Nektar Therapeutics (NKTR) 2012 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Nektar Therapeutics first-quarter 2012 financial results conference call. My name is Jeremy, and I will be your operator for today. At this time all participants are in listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions).

I would now like to turn the conference over to your host for today, Ms. Jennifer Ruddock, Vice President of Investor Relations. Please proceed.

Thank you, Jeremy. Good afternoon, everyone, and thank you for joining us. With us today are Howard Robin, our President and CEO; John Nicholson, our Chief Financial Officer; Dr. Robert Medve, our Chief Medical Officer; and Dr. Steve Doberstein, our Chief Scientific Officer.

On the call today we expect to make forward-looking statements regarding our business, including but not limited to clinical development plans; the timing of future clinical results and regulatory filings; the economic potential of our collaboration partnerships, including potential milestone payments and royalties; the therapeutic and market potential of our drug candidates, and those of our partners; our financial guidance for 2012; and certain other statements regarding the future of our business.

Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes that are difficult to predict, and many of which are outside of our control. Important risks and uncertainties are set forth in our annual report on Form 10-K, filed with the SEC on February 29, 2012, and a Form 8-K filed today, each of which are available at sec.gov. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future developments, or otherwise.

A webcast of this call will be available for replay on the Investor Relations page at Nektar's website at nektar.com. With that, I would like to hand the call over to Howard Robin. Howard?

Thank you, Jennifer. Thanks to everyone for joining us this afternoon. Today I'll focus on the significant progress we made in the first quarter with our partner programs in our proprietary pipeline. Following that, John will provide a quick review of financials.

Nektar had a lot of momentum in the first quarter of 2012. We strengthened our balance sheet with a royalty sale that raised $124 million; we advanced our two lead clinical pain candidates, NKTR-181 for chronic pain and NKTR-192 for acute pain. And finally, the FDA approved the eighth product enabled by Nektar technology, Affymax's OMONTYS.

By the end of 2012 we anticipate 4 late-stage Nektar drug candidates will either be in or poised to enter phase 3 clinical trials. Three of these programs, Naloxegol and opioid-induced constipation; BAX-855 in hemophilia; and Amikacin Inhale in pneumonia are being developed and funded by our strategic pharmaceutical partners, with the potential for significant partnership economics to Nektar.

The fourth Phase III program, NKTR-102 in metastatic breast cancer, is proprietary to Nektar. And as I just mentioned, Nektar is also rapidly advancing two new proprietary opioid molecules through the clinic. I'll talk more about the progress made in Q1 with these new opioid candidates in a moment.

First, an update on Naloxegol with AstraZeneca. As you know, we are excited about the scope of AstraZeneca's global Phase III program for Naloxegol, which is under investigation for the treatment of opioid-induced constipation. The two pivotal registration studies will each include an estimated 630 patients with non-cancer pain and opioid-induced constipation and will evaluate the safety and efficacy of Naloxegol in chronic pain patients.

The primary endpoint for both studies is based on a 12-week treatment period. In addition, there is a 52-week open label safety study, which includes over 1100 patients. These 3 studies complete the registration package for Naloxegol.

As a reminder, the 52-week safety study for Naloxegol completed enrollment in November of 2011, and last week the first of the two 630-patient pivotal studies completed enrollment as well. Both pivotal studies and the safety study are continuing on track for a mid-year 2013 filings in both the US and the EU.

Upon acceptance of these filings, Nektar is entitled to $95 million of our $235 million in filing and launch milestones under the agreement with AstraZeneca. The remaining $140 million are due when Naloxegol is approved and launched in the US and EU. AstraZeneca is responsible for all costs of development and commercialization of Naloxegol.

There are more than 100 million patients taking prescription opioids for chronic pain worldwide, and about 50% of these patients taking opioids for chronic pain experience constipation. So we are very excited about the potential of Naloxegol to address this significant need.

In addition to the $235 million in filing and launch milestones under the agreement with AstraZeneca, Nektar is also entitled to significant, escalating double-digit royalties on product sales of Naloxegol, with up to $375 million in additional sales milestones at certain commercial sales levels.

