Nektar Therapeutics - Earnings Call - Q3 2025

Executive Summary

• Q3 2025 revenue was $11.8M and diluted EPS was -$1.87; both beat Wall Street consensus (revenue est. ~$10.2M; EPS est. -$2.61) driven by lower operating expenses and stable non-cash royalty revenue; year-over-year revenue declined due to the sale of Huntsville manufacturing (no product sales) [*S&P Global estimates].
• Management raised year-end cash guidance to ~$240M (from $100M–$185M prior) and extended cash runway into Q2 2027, aided by $107M July secondary and $34.3M September ATM, plus $38.3M in October ATM proceeds.
• Clinical catalysts strengthened: REZOLVE-AD Phase 2b showed statistically significant asthma comorbidity improvements and validated 24-week induction for planned Phase 3; top-line alopecia areata Phase 2b data expected in December 2025.
• Near-term stock reaction catalysts: upcoming AA data, FDA end-of-Phase II meeting for AD, and ACAAI late-breaking AD+asthma data support a differentiated Treg mechanism narrative that may drive estimate revisions and sentiment.

What Went Well and What Went Wrong

What Went Well

• REZOLVE-AD Phase 2b delivered statistically significant and clinically meaningful improvements across primary and secondary endpoints (EASI, vIGA-AD, NRS-Itch), with late-breaking ACAAI data showing asthma control benefits in AD patients; management highlighted differentiation versus IL‑13/OX‑40 pathways.
• Operating discipline: total operating expenses fell to $43.5M vs. $58.5M YoY, with R&D down to $27.3M and G&A down to $16.1M, helping EPS beat consensus despite revenue mix shift to non-cash royalties.
• Liquidity strengthened and runway extended: cash/investments reached $270.2M; year-end cash guided to ~$240M; runway into Q2 2027; CFO reiterated no debt and provided clear FY25 guidance across line items.

Management quote: “We have made tremendous progress advancing rezpegaldesleukin… These compelling data give rezpegaldesleukin a unique position in the competitive landscape… we look forward to reporting in December the topline data for rezpegaldesleukin in… alopecia areata”.

What Went Wrong

• Year-over-year revenue decline (Q3 2025 $11.8M vs. Q3 2024 $24.1M) due to no product sales post-Huntsville facility divestiture; revenue now primarily non-cash royalty and limited collaboration income.
• Non-cash equity method losses persisted (Gannet BioChem: $0.5M in Q3; $7.4M YTD), and non-cash interest on royalty liabilities remained elevated ($6.0M in Q3).
• Continued net loss (-$35.5M; -$1.87 per share) highlights dependence on clinical milestones and future partnering/approval; the company will enter a quiet period ahead of AA readout, limiting near-term visibility.

Transcript

Operator (participant)

Hello, and thank you for standing by. Welcome to the Nektar Therapeutics third quarter 2025 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Vivian Wu from Nektar Investor Relations. To kick things off, please go ahead.

Vivian Wu (Head of Investor Relations)

Thank you, Crystal, and good afternoon, everyone. Thank you for joining us today. Today, you will hear from Howard Robin, our President and Chief Executive Officer; Dr. Jonathan Zalevsky, our Chief Research and Development Officer; and Sandra Gardiner, our Chief Financial Officer. Dr. Mary Tagliaferri, our Chief Medical Officer, will also be available during the question-and-answer session. On today's call, we expect to make forward-looking statements regarding the business, including statements regarding the therapeutic potential of and future development plans for REZPEG, the timing and plans for future clinical data presentations, and other statements regarding the future of our business. Because forward-looking statements relate to the future, they're subject to uncertainties and risks that are difficult to predict, and many of which are outside of our control. Our actual results may differ materially from these statements.

Important risks and uncertainties are set forth in our latest Form 10-Q, available at sec.gov. 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 of this call will be available on the IR page on Nektar's website at nektar.com. With that said, I would like to hand the call over to our President and CEO, Howard Robin. Howard?

Howard Robin (President and CEO)

Thank you, Vivian, and good afternoon, everyone. Before I start with remarks for the quarter, I'd like to take a minute to welcome Dr. Mary Tagliaferri back to the company, who has recently rejoined us as Chief Medical Officer after a need to step away for personal reasons earlier this year. Mary was instrumental in the design and execution of our successful phase II program for atopic dermatitis, and we are so fortunate that she has now rejoined us as we prepare for the initiation of the phase III program next year. I'd also like to thank Brian Kotzin for his help serving as the interim CMO during the period. Brian has worked with us for nearly 10 years, and we are grateful that he will continue to serve as a medical consultant.

This quarter and year to date, we've remained laser-focused on pursuing regulatory T cell science across our pipeline and preparing to advance our lead program, rezpegaldesleukin, also known as REZPEG, into phase III development. Our pipeline programs are focused on stimulating T regs in different ways to restore the proper balance between T effector cells and T regulatory cells and achieve homeostasis in the immune system. The data in atopic dermatitis reported in June and presented at EADV 2025 for REZPEG represented a powerful translation of the scientific discoveries that led to an understanding of the importance of T regs and to the first demonstration of their clear clinical efficacy in autoimmune disease. The Nobel Prize in Physiology or Medicine was recently awarded for these discoveries that established FOXP3-positive T regs as key enforcers of immune tolerance.

