Ladies and gentlemen, thank you for standing by, and welcome to the Nektar Therapeutics Fourth Quarter 2019 Financial Results Conference. [Operator Instructions] I would now like to hand the conference over to your speaker today, Ms. Jennifer Ruddock, Head of Corporate Affairs. Ma'am, you may begin.

Thank you, Crystal. Good afternoon, everyone, and thank you for joining us today. With us are Howard Robin, our President and CEO; Gil Labrucherie, our COO and CFO; Dr. Jonathan Zalevsky, our Head of R&D and Dr. Wei Lin, our Head of Development. On today's call, we expect to make forward-looking statements regarding our business, including clinical trial results, timing and plans for future clinical trials, timing and plans for future clinical data presentations at medical meetings, the therapeutic potential of our drug candidates, outcomes and plans for health authority regulatory actions and decisions, financial guidance and certain other statements regarding the future of our business. Because these 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 that we filed on November 7, 2019, which is available at sec.gov. We undertake no obligation to update any of these 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 will now hand the call over to our President and CEO, Howard Robin. Howard?

Thank you, Jennifer, and thank you to everyone for joining us on the call today. On today's call, we will provide an update on our pipeline compounds, which include our IO pipeline of Nektar IL-2, IL-15 and TLR agonist candidates and our immunology program NKTR-358. We will also review our planned upcoming milestones for these programs and provide our financial guidance for 2020. But before I discuss the advancements we made with our IO and immunology portfolio, I'd like to briefly cover some challenges we faced this year that are outside of the core focus of our pipeline. Starting with NKTR-181. As you know, we made a strategic decision last month to withdraw the NDA for NKTR-181. The NKTR-181 ADCOM was the first of several that week that were negative for the opioid class, and it became clear from these discussions that the bar for approval of any opioid compound is much higher than what was established by approvals in the past. Additionally, since that time that we submitted our NDA, the liability in the opioid class has become a significant consideration with numerous lawsuits filed against opioid manufacturers and distributors. And based upon all of these factors, we made a business decision that further investment could not be justified for medicine in this class, which would have been at the expense of sacrificing important developmental work for our immuno-oncology pipeline. As we look back at our successful development efforts for this program. I want to thank our team for their hard work, thank the patients and physicians who participated in our clinical trials, some of whom came to speak at the ADCOM. We did not take this decision lightly, but believe it is the appropriate action to take as we focus on the advancement of our IO and immunology…

Thank you, Howard. I'd like to discuss briefly the comprehensive plan we've developed with our partner, BMS for the doublet plus nivolumab in the melanoma setting. An area where the IL-2 pathway has already been validated. As Howard stated, we have generated breakthrough designation worthy data in first-line metastatic melanoma from our pivotal II study of NPAC plus NIVO. At a median follow-up of approximately 18 month, 34% of patients had a complete response as determined by blinded independent central review. 42% had a 100% reduction in hard lesions and 47%, almost half, had a greater than 75% reduction in target lesions. The significance of deep responses in metastatic melanoma and its association with survival have recently been demonstrated by the FDA in a metanalysis they presented at ASCO 2019. Based on this analysis, patients who achieved a 75% or greater tumor shrinkage in their RECIST targ lesions, including patients that achieved a complete response, had a very high likelihood of having the greatest improvement in progression-free survival and overall survival, especially if they were treated with immunotherapy. So definitely response is very highly correlated with survival in melanoma with IO agents. With that context, our data from the pivotal II study is showing that nearly 1/2 of the melanoma patients had a 75% or greater response reinforces our confidence in the doublet in melanoma. And indeed, as we presented in November at SITC 2019, with approximately 18 months of follow-up, median PFS had not been reached. We plan to share updated data from this cohort at a future meeting in the second half of this year. Our confidence in the potential clinical benefit that BEMPEG plus NIVO may offer in melanoma has led us in BMS to initiate a study in the adjuvant setting. This study, we evaluate the…

