Nektar Therapeutics (NASDAQ:NKTR) Q3 2020 Earnings Call

0:00 Ladies and gentlemen, thank you for standing by, and welcome to the Nectar Therapeutics third quarter 2020 financial results. At this time, all participants' lines are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star and then one on your telephone. Please be advised that today's conference may be recorded. If you require any further assistance, please press star and then zero. 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 on the call are Howard Robin, our President and CEO, Gil Laboucherie, our COO, Dr. Jonathan Zalevsky, our Head of Research and Development, and Dr.

0:47 Wei Lin, our Head of Development. On today's call, we expect to make forward-looking statements regarding our business, including clinical trial enrollment and 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 the forward-looking 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-Q that we filed on August 7, 2020, which is available at www.sec.gov.

1:38 We undertake no obligation to update any of these forward-looking statements, whether as a result of new information, future developments or otherwise. A webcast replay of this call will be available on the IR page at NECTR's website at NECTR.com. Before turning over the call to Howard, As we are all dialing in from separate locations, I will moderate the Q&A session for our team so we can avoid technical issues during the session. We appreciate your patience as we work to ensure that there are no technology disruptions for all of 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 to everyone for joining us on the call today. Over the past quarter, we've continued to advance our joint development program for BEMPEG with our partner, Prisselmeyer Squibb, including the start of two new studies in Q3, a Phase III registrational study in adjuvant melanoma patients that Nectar is sponsoring, and a new Phase I-II study that BMS is sponsoring, which expands the development of BEMPEG and renal cell carcinoma with a triplet regimen of BEMPEG plus NEVO in combination with a TKI agent.

2:49 The BEMPEG joint development program with BMS now has six separate studies ongoing for our lead cytokine candidate, including five registrational studies. The registrational program for BEMPEG collectively aims to benefit quite a large patient population across melanoma, renal cell carcinoma, and bladder cancer. And this joint development program for BEMPEG plus NEVO reflects a large investment into BEMPEG, and it underscores the excitement for how this unique and differentiated IL-2 agent may serve as an important backbone therapy with the checkpoint inhibitor nivolumab for the treatment of solid tumors. We're also advancing our development of BEMPEG with the checkpoint inhibitor pembrolizumab in the PROPEL study in non-small cell lung cancer, which is one of the largest solid tumor opportunities for BEMPEG. We are well ahead of our enrollment projections for the PROPEL study, and I'll let Wei share more about this program and more about the progress that we've made in the program in that study in a moment.

3:52 Next week at CITSE, we will present several new data sets from our immune oncology pipeline, including updated PIVOT-02 data for BEMPEG in melanoma with more than 30 months of follow-up for those patients, as well as the first data for our NECTAR255 program, our IL-15 candidate. As you know, for PIVOT-02, we reported very strong results for BEMPEG plus NEVO in this cohort at last year's CITI with a high complete response rate of 34% with 42% of patients experiencing a 100% reduction of their resist target lesions. And importantly, we recently reported that after 21 months, the cohort had not yet reached a median PFS.

4:40 These results led to a breakthrough therapy designation for PEMPEG and two large phase three studies in melanoma. one in first-line metastatic melanoma and one in the adjuvant setting. The addressable market opportunity for BEMPEG in these two areas is quite significant. As a reference, combined Updivo and Keytruda sales in this setting are approximately $2 billion. We're excited to share these updated results from the PIVIT-O2 melanoma patients next week at CITSE. We continue to be impressed with the efficacy benefit demonstrated by BEMPEG plus NEVO in this study. And we maintain great optimism as we await the phase three data readout. Our ultimate goal with BEMPEG plus NEVO is to establish a new treatment paradigm in melanoma for the betterment of patients. And Nectar will host an analyst event on November 11th with key oncology experts to discuss these data, as well as our additional SITC presentations.

5:41 And we hope you'll join us for that discussion. We've also recently initiated a second Phase 1-2 study of Nectar 255, our IL-15 program, and the next cytokine in our pipeline. The new trial will evaluate Nectar 255 in patients with solid tumors. This adds to the ongoing Phase 1 study for Nectar 255 in patients with non-Hodgkin's lymphoma and multiple myeloma. As a reminder, unlike other IL-15 approaches, Nectar 255 was designed to harness the full biology of the IL-15 pathway, meaning that Nectar 255 is specifically designed to capture all of the receptor ligand interactions available for targeting the IL-15 agonist pathway.

6:29 We believe this gives Nectar 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 positive T cells. Natural killer cell agents are currently gaining great interest as this cancer cell killing mechanism is designed to boost and restore the immune response in patients, which can enable them to more effectively fight their cancer. For Nectar 358, we presented new data yesterday at the American College of Rheumatology Conference, and I know many of you listened to that presentation. Most notably, we observed a dose-dependent increase in T regulatory cells in lupus patients treated with Nectar 358. with a corresponding order of magnitude of reduction in disease symptomology.

7:18 In Q3, Lilly started a phase two study in patients with lupus and they are also planning a second phase two study in patients with ulcerative colitis. These are in addition to Lilly's two ongoing phase one B studies of Nectar 358 in atopic dermatitis and psoriasis. Nectar 358 is a first in class investigational Treg stimulating agent which is designed to correct an underlying immune imbalance in patients with autoimmune conditions, many of whom experience reduced numbers and impaired function of their own T regulatory cells. We are very pleased that Lilly is advancing Nectar 358 and we look forward to the continued expansion of this development program.

8:04 As all of you know, we continue to navigate the evolving COVID-19 landscape and I'm very proud of our employees who are working hard to ensure the least amount of interruption to our business. To that end, I'm pleased to report that we remain largely on track with our previously discussed trial timelines that were reviewed on our August financial results call. As I stated earlier, we remain highly focused on the five ongoing registrational oncology studies with BEMPEG plus Novolumab. These are the first in line metastatic melanoma study, the first line bladder cancer study, the first line renal cell carcinoma study, and the muscle emblazoned bladder cancer study, and the adjuvant melanoma study. We will provide a thorough review of the entire BEMPEG Registrational Program momentarily, but I'd like to mention a few timeline highlights from the Registrational Program for the Propel study in non-small cell lung cancer.

