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Presentation

Nektar Therapeutics misses on earnings expectations. Reported EPS is $-0.15 EPS, expectations were $-0.13.

Operator: Good day, and thank you for standing by. Welcome to the Nektar Therapeutics Fourth Quarter 2024 financial results conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Vivian Wu. Please go ahead.

Vivian Wu: Thank you, Crystal, and good afternoon, everyone. Thank you for joining us today. With us on the call are Howard Robin, our President and Chief Executive Officer; Dr. Jonathan Zalevsky, our Chief Research and Development Officer; Dr. Brian Kotzin, our Interim Chief Medical Officer; and Sandra Gardiner, our Chief Financial Officer. On today’s call, we expect to make forward-looking statements regarding our business, including statements regarding the therapeutic potential of and future development plans for drug candidates and research programs, the timing of initiation of clinical studies and the availability of clinical data for drug candidates, the timing and plans for future clinical data presentations, the formation, future development plans or success of our collaboration agreements, financial guidance and certain other 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 November 08, 2024, 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. With that said, I would like to hand the call over to our President and CEO, Howard Robin. Howard?

Howard Robin: Thank you, Vivian. Thank you all for joining us today. 2024 was a productive year for Nektar, and I’m very proud of our team for executing on important clinical development milestones for our lead autoimmune pipeline program, rezpegaldesleukin, also known as REZPEG. The achievement of these clinical development goals prepares us for meaningful data catalyst for REZPEG in 2025. Earlier this year, we announced the enrollment completion for both our Nektar-sponsored Phase 2b studies. Our 400-patient REZOLVE-AD trial in atopic dermatitis opened enrollment in October of ’23 and completed enrollment in just 14 months. Our 90-patient REZOLVE-AA study in alopecia areata opened in March of 2024 and completed enrollment in roughly one year.

Both studies were completed on schedule in highly competitive clinical trial landscapes for both indications, which I think demonstrates the enthusiasm from patients and physicians for REZPEG’s novel mechanism of action and for the data that has been generated to date. JZ will discuss in a minute some of the unique operational features of our studies that are designed to minimize clinical operational risk. We look forward to data from both trials in atopic dermatitis and alopecia areata in the second quarter and fourth quarter of this year, respectively. Now, in the US alone, there are over 15 million people living with moderate to severe atopic dermatitis. And we know that less than 10% of those patients who could relieve — could receive biologic treatments for this chronic skin disorder are actually receiving treatment.

New mechanisms are the key to growing this underserved market. This belief also extends to alopecia areata. According to the National Alopecia Areata Foundation, nearly 7 million people in the US alone have or will develop this disease and a treatment market that is estimated to reach 5.2 billion in the United States and Europe by [2023] (ph). This disorder significantly affects the quality of life for patients, and the approved JAK inhibitor therapies with their high relapse rates are not durable and can carry significant potential safety risks. With REZPEG, we hope to offer a more durable treatment option in the form of a novel immunomodulating mechanism. And moving on to type 1 diabetes, we recently announced the clinical trial agreement with TrialNet, an international clinical trial network at the forefront of diabetes research, in which they will conduct and fund a Phase 2 clinical trial to investigate REZPEG in 66 patients with new onset type 1 diabetes.

We’re proud to support TrialNet’s mission of advancing innovative mechanisms aimed at slowing or stopping the progression of this disease. Nearly 2 million people in the US have type 1 diabetes, and the disease incidence continues to rise at a rate of 3% to 5% per year. And Brian will talk more about this later in the call. Now, turning to the progress we’ve made with our preclinical programs, over the past year, we expanded the company’s preclinical pipeline in immunology and inflammation. First, we continue to advance our novel TNFR2 agonist antibody program, NKTR-0165. IND-enabling studies are ongoing with the goal of preparing for an IND submission in the second half of 2025. Last year, we presented the first preclinical data at EULAR showing that this antibody demonstrated selective enhancement of Treg cell function.

Given the importance of TNFR receptor two agonism and a number of autoimmune diseases, NKTR-0165 could potentially be developed in autoimmune diseases such as multiple sclerosis, ulcerative colitis, and vitiligo. We’re also designing a pipeline of bispecific molecules that pair TNFR2 agonism with other antibody targets. And we’re planning for the first bispecific in this program to be ready for an IND-enabling studies within the second — next quarter. We look forward to providing more color on our early pipeline as these programs progress, and JZ will discuss more on this later. Now, before I turn to the R&D discussion, I want to reintroduce Brian Kotzin, who we announced last month would be returning to Nektar to lead the development of REZPEG as Interim Chief Medical Officer.

