Earnings Call Transcript - NKTR Q2 2023

Vivian Wu, Moderator

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; Dr. Jonathan Zalevsky, our Chief of Research and Development; Dr. Mary Tagliaferri, our Chief Medical Officer; Jennifer Ruddock, our Chief Business Officer; and Sandra Gardiner, our acting Chief Financial Officer. On today’s call, we expect to make forward-looking statements regarding our business, including statements regarding the therapeutic potential of and future development plans for drug candidates and research programs. The timing of the initiation of clinical studies and the availability of clinical data for drug candidates, the timing and plans for future clinical data presentations, the formation, future development plans or success of our collaboration agreements, the expectations following our corporate restructuring and reorganization plans, financial guidance and certain other statements regarding the future of our business. Because forward-looking statements relate to the future, they are subject to uncertainties and risks that are difficult to predict, many of which are outside of our control. Our actual results may differ materially from these statements. Important risks and uncertainties are set forth in our Form 10-Q that was filed on May 10, 2023, 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 over the call to Howard, I would like to note that Jennifer will be moderating 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, CEO

Thank you, Vivian, and thank you for joining us today. The first half of this year has been a pivotal time for us. In April, we implemented a new strategic plan that focuses on our immunology programs and extends our cash runway through at least the middle of 2026. Our most advanced program is REZPEG, for which a large Phase IIb study is set to start soon for patients with atopic dermatitis. I will elaborate on that shortly. We are also advancing our preclinical programs in immunology, including a TNFR2 agonist antibody and a CSF1 program, with the intention to file an IND for one of these in 2024. Furthermore, we are continuing two Phase II randomized clinical studies for NKTR-255 in solid and liquid tumors. With our new strategic plan, we believe we have positioned ourselves to achieve significant value-enhancing Phase II catalysts in 2024 and 2025, all before our cash runway guidance extends into at least the middle of 2026. First and foremost, we are committed to advancing REZPEG. Now a wholly owned asset of Nektar, preparations are underway to initiate a randomized Phase IIb study for REZPEG in patients with atopic dermatitis, with initial data expected in the first half of 2025. Yesterday, we reported that clinical efficacy data previously generated by Eli Lilly for REZPEG were found to be incorrectly calculated for both atopic dermatitis and psoriasis. This issue arose after the rights to REZPEG were returned to Nektar and the raw data files from the clinical studies were transferred to us. The internal teams at Lilly overseeing these studies were informed of the data errors we discovered, which Lilly also confirmed in writing. The revised data from the atopic dermatitis study indicate that 12 weeks of REZPEG therapy at the highest dose led to a mean EASI score improvement of 83% and a 41% EASI 75 response rate. The corrected data also demonstrate a rapid drop in EASI scores shortly after starting therapy, much sooner than current biologic therapies. A notable aspect of REZPEG is that after the treatment period ended, the mean drop in EASI score continued for patients monitored in the study. The potential for REZPEG to provide a novel mechanism compared to existing IL-13 therapies and a lasting effect for patients is indeed compelling. The biologic treatment landscape for atopic dermatitis is expanding significantly, driven by the approvals of DUPIXENT and other IL-13 based biologics. Approximately 16 million people in the U.S. are affected by atopic dermatitis, with 75% experiencing moderate to severe disease. In 2021, sales of biologics for atopic dermatitis approached $5 billion and are still growing. A treatment like REZPEG, which reduces the need for frequent dosing post-induction, could greatly disrupt the current multibillion-dollar market for atopic dermatitis therapies. Continuous dosing is typically necessary to maintain benefits, and in many cases, stopping treatment leads to a return of eczema or atopic dermatitis. Furthermore, at least 50% of patients on IL-13 therapies do not respond adequately. Clearly, REZPEG shows significant potential for treating patients with atopic dermatitis, and these corrected data strengthen Nektar’s commitment to a thorough Phase IIb study for REZPEG. As stated in our press release yesterday, we plan to hold an investor and key opinion leader meeting in the coming weeks to discuss these data and share the study design for the Phase IIb trial for REZPEG in atopic dermatitis. JZ will delve deeper into the revised REZPEG data shortly and also touch on our early-stage immunology programs. Regarding our oncology asset, NKTR-255, we are actively exploring potential strategic partnerships while continuing the Phase II clinical trials. I’ve invited Mary to provide more information on the ongoing clinical studies for NKTR-255. Now, I will hand over the call to JZ to discuss REZPEG and our preclinical programs in immunology. JZ?