9:01 We now have three Registrational Studies for BEMPEG, where we can see our first data readouts in the same timeline. These are the metastatic melanoma study, the cisplatin and eligible bladder cancer study, and the metastatic RCC study. For the metastatic melanoma study, which is being run by BMS, as we previously stated last quarter, because of COVID-19 delays in that study, we expect to report the first data in late 2021 or early 2022. The study has three endpoints, ORR, PFS, and OS. These are sequential endpoints. and PFS is the endpoint designed to support a full approval. For the bladder cancer study, we expect a similar timeline reporting ORR and the duration of response in the first part of 2022.

9:51 And for RCC, we expect to get our first interim analysis for overall survival around the same time. In non-small cell lung cancer, we are actively enrolling patients into the ongoing PROPEL study of BEMPEG plus Merck's Pembrolizumab, which is the established standard of care in this setting. These data will inform our strategy for a registrational program for BEMPEG and first-line non-tumor cell lung cancer. And there's been a significant investigator interest in this study. And as a result, we've seen a recent increase in patient enrollment. We now expect that we will have preliminary ORR data in the first part of 2021 for approximately 30 patients with a minimum of two scans on treatment from the non-small-cell lung cancer cohorts of this study.

10:39 You'll recall that our original thought was that we would have data available for only 10 to 20 patients, so we're very pleased with the speed of enrollment. We ended the third quarter with a strong balance sheet with over $1.2 billion in cash and investments and no debt. Our strong financial position allows us to focus on advancing our pipeline of autoimmune oncology candidates including lead cytokine programs IL-2 and IL-15 which have broad applicability in a wide range of tumor types. And I will now turn over the call to Wade to review the BEMPEG development program in more detail. Thank you, Howard. I'd like to review the progress and timelines for our BEMPEG recreational program which includes five separate recreational studies designed to position BEMPEG as the standard care in frontline metastatic and Ashwin Settings in melanoma, as well as the kidney cancer and bladder cancer.

11:38 Let me begin with the first-line metastatic melanoma study, which is being run by our partner, BMS. This summer, BMS successfully restarted enrollment activities for this study in many countries. Since then, they have been able to bring more investigational sites online in effort to remedy time lost as a result of the COVID-19 pause. As Howard mentioned earlier, We have received a breakthrough therapy destination for BEMPEC plus NEVO based on the high complete response rate we observed in the first-line melanoma population. In the Phase III study, we have three endpoints, overall response rate, or ORR, progression-free survival, or PFS, and overall survival, OS.

12:29 The first readout will be an interim look comparing the ORR in the doublet arm of MPEG plus NEVO to the ORR in the NEVO monotherapy arm and will include about two-thirds of the patients in the study who have at least six months of follow-up. This endpoint was designed for a potential early accelerated approval submission for the doublet, which would enable us to bring this innovative therapy to patients more quickly if approved. The application for full approval of MPEG in the U.S. and in Europe will be based on PFS and OS. Because of our high complete response rate, many of you have asked whether we could use this as an endpoint for registration instead of ORR.

13:18 After discussion with multiple global health authorities, VMS and Nectar have made the decision to leave the current protocol intact with existing endpoints. The study continues with the original three endpoints of ORR, PFS, and OS. The original design of the study assumes a median PFS for the nivolumab arm to be comparable to the 6.7 months observed in the Checkmate 067 study. For our study, based upon its original design, the PFS analysis is projected to occur about six to seven months after the ORR analysis. However, PFS is an event-driven analysis, and a number of other factors could impact this timing as well, including the time needed to review the data by independent blinded radiology review.

14:12 With respect to the registration study in first-line med-sac bladder cancer, we reached our enrollment goal in September for this study. As a reminder, the primary endpoints in the study are ORR and duration of response. as determined by central radiology review for about 110 metastatic bladder cancer patients who have a confined PD-L1 positive baseline score of 10 or lower, which will serve as a basis for a potential accelerated approval filing. The duration of response is a critical part, important endpoint in this cisplatin ineligible patient population because this endpoint was the differentiating factor that led to federal approvals for single-agent checkpoint inhibitors in this setting as compared to a gemcitabine carboplatin combination standard pair regimen.

15:11 For this study, we are planning a minimum follow-up of 18 months to better assess the duration of response. This brings the timeline for our first data for this study to the first part of 2022. For the first-line renal cell carcinoma study, we remain on track with our enrollment projections for this study, which means we also expect to achieve the first interim analysis on the primary endpoint of overall survival in the first quarter of 2022, consistent with our prior guidance. Based upon the early data generated for BMPAC plus NEVO in renal cell carcinoma. BMS and Nectar have formulated a comprehensive approach for the development of BAMPEG in this indication.

16:01 To this end, and as Howard stated earlier, in addition to the ongoing Phase III study, BMS recently started a Phase I-II study in this setting, which includes a tyrosine kinase inhibitor. The new study will evaluate the triplet combination of BAMPEG and nivolumab plus either Exitinib and will then be expanding to a second part, which will compare the triplet of Bentec Nevo plus a TKI to the doublet of Nevo plus TKI in patients with RCC. The muscle invasive bladder cancer study, which is being run by BMS, is enrolling approximately 540 patients who will receive Bentec plus Nevolumab or Nevolumab monotherapy for a 12-month treatment period.

16:52 following surgery. The study is actively recruiting patients, and more sites have been initiated throughout this year. As this study is longer, we expect the first data readout to be in 2024. Finally, for the adjuvant melanoma study, in Q3, we initiated this important additional Phase III registration trial well ahead of schedule. and the study is now actively enrolled. As Howard stated, this study provides us with an opportunity to position BEMPEG as a new standard care for the treatment of melanoma and it significantly increases the number of patients that can potentially benefit from this agent.

