FATE THERAPEUTICS INC

Previous wording

On September 14, 2018, we entered into the Ono Agreement for the joint development and commercialization of two iPSC-derived CAR T-cell product candidates (Candidate 1 and Candidate 2). Pursuant to the terms of the Ono Agreement, we received an upfront, non-refundable and non-creditable payment of $10.0 million. Additionally, we are entitled to receive fees for the conduct of research and preclinical development under a joint research plan, which fees were estimated to be $20.0 million in aggregate.

Current wording

On September 14, 2018, we entered into the Ono Agreement for the joint development and commercialization of two iPSC-derived CAR T-cell product candidates (Candidate 1 and Candidate 2). Pursuant to the terms of the Ono Agreement, we received an upfront, non-refundable and non-creditable payment of $10.0 million. Additionally, we are entitled to receive funding for the conduct of research and preclinical development under a joint research plan, which fees were estimated to be $20.0 million in aggregate.

Previous wording

In June 2022, we entered into an amendment with Ono to the Ono Agreement (the 2022 Ono Amendment). Pursuant to the 2022 Ono Amendment, the companies agreed to designate an additional antigen expressed on certain solid tumors for research and preclinical development, and Ono agreed to contribute proprietary antigen binding domains targeting such additional solid tumor antigen (Candidate 3). In addition, for both Candidate 2 and Candidate 3, the companies expanded the scope of the collaboration to include the research and preclinical development of iPSC-derived CAR NK cell product candidates (in addition to iPSC-derived CAR T-cell product candidates) targeting the designated solid tumor antigens. Similar to Candidate 2, we granted to Ono, during a specified period of time, a preclinical option (Candidate 3 Development Option) to obtain an exclusive license under certain intellectual property rights, subject to payment of an option exercise fee to us by Ono, to further develop and commercialize Candidate 3 in all territories of the world, where we retain rights to co-develop and co-commercialize Candidate 3 in the United States and Europe under a joint arrangement with Ono under which we are eligible to share at least 50% of the profits and losses. The Candidate 3 Development Option represents an option with no material right. We maintained worldwide rights of manufacture for Candidate 3. The Candidate 3 Development Option expires upon the earlier of: (a) September 30, 2024, or (b) the achievement of the pre-defined preclinical milestone under the joint research plan for Candidate 3. Subject to payment of an extension fee by Ono, Ono may choose to defer its decision to exercise the Candidate 3 Development Option until no later than June 2026. Under the 2022 Ono Amendment, aggregate estimated research and preclinical development fees have been increased by approximately $9.3 million, for a total estimated $29.3 million in aggregate research and preclinical development fees over the course of the joint research plan.

Current wording

In June 2022, we entered into an amendment with Ono to the Ono Agreement (the 2022 Ono Amendment). Pursuant to the 2022 Ono Amendment, the companies agreed to designate an additional antigen expressed on certain solid tumors for research and preclinical development, and Ono agreed to contribute proprietary antigen binding domains targeting such additional solid tumor antigen (Candidate 3). In addition, for both Candidate 2 and Candidate 3, the companies expanded the scope of the collaboration to include the research and preclinical development of iPSC-derived CAR NK cell product candidates (in addition to iPSC-derived CAR T-cell product candidates) targeting the designated solid tumor antigens. Similar to Candidate 2, we granted to Ono, during a specified period of time, a preclinical option (Candidate 3 Development Option) to obtain an exclusive license under certain intellectual property rights, subject to payment of an option exercise fee to us by Ono, to further develop and commercialize Candidate 3 in all territories of the world, where we retain rights to co-develop and co-commercialize Candidate 3 in the United States and Europe under a joint arrangement with Ono pursuant to which we are eligible to share at least 50% of the profits and losses. The Candidate 3 Development Option represents an option with no material right. Under the 2022 Ono Amendment, aggregate estimated research and preclinical development fees have been increased by approximately $9.3 million, for a total estimated $29.3 million in aggregate research and preclinical development fees over the course of the joint research plan.

