Nektar Therapeutics (NKTR) Earnings Call Transcript & Summary

[Audio Gap] Chris Shibutani. I'm a member of the Cowen biotech team. We are thrilled to once again have Nektar Therapeutics join us at our 40th Annual Cowen Healthcare Conference. Nektar has always been about some really potent core capabilities, technology and capabilities that have really been applied in some of the toughest challenges. Not everything always works. But I think, particularly from the standpoint of being able to establish a commercial business, these guys PEGylate stuff like nobody's business. I think they have tried to take on some of the most important challenges, and there have been sometimes bumps in the road, but now there's a deep commitment and a deepening layer of science to everything that they do. And with that, they're targeting areas in oncology, autoimmune disease. And these are never 4- to 7-quarter journeys. They're 4- to 7-year journeys. And the good news is we're quite a few years into those journeys. So I think this is a particularly opportune time and point for the stock to pay attention and watch as more data and more of these opportunities, particularly in the autoimmune side as well begin to play out. Very pleased that the management team that's joining us here includes the CFO, Gil Labrucherie; the IR, rocking Jen Ruddock is here with us. And here to tell the story and lead it, JZ, Jonathan Zalevsky, Chief of R&D. Thank you, JZ.

Thank you, Chris. That was a wonderful introduction. It's my pleasure to be here representing Nektar, all of our employees and to present the corporate presentation on behalf of our company. In today's presentation, I'll make some certain forward-looking statements. The latest information regarding Nektar is filed in our 10-Q form that we filed February 27, just last month. Well, as Chris really introduced in a very lovely way, our core competent technology that we've been doing for many decades now is in the application of polymer chemistry to change the biological properties and pharmacological and even pharmaceutical properties of many agents that can become medicines. We've applied that to a number of drugs that have moved into the landscape. This would -- all the way back as early as PEGylated interferon. And most recently into the hematology product, ADYNOVATE, where we also apply polymer chemistry onto the factor VIII. But we've been lately applying this technology much more concertedly into our own wholly owned pipeline. We're focusing into 2 primary areas in therapeutic research. The majority of our pipeline is focused into immuno-oncology. And there, our flagship program is bempegaldesleukin, and I'll spend quite a few minutes speaking about that today and giving you an update on all of the registrational trials ongoing as well as all of the partnered activities that we're conducting with bempeg. Followed behind bempeg is an intratumoral TLR agonist, NKTR-262, that's currently ongoing a dose escalation study in an early development setting. And just late last year, we started the first-in-human clinical trial for our most recent entrant, NKTR-255, which is an interleukin-15 based polymer conjugate. And there, we're targeting hematological malignancies and also different parts of the immune cascade. And all that is rounded with a very large collaboration we also have with Eli Lilly, where we're evaluating a novel Treg-inducing drug NKTR-358 for the treatment of autoimmune and chronic inflammatory diseases. Well, to begin, I thought it would make the most sense to focus on our immuno-oncology pipeline. And what's shown here is the way that we approach research and our pipeline in the immuno-oncology space. Now what we've done here is we presented to you several of the steps that either make up the immune surveillance cascade or the tumor immunity cycle. And traditionally, there are a number of really important concerted immunological steps in this cascade. There's an initial recognition of an antigen on a tumor, which is the tumor-associated or a tumor-specific antigen by the arms of the T cell or the adaptive immune system. And we target NKTR-262 as a key component of that initiating response. Now with bempegaldesleukin, we really control the expansion of antigen-specific T cells. In fact, we can grow these cells in the patient's body and replenish the patient's immune system to continuously create tumor antigen-specific T cells that can infiltrate the tumor micro environment and perform tumor killing. And it's all rounded out by NKTR-255. With NKTR-255, we can access the natural killer arm of the immune system, which is a novel and a very important cell population that bridges innate and adaptive immune responses and also gives us an opportunity to target the memory or the stem component of the immune system as well. Well, let's begin and dive down into bempegaldesleukin. Of course, this is the molecule that we used to call NKTR-214. We've been working on this molecule for many years now. With bempegaldesleukin, we actually took the most advanced form of our PEGylation technology. In that, we created PEG