Prepared remarks
Hello, and thank you for standing by. Welcome to the Nektar Therapeutics second quarter 2026 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' 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.
Thank you, Crystal, and good afternoon, everyone. Thank you for joining us today. On today's call, you will hear from Howard W. Robin, our President and Chief Executive Officer; Dr. Jonathan Zalevsky, our Chief Research and Development Officer; and Linda Rubinstein, our Chief Financial Officer. Dr. Mary Tagliaferri, our Chief Medical Officer, will also be available during the Q&A. Before we begin, I would like to remind you that we will be making forward-looking statements regarding our business including statements related to therapeutic and commercial potential, and development plans for rezpeg (aldesleukin). The timing and expectations for clinical data presentations, regulatory submissions, regulatory interactions, our expected cash runway, and 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 and many of which are outside of our control. For a discussion of these risks and uncertainties, please refer to our filings with the SEC, including our most recent Form 10-K and subsequent filings. We undertake no obligation to update these forward-looking statements, except as required by law. A live webcast and replay of this call will be available on the Investor Relations section of our website at nektar.com. With that, I will hand the call over to Howard.
Thank you, Vivian. Thank you to everyone for joining us this afternoon. In July, we achieved yet another important milestone for Nektar with the initiation of the global Zenith AD Phase 3 program for rezpeg (aldesleukin) in moderate to severe atopic dermatitis. We are excited to be advancing this very important novel medicine towards registration in the first of several potential indications. Following our end-of-Phase 2 meeting with the FDA, we also finalized the design of a single registrational Phase 3 study for rezpeg in alopecia areata, which we plan to initiate in early 2027. The registrational study designs for rezpeg build on the positive clinical data we have generated in the first half of this year in patients with atopic dermatitis and alopecia areata and also reflect input from our completed regulatory meetings. JZ will talk more about these designs later on during the call. Importantly, with the first Phase 3 studies in atopic dermatitis now underway, we expect topline data from these studies in mid-2028 and, if positive, expect to submit a BLA in 2029. As a novel Treg agonist mechanism, rezpeg works fundamentally differently by acting upstream of multiple inflammatory pathways to restore immune balance. To that end, we continue to evaluate new indications for expansion of rezpeg's development in the future. Through TrialNet, we are evaluating its potential in type 1 diabetes in an ongoing Phase 2 study. We also believe there are other autoimmune conditions where a Treg mechanism could benefit patients, and we therefore view rezpeg as a potential pipeline-in-a-product. Importantly, the market opportunity and patient need in each of our two lead indications are substantial. More than 15 million people in the United States have moderate to severe atopic dermatitis and currently fewer than 10% are treated with a systemic therapy. We believe that this market will grow with the introduction of novel mechanisms of action, as was the case in the psoriasis market, and that rezpeg is highly differentiated from other novel mechanisms of action approved or in development. We know that roughly half of the patients on currently available IL-13-based agents, including Dupixent, either do not respond to therapy or lose their response over time. This leaves a large unmet need for a new therapeutic option. We believe rezpeg has the potential to alter the treatment paradigm in this indication by offering a differentiated efficacy and safety profile with a long-term, highly attractive monthly or quarterly maintenance dosing regimen. We recently completed extensive market research which included our 52-week maintenance data for rezpeg. The research reinforces our commercial thesis in atopic dermatitis. We interviewed and surveyed 151 high-volume prescribers and key opinion leaders in the United States and Europe. A recurrent theme that came up in the research was physician enthusiasm for a novel mechanism of action as compared to overlapping mechanisms of action in the IL-13 class. The RESOLVE AD data was viewed highly positively including EASI-75 and itch NRS responses. The quarterly dosing schedule for maintenance and the EASI-100 rates were called out as notable and differentiating. The data in comorbid asthma was also cited as a key differentiator as physicians see patients with a range of other allergic comorbidities which could benefit from a Treg therapeutic approach. Notably, safety was viewed as a key differentiator with no increased risk for infection and no conjunctivitis observed in the rezpeg treatment arms in our Phase 2b RESOLVE AD study. Importantly, 150 out of the 151 physicians interviewed said that injection site reactions were not a hindrance to prescribing or