Good day and thank you for standing by. Welcome to the Nektar Therapeutics First Quarter 2025 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Corinne Franklin in Nektar Investor Relations, who is filling in for Vivian Wu who is on maternity leave. Please go ahead.

Thank you, Crystal, and good afternoon, everyone. Thank you for joining us today. With us on the call are Howard Robin, our President and Chief Executive Officer; Dr. Jonathan Zalevsky, our Chief Research and Development Officer; Dr. Brian Kotzin, our Chief Medical Officer; and Sandra Gardiner, our Chief Financial Officer. On today's call, we expect to make forward-looking statements regarding our business, including statements regarding the therapeutic potential of and future development plans for drug candidates and research programs, the timing of the initiation of clinical studies and the availability of clinical data for drug candidates, the timing and plans for future clinical data presentations, the formation, future development plans or success of our collaboration agreements, financial guidance and certain other certain statements regarding the future of our business. Because forward-looking statements relate to the future, they are subject to uncertainties and risks that are difficult to predict, many of which are outside of our control or actual results may differ materially from these statements. Important risks and uncertainties are set forth in our Form 10-K that was filed on March 14, 2025 which is available at sec.gov. We undertake no obligation to update any of these forward-looking statements, whether as a result of new information, future developments or otherwise. A webcast of this call will be available on IR page of Nektar's website at nektar.com. With that said, I would like to hand the call over to our President and CEO, Howard Robin.

Thank you, Corinne, and thank you all for joining us today. During the first quarter of 2025, we've been concentrating on the successful development of our immunology pipeline with a focus on advancing rezpegaldesleukin, also known as REZPEG, in three separate Phase 2 studies and completing the IND-enabling studies for our lead earlier stage program NKTR-0165, a TNFR2 agonist antibody. REZPEG is a first-in-class T regulatory cell biologic therapy with the broad potential in a number of immune disorders. As a novel immune modulator mechanism, REZPEG is poised to help a significant number of patients battling chronic conditions. In June, we plan to share our first top line results from the 16-week induction period for the 400 patients Phase 2b study known as REZOLVE-AD, which is studying REZPEG in biologic naïve patients with moderate-to-severe atopic dermatitis. I will let JZ review the upcoming important data milestone and the study design in a moment. Our objective in this study is to demonstrate efficacy and safety and establish a dose to take forward in Phase 3 studies. The study also has a 36-week maintenance period where patients will receive the same dose from induction but at every four-week or every 12-week dosing intervals. The data from this maintenance period will be available in early 2026. Atopic dermatitis is a significant opportunity as there's a high unmet need for new mechanisms to treat these patients. There are currently 30 million adult patients with atopic dermatitis in the U.S. and 220 million adult patients globally. About half of these patients have moderate-to-severe disease and this means their eczema covers a significant portion of their body and can severely affect their overall quality of life. According to the National Eczema Association, adults with atopic dermatitis are three times more likely to experience anxiety and depression, which increases with the severity of the disease. Eczema could also cause severe itching and inflammation, impact a patient's sleep and lead to body shame. Currently, approximately 8% of the patients with moderate-to-severe disease are treated with a biologic, most frequently DUPIXENT, and yet we know that about half of those patients ultimately either don't benefit from treatment or become refractory, and once treatment is stopped, their atopic dermatitis returns. We believe this is because the approved biologics are effective at controlling the signs and symptoms of the disease, but they do not therapeutically target the underlying disease pathology to restore and heal the skin. As a T regulatory cell therapy, REZPEG instead regulates multiple immune pathways to address the overall disorder and so we believe it could provide a much needed alternative to the IL-13 and IL-31 based therapies currently approved for these patients. For our REZPEG-AA Phase 2b study in alopecia areata, we will report top line results in December of this year. The patients enrolled in this study have severe to very severe alopecia areata. These are patients who have lost at least 50% of the hair on their scalp. In addition, this disease can impact the patient's eyebrows, eyelashes and facial hair. Nearly 7 million people in the U.S. have alopecia areata and 160 million people worldwide. Many of these patients also have other autoimmune diseases. Our 90-patient study is evaluating a 36-week treatment period for patients with alopecia areata as compared to placebo. We will then evaluate patients once they are off-therapy to understand the long-term remitted potential for REZPEG. Today, JAK inhibitors are used to treat alopecia and we know that when therapy is removed, patients lose their hair again very quickly. Our hope is that REZPEG can provide a new treatment paradigm and a long-term solution for patients battling this chronic condition. In Type 1 diabetes, REZPEG has great potential as a T regulatory cell therapy to slow the progressive loss of insulin producing beta cells which are the target of the patient's overactive immune cells in this disease. We're looking forward to the start later this year for the important proof-of-concept study in new onset Type 1 diabetes which is being sponsored and funded by TrialNet. Finally, with respect to our early stage immunology pipeline, we're advancing NKTR-0165, our TNFR2 agonist antibody program through IND-enabling studies this year and we've made great progress on this front. We are on track to complete these studies in 2025 and will be prepared to submit an IND filing. In addition, the bispecific program NKTR-0166 which incorporates a TNFR2 epitope with a validated antibody target is also on track and we're advancing this new program into preclinical studies. Lastly, we remain in a strong financial position with a runway into the fourth quarter of 2026. And with that, I'll hand the call over to JZ for review of the upcoming data milestones.

