Nektar Therapeutics (NKTR) 2014 Q2 法說會逐字稿

Good day ladies and gentlemen, and welcome to the Nektar Therapeutics second quarter 2014 financial results conference call. (Operator Instructions) I will now turn the call over to your host, Jennifer Ruddock, Vice President, Investor Relations. Please go ahead.

Thank you, Stephanie. 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. Ivan Gergel, 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 potential regulatory approval decisions and commercial launch timing, the timing of future clinical results, clinical development plans, 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, 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, which is filed with the SEC on May 8, 2014, and our Form 8-K which is filed today, both of which are available at SEC.gov. 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 on the IR page at Nektar's website, at Nektar.com.

With that, I would like to now hand the call over to Howard. Howard?

Thank you Jennifer, thanks to everyone for joining us this afternoon for our second quarter financial results call. Today, I'd like to focus on our late-stage programs which have significant upcoming milestones over the next six months. These are MOVANTIK, for opioid-induced constipation; BAX-855 for hemophilia A, NKTR-102 for advanced breast cancer, and NKTR-181 for chronic pain. I will also update you on two of our early-stage candidates, NKTR-171, a peripherally-acting oral sodium channel blocker, which is in Phase 1 studies, and NKTR-214, a cancer immunotherapy which we are preparing to enter the clinic next year. Then, John will review financials and remind you of our financial guidance for the second half of this year.

First, I'd like to take the opportunity to introduce Dr. Ivan Gergel, our new Senior Vice President of Drug Development and Chief Medical Officer, who is joining us on today's call. Many of you have had the opportunity to meet Ivan in the past several weeks. Ivan brings over 25 years of drug development experience to Nektar with an impressive track record. During his tenure heading R&D at both Endo and Forest, Ivan was responsible for a number of late-stage development programs and product approvals. This includes BEMA Buprenorphine, which just achieved successful outcomes in Phase 3 studies for chronic pain, and abuse-deterrent Opana ER for chronic pain. At Forest, his successful approvals included Celexa and Lexapro for depression as well as Namenda for Alzheimer's disease, Combunox for acute pain, and Savella for fibromyalgia.

Ivan's contributions to our clinical strategy will be invaluable as we advance our pipeline of wholly-owned compounds.

As most of you know, the June FDA Advisory Committee meeting resulted in a highly positive outcome for MOVANTIK. The majority of panel members recommended in a 22 to 2 vote that there was no need for cardiovascular outcome trials. The majority also agreed that the appropriate path forward would be for sponsors to conduct post-marketing observational studies.

Following the panel, Salix, who participated along with AstraZeneca at the meeting, indicated that FDA has informed them that it would approve their injectible PAMORA for chronic OIC patients with a requirement for post-marketing observational trials only.

As we head towards the September 16 PDUFA date, we are encouraged by the positive vote from the Advisory Panel, and the subsequent positive FDA action reported by Salix.

On their conference call this morning, AstraZeneca noted that signs were positive for approval on September 16, based on their interactions with the FDA. AstraZeneca also said they were on track for potential EU approval before the year end as well.

As you will recall, Nektar renegotiated our AstraZeneca agreement in August of 2013 in order to give MOVANTIK the best opportunity to be well-positioned in advance of the Advisory Panel, and to ensure that the regulatory review clocks would start in both the US and the EU. Clearly, this was the right decision for MOVANTIK, which has now advanced closer to US approval without delay. Notably, during MOVANTIK's review cycle in the past 12 months, there have been significant changes to the competitive landscape for OIC. Potential competitors with oral OIC therapies earlier in development delayed their programs in order to wait for the outcome of the Advisory Panel.

So, when others reacted to uncertainty by waiting, Nektar and AstraZeneca saw opportunity and took action. MOVANTIK, if approved, would be the first oral once-daily tablet to come to market that specifically targets the mu receptor to treat opioid-induced constipation, and in my opinion MOVANTIK is not likely to face potential competition from other oral PAMORA therapies for at least two to three years.

In June, the KODIAC efficacy results for MOVANTIK in patients with chronic OIC were published in the New England Journal of Medicine. The studies demonstrated a rapid and sustained improvement for patients taking MOVANTIK, without compromising their pain management. There is a tremendous unmet need for an oral therapy like MOVANTIK that directly targets the underlying mechanism of OIC at the receptor level, without interfering with analgesic relief.

