operating Lease Payments (in thousands) | | :---------------------- | :------------------------------------ | | Remaining in 2019 | $2,422 | | 2020 | $3,761 | | 2021 | $3,873 | | 2022 | $3,989 | | 2023 | $4,109 | | 2024 | $4,232 | | Thereafter | $18,238 | | **Total Undiscounted Lease Payments** | **$40,624** | | Less imputed interest | $(12,907) | | **Total Lease Liability** | **$27,717** | [8. Convertible Preferred Stock and Stockholders' Equity](index=17&type=section&id=8.%20Convertible%20Preferred%20Stock%20and%20Stockholders'%20Equity) This section details Class A Convertible Preferred Stock terms, stock option and RSU activity, and stock-based compensation expense allocation - In November 2016, the company issued **2,819,549** shares of non-voting Class A Convertible Preferred Stock, each convertible into five shares of common stock[79](index=79&type=chunk) - Stockholders approved the issuance of up to **14,097,745** shares of common stock upon conversion of outstanding Class A Preferred Stock in May 2017, allowing Redmile to increase its ownership percentage[79](index=79&type=chunk) Stock Option Activity | Metric | Number of Options | Weighted Average Price ($) | | :------------------------- | :---------------- | :------------------------- | | Balance at December 31, 2018 | 6,980,581 | $5.58 | | Granted | 2,693,160 | $16.32 | | Cancelled | (228,528) | $10.25 | | Exercised | (420,920) | $3.02 | | Balance at March 31, 2019 | 9,024,293 | $8.79 | Stock-Based Compensation Expense (in thousands) | Expense Type | Three Months Ended March 31, 2019 (in thousands) | Three Months Ended March 31, 2018 (in thousands) | | :------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Research and development | $2,183 | $1,382 | | General and administrative | $1,685 | $0 | | **Total** | **$3,868** | **$1,382** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, liquidity, and capital resources, emphasizing the company's cellular immunotherapy focus and R&D investments driving continued net losses [Overview](index=20&type=section&id=Overview) Fate Therapeutics is a clinical-stage biopharmaceutical company developing cellular immunotherapies, incurring significant net losses since inception due to extensive R&D - Fate Therapeutics is a clinical-stage biopharmaceutical company dedicated to developing programmed cellular immunotherapies for cancer and immune disorders, utilizing cell programming and iPSC technology[88](index=88&type=chunk) - The company has never been profitable and has incurred net losses in each year since inception, with an accumulated deficit of **$305.2 million** as of March 31, 2019[89](index=89&type=chunk)[109](index=109&type=chunk) - The company expects to continue incurring operating losses for the foreseeable future due to ongoing and planned clinical trials (ProTmune, FATE-NK100, FT500, FT516), GMP manufacturing, preclinical research, and intellectual property maintenance[89](index=89&type=chunk)[91](index=91&type=chunk) [Financial Operations Overview](index=21&type=section&id=Financial%20Operations%20Overview) This section outlines revenue from collaborations and grants, details increased R&D and G&A expenses, and discusses critical accounting policies and estimates [Collaboration Revenue](index=21&type=section&id=Collaboration%20Revenue) Revenue is solely from collaboration agreements and government grants, with specific amounts recognized from the Ono and Juno Agreements in Q1 2019 - Revenues are derived from collaboration agreements and government grants, with no therapeutic product sales to date[93](index=93&type=chunk) - Recognized **$1.6 million** of collaboration revenue under the Ono Agreement and **$1.0 million** under the Juno Agreement for the three months ended March 31, 2019[95](index=95&type=chunk)[98](index=98&type=chunk) - The initial transaction price under the Ono Agreement is **$30.0 million** (upfront payment + estimated R&D fees), recognized over an estimated four-year period[95](index=95&type=chunk) [Research and Development Expenses](index=22&type=section&id=Research%20and%20Development%20Expenses) R&D expenses increased in Q1 2019, driven by higher compensation, consultant fees, equipment, and lease expenses, with further increases anticipated as product candidates advance Research and Development Expenses (in thousands) | Metric | Three Months Ended March 31, 2019 (in thousands) | Three Months Ended March 31, 2018 (in thousands) | | :------------------------- | :----------------------------------------------- | :----------------------------------------------- | | R&D Expenses | $17,728 | $11,476 | - The increase in R&D expenses primarily includes a **$2.7 million** increase in employee compensation, **$1.5 million** in third-party professional consultant expenses, **$1.3 million** in laboratory equipment/supplies, and **$0.6 million** in facility lease expense[106](index=106&type=chunk) [General and Administrative Expenses](index=23&type=section&id=General%20and%20Administrative%20Expenses) G&A expenses increased in Q1 2019, primarily due to a rise in employee compensation and benefits expense, including stock-based compensation General and Administrative Expenses (in thousands) | Metric | Three Months Ended March 31, 2019 (in thousands) | Three Months Ended March 31, 2018 (in thousands) | | :------------------------- | :----------------------------------------------- | :----------------------------------------------- | | G&A Expenses | $5,350 | $3,604 | - The increase in G&A expenses primarily relates