17:38 The trial will enroll 950 patients for the 12-month treatment period post-surgery and an endpoint of event-free survival. Initial data from this study are expected in 2024 as well. For Propel, our study in non-small cell lung cancer in combination with pembrolizumab, we've had great interest in the study from leading thoracic cancer centers in the U.S. and Europe. And consequently, we have surpassed our expected enrollment in the last few months. We now expect that we will have more data for each of the people less than 1%, from this study with data from approximately 30 patients who have had two scans or more available in the first part of 2021.

18:31 Finally, as we noted last week, we have initiated a proof-of-concept clinical study of MPEGs for the treatment of COVID-19 patients. As we all know, the United States continues to hit all-time highs in new daily coronavirus cases. We saw an opportunity to evaluate BAMPEG to potentially address an underlying phenomenon being observed in patients who go on to have more severe disease. And that is the observation of low baseline lymphocyte counts in these patients that may be a result of a lack of an adequate Thank you.

19:17 Thank you. to discuss more on our Nectar 358 and Nectar 255 programs. Thanks, Wei. Let me begin with a brief update on Nectar 358.

20:02 Many autoimmune disorders, including systemic lupus, are associated with decreased Treg numbers, reduced Treg function, and or reduced production of interleukin-2. Treg deficiencies are important in the pathogenesis of these autoimmune diseases. With Nectar 358, our goal is to address these Treg abnormalities and to develop an IL-2-like molecule that could selectively stimulate Tregs in a more effective manner than native IL-2. At ACR yesterday, we shared new data from our Phase 1b study evaluating Nectar 358 in patients with mild to moderate lupus. and I'd like to call out a few key takeaways.

20:47 As we reported at ULAR earlier in the year, Nectar 358 led to a selective dose-dependent expansion of CD25 bright Tregs and this was maintained through multiple administrations. In the data yesterday, we showed that Nectar 358 resulted in dose-dependent and increased Treg activation markers and genes associated with Treg functionality. For the first time, we also reported on disease activity that was observed in patients treated with Nectar 358. The study enrolled patients with mild to moderate disease, and the patients only received three doses of Nectar 358, so it was very short in treatment duration.

21:33 And in our analysis, we looked at a subset of patients who had moderate disease activity with classy activity scores that were greater than or equal to four. In these patients, Nectar 358 led to a dose-dependent reduction in Class EA score from baseline. Notably, patients at all dose levels with Nectar 358 experienced a reduction in Class EA while the placebo patients did not. And 7 of 18 patients had a 4 or more point score reduction by day 43 as compared to their baseline scores. and one patient at the highest dose level of 24 micrograms per kilogram experienced a reduction in class EA score from 22 at baseline to 5 by day 43, two weeks after the last dose of Nectar 358.

22:26 And this is very exciting to see that Nectar 358 demonstrated a dose-dependent reduction in class EA composite clinical scores in patients with moderate SLE After only three treatment cycles and complements well what we're seeing with the PK data for Nectar 358 exposure and the PD data for Treg induction. Overall, we're very excited about these data at ACR 2020 because we have now demonstrated that in SLE patients, Nectar 358 can produce a much larger magnitude of Treg increase in low-dose IL-2, The effects of Nectar 358 are dose-dependent, and we can detect molecular, cellular, and clinical changes in these patients after treatment.

23:15 The promising results from our Phase I studies of Nectar 358 led to the initiation or planning of a number of studies by our partner, Eli Lilly. These include two separate Phase Ib studies in atopic dermatitis and psoriasis, the new Phase II study in lupus patients, which started in Q3, and a phase two study being planned in ulcerative colitis. In the phase two study in lupus, patients are being randomized to one of three dose levels of dextrose 358 or placebo. And the treatments are given on an every two week regimen for a treatment period of 24 weeks. The primary endpoint in the phase two study is the reduction in the solidite 2K scale. Secondary endpoints include the percent of patients who achieve an SRI-4 response, bilag-based BICLA response, and a level of low disease as defined by the Lupus Low Disease Activity State, or LLDAS.

24:17 We will also characterize PK, PD, and immunogenicity in treated patients. The endpoints will be measured at week 24. and we expect the study to be completed within 18 to 24 months. Now, let's turn to NECTAR255, our IL-15 agonist program and our next cytokine therapy in clinical development. As Howard stated earlier, the IL-15 mechanism is being recognized by the scientific community as critically important for the engagement of natural killer cell biology in the treatment of cancer. and as you know, this area of research is generating much excitement. Nectar 255 is designed to capture the full biology of the IL-15 pathway because both proliferation of NK cells as well as the expansion of CD8 memory T cell. And this provides us with a wide range of potential development pathways for Nectar 255 in both liquid and solid tumors.

25:19 And even virology. have demonstrated in our early research collaboration with Gilead. Given Nectar 255's pharmacological profile, we are advancing forward on multiple fronts with this program. We are currently conducting a Phase I study in patients with relapsed refractory hematologic malignancy. Although the study enrollment has been a little slower than we'd like because of COVID-19 challenges at Phase I study sites, We have recently brought on new sites and the study is back on track. We expect to complete the dose escalation monotherapy portion of the study in the first quarter of 2021. After dose escalation, the study will expand into several arms that will evaluate Nectar 255 as a monotherapy in NHL and will also evaluate Nectar 255 in combination with Daratumumab in multiple myeloma and in combination with Rituximab and NH Health.

26:21 We expect to enroll approximately 60 patients in this part of the study. We are also very pleased to report today that we recently entered into a new drug supply collaboration with Janssen. Janssen will supply Darzalex Baspro, their new subcutaneous version of Daratumumab, which was approved for multiple myeloma in May of this year. and we look forward to evaluating the combination of NEXRA-255 plus Darzalex TASPRO in multiple myeloma patients in our ongoing trial. And as mentioned, we expect to open the daratumumab combination cohort as well as the rituximab combination cohort after completing the dose escalation portion of the trial in the first quarter 2021.

