Good day ladies and gentlemen and welcome to the Nektar Therapeutics' Fourth Quarter and Year End 2012 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will following at that time. (Operator Instructions) As a reminder, this call maybe recorded. I’ll now turn the call over to your host Jennifer Ruddock, Vice President of Investor Relations. Please go ahead.

Good afternoon and thank you all 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 the clinical development program plans and expectations, the timing of future clinical results and regulatory filings by us or our collaboration partners, the economic potential of our collaboration partnerships, including potential future milestone payments, the therapeutic and market potential of our drug candidates and those of our partners, our financial guidance for 2013, 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 certain important risks and uncertainties that are detailed in our SEC report including our Form 10-Q filed on November 9, 2012 and our Form 10-K to be filed no later than tomorrow. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future developments or otherwise. A webcast of this call will be available for replay on the investor relations page of Nektar’s website at www.nektar.com. And with that I would like to hand the call over to our Howard. Howard?

Thank you, Jennifer, and thank you all for joining us this afternoon. I’m exceptionally proud of Nektar’s transformation and significant progress over the past several years and as we begin 2013, we have never been in a stronger position. Nektar now has five highly valuable programs spanning multiple therapeutic areas that have either completed Phase III, in Phase III or starting Phase III. And we have a key Phase II program which has been given fast track status by the FDA and for which we will (inaudible) two data this year. Our pipeline leverages an innovated technology platform that continues to generate new drug candidates. We’re very excited that our partner AstraZeneca reported excellent results from the long term safety study of Naloxegol this week. Naloxegol has now completed Phase III development and is being prepared for regulatory filings in the third quarter of this year. We are exceptionally pleased with all of the data from the four KODIAC studies with Naloxegol and I will talk more about the positive results from Naloxegol in a moment. But in addition to Naloxegol, we are in a unique position within our industry with four key phase 3 program. (inaudible) Nektar 102 are wholly owned program and metastatic breast cancer which is in phase 3, Cipro inhale which is in phase 3 with our partner Bayer, PAX855 which is in phase 3 with our partner Baxter and Amikacin inhale with Bayer which is scheduled to start phase three within the next few weeks. Our partner portfolio of Naloxegol BAX855, Cipro inhale and Amikacin inhale represents significant economic potential for Nektar. The future royalties alone associated with these programs not including any milestones or others payment, could total up to $750 million annually. Today, I will share with you some additional detail on these…

Thank you Howard and good afternoon everyone. I will start with a review of Nektar’s 2012 financial results and will then present Nektar’s 2013 financial guidance. At the end of 2012 cash and investments were $302.2 million. Total revenue in the fourth quarter of 2012 was $21.1 million compared to $15.8 million in the fourth quarter of 2011. Total revenue in 2012 was $81.2 million versus $71.5 million in 2011. The increase in revenue for the quarter and the year is primarily attributable to higher product sales and noncash royalty revenue related to the UCB Cimzia and Roche MIRCERA royalty monetization for which Nektar received $124 million in February 2012. Total operating costs and expenses in the fourth quarter of 2012 were $64.5 million versus $50.3 million in the same quarter a year ago. For the full year 2012, total operating costs and expenses were $222.4 million as compared to $195.4 million in 2011. Total operating costs and expenses increased primarily due to higher R&D expense for clinical development and higher cost of goods related to increased product sales. Research &Development expenses were a $46.4million for the fourth quarter of 2012, compared to $33.3 million in the fourth quarter of 2011. For the full year 2012, our Research and Development expenses were $148.7 million as compared to $126.8 million in 2011. Our R&D expenses in 2012 increased primarily as a result of the advancement in the clinic for proprietary pipeline candidate NKTR102 and NKTR181. As Howard mentioned earlier, in the past year we have initiated over 140 investigating site for phase 3 programNKTR102 metastatic breast cancer, and we completed the phase 2 expansion study of NKTR102 in ovarian cancer. For NKTR 181 we completed phase 1 clinical development and initiated a phase 2 randomized control study of NKTR 181 in…

(Operator Instructions). Your first question comes from the line of Jonathan Aschoff with Brean Capital. Your line is open.

What were types of MACE events, if you could tell us that and what was the rate of the abdominal pain that you saw, was it similar to what you saw in Phase II.