Thanks, Howard, and thanks to everyone on today's call. To begin, I'd like to share with you some of the trial design details for our REZPEG studies which will be providing Nektar with numerous data catalysts over the next nine months. First, in atopic dermatitis, REZOLVE-AD enrolled approximately 400 biologic naïve patients from October 2023 to January 2025 across multiple geographic regions globally. The 52-week study is designed in two distinct phases, the induction phase and the maintenance phase. As you'll recall, we only had the induction phase which was 12 weeks of treatment in the prior REZPEG Phase 1b study. The goal of our Phase 2b study is to identify a proper dose for an initial 16-week induction period which can be our Phase 3 dose, and also to identify a maintenance dose regimen that would be used for an additional 36 weeks after induction to maintain or potentially even improve effect for patients. For the induction, we are evaluating three dose regimens as compared to placebo with a 3:3:3:2 design, a high dose of 24 micrograms per kilogram twice monthly, a mid dose of 18 micrograms per kilogram twice monthly and a lower exposure dose of 24 micrograms per kilogram once monthly. With the goal, as I just stated, to establish a dose for induction treatment to advance into Phase 3 studies. As you will recall, the 24 microgram per kilogram dose given every two weeks was carried over from the Phase 1b study of REZPEG in atopic dermatitis. And this dose arm achieved statistical significance as compared to placebo following only a 12-week induction treatment period in that study. REZPEG resulted in an 83% decline in EASI scores as compared to 47% in placebo. After withdrawing the treatment in the Phase 1b, we observed a strong signal of a remitted effect with patients maintaining their reduced EASI scores for 36 weeks, once the 24 microgram per kilogram twice a month dose was stopped at week 12. The mid dose of 18 micrograms per kilogram given twice a month is a dose that is in between the 12 microgram per kilogram level that was studied in the Phase 1b and the highest dose study of 24. And finally, in order to approximate the PK exposure for the low dose of 12 micrograms per kilogram from the Phase 1b study, we also gave the 24 microgram per kilogram dose once a month. Importantly, because REZPEG is an agonist, we maintained weight based dosing in our Phase 2b study in atopic dermatitis as well as in the alopecia study. And our primary endpoint is the mean change in EASI score from baseline and we are also measuring the secondary endpoints EASI 75, EASI 90, BSA, itch and vIGA scores. As you will recall, in the Phase 1b study for rezpeg in atopic dermatitis, all patients were enrolled in the U.S. because we observed an increased placebo effect in the U.S. in our Phase 1b study and other investigators have experienced the same challenge. We targeted a lower enrollment number in the U.S. for the Phase 2b study. As a result, we enrolled only 17% of patients in the U.S. with 67% in Europe, primarily in Poland, and the remainder in Australia and Canada. We took other important measures to address the high placebo rate observed in other atopic dermatitis studies. First, prior to randomization in REZOLVE-AD, baseline scores for patients were collected at screening and again at randomization. Patients with high variability in their baseline EASI scores were screen failed and this was done to eliminate patients with unstable disease. Another key objective in the Phase 2b study was to utilize primarily sites that were led by board-certified dermatologists who had specific prior experience in successful atopic dermatitis studies. This ensured higher quality sites were participating in the study. We enrolled patients across 110 global sites and the sites were carefully chosen and trained as part of our study operations. As I just stated earlier, we saw a strong signal of remittive effect after the 12-week induction period in our Phase 1b even after removal of two twice-monthly dose regimens after week 12. For the Phase 2b, we are exploring what continued treatment with REZPEG will look like after the induction period for a 36-week maintenance period. At the end of the 16-week induction period, patients who achieved at least an EASI 50 score are re-randomized to receive one of two maintenance regimens at their original dose level for a 36-week treatment period on either a once a month or once every three month regimen. We’re excited to see the effect of continuing to treat after induction for REZPEG, which as Howard said earlier will be a future data readout in early 