Yahoo Finance Nektar Therapeutics (NASDAQ:NKTR) Q1 2024 Earnings Call Transcript
Nektar Therapeutics (NASDAQ:NKTR) Q1 2024 Earnings Call Transcript May 9, 2024
Nektar Therapeutics isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day, and thank you for standing by. Welcome to the Nektar Therapeutics First Quarter 2024 Financial Results Conference Call. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Vivian Wu. Please go ahead.
Vivian Wu: Thank you, Crystal, 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 Jennifer Ruddock, our Chief Business Officer. Unfortunately, Sandra Gardiner, our acting Chief Financial Officer, was not able to make it on today's call due to an unexpected family emergency. 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, the expectations following our corporate restructuring and reorganization, financial guidance, and certain other statements regarding future of our 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-K that was filed on March 5, 2024, which is available at SEC.gov. We undertake no obligation to update any of these forward-looking statements, whether as a result of information, future developments, or otherwise. A webcast of this call will be available on the IR page of Nektar's website at nektar.com. Before turning over the call to Howard, I would like to note that our team is dialing in from different locations and that Howard will be moderating the Q&A session for our team, so we can avoid technical issues during the session.
We appreciate your patience. 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. We begun 2024 with positive momentum as we continue to build a best-in-class pipeline focused on immunology and inflammation. One of our key goals is to address the underlying deficiency in regulatory T cells, which underlie a range of serious immune disorders. So we have several key immunology targets and first-in-class mechanisms in our pipeline, including our lead program, REZPEG, as well as the new TNFR2 agonist, NKTR-0165, both of which target immune-resolving pathways. In the first quarter, we continued to make significant advancements with our REZPEG program. As you know, we're evaluating REZPEG in a Phase 2b study in moderate to severe atopic dermatitis, which started last year and this study is currently enrolling patients worldwide.
I'm pleased to report today that the study enrollment is on track to report top-line data from the study's 16-week induction period in the first half of 2025. There are approximately 30 million people in the US alone living with atopic dermatitis and half of these patients are diagnosed with moderate to severe disease. Biologic treatments in atopic dermatitis represent a multi-billion dollar market that continues to grow. And we're excited that REZPEG could become a highly differentiated treatment for atopic dermatitis, a disease that still has a high unmet need for safety and durable treatment options. We believe REZPEG has the potential to be a significant advancement in the treatment of atopic dermatitis. The new and corrected data from the Phase 1b study we reported at the EADV conference last year showed a dramatic drop of 83% in ESI scores over 12 weeks of treatment.
Notably, the study also showed that REZPEG resulted in durable responses 36 weeks after treatment ended, opening up the potential for REZPEG to have an immunomodulatory effect. This past quarter, we initiated our second Phase 2b study of REZPEG in patients with severe to very severe alopecia areata. We believe there is a significant opportunity for REZPEG to help people with this devastating disease. Nearly 7 million people in the US alone have or will develop alopecia areata. This disorder significantly affects the quality of life for patients, and the currently available therapies are not durable, have high relapse rates, and carry significant safety risk. Therefore, there's an urgent unmet medical need for new therapies. Enrollment opened in March for the Phase 2b alopecia areata study to evaluate REZPEG over a 36 week induction period.
JZ will talk more about this program later on the call. Enrollment is on track for this study, and we expect to report top-line results in the first half of 2025. In addition, we're advancing NKTR-0165 our novel TNFR2 agonist antibody TNFR2 has been shown to potentiate the suppressive effects and overall functional properties of Tregs. This program is built on what we've learned through our deep experience with REZPEG and the Treg field and represents a promising first-in-class differentiated mechanism for multiple sclerosis, ulcerative colitis and a range of other autoimmune diseases. We are currently conducting IND-enabling studies with the goal of submitting an IND in mid-2025. And I'm pleased to announce that our preclinical data has been selected for presentation at UR, and we're looking forward to presenting the first data on this program.
Moving to NKTR-255, our IL-15 program in oncology, we're continuing our clinical work with our partners, and we expect data from some of these partners this year. And consistent with our strategic focus in immunology and inflammation moving forward, we're continuing to evaluate strategic partnership opportunities for this program. Finally, Nektar is in a strong financial position with a cash runway that extends well into the third quarter of 2026. I'm very proud of our team at Nektar, and we are laser-focused on executing the development plans for REZPEG in order to achieve value-enhancing data milestones next year. And with that, I'll hand the call over to JZ for an R&D discussion. JZ?
