Good day, ladies and gentlemen, and welcome to the Nektar Therapeutics Q4 and Year End 2016 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 would now like to introduce your host for today’s conference, Ms. Jennifer Ruddock, Vice President, Investor Relations. Please go ahead

Thank you Crystal. Good afternoon and thank you for joining us today. With us are Howard Robin, our President and CEO; Gil Labrucherie; our Chief Financial Officer; Dr. Ivan Gergel, our Chief Medical Officer; Dr. Steve Doberstein, our Chief Scientific Officer; and we also have with us Dr. Jonathan Zalevsky, our Vice President of Biology and Dr. Mary Tagliaferri, our VP of Clinical Development. On today’s call, we expect to make forward-looking statements regarding our business, including potential regulatory approval decisions and commercial launch timing, the timing of future clinical trial and clinical trial results. Clinical development plan, the economic potential of our collaboration partnerships, the therapeutic and market potential of certain drugs and drug candidates, as well as those of our partners and our financial guidance for 2017 as well as certain other statements regarding the future of our business. Because 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-K which was filed today and is 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 Investors Relations page at Nektar’s website at nektar.com. With that, I will now turn the call over to Howard. Howard?

Thank you, Jennifer, and thanks to everyone for joining us today for our fourth quarter and year end conference call. On today’s call we will discuss our progress over the last quarter and year-to-date, provide financial guidance for 2017 and also review the many upcoming catalyst and milestones for Nektar’s pipeline expected in 2017. Nektar had a very successful 2016 during which we advanced multiple Nektar pipeline programs including an emerging immuno-oncology and immunology portfolio. In the fourth quarter we began the clinical development with our collaborator Bristol-Myers Squibb to evaluate the combination of our lead IO program NKTR-214 and BMS’s anti-PD-1 agent Opdivo and five different tumor types and at least eight indications. The BMS collaboration is the first of a number of clinical collaborations for NKTR-214 which are designed to position NKTR-214 as a keystone therapeutic in immuno-oncology. We’ll talk more about our strategy with NKTR-214 on this call and also about our next IO development candidates NKTR-262, a new TLR agonist which complements NKTR-214 and NKTR-255 our novel IO 15 agonist. Our wholly owned pipeline also includes innovative approaches for the treatment of autoimmune disease NKTR-358 and for the treatment of chronic pain NKTR-181. We’re on track to report top line results from the Phase 3 efficacy trial of NKTR-181 in chronic pain patients later this month and we’ve submitted an IND for NKTR-358 and are on track for that molecule to enter the clinic this month. Nektar’s impressive wholly owned R&D pipeline combined with current and future royalties and milestones from our partner portfolio really positions Nektar well for excellent growth in 2017. Our partnered portfolio includes existing products such as MOVANTIK with AstraZeneca and ADYNOVATE with Shire and products which could approved in the next year such as ONZEALD with Daiichi Sankyo, Cipro DPI and…

Thank you Howard and good afternoon. Today I’d like to review in more detail, Nektar’s combination programs for NKTR-214 with checkpoint inhibition. This includes the NKTR-214 plus nivolumab development program known as the PIVOT program which we’re conducting with our clinical collaborator BMS and the NKTR-214 plus atezolizumab trial known as the PROPEL program, which Nektar is conducting. I’ll also highlight some recent exciting data for NKTR-214 from our single agent trial for patients who came off the monotherapy study with stable disease per resist to immediately initiate treatment with anti-PD-1 base therapy including nivolumab. The Phase 1 dose escalation portion of the PIVOT program, PIVOT-02 is well underway. BMS and Nektar believes that the combination of Opdivo with NKTR-214 the first medicine that grows tumor-killing cells has tremendous promise in advancing the field of immune-oncology. This is why the PIVOT program will pursue eight or more indications and at least five different tumor types. As a reminder in the dose escalation portion of the program, we plan to enrol approximately 30 to 40 patients with first-line melanoma, second-line renal cell carcinoma, and second-line non-small cell lung cancer. We’re looking at a number of two-week and three-week dosing regimens. We’ve already completed enrolment to the first dose cohort and we’re simultaneously enrolling patients to the next four combination cohorts in parallel in order to identify the optimal dosing regimen. Our current target is to select the combination regimen with the optimal safety and efficacy profile around the middle of the year. Once the recommended Phase 2 dose is established, we will then begin to enrol into the eight expansion cohort of the PIVOT-02 and PIVOT-04 studies. The expansion part of the program will enrol up to 260 patients and will include first-line melanoma patients, first-line or IO-naïve populations with non-small…

