Nektar Therapeutics (NKTR) Earnings Call Transcript & Summary

Great. Good afternoon, everyone. Welcome. My name is Jess Fye. I'm a Senior Biotech Analyst at JPMorgan, and we're continuing the 42nd Annual Healthcare Conference today with Nektar. We're going to hear a presentation and then go into Q&A session after that. If you're in the room and you want to ask a question, you can raise your hand, somebody will bring you a microphone or you can also use the portal and it will send me questions on the iPad up here. So with that, let me turn it over to Jonathan Zalevsky to present.

Thank you, Jess, and hello, everyone. I'm here presenting on behalf of our CEO, Mr. Howard Robin. Unfortunately, Howard has COVID, was not able to make the conference. So, I'm here to present on his behalf. And I'm the R&D Chief for Nektar. So, there will be some forward-looking statements in today's presentation, and the most recent information is filed in our 10-Q from last November. Now, Nektar is a company that's focused on targeting the immune system to address the underlying immunological dysfunction in autoimmune and chronic inflammatory diseases. And we have 5 generally -- general pillars that we focus our activities around. The first is through our staff and our experience, we've developed an understanding of immunology. And that addresses different immunological pathways, targeting different cell populations and different underlying biologies in autoimmune diseases. One of our key goals is to address the underlying deficiency in regulatory T cells, address that cellular compartment actively to induce immune homeostasis. We have a range of novel targets in first-in-class differentiated mechanisms that we work with. And that includes rezpegaldesleukin, which I'll be speaking about today, as well as a new TNFR2 monoclonal antibody that's an agonist of that receptor, both of which target immune-resolving pathways. We've seen compelling proof of concept with our lead program, REZPEG, in multiple dermatological diseases, but really punctuated by our Phase Ib data in atopic dermatitis. And as an example, that's an indication with a very large addressable patient population. It's an area of very high unmet need and an area of growth, particularly with emerging biologic therapies. And through all of that, we focus our activities. We're prioritizing our work around our immunology portfolio. We're well-capitalized through the next 18 months of upcoming catalysts. And we ended last year with $329 million in cash, and that gives us a steady runway through the middle of 2026. Now, this shows our pipeline. On the upper portion of the slide are the programs that are focused in immunology and autoimmunity. REZPEG is our keystone program. It's undergoing multiple Phase IIb clinical trials, which I'll discuss today. NKTR-0165 is our TNFR2 agonistic monoclonal antibody and will be entering the clinic next year. And we also have a program that addresses granulocytes and the erythrocytic granulocyte biology associated with fibrosis and other immune resolving pathways. We also have 2 oncology programs that still we maintain in our pipeline. These are a bit more legacy, but they're ongoing 5 critical studies with NKTR-255 that we'll touch on near the end of the presentation, as well as the preclinical interferon gamma program, NKTR-288. So what are Tregs? Tregs are very important cells in our immune system. They respond to antigens, and they really antagonize antigen-driven auto-inflammatory reactions. They're really interesting because they can regulate multiple kinds of T-helper responses. So as shown here on this slide are Th1 responses that are dominant in a range of different diseases and conditions, Th2 responses as well as Th17. And all of those make up the constellation of dysfunctional T cells that drive canonical pathways of inflammation. And we know that we can address these with specific drugs that target those specific populations. So, one of the advantages of a Treg and a Treg agonist is that you can control all of these different kinds of biologies because Tregs can block all of these kind of a barren T-cell responses. Now, we created a molecule known as rezpegaldesleukin, which is a derivative of native IL-2, so actually the same sequence as native IL-2, and it's conjugated with our core competency of polymer chemistry technology. And when we did that approach, we created a molecule that's highly specific and highly selective for activating T regs, driving their proliferation and improving their overall homeostatic properties. Now the gold standard for activating Tregs in the body is basically IL-2. It's the primary non-redundant function of Interleukin-2. And the most penetrant phenotype in the IL-2 knockout mouse is the deficiency in regulatory T cells. Up to this date, really only clinical activity using low-dose IL-2 has been addressed in the clinic in order to activate regulatory T cells. But compared to low-dose IL-2, REZPEG has substantially improved and differentiated. For one thing, it has a 10-day half-life, making it very convenient for subcutaneous administration. It's far more selective for regulatory T cells, and it addresses the receptor binding profiles of the receptors across the cell populations that gives it that selectivity. And there's an emerging class of IL-2-based drugs that target the Treg pathway. And there are a number of examples in both small and large pharmaceutical companies that are addressing this field. REZPEG is uniquely positioned as the most advanced and most dominant player in this field. We have run 9 clinical trials in the REZPEG program and nearly 600 patients and healthy volunteers together. People have been treated with rezpegaldesleukin, many of them for up to 6 months of treatment duration. What we see with REZPEG is consistent and highly predictable clinical pharmacology. We know the dose response. We know the magnitude of regulatory T cells induced and the duration of their activation after a single or multiple repeated doses. And you can look and learn so much across these clinical studies. In fact, we've seen activity in clear-cut skin biological disorders. And that includes patients that have cutaneous lupus and skin manifestations of that systemic disease, patients with psoriasis, patients with atopic dermatitis. 