There are up to 69 million patients in the US and Europe that currently rely on oral opioid -- on opioid therapies to manage their chronic pain. OIC is a debilitating medical condition in these patients, with an incidence as high as 80%.

AstraZeneca intends to launch MOVANTIK in the US and EU as soon as possible following approvals. As AstraZeneca stated this morning, there will be a short gap between approval and launch, so let me remind you of why that is.

As we've stated in the past, following approval of MOVANTIK in the US, it will need to go through a routine descheduling process by the DEA. Just like other opioid antagonists, such as naloxone and naltrexone, the initial label for naloxegol will have a Schedule II designation because of the structural similarities of opioid antagonists to opioid agonists.

Therefore, AstraZeneca is planning a late Q1 2015 or early Q2 2015 launch in the US based on the anticipated timeline for completing this descheduling process. Launch in the EU is planned for Q2 2015.

We're looking forward to AstraZeneca launching MOVANTIK. If approved, it would represent the first oral targeted medicine for opioid-induced constipation, great news for patients with this debilitating condition.

The MOVANTIK agreement with AstraZeneca provides significant potential upside for Nektar. As a reminder, if FDA follows the Advisory Panel recommendation and does not require a pre-approval cardiovascular outcomes trial, we will retain the $70 million NDA filing fee that we received last year and we will receive an additional $35 million. We are also entitled to receive $100 million upon the US launch, and $40 million upon the EU launch. We have significant and escalating double-digit royalties on sales of MOVANTIK, and in addition to these royalties, potential sales milestones totaling $375 million.

So clearly, MOVANTIK's success would benefit Nektar financially. And just as important for Nektar, MOVANTIK would be the first-approved novel oral NCE created using our proprietary small-molecule polymer chemistry platform. We're looking forward to the next six months as MOVANTIK advances.

Our next development program with significant milestones occurring in the second half of 2014 is BAX 855, a longer-acting ADVATE therapy invented by Nektar and being developed by our partner, Baxter. BAX 855 is based upon the full-length recombinant factor VIII molecule ADVATE, which is the gold standard for treating hemophilia A. We combined Nektar's proven PEGylation technology with ADVATE to create this important new molecule.

Nektar's PEGylation technology has been used with protein therapeutics for over 15 years to create meaningful medicines that are approved to treat chronic and serious diseases in different therapeutic areas. Hundreds of thousands of patients globally have benefited from these PEGylated medicines which are on the market today.

Baxter recently reported that dosing in the Phase 3 PROLONGATE study of BAX 855 is now complete. On their recent financial results call, they announced that they have observed no inhibitors or drug-related serious adverse events in the study to date. They are on track to report top-line data from the study this quarter. PROLONGATE is assessing the annual bleed rate, or ABR, for both a twice-a-week BAX 855 prophylaxis regimen, and for an on-demand regimen in previously-treated adult patients with hemophilia A.

Baxter is planning to file a BLA for BAX 855 in the US by the end of this year.

As you know, Baxter is the global leader in treating patients with hemophilia A, and ADVATE currently generates over $2 billion in annual sales. 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, or etirinotecan pegol, our wholly-owned Phase 3 oncology candidate. NKTR-102 is a novel topo I inhibitor which is designed to concentrate in tumor tissue. Its unique PK profile is designed to provide sustained levels of the drug throughout the entire three-week treatment cycle, and reduce the peak exposures that are associated with toxicities of other chemotherapies.

The BEACON Phase 3 study of NKTR-102 enrolled 852 patients with metastatic breast cancer who had failed anthracycline, taxane, and capecitabine therapies. The study is comparing single-agent NKTR-102 to a single agent of physician's choice with a primary endpoint of median overall survival.

90% of the patients enrolled in the NKTR-102 BEACON study were HER2 negative. This is important because while there has been tremendous progress in treatments for breast cancer patients with HER2 positive disease, the fact remains that 75% of patients with breast cancer have HER2 negative disease with far fewer treatment options.

In addition, many of these treatments, which are single-agent chemotherapies, are microtubule disruptors with overlapping mechanisms and side effects. As a topo I inhibitor, NKTR-102 has the potential to offer these patients a different mechanism of action to treat their disease. We estimate top-line data from the study will be available in the first quarter of 2015. If the BEACON study is successful, we plan to submit regulatory filings in both the US and Europe in the second half of 2015.

