Good day, ladies and gentlemen, and welcome to the Nektar Therapeutics Second Quarter 2015 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 today. With us 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 today’s call, we do 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 these forward-looking statements relate to the future they are 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 our Form 10-Q filed on May 1, 2015 and are available at sec.gov. 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 on the IR Page at Nektar’s website at nektar.com. With that, I would now like to hand the call over to Howard. Howard?

Thank you, Jennifer. And thanks to everyone for joining us today for our second quarter 2015 financial results call. I would like to spend today's call reviewing the significant progress we've made in the second quarter and highlight upcoming milestones for Nektar over the next 12 months to 18 months. I would like the first focus on the recent successful launch of MOVANTIK and the near-term potential approval of BAX 855. And then I will hand the call over to Ivan, who will talk more about the Phase III program for NKTR-181, a wholly-owned pipeline program of Nektar’s which could address the major problem in our society opioid abuse. We’ll also cover NKTR-214 our new cancer immunostimulatory agent, which is entering Phase I/II with MD Anderson. NKTR-214 has the potential to bring a new mechanism directing selective stimulation of the patient's cancer fighting T-cells for the next generation of cancer immunotherapies. We’re very pleased that AstraZeneca has reported that the launch of MOVANTIK in the U.S. is off to an encouraging start. AstraZeneca launched MOVANTIK at the beginning of April and their U.S. partner Daiichi Sankyo begin contributing to the launch in early May. In the second quarter AstraZeneca reported a rapid uptake of MOVANTIK with over 3000 users. AstraZeneca indicated that more than 50% of the businesses from new therapy starts and there are significant number of patients now take MOVANTIK were previously on OTC laxatives. As many of you have seen AstraZeneca recently initiated an unbranded direct-to-consumer TV campaign which has been running since the end of June. In the first three weeks of July as most of you have observed from the available published IMS figures we are seeing double-digit weekly growth in MOVANTIK prescriptions. Although we are still early in the U.S. launch AstraZeneca and Nektar…

Thanks Howard. As Howard mentioned NKTR-181 could emerge as an important drug in addressing the major societal problem of opioid abuse. NKTR-181 is particularly interesting, because it’s designed to be a revolutionary new opioid not a reformulation of an existing opioid and because of this it could represent a significant advance in pain medicine. Importantly it's also been granted Fast Track by FDA. NKTR-181 acts as a full agonist of the mu-opioid receptor and it has unique absorption and distribution kinetics that are related to the actual structure of the NKTR-181 API. NKTR-181 is specifically designed to cross the blood-brain-barrier at a slow rate compared to traditional opioid therapies thereby reducing its potential for euphoria and abuse. Enrollments well underway and is ahead of schedule in the Phase III SUMMIT-07 which began in February of this year. The trial compares NKTR-181 to placebo in opioid-naive patients with chronic low back pain with approximately 200 patients to be randomized into each arm. Patients from this efficacy trial will also be eligible to roll into the long term safety study of NKTR-181 which was also initiated earlier this year. The SUMMIT-07 efficacy trial includes an interim analysis that will allow for adjustments to the sample size in order to maintain appropriate study power to detect a statistically significant difference between NKTR-181 and placebo. Such an analysis is designed to increase the probability of a successful outcome and we expect the SUMMIT-07 trial to be completed in approximately 18 months. In addition, we are currently finalizing the design with the FDA for the second Phase III efficacy study for NKTR-181, which will be conducted in opioid experienced patients. Now, I would want to move on to what we are doing in cancer immunotherapy and in particular what we are doing with NKTR-214, a…

Thanks, Ivan for the clinical update. We are very pleased that the launch of MOVANTIK is off to a strong start that Baxter is looking forward to approval and launch of ADYNOVATE later this year. We’re proud of the pipeline we built at Nektar, which includes as I’ve said four Phase III programs, one filed BLA and a recently approved and launched drug. As I said earlier our clinical stage partnered programs combined with the revenue streams from MOVANTIK and ADYNOVATE to potentially lead to peak royalty revenue of $750 million annually. As we said last quarter we will continue to balance our near-term development priorities and spend with the goal of advancing our pipeline becoming cash flow positive and avoiding dilutive finance. With that said, I’ll turn the call over to John for discussion on our financial results. John.

