Good afternoon, everyone. I believe this is the last session for 2024 Jefferies Global Healthcare Conference. My name is Roger Song, senior analyst covers mid-cap biotech in the U.S. It's my pleasure to have the next, fireside chat with Nektar Therapeutics. We have Jay, we have ZJ, and we have for Mary. Very welcome to you, both of you.
Hello.
Awesome. So, maybe, we have a couple things to cover for this session, and before that, either of you can give us some opening remark. What's the recent updates from Nektar at the high level? And then we can go into the conversation.
Hi. I'm actually Jennifer Ruddock, Chief Business Officer.
Jennifer, yes.
I'll comment on the litigation. The litigation's proceeding. There's not a lot to comment on. We obviously had a court-ordered mediation. The details of any mediation are actually neither party's allowed to talk about it. But the case is proceeding. I think there's been a trial date set for a little bit over a year from now. There's been various counterclaims filed. We are filing motions to dismiss those, and I think that's the biggest update that I have.
Excellent. Okay, so I know, the major driver for Nektar right now is Rezpeg. And then maybe, if we can, spend the first couple minutes talk about the design of the molecule, how this is differentiated from other IL-2 Treg driving kind of therapy, that would be very helpful to set the stage.
Mm-hmm. Sure.
All right.
Hi, my name is Jonathan Zalevsky. I'm the R&D Chief for Nektar Therapeutics. Rezpeg is designed based on some really important and kind of well-known immunology about interleukin-2, and that is that interleukin-2 has a number of functions, but its primary non-redundant function is to maintain the Treg pools in our body. They require continuous positive selection, and having IL-2 in the thymus and other places is what keeps those populations alive. We took that understanding to design a much better version of IL-2 that could be used potentially medicinally. That was our whole approach. The way we designed Rezpeg was we used our core competency strength, which is in polymer chemistry engineering, and we engineered a stably polymer conjugated or pegylated version of the native IL-2 protein. This imparts two major properties onto the molecule.
First is it makes it have a very attenuated interaction with the receptors, which changes its properties as an agonist on Tregs. It also has very, very slow clearance due to the PEGylation, so it also has long exposure, and that gives it very high specificity and selectivity to expand Treg populations and minimize conventional T cells and autoimmune and non-Treg cell populations. So we did a lot of work to establish that preclinically. We published our work, the first paper back in 2021, where we showed the design, the engineering, the inception of the molecule, its biophysical characterization, its biochemical characterization, and then studies both in non-clinical species, including primates, that demonstrated how it worked and sort of the reduction to practice. It's really important in our philosophy that you do not mutagenize the IL-2 sequence.
There have been a number of examples of a class of proteins called IL-2 muteins, and these were created by very smart structural biologists that started to understand how to skew the interaction between components of the IL-2 receptor and IL-2, the ligand. And they created point mutations that skewed the specificity of different receptor complexes for these mutated forms of IL-2. But one of the consequences of that is that you have to minimize interaction with one of the receptors, called IL-2 receptor beta or CD122, and that's the only subunit that signals. And it turns out the consequence of these mutations, while they skewed cell activity onto certain cells and not others, they created partial agonists, and that's been a problem in the field. And there are several examples of these IL-2 muteins that are in development, and you can see that they're incomplete agonists.
This is one of the really large differentiating features of Rezpeg. If you look at the maximal signaling that you achieve, we call that Emax, which is how you measure a full versus a partial agonist. Native IL-2 and Rezpeg always are full agonists, whereas IL-2 muteins with mutations, particularly at the beta residue, are partial agonists. So that's one area of a very significant differentiation for us in the design of Rezpeg.
Excellent. I know I said a couple minutes. If I give you 30 minutes, you probably can use the whole thing as well.
Keep it brief.
Okay, so in terms of another mechanistic question, it now seems that you are developing Rezpeg in the dermal autoimmune diseases, and obviously it's a very relatively competitive space. We have many different mechanism. Why you think IL-2 driven Treg is the right or it's a very good competitive mechanism to address those indications, including atopic dermatitis and alopecia areata?
Yeah. So early in our development program, we actually noticed that various manifestations of skin disease biologies were adequately and not really remarkably well treated with Rezpeg and its Treg mechanism of action. We saw that in the very first set of patients that we treated in our very first Phase 1b study. These were patients that had mild to moderate lupus... but they also had cutaneous disease as a secondary manifestation. And we saw a very powerful and rapid dose-dependent reduction in CLASI, which is the marker of skin disease in that patient population. And that was followed up with a Phase 1b study in psoriasis and a Phase 1b study in atopic dermatitis, and there was activity in those other studies as well. We saw activity in psoriasis that looked at something like a maintenance regimen, like in the range of Otezla.
