Nektar Therapeutics (NKTR) Earnings Call Transcript & Summary

Welcome to the 2020 Annual Meeting for Nektar Therapeutics. Our host for today's call is Mark Wilson, Senior Vice President and General Counsel. [Operator Instructions] I will now turn the call over to your host, Mr. Wilson, you may begin, sir.

Thank you. I would like to welcome everyone to the Nektar Therapeutics' 2020 Annual Meeting of Stockholders. It is my pleasure to host the 2020 Annual Meeting, and I will serve as Chairman and Secretary of the meeting. We are excited to be hosting our first virtual meeting, which allows our stockholders to safely participate in our annual meeting. As in past years, we will conduct the business portion of our meeting first and answer questions at the end of the meeting. Before we begin, I would like to introduce the members of our Board of Directors who are with us today: Rob Chess, the Chairman of the Board; Jeff Ajer, Myriam Curet; Karin Eastham; R. Scott Greer; Lutz Lingnau; Howard Robin, who is also our President and CEO; and Roy Whitfield. Also in attendance today are certain members of Nektar's executive team: Kevin Brodbeck, Senior Vice President of Manufacturing; Gil Labrucherie, Senior Vice President, Chief Operating Officer and Chief Financial Officer; Wei Lin, Senior Vice President, Head of Development; John Northcott, Senior Vice President and Chief Commercial Officer; Jennifer Ruddock, Senior Vice President, Strategy and Corporate Affairs; Jill Thomsen, Senior Vice President, Finance and Chief Accounting Officer; and Jonathan Zalevsky, Chief Research and Development Officer. Representing Ernst & Young, our independent auditors, are Michael Formolo and Abdul Kazi. And representing Goodwin Procter, our Corporate Counsel, is Sam Zucker. We will now turn to the formal business portion of the agenda. When that is complete, I will turn the meeting over to Howard to provide an overview of business highlights from the past year, and then we will open the floor for stockholder questions. The 2020 Annual Meeting of the Stockholders of Nektar Therapeutics will now officially come to order. I have at this meeting a complete list of the stockholders of record of the company's common stock on April 20, 2020, the record date for this meeting. I also have a notarized affidavit of distribution signed by Joanne Vogel, Manager, Broadridge Financial Solutions, Inc. certifying that commencing on April 29, 2020, notice of this meeting was duly delivered to the stockholders. This affidavit will be filed with the minutes of this meeting. Kathy Blackwell, representing Broadridge Financial Solutions will act as our inspector of elections today. Ms. Blackwell has signed an oath of inspector of elections, which will be filed with the records of this meeting. I have been informed by the inspector of elections that proxies have been received for 165,787 -- 165,787,016 of the shares of common stock of the company outstanding on the record date, which represents approximately 93% of the total number of outstanding shares. This constitutes a quorum for the meeting today. There are 5 proposals to be considered by the stockholders at this meeting as set forth in the notice of annual meeting and proxy statement. The polls are now open for voting. At this time, any stockholders who have not already submitted a proxy and wish to vote their shares may do so now by clicking on the Vote Here button on your screen. The polls will be closed after I review the proposals to be voted on. Each share of common stock is entitled to 1 vote. Voting is by proxy and online during the meeting. If you have already voted by proxy, then you do not need to vote again during this meeting, unless you would like to change your vote. The first item of business is to elect 3 directors to serve on the company's Board of Directors until the 2023 Annual Meeting. The nominees for directors are: Karin Eastham, Myriam Curet, and Howard Robin. A discussion of this proposal can be found on Page 8 of the proxy statement. The second item of business is to approve an amendment of our Amended and Restated 2017 Performance Incentive Plan to increase the aggregate number of shares of common stock authorized for issuance under the plan by 10 million shares. A discussion of this proposal can be found on Page 10 of the proxy statement. The third item of business is to approve an amendment and restatement of our Amended and Restated Employee Stock Purchase Plan to increase the aggregate number of shares of common stock authorized for issuance under the plan by 1 million shares. A discussion of this proposal can be found on Page 19 of the proxy statement. The fourth item of business is ratification of the Audit Committee's selection of Ernst & Young LLP as the independent auditors of the company for the fiscal year ending December 31, 2020. A discussion of this proposal can be found on Page 24 of the proxy statement. The fifth item of business is the approval of a nonbinding advisory resolution regarding our executive compensation commonly referred to as a say-on-pay vote. A discussion of this proposal can be found on Page 25 of the proxy statement. The polls are now closed for voting. The preliminary report of the inspector of elections as to the results of the voting on the 2020 Annual Meeting proposal is as follows: the proposal to elect Karin Eastham is approved by at least 96.8% of shares voted; the proposal to elect Myriam Curet is approved by at least 99.7% of the shares voted; and the proposal to elect Howard Robin is approved by at least 98.4% and of the shares voted. The proposals to amend our Amended and Restated 2017 Performance Incentive Plan and to amend and restate our Amended and Restated Employment Stock Purchase Plan are each approved by a majority of the shares voted. The selection of Ernst & Young LLP as independent auditors for the fiscal year ending December 31, 2020, is ratified by a majority of the shares voted. And the nonbinding advisory resolution regarding our executive compensation is approved by a majority of the shares voted. The final results of the meeting will be made a part of the minutes of this meeting and will be published in a current report on Form 8-K no later than 4 business days from today. The 2020 Annual Meeting of Stockholders of Nektar Therapeutics is now adjourned. Before we transition to our CEO, Mr. Howard Robin, for some remarks on the company's business, followed by stockholder questions, I would like to mention that during Howard's presentation, he will make forward-looking statements regarding our business. These forward-looking statements are subject to important risks and uncertainties, which can be found in our filings with the SEC, including our most recent quarterly report on Form 10-Q filed with the SEC on May 8, 2020, and can be found at www.sec.gov. And now it is my pleasure to introduce our CEO, Mr. Howard Robin. Howard?

