Part I [Business](index=7&type=section&id=Item%201.%20Business) Nektar Therapeutics develops innovative medicines in oncology, immunology, and virology using its polymer conjugate technology, advancing proprietary and partnered programs - Nektar is a research-based biopharmaceutical company focusing on oncology, immunology, and virology, leveraging its **proprietary polymer conjugate technology platform** to design new drug candidates[21](index=21&type=chunk) - The company's lead immuno-oncology (I-O) candidate is **bempegaldesleukin**, which is being developed in a broad clinical collaboration with **Bristol-Myers Squibb (BMS)** in combination with Opdivo®[23](index=23&type=chunk)[24](index=24&type=chunk) - Nektar's key collaboration partner programs include **NKTR-358** with Eli Lilly for autoimmune diseases, **MOVANTIK®** with AstraZeneca for opioid-induced constipation, and **ADYNOVATE®** with Baxalta (Takeda) for Hemophilia A[31](index=31&type=chunk)[34](index=34&type=chunk) - The company's business strategy is to advance its **proprietary clinical pipeline**, ensure future growth through internal research, transition to a **fully-integrated company** with commercial capabilities in I-O, selectively enter strategic collaborations, and build its **intellectual property estate**[44](index=44&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk) - Competition is **intense** in the pharmaceutical and biotechnology industry, with Nektar facing competition in its technology platforms and drug programs from numerous large pharmaceutical companies[113](index=113&type=chunk)[115](index=115&type=chunk)[116](index=116&type=chunk) [Our Proprietary Programs](index=7&type=section&id=Our%20Proprietary%20Programs) - The lead proprietary candidate is **bempegaldesleukin**, an **IL-2 pathway agonist** for **immuno-oncology**, being developed in a comprehensive clinical program, including a major collaboration with **Bristol-Myers Squibb (BMS)**[23](index=23&type=chunk) - The BMS collaboration for bempegaldesleukin includes a **$1.0 billion up-front payment**, an **$850.0 million equity investment**, and a **65% profit share** for Nektar, with Nektar recording global revenue[24](index=24&type=chunk) - Other key proprietary programs include **NKTR-262**, a **TLR agonist** developed in combination with bempegaldesleukin, and **NKTR-255**, an **IL-15 pathway agonist** for immuno-oncology[26](index=26&type=chunk)[27](index=27&type=chunk) - The company is also exploring **bempegaldesleukin** and **NKTR-255** for applications in **virology**, including a clinical study of bempegaldesleukin for treating **mild COVID-19**[28](index=28&type=chunk)[29](index=29&type=chunk) [Collaboration Partner Programs](index=8&type=section&id=Collaboration%20Partner%20Programs) - **NKTR-358**, an **IL-2 agonist** for **autoimmune diseases**, is being co-developed with Eli Lilly and Company under a worldwide license agreement, with Nektar receiving a **$150.0 million initial payment** and eligible for up to **$250.0 million in milestones**[30](index=30&type=chunk)[31](index=31&type=chunk) - **MOVANTIK®**, for **opioid-induced constipation**, was developed by Nektar and licensed to **AstraZeneca**, which markets the drug globally[34](index=34&type=chunk) - **ADYNOVATE®**, an extended half-life treatment for **Hemophilia A**, was developed in collaboration with **Baxalta (a Takeda subsidiary)** and is approved in the U.S., EU, and other countries[34](index=34&type=chunk) - More than **10 products** using Nektar's **PEGylation technology** have received **regulatory approval** in the U.S. or EU through collaborations with companies like Amgen, Pfizer, and UCB Pharma[34](index=34&type=chunk) [Our Technology Platform](index=9&type=section&id=Our%20Technology%20Platform) - Nektar is a leader in **polymer conjugation**, with an **advanced technology platform** designed to improve the profile of a wide range of molecules by enhancing efficacy, safety, targeting, and other pharmacological properties[36](index=36&type=chunk)[37](index=37&type=chunk) - The platform's benefits include **improving pharmacokinetics**, **extending half-life**, enabling **oral administration** of parenteral drugs, and **reducing undesirable side effects** by limiting passage across the blood-brain barrier[38](index=38&type=chunk) - Specific applications of the technology include **large molecule pro-drug conjugates** like bempegaldesleukin, **small molecule stable polymer conjugates** like MOVANTIK®, and **antibody fragment conjugates** like CIMZIA®[39](index=39&type=chunk)[41](index=41&type=chunk)[43](index=43&type=chunk) [Government Regulation](index=20&type=section&id=Government%20Regulation) - The company's products are subject to **extensive regulation** by the **FDA** and comparable foreign agencies, covering research, development, clinical testing, manufacturing, marketing, and sales[83](index=83&type=chunk) - The **FDA approval process** for a new chemical entity involves extensive preclinical testing, submission of an **Investigational New Drug (IND) application**, and adequate and well-controlled human **clinical trials (Phases 1, 2, and 3)** before a **New Drug Application (NDA) or Biologics License Application (BLA)** can be submitted[84](index=84&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk) - The FDA granted **Breakthrough Therapy designation** for **bempegaldesleukin** in combination with **Opdiv®** for **metastatic melanoma**, which is intended to expedite development and review[93](index=93&type=chunk) - Product sales depend on **coverage and reimbursement** from **third-party payers** like Medicare, Medicaid, and private insurers, who are increasingly challenging prices and examining cost-effectiveness[95](index=95&type=chunk)[97](index=97&type=chunk) - The company is subject to **healthcare laws** targeting **fraud and abuse**, such as the federal **Anti-Kickback Statute** and the **False Claims Act**, with non-compliance potentially leading to **significant civil and criminal penalties**[99](index=99&type=chunk)[103](index=103&type=chunk) [Patents and Proprietary Rights](index=25&type=section&id=Patents%20and%20Proprietary%20Rights) - Nektar owns **over 300 U.S. and 1,050 foreign patents**, with numerous pending applications covering polymer architecture, drug conjugates, formulations, and manufacturing methods[107](index=107&type=chunk) - The company's **patent strategy** is to file applications on innovations to cover major pharmaceutical markets worldwide, with patents generally having a term of **twenty years**[107](index=107&type=chunk) - In addition to patents, Nektar relies on **trade secret protection** for confidential and proprietary information, requiring employees, consultants, and collaborators to execute **confidentiality agreements**[108](index=108&type=chunk)[110](index=110&type=chunk) - The patent position of biotechnology companies is **uncertain** and involves **complex legal issues**, with no assurance that issued patents will be held valid and enforceable, and they can be **challenged** through various legal proceedings[109](index=109&type=chunk) [Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) Nektar faces substantial risks including high dependency on bempegaldesleukin's success, clinical trial failures, intense competition, and capital requirements - The company is **highly dependent** on the success of its lead I-O candidate, **bempegaldesleukin**, and a failure in its clinical development would **significantly harm** the business, market valuation, and financial condition[140](index=140&type=chunk) - Nektar **relies heavily on collaboration partners** like BMS and Lilly to conduct and prioritize clinical trials, and any failure or deprioritization by these partners would **significantly harm** the prospects of the associated drug candidates[152](index=152&type=chunk) - The company has **substantial future capital requirements** and may not have sufficient access to capital, with failure to receive milestone payments or secure new funding potentially forcing a **reduction in R&D investment**[158](index=158&type=chunk) - The **COVID-19 pandemic** poses a risk to business operations, including potential **disruptions to clinical trials** (e.g., enrollment delays), **manufacturing supply chains**, and the health of the workforce[170](index=170&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk) - **Manufacturing and supply risks** are significant, as the company relies on **contract manufacturers** and a **limited number of suppliers** for critical raw materials, and any disruption could **delay clinical studies** and harm financial results[180](index=180&type=chunk)[185](index=185&type=chunk) - The company faces risks from **intellectual property disputes**, potential **patent invalidity**, and **litigation**, and is currently involved in several legal proceedings, including **securities class action lawsuits**[208](index=208&type=chunk)[218](index=218&type=chunk)[220](index=220&type=chunk) [Unresolved Staff Comments](index=54&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the Securities and Exchange Commission - None[244](index=244&type=chunk) [Properties](index=54&type=section&id=Item%202.%20Properties) Nektar's principal facilities include leased corporate headquarters and R&D space in San Francisco, and owned facilities in Alabama and India - Corporate headquarters and R&D operations are located in a **153,203 sq. ft.** leased facility in San Francisco, CA, with an additional **135,936 sq. ft.** of leased R&D space nearby[245](index=245&type=chunk)[246](index=246&type=chunk) - The company owns a **124,000 sq. ft.** facility in Huntsville, Alabama, which houses laboratories and manufacturing facilities for its polymer conjugate technology[247](index=247&type=chunk) - An **88,000 sq. ft.** research and development facility is owned near Hyderabad, India[248](index=248&type=chunk) [Legal Proceedings](index=54&type=section&id=Item%203.