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Nektar Therapeutics (NASDAQ:NKTR)
Q1 2021 Earnings Call
May 6, 2021, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Operator: Good day, and thank you for standing by. Welcome to the Nektar Therapeutics First Quarter 2021 Financial Results Conference Call. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Ms. Jennifer Ruddock, Head of Corporate Affairs. Ma'am, you may begin.

Jennifer Ruddock -- Head of Corporate Affairs

Thank you, Crystal, and good afternoon, everyone, and thank you for joining us today. With us on the call are Howard Robin, our President and CEO; Gil Labrucherie, our COO and CFO; Dr. Jonathan Zalevsky, our Chief of Research and Development; and Dr. Brian Kotzin, our Interim CMO and Head of Development.

On today's call, we expect to make forward-looking statements regarding our business, including clinical trial enrollment and clinical trial results, timing and plans for future clinical trials, timing and plans for future clinical data presentations, the therapeutic potential of our drug candidates, outcomes and plans for health authority regulatory actions and decisions, estimates and predictions of the COVID-19 pandemic's impact on our business and on clinical trials, financial guidance and certain other statements regarding the future of our business.

Because forward-looking statements relate to the future, they are subject to inherent uncertainties and risks that are difficult to predict and many of which are outside of our control. Important risks and uncertainties are set forth in the Form 10-K that was filed on February 26, 2021, which is available at sec.gov. We undertake no obligation to update any of these forward-looking statements, whether as a result of new information, future developments or otherwise. A webcast of this call will be available on the IR page of Nektar's website at nektar.com.

Before turning over the call to Howard, I'd like to remind you that, since we're dialing in from different locations today, I will moderate the Q&A session for our team, so we can avoid technical issues during the session. We appreciate your patience.

With that said, I would like to hand the call over to our President and CEO, Howard Robin. Howard?

Howard W. Robin -- President and Chief Executive Officer

Thank you, Jennifer, and thank you to everyone for joining us on the call today. We entered 2021 with a deep portfolio of candidates in immuno-oncology and immunology, spanning from Phase 1 to Phase 3 development, and we're looking forward to a steady cadence of key data readouts beginning later this year.

These data sets have the potential to set Nektar on a new trajectory and transform the treatment of a range of tumor types and autoimmune disease. Each investigational medicine in our portfolio provides us with its own distinct value, and gives us the ability to broaden the patient populations that we could potentially serve.

Our pioneering work designing novel cytokine conjugates as medicine has given us a leadership position in the field, and we continue to focus our research in this area and in the area of immune science, setting the stage for the next wave of IND candidates for our company.

So I'll start with a brief overview of the status of BEMPEG, our most advanced late-stage clinical program and novel IL-2 pathway agonist, which is being developed in combination with checkpoint inhibitors, OPDIVO or nivolumab and KEYTRUDA or pembrolizumab.

Our strategy for BEMPEG combined with these checkpoint inhibitors is focused on pursuing multiple large frontline and adjuvant solid tumor settings. Melanoma, renal cell carcinoma and bladder cancer with nivolumab and head and neck cancer and non-small cell lung cancer with pembrolizumab.

The opportunity for combining BEMPEG in these tumor settings, a significant 2020 sales of PD-1 checkpoint inhibitors across these five tumor settings were greater than $5 billion. So we're pleased with how BEMPEG is positioned in multiple registrational studies and with our planning for additional strategic late-stage studies.

The clinical program we put in place over the last several years, positions us far ahead of others pursuing IL-2 programs in cancer. Through our partnership with BMS, we have five ongoing registrational studies of BEMPEG with nivo that are proceeding nicely. Our first three registrational studies to read out in the first half of 2022 are the Phase 3 study in metastatic melanoma, the Phase 3 study in renal cell carcinoma and the Phase 2 accelerated approval study in cisplatin-ineligible bladder cancer.

Also ongoing are two large Phase 3 trials, further up line, one in adjuvant melanoma and one in muscle invasive bladder cancer. Both indications offer an opportunity to expand the patient populations in melanoma and bladder cancer that could benefit from treatment with BEMPEG.

In addition, BMS is conducting a Phase 2 study in renal cell carcinoma for BEMPEG plus nivo with a TKI to pave the way for future development of a TKI inclusive regimen in the setting of first-line RCC. The study is designed to build on their recent successful approval of nivo plus CABO.