Thanks, Mark. Good afternoon, everyone, and thank you for joining us today on our 2020 Annual Shareholder Meeting. This is our first virtual meeting. So we thank you for bearing with us in case there are any technical difficulties. Over the past year, Nektar has substantially advanced many programs in our research and development pipeline. And this has allowed us to advance a diverse and important pipeline in the areas of immuno-oncology and immunology with the potential to create transformative medicines for patients with multiple tumor types and serious diseases. And as you can see, Nektar's pipeline in immuno-oncology is very broad, with many clinical studies underway in solid tumors and in liquid tumors. We also have notable collaborations with Bristol-Myers Squibb, Janssen and Gilead. This past January, we announced a revised collaboration agreement with our partner, BMS. And under that new joint development plan, we expanded the BMS Nektar active registrational programs for the doublet of bempeg and nivo, and you can see that those registrational studies listed on the pipeline slide here. In addition to the 3 ongoing registrational trials in first-line metastatic melanoma, first-line cis-ineligible metastatic bladder cancer and first-line metastatic renal cell carcinoma, our partner, BMS, has already launched a new Phase III study in muscle-invasive bladder cancer. In addition, we added a Phase III study in patients in the adjuvant setting, which is a new tumor setting that was added to the amended agreement with BMS. The economics of the revised agreement reflect BMS's continued commitment to the collaboration. At a high level, if you look at BMS's share of clinical costs for the new joint development plan associated with the development plan, it is approximately $1.2 billion. There were also some enhancements to the economics for Nektar, which provided additional and accelerated near-term milestone payments of $25 million each for the start of studies in 2020 in muscle-invasive bladder cancer and adjuvant melanoma. The rest of the economics of our collaboration remain unchanged. In addition to the BMS collaboration, we have a large autoimmune program with Eli Lilly for NKTR-358, a T regulatory cell stimulator that we're using to address a wide range of autoimmune disorders. This program has made substantial progress over the past year, and I'll review our progress there in a moment. So I'd first like to start with our approach with respect to our IO Pipeline. So with our approach, we're intervening at multiple points in the IO cycle. Starting with NKTR-62 -- 262, a small molecule that induces antigen-specific T cells. And this program has now advanced into a Phase I study currently in combination with our lead IO asset, bempeg, in patients with refractory melanoma. Here, we're looking to use this combination to overcome resistance to other IO therapies and mount an antigen-specific T cell response to the tumors. And then bempeg, which is a T cell proliferator, as you know, this is in multiple registrational trials with nivolumab with our partner, BMS. And ultimately, NKTR-255, a new program for us, which we're very excited to have advanced into the clinic in late 2019. This is an IL-15 receptor agonist which causes a proliferation of another type of important immune cell known as natural killer cells as well as memory T cells. This unique portfolio allows us to capture opportunities to treat cancer patients which span both solid and liquid tumors. And today, I'll walk you through some of the key highlights and advances from these programs over the past year. We'll start with bempeg. So here's the reason we're excited to expand our footprint in melanoma. We used bempeg to help even more patients with this devastating type of cancer. Now last year, we obtained FDA breakthrough therapy designation for bempeg plus nivo in patients with metastatic melanoma based on the positive data, including a high complete response rate from our PIVOT-02 studies. At SITC last year in November, we presented data from this cohort with a median follow-up of approximately 18 months. And at that time, 34% of patients had a complete response as determined by blinded independent central review; 42% had a 100% reduction in target lesions; and 47%, almost half, had a greater than 75% reduction in target lesions, which, as you know, has -- is a very -- generally means a very good outcome is possible and likely. So here is how the high number of complete responses I just showed you translates into a PFS curve. Here's the PFS curve we just showed at the SITC conference last November. At the time last year, with a September data cutoff, as I just stated, we were at 18.6 months' follow-up, and the cohort had not yet reached median PFS. On our last financial results call, we recently completed an additional blinded review of the PIVOT-02 melanoma cohort at the end of December 2019, and