Dr. Jonathan Zalevsky, Chief of Research and Development

Thank you, Howard. Starting off with our lead immunology program, REZPEG is a unique molecule that aims to address the underlying Treg deficiencies and consequently, the overactivity of affected T-cells in autoimmune diseases by selectively activating and expanding Tregs. REZPEG provides a completely different mechanism of action compared to other drugs that are currently approved or under development in the atopic dermatitis space. This program is uniquely positioned as the most advanced IL-2-based Treg mechanism in the clinic. REZPEG has potential in multiple autoimmune diseases, and while our focus is currently on atopic dermatitis, there are plans to explore REZPEG in other autoimmune indications in the future. As Howard mentioned, we discovered the data previously reported for REZPEG by Eli Lilly was miscalculated. The primary errors were related to miscalculations for the EASI score and the PASI score, as well as the EASI-related and PASI-related clinical efficacy endpoints reported at the EADV in September of 2022 in the atopic dermatitis and psoriasis posters that were presented. This discovery was only made after all rights to REZPEG were returned to Nektar and the raw data files from the REZPEG clinical studies were transferred to Nektar. A leading independent statistical firm was then employed to analyze the raw data de novo, and confirmed that the original statistical analysis calculated by Lilly was incorrect. For atopic dermatitis, EASI is the validated and widely used standard measurement for atopic dermatitis studies that has been used by clinicians and reported in the literature for over 20 years. The EASI measures the severity of atopic dermatitis for patients, and scoring ranges from zero with no disease to 72 for maximal disease. The corrected and audited interim data analysis for the atopic dermatitis study utilizes the validated 72-point EASI scoring system and includes all the patient data that was available at the time of the EADV 2022 data cut. The data demonstrate that 12 weeks of REZPEG therapy at the highest dose resulted in a mean EASI score improvement of 83% with a p-value of 0.002 as compared to placebo and an EASI 75% response rate of 41%. In addition to the strong efficacy, we observed that after 12 weeks of treatment with REZPEG, the results were at least in line with or better than efficacy observed after 16 weeks of treatment with dupilumab, which in Phase IIa and Phase IIb studies showed a 74% and 68% improvement, respectively. An important observation in the new and corrected data was that REZPEG also provided a rapid and steep drop in EASI scores immediately after initiation of therapy. Specifically, after only two doses of REZPEG, the mean drop was -71% for the highest dose at the week four-time point. The corrected data also reinforces the remitted effect and durability of REZPEG responses in atopic dermatitis patients. As Howard stated, the possibility that REZPEG could provide, for the first time, a therapy that could be dosed less frequently than anything patients have available now and could provide real long-term durability. With the differentiated T-regulatory cell mechanism that we specifically designed, the underlying scientific basis for why this is happening has been hypothesized for some time. The concept is that stimulating the T-regulatory cells could result in the reeducation of the immune system by treating the underlying pathology rather than just the symptoms of the disease. These clinical data provide for the first time a novel clinical finding, demonstrating that the Treg mechanism can translate into effectively what looks like memory of the immune system, resulting in both long-term durability and strong efficacy in atopic dermatitis. This is the first clinical observation of a Treg stimulating therapy being efficacious in atopic dermatitis, and has the key opinion leaders extremely enthusiastic. The durability of response that we’ve observed is not seen with DUPIXENT or with the other agents in the IL-4 and IL-13 class or with JAK inhibitors. And again, this has us and KOLs very enthusiastic about the potential for long-lasting responses and infrequent maintenance dosing with REZPEG in the setting of atopic dermatitis. There were no underlying formulaic or mathematical miscalculations of the other efficacy endpoints presented at EADV last year. However, I’ll point