Nektar Therapeutics (NKTR) 2020 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Nektar Therapeutics First Quarter 2020 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, Ms. Jennifer Ruddock, Head of Corporate Affairs. Ma'am, you may begin.

Thank you, Crystal. Good afternoon, everyone, and thank you for joining us today. With us are Howard Robin, our President and CEO; Gil Labrucherie, our COO and CFO; Dr. Jonathan Zalevsky, our Head of R&D; and Dr. Wei Lin, our Head of Development.

On today's call, we expect to make forward-looking statements regarding our business, including 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, estimates and predictions of the COVID-19 pandemic's impact on our business and clinical trials, financial guidance and certain other statements regarding the future of our business.

Because these 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 the Form 10-K that we filed on February 28, 2020, which is available at sec.gov. We undertake no obligation to update any of these 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 as a replay.

Before turning over the call to Howard, I'd like to comment on a small housekeeping item. Due to the shelter-in-place restrictions in San Francisco, each of us are calling in from different locations. So in order to facilitate a smooth call flow, I will moderate the Q&A session for our team so we can avoid technical issues during this session. Thank you very much, and we appreciate your patience as we work to ensure there are no technology disruptions for those listening.

With that said, I will hand the call over to our President and CEO, Howard Robin. Howard?

Thank you, Jennifer, and thank you, everyone, for joining us on the call today. I'd like to start the call by discussing what is certainly on everyone's mind, managing the challenging circumstances caused by COVID-19 in the past several months. So the wide-ranging impact that this virus has had on the health and well-being of our communities is significant. And like all of you, we're all working hard to appropriately adapt our business practices while at the same time, leading and operating the business effectively. It is a dynamic situation, and we will continue to adapt our response. However, I want to highlight a few key areas. As we start working -- as we work together to navigate the current environment, we have 3 main priorities: First is to protect the health of our employees, while continuing our essential operations on-site to advance our research and development, such as laboratory and manufacturing activities; second, to ensure that each of our trial investigators and their teams can continue to provide superior care and uninterrupted access to study treatment to patients fighting cancer; and third, to ensure that the conduct of our clinical trials is minimally impacted and that the integrity and quality of data being collected from these studies are maintained.

So to the first priority. For employees who continue to work on clinical tasks -- critical tasks in our facilities, including manufacturing and our laboratories, we have instituted additional safety precautions, including increased protective equipment and physical distancing practices. For employees that can work effectively remotely, Nektar has adopted work-from-home policies, and we're supporting these employees with the technology tools to continue to work interrupted. We've been adhering to all local state, county and federal guidelines in this regard.

At this time, we do not anticipate any supply interruptions for manufacturing, including our preparations for scale up of commercial supply of bempeg that are underway. We have sufficient clinical trial material on hand to treat all patients in the studies for bempeg, NKTR-262, NKTR-255 and NKTR-358, which are either underway or planned to start in 2020. We and our manufacturing partners are continuing to regularly assess the situation as well. Additionally, our research team is continuing to work towards generating our next IND candidate so that we could achieve the company's next IND filing in early 2021.

To the second priority, we have over 200 investigator sites around the world participating in our oncology clinical studies. We have been actively engaging with site investigators and our CRO partners in order to assess site status and staffing issues and to provide resources and support to these sites. Conditions are fluid and evolving. However, Nektar is taking a strategy to allow sites to continue to enroll new patients and to initiate new investigator sites. So far, this strategy has been successful, and Wei will discuss more of these initiatives in a moment.

Our third, but equally important, priority is to ensure the integrity and conduct of our clinical trials. This means capturing any protocol deviations, if they arise during this time, carefully collecting any patient information, which may be related to COVID diagnosis and being prepared to track any possible interruption of important treatment or scan visits related to COVID travel restrictions. The FDA has issued guidance on clinical trial conduct, and we expect this guidance to continue to evolve. In light of this, the most important activities for us are to carefully monitor our study sites to ensure that patients meet the appropriate eligibility criteria under the protocol and that the data are being collected and tracked appropriately as well.

Now many of you have asked about the potential impact to clinical trial time lines related to COVID. We have some preliminary insights to share, but caution that because of the fluidity of the situation there is significant uncertainty. We will therefore need to continually assess these time lines throughout the year, and we continue to get more visibility to the timing and extent of COVID impacts. Our Nektar clinical development and operations teams are highly focused during this time on the oversight of the 5 clinical studies in immuno-oncology where Nektar serves as the sponsor. The first-line bladder cancer study of bempeg plus nivo, the first-line renal cell carcinoma study of bempeg plus nivo, the PROPEL study of bempeg plus pembro, and NKTR-262 REVEAL study with bempeg and the NKTR-255 studies.

First, in response to some questions we've received, we've only had a few reports of patients in our studies who have had suspected or confirmed COVID diagnosis. For the 5 clinical studies that I just mentioned as of today, we have received only 4 reports of patients who have been diagnosed with COVID. This is across our 200-plus investigator sites. With respect to new study starts, Nektar is still on track to initiate the adjuvant melanoma study in the third quarter. Based upon our assessment of the current situation and barring any negative external COVID developments in the second half of the year, we believe this is very achievable. The protocol for the adjuvant melanoma study is now being finalized, and we are in the process of identifying and recruiting investigator sites for initiation later this year.

With respect to the first-line bladder cancer study, we have not seen any impact on enrollment pace to date, and we expect to achieve our enrollment goal this summer. This means that we will meet the time line of achieving primary endpoint for the study sometime in mid-2021. And as a reminder, the primary endpoint in the study is ORR independent review for patients with under 10 CPS score. For the first-line renal cell carcinoma study, we are on track for our projections for enrollment prior to COVID, which means we are also on track to achieve the first interim analysis on the primary endpoint of the overall survival in the first quarter of 2022.

For our PROPEL study of bempeg plus pembro in non-small cell lung cancer that was initiated late in 2019, enrollment is ongoing. The COVID situation delayed initiation for the investigator sites in Europe for PROPEL. However, we are still initiating some of these European sites in countries that are less impacted by COVID. But we are doing this very carefully and only with sites that also have demonstrated that they can adequately provide clinical trial oversight and services along with patient care. We have previously provided guidance that we would have initial safety as well as preliminary ORR data for between 10 and 20 patients that were enrolled in the dose escalation and non-small cell lung cancer cohorts of this study by November. We now expect that this will either be by the end of this year or first quarter 2021.

Our Phase I/II REVEAL study is advancing. We recently expanded the study to evaluate the recommended Phase II dose of NKTR-262 in up to 24 relapsed and refractory melanoma patients. We were now, for the first time, evaluating simultaneous dosing of the 2 investigational agents. In the dose escalation phase, we observed high levels of TLR activation in the tumor microenvironment, and we're able to characterize safety for NKTR-262. We're planning to submit these dose escalation data for potential presentation at a medical meeting or a manuscript publication later this year.

For NKTR-255, our IL-15 agonist program and our newest clinical candidate, we are actively enrolling patients into the first-in-human clinical study of NKTR-255, which began late last year. We're still initiating sites in the study and still have a goal to complete the dose escalation portion of the study by the end of this year. Of course, meeting this goal will depend upon how many dose cohorts we need to enroll before achieving a maximum tolerable dose. With the first several patients we enrolled into the study, we already have good biomarker evidence of target engagement of the IL-15 pathway, and we're planning to present these data later this year or early 2021. And as a reminder, the study is evaluating NKTR-255 first as a monotherapy and then in combination with daratumumab, rituximab in multiple myeloma and non-Hodgkin's lymphoma, respectively.