Thanks, Wei. I'd like to spend a little more time discussing the IL-15 program, NKTR 255, as it is the next large cytokine program in our pipeline that is generating significant interest. NKTR-255 was designed to capture the full biology of the IL-15 pathway. Specifically meaning that NKTR-255 is designed to capture all the receptor ligand interactions available through targeting the IL-15 agonist pathway. As a consequence, NKTR-255 functions as a significant expander of natural killer cells and an agent that promotes the survival and expansion of memory CD8 T cells. The clinical and research community is increasingly recognizing the importance of NK cells and memory cells in the IO cascade. Now as I just stated, a key differentiating factor for NKTR-255 is that we have engineered it to bind to all forms of the IL-15 receptor versus other mutant proteins in development that only bind to beta gamma receptors. We believe that this will translate to enhanced efficacy. For example, we know that in order to support NK cell-mediated cellular killing, you need to induce intracellular granzyme B and data presented at SITC 2019 showed that we get maximum granzyme B production versus other muteins and even more than native IL-15. Additional preclinical data we generated to date highlights the various combination opportunities for this candidate. First, we see an opportunity to combine with antibodies such as daratumumab and rituximab that worked through an antibody-dependent cellular cytotoxicity or ADCC mechanism of action. In the ADCC reaction, antibodies buying to the target cell surface via the antigen recognition portion of the antibody. This coating of a cell with antigen recognizing antibodies is an immune process called opsonization. These opsonized cells are then recognized by NK cells via the Fc gamma receptors on the NK cells binding to the Fc region…

Thank you, JZ, and good afternoon, everyone. This afternoon, we announced our full year financial results for 2019 in our earnings press release. On this call, I will provide our annual financial guidance for 2020. Starting with our cash position, we exited 2019 with $1.6 billion of cash and investments. With our exceptionally strong cash position, we have decided to repay the $250 million of outstanding senior secured notes on our balance sheet. This will strengthen our balance sheet and improve our annual cash flow as it will result in approximately $20 million of annual interest savings on a go-forward basis. With respect to cash usage for R&D and operations, we expect to use approximately $350 million in net cash in 2020. This compares to net cash usage of $315 million in 2019. This increase in investment in 2020 is primarily a result of our plans to complete enrollment in the first-line Registrational Studies in melanoma, bladder, renal cell carcinoma as well as begin the two new Phase III studies we are initiating this year for the expanded BEMPEG development program under our BMS collaboration. After taking account of our plan to repay the $250 million of debt in Q2, we expect to end 2020 with approximately $1 billion in cash and investments. Now turning to revenue. Our GAAP revenue is expected to be between $140 million and $145 million this year. GAAP revenue includes $50 million of new and accelerated milestone payments from BMS under our expanded agreement. The first $25 million of these milestones will be recognized in Q1 for the start of the MIBC study, which occurred in January of this year. And the second $25 million milestone will be in connection with the start of the adjuvant melanoma study, which is currently planned for Q3. Excluding…

[Operator Instructions] And our first question comes from Chris Shibutani from Cowen. Your line is open.

Thank you. Good afternoon. With the BEMPEG programs in lungs, can you give us a sense for how enrollment is progressing, both with the program with OPDIVO as well as with pembro I think historically, there have been some bumps in the road. Can you talk about what initiatives you have put in place that may be helping to engender confidence in your time lines?

Hi, this is Wei Lin. I'll take that question. So regarding the our BEMPEG combination in lung, as been stated in the call, our strategy is really two pronged. In combination with pembrolizumab as well as combination with nivolumab. First of all, the combination pembrolizumab that's being operationalized by Nektar. And we expect so that study has started enrollment. And we expect at the end of the year to have 10 to 20 patient worth of data that has a sufficient follow-up at least two scans to allow us for a assessment of activity. The combination with nivolumab, that's being operationalized fully by BMS. And that study has not opened yet, and we'll provide more details as the year goes along.

Great. And then with 255, which seems to be an asset that JZ highlighted here, can you give us a sense, maybe frame what kind of efficacy results we may see in the monotherapy setting for those two indications that we are likely to see data of the myeloma, etc.

Sure. Chris, this is JZ. So we'll be exploring patients that have pretty late-stage disease, because remember, this is a first-in-human study. So we're dose escalating in a typical way with small numbers of patients at any given dose level. And we're treating patients with very advanced late-line disease, kind of like in a salvage regimen. So we'll be monitoring all of the possible outcomes that you can get in the study of this kind in a first-in-human setting in addition to any responses that we may see in these liquid tumor settings. Chris will also be deeply diving into the mechanism of action of IL-15 pathway agonism. So we'll be looking for cellular changes systemically. We'll also be looking in the tissue, for example, like in the bone marrow compartment, where we expect there to be additional cellular changes induced by this mechanism of action. So we'll be looking to present the totality of the results as we can this year.

And remind me in what form or setting that data may come? At a medical meeting? Or will you be top lining at the ASH?

