Good day, ladies and gentlemen, and welcome to the Nektar Therapeutics Fourth Quarter and Year End 2014 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 follow at that time. [Operator instructions] As a reminder, this conference may be recorded. I will now turn the call over to your host, Jennifer Ruddock, Vice President of Investor Relations. Please go ahead.

Thank you, Stephanie. 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. Ivan Gergel, 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 potential regulatory approval decisions and commercial launch timings. The timing of future clinical results, clinical development plans, the economic potential of our collaboration partnerships, the therapeutic and market potential of certain drugs and drug candidates and those of our partners, our financial guidance for 2015, 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 that are difficult to predict and many of which are outside of our control. Important risks and uncertainties are set forth in our Form 10-Q for the quarter ended September 30, 2014, and a Form 8-K filed today which are both available at www.sec.gov. We undertake no obligation to update any of these forward-looking statements, whether as a result of new information, future developments, or otherwise. A webcast of this call will be available on the IR page at nektar.com. With that, I would like to hand the call over to Howard. Howard?

Thank you, Jennifer, thanks to everyone for joining us this afternoon for our fourth quarter and full year 2014 financial results call. 2014 was a landmark year for Nektar, with the approval of MOVANTIK in both the U.S. and Europe and the filing of BAX 855 in the U.S. Nektar now has two significant partnered programs that are poised to potentially contribute substantial revenues to our company. With no further expenses associated with these revenue streams. I will provide more detail on the economics from these programs later on the call and John will be providing our 2015 financial guidance. We’re tremendously excited about the recent approvals of MOVANTIK in the U.S. and in Europe. Importantly, MOVANTIK is the first approved oral new chemical entity using Nektar’s proprietary small-molecule polymer chemistry platform. This new medicine demonstrates the powerful nature of our technology to create therapeutics based on both novel small-molecules and biologics. MOVANTIK is the first and only oral peripherally-acting mu-opioid receptor antagonist [PAMORA], to be approved to treat opioid-induced constipation also known as OIC in adults with chronic, non-cancer pain. We believe there is a significant market potential for MOVANTIK in the United States and Europe. In the U.S., there are 38 million patients who take daily opioids to manage their chronic pain and in Europe, there are 12 million patients, up to 80% of these patients experienced OIC and as the first oral PAMORA, MOVANTIK provides an important new targeted mechanism to address the underlying cause of this condition. Importantly, we believe MOVANTIK is unlikely to face competition from other oral PAMORA therapies for at least two years. Our partner AstraZeneca estimates the sales potential of MOVANTIK to be more than $1 billion annually. With the DEA de-scheduling process completed last month, AstraZeneca will be launching MOVANTIK in…

Thank you Howard. And good afternoon everyone. I will start with a brief review of Nektar’s 2014 financial results and will then discuss 2015 financial guidance. At the end of 2014 cash and investments were $262.8 million. 2014 total revenue was $200.7 million, as compared to 2013 revenue of a $148.9 million. 2014 revenue includes milestones related to a two lead partnered programs. For MOVANTIK, we recognized revenue from $70 million NDA filing milestone that we received in 2013 and a $35 million milestone we received in 2014 following FDA’s approval of MOVANTIK. For BAX 855, we’ve recognized a milestone of $8 million following positive Phase 3 results. For full year 2014 total operating cost and expenses were $217.2 million, as compared to $269.1 million in 2013. The decrease in total operating costs and expenses were primarily a result of lower R&D expense. Total R&D expense was $147.7 million in 2014 as compared to $190 million in 2013. R&D expense decreased in 2014 compared to 2013 primarily due to reduced activities in 2014 on our ongoing NKTR-102 BEACON study as the study progresses towards completion. 2014 R&D expense included approximately $50 million of non-cash expenses such as depreciation and stock-based compensation expense. Before year 2014 G&A expense was $40.9 million, compared to $40.5 million in 2013. 2014 G&A expense included approximately $10 million of non-cash expenses such as stock-based compensation expense and depreciation. Interest expense was $17.9 million in 2014, non-cash interest expense was $20.9 million from the monetization of UCB’s CIMZIA and Roche’s MIRCERA royalties. Now, launch of our 2015 financial guidance. Revenue for 2015 is expected to be between $225 million and $235 million. I’d like to take a moment to outline for you what our revenue guidance includes and importantly what it does not include. This will…

Thank you [Operator Instructions] Our first question comes from Jonathan Aschoff with Brean Capital. Your line is open.