this data had -- this data cut added an additional 3 months of follow-up, bringing us to 21 months' median follow-up points. And at 21 months, we have still not achieved median PFS for the patients in this cohort. So furthermore, we also continue to see deepening of responses for these patients, and we plan to present updated data from an even later data cut at SITC later this year. So looking forward to that point in time, I think that these data really highlight our excitement for bempeg to help patients with melanoma. We also advanced bempeg in our PROPEL study which is a combination of bempeg and Merck's pembro in first-line non-small cell lung cancer. This is a major opportunity for bempeg and pembro as pembro has emerged as the standard of care in this setting over the past several years. The dose optimization cohort includes 40 patients and the expansion cohort includes 58 patients. We plan to report on some of the initial safety as well as preliminary overall response rate data for between 10 and 20 patients who were enrolled in the dose escalation in non-small cell lung cancer cohorts of this study by the end of this year or first quarter of '21. Now let me turn to our newest clinical candidate, our IL-15 agonist program known as NKTR-255. NKTR-255 is designed to capture the full biology of the IL-15 pathway to cause both proliferation of NK cells and the expansion of CD8 memory cells. This mechanism allows for a wide range of political -- of potential development pathways for NKTR-255. Given the product profile, we're planning an early development path in both liquid and solid tumors, potentially, so we're very excited about where we can go with this program and how important this molecule can be. And I think everybody understands that the proliferation of NK cells is becoming more and more recognized, is becoming more and more important in the oncology community. Last year, we initiated our first-in-human study of NKTR-255 in non-Hodgkin's lymphoma and multiple myeloma. The dose escalation portion of this Phase I/II study has now been initiated and is evaluating safety, pharmacokinetics, pharmacodynamics of NKTR-255 as a monotherapy. We will then expand the study into combinations with antibodies that work through an ADCC mechanism, including daratumumab and rituximab. At the dose escalation part of the study, we plan to enroll up to 40 patients with relapsed/refractory multiple myeloma and non-Hodgkin's lymphoma. And we've also introduced a robust biomarker program into the trial, including measurements of the NKTR-255 effect on multiple immune cell population, especially on expansion of NK cell numbers as well as their activation and function. We aim to provide a deep assessment of the NKTR-255 mechanism of action. And with the first several patients we enrolled in the study, we already have good biomarker evidence of target engagements of the IL-15 pathway, and we're planning to present initial data from this study at this year's SITC conference in November. Moving on to our immunology program. NKTR-358 is our T reg stimulatory program, which is partnered with Lilly. And we reported significant progress with this program last year at EULAR, where we shared first-in-human data in healthy volunteers. These data demonstrated the candidate's dose-dependent and selective proliferation of T reg cells. Earlier this month, we presented data from the Phase Ib study evaluating multiple ascending doses of NKTR-358 in systemic lupus patients in a virtual session at EULAR. The data showed that NKTR-358 was safe and well tolerated in patients with mild to moderate lupus and led to a marked and selective dose-dependent expansion of T reg cells that was maintained over multiple administrations. And based on these positive results, we are advancing along with our partner, Lilly, NKTR-358 into a Phase II study in patients with moderate to severe lupus, which will be initiated this summer. We also recently initiated Phase Ib studies in 2 new autoimmune indications, psoriasis and atopic dermatitis. Both studies are ongoing and enrolling patients. And Lilly also has plans to start a Phase II dose-ranging study in lupus in the middle of this year, and they plan to add another Phase II autoimmune indication to the development program this year. So we're very pleased with their commitment, the broad nature of this development program, which really reflects the potential of this novel mechanism to treat autoimmune disease. So in closing, before we start Q&A, I'd like to thank everyone for joining us today. We have made a great deal of progress over the past year, I want to thank all of the Nektar employees for their hard work and their dedication as well as all of our shareholders for their continued support. I hope you and your families are safe and healthy in these challenging times. And with that, we will now open the QA session. So Jennifer, can you start the QA for us?