27:11 We have introduced a robust biomarker program into the Phase I Nectar 255 study, which is measuring its effect on multiple immune cell populations that we know are important for tumor control. We're especially focused on the expansion of NK cell, analysis of NK cell subsets, as well as their activation and function, and expansion of CD8 T cells. With initial patients treated in our Phase I study, We have already observed evidence of target engagement of the IL-15 pathway, and we look forward to sharing more details on this next week with CITSE. We are also very excited that we recently initiated our second Phase 1-2 study of Nectar 255 to evaluate the combination with Cytuximab in two distinct groups of highly refractory second- and third-line patients with metastatic colorectal cancer or metastatic head and neck cancer.

28:11 The overall study will enroll up to 75 patients and will include a dose escalation component for the combination regimen, which will then be expanded into dedicated expansion cohorts for head and neck and colorectal cancer. We're building significant momentum with the Nectar 255 program, and we look forward to presenting early translational data from the initial dose escalation cohorts in our first in-human Phase I study at CIDC next week. With that, I will now turn the call over to Gil for a review of the financials. Thank you, Jay-Z, and good afternoon, everyone. On this call, I will review our 2020 financial guidance. Starting with our strong financial position, we ended the quarter with $1.2 billion in cash and investments and no debt on our balance sheet. We still plan to end 2020 with over $1 billion in cash and investments.

29:09 Now turning to our annual financial guidance, our full year 2020 gap revenue projection remains between 140 and 145 million. This includes 50 million of milestone payments from BMS and 90 to 95 million of royalties, product sales, and other revenue. Under the BMS collaboration, we recognized a $25 million milestone for the start of the Muscle Invasive Bladder Cancer Study in Q1, and recognized a second $25 million milestone related to the start of the adjuvant melanoma study in Q2. For our GAP R&D expense guidance, we now anticipate 2020 GAP R&D expense will range between $415 and $425 million, which includes approximately $60 million of non-cash depreciation and stock compensation expense.

30:12 This decrease in our R&D expense forecast is a result of a number of factors including the timing of R&D expenditures for certain of our earlier stage and non-oncology programs due to COVID, lower than projected non-cash stock compensation and depreciation expense and reduced travel and other costs due to the impact of the COVID-19 pandemic. Our G&A expense for 2020 is still projected to be between 105 and 115 million, which includes approximately 45 million of non-cash stock compensation and depreciation expense. Finally, due to the impact of the COVID-19 pandemic on the financial markets and lower than expected yields on our investment portfolio, We now project that interest income will be approximately $20 million for 2020.

31:10 Importantly, we have not experienced any significant realized or unrealized losses on our portfolio of investments. We continue to closely manage our operating expenses and remain highly focused on the execution of our broad portfolio of research and development programs. And as I stated earlier, we still plan to end 2020 with over $1 billion in Cash and Investments. And with that, I'll open the call to questions. Operator? Thank you. Ladies and gentlemen, if you have a question at this time, please press the star followed by the number one key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Once again, to ask a question, please press star and then one now.

32:03 and our first question comes from Peter Lawson from Barclays. Your line is open. Hi, guys. This is Wally Dawn for Peter. Thanks for taking the question. Just a question here on your study in frontline melanoma, just how we should be thinking about the bar here for efficacy. What would be considered positive results in your pivotal data that could help support approval? Thanks, Wally. Wei, I'm going to ask you to answer that. Thanks. Yeah, sure. I think the way we kind of look at this data is really looking at the control arm, which is the standard care right now is the Nivolumab. And so our comparators set up very well and it's well recognized worldwide and would serve as a basis for worldwide registration.

32:55 So our recreational strategy really is a two-step process. One is we're going to aim for accelerated approval based on ORR, and then followed by a full approval based on progression pre-survival with subsequent supplemented by overall survival. So it's really looking at these two benchmark numbers. So nivolumab in this setting, the baseline response rate is around 40%. We would like to clear that with ORR roughly 10% to 15% higher than response rate of Nebola Lab single agent. I think then we can demonstrate unequivocally in a statistically significant fashion that we have a superior response rate compared to Nebola Lab.

33:40 So that, together with durability response and the safety profile, that would be the final package that would enable a thorough approval based on ORR. Now, subsequently, the progressionally free survival, or PFS, which would allow us to gain full approval, will be not only a second shot at gold, but also a potential conversion if we were to gain solid approval based on ORR. And that would be benchmarked against the six to seven month PFS that's been observed historically for Neoboloma in this setting. And so, as many of you well recognize that we've been generate early phase data in PIPO2, and specifically with regard to our melanoma cohort, the patients who were enrolled in that cohort have actually experienced fairly phenomenal benefit from the combination of BANTEC plus Nivolumab with, I think, at the last, at a prior earnings call, with even 21 months of follow-up, we have not reached the median progression-free survival. So at the upcoming CITSE, we'll be providing even further update with longer follow-up.

34:59 And so all of us are certainly very encouraged by the data from Pivotal 2. And if the Phase 3 registration study were to be able to replicate the data from Pivotal 2, then we should have a fairly significant margin improvement in PFI compared with nevularized single agent. And that would bring huge value in extension of survival for patients with first-time metastatic melanoma. Great. Thank you. Thank you for taking the question. Thank you. And our next question comes from Alexander Duncan from Piper Sandler. Your line is open. Hi. Thanks for the questions. One on BEMPEG and one on 255.

35:45 So for BEMPEG, the recent uptake in Propel enrollment is great to see. Just curious to understand the dynamics here a little bit more, if you can elaborate on that. Is this largely due to discontinuation of the NEVO BEMPEG trial? And secondly, for the 255 monotherapy dose escalation update at CITC, what safety signals are you paying particularly close attention to? And then whether or not you identify the MTD How are you going to use the 255 monotherapy biomarker data to inform safe dose selection to use with the combination cohorts? I guess my question here is, what's your confidence that the combination of 255 and rituxan, for example, won't potentiate in adverse events such as infections and liver tox?