As you may recall, NKTR-102 was granted fast track designation by the FDA for patients with locally-recurrent or metastatic breast cancer. This designation enables us to potentially qualify for priority review and submit a rolling NDA. If we are successful, NKTR-102 could emerge as an important new therapeutic option for women with advanced breast cancer, particularly those patients with HER2 negative disease.

At the 2014 ASCO annual meeting, Stanford University investigators presented data from one of our ongoing investigator-sponsored trials of NKTR-102. The Stanford study evaluated NKTR-102 as a single agent therapy in patients with Avastin-refractory high-grade glioma, including glioblastoma. Dr. Lawrence Recht and Dr. Seema Nagpal of Stanford University conducted the Phase 2 study.

Patients with Avastin-refractory glioblastoma progress very quickly, and they currently have no further treatment options to help them manage their disease. Responses to agents in these patients are rarely seen. The Phase 2 study enrolled 20 patients with Avastin-refractory disease. 55% of patients in this study achieved six-week progression-free survival with single agent NKTR-102 treatment, exceeding the trial's threshold expectation of 25%. Three patients, or 15%, achieved partial responses with NKTR-102 monotherapy, seeing marked reductions in tumor size. Two of the three patients experienced a long duration of response of 14 and 20 months. An additional 8 patients, or 40%, achieved stable disease as best response. NKTR-102 was also well-tolerated in spite of the patients being heavily pre-treated and neurologically symptomatic.

As of July 31, there is still one patient in the study who is continuing on NKTR-102 therapy and she has been on the study for 14 months.

Patients with high-grade gliomas who have progressed through Avastin represent a population in dire need of new therapies. We are currently evaluating the next steps for NKTR-102's development in glioblastoma.

Now, I'd like to discuss our Phase 3 program for NKTR-181. As I mentioned earlier, Dr. Ivan Gergel joined us several months ago to lead development at Nektar. His focus initially has been on finalizing our Phase 3 strategy for NKTR-181 in patients with chronic pain. As we've discussed in the past, while NKTR-181 provided evidence of effective analgesia in our Phase 2 study, we did not see the expected rebound in pain scores in patients who were randomized to placebo during the 21-day treatment period. It is our belief that several factors contributed to this lack of rebound, and we will be addressing these factors in our Phase 3 study design.

We have decided to use an enriched enrollment randomized-withdrawal study design, also known as EERW, because the EERW design has the advantage of allowing titration to the optimal dose for individual patients prior to randomization. There are several key elements that we plan to incorporate into our Phase 3 design.

First, as you know, we allowed patients to continue their background medications in our Phase 2 study. For the Phase 3 study, patients will not be permitted to take potentially-confounding background medications, and specifically we will not allow any concomitant, non-steroidal, anti-inflammatory drugs. Rescue medication will be restricted to acetaminophen.

Second, if you recall in the Phase 2 study, we only required patients to have a drop in their pain scores of 20% in order to qualify them for the randomization phase of the study and maintain this drop for four days. For the Phase 3 study, we will require that patients achieve a more significant and sustained response prior to entering the randomization phase.

Third, the Phase 2 study only had a three-week post-randomization treatment period. For the Phase 3 study, we will include a 12-week post-randomization treatment period.

Lastly, we are evaluating the right chronic pain setting for the Phase 3 trial. Recent successful studies with mu-opioid-agonists have been conducted in patients with lower back pain, and our review of the data indicates that the effect size is larger in this patient population. Therefore, we are seriously considering this setting for our Phase 3 plan.

We have not yet finalized the sample size or statistical plan for the program, but assuming that we can achieve agreement with the FDA, we will incorporate an interim analysis as part of the Phase 3 protocol that will confirm or allow adjustments to the sample size in order to maintain appropriate study power to detect statistically-significant differences between NKTR-181 and placebo. Such an analysis is designed to increase the probability of a successful outcome.

We are currently preparing for our end of Phase 2 meeting with the agency to review the proposed study design for Phase 3. After our meeting with the FDA, which we expect to occur in the next few months, we will update you on the final details for the Phase 3 program. We plan to finalize the protocol and start the IRB approval process by the end of this year.

As you know, NKTR-181 received fast track status from the FDA for the treatment of chronic pain. NKTR-181 is designed to be the first novel opioid molecule with anti-abuse properties that are inherent to its molecular structure and not a result of a formulation. Prescription drug abuse and opioid addiction continue to be front-and-center as public health issues. Because NKTR-181 is specifically designed to avoid the euphoria that leads to abuse with today's opioids, we believe NKTR-181 has the potential to be a transformational product in both the treatment of pain and in addressing this current health epidemic.