3 different kinds of skin conditions, regulatory T cells driven by rezpegaldesleukin show clinical efficacy across those indications. And overall, with all of the patients treated, we see a well-tolerated agent with minimal side effects, very, very conducive to chronic systemic administration. And of course, our overall TPP is this being a self-administered drug that the patient will give themselves over the duration of treatment. Now, this shows an example of very recent data that we presented at the EADV 2023 just in October of last year. This shows the final study results from the Phase Ib study, which was a randomized, placebo-controlled trial of different doses of rezpegaldesleukin in patients with moderate-to-severe atopic dermatitis. In gray, you can see the placebo patients. In blue are patients treated with the lower dose of 12 micrograms per kilogram Sub-Q, and in red are patients treated with the higher dose. Patients were treated subcutaneously twice a month over a 12-week treatment period for 3 months. Now, there are a couple of very clear cut things that you can see from this data that really jump off the page. The first is you see a very rapid onset of response. You can see a dose dependence to the response. And at the end of the induction period at the end of 12 weeks, you see a very profound magnitude of efficacy, 83% reduction in percent change from baseline EASI score seen with the highest dose tested. This is very substantial. As you'll see later, this is really the largest magnitude of change that we've seen for a biologic and outside of one JAK inhibitor really only -- that's the only time that we've ever crossed the 80% threshold. The other very powerful element of the data is that we stopped treatment at week 12. But you can see that the patients maintain durability of their disease control all the way through week 48 for 36 additional weeks after we stop treatment. This kind of durability and potential remittive property is really not something you'd see with the standard of care drugs or other biologics for atopic dermatitis. And whether we focus on the physician-assessed endpoints such as EASI on the previous slide, or the patient-reported outcome, which is DLQI on this side, we really saw the same kind of effect, dose dependence and every endpoint that we assessed, including multiple PI assessed, the multiple patient reported, we all saw that same result, rapid onset of effect, dose dependence and the long durability of control. And these patient-reported outcomes in this disease are really important because that really assesses the overall disease burden to the patient, and it really substantially adds to the overall value proposition of this potential medicine. Now, Dr. Silverberg presented these results at EADV, and he made some very, very important remarks. And this is just a quote of his. But one thing that's really important is particularly as clinical immunologists as many dermatologists are, the ability to actually address the Treg compartment with a reliable agent is something that's really novel and really first-in-class and really just a completely new approach to addressing these diseases. He made this point, and it was obviously something that we took to heart because it really establishes both the validation of Tregs in these indications and for the first time, the ability to target them mechanistically for therapy. Atopic dermatitis in general is a very substantial opportunity. You can see the number of people that have this disease. It's a disease that comes on in childhood. For some children, it resolves with age. Many of us had allergies as children. But for many people, it doesn't. And as they advance into adulthood, the disease progresses and in particular, it starts to manifest with additional T-helper phenotypes, switching from Th1 often -- Th2 often to a Th1 disease as patients progress and get older. There are 3 really important issues that still face patients that are treated with this disease. We still need therapies that really impact more people that have the disease. We want to see more efficacy, meaning a greater magnitude of response and potentially durability a therapy-free remission. These drugs are chronic drugs and they're very inconvenient to patients because they require continuous dosing. So being able to offer very flexible dosing regimen is another big opportunity. And of course, the risk benefit profile always needs to be there, the tolerability of the drug and the ability to take it for a long time is essential. And there are major opportunities even against this field. We have primarily 2 classes of agents that are approved for atopic dermatitis. We have multiple examples of either IL-4/13 or IL-13 pro inhibitors. These are biologics. They're used after patients fail topical corticosteroids. They don't really offer a lot of dose flexibility. They don't offer durability when patients discontinue, the disease comes rearing back and they're plagued by some significant toxicity, particularly conjunctivitis and other kinds of issues. And these can creep in even after months of taking the drug. JAK inhibitors have also recently been approved. They're more difficult to use in the line settings. They come with multiple black box warnings. They do not control the disease durably when patients discontinue, within weeks, the disease comes back. And importantly, if patients have secondary comorbidities, such as being elderly diabetes or others, it's really contraindicated to take JAK inhibitors. So there's definitely an opportunity, and this is a very large field. And you can just see how REZPEG's data in Phase Ib compares to some of the important benchmarks. On the left of the slide in purple, are the approved agents and in blue are the very recent Phase II and some of the agents ongoing Phase III. And you can see that up and down, REZPEG is highly competitive in its profile against these other agents. So when we take a step back and we think about where we are with atopic dermatitis, in particular as an indication, with REZPEG, we see consistent effect, a rapid onset of action. We see dose dependency. We saw all those results in the blinded placebo-controlled study. And the efficacy across both the physician assessed and patient-reported outcomes were differentiated against the landmarks in the field. Then there were many other differentiating features such as the durability of response and altogether a favorable safety profile. And it really strikes us that first in rheumatology with the entry of TNF inhibitors, in psoriasis with the entry of Stelara and then later IL-17 inhibitors are now in this field. As more biologics come in, these markets really expand. There are so many patients to be treated. They're still underserved, particularly by systemic medicines and that really gives us a unique opportunity with REZPEG. And we're really following up on that aggressively. Last October, we began this Phase IIb trial that's shown here. This is a very large 400-patient Phase IIb study in patients that are biologic naive, and they have the same moderate-to-severe atopic dermatitis and inclusion criteria as the same population that we just studied in the Phase Ib that we were just looking at moments ago. In this study, we're doing a 16-week induction period. We're testing 2 different dose regimens, either once a month or twice a month. And then for patients that achieve an