Nektar Therapeutics (NKTR) 2015 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Nektar Therapeutics second-quarter 2015 financial results conference call. (Operator Instructions.) As a reminder, this conference may be recorded. I will now turn the call over to your host, Jennifer Ruddock, Vice President of Investor Relations. Please go ahead.

Thank you, Stephanie. Good afternoon and thank you for joining us today. With us 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 today's call, we do 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 certain drugs and drug candidates and those of our partners, our financial guidance for 2015, and certain other statements regarding the future of our business. Because these forward-looking statements relate to the future, they are subject to inherent uncertainties and risks that are difficult to predict and many of which are outside of our control.

Important risks and uncertainties are set forth in our Form 10-Q filed on May 1, 2015, and 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 now like to hand the call over to Howard. Howard?

Thank you, Jennifer. Thanks to everyone for joining us today for our second-quarter 2015 financial results call. I'd like to spend today's call reviewing the significant progress we've made in the second quarter and highlight upcoming milestones for Nektar over the next 12 to 18 months.

I would like to first focus on the recent successful launch of MOVANTIK and the near-term potential approval of BAX 855. Then I'll hand the call over to Ivan, who will talk more about the Phase III program for NKTR-181, a wholly-owned pipeline program of Nektar's which could address the major problem in our society, opioid abuse. We will also cover NKTR-214, our new cancer immunostimulatory agent, which is entering Phase I/II with MD Anderson. NKTR-214 has the potential to bring a new mechanism, direct and selective stimulation of the patient's cancer-fighting T-cells, to the next generation of cancer immunotherapies.

We're very pleased that AstraZeneca has reported that the launch of MOVANTIK in the US is off to an encouraging start. AstraZeneca launched MOVANTIK at the beginning of April, and their US partner, Daiichi Sankyo, began contributing to the launch in early May. In the second quarter, AstraZeneca reported a rapid uptake of MOVANTIK, with over 3,000 users. AstraZeneca indicated that more than 50% of the business is from new therapy starts, and there are a significant number of patients now taking MOVANTIK who were previously on OTC laxatives. As many of you have seen, AstraZeneca recently initiated an unbranded direct-to-consumer TV campaign, which has been running since the end of June.

In the first three weeks of July, as most of you have observed from the available published IMS figures, we are seeing double-digit weekly growth in MOVANTIK prescriptions. Although it is still early in the US launch, AstraZeneca and Nektar are very pleased with the growth of both users of MOVANTIK and prescriptions, and more importantly, the favorable reception that the drug has received so far from both physicians and patients. Also during the second quarter, MOVANTIK received approval in Canada, and AstraZeneca is planning to launch there in the second half of this year.

As you know, MOVANTIK is the first and only oral peripherally acting mu-opioid receptor antagonist, or PAMORA, to be approved to treat OIC. We believe there is a significant market potential for MOVANTIK in the United States and Europe. In the US, there are approximately 38 million patients who take daily opioids to manage their chronic pain. These chronic pain patients have an approximate therapy duration of about five months, and up to 80% of these patients experience OIC. With this magnitude of patients experiencing OIC, at a cost of $260 per month, we believe it is not difficult to imagine that MOVANTIK sales could easily reach over $1 billion annually.

In Europe MOVANTIK is already available in the Nordic markets. Upon launch in a major European market, Nektar is entitled to another $40 million milestone payment -- nice. And the UK recently issued favorable guidance for MOVANTIK, and it is now recommended as an option for treating OIC in adults whose symptoms have not adequately responded to laxatives. The first planned launches in major European markets are the UK and Germany, which are expected to occur in the second half of this year.

To remind you, there are an additional 12 million patients taking opioids for chronic pain in Europe, so it is also a sizable market opportunity. Nektar will receive escalating royalties on net sales, which in the US start at 20%, and in Europe and the rest of the world, start at 18%. In addition to these royalties, we also have the potential to receive up to $375 million in sales milestones based on achieving certain annual sales targets.

