Nektar Therapeutics (NKTR) 2010 Q2 法說會逐字稿

Good day, ladies and gentlemen and welcome to the Q2 2010 Nektar Therapeutics financial results call. I will be your coordinator for today. At this time, all participants are in listen-only mode. We'll be facilitating a question-and-answer session toward the end of today's conference. (Operator Instructions). I would like to turn the presentation over to your host for today's conference, Ms. Jennifer Ruddock. Please proceed, ma'am.

Thank you. Good afternoon and thank you for joining us for Nektar Therapeutics' second quarter 2010 financial results conference call. With us today are Howard Robin, our President and CEO, John Nicholson, our Chief Financial Officer, Bharatt Chowrira, our Chief Operating Officer, Dr. Lorianne Masuoka, our Chief Medical Officer, and Steve Doberstein, our Chief Scientific Officer.

Before we get started, please note that in today's discussions we will make forward-looking statements regarding the value and potential of our advanced polymer chemistry technology platforms. The timing and availability of future results of our clinical program, the potential and timing of future regulatory submissions, the status and future plans for certain of our partners' programs in research and clinical development, the timing and potential for completion of certain transactions, the market potential of our drug candidates in development, potential future revenues that may be realized under one or more of our collaboration agreements, our financial guidance for 2010, and certain other future events and opportunities relating to our company.

These forward-looking statements involve significant risks and uncertainties that are detailed in Nektar's reports and other filings with the SEC, including our Form 10-Q quarterly report filed with the SEC on May, 2010, and our report on Form 8-K filed today. Actual events could differ materially from these forward-looking statements. We assume no obligation to update any forward-looking statements as a result of new information, future events or developments.

A webcast of this call is available for replay on the IR page of Nektar's Web site at www.Nektar.com. With that, I would like to hand the call over to our CEO, Howard Robins. Howard?

Thank you, Jennifer. Thanks to everyone for joining us today. Nektar has built a strong and impressive R&D pipeline based on our proven advanced polymer conjugate technology platform. Over this past year, we have advanced several clinical candidates and achieved clinical validation in two distinct areas of our technology with small molecules. I'm talk more about these important advances in a minute. Today, I would also like to update you on specific achievements in the second of 2010, including the very exciting data we announced for NKTR-102 in both breast and ovarian cancers. Finally, we'll also highlight a number of upcoming data milestones and anticipated future events for Nektar.

Our pipeline now has numerous drugs in various stages of development, ranging from pre-clinical compounds to candidates preparing for Phase III trials. As this pipeline advances, Nektar could see our first commercial launch as early as 2012. The number of drug candidates advanced by Nektar in just three years highlights the unique potential of our polymer conjugation technology. This proprietary platform is a highly flexible and powerful drug discovery engine, and it can be applied to both large and small molecules in different therapeutic classes to create new chemical entities.

Our technology puts us in an enviable position within the biopharmaceutical industry, allowing us to create a steady stream of innovative and potentially valuable product opportunities. Literally hundreds of drugs, both proteins and small molecules, could be candidates for our technology platform, and because we begin our discovery process with well-understood pharmacophores, we're able to greatly reduce the target biology risk associated with drug candidates, and focus instead on changing, improving and extending their action within the body.

In oncology, we're using our releasable conjugate approach to create targeted cytotoxic pro-drugs, such as NKTR-102, NKTR-105, and NKTR-107. With these products, we have focused on increasing efficiency and improving tolerability, by putting the optimal amount of active chemotherapeutic in the right place, at the right time. We're particularly excited about the recent data for NKTR-102 presented at the Oral Gynecologic session at ASCO, as well as our emerging data in breast cancer.

Cytotoxic drugs represent a $12 billion global market, and these drugs are the primary way in which cancer is treated. If you look at the number of cancer treatments each year, chemotherapies as monotherapy or in combination regimens dwarf the use of targeted agents. Chemotherapies are the most important tumor-killers used in the fight against cancer. Topoisomerase-1 inhibitors are very potent anticancer agents, but they have a poor half-life, and have greatly limited their effectiveness. They also cause significant dose-limiting toxicities, further limiting their use. So as many experts have said, if you can dramatically improve the PK profile of a topo-1 inhibitor, you could have an incredibly powerful anticancer compound.