Brian has over 40 years of expertise in immunology and has extensive development and management experience. He’s also been supporting the clinical development of REZPEG in various capacities since 2017, and his intimate familiarity with this program has provided a seamless transition. And before I hand the call over to Brian, I want to highlight that Nektar remains in a strong financial position with a cash runway that extends into the fourth quarter of 2026, ending 2024 with $269 million in cash and investments on hand. I’m going to ask Brian to share a few comments on his enthusiasm for REZPEG and also comment on our recent announcement for the program in type 1 diabetes before we turn it over to JZ to review more details on REZPEG’s ongoing Phase 2b studies and our early pipeline programs.

Brian?

Brian Kotzin: Thank you, Howard. It’s great to be back at Nektar. As Howard mentioned, I’ve had the great pleasure to work on REZPEG since 2017, even continuing as a strategic adviser since retiring in 2023. When Howard and JZ called me with the opportunity to work on this program with my colleagues at Nektar again, I was very enthusiastic to help. I have a great passion for the potential of boosting regulatory T cells and autoimmune disease, and REZPEG is the most advanced IL-2 Treg stimulating mechanism in the field. Having closely worked for several years on this clinical development, I believe it has the potential to truly address unmet needs for safe and durable therapeutic options for patients battling atopic dermatitis, alopecia areata and now type 1 diabetes.

As Howard mentioned, we recently announced the collaboration agreement with TrialNet to evaluate REZPEG in a Phase 2 placebo-controlled clinical trial in patients with new onset type 1 diabetes. I’ve had great interest in pursuing REZPEG in this indication since it first entered the clinic, and I’m very excited to work with some of my colleagues at TrialNet on this new clinical study. In type 1 diabetes patients, there is a dysregulation of the balance between regulatory T cells and pathogenic autoreactive T cells, which leads the autoreactive T cells to destroy insulin-producing beta cells in the pancreas. Studies in mouse models and early human research of low-dose IL-2 and other agents have shown that boosting Tregs can lead to the preservation of insulin-producing beta cells.

This preservation of endogenous insulin secretion is key to improving long-term health outcomes and quality of life for patients with this disease. This is why I’m so excited about the work that TrialNet is recommending for REZPEG. The proposed placebo-controlled TrialNet study will enroll approximately 66 patients while they still have preserved — partially preserved beta cell function and insulin production. We will start evaluation in adult patients and move to pediatric and adult patients in different phases of the study. TrialNet’s goal is to initiate the study later this year. And with that, I’d like to hand the call to JZ.

Jonathan Zalevsky: Thank you, Brian. It’s exciting to be working with you on a daily basis again. As Howard mentioned, we announced in January that we completed enrollment in the REZOLVE-AD Phase 2b trial in patients with atopic dermatitis in just under 14 months. We are grateful to the patients and physicians whose strong interest in this novel mechanism and proof of concept clinical data led to enrollment completion of this large Phase 2b study, and we look forward to reporting the topline data from the 16-week induction period in June of this year. In February, REZPEG was granted Fast Track designation by the FDA for the treatment of adult and pediatric patients with moderate to severe atopic dermatitis. This designation allows us to collaborate closely with the agency on the design of the registrational program for REZPEG, and we’ll be leveraging it as we work on our Phase 3 registrational strategy in atopic dermatitis.

As a reminder, the REZOLVE-AD study randomized approximately 400 biologic naive patients with moderate to severe atopic dermatitis across three different dosing regimens of REZPEG or placebo. Guided by our scientific advisory board of industry-leading dermatologists, we designed this study to ensure high-quality sites were used and implemented criteria with the goal of addressing some pitfalls in operational execution from past trials. Patients were recruited from approximately 110 sites globally to ensure adequate geographic representation. Patients were stratified based on geographic region as well as baseline disease severity. 67% of patients were enrolled in Europe across Poland, Bulgaria, Germany, Czechia, Spain, Croatia and Hungary; 17% enrolled in the United States; and the rest were enrolled in Canada and Australia.