Thanks Mary. I’d like to start with the discussion on NKTR-358. Nektar’s program and autoimmune diseases which will enter the clinic before the end of this month. Now the notion of balanced immune system is a critical concept in health and disease. We know that patients with autoimmune and chronic inflammatory disorders live with the state of persistent immune system activity and have lost the normal regulatory mechanisms that resolve this activation and balance the immune system. With cancer, we see an imbalance, where immune resolution pathways dominate and overtake activation pathways and the resulting immunesupression promotes tumor growth and disease progression. With autoimmune disease we see the opposite, in this setting. Immune activating pathways dominate and ineffective counteraction by immune resolving pathways allows for progressive autoimmune disease. Now as Howard and Mary have discussed, we’ve now shown that NKTR-214 can activate the TIL and T effector arm of the immune system to overcome immune suppression in the tumor and create an optimal biological environment for our IO therapy. In essence, NKTR-214 overcomes the imbalance to help treat cancer. With NKTR-358 we overcome the opposite imbalance to treat autoimmune disease. NKTR-358 is a novel agent that allows for pharmacological control of immune regulatory pathways by increasing the number and suppressive function of regulatory T cells. The body’s natural mechanisms of immune regulation. Patients with autoimmune disease, have either insufficient number and or insufficient activities of these Tregs in their body. And in the case of normal health, the Tregs control the normal population of self-reactive T cells in the body and indeed Tregs play a key role in peripheral tolerance mechanisms. But when there are insufficient numbers or activity of Tregs it leads to a breakdown of these peripheral tolerance mechanisms and ultimately result in the patient developing autoimmune diseases.…

Thank you Jonathan and good afternoon, everyone. I’ll start with a few points on the progress of MOVANTIK, ADYNOVATE and ONZEALD and then I’ll review our 2017 financial guidance. As Howard mentioned MOVANTIK showed very nice annual growth in US prescription as peak weekly prescriptions increased year-over-year by 75% from 5,900 to 2015 to 10,600 in 2016. Currently the annual run rate is over $160 million for MOVANTIK in the US. In Europe Kyowa Kirin continues their early launch of MOVANTIK in the UK and Germany and they recently achieved pricing approvals in Spain and Italy. We continue to expect pricing approval and launch of MOVANTIK in France in the first half of 2017. In 2016, we recognized $15.5 million in royalty revenue from MOVANTIK sales and we’re including $25 million to $28 million in royalty revenue in our 2017 financial guidance. Remember, we recognize our royalties one quarter in years, so our 2017 royalty guidance includes royalties from sales in Q4, 2016 and projected royalties from sales through Q3, 2017. Now turning to ADYNOVATE, the first full year of launch progressed nicely with Shire reiterating that they’re fully committed to the Hemophilia franchise. Shire clearly believes that ADYNOVATE fits an unmet need in the marketplace and they’re highly focused on ensuring patient access to this new medicine. The label in the US was recently expanded into pediatric patients and surgical settings and Shire awaits approval in Europe, which they expect in the first half of 2017. For ADYNOVATE, Nektar is entitled to 4% royalty on annual sales up to $800 million, a 6% royalty on annual sales between $800 million and $1.2 billion and a flat 13% royalty on sales exceeding $1.2 billion. We are also entitled to $10 million milestone on approval of ADYNOVATE in Europe and an…

[Operator Instructions] and our first question comes from Bert Hazlett from BTIG. Your line is open.

Congratulations on the progress. So I have a couple of questions, but I guess mostly around 214 and the immunology IO program. So I just with the success you’ve been seeing with the sequential dosing, with the patients you referred to what do you think about that boosting regimen compared to the combination dose in this [indiscernible] with BMS and how are you evaluating that in ongoing trials? And then secondly, you mentioned you may potentially use of 214 in combination with vaccines and with other small molecule inhibitor, so what do you envision in terms of the structure of those deals, should they move forward? Thanks.