NKTR-102 is an excellent example of how we've done exactly that, and used our technology to transform the pharmacologic profile in an elegant and efficient way, creating a highly valuable new chemical entity. What we've done with NKTR-102 can also be done with a wide range of other small molecule chemotherapies to create the next generation of these kinds of agents. As you know, the impressive clinical data for NKTR-102 in platinum-resistant and refractory ovarian cancer led to these data being selected for a highly prestigious oral session at ASCO.

I'll comment on this in a moment, but first, let me provide a quick background on ovarian cancer to put our data into context. Ovarian cancer is a common form of cancer in women with an exceptionally high mortality rate. Most patients are diagnosed with late-stage disease, and despite surgery, almost 80% of them have a recurrence and go on to platinum therapies. Initially, most of these women respond well to platinum, but the sad fact about this cancer is that in almost every case, platinum therapies stopped working, and women eventually become resistant and refractory to these agents. So the vast majority of patients diagnosed with ovarian cancer will become candidates for treatment with NKTR-102.

Now, when one looks at data in ovarian cancer, it would be easy to make the mistake of lumping all the results of drugs treating different degrees of chemo-resistant ovarian cancer into one pool, and then try to compare them. Indeed, the expected response rates of tumors to any agents varies greatly, depending on where a patient is on the spectrum of platinum-sensitive to platinum-refractory. The more platinum-resistant the patient becomes, the less likely they are to respond to any other therapies. The most chemotherapy-resistant women are platinum refractory, and these women have expected response rates that are very low, close to zero.

Our study of NKTR-102 was conducted in highly chemo-resistant women with ovarian cancer. Resistance to platinum therapy occurs when a patient progresses within six months of their last platinum dose. 71% of the patients in the NKTR-102 study had progressed within three months of their last platinum dose and were therefore highly chemo resistant. Almost half of the patients were actually platinum-refractory, which means that they did not achieve any benefit from their last platinum regimen. These women were also heavily pre-treated. NKTR-102 is a median fourth line of therapy in the trial. So really, the women in our study had the worst prognosis for patients that can be enrolled in an ovarian cancer trial.

Many companies would hesitate to enroll this heavily pre-treated and refractory patient population, because the expected response rate to any agent in this population is very close to zero. Clearly, we made the right decision at Nektar to study NKTR-102 in this population. The Phase II results show that NKTR-102 is very active, even in these highly chemo-resistant patients.

We also knew that if we could create a highly innovative product in a tumor setting where patients have failed available therapy, the drug could follow a significantly faster pathway to approval. And what was remarkable to the oncology community is how single agent NKTR-102 performed in these women who currently lack good treatment options. Confirmed objective response rates for NKTR-102 using resist were 21% and 23% in the Q-14 and Q-21 day dose schedules respectively. Confirmed GCIG response rates, a combination of CA 125 responses and Resist responses was 29% in the Q-14 day dose schedule and 38% for the Q-21 day schedule.

Another important outcome was the overall clinical benefit for women in our study; a combination of response and stable disease. Clinical benefit was seen in 54% and 45% of patients, in each dose schedule respectively. None of these patients had a good quality response to a prior platinum-based regimen, yet about half of the women in our study had a clinical benefit from treatment with NKTR-102.

Let me point out two very important results that came from our study, which will clearly shape the future development of the drug. First, when we look at the patients in the most chemo-resistant category, those that progressed during platinum therapy, single agent NKTR-102, given every three weeks had a confirmed Resist response rate of 17% and a confirmed GCIG response of 35%. This is truly remarkable response rate in this population.

