Nektar Therapeutics (NASDAQ:NKTR) Q3 2024 Earnings Call Transcript

Nektar Therapeutics (NASDAQ:NKTR) Q3 2024 Earnings Call Transcript November 8, 2024

Operator: Good day and thank you for standing by. Welcome to the Nektar Therapeutics’ Third Quarter 2024 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Vivian Wu. Please go ahead.

Vivian Wu: Thank you, Krystal and good afternoon, everyone. Thank you for joining us today. With us on the call are Howard Robin, our President and Chief Executive Officer; Dr. Jonathan Zalevsky, our Chief Research and Development Officer; Dr. Mary Tagliaferri, our Chief Medical Officer; and Sandra Gardiner, our Chief Financial Officer. On today’s call, we expect to make forward-looking statements regarding our business including statements regarding the therapeutic potential of and future development plans for drug candidates and research programs; the timing of the initiation of clinical studies and the availability of clinical data for drug candidates; the timing and plans for future clinical data presentations; the formation, future development plans, or success of our collaboration agreements; financial guidance; and certain other statements regarding the future for business.

Because forward-looking statements relate to the future they are subject to uncertainties and risks that are difficult to predict, many of which are outside of our control. Our actual results may differ materially from these statements. Important risks and uncertainties are set forth in our Form 10-Q that was filed on August 9th, 2024, 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 of Nektar’s website at nektar.com. With that said, I would like to hand the call over to our President and CEO, Howard Robin. Howard?

Howard Robin: Thank you, Vivian and thank you all for joining us today. During the third quarter, we made significant progress in advancing our highly promising pipeline, focused on immunology and inflammation. Importantly, we are laser focused on advancing our Phase 2 studies for our lead aspect. Our lead asset, rezpegaldesleukin, also known as REZPEG, which is designed to directly expand functional Treg cells and engage multiple immunoregulatory pathways in patients with autoimmune disorders. As you know, REZPEG has generated promising early data which support its potential to become a highly differentiated and new mechanism in the treatment of ectopic dermatitis and alopecia. There are approximately 15 million people living with moderate to severe ectopic dermatitis in the USA today.

It is estimated that under 10% of those patients who could receive biologics today are actually receiving treatment. We believe that new mechanisms are the key to growing this underserved biologic market. This is why we’re so excited by REZPEG’s potential as a first in class T regulatory cell mechanism for these patients with critical unmet need. Enrollment in our Phase 2 study in ectopic dermatitis is on track with a top line data readout in the first half of 2025. We’re very pleased with the enrollment pace for this large 400-patient Phase 2b study and JZ will share more on the ongoing study in a moment. We believe there’s also significant potential for REZPEG to help people with alopecia areata. Nearly 7 million people in the United States alone have or will develop the disease.

The disorder significantly affects the quality of life for patients, and the currently available JAK inhibitor therapies are not durable, have high relapse rates, and carry significant safety risks. Therefore, there’s an urgent unmet medical need for new therapies for these patients as well. Enrollment in our second Phase 2b study of REZPEG in 86 patients with severe to very severe alopecia areata also remains on track for top line data in the second half of 2025. Two weeks ago, we published in Nature Communications the data from the Phase 1b study of REZPEG in ectopic dermatitis and psoriasis. These data, taken in aggregate, bolster our decision to proceed with the clinical plan and advance our Two phase 2b studies in ectopic dermatitis and alopecia areata, and JZ will talk more about the important data from these publications later on in the call.

Turning to our preclinical programs. We continue to advance NKTR-165, our novel TNFR2 agonist antibody program. Given the importance of TNF receptor 2, NKTR-165 could potentially become a first in class treatment for autoimmune diseases such as multiple sclerosis, ulcerative colitis, and vitiligo. Earlier this year at EULAR, we presented the first preclinical data for this program showing that NKTR-165 demonstrated selective enhancement of Treg cell function, and JZ will discuss more about that later. We’re currently conducting IND enabling studies with the goal of preparing for an IND submission in the second half of 2025. Now, leveraging our learnings from NKTR-165, we’ve also designed a pipeline of TNFR2 containing bispecific molecules that pair TNFR2 agonism with other antibody targets, and we look forward to providing more color on this pipeline as development candidates emerge.

