Nektar Therapeutics (NKTR) Earnings Call Transcript & Summary

I would like to welcome everyone to Nektar Therapeutics' 2021 Annual Meeting of Stockholders. My name is Mark Wilson, Senior Vice President, General Counsel and Secretary at Nektar. It is my pleasure to host the 2021 Annual Meeting. I will serve as Chairman and Secretary of the meeting. We are excited to be hosting this 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 J. Curet; Karin Eastham; Scott Greer; 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; 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. Representing Goodwin Proctor, our Corporate Counsel, 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 2021 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 12, 2021, 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 30, 2021, 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 169,576,031 shares of common stock of the company, which represents approximately 93% of the total number of outstanding shares as of the record date. This constitutes a quorum for the meeting today. There are 4 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 2024 annual meeting. The nominees for directors are: Jeff Ajer, Robert Chess and Roy Whitfield. A discussion of this proposal can be found on Page 7 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 5 million shares. A discussion of this proposal can be found on Page 9 of the proxy statement. The third 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, 2021. A discussion of this proposal can be found on Page 17 of the proxy statement. The fourth 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 18 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 2021 Annual Meeting proposals is as follows: the proposals to elect Jeff Ajer, Robert Chess and Roy Whitfield are each approved by a majority of the shares voted. The proposals to amend our Amended and Restated 2017 Performance Incentive Plan are approved by a majority of the shares voted. The selection of Ernst & Young LLP as independent auditors for the fiscal year ending December 31, 2021, 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 filed with the SEC no later than 4 business days from today. The 2021 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 7, 2021, and can be found at www.sec.gov. And now it is my pleasure to introduce our CEO, Mr. Howard Robin. Howard?

Thank you, Mark, and thank you to everyone for joining us today. I'd like to start by talking about the important robust pipeline we have in immuno-oncology and immunology. And if you notice, we have at least 6 programs, 6 registrational studies running. And we have a number of very important programs running that are in Phase II and Phase I, all in immuno-oncology. And we have 4 programs running in immunology and autoimmune disease. I'm going to talk about those in a moment. Let's start with what we're doing in oncology and what is hopefully to be seeing data in the next 2 years. So if you look at the 6 registrational trials that are running or soon to start, in metastatic melanoma, we expect data from that study in the first quarter of next year, first quarter of 2022. In metastatic renal cell carcinoma and in cis-ineligible bladder cancer, we expect data in the first half of next year. And in cis-ineligible muscle-invasive bladder cancer and adjuvant melanoma, we expect data at early 2024. And we will be starting this year, a study also in head and neck cancer. So those are 6 registrational studies, all with BEMPEG in various autoimmune -- excuse, various oncology applications. If you look at our data with BEMPEG in metastatic melanoma, which will be the first study that reads out, and as I said, it will be early next year. If you look at that data that we have so far as a result of the work we've done in the PIVOT-02 study, I want to remind you on how important this data is. So if you look at it, you can see that we had a median reduction from baseline of 75%. And 5 out of 10 patients with liver metastases experienced a complete response. Now the overall response rate was 53%. Importantly, the complete response rate was 34% and 47% of the patients had a 100% reduction in their target lesions. And of note, patients who responded -- of the patients who responded, 90% of those patients achieved a 100% reduction in their target lesions. So if you look at this waterfall plot, you'll see that the effect that BEMPEG had combined with nivo on metastatic melanoma was quite profound. Another actually important piece of information from this study was PFS. Now if you look at the PFS for nivo alone, it averages from historical data about 6.9 months. If you look at the median PFS of ipi combined with nivolumab, it's about 11.5 months. The PIVOT-02 data, and we presented this at SITC last year. The PFS data for a combination of nivolumab plus BEMPEG was almost 31 months. So dramatically different than nivo alone at 6.5, 7 months and dramatically different than ipi/nivo at about 11 months. And also dramatically different than what BMS has just presented with nivolumab LAG-3 combination. So the phase -- the PIVOT-02 data showed about 31 months, and we will see at the beginning of 2022, what the final data looks like or the top line data looks like in our Phase III registrational trial combined with nivo. If I jump to NKTR-255, another very, very important area of immuno-oncology is the proliferation of NK cells. And there are drugs such as the ADCC antibodies, drugs like rituximab, cetuximab, have become the gold standard as ADCC antibodies and treating a number of different tumor types. However, for those antibodies to work, you need to have NK cells. And your NK cells, natural killer cells, are depleted as you use these ADCC antibodies and eventually the ADCC antibodies no longer work well. With a drug like NKTR-255, IL-15, you should be able to cause a proliferation of NK cells and consequently, greatly enhance the effect of ADCC antibodies. And that -- those studies are underway, and it's actually an incredibly exciting area of immuno-oncology. So we have studies running in hematological malignancies, multiple myeloma, Non-Hodgkin's Lymphoma in combination with drugs like rituximab. And we also are working in combination with ADCC antibodies, such as Erbitux, cetuximab in colorectal cancer and head and neck cancer. And I think you'll find that IL-15 will become just as important as IL-2 in some of these very, very important in unserved tumor areas. If I move on to NKTR-358, which is sort of the polar opposite of IL-2, here rather than cause a proliferation of effector T cells, we want to cause a proliferation of regulatory T cells. And rather than in the area of autoimmune disease, where you want to -- where you currently try to downregulate the immune system by immunosuppressing the patients, our goal is to -- rather close immunosuppression, our goal is to restore homeostasis and replace or increase the necessary regulatory T cells. And here, we have a collaboration with Eli Lilly, and that program is moving along very, very well. And we're very excited about the potential for NKTR-358. We have studies running in -- we have Phase II studies running in lupus, in ulcerative colitis, and we have Phase I studies running in psoriasis and atopic dermatitis. Four very, very large diseases, quite unserved. And the current therapies either do not exist or don't work very well with potential for side effects. And I think the restoration of homeostasis and the restoration of T regulatory cells would be a dramatic change in the way these autoimmune diseases are treated. So we're actually excited about that. And I know Lilly is as well. So with that, that's a summary of what we've been working on. I'd like to take any questions.