Following the recent accomplishments for the launch of MOVANTIK and the significant level of commitment from AstraZeneca and Daiichi Sankyo to the success of the drug, we remain very positive about the prospects for MOVANTIK as an important new medicine for patients with OIC and its potential ability to provide Nektar with substantial revenue.

Now let's talk about the next important medicine that we expect to contribute to our near-term path to cash flow positive -- Baxalta's BAX 855. Baxalta recently announced the publication in the journal Blood of the pivotal data for BAX 855 and announced that it will be marketed under the brand named ADYNOVATE upon approval in the US. The positive data from the pivotal study were originally reported in August of 2014 and supported the BLA filing with the FDA. Based on these highly successful Phase III clinical results for ADYNOVATE, Baxalta anticipates approval and launch by the end of this year.

Additionally, Baxalta has submitted a new drug application to Japan's Ministry of Health for the approval of ADYNOVATE. Baxalta has also completed enrollment in the Phase III pediatric trial of ADYNOVATE, which is being conducted in previously treated patients under the age of 12 with severe hemophilia A.

Upon completion of this study, they expect to file for marketing authorization in Europe in 2016. The study will also support post-approval label expansion in the US for previously treated pediatric patients. ADYNOVATE is also being evaluated in a PK-specific dosing study to support both US and European label expansion and regulatory approvals.

As you know, ADYNOVATE is the next-generation ADVATE, a medicine which has global sales of over $2.5 billion. As an important continuation of the ADVATE brand, we are excited about the potential approval and launch of ADYNOVATE later this year. Nektar is entitled to receive mid-single-digit royalties on sales up to $1.2 billion and royalties in the low teens on sales greater than $1.2 billion, as well as an additional $73 million in development and sales milestones.

Again, the economic potential of MOVANTIK and ADYNOVATE alone can contribute substantial revenues to Nektar and move us towards becoming a cash flow positive company.

Now we'd like to briefly mention NKTR-102. As we stated on last quarter's call, we continue to work diligently to find a regulatory path forward for NKTR-102 in the BEACON data. We expect to complete our regulatory discussions for NKTR-102 before the end of this year.

In the area of anti-infectives, Amikacin Inhale and Cipro Inhale, being developed by Bayer, are also poised to become important new potential medicines. These programs represent significant potential revenue streams for Nektar. Cipro DPI and Amikacin Inhale are both novel drug device anti-infective products that have been granted Qualified Infectious Disease Product, or QIDP, designation by the FDA. Both products are designed to deliver antibiotic deep in the lungs in order to achieve both higher concentrations at the site of infection and lower systemic exposure, thereby significantly reducing the toxicities associated with these agents when administered systemically.

Cipro DPI is targeting non-cystic fibrosis bronchiectasis, or NCFB. The Phase III RESPIRE program featured two 48-week multinational randomized, placebo-controlled studies. One of these studies has already completed enrollment in April of this year, and Bayer expects the trial to complete in the first half of 2016. The second study is still enrolling, and Bayer expects this study to complete in the second half of 2016. The market for Cipro DPI is estimated to be about $750 million, and Nektar will receive an average 10% royalty on net sales.

Amikacin Inhale targets gram-negative pneumonia in ventilated patients in the ICU. Bayer is expecting completion of the Amikacin Inhale Phase III program in late 2016 or early 2017. The global market for Amikacin Inhale is estimated to be approximately $700 million, which would translate into highly significant revenues for Nektar. We will receive a flat 30% royalty on US sales and an average 22% royalty on ex-US sales. This level of royalty is the equivalent of owning half of the drug.

Our strategy has always been to balance our development risk across multiple drug candidates and therapeutic areas. This strategy has served us well and resulted in the deep and valuable pipeline we built at Nektar, which includes four Phase III programs, one filed BLA, and a recently approved and launched medicine. Our clinical late-stage partner programs, combined with the revenue streams from MOVANTIK and ADYNOVATE, could potentially lead to peak royalty revenue of $750 million annually.

With that, I'd like to hand the call over to Ivan to provide a clinical update on our internal programs.

