Good day ladies and gentlemen. Welcome to the first quarter 2008 financial results conference call for Nektar Therapeutics. (Operator Instructions). I would now like to turn the presentation over to your host for today's call Mr. Tim Warner, Senior Vice President of Investor Relations and Corporate Affairs. Please proceed, sir.

Good afternoon and thank you for joining us for Nektar Therapeutics first quarter 2008 financial results conference call. Before we get started please note that the following presentation contains forward-looking statements that reflect our current views as to the company's business strategy, the value and potential of our technology platforms, the clinical prospects of our proprietary and partnered products, the future potential of our inhaled insulin programs, our financial guidance for 2008, and other future events related to the company. These forward-looking statements involve uncertainties and other risks that are detailed in Nektar's reports and other filings with the SEC including our annual report on Form 10-K for the year ended December 31, 2007 and the Form 8-K we filed with the SEC today. Actual events could differ materially from these forward-looking statements. We assume no obligation to update any forward-looking statements as a result of new information, future events or developments. A webcast of this conference call will be available for replay on the Investor Relations page at Nektar's website www.nektar.com. In the event that any non-GAAP financial measure is discussed on this conference call that is not described during the call, related information will be made available on the Investor Relations page at our website as soon as practical after the conclusion of this conference call. Now I'm pleased to introduce the President and CEO of Nektar Therapeutics, Howard Robin.

Good afternoon. Thank you for joining us. Today we're going to update you on the important and exciting progress in our proprietary and partnered drug development programs along with our financial results for the quarter. But first, I would like to take a minute to address the termination of inhaled insulin. We believed that we would enter into a license agreement for inhaled insulin. We were engaged in active negotiations that could have yielded significant economic benefits to Nektar. Unfortunately, the concern over new data analysis from ongoing clinical trials, the increased number of lung cancer cases, and the FDA mandated warning resulted in the termination of all negotiations with potential partners. On our last conference call I committed that Nektar would cease all spending on inhaled insulin in the absence of a partnership. As John Nicholson will discuss in a moment we've kept this commitment. Importantly, there are no new unexpected charges related to the termination and our financial guidance for 2008 remains unchanged. Let me make it perfectly clear Nektar has moved beyond Exubera. We continue to focus all of our efforts on capitalizing on our core strengths and building one of the most exciting product pipelines in our industry. Nektar's technology platforms give a significant competitive advantage by allowing us to greatly improve known molecules, providing us with a steady stream of new and important product development opportunities. With our technologies we have created a partnered pipeline revenue stream of potentially more than $400 million by the end of 2012. This pipeline includes PEGylation drug development partners like UCB for Cimzia, Affymax and Takeda for Hematide, Roche for Mircera, and for pulmonary it includes Novartis with inhaled Tobramycin and Bayer for both inhaled amikacin and inhaled Cipro. As I've said before, you can make your own assessment…

Thank you, Howard and good afternoon. There are a few things I will highlight for you today from the press release and financial tables. As Howard said, there were no new unexpected charges related to the termination of inhaled insulin, and our financial guidance for 2008 remains unchanged. First, I would like to summarize the financial impact of the termination of inhaled insulin. Our first quarter financial results include cash payments of $36 million related to the termination and maintenance of inhaled insulin. In the second quarter we made final payments of $10.3 million. Included in these payments were $8 million to maintain inhaled insulin manufacturing capabilities. It is important to note that all these payments were previously accrued as expenses in 2007, or included in our 2008 guidance as provided on our last conference call. As a result, our first quarter GAAP cash use in operation was $65 million. Our non-GAAP cash use in operation was $25.1 million. Our non-GAAP cash use in the first quarter excludes the following specific payments related to the maintenance and ultimate termination of inhaled insulin programs. $3.6 million to maintain manufacturing capacity, $32.4 million to terminate contract manufacturer agreements, and $3.9 million related to work force reductions at Nektar. For the rest of 2008, we expect our cash use in operations to be significantly lower than our first quarter run rate primarily because of anticipated significant cash receipts for milestones from our existing partnerships and the positive impact of our work force reductions. At March 31 we had a cash balance of $412.6 million compared to $482.4 million at the end of 2007. Our capital expenditures in the first quarter were $5.3 million and other net sources of cash were $500,000. Revenue was $20 million in the first quarter. Based on projected timing…

Thank you, John. Over the past year, we identified our strengths and completed important restructuring that allows us to build on our unique competencies. Our core value lies in our platform technologies, our robust partnered pipeline and our proprietary drug development programs. We continue to move forward with clarity and competence and we are firmly in control of our destiny and we are strategically positioned to succeed as we build an exciting and valuable company. I thank you for your continued support of Nektar and I look forward to updating you on our progress throughout the year.