Another promising candidate in Nektar's pipeline of pain therapies is NKTR-171, a novel sodium channel blocker being developed for peripheral nerve pain. NKTR-171 was created using Nektar's advanced polymer conjugation technology to selectively restrict the molecule to peripheral pain pathways, and thereby avoid the severe sedation and side effects that make standard sodium channel blockers impractical for most patients.

In September, we start a multiple ascending-dose study of NKTR-171 to assess safety and pharmakinetics. We have already completed the first Phase 1 dosing study to evaluate single doses of NKTR-171, and the drug was well-tolerated.

Current drugs to treat neuropathic pain such as the gabapentinoids 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 an effective therapeutic option for patients with peripheral neuropathic pain.

Moving on now to a very exciting program in the field of cancer immunotherapy, NKTR-214, a program that many of you are asking about. NKTR-214 is a novel cytokine engineered to selectively activate the IL-2 receptor complex. The aim of NKTR-214 treatment is to increase the activity of tumor killing cells, while reducing the activity of T-regulatory cells that suppress the anti-tumor immune response. This is the first application of our technology to modulate receptor activity.

In our pre-clinical work, NKTR-214 demonstrated significant activity in an aggressive mouse melanoma model, as well as other aggressive tumor models.

The field of immunotherapy is moving towards capitalizing on multiple mechanisms of immune stimulation to achieve durable responses in patients. What we have shown recently in pre-clinical data presented at AACR and at ASCO, is that by combining NKTR-214 with the checkpoint antibodies anti-CTLA-4 or anti-PD-1, we could eliminate tumors from a majority of the animals tested. But what is even more remarkable, is that we now have been able to demonstrate that the combination of NKTR-214 and anti-CTLA-4 produces an anti-tumor immunity that lasts long after the initial treatment response.

Let me explain what I mean by that. 30 days after we stopped dosing, the cured mice were re-challenged with the same tumor cells and the tumors were unable to grow in 70% of those mice without any further drug treatment. In other words, their immune systems retained memory of the tumor being foreign. These tumor re-challenge experiments truly exemplify the potential of NKTR-214 combination regimens to mobilize the immune system to recognize and eradicate tumors.

Now, efficacy is one part of the equation. One challenge in the field of immunotherapy with all agents is the potential for autoimmune or other severe side effects. There is particular sensitivity around the activation of the IL-2 receptors, which over the years has limited the development of drugs targeting this important pathway.

Because NKTR-214 was designed to selectively activate the right receptors in this pathway, we can achieve therapeutic activity at much lower doses than are required by Proleukin. We recently completed a comprehensive GLP toxicology program with NKTR-214 in both rodents and in non-human primates. We found that NKTR-214 is very well-tolerated at therapeutically-relevant doses with no evidence of vascular leak syndrome, the most detrimental side effect of activating the IL-2 pathway.

So, what we've observed so far is a highly-effective immune-stimulating agent in pre-clinical models that is well-tolerated in non-human primates which, combined with its unique mechanism, give it the potential to be combined with multiple other immunotherapies to provide durable responses. NKTR-214 could be an important advance in the emerging landscape of cancer immunotherapy, and we are excited to be moving this unique molecule towards an IND filing next year.

One last note before I turn the call over to John, a few quick comments on cipro DPI and Amakacin Inhale, our two Phase 3 anti-infective programs, partnered with Bayer, which are continuing to enroll patients. Cipro DPI is being evaluated in non-cystic-fibrosis bronchiectasis, or NCFB, and Bayer expects Phase 3 results in the latter part of 2015. Under our agreement, Bayer is responsible for all development costs, and we are entitled to escalating royalties with an average royalty of approximately 10%.

Amakacin Inhale is being evaluated in Gram-negative pneumonias in ventilated patients and Bayer expects Phase 3 data in early 2016. Our economics for Amakacin are significant, with a 30% flat royalty in the US and an average 22% royalty in ex-US countries. Both programs are each estimated to have at least $750 million global market potential.

With that, I'll turn the call over to John for a discussion on the quarter's financial results and a reminder of our 2014 guidance.