In addition to NKTR-165, we also have our PEG CFS1 program, NKTR-422, in preclinical stage that was engineered to selectively modulate resolution processes of inflammation. We’re excited to announce that preclinical data spanning multiple animal models including collagen induced arthritis, were selected for an oral presentation at the upcoming 2024 ACR Convergence meeting in Washington, DC. This will be our first presentation of preclinical data from this program and NKTR-422 has the potential applications in a number of therapeutic indications including acute and chronic inflammation. Next, I’d like to discuss NKTR-255, our IL15 program in oncology. We’ve recently announced multiple sets of data from this program published in blood and at ASH.

These data show that NKTR-255 can enhance the activity of CAR-T therapies. Today we presented a late breaking abstract at SITC demonstrating the use of NKTR-255 in a new application. In that abstract, NKTR-255 showed the ability to recover radiation induced lymphopenia in patients with non-small cell lung cancer and Mary will talk more about that program on the call today. Now, before I hand the call to JZ, I want to briefly discuss our transaction announced this week. Earlier this week we announced that we signed an agreement to sell our commercial PEGylation reagent manufacturing facility in Huntsville to Ampersand Capital Partners. The PEG reagent facility will be spun out as a standalone Ampersand portfolio company. Nektar will receive $90 million in total compensation, which is comprised of $70 million in cash and $20 million in equity ownership in the new portfolio company, and we expect the deal to close on December 2nd.

In addition to serving the plant’s existing customers, the new company will continue to serve Nektar’s PEG supply needs for REZPEG and our other PEG related programs in our pipeline. We will retain all rights to royalties and milestones under existing PEG license agreements, including those related to DAPI pegol, which has already demonstrated positive Phase 3 efficacy in lupus. This strategic divestiture of the plant allows us to streamline our operations and further bolsters Nektar’s financial position as we head into top line data readouts in 2025. The proceeds will extend our cash runway into the fourth quarter of 2026. And with that I’ll hand the call over to JZ for an R&D discussion. JZ?

Jonathan Zalevsky: Thank you, Howard. Starting with REZPEG, this program is the most advanced IL2 Treg mechanism in the field. We believe there are major opportunities in both atopic dermatitis and alopecia areata that REZPEG could potentially address. Our Phase 1b REZPEG data in atopic dermatitis demonstrated dose dependent efficacy and encouraging durability observed long after patients completed the 12-week induction period. In fact, for both patient reported outcomes and physician assessed endpoints, we observed the same trends rapid onset of effect, dose dependence and long-term durability of control. The rapid onset of action and the type of extended disease control after the end of dosing rivals are outperformed of dupilumab or JAK inhibitors.

And these promising data have us and physicians very enthusiastic about the potential for long lasting responses and infrequent maintenance dosing with REZPEG in atopic dermatitis. As Howard mentioned, last month we published preclinical and clinical REZPEG data in Nature Communication. The manuscript includes results from mouse models and two human Phase 1b studies in atopic dermatitis and psoriasis, all demonstrating the potential of REZPEG for the treatment of inflammatory skin diseases. The clinical results from these two different inflammatory skin conditions showed that REZPEG improved physician assessed disease activity and patient reported outcomes. These promising findings clinically validate the Treg hypothesis that causally restoring Treg function through a central pathway of IL2 receptor driven Treg Rescue can have therapeutic potential across a variety of chronic skin diseases.

