Good day, ladies and gentlemen, and welcome to the Nektar Therapeutics Q2 2017 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 call may be recorded. I would now like to introduce your host for today's conference, Ms. Jennifer Ruddock, Senior Vice President, Investor Relations. You may begin.

Thank you, Crystal. Good afternoon, and thank you to everyone 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. Jonathan Zalevsky, our Senior Vice President of Biology; and Dr. Mary Tagliaferri, our Senior Vice President of Clinical Development. On the call today, we expect to make forward-looking statements regarding our business, including potential regulatory approval decisions and commercial launch timing, the timing of future clinical trials and clinical trial results, clinical development plans, 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, our financial guidance for 2017, 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 most recent Form 10-Q, which is available at 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's website at nektar.com. And with that, I will now turn the call over to Howard. Howard?

Thank you, Jennifer, and thank you to everyone for joining us today for our second quarter conference call. On today's call, we will discuss many upcoming milestones for Nektar's pipeline throughout the end of the year including comprehensive data presentations for NKTR-181 at PAINWEEK in early September and for NKTR-214 at $WIFI. We will also update our financial guidance for the remainder of 2017, which incorporates the recent Lilly collaboration for NKTR-358. Nektar is having a highly successful 2017 with a number of notable recent accomplishments. First, we announced positive data from our human abuse potential trial for NKTR-181 which builds on the overwhelmingly positive Phase 3 efficacy and safety data for NKTR-181 that we announced in the first quarter. NKTR-181 is an important potential medicine that is capturing a lot of attention because of its promise to both address opioid abuse epidemic and advance the treatment of pain. I’ll talk more about our excitement for NKTR-181 in our next steps in a moment. Second, we recently entered into a collaboration with Lilly for Nektar 358, our first-in-class Treg stimulator, which is in development for the treatment of immune and inflammatory disorders. And I will discuss more about the importance of this new partnership in a moment. Third, we are very excited about our emerging data from the PIVOT study for NKTR-214 in combination with nivolumab. And I’ll update you on our progress with that trial. I’ll start with our new collaboration for NKTR-358 with Lilly. Lilly is a strong leader in immunology and this collaboration enables the broad and parallel development of NKTR-358 in multiple autoimmune conditions, so we can ensure that it has full potential as a first-in-class resolution therapeutic. The collaboration allows Nektar to retain a very significant ownership interest in NKTR-358 with substantial royalties for a…

Thank you, Howard, and good afternoon. Today, I'd like to update you on the clinical development program for NKTR-214. As Howard stated, we are very pleased that the Phase I dose escalation portion of the PIVOT program has completed enrollment and we are particularly pleased that we have determined our optimal Phase 2 dose and schedule. A total of 35 patients were enrolled to the dose escalation part of the PIVOT trial. The population includes 20 patients with Stage-4 renal cell carcinoma, 10 patients with Stage-4 melanoma and five patients with locally advanced or metastatic non-small cell lung cancer. All patients enrolled were IO naïve. Our recommended Phase 2 dose is an every three week concurrent dosing schedule of NKTR-214, 0.006 mg per Kg plus Opdivo 360 milligrams. As of today, a total of 22 patients in the dose escalation received this regimen. As our recommended Phase 2 dose or lower, we’ve observed strong efficacy signals across each of these patient populations and at all of our investigator sites and we continue to show no Grade 3 or higher AEs. Moreover, no patient has discontinued treatment in the trial due to an adverse event. As we saw at ASCO, the immune mechanism synergy between NKTR-214 and Opdivo continues to reinforce the ongoing evaluation of the biomarker data. We look forward to presenting updated efficacy safety and biomarker data from the dose escalation part of the study at SITC in November. This program is advancing rapidly and we’ve already dosed our first patients in the expansion cohorts in the Phase 2 part of the PIVOT. We are in the process of activating an additional 40 clinical sites in the U.S. and Europe in order to expedite enrollment to the eight different expansion cohorts spanning five different solid tumor cancers. The expansion…

