Nektar Therapeutics (NKTR) 2021 Q2 法說會逐字稿

Good day, and thank you for standing by. Welcome to the Nektar Therapeutics Second Quarter 2021 Financial Results Conference Call. (Operator Instructions) Please be advised that today's conference may be recorded. (Operator Instructions) I would now like to hand the conference over to your speaker today, Jennifer Ruddock, Head of Corporate Affairs. Please go ahead.

Thank you, Crystal, and good afternoon, everyone. Thank you for joining us today. With us on the call are Howard Robin, our President and CEO; Gil Labrucherie, our COO and CFO; Dr. Jonathan Zalevsky, our Chief of Research and Development; and Dr. Dimitry Nuyten, our new Chief Medical Officer.

On today's call, we expect to make forward-looking statements regarding our business, including clinical trial enrollments and clinical trial results, timing and plans for future clinical trials, timing and plans for future clinical data presentations, the therapeutic potential of our drug candidates, outcomes and plans for health authority regulatory actions and decisions, financial guidance and certain other statements regarding the future of our business.

Because 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. Our actual results may differ materially from these statements. Important risks and uncertainties are set forth in the Form 10-Q that was filed on May 7, 2021, which is available at sec.gov. We undertake no obligation to update any of these 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 of Nektar's website at nektar.com.

Before turning the call over to Howard, I'd like to remind you again that since we're dialing in from different locations, I will moderate the Q&A session for our team, so we can avoid technical issues during the session. We appreciate your patience. With that said, I would like to hand the call over to our President and CEO, Howard Robin. Howard?

Thank you, Jennifer, and thanks, everyone, for joining us on the call today. Since the beginning of this year, we've continued to advance our deep portfolio in immuno-oncology and immunology, setting the stage for a steady cadence of key data readouts starting in the second half of this year and will continue through the first half of 2022. These data sets are poised to provide us with the platform for a series of BLA filings and commercial launches of bempeg across multiple frontline solid tumor indications.

Each of the investigational candidates in our pipeline, bempeg, NKTR-255 and NKTR-358, provide us with our own distinct value and broad development potential. And collectively, our clinical pipeline represents one of the most diverse and leading cytokine portfolios in development, a testament to our pioneering work in targeting cytokine biology and designing cytokine conjugates.

Behind our clinical portfolio, we continue to invest in the area of immune science and cytokine biology to drive the next wave of IND candidates. From an operational perspective, we entered the third quarter of 2021 with an exceptionally strong balance sheet with over $1 billion in cash and no debt. Our strategic collaborations offer significant funding support for certain trials. And in the case of our collaboration with BMS, provide for a potential $1.4 billion in filing and approval milestones for bempeg in the U.S., Europe and Japan.

And as a reminder, these milestones are tied to any approval of bempeg, whether the approval is in combination with nivo or not. So let me begin today with bempeg, our most advanced clinical program, an IL-2 pathway agonist that is being developed in combination with checkpoint inhibitors nivo and pembro in multiple large frontline and adjuvant tumor settings.

Throughout our partnership with BMS, we have 5 ongoing registrational studies of bempeg with nivo that are proceeding nicely. We're uniquely positioned with 3 registrational studies for bempeg, which are expected to read out in the first half of 2022. These are the Phase III study in metastatic melanoma, the Phase III study in renal cell carcinoma and the Phase II accelerated approval study in PD-L1 low cisplatin-ineligible bladder cancer. Also ongoing with our partner, BMS, our 2 additional large Phase III studies, one in adjuvant melanoma and one in muscle-invasive bladder cancer. Both indications offer an opportunity to expand the patient populations in melanoma and bladder cancer and could potentially benefit patients earlier in those diseases from treatment with bempeg.

In addition, BMS is conducting a Phase II study in renal cell carcinoma for bempeg plus nivo with a TKI to pave the way for future development of a TKI inclusive regimen building on their recent successful approval of nivo plus cabo. In terms of our strategy for bempeg plus pembro, our first priority is to focus on the largest settings where pembro is the gold standard of care, non-small cell lung cancer and head and neck cancer, and where we have the ability in that setting to combine bempeg with pembro and run a comparative study against monotherapy pembro designed for registrational purposes.

We look forward to reporting data from our Phase II PROPEL study in non-small cell lung cancer later this year, which will help inform our registrational strategy for the doublet, either with or without chemotherapy in non-small cell lung cancer. While pembro has improved overall survival in patients with non-small cell lung cancer, its benefit is still limited to 2 years or so. And so we believe there's an opportunity to increase the treatment benefit in multiple regimens, while also offering a chemo-sparing regimen in this tumor setting.

We've also made excellent progress as we prepare to launch our Phase II/III study of pembro and bempeg in head and neck cancer. We're ahead of schedule and now expect the study to be open for patient enrollment within the next few months. We're excited about the potential of this doublet to increase and deepen responses versus pembro alone in this cancer, which has been shown to be immune sensitive. Pembro has about 75% of the market share in the first-line setting for treatment of head and neck cancer. And with several recent Phase III failures in this setting, we are particularly encouraged by the potential of this doublet, the leading checkpoint inhibitor combined with our unique IL-2 mechanism.