Thank you Howard, and good afternoon, everyone. I will start with reiterating our financial guidance for 2014, which remains unchanged from our 2013 year-end call. For 2014, we plan to end the year with approximately $225 million in cash and investments, representing net use of cash of approximately $155 million. As Howard said, if approved, we anticipate the launch of MOVANTIK in both the US and the EU in the first part of 2015, which would trigger launch milestones to Nektar of $100 million in the US and $40 million in Europe. As a result, our 2014 year-end cash balance projection does not include these $140 million of launch milestones.

Revenue for the full year 2014 is still expected to be between $190 million and $195 million, including $20 million of non-cash royalty revenue from UCB's Cimzia and Roche's MIRCERA.

This guidance includes the anticipated recognition of two significant milestones in the third quarter of 2014, pursuant to the agreement with AstraZeneca signed last August: a $70 million milestone payment that we received from AstraZeneca in Q4 2013 and the potential $35 million milestone payment from AstraZeneca, both of which are related to FDA confirmation that a significant pre-approval cardiovascular safety study for MOVANTIK will not be required.

For the full year, we expect to recognize additional milestones related to other collaborations of approximately $17 million. We received and recognized $9 million in Q2 and expect the remaining milestones in Q4.

Other than the milestones discussed, we expect the remaining revenue for the year will be approximately evenly split between the last two quarters. Our R&D expense guidance is still between $165 million and $175 million, with approximately $16 million of this as non-cash items such as stock-based compensation and depreciation expense.

2014 G&A is still anticipated to be between $40 million to $42 million, which includes $10 million of non-cash expense. Total revenue of Q2 2014 was $28.5 million versus $33.9 million in the second quarter of 2013. Revenue for Q2 2014 includes $4.8 million of non-cash royalty revenue from UCB's Cimzia and Roche's MIRCERA, and $9 million of additional collaboration milestones.

The decrease in revenue for the quarter is due primarily to reduced manufacturing activity.

Total operating costs and expenses in the second quarter 2014 were $51.4 million versus $66.5 million in the same quarter a year ago. The decrease was primarily driven by lower R&D expense. For Q2 2014, our research and development expenses were $36.7 million as compared to $52.2 million in Q2 2013.

R&D expense was lower in the second quarter and first half of 2014, as compared to the same periods in 2013, primarily because of decreased costs for our NKTR-102 BEACON study in metastatic breast cancer which completed enrollment in third quarter of 2013.

R&D expense in the quarter included expenses related to a NKTR-102 BEACON Phase 3 trial, Amakacin Inhale clinical devices and commercial readiness activities, a Phase 1 study of NKTR-171, and preparation for our NKTR-181 Phase 3 trial. Research and development expenses included $3.9 million of non-cash, stock-based compensation and depreciation expense.

For the second quarter 2014, G&A expense was $9.6 million compared to $9.2 million in the second quarter 2013. There were approximately $2.4 million in non-cash expenses included within G&A in the second quarter of 2014. Interest expense this quarter was $4.5 million, related to the senior secured notes issued in 2012, and non-cash interest expense related to the monetization of UCB Cimzia and Roche MIRCERA royalties was $5.1 million. Cash and investments at June 30, 2014 were $301.4 million as compared to $309.1 million at March 31, 2014.

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

(Operator Instructions) Our first question comes from Jonathan Aschoff with Brean Capital, your line is open.

Thank you. Hi Howard, I was wondering if you could please describe what Astra and/or Nektar has done already to define what it believes is an adequate post-marketing observational study for MOVANTIK including the cost of that. And then secondly on that drug, could you describe what AstraZeneca's pre-launch commercial activities to date have been?

Sure. Hi, Jonathan. I think, look, to take your first question, we have not designed that with AstraZeneca yet. And I think AstraZeneca certainly believes that the FDA will provide a lot of guidance on this, and there are certain FDA systems that are currently being put in place that may actually make those observational-type studies easier to perform. I don't think anybody believes that these observational studies are particularly onerous or complex. I think they're pretty straightforward.

And while we don't have any idea of really what an observational study would cost in detail, I think -- we think about this in terms of somewhere in the $10 million to $20 million range for the total cost of the study. So, I can also tell you that Nektar is responsible for about a third of that, so if you look at the cost of a study, an observational study being $10 million to $20 million, Nektar's liability for that study is about a third. You can see that it's relatively small compared to the cost of the program, and I don't consider it a major obstacle at all.

In terms of what AstraZeneca has been doing to get prepared for the market, I talk to them, and the Nektar group talks to them with some regularity, and they are very, very active in preparing for this launch. I know their commercial organization is meeting regularly to get set up for the commercial launch, and they -- we are frequently participating in those discussions with them.

