Nektar Therapeutics (NKTR) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Nektar Therapeutics Analyst and Investor Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Ms. Jennifer Ruddock, Head of Corporate Affairs. Please go ahead.

Thank you, Crystal, and good afternoon, everyone. Thank you for joining us today. With us on the call are Howard Robin, our President and CEO; Gil Labrucherie, our COO and CFO; and Dr. Jonathan Zalevsky, our Chief of Research and Development; and our newly appointed Chief Medical Officer, Dr. Brian Kotzin. On today's call, we expect to make forward-looking statements regarding our business, including clinical trials, enrollment and clinical trials results, timing and plans for future clinical trials, timing and plans for future clinical data presentations, the therapeutic potential of our 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 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 the 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 will be available on the IR page of Nektar's website at nektar.com. Before turning the call over to Howard, I'd like to remind you again that since we all are dialing in from different locations, I will moderate the Q&A session again for our team, so we can avoid technical issues on everyone's end. We appreciate your patience. With that said, I would like to hand the call over to our President and CEO, Howard Robin. Howard?

Thank you, Jennifer. Thank you. Good afternoon to everyone. Today is a difficult day for all of us at Nektar. And as you can see from today's press release, as we told you when we last spoke in mid-March, we're making substantial changes to our business operations and setting in place a new strategic plan for Nektar. The key elements of the plan are as follows: first, focus our efforts on value-enhancing data and other milestones across our key pipeline and partner programs to drive increased shareholder value over time; second, rightsize the organization to align optimal resources to drive these key development programs and research initiatives; and third, ensure Nektar has a cash runway for the first half of 2025 with the existing capital on hand. Over the past several weeks, the executive team has made decisions to prioritize key research and development efforts that will be most impactful to the future of our company. This new strategic plan refocuses our entire company around specific and prudent investments into our most important pipeline programs, NKTR-358, NKTR-255 and preclinical candidates, each of which we believe presents an opportunity to create significant value for our shareholders. These programs each have distinct opportunities and represent different approaches scientifically in distinct therapeutic areas. JZ will provide an update on our plans with each of these programs on the call today. All of us continue to be extremely surprised and disappointed with the results for BEMPEG. We clearly did not expect this outcome after many years of commitment to its success by BMS and our own teams. BMS made substantial investment into the promise of BEMPEG as a medicine for cancer patients. This fact, along with their immuno-oncology expertise, win our confidence in its future success as I know it did yours. Our employees should be proud of the innovation and effort that took us to accomplish this invention of BEMPEG. We set out to do something very important: transform the treatment of cancer by tackling the IL-2 pathway, which had great promise. We found a partner, a leader in immuno-oncology who also believes in the potential of using IL-2 in combination with their leading approved I/O drug. Given the outstanding results in Phase II in metastatic melanoma, we were all particularly shocked at this outcome, and we certainly never anticipated these results with the program. Drug development is a tough industry. Perseverance and grit combined with the hope that we can achieve medical breakthroughs are its most important traits. We remain extremely grateful to the investigators, patients and their families who participated in the BEMPEG studies, and I'm extremely proud of the employees at Nektar who worked diligently on what could have been a truly novel therapy for patients fighting melanoma and other devastating cancers. Because of the discontinuation of the BEMPEG program, we are taking actions to align our ongoing cost structure and head count with the new strategic plan for our business. Under the new plan, we are reducing our workforce by approximately 70%. The scale and scope of this reduction aligns with the substantial work we did to conduct late-stage registrational studies of BEMPEG and prepare for widespread distribution and commercial launch of BEMPEG. Ensuring that we have the capital and the resources to advance our pipeline has resulted in the need to make these very hard choices, ones that we all wish we didn't have to make. As we're planning to have a cash run rate through the first half of 2025, we do not anticipate a need to raise any external capital while executing on our key pipeline and partner programs, in their corresponding value inflecting milestones. We ended the first quarter with approximately $700 million in cash and investments and no debt on our balance sheet. Gil will review in more detail our specific actions and adjustments to the cost structure in a moment when he updates the financial guidance for 2022. We also have announced several changes to the executive team at Nektar, Dr. Dimitry Nuyten will be departing as Chief Medical Officer; and Dr. Brian Kotzin will -- our current Head of Immunology is being appointed as our new CMO. Brian has over 30 years of drug development experience and is a recognized leader in the fields of inflammation and immunology, and we're pleased that he is assuming the role of CMO. His strategic guidance will be invaluable to Nektar as we continue to execute on development activities for R&D pipeline programs. We thank Dimitry for his contributions and wish him well in his next endeavors. John Northcott, our Chief Commercial Officer, who is instrumental in preparing our company for commercial launch of BEMPEG will be stepping down from his role this summer and will serve as a strategic consulting advisor to the company. John is an outstanding leader and we value his input and continued guidance. A strategic plan going forward is built upon 3 core R&D pillars to create value. First, we plan to fund development of NKTR-358 for maximum royalty participation. These royalty percentages range up to the low 20s. And if successful approvals are reached, we also have the option to co-promote under our agreement with Eli Lilly. Second, we plan to develop NKTR-255 prudently in the areas of strength and differentiation with a focus on its role as a cell therapy potentiator. And third, we plan to invest in core research programs in immunology, oncology and other areas. I'll now let JZ briefly take you through these 3 pillars and our plan for each program as well as the upcoming data catalysts.