out that with all patient data included in the new and corrected data, there was also some improvement in the vIGA responder and NRS Itch responder endpoints from what was previously reported at EADV. For the highest dose of REZPEG, the vIGA increased from 24% reported at EADV up to 29%. And for the NRS Itch measurement, the improvement went from 35% reported at EADV up to 41%. For psoriasis, endpoints related to the PASI were similarly miscalculated for the validated 72-point PASI scoring system. PASI is also a validated and widely used standard for over 20 years, which is used by clinicians and reported in the literature to measure the severity of psoriasis plaques in patients. The scoring also ranges from zero with no disease to 72 for maximal disease. The corrected and audited final data analysis for the psoriasis study utilizes the validated 72-point PASI scoring system. The corrected data showed a 44% change from baseline PASI and PASI-50 and PASI-75 response rates of 32% and 21%, respectively. The statistical and clinical teams in charge of the two studies at Lilly were made aware that Nektar discovered the data errors. The Lilly team confirmed the errors in written communications with Nektar. We plan to hold an investor meeting with key opinion leaders in the coming weeks to present additional new data from the atopic dermatitis study for the 12-week induction and for the 36-week follow-up period for REZPEG, all of which strengthens the concept of REZPEG providing a remitted effect. We will also share more details about the new study design for the Phase IIb study in biologic-naïve patients with moderate-to-severe atopic dermatitis who have progressed on topical corticosteroids. We expect to initiate the trial in October of this year, with data expected in the first half of 2025. While our near-term focus for REZPEG is on atopic dermatitis, we continue to believe that REZPEG has broad potential in multiple indications. As the development of this program progresses, we will continue to evaluate further opportunities and indications for REZPEG. Now turning to our immunology preclinical research programs. We are advancing our research pipeline for two autoimmune disease programs. The first program we are working on is our TNF receptor 2 or TNFR2 agonist antibody being developed in collaboration with Biologic Design. TNFR2 is highly expressed on Tregs, neuronal cells, and endothelial cells, and TNFR2 agonism has been shown to potentiate the suppressive effect and overall functional properties of Tregs. In its absence, it is associated with autoimmunity and other genetic conditions resembling FOXP3 loss-of-function. In contrast, its presence has been associated with immunoregulatory function and protective effects for multiple cell populations and tissues in the body. Working with our collaborator, we have identified two lead antibodies that have been validated for selective TNFR2 binding, cell type specificity and TNFR2 agonism in primary human cell-based assays. The lead antibodies are currently undergoing manufacturing cell line development. We, along with the immunology community, are very excited about the TNFR2 target, and our lead TNFR2 agonist antibodies show a desirable biochemical and cellular profile. We are aggressively progressing this program toward IND-enabling studies and believe that a selective TNFR2 agonist holds great promise for the treatment of multiple autoimmune diseases. Our second preclinical program is a conjugate version of the CSF1 protein. This molecule was engineered to optimize the receptor-ligand interaction and the exposure to selectively modulate the resolution process of inflammation. Traditionally, CSF1 is a myeloid-targeting cytokine involved in monocyte development and mobilization. In the right cytokine milieu, CSF1 creates the kind of resolution macrophages that are ideal for turning off an inflammatory response. With CSF1, we have tuned the ligand-receptor binding property to generate a novel signal to the CSF1 receptor. We are characterizing this biology in multiple biologic contexts, including acute and chronic inflammation as well as fibrosis. We are very excited about these programs and plan to file an IND for at least one of the programs in 2024 and look forward to keeping you updated on our progress as these programs mature. Now I’d like to turn the call over to Mary to provide an update on our oncology program, NKTR-255. Mary?

