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Nektar Therapeutics (NASDAQ:NKTR)

Naloxegol Study Results Call

November 12, 2012 08:15 am ET

Executives

Jennifer Ruddock – Vice President of Investor Relations and Corporate Affairs

Howard W. Robin – President and Chief Executive Officer

Analysts

Jonathan Aschoff – Brean Capital

Cory Kasimov – JPMorgan

Birin Amin – Jefferies & Company

Bert Hazlett – ROTH Capital Partners

Jon LeCroy – MKM Partners

Operator

Good day ladies and gentlemen welcome to the Nektar Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session with instructions following at that time. (Operator Instructions) As a reminder, this conference is being recorded. Now, I’ll turn the conference over to Jennifer Ruddock, Vice President of Investor Relations. Please begin.

Jennifer Ruddock

Thank you, [Tyron]. Good morning and thank you all for joining us today to discuss the positive results announced earlier today from AstraZeneca’s Phase III studies of Naloxegol for Opioid-induced constipation. With us today are Howard Robin, our President and CEO; John Nicholson, our Chief Financial Officer; Dr. Robert Medve, our Chief Medical Officer; and Dr. Steve Doberstein, our Chief Scientific Officer.

On this call, we expect to make forward-looking statements regarding our business, including but not limited to the Naloxegol clinical development program, the timing of future clinical results and regulatory filings, the economic potential of our collaboration partnerships, including potential milestone payments, the therapeutic and market potential of our drug candidates and those of our partners, our financial guidance for 2012, and certain other statements regarding the future of our business.

Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes that are difficult to predict and many of which are outside of our control. You should review the important risks and uncertainties that are set forth in our quarterly report on Form 10-Q filed on November 9, 2012 that can be accessed at www.sec.gov.

We undertake no obligation to update any forward-looking statements, whether as a result of new information, future developments or otherwise. As we noted in our call advisory, today’s conference call will replace our regular financial results call, which was scheduled to occur tomorrow. A webcast of this conference call will be available for replay on the home page of Nektar’s website at www.nektar.com.

With that I would like to hand the call over to our CEO, Howard Robin. Howard?

Howard W. Robin

Thank you, Jennifer, and thank you all for joining us this morning. We’re exceptionally pleased to report that in both of the pivotal studies for naloxegol, the 25 milligram dose arm met the primary end point with statistical significance. Today’s results represent a major milestone for Nektar and validate the power of our technology to create novel medicines.

Let me remind you of the design of the KODIAC pivotal studies to evaluate the chronic use of naloxegol as a treatment for opioid-induced constipation. Both studies where identical, randomized, double-blind, placebo-controlled trails with a 12-week treatment duration. Each trail enrolled more than 600 patients and evaluated 25 milligrams and 12.5 milligram naloxegol doses administered once daily as compared to placebo.

The primary endpoint in both trails was percentage of OIC responders versus placebo over 12-weeks of treatments. A responder was defined as a patient having at least three Spontaneous Bowel Movements per week with at least one Spontaneous Bowel Movements per week increase over baseline. This needed to be met for at least nine out of 12 weeks and at least three out of the last four weeks. Under the design of both efficacy trials statistical significance for the primary end point required a P value of less than 0.025, compared to placebo.

As I said earlier, the 25 milligram naloxegol dose met the primary end point with statistical significance in both pivotal studies. In KODIAC-04, the P value for the 25 milligram dose was equal to 0.001 and in KODIAC-05 the P value for the 25 milligram dose was equal to 0.021.

The 12.5 milligram dose also met the primary end point with statistical significance in one of the studies, KODIAC-04, with a P value of 0.015. As a reminder, the 25 milligram dose is the standard of care dose and is being evaluated in this 52-week long-term safety study. The secondary end points in the studies included the median time to first Spontaneous Bowel Movement and days per week with at least one bowel movement.

All secondary end points were statically significant for the 25 milligram dose. Now on to the important safety finders. There were no clinically relevant imbalances in serious adverse events across the three treatment arms in either pivotal study. The most common adverse event in any treatment arm in either trials included abdominal pain, diarrhea and nausea, all expected in a drug that is intended to reverse constipation in GI track.