Thanks, Howard. I will walk you through an update on each of our programs: NKTR-358, NKTR-255 and our research programs. Let's first start with our immunology program, NKTR-358. With NKTR-358, we've utilized a completely different approach with our PEGylation chemistry to capture the immune-regulating potential of IL-2 by specifically stimulating T regulatory cells or Tregs. Thus, our goal with NKTR-358 is to address the underlying Treg abnormalities in autoimmune disease and to develop an IL-2-like molecule that could selectively stimulate Tregs in a more effective manner than low-dose IL-2. The data that emerged from the program in both the lupus and in atopic dermatitis has reinforced our conviction in this approach. In a Phase Ib multiple ascending dose study of NKTR-358 is compared to placebo in lupus patients, NKTR-358 led to a dose-dependent reduction in lupus skin disease activity measured by the CLASI activity score in the subset of 18 patients with a baseline score greater than or equal to 4. These data, along with the PK, PD and safety information we collected in our Phase Ib lupus trial, led to Lilly launching a Phase IIb dose range-finding study in 280 lupus patients, which is under way and recruiting nicely. Late last year, Lilly announced exciting initial proof-of-concept data in the second dermal disease pathology, moderate to severe atopic dermatitis. The 12-week study conducted by Lilly tested 2 doses of NKTR-358 compared to placebo and then followed patients for quite a while after the last dose of the therapy. Treatment with NKTR-358 showed a dose-dependent reduction in eczema, area and severity index scores in patients, also known as the EASI scale, with approximately a 70% maximum reduction in scores at week 12 at the highest dose tested. The efficacy seen is in line with the current standard of care DUPIXENT, after 16 weeks of treatment with that agent. But clearly, the most fascinating observation from the study was that when we looked at patients 36 weeks after we stopped dosing NKTR-358 therapy, their skin scores remain very low, and in fact, even dropped further during this extended period. This has us and Lilly very excited about the potential for durability with NKTR-358 in the setting of atopic dermatitis. The data set from the Phase Ib study of NKTR-358 atopic dermatitis will be submitted for presentation at an upcoming dermatology meeting in September of this year. In addition, results from the Phase Ib study in psoriasis patients will also be submitted for presentation at the same meeting. Built on early proof-of-concept data, the Phase II program for NKTR-358 includes the ongoing 280-patient Phase II study in lupus, a second Phase II study planned to start shortly in 300 patients with atopic dermatitis and a third Phase II study being planned in a yet-to-be-announced autoimmune indication, which could potentially start in 2023. We were very recently informed by Lilly that an interim analysis in ulcerative colitis has led to the discontinuation of development in this indication. The aggressive mucosal inflammation driving the disease in patients with UC is vastly different than dermal inflammation observed in patients with atopic dermatitis and the systemic inflammation observed in SLE, with SLE also being specifically characterized by dysfunctional Treg compartment and reduced levels of IL-2 and IL-2 signaling. Lilly reinforced their conviction to pursue development of NKTR-358 in other autoimmune diseases as each indication has its own clinical hypothesis. The Phase II studies in atopic dermatitis and lupus evaluate multiple doses of NKTR-358 as compared to placebo and should provide proof-of-concept data to make decisions on proceeding to potential Phase III studies in each indication. It is standard for Lilly to design interim analyses in Phase II, although they vary in their objectives. In order to protect the integrity of ongoing trials, Lilly does not comment on the timing of these interim analyses. We do expect additional data from the Phase II program over the coming 12 to 24 months. Second, moving on to NKTR-255. Our development plan is focused on key areas of differentiation and strength for the development of NKTR-255. Additionally, our plan includes leveraging external collaborations with partners to generate proof-of-concept data. The first area of focus for our development work is being conducted by our collaborators who are combining NKTR-255 with anti-PD-L1 agents. Our partner, Merck KGaA, is initiating the Merck JAVELIN Bladder Medley Study in the second quarter of this year. We really like