Nektar Therapeutics

Good day and thank you for standing by. Welcome to the Nectar Therapeutics second quarter 2024 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. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Vivian Wu. Please go ahead.

Thank you, Crystal, and good afternoon, everyone. Thank you for joining us today. With us on the call are Howard Robin, our President and Chief Executive Officer, Dr. Jonathan Zalewski, our Chief Research and Development Officer, Dr. Mary Tacliaferri, our Chief Medical Officer, and Sandra Gardner, our Chief Financial Officer. On today's call, we expect to make forward-looking statements regarding your business, including statements regarding the therapeutic potential of and future development plans for drug candidates and research programs, the timing of the initiation of clinical studies and the availability of clinical data for drug candidates, the timing and plans for future clinical data presentations, the formation, future development plans, or success of our collaboration agreements, financial guidance, and certain other statements regarding the future of our business. Because forward-looking statements relate to the future, they are subject to uncertainties and risks that are difficult to predict, 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 Form 10-Q that was filed on May 10, 2024, which is available at sec.gov. We are to take 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 of Nectar's website at Nectar.com. With that said, I would like to hand the call over to our President and CEO, Howard Robin. Howard?

Thank you, Vivian, and thank you all for joining us today. We've made good progress in the second quarter towards our goal of building a highly promising best-in-class pipeline focused on immunology and inflammation. In this quarter, we continue to make significant advancements with our lead program, Respeg-Aldis-Lucan or Respeg. Respeg is designed to both dampen the inflammatory response and simultaneously restore immune balance by directly expanding functional Treg cells and engaging multiple immunoregulatory pathways in patients with autoimmune disorders. Respeg has generated promising data which supports its potential to become a highly differentiated novel treatment for immune disorders. These data include the phase 1B efficacy data in ectopic dermatitis, which is the most common chronic inflammatory skin disease, and is marked by dysregulation of the immune system, and specifically excessive activation of autoreactive and inflammatory T cells. Respeg is designed to address this root dysfunction, dysregulation, by proliferating regulatory T cells, which can act on multiple inflammatory pathways at once. Respeg is a first-in-class agent in the most clinically advanced program of its kind, targeting ectopic dermatitis, which is traditionally focused on signal pathway antagonists. I'll let Jay-Z talk more about this in a moment, but I'm proud to announce that we have an upcoming paper accepted in Nature Communications and a presentation at the EADV conference in September, which illustrate Respeg's mechanism. These publications will feature extensive biomarker analyses, from our Phase 1B studies in immune-driven skin-related disorders of ectopic dermatitis and psoriasis. Respec is advancing nicely in the two Phase 2B studies that Nectar is conducting in ectopic dermatitis and alopecia areata. Enrollment for both studies remains on track. The ectopic dermatitis study is enrolling 400 patients throughout approximately 110 clinical investigator sites in the U.S., Canada, Europe, and Australia. Patients who are enrolling in the study are diagnosed with moderate to severe ectopic dermatitis and are also biologic naive and have failed topical treatment options. Importantly, this is the identical patient population studied in the Phase 1b study of ResBag. Jay-Z will talk more about this study design later in the call. And as I just stated, enrollment is on track for top-line data readout from the study's 16-week induction treatment stage in the first half of 2025. Data from the maintenance stage, which looks at maintenance dosing every four weeks and every 12 weeks, will be available towards the end of 2025 and early 26. There's a high unmet need for distinctive new mechanisms to treat ectopic dermatitis. With the extent and breadth of studies being conducted right now and the competition for patient recruitment, I am proud that we're achieving our enrollment goals. We believe that this is driven by a combination of the compelling RESPEC Phase 1b data presented at EADV 2023 and, of course, the hard work of our clinical team. In the U.S., there are approximately 30 million people living with ectopic dermatitis, and half of these patients are diagnosed with moderate to severe disease. And it's estimated that under 10% of patients who could receive biologics today are actually receiving treatment. We believe that new mechanisms are the key to growing this market and that there's a high unmet medical need for novel treatment options. So we are excited that Respeg is poised to emerge as a highly differentiated potential treatment for these patients. Now, as you know, we have a second phase two study for Respeg that is enrolling 84 patients with alopecia areata. Enrollment for this study opened in March and the enrollment also remains on track for this study. We're looking forward to top line data from this trial in the middle of 2025, which is estimated to be a few months following the top line readout from the phase two study in ectopic dermatitis. We believe there's a significant potential for Respec to help people with this devastating disease. Nearly 7 million people in the US alone have or will develop alopecia areata. This disorder significantly affects the quality of life for patients, and the currently available JAK inhibitor therapies are not durable, have high relapse rates, and carry significant safety risks. Therefore, there's an urgent unmet medical need for these new therapies. On the preclinical side, we continue to advance NECTAR-0165, our novel TNFR2 agonist antibody program. In June, We reported the first preclinical data on this program at ULAR. These data show that Nectar-0165 is a unique antibody with monomeric activity that selectively binds to TNFR2 on Tregs to enhance their immunoregulatory function. Given the importance of TNFR receptor 2 in certain autoimmune diseases, Nectar-0165 could potentially become a first-in-class treatment for autoimmune diseases such as multiple sclerosis, ulcerative colitis, lupus, and vitiligo. We're currently conducting IMD-enabling studies with the goal of preparing for an IFD submission in the middle of 2025. Next, I'd like to give you an update on Nectar 255, our IL-15 program in oncology. As you know, Nectar is completing a study in large B-cell lymphoma, or LBCL, and Mary will be discussing this later in the call. In addition to the clinical study we're completing in LBCL, there are clinical studies ongoing for NIPTR255 being funded by our collaborators, Merck KGA in bladder cancer and Abel Zeta in non-small cell lung cancer. We also have an IST study ongoing at the Fred Hutchinson Cancer Center and an IST that recently concluded at Stanford. Stanford University recently published data from their IST and the peer-reviewed journal of the American Society of Hematology, Blood. The online manuscript has been posted and it will be in print shortly. Stanford reported data that showed a doubling of recurrence-free survival at 12 months when Nectar 255 was combined with their investigational CD1922 CAR T therapy compared to historical controls with their investigational therapy alone. In addition to these studies, Mary will discuss more on the other studies for NECTAR-255 and the strength of the data to support combination with cell therapies. As the data emerged this year, we believe that NECTAR-255 can become an important component of cell therapy in cancer, and we continue to evaluate strategic partnership opportunities for this program. Before I hand the call over to Jay Z, I just want to say that NECTAR remains in a strong financial position with a cash runway that extends into the third quarter of 2026, giving us more than a year's cash at the time of RASPEG's top-line data results. And with that, I'd like to hand the call over to Jay Z for an R&D discussion. Jay Z?

