Nektar Therapeutics (NKTR) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Nektar Therapeutics ACR analyst call. [Operator Instructions] Please be advised that today's conference may be recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Ms. Jennifer Ruddock, Head of Corporate Affairs. Ma'am, you may begin.

Thank you, Crystal. Good afternoon, everyone, and thank you for joining us on today's analyst call to review data being presented for NKTR-358 at the 2020 American College of Rheumatology Congress. Before we start, I'll remind you that this presentation includes forward-looking statements regarding Nektar's drug candidate, NKTR-358, and other potential drug candidates, clinical trial results, the timing of the start and conclusion of ongoing or planned clinical trials, the timing and outcome of regulatory decisions and future availability of clinical trial data. Because these 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. Actual results could differ materially and these statements are subject to important risks and uncertainties, which are set forth in our Form 10-Q that was filed on August 8, 2020, and which is available at sec.gov. We undertake no obligation to update any of these statements whether as a result of new information, future developments or otherwise. A webcast of this call will be available on the IR page of Nektar's website at nektar.com. Joining us today are Dr. David Klatzmann of the Sorbonne University who is an expert in T regulatory cell biology; and Dr. Jonathan Zalevsky, Nektar's Head of Research and Development. To start off, Dr. Klatzmann will provide an overview of the clinical research with low-dose IL-2 regimens in patients with autoimmune diseases. Following that, JZ will present today's poster release at the ACR 2020 annual meeting, which includes new data from the Phase Ib study of NKTR-358. With that, I'd like to introduce Dr. Klatzmann of Sorbonne University who many of you already know. Dr. Klatzmann joined us previously during the EULAR congress in mid-2019, when we reported our first clinical results for NKTR-358 from the single-ascending dose study in healthy volunteers. David is a professor of immunology at the Sorbonne University in Paris, where he received both an MD and PhD. He also serves as their chairman of the inflammation, immunopathology and biotherapy department. His research interests include translational immunology with a focus on T regulatory cells. David has pioneered important research on low-dose IL-2 and its potential utility in treating autoimmune and inflammatory conditions. We are very privileged to have David join us again today to discuss the findings from our multiple-ascending dose Phase Ib study of NKTR-358. And with that, I will now hand the call over to Dr. David Klatzmann. David?

