nktr-20220930
false2022Q3000090670912-31P1Y00009067092022-01-012022-09-3000009067092022-10-27xbrli:shares00009067092022-09-30iso4217:USD00009067092021-12-31iso4217:USDxbrli:shares0000906709us-gaap:ProductMember2022-07-012022-09-300000906709us-gaap:ProductMember2021-07-012021-09-300000906709us-gaap:ProductMember2022-01-012022-09-300000906709us-gaap:ProductMember2021-01-012021-09-300000906709nktr:NonCashRoyaltyRevenueRelatedToSaleOfFutureRoyaltiesMember2022-07-012022-09-300000906709nktr:NonCashRoyaltyRevenueRelatedToSaleOfFutureRoyaltiesMember2021-07-012021-09-300000906709nktr:NonCashRoyaltyRevenueRelatedToSaleOfFutureRoyaltiesMember2022-01-012022-09-300000906709nktr:NonCashRoyaltyRevenueRelatedToSaleOfFutureRoyaltiesMember2021-01-012021-09-300000906709nktr:LicenseCollaborationAndOtherRevenueMember2022-07-012022-09-300000906709nktr:LicenseCollaborationAndOtherRevenueMember2021-07-012021-09-300000906709nktr:LicenseCollaborationAndOtherRevenueMember2022-01-012022-09-300000906709nktr:LicenseCollaborationAndOtherRevenueMember2021-01-012021-09-3000009067092022-07-012022-09-3000009067092021-07-012021-09-3000009067092021-01-012021-09-300000906709us-gaap:CommonStockMember2020-12-310000906709us-gaap:AdditionalPaidInCapitalMember2020-12-310000906709us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310000906709us-gaap:RetainedEarningsMember2020-12-3100009067092020-12-310000906709us-gaap:CommonStockMember2021-01-012021-03-310000906709us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-3100009067092021-01-012021-03-310000906709us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-03-310000906709us-gaap:RetainedEarningsMember2021-01-012021-03-310000906709us-gaap:CommonStockMember2021-03-310000906709us-gaap:AdditionalPaidInCapitalMember2021-03-310000906709us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-310000906709us-gaap:RetainedEarningsMember2021-03-3100009067092021-03-310000906709us-gaap:CommonStockMember2021-04-012021-06-300000906709us-gaap:AdditionalPaidInCapitalMember2021-04-012021-06-3000009067092021-04-012021-06-300000906709us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-04-012021-06-300000906709us-gaap:RetainedEarningsMember2021-04-012021-06-300000906709us-gaap:CommonStockMember2021-06-300000906709us-gaap:AdditionalPaidInCapitalMember2021-06-300000906709us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-300000906709us-gaap:RetainedEarningsMember2021-06-3000009067092021-06-300000906709us-gaap:CommonStockMember2021-07-012021-09-300000906709us-gaap:AdditionalPaidInCapitalMember2021-07-012021-09-300000906709us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-07-012021-09-300000906709us-gaap:RetainedEarningsMember2021-07-012021-09-300000906709us-gaap:CommonStockMember2021-09-300000906709us-gaap:AdditionalPaidInCapitalMember2021-09-300000906709us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-09-300000906709us-gaap:RetainedEarningsMember2021-09-3000009067092021-09-300000906709us-gaap:CommonStockMember2021-12-310000906709us-gaap:AdditionalPaidInCapitalMember2021-12-310000906709us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310000906709us-gaap:RetainedEarningsMember2021-12-310000906709us-gaap:CommonStockMember2022-01-012022-03-310000906709us-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-3100009067092022-01-012022-03-310000906709us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-03-310000906709us-gaap:RetainedEarningsMember2022-01-012022-03-310000906709us-gaap:CommonStockMember2022-03-310000906709us-gaap:AdditionalPaidInCapitalMember2022-03-310000906709us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-310000906709us-gaap:RetainedEarningsMember2022-03-3100009067092022-03-310000906709us-gaap:CommonStockMember2022-04-012022-06-300000906709us-gaap:AdditionalPaidInCapitalMember2022-04-012022-06-3000009067092022-04-012022-06-300000906709us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-04-012022-06-300000906709us-gaap:RetainedEarningsMember2022-04-012022-06-300000906709us-gaap:CommonStockMember2022-06-300000906709us-gaap:AdditionalPaidInCapitalMember2022-06-300000906709us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-06-300000906709us-gaap:RetainedEarningsMember2022-06-3000009067092022-06-300000906709us-gaap:CommonStockMember2022-07-012022-09-300000906709us-gaap:AdditionalPaidInCapitalMember2022-07-012022-09-300000906709us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-07-012022-09-300000906709us-gaap:RetainedEarningsMember2022-07-012022-09-300000906709us-gaap:CommonStockMember2022-09-300000906709us-gaap:AdditionalPaidInCapitalMember2022-09-300000906709us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-09-300000906709us-gaap:RetainedEarningsMember2022-09-300000906709us-gaap:EmployeeSeveranceMember2022-04-012022-04-30xbrli:pure0000906709nktr:BristolMyersSquibbCollaborationAgreementMember2022-09-300000906709nktr:BristolMyersSquibbCollaborationAgreementMember2021-12-310000906709srt:MinimumMember2021-01-012021-12-310000906709srt:MaximumMember2021-01-012021-12-310000906709us-gaap:FairValueInputsLevel2Memberus-gaap:CorporateDebtSecuritiesMember2022-09-300000906709us-gaap:FairValueInputsLevel2Memberus-gaap:CorporateDebtSecuritiesMember2021-12-310000906709us-gaap:FairValueInputsLevel2Memberus-gaap:CommercialPaperMember2022-09-300000906709us-gaap:FairValueInputsLevel2Memberus-gaap:CommercialPaperMember2021-12-310000906709us-gaap:FairValueInputsLevel2Memberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2022-09-300000906709us-gaap:FairValueInputsLevel2Memberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2021-12-310000906709us-gaap:FairValueInputsLevel2Member2022-09-300000906709us-gaap:FairValueInputsLevel2Member2021-12-310000906709us-gaap:FairValueInputsLevel1Memberus-gaap:MoneyMarketFundsMember2022-09-300000906709us-gaap:FairValueInputsLevel1Memberus-gaap:MoneyMarketFundsMember2021-12-310000906709us-gaap:FairValueInputsLevel2Memberus-gaap:CertificatesOfDepositMember2022-09-300000906709us-gaap:FairValueInputsLevel2Memberus-gaap:CertificatesOfDepositMember2021-12-310000906709nktr:SFJPharmaceuticalsMember2021-02-122021-02-120000906709us-gaap:DerivativeFinancialInstrumentsLiabilitiesMemberus-gaap:FairValueInputsLevel3Member2022-06-300000906709us-gaap:DerivativeFinancialInstrumentsLiabilitiesMemberus-gaap:FairValueInputsLevel3Member2021-06-300000906709us-gaap:DerivativeFinancialInstrumentsLiabilitiesMemberus-gaap:FairValueInputsLevel3Member2022-07-012022-09-300000906709us-gaap:DerivativeFinancialInstrumentsLiabilitiesMemberus-gaap:FairValueInputsLevel3Member2021-07-012021-09-300000906709us-gaap:DerivativeFinancialInstrumentsLiabilitiesMemberus-gaap:FairValueInputsLevel3Member2022-09-300000906709us-gaap:DerivativeFinancialInstrumentsLiabilitiesMemberus-gaap:FairValueInputsLevel3Member2021-09-300000906709us-gaap:DerivativeFinancialInstrumentsLiabilitiesMemberus-gaap:FairValueInputsLevel3Member2021-12-310000906709us-gaap:DerivativeFinancialInstrumentsLiabilitiesMemberus-gaap:FairValueInputsLevel3Member2020-12-310000906709us-gaap:DerivativeFinancialInstrumentsLiabilitiesMemberus-gaap:FairValueInputsLevel3Member2022-01-012022-09-300000906709us-gaap:DerivativeFinancialInstrumentsLiabilitiesMemberus-gaap:FairValueInputsLevel3Member2021-01-012021-09-300000906709nktr:PurchaseAndSaleAgreement2012Member2022-09-300000906709nktr:PurchaseAndSaleAgreement2020Member2022-09-300000906709nktr:PurchaseAndSaleAgreement2012Member2012-01-012022-09-300000906709nktr:PurchaseAndSaleAgreement2020Member2022-01-012022-09-3000009067092012-01-012022-09-