Nektar Therapeutics
Q1 2020 Earnings Call Transcript

Published: 8 May 2020

[Operator:]

Ladies and gentlemen, thank you for standing by, and welcome to the Nektar Therapeutics First Quarter 2020 Financial Results Conference Call. At this time, all participants lines 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 may be recorded. [Operator Instructions]I would now like to hand the conference over to your speaker today, Ms. Jennifer Ruddock, Head of Corporate Affairs. Ma'am, you may begin.

[Jennifer Ruddock:]

Thank you, Crystal. Good afternoon, everyone, and thank you for joining us today. With us are Howard Robin, our President and CEO; Gil Labrucherie, our COO and CFO; Dr. Jonathan Zalevsky, our Head of R&D; and Dr. Wei Lin, our Head of Development. On today's call, we expect to make forward-looking statements regarding our business, including clinical trial results, timing and plans for future clinical trials, timing and plans for future clinical data presentations, the therapeutic potential of our drug candidates, outcomes and plans for health authority regulatory actions and decisions, estimates and predictions of the COVID-19 pandemic's impact on our business and clinical trials, financial guidance and certain other statements regarding the future of our business.Because these statements relate to the future, they are subject to inherent uncertainties and risks that are difficult to predict and many of which are outside of our control. Important risks and uncertainties are set forth in the Form 10-K that we filed on February 28, 2020, which is available at sec.gov. We undertake no obligation to update any of these 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 as a replay.Before turning over the call to Howard, I'd like to comment on a small housekeeping item. Due to the shelter-in-place restrictions in San Francisco, each of us are calling in from different locations. So in order to facilitate a smooth call flow, I will moderate the Q&A session for our team so we can avoid technical issues during this session. Thank you very much, and we appreciate your patience as we work to ensure there are no technology disruptions for those listening.With that said, I will hand the call over to our President and CEO, Howard Robin. Howard?

[Howard Robin:]

Thank you, Jennifer, and thank you, everyone, for joining us on the call today. I'd like to start the call by discussing what is certainly on everyone's mind, managing the challenging circumstances caused by COVID-19 in the past several months. So the wide-ranging impact that this virus has had on the health and well-being of our communities is significant. And like all of you, we're all working hard to appropriately adapt our business practices while at the same time, leading and operating the business effectively. It is a dynamic situation, and we will continue to adapt our response. However, I want to highlight a few key areas.As we start working as we work together to navigate the current environment, we have three main priorities

[Wei Lin:]

Thank you, Howard. I'd like to discuss briefly the comprehensive plan we've developed to ensure that we're meeting the two priorities Howard mentioned earlier

[Jonathan Zalevsky:]

Thank you, Wei. I'd like to spend a little more time discussing two programs

[Gil Labrucherie:]

Thank you, JZ, and good afternoon, everyone. On this call, I will review our 2020 financial guidance, which is unchanged. Starting with our exceptionally strong financial position, we ended the first quarter with $1.5 billion in cash and investments.As we discussed on our last earnings call, we plan to repay the $250 million in outstanding senior notes in the second quarter of this year. We indeed completed this repayment in April, so this will be reflected in our Q2 2020 balance sheet. The senior note repayment has strengthened our balance sheet and will result in approximately $20 million of annual interest savings on a go-forward basis. After taking into account the repayment of our senior notes and our projected cash usage this year, we still plan to end 2020 with at least $1 billion in cash and investments.As we discussed on our last earnings call and consistent with our guidance, we recorded a $45.2 million impairment charge in the first quarter that concludes our NKTR-181 activities. Our loss per share of $0.78 for the first quarter includes the $0.25 loss per share attributable to this impairment charge.I will now turn to our 2020 financial guidance, which remains unchanged. At the outset, I'd like to note that we are not changing our full year financial forecast based on COVID-19 impacts, given that our clinical pipeline progress remains largely on track, as Howard reviewed earlier on the call. Our full year GAAP revenue guidance remains between $140 million and $145 million for 2020. This includes $50 million of milestone payments from BMS and $90 million to $95 million of royalties, product sales and other revenue. As Howard stated, we recognized and received the first $25 million milestone for BMS' start of the muscle-invasive bladder cancer study, which occurred in January of this year. The second $25 million milestone is in connection with the start of the adjuvant melanoma study and is still planned for Q3 of this year. As a reminder, the $90 million to $95 million of remaining GAAP revenue is still expected to be recognized on a fairly ratable basis over the four quarters of this year.Our GAAP R&D expense guidance is also unchanged. We anticipate 2020 GAAP R&D expense will range between $475 million and $500 million, which includes approximately $70 million of noncash depreciation and stock compensation expense. Our G&A expense for 2020 is still projected to be between $105 million and $115 million, which includes approximately $45 million of noncash depreciation and stock compensation expense. And as I reviewed earlier, we still plan to end the year with at least $1 billion in cash and investments after we completed the repayment of our $250 million in senior debt this quarter.And with that, I will open the call to questions. Operator?

[Operator:]

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

[Peter Lawson:]

Hi. Thanks for taking my questions. I guess, the first question just probably around the JZ around 255. Just timing around the initial data on the patients we could see? And what would you want to see to move that project forward?