Previous wording

In November 2022, Ono exercised its option to obtain a license to develop and commercialize Candidate 2 (the Candidate 2 Development Option), and we exercised our option to co-develop and co-commercialize in the United States and Europe under a joint arrangement with Ono. As a result, we recognized an option exercise fee of $12.5 million from Ono during the year ended December 31, 2022. We and Ono are proceeding under a joint development plan for the ongoing development of Candidate 2, and, as such, we have initiated clinical studies for Candidate 2. The costs of this joint development plan are accounted for in accordance with ASC 808, and cost sharing payments to us from Ono are recorded as contra-research and development expenses.

Current wording

In November 2022, Ono exercised its option to obtain a license to develop and commercialize Candidate 2 (the Candidate 2 Development Option), and we exercised our option to co-develop and co-commercialize Candidate 2 in the United States and Europe. As a result, we received and recognized an option exercise fee of $12.5 million from Ono during the year ended December 31, 2022. We and Ono are proceeding under a joint development plan for the ongoing development of Candidate 2, and, as such, we have initiated clinical studies for Candidate 2. The costs of this joint development plan are accounted for in accordance with ASC 808, and cost sharing payments to us from Ono are recorded as contra-research and development expenses.

Previous wording

On November 30, 2023, we entered into an amendment with Ono to the Ono Agreement (the 2023 Ono Amendment). Under the 2023 Ono Amendment, aggregate estimated research and preclinical development fees payable to us by Ono have been increased by approximately $1.4 million, for a total estimated $30.7 million in aggregate research and preclinical development fees over the course of the joint research plan.

Current wording

In November 2023, we entered into an amendment with Ono to the Ono Agreement (the 2023 Ono Amendment). Under the 2023 Ono Amendment, aggregate estimated research and preclinical development fees payable to us by Ono for Candidate 3 have been increased by approximately $1.4 million, for a total estimated $30.7 million in aggregate research and preclinical development fees over the course of the joint research plan.

Previous wording

In May 2024, following Ono's exercise of the Candidate 2 Development Option, we achieved a $5.0 million clinical development milestone for Candidate 2. We determined that we had completed our performance obligation with respect to such milestone in the three months ended June 30, 2024, and accordingly, recognized such amount as revenue during the period.

Current wording

In May 2024, following Ono’s exercise of the Candidate 2 Development Option and grant of the development and commercialization license, we achieved a $5.0 million clinical development milestone for Candidate 2. We determined that we had completed our performance obligation with respect to such milestone in the nine months ended September 30, 2024, and accordingly, recognized such amount as revenue during the period.

Previous wording

We account for the Ono Agreement, Ono Letter Agreement, and Ono Amendments (collectively, the Ono Arrangement) as a revenue contract under ASC 606. The initial transaction price under the Ono Arrangement was determined to be $40.7 million, consisting of the upfront, non-refundable and non-creditable payment of $10.0 million, the aggregate estimated research and preclinical development fees of $30.7 million. We also concluded that the Candidate 2 milestone fee of $10.0 million for further research and preclinical development of Candidate 2 represented a variable consideration that was previously constrained. We identified our promised goods and services under the Ono Arrangement to include our grant to Ono of a research license to certain of our intellectual property subject to certain conditions, our conduct of research and preclinical development services, and our participation in a joint steering committee. We determined that the promised goods and services should be accounted for as one combined performance obligation. We recognize revenue for the combined performance obligation over time as the research and preclinical development services are performed.

Current wording

We account for the Ono Agreement, Ono Letter Agreement, and Ono Amendments (collectively, the Ono Arrangement) as a revenue contract under ASC 606. The initial transaction price under the Ono Arrangement was determined to be $48.0 million, consisting of the upfront, non-refundable and non-creditable payment of $10.0 million, the aggregate estimated research and preclinical development fees of $38.0 million. We also concluded that the Candidate 2 milestone fee of $10.0 million for further research and preclinical development of Candidate 2 represented a variable consideration that was previously constrained. We identified our promised goods and services under the Ono Arrangement to include our grant to Ono of a research license to certain of our intellectual property subject to certain conditions, our conduct of research and preclinical development services, and our participation in a joint steering committee. We determined that the promised goods and services should be accounted for as one combined performance obligation. We recognize revenue for the combined performance obligation over time as the research and preclinical development services are performed.

