Earnings Call Transcript - NKTR Q2 2021

Jennifer Ruddock, Head of Corporate Affairs

Thank you, Crystal, and good afternoon, everyone. Thank you for joining us today. With us on the call are Howard Robin, our President and CEO; and Gil Labrucherie, our COO and CFO; Dr. Jonathan Zalevsky, our Chief of Research and Development; and Dr. Dimitry Nuyten, our new Chief Medical Officer. On today's call, we expect to make forward-looking statements regarding our business, including clinical trial enrollment and 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; financial guidance and certain other statements regarding the future of our business. Because forward-looking 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. Our actual results may differ materially from these statements. Important risks and uncertainties are set forth in the Form 10-Q that was filed on May 7, 2021, which is available at sec.gov. We undertake no obligation to update any of these forward-looking statements, whether as a result of new information, future developments or otherwise. A webcast of this call will be available on the IR page of Nektar's website at nektar.com. Before turning the call over to Howard, I'd like to remind you again that since we're dialing in from different locations, I will moderate the Q&A session for our team, so we can avoid technical issues during the session. We appreciate your patience. With that said, I would like to hand the call over to our President and CEO, Howard Robin. Howard?

Howard Robin, President and CEO

Thank you, Jennifer, and thanks, everyone, for joining us on the call today. Since the beginning of this year, we've continued to advance our deep portfolio in immuno-oncology and immunology, setting the stage for a steady cadence of key data readouts starting in the second half of this year and will continue through the first half of 2022. These data sets are poised to provide us with the platform for a series of BLA filings and commercial launches of BEMPEG across multiple frontline solid tumor indications. Each of the investigational candidates in our pipeline, BEMPEG, NKTR-255 and NKTR-358, provide us with our own distinct value and broad development potential. And collectively, our clinical pipeline represents one of the most diverse and leading cytokine portfolios in development, a testament to our pioneering work in targeting cytokine biology and designing cytokine conjugates. Behind our clinical portfolio, we continue to invest in the area of immune science and cytokine biology to drive the next wave of IND candidates. From an operational perspective, we entered the third quarter of 2021 with an exceptionally strong balance sheet with over $1 billion in cash and no debt. Our strategic collaborations offer significant funding support for certain trials. And in the case of our collaboration with BMS, provide for a potential $1.4 billion filing and approval milestones for BEMPEG in the US, Europe and Japan. And as a reminder, these milestones are tied to any approval of BEMPEG, whether the approval is in combination with nivo or not. So let me begin today with BEMPEG, our most advanced clinical program, an IL-2 pathway agonist that is being developed in combination with checkpoint inhibitors nivo and pembro in multiple large frontline and adjuvant tumor settings. Throughout our partnership with BMS, we have five ongoing registrational studies of BEMPEG with nivo that are proceeding nicely. We're uniquely positioned with three registrational studies for BEMPEG, which are expected to read out in the first half of 2022. These are the Phase 3 study in metastatic melanoma, the Phase 3 study in renal cell carcinoma and Phase 2 accelerated approval study in PD-L1 low cisplatin-ineligible bladder cancer. Also ongoing with our partner, BMS, are two additional large Phase 3 studies on adjuvant melanoma and one in muscle-invasive bladder cancer. Both indications offer an opportunity to expand the patient populations in melanoma and bladder cancer and could potentially benefit patients earlier in those diseases from treatment with BEMPEG. In addition, BMS is conducting a Phase 2 study in renal cell carcinoma for BEMPEG plus nivo with a TKI to pave the way for future development of a TKI inclusive regimen building on their recent successful approval of nivo plus cabo. In terms of our strategy for BEMPEG plus pembro, our first priority is to focus on the largest settings where pembro is the gold standard of care, non-small cell lung cancer and head and neck cancer. And where we have the ability in that setting to combine BEMPEG with pembro and run a comparative study against monotherapy pembro designed for