[Howard Robin:]

Sure. Thanks, Peter. Sorry, Jennifer. Yes. Thank you, Peter. So yes, so with NKTR-255, as we stated earlier in the call. So we've been starting into the dose escalation now. And we have seen some very interesting target engagement data from the first few patients that we've enrolled into the study. And the kind of results that we're looking to see obviously is an assessment of the overall safety and the tolerability and the pharmacokinetics and pharmacodynamics, all of the things that are typical in every kind of first-in-human study, when you advance into the clinic for the first time and you perform the dose escalation.But specifically, in the case of 255, we had built a wealth of understanding from our preclinical studies. Where remember, we evaluated the molecule in non-human primates and mice and other species. And we saw the effect on the immunological changes that the molecule could make. Though we saw natural saw natural killer cell elevations, we saw their persistence. We saw changes in the activation stage of the cells and -- we also even, of course, proposed data -- presented data on the overall differentiation of the natural killer cell compartment as well.This is the kind of biology Peter that's only possible to achieve with an IL-15 mechanism. So as we move into the clinic, we're looking to translate all of those kinds of findings. And the clinical trial has built into it, an extensive biomarker program that allows us to measure these kind of changes. It allows us to assess the natural killer cells and the CD8 T cells and assess them in multiple compartments such as the blood as well as in the tissue.So we'd be very excited to present the data that we're seeing in the study. We think it's reasonable that either later this year or early next is a time when we can do that. Assuming the dose escalation continues as planned, and the kind of things we'd like to see out of that dose escalation are, as I described, combination of safety, tolerability, the PK and the biomarkers in the program.

[Peter Lawson:]

Got you. Thank you. And then, I guess, I think for Howard just, I know, difficult during this time because interim readout in first-line melanoma to assess are between the two arms. Is there any sense of timing around that and how's the dialogue changed or have you had further dialogue with the FDA around that -- point?

[Jennifer Ruddock:]

So thanks, Peter. This is Jennifer. I'm going to ask Wei to address that if possible, Wei?

[Wei Lin:]

Yes. Thanks, Jennifer. Yes, thanks for the question. So we are actively working with our partner, BMS in engaging the health authority. So we'll definitely provide feedback once we completed the health working discussion. And this definitely involved not only the FDA, but the EU health authorities were, I think, are planned for obtaining macro authorization should be global and hence getting obtaining feedback, globally from all health authorities -- all the major ones are really critical for us to make the change.The current design with a three end point has been reviewed and proved by the relevant health authorities. So before we make a change, it's not only the FDA engagement, but also health engagement that we need to obtain before proceeding with the change. And once that's done then we'll be sharing that information.

[Peter Lawson:]

Okay. Thank you so much. I'll hop back in the queue.

[Howard Robin:]

Sure.

[Operator:]

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

[Tyler Van Buren:]

Hey, guys. Good afternoon. Thanks for taking the questions. I guess the first one is on the melanoma PIVOT-02 update that you gave with December cut off. I think you said that medium PFS was not achieved at 21 month and if I look back to SITC it was 18.6 months of follow-up. And at that point, you guys said that median PFS could be no worse than 15 months. So is that kind of three months different fair to apply here, meaning maybe medium PFS can be no worse than 18 months or curious to get your thoughts there?

[Jennifer Ruddock:]

Wei, I'm going to ask you to answer that. Thank you.

[Wei Lin:]

Sure. Thanks, Jennifer. Yes. Thanks for that question. So the -- it's not always directly linear, definitely with longer follow-up than the minimum PFS would also be extended. But because what we represented is an ongoing look as we are doing periodic data review and we were not ready to present this publicly yet. So I would not -- we have not done an analysis to really project out what the minimum PFS would be at this time.Is definitely longer than it was back at SITC and we do plan in the second half of the year to update melanoma data. At that time, we can provide the detail what it means in terms of PFS as we continue our follow up.

[Tyler Van Buren:]

Okay. And as a follow-up, is it possible to state, I guess, what median PFS, at what point of median PFS, how many months you guys would be really confident that you're seeing a significant difference here with the combination because if you look at other Phase II studies. Some clients have pointed out that they've shown 20 months median PFS. And then in Phase III, have shown no effects. Even that these time points seem to be impressive relative to nivo monotherapy at seven months of nivo be at 11.5.

[Jennifer Ruddock:]

Wei, I'm going to ask you to answer that as well.

[Wei Lin:]

Sure. So the -- I think I'll kind of break this into kind of two parts to really address. One is sort of the median and the other is the haz ratio. So the ultimately when FDA and other health care review the data for a full approval based on PFS, it's really the combination of those two values. So median certainly is very important, but the hash ratio give you the complete separation of the two [indiscernible] curves for the entire length of the curve. So those two elements are really important, too. So it's a -- it's been really -- it's always difficult to really say that this is a particular median is sufficient because it's really the complete shape of the curve. Sometimes the median can bubble, sometimes the median may not concave a bit but if the rest of the curve contribute to a really strong haz ratio difference, that's also very, very meaningful too. So -- but I think the current data certainly suggest a fairly big separation between the NIVO BEMPEG arm versus the NIVO arm, but that's based on the PVIOT-02 data.Now in terms of translatability, so the second part, I want to really talk about is really translatability of the Phase two data from PIVOT-02 onto registrational Phase three and that sort of gets to the crux of your question, which is -- certainly, historically, there's been many studies where the Phase two data does not translate into a Phase three and to what level of confidence do you actually have in doing that?And granted that, there's many historical examples of that. And I want to really point out the -- largely the non-translatability has to do with the lack of connection with the endpoint being studied in the Phase two and the endpoint being studied in the Phase three. So taking an example, there are many diseases where the Phase two is actually based on a PFS endpoint.And then the Phase three is based on OS endpoint. And in certain diseases, those two endpoints do not really connect really well. It does connect, for instance, in CRC really well. But in many other tumor types, it does not really connect really well. But for lack of a good endpoint, then people kind of have to base it on something and oftentimes it's based on PFS and hoping would translate to OS. And that's where the lack of connection leads to some of the failures we've observed in the past.Now in our particular case, in the first-line metastatic melanoma, what gave us particular confidence is the analysis done by FDA that was presented at ASCO in 2019. And in that FDA analysis, many of you are familiar. FDA took nearly 5,000 worth of patient data from all the registration trials that were submitted to them for approval in first-line metastatic melanoma and get a very comprehensive net analysis. And what they asked is the question is, how well do response rate really connect with both progression-free survival and overall survival.And in particular, how well does it depth response, not the arbitrary RECIST 1.1 criteria, which is a 30% reduction in tumor size, but actually across all cut points. They looked at 25% tumor reflection, 50% tumor reflection, 75% tumor reflection and also see disappearance of all the target lesions. And with each of those subgroups, they took a look at, what is their PFS, what is their OS?And is there a strong correlation across all these cut points. And they see extremely strong trend, not only with target therapy like BRAF and MEK inhibitors, but especially with immunotherapies, such as nivolumab and pembrolizumab and ipilimumab. And the conclusion they come to is, the depth response really correlates extremely strongly with survival, both in terms of PFS and overall survival.And in particular, the strongest came through when you look at patients who have more 75% reduction and also especially with complete disappearance. And it's really on that basis, looking -- the biggest difference that we observed between the PIVOT-02 data and ultimately connecting to the survival is really our CR rate. And based on the FDA analysis, if you -- for the patient complete disappearance of their target lesions, at the PFS at one year, and the PFS -- and OS at one year. This is surely high. And it's really -- so there's clear demonstration given the extensive metanalysis FDA have done of translatability or strong connection between a clear what's observed in terms of death response and the final PFS and OS delivered by these registration studies. And this is where looking at our CR rate, we think there's a high likelihood that this may translate into some type of survival benefit and a strong survival benefit. So I hope that answers your question.