The other important result is how NKTR-102 performed in women who failed doxil-therapy. The women in this category truly have no other good therapeutic options. With single-agent NKTR-102 every three weeks, the Resist confirmed response rate in doxil failures was 29%. This extraordinarily high level of activity gives these women hope and clearly demonstrates the potential of NKTR-102. Another dramatic benefit of using our technology to reduce the Cmax of NKTR-102 is its improved side effect profile. After every three-week dose schedule, the grade three diarrhea was only 14% and grade four diarrhea was 0%. Grade three and four neutropenia rates were only 6% and 3% respectively. These rates are far less than what is typically observed with other topo-1 inhibitors, which can have diarrhea or neutropenia acting nearly all patients. Our rates of alopecia were also low, something very important to women who had been through multiple rounds of prior chemotherapies.

As a result of these data for NKTR-102, we received a highly enthusiastic response from oncologists and patient advocates, and NKTR-102 is quickly emerging as one of the most important drugs under development in ovarian cancer. We are expanding our existing Phase II study by 50 patients who have failed prior doxil, which gives us the option to pursue a potential accelerated approval for NKTR-102. The enrollment of this expansion arm is proceeding, and has received a high level of investigator enthusiasm.

NDA approval by the FDA prior to completion of Phase III is rarely granted; however, we think it is important to leave this option open as Nektar is committed to getting NKTR-102 to the patients who need it most, as quickly as possible. In order to continue to move this program along as rapidly as possible, we are planning Phase III trials for NKTR-102, concurrent with partnership activities for this compound. Phase III studies are required, regardless of whether we pursue a regular or an accelerated approved pathway with the FDA.

Let's spend a few minutes on NKTR-102 in breast and colorectal cancer. Our study of NKTR-102 in metastatic breast cancer enrolled 70 women. Approximately 85% of these women had prior anthracycline taxane therapies with or without capecitabine. Patients that have undergone AT or ATC regimens may respond to their next regimen initially, but their tumors tend to rapidly develop resistance. So new agents with different mechanisms of action are desperately needed in breast cancer. If we are successful, NKTR-102 could be the first topoisomerase-1 inhibitor approved in metastatic breast cancer.

In June, we released preliminary data from 66 patients in the study, showing confirmed and unconfirmed responses of 18% for the Q-14 day dose regimen and 24% for the Q-21 day dose regimen. In addition to most patients having received prior AT therapies, 29% of the women in our trial had triple negative breast cancer, a group with a particularly poor prognosis. A number of patients are still on treatment in our study. Because of NKTR-102's preliminary high response rates as a single agent, it has great promise as a monotherapy and its manageable safety profile indicates its potential to be used as a combination treatment as well, in the breast cancer setting. We have submitted the data in breast cancer to a major medical meeting that will held later this year.

In the colorectal cancer setting, our Phase II clinical trial is also ongoing. This randomized 174 patient study evaluates NKTR-102 against irinotecan in second-line colorectal patients whose tumors have the K-RAS gene mutation. We anticipate reporting preliminary data from some of these patients in this study around the end of 2010. At the recent ESMO Congress on GI Cancers in Barcelona, Spain, we reported highly promising non-clinical data that demonstrated significant better anti-tumor activity with NKTR-102 in combination with 5-FU, as compared to irinotecan in 5-FU alone, or in combination. These data led to the Phase I study of NKTR-102 in combination with 5-FU leucovorin, and we recently treated the first group of patients in this study. Our principal advisor for the study is Dr. Neal Meropol at Case Western and we expect to announce data around the end of this year as well.

Both the Phase II study of single-agent NKTR-102 in K-RAS patients and the Phase I study of NKTR-102 in combination with 5-FU are designed to support our ultimate goal of replacing irinotecan wherever it is used in colorectal cancer. As I said earlier, our technology platform is uniquely positioned to generate new chemical entities with full composition of matter patent protection. In June, we received a composition of matter patent for NKTR-102 that extends to 2026. We also received a composition of matter patent covering NKTR-118 that extends to 2022. As a result of the compelling data for NKTR-102, and its potential in multiple tumor settings, we have a significant level of interest from major pharmaceutical companies. We expect to enter into a partnership by the end of this year, and as we've said in the past, we are exploring various structures with this transaction that will maximize the value for our shareholders.

