Ladies and gentlemen, thank you for standing by and welcome to the Nektar Therapeutics Second Quarter 2020 Financial Results Conference Call. [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 Chief of Research and Development; 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 enrollment and clinical trial results, timing and plans for future clinical trials, timing and plans for future clinical data presentations, the therapeutic potential of our drug candidates; outcomes and plans for health authority regulatory actions and decisions, estimates and predictions of the COVID-19 pandemic’s impact on our business and clinical trials, financial guidance and certain other statements regarding the future of our business. Because these forward look 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 May 8, 2020, 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. Before turning the call over to Howard, I’d like to comment on a small housekeeping item. Due to the continued shelter-in-place restrictions in San Francisco, each of us are, again, calling in from different locations. So in order to facilitate a smooth call flow, I will moderate the Q&A session for our team, so we can avoid technical issues during the session. We appreciate your patience as we work to ensure that there are no technology disruptions for those who are listening. With that said, I will 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. I would like to start the call by reviewing the ways in which we’ve successfully led our business as well as our accomplishments during the second quarter and year-to-date. For all of us located in the many areas that we operate our business and our clinical trials, we continue to face a complex environment caused by COVID-19. Our key focus has been to navigate this dynamic situation with minimal disruption to our business. And as a result of these efforts, we have seen continued progress in the advancement of our registrational and earlier-stage clinical trials as well as the continuation of our research and manufacturing activities in spite of the challenges posed by the COVID-19 pandemic. We ended the second quarter in a position of exceptional strength. We have built a robust pipeline in oncology and immunology with multiple registrational and earlier-stage clinical trials underway, and we ended the second quarter in a strong financial position with $1.2 billion in cash and investments and no debt on our balance sheet. During this time, we’ve adapted our practices to allow us to both protect the health of our employees and continue essential operations at our locations, such as research and manufacturing laboratory-based activities, which are essential to our business. We’ve also worked tirelessly with our trial investigators and their teams to ensure that they can continue to provide superior care and uninterrupted access to study treatment to patients fighting cancer in our clinical trials. Finally, we’ve been diligently working to ensure that the conduct of our clinical trials is minimally impacted by the evolving situation and that the integrity and quality of data being collected from these studies are maintained and tracked appropriately. Wei will review…

Thank you, Howard. As Howard said, we continue to take all possible measures to ensure that our clinical studies remain on track given the COVID pandemic. In addition to the rigorous ways our study teams conduct our clinical trials, our monitors and data collection systems are also capturing any COVID-related protocol deviations or changes in study conduct that we may need to provide to the FDA in the future. As you know, the FDA issued guidance on clinical trial conduct given the pandemic, and we’re closely following FDA guidance as we track any impact of COVID on the patients in our study. We have seen very good patient compliance, particularly in their visits to study sites to receive study treatments and for scheduled scans. We continue to be tremendously impressed with high degree of engagement from our investigators and their staff and extraordinary care they’re providing to their patients during this very challenging time for all of us. In response to some questions we’re receiving, we have received only a few reports of patients in our studies who have suspected or confirmed COVID infection. As of today, for the clinical studies that Nektar is running across our 200-plus investigator sites globally, we have a few reports of patients who have been diagnosed with COVID or have missed study treatment or missed study scans due to COVID. We’re carefully collecting all information pertaining to these cases and any other impact to the studies that could be related to COVID and are following FDA guidance to enable us to communicate any protocol deviations related to COVID to the FDA to ensure future registration. Before I hand the call to JZ to discuss our work with NKTR-358 and NKTR-255, I want to follow up on continued inquiries we’ve received on the changing of…

Thanks, Wei. I would like to spend a little more time discussing two programs. The first is the NKTR-358 program and our plans for the lupus study; and the second is our IL-15 program, NKTR-255. First, for NKTR-358, and as Howard stated, we presented our first data from the Phase 1b multiple-ascending dose study, which was conducted in patients with mild-to-moderate lupus at this year’s European League Against Rheumatism, or EULAR, conference in early June. We are the only company that has presented data from a multiple ascending dose study of a novel Treg stimulating therapy in patients. We are tremendously pleased that these promising data have now led to our partner, Eli Lilly, initiating a Phase 2 study in lupus patients with plans for a second Phase 2 in an another autoimmune indication by year’s end. Many autoimmune disorders, including systemic lupus, are associated with decreased Treg numbers, reduced Treg function and/or reduced production of IL-2. Treg deficiencies are important in the pathogenesis of these autoimmune diseases. And with NKTR-358, our goal is to address these Treg abnormalities and disease and to develop an IL-2-like molecule that could selectively stimulate Tregs in a much more effective manner than IL-2. The results from the Phase 1 study presented at EULAR concluded that NKTR-358 was safe and well tolerated when multiple doses were administered in patients with lupus. This reinforces our earlier study findings with single-dose administration in healthy volunteers. Additionally, demonstrating that the safety profile was similar between single and repeat administrations was critically important for potential treatments for chronic disease. The data also showed a dose proportional PK and prolonged exposure with the half-life of 10 to 13 days, that easily enables every 2-week dosing in the Phase 2 study. Importantly, NKTR-358 elicited a marked, selective and dose-dependent expansion…

