My name is Arthur He, Senior Biotech Analyst at H.C. Wainwright. Thanks for joining us to have a conversation with the management of Nektar Therapeutics. A little bit about Nektar: Nektar is a global biopharmaceutical company focused on developing novel therapies that selectively modulate the immune system to treat autoimmune disorders by leveraging the company's expertise in polymer chemistry. Joining me here are Dr. Jonathan Zalevsky, Chief R&D Officer, and Ms. Jennifer Ruddock, Chief Business Officer. JZ and Jennifer, welcome.
Hello. Thank you for having us.
I guess right now, Rezpeg is obviously the talk of the town. Before we dive into the real business, I'm just curious if you guys can give us a quick overview of Rezpeg's history. How did it transition from a collaborative program with Lilly to your own hands?
Sure. Yeah. So Nektar invented Rezpeg based on a lot of the learnings and understanding we had around both our polymer chemistry platform and also around the protein interleukin-2. From inception to our first in human dosing was about a 15-month period of time that we took the molecule forward. We entered into a partnership with Eli Lilly at that time, roughly in 2017. With Lilly, we advanced the program through nine completed clinical studies, two studies that Nektar ran themselves, and seven studies that were run by Eli Lilly. We terminated the collaboration in April of 2023. We've been operating the program, wholly owned asset since then.
We have just recently, just this year, completed the enrollment of two very large Phase IIb studies, a Phase IIb study in patients with moderate to severe atopic dermatitis, which is a 400-patient study, which we completed enrollment of in January. We will have the top-line results from that study in June of this year. Those are the results from the 16-week induction period. We also completed enrollment of approximately 90-patient alopecia areata Phase IIb study as well. We announced that roughly a month ago. In the fourth quarter of this year, we expect results from the 36-week treatment period from that study as well. That is a very abridged timeline of many years' worth of work.
That's very helpful. I guess let's move back a little bit. Could you walk us through Rezpeg's Phase Ib data in atopic dermatitis? What are the key differences between your analysis and the initial findings there?
Yeah. What I'll say is, in the clinical study that was operated by our former partner, Eli Lilly, we conducted a very straightforward Phase Ib study. It was a randomized double-blind placebo-controlled study. There were two doses of Rezpeg explored, 12 mcg/kg given twice a month subcutaneously was the low dose treated for 12 weeks. And 24 mcg/kg given twice a month subcutaneously for a 12-week treatment was the high dose of Rezpeg. After 12 weeks of treatment, patients were followed through week 19. Patients that had an EASI 50 or better could continue in the study all the way to week 48. We definitely saw a lot of key elements of data from the study. We saw dose-dependent efficacy. We also saw a drop in EASI score change from baseline that was quite notable.
We saw a very rapid onset of efficacy as well. We saw a very important finding, which was a remittive potential of Rezpeg, whereas even though we stopped treatment at week 12, the majority of people, in fact, the vast majority of people maintained their responses and they maintained disease control all the way through week 48 for six months off drug, which is a feature that's quite different than what you'd expect to see from the standard of care drugs, whether they're Dupixent or even the JAK inhibitors and so on. In terms of the specific data differences, after we terminated the collaboration, we did identify that there was a data issue.
The way that the EASI scores were calculated by the contractor that Lilly hired to run the study, both in the atopic dermatitis study with the EASI endpoint and in the psoriasis study with the PASI endpoint, there was a systematic error made and both of the scores were miscalculated. The basic feature of the error was that in both of the scores, you calculate the disease-specific severity. It is specific for eczema, specific for psoriasis, right, depending on the different skin features. In both instruments, you also need to calculate the area of the skin that's affected and the proportion of that skin across all four geographical regions of the body, your head, your trunk, your upper limbs, and your lower limbs. That is a systematic error that was made.
Both the EASI score and the PASI score by our former partner were miscalculated and they omitted those two area scores. After we received the data, we've corrected that. The corrected data was first presented in 2023, but it was really formally presented in our publication in Nature Communications in October of last year.
Thank you, Jonathan, for such a detailed, comprehensive description. We know that Rezpeg, the way that Rezpeg treats the AD, is completely different from the other pros currently in most drugs in the market, right? Could you tell us a little bit more about what's the potential benefit for targeting Tregs by Rezpeg compared to the other approach for the AD?
