Good day, ladies and gentlemen, and welcome to the Nektar Therapeutics Third Quarter 2015 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference may be recorded. I will now turn the call over to your host, Jennifer Ruddock, Vice President of Investor Relations. Please go ahead.

Thank you, Stephanie. Good afternoon and thank you for joining us today. With us today are Howard Robin, our President and CEO; John Nicholson, our Chief Financial Officer; Dr. Ivan Gergel, our Chief Medical Officer; Dr. Steve Doberstein, our Chief Scientific Officer; and Dr. Jonathan Zalevsky, our VP of Biology and Preclinical Development. On this call, we expect to make forward-looking statements regarding our business, including potential regulatory approval decisions and commercial launch timing, the timing of future clinical results, clinical development plans, the economic potential of our collaboration partnerships, the therapeutic and market potential of certain drugs and drug candidates and those of our partners, our financial guidance for 2015, and certain other statements regarding the future of our business. Because forward-looking statements relate to the future, they are subject to inherent uncertainties and risks that are difficult to predict and many of which are outside of our control. Important risks and uncertainties are set forth in our Form 10-Q which was filed on August 6, 2015 and is available at sec.gov. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future developments, or otherwise. A webcast of this call will be available on the Investor Relations page of Nektar's website at nektar.com. With that, I would now like to hand the call over to Howard. Howard?

Thank you, Jennifer and thanks everyone for joining us today for our third quarter 2015 financial results call. I'd like to spend today's call reviewing our achievements in the third quarter and then focus on upcoming milestones for Nektar over the next 12 months. Before we start, I'd like to give you a quick update on NKTR-214, our new immune-oncology agent. We are expectationally pleased to report that last week the FDA cleared our NKTR-214 IND, which included a comprehensive preclinical efficacy, safety, and CMC package and our Phase 1/2 protocol. The FDA cleared the IND earlier than anticipated and we expect to dose our first patient shortly at our clinical sites, MD Anderson and Yale. NKTR-214 has the potential to bring a new mechanism, direct and selective stimulation of a patient's cancer-fighting T-cells to the next generation of cancer immunotherapies. In essence, NKTR-214 grows tumor-killing T-cells in a way that no other immunotherapy does. Ivan will cover the clinical program for NKTR-214 in more detail later in the call. So let's start with an update on MOVANTIK. We are very pleased with AstraZeneca's continued progress with the launch of MOVANTIK in the U.S., Europe, and the rest of the world. In the third quarter, following the start of direct-to-consumer advertising here in the U.S., AstraZeneca has informed us that there are over 10,000 prescribing physicians for MOVANTIK compared to 3,000 in the second quarter. Almost 60% of these physicians are primary care physicians and about 40% are specialists such as pain management physicians, orthopedic surgeons, and rheumatologists. As of October 23, over 64,000 total prescriptions have been filled and we are now approaching a 40% refill rate per week. The feedback from physicians and patients on MOVANTIK has been very positive and this is reflected by a discontinuation rate…

Thank you, Howard. I'd like to start by giving an update on NKTR-181. First, as we stated at our R&D Day, enrollment in our ongoing pivotal study, SUMMIT-07, is ahead of schedule. SUMMIT-07 compares NKTR-181 to placebo in opioid naïve patients with chronic low back pain and it will enroll about 400 patients. Since enrollment is ahead of schedule, we now expect top-line data from this trial sometime in the fourth quarter of 2016. As you'll recall this trial includes an interim sample size analysis that will occur once half of the patients have completed a randomized treatment period. This analysis allows us to enroll an additional 200 patients into the trial in order to increase the study's powering if necessary and ultimately increase the likelihood of a successful outcome without incurring a statistical penalty. If there is an increase in the sample size based upon this analysis, we would expect top-line data in early 2017 rather than the fourth quarter of 2016. Patients from SUMMIT-07 will also be eligible to roll over into the long-term safety study of NKTR-181 which was initiated earlier this year. Additionally, we are planning a second Phase III study for NKTR-181, which will be conducted in opioid-experienced patients and we plan to start this study after we have the results from SUMMIT-07. As Howard mentioned, NKTR-181 could emerge as an important drug in addressing the major societal problem of opioid abuse. NKTR-181 is particularly interesting because the molecule is designed to be a revolutionary new opioid analgesic, which crosses the blood-brain barrier at a slow rate, and this slow rate of entry is designed to reduce the euphoria and likeability associated with highly-abused opioids. It is important to note that as opposed to other long-acting opioids, NKTR-181s properties are not a result of a…