the study design that Merck is implementing and is sponsoring. The study will compare NKTR-255 in combination with avelumab, to avelumab alone in the setting of maintenance treatment for bladder cancer in patients whose disease did not progress following a platinum regimen. This is a setting where avelumab is approved and currently has sales of approximately EUR 120 million per quarter. The foundation of this collaboration is the unique scientific rationale of the combination of NKTR-255 with avelumab, which to remind you, is a PD-L1 inhibitor with an ADCC active IgG1 Fc region. The JAVELIN study should provide us with clear comparative proof-of-concept data in these patients. The primary endpoint of the study is progression-free survival. It also gives NKTR-255 a possible path in a future registrational trial in this setting based upon the strength of the data generated in this Phase II study. The study also includes separate arms with Merck's own TIGIT program and Gilead's Trodelvy. The NKTR-255 arm will be compared statistically only to the avelumab arm. So it's a unique basket study design in that regard. We expect the first potential data from the study in 2024. Our second study of NKTR-255 combined with an anti-PD-L1 agent is a single site collaborated trial being conducted at MD Anderson Cancer Center in the lab of Dr. Steven Lin. The study will combine NKTR-255 with durvalumab, also known as IMFINZI and its approved indication of Stage 2 to 3 non-small cell lung cancer following chemoradiation. The study will assess activity of the doublet in this patient population in order to help us understand the future development path for NKTR-255 in this setting. The second area of focus for our development work is to pursue the potential of NKTR-255 as a cell therapy potentiator in the broad and developing landscape of cell therapy. Our rationale to pursue this path is based upon a number of clinical and preclinical observations. Clinical responses with chimeric antigen receptor T cells, or CAR-T, they tend to relapse over time for many patients -- and so there is both a high unmet need to provide an extended duration of response as well as to drive to a higher frequency of complete responses. High IL-15 levels observed after the conditioning regimen are correlated with durable clinical responses to CAR T cell therapies. In preclinical models, evaluating multiple liquid tumor antigen or solid tumor antigen targeting CAR-T agents, NKTR-255 drives CAR-T expansion, a favorable CD8 to CD4 CAR-T ratio, persistence of CAR T cells after their administration and their infiltration into the tissues where the tumor resides in these various models. So for example, into bone marrow in the liquid tumor model setting, and in the peripheral side of tumor implant in the solid tumor models. As an example of the CAR-T persistence seen with NKTR-255 treatment, we've even observed reduced relapse in disease-free mice rechallenged with tumor even without the need to retreat the animals with either additional NKTR-255 or give additional CAR-T cells. And at ASH, in 2021, we reported the first clinical results for NKTR-255 in patients who had received prior CAR-T therapies, some up to a year earlier, and observed an increase in CAR-T cells in these patients. We believe NKTR-255 could play a key role in the enhancement of CAR-T cell persistence, which could ultimately allow us to help extend the duration of benefit of these therapies. To that end, we currently have 2 studies underway with external collaborators to evaluate NKTR-255 in combination with CAR-T therapies. The first study is sponsored by Dr. Crystal Mackall, who is the Founding Director of the Stanford Center for Cancer Cell Therapy. Stanford is combining their proprietary CD19, CD22, CAR-T cell therapy with NKTR-255 in patients with relapsed or refractory acute lymphoblastic leukemia. They intend to study the regimen in up to 24 patients who will receive NKTR-255 approximately 10 to 14 days following CAR-T infusion, and then receive it on an ongoing basis every 28 days for up to 9 additional cycles, if needed. Although the CR rate is high with this therapy, there is a high rate of relapse and a short duration of response as well as a short median PFS. Our goal is to evaluate whether NKTR-255 can extend the duration of patient CRs with this regimen. And we expect to have results from the first several patients in the study by Q4 of this year. The second study is being sponsored by Dr. Cameron Turtle's lab at the Fred Hutchinson Cancer Center. The Hutch is combining NKTR-255 with BREYANZI or liso-cel, an