2026. Patients that did not meet an EASI 50 or better efficacy threshold at week 16 were permitted to go into an escape arm, which is the 24 microgram per kg dose given every two weeks. Because REZPEG has an immune modulating mechanism, we are also following participants for one year after the conclusion of the 52-week treatment period, enabling us to evaluate REZPEG’s potential for a long-term remittive effect in patients. We want to understand how REZPEG differentiates from the IL-13 based mechanisms and JAK inhibitors where disease recurs in a substantial fraction of patients after discontinuing treatment. Now moving on to alopecia areata. As Howard stated, we expect top line results from the 90-patient alopecia study in December of this year. This study was started in March of 2024, and we completed enrollment in February of this year across 30 sites globally. 62% of patients were enrolled in Poland, 24% in Canada, and the rest in the U.S. The study has a 36-week treatment period and is a similar design compared to the Phase 2 study of baricitinib in alopecia. Alopecia areata is a dermal disease in which the patient’s immune system mistakenly attacks the hair follicle and disrupts the body’s normal ability to keep and grow hair, leading to severe hair loss and lack of hair regrowth. There is a strong rationale for REZPEG in this indication based on the role of Tregs to either prevent or downregulate the underlying pathology of the disease. Patients had to present with severe to very severe disease defined by the severity of Alopecia Tool score or SALT 50 to SALT 100 for at least six months in order to be eligible for inclusion. We are evaluating two doses, the 24 microgram per kilogram and the 18 microgram per kilogram given every two weeks as compared to placebo. Placebo rates tend to be quite low, under 10%, in this disease setting. Our primary endpoint for this study is the mean percent improvement in SALT at week 36. We will also be looking at a number of other secondary endpoints including the proportion of patients that had certain levels of improvement in SALT score, including the regulatory approval endpoint for a Phase 3 study, the SALT 20 responder health. As Howard stated, we are also excited about the start of the Phase 2 TrialNet sponsored study of Type 1 diabetes for REZPEG. The 66 patient placebo-controlled study will enroll Stage 3 new onset type 1 diabetes patients and we look forward to providing the REZPEG drug for this important indication. Finally, we are making great progress in the IND-enabling studies for our novel TNFR2 agonist antibody program NKTR-0165. TNFR2 agonism potentiates Treg function as well as maintenance of Treg lineage stability especially in the non-lymphoid tissue compartment. The first preclinical data from this program presented last year at EULAR demonstrated that NKTR-0165 has a very high specificity for signaling through TNFR2 on Tregs and enhancing their immunoregulatory phenotype. It also showed that the agonist we discovered is able to signal through the TNFR2 multimeric receptor as a single arm monovalent antibody. We believe this is the only antibody in this class being developed that has this attribute. We are very excited with the unique differentiated profile of this antibody and we believe it has potential to become a first-in-class treatment for various autoimmune diseases including multiple sclerosis, ulcerative colitis, and vitiligo. We’re also designing a pipeline of bispecific molecules that pair TNFR2 agonism with other antibody targets and we’ve identified the first bispecific antibody NKTR-0166 in this program. This first bispecific antibody incorporates a TNFR2 epitope with another validated antibody target, and we are initiating our preclinical studies now. We look forward to providing more details on this antibody as the studies progress. For NKTR-255 our IL-15 based oncology program, I am excited to share the data from our collaborators at the Fred Hutchinson Cancer Center in Seattle. We’re accepted for an oral presentation at this year’s European Hematology Association Congress being held in Milan. This will be the first data presented from their investigator-sponsored study of NKTR-255 following CD19-directed CAR T cells Breyanzi in the second and third line large B cell lymphoma patients. We believe these data reinforce the potential for NKTR-255 to improve upon existing cell therapies for patients. We continue to explore opportunities for continued development of this drug candidate in partnership with collaborators. And now I’d like to turn the call over to Sandy for a review of our financials.