An equally compelling opportunity for us in the earlier stages of development is our second immuno-oncology candidate, NKTR-255, an IL-15 agonist, which has demonstrated its ability to expand natural killer cells, CD8 T cells and memory T cells. Given these unique attributes, NKTR-255 could address even more tumor types than bempeg, including both liquid and solid tumors. We have a robust development plan in place, focused first on combining NKTR-255 with antibodies that use antibody-dependent cellular cytotoxicity, or ADCC, to kill cancer cells as these antibodies require functional NK cells for their mechanisms of action.

We know that long-term expansion of natural killer cells through an IL-15 mechanism can greatly enhance the activity of these ADCC agents. And we have 2 ongoing studies, 1 in solid tumors with cetuximab focused on colorectal cancer and head and neck cancer and 1 in liquid tumors with rituximab focused on non-Hodgkin lymphoma and with daratumumab focused on multiple myeloma. We look forward to providing data updates from these studies at medical meetings later this year.

The third cytokine in our portfolio is NKTR-358, which is being developed in autoimmune disease in partnership with Eli Lilly to address a broad range of autoimmune and inflammatory conditions. NKTR-358 targets the IL-2 receptor complex in order to stimulate proliferation of powerful inhibitory immune cells known as regulatory T cells. By activating these cells, NKTR-358 may bring the immune system back into balance. While we have seen recent activity in the Treg mobilizing pipelines, for example, Merck's recent acquisition of Pandion Therapeutics, Lilly is the clear leader in this space in respect to both the broad scope of development and the advanced clinical stage of the NKTR-358 program.

And we're the only company to have reported a multiple dose effect of our agent on key regulatory cells in patients. As was planned from the outset of our collaboration with Lilly, the development program, including manufacturing, has now transitioned over to Lilly. Lilly now has 4 NKTR-358 clinical studies underway, a 280-patient placebo-controlled Phase II study in lupus, a 200-patient placebo-controlled Phase II study in ulcerative colitis and 2 ongoing separate Phase Ib studies in psoriasis and atopic dermatitis.

We expect data readouts from these Lilly-run studies over the next 6 to 18 months. And there are plans for future Phase II studies to be added to the program in the near future. I want to take a brief moment here to introduce our new Chief Medical Officer, Dr. Dimitry Nuyten who joined Nektar last month. We are fortunate to have Dimitry on Board at this exciting time for the company, and he brings to Nektar extensive clinical development experience in immuno-oncology that will be valuable as we advance our pipeline.

While at Pfizer, he designed and led the successful JAVELIN Bladder 100 study, which resulted in U.S. and European approvals for avelumab in first-line maintenance setting for patients with bladder cancer. Dimitry will oversee our clinical strategy and activities including direct supervision of clinical sciences, clinical operations, data science and systems, medical affairs and clinical pharmacology. And we look forward to his leadership as we execute our robust development programs from bempeg and NKTR-255. So I'd like to turn it now over to Dimitry. Dimitry?

Thank you, Howard, for the kind introduction. To say a few words about my background, I'm a radiation oncologist and finished my training at the Netherlands Cancer Institute in Amsterdam. I hold a PhD in Cancer Biology from the University of Amsterdam. I started my industry career at Bristol Myers Squibb in early development oncology, leading a number of early development programs. I then went on to Pfizer where I led the clinical development for immuno-oncology, most notably, the BAVENCIO or avelumab program with a number of registrational trials, including RCC and bladder cancer.

Most recently, I was Chief Medical Officer for Aduro Biotech. I'm very excited to be joining Nektar, a company that has led the way in engineering cytokine therapies that address some of the biggest challenges in the treatment of cancer and autoimmune disease. While the potential advantages of IL-2 and IL-15 based therapies are well characterized, the challenges associated with turning these into accessible therapies have hindered the development of agents targeting these pathways.

I was particularly impressed with Nektar's expertise in both immune sciences and polymer chemistry, the combination of which has allowed to create one of the most impressive pipelines in oncology and immunology today. With several late-stage development programs for bempeg nearing their completion and the clinical development strategy for NKTR-255 being formed, I look very much forward to working alongside the rest of the program teams and executive team, to drive the development of these programs with our goal, of course, of improving the lives of patients.

I will provide a quick update on the bempeg program and the timing for registrational studies, which remain firmly on track consistent with our prior guidance. First, for the 760-patient Phase III first-line metastatic melanoma study, which is being run by our partner, BMS. We and BMS are very much looking forward to completion of the study and future data. BMS has an excellent track record in the melanoma setting, and nivo has a very robust and dominant market share.

This presents a unique opportunity for the doublet of bempeg and nivo to potentially help patients who still do not have enough treatment options. As you know, BMS is running the study. And after the pause for COVID enrollment in the study went very well in the first part of 2021. BMS has recently informed us they intend to conduct their first analysis of the data for both ORR and PFS endpoints for the Phase III melanoma study when the number of events outlined under the statistical protocol for the PFS endpoints are reached.