Thanks, Mary. I’d like to start with NKTR-214 and then I’ll cover the other parts of our portfolio including NKTR-262, NKTR-255 and NKTR-358. Now as Howard stated earlier, and to build on Mary’s remarks, NKTR-214 is a broad based mechanism that we intend to establish as a keystone therapeutic in IO. And to this end, we have ongoing pre-clinical work with several collaborators which is designed to evaluate the combination of NKTR-214 with additional mechanisms in IO beyond checkpoint inhibition. This includes research in mouse tumor models with neo antigen-based vaccines to explore a patient-specific, personalized cancer vaccine program and it also includes preclinical studies with a number of small molecules. In the second quarter, we announced a new preclinical research program with Takeda to evaluate NKTR-214 with five different Takeda clinical compounds targeted for the treatment of liquid and solid tumors. Preclinical work from this collaboration is ongoing. We are evaluating all five compounds and three different mouse tumor models testing all combinations of single-agents, double combinations and even in the triple combinations with anti-PD1. The emerging data are very encouraging. As we achieve positive preclinical results for these initiatives, our goal is to advance some of these programs rapidly into the clinic. Now as Howard also mentioned, we are moving forward with our own NKTR-214 combination regimen that includes a wholly-owned TLR7/8 agonist NKTR-262. Now the combination of NKTR-262 which activates the immune system and focuses activity against myeloid cell populations with NKTR-214, which activates the adaptive immune system with focused activity against lymphoid cell populations, constitutes a marriage of two highly desirable and complementary mechanism for immune-oncology. By targeting these non-overlapping immunological mechanisms, the combination is armed to provide a robust immune activation and anti-tumor activity. The preclinical data we’ve collected and recently presented at the CHI…

Thank you, Jonathan. On today’s call, I will provide a brief update on our partnered programs as well as updated financial guidance for 2017. Starting with MOVANTIK, U.S. sales are currently at a $175 million annual run rate with over 11,000 in weekly prescriptions. As a reminder, Nektar receives 20% royalties on sales of MOVANTIK, which are recognized one quarter in arrears. Royalties for MOVANTIK grew 13% in the second quarter of 2017 as compared to the first quarter of 2017. For ADYNOVATE, our partner Shire just noted on their last conference call that ADYNOVATE sales grew to $75 million in Q2 2017, which represents an annual runrate of $300 million. Sales of ADYNOVATE represented more than 10% of Shire’s hemophilia sales in Q2, which is a tripling of sales for Shire over Q2 of last year. In addition, ADYNOVI was recently approved and launched in Switzerland and Shire is awaiting a potential CHMP opinion and European Commission approval later this year in order to launch ADYNOVI in additional European markets. With respect to Amikacin Inhale, Bayer’s Phase III trials are complete and Bayer expects to have top-line results from this program in the fourth quarter of 2017. For ONZEALD, we have a collaboration in place in Europe with Daiichi Sankyo. As previously announced, we intend to appeal the recent CHMP opinion and seek a reexamination of that opinion, a diagnosis of brain metastasis in women with advanced breast cancer is devastating and there are no therapies approved to treat this specific patient population. During the appeal process, Nektar and Daiichi Sankyo Europe will continue to collaborate on ONZEALD. Now on to our updated financial guidance, we are raising our year-end cash position guidance and now expect to end 2017 with approximately $350 million. This includes the $150 million upfront…

[Operator Instructions] And our first question comes from Jessica Fye from JP Morgan. Your line is open.

Hey guys, this is Ryan on for Jess. Thanks for taking our questions. I just got a couple for you. Maybe we can start with 181. You talked about – you’ll have some data at the PAINWEEK Conference coming up here, maybe could you give us a sense of what additional details you may present there?

Yes, hi, Ryan. This is Ivan. We are going to present some pretty extensive results from our Phase 3 efficacy study, SUMMIT-07. We’ve also got additional analyses that we’ve undertaken on withdrawal data including output from COWS and SOWS and also abuse data from the MADDERS scale which is part of that too. So it’s really quite an extensive amount of data we are presenting.

Okay, and my second is on 214. You have a number of collaborations ongoing, I guess, how do you think about sort of prioritizing or the different paths there and then also given – it sounds like there is some exciting data with the Takeda collaboration. Would you present that at some point or would we – or announce kind of what you are seeing there?

Okay, good well, I’ll let Jonathan talk about what we are doing in Takeda, let me say this. There is incredible amount of interest in NKTR-214 and as you know, we’ve said for quite a while now, that we really see it as the centerpiece in immune oncology and if you look at the progress we are making in combination with OPDIVO checkpoint inhibition, it looks fairly remarkable and we’ll be talking about that at SITC. And in terms of using it with other approaches, I think, almost every one of these approaches in immune oncology recognizes the need to have tumors with a sufficient immune system to respond to these mechanisms. So we are really excited about it. This is not a drug that we are planning to license out NKTR-214 as Nektar’s program and I think we could work with a lot of companies, there is a lot of opportunities here, but NKTR-214 is something that we plan to keep as our own molecule. And I’ll let Jonathan talk for a moment about Takeda.

