Nektar Therapeutics

NASDAQ:NKTR

Earnings Call Analysis

Company's Progression and Financial Outlook

The company is on track with the REZPEG study in atopic dermatitis, expecting data by the first half of 2025 and beginning a Phase IIb study in alopecia areata, anticipating it could be a game-changing treatment for the disease. Utilizing its expertise in Treg mechanisms, the company has developed NKTR-0165, a TNFR2 agonist antibody with potential applications in multiple diseases, aiming for clinic entry in the first half of 2025. Financially, the company ended the year robust with $329.4 million in cash and investments, projecting to finish 2024 with $200-$225 million and a cash runway into Q3 2026. Full-year 2024 revenue is estimated at $75-$85 million, including robust noncash royalties and product sales.

A Pivotal Year with Strategic Refocus

For Nektar, 2023 marked a significant turning point as the company streamlined its pipeline to concentrate on immunology and inflammation, specifically advancing REZPEG through critical mid-stage trials expected first-half 2025. REZPEG, leveraging a unique agonistic action, targets the atopic dermatitis market – affecting over 30 million people in the U.S. alone – with the potential of improved efficacy and dosing frequency over current treatments. Notably, Nektar regained full rights to REZPEG from Eli Lilly.

Promising Clinical Developments for REZPEG

REZPEG has shown promising results, including an 83% reduction in eczema skin scores in a Phase Ib study, demonstrating its potential for rapid response and long-term disease control in atopic dermatitis – a stark contrast to current treatments that lose effectiveness once stopped. This impressive profile has fueled excitement for REZPEG as a potentially game-changing treatment.

Expanding Indications to Address High Unmet Needs

Nektar is extending REZPEG's utility, launching Phase IIb trials for alopecia areata – an autoimmune skin disease leading to hair loss with limited treatment options. The study aims to establish REZPEG's ability to deliver a durable response, capitalizing on its Treg-boosting mechanism to restore immune balance, which could offer a major advantage over existing therapies.

A New Player in the Autoimmune Arena: NKTR-0165

Nektar introduced another candidate to its immune-focused pipeline: NKTR-0165, a TNFR2 agonist antibody that builds upon Treg research from REZPEG. Targeting various autoimmune disorders, the company is proceeding with preclinical development and planning clinical trials, anticipating broad interest and potential partnerships as it advances towards clinic entry in the first half of 2025.

Diversifying With an IL-15-based Oncology Program

Outside immunology, NKTR-255, an IL-15-based agent, is showing potential in oncology, especially when combined with cell therapies and checkpoint inhibitors. Trials are in progress for multiple cancers, including large B cell lymphoma and non-small cell lung cancer, with data expected to be submitted to medical conferences in the second half of this year.

Solid Financials and Future Revenue Projections

Nektar concluded 2023 with strong cash reserves of $329.4 million and no debt. The recent $30 million financing has reinforced this position, setting the company up for an extended cash runway into the third quarter of 2026. Revenues are projected to hit between $75 million and $85 million for 2024, incorporating substantial noncash royalties and product sales. This secure financial footing will support the company as it approaches significant data milestones with REZPEG.

Earnings Call Transcript 2023-Q4

[Operator]

Good day, and thank you for standing by. Welcome to the Nektar Therapeutics Fourth Quarter 2023 Financial Results Conference Call. [Operator Instructions]. Please be advised today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Vivian Wu. Please go ahead.

[Vivian Wu, executive]

Thank you, Crystal, and good afternoon, everyone. Thank you for joining us today. With us on the call are Howard Robin, our President and CEO; Dr. Jonathan Zalevsky, our Chief of Research and Development; Dr. Mary Tagliaferri, our Chief Medical Officer; Sandra Gardiner, our Chief Financial Officer; and Jennifer Ruddock, our Chief Business Officer.

On today's call, we expect to make forward-looking statements regarding our 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 agreement expectation is following our corporate restructuring and reorganization, financial guidance or 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 November 8, 2023, which is 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 of 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 W. Robin, executive]

Thank you, Vivian, and thank you for all joining us today. 2023 was a pivotal year for Nektar. We refocused the company's development pipeline on immunology and inflammation with our primary near-term goal to advance REZPEG to media data catalysts in the first half of 2025. REZPEG is poised to be highly disruptive in the biologic treatment landscape for atopic dermatitis by offering a novel agonistic mechanism. REZPEG 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 atopic dermatitis and other autoimmune disorders.