approved CD19 CAR-T cell therapy in relapsed or refractory large B-cell lymphoma patients. In this study, we will look at dosing NKTR-255 in the same window of 10 to 14 days following CAR-T infusion and then continuing every 28 days. As you know, the Hutch has presented compelling data associating high levels of IL-15 with better response in these patients receiving CD19 CAR therapies. They are eager to evaluate NKTR-255 as a full agonist of the IL-15 pathway in this setting, particularly its ability to increase the number and duration of CR for patients receiving the therapy. We also expect to have results from the first several patients in this study by Q4 of this year. Based upon the promise of NKTR-255 as a cell therapy potentiator, we are also currently designing a Nektar-sponsored comparative study of NKTR-255 combined with approved CAR therapies, and we hope to initiate that study in the second half of 2022. The goal would be to generate comparative data in this setting, and our work here could enable future potential registrational trials. The third area of focus is for our Nektar-sponsored ADCC combination studies underway with NKTR-255. We have 2 studies ongoing in liquid and solid tumors in combination with ADCC antibodies. Our current plan is to complete the dose escalation work in these studies and let the data mature. We plan to present these mature dose-escalation data at a future medical meeting. As you remember, we stated last month that we will be evaluating these studies to assess whether we want to design comparative arms for them. While we have seen interesting early activity in these trials, the cost for conducting comparative trials in these settings is significant and the development pathway for such a combination therapy could be more complex. Therefore, we want to wait to assess the mature data from dose escalation before making a final determination as to whether to invest in future ADCC combination work. Finally, moving on to our third pillar in the plan, which is cultivating our research programs with the near-term research work focused on immunology and its application to oncology and autoimmune disease. The first program we are working on, NKTR-288, is the PEG conjugate of the protein interferon gamma. This molecule is designed as a site-specific conjugate PEG to protein in order to modify binding of interferon gamma with 1 of its substrates, and overall, to greatly optimize the pharmacodynamic duration of interferon gamma signaling. This program has application in a number of indications, including oncology as well as infectious disease and others. We are progressing this program through IND-enabling studies and in addition to our internal work, will explore collaboration opportunities to bring this program into the clinic. Our second program is being developed under a collaboration with Biolojic Design that we entered into in 2021. And this program is an example of our push to bring in external candidates and new modalities into our pipeline. Biolojic's antibody platform is being used to design novel antibody binding specificities using their proprietary artificial intelligence or AI platform. The AI-driven antibody engineering capabilities of Biolojic are especially useful for the design of epitope-specific antibody-based agonists. And in this collaboration, we are working on a unique bivalent agonistic antibody targeting TNFR2, also known as the tumor necrosis factor receptor 2 pathway. TNFR2 is highly expressed on T regulatory cells, neuronal cells and endothelial cells. TNFR2 agonism has been shown to potentiate the suppressive effects and overall functional properties of Tregs. Its absence is associated with CNS autoimmunity and its presence has been associated with protective effects for neuronal cells as well as other cell populations and tissues in the body. We expect to choose a candidate for IND-enabling studies by year-end. Our third program, which was invented in our research laboratories at Nektar, is a biologic candidate focused on targeting immune cell populations that participate in tissue repair and tissue protection. This program uses polymer engineering to modify a nonlymphocyte-targeting cytokine. We are looking forward to sharing more on this target as we continue the in vivo characterization and advance it into IND-enabling work. As we described with NKTR-288, we will also explore collaboration opportunities to bring both of these programs into the clinic. And with that, I will hand the call to Gil for a review of guidance and to provide more details on our cost restructuring plan.