As you know, the PFS endpoints was intended for -- from the onset to be the endpoint for filing for full approval for the study. BMS and Nektar believes that with the breakthrough therapy designation and a single data analysis at PFS time point, this approach will enable preparation for our teams to allow for expeditious future regulatory filings once top line results are available and if warranted by the data. Current projections from BMS indicates that this data analysis could occur in the early part of 2022. Since PFS is an event-driven analysis, a number of factors including the actual rate of PFS events might impact the timing.

The next study, which Nektar is running, is the 620-patient Phase III first-line renal cell carcinoma study comparing bempeg plus nivo versus a PKI agent or physician's choice, which can be either sunitinib or cabozantinib. We expect that we could reach our first interim analysis for the primary endpoint of overall survival sometime in the first or second quarter of 2022. BMS and Nektar are taking a comprehensive approach to the development of bempeg plus nivolumab in this particular tumor type. And BMS is also conducting a 250-patient Phase II study in RCC that combines bempeg plus nivo with Exelixis' CABOMETYX, which allows us to compare this treatment to the nivo-cabo regimen to pave the way for a TKI inclusive regimen in RCC with bempeg plus nivolumab.

The first -- this past quarter, BMS and Nektar expanded the strategy in RCC to a new collaboration with Exelixis, who will conduct a study evaluating bempeg plus nivolumab with novel next-generation TKI XL092. The study will also include other GU cancer, including urothelial cancer. With respect to the Phase II study in first-line CIS-ineligible urothelial carcinoma, which Nektar is also running, the study is designed to serve as a basis for potential filing for accelerated approval. The study includes about 110 cisplatin-ineligible urothelial carcinoma patients who have a baseline CPS score of 10 or lower as a measure of PD-L1 expression.

The primary endpoint of -- sorry, the primary endpoints are overall response rate and duration of response as determined by central radiology review. For this study, we are looking to achieve a median follow-up for measuring duration of response of 18 months, and we expect our first data from this study in the first or second quarter of 2022 as well. The bempeg-nivolumab program also has a large Phase III study in muscle-invasive bladder cancer and adjuvant melanoma.

First, our Phase III peri-adjuvant muscle-invasive bladder cancer study, which is being run by BMS, is enrolling approximately 540 patients who will receive bempeg plus nivo or nivo monotherapy first in a neoadjuvant setting prior to radical cystectomy and then in the adjuvant setting for a 12-month treatment period following surgery.

As this study treatment period is long, we expect the first data readout to be in 2024. This study is also designed to serve as a confirmatory study for our planned potential accelerated approval in the metastatic CIS-ineligible urothelial carcinoma setting.

Second, the Phase III adjuvant melanoma trial, which Nektar is running and is enrolling a total of approximately 950 patients with a 12-month treatment period post-surgery with an endpoint of recurrence-free survival by blinded independent central review. This study is now rapidly enrolling ahead of schedule. The study is designed to position bempeg as standard of care for the treatment of melanoma building on the recent nivolumab approval in this setting.

If successful, the study could significantly expand the number of melanoma patients that can benefit from bempeg plus nivo in combination. Initial data from this study is expected in 2024.

I'll turn now to the PROPEL study evaluating bempeg plus pembro in non-small cell lung cancer. As Howard stated, we report the initial data from the PROPEL non-small cell lung cancer study before the end of 2021. As we've said in the past, we are looking for a maturity of at least 2 scans or more for patients on treatment, so we can fully understand the potential clinical benefit of the doublet over time. As a reminder, we plan to have data from approximately 60 patients that will be spread across 3 separate PD-L1 expression subgroups, and the study plan is designed to show benefit of the doublet compared to historical ORRs achieved with single-agent pembrolizumab in the efficacy evaluable population treated in less than 1%, 1% to 49% and greater than or equal to 50% PD-L1 expression subgroups.

In non-small cell lung cancer, we know that the quantity of underlying inflammation in the tumor microenvironment can impact antitumor activity of single-agent checkpoint inhibitors such as pembrolizumab. This is defined by PD-L1 expression status. As we have discussed in the past, single-agent pembrolizumab has most benefit in patients in the greater than 50% subgroup. Given the mechanisms of bempeg, which targets and increases the inflammatory state of the tumor of regulation PD-L1 in the tumor microenvironment, we believe that the combination of bempeg and pembro in non-small cell lung cancer could improve the efficacy of the doublet in multiple PD-L1 expression subgroups.

We also recently added a chemotherapy combination arm to the PROPEL study in order to allow us for potentially including the doublet with chemotherapy option in our Phase II strategy. This work plus the initial data from PROPEL will allow us to determine a comprehensive Phase III strategy for bempeg in non-small cell lung cancer. For our new registrational Phase II/III trial in head and neck cancer, as Howard stated, we are ahead of schedule and expect our first patients will be enrolling in the next few months. We have collaborations in place with both Merck and SFJ Pharmaceuticals for this study and are very excited about the opportunity to address a large patient population here in the frontline setting.

