NKTR - NASDAQ

Good day and thank you for standing by. Welcome to the Nektar Therapeutics' Third Quarter 2024 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [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, Krystal and good afternoon, everyone. Thank you for joining us today. With us on the call are Howard Robin, our President and Chief Executive Officer; Dr. Jonathan

Thank you, Vivian and thank you all for joining us today. During the third quarter, we made significant progress in advancing our highly promising pipeline, focused on immunology and inflammation. Importantly, we are laser focused on advancing our Phase 2 studies for our lead aspect. Our lead asset, rezpegaldesleukin, also known as RE

Thank you, Howard. Starting with RE

Thank you, J

Thank you, Mary and good afternoon, everyone. We ended the third quarter with $249 million in cash and investments and with no debt on our balance sheet. With the proceeds from the sale of our Huntsville, Alabama commercial PEG manufacturing facility for $90 million which includes $70 million in cash and $20 million in equity ownership, our financial position is further strengthened. We now expect our cash runway to extend into the fourth quarter of 2026, taking us through several key data milestones including top line data from both of our Phase 2b RE

Thank you. [Operator Instructions] And our first question will come from Yasmeen Rahimi from Piper Sandler. Your line is open.

Good afternoon, team. Thank you so much for all the wonderful updates across the entire pipeline. Really informative. I guess, one question. I think a lot of investors are eagerly waiting the AD and AA readouts and it was really appreciated the color you gave that enrollment is progressing really well and on track for delivering both data readouts. But could you kind of -- is there an opportunity to quantify how close we're getting to bringing both of the studies to finish line? Do you see? I think that could be really helpful. And then two, I think the second question that's most often asked is the ability to -- on a positive data, especially from the AD study, how to extrapolate efficacy and biologically experienced patients. And I apologize for asking two questions. I'll jump back in the queue.

Mary, you want to take that question?

Yeah, sure. Thanks, Yasmeen for the question. So starting with the first one, can we provide more color on enrollment? I can just say we started this trial last October in 2023, and we have advised that we will have our top line data in the first half of 2025. What we will commit to doing is on clinicaltrials.gov when we've completed enrollment, we will change the status on clinicaltrials.gov, so people can continue to monitor the progress of our trial there. In terms of efficacy, our clinical trial in the Phase 1 study was in biologic naive patients. And we made the decision to also advance RE

Thank you.

Thank you, Yasmeen.

Thank you. Our next question will come from Julian Harrison from BTIG. Your line is open.

Hi. Thank you for taking my questions and congratulations on all the recent progress. First, I'm wondering if you have a good sense for when damages could be publicly specified in your ongoing litigation against Eli Lilly.

Yeah. Look, obviously, we really can't comment on an ongoing lawsuit. I can tell you that we're in the process of mediation. We're talking with each other about how to resolve this, and we're -- Nektar is fully committed to following through and we believe we have a very strong case. And clearly, there were a number of mistakes made during that clinical trial process. So, I can't comment on when we'll have a damages number and when we'll get this resolved. I can tell you that we're actively pursuing it, but, of course, it's an active lawsuit and consequently, I really can't get into a lot of discussion on it.

Got it. Understood. And one more, if I may. Just on your Phase 2b atopic dermatitis trial, can you remind us of the protocol pertaining to corticosteroids use?

Mary, you want to cover that?

Yes. So, this is not a combination trial. So, patients have to wash out of the use of topical corticosteroids before they enroll into the study. And then they're not permitted to use topical corticosteroids, and if they do after the first two weeks of treatment, then that would be the use of rescue medication and those patients would discontinue treatment.

Got it. So, all rescues are considered study discontinuations?

That's correct. Now, one aspect of our trial that I think incentivized patients to stay on the trial and adhere to the rules for no use of topical corticosteroids is after the 16-week induction period, if patients have adhered to the protocol, they have the possibility to re randomize in the maintenance period. And, of course, if they are not responders, then they will go to an escape arm and receive the highest dose of RE

Okay. Great. Very helpful. Thank you.

Thank you. Our next question will come from Jay Olson from Opp Co. Your line is open.

Hey, this is Chong [ph] on the line for Jay. Thanks for taking the question and congrats on progress. Just on the RE

Yeah. Hi, this is Mary. This is a fully blinded study and we've really meticulously drafted protocols and plans to make sure that we capture data and do so accurately and timely and that we clean our data and that we maintain a blind of this study. I personally have not been looking at those aggregated data in a blinded fashion and we promise that we will provide you with very clear baseline characteristic traits as well as very clear top line data for three different doses compared to placebo.

Got it. Thank you.

Thank you. And our next question will come from Jessica Fye from JPMorgan. Your line is open.

Hey guys, good afternoon. Thanks for taking my questions. I guess, first one, this data at EADV on serum proteomic biomarkers in AD. I believe it was noted that RE

Yeah. Hey Jess, this is J

Okay. And then, forgive me if I just didn't, but on the alopecia timing shift from, I think it used to be first half, then mid '25 and now back half of '25, is that like a delay of getting sites up and running? Is it screen failure or something? What's kind of behind that timing shift?