Yes, it would most likely be at a medical meeting. Yes, that's correct. So that's a good example. There are a couple of others that you could think of where liquid tumors are the focus.

Sounds good. We look forward to that date on to five five program. Thank you.

Thank you. Our next question comes from Alexander Duncan from Piper Sandler. Your line is open.

Hey, thanks for the questions for the 255 program, have you had discussions to evaluate 255 in bladder cancer as a doublet or triple, given some positive IL-15 superagonist data there recently and you're doubling down in bladder BEMPEG. And then maybe more broadly as a platform, what gives you the most confidence that Nektar's compounds will be the ideal cytokine mimetics to combine with moving forward as we see more and more competitors and investment in space?

Yes. So there are two questions there. Let's start with the first one. So in the setting of NKTR-255, we, like you stated, we appreciate that this is a very broad mechanism. And it shares a lot of features that are nonoverlapping with IL-2, kind of, pathway engagement. And you can apply that IL-15 pathway agonist broadly, not only in liquid tumors, which is the first-in-human study, but also into the solid tumor settings. And there are a number of tumors that are characterized with NK cell infiltrates, and bladder cancer is one of those. There are others that share some features of the GU tumor kinds of settings as well. So there are definitely very, very broad application opportunities. And it doesn't even just stop with 255 because it also goes with the combination partners that are selected. For example, when you consider targeted therapy as the combination partner, you know that you have an incredibly wide range of targeted therapies across many, many tumor types, including large indications ranging from things like breast cancer with agents like Herceptin to all of the rituximab B-cell, NHL kinds of opportunities. So yes, we'll be looking for a very broad set of development opportunities for 255. And on the second question about the cytokines that Nektar works on. I mean, I think that we've sort of had the chance to really revitalize and inject a whole new momentum. Into the cytokine field with the results that we were able to deliver with BEMPEG. And obviously, we've been building off of that in the sense that we've been advancing the BEMPEG program very aggressively and very, very quickly into multiple Registrational settings. We've kind of set a bar and a hurdle for other companies that are following behind us. We obviously have a deep belief in our approach to targeting cytokines. And our molecules have differentiating properties that we've built into them with our polymer chemistry conjugation platform. And those other companies that are behind us, they have to chase us in that regard.

Thank you.

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

Hey, guys. Good evening. Thanks for taking my question. Can you talk about whether you might pursue the potential to shift the interim in the first-line Phase III melanoma trial to one based on complete response rate. Would the decision to change it be based on feedback from the FDA that success on CR could serve as the basis for accelerated approval? And if so, have they given you any feedback on that front?

Hi, this is Wei Lin. Yes, we certainly to a large extent, the breakthrough designation, we obtained in first-line melanoma was to a large extent, based on the pathologies based on the complete response that was seen in our pivotal two cohort. And I think it was very encouraging in using that endpoint in assessing the quality and totality of our data. Now we do have ongoing discussions with agencies, multiple agencies worldwide. Regarding that endpoint as the first endpoint to take a look at. And that's something that we'll provide further update as we complete those regulatory discussions. So right now, the formal first primary readout is still based on ORR.

Great, thank you.

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

Thank you. Thank you for taking the questions. I have two of them. First is, it seems that you in the Phase III, in first-line melanoma, you would want to match the patient characteristics of pivotal 2. Can you give us any anecdotes that you've been able to do that in Phase III, the pivotal study, versus the PIVOT-02 results that you've shown? And then secondly, JZ, you mentioned $262 million in the safety, could you want to share any characteristics of the safety of that program you saw in Phase I.

