Earnings Call Transcript
NEKTAR THERAPEUTICS (NKTR)
Earnings Call Transcript - NKTR Q1 2020
Operator, Operator
Ladies and gentlemen, thank you for standing by, and welcome to the Nektar Therapeutics First Quarter 2020 Financial Results Conference Call. At this time, all participants' lines are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference may be recorded. I would now like to hand the conference over to your speaker today, Ms. Jennifer Ruddock, Head of Corporate Affairs. Ma'am, you may begin.
Jennifer Ruddock, Head of Corporate Affairs
Thank you, everyone, and thank you for joining us today. With us are Howard Robin, our President and CEO; Gil Labrucherie, our COO and CFO; Dr. Jonathan Zalevsky, our Head of R&D; and Dr. Wei Lin, our Head of Development. On today's call, we expect to make forward-looking statements regarding our business, including clinical trial results, timing and plans for future clinical trials, timing and plans for future clinical data presentations, the therapeutic potential of our drug candidates, outcomes and plans for health authority regulatory actions and decisions, estimates and predictions of the COVID-19 pandemic's impact on our business and clinical trials, financial guidance, and certain other statements regarding the future of our business. Because these statements relate to the future, they are subject to inherent uncertainties and risks that are difficult to predict and many of which are outside of our control. Important risks and uncertainties are set forth in the Form 10-K that we filed on February 28, 2020. We undertake no obligation to update any of these statements, whether as a result of new information, future developments, or otherwise. A webcast of this call will be available on the IR page of Nektar's website as a replay. Before turning over the call to Howard, I'd like to comment on a small housekeeping item. Due to the shelter-in-place restrictions in San Francisco, each of us is calling in from different locations. So in order to facilitate a smooth call flow, I will moderate the Q&A session for our team to avoid technical issues during this session. Thank you very much, and we appreciate your patience as we work to ensure there are no technology disruptions for those listening. With that said, I will hand the call over to our President and CEO, Howard Robin.
Howard Robin, President and CEO
Thank you, Jennifer, and thank you, everyone, for joining us on the call today. I'd like to start the call by discussing what is certainly on everyone's mind, managing the challenging circumstances caused by COVID-19 in the past several months. The wide-ranging impact that this virus has had on the health and well-being of our communities is significant. We're all working hard to appropriately adapt our business practices while at the same time, leading and operating the business effectively. It is a dynamic situation, and we will continue to adapt our response. However, I want to highlight a few key areas. As we start working together to navigate the current environment, we have three main priorities: First is to protect the health of our employees, while continuing our essential operations on-site to advance our research and development, such as laboratory and manufacturing activities; second, to ensure that each of our trial investigators and their teams can continue to provide superior care and uninterrupted access to study treatment to patients fighting cancer; and third, to ensure that the conduct of our clinical trials is minimally impacted, and that the integrity and quality of data being collected from these studies are maintained. For employees who continue to work on clinical tasks critical tasks in our facilities, including manufacturing and our laboratories, we have instituted additional safety precautions, including increased protective equipment and physical distancing practices. For employees that can work effectively remotely, Nektar has adopted work-from-home policies, and we're supporting these employees with the technology tools to continue to work uninterrupted. We've been adhering to all local, state, county, and federal guidelines in this regard. At this time, we do not anticipate any supply interruptions for manufacturing, including our preparations for the scale-up of commercial supply of bempeg that are underway. We have sufficient clinical trial material on hand to treat all patients in the studies for bempeg, NKTR-262, NKTR-255, and NKTR-358, which are either underway or planned to start in 2020. We and our manufacturing partners are continuing to assess the situation regularly as well. Additionally, our research team is continuing to work towards generating our next IND candidate so that we can achieve the company's next IND filing in early 2021. To the second priority, we have over 200 investigator sites around the world participating in our oncology clinical studies. We have been actively engaging with site investigators and our CRO partners to assess site status and staffing issues and to provide resources and support to these sites. Conditions are fluid and evolving. However, Nektar is taking a strategy to allow sites to continue to enroll new patients and to initiate new investigator sites. This strategy has been successful so far, and Wei will discuss more of these initiatives in a moment. Our third, but equally important, priority is to ensure the integrity and conduct of our clinical trials. This means capturing any protocol deviations, if they arise during this time, carefully collecting any patient information, which may be related to COVID diagnosis, and being prepared to track any possible interruption of important treatment or scan visits related to COVID travel restrictions. The FDA has issued guidance on clinical trial conduct, and we expect this guidance to continue to evolve. In light of this, the most important activities for us are to carefully monitor our study sites to ensure that patients meet the appropriate eligibility criteria under the protocol and that the data are being collected and tracked appropriately as well. Now, many of you have asked about the potential impact to clinical trial timelines related to COVID. We have some preliminary insights to share but caution that because of the fluidity of the situation, there is significant uncertainty. We will therefore need to continually assess these timelines throughout the year, and we continue to get more visibility to the timing and extent of COVID impacts. Our Nektar clinical development and operations teams are highly focused during this time on the oversight of the five clinical studies in immuno-oncology where Nektar serves as the sponsor. First, in response to some questions we've received, we've only had a few reports of patients in our studies who have had suspected or confirmed COVID diagnosis. For the five clinical studies that I just mentioned, as of today, we have received only four reports of patients who have been diagnosed with COVID. This is across our 200-plus investigator sites. With respect to new study starts, Nektar is still on track to initiate the adjuvant melanoma study in the third quarter. Based upon our assessment of the current situation and barring any negative external COVID developments in the second half of the year, we believe this is very achievable. The protocol for the adjuvant melanoma study is now being finalized, and we are in the process of identifying and recruiting investigator sites for initiation later this year. With respect to the first-line bladder cancer study, we have not seen any impact on enrollment pace to date, and we expect to achieve our enrollment goal this summer. This means that we will meet the timeline of achieving the primary endpoint for the study sometime in mid-2021. And as a reminder, the