Good day, and thank you for standing by. Welcome to the Nektar Therapeutics Third Quarter 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s 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 it 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 Zalevsky, our Chief of Research and Development; Jill Thomsen, our Chief Financial Officer; and Dr. Brian Kotzin, our Chief Medical Officer. On today’s call, we expect to make forward-looking statements regarding our business, including statements regarding the therapeutic potential of and future development plans for drug candidates in research programs; the timing of the initiation of clinical studies and the availability of clinical data for our drug candidates; the timing and plans for future clinical data presentations, the formation, future development plans or success of our collaboration arrangements; the expectations following our corporate restructuring and reorganization, financial guidance and certain other statements regarding future of our business. Because forward-looking statements relate to the future, they’re subject to inherent uncertainties and risks that are difficult to predict, many of which are outside of our control. Our actual results may differ materially from the statements, important risks and uncertainties are set forth in our Form 10-Q that was filed on August 5, 2022, 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 development or otherwise. A webcast of this call will be available on the IR page of our Nektar website at nektar.com. With that said, I would like to hand the call over to our President and CEO, Howard Robin. Howard?

Thank you, Vivian. Thank you to everyone for joining us today. During the third quarter, we continue to make meaningful progress toward execution of our new strategic plan directed to the fields of oncology and immunology with a sharp focus on 3 core R&D pillars, NKTR-358, NKTR-255, and our research activities. With NKTR-358 and NKTR-255, our biologic clinical pipeline is poised to generate value enhancing clinical trial data begin 2023 and continuing through 2025. Importantly, our plan provides us with a cash runway through the middle of 2025. And this is exclusive of any potential future cash inflows from new partnering activities. Each program in our pipeline provides us with a distinct and highly promising opportunity to provide patients with novel potential medicines across a range of therapeutic areas. And we’re already starting to see encouraging data across our portfolio. This past quarter, we reported positive data for our clinic stage program in immunology, NKTR-358, now known as rezpegaldesleukin or REZPEG. In the setting of atopic dermatitis, REZPEG is being developed with our partner, Eli Lilly, and multiple autoimmune diseases. And in addition to atopic dermatitis, we’re also pursuing lupus. And we have plans to go into at least 1 additional indication, and we look forward to announcing that new indication in the coming months. Our lupus Phase 2 study, which enrolled about 280 patients, is expected to report topline data in the first half of 2023. And the important Phase 1b data in atopic dermatitis patients that were presented in Q3 will shape the robust Phase 2b study in this setting, which is planned to start also in the first part of 2023. The design for that study is being finalized now, and Brian will provide further information on the REZPEG program in a moment. Our second significant clinical…

Thank you, Howard. REZPEG is a unique molecule and I am truly excited about the work we are doing with our partner, Eli Lilly, on this important first-in-class Treg stimulator for the treatment of autoimmune and inflammatory diseases. Our goal with this program is to address the underlying Treg deficiencies and consequent over activity of effector T cells in these diseases by selectively activating and expanding Tregs. Unlike immunosuppressive drugs, REZPEG is designed to bring the immune system back into a normal balance. The data we recently presented in atopic dermatitis continued to reinforce our conviction in this approach. As Howard mentioned, this past September at the EADV Congress, full data from our first initial proof-of-concept study and moderate-to-severe atopic dermatitis were presented. The 12-week Phase 1b study conducted by Lilly tested 2 doses of REZPEG compared to placebo, and then followed patients for 36 additional weeks after the last dose of therapy. Treatment with REZPEG showed a dose dependent reduction in Eczema Area and Severity Index Scores in patients also known as the EASI score, with approximately a 70% reduction in scores at week-12 at the highest dose tested. We also saw a trend toward a dose dependent improvement in the investigator global assessment for atopic dermatitis, and its responder rates through week-12 of treatment. Consistent with the REZPEG mechanism of action, total Tregs and CD25bright Tregs increased versus placebo through week-12. The efficacy observed the 12 weeks of treatment with REZPEG is in line with efficacy observed after 16 weeks of treatment with DUPIXENT, the current standard of care for moderate-to-severe disease. But clearly the most fascinating observation from the study was that when we looked at patients 36 weeks after we stopped dosing REZPEG, their skin scores and other measurements of disease remained very low. And this…

