Item 1.01. Entry into a Material Definitive Agreement.

At Market Issuance Sales Agreement

On September 4, 2020, the Company entered into an At Market Issuance Sales Agreement (the "Agreement") with Ladenburg Thalmann & Co. Inc. ("Ladenburg"). Under the Agreement, the Company may offer and sell its common stock, par value $0.001 per share, from time to time having an aggregate offering price of up to $30,000,000 (the "Shares") during the term of the Agreement through Ladenburg. The Company will file a prospectus supplement relating to the offer and sale of the Shares pursuant to the Agreement. The Shares will be issued pursuant to the Company's previously filed and effective Registration Statement on Form S-3 (File No. 333-224880), which was initially filed with the Securities and Exchange Commission on May 11, 2018, and declared effective on May 23, 2018. The Company intends to use the net proceeds from the offering, if any, to continue to fund the ongoing clinical development of its product candidates and for other general corporate purposes, including funding existing and potential new clinical programs and product candidates.

The Company is not obligated to sell any Shares pursuant to the Agreement. Subject to the terms and conditions of the Agreement, Ladenburg will use commercially reasonable efforts, consistent with its normal trading and sales practices and applicable state and federal law, rules and regulations and the rules of The Nasdaq Capital Market ("Nasdaq"), to sell Shares from time to time based upon the Company's instructions, including any price, time or size limits or other customary parameters or conditions the Company may impose.

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Under the Agreement, Ladenburg may sell Shares by any method permitted by law deemed to be an "at the market offering" as defined in Rule 415 of the Securities Act of 1933, as amended, and the rules and regulations thereunder, including, without limitation, sales made directly on or through Nasdaq, on or through any other existing trading market for the Shares or to or through a market maker. If expressly authorized by the Company, Ladenburg may also sell Shares in negotiated transactions.

The Agreement will terminate upon the earlier of (i) the issuance and sale of all of the Shares through Ladenburg on the terms and subject to the conditions set forth in the Agreement or (ii) termination of the Agreement as otherwise permitted thereby. The Agreement may be terminated at any time by either party upon ten days' prior notice, or by Ladenburg at any time in certain circumstances, including the occurrence of a material adverse effect on the Company.

The Company has agreed to pay Ladenburg a commission equal to 3.0% of the gross proceeds from the sales of Shares pursuant to the Agreement and has agreed to provide Ladenburg with customary indemnification and contribution rights.

The foregoing summary of the Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Agreement, a copy of which is filed as Exhibit 10.1 hereto and incorporated herein by reference. The Agreement contains representations and warranties that the parties made to, and solely for the benefit of, the other in the context of all of the terms and conditions of the Agreement and in the context of the specific relationship between the parties. The provisions of the Agreement, including the representations and warranties contained therein, are not for the benefit of any party other than the parties to the Agreement and are not intended as a document for investors and the public to obtain factual information about the Company's current state of affairs. Rather, investors and the public should look to other disclosures contained in the Company's filings with the SEC.

The opinion of the Company's counsel regarding the validity of the Shares that may be issued pursuant to the Agreement is filed herewith as Exhibit 5.1.

This Current Report on Form 8-K shall not constitute an offer to sell or the solicitation of an offer to buy Shares, nor shall there be any sale of the Shares in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

Item 1.02. Termination of Material Definitive Agreement.

On September 4, 2020, the Company delivered written notice to Citigroup Global Markets Inc. that it was terminating its Equity Distribution Agreement, dated November 21, 2018 (the "Citi Agreement"), pursuant to Section 8(a) of the Citi Agreement. A copy of the Citi Agreement was filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission (the "SEC") on November 21, 2018.

Item 8.01. Other Events.