We had a goal to balance US recruitment due to the recent phenomenon in the last several years of a rising placebo effect observed in the US. We are very pleased with the 17% ultimate US recruitment figure, which aligns more closely with the recent winning atopic dermatitis study in terms of site distribution. Other important criteria that we used in the study include requiring that most of our sites be board-certified dermatologists or immunologists with prior experience participating in other atopic dermatitis studies. We also require that patients enrolled met a strict easy threshold that was consistent with both screening and randomization, unlike some other trials that have only required easy measurement at screening. Reconfirming that the patient’s disease severity has not changed significantly between the screening and baseline timepoint allows us to reduce the potential for enrolling patients with flaring or episodic disease into the study.

Patients with unstable disease or with a significant change between screening and randomization are [screened down] (ph). After randomization, patients receive either REZPEG at 24 micrograms per kilogram twice a month, 24 micrograms per kilogram once a month, and 18 micrograms per kilogram twice a month or placebo for a 16-week induction treatment period. After the induction period, patients that meet an EASI-50 or better efficacy threshold to advance from induction to maintenance are rerandomized into one of two maintenance regimens at their original dose level to receive that dose on either a once a month or once every three month regimen. The maintenance portion of the study is 36 weeks, which will, in total, provide 52 weeks of treatment duration for patients in the study.

We are following participants for one year after the conclusion of the 52-week treatment period, enabling us to evaluate REZPEG’s potential for long-term remittive effect. As I just mentioned, we anticipate topline data from the 16-week induction period of this Phase 2b study in June, and we expect data from the 36-week maintenance period of the study in the first quarter of 2026. Now, turning to REZOLVE-AA study, alopecia areata is a dermal disease in which the patient’s immune system mistakenly attacks the hair follicle and disrupts the body’s normal ability to keep and grow hair, leading to hair loss. There is strong rationale for REZPEG in this indication based on the role of Tregs to either prevent or downregulate the underlying pathology of the disease.

Last month, we announced enrollment completion for our 90-patient Phase 2b study in alopecia areata. The trial recruited patients across approximately 30 global sites. Patients had to present with severe-to-very-severe disease to find at SALT 50 to SALT 100 for at least six months in order to be eligible for inclusion. 62% of patients were enrolled in Poland, 24% in Canada, and the rest in the US. Randomized patients will be treated for a period of 36 weeks and observed for up to 60 in total. Our primary endpoint for this study is mean percent improvement in SALT, or the severity of alopecia tool, for week 36. We will also be looking at a number of other secondary endpoints, including the proportion of patients that was observed to have varying degrees of improvement in SALT score, including the regulatory approval endpoint SALT 20.

We expect topline data from the 36-week treatment period in the fourth quarter of this year. Turning to our preclinical programs in immunology, I’ll start by talking about our novel TNFR2 agonist antibody program, NKTR-0165. TNFR2 agonism has been shown to potentiate Treg function as well as maintenance of Treg lineage stability, especially in the non lymphoid tissue compartment. Genetic studies show that if TNFR2 is absent, the phenotypic effect is autoimmunity as well as other conditions that resemble FoxP3 loss of function. In contrast, its presence and activation of its signaling has been associated with immune regulatory function and tissue protective effects. The first preclinical data from this program presented last year at EULAR demonstrated that NKTR-0165 has a very high specificity for signaling through TNFR2 on Treg and enhancing immunosuppressive activity.

It also showed that the agonists we discovered are able to signal through the TNFR2 multimeric receptor single arm monovalent antibody, which is a very novel finding for a TNFR2 agonist antibody. We are very excited with NKTR-0165 unique and differentiated profile, and we believe it has the potential to become a first-in-class treatment for various autoimmune diseases, including multiple sclerosis, ulcerative colitis and vitiligo. And we are rapidly advancing this program into the clinic with plans to submit an IND in the second half of this year. Since the TNFR2 agonist antibody specificities we discovered are active as single arm antibodies, we have leveraged this to design a pipeline of TNFR2 containing bispecific molecules that pair TNFR2 agonism with other specificities.

First of these is known as NKTR-0166. These assets take advantage of multiple mechanisms to bring about novel molecules to target autoimmune diseases. We will nominate the first development candidate NKTR-0166 from this pipeline in the second quarter of this year and look forward to providing more color around this in the future. Overall, we have observed growing interest for a selective TNFR2 agonist like NKTR-0165. And as we move forward with our IND-enabling study and develop the bispecific pipeline, we remain open to opportunities to work with companies interested in these areas, strategizing the best path forward. Before turning the call over to Sandy, I’ll make a few comments on NKTR-255, our IL-15-based oncology program. Last year, we presented data on NKTR-255 that highlights its potential to augment the response in patient outcomes of a variety of cancer treatments in both solid and liquid tumors.