Thanks. Hi, guys really nice cash management I have to say. I was wondering what specific numbers and details can you tell us about what AstraZeneca will put behind the launch and by numbers I mean salesforce size and what sort of specific DTC advertising do they have in mind?

Thank you Jonathan. It’s a good question. Look I can’t go into specific details obviously. I know that they are thinking of this is as a very large product, as a matter of fact, you know that I’ve given you their statement, which is they expect this to have sales in excess of $1 billion annually. I know they are going to have significant sales force effort somewhere in the 800 to 1,000 sales reps. I mean, I can’t be very specific. I know they are going to have unbranded and branded direct-to-consumer advertising and that will start fairly soon. So I know they are very focused on this drug. We meet with them with some regularity; I think, they are a great group, I think, they are very talented people when it comes to sales and marketing among other things. And I know that they treat this as a very, very important drug. So we’re looking forward to the launch. And I know they’re putting a lot of muscle behind it. And like I’ve said, essentially the first two years in this market they have to themselves it’s the only oral PAMORA available and I think they are going to do a great job with it.

So with that last thing you said, Howard when oral Relistor is approved on how might AZN counter can you detail that drug.

I can’t, listen, I obviously can’t discuss their plans in that regard. I think it will be quite some time before oral Relistor is approved and in any case I think that the position that we have in terms of just as a quality of MOVANTIK having such great oral bioavailability alone is enough to set it apart. So even if you just look at the bioavailability difference between MOVANTIK and oral Relistor, there is a story in and of itself. So I’m not too worried about that right now and we’ve got two years to build that market, I think.

Actually Howard, did you address the part of my question about DTC advertising, do you have specifics of that or is that something you can’t share?

Jonathan, I can’t go into the specifics. I know that they will be doing unbranded and branded DTC, but I can’t share the specifics. We have seen some of their programs, but I can’t share the specifics really.

Okay. And then the last thing is just given the last result with NKTR-101 [ph], was there any noteworthy last minute trial design tweaks?

I will let – I will comment a bit, the answer to that is no. I think we’ve kept the study design very similar to what we’ve discussed all along, but Ivan if you would like to comment.

Yes [indiscernible].

It’s a bit hard to hear.

Sorry.

Having some mic problem.

Hi Jonathan yes, no - as Howard said, no good design changes it’s a EERW design, it’s in chronic low back pain it’s 200 patients per arm with an interim analysis. And it’s a relatively standard design, but we are hopeful that – we think it’s the optimal type of design to demonstrate efficacy for this. And we’re very pleased that we enrolled our first patient today. So that study is now running.

Thank a lot guys.

Our next question comes from Jessica Fye with JPMorgan. Your line is open. Q – Unidentified Analyst: Hi, this is Ryan [ph] for Jess. Thanks for taking my question. I guess for NKTR-102, beyond breast cancer, how are you looking at or maybe rather how are you prioritizing additional indications? Thanks.