Thank you, Howard. As Howard mentioned, NKTR-181 could emerge as an important drug in addressing the major societal problem of opioid abuse. NKTR-181 is particularly interesting because it's designed to be a revolutionary new opioid, not a reformulation of an existing opioid. And because of this, it could represent a significant advance in pain medicine. Importantly, it's also been granted fast track by FDA.

NKTR-181 acts as a full agonist at the mu-opioid receptor, and it has unique absorption and distribution kinetics that are related to the actual structure of the NKTR-181 API. NKTR-181 is specifically designed to cross the blood-brain barrier at a slow rate compared to traditional opioid therapies, thereby reducing its potential for euphoria and abuse.

Enrollment's well underway and is ahead of schedule in the Phase III SUMMIT-07 trial, which began in February of this year. The trial compares NKTR-181 to placebo in opioid-naive patients with chronic low back pain, with approximately 200 patients to be randomized into each arm. Patients from this efficacy trial will also be eligible to roll into the long-term safety study of NKTR-181, which was also initiated earlier this year.

The SUMMIT-07 efficacy trial include an interim analysis that will allow for adjustments to the sample size in order to maintain appropriate study power to detect a statistically significant difference between NKTR-181 and placebo. Such an analysis is designed to increase the probability of a successful outcome, and we expect the SUMMIT-07 trial to be completed in approximately 18 months. In addition, we are currently finalizing the design with the FDA for the second Phase III efficacy study for NKTR-181, which will be conducted in opioid-experienced patients.

Now I'd want to move on to what we are doing in cancer immunotherapy, and in particular what we are doing with NKTR-214, a program that many of you have been asking about. If we are successful with NKTR-214, we believe it showcases how our technology platform could play an important and unique role in the development of next-generation immuno-oncology therapies.

NKTR-214 is a CD122-biased immune stimulatory cytokine which targets the key signaling receptor on the CD8-positive effector T-cells. These effector T-cells are the body's most effective tumor-killing cells. Activation of CD122 increases the proliferation of these effector T-cells, and this action is what differentiates NKTR-214 from the range of regulatory checkpoint inhibitors in development or approved today. So our objective with NKTR-214 is to increase these tumor-killing cells specifically within the tumor without stimulating production of T-regulatory cells, which would suppress an anti-tumor response.

In pre-clinical studies using a subcutaneous B16F10 mouse melanoma model, NKTR-214 resulted in a 400-to-1 ratio of CD8-positive effector T-cells as compared to T-regulatory cells within the tumor itself. And to give you an idea of how meaningful this ratio is, in the same model, treatment with vehicle resulted in a ratio of 1-to-1. We believe this explains why NKTR-214 performed exceptionally well as a single agent in very difficult tumor models of melanoma and lung cancer.

From a safety standpoint, the molecule appears to be well tolerated in our toxicology studies of predicted therapeutic doses based upon pre-clinical modeling, including several non-human primate studies, where we have observed no evidence of vascular leak syndrome or low blood pressure.

We have also combined NKTR-214 with PD-1 inhibitors and CTLA-4 inhibitors in various tumor models, which resulted in synergistic anti-tumor immune responses. In tumor rechallenge experiments with NKTR-214, the combination of anti-CTLA-4 and NKTR-214 achieved durable and long-lasting responses after a single course of the combination was administered.

Although it is a cytokine, NKTR-214 is designed to be dosed like an antibody, similar to the dosing schedules with PD-1 and CTLA-4 agents. Because of its safety profile and its dosing schedule, it could be an ideal combination drug in the evolving landscape of immuno-oncology.

In Q2, we signed a clinical collaboration with MD Anderson Cancer Center for the Phase I/II development of NKTR-214. Drs. Patrick Hwu and Adi Diab will be running the Phase I/II studies at MD Anderson. The study will also be conducted at Yale under the leadership of Dr. Mario Sznol.

The Phase I/II clinical studies will evaluate NKTR-214 in a variety of tumor types, both as a monotherapy and in combination with other agents, including a PD-1 inhibitor. The first single-agent dose escalation part of the study will begin before the end of this year. And also as a part of this program, we are working with MD Anderson to establish a comprehensive assessment of predictive biomarkers, which we would use to increase the likelihood of successful development of NKTR-214.

