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Edited Transcript of FTSV.OQ earnings conference call or presentation 12-Nov-19 1:00pm GMT

Q3 2019 Forty Seven Inc Earnings Call

Dec 4, 2019 (Thomson StreetEvents) -- Edited Transcript of Forty Seven Inc earnings conference call or presentation Tuesday, November 12, 2019 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Ann D. Rhoads

Forty Seven, Inc. - CFO

* Chris H. Takimoto

Forty Seven, Inc. - Chief Medical Officer

* Mark Chao

Forty Seven, Inc. - Founder & VP of Clinical Development

* Mark A. McCamish

Forty Seven, Inc. - President, CEO & Director

* Mukul Agarwal

Forty Seven, Inc. - VP of Corporate Development

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Conference Call Participants

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* Adam Gerald Evertts

LifeSci Capital, LLC, Research Division - Senior Research Analyst

* Charles Anthony Butler

Roth Capital Partners, LLC, Research Division - MD, Senior Equity Analyst & Head of Biotechnology Research

* James Winsor Colby

BTIG, LLC, Research Division - Research Analyst

* Mara Goldstein

Mizuho Securities USA LLC, Research Division - MD of Equity Research Department

* Matthew Cornell Biegler

Oppenheimer & Co. Inc., Research Division - Associate

* Sean Lee

H.C. Wainwright & Co, LLC, Research Division - Equity Research Associate

* Soumit Roy

JonesTrading Institutional Services, LLC, Research Division - VP & Healthcare Analyst

* Yue-Wen Zhu

Guggenheim Securities, LLC, Research Division - Associate

* Michael Horowicz

Stern Investor Relations, Inc. - Analyst

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Presentation

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Operator [1]

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Good morning, and welcome to Forty Seven's Third Quarter 2019 Financial Results Conference Call. (Operator Instructions)

This call is being webcast live on the Investors section of Forty Seven's website at www.fortyseveninc.com. Please be advised that this call is being recorded. Following the formal remarks, we will open up the call for questions.

At this time, I would like to turn the call over to Michael Horowicz with Stern Investor Relations.

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Michael Horowicz, Stern Investor Relations, Inc. - Analyst [2]

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Thank you. This morning, Forty Seven issued a press release detailing its third quarter 2019 financial results, along with anticipated future milestones and recent accomplishments. The release is available on the Investor section of Forty Seven's website at www.fortyseveninc.com.

Today's call will begin with prepared remarks by Dr. Mark McCamish, Chief Executive Officer of Forty Seven; and Ann Rhoads, Chief Financial Officer of Forty Seven. Then we will open the call up for questions. Dr. Chris Takimoto, Chief Medical Officer, Dr. Mark Chao, Founder and Vice President of Clinical Development; and Mukul Agarwal, Vice President of Corporate Development are also on the call and will be available for questions.

Before we begin, I would like to remind everyone that statements we make on this call will include forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ. A description of these risks can be found in our most recent periodic reports we file with the SEC. Any forward-looking statements are made only as of today's date, and we undertake no obligation to update these forward-looking statements to reflect subsequent events or circumstances.

I would now like to turn the call over to Mark.

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Mark A. McCamish, Forty Seven, Inc. - President, CEO & Director [3]

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Thanks, Michael. Good morning, everyone, and thank you for joining us today to review our third quarter 2019 financial results and recent business highlights, which we announced earlier today.

In the third quarter, we continue to progress toward our goal of delivering safe, well-tolerated and effective treatments to patients in disease areas of high unmet need. As you know, our lead product candidate, magrolimab, previously known as 5F9, is an anti-CD47 antibody, which aims to turn off an abnormal cell's up-regulated "do not eat me" signal, thus enabling macrophages, the innate immune system's first responders to effectively initiate an immune cascade and promote abnormal cell killing and long-term defense.

During the quarter, we achieved meaningful progress across our pipeline, including our earlier-stage programs that target other components of the CD47 pathway. Alongside magrolimab, we are advancing FSI-189, our anti-SIRPa antibody and FSI-174, our anti-cKIT antibody, in order to explore additional opportunities to more fully exploit the CD47 pathway as a novel therapeutic target.

On this morning's call, I will highlight that progress across 2 of our pipeline candidates, magrolimab and FSI-174. I will also remind you of upcoming next steps for each program.

Beginning with our lead candidate, magrolimab. In the third quarter, we focused on preparing to initiate our first potential registration-enabling trials in myelodysplastic syndrome, or MDS, and diffuse large B-cell lymphoma or DLBCL. Following recent interactions with the FDA, we believe we have plans in place for both programs, which could allow us to achieve accelerated approval and to address the unmet needs of substantial patient populations. On today's call, I want to provide an update on these plans and also elucidate what we consider to be the market opportunity from magrolimab in MDS and DLBCL, 2 of the hematologic malignancies with the highest burden of disease as measured by both annual incidents and mortality.

