Nektar Therapeutics (NKTR) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Nektar Therapeutics Analyst Conference 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, Jennifer Ruddock, Head of Corporate Affairs. Please go ahead.

Thank you, Crystal, and good morning, everyone. With us on today's call are Howard Robin, our President and CEO; Gil Labrucherie, our COO and CFO; Dr. Jonathan Zalevsky, our Chief of Research and Development; and Dr. Dimitry Nuyten, our Chief Medical Officer. On today's call, we expect to make forward-looking statements regarding our business, including clinical trial enrollments and clinical trial results, timing and plans for future clinical trials, timing and plans for future clinical data presentations, the therapeutic potential of bempegaldesleukin and our other drug candidates, outcomes and plans for health authority regulatory actions and decisions, financial guidance and certain other statements regarding the future of our business. Because these forward-looking 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. Our actual results may differ materially from these statements. Important risks and uncertainties are set forth in our Form 10-K that was filed on February 28, 2022, which is available at sec.gov. We undertake no obligation to update any of these forward-looking statements, whether as a result of new information, future developments or otherwise. A webcast of this call is available on the IR page of Nektar's website at nektar.com. With that said, I would like to hand the call over to our President and CEO, Howard Robin. Howard?

Thank you, Jennifer, and good morning, everyone. Thank you for joining us to discuss the press release that we issued this morning with our partner, Bristol-Myers Squibb. So today's news is obviously very upsetting for all of us at Nektar. We have a highly talented team at Nektar that have contributed so much to the BEMPEG program, and we have worked closely with our partner, BMS over the years. We were all highly surprised and disappointed when we received the news of the independent data monitoring committee analysis from our partner BMS, who ran the study in metastatic melanoma. After discussions with the senior team at BMS, we know that they share in our surprise in disappointment that this unexpected outcome. This morning, I will briefly discuss with you what the news means for BEMPEG and importantly, also have a broader discussion about Nektar, our other pipeline programs and our plans for our business. So first, today's results for the Phase III study of BEMPEG plus OPDIVO in metastatic melanoma patients was the first analysis conducted for BEMPEG in a Phase III study. As we've previously communicated, this was a final analysis on the overall response rate endpoint and the progression-free survival endpoint for this study. The study was designed and run by our partner, BMS, in the first-line previously untreated advanced or metastatic melanoma setting and BMS enrolled 783 patients, which were randomized 1:1 to the doublet arm or OPDIVO monotherapy arm. Following review of the data by an independent data monitoring committee of DMC, BMS and Nektar were informed that the study did not meet the primary endpoints of progression-free survival and objective response rate as assessed by blinded independent central review. The DMC also notified us that the first interim analysis of the third primary endpoint of the overall survival did not meet statistical significance. Given there was no additional clinical benefit in the doublet therapy arm compared to the monotherapy arm and based on the data reviewed by the DMC, BMS and Nektar have decided to unblind this trial and to perform no additional analysis for the OS endpoint. The bottom line is that OPDIVO essentially performed in line with efficacy expectations from prior studies, and there was no added benefit from adding BEMPEG to OPDIVO. According to the DMC analysis and report the hazard ratio provided to us for the PFS endpoint was 1.09, with a confidence interval of 0.88 to 1.35. This result suggests that stimulating the immune system with an IL-2 mechanism in combination with OPDIVO does not provide an increase in efficacy in melanoma patients. The safety profile of BEMPEG in combination with OPDIVO observed in the study was consistent with what we observed in previously reported studies of the combination as more data from the study become available from BMS, including the biomarker panels and subgroup analysis, we will carefully review these data to better understand the outcome of this study. Additionally, after consideration and discussion between our 2 companies and based on the results from this study in metastatic melanoma, BMS and Nektar have also made the decision to stop enrollment and unblind the ongoing PIVOT-12 study in adjuvant melanoma. As a reminder, the metastatic melanoma study was initiated on the back of highly promising Phase II data, which suggests that adding BEMPEG to OPDIVO may increase efficacy in melanoma patients, and these data led to a breakthrough designation for this doublet in this setting. Those results with BEMPEG in combination with OPDIVO, gave both BMS and Nektar great hope in the program and the continued financial and operational commitment from BMS for the past several years on this program reinforced Nektar's confidence. BMS' investment included the continued majority share of the development cost of a large development program for 6 late-stage clinical studies of BEMPEG in combination with OPDIVO and included their substantial preparations for a potential commercial launch. This is one of the reasons why we're truly surprised at the results announced today, which were unexpected by all of us. Now let me move to what the result means for BEMPEG and other tumor types, which are separate and distinct for melanoma. We have 4 registrational studies or earlier