to a **$1.4 million** increase in employee compensation and benefits expense, including employee stock-based compensation expense[108](index=108&type=chunk) [Other Income (Expense)](index=23&type=section&id=Other%20Income%20(Expense)) Other income (expense), net, improved in Q1 2019, primarily due to increased interest income from cash and short-term investments, partially offset by interest expense Other Income (Expense), Net (in thousands) | Metric | Three Months Ended March 31, 2019 (in thousands) | Three Months Ended March 31, 2018 (in thousands) | | :---------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Other Income (Expense), Net | $686 | $(81) | [Critical Accounting Policies and Significant Judgments and Estimates](index=23&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Judgments%20and%20Estimates) Financial statements rely on management's estimates, with the adoption of new lease guidance (ASC 842) being the only material change in Q1 2019 - Management's financial analysis relies on estimates and judgments, with the most significant relating to accrued expenses and stock-based compensation[103](index=103&type=chunk) - The adoption of new lease guidance (ASC 842) effective January 1, 2019, was the only material change to critical accounting policies during the three months ended March 31, 2019[103](index=103&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) This section compares financial performance for Q1 2019 and 2018, detailing changes in revenue, operating expenses, and other income/expense [Comparison of the Three Months Ended March 31, 2019 and 2018](index=23&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20March%2031%2C%202019%20and%202018) Collaboration revenue increased, while research and development and general and administrative expenses also rose, with other income (expense), net, showing a positive change Comparison of Financial Performance (in thousands) | Metric | Three Months Ended March 31, 2019 (in thousands) | Three Months Ended March 31, 2018 (in thousands) | Increase/(Decrease) (in thousands) | | :---------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :--------------------------------- | | Collaboration revenue | $2,632 | $1,026 | $1,606 | | Research and development expense | $17,728 | $11,476 | $6,252 | | General and administrative expense | $5,350 | $3,604 | $1,746 | | Total other income (expense), net | $686 | $(81) | $767 | [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) The company relies on financing and collaboration revenues due to losses and negative cash flows, with existing cash projected to fund operations for at least 12 months, but future capital needs are substantial and uncertain [Operating Activities](index=24&type=section&id=Operating%20Activities) Cash used in operating activities increased in Q1 2019, primarily driven by the increase in net loss, partially offset by higher stock-based compensation expense Net Cash Used in Operating Activities (in thousands) | Metric | Three Months Ended March 31, 2019 (in thousands) | Three Months Ended March 31, 2018 (in thousands) | | :---------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Net Cash Used in Operating Activities | $(17,493) | $(12,551) | [Investing Activities](index=25&type=section&id=Investing%20Activities) Investing activities provided cash in Q1 2019, a significant positive shift from prior year, mainly due to maturities of short-term investments offsetting purchases of property and equipment Net Cash Provided by (Used in) Investing Activities (in thousands) | Metric | Three Months Ended March 31, 2019 (in thousands) | Three Months Ended March 31, 2018 (in thousands) | | :---------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Net Cash Provided by (Used in) Investing Activities | $8,754 | $(43,844) | - Investing activities in Q1 2019 were primarily driven by **$10.5 million** in maturities of short-term investments, partially offset by **$1.7 million** in purchases of property and equipment[116](index=116&type=chunk) [Financing Activities](index=25&type=section&id=Financing%20Activities) Financing activities provided cash in Q1 2019, mainly from common stock issuance, with the company historically funding operations via equity and debt sales Net Cash Provided by Financing Activities (in thousands) | Metric | Three Months Ended March 31, 2019 (in thousands) | Three Months Ended March 31, 2018 (in thousands) | | :---------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Net Cash Provided by Financing Activities | $1,258 | $355 | - As of March 31, 2019, the company had aggregate cash and cash equivalents of **$183.0 million**[117](index=117&type=chunk) - Public offerings in September 2018 and December 2017 generated net proceeds of **$134.9 million** and **$43.0 million**, respectively[118](index=118&type=chunk) - The **$15.0 million** 2017 Term Loan from Silicon Valley Bank had its interest-only period extended through July 31, 2019[122](index=122&type=chunk) [Operating Capital Requirements](index=27&type=section&id=Operating%20Capital%20Requirements) The company anticipates continued losses and requires significant additional capital, with existing cash expected to fund operations for at least 12 months, but future needs are uncertain - The company anticipates continued losses and will require significant additional capital for research and development of product candidates and regulatory approvals[127](index=127&type=chunk) - Existing cash and cash equivalents (**$183.0 million** as