Thank you, Howard. I'd like to begin with RASPEG. This program is the most advanced IL-2 Treg mechanism in the field. we believe there are major opportunities in both atopic dermatitis and alopecia areata that RESPEC could potentially address. Our Phase 1b RESPEC data in atopic dermatitis demonstrated dose-dependent efficacy and encouraging durability observed long after patients completed the 12-week induction period. In fact, for both patient-reported outcomes and physician-assessed endpoints, we observed the same trends, rapid onset of effect, dose dependence, and long durability of control. The rapid onset of action and the type of extended disease control after the end of dosing rivals or outperform that of dupilumab or JAK inhibitors. These promising data have us and KOLs very enthusiastic about the potential for long-lasting responses and in frequent maintenance dosing with ResPag in atopic dermatitis. Our Phase IIb study in atopic dermatitis is enrolling roughly 400 patients with three different regimens of ResPag versus placebo, evaluated over a 16-week induction period. After the induction period, patients that meet a threshold to advance from induction to maintenance will be re-randomized into one of two maintenance regimens at their original dose level to receive that dose level on either a once a month or once every three months regimen. To best position our program for registration, we've recently amended the protocol to extend the time on treatment during the maintenance portion of this study. The maintenance portion of the Phase IIb study was originally designed as a 26-week treatment period but we have now extended that to 36 weeks, which will in total provide 52 weeks of treatment duration for patients in the study. This will strengthen the robustness of our dataset with long-term exposure in this disease setting and increase the number of patients in our safety analysis to support registrational trial work following this phase two study. We also extended the off-treatment follow-up to be a one-year period that begins upon the conclusion of the 52-week treatment period in order to allow us to evaluate the potential remittive effect of RASPAC in patients after one year of treatment. As Howard stated, we still anticipate top-line data from the 16-week induction period of this phase 2b study in the first half of 2025, and data from the 36-week maintenance period of the study will be available towards the end of 2025 or early 2026. Now, turning to alopecia areata, which is a dermal disease localized to hair follicles. In this disease, the patient's immune system attacks the hair follicle, disrupting its normal ability to keep and grow hair, leading to hair loss. We believe there is strong rationale for RESPEG in this indication based on the role of Tregs, on the underlying pathology of this disease. Normal hair follicles exist in a state of immune privilege. So in other words, there are essentially no immune cells, no MHC expression, and minimal immune system components inside the hair follicle. We know this exclusion of the immune system is needed to maintain healthy, long-lived, and continuously functioning stem cells to grow hair during our lifespan. In people with alopecia areata, there is a breakdown of the immune privilege in the hair follicle, infiltration of the immune system, inflammation, and all this leads to hair loss and eventually complete baldness. Biologically speaking, RESPEC, through its central pathway of Treg Rescue, is uniquely poised to address the diversity of immunopathology, providing broad potential for targeting and treating alopecia areata, as well as other dermal diseases. In published preclinical studies, both in vitro and in mice implanted with human alopecia skin samples, the studies have shown that Tregs are essential for restoring and maintaining immune privilege, and therefore, a novel therapeutic strategy for the treatment of this disease. And consequently, we believe the Treg mechanism of RasPag can restore immune privilege and could provide durable disease control. There is a high unmet need in this patient population for tolerable treatment options with durable responses that currently available treatments like JAK inhibitors cannot provide. And we believe there is an opportunity for Restag to become a novel and potentially game-changing biologic therapy in alopecia areata. The Phase IIb study is well underway and plans to recruit 84 patients with severe to very severe disease that will be randomized to Restag or placebo. Patients will be treated for a period of 36 weeks and observed up to 60 weeks in total. Our primary endpoint for this study is mean percent improvement in SALT, or the severity of alopecia tool, at week 36. We will also be looking at a number of other secondary endpoints, including the proportion of patients that were observed to have varying degrees of improvement in SALT score. We are well underway with enrolling patients into this study, and we expect top-line data near the middle of 2025, a few months following the top-line data readout from our atopic dermatitis study. Now, turning to NEC0165, our TNFR2 agonist antibody. TNFR2 is highly expressed on Tregs, myeloid suppressor cells, regulatory B cells, neuronal cells, and others. In Tregs, TNFR2 agonism has been shown to potentiate the effector function, suppressive functions, and maintenance of Treg lineage stability, especially in non-lymphoid tissue compartments. Genetic studies show that if TNFR2 is absent, the phenotypic effect is autoimmunity, as well as other conditions that resemble FOXP3 loss of function. In contrast, its presence and activation of its signaling has been associated with immunoregulatory function and tissue protection effects. The TNF R2 agonist program is built upon many years of Treg experience that we've gained from studying RESPEG. RESPEG is an IL-2 receptor pathway agonist, drives JAK-STAT signaling in Tregs, which is critical to drive Treg proliferation and function in primary and secondary lymphoid organs. TNFR2 is the most abundant TNF superfamily member expressed on Treg and the key activator of NF-kappa-B, which also controls the FOXP3 protein expression and is critical to maintain Treg function, especially in non-lymphoid organs. Thus, with the RESPAG and TNFR2 agonist programs, Nectar's pipeline provides target rationale for both lymphoid and non-lymphoid Tregs, and this is why we are so excited about Nectar 0165. As Howard mentioned, we presented the first preclinical data for this program at ULAR in June of this year. In the presentation, we demonstrated several novel and innovative properties of the antibodies that we discovered and are developing. Firstly, the TNFR2 agonist we discovered came from AI-based de novo design. And consequently, they provide novel TNFR2 binding and cell signaling properties. One example of that novelty is a demonstration that these antibodies are able to signal through the TNFR2 multimeric receptor as single-arm monovalent antibodies. This is a very novel effect for a TNFR2 agonistic antibody. We grafted these into a regular bivalent antibody format, a Nectar 0165, and demonstrated the very high specificity of this antibody for binding and signaling through TNFR2 on Tregs, with little to no binding and signaling in conventional T cells and K cells or monocytes. Nectar 0165 also drove Treg proliferation, upregulation of FOXP3, and other activation markers in primary human Tregs. And importantly, NECTAR-0165 drove these effects as a single agent without need for CD3 ligation, co-stimulation, cytokine, or mitogen support. We also studied NECTAR-0165 in a human TNFR2 knock-in mouse and used that model to confirm the Treg-selective PKPD profile of the antibody and also demonstrated single-agent efficacy in a mouse model of KLHDTH established in the same TNFR2 knock-in mouse strain. We are very excited with the unique and differentiated profile of the antibodies that were discovered, and we are rapidly advancing NECTARO165 into the clinic. We expect to initiate first in human studies in the middle of 2025. Examples of indications that could be addressed include multiple sclerosis, mucosal immunology conditions such as ulcerative colitis and GI or other oral mucosal diseases, lupus, and even dermal autoimmune diseases like vitiligo. We note the growing interest for a novel and selective TNFR2 agonist like Nectar 0165, and as we move forward with our IND-enabling studies, we will continue to be open to the opportunity of working with companies that have interest in these areas to strategize the best path forward. And with that, I'll hand the call over to Mary to discuss Nectar 255. Mary?