The 500-plus trial is designed to support a potential global registration of bempeg plus pembro doublet. It includes an interim analysis of ORR after the first 200 patients are enrolled. If the ORR passes a prespecified futility boundary, the study will continue and the remaining 300 patients will be enrolled to the Phase III portion of the study and then a total of 500 patients will be evaluable for the primary endpoints of ORR and overall survival.

Given the favorable competitive landscape, we see this as a unique opening for us to establish bempeg as first IL-2 mechanism-based treatment in head and neck cancer. Let me now turn the call over to JZ, who will review the NKTR-255 program and the Lilly NKTR-358 program.

Thank you, Dimitry. Let me start with NKTR-255, an agent that engages the full biology of the IL-15 pathway to provide functional activation and homeostatic control of IL-15 response of immune cells, namely natural killer cells, CD8 T cells and immune memory subsets. As an agonist of the full IL-15 pathway, NKTR-255 can therefore be combined with multiple mechanisms ranging from targeted agents to cell therapy and even immunological checkpoints to potentially improve their efficacy.

In May, we published our first peer-reviewed manuscript on NKTR-255 in the Journal of ImmunoTherapy of Cancer, or JITC, The paper presents a head-to-head evaluation of NKTR-255 in comparison to pre-complex IL-15 agonist, which represents the vast majority of competitive IL-15 pipeline.

NKTR-255 demonstrated substantial differentiation from pre-complex IL-15 agonist in that NKTR-255 engages the full spectrum of IL-15 biology and has a prolonged pharmacokinetic and pharmacodynamic profile. And collectively, these properties of NKTR-255 promoted elevations in functionally competent cytotoxic NK cells in the tumor microenvironment and overall translated into increased survival rates and superior antitumor activity in the B-cell lymphoma model versus those pre-complex cytokines.

And as Howard mentioned, our initial focus is on antibodies that function through an ADCC mechanism of action. And we've developed a clinical strategy to combine with leading targeted antibodies in both the liquid and solid tumor setting. For our Phase I/II study in patients with relapsed/refractory hematologic malignancy, we expect to complete the dose escalation monotherapy portion of the study later this year, and we plan to present the data from these monotherapy dose-escalation cohorts at a medical meeting later this year.

As the trial continues, we will expand into several arms to approximately 20 patients per arm. The one arm will evaluate NKTR-255 as monotherapy or in combination with rituximab in third line or greater follicular lymphoma or low-grade NHL. In other arm, we'll evaluate NKTR-255 as a monotherapy and in combination with DARZALEX FASPRO in third line or greater multiple myeloma. And a third arm will evaluate NKTR-255 as a monotherapy for NHL patients who have previously progressed following approved CD19 CAR-T cell therapy.

Our second clinical study is evaluating NKTR-255 in combination with cetuximab in 2 distinct groups of highly refractory late-line patients with metastatic colorectal cancer or head and neck cancer. We are enrolling up to 80 patients in the U.S. and Europe. As you know, cetuximab has a very low response rate, about 10% or 15% in this setting. And our goal is to improve upon that with the addition of NKTR-255, which would then provide several potential paths forward for the program. Now this study begins with a dose escalation running where we evaluate the combination of cetuximab with increasing dose levels of NKTR-255.

We have already completed the first dose-escalation cohort at the lowest dose and have fully enrolled the second dose cohort. As we complete the dose-finding portion for the combination, the study will then expand into dedicated cohorts for colorectal cancer and head and neck cancer patients. And we expect to present some initial data from the dose-finding cohort for this portion of the study at a medical meeting later this year.

Now switching gears to immunology. As Howard said earlier, we are very pleased with the broad scope of development and overall advancement of the NKTR-358 program being executed by our partner, Eli Lilly. Many autoimmune and inflammatory disorders, including systemic lupus and ulcerative colitis are associated with decreased Treg numbers, reduced Treg function and/or reduced production of IL-2.

With NKTR-358, our goal is to address these Treg abnormalities and to develop an IL-2-like molecule that could selectively stimulate Tregs in a more effective manner than low-dose IL-2. Also in May of this year, we announced the publication of our preclinical results in the Journal of Translational Autoimmunity. This publication describes the foundational science behind NKTR-358 and its potential role in the treatment for a broad range of autoimmune disorders. And indeed, we have seen this preclinical data translate into positive clinical data with positive data in lupus patients presented at both EULAR and ACR last year.

And following that data, Lilly commenced the Phase II study in lupus. Then earlier this year, Lilly initiated a Phase II study in ulcerative colitis. Lilly also continues to advance the 2 separate Phase Ib studies in psoriasis and atopic dermatitis. The Phase II trial of lupus is progressing very nicely. As a reminder, 280 patients are being randomized to 1 of 3 doses of NKTR-358 or placebo, administered every 2 weeks for a treatment period of 24 weeks. The primary endpoint in the Phase II study is the percentage of patients achieving at least 4-point reductions in the SLE Disease Activity Index or SLEDAI scale.