[Tyler Van Buren:]

That's very helpful. Thank you.

[Howard Robin:]

Okay. Sure.

[Operator:]

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

[Chris Shibutani:]

Great. Thanks very much. Maybe this is for JZ. I know that certainly in PROPEL, the combo work that you're doing involve the opportunity to explore different doses of bempeg, in particular, I think, higher doses. And I think that's some commentary that you began describing over six months ago now. I'm just curious to know if there's anything at this stage that you have been observing or learning that is making you contemplate approaching any further development work with bempeg, either in existing or additional indications in any other way?

[Howard Robin:]

Thanks, Chris. Actually, I'm going to ask Wei to comment on that. He's been working on the dose escalation component for PROPEL. And then I'll ask JZ to comment afterwards. Thanks, Wei.

[Wei Lin:]

Yes. Sure. Absolutely. So the PROPEL study may be helpful me to kick a step back and look at the bigger picture. So PROPEL study really has two parts there's a dose optimization part, and then parts there's a focused extension, sort of a Phase two study embedded in there looking at specifically non-small cell lung cancer in the first-line setting.So the rationale for us to undertake a dose optimization, even though the molecules already in the restoration phase is actually a couple fold. One is we have learned a tremendous amount above this molecule as we progress. This is still a clinical development stage molecule. And while we have full confidence in the dose of six-microgram per kilogram in combination nivolumab in all our current regression studies. And that's highlighted by the fact that the data is good enough to obtain a FDA breakthrough designation, which is kind of the highest acknowledgment of the potential benefit the combination may bring to patients.And in partnership with our BMS colleague we've taken a number of regression studies all based on data that we generated in PROPEL. So we firmly believe that the six-microgram per kilogram dose is a very active dose and have compo data to back it up. And certainly, and that's really also supported by the belief in investment from our BMS colleagues and also the breakthrough definition from the FDA.But that being said, we have learned tremendous amount as we dose a lot of patients and manage the AE profile that we think we can actually improve the management of the adverse events in patients and perhaps can even push the dose even higher. And as you know, different diseases have different sensitivity to immunotherapy. And in lung cancer, compared to, say, melanoma, the degree of sensitivity is it's actually little -- is not as strong.So, for instance, monotherapy, nivo or monotherapy pembro is active across all expression subgroups in melanoma but not so in lung. So the current approval is really for just PD-L1 positive, not for the all-comers population and the predominant use of pembrolizumab in the 50% above population. And given that, we thought it would be really helpful to really push the dose a bit, see if we can, with a new management guideline in place, identify even a higher dose and produce even stronger benefit to patients in a disease that's challenging than melanoma in terms of how sensitive it is to new therapy. So that's the dose definition and the rationale why we're indicating that. At the same time, we're doing the expansion in first line non-small cell lung cancer. And then combining with pembrolizumab, the mono -- in a combination because pempro currently is the established first-line standard of care in the first line study so.

[Chris Shibutani:]

So any willingness on about whether it seems promising or?

[Howard Robin:]

Well, the study is ongoing, we've dosed a handful of patients, and then we have, as Howard mentioned, we have plans to really share a part of that data at a future conference either at the end of this year or beginning of next year.

[Chris Shibutani:]

Okay. Well, you're so well behaved. I know, you're not going to spill. Maybe I can ask a question about partnerships. So I mean, thinking about historically, you guys really set up a terrific relationship with Bristol going back. And that was structured with kind of a time line objective, which I remember a year ago, you guys extended into September. And then we've had the renegotiated contract and I think that was kind of announced extended into September really pre COVID kind of era now that we're COVID environment where everyone is looking to buy time, just curious about the renegotiated contract.Is there some sort of a scope clause that allows them to wiggle in the next to three or six months? Is there some sort of time line that we should think because you get out of jail card? Just curious to know, given clinical trials are pacing and completion time lines are obviously all sort of encumbered now and wondering in particular about the Bristol renegotiated or maybe some of the other more material other material partnership you had with folks at with Pfizer or Gilead?

[Gil Labrucherie:]

Thanks, Chris. I'm going to ask Howard, if you can answer that, Howard.