EASI 50 response at the end of induction, they can advance into maintenance. And in maintenance, we're testing both a monthly and a once every 3-months regimen. Now, we saw such a profound durability when we withdrew drug that we feel comfortable that a Q12 week regimen is possible with this mechanism. And if this is successful, that would be highly differentiating as none of the other drugs can offer such a low frequency. Now, this study began in October. It's enrolling patients very nicely, and we expect results from this trial for the induction period in the first half of 2025. Now, regulatory T cells, as well as particularly the dermal compartment, obviously, can give us a broad range of indications that we can target. And another one that we're studying is alopecia areata. Alopecia areata is also a disease of the skin. But here, it's really where the immune system attacks the hair follicles embedded in the skin. And basically, it is a disease where your immune system starts to attack the hair follicle, weakening the ability of the stem cells to grow hair. And then with prolonged immune attack, it actually causes the hair follicle to release the hair altogether, causing to baldness. Now, this is a substantial disease and indication. You can see the epidemiological effect shown in the first bullet on this slide. It's also a disease that comes on pretty early in patients' lives. Some patients actually developed this disease, even pre-puberty. And importantly, it's a very common comorbidity for patients that have other kinds of atopic conditions, such as allergy or eczema or vitiligo and others. Now, there's a very important hypothesis around, a, why this is a significant opportunity and why this is uniquely suited for REZPEG's mechanism of action. Now, the first important opportunity is that JAK inhibitors are the only agents approved in this indication. And JAK inhibitors really do not provide durability at all in this disease. And it can take the patient 6 months, 9 months and 12 months to grow hair. And then the second they stop taking the JAK inhibitor, which for a variety of reasons they may need to from toxicity and others, all that air falls off. And that's psychologically so damaging and disturbing for patients that have this disease after spending all that time and not having air for so long to then lose it. So, there's a huge opportunity to be able to provide durable therapy. And I even like to say a JAK-spar potential kind of a therapy. And why we think we can achieve that is from what's shown on this slide. This is the underlying scientific hypothesis, as well as the underlying immunology of the disease. So, this slide shows an image of a hair follicle. In the normal hair follicle, there would be no cells at the bottom of that image. There are almost no immune cells. There's no MHC expression. There is absolutely no immune system. It's an immune privileged tissue. Tregs, it turns out are really important in maintaining that immune privilege state and everybody that has alopecia areata develops that breakdown of immune privilege. The JAK inhibitors don't restore it. They quell the inflammation, but they don't actually heal the hair follicle. And we think the Treg mechanism of REZPEG can restore immune privilege and that could provide durable disease control. And that would be really game-changing in this indication. So, this is a Phase IIb study that we're running. This study actually kicks off next month and begins enrolling patients. We're activating sites for the study now. There are 84 patients that will be enrolled in groups from placebo, as well as 2 different dose regimens of REZPEG. In this study, patients are treated for 36 weeks. And then at the end of that 36-week induction, we will have a 24-week follow-up period. That follow-up period is very similar to the atopic dermatitis study that I showed you a few slides ago. And again, our objective is, a, to drive efficacy, at least equal to a JAK inhibitor and then in the follow-up period to maintain that efficacy when patients discontinue the drug. Now this study, as I mentioned, kicks off next month, and we also expect the results of the induction period from this study in the first half of 2025. Now, continuing down the theme of Tregs, it occurs to us that there are important physiological and cell biological pathways that regulate their underlying function. And it's oversimplified, but this slide really sort of tries to crystallize it in a nutshell, particularly thymic Tregs and Tregs exposed to the central compartment. They're very dependent on the IL-2 pathway for both their proliferation, as well as their activation and their overall distribution throughout the body and their proliferation. We actually believe that these Tregs undergo positive selection continuously throughout our adulthood. So in the periphery, IL-2 is the dominant signal. However, when these Tregs extravasate out of the blood compartment and move into deeper and deeper tissues, they find themselves in different kinds of cytokine environments. They actually downregulate IL-2 receptors. You can see in purple, their dependence on IL-2 drops, and they start to need an NF kappa B signal. And one of the most dominant NF kappa B agents is a TNF superfamily protein, TNFR2 which is very, very highly expressed on Tregs. It's actually the most abundant TNF superfamily protein member on Tregs. So in the tissue, you need an NF kappa B signal and agonizing the TNFR2 pathway would be highly desirable. And that's what we've done. So, we've discovered a very novel antibody called NKTR-0165, in which we identified a unique TNFR2 binding epitope that can induce signaling even as a monomeric agent. And then we grafted that into a bivalent antibody, and that created this program called NKTR-0165. Now TNFR2 is like, as I mentioned, very important in driving immunoregulatory function. Overall, Treg stability, maintaining their function, limiting their differentiation in tissues and really maintaining FOXP3 expression. Our antibodies are highly selective for Tregs, and they're highly agonistic on Tregs. And they work in a whole range of different cellular conditions and even inflammatory conditions. Examples of indications that you could address with these agents include mucosal immunology kind of conditions such as ulcerative colitis of the GI, even oral mucosal diseases. Particularly in the central nervous system, TNFR2 is a very powerful antagonist of TNFR1. And there are many neuroinflammatory conditions such as MS, also Parkinson's, even Alzheimer's that we know are impacted by TNFR2 biology. So, those are also very important indications, as well as multiple skin conditions as well. Now, we succeeded in making a manufacturing cell line for this antibody, produces very high level yields. And we're in IND-enabling studies now, and we will enter the clinic with