Standard clinical composite endpoints used in lupus studies are also included in the secondary endpoints. We will also characterize pharmacokinetics, pharmacodynamics and immunogenicity in treated patients. Endpoints will be measured at week 24, and we expect the study to be completed within 18 to 24 months. Earlier this year, Lilly also initiated a Phase II randomized, placebo-controlled trial in patients with ulcerative colitis and began enrolling patients in the first quarter of this year. The study will evaluate multiple dose levels during the initial induction period using an adaptive design. Total enrollment is planned to be 200 patients. And the trial endpoint is the percentage of patients with clinical remission after induction treatment at 12 weeks.

In addition, as Howard stated earlier, we know that Lilly is planning to continue to grow the development program for NKTR-358. There are plans for 2 additional Phase II studies to be initiated in 2 new indications. We are pleased with Lilly's rapid advancement of the program and their desire to develop this agent broadly in inflammatory and autoimmune diseases. Finally, we look forward to the potential presentation from the Phase Ib work ongoing in psoriasis and atopic dermatitis with NKTR-358, with data from at least one of these studies to be presented at a medical meeting in the next year.

Now before I hand the call to Gil, I'd like to give an update on our COVID-19 study. I am pleased to report today that the study is now concluded, and we have obtained encouraging results. As a reminder, the study was designed as a Phase Ib randomized, double-blind, placebo-controlled trial, evaluating only a single dose of bempeg or placebo given to 30 adult patients with confirmed mild COVID-19 infection. You will recall that the scientific hypothesis in the study was to understand whether bempeg could be used to increase absolute lymphocyte count or ALC over an 8-day period in patients with mild COVID-19 as compared to placebo.

Research has shown that those patients diagnosed with COVID-19 who present with a low baseline ALC have a much higher likelihood of going on to develop severe disease and require hospitalization. In this study, we evaluated 3 escalating single doses of bempeg, 0.00075 milligrams per kilogram, 0.0015 milligrams per kilogram and 0.003 milligrams per kilogram. For reference, the top dose studied in this trial is 50% of the Q3 week dose that we are using in our registrational studies in bempeg plus nivolumab in cancer patients.

Overall, single doses of bempeg were well tolerated in patients with mild COVID-19, with AE similar to what we would expect based upon our prior experience with bempeg monotherapy in cancer patients. This was an important observation because it indicates that bempeg can be administered to patients with underlying viral-induced inflammation. The study met its primary objective in that we observed a clear dose response and absolute lymphocyte count increased from baseline to day 8 for the different dose levels of bempeg.

For the 15 placebo patients over the 8-day period measured, there was an overall reduction in ALC from baseline. Although this study was not designed for efficacy and the patients enrolled only had mild symptoms, we observed a shift in the WHO Clinical Progression Scale for the 5 patients that received the highest dose of bempeg with the majority of those patients experiencing improvement in symptoms by day 8 as compared to the patients who received placebo doses in the study. We are still analyzing these results and plan to share them with our advisers who are experts in this field.

We have also been carefully watching the situation with COVID, the combination of vaccine hesitancy, evolving COVID-19 variants and the growing number of long COVID cases. And if there appears to be a continued need to augment today's therapy, we want to be prepared to proceed. We look forward to keeping you updated on our next steps here once we've gone back to our advisers and had a chance to thoroughly evaluate the unmet need. And while we are enthusiastic about bempeg's potential in virology, of course, we are prioritizing the development of bempeg for the treatment of oncology. And with that, I will turn the call over to Gil.

Thank you, JZ, and good afternoon, everyone. On this call, I'll review our 2021 financial guidance, which is unchanged for the year. We ended the second quarter with over $1 billion in cash and investments, and we still plan to end the year with at least $750 million in cash and investments and no debt on the balance sheet. As a result, we remain in a very strong financial position. As we approach top line results for the 3 registrational studies for bempeg, beginning early 2022, as you will recall, we also have significant regulatory and approval milestones for bempeg under our BMS collaboration.

These milestones include $625 million associated with the approval and launch of bempeg for the first indication in the U.S., European Union and Japan and $260 million for each of the next 3 indication follow-on approvals for bempeg. This puts us in a very strong position to prepare for the commercial launch of bempeg as early as the second half of 2022 and at the same time, to continue to broadly advance our wide array of development programs.

As a reminder, our full year GAAP revenue guidance is approximately $100 million and includes $15 million to $20 million of product sales and $80 million to $85 million of noncash royalties. We expect to recognize the remaining revenue on a fairly ratable basis in the second half of the year. Our GAAP R&D expense guidance remains between $450 million and $500 million. We expect R&D expense to increase in the second half of the year as we continue to enroll patients across our broad clinical development portfolio. As mentioned earlier, we are currently initiating sites for our bempeg head and neck study to begin enrollment later this year. We continue to significantly wrap enrollment in the Phase III adjuvant study for bempeg and the NKTR-255 program.

And our partner, Eli Lilly continues to enroll and expand the NKTR-358 development program. Our R&D expense guidance includes approximately $85 million of noncash expense arising from stock compensation and noncash depreciation and the SFJ funding of the head and neck cancer study. Our G&A expense guidance is still projected to be between $120 million and $125 million and includes approximately $35 million of noncash depreciation and stock compensation expense.

