Nektar Therapeutics (NKTR) 2013 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Nektar Therapeutics Q4 2013 financial results conference call.

(Operator Instructions)

As a reminder, this conference call may be recorded. I would now like to turn introduce your host for today's conference, Jennifer Ruddock, Vice President of Investor Relations. Ma'am, you may begin.

Thank you, Sonia. Good afternoon, 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 this call, we expect to make forward-looking statements regarding our business, including but not limited to: clinical development plans; the timing of future clinical results; potential regulatory filings and commercial launch timing; the economic potential of our collaboration partnerships; the therapeutic and market potential of our drug candidates and those of our partners; our financial guidance for 2014, which includes potential milestone payments; 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 quarterly report on Form 10-Q, filed with the SEC, on November 7, 2013. We undertake no obligation to update any forward-looking statements, 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 now like to hand the call over to Howard. Howard?

Thank you, Jennifer. Thanks, everyone, for joining us this afternoon. 2014 will be a very important year for Nektar, with several key milestones ahead of us for the late-stage programs in our pipeline. I would like to spend today focusing on these programs and outlining our key priorities for this coming year. We ended 2013 in a strong cash position, with $262 million in cash and investments, which does not include $117 million in net proceeds from our recent financing. Later in the call, John will provide you with our specific financial guidance for this year.

As you know, Nektar has five highly valuable, late-stage programs spanning multiple therapeutic areas, that are either filed or in Phase 3 clinical testing. Four of which are being developed by our pharmaceutical partners, AstraZeneca, Baxter, and Bayer. The economics of these partnered programs are significant for Nektar, and these programs will provide us with a steady stream of catalysts in 2014 and beyond. As I mentioned earlier, we anticipate several key milestones over the coming year for these late-stage pipeline products.

First, potential approval and commercial launch of Naloxegol for opioid-induced constipation in the US, EU, and Canada, which will trigger milestone payments to Nektar of up to $175 million. Second, we expect both Phase 3 data and the planned BLA filing in the US for BAX 855 in hemophilia A by our partner Baxter. Third, Phase 3 data from the NKTR-102 pivotal study in women with advanced breast cancer is expected by early 2015.

In addition, we are finalizing our plans to start the Phase 3 program for NKTR-181 around the middle of this year. We believe NKTR-181 can be a transformational product, in both the treatment of pain, and in addressing the current health epidemic of opioid abuse and addiction. I would like to start with a brief update on Naloxegol. As you know, AstraZeneca announced on their recent earnings call that the FDA advisory committee meeting to discuss OIC drugs is now being rescheduled.

The panel discussion had been tentatively scheduled for March 10 and 11, with the Anesthetic and Analgesic Drug Products Advisory Committee. We will provide an update on the new dates for the meeting as soon as we have them. AstraZeneca and Nektar are actively working together to prepare for the advisory committee panel discussions on OIC drugs.

As you know, AstraZeneca conducted a comprehensive Phase 3 program for Naloxegol, which included four clinical trials designed to investigate the safety and efficacy of Naloxegol for the treatment of OIC. Two pivotal efficacy studies, KODIAC-04 and KODIAC-05, enrolled a total of more than 1,300 patients. These were both 12-week, multi-center, randomized, double-blind placebo-controlled studies that evaluated 12.5-milligrams and 25-milligram doses of Naloxegol, administered once daily.

The 25-milligram dose of Naloxegol achieved statistical significance. In both studies, for the primary endpoint of responder rate and for all of the key secondary endpoints, including: mean time to first post-dose laxation, mean number of days per week with at least one bowel movement, and importantly, responder rate in patients who had a history of inadequate response to one or more laxatives. AstraZeneca also conducted two safety trials, KODIAC-08 an open-label, controlled, randomized 52-week, long-term safety study of Naloxegol compared to usual care, and KODIAC-07, a 12-week safety extension from one of the efficacy studies.

The most common adverse events observed in the Phase 3 clinical program were abdominal pain, diarrhea, and nausea. This is consistent with what is expected in patients when an opioid-impaired bowel begins functioning again. We observed no differences in mean pain scores and no differences in mean opioid usage with Naloxegol compared to placebo, which demonstrated that Naloxegol was not reversing analgesia for patients in this study.