In terms of our strategy for BEMPEG plus pembro, our first priority is to focus on the largest settings where pembrolizumab is the gold standard of care, non-small cell lung cancer and head and neck cancer. And where we have the ability in that setting to combine BEMPEG with pembro and run a comparative study designed for registrational purposes comparing against monotherapy Pembro.

For the first-line head and neck cancer indication, in February, we announced two separate collaborations, one with SFJ and one with Merck, which allows us to fund and advance a new registrational study for BEMPEG plus pembro versus monotherapy pembro. And recently, two late-stage competing studies had negative data readouts in the first-line setting. And as a result, the competitive landscape has so narrowed that we're excited about our decision and our ability to proceed with this study.

Pembro is now used in over 70% of patients in this setting and has replaced the extreme regimen. The study is very much on track to start at the end of Q3 or early Q4. We estimate that this new opportunity in head and neck cancer could generate annual revenues of between $500 million and $800 million globally, and so it represents a substantial value addition to the BEMPEG development group.

In non-small cell lung cancer, Nektar is advancing our own Phase 2 study known as PROPEL, studying BEMPEG plus pembro. We have been very pleased with the great interest in the study from leading thoracic oncology treatment sites. While pembrolizumab has improved overall survival for patients with non-small cell lung cancer, its benefit is still limited to two years or so. And we believe there's an opportunity to increase the benefit, the treatment benefit and develop a chemo-sparing regimen in this tumor setting. We're planning our first formal data cut from the initial part of the study sometime in the second half of this year. As we track to doublet PROPEL, we will use these data to form our first Phase 3 registrational trial strategy in non-small cell lung cancer, where we believe there to be a true differentiation in a chemo-sparing regimen.

Now to remind you, in the agreement with BMS, we have a $1.4 billion filing and milestone approvals for BEMPEG in the U.S., Europe and Japan, and these are tied to any approval of BEMPEG, whether the approval is in combination with nivo or not. We're eligible to receive $625 million for filings and approvals in the first indication and $260 million for each of the next three indications. Again, regardless of whether the filing and approval is in combination with nivo or pembro. With six registrational studies to support potential filings, we have many opportunities to bring in these milestones.

I'll now turn to NKTR-255, our second major cytokine program in immuno-oncology. This candidate is a remarkable development opportunity for us as a proliferation of natural killer cells that has also demonstrated its ability to expand CD8 T cells and memory T cells.

These unique attributes provide us with an opportunity for NKTR-255 that could even be more significant than BEMPEG in different tumor types, as we are developing this differentiated IL-15 agent in early stage studies in both liquid and solid tumors.

Our first Phase 1/2 clinical studies focused on combining NKTR-255 and with leading approved antibodies that use the mechanism of ADCC, or antibody-dependent cellular cytotoxicity, to kill cancer cells and which require functional natural killer cells for their mechanism of action.

We know that long-term expansion of natural killer cells through an IL-15 mechanism can greatly enhance the activity of these ADCC agents. And we're focusing our initial clinical studies in liquid and solid tumors to demonstrate that NKTR-255, given in combination with these agents increases clinical benefit for patients.

In liquid tumors, we're combining with rituximab and daratumumab. And in solid tumors, we're combining with cetuximab. We will have our first data in combination with these agents by the end of this year, and we look forward to sharing these data with you. And JZ will talk more about our excitement for NKTR-255 in a moment.

The third cytokine program in our portfolio is NKTR-358, which is being developed in autoimmune disease in partnership with Eli Lilly to address a broad range of autoimmune and inflammatory conditions. We currently anticipate Lilly will pursue Phase 2 studies in at least four indications.

NKTR-358, which was developed and discovered in our labs at Nektar, targets the interleukin-2 receptor complex in the body in order to stimulate proliferation of powerful inhibitory immune cells known as regulatory T cells. By activating these cells, NKTR-358 may have to bring the immune system back into balance.

With our partner, Lilly, we are the clear leader in this space, in respect to both our scope and our stage of development. And we're the only company to have reported multiple dose effect of our agent on T regulatory cells in patients. Brian will share more in this program later, but we've made great progress over the last six to nine months.

