Nektar Therapeutics (NKTR) Earnings Call Transcript & Summary

Good morning, and thank you for joining the Nektar conference call to review the 16-week induction data for the Phase IIb study of REZPEG in patients with atopic dermatitis. [Operator Instructions] As a reminder, this call is being recorded, and a replay will be made available on the Nektar website following the conclusion of the event. And with that, I will now hand the call over to [ Corinne Franklin ] in Investor Relations at Nektar Therapeutics. Please go ahead, Corinne.

Thank you, and good morning, everyone. Thank you for joining us today. With us on the call are Howard Robin, our President and Chief Executive Officer; Dr. Jonathan Zalevsky, our Chief Research and Development Officer; and Dr. Brian Kotzin, our Chief Medical Officer. Later in the call, we'll be joined with Dr. Jonathan Silverberg from the Department of Dermatology, George Washington University School of Medicine; and Dr. David Rosmarin from the Indiana University School of Medicine. On today's call, we expect to make forward-looking statements regarding our business, including statements regarding the therapeutic potential of and future development plans for rezpegaldesleukin, the timing and plans for future clinical data presentations and other statements regarding the future of our business. Because forward-looking statements relate to the future, they are subject to uncertainties and risks that are difficult to predict, 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-Q that was filed on May 9, 2025, 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. With that said, I would like to hand the call over to our President and CEO, Howard Robin. Howard?

Good morning, and thank you, everyone, for joining us. Over the past several years at Nektar, our strategy has been to advance innovative therapies or serious autoimmune and inflammatory conditions with a focus on driving a paradigm shift in treatment through immune system rebalancing and an ultimate goal to achieve immune homeostasis for patients. Our focus on regulatory T cells as a modality has been driven by early proof-of-concept data signaling to us the potential for this first-in-class mechanism to treat a range of autoimmune and inflammatory conditions, particularly dermatological diseases. With these Phase IIb studies results in atopic dermatitis, REZPEG, which is a first-in-class Treg stimulator based upon IL-2, has now also been validated as a best-in-class approach. While other approaches to access IL-2 agonism have focused on the design of muteins, which we believe hindered their development, we instead took an elegant approach with a native sequence IL-2 and a validated technology PEGylation, which has led to the approval of over 2 dozen biologics over the past several decades. Today, we're excited to share positive and statistically significant results across primary and secondary endpoints for REZPEG in the 16-week induction phase from our Phase IIb trial in atopic dermatitis. These data potentially pave the way for a differentiated and novel treatment option for patients. The trial met its primary endpoint of the mean improvement from baseline in EASI score at week 16 for all 3 arms of REZPEG versus placebo with a p-value of less than 0.001. All 3 dose arms also achieved statistical significance at week 16 for the key secondary endpoints of EASI-75, EASI-50 and BSA and the Q2 week arms achieved statistical significance at week 16 for the key secondary endpoints of vIGA and Itch. In addition, at week 16, the highest REZPEG dose of 24 micrograms per kilogram Q2 weeks achieved statistical significance on the EASI-90 endpoint. We saw a rapid onset of response for all 3 endpoints and especially for EASI-75 and Itch, separating from placebo quickly within a few doses of receiving REZPEG and JZ will talk more on that later. This is a key differentiator from other immune modulation approaches such as OX40 pathway inhibitors. Safety was consistent with our previously reported results and importantly, we saw less than 1% of patients discontinue because of an ISR. Additionally, we saw no increased incidence of conjunctivitis and infections such as oral herpes as compared to placebo. This is another key differentiator compared to approved agents and to those in later-stage development. The compelling efficacy findings are further boosted by the translational data, which show for the first time that REZPEG also reduced key TH2-related inflammatory markers of atopic dermatitis. With this validation, we eagerly await results in the fourth quarter of this year, evaluating REZPEG in patients with alopecia areata. This would add another significant opportunity for REZPEG. So now I'd like JZ to walk you through the data in detail. JZ?