a barrier for patients and actually preferred a self-resolving, short-lived injection site reaction over managing longer duration conjunctivitis. It was clear that physicians would welcome a novel immune modulating mechanism like rezpeg in the treatment paradigm and that rezpeg would likely be prescribed across first-, second-, and third-line populations. The research supports our decision to pursue a label with our registrational program in atopic dermatitis that captures both treatment-naive and experienced patients. Turning to the opportunity in alopecia areata, nearly 6.7 million people in the United States are affected by the disease, and the large majority currently go untreated. There are well-known safety challenges associated with JAK inhibitors, which is the only approved class to treat severe patients, and that has limited their use. In spite of that, the market for agents currently approved for alopecia areata is still projected to grow to $5 billion by 2033. But more than half of dermatologists are not comfortable prescribing these agents given their boxed warnings and the ongoing monitoring burden. Our rezpeg market research with physicians in alopecia areata reaffirms this hesitation to prescribe JAK inhibitors. In addition to rezpeg's safety profile observed to date and its novel mechanism of action, physicians and patients in our research cited rezpeg's twice-monthly dosing for alopecia areata patients as more attractive than once-daily oral dosing. Physicians also noted the ability to ensure patient compliance with treatment is much higher with an injectable twice-monthly regimen. The research reaffirms our belief that rezpeg has the potential to become a preferred first-line treatment option for patients with severe to very severe alopecia areata. Before I hand the call to JZ, I will note that we ended the quarter in a strong financial position with over $1 billion in cash and investments and our cash runway extends into the third quarter of 2028, past the initial Phase 3 atopic dermatitis data readouts in mid-2028. Our team is laser-focused on successful execution of our Phase 3 programs and advancing rezpeg to BLA submission as quickly as possible. With that, I will turn the call over to JZ.
Thank you, Howard, and good afternoon, everyone. Everything we have learned about rezpeg from the data from the clinical programs to date points to a consistent and, we believe, differentiated clinical profile: meaningful efficacy, a favorable safety profile with dosing as infrequent as once a quarter, and responses that continue to deepen over time. As Howard stated, rezpeg works upstream of the currently approved agents in the diseases we are targeting. It stimulates regulatory T cells and gets closest to natural causal biology to restore the immune balance that is disrupted in autoimmune and inflammatory disease rather than blocking a single target or even multiple targets downstream. Rezpeg is able to correct Th1, Th2, Th17, and other upstream inflammatory dysfunctions that can drive disease pathology across atopic dermatitis, alopecia areata, and other autoimmune diseases. Because regulatory T cells target the underlying immune imbalance of inflammatory and autoimmune diseases, we have seen rezpeg produce very high durability over time. This was our key hypothesis when we developed rezpeg, and it is supported by the data we reported from our monthly and quarterly dosing regimens in our Phase 2b program. In our first Phase 1 study, following a 12-week treatment cycle, we observed durability of clinical responses for approximately nine months off treatment which we have previously published. As Howard mentioned, Zenith AD, our global Phase 3 program in atopic dermatitis, is now up and running. The first two studies, both in biologic- and JAK inhibitor–naive patients, were initiated and we started randomizing patients back in July. The planned study in treatment-experienced patients is set to start by the end of September. As a reminder, each of the two pivotal studies will enroll adolescent and adult patients aged 12 and older randomized 2:1 to rezpeg at 24 micrograms per kilogram every two weeks or placebo. There is a 24-week induction period followed by a 28-week maintenance period through week 52 during which we will evaluate both monthly and quarterly dosing. The third Phase 3 study in treatment-experienced patients has the same design and is expected to support second-line and later usage in the label. Taken together, the studies are designed to support a potential label in this patient population that captures both naive and experienced patients spanning first-line, second-line, and later-line usage. The studies are designed to support U.S. and global registration with an IGA-related primary endpoint for the U.S., and co-primary endpoints of EASI-75 and IGA for significant territories outside the U.S., along with multiplicity-protected secondary endpoints for key patient-reported outcomes such as itch numerical rating scale (NRS), skin pain NRS, and the Atopic Dermatitis Sleep Scale (ADSS). As you know, many patients with atopic dermatitis also have other comorbidities including asthma and allergic rhinitis. As a Treg-based