Data published in Blood, the peer-reviewed medical journal of the American Society of Hematology, from Stanford’s IST demonstrated that NKTR-255, when combined with Stanford’s CD19, CD22 by CAR T-cell therapy, doubled the 12 month relapse-free survival rate for patients with B cell acute lymphoblastic leukemia at 67% compared to 38% in Stanford’s historical controls treated with the same CAR T-cell therapy. At ASH, we shared supporting data showing that NKTR-255 enhanced complete response rates following CD19-directed CAR T therapy in patients with relapsed/refractory large B cell lymphoma. 73% of the NKTR-255 treatment group achieved a complete response at six months compared to 50% in the placebo group. This clinical benefit surpasses the published historical benchmark data from multiple pivotal trials and real-world meta analyses of currently available commercial CD19 CAR T-cell therapy.

Finally, interim data presented at SITC from Dr. Steven Lin’s Phase 2 study suggests that NKTR-255 has the potential to confer clinical benefits in patients with locally advanced non-small-cell lung cancer. Results show that NKTR-255 in combination with durvalumab demonstrates a statistically significant improvement in the eight week absolute lymphocyte count compared to historical control data. And these data strengthen our belief in NKTR-255’s therapeutic potential as a new application in combination treatment with checkpoint inhibitors. The growing body of evidence showcases its broad applicability to be combined with a variety of therapies across cancer indications. Looking ahead, we’ll continue to collaborate with Abel Zeta to evaluate NKTR-255 in combination with their tumor infiltrating lymphocytes in patients with advanced non-small-cell lung cancer who do not respond to anti-PD-1 therapy.

And we continue to work with Merck KGaA to evaluate NKTR-255 in combination with Bavencio in their Phase 2 JAVELIN Bladder Medley study with the first potential PFS readout expected in the middle of this year, as this is an event-driven analysis. As we continue to generate supportive data in these combination studies, we continue to explore the best areas for continued development of this drug candidate in partnership with collaborators. And with that, I will turn the call over to Sandy for a review of our financial guidance.

Sandra Gardiner: Thank you, JZ, and good afternoon, everyone. We ended 2024 with $269.1 million in cash and investments with no debt on our balance sheet. On December 02, 2024, we completed the sale of our Huntsville manufacturing facility for consideration of $64.7 million in cash, net of transaction costs, and approximately 20% equity ownership in the new portfolio company, Gannet BioChem. Turning to the income statement. Our revenue was $29.2 million for the fourth quarter of 2024 and $98.4 million for the full year 2024. Our R&D expenses were $28.7 million for the fourth quarter and $120.9 million for the full year. Our G&A expenses were $17.1 million for the fourth quarter and $76.8 million for the full year. In connection with the sale of our Huntsville manufacturing facility, we recognized the gain of $40.4 million.

Our non-cash interest expense for the fourth quarter was $10.2 million and $28.1 million for the full year. And our net income for the fourth quarter was $7.3 million or $0.03 basic and diluted earnings per share. For the full year 2024, our net loss was $119 million or $0.58 basic and diluted loss per share. I will now review our 2025 financial guidance. We remain strong in our financial position and still expect our cash runway to extend into the fourth quarter of 2026. We plan to end 2025 with approximately $100 million in cash and investments. Our revenue for the full year of 2025 is expected to be between $40 million and $50 million, which primarily includes non-cash royalties. As a result of the sale of our Huntsville manufacturing facility, we will no longer have product revenue and cost of goods sold.

We anticipate full year R&D expense will range between $110 million and $120 million, including approximately $5 million to $10 million of non-cash depreciation and stock-based compensation expense. We expect R&D expense to remain consistent with 2024 levels as we continue our Phase 2b studies in atopic dermatitis and alopecia areata. We expect G&A expense for the full year of 2025 to be between $60 million and $65 million, including approximately $5 million to $10 million of non-cash depreciation and stock-based compensation expense. Our full year non-cash interest expense is expected to be between $15 million and $20 million And as I stated earlier, we expect to end the year with approximately $100 million in cash and investments. And with that, now, we’ll open the call for questions.

Operator?

Operator: Thank you. [Operator Instructions] And our first question will come from Yasmeen Rahimi from Piper Sandler. Your line is now open.