Thank you, JZ and good afternoon everyone. On this call, I’ll review our 2020 financial guidance, which is unchanged. Starting with our strong financial position, during the second quarter, we repaid $250 million in outstanding senior notes, ending the quarter with $1.2 billion in cash and investments and no debt on our balance sheet. We still plan to end 2020 with over $1 billion in cash and investments. Turning to our annual financial guidance, our full year GAAP revenue guidance remains between $140 million and $145 million for 2020. This includes $50 million of milestone payments from BMS and $90 million to $95 million of royalties, product sales and other revenue. We recognized a $25 million milestone for the start of the muscle-invasive bladder cancer study in Q1. And as Howard mentioned, we successfully initiated the adjuvant melanoma study ahead of schedule and recognized a second $25 million milestone under the BMS collaboration in Q2 rather than Q3 as we projected last quarter. The $90 million to $95 million of remaining GAAP revenue is still expected to be recognized on a fairly ratable basis over the 4 quarters of this year. Our GAAP R&D expense guidance is also unchanged as our clinical pipeline progress remains largely on track. We anticipate 2020 GAAP R&D expense will range between $475 million and $500 million, which includes approximately $70 million of non-cash depreciation and stock compensation expense. Our G&A expense for 2020 is still projected to be between $105 million and $115 million, which includes approximately $45 million of non-cash depreciation and stock compensation expense. We continue to closely manage our operating expenses and remain highly focused on the execution of our broad portfolio of research and development programs. And as I reviewed earlier, we plan to end 2020 with at least $1 billion in cash and investments. And with that, I will open the call to the questions. Operator?

Thank you. [Operator Instructions] And our first question comes from Peter Lawson from Barclays. Your line is open.

Hi, thanks for taking the questions. Just really on the early clinical data that we see for 262 and 255, is there something that we should focus on what should we expect and is there anything we should draw our attention to?

JZ, I am going to ask you to answer that question. Thanks.

Yes. Thanks Peter. So certainly, both programs are giving early data both of them from first-in-human studies. So, the things that we pay attention to are really what the focus and design of the studies were. So these studies are designed to assess the overall tolerability and safety of the agents, also to assess the pharmacokinetics and also the pharmacodynamics. Now as you know, we really pay a lot of attention on to the mechanism that these drugs have. And really – that’s really built in into how we do our drug development, and especially at the early stages, so both of the studies have robust biomarker programs built in. So in the setting of NKTR-262 in REVEAL, we are looking at key biomarkers associated with TLR 7 and 8 activation. And remember, we can analyze those as a monotherapy in the first cycle and then also in the combination with bempeg on successive cycles. Remember, that study has a kind of a staggered design because it was a first-in-human for a novel-novel combination. So in that setting, we’ll be looking very closely at the interferon responses, Type 1 induced by the TLR activation and the Type 2 interferon response is induced by bempeg and then looking at the combination of the two having patients receive continued treatment. In the setting of 255, you know that’s a different cytokine than bempeg. And it engages a different set of immunological pathways. So as I mentioned earlier in my presentation, they’re really diving very, very deeply into certain immunological tissue and blood-based cellular compartments. In particular, we’re focusing a lot on natural killer cells. NK cells are a very robust target of IL-15 pathway engagement and NKTR-255 really targets that compartment very well. So we don’t just look at total book numbers. We’ll even look at the different subsets of NK cells, even precursor, in early maturing immune cells as well. And then we will study markers of activation and even extend that to overall markers of effector function. So that’s the nature of the data that we will be focusing on and kind of gives you a flavor of the kind of data that you can expect to see later this year.