Yeah. Our drug is an agonist. All of the other drugs we've talked about are inhibitors or antagonists, right? For example, the IL-13 or IL-4/13 class, it's really trying to block cytokines in that pathway. It's targeted therapy. JAK inhibitors are trying to block the JAK enzymes, right, of course, that are kinases. Our molecule is an agonist. We agonize the immune system, but we agonize normal pathways of immune resolution. Those are at the level of the regulatory T cell, whose job it is in our bodies is to control peripheral tolerance and turn off unwanted inflammation. Wherein an antigen is triggering an autoreactive cell to have an inflammatory reaction, that same antigen can trigger a Treg to block that cell in a very specific way. That's one really big fundamental difference.
We're agonizing the body's natural defense mechanisms and the natural sort of feedback loops that the body normally has in place to block unwanted inflammation. The other thing that's quite important is as a Treg is our main sort of focus mechanistically, that Treg is able to control many different kinds of inflammation. We know in atopic dermatitis, while there can be a TH2 dominance, there are also TH1, TH17 additional signatures that people have, especially adults that have really advanced disease where they've had multiple relapses and multiple flares throughout their life. They become much more mixed in their presentation. Those are all things where our Treg mechanism is quite broad, right? It can work against many different kinds of inflammation as opposed to a targeted cytokine blocker, which can really just block one cytokine.
I see. Let's dive into the Phase IIb study. Okay. We know there's a data readout in June. Before we talk about that, could you walk us through the trial design of the Phase IIb study? I know recently you shared the dose level for the study, the three different dose levels. What's the rationale behind those selections, especially?
Sure. Yeah. The study is about a 400-patient trial design that's randomized 3:3:3:2 on drug to placebo. We're expecting roughly 70-75 people in the placebo group and roughly 105-110 or so in the three drug treatment groups. That gives you a sense of the size. The doses that we're using for the study are 24 mcg/kg given twice. Oh, we could do slides. Okay, 24 mcg/kg .
That's nice.
Yeah, given twice a month. That's the ARM-A shown in orange at the top. We also have that same 24 mcg/kg dose level given once a month. That's ARM-B. ARM-C is 18 mcg/kg given twice a month. Now, what is the thinking behind those dose levels? The first is ARM-A and ARM-B are the top dose that we used in the Phase Ib study of Rezpeg in patients to moderate to severe atopic dermatitis. That, of course, was a very efficacious dose level. We saw an 83% change from baseline EASI score at that dose level at the end of 12 weeks. We saw a very rapid onset of efficacy. We also saw the durability after we stopped dosing, along with very nice results across the EASI responder endpoints, IGA, NRSH, as well as DLQI and POEM.
We wanted to definitely build off of what we learned from that dose level. We also wanted to test a once-a-month regimen at that same dose level so that we could test the hypothesis of the same Cmax, but half of the AUC, right, because we were giving it once a month instead of twice a month. We also saw from the Phase Ib that the 12 mcg/kg dose level, which was the lower dose in that study, it did show activity, but we thought it was a little bit too low. We really wanted to get more kind of dose information from the study. We bumped up that dose level to 18 mcg/kg , right, to create a different dose paradigm. That is a lot of the thinking in how the doses were selected.
One important element of this study, though, the patient population is exactly the same as the Phase Ib. It's the same biologic naive patient population with the same inclusion criteria. However, in this study, we're extending the induction period from 12 weeks in Phase Ib to 16 weeks in Phase IIb. There is additional treatment. We believe that this additional treatment is really a benefit because even though a number of people showed great control after 12 weeks of treatment, there were people that could have done better with more dosing. The other thing is in that study, we withdrew the dose altogether at week 12, whereas here you can see we're maintaining the dosing into the maintenance period. This is something we're very excited about because we're interested to see if there's going to be the potential of even greater efficacy with continued dosing.
That is what this study is really well designed to test. In June, we will reach the final analysis for that 16-week induction period. Basically, the last patient reaching their week 16 assessment is the cutoff date for that database lock. Eventually, when we present that in June of this year, it will be the final analysis for the week 16 induction endpoint. In terms of the way the study is designed, at week 16, each patient basically has two choices. If they have an EASI 50 or better response, then they can move into the maintenance period where they will stay on the same dose level but switch to either a once-a-month or once-every-three-month dose administration and maintenance. Patients that have not reached an EASI 50 response have the option to enter into what we call the escape arm.
In the escape arm, they would switch to the 24 mcg/kg twice a month, which is the high dose in the study. They would remain on that dose through that 36-week maintenance period. At the end of the maintenance period, which would be at one year of total treatment, there is another one year of follow-up off drug where our intention is to assess that remittive potential and durability of response. We expect the June data event from the study for the induction. The first quarter of next year would be a data event for the maintenance portion of this study.
