Earnings Call Transcript - NKTR Q3 2025

Operator, Operator

Hello, and thank you for standing by. Welcome to the Nektar Therapeutics Third Quarter 2025 Financial Results Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Vivian Wu from Nektar Investor Relations to kick things off. Please go ahead.

Vivian Wu, Investor Relations

Thank you, Crystal, and good afternoon, everyone. Thank you for joining us today. Today, you will hear from Howard Robin, our President and Chief Executive Officer; Dr. Jonathan Zalevsky, our Chief Research and Development Officer; and Sandra Gardiner, our Chief Financial Officer. Dr. Mary Tagliaferri, our Chief Medical Officer, will also be available during the question-and-answer session. On today's call, we expect to make forward-looking statements regarding the business, including statements regarding the therapeutic potential of and future development plans for rezpegaldesleukin, the timing and plans for future clinical data presentations and other 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 and many of which are outside of our control. Our actual results may differ materially from these statements. Important risks and uncertainties are set forth in our latest Form 10-Q 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 the 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. Howard?

Howard W. Robin, CEO

Thank you, Vivian, and good afternoon, everyone. Before I start with remarks for the quarter, I'd like to take a minute to welcome Dr. Mary Tagliaferri back to the company, who has recently rejoined us as Chief Medical Officer after a need to step away for personal reasons earlier this year. Mary was instrumental in the design and execution of our successful Phase II program in atopic dermatitis, and we are so fortunate that she has now rejoined us as we prepare for the initiation of the Phase III program next year. I'd also like to thank Brian Kotzin for his help serving as the Interim CMO during the period. Brian has worked with us for nearly 10 years, and we are grateful that he will continue to serve as a medical consultant. This quarter and year-to-date, we've remained laser-focused on pursuing regulatory T cell science across our pipeline and preparing to advance our lead program, rezpegaldesleukin, also known as REZPEG, into Phase III development. Our pipeline programs are focused on stimulating Tregs in different ways to restore the proper balance between T effector cells and T regulatory cells and achieve homeostasis in the immune system. The data in atopic dermatitis reported in June and presented at EADV 2025 for REZPEG represented a powerful translation of the scientific discoveries that led to an understanding of the importance of Tregs into the first demonstration of their clear clinical efficacy in autoimmune disease. The Nobel Prize in Physiology or Medicine was recently awarded for these discoveries that established FOXP3-positive Tregs as key enforcers of immune tolerance. We're very humbled that the Nobel Committee included the publication of the Phase Ib data for REZPEG in atopic dermatitis and psoriasis as support in the background documents for this award. The recognition of REZPEG was truly an honor and speaks to the journey that our Nektar scientists and clinicians have traveled over the years to turn important scientific discoveries into real potential medicines for patients. Our approach with REZPEG and stimulation of Tregs is highly differentiated in the field. We believe this is why we've been able to uniquely generate meaningful and robust clinical data that clearly support continued development of this novel modality. REZPEG was designed to closely mimic the way Tregs in our own immune system work to resolve inflammation. Its construct gets closest to emulating natural human biology, achieving this through IL-2 agonism with native sequence IL-2 receptor interactions and a validated chemistry approach, PEGylation that has led to over 2 dozen approved biologics. At the 2025 EADV Congress in September, we presented compelling results from the 16-week induction period of the 400-patient RESOLVE-AD study of REZPEG in moderate to severe atopic dermatitis. These data showcased the clinical differentiation that could be achieved with this novel MOA, and JZ will touch on this later in the call. And this weekend, at the 2025 American College of Allergy, Asthma and Immunology Annual Scientific Meeting, we will present data from a preplanned analysis of atopic dermatitis patients from the RESOLVE-AD study who also had a history of asthma. These data provide further basis for differentiation of REZPEG. Recently approved and in development IL-13 selective pathway blockers and OX40 pathway blockers have shown limited potential to help the asthma symptoms in patients with both atopic dermatitis and asthma, which is a comorbidity in 25% of all atopic dermatitis patients. And so we're very excited about these new data. In Q1, we will present 52-week maintenance and escape arm data from the RESOLVE-AD study in atopic dermatitis. The maintenance arm data, in particular, will be an important look at continued treatment with REZPEG in patients who have established an EASI-50 response at the end of 16 weeks of induction treatment. There remains a need for novel mechanisms beyond those available currently in the treatment landscape for atopic dermatitis patients. In the U.S., there are over 15 million people with moderate to severe atopic dermatitis and fewer than 10% are receiving biologic treatments for this chronic skin disorder with many patients not responding well to the existing agents. We believe that this market will grow with the adoption of novel mechanisms as was seen with the induction of new mechanisms in the evolution of the psoriasis market. We expect to hold an end of Phase II meeting with the FDA before the end of this year to review our Phase III plans for REZPEG in moderate to severe atopic dermatitis. Importantly, in December, we plan to present the top-line results from the Phase IIb RESOLVE-AA study in patients with alopecia areata. This study enrolled approximately 90 patients with severe to very severe alopecia areata with strong Phase II results in the dermatological setting of atopic dermatitis, we're optimistic about the second dermatological setting for REZPEG. Nearly 7 million people in the U.S. have or will develop alopecia areata and over 1 million of these patients have severe to very severe disease according to the 2023 population-based cohort study. Patients with severe to very severe alopecia have limited treatment options. The only FDA-approved systemic treatments for alopecia areata are JAK inhibitors, which carry multiple well-known black box warnings and are associated with high relapse rates upon discontinuation. In a 2024 survey of 131 U.S.-based board-certified dermatologists, a majority of physicians said they were uncomfortable prescribing a JAK inhibitor and more than half of these physicians reported they would try alternative therapies prior to prescribing a JAK inhibitor. With this backdrop, REZPEG could be introduced as the first biologic in the setting of alopecia areata, representing an additional $1 billion market opportunity. And so we look forward to these upcoming results from the 36-week treatment period of the RESOLVE-AA study expected in December of this year. In immunology, our partner, TrialNet, recently initiated the Phase II study of REZPEG in type 1 diabetes. This study, which is funded and sponsored by TrialNet, will evaluate REZPEG in new onset Stage III type 1 diabetes patients. JZ will update you on our other programs as well as our lead pipeline antibody, a TNFR2 agonist that has a unique tissue-specific Treg and Breg stimulator profile. Because of its monomeric activity, we're now building a bispecific program based upon this mechanism, which combines it with validated antibody targets in immunology. Our goal is to advance one of these antibody programs into the clinic next year. And with that, I'd like to turn the call over to JZ to review more details on REZPEG's ongoing Phase IIb studies and our early pipeline programs. JZ?