Okay. Thank you. And then how many patients could we potentially see and could we see you think initial clinical efficacy or is that too early?

Yes. So with the 255, it will be a subset as we mentioned that study is still ongoing, dose escalation. So that will be an early set of cohorts. And in the REVEAL study, we have the entire dose escalation moving through the identification of the recommended Phase 2 dose, which is being studied now in larger cohorts. So we’ll definitely present all of the data that’s available. We presented earlier that we had instances of responses observed in the REVEAL study, and we presented that data last year. So we’ll continue to build on all of those. But to your point, it’s really when we move into the larger cohorts that the studies start to enroll patients with low – large enough patient cohorts, right, that we will zero in on efficacy. Thanks for the question, Peter.

Great. Thanks so much.

Thank you. Our next question comes from Tyler Van Buren from Piper Sandler. Your line is open.

Hey, good afternoon. Congrats on all the progress. I guess I have two questions. The first one is on PROPEL, the first-line non-small cell lung cancer trial, combo with pembro. We are going to get initial data potentially year end to early next year and you noted that we could get overall response rate data in 10, 20 patients greater than two scans. So I guess, can you just help us understand exactly what pembro monotherapy would show at that time point and therefore, what overall response rate with the combo you would like to see to really be confident in the combo moving forward? And then the second question is just related to the process that you are undergoing to potentially in first-line melanoma to move that interim readout from the overall response rate to a CR rate interim look, which is, of course, encouraging given the wider delta there. But maybe just – I’d like to hear the argument that you are going to make to the FDA and the regulatory agencies to get that changed?

Thanks, Tyler. Wei, I am going to ask you to remind folks of the PROPEL design and the different cohorts that we are looking at with respect to non-small cell lung cancer and help Tyler with his first question.

Okay. Sure, absolutely. Yes, thanks for the question. Yes, certainly, I think non-small cell lung cancer, even with the recent advancement, still remains a high unmet medical need. I think – so we’re building upon the standard-of-care pembro monotherapy. And as you know that non-small cell lung cancer really is segmented into 3 different populations based on PD-L1 status. You have the 50% and above PD-L1 expression and 1% to 49% and less than 1%. And there are different benchmarks. In the 50% and above and 1% to 49%, the response for a single agent is certainly different, and that’s also different than the less than 1% where pem mono is not actually approved. Because we have available these response datas of pembro monotherapy, we can evaluate what the additive value of potential synergy the bempeg in combination with pembrolizumab can bring. And so that is how we’re going to really evaluate the data. So with our PROPEL study design, so first of all, we have two parts of the study. There’s an optimization cohort and there’s a expansion cohort in non-small cell lung cancer. And to really address your question, I’ll focus on the expansion cohort in non-small cell lung cancer. And in there, we have actually subdivided the groups of patients into enrolling separately patients that are 50% and above, 1% to 49% and also less than 1% conforming with the current kind of the segmentation of use of either pembro monotherapy or pembro plus chemo in these segments and also knowing the different benchmarks. And so that is how we’re going to really look at the data. So we will enroll 20 patients roughly in each of these subgroups for a total of roughly 60 patients. And then based on the response we observe in the 50% and above, in the 1% to 49% and less 1% and benchmarking against pembro monotherapy, that’s how we will make an assessment whether there is additivity or synergy that we can potentially observe with the combination with pembrolizumab and bempeg and our future registration trial in first-line non-small cell lung cancer would entirely be based on what we observe in each of these subgroups and what population will be ideally enrolled into the future registration study. So yes, so that addresses how we are going to look at the data in regard to making a registration decision in non-small cell lung cancer. Jennifer, should I go on and probably answer the melanoma?

Yes. Could you share a little bit on how we are thinking about the CR endpoint and what sort of things that we are looking at there? Thank you.

Sure, absolutely. ORR historically has always been used as sort of the benchmark for assessing the preliminary activity of any drug in oncology. Now I think these response rate endpoint are somewhat arbitrary and their strength relies on how they correlate with progression-free survival, ultimately overall survival. And what really helped us our assessment and certainly argument we are making to both FDA as well as ex U.S. health authorities, including EU and other places, it’s really based on the venn analysis presented by FDA back in – around ASCO 2019. And just a reminder, back at that time, FDA had pulled together all the patient data in first-line metastatic melanoma from all the registration trials, regardless of type of agent, whether it be TKIs, BRAF in that or IO therapy, whether it be PD-1, PD-L1 or even CTLA-4. Based on all these first-line data they have in their database, they performed meta-analysis, looked at the correlation of various response rate endpoints to progression-free survival, overall survival. And what they have actually demonstrated in their analysis of nearly 5,000 patients is even beyond just overall response rate, ORR, the depth response, the deeper the response, the stronger the correlation to PFS and overall survival. So the correlation to long-term survival is higher for 50% depth response compared to 25% and even higher for patients who achieved 75% shrinkage of tumor compared to 25%. And the best – patient would get the best are the patients who achieved 100% shrinkage of their tumor. So – and that is really the strength with which we are proposing a change from ORR to CRR because of this stronger correlation with a deeper response. And the highest response or most depth of response can achieve is of course a complete response. And this is…