I'll now move on to discuss studies that are being run by our partners. As many of you have likely listened to conference calls from large pharmaceutical companies over the past several weeks, management practices around ongoing and planned clinical trial activities have varied during the COVID situation. Many companies are projecting that normal practices for clinical trial activities in most countries will resume in the second half of 2020. In general, this has been adjustment of time lines for studies of anywhere from 3 to 6 months. Each of our partners has deployed different methodologies.

With respect to our partner, BMS, during the ongoing COVID situation, BMS has publicly stated that they have paused initiation for all new investigator sites in any clinical study they are conducting across the company. BMS is running 2 ongoing bempeg clinical studies currently the first-line melanoma study and the muscle-invasive bladder cancer study. As you know, BMS is operationalizing these studies and managing these studies time lines. BMS continues to recruit patients for these studies at investigator sites that are allowing on-site monitoring for new patients.

At this time, because the COVID situation is ongoing and BMS has not reprojected any study time lines, Nektar expects this will have an impact on the enrollment for both studies, which could translate into delays of 3 to 6 months. We are now working closely with BMS to determine when BMS will remove or modify any restrictions that impact enrollment. Also as a reminder, we received the $25 million milestone payment in the first quarter of this year under the revised BMS agreement for the start of the muscle-invasive bladder cancer study for bempeg plus nivo. BMS is also planning to start later in the year for the TKI combo renal cell carcinoma study and the Phase II study of bempeg plus nivo in first-line non-small cell lung cancer.

With respect to our partner, Lilly and NKTR-358, our Treg stimulatory program, the Phase I multiple dose studies in psoriasis and atopic dermatitis have temporarily suspended recruitment during the COVID situation. However, Lilly is continuing to assess the situation and evaluating the status of investigator sites to determine when the best time is to reopen these studies for patient recruitment.

We're still anticipating 2 Phase II studies to be initiated by Lilly this year, 1 in lupus patients and 1 in an additional autoimmune disease state, both are slated to start in the second half of 2020. We know that the team at Lilly is evaluating all options to start these studies, including focused on initiating investigator sites in countries with low impact or minimal current impact from COVID. And so we appreciate their dedication to creatively finding paths forward to initiate these new studies. Overall, we're very pleased with Lilly's continued commitment to NKTR-358 as well as the broad plans for its development, which reflect the potential of this novel mechanism to treat autoimmune disease.

And before I hand the call over to Wei, I'd like to mention several additional data presentations we're planning for this year. First, for the melanoma cohort for PIVOT-02, as many of you know, last year, we obtained FDA Breakthrough Therapy Designation for bempeg plus nivo in patients with metastatic melanoma based on the positive data, including a high CR rate from our PIVOT-02 study. At SITC last year in November, we presented data from this cohort with a median follow-up of approximately 18 months. And at that time, 34% of patients had a complete response as determined by blinded independent central review, 42% had a 100% reduction in target lesions and 47%, almost half, had a greater than 75% reduction in target lesions. We recently completed an additional blinded review of the PIVOT-02 melanoma cohort at the end of December 2019, and this data cut added 3 additional months of follow-up from our prior SITC presentation. And I am pleased to inform you today that at the 21-month median follow-up point, we have still not achieved median PFS for the patients in this cohort. We also continue to see deepening of responses for these patients, and we plan to present updated data from an even later data cut at the SITC 2020.

Also for bempeg, data from the dose escalation portion of PIVOT-02 will be recognized in a publication at a cancer journal in May. And finally, we are planning to submit for publication additional manuscripts for the bladder and kidney cancer patient cohorts from PIVOT-02.

For NKTR-358, we recently completed the Phase Ib multiple ascending dose study in lupus patients that Nektar conducted as part of our Lilly collaboration. And the initial data from this Phase Ib study were accepted for presentation at the upcoming virtual EULAR conference. We also intend to present additional data from the same study at the 2020 American College of Rheumatology Meeting, ACR, later this year.

With that, I'll turn the call over to Wei to review in more detail some of the techniques we are deploying across the Nektar run clinical trials, to address the COVID situation and to ensure the integrity and conduct of the studies during this challenging time. Wei?

Thank you, Howard. I'd like to discuss briefly the comprehensive plan we've developed to ensure that we're meeting the 2 priorities Howard mentioned earlier: One, to ensure patients have uninterrupted access to study treatments in our clinical trials; and two, to ensure that the conduct and integrity of our clinical trials are intact. For those patients currently enrolled in our clinical trials that Nektar is running, we're making every effort to ensure that patients in highly affected areas and in areas with heavy restrictions are able to continue their study treatment and receive appropriate care and monitoring. As conditions allow and within the applicable guidelines, we're deploying extra patient concierge services to provide transportation options and resources for patients in their studies. We're also allowing patients to visit local facilities for scheduled study treatment and scan visits rather than having to travel longer distances when possible. And we're heavily focused on utilizing every method possible to provide our investigator sites with the proper resources necessary to maintain care and monitoring of patients, including virtual monitoring and telemedicine in order to protect patient and site staff safety.

We've increased our efforts to monitor site activities. We've been in continual communication with site investigators and staff. We're focused on providing site staff with information on appropriate data entry and understanding available options for patients. We are also checking to ensure that site staff are available and able to comply with any new measures being put in place.

Our clinical monitors are focused on collecting all relevant data with respect to any protocol deviations, data entry or any study conduct that we may need to provide to the FDA in the future. As Howard stated, the FDA has issued guidance on clinical trial conduct, and we continue to monitor this guidance. We're also engaged along with our industry peers in providing input back to FDA on various clinical trial conduct issues that arise due to the COVID-19 pandemic. We're permitting sites to continue to enroll new patients, and we continue to initiate new study sites. However, we're highly focused on the appropriate eligibility of the patients being enrolled and ensuring that all enrollment criteria are met.

In addition, we want to make sure a site is appropriately staffed and is not overly impacted by COVID-19 before bringing a new site into any of our clinical studies. I'm pleased to report that to date, we have seen exceptional patient compliance in our clinical studies, particularly in terms of receiving study treatment and scheduled scans, with only 1 patient across all of our Nektar run studies who has missed a scan and none have missed a study treatment.

We have been tremendously impressed with the high degree of engagement from our investigators and their staff and extraordinary care they're providing to their patients during this difficult time. We believe that with the measures we're taking, we can appropriately navigate the current situation, so that we can advance our clinical programs forward.

Before I hand the call to JZ to discuss our work with NKTR-358 and NKTR-255, I want to address questions we've been getting on the changing of interim response rate endpoint in our first-line melanoma study. As you know, we received a Breakthrough Therapy Designation for bempeg plus nivo in this setting based upon the high complete response rate we observed in the first-line melanoma population. In the Phase III study being run by BMS, we have 3 endpoints: overall response rate, ORR; progression-free survival, PFS; and overall survival, OS. The first endpoint is an interim analysis where a very small amount of alpha is spent to compare the ORR in the double combination of bempeg plus nivo to the ORR in nivolumab monotherapy arm. We are looking for a 6-month duration of follow-up for a specific number of patients in the study. Because of our high complete response rate, many of you have asked whether we could change the interim to look at complete response rate in each arm instead. This is something we and our partner, BMS, are evaluating, and we hope to have an update on this question before the end of the year. In the meantime, the study continues to have our 3 original endpoints ORR, PFS and OS.