Dr. Mary Tagliaferri, Chief Medical Officer

Thank you, JZ. We have two different development pathways for NKTR-255, one in solid tumors and a second in liquid tumors with cell therapies. So let’s talk about our bladder cancer study first. In our partnered program with Merck KGaA, Merck is conducting a randomized clinical trial comparing avelumab versus avelumab plus NKTR-255 as maintenance therapy for unresectable or metastatic bladder cancer after completion of first-line platinum-based chemotherapy. Our joint scientific hypothesis is that NKTR-255 will synergize with avelumab by generating new cytotoxic and memory T-cells as well as NK cells to enhance the unique ADCC effect of avelumab. With the ability to capitalize on this dual mechanism of action in the JAVELIN Bladder Medley study, we are excited about the combination of avelumab and NKTR-255. Enrollment in the Merck KGaA study is on track, and the first interim data analysis for progression-free survival is scheduled for the second half of 2024. Our second development pathway is in liquid tumors. Enhancing and developing T-cell function or fitness of CAR-T cells has been a key focus to improve the efficacy of cellular therapies. Several studies have shown that higher endogenous IL-15 concentration post-lymphodepletion is associated with greater CAR-T cell expansion and improved persistence as well as clinical responses. Because of this foundational data, we are evaluating NKTR-255 in one Nektar-sponsored study and two investigator-sponsored trials to enhance the cellular PK of CAR-T cell therapies to improve response rates and clinical outcomes. We believe there is a potential broad application for NKTR-255 to enhance the efficacy of cellular therapies, including autologous and allogeneic CAR-T cells and other cell therapy products from TILs to TCR-based therapies. And with that, I will turn the call over to Sandra for a review of our financial guidance. Sandra?

Sandra Gardiner, Acting Chief Financial Officer

Thank you, Mary, and good afternoon, everyone. We ended the second quarter with $409.4 million in cash and investments, with no debt on our balance sheet, and we still expect to end 2023 with at least $315 million in cash and investments. We rapidly executed our restructuring and strategic plan in April, and because of this, our financial position remains strong, with a cash runway that extends at least through the middle of 2026. This will take us through several key value-generating milestones for our pipeline. As discussed in May, we reduced our San Francisco-based workforce by approximately 60%, and this personnel reduction represents approximately $30 million a year in operating expense reductions. The costs related to the restructuring were substantially paid in the second quarter and we have begun to realize the cost savings in this third quarter, which we will fully realize in 2024. In Q2, we recorded a $13.3 million non-cash impairment charge for leased assets. For the full year 2023, we now expect to recognize restructuring, impairment, and costs of terminated programs of approximately $40 million to $45 million, which includes $27 million of non-cash impairment charges recognized in the first half of 2023. I will now review the remainder of our 2023 financial guidance, which remains unchanged. Our GAAP revenue for the full year 2023 is expected to be between $80 million and $90 million. This revenue includes $65 million to $70 million in non-cash royalties and $15 million to $20 million in product sales. We anticipate full-year 2023 GAAP R&D operating expenses will range between $105 million and $115 million, which includes approximately $15 million to $20 million of non-cash depreciation and stock compensation expense. We expect G&A operating expense for the full year 2023 to be between $75 million and $80 million, which includes approximately $15 million to $20 million of non-cash depreciation and stock compensation expense. Our full-year 2023 non-cash interest expense is expected to be between $20 million and $25 million. As I mentioned earlier, we expect to end 2023 with at least $315 million in cash and investments. We will now open the call for questions. Operator?

Operator, Operator

Thank you. Our first question will come from Jay Olson from Oppenheimer. Your line is open.

Unidentified Analyst, Analyst

Oh! Hey. This is Cha on the line for Jay. Thanks for taking the question. We have a couple of questions on REZPEG if we may and congrats on the corrected data on the Phase Ib trial. I guess one thing that’s caught our attention and JZ you alluded to is that the corrected data now seem to have even stronger early separation of curves, and you can now see over 70% EASI improvement at week four and week six. So I’m just curious if you think this is something potentially differentiating from others and how important is the early symptom improvement based on your market research and KOL feedback? And I have a follow-up.

Jennifer Ruddock, Chief Business Officer

Thank you.

Dr. Jonathan Zalevsky, Chief of Research and Development

Thank you for the question. As you mentioned in the materials we released with the press release yesterday, there is a significant and rapid decrease. The week four data is particularly noteworthy because it reflects the period after patients have received two doses of REZPEG, first at week zero and then at week two. We observe a strong inflection point and a change in the curve's slope, achieving a 70% reduction in EASI score quite quickly. This is crucial because patients with this condition are accustomed to treatment with topical corticosteroids, which provide relatively fast relief through applying a cream. Our study population consists of patients who have progressed beyond the effectiveness of topical corticosteroids and are transitioning to systemic biologic therapy. Thus, achieving a rapid response is beneficial for both the patient and their expectations. We believe this demonstrates a key differentiator for REZPEG and complements the significant response depth reported at week 12, as well as the prolonged disease control observed for 36 weeks after we stopped dosing. All these aspects align well and suggest a potential advantage stemming from this novel mechanism. I believe you had a second question.