Thank you, Ivan, and good afternoon everyone. I will start with a review of our third quarter financial results and then I will go through our annual financial guidance. Total revenue in the third quarter was $60 million, primarily consisting of a $40 million milestone payment from AstraZeneca triggered by the first commercial sale of MOVENTIG in Germany. Total operating costs and expenses for the third quarter were $59.5 million versus $52.6 million in the same quarter a year ago. R&D expense in the third quarter was $43.2 million and included IND enabling, manufacturing, and final preclinical activities to prepare NKTR-214 for the clinic, the ongoing NKTR-181 Phase 3 program, the commercial scale-up of device production for Amikacin Inhale program and ongoing management expenses for patients still in the follow-up in the Phase 3 BEACON study. Research and development expenses also included $4 million of non-cash stock based compensation and depreciation expense. For Q3, G&A expense was $9.5 million, which included approximately $2.5 million in non-cash stock based compensation and depreciation expenses. Cash and investments at September 30, 2015 were $267.8 million as compared to $279.7 million at June 30, 2015 and includes the $40 million milestone that we received from AstraZeneca and recognized as revenue in Q3, 2015. The September 30 cash balance does not include the net proceeds from our recent financing transaction that closed on October 5, 2015. The financing transaction was the direct private placement with TPG of $250 million of senior secured notes with an annual interest rate of 7.75% which are due in October 2020. We used proceeds from this transaction to fully redeem our $125 million 12% senior secured notes that were outstanding as of September 30, 2015 and would have been due in 2017. We will recognize a one-time expense of $14…

Thank you. [Operator Instructions] Our first question comes from Jessica Fye with JPMorgan. Your line is open.

Hey, guys, thanks for taking my questions. A question for – maybe this is for Howard. In the prepared remarks, can you remind me what you said about the refill rate you are seeing for MOVANTIK thus far and is that consistent with what you expected, and if not, what's your and Astra's kind of thinking are the goal refill rate there? And then the second question – sorry.

No, no go ahead. Sorry; finish.

All right. Question number two is on NKTR-214. Just within those expansion cohorts and the various tumor types you laid for monotherapy, I'm curious which you are most excited about; where do you see the most potential for efficacy, not just based on kind of a market size. Thanks.

Okay, good. Well, look, I said the refill rate is approximately 40% and that's what we expected and it's growing and prescriptions are also growing nicely. So I think everyone is very, very pleased with MOVANTIK. There is no doubt that there has been better performance after we started, or after AstraZeneca and Daiichi started direct-to-consumer advertising. But right now, as I've said, there are over 10,000 physicians writing prescriptions. That's up significantly from it was in the prior quarter, and right now we are running about 5,000 prescriptions a week, of which about 40% are refills. And the thing is, the numbers will eventually grow, clearly, and I think I've always said that I believe strongly that this will grow into a $1 billion pharmaceutical product. I think the ramp rate is very good; I think it will get better. But I think the most important thing is that when you talk to physicians and you talk to patients, they are very, very happy with the drug; the drug works well, it works as expected. Patients are happy with it. I think it does certainly take some time to create a brand new market. I mean, there is no market there right now and AstraZeneca and Daiichi are creating it from scratch. They are doing an incredibly good job. And I think everybody is very pleased with the performance of MOVANTIK. I will let Ivan focus for a moment on your question about which indication might be the most interesting for NKTR-214.