It also demonstrates that REZPEG can act on multiple disease driving pathways and is uniquely poised to address a diversity of immunopathology. Furthermore, a consistent safety and tolerability profile was observed across the studies and in line with previously published data. The exciting cross indication clinical efficacy we observed is buttressed by serum biomarker analysis demonstrating that REZPEG can modulate multiple immunoregulatory pathways to provide rapid onset and duration of efficacy. In the atopic dermatitis study, we included longitudinal serum proteomics analysis and it demonstrated the plural virality of Treg mediated pathways with potential effects on tissue resident memory T-cell population, resulting in sustained efficacy seen in the antigen challenged mouse models and in the clinical trial.

These proteomic findings further validate our therapeutic approach of using a Treg stimulator to dampen inflammatory responses and simultaneously restore immune balance in patients with chronic inflammatory skin diseases. Overall, the totality of the observations, including the biomarker analysis, provide an understanding of how treatment with REZPEG led to dose dependent efficacy in the Phase 1b study over the 12-week treatment period including its rapid onset of action and it also provides insight into pathways that could result in the sustained efficacy that was observed in the study even after treatment was removed. And all of this supports the design of our ongoing Phase 2b study in atopic dermatitis which is enrolling roughly 400 patients with moderate to severe disease across three different regimens of REZPEG versus placebo evaluated over a 16-week induction period.

After the induction period, patients that meet a threshold to advance from induction to maintenance will be rerandomized into one of two maintenance regimens at their original dose level to receive that dose level on either a once a month or once every three-month regimen. The maintenance portion of the study is 36 weeks which will in total provide 52 weeks of treatment duration for patients in the study. We will also follow participants for one year after the conclusion of the 52-week treatment period enabling us to evaluate the potential remittance effects of REZPEG. Enrollment is on track and approximately 130 clinical investigator sites are active across the US, Canada, Europe and Australia. As Howard mentioned, we anticipate top line data from the 16-week induction period of this Phase 2b study in the first half of 2025 and data from the 36-week maintenance period of the study will be available towards the end of 2025 or early 2026.

Now turning to alopecia areata which is a dermal disease localized to hair follicles. In this disease the patient’s immune system attacks the hair follicle disrupting its normal ability to keep and grow hair leading to hair loss. We believe there is strong rationale for REZPEG in this indication based on the role of T-regs on the underlying pathology of the disease. The Phase 2b study is well underway and plans to recruit 84 patients with severe to very severe disease that will be randomized to REZPEG or placebo. Patients will be treated for a period of 36 weeks and observed up to 60 weeks in total. Our primary endpoint for this study is mean percent improvement in SALT or the severity of alopecia tool at week 36 and we expect top line data in the second half of 2025.

Now turning to NKTR-0165 our TNFR2 agonist antibody. TNFR2 is highly expressed on T-regs, myeloid suppressor cells, regulatory B cells, neuronal cells and others. In T-regs, TNFR2 agonist has been shown to potentiate the effector functions, suppressive functions and maintenance of Treg lineage stability, especially in the non-lymphoid tissue compartments. Genetic studies show that if TNFR2 is absent, the phenotypic effect is autoimmunity as well as other conditions that resemble FOXP3 loss of function. In contrast, its presence and activation of its signaling has been associated with immunoregulatory function and tissue protection effects. Our TNFR2 agonist program is built upon many years of Treg experience that we’ve gained from studying REZPEG.

REZPEG as you know, as an IL2 receptor pathway agonist drives JAK STAT signaling in Treg, which is critical to drive Treg proliferation and function in primary and secondary lymphoid organs. TNFR2, on the other hand, is the most abundant TNF superfamily member expressed on Tregs and a key activator of NF Kappa B, which also controls the FOXP3 protein expression and is critical to maintain Treg function, especially in the non-lymphoid organs. Thus, with the REZPEG and TNFR2 agonist programs, Nektar’s pipeline provides target rationale for both lymphoid and non-lymphoid Tregs and this is one of the reasons why we are so excited about NKTR-0165. We presented the first preclinical data for this program at EULAR in June of this year and there were several key takeaways from that presentation.