Thank you, Howard, and thank you to our shareholders for joining us today. [Operator Instructions] And the first question that we have is, what role does Nektar has in COVID vaccine research? Howard?

Okay. That's a great question. Look, it's very interesting. We've spent a lot of time looking at this. And it appears that patients who have low lymphocyte counts don't do very well with their COVID treatments, their COVID-19 treatments. Now it isn't well known -- it isn't really understood whether the low lymphocyte counts are associated with a poor diagnosis or whether they're associated with having the disease itself. And it's hard to imagine what the prognosis can be at this point. But we're doing some preclinical work to really understand that because it might be advantageous to treat patients who have low lymphocyte levels with a drug like bempeg, which could greatly elevate those levels and potentially help them in the case of COVID-19. Now of course, everybody recognizes that patients do have cytokine shock or go into a more serious condition with a cytokine storm in the late stages of COVID-19. And consequently, we're going to make sure that we -- for these studies that we hope to do one day, we use very, very low doses, much lower than what we're dosing bempeg in oncology. But I think once we understand the potential for using bempeg in the preclinical models, and whether there is a direct association with low lymphocyte counts and poor outcomes, this might be another important therapy to treat this virus. And as you know, we are always carefully looking at the potential for bempeg and NKTR-255 to be used as antivirals, and we have a collaboration with Gilead in that field. So stay tuned, but there's obviously a bunch of preclinical work to do yet.

Thank you, Howard. The next question is, can you explain what happened with NKTR-181? It was disappointing to see that it did not get approved. I was excited about the potential of that drug.

