Good day. And thank you for standing by. Welcome to the Nektar Therapeutics Fourth Quarter 2021 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference may be recorded. If you require any further assistance, 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 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 enrollment and clinical trial results, timing and plans for future clinical trials, timing and plans for future clinical data presentations, the therapeutic potential of our drug candidates, outcomes and plans for health 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 we filed on November 5, 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 Investor Relations page of Nektar's website at nektar.com. Before turning the call over to Howard, I'd like to remind you that since we're calling in from different locations, I will moderate the Q&A Session for our team so we can avoid technical issues during the session. We appreciate your patience during this time. With that said, I would like to hand the call over to our President and CEO, Howard Robin. Howard?

Thanks, Jennifer. Thank you all for joining us today. 2021 was highlighted by advancements and execution across many areas of our business, and we continue to establish Nektar's leadership position in the development of cytokine therapeutics for the treatment of cancer and autoimmune disease, and we are excitingly awaiting three late-stage registrational study readouts in the first half of this year from our BEMPEG program. If successful, these studies will put us on a path to regulatory approvals and global commercialization in multiple, large frontline cancer settings in melanoma, renal cell carcinoma and bladder cancer. Our organization is preparing for potential regulatory filings and the commercialization of that BEMPEG. And moreover, with a breakthrough designation in first-line melanoma, we believe that positive Phase 3 data will enable us to expedite the U.S. regulatory filing for BEMPEG in this setting. And this means we can potentially make BEMPEG available to cancer patients beginning in the latter part of this year or early 2023. Beyond the three studies reading out in the first half of this year, we have several additional registrational studies underway with nivolumab in the adjuvant setting of melanoma and the peri-adjuvant setting of bladder cancer and with pembrolizumab in first-line head and neck cancer. Our broad global registrational program for BEMPEG was designed to capture the most significant cancer types where we believe BEMPEG in combination with a checkpoint inhibitor has the potential to demonstrate significant clinical benefit for a large number of patients. Current sales of checkpoint inhibitors in these settings are in excess of $6 billion, and we believe we have positioned BEMPEG as a first-in-class IL-2 therapeutic with the development strategy to establish BEMPEG in first-line settings targeting a large number of patients. BEMPEG is the only IL-2 agent in development that possesses three key…

Thank you, Howard. Before I dive into an update on our BEMPEG trials, let me take a moment to remind you of its mechanism and its approach. Our goal when we started the development of BEMPEG was to create a new and novel molecule that captured the positive attributes of IL-2 and also addresses the historical problems with high-dose IL-2. Leveraging our technology platform, we were able to engineer a product candidate that we believe is best-in-class. Let me highlight some of the differentiating aspects of BEMPEG. First, we preference signal to the beta gamma IL-2 receptors, which stimulates the growth of cytotoxic T cells. We do this without over-activating the cell populations, which can lead to downregulation of the immune system. And unlike mutated forms of IL-2 that only bind to the beta gamma receptors, we retain some transient binding to the alpha receptor. And by doing so, we can enhance the priming of T cells in lymph nodes, enabling T cell proliferation and infiltration of those T cells into tumors when the new tumor antigen is presented. Second, we used the full-length IL-2 molecule with no amino acid substitutions rather than a mutated version. This ensures that we do not see any tachyphylaxis on the receptor or issues that mutant versions can exhibit over time in vivo, including antidrug antibodies, leading to diminish efficacy over time. Third, as a prodrug, BEMPEG avoids the risk of a cytokine storm that you may see with a non-product approach. Certainly, this is something you really want to avoid in a medicine that could potentially be used in so many cancer patients. And finally, we have achieved an antibody like dosing schedule in an outpatient setting that easily combines with checkpoint inhibitors versus the intense and dense regimen for high-dose IL-2 usually…

Thank you, Dimitry. As Dimitry said, we are all very excited about the upcoming milestones for BEMPEG and the opportunity for this important IL-2-based therapeutic to treat a large number of patients battling cancer. As you know, Nektar has built a very strong and well-diversified clinical pipeline, and we’ve established ourselves as the leader in cytokine therapeutics. Our focus is on targeting significant opportunities in cancer in solid and liquid tumors and even beyond cancer in a broad range of autoimmune disorders. We are advancing clinical studies to capitalize on these significant opportunities with two large clinical programs, NKTR-255 and NKTR-358. And in addition, we have a robust research pipeline looking at immune-based agents in cancer and autoimmune diseases as well. So 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. Now as a full agonist of the IL-15 pathway, NKTR-255 can – must be combined with multiple mechanisms, ranging from targeted agents to cell therapies including CAR-Ts and even immunological checkpoints in total to potentially improve the efficacy of these agents. In our early dose escalation work, we have observed a consistent increase of natural killer cells as well as CD8 T cells across multiple tumor types, including multiple myeloma, non-Hodgkin’s lymphoma, colorectal cancer, and head and neck cancer. We have seen up to a nine-fold increase in NK cells, and our pharmacokinetic profile is highly predictable, allowing us to dose NKTR-255 every three or four weeks. And importantly, we see increases in NK and CD8 T cells and even the toughest patients, including multiple myeloma patients with compromised bone marrow. And this is a very important attribute…