registrational purposes. We look forward to reporting data from our Phase 2 PROPEL study in non-small cell lung cancer later this year, which will help inform our registrational strategy for the doublet, either with or without chemotherapy, in non-small cell lung cancer. While pembro has improved overall survival in patients with non-small cell lung cancer, its benefit is still limited to two years or so. And so we believe there's an opportunity to increase the treatment benefit in multiple regimens while also offering a chemo-sparing regimen in this tumor setting. We've also made excellent progress as we prepare to launch our Phase 2/3 study of pembro and BEMPEG in head and neck cancer. We're ahead of schedule and now expect the study to be open for patient enrollment within the next few months. We're excited about the potential of this doublet to increase and deepen responses versus pembro alone in this cancer, which has been shown to be immune sensitive. Pembro has about 75% of the market share in the first-line setting for treatment of head and neck cancer. And with several recent Phase 3 failures in this setting, we are particularly encouraged by the potential of this doublet. The leading checkpoint inhibitor combined with our unique IL-2 mechanism. An equally compelling opportunity for us in the earlier stages of development is our second immuno-oncology candidate, NKTR-255, an IL-15 agonist, which has demonstrated its ability to expand natural killer cells, CD8 T cells and memory T cells. Given these unique attributes, NKTR-255 could address even more tumor types than BEMPEG, including both liquid and solid tumors. We have a robust development plan in place, focused first on combining NKTR-255 with antibodies that use antibody-dependent cellular cytotoxicity, or ADCC, to kill cancer cells as these antibodies require functional NK cells for their mechanisms of action. We know that long-term expansion of natural killer cells through an IL-15 mechanism can greatly enhance the activity of these ADCC agents. And we have two ongoing studies, one in solid tumors with cetuximab focused on colorectal cancer and head and neck cancer and one in liquid tumors with rituximab focused on non-Hodgkin lymphoma and with daratumumab focused on multiple myeloma. We look forward to providing data updates from these studies at medical meetings later this year. The third cytokine in our portfolio is NKTR-358, which is being developed in autoimmune disease in partnership with Eli Lilly to address a broad range of autoimmune and inflammatory conditions. NKTR-358 targets the IL-2 receptor complex in order to stimulate proliferation of powerful inhibitory immune cells known as regulatory T cells. By activating these cells, NKTR-358 may bring the immune system back into balance. What we have seen recent activity in the Treg mobilizing pipelines, for example, Merck's recent acquisition of Pandion Therapeutics, Lilly is the clear leader in this space in respect to both the broad scope of development in the advanced clinical stage of the NKTR-358 program. And we're the only company to have reported a multiple dose effect of our agent on key regulatory cells in patients. As was planned from the outset of our collaboration with Lilly, the development program, including manufacturing, has now transitioned over to Lilly. Lilly now has four NKTR-358 clinical studies underway, a 280 patient placebo-controlled Phase 2 study in lupus, a 200-patient placebo-controlled Phase 2 study in ulcerative colitis and two ongoing separate Phase 1b studies in psoriasis and atopic dermatitis. We expect data readouts from these Lilly run studies over the next six to 18 months. And there are plans for future Phase 2 studies to be added to the program in the near future. I want to take a brief moment here to introduce our new Chief Medical Officer, Dr. Dimitry Nuyten, who joined Nektar last month. We are fortunate to have Dimitri on board at this exciting time for the company, and he brings to Nektar extensive clinical development experience in immuno-oncology that will be valuable as we advance our pipeline. While at Pfizer, he designed and led the successful JAVELIN Bladder 100 study, which resulted in US and European approvals for Avelumab in first-line maintenance setting for patients with bladder cancer. Dimitry will oversee our clinical strategy and activities including direct supervision of clinical sciences, clinical operations, data science and systems, medical affairs and clinical pharmacology. And we look forward to his leadership as we execute our robust development programs from BEMPEG and NKTR-255. So I'd like to turn it now over to Dmitry. Dmitry?