Jonathan Zalevsky, CRO

Thanks, Howard, and thank you, everyone, on the call for joining us today. To begin, I'll remind you that earlier this year, the RESOLVE-AD Phase IIb results demonstrated the promise of Nektar's novel approach to the IL-2 pathway. The global study randomized 393 patients with moderate to severe atopic dermatitis to receive subcutaneous treatment with 3 doses of REZPEG, a high dose of 24 micrograms per kilogram every 2 weeks, a middle dose of 18 micrograms per kilogram every 2 weeks and a low dose of 24 micrograms per kilogram every 4 weeks or placebo every 2 weeks for an induction period of 16 weeks. Following week 16, REZPEG-treated patients who achieved EASI reductions of 50% or greater were re-randomized to continue at the same dose level on a Q4-week or Q12-week regimen for an additional 36-week maintenance period. In our June data disclosure, we reported that the study achieved statistical significance on the primary endpoint at week 16 for a mean percent change in EASI score from baseline for all REZPEG arms versus placebo. And the study achieved statistical significance for key secondary endpoints at week 16 of disease reduction, including EASI-75, EASI-90, Itch NRS, the vIGA-AD and BSA. Additionally, we have yet to see a plateau in the efficacy response in the REZPEG treatment arms. This study is currently ongoing with 2 additional upcoming data readouts that Howard mentioned. The first will be the 36-week maintenance study results, which compare treatment with REZPEG at either 1-month or 3-month dosing intervals out to a full year, which would be the intended maintenance-based dosing regimens following the 16-week induction period. And the second readout will be the 1-year off-treatment data expected in the beginning of 2027, which will measure the potential remittive effect of REZPEG in atopic dermatitis. In the meantime, we continue to add to the compelling data set from the RESOLVE-AD study, including the data we shared from the escape arm of the trial at this year's EADV Congress. As a reminder, the study design allows for patients who originally received placebo in the 16-week induction period and achieved less than EASI-50 at week 16 to enter into an open-label treatment escape arm to receive the high-dose REZPEG regimen for a treatment period of up to 36 weeks. The data presented at EADV demonstrated a deepening of responses in these patients with continuous treatment with REZPEG and support a 24-week induction period for our Phase III program. As Howard stated earlier, we are presenting additional data in patients with asthma from RESOLVE-AD in a late-breaking oral presentation at the ACAAI meeting being held in Orlando, Florida this weekend. In addition to the asthma data that I'll discuss in a moment, that presentation will also give an update on the placebo crossover data, where now all but one patient have crossed over to 24 weeks of treatment with 24 micrograms per kilogram REZPEG Q2 weeks. We will also cover additional endpoints such as EASI-90 and itch NRS. In addition, the presentation will show a forest plot demonstrating the consistency of REZPEG efficacy across multiple subgroups. This important finding prepares us for Phase III. Given that 1 in 4 patients with atopic dermatitis also have asthma, we designed the study in advance to evaluate its effect on symptoms of asthma using the validated 5-point asthma control questionnaire, also known as the ACQ-5. And these data include a prespecified exploratory endpoint for the subset of patients in RESOLVE-AD that also had asthma, including those with moderate and uncontrolled asthma at baseline. The ability to improve comorbid conditions is a substantial factor in clinical treatment decisions for atopic dermatitis and could expand the potential market opportunity for REZPEG in this setting. We know that beyond Dupixent, neither tralokinumab nor lebrikizumab has been able to show an improvement in asthma symptoms in patients with atopic dermatitis. And now turning to alopecia areata. We are on track and look forward to reporting data from the Phase IIb study in December of this year. A positive outcome here would reinforce the potential of REZPEG to provide a