Yasmeen Rahimi: Good afternoon, team. Thank you so much for all the great updates, and we’re very much looking forward to the data across both of the studies for this year. I guess, the first question is, you guys have shown in the earlier stage really phenomenal dose responses in the EASI scores. Would love to understand how you’re thinking about dose response across the three-dose arms. And then, secondly, if you could just maybe remind us, what is the criteria or responder analysis defined for patients to be eligible to go from the induction phase to the maintenance phase? And I’ll jump back in the queue.

Howard Robin: JZ, you want to take that call — that answer — the question?

Jonathan Zalevsky: Sure. Yeah. Thanks, Yas. So, the first question about the dose response, so we addressed that with three different cohorts that addressed both dose level and regimen. So, two of our dose cohorts evaluated the 24 microgram per kilogram dose. One of those evaluated that dose twice a month, the other cohort at once a month. And we changed the frequency there because that was sort of designed to model the pharmacodynamic profile of the Tregs that we measure in the blood. And so, that’s why we wanted to have the same [Cmax] (ph) one time with different exposures in the once-a-month versus twice-a-month set. So that was the goal there, to assess that based on the PK-PD knowledge. And then, we also selected 18 micrograms per mil dose twice-a-month.

That dose is higher than the 12 microgram per kilogram that we used in the Phase 1b study. We felt that that dose 12, while it did separate a little bit from placebo, was a little bit on the lower efficacy side. So, we wanted to evaluate a higher dose level than 12 micrograms per kilogram in the Phase 2b. And that’s why we chose 18 micrograms per kilogram, halfway between 12 and 24 from the Phase 1b study. So, that’s our expectations around the design of the Phase 2b. And then, in terms of the criteria for patients moving from the induction to the maintenance arms of the study, at the end of the 16-week induction, patients that have an EASI-50 or better response are eligible to be re-randomized to enter into the maintenance. And then, in the maintenance, they’re re-randomized to stay on the same dose level that they were on in the induction portion of the study.

But now the regimen is either once a month or once every three months. So, we use that EASI-50 criteria for advancement from induction to maintenance.

Yasmeen Rahimi: Thank you, JZ.

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

Julian Harrison: Hi. Thank you for taking my questions. First on the Phase 2b atopic dermatitis data expected next quarter, I’m wondering if you could talk about what kind of efficacy bar either on EASI or IgA you think would be commercially viable and worthwhile to advance REZPEG into pivotal development?

Howard Robin: Yeah, that’s a good question. I think, we’ve done a lot of homework in that area, especially recognizing that Amgen just released its data on OX40. So, I’ll let JZ give you a more thorough answer on that.

Jonathan Zalevsky: Yeah. Thanks, Julian. So, we definitely see at least two different versions of activity. Obviously, like, there’s ranges of EASI, that are active and that are desirable to achieve. And also, the separation from placebo, both features are very important. We like what we saw in our Phase 1b study, right, which showed both the dramatic separation from placebo in terms of placebo-adjusted and also an 83% change from baseline. So, we’re looking to replicate that kind of data in our Phase 2b, but we also acknowledge that as a drug with a novel mechanism and an agent that’s already shown a remittive effect as we’ve shown in the Phase 1b that even efficacy in the range of Dupixent, the standard of care currently, would also be a very successful outcome for us.

We’re definitely aware of the recent results in the field, including Amgen’s ROCA data. And I think that data is probably considered a little bit underwhelming by some of the folks that have addressed and looked at that data. And we think that we’re in a great position to replicate the Phase 1b results that we had with REZPEG.

Howard Robin: And always remember that this isn’t a zero-sum game and it really is a quite underserved market with a very serious disease and having a novel mechanism is certainly going to be appreciated by patients and physicians, I’m sure of that.

Julian Harrison: Got it. Thank you. That makes a lot of sense. And then, one more, if I may. I’m curious how you’re thinking about your rights to dapirolizumab in light of the recent litifilimab royalty monetization. Are there any differences compared to litifilimab that are worth noting?

Howard Robin: JZ, do you want to comment on that?

Jonathan Zalevsky: Yeah. They’re different mechanisms of action, of course, right? One is a BDCA2 inhibitor that’s targeting more of the plasmacytoid arm. And, of course, that drug has shown activity in both systemic lupus and cutaneous lupus. And it seems like it has maybe even more potential in the cutaneous form of the disease, whereas dapi, right, is a CD40 ligand targeting agent, right, so it addresses different mechanisms of action. And then — so that’s mechanistically, both of the drugs have demonstrated, I think, impressive results in Phase 2. And obviously, dapi has positive Phase 3 data as well.