300000906709nktr:LegalMattersMember2021-12-310000906709nktr:LegalMattersMember2022-09-300000906709nktr:OpdivoMembernktr:Nektar214Membernktr:BristolMyersSquibbCompanyMembernktr:BristolMyersSquibbCollaborationAgreementMember2018-02-122018-02-130000906709nktr:OpdivoMembernktr:Nektar214Membersrt:ParentCompanyMembernktr:BristolMyersSquibbCollaborationAgreementMember2018-02-122018-02-130000906709nktr:Nektar214Membernktr:BristolMyersSquibbCompanyMembernktr:BristolMyersSquibbCollaborationAgreementMember2018-02-122018-02-130000906709nktr:Nektar214Membersrt:ParentCompanyMembernktr:BristolMyersSquibbCollaborationAgreementMember2018-02-122018-02-130000906709nktr:Nektar214Membersrt:ParentCompanyMembernktr:BristolMyersSquibbCollaborationAgreementMember2018-04-012018-04-300000906709nktr:SharePurchaseAgreementMembernktr:BristolMyersSquibbCompanyMember2018-04-300000906709nktr:SharePurchaseAgreementMembernktr:BristolMyersSquibbCompanyMember2018-04-012018-04-300000906709nktr:MilestoneOneMembernktr:Nektar214Membersrt:ParentCompanyMembernktr:BristolMyersSquibbCollaborationAgreementMember2020-12-310000906709nktr:Nektar214Membernktr:BristolMyersSquibbCompanyMember2022-07-012022-09-300000906709nktr:Nektar214Membernktr:BristolMyersSquibbCompanyMember2022-01-012022-09-300000906709us-gaap:ResearchAndDevelopmentExpenseMembernktr:Nektar214Membernktr:BristolMyersSquibbCompanyMember2022-01-012022-09-300000906709us-gaap:ResearchAndDevelopmentExpenseMembernktr:Nektar214Membernktr:BristolMyersSquibbCompanyMember2021-07-012021-09-300000906709us-gaap:ResearchAndDevelopmentExpenseMembernktr:Nektar214Membernktr:BristolMyersSquibbCompanyMember2021-01-012021-09-300000906709nktr:Nektar358Membersrt:ParentCompanyMember2017-07-232017-07-230000906709srt:MaximumMembernktr:Nektar358Membernktr:EliLillyAndCompanyMember2017-07-230000906709nktr:EliLillyMembernktr:Nektar358Member2017-07-232017-07-230000906709srt:MaximumMembernktr:Nektar358Membernktr:EliLillyAndCompanyMembersrt:ParentCompanyMember2017-07-232017-07-230000906709nktr:Nektar358Membernktr:EliLillyAndCompanyMembersrt:ParentCompanyMember2017-07-232017-07-230000906709nktr:OtherPartnerMember2022-09-300000906709us-gaap:EmployeeSeveranceMember2022-06-30nktr:employee0000906709us-gaap:EmployeeSeveranceMember2022-04-300000906709nktr:EmployeeSeveranceWithNoServicePeriodMember2022-09-300000906709nktr:EmployeeSeveranceWithServicePeriodRequirementMember2022-09-300000906709us-gaap:EmployeeSeveranceMember2022-09-300000906709nktr:EmployeeSeveranceWithNoServicePeriodMember2022-03-310000906709nktr:EmployeeSeveranceWithServicePeriodRequirementMember2022-03-310000906709us-gaap:EmployeeSeveranceMember2022-03-310000906709nktr:EmployeeSeveranceWithNoServicePeriodMember2022-04-012022-06-300000906709nktr:EmployeeSeveranceWithServicePeriodRequirementMember2022-04-012022-06-300000906709us-gaap:EmployeeSeveranceMember2022-04-012022-06-300000906709nktr:EmployeeSeveranceWithNoServicePeriodMember2022-06-300000906709nktr:EmployeeSeveranceWithServicePeriodRequirementMember2022-06-300000906709nktr:EmployeeSeveranceWithNoServicePeriodMember2022-07-012022-09-300000906709nktr:EmployeeSeveranceWithServicePeriodRequirementMember2022-07-012022-09-300000906709us-gaap:EmployeeSeveranceMember2022-07-012022-09-300000906709nktr:MeasurementInputMarketParticipantSubtenantBorrowingRateMember2022-01-012022-09-300000906709nktr:SubleasePropertyPlantAndEquipmentMemberus-gaap:CarryingReportedAmountFairValueDisclosureMember2022-09-300000906709us-gaap:CarryingReportedAmountFairValueDisclosureMembernktr:SubleaseOperatingLeaseRightOfUseAssetsMember2022-09-300000906709us-gaap:CarryingReportedAmountFairValueDisclosureMember2022-09-300000906709us-gaap:EstimateOfFairValueFairValueDisclosureMembernktr:SubleasePropertyPlantAndEquipmentMemberus-gaap:FairValueInputsLevel3Member2022-09-300000906709us-gaap:EstimateOfFairValueFairValueDisclosureMembernktr:SubleaseOperatingLeaseRightOfUseAssetsMemberus-gaap:FairValueInputsLevel3Member2022-09-300000906709us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel3Member2022-09-300000906709nktr:SubleasePropertyPlantAndEquipmentMember2022-01-012022-09-300000906709nktr:SubleaseOperatingLeaseRightOfUseAssetsMember2022-01-012022-09-300000906709nktr:BuildingAndLeaseholdImprovementsMember2022-09-300000906709nktr:BuildingAndLeaseholdImprovementsMember2021-12-310000906709nktr:LaboratoryEquipmentMember2022-09-300000906709nktr:LaboratoryEquipmentMember2021-12-310000906709nktr:ComputerEquipmentAndSoftwareMember2022-09-300000906709nktr:ComputerEquipmentAndSoftwareMember2021-12-310000906709us-gaap:EquipmentMember2022-09-300000906709us-gaap:EquipmentMember2021-12-310000906709us-gaap:FurnitureAndFixturesMember2022-09-300000906709us-gaap:FurnitureAndFixturesMember2021-12-310000906709nktr:TotalPropertyPlantAndEquipmentExcludingConstructionInProgressMember2022-09-300000906709nktr:TotalPropertyPlantAndEquipmentExcludingConstructionInProgressMember2021-12-310000906709us-gaap:ConstructionInProgressMember2022-09-300000906709us-gaap:ConstructionInProgressMember2021-12-310000906709nktr:TwoThousandSeventeenPerformanceIncentivePlanMember2022-06-080000906709us-gaap:CostOfSalesMember2022-07-012022-09-300000906709us-gaap:CostOfSalesMember2021-07-012021-09-300000906709us-gaap:CostOfSalesMember2022-01-012022-09-300000906709us-gaap:CostOfSalesMember2021-01-012021-09-300000906709us-gaap:ResearchAndDevelopmentExpenseMember2022-07-012022-09-300000906709us-gaap:ResearchAndDevelopmentExpenseMember2021-07-012021-09-300000906709us-gaap:ResearchAndDevelopmentExpenseMember2022-01-012022-09-300000906709us-gaap:ResearchAndDevelopmentExpenseMember2021-01-012021-09-300000906709us-gaap:GeneralAndAdministrativeExpenseMember2022-07-012022-09-300000906709us-gaap:GeneralAndAdministrativeExpenseMember2021-07-012021-09-300000906709us-gaap:GeneralAndAdministrativeExpenseMember2022-01-012022-09-300000906709us-gaap:GeneralAndAdministrativeExpenseMember2021-01-012021-09-300000906709nktr:RestructuringImpairmentAndOtherCostsOfTerminatedProgramMember2022-07-012022-09-300000906709nktr:RestructuringImpairmentAndOtherCostsOfTerminatedProgramMember2021-07-012021-09-300000906709nktr:RestructuringImpairmentAndOtherCostsOfTerminatedProgramMember2022-01-012022-09-300000906709nktr:RestructuringImpairmentAndOtherCostsOfTerminatedProgramMember2021-01-012021-09-300000906709us-gaap:RestrictedStockUnitsRSUMember2022-07-012022-09-300000906709us-gaap:RestrictedStockUnitsRSUMember2021-07-012021-09-300000906709us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-09-300000906709us-gaap:RestrictedStockUnitsRSUMember2021-01-012021-09-30
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, 2022
or
TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from       to       
Commission File Number: 0-24006
_______________________________________________________________________
NEKTAR THERAPEUTICS
(Exact name of registrant as specified in its charter)
_______________________________________________________________________
Delaware94-3134940
(State or other jurisdiction of
incorporation or organization)
(IRS Employer
Identification No.)
455 Mission Bay Boulevard South
San Francisco, California 94158
(Address of principal executive offices)
415-482-5300
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock, $0.0001 par valueNKTRNASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes x  No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).  Yes   No
The number of outstanding shares of the registrant’s Common Stock, $0.0001 par value, was 187,954,482 on October 27, 2022.