Thank you, Howard and good afternoon everyone. I will start with the review of our second quarter 2015 financials and then I’ll go through our annual financial guidance. Total revenue in Q2 2015 was $22.7 million versus $28.5 million in the second quarter of 2014. The decrease in revenue was due to lower milestones from our collaboration partners, partially offset by higher product sales. Total operating costs and expenses for the second quarter 2015 were $66.1 million versus $51.4 million in the same quarter a year ago. The increase is primarily driven by increased R&D expenses as a result of our NKTR-181 Phase-III program as well as increased cost of goods sold. R&D expense in Q2 2015 included the ongoing NKTR-181 Phase III program, including SUMMIT-07 the 12-week efficacy study and SUMMIT-08 the long-term safety study. The commercial scale up for device production for Amikacin Inhale program, ongoing monitoring expense for patients still in the NKTR-102 Phase III BEACON study, IND enabling manufacturing and final preclinical activities for NKTR-214. Research and development expenses also included $3.6 million of non-cash stock-based compensation and depreciation expense. For the second quarter 2015, G&A expense was $10.2 million, which included approximately $2.4 million in non-cash expenses. Cash and investments at June 30, 2015 were $279.7 million as compared to $325.8 million at March 31, 2015. Our year-end cash guidance for 2015 remains unchanged and we still plan to end the year with approximately $200 million in cash and investments and does not include any royalties from MOVANTIK. This represents a net use of cash of approximately $63 million in 2015. As Howard stated, the launch of MOVANTIK by AstraZeneca occurred at the end of the first quarter. However, our cash and revenue guidance does not include projections for royalties from net sales of MOVANTIK…

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

Thanks. Hi, guys. I was wondering could you tell us if any additional promotional initiatives will come in the near future from Astra or Daiichi Sankyo. And I guess another thing on MOVANTIK would be – when the sales force does receive pushback from docs how would you characterize that pushback?

Okay. Hi, Jonathan, good question. Look I certainly can't be specific and I don’t want to be specific, but I know that AstraZeneca certainly has a direct-to-consumer branded program, advertising program and television program planned as physicians become more comfortable and more aware of MOVANTIK. So right now, they're running unbranded ads and I think at some point in the future they will be running branded television ads. But I'm really not a liberty or it’s probably inappropriate for me to speculate on when that might be, but it’ll certainly be coming. In terms of pushback that sales reps get from physicians I think overall it's what you would expect when you're launching a new therapy into a much underserved market. You go to physicians they’re not necessarily willing to admit that their patients have OIC. The pain specialist probably a little bit more than the primary care docs are willing to admit it, but generally speaking our physicians have no way to treat OIC because let's be realistic laxatives don't work and even other therapies that are not PAMORA’s don't work that well. So physicians don't have many options and they sort of ignore the fact that patients have OIC. Now you come along with a drug that specifically targets this condition to be a very targeted mechanism and it takes a little bit of time to get physicians to acknowledge that their patients have it to ask their patients about it et cetera. I would say this though as the physicians learn how many of their patients have OIC and they'll tell you that’s the vast majority of their patients that are taking chronic opioid therapy. They also readily understand how the mechanism works however it PAMORA works, it’s a very, very logical construct and because of that the adoption is pretty rapid. As I said we are very pleased with the reception we are getting from physicians and patients, but you got to get through that initial barrier because you're launching a drug and you are building a market that doesn't exist. And I think they're off to a great start.

Thanks for that. I was wondering for NKTR-181, what is your sense of the maximum number of patients you might have to add and how much time would that add today really it’s like have you thought about where you actually could have to wind up and like what is that upper end of the range?

I’ll turn that call over to Ivan to take a stab at that.

Hey, Jonathan. So clearly at the outset we are putting about 400 patient into the study, oh 208 actually for a total of 416 randomized 1:1, but we will be doing I think I mean sort of interim analysis simply for sample size reevaluation. If we need to increase the sample size that'll be an incremental 200 patient. So the maximum number of patients going into the study will be about 600. I don't envisage that will have some impact on the timings, but at time we probably get the results of the interim analysis we should be around about fully recruited the first 400. So I think and will be moving quite quickly I envisage to that point with those centers really open and going on the same. So one would hope potentially at maximally six months to the study, but hopefully less than that.

That was helpful, thanks. I was wondering could you be a little more specific about what trials you are running with 214 and what you intend to spend on it next year at least?

Well, certainly as you know we intend to initiate 214 at the end of this year, we have to have the first patient in it; we are running with MD Anderson and at Yale. The first part of the study will be a dose escalation in multiple tumor types and then once we have seen the early results of that we intend to go into those expansion cohorts.