Now let's talk about NKTR-102, Nektar's targeted Topoisomerase I Inhibitor. NKTR-102 recently received its use end name, etirinotecan pegol. The promising cancer treatment is being developed as a single agent in multiple tumor settings.

Enrollment for the BEACON Phase III study of a single-agent NKTR-102 in metastatic breast cancer is proceeding nicely and on track for completion by the end of 2013. BEACON is an open-label, randomized head-to-head trial which will in role approximately 840 patients comparing single-agent NKTR-102 to an agent of physician's choice, with a primary endpoint of overall survival. The FDA and the EMA have agreed with our proposed study design, our primary endpoint of overall survival, and our comparator arm. We have initiated over 60 sites in the US and enrollment is ahead of schedule.

In Q1 we receive the necessary approvals of our ex-US sites, and we have begun initiating sites in Europe. We are planning up to 160 sites worldwide.

As the first and only topo I inhibitor being developed in breast cancer NKTR-102 offers a different mechanism of action than microtubule inhibitors, the most commonly used drugs to treat these patients. These agents can exhibit cross-resistance with each other and have overlapping side effects. We believe NKTR-102 could provide physicians and patients with a new therapeutic option in the fight against breast cancer. If the BEACON study is successful, NKTR-102 will have the opportunity to become a worldwide standard of care in advanced breast cancer.

In platinum-resistant ovarian cancer, we have now treated over 170 women with NKTR-102 and our Phase II study and expansion. As of the end of April, there were approximately 17 patients still on study drug. As we mentioned at our most recent R&D Day, over the next several months we will collect final data from this study, including response rate, progression-free survival, and safety. Following a review and analysis of the data from the complete Phase II trial in ovarian cancer, we plan to meet with the FDA and EMA to discuss or regulatory options and possible next steps for the development of NKTR-102 in ovarian cancer.

Moving on to Amikacin Inhale, partnered with Bayer, Amikacin Inhale could be the first product to treat serious pulmonary infections by delivering antibiotic directly into the lungs and is being developed for use in the ICU setting. Nektar and Bayer are continuing preparation device production and stability studies for the start of Phase III.

Bayer is now beginning the process of engaging a CRO for these Phase III studies. The timing of Phase III start will be finalized once the CRO is in place. The Phase III program for Amikacin Inhale would be conducted under an SPA and will enroll approximately 1200 patients, with a primary endpoint of clinical test of cure.

Amikacin Inhale has considerable potential economic value for Nektar. Nektar will receive a flat 30% royalty in the United States and an average ex-US royalty of approximately 20% on all product sales.

Another important program I want to discuss is BAX 855, which is partnered with Baxter. BAX 855 is currently in a Phase I/II clinical study in hemophilia patients, which is expected to be completed this year. Baxter plans to initiate Phase III with BAX 855 by the end of 2012. BAX 855 uses Nektar's proprietary PEGylation technology to create a long-acting factor VIII molecule to treat Hemophilia A, a PEGylated ADVATE.

We are very excited about the potential for this new important biologic candidate. In preclinical studies BAX 855 achieved a profile that supports its potential to be dosed less frequently than ADVATE. Baxter is a world leader in the treatment of hemophilia, and ADVATE has sales of over $2 billion annually. Analysts estimate a market potential of between $3 billion and $4 billion for long-acting factor VIII products.

We are very pleased to be partnered with Baxter on this innovative, new long-acting ADVATE. Under our agreement, Nektar will receive significant royalties on net sales of BAX 855 upon commercialization.

Now I'd like to talk about the progress we made in Q1 with our two new opioid analgesic programs -- NKTR-181 for chronic pain and NKTR-192 for acute pain. Both programs capitalize on the ability of our technology to modulate the entry of small molecules into the CNS. These new, highly compelling pain drugs put Nektar at the forefront of solving an increasingly important and serious issue that the FDA has focused on -- the abuse and diversion of opioids.