mechanism, rezpeg is designed to work upstream and is uniquely positioned to simultaneously address multiple autoimmune and inflammatory manifestations at once. To that end, we also include a number of multiplicity-protected secondary endpoints that will help us explore this benefit. The first being ACQ-5, which measures improvements in patient-reported asthma. Approximately 25% of patients with moderate to severe atopic dermatitis also have asthma, and in our Phase 2b study, rezpeg produced statistically significant improvements in ACQ-5 versus placebo, including in patients with uncontrolled asthma at baseline. A second endpoint we have included is the Sino-Nasal Outcome Test-22, referred to as SNOT-22, a validated patient-reported measure of sinonasal symptoms. Rhinitis is a type 2 inflammatory comorbidity found in patients with atopic dermatitis, and up to 30% of patients with atopic dermatitis also have allergic rhinitis. In our Phase 2b study, we measured SNOT-22 for patients with self-reported symptoms, including patients who had self-reported asthma with rhinitis. We are including SNOT-22 as a secondary endpoint in our Phase 3 study and we plan to present the SNOT-22 data from the RESOLVE AD study at a future medical meeting. Our strong RESOLVE AD Phase 2b data underlies the design of our Phase 3 program. In RESOLVE AD, we saw rapid onset of skin clearance and itch relief early in treatment and we saw those responses deepen over time rather than plateau. With less frequent monthly and quarterly maintenance dosing, we achieved high rates of complete skin clearance, including up to a fivefold increase in EASI-100 rate during the 36-week maintenance treatment period — a level of response rarely achieved. As Howard said, we expect the first data from the Phase 3 program in mid-2028 and if positive to submit a BLA in 2029. Turning to alopecia areata: we recently held our end-of-Phase 2 meeting with the FDA and we received alignment to conduct a single registrational Phase 3 study which we are calling ZENITH AA. In the pivotal study, we have finalized that 850 adolescent and adult patients aged 12 and older will be randomized to receive rezpeg at 24 micrograms per kilogram every two weeks or placebo, with treatment continuing through 52 weeks. The study will include patients that have a current episode of alopecia areata of up to eight years. This was the inclusion criteria for all of the JAK inhibitor Phase 3 trials as well as our Phase 2b randomized placebo-controlled study. We will include both patients who are naive to systemic treatment including biologics and JAK inhibitors as well as those who have been treated with a prior systemic agent, provided they have undergone an extended washout period. The primary endpoint will be a SALT score of 20 or less at week 52, which corresponds to 80% or more scalp hair coverage. This is the established registrational endpoint for patients with severe to very severe alopecia areata. Key secondary endpoints include SALT scores of 10 or less and 30 or less, along with 50%, 75%, and 90% SALT reductions from baseline which capture increasing degrees of hair regrowth. You will recall that we observed improvement with rezpeg treatment across all these endpoints in our Phase 2b trial. Patients from the study will also have the ability to roll over into a long-term extension which will allow us to characterize durability of response on treatment and long-term safety. We plan to initiate the Phase 3 alopecia areata study in early 2027 and we expect data in the second half of 2029, and if positive, would expect to seek approval in alopecia areata as a second indication shortly following our planned submission in atopic dermatitis. We expect to have data from the 24-week off-treatment period of the Phase 2b RESOLVE AA study in alopecia areata in the fourth quarter of this year. Our objective for measuring patients in the off-treatment period is to determine a maintenance dosing regimen beyond 52 weeks — whether we continue to dose twice monthly or offer an additional once-a-month regimen. As you know, we already have an advantageous dosing schedule of twice monthly as compared to a daily JAK inhibitor; as Howard pointed out earlier, our market research has reinforced that both physicians and patients would prefer a less frequent injectable regimen as opposed to daily oral administration. When you couple this dosing-regimen advantage with the safety profile observed to date, we believe rezpeg has the potential to become an important first-line treatment for this indication. In addition, datasets from both our lead programs in atopic dermatitis and alopecia areata have been accepted for oral presentations at the European Academy of Dermatology and Venereology (EADV) Congress to take place in Vienna in October. These presentations will feature the RESOLVE AD maintenance data, covering both patients who maintain their response and those who develop new and deepening responses over time, including complete clearance, as well as the RESOLVE-52 data. We are grateful for the opportunity to present these data at this important meeting. Beyond our two lead indications, the Phase 2 study of rezpeg in new-onset type 1 diabetes