Everyone, welcome to H.C. Wainwright's second annual autoimmune and inflammatory disease virtual conference. My name is Arthur He, Senior Healthcare Analyst at the firm. Thanks for joining us to have a conversation with Nektar's management, Dr. Jonathan Zalevsky, Chief R&D Officer, and Ms. Jennifer Ruddock, Chief Business Officer. Nektar Therapeutics is a clinical-stage biotech company focused on developing treatments for autoimmune and chronic inflammatory disease. To discuss Nektar's pipeline and learn about the company's development strategy in 2024 and beyond, I'd like to invite Jay-Z and Jennifer to this fireside chat. Good morning, Jay-Z and Jennifer. Morning, Arthur. Morning. So, to first help set the stage for our audience, could you give us an overview of Nektar's pipeline? Sure. So, you know, last year we made a strategic shift to focus our development pipeline on immunology and inflammation with the major focus around our keystone program, which is Rezpegaldesleukin. And Rezpegaldesleukin is an IL-2 agonist that's designed to address the underlying autoimmune pathology by fixing the underlying problem in the immune-deficient individual. It targets regulatory T cells, and it promotes the expansion and proliferation and the lineage stabilization of those cells. And we've generated a lot of data across a range of indications. In particular, Rezpegaldesleukin has shown activity in psoriasis, atopic dermatitis, and in patients with cutaneous manifestations of lupus. And I know we'll be talking probably more about some of those data in more detail, but it's really demonstrating a highly differentiated phenotype across those diseases. We're currently at a phase 2b development stage with REZPEG, and there are two studies ongoing, one in atopic dermatitis and one in alopecia areata. In addition to REZPEG, we also make up in our pipeline a TNFR2 agonistic monoclonal antibody, that has a unique set of properties that addresses another element of the Treg biology axis, whereas IL-2 really targets a JAK-STAT pathway that's very important for central and lymphoid cells. TNFR2 targets the NF-kappa B pathway, which is particularly important for tissue, in particular non-lymphoid tissue regulatory T cell dynamics. So those are the two elements of our pipeline that we're really focused on. Sounds good. Thanks, Jay-Z. So, from a scientific point of view, could you walk us through the drug design of the Rezpegaldesleukin, particularly on its PEGylation pattern? How does that compare to the PEGylation using other approved and investigational drugs? Yeah. So firstly, with REZPEG, it's designed to stimulate, you know, Tregs and really target that population. And really, as I described earlier, one of the gold standards for signaling and creating a level of growth factor support for Tregs is the IL-2 receptor agonist pathway. So IL-2 is key, but IL-2 is highly pleiotropic. And we know that Tregs are very sensitive to it, but other non-Treg cells are as well. And so the role of PEGylation in our drug REZPEG is really aimed at creating that selectivity and specificity of REZPEG onto Tregs, and then eliminating interactions on conventional T cells. So there is a really substantial index shift onto Tregs with, you know, like logarithmic reductions in signaling on conventional T cells, as well as other lineage cells as well. And so this is all achieved by PEGylation. And the PEG in REZPEG is covalently or irreversibly attached to the PEG. It's actually the same PEG as in very recently approved drug Adynovate. So it's a PEG that Nektar has been making for a long time and has successfully in multiple, you know, products, as I described, including commercialized products. And overall, the PEG, besides giving the selectivity onto Tregs to REZPEG, it also really improves the clearance properties. So whereas IL-2 has a half-life that's minutes, REZPEG has a half-life of about 10 days. And so that also makes it a very convenient subcutaneously administered agent. And in fact, we administer it on either twice a month or once a month and will be testing in our phase 2B once every three months regimens. Sounds great. And so, speaking of the Treg targeting. So why, I guess, the key question is what's the advantage for targeting Treg compared to the other approach for, for the indication you guys are pursuing in the autoimmune area? So one of the things that we're starting to understand is that a lot of autoimmune diseases are. There was a time when we thought they were really driven by one type of TH response, say, atopic dermatitis is a TH2 disease. But we now understand that that's much too simplistic. In fact, people have a wide range of deficient T cell, you know, helper dysfunction that characterize the disease. And so one of the important things about a mechanism like Treg activation is, as an agonist, it can stimulate a Treg cell population that, in response to antigen, can actually regulate any kind of skewed response to that antigen. So a TH1, a TH2, a TH17, a TH22, a TH9, as long as that antigen is there and a Treg is there, it can block any type of autoreactivity against that antigen. That's one of the advantages for this mechanism versus, say, targeting a single cytokine, you know, or targeting an individual signaling mediator. Gotcha. So it's more a broader activity if you're targeting the Treg. So let's focus on the atopic dermatitis first, is your leading indication. So could you give us an overview of the current competitive landscape for the AD and how the REZPEG can potentially fit into the current treatment landscape? Sure. Yeah. Well, so, you know, the current treatment landscape for patients that have moderate to severe disease, which really are uncontrolled by topical corticosteroids and require biologic systemically, it's really composed of two agents that