Thank you, JZ, and good afternoon everyone. We ended the first quarter of 2025 with $220.7 million in cash and investments and with no debt on our balance sheet. We remain in a strong financial position and still expect our cash runway to extend into the fourth quarter of 2026 and to end 2025 with approximately $100 million in cash and investments. Turning to the income statement. Our first quarter 2025 revenue of $10.5 million was within our guidance range and comprised of non-cash royalty revenue. We currently expect our quarterly revenue to remain at a similar level to Q1 for the remainder of 2025, totaling approximately $40 million for the full year. Our R&D expenses were $30.5 million for the first quarter of 2025 and we still anticipate full year R&D expense to range between $110 million and $120 million, including approximately $5 million to $10 million of non-cash depreciation and stock-based compensation expense. Our G&A expenses were $24.3 million for the first quarter. We still continue to expect G&A expense for the full year of 2025 to be between $60 million and $65 million, including approximately $5 million to $10 million of non-cash depreciation and stock-based compensation expense. Note, that our operating expenses are not ratable throughout the year and will vary based on the level and type of activities each quarter. For example, our R&D expenses are higher in the first half of the year with greater study operational activities in our REZPEG Phase 2 atopic dermatitis study. Non-cash interest expense for the first quarter was $5 million and is expected to remain at a similar level for the remaining three quarters totaling approximately $20 million for 2025. This quarter we have included a new non-operating line item on our income statement titled Gain or Loss from Equity Method Investment. As a reminder, on December 2, 2024, we completed the sale of our Huntsville manufacturing facility for consideration of $64.7 million in cash, net of transaction costs and approximately 20% ownership in the new portfolio company Gannet Biochem or Gannet. Under the required equity method of accounting, our investment in Gannet was recorded at fair value. At each subsequent period end date, our share of Gannet’s gains or losses are recorded using the hypothetical liquidation at book value or HLBV method. The HLBV method calculates the change in the hypothetical amount we would be entitled to receive if Gannet were liquidated at book value at the end of each period. This is a non-cash charge recorded outside of Nektar’s operating expenses and from period to period could fluctuate from a loss to a gain. In the first quarter, due to this accounting methodology, we recorded a non-cash loss from equity method investment of $4.5 million and we currently expect a loss of approximately $10 million for the full year 2025. Importantly, as I just said, this is non-cash. We have no commitments to contribute cash to Gannett as an equity investor. We are simply providing this information as a housekeeping item so that you can forecast the rest of 2025 for this new non-cash line item. Our net loss for the first quarter was $50.9 million or $0.24 basic and diluted net loss per share. Net loss before the equity method investment totaled $46.4 million, equating to a non-GAAP basic and diluted net loss per share of $0.22. And as I stated earlier, we still expect the year to end the year with approximately $100 million in cash and investments with our cash runway extending into the fourth quarter of 2026. Finally, as we head into our June data reporting, we intend to enter into a quiet period for the month of June until we report the top-line results for the REZPEG atopic dermatitis study. And with that, we'll now open the call for questions.