primary endpoint in the study is ORR independent review for patients with under 10 CPS score. For the first-line renal cell carcinoma study, we are on track for our projections for enrollment prior to COVID, which means we are also on track to achieve the first interim analysis on the primary endpoint of the overall survival in the first quarter of 2022. For our PROPEL study of bempeg plus pembro in non-small cell lung cancer that was initiated late in 2019, enrollment is ongoing. The COVID situation delayed the initiation for the investigator sites in Europe for PROPEL. However, we are still initiating some of these European sites in countries that are less impacted by COVID. But we are doing this very carefully and only with sites that have also demonstrated that they can adequately provide clinical trial oversight and services along with patient care. We have previously provided guidance that we would have initial safety as well as preliminary ORR data for between 10 and 20 patients that were enrolled in the dose escalation and non-small cell lung cancer cohorts of this study by November. We now expect that this will either be by the end of this year or the first quarter of 2021. Our Phase I/II REVEAL study is advancing. We recently expanded the study to evaluate the recommended Phase II dose of NKTR-262 in up to 24 relapsed and refractory melanoma patients. We're now, for the first time, evaluating simultaneous dosing of the two investigational agents. In the dose escalation phase, we observed high levels of TLR activation in the tumor microenvironment, and we're able to characterize safety for NKTR-262. We're planning to submit these dose escalation data for potential presentation at a medical meeting or manuscript publication later this year. For NKTR-255, our IL-15 agonist program and our newest clinical candidate, we are actively enrolling patients into the first-in-human clinical study of NKTR-255, which began late last year. We're still initiating sites in the study and still have a goal to complete the dose escalation portion of the study by the end of this year. Of course, meeting this goal will depend upon how many dose cohorts we need to enroll before achieving a maximum tolerable dose. With the first several patients we enrolled into the study, we already have good biomarker evidence of target engagement of the IL-15 pathway, and we're planning to present these data later this year or early 2021. As a reminder, the study is evaluating NKTR-255 first as a monotherapy and then in combination with daratumumab and rituximab in multiple myeloma and non-Hodgkin's lymphoma, respectively. I'll now move on to discuss studies that are being run by our partners. As many of you have likely listened to conference calls from large pharmaceutical companies over the past several weeks, management practices around ongoing and planned clinical trial activities have varied during the COVID situation. Many companies are projecting that normal practices for clinical trial activities in most countries will resume in the second half of 2020. In general, this has been adjustment of timelines for studies of anywhere from three to six months. Each of our partners has deployed different methodologies. With respect to our partner, BMS, during the ongoing COVID situation, BMS has publicly stated that they have paused initiation for all new investigator sites in any clinical study they are conducting across the company. BMS is running two ongoing bempeg clinical studies currently, the first-line melanoma study and the muscle-invasive bladder cancer study. As you know, BMS is operationalizing these studies and managing these studies timelines. BMS continues to recruit patients for these studies at investigator sites that are allowing on-site monitoring for new patients. At this time, because the COVID situation is ongoing and BMS has not reprojected any study timelines, Nektar expects this will have an impact on the enrollment for both studies, which could translate into delays of three to six months. We are now working closely with BMS to determine when they will remove or modify any restrictions that impact enrollment. Also, as a reminder, we received the $25 million milestone payment in the first quarter of this year under the revised BMS agreement for the start of the muscle-invasive bladder cancer study for bempeg plus nivo. BMS is also planning to start later in the year for the TKI combo renal cell carcinoma study and the Phase II study of bempeg plus nivo in first-line non-small cell lung cancer. With respect to our partner, Lilly and NKTR-358, our Treg stimulatory program, the Phase I multiple dose studies in psoriasis and atopic dermatitis have temporarily suspended recruitment during the COVID situation. However, Lilly is continuing to assess the situation and evaluating the status of investigator sites to determine when the best time is to reopen these studies for patient recruitment. We're still anticipating two Phase II studies to be initiated by Lilly this year, one in lupus patients and one in an additional autoimmune disease state, both slated to start in the second half of 2020. We know that the team at Lilly is evaluating all options to start these studies, including focused on initiating investigator sites in countries with low impact or minimal current impact from COVID. We appreciate their dedication to creatively finding paths forward to initiate these new studies. Overall, we're very pleased with Lilly's continued commitment to NKTR-358, as well as the broad plans for its development, which reflect the potential of this novel mechanism to treat autoimmune disease. Before I hand the call over to Wei, I'd like to mention several additional data presentations we're planning for this year. First, for the melanoma cohort for PIVOT-02, as many of you know, last year, we obtained FDA Breakthrough Therapy Designation for bempeg plus nivo in patients with metastatic melanoma based on the positive data, including a high CR rate from our PIVOT-02 study. At SITC last year in November, we presented data from this cohort with a median follow-up of approximately 18 months. At that time, 34% of patients had a complete response as determined by blinded independent central review, 42% had a 100% reduction in target lesions, and 47%, almost half, had a greater than 75% reduction in target lesions. We recently completed an additional blinded review of the PIVOT-02 melanoma cohort at the end of December 2019, and this data cut added three additional months of follow-up from our prior SITC presentation. I am pleased to inform you today that at the 21-month median follow-up point, we have still not achieved median PFS for the patients in this cohort. We also continue to see deepening of responses for these patients, and we plan to present updated data from an even later data cut at the SITC 2020. Also for bempeg, data from the dose escalation portion of PIVOT-02 will be recognized in a publication at a cancer journal in May. Finally, we are planning to submit for publication additional manuscripts for the bladder and kidney cancer patient cohorts from PIVOT-02. For NKTR-358, we recently completed the Phase Ib multiple ascending dose study in lupus patients that Nektar conducted as part of our Lilly collaboration. The initial data from this Phase Ib study were accepted for presentation at the upcoming virtual EULAR conference. We also intend to present additional data from the same study at the 2020 American College of Rheumatology Meeting later this year. With that, I'll turn the call over to Wei to review in more detail some of the techniques we are deploying across the Nektar run clinical trials to address the COVID situation and to ensure the integrity and conduct of the studies during this challenging time.