Notably, no imbalance in serious adverse events, including externally adjudicated major cardiovascular, or MACE events, in the long-term safety study, or in the pooled-efficacy studies was observed. Both AstraZeneca and Nektar are highly confident that the data from the KODIAC Phase 3 program support the safety and efficacy of Naloxegol for the treatment of opioid-induced constipation.

OIC is the most common side effect caused by chronic administration up prescription opioid pain medicines. It is estimated that there are about 69 million patients, in the major markets, being prescribed opioids for chronic pain. At least half of these patients develop OIC, and up to 50% of those patients do not get relief from laxatives. There are no approved oral therapies that directly target the underlying receptor-mediated mechanism of OIC.

If approved, Naloxegol could be the first oral, once-daily medicine to address this significant unmet need. The NDA, MAA, and NDS filings for Naloxegol were accepted for filing in the US, EU, and Canada, respectively. The PDUFA date for Naloxegol is September 16 of this year. As you know, we are entitled to substantial milestones upon approval and launch of Naloxegol.

Currently, AstraZeneca is preparing to launch Naloxegol in Q1 of 2015. We will receive $35 million in 2014 if no significant pre-approval cardiovascular safety study is required in the US. Then, in early 2015, we will receive $100 million upon commercial launch in the US, and $40 million upon commercial launch in Europe. We will also receive significant escalating, double-digit royalties on global sales of the products and several sales milestones of up to $375 million in addition to the royalties.

One reason that we are so excited about Naloxegol is that it could be the first oral, small-molecule drug approved that uses our proprietary polymer conjugate technology platform. Naloxegol is also the first drug using our technology that specifically targets receptors in the periphery by restricting the drug from the CNS.

Now, moving on to another key partnered program, BAX 855, which is our next drug candidate planned for BLA filing later this year. BAX 855 is an extended half-life, recombinant Factor VIII therapy for hemophilia A, which was designed using the full-length ADVATE molecule and Nektar's proprietary PEGylation technology. The Phase 3 PROLONG-ATE study completed enrollment in November with 150 patients.

PROLONG-ATE is aimed at assessing the efficacy of BAX 855 and reducing annualized bleed rates in both prophylaxis and on-demand treatment schedules. Baxter has reported that BAX 855 has been well tolerated in the trial, so far, with no inhibitors or safety issues occurring in the study. Baxter plans to report top-line data from the study in the third quarter this year, and they plan to file for US regulatory approval by the end of this year. A pediatric study is also being planned in order to support EU filings and approval in 2016.

We are very excited by Baxter's rapid progress with this program. ADVATE is the gold-standard hemophilia therapy, with over $2 billion in annual sales, and BAX 855 is positioned to provide an important new therapy in the ADVATE franchise for patients with hemophilia. Under our agreement, Nektar will receive significant royalties on net sales, as well as remaining development and sales milestones of over $70 million.

Now, moving on to NKTR-102, our proprietary oncology candidate, which is currently being evaluated in a Phase 3 study in metastatic breast cancer. NKTR-102 is a novel Topoisomerase 1 inhibitor, designed to concentrate in tumor tissue, provide sustained tumor suppression throughout the entire chemotherapy cycle, and reduce the peak exposures that are associated with toxicities of standard chemotherapies.

Last month, we announced that the Independent Data Monitoring Committee, for the Phase 3 BEACON study of NKTR-102, recommended continuation of the trial following a planned interim efficacy analysis of data from the study. The BEACON study enrolled 852 patients with metastatic breast cancer to compare single-agent NKTR-102, as a third-line or greater therapy, to a single agent of physician's choice.

The interim efficacy analysis conducted by the Independent DMC, was scheduled to occur at 50% of the patient events in this study needed for the primary endpoint of overall survival. The DMC reviewed both safety and efficacy data and recommended continuation of the study with no modifications. We expect top-line survival data from the BEACON study by early 2015, and we plan to submit regulatory filings in both the US and Europe in the second half of 2015. You will recall that NKTR-102 was granted fast-track status for this indication, which enables us to request priority review and submit a rolling NDA.

If we're successful with the BEACON study, NKTR-102 could emerge as an important new therapeutic option for the 300,000 women with metastatic breast cancer in the US and Europe. Based on the highly encouraging data we've reported for NKTR-102 was well of the need for novel mechanisms, to treat metastatic breast cancer and other tumors, we've received strong interest from the medical community. This enthusiasm helped accelerate our rapid completion in enrollment in the BEACON study and has led to a number of physician-sponsored studies as well.