First of all, I can’t comment on the specific type of MACE events, it’s not for us to comment on. I can tell you that it’s interesting that when you look at two events in the usual care arm and two events on the Naloxegol arm and the randomization was 2 to 1, that means the rate of incidence of MACE events was actually lower on the Naloxegol. But I can't comment on what those events were. But it’s actually as it rate less for Naloxegol than it was usual care. With regards to abdominal pain, if you look at the abdominal pain in KODIAC-04 or 05 and 08 at 25 mg dose, the abdominal pain was I think about 12% in KODIAC-04, 19% in KODIAC- 05, 18% in KODIAC-08. If you look at what’s very important dose, so, you’re looking at abdominal pain that was somewhat less than the Phase II study. And I let Rob comment a little further. If you look at what’s very interesting for me is if you look at the KODIAC-07 study which is the rollover study, rate of abdominal pain was about 3%. So, what you have is as you stay on the drug longer, the abdominal pain of course disappears, the abdominal pain is temporary, the abdominal pain is associated with a paralyzed bowel starting up again. So the abdominal pain does go away obviously and as I said look at the patients that were in the KODIAC-7 roll over study, their abdominal pain was fairly low.

Okay, but you are only just talking about the 25 mg doses in 4 and 5, right?

That is what I just talked about, correct. Thank you Howard and thank you Jonathan for the question. To the first part of your question, while not being able to provide details of course, as AstraZeneca will be presenting the state at a future meeting. The character of these events in the two arms is similar in terms of the MACE of answers. There is no really difference in the character of the events that were noted. So I really can't provide any more details than that but on the abdominal pain, as Howard noted generally between 10% and 20% is what we see for abdominal pain. And importantly as we've stated previously that these appear to be early events and our transient and as patients continue on therapy, they actually decrease substantially. So in the extension trial which was the KODIAC-7 trial you see an incidence of abdominal pain, these are patients who have been on the drug, drops dramatically and that's very consistent with what we have been saying. Also, we are actually very pleased to note that this overall incidence of abdominal pain is less than we reported in the Phase II trials so all of this is very comforting; we are very pleased with the data.

Jonathan one more point I would make, I think what's very important to notice that there were no significant adverse events associated with draft attributable to the Naloxegol. So we didn’t see any serious adverse events related to withdrawal, it was attributable to Naloxegol and I think it's very important to see that even though the number of events were balanced between the usual care arm and Naloxegol arm, as a rate there was actually more in the usual care arm. And as Rob said the types of events we can't discuss, but they are exactly what you'd expect to see when you look at 850 patients for a year.

Definitely, can you tell me a couple of questions on (inaudible). What's the incidence of gram negative pneumonias in the hospital setting; (inaudible) inhale and are there any other nebulizer antibiotics approved for hospital use in that setting?

Well there are about 350,000 patients in the U.S. every year that are mechanically ventilated and there is even a higher incidence in the EU. And we know about 65% of those patients are diagnosed with gram negative pneumonias and I don’t believe there are any effect means of providing and the case in which you know is an excellent antibiotics directly to the lungs, I mean you can give it systemically but you reach toxic levels systemically before you can deal with the resistant bacteria in the lung. So this is a fairly large market and highly-highly underserved and if you look at current therapies that are used in the ICU in these intensive care systems, they are roughly going for $200 a day. So, I think this is a very exciting product, I think it’s got lots of potential. We get a very large economic return and I am very excited that Bayer will be starting the program shortly.

And lastly can you tell us the breakdown of $140 million milestones for approval?

No, we haven’t disclosed that but it is split between U.S. and EU and it's probably more heavily weighted to the U.S. that’s all I would say.

Our next question comes from Cory Kasimov from JPMorgan, your line is open.

It's actually Matt Loos for Cory today. Just a couple of questions. The first one is, I am interested to know which PEG is used in OMONTYS and may be which other programs share that same PEG and then if you could just help us frame expectations for the phase 2 data for 181, I guess quantitatively what in your eyes would be a good result in sense of the endpoint and if you could just put that into quantitative terms that will be great thank you.

Sure let me deal with the first question and then I will turn it over to Rob. I can’t specifically say which PEG that is used that we can’t disclose that but I can tell you that the PEG that used in OMONTYS is used in a number of other products, it’s using in one very significant product that’s being on the market for over 10 years and we have no incidences of allergic reactions or negative side effects with that PEG and it is actually the exact same PEG that is used in OMONTYS and it’s used in a number of other products, made in the same plant, made in the same facility, shipped as one batch compared to the next batch. so there is absolutely no connection there that we can possibly imagine and as I said the exact same PEG has been on the market in a very significant product for well over 10 years with no incidence of any adverse events related to the PEG. Let me turn the second part of the call on Nektar 181 of your question to Rob.

The expectations around phase 2, there are two protocols in our phase 2 program, that include efficacy and the second one on (inaudible) liability, on the first around efficacy, generally speaking without getting into particular end points in this trial, generally speaking we expect to see about 30% reduction from baseline pain scores as a clinically significant change and that’s been published in the literature certainly available. So we would expect, based upon the design of our trial that we will see that level of affect in our trials. So study is designed and powered and so on to capture that level of effect at least. On the human abuse liability trial, again this is using, an active comparator using a commonly abused compound, so our expectation is that we would see less likability which is the primary endpoint in these sorts of trials, less likability compared to a standard comparator of a highly abused drug, so in general terms those are the endpoints and the outcomes that we expect.