The clinical program successfully transitioned from our development team to Lilly's team. And Lilly now has four clinical studies under way, a 280-patient placebo-controlled Phase 2 study in lupus; a 200-patient placebo-controlled Phase 2 study in ulcerative colitis; and two ongoing separate Phase 1b studies in psoriasis and atopic dermatitis. There are plans for additional Phase 2 studies to be added to the program.

In lupus and in ulcerative colitis alone, the opportunity for NKTR-358 could be very significant. The leading agent in lupus right now, Benlysta, sells almost $800 million worldwide, but there's a great need for new and better treatment for these patients, with an estimated 750,000 patients in the U.S. now diagnosed with lupus.

Our early results are highly encouraging and this led to a large dose-ranging placebo-controlled study of NKTR-358 in these patients, which started in Q3 of last year. We anticipate results from this study could come in 2022.

In ulcerative colitis, current approved agents sell approximately six new -- $6 billion per year, with 600,000 patients in the U.S. and Europe alone diagnosed with moderate to severe ulcerative colitis. We believe we have an opportunity to serve these patients with a better potential therapy. The Phase 2 study in ulcerative colitis is now recruiting patients, and we're looking forward to the advancement of that program as well. We and our partner, Lilly view NKTR-358 as a potential first-in-class resolution therapeutic that may address the underlying immune system imbalance in patients with many autoimmune and inflammatory conditions.

Finally, our economics are significant here for NKTR-358, as our royalties in this agreement scale along with our development participation, which translates into significant ownership of an agent that is being broadly developed. We're proud of the work we've done in this program and are excited about the recognition from Lilly, a leader in the autoimmune space that NKTR-358 has the potential to help patients with a wide range of autoimmune and inflammatory conditions.

We also remain in a very strong financial position to execute against our deep and expanding pipeline. We ended the first quarter of 2021 with approximately $1.1 billion in cash and investments. And as you could see, Nektar has built an incredibly powerful pipeline of differentiated cytokine therapeutics that positions us well to build substantial value in multiple therapeutic areas.

So I'd like to turn the call now over to JZ, who will spend some time talking about the key development programs and the data readouts this year as well as other updates. JZ?

Jonathan Zalevsky -- Chief Research and Development Officer

Thank you, Howard. Let me start with the BEMPEG program and timing for our registrational trial readouts. But first, for the first-line metastatic melanoma study, which is being run by our partner, BMS. BMS has indicated that data from this trial would be available in the time frame of late this year or in the first part of 2022. Now this study evaluates the combination of BEMPEG plus nivolumab versus nivolumab monotherapy, and the design is modeled on a median progression-free survival for PFS for the nivolumab arm to be comparable to the 6.9 months observed in the CheckMate 067 study. And remember, since PFS is an event-driven analysis, a number of factors, including the rate of PFS event accumulation might impact the timing.

The next study, which Nektar is running, is the Phase 3 first-line renal cell carcinoma study. We expect that we could reach our first interim analysis for the primary endpoint of overall survival sometime in the first half of 2022. And as Howard stated earlier, BMS and Nektar are taking a comprehensive approach to the development of BEMPEG plus nivolumab in this tumor type. BMS is conducting a Phase 1/2 study in RCC that combines BEMPEG plus nivolumab with a TKI and allows us to compare this treatment to nivolumab TKI regimen to pave the way for a TKI inclusive regimen in RCC for the BEMPEG plus nivolumab doublet as well.

With respect to the Phase 2 study, first-line cisplatin-ineligible urothelial carcinoma, the study is designed to serve as a basis for a potential filing for accelerated approval. And the primary endpoints of overall response rate or ORR and duration of response as determined by central radiology review for about 110 cis-ineligible urothelial carcinoma patients who have a baseline CPS score of 10 or lower as a measure of PD-L1expression.

For this study, we are looking to achieve a median follow-up for measuring duration of response of 18 months, and we expect our first data from this study in the middle of 2022. We also have two large Phase 3 studies that build on our other work in urothelial carcinoma and melanoma.

First, our muscle invasive bladder cancer study, which is being run by BMS, is enrolling approximately 540 patients who will receive BEMPEG plus nivolumab or nivolumab monotherapy in the periadjuvant setting for the 12-month treatment period following surgery. As this study is large, we expect the first data readout to be in 2024. This study is also designed to serve as a confirmatory study for a potential accelerated approval in the cis-ineligible urothelial carcinoma setting.