Dr. Diab will be attending our R&D Day on October the 8th in New York, and he will share more details on the development path and translational research planned for NKTR-214.

And with that, I would like to turn the call back to Howard.

Thanks, Ivan, for the clinical update. We're very pleased that the launch of MOVANTIK is off to a strong start and that Baxter is looking forward to approval and launch of ADYNOVATE later this year. We're proud of the pipeline we built at Nektar, which includes, as I've said, four Phase III programs, one filed BLA, and a recently approved and launched drug.

As I said earlier, our clinical-stage partner programs, combined with the revenue streams from MOVANTIK and ADYNOVATE, could potentially lead to peak royalty revenue of $750 million annually. As we said last quarter, we will continue to balance our near-term development priorities and spend with the goal of advancing our pipeline, becoming cash flow positive, and avoiding dilutive finance.

With that said, I'll turn the call over to John for a discussion on our financial results. John?

Thank you, Howard, and good afternoon, everyone. I will start with a review of our second-quarter 2015 financials, and then I will go through our annual financial guidance.

Total revenue in Q2 2015 was $22.7 million versus $28.5 million the second quarter of 2014. The decrease in revenue was due to lower milestones from our collaboration partners, partially offset by higher product sales.

Total operating costs and expenses for the second quarter of 2015 were $66.1 million versus $51.4 million in the same quarter a year ago. The increase was primarily driven by increased R&D expenses as a result of our NKTR-181 Phase III program as well as increased costs of goods sold.

R&D expense in Q2 2015 included the ongoing NKTR-181 Phase III program, including SUMMIT-07, the 12-week efficacy study, and SUMMIT-08, the long-term safety study; the commercial scale-up of device production for Amikacin Inhale program; ongoing monitoring expense for patients still in the NKTR-102 Phase III BEACON study; IND-enabling manufacturing; and final pre-clinical activities for NKTR-214. Research and development expenses also included $3.6 million of non-cash stock-based compensation and depreciation expense.

For the second quarter of 2015, G&A expense was $10.2 million, which included approximately $2.4 million in non-cash expenses. Cash and investments at June 30, 2015, were $279.7 million as compared to $325.8 million at March 31, 2015. Our year-end cash guidance for 2015 remains unchanged, and we still plan to end the year with approximately $200 million in cash and investments and does not include any royalties from MOVANTIK. This represents a net use of cash of approximately $63 million in 2015.

As Howard stated, the launch of MOVANTIK by AstraZeneca occurred at the end of the first quarter. However, our cash and revenue guidance does not include projections for royalties from net sales of MOVANTIK in the US and Europe. We believe there will be more to provide guidance once there is an established sales history for the product. As a reminder, we recognize all royalties on net sales one quarter in arrears.

Revenue for 2015 is still expected to be between $215 million and $225 million, including $19 million of non-cash royalty revenue. We expect to recognize the $40 million milestone payment in the fourth quarter of 2015 following first commercial sale in either Germany or the UK. Additionally, we expect to recognize a $10 million milestone from Baxter in the fourth quarter upon approval of BAX 855. Other than the milestones discussed, we expect the remaining revenue for the year will be approximately evenly split between the last two quarters. Again, our revenue guidance does not include MOVANTIK royalties.

Our R&D expense guidance is unchanged at $185 million to $195 million, with approximately $16 million of this as non-cash items such as stock-based compensation and depreciation expense. 2015 G&A is also unchanged and is anticipated to be between $42 million to $44 million, which includes $11 million of non-cash expense. And let me remind you again, our cash guidance for the end of the year is unchanged, and we still expect to end 2015 with $200 million.

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

Thank you. (Operator Instructions.) Jonathan Aschoff, Brean Capital.

I was wondering, could you tell us if any additional promotional initiatives will come in the near future from Astra or Daiichi Sankyo? And I guess another thing on MOVANTIK would be when the sales force does receive pushback from docs, how would you characterize that pushback?