Our approach is completely different that approaches which have been tried before, such as formulations or pro-drugs. NKTR-181 and NKTR-192 are to two entirely novel opioid molecules, each with their own distinct pharmacological profile, and each representing a sizable market opportunity for Nektar.

NKTR-181 is a novel opioid molecular structure that has been specifically engineered to have a number of important properties inherent to the molecule. First, it has been designed to enter the CNS slowly to avoid the dopamine rush of traditional opioids, which is associated with euphoria and can lead to abuse, addiction, and mis-use. The slower rate of entry should also reduce other serious CNS-mediated side effects seen with traditional opioids, such as sedation and respiratory depression.

Second, NKTR-181 is a long-acting profile, also inherent to its structure, which will allow it to provide consistent analgesia for chronic pain conditions. Because NKTR-181's benefits are inherent to its chemical structure and not a result of a physical barrier or formulation, it is a molecule, and can't be crushed, melted, or otherwise manipulated to release rapid-acting opioid. This is an important property of NKTR-181 that can help address the issue of diversion.

In Q1 we made great progress preparing NKTR-181 for Phase II development. We completed all of the Phase I development work, including validation of tablets for the Phase II study. We also finalized the Phase II study design and are currently recruiting clinical sites to allow us to start this study in July of this year.

The Phase II study will be a placebo-controlled trial of NKTR-181 in chronic pain patients. The study will evaluate the efficacy and safety of NKTR-181 in approximately 200 patients with osteoarthritis of the knee using a randomized withdrawal design. This design is a standard study design for the development of opioid compounds, and it features two stages.

In the first stage, patients are titrated to an effective twice-daily dose of NKTR-181. In the second phase, these patients will be randomized to receive either NKTR-181 or a placebo. The Phase II study will enable us to establish analgesic doses for NKTR-181 in chronic pain patients.

Importantly, we will also be assessing multiple secondary endpoints in the trial in order to establish a differentiated profile for NKTR-181. These endpoints will include analysis of CNS-mediated side effects typically seen with standard opioid therapies. We expect this study to complete in the first half of 2013. We will also be conducting a cumulative use liability study, which will compare the likability of NKTR-181 to commonly abused opioids in approximately 25 recreational drug users.

In the first quarter we also initiated our first clinical study of NKTR-192. This novel mu-opioid analgesic molecule has a completely distinct profile from NKTR-181. It is designed to have a short-acting profile and a relatively fast onset of analgesic action in order to treat more acute pain conditions. And similar to NKTR-181, NKTR-192 one is engineered to enter the CNS at a much slower rate than standard opioids, in order to reduce the associated abuse liability and central nervous system side effects that are typical of the class.

In Q1 we began annoying healthy subjects into the first single ascending dose Phase I study of NKTR-192, which is designed to characterize its pharmacokinetic profile in humans. This study should complete shortly. Following this first study we plan to conduct a second Phase I study, which will evaluate multiple ascending doses and look at both pharmacokinetic and pharmacodynamics for NKTR-192.

With NKTR-181 and NKTR-192 we are now positioned to address two very significant segments of the pain market -- chronic and acute pain, and we are excited about their advancement in the pipeline.

One of the most remarkable things about Nektar's advanced polymer conjugate technology platform is its flexibility to create new small molecules, such as NKTR-181 and NKTR-192, as well as new biologics, like OMONTYS, BAX 855, and NKTR-214. Further, the mechanism of action of the resulting new molecular entity is generally well understood, since these are known targets. This helps to reduce the development risk and increase the probability of success, while still allowing us to address significant unmet needs.

With the recent approval of Affymax's OMONTYS, Nektar's proprietary technology platform has now successfully created 8 approved therapeutics. OMONTYS is the first example of an engineered small peptide enabled by polymer conjugation, a class of molecule that has been difficult to develop due to their short circulating half-lives.

We continue to invent new ways of capitalizing on our platform, and our new advances in polymer conjugate technology have enabled new small molecules and biologic candidates that Nektar and our partners are advancing in the clinic today.