Thank you, Jonathan, and good afternoon, everyone. This afternoon, we announced our full year financial results for 2021 in our earnings press release. On this call, I will provide our annual financial guidance for 2022. Starting with our cash position, we finished 2021 with a very strong balance sheet with approximately $800 million in cash and investments and no debt. In addition, under our collaboration with BMS, there are very significant near-term regulatory and commercial launch milestones associated with successful outcomes from the registrational studies for BEMPEG. Let me provide you with some more detail on how these milestones break down. For the first indication, there are $60 million of milestones associated with health authority filings for BEMPEG in the U.S. and EU, $500 million in commercial launch milestones split equally between the first the first commercial sale in the U.S, and the first commercial sale in the EU, and $65 million in milestones associated with regulatory submissions and commercial launch in Japan. For each of the next three indications, there are $30 million of milestones associated with health authority filings in the U.S. and EU, $200 million in commercial launch milestones split equally between the first commercial sale in the U.S. and the first commercial sale in the EU, and $30 million in milestones associated with regulatory approval submissions and commercial launch in Japan. Before I get into the line item projections for our 2022 financial guidance, I wanted to review a few key assumptions that we made in formulating this guidance. If one or more of our registrational studies for BEMPEG are successful in the first half of 2022, it is possible that BEMPEG could be approved and launched as early as late 2022, dependent upon regulatory filing and review time lines. However, in our financial guidance for…

Thank you. Thanks for taking the question. Thanks for all the detail in the call. Just maybe as we think about the three Phase 3 readouts, just kind of your level of read-through that we should be taking from melanoma to RCC to bladder for the BEMPEG trial?

Yes. Thank you, Peter. I'm going to ask Dimitry to take that one. Dimitry?

Yes. Thank you for the question. I think these are, as I like to call them independent shot-on-goals. On one hand, of course, the indications have been carefully selected based on, let's say, IL-2 validation specifically for melanoma and for renal cell carcinoma. Bladder cancer is a different indication. We built, let's say, strong early data across the different indications. However, if you think about read-through, there are very different tumor types. The studies are different in design. Specifically if you think about melanoma, we are building upon standard of care combining with nivolumab, comparing it to nivolumab alone. However, in renal cell, we have a double I-O approach versus a TKI approach. So I would overall say there's limited read-through, and these are truly independent shots on goal.

Thank you. Our next question comes from Chris Shibutani from Goldman Sachs. Your line is open.

Hi. Good evening. This is CJ Zopf on for Chris this evening. Obviously, we are all waiting on tenterhooks to see the Phase 3 readouts coming up this half. Gil, thanks so much for helping us think through what they spend might look like under the assumptions that you gave. In the unfortunate event that the trials are not positive, how should we be thinking about any potential spend trajectory changes?

Yes. Gil, do you want to take that?

Yes. So of course, as you – as we outlined our assumptions in our guidance, we're expecting positive results out of the BEMPEG trials. As I'm sure you can imagine, we have some contingency plans in the unlikely event we were not to have success. But I think it's way too early to even be contemplating or talking about those plans. So we're certainly planning for success and ready to make any adjustments as we go forward.

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

Thank you. This is Cha on the line for Jay. Thanks for taking the question. Maybe just one for 255. Just wondering how are you thinking about the collaboration opportunity for 255 with cell therapy. And separately, I'm just curious about the newly initiated study with CAR T. When will you dose 255 for – in the CAR-T? And if you're going to dose like for one time or you will be dosing periodically? Thank you.

Yes. Thank you for that. JZ, do you want to talk about our approach in cell therapy as well as the CAR T study a little bit more? Thank you.