Thank you. Our first question will come from Yasmeen Rahimi from Piper Sandler. Your line is open.

Hi, this is Dominic on behalf of Yas. Thank you for taking our questions and congratulations on the quarter. Could you remind us kindly what you hope to see in REZOLVE-AD to move forward into a Phase 3 and is your plan to move forward with one or two doses for that? And then also what is your expectation for the placebo response in REZOLVE-AD? Thank you.

JZ, would you like to answer that?

Certainly. Thank you for the question. So, firstly, one of our objectives is that we, of course, had Phase 1 data already and have demonstrated proof-of-concept in atopic dermatitis. So one of the things we'd like to see is a replication of that data. So that's one of the components of efficacy that we'd like to see. And then we'd also compare the results against the other key benchmarks. And of course, Dupixent is a very important benchmark. It is the leading standard of care in this space. So we'd like to be, at minimum, in the range of the efficacy that you see with Dupixent. And then of course, we'd like to even better improve on that and replicate our results of Phase 1. In terms of the number of dose levels that we would like to study, the purpose of the Phase 2b study is it's a classical dose range finding study. So ideally we would identify a clear dose and dose regimen that we would take forward. We'd have to obviously see what the results show us. But in the ideal case, we would have one dose level that we would be taking forward into Phase 3 studies. And can you remind me your third question, please?

Yes. It was, what are the expectations for the placebo response in REZOLVE-AD?

Yes. Okay, thank you. Yes. So as I mentioned in the call, in the Phase 1, we used sites that were 100% in 13 sites, and we saw about a 47% placebo response, which was a little bit on the higher side, still in the range of modern studies, but on the higher end. And it's certainly reflective of a general trend that we're seeing, particularly in sites in the U.S. and so we took proactive measures in order to try and control the placebo response rate by only enrolling a proportion of patients in the U.S. 17%, and enrolling in the rest of the world for the remainder of the patient population, as well as some of the other things that I mentioned, such as using board certified dermatologists in the majority of the sites to have consistent and highest quality rating of the disease. So we'd like to see a lower rate, for example, than what we saw in Phase 1b. And we look forward to reporting the actual placebo response rate as we prepare and report the top line next month.

Thank you. Our next question will come from Julian Harrison from BTIG. Your line is open.

Hi, congrats on the progress and thank you for taking my questions on the Phase 2b atopic derm data we’re expecting in June or rather the trial. I have a specific question. I was wondering if you're able to tell us how many patients have progressed to the maintenance portion of the trial so far and of those – how many have crossed over to the escape arm of the trial. Are you blinded to that? Or is that maybe something you could disclose now?

JZ, did you get that question?

Hey Julian. Yes, this is JZ. Yes, so it's a good question. We can't disclose that kind of information right now, but we will disclose that as well as more features of the data and the actual results, next month when we present the top line results of the study.

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

Oh, hey, congrats on the progress and thank you for taking our questions. When you share the results from the Phase 2b results study, can you just talk about the scope of the data you're planning to share and of the secondary endpoints which are most important?

Yes, thanks, Jay. So one of the kind of unique things about the dermatology conferences is that they're a little bit more lenient than say ASCO is in terms of embargoed data. And I think that's a good thing here. So certainly when we present the top line data, the primary endpoint will be a key element that we represent and that's the percent change from baseline in EASI score and compare to placebo, all of the cohorts one by one. And then there are secondary endpoints and you ask which ones are quite important. So definitely EASI-75, EASI-90, the IGA quite important. Probably itch is also quite important. I mean those are the ones that really first they are used as registering endpoints in the case of EASI-75 and IGA. And also things like itch are just key for the kind of comparisons that we do. And then we also give the picture. The picture isn't efficacy; it would be the total tolerability, the total ability to understand the both risk and the benefit of the drug. So I hope that gives you a flavor of the kind of things we would present.

Yes, absolutely. Super helpful. And maybe if I could please ask one follow up. Will you be taking weight-based dosing into Phase 3 or will it be a fixed dose?

Yes, so one of the things that we've learned about this drug as an agonist, it's quite important to dose it very precisely. And so, weight-based dosing is what we've identified is critical. So our plan is to continue to use weight-based dosing. And it's pretty common. There are many, many drugs that are dosed, what you call weight bands. So if a person is between weight A and weight B, they get this, they get this SKU or another SKU, for example, Orencia, other drugs; many other drugs are dosed that way. So we would be using weight-based dosing, and then our long term goal would be also that we would launch in an auto-injector and maintain that kind of weight-based banding as our dose approach.

Thank you. Our next question comes from Roger Song from Jefferies. Your line is open.