%20Legal%20Proceedings) The company is not a party to any material legal proceedings, referring to Item 1A for ongoing litigation details - The company is not currently a party to or aware of any proceedings that it believes will have a material adverse effect on its business, financial condition, or results of operations[249](index=249&type=chunk) - For information regarding ongoing securities class action and shareholder derivative litigation, the company refers to the Risk Factors section (Item 1A)[249](index=249&type=chunk) [Mine Safety Disclosures](index=54&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Not applicable[250](index=250&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=55&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Nektar's common stock trades on NASDAQ under "NKTR"; the company has never paid and does not anticipate paying cash dividends - The company's common stock trades on The NASDAQ Global Select Market under the symbol **"NKTR"**[252](index=252&type=chunk) Year Ended December 31, 2020 | Year Ended December 31, 2020 | High | Low | | :--- | :--- | :--- | | 1st Quarter | $27.96 | $14.47 | | 2nd Quarter | $23.44 | $16.86 | | 3rd Quarter | $24.79 | $16.59 | | 4th Quarter | $19.03 | $15.77 | - As of February 17, 2021, there were approximately **159 holders of record** of the company's common stock[254](index=254&type=chunk) - The company has never declared or paid cash dividends and does not anticipate paying any in the foreseeable future[255](index=255&type=chunk) [Reserved](index=56&type=section&id=Item%206.%20Reserved) This item is intentionally left blank - None [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=56&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Nektar's 2020 revenue increased to **$152.9 million** due to BMS milestones, with a **$444.4 million** net loss, and **$1.2 billion** in cash and investments - The company's strategic focus is on advancing its pipeline, particularly the immuno-oncology candidate **bempegaldesleukin** in collaboration with BMS, and **NKTR-358** in immunology with Lilly[261](index=261&type=chunk)[262](index=262&type=chunk)[267](index=267&type=chunk) - In January 2020, the company withdrew the NDA for **NKTR-181** after an unfavorable FDA advisory committee recommendation and decided to make no further investments in the program[269](index=269&type=chunk) - The COVID-19 pandemic has caused varying impacts on clinical trials, with some Nektar-run and partner-run studies experiencing delays of approximately **three to six months**[279](index=279&type=chunk)[280](index=280&type=chunk)[281](index=281&type=chunk) - As of December 31, 2020, the company had approximately **$1.2 billion** in cash and investments and believes it has sufficient working capital to fund business plans for at least the next twelve months[287](index=287&type=chunk) [Results of Operations](index=63&type=section&id=Results%20of%20Operations) Revenue Breakdown (2020 vs. 2019) | Revenue Category | 2020 (in thousands) | 2019 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Product sales | $17,504 | $20,117 | (13)% | | Royalty revenue | $30,999 | $41,222 | (25)% | | Non cash royalty revenue | $48,563 | $36,303 | 34% | | License, collaboration and other | $55,849 | $16,975 | >100% | | **Total revenue** | **$152,915** | **$114,617** | **33%** | - The increase in License, collaboration and other revenue was driven by the recognition of two **$25.0 million** milestone payments from the BMS Collaboration Agreement in 2020[294](index=294&type=chunk) - Research and development (R&D) expense decreased by **6%** to **$408.7 million** in 2020 from **$434.6 million** in 2019, mainly due to the cessation of spending on the NKTR-181 program, offset by increased costs for bempegaldesleukin, NKTR-255, and NKTR-262 programs[300](index=300&type=chunk)[301](index=301&type=chunk) - General and administrative (G&A) expense increased **6%** to **$104.7 million** in 2020, primarily due to increased personnel costs to build commercial capabilities for bempegaldesleukin[312](index=312&type=chunk) - The company recorded a charge of **$45.2 million** in 2020 for 'Impairment of Assets and Other Costs for Terminated Program' related to the wind-down of the NKTR-181 program[313](index=313&type=chunk)[314](index=314&type=chunk) [Liquidity and Capital Resources](index=71&type=section&id=Liquidity%20and%20Capital%20Resources) - As of December 31, 2020, the company had approximately **$1.2 billion** in cash and investments in marketable securities[323](index=323&type=chunk) - On April 13, 2020, the company repaid the principal and accrued interest of its senior notes, totaling **$254.8 million**[323](index=323&type=chunk) - The company believes its current working capital is sufficient to fund business plans for at least the next **twelve months**[325](index=325&type=chunk) - Future liquidity is significantly impacted by potential milestone payments from the BMS collaboration, which total approximately **$1.405 billion** remaining, with **$625.0 million** associated with the first approval and launch of