The original design of the study, which was based upon CheckMate 067, modeled the PFS endpoint at roughly 6 to 7 months following overall response rate. But as a reminder, this was only a projection and is event-driven and based upon enrollment rate, and so that timing could change. For both ORR and PFS, the results will be analyzed by blinded independent radiology review. So this process will affect timing for the completion of any data analyses as well. As we get closer to achieving these endpoints, we should be able to refine our time line. As a reminder, ORR is designed as an accelerated approval endpoint. We spent only a small amount of alpha on this, and PFS will be the basis for a full approval.

With that, I'll hand the call to JZ to discuss more on our NKTR-358 and NKTR-255 programs.

Thank you, Wei. I'd like to spend a little more time discussing 2 programs: The first is the NKTR-358 program and our plans for the lupus study; and the second is our IL-15 program, NKTR-255.

First, for NKTR-358, as Howard stated, we will present our first data from the Phase Ib multiple ascending dose study, which was conducted in patients with mild-to-moderate lupus at this year's European League Against Rheumatism, or EULAR Meeting, in early June. As the conference is virtual, we will also host a virtual webcast to review the data with investors and analysts on the morning of June 5. Many autoimmune disorders, including systemic lupus, are associated with decreased regulatory T-cell numbers, reduced Treg function and/or reduced production of IL-2. These Treg deficiencies are important in the pathogenesis of these autoimmune diseases. With NKTR-358, our goal is to address the Treg abnormalities in disease and to develop an IL-2 molecule that could selectively stimulate Tregs in a much more effective manner than native IL-2.

You will recall that at last year's EULAR Congress, we presented results from our first-in-human single dose study, which showed that NKTR-358 was safe, well tolerated and exhibited a dose-proportional PK profile, prolonged exposure with a half-life of approximately 8 to 9 days.

Importantly, NKTR-358 resulted in a market and selective dose-dependent expansion of CD25(bright) Tregs. In contrast, there were no measurable effects on the numbers or percentages of CD4 and CD8 conventional T cells at all doses tested.

In the study, we will present at this year's view EULAR Congress, we evaluated multiple ascending dose regimens in NKTR-358 in lupus patients in order to study the safety, tolerability and pharmacodynamics of NKTR-358 and also to inform the design of the Phase II study of NKTR-358. As Howard stated, this Phase II study in lupus patients is planned to start in the second half of this year, and we are excited about the advancement of this program.

Moving on to NKTR-255. The dose escalation portion of this Phase I/II study is proceeding. The study is evaluating the safety, pharmacokinetics and pharmacodynamics of NKTR-255 as a monotherapy, and then will expand into combination with antibodies that work through an ADCC mechanism, including daratumumab and rituximab. We plan to enroll up to 40 patients with relapsed or refractory multiple myeloma and non-Hodgkin's lymphoma in the dose escalation part of the study. We have also introduced a robust biomarker program into this trial, including measurement of the NKTR-255 effect on multiple immune cell population, especially on expansion of NK cell numbers as well as their activation and function. We aim to provide a deep assessment of the NKTR-255 mechanism of action.

As a reminder, unlike other IL-15 approaches, NKTR-255 was designed to capture the full biology of the IL-15 pathway, specifically meaning that NKTR-255 is designed to capture all the receptor-ligand interaction available through targeting the IL-15 agonist pathway. This gives NKTR-255 the ability to act as a significant expander of natural killer cells as well as the ability to promote the survival and expansion of memory CD8 T cells.

As Howard stated, our goal is to complete the dose escalation monotherapy portion of the Phase I trial by the end of this year, and we are excited about the early biomarker results we've observed in the first patients enrolled.

With that update, let me now turn the call over to Gil for a review of the financials.

Thank you, JZ, and good afternoon, everyone. On this call, I will review our 2020 financial guidance, which is unchanged. Starting with our exceptionally strong financial position, we ended the first quarter with $1.5 billion in cash and investments. As we discussed on our last earnings call, we plan to repay the $250 million in outstanding senior notes in the second quarter of this year. We indeed completed this repayment in April, so this will be reflected in our Q2 2020 balance sheet. The senior note repayment has strengthened our balance sheet and will result in approximately $20 million of annual interest savings on a go-forward basis. After taking into account the repayment of our senior notes and our projected cash usage this year, we still plan to end 2020 with at least $1 billion in cash and investments.

As we discussed on our last earnings call and consistent with our guidance, we recorded a $45.2 million impairment charge in the first quarter that concludes our NKTR-181 activities. Our loss per share of $0.78 for the first quarter includes the $0.25 loss per share attributable to this impairment charge.

I will now turn to our 2020 financial guidance, which remains unchanged. At the outset, I'd like to note that we are not changing our full year financial forecast based on COVID-19 impacts, given that our clinical pipeline progress remains largely on track, as Howard reviewed earlier on the call. Our full year GAAP revenue guidance remains between $140 million and $145 million for 2020. This includes $50 million of milestone payments from BMS and $90 million to $95 million of royalties, product sales and other revenue. As Howard stated, we recognized and received the first $25 million milestone for BMS' start of the muscle-invasive bladder cancer study, which occurred in January of this year. The second $25 million milestone is in connection with the start of the adjuvant melanoma study and is still planned for Q3 of this year. As a reminder, the $90 million to $95 million of remaining GAAP revenue is still expected to be recognized on a fairly ratable basis over the 4 quarters of this year.

Our GAAP R&D expense guidance is also unchanged. We anticipate 2020 GAAP R&D expense will range between $475 million and $500 million, which includes approximately $70 million of noncash depreciation and stock compensation expense. Our G&A expense for 2020 is still projected to be between $105 million and $115 million, which includes approximately $45 million of noncash depreciation and stock compensation expense. And as I reviewed earlier, we still plan to end the year with at least $1 billion in cash and investments after we completed the repayment of our $250 million in senior debt this quarter.

And with that, I will open the call to questions. Operator?

(Operator Instructions) And our first question comes from Peter Lawson from Barclays.

I guess the first question is just probably around -- for JZ, just around 255. Just timing around the initial data on the patients we could see? And what would you want to see to move that project forward?

Sure. Thanks, Peter. Sorry, Jennifer. Yes. Thank you, Peter. So yes, so with NKTR-255, as we stated earlier in the call, so we've been starting into the dose escalation now. And we have seen some very interesting target engagement data from the first few patients that we've enrolled into the study. And the kind of results that we're looking to see, obviously, is an assessment of the overall safety and the tolerability and the pharmacokinetics and pharmacodynamics, all of the things that are typical in every kind of first-in-human study when you advance into the clinic for the first time and you perform the dose escalation.

But specifically, in the case of 255, we had built a wealth of understanding from our preclinical studies where, remember, we evaluated the molecule in nonhuman primates and mice and other species, and we saw the effect on the immunological changes that the molecule could make, though we saw natural killer cell elevations, we saw their persistence, we saw changes in the activation state of these cells. And we also even, of course, proposed data, presented data on the overall differentiation of the natural killer cell compartment as well. This is the kind of biology, Peter, that's only possible to achieve with an IL-15 mechanism.

So as we move into the clinic, we're looking to translate all of those kinds of findings. And the clinical trial has built into it an extensive biomarker program that allows us to measure these kind of changes. It allows us to assess the natural killer cells and the CD8 T cells and assess them in multiple compartments, such as the blood as well as in the tissue. So we'd be very excited to present the data that we're seeing in the study. We think it's reasonable that either later this year or early next is the time when we can do that, assuming the dose escalation continues as planned. And the kind of things we'd like to see out of that dose escalation are, as I described, combination of safety, tolerability, the PK and the biomarkers of the program.