Then in atopic dermatitis, we saw some really dramatic efficacy that, you know, I think we've discussed, where we saw a very large magnitude of effect size. We saw an 83% change from baseline as an average for drop in EASI score for patients treated at the high dose level. And that, that's really like a realm of magnitude of drop that we really see with maybe JAK inhibitors. It's pretty uncommon to see that kind of magnitude of reduction with a biologic. In addition, besides that magnitude, we saw a very clear dose-dependent responses. In the atopic dermatitis study, we tested a 12 and a 24 microgram per kilogram dose, and a very clear dose dependence. And that's reflected both in the magnitude of efficacy and also in the rate of onset of efficacy.
So you see also very fast rate, and that rate of reduction in EASI was dose dependent. And then the third part that I think was really a novel finding when it was first presented back in 2021 is that when we withdrew drug treatment, most patients, you know, far more than half of the patients, like nearly two-thirds to 70%-80% of the patients actually maintained their response and efficacy for an additional six months after we withdrew the drug. And that's really a new thing, the potential remittive elements in patients with atopic dermatitis that really hadn't been seen before. We know that the approved standard of care, drugs like Dupixent or other IL-13 inhibitors like tralokinumab, they really require continuous treatment. When you withdraw those drugs, the patients rebound and relapse.
With the JAK inhibitor, the same exact situation. Patients are well controlled when they're on the drug. When they withdraw, they quickly rebound. So that also was a novel feature. And those are some of the things that give us, you know, confidence in this mechanism.
Yeah, sure. So you already touched upon the clinical data. Maybe stay on that, particularly for the last point. That's pretty differentiated because, you know, we can say cross trial comparison for the efficacy, you know, DUPI or the JAK for the atopic dermatitis. But no matter how you're gonna compare, they don't see the sustained efficacy, right? So obviously, this is a very unique kind of mechanism, maybe driven by the IL-2. So what's the hypothesis behind this mechanism, understanding this immunotherapy-
Yeah
... type of the regimen?
Yeah, it's a great question. I mean, we can really only speculate on what it is that drives this, but this is our hypothesis that we have, and it's based on some preclinical studies that we did. And so what we did was a study in mice where we created a contact dermatitis in response to challenge, sensitization and challenge to a protein-based antigen. And what we found is that, you know, of course, when you treat with Rezpeg, you can dose-dependently suppress that inflammation. So that part's not exciting, or even. That's not an. I mean, that's standard, right? Kind of, we would expect that.
But then what we discovered is that when we stopped treatment and we put the animals back in the vivarium, waited 4, 6, 8 weeks and brought them back out and re-challenged them with the same antigen, they remained suppressed. If we introduced a novel, irrelevant antigen, they mounted a complete inflammatory response. But if you kept challenging them, and we even did this in the same animal, the old antigen and the new antigen on 2 different ears, one ear would inflame, the other one wouldn't. And so what we saw is that we could model in mice, whether you call it a memory response or you call it some kind of immune education, you, you could create a lasting, you know, blunting, right, of inflammation to the antigen that you used in those original sensitization challenge-
Mm-hmm
... during the time of treatment. So that showed us you could create some kind of lasting effect. When we saw the results that we observed in atopic dermatitis, I mean, that was consistent with that animal study. And it also is consistent with our hypothesis that Rezpeg is really not a drug that treats the inflammatory symptoms of disease. For example, it's not like taking a steroid. It's not like taking a JAK inhibitor that blunts ongoing inflammation. The Treg would actually remove the inflammation-inducing cells altogether, right? That's how scientifically, you know, we think about these cell populations. They really regulate away, and they tolerize to the antigen that's causing the inflammatory auto effect in the first place. So it's consistent with the fact that you have a resolving effect of its mechanism.
We'd need to do a lot more studies really to get at the underlying, you know, biology of that. You know, we have some hypotheses around, like, tissue-resident memory cells, which we know are really bad guys in, in atopic dermatitis. That's why people have the disease in the exact same place every single time their whole life, 'cause they're memory cells in that location in their skin that never die off. But maybe this kind of a Treg mechanism is addressing that. So these are some of the things that we're studying translationally.
Excellent. Yeah, so the cell therapy for other immune disease try to kind of reset the immune system. That's very intriguing. For Rezpeg, seems that you are re-educating the immune cell. That's also very interesting. So okay, so you have a lot of the preclinical mechanism and the translational data, and also you have Phase 1b data, also pretty kind of robust.
Mm-hmm.
Now you are in the Phase 2, so tell us, what is the design reflecting? We just discussed those findings and then the mechanism.
Mm-hmm.
When we're gonna see the data update from the trial?