Yeah, hi, Jessica thanks for the question. Obviously we thought long and hard about the, sort of where we want to take the drug and the expansion cohorts. And some of that might be directed by the sort of dose-ascending part of the study that we see particularly good responses. But each of them has good reason – each of the indications has a good reason behind it. I think renal cell carcinoma is obviously somewhere where IL-2 has worked. And given our mechanism of action, there is reason to suspect that we will work there too. But I think it is important to recall that IL-2, you saw 5% to 7% durable responses, where in two recent agents that reported out, really only came out at about 1% durable responses. So there is reason to believe that we actually might look particularly good in that indication. Obviously, melanoma is somewhere where IL-2 has also shown good efficacy previously in non-small lung, particularly in PD-L1 non-expresses. That's very interesting to us. That's not to say, we won't work in PD-L1 expresses, but obviously, clearly efficacy in PD-L1 non-expresses would be very, very interesting too. So I hope that that helped.

I don't know if you picked on, but thanks for the color.

Well, I think it will be interesting to do the experiment in all of these indications and I think picking one now that's most interesting, it's hard to say. But I think the fact that we have a molecule here that hopefully safely grows cancer-killing T-cell – tumor-killing T-cells is I think very exciting, there is nothing else like it and it changes – it clearly, if it works, changes the direction of cancer immunotherapy. And I think that's what's exciting and ultimately probably has lots of potential in many different types of cancer.

Yeah, and I will add to what Howard said. We've clearly been working with all the leaders in the field at this point and they have been very enthusiastic about the various types of tumor that we've selected. So I think it's difficult really to pick one out of that group at this point.

Got it, thanks. Maybe just to follow up on that, is there any human data that we could see at ASCO potentially or is this really second half before we see your first human data?

Yeah, as we said, it's really second half at this point. We believe that's going to be first time that we are presenting human data.

Okay, got it. Thank you.

Thanks.

Thank you, Jessica. [Operator Instructions]

Our next question comes from John Sonnier with William Blair. Your line is open.

Hi, thanks for taking the question and thanks for the progress. Want to ask Ivan about NKTR-214. I may have missed this, but did you disclose what size trial you are thinking about, either in the dose-ascending part of the trial, the expansion cohorts?

Yeah, we actually did. And we've presented slides from this that – I wasn't specific on this call, but we said we did go into some detail to that at our R&D Day. The dose-ascending part of the study will be a sort of somewhat typical three plus three design, so we probably envisage anywhere from sort of 20ish to 30ish patients going into that part. In our expansion cohorts though we envisage up to – in the monotherapy expansion cohorts, we envisage is anywhere up to 60, or perhaps beyond, depending on the sort of signals we are getting. So we will be growing – these studies, we expect will expand quite – the study itself will expand dramatically into each of the expansion cohorts. And at the same time, once we've identified a dose, we will also start to consider sort of a combination dosing strategy and try to work through some of the dosing aspects of that.

And as I said, you can imagine that if we see reasonably good results by the second half of next year, then we're going to move the expansion cohorts rapidly and move towards a program that allows us to accelerate the approval process for this drug. I mean, it is unique and it shows what we can do with our technology and I think it has a lot of applications.

No, that makes a lot of sense. And from the standpoint of patient selection, I know you've said a couple of times it shall be looking specifically at PD-L1 non-expression. Are you also going to be looking at, prospectively, mutational load or – I've always thought there could be a potential for this drug in tumors that aren't inflamed to be used as a priming agent or is it going to be kind of just strictly driven by PD-L1 non-expression?

No, absolutely no. We have a very extensive biomarker program. As we go through the dose escalation, we will – we are not going to restrict ourself just to PD-L1. Mutational load is clearly a key component as well as other biomarkers.

Okay. Thank you.

Thank you. I'm showing no further questions. I will now turn the call back over to Howard Robin, CEO, for closing remarks.

Okay, well, thank you everyone for joining us this afternoon. Of course, I want to thank our employees for all their hard work and dedication and we look forward to seeing you at a number of conferences in November, December and of course here in San Francisco at JPMorgan in January. So thank you very much and have a good evening. Thanks.