Hey, Bert. This is JZ. So one of the things that we did in the PIVOT-02 cohort is made sure that we enrolled patients that had the same array of baseline demographics and risk factors. That would match the Phase III patient population. So for example, about 1/3 of our patients presented with liver metastases that entered into the PIVOT-02 cohort. Also about 1/3 of our patients presented with elevated LDH, lactate dehydrogenase levels, above the upper limit of normal, as well as being stratified into the M1c and M1b, which are the more sort of severe or worse prognostic factors for patients with melanoma. And the reason why we did that was we ensured that, that was a patient population that would match our Phase III. And in fact, if you look at the results the BMS published for CheckMate 067, and the proportion of patients that had liver mets or elevated LDH or M1c status is actually very, very similar to what we have in our PIVOT-02 cohort. So that's a very important point. Very happy you asked that question. And for us, it was very important because when we looked at the overall PIVOT-02 cohort data for melanoma, not only was it important that we presented it by a blinded independent central review right to increase the strength of a single-arm cohort, but also that the patients within that cohort had many poor prognostic factors. And we presented in that last update at SITC, that even patients with liver mets had complete responses, right? So even in the most severe case, the most severe setting, there was still a very, very deep response observed and its patient population that matches the Phase III population. So that's an important point. And then to your second question, you were asking about the safety with 262. So definitely one of the things that we did in developing 262 was create an intratumoral administration route of administration strategy, and we use our polymer conjugation to enrich the residence time of the agent in the injected tumor. And all that is done to minimize systemic exposure. And the good thing is that because this is a TLR7/8, it's based on a pathway that we really have a lot of experience in clinically. We're able to compare the results that we're seeing in our study relative to the results that you'd expect for systemic infusion of a TLR7/8 agonists. And as we presented preclinically, and as we saw in our toxicology studies and others, intratumoral injection is a very, very different and a much better tolerated way to administer a TLR agonist. Certainly much, much better than giving it systemically, where you have massive kind of systemic cytokine effects. In the intratumoral setting, it's all very localized, and you really don't see that.

Terrific, thanks for the color look forward to the data.

Sure. Thanks, Bert.

Thank you. Our next question comes from Paul Choi from Goldman Sachs. Your line is open.

Hi, good afternoon, everyone. And thanks for taking your questions. I have 2. The first is on the Phase III metastatic melanoma program with regard to time lines. I think the trial is still indicated on ct.gov to be enrolling patients. But as you're thinking about an interim readout in the fourth quarter, given the fact that we saw with PIVOT-02 that the time to response for complete response was about eight months. Can you maybe just comment on how we should sort of frame what kind of CR rates, we should see. Just given, what might be, sort of, a hurdle treatment duration or exposure to the drug, during the time period that'll be in effect.

Thanks for the question, Paul. So as been stated earlier, I think the endpoint has not been changed in CR yet. And CR, as you pointed out, the median time to CR is about seven months. And because of that, if we were to do a CR analysis, we would like to follow the patient for probably a 10-month duration. And so there's going to be ongoing discussion with the health authorities regarding the sample size number that will be required for registration based on the CR endpoint. And based on that, followed with a sufficient duration that's going to determine the readout of the CR, if that were the endpoint. So some of that is still yet to be decided. I think we by our current estimate, it's probably going to be roughly around the same time as the whole current projected ORR. But obviously, this is all based on current projection and in absence of the full health authority interaction. So those things will be made clear in the coming months.

Okay. Thanks for that, Wei. And then just on 358, as you and your partner, Lilly, explore the advancing the program in the various dermatological indications, these are sort of fairly competitive areas. And I guess, just as you think about efficacy bars, whether it's an AD or other indications are you with the next set of data updates, are you looking to for any particular metrics or any points of particular differentiation? Any color there you could provide would be helpful.

Sure. Hey, Paul. Yes. So this is a very similar question, you asked a couple of days ago. So in the exciting of the dermatological uses. Definitely, the benchmarks are out there, right? And we know, like agents like IL-23 and others, they're setting some very unique bars in those settings. So we are aware of those. Lilly is aware of those. And so those are important benchmarks for judging all of the nature of advancement in dermatological indications. So that's always there. The second thing that is tough, really important is that this is a novel mechanism that's being applied into this dermatological setting. And so in fact, we know that there's even expectations of Tregs moving within to the skin where you have areas of dysfunctional dermal cell growth. For example, we'd expect the vulgar in psoriatic patients to be infiltrated by Tregs or an AD plaque to be also infiltrated by Treg. So we'll be looking also for that kind of mechanism of action because that adds to that whole assessment. And then the other is, remember that in these kinds of diseases, you see themes of kind of similar autoimmune dysfunction. The tissue is different because tissues represent different kinds of inflammation. But in terms of the immunology, we see similarities. And in that regard, indication like atopic dermatitis is very important because there are many indications that have a atopi as an underlying disease pathology driver. Not even beyond atopic dermatitis. That's just a atopi in the skin, so we can also see a topic in allergy and many other kinds of settings, right? Beyond the dermal compartments. So those are very important studies that give us both a sense of opportunity within those specific derm indications and also how to even more widely consider broadening the Treg mechanism into the additional autoimmune themes covered by those two indications.

Thanks for the call.