this program next year. Now, this slide just shows 2 examples of genetic models that really just show how important TNFR2 is both in diseases as well as in Tregs. In both cases, you're looking at data, either EAE, which is a mouse model of multiple sclerosis or colitis, which is a mouse model of ulcerative colitis and you're looking at knockout data. So on the left, you can see that in the dark symbols, the knockout mouse that doesn't have TNFR2, actually has substantially exacerbated or worsened symptoms of EAE and MS. And in the dot plot, you can see that because there are very, very few Tregs that marginate into the CNS. And in the case of colitis, this is an adoptive transfer model. And you can see that when you adoptively transfer healthy Tregs on the far right, the smaller dash line, you actually reduce the incidence of colitis. But when you transfer deficient Tregs, you actually exacerbate the disease, and you can see in bar chart that there are far fewer Tregs. So between these mouse studies between translational studies and in this particular case, decades and decades of research studying TNF neutralization. The original PAN agents, like the Remicades, Etanercepts, the HUMIRAs, that knock out both soluble and transmembrane, understanding the dichotomy of TNFR1 and TNFR2 signaling, understanding where blockade of TNFR2 actually exacerbates or worsens diseases with the TNF antibodies, and the knowledge that if you could add in an R2 signal to an R1 inhibition, you would really create very, very desirable TNF biological activities that are therapeutic. That's really led to the crystallization of how important TNFR2 is a target and to drive its signaling how that could be very, very desirable. And this just shows an example that the addressable markets with these agents are very, very large. And this is just an example of a neuroscience, a mucosal as well as dermal and there are multiple adjacent indications. Now in the last minute, I'd like to just touch on what we're doing with our ongoing NKTR-255 program. So remember, this is one of our oncology programs. This is a polymer-conjugated Interleukin-15. And we established it to really optimize the pharmacodynamics of IL-15 signaling in the immune system. Now through the years, we published multiple reports on the interaction of cellular therapies with IL-15. And that's both in the setting of TILs, both in the setting of CAR-T and even in other NK and other kinds of use settings. It turns out that when we use cell therapies, the cytokine environment that the cell therapy experiences is essential for maintaining both the cell therapy fitness, the total amount and levels of cells, their persistence and ultimately, giving rise to the long-term efficacy that you could achieve with these therapies. And we've been studying that and are continuing the studies that are ongoing, assessing these different use settings. So as shown at the top, we have multiple examples where NKTR-255 is combined with either BREYANZI, one of the approved CD19 CAR-Ts and in a different study where we're combining it with YESCARTA and BREYANZI. And in both of these studies, patients are conditioned, they're given the cell therapy and about 2 weeks later are given NKTR-255. And we know that the level of cytokine induces the expansion of the cells because the max peak of expansion is highly associated with response. And we're studying long-term long-ranging endpoints, particularly a 6-month complete response rate because it's that expansion that leads to the durability. And the durability is the highest unmet need in the cell therapy setting. So, we have multiple studies ongoing. We've seen some very encouraging results. We will have roughly 20, 25 patients of data later in the year that we'll be presenting. We're very excited about that study. We also have a collaboration with AbelZeta that's just kicked off. Now, this is a study that AbelZeta is running using their TILs. And this is a TIL that they're developing in the setting of non-small cell lung cancer in a combination with checkpoints. And so we're also kicking off that study with AbelZeta. Again, here in the setting of the TIL, you need IL-2 for the TIL cells post transplant. And we've seen how difficult it can be to use these for some of the recent results from Iovance. Now, this is a very novel approach. We're actually going to be replacing the need for IL-2, and we'll be switching to NKTR-255 as an IL-15 signal to drive the TIL response. With our partner, Merck KGaA, we've been evaluating the combination of BAVENCIO plus NKTR-255 versus single agent as an active comparator, BAVENCIO, in the on-label setting where BAVENCIO was approved in switch maintenance bladder. So, that study began. It's been enrolling very, very nicely, and we expect to have interim data, which is progression-free survival later this year. And again, that's very powerful PFS data with an active comparator in an on-label indication. And finally, at the bottom, we have a study also in the on-label setting with IMFINZI. Now, this is a setting in Stage 3 unresectable non-small cell lung cancer or after chemo radiation, patients go on durvalumab for maintenance therapy. But we know that patients that have acquired lymphopenia as a result of chemoradiation, they do far worse on maintenance of IMFINZI. And so we've shown preclinically that you can restore lymphopenia with the addition of NKTR-255. So, we're very excited about advancing that hypothesis clinically, and that's a study that's also ongoing. And we'll have some data this year. So to kind of wrap up before we do some questions, I just wanted to address some key upcoming milestones for us over the next 18 months. So the most recent, of course, is the initiation of our alopecia areata study, which begins next month. We expect in the second half of this year, the interim results from the JAVELIN Bladder Medley Study that I just described. We're really moving forward the TNFR2 agonist antibody, both with all of the IND-enabling studies from manufacturer to toxicology and so forth. And we'll also be presenting data for the program at a preclinical -- the preclinical data at a medical conference later this year. As I mentioned, we also have multiple ongoing cell therapy studies of NKTR-255 that we also expect to present this year. And then into 2025, we expect 2 key catalysts from our REZPEG program. First would be the atopic dermatitis study. And following with that would be our alopecia areata study, both of those we expect in the first half of 2025. We're really well positioned to advance across all of these components of our work. We ended the year with $329 million in cash, and we expect to get through this milestone period and have at least a year of operating capital into the middle of 2026. So with that, I want to thank you for your attention. I'd be happy to take questions.