linkages to the protein using releasable chemical linkers. This allows us to take a prodrug design into the creation of bempegaldesleukin. And that's essentially quite important because the number of T cells floating around in the blood is very, very high. And the application of any T cell agonists under those conditions can cause unwanted or overactivation of the immune system. So a prodrug design is very important because it enables a very effective administration of bempeg. And over time, the PEG chains, they gradually release, and this release is irreversible. And as the PEG chains release, then you form active species that contain fewer PEG chains, conjugated to IL-2. And those are the molecules that signal. And when they signal, they have a preferential approach in that CD122 or the dimeric form of the receptor. It's the primary receptor ligand complex that the active species of bempeg engage with. This gives us the ability to expand cytotoxic CD8 T cells in the tumor and not expand regulatory T cells in the tumor. And importantly, with this design, we're able to achieve all of this in a very straightforward outpatient regimen for the patient. In fact, we deliver bempeg once every 3 weeks in an outpatient setting. Contrast that to high dose IL-2, which is given 3 times a day in an intensive care unit setting. So a complete different way to target and address the IL-2 pathway. Well, we've had a chance to present many features of clinical data from bempegaldesleukin over the years, and what's shown here is the most recent data presentation. This is data from SITC 2019. And in this case, what you're looking at are results in first-line metastatic melanoma. These are patients with stage IV disease, and they were treated with the combination of bempegaldesleukin plus nivolumab. And there are a lot of very important features that you can see from this data set and in this waterfall plot, in particular. The first is this is data with an 18.6-month median follow-up. The last time before this occasion that we presented that data, it was around a 12-month follow-up. And what you can see is the patients that have the downward arrows. Those are patients that have further deepening or further tumor shrinkage between the last and the present update. So what's really important is you can see the patients, they remain on treatment, their tumors continue to shrink. And the consequence of this was that we saw a very substantial depth of response. We saw a 34% complete response in this 18.6-month follow-up cohort. And importantly, 42% of patients had 100% reduction of their target lesions. And in particular, patients that had very negative risk factors, such as liver metastases or elevated LDH, also saw very beneficial response rates. In fact, it was notable that of the 5 patients with liver mets that responded, all of them had complete responses. One of the other very important features of this data is that earlier this year -- or last year at ASCO, the FDA presented the results of a very important meta-analysis. And in melanoma, the meta-analysis showed that patients that reached a very deep response CR or greater than 75% tumor shrinkage, they had the greatest benefit on both progression-free survival and overall survival. And in fact, this meta-analysis presented at ASCO indicated that an early and a deep response in melanoma, particularly with immunotherapy, was very, very well linked and translatable to a very long durability of survival. We had the opportunity to present this data to the FDA, and the FDA awarded us with breakthrough therapy designation in first-line melanoma. And this is quite notable because this is a solid tumor indication. It's a first-line indication. It's not a small orphan disease, and bempegaldesleukin is a novel investigational therapy. So those are really 3 cases that make this a very, very rare occurrence. But for us, they really propel the program in melanoma, in particular. And we have an ongoing Phase III registrational study, where we're evaluating nivo versus bempeg nivo in this setting. We also had a chance like very consistently with what I just explained to also update the data last year at SITC. And as you can see here, with 18.6 months of follow-up, the median progression-free survival has not yet been reached for this cohort. And it's very important because some important benchmarks you can see here in nivolumab has about a 6.9-month PFS in this population. So we're well beyond that in this cohort. Earlier this year, we announced the amendment and modification of our agreement with Bristol-Myers Squibb, and this was a very important occurrence because it really clarified all of the registrational activities and exclusivity components of our collaboration with Bristol-Myers Squibb. So we're now working deeply across the 4 tumor types that you can see here. In melanoma, as I mentioned, we have an ongoing trial, registrational trial in the metastatic first-line setting. And also later this year, we'll begin an adjuvant melanoma trial as well. We plan to initiate that study in the middle of the year. In renal cell