Let me start with MDS. In the second quarter, we announced that we expect to take a 2-part approach to securing potential approval. First, we're expanding our ongoing Phase Ib trial, which uses a weekly dosing regimen of magrolimab in combination with azacitidine to approximately 90 patients with untreated intermediate to very high-risk MDS to accelerate the acquisition of 12-month safety data. We continue to enroll patients in this ongoing single-arm trial, and the primary endpoint of that trial is overall response rate with durability response. We are also working with the FDA under a special protocol assessment to finalize key parameters of our second trial which will use a more convenient 2-week dosing regimen to evaluate the combination of magrolimab and azacitidine in MDS patients. We expect to complete enrollment of our first trial in the third quarter of 2020 and to initiate our second MDS trial in the first quarter of 2020.

In parallel, we are moving forward with chemistry, manufacturing and controls or CMC activities to support an expected filing of the BLA in the fourth quarter of 2021. Our confidence in magrolimab and azacitidine in combination is buoyed by the data that continue to emerge from our ongoing Phase Ib clinical trial. As we announced last week, we'll be presenting additional data from our ongoing trial at the 61st American Society of Hematology, or ASH, Annual Meeting. These data include additional efficacy and durability data for a larger number of patients. We're encouraged to see that the response rate we presented at ASCO in June 2019 continue to hold over time with 54% of untreated MDS patients achieving a complete response. These data are particularly exciting in what they mean for patients living with MDS. While the MDS affects thousands of people, a vast majority go untreated. Approximately 75% of patients receive only supportive care or watchful waiting, due in large part to the limited number of safe and tolerable therapies available.

Patients can choose to undergo allogeneic stem cell transplant, which, as you know, is a risky and complicated procedure or they can try Vidaza, Dacogen or Revlimid, but these offer an unattractive risk-benefit profile and low rates of response. With magrolimab, we believe we have the potential to offer the first new therapy in over 13 years with a treatment that thus far, is well tolerated and effective. We're excited about the opportunity and look forward to providing additional detail on our Phase Ib clinical trial results and our future plans around ASH next month.

Turning to DLBCL. As you know, following receipt of FDA guidance, we are planning to initiate a single-arm trial of magrolimab in combination with rituximab in heavily pretreated DLBCL patients with primary endpoints evaluating overall response rate, including PRs and CRs with durability of response. In this trial, we plan to enroll approximately 100 patients who have failed at least 2 prior lines of therapy, which could include, but is not limited to patients who are ineligible for CAR-T therapy. In line with previous guidance, we expect this trial to begin enrollment in the first quarter of 2020 and expect that we'll be in a position to report interim efficacy data by the fourth quarter of 2020. In parallel, we'll continue to evaluate biomarkers for options to advance into earlier lines of treatment.

As you've heard us describe before, there remains a substantial unmet need in DLBCL, even despite recent approvals. This is especially true in relapsed/refractory setting where there is still a paucity of options that can be tolerated by fragile, elderly or rapidly progressing patients. Like in MDS, there's a clear and compelling need for safe, well-tolerated and effective therapy for people with DLBCL, and we're committed to moving magrolimab forward as an effective option in this population as our lead focus for approval in DLBCL.

To expand in earlier lines of treatment, we continue to explore biomarkers for potential predictive value and several triplet regimens in partnership with large pharma companies. Importantly, the FDA has granted magrolimab Fast Track designation for the treatment of both MDS and DLBCL, which we believe speaks to encouraging efficacy data to date and the urgent need for safe and well-tolerated new treatment options for these underserved patient populations. We believe that magrolimab mechanism of action, coupled with its combinability with other immunotherapies and oncolytics and favorable safety profile, offers a unique product profile with the potential to transform the treatment of cancer and empower patients to better fight their disease.

I want to briefly comment on our programs in solid tumors. We recently submitted abstracts that include data from our ongoing Phase Ib trial of magrolimab in combination with avelumab in patients with ovarian cancer, and our Phase Ib trial of magrolimab in combination with cituximab in patients with colorectal cancer, to major meetings that will occur in the first quarter of 2020. After those meetings, we plan to announce initial data from both studies at the time of those presentations.

Alongside all of these important efforts, we are continuing to advance our pipeline assets, FSI-174, which targets cKIT; and FSI-189, which targets SIRP-alpha, towards the clinic, and we remain on track to initiate Phase I trials of both next year. Earlier today, we announced our entrance into a collaboration with bluebird bio to evaluate our antibody-based regimen which is comprised of FSI-174 and magrolimab with bluebird's LentiGlobin gene therapy platform for treatment of diseases that can be corrected with transplantation of autologous gene-modified blood forming stem cell. This partnership represents a critical step toward our own cKIT program, and we are excited to work with bluebird, a leader in gene therapy, to evaluate opportunities to improve pre-transplantation conditioning.

As you know, most ex vivo hematopoietic stem cell transplants and gene therapies require that a patient's own stem cells first be depleted from the bone marrow to facilitate engraftment of the new hematopoietic stem cells, or HSCs, through a process called conditioning. This process typically requires the use of chemotherapy with or without radiation exposure, which can induce sterility, acute infections, prolonged hospitalizations and increased risk of emergence of secondary malignancies. It is our hope that our novel antibody-based conditioning regimen, which requires neither chemotherapy nor radiation, could avoid these toxicities.