Dimitry Nuyten, Chief Medical Officer

Thank you, Howard, for the kind introduction. To say a few words about my background. I am a radiation oncologist and finished my training at the Netherlands Cancer Institute in Amsterdam. I hold a PhD in cancer biology from the University of Amsterdam. I started my industry career at Bristol-Myers Squibb in early development in oncology, leading a number of early development programs. I then went on to Pfizer, where I led the clinical development for immuno-oncology, most notably, the BAVENCIO or Avelumab program with a number of registrational trials, including RCC and bladder cancer. Most recently, I was Chief Medical Officer for Aduro BioTech. I'm very excited to be joining Nektar, a company that has led the way in engineering cytokine therapies that address some of the biggest challenges in the treatment of cancer and autoimmune disease. While the potential advantages of IL-2 and IL-15 based therapies are well characterized, the challenges associated with turning these into accessible therapies have hindered the development of agents targeting these pathways. I was particularly impressed with Nektar's expertise in both immune sciences and pulmonary chemistry, the combination of which has allowed us to create one of the most impressive pipelines in oncology and immunology today with several late-stage development programs for BEMPEG nearing their completion and the clinical development strategy for NKTR-255 being formed. I look very much forward to working alongside the rest of the program teams and executive team to drive the development of these programs with our goal, of course, of improving the lives of patients. I will provide a quick update on the BEMPEG program and the timing for registrational studies, which remain firmly on track consistent with our prior guidance. First, for the 760 patient Phase 3 first-line metastatic melanoma study, which is being run by our partner, BMS. We and BMS are very much looking forward to completion of the study and future data. BMS has an excellent track record in the melanoma setting, and nivo has a very robust and dominant market share. This presents a unique opportunity for the doublet of BEMPEG and nivo to potentially help patients who still do not have enough treatment options. As you know, BMS is running the study, and after the pause for COVID enrollment in the study went very well in the first part of 2021. BMS has recently informed us they intend to conduct their first analysis of the data for both ORR and PFS endpoints for the Phase 3 melanoma study when the number of events outlined under the statistical protocol for the PFS endpoints are reached. As you know, the PFS endpoint was intended for, from the onset, to be the endpoint for filing for a full study. BMS and Nektar believe that with the breakthrough therapy designation and a single data analysis at the PFS time point, this approach will enable preparation for our teams to allow for future regulatory filings once top line results are available and if warranted by the data. Current projections from BMS indicate that this data analysis could occur in the early part of 2022. Since PFS is an event-driven analysis on a number of factors, including the actual rate of PFS events might impact the timing. The next study, which Nektar is running, is the 620 patient Phase 3 first-line renal cell carcinoma study comparing BEMPEG plus nivo versus the PKI agent or physician's choice, which can be either sunitinib or cabozantinib. We expect that we could reach our first interim analysis for the primary endpoint of overall survival sometime in the first or second quarter of 2022. BMS and Nektar are taking a comprehensive approach to the development of BEMPEG plus nivolumab in this particular tumor type. And BMS is also conducting a 250 patient Phase 2 study in RCC that combines BEMPEG plus nivo with Exelixis Carbomedics which allows us to compare this treatment to the nivo carbo regimen to pave the way for a TKI inclusive regimen in RCC with BEMPEG plus nivolumab. The first – this past quarter, BMS and Nektar expanded the strategy in RCC to a new collaboration with Exelixis, who will conduct a study evaluating BEMPEG plus nivolumab with novel next-generation TKI-XO92. The study will also include patients with varying cancers. With respect to the Phase 2 study in first-line CIS-ineligible urothelial carcinoma, which Nektar is also running, the study is designed to serve as a basis for potential filing for accelerated approval. The study includes about 110 cisplatin-ineligible urothelial carcinoma patients who have a baseline CPS score of 10 or lower as a measure of PD-L1 expression. The primary endpoints are overall response rate and duration of response as determined by central radiology review. For this study, we are looking to achieve a median follow-up for measuring duration of response of 18 months, and we expect our first data from this study in the first or second quarter of 2022 as well. The BEMPEG-nivolumab program also has a large Phase 3 study in muscle invasive bladder cancer and adjuvant melanoma. First, our Phase 3 peri-adjuvant muscle invasive bladder cancer study, which is being run by BMS, is enrolling approximately 540 patients who will receive BEMPEG plus nivo or nivo monotherapy first in a neoadjuvant setting prior to radical cystectomy and then in the adjuvant setting for a 12-month treatment period following surgery. As this study treatment period is long, we expect the first data readout to be in 2024. This study is also designed to serve as a confirmatory study for our planned potential accelerated approval in the metastatic intelligible cancer setting. Second, the Phase 3 melanoma trial, which Nektar is running and is growing a total of approximately 950 patients with a 12-month treatment period to surgery with an endpoint of recurrence-free survival by blinded independent central review. This study is now rapidly enrolling ahead of schedule. The study is designed to transition BEMPEG to a standard of care for the treatment of melanoma, building on the reasons for nivolumab's approval in this setting. If successful, the study could significantly expand the number of melanoma patients that can benefit from BEMPEG plus in combination. Initial data from this study is expected in 2024. I'll turn now to the PROPEL study evaluating BEMPEG plus pembro in non-small cell lung cancer. As Howard stated, we report the initial data from the PROPEL non-small cell lung cancer study before the end of 2021. As we've said in the past, we are looking for a maturity of at least two scans or more for patients on treatment, so we can fully understand the potential clinical benefit of the doublet over time. As a reminder, we plan to have data from approximately 60 patients that will be spread across three separate PD-L1 expression subgroups, and the study plan is designed to show benefit of the doublet compared to historical ORRs achieved with single agent pembrolizumab in the efficacy evaluable population treated in less than 1%, 1% to 49% and greater than or equal to 50% PD-L1 expression subgroups. In non-small cell lung cancer, we know that the quantity of underlying inflammation in the tumor microenvironment can impact antitumor activity of single agent checkpoint inhibitors such as pembrolizumab. This is defined by PD-L1 expression status. As we have discussed in the past, single-agent pembrolizumab has the most benefit in patients in the greater than 50% subgroup given the mechanisms of BEMPEG, which targets and increases the inflammatory state of the tumor microenvironment. We believe that the combination of BEMPEG and pembro in non-small cell lung cancer could improve the efficacy of the doublet in multiple PD-L1 expression subgroups. We also recently added a chemotherapy combination arm to the PROPEL study in order to allow us for potentially including the doublet with chemotherapy options in our Phase 2 strategy. This work plus the initial data from PROPEL will allow us to determine a comprehensive Phase 3 strategy for BEMPEG in non-small cell lung cancer. For our new registrational Phase 2/3 trial in head and neck cancer, as Howard stated, we are ahead of schedule and expect our first patients will be enrolling in the next few months. We have collaborations in place with both Merck and SFJ Pharmaceuticals for this study and are very excited about the opportunity to address a large patient population here in the frontline setting. The 500-plus trial is designed to support a potential global registration of BEMPEG plus pembro doublet. It includes an interim analysis of ORR after the first 200 patients are enrolled. If the ORR passes a pre-specified futility boundary, the study will continue and the remaining 300 patients will be enrolled to the Phase 3 portion of the study, and then a total of 500 patients will be evaluable for the primary endpoints of ORR and overall survival. Given a favorable competitive landscape, we see this as a unique opening for us to establish BEMPEG as the first IL-2 mechanism-based treatment in head and neck cancer. Let me now turn the call over to JC, who will review the NKTR-255 program and the Lilly NKTR-358 program.