Wei Lin, Head of Development
Thank you, Howard. I'd like to discuss briefly the comprehensive plan we've developed to ensure that we're meeting the two priorities Howard mentioned earlier: One, to ensure patients have uninterrupted access to study treatments in our clinical trials, and two, to ensure that the conduct and integrity of our clinical trials are intact. For those patients currently enrolled in our clinical trials that Nektar is running, we're making every effort to ensure that patients in highly affected areas and in areas with heavy restrictions are able to continue their study treatment and receive appropriate care and monitoring. As conditions allow and within the applicable guidelines, we're deploying extra patient concierge services to provide transportation options and resources for patients in their studies. We're also allowing patients to visit local facilities for scheduled study treatment and scan visits rather than having to travel longer distances when possible. And we're heavily focused on utilizing every method possible to provide our investigator sites with the proper resources necessary to maintain care and monitoring of patients, including virtual monitoring and telemedicine to protect patient and site staff safety. We've increased our efforts to monitor site activities. We've been in continual communication with site investigators and staff. We're focused on providing site staff with information on appropriate data entry and understanding available options for patients. We are also checking to ensure that site staff are available and able to comply with any new measures being put in place. Our clinical monitors are focused on collecting all relevant data with respect to any protocol deviations, data entry, or any study conduct that we may need to provide to the FDA in the future. As Howard stated, the FDA has issued guidance on clinical trial conduct, and we continue to monitor this guidance. We're also engaged along with our industry peers in providing input back to the FDA on various clinical trial conduct issues that arise due to the COVID-19 pandemic. We're permitting sites to continue to enroll new patients, and we continue to initiate new study sites. However, we're highly focused on the appropriate eligibility of the patients being enrolled and ensuring that all enrollment criteria are met. In addition, we want to make sure a site is appropriately staffed and is not overly impacted by COVID-19 before bringing a new site into any of our clinical studies. I'm pleased to report that to date, we have seen exceptional patient compliance in our clinical studies, particularly in terms of receiving study treatment and scheduled scans, with only one patient across all of our Nektar run studies who has missed a scan and none have missed a study treatment. We have been tremendously impressed with the high degree of engagement from our investigators and their staff and the extraordinary care they're providing to their patients during this difficult time. We believe that with the measures we're taking, we can appropriately navigate the current situation, so that we can advance our clinical programs forward. Before I hand the call to JZ to discuss our work with NKTR-358 and NKTR-255, I want to address questions we've been getting on changing the interim response rate endpoint in our first-line melanoma study. As you know, we received a Breakthrough Therapy Designation for bempeg plus nivo in this setting based upon the high complete response rate we observed in the first-line melanoma population. In the Phase III study being run by BMS, we have three endpoints: overall response rate, ORR; progression-free survival, PFS; and overall survival, OS. The first endpoint is an interim analysis where a very small amount of alpha is spent to compare the ORR in the double combination of bempeg plus nivo to the ORR in the nivolumab monotherapy arm. We are looking for a six-month duration of follow-up for a specific number of patients in the study. Because of our high complete response rate, many of you have asked whether we could change the interim to look at complete response rate in each arm instead. This is something we and our partner, BMS, are evaluating, and we hope to have an update on this question before the end of the year. In the meantime, the study continues to have our three original endpoints ORR, PFS, and OS. The original design of the study, which was based upon CheckMate 067, modeled the PFS endpoint at roughly six to seven months following overall response rate. But as a reminder, this was only a projection and is event-driven and based upon enrollment rate, and so that timing could change. For both ORR and PFS, the results will be analyzed by blinded independent radiology review. So this process will affect timing for the completion of any data analyses as well. As we get closer to achieving these endpoints, we should be able to refine our timeline. As a reminder, ORR is designed as an accelerated approval endpoint. We spent only a small amount of alpha on this, and PFS will be the basis for a full approval.
Jonathan Zalevsky, Head of R&D
Thank you, Wei. I'd like to spend a little more time discussing two programs: The first is the NKTR-358 program and our plans for the lupus study; and the second is our IL-15 program, NKTR-255. First, for NKTR-358, as Howard stated, we will present our first data from the Phase Ib multiple ascending dose study, which was conducted in patients with mild-to-moderate lupus at this year's European League Against Rheumatism, or EULAR Meeting, in early June. As the conference is virtual, we will also host a virtual webcast to review the data with investors and analysts on the morning of June 5. Many autoimmune disorders, including systemic lupus, are associated with decreased regulatory T-cell numbers, reduced Treg function, and/or reduced production of IL-2. These Treg deficiencies are important in the pathogenesis of these autoimmune diseases. With NKTR-358, our goal is to address the Treg abnormalities in disease and to develop an IL-2 molecule that could selectively stimulate Tregs in a much more effective manner than native IL-2. You will recall that at last year's EULAR Congress, we presented results from our first-in-human single dose study, which showed that NKTR-358 was safe, well tolerated and exhibited a dose-proportional PK profile, prolonged exposure with a half-life of approximately eight to nine days. Importantly, NKTR-358 resulted in a marked and selective dose-dependent expansion of CD25(bright) Tregs. In contrast, there were no measurable effects on the numbers or percentages of CD4 and CD8 conventional T cells at all doses tested. In the study we will present at this year's EULAR Congress, we evaluated multiple ascending dose regimens in NKTR-358 in lupus patients in order to study the safety, tolerability, and pharmacodynamics of NKTR-358 and also to inform the design of the Phase II study of NKTR-358. As Howard stated, this Phase II study in lupus patients is planned to start in the second half of this year, and we are excited about the advancement of this program. Moving on to NKTR-255. The dose escalation portion of this Phase I/II study is proceeding. The study is evaluating the safety, pharmacokinetics, and pharmacodynamics of NKTR-255 as a monotherapy, and then will expand into a combination with antibodies that work through an ADCC mechanism, including daratumumab and rituximab. We plan to enroll up to 40 patients with relapsed or refractory multiple myeloma and non-Hodgkin's lymphoma in the dose escalation part of the study. We have also introduced a robust biomarker program into this trial, including measurement of the NKTR-255 effect on multiple immune cell populations, especially on expansion of NK cell numbers as well as their activation and function. We aim to provide a deep assessment of the NKTR-255 mechanism of action. As a reminder, unlike other IL-15 approaches, NKTR-255 was designed to capture the full biology of the IL-15 pathway, specifically meaning that NKTR-255 is designed to capture all the receptor-ligand interactions available through targeting the IL-15 agonist pathway. This gives NKTR-255 the ability to act as a significant expander of natural killer cells as well as the ability to promote the survival and expansion of memory CD8 T cells. As Howard stated, our goal is to complete the dose escalation monotherapy portion of the Phase I trial by the end of this year, and we are excited about the early biomarker results we've observed in the first patients enrolled. With that update, let me now turn the call over to Gil for a review of the financials.