Great. Thanks for the presentation. Question on the Phase IIb data for atopic dermatitis. How is enrollment going in that trial? And is there anything you can do to kind of speed enrollment to just ensure you hit that first half of '25 timeline for data?

Sure. Yes. Yes. So the study enrollment and the site activation are on schedule with what we established. Remember, it began in October. So we had sites activated in October, November, more in December and will continue onwards. Now, we're running that study, both in North America as well as in Europe and Australia. So really, we want to make sure that we have a large enough footprint and a large enough number of study sites so that we can achieve the enrollment objectives that we have. We're also focusing on sites that have successfully evaluated biologics in atopic dermatitis studies, both Phase II and Phase III trials as well. And then I think the most important thing that we're doing is we're actually really getting out there. So firstly, we're highlighting the data that we have with REZPEG. And we've done that both at major dermatology conferences and at other different kinds of events. So the physicians see these results, and they see how differentiated they are and they see that it's a new mechanism. And so that's a very important thing that we do. And that gets a lot of excitement for the study. The other thing that we're doing is we're showing up to all of the initiation visits. So some combination of our CMO, Mary, or other people in Mary's team are actually there on the ground, communicating with the staff, communicating with the investigators. We know it's an active process. You can't just sit back. So, we're doing all of those things to ensure that the study enrolls quickly and it rolls effectively.