[Howard Robin:]

Sure. Hi, Chris. Look, there's certainly nothing in the contract that gives one an escape for this kind of force majeure situation, obviously. But I will tell you that, look, clinic -- every company has its own method of moving trials forward in this situation. Nektar is being fairly successful in recruiting sites and recruiting patients. There'll always be some delays. But generally, we're moving things some delays.Other companies such as BMS, have set across all their programs. They're not going to be recruiting any new sites. Until they get a better handle on what's going on with COVID-19. So we said there could be a three to six months delay. It does really change anything in the agreement I think we're still working very closely with BMS to move these programs forward. The ones that we're running in the collaboration are moving forward nicely. They will figure out shortly, I'm sure, how to start enrolling sites again and how to recruit patients again remotely as every other company is doing. And so I think there could be a delay. Most likely will be a delay in some of those studies, but I don't think it's anything that has any contractual impact. And as long as we have a great relationship with them and we do. And the teams have changed and evolved. And I think, together with BMS, everything is going smoothly outside of COVID-19.I think there's always going to be delays. There's always challenges in any clinical study, but I think everybody believes that certainly, bempeg and nivo in first line melanoma, have a -- metastatic melanoma have a significant benefit. And if you look at the PFS data that we've had so far, in the PIVOT-02 study, we're -- I don't see how we'll be lower than 21 months. That would be I would think the 21, 21.5 months would be the lower limit of median PFS.So, with that said, I think when you compare that to nivo alone, which is six and a half months, I think that's fairly dramatic. And remember, as Wei said earlier -- and this is what everybody, I think, is excited about. What Wei said earlier is I don't think you can compare this necessarily to other challenges that companies have seen when they went from Phase two to Phase three. Number one, we have the same endpoints. Number two, we didn't see any toxicity in Phase two that would require us to lower the dose going into Phase three, which some other companies have had to do.So, I think it's as apples-to-apples as you're going to get. And I think BMS should be and is as excited about it as we are. But no, there's no contractual provision for this type of thing. No one could have ever envisioned this. So, as far as I'm concerned, the companies are behaving well together and I'd like to see it all move forward in a respectable fashion.

[Chris Shibutani:]

Great. And then lastly, when your team is sitting on Zoom conference calls with the Gilead folks, are they begging to put one of your assets into a COVID therapeutics trial, might be good for a retail pop in the stock?

[Howard Robin:]

Well, look, I can say this. We've certainly looked at all the literature and there's an awful lot of literature that suggests that patients who have low lymphocyte counts levels, don't do very well with COVID-19. And if you can increase their lymphocyte levels, those patients with lymphocyte levels is actually too much better with COVID-19. So, it's something we're looking at. It's something we're talking about. And we haven't made any plans yet, but it's something that if we decide to if we come up with an approach to move forward, we'll certainly share it with everybody.

[Chris Shibutani:]

Great. Thanks for taking my questions. Thanks again.

[Operator:]

Thank you. Our next question comes from Jessica Fye from JPMorgan. Your line is open.

[Unidentified Analyst:]

Hi, this is Yuko [ph] on the call for Jessica. Thank you for taking our questions. Starting the 180 patient Phase 1/2 dose optimization and expansion study in non-small cell lung cancer that BMI would be running. Can you provide an overview of that study, including the doses that you'll be evaluating in the dose optimization phase? And then do you plan to select patient based from PD-L1 status or any other biomarkers?

[Howard Robin:]

Thanks, Yuko. I'll pass to ask Wei to walk through what the structure of the BMS study would be for, then take small cell lung cancer? Thanks Wei

[Wei Lin:]

Yes, thanks. So the -- so that study also very similar to the PROPEL study in design. Now, that study is not finalized yet. So, I cannot share too much details now. But at a very high level concept, we'd be very similar to PROPEL in the sense that we'd be pushing the dose higher beyond six micrograms. And in addition, we'll be enrolling patients across OPR expression to really try to observe if the combination of bempeg plus nivolumab can expand the activity checkpoint to the low-pressure, population as well as the negative population. So the data coming from that study along with PROPEL study would help we and our partners to make an assessment, what will be an appropriate and best trial design, going into Phase III.

[Unidentified Analyst:]

Great. Thank you.

[Operator:]

Thank you. We'll take our next question from Difei Yang from Mizuho. Your line is open.

[Difei Yang:]

Good afternoon. And thanks for taking my question, just a quick one on NKTR-255. So you have a couple of trials ongoing in liquid tumor. How do you think about the opportunity will follow and where do you see the biggest opportunities for IL-15.

[Howard Robin:]

Thank you, Difei. I'm going to ask JZ to answer that, JZ.

[Jonathan Zalevsky:]

Yes, certainly. So there are a number of interesting opportunities in the solid tumor space. When you consider a combination with targeted antibodies as we know how a component of their mechanism associated with antibody effector function. So, you know that in the tissues, right, that we typically see lower levels of natural killer cells, right? So we rely on antibodies that work through direct signalling, like, for example, EGFR engaging antibodies, for example. But then we also hope that they can engage oncology mechanism as part of their effector function in the tissue.And one of our overarching hypotheses with 255 is that in addition to all of that mechanism we certainly able to drive natural killer cells into the tumor, as well. And I think you saw some of the data that we presented other conferences that showed that even in the mouse model, where you had an intact immune system or in one that you had a xenograft, but it was still NK cell confident.Even if you implanted tumors into peripheral tissue, like the fly anchor, the pie, if you gave 255, you could still drive NK cells into these peripheral tumors. And you know this very well, right? That's not a lymphoid kind of a tumor. It's right? It's not a liquid tumor by any means. This is a traditional solid tumor that NK cells can populate. And we demonstrated that whether you combine with you combine with Herceptin, HER-2s types of bindings like Herceptin and HER-2s and others that -- in a range of different tumor models, either in the xenographic or in the fully competent or even in PIVOT case.You can engage those kinds of activities in the solid tumor space. So as we eye opportunities in the clinic, some of the things that's quite interesting to us, they're combinations, for example, with agents like cetuximab. We already know that there are opportunities in targeting the NK cell compartment in the combination with cetuximab. And we've seen some other antibody combinations do that. So, I think that represents one, very unique opportunity. And then, of course, there's really a whole wealth of other opportunities, because you can quickly move beyond cetuximab to additional solid tumor targeting antibodies and consider additional lines of therapy.So I hope that answers your question, Difei.