As previously reported, on June 15, 2020, the Company completed its business combination with Forte Subsidiary, Inc. ("Forte Subsidiary"), in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated February 19, 2020, as amended (the "Merger Agreement"), by and among the Company, Telluride Merger Sub, Inc. ("Merger Sub"), and Forte Subsidiary, pursuant to which Merger Sub merged with and into Forte Subsidiary, with Forte Subsidiary surviving as a wholly owned subsidiary of the Company (the "Merger"). Immediately prior to the closing of the Merger, the then outstanding shares of the Company's common stock were adjusted with a reverse stock split of 15 to 1. At the closing of the Merger, each share of Forte Subsidiary's common stock was converted into the right to receive approximately 3.1624 shares of the Company's common stock (before giving effect of the reverse split). Immediately prior to closing of the Merger, the Company changed its name from "Tocagen Inc." to "Forte Biosciences, Inc."

In connection with the Merger, the Company provides the following information set forth in this Item 8.01.



                        DESCRIPTION OF FORTE'S BUSINESS

Overview

Forte is a clinical-stage biopharmaceutical company focused on advancing through clinical trials our lead product candidate, FB-401, which is a live biotherapeutic for the treatment of inflammatory skin disease, including pediatric and adult patients with atopic dermatitis ("AD"). Forte's lead product candidate, FB-401, is a live biotherapeutic for the treatment of inflammatory skin disease developed in collaboration with the NIH and NIAID. The skin is a complex barrier organ characterized by complex interactions between microbial communities and host tissue via signaling provided by the innate and the adaptive immune systems. Exposure to various endogenous and exogenous factors impact the system balance potentially leading to inflammatory skin conditions comprising infections, allergies or autoimmune diseases. Researchers in microbiology and dermatology have identified and characterized the microorganisms present on the skin to evaluate the bacterial contribution to skin health and dermatological conditions.

Forte is developing a new approach to treating inflammatory skin disease using a topical live biotherapeutic, FB-401. FB-401, consists of three therapeutic strains of a commensal gram-negative bacteria, Roseomonas mucosa that were specifically selected for their impact on key parameters of inflammatory skin disease. Forte has extensive preclinical and mechanism of action data demonstrating that FB-401 improves atopic dermatitis disease parameters by driving tissue repair and anti-inflammation as well as suppressing potentially harmful bacteria like S. aureus. Specifically, Forte believes that FB-401:





  •   drives immune pathways that are defective;




  •   suppresses Staphylococcus aureus growth; and




  •   improves skin barrier function.

To date, Forte has completed a Phase 1/2a study, including both adults and pediatrics, demonstrating a significant reduction in atopic dermatitis disease and pruritus, as well as control of S. aureus while tapering/eliminating steroid use. The full results from this study are expected to be published in the next month or two and are consistent with the published interim dataset. Forte is currently planning to initiate a Phase 2 clinical trial in the third quarter of 2020.

Market for Treating AD

AD is a relapsing and remitting inflammatory skin disorder that affects all age groups. It is chronic and incurable, and is characterized by skin-barrier disruption and immune dysregulation. Clinically, AD is characterized by xerosis, erythematous crusted eruptions, lichenification, an impaired skin barrier and intense pruritus AD flares are frequently triggered by exposure to environmental factors, irritants, and allergens.

Although estimates of AD prevalence vary widely across different studies due to differences in data collection methodology, inconsistent age group assessment, and study periods, AD is one of the most common dermatologic diseases, involving 10%-20% of children and 2%-10% of adults. A 2010 study in the United States evaluating AD severity in children found that 67% had mild disease, 26% had moderate disease and 7% had severe disease. Approximately 85% of all cases of AD begin before age five.

Patients with AD have a high disease burden and their quality of life is significantly affected. AD has been shown to have a greater negative effect on patient mental health than diabetes and hypertension. Patients with moderate-to-severe AD have a higher prevalence of social dysfunction and sleep impairment, which are directly related to the severity of the disease. Depression, anxiety, and social dysfunction not only affect patients with AD, but also affect their caregivers. Compared with psoriasis, another common and debilitating skin disease, patients with AD have lower physical, vitality, social functioning, role-emotional, and mental health scores.