Sure. Yeah, so one of the things that was really important for us in our Phase 2b is that we really design a study that is like almost identical, right, to the Phase 1b study that gave us such exciting results, right, that we've just been discussing. So really, the Phase 2b that we're running is in the same patient population. It has the same inclusion criteria as the P hase 1b. It's just a larger study, so this is a 400-patient study. It has multiple dose regimens, but and one of those dose regimens is the same as one of the dose regimens we studied in the P hase 1b as well. So we really are creating a study design in the same patient population with the same elements that really allow us to replicate and build upon the success of the P hase 1b data.
There are just a few differences that are differences that we think will even accentuate what we saw in P hase 1b. So the first is, we're exploring a longer induction period, because in our P hase 1b study, we dosed for 12 weeks, and then we withdrew drug. Here, we're dosing for a 16-week induction, because even though we saw that there were many people for whom 12 weeks of treatment was adequate, there was a population of people that could have benefited from more treatment. So that's one of the reasons for extending the induction for a month. The other is that in our maintenance, we already know what happens when you withdraw the drug. We studied that in P hase 1b. So now we're also going to study ongoing treatment in maintenance.
All of the patients that move into the maintenance phase will be re-randomized to either a once-a-month or once every 3-month regimen. We think that we might not have even mapped out the magnitude of efficacy yet, right? 'Cause we only dosed for 12 weeks. We do think that we have an opportunity to see even, even further pushing the envelope, pushing the bar on efficacy with the additional treatment we'll be doing in this study.
Excellent. It's a 16-week treatment, so what's the, what's the bar you set for yourself? You know, we have a couple agents out there, and a very, you know, crowded pipeline for the competitor's perspective. So what you wanna see—you want, what do you wanna show to be able to move this forward?
Yeah. So, you know, so, so we've, we've given kind of, you know, rough impressions of that based on our own P hase 1b data, right? So our P hase 1b data is, at minimum, in the range of standard of care, but it's pushing the envelope of standard of care. So we'd like to be in that same zone. We think we could have a better maximal reduction in EASI than you see with the IL-13 mechanism of action, and we'd like to really push on the EASI-75 and the IGA responses as well. You know, the study overall is also doing. It's doing really well. We opened in October. We've nearly activated all of the sites in the study, and there's over a hundred sites, and we're almost at the full activation component of it, and it's enrolling very nicely.
You asked earlier about our expectations of data, and in the first half of 2025 is when we would expect to have data from that 16-week induction period from the study.
Excellent. Okay, maybe quickly take a step back, because you have some history with Lilly for this compound, and the understanding, you take the full rights back because of the, the miscalculation from Lilly and the decision from Lilly. And then now you are having some ongoing litigation with them. So maybe, any kind of a, you know, very quick, high-level overview of that case, and then more importantly, what is the potential outcome, investors should expect from that in litigation with the, with Lilly?
Yeah, so this is Jennifer. I can, I can take that. You know, we obviously had a long partnership with Lilly, and one of our... You can read it in the documents that are on file. They're available publicly. Certainly, we felt as if the drug should have been pushed into P hase 2 a lot earlier than it was, in addition to obviously the incorrect reporting of data, right? So, you know, they used an outside CRO firm to calculate the data, but it was reported twice in the public domain, and so, you know, that was very disappointing to us and not moving into P hase 2-
Mm-hmm.
-quickly. Clearly, the data that we see today warrants Phase 2 development, and so, that loses probably about 2-2.5 years of development life, in terms of patent life and the end of, you know, and that's sort of unquantifiable.
Mm-hmm.
I think from our standpoint, we hired a great firm to handle this, Quinn Emanuel. They're driving everything. I think inside of the company, we're very focused on executing on the P hase 2b study, getting to the data in the first half of 2025. We also have an alopecia areata study going that will read out shortly after the atopic dermatitis trial. So, you know, we're keen to make sure that we execute on that as well. So I think from the business standpoint, we're focused on executing on the business side. Again, hired a great firm that... You know, the litigation's ongoing, so, you know, we'll see where that ends up. So we're in discovery right now. I might have mentioned that earlier.
Yeah, in the discovery process.
Yeah.
Any timeline or potential outcome or scenario you wanna lay out for us?
Trial date, you know, not set for over a year from now.
Mm-hmm.
And I don't think we're gonna set any expectations on that. But, you know, again, you know, our position is that we lost quite a bit of development, and probably, you know, that could impact sort of how we look at, you know, what kind of damages we have, so.
Cool. All right, so maybe quickly move on to the second indication, alopecia areata. I think, Jennifer, you already mentioned you are in the P hase 2 as well. First of all, why alopecia areata as the second, given this mechanism seem to be pretty broadly applicable? And then, where are you for the P hase 2, and then when are we gonna see the data?
Sure, yeah. So one of the things why alopecia, firstly, is it is a disease of the skin. Right. So we've seen so many examples now of not just the same kind, but different kinds of skin biology that could be really positively impacted therapeutically with the Rezpeg mechanism. And so alopecia really, really rose to the top for a few reasons. One of those reasons is that it's a—it's really a disease of an immune infiltration into a hair follicle that, in healthy people, has no immune system in it, right?