Yes. Thank you very much for the introduction. It's my pleasure to give this introductory talk describing briefly some of the properties of low-dose IL-2 toward Tregs and our own experience in using low-dose IL-2 to treat autoimmune disease. So if we go to Slide 5, I'd like to summarize the main properties of interleukin-2, which are relevant to its use for treatment of autoimmune disease. First and for all, IL-2 actually stimulate and expand regulatory T cells, which I'll call Treg during this talk. The mechanism by which to IL-2 stimulate Treg is very well known. Treg express permanently the high-affinity receptor for interleukin-2, which obviously [ don't expire ]. And because of that, very low-dose IL-2 will actually stimulate Tregs. Also the downstream activation pathway after [indiscernible] with this receptor and cause different pathways, in fact, in Treg and Teff. And for Treg, it's a much more [ sensitive ] pathway. So based on this property, we, in the past, thought that IL-2 at low dose could be used to expand and activate Tregs, which I'll show thereafter. However, besides this first and main property, there are other interesting properties of IL-2 that could be exploited for treating autoimmune disease. It has been shown in very good scientific journals and reproduced by many teams that IL-2 also blocks the differentiation of what's called Tfh cells, T follicular helper cells, which are both cells that actually help for the activation of B cells and their differentiation in antibody secreting cells. And that's important because by this mechanism, you can somehow control the production of antibody. And in the case of autoimmune disease, with the other antibodies like SLE, for example, it's obviously a beneficial effector layout. Also, and importantly, interleukin-2 blocks the differentiation of pro-inflammatory Th17 cells. Again, results reproduced in many labs and published in the best scientific journals. So this also will be an interesting progress for the treatment autoimmune disease, and it will lower inflammation in patients. And with these 3 main properties, it's no surprise that interleukin-2 has been tested in different preclinical model and always with really good results. And in more than 30 experimental autoimmune and inflammatory disease in mice, IL-2 has proven to really provide significant therapeutic effect and in -- among this model -- among this type 1 diabetes model, MS model and SLE models. Next slide, please. So with this rationale -- next slide, please. Yes, with this rationale, in fact, mostly with the rationale that IL-2 activates Treg, we embarked in a first clinical trial of low-dose IL-2 now almost 10 years ago. We were treating a disease called vasculitis, which is, in that case, induced by a chronic HCV infection. In this disease, we have shown that patients that had a defect in their Tregs won't see whether the stimulation of Treg could provide strategic benefit. At the time, it was not known what would be a low-dose of IL-2 that would efficiently stimulate Tregs and will not affect other important cell types, including effector T cells. I don't have a time to summarize, to explain how we picked up the dose, but we started using IL-2 at the dose of 1.5 million and then 3 million units per day and per injection. And what we saw first, which is in the upper part of the slide, is that -- and the gray bars represent the administration of interleukin-2. And we had actually 4 portions of IL-2 that were provided to this patient. Each time we're giving IL-2, there is an increase of Tregs, which was significant, very significant. And in fact, not shown on this slide, there was no increase of effector T cells. So this was the first outcome of this work, which is -- was the first time it was described like this. And accompanying this increase in Tregs, we were most happy to see that there was apparently a clinical benefit because the clinical sign associated with this disease, which are represented here as a small colored bar, where each color represents one symptom, arthralgia, fatigue, kidney involvement, neuropathy in particular. These symptoms were resolving with time during the treatment with interleukin-2. So this was the first proof-of-concept that at low-dose, IL-2 stimulate Tregs without stimulating effector T cells will have some potential clinical benefit in an autoimmune disease. In the same issue of the New England Journal of Medicine where this paper was published, another group also used low-dose IL-2 to treat not an autoimmune disease, but what's called an allo-immune inflammatory disease. It's mostly an inflammatory disease, which is a chronic graft-versus-host disease following allogeneic stem cell transplantation. And this is actually chronic GVHD. It's really a bad disease with involvement of many tissues that are attacked by the cell from the graft, effector cells from the graft. Patient here were receiving a dose of 1 million unit per square meter, which is roughly the equivalent of 2 million unit per injection. So those that are very close to what we used. What you see on the upper right-hand side of the slide is that this actually led to an increase in the Tregs, which are represented here as the black cells expressing CD25 and low in CD127. There was roughly a fourfold increase in Tregs in this trial. If you look at the lower graph on the right-hand side, you see that this increase in red was seen all over the treatment period here. Also shown on this slide is the fact that NK cells in blue were expanding with time. But the Treg/Tcon ratio or Treg/Teff ratio was, in fact, increased, indicating that effector T cells were not activated. In terms of clinical results, it was shown at the time that these patients improved. And in fact, that there was a reduction in the steroid usage in this patient, an improvement in the skin pathology and the liver function. The skin pathology is illustrated on this slide, where you can see before and after on the right-hand side, the image of the skin of this patient. And there is what was recognized here as a clear improvement, although, of course, not a complete cure of the symptoms. So this was, I should say, almost history. This was like almost 10 years ago. Since then, we've pursued the use of IL-2 in many different indication. And I'm talking here about native IL-2, the unmodified molecule. Next slide, please, Slide 8. And I'd like to share here the results of the recent study that we performed. This one was a study in type 1 diabetes in children. In fact, we were treating patients with recently diagnosed type 1 diabetes at the time the type 1 diabetes is diagnosed. The treatment scheme is illustrated on the upper part of the slide. This is the scheme that we're now using all the time in most of our trials. We start with what we call an induction period, induction course, where we have 1 injection per day for 5 days. And then we have what we call the maintenance course, which is 1 injection every 2-week or every week depending on the protocol. And this is the scheme you will see also for the other protocol I'm going to show thereafter. What you can see here is that on the lower graph is that there is a very nice dose-dependent response in this patient all of the 1-year period of treatment. After the induction