36:37 Thank you. Thanks, Alex. Wei, I'm going to ask you to answer the first part of the question about the PROPEL study, and then, Jay-Z, I'll ask you to take the second one. Thank you. Yeah, thanks. Yeah, so PROPEL study, as you know, is a study that we hope that would actually engage registration study in first-line non-small cell lung cancer. And to that end, we're trying to generate data currently with a doublet of BEMPEG plus pembrolizumab. building upon the foundation of Pembrolizumab as the current standard care in PLM-positive patients. Right now, with the COVID pandemic happening, everyone has experienced a lot of challenges in enrollment, and our study team has really navigated this extraordinarily well. As we shared earlier in an earlier earnings call that with the Propel study, While we were planning to open the sites in both Europe as well as in the U.S., we had some challenges because the first wave pandemic hitting Europe coincided with our plan to initiate the sites.

37:47 But we were very vigilant in both working with the sites, finding out the best time to open the sites. And while initially we had a delay in opening the sites in Europe, but as soon as the first wave pandemic passed, we were able to get our sites up and going. and the moment has been really, really brisk. I think that just reflects, while PEMBRO has really brought a huge improvement in overall survival for patients suffering from non-small cell lung cancer, its benefit is still limited with monotherapy to about two years or so. So there's still a tremendous need for these patients for better improved therapy. and especially for things that are chemo-sparing.

38:34 And hence, and that's reflected by how well this study has enrolled after we have gotten the sites in the U.S. and in Europe up and going. So we've seen a gradual enthusiasm for the combination and also it's reflecting the need that the doctor continues to see in spite of the PEMPO monotherapy being a wonderful established standard of care to really build upon that and really improve on that, extending patients' lives and medications. So we're certainly enthused about this study, enthused about the data we will deliver next year, and also the potential of sharing the data and evaluating the possibility of a phase three to follow up on that data analysis. Thanks, Wei. And Alex, thank you for the question.

39:24 Regarding 255, so as you know, this is a first in human study. And in the dose escalation part, we're taking patients with pretty advanced disease, either non-Hodgkin's lymphoma or multiple myeloma, and treating them with escalating doses of Nectar 255 delivered intravenously. Now, what we're looking for in terms of the key safety signals are things that both were informed from our preclinical toxicology and other studies. but also what we know experience-wise from the groups of Waldman and others that have also used IL-15 as an agent clinically. So we're looking for those same kinds of effects. We're studying key cytokine-related toxicities and adverse events. We're looking at secondary cytokines, which are essential, because of course we expect IL-15 agonism of cells that express IL-15 receptor complexes to induce cytokine responses.

40:22 and we're also studying the downstream cellular dynamics associated with IL-15. And as you know, it can have a lot of homeostatic effects. So you were asking if the MTD in the study had been reached and it did not. We're still dose escalating. And we have a very rich biomarker program that we can use to inform dose selection. And this is, again, a page of the playbook that we played, for example, with BEMPEG, where we have a lot of markers that assess and many more. So, we use all of those things to inform our dose selection. and give us a very, very clear confidence that we've engaged the targeter in getting the kind of pharmacodynamic response that we want.

41:25 So then when we identify a go-forward recommended phase two dose for the expansion cohort, you're absolutely right, we're going to pay a lot of attention to what happens when we combine either with daratumumab or rituximab. And in that case, as you know, these are both antibodies that have an IgG1. They're also antibodies that are known to have something like a tumor lysis syndrome that can be seen when you have very rapid lysis of B cells, for example, with rituximab when it clears them so quickly with clearance either through the liver or to the spleen from the fixed tissue cells. So we'll be looking very closely at those things. We'll be looking very closely at the cellular changes and also monitoring the patients very, very closely to ensure that we're not seeing any kind of adverse events of the combination because, in fact, we'll try to do the exact opposite which is substantially improved cell clearance, not just in the blood compartments, but particularly in the secondary lymphoid compartments where these tumors reside.

42:26 Thanks for the question. Thank you. And our next question comes from Jessica Five from JP Morgan. Your line is open. Hi, this is Daniel for Jessica Five. Thanks for taking your question. Staying with 255, you stated that you're going in colorectal cancer and head and neck initially in solid tumors. Can you help us think about the opportunity of 255 in solid tumors, why you're able to choose those two different tumor types, and then do you see combination as an ideal approach for this program as you advance it forward, or is there an opportunity to evaluate it as a monotherapy as well? Yeah, thanks. Wei, I'm going to ask you to take that.

43:12 Sure. Yeah. So we really see a tremendous opportunity in solid tumors for an IL-2 agent like 255 because now monoclonal antibody has become the standard care in cancer in general, but both in heme and solid tumors. And in fact, one of the first approved to mine. Monoclonal antibody in any cancer type was Herceptin in HER2-positive breast cancer. So there's a long history of tradition of monoclonal antibody, and now it's become well-established standard care in many, many tumor types. And as we think about how to develop 255 within the cell tumor space, we really look at which are the indications where the usage of a monoclonal antibody and many more.

44:06 And so, we're going to talk a little bit about some of the things that we're going to talk about today. So, we're going to talk a little bit about some of the things that we're going to talk about today. And so, we're going to talk about some of the things that we're going to talk about today. but eventually moved to the first-line setting based on the extreme trial. And then the regimen of Serteximab plus platinum chemotherapy plus 5-FU had become the standard care when you had cancer in the first-line setting for quite a while until more recent times when Pembrolizumab plus chemotherapy has improved upon that standard care. And then so then the use of Serteximab had returned back to a later-line use as monotherapy.