Our hair follicles have this state of what we call immune privilege, where the whole immune system is excluded because the stem cells need to keep growing hair, and your immune system gets confused that stem cells are tumors, and it starts to attack them, and then your hair falls out, and that's bad. So what we want to do is restore immune privilege and create healthy, you know, hair follicles and healthy hair. And in translational models, Tregs have been shown to be very important for maintaining immune privilege in the hair, in the healthy hair follicle. So we have the opportunity to advance that same kind of mechanism. The other key point in this field is only JAK inhibitors are approved.
Much like we discussed in atopic dermatitis, in alopecia, JAK inhibitors will allow patients to regrow hair, but then when patients stop taking them, all the hair will fall out, and it can fall out pretty rapidly. For a person that's, you know, lived decades in an alopecia state, it can be really crushing to grow hair and then have it all fall out when you have to stop taking a drug for toxicity or other reasons, as is the case with those, those agents. So if we're able to replicate that kind of durable period of control off drug, that would be totally transformational in this indication. So, so that was really a lot of compelling reasons for us to move into alopecia. So we began the study in March. It's a P hase 2b dose-range finding studies.
There are about 84 patients that we'll enroll. The placebo rate is very, very small in these studies. People don't spontaneously regrow hair, so with an effect size, you can actually conduct a much smaller study very compactly. And we also expect data in 2025. It'll probably read out maybe 2, 3, or 4 months or so after the atopic dermatitis study. And what was your other question?
Yeah. So yeah, when are you gonna have the data?
Okay.
and then what, what were we gonna... You say the placebo rate is supposed to be very low.
Yeah.
And that's why you power the study sufficiently to see the statistic. Is that the expectation?
Yeah, exactly. Yeah. You-
Mm-hmm.
You can see that, like, these studies are much smaller than, you know, other studies where you have to adjust for placebo, right? Placebo rates that are there statistically so... But in alopecia areata, again, that rate is very, very low.
Yeah. The historical Nektar has a very great track record to sign very meaningful partnership. So how should we think about your late-stage development for Rezpeg in alopecia areata or the atopic dermatitis? You know, we see the leading partnership. So is that something you're still considering or any kind of a potential hurdle to sign another partnership for the Rezpeg?
Yeah, well, I mean, there's certainly interest in the asset. I think we made the decision internally.
Mm-hmm.
We wholly own it now, to invest in the P hase 2b studies.
Mm-hmm.
I think, you know, once we get to the data, you know, we can have a lot of optionality there in terms of how we proceed. But certainly, if the data warrant it, we want to drive it into P hase 3 and get it to patients as soon as possible.
Excellent. Okay, so we talk enough about the Rezpeg, and then you do have some other pipeline, and given this platform, so you have oncology. You also have some other earlier kind of pipeline.
Mm-hmm.
So, anything you wanna highlight with us, in the particularly-
Yeah
... what we can expect?
I mean, I can talk about the oncology asset.
Yeah.
We, you know, we're actively evaluating strategic partnering options for that asset. We focused the company in the middle of last year into I&I.
Mm-hmm.
So the key resources and the spend is on the I&I work. So we have the Rezpeg work that's ongoing, which is the majority of that spend. We expect to end this year between $200 million and $225 million in cash. But also included in that is a TNFR2 agonist antibody program, that's in IND-enabling studies right now. We intend to put that into the clinic in the middle of next year. So our focus is on investing in those programs, and we're looking-- We have, we have the oncology program, which is an IL-15 agonist program. It's a very interesting program. It's a combination asset. We have it in multiple studies with some clinical collaborators, and so those data will read out kinda throughout this year. But we're also evaluating strategic partnering options for that as well.
So we only have a certain amount of resources, and we made the decision to invest in the monotherapy Rezpeg studies.
Sure. Okay. So last minute, cash, cash position runway, and then also the, anything else that we haven't talked about...
Mm
... you wanna highlight?
We expect to end this year with between $200 million and $225 million in cash. That amount funds us really through these P hase 2b trials. It doesn't include P hase 3 funding.
Mm-hmm.
However, we do have a cash runway through the middle, through the third quarter of 2026.
Mm-hmm.
So, you know, I think from our standpoint, we're well-positioned to get to those data catalysts, which is really the most important thing.
Mm-hmm.
Going into the data catalyst with a really good, strong cash, cash position was important to us as well.
Mm-hmm.
We did a little financing in March, to kind of meet that gap there, but we'll expect to end this year with a really strong cash position going right into data catalyst. It's a good place to be.
Awesome. All right. Look forward to all the data updates. Thank you.
Thank you.
Thank you, Jennifer. Thank you, Jonathan.
Thank you very much.
Bye.