course, you have the peak of the response, which is not even a doubling of the Tregs. But then you have a maintenance of this effect of the injections that are provided. Here, we're testing 3 doses because these were children, the doses were expressed here in square meter. To have the equivalent in the adult dose that we're using, just have to multiply by 2. So the black line here corresponds almost to 1 million unit per day. So we were happy with this dose-dependent response. Next slide, please. In another study, which is called the TRANSREG study, we've been using low-dose IL-2 to treat patients with one of -- in fact, not 11 but 14 autoimmune diseases that were selected to be mild to moderate. The interest we had here was to investigate whether the effect of IL-2 would be universal, whether the activation of the Tregs that we would obtain would be equivalent according to the disease and according also to the background treatment that these patients received. And because they were all kind of diseases, there are also all kind of background treatment. What we recently published is the result of the first 40 patients. We now have 80 patients, which I will report in the next slide. But in Panel A, you can see that, again, after the induction course, the 5 injections, that I mentioned earlier, you have a doubling of the Tregs. And then during the maintenance course, you maintained and increase by 30% over the baseline. And these numbers are important because you're going to see both that you can obtain with the Nektar molecule thereafter. If you skip to Panel C, of course, you have an increase in the Treg/Teff ratio, indicating that not only you activate Treg, but you don't activate the effector cells. And most importantly, in this trial, we actually could see indication of efficacy. I must say that this trial was an open trial because there were all kind of different disease. We used the so-called CGI scale to evaluate patients across the different disease. And there was a reduction -- significant reduction in disease activity and in disease severity across all these different patients. And we also noticed in this trial that fatigue and arthralgia, which are 2 symptoms that are shared by many of the disease we treated, responded nicely to the treatment. Next slide, please, Slide 10. We've pursued this study and added 40 more patients. Now at 80 patients, which now allows us to look in a bit more details at the response according to the disease, which is what is shown on this slide. If you look to the left panel, you can see basically the increase of the Tregs from baseline, which is the first point to day 8 after the first injection, which means 3 days after the last injection of the induction phase. As you can see, there is no single patient that does not respond to IL-2. So, so far, we've not treated a single patient that did not respond to interleukin-2, although there is some variation from one patient to the other. But in fact, besides the variation from one patient to another, there is no real variation from one disease to the other. So IL-2 model has a universal effect of expanding Tregs and activating Tregs across all these different diseases listed here and independency of the background treatment that these patients received. And more or less, it's the same thing that you can actually see on the right-hand side. Next slide, please. In this trial, also, we look to in a bit more details at whether this increase of Tregs would affect the so-called resting Tregs or naive Tregs, according to what people like to call them, and the activated Tregs. Both are actually actively involved in the control of the autoimmune disease. So if you look to the right-hand panel, these activated Tregs are those that are in red. And you can see clearly that there are those who -- that are activated by low-dose IL-2 with a threefold increase of the numbers at day 8 and then an activation that actually persists over the 180 days of the treatment. The resting Tregs, which are in black, they have actually, a small increase, but then they more or less go back to their initial values. And interestingly enough, we also measured in this trial the proportion of Tregs that expressed the CD31 marker, which is a marker we call recent thymic emigrants, meaning that these are new T cells, new Tregs that are released from the thymus where they are generated [indiscernible]. And you can see that you had a significant increase of these recent thymic emigrants also all over the treatment period. So IL-2 at low dose activates mostly the activated Treg, those that you need for the control of autoimmune disease and also help replenish the pool of Tregs by stimulating the release of new Tregs from the thymus. Next slide, please. So clearly, there is an expansion of Tregs to low-dose IL-2, but there is also an activation of this cell, which is observed looking at their -- at some of the markers expressed at their surface. And we looked at such markers, CD25, GITR, CD52 -- CD152, HLA class 2, CD39 and Helios. What we see here is that when we look at day 8, which is just 3 days after the last IL-2 injection of the induction phase, we see a marked increase in all of them. So not only the Tregs are expanded, but they are also activated. When you look back at later time points, the increase is much lower. And the reason is that when we're sending our patients, we're sending them a week or 2 weeks after the previous injection of IL-2 that they have received, okay? And just before, they are receiving a new injection of IL-2. So at this stage, they have lost a large part of the effect of the IL-2, and these activation markers are less increased. And of course, this tells you that you may also like to have a mean to maintain this activation marker a bit, increase over time, a longer period of time. Next slide, please. Interestingly enough, in this TRANSREG study where we treated altogether 80 patients with a different disease that are listed on the side here, we saw some clinical response in almost all of the disease. It happened that there were no clinical response in the disease called sclerosing cholangitis. I don't know if it's just by chance in this case. So this is a disease that kind of resists the effect of Tregs stimulation. We didn't have good results in rheumatoid arthritis. I must say, we're only 1 out of 4 patients that responded. And actually, this is why clinicians didn't want to include more of such patients in this assay. But then we had actually good results for most of the other disease we treated, including, for example, systemic lupus erythematosus, for which 8 out of 12 patients responded to the low-dose IL-2 treatment. So not only how to the kind of universal effect for activating Tregs in the different context, but in all these different disease with really different pathophysiology, the stimulation of Tregs does provide a clinical benefit, which again indicates that Tregs are central to the pathophysiology of the disease. Of course, I have to say again here, this is an open study, and all these results will have to be validated in a controlled trial after this. Next slide, please. Now as I just mentioned, SLE. We did observe this good response in SLE patients, but I'd like to point that all the groups have also observed a very