Thank you. Our next question comes from George Farmer from BMO Capital Markets. Your line is open.

Hi, thanks for taking my questions. I'd like to ask more about using complete response as an endpoint in the Phase III melanoma study. Firstly, is Bristol-Myers on board with this approach? Number one. And number two, how do you think about using CR is an important? What is what is the delta that needs to be achieved, do you think, in order to determine whether the trial should be submitted for an accelerated approval?

Yes. So first of all, we certainly BMS is a partner with us on this. We have had extensive discussion. And based on the enthusiasm FDA has shown with the CR endpoint, BMS is also very much in agreement that this is a valid endpoint that we should really pursue. And so now in terms of the bar. So the bar is nivolumab, which is a conform in our ongoing studies, about 8% to 9% with sufficient follow-up that we expect to be at the time to read out. So that would be the benchmark. And we'll probably target something around 15% improvement, be able to adequate to statistically exclude the possibility of this being a type one error. So that's so right now, I'll just remind you, based on our pivot to data, our CR rate with about 18 months of follow-up is about 34%. And in fact, even back with the 12-month follow-up, it was at 34 per percent, right? So I think that's what we're trying to project based on that number. So at least as if we're able to replicate what we're seeing in PIVOT-02, we have a good degree of confidence that we can clear the bar of improving upon this past year, being seen in nivolumab.

Okay. Yes, that's very helpful. And then do you think when you ultimately do present more PIVOT-02 data, do you think we'll be able to see some overall survival results from that study?

Yes. So PIVOT-02, the melanoma cohort, we're continuing to follow, there are still a number of patients that are on treatment, and there's at least two patients who have potential of converting from PR to CR. And in second half of the year, we would like to provide update on potentially two changes. One is deepening response in any potential patient kind of changing from PR to CR as well as a new estimate on what the possibility PFS would be. As a reminder, with 18 months of follow-up, we have not identified the medium progression-free survival yet. And with longer follow-up, we can estimate even a longer PFS potential. And as a reminder, nivolumab really has about seven months of PFS, six to seven months of PFS. So that is the benchmark in our current study.

Great. And then finally, on NKTR-358, the fact that Lilly is moving forward into a Phase II in lupus, does that imply that the Phase Ib data is looking good. I mean, what drove that decision to move forward?

Hey, George, this is JZ. So with Lilly, you remember, as we entered into an agreement, they'll be running four at least four actual Phase II studies across multiple autoimmune indications. We certainly ran the Phase Ib and if they've completed that study, that was a multiple ascending dose study in patients with mild to moderate lupus. And then this Phase II study, obviously, is now diving deeper into the lupus population. Obviously, they'll be treating them for much, much longer duration than the multiple ascending dose study does. And also moving into more moderate to severe disease for therapeutic benefit. Now why lupus, right? It's a great question that you asked. And actually, lupus has a very deep biomarker that's driven by regulatory T cells and then the application of NKTR-358. Lupus patients have a well-known and well-characterized dysfunction in their regulatory T cell compartment. And we see this manifested in two ways in patients with disease, especially progressive disease, we see both a lowering and the number of Tregs in circulation relative to healthy patients, patients that don't have lupus. And you also see a decreased suppressive capacity. So when you actually isolate Tregs from lupus patients and you test them in a functional assey, they're very, very poor at immunoregulatory function relative to Tregs isolated from healthy donors. So both of those represent two key sort of therapeutic themes, right? For applying NKTR-358 in this mechanism of action into this disease. So we're looking forward also to presenting some data from the Phase Ib study in lupus patients later this year. We already submitted an abstract to EULAR to present that data. We look forward to giving an update on that from the Phase Ib, and we look even more forward to Lilly starting their Phase II study later this year.

Great, thanks, JZ.

Thank you. Our next question comes from Jay Olson from Oppenheimer. Your line is open.

Thanks for taking the questions. Can you talk about the data that you have supporting your decision to move the doublet it into muscle-invasive bladder cancer? And do you expect to see efficacy in all-comers? Or will it depend on PD-L1 expression level or tumor mutational burden or some other factor?

Yes. This is Wei. Yes, thanks for that question. So the data to support us going to muscle-invasive data, bladder cancer, is the same data set that supports us going into the metastatic disease. And there in fact, in the data we have shared publicly, we've actually seen benefit in the PD-L1 negative as well as the positive. And so it is all-comers, in the sense this could be a, regard to the PD-L1 status, but it is limited to the cis-ineligible population, just like our metastatic study.

