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Executives

Howard W. Robin – President and Chief Executive Officer

Analysts

Cory William Kasimov – JPMorgan Securities LLC

Nektar Therapeutics (NKTR) 32nd Annual JPMorgan Healthcare Conference Call January 14, 2013 1:00 PM ET

Cory William Kasimov – JPMorgan Securities LLC

Good morning everyone, my name is Cory Kasimov, I’m a Senior Biotech Analyst at JPMorgan. It’s my pleasure to introduce our next company, which is Nektar Therapeutics. Here to present for Nektar is the President and CEO Howard Robin and following the presentation there will be a breakout session just down the hall to the right in the Yorkshire Room, so with that I will turn it over to Howard.

Howard W. Robin

Thanks Cory, good morning everyone, thanks for joining us today. I just want to put up forward-looking statements, we’ll be making some of those and you could follow up with our SEC filings. So I think Nektar is very well positioned to move towards a positive cash flow. If you look at what we have in, either in Phase III or filed programs, it’s pretty impressive.

In Phase III, we have Amikacin Inhale and I’ll talk about some of these today, Amikacin Inhale and Cipro Inhale. We also have two programs that we’re just sort of announcing today because these companies or private companies and now that they have completed their IPOs, we can talk about them Fovista from Ophthotech and REG1 from Regado or both programs that are enabled by Nektar’s technology, we receive royalties on these programs. So haven’t talked about them in the past, but I am sure as time goes on, we’ll talk more about them in the future.

Phase III enrollment is complete for BAX 855 with Baxter, we’ll go over that today. NKTR-102 is moving forward in Phase III as well and we have naloxegol filed in the U.S., EU and Canada. We have a number of programs that are in Phase I and Phase II. In Phase I, we announced that we started dosing NKTR-171 for neuropathic pain, we’ve also completed Phase II for NKTR-181 and we’ll talk about how we move that into Phase III and lastly we have a number of preclinical programs I haven’t shown you all of our research programs, but a number of important preclinical programs in both oncology and in various components of the pain field.

So let’s start with naloxegol and I mentioned that the NDA, MAA and NDS are all been expected in the U.S., EU and Canada. The U.S. PDUFA date is September 16 of this year and Nektar and AZ will be participating along with other companies in the FDA advisory panel for OIC which is tentatively scheduled for March 10 and 11. So we are very excited about that and I am going to talk about our safety data in a little bit and what work we are doing to make sure that we have the best possible outcome at the advisory committee meeting.

Nektar is eligible for substantial payments on naloxegol up to a $175 million in regulatory and launch milestones, $375 million in sales milestones and quite significant in escalating double-digit royalties. This market is a quite an under-served market, this is a very, very important area of medicine for patients who are taking chronic opioid therapy, there is almost $15 billion worth of opioids sold for pain and that turns into about 69 million patients in the major markets and about half of those patients develop OIC and some think it’s more like 75%, but let’s call it half, that’s about 28 million to 35 million patients developed Opioid-Induced Constipation and more than 50% of those patients don’t get relief from laxatives and some people will argue that it’s 60%, 70%, 80% of those patients don’t get any relief from laxatives.

So a quite a high unmet medical need and if any of you have taken opioids for chronic pain and have become constipated, you know how serious the medical problem that can be.

I am just going to refresh your memory on the naloxegol data from the Phase III study. If you look at the primary endpoint of the study in the KODIAC-04 and KODIAC-05 study where we compared a number of bowel movements in naloxegol versus placebo, you can see that we achieved p values of 0.001 and 0.021.

I want to direct you to the right side of the slide, which is also a very important component of our study and we actually split the alpha if you remember that’s why we had achieved 0.025 in the pivotal studies because we wanted to put a lot of weight on the value of measuring the response rate in patients who didn’t respond well for laxatives. In other words, inadequate response to lots of patients and there we took those patients and we compared naloxegol to placebo when you could see we achieved p values of 0.002 and 0.014 respectively.

So clearly naloxegol works very well in patients who don’t respond well for laxatives and that’s very important for reimbursement purposes as well as helping the patients.

Now I think another very important component of naloxegol that demonstrates for me the significant efficacy of this product is the time to first bowel movement post-dose. So if you look at the KODIAC-04 study for example, 70% of the patients have their first bowel movement within 24 hours compared to 36.9% on placebo and even more dramatic, the median time to first bowel movement on naloxegol was 5.9 hours and on placebo was almost 36 hours, a dramatic indication of the efficacy of this product.