The therapeutic approach to AD primarily consists of trigger avoidance, skin hydration with bathing, and use of emollients and anti-inflammatory therapies consisting predominantly of topical corticosteroids ("TCS"). In many patients, treatment with TCS provides some measure of symptomatic relief but does not adequately control

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the disease. Potential local reactions observed with exposure to TCS include atrophy, striae, telangiectasia, irritation, folliculitis, acneiform eruptions, hypopigmentation, allergic contact dermatitis, and secondary infection. Potential systemic adverse reactions observed with exposure to TCS include hypothalamic-pituitary-adrenal axis suppression, Cushing's syndrome, hyperglycemia, and unmasking of latent diabetes mellitus.

In addition to TCS, mild to moderate disease is treated with topical calcineurin inhibitors or with crisaborole (EUCRISA®), a topical PDE-4 inhibitor. Topical calcineurin inhibitors are indicated for the short-term and non-continuous chronic treatment of AD in the population age two years and older and not indicated for immunocompromised patients or patients less than two years of age. Topical calcineurin inhibitors carry a boxed warning regarding rare cases of malignancy (e.g., skin and lymphoma) and are labeled as second-line therapy. Crisaborole is associated with local irritation (pain and burning) and occasional hypersensitivity reactions. Therefore, there is a role for additional agents that provide meaningful efficacy with an acceptable safety profile, especially for children.

There is currently no cure for AD. In the United States, approximately 17 million people have been diagnosed with AD, of which more than half are pediatric patients (<17 years old). Treatment options for pediatrics in particular are very limited.

Strategy

Forte's goal is to become a leading dermatology focused biopharmaceutical company. Forte intends to focus its initial efforts on completing the FB-401 clinical development to show its safety and efficacy in treating inflammatory skin diseases including AD. After obtaining FDA approval for FB-401, Forte's focus will be on bringing FB-401 market in order to address the significant unmet need for safe and effective AD therapy for pediatric as well as adult patients.

Background

Although bacteria are often associated with infection and disease, much of the bacteria that colonize the human body are essential for life. Until recently, few scientific studies focused on the benefits of commensal bacteria.

The NIH was the first to culture Gram-negative bacteria from the skin and has been a thought leader in understanding the bacterial composition of the skin. That work at NIH demonstrated:





     •    significant differences in the Gram-negative skin biome between AD
          patients and healthy volunteers, using genetic-based microbiome
          identification;




     •    identified substantial differences in the Gram-negative microbiome
          present on the skin of AD patients and healthy volunteers;




     •    found that the predominant species of skin commensal Gram-negative
          bacteria in healthy volunteers was Roseomonas mucosa; and




     •    discovered that over 50% of AD patients did not have any culturable
          Gram-negative flora, consistent with DNA-based analysis.

Rigorous preclinical testing established a causal connection between specific strains of R. mucosa and skin healing in AD. Subsequent screening based on key parameters of inflammatory skin disease resulted in the identification and selection of three unique therapeutic strains of R. mucosa that comprise FB-401. Based on the therapeutic potential observed in preclinical testing, FB-401 was advanced into clinically testing in a Phase 1/2a proof of concept study.

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Clinical Trial

Design

FB-401 is lyophilized (freeze-dried) in vials and is reconstituted with an aqueous solution by the patient prior to use which is then sprayed onto the affected areas of the skin. The open-label Phase 1/2a study enrolled two cohorts:





  •   initial cohort enrolled 10 adult AD patients, 18 years and older; and




     •    following positive safety assessment from the adult cohort, the second
          cohort consisted of 20 pediatric patients.

The primary objective of this study was to evaluate the safety and activity of FB-401 as a live biotherapeutic for treatment of AD, and a secondary objective was to evaluate the effect of FB-401 on quality of life of participants with AD.