Okay, great. And then in RCC, can you describe the rationale for pursuing a TKI sparing regimen. Is that based on a potentially superior AE profile? Or are you looking for superior efficacy?

Yes, it is certainly based on superior AE profile. As you know, that the level of grade three AE, whether you look at avelumab plus axitinib or pembrol plus axitinib, it's actually very, very high, it's actually over half the patients experience grade three or higher AE during the cellular treatment. And there's discontinuation due to that. And so to really provide maximum benefit we expect, if we can keep the patient on drug, that's a way to really provide the maximum benefit. And in addition, by using both the TKI as well as the checkpoint in one regimen as a first line, you basically exhaust most of the available therapy. And if we can combine a TKI spearing regimen as first-line, the physician and patients still having reserved a TKI option, a second line with subsequent therapy. I think all those are benefits to the patients. So those are multiple considerations at our initial study that has really has been designed PST caspin. Obviously, there are some patients who are not eligible for TKI due to variety of reasons. And so we thought it was very important to provide that option to patients for all these reasons.

Thanks for super helpful. Thank you very much for taking the questions.

Thank you. Our next question comes from Arlinda Lee from Canaccord. Your line is open.

Hi, guys. Thanks for taking my questions. I was interested in IL-15. There seems to be a number of other competitors in this space, roughly entering the clinic right around now. I was curious what do you think are some key differentiators and early reads that we should look at to maybe help assess or look at the competitive landscape?

Sure. Hey, Arlinda, this is JZ. So certainly, like one of the things about IL-15, is it it like other IL-2 family cytokines like IL-2, 15 and 7, all the ones that are in the same class, they have multiple receptor ligand interactions as part of their biology. So there's usually a dedicated alpha receptor, right? And then there is a common or shared set of beta gamma receptors. And of course, gamma, as you know, is common gamma chain, that's shared with like over 50 different cytokines and signal through that. And so the receptor ligand interactions, the cells that express the different receptor complexes and all the nodes are binding, we believe are very important. And in particular, for IL-15, there's at least three modes of binding. So there's IL-15 alpha dependent and independent binding. And if it's independent, then it works kind of like a soluble ligand, interacting with the IL-2 receptors beta and gamma functioning kind of sometimes called as a superagonist. And then there's two different modes of IL-15 alpha dependent binding. One is when it's on the same cell, we call that in sis or on a different cell, we call that in trans. And in the trans binding, it's particularly important because that's driven by cell-cell contact. And a lot of IL-15 signaling is driven at the cell-cell contact level when one cell presents on alpha bound IL-15 molecule onto a neighboring cell that has the beta gamma receptor complexes. Now our molecule NKTR-255 is very different from all of the competing pipelines because in all of those settings, they have IL-15 in complex with the IL-15 receptor alpha. So really like the Altor molecule or the SUNCOR and others or the Novartis and Sushi Domains molecule, they all really share just one primary mode of binding and that they only interact with the IL-2 receptor beta gamma. They're unable to interact in either the sis or trans alpha-dependent binding modes. So whereas NKTR-255 preserves all of the available receptor ligand complexes and we designed it that way on purpose. So firstly, that's a scientific differentiation at the receptor level. And then we've shown examples of what that means biologically. So we can induce a higher grandzyme induction, we can induce interleukin 18 expression in CD14 monocytes, and we've presented that data publicly. And those are two activities that the receptor complexed versions of IL-15 targeting were unable to sustain. The other thing that I think is really important to look at is if you see evidence of kind of tachyphylaxis with repeated dosing, Is there a loss in any biological effect? And that's going to be another one really important place to look at because I think that's going to be a place where a molecule like NKTR-255 will really distinguish itself as it should have far, far less or no evidence of tachyphylaxis relative to some of the other pipelines.

Is the tachyphylaxis something that might show up in Phase I?

Yes, yes. So there's been publications from other molecules. For example, as a publication from the outdoor molecule that shows in the clinic that upon repeated dosing, there's a loss of biological effect, specifically at the level of cellular expansions, they have measured in the blood of patients treated with that molecule.

Thank you.

Thank you. And our next question comes from Andy Hseih from William Blair. Your line is open.

Great, thanks for taking my question. In RCC, it's kind of interesting because it's in a front-line setting, I think CR drives adoption. And if I remember correctly, the CR rate within the RCC cohort was about 4%. So just curious if well, I guess, last year, I think the company had planned on presenting data at ESMO. Just curious about the next steps of data release for that cohort.