Yes, we don’t generally discuss the specific cause of trial Jonathan, but I would tell you that what we’re doing these Phase I/II trials at MD Anderson and certainly this is potentially a very, very important cancer immunotherapy agent and if works while no one could be certain, we are hopeful that these Phase I/II trials could function as pivotal trials. There is no guarantee that we will get there, but I think that's certainly something that we’re hoping for and if we see the kind of results in humans that we’ve seen in our preclinical models it should be very impressive. So at least conceptually we’re thinking about these Phase I/II programs is potentially pivotal we would say.

Okay, I mean lastly really briefly some $11.7 million in product sales and royalty, is that just a bump, a temporary bump because that numbers been kind of bumping around or is just something from which you intend to grow?

To be honest with you Jonathan from a gross standpoint we don’t see much growth there based upon what's on the market today because most of that comes from sales for Cimzia, it really going to depend upon whether or not other things that are in Phase II, Phase III are successful going forward. So like if [Alfatec] has a positive Phase III obviously there will be an increase in revenue for us there, but you know that’s all dependent upon their Phase III readout.

Okay thank you very much guys.

Your next question comes from Jessica Lee with JPMorgan. Your line is open.

Hey, guys this Ryan on for Jess. I appreciate you guys taking our questions. Are there any metrics or comments you can give us on the DTC effort and what you learning from that program. And also can you give us any more color on Tier 2 access. Thanks.

Well, I think first of all remember the direct-to-consumer program that’s running now is unbranded. The deals with OIC it doesn't deal with MOVANTIK that said there's clearly a benefit to that program and there's certainly if you look at over the last few weeks, double-digit growth of MOVANTIK prescriptions I think it's very impressive. And I think of course it's very important to make sure that that the marketplace understand there is a medical condition here. So, lot of these patients remember a lot of these patients don't talk about it with their physicians because they are embarrassed to talk about the fact that they are severely constipated. And the physicians don't want to discuss with the patients because quite frankly before MOVANTIK was launched there really wasn't any reasonable way to treat these patients other than give them some version of laxative whether it's prescription or over-the-counter. So I think you got allow the patients to understand that there's a viable reason for going to the physician and talking about your OIC. Once the physicians are very comfortable that they understand how MOVANTIK works what it can do the profile of MOVANTIK then I think you will see direct-to-consumer branded advertising start and its up to AstraZeneca when they feel they’re ready to do that. But I would expect it to not be in the - I wouldn't expect to be too far out. But I think overall the feedback that you know that AstraZeneca gets from physicians and patients as they like the drug very much and I think we are very happy with the growth rate. And double-digit growth has really taken off since the unbranded ads have started. So there is no doubt that those television ads are having the desired effect and I would expect the branded television ads that have even more profound effect. I’ll let John talk about the Tier 2 part.

So as far as the Tier 2 goes basically what AstraZeneca was able to accomplish in the beginning was before the product was even launched they had an agreement with three of the major payers to basically make the product to Tier 2 and they are continuing to work through additional payers as time goes forward. Obviously, for competitive reasons they do not make that information public as who they are.

Okay and a follow-up question if I may changing to 214, I know that it's early but you know how are you guys thinking about potentially going at it alone with this or potentially bringing on a partner.

Oh I think look if 214 works the way we expected to work and of course we have to complete our Phase I studies and Phase II studies to get that. I think that's a drug Nektar keeps for itself. I mean if you think about I mean NKTR-214 understand is very, very different from every other cancer immunotherapy being developed. We’re not focused on affecting the regulatory side of the immune system we are directly stimulating the immune system and not allowing the regulatory side of the immune system to down regulate the immune system. So a very, very unique approach is no other molecule that I know that works in that fashion and I think it's absolutely appropriate and doable for Nektar to develop that drug and bring it to market.

Great.

Yes, I think just to add to Howard's point that's why MD Anderson was soaking, they were very excited, they remain very excited about working with this, and then one of the reasons we’ve reached out to them and they came back to us. I mean it’s going to be a great collaboration I believe.

Great guys. I appreciate. Thank you for taking our questions.

Thank you.

[Operator Instructions] Our next question comes from Bert Hazlett with Ladenburg. Your line is open.

Thanks. Congratulations on all the progress. Just on the I guess on the 181 program in the second Phase III, you’ve said at this point it’s 18 months to – I think the data readout was what I heard. If that’s not correct, could you correct it? And is that roughly what we should be modeling in for the second Phase III in opioid-experienced patients as well?