Previous wording

During the three and six months ended June 30, 2024, we recognized $6.8 million and $8.7 million of collaboration revenue, respectively, and $1.1 million and $2.0 million of contra-research and development expense, respectively, under the Ono Arrangement. During the three months ended June 30, 2024, we achieved a clinical development milestone under the Ono Arrangement and received a cash payment of $5.0 million. The milestone payment is included as revenue during the three months ended June 30, 2024. During the three and six months ended June 30, 2023, we recognized $0.9 million and $7.6 million of collaboration revenue, respectively, and $2.8 million and $3.8 million of contra-research and development expense, respectively, under the Ono Arrangement.

Current wording

During the three and nine months ended September 30, 2024, we recognized $3.1 million, which includes $1.4 million associated with the 2024 Ono Amendment, and $11.8 million of collaboration revenue, respectively, and $1.7 million and $3.6 million of contra-research and development expense, respectively, under the Ono Arrangement. During the nine months ended September 30, 2024, we achieved a clinical development milestone under the Ono Arrangement and received a cash payment of $5.0 million. The milestone payment is included as revenue during the nine months ended September 30, 2024. During the three and nine months ended September 30, 2023, we recognized $1.9 million and $9.5 million of collaboration revenue, respectively, and $2.1 million and $5.9 million of contra-research and development expense, respectively, under the Ono Arrangement.

Previous wording

During the six months ended June 30, 2023, we recognized $52.3 million of collaboration revenue under the Janssen Agreement, of which $41.2 million was deferred as of December 31, 2022. No revenue was recognized during the three months ended June 30, 2023 under the Janssen Agreement.

Current wording

During the nine months ended September 30, 2023, we recognized $52.3 million of collaboration revenue under the Janssen Agreement, of which $41.2 million was deferred as of December 31, 2022. No revenue was recognized during the three months ended September 30, 2023 under the Janssen Agreement.

Previous wording

Due to the inherently unpredictable nature of preclinical and clinical development and manufacture, and given our novel therapeutic approach and the current stage of development of our product candidates, we cannot determine and are unable to estimate with certainty the timelines we will require and the costs we will incur for the development and manufacture of our product candidates. Clinical and preclinical development and manufacturing timelines and costs, and the potential of development and manufacturing success, can differ materially from expectations. In addition, we cannot forecast which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development and manufacturing plans and capital requirements. We cannot predict the effects of the impact of global economic and market conditions, a continued and prolonged public health emergency such as the COVID-19 pandemic, and wars and other armed conflicts, such as the ongoing conflicts between Russia and Ukraine and between Israel and Hamas, on our business and operations, and our expenditures may be increased by delays or disruptions due to these or other factors, including as a result of actions we take in the near term to ensure business continuity and protect against possible supply chain shortages.

Current wording

Due to the inherently unpredictable nature of preclinical and clinical development and manufacture, and given our novel therapeutic approach and the current stage of development of our product candidates, we cannot determine and are unable to estimate with certainty the timelines we will require and the costs we will incur for the development and manufacture of our product candidates. Clinical and preclinical development and manufacturing timelines and costs, and the potential of development and manufacturing success, can differ materially from expectations. In addition, we cannot forecast which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development and manufacturing plans and capital requirements. We cannot predict the effects of the impact of global economic and market conditions, a continued and prolonged public health emergency such as the COVID-19 pandemic, and global geopolitical tensions, including wars and other armed conflicts, on our business and operations, and our expenditures may be increased by delays or disruptions due to these or other factors, including as a result of actions we take in the near term to ensure business continuity and protect against possible supply chain shortages.

Previous wording

Other income consists of changes in the fair value of stock price appreciation milestones associated with the Amended MSKCC License with MSKCC, interest income earned on cash and cash equivalents and interest income from investments (including the amortization of discounts and premiums).

Current wording

Other income consists of changes in the fair value of stock price appreciation milestones associated with the Amended MSKCC License with MSKCC, interest income earned on cash, cash equivalents and investments (including the amortization of discounts and premiums).