And then, I guess, may be just on -- Howard, just I know it's difficult during this time about the interim readout in first-line melanoma to assess between the 2 arms. Is there any sense of timing around that? And has the dialogue changed or you had further dialogue with the FDA around the change in endpoint?

So thanks, Peter. This is Jennifer. I'm going to ask Wei to address that if possible, Wei?

Yes. Thanks, Jennifer. Yes, thanks for the question. So we are actively working with our partner, BMS, in engaging the health authority. So we'll definitely provide feedback once we completed the health authority discussions. And this definitely involves not only the FDA, but the EU health authorities, where, I think, our plan for obtaining market authorization should be global and hence, getting -- obtaining feedback globally from all health authorities, all the major ones, is really critical for us to make the change. The current design with a 3 endpoints has been reviewed and proved by the relevant health authorities. So before we make a change, it's not only the FDA engagement, but also other health authority engagement that we need to obtain before proceeding with the change. And once that's done, then we'll be sharing that information.

Our next question comes from Tyler Van Buren from Piper Sandler.

I guess the first one is on the melanoma PIVOT-02 update that you gave with the December cutoff. I think you said that medium PFS was not achieved at 21 months. And if I look back to SITC, it was 18.6 months of follow-up. And at that point, you guys said that median PFS could be no worse than 15 months. So is that kind of 3 months difference fair to apply here, meaning maybe medium PFS can be no worse than 18 months, or curious to get your thoughts there.

Wei, I'm going to ask you to answer that.

Sure. Thanks, Jennifer. Yes. Thanks for that question. So the -- it's not always directly linear, definitely with longer follow-up than the minimum would -- at the minimum, PFS would also be extended. But because what we represented is an ongoing look as we are doing periodic data review and we were not ready to present this publicly yet. So I would not -- we have not done an analysis to really project out what the minimum PFS would be at this time. It's definitely longer than it was back at SITC, and we do plan in the second half of the year to update melanoma data. And at that time, we can provide the detail what it means in terms of PFS as we continue our follow up.

Okay. And as a follow-up, is it possible to state, I guess, what median PFS -- at what point of median PFS, how many months you guys would be really confident that you're seeing a significant difference here with the combination because if you look at other Phase II studies, some clients have pointed out that they've shown 20 months median PFS, and then in Phase III have shown no effect, given that this -- these time points seem to be impressive relative to nivo monotherapy at 7 months and nivo/ipi be at 11.5 months.

Wei, I'm going to ask you to answer that as well, thanks.

Sure. So the -- I think I'll kind of break this into kind of 2 parts to really address. One is sort of the median and the other is the haz ratio. So the -- ultimately, when FDA and other health authorities review the data for a full approval based on PFS, it's really the combination of those 2 values. So median certainly is very important, but the haz ratio give you the complete separation of the 2 Kaplan-Meier curves for the entire length of the curve. So those 2 elements are really important, too. So it's really -- it's always difficult to really say that this is -- a particular median is sufficient because it's really the complete shape of the curve, sometimes the median can bubble, sometimes the median may not concave a bit. But if the rest of the curve contribute to a really strong haz ratio difference, that's also very, very meaningful, too. So -- but I think the current data certainly suggests a fairly big separation between the nivo/bempeg arm versus the nivo arm, but that's based on the PVIOT-02 data.

Now in terms of translatability, so the second part, I want to really talk about is really the translatability of the Phase II data from PIVOT-02 onto a registrational Phase III and that sort of gets to the crux of your question, which is, certainly, historically, there's been many studies where the Phase II data does not translate into a Phase III and to what level of confidence do you actually have in doing that? And granted that, there's many historical examples of that. And I want to really point out the -- largely the non-translatability has to do with the lack of connection with the endpoint being studied in the Phase II and the endpoint being studied in the Phase III. So take an example, there are many diseases where the Phase II is actually based on a PFS endpoint, and then the Phase III is based on OS endpoint. And in certain diseases, those 2 endpoints do not really connect really well. It does connect, for instance, in CRC really well, but in many other tumor types, it does not really connect really well. But for lack of a good endpoint, then people kind of have to base it on something and oftentimes it's based on PFS and hoping would translate to OS. And that -- clearly, the lack of connection leads to some of the failures we've been -- observed in the past.

Now in our particular case, in the first-line metastatic melanoma, what gave us particular confidence is the analysis done by FDA that was presented at ASCO in 2019. And in that FDA analysis, many of you are familiar, FDA took nearly 5,000 worth of patient data from all the registration trials that were submitted to them for approval in first-line metastatic melanoma and did a very comprehensive meta-analysis. And what they asked is the question is, how well do response rate really connect with both progression-free survival and overall survival? And in particular, how well does the depth of response, not the arbitrary RECIST 1.1 criteria, which is 30% reduction in tumor size, but -- actually across all cut points, they looked at 25% tumor reduction, 50% tumor reduction, 75% tumor reduction and also complete disappearance of all the target lesions. And with each of those subgroups, they took a look at, what is their PFS, what is their OS? And is there a strong correlation across all these cut points? And they see a extremely strong trend, not only with target therapy like BRAF and MEK inhibitors, but especially with immunotherapies, such as nivolumab and pembrolizumab and ipilimumab.

And the conclusion they had come to is the depth of response really correlates extremely strongly with survival, both in terms of PFS and overall survival. And in particular, the strongest came through when you look at patients who have more than 75% reduction and also especially with complete disappearance. And it's really on that basis, looking -- the biggest difference that we observed between the PIVOT-02 data and ultimately connecting to the survival is really our CR rate. And based on the FDA analysis, if you -- for the patient, complete disappearance of their target lesions, the PFS at 1 year and the PFS -- and OS at 1 year is extraordinarily high. And it's really -- so there's a clear demonstration given the extensive meta-analysis FDA had done of translatability where strong connection between what's observed in terms of depth of response and the final PFS and OS delivered by these registration studies. And this is where looking at our CR rate, we think there's a high likelihood that this may translate into some type of survival benefit and a strong survival benefit. So I hope that answers your question.

Our next question comes from Chris Shibutani from Cowen.

Maybe this is for JZ. I know that certainly in PROPEL, the combo work that you're doing involve the opportunity to explore different doses of bempeg, in particular, I think, higher doses. And I think that's some commentary that you began describing over 6 months ago now. I'm just curious to know if there's anything at this stage that you have been observing or learning that is making you contemplate approaching any further development work with bempeg, either in existing or additional indications in any other way?

Thanks, Chris. Actually, I'm going to ask Wei to comment on that. He's been working on the dose escalation component for PROPEL. And then I'll ask JZ to comment afterwards. Thanks, Wei.

Yes. Sure. Absolutely. So the PROPEL study -- maybe help for me to take a step back and look at the bigger picture. So PROPEL study really has 2 parts; there's a dose optimization part; and then there's a focused extension sort of a Phase II study embedded in there looking at specifically non-small cell lung cancer in the first-line setting. So the rationale for us to undertake a dose optimization, even though the molecule is already in the registration phase, is actually a couple fold; one is we have learned a tremendous amount about this molecule as we progress. This is still a clinical development stage molecule. And while we have full confidence in the dose of 6-microgram per kilogram in combination with nivolumab in all our current registration studies, and that's highlighted by the fact that the data is good enough to obtain a FDA Breakthrough Designation, which is kind of the highest acknowledgment of the potential benefit the combination may bring to patients.

