Good day, ladies and gentlemen, and welcome to the Nektar Therapeutics Second Quarter 2012 Financial Results Conference Call. My name is Erin, and I’ll be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session toward the end of today’s conference. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now turn the presentation over to your host for today’s call, Ms. Jennifer Ruddock. Please proceed, ma’am.

Good afternoon and thank you for joining us. With us today are Howard Robin, our President and CEO, John Nicholson, our Chief Financial Officer, Dr. Robert Medve, our Chief Medical Officer and Dr. Steve Doberstein, our Chief Scientific Officer. On this call, we expect to make forward looking statements regarding our business including but not limited to clinical development plans, the timing of future clinical results and regulatory filings, the economic potential of our collaboration partnerships including potential milestone payments, the therapeutic and market potential of our drug candidates and those of our partners, our financial guidance for 2012, and certain other statements regarding the future of our business. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes that are difficult to predict and many of which are outside of our control. You should refer to important risks and uncertainties are set forth in our Annual Report on Form 10-K filed in February and our Form 8-k filed today, available at www.sec.gov. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future developments or otherwise. A webcast of this conference call will be available for replay on the Investor Relations page at Nektar’s website at www.nektar.com. Now, I would like to hand the call over to Howard Robin.

Thank you Jennifer, and thanks to everyone for joining us this afternoon. Nektar continues to make significant progress this year advancing our clinical and preclinical programs and greatly strengthening our financial position. I would like to give you a business update and then hand the call over to John for a review of the financials. Last month, we completed a $125 million private placement of Senior Secured Notes that strengthens our balance sheet without any dilution to our shareholders. These Notes, which have no equity or warrants associated with them, are due in July of 2017 and callable by Nektar beginning in July of 2015. Importantly, the notes have no financial performance targets and we retain the freedom to operate our business as we have in the past, including, for example, our ability to enter into collaborative transactions or monetize royalties. We are very pleased with this transaction which we believe reflects the strength of Nektar’s proven technology and our late-stage pipeline. The placement of these secured notes builds on the $124 million sale of nonstrategic royalties that we completed in the first quarter of this year. Funds from these 2 transactions will be used to repay the remaining balance on our convertible debt which is due in September of this year. This will eliminate the significant dilution associated with convertible debt for Nektar. After repayment of the convertible debt, we now expect to end 2012 with approximately $300 million in cash and investments which should give us multiple years of working capital and bring us through many important potential product milestones. Now I’d like to review the significant progress we’ve made with our clinical pipeline in the past quarter. Let me start first with an update on naloxegol, a peripherally-acting mu-opioid receptor antagonist being developed by AstraZeneca as a…

Thank you, Howard, and good afternoon, everyone. At the end of the second quarter, cash and investments were $477.1 million. Following the end of Q2, in July, we completed the placement of $125 million of senior secured notes. This transaction, along with the $124 million monetization of non-strategic royalties completed in Q1, will be used towards the repayment of the remaining convertible debt in September of this year. We expect to end 2012 with approximately $300 million in cash and investments. Our financial guidance for 2012 remains unchanged. We expect our cash used in operations, including capital expenditures, to be between $130 million and $140 million. Revenue for 2012 is expected to be between $75 million and $85 million. Our R&D expense guidance is still between $152 million and $157 million, with approximately $19 million of this as non-cash expenses, such as stock-based compensation and depreciation. 2012 G&A is still anticipated to be between $44 million and $46 million. Included in our 2012 G&A expense are $11 million of non-cash items, such as amortized free rent on our San Francisco facility, stock-based compensation expense, and depreciation. Total revenue in Q2 2012 was $23.7 million versus $17.3 million in the second quarter of 2011. Total revenue was $41.6 million in the first half of 2012 compared to $28.6 million in the first half of 2011. Revenue increased as a result of higher product sales, royalties, and collaboration revenue. Total operating costs and expenses in the second quarter of 2012 were $50.7 million versus $51.6 million in the same quarter a year ago. For the first half of 2012, total operating costs and expenses were $106.6 million as compared to $96.8 million for the same period in 2011. Total operating costs and expenses increased primarily because of increased cost of goods related…

[Operator Instructions] Your first question comes from the line of Jonathan Aschoff from Brean, Murray.

Yes. I -- just for everybody in the call, we’ve just been informed that -- by the conference call provider that there was some technical fault, and we did notice some technical difficulty during the call. If you noticed at one point I had to stop because we are having some difficulty with the conference call procedure. So if right now we were trying a different system and we can hear you. So please, if you can stay on the call, everybody on the call please feel free to ask as many questions as you like, and we’ll try to clarify for you. So go ahead Jonathan, I can hear you now yes.