Gil Labrucherie, CFO
Thank you, JZ, and good afternoon, everyone. On this call, I will review our 2020 financial guidance, which is unchanged. Starting with our exceptionally strong financial position, we ended the first quarter with $1.5 billion in cash and investments. As we discussed on our last earnings call, we plan to repay the $250 million in outstanding senior notes in the second quarter of this year. We indeed completed this repayment in April, so this will be reflected in our Q2 2020 balance sheet. The senior note repayment has strengthened our balance sheet and will result in approximately $20 million of annual interest savings on a go-forward basis. After taking into account the repayment of our senior notes and our projected cash usage this year, we still plan to end 2020 with at least $1 billion in cash and investments. As we discussed on our last earnings call and consistent with our guidance, we recorded a $45.2 million impairment charge in the first quarter that concludes our NKTR-181 activities. Our loss per share of $0.78 for the first quarter includes the $0.25 loss per share attributable to this impairment charge. I will now turn to our 2020 financial guidance, which remains unchanged. At the outset, I'd like to note that we are not changing our full year financial forecast based on COVID-19 impacts, given that our clinical pipeline progress remains largely on track, as Howard reviewed earlier on the call. Our full year GAAP revenue guidance remains between $140 million and $145 million for 2020. This includes $50 million of milestone payments from BMS and $90 million to $95 million of royalties, product sales and other revenue. As Howard stated, we recognized and received the first $25 million milestone for BMS' start of the muscle-invasive bladder cancer study, which occurred in January of this year. The second $25 million milestone is in connection with the start of the adjuvant melanoma study and is still planned for Q3 of this year. As a reminder, the $90 million to $95 million of remaining GAAP revenue is still expected to be recognized on a fairly ratable basis over the four quarters of this year. Our GAAP R&D expense guidance is also unchanged. We anticipate 2020 GAAP R&D expense will range between $475 million and $500 million, which includes approximately $70 million of noncash depreciation and stock compensation expense. Our G&A expense for 2020 is still projected to be between $105 million and $115 million, which includes approximately $45 million of noncash depreciation and stock compensation expense. As I reviewed earlier, we still plan to end the year with at least $1 billion in cash and investments after we completed the repayment of our $250 million in senior debt this quarter. And with that, I will open the call to questions.
Operator, Operator
Thank you. Our first question comes from Peter Lawson from Barclays. Your line is open.
Peter Lawson, Analyst
Hi. Thanks for taking my questions. I guess the first question is just probably around JZ regarding 255. Just timing around the initial data on the patients we could see? And what would you want to see to move that project forward?
Howard Robin, President and CEO
Sure. Thanks, Peter. So yes, with NKTR-255, as we stated earlier in the call. We've been starting into the dose escalation now. And we have seen some very interesting target engagement data from the first few patients that we've enrolled into the study. The results we're looking to see are an assessment of the overall safety and the tolerability and the pharmacokinetics and pharmacodynamics, all of the things that are typical in every kind of first-in-human study, when you advance into the clinic for the first time and you perform the dose escalation. Specifically, in the case of 255, we had built a wealth of understanding from our preclinical studies. Remember, we evaluated the molecule in non-human primates, mice, and other species. We saw the effect on the immunological changes that the molecule could make. We saw natural elevations of natural killer cells, their persistence, and changes in the activation stage of the cells. We also proposed data and presented data on the overall differentiation of the natural killer cell compartment as well. This is the kind of biology that's only possible to achieve with an IL-15 mechanism. So as we move into the clinic, we're looking to translate all of those findings. And the clinical trial has built into it an extensive biomarker program that allows us to measure these changes. It allows us to assess the natural killer cells and the CD8 T cells across multiple compartments, such as the blood and in the tissue. We'll be very excited to present the data that we're seeing in the study. We think it's reasonable that either later this year or early next is a time when we can do that. Assuming the dose escalation continues as planned, and the kind of things we'd like to see out of that dose escalation are, as I described, combination of safety, tolerability, the PK, and the biomarkers in the program.
Peter Lawson, Analyst
Got you. Thank you. And then, I guess, I think for Howard just, I know, difficult during this time because interim readout in first-line melanoma to assess are between the two arms. Is there any sense of timing around that and how's the dialogue changed or have you had further dialogue with the FDA around that point?
Jennifer Ruddock, Head of Corporate Affairs
So thanks, Peter. This is Jennifer. I'm going to ask Wei to address that if possible, Wei?
Wei Lin, Head of Development
Yes. Thanks, Jennifer. Yes, thanks for the question. So we are actively working with our partner, BMS in engaging the health authority. We'll definitely provide feedback once we complete the health working discussion. This definitely involves not only the FDA, but the EU health authorities, which are planned for obtaining macro authorization should be global and hence getting feedback globally from all the major health authorities is really critical for us to make the change. The current design with the three endpoints has been reviewed and approved by the relevant health authorities. Before we make a change, it's not only the FDA engagement but also health engagement that we need to obtain before proceeding with the change. Once that's done then we'll be sharing that information.
Peter Lawson, Analyst
Okay. Thank you so much. I'll hop back in the queue.
Howard Robin, President and CEO
Sure.
Operator, Operator
Thank you. Our next question comes from Tyler Van Buren from Piper Sandler. Your line is open.
Tyler Van Buren, Analyst
Hey, guys. Good afternoon. Thanks for taking the questions. I guess the first one is on the melanoma PIVOT-02 update that you gave with December cut off. I think you said that median PFS was not achieved at 21 months, and if I look back to SITC, it was 18.6 months of follow-up. And at that point, you guys said that median PFS could be no worse than 15 months. So is that kind of three months different fair to apply here, meaning maybe median PFS can be no worse than 18 months or curious to get your thoughts there?
Jennifer Ruddock, Head of Corporate Affairs
Wei, I'm going to ask you to answer that. Thank you.
Wei Lin, Head of Development
Sure. Thanks, Jennifer, for the question. The relationship isn't always directly linear, and with longer follow-up, the minimum progression-free survival would also be extended. What we have shared is based on an ongoing review of data, and we weren't ready to present this publicly yet. Therefore, we haven't conducted an analysis to project the minimum progression-free survival at this moment. It is certainly extended compared to what was reported at SITC, and we intend to update melanoma data in the second half of the year. At that point, we can provide details regarding what it means for progression-free survival as we continue our follow-up.