Okay, hi, Jonathan, good questions. Look, I certainly can't be specific, and I don't want to be specific, but I know that AstraZeneca certainly has a direct-to-consumer branded program, advertising program and television program planned as physicians become more comfortable and more aware of MOVANTIK. So right now, they're running unbranded ads, and I think at some point in the future, they will be running branded television ads. But I'm really not at liberty, or it's probably inappropriate for me to speculate on when that might be. But it will certainly be coming.

In terms of pushback that sales reps get from physicians, I think overall it's what you would expect when you're launching a new therapy into a much-underserved market. You go to physicians; they're not necessarily willing to admit that their patients have OIC. The pain specialists, probably a little bit more than the primary care docs, are willing to admit it, but generally speaking, physicians have no way to treat OIC, because let's be realistic -- laxatives don't work. And even other therapies that are not PAMORAs don't work that well. So physicians don't have many options, and they ignore the fact that patients have OIC.

Now you come along with a drug that specifically targets this condition via a very targeted mechanism, and it takes a little bit of time to get physicians to acknowledge that their patients have it, to ask their patients about it, et cetera. I would say this, though -- as the physicians learn how many of their patients have OIC, and they'll tell you that's the vast majority of their patients that are taking chronic opioid therapy, they also readily understand how the mechanism works, how a PAMORA works. It's a very, very logical construct. And because of that, the adoption is pretty rapid.

So as I said, we're very pleased with the reception we're getting from physicians and patients, but you've got to get through that initial barrier because you're launching a drug and you're building a market that doesn't exist. And I think they're off to a great start.

Thanks for that. I was wondering, for NKTR-181, what is your sense of the maximum number of patients you might have to add, and how much time would that add to data release? Have you thought about where you actually could have to wind up? And what is that upper end of the range?

I will turn that call over to Ivan to take a stab at that.

So clearly, at the outset, we're putting about 400 patients into the study -- or 208, actually, for a total of 416, randomized one-to-one. But we will be doing, as I think, an interim analysis simply for sample size reevaluation. If we need to increase the sample size, that will be an incremental 200 patients, so the maximum number of patients going into the study would be about 600.

I don't envisage that will have -- it will have some impact on the timings, but at the time we probably get the results of the interim analysis, we should be around about fully recruited to the first 400, so I think. And we'll be moving quite quickly, I envisage, at that point, with all centers really up and going under steam. So one would hope it potentially adds maximally six months to the study, but hopefully, less than that.

That was helpful. Thanks. I was wondering, could you be a little more specific about what trials are run with 214 and what you intend to spend on it next year, at least?

Certainly, we are -- as you know, we intend to initiate 214 at the end of this year. We hope to have the first patient in at -- we're running it with MD Anderson and at Yale. The first part of the study will be a dose escalation in multiple tumor types. And then, once we have seen the early results of that, we intend to go into dose expansion cohorts.

And look, we don't generally discuss the specific costs of trials, Jonathan, but I would tell you that look, we're doing these Phase I/II trials at MD Anderson. And certainly, this is potentially a very, very important cancer immunotherapy agent. And if it works, while no one could be certain, we're hopeful that these Phase I/II trials can function as pivotal trials. There's no guarantee that we'll get there, but I think that's certainly something that we're hoping for. And if we see the kind of results in humans that we've seen in our pre-clinical models, it should be very impressive. So at least conceptually, we're thinking about these Phase I/II programs as potentially pivotal. We'll see.

Okay. I mean lastly, really briefly, this $11.7 million in product sales and royalty -- is that just a bump, a temporary bump? Because that number's been bumping around. Or is this something from which you intend to grow?

To be honest with you, Jonathan, from a growth standpoint, we don't see much growth there based upon what's on the market today, because most of that comes from sales for Cimzia. It really is going to depend upon whether or not other things that are in Phase II and Phase III are successful going forward. So like if Ophthotech has a positive Phase III, obviously, there will be an increase in revenue for us there. But that's all dependent upon their Phase III readout.

Okay, thank you very much, guys.

Jessica Fye, JPMorgan.