Thank you, Howard. I'll start with a quick recap of the overall design of the Phase IIb study. We enrolled biologic-naive patients with active, moderate-to-severe atopic dermatitis. For the 16-week induction treatment period, patients were randomized 3:3:3:2 to receive subcutaneous treatment across 3 dose arms of REZPEG, the high dose of 24 microgram per kilogram Q2W, the mid dose of 18 microgram per kilogram Q2W and a low dose of 24 microgram per kilogram Q4W or placebo Q2W. In total 393 patients who received at least 1 dose of study drug were randomized across the 3 active dose arms and placebo. The primary endpoint and secondary endpoints were assessed at week 16 at the end of the induction period. Today, we are reporting the results of the completed 16-week induction period. However, the trial has a 52-week design and is still ongoing. At week 16, REZPEG-treated patients who achieved at least a 50% improvement in their disease severity were rerandomized 1:1 to continue at their same dose level on a Q4W or Q12W regimen through week 52 in the ongoing blinded maintenance period. Placebo patients that met this criteria continued on to receive placebo Q4W and patients that failed to achieve a 50% improvement in EASI at week 16 were given the option to enter the ongoing open-label escape arm with REZPEG high-dose administered Q2W. As this is an immune balancing mechanism and as we observed a remittive effect in Phase Ib for up to 36 weeks for many atopic dermatitis patients after removing REZPEG treatment, we are eager to see the effect of continuing to treat patients beyond the induction period. The primary endpoint in REZOLVE-AD was the mean change in EASI score following induction treatment at week 16. Key secondary endpoints for disease control being reported today are EASI-50, 75, 90, Itch NRS, vIGA of 0 or 1 and the mean percent reduction in body surface area or BSA. There are additional patient-reported outcome secondary endpoints around quality of life, OM, sleep disturbance, skin pain and others that we plan to submit for presentation at a medical meeting later this year. The statistical elements of the study are presented here. In the coming slides, you will see the primary and secondary endpoints reported using primary estimate analysis, which is similar to other contemporary Phase IIb and Phase III studies. Specifically, patients that discontinued due to disease worsening or take rescue medication outside the protocol-specified period are considered nonresponders, and patients that discontinue for other reasons are set to missing. The primary estimate applies to both the continuous and the binary endpoints. We enrolled the typical study population of biologic-naive patients with moderate to severe atopic dermatitis. Patients were predominantly from Europe and also included those from North America and Australia. The study was well balanced among men and women, and the majority of patients were under 65 years old. Mean disease duration was 21.5 years. The mean baseline EASI score for the overall population was 26.0. About 60% had an EASI of at least 21 and 32% had baseline severe disease as assessed by vIGA score of 4. Mean baseline BSA involvement was 39.5% and the mean baseline worst daily itch score was 6.8. The study was well balanced across arms on these baseline disease severity parameters. Now let's turn our attention to the clinical efficacy data. As Howard mentioned, the overall study was a success, and the primary endpoint mean percent change from baseline EASI score was statistically significant at all doses at week 16 with a p-value of less than 0.001. The REZPEG arms separated from placebo at the earliest 2-week post-dose time point and remained separated at all time points measured during the 16-week treatment period. One point worthy of mention is the low placebo response rate of 31% in REZOLVE-AD. As you all know, we implemented a number of proactive measures to address the placebo response rate, and we are very pleased with the outcome. For key easy responder endpoints at week 16, all REZPEG dose levels and regimens met statistical significance versus placebo for the EASI-50 and EASI-75 endpoints. EASI-75 is a key registrational endpoint in both Q2W arms met with a p-value less than 0.001 and responder rates of 42% and 46% as compared to 17% for placebo. For EASI-90, the high-dose arm met significance with a 25% response rate compared to 9% in placebo. Another key registrational end point is the vIGA responder analysis. For this endpoint, both Q2 week REZPEG arms were significant, with 20% and 26% response rates as compared to 8% in placebo. The Itch score was notable in the study with 42% of patients who started with a baseline Itch score of 4 or greater, seeing a drop of at least 4 points on Itch. The placebo rate was only 16%. Body surface area mean change and improvement was consistent with what we saw with the EASI mean score reductions with all 3 dose arms of REZPEG showing significant separation from placebo. Digging deeper on key responder metrics. As Howard stated earlier, we saw a rapid onset of response for primary end points. Shown here are the time course responder plots for EASI-75, EASI-90, vIGA and Itch. We can see quick separation from placebo, beginning within a few weeks of patients starting on REZPEG. This is a key differentiator from some approved biologic agents and other immune modulation approaches such as OX40 pathway inhibitors, which are currently in Phase III. Looking at EASI responder rates by baseline vIGA scores, we see comparable efficacy in more severe patients with vIGA baseline scores of 4, as we do in moderate patients with baseline scores of 3. For example, you can see the clear difference in placebo response rates between the moderate and severe patients when comparing the gray lines on the left-hand versus the right-hand charts. But there is essentially no change for the REZPEG arms. In addition, when we look at EASI-90, one of the deepest efficacy measures we deployed in the study you can see the notable performance of the high dose arm, especially in the patient population with baseline severe disease. Now let's look at the initial translational data showing a clear objective and meaningful immunological impact of REZPEG on lowering key Th2 inflammatory markers associated with atopic dermatitis. We observed dose-dependent reduction in IL-19, TARC also known as CCL17, periostin and MDC, also known as CCL22. Shown here are the absolute mean reductions from baseline to week 16 in patients that had baseline levels of these markers above the upper limit of normal. Consistent with what we reported from the Phase I studies of REZPEG in dermatological settings, we saw a dramatic decrease in CCL22. CCL22 is one of the chemokines for the CCR4 receptor. The other chemokine ligand for CCR4 is CCL17. And we observed a dose-dependent reduction at week 16 for CCL17 and in contrast, placebo patients showed increased levels of CCL17 over the 16-week induction period. Also consistent with our prior reports in our Phase I data, we saw dose-dependent decreases in serum IL-9. And another new observation following REZPEG treatment was a dose-dependent reduction in periostin, a key marker present in the lesions of patients with atopic dermatitis. Interestingly, expression levels of periostin are positively correlated with itching intensity. In the future, we will be extending this translational analysis covering additional proteomic endpoints and aiming to correlate baseline and on-treatment biomarker effects with treatment outcomes. Our PK and PD profile is consistent with prior studies of REZPEG. We saw up to a sixfold increase in Tregs at the high dose of the study, which is very similar to what we observed with the same high dose level in regimen in our Phase Ib study. And as shown here, all other cellular PD results and flow cytometry analyses were similar to our historical studies and prior publications. REZPEG had no effect on conventional CD4, CD8 T cells and the second most expanded cell population after Tregs for the CD56bright, CD16dim subset of NK cells. Our PK profile was dose-dependent and produced the expected exposure, which ranked from highest to lowest as 24 Q2W, 18 Q2W and 24 Q4W. There is a clear dose response observed in this study and the consistency of this dose response across PK, PD and efficacy endpoints gives us confidence in these dose ranges for an induction regimen in atopic dermatitis. Moving on to a summary of safety. The safety profile for the 16-week induction period of REZPEG was consistent with previously reported safety results. We saw no increased risk of conjunctivitis, infections such as oral herpes or oral ulcers in the REZPEG arms. There was no difference in all-cause infection risk between placebo and the REZPEG groups consistent with its immunoregulatory mechanism of action. Serious and severe adverse events were rare at 1.6% and 3.1%, respectively, for REZPEG-exposed patients. Discontinuation rates due to AEs was low at 5.6% for REZPEG-exposed patients and was lower than what we observed in the Phase Ib within the ranges seeing a contemporary Phase IIb studies. The most common treatment-emergent adverse events were local injection site reactions, or ISRs, which were observed in 69.7% of all REZPEG treated patients, with the largest proportion of these being mild or moderate at 99.6%. All ISRs self-resolved and less than 1% of patients discontinued because of an ISR. Further, almost all reports of ISRs are mild to moderate, self-resolved and didn't lead to discontinuation in our study. But nevertheless, we are actively planning an ISR mitigation strategy for commercialization, including a shift to an auto-injector and other mitigation approaches. We have already conducted mechanistic studies that help us understand the underlying cause and inform our mitigation approaches. In the pooled REZPEG arms, TEAEs, excluding ISRs, were reported in 60.3% of patients and in 57.5% of placebo-treated patients. Other TEAEs more commonly observed at a greater than 5% frequency in the study treatment arms, comparing 320 people exposed to REZPEG versus 73 as opposed to placebo, included eosinophilia, 7.8% in REZPEG versus 2.7% in placebo; pyrexia, 6.3% in REZPEG versus 2.7% in placebo; headache at 6.3% for REZPEG versus 4.1% for placebo; upper respiratory tract infection at 5.9% for REZPEG versus 5.5% for placebo; and arthralgia at 5% for REZPEG versus 1.4% for placebo. When looking more closely at ISRs, across all REZPEG doses administered in the study over the 16-week induction period, we see that more than half of all dose administrations are not even associated with an ISR. Specifically, 56% of dose administrations were associated with no ISRs. And in the remaining reports, 30% were mild and 14% were moderate. Many patients only had 1 or 2 reports of ISRs at all over the entire 16-week treatment period. And the majority of ISRs are mild and associated with pain, erythema and are asymptomatic. In this table, we show key Phase IIb studies in atopic dermatitis arranged chronologically with the most recent studies shown on the left. As you can see, we achieved the target range of efficacy for REZPEG that has been observed with other agents in Phase III development or approved biologics. I will note though the comparison to prior Phase IIb studies has some challenges due to differences between the studies, including differences in patient population and statistical methodologies, yet these benchmarks are still quite important. And since REZPEG is an immune modulator and the REZOLVE-AD study completed enrollment in 2025, it is highly instructive to compare REZOLVE-AD results for REZPEG to the Phase IIb studies for the OX40/OX40 ligand class since these are also immune modulating mechanisms. The studies were completed in similar time frames, had similar global footprints and had most similar statistical designs. As you can see, focusing on the primary and secondary endpoints of each study, REZPEG has a compelling 16-week induction profile. Diving deeper into one of the registrational endpoints, EASI-75, you can see the results of EASI-75 response rate over the 16-week endpoint comparing REZPEG to the OX40 ligand class, and we can see how REZPEG compares to the Phase III dose levels advanced into registrational studies by those programs. REZPEG begins to separate at week 4, which is earlier in treatment compared to the OX40s. And this slide shows a similar time course analysis for the IGA endpoint. Note that the REZPEG and ROCA studies used a validated IGA or vIGA endpoint, while amlitelimab used an IGA endpoint as did all of the IL-13 development programs. And even with this methodological difference, we see the comparability of the vIGA response rates at week 16 between REZPEG and the OX40 class. And REZPEG begins to separate at week 6, which is earlier in treatment as compared to the OX40s. We are pleased to have 2 of the leading thought leaders and practitioners in the field today with us: Dr. Jonathan Silverberg and Dr. David Rosmarin. I'd now like to ask Dr. Silverberg and Rosmarin to share their impressions and perspectives on the REZOLVE-AD trial results. Jonathan, may I please turn the floor over to you first.