good benefit of treating patients with low-dose IL-2. The first report actually came from the observation of a single patient with SLE, which is worth mentioning because this was actually a 36-year old female, which had a very high deal of activity and which actually had been treated with all kind of the level of treatment without any response. And in fact, they got the permission in Germany here to treat this patient with low-dose IL-2 because they had no other option. And what's interesting here is they, of course, observed a nice activation of the Tregs, which is shown on Panel F with this increase. I reported earlier that's also in our trial. But importantly, enough, and this is the A-panel at the bottom, they saw a reduction in the SLEDAI score for this patient that was maintained all over the treatment period. We, in fact, an increase in [indiscernible] after the cessation of the treatment, which we could discuss later. And this was the first report, which -- with our own results, next slide, led us to perform our own randomized trial of low dose IL-2 in SLE, in which we treated 100 patients with either placebo or SLE. And what we could actually observe in this trial is that there was a response that was actually much higher in patient receiving low dose IL-2 with a 69% SRI-4 response over time at month 3. While in the placebo, we had only 33% responders. And by the way, I must say that this type of response to placebo is common in SLE trials, where usually people report response in placebo from 25% to 45%. In this case, we have 33%; and in the patient with IL-2, 69% response. Interestingly enough, a group in China also performed a randomized controlled trial with a different scheme of administration, but roughly the same dose of IL-2 that we use. And they observed very similar results compared to us since -- at, in fact, month 3. They also saw an increase by 30% of the response rate in the patients. Next slide. Now we treat patients with IL-2. We see Tregs expansion and we see clinical improvement. But of course, it would be nice to be able to directly correlate the Treg expansion and the clinical benefit to really prove that this is the mechanism of action by which you're getting the clinical benefit. There are a couple of ways to do this, including just looking for correlation between response and Tregs increase. And here, I'm going to show you we saw -- that we've gathered in 3 different trials that actually indicate that the increase of Tregs is the driver for the clinical response. On the left-hand side, you see results from this TRANSREG trial that I presented earlier, where we looked here at patients with vasculitis, Sjogren's syndrome, Behcet's disease and scleroderma. And we separated this patient in responders and nonresponders. And the responder are in green and the nonresponders -- clinical responders, I must say here, are in violet. And as you can see, in those who respond, you see a higher increase in Tregs after IL-2 treatment. So the higher is the Treg response, the better is the clinical benefit. We've also observed this in the randomized controlled trial of LUPIL-2 in type 1 diabetes that I presented earlier. In this trial, we had Treg high responders and Treg low responders. And when we look at the maintenance of insulin production by the remaining pancreatic cells over time, which was the -- which is an indication of [indiscernible] the opening process and the survival of more insulin producing cells, you can see that in Tregs high responders, you have a better preservation of insulin secretion than in the Treg low responders. Finally, in the LUPIL-2 trial, which I mentioned also earlier, which is a randomized controlled trial, as you can see, if you look at the increase in Treg in responders versus nonresponder, and here, we're talking about the clinical response. You can see that the expansion of Tregs is actually higher when you're a clinical responder. So that's another of the observation correlation. But we went further in exploring this. So in here, you just have to look at the lower panel where we correlated the increase in Tregs, all over the treatment period. So we do the -- a, you see the area under the curve for what you see in Panel C. And now when you try to correlate this with the reduction in the clinical activity, which is measured by SLEDAI, you see that you have an extremely nice correlation. In other words, the more you expand your Tregs, the better is your clinical benefit. And I think that with what I presented earlier, this altogether indicate that the Treg stimulation is the driver of the clinical benefit. Now as a conclusion, native IL-2, which I like to call also organic IL-2, represents a first-in-class Treg agonist with an excellent safety profile; with a well-understood mechanism of action; with indication of efficacy in open and in Phase II trials, which have to be confirmed in proper Phase III trials; and with indication that efficacy is correlated to the level of expansion and activation of Tregs. And now before I conclude, I'd like to say a brief word about the entire field. And I think, in part, based on our initial observation, a lot of the companies have started to develop their own version of interleukin-2. They usually have worked with the idea that they could increase the half-life of the product to have less injection. And they have also tried to modify the interleukin-2 such as to be able to provide -- to give more IL-2 and activate more Tregs without having the risk of stimulating effector T cells. So this slides have been prepared by Nektar is illustrating actually the molecule for which we have some information. They're all in early clinical development. As you can see here, they're all molecules that are administered subcu. Many of them are IL-2 with some mutations that are fused to Fc portion of immunoglobulins to increase the half life. Nektar molecule, as you all know, is native IL-2. So the [ prelim ] and the stability is provided by the pegylation. Importantly enough, everybody has tried to improve the binding for the high-affinity receptor of IL-2. I don't have time to describe this in detail. In fact, what people do really is to lower the affinity for the better chain of the IL-2 receptor, which, in fact, lowers the activity for effector cells but retain the high activity for the trimeric receptor. So this kind of mutation that are in all the molecule development, except for the molecule developed by Nektar, they, in fact, affect the binding to the beta chain and reduce the [ logical ] activity of the protein. Nevertheless, they all actually -- for those for which we have information and for those of which there are reports at meetings of the effect of the molecule, it seems that the whole -- they all lead to the induction of a dose-dependent increase of Treg that can go pretty high, as you will see later. Tolerability has not been described in much detail. But importantly enough, for many of these molecules, there are already reports that there is a high level of induction of antidrug antibody, which can be a problem. So I think that with this slide, I will end my presentation and actually give the podium or -- welll, it's a web presentation to Jonathan Zalevsky to present the results with this NKTR-358 molecule. Jonathan?