sponsored and funded by TrialNet is ongoing. As a reminder, this is the same consortium that ran the foundational studies for teplizumab, the only approved therapy in this setting, and they bring expertise and a deep commitment to finding better therapies for patients with this disease. We are looking forward to the data from the first cohort of patients in the type 1 diabetes study in 2027. As this program matures, we continue to evaluate additional opportunities for rezpeg and other potential indications. As I mentioned earlier, rezpeg is fundamentally different from therapies that block a single downstream inflammatory mediator. Rezpeg acts upstream by expanding regulatory T cells and enhancing their suppressive function, thereby restoring immune tolerance and reestablishing regulatory control over pathogenic immune responses. Our objective is to start a clinical study prior to year-end which would allow us to evaluate rezpeg's activity in a new indication. Turning to our earlier pipeline programs, we are continuing our development of our TNFR2 programs. NKTR-0165 is our bivalent TNFR2 agonist antibody — a molecule with very high specificity for signaling through TNFR2 on regulatory T cells to enhance their ability to regulate the immune system. We believe this mechanism has potential across a range of indications including MS, ulcerative colitis, and vitiligo. Because NKTR-0165 demonstrated strong monomeric activity, we realized the TNFR2 molecule could be incorporated in the design of bispecific and trispecific constructs in combination with validated targets. Therefore, we are designing a pipeline of TNFR2-containing bispecific molecules that pair TNFR2 agonism with other antibody targets. The first of these programs, NKTR-0166, is a bispecific molecule that combines a TNFR2 agonist epitope with an antagonist epitope previously validated in rheumatology. This dual mechanism gives NKTR-0166 the potential to modify disease pathogenesis across multiple autoimmune indications. We are continuing our research in both TNFR2 programs and will share more as they progress. With that, I will turn the call over to Linda to review our financial results.
Thank you, JZ, and good afternoon, everyone. On today's call, I will review our quarterly financials for the second quarter of 2026 and our 2026 financial guidance. We ended the second quarter of 2026 with $1.02 billion in cash and investments with no debt on our balance sheet. In April, we completed an underwritten public offering resulting in $350 million in net proceeds. We are increasing our cash guidance for year-end 2026 and now expect to end 2026 with approximately $815 million to $840 million in cash and investments. Turning to the income statement: our second quarter 2026 non-cash royalty revenue totaled $10.1 million. Full year revenue for 2026 is still expected to total $40 million to $45 million. Our R&D expenses were $39.1 million for the second quarter of 2026, and we now anticipate full-year R&D expense to range between $210 million and $230 million including approximately $5 million to $10 million of non-cash depreciation and stock-based compensation expense. As a reminder, we expect R&D expense to increase on a quarterly basis in 2026 as our Phase 3 clinical studies and supporting CMC activities progress. Our G&A expenses were $12.8 million for the second quarter. We continue to expect G&A expenses for the full year 2026 to be between $60 million and $65 million including approximately $5 million of non-cash depreciation and stock-based compensation expense. Non-cash interest expense for the second quarter was $7.2 million and we expect non-cash interest expense to total approximately $30 million to $35 million for 2026. Our net loss for the second quarter was a net loss of $40.6 million or $1.23 basic and diluted net loss per share. Our financial position is strong, enabling us to continue investing in our rezpeg atopic dermatitis and alopecia areata programs, as well as advancing our TNFR2 agonist antibody program which includes NKTR-0165 and NKTR-0166. I will now turn it over to the operator for Q&A.
Questions and answers
Thank you. Please press *1 on your telephone, and wait for your name to be announced. To withdraw your question, please press *1 again. In the interest of time, we do ask that you please limit yourself to one question at this time. And our first question will come from Yasmeen Rahimi from Piper Sandler. Your line is open.
Good afternoon, team. Congrats on getting the alignment on the Zenith AA setting and kicking that off — congrats and great update. You guys always do a wonderful job helping us think about the next catalyst in terms of timing, the type of data we will get, and expectations. I'd love to talk about the next important data readout which will be the withdrawal data coming in the fourth quarter. Could you talk about what your expectations are in terms of the size of the cohort, what you expect to see that would be meaningful, and whether any of that off-treatment alopecia areata data will inform in any way the data collection that will be ongoing in your Phase 3 study?
Yeah, thank you — that is a great question. I will let Mary take that question.
