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Edited Transcript of NKTR earnings conference call or presentation 8-May-19 9:00pm GMT

Q1 2019 Nektar Therapeutics Earnings Call

SAN FRANCISCO Jun 11, 2019 (Thomson StreetEvents) -- Edited Transcript of Nektar Therapeutics earnings conference call or presentation Wednesday, May 8, 2019 at 9:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Gil M. Labrucherie

Nektar Therapeutics - Senior VP & CFO

* Howard W. Robin

Nektar Therapeutics - CEO, President & Director

* Jennifer Ruddock

Nektar Therapeutics - SVP of IR & Corporate Affairs

* Jonathan Zalevsky

Nektar Therapeutics - Chief Scientific Officer

* Mary Tagliaferri

Nektar Therapeutics - Chief Medical Officer

* Stephen K. Doberstein

Nektar Therapeutics - Chief Research & Development Officer

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Conference Call Participants

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* Arlinda Anna Lee

Canaccord Genuity Limited, Research Division - Analyst

* Asthika Goonewardene

Bloomberg Intelligence - Senior Biotech Analyst

* Chris Shibutani

Cowen and Company, LLC, Research Division - MD & Senior Research Analyst

* Daina Michelle Graybosch

SVB Leerink LLC, Research Division - MD & Senior Research Analyst

* David Michael Steinberg

Jefferies LLC, Research Division - Equity Analyst

* Difei Yang

Mizuho Securities USA LLC, Research Division - Executive Director of Americas Research

* George Farmer

BMO Capital Markets Equity Research - Analyst

* Jessica Macomber Fye

JP Morgan Chase & Co, Research Division - Analyst

* Paul Choi

Goldman Sachs Group Inc., Research Division - Equity Analyst

* Robert Cummins Hazlett

BTIG, LLC, Research Division - MD

* Andy Hsieh

William Blair & Company L.L.C., Research Division - Senior Research Analyst

* Tyler Martin Van Buren

Piper Jaffray Companies, Research Division - Principal & Senior Biotech Analyst

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the Nektar Therapeutics First Quarter 2019 Financial Results Conference Call. (Operator Instructions) As a reminder, this conference call may be recorded.

I would now like to introduce your host for today's conference, Ms. Jennifer Ruddock, Head of Investor Relations. Ma'am, you may begin.

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Jennifer Ruddock, Nektar Therapeutics - SVP of IR & Corporate Affairs [2]

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Thank you, Crystal. Good afternoon, everyone, and thank you for joining us today. With us are Howard Robin, our President and CEO; Gil Labrucherie, our Chief Financial Officer; Dr. Stephen Doberstein, our Head of R&D; Dr. Jonathan Zalevsky, our Chief Scientific Officer; and Dr. Mary Tagliaferri, our Chief Medical officer.

On today's call, we expect to make forward-looking statements regarding our business, including the timing of future clinical trials and clinical trial results, clinical development plans, including the plans to start future clinical trials; the therapeutic potential of certain drugs and drug candidates as well as those of our partners; our financial guidance for 2019 and certain other statements regarding the future of our business.

Because these forward-looking statements relate to the future, they're subject to inherent uncertainties and risks that are difficult to predict and many of which are outside of our control. Important risks and uncertainties are set forth in the Form 10-K that was filed on March 1, 2019, and which is available at www.sec.gov. We undertake no obligation to update any of these statements whether as a result of new information, future developments or otherwise.

A webcast of this call will be available on the Investor Relations page of Nektar's website at nektar.com.

With that, I will now turn the call over to our President and CEO, Howard Robin, Howard?

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Howard W. Robin, Nektar Therapeutics - CEO, President & Director [3]

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Thank you, Jennifer, and thank you to everyone for joining us on the call today. On today's call, we will review our planned milestones over the coming months, including the continued trial starts for the registrational program for bempeg, additional trials with other bempeg collaborators, new studies being initiated for NKTR-358 with our partner Lilly, and the advancement of NKTR-255, our IL-15 agonist program and next I-O candidate. We will also provide guidance on clinical data presentations, plan throughout the year and reiterate our financial guidance for 2019.

Starting first with chronic pain and an update on NKTR-181, the opioid crisis continues to be front page news in our country. We continue to believe that a significant and necessary building block to addressing the opioid crisis is providing new pain medications that don't carry the same profiles as the existing opioid mechanisms on the market. And to this end, we remain confident that NKTR-181 can be an important building block in addressing the crisis and potentially helping patients new to opioid therapy suffering from chronic low back pain.

We continue to work closely with the FDA during the review of NKTR-181, as we've done throughout its development; and the PDUFA is August 29. We remain confident in the entire data package supporting our NDA submission and the FDA has informed us that they plan to hold an advisory committee meeting to review our NDA. A general timeline of August has been suggested, but no firm date has been set.

As I stated last quarter, we have established a separate subsidiary company to launch NKTR-181. We expect to announce the new company and management team members within the next several weeks. As we head to a potential approval, our objective is to finalize the capital structure with 1 or more potential capital partners to support commercial launch. We believe a launch can be done efficiently with a specialized medical liaison team and a small sales force. To prepare for launch, we are completing the production of launch inventory as well as market access preparation and distribution arrangements. We continue to be very excited about the future for NKTR-181.

Moving now to immuno-oncology. We continue to execute on our strategy to develop a full pipeline of new potential medicines that address the key components of the immune cycle in order to restore immune surveillance and properly harness the body's immune system to fight cancer.

Starting with bempeg and our collaboration with Bristol-Myers Squibb, we have initiated a number of registrational trials for the bempeg and nivo doublet combination in first-line metastatic melanoma, renal cell carcinoma and bladder cancer. And we added a new expansion arm to PIVOT focused on enrolling second line non-small cell lung cancer patients following treatment in relapse in first line with chemo and checkpoint therapy.