Jonathan Zalevsky, Chief of Research and Development

Thank you, Dmitry. Let me start with NKTR-255 in agents that engage the full biology of the IL-15 pathway to provide functional activation and homeostatic control of IL-15 response of immune cells, namely natural killer cells, CD8 T cells, and immune memory subsets. As an agonist of the full IL-15 pathway, NKTR-255 can therefore be combined with multiple mechanisms ranging from targeted agents to cell therapy and even immunological checkpoints to potentially improve their efficacy. In May, we published our first peer-reviewed manuscript on NKTR-255 in the Journal of Immunotherapy of Cancer, or JITC. The paper presents a head-to-head evaluation of NKTR-255 in comparison to pre-complex IL-15 agonists, which represent the vast majority of the competitive IL-15 pipeline. NKTR-255 demonstrated substantial differentiation from pre-complex IL-15 agonists in that NKTR-255 engages the full spectrum of IL-15 biology and has a prolonged pharmacokinetic and pharmacodynamic profile. Collectively, these properties of NKTR-255 promoted elevations and functionally competent cytotoxic NK cells in the tumor microenvironment and overall translated into increased survival rates and superior antitumor activity in the B-cell lymphoma model versus those pre-complex cytokines. And as Howard mentioned, our initial focus is on antibodies that function through an ADCC mechanism of action. We've developed a clinical strategy to combine NKTR-255 with leading targeted antibodies in both the liquid and solid tumor settings. For our Phase 1/2 study in patients with relapsed refractory malignancies, we expect to complete the dose escalation monotherapy portion of the study later this year, and we plan to present data from these monotherapy dose escalation cohorts at a medical meeting later this year. As the trial continues, we will expand into several arms to approximately 20 patients per arm. One arm will evaluate NKTR-255 as a monotherapy or in combination with rituximab in third-line or greater follicular lymphoma or low-grade NHL. In the other arm, we'll evaluate NKTR-255 as a monotherapy and in combination with DARZALEX FASPRO in third-line or greater multiple myeloma. A third arm will evaluate NKTR-255 as a monotherapy for NHL patients who have previously progressed following approved CD19 CAR T cell therapy. Our second clinical study is evaluating NKTR-255 in combination with cetuximab in two distinct groups of highly refractory late-line patients with metastatic colorectal cancer or head and neck cancer. We are enrolling up to 80 patients in the US and Europe. As you know, cetuximab has a very low response rate, about 10% or 15% in the extent. Our goal is to improve upon that with the addition of NKTR-255, which would then provide several potential paths forward for the program. Now this study begins with a dose escalation running where we evaluate the combination of cetuximab with increasing dose levels of NKTR-255. We have already completed the first dose escalation cohort at the lowest dose and have fully enrolled the second dose cohort. As we complete the dose escalation portion for the combination, the study will then expand into dedicated cohorts for colorectal cancer and head and neck cancer patients. We expect to present some initial data from the dose-finding cohort for this portion of the study at a medical meeting later this year. Now, switching gears to immunology. As Howard said earlier, we are very pleased with the broad scope of development and overall advancement of the NKTR-358 program being executed by our partner, Eli Lilly. Many autoimmune and inflammatory disorders, including systemic lupus and ulcerative colitis, are associated with decreased Treg numbers, reduced Treg function, and/or reduced production of IL-2. With NKTR-358, our goal is to address these Treg abnormalities and to develop an IL-2-like molecule that could selectively stimulate Tregs in a more effective manner than low-dose IL-2. Also in May of this year, we announced the publication of our preclinical results in the Journal of Translational Autoimmunity. This publication describes the foundational science behind NKTR-358 and its potential role in the treatment for a broad range of autoimmune disorders. Indeed, we have seen this preclinical data translate into positive clinical data with positive data in lupus patients presented at both UR and ACR last year. After that data, Lilly commenced the Phase 2 study in lupus. Earlier this year, Lilly initiated a Phase 2 study in ulcerative colitis. Lilly also continues to advance the two separate Phase 1b studies in psoriasis and atopic