Yes. Great. Thank you very much, Dr. Klatzmann. With the promising human data in hand from our first Phase I study of NKTR-358 in healthy volunteers, we designed a Phase Ib study to look at multiple ascending doses in patients with systemic lupus erythematosus. The goal of the study was to understand whether we see the same levels of Treg increases in patients with lupus who are known to have an underlying imbalance in these types of cells. These data are being presented by Dr. Richard Furie at this year's ACR in a virtual poster presentation. Compared with nonpegylated recombinant human IL-2, PEG conjugation reduces the affinity for IL-2 components, thereby favoring binding of NKTR-358 to the high-affinity IL-2 receptor, as David just mentioned. These properties lead to selective stimulation of Tregs over conventional T cells. And PEG conjugation also markedly prolongs the half-life of NKTR-358, allowing for stable and sustained activity. And as Dr. Klatzmann has pointed out in his presentation, much evidence indicates that lupus is characterized by a reduction in numbers and function of regulatory T cells, which contributes to the immune imbalance and autoimmune processes in these patients. By boosting Tregs over conventional T cells, we hypothesized that NKTR-358 may enable a greater increase in Treg versus what is achievable with low-dose IL-2, and thereby, restore the intrinsic immune imbalance we see in lupus and other inflammatory and autoimmune diseases. Well, here's the study design. The study is a randomized, double-blind, multiple ascending dose Phase Ib study where NKTR-358 was administered subcutaneously on an every 2-week dosing regimen at various dose levels and compared to placebo. We enrolled 48 patients diagnosed with systemic lupus erythematosus who are exhibiting mild to moderate disease activity. These patients were on stable concomitant medications and could be on no more than 10 milligrams of steroids per day. The study was designed to help us better understand the PK profile of NKTR-358 and its peak pharmacodynamic effect. Each dose cohort received a total of 3 doses administered over a very short 6-week treatment period. 9 patients in each cohort had active drug and 3 patients received placebo. We escalated from 3 micrograms per kilogram up to 24 micrograms per kilogram dose levels. With respect to immunophenotyping, we use a variety of standard flow cytometry methodologies to quantify immune cell subsets. In surface, intracellular markers used for enumeration of the key cell populations are listed in the slide. In addition, we performed nucleic acid-based evaluations, including assessment of DNA methylation of the FoxP3 gene using a qPCR method to further identify Treg cell populations and gene expression of serial whole blood specimens to evaluate genetic networks induced by NKTR-358 target engagement. Here are the demographics, mean age was about 47 years of age. And given that this is a study in SLE patients, our population was predominantly female. And note that these are typical demographics, as we know that lupus is a disease which presents predominantly in this gender with 90% of patients being female. Patients were on the mix of baseline medications but, again, were required to be on stable medication regimens for at least 8 weeks upon entry into the study. We report the NKTR-358 was safe and well tolerated. There were no dose-limiting toxicity, and adverse events were mostly mild grade 1 or grade 2 injection site reactions. Here, we show the changes in numbers and percentages of Tregs. We see that NKTR-358 led to a selective dose-dependent expansion of CD25bright Tregs, which was maintained through multiple administrations. And this is the same data that we reported earlier this year at EULAR. In the study, Treg expansion with NKTR-358 was further supported by an observed correlation between the number of Tregs and the extent of DNA methylation at the FoxP3 gene locus. Epigenetically active or demethylated FoxP3 gene is observed only in Tregs and not in activated CD4 positive T conventional cells. So it is clear that we were achieving our desired outcome to increase not only the amount of Tregs but also stabilize the functional phenotype. Additionally, after treatment, a significant correlation was observed between NKTR-358 induced Tregs identified by flow cytometry on the x-axis of this chart and Tregs identified by epigenetic analysis of the Treg-specific demethylation region or sometimes called the TSDR, which is plotted on the y-axis of this chart. This chart highlights this correlation for the 24-microgram per kilogram dose level as an example. And in the trial, we observed the same correlation at all the dose levels greater than or equal to 6 microgram per kilogram. Furthermore, NKTR-358 increased the expected cell surface and intracellular proteins associated with Treg function. As David presented earlier in the analysis of TRANSREG, we saw dose-dependent elevations of the Treg activation marker, CD25, CTLA-4 and Helios. The magnitude of increase was similar to the change observed in the SAD study in healthy volunteers. There were low level increases in the total number of NK cells at the highest dose tested, and this data was presented previously at EULAR earlier this year. We've now expanded this analysis to evaluate the increase in CD56bright, CD16dim versus CD56dim, CD16bright natural killer cells. And as expected, NKTR-358 induced a greater increase in the CD56bright, CD16dim subset than