[Operator Instructions] We do have one question, Howard. If BEMPEG is approved in one or more of the Phase III tumors, the company's revenue will grow considerably. Where do you plan to take the company in the next 5 years if that happens?

Good question. Well, look, I think BEMPEG has enormous potential. If you look at the checkpoint inhibitors, in -- just in the 5 or 6 registrational areas that we're working, the sales are in excess of $5 billion a year. If you think that BEMPEG will greatly enhance those checkpoint inhibitor, the checkpoint inhibitor activity, you can imagine that BEMPEG has enormous potential as well. I think as the -- we have a very important pipeline, I mean, NKTR-255, IL-15, I think, is just as important in treating oncology patients as much as IL-2 as much as BEMPEG. And I -- we don't have any plans to out-license that drug, that is our drug. And at this point, we've decided to develop that ourselves and keep that for ourselves. If you look at NKTR-358, which we have partnered with Eli Lilly, we have either the right to co-promote that or we get a substantial royalty on a drug that also has enormous potential, given the fact that those are pretty much mass market diseases. So we also have a fairly broad pipeline that we're working on coming out of research. And we have a number of programs in the immuno-oncology space as well as immunology that can move forward. So over the next 5 years, with the revenue stream from BEMPEG, I would expect Nektar to be a well-funded, well-invested and with a very, very dramatic and important pipeline.

Thank you, Howard. We have another question. How many more indications do you think Eli Lilly will pursue with NKTR-358?

Well, I know they are. I know they are considering a number of additional indications. The 4 that I mentioned are public, I know there are other autoimmune disease indications that they are considering, and I'm not at liberty to talk about them specifically. But I do know, having had many discussions with Eli Lilly, that they are very happy with NKTR-358. And you know it does change the landscape completely. I mean if NKTR-358 is a success. And so far, it looks very, very promising. It does really change the way autoimmune diseases are treated. And as I said, rather than drugs that suppress the immune system and work but bring along potential side effects, restoring the natural Treg balance is perhaps a much more important approach so I know they consider it an important drug for them. And I have -- there's no doubt in my mind that there will be additional indications.

Thank you, Howard. We have another question. Can you give us an update on NKTR-262.

Yes. NKTR-262, we're still studying NKTR-262. As you know, it's a TLR agonist combined. I think we will have data at some point in the future, where we have put more investment into BEMPEG and more investment into NKTR-255 because I think at this point, those drugs are more relevant and have been showing great promise. So we will give an update in the future on 262.

Thank you, Howard. [Operator Instructions] It looks like we've received all the questions. I'll hand it back to you for closing remarks.

Okay. Well, thank you for joining us today for our shareholder meeting. And as I usually do and is very important, I want to thank all of our employees for doing such a spectacular job through a very tough year with the COVID lockdowns and working remotely. We're all getting back to work. We're all starting to come back to the office, and we're all eager to be here, and I would expect the rest of this year and next year to be very transformational for Nektar in a very positive way. So again, thank you to all of our employees, and thank you to all of our shareholders for being with us today.