Yes. Absolutely. Thank you for the question. So one of the things that we observed when we started our collaboration with Cameron Turtle at the Hutch is that we ran a number of preclinical studies with him. And of course, remember, he's really one of the founding fathers of this whole field. And we were really following on the understanding that patients that have the highest levels of IL-15 post conditioning seem to have some of the best outcomes following CAR T cell therapy transplant. So the opportunity here is really providing exogenous IL-15 pathway source to help in this setting. So what we first really we're excited about is that when we saw the early preclinical studies we saw that administration of NKTR-255 could actually rescue subclinical doses of CAR T cells applied in a preclinical model. So these are levels of CAR T that are so low that they hardly provide any tumor control. But in the combination with 255, not only do they kill the tumors; the animals maintain long-term persistence of effect. You could keep rechallenging them with the same tumors and they continue to be completely tumor-free for many, many months after treatment. So the study that then not extended to that is also being run by Cameron Turtle at the Hutch is really now kind of leveraging forward from those early preclinical studies to the ASH data that I summarized in patients long since their prior transplant into the setting where we're going to be administering NKTR-255 much more contemporaneously with the CAR T therapy. So very much like you pointed out here 255 will be given very close in time to the CAR T administration and as you pointed out, you have this ability to continue treatment. So we will be continuing to treat with NKTR-255 for an extended period of time after the original CAR T transplant with the opportunity in all these cases to increase the persistence of the CAR-T cells and ultimately and hopefully improve the efficacy and durability seen with these therapies. Thanks for the question.

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

Hey guys good evening. Thanks for taking my question. When do you expect to have mature overall survival data from the frontline melanoma trial? And what's the minimum PFS hazard ratio you could detect in that study? Thanks.

Hi Jess, thanks. Dimitry, I'm going to ask you to take those two.

Yes, sure. Thanks for the question. I'll start with the PFS hazard ratio. As we stated before, we haven't given additional guidance or detailed guidance on our statistical analysis plan. I would say this is fairly atypical for companies to disclose those details until a full publication is available. We've talked about clinical relevance before, and I've emphasized two things. First of all, as a, let's say, benchmark or as a reference trial, the CheckMate study can be looked at for a lot of details. And our study is well designed to detect a clinically relevant, let's say, hazard ratio. When it comes to the survival analysis, that's also something we haven't commented on. We're not providing any guidance on the number of events and the timing. I can only say that it's one of the three co-primary end points. We don't need a survival data for a regulatory path. PFS by itself is a registrational end point and survival data as, I think, is known for many other trials in melanoma lack significantly behind, which is a good thing for patients. They’re living a lot longer than they live without disease progression. So that’s something we’ll give, let’s say, updates on in the future but not at this time.

Thank you. Our next question comes from Greg Harrison from Bank of America.

Hey good afternoon. And thanks for taking the question. If the melanoma data are positive but either maybe in line or just not clearly superior to IPI/NIVO and CheckMate 067, how would this change or path forward for commercialization? In other words, are there other aspects of BEMPEG that you would expect to be differentiated and help you gain some share there?

Thanks, Greg. I'm going to ask Dimitry to take that one as well. Thanks, Dimitry.

Yes, thank you for the question. I think it's complicated. I've said a few times in earlier calls before the median PFS, of course, is one of many things to look at. I think the hazard ratio is one thing to look at. If we would assume your question about being similar hazard ratios, then there's very – let's say, there's a lot of other, let's say, differentiating elements in our clinical trial that we can read out and we can emphasize for the patient's value. One thing as we've shown in the PIVOT-02 data, is our very impressive CR rate. That's something that obviously is, let's say, an early readout for potentially long-term benefit. And the CR rate, of course, provides benefit to a substantial number of patients but perhaps not have the patients. So, it might not capture the median PFS but it might capture a very significant minority of patients who has very long-term benefits. So that's one important differentiator that we will be looking at. And based on the safety data we have presented, that's another what we think is potentially a very strong differentiator specifically for ipi/nivo with an over 50% Grade 3/4 AE rate.

Thank you. Our next question comes from Bert Hazlett from BTIG. Your line is open.

Thanks. Thanks for taking the question. Thanks for the additional detail on the milestones upcoming. Just two quick ones, I'm going to slide in. First, could you remind us again of any differences or similarities in patient population enrolled between Phase 2 and Phase 3 in the first-line metastatic melanoma studies? And then secondly, unfortunately, there is a war on, as we know, the sanctions have been mostly financial against the Russian Federation but not all of them. You have some centers there. Do you foresee any challenges in accessing any of the data for any of your trials upcoming? Thanks.

So, I'm going to start with the first part of that question for Dimitry related to the patients enrolled in the Phase 3 versus the Phase 2. And the second part of the study, I'll ask Howard to comment on with respect to the evolving situation in Ukraine. Dimitry, do you want to take the question?