of March 31, 2019) are believed to be sufficient to fund projected operating requirements for at least the next twelve months[127](index=127&type=chunk) - Future funding requirements are highly dependent on unpredictable factors such as the initiation, timing, progress, and costs of clinical trials, manufacturing, and regulatory approvals[127](index=127&type=chunk) [Contractual Obligations and Commitments](index=28&type=section&id=Contractual%20Obligations%20and%20Commitments) Material contractual obligations include a term loan with Silicon Valley Bank and a non-cancelable operating lease for office and laboratory space, with significant future minimum fixed payments - The company has a **$15.0 million** term loan with Silicon Valley Bank[130](index=130&type=chunk) - Future minimum fixed payments under the non-cancelable operating lease for office and laboratory space total **$40.6 million** through 2028[130](index=130&type=chunk) [Off-Balance Sheet Arrangements](index=28&type=section&id=Off-Balance%20Sheet%20Arrangements) The company did not have, and currently has no, material off-balance sheet arrangements - The company did not have, and does not currently have, any material off-balance sheet arrangements[131](index=131&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces interest rate risk primarily on cash and equivalents, but a change in market rates is not expected to materially impact financial results due to investment profile and debt terms [Interest Rate Risk](index=28&type=section&id=Interest%20Rate%20Risk) Primary market risk is interest income sensitivity from cash and money market funds, with floating-rate debt's floor and ceiling limiting material impact from interest rate changes - The company's primary exposure to market risk is interest income sensitivity, affected by changes in U.S. interest rates, particularly for cash and money market mutual funds[132](index=132&type=chunk) - A **10%** change in market interest rates would not have a material impact on the company's financial condition or results of operations, due to the low-risk profile of its investments and the interest rate floor/ceiling on its floating-rate debt[132](index=132&type=chunk) [Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of March 31, 2019, with internal control enhancements made due to ASC 842 lease accounting adoption [Disclosure Controls and Procedures](index=29&type=section&id=Disclosure%20Controls%20and%20Procedures) Disclosure controls and procedures were evaluated by management and deemed effective at a reasonable assurance level as of March 31, 2019 - Disclosure controls and procedures were evaluated and deemed effective at the reasonable assurance level as of March 31, 2019[134](index=134&type=chunk) [Changes in Internal Control over Financial Reporting](index=29&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) No material changes in internal controls over financial reporting occurred, except for enhancements due to ASC 842 lease guidance adoption effective January 1, 2019 - No material changes in internal controls over financial reporting occurred during the latest fiscal quarter, other than enhancements due to the adoption and implementation of new lease guidance under ASC 842, effective January 1, 2019[135](index=135&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=30&type=section&id=Item%201.%20Legal%20Proceedings) The company is not involved in any material legal proceedings and does not anticipate existing claims to have a material adverse effect - The company is not a party to any material legal proceedings at this time and does not believe any existing claims would have a material adverse effect on its business[137](index=137&type=chunk) [Risk Factors](index=30&type=section&id=Item%201A.%20Risk%20Factors) This section details risks spanning product development, regulatory approval, third-party reliance, intellectual property, commercialization, financial health, and stock ownership [Risks Related to the Discovery, Development and Regulation of Our Product Candidates](index=30&type=section&id=Risks%20Related%20to%20the%20Discovery%2C%20Development%20and%20Regulation%20of%20Our%20Product%20Candidates) Substantial risks exist in product candidate discovery, development, and regulation, including clinical trial delays, funding needs, and complex, unpredictable regulatory approval for novel cellular therapies - The company may face delays or failures in initiating, conducting, or completing clinical trials for its product candidates (ProTmune, FATE-NK100, FT500, FT516) due to difficulties in patient enrollment, unexpected safety issues, or regulatory hurdles[139](index=139&type=chunk)[141](index=141&type=chunk) - Development of product candidates will require substantial additional funding, and the company expects its research and development expenses to increase significantly[145](index=145&type=chunk) - The regulatory approval process for novel cellular therapies, especially iPSC-derived products, is difficult to predict, expensive, and may take longer due to a lack of prior experience and evolving regulatory requirements[158](index=158&type=chunk)[160](index=160&type=chunk) - The manufacture of cell product candidates is complex and subject to risks such as process scale-out, reproducibility, and regulatory compliance, which could increase costs, limit supply, and delay commercialization[152](index=152&type=chunk)[153](index=153&type=chunk) [Risks Related to Our Reliance on Third