Nektar Therapeutics (NASDAQ:NKTR)
UBS Global Life Sciences Conference
September 19, 2012 10:30 am ET
Howard W. Robin – President, Chief Executive Officer & Director
We have here Howard Robin who is the President and CEO of Nektar Therapeutics. After the presentation we’re going to have a breakout session in the floor below this one in the room called Carnegie.
Howard W. Robin
Good morning and thank you everyone for joining us today. I’m going to be making some forward-looking statements, I want to remind you of that. I want to make it clear that Nektar is on a path towards positive cash flow and we’re well positioned to achieve that positive cash flow and I want to show you why. I want to show you where we are with our Phase-III programs and if you look at the late stage programs, we have five programs that are either in Phase-III or ready to start Phase-III.
Now, Naloxegel we’re going to talk about that today, that is finishing Phase-III; NKTR-102 for metastatic breast cancer is in Phase-III; Cipro, inhaled Cipro we’re going to talk about a little today, we haven’t spent much time on that in the past but that has now entered Phase-III; BAX 855 for hemophilia is getting ready to start Phase-III; and Amikacin Inhale is also getting ready to start Phase-III. So if you look at those programs, if you take NKTR-102 out of it because we haven’t partnered NKTR-102, if you look at the four programs listed there, they could generate over $750 million a year in royalty income so a very impressive estate of a Phase-III programs.
If you look at our development pipeline, equally impressive, NKTR-181 which we will talk about today in detail is in Phase-II; NKTR-192 is in Phase-I; and we have two programs ready to enter the clinic in a year, next year, NKTR-171 for neuropathic pain and NKTR-214 which is an immunotherapy. So an impressive pipeline for Phase-I and II as well.
Lastly, we have a very strong financial position. We monetized earlier this year selected non-core royalty assets. We then secured some straight debt which is due in 2017 which has no dilutive components at all. There’s no warrants, there’s no options, it is straight debt long term and we will repay all of our outstanding convertible debt on September 28th which is about a week and a half away. So we will end this year with over $300 million in cash and some long term debt with no effect on our cap structure so excellent financial position.
So let’s start by talking about the Phase-III assets. NKTR-118, Naloxegel for opioid-induced constipation, AstraZeneca and Nektar have said that we will have top level results in the fourth quarter of this year. That’s not too far out and AZ is planning a filing in the middle of next year. Now, when AZ makes the filing we’ll receive $95 million in milestone payments followed up by $140 million in launch milestones, $375 million in sales milestones, and in addition to all of that a significant and escalating double digit royalty. So a very important product for us and we will have top line data over the next few months.
AstraZeneca has done an incredible job, an incredible job in designing the clinical studies for this program. If you look at what’s been done there are two 12-week efficacy study programs which are very important for the chronic use of NKTR-118 in OIC. There’s a 12-week extension study in 633 patients and there’s a 52-week open label long term safety study which will complete in November. I would point out that the first of the two 12-weeks efficacy studies is now complete and being analyzed and the second one is almost complete. So this is an incredible package and a very robust package to support the use of NKTR-118 in chronic OIC.
Why is it so important and why is AstraZeneca such a great partner? Well, if you look at 250 million opioid prescriptions written each year in the US, over 100 million patients worldwide taking opioids for chronic pain, half of them, at least half of them, get constipated. This is a primary care drug, these patients go back to the physician that wrote the prescription for the opioid. This is principally primary care. There are other specialties such as oncology and orthopedics and there’s also pain but people talk to GI docs and say, “Well, the GI doc doesn’t know much about opioid induced constipation.” That’s because patients don’t go to a GI specialist when they become constipated, they go back to the physician that wrote the opioid prescription and that’s principally primary care. So I can’t think of a better company to market this drug than AstraZeneca.
Let’s move on to NKTR-102, a next generation topoismerase inhibitor. We took our topoismerase I inhibitor, greatly improved the pharmacokinetic profile. We saw excellent results in our Phase-II studies. The Phase-III study is underway for metastatic breast cancer and we have a Phase-II study underway in ovarian cancer. The commercial opportunity for this drug is well in excess of $1 billion.