There are very few technologies in the pharmaceutical industry that have evolved to successfully produce such a diverse pipeline. We are using polymer conjugation in ways now that we could not have conceived of even a few years ago. I am exceptionally proud of the scientists at Nektar that are continually seeking new discoveries with our platform.

At our recent R&D Day in New York, we discussed several preclinical candidates from our research pipeline that showcase how far Nektar's technology has progressed in recent years. Among these is NKTR-214, a new engineered immunostimulatory cytokine for cancer.

NKTR-214 is designed to selectively target tumor tissue and activate the potent IL-2 signaling pathway through beneficial IL-2 receptors on natural killer cells, which attack tumor cells. At the same time, it's designed to reduce the activation of the alternate IL-2 receptors on regulatory T-cells, which dampen the anti-tumor response. Equally important, it reduces the activation of the alternate IL-2 receptors present on pulmonary endothelial cells, which cause severe vascular side effects and have limited traditional anti-tumor cytokine therapy.

This is the first time that polymer conjugation technology is being used to tune the receptor selectivity of a therapeutic, and we are excited about this unique capability. The ability to alter the receptor's selectivity of both protein and small molecule drug candidates allows us to explore new applications of drugs that have multiple targets where receptor selectivity is a key mediator of their actions.

Another product candidate in preclinical development also capitalized on additional core strengths of our polymer conjugate platform. NKTR-171 leverages our ability to restrict entry of molecules into the CNS by creating an orally peripherally restricted sodium channel blocker to treat neuropathic pain conditions without CNS side effects.

NKTR-125 leverages the same approach to create an oral peripherally restricted anti-histamine molecule that doesn't cause sedation at highly potent therapeutic doses. And NKTR-228 capitalizes on the ability of our technology to increase solubility and extend half-life. This new drug candidate could allow IV dosing of long-acting calcimimetics at the time of dialysis, providing a better treatment option for renal patients than the current standard of care.

These late-stage preclinical programs capitalize on different aspects of our technology platform, demonstrating the breadth and depth of opportunities available to us. As we advance these molecules and others through preclinical development this year, we expect to identify our next IND candidate by the end of 2012. It continues to be our objective to advance at least one new drug candidate each year into clinical development.

With that, I'll now turn the call over to John. John?

Thank you, Howard, and good afternoon, everyone. I will start with reiterating our financial guidance for 2012, which remains unchanged from our 2011 year-end call.

For 2012 we expect our cash used in operations, including capital expenditures, to be between $130 million and $140 million. Revenue for 2012 is expected to be between $75 million and $85 million. Our R&D expense guidance is still between $152 million and $157 million, with approximately $19 million of this as non-cash expenses, such as stock-based compensation and depreciation.

2012 G&A is still anticipated to be between $44 million to $46 million. Included in our 2012 G&A expense are $11 million of non-cash items, such as amortized free rent on our San Francisco facility, stock-based compensation expense, and depreciation.

Total revenue in Q1 2012 plus $17.9 million versus $11.3 million in the first quarter of 2011. The revenue increased in Q1 compared to the same quarter of last year as a result of higher product shipments through our collaboration partners.

Total uprooting costs and expenses in the first-quarter 2012 were $55.9 million versus $45.2 million in the same quarter a year ago. The increase was primarily driven by higher cost of goods sold and higher research and development expenses. The increase in cost of goods sold of $5.4 million in Q1 2012 compared to the same quarter of 2011 is attributable to the increase in product sales.

For Q1 2012, our research and development expenses were $35.1 million, an increase of approximately $5 million as compared to $30.2 million in Q1 2011. R&D expense for the quarter included expenses related to our NKTR-102 BEACON Phase III trial; the production of Phase III devices for Amikacin Inhale; the Phase I tablet study for NKTR-181; and the initiation of Phase I clinical study of NKTR-192. Research and development expenses included $4.2 million of non-cash stock-based compensation and depreciation expense.

For the first quarter of 2012, G&A expenses decreased to $10.4 million as compared to $11.7 million in the first quarter of 2011. In the first quarter of 2012, $2.5 million of G&A expenses were non-cash. Cash, cash equivalents, and short-term investments at March 31, 2012, were $498.8 million as compared to $414.9 million at December 31, 2011.