Parties](index=39&type=section&id=Risks%20Related%20to%20Our%20Reliance%20on%20Third%20Parties) Reliance on third parties for manufacturing, research, and clinical trials introduces risks of non-performance, regulatory non-compliance, supply chain issues, and collaborator conflicts - The company relies on third parties for manufacturing product candidates for clinical trials and commercial sale, which entails risks related to regulatory compliance, quality assurance, and potential failure to meet specifications[169](index=169&type=chunk) - Dependence on third-party cell processing facilities for ProTmune and FATE-NK100 manufacturing requires consistent quality and adherence to regulatory requirements, with potential for delays if these facilities fail to comply[171](index=171&type=chunk) - Strategic partnerships, such as the Ono Agreement, involve risks that collaborators may shift priorities, fail to commit sufficient resources, or develop competing products, potentially delaying or harming product development[172](index=172&type=chunk)[174](index=174&type=chunk) - Manufacturing depends on the availability and quality of reagents, specialized materials, equipment, and human donor material (for ProTmune and FATE-NK100), which may be difficult to source or have inconsistent attributes[175](index=175&type=chunk)[177](index=177&type=chunk) [Risks Related to Our Intellectual Property](index=43&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) Commercial success depends on intellectual property protection, facing risks like uncertain patent scope, reliance on licensors, potential infringement, and challenges to inventorship or trade secrets - Inability to obtain and maintain adequate intellectual property protection for product candidates and cell programming technology could allow competitors to develop similar products, reducing demand and harming the business[182](index=182&type=chunk) - Reliance on licensors to prosecute and maintain patents and patent applications material to the business means any failure by licensors could adversely affect the company's intellectual property rights[184](index=184&type=chunk) - The company or its strategic partners may infringe the intellectual property rights of others, potentially leading to development delays, commercialization blocks, or substantial monetary damages[187](index=187&type=chunk)[189](index=189&type=chunk) - Changes in U.S. patent law could diminish the value of patents in general, impairing the company's ability to protect its product candidates and technology[193](index=193&type=chunk)[195](index=195&type=chunk) [Risks Related to the Commercialization of Our Product Candidates](index=46&type=section&id=Risks%20Related%20to%20the%20Commercialization%20of%20Our%20Product%20Candidates) Lack of marketing experience and uncertain commercial success due to market acceptance, pricing, and reimbursement risks, compounded by potential negative impacts from healthcare reforms - The company has no experience in marketing and selling therapeutic products, and commercial success depends on establishing internal capabilities or effectively partnering with third parties[197](index=197&type=chunk) - Commercial success depends on market acceptance by physicians, patients, and third-party payers, which is uncertain for novel therapies and could lead to insufficient product revenue[198](index=198&type=chunk)[199](index=199&type=chunk) - Significant uncertainty exists regarding the pricing of novel cellular immunotherapy product candidates, and unfavorable pricing policies or reimbursement could impair commercial success[200](index=200&type=chunk)[202](index=202&type=chunk) - Healthcare legislative or regulatory reform measures, such as the ACA and drug pricing scrutiny, may negatively impact the business by delaying approvals, restricting activities, or reducing reimbursement[204](index=204&type=chunk)[208](index=208&type=chunk) [Risks Related to Our Business and Industry](index=50&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Industry) Success depends on HSCT and cellular immunotherapy developments, facing intense competition, challenges in retaining personnel, and risks of misconduct or non-compliance with healthcare laws - The success of the company's product candidates is substantially dependent on developments within the field of HSCT and cellular immunotherapy; adverse developments could significantly harm business prospects[211](index=211&type=chunk) - The biotechnology and pharmaceutical industries are intensely competitive, and the company faces competition from entities with greater financial and other resources[212](index=212&type=chunk) - Inability to attract and retain qualified management, scientific, and clinical personnel and consultants could significantly impede the achievement of development objectives and business strategy[213](index=213&type=chunk) - The company is exposed to risks of employee fraud or other misconduct, including non-compliance with regulatory standards and healthcare fraud and abuse laws, which could result in significant fines or sanctions[223](index=223&type=chunk)[225](index=225&type=chunk) [Risks Related to Our Financial Condition and the Ownership of Our Common Stock](index=53&type=section&id=Risks%20Related%20to%20Our%20Financial%20Condition%20and%20the%20Ownership%20of%20Our%20Common%20Stock) Limited operating history, significant losses, fluctuating stock price, principal stockholder control, and potential dilution from future financings pose risks to financial condition and stock