Cory Kasimov – JP Morgan
Alright, good morning everybody. My name is Cory Kasimov, I’m the Senior Biotech Analyst at JP Morgan and it’s my pleasure to introduce our next company, Nektar Therapeutics and its CEO, Howard Robin. There’s a lot to go through with this one so I’m not going to take up any of Howard’s time, but please note that there is a breakout following the presentation down the call in the Olympic Room. So with that I’ll turn it over to Howard.
Thank you, Cory. Thanks everyone for joining us this morning. I’ll be making some forward-looking statements as I’m sure you’re aware.
Nektar is well positioned to achieve a positive cash flow, and I think we have some significant late stage programs that I’m very proud of. If you look at Naloxegol, which has now finished Phase III successfully, NKTR-102 in Phase III, Cipro DPI with Bayer in Phase III and Baxter 855 and Amikacin Inhale preparing for Phase III – these royalties on these products alone, leaving out NKTR-102 which we’ve kept for ourselves, the royalties alone can generate over $750 million a year. So we’re very, very excited about this late stage program cash flow.
If you look at our development pipeline, again, a number of very, very important programs at various stages – either preparing for the clinic, in Phase I or in Phase II, and we’ll talk about some of these today. Lastly, we’re in a very good financial position. We monetize certain non-core assets – Cimzia and Mircera royalties earlier in 2012 for $124 million. We secured straight debt due in 2017 of $125 million and we paid off all of our very, very expensive convertible debt last year. So we now have a straight debt position that goes into 2017, and we ended 2012 with more than $300 million in cash. So we’re in a good position.
Today I want to talk about some of these programs. I’m going to start with programs in our pain portfolio; I’ll start with Naloxegol, I’ll move to our pain portfolio and then move to oncology, and then move to some other very important partnered programs.
So let’s talk about Naloxegol, NKTR-118 for opioid-induced constipation. You know the clinical trials, the two Phase III trials were quite successful at the 25 mg dose. Both trials met their endpoints with P values of .001 and .021 respectively, so very impressive results. The secondary endpoints for the 25 mg dose were met also with high statistical significance, and those secondary endpoints were the 12-week response rate in patients who don’t respond well to laxatives; median time to first bowel movement; and number of days with at least one bowel movement. And the 12-week response rate in patients that don’t respond well to laxatives is of course very, very meaningful and these were all highly statistically significant and they were all met.
Now, to make sure that we weren’t removing the analgesia we measured pain scores and we measured opioid use, because we wanted to make sure we weren’t putting patients in withdrawal, we wanted to make sure that we weren’t getting rid of their pain relief. And there was no change in mean pain scores and mean opioid dose as compared to placebo in any of those groups – no change whatsoever. No clinically relevant imbalances and serious adverse events, no difference between drug and placebo; and the most common adverse events were abdominal pain, diarrhea and nausea, all associated with taking a paralyzed bowel and turning it back on again. So nothing unexpected there.
We have a large, well-controlled 52-week open label safety study, the KODIAC-08 study, that was completed in December and that analysis is ongoing and we’ll give you an update as soon as that analysis is complete. We’ll provide you with a safety analysis update this quarter, but again, that was an open label study. Astra-Zeneca, our partner, is planning NDA/MA filings in Q3 of this year pending the results of the 08 study and the pre-NDA meeting with the FDA; and they’re responsible for all regulatory and commercialization activities.
The economics for Nektar are substantial. We have a $95 million payment upon the acceptance of the filings; $140 million in launch milestones; and $375 million in sales milestones as well as significant escalating double-digit royalties. So we’re very excited about this program. It is our first complete and successful Phase III program and it not only demonstrates that we have a very impressive drug here with great economics for us, but it also demonstrates that we can use polymer conjugate technology to improve the quality of small molecules.
This is a slide I borrowed from Astra-Zeneca. This is actually their slide that they’ve used to show the market for opioid-induced constipation. I’ll take you through it briefly just because I think it’s important to understand just how large a market this is. The global opioid market is $14.8 billion in sales annually, and that’s made up of five major markets – US, UK, Germany, Canada, and France. In those five major markets there are 69 million patients taking opioids for chronic pain, and the most common side effect is opioid-induced constipation. Approximately 40% to 50% of those patients develop constipation – that’s 28 million to 35 million people, and over half of them don’t get any benefit at all from laxatives.
So as you can see, this is a high unmet medical needs. There are patients who stop taking their pain meds because they’d rather be in pain than be constipated. So it’s a significant unmet medical need. The market is enormous and we’re very, very excited about this drug and very happy that we’ve had a successful Phase III result.