Great. Thanks for taking the question.

Sure.

Thank you. Our next question comes from Chris Shibutani from Cowen. Your line is open.

Great. Thank you very much. Two questions, if I may. On 358, can you just remind us, and I apologize if you already mentioned, psoriasis and AD. Will we see data on this, and if so, when? It sounds like Lilly has commenced some Phase 2 in one of those during the year or that is the plan. And when we see that data, will it just be PK-PD similar to lupus? Or is there a possibility of seeing some early efficacy endpoints as well?

Thanks, Chris. JZ, I ask you to take the 358 question. Thanks.

Yes, sure. Hey, Chris. So yes, just to clarify, Lilly is running 2 Phase 1b studies. That one is in psoriasis and the other is in atopic dermatitis. And we mentioned in the call also when the COVID pandemic broke out, Lilly’s first response was to pause those studies, and it really made sense. Those are non-oncology studies, for example. So they are really the chronic nonlife threatening diseases. But as we did also mention earlier in the call, those studies have now been restarted, and they are enrolling patients. So we would expect that data from those studies will not be presented this year. Those studies are still in the enrollment phase, but it’s reasonable that perhaps at the end of next year, that would be reasonable to see some data from these studies. And then in terms of what kind of data you could see, that these studies are Phase 1b, so they definitely have substantial pharmacokinetics as well as pharmacodynamic component to them. But the other thing that’s also present here is, there are a lot of biomarkers that have been put in, especially, as you know, Chris, with your familiarity with a lot of skin studies, skin biopsies and punch biopsies are very, very doable. So there’s also going to be an assessment of what’s happening locally in the skin, for example, with the different keratinocytes, Things that are happening within disease lesions and in particularly looking for infiltration of Tregs, that could be very disease beneficial. I hope that answers your question.

Yes. So then how will Lilly determine which one they will start as Phase 2 trial in, in terms of the two indications and will we get a visibility into that decision during 2020?

Yes. So in the deal that we signed with Lilly a few years ago, in that deal, there were four Phase 2 studies. And Lilly very much likes to use the practice of not announcing what the indications are too early to maintain competitive and other advantages. So the lupus study is announced because that study just kicked off. As we stated, there’s a second Phase 2 study that will begin later in the year in a different autoimmune indication, not lupus, a different one. And as we get closer to the start of that study, I expect Lilly will announce that indication. And then there are two more indications that are coming – that again will be announced later. And we expect those two studies to begin next year.

Great. And my quick second follow-up, the current conference calls have tended to be choice easter egg moments during Q&A, where you give us some sort of a bempeg PIVOT-02 melanoma update. Did I miss that? Is there anything you can share with us?

We are going to save that for SITC, Chris.

Okay.

Thank you. Bye.

Thank you. And our next question comes from Difei Yang from Mizuho. Your line is open.

Hey, good afternoon everyone. This is Alex on for Difei. I was – I had a question on the bladder cancer setting. I guess I was wondering if you could comment on how do you see the market opportunity there for bempeg? And where do you see the biggest unmet need given the evolving competitive dynamics, competitive landscape there?

So Wei, do you want to answer that question?