ownership - The company has a limited operating history, has incurred significant net losses since inception (**$305.2 million** accumulated deficit as of March 31, 2019), and anticipates continued significant losses for the foreseeable future[226](index=226&type=chunk) - The market price of the company's common stock is subject to wide fluctuations based on clinical trial results, regulatory developments, competitive announcements, and financing efforts[229](index=229&type=chunk)[230](index=230&type=chunk) - Executive officers, directors, and affiliated entities beneficially own approximately **46.4%** of outstanding voting stock, allowing them to influence management and matters submitted to stockholders for approval[232](index=232&type=chunk) - Future sales of additional equity or debt securities to fund operations may result in dilution to stockholders and could impose restrictions or limitations on the business[233](index=233&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=57&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Information on unregistered equity sales and use of proceeds has been previously disclosed in the company's Form 8-K - All information regarding unregistered sales of equity securities and use of proceeds has been previously reported in the company's Current Report on Form 8-K[240](index=240&type=chunk) [Defaults Upon Senior Securities](index=57&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - There were no defaults upon senior securities[241](index=241&type=chunk) [Mine Safety Disclosures](index=57&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Mine Safety Disclosures are not applicable to the company[242](index=242&type=chunk) [Other Information](index=57&type=section&id=Item%205.%20Other%20Information) No other information to report under this item - No other information to report[243](index=243&type=chunk) [Exhibits](index=58&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with Form 10-Q, including organizational documents, officer certifications, and XBRL taxonomy documents - Exhibits include the Amended and Restated Certificate of Incorporation, Bylaws, Specimen Common Stock Certificate, Certifications of Principal Executive and Financial Officers (pursuant to Rules 13a-14/15d-14 and 18 U.S.C. Section 1350), and XBRL Instance, Schema, Calculation, Definition, Label, and Presentation Documents[245](index=245&type=chunk) [SIGNATURES](index=59&type=section&id=SIGNATURES) The report is signed by J. Scott Wolchko, serving as President, CEO, Director, Principal Executive, Financial, and Accounting Officer - The report is signed by J. Scott Wolchko, President and Chief Executive Officer and Director, who also serves as Principal Executive Officer, Principal Financial Officer, and Principal Accounting Officer[250](index=250&type=chunk)

Fate Therapeutics, Inc. (NASDAQ:FATE) Q4 2018 Results Conference Call March 5, 2019 5:00 PM ET Company Participants Scott Wolchko - President and CEO Dr. Dan Shoemaker - Chief Scientific Officer Conference Call Participants Ted Tenthoff - Piper Jaffary Kripa Devarakonda - Citi Yanan Zhu - Wells Fargo Biren Amin - Jefferies Matt Biegler - Oppenheimer Reni Benjamin - Raymond James Operator Welcome to the Fate Therapeutics Fourth Quarter 2018 Financial Results Conference Call. At this time, all participants ar ...

Part I [Business](index=5&type=section&id=Item%201.%20Business) Fate Therapeutics is a clinical-stage biopharmaceutical company developing programmed cellular immunotherapies for cancer and immune disorders [General Description and Strategy](index=5&type=section&id=General%20Description%20and%20Strategy) The company develops first-in-class cellular immunotherapies using cell programming and iPSC technology, focusing on allogeneic therapies and strategic collaborations - Fate Therapeutics is a clinical-stage biopharmaceutical company developing programmed cellular immunotherapies for cancer and immune disorders[9](index=9&type=chunk) - The company's therapeutic approach involves 'cell programming' using either pharmacologic modulators on donor cells or generating therapies from clonal master induced pluripotent stem cell (iPSC) lines[9](index=9&type=chunk)[13](index=13&type=chunk) - The business strategy focuses on developing allogeneic therapies to improve consistency and reduce costs, leveraging its **iPSC platform** for off-the-shelf products, and forming strategic partnerships to accelerate clinical translation[15](index=15&type=chunk) [Product Pipeline & Partnerships](index=6&type=section&id=Product%20Pipeline%20%26%20Partnerships) The company's pipeline includes Immuno-Oncology and Immuno-Regulation programs, featuring donor and iPSC-derived cell therapies, supported by strategic partnerships Development Pipeline Summary | Product Candidate | Cell Type | Stage of Development | Therapeutic Area | Commercial Rights | | :--- | :--- | :--- | :--- | :--- | | **Immuno-Oncology** | | | | | | FATE-NK100 | Donor NK | Phase 1 | AML, Ovarian Cancer, Solid Tumors | Worldwide | | FT500 | iPSC-NK | IND Allowed | Advanced Solid Tumors | Worldwide | | FT516 | iPSC-NK | IND Allowed | Hematologic Malignancies | Worldwide | | FT596 | iPSC-NK | Preclinical | Hematologic Malignancies | Worldwide | | FT538 | iPSC NK | Preclinical | Hematologic Malignancies | Worldwide | | FT819 | iPSC-T | Preclinical | Hematologic Malignancies | Worldwide | | **Immuno-Regulation** | | | | | | ProTmune™ | Donor cell graft | Phase 2 | Prevention of Acute GvHD | Worldwide | | FT301 | iPSC-MDSC | Preclinical | Immune Disorders | Worldwide | - **FATE-NK100** is in three Phase 1 trials for AML, ovarian cancer, and advanced solid tumors, showing some anti-leukemic activity and disease control[23](index=23&type=chunk)[26](index=26&type=chunk)[27](index=27&type=chunk) - The FDA cleared IND applications for **FT500** and **FT516**, the first iPSC-derived cell therapies to enter clinical investigation in the U.S., for solid tumors and hematologic malignancies respectively[17](index=17&type=chunk)[30](index=30&type=chunk)[34](index=34&type=chunk) - **ProTmune™** is in a randomized, controlled Phase 2 trial (PROTECT study) for preventing acute GvHD in HCT patients, with Phase 1 data showing good tolerability and no graft failure or cancer relapse[41](index=41&type=chunk)[44](index=44&type=chunk) - A key partnership with **Ono Pharmaceutical** for iPSC-derived CAR T-cell candidates involved a **$10 million** upfront payment and up to **$20 million** in R&D fees[46](index=46&type=chunk)[48](index=48&type=chunk) [Intellectual Property and License Agreements](index=18&type=section&id=Intellectual%20Property%20and%20License%20Agreements) The company's extensive IP portfolio, comprising over 300 patents and applications, is bolstered by key exclusive license agreements with academic institutions - The company's intellectual property portfolio consists of over **200 licensed** and over **100 owned** issued patents or pending applications, covering its product candidates and platform technologies[53](index=53&type=chunk) - Key IP relates to programming hematopoietic and immune cells (patents expiring **2027-2039**) and iPSC technology, including generation, engineering, and differentiation (patents expiring **2024-2038**)[56](index=56&type=chunk)[57](index=57&type=chunk)[59](index=59&type=chunk) - The company has material exclusive license agreements with several institutions, including Children's Medical Center, University of Minnesota, Memorial Sloan Kettering, Whitehead Institute, and The Scripps Research Institute, crucial for product development[61](index=61&type=chunk)[64](index=64&type=chunk)[65](index=65&type=chunk) - These license agreements obligate the company to pay annual maintenance fees, development and commercial milestones (e.g., up to **$5.0 million** per product to CMCC, **$12.5 million** per product to MSK), and royalties on net sales[61](index=61&type=chunk)[66](index=66&type=chunk) [Manufacturing, Competition, and Regulation](index=23&type=section&id=Manufacturing%2C%20Competition%2C%20and%20Regulation) The company manages manufacturing through third parties and its own GMP facility, faces intense competition, and navigates complex FDA regulations for its cell therapies - Manufacturing for **ProTmune** and **FATE-NK100** is performed at clinical cell processing facilities affiliated with trial sites[73](index=73&type=chunk)[74](index=74&type=chunk) - The manufacturing of iPSC-derived products is a three-stage process, utilizing CMOs and the company's own developing GMP facility[76](index=76&type=chunk) - The company faces significant competition from numerous large and small biopharmaceutical companies in the cellular immunotherapy space, including Allogene, Atara, bluebird bio, Celgene, Gilead, and Novartis[96](index=96&type=chunk) - Biological products are regulated by the FDA under the FDCA and PHS Act, requiring rigorous nonclinical testing, an effective IND, well-controlled clinical trials, and an approved Biologics License Application (BLA)[78](index=78&type=chunk)[80](index=80&type=chunk)[81](index=81&type=chunk) - The FDA offers expedited programs such as Fast Track, priority review, accelerated approval, and breakthrough therapy designation, with **ProTmune** having received Fast Track designation[88](index=88&type=chunk)[44](index=44&type=chunk) [Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) The company faces substantial risks including clinical trial failures, manufacturing complexities, funding needs, intense competition, and intellectual property and commercialization challenges - **Development & Regulatory Risks:** The company may face delays or failures in clinical trials due to difficulties in patient enrollment, unexpected safety issues, or regulatory hurdles for its novel cell therapies, potentially requiring additional unanticipated studies[105](index=105&type=chunk)[108](index=108&type=chunk)[113](index=113&type=chunk) - **Manufacturing & Supply Risks:** Manufacturing of cell therapies, particularly iPSC-derived products, is complex, costly, and subject to risks of failure or inconsistency, with reliance on third-party manufacturers and suppliers for critical materials[117](index=117&type=chunk)[120](index=120&type=chunk)[140](index=140&type=chunk) - **Financial & Operational Risks:** The company has a history of losses and will require substantial additional funding to complete development and commercialization, facing intense competition from better-funded companies and reliance on key personnel[109](index=109&type=chunk)[178](index=178&type=chunk)[191](index=191&type=chunk) - **Third-Party & IP Risks:** The business depends on strategic collaborations (e.g., Ono, Juno), and their failure could harm product development; the company must also obtain, maintain, and defend its intellectual property rights and could face infringement claims[136](index=136&type=chunk)[147](index=147&type=chunk)[152](index=152&type=chunk) - **Commercialization Risks:** The commercial success of its products depends on market acceptance by physicians and payers, favorable pricing, and adequate reimbursement, all of which are uncertain for novel cell therapies[164](index=164&type=chunk)[165](index=165&type=chunk)[167](index=167&type=chunk) [Properties](index=55&type=section&id=Item%202.