We're very humbled that the Nobel Committee included the publication of the phase 1b data for REZPEG in atopic dermatitis and psoriasis as support in the background documents for this award. The recognition of REZPEG was truly an honor and speaks to the journey that our Nektar scientists and clinicians have traveled over the years to turn important scientific discoveries into real potential medicines for patients. Our approach with REZPEG and stimulation of T regs is highly differentiated in the field. We believe this is why we've been able to uniquely generate meaningful and robust clinical data that clearly support continued development of this novel modality. REZPEG was designed to closely mimic the way T regs in our own immune system work to resolve inflammation.

Its construct gets closest to emulating natural human biology, achieving this through IL-2 agonism with native sequence IL-2 receptor interactions and a validated chemistry approach, pegylation, that has led to over two dozen approved biologics. At the 2025 EADV Congress in September, we presented compelling results from the 16-week induction period of the 400-patient resolved AD study of REZPEG in moderate to severe atopic dermatitis. These data showcased the clinical differentiation that could be achieved with this novel MOA, and JZ will touch on this later in the call. This weekend, at the 2025 American College of Allergy, Asthma, and Immunology annual scientific meeting, we will present data from a pre-planned analysis of atopic dermatitis patients from the resolved AD study who also had a history of asthma. These data provide further basis for differentiation of REZPEG.

Recently approved and in development IL-13 selective pathway blockers and OX-40 pathway blockers have shown limited potential to help the asthma symptoms in patients with both atopic dermatitis and asthma, which is a comorbidity in 25% of all atopic dermatitis patients. We're very excited about these new data. In Q1, we will present 52-week maintenance and escape arm data from the resolved AD study in atopic dermatitis. The maintenance arm data in particular will be an important look at continued treatment with REZPEG in patients who have established an EASI-50 response at the end of 16 weeks of induction treatment. There remains a need for novel mechanisms beyond those available currently in the treatment landscape for atopic dermatitis patients.

In the U.S., there are over 15 million people with moderate to severe atopic dermatitis, and fewer than 10% are receiving biologic treatments for this chronic skin disorder, with many patients not responding well to the existing agents. We believe that this market will grow with the adoption of novel mechanisms, as was seen with the induction of new mechanisms in the evolution of the psoriasis market. We expect to hold an end-of-phase II meeting with the FDA before the end of this year to review our phase III plans for REZPEG in moderate to severe atopic dermatitis. Importantly, in December, we plan to present the top-line results from the phase IIb resolved AA study in patients with alopecia areata. This study enrolled approximately 90 patients with severe to very severe alopecia areata.

With strong phase II results in the dermatological setting of atopic dermatitis, we're optimistic about the second dermatological setting for REZPEG. Nearly 7 million people in the U.S. have or will develop alopecia areata, and over 1 million of these patients have severe to very severe disease, according to the 2023 population-based cohort study. Patients with severe to very severe alopecia have limited treatment options. The only FDA-approved systemic treatments for alopecia areata are JAK inhibitors, which carry multiple well-known black box warnings and are associated with high relapse rates upon discontinuation. In a 2024 survey of 131 U.S.-based board-certified dermatologists, a majority of physicians said they were uncomfortable prescribing a JAK inhibitor, and more than half of these physicians reported they would try alternative therapies prior to prescribing a JAK inhibitor.

With this backdrop, REZPEG could be introduced as the first biologic in the setting of alopecia areata, representing an additional billion-dollar market opportunity, and we look forward to these upcoming results from the 36-week treatment period of the resolved AA study expected in December of this year. In immunology, our partner TrialNet recently initiated the phase II study of REZPEG in type 1 diabetes. This study, which is funded and sponsored by TrialNet, will evaluate REZPEG in new-onset stage 3 type 1 diabetes patients. JZ will update you on our other programs, as well as our lead pipeline antibody, a TNF-R2 agonist that has a unique tissue-specific T reg and B reg stimulator profile. Because of its monomeric activity, we're now building a bispecific program based upon this mechanism, which combines it with validated antibody targets in immunology.

Our goal is to advance one of these antibody programs into the clinic next year. With that, I'd like to turn the call over to JZ to review more details on REZPEG's ongoing phase IIb studies and our early pipeline programs. JZ?

Jonathan Zalevsky (Chief Research and Development Officer)

Thanks, Howard, and thank you, everyone on the call, for joining us today. To begin, I'll remind you that earlier this year, the resolved AD phase IIb results demonstrated the promise of Nektar's novel approach to the IL-2 pathway. The global study randomized 393 patients with moderate to severe atopic dermatitis to receive subcutaneous treatment with three doses of REZPEG: a high dose of 24 micrograms per kilogram every two weeks, a middle dose of 18 micrograms per kilogram every two weeks, and a low dose of 24 micrograms per kilogram every four weeks, or placebo every two weeks, for an induction period of 16 weeks. Following week 16, REZPEG-treated patients who achieved EASI reductions of 50% or greater were re-randomized to continue at the same dose level on a Q4-week or Q12-week regimen for an additional 36-week maintenance period.