Thanks, Brian. Our therapeutic candidate NKTR-255 is 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. As a full agonist of the IL-15 pathway that can signal to both this and transpresentation, the trimeric IL-15 receptor complex; NKTR-255 can be combined with multiple mechanisms ranging from targeted agents to cell therapies including CAR-T, and even checkpoint inhibitors to potentially improve the efficacy of these agents. We are pleased to be presenting the first data for NKTR-255 in combination with DARZALEX, in patients with multiple myeloma at ASH. This combination study of NKTR-255 with DARZALEX is a key biological proof of mechanism study for NKTR-255, because of the unique consequences of the DARZALEX mechanism of action. DARZALEX is the CD38 targeting antibody that depletes CD38 positive cells through ADCC mechanism. DARZALEX is effective for the treatment of multiple myeloma, because stem cells, which are the pathogenic tumor cells in multiple myeloma, express CD38 on their cell surface, and are effectively targeted and depleted by DARZALEX. However, NK cells also express CD38 on their cell surface, and these cells are also directly targeted and depleted by DARZALEX. And since NK cells are the critical immune effector cells that execute the ADCC mechanism, and emerging hypothesis is that restoring NK cell levels during DARZALEX treatment may be beneficial. Consistent with this hypothesis, last summer, we published a paper in Blood Advances with our collaborator, Dr. Nikhil Munshi at Dana-Farber that showed NKTR-255 when used in combination with DARZALEX. Substantially potentiated the efficacy of DARZALEX against multiple myeloma cells in a number of in vitro and in vivo preclinical models. As mentioned by Howard, we’re very encouraged to see…

Thank you, JZ, and good afternoon, everyone. We ended the third quarter with $546 million in cash and investments and no debt. Our 2022 financial guidance remains unchanged, and we expect to end the year with approximately $450 million in cash and investments. We rapidly executed our restructuring and strategic plan beginning in April. And because of this, our financial position remains strong with a cash runway that extends through the middle of 2025. This will take us through several key value generating milestones for our pipeline. Our team has worked diligently to execute an efficient operational wind down of the BEMPEG program consistent with our obligations to patients and their physicians. In accordance with that plan, all patients on the 6 Nektar run BEMPEG studies have now transitioned to standard of care or other post-trial treatment options. Now, I’d like to remind you of our financial guidance. Our full-year GAAP revenue guidance is unchanged and expected to be between $85 million and $95 million, which includes this team to $20 million of product sales, and $70 million to $75 million in non-cash royalties. We still expect to recognize a total of approximately $150 million to $160 million in restructuring and impairment charges related to the BEMPEG program termination. Our R&D expense is still expected to be between $240 million and $250 million, including $40 million to $45 million in non-cash depreciation and stock compensation expense. And our G&A expense is still projected to be between $90 million and $95 million, including $25 million to $30 million in non-cash depreciation and stock compensation expense. Finally, our non-cash interest expense is expected to be between $25 and $30 million related to the prior monetization of our royalty stream. I’d like to reiterate that we still plan to end the year with approximately $450 million in cash and investments. And with that, we will now open the call to questions. Crystal?

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

Hi, this is Chen [ph] on the line for Jay. Thanks for taking the question, and congrats on the progress. Maybe on the REZPEG, just wondering how are you thinking about the unmet need that can be potentially addressed by REZPEG? And if you think the target population could be those who deal with, but well to DUPIXENT, and maybe if I can ask 255 questions in combination with CAR-T? Wondering what’s the expectation you want to see for the additional benefits whether you are planning or you’re hoping to see a higher response rates, say, at month 6 were patients may remain disease free for longer time. Thank you.