Julian Harrison: All right. Excellent. Thank you.

Operator: Thank you. Our next question will come from Jay Olson from Oppenheimer. Your line is open.

Jay Olson: Oh, hey, congrats on all the progress, and thank you for providing this update. Maybe another question on the topline Phase 2 atopic dermatitis results in the second quarter. Can you just talk about the scope of data that you’re planning to share in that topline release and maybe some of the secondary endpoints we should be looking for? And then, also, what do you think the profile would be that would help you capture meaningful market share in a first-line setting?

Howard Robin: Yeah. I think, good questions. I think, we haven’t discussed a lot about the exact secondary endpoints at this point. I think, clearly as a novel mechanism that it was completely different approach than IL-13, I would like to see a drug that’s similar in activity to Dupixent with a very different biologic profile. I’ll let JZ talk a little bit more about that. Go ahead, JZ.

Jonathan Zalevsky: Yeah. Sure. Thanks, Jay. Yeah, so just to reiterate, as Howard said, we haven’t sort of guided on the specificity of the topline. Obviously, the majority of the data, we would need to present at a medical meeting. But we would intend to focus obviously on the 16-week induction data as we have described and to give at least a minimum directional, right, understanding of the performance of the drug. I think it’s a bare minimum. We can cover that more later. And then, in terms of the profile, I mean, it’s pretty obvious that the greatest way to impact the share in the frontline setting is with efficacy, right? So, if we are able to replicate the Phase 1b results that were really quite marked, right, quite notable, I would say that’s one of the strongest ways to impact the first-line treatment space.

But even all that aside, we’re a completely different mechanism. We’re not another IL-13. We’re not a depleting antibody like Roca is. We’re really providing a completely different mechanism of action, and we’re providing the data set that’s already demonstrated the potential for really durable responses, which could translate into very, very low-frequency dosing regimen, which would, at minimum, be highly convenient to patients. So, we think there are really a number of ways that we can impact this market and we’re very excited that being a novel Treg mechanism gives us these additional avenues for.

Howard Robin: Yeah. I think it’s also important to point out that while Dupixent is certainly an excellent drug, no debate on that, there’s a high percentage of patients failed Dupixent therapy over time. And as JZ just said, having a novel mechanism that works in a completely different fashion is something this market desperately needs. So, when we wind up comparing our results to Dupixent results, certainly, I’d like to see similarities, but recognize that you’re dealing with a completely different way of approaching the treatment of this disease.

Jay Olson: Thank you. That’s super helpful. And if I could sneak in a question on 255? Can you just talk about any updates on timing or expectations for the interim PFS results from the JAVELIN Bladder Medley study and what we should be looking for there? Thank you.

Howard Robin: We should be seeing results from that middle of this year. JZ, do you want to comment a little further?

Jonathan Zalevsky: Yeah. That’s exactly right. It is event-driven, right? So, you need to accumulate PFS event. Merck gave us some guidance at the middle of the year, like summertime is about the kind of time where we might expect to see that. And then, in terms of PFS events, obviously, our goal is to improve, right, on the PFS and potentially maybe even the OS of single agent Bavencio in this setting, right, in the post-chemo setting. So that’s obviously the objective of the study. That’s what we’d like to see, that’s what Merck would like to see as well. I mean, that’s how the study has been designed with Bavencio as an active comparator to directly test the combination of 255 plus Bavencio versus Bavencio alone.

Jay Olson: Thank you. Super helpful. Thanks for taking the questions.

Operator: Thank you. Our next question will come from Roger Song from Jefferies. Your line is open.

Roger Song: Great. Thanks for the update and taking all the questions. I have a quick one related to the Phase 2 atopic dermatitis. Given the enrollment you have completed, compared to the recent atopic dermatitis trial, what’s your expectation in terms of the patient baseline? And then, how will that impact the — particular on the placebo arm? What’s your expectation there? Thank you.

Howard Robin: JZ or Brian, you want to take that one?