Moving on to our next exciting oncology compound in Phase I development, NKTR-105. NKTR-105 combines our polymer conjugate technology with docetaxel, a potent anticancer agent, approved for use in many solid tumor cancers. Docetaxel currently sells over $2 billion annually. Preliminary PK data from our Phase I study demonstrates that we have, in fact, achieved our target PK profile with NKTR-105 in humans. The PK data demonstrates a markedly reduced Cmax and a significantly prolonged half-life of approximately 20 days, allowing us to provide continuous exposure of drug to tumor in a typical three-week cycle, just as we did with NKTR-102. Enrollment in the study continues to go well, and we observed no neutropenia with NKTR-105, which is the dose limiting toxicity of docetaxel. We anticipate reporting data from the trial by the end of this year.

I'm very excited about the prospects for both NKTR-102 and NKTR-105, and the implications for applying our advanced polymer conjugate technology to other chemotherapeutic agents. We are also actively working on our next candidates in this area. This includes NKTR-107, which is a planned IND filing in 2011. As I said earlier, chemotherapies represent an area of high potential reward, and Nektar has a large opportunity in front of us to make a major impact on cancer care in this area.

Now I want to tell you about the next set of important developments for Nektar, in the area of pain. Pain therapies are among the fastest-growing categories of pharmaceuticals, with an estimated $21 billion in global sales alone. Nektar's pain candidates leverage the discovery made by our scientists that our technology can be used to control the entry of oral small molecule drugs into the brain. This technology breakthrough led first to the development of NKTR-118. As you recall, NKTR-118 is Nektar's first oral compound, which is being developed for opioid-induced constipation.

Last year, we signed a collaboration with AstraZeneca for NKTR-118 and NKTR-119. The collaboration includes worldwide rights to both programs, and Nektar will receive up to $1.5 billion in up-front and milestone payments as well as significant double digit royalties on product sales. The planned technology transfer to AstraZeneca for NKTR-118 by year end is on track, as we previously told you on prior conference calls. AstraZeneca is currently preparing for the Phase III trials, which should start in early 2011, shortly after this technology transfer is complete.

The development of NKTR-118 led us to three new and highly compelling programs in pain; NKTR-181, NKTR-171, and NKTR-194. Today I'd like to spend a few minutes focusing on NKTR-181, our next IND filing for this year. We are particularly excited about this program, because of its potential to capture a large and growing opioid market. Opioids are potent painkillers, and are widely used in pain management; however, their misuse has been a key area of focus for the FDA over the past decade.

Long acting opioids in particular have posed significant problems to physicians and the FDA. As a result, the Agency has been very vocal about the widespread and serious public health crisis in the us caused by these prescription opioids. The FDA has been particularly critical of the inadequacy of the pharmaceutical industry's current strategies to address the dangers of opioids and have even threatened to pull these products from the market. According to recent panel discussions on opioid therapies, in the FDA's opinion, the most common and serious adverse events that need to be addressed are respiratory depression, CNS depression, addiction, abuse and death.

That is why we are particularly excited about NKTR-181. Nektar's technology uniquely positions NKTR-181 to potentially address every concern raised by the FDA about long-acting opioid therapies. Let me explain to you how NKTR-181 works. NKTR-181 is a new opioid chemical structure that attaches a small molecular-weight polymer in a stable conjugate bond to a potent, highly effective opioid scaffold.

Because of the unique chemical structure of NKTR-181, the drug has a very slow rate of entry into the brain. The euphoric effect of traditional opioids, such as morphine and oxycodone, is caused by a rush of these drugs into the brain immediately after dosing. So by reducing the rate of entry of NKTR-181 into the CNS, we can greatly reduce the euphoria and other problems associated with traditional opioids right at their source and mitigate the physiological basis for addictive behavior. If NKTR-181 is successful, it would represent the first time a new opioid pain reliever specifically addresses the full spectrum of issues raised by the FDA with prescription opioids.