Now you know we have an Adcom Meeting coming up in March to look at cardiovascular safety of a number of different OIC drugs. We conducted a large well controlled 52-week randomized safety study where we’ve had 534 patients on naloxegol and 270 patients on usual care, not placebo just continuing their usual care and what we observed with the most common adverse event with GI adverse events, abdominal pain, diarrhea and nausea, exactly what you’d expect from patients where you sort of paralyzed bowel and started to functioning again.

We saw no increase in mean pain scores, no increase in mean opioid doses, so we clearly worked antagonizing the opioid in the central nervous system. There was no imbalance and serious adverse events including major cardiovascular events. So we had two MACE events out of 534 patients in naloxegol arm and two MACE events out of 270 patients in the usual care arm. So no imbalance, if anything, it’s little in favor of the drug. So I think we also saw no reports of opioid withdraw adverse events attributable to naloxegol.

So we go into the Adcom process with a very, very clean dataset, we are very pleased with the safety of naloxegol. We are doing an awful lot, AstraZeneca and Nektar are doing an awful lot of preparation work and we are very hopeful that the FDA agrees with us that naloxegol is a very, very safe drug.

Let me move on to BAX 855. Now you know Baxter is the leading company in the Hemophilia A space. ADVATE is the gold standard by which Hemophilia A is treated and BAX 855 is sort of the extension of the ADVATE legacy and this is a very, very important program for us, it’s a very important program for Baxter. The Phase III PROLONG-ATE study has completed enrollment with 150 patients; the therapy was well tolerated, there were no inhibitors, no safety issues in the study to-date.

As you remember from the Phase I study, there was a target half-life of 1.5 fold increase achieved and Baxter has plans for U.S. Regulatory Filings this year. So if I’ll remind you that ADVATE already sells $2 billion worth of drug, this is ultimately a much more convenient form of ADVATE and we are very excited about Baxter moving this forward.

We get up to $84 million in developments and sales milestones and significant royalties on net sales, so another very, very important program for Nektar where we will have data this year.

Let me talk about Amikacin Inhale also in Phase III. The Phase III program is ongoing, data is expected in the first half of next year and here we have targeted Amikacin delivery directly to the lungs and everybody knows Amikacin works very well in gram-negative pneumonias, but for patients that are on a ventilator, you’ve got to get the Amikacin deep into their lungs to work. If you try to give it systemically, you can’t give enough systemically without closing systemic toxicity.

So you can’t give it as an IV infusion and expect to have that patient do well. So the concept of putting it directly into the lungs is very important and the device that we have engineered that has specific flow rates, specific particle size allows the Amikacin to get deep within the lung tissue and become very effective.

Bayer has done an outstanding job in putting an SPA in place for the program, the primary endpoints of the study is a clinical test of cure after 10-day treatment period. So it’s very, very well defined. The royalties for Nektar are 30% flat royalty in the United States from [indiscernible] and 22% ex-U.S. royalties. Estimated global market I think conservatively is approximately $700 million, so another very important revenue generator for Nektar.

Now I want to move onto NKTR-102. You know we announced this morning that an Independent Data Monitoring Committee reviewed the interim efficacy analysis for NKTR-102 and has recommended that we continue the Phase III study. What they looked at was – they looked at all of the data, because they also review safety, but they looked at 50% of the events necessary to achieve the primary endpoint of survival and they have recommended that we continue on with the study. So we were very, very happy about that.

This is a study in patients with metastatic breast cancer, randomized single-agent NKTR-102 one arm and Physician’s Choice the other one with a primary endpoint of overall survival. In this study, there will be HER2-, HER2+ and Triple Negative disease patients. We expect final topline survival data late this year or early next year with regulatory filings planned for the second half of next year. So we are very, very happy that this program has passed [indiscernible] moving forward.

Now we have another study running with NKTR-102 at Stanford University in Avastin resistant high grade glioma patients and it is a very, very serious disease and of course exceptionally difficult to treat it all. The primary endpoint of this study was a six week PFS of 25% and we achieved a six week PFS of 55%, so we’re very pleased to significantly exceed the primary endpoints of the study.

And this is also very important; 50% of the patients achieved stable disease that’s 10 out of 20 patients with Avastin resistant high grade glioma achieved stable disease in an overall response rate at six weeks of 10%, which in this patient population I think is remarkable, says an awful lot about the potency of NKTR-102.

And as of January, as of this month, there are two patients that are still receiving study drug; one patient on study for over a year and one on study for seven months. So I think very impressive results in a very, very bad disease and we will have data presented at a major medical meeting this year.