Our noncash interest expense is expected to be between $50 million and $60 million arising from the monetization of our royalty streams. Additionally, our nonoperating expense includes approximately $15 million for the accounting of the contingent success-based payments to SFJ as a derivative liability. And with that, I will open the call to questions. Operator?

(Operator Instructions) And our first question comes from Chris Shibutani from Goldman Sachs.

This is CJ on for Chris this evening. I was curious, what's the limiting factor determining when the PROPEL data are going to be available later this year? Has enrollment completed? Or are we just waiting for a follow-up? And then I guess, will we see any of the chemo cohort data in the readout as well?

Thanks, CJ. JZ, I'm going to have you take that one. Thank you very much.

Yes. Thank you, CJ, for the question. So as we explained earlier, the enrollment in the PROPEL study has been going very well. We gave guidance at earlier calls that at the very end of the last year, we saw a pretty big rise in enrollment, particularly as we saw COVID wane in Europe and most of our sites for that study are in Europe. And so with the cohort of patients enrolled, we wanted to ensure they'll be provided the most mature and rich and robust data set. And that's why we're targeting the second half of this year for the presentation of that data.

Now one of the things you can expect in that data presentation is that we will provide all of the available information that we've collected on the patients that we've been following in those cohorts. The study has 3 different subgroups of patients distributed between PD-L1 expression levels, patients in the less than 1% PD-L1 category, the 1% to 49% category and the greater than 50%. And our intention is to provide the full range of observations. So that will include all of the correlations of safety readouts, all of the efficacy information, including the ORR as well as the CR, the composite endpoint and any time-to-event events that have also been accumulated in the data.

And we're looking forward to presenting that later this year. And to the second part of your question, so the chemo-containing cohorts, which are the newest components of that study, they are open and they're enrolling patients. But it's likely too soon to present any of that data as those cohorts are only underway enrolling patients now.

Our next question comes from Jay Olson from Oppenheimer.

Maybe I could ask a big picture question. Since you're doing your bempeg studies in combination with nivo and pembro, is there any reason to believe that bempeg would have greater synergies with PD-1 antibodies versus PD-L1 antibodies? Or would you expect those combinations to be equally synergistic?

JZ, I'm going to go ahead and ask you to address that. Thanks.

Certainly, yes. So thank you for the question, Jay. So that mechanism, obviously, PD-1 is the receptor and PD-L1 is the ligand. And I think you also know that there's a second ligand, PD-L2, that could also engage with the PD-1 receptor. So there are multiple ligands for the same receptor. I think that we've seen across the kind of pipelines. Like if you look at activity of drugs like durva from AstraZeneca; or atezo from Genentech, Roche; or avelumab, BAVENCIO from EMD as well as Pfizer, you see activity of that molecule in a range of different tumor types. That is for sure.

But I think what we've also seen is that Merck's pembro or KEYTRUDA has really taken a very, very dominant share, and it's achieved approval in really the greatest numbers of different tumor types. So there's definitely many more opportunities where Merck's pembro is the first-line standard of care, whether that be it in a monotherapy or in a combination setting. One of the elements that's so important in our strategy is the combination of bempeg with a checkpoint inhibitor.

And as you can see from our development strategy, we're really prioritizing indications where the single-agent checkpoint is the standard of care and ideally in the first line. And that happens to just create more opportunities in the PD-1 subclass than the PD-L1. But if you ask me just as a basic scientific question, I can really see the scenario where the mechanism of bempeg addition would provide quite a bit of synergy to either a PD-1 or a PD-L1 inhibitor.

Our next question comes from Jessica Fye from JPMorgan.

So when we think about the PROPEL data, on the one hand, in order to see what bempeg is doing, it seems like it would be worth comparing those combination results to what one would expect from single-agent pembro. But from a real-world standpoint, it seems like the competitive (inaudible) clinically speaking would be the KEYNOTE-189 data. So with that in mind, is there actually a path you're interested in pursuing for this doublet combo? Or is this a step along the way to ultimately advancing the triplet?

JZ, do you want to address that?

Sure. Yes. Jess, that's -- thank you for the question. And so I think you've diagnosed like the landscape, I think, really well with your question. So we know that the kind of monotherapy or the chemo-sparing use of pembro, it's really most dominant in the greater than 50% PD-L1 population. And that has a global label, right? So KEYTRUDA is used as a monotherapy in pretty much all over where it's approved in that subset. But in the subset of patients that have less than 50% expression, such as 1% to 49% or less than 1%, there's quite a bit of difference. In the less than 1%, it's always used in the setting of chemo. And in the 1% to 49% subgroup, there's a little bit of a difference between the different health authorities.