studies ongoing with OPDIVO, 2 in renal cell carcinoma and 2 in bladder cancer, we will have top line data available from the Phase III RCC study in the next month and data from the Phase II bladder study shortly thereafter. We look forward to collaborating with BMS to evaluate the data from these studies to guide future development of BEMPEG. Certainly, these results will contribute to our understanding of the role of IL-2 in combination with an anti-PD-1 agent. As these data emerge, we, with BMS, will consider whether we're able to file a BLA for the BEMPEG plus OPDIVO combination in either of these settings, whether results from the melanoma study have any read-through to the studies in renal cell carcinoma and bladder cancer remains an open question for us and that will be answered shortly with the top line results. With respect to earlier studies for BEMPEG, such as our non-small cell lung cancer PROPEL study will be quickly determining next steps. We also work with our partner, SFJ, on what the next steps will be for the head and neck cancer study. As a reminder, SFJ has financial responsibility for that study and any potential wind-down activities if that is the ultimate decision. I know this is terrible news and we're all shocked and devastated by these results. So many at Nektar worked hard on this program for many years, as did many at BMS with the hope that we would have a significant new treatment option for melanoma patients. So what does today's announcement mean for Nektar as a company? Our team has worked diligently to build a pipeline of important clinical and research programs that include NKTR-255 in cancer and NKTR-358 in autoimmune disease. We believe in the cytokine programs we've discovered at Nektar and the application of our PEGylation technology to these molecules, and we absolutely do not believe there should be a read-through from the results today to the rest of the pipeline. First, let's start with NKTR-255. NKTR-255 is a completely different cytokine. It is an IL-15-based program in cancer with a primary NK cell mechanism. The biology within NKTR-255 is not overlapping with BEMPEG. Additionally, NKTR-255 leverages a completely different PEGylation approach, which closely resembles the techniques used in earlier biologic approaches with approved PEGylated agents. And as you know, we have multiple data readouts from the NKTR-255 studies in liquid and solid tumors over the next 6 to 12 months. We recognize that single-arm combination data from these studies should be heavily scrutinized. To that end, we understand the importance of rapidly creating proof-of-concept data for NKTR-255 that can provide a strong basis for future investment into the program and can reinforce our understanding of the contribution of components for our ADCC combination work. We plan to modify these ongoing studies with the addition of reference arms. We also recently opened enrollment into a monotherapy arm in the solid tumor study to evaluate NKTR-255 as a monotherapy in cutaneous squamous cell carcinoma, cervical or anal cancers. And for NKTR-358, we're also expecting multiple data readouts over the next 12 to 18 months for this T regulatory cell agent partnered with Eli Lilly. This program has already generated strong proof-of-concept data for 358 as a stand-alone therapy in lupus and in atopic dermatitis, both data sets for NKTR-358 are comparative as well. These early data underscore the Phase II work being done on NKTR-358 in lupus, atopic dermatitis and in ulcerative colitis. Additionally, the future royalties from the NKTR-358 Lilly program are substantial to Nektar and range from the mid-teens into the low 20s and the potential indications are substantial and we believe the value of this program is significant to our company. We ended 2021 with approximately $800 million in cash. Today's results will obviously mean that we have to make changes to our business operations and the structure of Nektar. These changes will be substantial and will be difficult to undertake, but we're preparing a plan that has the goal of establishing a minimum cash runway through the end of at least 2024 with our existing cash balance. We'll provide more details on our revised financial plan on our Q1 conference call in early May. And with that, I'll open the call for Q&A...

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

This is Alex on for Peter. At this point, do you have any insights into whether any subgroups of patients may have shown a benefit?

This is Dimitry. So as we stated on the call, we have received the DMC report. And by the primary analysis specified, there were no subgroup analysis performed as of this time. That's something that will happen shortly once we receive the online data.

Our next question comes from Chris Shibutani from Goldman Sachs.

I appreciate the burden at the head in terms of figuring out how to streamline operations to continue with your cash at $800 million as of the end of last year. Can you talk about the relative proportion of how we think spending in some of these clinical programs that you have will be a factor there? In particular, if you are in position at all to make any changes with your current partners that could perhaps secure visibility on your ability to continue to fund operations through '24.

Yes, Chris, thanks for the question. This is Gil. I think a couple of important things that we're thinking about. The first is that BMS continues to have the obligation to pay 67.5% of the program going forward, and that would include any wind-down costs of studies. We don't have the details on our revised financial plan at this time. But as Howard said, we are going to look at making substantial changes to our operations to extend that runway. So we'll have that detail over the coming weeks and on our May conference call. So we'll get back to you with more detail on our plans...

