All right. Welcome, everyone, to Jefferies Linda Healthcare Conference 2025, last day. Thank you for everyone in the room. And my name is Roger Song, one of the senior analysts covering biotech in the U.S. It is my pleasure to have a fireside chat with our next company, Nektar Therapeutics, and then JD, Chief Research and Development Officer. Welcome. Hello, everyone. Good morning. Awesome. JD, we have a lot to cover because Nektar has an exciting moment. I know you just had a lot of the momentum and then into 2026. Toward the end of the year, you have a lot going on. Why don't we just go right into it? Most near term, you are about to read out phase 2b, alopecia areata, from your RESPECT. Maybe just set the stage. What's your expectation? You have been guiding. Maybe just remind us what you want to see in that data readout. Yeah, sure. Maybe I'll just take a moment to describe the study and the trial design. The study is a trial where we enroll just under 100 people that have severe to very severe alopecia areata. The baseline is a SALT 50 or higher. This is effectively the same patient population as you saw that was randomized and treated in the JAK inhibitor studies, multiple JAK inhibitors that have been approved in this space. It's the same patient population. We're also looking at people that have had at least a six-month duration episode. We know patients that are in the severe category are typically patients that have multi-year of their current episode. We randomize the patients 3:3:2 onto two dose levels of rezpegaldesleukin, 24 or 18 micrograms per kilogram, given subcutaneously every two weeks. We treat for 36 weeks. The data that we'll be reading out next month in our top-line presentation will be the 36-week data for the patients that have basically extended through a 36-week, a nine-month induction period. The primary endpoint in the study is the% change from baseline in SALT. SALT is not just a condiment. It's also the primary endpoint in these studies. We use that as a Severity of Alopecia Tool, and it's a way to assess what% of the patient's scalp is associated with the disease and the amount of hair loss. SALT 50 means 50% of your scalp has been affected. A SALT 100 would be a patient that is effectively completely bald. They have 100% of their hair loss. A SALT 0 is a person with no hair loss. The percent change from baseline, our primary endpoint, is that reduction in that endpoint. This is a continuous measure. It is much like the percent change from baseline in EASI score that we use in atopic dermatitis. We will be looking at that reduction in the SALT score. We use the continuous endpoint to give additional power into that endpoint in the study. The goal is to demonstrate a separation from placebo. Our benchmark is to hit targets associated with low-dose Xeljanz, which is really the first approved and the most used JAK inhibitor in this space. Awesome. All right. Good. That is the design and then the data readout, the expectation. You say low-dose salumin. Just want to clarify that low-dose salumin is in the label. Basically, it is a phase III result, salumin, not the phase because when we look at the phase II, it seems phase II, like many trials, phase II result is a little bit better than the phase 3. Yeah. We're really using the label as the key measure of the benchmark because that really is the only benchmark. The important thing is that the endpoints are a little bit different. We use the% change from baseline SALT as the primary endpoint, like I mentioned. The key secondary endpoints that we'll be covering in our data release include the dichotomous endpoints, which is a proportion of people that reach SALT 20, as that's the U.S. FDA approval endpoint in this indication, and also the proportion of patients that reach a SALT 10. These numbers, SALT 20 and 10, they're not a percent. They're the absolute. This is looking at the proportion of people that have 20% or less hair loss involvement or 10% or less. They're absolute dichotomous endpoints. They're the two registrational endpoints, SALT 10 being in Europe. The goal is that when we use these benchmarks, we're using those to key to the phase III approved on-label data. For example, for the% change in SALT score that was seen in phase III, it was about a 25% placebo-adjusted result. Across the two studies, it basically ranged 20%-25% placebo-adjusted SALT reduction. The placebo-adjusted SALT 20 result for salumin was in the 10%-15% range across the two studies. Those are our targets. One of the things that's important to remember is that there's no biologic approved in alopecia areata. You have a range of JAK inhibitors. They were really shown based on the premise that interferon gamma is an important driver of disease, and the JAK inhibitor can block interferon gamma biology. That led to the first use of a JAK inhibitor. Now we've seen multiple JAKs approved and even phase III data from RINVOQ that was just recently announced a couple of months ago. That creates one example of efficacy. We know, and the derm community knows, that JAK inhibitors are really not the most optimal chronic drugs. When you're dealing with a disease where you expect to treat patients for years of ongoing therapy, it's difficult with the safety profile of a JAK inhibitor to employ that kind of a therapy in patients for so long. There are numerous risk factors. There's a black box warning label associated with JAK inhibitors. There's a risk of infection. There's a risk of viral reactivation. There's transaminase liver risks and others that really make it a difficult agent to use. Without a biologic in this space, that creates a really big opportunity because we've seen in numerous indications, starting with rheumatoid arthritis with the approval of infliximab to numerous other diseases, psoriasis, atopic derm, and so on. When a biologic comes in, it really grows the market. It increases the addressable patient population. Even though we know biologics