In our June data disclosure, we reported that the study achieved statistical significance on the primary endpoint at week 16 for mean percent change in EASI score from baseline for all REZPEG arms versus placebo. The study achieved statistical significance for key secondary endpoints at week 16 of disease reduction, including EASI-75, EASI-90, NRS, the vIGA-AD, and BSA. Additionally, we have yet to see a plateau in the efficacy response in the REZPEG treatment arms. This study is currently ongoing with two additional upcoming data readouts that Howard mentioned. The first will be the 36-week maintenance study results, which compare treatment with REZPEG at either one-month or three-month dosing intervals out to a full year, which would be the intended maintenance-based dosing regimens following the 16-week induction period.

The second readout will be the one-year off-treatment data expected in the beginning of 2027, which will measure the potential remissive effect of REZPEG in atopic dermatitis. In the meantime, we continue to add to the compelling data set from the resolved AD study, including the data we shared from the escape arm of the trial at this year's EADV Congress. As a reminder, the study design allowed for patients who originally received placebo in the 16-week induction period and achieved less than EASI-50 at week 16 to enter into an open-label treatment escape arm to receive the high-dose REZPEG regimen for a treatment period of up to 36 weeks. The data presented at EADV demonstrated a deepening of responses in these patients with continuous treatment with REZPEG and support a 24-week induction period for our phase III program.

As Howard stated earlier, we are presenting additional data in patients with asthma from resolved AD in the late-breaking oral presentation at the ACAAI meeting being held in Orlando, Florida, this weekend. In addition to the asthma data that I'll discuss in a moment, that presentation will also give an update on the placebo crossover data. We're now all but one patient have crossed 24 weeks of treatment with 24 micrograms per kilogram REZPEG Q2 weeks. We will also cover additional endpoints such as EASI-90 and NRS. In addition, the presentation will show a forest plot demonstrating the consistency of REZPEG efficacy across multiple subgroups. This important finding prepares us for phase III.

Given that one in four patients with atopic dermatitis also have asthma, we designed the study in advance to evaluate its effect on symptoms of asthma using the validated five-point Asthma Control Questionnaire, also known as the ACQ-5. These data include a pre-specified exploratory endpoint for the subset of patients in resolved AD that also had asthma, including those with moderate and uncontrolled asthma at baseline. The ability to improve comorbid conditions is a substantial factor in clinical treatment decisions for atopic dermatitis and could expand the potential market opportunity for REZPEG in this setting. We know that beyond Dupixent, neither tralokinumab nor lebrikizumab has been able to show an improvement in asthma symptoms in patients with atopic dermatitis. This extends to the OX-40 programs in late-stage development as well.

Now turning to alopecia areata, we are on track and look forward to reporting data from the phase IIb study in December of this year. A positive outcome here would reinforce the potential of REZPEG to provide a completely new treatment paradigm for patients with chronic dermatological diseases. The resolved AA trial was initiated in March 2024. A total of 94 patients with severe to very severe alopecia areata who have not received a JAK inhibitor or other biologic were randomized to two different dose regimens of REZPEG, 24 micrograms per kilogram every two weeks and 18 micrograms per kilogram every two weeks, or placebo. Patients were recruited across approximately 30 sites globally, with two-thirds of patients enrolled in Europe and the rest from North America. As a reminder, patient eligibility for this study was determined using the SALT score at both screening and randomization.

Patients who experienced an unstable course of alopecia areata over the last six months, per investigator assessment, were excluded from the study, and patients with diffuse alopecia and other forms of alopecia were also excluded. The primary efficacy endpoint of this study will evaluate mean percent change in the Severity of Alopecia Tool or SALT score at the end of the 36-week induction period. Secondary endpoints include proportion of patients achieving SALT 20, which is an absolute SALT score of less than or equal to 20, mean percent improvement in SALT score at other assessed time points, and proportion of participants with greater than or equal to 50% reduction in SALT score at week 36 and other assessed time points. Importantly, SALT 20, the responder analysis, is also the established regulatory endpoint for phase III trials.

As Howard mentioned, the only available systemic therapies that are FDA-approved for the treatment of alopecia areata are JAK inhibitors, which contain a number of black box warnings, and many patients experience hair loss after treatment cessation. With the limited treatment options available in alopecia areata, we believe there's opportunity for a novel mechanism like REZPEG, especially when the therapeutic is shown to be safe and well tolerated. When comparing the outcomes from resolved AA to the approved JAKs, we see low-dose Olumiant as the appropriate benchmark. In its two phase III trials, the approved two-week dose of Olumiant showed that 15%-16% of patients achieved SALT 20 on the placebo-adjusted basis at week 36, and the mean improvement in SALT scores from baseline was 24%-26% on a placebo-adjusted basis.