Well, I think that’s a great question. I think if you look at the investigator sponsored trials, we’ve either run in glioblastoma, that we have running in small cell lung cancer, non-small cell lung cancer, brain metastasis in lung cancer, I think it will be a lot of information there that helps us select the next program to go after, but there’s an awful lot of opportunities for a great PK well behaved, topoisomerase 1 inhibitor. If you think about the combination with PARP inhibitors the data there is very, very impressive. If you look at the safety and tolerability of NKTR-102 makes it very suitable for pediatric tumor settings. And you know that there are many, many pediatric oncologist that would love to treat pediatric patients with the topo-1 inhibitor, but drugs like etirinotecan are simply way too toxic for those patients. So the fact that we have an effective, potentially effective and well behaved topo-1 inhibitor says a lot about what we can do in pediatric. So I think we’re gathering, we’re talking with pediatric ODAC about those kinds of opportunities, we’re talking with front leaders in the pediatric community about those opportunities, we’re looking at the investigator-sponsored studies that we’re running in non-small cell and small cell lung cancer, as well as Glioblastoma, and we will be making decisions there and move this program forward. But I have to say that the combination with PARP inhibitors is equally exciting. And we’ve seen some tremendously impressive preclinical data there. I know there is a lot of interest in that. So lot of opportunities as I said for effective well behaved topo-1 inhibitor. Q – Unidentified Analyst: Okay, thanks guys.

Our next question comes from Bert Hazlett with Ladenburg. Your line is open.

Yes, thanks for taking the question and congratulations on all the progress folks. I have two lines of questions, one is on the AstraZeneca collaboration with MOVANTIK, given that MOVANTIK appears to be moving forward with some robustness as you mentioned Howard, can you give us an update as to the status and then the gaining items that might be involved with the combinations that are also included in the MOVANTIK deal down the road? And then I have a question on NKTR-102, as well.

Well look, I can’t comment on exactly what AZ would like to do in that area. I think my sense is they want to get some experience and some exposure with MOVANTIK before they pursue the combination approach. Realistically though, the combination approach can be a combination blister pack with both an opioid, as well as a MOVANTIK tablet, it could be a actual combination of both types of drugs in one tablet. There are number of ways to do it. But at this point, they haven’t commented on how and when they want to pursue that sorry, I really can’t speak for them.

Okay, thank you. And then on one or two – just if the program is successful, as you just mentioned the PARP combination is attractive, the brain mets and the additional, potential, multiple indications are possible. If it’s not successful in BEACON, how do you think about that asset, is it still alive from Nektar’s perspective given the relative enthusiasm that you are expressing here now, and how should we think about it?

Well look, a really good question. I must say. Now I’ll tell you - I will answer that, I must say and I’ve said it during the call, we absolutely have no idea about the results of this study, good or bad. I mean the data is blinded, it’s been looked at, to my knowledge there’s no leak certainly I haven’t heard anything. So we are completely in the blind regarding the results of that study. Now to answer your question, I think you have to look at the data to answer that question clearly, if it works there’s many, many opportunities with NKTR-102 we don’t have to decide that. Your question is a good one. In that I think we would all agree that NKTR-102 is a very active anti-cancer agent, I think that probably realistic to say. Now whether we sufficiently be physician’s choice to show a benefit of survival or not, I can’t answer that today, I wish I could, but I can’t. However, to your point, let’s say it doesn’t, let’s say it misses is its primary endpoint. That doesn’t mean that because it missed its primary endpoint in metastatic breast cancer, let’s make up a scenario, it’s only slightly better than physician’s choice, it’s not a lot better than physician’s choice. It still might be a very active drug, which in this case wasn’t sufficiently better to warrant meeting its primary endpoint, that doesn’t mean it doesn’t work exceptionally well in glioblastoma, or exceptionally well in non-small cell lung cancer, or exceptionally well in small cell lung cancer. There’s so many possibilities or the pediatric cancers like Ewing's sarcoma and neuroblastoma. So there’s so many things you can do with this. I would say that then unless we have some results from this study that show we have a very, very serious problem with NKTR-102, I would say there is a very high likelihood NKTR-102 moves forward in some other way, even if we just miss our primary end point. Now I say that and I don’t want anyone to read into this, I want to make it crystal clear, I answered that question without having a shred of information as to what that study looks like. So I want to make it clear, don’t read into body language, don’t read into tone of voice, I simply don’t know the results of the study. But I think honestly, unless the study has major issues associated with it, then I think NKTR-102 has a lot of potential in oncology, regardless of the results in late-stage metastatic breast cancer.