Sure. Yes. I would be happy to. So I think – so over the last year, I think the landscape for first-line metastatic bladder cancer has continued to evolve and we will gain some clarity. I think with the success of avelumab in that disease setting, we see that maintenance therapy now has been introduced into bladder cancer in the first-line setting. And then with the failure of pembro in their registration trial in combination chemotherapy, I think the combination with chemotherapy, it looks like it won’t be the de facto, sort of the dominant standard care in first line. So it remains fairly segmented in the sense that there – you still have disease entities that are classified as cisplatin-eligible and cisplatin-ineligible. And the standard of care hasn’t changed dramatically in the sense that in the cisplatin-ineligible remains to be segmented for IO for PD-L1 positive and PD-L1 negative, right? I think what has done, gained clarity is probably IO plus chemo is not going to be a dominant therapeutic option, unlike, say, non-small cell lung cancer or in head and neck cancer. And remains fairly open for novel agents that can bring significant benefit to patients in that therapy. So providing that context first, I think the promising treatment that are currently in development certainly include not only our combination of bempeg plus nivolumab, but also PADCEV from Seattle Genetics plus pembrolizumab. And there’s pros and cons with different regimen. I think the – our regimen is a pure IO regimen that still reserve chemotherapy option for later line of therapy, whereas the PADCEV-pembro combination is really a combination that has a – is ADC effectively a – is pretty smart chemo backbone. And so I think the activity looks like it’s higher based on early phase data,…

Okay. Thank you very much for the color. And then just on the PIVOT-02. Do you guys have any plans to provide an update from PIVOT-02 in bladder cancer by any chance before the Phase 3 data?

Yes. The data we provided to date publicly, both in public congresses as well as over earnings calls have been pretty mature data. I think for future update, we do plan to collate our data from PIVOT-02, including our bladder cancer data in a follow-up publication, where we can more finally – more in greater detail dissect out all the nuances of the data and provide much rigorous set of data in a publication than can otherwise be presented in a 5 to 10-minute congress presentation.

Great. Thanks for taking my questions.

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

Great. Thanks. This is Gobind on for George. Just two questions. One on 358 and the other on the bempeg program, but for 358, are they – as we think about the data coming up, I believe the mild-to-moderate data. And then I think JZ mentioned the lupus disease activity index for the upcoming trial is going to be [indiscernible] taken above or for this one, it was probably below 6%. So I am just trying to figure out here if we – there’s going to be some biomarker data, there’s going to be some – probably just not sure if there’s going to be activity and this is going to be shown. How should we be thinking about what would be a meaningful change? It’s totally understanding that this is not – this was not a trial design for F50 short duration of treatment and all of that. And then the second question on the bempeg part was, for the bempeg Keytruda program, can you remind us again how bempeg was able to go higher? I believe you guys are dose escalating that, it’s really higher than what you have done with OPDIVO and with that higher dose, is that something that you guys – if you guys expanded into other tumor indications, you would be at this higher dose as well? Thanks.

Thanks, Gobind. I am going to ask JZ to take the first question on 358 and the ACR data that we plan on presenting, and then I will have Wei take the second one on – back to the PROPEL design and the dose escalation component of it. Thanks. JZ?

Yes. Thanks, Jennifer. Gobind, very insightful questions. So you are absolutely right. The MAD study in 358 was in mild-to-moderate lupus patients. So there’s really a range of baseline disease, including very mild, right, in some cases because remember, the patients are on steroids and they could be under control, which is in stark contrast to the Phase 2b, where all patients will have at least a baseline SLEDAI of 6. So those patients are going to be much more advanced, and they will all have clinical presentation of disease, which is not the case in the Phase 1b MAD. So the patient population is different. And then, of course, the duration of treatment is very different, right? It was a 6-week treatment in the Phase 1b, whereas it will be a 6-month treatment in the Phase 2b. So then given all of those important differences, what are some of the things that you could look for? So when we present additional data from that study, firstly, we will be presenting the same kind of sort of additional constellation of data that we presented for the single-ascending dose study in healthy volunteers. There’s quite a bit more biomarker data. There’s quite a bit more FOXP3 and other Treg associated data as well as potential for some genetic gene expression data as well. So, that we presented at ACR last year in the SAD data. So we will present the same additional biomarkers. And then there’s one additional set of features, which is that we do have measures of disease activity, anything that we measured and we measured a range of different endpoints, such as the SLEDAI scale, the classi scale and so forth. So with this kind of an early study in the early setting, what I really look for that makes me excited is, do I see dose-dependent changes? And you don’t expect that under such a short amount of treatment, you would have a very profound setting on the disease course. But if I see dose-dependent changes in a clinically measurable marker, that would make me really excited. And certainly be the kinds of information that would make you feel really confident to move into the Phase 2b setting. So, our aim will be – we will be working with Lilly, and we are going to present many additional features of that study. So please stay tuned for that. That’s also coming up in November, Gobind. And now what I will do is, I will turn it over to you, Wei, to talk about dose escalation and optimization portion of the bempeg plus pembro program.