Second, the advent melanoma trial is enrolling approximately 950 patients within a 12-month treatment period post-surgery, and an endpoint of event-free survival. The study is designed to position BEMPEG as the standard of care for the treatment of melanoma, building on the recent nivolumab approval in this study. The study, if successful, could significantly increase the number of melanoma patients that can benefit from the BEMPEG plus nivolumab combination. Initial data from this study is also expected in 2024.

As Howard stated, we expect to report initial data from the PROPEL non-small cell lung cancer study in the second half of this year. As we've said in the past, we are looking for a maturity of at least two scans or more for patients on treatment, so we can fully understand the potential clinical benefit of the doublet over time. The patients will be spread across three separate PD-L1 expression subgroups and the study plan is designed to show the benefit of the BEMPEG plus pembrolizumab doublet compared to historical ORR rates achieved with single-agent pembrolizumab in the efficacy of valuable patients treated in less than 1%, once at 49% and greater than or equal to 50% PD-L1 expression subgroups.

In non-small cell lung cancer, we know that the quantity of underlying inflammation in the tumor microenvironment has a big impact on the efficacy of single agent checkpoint inhibitors such as pembrolizumab. This is defined by PD-L1 expresser status. And as we have discussed in the past, single-agent pembrolizumab has the most benefit in patients in the greater than 50% subgroup.

Given the mechanism of BEMPEG, which targets and increases the inflammatory state of the tumor macro environment, we believe that the combination of BEMPEG and pembrolizumab in non-small cell lung cancer could improve the efficacy of the doublet in multiple PD-L1 expression subgroups. We also recently added a chemotherapy combination arm to the PROPEL study in order to allow us to potentially include the doublet with chemo option in our Phase 3 strategy.

The initial data from PROPEL. And the additional work we are also doing with a doublet in combination with chemotherapy will allow us to determine a comprehensive Phase 3 strategy for BEMPEG in non-small cell lung cancer. And we're looking forward to presenting data from the BEMPEG plus pembrolizumab doublet cohort in the second half of 2021.

For our new registrational Phase 2/3 trial in head and neck cancer, we are sponsoring the study and are close to finalizing the protocol details with the FDA and our collaborators, Merck and SFJ.

As Howard stated earlier, we are on track to start the study in the second half of this year. The 500-patient trial is designed to support a potential global registration for the BEMPEG plus pembrolizumab doublet.

It includes an interim analysis of ORR after the first 200 patients are enrolled. If the ORR passes a prespecified futility boundary, the study will continue and the remaining 300 patients will be enrolled to the Phase 3 portion of the study, and now 500 patients evaluated the primary endpoints of ORR and overall survival.

We are excited about the potential of this doublet, to increase and deepen their response versus pembrolizumab alone in this immune-sensitive cancer, especially given the data we have seen combining BEMPEG plus nivolumab in melanoma, which is another immune sensitive cancer.

Historically, IL-2 has shown activity in head and neck cancer, with several published studies in both the metastatic and adjuvant setting, and we're very excited to develop BEMPEG plus pembrolizumab here.

Additionally, there are limited late-stage studies going on in this frontline indication. There have been several recent failures of other mechanisms in the front line. So we see this as a unique opening for us to establish BEMPEG as the first IL-2 mechanism in head and neck cancer.

For our COVID-19 study, we remain on track to report data from this study by the middle of this year. As a reminder, last November, we started this Phase 1b randomized, double-blind, placebo-controlled trial, evaluating single doses of BEMPEG given to up to 30 adult patients with a confirmed COVID-19 infection who have mild symptomology.

The primary objectives of the trial are to establish the tolerability of BEMPEG as patients with mild COVID-19, evaluate the changes in immune activation over time and identify a recommended dose for the next study.

The study is proceeding very nicely, and we are currently enrolling into our last dose cohorts of patients. We are on track to report the first data this summer, and this will help us shape the potential future development path for BEMPEG in this setting, based upon the current treatment landscape.

And turning to NKTR-255, our IL-15 agonist program. The importance of natural killer cell biology in the treatment of cancer is becoming widely recognized. We've accessed the rich biology and therapeutic potential of natural killer cells with the discovery and development of NKTR-255, in agents that engages the full biology of the IL-15 pathway.