At Stanford University, Dr. Larry Recht and Seema Nagpal are conducting a study evaluating NKTR-102 administered as a single agent in Avastin-resistant high-grade Glioma. The study enrolled 20 patients who had already received a median of three lines of prior therapy for high-grade Glioma, including Avastin. This study was designed to show a six-week PFS of 25%, based upon the performance of other single agents in this population.

NKTR-102 exceeded the primary endpoint established for this study with a 55% of patients achieving at least six-week progression-free survival. As of today, there are two patients still receiving NKTR-102 in the study. One patient has been on study for over a year and has received 20 treatment cycles of NKTR-102, and another patient has been on study for over nine months, with 11 treatment cycles of NKTR-102. We expect the final data to be presented by the Stanford investigators at a major medical meeting in 2014.

We also have two other investigator-sponsored studies ongoing for NKTR-102. The first is a Phase 2 study in small cell lung cancer, with Dr. Alex Adjei at Roswell Park Cancer Institute, and the second study is a non-small cell lung cancer study, with Doctors Langer and Aggarwal at the University of Pennsylvania Abramson Cancer Center. Data from these studies are expected in 2015. The investigator community continues to support NKTR-102, and we continue to receive proposals for additional investigator-sponsored studies as well.

Now, I would like to move on to discuss our Phase 3 plans for NKTR-181. As I said earlier, NKTR-181 has the potential to be a transformational product in the treatment of pain. NKTR-181 is a novel opioid molecule with anti-abuse properties that are inherent to its molecular structure and not a result of a formulation. We are in the process of finalizing the designs for the Phase 3 program, including the long-term safety studies. These designs will be reviewed by our external experts as well as the FDA.

As you know, NKTR-181 received fast-track status from the FDA. The agency gave us very good initial feedback on our proposed Phase 3 trial design late last year. Following discussions with the FDA and our experts on the target patient population and study endpoints, we have designed the first Phase 3 study to include approximately 600 patients with osteoarthritis of the knee. Patients will be randomized one to one to either NKTR-181 or placebo. There will be a titration phase in both arms followed by a 12-week treatment period.

The agency also agreed that the WOMAC pain subscale is appropriate for evaluation in an OA population and that it is acceptable as a primary endpoint for pivotal studies. Importantly, WOMAC pain scores are collected at predefined clinic visits in a controlled environment, rather than the individual patient diaries completed at home. We are also building an interim futility analysis into our Phase 3 protocol.

Once we get through 200 patients, which is roughly equivalent to the size of a Phase 2 study, we plan to conduct the futility analysis, and make sure that we are on the right track with the proper study design before we commit to the full cost of a Phase 3 program. We plan to initiate the first Phase 3 study around in the middle of this year. In our Phase 2 study, we demonstrated that NKTR-181 can provide patients with effective pain relief with substantially fewer CNS side effects than would be expected with standard opioids.

During the titration phase of the Phase 2 study, a total of 213 patients achieved an average 40% reduction in pain. Only 3% of the patients in the titration phase were unable to successfully titrate to analgesia with NKTR-181. And, only 18% of the patients dropped out during titration because of adverse events, which were mostly reports of constipation. Importantly, nearly all of the patients dropping out for adverse events experienced significant pain relief while on the drug.

After titration, patients receiving NKTR-181 continued to show a reduction in pain scores during the randomized period of the study. While NKTR-181 clearly provided effective analgesia to the patients in the study, we did not see the expected rebound in pain scores in patients who received placebo during the 21 treatment days of the randomized period. We believe this uncharacteristic behavior of the placebo arm is due to several key factors, which we plan to mitigate in our Phase 3 design.

The results from our human abuse liability study of NKTR-181 were extremely compelling. Subjects reported substantially lower drug-liking scores and significantly reduced feeling-high scores with NKTR-181 as compared to oxycodone, with P-values less than 0.0001. In the critical period shortly after drug administration, subjects receiving oxycodone reported high scores for both drug liking and feeling high within the first 15 minutes, which is exactly what recreational of abusers seek in opioids.