Note that the placebo response rate in these trials is relatively low, at 3%-5% for the SALT-20 endpoint and 4%-9% on the mean reduction endpoint. Because of our differentiated mechanism of action compared to the JAK inhibitors and our safety profile, we see a very clear market opportunity for REZPEG in alopecia areata if REZPEG achieves these benchmarks. We look forward to sharing the top-line data from the 36-week treatment period of the resolved AA study in December. Defining the potential for REZPEG in this new indication. Similar to atopic dermatitis, with positive results from phase IIb, we would move very quickly into phase III preparations, taking advantage of our fast-track designation in the alopecia areata indication. A quick few words on type 1 diabetes, another autoimmune disease where REZPEG has great potential as a T regulatory mechanism.

We believe REZPEG can potentially slow the progressive loss of insulin-producing beta cells, which are the target of the patient's overactive immune cells in this disease. As Howard mentioned, TrialNet has initiated and is funding an investigator-sponsored phase II clinical trial evaluating REZPEG in 66 patients with new-onset type 1 diabetes. Lastly, on our pipeline progression, Nektar 0165, our TNF-R2 agonist, remains on track. This molecule has very high specificity for signaling through TNF-R2 on T regs to enhance and optimize their ability to regulate the immune system. Nektar 0165 has also shown that a strong signal can be generated through a single-arm monovalent antibody, making it a perfect candidate for inclusion in bispecific and trispecific constructs. Our goal is to advance one of these antibody programs into the clinic next year. We look forward to sharing more on these sophisticated antibody engineering programs in future earnings calls.

I'll now turn it over to Sandy for the financials. Sandy?

Sandra Gardiner (CFO)

Thank you, JZ. Good afternoon, everyone. On today's call, I'll briefly review our quarterly financials and share updates to our financial guidance for 2025. We ended the third quarter of 2025 with $270.2 million in cash and investments and with no debt on our balance sheet. As discussed in our Q2 earnings call, this end-of-third-quarter cash balance includes the completion of the secondary public offering in July with net proceeds of approximately $107 million. It also includes additional net proceeds of $34.3 million we raised in September from our existing ATM facility. We now expect to end the year with approximately $240 million in cash and investments, up from our prior guidance of $100 million-$185 million. This increased year-end guidance also includes $38.3 million of net proceeds from additional sales of our ATM facility in October.

Based upon our higher year-end cash balance, we are extending our cash runway guidance into the second quarter of 2027. Now turning to the income statement. Our non-cash royalty revenue was $11.5 million for the third quarter of 2025. We still expect our non-cash royalty revenue to total approximately $40 million for the full year. Our R&D expense was $27.3 million for the third quarter of 2025, and we still anticipate full-year R&D expense to range between $125 million-$130 million, including approximately $5 million-$10 million of non-cash depreciation and stock-based compensation expense. Our G&A expense was $16.1 million for the third quarter. We still expect G&A for the full year of 2025 to be between $70 million-$75 million, including approximately $5 million-$10 million of non-cash depreciation and stock-based compensation expense.

Non-cash interest expense for the third quarter was $6 million, and we still expect non-cash interest expense for the full year to total approximately $20 million. Our non-cash loss from equity method investment was $500,000 in the third quarter of 2025, and we still expect non-cash loss of approximately $10 million for the full year 2025. As an equity investor in Ginkgo Bioworks, we have no commitment to contribute cash to Ginkgo. Our net loss for the third quarter was $35.5 million, or $1.87 basic and diluted net loss per share. As I stated earlier, we now expect to end the year with approximately $240 million in cash and investments, with our cash runway extending into the second quarter of 2027.

Finally, as we head into our December data reporting, we intend to enter into a quiet period for the month of December until we report the top-line results for the REZPEG alopecia study. With that, we'll now open the call for questions. Operator?

Operator (participant)

Thank you. As a reminder to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. In the interest of time, we do ask that you please limit yourself to one question at this time. Please stand by while we compile the Q&A roster. Our first question will come from Yasmeen Rahimi from Piper Sandler. Your line is now open.

Dominic Risso-Gill (Managing Director)

Hi. Congrats on a great quarter. This is Dominic on for Yasmeen Rahimi. We just had a quick question on the upcoming ACAAI data that will be presented. Could you help us understand what you hope to report in the presentation on patients with AD and asthma? Moving forward, how would you expect this data to, I guess, impact development in asthma? Thank you.

Howard Robin (President and CEO)

Let me—I'll have JZ answer that, but I would tell you that at this point, we're not pursuing an asthma indication. I think. However, I think it's important to recognize that in atopic dermatitis, the fact that we have an important drug that potentially solves that comorbidity issue is very exciting. As I said earlier, 25% of the patients who have atopic dermatitis also have asthma as a comorbidity. I think it's a very important component of differentiating REZPEG, although we don't have a plan to run an asthma study. JZ, would you like to help with the rest of the question?

