Good day, and thank you for standing by. Welcome to the Nektar Therapeutics Third Quarter 2021 Financial Results Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Jennifer Ruddock, Head of Corporate Affairs. Please go ahead.

Thank you, Crystal, and good afternoon, everyone. Thank you all for joining us today. With us on the call are Howard Robin, our President and CEO; Gil Labrucherie, our COO and CFO; Dr. Jonathan Zalevsky, our Chief of Research and Development; and Dr. Dimitry Nuyten, our Chief Medical Officer. On today's call, we expect to make forward-looking statements regarding our business, including clinical trial enrollments and clinical trial results, timing and plans for future trials, timing and plans for future clinical data presentations, the therapeutic potential of our drug candidates, outcomes and plans for health authority regulatory actions and decisions, financial guidance and certain other statements regarding the future of our business.. Because these 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. Our actual results may differ materially from these statements. Important risks and uncertainties are set forth in the Form 10-Q that was filed on August 6, 2021, which is available at sec.gov. We undertake no obligation to update any of these forward-looking statements, whether as a result of new information, future developments or otherwise. A webcast of this call will be available on the IR page of Nektar's website at nektar.com. Before turning the call over to Howard, I'd like to remind you that we are dialing in from different locations. I will moderate the Q&A session for our team, so we can avoid technical issues during the session, and we appreciate your patience. With that said, I would like to hand the call over to our President and CEO, Howard Robin. Howard?

Thank you, Jennifer. Thanks to all of you for joining us today. This quarter, we continued to advance both our IO and immuno-oncology pipeline. Our progress has set the stage for what is expected to be a transformative period for Nektar, starting with a series of anticipated key registrational and key mid-stage data readouts across our portfolio throughout 2022, with the most anticipated data from our Phase III study for BEMPEG in melanoma coming in the early part of 2022. So let me begin today with BEMPEG, our most advanced clinical program. Our IL-2 pathway agonist is being developed in combination with checkpoint inhibitors, NIVO and PEMBRO in multiple large frontline and adjuvant tumor settings. Together with our partner, BMS, we're advancing 5 ongoing registrational studies of BEMPEG and NIVO under our joint development plan. Three of these studies are on track for top line data readouts in the first half of 2022. In October, BMS informed us that they completed enrollment in the Phase III study of BEMPEG plus nivo in previously untreated metastatic melanoma. The current forecast for timing for the ORR and PFS analysis from this study is sometime in the early part of 2022. Additionally, we anticipate data from the Phase III study in renal cell carcinoma and the Phase II accelerated approval study in cisplatin-ineligible bladder cancer in the first half of 2022 after the melanoma top line data. Positive data from these 3 studies would support a series of BLA filings for BEMPEG, followed by commercial launches for the combination treatment of BEMPEG plus nivo beginning as early as late 2022 or early 2023. The registrational program with BMS also includes 2 additional large Phase III studies, one in adjuvant melanoma and one in muscle invasive bladder cancer. These indications offer an opportunity to…

Thank you, Howard. I will provide a quick update on the BEMPEG program and the timing for registrational studies, which are tracking in line with our prior guidance. First, for the 760 patient Phase III first-line metastatic melanoma study which is being run by our partner, BMS. We and BMS are very much looking forward to completion of the study and future data. As Howard stated, BMS informed us in October that the study was fully enrolled. BMS has an excellent track record in melanoma, with multiple successful registrational trials for IO agents under their belt. Melanoma has proven to be a very immune-sensitive tumor setting and the promise of BEMPEG, an agent that can deepen responses and extend responses for these patients is very exciting. The BEMPEG plus nivolumab combination received a breakthrough therapy designation from the FDA in August 2019 based upon this panel in melanoma patients. If the Phase III study results are similar, we envision a unique opportunity for the BEMPEG nivolumab doublet to emerge as new standard of care in this setting. As we noted last quarter, BMS has told us they intend to conduct their first analysis of data for both ORR and PFS endpoints and a number of defense, as outlined in the statistical analysis plan for PFS endpoint are reached. Current projections from BMS indicates that this data analysis could occur in the early part of 2022. Given the breakthrough therapy designation I mentioned earlier for this indication, we believe that we would be able to move rapidly toward a regulatory filing, if warranted by the data. Of course, since PFS analysis is an event-driven analysis, a number of factors, including the actual rate of PFS defense might impact the timing of the analysis. The next study, which Nectar is running, is…