First, the TNFR2 agonists we discovered are able to signal through the TNFR2 multimeric receptor, single arm monovalent antibody which is a very novel effect for a TNFR2 agonistic antibody. Second, the clinical candidate NKTR-0165 demonstrated very high specificity for binding and signaling through TNFR2 on Tregs with little to no binding and signaling in conventional T-cells, NK cells or monocytes. Third, NKTR-0165 is a monotherapy drove Treg proliferation upregulation of FOXP3 and other activation markers of primary human Tregs. Fourth, the PKPD of NKTR-0165 and efficacy in the KLH DTH model were confirmed in a human TNFR2 knock in mouse model. We are very excited with the unique and differentiated profile of the antibodies that were discovered and we are rapidly advancing NKTR-0165 into the clinic and we expect to submit an IND for this program in the second half of 2025.

Examples of indications that could be addressed include multiple sclerosis, mucosal immunology conditions such as ulcerative colitis, and even dermal autoimmune diseases such as vitiligo. Now, since the TNFR2 agonist antibody specificities we discovered are active at stake single arm antibodies, we have leveraged this to design a pipeline of TNFR2 containing bispecific molecules that pair TNFR2 agonism with other specificities. These novel assets take advantage of multiple mechanisms to bring about novel molecules with novel approaches for targeting autoimmune diseases. We look forward to provide more color on this pipeline as development candidates emerge for future clinical entry. Overall, we have observed growing interest for a novel and selective TNFR2 agonists like NKTR-0165 and as we move forward with our IND enabling studies as well as with our progression of the bispecific pipeline, we will continue to be open to the opportunity of working with companies that have interest in these areas to strategize on the best path forward.

We have a second preclinical target in the immunology space, PEG CSF1 called NKTR-422. This program is a PEG modified hematopoietic colony stimulating factor protein. Current standard of care, Chronic inflammatory disease therapies are designed to suppress inflammation and are not optimized for inflammation resolution and the restoration of tissue homeostasis tissue function. The goal of NKTR-422 is to stimulate inflammation resolution and tissue repair by targeting the expansion, reprogramming and activation of anti-inflammatory tissue resident macrophages. An agent that possesses such biological properties could create a new class of anti-inflammatory therapeutics and this is our objective with NKTR-422. To discover NKTR-422, we used in vitro and in vivo screening of CSF1 PEG conjugates to identify a CSF1 receptor agonist with a differentiated PKPD profile compared to the native cytokine.

And what we found was in vivo treatment with NKTR-422 shows significantly reduced target media clearance, sustained target engagement, durable signaling on both the ERK and AKT pathways, proliferation and expansion of tissue resident macrophages with minimal off target effects of monocyte infiltration or production of monocyte derived macrophages. Moreover, tissue macrophages induce the expression of inflammation resolution and tissue repair markers including increased IL4 receptor alpha, IL10 receptor alpha cell surface expression, spherocytosis receptor, MerTK regulation and metalloprotease activation. NKTR-422 monotherapy showed efficacy in the mouse CSS colitis model and combination treatment of NKTR-422 with etanercept greatly increased the efficacy of TNF alpha blockade on arthritic PAS swelling after starting treatment at the peak of inflammation in a rat collagen induced arthritis model.

As Howard mentioned, data from our early research of this program has been selected for an oral presentation at this year’s ACR Convergence Conference. This program has applications in a number of therapeutic indications that span acute and chronic inflammatory diseases and we’re excited to be presenting this first preclinical data next week. And with that, I’ll hand the call over to Mary to discuss NKTR-255. Mary?

Mary Tagliaferri: Thank you, JZ. Now turning to our IL15 based oncology program. Since October, we have three new data disclosures for NKTR-255. All of the publications and presentations can be found on Nektar’s website. First, the Journal Blood recently published data from Stanford study evaluating NKTR-255 in combination with their proprietary CD1922 CAR-T cell for B-cell acute lymphoblastic leukemia. The results show NKTR-255 added to Stanford’s proprietary CAR-T cell therapy increased the 12-month relapse free survival rate from 38% to 67% when compared to Stanford’s historical controls. Also of note, NKTR-255 enhanced lymphocyte trafficking to diseased tissue which further supports the mechanism of action. Second, the abstract for our ASH poster presentation was made public this week.