Okay. So regarding abuse resistant competitors, have abusers sound ways to better abuse that latest version OxyContin that was approved in 2010, and is that potential Pfizer competitors has immediate released only, is that just on unabusable in that non-oral route to administration is difficult?

Little bit, yes. All right, if you can hear me, I’m going to let Rob answer that question to you.

All right, Jonathan, it’s Rob. Thank you for the question. Two parts to the answer. One around the reformulated OxyContin. All of these things generally fall in this category where there are sort of physical barriers to accessing the active pharmaceutical or the API. The API itself is the issue of these compound, essentially immediately and they play in once they are in the blood and that’s why people try to manipulate it from and can get them in faster. So the answer is yes. Apparently [indiscernible] That immediate release of oxycodone and the formulation similarly [indiscernible] compound relatively quick as an immediate release.

Okay. And could you guys please highlight some key primary, secondly endpoints that may have been strongly encouraged by FDA for NKTR-118?

Yes. I’ll let Rob to comment on that specifically, but I think as I mentioned I hope you heard this during the call, that we put together what we believe is the most comprehensive program in depth and breadth that has been done for drugs such as NKTR-118 to treat opioid-induced constipation. And we believe that we have the most expensive program available. And I’d like to let Rob comment on your question regarding key endpoints.

I mean these are two very big development program that been through lots of up. The breadth and depth for in the loss of our Forex fees what have been done in support of [indiscernible]. The last of our program is robust, it’s proactive and it incorporates feedback from the FDA and the EMA on appropriate endpoints. Now there are many more differences than there are similarities between the programs, but the key differences are really around the end points and the dosing. Importantly, naloxegol incorporates 12 daily dosing in pivotal trials whereas the rest of the program was 4 weeks followed by (inaudible) so in terms of market differences in the primary endpoints relative [indiscernible] were full 12-week responder analysis. And it’s really important to note that the 12-week responder analysis was specifically recommended by the FDA as a necessary to support a chronic once-daily indication. Another important differences around the nature of the safety data being collective, the last program has randomizing control sleeping database [indiscernible] exposure. But as I mentioned, they are very, very different programs AstraZeneca put together a very robust program really seeks to proactively address potential issues. So we’re very pleased.

How about specific ways of monitoring opiate withdrawal?

Yes. There are very specific ways to measure that. We incorporate -- there are instruments that are specifically designed to capture potential opioid withdrawal symptom post objective symptoms withdrawal and objective symptoms withdrawal. So, when I mentioned the program being robust and proactive, I’m referencing they were proactively looking for things that one would presume to be potential issues and that includes issues around withdrawal.

Jon, this is Howard. I think, look it’s very difficult to understand what the current status of [indiscernible] is there is not a lot of information for forthcoming and what the FDA’s concerns are. But I would say this, I looked at them last call. I wouldn’t look at the last call [indiscernible] clinical development for -- I mean, really short clinical development brought them in the same way at all, very, very different programs, very different endpoints and we took a lot of advice from the FDA. So, we leave at that.

Okay. And then lastly, simply yes or no I guess. Is Astra speaking any other slower at inversion of 118 that predominantly seek to foster daily rather than any kind of PRMUs ?

Well, the NKTR-118 is being developed as daily chronic therapy and not PRM, I’m not sure I followed your question.

Okay. So like nothing that works even slower than that is in your plan, is that true, like a slower onset?

No. We’re developing naloxegol as a once-daily oral formulation. And I can’t speak for AstraZeneca’s plan for potential follow-on on life essential products.

And your next question comes from the line of Bob Hazlett from Roth Capital.

I too am having serious difficulties hearing you folks. So if I ask something that’s been touched on, my apologies. Really 2 separate things, just one more on the -- on the 118 program. I believe, Rob, you mentioned the differences between Relistor and the 118 program, really the time to VEN analysis versus your 12-week responder analysis, I think I got that. We talked about the opioid withdrawals. What other differences can you specifically point out between the 2 -- the programs that would influence FDA? And again, my apologies if I’ve asked this again, but again the breakup in the phone line is very difficult to manage.

No. We apologize for the technical difficulty. So, the programs are very, very different in scope, as you might imagine. The program for naloxegol is built in support of full NDA filing, it’s not an S&DI state filling obviously. So there is a lot more data being generated around that. We’re following pain data, opioid use, all sort of things. And the secondary end points are actually listed on the clinicaltrials.gov for the pivotal and the safety trial. So you can certainly find a comprehensive listing of them there. But we believe this program is very proactive in addressing, what may -- what one would think of as the typical piece of the information you would really want to know around, are opioid use patterns changing during the trail, are pain scores changing during the trail, or the safety data. So everything is working. That’s why it’s every important to have a controlled safety database, not just everybody on drug and not knowing how to interpret anything that you might absorb. So there is -- as I mentioned there is many more differences than there are similarities between the programs and strategically the naloxegol program that is designed to be a full global regulatory filing and not just a trial in support of an SNDA.