completely new treatment paradigm for patients with chronic dermatological diseases. The RESOLVE-AA trial was initiated in March 2024. A total of 94 patients with severe to very severe alopecia areata who have not received a JAK inhibitor or other biologic were randomized to 2 different dose regimens of REZPEG: 24 micrograms per kilogram every 2 weeks and 18 micrograms per kilogram every 2 weeks or placebo. Patients were recruited across approximately 30 sites globally with 2/3 of patients enrolled in Europe and the rest from North America. As a reminder, patient eligibility for this study was determined using the SALT score, both screening and randomization. Patients who experienced an unstable course of alopecia areata over the last 6 months per investigator assessment were excluded from the study, and patients with diffuse alopecia and other forms of alopecia were also excluded. The primary efficacy endpoint of this study will evaluate mean percent change in the severity of alopecia tool or SALT score at the end of the 36-week induction period. Secondary endpoints include the proportion of patients achieving SALT 20, which is an absolute SALT score of less than or equal to 20, mean percent improvement in SALT score at other assessed time points and the proportion of participants with greater than or equal to 50% reduction in SALT score at week 36 and other assessed time points. Importantly, SALT 20, the responder analysis is also the established regulatory endpoint for Phase III trials. As Howard mentioned, the only available systemic therapies that are FDA approved for the treatment of alopecia areata are JAK inhibitors, which contain a number of black box warnings and many patients experience hair loss after treatment cessation. With the limited treatment options available in alopecia areata, we believe there's opportunity for a novel mechanism like REZPEG, especially when the therapeutic is shown to be safe and well tolerated. When comparing the outcomes from RESOLVE-AA to the approved JAKs, we see low-dose Olumiant as the appropriate benchmark. In its 2 Phase III trials, the approved 2 mg dose of Olumiant showed that 15% to 16% of patients achieved SALT 20 on a placebo-adjusted basis at week 36, and the mean improvement in SALT scores from baseline was 24% to 26% on a placebo-adjusted basis. Note that the placebo response rate in these trials is relatively low at 3% to 5% for the SALT 20 endpoint and 4% to 9% on the mean reduction endpoint. Because of our differentiated mechanism of action compared to the JAK inhibitors and our safety profile, we see a very clear market opportunity for REZPEG in alopecia areata if REZPEG achieves these benchmarks. We look forward to sharing the top-line data from the 36-week treatment period of the RESOLVE-AA study in December and defining the potential for REZPEG in this new indication. Similar to atopic dermatitis, with positive results from Phase IIb, we would move very quickly into Phase III preparations, taking advantage of our Fast Track designation in the alopecia areata indication. A quick few words on type 1 diabetes, another autoimmune disease where REZPEG has great potential as a T regulatory mechanism. We believe REZPEG can potentially slow the progressive loss of insulin-producing beta cells, which are the target of the patient's overactive immune cells in this disease. As Howard mentioned, TrialNet has initiated and is funding an investigator-sponsored Phase II clinical trial evaluating REZPEG in 66 patients with new onset type 1 diabetes. Lastly, on our pipeline progression, NKTR-0165, our TNFR2 agonist remains on track. This molecule has very high specificity for signaling through TNFR2 on Tregs to enhance and optimize their ability to regulate the immune system. NKTR-0165 has also shown that a strong signal can be generated through a single-arm monovalent antibody, making it a perfect candidate for inclusion in bispecific and trispecific constructs. Our goal is to advance one of these antibody programs into the clinic next year. We look forward to sharing more on these sophisticated antibody engineering programs in future earnings calls. And I'll now turn it over to Sandy for the financials. Sandy?