[Difei Yang:]

Yes. It's very helpful. I have just one quick follow-up with bempeg. When you do reminders, what is the MTD for bempeg? For the study, something like you're planning to dose escalate to 10 micrograms per kilo so what is the MTD?

[Jennifer Ruddock:]

Wei, would you like to take that question?

[Wei Lin:]

Sure. Yes. So the current design allows us to dose escalate all the way up to 12 micrograms per kilogram, which is twice the current dose in our registration studies. So now obviously in the end MTD is one of the element that contributes the decisions for RPTD but in addition, we're going to look at the totality of data, both in terms of safety and efficacy and from the safety also as patients be treated longer, whether the tolerability continues to be well behaved.

[Difei Yang:]

Thank you, Wei. And thanks for taking question.

[Wei Lin:]

Absolutely.

[Operator:]

Thank you. Our next question comes from Bert Hazlett from BTIG. Your line is open.

[Bert Hazlett:]

Yes, sure. Thanks for taking the question. If this got asked yet, but in the PIVOT-02 melanoma cohort, is it possible that you're already at the minimum of 21 months in terms of PFS for that that cohort? Just an update on the PIVOT-02 melanoma cohort, PFS would be, would be great?

[Jennifer Ruddock:]

JZ, do you want to take that one?

[Jonathan Zalevsky:]

Yes, sure. Hey, Bert, nice to speak with you. And yes, I just want to definitely clarify, you diagnosed that correctly. So in the current assessment of the data, we're at a minimum of a 21-month duration in the PFS. So this is very exciting data, right? We're continuing to watch this cohort developed continuing to see the patients. Obviously, this is indicative of the kind of durability that we've already presented on last year. We're seeing that kind of durability extend. And we're seeing a further extension of the PFS. We're really looking forward to giving additional update on this cohort. We'd be looking to do that perhaps at a medical meeting later this year.

[Bert Hazlett:]

Okay. Thank you. We are looking forward to that as well.

[Operator:]

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

[George Farmer:]

Hi, good afternoon. Thanks for taking my question. More on PIVOT-02 and the melanoma cohort. I recall at SITC that while you had not hit your median after 18 months in PFS, it looked like the 12-month PFS was probably around 53%. So that implies maybe progression by one or two patients would throw the curve off into off into the lower half of the graph. Is it safe to say that no patients have progressed since that time? And are you, in fact, following all the patients? Or have some patients been lost to follow-up and they're just censored at various time points? You could comment on any of that would be great.

[Jennifer Ruddock:]

Wei, do you want to start or JZ either one of you?

[Wei Lin:]

JZ, if you want to start first? Yes. I'll add in.

[Jonathan Zalevsky:]

Yes. Sure. So George, those are good questions. And what we would like to do is to update the data at a medical meeting later this year. Then we can go through all of the details of the data because in addition to any -- like the questions you asked about durability, right, also, we can cover deepening of responses, the additional kinds of overall effect that the patients have seen.I also have to remember, these are patients that have now been in treatment for a very long time as well, right? So we were also, as you saw last time when we gave an update since the we saw patients that achieve maximal benefit, maintaining very, very deep responses or complete response in many cases for over 12 months of additional treatment. So we would provide that kind of detail in that kind of assessment. And even we can walk through the kind of spider classes we do, right, like one-on-one like we would do that at the future meaning where we can really unveil the data later this year.

[George Farmer:]

Will you -- do you think you'll be sharing overall survival data as well?

[Wei Lin:]

I think say that...

[Howard Robin:]

Wei, do want to --

[Wei Lin:]

Yes.

[Howard Robin:]

Yes. Okay, go ahead, Wei.

[Wei Lin:]

Yes. I think so the -- right now, the survival data is really quite long. So I think our primary goal we really focused on describing the PFS. Since that is the primary endpoint for the study, the basis which will be for us to obtain a full approval. So I think that's probably more meaningful. I think it's right now, it'd be really hard to estimate what the OS is given how the curve is looking.

[George Farmer:]

Okay. And then JZ, regarding 358 and the presentation of lupus data -- Phase Ib lupus data. You're presenting at two conferences at EULAR and ACR? What will be different between those two presentations, if anything?

[Jonathan Zalevsky:]

Yes. So I think George. Good question. So I one of the things that because EULAR is going to be a virtual conference. We know that it's harder to get same king of visibility. The program because you normally use to that large conference all the people there and the ability to socialize the results. We expect that ACR when it comes to Rheumatology, which comes in November, we expected that is likely not going to be a virtual conference. I mean, with COVID aside, we're projecting that the situation is different, roughly six months from now.And so for there, we would be looking for the actual would be looking for the actual real-time conference field. One of the things that we did last year when we presented the single ascending dose data is that we covered kind of the clinical data in two parts. So for example, at the EULAR conference in the SAD study, we covered the safety of pharmacokinetics and then the Treg pharmacodynamics showing the dose-dependent expansion that we presented. Remember, we showed about a 17 fold increase in Treg levels over baseline at the top dose that we evaluated in that study.And then at ACR, we go much deeper into the phenotype of the patients treated with NKTR-358. So there we looked very closely at any cytokine responses. We look very closely at the Tregs and their activation status. And we even did, as you recall, the methylation studies of the recall, the methylation studies of the promoter again, really diving deeper into the immunology. So that's one thing that you can consider for how we will parse the data in consideration for EULAR and ACR. And then, of course, the key point of the multiple ascending dose study is this is in lupus patients. So we're evaluating 358 in the disease immune system. And of course, we're evaluating multiple doses of the drug, not just a single dose.So EULAR is really right around the corner. It's barely a month away. So you'll see the early presentation of the data and then a much bigger pie showcase of it to come at ACR later this year.

[George Farmer:]

Okay. And then finally, do you think 358 could treat cytokine storm associated with COVID?