Thank you, Dmitry. Let me start with NKTR-255, an agent that engages the full biology of the IL-15 pathway to provide functional activation and homeostatic control of IL-15 responses of immune cells, namely natural killer cells, CD8 T cells, and immune memory subsets. And as an agonist of the full IL-15 pathway, NKTR-255 can therefore be combined with multiple mechanisms, ranging from targeted agents to cellular therapies and even immunological checkpoints to potentially improve their efficacy. As Howard mentioned, our initial strategy is focused on combining with antibodies that function through an ADCC mechanism of action. And we have a robust clinical program in place in both liquid and solid tumors. Our recent clinical collaboration with Merck KGaA and Pfizer is a further extension of that strategy. Avelumab is the only immunotherapy treatment to demonstrate a survival benefit in patients with locally advanced or metastatic urothelial carcinoma who have not progressed on first-line platinum-containing chemotherapy and so it has rapidly established the dominant market position in this setting. And we are very excited to combine NKTR-255 with the market leader and look forward to leveraging Merck and Pfizer's collective expertise to broaden our NKTR-255 development program. The JAVELIN Bladder Medley study is a global multicenter Phase 2 umbrella trial that will evaluate Avelumab monotherapy versus the doublet of Avelumab and NKTR-255 in this maintenance setting. The NKTR-255 combination arm of the study plans to recruit 72 patients and will be compared to the 36 patients Avelumab arm. Findings from this trial will help determine whether there is a registrational pathway for NKTR-255 in this setting where Avelumab is already approved. The Avelumab alliance between Merck and Pfizer are sponsoring the trial and Merck taking the lead. Merck is on track to initiate the study in the first quarter of 2022.…

Thank you, JZ, and good afternoon, everyone. On today's call, I'll review our 2021 financial guidance, which includes a reduction of our full year projected GAAP R&D expense and a commensurate increase in yearend cash position. We ended the third quarter in an exceptionally strong financial position, with $955 million in cash and investments and no debt on the balance sheet. We now expect to end the year with over $800 million in cash and investments, an increase of $50 million from our prior guidance of $750 million. Our full year GAAP revenue guidance is unchanged at approximately $100 million and includes $15 million to $20 million of product sales and $80 million to $85 million non-cash royalties. Our guidance for full year GAAP R&D expense is now anticipated to be between $425 million and $430 million. Our registrational trials for BEMPEG are on track, with enrollment for first-line metastatic melanoma, RCC and bladder studies all completed. And we are very pleased with the pace of enrollment in the adjuvant study, and that enrollment is now open in the head and neck study. Our R&D expense guidance includes approximately $85 million of non-cash expenses, arising from stock compensation, depreciation and the expense related to the head and neck cancer study that is being funded by SFJ. Our G&A expense guidance is still projected to be between $120 million and $125 million and includes $35 million of non-cash depreciation and stock compensation expense. Our non-cash interest expense is expected to be between $50 million and $60 million, arising from previously completed monetization of our royalty streams. Additionally, our non-operating expense includes approximately $15 million for the accounting of the contingent success based payments to SFJ as a derivative liability. And with that, we will open the call for questions. Operator?

Thank you. [Operator Instructions] And our first question comes from Chris Shibutani from Goldman Sachs. Your line is open.

This is CJ Zopf on for Chris tonight. Thanks for the update on the PROPEL data. Just to be clear, it pembro based on the data as a chemo sparing option. And then when do you think we would be able to see a first look at some of those chemo cohorts that are going to be starting soon?

Hi, CJ. It's Jennifer. I'm going to ask Dmitry to answer those two questions. Did you have another part? Sorry, I cut you.

No, that was it. Thanks.

Okay, great. Thank you. Dimitry?