Previous wording

The estimates and judgments involved in our accounting policies, as described in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023, continue to be our critical accounting policies and there have been no other material changes to our critical accounting policies during the six months ended June 30, 2024.

Current wording

The estimates and judgments involved in our accounting policies, as described in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023, continue to be our critical accounting policies and there have been no other material changes to our critical accounting policies during the nine months ended September 30, 2024.

Previous wording

Collaboration Revenue. During the three months ended June 30, 2024 and 2023, we recognized revenue of $6.8 million and $0.9 million, respectively, under our collaboration agreement with Ono. The increase in collaboration revenue was primarily due to our achievement of a clinical development milestone, resulting in the recognition of $5.0 million of revenue during the three months ended June 30, 2024.

Current wording

Collaboration Revenue. During the three months ended September 30, 2024 and 2023, we recognized revenue of $3.1 million and $1.9 million, respectively, under our collaboration agreement with Ono. The increase was primarily driven by an increase in research and preclinical development fees payable by Ono under the 2024 Ono Amendment.

Previous wording

Research and development expenses. Research and development expenses were $34.6 million for the three months ended June 30, 2024, compared to $40.9 million for the three months ended June 30, 2023. The decrease in research and development expenses was attributable primarily to the following:

Current wording

Research and development expenses. Research and development expenses were $34.7 million for the three months ended September 30, 2024, compared to $34.3 million for the three months ended September 30, 2023. The increase in research and development expenses was attributable primarily to the following:

Previous wording

$1.9 million decrease in expenditures for laboratory materials and supplies relating to the manufacture of our product candidates and the conduct of our research activities, including under our collaboration agreements.

Current wording

$1.0 million increase in laboratory materials and supplies relating to the manufacture of our product candidates; and

Previous wording

General and administrative expenses. General and administrative expenses were $17.3 million for the three months ended June 30, 2024, compared to $22.6 million for the three months ended June 30, 2023. The decrease in general and administrative expenses was attributable primarily to a $2.2 million decrease in employee compensation and benefits expense, including a $1.7 million decrease in employee stock-based compensation expense, a $1.0 million decrease in third-party professional consultant expense, and a $0.6 million decrease in patent and legal expenses.

Current wording

General and administrative expenses. General and administrative expenses were $20.8 million for the three months ended September 30, 2024, compared to $18.9 million for the three months ended September 30, 2023. The increase in general and administrative expenses was attributable primarily to a $1.5 million increase in legal expense and a $1.1 million increase in employee stock-based compensation expense, partially offset by a $0.8 million decrease in employee compensation and benefits expense.

Previous wording

Other income. Other income was $6.7 million and $9.8 million for the three months ended June 30, 2024 and 2023, respectively. During the three months ended June 30, 2024, we recorded other income of $1.6 million attributable to the change in fair value of the stock price appreciation milestones under the Amended MSKCC License. Other income for the three months ended June 30, 2024 also consisted of interest income earned on cash and cash equivalents and interest income from investments (including the amortization of discounts and premiums).

Current wording

Other income. Other income was $4.7 million and $6.1 million for the three months ended September 30, 2024 and 2023, respectively. Other income for the three months ended September 30, 2024 primarily consisted of interest income earned on cash, cash equivalents and investments (including the amortization of discounts and premiums).

Previous wording

The following table summarizes the results of our operations for the six months ended June 30, 2024 and 2023 (in thousands):

Current wording

The following table summarizes the results of our operations for the nine months ended September 30, 2024 and 2023 (in thousands):

Previous wording

Collaboration Revenue. During the six months ended June 30, 2024 and 2023, we recognized revenue of $8.7 million and $59.9 million, respectively, under our collaboration agreements with Janssen and Ono. The decrease in collaboration revenue was primarily attributable to the termination of the Janssen collaboration in 2023. The following table summarizes the revenue recognized with respect to each collaboration partner for the six months ended June 30, 2024 and 2023:

Current wording

Collaboration Revenue. During the nine months ended September 30, 2024 and 2023, we recognized revenue of $11.8 million and $61.9 million, respectively, under our collaboration agreements with Janssen and Ono. The decrease in collaboration revenue was primarily attributable to the termination of the Janssen collaboration in 2023. The following table summarizes the revenue recognized with respect to each collaboration partner for the nine months ended September 30, 2024 and 2023:

Previous wording

Research and development expenses. Research and development expenses were $66.7 million for the six months ended June 30, 2024, compared to $106.5 million for the six months ended June 30, 2023. The decrease in research and development expenses was attributable primarily to the following:

Current wording

Research and development expenses. Research and development expenses were $101.4 million for the nine months ended September 30, 2024, compared to $140.8 million for the nine months ended September 30, 2023. The decrease in research and development expenses was attributable primarily to the following:

Previous wording

$6.2 million decrease in third-party professional consultant and clinical trial related expense.

Current wording

$17.7 million decrease in third-party professional consultant and clinical trial related expense;

Previous wording

General and administrative expenses. General and administrative expenses were $38.1 million for the six months ended June 30, 2024, compared to $44.6 million for the six months ended June 30, 2023. The decrease in general and administrative expenses was attributable primarily to a $5.0 million decrease in employee compensation and benefits expense, including a $2.3 million decrease in employee stock-based compensation expense and a $1.4 million decrease in third-party professional consultant expense.

Current wording

General and administrative expenses. General and administrative expenses were $58.9 million for the nine months ended September 30, 2024, compared to $63.5 million for the nine months ended September 30, 2023. The decrease in general and administrative expenses was attributable primarily to a $4.7 million decrease in employee compensation and benefits expense, including a $1.2 million decrease in employee stock-based compensation expense and a $1.6 million decrease in third-party professional consultant expense.

Previous wording

Other income. Other income was $9.7 million and $19.5 million for the six months ended June 30, 2024 and 2023, respectively. During the six months ended June 30, 2024, we recorded other income of $0.2 million attributable to the change in fair value of the stock price appreciation milestones under the Amended MSKCC License. Other income for the six months ended June 30, 2024 also consisted of interest income earned on cash and cash equivalents and interest income from investments (including the amortization of discounts and premiums).

Current wording

Other income. Other income was $14.4 million and $25.6 million for the nine months ended September 30, 2024 and 2023, respectively. Other income for the nine months ended September 30, 2024 primarily consisted of interest income earned on cash, cash equivalents and investments (including the amortization of discounts and premiums).

Previous wording

During the six months ended June 30, 2023, we recorded other income of $4.0 million attributable to the FT516 CIRM Award, $5.1 million attributable to the ERC, and $2.1 million attributable to the change in fair value of the stock price appreciation milestones under the Amended MSKCC License. Other income for the six months ended June 30, 2023 also consisted of interest income earned on cash and cash equivalents and interest income from investments (including the amortization of discounts and premiums).

Current wording

During the nine months ended September 30, 2023, we recorded other income of $4.0 million attributable to the FT516 CIRM Award, $5.1 million attributable to the ERC, and $3.2 million attributable to the change in fair value of the stock price appreciation milestones under the Amended MSKCC License. Other income for the nine months ended September 30, 2023 also consisted of interest income earned on cash, cash equivalents and investments (including the amortization of discounts and premiums).

Previous wording

During the six months ended June 30, 2024, cash used in operating activities was $65.7 million compared to cash used in operating activities of $57.4 million during the six months ended June 30, 2023. The primary drivers of this change in cash used in operating activities was our increase of $14.8 million in net loss primarily due to the termination of the Janssen agreement.

Current wording

During the nine months ended September 30, 2024, cash used in operating activities was $95.1 million compared to cash used in operating activities of $95.6 million during the nine months ended September 30, 2023. The primary drivers of this change in cash used in operating activities was our increase of $17.3 million in net loss primarily due to the termination of the Janssen agreement.