In the U.S., pembro is approved in the 1% to 49% population, but that's not the case outside of the U.S. where it's used in the setting with chemo. So there are a number of ways to impact the treatment landscape. So for example, one of the ways is there's a lot of opportunity to improve the overall activity of pembro. And as Howard said earlier in his presentation, we still have effects that peak out around 2 years. And so there are a lot of opportunities in the setting with bempeg, for example, to really extend that maintenance period and provide even greater durability of the activity. There are also opportunities to create a chemo-sparing option as well. So there are a number of patients that are ineligible for chemo. So there is an opportunity to address those patients. And then there's always the opportunity to provide an even greater additional treatment opportunity for physicians that they can consider in the setting either with or without chemo.

And then, of course, in our long-term planning, with PROPEL, we've also now opened cohorts that include chemo combinations. And that allows us to address bempeg plus pembro in the setting of chemo and the different chemos depending on the different histology of the disease. And so with that kind of strategy, bempeg plus pembro or bempeg plus pembro and chemo, it allows us to address all of the different populations and pretty much the entire treatment landscape in non-small cell lung cancer. And we look forward to presenting some of that information later this year and as the chemo-containing cohorts continue to enroll that in the future as well. Thanks for the question.

Our next question comes from Difei Yang from Mizuho.

This is Alex on for Difei. Just coming back on the lung cancer data here. And -- is it fair to say that you'd be in a position to start the registrational study of the combo at some point next year after you see the initial data and then you do something with the chemo later on?

JZ, do you want to talk about how we're thinking about the Phase III strategy? Thanks.

Certainly, yes. So the nature of the PROPEL study, right, is it's really designed to create a Phase III informing strategy. So that's why these first cohorts evaluate bempeg plus pembro, and they evaluate patients segregated by the PD-L1 expression subgroups, as I mentioned earlier, from the less than 1% to 1 to 49% and greater than 50%. And so that's really designed to identify areas where there is the greatest signal, and they inform different kinds of Phase III design options.

So for example, in a chemo-sparing setting, you could consider a Phase III study where you evaluate single-agent pembro versus the doublet of bempeg plus pembro, for example, just in an example in greater than 1% PD-L1 expression category. So that's one potential option that could arise. Now certainly, the intention in reporting data later this year is to put Nektar in a position to be able to move through Phase III if the data warranted.

And then very much to your question, with the chemo additional cohorts that we've added into PROPEL, that gives that additional opportunity to explore even more treatment regimens for bempeg plus pembro. And there -- in that situation, we would be evaluating a different kind of a comparator in a registrational setting. For example, we would be evaluating pembro plus chemo versus bempeg plus pembro plus chemo and targeting a different patient population, now focusing much more on the less than 1%.

Our next question comes from Alex Ramsey from William Blair.

This is Alex. I'm on for Andy Hsieh. So we've seen some literature, studies that suggest that when NSAIDs are used as prophylactics in the vaccine setting, that they can dampen the humoral immune response. And so we're wondering if you could please remind us of the protocol for bempeg studies when it comes to NSAID dosing? And specifically are NSAIDs ever used prophylactically for bempeg to mitigate flu-like symptom?

Great. Thanks, Alex. JZ, do you have the details of the protocols? Thanks.

Yes, certainly. Alex, thanks for the question. So just first to clarify, this study was not a vaccine study. So we were enrolling patients that had mild COVID-19, and they were already confirmed to be COVID positive by COVID PCR test. So this isn't a vaccine study per se. And then your general question are NSAIDs, can they be used or are they ever used? So we do allow physicians the opportunity to use standard of care. So in the setting of patients that might have had untoward inflammation, if the physician felt the need to use an NSAID or an over-the-counter Tylenol, for example, those are things that would be a possibility because those things are normal standard of care for the treatment of COVID anyway. Hope that clarifies your question.

Yes, that does. Appreciate it.

Our next question comes from Benjamin Burnett from Stifel.

This is Neil Carnahan on for Ben. On the PROPEL study, I was wondering, is there a scenario where one PDL expression group looks more favorable versus the others regardless of combination arm and to enrich for that patient group in the pivotal study?

JZ, do you want to take a stab at that?

Yes. I'm not sure I understand the question. So let me maybe answer what I think you were asking. So the way that that study was done is we enroll patients, we enroll them essentially as allcomers and then we collect biopsies, and we use central testing to evaluate their PD-1/PD-L1 levels. And then they're stratified to the different subgroups depending on their status. And so all the patients are treated with the doublet, bempeg plus pembro. So we'll be evaluating all the different subgroups. We'll be evaluating all of them at the same time. Maybe what you were also asking is that when we look at the data, in the future, we may see a greater signal in one of the subgroups, for example, over another.

So like here are some benchmarks. We know that single-agent pembro has about an 8% response rate in the less than 1% population and about a 15% to 17% response rate in the 1% to 49% population. So those are 2 areas where single-agent pembro has a lot less activity. Much, much less than it has in greater than 50% population. So it's quite reasonable based on the mechanism of action of bempeg that we may see greater activity in those lower PD-L1 expression subgroups. And if that's what we see in the data, then that's the kind of thing that would inform our Phase III strategy going forward if the data warrants that. I hope that answers your question because I'm not sure I fully understood.

It does. That second part was what I was trying to get at. I appreciate it.