Our next questions comes from John Sonnier from William Blair, your line is open.

I know you touched on this, in the prior question but what are the questions we received in the aftermath of (inaudible) whether or not you guys have seen historically antibody development against any portion of the tag, that you comment on, I guess what we know there, and whether or not we need to look more carefully at some of the chronic use PEGylated proteins going forward?

Good question let me turn that over to Steve, and let him comment on that.

Great, yes, that’s a good question. I think, one of the things that’s important to distinguish here is that the development of the antidrug antibodies which happens with every single protein drug on the market whether it’s PEGylated or not. Some small number of patients develop antidrug antibodies, generally always upon multiple administrations of the drug. So their immune system is recognizing the drug and adapting for it. Typically what happens in those cases is that, rather than getting a hypersensitivity reaction you simply see the neutralizing antibodies clear the drug faster than it normally would, and so in patients who develop those antibodies the drug tends to lose its efficacy. It’s important to distinguish that from what apparently has happened in the case of OMONTYS which appears to be an immediate hypersensitivity reaction upon the very first dose. So I think the two issues are quite separate from each other, immediate hypersensitivity or allergic type reactions like that, anaphylaxis reactions upon first row of dose are really distinct class of events that really are different than anything you would have seen with development of antidrug antibodies.

That's helpful Steve, and have you seen any evidence of tachyphylaxis I guess on the other side of the equation, whether it might be specifically attributed to an anti-PEG antibody.

No none that I am aware of; PEG is generally regarded as safe. It's nearly ubiquitous in modern consumer products including cosmetics. Many-many pharmaceuticals as a formulation exhibiant and certainly anyone who has had a colonoscopy is aware of the need to consume large quantities of polyethylene glycol before one has that procedure. So we are not aware of any case in which PEG itself would cause these kind of reactions. I suspect that somewhere there is somebody who might be allergic to PEG; I certainly haven’t heard of them.

Yes and as I said earlier look at the exact PEG, the exact same PEG as used in OMONTYS is used in a number of other well known drug. And one of them has got significant sales volume and has been on the market for well over 10 years and no instance of these earlier allergic reactions so we thought about it and couldn’t even conceive of a way this could be associated with a peg.

Our next question comes from Bert Hazlett from Roth Capital your line is open.

First is on 118 and again congratulate you on a successful study there; the safety data. Can you tell us what the 118 success and the potential for the approval means for the 119 combination, so there are other elements to that agreement with AstraZeneca, have you had any discussions there and what are the plans for 119?

First is on 118 and again congratulate you on a successful study there; the safety data. Can you tell us what the 118 success and the potential for the approval means for the 119 combination, so there are other elements to that agreement with AstraZeneca, have you had any discussions there and what are the plans for 119?

First is on 118 and again congratulate you on a successful study there; the safety data. Can you tell us what the 118 success and the potential for the approval means for the 119 combination, so there are other elements to that agreement with AstraZeneca, have you had any discussions there and what are the plans for 119?

First is on 118 and again congratulate you on a successful study there; the safety data. Can you tell us what the 118 success and the potential for the approval means for the 119 combination, so there are other elements to that agreement with AstraZeneca, have you had any discussions there and what are the plans for 119?

Well you know 119 is a combination of an opioid with NKTR-118 so it’s in essence like a prophylactic type therapy. Certainly I can't discuss all of the details of discussions we've had with AstraZeneca. I think clearly there is a high level of interest in 119 and I think rightly so, they wanted to see what would happen with 118 in the clinic before moving forward with the 119 program. I know we've developed 119 as a tablet it’s prepared and I can't comment on how easy AstraZeneca might want to move it forward, but I think clearly they rationally wanted to see the results of the 118 clinical process and now that we have that I am hopeful that 119 does move forward.

Is it a full blown Phase 1 through Phase 3 program that will be required or might they be able to bridge through some of the 118 and the opioid data together?

Is it a full blown Phase 1 through Phase 3 program that will be required or might they be able to bridge through some of the 118 and the opioid data together?

Is it a full blown Phase 1 through Phase 3 program that will be required or might they be able to bridge through some of the 118 and the opioid data together?

Is it a full blown Phase 1 through Phase 3 program that will be required or might they be able to bridge through some of the 118 and the opioid data together?

It’s a very good question, it’s also a question that I can’t actually answer, I can’t speak to AstraZeneca’s development plans for that. Certainly the preclinical in technology data is all bridgeable.

And then just on 181. Assuming success in the Phase II study is you’re currently in the multiple one. How rapidly would you expect that to move into Phase III maybe you spoke to that but I didn’t quite pick that up?