dermatitis. The Phase 2 trial of lupus is progressing very nicely. As a reminder, 280 patients are being randomized to one of three doses of NKTR-358 or placebo. Administered every two weeks for a treatment period of 24 weeks. The primary endpoint in the Phase 2 study is the percentage of patients achieving at least a four-point reduction in the SLE disease activity index, or scale. Standard clinical composite endpoints used in lupus studies are also included in the secondary endpoints. We will also characterize pharmacokinetics, pharmacodynamics, and immunogenicity in treated patients. Endpoints will be measured at week 24, and we expect the study to be completed within 18 to 24 months. Earlier this year, Lilly also initiated a Phase 2 randomized, placebo-controlled trial in patients with ulcerative colitis and began enrolling patients in the first quarter of this year. The study will evaluate multiple dose levels during the initial induction period using an adaptive design. Total enrollment is planned to be 200 patients. The trial endpoint is the percentage of patients with clinical remission after induction treatment at 12 weeks. In addition, as Howard stated earlier, we know that Lilly is planning to grow the development program for NKTR-358. There are plans for two additional Phase 2 studies to be initiated in two new indications. We are pleased with Lilly's rapid advancement of the program and their desire to develop this agent broadly in inflammatory and autoimmune diseases. Finally, we look forward to the potential presentation from the Phase 1b work ongoing in psoriasis and atopic dermatitis with NKTR-358, with data from at least one of these studies to be presented at a medical meeting in the next year. Now, before I hand the call to Gil, I'd like to give an update on our COVID-19 study. I am pleased to report today that the study is now concluded, and we have obtained encouraging results. As a reminder, the study was designed as a Phase 1b randomized, double-blind, placebo-controlled trial, evaluating only a single dose of BEMPEG or placebo given to 30 adult patients with confirmed mild COVID-19 infection. You will recall that the scientific hypothesis in the study was to understand whether BEMPEG could be used to increase Absolute Lymphocyte Counts for ALC over an eight-day period in patients with mild COVID-19 as compared to placebo. Research has shown that those patients diagnosed with COVID-19 who present with a low baseline ALC have a much higher likelihood of going on to develop severe disease and require hospitalization. In this study, we evaluated three escalating single doses of BEMPEG: 0.00075 milligrams per kilogram, 0.0015 milligrams per kilogram, and 0.003 milligrams per kilogram. For reference, the top dose studied in this trial is 50% of the Q3 week dose that we are using in our registrational studies in BEMPEG plus nivolumab in cancer patients. Overall, single doses of BEMPEG were well tolerated in patients with mild COVID-19, with AE similar to what we would expect based upon our prior experience with BEMPEG monotherapy in cancer patients. This was an important observation because it indicates that BEMPEG can be administered to patients with underlying viral-induced inflammation. The study met its primary objective and that we observed a clear dose response in absolute lymphocyte count increase from baseline to day eight for the different dose levels of BEMPEG. For the 15 placebo patients over the eight-day period measured, there was an overall reduction in ALC from baseline. Although this study was not designed for efficacy and the patients enrolled only had mild symptoms, we observed a shift in the WHO clinical progression scale for the five patients that received the highest dose of BEMPEG, with the majority of those patients experiencing improvement in symptoms by day eight as compared to the patients who received placebo doses in the study. We are still analyzing these results and plan to share them with our advisers who are experts in this field. We have also been carefully watching the situation with COVID, the combination of vaccines, evolving COVID-19 variants, and the growing number of long COVID cases. If there appears to be a continued need to augment today's therapy, we want to be prepared to proceed. We look forward to keeping you updated on our next steps here once we've gone back to our advisers and had a chance to thoroughly evaluate the unmet need. While we are enthusiastic about BEMPEG's potential in virology, of course, we are prioritizing the development of BEMPEG for the treatment of oncology. And with that, I will turn the call over to Gil.