Great. Hi, Yasmeen, and thank you so much for the question. We have a 24-week follow-up off-treatment period in the RESOLVE AA study. This is an ongoing part of our trial and in the fourth quarter we will have the data. We enrolled 92 patients total into the trial and of those 92, 31 went on into our 16-week extension. We do follow every patient who was enrolled in the study for that 24-week off-treatment period. With respect to Phase 3, the most important for us is that after 52 weeks of treatment in the Phase 3 alopecia areata registrational study we will continue to follow those patients in a long-term extension study. These data will help to instruct whether treatment should continue to be every two weeks or whether we can extend that frequency in a maintenance period to a longer interval such as once a month. We are really excited to look at those data so we can have more clarity on treatment after 52 weeks in our Phase 3 program. Likewise, in the first quarter of next year we will have 52-week off-treatment data for our atopic dermatitis Phase 2b study. In that, we are also really looking to instruct what the dosing should be after 52 weeks of treatment and whether there are patients that experience durability of responses beyond the dosing intervals we evaluated in Phase 2b such as monthly and every three months. We did see in Phase 2b that patients experienced great durability and many experienced deepening of response. Now we want to look at the 52-week off-treatment durability to see if it is feasible to extend that dosing interval beyond quarterly.
Thank you so much, Mary, for the thoughtful color.
Thank you. Our next question comes from Samantha Semenkow from Citi. Your line is open.
Hi, good afternoon. Thanks very much for taking the question and thank you for all of the details in the recent market research that you shared in atopic dermatitis. I'm just wondering if you can elaborate a bit more on how physicians are thinking about prescribing rezpeg in the first-line setting. Is there a certain patient population or patient characteristics that physicians identified as best suited for rezpeg? Did your market research give any indication on the breakdown of the portion that would be candidates for first line versus second line or later? Thanks very much.
Very good question. The market research we did was extensive and we wanted to understand how to position our drug because it is a completely novel mechanism. Some expect there will be a step through IL-13 agents to ultimately get to something like a Treg mechanism, but we do not find that to be the case. There is only about 10% of the population with atopic dermatitis being treated with systemic therapies, so it is an enormous upside market potential. Even among patients getting IL-13s, about half either do not respond or fail after a year or so, so there is lots of opportunity for rezpeg as a first-line option. Clearly, second-line also fits given patients who fail IL-13s; with a quarterly maintenance dose regimen, it is a very easy drug to take for those patients. But I do think we will get a significant share of the first-line market once physicians gain experience. Remember, it does not cause infections and did not show conjunctivitis in our trials, and those side effects are potentially much more problematic than mild to moderate self-resolving injection site reactions. Overall, we are pretty happy about our first-line market potential.
Thanks very much.
Thank you. Our next question comes from Jay Olson from Oppenheimer. Your line is open.
Thinking about eventually moving into the first-line setting?
I am sorry — I barely heard that question. Could you say it again louder?
And we will take our next question. Next question comes from Cha Yang from Jefferies. Your line is open.
Hi team. This is Cha on for Robert. Thank you so much for the update — very informative. I was wondering if you could give us some comments on the pretrial that happened last week. Any color you can give on the outcomes of that and what impact you expect those outcomes to have on your upcoming September trial? Thank you.
That's a good question, but of course we cannot really comment on ongoing litigation. I can tell you the jury trial is scheduled in federal court in San Francisco for September 8th and we believe we have a very strong position. That's unfortunately all I can tell you at this point. I would love to give you more but it is difficult to comment on ongoing litigation.
Thank you. Our next question comes from Arthur He from H.C. Wainwright. Your line is open.
Hey Howard and team — congrats on progress. Mary, congrats on getting the single trial for the AA study sign-off. For the off-drug data in the fourth quarter, for the patients who finished the study or finished the 36-week portion, are we going to also look into the data from those particular patients?
Hi Arthur. Yes — we will be looking at those patients as well as those who completed the 52 weeks of treatment. What will be most instructive is those 31 patients who went into the 16-week extension, but we will be looking at all 92 patients that we randomized and providing an update on the totality of the findings.
Okay, thanks. Quick follow-up: when you were talking to the FDA, did they put any requirement on a minimum duration for the current episode for the alopecia patients?