[Jonathan Zalevsky:]

So that's a very interesting question. So 358 question definitely induces regulatory T cells. And yes, you're familiar with our data. It can induce the polyclonal regulatory T cell response. So it's a very interesting concept in nuance. One of the things that we do know about COVID in the cytokine storm is those are seem to be non-lymphoid derived cytokines, right? They're typically innate kind of cytokines like IL-6, others linked to CRP, for example. So we typically do think that lymphoid cells can antagonize that. So it's a very interesting thought, very interesting idea. But right now, our plans with 358 are much very squarely focused in the autoimmune disease space.

[George Farmer:]

Okay, great. Thanks very much.

[Operator:]

Thank you. Our next question comes from Arlinda Lee from Canaccord. Your line is open. Please check that your line is on unmute.

[Arlinda Lee:]

Sorry, I was on mute. Thanks for taking my question. I had maybe a follow-up question on your IL-15 agonist 255. And you already talked a little bit about what you guys are looking to see in the data set in the initial Phase one data. I'm curious that with other IL-15 entering the clinic recently with different strategies, whether you might also talk a little bit more in-depth about how you guys designed your IL-15? And what kind of differentiators might we look for in that early data set that you guys are hoping to have at around year end? Thank you.

[Howard Robin:]

Thanks, Arlinda. I'm going to have JZ answer that, JZ.

[Jonathan Zalevsky:]

Sure, Arlinda. So one of our goals, as you know, from our 255 program was that we really wanted to maintain all of the possible receptor ligand maintain all of the possible receptor ligand interaction that IL-15 uses when it naturally signals as the cytokine is like a naked cytokine in the human body. And we know that, it has at least two--well, at least three different kinds of binding modes. So it can signal through the dimeric beta gamma receptor complex. Wherever that complex can exist on any cell exist on any cell type.But then it can also signal through a trimeric receptor complex, where there's an IL-15 receptor alpha specific subunit that then complexes with beta gamma. And that mode of signaling is different than the IL-2 pathway, because, in this case, the IL-15 alpha receptor subunit can either be expressed on the same cell as beta gamma, we call that signaling. Or it can be expressed on a neighboring cell, where it hands-off to a beta gamma on a nearby cell. That cell is kind cell contact mediated signaling, and we call that trans presentation. So those are all three modes of natural IL-15 dependent biology. And the immune system uses all three. And so we wanted to make sure that the biology at 255 could recapitulate all of the biology that the native IL-15 has available to us.So fundamentally, this approach is very different than a lot of the competing pipelines, because almost all of those designs involve the IL-15 cytokine generated as a drug product in complex with the extracellular domain of IL-15 receptor alpha. And there are variations on that theme. Some use the entire receptor. Others just use a sushi domain. As you know, others use an FC fusion to make a two-arm cytokine plus receptor complex. But they all have that same sort of basic underlying design principles. And there are some unique differentiating properties. We presented recently at SITC last year, we presented some studies that evaluated head-to-head, the assemblies that have the receptor and complex to the cytokine in comparison to either native IL-15 or NKTR-255. And we saw a lot of unique differences. We saw differences in receptor internalization between the different designs versus the native 255.We saw differences in Granzyme B production cellularly in NK cells. And even when you evaluate an attack PBMC culture, we even saw differences of CD14 monocytes that could express intracellular. And we saw those kinds of changes in Granzyme B inductions, really in either the native IL-15 or the 255 molecule those kind of things were not really well supported or induced with the assemblies that had both the receptor and complex with cytokine. So, we think that's one difference. There should be a very significant modification of how the immune system can be targeted with the IL-15 pathway using this kind of 255 design and we then seem to translate into things like reduced tachyphylaxis with repeated dosing and a number of other kinds of potential improvements.

[Operator:]

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

[Aydin Huseynov:]

Hi, thank you for taking my questions and appreciate all the safety measures provided across the site. I've got a couple of questions on bempeg melanoma study and one follow-up about the guidance. So on melanoma, I wanted to confirm the status of Phase three melanoma study, how many patients have been enrolled so far? And given that it looks like the PFS is expected to be in the first quarter of 2021. Whether we would be able to see the complete response numbers early than that, let's say, maybe early -- at the end of this year or maybe in the beginning -- to the very beginning of the next year?

[Jennifer Ruddock:]

Thanks, Aydin. Wei, I'm going to ask you to address that question?

[Wei Lin:]

Sure. Thanks for the question. So just correct, the guidance is not the PFS will be beginning of year. It's -- our guidance has been that the response rate based standpoint, that first endpoint would probably occur potentially in Q1 next year. So -- and our guidance has been that based on the study design, the current study design, the initial projection has been that the PFS could potentially come in six to seven months after the OR endpoint.Now as we discussed before, that currently, we're in discussion with health authorities for the potential change in the first endpoint, which from OR to CRR. And then in addition, with that change and then the current ongoing enrollment of the study, the difference in the CR readout and the PFS readout, if we were to affect that change could be different than the six to seven months. So some of that really because PFS is really an event-driven re readout. So I want to be clear about the guidance we provided to date. And regarding your first question, how many patients can enroll, that is really a study conduct.In an ongoing study, we typically do not provide those numbers. Once the study is completely enrolled, and that the completion enrollment information will be provided. Thank you.

[Aydin Huseynov:]

Okay. Appreciate that. Just want to confirm. So we're going to see CR number together with RR number in the beginning of 2021, right?

[Howard Robin:]

That's our current guidance, yes.

[Aydin Huseynov:]

Okay. Appreciate that. And another question on financial guidance. So I was just curious to understand that given that certain studies would be postponed or pushed to the later of the year or for some maybe even pushed to the next year trying to understand the cash burn. Why it kind of stays the same as previously guided, given that there might be less expenses associated with research and development and overhead expenses.