Sure. Good morning. Good morning, everyone. First, congratulations. These are very impressive data. And my -- just some free thoughts, if you will. I mean, I think the first thing we see here is we have a drug, and that's a very important conclusion to make, I think, looking at the totality of the data. I think there's a lot of -- we obviously showed a ton of data and there's a lot of key elements, I think, that we can focus on. I mean first, the dose response, supporting the mechanism, supporting the drug, the overall consistency between the clinical endpoints and the translational markers like TARC and periostin. And it's not like we're going to prescribe a drug purely on TARC and periostin, but having that overall consistency and supportive package from the translational and the clinical really reassures us. I think the kudos on the strategy is taken for management of placebo responses. This has been the bane of many trials and been a big discussion in the field. Everything we see here makes sense. We see a little bit of a higher placebo response in the moderate patients than in the severe patients, we expect that. That's totally par for the course. But overall, these numbers are quite low, and you've done a great job in this trial landscape and managing that. And so I would say what you've done, just keep doing it for Phase III. Looking at the kinetics of response, I think there's a few key things that I focus on. I think first is the early onset for some of these endpoints. And we see the EASI-75 responses look like maybe they jump a little faster than, let's say, the NRS4 responses, which would support sort of more of an indirect effect of the mechanism on Itch. What we're seeing really a very nice efficacy overall for Itch and actually relatively early responses. And as you optimize the dose, I think will get even better. And that's -- I think some folks might take that for granted. But I think in the current trial landscape, we shouldn't. When we look at some of the readouts from Phase II and some of the Phase III readouts for the OX40/OX40 ligand class, Itch kind of did weird things, unexpected things. And so -- and we've seen some drugs that work better on Itch than they do on lesions, sometimes better on lesions than Itch. And here to see that consistency between lesional efficacy and the Itch is nice. And it shows -- because obviously, for this disease, you need a drug that works on Itch as well. I think also importantly, no plateau for a number of the endpoints. So you're already seeing good efficacy at the primary efficacy time point, but a suggestion that would continue dosing beyond week 16 that you would get even more efficacy. And then I think the last thing is just to note that here, we're not even fully potentially optimized on dose in the sense that we haven't seen the loading dose put into play. And I think we've seen for every drug out there that when you put that loading dose into play, you get even faster responses and potentially even deeper responses in that induction period. So to me, I look forward to seeing what loading dose would bring because my expectation is that it will increase the efficacy and speed up the responses even more than the great data you've shown so far. So those are just some of my high-level thoughts and happy if David wants to chime in.

Thank you, Jonathan. And I want to echo what you said. You made many excellent points. But the first one that I want to start with is that the study is very well designed. And equally important, it was really well executed. The results are quite consistent. You see this nice dose response. It's great to see that low placebo, which has been a problem for other studies. We now have some great Itch data as well, and it's nice to see it perform similarly well in both the severe and moderate patients. I think one of the big news from the data here is that patients were not dropping out due to the injection site reactions, which I think is really an important point. Personally, I'm a fan of this mechanism. The idea of agonizing the brakes on the immune system is very appealing to some of my patients, that kind of concept. I'm also optimistic, as Jonathan stated, about potential for not only sustained response but a deepening of that response. He mentioned that there was no plateau yet. And I think that, that's something that we can be optimistic about, given both the mechanism as well as the Phase Ib data. Jonathan also commented on the faster speed of onset, which is certainly a plus and potentially a differentiator from the OX40s. And there's opportunity for infrequent dosing and maintenance, which is, again, quite appealing. Overall, given everything we're seeing, I think I personally have high confidence that a Phase III program will be successful and the medicine will have a place in our armamentarium. I also wanted to comment that there's quite a bit of potential for alopecia areata as well as other dermatologic diseases. For example, lupus, GVHD, et cetera. In terms of the alopecia areata, it's really a disease where we have tremendous need, need in terms of efficacy, safety and a drug for a sustained response. And given the mechanism of REZPEG, it really makes sense that this is being studied for this condition. With the capacity for rapid onset, sustained response and the safety thus far, again, I'm very optimistic and looking forward to those results in quarter 4. But overall, just to echo what Jonathan said, congratulations. It's a great result, and you have a drug.