Thank you, JZ. As Howard said, we are highly focused on executing the new strategic plan for Nektar, which is being implemented immediately. We are proud of the talented colleagues that came to Nektar to work on the promise of the BEMPEG program. While this is and has been a difficult time, the restructuring actions we are taking are necessary in order to sustain our business and advance a key value-enhancing clinical milestones over the coming months with the existing capital on hand. We have a pipeline of very promising programs in the clinic, including NKTR-358 and NKTR-255 as well as a number of innovative preclinical programs that JZ just described. Our new long-range operating plan is designed to support the advancement of these programs through a steady stream of data catalysts that we expect to occur beginning in the second half of 2022 and over the coming 3 years and beyond. We believe our current restructuring is the best way to grow the long-term value of the business. Now I'd like to summarize the key actions we are taking to reduce our ongoing operating expenses. We are reducing our headcount by approximately 70% from around 735 employees to 225 employees. Our remaining head count includes approximately 65 employees dedicated to our manufacturing business in Huntsville, Alabama. We are optimizing this business structurally to operate on a cash breakeven basis to serve our PEGylation reagent customers such as UCB Pharma, Takeda and Pfizer as well as to manufacture product for our proprietary R&D programs, including our collaboration with Eli Lilly on NKTR-358. Our annual -- on an annual run rate basis, this reduction in personnel alone represents approximately $120 million in annual operating expense savings. We have been actively working with BMS on the most efficient operational wind-down of the BEMPEG program, consistent with our obligations to patients and their physicians. The studies are being discontinued and patients will be transitioned to standard-of-care options. We are closing our site in Hyderabad, India, where we own a research and development facility, consisting of approximately 88,000 square feet. We plan to pursue a sale of the Hyderabad lab in facilities in the near term. We also plan to sublease a substantial portion of our facilities in the San Francisco Bay Area, while still maintaining sufficient office and laboratory space to allow our team to continue to innovate and drive forward our proprietary programs. Now I'd like to turn to our preliminary first quarter financial results and updated financial guidance for 2022. We ended the first quarter in a strong financial position with approximately $704 million in cash and investments. And after accounting for BEMPEG wind down and restructuring costs, we now expect to end the year with approximately $440 million to $450 million in cash and investments and no debt on our balance sheet. Beginning in full year 2023, our average annual net cash used in operations will range between $150 million and $175 million, which represents a reduction of $225 million to $250 million, prior to the restructuring and reprioritization we announced today. With this reduction in annual operating expenses, our plan is built to ensure our cash runway through the first half of 2025. This should take us through several key value-generating milestones for our pipeline. As Howard stated earlier, our plan includes fully funding Nektar's 25% share of the NKTR-358 development program. There are a series of expected milestones that we will receive through the late-stage development of NKTR-358 under our collaboration agreement with Eli Lilly, totaling $250 million, and these include the following: $50 million for the first patient enrolled in a Phase III clinical study; $75 million upon the first Phase III study to meet its primary end points; $75 million for the first BLA approval in the U.S.; and $50 million for the first European approval. These milestones are a critical component of our collaboration agreement with Lilly as they essentially help us pay for Nektar's share of the 25% funding participation in Phase III studies of NKTR-358. Our GAAP revenue is expected to be between $85 million and $95 million in 2022. Our revenue includes $70 million to $75 million in noncash royalty and $15 million to $20 million in product sales. We expect to recognize approximately $25 million in total revenue in the first quarter and the remainder on a fairly ratable basis over the remaining 3 quarters of 2022. In connection with the business restructuring and reduction in head count, we expect to take an impairment charge of $150 million to $160 million, a substantial portion of which will be recognized during the second quarter ending June 30, 2022. The restructuring charge includes the following: severance and benefits for approximately 500 employees that will exit this week in the restructuring, totaling approximately $35 million; our share of the future cost to wind down the BEMPEG clinical program, totaling $65 million to $75 million; a noncash impairment charge of approximately $40 million to $50 million, associated with a portion of our San Francisco facilities that we will no longer occupy and for which we will be seeking a sublease; a write-down of commercial and other IT systems and laboratory equipment, that we will have no future use with our revised operating plan, totaling approximately $5 million. We anticipate full year 2022 GAAP R&D expense will range between $240 million and $250 million, which includes approximately $40 million to $45 million of noncash depreciation and stock compensation expense. We recognized approximately $110 million in R&D expense in the first quarter, and the remainder will be recognized on a fairly ratable basis over the remaining 3 quarters of 2022. G&A expense for 2022 is now projected to be between $90 million and $95 million, which includes approximately $30 million of noncash depreciation and stock compensation expense. We expect to recognize approximately $28 million in G&A expense in the first quarter and the remainder on a fairly ratable basis over the remaining 3 quarters of 2022. G&A expense for 2022 includes approximately $10 million of rent, maintenance and utilities of San Francisco facilities, which we will vacate and intend to sublease. Additionally, our preliminary first quarter results include the derecognition of our development derivative liability with SFJ Pharmaceuticals in connection with the BEMPEG head and neck cancer study. Due to the result of BMS' first-line melanoma trial in March, we determined that it was probable that our collaboration with SFJ and the head and neck trial would be terminated. The derecognition of this liability results in a gain of approximately $33 million that will flow through the income statement in the line item, change in fair value of development derivative liability for the first quarter of 2022. Any future noncash adjustments to the development derivative liability, if any, are not expected to be material. Our noncash interest expense is expected to be between $25 million and $30 million related to the monetization of our royalty streams described above. We anticipate filing our Form 10-Q for the first quarter on or prior to May 10, which will include our complete financial results for the quarter. Given that today, we provided an update on our business plan and revised full year 2022 finance, management will not be holding another conference call to further discuss first quarter financial results. And with that, we will now open the call for questions. Operator?