[Howard Robin:]

Yes. Thanks for the question. Yes, as we talked about on the call and Howard reviewed many of the studies that we're running and the ones, in particular, that we have in-house, remain on track. So that obviously would have no effect on our expense guidance and some of the other potential changes are more minor in nature. So we don't -- as we sit here today, I think that's going to have an impact on our R&D expenses. Some of them are activity based, some of them are not. So we're comfortable with the current guidance. Aren't making any changes at this time.

[Aydin Huseynov:]

Okay. Thank you. Appreciate it.

[Operator:]

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

[Jay Olson:]

Hi. Thanks for taking the questions. I had one on RCC. Where it seems like the goal line keeps moving with all the combinations and now the CheckMate 9ER study results look pretty solid for nivo plus cabo. So I was wondering if those study results change your view of the opportunity for bempeg plus nivo in RCC? And then I had a follow-up on 358, if I could.

[Jennifer Ruddock:]

That's great, Jay. Thank you. Wei, I'm going to ask you to address the RCC question and the landscape.

[Wei Lin:]

Sure. Yes. So I think definitely, the RCC landscape continue to evolve. And so right now, you have a nivo plus AP combination and also checkpoint plus TKI, both involving pembro and avelumab and now most recently with new nivo. So the way we think about it is really two things. One is the combination of bempeg plus nivolumab does offer another treatment option. Now the TKI can be used in multiple settings. It can be used on in combination with a checkpoint in the first-line setting or can be used later as a monotherapy treatment. So I think -- so different -- if you talk to different physicians around the world, people are really taking advantage of these options and using them differently.There are still -- some physicians who prefer to use the IIL combo in first-line setting and other like to use a TKI combo and then use that option of TKI in the first-line setting. I think our goal here is to introduce another treatment option. Now, we expect to have a different safety profile than is offered by a checkpoint plus a TKI combination and then also depends on the efficacy we're able to deliver. I think it does offer a different treatment option and also give doctors an opportunity to serve a TKI as a later line therapy rather than exhausting the first line. So that's one. And second of all, it has been disclosed previously, PMS is undertaking a Phase I study with a triple combination of bempeg plus nivo and then TKI, so and that study is expected to start.And so that type of combination start once the progresses on to a study on to a study can offer additional treatment options that involved within that line of therapy.

[Jay Olson:]

Great. That's super helpful for that comprehensive review. And then I guess, just on 358, it seems like there's been a few new drug approvals for lupus over the past 50 years. I think been leased to might be one of the only ones. But -- and now there's a few promising treatment options in development, including Astrazeneca's and Biogen's new molecules. I was wondering how you see the lupus landscape evolving and how the 358 mechanism compares to anifrolumab and 559

[Howard Robin:]

That's great JZ.

[Jonathan Zalevsky:]

I take that one. Yes. Yes. Happy to answer that. So yes, you definitely diagnosed and characterize the problem very, very well. So outside of right, which came several years ago, there really haven't been any approvals. And frankly, there hasn't really ever been even any kind of really exciting trial results until anifrolumab in the bacon came along. And the thing that we saw with some pretty exciting data in Phase II, and then we saw Phase III data. Phase III data for an a little bit more confusing, right, as you know.And also what we see in that case is potentially yet again changing in some of the endpoints in lupus studies. We saw that the first time with been listed approval and we're potentially going to see it again in the case of any.One of the things, though, that's an important takeaway is if you look at the landscape of mechanisms that have been tested for treatment targeting, they're all highly overlapping, right? They're targeting the same kind of pathways. They're focused on the same kinds of specific subset of immunology. And we keep doing a lot of studies with very, very similar kind of mechanisms.One of the things that's really exciting about considering Tregs as a treatment option in lupus is that lupus patients are known to have a very specific dysfunction in their Treg have a very specific dysfunction in their Treg compartment. So we know that as lupus patients have progression to moderate severe disease, they have low levels of IL-2, even in response to normal low levels of IL-2, even in response to normal stimuli that would induce in order expression they also have reduced levels of regulatory T cells. They have kind of that imbalance between TH17 and Treg cells, where you're seeing an over preponderance of Th17 and a drop in Treg numbers and there are also reports as we would reduce suppressive capacity of Tregs in lupus patients. So of all of the things that make up lupus and it is heterogeneous disease, we have to accept that.Tregs are a very unique kind of biological feature that seems to be associated with the dysfunction in the patients that present with this disease. And we've now seen multiple clinical studies where low dose IL-2 has been applied for the treatment of lupus. And we've seen both Treg elevations by low dose IL-2 in these two -- multiple studies, for example, one was in China, one was in Germany. And we've also seen some efficacy that came out of those trials. So this is kind of the application of first in class kind of a mechanism for the treatment of lupus. So I think that represents one kind of exciting opportunity.The other exciting opportunity of us is that, of course, we've already shown that NKTR-358 can induce Tregs both in their numbers and their duration of expansion and even in their suppressive functional enhancement in a way that IL-2 just can't. You can't use any kind of low dose IL-2 regimen to produce the mass quantity, the huge amount of Treg inductions that we're able to produce for 358.So we think all of those things together represents a very reasonable and strong scientific rationale to advance into lupus and that's why this will be the first Phase two study that we're going to be initiating with Lilly. And as Howard said, it's not going to be blocked. You'll see additional Phase two studies in other indications after lupus. And contractually, the two companies that we've agreed to run-up to four Phase II studies. So we're looking for the full expansion of that this year and into next.

[Jay Olson:]

That's super helpful. Thank you very much for the taking the questions.

[Operator:]

Thank you. And we'll take our next question from Paul Choi from Goldman Sachs. Your line is open.

[Unidentified Analyst:]

This is Karen Jenkins [ph] on of Paul. I was wondering if you could talk a little about what your ability is to advance NKTR-350 outside of some of the Lilly studies and if you've explored potential indications, where you could pursue either in different partnerships or on your own?

[Jennifer Ruddock:]

JZ, I'm going to let you answer that.