%20Properties) The company leases approximately **48,000 square feet** of office and laboratory space in San Diego, California, with an additional **24,000 square feet** leased in January 2019 - The company leases approximately **48,000 square feet** of office and laboratory space in San Diego, CA under a lease through December 2028[207](index=207&type=chunk) - In January 2019, the company expanded its leased space by an additional **24,000 square feet**[207](index=207&type=chunk) [Legal Proceedings](index=56&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings and does not anticipate any significant adverse effects from potential future claims - As of the report date, the company is not a party to any material legal proceedings[209](index=209&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=57&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on NASDAQ under 'FATE', has never paid dividends, and made no share repurchases in 2018 - The company's common stock is traded on The NASDAQ Global Market under the ticker symbol "**FATE**"[213](index=213&type=chunk) - The company has never paid dividends and does not plan to in the foreseeable future[217](index=217&type=chunk) - No equity securities were repurchased by the company in the year ended December 31, 2018[220](index=220&type=chunk) [Selected Financial Data](index=58&type=section&id=Item%206.%20Selected%20Financial%20Data) In 2018, the company reported **$4.7 million** in revenue and a **$66.6 million** net loss, with total assets increasing to **$213.0 million** Selected Consolidated Financial Data (in thousands, except per share data) | Metric | 2018 | 2017 | | :--- | :--- | :--- | | Collaboration Revenue | $4,740 | $4,106 | | Research and development | $56,024 | $34,358 | | General and administrative | $15,808 | $11,873 | | Loss from operations | $(67,092) | $(42,125) | | Net loss | $(66,598) | $(42,952) | | Net loss per common share | $(1.19) | $(1.02) | | **Balance Sheet Data** | | | | Cash and cash equivalents | $190,514 | $88,952 | | Total assets | $213,032 | $105,292 | | Total stockholders' equity | $160,469 | $77,189 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=59&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The company's 2018 net loss increased to **$66.6 million** due to higher R&D and G&A expenses, while liquidity improved to **$201.0 million** from a public offering [Results of Operations](index=70&type=section&id=Results%20of%20Operations) In 2018, collaboration revenue slightly increased to **$4.7 million**, while R&D expenses surged by **$21.7 million** and G&A expenses by **$3.9 million** Comparison of Operations (Years Ended Dec 31, in thousands) | Item | 2018 | 2017 | Change | | :--- | :--- | :--- | :--- | | Collaboration revenue | $4,740 | $4,106 | $634 | | Research and development expenses | $56,024 | $34,358 | $21,666 | | General and administrative expenses | $15,808 | $11,873 | $3,935 | - The **$21.7 million** increase in R&D expenses in 2018 was driven by higher costs for third-party services (**$7.8 million**), licensing (**$6.7 million**), employee compensation (**$4.3 million**), and lab supplies (**$2.5 million**)[250](index=250&type=chunk) - The **$3.9 million** increase in G&A expenses in 2018 was mainly due to higher employee compensation (**$2.2 million**) and increased advisory and consulting fees (**$1.3 million**)[250](index=250&type=chunk) [Liquidity and Capital Resources](index=71&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2018, the company held **$201.0 million** in cash and investments, significantly bolstered by **$140.8 million** from financing activities, primarily a public stock offering Summary of Cash Flow Activity (in thousands) | Activity | 2018 | 2017 | | :--- | :--- | :--- | | Net cash used in operating activities | $(38,650) | $(36,817) | | Net cash used in investing activities | $(463) | $(10,196) | | Net cash provided by financing activities | $140,780 | $47,356 | - As of December 31, 2018, the company had **$201.0 million** in cash, cash equivalents, and short-term investments[263](index=263&type=chunk) - In September 2018, the company raised net proceeds of **$134.9 million** from a public offering of common stock[265](index=265&type=chunk) - The company believes its existing cash and investments are sufficient to fund projected operating requirements for at least the next twelve months[275](index=275&type=chunk) [Contractual Obligations](index=72&type=section&id=Contractual%20Obligations) As of December 31, 2018, total contractual obligations were **$59.7 million**, comprising **$18.5 million** in debt and **$41.2 million** in operating lease obligations Contractual Obligations at December 31, 2018 (in thousands) | Obligation | Total | Less than 1 Year | 1 - 3 Years | 3 - 5 Years | More than 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Long-term debt (including interest and fees) | $18,480 | $3,720 | $13,131 | $1,629 | $— | | Operating lease obligations | $41,221 | $3,019 | $7,634 | $8,098 | $22,470 | | **Total** | **$59,701** | **$6,739** | **$20,765** | **$9,727** | **$22,470** | - The company has additional obligations for potential milestone payments and royalties under its license agreements, which are not quantified