[Operator Instructions] And our first question comes from Jay Olson from Oppenheimer.

For 358, can you just talk about the time line during which you expect to become eligible for milestone payments from Lilly? And then for 255, could you just provide some color on the comparative study of 255 plus CAR-T therapy, for example, the study objectives and study size and when do you plan to initiate that study? And then maybe a big picture question. Do you envision Nektar transitioning into an immunology-focused company?

Thanks, Jay. This is Jennifer. I'm going to ask Gil to take the first part of that, JZ to take the second and Howard to take the third part. Go ahead, Gil.

Great. Thanks, Jay. Yes. So as I mentioned in my prepared remarks, the first milestone in the Lilly collaboration is $50 million on the start of the Phase III. And as JZ laid out, we expect to have Phase II data coming over the next 12 to 18 months. So it's a little early to be guiding on the start of the Phase III, but that would be when the when the first milestone will be received when Lilly makes that go decision in one or more of these indications.

This is to the next question that you asked about the 255 comparative study. So firstly, to reiterate from what I presented earlier, the 2 studies we are running now are both investigator-sponsored studies, right, one led by Dr. Crystal Mackall at Stanford and the other by Dr. Cameron Turtle at The Hutch. And so both of those are evaluating the combination of 255 with different CAR-T agents in different indications. The Nektar-sponsored study that we would like to run will be a truly comparative study. So in that trial, which we're still designing, but what we would like to do is to compare a group containing a CAR-T alone or, for example, with placebo versus a group containing NKTR-255 plus the CAR-T agent. We'd like to focus on the approved CAR-T agents and in the indication where they're approved as well. So those would be some of the kinds of elements. And then we're still working out some of the details in terms of the overall size of the study, and we're having a lot of discussions with experts in the field and advisory and kind of steering as you commonly do when you design these kind of studies. And we expect that, that study will begin before the end of this year.

Okay. Let me -- this is Howard. Let me take the third part of your question. Look, we've spent a lot of time working on oncology as well as immunology. And if you look at NKTR-358 as well as the other potent molecules that we invented, there's a potentially very exciting role for them in the area of immunology. Autoimmune disease will become a focus. JZ talked earlier about some of the programs we're working on. We haven't discussed them in detail, but a number of the programs we're working on in our preclinical research evolve around autoimmune disease. And our new CMO, Brian Kotzin, is really clearly one of the leading authorities on developing drugs in the area of autoimmune disease. So I do think we will gradually shift over probably more of a focus in immunology, and I think that's where our underlying strengths are. But certainly, we will have some oncology programs also in development.

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

The main question I have is, would you look to enter into other partnerships similar to the Lilly partnership where you had maybe less upfront investment in a larger company running and paying for the bulk of the pivotal trial? It seems like it might be an efficient way to develop given the need to preserve cash. And then are any of the milestones due from Lilly assumed to be received when -- in your projected cash runway?

I'll let Gil answer the questions on that. Let me take the first part of your question. First, look, we're looking -- we're always going to be looking at any opportunity that makes sense for us and makes sense for the shareholders. And I think we would be certainly open to those possibilities. We are in the process of talking to the various companies about working together on some of our programs, just like we put together this collaboration with NKTR-255 and Merck. I think there's other opportunities for some of our programs as well. So we have preclinical assets that I think can have value to somebody, although not as much -- you're correct, not as much value upfront as they would if they were further developed. But I do think at this point, we will look at every possible opportunity every business combination possibility and see what makes sense for us and our shareholders. Gil, maybe you could answer the question regarding the timing of the milestones.

Yes. Absolutely, Howard. So the way to think about the milestones, as I described in the script, it essentially self-funds the Phase III program. So we do have milestones in there for Phase III in the later years, but we also have the expenses. So they essentially fund themselves. So in terms of the runway, it won't have an effect on our total operating plan.

Our next question comes from Mara Goldstein from Mizuho.

Just on the sale of Hyderabad facility, can you maybe provide a little bit of color around, a, the timing of that and the magnitude of that and whether that's incorporated into that 2025 cash runway?

Yes. So obviously, we just recently made that decision with Hyderabad. So we're assessing that now. We expect it to take a number of months to put -- market the facility and sell the facility, but we do have some proceeds into our plan. I mean, it's in the high single-digit millions that we would expect to recover based on the sale of the facility. But we don't have a precise timing on that, but I'd say 6 to 12 months, I think that is a reasonable time frame to think about for a sale of that facility.