Thank you, J.G. And finally, turning to our IL-15-based oncology program, NECTAR255. We believe the IL-15-based mechanism of action has promising potential in combination, particularly with cell therapies. While autologous CAR T-cell therapy transformed the management of patients with large B-cell lymphoma after the first cellular therapies were approved, clinical responses were not durable and roughly 60% of patients receiving CAR T-cell therapy for large B-cell lymphoma eventually progressed. In 2017, the NCI and KITE, and months later the Fred Hutch Group, published data showing that high serum IL-15 levels were associated with a higher Cmax and AUC of CAR T-cells, both factors correlated with responses in lymphoma. Thus, our initial development strategy aimed to improve the long-term efficacy of CAR T cell products with the administration of exogenous IL-15, given the wealth of data about this cytokine's importance. Dr. Cameron Turtle from Fred Hutch completed preclinical experiments showing that NECTAR255 enhanced the in vivo persistence and anti-tumor efficacy of CD19-directed CAR T cells in a dose-dependent manner. As predicted, mice treated with the CAR-T cell NECTR255 combination maintained significantly higher CAR-T cell peak levels and continued tumor suppression, translating into durable efficacy. Following Dr. Turtle's published results in Blood Advances, we all shared a strong conviction that NECTR255 could lead to re-expansion of CAR-T cells when dosed in patients to enhance efficacy. Fred Hutch began an IST to evaluate NECTAR255 as an adjuvant treatment to CAR T cells to improve the complete response rate in patients with large B-cell lymphoma. Doctors Crystal McCall and Laurie Muffley also evaluated NECTAR255 to enhance the efficacy of Stanford's proprietary CD1922 CAR T cell for B-cell acute lymphoblastic leukemia. Stanford's data was published in Blood last month Compared to Stanford's control group previously treated with the CAR T-cell therapy, NECTAR255 when added to the CD1922 CAR T-cell therapy increased the 12-month relapse-free survival from 38% to 67%. The median RSS for the CAR T-cell only cohort was 3.9 months, and for the cohort treated with NECTAR255 and the proprietary CAR T-cell therapy, It has not been reached with over 14.4 months of follow-up. So why does NECTAR255 work? We've now confirmed in patients the re-expansion of CAR T cells following NECTAR255 that we saw pre-clinically. In the Stanford study, we observed re-expansion of the CAR T cells in the CNS following NECTAR255 administration. At Fred Hutch, where they're combining Nectar 255 with Brianzi in patients with large B-cell lymphoma, we have confirmed re-expansion of the CAR-T cells after Nectar 255 as well, leading to a second peak and increase in AUC. An additional observation from Stanford suggests that Nectar 255 also influences lymphocyte trafficking to diseased tissues. As you know, we've been running our own trial where we've enrolled 15 patients with large B-cell lymphoma. In this study, NECTAR255 is administered after autologous CD19 CAR-T cell therapy. We are concluding treatment of the patients randomized in our study, and we have now observed in a third trial the same re-expansion phenomenon of CAR-T cells following NECTAR255 treatment in these patients. and we look forward to presenting the full data set from this study at a future medical meeting. This compounding effect has the potential to extend beyond CAR-T cell therapies. We continue to collaborate with Able Zeta, a leading cell therapy company, to evaluate NEXR255 in combination with their tumor infiltrating lymphocytes, or TILs, in an ongoing Phase I clinical trial in patients with advanced non-small cell lung cancer, who do not respond to anti-PD-1 therapy. Lastly, we are continuing to work with Merck KGA, who is conducting the Phase II Javelin Bladder Medley Study, which is evaluating Nectar 255 in combination with Bivencio. Merck is projecting the first potential PFS analysis from this study around the end of this year. As a reminder, there are three separate combinations being evaluated in this study. each being compared separately to the Bovencio monotherapy arm. And with that, I will turn the call over to Sandra for a review of our financial guidance. Sandra?