The joint development plan with Bristol includes many registrational trials across multiple tumor types. BMS and Nektar are currently working on the designs for the next wave of trials in lung, breast, gastric, and colorectal cancers as well as sarcoma. Our 2 teams have been working very closely together on trial designs in a changing competitive landscape.

We are developing a comprehensive registrational strategy and one that positions competitively the doublet of bempeg and nivo as well as the triplet of bempeg, nivo and ipi, across various tumor types in our collaboration. As you know, from the start of our collaboration, we were targeting early June for the submission of INDs for the studies in our joint development plan. Given the scope and complexity of the program, Nektar has agreed to extend the target date by 4 months for registrational trials in the joint development program that have not yet been started.

As we stated earlier in the year, the data from additional PIVOT cohorts in other tumor types mature over the next 12 months. Nektar and Bristol are planning to present the data at various medical meetings, including tumor-specific conferences.

And let me start with our plans for ASCO this year. We have several presentations accepted for this meeting. First, on Saturday, June 1, Dr. Michael Hurwitz of Yale Cancer Center will be presenting additional translational data from PIVOT. Although not in the abstract, during this presentation, we plan to provide 12-month follow-up from the first-line melanoma cohort in the PIVOT study.

This will be a follow-up to Dr. Diab's SITC 2018 presentation, which at that time had a median 7.2-month follow-up for patients in that cohort. This presentation will include an update on the ongoing deepening of responses from the cohort in order to further illustrate the continued benefit of the combination of bempeg and nivo over time. Now at the 12-month median follow-up time, the data are still too early to calculate medium PFS.

Second, on Monday June 3, there will be an oral presentation showing preliminary activity observed in patients with late-line rapidly progressing and rare sarcoma subtypes enrolled in an investigator-sponsored exploratory study of bempeg and nivo conducted by Dr. Sandra D'Angelo from Memorial Sloan-Kettering Cancer Center.

As we stated last quarter, we are also currently targeting several presentations of PIVOT data in 2019, including lung cancer data at this year's ESMO meeting. Nektar and BMS are also currently planning to submit data from the triple-negative breast cancer cohort for presentation at the quadruplet CRI meeting in September. And for RCC, we are targeting the 18th International Kidney Cancer Symposium in November. For RCC, we plan to present data from 2 cohorts in PIVOT, the doublet of bempeg and nivo and the triplet of bempeg/nivo and ipi.

Pfizer and Nektar are currently finalizing the Phase Ib/II study in head and neck cancer and castration-resistant prostate cancer. Pfizer plans to initiate this study in the middle of Q3. The study will evaluate various doublet and triplet combinations with bempeg and Pfizer and Merck Serono's anti-PD-L1 agent of avelumab, Pfizer's PARP inhibitor and Pfizer and Astellas' anti-androgen agent. We're very excited to work with Pfizer on this because of the opportunity in these 2 solid tumor settings for bempeg, particularly in patients with PD-L1 negative tumors.

We also have an ongoing study with Takeda to combine bempeg with Takeda's TAK-659, which is a dual SYK/FLT inhibitor in liquid tumors. We know that the 3 mechanisms together, IL-2, SYK and FLT, showed a dramatic effect in our preclinical models, so we are excited about the first study, which has already started in advanced NHL patients.

Moving on to updates for NKTR-255, our IL-15 agonist cytokine, which is currently in IND-enabling studies. We know that the activation of the IL-15 pathway in addition to creating memory T cells also strongly promotes the expansion, activation and survival of natural killer cells. NKTR-255 has applications in both liquid and solid tumors, where this mechanism could greatly enhance ADCC antibodies such as daratumumab. We are targeting completion of the IND-enabling work for NKTR-255 in the second half of this year, and we're currently designing our first clinical trials in both liquid and solid tumor settings.

We also have a preclinical collaboration with the Fred Hutchinson Cancer Center, evaluating the use of NKTR-255 to enhance CAR-T persistence and improve overall responses following CAR-T. Fred Hutch is planning the first presentation of this preclinical data at The European Hematology Association Congress being held June 13 to 16 in Amsterdam. Based on the preclinical data, we are also planning a clinical trial in combination with CD19 CAR-T cells as one of our NKTR-255 development programs.

In the fourth quarter of last year, we entered into a research collaboration with Gilead to explore NKTR-255 with different Gilead molecules and their portfolio in the area of urology. These preclinical studies in nonhuman primate models started earlier this year and the program is proceeding nicely.

I'd like to move on to discuss the great progress we're making with our partner Eli Lilly on the advancement of NKTR-358, our Treg cell stimulator candidate being developed to address various autoimmune conditions. As you know, we have an ongoing Phase Ib multiple-ascending dose study in lupus patients that is proceeding nicely through the dose escalation phase, and we expect that the study will complete later this year.

We are very pleased that our first in human data from the Phase Ia study was accepted for an oral presentation at the European Congress of Rheumatology to be held June 12 to 15 in Madrid. The oral presentation will be on June 13, in the genetics, epigenetics, and [immunity] session. The presentation will include data from our completed single-ascending dose study of NKTR-358 in healthy volunteers. And we will also host an Investor Call to review the data presentation for those unable to attend EULAR.

Lilly is currently designing a Phase II lupus study, which will start following the completion of our Phase Ib study at the end of this year. And in addition, Lilly is also designing 2 additional Phase Ib studies in 2 new autoimmune indications that will start in the second half of this year. We remain very excited about NKTR-358 emerging as a potential resolution therapeutic in the treatment of autoimmune disease.

And with that, I'll hand the call over to Gil for a review of our financials.