carcinoma, we have a currently ongoing registrational study, evaluating bempeg plus nivo versus TKI, a physician's choice. That study is ongoing and recruiting nicely. And later this year, BMS will operationalize the study, where we'll be evaluating the triplet of bempeg plus nivo along with axitinib as TKI. In urothelial carcinoma or bladder cancer, we have 2 studies. Both of them are ongoing now. One study is in the cis-ineligible metastatic urothelial carcinoma patients. This is in patients that have CPS low or PD-L1 negative disease. That trial is ongoing. And just in January, BMS began a trial in muscle-invasive bladder cancer. And this is a study in the peri-adjuvant setting. Finally, when we consider lung cancer, there are a 2-step approach that we're taking. So the first of these is indicated here. Bristol will operationalize and fully fund a non-small cell lung cancer study evaluating bempeg plus nivo. Nektar, in parallel, is evaluating bempegaldesleukin with pembrolizumab or KEYTRUDA, since that's the standard of care in that tumor type. And I'll cover that study. We call that trial PROPEL, and I'll cover that in a brief moment. Additionally, there are very important modifications to the economics of our collaboration. There are new near-term milestones as a result of our modification to the -- our agreement and collaboration. There is an additional milestone. I was already paid for the start of the Phase III muscle-invasive bladder cancer study. And also, when the adjuvant melanoma begins later this year, there'll be another milestone as well as a milestone on a start of a Phase III that combines bempeg plus nivolumab in first line non-small cell lung cancer. All of the remaining economics are the same as they were in the deal from its inception a few years ago. Now I mentioned that the non-small cell lung cancer is a very important tumor type, of course, for this combination. It's also very important as there's a significant unmet need in patients that have that disease. Now we understand that the standard of care in this tumor type is KEYTRUDA. Greater than 1% is approved as a monotherapy, and it's combined with chemo in less than 1. But there could be some gray zones on the usage there. So for us, it was very important that we evaluate the contribution of the bempeg mechanism along with the standard of care in this setting. So we're currently running a study called PROPEL, which is indicated here. And the PROPEL has 2 arms ongoing in parallel. In one arm, we're evaluating some additional dose escalation with KEYTRUDA, evaluating different dose levels of bempeg to combine with KEYTRUDA, and that's in the dose optimization and the part shown in blue at the top. And in parallel, we're enrolling an expansion cohort. The expansion cohort combines bempeg plus pembrolizumab, and it segments the patients into the 3 classes of marker expression: PD-L1 low; PD-L1 intermediate, the 1% to 49% patients; as well as the PD-L1 high. We're very excited about this study, and we expect to be able to present data from approximately 10 to 20 patients from this trial with about 6 months of follow-up by the end of this year. Now in addition to all of the work we're doing with BMS, we also have additional collaborations that span the bempeg program, and those are indicated on this slide. With Pfizer, we are doing a clinical study that evaluates bempeg with avelumab in second line head and neck cancer and also evaluates bempeg plus avelumab in 2 triplet combinations, 1 triplet that includes talazoparib and the other triplet that includes enzalutamide, and both of those are being tested in castration-resistant prostate cancer. So that's a JAVELIN, one of the JAVELIN clinical trials, and it's underway and enrolling patients right now. With Vaccibody, we'll be initiating a study later this year. With Vaccibody, we'll be evaluating bempeg along with Vaccibody's DNA vaccine-based personalized neoantigen vaccination platform. So this is one where a personalized vaccine is made to each patient's individual biopsy. And so this is a study that will get underway later this year. It's currently recruiting patients. And we have a planned Phase I also with another collaborator, BioXcel Therapeutics. They've been developing DPP 8 or is it like a -- like a [ pan ] dipeptidyl peptidase inhibitor. These are agents that can attack the underlying stroma in the tumor microenvironment, particularly fibroblastic remodeling, and we'll be doing a combination clinical trial with BioXcel, along with avelumab and bempegaldesleukin in the setting of pancreatic cancer. Now switching gears to the other parts of our portfolio. I'd like to spend a few moments and talk to you about NKTR-262, which is our TLR7/8 agonists. With NKTR-262, we used our polymer chemistry approach to PEGylate a small molecule. And the purpose of that PEGylation strategy is its emphasis in intratumoral therapy, we want to maximize the retention of the injected small molecule locally in the injected tumor, minimize any distribution out of the tumor because, in fact, you want to mimic -- limit systemic exposure