Thank you for the update and for taking my question. Could you remind us of the dropout rate for your Phase 1b atopic dermatitis trial? I understand it’s small, but what are your expectations for Phase 2? Can you share any details regarding the blinded study design? What discontinuation rates are you observing? Will you report both ITT and other measures for the efficacy endpoint?

Yes. Hey, Roger, thanks for the question. So you know, when we published the results from the Phase 1b last year in our Nature Communications paper, we showed that there was between a 30% and 20% dropout rate for placebo and the two dose levels of REZPEG, and it was actually higher for placebo, 30% for placebo and in the low to mid-20s for the REZPEG arms for the low dose and the high dose. And so we presented that data, and for example, if you consider a study like the Lebrikizumab Phase 2 trial, there in that study when they looked at the overall pool analysis, I think they had about a 28% dropout rate. It's just another benchmark. And for us in the case of June, we'll report the dropout rates and we'll report that, for example, patients that discontinued during the induction period, as well as the earlier question, patients that completed the induction period that either went on to re-randomize into maintenance or that went into the escape arm. So stay tuned and we'll report all of those results next fall.

Got it. Okay. And then in terms of the next step, given the Phase 2 is biologic naïve patient population, how would you consider to expand this into post biologics and then in the Phase 3? Thank you.

Yes. So our data is really built upon what we've seen in our own proof-of-concept study, right? And that's why we ran that Phase 1 in biologic naive patients, and we ran the Phase 2 biologic naive patients, and we would expect to also run our Phase 3 studies in the biologic naive patients. However, during the Phase 3 program, we would also study the drug in biologic experience. So that would be something that we would do as part of the Phase 3 program. Different companies use different approaches. For example, Amgen with the ROCA program combined biologic naive and experienced into the same study, whereas lebrikizumab and amlitelimab did separate studies for those populations. So we'll still be deciding the best approach for us, but we will definitely evaluate both naive and experienced patient populations in the Phase 3 program.

Excellent. Just one last quick question. In terms of the partnership, would you be considering seeking partnership after Phase 2? Or you will take this REZPEG into Phase 3 on your own? Thank you.

Yes, that's – this is Howard. That's a very good question, Roger. I think, look, if you look at Nektar's current financial position, we clearly aren't in a position to execute on a full Phase 3 program without a partner. So I think what we will be doing is looking at the quality and the strength of the data and we will be talking to companies about collaborating. Now that doesn't mean we'll be out licensing the drug. No way we will do that. But we will be talking to companies and come up with a collaboration that allows the least amount of dilutive financing for our investors and at the same point allows us to retain a significant portion of ownership of the drug. And there's lots of different ways to do that, but clearly collaboration is likely the direction we go.

Thank you. Our next question comes from Mayank Mamtani from B. Riley Securities. Your line is open.

Yes, good afternoon. Thank you for addressing our questions. JZ, could you share any insights on where your baseline EASI might land and how significant the transition from 12 to 16 weeks in this Phase 2b is compared to Phase 1b for distinguishing it from placebo? Are we expecting all dose levels, including the 24 mg/kg once a month, to achieve statistical significance, with the monthly dose being identified as the lowest therapeutic effective dose?