Yeah. So that study began in -- Mary, you can go ahead.

Yeah. This is Mary Tagliaferri. So, as you know, the trial for atopic dermatitis began in October of 2023. And then it was about five months later that we began the alopecia areata study. And those patients are followed for 36 weeks of treatment. And so, I don't think we're necessarily far off from our predictions. I think we're very close to what we predicted when we started the study. We are enrolling in Canada, the United States and in Europe. It is true that in any trial these days that you're going to run in immunology and with the globalization process in Europe, it does take longer to bring the European sites on than it is in US, so you certainly start your enrollment earlier in the United States and Canada. But we are on our projected timelines and we'll have the data in the second half of 2025.

Thanks.

Thank you. And our next question will come from Andy Hsieh from William Blair. Your line is open.

Hey, thanks for taking our questions. Just a question on the SITC poster that's presented today. One is, you looked at NK cell proliferation. I'm just wondering if there are any other relevant cell populations that you looked at. That's part one. Part two is really on the control arm, I think, Mary, you said that they basically took patients from MD Anderson basically in the same institution. I'm curious if the lymphocyte count pattern is similar to some of the Pacific studies that have been done with Astra

Sure. Hi, Andy. It's Mary. So, in terms of the historical control arms, these are all patients that that were treated at MD Anderson. There were 39 of them that antedated the approval of durvalumab. So, they were only treated with chemoradiation. And then there were 120 patients that were treated with CRT plus durva. And the ALC counts in these patient populations are relatively analogous. And what Dr. Lin showed today was if you look at cycle one, day eight, the median increase in ALC was 2.35 fold higher. And at cycle two, day eight, it was 3.6 fold higher. And these were statistically significant against his controls. And what he is astounded by is the persistence of the lymphopenia that he's seen in these patient populations and that it's remarkable that this effect persists for 12 months after completing radiation therapy. I don't know, Andy, if you know the literature, but Steven Lin did put in the background information, his data from the study that he did with, again, an analogous patient population. And there has been a second study that was completed at Johns Hopkins, and it's an author by the name of Fredes [ph]. And what he showed was he used a slightly different absolute lymphocyte count than Stephen Lin. Stephen Lin used 0.23 times 10 to the 9th liters for lymphocytes. And at the Johns Hopkins center, they used 0.5. And they showed that the median PFS for those patients with severe lymphopenia was -- and this is on the Pacific regimen on durvalumab was only 217 days, which is about seven months versus 570 days for those patients that didn't have. And when you look at what the median PFS was in the Pacific trial for patients on placebo, it was 5.6 months. And so, what Stephen Lin's point is, when you look at these data, it's astonishing that patients with severe radiation induced lymphopenia at various thresholds really don't do well and seem to have very, very little benefit from durvalumab. And so, he has a strong belief that combining NKTR-255 with durvalumab in this setting would be a very powerful mechanism to improve the PFS and overall survival of these patients who aren't deriving benefit today of a checkpoint inhibitor.

And Andy, I can answer your first question. So, what was shown today were NK cell effects and both proliferative effects, as well as modification of cell surface proteins associated with activity on the NK cells and some of those phenotypic functions that was shown that's one of the targets of the drug. But in the study, there's quite a bit more phenotypic analysis as well as assessing T-cell populations and then assessing the overall proportion of the cells in the patients that recovered from lymphopenia. Looking at the memory cell pools, and also just looking at the overall health, one of the underlying hypotheses, as Mary was also mentioning, is the cells themselves, because in the patients that have lymphopenia, they're missing. Lymphocytes are probably also missing lymphocytes, the targeted tumor. So also looking at the recovery of specific populations as well. Those are all key objectives that are coming in the study.

Thank you. [Operator Instructions] And our next question next will come from Arthur He with HCW. Your line is now open.

Hey, good afternoon, everyone. I just had a quick question regarding the AD study design. So after the 36-week maintenance period, does do the patient have the opportunity to receive the treatment continuously during the follow up?

Hi. This is Mary.

Hey, Arthur.

I am sorry. Go ahead, J

Yeah. I was just going to say, Arthur, that in this study, so after the 52 weeks of total treatment, which is both the 16-week induction as well as the maintenance period, then the patients will be followed for 52 weeks with no further treatment. So, one of our objectives here is treat for a year and then assess the remittance effect after one year of treatment.

I see. Which means we can get the data regarding how the off-treatment control from this study.

Yeah. So, for example, as the program continues and say moves into later stage studies like Phase 3, eventually this Phase 2 study will have data from both the one year treatment as well as the one year off-treatment follow up. That's exactly right.

Okay. Gotcha. Thanks for the color.

Well, thank you everyone for joining us today. And we remain focused on advancing our I&I pipeline and we're very excited about the potential for each of our unique programs. I want to thank all of our employees for their hard work and diligence, and I want to thank our investors for their continued support. And we look forward to providing you with updates on our progress. So, stay tuned. Thank you very much.