are always less efficacious than JAKs, in every indication where both agents are approved, the JAK is always more effective than the biologic. The biologic takes a considerable share because of the safety profile of giving a drug like that chronically. That is something that we know is very important in all those fields. We think for RESPECT, that represents a big opportunity. If we have a successful result in this phase II, we'll quickly eye to phase III with the potential of being the first biologic approved in the alopecia areata indication. Yeah. I think that's a very critical point. It's not just about the efficacy. You have to reach a certain point, which you benchmark to that. That's reasonable. On the other side, the safety is you have a huge advantage. Which means, if that's true, based on your market research, you are testing this low-dose alumin, the efficacy profile along with the existing to date, the pretty benign safety profile. Together, you'll be preferred over a JAK inhibitor if you achieve that profile. Yeah, that's exactly right, Roger. In fact, we did market research testing a TPP that had the efficacy benchmarks I mentioned of low-dose salumin, but the convenience of a low-frequency subcutaneous injection and a safety profile associated with the biologic, not associated with the black box warning label drug. It tested extremely favorably. It tested even in all lines, not just in the early line where a physician would be choosing between a JAK or a biologic like rezpegaldesleukin. Even in disease severity that starts to notch down, where you'd prefer a biologic even more. Post, you'd prefer a biologic completely. In pretty much all the lines, it was positive. One of the interesting takeaways from that research also was that both the physician side for compliance and patients for convenience preferred an injection over daily pills, which is unique because you do not always see that when you test that kind of a profile. One of the reasons driving that is that with a JAK inhibitor, the effect is lost very quickly when treatment is interrupted. Even a short interruption, like the patient for compliance reasons forgets for a day or two, can lead to the thinning of hair. If you have a tolerability or other reason to discontinue the JAK altogether, if you were lucky enough to have grown hair, you lose the hair right away. More than 90% of people lose all of the hair that they regrew on a JAK inhibitor when they stop the treatment because it really is an interferon gamma blocker on target. As soon as it washes out, the disease comes right back. Having a drug that you can give subcutaneously once or twice a month actually protects you from interruptions and protects you from compliance issues with the JAK inhibitor that tested positively. The other thing that was very positive from the market research is that the dermatologists really do not like to do transaminase liver function testing. It is hard to manage patients against the profile of the JAK inhibitors off target and side effects relative to how dermatologists normally manage patients that they see with these indications. It really tested very, very positively. That is why we feel very confident using that TPP and those benchmarks. Yeah. JD, you used the psoriasis and then atopic dermatitis as the analog to the AA because AA, we have not seen biologics approved. Is that true in your market research with this respect, the potential TPP? You'll be used naive to JAK inhibitor and then maybe even after. What's the line of therapy you're using? The reason I ask that is that some of the investors are asking, JAK inhibitor is now having high sales in the AA. Why do we think this can be a blockbuster opportunity for you? Yeah. No, it's a really good point. Part of that is driven by the fact that physicians don't want to use a JAK inhibitor. There was an independent survey published recently. We touched on it in our earnings call that as much as three quarters to two thirds of dermatologists won't even use a JAK. Against that background, those docs, many of them, are comfortable to use a biologic. That's basically one simple answer. Why does the market grow? Why are more people treated with medicine? If the first medicine is one that a doctor is uncomfortable to prescribe, the addressable patient population increases if they're comfortable to use a biologic. If we thought the segment was this large with JAK, it could be this large with a biologic. Yeah, one of the things that came out from that market research. It's also precedented. I mean, again, RA is a great example. Before infliximab was approved, sulfasalazine's gold. It was actually a very small market with very few penetrated drugs. Even after first infliximab and then Enbrel or etanercept were approved, nobody thought it would grow and support six TNF biologics. It did in the number of people that are treated with these is enormous. We think that similar can happen. For the JAK inhibitor sales, they sell a few billion dollars, but it's all combined. They do not break it out potentially. We do think that alopecia as a component of that can reach at least in the $500 million range, especially as they continue to move and more JAK center, especially with RINVOQ coming in. All of that's just background. We think with the biologic mechanism, it doesn't impact it. We think we can grow that market substantially. Yeah. Another point in terms of the benchmark, because we do see that RINVOQ, they report some phase II AA data as well. Very impressive on the efficacy side. You used the low-dose Olumiant as the benchmark. How much the delta in your market research, they say, OK, you're taking this here, but I have a lot of other advantages we just discussed that they still prefer using this over JAK inhibitor. How likely that RINVOQ will also expand the JAK inhibitor market? Yeah. I think, first of all, just as an immunologist, RINVOQ is sort of like the best JAK inhibitor. Every indication, it beats up