Jonathan Zalevsky: Yeah, Sure. Yeah. Thanks, Roger. So, one of the things that we’d really like to see is the baseline EASI to be in the range of, like, 25 to 30, right? Because as we’ve seen, like, other studies historically, those kind of baseline EASI scores for the entire population have generally been linked with lower overall placebo responses and also better studies. There’s more dynamic range to measure from patients that are having higher EASI scores. So, that’s one of the things that we’d like to see in the study, something in that kind of range for baseline. And then, in terms of setting expectations for placebo, I mean, we don’t know. I mean, this is a blind study, but certainly, we would like to see much, much lower placebo response rates than have been reported recently for some of the studies and including the studies that were reported last December, such as from [Q32] (ph), where the placebo rate was very, very high.

One of the things that we did in our study that I tried to cover earlier in our call was that we really had a number of prospective features that we built into the study, such as limiting The US footprint geographically. We only had 17% of our sites in the US. Focusing on board-certified dermatologists and immunologists that had demonstrated experience working in atopic dermatitis study as well as measuring the easy score multiple times before drug was administered and patients were randomized. And all of those things we did prospectively in order to protect the study and ensure that ideally we don’t have a very, very high placebo response rate. So, when we present the results of the topline later this year in June, we’ll show what that is directly.

So, thanks for the question, Roger.

Roger Song: Thank you.

Operator: Thank you. And our next question will come from Mayank Mamtani from B. Riley Securities. Your line is open.

Mayank Mamtani: Yes. Good afternoon, team. Thanks for taking our questions, and glad to see the progress here. Could you touch on — just a related question to the last comment, JZ, anything you can touch on the screen failure rate you’ve seen on this extra stringent criteria you’re using and how that may compare to some other studies that have been done around screening and then randomization? And then, I have a quick follow-up.

Howard Robin: Yeah, that would be the kind of information we would share in the future when we present the results of the study.

Mayank Mamtani: Okay. Got it. And then, the escape piece in the protocol how patients go on the escape arm, could you just remind me how that’s kind of structured for induction and maintenance? And then lastly, just high-level read through from AD dataset to the REZOLVE-AA study, any translational markers you’re looking at would be helpful to know. Thanks for taking that question.

Jonathan Zalevsky: Sure. Yeah. So, in the way the study is designed, which was one of the expert pieces of advice also given to us by the standing committee is that, when patients reach the end of the 16-week induction, if they are not better than EASI-50, then they have the option to enter into an escape arm. And the escape arm is the 24 microgram per kilogram dose of REZPEG given twice a month. Particularly good for patients, for example, at blind study, but they might have been randomized to a placebo arm, right? It gives everyone a chance to have access to drug. So that’s how that escape arm works. And so, the primary entry point is at that 16-week time point at the end of induction for patients that fail to meet the EASI-50 or better re-randomization criteria to enter maintenance.

The other way the patients can enter into the escape is during the maintenance. If for one reason or another people lose activity or lose response, then they have a second chance to enter into the escape arm. And that’s really the way that it works. And it’s really very standard to these kind of studies that offer an escape arm therapy to patients that are in the study. And then, in terms of other kind of questions you asked about sort of read through, I mean, we selected alopecia really because it is a key dermatological indication, right? And as you know, with REZPEG, we’ve seen activity in multiple dermatological inflammatory conditions ranging from skin manifestations of lupus, psoriasis, atopic dermatitis, and also the underlying knowledge about the biology of immune privilege and the role that Tregs play in helping to maintain and sustain that immune privileged state.

We will be looking at biomarkers across both studies. And as you saw from our publication in Nature Communications in October of last year, a number of biomarkers that we measure are induction markers because our drug is an agonist. And so, I expect we’ll be able to measure those kind of induced pathways, independent of underlying disease, etiology of the patient. Those will just be based on the signaling of our molecule onto Tregs, for example. So, those will be some very important correlative biomarkers that we’ll be collecting in the future. And we’re looking forward to the readout of both of these studies. As we discussed, the first one atopic derm is coming in June for that induction. And for alopecia areata in the fourth quarter of this year, we expect to be reading out the 36-week treatment data from that study as well.

Mayank Mamtani: Thank you, JZ.

Operator: Thank you. Our next question will come from Arthur He from H.C. Wainwright. Your line is open.

Arthur He: Hey. Good afternoon, Howard and team. Thanks for taking our question. So, JZ, thanks for the additional color on the dose regimen for the AD study. I just want to follow-up a little bit on the rationale to pick those three regimen arms. So, why not go for a higher-dosing regimen than the 24 microgram per kilo Q2W? Yeah. And then, I had a follow-up on the on the trial as well.