Excellent. Thank you so much, Jonathan and David, for your comments. Well, to summarize, we are exceptionally pleased with the results for the 16-week induction period that we reported today. Nektar has established a novel Treg MOA and a whole new biology, which differentiates from existing and in development biologics. And furthermore, REZPEG is the only T-regulatory mechanism and the only IL-2-based therapy to show significant and compelling efficacy data across all endpoints in the large Phase IIb study. And we know this MOA translates. We saw Treg fold increase up to sixfold and a clear reduction across key pro-inflammatory markers of atopic dermatitis. On the efficacy profile, the highest dose arm was significant on the primary and all key secondary endpoints. And importantly, we observed a rapid onset of clinical benefit observed within the first few weeks of starting therapy. We saw a clear dose-dependent efficacy across multiple dose arms, and we had no drop-off in treatment effect in the patients that had baseline severe disease. The safety profile of REZPEG is consistent with previously reported safety results. And most notably, we saw no increased risk of conjunctivitis or oral herpes or oral ulcers as found with other biologics and JAK inhibitors. We know from our Phase Ib results that REZPEG has potential for a long-standing clinical benefit, potentially even remission. And with REZOLVE-AD, we have now firmly established the induction period. Moreover, we are eager to see the results from the maintenance and escape arms in REZOLVE-AD, where we aim to show a sustained and even potentially a deepening of response within frequent dosing in patients with atopic dermatitis. So for next steps, we plan to schedule an end of Phase II meeting with the FDA to review the results of this study and the Phase III development plan. We intend to submit these data for presentation at a future medical meeting, where we will present the results in greater detail as well as additional endpoints from the 16-week induction period, including a number of the patient-reported outcome endpoints. As we mentioned earlier, we plan to present the top line results from the Phase IIb REZOLVE-AA or alopecia study in December of this year. This study enrolled approximately 90 patients with severe to very severe alopecia areata. And now that we have strong Phase II results in the dermatological setting of atopic dermatitis, we are incredibly optimistic about the second Phase II study. From this REZOLVE-AD study in atopic dermatitis, we also plan to present 52-week maintenance and escape arm data in early 2026. This will allow us to evaluate that continued dosing of REZPEG beyond the 16-week induction period, and we will be looking at the potential of sustained and possibly deepen responses from that part of the study. In dermatology and immunology, we see great potential for REZPEG across multiple blockbuster indications. In dermatology, of course, atopic dermatitis and alopecia areata, 2 immune-driven skin conditions, and we're running those studies. And beyond that, we believe the Treg mechanism could translate to vitiligo and other skin conditions. In immunology, our partner, TrialNet, will initiate the Phase II study in type 1 diabetes in the second half of this year. The study, which is funded and sponsored by TrialNet, will evaluate REZPEG in new onset Stage III type 1 diabetes patients. We also believe REZPEG has potential in lupus. Although our study conducted by Lilly did not meet its endpoints, we believe this is because the fixed dose arms were not chosen properly. With the experience of our weight-based dosing in the REZOLVE-AD study, we believe there is a real opportunity to translate this dosing into a potential opportunity in lupus. And finally, with this validation of a Treg mechanism, I'd like to also mention our antibody program in preclinical development. Our lead antibody, a TNFR2 agonist, which is planned for an IND at the end of this year, is a unique Treg stimulator. And because of its monomeric activity, we are building a large bispecific program based upon this mechanism combined with other validated targets in immunology. We believe this mechanism has potential multiple indications, including Crohn's, ulcerative colitis, multiple sclerosis and others. And with that, I will now open the call for questions. Operator?

[Operator Instructions] So our first question comes from Yasmeen Rahimi at Piper Sandler.

Can you hear me?

Yes, we can.

Okay. Perfect. Congrats team to the fantastic data and really an incredible execution, very proud to see the top line data. I guess the first question is for the Nektar management team. I think JZ, the expectation was static across one dose, which would have made our life easy to figure out what is the dose moving forward. So I guess help us understand how you're thinking about dosing strategies in Phase III. And then for our KOLs, I think you alluded to in your prepared commentary around translation from Phase II to Phase III. Obviously, given the same execution, what would your prediction be in terms of a larger Phase III study even though this was quite one of the most robust Phase IIbs we have ever seen? And then the second question for the KOLs are, if they could just comment on what you would predict the REZPEG effectiveness to be in a study where we would include biologically experienced patients? And again, congrats, and I'll jump back in the queue.

Okay. Thanks, Yasmeen. So I'll start off with the first question. So the first key thing is in this Phase IIb study, as you saw, we studied a dose range. And that dose range was clearly resolvable, meaning not only could we separate the PK and PD, but we can also separate the efficacy when we looked across the study. We also saw that in the Q2 week regimen, we actually hit the majority of the endpoints. And at the highest dose, the 24-microgram per kilogram Q2 week, we hit on all of the secondary endpoints as well, including EASI-90. And in fact, that was the only dose that hit on the EASI-90 endpoint. So in kind of processing all of this data and thinking forward to Phase III, there's still a little bit more that we are aiming to get out of this study. So for example, we discussed the endpoint at week 16. And as we've discussed in this call, like we're not flattening out yet, we still keep going. And so one of the things that we'll be looking into is the overall totality of the dose level, the dose regimen and the duration of dosing, all that come together into optimizing the key Phase III dose level, range, regimen and duration that we'll put forward into the design of the Phase III. I'm very happy to say that this study really gives us everything that we need to design the Phase III regimen. And then some of the things that we're doing to prepare for the end of Phase II meeting, which addressed the kind of questions that the health authorities ask as you prepare for Phase III is all of the PK data from the study is modeled into a population PK model and then exposure response modeling is done with that data as well. And that has always used to support all of the Phase III dose decisions. So we're in great shape. And I am also very confident we're in great shape to have just one dose level and regimen for the Phase III as well. Now I think the next question was about the translatability of Phase IIb to Phase III results. And maybe I can ask Jonathan to comment on that. And David, if you could comment on a bioexperience combination, both naive and experienced patients. So Jonathan, would you like to go first?