Yes, I think good question. I think you are correct that you shared the first readouts on the first Phase III study in about 18 months. And the study runs about 18 months. And the second study would also be approximately 18 months, but we haven't – obviously we haven’t started that yet and we’re having the discussions with the FDA as to what that study should look like in opioid-experienced patients. I would hope that a positive first 181 Phase III study is bodes well for success in the second Phase III 181 study. But they are not fully running in parallel at this point obviously.

Okay, thank you. Two other questions, just my favorite one on the MOVANTIK line extension/combinations with the underlying opioid. Where does that stand and when do might we hear anything?

Yes. Look I can't speak for AstraZeneca I think they have an obligation to develop – that’s NKTR-119, they have an obligation under the contract to develop that drug and I can't speak for them as to how they are approaching that and what they're doing. I think they have to be the ones to answer that question for the contract I’m not really allowed to comment on that. But they do have an obligation to develop that drug and you can imagine a number of different opioids that you could combine with MOVANTIK, it's a fairly straightforward process. So at this point I can’t comment any more than that.

Okay, thank you. And then just on NKTR-214, if any of the group was [indiscernible] just the Phase I/II moving to potentially being a pivotal. I know you’ve discussed that in general terms before. Could you put a little bit more of finer point on that and I know it's early days in terms of the collaboration, but any sense in terms of timing when we might get our first look at any kind of data from that study?

Well, look I’ll turn it over to Ivan. Let me just clarify based on what you said. I think clearly you have to define in the study what kind of response rates you are expecting and if the response rate is very, very profound and robust and combined with an excellent safety profile you can potentially go to the FDA with that kind of data set. But I don't think we’ve fully defined that yet so I’ll let Ivan to talk about timing with you.

Yes. Hi Bert. So look, obviously we’re going to do the initial phase of the study is dose escalation and we envisage that will probably take nine months-ish once we started before we get into dose escalation. Obviously, we are going to hopefully get some nice signals potentially out of that and we’ll be looking at biomarkers will then go into dose expansion cohorts where in that area we are likely be looking at renal cell carcinoma, melanoma potentially non-small cell lung. And if we start to see strong signal there obviously we’ll expand, our expansion cohorts will be looking for signals. Clearly the pathway is when where we’d be looking potentially for – if you look at where other agents have gone - they’ve gone for overall response rates and where they’ve seen meaningful signals in patients that remain for [fraction] to other therapies is clearly a regulatory pathway that way. So if our molecule is robust, if we get good results clearly that's the sort of pathway we’d be considering on taking.

Okay. And just a quick follow-up in terms of biomarkers. Can you illustrate any further what you might be looking for in the early days with the study?

Yes, hi Bert. This is Steve. Yes, look there's a whole array of biomarkers as we know in the immune field and those range from pharmacodynamic markers looking for effects on lymphocytes both in the tumor and in the periphery to the kind of markers that you think might be predictive. And I think the things that have borne out well so far for the checkpoint inhibitors have been things like excellent sequencing for total mutational load, looking histologically for tumor infiltrating lymphocytes and things like that. We would certainly be looking at a number of things here because our goal here is to not only of course be able to better define the population that might respond really well the 214, but of course as a whole emerging set of data about the checkpoint inhibitors that tell us what populations are not well served by the checkpoint inhibitors. For example if you think about the anti-PD-1 and looking at PD-L1 status in those patients. I think there are some emerging evidence there that’s pretty interesting that says if your PD-L1 negative that the anti-PD-1 is not work very well there. Of course CD122 the target of NKTR-214 is present on all T-cells and so that might be a very interesting kind of subgroup to look at it some day. I think so we’re going to have to integrate the data that we collect and look at here in Phase I and early Phase II with the outside data that comes in from the outside world as we understand better the tumor immune response. We’re going to talk a lot more detail about this at our upcoming Analyst Day in October and so I differ the rest of it to there, but that’s kind of our general thinking

Thank you. Exciting stuff, we look forward to additional conversations. Thank you. End of Q&A

And that does conclude the Q&A session. I'll now turn the call back over to Howard Robin, President and CEO for closing remarks.

Okay. Well, first I would like to as usual thank all of our employees for doing such a great job to develop such an impressive pipeline and I know they all work very, very hard and they deserve a lot of credit. And thank you all for joining us this afternoon and by now you received and heard that we will have our R&D Day on October 8 in New York. And we will be hosting a panel of immuno-oncology experts and other key opinion leaders in order to showcase our internal pipeline programs. So we look forward to seeing you there and we also look forward to seeing many of you at the FBR in the Ladenburg Conferences in September. So thank you very much and have a great evening. Thank you. Bye-bye.