Table of Contents
NEKTAR THERAPEUTICS
INDEX
Item 3.

2

Table of Contents
Forward-Looking Statements
This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are “forward-looking statements” for purposes of this Quarterly Report on Form 10-Q, including any projections of market size, earnings, revenue, milestone payments, royalties, sales or other financial items, any statements of the plans and objectives of management for future operations (including, but not limited to, preclinical development, clinical trials and manufacturing), any statements related to our financial condition and future working capital needs, any statements related to our strategic reorganization and cost restructuring plans, any statements regarding potential future financing alternatives, any statements concerning proposed drug candidates and our future research and development plans, any statements regarding the timing for the start or end of clinical trials or submission of regulatory approval filings, any statements regarding future economic conditions or performance, any statements regarding the initiation, formation, or success of our collaboration arrangements, commercialization activities and product sales levels by our collaboration partners and future payments that may come due to us under these arrangements, any statements regarding our plans and objectives to initiate or continue clinical trials, any statements related to potential, anticipated, or ongoing litigation and any statements of assumptions underlying any of the foregoing. In some cases, forward-looking statements can be identified by the use of terminology such as “believe,” “may,” “will,” “expects,” “plans,” “anticipates,” “estimates,” “potential” or “continue,” or the negative thereof or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, such expectations or any of the forward-looking statements may prove to be incorrect and actual results could differ materially from those projected or assumed in the forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to inherent risks and uncertainties, including, but not limited to, the risk factors set forth in Part I, Item 1A “Risk Factors” below and for the reasons described elsewhere in this Quarterly Report on Form 10-Q. All forward-looking statements and reasons why results may differ included in this report are made as of the date hereof and we do not intend to update any forward-looking statements except as required by law or applicable regulations. Except where the context otherwise requires, in this Quarterly Report on Form 10-Q, the “Company,” “Nektar,” “we,” “us,” and “our” refer to Nektar Therapeutics, a Delaware corporation, and, where appropriate, its subsidiaries.
Trademarks
The Nektar brand and product names, including but not limited to Nektar®, contained in this document are trademarks and registered trademarks of Nektar Therapeutics in the United States (U.S.) and certain other countries. This document also contains references to trademarks and service marks of other companies that are the property of their respective owners.
3

Table of Contents

Summary of Risks
We are providing the following cautionary discussion of risk factors, uncertainties and assumptions that we believe are relevant to our business. These are factors that, individually or in the aggregate, we think could cause our actual results to differ materially from expected and historical results and our forward-looking statements. We note these factors for investors as permitted by Section 21E of the Exchange Act and Section 27A of the Securities Act. Investors in Nektar Therapeutics should carefully consider the risks described below before making an investment decision. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider this section to be a complete discussion of all potential risks or uncertainties that may substantially impact our business. Moreover, we operate in a competitive and rapidly changing environment. New factors emerge from time to time, and it is not possible to predict the impact of all of these factors on our business, financial condition or results of operations.
Risks to our business are more fully described below in Item 1A in this Form 10-Q, which risks include, among others:
Risks Related to our Research and Development Efforts:
clinical drug development is a lengthy and uncertain process and we may not be able to generate and develop successful drug candidates for commercial use;
we are highly dependent on the success of rezpegaldesleukin (previously referred to as NKTR-358) and NKTR-255 and our business will be significantly harmed if either rezpegaldesleukin or NKTR-255 do not continue to advance in clinical studies;
the outcomes from competitive oncology and immunology therapy clinical trials, and the discovery and development of new potential oncology and immunology therapies could have a material and adverse impact on the value of our pipeline;
significant competition for our polymer conjugate chemistry technology platforms and our products and drug candidates could make our technologies, drug products or drug candidates obsolete or uncompetitive;
preliminary and interim data from our clinical studies are subject to audit and verification procedures that could result in material changes in the final data and may change as more patient data become available; and
clinical trials for any of our drug candidates could be delayed for a variety of reasons.
Risks Related to our Financial Condition and Capital Requirements:
we are implementing a strategic reorganization plan focused on prioritizing key research and development efforts, as well as a cost restructuring plan, and our business will be significantly harmed if either of these plans is unsuccessful;
we have substantial future capital requirements and there is a risk we may not have access to sufficient capital to meet our current business plan;
our revenue is exclusively derived from our collaboration agreements. If we are unable to establish and maintain collaboration partnerships with attractive commercial terms, including significant development milestones and research and development cost-sharing, our business, results of operations and financial condition could suffer; and
we expect to continue to incur substantial net losses from operations and may not achieve or sustain profitability in the future.
Risks Related to our Collaboration Partners:
we are highly dependent on Eli Lilly and Company, our collaboration partner for rezpegaldesleukin, our lead drug candidate, to initiate, properly conduct and prioritize clinical trials for rezpegaldesleukin and to perform important additional development and commercialization activities, and our business will be significantly harmed if our partner’s actions deprioritize or otherwise harm the prospects of rezpegaldesleukin;
Risks Related to the COVID-19 Pandemic:
our business and those of our collaboration partners could be adversely affected by the effects of health epidemics, including the ongoing COVID-19 pandemic. While the COVID-19 pandemic has not had a material adverse effect on our current operations, the ongoing challenges associated with the pandemic, including
4

Table of Contents
shortages in raw materials and equipment and other supply chain disruptions, could have a material negative impact on our and our collaboration partners' businesses and the clinical trial timelines for our drug candidates.
Risks Related to Supply and Manufacturing:
if we or our contract manufacturers are not able to manufacture drugs or drug substances in sufficient quantities that meet applicable quality standards, our business, financial condition and results of operations could be harmed; and
we purchase some of the starting material for drugs and drug candidates from a single source or a limited number of suppliers, and the partial or complete loss of one of these suppliers could cause delays, loss of revenue and contract liability.
Risks Related to Intellectual Property, Litigation and Regulatory Concerns:
we or our partners may not obtain regulatory approval for our drug candidates on a timely basis, or at all;
patents may not issue from our patent applications for our drug candidates, patents that have issued may not be enforceable, or additional intellectual property licenses from third parties may be required, which may not be available to us on commercially reasonable terms; and
from time to time, we are involved in legal proceedings and may incur substantial litigation costs and liabilities that could adversely affect our business, financial condition and results of operations.
In addition to the above-mentioned risks, our business is subject to a number of additional risks faced by businesses generally.
5

Table of Contents
PART I: FINANCIAL INFORMATION
Item 1.    Condensed Consolidated Financial Statements—Unaudited:
NEKTAR THERAPEUTICS
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
(Unaudited)
September 30, 2022December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents
$105,758 $25,218 
Short-term investments
440,629 708,737 
Accounts receivable
11,532 22,492 
Inventory
19,057 15,801 
Other current assets
22,507 23,333 
Total current assets
599,483 795,581 
Long-term investments
 64,828 
Property, plant and equipment, net
36,803 60,510 
Operating lease right-of-use assets
65,896 117,025 
Goodwill
76,501 76,501 
Other assets2,323 2,744 
Total assets
$781,006 $1,117,189 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$5,329 $9,747 
Accrued compensation
24,392 15,735 
Accrued clinical trial expenses
20,461 26,809 
Other accrued expenses
15,299 15,468 
Operating lease liabilities, current portion
18,508 17,441 
Total current liabilities
83,989 85,200 
Operating lease liabilities, less current portion
116,145 125,736 
Development derivative liability 27,726 
Liabilities related to the sales of future royalties, net165,595 195,427 
Other long-term liabilities3,054 3,592 
Total liabilities
368,783 437,681 
Commitments and contingencies


Stockholders’ equity:
Preferred stock, $0.0001 par value; 10,000 shares authorized; no shares designated or outstanding at September 30, 2022 or December 31, 2021, respectively
  
Common stock, $0.0001 par value; 300,000 shares authorized; 187,954 shares and 185,468 shares outstanding at September 30, 2022 and December 31, 2021, respectively
19 19 
Capital in excess of par value
3,561,878 3,516,641 
Accumulated other comprehensive loss(8,169)(4,157)
Accumulated deficit
(3,141,505)(2,832,995)
Total stockholders’ equity
412,223 679,508 
Total liabilities and stockholders’ equity
$781,006 $1,117,189 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6

Table of Contents
NEKTAR THERAPEUTICS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share information)
(Unaudited)
Three Months Ended September 30,Nine Months Ended
September 30,
2022202120222021
Revenue:
Product sales
$4,969 $5,194 $15,969 $17,835 
Non-cash royalty revenue related to the sales of future royalties18,342 19,413 52,167 58,667 
License, collaboration and other revenue
314 314 1,896 396 
Total revenue
23,625 24,921 70,032 76,898 
Operating costs and expenses:
Cost of goods sold
4,972 5,311 15,402 18,734 
Research and development
33,590 103,738 183,583 300,655 
General and administrative
22,534 29,468 70,394 90,702 
Restructuring, impairment and other costs of terminated program16,830  124,350  
Total operating costs and expenses
77,926 138,517 393,729 410,091 
Loss from operations(54,301)(113,596)(323,697)(333,193)
Non-operating income (expense):
Change in fair value of development derivative liability (3,328)33,427 (7,640)
Non-cash interest expense on liabilities related to the sales of future royalties(6,953)(12,801)(21,710)(39,186)
Interest income and other income (expense), net
2,050 131 3,541 2,388 
Total non-operating income (expense), net
(4,903)(15,998)15,258 (44,438)
Loss before provision for income taxes(59,204)(129,594)(308,439)(377,631)
Provision (benefit) for income taxes(155)112 71 561 
Net loss$(59,049)$(129,706)$(308,510)$(378,192)
Basic and diluted net loss per share$(0.31)$(0.70)$(1.65)$(2.07)
Weighted average shares outstanding used in computing basic and diluted net loss per share187,641 184,110 186,767 182,736 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7

Table of Contents


NEKTAR THERAPEUTICS
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
Three Months Ended September 30,Nine Months Ended
September 30,
2022202120222021
Net loss$(59,049)$(129,706)$(308,510)$(378,192)
Other comprehensive income (loss):
Net unrealized gain (loss) on available-for-sale investments490 (176)(2,589)(1,006)
Net foreign currency translation gain (loss)(468)13 (1,423)(262)
Other comprehensive income (loss)22 (163)(4,012)(1,268)
Comprehensive loss$(59,027)$(129,869)$(312,522)$(379,460)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8