Moreover, the holistic function of engaging the IL-15 pathway with NKTR-255 can provide functional activation and homeostatic control of IL-15 responsive immune cells. Namely natural killer cells, CD8 T cells and immune memory subsets.

The biology unleased by NKTR-255 can be combined with multiple mechanisms ranging from targeted agents to cell therapy and even to immunological checkpoints to potentially improve their efficacy.

Our first clinical study focus on targeted antibodies that function through an ADCC mechanism of action. And we've developed a clinical strategy to combine with leading targeted antibodies in both liquid and solid tumors.

We expect to have several initial data readouts for multiple studies, capturing single-agent NKTR-255 dose escalation and combination with at least one targeted antibody in the second half of this year. We are looking forward to sharing these initial findings.

For our Phase 1/2 study in patients with relapsed/refractory hematologic malignancies, we've reported encouraging initial data at SITC 2020 in November, in patients with multiple myeloma and non-Hodgkin lymphoma, or NHL, which show that NKTR-255 is increasing NK cells in these patients. And we demonstrated additional dose-dependent pharmacodynamic changes and encouraging early signs of clinical activity of NKTR-255 as a single agent in these early dose cohorts.

We expect to complete the dose escalation monotherapy portion of the study in the first part of 2021, with data from dose escalation to be presented later this year. Once dose escalation is complete and we've identified a recommended Phase 2 dose, we will expand into several arms to approximately 20 patients per arm.

One arm will evaluate NKTR-255 as monotherapy or in combination with rituximab in third-line or greater follicular lymphoma or low-grade NHL. Another arm will evaluate NKTR-255 as a monotherapy and in combination with DARZALEX FASPRO in third-line or greater multiple myeloma. In one arm will evaluate NKTR-255 as a monotherapy for NHL patients who have previously progressed following approved CD19 CAR T cell therapies.

Our second clinical study is evaluating NKTR-255 in combination with cetuximab in two distinct groups of highly refractory late-line patients with metastatic colorectal cancer or head and neck cancer. We are enrolling up to 80 patients in the U.S. and Europe. As you know, cetuximab has a very low response rate, about 10% or 15% of these settings. And our goal is to improve upon that with the addition of NKTR-255. And this study begins with a dose escalation combination arm, and we've already treated patients here at our lowest dose and are proceeding to the next dose level.

As I stated, because of the low response rate achieved with cetuximab alone, there was a high unmet need in this later-line setting. Since we are able to demonstrate a higher response rate, we will have several potential paths forward with NKTR-255. And after the dose-finding portion for the combination, the study will then expand into dedicated cohorts for colorectal cancer and head and neck cancer patients. We expect to have some initial data from the dose-finding portion of the study later this year.

Now before I hand the call to Brian, I'd like to provide a brief update on our next wave of research activities. In our research and discovery laboratories, we continue our pioneering work based on our rich foundation expertise in immune science, cytokine biology and polymer chemistry. It goes without saying that the application of polymer chemistry has dramatic potential to improve the pharmacological properties of proteins, especially cytokines.

At Nektar, we have provided three clear examples in BEMPEG, NKTR-358 and NKTR-255. We continue this work with emphasis on other cytokines and their therapeutic applications inside and outside of oncology. This is a very rich target space for us because there are many cytokines that target diverse biological processes. And with polymer chemistry, we can employ multiple drug ability vectors to reach the desired biology.

Additionally, we focus our immune science expertise to consider other platform modalities beyond polymer chemistry on a case-by-case basis, depending on the target and the therapeutic hypothesis. Earlier this year, we announced a discovery collaboration with biologic design to develop therapeutic antibodies against a very important targeted immune system.

In this collaboration, we seek to further strengthen our pipeline and expand our modality footprint. We continue our efforts with preclinical advancement of our IND-enabling programs and I look forward to sharing additional updates on this work in the future.

I'll now turn the call over to Brian to review the NKTR-358 program in more detail.