So thank you for the question. In atopic dermatitis, it’s important to emphasize that the mechanism of REZPEG is completely different than any of the other therapeutics now being studied. And because of this, it seems very possible that patients who do not respond to standard of care therapies, for example, DUPIXENT or even other IL-13 directed therapies can respond to a mechanism like REZPEG, which is really extremely different, it’s inducing Tregs to suppress the inflammation at the site, without increasing immunosuppression. So REZPEG has this possibility in terms of the unmet need, that you’re asking about, to approach people who are not responding, for example, other standards – other therapies – standard of care therapies, like, for example, DUPIXENT, and the IL-13 directed therapies. It’s also important to emphasize that our initial data, we saw this really fascinating observation, that once we stopped therapy, we continued to see a suppression of disease. This is really quite remarkable. And it’s this durability of response that’s also differentiates us from, for example, DUPIXENT. So it’s possible that we could deliver this therapy and maintain responses with very infrequent therapy much less frequent, for example, than DUPIXENT, and/or even without therapy for long, long periods of time, and I think this is another area that we can differentiate in this space. So thanks again for the question.

And we’ll have JZ, answer the 255 question.

Yeah, thank you. So the question was about the expectation in our study. So, I guess, I’ll start off by reminding you about some of the preclinical studies that we’ve conducted, evaluating NKTR-255 in combination with a range of different CAR-T therapies. And we’ll be seeing both in vitro and in vivo, is it the addition of NKTR-255 causing 2 really strong biological effects, very prominent effects. First is, it causes a very large expansion in the maximum number of the peak of CAR-T cells that proliferate inside of the organism, after the CAR-T cells have been transplanted, remember, these are living drugs, and they proliferate inside of the patient or inside of the test system and, say, it’s a mouse or something. So with 255 was the large expansion in cells. Second thing that we see is a prolongation of the cells survival inside of the animal, when we treat with 255. You get both an increased number, and you get an increased persistence. And in those preclinical studies that leads to substantial efficacy. Efficacy relative to CAR-T alone in the absence of 255 is quite different, and it’s that night and day kind of a difference. So then when we turn our attention to some of our expectations, we hope to see similar kinds of effects. We would like to see increases in CAR-T cell number, when we add 255 to patients receiving one of the approved CAR-T cell regimen from an increase their peak, and we want to increase their persistence and duration. We also want to increase their memory, phenotype, sustain and stabilize that phenotype and maintain an activated state in those cells. And then clinically, our hope is that this will give rise two – these two kinds of measurements, they’d like to see an increase in the complete response rate and the durability of that complete response rate. As you know, one of the challenges with these therapies is that the effect wanes over time, we want to make that effect last as long as possible. And then, ultimately, that should translate to additional time to event endpoints as well. Thanks for the question.

Thank you. One moment for our next question, please. And our next question will come from Chris Shibutani from Goldman Sachs. Your line is open.

Yes, good afternoon. Thank you. Two questions. One, on the sort of run rate for operating expenses, a lot of hard work this year, obviously, difficult work to address the restructuring. Should we think about the level of R&D and SG&A spending that you just posted in this most recent quarter? R&D coming in below, but we had projected, and I believe consensus as well. Is this a reasonable proxy, if we’re thinking about on a go-forward basis for the near- to intermediate-term? And then a second question, perhaps, for Howard. Obviously, during the quarter, there were headlines that related to a potential combination with PureTech, which would have prompted some unique sort of potential combinations for you as an entity. I think that that discussion was relatively briefly in discussions, but then terminated, I think today was technically originally the end of that. Can you talk to sort of the genesis of that, and maybe how you’re thinking strategically, it’s clear that you have the Lilly partnership, the oncology assets, et cetera. But that certainly was a sort of ink in the ointment that not many would have anticipated. And if you could share any comments about how that came about, and we move forward from here in terms of how you and the board are thinking? That would be terrific. Thank you.

Hi, this is Jill. So, I’ll take the financial question first. So when we – just to reiterate, we’re not changing our guidance for 2022. But as we look forward into 2023, and our runway through 2025, when we announced our restructuring plan last spring, we talked about our annual burn going into the direction of $150 million to $175 million a year on average over that time period. So, I think, that’s the way you can think about the cash burn guidance. GAAP could be a little bit different from that, as you know, it depends a little bit on the timing of the incurred expenses. But if you want to focus on the GAAP, the cash, I would say $150 million to $175 million is kind of the right way to think about it for now. And of course, we’ll get updated our guidance in our February call for 2023.