bempegaldesleukin[271](index=271&type=chunk)[325](index=325&type=chunk) - In December 2020, the company received proceeds of **$146.3 million (net)** from the sale of future royalty rights for MOVANTIK®, ADYNOVATE®, and REBINYN® to Healthcare Royalty Management, LLC[336](index=336&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=77&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate fluctuations on debt securities, with a **50 basis point** increase potentially decreasing fair value by **$2.5 million** - The primary market risk is interest rate risk on the company's portfolio of debt securities, with investments in high-quality securities with maturities of **two years or less** to minimize this risk[346](index=346&type=chunk) - A hypothetical **50 basis point** increase in interest rates would result in an approximate **$2.5 million** decrease in the fair value of available-for-sale securities as of December 31, 2020[347](index=347&type=chunk) - The company is subject to foreign currency exchange risk from transactions in British pounds, Euros, and Indian Rupees, but does not utilize derivative financial instruments to manage this risk[349](index=349&type=chunk) [Financial Statements and Supplementary Data](index=78&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) Consolidated financial statements for 2020 show **$1.54 billion** in assets, **$152.9 million** revenue, and a **$444.4 million** net loss, with an unqualified audit opinion Consolidated Balance Sheet Highlights (as of Dec 31, 2020) | Metric | Amount (in thousands) | | :--- | :--- | | Total current assets | $1,138,005 | | Total assets | $1,538,767 | | Total current liabilities | $115,779 | | Total liabilities | $461,472 | | Total stockholders' equity | $1,077,295 | Consolidated Statement of Operations Highlights (Year ended Dec 31, 2020) | Metric | Amount (in thousands) | | :--- | :--- | | Total revenue | $152,915 | | Research and development | $408,678 | | Total operating costs and expenses | $578,026 | | Net loss | $(444,440) | | Net loss per share (Basic & Diluted) | $(2.49) | - The independent auditor, Ernst & Young LLP, issued an **unqualified opinion** on the financial statements and the effectiveness of internal control over financial reporting[355](index=355&type=chunk)[370](index=370&type=chunk) - Critical Audit Matters identified by the auditor were the accounting for accrued research and development expenses and the accounting for cost-sharing under the Bristol-Myers Squibb (BMS) Collaboration Agreement[359](index=359&type=chunk)[362](index=362&type=chunk)[364](index=364&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=119&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants regarding accounting or financial disclosure - None[551](index=551&type=chunk) [Controls and Procedures](index=119&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2020 - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of the end of the period covered by the report[553](index=553&type=chunk) - Management concluded that the company's internal control over financial reporting was **effective** as of December 31, 2020, based on the COSO 2013 framework[556](index=556&type=chunk) - There were no changes in internal control over financial reporting during the fourth quarter of 2020 that materially affected, or are reasonably likely to materially affect, these controls[557](index=557&type=chunk) [Other Information](index=120&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[560](index=560&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=121&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2020 proxy statement - Information required by this item is incorporated by reference from the company's definitive proxy statement for its **2020 Annual Meeting of Stockholders**[563](index=563&type=chunk) - The company has a Code of Business Conduct and Ethics available on its website, and any amendments or waivers for executive officers will be disclosed there[564](index=564&type=chunk) [Executive Compensation](index=121&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the Proxy Statement - The information required by this item is incorporated by reference from the Proxy Statement[566](index=566&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=121&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership and related stockholder matters is incorporated by reference from the Proxy Statement - The information required by this item is incorporated by reference from the Proxy Statement[567](index=567&type=chunk) [Certain Relationships and Related Transactions and Director Independence](index=121&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%20and%20Director%20Independence) Information on certain relationships, related transactions, and director independence is incorporated by reference - The information required by this item is incorporated by reference from the Proxy Statement[568](index=568&type=chunk) [Principal Accountant Fees and Services](index=121&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the