on all the other JAK inhibitors. It's really strong on the target. And it's one of the best JAK inhibitors that I think we know of. I think RINVOQ's data was important for the JAK inhibitor class. It's important for it to win in the preference against the other JAKs that it competes against. Its efficacy is extremely high. It still carries all the other baggage. If anything, part of why RINVOQ is as efficacious as it is, it also carries some of the toxicity with it because it's on the same axis. It has more acne. It has more things that you have to mind as a physician. If it's even a little bit more poorly tolerated and you have to discontinue it, now you're fighting against the discontinuation of hair loss. All of the same features apply. We don't think it actually impacts the positioning of the biologic because, again, Dupixent and RINVOQ are both approved in atopic dermatitis. Xeljanz and Humira, it still won't change that. Got it. OK, great. Before we move on to AD, take a quick step back because back to the phase II, the expectation, understanding this is a phase II, dose finding, relatively small size compared to the phase III hundreds patient. I know you haven't formally disclosed the powering assumption. What you can tell investors, say, OK, how the study is powered and what's the benchmark? Is that fair to say this trial does not necessarily have to see the statistical significance? Obviously, you would like to see. If you see enough signal, you can move to the next step. Yeah, sure. Yeah. I mean, it's generally our practice at Nektar. When we report the data, we'll give you all of the design of the study, the statistical considerations. You can look at our atopic derm presentation in June where we really covered that really deeply. What I can say now before the top line next month is that this is about 100 people, like I said, just under 100 patients were enrolled. Our strategy is, A, in this patient population, you have a level of understanding of the placebo response rate. Patients that are severe and very severe really don't spontaneously regrow their hair. If we were doing a study in moderate patients, different story. There's a lot more regrowth. In severe to very severe, people have had long episodes. For many of these people, for many years, they've had alopecia. It would be unusual for them to suddenly see a spontaneous regrowth. That's partly why you can make decisions around the sample size and total. The other thing is our primary endpoint, like I mentioned, is a continuous endpoint. Unlike a dichotomous endpoint, you do not get the full curve and every time point that fits into the continuous endpoint model when you use the statistics to fit the data. By using all of those considerations, we designed the study as such and powered to meet the difference. We will report the results next month. In terms of your second question, I mean, if you just take a step back, fundamentally, the purpose of a phase 2B dose range finding study is to set your dose for phase II. Those studies do not fundamentally or formally or from a regulatory standpoint need to meet statistical significance. In fact, I can rattle off many examples of phase II studies that did not meet stat-sig, but that clearly allowed you to pick the dose and then had successful phase 3s. That is common. There is no regulatory requirement for that. I guess formally, from the standpoint of your question, it is true. We think that there is a really good chance for rezpegaldesleukin and its mechanism of action and the role of Tregs in this disease and underlying the pathology of alopecia to be efficacious. Yeah. OK. Yes, we're all with that. We look forward to that data readout. I think you have a very decent chance to meet the statistical significance and the benchmark for the low-dose alumim. OK, quickly move on to the AD. It's supposed to be a major part of the story. Also, it's because of the proximity of the data readout for AA. A lot of investors care about the readout. That's why we spend a bit more time. AD, that's another next very major catalyst for Nektar early next year. Just to remind us, what do you expect to show us in terms of the maintenance and the rescue, the cohort and a little bit complicated design? I think the purpose of that trial is very meaningful because you want to show differentiation compared to other biologics. Yeah. One of the things maybe I'll just touch on is about two weeks ago, we presented data at the American College of Allergy and Immunology, the ACAI meeting. One of the things that we presented was a very differentiating feature of rezpegaldesleukin's mechanism. We looked at efficacy in patients that had atopic dermatitis, of course, in the atopic dermatitis study, but that also had the comorbidity of asthma. We know from the epidemiology that one in four atopic derm patients also have asthma. So 25%, a considerable proportion of the entire atopic dermatitis addressable population also has asthma. We showed that in the study, we put in a pre-specified endpoint called the Asthma Control Questionnaire, ACQ5, which is a validated endpoint for measuring asthma control as a patient-reported outcome. There is also a 0.5-point reduction, which is a validated responder scale. We showed that all the doses of RESPECT reduced the ACQ5 over 16 weeks of treatment. That was true in the entire population and even in the subset of patients that had a baseline score of 1.5 and higher, which is categorized by that scale as uncontrolled asthma. These are people for whom they have significant life disturbance owing to the asthma. That puts RESPECT in a very unique category because right now, we only know of three drugs, two other drugs besides RESPECT that do this: JAK inhibitors and Dupixent. Now RESPECT also induces ACQ5 lowering. The selective IL-13 inhibitors like Lebrikizumab or Adbry do not reduce ACQ5 scores in the comorbid population. Both of those drugs were originally developed as asthma drugs: Genentech with