Through its unique mechanism, REZPEG also has the potential to provide patients with superior efficacy as well as more favorable in frequent dosing. There are over 30 million people in the U.S. alone battling this chronic skin condition, and it can greatly impact quality of life and mental health for these patients. We made significant advance in 2023 with respect to our REZPEG program. Most notably, we regained the full right to REZPEG from Eli Lilly and now own the program 100% with no encumbrances.

As move to quickly design a Phase IIb study in atopic dermatitis based on the promising results from the Phase Ib placebo-controlled randomized study of REZPEG, which showed an 83% drop in eczema skin scores after just 12 weeks of treatment. Our Phase IIb global study in this indication was launched in October of '23 and enrollment is on track for data readout in the first half of '25.

In late 2023, we also began work designing a Phase IIb study in alopecia areata under an area of high unmet need. The study is starting this month. There are approximately 7 million patients in the United States and 160 million people worldwide who have alopecia areata. JAK inhibitors are the primary treatment option for patients with alopecia but have a significant rebound effect with treatment cessation and several black box warning.

Based on the data we've generated to date on REZPEG in the skin-related autoimmune condition of atopic dermatitis, psoriasis and in patients with cutaneous manifestations of lupus, we believe REZPEG has strong scientific rationale. In the setting of alopecia and could have the potential to be a highly differentiated treatment option with a similar remittive effect for this unserved patient population.

As I stated earlier, we look forward to the Phase IIb data for our atopic dermatitis study and for our alopecia study in the first half of 2025. These will be highly meaningful data catalysts for Nektar.

In addition to REZPEG, we have another important immunology program that we're moving towards the clinic. This is a first-in-class differentiated mechanism in immunology, a TNFR2 agonist antibody, NKTR-0165. TNFR2 has been shown to potentiate the suppressive effects and overall functional properties of Tregs and the program is built on what we've learned through our deep experience with REZPEG and the Treg field and represents a promising mechanism for treatment of autoimmune including multiple sclerosis and ulcerative colitis. We're currently conducting IND-enabling studies with the goal of targeting an IND submission in the first half of next year.

In line with our objectives to advance our immunology pipeline, today, we announced a $30 million financing that further bolsters Nektar's financial position as we head into transformative data catalysts. Informally, we're pleased to bring on a new high-quality long-term investor TCG Crossover, who clearly shares our belief in the potential of REZPEG. At a price of $1.20 per share, the transaction represents a premium of over 80% to Nektar's 30-day VWAP. This puts us in a strong financial position and extends our cash runway from our previous guidance, which was the middle of 2026 to now well into the third quarter of 2026.

With that, I'll hand the call over to JZ for an R&D discussion. JZ?

[Jonathan Zalevsky, executive]

Thank you, Howard. Let's begin today with REZPEG, which is the most advanced IL-2-based Treg mechanism in the field. Across the REZPEG studies that have been conducted to date, we have observed a consistent and highly predictable clinical pharmacology profile with respect to target engagement as well as the peak and duration of Treg mobilization. It has demonstrated a well-tolerated safety profile and clear clinical efficacy in atopic dermatitis and also psoriasis and in patients with cutaneous manifestations of lupus. Our deep experience with REZPEG to date across the totality of this clinical program gives us conviction in our ongoing Phase IIb studies in atopic dermatitis, alopecia areata.

Specifically in atopic dermatitis, there are 3 important issues that patients with this disease continue to fit. First, there is a need for great efficacy, specifically a deeper magnitude of response and rapid onset of treatment. Second, patients like durable responses and therapy free remission. Once current therapies are discontinued, patients rebound rapidly. And third, treatments with favorable safety profiles are lacking. This is especially important given the chronic nature of disease and the need for continuous dosing. We believe there are major opportunities in this disease state, but the differentiated profile of REZPEG could potentially address.

A diving in to our data of atopic dermatitis, through the 12-week induction period, REZPEG demonstrated dose-dependent efficacy across both physician assessed and patient-reported efficacy measurements, reaching statistical significance across many of these measures. At the highest dose level, REZPEG demonstrated a very rapid onset of response with over 40% of patients achieving EASI-75 by week 3, after only 2 doses of REZPEG. This rapid onset of action rivals that of JAK inhibit, which have outperformed dupilumab on this parameter.