Our scientific founders observe that blood forming stem cells, which uniquely express cKIT, can be targeted by FSI-174. Once FSI-174 binds HSCs, cotreatment with magrolimab releases macrophages to attack and clear these stem cells. Based on these observations, coupled with the results of preclinical studies, we believe the combination of FSI-174 and magrolimab could offer an important and improved conditioning regimen, with more selective and short-term antibody-mediated clearance of HSCs. It is our hope that this could massively expand the number of patients eligible for transplantation and therefore, enable many more people to benefit from the curative potential of transplantation.

At ASH, we will be presenting a poster, including new preclinical data for FSI-174. This poster details the results of nonhuman primate studies in which we observed that the combination of magrolimab and FSI-174 significantly depletes the frequency of bone marrow HSCs compared to placebo, with no change in peripheral blood cell counts over the course of the study. We believe these data demonstrate the specificity, efficacy and safety of the combination in a highly relevant preclinical model. Based on these results, we are eager to initiate our Phase I healthy volunteer study of FSI-174 early next year and to then start our combination trial with bluebird. If successful, we hope to expand beyond genetic blood disorders to other transplant settings such as allogeneic and other tumors.

We -- with that, I will turn over the call to Ann to review our financial results for the third quarter of 2019.

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Ann D. Rhoads, Forty Seven, Inc. - CFO [4]

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Thanks, Mark. We ended the third quarter of 2019 with cash, cash equivalent and short-term investments of $166.7 million compared to $139 million as of December 31, 2018. This increase reflects aggregate gross proceeds of approximately $86.3 million from our underwritten public offering of common stock that closed in July of 2019 as well as an approximately $15.7 million upfront license payment from our entry into a collaboration with Ono Pharmaceutical. We believe we are sufficiently funded to support our planned operations and capital expenditures through the end of the first quarter of 2021, which is beyond anticipated interim data readout from almost all of our ongoing clinical trials while also investing in our earlier stage pipeline.

Now turning to the third quarter 2019 income statement. During the third quarter, we recognized $15.7 million in revenue due to the license granted under the Ono agreement. We did not record revenues in the third quarter of 2018. Also, during the third quarter, we incurred $27.1 million in research and development expenses compared to $18 million for the same period last year. This was primarily due to a $9.2 million increase in advancing our current clinical programs focused on magrolimab and the associated contract manufacturing costs for our BLA-enabling studies. The $3.2 million increase in preclinical program costs, a $1.5 million decrease in funding recognition under the California Institute for Regenerative Medicine and Leukemia and Lymphoma Society grants as well as a $1.1 million increase in personnel-related costs, partially offset by $5.9 million decrease in license fees primarily due to the nonrecurring license fees paid under the BliNK asset purchase and Synthon license agreements in 2018.

Our general and administrative expenses were $5 million for the third quarter of 2019 compared to $4.4 million for the third quarter of 2018. This increase was primarily due to a $400,000 increase in personnel and corporate-related costs driven by an increase in head count. Our net loss for the quarter was $15.1 million or $0.38 per share as compared to a net loss of $21.7 million or $0.71 per share for the third quarter of 2018.

With that, I'll now turn the call over to the operator for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Michael Schmidt of Guggenheim Securities.

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Yue-Wen Zhu, Guggenheim Securities, LLC, Research Division - Associate [2]

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This is Charles Zhu on for Michael Schmidt. Congrats on the progress. First one for me. Within MDS, what kind of a patient subtype breakdown, for example, between intermediate or very high-risk patients, would you expect within these trials? And could the benchmark for approval change based on set breakdown?

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Mark Chao, Forty Seven, Inc. - Founder & VP of Clinical Development [3]

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This is Mark Chao. Thanks for the question. So we will be, as we've reported at ASCO, but we'll be reporting at ASH, our breakdown of patients enrolled that are intermediate, high and very high-risk by IPSS-R criteria, which packages our breakdown of entry criteria. Per prior discussions, we have seen a very balanced enrollment for both intermediate all the way up to very high risk. And notably, based on our previous presentations, we have had a fair percentage of patients with core cytogenetic risk factors, too, which is a key predictor of core prognosis. With regards to the potential approval, again, we believe that this criteria as well as based on our FDA discussions, is sufficient for a potential registrational population, and so we anticipate that those, again, our inclusion criteria would be obtained going forward in our registrational studies.

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Yue-Wen Zhu, Guggenheim Securities, LLC, Research Division - Associate [4]

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Got it. Makes sense. Could you also remind us why you're looking at both the twice weekly in addition to the once-weekly dose and the degree to which you'll need data from both trials or if you have an approval pathway based on one of those trials?

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Mark A. McCamish, Forty Seven, Inc. - President, CEO & Director [5]

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Charles, this is Mark McCamish. This relates to the ongoing experience we've had with AML transitioning into MDS. And with AML, we used weekly dosing as these patients were in the hospital very often for transfusions and other treatments. As we have then progressed to MDS, these patients are less often in the hospital and using a less frequent dosing is going to be much more convenient. We want to be able to provide the best option for these patients, to be able to penetrate the market and benefit them. So we are transitioning to the every 2-week dosing in our second trial, so that we have the option of using that in the commercialization of this product, which we feel, will allow us to penetrate a larger segment of the market population. We've already looked at pharmacokinetic evaluations of this over time, and this is very similar to the dosing that we'll be using in DLBCL. So we're very comfortable with using that every 2 week dosing.