Proxy Statement - The information required by this item is incorporated by reference from the Proxy Statement[569](index=569&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=122&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists financial statements, schedules, and key exhibits filed with the Form 10-K, including collaboration agreements and certifications - This item lists all financial statements, schedules, and exhibits filed with the Form 10-K[572](index=572&type=chunk)[573](index=573&type=chunk) - Key exhibits filed or incorporated by reference include the Strategic Collaboration Agreement with Bristol-Myers Squibb, the License Agreement with Eli Lilly, and the Purchase and Sale Agreement with Healthcare Royalty Management[576](index=576&type=chunk)[577](index=577&type=chunk) - Certifications by the Principal Executive Officer and Principal Financial Officer as required by Rule 13a-14(a) and Section 1350 are included as exhibits[577](index=577&type=chunk)

NEKTAR® SMARTER MEDICINE™ 39th Annual J.P. Morgan Healthcare Conference Howard Robin President & CEO January 11, 2021 2 This presentation includes forward-looking statements regarding Nektar's proprietary drug candidates, the timing of the start of and plans for ongoing or planned clinical trials with partners, the therapeutic potential of our drug candidates, the timing and outcome of regulatory decisions, and future availability of clinical trial data. Actual results could differ materially, and these sta ...

Financial Data and Key Metrics Changes - The company ended Q3 2020 with over $1.2 billion in cash and investments and no debt, maintaining a strong financial position [28][66] - Full year 2020 GAAP revenue projection remains between $140 million and $145 million, including $50 million of milestone payments from BMS and $90 million to $95 million of royalties, product sales, and other revenue [67] - GAAP R&D expense guidance is now anticipated to range between $415 million and $425 million, reflecting a decrease due to various factors including COVID-19 impacts [68] Business Line Data and Key Metrics Changes - The bempeg joint development program with Bristol-Myers Squibb (BMS) includes 6 ongoing studies, with 5 being registrational studies targeting melanoma, renal cell carcinoma, and bladder cancer [9][30] - The PROPEL study in non-small cell lung cancer is ahead of enrollment projections, indicating strong interest and demand for the treatment [10][26] Market Data and Key Metrics Changes - The addressable market opportunity for bempeg in melanoma and bladder cancer is significant, with combined sales of OPDIVO and KEYTRUDA in this setting approximating $2 billion [13] - The company is actively navigating the evolving COVID-19 landscape, ensuring minimal disruption to clinical trials and business operations [21] Company Strategy and Development Direction - The ultimate goal with bempeg plus nivolumab is to establish a new treatment paradigm in melanoma, enhancing patient outcomes [14] - The company is expanding its pipeline with new studies for NKTR-255 and NKTR-358, focusing on solid tumors and autoimmune conditions, respectively [15][19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the efficacy of bempeg, particularly in combination with nivolumab, and is encouraged by the data from ongoing studies [12][77] - The company remains focused on advancing its pipeline while managing operating expenses effectively amidst the challenges posed by the COVID-19 pandemic [69] Other Important Information - The company plans to host an analyst event on November 11 to discuss new data sets from its immune-oncology pipeline [14] - A proof-of-concept clinical study of bempeg for COVID-19 patients has been initiated, aiming to address severe disease phenomena observed in patients [44][45] Q&A Session All Questions and Answers Question: What is the efficacy bar for the PIVOT study in frontline melanoma? - The company aims for a response rate that is 10% to 15% higher than nivolumab's baseline response rate of around 40%, which would support accelerated approval based on overall response rate (ORR) [74] Question: Can you elaborate on the dynamics of PROPEL enrollment? - Enrollment has improved due to the reopening of sites after initial COVID-19 delays, reflecting the ongoing need for better therapies in non-small cell lung cancer [82] Question: What safety signals are being monitored in the NKTR-255 study? - The company is monitoring key cytokine-related toxicities and adverse events, focusing on the pharmacodynamic responses to ensure safety in combination therapies [87][90]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _______________________________________________________________________ FORM 10-Q _______________________________________________________________________ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 For the transition period from to Commission File Number: 0-24006 ______________________________________________________________ ...