CD56dim, CD16bright subset at the highest NKTR-358 dose level. Overall, the total increase was mainly driven by 2 outlier individuals. As we know from the literature and other studies for IL-2, the CD56bright, CD16dim population is much more sensitive to IL-2 agonism, and we observed the same effect for NKTR-358. Also, the ratio of CD56bright,CD16dim to CD56dim, CD16bright NK cells increased 16-fold over pre-dose at the 24 microgram per kilogram dose level. We also saw that NKTR-358 led to the dose-dependent and time-dependent induction of genes associated with regulating immune processes and Treg function. Many genes were studied in this analysis. And as an example shown in the chart are the NKTR-358 induced elevations in IDO1 and CD24 gene expression levels. Some of the differentially expressed genes overlap with those reported previously in healthy volunteers treated with NKTR-358. Overall, we observed that repeat administration with NKTR-358 led to induction of genetic networks associated with Treg function and suppressive activity. In switching gears toward the translation in clinical scores in patients with moderate SLE, in the slide before you, you'll see the mean change in CLASI-A score from baseline with NKTR-358. As this study was very shortened treatment duration and most patients enrolled had mild to moderate disease activity, we sought to explore the connection between an increase in T regulatory cell counts in patients with measures of disease symptomology. To that end, we evaluated a subset of 18 patients who had higher baseline CLASI-A activity scores. And these were patients with baseline scores greater than or equal to 4, indicating that they had measurable disease symptoms at baseline. And just to remind you, CLASI-A is a measure of outward SLE disease manifestation primarily in the skin. In these patients, NKTR-358 led to a dose-dependent reduction in CLASI-A score. You can see in this analysis that patients at all dose levels of NKTR-358 experienced a reduction in CLASI-A while the placebo patients did not. And notably, 7 of 18 patients had a 4 or more point score reduction by day 43 as compared to their baseline scores. One patient at the highest dose level of 24 micrograms per kilogram experienced a reduction in CLASI-A score from 22 baseline down to 5 by day 43, 2 weeks after the last dose of NKTR-358. This is exciting to see that NKTR-358 demonstrated a dose-dependent reduction in CLASI-A composite clinical scores in patients with moderate SLE after only 3 treatment cycles. And this data complements well with what we're seeing with the PK data for NKTR-358 exposure and the PD data for Treg induction. So in conclusion, NKTR-358 was safe and well tolerated with a similar safety profile for single and repeat doses in patients with mild to moderate SLE as was observed in healthy volunteers from the prior Phase I study. And selective dose-dependent expansion in CD25bright Tregs was observed, and this was maintained through multiple NKTR-358 administrations. Treg induction was further supported by a correlation between the number of Tregs and the extent of demethylated FoxP3. Increases in Treg activation markers, such as CD25, Helios and CTLA-4 as well as genes associated with Treg function, were observed after NKTR-358 treatment. There were low level increases in NK cell numbers, and these occurred in most patients at the highest NKTR-358 dose. The CD56bright, CD16dim population was more sensitive than the CD56dim, CD16bright population. A dose-dependent reduction in CLASI-A score was seen with NKTR-358 treatment. These early results were in a small number of patients with mild to moderate disease and that experienced only a shortened treatment duration with NKTR-358. The results of this Phase Ib study are very encouraging, and they warrant further exploration. Our data further provides strong support for continued testing of NKTR-358 in patients with SLE and other inflammatory diseases. A Phase II study in SLE patients is already underway and being conducted by our partner, Eli Lilly. So a reminder on the Phase II step design. The patient population is similar to other Phase IIb lupus studies in regard to required diagnosis of SLE using ACR classification criteria, positive autoantibodies characteristic of lupus and active clinical disease activity despite standard of care. The primary and key secondary endpoints will be measured at week 24. The primary endpoint is the reduction in the SLEDAI-2K scale. Important secondary endpoints include the percent of patients who achieve a systemic lupus response index, or SRI-4 response, the BILAG-based BICLA response, the percent of patients who achieved low disease activity as defined by the lupus low disease activity state as well as the characterization of the PK and PD effects in treated patients. Overall, the design is fairly straightforward for a Phase IIb dose-ranging lupus study. At the beginning of the year, we set out a number of milestones for this program, which included the start of the Phase II study in lupus, which as mentioned moments ago, was initiated this past summer and is currently recruiting. One other milestone we mentioned earlier this year was the announcement of the second Phase II indication. We're pleased to announce that we, in conjunction with Lilly, are planning a Phase II study in ulcerative colitis. Lilly will be providing guidance on timing of the start of the study at a later time. And with that, I will open it up to questions. Operator?