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Gil M. Labrucherie, Nektar Therapeutics - Senior VP & CFO [4]

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Thank you, Howard, and good afternoon, everyone. I will start with a brief review of highlights from our first quarter 2019 financial results, and then I'll review our 2019 financial guidance. We ended the first quarter with $1.8 billion of cash and investments. Total revenue was $28.2 million for the quarter compared to $38 million for the first quarter of 2018.

R&D expense was $118.5 million in the first quarter of 2019, as compared to $99.4 million for the first quarter of 2018. The increase in R&D expense in 2019 as compared to the same quarter of 2018 is a result of the expanded clinical development of bempeg, NKTR-358, NKTR-262 and NKTR-255. In Q1 2019, bempeg R&D expense included registrational studies in RCC, melanoma, bladder, non-small cell lung cancer and manufacturing cost to supply the future broad bempeg clinical development program.

G&A expense was $25 million in the first quarter of 2019 as compared to $18.7 million in the first quarter of 2018. G&A expense increased, primarily due to commercialization readiness activities for NKTR-181 and increased noncash stock compensation expense.

We recognized a net loss of $118.5 million for the first quarter of 2019, or $0.68 loss per share as compared to a net loss of $95.8 million or $0.60 loss per share in the first quarter of 2018.

Now let's turn to our 2019 financial guidance, which is unchanged from our last call. Starting with our cash position, we continue to anticipate ending 2019 with approximately $1.5 billion with a receivable balance of approximately $65 million to $75 million due from BMS at the end of 2019.

As a reminder, our R&D expense is accounted for a net of BMS' share of bempeg development costs. And our annual R&D expense obligation with BMS is subject to $125 million annual cap that will not limit our annual cap R&D expense, but will limit our annual cash funding obligation prior to the commercialization of bempeg.

Our full year GAAP revenue guidance remains at between $100 million and $110 million in 2019. We continue to expect revenue to be fairly ratable on a quarterly basis. Our GAAP expense guidance is also unchanged. We still anticipate 2019 GAAP R&D expense will range between $500 million and $525 million, which includes approximately $80 million of noncash depreciation and stock compensation expense.

As we complete a number of bempeg manufacturing batches in Q2, we do expect R&D expense to be relatively higher in Q2 as compared to the other quarters of 2019. As a component of our R&D expense, we expect our bempeg manufacturing investment to be significant in 2019 as we build our drug supply to support the multiyear clinical development plan for bempeg. Under our collaboration, BMS generally shares in approximately 35% of bempeg manufacturing and supply costs.

Beyond bempeg, R&D investment is funding the advancement of a broad clinical development pipeline, including NKTR-358, NKTR-262, NKTR-255, as well as future IND candidates currently in the research stage. In 2019, we will complete the manufacture of NKTR-181 commercial launch supplies that are included in R&D expense, and not capitalized into inventory prior to regulatory approval.

G&A expense for 2019 is still projected to be between $110 million and $120 million. We continue to invest in activities necessary to support regulatory approval of NKTR-181 and we are carefully staging our investment and commercial readiness for NKTR-181 as we approach a potential approval later this year.

And with that, I'll open the call for questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question comes from Chris Shibutani from Cowen.

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Chris Shibutani, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [2]

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I appreciate the updates across all the programs. If I could just get 2 in particular relating to bempeg, and the Bristol relationship, you commented that there is now an extension in the timelines, I believe that was the phrase you used in terms of requiring to meet the commitments of beginning all the different trials and indications. Can you comment about what the genesis of that is? Are there any issues at all with enrolling? Or is it owing to shifts of strategy? That would be helpful.

Secondly, the list of all the different incremental readouts is much appreciated. But then if we were to try and to think about what indication might get across or approach the finish line first to the extent that, that also -- kind of the first one through the fire so to speak.

Can you help us with how we should think about it? I remember that melanoma started first, et cetera, but when we think about crossing or approaching the finish line, can you help us with how the sequencing of that could be as we think about sort of moments of truth to get through next key stages?

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Howard W. Robin, Nektar Therapeutics - CEO, President & Director [3]

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Sure. Thanks, Chris. Look, in regard to the 4-month extension, look, these are very, very complex programs. As you know, we already have 6 INDs filed. We are preparing the next 5, 6, 7 INDs. We're working very closely with BMS. We have a great relationship with them. And this is a tremendous amount of work and a lot of thinking must go into these studies to get them right. It's a rapidly evolving competitive landscape and we want to make sure that we are successful. We want to make sure that we're successful with these trials.

I think an extension of 4 months is something that we think is perfectly reasonable in terms of this such a complex development plan. And maybe we were a little aggressive on the initial timelines, but in any case I think we're moving forward rapidly and we have a definite focus between the 2 companies to get this done.

Regarding what you might see in terms of readouts, I'm going to let Mary take that question. Mary, go ahead.

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Mary Tagliaferri, Nektar Therapeutics - Chief Medical Officer [4]

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Yes, Chris, in terms of incremental readouts, as you know, we have 4 registrational trials ongoing now and we're actively recruiting and that includes our first-line metastatic urothelial carcinoma or bladder cancer study. Our first-line melanoma Phase III trial. We also have our PIVOT-02 expansion cohort for relapsed refractory lung cancer cohort. Actually, these patients are patients who are -- relapsed to first-line treatment with chemotherapy plus the checkpoint inhibitor. And then the fourth Phase III clinical trial we have is our first-line RCC study.

And in terms of the sequence of the readouts, we expect that the bladder cancer trial would read out first. The melanoma and expansion cohort from PIVOT-02 could be the second and third trials, and the fourth trial would be the Phase III clinical trial in RCC, where we are comparing bempeg plus nivo versus TKI.