In KODIAC-07 the three month safety extension for KODIAC-04, the occurrence of adverse events and serious adverse events was lower than in KODIAC-04 and 05. Among non-serious adverse events arthralgia was the most common and was reported only in patients in the naloxegol 25 mg arm. All other common adverse events were distributed similarly across the three treatment arms. Importantly, there were very few externally adjudicated cardiovascular events overall.

The occurrence of these events in placebo was greater than in either of the naloxegol groups. In addition, there were no significant increases in pain scores and no significant increases in opioid doses for naloxegol patients at any dose across all three treatment arms.

AZ plans to submit the final data from these trials at future medical meetings. The fourth trial in the KODIAC program, KODIAC-08 is a robust 1,200 patient, 52 week well controlled safety study with chronic daily administration of naloxegol as compared to usual care in patients taking opioids for chronic pain.

AZ expects this study to be completed by Q1 of 2013. An NDA filing in the United States and an MAA filing in the EU are planned for the third quarter of 2013, pending results of KODIAC-08 and a pre-NDA meeting with the FDA.

Opioid induced constipation is a burdensome condition, which is often overlooked, inadequately managed and can negatively impact the patients’ quality of life. AZ estimates that up to 35 million patients taking opioids for long-term pain relief will develop constipation in an estimated 50% of OIC suffers do not receive sufficient relief from conventional access.

Based on our agreement with AstraZeneca Nektar is entitled to receive $95 million upon acceptance of regulatory filings and an additional $140 million in milestone payments upon regulatory approval and launch in the U.S. and EU.

Nektar is also entitled to receive significant escalating double-digit royalties on product sales of naloxegol with up to $375 million in additional sales milestones at certain commercial sales levels. AstraZeneca is responsible for all costs of commercialization for naloxegol. AstraZeneca with its global presence is an ideal partner for the marketing of naloxegol and we are very confident in their clinical program for naloxegol.

In just a few years, Nektar has leveraged our proprietary technology platform to generate an extensive pipeline of clinical and preclinical programs, which include multiple high-value drug candidates in pain and oncology, including a Phase III program in breast cancer.

Naloxegol was the first oral drug designed using Nektar’s Polymer Conjugate Technology and it was specifically engineered to stay out of the CNS to preserve analgesia, while antagonizing the mu-opioid receptors in the gut to reverse the constipating effect of opioids.

The results from the studies today show us that naloxegol behaves as we designed it. In the design of naloxegol, we leveraged our understanding of the interaction of Nektar’s Polymers with the blood brain barrier. This is a key element of our proprietary platform that allows us to modulate the entry of drugs into the CNS and even to exclude them completely when we desire.

This approach lead our scientist to the discovery of additional non-drug candidates with modulated CNS entry, NKTR-181 for chronic pain, which is in Phase II, NKTR-192 for acute pain, which is in Phase I, and NKTR-171 for neuropathic pain slated to enter the clinic in 2013. Today’s results underscore the tremendous growth and momentum we have achieved with Nektar in just a few shot years or while maintaining a solid financial position.

Before we open the call for questions, I just want to note that since this call will replace our financial results call, which was scheduled for tomorrow, we want to take this opportunity to remind you that we expect to end 2012 with approximately $300 million in cash and equivalents. All other financial guidance remains unchanged from our prior guidance.

With that I’d like to open the call for questions?

Question-and-Answer Session

Operator

(Operator Instructions) Our first question is from Jonathan Aschoff of Brean Capital. Your line is open.

Jonathan Aschoff – Brean Capital

Good morning, so Howard I have always viewed, but you can argue with this if you want, but I’ve always viewed 25 milligrams is being on the cusp of tolerability and that sort of led to the 12.5 milligrams inclusion in Phase III, so can we have any actual Phase III data today that helps us better ascertain the safety of that 25 mg dose relative towards say, oral relistor.

Howard W. Robin

I’ll let Rob answer that in some more detail, but I want to tell you that that’s not the reason the 12.5 milligram was put in the study. We always believe that the 25 milligram dose was going to be the proper dose and a 12.5 milligram dose was actually just to see how low we can go and still get efficacy. It was never put in there for safety reason Jonathan, but I’ll let Rob comment on that further?