Jonathan Zalevsky (Chief Research and Development Officer)

Sure. Yeah. Thanks for the question, Dominic. At the ACAAI presentation, we are presenting the results of a pre-planned exploratory analysis that was included in the study. There is a validated questionnaire instrument that—it's like a patient-reported outcome—around ACQ-5, which stands for the Asthma Control Questionnaire. With that, you can assess the comorbidity symptoms of asthma in patients that have both atopic dermatitis as well as asthma. That allows you to look at the total sort of improvement in the ACQ-5 scores over time. It also lets you isolate on patients that have more severe, for example, uncontrolled asthma at baseline. That is the subset of people that have higher scores on ACQ-5 at baseline. For us, this is really interesting because, like we discussed, roughly 25% of patients have that. Roughly 100 people in our study also had asthma in addition to atopic dermatitis.

This allows us to assess the effect of REZPEG on asthma control and even potentially the improvement of those asthma symptoms in patients that also had atopic dermatitis. One of the things that's so important about that is that when you are faced with treatment decisions as a physician and you know you have patients with atopy, and atopy constantly includes other organs—that's why such a high proportion of atopic dermatitis patients also have asthma—that starts to influence some of the treatment decisions. Right now, Dupixent is really the drug that's gone to for people with comorbidity, as Dupixent has demonstrated activity in both asthma and atopic dermatitis and in patients that express both symptoms as well as each indication separately. That's really likely with the IL-4 component of its mechanism.

The other agents in the class approved for atopic dermatitis do not have nearly the level of effect that Dupixent does. This is a differentiating element of the T reg mechanism of REZPEG. We do think it differentiates REZPEG further from the other molecules in the class and the other molecules in development, as well as the approved agents like IL-13 selective antagonists and the OX-40 classes as well. We think it is something that has potential to really further build upon with REZPEG and something that we will be exploring and thinking a lot about in the future, both in the setting of the comorbidity and, as Howard said, even beyond. Thanks, Dominic.

Dominic Risso-Gill (Managing Director)

Thank you.

Operator (participant)

Thank you. Our next question will come from Julian Harrison from BTIG. Your line is open.

Julian Harrison (Managing Director)

Hi. Thank you for taking the questions and congrats on all the recent progress. It looks like you've had a few months now to socialize with the medical community, the initial resolved AD results, and REZPEG's potential here. I'm wondering if you have a good sense now for the level of interest for a therapy that potentially has a truly remissive effect. To what extent do you think that could emerge as a differentiator for REZPEG in atopic derm? Switching to alopecia areata, JZ, I heard your comments around the Olumiant low-dose magnitude of efficacy potentially setting the bar. Do you see maybe an opportunity for use if efficacy is even lower than that, just given how presumably safe REZPEG is, potentially free of box warnings compared to JAK inhibitors?

Howard Robin (President and CEO)

Oh, Julian, I'll take the first part of the question. Look, clearly, this mechanism, the T reg mechanism, has received a lot of attention, especially in the Nobel Prize in Physiology or Medicine. I think given this very strong data we have in atopic dermatitis, and the rescue data, or the escape arm data, I should say, where patients who failed to see any response on placebo did exceptionally well when they were crossed over to drug, I think that's incredibly compelling data. We're very proud of that. The combination of that data with what we now see in the comorbidity of asthma, I think, sets apart REZPEG from a number of different drugs in treating atopic dermatitis. Yes, to answer your question more directly, there's a lot of interest in it.

There's a lot of inbound interest in it, and I think it's going to have very good prospects. I'll let JZ handle the rest of the question.

Jonathan Zalevsky (Chief Research and Development Officer)

Yeah. Thanks, Howard and Julian. I mean, in the context of the benchmarks, I think what's really important is that REZPEG has the potential to be a truly differentiated mechanism in alopecia areata by numerous factors. One of those is especially given its safety profile. Right now, there are no approved biologics in the alopecia areata space. There's really been no therapy that's demonstrated a sustained treatment effect. What I mean by that is even a short-term interruption in a JAK course can cause hair thinning. It's really quick to wear off.

You have the ability to address so many features that both affect the disease and then the convenience factor for the patient and substantially the comfort level for the physician in a drug that does not have a black box warning, which is one of the issues and limitations of the JAK inhibitors. There is no question that those are great drugs for reducing inflammation and reducing inflammation quickly. They are just very difficult drugs to take for a long period of time. These are chronic conditions. It is really the challenge with a drug like that. With REZPEG, you can turn that whole problem on its side. We have done a lot of the market research. We have tested the profile.

The profile of low-dose Olumiant, we find, is very competitive given all of the other elements, features of the mechanism of action, and the differentiated safety profile. We know that there's space there, to your point, Julian. We're using that as a reasonable kind of proxy benchmark for now. It is an approved drug and an approved dose, but there is some space around that, to your point. Thanks.

Julian Harrison (Managing Director)

Excellent. Thank you. That's all very helpful.