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Chris Shibutani, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [5]

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Great. And in terms of the mindset, then if bladder is coming first and I think there's been something impressive data there. Would your and Bristol's mindset be to press forward with that as an individual indication into perhaps regulatory filings? Or would there be a sense of needing to or wanting to cluster with other readouts that may be in some ways proximate to give you, I don't know multiple shots on goal, but could bladder go first through the fire, so to speak?

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Mary Tagliaferri, Nektar Therapeutics - Chief Medical Officer [6]

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Yes, it's possible that bladder could go first. And as we shared before, we have had conversations with the FDA about the potential of this trial being used for an accelerated approval. And we've also shared with you that we have a confirmatory trial agreed upon with the FDA, which is our muscle invasive bladder cancer Phase III trial. So it is possible that could be the first filing for the company.

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Operator [7]

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Our next question comes from Paul Choi from Goldman Sachs. And we'll move on to our next question from Jessica Fye from JPMorgan.

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Jessica Macomber Fye, JP Morgan Chase & Co, Research Division - Analyst [8]

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Just a few -- first, just following upon Chris' question, sorry, if I missed this. What was the prior deadline for starting the pivotal studies? And what's the new deadline under the Bristol collaboration?

Then to confirm the melanoma update that you mentioned at ASCO, did you say that will not have data in the abstract? And just to confirm, did you also say that there has been further deepening of responses since the SITC update? And then lastly, on the sarcoma IST data at ASCO, should we expect data from sarcoma patients in that abstract?

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Howard W. Robin, Nektar Therapeutics - CEO, President & Director [9]

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Okay. Well, first of all, let me take the first question. We -- the contract and the agreement and the collaboration was to have the trials running by June by next month. And we've moved that to end of September. So we moved that 4 months. So the new date is end of September. And as I said, we did that recognizing the complexity of all the work that has to be -- that has to be done and also potentially a little ambitious in any case.

I did talk about the presentation of melanoma data at ASCO, where we will talk about a deepening of responses. And I'm going to let Mary cover that a bit.

Go ahead, Mary.

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Mary Tagliaferri, Nektar Therapeutics - Chief Medical Officer [10]

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Yes. So as you know Jess, over 5,000 abstracts are submitted to ASCO and she was accepted for an oral presentation -- and Dr. Sandra D'Angelo, who will be presenting data on multiple different sarcoma histologies, some that are very rare. And she will be breaking out responses based on these various cohorts by histology, including leiomyosarcoma, undifferentiated pleomorphic sarcoma and chondrosarcoma. These patients who have been enrolled to her study were advanced patients who were refractory to multiple agents. It is possible that Dr. D'Angelo will be adding more patients to the roughly 50 that she included in her abstracts.

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Howard W. Robin, Nektar Therapeutics - CEO, President & Director [11]

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And Mary, you also covered what the -- some discussion on melanoma because we talked about that there.

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Mary Tagliaferri, Nektar Therapeutics - Chief Medical Officer [12]

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Yes, sure. So in terms of melanoma, you will remember, Jess, that we provided an update at SITC last year and at that time, we had roughly a follow-up of 7.2 months. And you will remember that we had confirmed responses by independent radiology, those 53% with a CR rate of 24%. And so we will be providing an update on the deepening of responses as Howard mentioned at our presentation at ASCO.

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Jessica Macomber Fye, JP Morgan Chase & Co, Research Division - Analyst [13]

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And will patient data be in the abstract for melanoma?

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Mary Tagliaferri, Nektar Therapeutics - Chief Medical Officer [14]

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No; we won't have patient data in the abstract.

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Jessica Macomber Fye, JP Morgan Chase & Co, Research Division - Analyst [15]

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Got it. Can I just ask 1 more for Howard, in the beginning when you were talking about 181, and I think you mentioned a potential adcom, did you say it could be in the August timeframe, i.e., very close to the PDUFA date?

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Howard W. Robin, Nektar Therapeutics - CEO, President & Director [16]

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Yes, the FDA has told us that they want to have an adcom, it will likely be in August. We don't have a date yet.

Steve, would you like to comment further on that?

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Stephen K. Doberstein, Nektar Therapeutics - Chief Research & Development Officer [17]

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Yes, sure. Jess, the adcom date as we tried to get it scheduled in August, that's when FDA has indicated they're shooting for. That may seem a little bit close to the PDUFA date, but in fact with this particular division, there is a pretty good precedent for rapid turnaround after an adcom to a potential approval decision almost immediately afterwards.

For example, the most recent example I can think of is Dsuvia, where there was an adcom. And then the approval happened about 3 weeks later. So they can turn around pretty quickly in this particular division. So I'm not particularly concerned about the closeness and time of a potential adcom to the PDUFA date.

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Operator [18]

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Our next question comes from George Farmer from BMO Capital Markets.

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George Farmer, BMO Capital Markets Equity Research - Analyst [19]

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I want to dig into a bit more on the melanoma data that we'll be seeing at ASCO. Did you say that you have not hit your median PFS as of 12 months or as of today?

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Mary Tagliaferri, Nektar Therapeutics - Chief Medical Officer [20]

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Yes. So we have a 12-month follow-up and we will be presenting data from our 12-month median follow-up for this cohort, and to date, the data are too immature to calculate the median PFS.

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George Farmer, BMO Capital Markets Equity Research - Analyst [21]

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Okay. Great. And can you comment as to how many patients are remaining on treatment as of today?

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Mary Tagliaferri, Nektar Therapeutics - Chief Medical Officer [22]

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Not today, but as of SITC in 2018, we did have 7 patients that could have had deepening of responses on treatment that had not reached a CR. And so we will able to provide an update on how these patients have progressed now at a 12-month median follow-up.

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George Farmer, BMO Capital Markets Equity Research - Analyst [23]

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Okay. And also getting back to previous question about 181, it does seem a little tight to have the panel so close to the PDUFA? I mean is it possible that the PDUFA could be extended, again?