Robert Medve

Certainly Jonathan this is Rob Medve. The 25 milligram dose is what’s included in the long term safety studies, it was always the target dose for this commercialization opportunity, and the 12.5 inclusion offers you an opportunity to perhaps look at concepts like lowest effective dose and some flexibility in building the label. So, we don’t see, I disagree with your characterization of that as being on the cusp of any way shaper or format, I think this is the appropriate dose for naloxegol, and that’s what we carried in from Phase II, and I believe seems to be supported by what we’ve seen in Phase III.

Jonathan Aschoff – Brean Capital

Okay. So what did preclinical safety study show you guys regarding any sort of opioid withdrawal and CV events there, what did you see there?

Howard W. Robin

Well, Jonathan, with regard to opioid withdrawal, first of all the preclinical studies, we saw no evidence of opioid withdrawal. And even in these studies, there were few if any cases of opioid withdrawal, there might have been a few, we are not certain they were exceptionally mild. They haven’t actually been well characterized yet. But our position is at this point that we saw very, very few incidence of opioid withdrawal, and if there were, they were exceptionally mild, and I will let Rob comment on that a little bit further.

Robert Medve

Certainly in the preclinical database, we didn’t see any evidence that we were creating opioid withdrawal or a cardiovascular risk. As you are aware, in the human populations, we’ve done therapeutic studies and not identified any risk directly from that. And in terms of, as Howard mentioned with opioid withdrawal, opioid withdrawal, people think of the constellation of symptoms and somebody implored withdrawal.

And certainly we don’t see anything like that and we see very little of anything. The question is if you have somebody who has a flu in the middle of the trial, those symptoms can mimic what you might see for very, very mild opioid withdrawal. So there is no clear cut pattern there. What you do see and it’s very important to note is that you don’t see any changes in opioid dose, you don’t see any changes in pain score. So, there’s no clinically relevant from a pain management perspective certainly, but no clinically relevant indicators of significant opioid withdrawal and that also carries over into the safety as well.

Jonathan Aschoff – Brean Capital

Okay. And then lastly, you guys clearly acknowledged the FDA’s, I’ll call it a new view in your 10-Q on what might be required long-term safety trial wise. So, do you guys still have any confidence that what comes in the first quarter of 2013 can be sufficient if it’s clean or you really think that there’s a lot more understanding that needs to be had between you and the FDA?

Howard W. Robin

Of course I can’t comment on confidential discussions with FDA and I can’t speculate on what the FDA might do or might not do. We’re aware that the FDA is exploring whether there’s evidence of a cardiovascular risk associated. Related to opioid withdraw from mu-opioid antagonist, and I know that AZ remains confident that the program is designed to properly evaluate that. I think we’ve seen essentially very little of no incidences of withdrawal. And as I said, anything that we might have seen has been very mild. We don’t see any cardiovascular risk signal in these studies. As I said earlier, there was no imbalance in adverse events across all three treatment arms. So, I think, at this point we’re very, very happy with the safety profile of naloxegol.

Jonathan Aschoff – Brean Capital

Okay. Thank you very much.

Operator

Thank you. Our next question is from Cory Kasimov of JPMorgan. Your line is open.

Cory Kasimov – JPMorgan

All right, great. Thanks. Good morning. Thank you for taking the questions and congratulations on the data. First one, I would just follow-up on Jonathan’s questions around the CV issue here with the FDA, and I guess just asking from your press release as well as your prepared comments you suggested that there were no clinically relevant imbalances in SAs including major cardiovascular events. I guess I’m just wondering what you define as clinically relevant imbalances and could you provide some context around that that might give us some comfort to that. Is there an agreed upon analysis with the FDA that you are going upon there or something else. And then my follow-up question is on the DEA scheduling review to obtain decontrol, if you can just kind of give us an update on where that stands? Thanks.

Robert Medve

Cory, this is Rob. In terms of the serious adverse events and clinically relevant imbalances and I’ll sort of cover this step wise. When we actually look at the reporting of series of adverse events it’s relatively higher actually in placebo than active drug arms, but the differences are small numbers, so the differences are not clinically significant. So they are not in terms of having more serious adverse events in the naloxegol arm that’s absolutely not the case. So that’s the hence the language around that.