Bert, this is Howard. I’ll let Mary handle the first part of your question and JZ will take the second part of your question.

Hi, Bert it’s a great question and certainly one that we thought of a lot here at Nektar and I’ve been speaking to JZ extensively about number of preclinical animal models that he’s looked at with both sequential dosing and concurrent dosing and truthfully in our animal models, we don’t see any different or enhanced efficacy with either dosing regimen, which is why when we built our program with BMS and we shared the data with BMS, they thought that it would made a lot of sense to go forward with the concurrent dosing. The second thing that we learned from our NKTR-214 monotherapy program is that, we see very early on is that week’s three time point on drug that we have a very robust immune stimulation with high increase in tills and K cells and very quick short amount of time and so we knew that the half-life of nivolumab is very long and so therefore starting those two drugs at the same time, certainly would make a lot of biological sense. At ASCO this year we look forward to sharing with you both the total updated data from the monotherapy as well as the dose escalation from the combination.

Thanks Mary and Bert to your other question, definitely as we’ve talked about before, it’s very important to explore all of the targets phase, that we think that NKTR-214 biology can really help in and when you think about all the IO mechanisms you can really think about things that are clearly like immune targets even modalities and then even when we bring in the idea of small molecules that lets us taken an even larger sphere of targets that are associated with that, even ones not traditionally thought of as classical immune targets. So we’re really taking a very, very open minded approach to that and then specifically to your questions, we’re approaching these kind of collaboration very much in the same way we approach the BMS clinical collaboration. We’re looking to share the responsibilities and share the resources of advancing these molecules forward and our thinking is very much in the vein that we’d like to begin with pre-clinical evaluation use that to help us prioritize identify exciting combinations even unexpected combinations and advance those clinically.

And just one quick follow-up, you mentioned 60% of reduction seen in tumor burden, Dr. Diab has mentioned was the reduction in tumor burden with the additional patients on that scale, can you present some increased granularity later?

Yes, we’re going to present the granularity at ASCO and Dr. Diab is very excited to share the specificity of these patient cause as you know this type of response rate in RCC patients is certainly is higher than you’d see with single agent nivolumab, so Dr. Diab is very eager to share these data at [indiscernible] we’ll provide the specificity as well as the actual CT scans at ASCO.

Great. We look forward to that. Thank you very much.

Thank you. Our next question comes from Jessica Fye from JP Morgan. Your line is open.

Great, thanks for taking my question guys. Kind of following up on the last one, what is the response rate that you see is the bar for single agent nivolumab, i.e. what’s the response rate that you’re comparing this group of RCC patients to. And is it possible to elaborate a little bit more on the reasons for discontinuation that we’re not related to progression. Thanks.

Sure, so your first question Jessica. When you look at the second line setting in RCC for patients who progress on prior TKI, the objective response rate with single agent nivolumab is 21.5%, there’s also very, very low rate of patients who have complete responses with RCC only 1%. So in our combination program we’re looking to see an objective response rate of roughly 40% and the other things that we’re looking at are not just the objective response rate, but we’re looking to the time to response. How quickly do those responses happen? We’re looking at the depth of the responses and when I say depth, we’re not even it’s not just binary, a partial response versus a complete response producing 80% reduction in tumor burden versus 31% and then the duration of that response. The nice part about working with BMS, they have a lot of unpublished data, that we’re allowed to tap into and collaboratively work with them on further understanding those parameters above and beyond objective response rate and the second question you asked about the discontinuation of those patients, number of them as we mentioned to you actually went on to an anti-PD-1 base therapy and Dr. Diab did that intentionally because he knew from a biological perspective increasing TILs into the tumor microenvironment with the exact biology that would synergize with checkpoint inhibitor and so that was Dr. Diab’s strategic decision and it felt like it was the best for the patients and we certainly supported Dr. Diab taking steps that he felt would provide the best possible outcome for his patients and low and behold, I think he made the right decision.

Thank you.

Thank you. Our next question comes from Debjit Chattopadhyay from Janney Montgomery. Your line is open.