That’s helpful. And the reception seems to be a bit clear now. So thank you for that as well. Just 2 more quick ones. In terms of the Bayer program in the single-used device, have you set down specifically that have enough product or enough devices -- single-use devices to initiate Phase 3? And when should we expect milestones from that program? I think there are some still upcoming if I’m not mistaken in terms of development?

Yes. Well, we do have enough devices manufactured. They are in final stability testing. And as I said, you may not have heard it during the call, Bayer has now hired a CRO, and it’s planning and starting up Phase 3 activities in terms site recruitment, et cetera. So we do have sufficient quantities. I think there is a $10 million milestone on the start of Phase 3. And we do expect that to start early in 2013, but the important answer is yes, we do have the devices manufactured. They are on final stability testing and Bayer has hired a CRO and he is starting up Phase 3 activities.

And again that’s clear. And just one more quick one, in terms of the potential next in the clinical, I am seeing a lot of focus on NKTR-171 in terms of the additional pain programs, is that a likely candidate for the next in the clinic, and peripherally-restricted sodium channel blocker?

Well look I’ve said that NKTR-171 for peripheral pain as you properly describe and a NKTR-214 which is cancer therapy, are the 2 next programs that are vying for the next IND filing, which we said we would have by the end of year. And I can’t comment on which one of those 2 it will be, but clearly NKTR-171 is very-very important and I would expect that we put a lot of emphasis on it.

And your next question comes from the line of Rashie Jain from JPMorgan.

This is Rashie on behalf of Cory Kasimov from JPMorgan. Thanks for taking my questions. I have two. First, how much data will be top-lined with the Phase 3 results later this year, if you could provide us more granularity in terms of what end points and measurements we can expect? And second, with respect to filings, I wanted to -- in ovarian cancer, are you proposing similar regulatory options in U.S. and EU? Thanks a lot.

Okay. Let me do the first question and I’ll have Rob answer in more details. But as we’ve said and I heard you -- I hope you heard this during the call that Nektar and AstraZeneca plan to provide top line results from the NKTR-118 Phase 3 pivotal programs in the fourth quarter of this year. So, I’ll let Rob comment on what’s that top line results should look like in terms of data.

Yes. And I didn’t completely hear your questions. So I hope I’m answering the right question. Let me say, the total high-level data generally we’re talking about top line around primary and key secondary end points. There’ll be 2 pivotal trials as noted and also the 6 month extension, which is primarily a safety trial. So, we’ll have safety and efficacy data as what we are expecting. And could you read -- we were a little -- had a little difficult hearing you as well. What was the answer to your second question, what was your second question?

Yes. Sure. With respect to filings for 102 ovarian cancer, so are you proposing similar regulatory options in the U.S. and EU both?

Yes. We are absolutely looking at what we - where we can go with NKTR-102 in ovarian cancer in the EU as well and we think there is a number of good options.

[Operator Instructions] Your next question comes from the line of Biren Amin from Jefferies.

Thanks for taking my question. I have one question on naloxegol. Given the dropout would be considered non-responders in the primary efficacy responders analysis, what measures if any are being utilized to minimize dropouts in both Phase 3 trials? And are your assumptions for dropouts in the Phase 3 program similar to the discontinuation rates that have been observed in the Phase 2 trial? Thanks.

Well, much of that I can’t speak to and those are AstraZeneca questions. We do, in these trials, typically handle dropouts the way we do in clinical trials. So people can dropout for like of efficacy. They can also dropout for adverse events. Both are relevant to interest, relevant and interesting endpoints of course. The way we deal those is in line with what’s typically done in a statistical analysis plan. So, I’m not sure I’m directly answering your question, so it’s not a specific measure to try to encourage patients to continue dosing that could potentially muddy your results if you try to do something like that. Am I getting to your question Birin?

And I would now like to turn the call over to Howard Robin for closing remarks.

Well, thank you. I’m I glad you were able to bear with you today. And I am sorry about this technological problem. We’re going to make sure that the webcast replay has a full audio check and that’s its crystal clear, and the transcript is accurate. So please go to our website if you want to listen to this again. We’ll make sure it’s crystal clear for you. And feel free if there are any other questions, do contact Jennifer Ruddock, we’ll make sure that we set up the appropriate meetings. And I again I apologize for the bad audio. But I’m very, very happy with the progress the company is making and I think we’re in excellent position both scientifically, clinically and financially. And it’s turning out to be so far very, very good year for Nektar. So thanks for sticking with us. I appreciate it. We will see you all at the UBS Conference in New York. Thanks a lot. Bye-bye.

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Have a good day.