Thank you, Mary, and good afternoon, everyone. We ended the second quarter with $290.6 million in cash and investments with no debt on our balance sheet. Our financial position remained strong, and we still plan to end 2024 with $200 million to $225 million in cash and investments. Our cash runway extends into the third quarter of 2026, which will take us through several key data milestones, including top line data for both our Phase IIb RESPEG studies. I'll now briefly review our quarterly financials and reiterate our financial guidance for 2024. Our revenue was 23.5 million for the second quarter of 2024. We still expect our revenue for the full year to be between 75 million and 85 million, which includes 55 to 65 million in non-cash royalties and 20 million to 25 million in product sales. For the second half of the year, we expect the remaining revenue to be weighted more heavily towards the fourth quarter. R&D expense for the second quarter of 2024 was 29.7 million, and we still anticipate full-year R&D expense to range between 120 million and 130 million. G&A expense for the second quarter of 2024 was 20.5 million. We continue to expect G&A expense for the full year to be between 70 and 75 million. Lastly, our 2024 non-cash interest expense remains unchanged and is expected to be between 20 million and 25 million. In Q2, we recorded $13.3 million in non-cash impairment charges for our real estate obligations due to the continuous decline of the San Francisco life sciences and office real estate markets. Our net loss for the second quarter of 2024 was 52.4 million, or 25 cents, basic and diluted loss per share. Excluding the $13.3 million in non-cash impairment charges, net loss on a non-GAAP basis was $39.1 million, or $0.19 basic in diluted loss per share. And as I mentioned earlier, we still plan to end 2024 with $200 million to $225 million in cash and a runway that extends into the third quarter of 2026. And with that, I'll now open the call for questions. Crystal?