Let me tell you why it’s so important for metastatic breast cancer. It’s a new mechanism of action. If you look at the current metastatic breast cancer therapies they have a common mechanism, they’re all microtubule inhibitors or disruptors and because of that you get resistance, you have overlapping side effects, and these patients are in desperate need for some other mechanism to deal with metastatic breast cancer.
NKTR-102 is a topoismerase I inhibitor, a completely different mechanism, no cross resistance, no overlapping side effects and we saw excellent results in our Phase-II study, 29% overall response rate, 13.1 months overall survival. So we’re running the BEACON Study which is a Phase-III study in metastatic breast cancer. It’s single agent NKTR-102 in a randomized design compared to a physicians’ choice, which is a very standard design. The primary end point is overall survival and what’s important to note is that we’re studying this drug in all types of patients so we saw excellent results in all subsets in Phase-II so this study will include HER2 positive patients, HER2 negative patients, triple-negative patients and we have agreement with the FDA and EMA on the study design. Over 90 sites have already been initiated and enrollment is ahead of schedule so we’re very pleased with this study.
In ovarian cancer there’s over 170 women have been in our Phase-II study. Patients are still on study drug. We expect that study to be complete by the end of this year and then we will go meet with the FDA and EMA to determine how we move that program forward. I will just show you some data from the Phase-II study to give you a sense of how important this drug is. If you look at the study patients to median prior therapies were three, heavily pretreated patients, very, very ill patients and in that group of patients we have a 17% overall response rate.
If you look at other therapies for ovarian cancer, patients with a median prior therapy of one, so not as heavily pretreated, you could see that the response rates are considerably less so this is a very active drug in ovarian cancer. We’re very excited about it and when the study is over at the end of this year we’ll take it forward to the FDA.
I want to talk about a new program for a moment, we haven’t talked about this before, this is inhaled Cipro for NCFB which is a very serious chronic respiratory disease. This is partnered with Bayer. Bayer has just announced that they started Phase-III for this program. There are over 200,000 patients in the US and EU that have NCFB and they had positive Phase-II results and have decided to move this program forward into Phase-III.
Bayer has all the responsibility for the cost and development costs and commercialization of this drug and Nektar’s royalty on this is approximately 10%. The market for this drug is about $750 million a year so we’re very excited to have another one of Nektar’s partner programs starting Phase-III.
BAX-855, another important Phase-III or almost Phase-III program for us. BAX-855 is a next generation long acting pegylated Advate for hemophilia A. Now, if you look at the hemophilia market, annual for factor VIII the market is about $5.7 billion, Advate is about a little over $2 billion of that. Baxter is clearly the leader in the factor VIII market. BAX-855 is in essence a replacement for Advate. They’re running a Phase-I/II study. They expect that study to be completed this year. They have announced that they expect to start Phase-III by the end of the year and Nektar will receive up to $84 million in development and sales milestones and a significant royalty on sales.
If you can image that BAX-855 ultimately replaces Advate than you can see that this has the potential to be a multibillion program and Nektar’s royalties on this are substantial. So another program that’s ready to go into Phase-III.
Lastly, Amikacin Inhale is our last Phase-III ready program. I’ve told you about this before, this is to treat gram-negative pneumonia for patients that are intubated. A very serious problem where patients have resistant bacteria, can’t give a drug systemically because if you give it systemically you become toxic to the Amikacin and giving it directly to the patients through their ventilator is the only way to treat resistant bacteria in the lungs.
Bayer has done an absolutely outstanding job putting in place an SPA with the FDA for this program. The primary endpoint is a clinical response at a test of cure visit after 10 days of therapy. So excellent Phase-III design. Bayer has hired the CRO, they’re in the process of starting up the sites and Nektar and Bayer are in the process of finishing the stability studies on the devices. The Nektar royalties on the net sales are 30% flat royalty in the US and a 22% average ex-US royalty. The estimated market is at least $700 million a year so another very, very important Phase-III ready program for Nektar.
So that’s five programs either in Phase-III or ready for Phase-III. Let’s go to some of our programs that are in Phase I and II. NKTR-181 may be the most important molecule we have in that it is a novel opioid for pain. It is in Phase-II, I’m going to talk about that program in a moment, but if you look at the opioid market in the US the chronic pain market for opioids is about $7 billion a year.