Sandra Gardiner, CFO

Thank you, JZ, and good afternoon, everyone. On today's call, I'll briefly review our quarterly financials and share updates to our financial guidance for 2025. We ended the third quarter of 2025 with $270.2 million in cash and investments and with no debt on our balance sheet. As discussed in our Q2 earnings call, this end of third quarter cash balance includes the completion of the secondary public offering in July with net proceeds of approximately $107 million. It also includes additional net proceeds of $34.3 million we raised in September from our existing ATM facility. We now expect to end the year with approximately $240 million in cash and investments, up from our prior guidance of $100 million to $185 million. This increased year-end guidance also includes $38.3 million of net proceeds from additional sales of our ATM facility in October. Based upon our higher year-end cash balance, we are extending our cash runway guidance into the second quarter of 2027. Now turning to the income statement. Our noncash royalty revenue was $11.5 million for the third quarter of 2025. We still expect our noncash royalty revenue to total approximately $40 million for the full year. Our R&D expense was $27.3 million for the third quarter of 2025, and we still anticipate full-year R&D expense to range between $125 million and $130 million, including approximately $5 million to $10 million of noncash depreciation and stock-based compensation expense. Our G&A expense was $16.1 million for the third quarter. We still expect G&A for the full year of 2025 to be between $70 million and $75 million including approximately $5 million to $10 million of noncash depreciation and stock-based compensation expense. Noncash interest expense for the third quarter was $6 million, and we still expect noncash interest expense for the full year to total approximately $20 million. Our noncash loss from equity method investment was $0.5 million in the third quarter of 2025, and we still expect noncash loss of approximately $10 million for the full year 2025. As an equity investor in Gannet BioChem, we have no commitment to contribute cash to Gannet. Our net loss for the third quarter was $35.5 million or $1.87 basic and diluted net loss per share. And as I stated earlier, we now expect to end the year with approximately $240 million in cash and investments with our cash runway extending into the second quarter of 2027. Finally, as we head into our December data reporting, we intend to enter into a quiet period for the month of December until we report the top-line results for the REZPEG alopecia study. And with that, we'll now open the call for questions.

Operator, Operator

Our first question will come from Yasmeen Rahimi from Piper Sandler.

Unknown Analyst, Analyst

Congrats on a great quarter. This is Dominic on for Yasmeen Rahimi. We just had a quick question on the upcoming ACAAI data that will be presented. Could you help us understand what you hope to report presentation in patients with AD and asthma? And then moving forward, how would you expect this data to, I guess, impact development in asthma?