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. In the interest of time, we do ask that you please limit yourselves to one question at this time. Please stand by while we compile the Q&A roster. And our first question will come from Jay Olson from Oppenheimer. Your line is open.

Oh, hey. Congrats on all the progress, and thank you for taking our question. That NECTAR255 data in collaboration with Stanford looks great. Can you talk about the next steps and if there's potential synergy for NECTAR255 with CAR T for autoimmune diseases? Thank you.

Jay Z, you want to take that call, that question?

Sure, yeah. So, thanks, Jay, for the question. So, I'll start off, and maybe, Mary, you can add also a little bit of color onto that. But I think that that study with Stanford was a very important study, Jay, for us, because it was the first time that treatment was evaluated very close to the time of the administration of the car. Like, there was just a short offset of a couple of weeks after the car was delivered before Nectar 255 was treated. And we observed some very exciting findings that were published by the Stanford group. Those included changes in the cellularity, changes in the migration, including into one patient that had a CNS disease with a really large amount of CAR moving into the CNS, really impacting positively that patient. And then, of course, the duration of effect. as Mary described, in terms of the really extent of efficacy that was observed relative to what's known historically for that car, where durability of the effect wanes. Mary, maybe if you could talk medically about adding some more of the context and how it fits together with the other studies that are ongoing.

Yeah. Hi, Jay. This is Mary. You know, what we were really excited about is in three different studies now, we wanted to look at the safety, the feasibility, and the efficacy so we could hone in on the recommended phase three dose. And across all three studies, we have not seen a dose limiting toxicity. We see a consistent safety profile that's highly favorable to patients. And as you can imagine, that's remarkable when you're combining a drug with CAR T-cell treatments. it's also feasible to not only dose this drug in the adjuvant setting right after patients receive CAR T cells, but they continue to receive Nectar 255 every three weeks, which is also highly favorable to patients. And when we think about next steps and where we can go, I believe with the combination and aggregates of the data from the three trials, we have identified our recommended phase three dose. The other place where we're developing the drug, as I mentioned, is in combination with TIL therapy. And as you know, right now, Iovance combines their TIL therapy with high-dose IL-2. And that's really, you know, fraught with error because there are, it's very difficult to tolerate high-dose IL-2. Patients have to be in the inpatient setting to receive high-dose IL-2. And certainly in the area of non-small cell lung cancer, patients who actually receive pills in high-dose IL-2 in a very small study of patients, you know, there were two deaths in that trial conducted by Dr. Scott Antonia and published in Nature. And so I think that the opportunities here are very broad in the area of cellular therapy, both with autologous and allogeneic and CAR T cells as well as TILs. And then again, you know, we're awaiting the data in combination with a checkpoint inhibitor. And, you know, if the data proved to be compelling and strong, there's, you know, an additional indication for combining with checkpoint inhibitors.

