Nektar Therapeutics said it will eliminate about 70% of its workforce—more than 500 jobs—as part of a restructuring announced 11 days after the failure of a four-year-old collaboration with Bristol Myers Squibb (BMS) to develop Nektar’s bempegaldesleukin (BEMPEG) with BMS’ cancer blockbuster Opdivo (nivolumab).

The estimate of jobs to be eliminated is based on the company disclosing in its Form 10-K annual report for 2021 that it ended 2021 with 740 employees, of which 577 employees were engaged in research and development, manufacturing, and quality-related activities, and 163 employees in general administrative and commercial operations function. Of the 740 employees, 661 were based in the U.S., Nektar disclosed.

Two senior executives will leave the company, Nektar disclosed. Dimitry S.A. Nuyten, MD, PhD, Nektar’s chief medical officer, will step down following a transition period ending in June. He will be succeeded by Brian Kotzin, MD, Nektar’s Head of Immunology, who the company said had more than 30 years of drug development experience and was an expert in the areas of immunology and inflammatory diseases. Kotzin had previously served as Nektar’s interim CMO.

John Northcott, Nektar’s chief commercial officer, who led the pre-commercialization activities for BEMPEG, will depart the company in June following a transition period, but will remain as a strategic consulting advisor to the company through the end of 2022, the company said.

In connection with the job reductions, Nektar said it expected to incur a charge of between $150 million and $160 million, of which a “substantial” portion will be reflected in its second-quarter financial results.

“Our new operating plan is designed to ensure we have at least three years of cash runway to support the advancement of our key programs through a steady stream of data catalysts that we expect will begin in the second half of 2022,” Nektar President and CEO Howard W. Robin, said yesterday in a statement.

Investors did not appear to immediately embrace the restructuring, as Nektar shares fell nearly 5% in early trading today, to $4.50 as of 10 a.m. ET, from yesterdays close of $4.72.

The restructuring, according to Nektar, will extend its cash runway into the first half of 2025 and ensure it has enough working capital to fund key R&D programs toward clinical milestones without having to raise external capital.

Two key clinical candidates

Nektar said it will slim down its pipeline to two major clinical development candidates and several core research programs.

One key candidate for Nektar going forward is NKTR-358, a first-in-class regulatory T (Treg) cell stimulator being co-developed with Eli Lilly through an up-to-$400 million collaboration launched in 2017. NKTR-358 (which Lilly has named LY3471851) targets the CD25 sub-receptor in the IL-2 pathway in order to stimulate proliferation and growth of regulatory T cells, thus addressing the imbalance in the immune system that underlies several autoimmune disorders and chronic inflammatory conditions.

Nektar’s Phase II program for NKTR-358 includes the ongoing 280-patient ISLAND-SLE Phase II trial in systemic lupus erythematosus (NCT04433585), a second Phase II trial the company said will start shortly in 300 patients with atopic dermatitis, and a third Phase II study assessing the drug in an as-yet-undisclosed autoimmune indication, set to potentially start in 2023.

Under its agreement with Lilly, Nektar received $150 million upfront and is eligible for up to $250 million in development and regulatory milestones. Nektar will have the option to participate in Phase III development up to 25% on an indication-by-indication basis and said it can receive “significant” double-digit royalties on global sales of NKTR-358 with the first tier in the mid-teens and the second tier in the low twenties of global sales of NKTR-358. Lilly has agreed to shoulder all costs of global commercialization, with Nektar retaining an option to co-promote NKTR-358.

The other key clinical program for Nektar is NKTR-255, an IL‐15 receptor agonist designed to boost the immune system’s natural ability to fight cancer by increasing the proliferation and survival of cancer-killing natural killer (NK) cells and memory CD8+ T cells. NKTR-255 is designed to engage the entire IL-15 receptor complex (IL‐15Rα/IL‐15Rβγ, in order to enhance the formation of long-term immunological memory, which the company reasons can lead to sustained antitumor immune response.

Nektar said it will continue the Merck KGaA-sponsored JAVELIN Bladder Medley Study (NCT02554812) and undertake new development efforts focused on using NKTR-255 as a cell therapy potentiator, based upon clinical observations and preclinical models suggesting NKTR-255 showed  potential to enhance CAR-T cell persistence.

NKTR-255 is also the subject of two studies being conducted with external collaborators assessing the drug in combination with CAR-T therapies. Nektar is also designing a company-sponsored comparative study which it said it aimed to begin in the second half of this year.  Nektar will also continue its dose-escalation development work in combination with antibody-dependent cell mediated cytotoxicity (ADCC) agents, adding that it planned to evaluate potential next steps once these data mature.

Analyst sees ‘negligible impact’

“Major catalysts for both programs will likely come in the 2023 to 2024 time frame with small data readouts in 2022 that, we believe, will have negligible impact on investor confidence,” Daina M. Graybosch PhD, a senior research analyst at SVB Securities covering Immuno-Oncology, wrote today in a research note. “We also believe it is too early for Nektar’s most advanced preclinical programs to have meaningful impact on the stock.”

In addition to its clinical programs, Nektar said, it is pursuing research programs that include a collaboration with Biolojic Design to develop a bivalent agonistic antibody targeting TNFR2; as well as company-initiated programs described only as being focused on autoimmune disease and oncology.

“Over the past several weeks, the Nektar executive team has made decisions to prioritize key research and development efforts that will be most impactful to the future of our company,” Robin stated. “This new strategic plan focuses on important pipeline programs—NKTR-358, NKTR-255 and preclinical candidates—each of which we believe presents an opportunity to create significant value for our shareholders.”

As a result of winding down its BEMPEG collaboration with BMS and restructuring costs, Nektar said it expected to end 2022 with approximately $440 million to $450 million in cash and investments, and no debt.

However, Nektar finished 2021 with $798.783 million in cash and cash equivalents, as well as short- and long-term investments—down 33% from $1.199 billion as of December 31, 2020.

As for cash and cash equivalents alone, Nektar spent more than half of that during the fourth quarter of 2021, going from $54.017 million as of September 30 to $25.218 million as of December 31—87% less than the $198.955 million the company reported at the end of 2020.

Shares of Nektar dropped 23% on April 18, four days after the company joined BMS to announce an end to their BEMPEG-Opdivo collaboration following failures in two clinical trials—the Phase III PIVOT-09 (NCT03729245) in patients with previously untreated advanced or metastatic renal cell carcinoma (RCC); and the Phase II PIVOT-10 trial (NCT03785925) in patients with cisplatin-ineligible, locally advanced or metastatic urothelial cancer.

BEMPEG-Opdivo failed PIVOT-9 by not meeting the prespecified boundary for statistical significance vs. the tyrosine kinase inhibitor (TKI) control arm in the International Metastatic Renal Cell Carcinoma Database Consortium (IMDC) intermediate/poor-risk or all-risk populations. PIVOT-10 did not reach an efficacy threshold to support continuing the program, BMS and Nektar acknowledged.

Those failures proved to be strikes two and three for BEMPEG-Opdivo. Last month came strike one, when the combination failed the Phase III PIVOT IO-001 trial (NCT03635983), assessing BEMPEG-Opdivo as a first-line treatment for previously untreated unresectable or metastatic melanoma.

In PIVOT IO-001, the independent Data Monitoring Committee (DMC) told the companies the combination missed the study’s third primary endpoint of overall survival (OS) because the data did not meet statistical significance at the first interim analysis. Worse, BEMPEG-Opdivo missed the trial’s two other primary endpoints altogether, progression-free survival and objective response rate.