Howard W. Robin, CEO

Well, let me have JZ answer that, but I would tell you that at this point, we're not pursuing an asthma indication. However, it's important to recognize that in atopic dermatitis, having a significant drug that potentially addresses that comorbidity issue is very exciting. As I mentioned earlier, 25% of patients with atopic dermatitis also have asthma as a comorbidity. So, I think this is a crucial aspect of differentiating REZPEG, even though we don't have a plan to conduct an asthma study. JZ, would you like to help with the rest of the question?

Jonathan Zalevsky, CRO

Sure, thank you for the question, Dominic. At the ACAAI presentation, we will present the results of a preplanned exploratory analysis that was part of the study. There is a validated patient-reported outcome instrument known as the ACQ-5, which stands for the asthma control questionnaire. This allows us to evaluate the comorbidity symptoms of asthma in patients who have both atopic dermatitis and asthma, providing insight into the overall improvement in ACQ-5 scores over time. It also enables us to focus on patients with severe, uncontrolled asthma at baseline, a subset of individuals who have higher ACQ-5 scores initially. This information is particularly interesting to us because, as we noted, around 25% of patients have this condition, equating to roughly 100 individuals in our study who also had asthma alongside atopic dermatitis. This analysis helps us understand the impact of REZPEG on asthma control and possibly the enhancement of asthma symptoms in patients with atopic dermatitis. This factor is crucial when physicians are making treatment decisions, as patients with atopy frequently experience issues with multiple organs, which is why a significant proportion of those with atopic dermatitis also have asthma. This can influence treatment choices. Currently, Dupixent is the primary medication recommended for patients with comorbidities, as it has shown efficacy in treating both asthma and atopic dermatitis in patients displaying symptoms of both conditions and each indication separately. This efficacy is likely due to the IL-4 component of its mechanism. However, other approved agents for atopic dermatitis do not have the same level of effectiveness as Dupixent. This highlights a differentiating aspect of the Treg mechanism of REZPEG, setting it apart from other similar treatments, as well as those currently in development, including IL-13 selective antagonists and OX40 classes. We believe this presents an opportunity to further develop REZPEG, and it is an area we will be investigating more in the future, both regarding comorbidities and beyond.

Operator, Operator

Our next question will come from Julian Harrison from BTIG.

Julian Harrison, Analyst

Congrats on all the recent progress. It looks like you've had a few months now to socialize with the medical community, the initial RESOLVE-AD results and REZPEG's potential here. I'm wondering if you have a good sense now for the level of interest for a therapy that potentially has a truly remittive effect. To what extent do you think that could emerge as a differentiator for REZPEG in atopic derm? And then switching to alopecia areata. JZ, I heard your comments around the Olumiant low-dose magnitude of efficacy potentially setting the bar. Do you see maybe an opportunity for use if efficacy is even lower than that, just given how presumably safe REZPEG is potentially free of box warnings compared to JAK inhibitors?

Howard W. Robin, CEO

Julian, I will address the first part of your question. This Treg mechanism has certainly garnered significant attention, particularly with its recognition in the Nobel Prize in physiology or medicine. The strong data we have in atopic dermatitis, especially from the crossover data where patients who did not respond to placebo had remarkable results when switched to the drug, is incredibly compelling, and we take pride in it. Furthermore, the data regarding the connection with asthma sets REZPEG apart from several other treatments for atopic dermatitis. To directly answer your question, there is a great deal of interest in REZPEG, and I believe its prospects are very promising. I’ll let JZ continue with the rest of the question.

Jonathan Zalevsky, CRO

Thank you, Howard and Julian. In terms of the benchmarks, it's important to highlight that REZPEG could be a uniquely effective treatment for alopecia areata in several ways. One crucial aspect is its safety profile; currently, there are no approved biologics for this condition, and no therapy has shown a lasting treatment effect. For instance, a short interruption in a JAK course can lead to hair thinning, and the effects can diminish rapidly. REZPEG has the potential to address various aspects of the disease, enhancing convenience for patients and improving comfort for physicians, particularly since it does not carry a black box warning, which is a concern with JAK inhibitors. While those drugs are effective at quickly reducing inflammation, they can be challenging to use long-term, especially given the chronic nature of these conditions. REZPEG, on the other hand, could offer a different solution. We have conducted extensive market research and found that the profile of low-dose Olumiant is highly competitive when considering all its attributes, including its safety profile. We recognize there is an opportunity there, as you mentioned, Julian. We're currently using it as a reasonable benchmark since it is an approved drug at an approved dose, while also noting that there is some flexibility around that.