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Stephen K. Doberstein, Nektar Therapeutics - Chief Research & Development Officer [24]

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This is Steve Doberstein. From a regulatory standpoint, it's actually not correct for the agency to formally move the PDUFA. However, it is possible for them to miss their PDUFA date. They really don't like to do that and we don't expect them to do.

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Operator [25]

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Our next question comes from Bert Hazlett from BTIG.

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Robert Cummins Hazlett, BTIG, LLC, Research Division - MD [26]

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Just following up on the 181 discussion, have you had any interactions with regard to scheduling of 181? Any color at all would be helpful. And then just with regard to the Takeda collaboration and your comments there, when might we expect some data coming from that collaboration?

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Stephen K. Doberstein, Nektar Therapeutics - Chief Research & Development Officer [27]

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Yes. So with respect to 181, we make a recommendation for schedule, for scheduling during the process, but of course, that discussion happens between FDA, who makes a recommendation to DEA post-approval. And so we wouldn't expect that kind of scheduling decision or advanced discussion to happen until after the PDUFA date.

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Jonathan Zalevsky, Nektar Therapeutics - Chief Scientific Officer [28]

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And -- hey Bert, this is JZ. In response to your question about the Takeda collaboration, the trial really just got underway, and so it's in the very earliest stages. So we expect that it may take at least a year or so to enroll enough patients. So we would probably be looking something that's reasonable is the timeframe next year, where we would be looking at data from that trial.

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Operator [29]

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Our next question comes from Difei Yang from Mizuho Securities.

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Difei Yang, Mizuho Securities USA LLC, Research Division - Executive Director of Americas Research [30]

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Just a couple. The first one is on 181. How do you think about the potential sales force and potential burn to launch on 181? And then, secondarily, with regards to the 4 month delay on BMS collaboration, in between that 4 month delay is it just a tactical delay that they need more time, you need more time to prepare for the IND? Or is there any data readout you're expecting maybe perhaps that will help to inform the decision?

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Howard W. Robin, Nektar Therapeutics - CEO, President & Director [31]

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Okay, great. Good questions. I think -- and the latter question, no, there is no data. There is no data readout that we're waiting for, it is purely the work that has to get done and making sure that we get everything right and making sure that we're extremely competitive in how we manage and how we design our study. So there is no data being looked for here.

Regarding your first question on NKTR-181, I think this is a very -- this is a unique opioid molecule. The goal is to market it and put it forward in a way that really helps patients who have chronic lower back pain. And where they can get a benefit from hopefully a less abusable opioid. I think, we are seeking equity partners for this. We expect to have capital coming into fund this subsidiary that we've created. And I think it's a fairly small sales organization. I don't think this is a mass marketing concept.

I think what we're doing here is looking for a small sales organization, maybe medical scientific liaisons. This is a very technical scientific story behind NKTR-181. This is not your average opioid. It's a very different molecule, is probably the first new opioid molecule in 50 years. And I expect that it will be launched in a very, very high science and focused way with a fairly small sales organization.

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Difei Yang, Mizuho Securities USA LLC, Research Division - Executive Director of Americas Research [32]

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Just a quick follow-up on the partnership for 181. Do you expect to spin-off this operation? Or will the operation still fall under the Nektar umbrella?

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Howard W. Robin, Nektar Therapeutics - CEO, President & Director [33]

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Well, good question and it's not a -- well, at this point, it's not a partnership; it's a wholly-owned subsidiary. Of course, we do expect the outside funding in that. I think at some point that could very well happen. At some point, it could very well be a spun-off entity. And I think it's being set up to potentially do that. Let's see how well the drug does. I think the drug solves or at least goes a long way to solving some of the problems that we currently face in this opioid crisis. And if we're successful there then there is no reason to believe this can't be an entity on its -- unto itself one day.

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Operator [34]

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Our next question comes from Tyler Van Buren from Piper Jaffray.

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Tyler Martin Van Buren, Piper Jaffray Companies, Research Division - Principal & Senior Biotech Analyst [35]

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Looking forward to the rest of the year. There is a lot of clinical updates. I had a couple of follow-ups with respect to the ASCO data presentations. So my understanding, I think is with nivo monotherapy median progression-free survival is 6.9 months, if I recall that correctly. And so if median PFS, if it's too early to be calculated with 12 months of follow-up, obviously it's going to be important to see disease control rate and response rates, but isn't that disclosure alone meaningful and suggest that it's tracking well ahead of that?

And also secondarily, could you remind us of what median -- appropriate median PFS comp is for nivo/ipi combination therapy?

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Mary Tagliaferri, Nektar Therapeutics - Chief Medical Officer [36]

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Yes, thanks for the great, wise question, Tyler, and we're definitely very pleased with the fact that the data are still too immature to calculate the median PFS. And as you know, even with ipi plus nivo, which showed a statistically significant difference in PFS, that was less than 12 months. So as a median PFS, that was -- already been published. Likewise, even with our CR rate at 24%, at just a 7-month median follow-up, we also had a much higher, almost double CR rate compared to ipi plus nivo, and more than that compared to nivo alone.

So the one last comment I'll make is about AEs. When you look at the 4-year survival data, there is almost a 60% Grade 3 AE rate, with a very high dropout rate. And when we presented the data at SITC this year, we have less than 20% of patients having a grade 3 AEs. And with very few patients who have to go off-treatment due to any adverse events.

So the totality of all this data of patients being able to tolerate treatment, high disease control rate, high CR rate and very good objective response rate by independent radiology, which will be the arbiter, of course, in our Phase III trial. We are very pleased moving forward into a pivotal registrational study. So thanks for the question.