Thanks, JZ. So that’s a really great question about the – so why are we still optimizing the dose when the molecule is – for the registration? So first of all, I think it’s helpful to remind people that the 6-microgram per kilogram dose in combination nivolumab in registration in several of our programs is still – it’s a very efficacious dose. That’s a dose on which we have obtained a breakthrough therapy destination from the FDA. So – and so it’s highly active. And so it’s actually a very good dose and provide an outstanding safety profile, where we basically – as far as immune-related AE is concerned, we observed the same rate of IMAE in nivolumab monotherapy. So that having been said, I think if you look at the entire oncology landscape and variety of tumor types, you kind of can segregate into roughly several different types in regard to the response to PD-L1 therapy. You have diseases like melanoma and RCC where a PD-L1 biomarker is not needed at all. So monotherapy pembro and monotherapy nivo works very, very well because of PD-L1 expression in melanoma. In RCC in combination, you do not need a biomarker at all. Now then, on the other hand, you have tumor types such as non-small cell lung cancer, head and neck cancer and especially triple-negative breast cancer where a biomarker is needed. Now for both lung and for head and neck, monotherapy only works for a certain cut point or higher PD-L1 expression. Below that, you really need the boost from chemotherapy. And for triple-negative breast cancer, both the pembro and atezolo data demonstrate even combination chemotherapy, the PD-L1 negative patients do not drive benefit from the addition of a checkpoint. So I think in some tumor types, you definitely need…

That’s really helpful. Thank you. But if I may just have one more on top of that, does that mean you guys have figured out what the new bempeg dose is with this new protocol? And can you share that with us?

And so that’s – it’s still in dose isolation, the optimization cohort and is actually active, Gobind. And then I think – so that data we would present at a future congress. And so far, we have not identified any DLTs in our ongoing dose escalation, but we would certainly be happy to share the data at a future congress. Thanks.

Great. Thank you.

Thank you. Our next question comes from Aydin Huseynov from Benchmark. Your line is open.

Hi everyone thank you for taking my questions and congrats on the progress this quarter. I have a question regarding bempeg adjuvant melanoma study. Is there any accelerated approval, kind of surrogate endpoint, just like CR in metastatic just to make this argument for adjuvant melanoma case? And also regarding the enrollment so I think it was previously 1,100 patients. Could you just clarify the target enrollment at this time?

Wei, could you review the study design and address this question? Thanks

Yes. So for the adjuvant study, it’s a wonderful question. I think that’s sort of the holy grail. All of us would look – like to have a surrogate endpoint that allow an early readout for adjuvant study because adjuvant study can be very, very long on the one hand and it requires large portion of patients and it’s a huge investment, and then a lot of patients are certainly waiting because that’s one area we can provide a cure to a lot of patients. So I think unlike, say, in the metastatic setting, adjuvant really is challenging in having a certain amount of data to link up some type of surrogate to either disease-free survival or relapse-free survival. And in melanoma, I think the most promising marker to date is probably some type of circulating tumor DNA clearance. However, that has not been firmly established yet. There’s not a wealth of data, like I pointed out, with the FDA meta-analysis where they have connected the depth response with long-term survival. There has not been a wealth of data of a lot of patients tested with CTDNA in a completed registration study and linked to the clearance of CTDNA, say, with either DFS or RFS. So with that lacking, I think the Health Authority feedback, and I’ve certainly attended a number of workshops on this. And I think that’s – FDA made it clear in one of the workshops that, that is the kind of data they’re looking for to really establish a marker such as CTDNA clearance as a potential surrogate for accelerated approval, right? So that’s sort of the – what has not been the – what’s the missing piece in terms of registration for adjuvant setting. Now whether that data will emerge between now and the completion of our melanoma study in adjuvant setting, I think that’s to be seen. If such a data were to emerge and FDA feel confident about that data, that will certainly allow them to provide – open up – using, say, for instance, the CTDNA as a surrogate to allow early approval in Hodgkin’s diagnostic study, followed by delivery of the DFS or RFS in that setting. I hope that answers your question.

Thank you. Yes, absolutely. And for the target enrollment for this study?

For the target enrollment. Yes. Go ahead, Jennifer.

Yes. I was just going to say if you can explain the difference in the 950 and 1,100, we landed on 950 for the final protocol Thanks

Yes. Is that what you’re asking just the number or.

Yes. Just curious.