I think they are, as I said, they're looking forward to launching this as soon as possible after approval, but of course we all have to wait for the routine DEA descheduling process. And I think you know, I can't tell you whether that is a two-month or a five-month or a six-month process, and that's why AstraZeneca and Nektar have said, look, it'll be in the first quarter, it could be early the second quarter. Can't tell you whether it's February or April. I mean, that would be too difficult to call.

But I can tell you that they are very, very active in preparing to launch this product, and we are frequently having those discussions with them. So, I think it's in very good hands, and I think AstraZeneca is quite committed and my discussions with them make me feel very comfortable.

All right, great. Thank you, Howard.

Our next question comes from Cory Kasimov with JPMorgan. Your line is open.

Hi there, it's actually Matt Lowe in for Cory today. Just a quick one, I guess if you could just give us some detail on how you see the market opportunity for BAX 855, given the competitive landscape, just how you view that. And if you could remind us of Nektar's economics on that program, thank you.

Yes. I think, as I said, Advate is a $2 billion drug, and it is clearly the gold standard and the market leader. And yes, I think certainly Biogen will be out there discussing their product and marketing their product, but I think most people or most physicians, most patients, are very, very familiar with Advate. And as you know, it is a very, very safe drug, and our PEGylation technology which has been in multiple drugs in hundreds of thousands of patients, is of course quite proven.

So, I think one of the things, one of the things that will define that market is just how safe Biogen's drug is, and I don't think that's been fully-determined in the marketplace yet. So, at this point, I think -- I'm very comfortable that Baxter has an important position in the market. They will maintain, they will maintain that position and they will grow that position. And I believe that should the data be successful, and I'm hopeful that it will be, they will launch Advate -- PEGylated Advate -- and become, remain, the dominant force in that market.

In terms of our royalty rate, it starts in the mid single digits and goes up in range to the low teens. So, you could estimate that any way you like, but it's still fairly substantial for Nektar. And if you look at PEGylated Advate, BAX 855, as a billion-dollar drug, then certainly for us the economic potential is significant.

Okay, that's helpful. Thank you.

Our next question comes from Bert Hazlett with Ladenburg, your line is open.

Thank you for letting me take the questions. I actually have a couple. First, on NKTR-102, assuming success with BEACON, Howard, do you intend to keep that program internally? Or is that an out-license candidate? And then when do you make the decision on glioma or other indications?

Well, good question. First of all, let's take the second part first. I think you know, we're very hopeful that we see positive results in the metastatic breast cancer study, in the BEACON study. However, of course you know, these are completely different diseases, and moving the drug forward and treating gliomas is somehow independent of what it looks like in metastatic breast cancer, although I'm very hopeful that it shows promising results in both.

To your first point, we haven't made those strategic decisions yet, but quite frankly, I think there's an awful lot of merit to Nektar moving forward with a drug like NKTR-102 ourselves, if we're successful with the metastatic breast cancer study. And while we're still having those interesting discussions, and there are still partnering discussions that take place, I'm looking more and more hopeful to perhaps take that drug forward ourselves.

So, we're excited about it. If it works, it's a very important therapy because it is a completely different mechanism. It is a completely different mechanism in the treating of HER2 negative disease. And we have to continue to have those discussions, but I'll keep you posted.

Thank you. And then just on 181, could you -- thank you for the solidification of your thoughts regarding Phase 3 and the study design. Could you talk a little bit more about the timing? When will you start the program? And maybe when the Phase 3 will complete.

And then this is a fast-track molecule, I believe. Is there an ability to run one single Phase 3 study here and get it through, or are you contemplating two separate studies? Maybe I missed that.

Okay, so I think we are having discussions -- we're certainly having discussions with the FDA around the Phase 3 design, and we do expect to start to have that locked up and start the IRB approval process this year.

Now, we also want to design into it, as I said, an interim analysis that allows us to make mid-course corrections and also give us some information, and give the investors information, as to how the trial is going.

I think it's going to require -- it's certainly going to require two trials. It's not going to be a single trial. It's going to require two trials. And we are currently evaluating how we proceed with that, how we time that. Do we do two trials from the beginning? Do we wait and get some information and then start the second trial? That hasn't been determined yet. Let me turn this over to Ivan for a moment, and let him comment a bit.