Let’s move on to other products in our pain portfolio – NKTR-181. Now, this is a very exciting molecule. It’s a new opioid for chronic pain and as you can see, the chronic pain market is substantial. The chronic pain market for opioids is about $12.6 billion and there’s NSAIDs at about $6 billion – so there’s a very substantial market here for chronic pain. And NKTR-181 is a novel opioid that is designed to get into the CNS slowly, and by getting into the brain slowly it reduces abuse liability, because you don’t see euphoria; it reduces drowsiness and sedation, and it reduces respiratory depression.
And people have said to me, I’ve heard people say “Well, why are you working on an opioid? The world doesn’t need another opioid.” That’s not the case. The fact is the world does need another opioid with these kinds of characteristics, because quite frankly, opioids are the best drug to treat severe pain, moderate to severe pain. The world does need an opioid with these types of characteristics, that limits abuse potential, reduces drowsiness, reduces respiratory depression. And the proof of that is we’ve received fast track status from the FDA for this opioid.
Now, one thing I want to point out that’s exceptionally important is there are a lot of programs in development that are based on time release coatings, gummy pills to inhibit crushing, tamper-proof formulations with antagonist [cores]. A lot of things are done to prevent the abuse of opioids because you know it’s a major healthcare problem. You have to understand something about NKTR-181. NKTR-181 is a new opioid molecule. It can’t be converted into a rapid acting form. The polymer conjugates are covalently bound to the opioid; it is a molecule. And importantly, I’m going to show you the Phase I data – the drug is now in Phase II but I’m going to show you some Phase I data. In Phase I we gave it to the patients as a liquid – they just drank it. So this is not a formulation. This is a new opioid molecule.
Let me show you some Phase I data. If you look at Oxycodone, the plasma to CNS equilibration time is about 11 minutes. So when you give that drug, 11 minutes later it’s in the brain. With NKTR-181, the plasma to CNS equilibration time is 1.7 hours, and that difference is what reduces euphoria, reduces sedation, reduces respiratory depression.
Now that wouldn’t be very useful if the drug didn’t work well as an analgesic, and I’m going to show you the data that we prepared in Phase I. If you look at two types of pain – centrally mediated main and peripherally mediated pain, in the centrally mediated pain you see how long a volunteer can keep their hand in a bucket of ice water. And you can see compared to placebo there was a highly statistically significant difference between NKTR-181 and placebo. And if you look at peripherally mediated pain, a UVB sunburn test, you can also see that the results between placebo and NKTR-181 in terms of pain relief were dramatic. So we’re very, very excited about this program.
In that Phase I study in 48 patients there were no serious or severe adverse events or dose limiting toxicities throughout the eight-day dosing period, up to 400 mgs twice daily. There was no observed sedation, no observed respiratory depression – quite frankly, these patients were all pretty active even after taking these large doses of this opioid. There was only one incidence, one case of mild elevated mood in those 48 patients, and the most common adverse events were constipation, headache and nausea which is what you’d expect with opioids. And we just talked about the constipation aspects of opioids – we have a drug for that actually.
So NKTR-181 is in Phase II. The program will complete by the middle of this year. We’re measuring efficacy in 200 patients with chronic pain from osteoarthritis of the knee, and we’re also starting this quarter a Phase II human abuse liability study to compare the likability of NKTR-181 to commonly abused opioids in recreational opioid users. You have to do that study. It should show that they don’t like NKTR-181; they’d rather take some other opioid. So the results of those two studies will be available the middle of this year and then the program would move on to a Phase III program.
Let me talk about NKTR-192. Now, this is a new opioid molecule for acute pain. NKTR-181 was for chronic pain; this is for acute pain. It’s a completely different opioid, completely different opioid however it has the same characteristics using polymer conjugation technology. A slow rate of entry into the CNS reduced abuse liability, reduced drowsiness, reduced respiratory depression – again, a molecule, not a formulation. It has a short-acting profile and we’re targeting here the markets of Vicodin and Percocet.
It’s currently in Phase I. It’s finished the first part of Phases I which is a single ascending dose study to measure the pharmacokinetic profile, and the pharmacokinetic profile we set out to achieve we did achieve. The second study is underway measuring the pharmacodynamics of that single dose and then we will start the multiple dose Phase I study to establish a dose range for Phase II. And we expect to complete the entire Phase I program by the middle of this year and get the program ready for Phase II – so another very important molecule that works well with NKTR-181 in terms of capturing the chronic pain market and the acute pain market.