In February 2012 we received $124 million in proceeds related to the sale of future Cimzia and Mircera royalties. In relation to this transaction, you may notice on our balance sheet a new line item entitled liability related to the sale of future royalties.

Based on GAAP reporting requirements, we have to account for this transaction with a number of non-cash items, which include this new line item. We will amortize this non-cash liability over the estimated life of the royalty term, which will result in non-cash royalty revenue and non-cash interest expense passing through our income statement.

With that, I will now open the call to questions. Operator?

(Operator Instructions). Jonathan Aschoff, Brean Murray.

Thank you. Howard, I was wondering, which preclinical candidate do you think you might be able to give us a little help on to be your next IND? It seems to me that inhibiting or slowing central access is something you guys have down really well, so 171 sounds like a great one to me.

Well, look -- hi, Jonathan. It's a good question. NKTR-171 is clearly a very important program in that it becomes a peripheral neuropathic pain drug. I think that's very, very exciting. And we know mechanistically, our polymer conjugation can enable a drug like that. So yes, that is very exciting.

But I'm also very excited about NKTR-214, because I think to produce and immunostimulatory cytokine for cancer that is highly, highly effective in that it activates the IL-2 pathway, and one where you have very, very greatly diminished the negative side effects associated with IL-2 therapy, for me is also a very, very important program.

So I think one of the wonderful things about Nektar is we have a number of great programs, including NKTR-125 and including a number of other things that we talked about at R&D Day. So I'm pretty happy with all of these choices. But you're right, NKTR-171, NKTR-214 -- very important programs that could move quickly.

I was wondering, when might we see the absolute last data from the ovarian Phase II? Is seems more like a IV drip coming out. When might be that last bit that will make up a Phase III GO/NO GO decision?

I'm going to turn that over to Rob to see if he can give you little more insight into that.

Certainly. Hi, Jonathan, it's Rob. We still have patients -- as Howard noted, we still have 17 patients in the study who are on-drug. So the study is very much ongoing, although close to enrollment. We would anticipate the second half of this year we would reach data, and then, as we've said at R&D day and previously, we'll then be taking that data for discussion with FDA and EMA about next steps in development. So we'll make that very much a data-driven decision.

And John, just sat that COGS bump as in years past -- it's just sort of a very inconsistent thing, right?

Yes, Jonathan. As you know, we really don't have a control over when our partners are going to order product from us. The main difference between this year and last year was in the first quarter of last year there were less product sales, and that's the reason for the bump.

Thank you very much.

Matt Lowe, JPMorgan.

It is Matt Lowe, in for Cory Kasimov today. Just for 102, just wondering how long after you receive the final Phase II ovarian data could you potentially meet with the FDA on that program? And given the recent deal between Endocyte and Merck, does this change your plans, or how does that play into your thinking with 102 and ovarian cancer? Thanks.

Yes, thank you. Well, I will let Rob answer the first part of your question, but let me take the second part of your question first.

I don't think the program -- Endocyte's program really concerns us. I think it's potentially a very good drug. I think there hasn't been a useful drug approved for ovarian cancer since, I believe, 1999, when Doxil was approved. So anything for ovarian cancer patients is important.

But these are patients that are going to need multiple treatment options. You're not going to cure the disease at that stage. And these are completely different mechanisms. So I think for the patient's benefit, a drug like Endocyte's drug has great potential for these patients. And NKTR-102 will, as well.

So I don't think they are competing with each other. I think you have a patient population that needs all the different treatment options it can possibly get. With that, I'll turn it over to Rob and give you some insight into timing.

Thank you, Howard. Once we finalize the data, and again, we have lots of patients still on-drug, and even more than that in follow up on the trial, so we need to mature the database to get to those progression-free survival and overall survival numbers.

We'll then, when we have that, request the meeting. And of course, the timing of meetings with the regulatory agencies is out of our control. But as soon as we reach a point where we're able to put together a pre-meeting package that is substantive and unlikely to change, we'll make that request.