Hi. Thanks for the question. So we just received the final data from the independent report on PROPEL in the past week. So we do need additional time to review the data in more detail. There will be continued follow-up also on 15 patients still on treatment in the study as well as, let's say, the generation of data for BEMPEG plus pembrolizumab and chemotherapy. So with this totality of the data, we will be, let's say, making a fully informed decision about the lung cancer strategy. We have a number of very interesting observations from Propel, especially on the metrics, which are difficult to find evidence for in non-small cell lung cancer, the depth of response that we observed. And we want to make sure we leverage BEMPEG's advantage in our development plan. We are currently heavily focused on the chemotherapy combination options in the low expressors because the chemotherapy backbone is the appropriate regulatory path for these patients and the standard of care. As you know, there have been several Phase III failures recently in this space even within the last 30 days, and many several of that before us. Recently, a chemo-sparing treatment option from ESA's Phase III, the LEAP 7 trial evaluating pembrolizumab and afatinib in patients greater than 1% expression. This study was discontinued early at the DMC review for, let's say, interim analysis by the DMC. And we know these results will be presented at ESMO-IO. So we definitely want to look at the data in detail. We're also running a chemotherapy combination trial known as the LEAP 6 trial, and we are expecting results next year. Secondly, Novartis just announced the Beovu trial, which was evaluating pembro plus IL-1 beta inhibitor canakinumab plus chemotherapy versus pembro chemotherapy, and the study was announced is not meeting primary endpoints, OS and PFS, both in squamous and non-squamous, but Novartis noted that they were clinically meaningful improvements in a number of subsets. So that's something we definitely want to look at. But combining, let's say, my answer and coming back to the core of your question, we are most interested in the chemotherapy combination option in low expressors as a path forward.

Thank you. Our next question comes from Jay Olson from Oppenheimer. Your line is open.

Hey. Thanks for taking the question and thanks for the update on the PROPEL study. Could you share with us any potential read across you may have from your initial learnings after looking at that data, any potential read across to other studies for BEMPEG? Thank you.

Thanks, Jay. Dimitry, would you like to answer that question?

Sure. I think the read-through to other tumor types would be would be limited for now. I think the read-through that we can see are some of the positives we have seen what we know BEMPEG do deepening of responses and generating CRs. But I think we have to be careful in translating results from one tumor type to the other tumor type. Non-small cell lung cancer and melanoma, for example, are very differently, as I stated on the call, melanoma is a very immune-sensitive tumor, where we know that non-small lung cancer is not as immune-sensitive and traditionally has always been treated by chemotherapy. And even now, chemotherapy is still the backbone of treatment in the majority of patients. On the other hand, if you look at melanoma, there is a significant tremendous predictable history of IL agents performing very well IL-2 itself has been approved in melanoma. And prior to the development of IL agents, mostly notably, the checkpoint inhibitors over the last years, chemotherapy in melanoma specifically was really an inferior treatment option. And chemotherapy has been a viable option for non-small cell lung cancer as standard of care. So we are really looking at these two different types as two different settings. And let's say, with the PROPEL data, of course, we are looking at the ability of BEMPEG to drive deep and durable responses. So that's something that might translate as a general mechanism but the overall immune sensitivity is very different. And as a reminder, for example, the results that we have already published for our melanoma cohort with a 29-month follow-up was an overall response rate of 53% and a complete response rate of 34%. And then, let's say, the median change in the size of target lesions was almost 80%, and so I think a very, very different data set there.

Thank you. Our next question comes from Jessica Fye from JPMorgan. Your line is open.

Hi. Good afternoon. This is Daniel for Jessica. Thanks for taking our question. Did I hear correctly that the chemo final data is anticipated in mid-2022 with the prepared remarks? And if so, will you have to -- will you need to wait until that point to make a decision on the path forward?

Thanks, Daniel. I'm going to ask Dmitry to share his thoughts on that. Dimitry?

Yes. So that's correct. We are expecting I would first -- let say, a full safety data set in the first efficacy in the middle of 2022. Looking at that data, of course, will be critical for informing our Phase 3 strategy. But as I also said, we do have a lot of data already from PROPEL, and that's something we'll be analyzing more. So in the meantime, we'll be working on different, let's say, plans moving forward and then use the final data on the chemotherapy combination to flush out a strategy.

Thank you. Our next question comes from Greg Harrison from Bank of America. Your line is open.

Hey, guys. Thanks for taking the question. What steps are you taking at this point to start preparing for BEMPEG launch, given that best case scenario could put it on the market in about a year?

I'm going to ask Gil to answer that question. Thanks, Greg.

Thanks for the question, Greg. Yes, we're taking a number of steps, as Howard said in his opening remarks, with data coming in the first part of 2022, we got a commercial launch as early as the end of 2022. So we've been working together with our team and BMS to kind of stage appropriate way set up all the infrastructure for distribution, patient support and all the things that go into having the drug available, both in the U.S. and in Europe. So we feel like we're in a really good position. We've made the right investments, the right stage approach for our investments, and we've worked with Bristol and prepare for the launch. So we feel really good about the position that we're in as we get the data next year.