Sure. So -- okay. So there -- I think it's obviously a very important question. And my take on this is there is a very -- and I think David actually mentioned this in passing before, I think there is a very, very high probability of success in terms of achieving statistical significance in Phase III. I don't see any holes in the data. And what I mean by that is sometimes you look at the data and you're seeing wonky signals or you're only getting efficacy in some endpoints but not in other end points. You're really seeing consistency across everything in terms of whether it's the moderate endpoints, the robust endpoints, the Itch, the lesions, it's all behaving the way it should. You've got predictable time course in terms of the kinetics and the curves. You're not seeing this sort of fluctuation. These are bouncing up and down that you'll see with smaller trials, which may suggest just a few patients skewing things here or there. I mean, you're really seeing a consistent package here. And then the biomarkers are just icing on the cake to reaffirm that you're really having a consistent biologic activity. And on top of that, I would argue that the opportunity for loading dose only gives you more potential for efficacy, faster responses, getting you there quicker to make even more competitive. So I think the probability of stats in Phase III is extremely high. And then I look -- the other thing you could think about is what about with safety or would ISRs or other things be an issue. And that's always something that you just -- you don't know safety until you study it long enough, but we haven't seen anything that has been an issue. And I think based on the mechanism, we're very optimistic overall. The ISRs was the one thing that we were keeping an eye on. And I mean, it's come out beautifully so far. So I don't think that, that's going to be a major rate limit or in any way in Phase III. And so when you think about how safety can sometimes impact an NRI analysis type of thing, we're not seeing massive drop out, we're not seeing those issues come up. And so my expectation is that this is manageable safety and something that can deal with in Phase III should not be an obstacle. So I think these results do translate into Phase III well. I'm really trying to think about this critically. I mean I just don't see anything here that would get me nervous in this sense, other than you've got to roll the dice and run the trial.

Yes. I completely agree with what Jonathan was saying. I would be surprised if the Phase III weren't successful based on what we're seeing. In terms of biologically experience patients, that you truly don't know until you test it. However, I'm optimistic they're going to have a similar response to the biologically naive because this is really an alternative mechanism to those patients. So if patients fail via the IL-4 blockade, well, that this -- we're treating them with a completely different mechanism. So I think that for those reasons, I don't see that those patients necessarily will have a poor response to REZPEG. I also think what's helpful is seeing that the more severe patients behave similarly well to the moderate patients also gives me a little bit more confidence in that speculation as well. But the truth is you just have to run the study to truly know. But again, I'm optimistic that it will -- those biologically experienced patients will also respond.

Our next question comes from Arthur He at H.C. Wainwright.

I want to extend my congratulations to achieving this milestone. I had a couple of questions. So for JZ, could you give us more -- a little bit more color on the patient who have been enrolling to the escaping arm so far? And for JZ and the doctors, I just want to see besides the oral injector, what kind of the strategy further mitigate the ISR in the Phase III study?

Sure. Thank you, Arthur. So let me begin. You asked a question about the patients that moved into the escape arm. So just to kind of briefly remind the way the study was designed, right, patients were treated for 16 weeks and completely blinded fashion, of course. And then for patients that did not achieve an EASI-50 response, they had the opportunity to move into an open-label escape arm. And in the escape arm, they would receive the high dose of REZPEG, which was 24 micrograms per kilogram on the Q2 week regimen. So we did an interesting analysis to look at the people that escaped at the end of week 16. And what we found is that actually 65% of patients in the placebo group that completed 16 weeks did not have sufficient efficacy and those are the people that transitioned into the escape arm. So as you'd expect, about 2/3 or a large majority of the people in the escape arm moved into -- people in the placebo and during the induction period moved into the escape arm. In contrast, for people that were on the REZPEG arms, again, all blinded. Nobody knew that they were on. But there, you saw a very low frequency, less than 25% move into the escape period. So that did give us a great sense of reassurance, right, of what you're seeing. You would expect the majority of placebo-treated patients to not achieve sufficient efficacy and move into the escape arm. So that was one piece of information. And I think related to that is that this is just a portion of the study that's ongoing. So all of the people that are in that arm have the opportunity for 36 weeks of additional treatment until they reach week 52. And as mentioned earlier, our goal in the early part of next year, once we complete that 36-week extension part of the study, we would report the results of all of the people that were treated in the study for a year. So that would include the people in the escape arm, and it would also include all the people that are in the ongoing maintenance arms as well. I think your other question, Arthur, was about some of the ISR mitigation strategies, and maybe I'll start off and then I'll ask maybe some of our doctors to comment. So the first thing is that we definitely have started to do mechanistic studies. And one of the things that we've begun to do is to do skin organoid cultures where we can actually study the biology, it's happening. And so in these studies, we actually are able to collect skin samples from tummy tuck surgeries. And that's great because it's abdominal skin, which matches the abdominal site of administration of the drug. You can culture the skin in an air-liquid interface, maintaining the barrier at the top layer of the skin and maintaining all the layers of the skin down to the subcutaneous tissue. And so you can actually study the biology that's going on. And we've been able to assess gene expression changes using skin organoids, following REZPEG injection into that organoid culture. And that's been a huge breakthrough for us because we're starting to see the genetic pathways that are induced. And specifically to your question, that leads us to targeting mitigation approaches, right? Because when we know the kinds of pathways and signaling that's happening, and say, the cell types that are firing, then we can isolate on mitigation strategy. So that's one set of activities that we're doing. And then also others are, of course, switching to really a more typical presentation of the drug, right? So our intention at commercial launch is that this is a self-administered product. So the patient would have an auto-injector device and they would self-administer REZPEG as we do typically for just about all injectable biologics. And then maybe just to discuss the significance of ISRs because we can go into so many different levels of them. But maybe I would ask David and Jonathan to comment on just sort of your interpretation of that is really the most frequently observed adverse event?