Tyler Van Buren, Analyst
Okay. And as a follow-up, is it possible to state, I guess, what median PFS, at what point of median PFS, how many months you guys would be really confident that you're seeing a significant difference here with the combination because if you look at other Phase II studies? Some clients have pointed out that they've shown 20 months median PFS. And then in Phase III, have shown no effects. Even that these time points seem to be impressive relative to nivo monotherapy at seven months of nivo be at 11.5.
Jennifer Ruddock, Head of Corporate Affairs
Wei, I'm going to ask you to answer that as well.
Wei Lin, Head of Development
Certainly. I will break this down into two parts for clarity. First, there is the median and then the hazard ratio. When the FDA and other healthcare organizations evaluate the data for full approval based on progression-free survival, both values are crucial. The median is important, but the hazard ratio provides a complete view of the separation between the two curves throughout their duration. These two factors are quite significant. It's challenging to declare any particular median as adequate, as the overall shape of the curve matters. Occasionally, the median can fluctuate, or it may not exhibit a clear concave shape, but if the remainder of the curve indicates a substantial difference in the hazard ratio, that is also highly meaningful. Current data shows a considerable separation between the NIVO BEMPEG arm and the NIVO arm based on the PIVOT-02 results. Regarding the second point, I'll address the translatability of the Phase II data from PIVOT-02 to the registrational Phase III trials, which touches on your question. Historically, many studies have demonstrated that Phase II data sometimes does not translate into Phase III results, and insufficient endpoints have led to some past failures. In our situation, we maintain the same endpoints, and we did not encounter any toxicity in Phase II that would necessitate dose adjustments for Phase III. It's as comparable as possible. I believe BMS shares our enthusiasm about this. However, there is no contractual obligation regarding this aspect.
Tyler Van Buren, Analyst
That's very helpful. Thank you.
Howard Robin, President and CEO
Okay. Sure.
Operator, Operator
Thank you. Our next question comes from Chris Shibutani from Cowen. Your line is open.
Chris Shibutani, Analyst
Great. Thanks very much. Maybe this is for JZ. I know that certainly in PROPEL, the combo work that you're doing involves the opportunity to explore different doses of bempeg, in particular, I think higher doses. And I think that's some commentary that you began describing over six months ago now. I'm just curious to know if there's anything at this stage that you have been observing or learning that is making you contemplate approaching any further development work with bempeg, either in existing or additional indications in any other way?
Howard Robin, President and CEO
Thanks, Chris. Actually, I'm going to ask Wei to comment on that. He's been working on the dose escalation component for PROPEL. And then I'll ask JZ to comment afterwards. Thanks, Wei.
Wei Lin, Head of Development
Yes. Sure. Absolutely. So the PROPEL study may be helpful me to kick a step back and look at the bigger picture. So PROPEL study really has two parts: there's a dose optimization part, and then there's a focused extension, sort of a Phase II study embedded in there looking at specifically non-small cell lung cancer in the first-line setting. The rationale for us to undertake a dose optimization, even though the molecules already in the restoration phase, is actually a couple-fold. One is we have learned a tremendous amount about this molecule as we progress. While we have full confidence in the dose of six micrograms per kilogram in combination with nivolumab in all our current regression studies, and that's highlighted by the fact that the data is good enough to obtain FDA breakthrough designation, which is kind of the highest acknowledgment of the potential benefit the combination may bring to patients. And in partnership with our BMS colleague, we've taken a number of regression studies, all based on data that we generated in PROPEL. We firmly believe that the six micrograms per kilogram dose is a very active dose and have composite data to back it up. Certainly, that's really also supported by the belief in the investment from our BMS colleagues and also the breakthrough definition from the FDA. But that being said, we have learned tremendous amounts as we dose many patients and manage the adverse event profile that we think we can actually improve the management of the adverse events in patients and perhaps can even push the dose even higher. Different diseases have different sensitivities to immunotherapy, and in lung cancer, compared to, say, melanoma, the degree of sensitivity is not as strong. So, for instance, monotherapy, nivo is active across all expression subgroups in melanoma but not in lung. The current approval is really for just PD-L1 positive, not for the all-comers population, and the predominant use of pembrolizumab in the 50% above population. Given that, we thought it would be really helpful to push the dose a bit and see if we could, with the new management guidelines in place, identify even a higher dose and produce even stronger benefit to patients in a disease that's challenging than melanoma in terms of how sensitive it is to new therapy.
Chris Shibutani, Analyst
So any willingness... on about whether it seems promising or?
Howard Robin, President and CEO
Well, the study is ongoing; we've dosed a handful of patients, and then we have, as Howard mentioned, plans to really share a part of that data at a future conference either at the end of this year or beginning of next year.
Chris Shibutani, Analyst
Okay, well you're so well behaved. I know, you're not going to spill. Maybe I can ask a question about partnerships. So, I mean, thinking about historically, you guys really set up a terrific relationship with Bristol going back. And that was structured with kind of a time line objective, which I remember a year ago, you guys extended into September. We've had the renegotiated contract and I think that was kind of announced extended into September really pre-COVID kind of era now that we're in the COVID environment where everyone is looking to buy time. Just curious about the renegotiated contract. Is there some sort of a scope clause that allows them to wiggle in the next to three or six months? Is there some sort of timeline that we should think because you get out of jail card? Just curious to know, given clinical trials are pacing and completion timelines are obviously all sort of encumbered now and wondering in particular about the Bristol renegotiated or maybe some of the other more material partnerships you had with folks at Pfizer or Gilead?
Gil Labrucherie, CFO
Thanks, Chris. I'm going to ask Howard if he can answer that, Howard.