make up the standard of care. So one class of these are the IL-13 or IL-4 and 13 targeting antibodies. So the most famous of these is Dupixent. Lebrikizumab and Adbry are two other really important examples in this class. Adbry and Dupixent are the two that are approved. And Lebrikizumab is quite close. We think to being approved in the US, it's already approved in Europe. And so these are pretty effective drugs. Like we described earlier, they target IL-13 or IL-4, which really controls the TH2 symptoms. And for the folks that have a really TH2-driven, you know, dominant atopic dermatitis, you can see pretty good efficacy. These drugs have been used for a while. They've been approved for several years. You can get pretty good control of disease. Patients can generally stay on them for years. However, there are a couple of issues that definitely patients and doctors watch out for. There are rates of conjunctivitis and red face, which can appear. They can appear at random times. A patient can be on the drug for a long time with no symptoms and all of a sudden develop a severe conjunctivitis. The other kind of big issue is that these drugs really don't provide a lasting disease control. So once you discontinue the drug, the patients generally relapse. The other classes of drugs that are approved are JAK inhibitors. JAK inhibitors can be very efficacious. They can produce very deep EASI responses, as well as IGA responses. But they carry with them the issue that typically comes along, the black box warnings with JAK inhibitors. And while they can actually produce even deeper responses than the IL-13 class can, patients generally relapse even faster after they discontinue these agents. Again, really, these two classes are highly symptomatic. You know, they don't really control the underlying disease, and they don't really control the underlying dysfunction that the patients have. So those are the main, kind of competitive landscape in terms of the approved agents. And there are a few other agents in phase 3 and phase 2. But ultimately, our Treg mechanism with REZPEG is something that we know is going to be highly competitive with these other mechanisms because it will be treating the underlying issue that the patients have with the disease, not just the symptoms. Oh, thanks, Jay-Z. So, for the Rezpegaldesleukin data in the AD, I guess, we all know the story there, but could you highlight the phase 1b data for our audience? And, yeah, I had a follow-up regarding data. Yeah. Sure. So the phase 1b data that we collected was in patients with moderate to severe atopic dermatitis who were biologic naive. The data was collected in a randomized double-blind placebo-controlled study where we tested 2 doses of REZPEG versus placebo. We found that through a 12-week treatment period where patients were treated twice a month subcutaneously, REZPEG demonstrated dose-dependent efficacy across all of the physician-assessed and all of the patient-reported efficacy measurements. It reached statistical significance across most of these measures, even though it was a very small study, not powered for statistical significance. At the highest level, REZPEG demonstrated very rapid onset, with over 40% of patients achieving an EASI 75 response by week 3 after only 2 doses of REZPEG. This kind of speed of onset is quite fast, and it's typically more seen with JAK inhibitors than it is with the IL-13 class. We saw a really profound magnitude of response. Besides all of the criteria of efficacy being dose-dependent, at the highest dose tested, we observed an 83% reduction in EASI% change from baseline. Again, this is something that you would typically only see for a JAK inhibitor. Biologics really can't deliver such a deep magnitude of change from baseline, such as to reach an 83% drop. The other very profound takeaway from the data was that there was a substantial durability of the response. As I mentioned, patients were treated for 12 weeks. Afterwards, we observed patients for 36 weeks additionally when we withdrew drug. So we just followed patients, and we followed the stabilization and the depth of their response. And we saw a profound rate of control. So, for example, of the people that achieved an EASI 75 response, about 70% of them maintained that response through 36 weeks off drug. So after just a 12-week treatment regimen, we maintained an EASI 75 response in 70% of the people. So this actually got us very excited. And it also got the KOL community really, really excited. In fact, we've seen many, you know, investigators present our data at various dermatological meetings. We're not even involved in the presentation. But even the community is starting to talk about the potential remittive effects of drugs like a Treg drug and the potential of sort of causing a kind of a lasting immune homeostasis that can really, really, really set a new bar for efficacy potentially in this disease. I see. I, I'm really amazed by the susceptibility for the efficacy during the off-treatment period. So what's the possible mechanism there? You. Yeah, it's a, it's a really great question. So, when we did our preclinical studies of the mechanism, we did study if in mice we could create a lasting durability to repeated challenge with the same kind of protein antigen. And what we found was that we could, we could take mice in the regular sensitization challenge, like, like a typical delayed-type hypersensitivity model. And we could, of course, show a dose-dependent reduction in inflammation when you treat it with REZPEG. But then we decided, well, what if we then stop treating the animals and put them back in the vivarium? And several months later, take them out and re-challenge them with the same antigen, but with no additional treatment since only that first brief occasion of treatment, the very