And then just on 181. Assuming success in the Phase II study is you’re currently in the multiple one. How rapidly would you expect that to move into Phase III maybe you spoke to that but I didn’t quite pick that up?

And then just on 181. Assuming success in the Phase II study is you’re currently in the multiple one. How rapidly would you expect that to move into Phase III maybe you spoke to that but I didn’t quite pick that up?

And then just on 181. Assuming success in the Phase II study is you’re currently in the multiple one. How rapidly would you expect that to move into Phase III maybe you spoke to that but I didn’t quite pick that up?

As we’ve said in the guidance, we’re planning for the start of Phase III, for later part of this year whether we’re dosing patients in December, we’re dosing patients in January 2014, I can’t be specific on that now. But our goal would be to move into Phase III as rapidly as possible. I have discussions with FDA at the end of Phase II, see what Phase III actually like, remember this does have fast track status. So, let’s see what the FDA thinks of it, let’s see how we can accelerate things and I would move this as rapidly as I possibly could. This is a true breakthrough drug that has enormous potential to change the chronic pain.

And just one more quick one. In terms of 181 and 171 and the entire pain portfolio, at this point given what’s going on with 181, are these in house, are these proprietary products of going forward or are they candidates for licensing.

And just one more quick one. In terms of 181 and 171 and the entire pain portfolio, at this point given what’s going on with 181, are these in house, are these proprietary products of going forward or are they candidates for licensing.

And just one more quick one. In terms of 181 and 171 and the entire pain portfolio, at this point given what’s going on with 181, are these in house, are these proprietary products of going forward or are they candidates for licensing.

And just one more quick one. In terms of 181 and 171 and the entire pain portfolio, at this point given what’s going on with 181, are these in house, are these proprietary products of going forward or are they candidates for licensing.

No. Looking I think, we haven’t been absolute about how we would move the business forward with NKTR-181 and 192 and 171 but I think it’s sufficient to say that I’m not in any position to or I should say I have no great desire to license those programs out at this point. Those are our programs, they are in house Nektar programs, they are proprietary and I think it solidly cements Nektar as major player in the pain business if these drugs work. So, at this point they are our drugs.

Our next question comes from Joshua Schimmer from Lazard Capital Markets. Your line is open.

First on 181, I’m wondering if because it has a high gradient between (inaudible) concentrations would we expected to then have a greater peripheral opioid side effect profile and so does that mean it should likely be co-formulated or co-developed in Naloxegol. And then the second question is if you can remind us on the 102, whether there is a utility or (inaudible) and if so, what makes you say that? Thank you.

On the first question that is on 181 with the relatively greater participating into referral compartment. This was designed specifically to address the (inaudible) of central side effects. As far as peripheral side effects we certainly don’t expect that they would be greater than existing opioids in terms of the peripheral effects and so that from perspective just changing that gradient is not likely to significantly change what's observant with current opioids and on the second question around 1 or 2. There is a planned interim analysis in the trial, very, very low spend of alpha but it's planned for half of the events and of course since an event based analysis it is not possible to clearly nail that down but enrollment has been progressing very well and we complete enrollment around the end of this year. One would expect that the interim analysis on half of the events given the usual survival will probably not be significantly far behind that.

(Operator Instructions) Our next question comes from Viren Amin from Jefferies, your line is open.

I had a question on 181; I understand that the company plans to start phase 3 trials later this year. Would they plan to start it alone or would you potentially partner it before starting the phase 3, thanks.

I have no plans to partner NKTR-181 at this point, I mean this is a, if NKT-181 works it is a multi-multi-billion dollar drug as you can imagine which greatly serves a medical need that is on the forefront of every American and everyone in the world's attention, and the abuse of opioids right now is so significant that even in the face of a novel opioid the FDA is willing to grant fast track status, so quite frankly, we’re going to run with this, in our guidance, John has already included the start of our phase 3 program and at this point I do not expect to be licensing out NKTR-181 in the U.S. prior to the end of phase 3. If at all by the way.

I am currently showing no further questions, I will now turn the call back over to Howard Robin for closing remarks.

Well thank you everyone for joining us today and I just want to close by thanking our employees for their dedication and hard work to advance our proprietary pipeline and our research efforts, I also want to thank our partners AstraZeneca, Bayer and Baxter for their strong commitment to the three late stage programs underway, an Opioid-Induced Constipation, Hemophilia A and pneumonia. And Nektar is in its terrific position in 2013 and we look forward to sharing more on our progress with you throughout the year. This month we'll be seeing many of you at the (inaudible) Roth and Barclays Conferences and we look forward to catching up with you then. So we appreciate your support as shareholders of our company. Thank you very much.

Ladies and gentlemen that does conclude today's conference. You may all disconnect and have a wonderful day.