And in partnership with our BMS colleagues, we've taken a number of registration studies, all based on data that we generated in PIVOT-02. So we firmly believe that the 6-microgram per kilogram dose is a very active dose and have complete data to back it up. And certainly -- and that's really also supported by the belief and investment from our BMS colleagues and also the Breakthrough Designation from the FDA.

But that being said, we have learned a tremendous amount as we dose a lot of patients and manage the AE profile that we think we can actually improve the management of the adverse events in patients and perhaps can even push the dose even higher. And as you know, different diseases have different sensitivity to immunotherapy. And in lung cancer, compared to, say, melanoma, the degree of sensitivity is -- it's actually a little -- it's not as strong. So for instance, monotherapy nivo or monotherapy pembro is active across all PD-L1 expression subgroups in melanoma, but not so in lung. So the current approval is really for just PD-L1 positive, not for the all-comer population. And the predominant use of pembro will be in the 50% above population. And given that, we thought it would be really helpful to really push the dose a bit, see if we can, with a new management guideline in place, identify even a higher dose and produce even stronger benefit to patients in a disease that's more challenging than melanoma in terms of how sensitive it is to new therapy. So that's the dose definition and the rationale why we're indicating that. At the same time, we're doing the expansion in first-line non-small cell lung cancer and then combining with pembrolizumab, the mono -- in a combination because pembro currently is the established first-line standard of care in the first-line study.

So any willingness to share hands about whether it seems promising or...

Well, the study is ongoing. We've dosed a handful of patients, and then we have -- as Howard mentioned, we have plans to really share a part of that data at a future conference either at the end of this year or beginning of next year.

Okay. Well, you're -- Wei you're so well behaved, I know you're not going to spill. Maybe I can ask a question about partnerships. So I mean, thinking about historically, you guys really set up a terrific relationship with Bristol going back. And that was structured with kind of a time line objective, which I remember a year ago, you guys extended into September. And then we've had the renegotiated contract, and I think that was kind of announced at the end of September, really pre-COVID kind of era. Now that we're in this COVID environment where everyone is looking to buy time, just curious about the renegotiated contract. Is there some sort of an escape clause that allows them to wiggle in an extra 3 or 6 months? Is there some sort of time line that we should think to your get-out-of-jail-card? Just curious to know, given clinical trials pacing and completion time lines are, obviously, all sort of encumbered now and wondering in particular about the Bristol renegotiated or maybe some of the other more material -- other material partnerships you have with, obviously, Pfizer or Gilead?

Thanks, Chris. I'm going to ask Howard, if he can answer that. Howard?

Sure. Chris, look, there's certainly nothing in the contract that gives one an escape for this kind of force majeure situation, obviously. But I will tell you that, look, clinic -- every company has its own method of moving trials forward in this situation. Nektar is being fairly successful in recruiting sites and recruiting patients. There'll always be some delays. But generally, we're moving things along quite nicely. Other companies, such as BMS, have set across all their programs they're not going to be recruiting any new sites until they get a better handle on what's going on with COVID-19. So we said there could be a 3 to 6 months delay. It doesn't really change anything in the agreement. I think we're still working very closely with BMS to move these programs forward. The ones that we're running in the collaboration are moving forward nicely. They will figure out shortly, I'm sure, how to start enrolling sites again and how to recruit patients again remotely, as every other company is doing.

And so I think there could be a delay. There most likely will be a delay in some of those studies, but I don't think it's anything that has any contractual impact. And as long as we have a great relationship with them, and we do, as the teams have changed and evolved, and I think, together with BMS, everything is going smoothly outside of COVID-19. I think there's always going to be delays. There's always challenges in any clinical study, but I think everybody believes that certainly bempeg and nivo in first-line melanoma have a -- metastatic melanoma have a significant benefit. And if you look at the PFS data that we've had so far in the PIVOT-02 study, we're -- I don't see how we'll be lower than 21 months. That would be -- I would think the 21, 21.5 months would be the lower limit of median PFS.

So with that said, I think when you compare that to nivo alone, which is 6.5 months, I think that's fairly dramatic. And remember, as Wei said earlier, this is what everybody, I think, is excited about. What Wei said earlier is I don't think you can compare this necessarily to other challenges that companies have seen when they went from Phase II to Phase III. Number one, we have the same endpoints; number two, we didn't see any toxicity in Phase II that would require us to lower the dose going into Phase III, which some other companies have had to do. So I think it's as apples-to-apples as you're going to get. And I think BMS should be and is as excited about it as we are. But no, there's no contractual provision for this type of thing. No one could have ever envisioned this. So as far as I'm concerned, the companies are behaving well together, and I'd like to see it all move forward in a respectable fashion.

Great. And then lastly, when your team is sitting on those Zoom conference calls with the Gilead folks, are they begging to put one of your assets into a COVID therapeutics trial, might be good for a retail pop in the stock?

Well, look, I can say this. Look, we've certainly looked at all the literature, and there's an awful lot of literature that suggests that patients who have low lymphocyte counts, leukemia, don't do very well with COVID-19. And if you can increase their lymphocyte levels, there is -- those patients with higher lymphocyte levels actually do much better with COVID-19. So it's something we're looking at, it's something we're talking about. And we haven't made any plans yet, but it's something that if we decide to -- if we come up with an approach to move forward, we'll certainly share it with everybody.

Our next question comes from Jessica Fye from JPMorgan.

This is Yuko, on the call for Jessica. Starting the 180 patient Phase I/II dose optimization and expansion study in non-small cell lung cancer, that BMY will be running, can you provide an overview of that study, including the doses that you'll be evaluating in the dose optimization phase? And then do you plan to select patients based from PD-L1 status or any other biomarkers?

Thanks, Yuko. I'm going to ask Wei to walk through what the structure of the BMS study would be for bempeg plus nivolumab non-small cell lung cancer? Thanks, Wei.

Okay. Yes, thanks. So the -- so that study is also very similar to the PROPEL study in design. Now that study is not finalized yet, so I cannot share too much details now. But at a very high level concept, it'd be very similar to PROPEL in the sense that we'll be pushing the dose higher beyond 6 micrograms. And in addition, we'll be enrolling patients across all PD-L1 expression to really try to observe if the combination of bempeg plus nivolumab can expand the activity of checkpoint to the low expression population as well as the negative population. So the data coming from that study along with PROPEL study would help we and our partners to make an assessment what would be the more appropriate and best trial design going into Phase III.

We'll take our next question from Difei Yang from Mizuho.

Just a quick one on NKTR-255. So you have a couple of trials ongoing in liquid tumor. How do you think about the opportunities for solid tumor? Where do you see the biggest opportunity for IL-15.?

Thank you, Difei. I'm going to ask JZ to answer that. JZ?

Yes, certainly. So -- Difei, so there are a number of interesting opportunities in the solid tumor space. When you consider a combination with targeted antibodies that we know have a component of their mechanism associated with antibody effector function. So you know that in the tissues, right, that we typically see lower levels of natural killer cells, right, so we rely on antibodies that work through direct signaling, like, for example, EGFR-engaging antibodies, for example. But then we also hope that they can engage a phagocytic mechanism as part of their effector function in the tissue. And one of our overarching hypothesis with 255 is that in addition to all those mechanisms, we should be able to drive natural killer cells into the tumor as well. And I think you saw some of the data that we presented at SITC and other conferences that showed that even in a mouse model, where you had an intact immune system or in one that you had a xenograft, but it was SCID, so it was still NK cell competent. Even if you implanted tumors into peripheral tissue, like the flank or the thigh, and you gave 255, you could still drive NK cells into these peripheral tumors. And you know this very well, right, that's not a lymphoid kind of a tumor, it's not a liquid tumor by any means. This is a traditional solid tumor that NK cells can populate.