45:02 And with that, and many more. The NK cells, which are so critical in executing the ADCC activity of these monoclonal antibodies, including cetuximab. So the MOA strongly supports the hypothesis that the addition of 255 by expanding the NK cell population would significantly enhance the activities of an ADCC antibody like cetuximab and improve upon the 15% response rate in late-line head and neck cancer. So that's sort of the rationale we decided to pick setzotuximab in head and neck cancer as one of the first indications to pursue. In addition, a similar kind of situation was placed out in colorectal cancer. Now worldwide, colorectal cancer is something that's a much bigger disease. Now, the setzotuximab used, it's somewhat divided. So to a large extent, setzotuximab is either used in first-line or second-line setting together with

46:32 a chemotherapy regimen. It's full fury. But in some centers, as well as some investigators, use such a text map as a single agent as well. So due to the variety of different use, we also saw an opportunity to really combine with such a text map as a single agent in combination with 255 to improve upon the benefit a single agent has. And again, it's in the 15% range in terms of single agent activity in colorectal cancer in a later-line setting. And were we to be successful there, it leaves room for us to move into an earlier-line setting where it's in combination with chemotherapy as well.

47:21 It's because both head, neck, and colorectal cancer offers opportunity to leverage the monoclonal antibody ADCC MOA and has well-established standard of care in use in a later-life setting. And with the efficacy bar that leaves tremendous room for improvement, those were the reasons we kind of picked these indications and picked CETEXMAP as a combination partner to start out with. If we generate the proof of concept with the Tuximab in head and neck cancer or in colorectal cancer, that would allow us to move forward after demonstrating this proof of concept based on this MOA to expand the combination to other ADCC-based monoclonal antibodies in solid tumor, as well as the generation data in heme allow us to move forward in heme legacies as well. and to build upon that, and I think 255 really has huge potential and improve upon the current standard care, which is wide use of ADCC monoclonal antibodies that cover so many different tumor types.

48:31 So thanks for the question. Thank you. And our next question comes from George Farmer from BMO Capital Market. Your line is open. Hi, good afternoon. Thanks for taking my questions. Wei, can you comment a bit on what the bar for success would be in Propel? 30 patients that are basically going to be distributed among different PD-L1 subgroups. Are you expecting to see any differences there? And I know 30 patients is a good number to hit, but it's spread across all these different subgroups. It might get a little thin per subgroup. and then Jay-Z, I know there was some discussion about this yesterday, but could you talk about the significance of the CLAS EA score and how that relates to SLEET-I in lupus and how we can think about the two different scoring systems?

49:31 Okay. Thanks, George. Sure. Yeah, I'll take the first part of the CLAS question. Yeah. Thanks for that great question. So it's something we've thought a lot about because the registration goal decision is an important decision for development of any drug. For BEMPEC in particular and for the PROPEL study, as you well know, the current standard care really segments that population in the first line metastatic non-small cell lung cancer population into three subgroups, and that's less than 1% of PDR expression, 1 to 49, and 50% above. and then we have either early phase data or recreational data that we can use to benchmark against the historical numbers that Pembrolizumab has in each of these subpopulations.

50:27 So first of all, looking at the population of less than 1%, Pembrolizumab as a single agent based on the early phase data really had a response rate of 7 to 8%. in the single-digit range, in the 5% to 10% range. And that's what to expect, right? So that's the benchmark for that population of patients. For the 1% to 49%, the response rate is typically hovering around 17% or so from past trials, specifically Keynote 42. And so we're really looking at a benchmark of pembrolizumab in that population of patients of 1% to 49%, ranging about 15% to 20% response rate, and then finally the benchmark for the 50% above PD-L1 expression subgroup.

51:17 Looking at data from Keynote 24 as well as 42, we're looking at the numbers that are really in the 40 to 50% range. So that's the baseline response rate for monotherapy pembrolizumab. So I think to your point, because of these subgroups, we have When we do generate the 30 plus patient worth of data, we'd be looking at the data by segmenting into each of these subgroups. And this would help us to really understand fully how our drug works and also help us to design our registration study. So I think what the, now the registration study for a doublet of PEMBRO plus BAMPEG pitting that against Pembrolizumab monotherapy will be limited to the 1% above population because Pembrolizumab mono is not approved in less than 1%. However, I think the less than 1% data generating from Propel will be extremely informative because I think IL-2 being known as a pro-inflammatory cytokine is expected to inflame the tumor as we have shown in our early phase data from PIVO2 on treatment biopsies. For instance, in our bladder cancer trial, we were able to demonstrate

52:48 that 7 out of 10 patients who previously was PD-L1 negative, meaning PD-L1 expression less than 1%, were able to convert to be PD-L1 positive after treatment, just one cycle treatment of BEMPEG. And so I think this is where We really hope to be able to see similar phenomena in non-small cell lung cancer in the PROPEL study and hence while the PEMBRO monotherapy is approved in a broad spectrum of patients, I think probably the subgroup that would be most informative to us would be the less than 1% as well as the 1 to 49% because Number one, those benchmarks are known. Number two is those benchmarks are actually fairly low, such that if we demonstrate a significant improvement of, say, a doubling of the response rate, then we know that the BMPAC as a molecule has truly followed through its MOA, as we have seen in other tumor types of inflaming the tumor, especially in the PD-L1 low-expressing or the non-expressing Thank you very much.

54:30 that pembrolizumab monotherapy is delivered to patients in first-line non-small cell lung cancer. Thanks. And, Jay Z, you want to take the CLASI versus SLEDI question? Yeah. Hey, George. Thanks for the question. So you asked about the CLASI versus SLEDI, kind of how they're related. To start off with, CLASI is a score that specifically zeroes in on the cutaneous manifestations of the lupus disease. So really looking at the skin. It's not directly linked to the SRI or the sleet eye, but we always use CLASI along with those other instruments because we use them to characterize lupus patients. But there is one important connection. and remember, lupus patients are characterized by their secondary organ involvement.