Our next question comes from Jessica Fye from JPMorgan.

This is JL for Jess. So on 255, can you -- is there any color you could give us to help us understand, do you -- how do you decide whether you actually run the Nektar-sponsored comparative to study with the CAR-T cell therapies? Are there any gating factors from the 2 investigator study that you mentioned? And then outside of CAR-T cell therapies, do you or have you evaluated the potential 255 to be combined with the, let's say, NK cell therapy considering the dual impact of IL-15 on both T and NK cells?

Yes. I'm going to ask JZ to answer those 2 questions.

Sure. Yes. JL, so first off, with the 2 IST studies running, it is a very nice thing that those studies are already open, right, and they're recruiting patients, right? And so that does definitely help inform the kinds of considerations into the sponsored study design that we will be running. They're not gating per se, specifically to your question, it's not gating, but it's very helpful because it's all correlative information that will be used in the design of the study that we execute and begin later this year. And to your next question, I mean, absolutely, we fully agree with you about the opportunities in NK cell therapy. I think you're aware that there are other IL-15 molecules used in an NK therapy setting. And even in our [ heme ] study, we have even enrolled patients that were on a prior NK therapy as well. Of course, the mechanism of action with a molecule like NKTR-255 is very heavily aligned on to the NK cell axis with CD8 T cells being sort of like the second most sensitive cell population. So certainly, the use in NK cell potentiation is essential. And one example of that also, which is kind of parallel to your question is it even takes us into the reason for the underlying scientific rationale of the combination of NKTR-255 with avelumab. That takes us into the collaboration we're running with Merck KGaA. And that is in their studies, they even identified NK cell levels and NK cell phenotype as a biomarker that was functionally correlated with patients' improved response to avelumab in their JAVELIN clinical study, the JAVELIN 100 trial. Again, just sort of further strengthening the connection between NK cells and these mechanisms and further strengthening the connection between IL-15 agonism like the kind that NKTR-255 can bring with that cell population.

Our next question comes from Christopher Zopf from Goldman Sachs.

I just wanted to check in on 255, maybe a little more information you could share potentially on the maturity of the data that you're looking for. Is there anything specific you're hoping to see with longer follow-up? Can you comment maybe on if the escalation is fully enrolled? And do we have expansions enrolled as well? Is it looking for kind of late responders? Or what are you looking for there? And from your commentary, should we take it to mean that this is more of a 2023 event?

Chris, I'm going to ask JZ to take that.

Yes, Chris. And so to your question, it's actually a number of the things that you laid out. So the dose escalation is continuing in the study. So that's one of the essential points as we want to continue to dose range, right, as we complete that portion of the study design. And the other is that we want to look at patients that have sufficient follow-up so that you can make an assessment of the results, right, for a number of different factors from the response rate to the durability of the response as well. And so that's what we mean specifically in those 2 settings. And as I mentioned, for both of the studies, those dose-escalation periods are continuing. And so we will present the data at a future meeting, which could come in the very later part of this year or into the early part of next year. Again, we need to present a mature data set to make the results the most informative and robust.

Our next question comes from Boris Peaker from Cowen.

I guess many of them answered already, but can you maybe summarize the key data catalysts that we should expect to see over the next 6 to 12 months?

Yes. Boris, this is Jennifer. I think we went over a lot of those catalysts on the call. I think in the second half of this year, some of the items to be looking for just what JZ just mentioned, the solid tumor data in combination with ADCC. We should also have initial patients from the CAR-T collaborator studies. So probably half a dozen patients from those studies towards the end of the year. And then going into next year, we have this possibility that we're going to see data from the 358 study in lupus. That could be within the next 12 to 18 months, so that could be within that window. And then going into 2023, we're going to see additional data coming from the CAR-T studies as well. The Merck KGaA study is expected to read out in 2024.

Our next question comes from Andy Hsieh from William Blair.

I have 2. So JZ, you mentioned about your conversation with Eli Lilly recently. So we're just curious in light of the UC data, does it have any impact on the fourth undisclosed indication regarding whether they're going to start that or not? Second question is, if you look at the landscape, just curious if you have any thoughts on the armored CAR versus 255 where it's kind of added to CAR-T or NK cells. The question is really inspired by the data that Nkarta released earlier today about the de novo IL-15 approach.