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Operator [6]

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Our next question comes from Matthew Harrison of Morgan Stanley.

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Unidentified Analyst, [7]

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This is [Joe] on for Matthew Harrison. My first question is, could you give us an idea of how many more patients and what kind of duration to expect at ASH from the MDS cohort?

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Mark Chao, Forty Seven, Inc. - Founder & VP of Clinical Development [8]

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Sure. Thanks for the question. So with the ongoing Phase Ib study, we continue to be pleased about the robust enrollment and excitement we've seen with our investigators. Because, again, patients are continuing to enroll and as well as our intention to want to touch on the most recent data, we will be providing a separate data right ahead of the ASH oral presentation. Because of that, we're able to provide exact guidance and numbers on patients and follow-time, but we will have additional patients from what's presented at the initial ASH abstract that was released last week. I will also say that as we grow our data set, we will also be looking at patients of analysis at which we've started to look at mutational -- responses by the mutational subtypes of which we highlighted TP53. So we will continue to provide such data at the ASH presentation.

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Unidentified Analyst, [9]

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Okay. Great. How about the duration?

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Mark Chao, Forty Seven, Inc. - Founder & VP of Clinical Development [10]

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Yes. So we will be following these patients, obviously, for longer, and that would be another key output. Again, it's because patients are enrolled continuously, it's hard for us to be able to predict the exact duration of follow-up. But we do believe that's a key important factor when we provide our day-to-day on our patients that have been enrolled.

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Unidentified Analyst, [11]

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Okay. My second question is could you give us any guidance around the process with FDA for the second MDS pivotal study? Basically, what is the level of progress with the FDA and how many issues remain that you need to clarify?

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Mark A. McCamish, Forty Seven, Inc. - President, CEO & Director [12]

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Yes. We've been having an ongoing discussion with FDA under the Special Protocol Assessment provision, and that involves both teleconference calls as well as in-person meetings with them. And as you can imagine, there are several components that we're discussing, including primary endpoint justification as well as the potential of the effects of magrolimab in monotherapy as well as rituximab and mono -- excuse me, azacitidine monotherapy. So with those, there's pretty good historical information about aza in monotherapy, less information about magrolimab in monotherapy. And so we're discussing those issues as well as how we provide data around that. So it's an ongoing discussion, and we expect that to be wrapped up in the next quarter or so.

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Operator [13]

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Our next question comes from Mara Goldstein of Mizuho.

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Mara Goldstein, Mizuho Securities USA LLC, Research Division - MD of Equity Research Department [14]

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First question on the DLBCL trial. You indicated that you've sort of completed the inclusion and exclusion criteria for those patients. Can you provide us a little bit more color around what would constitute these CAR-T ineligible patients within the context of the population you plan to enroll? And then secondarily, on the bluebird collaboration. Can you just speak to the dosing mechanism around the -- your combination of magrolimab and cKIT?

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Mark Chao, Forty Seven, Inc. - Founder & VP of Clinical Development [15]

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So Mara, thanks for the question. In regards to your question about the eligibility criteria for the DLBCL study, just to be clear, we are not mandating that patients be CAR-T ineligible as we go forward, but we are including patients who may be CAR-T ineligible and then we will be collecting the reasons why they are CAR-T ineligible. We know from our past Phase II experience that there are a variety of reasons that range from medical reasons, for being unfit versus things like socioeconomic insurance reasons, geographic reasons as well. But we are not focusing just on the CAR-T ineligible population moving forward.

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Mara Goldstein, Mizuho Securities USA LLC, Research Division - MD of Equity Research Department [16]

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Right, of course. But will you be able to look at those different buckets of ineligibility, sort of medical versus other?

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Mark Chao, Forty Seven, Inc. - Founder & VP of Clinical Development [17]

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Yes. And that's actually something that we've looked at very closely in our current population. And we've identified that there are patients, particularly patients that are elderly and more frail, who actually do benefit from our therapy. Again, our favorable safety profile, really, actually fits quite well with that population and we have seen benefit. I would say the one population that is CAR-T ineligible that doesn't seem to benefit from therapies in general are those who are rapidly progressive and are having disease that's progressing very rapidly or -- and cannot wait for CAR-T therapy. But overall, we're going to be looking at this broadly.

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Mark A. McCamish, Forty Seven, Inc. - President, CEO & Director [18]

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Okay. And then, Mara, on your second question regarding the dosing around cKIT. As you know, the goal here is to clear out the hematopoietic stem cells. So we dose with both 5F9 as well as the anti-cKIT. What we do is we use the priming dose initially with 5F9, followed by a therapeutic dose and that therapeutic dose is given with the anti-cKIT. And the goal is to then clear out the hematopoietic stem cell. So the anti-cKIT labels hematopoietic stem cells then the 5F9 frees up macrophages to attack and clear those. We're -- we've worked out the PK in nonhuman primates that we'll be talking about in ASH. And the important component is to ensure that you give enough to clear out the hematopoietic stem cells and then allow for those agents to be eliminated prior to transfusion of your gene-modified cells, and we'll be talking about that at ASH as well. That's the primary focus.