Results

Adult Cohort

Ten adult AD patients were treated in two-week intervals with increasing dosages of 103, 104, and 105 colony-forming units ("CFU") of R mucosa twice per week for a total of six weeks. CFU is a measure of viable bacterial cells. At enrollment, the history and physical characteristics of each patient's AD was assessed, including the measurement of AD in a blind manner using a clinical tool, SCORing Atopic Dermatitis ("SCORAD"), to assess the extent and severity of AD. SCORAD measures, on a scale of 0-3 for each measure, dryness, redness, lichenification (thick or leathery skin as a result of itching), excoriation (urge to itch), crusting and edema (swelling) of each patient's AD. In addition to SCORAD, each patient's AD was measured and recorded using lab work, photographs and skin swabs. Each patient then also gave their subjective score of pruritus on a scale of 0-10. An A.C. SCORAD was then recorded; A.C. SCORAD is the sum of (i) the intensity (as determined by SCORAD) and (ii) the reported pruritus for each patient for the antecubital area (inside of arm near the elbow). The adults were only treated at the antecubital fossa and one other body area selected by the patients. At the end of the six-week period, each patient's AD was again assessed.

No adverse events were observed in this first adult cohort study. In addition, even with a short duration of therapy, FB-401 demonstrated improvements in this Phase I adult cohort study:





                            [[Image Removed: LOGO]]

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Pediatric Cohort

Twenty pediatric/adolescent patients with active AD were then treated in four four-week intervals for a total of 16 weeks as follows:





  •   103 CFU twice per week for four weeks;




  •   104 CFU twice per week for four weeks;




  •   105 CFU twice per week for four weeks; and




  •   105 CFU every other day for four weeks.

Assessments of each patient's AD were made at the beginning of the study and at the end of each four-week period using the same assessment methodology described above plus recording the number of steroid applications used by each pediatric patient.

Key clinical parameters included:





  •   % of subjects with 50% improvement in SCORAD




     •    % of subjects with 50%, 75% and 90% improvement in Eczema Area and
          Severity Index ("EASI") score




  •   % improvement in SCORAD




  •   % improvement in EASI score

In addition, this study also explored the following objectives:





  •   Measure trans epidermal water loss ("TEWL");




     •    Characterize changes to total and specific Immunoglobulin E ("IgE"),
          which are antibodies produced by the immune system;




  •   Evaluate potential changes to pre-diagnosed asthma and/or food allergies;




  •   Evaluate incidence of S aureus infections that require treatment; and




  •   Persistence of R mucosa colonization after treatment.

The following shows the results of this pediatric cohort study in the first five patients, ages 7-17:





                            [[Image Removed: LOGO]]

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In addition, significant improvement in one patient's AD is shown below:





                            [[Image Removed: LOGO]]

FB-401 was designed to improve atopic dermatitis by selecting three strains of R. mucosa that demonstrated improvement in barrier function, enhanced immune balance, and inhibited S. aureus. As a commensal gram-negative bacterium, Forte believes FB-401 has the potential for an acceptable safety profile. This study was designed to evaluate the safety of FB-401 in subjects with atopic dermatitis. The dose escalation component of the study design allowed safety to be assessed in a conservative manner. Additionally, multiple efficacy parameters were measured to assess the impact of FB-401 on effected skin. The study demonstrated:





  •   FB-401 was well tolerated in both adult and pediatric/adolescent subjects.




  •   FB-401 resulted in clinical improvement in treated areas in adult subjects.




     •    Children treated with FB-401 had improvement in disease activity
          including as measured by SCORAD, EASI, pruritus, TEWL and the Children's,
          or Family, Dermatology Life Quality Index. The degree of improvement was
          substantial and, despite the absence of a control group, appears to be
          substantially greater than would be expected in a placebo group.
          Furthermore, these improvements were seen despite meaningful decreases in
          topical steroid use.