Thank you for asking. We will be following the same convention as the JAK inhibitor registrational studies. Our study design provides for patients that have up to eight years of their current episode. We do know some sponsors have looked at a more enriched population with a current episode of two years, but we do not think that reflects the broader population of patients with alopecia areata and we want a broad label. So we designed a study that will include both JAK inhibitor-naive and JAK inhibitor-experienced patients, adolescent as well as adult patients, and we will look at patients with current episode durations of less than four years and four to eight years. We think having the broadest label has the greatest commercial potential and serves the broadest proportion of patients, and it is consistent with prior JAK inhibitor studies.
Awesome.
Thank you. Our next question comes from Mayank Mamtani from B. Riley Securities. Your line is open.
I appreciate all the level of detail. Two-part question: on EADV, what incremental datasets should we expect, and is there a chance the off-treatment data could also be presented since EADV is in October? And on enrollment enthusiasm for your global alopecia Phase 3 and on the maintenance atopic dermatitis data: based on your Phase 1b where we got EASI-75 up to nine months off-treatment, can you highlight differences in this off-treatment dataset versus what we saw in Phase 1b? Should we expect some of the EASI-100 responders to maintain off-treatment remission?
Great question, Mayank. We are pleased to have two oral presentations accepted at EADV. When we submitted the abstracts, we did not have the 24-week follow-up data, so our abstract does not include that portion of the study. The study is still ongoing and blinded. That said, it is possible we could include the 24-week data if we have the readout in time and are ready; we can't make that commitment today because the trial is still ongoing and we have not locked that part of the database. Regarding the 52-week off-treatment for Phase 2b in atopic dermatitis: you are correct we showed off-treatment data from our Phase 1b for nine months. The difference here is we will have three additional months of follow-up post-withdrawal from drug. This will help us look at durability of responses and to evaluate EASI-75, EASI-90 and EASI-100 off-treatment. We did see patients continue to improve with ongoing rezpeg treatment, showing deepening responses; now we want to look at whether those responses persist after withdrawal up to the nine-month timemark and beyond, which will be valuable in optimizing maintenance dosing. For some patients, maintenance could potentially be longer than every three months. We are excited to examine the durability closely.
Very helpful and comprehensive.
Thank you. Our next question comes from Julian Harrison from BTIG. Your line is open.
Hi, thank you for taking the questions and congrats on all the recent progress. First, do you have any updated views on rezpeg's competitive positioning in alopecia areata in light of a recent dataset last month from another non-JAK treatment option in development in the broader space? Second, keeping in mind the rezpeg pipeline and product potential, have you thought about supporting any signal-seeking efforts on an investigator-initiated trial (IIT) basis? Have you gotten investigator requests, and are you open to that versus keeping future trials fully controlled by Nektar?
Two very good questions. Regarding competition in alopecia areata: the recently released study is difficult to interpret and was a single-arm study. I will let Mary comment more, but it also had a patient population that was less severe or earlier in disease than what we are planning. On your second question about other indications and investigator trials: we are considering which indications would warrant pilot proof-of-concept studies. We were successful in lupus when we analyzed weight-based dosing rather than fixed dosing, and there may be potential in cutaneous lupus and other indications. Whether it is an investigator-sponsored trial or our own pilot studies, we are evaluating opportunities, and we will consider both approaches.
Hi Julian. We view the alopecia areata market as very large and these patients are underserved by JAK inhibitors. Innovation here is welcome. That said, the new dataset is difficult to interpret — it was a small, 33-patient open-label study with no placebo and enrolled a selective patient population, which can skew results in favor of any drug tested. By contrast, our Phase 2b study was randomized, placebo-controlled, looked at more than one dose, and allowed a broad patient population consistent with JAK inhibitor studies. The generalizability and rigor of our data were recognized by the FDA as sufficient to move to a Phase 3 study. We remain very encouraged by our efficacy and safety profile and the dermatology community is looking forward to enrollment beginning in Q1 next year.
Thank you. Our next question will come from Marc Frahm from TD Cowen. Your line is open.
Hi, thanks for taking my questions and congrats on all the progress getting Phase 3 up and running. Maybe Howard, you touched a little bit about the different unmet needs in the AD market, particularly treatment-naive versus experienced patients. How do you view that impacting relative enrollment pace for these Phase 3s and the two different flavors of Phase 3 in terms of patient sizes and levels of unmet need?