Table of Contents
NEKTAR THERAPEUTICS
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)
Common
Shares
Par
Value
Capital in
Excess of
Par Value
Accumulated
Other
Comprehensive Loss
Accumulated
Deficit
Total
Stockholders’
Equity
Balance at December 31, 2020180,091 $18 $3,388,730 $(2,295)$(2,309,158)$1,077,295 
Shares issued under equity compensation plans2,199 — 17,106 — — 17,106 
Stock-based compensation— — 23,898 — — 23,898 
Comprehensive income (loss)— — — (826)(122,967)(123,793)
Balance at March 31, 2021182,290 $18 $3,429,734 $(3,121)$(2,432,125)$994,506 
Shares issued under equity compensation plans1,483 — 12,553 — — 12,553 
Stock-based compensation— — 23,714 — — 23,714 
Comprehensive income (loss)— — — (279)(125,519)(125,798)
Balance at June 30, 2021183,773 $18 $3,466,001 $(3,400)$(2,557,644)$904,975 
Shares issued under equity compensation plans781 — 1,777 — — 1,777 
Stock-based compensation— — 24,657 — — 24,657 
Comprehensive income (loss)— — — (163)(129,706)(129,869)
Balance at September 30, 2021184,554 $18 $3,492,435 $(3,563)$(2,687,350)$801,540 
Common
Shares
Par
Value
Capital in
Excess of
Par Value
Accumulated
Other
Comprehensive Loss
Accumulated
Deficit
Total
Stockholders’
Equity
Balance at December 31, 2021185,468 $19 $3,516,641 $(4,157)$(2,832,995)$679,508 
Shares issued under equity compensation plans806 — 188 — — 188 
Stock-based compensation— — 20,961 — — 20,961 
Comprehensive income (loss)— — — (2,375)(90,393)(92,768)
Balance at March 31, 2022186,274 $19 $3,537,790 $(6,532)$(2,923,388)$607,889 
Shares issued under equity compensation plans1,131 — 467 — — 467 
Stock-based compensation— — 11,103 — — 11,103 
Comprehensive income (loss)— — — (1,659)(159,068)(160,727)
Balance at June 30, 2022187,405 $19 $3,549,360 $(8,191)$(3,082,456)$458,732 
Shares issued under equity compensation plans549 — — — —  
Stock-based compensation— — 12,518 — — 12,518 
Comprehensive income (loss)— — — 22 (59,049)(59,027)
Balance at September 30, 2022187,954 $19 $3,561,878 $(8,169)$(3,141,505)$412,223 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

9

Table of Contents
NEKTAR THERAPEUTICS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
September 30,
20222021
Cash flows from operating activities:
Net loss$(308,510)$(378,192)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash royalty revenue related to the sales of future royalties(52,167)(58,667)
Non-cash interest expense on liabilities related to the sales of future royalties21,710 39,186 
Change in fair value of development derivative liability(33,427)7,640 
Non-cash research and development expense4,951 11,497 
Stock-based compensation44,582 72,269 
Depreciation and amortization9,848 10,710 
Impairment of right-of-use assets and property, plant and equipment58,521  
Amortization of premiums (discounts), net and other non-cash transactions(372)5,677 
Changes in operating assets and liabilities:
Accounts receivable10,960 9,895 
Inventory(3,256)(38)
Operating leases, net(1,423)2,932 
Other assets4,861 814 
Accounts payable(4,184)1,247 
Accrued compensation8,657 18,350 
Other accrued expenses(7,055)(4,442)
Net cash used in operating activities(246,304)(261,122)
Cash flows from investing activities:
Purchases of investments(295,439)(816,049)
Maturities of investments626,424 902,687 
Sales of investments 5,035 
Purchases of property, plant and equipment(5,164)(9,093)
Net cash provided by investing activities325,821 82,580 
Cash flows from financing activities:
Proceeds from shares issued under equity compensation plans655 31,436 
Cash receipts from development derivative liability750 2,250 
Net cash provided by financing activities1,405 33,686 
Effect of foreign exchange rates on cash and cash equivalents(382)(82)
Net increase (decrease) in cash and cash equivalents80,540 (144,938)
Cash and cash equivalents at beginning of period25,218 198,955 
Cash and cash equivalents at end of period$105,758 $54,017 
Supplemental disclosures of cash flow information:
Operating lease right-of-use asset recognized in exchange for lease liabilities$ $1,057 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
10

Table of Contents
NEKTAR THERAPEUTICS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
Note 1 — Organization and Summary of Significant Accounting Policies
Organization
We are a research-based biopharmaceutical company headquartered in San Francisco, California and incorporated in Delaware. We (individually or with a partner) are developing a pipeline of drug candidates that utilize our advanced polymer conjugate technology platforms, which are designed to enable the development of new molecular entities that target known mechanisms of action. Our research and development pipeline of new investigational drugs includes investigational treatments in oncology and immunology.
Our research and development activities have required significant ongoing investment to date and are expected to continue to require significant investment. As a result, we expect to continue to incur substantial losses and negative cash flows from operations in the future. We have financed our operations primarily through cash generated from licensing, collaboration and manufacturing agreements and financing transactions. As of September 30, 2022, we had approximately $546.4 million in cash and investments in marketable securities.
Results of Bempegaldesleukin Program and the Restructuring Plan
In March and April 2022, we announced the unsuccessful results from our clinical trials studying bempegaldesleukin in combination with Opdivo® under our Strategic Collaboration Agreement with Bristol-Myers Squibb Company (BMS). Based on these results, we decided to discontinue all of our ongoing clinical trials of bempegaldesleukin in combination with checkpoint inhibitors and tyrosine kinase inhibitors. In April 2022, we also announced new strategic reorganization and cost restructuring plans (together, the Restructuring Plan) for the Company’s future:
On March 14, 2022, BMS and we announced that the registrational trial for bempegaldesleukin in combination with Opdivo® in metastatic melanoma did not meet its primary endpoints and that BMS and we decided to discontinue the registrational trials in metastatic melanoma and adjuvant melanoma. See Note 7 for additional information on our BMS Collaboration Agreement.
On April 14, 2022, we announced that each of our registrational trials for bempegaldesleukin in combination with Opdivo® in renal cell carcinoma and in cisplatin-ineligible, locally advanced or metastatic urothelial cancer did not meet their respective primary endpoints. Due to these results, BMS and we decided to discontinue these studies and all other ongoing studies for bempegaldesleukin in combination with Opdivo®.
On April 14, 2022, we announced that, in consultation with SFJ Pharmaceuticals and based upon a recommendation from an independent Data Monitoring Committee, we decided to discontinue our Phase 2/3 study in bempegaldesleukin in combination with Keytruda® in patients with metastatic or unresectable recurrent squamous cell cancer of the head and neck under our Co-Development Agreement with SFJ Pharmaceuticals. See Note 4 for additional information regarding our Co-Development Agreement with SFJ Pharmaceuticals.
We also announced on April 14, 2022, the discontinuation of our Phase 1/2 PROPEL study of bempegaldesleukin in combination with Keytruda® in locally advanced or metastatic solid tumors, including non-small cell lung cancer. With these announcements on April 14, 2022, subject to activities required for an orderly wind down of the studies, there will be no ongoing clinical development activities of bempegaldesleukin.
On April 25, 2022, we announced our Restructuring Plan, which was reviewed and approved by our Board of Directors on April 14, 2022. Pursuant to the Restructuring Plan, on April 26, 2022, our duly authorized officers implemented certain strategic, operational and organizational steps, including the prioritization of key Phase 2 development programs to advance our early stage research pipeline. In addition, we announced our plan to reduce our workforce by approximately 70% and to close our research facility in India.
We have incurred and expect to incur significant costs resulting from these decisions and plans. See Note 8 for additional information on the effect on our Condensed Consolidated Financial Statements.
11