Importantly, NKTR-181 was administered as an oral liquid of drug API in water without formulation, confirming that its properties are inherent to its molecular design and not a result of a formulation technique. Another important assessment in the HAL study was the extent to which NKTR-181 caused sleepiness. And, all doses of NKTR-181 scored statistically lower on sleepiness when compared to oxycodone.

We observed these same low rates of sleepiness in the Phase 2 efficacy study in OA patients. These patients also reported very low rates of dizziness. This means that NKTR-181 could provide effective pain relief without interfering with a patient's daily activities and without causing the mental fog that is common with other opioids. With NKTR-181, we believe that we have a drug that works well as an analgesic and is well tolerated by patients. We have also shown that NKTR-181 is not attractive to recreational drug users because it does not produce the euphoria that they are seeking.

As a result, NKTR-181 has the potential to address a major public-health issue. We are focused on bringing this important medicine to patients as quickly as possible. If we are successful in the development of NKTR-181, we are confident that we could become the therapy of choice in the $12 billion opioid market for chronic pain. We are looking forward to getting our final feedback from the FDA on the Phase 3 program, at the end of Phase 2 meeting, and starting the first Phase 3 study.

The newest clinical candidate in our pain portfolio, NKTR-171, is a novel sodium channel blocker created using Nektar's proprietary oral small-molecule polymer conjugate technology. NKTR-171 is designed to selectively restrict the molecule's action to the periphery, and thereby avoid the severe sedation found with standard sodium channel blockers that make these agents unsuitable for most patients. This technology approach is similar to what we accomplished with Naloxegol, which demonstrates our ability to restrict a drug to the periphery.

Current drugs that treat neuropathic pain represent a multi-billion-dollar market today, in spite of their limited efficacy and unwanted side-effect profiles. If we are successful with NKTR-171, we could provide a highly effective therapeutic option for patients with neuropathic and peripheral pain. In January, we initiated patient dosing in a Phase 1 single-ascending dose study that will assess pharmacokinetics tolerability and safety in up to 50 healthy subjects. We expect to have results from this Phase 1 trial of NKTR-171 in the second quarter of this year.

Finally, a quick update on our two anti-infective programs with our partner, Bayer: Amikacin Inhale to treat gram-negative pneumonias in ventilated patients, and Cipro DPI to treat patients with chronic recurring lung infections as a result of non-cystic fibrosis bronchiectasis, also known as NCFB. Amikacin Inhale is a hospital-based product that is specifically designed to work within a ventilator system in order to target infections in the lungs, directly, with a proven and effective antibiotic. If successful Amikacin Inhale could emerge as the preferred treatment for deadly gram-negative pneumonias, which is one of the leading causes of mortality in the ICU.

The Phase 3 studies are being conducted under an SPA, with the FDA, and are comparing Amikacin Inhale, given adjunctively with current standard-of-care antibiotics, versus placebo, given with current standard-of-care antibiotics. The studies will use a primary endpoint of clinical test of cure. Both trials are on track and are expected to complete in the first half of 2015. We estimate the market potential for Amikacin Inhale is over $700 million annually, and as a reminder, our economics are significant, with a 30% flat royalty in the US, and an average 22% royalty in ex-US countries.

For Cipro DPI, the Phase 3 RESPIRE trials are ongoing to evaluate Cipro for the improvement of exacerbations in patients with NCFB for a 48-week treatment period. NCFB is estimated to affect more than 200,000 patients in the US and Europe, with an estimated market of around $750 million annually. These Phase 3 trials are expected to complete in the second half of 2015. Under our agreement, Bayer, is responsible for all development costs associated with Cipro DPI, and we are entitled to escalating royalties, with an average royalty of approximately 10%.

Clearly, this year could be a transformational one for Nektar, with multiple product candidates advancing to potential approval, regulatory filing, and key Phase 3 data. With that, I will turn the call over to John for a discussion on financial results and 2014 guidance.

Thank you, Howard, and good afternoon, everyone. I will start with a review of Nektar's 2013 financial results and will then discuss 2014 financial guidance.