55:23 And the sleet eye as well as the bilag, they both take into account the additional accessory tissues. And since these are multi-component scales, you know, you get scoring ranging everything from the presence or absence of autoantibodies to the presence or absence of secondary organ involvement. and it's the abcutaneous lupus that will contribute to the spleen-eye score. So there is a level of relationship. Now, we really focused in on it because we know that there is a really good long-standing biology about Tregs and Treg action, particularly in the skin. And you know that with Lily, we are currently in the process of two phase 1B studies that focus on dermal application, right? So there we're treating patients in one study with atopic dermatitis and another study were treating patients with psoriasis.

56:14 And even if you remember from David's presentation yesterday, he showed that low-dose IL-2 showed quite a bit of efficacy in patients with psoriasis and other skin diseases because he showed that large table of phenotypes of patients treated in the TRANSREG study. So really, we're both extremely excited and encouraged that we saw a dose-dependent reduction in CLASI. The effect was really quite pronounced. As you saw, one patient that was enrolled in the study had a pretty severe skin involvement with a 22-score baseline. That patient had a 17-point reduction in their CLASI over the course of treatment. That patient was enrolled at the highest dose level of NECR 358. So it's a very encouraging piece of information, and it's very, very consistent with the dose-dependent relationship we see in T-regs.

57:07 and it's one of the main reasons why we're so excited that we're now in the phase two B dose range finding study with Lilly. That study began just a couple of months ago in the summertime and it's currently enrolling patients and a second phase two study is around the corner as well in ulcerative colitis and additional ones will follow next year. Thanks, Jory. Thank you. and in the interest of time, we kindly ask that you please limit yourselves to one question at this time. And our next question comes from DeFay Yang from Mizuho. Your line is open. Hi, good afternoon everyone. This is Alex on for DeFay. Thanks for taking the question and apologies if this was addressed already, but quick question on non-small cell lung cancer and the PEMPEG combo with PEMBRO.

57:57 Assuming you show positive data here in the upcoming readouts, what would be the strategy going forward, and would there be an opportunity to pursue kind of an accelerated pathway to approval? Thanks, Alex. Wei, I'll ask you to comment again briefly on that. Sure, yeah. I think it's a great idea. It's certainly something that we would be willing to interest and explore with the authorities. Now, historically, in the first-line setting, There has not been an example of accelar approval based on just a response rate, certainly not with exception of like a TK, such as . So it's something that we will have to explore with the authorities, and it really depends on the robustness of the data we generate from Propel.

58:59 Thank you. And our next question comes from Arlinda Lee from Canaccord. Your line is open. Please check that your line is not on mute. Hi, guys. Thanks for taking my question. Sorry about that. On 358, given the potentially broad applicability of the T-reg mechanism that you're carrying while presenting yesterday, I'm kind of curious about how you guys chose are the first two indications, and if there's time to explore others as well. Thank you. Thanks, Erlinda. Jay-Z, I'm going to ask you to answer that. Thank you. Yeah. Hi, Erlinda. Great question. So about the indications for Treg, so there's definitely a very large realm of autoimmune indications and chronic inflammatory diseases where you can consider the Treg mechanism.

59:59 and it kind of sort of breaks apart into some of the different pathobiologies. So one of the key reasons why we focused on SLE as the first indication is that's a disease that has a very clear and characteristic dysfunction in the Treg compartment. So those patients have, especially as they get more severe in the disease progression, they have both a drop in Treg levels and then the T-Rags that are recovered from those patients are far less suppressive, so they're much less functionally active. Now, if you also remember, David talked about T-follicular helper cells yesterday. T-Rags antagonize those cells. The T-follicular helper cells are the main T-cells that drive the germinal cell reaction, which leads to antibody production, which in autoimmune diseases is really detrimental because it leads to autoantibody production.

1:00:54 and in those same patients that have a drop in Tregs, they have an expansion of T-follicular helper cells. So that was one of the very strong reasons why some of those early studies in the earliest cases of treating lupus patients with low-dose IL-2 specifically to reduce a Treg increase in those patients led to some of the very encouraging results that have been reported. And that's now been replicated in multiple studies But with low-dose IL-2, you can really only achieve so much of a T-reg normalization. So really, with Nectar 358, we can reach far, far higher levels of T-reg elevation and sustain those levels for much longer periods of time than is possible with low-dose IL-2. So that's why this is a key lead indication for us.

1:01:46 The second indication is ulcerative colitis. And actually, this is very interesting because UC is also another disease that's highly known to be characterized by Treg biology. And this is biology at the gut axis where you have a lot of Treg function associated with the lamina and other kinds of compartments where you're regulating pathologic T cell responses in that disease. And unlike a disease like lupus, which has autoantibodies, The disease like UC has much less, but it has underlying chronic inflammation with pathogenic T-cells. And here we know that T-regs can restore those pathogenic T-cell responses. It's also very notable, you know, Arlinda, that the earliest discovery of the FOXP3 cell, the cell that was originally coined the T-suppressor cell but later learned to be a T-reg, actually came from studies in EAE, which is the mouse model, of UC. So it's a very, very important related and also TNBS as well. So it's a very, very, very nice correlation that links to that.

1:02:58 And then beyond these two lead indications, we're also evaluating with Eli Lilly a number of other indications. In the collaboration that we struck with Lilly, Lilly will be running four Phase II studies. of which the first one has started and the second one was just recently announced just yesterday and again covered today with UC. And so there'll be two other studies that are starting and we'll see more of those coming next year. We'll be sampling different indications so it will be different than these first two and we'll really be focusing in all of the places where Treg biology and intervention with 358 we expect scientifically to have a very strong effect at controlling the disease.

1:03:46 Thank you. Thank you. Our next question comes from Jay Olson from Oppenheimer. Your line is open. Oh, hi. Thanks for taking my question and congrats on the 358 update yesterday. I had a question about it seems like a dose-dependent increase in NK cells, and I was wondering how you would interpret those findings. Thank you. Jay, I'll ask you to take that. Yeah, thanks, Jay, for the question. So we do observe low-level increases in NK cells, and we only really observe that at the highest dose level tested, 24 microgram per kilogram dose level.