We've tested NKTR-181 for its abuse potential, using several gold standard pre-clinical abuse liability models, with excellent results. But the significance of NKTR-181 goes beyond its considerable potential to address addiction and abuse. Opioids can be highly dangerous, as noted by the FDA, and there is a risk of patients dying in their sleep due to drug-induced respiratory depression. But also, as everyone knows, who has had to take an opioid painkiller, a very significant and unwanted side effect in these drugs is sedation. By slowing the rate of uptake and lowering the overall opiate concentrate in the brain, we've designed NKTR-181 to have the potential for less respiratory depression and sedation. In pre-clinical models, we observed no sedation or CNS side effects with NKTR-181 at equal analgesic doses to oxycodone, morphine, and hydrocodone. In fact, even at five times the lethal dose of oxycodone, NKTR-181 did not cause death from respiratory depression.

It is important to point out that the opioid is covalently bound to the polymer in NKTR-181, therefore, the safety advantages of NKTR-181 are inherent to the molecule. Because of this, NKTR-181 is not convertible to a rapid-acting abusable form by any known means. As a result, we believe it is one of the most comprehensive and innovative opioid compounds in development.

The pre-clinical data set for NKTR-181 were recently accepted for presentation at two prestigious upcoming conferences in 2010, the Annual Meeting of the American Society of Anesthesiologists in October, and the Society For Neuroscience Annual Meeting in November. We hook forward to sharing the science behind NKTR-181 at these conferences. If NKTR-181 is able to provide potent pain relief while avoiding respiratory depression, sedation and the euphoria that leads to abuse, we believe that it could absolutely become the opioid of choice for physicians and patients in a $10 billion US market.

Just a quick update on Amikacin Inhale, our partner buyer is continuing to prepare for Phase III studies of Amikacin Inhale, and the process of manufacturing devices for these trials is ongoing. Both companies are committed to moving this program forward.

In closing, Nektar's demonstrated ability to leverage our advanced polymer conjugate technology to create novel, high-value compounds makes our company unique in our industry. We have an impressive platform technology that could rapidly generate novel drugs, combined with talented and driven research and development teams committed to discovering and developing innovative and important new therapies. I continue to be exceptionally proud of Nektar's achievements, and am very excited about our future. With that, I'll turn the call over to John for a review of our second financials. John?

Thank you, Howard, and good afternoon, everyone. We ended the second quarter with $338.2 million in cash. Revenue in the second quarter increased to $42.6 million, as compared to $13 million in the second of 2009. This increase was primarily related to the amortization of the up-front payment from AstraZeneca for NKTR-118, which will be fully amortized following technology transfers to AstraZeneca by the end of this year.

Research and development expense increased to $25.6 million in the second of 2010 as compared to $24 million for the second quarter in 2009. G&A expenses were $10.2 million in the second quarter of 2010 compared to $9.1 million in the second of 2009. Total operating costs and expenses in the second quarter of 2010 declined by 6% to $40.7 million, compared to $43.5 million in the second of 2009.

Our financial guidance for 2010 remains unchanged. Revenue for 2010 is expected to be between $155 million and $165 million. As I mentioned, this revenue pro jokes includes the amortization of approximately $100 million from the upfront payment of $125 million, received from AstraZeneca in 2009. R&D expense for 2010 is expected to be between $110 million and $115 million, an increase over the $95 million spent in 2009. These development expenses for 2010 include a continuing investment into our Phase I clinical study of NKTR-105 and Phase I and Phase II studies of NKTR-102 in ovarian, breast and colorectal cancers.

In addition, these expenses include the expansion of the Phase II trial for NKTR-102 in ovarian cancer and the manufacture of NKTR-102 Phase III clinical supplies. Our research expenses also includes pre-clinical studies for a new pain and oncology compound, as well as the activities necessary to bring NKTR-181 to an IND filing later this year. G&A expense for 2010 is still anticipated to be approximately $41 million, essentially consistent with 2009 levels. Included in this amount is approximately $12.1 million of non-cash items consisting mainly of depreciation and stock compensation expense.

Capital expenditures for ongoing operations is still expected to be $10 million for 2010. Also expected tenant improvements, which are projected to be about $25 million, are proceeding on budget and according to schedule for Nektar's new mission-based Research and Development Center in San Francisco. As I previously said, we anticipate moving into the facility by the end of this year. As a reminder, under the terms of the lease, we will not pay any rent for this facility until August 2014.