Brian L. Kotzin -- Interim Chief Medical Officer and Head, Development

Thank you, JZ. As Howard said earlier, we are very pleased with the broad scope and progress of the NKTR-358 program by our partner, Eli Lilly. Following positive data in lupus patients last year, Lilly commenced the Phase 2 study in lupus, followed earlier this year by the initiation of a Phase 2 study in ulcerative colitis. Lilly also continues to advance the two separate Phase 1b studies in psoriasis and atopic dermatitis.

The rationale for T regulatory cell or Treg mechanism in the treatment of autoimmune diseases is compelling, and based upon extensive evidence of the role of the malfunctioning or imbalanced immune system as the underlying cause of the clinical manifestations of these diseases.

Many autoimmune and inflammatory disorders, including systemic lupus and ulcerative colitis are associated with decreased Treg numbers, reduced Treg function and/or reduced production of IL-2. With NKTR-358, our goal is to address these Treg abnormalities and to develop an IL-2-like molecule that could selectively stimulate Tregs in a more effective manner than native low-dose IL-2.

Data presented last year at both EULAR and the American College of Rheumatology meeting highlighted the potential of our approach. Importantly, we saw a dose-dependent and profound increase in Tregs and Treg subsets, induced by NKTR-358 in patients with mild-to-moderate lupus. We also saw improvement in lupus skin disease activity with NKTR-358.

These exciting data led Lilly to initiate a Phase 2 study in lupus with moderate to severe systemic lupus. In the Phase 2 study in lupus, which began dosing patients in quarter three of 2020, 280 patients are being randomized to one of three doses of NKTR-358 or placebo, administered every two weeks for a treatment period of 24 weeks.

The primary endpoint in the Phase 2 study is the percentage of patients achieving at least a 4-point reduction in the SLE disease activity index, or SLEDAI scale. Standard clinical composite endpoints used in lupus studies are also included as secondary endpoints.

We will also characterize pharmacokinetics, pharmacodynamics and immunogenicity in treated patients. Endpoints will be measured at week 24, and we expect the study to be completed within 18 to 24 months.

Earlier this year, Lilly also initiated a Phase 2 randomized placebo-controlled trial on patients with ulcerative colitis that began enrolling patients in quarter one of 2021. As in lupus, there is considerable evidence in the literature on the role of Tregs in inflammatory bowel diseases such as ulcerative colitis.

Reduced numbers and functionality of peripheral Treg cells have been noted in these patients, and there is also evidence that an inappropriate balance between functional Tregs and T effector cells in the intestinal microenvironment contributes to inflammatory lesions. So we are excited to pursue ulcerative colitis with NKTR-358 and expand this program with our partner, Lilly.

The study will evaluate multiple dose levels during the initial induction period, using an adaptive design. Total enrollment is planned to be 200 patients, and the trial endpoint is the percentage of patients with clinical remission after induction treatment at 12 weeks.

In addition, as Howard stated earlier, we know that Lilly is planning to continue to grow the development program for NKTR-358. There are plans for two additional Phase 2 studies to be initiated within the next nine to 12 months, in as yet undisclosed indications. We are pleased with Lilly's rapid advancement of the program and their desire to develop this agent broadly in inflammatory and autoimmune diseases.

Finally, we look forward to the potential presentation from the Phase 1b work ongoing in psoriasis and atopic dermatitis with NKTR-358. With data from at least one of these studies to be presented at a medical meeting in the next year.

I will now turn the call over to Gil for a review of the financials.

Gil M. Labrucherie -- Chief Operating Officer and Chief Financial Officer

Thank you, Brian, and good afternoon, everyone. On this call, I will review our 2021 financial guidance, which is unchanged for the year. We ended the first quarter in an exceptionally strong financial position with $1.1 billion in cash and investments.

During the quarter, we were pleased to announce that we entered into strategic collaborations with SFJ Pharmaceuticals and Merck. Under the terms of these agreements, SFJ is committed to fund up to $150 million to support the BEMPEG registrational study in head and neck cancer, and Merck will contribute pembrolizumab at no cost to Nektar. SFJ is entitled to success pavements based only on FDA approval of BEMPEG in first-line metastatic melanoma, head and neck cancer and one other BEMPEG indication.

We are very pleased with the risk/reward structure of these collaborations, giving us the ability to add another very large indication opportunity to the BEMPEG portfolio. Our projected cash usage for 2021 is unchanged from our February earnings call, and we still plan to end the year with at least $750 million in cash and investments.