At the annual conference in December, we will present final data for the 15 patients in our Phase 2 placebo controlled trial evaluating NKTR-255 after approved CD19 CAR-T cell therapies for large B-cell lymphoma. We’re encouraged by the six-month complete response rate data from this trial which align with the findings from the Stanford trial and further confirm NKTR-255’s ability to enhance CAR-T cell efficacy. Third, data presented today at SITC strengthen our belief in NKTR-255’s therapeutic potential in a new application as a combination treatment with checkpoint inhibitors. For some background, radiation induced lymphopenia is a common occurrence after chemoradiation and is associated with a worse overall survival in multiple solid tumors including lung cancer.

The presence of severe lymphopenia at the initiation of consolidated durvalumab therapy after definitive chemoradiation for unresectable locally advanced non-small cell lung cancer was found to be an independent predictor of shorter progression free survival and overall survival. Dr. Stephen Lin [ph] presented interim data from his Phase 2 study evaluating NKTR-255 to restore lymphocyte counts after chemoradiation for patients with locally advanced non-small cell lung cancer. In comparison to MD Anderson’s historical control data, NKTR-255 in combination with durvalumab demonstrated a statistically significant improvement in the eight-week absolute lymphocyte count. These interim data, presented as a late breaking abstract at SITC today, suggest that NKTR-255 has the potential to confer clinical benefits in patients with locally advanced non-small cell lung cancer.

Now looking ahead, we’re continuing our Phase 1 trial with AbelZeta to assess NKTR-255 with their TILs for advanced non-small cell lung cancer patients who do not respond to anti PD1 therapy. We’re also collaborating with Merck KGaA to evaluate NKTR-255 in combination with BAVENCIO for bladder cancer with the first potential PFS readout expected either by the end of this year or in the first part of next year as this is an event driven analysis. All-in-all, the growing body of evidence highlights the broad applicability of our IL15. As new data emerge, we continue to explore partnering options to continue the NKTR-255 development program. And with that, I’ll turn it over to Sandra for our financial guidance. Sandra?

Sandra Gardiner: Thank you, Mary and good afternoon, everyone. We ended the third quarter with $249 million in cash and investments and with no debt on our balance sheet. With the proceeds from the sale of our Huntsville, Alabama commercial PEG manufacturing facility for $90 million which includes $70 million in cash and $20 million in equity ownership, our financial position is further strengthened. We now expect our cash runway to extend into the fourth quarter of 2026, taking us through several key data milestones including top line data from both of our Phase 2b REZPEG studies. We now expect to end the year with approximately $265 million in cash and investments. I’ll briefly review our quarterly financials and share updates to our financial guidance for 2024.

Our revenue was $24.1 million for the third quarter of 2024. We now expect our revenue for the full year to be between $90 million and $95 million, which includes $60 million to $65 million in non-cash royalties and $30 million to $35 million in product sales. Our product sales generate a negative gross margin. We expect to recognize a gain upon the close of the sale of the Huntsville manufacturing facility in the fourth quarter of approximately $40 million to $45 million. We do not expect to owe any taxes on this gain. R&D expense for the third quarter of 2024 was $35 million. And we still anticipate full year R&D expense to range between $120 million and $130 million with approximately $10 million of non-cash expense. G&A for the third quarter of 2024 was $19 million.

We now expect G&A expense for the full year to be between $75 million and $80 million with an increase in the non-cash portion to approximately $12 million from $5 million to $10 million. Lastly, our 2024 non-cash interest expense remains unchanged and is expected to be between $20 million and $25 million. Our net loss for the third quarter of 2024 was $37 million or $0.18 basic and diluted loss per share. And as I mentioned earlier, we plan to end 2024 with approximately $265 million in cash and investments and a runway that extends into the fourth quarter of 2026. And with that, we’ll now open the call for questions. Krystal?