Jonathan Zalevsky: Thank you, Howard. Beginning with REZPEG. This program is the most advanced IL-2 Treg mechanism in the field. In the setting of atopic dermatitis, there are three important issues that patients with this disease continue to face: first, there is a need for more efficacy, a greater magnitude of response and rapid onset of treatment. For example, only about half of patients treated with IL-13 based biologics achieved a meaningful clinical benefit. Second, patients lack of durable responses and therapy free remission. Once current therapies are discontinued, patients rebound rapidly. And third, treatments with tolerable long-term safety profiles are lacking. This is especially important given the chronic nature of the disease and the need for continuous dosing.
We believe there are major opportunities in this disease state that REZPEG could potentially address. In our Phase 1b data in atopic dermatitis, REZPEG demonstrated dose-dependent efficacy and encouraging durability seems long after the patients completed the 12-week induction period. In fact for both patient-reported outcomes and physician-assessed endpoint, we observed the same trend: rapid onset of effect, dose dependence, and long durability of control. Additionally, REZPEG was well-tolerated and treatment with REZPEG did not induce anti-drug antibodies in patients, which has been reported with some examples in the IL-2 mutein class. We are looking forward to publishing in a peer reviewed journal this year new translational biomarker data from this study, along with the clinical and safety data from atopic dermatitis and psoriasis.
The rapid onset of action and the type of extended disease control after the end of dosing rivals or outperforms that of dupilumab or JAK inhibitors. These promising data have us and KOLs are very enthusiastic about the potential for long-lasting responses and in frequent maintenance dosing with REZPEG in atopic dermatitis. Enrollment is progressing on track in our Phase 2b study of REZPEG in biologic-naive atopic dermatitis patients. Our goal is to enroll roughly 400 patients with 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 re-randomized into one of two maintenance regimens at different dosages at either once a month or once every three month dosing schedules.
We expect initial data in the first half of 2025. And moving to alopecia areata, we believe REZPEG has strong scientific rationale in this indication. Alopecia areata is also a disease of the skin where your immune system starts to attack the hair follicle, weakening the ability of stem cells to grow hair. With prolonged immune attack, it causes the hair follicle to release the hair altogether, resulting involvement. And biologically speaking, REZPEG through its central pathway of T-reg rescue, is uniquely poised to address the diversity in immunohematology, providing broad potential for targeting multiple dermal diseases including alopecia areata and specifically, alopecia areata is a breakdown of immune privilege in the hair follicle. And so what does this mean exactly?
Well, normal hair follicles exist in the state of immune privilege. So in other words, there are no immune cells, no MHC expression, and basically no immune system components inside the follicle. We know this exclusion of the immune system is needed to maintain healthy long-lived and continuously functioning stem cells to grow hair during our lifespan. In people with alopecia areata, there is a breakdown of the immune privilege in the hair follicle. Infiltration of the immune system, inflammation, and all this leads to hair loss and eventually, complete baldness. Preclinical studies in vitro and in mice implanted with human alopecia skin samples have shown that Tregs are essential for restoring and maintaining immune privilege and thus are a novel therapeutic strategy for the treatment of this disease.
And consequently, we believe Treg mechanism of REZPEG can restore immune privilege and could provide durable disease control, which would be game changing in this indication. In alopecia areata, JAK inhibitors are the only agents approved in this field, and it is a lifelong treatment. With JAK inhibitors, it could take a patient anywhere from 6 to 12 months to grow hair, and once a patient stops taking a JAK inhibitor, which may happen for a variety of reasons such as toxicity, their hair falls out again rapidly. And there is a high unmet need in this patient population for tolerable treatment options that provide durable responses. And for these reasons, we believe there is an opportunity for REZPEG to become a novel biologic therapy in alopecia areata.
We are well underway with enrolling patients into the Phase 2b study of REZPEG in alopecia areata. This study plans to recruit roughly 80 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. We will also be looking at a number of other secondary endpoints, including proportion of patients that were observed to have varying degrees of improvement in SALT score. We expect to have top-line data in the first half of 2025. Now turning to NKTR-0165, our TNFR2 agonist antibody. TNFR2 is highly expressed on Tregs, myeloid suppressor cells, regulatory B-cells, neuronal cells and others.