So we have shared data in the last earnings call, toward the second half of it last year. So there's been no new update regarding the RCC data. So we don't have any plans to have another presentation and a major medical congress on the RCC data, but we do eventually plan to present that in a manuscript form.

Got it. Okay. And just kind of follow-up on Bert's question on 262. So how so is the strategic positioning here that you'll have a potential combination 262 and BEMPEG as a salvage as a checkpoint less salvage regimen in various solid tumors. Is that a correct assertion?

Hey, this is JZ. So remember, when we presented this program for the first time, we described the rationale for 262. So in providing an innate signal to BEMPEG, which is an adaptive signal, right? You have a comprehensive kind of an immune response. And we developed it in addition so that it's really a wholly owned doublet that Nektar has. And really, it was developed specifically and expressly to be used with BEMPEG. So then in terms of all of the uses of it, it's really it could be quite broad. We're choosing to begin the clinical development in evaluating the activity in patients with very late-stage disease. So as you know, REVEAL is kind of like a basket study with very advanced patients with solid tumors rolling multiple different tumor types. But as we mentioned, we're going to focus on certain tumor types, such as melanoma in the relapsed/refractory setting as we move forward. And you know that we'll be evaluating the doublet as well as a triplet by adding a checkpoint inhibitor as well to the combination of of NKTR-262 plus BEMPEG. Now there's really a lot of opportunity to use this kind of a combination. We'll be beginning, but like I said, we're beginning the development in the relapsed/refractory setting. One of the things that we saw, preclinically, with the program, remember, it was a really deep set of abscopal, immunological responses. And we presented data showing, for example, animals that have multiple tumors. But you only needed to inject one tumor and only one time in order to get the full benefit of the immune reaction moving throughout the animals' body and really eradicating any tumor, no matter where it was, no matter how distal it was from the original injected tumor. And this is a response that we call in cancer immunotherapy and abscopal, kind of, an immune response. And so again, that was really one of the predicated visions of the program. And so as we move into that setting, and as we demonstrate that the molecule can work in that way, that could give a lot of very broad use and broad opportunity for that regimen.

Okay. And in terms of dosing in non-small cell lung cancer. So the increase in dosing relative to other pivotal studies, is that a non-small cell lung cancer specific phenomenon? Or how do you think about just kind of cross indication differences in dosing?

Yes. I think there are there a couple of thoughts to underlying our plan to both optimize our dose as well as expanding to non-small cell lung cancer. And certainly, we we stand by our 6-microgram per kilogram dose, which is in all the Registrational Studies in melanoma, bladder cancer and RCC. And that's all supported by the PIVOT-02 data that enabled and engaged the retraction trial with our partner, BMS. And certainly, in melanoma, the data is sufficient for a breakthrough designation. So the local activity is clearly there. I think as we take a look at the treatment landscape for non-small cell cancer and also the biology disease and the fact that monotherapy requires a biomarker, all this highlight that the challenge of non-small cell lung cancer and makes us think whether a different dose could provide a greater benefit there. That's one. And the other is, since we treated around 500 patients with the combination of nivolumab plus BEMPEG, we've learned a lot about the safety profile of giving BEMPEG together with nivolumab. And from all those lessons, we're able to control the AE quite, quite well, much better than when we started the program. And we believe with the current management guideline, we can actually dose BEMPEG at a higher dose, and that's another hypothesis we certainly like to try. And that's another reason why we're undertaking the dose optimization. So if we're able to achieve a higher dose than potentially in the long Registrational Study would be using that dose to move forward.

Okay. And last question for Gil. Just kind of remind us in terms of the R&D reimbursement from Bristol. I think there is a cap, there's an annual cap and the excess amount would basically get reimbursed in the first quarter. So how do you from a modeling standpoint, how do you kind of anticipate that as we head into the first quarter?

Yes. So the you're right, Andy, there is there remains $125 million a year cap on R&D expense sharing under the agreement. And that's under GAAP revenue, and we expect this year that we will exceed the cap toward the end of the year. And the way the agreement works is that that we would reimburse for it we'd be reimbursed for exceeding the cap in the following quarter. So that cash would come in, in 2021.

Okay, great. Thanks for answering all my questions.

[Operator Instructions] And we're going to take our last question from Daina Graybosch from SVB Leerink. Your line is open.

Thank you so much for the question. The first is a clarification on the early stage melanoma trial. Is this going to be an adjuvant trial or a neoadjuvant trial?