Yes. Hey, thanks Ryan. So, one of the interesting things in that collaboration is all five of the compounds that we are working on with Takeda. All of them are clinical compounds in Takeda’s portfolio. And there was some opportunities subsequent of that would be that if we see the kind of results that are very, very encouraging from preclinical models, it would lead to opportunities to move into combination clinical studies quite rapidly. Now, as far as data presentation and so forth, that’s something that we’ll have to work out with Takeda because it’s a collaboration that we have. But it’s something that it’d be likely to find in a medical or a cancer research meeting to come in the future.

Okay, great. Thanks so much guys.

Thank you. Our next question comes from Bert Hazlett from BTIG. Your line is open.

Thanks. I want to follow-up on an element or two. It seems like Mary’s characterization of strong efficacy signals in each of the settings is just something I’d like to have a little bit more clarity on as much as you can provide it.

Hi, Bert. We developed this program to be able to evaluate NKTR-214 and Opdivo in first-line setting with melanoma and first of second-line setting with RCC and first or second-line setting with non-small cell lung cancer and we have a fair number of patients we’ve now enrolled. Our cohort for RCC is 20 patients are cohort for melanoma is 10 patients and for non-small cell lung cancer it’s 5 and that’s just in the dose escalation. And as we’ve mentioned, we’ve advanced into the Phase 2 dose escalation. We do – we have promised our investigators that we would wait until SITC to share the exciting efficacy and safety data and so we are going to do that. And so, in November, we will provide the response data for this set of 35 patients and we will certainly update our safety data, but as we mentioned, we’ve seen no grade 3 related adverse events secondary to this regimen. So thank you for your patience. We look forward to seeing you at SITC.

Well, you certainly will. So the question with regard to sarcoma, I want to make sure that I am understanding – again a little bit more about the urgency with which you are considering the various indications around sarcoma. If you could put a little bit – if you could frame the opportunity and why you are moving into those settings with as much urgency as you are?

Yes, so, the optimal treatment strategy for sarcoma has definitely been yet to be defined and Dr. Sandra D'Angelo has really been in the forefront of evaluating immuno oncology for sarcoma and she approached both BMS and Nektar about launching this program because certainly as Howard mentioned, and JZ has repeatedly shared with people driving T-cells into the tumor micro environment in sarcoma will be critical to see responses with immune oncology. So Dr. D'Angelo actually has a wait list of 35 patients. She believes she will have the first patient on this study in September and in the second-line in relapse metastatic patients with sarcoma the response rates are less than 10% and so you can imagine if we can see a response rate of 20% or greater in this patient population, this will be very, very exciting to patients to physicians that we hope we could have a conversation with the FDA about the potential pathway for accelerating the approval should we see these types of responses.

Okay, thank you. And then, just one broader strategy question, I guess, to Howard. The $150 million from Eli Lilly is nice in upfront, does that mean that with all these immune-oncology assets that you have moving forward, it’s your intention to keep them in-house?

Yes, I think – look, I think, we’ve talked about the desire to partner – NKTR-358 simply because with Lilly we can move very rapidly into multiple autoimmune disease conditions. With regard to NKTR-181, I think we have a potential solution for the opioid abuse crisis in the United States and we want to move that quickly to the market if we can and that’s something that we want to find a partner for to help us with as well. When it comes to immune-oncology, I think we really are in the forefronts of that area. We’ve got a number of very important programs. If you look at NKTR-214 and NKTR-262 and NKTR-255, and some other things that are coming that we haven’t even discussed yet. I think that’s an area where we plan to keep that for ourselves and I think every company needs to have a core that it focuses on. We have an incredibly powerful immune-oncology portfolio here including the things like combination of NKTR-214 and 262 which gives us our own combination which might be just as potent if not more so than a combination of 214 and a checkpoint inhibitor. So, we are in that space, I think permanently now and we are making excellent progress and as time goes on, we’ll be filling you in a new ideas and new molecules that are coming out of research in that area. So you have to think of Nektar now as really focusing its internal capabilities on immune-oncology and we have great external programs as well. So, I think we are in very good shape there.

Terrific. Thanks for the additional color. Congratulations on the progress.

Thank you.

Thank you. And our next question comes from Michael Higgins from ROTH Capital Partners. Your line is open.

Thanks operator. Good afternoon guys. Couple questions for you if I could on 358. I think you just confirmed for the timing on the Phase 2 when you believe that maybe complete, also these initial patient types might that be lupus and psoriasis? And then one more here, is there a minimum number of indications that Lilly will be paying the 75%? Thanks.