Sales and Marketing

Given the current developmental stage of Forte's product candidates and platform, Forte has not yet established a commercial organization. If FB-401 is approved in the United States and/or Canada, Forte intends to commercialize Forte's products both through selectively building its own sales and marketing team and partnering or collaborating with third parties.

Manufacturing

FB-401 is a live biotherapeutic product that contains live R. mucosa, a non-pathogenic normal skin commensal organism in healthy individuals. The manufacturing development of FB-401 is conducted following the general principle set forth in the FDA's June 2016 Guidance for Industry: "Early Clinical Trials with Live Biotherapeutic Products: Chemistry, Manufacturing, and Control Information".

Fermentation. FB-401 is currently being manufactured at scale in accordance with current applicable FDA cGMP. Based on the pilot and cGMP fermentation work to date, Forte expects that a typical commercial fermentation will yield on the order of thousands to tens of thousands of doses per liter.

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Purification. The FB-401 purification process utilizes tangential flow filtration ("TFF") to recover, diafilter and concentrate the bacterial cultures. Process development work with TFF at the current manufacturing contractor achieved virtually 100% viability through the manufacturing steps.

Formulation. FB-401 drug substance is produced by mixing the three FB-401 R. mucosa strains. FB-401 is filled into vials prior to lyophilization. The lyophilized product is reconstituted by the patient prior to use. FB-401 is administered topically by spraying it onto the affected areas of the skin.

Analytical. Each of the three R mucosa strain components in FB-401 is tested and released for manufacturing; specifications include appearance, potency, bioburden, purity and identity including DNA sequencing of the strains.

Forte primarily uses contract manufacturing and testing organizations to support the manufacturing of FB-401 drug product. Forte does not own or operate, and currently have no plans to establish, any GMP manufacturing facilities. Forte expects to continue to rely on third parties for the manufacture of FB-401 for clinical testing, as well as for commercial manufacture if FB-401 or any of its product candidates obtain marketing approval. Forte believes this strategy allows it to maintain a more efficient infrastructure by eliminating the need for Forte to invest capital resources in its own manufacturing facilities, equipment and personnel, while also enabling Forte to focus its expertise and resources on the clinical development of FB-401. To date, Forte has obtained FB-401 from a single-source third-party contract manufacturer. While any reduction or halt in supply from this contract manufacturer could limit Forte's ability to develop FB-401 until a replacement contract manufacturer is found and qualified, Forte believes that it has sufficient access to supply of FB-401 to support its planned clinical trial programs. Forte also believes it has multiple potential additional sources for the manufacture of FB-401.

Intellectual Property

Forte strives to protect and enhance the proprietary technology, inventions and improvements that are commercially important to Forte's business, including seeking, maintaining and defending Forte's patent rights. Forte owns or has an exclusive license to issued patents and patent applications relating to Forte's lead product candidate FB-401, as well as Forte's other product candidates. Forte's policy is to seek to protect its proprietary position by, among other methods, filing patent applications in the United States and in jurisdictions outside of the United States directed to Forte's proprietary technology, inventions, improvements and product candidates that are important to the development and implementation of Forte's business. Forte also relies on trade secrets and know-how relating to Forte's proprietary technology and product candidates and continuing innovation to develop, strengthen and maintain Forte's proprietary position in the field of oncology. Forte also plans to rely on data exclusivity, market exclusivity and patent term extensions when available. Forte's commercial success will depend in part on its ability to obtain and maintain patent and other proprietary protection for its technology, inventions and improvements; to preserve the confidentiality of its trade secrets; to defend and enforce its proprietary rights, including any patents that Forte may own or license in the future; and to operate without infringing on the valid and enforceable patents and other proprietary rights of third parties.

Forte's intellectual property portfolio for its core technology was initially built through licenses from the U.S. Department of Health and Human Services, the Agency for Healthcare Research and Quality and the NIH. Forte subsequently expanded its intellectual property portfolio by filing patent applications worldwide and negotiating additional licenses.