Our full year GAAP revenue guidance remains unchanged at approximately $100 million for 2021, and includes between $15 million and $20 million of product sales, and $80 million and $85 million of noncash royalties. We expect to recognize this revenue on a fairly ratable basis during the year. Our GAAP R&D expense guidance is also unchanged for the year. We anticipate 2021 GAAP R&D expense will range between $450 million and $500 million.

Our R&D guidance includes a significant noncash component of approximately $85 million, which is comprised of $30 million of noncash development expenses for the BEMPEG head and neck study, which is being funded by SFJ, but which will continue to be reflected as a component of our R&D expense, and approximately $55 million of noncash depreciation and stock compensation expense.

Our G&A expense guidance for 2021 is still projected to be between $120 million and $125 million, and includes approximately $45 million of noncash depreciation and stock compensation expense. Our noncash interest expense is expected to be between $50 million and $60 million, arising from the monetization of our royalty streams.

Additionally, our non-operating expense includes the accounting for the contingent success-based payments to SFJ as a derivative liability.

Over time, we will assess the probability of SFJ earning these success payments and recognize the expense on our income statement with a corresponding increase to the derivative liability, based on a probability adjusted and weighted discounted cash flow model that we will examine on a quarterly basis. As I reviewed on our February call, we continue to expect approximately $15 million of non-cash expense related to the remeasurement of this derivative liability during 2021.

And with that, I will open the call to questions. Operator?

Questions and Answers:

Operator

Thank you. [Operator Instructions] And our first question comes from Peter Lawson from Barclays. Your line is open.

Peter Lawson -- Barclays -- Analyst

Great. Thanks for taking the question. Thanks for that. On the PROPEL study in lung, what's the amount of data that we could potentially see in the second half of this year?

Jennifer Ruddock -- Head of Corporate Affairs

Thanks, Peter. JZ, do you mind taking this one?

Jonathan Zalevsky -- Chief Research and Development Officer

Yeah, sure. Hey, Peter, this is JZ. Thank you for the question. So as we gave an update, both at JPMorgan and even earlier this year. So the way the study is designed, is that it's designed to enroll approximately 60 patients, and those patients are stratified across three different PD-L1 expression subgroups. And it's approximately 20 patients across each of the subgroups.

And then, as we explained late last year, we saw a real increased rate in the amount of accrual of patients. And we talked about before it had a lot to do with sort of the reduction in a lot of COVID intensity in Europe. And a lot of our European sites really developed very, very quickly. And so with the patients, we intend to follow them for a very long period of time, with at least two scans of data worth for the patients to provide a very rich and mature data set.

And when we target our second half of the year presentation, we'll be presenting the totality of data that you can expect to see from such a Phase 2 study. So for all of the patients will present the response rates, will present all the additional composites of the response, such as the complete response rate, the depth of response, the duration of response, any of the time to event kind of endpoints, along with all of the safety information that we've accumulated from the patients, as well as some of the biomarkers that we've also collected, both from available tumor biopsies, as well as whole blood samples.

And the kind of benchmark that we talked about, thinking about this kind of study is, there are some reasonable information for single-agent pembrolizumab across the PD-L1 subgroups. In the less than 1%, we've seen about an 8% response rate for single-agent pembro from KEYNOTE I.

In the 1% to 49% subgroup, we've seen a response rate of about 15% for single-agent pembro. And in the greater than 50%, we've seen the response rate of 40 to 45. And so those are the kinds of benchmarks to keep in mind as we think about the data from this study. Thanks for the question.

Peter Lawson -- Barclays -- Analyst

Thank you. And then just a follow-up. Does that -- I guess the third arm with chemotherapy in the PROPEL lung. When should we see data around that as well?

Jonathan Zalevsky -- Chief Research and Development Officer

Yeah. So we just started to open those cohorts. So they're just starting in their accrual. So we would expect to see data in the future well into next year.

Peter Lawson -- Barclays -- Analyst

Okay. Thanks so much. Thanks for taking the questions.

Operator

Thank you. Our next question comes from Jay Olson from Oppenheimer. Your line is open.