Our year end cash guidance remains unchanged. We expect to end this year with $265 million to $275 million in cash and investments. Importantly, this anticipated year-end cash balance does not include any potential payments related to a NKTR-102 partnership. With that, I will now open the call to questions. Operator?

(Operator Instructions). Your first question comes from the line of Burt Hazlett, BMO Capital. Please proceed.

Hi, thanks. It's Jim Tumbrink here with Burt. Thanks for taking the question. Howard, I know you said enrollment in the extension study for ovarian cancer is going well. Just wondering if you can put any numbers behind that? Secondly, on a partnership, now that you're focusing on the potential filing, assuming that study goes well, have you changed your thinking around the terms or how much you might like to retain for yourself of that compound.

Let me answer the second half of the question first and then turn it over to Lorianne for a little description of the program. I think, look, it hasn't changed our thinking on partnering the program; but of course, the partnering structure could many, many different avenues and approaches. I think what we're looking to do is come up with the most logical structure for a relationship that, as I have said, gives our shareholders the best value, and I think there's many, many different ways to do that. But clearly we're very excited for the program and we're very excited to potentially have a drug that could be on the market as early as 2012. Lorianne, do you want to discuss the program a little more?

Sure. Thanks. With regard to the expansion of the Phase II study, we, as mentioned, are planning to enroll an additional 50 patients, some of whom have already been enrolled. Based on the high degree of enthusiasm that the investigators have for putting patients into the study, as many as they possibly can, we anticipate that the enrollment of this extension portion will go at least as quickly, if not more quickly, than who we saw with the main study.

And let me add one other point to what I said earlier. Clearly, the strategy of Nektar for partnering programs is not to outlicense them. It's to retain a significant economic ownership in these drugs. If you look at NKTR-118 and NKTR-119, if you look at the royalty structure or approximate the royalty structure, Nektar still owns about a third of that program, and I think whatever we do with NKTR-102, given its enormous potential, and given the type of breakthrough it is in treating refractory ovarian cancer, clearly whatever structure we come up with in a partnership, Nektar will retain a significant ownership of that drug in some fashion.

Your next question comes from the line of John Sonnier of William Blair. Please proceed.

Thanks for taking the question, and congrats on a lot of progress over there. Howard, I appreciate the update on this 50-patient extension study with 102. I think what would be helpful is, talk a little bit about, maybe, Lorianne, what the doxil NDA package hooked like back in 2002, and compare that to 102. So you finished the extension study. What will that body of data look like, how many patients, and how does that compare to what doxil got approved on? Thanks.

So I think as we've mentioned previously, the expansion of the Phase II study will include not only these patients that are extremely resistant, in fact, in many cases, refractory to platinum-based therapy, these are also patients who have failed prior doxil. So fundamentally, these are patients that really no longer have doxil as an option, so this is a very different approach, as compared to the original doxil approval as well as the follow-on submission that they made. So these are patients that really have no good available therapy. So I suppose, in a way that's very similar to when doxil was first being approved. They certainly did receive and accelerated approval. I can't comment or speculate as to whether or not that will positively or negatively influence our chances with our NDA package, but I think we've given you a pretty good sense of what the patients are going to look like when that submission comes together.

I guess more than the clinical response, I'm trying to get a sense of what the respective data packages look like from the standpoint of patient numbers, the number of trials, et cetera, because that's the pushback I get sometimes, is that you won't have enough data on the extension study to file.

Well, clearly we think that we can enroll the 50 patients that we currently have planned very quickly. If it seems to be our best interest to modify that slightly, we certainly can. But at least in our opinion, the package that we are currently planning is adequate for our intended purpose.

Okay. Thank you.

Your next question comes from the line of Ian Sanderson of Cowen and Company. Please proceed.

Good afternoon. Thanks for taking the question. Just a follow-up on that same line of questioning, will the expansion programs for NKTR-102 yield any survival data, or are you planning to try to go forward here with PFS results?