Great. Yes. Thanks, Mayank. So obviously when we report the top line results, we'll give the detailed baseline EASI. But I can tell you that with the kind of prospective actions that we took in the study, such as the geographic footprint, as well as focusing on experienced dermatologists, board certified derms that have successfully participated in studies, we'd like to see our baseline EASI rate between 25 and 30. And we think that when you look across successful studies, whether they're Phase 2 or Phase 3, this is a – that's a very good zone to be in. You'll note, of course, from our publications, we were a little bit lower than that in our Phase 1. We were in the 22, 23 range. Again, that was all U.S. sites. So we'd like to see a higher baseline EASI at this study. And then you asked another interesting question about the impact of increasing the time of – the overall dose interval. And we do think that that's quite important. So the Phase 1b was really informative and it showed us that a 12-week twice a month dosing regimen could definitely deliver quite a lot of efficacy and it could deliver a remitted effect that was seen in the majority of people. But it was also evident that there were people that could have done better with additional dosing. And when you look at that week 12 to week 19 off-drug period, we lost a few people at the different dose levels that really had an effect, but then that effect winked. So there were clearly people that could have done with additional dosing. So one of the first things that we'll be looking at in this study is the additional extension of the induction period from 12 to 16 weeks. That also gives more, as you described, space and the separation from placebo. But then also beyond that is the fact that we keep dosing in the maintenance period, which is also something that I mentioned, we're very excited about because it's possible we haven't really mapped out the extent of efficacy and that would continue treatment through 52 weeks. Patients could see even more benefits. So we're very excited to see the effect of that additional dosing. And then to your last question about the different dose levels. So we gave additional color in the call today about our expectations about the PK exposure and the kind of AUC that's matched across those dose levels. But also remember, this is a very well-powered study. We enrolled 400 patients into the study in order to fill the maintenance arms. And then the benefit of that is that the induction is very well powered. So that gives us a very good opportunity and a very good chance to hit significance across multiple dose arms. Thanks for the questions, Mayank.

Great. And if I may squeeze in an alopecia study question, please. Do you have a sense of what proportion of patients between very severe versus severe subgroups? And if you could comment on the kinetics of response relative to a pretty fast onset, you get an AD, how – what would your expectation be on the kinetics there? And then I have just one last follow-up after that.

Sure. So just look at the epidemiology. If you look at people that are SALT 50 or higher, you'd find between a third and a half are actually in the very severe, which are 95 and higher, right? And those are also the people that tend to be the candidates for clinical trials as well. So that's just where the epidemiology breaks down in that from a third to a half are in that very severe category which is defined as 95 to 100 on the SALT scale. And then your other question about onset, it's a very interesting question. The physiology in that disease is very different, like in atopic dermatitis, you're dealing with effectively an organ that recovers quickly in the skin, rashes can come and appear and clear quickly, as you know. And so can the other excoriation, magnification other features of the disease as well. But hair is its own thing, right? There are different stages of hair growth. In patients with alopecia they have an arrest of the hair follicle. So there's inflammation that slows down and it really interrupts the stem cell portion of the disease. And so that's why we actually are doing a 36-week induction period in that study. We see that even with JAK inhibitors, right? It can take time to grow hair. So we are doing a longer induction period. And in December we look forward to present the top line results of that study. And there we'll be able to characterize not just the magnitude but also the kinetics of the response. So we'll stay tuned for until December for that.

Great. And just one corporate question. Anything you guys can comment on the Lilly litigation, just update on what next steps are and if at all respects progression to late stage development has any impact on potential damages? Thanks again for taking our question.

Yes. Look, I can't obviously can't go into detail on our litigation. I can only tell you that we strongly believe we've been damaged by Lilly, and we are active. We're clearly actively pursuing an aggressive strategy in this legal action. And I think whether REZPEG is successful or REZPEG is not successful, I don't think it has really much impact on the damage that they've done to us. So, let's watch and wait as we move towards trial.

Thank you. Our next question comes from Arthur He from H.C. Wainwright. Your line is open.

Hey, good afternoon, Howard and team. Thanks for taking my question. So, JZ, you read my mind about disclosing the dose level for the AA study and so I just wondering, so assuming these Phase 2b starting in the AA turned out meets your guys' expectation, how should we think about the design for when you guys evaluating the maintenance of the in the AA patient, would that follow similar design path as the AD Study?

Yes, it's a really great question, Arthur. Yes, thanks for that. So, yes, one of the things we're going to learn in this Phase 2b study is what happens when we stop treatment. Right. So in the study design there's a nine-month induction and then the six-month off-treatment period. And our hope and desire in designing the study that way was that we could see the same kind of remitted potential in alopecia that we saw in atopic dermatitis in that off-drug period there. That would be a complete transformational change in this indication. So firstly there is no biologic approved in this disease. And the JAK inhibitors can be effective for people with alopecia. They're kind of difficult drugs to take because you have to take them for so long and this is easy. You also have to step up in dose in patients. But then as Howard and I described it, it's very difficult for patients because when you stop taking the JAK inhibitor the rate of hair loss is quick and you don't have a regrowth or a maintenance of what you grew. So we do think there's a really unique opportunity and again having the potential of being in a very, very exciting position as a biologic being tested and the potential to be so early into the space as a biologic therapy. The way we would approach a Phase 3 study, we would, of course, have to see the results of the Phase 2, right. We'd have to learn about the dose ranging that we've done in the Phase 2 study. And then as we look at the off-drug period, we would think about what is the appropriate maintenance regimen. Most likely we would treat and approach alopecia the way we approach atopic dermatitis, where there would be an induction period that would be a higher frequency of dosing and then there would be a maintenance period that would be much lower in frequency. That's most likely what we would see. But of course, we'd have to see the final results of the study to make that final design.