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Tyler Martin Van Buren, Piper Jaffray Companies, Research Division - Principal & Senior Biotech Analyst [37]

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Great. That's very helpful color. But I've just 1 last question on sarcoma. Clearly it's a difficult indication. And especially in refractory patients with limited options, I've got to imagine the bar is relatively low, but can you help set expectations on -- if you throw whatever there is available at these patients, what response rates you would expect in this patient population?

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Mary Tagliaferri, Nektar Therapeutics - Chief Medical Officer [38]

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Yes, it's a great question, Tyler. You know the nice part is, this is -- Dr. Sandra D'Angelo is an expert, not only in sarcoma at one of the largest cancer centers, Memorial Sloan-Kettering that focuses on sarcoma, but she also is an expert on the treatment of sarcoma with I-O agents. So she has published on the treatment of sarcoma with both single agent nivo and ipi plus nivo and she intends to put color and that into perspective during her presentation at the podium at ASCO. So please come.

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Operator [39]

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And our next question comes from Andy Hsieh from William Blair.

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Andy Hsieh, William Blair & Company L.L.C., Research Division - Senior Research Analyst [40]

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Just a follow-up to Tyler's questions earlier. The 12-month follow-up, that's obviously very intriguing. Could you remind me how big that population is currently that allows you to calculate the median?

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Mary Tagliaferri, Nektar Therapeutics - Chief Medical Officer [41]

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No, well, this was -- the total cohort is 38 patients and we'll certainly provide more color at ASCO, and we look forward to seeing you there, Andy, at our presentations.

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Andy Hsieh, William Blair & Company L.L.C., Research Division - Senior Research Analyst [42]

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Okay. And in terms of the RCC field, obviously, that rapidly evolving with different modalities being approved, just curious on your thoughts from a commercial perspective, is PFS alone sufficient from a market positioning perspective now?

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Mary Tagliaferri, Nektar Therapeutics - Chief Medical Officer [43]

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Yes. So we designed our first RCC Phase III study to have the primary readout to be overall survival. And we've given guidance that it will take us about 27 months to reach that end point. So we will be filing our first Phase III trial study results in RCC on an overall survival endpoint.

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Andy Hsieh, William Blair & Company L.L.C., Research Division - Senior Research Analyst [44]

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Okay. That's super helpful. And one last one in terms of the deadline. I just want to understand that, is there any sort of liability to Bristol if the deadline is pushed back, again? Or just help me understand is -- or is just a goal from both parties to get all the trials started. Just curious about the kind of the function of that deadline is?

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Howard W. Robin, Nektar Therapeutics - CEO, President & Director [45]

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Yes. The deadline is basically -- if the deadline is missed on any particular clinical trial, that just means that Nektar has the right to work in that indication or that line with another checkpoint inhibitor at another company. So it means that we could work with one of the other checkpoint inhibitors and we -- and not with nivo, if the deadline is missed, that's the consequence of missing the deadline.

I think, like I said, this is -- these are complex studies. This is a complex landscape. And we wanted to make sure we get it right. So we extended the deadline 4 months. I think I wouldn't read into it much more than that.

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Operator [46]

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Our next question comes from Paul Choi from Goldman Sachs.

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Paul Choi, Goldman Sachs Group Inc., Research Division - Equity Analyst [47]

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Maybe with regard to 255 and the CD19 program, I guess, can you either Mary or JZ maybe clarify for us in terms of the early-stage program? What you're thinking about the hurdle rate is versus some of the CAR-T programs in terms of what you'd want to see early or potentially some of the early data, we've seen from the bispecific antibody programs?

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Jonathan Zalevsky, Nektar Therapeutics - Chief Scientific Officer [48]

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Paul, this is JZ. So one of the things that is coming this summer is early preclinical presentation from our collaborators at the Fred Hutchinson Cancer Center, and so they will be showing data where we've conducted preclinical studies using human CD19 CAR-Ts. And the kinds of sort of categories of effects that we would like to see are ways that we can use NKTR-255 to improve the persistence of the CAR-T cells to improve their long ranging activity, to then, for example, minimize any differentiation that can happen to the cells, when they go inside of the organism. Of course, we use preclinical mice, but it was the same kind of things that you're dealing with in patients.

And then, ultimately, even more than that is also using an IL-15 mechanism NKTR-255, right, to maintain the homeostasis of the cells, their long-term survival. So those are like the kind of categories of activity that you would like to achieve when considering combinations in the CAR-T space.

In the setting of, say, a bispecific or in the setting of an ADCC antibody, there you're actually looking for a different kind of biology, right? So, for an example, in an ADCC setting, we're looking to activate and increase the natural killer cell compartment, maintain those cells going for a long, long periods of time so that then when the patients are co-administered the ADCC antibody, they have the best chance of having that kind of synergy of the 2 mechanisms coming together. So there are different goals in the different use settings.

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Paul Choi, Goldman Sachs Group Inc., Research Division - Equity Analyst [49]

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Okay. Great. And with regard to the 358 data that you will have at EULAR, I guess, how do you think about potentially segmenting that data going forward in the steroid experience or steroid refractory population? And then in terms of the 2 new Phase Is that you mentioned that are coming up here, have those been posted or disclosed publicly with regard to the population or the indication?

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Jonathan Zalevsky, Nektar Therapeutics - Chief Scientific Officer [50]

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Yes. So for the first question, we're going to be presenting data from the single-ascending dose study, so this is a study in healthy volunteers. So this is the dataset, that's our first human experience with 358. So there we're -- there isn't a steroid population or so forth to segment. There we're going to be presenting data on the overall safety profile, pharmacokinetic profile of 358.

And importantly, we're going to show data on its effect on the pharmacodynamic setting, its effect on mobilizing the regulatory T cell compartment and the specificity and selectivity of targeting Tregs and not engaging any of the other T cell components to that kind of Treg/Tcon ratio.