Hi, Bert. Look, I absolutely agree with everything Howard said. Essentially, we're going to try and submit two IRBs at the end of this year. It looks like it will be a two-phase program, a two-study program, because it is on fast track. But it's also an NCE, and I think the fact that it's an NCE and the molecule itself is designed to be abuse-resistant, is what makes it attractive.

Certainly in the past and going forward, we've had great sort of interactions with FDA, and we envisage that will be very, very collaborative going forward. We know they're keen on this product. So, you know, it's going to move quickly once we start, and we do intend to be starting the program towards the end of this year.

Thank you for the color. I just have one more quick one, just on R&D expenditures. $75 million for the first half. To get to the low end of the range, John, it looks like you're going to spend $90 million in the second half. Is that a reasonable figure? Or I mean, that seems like a lot now that BEACON is kind of winding through. Should we be thinking toward the lower end of the range for the R&D expenditure?

Well, Bert, the thing you have to remember, okay, is you have BEACON winding down, right? So, which means, we won't be buying product for the physician's choice for Europe, right? But on the other hand, we're gearing up for the start of the Phase 3, for 181, and we also have the multi-dose that will be going on for NKTR-171.

And on top of that, we're still spending money on NKTR-061 for the Amikacin program, and we still have an amount of work that has to be done for NKTR-181 from a CMC standpoint and also for NKTR-214 from a CMC standpoint. So, that's kind of the reason why we're guiding the way we are guiding right now.

Okay, thank you.

Bert, this is Howard again. I want to just also clarify one point I made. You asked a very good question about whether Nektar would take NKTR-102 forward commercially, and I said something we're considering. Certainly for ex-US, you would find a partner, and we're certainly having those discussions and we've been having those discussions. What I should have said more clearly is that for the purposes of the United States, this is certainly something that we would consider although we haven't made a decision yet as to taking it forward ourselves.

Thanks for that.

(Operator Instructions) Our next question comes from David Steinberg with Jefferies, your line is open.

Thanks. I don't think you touched on it, but given the very significant collaboration with Novartis I think in May, Fovista has moved more into the limelight. Could you talk a little about your collaboration on that product, and what some of your expectations are?

And then, I was going to ask a question Bert asked, so on commercialization I'll just broaden it a little bit which is, if you do decide to market 102 yourself, granted a lot of your products have been licensed out. But what are your general thoughts down the road about marketing more of your proprietary drugs, given the value proposition? Thanks.

Okay, good questions. Well first of all, on Fovista, all I can comment on Fovista is that we get mid (technical difficulties) on Fovista. So, I think Fovista can be a potentially very, very important drug. I think -- interesting aptamer; could in my mind be a billion-dollar drug. And I think especially used in combination with other drugs like Lucentis, there's lots of potential. We get mid-single-digit royalties on that, so I'm actually pretty happy about that.

With regard to how you move forward with a drug like NKTR-102, for a company the size of Nektar, look. It's the kind of thing where the market in oncology does not require tremendous commercialization efforts. Sure, you have to have a sales organization, albeit it could be relatively small. You have to have an organization of scientific liaisons. But I think a company the size of Nektar could easily handle that, especially if you look at the cash flow that could be coming from drugs like MOVANTIK.

So, while I said we haven't made the decision yet, I think launching a drug or bringing a drug forward commercially like NKTR-102 is entirely within our capabilities. Now, let's see how the drug look and let's see what the data look like, and we'll make some better decisions at a later point.

I think at some point -- your question is a very important strategic one -- at some point, Nektar has to shift from a royalty company to a product company, and I think we will. And whether that's with a drug like NKTR-102, whether that's a drug like NKTR-181 a few years down the road, I don't think we have to make that decision now. But I don't think you should be thinking of Nektar as a royalty company. You need to think of Nektar as a company that's developing proprietary drugs, and will eventually market them.

Helpful, thank you very much.

Thank you, at this time this does conclude the Q&A session. I will now turn the call back over to Howard Robin for closing remarks.

Well, thank you, everyone. I mean, clearly this year could be a transformational one for Nektar, with multiple products advancing to Phase 3 data and beyond. I want to thank our employees for their hard work and dedication. We wouldn't be here without them. And thank you for your time today and your continued support. I look forward to seeing many of you when we're in Boston and New York next week. Thank you very much.

Thank you, ladies and gentlemen, that does conclude today's conference. You may all disconnect and everyone have a great day.