At the end of 2013, cash and investments were $262 million. Our year-end cash balance includes a $25 million milestone from AstraZeneca for filing of Naloxegol in Europe, and a $70 million milestone from AstraZeneca for filing of Naloxegol in the US. Our year-end cash balance does not include the $117.2 million in net proceeds from our recent financing. Total revenue in the fourth quarter 2013 was $31.1 million, compared to $21.1 million in the fourth quarter of 2012. 2013 total revenue increased to $148.9 million, versus 2012 revenue of $81.2 million.

In addition to higher product sales in 2013, increased revenue was related to recognition of a number of collaboration milestones. These milestones were: a $25 million milestone from AstraZeneca for filing of Naloxegol in the EU, a $10 million milestone for the start of a Phase 3 study for Amikacin Inhale, and an $8 million milestone from a pay-collaboration partner. We plan to recognize a $70 million milestone for the US Naloxegol filing in 2014.

Total operating costs and expenses in Q4 2013 were $67 million, versus $64.5 million in the same quarter a year ago. For the full year 2013, total operating costs and expenses were $269.1 million, as compared to $222.4 million in 2012. The increase in total operating costs and expenses was primarily a result of higher R&D expense. For the full year 2013, R&D expense was $190 million, as compared to $148.7 million in 2012.

Our R&D expense in 2013 increased primarily as a result of the advancement in the clinic of our proprietary pipeline candidates, NKTR-102 and NKTR-181, as well as production of Amikacin Inhale devices from the start of Phase 3. Of the $190 million in R&D expense in 2013, approximately $17 million were non-cash expenses, such as depreciation and stock-based compensation expense.

G&A expense was $9.8 million in the fourth quarter of 2013, compared to $10.9 million in the fourth quarter of 2012. For the full year 2013, G&A expense was $40.5 million, compared to $41.6 million in 2012. 2013 G&A expense included approximately $10 million of non-cash expenses, such as stock-based compensation expense and depreciation. Interest expense was $18.5 million in 2013. Non-cash interest expense was $22.3 million, related to the monetization of UCB CIMZIA and Roche MIRCERA royalties.

Now, on to our 2014 financial guidance. Revenue for 2014 is expected to be between $190 million and $195 million. 2014 revenue guidance includes the recognition of $70 million milestone payment that I mentioned earlier, which we will received from AstraZeneca in the fourth quarter of 2013. It also includes a $35 million milestone payment from AstraZeneca, related to the FDA confirmation that a significant pre-approval CV safety study for Naloxegol will not be required. 2014 revenue guidance also includes approximately $20 million of non-cash royalty revenue from UCB's CIMZIA and Roche's MIRCERA.

R&D expense for 2014 is anticipated to be between $165 million and $175 million. Our 2014 expense includes the advancement of a number of key pipeline programs in the clinic, including: the ongoing NKTR-102 BEACON Phase 3 study, initiating the first Phase 3 efficacy study of NKTR-181, and preparing for the start of the long-term safety study of NKTR-181. Completing the Phase 1 clinical development program for NKTR-171 and preparing for the start of the Phase 2. Commercial manufacturing readiness for Amikacin Inhale under our agreement with Bayer, as well as preparing our next IND candidate this year.

2014 R&D expense includes approximately $16 million of non-cash expenses of depreciation and stock-based compensation. 2014 G&A expense is anticipated to be between $40 million and $42 million. Included in our 2014 G&A expense is approximately $10 million of non-cash items of depreciation and stock-based compensation. For 2014, interest expense will be approximately $19 million, and non-cash interest expense, related to the UCB CIMZIA and Roche MIRCERA royalty monetization, will be approximately $21 million.

We plan to end 2014 with approximately $225 million in cash and investments, representing a net use of cash of approximately $155 million. As Howard stated earlier, AstraZeneca is planning the launch of Naloxegol in first quarter of 2015, which will trigger milestones to Nektar of $100 million for the US launch and $40 million for the European launch. As a result, our 2014 year-end cash balance does not include these launch milestones.

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

(Operator Instructions)

Our first question comes from Jonathan Aschoff of Brean Capital. Your line is now open.

Thank you. Howard, I was wondering, to what extent, if you could describe better for us, the FDA buy in was for everything that went into the design of the 181 study?