(Operator Instructions) And our next question comes from Daina Graybosch from SVB Leerink.

I have one on the melanoma study in the interim readout. It sounded like, if I heard you correctly, that now the interim will assess ORR and PFS together. Was that a change in the interim design? Or are we seeing the impact of the COVID cause similar to what BMS saw with their relatlimab study, where the ORR in the interim fell behind the PFS and actually, we haven't seen it yet. First, that question. And also, could you confirm where you are with NKTR-262, that program still active?

Thanks, Daina. JZ, do you want to take those 2 questions? Thanks.

Sure. Yes. Thanks, Daina, for the questions. So in regards to the first data analysis, so one of the things that we did is that after the study began, right, because the study began in 2018. As you remember, in 2019, Nektar with bempeg achieved breakthrough therapy designation in first-line melanoma. And that was based on the strength of the PIVOT-02 data in first-line melanoma where bempeg placebo showed a very high complete response rate, 34%, as well as we recently presented a very, very long progression-free survival of almost 31 months.

And so with breakthrough therapy designation, that gives a lot of real kind of firepower in terms of the potential from the regulatory review in the filing. And so BMS and Nektar, we've made a decision together that we would conduct the analysis of both the ORR endpoint and the PFS endpoint as soon as the trigger for PFS events, which is predefined in the statistical analysis plan for the protocol is reached.

And so this is a very, very powerful thing because now we'll be able to present both sets of data and use the breakthrough therapy designation as an opportunity to put that in for a full approval for bempeg plus nivo in first-line melanoma. And so that's a very good decision that we made together with BMS. And yes, as Howard stated earlier, in the first half of 2022 is when we expect the results of that study to read out.

Daina, for the second part of your question, you asked about the NKTR-262 program, and that program is still active. In fact, we're looking forward to presenting results from the ongoing REVEAL trial in the future. One of the things that we've been studying in the REVEAL trial are a couple of additional cohorts of 262, one is 262 plus bempeg, another is 262 plus bempeg plus nivo. And those 2 cohorts that we evaluated, they've completed enrollment. We're assessing the data, and we'll look forward to present that at a medical meeting in the future.

And our next question comes from Arlinda Lee from Canaccord.

I have another one on PROPEL, sorry about that. But can you clarify that the data that you have later this year, there won't be that much chemo data? And then, Gil, can you remind us what kind of financial agreements are in place with Merck that might help you with next steps? And then thirdly, on the 255 data flow, you mentioned that the [heme] monotherapy dose escalations are done. So will we see the -- will we see any combination data? And then -- that's it.

JZ, do you want to take a stab at those. Thank you.

Yes, let me -- I'll answer the first and the third, Arlinda.

You did answer one of them earlier, but JZ can repeat it.

Yes. I'll answer the first and third, and then I'll turn it over to Gil for the middle one about financials. So in terms of PROPEL, so the chemo cohorts have just started enrolling. So we'll not be able to present data from those cohorts later this year. Again, it's just -- they're very, very early in their enrollment. And you can see that from our -- the clinical trials post and stuff that those cohorts only opened recently. So those will be coming in the future, Arlinda.

And then for 255, we're still continuing the dose escalation in monotherapy. We do believe we'll finish that dose escalation later this year. And what we do plan to present at a medical meeting later this year are all the results that we've accumulated from the 255 program to date. So those will be focused on the monotherapy administration of 255, and we'll cover all of the information that we've collected in terms of

(technical difficulty)

the pharmacokinetics, all of the pharmacodynamics for NK cell expansion, CD8 T cell expansion, the effect on the memory pool as well as continuing our assessment of patients in the post-CAR-T setting, where we already reported of activity, demonstrating elevations in CAR-T cells months after the CAR-T administration. So that's the kind of flavor from 255 that you might expect. And Gil, I'll turn it over to you for the financial question regarding Merck.

Yes. Thanks, JZ. Arlinda, yes, you remember the partnership that we announced back in February with SFJ and Merck -- Merck was a key part of our Phase II/III head and neck study, both from providing regulatory and design input to help us come to the final design for the study. But importantly, they also are contributing around $60 million in value of pembro to the trial. So that was really an important piece of the whole transaction for us, about 25% to 30% of the total study costs. So they were a key -- a key piece of that collaboration. And as far as what we might do going forward, obviously, as we've talked about in this call, we'll continue to evaluate Phase III strategies along with bempeg, and we'll see what the possibilities are as those lay out.

And that does conclude our question-and-answer session for today's conference. I'd now like to turn the call back over to Howard Robin for any closing remarks.

Well, thank you, everyone, for joining us today. And we are certainly approaching a busy and exciting period for Nektar with a number of key data readouts starting later this fall, and we're all highly anticipating seeing melanoma data in the early part of next year. I would like to thank our employees [in their] efforts in helping us reach these milestones during these challenging times, and I want to thank our shareholders for their continued support. And we look forward to providing you with updates on our progress. Stay tuned. Thank you.

Thank you. This concludes today's conference call. Thank you for your participation, and you may now disconnect. Everyone, have a wonderful day.