Sure. Hey, Michael. Thanks for the question. So, if I get this right, your question was, on the timing of Phase 1b, as well as the indications or the patients that would be included in the Phase 1b and then the range of total indications that Lilly would be paying for collaborating with us. Is that correct? I just want to make sure.

Just started, sure, thanks, yes.

Okay, sure. So, yes, so the timing of Phase 1b as I mentioned is for the very end of this year or very early in 2018. And that’s happening because the single ascending dose trial is progressing very, very nicely and so we are moving into the MAD portion imminently around the end of this year or early next. We’ve talked previously about the inclusion of lupus patients in Phase 1 b and now certainly that we are in collaboration with Eli Lilly, we are taking an approach to look at all of the opportunities for including patients into Phase 1b. And so, that could be lupus patients and also you mentioned psoriasis, also there is another category of patients, are being highly considered. So we are still working closely with our partner there to design the study, but we are very certain that we will be including patients in the Phase 1b study. And in terms of the range of indications, as Howard mentioned, there will be at least four indications in Phase 2 that will be conducted by Eli Lilly. And so, around those four, also from the trials that look very desirable and promising then a Phase 3 program will emerge beyond that. So really it’s a taking a very comprehensive approach. When you think about the application of a mechanism such as TREG mobilization, you can see how you could apply that to a range of autoimmune diseases that are typified by T-cells that are self-reactive against patients on tissues. And you could really apply that very, very broadly. And so, these four indications starting with Phase 2 is a great opening way to really advance and broadly develop NKTR-358.

Okay, that’s very helpful, thanks. On ONZEALD I believe you have the interim look, if you could just remind us at the number, I think it’s 120 patients and also the potential timing for that you look for that?

Yes, hi, Michael, this is Mary Tagliaferri. We believe that we could have an interim look at the fourth quarter of 2019 with about 130 events for the study and so far enrollment and site onboarding is going very well.

Okay, thank you. And then, lastly, on 181, just a follow up question, just to confirm, if there is any potential for the encapsulation on the oxy tablets have had an impact on the release profile versus the oxy that’s available in pharmacies today?

So, the question was whether the over encapsulation had an impact on the pharmacokinetics? Is that what you are saying? We think the answer to that is, yes, actually there is a potential for it to have a slight, delaying effect on the PK release relative to giving in an oral solution.

I think though, you have to focus on the HAP study in a different way. I mean, if you look at the therapeutic doses of NKTR-181 400 milligrams and less and 200 milligrams, you see no liking whatsoever compared to oxycodone regard of over encapsulation. Now, we were asked because this is a new molecule, this is an NCE, we were asked to do super therapeutic doses and there you still saw something like 10 to 12 x, the therapeutic dose of NKTR-181 was not like to compared to a typical 40 milligram – 60 milligram dose of oxycodone. So I think, overall that trial was incredibly successful and if you look at the data, it looks very much like tramadol and we know tramadol has schedule three labeling – so actually it was schedule four labeling. So we are very happy with the results. You look at the therapeutic dose of NKTR-181 and it’s simply was not likeable. It wasn’t interesting at all in these HAL studies or these HAP studies and we are very hopeful that the FDA sees it that way and we plan to meet with them shortly and discuss an NDA filing.

Just a follow-up on that. Tramadol scheduled 3 up until few years ago and despite the ongoing crisis it was moved back to 4 and maybe as an alternative maybe that’s what the FDA was thinking, but, if you continue to expect to go for schedule 3 or do you think you can get 4?

So, a couple of thoughts here. One, I think, if you look at the efficacy results, we saw in our study, it’s clear that we have a potent opioid which behaves not just in our efficacy study, but if you look at pupillometry data, it behaves very much like of a potent opioids. The difference here is not in efficacy. The difference with our agent is the delay, the slow rate that it gets into the CNS and the reason that we believe this is very attractive, it’s because that slow rate, if an opioid entering the CNS sort of it’s not associated with the euphoria that you see when you see opioids rapidly entering the CNS space. So we are very hopeful that we can get schedule 3 potentially better. If you look at our HAP data from the recently completed study, which Howard referred to, if you look the rate of rise, we see very slow rate of rise when you measure liking and when you measure drug high and we think that is completely different to what you see with oxycodone and other sort of typical potent opioids.