Table of Contents
Basis of Presentation and Principles of Consolidation
Our Condensed Consolidated Financial Statements include the financial position, results of operations and cash flows of Nektar Therapeutics and our wholly-owned subsidiaries. We have eliminated all intercompany accounts and transactions in consolidation.
We prepared our Condensed Consolidated Financial Statements following the requirements of the Securities and Exchange Commission (SEC) for interim reporting. As permitted under those rules, we may condense or omit certain footnotes or other financial information that are normally required by U.S. generally accepted accounting principles (GAAP) for annual periods. In the opinion of management, these financial statements include all normal and recurring adjustments that we consider necessary for the fair presentation of our financial position and operating results.
Our Condensed Consolidated Financial Statements are denominated in U.S. dollars. Accordingly, changes in exchange rates between the applicable foreign currency and the U.S. dollar will affect the translation of each foreign subsidiary’s financial results into U.S. dollars for purposes of reporting our consolidated financial results. We include translation gains and losses in accumulated other comprehensive loss in the stockholders’ equity section of our Condensed Consolidated Balance Sheets. To date, such cumulative currency translation adjustments have not been significant to our consolidated financial position.
Our comprehensive loss consists of our net loss plus our foreign currency translation gains and losses and unrealized gains and losses on available-for-sale securities. There were no significant reclassifications out of accumulated other comprehensive loss to the statements of operations during the three and nine months ended September 30, 2022 and 2021.
The accompanying Condensed Consolidated Financial Statements are unaudited. The Condensed Consolidated Balance Sheet data as of December 31, 2021 was derived from the audited consolidated financial statements which are included in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 1, 2022. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and the accompanying notes to those financial statements.
Revenue, expenses, assets, and liabilities can vary during each quarter of the year. The results and trends in these interim Condensed Consolidated Financial Statements are not necessarily indicative of the results to be expected for the full year or any other period.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Accounting estimates and assumptions are inherently uncertain.
Actual results could differ materially from those estimates and assumptions. As appropriate, we assess estimates each period, update them to reflect current information, and generally reflect any changes in estimates in the period first identified.
Significant Concentrations
Our customers are primarily pharmaceutical companies that are located in the U.S. and Europe and with whom we have multi-year arrangements. Our accounts receivable balance contains billed and unbilled trade receivables from product sales, milestones (to the extent that they have been achieved and are due from the counterparty), and other contingent payments, as well as reimbursable costs from collaborative research and development agreements. As of September 30, 2022 and December 31, 2021, our accounts receivable includes $8.0 million and $21.4 million, respectively, for unbilled net expense reimbursements from BMS. The remaining accounts receivable relate primarily to product sales. We generally do not require collateral from our customers. We perform a regular review of our customers’ credit risk and payment histories, including payments made after period end. Historically, we have not experienced credit losses from our accounts receivable. We have not recorded reserves for credit losses for the three and nine months ended September 30, 2022 and 2021, nor have recorded such an allowance as of September 30, 2022 or December 31, 2021.
We are dependent on our suppliers and contract manufacturers to provide raw materials and drugs of appropriate quality and reliability and to meet applicable contract and regulatory requirements. In certain cases, we rely on single sources of supply of one or more critical materials. Consequently, in the event that supplies are delayed or interrupted for any reason, including as a result of the COVID-19 pandemic, our ability to develop and produce our drug candidates, our ability to supply comparator drugs for our clinical trials, or our ability to meet our supply obligations could be significantly impaired, which could have a material adverse effect on our business, financial condition and results of operations.
12

Table of Contents
For our available-for-sale securities, we have significant concentrations of issuers in the banking and financial services industries. While our investment policy requires that we only invest in highly-rated securities and limit our exposure to any single issuer, various factors may materially affect the financial condition of issuers. Additionally, pursuant to our investment policy, we may sell securities before maturity if the issuer’s credit rating has been downgraded below our minimum credit rating requirements, which may result in a loss on the sale. Accordingly, if various factors result in downgrades below our minimum credit rating requirements and if we decide to sell these securities, we may experience losses on such sales.
Restructuring
We recognize restructuring charges related to reorganization plans that have been committed to by management when liabilities have been incurred. In connection with these activities, we record restructuring charges at fair value for:
contractual employee termination benefits provided that the obligations result from services already rendered based on vested rights to such benefits when the payment of benefits becomes probable and the amount can be reasonably estimated,
one-time employee termination benefits on the communication date from management to the employees provided that management has committed to a plan of termination, the plan identifies the employees and their expected termination dates, the details of termination benefits are complete, and it is unlikely that changes to the plan will be made or the plan will be withdrawn,
contract termination costs when we cancel the contract in accordance with its terms, and
costs to be incurred over the remaining contract term without economic benefit to us at the cease-use date.
For one-time employee terminations benefits, we recognize the liability in full on the communication date when future services are not required or amortize the liability ratably over the service period, if required. The fair value of termination benefits reflects our estimates of expected utilization of certain Company-funded post-employment benefits.
See Note 8 for additional information on the severance expense that we recognized for employees terminated in connection with our reduction-in-force.
Long-Lived Asset Impairment
We assess the impairment of long-lived assets whenever events or changes in business circumstances indicate that the carrying amounts of the assets may not be fully recoverable. In the case of property, plant and equipment and right-of-use assets for our leases, we determine whether there has been an impairment by comparing the carrying value of the asset to the anticipated undiscounted net cash flows associated with the asset. If such cash flows are less than the carrying value, we write down the asset to its fair value, which may be measured as anticipated net cash flows associated with the asset, discounted at a rate that we believe a market participant would utilize to reflect the risks associated with the cash flows, such as credit risk. See Note 8 for additional information regarding the impairment charge we recorded in connection with our leased facilities and certain property and equipment.
Note 2 — Cash and Investments in Marketable Securities
Cash and investments in marketable securities, including cash equivalents, are as follows (in thousands):
Estimated Fair Value at
September 30, 2022December 31, 2021
Cash and cash equivalents$105,758 $25,218 
Short-term investments440,629 708,737 
Long-term investments 64,828 
Total cash and investments in marketable securities$546,387 $798,783 
We invest in liquid, high quality debt securities which are subject to interest rate risk. To minimize the exposure due to an adverse shift in interest rates, we invest in securities with maturities of two years or less and maintain a weighted average maturity of one year or less. As of December 31, 2021, all of our long-term investments had maturities between one and two years.
13

Table of Contents
Our portfolio of cash and investments in marketable securities includes (in thousands):
Fair Value Hierarchy LevelSeptember 30, 2022December 31, 2021
Amortized CostGross Unrealized GainsGross Unrealized LossesFair ValueFair Value
Corporate notes and bonds2$115,652 $ $(1,489)$114,163 $278,121 
Corporate commercial paper2358,066  (1,763)356,303 478,629 
Obligations of U.S. government agencies21,130   1,130 5,875 
Available-for-sale investments$474,848 $ $(3,252)$471,596 $762,625 
Money market funds150,696 23,968 
Certificates of deposit215,754 10,940 
CashN/A8,341 1,250 
Total cash and investments in marketable securities$546,387 $798,783 
For the three and nine months ended September 30, 2022 and 2021, there were no transfers between Level 1 and Level 2 of the fair value hierarchy. At December 31, 2021, our gross unrealized losses totaled $0.7 million, and our gross unrealized gains were insignificant.
Note 3 — Inventory
Inventory consists of the following (in thousands):
September 30, 2022December 31, 2021
Raw materials$2,053 $3,166 
Work-in-process15,312 9,342 
Finished goods1,692 3,293 
Total inventory$19,057 $15,801 
We manufacture finished goods inventory upon receipt of firm purchase orders, and we may manufacture certain intermediate work-in-process materials and purchase raw materials based on purchase forecasts from our collaboration partners. We include direct materials, direct labor, and manufacturing overhead in inventory and determine cost on a first-in, first-out basis for raw materials and on a specific identification basis for work-in-process and finished goods. We value inventory at the lower of cost or net realizable value, and we write down defective or excess inventory to net realizable value based on historical experience or projected usage. We expense inventory related to our research and development activities as manufactured by us or when purchased.
Note 4 — Co-Development Agreement with SFJ Pharmaceuticals and Development Derivative Liability
On February 12, 2021, we entered into a Co-Development Agreement (the SFJ Agreement) with SFJ Pharmaceuticals XII, L.P., a SFJ Pharmaceuticals Group company (SFJ), pursuant to which SFJ would pay up to $150.0 million in committed funding to support a Phase 2/3 study of bempegaldesleukin in combination with Keytruda® (pembrolizumab) for first-line treatment of patients with metastatic or unresectable recurrent squamous cell carcinoma of the head and neck (the SCCHN Clinical Trial) whose tumors express PD-L1 (the SCCHN Indication). SFJ has primary responsibility for the clinical trial management of the SCCHN Clinical Trial, and we are the sponsor of the SCCHN Clinical Trial. The SFJ Agreement provided for us to pay up to $637.5 million in Success Payments in the event of FDA approval of bempegaldesleukin for the metastatic melanoma, the SCCHN Indication, or both, and in the event of FDA approval of one additional bempegaldesleukin indication.
As of March 31, 2022, due to the negative results of the metastatic melanoma trial and initial discussions with SFJ, we concluded that it was remote that SFJ and we would continue the SCCHN Clinical Trial. Accordingly, the fair value of the development derivative liability was reduced to $0 as of March 31, 2022, and we recognized a corresponding gain in the Change in fair value of development derivative liability. As discussed in Note 1, on April 14, 2022, BMS and we decided to end the development for bempegaldesleukin in combination with Opdivo® and that all other ongoing studies in the bempegaldesleukin program would be discontinued. We also announced that SFJ and we agreed to discontinue the SCCHN Clinical Trial.
14