Thanks

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

Hey guys. Congrats on the progress and thanks for taking my question. I had a question about 358, and I was wondering if you could comment on Amgen’s recent decision to discontinue development of their IL-2 muting in RA and focus on GI autoimmune disorders. Is there something about IL-2 that makes it particularly effective in the GI tract? And would you consider developing 358 for any GI indications?

JZ, I’m going to ask you to take that one. Thanks.

Sure. Yes. So yes, definitely, the – we noted that AMG-592, through clinical trials, really they announced some modifications to that study. Remember that study has been really ongoing for a very long time, right? They never really reported on the 1B portion, and they moved into the expansion in lupus and then announced that the RA part of that went away. I’m not – for me, from my standpoint, scientifically, you wouldn’t say that Tregs are not appropriate for a study in RA. There’s definitely some scientific rationale for that. I would just probably guess that they were focusing on other indications. Now we do know some data from the study that’s going on in Europe called TRANSREG. This is a study that was run by David Klatzmann, where he used low-dose IL-2 where, as you know, you can get a small amount of Treg induction using some kind of high-frequency dose administration regimens, no more than doubling or tripling of cells over baseline. But in that study, 12 different autoimmune disease indications were explored, and it was noted that some of the GI indications, such as ulcerative colitis and Crohn’s disease, have a propensity. And scientifically, that makes a lot of sense, Jay, because we know that Tregs play an important role in the GI tract. They actually help control some of the mucosal immunology that happens in between all the microbes on one side of the gut and all of the immune cells on the other side of the gut, and especially in areas like Peyer’s patch and other parts of immunological structures. So it definitely makes a lot of sense to focus on GI indications. And of course, Amgen is continuing to focus on lupus, right, which has been the ongoing part of their ongoing clinical trial too.

Great thank you for that comprehensive overview it is super helpful I appreciate you taking the question.

Sure. Thanks Jay.

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

Hi, this is Corinne Jenkins on for Paul. I was just hoping you could talk a little bit more about how you think about a registrational study in non-small cell lung cancer. And what the catalyst path will look like post that initial data from PROPEL later this year or early next?

Thanks, Corinne. Wei, I’m going to ask you to help Corinne with that question. Thanks.

Sure, absolutely. So as I discussed earlier, the current PROPEL study really has three substudies in the expansion cohort. It includes around 20 patients who are PD-L1 positive 50% and above. And then another 18 or 20 patients in the 1% to 49% group and then the less than 1% also has another 20 patients. And we will be looking for both the response rate as well as depth response and durability response in each of these subgroups. Now the benchmark number for pembro in each of these subgroups, are well-known and those are publicly available. So we can easily benchmark and the study is designed or analysis plan is designed to benchmark against these numbers. And it’s really going to be based on these comparisons to the historic numbers that we’re going to make assessment or combination deliver the greatest value, whether it’s in the 50% and above patients, making already inflamed tumor even more inflamed and bring on the activity of pembro mono to even a higher level and then even potentially longer durability or is it in the 1% to 49% where pembro mono seems to have comparable – provide comparable survival benefit to just platinum double chemotherapy but does not provide any superiority to the existing chemotherapy. But safety-wise, that’s actually superior. So that’s another area, I think, really high potential for a cytokine-based drug like bempeg to really add a lot of substantial value by inflaming a tumor that’s only low to moderately inflamed. And then obviously, there’s still the patients who have basically effectively PD-L1 negative less than 1%. And those are the patients, monotherapy does not work, that’s inferior to available chemotherapy. And for those patients, typically the standard of care today is chemo plus pembrolizumab or chemo plus atezolizumab. And so that obviously does deliver clinical benefit but really has the added toxicity of the combination chemotherapy. And I think what patients and their doctors are looking for is a chemo-free regimen that can provide similar superior benefit to what chemo plus a checkpoint can really deliver. And so these are really almost three different subgroups for which we’re going to have independent decisions made. And the Phase 3 trials are going to really be based on what the observed activity and durability of our responses and the depth response that we can see in the PROPEL study.

Great. And then separately, can you talk about how you landed on the solid tumor indications you’re looking out with NKTR-255? What’s the rationale for an IL-15 in head and neck and colorectal cancer? And are there any other indications where IL-15 really makes sense in your view?