first time we challenged them. And a mouse lives about 12 months. So a few months in the mouse's life is like, you know, many years for us. It's like dog years, right? And so what we found was that the mice maintained suppression to being challenged to the same antigen months after their last dose of REZPEG and months after they were originally challenged the first time. In contrast, you could sensitize and challenge them to an irrelevant antigen, and they form a normal high naive response to a new antigen. But you could even in the same animal challenge one ear with the new antigen, one ear with the old antigen, and this ear would remain suppressed. So that showed us that you could create a lasting, you know, effect. You know, we had some hints that there could be something like a memory type of a response, you know, that was there in these animals. You know, that was an interesting preclinical observation. But then we saw these results in atopic dermatitis that were very consistent with that. So we were very excited to see that. But it, you know, obviously to prove what's happening in humans will take many more experiments, many more translational studies. Wow, that's quite interesting. So, speaking of Lilly, I think everybody is interested. So if appropriate, could you tell us more about the behind-the-scenes story on Lilly, how they did a miscalculated data? Maybe both of you can chime in. Yeah, sure. So maybe I'll start off with the data, Jennifer, and then I'll hand it over to you. Yeah, so we discovered that Lilly had incorrectly calculated the efficacy data from the atopic dermatitis and the psoriasis Phase 1B studies of Rezpegaldesleukin that were originally presented, you know, in both in December of 2021 and then later in September of 2022 at the EADV conference. And we discovered that when the raw data from these studies was transferred over to us after our partnership with Lilly was terminated. And we discovered, and then it was later verified by a third-party, you know, independent statistical group, that Lilly had erroneously only used a subset of the EASI and PASI scores, not the total 72-point scale, which is industry standard, but a subset of 48-point scale that they had used erroneously. Nektar and Lilly were in communication about that. We actually made sure that the internal statistical and clinical teams in charge of the two studies were made aware. Lilly had, in fact, confirmed that those mistakes were made, both, you know, before August and since August as well. Then, of course, the fully corrected and final data from the atopic dermatitis study, which we were just speaking about, was presented by Dr. Jonathan Silverberg at EADV last year. You know, the important thing is this new data is so significant because not only does it further improve and extend the original observations, but again, like now it's statistically significant, right, when you calculate the data the correct way. Really, it's a very substantial error that was really important for us to correct. Jennifer, maybe I'll turn it over to you for a little bit more. Jennifer. Yeah, I mean, I think, one of the important things that we did when we discovered the mistake, so bear in mind that we had actually gotten the drug back after we discovered the mistake, the incorrect data was first reported in December of 2021 by Lilly. And, actually, the data was pretty well received. The, it was a 66% drop in EASI, which is, you know, similar to what you see with Dupixent. At the time, we were, expecting to go into phase 2 in 2022. And, clearly, that didn't happen. By the time we got to the spring of 2023, we could not agree on trial design. We could not agree on patient population and, next steps in atopic dermatitis. So it was at that point that, we got the drug back. Lilly terminated the agreement. We got the drug back. And we started the work on the phase 2b trial ourselves. So after we had discovered the mistake, which is after we terminated, after the agreement was terminated, we actually filed a litigation against Lilly. That litigation, which, again, was filed in the spring of last year, just cleared the motion to dismiss. So the judge agreed that we could go forward with our breach of contract, bad faith, breach of contract claims under the lawsuit. The judge has also ordered us to go to mediation within three months of that early March motion to dismiss hearing. So, but we are proceeding in active litigation right now. So, obviously, we lost at least a year and a half of development and patent life for this drug. It really should have been put into phase 2 with the strength of these data, particularly the corrected data in 2022. So, we're happy to have it in phase 2B now. I think, our sole focus at the company right now is executing on these clinical trials that we're running, ensuring that we stick to the timeline, we stick to clinical enrollment, and we get the data in the first half of 2025. So, that is the key focus of the organization right now is execution. Wow, that's really unbelievable. So as of now, you guys already started the phase 2B study. So what's next? What we could expect there? Yeah, well, maybe I could just, like, describe it a little bit. The study began in October of last year. It's in biologic naive atopic dermatitis patients that have moderate to severe disease. It's actually the exact same patient population that we studied in the phase 1B study. It's just a much, much larger study with some different dosing regimens, you know, that really extend on the observations of phase 1B. Our goal is to enroll about 400 patients. We'll have 3 different regimens of Rezpegaldesleukin versus placebo in the 16-week induction period. So that includes, you know, again, like, there was a very successful dose level in the, obviously, in the phase 1B. So we're