Unidentified Analyst, Analyst

Got it. Thanks. Yeah. Thanks. Just like with the more robust data now in AD. Just curious how you are thinking about the timing and also interest level in exploring additional opportunities with REZPEG maybe in ultra-immune diseases. Also, I’m wondering about potential opportunities in newer inflammatory diseases. Thank you.

Howard Robin, CEO

I can answer that. It's an excellent question. At this stage, given our strong capital and financial position, I would like to concentrate our company on atopic dermatitis right now. I believe REZPEG has the potential to be effective in atopic dermatitis, especially considering the robust data we have, as you mentioned. There are opportunities in other autoimmune diseases as well. While lupus is a smaller market compared to atopic dermatitis, I think it has potential there as well, and we are analyzing relevant data. Additionally, there may be other indications like type 1 diabetes and food allergy where we could develop REZPEG if we confirm that we have a drug that effectively promotes regulatory T-cells. For the time being, our focus at Nektar is on achieving outstanding results in a Phase IIb randomized study for atopic dermatitis, and if that is successful, we can explore further options from there.

Operator, Operator

Thank you. And our next question will come from Chris Shibutani from Goldman Sachs. Your line is open.

Unidentified Analyst, Analyst

Hi, everyone. Thank you for taking our questions. This is Charlie on for Chris, and also, I’ll extend my congrats on the corrected REZPEG data. So just two quick ones from us. First, just wondering if Lilly provided any basis for the exclusion of the three atopic dermatitis patients. Just wondering if there is a specific reason behind that exclusion that they may have provided. And then also with the corrected REZPEG data, just wondering if there was any impact on the safety and tolerability results that were presented last year? Thank you.

Jennifer Ruddock, Chief Business Officer

Thanks, Charlie. I’m going to ask JZ to comment on both of those questions. Go ahead, JZ.

Dr. Jonathan Zalevsky, Chief of Research and Development

Yeah. Thank you. Thanks for the question. So really, in terms of the data that was excluded, that was a judgment that Lilly made. It was based on criteria around topical medications that were permitted by the protocol. In reality, all patient data should have been included from the very beginning, as all of that patient data and the use of all those components are specified in the protocol. Now the next question you asked was about safety and tolerability. Those results are the same as they were in the EADV presentation. What we did at Nektar was we reviewed everything. We calculated and recalculated all of the components, and for the safety information presented at EADV from last year, that remains the same. Thanks.

Unidentified Analyst, Analyst

Great. That’s very helpful. Thank you so much.

Operator, Operator

Thank you. Our next question will come from Mara Goldstein from Mizuho. Your line is open.

Mara Goldstein, Analyst

Great. Thanks so much. I apologize if I signed in late, so if this is repetitive, please excuse me. But two questions for you. One is, given the reanalysis of data and the prior clinical situation, do you have to approach the FDA with this? I mean, obviously, you’re planning on launching a trial, but is this something that they need to be apprised of, number one? And then the second question is on the lawsuit understanding that you can’t comment on, because you’re in active litigation. Maybe you can just tell us procedurally what are the next steps here since you have filed that suit?

Jennifer Ruddock, Chief Business Officer

Yeah. Mary, could you take the first part about FDA, and then I’ll ask Howard to comment on the second?

Dr. Mary Tagliaferri, Chief Medical Officer

Sure. Regarding the reporting of data to the FDA, we would do that in a clinical study report. At this time, we have not finalized the clinical study report, and we will be providing all of the updated and corrected data into the clinical study report, which will be submitted to the FDA. And then I turn it over to Howard for the next part of the question.