Well, thank you for that, it clearly appears to be an active molecule and thank you for the additional comments. Just back to the AV question, really, quickly, when is there a decision that needs to be made on the combo? Is there some type of timing with regard to the combinations or is that just free-floating?

It’s more or less free-floating, there is no time line for that.

Okay. Thank you for the color.

And I would expect – AZ is a very sophisticated company, they are a good group they are very smart, they are not going to let a great opportunity slip by them, I am certain that if they are happy with MOVANTIK, they will be happy with the combination.

Okay, terrific. Thank you, congrats on the progress.

Our next question comes from Debjit Chattopadhyay with ROTH Capital Partners. Your line is open.

Hey thanks for taking my question. Just on the same lines as a - the previous question on NKTR-102, let’s assume the trial does not meet its primary end point, but it is non-inferior, numerically superior to physicians’ choice. But given the non-overlapping safety profiles, isn’t there an avenue for another therapeutic modality in breast cancer, given that the options are so limited and especially if you have a numerically superior outcome?

Absolutely correct. Now of course that’s a regulatory issue, certainly it’s much less of regulatory issue in Europe, compared to the U.S. So you clearly in that circumstance have a path forward in Europe, and in the U.S. you would have to make an argument that you’re numerically superior, you have a much more tolerable side effect profile, don’t ever forget that it’s also a completely different mechanisms. There are mechanisms, there is no topo-1 isomerase inhibitor used in metastatic breast cancer, so it is very different in the microtubule inhibitor. So a safe and well tolerated drug, a completely different mechanism that yes, could be numerically superior and still miss its end point, I think, the drug has still potential and I’m not going to comment any further on that today. But I think we’re thinking the way you are, as well in panning for that eventuality, is a possibility.

So, really the way I should understand is, in case something does go wrong, the contingency plan is if it does show numerical superiority than up of some sort of a regulatory path in Europe still remains open, U.S. remains to be decided depending on the feedback from the FDA.

I think that’s a fair statement yes.

The NKTR-102 in all the other indications that we outlined, in metastatic breast cancer, you move from a relatively uncontrolled Phase 2 to a large Phase 3 study. Would you take the same kind of risk if the trial doesn’t work, or would you think of a more regular Phase 2 kind of a randomized study and even non-small cell or any of the pediatric indications of small cell, before you proceed to your Phase 3?

Well, look, the challenge is, if you do – if the challenge is and I’ll Ivan comment on this further. But if you do randomized survival trials in Phase 2, don’t provide you with any sufficient information because of the size of the trial that would be required and I think at that point you’re probably better off just doing a Phase 3 study. You could look – you could do a comparative trial in Phase 2 and look at the PFS, but there is not a great – there is not always a great correlation between results in Phase 2 and Phase 3 in any case. The only way to really answer these questions, in terms of a survival benefit, is a reasonably powered Phase 3 size comparative trial. Ivan would you like to comment further?

Yes. Thanks Debjit for the question. I just have a couple of thoughts on this one, one is, what we look we will be looking carefully at some of the results coming out of our investigator instantiated studies. Two, we have to look at – we looked at literature where irinotecan itself is being used and where it shows evidence and sort of promising effect. And I think the biggest piece of information that we will have after we – is actually the results of BEACON, we will have comparative data, we will approve or not approve [ph] seen the effect size, as well it’s got a really good feel for this sort of what the side effect profile looks like when we do a head-to-head study. So I think we have a lot more information, but as Howard said, I think we will put all that together in a slightly – if we do go forward it will be a reasonable size what could potentially be a registration type study.

Let me also add one thing we’ve been pretty good about Nektar in terms of the last number of years has been fairly careful in watching our cash position, fairly careful about having non-dilutive financing even though we’ve certainly had some. Overall, we pay a lot of attention to our cash position, we pay a lot of attention to diluting shareholders and we don’t like to do that. So whatever we do in the future is also going to depend on the ramp up of MOVANTIK and the ramp in how well BAX 855 does. I mean MOVANTIK and BAX 855, does. MOVANTIK themselves should be able to generate, as I said, a casual that moves us towards cash flow of positive. And given the NKTR-102 metastatic breast cancer results positive or negative. If they are positive great, if they are negative how negative are they. There is a lot of moving pieces to this in both the science side and the cash side as well. So I don’t want you to think that the first thing we are going to do is in the event have a failed Phase 3 study run out and start five Phase 3 studies in various indications, of course we are not going to do that. We are very conscious of how we use our cash, but I think there is a lot of opportunities. Ivan, do you like to comment.