definitely repeating, you know, that dose level. And then we're actually looking at even lower dose frequencies in induction. Then, the patients that reach the end of the induction, if they meet the threshold, which is an EASI 50 or better, they can advance into the maintenance section. There they're re-randomized to one of two regimens, either a once-a-month or a once-every-three-month regimen. Again, we feel very confident about that once-every-three-month regimen because of the long off-treatment period where we saw such a prolonged effect. That schedule in maintenance continues for 28 weeks. Again, as we just described, the study is open. It's enrolling very nicely. We plan to have data in the first half of 2025. To make sure we achieve that goal, our execution, you know, we're focusing in North America, Europe, and Australia, where we have sites running, for this study. We're also very actively participating in outreach. We're attending all the site initiation visits. We're talking to the investigators at major dermatological conferences. There's a lot of outreach and contact points. One of the things that we're hearing is that there's a lot of excitement around our phase 1b data. You know, we're, there's a great dataset that's propelling the phase 2b study and it's looking very, very promising for us as we are opening the sites and are enrolling now. Oh, it's great. Thanks, Jason, for the color. Let's switch gears a little bit to alopecia. So could you give us the phase 2 design for the alopecia and what's the consideration behind adding a lower dose cohort? Sure. Yeah, so the study design is there are two dose levels of REZPEG, treated over a 36-week induction period. And then that's followed by a 26-week off-drug period. Yeah, so that second part looks a lot like the phase 1B atopic dermatitis study. And the design is really aiming to achieve a couple of key goals. So relative to placebo, you know, in this disease, we know the placebo rate is very, very low, right? People don't spontaneously regrow hair in this disease when it's so, so the placebo rates across many, many studies range from 5%-10% max. It's very, very low. So that means that you can actually use smaller cohorts because detecting an effect size is very different against that kind of a placebo rate. So that's why we're evaluating two dose levels of REZPEG. We chose 36 weeks because the JAK inhibitors, which are the approved agents in this field, they actually noted that a 36-week induction was more appropriate, right, for assessing because in some patients it can take a little bit longer to grow hair, when they're on a JAK inhibitor. And then the third part of this study that's so profound is that in this field, as remember we described how JAK inhibitors, people lose response when they discontinue. In alopecia, that happens as well. And it's even more devastating to patients that have regrown hair that they haven't had for years to watch it all fall out again if they go off a JAK inhibitor. So we believe that if we reproduce what we saw in atopic dermatitis, that would be completely transformational for the treatment of alopecia areata to show durability of response. Sure. So that data also expected in the first half of next year, right, for the phase 2? Okay. Yeah. Sounds good. So, Jennifer, I noticed you guys did a private placement with the TCG Crossover. So could you tell us more about the genesis of this financing and, you know, why do it now? Yeah, so actually TCGX came to us and early in the year. We, you know, were pleased that they had taken such an interest in REZPEG and the company, obviously. I think from our vantage point in terms of looking at our cash exiting 2023, we had $330 million in cash and we're starting two large phase 2 trials. So I think what was important to us was prioritizing exiting into the data, so exiting 2024 into the data readouts with at least $200 million in cash. So, our cash guidance at the end of 2024 is now $200 million-$225 million. And it really gives us a very strong cash position going into some key data catalysts, which will help us maintain some optionality as we go into the data. We are pleased that they took an interest in us and obviously they're a very well-respected fund and we're happy they took a large position as a new investor. Awesome. To close up our conversation, so could you guys give a summary for the catalyst for the next 12-18 months for Nektar? Sure. I think Jason mentioned the atopic dermatitis and alopecia phase 2 readouts. So atopic dermatitis will actually come first in the first half, and then alopecia we believe will read out, you know, a month or so or maybe two months after that. In 2024, we do have a readout coming on an oncology asset. We didn't talk about that today. It's actually in some partner trials right now. We would only develop that further under partnerships. But it's in a bladder study right now with Merck KGaA and Merck KGaA is running that trial. It's a combination trial with avelumab. And, it's a quite, quite a large trial, with a PFS endpoint. We are expected to see some data from that trial in the second half of this year. And then we have some manuscripts coming out on, on Rezpegaldesleukin this year. Those should come out throughout the year. We also have some data, preclinical data coming on an interesting preclinical asset, a TNFR2 agonist antibody. We haven't talked about that today, but that's sort of another program that we have in immunology and inflammation that we're going to put into the clinic in early next year. Sounds great. So thank you, Jennifer and Jay-Z, for accepting our invitation and having a fireside chat with us. It was a very informative and enjoyable conversation for me. Also, I'd like to thank our audience for tuning in. Thank you. Thank you, Arthur. Thank you, everyone.