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Operator [19]

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Our next question comes from Robert Hazlett of BTIG.

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James Winsor Colby, BTIG, LLC, Research Division - Research Analyst [20]

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This is Jake Colby on the line for Bert. I just wanted to follow up on the ASH abstracts. Will you be breaking out, I guess, the first 11 patients that we saw at ASH just to get a longer-term duration of follow-up there, acknowledging that a lot of patients will be enrolled recently?

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Mark Chao, Forty Seven, Inc. - Founder & VP of Clinical Development [21]

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Yes, Jake. Thanks for the question. This is Mark Chao here. I appreciate the comment. We will be detailing out, again, importantly, as you mentioned, follow-up for those patients. I think, as you alluded to, since we will have recent patients enrolled, that may not accurately capture the duration of follow-up for those initial patients. So we will make an attempt to do that. We think that's really important. Have been pleased to see, at least as of the ASH abstract announcement, that we continue to not see a median duration of response with additional follow-up, median-wise. So those will be data we'll continue to present for both the initial AML patients as well as the MDS patients and new patients that come on board.

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James Winsor Colby, BTIG, LLC, Research Division - Research Analyst [22]

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Great. And just a follow-up is based on your kind of your discussions with physicians and maybe some with FDA, what do you think is a clinically meaningfully differentiated duration of response for 5F9 is for MDS?

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Mark Chao, Forty Seven, Inc. - Founder & VP of Clinical Development [23]

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Sure. So I think I'll stick to our data first. So as you know from our abstracts we presented last week, we've been pleased to see that the efficacy is continuing to track. Notably, we've seen a CR rate of 54%. And again, seeing on regulatory endpoints, as stated as CR plus PR rate, we believe, is meaningful for registrational approval. With regards to -- in terms of why it would be a clinically meaningful benefit, I think part of that, from a regulatory approach as well as clinically, is being able to exclude what azacitidine monotherapy response rates are. We've guided at least, in the 2004 label, for azacitidine in MDS, that the CR plus PR rates were 16%, which is fairly low. So we believe that provides a bar of comparison at least in terms of demonstrating the combination over azacitidine monotherapy.

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James Winsor Colby, BTIG, LLC, Research Division - Research Analyst [24]

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Congrats on the progress.

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Mark Chao, Forty Seven, Inc. - Founder & VP of Clinical Development [25]

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Thank you.

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James Winsor Colby, BTIG, LLC, Research Division - Research Analyst [26]

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Thanks, Jake.

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Operator [27]

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Our next question comes from Sean Lee of H.C. Wainwright.

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Sean Lee, H.C. Wainwright & Co, LLC, Research Division - Equity Research Associate [28]

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My first question is on the upcoming MDS pivotal study. So I understand you're still working through the details of the SPA with the FDA. But I was just wondering, other than the change to dosing regimen, are there any additional changes proposed for the patient populations? And also, has the FDA signed off on the Objective Response Rate as the primary endpoint? Or are they looking for stuff like PFS as well?

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Mark A. McCamish, Forty Seven, Inc. - President, CEO & Director [29]

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Sean, we continue to work with the agency on this. The population that we'll be using is no different than what we've proposed previously. So there hasn't been too much discussion regarding that. And then primary endpoints, as we've mentioned previously, is a combination of PR and CR, and we'll continue to discuss with them the most appropriate approach as we move those forward. I think I detailed in the answers to my -- to other questions some of the issues that we're discussing and there's not anything that's surprising in that situation. Study design, number of patients, distal approach, et cetera. And the major change, of course, is the every 2-week dosing. And I think with our experience in the first study in weekly dosing, that gives us quite a bit of information to be able to hone in on the most important components with the agency, and that's an ongoing discussion.

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Sean Lee, H.C. Wainwright & Co, LLC, Research Division - Equity Research Associate [30]

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Great. My second question is on the collaboration with bluebird. So could you provide a little bit more color on the financial aspects of that? And who will be responsible for running the upcoming Phase I studies next year? And also, is this purely a research collaboration? Or are there any options or exclusivity associated with it?

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Mark A. McCamish, Forty Seven, Inc. - President, CEO & Director [31]

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Sure, Sean. I'll have Mukul jump in since he's worked out the agreement.

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Mukul Agarwal, Forty Seven, Inc. - VP of Corporate Development [32]

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Thanks, Mark. So yes, this is a research collaboration. It's for a very defined period. The research collaboration is designed around establishing a proof-of-concept for our antibody along with bluebird's gene therapy product. And so the way the collaboration would work is that each party would be responsible for its part of the research plan. For us, for Forty Seven, it would be -- we would be responsible for the preclinical studies, the filing for the IND and also the Phase I healthy volunteer study. And then bluebird would be responsible for the proof of concept. And each party would bring its product into the collaboration and also do cost-sharing as part of that.

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Mark A. McCamish, Forty Seven, Inc. - President, CEO & Director [33]

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And as we move forward, as Mukul mentioned, we'll be doing the Phase I trial and that Phase I trial is in normal healthy volunteers with our anti-cKIT. We have copious experience with magrolimab and this is designed as a combination program so that you use cKIT that labels HSCs and then magrolimab, which enables the macrophages to then attack. So the Phase I is fairly straightforward in normal healthy volunteers to confirm the PK and the approach we'll be using with our anti-cKIT, allowing us to then move into combination where we'd be working directly with bluebird in their approach.