of a TLR agonist. We really want to localize the TLR activity into the injected tumor. And the underlying scientific hypothesis behind that is shown here in this figure. When you administer NKTR-262 into the tumor, which is shown on the left of this slide, you basically create an innate immune reaction in that tumor. You're kind of tricking the immune system to thinking the tumor is an infection. And when it thinks that it's an infection, there's a preprogrammed assortment of cells and cytokines that get activated. The cells swarm in, dendritic cells go from an immature to a mature state, they pick up antigen. A lot of cytokines are released that we call innate cytokines locally, and then these dendritic cells, they move, they marginate to the nearest draining lymph node near that tumor, and there they prime T cells. Well, the benefit of then having bempeg or NKTR-214 on board is that that priming reaction is exceptionally efficient, because when you have cytokine help during that priming reaction, when dendritic cells are talking to T cells and the flood of cytokines, particularly IL-2, causes a massive expansion and proliferation of the cells that are antigen recognizing. And that's exactly what we are aiming to achieve with this doublet. So preclinically, we showed that we can activate all of this, this kind of immunity using this approach. And importantly, we can take -- we took animals preclinically that had tumors implanted on multiple locations. And we showed that you only had to inject one tumor and only one time. And that was enough to create that immune reaction that then the T cells themselves could just marginate throughout the body, find any tumor no matter how far away it was from the original injected lesion, and through the abscopal immune response, they could target that tumor for destruction. So we're very excited that with this molecule, we were able to develop it using a novel-novel combination approach, which is one of the things that the FDA allows you to do when you develop 2 novel agents. So we started the first-in-human trial called REVEAL. That trial was begun in the combination setting, but we had to run that study using a kind of a staggered dose approach because we needed some single-agent safety and pharmacokinetics and pharmacodynamic data for NKTR-262. Now we're pleased that as with this trial is ongoing, we will be starting an expansion cohort as the recommended Phase II dose has been identified now, and then we'll be expanding within a tumor type, evaluating both the doublet of NKTR-262 along with bempeg and a triplet, adding a checkpoint inhibitor as well. We're also very pleased that later this year, we'll present results of the dose escalation portion of the REVEAL study. Now continuing with the development of our pipeline, I'd like to next cover the program NKTR-255. Here, we took a polymer chemistry approach to modifying interleukin-15. Well, interleukin-15 is a very interesting cytokine. It's both in the family of IL-2 and IL-7. Those 3 cytokines make up a similar family. But IL-15 has some very important biological properties that are distinct and nonoverlapping with interleukin-2 or NKTR-214. Now one of the most important features is shown here on the left side of this slide. The way the cytokine signals is that it can engage multiple receptor ligand families, but it can also signal in a cell-cell contact. This is called transpresentation. We designed NKTR-255 in order to harness all of the different modes of IL-15 biology. So in fact, this molecule, NKTR-255, recapitulates everything the native cytokine can do, and I'll cover that more in a couple of slides. Then there are 2 very important biological themes that we're focusing on with NKTR-255. Shown on the top of this slide is that, with this pathway, the cytokine engaged, you can get a very strong signal to the natural killer cell compartment. That includes both the stem cells that make natural killers cells in the body as well as the processes that control the differentiation of natural killer cells from precursors, all the way into terminally differentiated effector cells. Now there are some very important drugs that utilize the NK cell system in the body. And in fact, antibodies that have an IgG1 or any kind of FC enhancement, they work through an optimization mechanism. And those antibodies, when they function, they require natural killer cells to perform the antibody-dependent cellular cytotoxicity or the ADCC reaction. Now this is an important part of many antibodies like rituximab, daratumumab and so on. Basically, any antibody that has an IgG1 FC domain attached to it has this property. But one of the challenges with the ADCC reaction is that NK cells themselves are consumed. Some hype cases, they die in the course of cell killing themselves. And in other cases, they just run out of degranulation factors like granzyme B and perforin and other enzymes that they use to coordinate that cell killing. So with NKTR-255, we can continually restore the NK cell compartment, which can create a lot of beneficial synergy with antibodies, multiple