I'm happy to take a crack at this. I mean, I think, obviously, there's all different types of ISRs. But when you're dealing typically with just localized reactions, the cutaneous reactions that may be more persistent, I mean there's all different scenarios. But if you're dealing with things that resemble more of a sort of dermatitis scenario, typically, they're not a big issue in the real world. And there's a number of different strategies that can be employed. And it's something we encounter with all kinds of drugs and not even just dermatologic drugs, comes up in Parkinson's disease and all kinds of other disorders where we deal with ISR. So this is something that derms are quite comfortable and I think, familiar with already. Certainly, if you think about potential for even just maintenance dosing and spreading out the interval of dosing in the long run and for patients who would like to be on drug real world, that might be an opportunity even just to spread it out a little. But even just from the day-to-day, we've used things simple, conservative strategies like cold compresses, sometimes actually it's warm compresses that do better than cold compresses. Sometimes it's just a gentle little massaging that can help for patients. So it doesn't always even require treatment, honestly. But in the real world, you don't -- you have to figure out how you do this in a trial. But in the real world, most of the time, it's simple, just given the topical steroids or calcineurin inhibitor or some other nonsteroidal. And that's it and stuff that they'd be using anyway for their atopic dermatitis. So I don't think it's anything that worries us, and there's a bunch of different things we can do. And I will say even we've seen with certain drugs, even just injection site matters, meaning like sometimes patients who inject in the abdomen just get fewer injection site reactions and those who injected, let's say, in the thighs, right? So it's something that I think we'll learn with continued use, but it's not something that I think is going to really be a rate limiter in any way.

Yes. All right. So I agree with Jonathan. I think the key for a successful trial is education. If you discuss the ISR side effect with patients in advance, that is extremely important at retaining those patients in the study. And I think what's also helpful again is looking at what is the discontinuation rate or the dropout rate while patients are forgetting these ISRs. And the fact that it's very low is really what I was looking at. And I think that is the key point. And I also agree with Jonathan as well that I find ice can be quite helpful if patients are experiencing it. However, I suspect that most patients won't even bother.

Our next question comes from Cha Cha Yang at Jefferies.

This is Cha Cha on for Roger. Congrats on the data. We had a question about your expectation for your Phase III and also for your maintenance data. We're really excited to see it in 2026. So if you could give any color on the maintenance data, that would be great. And then our second question has to do with timing. So for end of Phase II meeting or potential initiation for Phase III, if you have any sort of guidance that you can give us for that?

Sure. So maybe I'll start off. The first question was about some of the things that will monitor in maintenance. And so in maintenance, we're really going to be focused on the deepest responses. So remember, we had EASI-50 as a threshold for moving in to maintenance, but we really are interested in IgA EASI-90 as key markers to look at in maintenance. And we'll obviously follow EASI-75 as well that is registrational, but we're really looking at how many people that had a response sustain it and then how many people that, say, came in between 50 and 75 made it up to 90, right? Those are the kinds of levels and analyses that we'll be looking for. It's really that propagation and stability, and then we'll be looking for improvement along the way as well. And to help make sure that, that's done well, patients are randomized to 2 different regimens. And we also stratify by depth of response at week 16. So for example, we balance EASI-90s between the re-randomization and so on so that you can do a well-addressed analysis. And then in terms of timing, maybe Howard, I'll turn that question over to you for Phase III. But before commenting on Phase III, I'll just say that our goal for our end of Phase II meeting is we're already on a Gantt chart for that. That's been always a heavy part of our plan, and we plan to execute an end of Phase II meeting before the end of the year. But maybe, Howard, you'd like to comment on Phase III timing? Sorry, Howard, you are on mute.

Sorry about that. We're looking at -- look, we're looking at a number of different possibilities in terms of moving forward with Phase III. We want to certainly move forward as quickly as we can. Our goal would be to initiate Phase III in 2026 and spend the next 6 months or so doing all the necessary CMC work and assay work that's required. We're also talking to a number of potential partners and collaborators to help us with that. So stay tuned for that, and we'll keep you informed. But I would -- I certainly think we want to move as quickly as we can.

Our next question comes from Julian Harrison at BTIG.

Congratulations on these data. It's great to see a novel mechanism in atopic dermatitis with such a large effect size. A few questions for Howard and JZ. First, I'm wondering if these results change your approach at all to the ongoing litigation versus Eli Lilly. How should we be thinking about Lilly's potential liability here? Second, do you plan to continue weight-based dosing in Phase III? If not, are any bridging studies needed before you proceed to Phase III? And then third, just revisit a topic raised by another analyst. I'm wondering if you could talk more about how you're thinking about post IL-4R and post IL-13 atopic derm. Do you stay laser focused on frontline positioning? Or could be -- could there maybe be a worthwhile opportunity to explore later-line use maybe in a stand-alone Phase II study?

Okay. I'll take the first part of it. Look, good question. Certainly, I'm not in a position to comment. Certainly, I don't want to comment on the progress of our legal action against Lilly. All I would say is that clearly, REZPEG performed very well, and I think we're going to pursue this legal action vigorously. I'll let JZ handle the rest.

Thanks, Howard. So yes, Julian, your other question was about the way we will approach dosing in Phase III. And so what I'll start with is that in this study, we used weight-based dosing. In the Phase Ib, we use weight-based dosing. That's really important to dose with precision. And what we learned from -- I touched on this earlier in our script, what we learned from the lupus study was that study used a completely flat dosing approach, and we've conducted a post-hoc analysis by actually focusing on body weight range. And we saw that there was a profound impact in what we saw. And so that actually was one of the things that crystallized in our mind that the dosing precision is important. And it shouldn't be a surprise. This is an agonist drug, right? So agonist, you need to be certain, right, about how you're administering the drug. It's quite different than the antagonist drug. So our plan is to use weight-based dosing or Phase III. I mean, we're building on really strong results here. So we want to continue that. But what we are knowing -- what we know what you can do and are doing for commercial is we're understanding the weight bands. And this comes out of our population PK and other studies, where we know that there are likely going to be different bands for patients' body weights that will lead to their administration devices. So in a sense, you will be basically creating like narrower kind of flat dose ranges to accommodate different people's body weights, which give you the same effect as a weight-based dosing, and that will be the objective of the commercial launch for the product. So I hope that answers your second question. And then your third question was about sort of the patient population post-IL-4/13 and some of the positioning for REZPEG. So I will start off by saying that we've conducted a Phase Ib and a Phase IIb in biologic-naive patients. And we're seeing really strong effects here in this patient population. So that definitely will be a key component of our Phase III program, but we are also interested in adding biologically experienced patients and especially seeking the broadest label, right, which allows use in multiple settings in early in the late line. And Dr. Rosmarin and Jonathan already kind of commented on, there's really -- though we haven't done a study yet in bioexperience, there's no first principal or scientific reason why we would think a person that either stopped responding or never responded to an IL-4/13 class wouldn't respond to REZPEG. In fact, the more kind of mixed presentation the disease is, probably the more Treg approach, which can skew to different TH polarities can be helpful.