Hi, this Howard. Good question. Let me give you some background, I think, look, first of all, as I said, in April, when we reintroduced our strategic plan, and we revised our strategic plan, I said that we would be listening to anybody, any company that has levels of interest in a business combination, and we certainly continue to do that. And I think like any company from time to time, we’re going to evaluate proposals from other companies that that could benefit our business and make the proverbial one plus one equals three. And the PureTech approached us. We had some discussions with them. Normally, those discussions – we have discussions – actually, we have – we’re always having discussions with companies. It’s something that that goes on a regular basis. I can tell you, though, that the only reason it became public is because under certain they’re a UK company, and under certain UK rules, it had to be disclosed, even though we were fairly early in discussion. So I wouldn’t read too much into that. I would say that we’re always evaluating opportunities. And if there’s an opportunity that makes sense for our shareholders, we are highly interested in pursuing it. And with that – other than that, I really can’t comment too much more on what we’re doing in that regard. I hope that helps.

Thank you. One moment for our next question, please. Our next question will come from Mara Goldstein from Mizuho Securities. Your line is open.

Hi, this is support [ph] for Mara. Thank you for taking our question. Another question on REZPEG, I know that the Phase 2 strategies to being workout with Lilly. But I’m just curious if you have some sort of baseline activity that you hope to see for the Phase 2 study started in atopic dermatitis? And, secondarily, when do you anticipate getting to that point of making a decision whether this would proceed to Phase 3 of a patient directed study? Thank you.

So as we mentioned, we’re in the process of designing the Phase 2b study, which follows a proof-of-concept study that was presented. In terms of the goal of the next study, the Phase 2b is really to fully demonstrate the potential efficacy that we will see with REZPEG. It’ll be a study, which has pretty standard elements to it. There’ll be an induction phase probably similar to other agents, they’ll be a maintenance phase, and we will study different dosing regimens during that maintenance phase. And, I think, the key points that we will be looking for is, what type of efficacy, what level of efficacy do we see at the end of induction? And that will be in different patient subgroups. And then how does that compare it to other therapies in the space? And then in terms of especially in maintenance, what types of infrequent dosing, can we – get to can we achieve that maintains the benefit that we see after induction. And, of course, we’re hoping for best-in-class type efficacy. So that’s our expectation. Thank you.

Thank you.

Thank you. One moment for our next question, please. We’ll take our next question from Roger Song from Jefferies. Your line is open.

Great. Thank you for taking the question, and congrats for the progress. I did have a quick one for 255, understanding the mechanisms that is proliferating the T cell, it makes sense to combine with the CAR-T. But just curious given the bi-specific, particularly, they also know kind of a passive T cell therapy. Do you have any sense, why or why not 255 can combine with those bi-specific to drive better efficacy? Thank you.

Yeah. Hey, Roger, thanks for the question. This is JZ. So certainly there is no scientific or other reason why NKTR-255 could not be combined with bi-specific, whether it’s a CD3 targeting bi-specifics for T cells, and even an NK cell targeting bi-specifics such as CD16 arm, in fact, both of those are very relevant and reasonable opportunities as well for NKTR-255. In terms of the basic mechanisms, that could lead to potential synergy, right, of bi-specific with an agent like NKTR-255. It’s not that different from CAR-T. The CAR-T cells express autoimmune [ph] receptors, so they’re a direct target of NKTR-255 in this case, whereas in the bi-specific, it’d be targeting T cells, and giving the T cells that are CD3 positive health and a CD3 engager, more easy targeting and enhancing NK cells in a CD56 engager. Our intention to focus in the cell therapy space is obviously there are more approved agents here in this space. There’s clearly a high unmet need as well, even in these approved on labeled indications with these autologous products. And we think there’s a great place to show a lot of opportunity. Another key reason why we’re really focused on the cell therapy space as well, it’s also because there’s quite a lot of data that shows that IL-15 levels, both that are reached post-conditioning regiment, as well as that are maintained after CAR-T treatment has begun. They seem to be highly linked with patient’s ultimate ability to mount the best and most durable strongest response. So there’s also a really strong scientific theory for IL-15 and IL-15 pathway in the healthcare team pathway itself in the health cell therapy setting, and that’s why we chose to focus there. But certainly there’s a reason why we also could include bi-specifics as a component for a combination strategy in the future.