The restoration study is an adjuvant trial. It's conformed with the currently approved label for nivolumab, which will serve as a control arm for the study.

And a follow-up on that. Because in melanoma, we've seen really dramatic benefit in the neoadjuvant setting with IO, especially the combination, but also single agent, do you worry about missing out on that benefit? Or are the patients beginning NIVO alone in the neoadjuvant setting here?

That's certainly a possibility. I think current standard practice, that's actually not the standard of care, there's no approval in the neoadjuvant setting because most of this data are generated in very small cohort patients really in the teens. And so I think for an approval in the neoadjuvant setting, there has to be a full randomized trial that's been what's been done for adjuvant study. And certainly, right now, there's no undertaking attempt for by any of the sponsors to undertake such a large study, given that standard care is already established in the adjuvant setting. So now, some academic centers can practice and some physicians may treat themselves may treat their patients using a neoadjuvant approach for selected patients, but I think the predominant clinical practice is not going to be neoadjuvant. And hence, we don't expect in the foreseeable future, certainly within time frame of our study reading out, that re neoadjuvant's going to overtake adjuvant for standard of care.

Thank you for that. Second question back on the CR as the potential endpoint in the frontline metastatic melanoma study. It's interesting because usually, response rate is very quick. You get a snapshot of a certain amount of follow-up. But I think we all know that in melanoma, if you look at the three or four year CR rate, it continues to deepen with nivolumab or pembrolizumab alone. And I wonder how you're thinking about that whether you'd have to have the data mature over time, getting an interim, but also looking at the comparison of CRA over a number of years.

Yes. So certainly, our confidence in this potential use of CR as a basis for approval is based on our PIVOT-02 data as been pointed out previously, our time meeting time to CR is actually seven months. So it's actually fairly fast. I understand there's based on CheckMate 67, there's very long follow-up, up to five years. And it is true that with prolonged follow-up, the CR does deepen over time. But even if you look at the nivolumab and NIVO/ipi data, with prolonged follow-up, even after four to five years of follow-up, NIVO has not achieved it's CR higher than 20%. And NIVO plus ipi has rarely achieved a CR rate of 21%, which is very different than what we'd be able to accomplish just with a little over a year follow-up of 34%. So that is really the distinguishing factor, right? It's and so the at the rate of CR that the BEMPEG plus nivolumab has been able to achieve in the PIVOT-02 study is much quicker. And I think during the time the follow-up, even with what we plan to have a 10-month of follow, we think we can really truly distinguish ourselves from the nivolumab control arm.

Great. And one last question for JZ around NKTR 255. We know a lot of patients, especially hematological malignancy patients have exhausted or dysfunctional NK cells. And I'm wondering if NKTR-255 can restore their function and perforation as well?

Yes, that's definitely one of the things that we're very, very excited to look at. And it's part of the reason why the starting patient population. That we have in our study are late-stage patients with NHL, and in particular, late-stage patients with multiple myeloma. You know, Dana, really well, right, particularly in multiple particularly in multiple myeloma. There's a massive, and can be catastrophic, dysfunction in the NK cell compartment, both in terms of cells that have poor effector status that can maintain ability to degranulate and cell numbers that go down. And even, for example, even after agents like dara, for example, or any CD38 to deplete these cells further as well. So definitely, that's one of the earliest biomarkers that we're looking at in our clinical trial. As you know, with these cytokines, we measure systemic cell changes all the time. And because it's a blood-based central compartment measurement, it's very robust and easy to measure. So it's definitely a key part of our biomarker program and our mechanism of action testing for NKTR-255.

Great, thank you.

Thank you. And that does conclude our question-and-answer session for today's conference. I'd now like to turn the conference back over to Mr. Howard Robin for any closing remarks.

Okay. Well, thank you, everyone, for joining us today. And as usual, I'd like to thank our employees for their hard work and their commitment to our company. Nektar has really built a highly valuable pipeline of programs in immuno-oncology and immunology. And we've really tried to address large patient populations where large numbers of patients are suffering from serious disease and have a high unmet medical need in solid and liquid tumors across many potential treatment indications in an autoimmune disease across multiple autoimmune and chronic inflammatory disease states. So we look forward to advancing these programs, continue to provide you with progress on our growth, and we look forward to seeing many of you at the conferences over the next several months. So thank you very much for joining us today, and we look forward to seeing you. Thank you.

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