Yes. Well, good question. I mean we all were. I think we put in a lot of time and a lot of effort over the years to develop an opioid that was theoretically safer and less abusable. We certainly know we accomplished that. We met all of our clinical objectives. We worked very closely with the FDA, making sure that we followed their guidelines and followed their processes. We had long discussions with them about using -- filing on the basis of 1 study, and they allowed us to file on the basis of 1 study. So that was all prediscussed. I think -- and that study met all its end points in a highly statistically significant fashion. I think, unfortunately, it became a very significant political issue. I don't think anyone was ready to approve another opioid, unfortunately, again. And if you look at the other drugs that were looked at in the ADCOMs, and none of them were brought forward either. So quite frankly, I think it was very political. I think there was a desire or a scare, a frightened-ness to further approve opioids. I think I personally think it's a shame because I think NKTR-181 -- remember, NKTR-181 would not have caused someone who's addicted to not be addicted anymore, but it was a way to provide pain therapy to patients who are suffering and close it -- have a much safer, lower abuse opioid. And it's a shame the world doesn't have that now. Nevertheless, our main focus at Nektar is oncology, immunology and not pain medicine. So it was -- I think it was a great opportunity. It's unfortunate that the world doesn't have it available to them. In any case, we're not involved in the pain market anymore.

Thank you, Howard. The next question is, you have a lot of programs in the clinic right now. Do you have a favorite program?

We do have a lot of programs in the clinic, and that's a great thing about our company. Obviously, our favorite program is bempeg. And I do think, by the way, that NKTR-255 as an NK cell stimulator as well as NKTR-358 for T regs is going to be very, very important as well. But if you look at it right now, if you look at the data that we have from PIVOT-02. I mean we have to see what the data looks like in our registrational trials. But if you look at the PIVOT-02 data, with a very high complete response rate, I mean, a complete response rate that said 1 out of every 3 patients get cured. And when you look at a progression-free survival, haven't hit the median at over 21 months when nivo as a single agent is 6, 7, 8 months. That's -- we're talking triple nivo as a single agent. You look at that waterfall plot, it's very, very impressive. And you don't see things like that too often. So it's got a lot of potential. It -- melanoma is an incredibly large market. And as I said earlier, BMS has started the adjuvant studies, which further expands the market. And it's terribly exciting to bring a new mechanism forward. And remember, that's the other piece of this. This isn't another checkpoint inhibitor. This is a completely new mechanism added on to checkpoint inhibition. It will be the first time that someone comes up with a novel IL-2 therapy that's safe and effective. And I think we're getting there. And it becomes essentially -- if you leave out CAR-T for a moment, it essentially becomes another major breakthrough in IO therapy. So let's hope it works. We're all excited about it.

Thank you. And our final question is, as you look ahead to the future, where do you see the company in 3 to 5 years? Will you be an oncology company?

Yes. That's always a question we've discussed. I think the answer to that is, yes. Clearly, we plan to market -- even though BMS will be marketing it with us, we plan to market bempeg ourselves. We're building a commercial organization as we speak. We've hired some incredibly talented people to build up our commercial organization. With bempeg, we have the right under the contract to book global revenues. And we have 65% of the profits. So I would say, yes, we will be marketing bempeg and we will be expanding our oncology franchise after that. We're certainly looking at autoimmune disease because even though we've licensed NKTR-358 to Lilly, we still have the right to co-promote alongside them in autoimmune disease. And if we -- and we're looking at other autoimmune disease candidates, which would give us the basis for having a portfolio there. But clearly, at this point, it's easy to see us as an oncology company with bempeg, with NKTR-255 coming along, and with the potential to book global revenues on a very novel program. So that's how I see us. I hope that answers the question.

Great. Yes. Thank you, Howard. And that concludes our Q&A session and concludes the 2020 Annual Shareholder Meeting for Nektar Therapeutics. I'd like to thank everyone for joining us today, and you know where to find us if you need to reach out with any additional questions. Thank you. You can disconnect.

This now concludes the meeting. Thank you for joining, and have a pleasant day.