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Operator [34]

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Our next question comes from Adam Evertts of LifeSci Capital.

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Adam Gerald Evertts, LifeSci Capital, LLC, Research Division - Senior Research Analyst [35]

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Great. First question, I know it's difficult to comment on other companies' programs, but maybe if you're willing, it would be interesting to hear your view on the ASH abstract data from Celgene's anti-CD47, and sort of maybe what that means for the space or for magrolimab specifically?

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Mark Chao, Forty Seven, Inc. - Founder & VP of Clinical Development [36]

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Yes. Thanks, Adam. This is Mark here. So we can provide a little bit of color. I think as you alluded to, there are a few programs that presented updates on CD47 targeting agents, one of which was Celgene. And then also another company, ALX Oncology. I think overall, our viewpoint is we continue to -- are pleased with interest in those programs. We think, again, that it validates the target. Both programs did show evidence of efficacy. I think, again, with regards to the Celgene data, which was interesting, I think one of the things that they flagged was a higher rate of antidrug antibodies that, at least per their abstract, appear to be affected by PK and potential safety. So that may also be an issue with the program. I think what we can do is just comment in terms of our program. We've been quite pleased and deliberate, as you know, to define the most optimal asset in molecule to balance dose safety and efficacy. And so there, we've treated over 400-plus patients and we've really not seen any significant safety issues. We've worked around the on-target anemia with our priming and maintenance dose strategy, as you know. I think with regards to our anti-drug antibody rate, they have been quite low, less than 10% in our previously reported data without any evidence of any safety issues or PK changes. So that is something that, again, we think is differentiating. And again, I think it highlights the approach that one used to safely and effectively target CD47.

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Mark A. McCamish, Forty Seven, Inc. - President, CEO & Director [37]

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Yes. I think, Adam, we were pleased that others are interested in the program. It does validate the targets. And it just displays the experience that we've had in this with our founders. It goes back over a decade, which really allowed us to make progress and anticipate some of the issues that others have run into. So I think on both of those areas, we're pleased with the emerging data and look forward to sharing our data as we go forward.

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Adam Gerald Evertts, LifeSci Capital, LLC, Research Division - Senior Research Analyst [38]

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Great. And then a quick question actually on the Ono Pharmaceutical agreement. I realize it's relatively recent, but maybe if there are any updates there, in terms of when Ono might start a clinical trial in Asia. And if they might participate in either of the ongoing or planned studies using Asian sites.

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Mark A. McCamish, Forty Seven, Inc. - President, CEO & Director [39]

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So let me just comment on that in overarching themes. As you know, with Ono, they're very interested in moving this forward. In general, the approach that you use in partnership with a Japanese company is to provide Phase I data in the Japanese population. And so that's the most urgent thing that they'll be working on, is to provide information in the Japanese population, that there's no differences in PK and tolerance in -- with our agent. And then secondarily, as we've mentioned previously, one important component to both MDS and DLBCL is how do we move forward with either confirmatory randomized control trial or randomized controlled trials that will address ex U.S. participation. And we're working with Ono collaboratively in that, in terms of the approach we would take forward in MDS and DLBCL.

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Operator [40]

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Our next question comes from Tony Butler, Roth Capital.

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Charles Anthony Butler, Roth Capital Partners, LLC, Research Division - MD, Senior Equity Analyst & Head of Biotechnology Research [41]

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Three very brief questions and fairly simple. Number one is, Mark, just yet again, a comment. I think the filing pathway that you've laid out for these 2 studies is very clear. The question is, can you just speak about the EU and your thoughts there, okay? That's number one. Number two is, I'm just curious in the healthy volunteer study with cKIT, is it pretty easy -- this may be a silly question -- is it pretty easy to enroll patients who want to be immunosuppressed with the combination of agents and then allow just regrowth of their -- reconstitution of their immune system just naturally? That's number two. And then number three is more theoretical again. And this is just back to the simplicity of "eat me", "don't eat me" signals. The question is around VISTA deficiency? And does VISTA play a role either by being deficient or in being prolific? Does it play a role in whether or not that balance between "eat me" and "don't eat me" signals exists?

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Mark A. McCamish, Forty Seven, Inc. - President, CEO & Director [42]

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Tony, this is Mark McCamish. Thanks for your questions, and none are ever easy with you. So we appreciate it. So first on the EU and it's an important question. And we know that the EU is less likely to move forward with single-arm approaches that are there. And we're beginning to have discussions in terms of our approach. Obviously, we're looking at this as to how do we best coordinate and expand outside of the U.S. for commercial approaches. And it's likely that a randomized trial would be required. And that's fine because we'll be using that for confirmation in our approaches here in the U.S. So we're beginning to have those discussions. And one of the issues with any type of randomized controlled trial is, do you simply confirm your findings or do you expand your findings. And we'll have to discuss that. It's -- we would really like to get into lower-risk MDS patients. And one will have to decide whether you do that in a joint trial with low-risk and intermediate to high-risk or whether you have 2 separate approaches to expand those labels. So it's not easy, but we're discussing those, and we'll be discussing with the relative country agencies in Europe to come up with the best overall approach.