Howard Robin, CEO

In relation to the lawsuit, we won't comment on ongoing litigation, but we are taking this matter very seriously. The lawsuit is significant and substantial. The development of REZPEG was potentially ready for a Phase II study in atopic dermatitis around a year to a year and a half ago. We take this lawsuit extremely seriously and have engaged a highly regarded external statistical firm to reassess everything from scratch. We provided them with the raw data and clinical plan to generate their own results, which aligned with our corrective numbers. This issue is very important to us.

Operator, Operator

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

Kambiz Yazdi, Analyst

Hi, team. This is Kambiz on for Roger. Why have you decided to move into Phase IIb specifically in biologic naïve patients? Any preclinical and mechanism action related reasons that REZPEG works better in those patients? Thank you.

Jennifer Ruddock, Chief Business Officer

Yeah. Thanks, Kambiz. JZ, I’ll ask you to address that.

Dr. Jonathan Zalevsky, Chief of Research and Development

Sure. Thanks, Kambiz. One of the things that we wanted to do importantly is to build upon the data from the Phase Ib study that we’ve just been speaking about today and for which we released corrected data yesterday. That study was run in biologic-naïve patients. So we wanted to continue the development in the same patient population. The strength of the data discussed today, as well as all the elements of differentiation that REZPEG provides in this patient population, we want to continue to build on in the next focused clinical development step for REZPEG. In terms of the applicability of this mechanism, one of the compelling aspects of the Treg component is that it should work in multiple lines. While we’re starting our focus in biologic-naïve patient populations, there’s a scientific rationale to expect efficacy in patients post-biologics. For example, patients who have stopped responding or never responded to an IL-13 therapy like DUPIXENT or Adbry, we should be able to provide a Treg component in that post-population as well. In our future development plans, we’ll look into the biologic-experienced population as well.

Operator, Operator

Thank you. Our next question will come from Greg Harrison from Bank of America. Your line is open.

Unidentified Analyst, Analyst

Hi. This is Mary here on for Greg. Thanks for taking my question and going through the programs. I guess looking at the potential with REZPEG and the path forward with atopic dermatitis, are you aware of any precedent for this situation, and if so, what was the path forward here?

Howard Robin, CEO

Well, let me try…

Jennifer Ruddock, Chief Business Officer

Yeah. Go ahead, Howard. Yeah. Okay.

Howard Robin, CEO

I’m not aware of any precedents for companies making this kind of calculation error, so I can't comment on that. Moving forward, we have impressive Phase Ib data from a randomized trial, and we're enthusiastic about advancing to Phase II, where we believe we can show that REZPEG represents a novel therapeutic mechanism for treating autoimmune diseases, including atopic dermatitis. The lawsuit we filed against Lilly is important to us and will be addressed, but I don’t know of many similar situations. In my opinion, this is a significant error.

Operator, Operator

Thank you. And our next question will come from Boris Peaker from TD Cowen. Your line is open.

Unidentified Analyst, Analyst

Thank you for taking my question. This is Jane for Boris. For REZPEG, are you still exploring psoriasis as your next indication, or are you exploring other indications? And I have a follow-up.

Jennifer Ruddock, Chief Business Officer

Thanks, Jane. Since you have a follow-up as well, JZ, I’ll ask you to take the first part of the question.

Dr. Jonathan Zalevsky, Chief of Research and Development

Sure. Thank you. One of the things we discussed today was about the PASI score calculation and the underreporting of the data from EADV, which we’re very pleased to have been able to correct yesterday. In terms of the long-term focus of REZPEG development, we’re clearly focused on atopic dermatitis where we see very profound activity for REZPEG that we’ve been discussing on this call. In psoriasis, there are other mechanisms of action that are quite well entrenched, such as the IL-17 inhibitors, and we might consider psoriasis as a potential development in the future or maybe even in the life cycle management setting. But right now, near-term, we’re really focusing on atopic dermatitis for our development in the dermatology space.

Unidentified Analyst, Analyst

Thank you. For the next question, just regarding your developing preclinical assets targeting TNFR2 and CSF1. Can you just talk generally regarding the competitive landscape over those two targets and your potential market opportunities there? Thank you.