This is Ryan on for Jess. Are there any metrics or comments you can give us on the DTC effort? And what are you learning from that program? And also, can you give us any more color on Tier 2 access? Thanks.

Well, I think, first of all, remember, the direct-to-consumer program that's running now is unbranded. It deals with OIC; it doesn't deal with MOVANTIK. That said, there's clearly a benefit to that program, and there's certainly, if you look at, over the last few weeks, double-digit growth of MOVANTIK prescriptions, I think it's very impressive. And I think, of course, it's very important to make sure that the marketplace understands there's a medical condition here.

Remember, a lot of these patients don't talk about it with their physicians because they're embarrassed to talk about the fact that they're severely constipated. And the physicians don't want to discuss it with the patients, because quite frankly, before MOVANTIK was launched, there really wasn't any reasonable way to treat these patients other than give them some version of a laxative, whether it's prescription or over the counter.

So I think you've got to allow the patients to understand that there's a viable reason for going to the physician and talking about your OIC. Once the physicians are very comfortable that they understand how MOVANTIK works, what it can do, the profile of MOVANTIK, then I think you'll see direct-to-consumer branded advertising start.

And it's up to AstraZeneca when they feel they're ready to do that. But I would expect it to be in the -- I wouldn't expect it to be too far out. But I think overall, the feedback that AstraZeneca gets from physicians and patients is they like the drug very much. And I think we are very happy with the growth rate. And double-digit growth has really taken off since the unbranded ads have started.

So there's no doubt that those television ads are having the desired effect, and I would expect the branded television ads to have even a more profound effect.

I'll let John talk about the Tier 2 question.

So as far as the Tier 2 goes, basically, what AstraZeneca was able to accomplish in the beginning was before the product was even launched, they had an agreement with three of the major payers to basically make the product a Tier 2, and they're continuing to work through additional payers as time goes forward. Obviously, for competitive reasons, they do not make that information public as to who they are.

Okay. And a follow-up question, if I may, changing to 214. I know that it's early, but how are you guys thinking about potentially going at it alone with this or potentially bringing on a partner?

Oh, I think -- look, if 214 works the way we expect it to work -- and, of course, we have to complete our Phase I studies and Phase II studies to get that -- I think that's a drug Nektar keeps for itself. I mean, if you think about -- Nektar-214, understand, is very, very different from every other cancer immunotherapy being developed. We're not focused on affecting the regulatory side of the immune system.

We're directly stimulating the immune system and not allowing the regulatory side of the immune system to down-regulate the immune system. So a very, very unique approach. There's no other molecule that I know that works in that fashion. And I think it's absolutely appropriate and doable for Nektar to develop that drug and bring it to market.

I think, just to add to Howard's point, that's why MD Anderson was so keen. They were very excited. They remain very excited about working with us. And one of the reasons that we reached out to them and they came back to us -- I mean, it's going to be a great collaboration, I believe.

Great, guys. I appreciate you for taking our questions.

(Operator Instructions.) Bert Hazlett, Ladenburg.

Thanks. Congratulations on all the progress. Just on the -- I guess on the 181 program in the second Phase III, you've said at this point it's 18 months to, I think the data readout was what I heard. If that's not correct, could you correct it? And is that roughly what we should be modeling in for the second Phase III in opioid-experienced patients as well?

Yes, I think -- good question. I think you are correct, that you should have the first readouts on the first Phase III study in about 18 months, and the study runs about 18 months. And the second study would also be approximately 18 months, but we haven't -- obviously, we haven't started that yet, and we're having the discussions with the FDA as to what that study should look like in opioid-experienced patients. I would hope that a positive first 181 Phase III study bodes well for success in the second Phase III 181 study. But they are not fully running in parallel at this point, obviously.

Okay, thank you. Two other questions. My favorite one on the MOVANTIK line extension/combinations with the underlying opioid, where does that stand, and when might we hear anything?