Howard Robin, President and CEO
Sure. Hi, Chris. Look, there's certainly nothing in the contract that gives one an escape for this kind of force majeure situation, obviously. But I will tell you that every company has its own method of moving trials forward in this situation. Nektar is being fairly successful in recruiting sites and recruiting patients. There will always be some delays. But generally, we're moving things forward with some delays. Other companies, such as BMS, have set across all their programs. They're not going to be recruiting any new sites until they get a better handle on what's going on with COVID-19. So, we said there could be a three to six months delay. It does really change anything in the agreement. I think we're still working very closely with BMS to move these programs forward. The ones that we're running in collaboration are moving forward nicely. They will figure out shortly how to start enrolling sites again and how to recruit patients again remotely as every other company is doing. There could be a delay; there will always be challenges in any clinical study, but everyone believes that bempeg and nivo in first-line melanoma have a significant benefit. If you look at the PFS data that we've had so far, I don't see how we'll be lower than 21 months. I would think the 21, 21.5 months would be the lower limit of median PFS. With that said, when you compare it to nivo alone, which is six and a half months, I think that's fairly dramatic. As Wei said earlier, this is what everybody, I think, is excited about. I don't think you can compare this necessarily to other challenges that companies have seen when they went from Phase II to Phase III. Number one, we have the same endpoints. Number two, we didn't see any toxicity in Phase II that would require us to lower the dose going into Phase III. I think it's as apples-to-apples as you're going to get. I think BMS should be and is as excited about it as we are. There's no contractual provision for this type of thing.
Chris Shibutani, Analyst
Great. And then lastly, when your team is sitting on Zoom conference calls with the Gilead folks, are they begging to put one of your assets into a COVID therapeutics trial? Might be good for a retail pop in the stock?
Howard Robin, President and CEO
Well, I can say this: we've certainly looked at all the literature, and there's an awful lot of literature that suggests that patients who have low lymphocyte counts don't do very well with COVID-19. If you can increase their lymphocyte levels, those patients with lymphocyte levels actually do much better with COVID-19. So, it's something we're looking at. It's something we're talking about. We haven't made any plans yet, but it's something that if we decide to if we come up with an approach to move forward, we'll certainly share it with everybody.
Chris Shibutani, Analyst
Great. Thanks for taking my questions.
Operator, Operator
Thank you. Our next question comes from Jessica Fye from JPMorgan. Your line is open.
Unidentified Analyst, Analyst
Hi, this is Yuko on the call for Jessica. Thank you for taking our questions. Starting the 180 patient Phase 1/2 dose optimization and expansion study in non-small cell lung cancer that BMS would be running. Can you provide an overview of that study, including the doses that you'll be evaluating in the dose optimization phase? And then do you plan to select patient based from PD-L1 status or any other biomarkers?
Howard Robin, President and CEO
Thanks, Yuko. I'll pass to ask Wei to walk through what the structure of the BMS study for non-small cell lung cancer would be.
Wei Lin, Head of Development
Yes, thanks. So that study is also very similar to the PROPEL study in design. Now, that study is not finalized yet. So, I cannot share too much details now. But at a very high level concept, we'd be very similar to PROPEL in the sense that we'd be pushing the dose higher beyond six micrograms. In addition, we'll be enrolling patients across OPR expression to really try to observe if the combination of bempeg plus nivolumab can expand the activity checkpoint to the low-expression population as well as the negative population. The data coming from that study along with the PROPEL study would help we and our partners to make an assessment, what will be an appropriate and best trial design to move into Phase III.
Unidentified Analyst, Analyst
Great. Thank you.
Operator, Operator
Thank you. We'll take our next question from Difei Yang from Mizuho. Your line is open.
Difei Yang, Analyst
Good afternoon. And thanks for taking my question, just a quick one on NKTR-255. So you have a couple of trials ongoing in liquid tumor. How do you think about the opportunity will follow and where do you see the biggest opportunities for IL-15?
Howard Robin, President and CEO
Thank you, Difei. I'm going to ask JZ to answer that.
Jonathan Zalevsky, Head of R&D
Yes, certainly. So there are a number of interesting opportunities in the solid tumor space. When you consider a combination with targeted antibodies, we know how a component of their mechanism associated with antibody effector function. You know that in the tissues, we typically see lower levels of natural killer cells. We rely on antibodies that work through direct signaling. But then we also hope that they can engage oncology mechanisms as part of their effector function in the tissue. One of our overarching hypotheses with 255 is that in addition to all of that mechanism, we are able to drive natural killer cells into the tumor as well. You saw some of the data that we presented at other conferences that showed that even in the mouse model, where you had an intact immune system or one that you had a xenograft, but it was still NK cell competent, even if you implanted tumors into peripheral tissue, like the fly anchor, the pie, we could still drive NK cells into these peripheral tumors. That's not a lymphoid tumor; it's a traditional solid tumor that NK cells can populate. We demonstrated that whether you combine with agents like cetuximab or HER-2-targeting antibodies in a range of different tumor models, even there we could do that. I think that represents one very unique opportunity. There are a wealth of other opportunities because you can move beyond cetuximab to additional solid tumor targeting antibodies and consider additional lines of therapy.
Difei Yang, Analyst
Yes, very helpful. I have just one quick follow-up with bempeg. When you do reminders, what is the MTD for bempeg? For the study, something like you're planning to dose escalate to 10 micrograms per kilo so what is the MTD?
Jennifer Ruddock, Head of Corporate Affairs
Wei, would you like to take that question?
Wei Lin, Head of Development
Sure. Yes. The current design allows us to dose escalate all the way up to 12 micrograms per kilogram, which is twice the current dose in our registration studies. Obviously, the MTD is one of the elements that contribute to the decisions for RPTD but in addition, we're going to look at the totality of data, both in terms of safety and efficacy, and from the safety aspect also as patients are treated longer, whether the tolerability continues to be well-behaved.
Difei Yang, Analyst
Thank you, Wei. And thanks for taking my question.
Operator, Operator
Thank you. Our next question comes from Bert Hazlett from BTIG. Your line is open.
Bert Hazlett, Analyst
Yes, sure. Thanks for taking the question. If this got asked yet, but in the PIVOT-02 melanoma cohort, is it possible that you're already at the minimum of 21 months in terms of PFS for that cohort? Just an update on the PIVOT-02 melanoma cohort, PFS would be great?
Jennifer Ruddock, Head of Corporate Affairs
JZ, do you want to take that one?