Operator (participant)

Thank you. Our next question will come from Jay Olson from Oppenheimer & Co. Your line is open.

Oh, hi. This is John Eliza Jay. Thanks for taking the question and congrats on the progress. Maybe speaking to the AA, I'm just wondering how fast you can maybe start the phase three program, and are you planning to move the program by yourself or you may seek a partnership if the December data is positive. Separately, I'm also wondering, in the phase three AD study, are there any patients who have alopecia areata comorbidities? If so, any clarification on those patients? Thank you.

Howard Robin (President and CEO)

I think I got—I think the first part of your question—I did not hear it all clearly, but I think the first part of your question—I'll let JZ take the second part. The first part was, when do we think we could start a study in alopecia areata? I think, depending on the data that we receive in December, we certainly would look forward to starting it next year. I think it is important because, as we talked about, the only current therapy is a JAK inhibitor, and they come with lots of concerns and warnings. As I did describe, at physician surveys that we have conducted, physicians are somewhat reluctant to use a JAK inhibitor to treat alopecia areata given the safety concerns.

I think if we have a new modality to treat such a very serious disease and a condition that causes extreme depression in people, I think it could be very, very important. Consequently, we do plan to start that study next year. I'll let JZ comment on the rest.

Jonathan Zalevsky (Chief Research and Development Officer)

Yeah. Thanks, John. We did look at multiple comorbidities in the atopic dermatitis phase IIb study. Asthma was by far the largest patient population, as I mentioned. Roughly 100 people had both atopic dermatitis and asthma in that study. That will be presented at ACAAI this weekend. In terms of alopecia, we also looked at vitiligo, for example, very, very few people. Really not a large enough patient population to isolate out as a subgroup, like a handful of people in alopecia that had both of the diseases. Obviously, our phase IIb results in alopecia, which read out next month, John, I mean, that is by far a more definitive data set. Right? Much, much larger sample size, obviously a patient population enrolled with that as their primary disease.

Of course, we'll be looking at the treatment effect in that patient population reported next month. Thanks.

Thank you.

Operator (participant)

Thank you. Our next question comes from Cha Cha Yang from Jefferies. Your line is open.

Cha Cha Yang (Senior Associate and Biotech Equity Research)

Hi. This is Cha Cha Yang from Roger Song. I was wondering, in addition to low-dose Olumiant, are there any therapeutics that are in development, biologics for alopecia that you think would be an appropriate benchmark? My second question is, are there any IL-2 specific studies that you think could provide read-through to REZPEG in alopecia? Thanks.

Howard Robin (President and CEO)

JZ, you want to cover that?

Jonathan Zalevsky (Chief Research and Development Officer)

Yeah. Hi, please. Sure. Hey, Cha Cha. Yeah. So. Yeah, there are a couple of biologics in development for alopecia. And we've discussed them. There's an IL-7 receptor and other kinds of agents. I think that there are some earlier data sets. Our goal is we were doing a much, much larger study than those earlier programs. As we described, 94 people were enrolled and randomized in the phase IIb alopecia study that we're doing. We also have multiple doses. So a much larger study that gives a chance to really assess the treatment effect, which I think is going to be more informative than a lot of the single-arm or much, much smaller studies that have been done to date. It's certainly an area that people are exploring. T regs remain a very important mechanism. That is.

Invoked from a lot of translational studies in patients with alopecia areata. We know that there are low levels and deficiencies in T reg function. We also know T regs are necessary for hair growth and for hair moving through the hair growth cycle. The actual antigen phase that actually is associated with the elongation of the hair once it attaches down at the root actually requires T reg signaling to the stem cell compartment. We know that those are multiple key mechanisms. Those are one of the big reasons why we're so excited in conducting the study that we'll be reading out the top-line data for next month. In terms of IL-2 specific studies, there have only been a few studies that have been published. With IL-2. One was a case study, and one was a small randomized study.

The main situation is low-dose IL-2 is really not a good proxy for REZPEG. With REZPEG, we induce such a higher amount of T regs, much, much higher than low-dose IL-2 could ever achieve, a much greater duration of T reg elevation from a given dose, and the ability to treat for a very long time. We have now treated patients for over a year, for example, for a 52-week period in the phase IIb study in atopic dermatitis. It is definitely a surrogate in the sense of a T reg elevating agent, but really, REZPEG substantially exceeds anything that low-dose IL-2 has been able to present across multiple indications. Thanks.

Cha Cha Yang (Senior Associate and Biotech Equity Research)

Thanks so much for the call. That's super helpful.

Operator (participant)

Thank you. Our next question will come from Mayank Mamtani from B. Riley Securities. Your line is open.