You know there are a lot or problems with opioids and you can’t pick up a newspaper or magazine without reading about the problems with oxycodone, the problems with oxycontin, it is a major healthcare crisis in the US. NKTR-181 was designed to enter the brain, enter the CNS at a slower rate and by going in at the slower rate you avoid that dopamine rush and consequently it reduces the abuse liability, it reduces drowsiness, it reduces respiratory depression. It has a long acting profile and most importantly, the properties are inherent to the molecule.
So the proof of this is look at all the problems with opioids, people say, “Why do you need another opioid?” The fact is this is a novel opioid molecule and the FDA agrees with us in that sense because we received fast track status from the FDA for this opioid. That tells you how much of a problem there is out there in the opioid world and hopefully, NKTR-181 is a solution for that.
This is the point I want to make more than anything else, if you look at the other opioid formulations that are out there they are just that, they are formulations, time released coatings, gummy pills to avoid crushing, tamper proof formulations with antagonist cores. There are all kinds of things that people have tried to control the abuse of opioids. The fact is NKTR-181 is none of these, NKTR-181 is a new opioid molecule. It’s a molecule, it’s a novel opioid, you can’t convert it to a rapid acting form.
The polymer conjugates in the opioid are covalently bound so this is a new molecule. We’ve received our patents on this and I think that says an awful lot about what the potential is for this program. Now, I want to show you some human data from our Phase-I study. If you look at oxycodone we’re measuring plasma to CNS equilibration time, how long does it take from the time it gets in the plasma until the time it gets into your brain and you can say with oxycodone it’s about 11 minutes which is very quick and that’s what causes the rush and that’s what causes people to get addicted to the drug.
From our Phase-I study if you look at NKTR-181 and we measure this in health volunteers measuring pupil contraction, you can see that the CNS equilibration time is not 11 minutes, it’s 1.7 hours and that’s a huge difference in affecting abuse potential, affecting sedation, affecting respiratory depression. Now, that wouldn’t be meaningful if the drug didn’t work well as an analgesic but in fact it does work very well as an analgesic.
So two different analgesic tests in healthy volunteers in Phase-I. The first one is the pain tolerance cold pressure test, how long can you keep your hand in a bucket of ice water, a standard test for pain. As you can see NKTR-181 compared to placebo is highly statistically significant and its pain relief P value of less than .01. Another pain test UVB Sunburn test, a peripherally mediated pain, you could also see that compared to placebo NKTR-181 had a highly significant increase in pain relief, P value less than .009. So very, very impressive pain results and of course very excellent pharmacokinetic results which we expected to see.
In Phase-I 181 was well tolerated, 48 healthy volunteers, no serious or severe adverse events were seen up to 400 milligrams twice daily. No observed respiratory depression. Importantly, in the Phase-I study, only one volunteer out of the 48 healthy volunteers reported a mild elevated mode, so no euphoria associated with this drug at all which is what we set out to do. Most reported adverse events were mild constipation, headache, nausea, which is what you would expect from a opioid.
So NKTR-181 is now in Phase-II. It was initiated in July. It’s designed to establish that differentiated profile. The study will randomize 200 patients with osteoarthritis of the knee and a placebo controlled trial expecting to determine the efficacy of NKTR-181. There’s also a Phase-II human abuse liability study which will compare the likeability of NKTR-181 to commonly abused opioids and this will take place in recreational drug users. So you’ll be able to show efficacy and you’ll be able to show similar hopefully to what we showed in animal data that patients or drug users do not prefer to take NKTR-181. The study results for this will be available the middle of next year.
Let’s move on quickly to NKTR-192 which is a new opioid molecule for acute pain. Now 181 was for chronic pain, this is for acute pain. The acute pain market is well over $1 billion in the US alone and again, we applied the same technology to a different opioid and reduced the abuse liability, reduced drowsiness, reduced respiratory depression, but it has a short acting profile because it’s for acute pain and a more rapid onset of action and the market we’re going after there are the Vicodin ad Percocet markets. Basically, same technology as NKTR-181 with a different opioid.