The NKTR-102 Phase II study, just to remind you, is a non-comparative study. So in that setting, objective response rate is really the most appropriate measure of antitumor activity. We, of course, are collecting data related to progression, which enables us to calculate a progression free survival at the end of the study. And of course, we're collecting mortality data in order to give us an estimate of overall survival. But in this type of trial design, the most reliable measure of anticancer activity is the objective response rate. All of the other secondary end points will, of course, be included in any submission going forward.

Okay. And could you update us on the status of PEG [Advy]?

Could you repeat the question? I didn't quite get it.

This was for Baxter's. PEGylated Advy. Is that still in development?

I'm going to ask Steve Doberstein to comment.

Yes. Our collaboration with Baxter is ongoing. We've had some nice pre-clinical results. I don't think that we've actually given a formal update to the outside world, but that work continues. We have a really strong collaboration with Baxter across a couple of different molecules. So I think you'll be hearing more about that in the coming months.

Is anything in the clinic at this point, or is it still pre-clinical formulation?

Not yet. It's not actually formulation work going on, but there is advanced pre-clinical development going on for one of the candidates right now.

Okay. Thank you very much.

(Operator Instructions). Your next question comes from the line of Pamela Bassett of Cantor Fitzgerald. Please proceed.

Hi, everybody. Will you talk about how you might proceed with 181 from a clinical development standpoint? I'm assuming that this could move forward rather quickly.

As I said, we plan to have and IND filed this year for NKTR-181, and I think what we're looking to measure is quite easy to understand. If we have less sedation, if we have less respiratory depression, if it is not as addictive, we certainly know that the molecule is inherently tamper-proof in that the molecule is covalently bound to the opioid. It is inherently a tamper proof molecule, that can't readily be diverted. And there is of course a great need for this. So my guess is it could move forward very, very rapidly. It really does address every major issue the FDA has with opioids. Let me ask Lorianne to comment a little more on the clinical point.

Yes. You raise a really excellent point with regard to the development plan of NKTR-181. Pain therapeutics have a couple of very big advantages, one of which is that much of the work can actually be done in healthy volunteers. So these studies can be done very efficiently with very clear results; and because secondly, our target product profile for this so clear, and its very obvious what it is that we need to achieve to have a highly valuable product, again, this is going to lead to potentially a very efficient program going forward in development. So you might see very rapid development of this program going forward. You're absolutely right.

And what's also very important to note is that at least in the development of opioid painkillers, the pre-clinical models are very, very well established, and there's a very, very high correlation of results in the pre-clinical models to humans. So we're seeing excellent, excellent results in these pre-clinical models, and that should transfer directly, hopefully, to success in our clinical programs. So we're very, very excited about this. It may very well be an opioid that dramatically changes how pain is treated in the US.

Howard, could that compound move into position number three from a partnering standpoint?

Well, I think it's too soon to partner that compound.

But, say, next year after you've had some Phase I results, will you be able to correlate the animal models?

Well, look, I think this. I think, for me, partnering these programs is really an economic decision, relative to the value they can bring to Nektar and its shareholders. If the value is recognized and appropriate at the end of Phase I, then I'm certainly willing to talk to companies. If the value has to be demonstrated by Phase II, that works for me as well. I think overall, it's pretty easy to understand the potential for a drug like NKTR-181.

Look, if NKTR-181 works, there are $10 billion worth of opioid sales that are at great risk. The FDA already has a huge problem with those drugs and is looking for a solution, if this works. If this is a solution. And so it looks great in the pre-clinical models. Until we put it into humans, of course, we don't have that answer. If this works, and I take your point. It's a good point. If the Phase I studies, as Lorianne defined, validate what we saw in the pre-clinical models, which we know are well correlated, then this drug does have enormous potential, and let's see how that involves.

Great. Thanks.

There are no further questions at this time. I would like to turn the call over to Howard Robin for closing remarks.

Well, thank you, everybody for participating in today's call, and of course, I want to thank our employees for their dedication and very, very hard work. I believe we are building an extraordinary company, and we are absolutely committed to continuing to create significant value for our shareholders. That's what we do. So stay tuned and good afternoon. Thank you very much.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.