Sure, thank you for the question. So, until we have a full publication of our data set, the exact patient characteristics will not be known or disclosed. So, the percentage of patients with certain characteristics, we can't comment on right now. As you know, it's a blinded trial. Overall, the inclusion criteria are very similar. And we've made sure that we have, let's say, a good representation of the different risk factors. And also, as we have talked about before, we stratify for a number of important risk factors to make sure that the patients with the different risk factors are distributed equally between the two arms. So, we're confident that the Phase 3 trial, which is a global Phase 3 trial, will capture, let's say, the broad array of different prognostic and predictive factors for patients with metastatic melanoma.

Thank you, Dimitry. Howard, do you want to talk about the evolving situation in Ukraine?

Yes, of course. Look, obviously, the whole situation is devastating to watch, and our hearts go out to the Ukrainian people, and it's very difficult to watch what's going on. I think we would all agree. I can tell you that Nektar does not have any vendors, testing labs, raw material supply chain or clinical sites in the Ukraine, so none of these studies were conducted there. And we don’t anticipate any – we’ve looked at this very carefully, of course, and it’s an excellent question. But we don’t anticipate any risk to database loss, any plans to analyze top line data and/or any of the planned study results for BEMPEG as a result of what’s going on in the Ukraine-Russian conflict. And we don’t see any filing risks either at this point. We’re obviously going to continue to monitor this situation. We’re going to – we will determine if there is any problem. But at this point, there doesn’t appear to be anything that puts these trials or the database locks at risk. And again, we have no sites in the Ukraine at all. I hope that answers it for you.

Thank you. Our next question comes from Mara Goldstein from Mizuho. Your line is open.

Great. Thanks for taking the question. I wanted to ask about 358 and the decision to opt in. And what are the sort of potential timing and gating factors for that? And would it be – is the time frame consistent with this year where you’re expecting clinical data from potentially registrational studies?

Thank you, Mara. I’m going to ask Gill to take that question. Gil?

Yes, Mara. So, the way our collaboration that structure with Lilly, when they make the determination to go in Phase 3, we have a certain amount of time to elect, to co-develop and co-fund the Phase 3 program up to 25%. And that entitles us to the highest tier of royalties, which, as Howard mentioned earlier is in the mid-teens to low 20s very quickly into the low 20s. And while we haven’t crossed that bridge yet, I can’t say as we look out and we look at the size of these indications, when we look at the results that we’ve seen already for NKTR-358, which are extraordinarily encouraging, we would expect to fund our portion to get the maximum royalties. But of course, we’ll have to make the decision at that time or when Lilly begins to take different indications in the Phase 3 based on the Phase 2 data.

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

Great. Thanks for taking my question. So, I have a question for Dimitry. Dimitry, you mentioned the RCC trial in the second quarter that could potentially undergo this resizing based on the recommendation of DSMB. I’m curious about how that decision will be made. Is that based on overall survival response rate? And also, are you looking at the entire population or specifically just in the intermediate high-risk population? The second part of my question is also kind of related to RCC. You mentioned about the 250 triplet study. Is that ongoing? Just curious about the status of that trial. Thank you.

Sure. Thanks for the question. So, to start with the second part, that’s relatively easy. That trial is ongoing. So that’s on its way. We haven’t given any guidance for data readout but it’s ongoing. The first part of your question, just, let’s say, emphasize for everyone, it’s not a resizing of the trial. So, it’s not a sample size re-estimation. It’s an event size re-estimation for OS events. And it’s based on, let’s say, modeling that has been provided to the DMC by our statistical group before the trial started to optimize the, let’s say, event rate for survival in the intermediate and poor risk patients in the trial. I hope that answers the question.

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, and thank you for joining us today. And when you consider the range of therapeutic areas that we are working and the sheer breadth of our pipeline, I’m really very proud of our company that’s built such a strong and extensive clinical pipeline from a platform of science. And we have 17 clinical trials running in the area of immuno-oncology and immunology. In each of these programs, we’re pursuing BEMPEG, NKTR-255, NKTR-358 represents on their own a distinct value in our pipeline and each address significant patient populations. Of course, we have additional research programs, which we’re preparing for the clinic in the areas of cancer and autoimmune disease. And remember something important about BEMPEG IL-2. IL-2 is a well-understood mechanism. And using our technology, and – we invented a much better IL-2. And that’s why we’re looking forward to the BEMPEG melanoma results in the very near future. So, we’re certainly approaching a busy and exciting time for Nektar. I would like to thank our employees and their efforts and their hard work, and I want to thank our shareholders for their continued support. And we look forward to providing you with updates on our progress in the very near future. So please stay tuned. Thank you very much.

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