antibodies that work through an ADCC enhancement mechanism. Now in parallel to that, we're also exploring an additional theme, and that's the theme of memory stem cell control. And we know that in the setting of CAR-T, it's really the persistence and the stemness of the cells that are very, very important for maintaining a response and also driving the possibility of the depth of response in a complete response setting. And there, we'll also be evaluating NKTR 255. And I'd like to now take a -- some moment to show you some of the data that we've collected in both of these themes. So shown here are the results of a preclinical study, where animals are introduced intravenously with CD38 positive lymphoma. This is a kind of a surrogate model of multiple myeloma. Now when we give these cells intravenously, over the period of a few weeks, those cells move through the blood and they colonize the bone marrow. And in the bone marrow, they become agnostic kind of B-cell tumor, again, sharing many similar features with multiple myeloma, where the plasma cells take up a lot of that bone marrow compartment and produce pathologic antibodies and have other malignant features. Well, the important thing is, in this model, you can see that daratumumab is a single agent, shown on the right in blue, really has limited control. In fact, we chose this model on purpose because daratumumab itself is pretty weak in this model. Now if you look on the far left-hand side, you can see some of the impact. So here, we're counting the NK cells in the bone marrow. And you can see in blue, daratumumab is really not able to induce any NK cells in the bone marrow. And in the middle, you can see these are the presence of the malignant cells taken from the bone marrow biopsies of these animals, bone marrow collection. And you can again see that there's only a limited reduction in the number of tumor cells. However, in the green setting, not only do you get an extension of survival, shown on the right. But you'll also see a very substantial killing of tumor cells in the middle. But importantly, this biological effect of NKTR-255, you can see the increase in natural killer cells in the bone marrow. In fact, we got both proliferation and margination under these settings. This is a very, very important feature because it shows that with 255 on board, you're able to mobilize the NK cell compartment and that NK cell expansion is in the bone marrow tissue, which is the most important tissue for this kind of disease. In the setting of CAR-T, we've had the opportunity to work with collaborators at the Fred Hutch. And shown here are experiments that we've conducted with Dr. Cameron Turtle, who's one of the original investigators that worked on CAR-Ts from the very beginning. Here, we're using B-cell CAR-T that his laboratory generates from primary human donors. Now first important thing you can see in purple is that when cells of this kind of CAR-T cells are implanted into this kind of a tumor model, you see a very low amount of persistence. So the cells themselves, they're only around for a couple of weeks, then they start to quickly decline. However, if we co-administer NKTR-255, you can see the effect in orange. The cell counts remain high over the period of time of this experiment. But importantly, on the right, as you can see the efficacy results. When the CAR-Ts are given in the absence of NKTR-255 in purple, you get a short amount of control, but every animal relapses. Again, because the amount of CARs are just unable to hold back this tumor. But when you add NKTR-255 in orange, you can see the effect, not only do you get the drop in the tumor, but you maintain that level of control. And you maintain that level of control for several months after you stop treatment. So that was a very important feature in this model. Now there are some additional points of differentiation that we've built into NKTR 255, and those are shown in these next 2 slides. So I talked about how important it was for NK cells to undergo a differentiation to an effector phenotype, and so one of the most important effector enzymes is shown here, granzyme B. And in fact, what we could do is we could take primary human cells, PBMCs that have NK cells as a component of that lymphocyte compartment, treat them with either IL-15 or a NKTR-255 or the competing kinds of pipelines. All of the other companies that are working in IL-15 in this class are working on a form of the molecule that has the IL-15 cytokine bound to the IL-15 receptor alpha extracellular receptor. And that forms a complex, and that's the drug product as it signals around as a complex of those 2 entities. Now as a consequence, it can only engage part of the receptor ligand family. It can't express all of it. And you can see the differences of these approaches shown here. So if we look at IL-15, you see a dose-dependent elevation of granzyme B. But when you look at the complex of IL-15 with IL-15 receptor, you can see that you reach a plateau, stays quite low, even when you go to very high dose levels. In contrast with NKTR-255, it looks a lot more like