Nektar Therapeutics (NASDAQ:NKTR) Q2 2020 Earnings Conference Call August 6, 2020 5:00 PM ET Company Participants Jennifer Ruddock - Senior Vice President, Strategy and Corporate Affairs Howard Robin - President and Chief Executive Officer Gil Labrucherie - Chief Operating Officer and Chief Financial Officer Jonathan Zalevsky - Chief, Research and Development Wei Lin - Head, Development Conference Call Participants Peter Lawson - Barclays Tyler Van Buren - Piper Sandler Chris Shibutani - Cowen Alex Lim - Mi ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _______________________________________________________________________ FORM 10-Q _______________________________________________________________________ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 or ☐ TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Comm ...

Nektar Therapeutics (NASDAQ:NKTR) Q1 2020 Earnings Conference Call May 7, 2020 5:00 PM ET Company Participants Jennifer Ruddock - SVP, Strategy & Corporate Affairs Howard Robin - President & CEO Wei Lin - SVP & Head of Development Jonathan Zalevsky - Chief R&D Officer Gil Labrucherie - COO & CFO Conference Call Participants Peter Lawson - Barclays Tyler Van Buren - Piper Sandler Chris Shibutani - Cowen Difei Yang - Mizuho Bert Hazlett - BTIG George Farmer - BMO Capital Markets Arlinda Lee - Canaccord Aydin ...

[PART I: FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%3A%20FINANCIAL%20INFORMATION) [Item 1. Condensed Consolidated Financial Statements — Unaudited](index=5&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20%E2%80%94%20Unaudited) This section presents Nektar Therapeutics' unaudited condensed consolidated financial statements for Q1 2020 versus Q1 2019, reflecting key financial performance and position [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a decrease in total assets and stockholders' equity, alongside a slight increase in total liabilities, reflecting the period's financial activity Condensed Consolidated Balance Sheets (in thousands) | | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Total current assets** | $1,429,324 | $1,421,894 | | **Total assets** | **$1,887,933** | **$1,977,356** | | **Total current liabilities** | $377,471 | $354,661 | | **Total liabilities** | **$591,507** | **$571,965** | | **Total stockholders' equity** | **$1,296,426** | **$1,405,391** | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The statements of operations show a significant increase in total revenue but a widened net loss, primarily driven by an impairment charge for a terminated program Condensed Consolidated Statements of Operations (in thousands, except per share data) | | Three months ended March 31, 2020 | Three months ended March 31, 2019 | | :--- | :--- | :--- | | **Total revenue** | **$50,573** | **$28,222** | | License, collaboration and other revenue | $27,515 | $4,204 | | Total operating costs and expenses | $184,204 | $148,909 | | Research and development | $108,987 | $118,463 | | Impairment of assets and other costs | $45,189 | $— | | **Loss from operations** | **($133,631)** | **($120,687)** | | **Net loss** | **($138,651)** | **($119,632)** | | **Basic and diluted net loss per share** | **($0.78)** | **($0.69)** | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities improved slightly, while investing activities provided significant cash, leading to an overall increase in cash and cash equivalents Condensed Consolidated Statements of Cash Flows (in thousands) | | Three months ended March 31, 2020 | Three months ended March 31, 2019 | | :--- | :--- | :--- | | **Net cash used in operating activities** | **($78,075)** | **($80,895)** | | **Net cash provided by (used in) investing activities** | **$197,767** | **($12,138)** | | **Net cash provided by financing activities** | **$11,077** | **$4,894** | | Net increase (decrease) in cash and cash equivalents | $130,672 | ($88,153) | | **Cash and cash equivalents at end of period** | **$227,035** | **$106,752** | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes detail accounting policies, significant events like the NKTR-181 program termination and related impairment, and key collaboration revenue, alongside other financial disclosures - The company is a research-based biopharmaceutical firm focused on developing treatments for cancer and autoimmune diseases, expecting to continue incurring **substantial losses** and **negative cash flows** due to significant R&D investment[23](index=23&type=chunk)[24](index=24&type=chunk) - Following a negative FDA advisory committee recommendation for NKTR-181, the company withdrew its NDA and terminated the program, resulting in a Q1 2020 charge of **$45.2 million**, comprising a **$19.7 million** write-off of advance payments and **$25.5 million** in other costs[55](index=55&type=chunk)[56](index=56&type=chunk) - In Q1 2020, the company recognized a **$25.0 million** milestone payment from its collaboration with Bristol-Myers Squibb (BMS) for bempegaldesleukin, following the first patient visit in a registrational muscle-invasive