Q&A Session

Operator: Thank you. [Operator Instructions] And our first question will come from Yasmeen Rahimi from Piper Sandler. Your line is open.

Yasmeen Rahimi: Good afternoon, team. Thank you so much for all the wonderful updates across the entire pipeline. Really informative. I guess, one question. I think a lot of investors are eagerly waiting the AD and AA readouts and it was really appreciated the color you gave that enrollment is progressing really well and on track for delivering both data readouts. But could you kind of — is there an opportunity to quantify how close we’re getting to bringing both of the studies to finish line? Do you see? I think that could be really helpful. And then two, I think the second question that’s most often asked is the ability to — on a positive data, especially from the AD study, how to extrapolate efficacy and biologically experienced patients. And I apologize for asking two questions. I’ll jump back in the queue.

Howard Robin: Mary, you want to take that question?

Mary Tagliaferri: Yeah, sure. Thanks, Yasmeen for the question. So starting with the first one, can we provide more color on enrollment? I can just say we started this trial last October in 2023, and we have advised that we will have our top line data in the first half of 2025. What we will commit to doing is on clinicaltrials.gov when we’ve completed enrollment, we will change the status on clinicaltrials.gov, so people can continue to monitor the progress of our trial there. In terms of efficacy, our clinical trial in the Phase 1 study was in biologic naive patients. And we made the decision to also advance REZPEG into a Phase 2b in biologically naive patients. And so, we will be able to have a read through of our data from the Phase 1.

I think today it’s not well understood what the efficacy will be with biologics in biologically experienced patients. And as we see more data with the OX40 studies and other compounds, we’ll have a better sense of what is the response rate in that patient population. I think today it’s too early to say.

Yasmeen Rahimi: Thank you.

Mary Tagliaferri: Thank you, Yasmeen.

Operator: Thank you. Our next question will come from Julian Harrison from BTIG. Your line is open.

Julian Harrison: Hi. Thank you for taking my questions and congratulations on all the recent progress. First, I’m wondering if you have a good sense for when damages could be publicly specified in your ongoing litigation against Eli Lilly.

Howard Robin: Yeah. Look, obviously, we really can’t comment on an ongoing lawsuit. I can tell you that we’re in the process of mediation. We’re talking with each other about how to resolve this, and we’re — Nektar is fully committed to following through and we believe we have a very strong case. And clearly, there were a number of mistakes made during that clinical trial process. So, I can’t comment on when we’ll have a damages number and when we’ll get this resolved. I can tell you that we’re actively pursuing it, but, of course, it’s an active lawsuit and consequently, I really can’t get into a lot of discussion on it.

Julian Harrison: Got it. Understood. And one more, if I may. Just on your Phase 2b atopic dermatitis trial, can you remind us of the protocol pertaining to corticosteroids use?

Howard Robin: Mary, you want to cover that?

Mary Tagliaferri: Yes. So, this is not a combination trial. So, patients have to wash out of the use of topical corticosteroids before they enroll into the study. And then they’re not permitted to use topical corticosteroids, and if they do after the first two weeks of treatment, then that would be the use of rescue medication and those patients would discontinue treatment.

Julian Harrison: Got it. So, all rescues are considered study discontinuations?

Mary Tagliaferri: That’s correct. Now, one aspect of our trial that I think incentivized patients to stay on the trial and adhere to the rules for no use of topical corticosteroids is after the 16-week induction period, if patients have adhered to the protocol, they have the possibility to re randomize in the maintenance period. And, of course, if they are not responders, then they will go to an escape arm and receive the highest dose of REZPEG. So particularly for patients where there’s not great access to biologics, in Europe, where we’re going to enroll roughly 65% of the patients, I think we’ll see strong adherence to the protocol.

Julian Harrison: Okay. Great. Very helpful. Thank you.