Gil Labrucherie, COO and CFO

Thank you, JZ, and good afternoon, everyone. On this call, I'll review our 2021 financial guidance, which is unchanged for the year. We ended the second quarter with over $1 billion in cash and investments, and we still plan to end the year with at least $750 million in cash and investments and no debt on the balance sheet. As a result, we remain in a very strong financial position. As we approach top line results for the three registrational studies for BEMPEG, beginning early 2022, as you will recall, we also have significant regulatory and approval milestones for BEMPEG under our BMS collaboration. These milestones include $625 million associated with the approval and launch of BEMPEG for the first indication in the US, European Union and Japan and $260 million for each of the next three indication follow-on approvals for BEMPEG. This puts us in a very strong position to prepare for the commercial launch of BEMPEG as early as the second half of 2022 and at the same time, continue to broadly advance our wide array of development programs. As a reminder, our full year GAAP revenue guidance is approximately $100 million and includes $15 million to $20 million of product sales and $80 million to $85 million of non-cash royalties. We expect to recognize the remaining revenue on a fairly ratable basis in the second half of the year. Our GAAP R&D expense guidance remains between $450 million and $500 million. We expect R&D expense to increase in the second half of the year as we continue to enroll patients across our broad clinical development portfolio. As mentioned earlier, we are currently initiating sites for our BEMPEG head and neck study to begin enrollment later this year. We continue to significantly ramp enrollment in the Phase 3 adjuvant study for BEMPEG and the NKTR-255 program. Our partner, Eli Lilly continues to enroll and expand the NKTR-358 development program. Our R&D expense guidance includes approximately $85 million of non-cash expense arising from stock compensation and non-cash depreciation and the SFJ funding of the head and neck cancer study. Our G&A expense guidance is still projected to be between $120 million and $125 million and includes approximately $35 million of non-cash depreciation and stock compensation expense. Our non-cash interest expense is expected to be between $50 million and $60 million arising from the monetization of our royalty streams. Additionally, our non-operating expense includes approximately $15 million for the accounting of the contingent success-based payments to SFJ as a derivative liability. And with that, I will open the call to questions.

Operator, Operator

[Operator Instructions] And our first question comes from Chris Shabutani from Goldman Sachs. Your line is open.

Unidentified Analyst, Analyst

Hi. This is CJ on for Chris this evening. I was curious, what's the limiting factor determining when the PROPEL data are going to be available later this year? Has enrollment completed? Or are we just waiting for a follow-up? And then I guess, will we see any of the chemo cohort data in the readout as well? Thanks.

Jennifer Ruddock, Head of Corporate Affairs

Thanks, CJ. JZ, I'm going to have you take that one. Thank you very much.

Jonathan Zalevsky, Chief of Research and Development

Yes. Thank you, CJ, for the question. So as we explained earlier, the enrollment in the PROPEL study has been going very well. We gave guidance at earlier calls that at the very end of the last year, we saw a pretty big rise in enrollment, particularly as we saw COVID wane in Europe and most of our sites for that study are in Europe. And so with the cohort of patients enrolled, we wanted to ensure they'll be provided the most mature and rich and robust data set. And that's why we're targeting the second half of this year for the presentation of that data. Now one of the things you can expect in that data presentation is that we will provide all of the available information that we've collected on the patients that we've been following in those cohorts. The study has three different subgroups of patients distributed between PD-L1 expression levels. Patients in the less than 1% PD-L1 category, the 1% to 49% category and the greater than 50%. Our intention is to provide the full range of observations. So that will include all of the correlations of safety readouts, all of the efficacy information including the ORR as well as the CR, the composite endpoint and any time-to-event events that have also been accumulated in the data. And we're looking forward to presenting that later this year. And to the second part of your question, so the chemo-containing cohorts, which are the newest components of that study, they are open in their enrolling patients. But it's likely too soon to present any of that data as those cohorts are only underway enrolling patients now.

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 question. Maybe I could ask a big picture question. Since you're doing your BEMPEG studies in combination with nivo and pembro, is there any reason to believe that BEMPEG would have greater synergies with PD-1 antibodies versus PD-L1 antibodies? Or would you expect those combinations to be equally synergistic? Thank you.

Jennifer Ruddock, Head of Corporate Affairs

JZ, I'm going to go ahead and ask you to address that. Thanks.

Jonathan Zalevsky, Chief of Research and Development

Certainly, yes. So thank you for the question, Jay. PD-1 is the receptor and PD-L1 is the ligand. I think you also know that there's a second line and PD-L2 that could also engage with the PD-1 receptor. So there are multiple ligands for the same receptor. I think that we've seen across the kind of pipelines. If you look at the activity of drugs like Durvalumab from AstraZeneca or Atezolizumab from Genentech, Roche or Avelumab, BAVENCIO from EMD as well as Pfizer. You see activity of those molecules in a range of different tumor types. That is for sure. But I think what we've also seen is that Merck's Pembrolizumab or KEYTRUDA has really taken a very, very dominant share and achieved approval really in the greatest numbers of different tumor types. So there's definitely many more opportunities where Merck's Pembrolizumab is the first-line standard of care, whether that be in monotherapy or combination setting. One of the elements that's so important in our strategy is the combination of BEMPEG with a checkpoint inhibitor. As you can see from our development strategy, we're prioritizing indications where the single-agent checkpoint is the standard of care and ideally in the first line. That just creates more opportunities in the PD-1 subclass and the PD-L1. But as a basic scientific question, I can really see the scenario where the mechanism of BEMPEG addition would provide quite a bit of synergy to either a PD-1 or a PD-L1 inhibitor.