At the end of the induction period of 12 weeks, we observed a profound magnitude of efficacy. An 83% reduction in percent change from baseline EASI score with the highest dose tested. This is the largest magnitude of change that we've seen for biologic and outside of one JAK inhibitor. Importantly, we are encouraged to the extended durability seen for REZPEG. Long after the completion of the 12-week induction period, many patients maintain durable disease control for an additional 36 weeks after the end of doses. And this type of extended disease control after the end of dosing is not observed for dupilumab or for JAK inhibitors. Durability of the EASI-75 response preserved with approximately 70% of EASI-75 responders maintaining that response for 36 weeks after the end of the 12-week induction period. This is a very exciting result and suggest that REZPEG has the potential to be the first remitted therapy for atopic dermatitis.

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. Additionally, REZPEG was well tolerated and treatment with REZPEG did not induce antidrug antibodies in patients, which has been reported with some examples of the IL-2 mutein class. These promising data have us and KOL is very enthusiastic about the potential for long-lasting responses and infrequent maintenance of dose in REZPEG in the setting of atopic dermatitis.

In October 2023, we initiated the Phase IIb study of REZPEG in biologic-naive atopic dermatitis patients, and enrollment is well underway. Our goal is to enroll roughly 400 patients with 3 different regimens of REZPEG 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 rerandomized into 1 of 2 main regimens at different dosages at either once a month or once every 3-month dosing. And that schedule will continue for another 28 weeks. Our enrollment for this study is on track, and we expect data in the first half of 2025.

Moving to alopecia areata. We believe REZPEG has strong scientific rationale in this indication. Alopecia areata is also a disease of the skin, where your immune system starts to attack the hair follicle, thereby weakening the ability of stem cells to grow hair. With prolonged immune attack this eventually causes the hair follicle to release the air altogether, leading to patchy hair loss and as the disease progresses to balding.

Biologically speaking, REZPEG through its central pathway of Treg rescue, is uniquely poised to address the diversity of immunopathology providing broad potential for targeting multiple dermal diseases, including alopecia. For example, in alopecia, there are almost no immune cells in normal hair follicles. Meaning the hair follicle is an immune privileged tissue. Tregs are very important in maintaining that immune privilege and people with alopecia areata develop a breakdown of that immune privilege state. We think the Treg mechanism of REZPEG can restore immune privilege and could provide durable disease control, which we believe would be game-changing in this indication.

JAK inhibitors are the only agents approved in alopecia, and they do not provide disease durability after a patient discontinues treatment. With JAK inhibitors, we could take a patient anywhere from 9 to 18 months to grow hair. And once the patient stops taking a JAK inhibitor, which may happen for a variety of reasons, including toxicity, their hair falls out again rapidly. There is a high unmet need in this patient population for tolerable treatment options that provide durable response, and we believe that restoration of immune privilege is key to obtain durability.

For these reasons, we believe there is an opportunity for REZPEG to become a novel biologic therapy in alpecia areata. We are initiating a Phase IIb study of REZPEG and alopecia this month. The Phase IIb study plans to recruit roughly 80 patients with severe to very severe alopecia who will be randomized to REZPEG 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 the mean percent improvement in SALT or the Severity of Alopecia Tool at week 36, which is the validated outcome measure used for regulatory approval. We will also be looking at a number of other secondary endpoints, including a proportion of patients who saw a reduction in SALT.

Now turning to NKTR-0165, our TNFR2 agonist antibody. TNFR2 is highly expressed on Tregs myeloid suppressor cells, regulatory B cells, neuronal cells and others and TNFR2 agonism has been shown the suppressive effect in overall functional properties of Tregs and these other suppressive cell populations. If TNFR2 is absent is associated with autoimmunity and other genetic conditions that resemble FOXP3 loss of function. In contrast, its presence has been associated with immunoregulatory function and protective effects for multiple cell populations and tissues in the body. This TNFR2 agonist program in our pipeline is built upon many years of Treg experience gained from REZPEG. For example, we know that central Tregs, such as [ biomic ] Tregs require a substantial JAK/STAT signal that is physiologically provided by the IL-2 receptor pathway. And this is a central theme in the mechanism of action of REZPEG.

In contrast, Tregs that leave the central compartment and infiltrate the distal organs and tissues. They are less dependent on the JAK/STAT pathway and instead shift their reliance on to NF-kB pathway engagement for their maintenance of suppressive function. TNFR2 is the most abundant TNF [ superfamily ] member expressed on Tregs and the key driver of NF-kB signaling in those cells. And consequently, a bonafide TNFR2 agonist would be an incredibly exciting addition to our pipeline.