Operator, Operator

Our next question will come from Jay Olson from OpCo.

Cheng Li, Analyst

This is Cheng on the line for Jay. Congrats on the progress. Maybe speaking to the AA, I'm just wondering how fast you can maybe start the Phase III program? And are you planning to move the program by yourself or in a partnership if the December data is positive? And separately, I'm also wondering, in the Phase IIb AD study, are there any patients have alopecia areata comorbidities? And if so, any color you can share on those patients?

Howard W. Robin, CEO

I didn't catch the first part of your question clearly, but regarding when we might start a study in alopecia areata, depending on the data we receive in December, we definitely look forward to starting it next year. This is significant because currently, the only therapy available is a JAK inhibitor, which comes with various concerns and warnings. From the physician surveys we've conducted, it's clear that doctors are hesitant to use a JAK inhibitor for treating alopecia areata due to safety issues. Therefore, if we can introduce a new treatment for such a serious condition that greatly impacts people's mental health, it could be very important. Consequently, we do plan to start that study next year. I'll let JZ address the rest.

Jonathan Zalevsky, CRO

Yes. Thanks, Cheng. So we did look at multiple comorbidities in the atopic dermatitis Phase IIb study. Asthma was by far the largest patient population, as I mentioned, roughly 100 people had both atopic dermatitis and asthma in that study, and they'll be presented at ACAAI this weekend. In terms of alopecia, we also looked at vitiligo, for example, very, very few people. So really not a large enough patient population to isolate out as a subgroup, like a handful of few people in alopecia that had both of the diseases. Obviously, our Phase IIb results in alopecia, which read out next month, I mean, that is by far a more definitive data set, right? Much, much larger sample size, obviously, a patient population enrolled with that as their primary disease. And then, of course, we'll be looking at the treatment effect in that patient population reported next month.

Operator, Operator

Our next question comes from Cha Cha Yang from Jefferies.

Cha Cha Yang, Analyst

This is Cha Cha on for Roger Song. I was wondering in addition to low-dose Olumiant, are there any therapeutics that are in development, biologics for alopecia that you think would be an appropriate benchmark? And then my second question is, are there any IL-2 specific studies that you think could provide read-through to REZPEG in alopecia?

Jonathan Zalevsky, CRO

Sure. There are several biologics being developed for alopecia, which we have discussed, including an IL-7 receptor and other agents. We are conducting a much larger study than previous programs, with 94 participants enrolled and randomized in our Phase IIb alopecia study. This study includes multiple doses, allowing us to effectively assess the treatment effect, which should provide more informative results than earlier single-arm or smaller studies. The area remains a focus of exploration, especially regarding the important role of Tregs, which are highlighted in many translational studies involving alopecia areata. We have observed low levels and deficiencies in Treg function, which are crucial for hair growth and for advancing through the hair growth cycle. The antigen phase linked to hair elongation requires Treg signaling to the stem cell compartment, highlighting several important mechanisms at play. This is one of the primary reasons we are excited about our study, with top-line data expected next month. Regarding IL-2 specific studies, only a few have been published, including a case study and a small randomized study. It's important to note that low-dose IL-2 is not a good substitute for REZPEG. Our approach leads to significantly higher levels of Tregs compared to what low-dose IL-2 can achieve, with a much longer duration of Treg elevation from a given dose, allowing for extended treatment periods. For instance, we have treated patients for over a year in the Phase IIb study for atopic dermatitis. While low-dose IL-2 may serve as a surrogate for raising Tregs, REZPEG offers substantial advantages that surpass what low-dose IL-2 has demonstrated across multiple indications.

Operator, Operator

Our next question will come from Mayank Mamtani from B. Riley Securities.

Mayank Mamtani, Analyst

Congratulations on a productive quarter. Regarding the alopecia top line data analysis, will you report any off-treatment responder rates since some patients may have exceeded the 36-week treatment period? Also, could you remind us if there's an escape arm option for the placebo non-responders to cross over? From your AtD experience, the peak efficacy from the EADV data wasn’t observed until around 24 to 44 weeks, so I’m curious about your plan to evaluate if efficacy increases beyond the 36-week mark. Lastly, I have a quick follow-up.