So we'll be very, very excited to show that data. And we're also very excited because this is such an early field. And there are very few agents that have a Treg targeting and a Treg expansion mechanism of action. And NKTR-358 is right up there and one of the most advanced clinical stage molecules that has this kind of mechanism of action.

And then to your second question, so with Eli Lilly, we're very excited. We are expanding the program. And so this year, we'll be initiating additional Phase Ib clinical trials. Now we've mentioned that we already have the Phase Ib running in lupus. And these 2 additional studies are in 2 different autoimmune disease indications. So we'll be really expanding the program, and all that's happening as we move into the Phase II studies that will begin after the phase Ib ends in lupus.

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Operator [51]

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Our next question comes from David Steinberg from Jefferies.

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David Michael Steinberg, Jefferies LLC, Research Division - Equity Analyst [52]

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I want to loop back to 181 with a couple of questions. There's a train of thought among some of the top KOLs [maintain] that with more abuse deterrent products or less abusable severe pain drugs at some point yet, they would remove all the generic opioids or non-ADFs from the market, and so with each successive approval the likelihood that could happen, do you have any view on that? And if so, any thoughts on when it might?

And then secondly, to the extent Nektar's involved with the new JV that's going to sell 181, assuming the approval. Do you envision it being a 1-product company? Or will there be other products down the road brought in to leverage the sales force?

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Howard W. Robin, Nektar Therapeutics - CEO, President & Director [53]

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Sure. Look, I think it's certainly difficult to comment about what might happen in the future with the opioid market. Hopefully, NKTR-181 develops data over time, that demonstrates that it is a potent analgesic as well as a product that is less abusable and can't readily be converted into a more abusable form of opioid. And hopefully, at some point that market will be satisfied with a drug like NKTR-181, but it's obviously very difficult to predict what the FDA may do in the future with that.

The second part of your question was?

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David Michael Steinberg, Jefferies LLC, Research Division - Equity Analyst [54]

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It's to -- will this just be a 1-product company? Or to the extent that you're involved, do you think they're going to bring in additional products to leverage the sales force along with 181?

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Howard W. Robin, Nektar Therapeutics - CEO, President & Director [55]

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Okay, yes, that's right, I remember that, David. Good question. Look, at this point, we've created the subsidiary to market NKTR-181. It is entirely possible that there could be other products potentially that are highly, highly synergistic with a drug like NKTR-181 and something we would certainly take a look at, and we're always exploring those possibilities. And I would expect the new management team of that subsidiary to look at that very carefully.

Obviously, whatever we do in that new subsidiary has to be cost efficient and cost effective and have a good return to Nektar and the investors. So while I wouldn't say that's the immediate focus of that subsidiary, it's certainly is something that I'd expect them to consider if it makes sense.

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Operator [56]

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Our next question comes from Arlinda Lee from Canaccord.

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Arlinda Anna Lee, Canaccord Genuity Limited, Research Division - Analyst [57]

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I guess I was pretty intrigued about conversion of PD-L1 patients at an earlier conference this year. And I was wondering if we might see a broader additional information to that effect at -- on any of your data sets in the presentations that you've highlighted that are coming out later this year.

Secondly, I'd be curious about the triple-negative breast cancer dataset, and when -- what the scope of that dataset might look like?

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Jonathan Zalevsky, Nektar Therapeutics - Chief Scientific Officer [58]

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Arlinda, this is JZ. Let me answer the first question. So first of all, at ASCO, so the poster that we'll be presenting is on translational data that we've been accumulating to date. And so we're going to present more summary information. And among those, we will be highlighting the PD-L1 -- the effect of both PD-L1 levels at baseline as well as the conversion that we've seen so far.

And so that ASCO presentation will summarize that data to date. And then in future presentations that we're doing this year, we will always be adding translational components of our mechanism of action and those will be provided in as appropriate for those tumor-specific updates.

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Mary Tagliaferri, Nektar Therapeutics - Chief Medical Officer [59]

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Yes, Arlinda, this is Mary on triple negative breast cancer. I hope you like to travel to Paris because if you do, you could meet us in the end of September for the fifth quadruple international immunotherapy conference, where we will be presenting the data from the triple-negative breast cancer cohort.

Remember the benchmark data for single agent checkpoint inhibitors in this patient population is very low at 5%. We will show the data and be able to contextualize it in relationship to the data seen in single agent checkpoint inhibitors in the first and second line population.

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Operator [60]

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Our next question comes from Asthika Goonewardene from Bloomberg Intelligence.

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Asthika Goonewardene, Bloomberg Intelligence - Senior Biotech Analyst [61]

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I wonder, this has been asked already. But I want to maybe focus on -- if you could give us an update on some of the other patient groups that were on PIVOT, such as second, third-line melanoma, RCC, et cetera. Previously you said you had about 50%, 60% of those arms recruited, where are we on those today? And when can we hope to see some of that data this year?

And then on the -- just to follow-up on Arlinda's question on the pre/post therapy the PD-L1 status, [the process can be presented], the translational data, will that have this the PD-L1 conversion for just melanoma? Or would it have for other tumor types as well?

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Mary Tagliaferri, Nektar Therapeutics - Chief Medical Officer [62]

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Yes, so I'll take the first question, and I'll punt the second one to JZ. As Howard stated in his presentation, we are working with Bristol on when to present data for all of these cohorts. And we have gone on record this year to state that we'll be presenting data at 3 different meetings. We'll present the lung data at ESMO, the triple-negative breast cancer data, at the quadruple meeting, that I just responded to Arlinda; and we'll provide an RCC update at the 18th International Kidney Cancer Symposium. And we will continue to work very closely with Bristol on where and when to present those data.

And JZ, I'll let you answer the second question.