And I think it’s important to use the tramadol super analgesic HAP study results as a good model here, because even it’s schedule 3, the results that they had with their super analgesic dose looks very, very similar to what we saw with super analgesic doses of NKTR-181. So we are very pleased with that and clearly as I said at the analgesic doses, that with NKTR-181 is not really likeable at all and even if the super analgesic doses, it looks like the Tramadol results which granted it Phase 3 – schedule 3 and ultimately schedule 4 labeling. So we are very pleased with that and that’s what we are shooting for.

Appreciate the feedback. Thanks guys.

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

Thanks, good afternoon. I just wanted to touch base a little bit more on NKTR-181. So, post the strong efficacy results, I think in Q2, you discussed signing a partnership hopefully by year end. And now that you have the second HAL dataset, didn’t derisk further and I think, I assume there are no other milestones before the FDA meeting. So, two questions somewhat linked. You’ve been continually positive that these and other clinical trials that you did go right to an NDA filing and I guess, what’s your most thoughts, conversations with your consultants ask for data. It’d be very unusual to do so on the other hand, it’s a very unusual situation with opioids right now and they are linked, as your partners assess the potential for the product and ask – the efficacy data and will they be – meet with the FDA had to say, or entering into final discussions or do you think you would actually been in partnership before that?

Yes, you broke up a little bit on your cellphone. So I think, I got most of your question. Look, we are planning to meet with the agency shortly. And we are planning to meet with the agency shortly and I can’t – look, I can’t predict how they are going to react to our single Phase 3 efficacy study. The efficacy study, look, the efficacy study was incredibly successful, it met every primary and secondary endpoints and we also know what NKTR-181 is. It’s a mu-opioid agonist. There is no debate on what it is as a molecule. And the polymer conjugate chemistry approach that we took is also well understood and well documented. So, this is not a molecule that is not well understood and appreciated by the FDA. The HAL study was also or the HAP study was also a tremendous success and clearly demonstrates that we have a molecule that is not likeable. Thirdly, we have a long-term safety study, which is also incredibly successful and we have over 2000 patients and healthy volunteers that have taken NKTR-181. That is an incredibly important database. So, look, I can’t predict where the FDA will go with this. We have Fast Track status. We have a major opioid crisis in this country. This is a key solution to that opioid problem. We are not necessarily going to help people that have already become addicted, but you have to break the cycle. At some point, you have to break the cycle. You have to provide an opioid for pain relief that doesn’t cause people to get addicted to it and it doesn’t allow for diversion and the kind of use that leads to other drug taking. So we have that solution in hand. It’s available to us. I can’t…

Okay, thank you.

Thank you. Our next question comes from Andy Shay from William Blair. Your line is open.

Hi, thanks for taking my question and congrats on a very, very productive quarter. I just have a quick one. I believe last week Bristol-Myers submitted a fixed dose OPDIVO dosing scheme every four weeks 480 milligrams. Just wondering if it’s necessary to go back and do some dose escalation in combination with 214? And then move forward to the expansion cohorts, kind of go on and just get your thoughts on that.

Hi, Andy, thank you for your question. We looked at five different dosing regimens in our dose escalation part of the PIVOT trial and we do very extensive biomarker analysis much more so than most early phase clinical trials. And when we look at the aggregate of our safety data, our response data and the biomarker data, it really drove us to the optimal Phase 2 dose which for us is a every three week dosing regimen. And we spoke in extensively to our clinical investigators about your question and everybody feels that is reasonable to have patients come back to the clinic every three weeks and the optimal effect that we are getting both in terms of response, time to response, step to response were all considered. We are also looking to combine NKTR-214 with other triplets and those triplet regimens we are considering the Q4 week dosing cycle. And so, we will have an opportunity to see the effect of Nivo plus 214 plus third agents in triplets. We can always go back and evaluate new dosing regimens as we go forward, we feel confident, we did hit and nailed the right recommended phase 2 dose and we will be able to share those data with you at SITC. We also think that the three week dosing regimen is highly competitive with KEYTRUDA and Opdivo and newer triplet combinations that are coming out. I’d also say, as far as the cytokine goes, there is no other company that has a cytokine that they are dosing every three weeks and seize the influx and the robust immune activation that we are seeing with NKTR-214, which we believe is a huge competitive advantage for our own molecule.

Yes, that does make sense. Thanks for your answer.

Thank you. And I am showing no further questions from our phone lines. I would now like to turn the conference back over to Howard Robin for any closing remarks.

Well, thank you all for joining us this afternoon. As always, I would like to thank our employees for their hard work and dedication to the company and we look forward to seeing many of you at the Morgan Stanley, Canaccord and conferences over the next several months. So, thank you everyone. Bye-bye.

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