And we demonstrated that whether you combine with antibodies like EGFR engagers, like cetuximab, or Herceptin types of bindings, like Herceptin, HER2s and others that -- in a range of different tumor models, either in the xenograft or in the fully competent or even in PDX case, you can engage those kind of activities in the solid tumor space. So as we eye opportunities in the clinic, some of the things that's quite interesting to us, they're combinations, for example, with agents like cetuximab. We already know that there are opportunities in targeting the NK cell compartment in the combination with cetuximab. We've seen some other antibody combinations do that. So I think that represents, one, very unique opportunity. And then, of course, there's really a whole wealth of other opportunities because you can quickly move beyond cetuximab to additional solid tumor targeting antibodies and consider additional lines of therapy. So I hope that answers your question, Difei.

Yes. Very helpful. I have just 1 quick follow-up with bempeg. Wei, would you remind us what is the MTD for bempeg? For the PROPEL study, it sounded like you're planning to dose escalate to 10 micrograms per kilo, but what is the MTD?

Wei, would you like to take that question, please?

Sure. Yes. So the current design allows us to dose escalate all the way up to 12 micrograms per kilogram, which is twice the current dose in our registration studies. So now obviously, in the end, MTD is one of the element that contributes to decisions for RP2D. But in addition, we're going to look at the totality of data, both in terms of safety and efficacy. And from the safety also as the patients get treated longer, whether the tolerability continues to be well behaved.

Our next question comes from Bert Hazlett from BTIG.

Not sure if this got asked yet, but in the PIVOT-02 melanoma cohort, is it possible that you're already at the minimum of 21 months in terms of PFS for that cohort? Just an update on the PIVOT-02 melanoma cohort PFS would be great.

JZ, do you want to take that one?

Yes, sure. Bert, nice to speak with you. And yes, I wanted to definitely clarify. You diagnosed that correctly. So in the current assessment of the data, we're at a minimum of a 21-month duration in the PFS. So this is very exciting data, right? We're continuing to watch this cohort develop, continuing to see the patients. Obviously, this is indicative of the kind of durability that we've already presented on last year. We're seeing that kind of durability extend. And we're seeing a further extension of the PFS. We're really looking forward, Bert, to give additional update on this cohort. We'd be looking to do that perhaps at a medical meeting later this year.

Our next question comes from George Farmer from BMO Capital Markets.

More on PIVOT-02 and the melanoma cohort. I recall at SITC that while you had not hit your median after 18 months in PFS, it looked like the 12-month PFS was probably around 53%. So that implies maybe suppression by 1 or 2 patients would throw the curve off into the lower part -- lower half of the graph. Is it safe to say that no patients have progressed since that time? And are you, in fact, following all the patients or have some patients been lost to follow-up and they're just censored at various time points? If you could comment on any of that, it would be great.

Wei, do you want to start or JZ? Give it to either one of you.

JZ, do you want to start first, and I'll add in.

Yes. Sure. So George, those are good questions. And what we would like to do is to update the data at a medical meeting later this year. Then we can go through all of the details of the data because in addition to any -- like the questions you asked about durability, right, also, we can cover deepening of responses, the additional kinds of overall effect that the patients have seen. You also have to remember, these are patients that have now been in treatment for a very long time as well, right? So we were also -- as you saw last time when we gave an update at SITC, we saw patients that achieved maximal benefit, maintaining very, very deep responses or complete response in many cases for over 12 months of additional treatment. So we would provide that kind of detail in that kind of assessment and even we can walk through the kind of spider plots as we do, right, like one-on-one. So like -- we would do that at the future meeting when we could really unveil the data later this year.

Will you have -- do you think you'll be sharing overall survival data as well?

So I think that we have -- yes, okay, go ahead, Wei.

I think -- so the -- right now, the survival data is really quite long. So I think our primary goal would be really focused on describing the PFS. Since that, in the end, is the primary endpoint for the study, the basis which will be for us to obtain a full approval. So I think that's probably more meaningful. I think right now, it'd be really hard to estimate what the OS is, given how the curve is looking.

Okay. And then JZ, regarding 358 and the presentation of the lupus -- the Phase Ib lupus data, you're presenting at 2 conferences, at EULAR and ACR? What will be difference -- different between those 2 presentations, if any?

George, good question. So one of the things is because EULAR is going to be a virtual conference, we know that it's harder to get the same kind of visibility of the program because you're normally used to that large conference, all the people there and the ability to socialize the results. We expect that ACR, American College of Rheumatology, which comes in November, we expect that, that is likely not going to be a virtual conference. I mean, with COVID aside, we're projecting that the situation is different roughly 6 months from now. And so for there, we would be looking for the actual real-time conference feel. One of the things that we did last year when we presented the single ascending dose data is that we covered kind of the clinical data in 2 parts. So for example, at the EULAR conference in the SAD study, we covered the safety, the pharmacokinetics, and then the Treg pharmacodynamics showing the dose-dependent expansion that we presented. Remember, we showed about a 17-fold increase in Treg levels over baseline at the top dose that we evaluated in that study.

And then at ACR, we go much deeper into the phenotype of the patients treated with NKTR-358. So there we looked very closely at any cytokine responses. We looked very closely at the Tregs and their activation status. And we even did, as you recall, the methylation studies of the FoxP3 promoter. You know, again, really diving deeper into the immunology. So that's one thing that you can consider for how we will parse the data in consideration for EULAR and ACR. And then, of course, the key point of the multiple ascending dose study is this is in lupus patients, so we're evaluating 358 in the diseased immune system and of course, we're evaluating multiple doses of the drug, not just a single dose. So EULAR is really right around the corner, it's barely a month away. So you'll see the early presentation of the data and then a much bigger time showcase of it yet to come at ACR later this year.

Okay. And then finally, do you think 358 could treat cytokine storm associated with COVID?

So that's a very interesting question. So 358 definitely induces regulatory T cells. And yes, you're familiar with our data, it can induce the polyclonal regulatory T cell response. So that's a very interesting concept in nuance. One of the things that we do know about COVID and the cytokine storm is those are -- seem to be non-lymphoid-derived cytokines, right? They're typically innate kind of cytokines, like IL-6, others linked to CRP, for example. So we typically do think that lymphoid cells can antagonize that. So it's a very interesting thought, very interesting idea. But right now, our plans with 358 are more -- much very squarely focused in the autoimmune disease space.

Our next question comes from Arlinda Lee from Canaccord.

I had maybe a follow-up question on your IL-15 agonist, 255. You already talked a little bit about what you guys are looking to see in the data set in the initial Phase I data. I'm curious that with other IL-15s entering the clinic recently with different strategies, whether you might also talk a little bit more in-depth about how you guys designed your IL-15? And what kind of differentiators might we look for in that early data set that you guys are hoping to have at around year-end?

I'm going to have JZ answer that. JZ?