Great. Thanks.

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

Thank you for taking my questions. So Dmitry, I just was curious, the company you mentioned before that the FDA conducted an analysis basically looking at the depth of response correlating that with the durability of response, particularly for checkpoint IO agents. Just curious if that's kind of a trend that you saw also with PROPEL. And maybe if you don't mind, I do have a question for JZ, in particular to the ASH abstract about 255, you mentioned about the CAR-T potential combination and kind of reactivation of these CAR-T cells. Just curious if you have any hypothesis about the optimal temporal administration of 255 to really maximize this response.

Great. Thanks, Andy. JZ, I'm going to ask you to take the 255 question first, and then Dmitry, if you can address Andy's question about depth of response correlating with other metrics. Go ahead, JZ.

Andy, thanks for the question. Yes, so one of the things that we've observed, if you recall, going back to the preclinical studies is that in animals, where we gave the same CD19 CAR that's used as an approved agent, that the application of NKTR-255 could induce a persistence of those cells. And the net effect of that wasn't just an increase in cell numbers with time, but also with an increased efficacy in regards to the tumor killing potential of those cells. And so that was the preclinical realm. And what we did in this ongoing heme study is we allowed patients that had a suboptimal response to CAR-T, so essentially like a CAR-T failure, patients that did not have those durable CRs to also be enrolled into that study, and then we treated them with NKTR-255 as one of the patient populations. And so we have a number of patients in the study that are post CAR-T. And since the last year at 2020, remember, we showed one example of a case study, where one of these patients had taken a CAR-T therapy four months prior before beginning treatment with NKTR-255. And that patient saw an increase in the amount of CAR-T cells after application of NKTR-255. So we're very excited to extend those observations at ASH this year. We now have more patients, additional patients that have been enrolled that have been treated with 255. And so we have many more patients to add to that analysis in the post CAR-T setting. So that's been a very exciting thing and a unique niche, as you know, in the treatment landscape for these patients. And then to your other part of your question, which is the temporalness, that's very much something that we're thinking about very, very deeply. Obviously, in this setting, in this first-in-human study, we're treating patients that are CAR-T failures. So they're coming in well after CAR-T setting. But as we advance NKTR-255 in a CAR-T combination or even other cell therapies, we're actually very actively exploring the kind of temporal dosing relative to the two agents with each other. We have a lot of preclinical data that gives us an understanding of that by both the sequencing and time intervals between doses. And then that's the kind of thinking that we'll put into the study when we do that. Thanks, Andy.

Thanks, JZ. Dmitry, can you take Andy's question on correlation of depth of response with other clinical benefit in lung cancer?

Absolutely. Yes, thank you for the question. As you stated, the FDA has done extensive analysis to correlate, let's say, these endpoints and to make the point that, let's say, the quality of response is a very important metric. That's one of the reasons why it's something we carefully analyzing our data and the number of statements that I made about it with the depth of responses we've seen the number of CRs, than a number of patients who have 100% tumor volume reduction in their target lesions. So they are partial responders if they still have a target lesion that has completely disappeared. But obviously, that's also a much deeper response and someone with lower volume reduction. So those are the things we know. That's why we are excited about a number of findings in the trial. I can concretely answer your question with the note that needless to say, our study would be immature for overall survival, given the amount of follow-up and the fact that the median hasn't been reached. But in highly exploratory analysis given the time of where we are in the trial with the relatively short follow-up for survival, we do see, let's say, a trend in the right direction with a correlation for the depth of response for both PFS and OS. And again, I'd like to emphasize within a small trial and limited follow-up obviously, this is a strictly exploratory analysis, but we are able to see that correlation.

Thank you. And I am showing no further questions from our phone line. 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're certainly approaching a very busy and exciting period for Nektar. We hope you can join us for our [indiscernible] presentation. And we're looking ahead to the registrational readouts for BEMPEG beginning with the highly anticipated melanoma data in the early part of next year. I'd like to thank all of our employees for their efforts in helping us achieve these milestones during this very, very challenging period. And I want to thank our shareholders for their continued support. We look forward to providing you with updates on our progress. So please stay tuned. Thanks very much.

This concludes today’s conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.