We haven't had our end of Phase II meeting yet, so that will have to take place. We did have discussions under fast-track status with the agency, and we wanted to talk to them about some of the observations that we noticed during the Phase II study, specifically, how we measured drug efficacy; the method of patient pain reporting; whether the FDA would be receptive to changing the methodology going to the WOMAC method; whether we could do a purely one-to-one parallel arm design, where we look at placebo and drug from the onset. And, those were the types of things we asked them and we worked through with them, and they were very receptive to it.

My sense is that they recognize the importance of a new molecule like NKTR-181, which clearly addresses a major health-care crisis in the US, and I think they're very interested in working with us to see this become a success. But, we have to have our end of Phase II meeting, and that's where we will lock in the actual design of Phase III.

Okay. Even though the FDA has said that this panel is coming, quote, in the near future, are you given any reason to think that it would be something that could impact your PDUFA date?

Now, you're talking about NKTR-118. So, I think -- look, the FDA has said to everyone that they are rescheduling -- they rescheduled the panel because of scheduling conflicts. I don't see it affecting the PDUFA date.

We don't know when they are going to reschedule it. We'd like to believe it's in the near future, but they haven't told us yet. As soon as we get a date, we will certainly let everybody know.

Their point to AstraZeneca was, and to Nektar was, that this is a function of scheduling of the people that they would like to attend the panel discussion.

Okay. I was wondering if you could please comment on the recent Bayer announcement on its long-acting Factor VIII? And specifically, what are the differences here between their product, 855, and are they ahead of you in filing?

I am going to let Steve answer some of the technical issues. I think we expect that Baxter will file first because Baxter plans to file in the US this year.

Steve, I would like to let you comment a little further on the differences between the drugs.

Sure. Good question. Of course, BAX 855 is a full-length version of Factor VIII that is based on ADVATE. It comes right off the ADVATE manufacturing line and then is conjugated with the PEG that gives it the extended half-life.

The Bayer molecule is a truncated version of Factor VIII. It's called a B-domain deletion. It also has an amino acid change that was made -- it's an engineered protein sequence -- to allow a site-specific PEGylation to the engineered protein.

So, it's quite a different molecule from a protein-engineering standpoint. When we look at the results that they released this week, I think that, while they were just top-line results, and I don't want to read too much into them, certainly looked very similar to the [low-tate] results we have seen earlier, with longer periods of administration leading to higher bleed rates.

As Howard pointed out, when we think about time to NDA filing, of course Baxter is planning to file by the end of this year, and Bayer reiterated, I believe, in their press release, that they are going to file in the second half of next year, simultaneously in the US and EU. And, they made some comments about manufacturing stuff that they are doing in anticipation of that filing.

So, I think we still anticipate that Baxter's NDA filing -- or BLA filing, that is, will happen in advance of Bayer's.

Thanks for that. I was wondering, just briefly, what exactly is next for 102 in glioma?

We are going to be publishing data at a major medical conference this year. There is certainly a lot of interest from the medical community, as well as the commercial community, in terms of the effectiveness of NKTR-102 in high-grade glioma. And, the results we have seen, so far, are fairly compelling. There's really not much for me to report now, prior to us releasing data at a major medical conference.

But, I think what we have seen in late-stage Avastin-resistant glioma is very impressive and says a lot about what -- it really defines what everyone has said about topoisomerase 1 inhibitors. If you can make a topoisomerase 1 inhibitor that has a great pharmacokinetic profile and avoid these severe toxicities that are associated with that class of compounds, you probably have a very important anti-cancer drug, and that's what I think we have here.

Thank you very much, guys.

Thank you. Our next question comes from Bert Hazlett of ROTH Capital. Your line is now opened.

Thanks, I have one or two. First, on the economics of the $70 million amortization -- or $70 million from AstraZeneca that you got, will that be amortized over 2014, or is there a specific triggering event that will occur? Could you clarify that a bit? Thanks.

This is John, Bert, thank you for the question. To answer your question, we would recognize it immediately.

Basically, what it comes down to is that the drug would have to be approved in the US without any pre-cardiovascular studies being done, and AstraZeneca would have to move forward with the drug.

Okay --

We expect to do that this year.

Okay. Thank you. And then, another housekeeping item, I know you've said the Baxter milestones for development and sales are $70 million. Have you clarified what the development component of that is for 855?

I don't believe we have said that publicly, yet, so we'd have to check on that for you. We can look into that, but at this point, I don't think we've defined the breakout yet.

You can say here, that's okay (laughter).