Operator: Thank you. Our next question will come from Jay Olson from Opp Co. Your line is open.

Unidentified Analyst: Hey, this is Chong [ph] on the line for Jay. Thanks for taking the question and congrats on progress. Just on the REZPEG AD trial. Since we’ve been enrolling patients for some time now, I’m wondering if you can provide some color on the patient baseline characteristic of seeing, for example the baseline EC score. And also if you can share the split between patients enrolled from US site versus ex-US site, that would be super helpful. Thank you.

Mary Tagliaferri: Yeah. Hi, this is Mary. This is a fully blinded study and we’ve really meticulously drafted protocols and plans to make sure that we capture data and do so accurately and timely and that we clean our data and that we maintain a blind of this study. I personally have not been looking at those aggregated data in a blinded fashion and we promise that we will provide you with very clear baseline characteristic traits as well as very clear top line data for three different doses compared to placebo.

Unidentified Analyst: Got it. Thank you.

Operator: Thank you. And our next question will come from Jessica Fye from JPMorgan. Your line is open.

Jessica Fye: Hey guys, good afternoon. Thanks for taking my questions. I guess, first one, this data at EADV on serum proteomic biomarkers in AD. I believe it was noted that REZPEG reduced expression of serum proteins known to be elevated in AD and I was curious if those expression levels stay reduced even after REZPEG therapy was stopped. Just kind of trying to get the phenomenon you saw where patients experienced sustained benefit even after stopping REZPEG in the Phase 1b.

Jonathan Zalevsky: Yeah. Hey Jess, this is JZ. It’s a great question. Unfortunately, though, the last time point that was collected in that study was week 12 at the end of induction. So, we don’t have proteomic results beyond into the drug free follow up. However, in the Phase 2 we are collecting samples all through the maintenance period and also after the one year of treatment, in the one year follow up. So, we’ll be able to answer your question very directly in that study, but not in the Phase 1b where collection stops at week 12.

Jessica Fye: Okay. And then, forgive me if I just didn’t, but on the alopecia timing shift from, I think it used to be first half, then mid ’25 and now back half of ’25, is that like a delay of getting sites up and running? Is it screen failure or something? What’s kind of behind that timing shift?

Jonathan Zalevsky: Yeah. So that study began in — Mary, you can go ahead.

Mary Tagliaferri: Yeah. This is Mary Tagliaferri. So, as you know, the trial for atopic dermatitis began in October of 2023. And then it was about five months later that we began the alopecia areata study. And those patients are followed for 36 weeks of treatment. And so, I don’t think we’re necessarily far off from our predictions. I think we’re very close to what we predicted when we started the study. We are enrolling in Canada, the United States and in Europe. It is true that in any trial these days that you’re going to run in immunology and with the globalization process in Europe, it does take longer to bring the European sites on than it is in US, so you certainly start your enrollment earlier in the United States and Canada. But we are on our projected timelines and we’ll have the data in the second half of 2025.

Jessica Fye: Thanks.

Operator: Thank you. And our next question will come from Andy Hsieh from William Blair. Your line is open.

Andy Hsieh: Hey, thanks for taking our questions. Just a question on the SITC poster that’s presented today. One is, you looked at NK cell proliferation. I’m just wondering if there are any other relevant cell populations that you looked at. That’s part one. Part two is really on the control arm, I think, Mary, you said that they basically took patients from MD Anderson basically in the same institution. I’m curious if the lymphocyte count pattern is similar to some of the Pacific studies that have been done with AstraZeneca. I’m just curious about the consistency of that trend on the control arm. Thank you.

Mary Tagliaferri: Sure. Hi, Andy. It’s Mary. So, in terms of the historical control arms, these are all patients that that were treated at MD Anderson. There were 39 of them that antedated the approval of durvalumab. So, they were only treated with chemoradiation. And then there were 120 patients that were treated with CRT plus durva. And the ALC counts in these patient populations are relatively analogous. And what Dr. Lin showed today was if you look at cycle one, day eight, the median increase in ALC was 2.35 fold higher. And at cycle two, day eight, it was 3.6 fold higher. And these were statistically significant against his controls. And what he is astounded by is the persistence of the lymphopenia that he’s seen in these patient populations and that it’s remarkable that this effect persists for 12 months after completing radiation therapy.