Jonathan Zalevsky, Head of R&D
Yes, sure. Hey, Bert, nice to speak with you. Yes, I just want to clarify that. You diagnosed that correctly. The current assessment of the data shows we're at a minimum of a 21-month duration in the PFS. This is very exciting data; we're continuing to watch this cohort develop and continuing to see the patients. This indicates the kind of durability that we've already presented last year. We're seeing that durability extend. We're looking forward to giving additional updates on this cohort.
Bert Hazlett, Analyst
Okay. Thank you. We are looking forward to that as well.
Operator, Operator
Thank you. Our next question comes from George Farmer from BMO Capital Markets. Your line is open.
George Farmer, Analyst
Hi, good afternoon. Thanks for taking my question. More on PIVOT-02 and the melanoma cohort. I recall at SITC that while you had not hit your median after 18 months in PFS, it looked like the 12-month PFS was probably around 53%. So that implies maybe progression by one or two patients would throw the curve off into the lower half of the graph. Is it safe to say that no patients have progressed since that time? And are you, in fact, following all the patients? Or have some patients been lost to follow-up and they're just censored at various time points? You could comment on any of that would be great.
Jennifer Ruddock, Head of Corporate Affairs
Wei, do you want to start or JZ either one of you?
Wei Lin, Head of Development
JZ, if you want to start first? Yes. I'll add in.
Jonathan Zalevsky, Head of R&D
Yes. So George, those are good questions. What we would like to do is to update the data at a medical meeting later this year. Then we can go through all of the details of the data because in addition to any questions you asked about durability, we can cover deepening of responses, the additional kinds of overall effect that the patients have seen. I also have to remind you, the patients have now been in treatment for a very long time, right? We're seeing patients that achieve maximal benefit, maintaining very deep responses or complete response in many cases for over 12 months of additional treatment. We would provide that detailed assessment in that update.
George Farmer, Analyst
Will you be sharing overall survival data as well?
Wei Lin, Head of Development
I think it's right now, long. So I think our primary goal, we're focused on describing the PFS since that is the primary endpoint for the study, the basis which will be for us to obtain full approval. That makes it more meaningful at this time.
George Farmer, Analyst
Okay. And then JZ, regarding 358 and the presentation of lupus data for Phase Ib lupus. You're presenting at two conferences, EULAR and ACR? What will be different between those two presentations, if anything?
Jonathan Zalevsky, Head of R&D
Yes. So I think George. Good question. One of the things that because EULAR is going to be a virtual conference, we know that it's harder to get the same kind of visibility that you normally use to get from a large conference with all the people there and the ability to socialize the results. We expect that ACR when it comes to Rheumatology, which comes in November; we expect that is likely not going to be a virtual conference. With COVID aside, we're projecting that the situation is different roughly six months from now. For there, we would be looking for the actual real-time conference feel. One of the things that we did last year when we presented the single ascending dose data is that we covered kind of the clinical data in two parts. For example, at the EULAR conference in the SAD study, we covered the safety of pharmacokinetics and then the Treg pharmacodynamics showing the dose-dependent expansion that we presented. We showed about a 17-fold increase in Treg levels over baseline at the top dose that we evaluated in that study. At ACR, we go much deeper into the phenotype of the patients treated with NKTR-358. We looked very closely at cytokine responses and at Tregs and their activation status. We even did methylation studies of the recall of methylation studies of the promoter, really diving deeper into the immunology. We can consider that kind of parsing of the data for EULAR and ACR. Of course, the NKTR-358 study is evaluating in lupus patients. There will be multiple doses of the drug, not just a single dose. EULAR is right around the corner. You'll see the early presentation of the data and a later bigger pie showcase at ACR.
George Farmer, Analyst
Okay. And then finally, do you think 358 could treat cytokine storm associated with COVID?
Jonathan Zalevsky, Head of R&D
That's a very interesting question. So 358 can induce regulatory T cells. You're familiar with our data. It can induce the polyclonal regulatory T cell response. So it's a very interesting concept. One of the things that we do know about COVID in the cytokine storm is those seem to be non-lymphoid derived cytokines; they're typically innate kind of cytokines like IL-6, others linked to CRP, for example. We do think that lymphoid cells might antagonize that. It's a very interesting thought but right now, our plans with 358 are much very squarely focused on the autoimmune disease space.
George Farmer, Analyst
Okay, great. Thanks very much.
Operator, Operator
Thank you. Our next question comes from Arlinda Lee from Canaccord. Your line is open. Please check that your line is on unmute.
Arlinda Lee, Analyst
Sorry, I was on mute. Thanks for taking my question. I had maybe a follow-up question on your IL-15 agonist 255. You already talked a little bit about what you guys are looking to see in the data set in the initial Phase one data. I'm curious that with other IL-15 entering the clinic recently with different strategies, whether you might also talk a little bit more in-depth about how you guys designed your IL-15? And what kind of differentiators might we look for in that early data set that you guys are hoping to have at around year end? Thank you.
Howard Robin, President and CEO
Thanks, Arlinda. I'm going to have JZ answer that.
Jonathan Zalevsky, Head of R&D
One of our main objectives was to preserve all potential receptor-ligand interactions that IL-15 engages in during its natural signaling as a cytokine within the human body. We understand that it exhibits at least two, if not three, distinct binding modes. It can signal through the dimeric beta gamma receptor complex, which can potentially be found on any cell type. Additionally, it can signal through a trimeric receptor complex, where the IL-15 receptor alpha specific subunit interacts with beta gamma. This signaling mode differs from the IL-2 pathway because the IL-15 alpha receptor subunit can either be present on the same cell as beta gamma or on a neighboring cell, facilitating a transfer to beta gamma on another cell. These represent all three natural modes of IL-15 dependent biology. The immune system utilizes all three, and we aimed to ensure that the biology at 255 could replicate everything that native IL-15 offers. This approach is fundamentally distinct from many competing pipelines, as most of those designs involve the IL-15 cytokine produced as a drug product in conjunction with the extracellular domain of the IL-15 receptor alpha. Variations exist, with some using the entire receptor, others just the sushi domain, and some incorporating an FC fusion to create a two-arm cytokine plus receptor complex. Despite these variations, they share similar underlying design principles. Last year at SITC, we presented findings comparing assemblies that combine the receptor complex with the cytokine against native IL-15 or NKTR-255. We observed notable differences, including variations in receptor internalization and Granzyme B production in NK cells. In our attack PBMC cultures, we also noted differences in CD14 monocytes that could express intracellularly. This illustrates a significant alteration in how the immune system might be engaged via the IL-15 pathway using the 255 design, potentially leading to reduced tachyphylaxis with repeated dosing and other improvements.