Operator, Operator

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

Jessica Fye, Analyst

Hey, guys. Good afternoon. Thanks for taking my question. So when we think about the PROPEL data, on the one hand, in order to see what BEMPEG is doing, it seems like it would be worth comparing those combination results to what one would expect from single agent pembro. But from a real-world standpoint, it seems like the competitive clinically speaking would be the KEYNOTE-189 data. So with that in mind, is there actually a path you're interested in pursuing for this doublet combo? Or is this a step along the way to ultimately advancing the triplet?

Jennifer Ruddock, Head of Corporate Affairs

JZ, do you want to address that? Thanks.

Jonathan Zalevsky, Chief of Research and Development

Sure. Yes. Jess, that's – thank you for the question. The landscape, you've articulated really well. We know that the monotherapy or the chemo-sparing use of pembro is dominant in the greater than 50% PD-L1 population. And that as a global label, right? Pembrolizumab is used in pretty much all instances where it's approved in that subset. But in the subset of patients that have less than 50% expression, such as 1 to 49 or less than 1, there's quite a bit of difference. In the less than 1, it's always used in the setting of chemo. And in the 1 to 49 subgroup, there's a little bit of difference between the different health authorities. In the US, pembrolizumab is approved in the 1 to 49 population, but that's not the case outside of the US, where it's used in the setting with chemo. So there are a number of ways to impact the treatment landscape. For example, one way is to improve the overall activity of pembro. As Howard discussed earlier in his presentation, we still have effects that peak around 2 times. There are many opportunities in the setting with BEMPEG to extend the maintenance period and provide even greater durability of the activity. There are also opportunities to create a chemo-sparing option as well. There are a number of patients who are ineligible for chemo. There's an opportunity to address those patients. And then there’s always the opportunity to provide an additional treatment for physicians in the setting either with or without chemo. In our long-term planning, with PROPEL, we have now opened cohorts that include chemo combinations. That allows us to address BEMPEG plus pembro in the setting of chemo and the different chemos depending on the different histology of the disease. With that strategy, BEMPEG plus pembro or BEMPEG plus pembro plus chemo, we can address the different populations in pretty much the entire treatment landscape in non-small cell lung cancer. We look forward to presenting some of that information later this year as the chemo-containing cohorts continue to enroll in the future as well. Thanks for the question.

Operator, Operator

Thank you. Our next question comes from Difei Yang from Mizuho. Your line is open.

Unidentified Analyst, Analyst

Hi, good afternoon. This is Alex on for Difei. Thanks for taking the question. Just coming back on the lung cancer data here. Is it fair to say that you'd be in a position to start the registrational study of the combo at some point next year after you see the initial data? And then you do something with the chemo later on? Thanks.

Jennifer Ruddock, Head of Corporate Affairs

JZ, do you want to talk about how we're thinking about the Phase 3 strategy? Thanks.

Jonathan Zalevsky, Chief of Research and Development

Certainly, yes. The nature of the PROPEL study is really to create a Phase 3 informing strategy. That's why these first cohorts evaluate BEMPEG plus pembro and evaluate patients segregated by PD-L1 expression subgroups. That's really designed to identify areas where there is the greatest signal and to inform different kinds of Phase 3 design options. For example, in a chemo-sparing setting, you could consider a Phase 3 study where you evaluate single agent pembro versus the doublet of BEMPEG plus pembro in an example in the greater than 1% PD-L1 expression category. That's one potential option that could arise. The intention in reporting data later this year is to put Nektar in a position to move through Phase 3 if the data warrants. And with the chemo additional cohorts we've added into PROPEL, that gives an additional opportunity to explore even more treatment regimens for BEMPEG plus pembro. In that situation, we would evaluate a different kind of comparator in a registrational setting, for example, evaluating pembro plus chemo versus BEMPEG plus pembro plus chemo targeting a different patient population, focusing on the less than 1%.

Operator, Operator

Thank you. Our next question comes from Alex Ramsey from William Blair. Your line is open.

Unidentified Analyst, Analyst

Hello. This is [indiscernible] on for Alex Ramsey. Thank you for taking my question. So we've seen some studies that suggest that when NSAIDs are used as prophylactic in the setting, they can dampen the humoral immune response. So we're wondering if you could please remind us of the protocol for BEMPEG studies when it comes to NSAID dosing? Specifically NSAID used for BEMPEG to mitigate symptoms?

Jennifer Ruddock, Head of Corporate Affairs

Great. Thanks, Alex. JZ, do you have the details of the protocols? Thanks.