Sure, Andy. So firstly, like as I explained earlier, so that there were multiple indications that we're evaluating together with Eli Lilly in the NKTR-358 program. And each of those indications has a different clinical hypothesis. In fact, that was the reason why we did such a broad collaboration with 4 different Phase II studies to evaluate different use potentials. And if you kind of think about even the indications that we're evaluating, they're exploring different types of inflammation that are underlying in the pathology of the different organs and the different diseases that are represented where we've been studying the molecule in the Phase IIb. So as we understand with Eli Lilly and as we described earlier today, we're continuing with that opportunity to move to that fourth indication, which they think could come as early as 2023. Now in the next question you had was about the armored CAR and the Nkarta results. And basically, I think that like you're starting to see that the combination of an important cytokine that can help regulate the CAR-T cell is a very important contribution, very important in its addition. Now of course, in our approach, we believe that adding an exogenous additional cytokine like NKTR-255 with molecules that already are approved with the label is a totally different approach. You can choose how long you give it, the way that you administer it, its duration of dosing as well as the timing. And so all of those things, we think, give a different level of functionality. But certainly, the next generation moving into CARs takes advantage of that understanding of the role that the cytokine can bring in helping the CAR T an even better medicine.

Our next question comes from Ben Burnett from Stifel.

I wanted to ask a quick clarifying question on 358. The co-promote, is there any color you can provide on sort of the parameters of trigger [indiscernible]? And I guess, is there opportunity for Nektar to increase ownership of 358? And then just if I could, just following up on that last question. Some of the initial dose-ranging work with 255 was done in both monotherapy and in combination. So I guess for this sponsored investigator-sponsored studies with CAR-T, do they -- will this include a separate dose-ranging effort? Or is there -- is the dose already been identified for 255?

Ben, I'm going to have Gil answer the first part of that question on the co-promote. And then I'll have JZ answer the second question on the 255 CAR-T studies.

Yes, Ben, on the co-promote, it's an option that we have in our agreement. So it's triggered sometime around the end of Phase III development. So it would allow us to participate in the commercialization of 358, if it made sense for us at that time with the business. So it's purely optional, and it's a way for us, if it made sense for us in our overall business plan to leverage 358 to start commercialization effort in autoimmune. With respect to the ownership percentage in the program, we've outlined a 25% development participation in the program. And this takes us up to that royalty in the low 20s. So that's the maximum participation of maximum ownership. And when you think about the size of these markets, each of them are multibillion-dollar markets. And 22% from top line revenue, it's a very significant piece of the economics of the program. I'll hand it over to JZ for your next question.

Yes. Thanks, Gil. So you asked a really good question about the dose-ranging. And it's also a very good question, it kind of even related a little bit to the question that Andy asked. So one of the things that we learned in studying NKTR-255 in the setting of CAR-T is that, as you know, the CAR-T cells, when they engage their antigen, they're triggered to proliferate, which is what T cells do when they encounter their antigen, right? And these cells with the kind of co-stimulatory design that they have in their chimeric antigen receptors, they do it as well. And when you add a cytokine during that antigen engagement, right? You're increasing onto the strength of signal. So they're hypersensitized to respond to a cytokine. So it's very important. And why even low levels of cytokine can have such a dramatic effect. So in these studies, we are evaluating different dose levels of NKTR-255. In fact, in the study that Dr. Turtle is running, there are multiple dose levels that will be evaluated in an escalation protocol. And so in the study and then the concept around the different studies and the dose levels used, we have a lot of experience with from the translational studies that we've done, evaluating the kinds of CAR-T proliferative responses that I just described and also in studying NKTR-255 in both the liquid tumor and the solid tumor setting, where we've really well characterized the systemic immunological effects of application of 255 in a patient that either has a heme malignancy or different kinds of solid tumor malignancies.

Thank you. And that 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.

Thank you, Crystal. I'll close by saying that we believe in the potential of Nektar and our pipeline for the long term. And it's clear and what is clear is the potential value in our pipeline that can create growth opportunities for our people, a path of bringing important therapeutics to patients and value creation for our shareholders. I'd like to thank those remaining with the company for their continued commitment and support to our organization. Although the events of the last months have been very difficult, we believe the steps we're taking to position us for future success will work. On behalf of the entire Nektar management and the Board of Directors, I want to express my deep and humble gratitude to the employees who will be departing Nektar. We are immensely grateful for their contributions you've made to the company, your dedication to the mission and your efforts to bring new medicines to patients with debilitating diseases. With that said, we will continue to revisit our strategic plan to ensure it aligns with our goal to reach value-enhancing milestones for our company and we will evaluate all paths forward, including various business development opportunities. So thank you for joining us today.

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