Our next question comes from Mayank Mamtani of B. Riley.

Congrats on a very impressive data set here. Maybe just a couple of quick follow-ups. Just the shape of EASI, vIGA and NRS curves, how should we think of peak efficacy response rate as you continue dosing up to this 52-week maintenance portion? As was commented, the OX40 takes a bit longer to get to that peak induction efficacy? And I also wonder how much of accumulative drug exposure plays a role for you to go to this infrequent maintenance dose? You're obviously extending out frequency here. So how do you balance getting to peak efficacy versus sort of drug exposure? And then the second question I had was on the geographical sub analysis that was conducted at all yet. I would be curious to learn how your placebo-adjusted EASI responder analysis look like in U.S. versus ex U.S.? And obviously, it was good to see your placebo here go down from Phase Ib to Phase II, but an apples-to-apples Phase Ib versus Phase II would be looking at, say, the U.S. population directly?

Sure. So for your first question, it was about the shape of the secondary endpoint curves and their projection to future continued dosing. Jonathan, maybe can I ask you to comment on that? And then I can comment on some of your questions about drug exposure versus peak response as well as to the geography.

Sure. I mean, so just to clarify, so we're thinking really -- well, let's just talk at a high level around dose. And then just contrasting in your question, thinking about the OX40s and 40 ligands as sort of a comparator, that was a complicated class, remains a complicated class to identify dose because there never was a clear dose response. You looked at their Phase IIb data and you're like, what is the optimal dose. And that was very tricky. And then something seems to be class-wide. We don't have that problem here, right? We see a very clear dose response and consistency, right, in the subset populations, moderate, severe, et cetera. And so I think it automatically sort of distances itself from that sort of concern that comes up from the 40/40 ligand class. I don't know if that fully answers the question, but that's sort of how I'm thinking about is -- I don't -- my first glance at the OX40 is like, okay, well, what is that dose? I don't think we have that concern here. I think we have consistency. I think -- and so from my perspective, I'm not worried about that at all.

Thank you, Jonathan. And your next question was about sort of the relationship between drug exposure and peak response. And it's a very interesting question because as you remember in our Phase Ib study, we dosed for 12 weeks, withdrew the drug called TARC, but many of the patients continue to improve even through the 7-week period up to week 19 and then beyond. So there is also this kind of component, which is there's a duration of dosing. We believe the Q2 week is important for this induction because we really saw that dose level separate on the induction. And so you have kind of a start-up of effect on an induction regimen, and then you have the opportunity to see the impact of that with time. So for example, some of the more recent Phase III studies have started to move to a week 24 end point, which is really designed partly for the OX40 class, as Jonathan mentioned, but it's really designed to allow more time for the efficacy to develop. And we'll be considering things like that, which is, I think, squarely into your question, in the relationship to the dosing regimen in frequency and then the duration right until you read out the primary end point. But the good thing is that this study is just really well designed to answer those kind of questions for us. And then I'll just briefly touch on your question about geography. So what I will say is that when you do look at the different regions, you can see some different trends. So in the study, 16% of the patients were enrolled from the U.S., which is about 68 people or so. And the placebo rate in the U.S. was quite a bit higher, which is, I guess, not a big surprise, right, to our doctors sitting around the table. And why for us, it was such a key mitigation for us to really control the U.S. footprint and the U.S. patient population relative to the total worldwide geographical footprint of the study. And I guess as we report more results and publish these results in the future, Mayank, we can get into more of these regional breakouts of the data and different patient subsets from different regions.

Our next question comes from Jay Olson at Oppenheimer.

Congrats on these impressive landmark results with this novel mechanism in atopic dermatitis, and thank you for providing the update. Can you talk about what percent of patients have transitioned to maintenance therapy? And since the potential for remission or a disease modification was previously observed in the Phase Ib study, is that something we should expect to see in the maintenance phase of this study? And then, as a follow-up question, since Dr. Silverberg commented on the appealing nature of this immune balancing mechanism to both clinicians and patients for atopic derm, would that same rationale apply to alopecia areata? And what sort of read across do you see from these positive AD results to AA or even other areas like vitiligo?

Sure. So let me start off with your first question. And the number of patients that moved into the maintenance arms overall in the study was about actually 48%, about 190 people have moved into the maintenance arms. And the way that, that broke out was it was about 31% of the placebo patients. And for the REZPEG patients, it ranged from 56% to 49% across the different dose arms. And that's for all of the people throughout the study. And as I mentioned, for the people that completed at week 16, it was over 75% on the REZPEG arms that moved into the maintenance period. Now your next question was about the remission that we observed. So in the Phase Ib, it was really designed in a kind of a remittive protocol because you dosed for 12 weeks and withdrew. So in this study, we're continuing to dose after the induction through the maintenance. So we're looking at the durability and deepening with ongoing treatment up to 52 weeks. But then the second year of the study kicks in. And in the second year, we are actually observing patients for 52 weeks off drug. So that will really answer, Jay, deeply the remission kind of question. And we expect that, that for us would be something that we'd report on in the early part of 2027. And then really asking a pretty sophisticated question. We treat for a year, go off for a year, right? And what is the stability or the remittive potential after a year of dosing. So that's a future effect. And then I think your next -- last question was about the read-through to alopecia. And maybe I'll ask David to comment on that. And Jonathan, please feel free to add.