Yes, but we don't have it -- I have to look into what we're allowed to communicate regarding that. Sorry.

That's fair enough, thanks. A pipeline question on NKTR-214, I think you've said previously that the IND for that was still on track.

Maybe Steve could comment on that program and whether the enthusiasm is still high for that immunologic program? That'd be great.

Yes, you bet, Bert. We remain really bullish on 214. I have to say that the pre-clinical data, as we continue to expand into different models and use different combinations of other immunotherapies in those models, it really looks quite revolutionary to us.

So, we just couldn't be more excited. It continues to hold up to its potential in the pre-clinical analysis that we are doing.

We're continuing to work on the CMC aspects of the molecule, of course. It's our first homegrown biologic, and we are quite proud of that, and we want to make sure that we get that right. So, we are on track. I think you could see that drug hit the market -- or hit the clinic in 2015.

Of course, you have to remember that we've got three or four different small molecule pain-related programs that also are advancing towards the clinic, so that could change the timing, one way or the other, on 214. But, we remain really excited about it, and of course, I think the whole world is excited about cancer immunotherapy as, really, the emerging way to treat tumors. So, we are excited about it.

Thank you.

Thank you. Our next question comes from Cory Kasimov of JPMorgan. Your line is now opened.

Thanks for taking my questions. First one is on the significance of the NKTR-102 interim analysis. Could the data monitoring committee have stopped this for futility with this interim look? And, could they have also recommended for you to upsize the study, which I know they did not do, but was that an option?

The answer to both of those questions was, yes, they could have done both of those things. We don't have access to the data. It's blinded to us. But, they certainly could have stopped it for futility.

And, there was no recommendation to change the number of the timing of events and the number of events. So, now you know as much as we do.

Okay. And then, on 181, if you were to start the Phase III around mid-year, based on your enrollment assumptions and such, how long do you think it would be before you reach the interim look at 200 patients?

I think we said we would be at those 200 patients by second quarter 2015, I believe that's about right.

Okay. Great. Thank you.

Thank you.

(Operator Instructions)

Our next question comes from Simos Simeonidis with Cowen and Company. Your line is now opened.

Could you talk about the potential commercial effort behind Naloxegol from AstraZeneca? Also, Howard, you said that they're thinking or they're planning for first half of 2015, or early 2015 launch, if you have an approval in early September, probably wouldn't be able to launch earlier than 2015? Thank you.

I think they're doing a great job in getting ready to launch the product, and they're assembling all the necessary forces to do that. And, one of the reasons we selected AstraZeneca for this program, and why we wanted to collaborate with them and pick them as a partner, is because this -- remember, this is not a GI drug, it's a primary care drug.

You have to recognize that patients who take opioids and receive opioids from their primary care physician, for osteoarthritis or back pain, et cetera. If they become constipated, which many of them do, as you know, they don't go to a GI physician for that constipation. They go back to their primary care physician.

So, the GI market for a drug and opioid -- for an opioid-induced constipation drug is extremely small. This is a primary care physician market, and that's what I think is one of the great strengths of AstraZeneca and one of the reasons we selected them as a partner.

In terms of timing, they're planning for an early 2015 launch. I can't comment as to the exact timing and how they want to move that forward at this point. I think it's very safe to say that they will launch it and they plan to launch it in early 2015. And, I'm sure if they can accelerate it, they will.

[Again] -- in terms of what type of commercial effort do you think they might be putting behind the drug?

I can't tell you how many sales reps and how much money they're allocating to a launch program and a launch campaign. I know it's a very important drug for them. I know they take it very seriously.

We have a very effective joint-company steering committee, and we have discussions with AstraZeneca regularly. I can't comment on the specifics of what they plan to do, but I can tell you that they are an excellent partner, and I can tell you they take this drug very seriously. And, I'm sure they are going to put significant muscle behind it.

All right. Thank you very much.

Thank you. At this time, I'm not showing any further questions. I would like to turn the call back to Howard Robin for closing remarks.

Thank you, everyone, for joining us today. I want to thank all the employees of Nektar for doing such a great job in getting us to this stage.

We will see many of you at the Cowen, Needham, and ROTH conferences over the next month. Have a great afternoon or evening, everyone. Thank you. Goodbye.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone, have a wonderful day.