The second question was on the cKIT normal healthy volunteer study. Let me just walk through that a little bit. And that is, recall that anti-cKIT alone will not clear these stem cells. It just labels the stem cells with an IgG1, and our nonhuman primate data that we will be talking about at ASH, we'll lay this out fairly clearly. In the past, it is possible to use an anti-cKIT and to use that in immunocompromised patients and be able to clear out hematopoietic stem cells. We have found in immuno-sufficient patients that the anti-cKIT alone does not cause clearance of those HSCs. Therefore, that's the reason we use a combination. So the normal healthy study that we'll be performing will only use anti-cKIT to document the PK safety and tolerance of anti-cKIT. We'll not use the combination of anti-cKIT and 5F9 or magrolimab in normal healthy volunteers, as that would cause clearance of these normal hematopoietic stem cells, and we do not want to do that in normal healthy volunteers. So we'll use the combination in patients who will then be transplanted, but we'll use FSI-174 or our anti-cKIT only in normal healthy volunteers.

And the third question, I'm going to have Mark Chao take a shot at that.

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Mark Chao, Forty Seven, Inc. - Founder & VP of Clinical Development [43]

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Yes. Thanks, Tony, for the questions. So with regards to your question about does VISTA play a role. I'll just backtrack and highlight. I think one of the things that we really like about CD47 targeting with magrolimab is its ability to actually stimulate the adaptive immune system. And so as you know, we've discussed before, we have preclinical and some evidence of clinical data demonstrating that upon administration of magrolimab, macrophages can ingest cancer cells and present tumor-associated antigens to T-cells and activate an adaptive T-cell response. So I do think that then, in that regard with other T cell checkpoints by VISTA or PD1, there may be a role as well. We and others have demonstrated combination data in preclinical models with PD-1/PD-L1 blockade, plus 47 blockade. So I think that's important.

And then to your question about VISTA, I think there essentially, could be a role there. As you know, VISTA is expressed on tumor-infiltrating lymphocytes, has a role on Treg cells as well. We've shown some evidence preclinically that we also can modulate and down regulate regulatory T cells. So there certainly is a potential role. I think it, again, highlights that in addition to enabling the innate immune system, we also can enable the adaptive immune system. And then with regards to whether VISTA plays a role in the "eat me" or "don't eat me" cascade, I think that's something that still needs to be elucidated.

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Operator [44]

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Our next question comes from Mark Breidenbach of Oppenheimer.

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Matthew Cornell Biegler, Oppenheimer & Co. Inc., Research Division - Associate [45]

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This is Matt on for Mark. Our congrats as well on the bluebird collaboration. So just one from us actually and I apologize if I missed this in the prepared remarks, but one of the main drawbacks we commonly hear about bluebird's approach with busulfan is its effect on sexual reproduction. And we're just wondering if you could kind of shed some light or give us your expectation for whether you think your approach would be safer on gametes.

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Mark Chao, Forty Seven, Inc. - Founder & VP of Clinical Development [46]

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Yes, Matt, this is Mark Chao here. Appreciate the question. So I think you bring up a really important point, is that standard conditioning regimen cytotoxics like busulfan, which is what we use for many gene therapies cannot only cause, kind of morbidity in a short term and potential mortality, but importantly, long-term effects. So I think infertility and effect on sexual reproduction is a major issue, especially for young patients, pediatric patients that are getting gene therapy than other transplants for, let's say, sickle cell or beta thalassemia for example. I think based on our knowledge of cKIT and 47 blockade antibody-based approach, we believe that this antibody combination would be safer and potentially not have those risk of infertility, secondary malignancies, which, again, are really important for patients to determine whether they want to go for a transplant or not. So we do think that these are potential key areas of safety benefit with our antibody-based combination, our conditioning regimen, that will allow for patients and clinicians to have a better option to choose should our data, again, show that. So thanks for the question.

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Mark A. McCamish, Forty Seven, Inc. - President, CEO & Director [47]

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And again, Matt, this is Mark McCamish. We'll also have preclinical data that's required for the IND, which will include tox information and that will back up what Mark is saying, is if there's limited risk from the standpoint on this for sterility.

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Operator [48]

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Our next question comes from Soumit Roy of JonesTrading.

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Soumit Roy, JonesTrading Institutional Services, LLC, Research Division - VP & Healthcare Analyst [49]

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Just wanted to touch on the expansion of the enrollment criteria in the DLBCL trial. Could you just talk us through the decision-making process, why you think you could present competitive data in that space given your Phase I and Phase II combined gives a CR of 18% versus I mean CAR-T up to high 30s to 40s. Is there a reason you think that response could improve with certain patient groups? Just want to understand your thought process around it.