bladder cancer trial[75](index=75&type=chunk)[82](index=82&type=chunk)[85](index=85&type=chunk) - On April 13, 2020, subsequent to the quarter's end, the company redeemed its 7.75% senior secured notes by repaying the entire principal of **$250.0 million** and accrued interest of **$4.8 million**[107](index=107&type=chunk)[108](index=108&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses strategic pipeline focus, program terminations, the impact of COVID-19 on clinical trials, and financial performance, including revenue growth and net loss, while affirming sufficient working capital Revenue Breakdown Q1 2020 vs Q1 2019 (in thousands) | Revenue Type | Q1 2020 | Q1 2019 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Product sales | $3,444 | $4,398 | ($954) | (22)% | | Royalty revenue | $9,719 | $11,390 | ($1,671) | (15)% | | Non-cash royalty revenue | $9,895 | $8,230 | $1,665 | 20% | | License, collaboration & other | $27,515 | $4,204 | $23,311 | >100% | | **Total revenue** | **$50,573** | **$28,222** | **$22,351** | **79%** | - The increase in License, collaboration and other revenue was primarily due to the recognition of a **$25.0 million** milestone from the BMS Collaboration Agreement for the first patient visit in a registrational muscle invasive bladder cancer trial[151](index=151&type=chunk) - The company recorded an impairment charge of **$45.2 million** in Q1 2020 related to the termination of the NKTR-181 program, including a **$19.7 million** write-off of advance payments and **$25.5 million** for non-cancellable commitments and severance[166](index=166&type=chunk)[167](index=167&type=chunk) - The COVID-19 pandemic is expected to delay clinical trial timelines, with partner-led studies projected to be delayed by **three to six months** and earlier-stage Nektar-run studies by approximately **three months**[135](index=135&type=chunk)[136](index=136&type=chunk)[162](index=162&type=chunk) - As of March 31, 2020, the company had approximately **$1.5 billion** in cash and investments, and subsequently repaid **$254.8 million** in senior notes, with management believing it has sufficient working capital for at least the **next 12 months**[143](index=143&type=chunk)[175](index=175&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=51&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) There have been no material changes to the company's market risks since the prior annual report - Market risks as of March 31, 2020, have **not materially changed** from those reported in the 2019 Form 10-K[278](index=278&type=chunk) [Item 4. Controls and Procedures](index=51&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting despite the transition to remote work - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of the end of the period[280](index=280&type=chunk) - **No material changes** to internal control over financial reporting occurred in Q1 2020, and adjustments for remote work due to COVID-19 have **not materially impacted** these controls[281](index=281&type=chunk) [PART II: OTHER INFORMATION](index=53&type=section&id=PART%20II%3A%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=53&type=section&id=Item%201.%20Legal%20Proceedings) This section details ongoing legal proceedings, including securities class action and shareholder derivative complaints, for which no loss can be reasonably estimated or recorded - The company and certain executives are named in **securities class action** and **shareholder derivative lawsuits** alleging misrepresentations about bempegaldesleukin's efficacy, safety, and clinical trial plans[70](index=70&type=chunk)[261](index=261&type=chunk) - All legal cases are in early stages, and the company **cannot reasonably estimate** a potential future loss or range of losses, with **no liability** recorded as of March 31, 2020[70](index=70&type=chunk) [Item 1A. Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) This section outlines material risks, including dependency on lead drug candidate success, drug development uncertainty, COVID-19 impacts, manufacturing challenges, capital requirements, and competition - The company's future success is **highly dependent** on the successful development, regulatory approval, and commercialization of its lead immuno-oncology candidate, bempegaldesleukin[190](index=190&type=chunk) - The business could be **adversely affected** by health epidemics, particularly the COVID-19 pandemic, which may **disrupt clinical trials, manufacturing, and the supply chain**, and could delay patient enrollment and regulatory interactions[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk) - The company faces **risks related to manufacturing**, including the ability of its contract manufacturers to produce sufficient quantities and reliance on **single-source suppliers** for critical raw materials[211](index=211&type=chunk)[213](index=213&type=chunk) - The company has **substantial future capital requirements** and may **not have access to sufficient capital**, with future funding depending on achieving milestones, royalties, or new high-value collaborations[219](index=219&type=chunk)[222](index=222&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=53&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities or share repurchases during the quarter - There were **no unregistered sales** of equity securities or share repurchases in the three months ended March 31, 2020[287](index=287&type=chunk) [Item 3. Defaults Upon Senior Securities](index=53&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon its senior securities during the period - **No defaults** upon senior securities occurred[288](index=288&type=chunk) [Item 5. Other Information](index=53&type=section&id=Item%205.