IL-15. And again, that's exactly how we designed it, is to maintain all of those receptor contact that all of the different signaling modes that IL-15 itself can engage, and so you can see an elevation in granzyme B. Another important feature that you can see is this is now bridging to other kinds of cellular features of IL-15 biology. Here, we're looking at intra-cellular interleukin-18 in CD14 positive monocytes. So this is not a lymphocyte population. This is a granular population. And again, IL-15 and NKTR-255 are both able to induce IL-18 expression. However, the receptor complex is unable to do so. Well, we're very pleased that we began our first clinical trial with NKTR-255 late last year. This study is currently enrolling in the dose escalation phase, and it's moving forward in both multiple myeloma and non-Hodgkin's lymphoma. Once we identified the recommended Phase II dose, we will be evaluating 3 different cohorts in the expansion setting. We'll continue to evaluate monotherapy NKTR-255, but we'll also test 2 combinations with ADCC-enhancing antibodies. In the setting of multiple myeloma, we'll combine NKTR-255 with daratumumab or the drug DARZALEX, which is approved in the front-line setting, we'll be testing it in the relapsed/refractory or the salvage setting. And likewise, in parallel, we'll be combining NKTR-255 with rituximab, also in patients with refractory or relapsing NHL. So we're very excited to advance NKTR-255 as our latest entrant into the I-O space in our pipeline. There are, in addition, 2 important collaborations that we're conducting with NKTR-255. The first of these is with Janssen Oncology or J&J. And there, we're evaluating NKTR-255 with a host of assets in preclinical research studies. But the assets are ones that span Janssen's immuno-oncology portfolio. Janssen is responsible for executing all the work and also covering the cost of this collaboration. We're very excited to be working with them. And potentially, there may be some data that we can present from this collaboration later this year. Now in addition to that, and actually a few years ago now, we also began a collaboration with Gilead, where we're evaluating NKTR-255 in the setting of virology. Again, a number of the immune cells that NKTR-255 can stimulate have a lot of utility and application for use in the virology setting for infectious disease. Am I on track? We didn't turn our...

We're running [ quickly ]…

Yes. Now it's running. Okay, cool. Okay. Well, the last topic that I wanted to cover very briefly is NKTR-358, which is a novel agent that we developed for the treatment -- potential treatment of autoimmune disease in chronic inflammatory diseases. Now the way you could think about NKTR-358 is it's essentially the kind of the opposite of bempegaldesleukin. With bempeg, our goal was to selectively generate cytotoxic CD8 T cells that are antigen recognizing for the treatment of cancer. With NKTR-358, our goal is to selectively make regulatory T cells that are also antigen-specific, but in this case, they're going to control unwanted autoimmune or autoreactive lymphocytes. Now last year, we had the chance to present our first-in-human data from the single ascending dose trial in healthy volunteers of NKTR-358. This data was presented in EULAR last June. And shown here are some highlights of that data. Shown in the bar chart is the maximum induction of regulatory T cells divided by the conventional T cells. So this is effectively looking at the specificity of Treg induction over non-Treg cells. You can see that there is a quite large expansion. And in fact, from even a single dose of NKTR-358, we were able to elevate regulatory T cells for almost 3 weeks in a dose-dependent manner. And here, we reached a greater than fifteen-fold induction in Treg levels, which, to our knowledge, is the largest that's been reported to date for any of these kind of molecules. We're very, very excited to move this novel mechanism, really a first-in-class mechanism into the clinic. And with Eli Lilly, we're really taking a very broad approach into this molecule. Lilly is conducting 2 dermatological studies right now that are ongoing, one in atopic dermatitis and one in psoriasis. We also recently completed a multiple ascending dose study in lupus patients, and we look forward to present that data later this year at a medical meeting. And importantly, there will be 2 additional Phase II studies that begin this year. The first of this will be a study in lupus patients that will start around midyear, that would be a Phase IIb dose range finding study. And then there'll be a study later in the year, a different Phase II in a different autoimmune indication. Overall, in our collaboration with Eli Lilly, we'll be conducting up to 4 Phase II studies across at least 4 different autoimmune disease indications, with the first 2 of those beginning this year. Well, with that, I want to thank you very much for your time. I think I'm -- now the clock is running up. Again, I want to thank you very much for your time and enjoy the rest of the conference.

Thank you.

Thank you.