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Mark A. McCamish, Forty Seven, Inc. - President, CEO & Director [50]

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Yes. Soumit, this is Mark McCamish. Let me just walk you through a little bit of this and then Chris can back up as well. So the process was -- involved both our Phase I, Phase Ib and Phase II patients, our ongoing discussions with FDA and what would be best for patients moving forward. And as you know, we've initiated these programs in patients who are relapsed or refractory to rituximab treatment. It's important that you understand there are the differences with the approach we're using, which augments ADCP versus ADCC, which is the initial mechanism for rituximab so we can rescue patients who have been previously treated and don't respond to rituximab. It's also important to look at lines of treatment and how others are impacted by all of these. And we've looked at data from our Phase Ib, Phase II studies as well as interface with the agency. And as you can recall, when we talk with them after our initial meeting with presenting the data, they were giving us guidance regarding the approach to a single-arm trial. A randomized control trial is not an issue.

One can describe the standard of care approach we could take and move into that. However, with using a single-arm trial approach, they were guiding us in terms of the patient populations that would differentiate us from other agents. And initially, they were interested in the CAR-T ineligible patient population because they knew that this was a fairly large population. And there were various reasons one could be CAR-T ineligible. We explored that in our Phase II component and then have a good understanding of that. In our latest discussions with the agency and walking through this, we felt that CAR-T ineligible, when using the descriptor of that, was limiting. And when we looked at all of our data from the Phase Ib and Phase II, we felt that using a definition that would be greater than 2 lines of CD20 treatment, regardless of whether it was CAR-T ineligible or not, would allow us to have a patient population that would be along the line of third line patients and that would respond as we've outlined in our experience, was greater than 3 lines of -- greater and equal 3 lines of treatment in that patient population. So we've interfaced with the agency. We've looked at our data. We've looked at translational data to understand the responses that these patients would have. And we think we've got a reasonable understanding of that and have agreed with the agency to move forward in that greater than second line anti-CD20 that could include CAR-T ineligible but is not required to be CAR-T ineligible. And we think that gives us the best opportunity to have an impact on the patients that would most respond to our agents.

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Chris H. Takimoto, Forty Seven, Inc. - Chief Medical Officer [51]

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Yes, I'll just add that in our comprehensive review of the Phase I and Phase II data, very clearly, there were these patients that had a very strong benefit from magrolimab and rituximab. And again, many of these patients had even 3 or more prior lines of therapy before coming on to our study. Many of them were primary refractory. So there's very clearly a population here that does get a very good benefit with durable responses. And our plans to move forward is to really try and capture those patients.

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Soumit Roy, JonesTrading Institutional Services, LLC, Research Division - VP & Healthcare Analyst [52]

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Got it. If you could just remind us what percent were the CAR-T ineligibles in your Phase I combined? And I have just a -- second question is, with regard to -- in the solid tumor program, that we have seen your peers targeting (inaudible) signals in certain immune active tumor types like lung cancer type. Do you think you would focus on something more immuno-active types rather than ovarian and CRC, which is always a hard time with the IO agents?

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Chris H. Takimoto, Forty Seven, Inc. - Chief Medical Officer [53]

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Soumit, I'm having a little bit of difficulty hearing your first question. Could you repeat that first question, please, and let...

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Soumit Roy, JonesTrading Institutional Services, LLC, Research Division - VP & Healthcare Analyst [54]

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I First, I just wanted to ask what percent in your Phase I/II study were CAR-T ineligibles and (inaudible)?

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Chris H. Takimoto, Forty Seven, Inc. - Chief Medical Officer [55]

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So I can address that. In the Phase II population, essentially the vast majority, all those patients or nearly all those patients were CAR-T ineligible because that was a mandatory requirement. In the Phase I population, we did not capture the CAR-T ineligibility status there. And because CAR-T ineligibility oftentimes is a very subjective determination based on the treating physician, we can't give you the specific breakdowns in the Phase I population.

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Mark Chao, Forty Seven, Inc. - Founder & VP of Clinical Development [56]

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And then, so Soumit, this is Mark Chao here, to your second question with regards to kind of hot or cold tumor types in the solid tumor program. So we are looking at that approach. I think, as mentioned on the call, we have programs in ovarian cancer, which is more considered a cold tumor type. We do, of note, have a combination with atezolizumab that's run by Genentech and then our clinical collaboration in bladder cancer. And so that is, as you know, a more hot immuno active tumor type to really prove the hypothesis. So that study is ongoing, reducing that cold tumor in an area that's untapped. And in addition, I think one of the things that we're seeing in terms of class combinations is, with our data with azacitidine in other preclinical data that we see with cytotoxics or chemotherapies, up-regulating "eat me" signals and meeting the synergy, this would likely apply, we know preclinically, to other chemotherapy combinations. So this may be a strategy evaluate chemo combinations with magrolimab, especially in the solid tumor setting as well as in liquid cancers.

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Soumit Roy, JonesTrading Institutional Services, LLC, Research Division - VP & Healthcare Analyst [57]

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Congrats, again. Looking forward to your ASH data.

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Mark A. McCamish, Forty Seven, Inc. - President, CEO & Director [58]

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Thanks, Soumit.

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Operator [59]

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There are no further questions. I'd like to turn the call back over to Mark McCamish for any closing remarks.

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Mark A. McCamish, Forty Seven, Inc. - President, CEO & Director [60]

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Thank you all. And operator, thank you. We really appreciate you taking the time to join us early in the morning, and for your continued support of Forty Seven. We look forward to updating you again soon. Thanks again.

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Operator [61]

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Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.