I’m going to show you another program in the pain area that we expect to file an IND for this year, and I think a real interesting use of our polymer conjugate technology – much akin to what we did with NKTR-118. This is not an opioid; this is a sodium channel blocker and you know, for neuropathic pain gabapentinoids don’t work all that well. Sodium channel blockers work exceptionally well in neuropathic pain; however, because they’re CNS drugs they’re generally anti-epileptics, they come with all kind of CNS side effects – significant sedation, the potential for causing seizures, etc. So this is a CNS drug which you really can’t use for neuropathic pain in any substantial way because of the side effect profile.
So we took the same technology that we used in NKTR-118 and we can keep this sodium channel blocker out of the CNS entirely. So now you have a peripherally acting sodium channel blocker which works very well in pain, provides potent analgesia with low sedation, very few side effects. We’re not allowing it to get into the CNS, so another example of what we can do with our polymer conjugate technology. And it addresses a very substantial market where there are a number of drugs and a number of treatments but they don’t work very well. So this program, we will have an IND filed this year.
Let me move on to oncology. Etirinotecan pegol, NKTR-102, is being developed in metastatic breast cancer. I want to talk to you about where we stand on the BEACON study. We’ve completed the Phase II study in ovarian cancer – I want to give you an update on that; and we have two investigator-sponsored trials, one that’s running and one that’s starting shortly: a Phase II study in glioma patients by Dr. [Recht] at Stanford University and a Phase II study just ready to start in non-small cell lung cancer patients by [Dr. Langer] at the University of Pennsylvania. So we’re very excited about those two programs to expand the use of NKTR-102.
The reason that Etirinotecan pegol, NKTR-102 was so important in breast cancer, metastatic breast cancer, if you look at the metastatic breast cancer market, every drug to treat metastatic breast cancer is a microtubule inhibitor, etc. And resistance develops between these drugs over these overlapping toxicities, neuropathy, neutropenia. The beauty of NKTR-102 is that it’s a new mechanism. It’s a novel topo1 inhibitor, and as a single agent in Phase II it had a 29% overall response rate, 5.3 months of PFS and 13.1 months overall survival. And it overcomes the cross-resistance without overlapping toxicities.
It is a completely novel mechanism in metastatic breast cancer, and it does actually work well, go hand-in-hand with these other mechanisms as well. So we’re excited about that program. The BEACON study is underway. I’m not going to go through the detail of the BEACON study with you. I think most of you know it already: it’s single agent NKTR-102 compared to physician’s choice in metastatic breast cancer, patients who got a HER-2+, HER-2- and triple negative disease. What I want to make a comment on is that 130 sites have already been initiated out of 160 sites. The enrollment is well ahead of schedule. Physicians are very enthusiastic. You know this is an open label study so we’re very pleased that there’s such an enthusiastic response to NKTR-102 in metastatic breast cancer.
I want to talk a bit about ovarian cancer. We finished our expansion study with Etirinotecan pegol and ovarian cancer – 169 women with platinum refractory disease. All patient treatments were completed in November. The final data clearly show that 102 was highly active in platinum resistant ovarian cancer, and we plan to take this data to the FDA EMA in Q2 this year and determine opportunities and next steps in ovarian cancer. I’m going to show you what the drug looked like in terms of response rate and PFS, again benchmarked against the entire landscape.
So it’s a busy slide but I can summarize it for you very quickly. If you look at the orange bars on the left, that’s NKTR-102: a 17% overall response rate, 4.4 months progression-free survival in patients that were heavily pretreated. These patients had a median prior therapy of three. These were very, very, very sick patients. If you look at other single agent data, and we looked at all other single agents that we could find in ovarian cancer, patients with median prior therapies of one, investigational agents with patients with median prior therapies in excess of one – NKTR-102 looks as good if not better than any of them. So we were very excited about this. It’s a good benchmark to know where we stand. We’ll take this data to the FDA in Q2 this year and have a discussion as to how to proceed.
Now I want to talk about immunostimulatory drugs for a moment. This is a quote from [Dr. Stephen Hode] at Dana Farber: “If we’re ever going to use the word ‘cure’ the immune system is going to have to come into play.” And I want to tell you what we’re doing in immunostimulatory drugs with our polymer conjugate technology.