Okay, thank you.

Bert Hazlett, ROTH Capital.

Thanks. Thank you for taking these questions. My question is more in general on oncology and the relative emphasis on oncology. It seems as if you had a number of compounds in the pipeline a while back, and you've obviously progressed with 102 and had some erosion. But just thinking about the effort that is required in later-stage clinical studies with oncology, is that an area that Nektar might be thinking is more ripe for partnering as programs advance? Or is it something -- an area where you intend to maybe keep those programs in-house? How do you think about the relative weighting as programs advance through the clinic of the oncology assets, in particular?

Well look, I think that's a very good question. As you can see, Nektar is putting an awful lot of its effort into the pain programs. And if you look at NKTR-181, and 192, and 171, these programs for me are somewhat easier to develop than oncology classes.

That said, I think we're being fairly careful on what we develop in oncology. Nektar has partnering discussions ongoing with lots of programs, with lots of companies. We're always talking to all the major pharmaceutical companies about where a collaboration may make sense for them and for us.

But if you look at what we are doing with NKTR-102, very selectively, in metastatic breast cancer, that's a very, very defined population, and a very, very well-designed study which will answer the question as to the potential for NKTR-102. If you look at the program that we just recently talked about at R&D Day, and I talked about it again today, NKTR-214 -- NKTR-214 is a large molecule. It's the application of our technology back to large molecules, which we know works very, very well. And here we've designed something unique in which we can block receptor binding.

And if we can make a very potent immunostimulatory cytokine that has few side effects, I think -- that has historically, at least, been demonstrated as curative in a number of cancers. I think that's very, very exciting for us. But I think in general, we're going to be very selective on where we work on oncology drugs. I think while NKTR-102 is in the clinic, and we greatly enhanced the pharmacokinetic and pharmacodynamic profile of NKTR-102, I think if you look at something like NKTR-214, that's a completely different application of polymer conjugate technology.

So I think oncology is an important place to be, but we have to do it very, very selectively.

In the pain area it's very different. And there, as I said, we have NKTR-181, which has made great progress and going into Phase II this year. NKTR-192, which is just finishing Phase I, and NKTR-171, which may be -- is on our short list of programs that are moving toward IND stage.

I think if you look at the incredible advancements we've made with these new opioid molecules, let's be realistic -- if these drugs work as we'd like them to, if they meet their target profile, they change the pain market. So we're very excited about those, and I think overall we have a pretty impressive pipeline.

I wouldn't narrow it down to oncology, and I wouldn't start to hypothesize where we might partner or where we may keep it, because everything has a different driver.

I appreciate the color. Thank you.

Steve Byrne, Bank of America.

A couple of questions about the pain drugs, just starting with 181. From the perspective of the prescribers, how do you view the market opportunity for 181? Is it more that its less -- the less diversion? Or do you think the value is in being less addictive?

Well, I think it is -- it is a very good question. It's an excellent question. We went through a lot of time thinking about that before we even started the programs.

I think it encompasses a lot of features. First of all, from a pure diversion point of view, as I said, it's a molecule. It's not a formulation. We have not been able to do anything to free up the opioids without breaking that molecule.

So this is a molecule. And I think this would be the first anti-diversion, if you will, type of molecule or opioid, simply because of its inherent structure. That said, that's an important reason for society to embrace something that can provide patients and the world with a drug that can't be readily diverted.

That said, I think the lack of sedation is very important. And the lack of creating euphoria, which causes patients to be addicted, honest patients who aren't looking to abuse the drug in the first place. And if you talk to pain physicians, one of the things they're greatly worried about -- and this goes to your point about payers and reimbursers -- one of the things that people are very, very worried about, especially physicians who are prescribing opioids for patients who have severe pain, they don't want them to become addicted.

If you can provide a drug that works excellently as an analgesic and doesn't cause euphoria, and therefore your patient is unlikely to become addicted to it, I think that is a major health care benefit. And I think it will also cause physicians to want to prescribe that drug, because right now, they are very nervous about prescribing opioids to patients in pain, because they think they are going to make drug addicts out of them.