Operator, please open the call for questions.

(Operator Instructions). Our first question comes from the line of Corey Kasimov from JPMorgan. Please proceed.

Hey, good afternoon, guys. Thanks for taking the question. First of all on 102, can you just update us with regards to the Phase 2 status there and when we may see data either from the 2a part, the dose optimization in combination with [arbutoxin] and expectations for the 2b where it's randomized?

Well, thank you Corey. We are, as you know making progress in the 2a component of the trial and we said that we would be starting the Phase 2b program later this year. We haven't given any specific dates for that. Overall, we expect that we will have data from the Phase 2 program by the end of third quarter, fourth quarter 2009. That's what we're targeting for at this point. So we're making good progress in enrollment in Phase 2a and as soon as that is complete which should be, I would say over the next few months, we will be looking into starting our Phase 2b program.

Okay and then another question getting at clinical milestones this time on the pulmonary side. What are expectations either from you or from Bayer with regards to inhaled amikacin? I guess two parts to this question. First, the number of patients expected in the Phase 3 and then how long that study may last?

Well, actually I can't go into detail specifically about that program because under confidence with Bayer. I can say that we do expect it to start this year. I can't give you the specifics but it is a fairly acute usage of the drug, so this is a 7-day or so dosing regimen in an ICU setting. So you should be able to see results from that trial relatively quickly in the sense that it is not chronic usage. But I can't give out the specifics on that.

No, I understand. That's what I figured. And then lastly, with regards to vanco, can you update us on your thoughts regarding potential partnership there?

Well, at this point, it's a very important product and it's reasonably likely to work and it should work just as well as what we've seen with amikacin. We are certainly have had a number of companies talk to us about a high level of interest in inhaled vancomycin and we haven't discussed as publicly any partnerships or specifics yet, but you can imagine that there are a number of companies that are highly interested in it and if amikacin, which has looked good through Phase 2 and we expect will show promise in Phase 3 and show positive results in Phase 2, then this is essentially the same type of formulation, the same delivery device. So, one would expect that we can deliver vancomycin to the lungs just as effectively as we deliver amikacin to the lungs. So whether we take it through the clinic ourselves or whether we partner it, I think it has tremendous value for Nektar.

Okay. Thanks for taking the questions.

Our next question comes from the line of Rich Silver from Lehman Brothers. Please proceed.

Just one question on the R&D spend, which at least relative to our model looked like it was a bit higher than we expected in the quarter. Is that a good run rate to be using going forward or was that maybe a little bit unusually high as you look at the quarters for the year?

Well, I'll let John Nicholson answer that. I think as we said earlier in the call that what you've seen, the first quarter of 2008 was not representative in terms of an operating cash use or a run rate because of the specific costs associated with the wind down of Exubera. Now, we will be spending a much greater sum of money than in past years on our clinical programs, having four Phase 2 programs and two Phase 1 programs, something Nektar has never had before. So overall, if you look at our spending and you factor into our spending that this year we will invest as much as $50 million to $60 million in clinical programs, something Nektar has never done and then you look at an overall non-GAAP cash usage of somewhere between $50 million and $75 million, I think that says a lot about how efficient we've become and how we have executed on our plan to reduce expenses at Nektar. But I'll let John answer that even more thoroughly.

Yeah, right now we're anticipating to have a run rate of approximately $35 million per quarter going forward.

So does that mean that the Exubera portion in the first quarter was the difference? The wind down of Exubera that Howard was referring to.

Yeah, approximately that difference was that and it also included a little bit of a reduction in the force from the standpoint of people that were working on those programs.

Okay. I may have missed this did you make any comment about discussions for additional products to be partnered and announcements on that before the end of the year?