[Operator Instructions] And our first question comes from Peter Lawson from Barclays.

This is [indiscernible] on for Peter. Congrats on the data. Just wondering if you can talk through the size of the market opportunity here in SLE and your take on the addressable patient population for moderate to severe SLE? And then also, how would you fit within the current landscape of approved therapies and -- as well as emerging therapies in the space? And I have a follow-up after that.

Yes, certainly. So this market is a very large market. Our estimates indicate that it's about $1 billion market, for example, for BENLYSTA sales. And then you also know, there have been very few approvals. So this is a patient population in a market that's been really hoping and struggling to see new opportunities. There have been some recent Phase III studies, for example, anifrolumab, which had 2 Phase III studies readout. Unfortunately, they went in different directions. But overall, this is a very substantial, very, very sizable opportunity. One of our aspirations with an agent like NKTR-358 and really bringing Tregs as a mechanism of action into this therapeutic area. As you can see from the mechanisms of Tregs control and Dr. Klatzmann discussed is they may be able to really address some of the underlying disease pathology and some of the impacts of tolerance as well as organ issues that these patients see as they have progressive disease. So there's a real opportunity with this new mechanism to potentially impact this disease in a very novel way. So overall, we're very excited about this opportunity, and we're very excited that the first steps in the Phase IIb study that just began earlier in the summer lead us down that road to look and see if we can get closer and closer to this goal.