Yes, look, I can't speak for AstraZeneca. I think they have an obligation to -- that's Nektar-119, NKTR-119. They have an obligation under the contract to develop that drug, and I can't speak for them as to how they're approaching that or what they're doing. I think they have to be the ones that answer that question. Per the contract, I'm not really allowed to comment on that. But they do have an obligation to develop that drug, and you can imagine a number of different opioids that you could combine with MOVANTIK. It's a fairly straightforward process. So at this point, I can't comment any more than that.

Okay, thank you. And then just on 214, if you, if any of the group would want to expound on just the Phase I/II moving to potentially being a pivotal. I know you've discussed that in general terms before. Could you put a little bit more of a finer point on that? And I know it's early days in terms of collaboration, but any sense in terms of timing when we might get our first look at any kind of data from that study?

Well, look, I'll turn it over to Ivan. Let me just clarify, based on what you said. I think, clearly, you have to define in this study what kind of response rate you're expecting. And if the response rate is very, very profound and robust and combined with an excellent safety profile, you can potentially go to the FDA with that kind of dataset. But I don't think we've fully defined that yet, so I'll let Ivan talk about timing with you.

Yes, hi, Bert. So look, obviously, we're going to do the initial phase of the study is dose escalation, and we envisage that will probably take nine months-ish, once we've started, before we get into dose escalation. Obviously, we're going to hopefully get some nice signals, potentially, out of that, and we'll be there looking at biomarkers. We'll then go into dose expansion cohorts.

In that area, we're likely to be looking at renal cell carcinoma, melanoma, potentially non-small cell lung. And if we start to see a strong signal there, obviously, we'll expand our expansion cohorts and we'd be looking for signals.

Clearly, the pathway is one where we'd be looking potentially for, if you look at where other agents have gone, they've gone for overall response rates. And where they've seen meaningful signals in patients that remained refractive to other therapies, there's clearly a regulatory pathway that way. So if our molecule is robust, if we get good results, clearly, that's the sort of pathway we'd be considering on taking.

Okay, and just a quick follow-up in terms of biomarkers. Can you elucidate any further what you might be looking for in the early days with the study?

Yes, hi, Bert, this is Steve. Look, there's a whole array of biomarkers, as we know, in the immune field. And those range from pharmacodynamic markers, looking for effects on lymphocytes, both in the tumor and in the periphery, to the kind of markers that you think might be predictive. And I think the things that have borne out well so far for the checkpoint inhibitors have been things like exome sequencing for total mutational load, looking histologically for tumor-infiltrating lymphocytes, things like that.

We'd certainly be looking at a number of things here, because our goal here is to not only, of course, be able to better define the population that might respond really well to 214, but of course, there's a whole emerging set of data about the checkpoint inhibitors that tell us what populations are not well served by the checkpoint inhibitors.

For example, if you think about the anti-PD-1s and looking at PD-L1 status in those patients, I think there's some emerging evidence there that's pretty interesting that says if you're PD-L1 negative, that the anti-PD-1s don't work very well there. Of course, CD122, the target of NKTR-214, is present on all T-cells. And so that might be a very interesting kind of subgroup to look in someday, I think.

So we're going to have to integrate the data that we collect and look at here in Phase I and early Phase II with the outside data that comes in from the outside world as we understand better the tumor immune response.

We're going to talk a lot more detail about this at our upcoming Analyst Day in October, and so I defer the rest of it to there. But that's our general thinking.

Thank you. Exciting stuff. We'll look forward to additional conversations. Thank you.

And that does conclude the Q&A session. I will now turn the call back over to Howard Robin, President and CEO, for closing remarks.

Okay. Well, first, I'd like to, as usual, thank all of our employees for doing such a great job to develop such an impressive pipeline, and I know they all work very, very hard and they deserve a lot of credit. And thank you all for joining us this afternoon.

And by now, you've received and heard that we will have our R&D Day on October 8 in New York, and we will be hosting a panel of immuno-oncology experts and other key opinion leaders in order to showcase our internal pipeline program. So we look forward to seeing you there. And we also look forward to seeing many of you at the FBR and the Ladenburg conferences in September.

So thank you very much and have a great evening. Thank you, bye-bye.

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