Jonathan Zalevsky, CRO

Sure. Yes. So firstly, in the kind of information that we would present in December, we'll be presenting data from the 36-week induction period in the study. The primary endpoint is the mean percent reduction in SALT score from baseline. And then the key secondary endpoints that are really, really meaningful is the proportion of people that achieved the SALT 20 and also SALT 10. SALT 20 is the registrational endpoint in the U.S. and SALT 10 in Europe. But importantly, Mayank, right, the study is still going to be ongoing. So as you know, the way we designed the study is people that reached week 36 that are experiencing benefits such as hair regrowth, for example, but that have not yet reached a SALT 20 metric, they have the opportunity to take an additional 16 weeks of treatment to 52 weeks for a full year. So there's a proportion of people that will be ongoing. And also the study design has a 24-week off-drug observation period. So whenever a patient completes treatment, whether that's at 9 months or 12 months, there is then followed for that additional 24-week period of time. And that's really designed to assess that if you grew hair, can you keep hair, right, which is a significant differentiating element from a JAK mechanism of action where the hair loss is really, really rapid when the drug dosing is stopped. So because the study is still ongoing, I mean, we can't say yet the totality. But definitely, the 36-week endpoint, which is the primary analysis with the entire population crossing the 36-week is going to be the main subject of that top line presentation.

Mayank Mamtani, Analyst

Escape arm, is there an escape arm here?

Jonathan Zalevsky, CRO

No, there's no escape arm in the study.

Mayank Mamtani, Analyst

Okay. And on the auto-injector development, how far along are you? And is that going to be at the start of your Phase III study? And is that kind of part of the protocol as you get into the end of Phase II discussion?

Jonathan Zalevsky, CRO

The development of the auto-injector is ongoing, and our aim is to have it ready for the launch of REZPEG. We will conduct the Phase III studies similarly to the Phase II studies, using the drug in a vial. This approach allows us to begin the Phase III studies as swiftly as possible following the presentation of the top-line data in June of this year. Regarding your other question, during an end of Phase II meeting, we discuss all aspects of our plan for the Biologics License Application. This includes not only the Phase III clinical development program and pivotal studies, but also the Chemistry, Manufacturing, and Controls. We have outlined our plans for the final presentation of the product, the auto-injector, along with all the work we will undertake during the Phase III studies to prepare for the BLA and ensure it is available for launch.

Operator, Operator

Our next question will come from Arthur He from H.C. Wainwright.

Yu He, Analyst

Sorry, I apologize if the question has been asked before. So given the readout coming readout for the alopecia, JZ, maybe could you tell us a little bit more like what the potential REZPEG can offer compared to the JAK inhibitor here for the alopecia patient?

Jonathan Zalevsky, CRO

Yes, that's a great question. One situation with JAK inhibitors is that they are effective at reducing inflammation. They interact with multiple cytokines through common gamma chain uses and are a crucial part of the signaling cascade that responds to these cytokines, which makes them well-known for quickly lowering inflammation. However, the challenge with using a JAK inhibitor in any approved indication is that long-term use has certain disadvantages. These drugs come with black box warnings, significant limitations, and require monitoring, which makes their use a bit more complex. In dermatology, some of these factors are undesirable. REZPEG, if it achieves an efficacy profile similar to low-dose JAKs in settings like Olumiant, would present a different risk profile, free from black box warnings and with a significantly better safety profile, making it suitable for long-term chronic use. Additionally, being the first biologic in this area provides a tremendous advantage, as it could improve access; studies have shown that physicians are not too eager to use JAKs as a first-line treatment for patients. Having another alternative available could create significant opportunities. Lastly, JAK inhibitors tend to lose their effectiveness quickly, which can be psychologically challenging for patients. If a patient has been regrowing hair and then has to interrupt JAK treatment due to safety concerns or other issues, they risk losing that progress, contributing to a cycle of depression associated with this disease. With REZPEG, there is potential to maintain the hair that was regrown and to avoid problems with drug dosing interruptions, which would be transformative. These factors contribute to a substantial opportunity for REZPEG in treating alopecia areata.