So just want to follow-up on this RCC once again. I mean, do we have a handle on what the baseline TIL was before 214 dosing and what it was at the point where nivolumab dosing was initiated and in terms of the deep responses that you’re talking about 60% to 80% decrease in tumor burden what kind of rates do you normally see with nivolumab monotherapy?

Debjit, I’ll begin with the first part of your question. So what we saw in the biomarker program was we had a chance to look at biopsy at the three-week time point which was before the time of patients left the trial to go onto to the sequential therapy, so while the timing we can’t answer your question directly in the sense of what the TIL population was at the exact instant. What we do know, is that in these patients that Mary described we saw very large changes in the amount of infiltrating immune cells, both the proliferation status of those immune cells that intensity PD-1 positivity within the tumor microenvironment self [ph] and some of the other parameters that we touched on it, since we elaborated a little bit more in detail to GU poster as well. So what we can say is that all of these patients’ immune profile clearly shifted and it made them really as Mary said, for the lack of the term like priming or something, it really made their tumor looked like it would be the kind that’s much more likely to respond and respond very well to a checkpoint therapy.

Yes and to address your second question, making a go, no-go decision isn’t just based on one parameter and we’re looking at a whole myriad of different endpoints and specifically in terms of responses people have not published yet on the quartiles of responses meaning if you’ve had a partial response what is the response that this top 25% patients have had, the next 50% and so forth and that’s why we very strategically chose to work with BMS because they actually have a lot of new data that they haven’t published. However in collaboration with them, these are types of information sharing that and session that we have with them to further dissect and understand the value of NKTR-214 in combination with nivolumab. Again at ASCO, we plan to share with you the totality of the Phase 1 data which would be the safety and the efficacy and specifically additional information about these poor patients who went - that went on to nivolumab after NKTR-214. At that time, we also, we’ll have a presentation and we can shed some more light on the quality of these responses.

And then this planned TECENTRIQ study is that, at this point and [indiscernible] finding study or are you trying to specifically look at say an MSI high or MSS CRC patient population.

Yes, so with TECENTRIQ what we’re going to do is specifically look at two patient population in our dose escalation study and we’re going to look specifically in non-small cell lung cancer patients and bladder cancer patients and this will give us a better signal of the effective NKTR-214 with an anti-PD-L1 agent. We also feel, we’ve really honed in on recommended Phase 2 dose for NKTR-214 in combination with atezo, so we’ll be able to enrol the number of patients to specific dose cohorts not just your traditional three patients to a cohort, so we can glean and have a good sense of the safety and efficacy in this setting.

And in the IO refractory patient population, obviously there are multiple resistance pathways, how does increasing the TIL population address the acquired resistance to IO, which may be totally independent of T cell proliferation at that point?

No, it’s a great question. So just going back, I just want to remind you that the dose escalation trial will have 15 to 20 patients worth of data to share with you in combination NKTR-214 and nivolumab. So in terms of the relapse, the patient population you’re bringing up really great point and you know every conference that we go to, everybody is talking about the unmet need of this group and one of things that we see is there is a patient on monotherapy trial who actually was progressed RCC patient, who progressed on high dose IL-2 and then went on progress on Genentech’s OX40 and then the third treatment this patient went on was nivolumab, after failing all three of those IL agents, the patient on NKTR-214 and we did see tumor shrinkage in that patient. So we believe that we will be able to have an effect in this patient population that has failed prior IL therapies which is why, BMS and Nektar are collaborating and have built into our program three different patient populations in the refractory setting which includes melanoma, renal cell and non-small cell lung cancer and we all that these three patient populations could lead to an accelerated approval and the accelerated approval even in you know an open label single arm study that’s built into our strategy and the reason we believe we could have success in patients is because we’ve seen patients who fail, 60% of our patients in the monotherapy study fail the prior IL and we have seen that these patients have changes showing increase in TIL. We also have a patient who’s still on the trial, who has melanoma, metastatic disease to lung who failed [indiscernible] then went onto to fail B-RAF inhibitor and he’s been on NKTR-214 longer than any other anti-cancer therapy that this patient subbed [ph] previously prior to enrolling in the study.

Thanks and just one last question. Celgene recently required Delinia, and when you think about NKTR-358 could you walk us through the similarities between the programs and especially on the IP issues. Thank you so much.