Table of Contents
Accordingly, SFJ will not be entitled to any Success Payments, and SFJ has the responsibility to wind down the SCCHN Clinical Trial at its sole cost. SFJ has no right to seek reimbursement from us for any costs incurred for the SCCHN Clinical Trial.
We presented the SFJ Agreement as a Development derivative liability in our Condensed Consolidated Balance Sheets, which we remeasured to fair value at each reporting date. As SFJ conducted the SCCHN Clinical Trial, we recorded non-cash research and development expense with a corresponding increase to the development derivative liability, and as SFJ remitted funding to us to support our internal costs of conducting the trial, we also recorded a corresponding increase to the development derivative liability. We presented the gain (loss) from the remeasurement as change in fair value of development derivative liability in our Condensed Consolidated Statements of Operations.
The following table presents the changes in the development derivative liability:
Three Months Ended September 30,
Fair Value Hierarchy Level20222021
Fair value as of June 30, 2022 and 2021, respectively3$ $11,607 
Non-cash research and development expense 5,702 
Cash receipts from SFJ 750 
Change in the fair value of development derivative liability 3,328 
Fair value at end of period3$ $21,387 
Nine Months Ended September 30,
Fair Value Hierarchy Level20222021
Fair value as of December 31, 2021 and February 12, 2021 (inception), respectively3$27,726 $ 
Non-cash research and development expense4,951 11,497 
Cash receipts from SFJ750 2,250 
Change in the fair value of development derivative liability(33,427)7,640 
Fair value at end of period3$ $21,387 
Note 5 — Liabilities Related to Sales of Future Royalties
In 2012 and 2020, we sold to RPI Finance Trust (RPI) and entities managed by Healthcare Royalty Management, LLC (collectively, HCR), respectively, our rights to receive royalties under our license and manufacturing agreements with certain pharmaceutical partners as summarized below under the 2012 Purchase and Sale Agreement and the 2020 Purchase and Sale Agreement, respectively:
DrugManufacturerCounterparty under Purchase and Sale AgreementDate Sold
ADYNOVATE® and ADYNOVI® (brand name for ADYNOVATE® in Europe)
Takeda Pharmaceutical Company LimitedHealthcare Royalty Management, LLCDecember 16, 2020
MOVANTIK® (naloxegol tablets) and MOVENTIG® (brand name for MOVANTIK® in Europe)
AstraZeneca ABHealthcare Royalty Management, LLCDecember 16, 2020
REBINYN®
Novo Nordisk Inc., Novo Nordisk A/S and Novo Nordisk A/GHealthcare Royalty Management, LLCDecember 16, 2020
CIMZIA® (certolizumab pegol)
UCB PharmaRPI Finance TrustFebruary 24, 2012
MIRCERA® (Continuous Erythropoietin Receptor Activator)
F. Hoffmann-La Roche LtdRPI Finance TrustFebruary 24, 2012
Due to our ongoing manufacturing obligations in both arrangements, we account for the proceeds as imputed debt (Royalty Obligations) and therefore continue to recognize these non-cash royalties as revenue. As royalties are remitted to RPI
15

Table of Contents
and HCR by our licensees, the balances of the respective Royalty Obligations will be effectively repaid over the lives of the agreements. To determine the amortization of the Royalty Obligations, we are required to estimate the total amount of future royalty payments to be received by RPI and HCR, respectively. The sum of these amounts less the net proceeds we received will be recorded as non-cash interest expense over the lives of the respective Royalty Obligations. Additionally, to the extent that the amount or timing of the royalty payments is materially different from our original estimates, we will prospectively adjust the imputed interest rate and the related amortization of the applicable Royalty Obligation. As of September 30, 2022, our imputed interest rates for the arrangements with RPI and HCR were 16% and 15%, respectively.
The following table shows the activity within the liability account of each arrangement (in thousands):
 
Period from inception to September 30, 2022
 
2012 Purchase and Sale Agreement2020 Purchase and Sale AgreementTotal
Royalty monetization proceeds$124,000 $150,000 $274,000 
Non-cash royalty revenue(307,218)(78,400)(385,618)
Non-cash interest expense232,276 33,707 265,983 
Payments to RPI(10,000) (10,000)
Loss on revaluation of liability related to the sale of future royalties (1)23,522  23,522 
Liabilities related to the sales of future royalties – ending balance62,580 105,307 167,887 
Less: unamortized transaction costs (2,292)(2,292)
Liabilities related to the sales of future royalties, net$62,580 $103,015 $165,595 
(1) Loss recognized from Settlement Agreement to resolve UCB’s challenges to our patents, as agreed to by UCB, RPI and us, on October 13, 2021.
Note 6 — Commitments and Contingencies
Legal Matters
From time to time, we are involved in lawsuits, arbitrations, claims, investigations and proceedings, consisting of intellectual property, commercial, employment and other matters, which arise in the ordinary course of business. We make provisions for liabilities when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Such provisions are reviewed at least quarterly and adjusted to reflect the impact of settlement negotiations, judicial and administrative rulings, advice of legal counsel, and other information and events pertaining to a particular case. Litigation is inherently unpredictable. If any unfavorable ruling were to occur in any specific period, there exists the possibility of a material adverse impact on the results of our operations for that period and on our cash flows and liquidity.
In October 2018, we and certain of our executives were named in a putative securities class action complaint filed in the U.S. District Court for the Northern District of California (Case No. 18-cv-06607, which we refer to as the Mulquin action). The Mulquin plaintiffs challenged public statements Nektar made, between January 2017 and June 2018, about the clinical trials of bempegaldesleukin. In December 2020, the district court dismissed the action with prejudice. The plaintiffs filed a notice of appeal in January 2021 in the U.S. Court of Appeals for the Ninth Circuit. On May 19, 2022, the Ninth Circuit affirmed the district court's dismissal of all claims against the defendants.
A derivative action was also filed against certain of the Company’s current and former officers and directors, purportedly on the Company’s behalf, which was based on the allegations in the Mulquin action and on the premise that the Company’s officers and directors breached their fiduciary duties to the Company. The complaint for the derivative action was filed in February 2021 in the Court of Chancery of the State of Delaware (C.A. No. 2021-0118-PAF). Following a stay in the proceedings during the pendency of the appeal in the Mulquin action, the Company received an amended complaint in July 2022, which the defendants responded to in September 2022. Subsequently, the plaintiffs and defendants filed a joint stipulation to dismiss the action with prejudice on September 27, 2022.
We have recorded no liability for any litigation matters in our Consolidated Balance Sheets at either September 30, 2022 or December 31, 2021.
Indemnifications in Connection with Commercial Agreements
    As part of our collaboration agreements with our partners related to the license, development, manufacture and supply of drugs and PEGylation materials based on our proprietary technologies and drug candidates, we generally agree to defend, indemnify and hold harmless our partners from and against third party liabilities arising out of the agreement, including product
16

Table of Contents
liability (with respect to our activities) and infringement of intellectual property to the extent the intellectual property is developed by us and licensed to our partners. The term of these indemnification obligations is generally perpetual commencing after execution of the agreement. There is generally no limitation on the potential amount of future payments we could be required to make under these indemnification obligations.
From time to time, we enter into other strategic agreements such as divestitures and financing transactions pursuant to which we are required to make representations and warranties and undertake to perform or comply with certain covenants. For example, we made certain intellectual property representations in connection with our RPI and HCR transactions, however, the time limitation we have to indemnify RPI with respect to any breach of these intellectual property-based representations and warranties has passed. In the event it is determined that we breached certain of the representations and warranties or covenants made by us in any such agreements or certain express indemnification provisions are applicable, we could incur substantial indemnification liabilities depending on the timing, nature, and amount of any such claims.
To date, we have not incurred any costs to defend lawsuits or settle claims related to these indemnification obligations, nor any breaches of representations or warranties or covenants. Because the aggregate amount of any potential indemnification obligation is not a stated amount, we cannot reasonably estimate the overall maximum amount of any such obligations.
Note 7 — License and Collaboration Agreements
We have entered into various collaboration agreements including license agreements and collaborative research, development and commercialization agreements with various pharmaceutical and biotechnology companies. Under these collaboration arrangements, we are entitled to receive license fees, upfront payments, milestone and other contingent payments, royalties, sales milestone payments, and payments for the manufacture and supply of our proprietary PEGylation materials and/or reimbursement for research and development activities. We generally include our costs of performing these services in research and development expense, except for costs for product sales to our collaboration partners which we include in cost of goods sold. We analyze our agreements to determine whether we should account for the agreements within the scope of ASC 808, and, if so, we analyze whether we should account for any elements under ASC 606.
There have been no material changes to our collaboration agreements in the three and nine months ended September 30, 2022, other than as described below for our Strategic Collaboration Agreement with BMS and Note 4 regarding SFJ.
Bristol-Myers Squibb Company (BMS): Bempegaldesleukin, also referred to as NKTR-214
On February 13, 2018, we entered into a Strategic Collaboration Agreement (the BMS Collaboration Agreement) and a Share Purchase Agreement with BMS, both of which became effective on April 3, 2018. Pursuant to the BMS Collaboration Agreement, we and BMS have jointly developed bempegaldesleukin in combination with BMS’s Opdivo®. The parties share the internal and external development costs for bempegaldesleukin in combination regimens based on each party’s relative ownership interest in the compounds included in the regimens. In accordance with the agreement, the parties share development costs for bempegaldesleukin in combination with Opdivo®, 67.5% of costs to BMS and 32.5% to Nektar. The parties share costs for the manufacturing and commercialization of bempegaldesleukin, 35% of the costs to BMS and 65% to Nektar.
Upon the effective date of the BMS Collaboration Agreement in April 2018, BMS paid us a non-refundable upfront cash payment of $1.0 billion and purchased 8,284,600 shares of our common stock pursuant to the Share Purchase Agreement for total additional cash consideration of $850.0 million. In 2020, we received non-refundable milestone payments of $50.0 million in aggregate for the first patient, first visit in the registrational trials in muscle-invasive bladder cancer and adjuvant melanoma.
As discussed in Note 1, on March 14, 2022, we announced our registrational trial in metastatic melanoma did not meet its primary endpoints and that BMS and we decided to discontinue the trials in metastatic melanoma and adjuvant melanoma. On April 14, 2022, we announced that our registrational trials in each of renal cell carcinoma and cisplatin-ineligible, locally advanced or metastatic urothelial cancer did not meet their respective primary endpoints. Due to these results, BMS and we decided that these studies and all other ongoing studies in the program will be discontinued. The decision to terminate the program does not affect the cost-sharing provisions under the BMS Collaboration Agreement. However, without further development of bempegaldesleukin, we will no longer be eligible for the development, regulatory and sales milestones under the arrangement.
We determined that the BMS Collaboration Agreement falls within the scope of ASC 808. As mentioned above, BMS shares certain percentages of development costs incurred by us and we share certain percentages of development costs incurred by BMS. We consider these activities to represent collaborative activities under ASC 808 and we recognize such cost sharing proportionately with the performance of the underlying services. We recognized BMS’ reimbursement of our expenses as a reduction of research and development expense and our reimbursement of BMS’ expenses as research and development expense. As discussed in Note 8, beginning in the three months ended June 30, 2022, we began reporting clinical trial, other third-party costs and employee costs for the bempegaldesleukin program in Restructuring, impairment and other costs of program.
17