Yes. So first, why am I optimistic about alopecia areata? Well, first, the fact that we know that this medicine at least it does what it's supposed to do in terms of the Tregs, we know that for sure. So we can expect that same result in alopecia areata. Now there is some data that [indiscernible], for example, tried just plain IL-2 Aldesleukin, even though it was very imperfectly dosed for a very short period of time, even though we know you really have to treat alopecia for quite a while to see a response, and even with that imperfect medicine, imperfect dosing, there were some patients who responded with hair growth. We know that alopecia areata, there's a dominant form of the Th1 arm of the immune system, but there seems to be some other arms potentially involved as well. And there's a break of immune privilege within the hair follicle. So restoring that immune privilege by putting the brakes on the immune system and being able to down regulate these multiple pathways, I think, again, is -- all makes us optimistic. And then plus, when we actually have clinical data for those imperfect studies by theory in -- who's a friend in France, I mean that gives me a lot of optimism that we're going to see a response in the Phase II proof-of-concept study. I think the big question is more likely than will work, how well will it work is my big question.

I would echo that. I think the we know that alopecia areata is a T cell-driven disorder, right? So -- and it's something that there is potentially mixed polarities there. So just logically, on the mechanism, it makes total sense, right? You have to obviously have to study and see how well it works. But from a mechanistic perspective, we -- the rationale is clearly there.

Our next question comes from Andy Hsieh at William Blair.

Really congratulations on the robust data. So I have a question for Dr. Rosmarin and Dr. Silverberg. Really wanted to understand how you think about therapy selection and things and differentiation that you're looking for as you put patients on different -- various different therapies? So I'm curious, maybe in a hypothetical situation where you have all 3 modalities available, right, IL-2, OX40 and then Dupi on the market, how do you think about patient selection based on the data that you have seen today? Second question I have is really on the higher risk, basically more severe baseline patients, very, very intriguing data there. Maybe for the Nektar team, is there any sort of regulatory or commercial strategy that you can really amplify that differentiation there? And maybe third, on a more kind of biological perspective, you see maybe like a peaking of efficacy for OX40 and for maybe week 30 to 36. I'm curious in terms of any biological rationale that you might see kind of a more linear and longer benefit with REZPEG?

Yes. I think the first question was for Dr. Rosmarin and Silverberg was about sort of treatment decisions if you're in a hypothetical situation where you have multiple classes of agents available, IL-13, OX40 and Tregs.

Dave, you mentioned your name first, but I'm happy to -- look, this is obviously a $1 billion question. I mean I think it's a super important one. I mean for me, my overall gestalt answer for almost any question would have been shared decision-making and it is here as well. And I think it's going to be part of really understanding the nuances in efficacy, safety, tolerability dosing. It's really a -- it's the whole right package, so to speak, for any drug. The current tools that we have are solid drugs. But they -- there's definitely still a lot of unmet needs. So I would think of it as very high level first line versus second line and beyond. From a first-line perspective, we still have a lot to learn. And it may be that the best is yet to come in terms of some of the potential for remittive effects and longer-term benefits in terms of persistent Tregs populations, et cetera. But it's going to come down to certainly efficacy, modest endpoints, deeper end points, that stability of control, dosing, dosing really in the longer term. The induction period, we are less concerned about. But really in the longer term, what that kind of maintenance dosing would look like versus potential for eventually discontinuing drug. So I think there's a lot there. And then in terms of safety and tolerability, the, let's say, for example, the type 2 blockers, overall, well tolerated, but there have been adverse events that have been reported. There are issues that come up with [ conjunctivitis, ] et cetera. So having a drug that doesn't have or doesn't at least seem to have any of those type 2 classified side effects becomes important, both as a first-line consideration when discussing share decision-making, but also as a second line consideration because would we -- would I want to go from 1 type 2 blocker to another type 2 blocker down the road if I've got a novel MOA that shouldn't give me any of those type 2 side effects if I had a patient already experienced them with one likely not, right? So it gives me an opportunity to switch to a novel class. So I think there's so much more we can discuss about this. But at a high level, I think when you've got a good balance of efficacy, safety, dosing, potential remittive effects, that's giving you a lot to discuss with patients in that shared decision-making conversation.

Thank you for taking that one first. That's a very expansive question to answer in 2 minutes, how do you prescribe all the treatments. I think you can look at for some analogies in psoriasis that many of us will use all the different treatments first line. And I think that's probably going to be true with the AD treatments, where all of them will be used in some capacity first line. Dupilumab is not going away. That is still a well-beloved drug in dermatology. And I think that there is value in looking at the medicine for both first and second-line use. And it is going to be about shared decision-making. What does the patient value? If it pans out that this has -- you can use infrequent dosing, well, that's going to be very advantageous to a group of patients. If there's deeper responses, again, that is also important. So I think we want to learn more about the medicine, especially from the Phase III to really decide where it's placed. However, Jonathan is absolutely right, the shared decision-making is the right answer.

And then I think your next question, Andy, was about the approach now that we've observed that there was no softening of efficacy in the patients with baseline severe disease. And that's something that we're definitely going to explore. I mean, we know that, for example, even for DUPIXENT, the dose that's used actually has less activity in patients with baseline severe disease. That's the approved dose that's on the label. So we know that there is an unmet need and that there's a different level of quality of care in patients that are baseline severe. So that's something that we'll be looking to really understand in our future regulatory and other positioning and market access approaches. And then your last question was about a peak of efficacy. And I think for us, like we're really collecting data, right? I mean what we are really excited about was between what we learned in this study over the induction and what we learned in the Phase I study from the off-drug maintenance is that, I mean, we could really get patients to a pretty deep state of efficacy when they are treated in this kind of an induction regimen that the Q2 week has shown. So I think it's -- this is one of the still stay tuned kind of parts of this story as the doctors have mentioned, and we're very, very eager to look at the results of the maintenance in the early part of next year.

So this concludes today's Q&A session. I will now turn it back to Howard for closing remarks.

Well, thank you, everyone, for joining us this morning, and I'm very proud of the Nektar team and their hard work in developing a new and important mechanistic approach. And I also want to thank our shareholders for their continued support. So -- and of course, I want to thank Dr. Silverberg and Dr. Rosmarin for all their great help and advice. Stay tuned for alopecia areata results later this year. Thank you very much.