In terms of cardiovascular events, all events that were reported as cardiovascular were adjudicated by an independent third-party and what we see is a very low overall occurrence of cardiovascular events and actually more relatively speaking in the placebo arms and the act of drug arms. And your third question was around the …

Cory Kasimov – JPMorgan

Around the DEA scheduling, the decontrol.

Howard W. Robin

Let me answer that one clearly. I mean, we are not concerned about the scheduling issue Naloxone in the molecular scaffold, which naloxegol base has been accepted by the DEA as non-control since 1974. Originally, we believe that naloxegol should not be considered a control substance due its relation to Naloxone.

And remember that naloxegol is an opioid antagonist that is designed to be excluded from the brain and there is no reason to believe that it would be, have any addictive potential. AZ has completed all the necessary studies, submitted a decontrol petition for naloxegol that’s already been accepted by the DEA, I think this is just a matter process and I don’t think we have any concerns about this.

Robert Medve

Just to add to that as most of you, I’ve worked for many years with controlled substances and so on and the FDA – excuse me the DEA sees as a structural relationship and therefore triggers this kind of thing. It’s a pure antagonists, there is no evidence it acts as anything other than that, so this is just a matter of going through the process with the DEA to deduct a control. So that’s been an under review.

Cory Kasimov – JPMorgan

Okay great, I assume there was a procedure issue. I just wanted to confirm and make sure thank you very much.

Operator

Thank you. Our next question is from Birin Amin of Jefferies. Your line is open.

Birin Amin – Jefferies & Company

Hi guys. Thanks for taking my question and congrats on the data. Just wanted to maybe get some comments again on your CV events, are the CV collected at 12 weeks, or are these reports at the 24 weeks or the 12 week extension period?

Robert Medve

The cardiovascular events, and this is Rob. The cardiovascular events are collected throughout the trial, but anytime any event would occur or any adverse event cardiovascular or not is collected throughout the trial. So, these are all regardless of a time of occurrence, it’s not what we recall landmark analysis, where we are looking at the end of 12-week to see if anyone’s had a cardiovascular event. It’s regardless to whether a patients’ responded whether they have not responded, how many doses of drug. If they are on the trial and they’ve reported an adverse event then that is taken into consideration and evaluated in terms of generating the safety profile of the drug. So, will be anybody who has taken the naloxegol or placebo at anytime during the conduct of these studies. So, it’s a very large pool of people who are included in this safety database.

Birin Amin – Jefferies & Company

And can you comment on – in the 12-extension, did the placebo patients cross over to the active arm?

Howard W. Robin

No that’s not specifically across over trial. It’s just an extension trial.

Birin Amin – Jefferies & Company

So, the placebo patients continued on placebo for the second 12-week phase?

Howard W. Robin

Yes.

Birin Amin – Jefferies & Company

Okay. And could you maybe comment on discontinuation rates at 12 weeks and 24 weeks?

Howard W. Robin

I cannot, AstraZeneca as you know would like to present this data to major medical meeting, so it’s a limit to how much I can talk about without preempting their ability to a late breaker, so I’ll just say it’s not concerning to us at all of what we’ve seen.

Birin Amin – Jefferies & Company

Okay, great. Thank you.

Operator

Thank you. Our next question is from Bert Hazlett of ROTH Capital. Your line is open.

Bert Hazlett – ROTH Capital Partners

Thank you. Thank you for taking the question. Just my line has been in and out, my apologies for this. But you just answered the discontinuation rate question, but could you just comment on how this impacts the follow-on combinations? Do you know anything with those programs at this point or you need the additional trial data to make that determination? Thanks.

Howard W. Robin

I think, if you’re asking me, whether AZ wants to move forward with NKTR-119. I mean I can’t comment on that. I think they have every interest in moving this program forward and my guess is that as this program moves forward, they will probably be very pleased to move NKRT-119 forward. But that – but that isn’t something we are ready to share with anyone yet.

Bert Hazlett – ROTH Capital Partners

Okay. And do you think that that’s a decision that will be made at the time of the decision of filing for 118?

Howard W. Robin

I think it could come before that. I mean, honestly I don’t have any specific timing as to when they might announce that they want to move NKTR-119 forward. I’m sure they are actively evaluating that.

Bert Hazlett – ROTH Capital Partners

Okay. Thank you very much.