Yes, I think we have pain will be looking at dermatitis where they might be a positive pathway to approval a less sort of smaller type of studies as well as a significant need, clinical need.

And one last follow-up question on one or two, it seems like at least on literature topoisomerase inhibitors do have a direct effect in down regulating HIF-1 alpha. But I don’t see renal cell carcinoma is one of the potential indication that you have looked at all of at least read and talk about it. So just curious your thoughts on RCC especially the clear cell subtype where HIF-1 alpha is hugely over regulated and those patients really don’t have anything and bladder cancer as well.

Yes, this is Steve. That’s a really interesting question and something that we’ve been certainly looking at pre-clinically obviously Topo I inhibitors, irinotecan is no difference NKTR-102 we would anticipate would have substantial anti-HIF1 alpha activity. I think it’s an interesting path that’s not one that we started yet, clinically but certainly pre-clinically we’ve been doing some thinking there.

Thank you so much.

Our next question comes from David Steinberg with Jefferies. Your line is open.

Thanks very much. I had a question on Baxter’s 855 what you previously mentioned. It hasn’t been that long, but ELOCTATE from Biogen has been on the market for a couple of quarters and I just curious we observations on - based on what you’ve seen from that launch any thoughts on the margin more positive, less positive on the outlook for PEG-ADVATE given that it seems to be a fairly formidable competitor.

Look, I can only tell you what I learn from Baxter, Baxter we said publicly. First of all, they say that patients are switching back to ADVATE after going on ELOCTATE and they haven’t given our specific reason why, but they said they’re seeing a lot of switching back, I think it’s too soon to tell I think there is no doubt that ADVATE is the market leader. It’s the goal standard, everybody understands it - everybody understands its long-term usage safety profile. And when we design BAX 855 when we invented it we make sure that we kept the underlying molecule the same ADVATE. So this is a longer acting version of ADVATE and we did that for very, very specific safety reviews. So what long acting ADVATE looks like compared to ELOCTATE it’s going to be – it’s certainly going to be difficult to judge that today. I think that Baxter’s in a position of having the gold standard with the PK profile that looks just as good as Biogen’s drug and they tell me that people are switching back, but I don’t have any further – I don’t have any more specific information for you. I think it’s a large market, I think it’s lot of potential I think there is a lot of patient loyalty to these brands and I think it’s not necessarily easy to get patients to switch of ADVATE they’ve been taking for all these years. But let see how the market developments, how the market develops I certainly believe that long-acting ADVATE is equally formidable to ELOCTATE in quite frankly when it’s, well I understand your point about various companies, Biogen being a formal competitor I think without a doubt Baxter is the power house in the field of hemophilia, there is no debate on that.

Sure. I’m just turning to finance is that was great to hear the comment that you are moving towards being cash flow positive. So I thought given that you’ve accumulated lot of NOL’s over so I just curious based on your internal forecast how many years would it be once you turn cash flow positive that you wouldn’t have to pay taxes.

Well, we – in terms of how large our NOL’s are?

Exactly.

Well, I can’t tell you how many years, but our NOL’s are substantial, John would you like to carry that further.

Yes. David, I mean basically our NOL’s in the range like $1.2 billion for federal and somewhere around $700 million for California. But from the standpoint of saying how long will it take it use them, I mean that all depends upon, our revenue numbers in positive bottom line. So the real issue is hopefully we get to point of time, where we generate positive EPS before some of them start lapsing on us.