Yu He, Analyst

So another question is given that you've passed in the data there, how should we think about the primary endpoint for the approval there in the future? Do you think the SALT 20 is still could do the job? Or we probably should look to the SALT 10 or even SALT 0 there for the future drug for the alopecia there?

Jonathan Zalevsky, CRO

Yes, the health authority has established the registrational endpoints. Currently, those are set as SALT 20 in the U.S. and SALT 10 in Europe. However, each study also includes several secondary measures, such as eyelash assessment and SALT 0. We feel that this aspect should be handled by the regulators. Regarding UPA's efficacy, it appears that in markets where multiple JAK inhibitors are approved, UPA or RINVOQ consistently demonstrate superior efficacy in head-to-head comparisons with other agents. This trend has been observed across various indications, not just in the first dose. While there is a slightly more considerable safety profile associated with UPA, particularly concerning on-target toxicity, we believe that it will hold a significant position among other JAK inhibitors. However, we don't anticipate this affecting biologics. In fact, there are numerous indications where both biologics and small molecules, including JAK and non-JAK therapies, coexist, such as atopic dermatitis and psoriasis with the TYK2 mechanism. The patient population is large enough, and the demand for different treatment mechanisms ensures there is sufficient space for various approaches in this area.

Operator, Operator

And we do have time for one last question. And our last question will come from Andy Hsieh from William Blair.

Tsan-Yu Hsieh, Analyst

Mary, it's great to have you back. So we have 2 questions. So for the RESOLVE-AD study, I believe you spent a lot of time and resources to ensure that the placebo rate is low. So have you gotten a chance to review that initiative so that you can be best positioned for the positive Phase III outcome? And then the second question, maybe for Howard, what's your current manufacturing footprint? I figured given the intense interest in REZPEG, it would be really nice if you can secure one of those national priority vouchers.

Howard W. Robin, CEO

I'll address the second part first, and then Mary can continue. We are exploring various options. We sold our PEGylation manufacturing facility to Gannet BioChem, but we maintain a priority position there and have a reliable source for those raw materials. We also collaborate with several reputable contract manufacturing companies. Therefore, I'm confident in our ability to successfully manufacture REZPEG, and we are considering the vouchers. Now, I'll let Mary respond to the other part of your question.

Mary Tagliaferri, CMO

Thanks, Howard. And really great to hear your voice, too, Andy, and I'm really happy to be back. I mean, as you said, the data from RESOLVE-AD are very exciting. And I've also had the opportunity to speak to multiple dermatologists since I've been back, who are also very excited about the totality of the data, the speed of onset and the excellent safety profile. So it's very exciting to move this forward. And certainly, in our Phase III program, we have every plan to implement the exact same procedures that we did to minimize the placebo effect. And some of those are, of course, ensuring that we have board-certified dermatologists participating in our clinical trials. We also make sure that the eligibility criteria is met both in the screening and right before patients are randomized. And so we took multiple actions. Also in our Phase IIb, we had a quite large size of our placebo group, and we will, of course, have the same when we proceed forward in a larger Phase III study. So we were very pleased that we were able to implement multiple different procedures and activities in order to ensure our placebo effect was very low, and we believe we will continue to be very successful in our Phase III as well. So we look forward to moving forward. We've been doing a lot of planning. We're going to have our end of Phase II meeting with the FDA by the end of this year, and so we'll have a clear path forward to a BLA.

Operator, Operator

And this does conclude our question-and-answer session for today's conference. I'd like to turn the call back over to Howard Robin for any closing remarks.

Howard W. Robin, CEO

Well, thank you, Crystal, and thank you, everyone, for joining us today, and we greatly appreciate your continued support. And I want to thank all of the patients and their caregivers that have trusted and continue to trust Nektar to treat their disease. None of this research would be possible without them. And I also want to thank our employees for their dedication and extremely hard work, and we look forward to delivering data from our REZPEG program data in alopecia areata in December and additional results from the program in atopic dermatitis in the first quarter of next year. So please stay tuned. Thanks for joining us.

Operator, Operator

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