I want to show you something that we’re also doing with NKTR-102 in combination with PARP inhibitors. So we think there is an opportunity for synergy there, so we looked at this. This is animal data in an MX-1 Breast Cancer Model where you can see the Vehicle doesn’t have much effect of course and here is a PARP inhibitor, which certainly have some effect; 10 animals in each group, 10 animals on Vehicle, 10 animals on PARP inhibitor, here is what 10 animals look like who just received a single therapy with NKTR-102, but what’s most dramatic is when you give animals NKTR-102 and the PARP inhibitor that’s what you see, and we were really impressed with this.

All animals tumor-free 14 days after treatment in combination of PARP inhibitor and NKTR-102. The combined treatment was well tolerated, no body weight loss and we are still following these animals, but for us this means that NKTR-102 in combination with some of the PARP inhibitors have tremendous potential and we are going to be looking into that very carefully.

Let’s move on to our pain portfolio, NKTR-181. NKTR-181 is a new opioid molecule for chronic pain and it was designed to have a slow rate of entry into the central nervous system, reducing abuse liability, reducing drowsiness, reducing respiratory depression. It has a long acting profile and I will say this because, I’ll say this every time because I want people to fully understand it, this is a new molecule, this is an NCE, this isn’t the formulation, it isn’t something we did to an existing opioid, this is an NCE and it works as an NCE and it has received Fast Track status from the FDA.

Now you know the market is very, very large, the chronic opioid market is almost $13 billion in sales and we looked at the data from our Phase I study to make sure that we really were getting into the CNS slowly, then if you look at oxycodone, the plan from Plasma to CNS equilibration is about a 11 minutes and if you look at the Plasma to CNS equilibration time for NKTR-181 is 2.9 hours.

So clearly you are getting into the CNS at a very controlled rate, which is what we set out to do. We completed a Human Abuse Liability study for NKTR-181 of Phase II, Human Abuse Liability study and we saw significant reduction in euphoria, low abuse liability, there was really no liking for NKTR-181 compared to oxycodone. So patients didn’t like it and it passed the Human Abuse Liability study with flying colors. So clearly not likable, which is what we set out to achieve.

Now we conducted a Phase II efficacy study and the way this was designed was we had an Enriched Enrollment Withdrawal Design. So all patients in this study were given who had osteoarthritis of the knee were titrated to effect with NKTR-181 and then once they have achieved sufficient analgesia, half of them are crossed over to placebo.

We saw in this study that almost all of the patients had a 40% decrease in pain, there is only 3% of the patients that we couldn’t titrate the pain relief. So no one believes that this is a placebo effect. The fact that you can get only 3% of the patients in the study couldn’t be titrated the pain relief everybody else had an average decrease in pain of 40% was quite impressive. A problem came up in that the placebo arm, once we’ve crossed over the placebo arm did not show any rebound.

So as you noticed the placebo arm also stayed flat for those patients that were crossed over during that three week period and that of course just missed the primary endpoint of study even though everybody believes the drug is highly efficacious.

So we sat down and said, okay, we want to move into Phase III, should we move into Phase III, and what can we do, and what did we learn from this Phase II study to inform us in the design of a Phase III study and here is what we’ve learned.

We’ve spend a lot of time, talking with pain experts, key opinion leaders, the FDA and here is what we’ve learned. The EERW design was not optimal for a drug like NKTR-181 with low CNS side effects. Those studies are put in place, for opioids where the drop-out rates are well in excess of 50%, because of unwanted CNS side effects.

NKTR-181 drop-out rate in the study, was only 18%, because we have a very, very low CNS side effects, this was not the best study design for a drug with very low CNS side effects.

The second thing we’ve learned is that, subjects in our study were allowed to continue using their non-opioid pain meds and because NKTR-181 provided such strong analgesia, I mean an overall 40% reduction in pain, that significant reduction in analgesia combined with allowing the patients to take their background non-opioid pain meds and measuring for only a three week period didn’t allow us to show a separation.

And lastly, we used the NRS method, where patients for scoring where patients self-reported in their diaries, their pain scores and we believe the WOMAC pain subscale which is the method of measuring pain scores in the clinic by the physician is a much more rigorous and appropriate method for measuring pain scores. So I am going to talk about the Phase III design in a moment.