[Jonathan Zalevsky:]

Yes. So with NKTR-358, we signed basically like a licensing kind of a collaboration with Eli Lilly. So we work with them exclusively on NKTR-358. As I mentioned, the scope of the 358 program is pretty large, right? You could think of applying the Treg mechanism to a range of autoimmune diseases, and that's what we're doing together. But it's really a program that we've exclusively partnered with Lilly, and all of its development is in direct collaboration with Eli Lilly.

[Unidentified Analyst:]

Okay. Thank you. And then I think you said that you do still have 10 to 20 patients in the PROPEL update, but that's been pushed a couple of months. In addition to the delay, should we expect any impact on patient enrollment like would -- could we expect maybe the lower end of the range due to COVID-19 or anything like that?

[Jennifer Ruddock:]

Wei, I'll let you answer that.

[Wei Lin:]

Sure. Yes. So the -- so this study is rolling globally. That's our plan, in the U.S., EU and Australia. The -- based on the sites we selected, we expect majority of patients will come from Europe. There is a delay in site activation due to the effect of pandemic in Europe. We're actively looking at the sites in Europe. There's a high degree of variability, as you observed, the degree of to which depend adequately affected from country-to-country. There's a big difference between what has happened in Italy and Spain versus what happened in, say, Germany. And so we're taking a very measured approach, trying to understand at the site level in addition to the country level, look at the impact and trying to be very opportunistic in how we open up sites, enroll patients.So as we mentioned earlier in the call, what's most important to us is really to make sure that the right patients get put on the study and not compromise on eligibility because of the ongoing pandemic and in addition, we would only activate the site enroll patients at a site, if that site has demonstrated and a full capacity to follow through the protocol to really care for the patients and to execute all the treatments as well as the tumor assessment. So it's under those circumstances that we plan to really continue to roll into the study. So I think since we're really only a couple of months into the pandemic, exactly projecting out for the next six month impact would be really difficult at this time. But our team is really working hard to fulfill those criteria and making sure that the study does advance as we had already hope.

[Unidentified Analyst:]

Yes. Thank you.

[Operator:]

Thank you. And we'll take our last question from Daina Graybosch from SVB Leerink. Your line is open.

[Daina Graybosch:]

Great. Thank you for the questions. I have two. I'll give them both, and you can answer them one over order. The first is on PROPEL or BMS study that you guys are planning in first line non-small cell lung cancer. I'm wondering if there's any way that might be a small randomized study as we have seen more companies take with I-O combination, and when you might make the decision.And the second is on 358. There's other companies with their own IL-2 or Tregs therapies, and they're going after different indications. And I wonder if you can talk through how you and Lilly are prioritizing your indications beyond the lupus. And whether you -- because your current estimate say you've got throughout. But just what criteria you're using to make that next decision. Thank you.

[Howard Robin:]

So, I'd like to start with JZ answering the 358 question, and then move on to way to address the question that Daina had around randomized control trial. Thanks.

[Jonathan Zalevsky:]

Sure. Hey, Daina, nice to speak with you. So, with 358, as you know. So, Tregs can be applied to a range of different diseases. And so when we consider the different indications that Lily and Nektar would be working on, we looked at a number of factors. We looked at, of course the strategic factors that fit the areas that Lily is heavily engaged in and prioritizing. And we also looked very scientifically, almost from a bottom up approach, where we looked at were the kinds of underlying disease pathology is most heavily driven by a dysfunctional T-cell compartment where the nature of that T-cell compartment is antigen driven, where we have a kind of understanding of at least some of the key antigenic drivers. And then where we think we can, of course, generate antigen specific Tregs that can antagonize autoreactive immune cells that are responding to that same antigen.So we have ways of kind of classifying autoimmune diseases for ones that have different types of inflammation, depending on the organ that's involved, the underlying immunity in that organ. And that can go all the way from diseases that are highly inflammatory and drive, say diseases like, Crohn's for example, they are very, very highly T cell driven inflammatory disease, probably very little autoimmune or humoral response. And then, it can range in spectrum all the way to diseases that are completely autoimmune. So for example, a disease Pemphigus or Myasthenia, where it's completely driven by an auto antibody. So you can imagine that Tregs [ph] in those two different kinds of diseases looked at two different things.On the first type, you would really be antagonizing T cells that are trafficking to the gut, as you pointed out or blocking their inflammatory response to those types of antigens that they're reacting to. But in the latter case of that autoimmune disease, you were expect to antagonize T Folicular helper cells. Cells that are controlling B cell, T cell reactions and priming and dropping down any kind of auto antibody -- kind of production. So we can prioritize diseases, based on their underlying immunology. Look at where 358 and the cell population that induces can make biggest impact. And then use that to select for indication for assessment.Now, with -- Lilly [ph], we don't announce those indications ahead of time. So we would be announcing them as we get much closer to the start of those studies. So stay tuned as we get to later this year as we announce the additional indications. So we'll be working on together.

[Daina Graybosch:]

Great. Thanks.

[Operator:]

Thank you. That does conclude the question-and-answer session for today's conference. I'd now like to turn the conference back over to Howard Robin for closing remarks.

[Howard Robin:]

Okay. Well, thank you. Thanks, everyone for joining us today. And I also mainly want to thank our employees for the incredible amount of hard work and commitment to the company in particularly during this time where our environment is changing so rapidly. And we've had to adopt our work practices, behave in a different way. I'm exceptionally proud of how our employees have risen to overcome our daily challenges, keep our business on track and make tremendous progress. So I have to thank them all.We've built a very valuable pipeline in immunooncology and immunology, submitting -- addressing areas of high unmet medical need, and we're focused on moving these programs forward. And as shareholders, we want to thank you for your support. And we will continue to provide updates on our progress. And we also want to wish all of you and your families safety and health during this time. So thank you for joining us.

[Operator:]

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a wonderful day.