I don’t know, Andy, if you know the literature, but Steven Lin did put in the background information, his data from the study that he did with, again, an analogous patient population. And there has been a second study that was completed at Johns Hopkins, and it’s an author by the name of Fredes [ph]. And what he showed was he used a slightly different absolute lymphocyte count than Stephen Lin. Stephen Lin used 0.23 times 10 to the 9th liters for lymphocytes. And at the Johns Hopkins center, they used 0.5. And they showed that the median PFS for those patients with severe lymphopenia was — and this is on the Pacific regimen on durvalumab was only 217 days, which is about seven months versus 570 days for those patients that didn’t have. And when you look at what the median PFS was in the Pacific trial for patients on placebo, it was 5.6 months.

And so, what Stephen Lin’s point is, when you look at these data, it’s astonishing that patients with severe radiation induced lymphopenia at various thresholds really don’t do well and seem to have very, very little benefit from durvalumab. And so, he has a strong belief that combining NKTR-255 with durvalumab in this setting would be a very powerful mechanism to improve the PFS and overall survival of these patients who aren’t deriving benefit today of a checkpoint inhibitor.

Jonathan Zalevsky: And Andy, I can answer your first question. So, what was shown today were NK cell effects and both proliferative effects, as well as modification of cell surface proteins associated with activity on the NK cells and some of those phenotypic functions that was shown that’s one of the targets of the drug. But in the study, there’s quite a bit more phenotypic analysis as well as assessing T-cell populations and then assessing the overall proportion of the cells in the patients that recovered from lymphopenia. Looking at the memory cell pools, and also just looking at the overall health, one of the underlying hypotheses, as Mary was also mentioning, is the cells themselves, because in the patients that have lymphopenia, they’re missing. Lymphocytes are probably also missing lymphocytes, the targeted tumor. So also looking at the recovery of specific populations as well. Those are all key objectives that are coming in the study.

Operator: Thank you. [Operator Instructions] And our next question next will come from Arthur He with HCW. Your line is now open.

Arthur He: Hey, good afternoon, everyone. I just had a quick question regarding the AD study design. So after the 36-week maintenance period, does do the patient have the opportunity to receive the treatment continuously during the follow up?

Mary Tagliaferri: Hi. This is Mary.

Jonathan Zalevsky: Hey, Arthur.

Mary Tagliaferri: I am sorry. Go ahead, JZ.

Jonathan Zalevsky: Yeah. I was just going to say, Arthur, that in this study, so after the 52 weeks of total treatment, which is both the 16-week induction as well as the maintenance period, then the patients will be followed for 52 weeks with no further treatment. So, one of our objectives here is treat for a year and then assess the remittance effect after one year of treatment.

Arthur He: I see. Which means we can get the data regarding how the off-treatment control from this study.

Jonathan Zalevsky: Yeah. So, for example, as the program continues and say moves into later stage studies like Phase 3, eventually this Phase 2 study will have data from both the one year treatment as well as the one year off-treatment follow up. That’s exactly right.

Arthur He: Okay. Gotcha. Thanks for the color.

Operator: Thank you. And I am showing no further questions from our phone lines. And I’d like to pass the conference back over to Howard Robin for any closing remarks.

End of Q&A:

Howard Robin: Well, thank you everyone for joining us today. And we remain focused on advancing our I&I pipeline and we’re very excited about the potential for each of our unique programs. I want to thank all of our employees for their hard work and diligence, and I want to thank our investors for their continued support. And we look forward to providing you with updates on our progress. So, stay tuned. Thank you very much.

Operator: Thank you. This concludes today’s conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.