We met with the FDA, we met with key pain experts, we had a highly productive meeting, initial meeting with the FDA under our Fast Track Status and here is what we came away with from the FDA, that they are fine with us, starting the Phase III study in patients with OA that they are fine with the parallel design as opposed to an EERW design and I am going to talk about that in a moment and there is no requirement for EERW for registration and clearly everybody we spoke with, the FDA and all the key pain experts believe that NKTR-181 is clearly an analgesic and it has a superior profile and there is a high recommendation for continued development on osteoarthritis.

So that leads to the trial design that we expect to implement by the middle of this year. This will be patients with osteoarthritis of the knee, approximately 600 patients and there will be two arms, this is not going to be an enriched trial design, this is going to be a placebo arm, and a NKTR-181 arm, there will be randomized 121, there will be a titration to affect in both arms and then a 12-week treatment period and the primary endpoint will be using the WOMAC pain subscale.

So there will also be the elimination of any background medication, so there will be no background meds, in this trial and the pain reduction measured by WOMAC which is specifically designed to measure osteoarthritis pain and FDA has agreed to this endpoint and these pain scores will be monitored in the clinic in a clinic setting is opposed to individually rated by the patients.

We will to be safe had an interim futility analysis at 200 patients. So once we get through 200 patients, which is equivalent to the size of our Phase II study, once we get through 200 patients, we will do a futility analysis and make sure that we are on the right track, and we are spending our money wisely.

So I think it is a study design, we are going to start at this year and I think I can tell you clearly that everybody we’ve spoken with believes NKTR-181 is a very important analgesic and wants to see it developed.

Let me talk about our other acute pain programs. Now we finished, both the Phase 1 Multiple-Ascending dose study of NKTR-192; it demonstrated significant and rapid analgesic effect as a matter of fact that the highest dose at a 200 milligram dose the analgesic activity from 192 was superior of the 20 milligrams of IR oxycodone NKTR-182 also exhibited low CNS side effects, low levels of sedation, dizziness and no reports of euphoria.

So it met all of the goals we set out for its target product profile and we are very pleased with that however we did see at the highest dose in some patients elevated liver enzymes and because of that we’ve decided that that isn’t the optimal drug to take forward.

So we are putting it back in preclinical, we are developing it, we are going to look at it as a subcu formulation to avoid first pass metabolism. Remember these were all NCEs, these are all novel molecules, it has a tremendous opportunity as a subcu formulation for migraine and cancer pain, we are going to take a look at that and we have a number of other oral drug compounds either partial or full agonists that we can move back into the clinic.

So we want to put the optimal drug into clinic and we can take that out of our pipeline during the course of this year. So we are not happy about having to move NKTR-192 down the step, but I think as a subcu formulation, it could be interesting that we a number of other very important pain programs to move to the acute pain space.

Lastly, I want to talk about NKTR-171; this is for neuropathic pain and we dosed, we’ve announced today that we dosed our first subjects in the Phase I study. Gabapentinoids are widely used for neuropathic pain, they have very limited efficacy and lots of side effects.

Sodium channel blockers on the other hand are highly efficacious for neuropathic pain, but they cause severe sedation and lots of CNS side effects, because after all they were developed as [indiscernible] medications. So what we did is, we took a sodium channel blocker, we applied the same technology to it, that we applied to naloxegol, we keep it out of the CNS. So now you have a peripherally restricted sodium channel blocker, which should give potent analgesia without any of the CNS side effects that you would expect to see either in sodium channel blockers or gabapentinoids.

So I think this is a very important molecule. The market is about $5 billion for neuropathic pain, there were no drugs that work well in neuropathic pain and I think everybody believes that sodium channel blockers are a great solution for neuropathic pain if you can dial out the very, very bad side effects of sodium channel blockers from a CNS point of view and I believe using the same technology we applied for naloxegol we can do that. So this program is now in Phase I and we’ll be reporting to you the results of that study this year.

Lastly, we have a lot going on in Nektar as you can see a lot of catalysts for 2014 and beyond. We ended 2013 with $262 million in cash and we have a number of important events this year; the FDA Panel in OIC is scheduled for March LEVADEX Potential Approval this year, Naloxegol PDUFA Date, Naloxegol Potential EU Approval, BAX 855 Planned NDA Filing and Data, NKTR-171 Data and the start of NKTR-181 Phase III.

We’ve also towards the end of the year, early next year should see the NKTR-102 metastatic breast cancer data, so that is a year of riches for us and I think there is many, many opportunities for Nektar to have – develop a significant product of state and I think you will see a lot of good things coming from Nektar. So thank you very much for your time. I appreciate it.

Question-and-Answer Session

[No Q&A session for this event]

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