%20Other%20Information) No other information was reported under this item - **No information** was reported under this item[290](index=290&type=chunk) [Item 6. Exhibits](index=54&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Quarterly Report on Form 10-Q, including corporate governance documents and required certifications - **Lists exhibits** filed with the report, including corporate governance documents and **required SEC certifications**[292](index=292&type=chunk)[293](index=293&type=chunk)

Financial Data and Key Metrics Changes - The company exited 2019 with $1.6 billion in cash and investments and plans to end 2020 with approximately $1 billion after repaying $250 million in senior secured notes, resulting in $20 million annual interest savings [27][30] - GAAP revenue for 2020 is expected to be between $140 million and $145 million, including $50 million from new and accelerated milestone payments from BMS [27][28] - R&D expenses for 2020 are projected to range between $475 million and $500 million, with a significant portion allocated to the BEMPEG development program [28][29] Business Line Data and Key Metrics Changes - The company has made a strategic decision to withdraw the NDA for NKTR-181 due to increased regulatory scrutiny and liability concerns in the opioid class [4][5] - The ATTAIN study for ONZEALD did not meet its primary endpoint for overall survival, leading to the cessation of further clinical work on this product [6][7] - The BEMPEG program has expanded to include seven studies in collaboration with BMS, with a focus on melanoma, bladder cancer, and renal cell carcinoma [7][8] Market Data and Key Metrics Changes - The company is advancing its immuno-oncology and immunology pipeline, with NKTR-358 entering multiple clinical studies for autoimmune conditions [7][15] - The BEMPEG program has received FDA breakthrough therapy designation for metastatic melanoma, with ongoing studies expected to yield data in 2021 [9][10] Company Strategy and Development Direction - The company is focusing on immuno-oncology and immunology, believing it can create transformative medicines for patients [6][7] - The revised collaboration agreement with BMS reflects a strong commitment to the BEMPEG program, with plans for expanded studies and significant milestone payments [8][9] - The company is exploring combinations of BEMPEG with other checkpoint inhibitors and mechanisms, indicating a broad development strategy [12][13] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges faced in the opioid market and emphasized a strategic pivot towards immuno-oncology and immunology [4][5] - The company expressed confidence in the potential of BEMPEG and its differentiated approach in the cytokine field, setting a high bar for competitors [41][40] - Management is in ongoing discussions with regulatory agencies regarding endpoints for clinical trials, particularly in melanoma [44][45] Other Important Information - The company plans to initiate two Phase II studies for NKTR-358 in autoimmune diseases in 2020, reflecting a commitment to expanding its pipeline [29][15] - An impairment charge related to the NKTR-181 program is expected to be recorded in Q1, amounting to $45 million to $50 million [30] Q&A Session Summary Question: Enrollment progress for BEMPEG programs in lung cancer - Management indicated that enrollment for the pembrolizumab combination study has started, with data expected by the end of the year, while the nivolumab combination study is not yet open [32] Question: Efficacy expectations for NKTR-255 in monotherapy - Management noted that the study involves late-stage patients and will monitor various outcomes, including cellular changes in the bone marrow [34] Question: Potential to shift interim readout in melanoma trial to complete response rate - Management confirmed ongoing discussions with regulatory agencies regarding the use of complete response as an endpoint, but the primary readout remains based on overall response rate [44][45]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ___________________________________________________________________________ Form 10-K ___________________________________________________________________________ ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the fiscal year ended December 31, 2019 or ☐ TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to ...