Great. And what's the right way to think about data from the Phase Ib translating to the larger Phase IIb trial?

Yes. Well, so really the design of the study, the patient population, the elements, they're really almost carbon copied of the Phase Ib. They're just more people, right? So, we obviously want to replicate those results. We'd like to see data that's in line with what we saw in Phase Ib. We think that because we saw the dose dependency and because we hit across all of the endpoints, not just some, really across the board, we think that we have a very good probability and a very good chance of repeating these results.

Got it. So if you do get positive results in Phase IIb and atopic dermatitis, can you walk us through what the next steps would be?

Yes. Yes. So, definitely, our goal is to advance to these 2 studies. And then we have to kind of think about what we want to do and what we want to be. So, obviously, we want to make sure that we have sufficient runway after that data comes in to be able to be flexible. But we also know that this kind of data, it gets a lot of attention in this field. So, obviously, our intention is to see REZPEG be an approved agent in the future, but we'll have a variety of ways that we can explore that from activities that we do ourselves or seeking development partnerships or other ways that we can advance the program further.

How are you thinking about the possibility of evaluating REZPEG in biologic experienced patients as well? Is that something you would pursue?

Yes. So, one of the things we wanted to do in our Phase IIb study was advanced on our Phase Ib. And that's why it was really important to us that we focused on the biologic naive patient population to not change, really, right, the study in the same place where we already saw a differentiation. But now if I put on my scientist hat or translational immunology hat, I think this is a mechanism that has a lot of potential even after a patient has failed, for example, with IL-13 inhibitor. So, you can think about what happens when not all people, as I mentioned earlier, have even a Th2 dominant disease, right? We see people that have mixed presentation of their immunology. So, you get a lot of people that really aren't well served, right, by an IL-13 inhibitor, which is so specific for the Th2 arm of the pathway. You also see people that acquire resistance over time and also people that become intolerant. And all of these are different kind of segments of patients, but our mechanism of action really shouldn't be kind of impacted even by any of those, right? So, I think this is a really unique mechanism that has the potential to work in multiple lines, not just in atopic dermatitis, but in other diseases as well.

Great. Maybe thinking about alopecia, what gives you confidence that you'll see efficacy in that Phase IIb that you're starting on?