And I would add to that that, of course, we've shifted over to immune disease and inflammation, but clearly we have data with IL-15 that demonstrates how there's a great potential for it to be used in combination with cell therapies. And I think that may very well play an important role on the future of cell therapy. So we're talking to a number of companies, and I do think we can find an important collaboration there.

Super helpful. Thank you so much.

Jay, this is Jay-Z. Your other question about autoimmune disease, it's a really good question. It's kind of a theoretical question at this time, but based on what we saw in the data and were published at Stanford, as Mary described, which from a totality of both safety as well as pharmacodynamic effects, would make it feasible to also add this in the setting of autoimmune disease, CAR cell therapy use. We're focused on oncology now, but theoretically, first principles, it should be possible.

Okay, great. Really impressive data. Thank you again.

Thank you. Our next question will come from Chris Shabutani from Goldman Sachs. Your line is open.

Hi, this is Kevin on for Chris. Thanks for taking our question and congrats on the progress. Just wanted to focus on alopecia there. So just for housekeeping, I know that enrollment is on track and the primary completion is the same on clinicaltrials.gov, but just wondering about the timeline to mid-25 versus first half, and then also you know, understand the value proposition there versus JAK inhibitors, which are approved. It makes sense with the safety profile. How are you talking about efficacy? Are you going to want or need to match the efficacy of JAK inhibitors in alopecia? Thanks.

I want to let Mary answer your question on that.

Yep. Thank you, Howard. And, Kevin, yes, you know, we started the alopecia areata study in March. And, you know, we are on track and we will have top-line data based on our enrollment today in mid-2025. And I think, you know, you ask a great question, you know, which is what does success look like in alopecia areata and what's the bar for us? And, you know, as you know, JAK inhibitors are efficacious for alopecia areata. And, you know, the clinical trials that were conducted had a SALT endpoint at 36 weeks of treatment. And before I go into the efficacy data, you know, there are two main issues that the dermatologists share with us. One is, you know, there's absolutely no durability of effect with a JAK inhibitor and patients immediately start to lose their hair when they stop taking the JAK inhibitor and that hair loss is very rapid. The second, of course, is that 80% of patients who have alopecia areata are younger than age 40. And nobody really knows what kind of risks a JAK inhibitor would pose. Obviously, the black box warnings are for serious heart-related events like heart attacks and stroke and blood clots and thrombosis and cancer and serious infections. So there is just a general... you know, worry about exposing a patient to a JAK inhibitor for their entire life. So in terms, so those are the problem statements. And in terms of efficacy, we believe similar efficacy to say baricitinib would establish a differentiated compound because one, we're not, we don't have an association, you know, certainly with our 600 patients we've treated to date. with these serious side effects, and number two, we believe based on the phase 1B in atopic dermatitis that there's a potential for a remittive effect or a maintenance regimen that wouldn't be daily like you see with a JAK inhibitor, but rather we could potentially dose patients after a 36-week induction period with a frequency that's longer than every two weeks in the maintenance phase. You know, we've spoken a lot to doctors about even, you know, an induction time period. And, you know, their belief is, you know, it doesn't even matter if it takes these patients a year to grow their hair back. If you actually have a biologic that they, you know, that would provide a remittative benefit and not be associated with so many side effects, that would be critically important. And then specifically for the phase three trials with baricitinib, you know, the salt change at 36 weeks, was less than 10% for placebo, which makes it nice. You can run smaller size studies because the placebo effect is low, is approximately 30% for the low dose of baricitinib, the two milligram per day dose, and about 49% salt reduction for the high dose of four milligrams.

Great. Thank you.

Thank you. And our next question will come from Roger Song from Jefferies. Your line is open.

Hi, this is for Roger. Can you provide us an update on your litigation with Lilly?