Thank you. One moment for our next question, please. Our next question will come from Jessica Fye from JPMorgan. Your line is open.

Hey, guys. Good evening. Thanks for taking my questions. I’m curious do you expect you or Lilly to disclose yet named indication for 358 before or after the lupus Phase 2 data?

No, thanks for the question. I think, we just don’t know right now, we will be announcing that indication and/or hope to be announcing that within the next few months, in the upcoming months, but I don’t know how that will relate to the timing of the readout of the lupus study, which will also occur in early 2023.

Thank you. One moment for our next question. Our next question will come from Greg Harrison from Bank of America. Your line is open.

Hey, guys, good evening, and thanks for taking the question. Assuming that REZPEG continues to look differentiated in atopic derm. How fast could a pivotal trial be executed? And what would it look like in your ideal scenario? Just trying to get a sense of how our larger data catalysts like this would line up with your cash burn guide?

So, I think you can look at atypical studies, it does depend on the size of the Phase 2b that’s right now as we talked about, we’re in the process of finalizing the design. And that will be completed around by the end of the year. And we’re planning to, as we said, to initiate the study in the first part of 2023. So atypical study, the length of that study may be 18 to 24 months, so that that’s when we might expect the data from this study.

Thank you. [Operator Instructions] Our next question will come from Andy Hsieh from William Blair. Your line is open.

Great. Thanks for taking my questions. I got two. So, one, maybe for Brian. As you kind of think about the bladder cancer maintenance landscape paths that could potentially be approved around that setting around mid-year, next year. So I’m just curious if there’s any kind of strategy to potentially get incorporated into that setting, as opposed to just as maintenance setting. So that’s question number one. Question number two, maybe for JZ. You mentioned about the pivotal study with CAR-T, which is very, very interesting. I’m curious if you can remind us about explorations, if that you’ve done to get a sense of what is the best sequencing? You kind of mentioned from previous questions about potentially after the conditioning regimen, or shortly after the infusion. But I’m just curious about whether that’s been worked out, especially in light of Project Optimus where, when the FDA is really honing in on selecting the right dose. Thanks for taking my questions.

Yeah. Thanks, Andy. So I think I can actually answer both of them. So the first question you asked was about the avelumab setting, right? So avelumab’s label right now is in patients that take a platinum regimen, so chemo regimen right in the first line. And then patients that don’t have a complete response. They can they’re eligible for avelumab maintenance, and it’s quite effective, as you know, as maintaining patients and it has a nice survival that they presented and that’s been the key for their approval in that setting. Now, it’s true that there is some potential pads [ph] have plus pembro around the corner. But still a Phase 3 study that needs to complete and conclude. It is possible. We’re always looking to see if that changes the first line landscape. So, for example, does it start to erode or displace, that first line chemo, which is where avelumab is used. So that’s a component that we’re looking at paying attention to. And you can imagine that our collaborator, Merck KGaA is paying even closer attention to that. So we’re very tuned in on to that as well. And then, in terms of long-term depending on the results that we see in this maintenance setting, and what we learned in the bladder. Yeah, I think there’s an opportunity for additional expansion, additional lines to be evaluated as well, even potentially, on that Pembro pads have regimen if that regimen is approved. So that kind of like a crystal ball kind of a question. And the next question that you asked was about the CAR-T setting. And, I think, you asked a really great question. So you got it – I mentioned of Project Optimism, the selection of dose and the selection of regimen. And this was…

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

Thank you, everyone, for joining us today. And we’ve said – I think, we’ve outlined our continued progress in successfully executing on our strategy. And our pipeline and partner programs continue to advance and have the potential to address the needs of significant patient populations and provide the opportunity to create significant value for our shareholders. So I’d like to thank all of our employees for their efforts and hard work. And I want to thank our shareholders for continued support [Technical Difficulty] an update on our progress. So stay tuned. Thank you very much.

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