NKTR-214 has the potential to unlock the IL-2 pathway by selectively activating tumor killing T-cells. So this is the first time anyone has used a polymer conjugate technology to optimize receptor mining, and what we do with NKTR-214 Is we can selectively activate tumor killing T-cells without activating inhibitory T-cells. That’s a very, very important distinction because what it does is it makes the drug exceptionally potent.
At the same time, we’ve greatly extended its half-life and engineered it to concentrate in the tumor versus normal tissue. What that means is optimized selectivity, increased exposure, increased tumor concentration means you have a very, very efficacious drug with minimal toxicity. And you know the IL-2 pathway was considered curative in renal cancer and melanoma, but the drugs like Proleukin, which didn’t have these attributes, were huge problems from an efficacy and safety point of view.
I want to show you some animal data. We’re getting ready to prepare an IND for this drug and I want to show you some animal data. This is a mouse subcutaneous melanoma model, and here we’re comparing Proleukin, which is an old drug, but Proleukin to a vehicle. And you can see that over the course of twelve days you had to give 20 doses of Proleukin. You did clearly see some dramatic effects on tumor growth. 39% of the deaths in this study were due to treatment, and we all know that Proleukin to activate the IL-2 pathway was quite problematic.
Let me show you what NKTR-214 looks like in that model. Over the first twelve days we only dosed twice. You can see a dramatic control of tumor growth. We had less than 5% deaths associated with treatment. We gave one more dose at day 19 just to see how long we could extend it out and then we let it run out. But here you have the first time anyone’s used polymer conjugates to allow selective binding sites, and if we can activate tumor killing T-cells without activating the inhibitory cells; and at the same time confine the drug to tumor and not normal tissue, I think this is a very, very exciting advance in tumor immunotherapy. So we’re getting ready to file an IND on this drug.
Let me talk about Amikacin Inhale, a very important partnered program that we have with Bayer. Bayer plans to start Phase III in March of this year. This is to treat ventilator-associated pneumonia which is a very, very serious problem and has a very high mortality rate. The concept is putting Amikacin directly in the lungs. If you give Amikacin systemically you can’t get enough into the lungs to treat a resistant bacteria without causing substantial systemic toxicity.
Bayer has done an excellent job in negotiating an SPA where the clinical endpoint of this study is test of cure, not mortality. So it’s a test of cure endpoint; it’s a ten-day treatment. It’s an acute use drug so it’s a ten-day treatment. It should be a fairly quick clinical study. Bayer’s already put the CRO in place for Phase III, we are in the process of completing device production and stability studies on those devices and we’re excited that they’ll be starting this quarter.
Our royalties on net sales is 30% flat royalty in the United States and a 22% average royalty ex-US. The estimated global market is perhaps in excess of $700 million. Again, we’re very excited about Bayer moving this program forward.
Lastly I want to talk about BAX 855, long-acting ADVATE, which will be starting Phase III in hemophilia-A. You know, Baxter is clearly the market leader in hemophilia-A. You can see from this chart that they dominate the space, and ADVATE is the gold standard for treating hemophilia. We’re very excited that our technology has allowed us to achieve a long-acting ADVATE – a 1.5-fold increase in the targeted half-life of ADVATE. And this therapy was exceptionally well-tolerated. There was no inhibitory antibody formation; a very, very safe drug that works very well.
Baxter is moving into Phase III this quarter. Their study will include prophylaxis use as well as on-demand use and they plan regulatory filings for 2014. This is a fairly short study; I think it’s approximately 100 patients. We’re very excited about this. We get about $84 million in milestone payments, significant royalties on net sales, and they are the market leader. And now Baxter, as the market leader, has a long-acting version of ADVATE. They already sell $2 billion of ADVATE and they will soon have a long-acting version of that, so we’re very, very happy with these results.
Lastly I just want to comment on our pipeline overall. I think if you look at what we’ve built in the last five years, I think it’s substantial. I mean very little of this existed five years ago. And if you look at the clinical programs, a number of which have finished Phase III or are in Phase III, programs that are in Phase II or moving to Phase II – I think it’s quite an impressive portfolio. We talked about some of the preclinical programs that are moving forward and we should have INDs, at least two of them filed this year. We haven’t talked about the research programs but we’ll save that for Research Day, but we have a number of important research programs underway.
Overall, this says a lot about not only the scientific talent at Nektar but also about the importance of this technology platform and what it can do. As I said earlier, we ended 2012 with over $300 million in cash. The convertible debt is paid off. I think we’re in a pretty good financial position and I’m very, very excited about the future. So I’ll keep you posted and thanks for joining us today.
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