This is pre-clinical data, I just wanted to give you some sense of what it looks like. If you look at abuse liability here, animals are given a choice of taking food or drug, you can see that NKTR-192 when you give the animals a choice didn’t discriminate between 192 and saline. They didn’t see much of a difference there. Clearly, the animals chose oxycodone. So in an abuse liability test, much preferred oxycodone over 181. In sedative potential, measuring how the animals stay on a rotating rod, NKTR-192 doesn’t look that much different than saline and clearly oxycodone was much sedative. So this is the same kind of data we saw with NKTR-181, animals did not choice NKTR-181, they don’t chose NKTR-192 and from a sedation point of view, NKTR-181 didn’t make the animals sedated, NKTR-192 does not make the animals sedated. So a very, very exciting program and it’s great that we’ve covered chronic pain and now acute pain.
The Phase-I study is ongoing. There are two Phase-IA studies, the first one is complete, that’s to measure pharmacokinetics and we did achieve that short acting pharmacokinetic profile and now the second Phase-IA study which will measure pharmaco dynamics in that single ascending dose. After that is complete we’ll start a Phase-IB program to establish the dose range for Phase-II. We expect to start Phase-II planning in the second quarter of next year.
Now, let me tell you about another very exciting program that we have in the pain area and I hope you can see how we’re developing this incredibly important pain estate. NKTR-171 is a drug for neuropathic pain. We expect to enter the clinic next year. Now, neuropathic pain is a very different problem than chronic pain and acute pain and it’s generally treated with gabapentinoids, drugs such as Lyrica.
Now anyone who has taken Lyrica or any gabapentinoid for neuropathic pain will tell you it doesn’t work very well. It works a little but it really doesn’t work well at all. It’s also sedative so there’s nothing else to take but no one is certainly impressed with the gabapentinoids. Now, sodium channel blockers on the other hand which were developed as anti seizure medications are excellent, excellent analgesics for neuropathic pain however, they cause severe sedation and all kinds of other unwanted CNS effects because they were originally developed as anti seizure medications.
So we took NKTR-171, we took a sodium channel blocker, applied our technology to it, much like we did with NKTR-118. Not what we did with 181 and 192, where we let it get into the CNS slowly, here we applied the NKTR-118 technology and keep it out of the CNS. By keeping this sodium channel blocker out of the CNS you get excellent analgesia in neuropathic pain but none of the unwanted CNS side effects that come with sodium channel blockers. So a very important drug and we will have this in the clinic next year.
Just to show you some animal data on NKTR-171, here you see you’re measuring sedation which is the single biggest problem with all of these drugs and here you measure sedation by again seeing how long animals can stay on a rotating rod. Compared to if you look at Pregabalin, compared to the vehicle, Pregabalin you see severe sedation. Lamotrigine which is a sodium channel blocker, again some significant sedation. NKTR-171 doesn’t look all that much different than placebo. So again, we’ve dialed out the sedation by keeping it out of the CNS and these are all at equal analgesic doses, so very, very proud of this and this really does round out our pain estate between chronic pain, acute pain, and neuropathic pain.
The incredible pipeline that Nektar has built over the last five years, the clinical programs we talked about today, some of the pre-clinical work we talked about today. I didn’t discuss NKTR-214 which is a cancer immunotherapy, but discussed that in another meeting. I think we covered it pretty well at R&D day and we have extensive research going on to build this pipeline so I’m very happy with what we’ve built over the last five years. There are very few companies in biotech that have this kind of portfolio.
Lastly, we have a very strong financial position. I said we’re going to end this year with about $300 million in cash. We monetized Cimzia and Mircera royalties for $124 million we only earned $8.3 million on those royalties last year. We monetized that for $124 million in cash in the first quarter. We just issued $125 million in senior secured notes due in 2017. They’re callable by Nektar in 2015. There’s no underlying options, no warrants on the notes, this is essentially long term debt that has no impact whatsoever on our cap structure so no caps on the stock price, no overhang out there. It was the perfect thing for us to do.
We will repay all of the outstanding convertible debt on September 28th which is a week and a half away. Our full year 2012 guidance for cash used in operations is $130 to $140 million and that includes our capital expenditures so excellent financial position. So I’ll leave you with this, if you look at the next three to nine months you’ve got NKTR-118, you’ve got BAX-855, you have NKTR-061, you have NKTR-181 all reaching major inflection points over the next three to nine months. I think that’s a great position for us to be in. Stay tuned, I think you’re going to hear a lot more great things from Nektar. Thank you very much.
[No Q&A Session]
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