Mayank Mamtani (Senior Managing Director)

Yes. Good afternoon. Thanks for taking our questions, and congrats on a productive quarter. On the alopecia top-line data analysis, would you have any off-treatment responder rate you plan to report on, given some patients may have been past that 36-week treatment period? If you could remind us that there's an escape arm option here for the placebo non-responders to crossover. Obviously, wonder from your atopic dermatitis experience, the peak efficacy. From the EASI data, you did not get until 24, 48, 44 weeks even. Just wonder what is your plan to assess if efficacy increases beyond that 36-week period? What is the kind of plan there? I have a quick follow-up. Yeah.

Jonathan Zalevsky (Chief Research and Development Officer)

Sure. Yeah. Firstly, in the kind of information that we would present. In December, we'll be presenting data from the 36-week induction period in the study. The primary endpoint is the mean percent reduction in SALT score from baseline. The key secondary endpoints that are really, really meaningful are the proportion of people that achieve the SALT 20, and also SALT 10. SALT 20 is the registration endpoint in the U.S. and SALT 10 in Europe. I mentioned earlier in the presentation also the additional secondary endpoints, some of the time-dependent endpoints, and some of the proportional increases in the kind of hair regrowth, right, as metrics. The other things that kind of round out the baseline demographics, the safety profile, all the other things. Importantly, Mayank, right, the study is still going to be ongoing.

As you know, the way we designed the study is people that reach week 36 that are experiencing benefits, such as hair regrowth, for example, but that have not yet reached a SALT 20 metric, they have the opportunity to take an additional 16 weeks of treatment to 52 weeks for a full year. There is a proportion of people that will be ongoing. Also, the study design has a 24-week off-drug observation period. Whenever a patient completes treatment, whether that is at 9 months or 12 months, they are then followed for that additional 24-week period of time. That is really designed to assess that if you grew hair, can you keep hair, right, which is a significant differentiating element from a JAK mechanism of action where the hair loss is really, really rapid when the drug dosing is stopped.

Because the study is still ongoing, I mean. We can't say yet the totality, but definitely the 36-week endpoint, which is the primary analysis with the entire population crossing the 36-week, is going to be the main subject of that top-line presentation.

Mayank Mamtani (Senior Managing Director)

Escape arm? JZ, you said an escape arm here?

Jonathan Zalevsky (Chief Research and Development Officer)

Oh, no, there's no escape arm in the study.

Mayank Mamtani (Senior Managing Director)

Okay. Thank you. On the autoinjector development, how far along are you? Is that going to be at the start of your phase III study? Is that kind of part of the protocol as you get into the end of phase II discussion? Thanks for taking the question.

Jonathan Zalevsky (Chief Research and Development Officer)

Sure. Yeah. The autoinjector development is ongoing. Our goal and plan is to have the autoinjector available at the time of launch of REZPEG. The phase III studies will be conducted in the same way the phase II studies were, where the drug would be used in a vial. For us, we maintain that really for speed because this allows us to start the phase III studies as quickly as possible relative to when we presented the top-line data in June of this year. In terms of your other question, just contextually, at the end of phase II meeting, you really discuss everything in the plan to your BLA. That includes not just the phase III clinical development program, the registrational and pivotal studies. It also includes the CMC.

Yes, we have presented our plans for the final presentation of the product, the autoinjector, and then all the work that we do during the phase III studies into the BLA to have that available for launch.

Operator (participant)

Thank you. Our next question will come from Arthur He from H.C. Wainwright. Your line is now open.

Arthur He (VP of Equity Research)

Hey, good afternoon. How are you and team? Sorry, I apologize if the question has been asked before. Given the coming readout for the alopecia, JZ, maybe could you tell us a little bit more what the potential REZPEG can offer compared to the JAK inhibitor here for the alopecia patient?

Jonathan Zalevsky (Chief Research and Development Officer)

Yeah, it's a great question. I mean, I think that one of the situations with the JAK inhibitors, and we touched a little bit on this earlier, is that they definitely are effective at reducing inflammation. If you have common gamma chain uses and multiple cytokines use any either homo or heterodimers of JAKs, and it's an important part of the signaling cascade in response to multiple cytokines, and they're well known as effective ways of lowering inflammation quite quickly. The challenge with using a JAK inhibitor in any indication where it's approved is that long-term use carries with it some disadvantages, right? The drugs have black box warnings. They have other significant limitations. They require monitoring. There's just a number of things that make them a little bit more delicate to use. In the dermatological setting, some of those things are a little bit undesirable.

One of the things that REZPEG can offer is if the efficacy profile, as we discussed, reaches a benchmark such as a low-dose JAK in, say, the Olumiant setting, it already brings with it a completely different risk profile, right? It would not have a black box warning. It would have a completely different and much, much better safety profile and really has a safety profile that's much more aligned with being a very long-term chronic use drug. Also, the potential of being the first biologic in this space gives it a real tremendous advantage because that starts to really open access because we've learned from multiple studies that physicians are not so necessarily excited to try JAKs as a first option for patients with the disease. Having another alternative that's available could take a significant opportunity advantage.