Jonathan Zalevsky, Chief of Research and Development

Yes, certainly. Hey, Alex, thanks for the question. First, to clarify, this study was not a vaccine study. We were enrolling patients that had mild COVID-19 and were confirmed to be COVID positive by PCR test. This is not a vaccine study per se. Regarding your general question on NSAIDs, they can be used, or are they ever used? We allow physicians to use standard of care. For patients that might have had untoward inflammation, the physician felt the need to use an NSAID or over-the-counter Tylenol, for example. Those are things that would be a possibility because those things are the normal standard of care for the treatment of COVID anyway. Hope that clarifies your question.

Operator, Operator

Thank you. Our next question comes from Benjamin Burnett from Stifel. Your line is open.

Unidentified Analyst, Analyst

Yes. Good afternoon, guys. This is Neil Carnahan on for Ben. On the PROPEL study, I was wondering, is there a scenario where one PD-L1 expression group looks more favorable versus the others, regardless of combination arm, and that to enrich for that patient group in the pivotal study?

Jennifer Ruddock, Head of Corporate Affairs

JZ, do you want to pick that with that?

Jonathan Zalevsky, Chief of Research and Development

I'm not sure I understand the question. Let me maybe answer what I think you were asking. The way the study was done is we enrolled patients and we collected biopsies, and we used central testing to evaluate their PD-1 – PD-L1 levels. Then they're stratified to the different subgroups depending on their status. So all the patients are treated with the doublet BEMPEG plus pembro. All different subgroups will be evaluated at the same time. If we see a greater signal in one of the subgroups, for example, over another, we know that single agent pembrolizumab has about an 8% response rate in the less than 1% population and about a 15% to 17% response rate in the 1% to 49% population. So those are two areas where single agent pembrolizumab has a lot less activity than it has in greater than 50% population. It is reasonable based on the mechanism of action of BEMPEG that we may see greater activity in those lower PD-L1 expression subgroups. If that's what we see in the data, then that would inform our Phase 3 strategy going forward if the data warrants that. I hope that answers your question because I'm not sure I fully understood.

Operator, Operator

[Operator Instructions] And our next question comes from Daina Graybosch from SVB Leerink. Your line is open.

Daina Graybosch, Analyst

Hi. Thanks for the question. I have one on the melanoma study in the interim readout. It sounded like, if I heard you correctly, that now the interim will assess ORR together. Was that a change in the interim design? Or are we seeing the impact of COVID cause similar to what BMS saw with their rolatamab study, where interim fell behind the PFS and actually, we haven't seen it yet is that question. And also, could you confirm where you are with the NKTR-262 program, is that program still active?

Jennifer Ruddock, Head of Corporate Affairs

Thanks, Daina. JZ, do you want to take those two questions? Thanks.

Jonathan Zalevsky, Chief of Research and Development

Sure. Yes. Thanks, Daina, for the questions. Regarding the first data analysis, one of the things we did is after the study began, the study began in 2018. In 2019, Nektar with BEMPEG achieved Breakthrough Therapy Designation in first-line melanoma. That was based on the strength of the PIVOT-02 data in first-line melanoma, where BEMPEG placebo showed a very high complete response rate of 34%, as well as we recently presented a very long progression-free survival of almost 31 months. With Breakthrough Therapy Designation, that gives us a lot of real firepower in terms of the potential from regulatory review in the filing. BMS and Nektar made a decision together that we would conduct the analysis of both the ORR endpoint and the PFS endpoint as soon as the trigger for the PFS events, which is predefined in the statistical analysis plan for the protocol is reached. This is very powerful as we can present both sets of data and use the Breakthrough Therapy Designation as an opportunity for full approval for BEMPEG plus nivo in first-line melanoma. A very good decision we made together with BMS. As Howard stated earlier, we expect the results of that study to read out in the first half of 2022. Dana, for your second question, the NKTR-262 program is still active. In fact, we're looking forward to presenting results from the ongoing REVEAL trial in the future. We are studying in REVEAL a couple of additional cohorts of 262, One is 262 plus BEMPEG and the other is 262 plus BEMPEG plus nivo. Those two cohorts we evaluated have completed enrollment. We’re assessing the data and will look forward to presenting that at a medical meeting in the future.

Operator, Operator

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

Howard Robin, President and CEO

Well, thank you, everyone, for joining us today. We are certainly approaching a busy and exciting period for Nektar with a number of key data readouts starting later this fall, and we're all highly anticipating seeing melanoma data in the early part of next year. I would like to thank our employees for their efforts in helping us reach these milestones during these challenging times, and I want to thank our shareholders for their continued support. We look forward to providing you with updates on our progress. Stay tuned. Thank you.

Operator, Operator

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