1:04:35 Now, it's also important to note that what we presented yesterday was we dove into the NK subsets. And so there are, you know, several, but the two primary types that occur in, you know, in humans are the CD56 bright, CD16 dim subset. These are the ones that cannot participate in ADCC. They cannot bind to FC because they lack the CD16 receptor. and then there's the CD56 DIM, DD16 Bright. And the 16 DIM, sorry, the 56 DIM, 16 Bright are the majority of the NK cells in the body. They're also the ones that are the most hyperactive and they possess the CD16 so they bind FC and antibody receptors. And what you saw in our presentation is we saw very little change in that compartment but we saw the majority of change in the 56 bright, 16 dim. And actually a lot of scientists consider those to be like regulatory NK cells.

1:05:40 And why they're coined that way is because they don't secrete killer cytokines or inflammatory cytokines in response to stimulus. So they're almost the kind of cell that does the opposite function that you have the traditional NK cells do. So that's one important component. That's why we presented that DataJ to show the delineation and that this is really a subset-specific effect. The other important point is that what we learned is very consistent with what's been known and studied with the use of IL-2 throughout many historical uses. So we've always seen that that 56 bright CD16 DIM subset is much more sensitive to IL-2 than the other NK subset.

1:06:28 And we've also seen those same NK cells elevated in multiple studies of low-dose IL-2, and not just the studies from David Klatsman's lab, even in John Peretz's studies in chronic graft-versus-host disease patients. We also saw an expansion of NK cells, only the 56-brite subset, and they really haven't led to any sequelae. So it's something that we'll be following, you know, in all of our studies, because obviously in phase two, we'll be going to much longer treatment duration. And so we'll be studying that very, very closely. But so far, it doesn't look like that seems to have any clinically negative significance at all. Thank you. And our next question comes from Paul Choi from Goldman Sachs. Your line is open.

1:07:20 Hi, this is Corinne Jenkins on for Paul. I was hoping you could talk a little bit about your strategy in melanoma. I think you're going to have potentially a combination in adjuvant, but also two separate combinations in metastatic melanoma. And I was just hoping you could talk a little bit more about how you think about all of those kind of in the same indication. Yes, thanks, Corinne. Wei, I'm going to ask you to comment on these things. Sure. Yes, maybe can you elaborate what you mean by two different combinations in metastatic? Ben Pegg next week. So just hoping, pending obviously positive data, but how would you think about development and kind of how those two combinations work together in that market?

1:08:12 Sorry, I didn't catch the first part of what you were saying. With the CITSE data of Nectar 262 and BIMPEG plus your ongoing BIMPEG plus LTEVO studies and metastatic melanoma, how are you thinking about that? Right, right. So, yeah, so the 262 is right now the patient population being addressed is in the post-IO setting, so relaxotractory to IO versus the BIMPEG plus NEVO combination that is really being developed in the first line metastatic melanoma. So the thinking there is really in the first-line setting, we're trying to improve upon the standard care, which is nivolumab single agent, build on top of that by introducing a combination doublet of BAMPEP plus nivolumab and really displacing nivo as a standard care in that setting.

1:09:10 Now, after the patient who has failed IO therapy in the first-line setting, whether it be and a checkpoint inhibitor or a PD-1 plus a CTLA-4 combination. I think those are the patients being really being addressed with the two combinations that are currently in our review study. That's the 262 program. The two combinations are the 262 molecule, which is a Tolex receptor 7-8 in combination with BAMPEG, or the second combination is a triplet of 262 plus BAMPEG plus nivolumab. So that's a triple combination. And either combination is really designed to address a patient who have progressed on a checkpoint inhibitor in the first-line setting, whether the addition of a toll-like receptor agonist, which would ignite the innate immunity.

1:10:07 Because so far, I think if you think about whether you're talking about CTRI-4 or you're talking about a PD-1 agent, or you're talking about a BEMPEC agent, which is IL-2 targeting T cells. All of these are really trying to harness the body's adaptive immunity in the fight against cancer. And the 262 agent and any toll-like receptor agent is really going the other side, really try to trigger an immune response, trying to trigger adaptive immunity through the activation of innate immunity first. So, and I think there's been some data with other total receptor agents that seem to indicate that's a viable strategy to really reignite the immune response and really to pull in the adaptive immunity by first engaging and activating the innate immunity through these intra-tumor injections of total receptor activists.

1:11:09 So, and I think what our strategy is really unique on is really while the 2-6-2 or 2-lock receptor strategy is being done by others as well. We have the unique opportunity to add in IL-2 agents like BAMPEG to really additional provide that additional boost to that community. So really you get an enhancement of the immune response that's associated with a checkpoint inhibitor like nivolumab. And you get a double enhancement on the one hand with a total excess hyper agonist such as 262. So really trying to inflame the tumor and the immune response by activating the innate immunity. And on the other hand, you also add in an agent like MPEG, which really enhances the adaptive immunity.

1:12:01 So with this combination, I think it's one of the unique combinations that only Nectar can really do. that really leverages trying to activate the immune response in a IO relax refractory setting by activating both adaptive as well as the innate immunity. I hope that helps to answer your question. Thank you. And that does conclude our question and answer session for today's conference. I'd now like to turn the call back over to Howard Robin for any closing remarks. Well, thank you everyone for joining us today. I'd like to first thank our incredible employees for their continued hard work and tireless efforts during these challenging times. Their dedication to advancing our clinical studies while keeping our business on track makes me especially proud.

1:12:53 As I stated earlier, we're well positioned with a strong balance sheet, a maturing portfolio of immuno-oncology and immunology programs, and we thank our shareholders for their ongoing support and look forward to continuing to provide you with updates on our progress. And please join us at our analyst event on November 11th. And lastly, we sincerely hope that you and your family stay safe and healthy throughout the coming months. So thank you very much for joining us today. Ladies and gentlemen, this concludes today's conference. Thank you for your participation, and you may now disconnect. Everyone, have a wonderful day.