Previous wording

During the six months ended June 30, 2024, investing activities used cash of $36.1 million compared to cash provided by investing activities of $42.5 million during the six months ended June 30, 2023. The change was primarily attributable to an increase in the purchases of investments of $215.0 million during the six months ended June 30, 2024 compared to the purchases of investments of $206.7 million during the six months ended June 30, 2023. All other investing activities for the periods presented were attributable to the maturities of investments.

Current wording

During the nine months ended September 30, 2024, investing activities used cash of $10.6 million compared to cash provided by investing activities of $67.3 million during the nine months ended September 30, 2023. The change was primarily attributable to a decrease in the maturities of investments of $269.8 million during the nine months ended September 30, 2024 compared to the maturities of investments of $382.1 million during the nine months ended September 30, 2023. All other investing activities for the periods presented were attributable to the purchases of investments and purchases of property and equipment.

Previous wording

For the six months ended June 30, 2024, financing activities provided cash of $96.8 million, which primarily consisted of (i) the issuance of 14,545,454 shares of common stock at a purchase price of $5.50 per share in an underwritten offering of common stock in March 2024, (ii) the issuance of pre-funded warrants to purchase an aggregate of 3,636,364 shares of common stock at a purchase price of $5.499 per pre-funded warrant, which represents the offering price per share of common stock in the underwritten offering less the $0.001 exercise price per share of each pre-funded warrant, in a private placement concurrent with the underwritten offering, and (iii) the issuance of common stock from equity incentive plans pursuant to the exercise of employee stock options.

Current wording

For the nine months ended September 30, 2024, financing activities provided cash of $96.8 million, which primarily consisted of (i) the issuance of 14,545,454 shares of common stock at a purchase price of $5.50 per share in an underwritten offering of common stock in March 2024, (ii) the issuance of pre-funded warrants to purchase an aggregate of 3,636,364 shares of common stock at a purchase price of $5.499 per pre-funded warrant, which represents the offering price per share of common stock in the underwritten offering less the $0.001 exercise price per share of each pre-funded warrant, in a private placement concurrent with the underwritten offering, and (iii) the issuance of common stock from equity incentive plans pursuant to the exercise of employee stock options.

Previous wording

For the six months ended June 30, 2023, financing activities provided cash of $0.3 million, which consisted of the issuance of common stock from equity incentive plans pursuant to the exercise of employee stock options.

Current wording

For the nine months ended September 30, 2023, financing activities provided cash of $0.3 million, which consisted of the issuance of common stock from equity incentive plans pursuant to the exercise of employee stock options.

Previous wording

From our inception through June 30, 2024, we have funded our consolidated operations primarily through the public and private sale of common stock, the issuance of warrants, the private placement of preferred stock and convertible notes, commercial bank debt and revenues from collaboration activities and grants. As of June 30, 2024, we had aggregate cash and cash equivalents and investments of $352.0 million.

Current wording

From our inception through September 30, 2024, we have funded our consolidated operations primarily through the public and private sale of common stock, the issuance of warrants, the private placement of preferred stock and convertible notes, commercial bank debt and revenues from collaboration activities and grants. As of September 30, 2024, we had aggregate cash and cash equivalents and investments of $330.5 million.

Previous wording

In addition, we are closely monitoring inflation rates and global political and economic conditions, including the ongoing conflicts between Russia and Ukraine and between Israel and Hamas, and evaluating adjustments to our business and operations, which may negatively impact our financial condition and prospects and our operating results. We will continue to assess our operating capital requirements and may make adjustments to our business and operations if circumstances warrant. If we cannot continue or expand our research, manufacturing and development operations, or otherwise capitalize on our business opportunities, because we lack sufficient capital, our business, operations, financial condition and prospects could be materially adversely affected.

Current wording

In addition, we are closely monitoring inflation rates and global political and economic conditions, including ongoing and emerging global geopolitical tensions, including wars and other armed conflicts, and evaluating adjustments to our business and operations, which may negatively impact our financial condition and prospects and our operating results. We will continue to assess our operating capital requirements and may make adjustments to our business and operations if circumstances warrant. If we cannot continue or expand our research, manufacturing and development operations, or otherwise capitalize on our business opportunities, because we lack sufficient capital, our business, operations, financial condition and prospects could be materially adversely affected.