Examples of indications that could be addressed by TNFR2 agonism includes multiple sclerosis mucosal immunology conditions, such as ulcerative colitis of the GI or other oral mucosal diseases and even dermal autoimmune diseases like Vitilago. We have identified several lead to TNFR2 antibody programs from an artificial intelligence-based antibody discovering campaign with our partner, Biolojic Design. The lead antibody is called NKTR-0165, and it has highly desirable properties, including exclusive TNFR2 selectivity, TNFR2 agonism in primary human cells activity in multiple preclinical efficacy models and a very well tolerated profile in early non-GLP toxicology study. We have developed a manufacturing cell line for the lead and are conducting upstream and downstream process development with the aim to enter the clinic for this program in the first half of 2025.

Later this year, we plan to present the first preclinical data for NKTR-0165 at an upcoming medical conference. As we move forward with our IND-enabling studies, there is growing interest for a novel selective TNFR2 agonist like NKTR-0165, and thus, we remain open to the opportunity of working with companies that have interested in these areas to strategize on the best path forward.

Now let's switch gears to our IL-15-based oncology program, NKTR-255. NKTR-255 is IL-15-based mechanism of action, holds a big promise as a combination agent with cell therapies and other mechanisms, such as checkpoint inhibitors. And we are exploring the best partnering paths for continued development for this drug candidate. Our NKTR sponsored trial combining NKTR-255 with the approved CD19 CAR-T is BREYANZI and YESCARTA for treatment of patients with a large B cell lymphoma, has enrolled 15 patients in the dose escalation portion of the study. The combination of NKTR-255 and BREYANZI also being studied in a separate investigator-sponsored trial at Fred Hutch. We are targeting the potential submission of data from these studies at medical meetings in the second half of this year.

A clinical trial in non-small cell lung cancer, sponsored and funded by Abel Zeta data, which evaluates the combination of Abel Zeta's tumor-infiltrating lymphocyte cell therapy plus NKTR-255 and checkpoint inhibitor is also ongoing and enrolling patients. And with our partner, Merck KGaA, we have also been evaluating NKTR-255 in combination with BAVENCIO versus single agent of [ MCO ] in the Phase II JAVELIN Bladder Medley Study. And that study is on track to potentially report interim PFS data later this year.

And with that, I will turn the call over to Sandy for a review of our financial guidance. Sandy?

[Sandra Gardiner, executive]

Thank you, JZ, and good afternoon, everyone. We ended the year in a very strong financial position with $329.4 million in cash and investments and with no debt on our balance sheet. As Howard stated earlier, today's announcement of a $30 million financing further strengthens our cash position. Our revenue was $23.9 million for the fourth quarter of 2023 and $90.1 million for the full year of 2023. Our operating cost and expenses for the fourth quarter of 2023 were $57.4 million and $353.8 million for the full year 2023.

Our nonoperating expenses for the fourth quarter of 2023 were $8.6 million and $12.6 million for the full year 2023. Q4 2023 included a noncash charge of $6.1 million or $0.03 per share for the reclassification of the foreign currency translation adjustment to income related to the wind down of our India legal entity. As a reminder, our India facility was sold in December 2022 for approximately $12 million with the [ wind ] in of the entity occurring in 2023.

Our net loss for the fourth quarter of 2023 was $42.1 million or $0.22 per share. For the full year of 2023, our net loss was $276.1 million or $1.45 per share. Excluding $111.8 million in noncash goodwill and other impairment charges, net loss on a non-GAAP basis for the full year 2023 was $164.3 million or $0.86 basic and diluted loss per share. Looking forward to 2024 and beyond, our financial position remains strong, in part reflecting the cost savings initiatives we undertook last year. We plan to end 2024 with $200 million to $225 million in cash and investments.

In addition to the $30 million pipe we announced this morning, our 2024 cash guidance also includes $15 million resulting from an amendment executed today on a former 2020 agreement with certain entities of health care royalty. Our cash runway now extends well into the third quarter of 2026, which will take us through key value-generating milestones including Phase II REZPEG data in atopic dermatitis and alopecia areata.

Our revenue for the full year of 2024 is expected to be between $75 million and $85 million, which includes $55 million to $65 million in noncash royalties and $20 million to $25 million in product sales. We anticipate full year R&D expense will range between $120 million and $130 million. This includes approximately $5 million to $10 million of noncash depreciation and stock-based compensation expense. The increase in R&D spend for 2024 over 2023 represents an increased investment into REZPEG Phase IIb studies in atopic dermatitis and alopecia areata as well as IND-enabling studies for our antibody program, NKTR-0165. This increase is partially offset by decreased spending on NKTR-255 clinical studies in cell therapy which are completing in 2024. The remaining going clinical studies for NKTR-255 are primarily funded by our external partners.