Good question. With the absence of many new mechanisms, there is a strong opportunity for a novel mechanism like rezpeg. I don't think patient enrollment will be an issue and I expect it to go fairly quickly now that the studies have started. The market is enormous — even if only 10% of patients are treated systemically, that market opportunity is very large. If you have a novel mechanism, you should be able to capture a meaningful share. Jay Z can comment more on why we think rezpeg is especially well positioned.
Thanks, Howard. One thing our market research showed is that we would have good first-line penetration because most available approaches and many pipeline agents target the same Th2-dominant pathway. Our market research showed that a new mechanism of action was important to physicians and many indicated they would use a new MOA first. We think this positions rezpeg nicely. Our Phase 3 study designs take advantage of what we have learned and strengthen areas where we saw greatest differentiation in Phase 2 data to give rezpeg a significant opportunity for a highly differentiated label.
Thank you. Our next question comes from Jessica Macomber Fye from JPMorgan. Your line is open.
Hey guys, good afternoon. Thanks for taking my questions. Can you expand a little on your expectations for rezpeg's effect size in biologic-experienced AD patients versus biologic-naive? How should we think about benchmarking the biologic-experienced Phase 3 trial you are running — is the ADAPT study with lebrikizumab a good comparator or if not, what should we think about?
Thank you — that's an important question. We looked closely at whether there is a biological reason why patients who fail IL-13 therapy would not respond to a completely different mechanism and we could not find one. We expect to be successful in treating experienced patients. I'll let Mary and JZ expand on the clinical precedent and mechanism.
Jessica, that's an important point. Lebrikizumab was studied in the ADAPT study which included patients treated after Dupixent, and there was no diminution of efficacy. In ADAPT, 57% of Dupixent-exposed patients treated with lebrikizumab had an EASI-75 at week 16. In the lebri Phase 3 ADVOCATE 1 and 2 studies, EASI-75 at week 16 was 52% and 59% in the naive population. Given that precedence and the rezpeg mechanism that augments regulatory networks rather than blocking a single downstream mediator, we expect efficacy in biologic- and JAK inhibitor–experienced patients to be very similar to naive patients.
Further on mechanism: rezpeg's Treg induction is intended to help patients for whom inhibition of IL-13 or IL-4/13 is no longer adequate. A Treg approach acts upstream of those factors. Also note that the ADAPT study is open label and single-arm, so there has not been a true randomized placebo benchmark published for that patient population. If randomized data from other sponsors becomes available, that will provide useful context. Overall, we are excited about our Phase 3 design which, if successful, will lead to a differentiated label for rezpeg.
Thank you. And our next question will come from Andy Hsieh from William Blair. Your line is open.
Great, thanks for taking our question. Howard, you mentioned the physician survey which was helpful. I'm curious if you probed the group about durability as a means for differentiation — is there a specific time frame physicians were looking at such as three or six months? My second question is about the TrialNet type 1 diabetes trial: it seems rezpeg is treated for six months but the primary endpoint is measured at 12 months. Can we infer off-treatment effect from that design?
Very good questions. Duration of onset was important to physicians, but the most important attribute was long-term durability. You can see in our maintenance data that responses continue to deepen, and we expect that to continue. Physicians were also highly focused on a manageable side-effect profile; injection site reactions were not a major concern, while infections and conjunctivitis were more concerning. Mary, JZ can take the TrialNet question on design.
I'll describe the TrialNet study design. Recall that teplizumab (an anti-CD3 antibody) uses a short intervention but changes the disease trajectory. TrialNet was excited to dose longer with rezpeg than with teplizumab, so they selected a six-month course. Mixed-meal tolerance tests and C-peptide levels are measured throughout the year — during treatment and for six months after treatment. The study is designed such that a course of intervention can change the slope of disease progression and provide the therapeutic benefit we're seeking, which is why the measurements extend to 12 months.
Thanks.
Thank you. I am showing no further questions from our phone line. I would now like to pass it back to Howard W. Robin for any closing remarks.
Well, thank you everyone for joining us today. It is not often that a company develops a new mechanism of action that has the potential to greatly help patients in need. I want to thank our employees for their diligence and commitment and our shareholders for their continued support. Stay tuned, and thank you very much again. Good afternoon.
This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.