Table of Contents
Accordingly, during the three and nine months ended September 30, 2022, we recorded $8.3 million and $16.7 million, respectively, as a reduction of such expense for the net reimbursement from BMS. During the nine months ended September 30, 2022, we recorded $24.9 million as a reduction of research and development expense for the net reimbursement from BMS, reflecting the reimbursement recorded in the three months ended March 31, 2022. For the three and nine months ended September 30, 2021, we recorded $24.3 million and $76.5 million, respectively, as a reduction of research and development expense for the net reimbursement from BMS. As of September 30, 2022, we have recorded an unbilled receivable of $8.0 million from BMS in accounts receivable in our Condensed Consolidated Balance Sheet.
Eli Lilly and Company (Lilly): Rezpegaldesleukin (previously referred to as NKTR-358)
On July 23, 2017, we entered into a worldwide license agreement (the Lilly Agreement) with Eli Lilly and Company (Lilly) to co-develop rezpegaldesleukin, a novel immunological drug candidate that we invented, pursuant to which we received an initial payment of $150.0 million and are eligible for up to $250.0 million in additional development and regulatory milestones. We are currently in Phase 1B and Phase 2 development, where we share costs with 75% of the costs borne by Lilly and 25% of the costs borne by us. Lilly is responsible for the costs of Phase 3 development, but we retain the option to contribute up to 25% of the costs of Phase 3 development on an indication-by-indication basis in order for us to achieve the maximum royalty level under the Lilly Agreement, and further, if approved, we will have the opportunity to receive a royalty rate up to the low twenties percent based upon our Phase 3 development cost contribution and the level of annual global product sales. Lilly will be responsible for all costs of global commercialization, and we will have an option to co-promote in the U.S. under certain conditions. A portion of the development milestones may be reduced by 50% under certain conditions, related to the final formulation of the approved product and the timing of prior approval (if any) of competitive products with a similar mechanism of action, which could reduce these milestone payments by 75% if both conditions occur.
The Lilly Agreement will continue until Lilly no longer has any royalty payment obligations or, if earlier, the termination of the agreement in accordance with its terms. The Lilly Agreement may be terminated by Lilly for convenience, and may also be terminated under certain other circumstances, including material breach.
Although we are entitled to significant development milestones under this arrangement, through September 30, 2022, we have excluded such milestones from the transaction price due to the significant uncertainties involved with clinical development. We re-evaluate the transaction price at each reporting period and as uncertain events are resolved or other changes in circumstances occur.
Other
We have other collaboration agreements that have resulted in commercialized products for our collaborations partners. Under these agreements, we may sell our proprietary PEGylation materials for use in these products, and we are entitled to receive royalties based on net sales of these products as well as sales milestones. As discussed in Note 5, we have sold our rights to receive royalties from these other collaboration agreements. Our non-cash royalty revenue which totaled $18.3 million and $52.2 million for the three and nine months ended September 30, 2022, respectively, and totaled $19.4 million and $58.7 million for the three and nine months ended September 30, 2021, respectively, represents revenue for granting licenses which we had satisfied in prior periods.
Additionally, we have a collaboration agreement for a product under development, under which we are entitled to up to a total of $40.0 million of regulatory milestones, as well as sales milestones upon achievement of annual sales targets and royalties based on net sales of commercialized products, if any. However, given the current phase of development of the potential product under this collaboration agreement, we cannot estimate the probability or timing of achieving these milestones, and, therefore, have excluded all development milestones from the transaction price for this agreement.
Note 8 — Restructuring, Impairment and Other Costs of Terminated Program
As discussed in Note 1, because our registrational trials in bempegaldesleukin did not meet their primary endpoints, we decided to discontinue all of our ongoing clinical trials of bempegaldesleukin in combination with checkpoint inhibitors and tyrosine kinase inhibitors, and, during April 2022, we announced the Restructuring Plan to prioritize key Phase 2 development programs, to advance our early stage research pipeline and to reduce our workforce by approximately 70% from approximately
18

Table of Contents
735 to approximately 225 employees. In connection with these events, we reported the following costs in Restructuring, impairment and other costs of terminated program in the three and nine months ended September 30, 2022:
Clinical trial expense, other third-party costs and employee costs for the wind down of the bempegaldesleukin program, net of the reimbursement from BMS;
Severance and related benefit costs pursuant to the Restructuring Plan;
Impairment of right-of-use assets and property, plant and equipment resulting from the Restructuring Plan, primarily reflecting excess office and laboratory leased spaces in San Francisco, CA; and
Contract termination and other costs associated with these plans.
In prior periods through March 31, 2022, we reported the clinical trial costs, other third-party costs and employee costs related to the bempegaldesleukin program primarily in research and development expense.
Restructuring, impairment and other costs of terminated program includes the following (in thousands):
Three Months EndedNine Months Ended
September 30, 2022
Clinical trial expense, other third-party and employee costs for the wind down of the bempegaldesleukin program$8,530 $28,938 
Severance and benefit expense2,077 29,827 
Impairment of right-of-use assets and property, plant and equipment1,200 58,521 
Contract termination and other restructuring costs5,023 7,064 
Restructuring, impairment and other costs of terminated program$16,830 $124,350 
For the three and nine months ended September 30, 2022, we recorded reductions of expense of $8.3 million and $16.7 million, respectively, for the net reimbursement from BMS, primarily for clinical trial expense, other third-party and employee costs for the wind down of the bempegaldesleukin program.
Severance and Benefit Expense
Employees affected by the reduction in force under our Restructuring Plan are entitled to receive severance payments and certain Company funded benefits. We recognized severance and benefit expense in full for employees who were notified of their termination in April 2022 and have no requirements for future service, and we are recognizing expense for employees who are required to render services to receive their severance and benefits over the service period ratably over the service period. This service period began in April 2022 and all will end during 2022. The following table provides details regarding the severance and other termination benefit expense and a reconciliation of such liability for the three and nine months ended September 30, 2022, which we report within Accrued compensation on our Condensed Consolidated Balance Sheet (in thousands):
Three and Nine Months Ended September 30, 2022
No service periodService period requiredTotal
Total severance and other termination benefits, at fair value$23,000 $7,955 $30,955 
Liability balance as of March 31, 2022$ $ $ 
Expense recognized during the period23,588 4,162 27,750 
Payments during the period(12,881) (12,881)
Liability balance as of June 30, 2022$10,707 $4,162 $14,869 
Expense recognized during the period(588)2,661 2,073 
Payments during the period(9,544)(2,505)(12,049)
Liability balance as of September 30, 2022$575 $4,318 $4,893 
19