Yes. I think the selection of those 2 tumor types are based on a couple of considerations. I think the – now IL-15 really acts on two different cell populations, among others. In terms of therapeutic effect, one is the affected T cell population and the other is NK cell population. And currently, the solid tumor study is really leveraging or focusing and trying to harness the NK activity of our 255 molecule. And so the NK cell are instrumental for delivering the ADCC activity of monoclonal antibodies, which is the backbone of many of the current standard of care in oncology. And when we look at the entire treatment landscape in cell tumor and where you have benefit offered by monoclonal therapy, we were looking for tumor types and also drug combination that can still have potential room for improvement and can provide a proof of concept, after which we really can expand the utility of 255 into many other solid tumor types because there are many other monoclonal antibodies that are in use in solid tumor in addition to cetuximab, which is the backbone we’re adding on to here. I think head and neck and colorectal cancer offer a couple of advantages as that first initial proof-of-concept because the – as monotherapy, the cetuximab alone delivered response rate in 10% to 15% range. So it is active, the way that single agent chemotherapy is active, but it’s not so active that it’s very hard to improve upon. And so that provides sort of ideal platform for demonstrating and providing that proof-of-concept where there’s still substantial room for improvement in an agent like 255 that can significantly expand the NK cell population and really grow the army upon which these monoclonal antibody will rely on in executing the cell…

Okay thank you.

Thanks.

[Operator Instructions] And our next question comes from Daina Graybosch from SVB Leerink. Your line is open.

Great, thank you. Two questions for me. One, two-part and one, one-part, the two-part one on NKTR-358, Lilly is pretty excited about lupus, and they have multiple agents in the clinic for lupus, including their JAK and a BTLA inhibitor. And I wonder how you think Lilly’s thinking about their portfolio, if they’re going to take them all forward or pick one? And then sort of the second part to that, lupus has been a really hard place to do clinical trials. And I wonder if you can talk about why that is and what about your design is going to help you avoid those pitfalls in the past? And then one small question on NKTR-262, I wonder in the biomarkers you’ve seen thus far and that we’ll see in the fall if you’re going to tease out the relative concentration of TLR 7 and TLR 8 agonism? Thanks.

Great. JZ, do you mind taking the three questions?

Sure. Yes. So – okay. So Daina, thanks for the question. So let’s start off. You asked questions about Lilly’s lupus portfolio. And yes, they have multiple agents, small and large molecule there, bari as well as BTLA. And basically, those agents, right, as you know, they are targeting activation immunological mechanisms, right? So JAK inhibitor is blocking signaling through any JAK stat-mediated pathway, so primarily in the cytokine driven way. And then BTLA is also blocking one of the co-stimulatory coadapter kinds of molecules. So one of the reasons why Lilly places so much excitement and importance around the 358 program is because that’s what we call a resolution therapeutic. And so conceptually, it’s targeting a different kind of mode of addressing the underlying pathology of the disease. Whereas the other agents in Lilly’s pipeline and even other ones including anifrolumab and others, they’re blocking mechanisms of activation of immunological pathways and inflammatory pathways, whether they’re triggered by release of, say, RNA from dying cells that trigger an event or other kinds of systemic chronic inflammation. But the Treg mechanism is actually aiming to activate the body’s natural immune restoration or homeostatic for immune-resolving pathway. So it’s really a different arm and a different approach, right, for targeting these kinds of diseases. And one important component of that is it also does even if you really have a long view in mind, which you do, if you’re building, say, a pipeline of multiple agents targeting lupus, you also start to envision having the opportunities for combinations. And if you have a drug that say blocks activation and say another drug that stimulates resolution, now you are starting to talk about a really rational scientifically driven kinds of approach to treating these diseases. And traditionally, it’s been difficult to stack…

Great thank you.

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

Hello, thank you, everyone, for joining us today. And I would like to thank our employees for their hard work and commitment during these very difficult times for business in general. We are very proud of how our employees have worked tirelessly to advance our clinical studies, keep our business on track and navigate this environment with both optimism and perseverance. We are fortunate and proud that Nektar has built a highly valuable pipeline of programs in immuno-oncology, in immunology that address significant areas of unmet medical need in solid and liquid tumors across many potential treatment indications and across multiple autoimmune and chronic inflammatory disease states. And as I stated earlier, we are in a unique position of financial strength, with a robust balance sheet with $1.2 billion of cash and no debt. This enables us to continue our important work on advancing potential new medicines that can transform patient care. And we thank you all for your support as shareholders. We look forward to continuing to provide you with updates on our progress, and we also wish you and your families’ safety and health during this time. So thank you for joining us today. Appreciate it.

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.