due to uncertainty of timing and occurrence[277](index=277&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=73&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate sensitivity on its cash and investments, with a **10%** rate change not expected to materially impact financial results - The company's primary market risk is interest rate sensitivity on its cash, cash equivalents, and short-term investments[281](index=281&type=chunk) - Due to the short-term nature of its investments and the capped interest rate on its debt, a **10%** change in market interest rates is not expected to materially impact financial results[281](index=281&type=chunk) [Financial Statements and Supplementary Data](index=74&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) The 2018 consolidated financial statements show total assets of **$213.0 million**, a net loss of **$66.6 million**, and **$190.5 million** in cash, reflecting increased R&D and G&A spending [Consolidated Balance Sheets](index=75&type=section&id=Consolidated%20Balance%20Sheets) As of December 31, 2018, total assets reached **$213.0 million**, driven by increased cash to **$190.5 million**, with total liabilities at **$52.6 million** and equity at **$160.5 million** Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2018 | Dec 31, 2017 | | :--- | :--- | :--- | | Cash and cash equivalents | $190,514 | $88,952 | | Total current assets | $205,196 | $102,596 | | Total assets | $213,032 | $105,292 | | Total current liabilities | $27,263 | $11,049 | | Total liabilities | $52,563 | $28,103 | | Total stockholders' equity | $160,469 | $77,189 | [Consolidated Statements of Operations](index=76&type=section&id=Consolidated%20Statements%20of%20Operations) For 2018, the company reported a net loss of **$66.6 million** on **$4.7 million** in revenue, an increased loss primarily due to higher operating expenses Consolidated Statement of Operations Highlights (in thousands) | Account | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Collaboration revenue | $4,740 | $4,106 | $4,402 | | Research and development | $56,024 | $34,358 | $26,452 | | General and administrative | $15,808 | $11,873 | $9,913 | | Loss from operations | $(67,092) | $(42,125) | $(31,963) | | Net loss | $(66,598) | $(42,952) | $(33,462) | | Net loss per share | $(1.19) | $(1.02) | $(1.05) | [Consolidated Statements of Cash Flows](index=78&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) In 2018, net cash used in operations was **$38.7 million**, offset by **$140.8 million** from financing activities, resulting in a **$101.7 million** increase in cash Consolidated Statement of Cash Flows Highlights (in thousands) | Cash Flow | 2018 | 2017 | | :--- | :--- | :--- | | Net cash used in operating activities | $(38,650) | $(36,817) | | Net cash used in investing activities | $(463) | $(10,196) | | Net cash provided by financing activities | $140,780 | $47,356 | | Net increase in cash, cash equivalents and restricted cash | $101,667 | $343 | [Controls and Procedures](index=102&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2018, affirmed by an unqualified audit opinion - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2018[399](index=399&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2018, a conclusion audited and supported by an unqualified opinion from Ernst & Young LLP[399](index=399&type=chunk)[402](index=402&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=105&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the company's definitive proxy statement - The information required by this item is incorporated by reference from the registrant's definitive proxy statement to be filed with the SEC[409](index=409&type=chunk) [Executive Compensation](index=105&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's definitive proxy statement - The information required by this item is incorporated by reference from the registrant's definitive proxy statement[410](index=410&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=105&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership of certain beneficial owners and management is incorporated by reference from the company's definitive proxy statement - The information required by this item is incorporated by reference from the registrant's definitive proxy statement[411](index=411&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=105&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding certain relationships, related party transactions, and director independence is incorporated by reference from the company's definitive proxy statement - The information required by this item is incorporated by reference from the registrant's definitive proxy statement[412](index=412&type=chunk) [Principal Accounting Fees and Services](index=105&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information regarding principal accounting fees and services is incorporated by reference from the company's definitive proxy statement - The information required by this item is incorporated by reference from the registrant's definitive proxy statement[413](index=413&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=106&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements, schedules, and exhibits filed as part of the Annual Report on Form 10-K, with financial statements starting on page 74 - This section contains the index to the company's financial statements and a list of all exhibits filed with the report[416](index=416&type=chunk)[417](index=417&type=chunk)