Great. That makes a lot of sense. And just a question then on when we can see the next data set for NKTR-358 and how should we be thinking about the regulatory path forward here. What is the bar the FDA would like you to hit in order to support the development and regulatory path forward, specifically from the Phase II study that's currently ongoing?

Sure. Well, so we're working very closely with our partner, Eli Lilly, and so it's really up to them to set the time lines for any of the data disclosures. But what I will say is the trial just got underway earlier this summer. And as you saw from the design, we're evaluating the disease endpoints at 24 weeks. So it's a trial that we'll be reading out in the future. And then in terms of the kind of regulatory goal. As mentioned, there really hasn't been significant approvals in this space. So we saw the BENLYSTA approval in which they basically use at the time a novel endpoint. And really, there was a small delta over the placebo in that study. But it is a -- and that was in effect that was meaningful because its first proof therapy in that indication in decades. I think the next closest opportunity we'll see is with anifrolumab. But really, the key is for the studies to read out. And then, of course, placebo, controlled randomized blinded studies that we'll be looking for activity that's reasonable to take forward into future regulatory interactions.

Our next question comes from Tyler Van Buren from Piper Sandler.

For the Phase II trial, clearly, as you mentioned, the primary endpoint is greater than 4-point reduction in the SLEDAI-2K index. And I'm relatively familiar with that endpoint based upon lupus work I've done in the past. But I'm not very familiar with CLASI-A scores, and even though you said that there were no observed changes in these patients in SLEDAI or joint scores because of the short duration. So can you help us understand the predictability of positive CLASI-A scores to changes in SLEDAI scores or SLEDAI-2K scores? And maybe with respect to approved agents or effective agents that are out there, what have they shown in CLASI-A scores at this same time point?

Sure. So I think to comment on that question, Dr. Klatzmann, can I ask you to discuss some of the instrument of both CLASI as well as the timing for SLEDAI readouts and any relationship between the 2? And then I'm happy to afterwards, answer your question as well about other CLASI reference points.

Yes. So from CLASI, CLASI is a severity index for the cutaneous form of lupus. And here, I think, given the very short duration of this treatment period, this just should be taken as a nice indication that there is somehow on a limited number of patients with limited follow-up a nice indication that there is mainly a dose-dependent response of this cutaneous lesion. Now with respect to how you measure clinical efficacy in lupus. This is, of course, a very complicated field. People are still trying to design a new and better way to evaluate this patient. It's a disease with multiple facets, and many, many aspects of the disease have to be measured so far. Also, what's needed to be mentioned is that, as I think it was said by Jonathan, very often, the improvement in the SLEDAI score is actually occurring pretty late. And I think he mentioned if I could hear well, BENLYSTA, which is an approved drug in SLE, which has a delta of 15% -- 12% to 15%, actually appearing after 6 months after the initiation of the treatment. So I think that if your question was, can you kind of predict what would be observed in the new trial based on the CLASI-A score observed in this one first trial? I think, no, you cannot predict from that. This is just an observation from the dose-finding trial, an open trial. And of course, the Phase IIb trial will use some more classical index to evaluate the response to the treatment at 6 months, which is a reasonable period of time. As I showed you, the 2 previous study conducted by the Chinese group and ourselves, we could actually even already see improvement of the patient by month 3. So month 6 is actually a good time point. I don't know if I missed some of the questions, but...

No. Thank you, David. And Tyler, one thing I'll just also add is the kind of CLASI-A reductions that we observed are in line with what was recently presented for the BIIB059, the BDCA2 molecule from Biogen in terms of those kind of reductions from baseline across the doses that we presented. So as one frame of reference, they're similar. Our treatment duration was much shorter, of course, than that agent as that data is from a much more mature, longer treatment study.

Our next question comes from Jessica Fye from JPMorgan.

Maybe related to the last topic, as we think ahead to the Phase IIb. Dr. Klatzmann, what is a clinically meaningful improvement in SLEDAI score? And you talked about placebo response earlier. So with a 4-point responder analysis as the primary endpoint in Phase IIb, what would you expect the placebo response rate to be?

Yes. David?

I'm sorry. I just -- I'm not sure I could hear well the question. Can you repeat it for me? Hello?