Operator, Operator
Thank you. Our next question comes from Aydin Huseynov from Benchmark. Your line is open.
Aydin Huseynov, Analyst
Hi, thank you for taking my questions. A couple of questions on bempeg melanoma study and one follow-up about the guidance. On melanoma, I wanted to confirm the status of the Phase III melanoma study, how many patients have been enrolled so far? Given that it looks like the PFS is expected to be in the first quarter of 2021, whether we would be able to see the complete response numbers earlier than that, at the end of this year or in the very beginning of next year?
Jennifer Ruddock, Head of Corporate Affairs
Thanks, Aydin. Wei, I'm going to ask you to address that question.
Wei Lin, Head of Development
Sure. Thanks for the question. Just to clarify, the guidance is not that the PFS will be the beginning of the year. Our guidance has been that the response rate from that endpoint will probably occur potentially in Q1 next year. Our guidance has been that based on the study design, the initial projection has been that the PFS could potentially come in six to seven months after the OR endpoint. We're in discussions with health authorities for the potential change in the first endpoint, which is from OR to CRR. The difference in the CR readout from the PFS readout could be different than the six to seven months. Some of that really depends on how the PFS is an event-driven readout. So I want to clarify the guidance provided to date. Regarding your first question, how many patients we're enrolling, that is study conduct. In an ongoing study, we typically do not provide those numbers until the study is completely enrolled.
Aydin Huseynov, Analyst
Appreciate that. Just want to confirm. So we're going to see CR numbers together with RR numbers in the beginning of 2021, right?
Howard Robin, President and CEO
That's our current guidance, yes.
Aydin Huseynov, Analyst
Okay. Appreciate that. And another question on financial guidance. So I was just curious to understand that given that certain studies would be postponed or pushed to later in the year or for some maybe even pushed to the next year, trying to understand the cash burn. Why does it stay the same as previously guided, given that there might be less expenses associated with research and development and overhead expenses?
Howard Robin, President and CEO
Thanks for the question. Yes, as we talked about on the call and Howard reviewed, many of the studies that we're running, particularly those in-house, remain on track. So that obviously would have no effect on our expense guidance. Some of the other potential changes are minor in nature. So we don't believe it's going to have an impact on our R&D expenses. Some of them are activity-based, some of them are not. We're comfortable with our current guidance and are not making any changes at this time.
Aydin Huseynov, Analyst
Okay. Thank you. Appreciate it.
Operator, Operator
Thank you. Our next question comes from Jay Olson from Oppenheimer. Your line is open.
Jay Olson, Analyst
Hi. Thanks for taking the questions. I had one on RCC. Where it seems like the goal line keeps moving with all the combinations, and now the CheckMate 9ER study results look pretty solid for nivo plus cabo. I was wondering if those study results change your view of the opportunity for bempeg plus nivo in RCC? And then I had a follow-up on 358, if I could.
Jennifer Ruddock, Head of Corporate Affairs
That's great, Jay. Thank you. Wei, I'm going to ask you to address the RCC question and the landscape.
Wei Lin, Head of Development
Sure. Yes. The RCC landscape continues to evolve. Right now, you have nivo plus AP combinations and checkpoint plus TKI, both involving pembro and avelumab and now most recently with new nivo. So the way we think about it is really two things. One is the combination of bempeg plus nivolumab does offer another treatment option. The TKI can be used in multiple settings. It can be used in combination with a checkpoint in the first-line setting or can be used later as a monotherapy treatment. Different physicians around the world are really taking advantage of these options and using them differently. There are still some physicians who prefer to use the IIL combo in first-line setting and others like to use a TKI combo and use that option of TKI in the first-line setting. Our goal here is to introduce another treatment option. We expect that it has a different safety profile than is offered by a checkpoint plus TKI combination and then also depends on the efficacy we're able to deliver.
Jay Olson, Analyst
That's very helpful for the comprehensive review. Regarding 358, there have been a few new drug approvals for lupus over the past 50 years, and I believe it might be one of the only ones. However, there are now several promising treatment options in development, including new molecules from AstraZeneca and Biogen. I was curious about how you view the evolution of the lupus landscape and how the 358 mechanism compares to anifrolumab and 559.
Jonathan Zalevsky, Head of R&D
Great question. You definitely diagnosed and characterized the problem well. Outside of Benlista, which came several years ago, there haven't been any approvals. There's really been no exciting trial results until anifrolumab came along. We saw some pretty exciting data in Phase II, then we saw Phase III data. The Phase III data for anifrolumab is relatively confusing. There are some effective endpoints in lupus studies and we keep seeing a lot of studies with similar efforts. The landscape of mechanisms that have been tested is quite overlapping, focusing on similar pathways. One of the exciting opportunities is considering Tregs as a treatment for lupus because lupus patients tend to have a dysfunction in their Treg compartment. We know that as lupus patients have progression to moderate-severe disease, they have low levels of IL-2 and even in response to normal stimuli that induces those levels. They also have an imbalance between TH17 and Treg cells, with an overabundance of Th17. So we can prioritize diseases based on the underlying immunology, select those based on where NKTR-358 can make the biggest impact. That's why this will be the first Phase II study in lupus patients, that we're going to be implementing with Lilly.
Jay Olson, Analyst
That's super helpful. Thank you very much for taking the questions.
Operator, Operator
Thank you. And that will conclude our question-and-answer session for today's conference. I'd like to turn the conference back over to Howard Robin for closing remarks.
Howard Robin, President and CEO
Thank you. Thanks, everyone for joining us today. I also want to thank our employees for the incredible amount of hard work and commitment to the company, particularly during this time where our environment is changing so rapidly. I am exceptionally proud of how our employees have risen to overcome challenges, keep our business on track, and make tremendous progress. We built a very valuable pipeline in immuno-oncology and immunology, addressing areas of high unmet medical need, and we're focused on moving these programs forward. As shareholders, we want to thank you for your support. We will continue to provide updates on our progress.
Operator, Operator
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a wonderful day.