Sure, Arlinda. So one of our goals, as you know, from our 255 program was that we really wanted to maintain all of the possible receptor-ligand interaction that IL-15 uses when it naturally signals as the cytokine like a naked cytokine in the human body. And we know that it has at least 2 -- well, at least 3 different kinds of binding modes. So it can signal through the dimeric beta-gamma receptor complex wherever that complex can exist on any cell type. But then it can also signal through a trimeric receptor complex, where there's an IL-15 receptor alpha specific subunit that then complexes with beta-gamma. And that mode of signaling is different than the IL-2 pathway because, in this case, the IL-15 alpha receptor subunit can either be expressed on the same cell as beta-gamma, we call that cis-signaling, or it can be expressed on a neighboring cell, where it hands off to a beta-gamma on a nearby cell. That cell is kind of like a cell-cell contact-mediated signaling, and we call that trans-presentation. So those are all 3 modes of natural IL-15-dependent biology, and the immune system uses all 3. And so we wanted to make sure that the biology at 255 could recapitulate all of the biology that the native IL-15 has available to it.

So fundamentally, this approach is very different than a lot of the competing pipelines because almost all of those designs involve the IL-15 cytokine and generated as a drug product in complex with the extracellular domain of IL-15 receptor alpha. And there are variations on that theme. Some use the entire receptor, others just use a sushi domain, as you know, others use an Fc-fusion to make a 2-arm cytokine plus receptor complex. But they all have that same sort of basic underlying design principles. And there are some unique differentiating properties we presented recently at SITC last year, we presented some studies that evaluated head-to-head the assemblies that have the receptor and complex to the cytokine in comparison to either native IL-15 or NKTR-255. And we saw a lot of unique differences, we saw differences in receptor internalization between the different designs versus the native or 255; we saw differences in granzyme B production intracellularly in NK cells. And even when you evaluated an intact PBMC culture, we even saw differences of CD14 monocytes that could express intracellular interleukin-18. And we saw those kinds of changes in granzyme B inductions really in either the native IL-15 or the 255 molecule. Those kind of things were not really well supported or induced with the assemblies that had both the receptor and complex with the cytokine. So we think that's one difference. There should be a leery sort of significant modification of how the immune system can be targeted with the IL-15 pathway using this kind of 255 design, and we think that could translate into things like reduced tachyphylaxis with repeated dosing and a number of other kinds of potential improvements.

And our next question comes from Aydin Huseynov from Benchmark.

Appreciate all the safety measures you provide across the sites. I've got a couple of questions on bempeg melanoma study and one follow-up about the guidance. So on melanoma, wanted to confirm the status of Phase III melanoma study, how many patients have been enrolled so far? And given that it looks like the PFS is expected to be in the first quarter of 2021, whether we would be able to see the complete response numbers earlier than that, let's say, maybe early -- at the end of this year or maybe in the beginning, at the very beginning of the next year?

Wei, I'm going to ask you to address that question?

Sure. Thanks for the question. So just to correct, the guidance is not the PFS will be beginning of next year, it's -- our guidance has been that the response rate-based endpoint, that first endpoint would probably occur potentially in Q1 next year. So -- and our guidance has been that based on the study design, the current study design, the initial projection has been that the PFS could potentially come in 6 to 7 months after the OR endpoint. Now, as we discussed before, that currently we're in discussion with health authorities with a potential change in the first endpoint, which -- from OR to CRR. And then in addition, with the path change and then the current ongoing enrollment of the study, the difference in the CRR readout and the PFS readout, if we were to affect that change could be different than the 6 to 7 months, so some of that release because PFS is really an event-driven readout. So I want to be clear about the guidance we provided to date. And regarding your first question, how many patients we enrolled? That is really a study conduct. In an ongoing study, we typically do not provide those numbers. Once the study is completely enrolled, then that -- the completion enrollment information will be provided, Aydin.

Okay. Appreciate that. Just want to confirm. So we're going to see CR number together with ORR number in the beginning of 2021, right?

That's our current guidance, yes.

Okay. Appreciate that. And another question on financial guidance. So I was just curious to understand that given that certain studies would be postponed or pushed to later in the year or some maybe even pushed to the next year, trying to understand the cash burn, why it kind of stays the same as previously guided, given that there might be less expenses associated with research and development and overhead expenses?

Thanks, Aydin. Gil -- yes, Gil, go ahead.

Great. And thanks for the question. Yes, as we talked about on the call and Howard reviewed, many of the studies that we're running and the ones, in particular, that we have in-house remain on track. So that obviously would have no effect on our expense guidance and some of the other potential changes are more minor in nature. So we don't -- as we sit here today, I think that's going to have an impact on our R&D expenses. Some of them are activity based, some of them are not, so we're comfortable with the current guidance, and aren't making any changes at this time.

Our next question comes from Jay Olson from Oppenheimer.

I had 1 on RCC, where it seems like the goal line keeps moving with all the combinations and now the CheckMate 9ER study results look pretty solid for nivo plus cabo. So I was wondering if those study results change your view of the opportunity for bempeg plus nivo in RCC. And then I had a follow-up on 358, if I could.

That's great, Jay. Wei, I'm going to ask you to address the RCC question and the landscape.

Sure. Yes. So I think definitely, the RCC landscape continues to evolve. And so right now, you have a nivo plus ipi combination and also checkpoint plus TKI, both involving pembro and avelumab, and now most recently with neo nivo. So the way we think about it is really 2 things, one is the combination of bempeg plus nivolumab does offer another treatment option. Now the TKI can be used in multiple settings; it can be used in combination with a checkpoint in the first-line setting or it can be used later as a monotherapy treatment. So I think -- so different -- if you talk to different physicians around the world, people are really taking advantage of these options and using them differently. There are still some physicians who prefer to use a IL-IL combo in first-line setting and other like to use a TKI combo and then you sub that option of a TKI in the first-line setting. I think our goal here is to introduce another treatment option. Now, we expect to have a different safety profile than is offered by a checkpoint plus a TKI combination, and then also depends on the efficacy we're able to deliver, I think it does offer a different treatment option and also gives doctors an opportunity to serve a TKI as a later line therapy rather than exhausting the first line, so that's one. And second of all, it has been disclosed previously, BMS is undertaking the Phase I study with a triple combination of bempeg plus nivo and then TKI. So -- and that study is expected to start. And so that triple combination, once it progresses on to a registration study, can offer additional treatment options that involved a bempeg within front-line of therapy.

Great. That's super helpful. Thanks for that comprehensive review. And then, I guess, just on 358. It seems like there's been a few new drug approvals for lupus over the past 50 years. I think BENLYSTA might be one of the newly ones. But -- and now there's a few promising treatment options in development, including Astrazeneca's and Biogen's new molecules. I was wondering how you see the lupus landscape evolving and how the 358 mechanism compares to anifrolumab and BIIB059.

That's great. JZ, I hope you take that one.

Yes, thanks. Yes, happy to answer that. So yes, you definitely diagnosed and characterized the problem very, very well. So outside of BENLYSTA, right, which came several years ago, there really haven't been any approvals. And frankly, there haven't really ever been even any kind of really exciting trial results until anifrolumab and the BIIB came along.

And the thing that we saw was some pretty exciting data in Phase II, and then we saw Phase III data. Phase III data, frankly, was a little bit more confusing, right, as you know. And also what we see in that case is potentially yet again changing in some of the endpoints in lupus studies. We saw that the first time with BENLYSTA's approval and we're potentially going to see it again in the case of ani.