Well, we haven't said, look, we haven't said publicly anything about partnerships. Actually what we've said is in none of our numbers, in none of our guidance is any -- are any deal revenues included. Now that doesn't -- we're not talking about milestones that from existing partnerships. Certainly, we expect to see milestones from existing partnerships this year, but any new deals that we do, whether there's a vancomycin deal, whether there's a NKTR-118 deal, whatever comes about this year, those would be incremental in terms of revenues.

Sorry, less about the financials, excuse me and more just about managing our expectations as to whether you expect additional partnership announcements and how many.

Well, I would say this; there are many companies that are highly interested in NKTR-118. There are many companies interested in 102 as well as vancomycin. One has to make a decision as to what stage to take a financial deal with a company relative to keeping that product in the pipeline for Nektar. So we're always evaluating our economic situation, we're evaluating the value of the deal terms and we are evaluating, as most companies do at our stage, when you license products and at what stage you license them out. I think there is certainly -- it is certainly reasonable to assume that Nektar would do another license deal this year of substance, but I certainly thing it depends on the product and it depends on the opportunity in front of us. We're fully capable of taking NKTR-118 and NKTR-102 through Phase 2 and we're certainly capable of taking vancomycin through Phase 2. We certainly have the economic means and the internal resources to do that. So, if the deal terms make sense, then we will consider them. If deal terms are not to our liking, then we're more than happy to stand by our products and take them through Phase 2 and build additional value.

Thank you.

(Operator Instruction). Our next question comes from the line of Brett Hazlett from BMO Capital Markets. Please proceed.

Thanks. Thanks for taking the question. Howard, in your prepared remarks you made a comment about NKTR-102 and the patent estate with regard to PEGylation small molecules. Could you repeat that because that seems maybe a little bit ominous in terms of potential competitors out there, I know there is other folks that are PEGylating similar molecules? Could you just repeat that and add a little bit if you care to there?

Well, okay. I can certainly do that and I think what I know what I've said and I'm very clear on this, that we have built the dominant intellectual property position in the PEGylation field with both large and small molecules and we are the first company to invent, develop and pursue new applications for small molecule PEG. Now, we believe that we not only have freedom to operate in the area of NKTR-102, but that we have the dominant position in PEGylating small molecules as well. So, if this requires more discussion, we can try to have that but I think, I'm pretty clear on that.

Okay. Well, we'll let it sit there for now. And I guess the question, following up on Rich's line of questioning. As you're considering 102 and 118 and 63 to inhaled vancomycin, my question would be why partner any of them if you're -- if you feel that strongly in these technologies? Thanks.

Well, let me first go back to the other issue because I want to give you some further clarification. When you look at Nektar's PEGylated pipeline and Nektar's work that we've done in PEGylating small molecules and large molecules, I think if you think about that every PEG molecule that's been approved in the last decade has come from Nektar, let's use an example as we talked about, let's look at UCB and Cimzia. We are the only company that has had anything to do with Cimzia. We have invented that drug, we have an exclusive arrangement with UCB, no one else does, no one else has any kind of relationship with UCB, no one else has worked on Cimzia. We invented it, we scaled it up, we manufacture it, nobody else. Now, there are companies that get a tiny, that get a very small royalty from Nektar because of cross licenses that were done in the past and yes, we do have an occasional small royalty to pay out to somebody. But, if you're talking about cross licensing, well, companies do cross licensing and companies take license to patents all the time. Now, if you talk about as a, so as a patent issue, sure Nektar has cross licenses and Nektar has taken rights to certain IP that we have to pay small royalties on, rather small I would say. Now, if you separate that from the business of PEGylation, now let's use Cimzia as an example. Nektar, Cimzia is Nektar's drug and UCB's drug, nobody else and nobody else has that relationship and nobody else manufactures it, etcetera, etcetera, I think I've made my point on that. Now, let's go to your question about, if we believe so strongly in 102 and we believe so strongly in 118…

That does. Thank you and just one other point of clarification. You had mentioned, I think that 102 was going to finish Phase 2 in 3Q or 4Q 2009, is that correct?

I would say it's probably more like the fourth quarter.

Okay. Thank you.

There are no further questions. I would now like to turn the call over to Howard Robin for closing remarks.

Okay. Well, thank you everybody, for joining us today and I know you'll expect and will see a lot more great things coming out of Nektar. So, thanks very much. I look forward to seeing you all in person. Bye-bye.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Everyone have a great day.