Well I think good question. I’ll let JZ give you some sense of mechanistically where the differences are, I can tell you that we’re probably at least a year ahead of that program, we will be in the clinic this month and I think we’ve designed what we believe is the best approach towards causing the proliferation of regulatory T cells and I’ll let JZ give you a sense of how we’ve achieved that.

You know a lot of Debjit came from everything that we’ve learned from NKTR-214 we learned a lot about how the receptor ligand interaction between IL-2 and receptors regulator controlled, the kinetics is a binding and also we learned an awful lot about the different cellular sensitivities to IL-2 signal and particularly the Treg which is really tuned to signal to respond to the lowest amount of IL-2 which is you see the kind of efficacy see would [indiscernible] IL-2 and we’ve also had a chance of course in the 214 context we always compared against all of the other competing molecules and we’re always asked the question of bios [ph] verses cell activity in that context and so you know the answer to that story, we’ve talked about it for many months and now we’re seeing it in action in the clinic and really it’s very similar situation for NKTR-358 by using a polymer the way we do, we can really achieve a much better ability to interact with the receptors and we’ve even gotten as far as generating surrogates of the mutant versions of IL-2, the same ones that really mimic some of the biological properties of both the dillenia and the other molecules that are in this class as well and really wouldn’t tested head-to-head NKTR-358 has a much superior performance in the cellular assays that we test them in. So we’re really excited about where we are, we really excited with the fact that the IND just went in late last month and that we plan to open our first clinical trial later this month as well. So we very, very excited about position in this program.

I’m glad you raised the issue of Celgene buying Delinia and you can see how important molecule that stimulate regulatory T cell production as oppose to suppressing the entire immune system and clearly the value that a program like that has in treating numerous diseases. So it certainly sets a standard for a molecule like NKTR-358 which as JZ said we believe is actually a much better approach to doing this.

Thank you so much.

Thank you. Our next question comes from Difei Yang from Aegis Capital

[Indiscernible] on for Difei, sort of have few questions in relations to ADYNOVATE. Can you hear me all right?

Yes, we can hear you.

Okay, good. Yes the root of indication of adding indications that was taken in the US with the initial approval to ages 12 and up, then the ages 12 and under in surgical settings. Are there plans to follow that same indication approval route in Japan, where there is already ages 12 and up and then as well for Europe where it currently under review.

Hi, Scott. This is Jennifer Ruddock, how are you? So Shire has stated that they do have plans to globally develop Hemophilia and so that would be in all the same markets that ADVATE, so there are ideas to replicate the ADYNOVATE label with what they’ve done with ADVATE label, so the strategy would be the same.

Yes and I think clearly I mean certainly talking from like Baxalta point of view and now Shire’s point of view, they would like to see ADYNOVATE the successor to ADVATE and it certainly makes sense, it’s a better molecule and we put a lot of effort into making sure that ADYNOVATE is the exact same molecule as ADVATE but long acting, it is full end ADVATE and that was done intentionally so that they could eventually switch over patients and maintain the dominant position in this space.

Great and then kind of piggybacking on the European aspect of that for ADYNOVATE. How quickly do you really anticipate the launch to ramp up once you do receive marketing approval in Europe?

Well I can’t speak for them directly, I imagine they would do it fairly quickly. It’s difficult for me to speak for Shire, but I would imagine that they’re very interested in getting as many patients on ADYNOVATE as quickly as possible.

Yes, great and nice work on the immunology pipeline. Thanks.

Thank you and I’m showing no further questions from our phone line. I would now like to turn the conference over to Howard Robin for any closing remarks.

Well thank you everyone for joining us this afternoon. Of course I want to thank all our employees for their hard work and their dedication to the company this past year. As you can see from today’s call we have a number of milestones and catalyst coming up for Nektar over the next several quarters. The potential conditional approval for ONZEALD in Europe, the Phase 3 data for the bio programs, the Phase 3 data for NKTR-181 efficacy trial and of course data from the first 15 to 20 patients in the combination program of NKTR-214 with nivo and data from the first trial of NKTR-358 in lupus. So we very excited about this and we look forward to seeing many of you at the Cowen Conference next week. Thank you very much.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program, you may now disconnect. Everyone have a wonderful day.