We expect G&A expense for the full year of 2024 to be between $70 million and $75 million which includes $5 million to $10 million of noncash depreciation and stock-based compensation expense. Our full year noncash interest expense is expected to be between $20 million and $25 million. As I stated earlier, we expect to end this year with $200 million to $225 million in cash and investments.

And with that, we will now open the call for questions. Crystal?

[Operator]

[Operator Instructions]. And our first question will come from Jay Olson from Oppo.

[Cheng Li, analyst]

This is Cheng on the line for Jay. And congrats on the progress. Maybe just our REZPEG AD study. Wondering if you can talk about the initial feedback from doctors and patients participating in the study, especially in the context that there are many other competing trials out there. Also if you also could comment on the recruitment progress thus far versus your internal expectation, that would be great. And I have a quick follow-up question after that.

[Howard W. Robin, executive]

Mary, you want to take that question?

[Mary Tagliaferri, executive]

Yes. Sure, Howard. Thank you. Joe, this is Mary Tagliaferri. When we look at the aggregate of our data from site activation, screening activities and enrollment. We are on track to have our top line induction data from the AD study in the first half of 2025. And in terms of the feedback, we're really pleased with the type of screening we're seeing and we believe this is driven by the data that was presented by Jonathan Silverberg at the [ ADV ] 2023. The doctors really do see that one, REZPEG has a very rapid on set of actions. Number two, the depth of response that we're seeing with the mean percent change in EASI after only 12 weeks of treatment when most studies look at an induction period of 16 weeks the doctors have been very impressed with that. And then certainly for the [indiscernible] their patients, they really love the durability that we saw when patients were off treatment for 9 consecutive months. And they were able to maintain that very key response in EASI. This is all very, very attractive for recruiting patients for the study. So we're doing very well. I have heard that our studies are [indiscernible] with enrollment, and we're not experiencing that.

[Cheng Li, analyst]

Got it. And just a quick follow-up. Just wondering to what extent you can leverage the clinical side for the AD study for the upcoming alopecia areata initiation. So can you just use the same [ size ] where there's another layer of working to do?

[Mary Tagliaferri, executive]

Yes. So we are going to use 12 sites that are participating in the AD study in our alopecia study, and those physicians are very excited to have an opportunity for a second skin disease to evaluate REZPEG and alopecia areata. Again, they're really eager to see durability of response because, of course, when their patients with JAK inhibitors, and they grow [ their hair ] back, immediately, they start to lose their hair once they discontinue treatment with the JAK inhibitor. So the promise of agent [indiscernible] and restore immune privilege is definitely really encouraging and exciting to [ be speaking ].

[Operator]

And our next question will come from Roger Song from Jefferies.

[Kambiz Yazdi, analyst]

This is Kambiz for Roger. Maybe just following up on the alopecia areata study, how many total clinical sites will you be enrolling? And what's kind of the geographic distribution of those sites? And then what are some key baseline characteristics for the patients in these studies will be -- most of them be a JAK inhibitor refractory, any detail there would be appreciated.

[Mary Tagliaferri, executive]

Yes. Thanks, Howard. We'll have slightly over [ 3 ] sites. We're going to be in Canada, in the United States and in Poland. As you may imagine, when you're in Poland, they definitely have an access issue and it also takes a very long time for those patients to get into see a dermatologist. So it's actually a very favorable environment to enroll patients. These patients are going to be JAK inhibitor-naive patients and then our key inclusion criteria is the severe to very severe alopecia. So these patients all have to have a SALT driven with [ venereal ] and of course, this is the same patient population where there and [ Lilis JAK ] the Pfizer JAK inhibitor has the same eligibility criteria for the pivotal trials.

[Operator]

Our next question will come from Jessica Fye from JPMorgan.

[Jessica Fye, analyst]

For the Phase IIb atopic derm trial, what's the threshold patient need to be considered a responder and be rerandomized for IL-15. And then also curious what's your latest on whether the AD or the alopecia trial will read out first and why?

[Mary Tagliaferri, executive]

Yes. Jessica, it's Mary. So to be re-randomized, the patient has to have EASI-50 when they are rerandomized to the maintenance dose once a month or once every 3 months, they will be on the same dose that they were randomized to in the induction period. And do you have a second question?

[Jessica Fye, analyst]

Just the timing of alopecia versus AD data?