One of the things, though, that's an important takeaway is if you look at the landscape of mechanisms that have been tested for treatment targeting, they're all highly overlapping, right? They're targeting the same kind of pathways, they're focused on the same kinds of specific subset of immunology. And we keep doing a lot of studies with very, very similar kind of mechanisms. One of the things that's really exciting about considering Tregs as a treatment option in lupus is that lupus patients are known to have a very specific dysfunction in their Treg compartment. So we know that as lupus patients have progression to moderate-to-severe disease, they have low levels of IL-2, even in response to normal stimuli that would induce interleukin-2 expression. They also have reduced levels of regulatory T cells. They have kind of that imbalance between Th17 and Treg cells, where you see an overpreponderance of Th17 and a drop in Treg numbers, and there are also reports that we would reduce suppressive capacity of Tregs in lupus patients. So of all of the things that make up lupus and it is a heterogeneous disease, we have to accept that. Tregs are a very unique kind of biological feature that seems to be associated with the dysfunction in the patients that present with this disease. And we've now seen multiple clinical studies where low-dose IL-2 has been applied for the treatment of lupus. And we've seen both Treg elevations and low dose IL-2 in these 2 multiple studies, for example, one was in China, one was in Germany. And we've also seen some efficacy that came out of those trials. So this is kind of the application of first-in-class kind of a mechanism for the treatment of lupus. So I think that represents, one, kind of exciting opportunity. The other exciting opportunity for us is that, of course, we've already shown that NKTR-358 can induce Tregs both in their number and their duration of expansion and even in their suppressive functional enhancement in a way that IL-2 just can't. You can't use any kind of low-dose IL-2 regimen to produce the mass quantity, the huge amount of Treg inductions that we're able to produce for 358. So we think all of those things together represents a very reasonable and strong scientific rationale to advance into lupus. And that's why this will be the first Phase II study that we're going to be initiating with Lilly. And as Howard said, it's not going to be the last. You'll see additional Phase II studies in other indications after lupus. And contractually, the 2 companies that we've agreed to run up to 4 Phase II studies. So we're looking for the full expansion of that this year and into next.

We'll take our next question from Paul Choi from Goldman Sachs.

This is Corinne Jenkins, on for Paul. I was wondering if you could talk a little about what your ability is to advance NKTR-358 outside of some of these Lilly studies. And if you've explored potential indications where you could pursue either in different partnerships or on your own?

JZ, I'm going to let you answer that.

Yes. So with NKTR-358, we signed basically like a licensing kind of a collaboration with Eli Lilly. So we work with them exclusively on NKTR-358. As I mentioned, the scope of the 358 program is pretty large, right? You could think of applying the Treg mechanism to a range of autoimmune diseases, and that's what we're doing together. But it's really a program that we've exclusively partnered with Lilly, and all of its development is in direct collaboration with Eli Lilly.

Okay. And then I think you said that you do still have 10 to 20 patients in the PROPEL update, but that's been pushed a couple of months. In addition to the delay, should we expect any impact on patient enrollment, like could we expect maybe the lower end of the range due to COVID-19 or anything like that?

Wei, I'll let you answer that.

Sure. Yes. So the -- so this study is rolling globally. That's our plan in the U.S., EU and Australia. Based on the sites we selected, we expect majority of patients to come from Europe. There is a delay in site activation due to the effect of pandemic in Europe. We're actively looking at the sites in Europe. There's a high degree of variability, as you observed, the degree to which the pandemic really affected from country to country. There's a big difference between what has happened in Italy and Spain versus what's happened in, say, Germany. And so we're taking a very measured approach, trying to understand at the site level in addition to the country level, look at the impact and trying to be very opportunistic in how we open up sites, enroll patients. So as been mentioned earlier in the call, what's most important to us is really to make sure that the right patients get put on the study and not compromise on the eligibility because of the ongoing pandemic. And in addition, we would only activate a site, enroll patients at a site. If that site has demonstrated and a full capacity to follow through with the protocol, to really care for the patients and to execute all the treatments as well as the tumor assessment, so it's under those circumstances that we plan to really continue to enroll into the study. So I think since we're really only a couple of months into the pandemic, exactly projecting out for the next 6-month impact would be really difficult at this time. But our team is really working hard to fulfill those criteria and making sure that the study does advance as we had really hoped.

And we'll take our last question from Daina Graybosch from SVB Leerink.

I have 2, I'll give them both, and you can answer them whatever order. The first is on PROPEL or BMS' study that you guys are planning in first-line non-small cell lung cancer. I'm wondering if there's any way that might be a small randomized study as we have seen more companies take with IL-IL combination and when you might make the decision. And the second is on 358. There's other companies with their own IL-2, their Tregs-directed therapies, and they're going after different indications. And I wonder if you can talk through how you and Lilly are prioritizing your indications beyond lupus and whether, I guess, you're probably not going to say you could -- got gut directed, but just what criteria you're using to make that next decision.

So I'd like to start with JZ answering the 358 question and then move on to Wei to address the question that Daina had about randomized controlled trials.

Sure. Daina, nice to speak with you. So with 358, as you know, so Tregs can be applied to a range of different diseases. And so when we consider the different indications that Lilly and Nektar would be working on, we looked at a number of factors. We looked at, of course, the strategic factors that fit the areas that Lilly is heavily engaged in and prioritizing. And we also looked very scientifically, almost from a bottom-up approach, where we looked at where the kinds of underlying disease pathology is most heavily driven by a dysfunctional T cell compartment, where the nature of that T cell compartment is antigen-driven, where we have a kind of understanding of at least some of the key antigenic drivers, and then where we think we can, of course, generate antigen-specific Tregs that can antagonize our reactive immune cells that are responding to that same antigen. So we have ways of kind of classifying autoimmune diseases for ones that have a different types of inflammation, depending on the organ that's involved the underlying immunity in that organ, and that can go all the way from diseases that are highly inflammatory and drive, say, diseases like Crohn's, for example, very, very highly T cell-driven inflammatory disease, probably very little autoimmune or humoral response.

And then it can range in spectrum all the way to diseases that are completely autoimmune. So for example, a disease like pemphigus or myasthenia, where it's completely driven by an autoantibody. So you can imagine that the Treg in those 2 different kinds of diseases looked at 2 different things. On the first type, you would really be antagonizing T cells that are trafficking to the gut, as you pointed out, by blocking their inflammatory response to those types of antigens that they're reacting to. But in the latter case of the autoimmune disease, you would expect to antagonize T follicular helper cells, cells that are controlling B-cell, T cell reactions and priming and dropping down any kind of autoantibody kind of production. So we can prioritize diseases based on their underlying immunology, look at where 358 and the cell population that induces could make the biggest impact and then use that to select for indications for assessment. Now with Lilly, we don't announce those indications ahead of time. So we would be announcing them as we get much closer to the start of those studies. So stay tuned as we get to later this year as we announce the additional indications that we'll be working on together.

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

Okay. Well, thank you. Thanks, everyone, for joining us today. And I also mainly want to thank our employees for the incredible amount of hard work and commitment to the company, and particularly during this time where our environment is changing so rapidly, and we've had to adopt our work practices and behave in a different way. I'm exceptionally proud of how our employees have risen to overcome our daily challenges, keep our business on track and make tremendous progress. So I have to thank them all. We've built a very valuable pipeline in immuno-oncology and immunology, meeting -- addressing areas of high unmet medical need, and we're focused on moving these programs forward. And as shareholders, we want to thank you for your support. And we will continue to provide updates on our progress. And we also want to wish all of you and your families' safety and health during this time. So thank you for joining us.

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