The last one really comes down to that potential of maintenance. JAK inhibitors really lose their effect very quickly. It can be very psychologically difficult for patients because if you spend weeks and months regrowing hair that you did not have in a really long time, and then any need to interrupt the JAK, whether it is a safety signal or other reason or liver enzyme elevation or something, that can lead to loss of all that hair that you have grown, which can further drive the depression cycle that is a component of this disease. With REZPEG, there is the potential of maintaining the hair that was grown, having interruptions in drug dosing not be a problem. That would be completely transformational. These are all things that we think contribute to a very substantial opportunity for REZPEG in alopecia areata.

Arthur He (VP of Equity Research)

Thanks, JZ. Another question. Given that you've passed in the data there, how should we think about the primary endpoint for the approval there in the future? Do you think the SALT 20 is still doing the job, or we probably should look into the SALT 10 or even SALT 0 there for the future drug for the alopecia?

Jonathan Zalevsky (Chief Research and Development Officer)

Yeah. I mean, the health authority set the registrational endpoints, right? Right now, those are defined as SALT 20 in the U.S. and SALT 10 in Europe. Obviously, every study measures multiple secondaries, including eyelash, including SALT 0, and so on. I think that we leave that in the hands of the regulators. In terms of OOPA's efficacy, I think everywhere that there are multiple JAK inhibitors approved, OOPA or Rinvoq seems to always win, right? It just consistently produces the greatest amount of efficacy compared when it goes head-to-head against other agents. I think we've seen that in multiple indications, Arthur, not just in this one. It does carry with it a little bit more of a safety profile, which is the fake related, right? It's more on target and more on-target tox in addition to other things.

I do think, compared to the other JAK inhibitors, that OOPA is going to be very important, probably take a significant position against the other JAK inhibitors. We don't really see that as impacting the biologic, right? Again, there are numerous indications where biologics and small molecules, JAKs and non-JAKs coexist. Atopic dermatitis is a great example. In psoriasis, you have Tyk2 mechanism coexisting and others. There's really a large enough patient share and the need for multiple mechanisms that always makes plenty of room for multiple mechanisms in this indication.

Arthur He (VP of Equity Research)

All right. Thanks very much for taking my question.

Operator (participant)

Thank you. We do have time for one last question. Our last question will come from Andy Shea from William Blair. Your line is open.

Andy Shea (VP and Equity Research Analyst)

Great. Thanks for taking our questions. Mary, it's great to have you back. We have two questions. For the Resolve AD study, I believe you spent a lot of time and resources to ensure that the placebo rate is low. Have you gotten a chance to review that initiative so that you can be best positioned for the positive phase III outcome? The second question, maybe for Howard, what's your current manufacturing footprint? I figured given the intense interest in REZPEG, it would be really nice if you can secure one of those national priority vouchers. Thank you.

Howard Robin (President and CEO)

I'll take the second part first, and Mary can continue. Look, we are looking at a number of different options there. We sold our pegylation manufacturing facility to Ganna Biochem, but we have a priority position there, and we certainly have a guaranteed source of those raw materials. We have a number of different contract manufacturing companies, very well-known companies that we work with. I am not concerned about, at this point, the ability to successfully manufacture REZPEG. We are looking at the vouchers, etc. I will let Mary talk to you about the other part of your question.

Mary Tagliaferri (CMO)

Thanks, Howard. Really great to hear your voice too, Andy. I'm really happy to be back. I mean, as you said, the data from Resolve AD are very exciting. I've also had the opportunity to speak to multiple dermatologists since I've been back who are also very excited about the totality of the data, the speed of onset, and the excellent safety profile. It is very exciting to move this forward. Certainly, in our phase three program, we have every plan to implement the exact same procedures that we did to minimize the placebo effect. Some of those are, of course, ensuring that we have board-certified dermatologists participating in our clinical trials. We also make sure that the eligibility criteria is met both in the screening and right before patients are randomized. We took multiple actions.

Also, in our phase IIb, we had a quite large size of our placebo group, and we will, of course, have the same when we proceed forward in a larger phase III study. We were very pleased that we were able to implement multiple different procedures and activities in order to ensure our placebo effect was very low. We believe we will continue to be very successful in our phase III as well. We look forward to moving forward. We've been doing a lot of planning. We're going to have our end of phase II meeting with the FDA by the end of this year. We will have a clear path forward to a BLA.

Andy Shea (VP and Equity Research Analyst)

Great. Good luck with that. Thanks.

Mary Tagliaferri (CMO)

Thank you.

Operator (participant)

Thank you. This does conclude our question and answer session for today's conference. I'd like to turn the call back over to Howard Robin for any closing remarks.

Howard Robin (President and CEO)

Thank you, Crystal. Thank you, everyone, for joining us today. We greatly appreciate your continued support. I want to thank all of the patients and their caregivers that have trusted and continue to trust Nektar to treat their disease. None of this research would be possible without them. I also want to thank our employees for their dedication and extremely hard work. We look forward to delivering data from our REZPEG program in alopecia areata in December and additional results from the program in atopic dermatitis in the first quarter of next year. Please stay tuned. Thanks for joining us.

Operator (participant)

This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.