I see. To speak of the June readout. Besides the EASI score reduction, mean reduction, what other data point could we expect from the June readout?
Yeah. We definitely have to save some data for a medical presentation, but you can expect that we would give enough information to really set a good color, right, for the results of the study. That would include the EASI, which is the primary endpoint, probably some of the key secondary endpoints we would note. Of course, we would mention about what was seen from the safety standpoint as well, right, because that's a key endpoint. Our goal would be to make it informative.
I see. Maybe I just push a little bit. For those kind of readout you guys planned, what would a positive outcome look like for you guys?
I mean, we're really excited with the Phase Ib data. And so we really want to replicate our Phase Ib results, right? That's always sort of first and foremost in what we're doing. We also realize that we're a novel mechanism, right? We're a novel mechanism that's not the third or fourth IL-13 variation, right? We also know that even if we're in line with the standard of care, we would have a chance to have a drug that has a lot of potential being a novel mechanism and providing physicians an alternative, right, to the third or fourth agent in the same class. Also, with the different kind of dosing regimens, as you know, we're exploring like a once-every-three-month treatment regimen. We also have the opportunity to provide the patients additional convenience in that kind of a regimen approach.
We really have a range of activities, but we're all very excited to reproduce our Phase Ib data, of course.
Yeah. Same here. Speak of the other competitor drugs for the AD space. We all are being aware of the placebo effect in the recent AD study. What's your general view on the placebo effect in the AD study? What kind of steps have you guys taken to minimize the potential impact for your Phase IIb?
Yeah. We've definitely been given a lot of guidance from our steering committee that in the U.S. in particular, if you just look at different trials over recent readouts, the placebo rate in the U.S. is going up. That's probably a combination of multiple factors. Access to medicine is definitely one. Sort of the more moderate and maybe even barely moderate patients are being reserved for clinical studies because doctors don't want them to have the chance to end up on placebo for a severe patient. They'd rather put the severe patient straight onto Dupixent. Also, use of sites that are not board-certified dermatologists in the U.S., coupled with access to medicine, also is one of the things that can contribute.
Because definitely, you want to make sure that you have a highly skilled dermatologist, or at least an immunologist at minimum, right, that has experience scoring the disease and can really adequately select patients for the study participate. We were given the guidance to really minimize our footprint in the U.S. When we set off, we were anticipating about 30% of our patients to be enrolled from the U.S., but actually, it was 17% after we completed enrollment. That was one thing. The other is that by far, the vast majority of patients of study sites in our studies are led by board-certified dermatologists. That is another key thing. We also were given great guidance that in many of the studies, they just collect baseline disease once it is screening.
You can't really tell or be able to understand if you have a patient that might be in an active flare, maybe a flare that's resolving, right? We also measured our baseline disease twice, roughly a month apart between screening and baseline to ensure we were focused on patients that had stable disease. That's an example of kind of a flavor of some of the things that we did prospectively that are, we believe, modern practice, at least should be modern practice to help ensure your study is the most protected as it can be.
That's very super helpful, Jason. Let's shift the gear to the alopecia side. I think, obviously, the first question is, why did you choose alopecia as the next indication for Rezpeg? I know there's scientific rationale behind that as well as the commercial landscape-wise. Maybe you can tell us a little bit about that part.
Yeah. So it's interesting. I mean, one of the things that comes also from our own just observations clinically. The very first study we did in Phase Ib was in mild to moderate lupus patients. It was a very short six-week study. It was really too short to kind of read out a lupus kind of efficacy endpoint. What we noticed is that all the patients that had secondary cutaneous manifestations of disease showed a very rapid and dose-dependent clearance of their skin symptoms. Their CLASI scores resolved. That is really that first observation that led us to both the psoriasis and atopic dermatitis Phase Ibs, which were run in parallel. Rezpeg showed activity in both indications as well. We've really seen three indications of skin inflammatory diseases with different kinds of underlying biology, with Rezpeg showing efficacy.
We definitely are seeing an effect here, right, in three different kinds of skin diseases. We wanted to continue to explore that. Alopecia is a very interesting disease. It's actually also a skin disease, but it's focused on the scalp. It's really focused on the interaction between the follicles or the hair cells and the skin in this regard. It's a disease where you have a normal hair follicle compartment that should be in a complete immune privilege state, meaning it should be totally devoid and barren of any immune system infiltrate. You have that whole system broken down in patients with alopecia areata, and they have a very highly inflammatory environment. The role of the Treg in normal individuals is actually to help maintain that barrier and help entrust that an immune privilege state exists.