And TNFR2 agonism has been shown to potentiate the effector function, suppressive function, and maintenance of lineage stability of Tregs, especially in non-lymphoid tissue compartments. If TNFR2 is absent, the phenotypic effect is autoimmunity, and other genetic conditions that resembles loss of function. In contrast, its presence and activation of its signaling has been associated with immunoregulatory function and protective effects for multiple cell populations and tissues in the body. The TNFR2 agonist program is built upon many years of direct experience that we've gained from studying REZPEG. TNFR2 is the most abundant TNF superfamily member expressed on Treg and the key driver of NF-kappa B signaling in those cells, which is why we are very excited about this program and target.
In our program, we collaborated with an AI-based antibody engineering company to screen a wide diversity of TNFR2 selective binding antibody for novel modes of TNFR2 agonist. We are very excited with the unique and differentiated profile of the antibodies that we have discovered, and we are rapidly advancing these into the clinic. We anticipate our IND submission for this program in the middle of next year. Examples of indications that could be addressed by TNFR2 agonism include multiple sclerosis, mucosal immunology conditions such as ulcerative colitis of GI or other oral mucosal diseases, and even dermal autoimmune diseases like vitiligo. As Howard mentioned, data from our preclinical research of this program have been selected for poster presentation at UR.
This will be the first look at this novel therapeutically active anti-TNFR2 agonist antibody and we're looking forward to presenting these data. There is growing interest for a novel selective TNFR2 agonist like NKTR-0165, and as we move forward with our IND-enabling studies, 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. And finally, turning to our IL-15 based oncology program NKTR-255. We believe the IL-15 based mechanism of action has promising potential of the combination agent with cell therapies and other mechanisms such as checkpoint inhibitors. We are exploring the best partnering paths for continued development for this drug candidate.
We are completing our Nektar sponsored trial combining NKTR-255 with approved CD19 CAR-Ts Breyanzi and Yescarta for treatment of patients with large B cell lymphoma. A separate investigator-sponsored trial at Fred Hutch is also evaluating the combination of NKTR-255 and Breyanzi, and we plan on presenting data from this ongoing study at a medical meeting later this year. We continue to collaborate with AbelZeta, a leading cell therapy company to evaluate NKTR-255 in combination with their tumor infiltrating lymphocytes or TILs -- TIL therapy in an ongoing Phase one clinical trial in patients with advanced non-small cell lung cancer who do not respond to anti-PD-1 therapy. Lastly, we are continuing to work with our partner, Merck KGaA in the Phase II JAVELIN Bladder Medley study evaluating NKTR-255 in combination with Bavencio and expect to report interim data, including PFS later this year.
And with that, I will turn the call over to Jennifer for a review of our financial guidance. Jennifer?
Jennifer Ruddock: Thank you, JZ, and good afternoon, everyone. We ended the quarter with $326 million in cash and investments with no debt on our balance sheet. Our financial position remains strong and we still plan to end 2024 with $200 million to $225 million in cash and investments. This cash guidance includes the $30 million private placement of pre-funded warrants completed in Q1 and a $15 million cash payment from an amendment of the 2020 agreement with health care royalty, also completed in Q1. Our cash runway now extends well into the third quarter of 2026, which will take us through several key data milestones, including of course, the top line data from the Phase 2 REZPEG studies. I'll now briefly review our quarterly financials and reiterate our financial guidance for 2024.
Our revenue was $21.6 million for the first quarter of 2024. We still expect our revenue for the full year to be between $75 million and $85 million, which includes $55 million to $65 million in noncash royalties and $20 million to $25 million in product sales. R&D expense for the first quarter of 2024 was $27.4 million, and we still anticipate full year R&D expense to range between $120 million and $130 million. G&A expense in Q1 was $20.1 million. We continue to expect G&A expense for the full year to be between $70 million and $75 million. And our 2024 non-cash interest expense guidance also remains unchanged, and is expected to be between $20 million and $25 million. Our net loss for the first quarter of 2024 was $36.8 million, or $0.19 per share.
I will note that the loss per share reflects an increase in weighted average shares outstanding during the first quarter as compared to a year ago. The increase is primarily related to the effect of the PIPE financing in March, and is partially offset by the effect of the shares we repurchased from Bristol-Myers in February. Both of these items will be fully reflected in the calculation of weighted outstanding shares at the end of the second quarter. And as I mentioned earlier, we still plan to end 2024 with $200 million to $225 million in cash and a runway that extends well into the third quarter of 2026. And with that, we'll now open the call for questions. Crystal?
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