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Jonathan Zalevsky, Nektar Therapeutics - Chief Scientific Officer [63]

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Yes. Thank you, Mary. And yes, just very quickly. So at ASCO, we'll be focusing on melanoma and bladder because we're extending the data that we presented earlier, but focusing on the translational elements. And then later this year, we'll be covering, as I mentioned earlier, the additional tumor types and there we'll be including the translational data, including PD-L1 data as appropriate in those presentations.

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Operator [64]

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Our next question comes from Daina Graybosch from SVB Leerink.

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Daina Michelle Graybosch, SVB Leerink LLC, Research Division - MD & Senior Research Analyst [65]

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A couple ones, going back to the deadline delay with BMS, you mentioned the changing competitive landscape in those designs. I think somebody previously asked you a question if you're waiting for any particular readout and you said no. I wonder if you could give more color on the particular competitive dynamics that you're working through in those trial designs?

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Howard W. Robin, Nektar Therapeutics - CEO, President & Director [66]

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Yes, look I wasn't -- it's a good question. I wasn't being overly specific.

But let me ask Mary to step in and give you some flavor for that.

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Mary Tagliaferri, Nektar Therapeutics - Chief Medical Officer [67]

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Yes. I know Daina, you and probably several other people on this call are closely following what's happening in the I-O landscape. And just one example that we can give you is in first-line non-small cell lung cancer, for example, the pembrolizumab label as a single agent for first-line non-small cell lung cancer was just expanded in April to include patients that are not only greater than 50% PD-L1 positive at baseline, but now it is expanded to the 1% to 49% population as well.

And that certainly gives us pause to talk about our strategy in first-line lung. We've always said we're going with a chemo combination and a chemo sparing approach, and this has brought us back to the drawing board to talk to our partner about the best path forward and that's just one example.

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Daina Michelle Graybosch, SVB Leerink LLC, Research Division - MD & Senior Research Analyst [68]

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Got it. One more question on the deadline. Let's say we pass the deadline, and hopefully, you start most of these registration trials. Thinking forward, if you don't end up starting some, let's just pick one maybe sarcoma based on the data we see at ASCO depending on how difficult it is. Should we assume that, that may be there wasn't enough potential in that particular indication? Or is it possible that you would go on and collaborate with other checkpoints and companies?

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Mary Tagliaferri, Nektar Therapeutics - Chief Medical Officer [69]

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Yes. I want to mention, again, we have the broadest clinical development program ever known to man in a short period of time. And really this delay is a factor of going forward with 18 registrational trials in a short period of time. We were very aspirational. We thought we would hit these 18 in a 14-month timeframe. And I think what we realized is we need a few more extra months to file all those INDs, design the studies, and get the first patient in.

Dr. D'Angelo is going to kind of provide a frame of reference for the data and rare sarcoma subtypes. And she will be able to benchmark that to nivo and ipi plus nivo. I can tell you that she calls me frequently about her desire to move this forward for this patient population that really doesn't have good therapies to prolong survival.

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Daina Michelle Graybosch, SVB Leerink LLC, Research Division - MD & Senior Research Analyst [70]

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That's great. One last question: it's exciting that your IL-15 is moving forward. It's a pretty competitive field with a lot of different permutations of IL-15, some in the clinic and pre-clinic. Could you remind us how -- your asset is differentiated or how you'll differentiate it in the development?

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Jonathan Zalevsky, Nektar Therapeutics - Chief Scientific Officer [71]

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Sure, great question, Daina. So one of the most important things that we felt was critical was to maintain all of the different biological functions of IL-15. And so in this case what that means for this particular cytokine is that it can interact with multiple receptor subunits. And a lot of those subunits signal in cell-cell contact when one cell expresses IL-15 bound to an IL-15 receptor alpha. And it engages a neighboring cell, that expresses the 2 other receptor subforms, which are the beta and gamma receptors of the IL-2 receptor class. And this was what we call trans-presentation.

And all of the competing molecules that are in the clinic, they're actually -- the IL-15 molecule in complex with the alpha receptor, and so they really act only in the soluble fashion, bind to those dimeric receptors. They can't reproduce the trans-presentation or the cell-cell contact kind of signaling.

NKTR-255 that we made here at NKTR can completely maintain all of the biological functions of IL-15, including trans-presentation as well as signaling as a soluble form. And importantly, we did not have to introduce any amino acid mutations into our IL-15 molecule to create NKTR-255, which is also completely different than all of the competing pipelines. Some of which carry a large number of mutations in IL-15, which can limit the long-term ability to use such a molecule, due to the risk of antidrug antibodies.

So those are some of the key features that go into how NKTR-255 is differentiated from the competition. And then we're very, very excited because in some of our preclinical studies, what we've been able to demonstrate is that repeated administration of NKTR-255 into nonhuman primates maintains biological activity with each dose administration cycle. We don't see any kind of tachyphylaxis or limiting or loss of biological effect on repeat administration.

This is something very important because there is clinical data out there with IL-15 molecules from other companies that show that repeat administration in the clinic can lead to a loss of biological effect over time. We don't see any of that in our nonhuman primate studies. So we have a number of points of differentiation that make us very, very excited about that program and we're really looking forward to getting it into the clinic very soon.

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Operator [72]

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That concludes our conference call for the day. Thank you, and I'll hand it back to Howard Robin for any closing remarks.

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Howard W. Robin, Nektar Therapeutics - CEO, President & Director [73]

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Well, thank you, everyone, for joining us this afternoon, this evening. I want to, as usual, thank all the employees of Nektar for doing a spectacular job and moving forward with what I think is one of the best immuno-oncology and immunology pipelines in our industry. And I'm very proud of what they've done. So thank you, and we'll see you at ASCO. Thanks.

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Operator [74]

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Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect. Everyone, have a wonderful day.