Our next question comes from Jessica Fye from JPMorgan.

This is Jialiang on for Jess. So just would love to quickly confirm the hazard ratio, you gave us at 1.09, and that refers to the PFS, but not the OS endpoint? And then is any color you can share with us regarding the medium PFS from the study? And is it like very different from the Phase II medium PFS data you have collected previously.

Yes, this is Dimitry. I can take the question. Indeed, I can confirm that the hazard ratio is 1.09, and that the confidence in the fall. And to be precise, that's the 97% confidence into fall was 0.88 to 1.35. OPDIVO performed in line with our expectations with a median PFS of approximately 5 months. And therefore, the results are obviously very different from the Phase II. And as I said before, it's really about the comparison between the 2 arms. We know that OPDIVO did what we would expect it to do and with a hazard ratio of 1.09. That means that, let's say, the estimate for BEMPEG is slightly less favorable than for OPDIVO.

Our next question comes from Greg Harrison from Bank of America.

As far as the read-through to RCC and bladder, are there any either aspects of this trial you could point to that were maybe different than expected? Or just differences in the disease that would give you some sense that you may see success in those indications. [Technical Difficulty]

Pardon me, this is operator. Please standby.

Okay. And with respect to the biology -- the second question, the biology of RCC and bladder cancer, there is some evidence in the literature with respect to the differences in the biology across these tumor types. So for instance, the biology of RCC and UC, they share differential features to melanoma in this regard. So for example, we know there's additional biological cell types that are more present in tumors from the GU cancers, the RCC and UC. For example, a greater preponderance of NK cells is associated with better outcome in patients whereas in melanoma that's much more driven as the CD8 T-cell. And both of these are components of BEMPEG's biology. So besides there being multiple opportunities with different tumor types, there are also different features of IL-2 pathway and BEMPEG's mechanism that make it a good combination partner for testing in both of those tumor types. And I think there was a technical problem. So for the first question, which was a read-through question regarding RCC and bladder. We just want to reiterate that the reason why we evaluated BEMPEG plus nivolumab in multiple tumor types at the same time is to give ourselves, patients and BEMPEG the maximal opportunity to succeed, offering multiple opportunities with shots on goal in multiple studies. And that's why we're running all of those studies at the same time. And we're really excited about the next coming readouts for the program. which are within the next month to read out for renal cell carcinoma and shortly thereafter, the readout in urothelial carcinoma.

Our next question comes from Christopher Zopf from Goldman Sachs.

I was curious if you're able to share anything about potential differences in enrollment between patients in the Phase II versus the Phase III for the study? Any differences in, say, the proportion of PD-L1 status between the 2 studies?

Yes. This is Dimitry. Thanks for the question. We've looked at this, of course, in detail and also very importantly, looked at other registrational trials in melanoma, including the CheckMate 67 and the RELATIVITY-47 study with like III and then, of course, our own PIVOT-02 trial. And across the board, we can say that the patient characteristics are very similar across all the different trials and are as expected in the melanoma population. Specifically to your question on PD-L1, we did see a slightly higher percentage of PD-L1 positive patients by the same threshold of 1% that was used in the RELATIVITY trial. Our breakdown was 50-50 in this trial, where it was 60-40 in the RELATIVITY trial. As I said before, we don't have the results from the subgroup analysis. This kind of difference in a randomized trial, I don't think is a likely explanation for the results of the trial, but we will look at the subgroup analysis when they become available.

Our next question comes from Mara Goldstein from Mizuho.

I think, I wasn't sure maybe -- sorry, by the way, this is Supawat for Mara. I guess my question is, have you looked at other parameters rather than DMC, as you know, like, for example, on the AEs, whether it is consistent with the earlier trial?

Yes, that's something -- this is Dimitry again. This is something we've looked at in detail as much as the details are available from the DMC report. And overall, the AE profile for both arms is as what we would expect. We see, let's say, a number of specific AEs for BEMPEG in the BEMPEG arm. The nivolumab AEs are within line of previous trials. And the number of discontinuations, for example, is what we would have expected. So within the safety profile, there are no signals that we can point to, to say that was the reason why we can explain the results of the trial. Overall, the safety profile was as expected.

Thank you. And this does conclude our question-and-answer session for today's conference. I'd now like to turn the call back over to Howard Robin for any closing remarks.

Well, thank you, everyone, for joining us this morning. And we look forward to coming back to you with our plans to move forward. And I know we'll be speaking with many of you over the coming days. We share your disappointment today. We really do appreciate your support of shareholders and we will fill you in on our business plans at our Q1 earnings call. Thank you.

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