But to be able to demonstrate less addiction, is that really more of a theoretical concept, but in reality difficult to demonstrate?

Let me turn that over to Rob for a moment.

It's an interesting question. There's been a lot of news recently around the rate of entry of substances into the brain, and how that relates to the attractiveness of any drug, not just limited to opioids. But if you think about things like cocaine, and heroin, and nicotine, all these drugs that are very attractive as agents of abuse go very quickly into the brain.

That's a fundamental difference that we're looking at with 181 here. You might have heard at R&D Day some of the KOLs talking about the fact that the API or the active agent here is not a known drug, that once it's in the plasma, it's immediately into the brain. This is somehow -- this is a fundamentally different approach to this. So what does that do on the prescribers' side?

Well, this is about managing patients appropriately with a level of comfort for both the patient and the prescriber that this is a better way to treat patients who require an opioid. This is a better and safer way that is going to decrease the ability for patients to not only misuse the drug, but we believe, also, from everything we've seen so far, has a wider therapeutic index. So if that can -- meaning the distance, the separation between an effective analgesic dose and the dose that gets people into trouble with side effects, including things like respiratory depression, is actually wider than we see with other traditional opioids.

So there's a lot going on with this compound. It's a very interesting compound, and we're very excited to be carrying this forward into Phase 2 starting mid-year.

And to your point about how you would measure this, as I said earlier, the Phase I -- the Phase II study for NKTR-181 will clearly look at efficacy as well as a number of secondary endpoints, such as euphoria, such as sedation, et cetera. But we will also be conducting a likability study.

So you will basically be giving this drug to 25 or so recreational drug users and seeing if they like it. And in theory, they shouldn't like it. They shouldn't get high off this drug. They shouldn't like taking NKTR-181. It shouldn't provide them with any euphoria, and that is one of the ways you demonstrate that your drug is not doing that.

We know -- we saw in the Phase I study that out of 40 patients or so, only 1 patient experienced mild euphoria. The rest did not. And we also measured via pupilometry the rate of entry the rate of entry into the CNS, which we determined to be relatively slow. So the unique component of NKTR-181 is that it's not just a slow release into plasma, and then -- because there's a number of ways to get slow release into plasma.

Once it's in plasma, though, it's in the CNS. With NKTR-181, you get slow release into plasma, and then, from plasma across the blood brain barrier, you also have a slowing of the rate because of the structure of the molecule. So it's slow release into plasma; slow release into CNS. That's a very important distinction here.

And that's a segue into my next one -- and that is in the 192, how is it that it is slow entry into CNS, but yet rapid-acting? Is there a mechanism there that you could clarify for us?

Sure; this is Rob again. Again, it's a mu-agonist opioid, and this profile is what we observe in the animals. It's very interesting data with this compound in the animal models. And of course, we're just in the first human studies of this now.

But what we see in animals is onset -- in multiple different animal models, onset of analgesia very quickly, at the first time point we measure, often as early as 5 minutes. But then what we don't see is when we use the animal models that represent the addiction potential or abuse liability of a drug, the animals just don't identify it as an opioid.

So it has a very -- so animals who are trained to recognize an opioid don't recognize 192 as an opioid. Yet it has this rapid onset of analgesic effect. So it's a very interesting profile that we're seeing pre-clinically, and we'll see how this maps to humans. But generally speaking, with no susceptive pain conditions, it tends to map fairly well. So we're, again, very intrigued by what we're seeing. That's the profile we see. Rapid onset, but not identified as an opioid.

Okay, thank you.

At this time, there are no questions queued.

Okay. Well, thank you for joining us on today's call. I think we're very, very pleased with the progress we made in the first quarter. We are highly focused on executing our plans and advancing our programs. I am exceptionally proud of the accomplishment of the entire Nektar team. We appreciate your support as shareholders of the Company, and we look forward to seeing many of you over the next several months at the Deutsche Bank, Bank of America, and Jeffries conferences. So thank you very much and good afternoon.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.