Our whole concept with the study, besides it being another skin disease, there's a very strong translational hypothesis for Tregs in this indication. The real holy grail here, Arthur, is to be able to restore immune privilege and actually fix the problem because the JAK inhibitors can regrow hair, but they just block the inflammation symptoms. The second the patient goes off a JAK inhibitor, whatever hair they grew falls out again. Our goal is to, A, have Rezpeg grow, induce the induction of hair growth. B, just like in atopic dermatitis, withdraw the drug and show that the patients do not relapse, that they keep their hair in this case. That would be truly transformational. All of this also just dovetails nicely as you also set up in the kind of commercial and other considerations. There are no biologics approved in alopecia areata.
We have seen time and time again from RA to psoriasis, atopic dermatitis, that as biologics come in, they start to really establish really substantial growth commercially in these indications. We would be very excited to see if we can get the kind of result that we hope we can see from this study.
Yeah, I completely agree. I think especially for the commercial side, the alopecia landscape is definitely even more favorable than the AD side. I guess for the sake of the time, the alopecia readout is in fourth quarter, I believe, right? What kind of data set can we expect here? What's your expectation for the positive readout?
Yeah. This shows the study design of that study. It's a 36-week treatment. Our fourth quarter top line would be the 36-week treatment or this 36-week induction results. The primary endpoint is the mean % improvement in SALT at week 36 relative to placebo. That would obviously be one. The other really important endpoints here are the proportion of people that reach SALT 20 and SALT 10 because those are the two registrational endpoints. Our benchmark here is we want to be at least in line with a JAK inhibitor. We think even the low dose of the JAK inhibitor is quite meaningful because there are so many ways that we can differentiate from a JAK inhibitor with the mechanism of action of this drug. That kind of gives a sense of what we're thinking about.
Okay. That's great. I guess for the Rezpeg, I'm going to ask Brian for one question. I know you guys already, you've recently got the collaboration ongoing for the type 1 diabetes with TrialNet. Maybe you can share a little bit of a story behind the scenes, how you guys landed this partnership with them.
Thank you, Arthur. There's been a long history of thinking about different indications for Rezpeg where, in fact, the induction of regulatory T cells might have an important role. We've always had on the list type 1 diabetes because there's considerable evidence that there's a dysregulation of IL-2 as well as a dysregulation of the regulatory T cells that need to control the T cells that are destroying the beta cells in the pancreas, so the insulin-producing cells. Considerable evidence, including genetic evidence, animal model data. We've always kind of had it on the list as something that we would like to do. I've been working with the TrialNet individuals all along to try to kind of move this study forward. We now have a collaboration with the premier trialists in type 1 diabetes.
It's a study where we'll enroll 66 individuals enrolled two to one to either Rezpeg or placebo. It actually is in different stages so that in the first stage, it'll be adults. We'll move, and these are in patients who have new onset type 1 diabetes. They have to be within a period of time of presenting with type 1 diabetes, and they have to have at least partially preserved insulin or C- peptide production so that we can see the impact of a drug that might preserve what's remaining in these individuals. That could be highly clinically meaningful. The 66 patients will be enrolled. As I said, it'll be in stages. The first stage is adults. If we have good safety record there, we'll move to adolescents to be included in the study.
If that's good, then we'll move into younger children where the frequency of new onset type 1 diabetes is the most frequent. I am very excited about this. It will be executed by the TrialNet individuals. As many people know, they are the premier trialists in type 1 diabetes.
Gotcha. Thank you, Brian, for all this information. I guess I save the best for the ladies. Jennifer, can you remind us about the current cash position and your project runway now?
Yeah, sure. Thanks, Arthur. Nice to see everybody. We ended 2004 with $269 million in cash. We're currently projecting our runway to take us into the fourth quarter of 2026. That covers the cost of the Phase IIb trials that we're running right now in atopic dermatitis and alopecia, as well as the work that JZ is doing on our TNFR2 agonist antibody program that's advancing nicely. We intend to submit an IND for that at the end of this year.
Awesome. Great. JZ, Brian, and Jennifer, thanks so much for your great insight today. Yeah. I'd like to thank our audience who are tuning in today online. Thanks again from the H.C. Wainwright team. Thank you.
Thank you, Arthur.
Thank you.