Look I think, we certainly have substantial NOL’s I wouldn’t expect that has to pay taxes for some time. However, I think the most important take away from my message about being cash, moving towards cash flow positive, we have to look at Nektar and recognized that we just got a major drug approved for the U.S. and Europe, Movantik, that is a going to be in everybody’s mind a $1 billion plus drug. And we have – we owned essentially a third of it. I mean, if you’re getting a 20% royalty flat to start with the no real expenses that’s same as only the third of the drug or more in the initial years. With BAX 855 coming and I think everybody believe BAX 855 will get approved that’s our second approved drug in a row. So I think Nektar is in the enviable position of now having two one approved drug, one drug that should be approved this year that puts us in a tremendous position and it puts us in a unique position relative to other companies. And I think hopefully, hopefully that NOL won’t last long. That would be my goal. But I think it’s nice to see that we have that cushion for taxes. But overall, I think, Nektar’s in a great position we have two, we have one approved drug one drug that should be approved this year. And I think considering that we built all these technologies up in the last seven or eight years, it’s been a major accomplishment for this company. And I think we have a great future ahead of us.

Excellent, thank you.

[Operator Instructions] Our next question comes from Steve Byrne with Bank of America. Your line is open.

Hi, assuming the BEACON data are favorable, what are you thinking about the size of the commercial infrastructure that you would likely build in the U.S.?

Yes, that’s the great thing about Oncology. It doesn’t require the 800 person, 1,000 person sales organization that you need to bring your drug to the large primary care audience. So look without being specific I mean you’re probably in the neighborhood of 75 sales reps and 25 medical scientific liaisons and 25 marketing people. I mean, it’s probably less than a 150 people some marketed drug like that quite successfully in the United States. At this point we made it very clear, we don’t have any interest in spending resources to building ex-U.S. sales organization. I think that’s much better off, we’re much better to have a confident partner market this drug and promote this drug ex-U.S. But in the United States, Nektar can certainly build a sales and marketing organization capable of marketing a drug that is potentially as exciting as NKTR-102. And my back ground, I’ve launched a number of drugs and I think we have internal skills set that knows how to do this. So I’m to not too worried about it.

And a question about NKTR-214 or NKTR-214 do you have data preclinical data that indicates that it down regulates T-regs or is it just that it stimulates more cytotoxic T cells than it does regulatory T cells?

Yes, hi Steve, Steve Doberstein here. Great question, and so this is all data from mouse models of tumors and what we find is that in the tumor, when you treat with NKTR-214, you actually have a reduction in the number of T-regs relative to placebo treatment. And then a substantial reduction relative to Proleukin treatment. So that actually does look like is, the balance is tipped even in excess of what would happen if you didn’t treat at all. So it’s both acceleration of expansion of memory T cells, which are vector cells and then substantial reduction of T-regs, as well.

And given it sound like as doing both would you see any merit in combining it with some kind of a vaccine to increase the availability of antigen-presenting cells something to work synergistic with the cytotoxic T cells?

Yes, for sure I think we’ve got a pretty expansive preclinical program going on with NKTR-214 right now, that includes answering just those kind of questions not only with vaccine approaches, but with CAR T cells and of course the combination with other biologics check point inhibitors and other cytokines. So I think there’s a lot of ways to combine here and I think that’s the future of immune oncology, is figuring out the appropriate combination therapies for appropriate tumor types. But I think you spot on to and it’s a very interesting type of approach.

Okay and just one more on NKTR-181. Do you have any preclinical data or you’ve compared it to an active comparator?

Preclinical data yes of course we’ve got really extensive preclinical data for several years now comparing NKTR-181 in animal models of pain, to the pan Oily [ph] of traditional old school opioids and other analgesics. So we’ve shown that’s a lot of different ways.

Okay, thank you.

I’m showing no further questions I will now turn the call back over to Howard Robin for closing remarks.

Well thank you again for joining us this afternoon, I want to take this opportunity to thank our employees for their hard work and their devotion and we couldn’t be more pleased with the progress we made here at Nektar across the breath of our in-house programs and our partner programs. 2015 is off to a strong start and we look forward to speaking with you next month following our NKTR-102 results. So stay tuned thank you very much.