Jennifer Ruddock, Chief Business Officer

Thanks.

Dr. Jonathan Zalevsky, Chief of Research and Development

Sure. Thank you for that question. They are early assets, obviously, in the research setting, but I can give you some flavor around the targets and the opportunities. With TNFR2, that is certainly a very hot target, and there are just a couple of companies coming up that are studying that target and trying to create agonistic drugs. Some of the companies are focusing on applications for oncology and others are focusing on applications for autoimmune disease. We’re interested in the autoimmune disease applications for the TNFR2 target and our agonistic antibodies. It’s a very unique target because it controls a lot of tissue-protective and tissue-regenerative pathways. It can specifically act on regulatory T-cells once they move into individual compartments in the body and undergo different kinds of cytokine pressure. We can see a lot of opportunities for a TNFR2 agonist antibody in certain organ and inflammatory conditions. In the case of our CSF1 program, that targets a myeloid component of the immune system, creating an immunoregulatory effect. This is not targeting lymphocytes and T-cells like the other molecules in our pipeline, but targeting a whole different set of immunoregulating and immunosuppressing cell populations. We think that could have a very broad application because the myeloid compartment participates in a large number of diseases from common rheumatic diseases to some more rare ones as well. Thanks for the question.

Operator, Operator

Thank you. Our next question will come from Daina Graybosch from Leerink Partners. Your line is open.

Daina Graybosch, Analyst

Hi. Thank you. I have two questions. I wonder for the EASI score recalculation if you could help us by separating out the impact of the two changes, Lilly’s mathematical error and then the inclusion of the additional patients. How much of the additional total benefit and the speed of benefit came from those two changes? And then I’ll have a follow-up after that.

Jennifer Ruddock, Chief Business Officer

Thanks, Daina. Appreciate it. JZ.

Dr. Jonathan Zalevsky, Chief of Research and Development

Yeah. Hi, Daina. Thanks for the question. Basically, the majority, if not the totality, of the difference in the data that we presented on Monday really comes from the mathematical calculations of the EASI score. For example, if you correctly calculate the EASI score and you include all the patient data, the week 12 LS mean results that we presented yesterday were an 83% reduction. If you correct the EASI score but do not correct the data that was excluded, then the LS mean results at week 12 are 82%, right? So, the two numbers are virtually the same. Really, the majority of the effect and the change in the corrected data reported came from the mathematical calculation of the EASI score.

Daina Graybosch, Analyst

That is very helpful. Thank you. My second one is it seems like they made a mistake, and correct me if I’m wrong, in setting up their staff. Was the mistake consistent for all patients, meaning a certain column or certain multiplier was consistently left out, and does that actually tell us anything about the biology of REZPEG that we got such a big benefit from that consistently being left out?

Jennifer Ruddock, Chief Business Officer

JZ, do you want to take that as well?

Dr. Jonathan Zalevsky, Chief of Research and Development

Yeah. Sure. Thank you. Basically, when you calculate the 72-point EASI or PASI score, there are multiple components that contribute to the mathematics that yield the 72-point number. The first set typically consists of the severity scores, scoring components of eczema or psoriasis based on four sections of the body. The next components assess the affected area, and they also account for the skin region affected. A consistent error was made across both the EASI and the PASI that didn't capture all of those severity and area components, resulting in a score that was less than the 72-point score. The same mathematical calculation was applied uniformly across every person and every time point. An important point is that for over 20 years, there’s been only one measure used for either atopic derm or psoriasis studies. These measures are key endpoints seen in studies and used in dermatology clinics. Anything less than the 72-point score is not an apple-to-apple comparison. I hope that answers your question and provides more context.

Operator, Operator

Thank you. And I am showing no further questions from our phone lines. I’d now like to turn the conference back over to Howard Robin for any closing remarks.

Howard Robin, CEO

Thank you, everyone, for joining us today. We remain focused on executing on the development of REZPEG and our immunology-focused research programs. I’d like to thank all of our employees for their efforts and their extraordinarily hard work, and I want to thank our shareholders for their continued support. We look forward to providing you with updates on our progress. Stay tuned. Thanks again for joining us today.

Operator, Operator

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