Operator

Thank you. Our next question is from Jon LeCroy of MKM Partners. Your line is open.

Jon LeCroy – MKM Partners

Thank you. Can you talk a little bit about the treatment effect, where you are seeing increases in bowel moments of one per week, two per week, any sense of kind of a magnitude of effect here?

Robert Medve

This is Rob again. I can’t speak to that. Again, I can’t preempt AstraZeneca’s ability to present this at a major medical conference. So, I can’t give you specific numbers beyond the P-values that were provided.

Jon LeCroy – MKM Partners

Okay. Thank you.

Operator

Thank you. (Operator Instructions) Next question is from Bert Hazlett of Roth Capital. Your line is open.

Bert Hazlett – Roth Capital Partners

Thanks for taking the follow-up again. Do you think that – is there a life at this point for the 12.5 milligram dose in your view? Could there some role for it in some way, in some dose titration scheme or just general thoughts there for the 12.5 milligram? Thanks.

Robert Medve

Yeah, look, I don’t think that we’ve discussed that in great detail. And I think the 12.5 milligram as we said was put in the study only to evaluate what the lowest possible effect of dose could be and you see that in KODIAC-04 were statistic with significant efficacy and KODIAC-05 has missed it. So, I don’t know that if a 12.5 milligram dose is the relevant dose there wasn’t any significant safety difference between the doses as you know and therefore whether AZ wants to make 12.5 milligram available for titration purposes, I don’t think they’ve decided that, but I think you need, I think everybody needs to think about this as the 25 milligram dose is going to be the drug that is brought forward in the file.

Bert Hazlett – Roth Capital Partners

Thank you for the color, I appreciate it.

Operator

Thank you. Next question is from Cory Kasimov, JPMorgan. Your line is open.

Cory Kasimov – JPMorgan

Hey, thanks for taking the follow up. Just wondering how frequently DSMB is looking at the KODIAC-A result and that is open, that’s an open label study correct?

Robert Medve – Chief Medical Officer

Yes, hi Cory this is Rob. That is open label study, it is randomized as you know and well controlled and that’s very important distinction from what’s going on before. And so that’s an ongoing analysis. I can’t speak to how frequently the DSMD meets to evaluate event specifically, but certainly any events that – just generally speaking in trials and events that are serious get evaluated obviously, immediately so that’s ongoing that’s open. As of right now, we’re not aware of any signals coming from that trial that are of concern.

Howard W. Robin

And look, I would just like to add. That was a very important trial because look, if we wanted to make sure that we had an excellent safety database for this drug, so this a – that safety study is a 1,200 patients chronic use 52-week study controlled against standard of care. And so the results from that study will be very meaningful, chronic controlled 52 weeks, 1,200 patients. So, it’s a very meaningful study, and it was designed to answer the question as to whether naloxegol is a safe drug and as Rob said, it is open label and we have no safety signals from that study, they are problematic.

Cory Kasimov – JPMorgan

Great. Thank you.

Operator

Thank you. Your next question is from Bert Hazlett of ROTH Capital. Your line is open.

Bert C. Hazlett – ROTH Capital Partners LLC

Thanks again for taking the additional follow-up, maybe you’ve answered this and I missed it, my apologies again, but can you describe the effect size versus placebo, can you characterize that in anyway, shape or form, is it clinically significant, as much as you can please?

Howard W. Robin

I think Rob answered that before, because AZ wants to use this as late breaking news at a major medical conference, we can’t give you the numbers. The only thing I can characterize it is, we’re very happy with the effect of naloxegol. It works statistically significant and with a meaningful clinical benefit, and that’s as much as I can say?

Bert C. Hazlett – ROTH Capital Partners LLC

Okay, thank you. And that’s the question, thanks so much.

Operator

Thank you. This ends the Q&A portion of today’s conference. I like to turn the call over to Howard Robin for any closing remarks.

Howard W. Robin

Well, thank you everybody for joining us on today’s call. I just want to close by thanking AstraZeneca and our employees for the advancement of naloxegol and I’m exceptionally proud and grateful for the continued accomplishments of the Nektar team. We appreciate your support as shareholders of the Company and we look forward to seeing you at future investor conferences. So, thank you very much.

Operator

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the program. You may now disconnect. Have a wonderful day.

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