Thanks, JZ. So just a quick one on the technical side for the study design for the alopecia study. So I noticed that for those patients did not reach SAR score less than 20, they can get an additional 16-week treatment. Right. So those patients will be followed in an additional 24 weeks. So is that right? I mean for that thing those patients kind of have the total study time period will be a little bit longer.

It's the latter. So for those people, everybody gets 24 weeks off drug. So even if some people were improving at the end of week 36 and had an extension, they would still be followed for 24 weeks of the end of dosing. You are correct.

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

Hey guys, good afternoon. Thanks for taking my question. Is it fair to expect that you would wait for the 36-week AD data before pursuing an end of Phase 2 meeting with FDA and preparing to initiate a Phase 3 trial? Or is there potentially motivation to meet with the FDA sooner on the back of this upcoming data and get the ball rolling on Phase 3 that much sooner? Thank you.

Yes, thanks for the question, Jess. It is the latter. So we don't have to wait for the completion of the maintenance, which would come in a very early part of next year before we connect with the FDA on the induction regimen. And so in fact, it is our plan that with the top-line data that comes next month, we would begin eyeing in the – Phase 2 meeting with that 16-week induction data being the main substance and substrate as well as the driver of the Phase 3 study design that we would take forward. So yes, actually we would, you don't need to wait. And our goal would be to really to keep the momentum on the program. So if the study gives us the kind of results that we think it can, our intention would be to move quickly, maintain the momentum and enter Phase 3 moving into that Phase 3 program as quickly as we can.

Thank you. Our next question comes from Andy Hsieh from William Blair. Your line is open.

Oh, thanks for taking our questions. So, two for me. I'm just curious, for the protocol for atopic dermatitis, do you allow patients to be off the drug but still on the trial? The reason why I'm asking this question is perhaps for the first look, you can potentially get a glimpse into potential remittance, like you said, JZ, for those patients who are off-drug but still on trial. So that's question number one. Question number two is for the primary endpoint. I'm curious about which imputation method you're using. I think this is going back to Roger's question before, but I also have the same question. Thank you.

Okay, sure. Yes. So in terms of your first question, like any other protocol, right, there are rules for either stopping the study or stopping the treatment. Right. And then there are, if you fall into one of those categories, like any other protocol, you still keep the patients in the study. They continue to have follow-up visits, not just an end of study, but even after an end of treatment, they could continue to be followed. And so our protocol is no different than any others and it does allow that. And again, like so, yes, so that's something that is allowed in our protocol. And then the second question that you asked was about imputation. And so, yes, the kind of imputation methods that are used are typical of Phase 2 studies. So the FDA likes you to use an estimate approach when you report this kind of data. So there are events called intercurrent events, and again, they're well defined. And the FDA gives the guidance to all sponsors when you have a study of Phase 2 size. So we'd be using a primary estimate analysis and again, the routine kind of imputation methods that are typical of other studies. When we present the results, we'll get into the details. The methodology so you can see that before you see the protocol, for example, when we publish the study results. But I hope that gives you the kind of flavor. It's a standard imputation of primary estimate analysis.

Yes, that's helpful. Thank you, JZ.

Thank you. And I am showing no further questions from our phone lines. I'd now like to pass it back to Howard Robin for any closing remarks.

Well, thank you all for joining us today, and we greatly appreciate your continued support. And I want to thank all of our employees for their hard work and diligence. I look forward to sharing our REZPEG data in June. So please stay tuned.

Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.