In-Licensed IP

In December 2017, Forte entered into an exclusive license agreement with DHHS. Under the agreement, the DHHS granted Forte an exclusive, sublicensable, worldwide license to certain patent rights under which Forte may develop and commercialize pharmaceutical and biological compositions comprising Gram-negative bacteria

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for the topical treatment of dermatological diseases and conditions (the "DHHS License"). Under the DHHS License, Forte is obligated to meet certain development benchmarks within certain time periods. If Forte is unable to meet any of these development benchmarks, the DHHS could terminate the license. In addition, the DHHS may terminate or modify the DHHS License in the event of a material breach or upon certain insolvency events that remain uncured following the date that is 90 days following written notice of such material breach or insolvency event. The DHHS also has the right to require Forte to grant mandatory sublicenses to the patent rights licensed from the DHHS to product candidates covered by other DHHS licenses under certain specified circumstances, including if it is necessary to meet health and safety needs that Forte is not reasonably satisfying or if necessary to meet requirements for public use specified by federal regulations, which Forte is not reasonably satisfying. Any required sublicense of the DHHS License could result in the loss of significant rights and could harm Forte's ability to commercialize licensed products.

With respect to the financial obligations under the DHHS License, Forte is obligated to pay the DHHS a minimum annual payment of $20,000 and is required to reimburse the DHHS for certain patent-related expenses. In addition, Forte may also be obligated to make "benchmark" payments to the DHHS aggregating up to $105.5 million based on achieving specified development, regulatory and commercial milestones for the first licensed product and additional benchmark payments for each additional licensed product. In addition, to the extent licensed products are approved for commercial sale, Forte is also obligated to pay the DHHS a royalty within the range of 10% to 15% based on net sales of licensed products sold by Forte and its sublicensees until 2036. As of December 31, 2019, Forte had made aggregate payments of $0.07 million to the DHHS under the license.

In May 2020, Forte and DHHS entered into a second amendment to the DHHS License agreement, where Forte agreed to pay a minimum annual royalty of $100,000 beginning January 1, 2021. The second amendment reduced total milestone payments to the DHHS from $105.5 million to $40.5 million, based on achieving specified development and regulatory milestones for the first licensed product. In addition, DHHS royalties were reduced to a new range of 5% to 10% based on net sales of licensed products sold by Forte and if applicable, its sublicensees. No milestones have been achieved as of June 30, 2020.

Forte Owned IP

More specifically with respect to FB-401, Forte's seven U.S. patents in its exclusively licensed portfolio described above have claims directed to Forte's lead product candidate FB-401 as a pharmaceutical composition comprising FB-401, as well as claims directed to a method of treatment of atopic dermatitis comprising administering FB-401. These U.S. patents are expected to expire in March 2037, absent any patent term extensions for regulatory delay.

As of March 1, 2020, Forte owned pending patent applications related to its FB-401 product candidate. Specifically, Forte owned two pending U.S. patent applications, two pending U.S. provisional patent applications and two pending foreign patent applications, both of which are international patent applications filed under the Patent Cooperation Treaty.

Forte's owned portfolio described above also includes other pending patent applications related to FB-401. These applications include claims directed to FB-401 formulations, their manufacture, and their use for treatment of atopic disorders, including psoriasis, rosacea, and acne. Any patents that may issue from Forte's pending patent applications related to FB-401 are expected to expire between 2039 and 2041, absent any patent term adjustments or extensions.

Forte also possess substantial know-how and trade secrets relating to the development and commercialization of Forte's product candidates, including related manufacturing processes and technology.

With respect to Forte's product candidates and processes Forte intends to develop and commercialize in the normal course of business, Forte intends to pursue patent protection covering, when possible, microbial consortia, methods of use, dosing and formulations. Microorganisms in FB-401 are naturally . . .

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