[Mary Tagliaferri, executive]

Yes. So we expect the [indiscernible] trial to read out first.

[Operator]

Next question will come from Julian Harrison from BTIG.

[Julian Harrison, analyst]

I'm curious if you could remind us how you're thinking about efficacy beyond 12 weeks of dosing with REZPEG in atopic derm. Do you expect to plateau at some point? Or do you expect response rates to maybe be progressive through 44 weeks of dosing? And then with regards to the Lilly litigation, sorry if I missed it, I'm wondering if you could comment on its current status and timing of next steps.

[Howard W. Robin, executive]

Mary, why don't you take the first part, and I'll take the second part.

[Mary Tagliaferri, executive]

Yes. I definitely think that as we extend production period from 12 to 16 weeks, we're going to see a greater number of patients experience a deeper response. So I very much look forward to seeing what the mean percent changes. As you know, our EASI mean percent change from baseline to 12 weeks was 83%. And as such, that is greater than any of the biologic agents, if you look at DUPI or ADBRY or Lebri or Nemo or Roca, we definitely saw the deepest response. But I do believe that we'll probably see more patients who experience at EASI-75 and even at 90 as we go out additional 4 weeks in the induction period.

[Howard W. Robin, executive]

With regard to Lilly, Lilly after we filed our complaint in federal courts, Lilly tried to convince the Federal Court judge who has missed the case, as you know. And last week, the federal judge refused Lilly's request. And the judge agreed to allow Nektar's claims, primary claims to move forward, and we expect the judge to settle trial date in 2025. And the court also order the parties to engage in mediation within the next 3 months to try to resolve the issue. And so we're very, very happy with the case is moving forward. The judge did not dismiss the case. And we look forward to vindicating ourselves through the litigation process.

[Operator]

[Operator Instructions]. And our next question will come from Andy Shah from William Blair.

[Unknown Analyst]

Two quick ones for us. One is, can you talk about this ebb and flow dynamic associated with hair loss in alopecia would enrolling kind of severe and really severe patients kind of mitigate that variability? And the second question has to do with the TNF-receptor 165 program. We know that the receptor family is a trimer. So I guess to maximally agonize this receptor, you might have to have like a trimer design. I'm just curious if that's kind of a part of the design that goes into 165. And downstream from that, there's also kind of clustering. So is that also a part of the design of the molecule? Thanks.

[Howard W. Robin, executive]

Mary, you want to take the hair loss and then JZ can take the TNFR2.

[Mary Tagliaferri, executive]

So Andy, it's Mary. So you're exactly right. Once patients go into the severe and the very severe, generally speaking, there is not a regrowth of the hair. And that, you're exactly right that, that's why the eligibility criteria and even the threshold for approval by the FDA is this patient population. It does -- patients do start out with experiencing patchy hair loss. But as the disease progresses, certainly, the hair becomes more extreme and even towards baldness. But once a patient moves their hair. It's very [indiscernible] to have regrowth their hair without some sort of medical intervention.

And then I'll pass over the second question to JZ.

[Jonathan Zalevsky, executive]

Yes. Thanks, Mary, and thanks, Andy, for your question. So you're right. So TNF proteins or trimers. But as we've learned more and more about the biophysics of the receptors and the way the plat domains, right, which are the [ stride domains ] that hold together the receptor subunits, they actually work to create dimers receptor. And then a trimer comes along a cluster 6 receptors or 3 pairs of dimers. So and then you can get additional clustering and some of this ultrastructure has been published. And some structural studies have been done.

What we've come to understand, a, through learning about the cell biology of these receptors the way these dimers need to multimerize and the way the epitopes for binding to the receptor need to work is that the epitope is actually fundamentally important. And one of the things we discovered with NKTR-0165 is that it's an epitope that has its own unique properties, and it can signal in a completely cluster independent fashion. For example, it doesn't need [ Fc ]. It doesn't even need balancing. That's one of the things that's really unique and highly differentiated about the antibodies that we've created.

And keeping in mind all of these ultrastructural forms of the receptor. And then the different states that the receptor can occupy is obviously one of the key things that's important for developing a successful activity. Thanks for the question.

[Operator]

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

[Howard W. Robin, executive]

Well, thank you, everyone, for joining us today. And as we stated on our call, we really remain focused on executing the development of REZPEG and our immunology-focused research programs. I'd like to thank all of our employees for their very hard work and thank all of our shareholders, new and existing for their continued support, and we look forward to providing you with updates on our progress. So stay tuned. Thanks for joining us again.

[Operator]

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