Yeah, sure. Look, we're still having discussions with Lilly, as you know. And as you can see from the excellent Phase 1b data, clearly a mathematical mistake was made. And the data is somewhat compelling after we corrected for that math error that we discovered. We're still having discussions with Lilly. We had a mediation. The court has ordered us to continue mediation, and we expect to do that in the near future. So obviously, I can't spend a lot of time talking. I can't spend, I can't discuss in detail an ongoing litigation. But I can say that we firmly believe that we've been harmed by their behavior.

And consequently, we will continue mediation with them.

Thank you. And our next question will come from Andy Shea from William Blair. Your line is now open.

Hi, thanks for taking our question. So the bus paper is pretty intriguing. I'm curious about your interpretation of the historical controls, just, you know, given the non-randomized nature of the study. There's some, you know, kind of push and pulls regarding baseline patient characteristics. It seems like, you know, the historical control might be a little bit more heavily pretreated. The dosing is a little bit lower. So, I'm just curious, just kind of looking at the baseline characteristic, how would you characterize the similarities and differences? How alike are those two populations?

Thank you. Mary, it's a good question. Mary, could you give some insight into the Stanford historical controls?

Yes. So, really importantly, Andy, So first of all, I just want to talk a little bit about the person who conducted this trial. You know, Crystal McCall is the founding director of the Stanford Center for Cancer Cell Therapy, and she's really, you know, one of the godmothers of, you know, cell therapy. And if you look at Crystal's Nature paper, she actually had dosed 17 patients, you know, not eight that are used as the control. patients for this study. So she actually selected patients that had comparable baseline characteristic traits to be matched with the patients of this second study. So you can imagine with her academic background and her vast experience with treating ALL patients, she was very, very mindful of these baseline characteristic traits as well as burden of disease. So she very carefully actually selected the control group, which is a subset of the total number of patients she originally reported upon in nature.

That's helpful. Thank you.

Thank you. And as a reminder, to ask a question, please press star 1-1. And again, to ask a question, that's star 11. One moment for our next question, please. Our next question will come from Arthur He from HC Wainwright. Your line is open.

Hey, good afternoon, Howard team. I just had a quick question on the 165. Obviously, it's very interesting preclinical data. But maybe, Jay-Z, could you give us more color on the 165, the binding to the T-regs receptor, but not the other ones on the CD4 T cell or monocyte? Because we know the team FR2 also expressed on those two cells. Just curious about the mechanism of action there.

Thanks. Sure. Thanks, Arthur. Thanks for the question. Yeah, so one of the things that we found is that our antibody definitely has some form of conformational selectivity in terms of the epitope that it recognizes. And in that EULAR poster, there was a panel that showed binding to two different forms of TNFR2. So you know that TNFR2, primarily it's a transmembrane receptor, like a TNF receptor, but it can also be shed. by ectodomain shedding through normal metalloproteases, ADAM17, Cleaves TNFR2, and then that liberates a shed form that can circulate in the blood. And so we tested the binding of our antibody to the surface receptor and to the shed form, and the antibody bound the surface receptor much, much higher affinity, much more greatly, and it barely interacted with the shed form. So it indicates to us that there's a conformational specificity or conformational component to the binding. And to assess that, we're actually doing a lot of biophysical studies right now. So first of all, we're mapping the epitope and the peritope of the antibodies. So those experiments are ongoing. And we're also doing structural modeling using some of the structural approaches that you can do computationally to assess the epitope. And then we aim to put all that together. We might even possibly go as far as solving the crystal structure of the antibody. But our hypothesis, you know, right now is that it's very conformational. And that's why we see cellular cell activity, because while you're right, the receptors express of multiple cell types, its function is not the same on multiple cell types. And also the TRAF components that signal intracellularly are also not the same across those cell types. And we think that's the reason. But yeah, we're very excited because it's not like a typical finding, as you can imagine, for an antibody, which is why we think this is such an innovative molecule. Great. Thanks, Dave. Sure.

Thank you. And I am showing no further questions on the phone lines, and I'd like to turn the conference back over to Howard Robin for any closing remarks.

Okay. Well, thank you, everyone, for joining us today. And as you can see, we're making excellent progress in our strategic plan to focus Nectar's efforts on immunology and inflammation. And we're advancing multiple model and innovative therapies in and towards the clinic. So I want to thank all of our employees for their hard work, and I want to thank our investors for their continued support and please stay tuned. Thanks for joining us today.

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