Table of Contents
In the three months ended September 30, 2022, we recorded a reduction to severance and benefits expense for a decrease in the estimated utilization of Company-funded post-employment benefits, and we may record similar adjustments in future periods. However, we do not expect that such adjustments will have a material effect on our results of operations or financial condition.
Impairment of Right-of-Use Assets and Property, Plant and Equipment
In connection with our Restructuring Plan, we have consolidated our operations by exiting all of the office space from our leased facility at 360 Third St. and certain laboratory and office spaces at our leased facility at 455 Mission Bay Blvd. South, both in San Francisco, CA. We are seeking to sublease these spaces, while still maintaining sufficient office and laboratory space to allow our team to develop our proprietary programs. We have also terminated all research and development activities at our owned facility in India, which we plan to sell.
As a result of these plans, we reviewed each of our excess spaces for impairment as of May 31, 2022, when management had determined which spaces we would retain and which spaces we may sublease, and subsequently at each reporting date or as facts and circumstances change. As part of our impairment evaluation of each excess space, we separately compared the estimated undiscounted income for each sublease to the net book value of the related long-term assets, which include right-of-use assets and certain property, plant and equipment, primarily for leasehold improvements (collectively, sublease assets). We estimated sublease income using market participant assumptions, including the length of time to enter into a sublease and sublease payments, which we evaluated using sublease negotiations or agreements when applicable, current real estate trends and market conditions. If such income exceeded the net book value of the related assets, we did not record an impairment charge. Otherwise, we recorded an impairment charge by reducing the net book value of the assets to their estimated fair value, which we determined by discounting the estimated sublease income using the estimated borrowing rate of a market participant subtenant, which we estimated to be 6.4%. For our India site, we recorded no impairment charge because the estimated net proceeds from the anticipated sale exceed the net book value of the site. We have classified the India facility as an asset held for sale as of September 30, 2022 and report this in other current assets in our Condensed Consolidated Balance Sheet. Additionally, we recorded an impairment expense primarily for software which we plan to abandon and certain excess equipment based on the estimated income from selling such assets, which we also present as assets held for sale in other current assets in our Condensed Consolidated Balance Sheet as of September 30, 2022. We recorded impairment charges as follows (in thousands):
Nine Months Ended September 30, 2022
Property, Plant and EquipmentOperating Lease Right-of-Use AssetsTotal
Net book value of impaired facilities before write-off$16,348 $74,191 $90,539 
Less: Fair value of impaired facilities — Level 3 of Fair Value Hierarchy(6,976)(30,162)(37,138)
Impairment expense for facilities9,372 44,029 53,401 
Impairment of other property, plant and equipment5,120 — 5,120 
Total impairment of right-of-use assets and property, plant and equipment$14,492 $44,029 $58,521 
In the three months ended September 30, 2022, we recorded an impairment charge of $1.2 million for a right-of-use asset based on changes to sublease negotiations during such period. We may record adjustments to impairment expense in future periods as we enter into sublease or sale agreements or update our estimates when additional information becomes available to us.
20

Table of Contents
The following table presents our property, plant and equipment as of September 30, 2022 and December 31, 2021, reflecting the effects of the impairment charges and held-for-sale reclassifications.
September 30, 2022December 31, 2021
Building and leasehold improvements$78,380 $97,385 
Laboratory equipment34,628 42,704 
Computer equipment and software28,183 28,829 
Manufacturing equipment23,779 22,374 
Furniture, fixtures, and other4,647 10,094 
Depreciable property, plant and equipment at cost169,617 201,386 
Less: accumulated depreciation(135,064)(148,039)
Depreciable property, plant and equipment, net34,553 53,347 
Construction-in-progress2,250 7,163 
Property, plant and equipment, net$36,803 $60,510 
Note 9 — Stock-Based Compensation
On June 8, 2022, the stockholders of Nektar approved an amendment to the Amended and Restated 2017 Performance Incentive Plan to increase the aggregate number of shares of Common Stock authorized for issuance thereunder by 5,000,000 shares.
In connection with our Restructuring Plan, we recorded the benefit for the forfeitures of stock awards from employees who were terminated as part of our reduction-in-force during the nine months ended September 30, 2022. We recognized total stock-based compensation expense in our Condensed Consolidated Statements of Operations as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Cost of goods sold
$720 $688 $2,037 $2,131 
Research and development
5,422 14,138 22,215 41,779 
General and administrative
5,369 9,831 18,401 28,359 
Restructuring, impairment and other costs of terminated program1,007  1,929  
Total stock-based compensation$12,518 $24,657 $44,582 $72,269 
We issued stock-based awards of our common stock as follows (shares in thousands):
Three Months Ended September 30,Nine Months Ended
September 30,
2022202120222021
Options granted
5,890 397 6,019 674 
Weighted-average grant-date fair value of options granted
$3.23 $9.36 $3.24 $9.72 
RSUs granted
3,896 727 4,905 1,614 
Weighted-average grant-date fair value of RSUs granted
$4.73 $16.48 $4.98 $17.98 
Note 10 — Net Loss Per Share
We calculate basic net loss per share based on the weighted-average number of common shares outstanding during the periods presented and calculate diluted net loss per share based on the weighted-average number of shares of common stock outstanding, including potentially dilutive securities. For all periods presented in the accompanying Condensed Consolidated Statements of Operations, our net loss available to common stockholders equals the reported net loss.
Basic and diluted net loss per share are the same due to our net losses and the requirement to exclude potentially dilutive securities which would have an antidilutive effect on net loss per share. Potentially dilutive securities consisted of weighted-
21

Table of Contents
average common shares underlying outstanding stock options and RSUs as follows (in thousands):
Three Months Ended September 30,Nine Months Ended
September 30,
2022202120222021
Potentially dilutive securities19,575 17,634 20,809 18,454 
22

Table of Contents
Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed here. Factors that could cause or contribute to such differences include, but are not limited to those discussed in this section as well as factors described in Part II, Item 1A “Risk Factors.”
Overview
Strategic Direction of Our Business
Nektar Therapeutics is a research-based biopharmaceutical company that discovers and develops innovative new medicines in areas of high unmet medical need. Our research and development pipeline of new investigational drugs includes potential therapies for oncology and immunology. We leverage our proprietary and proven chemistry platform to discover and design new drug candidates. These drug candidates utilize our advanced polymer conjugate technology platforms, which are designed to enable the development of new molecular entities that target known mechanisms of action. We continue to make significant investments in new drug discovery and advancing our pipeline of drug candidates as we believe that this is the best strategy to build long-term stockholder value.
In oncology, we focus on developing medicines in immuno-oncology (I-O), which is a therapeutic approach based on targeting biological pathways that stimulate and sustain the body’s immune response in order to fight cancer. In the I-O area, we executed a broad clinical development program to develop bempegaldesleukin (formerly NKTR-214) in combination with Opdivo® (nivolumab) in collaboration with Bristol-Myers Squibb Company (BMS) under our Strategic Collaboration Agreement. We also conducted independent development work evaluating bempegaldesleukin in combination with other checkpoint inhibitors and agents with potential complementary mechanisms of action, including studies evaluating bempegaldesleukin combination with Keytruda® (pembrolizumab). In April 2022, we and BMS jointly announced that the companies would be ending the global clinical development program for bempegaldesleukin in combination with Opdivo® and discontinue all ongoing studies in our collaboration with BMS. We also decided to discontinue all studies of bempegaldesleukin in combination with Keytruda®, as well as our studies of NKTR-262, which was being evaluated in combination with bempegaldesleukin.
In April 2022, we announced new strategic reorganization and cost restructuring plans (together, the Restructuring Plan) focused on prioritizing key research and development efforts that will be most impactful to the Company’s future, including our NKTR-255 and rezpegaldesleukin (previously referred to as NKTR-358) programs and several core research programs.
NKTR-255 is a biologic that targets the IL-15 pathway in order to activate the body’s innate and adaptive immunity. Activation of the IL-15 pathway enhances the survival and function of natural killer (NK) cells and induces survival of both effector and CD8+ memory T cells. Recombinant human IL-15 is rapidly cleared from the body and must be administered frequently and in high doses limiting its utility due to toxicity. Through optimal engagement of the IL-15 receptor complex, NKTR-255 is designed to enhance functional NK cell populations and formation of long-term immunological memory, which may lead to sustained and durable anti-tumor immune response. Preclinical findings suggest NKTR-255 has the potential to synergistically combine with antibody-dependent cellular cytotoxicity molecules as well as to enhance CAR-T therapies. We have initiated a Phase 1 dose escalation and expansion clinical study of NKTR-255 in adults with relapsed or refractory non-Hodgkin lymphoma or multiple myeloma, as well as a Phase 1/2 clinical study of NKTR-255 in patients with relapsed or refractory head and neck squamous cell carcinoma or colorectal cancer. We are continuing our oncology clinical collaboration with Merck KGaA and Pfizer Inc. to evaluate the maintenance regimen of NKTR-255 in combination with avelumab, a PD-L1 inhibitor, in patients with locally advanced or metastatic urothelial carcinoma in the Phase II JAVELIN Bladder Medley study. We are also designing a Nektar-sponsored Phase 2/3 study to combine NKTR-255 with approved autologous CAR-T therapies in relapsed/refractory large B-cell lymphoma, to be initiated in the first quarter of 2023.
In immunology, we recognize that a large number of diseases and conditions are caused by an imbalance in the body’s immune system. Pharmaceutical agents designed to restore balance to the immune system can be used to help patients suffering from immunology-based conditions, such as autoimmune diseases and inflammatory diseases. Our drug candidate rezpegaldesleukin is being developed as a once or twice monthly self-administered injection for a number of autoimmune diseases and inflammatory diseasesis, and is designed to optimally target the IL-2 receptor complex in order to stimulate proliferation and growth of regulatory T cells. In 2017, we entered into a worldwide license agreement with Eli Lilly and Company (Lilly) to develop and commercialize rezpegaldesleukin, pursuant to which we received an initial payment of $150.0 million and are eligible for up to an additional $250.0 million for development and regulatory milestones. We have completed our responsibilities for Phase 1 clinical development and certain drug product development and supply activities. We also share Phase 2 development costs with Lilly, with Lilly responsible for 75% and Nektar responsible for 25% of these costs. Lilly is responsible for the costs of Phase 3 development, but we retain the option to contribute up to 25% of the costs of Phase 3 development on an indication-by-indication basis in order for us to achieve the maximum royalty level under the Lilly Agreement, and further, if approved, we will
23

Table of Contents