Lebrikizumab, AstraZeneca with Adbry. Neither of those drugs succeeded in asthma phase III studies. This puts RESPECT in a very unique opportunity. The IL-31 class actually exacerbates asthma as one of its side effects. The OX40 class has not shown this data. Sanofi just had a negative asthma study with amlitelimab. We think this is highly differentiating, not just for RESPECT, but the Treg mechanism and really starts to give us a good sense that with TH2 diseases like atopic derm, you have a very similar underlying immunology: TH2 inflammation, atopy, eosinophilic effects. When that's localized to your skin, you get atopic derm. When it's localized to your chest, you get asthma. When it's localized to your GI, you have food allergy. These diseases, there's a cluster of adjacencies that now we could really start to look at the mechanism of Tregs being therapeutic for. That's one piece of new data that we're very excited about. That is something that really adds to the differentiating profile for rezpegaldesleukin. Looking forward, in the first quarter of next year, after our alopecia areata readout next month, we will be reading out the 52-week portion, the maintenance portion of the phase 2b atopic dermatitis study that we were just touching on. In that, there are basically two categories to that study. After 16 weeks, all the patients that were EASI 50 or better moved into the maintenance portion. That was about 190 people. Again, the vast majority of the rezpegaldesleukin-treated patients moved into that category. There they remained on the same dose level they were on in the induction, but re-randomized at either a once-a-month or once-every-three-month subcutaneous dosing schedule. The once-every-three-month, very convenient low-dose regimen for maintenance. In that population, we will be looking at two major buckets. The first bucket are people that had a response. How many of them maintained the response on either the once-a-month or once-every-three-month regimens? The other thing we'll be looking at is we've seen evidence that with increasing dosing with this mechanism, with rezpegaldesleukin, the quality of the individual's response can improve. For example, an EASI 50 response can become 75, 75, 90, 90, 100, and so on. We'll also be looking at deepening of responses over that period of time as well against both the once-a-month and once-every-three-month regimens. That'll be one component of data in that update in the first quarter next month. That That really sets the induction maintenance and the maintenance regimens that are effective, and then particularly the cadence. We have a high reason to believe that a once-every-three-month will be effective because in our phase I, we've already shown we can stop dosing altogether after 12 weeks. The majority of patients maintained efficacy for six months off drug. The other part of the phase II study are all the patients that were worse than EASI 50 at the end of 16 weeks. They all move into an escape arm, which is high-dose rezpegaldesleukin, a 24 microgram per kilogram dose given twice a month subcutaneously. There we'll be basically looking at effectively intra-subject dose escalation. For example, if you were on a lower dose of rezpegaldesleukin, did not respond, but now you updose, do you gain a response? That does a lot to confirm the dose level we'd like to use. We are, of course, proposing that dose level and a 24-week regimen for our phase III induction. It also lets us kind of isolate on the placebo crossover cohort, which is a unique subpopulation. These are the people that were on placebo and induction did not achieve EASI 50. They did not even have a placebo response. We have already shown that when they switched onto rezpegaldesleukin in that escape arm, over the first 16 weeks of treatment, they looked effectively identical to people that were originally randomized to that dose level and induction. We have also seen with increasing dosing beyond week 16, we get deepening of efficacy across all of the parameters that we read out. We will also be looking at the effect of 36-week dosing in that pure crossover population. It will be a very rich data update from the first quarter of next year. Yeah, look forward to that. I think this will be the next major, major things that really people focus on. Before we go, I think those are the two major indications in phase 2B. How's the FDA interaction so far? What is the next step for phase III? Would you finance to run those two trials together, or you probably will find a partnership? A couple of parts of the question spend the last couple of minutes. Yeah, so really, really quickly, I mean, we have an end of phase II meeting that's planned before the end of the year. I mentioned it a little bit. We propose a phase III design, put that in front of the FDA. As we get their comments, that will allow us to finalize not just the pivotal study protocols, but the whole plan through the BLA, which captures the CMC, captures all of the components to get you to a launch product. That's ongoing. We'll give some level of color around that as we hear from the agency. In terms of the kind of long-term vision, I mean, one of the things that's exciting is if the alopecia study is positive in phase II, our goal would be to move to phase III. If you just take a step back, it would be to launch a second indication, so say alopecia indication, roughly 12-18 months after the atopic derm indication, which would be a really substantial opportunity because now you'd have two indications contributing to the ramp curve. For a drug like rezpegaldesleukin, which was launched recently, it started in prurigo. Then they added atopic derm. That really contributed to the growth of the drug. We think rezpegaldesleukin has a similar kind of opportunity. Beyond that, as there's more resource, we can add more indications. Excellent. Great. Thank you, JD, for all the chat today. Thank you, everyone, for listening. Thank you, everyone.