NKTR - NASDAQ

Good day and thank you for standing by. Welcome to the Nektar Therapeutics Third Quarter 2023 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Vivian Wu. Please go ahead.

Thank you, Crystal, and good afternoon, everyone. Thank you for joining us today. With us on the call are Howard Robin, our President and CEO; Dr. Jonathan

Thank you, Vivian, and thank you all for joining us today. In the third quarter, we made substantial progress in advancing our development programs. First, on RE

Thank you, Howard. Starting off with our lead immunology program, RE

Thank you, J

Thank you, Mary, and good afternoon, everyone. We ended the third quarter with $373 million in cash and investments with no debt on our balance sheet. We now expect to end this year with at least $320 million in cash and investments, slightly higher than our prior projection of $315 million. As we had previously announced earlier this year, we reduced our San Francisco-based workforce by approximately 60% and this personnel reduction represents approximately $30 million a year in operating expense reduction. The costs related to the restructuring were substantially paid in June. We will fully realize annual savings in 2024 as a result of this restructuring. And our financial position remains strong with a cash runway that extends into the middle of 2026. Importantly, this runway will take us through several key value-generating milestones for our pipeline. In Q3, we recorded a $10 million non-cash impairment charge for real estate leased assets in San Francisco, which contributed $0.05 to our net loss per share in the quarter. As a result, for the full year, we now expect to recognize restructuring, impairment and costs of terminated programs of approximately $50 million to $55 million, which includes $37 million of non-cash impairment charges recognized through the first nine months of 2023. There is more detail on this in our Form 10-Q, which is being filed this afternoon. We now expect G&A operating expense for the full year of 2023 to be between $80 million and $85 million, which includes approximately $15 million to $20 million of non-cash depreciation and stock comp expense. Our GAAP revenue for full-year 2023 is still expected to be between $80 million and $90 million. This revenue includes $65 million to $70 million in non-cash royalties and $15 million to $20 million in product sales. We anticipate full-year GAAP R&D operating expenses will range between $105 million and $115 million, which includes approximately $15 million to $20 million of non-cash depreciation and stock comp expense. Our full-year non-cash interest expense is expected to be between $20 million and $25 million. As I stated earlier, we expect to end this year with at least $320 million in cash and investments. And with that, we will now open the call for questions. Crystal?

[Operator Instructions] And our first question will come from Jay Olson from Oppenheimer. Your line is open.

Hi, congrats on the progress, and thanks for providing this update. Can you talk about the Phase 2b trial in atopic dermatitis? And congrats on the initiation of that study. Can you just talk about the feedback you're hearing from investigators? When do you expect to provide some guidance on enrollment rates? And when do you expect to complete recruiting for that study?

Yes, Thanks Jay. I'm going to ask Mary as she's been meeting with a lot of these investigators over the past couple of months to comment on that. Mary?

Thank you, Jennifer. And thank you Jay for asking the question. We recently attended EADV in Berlin, and we were able to meet with 30 different investigators, mostly from Europe. And we're going to recruit this trial at 100 different clinical sites in the United States, Canada, Europe and Australia. And I can tell you that the investigators are very excited about RE

Super helpful. Thank you so much for the details. Yes, and we'll look forward to future updates. On the Phase 2b study of RE

Mary or J

Sure. I'm happy to address that. So the JAK inhibitors, as you know, are efficacious. We see an effect after roughly 36 weeks of treatment. There are, as you know, many problems with JAK inhibitors. One, when you stop taking the JAK inhibitors, patients very rapidly lose their hair. And of course, you're well aware that their black box warning with the JAK inhibitors. We very closely looked at the baricitinib data, and we believe if we have efficacy similar to baricitinib, but don't accompany two things: one, a rapid loss of hair after cessation of treatment or the ability to have, again, just like we're looking at in atopic dermatitis, a maintenance regimen that is far more convenient and favorable for the patient, we believe that a biologic would have great appeal in the area of alopecia areata. We are going to look at two different doses versus placebo and we will evaluate this at 36 weeks. And again, I think, analogous or better efficacy than has been seen with the JAK inhibitors with an improved safety profile, tolerability profile and without accompanying black box warnings would make RE

Great, thank you for the super comprehensive responses, and congrats again on all the progress.

Thank you very much, Jay.

[Operator Instructions] And our next question will come from Chris Shibutani from Goldman Sachs. Your line is open.

Hi, everyone. This is Charlie on for Chris. Thanks so much for taking our questions. Congrats on the progress as well. Just couple of quick ones from us. First, on the NKTR-255 plans for strategic partnership. Wondering if there's any update on the expected time line for that partnership? I know year-end '23 was the previous target, I'm wondering if that was still the case or if we had a new time line in mind at this point? And then on the subsequent pipeline with the TNFR2 IND coming next year, wondering if there's any update on the PEG-CSF1 program and whether we should expect an IND from that program more on the 2025 sort of scale? Thank you.

So I'm going to have Howard take the first part of that question on NKTR-255. And then J

So, yes, sure. Good question. Look, NKTR-255 is a potentially very exciting program. We're talking to a number of companies. You see that we just completed a collaboration with CBMG in combination with TIL therapy, we have a collaboration with Merck KGaA in bladder cancer. So there's a lot going on with NKTR-255. We also have our own study running at the Fred Hutchinson Cancer Center in cell therapy. So there are companies that are interested. I think as -- we would like to complete a strategic collaboration for NKTR-255. Our focus as a company is in immunology now, although I think this is a very exciting asset. And I can't give you specifics as to when and how a collaboration will get done, but we're making great progress there. And as you can see with the CBMG collaboration, we've just added another exciting potential application for NKTR-255. So we'll keep you posted. I don't know that it's going to be end of this year or next year, can't say for sure. But clearly, we're focused on that, and I do think it will get done. J

Certainly. Yes. Thanks for the question. So at this time, we've really prioritized our efforts on the TNFR2 program and that's really for a couple of reasons. The first is that TNFR2 builds on a complementary pathway around Treg targeting that's distinct from the IL-2 pathway that RE

Great. That's helpful. Thank you all so much.

Thank you. And I am showing no further questions from our phone lines. I'd now like to turn the conference back over to Howard Robin for any closing remarks.

Well, thank you, everyone, for joining us today, and we remain focused on executing on the development of RE