Jonathan Zalevsky: Yeah. Across the clinical program, we’ve evaluated various doses, both weight-based dosing, such as what we’re using in the study, and also flat dosing as was used in other studies like the LUFA study. And then really when you look at it, that gives you a range of different note doses that we’ve established. So, we’ve gone well above and well below. And actually, the 24 microgram per kilogram is really an optimal dose level. It gives us all the things that we want to have from a PK-PD relationship. We engage as a target very effectively. We get very robust Treg expansion, and you can dose for a very long time at that dose level without seeing any cessation or any hysteresis in any of the pharmacodynamic responses. And from the biomarker data that was asked earlier and that we published, you can also see the very robust induction of immune pathways that we see at that dose level. So that’s really an optimal dose level that we’re really focused on.

Arthur He: Thanks for that. So — and the second question is also regarding probably both AD and AA study. Could you remind us how the stratification in both study in terms of the disease severity wise? How that could be decided for the stratification?

Jonathan Zalevsky: Yeah. So, we haven’t shared all of the details of the full stratification for that study, but I’ll share, I think, what’s the most relevant and important, Arthur. So, our study is enrolling the severe and very severe population. So, severe people have a SALT score between 50 and 35, and very severe people are 95 to 100. And very severe people are almost like they’re total. They’re almost, if not, in all cases, completely bald, right? And so, our study has quite a high number and are in both categories. And one of the stratification is to balance that between the treatment arm, right? So, that’s one key stratification. The severe and very severe patients, we want to balance across the treatment arms. And there’ll be other ones as well that we’ll present when we present the topline results from that study in the fourth quarter. But I think severe, very severe is probably what you were wondering about.

Arthur He: So, how about AD study?

Jonathan Zalevsky: Yeah. Again, we haven’t — we’ll share all of the full details of that later when we present the topline. But just as an example of flavor, the geographic regions is one of the important things to stratify in those kind of studies, and that’s one of our criteria.

Arthur He: I see. Thanks for that. Congrats on the progress.

Jonathan Zalevsky: Thank you.

Operator: Thank you. [Operator Instructions] And our next question will come from Chris Shibutani from Goldman Sachs. Your line is open.

Unidentified Analyst: Hey, good afternoon. This is Eric on for Chris Shibutani. And thank you so much for taking my question. So, just wanted to elaborate a little more on the point you made about the biomarker analysis and the AD trial. Do you have a sense of how translatable this correlation between biomarkers and clinical outcomes are and maybe the larger trial or potentially or across different patient populations? And are there plans to incorporating this biomarker in future trial designs?

Jonathan Zalevsky: Yeah. Thanks, Eric. That’s a really good question. So, what we were able to do in the Phase 1b atopic derm study is what I call more like descriptive analysis. We characterize the dose dependency of biomarkers analyzed by an MMRM model against various covariates that we did in the analysis. And we could see pathways that were statistically changed both as a function of dose and as a function of time. And why consider it more of like a summary or descriptive analysis is because the study was pretty small. And actually, in this Phase 1b study, there was a high number of responders. So, it was not really the right dataset to do a lot of correlative analysis. We did try. We tried a lot of correlative analysis, but it wasn’t clear from that particular study given its small size.

Now, in our Phase 2b study, this atopic dermatitis study, we’re doing that again, but now the study is designed, much larger. And also, we have a lot more understanding about the collection time points that we learned from the Phase 1b that are more optimized in the Phase 2. And also, we’re collecting tape strips so that we can collect what’s happening locally in the lesion against the serum biomarkers using the [old link] (ph) panels and the cellular analysis by flow cytometry. So, one of our objectives translationally in this Phase 2 study, in addition to all of the other normal kind of efficacy and safety endpoints, is we also want to dive very deeply into the translational sort of molecular phenotype of the patients and then understand any of these correlative analyses, whether they can be predictive, prognostic, and so on.

So that’ll be a very exciting dataset that we’ll be excited to share in the coming — in the future.

Unidentified Analyst: All right. Thank you very much.

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

Howard Robin: Well, thank you, everyone for joining us today, and we look forward to sharing important data from our Phase 2b studies of REZPEG later this year. We remain focused on advancing our pipeline and efficiently executing each of our unique programs. I want to thank all of our employees for their hard work and diligence. And, of course, I want to thank our investors for their continued support. So, please stay tuned. Thank you very much.

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