Jay Olson -- Oppenheimer -- Analyst

Hey, thanks for taking the question. As non-chemo triplets becomes increasingly promising. Can you comment on where the triple combo of BEMPEG plus nivo plus TKI would fit in RCC? And the potential to move a triplet combo like that into earlier lines of non-small cell lung cancer? Thank you.

Jennifer Ruddock -- Head of Corporate Affairs

Okay. JZ will you take that question.

Jonathan Zalevsky -- Chief Research and Development Officer

Sure. Yeah, yeah. Thank you for the question. So I think, certainly, we've seen the real impact, right, of a TKI combination with a checkpoint inhibitor in RCC. And we've seen multiple examples of that. You've seen it with avelumab plus axi, with pembro plus axi and then pembro with Lenvima, really some amazing results and of course, cabo plus nivolumab. So the opportunity to add a third agent, it does still exist because there's still the need for better response rates, better durability and further elevation of the tail of the curve.

Now all that said, you have to also balance all of these things. The RCC landscape is crowded, and there are a lot of developments going on. And then, of course, you also have to pay attention to not overly increasing any of the toxicity when you start combining three drugs together. But we're very excited about the opportunity with BEMPEG plus nivolumab in the TKI and as is BMS, which is why this is a really important part of our development program. And so that clinical trial is well under way. It's recruiting patients. And we think there's a real opportunity in that setting.

The other part of your question, I think, is also very, very provocative because we know that there's an ongoing study around the corner that's being run the LEAP [Phoneitc] study, both pembro plus Lenvima in non-small cell lung cancer. This one is really focusing on the greater than 1% population added on to nivolumab.

And so again, that would be a very interesting trial read out. It's expected likely in the early to mid part of the next year. And as that has the potential of impacting the standard of care in non-small cell lung cancer, again, it would be an opportunity for a triple combination, again, with the potential of that in BEMPEG even to that doublet as well.

Jay Olson -- Oppenheimer -- Analyst

Super helpful. Thanks for taking the question.

Operator

Thank you. Our next question comes from Jessica Fye from JPMorgan. Your line is open.

Jessica Fye -- JPMorgan -- Analyst

Hey guys, good evening. Thanks for taking my questions. I have a few on BEMPEG. First, nondominant then a couple on run. So you talked about the time to potential first data in that first-line melanoma study around year-end or early 2022. And I want to confirm whether that's based on the ORR interim? Or is that a PFS readout that you're referring to? And if it is ORR, then when do you expect the PFS results from that study tread out?

Jennifer Ruddock -- Head of Corporate Affairs

Hi, Jeff, this is Jennifer. I'll take this and see if JZ wants to add anything. But BMS is actually running the melanoma study. So we do have two endpoints ORR and PFS that will read out first. Based on the original design of the study, those two endpoints were separated by between four to six months. We have not decided with BMS yet how we'll be disclosing the data.

But I think the best guide is probably to look at other companies that they've had studies running with in terms of their disclosures and how they disclose data. For example, the CheckMate 9ER study was disclosed in a press release. So again, BMS is running the study, and we'll be working closely with them on the disclosures around it, but I don't think any decisions have been made yet on that. But the original design was ORR then PFS, and both by independent review.

Jessica Fye -- JPMorgan -- Analyst

Okay. And then on, one, what do you expect the average number of scans to be per patient in the PROPEL study by the time that it's presented? I know you talked about the patients all having a minimum of two scans, but I'm asking what the average number of scans you expect by them will be?

Jennifer Ruddock -- Head of Corporate Affairs

JZ, do you want to try to address this in terms of the level of maturity?

Jonathan Zalevsky -- Chief Research and Development Officer

Yeah. I mean, so what our intention, Jessica, is to present mature data. And so because the study began in the middle part of last year, so some patients have been in the study longer than others. And then, of course, we scan on approximately nine-week interval. And so our intention is that the minimum amount of data is two patients per scan. And again, the goal is to just really present a rich and interpretable data set.

Jessica Fye -- JPMorgan -- Analyst

Got it.

Operator

Thank you. And our next question comes from Difei Yang from Mizuho. Your line is open.

Alex -- Mizuho -- Analyst

Hey, good afternoon guys. This is Alex [Phoneitc] on for Difei. Thanks for taking the question. Another question on the long data here that's coming up in the second half. You talked a little bit about benchmarks with pembro alone and the ORR rates in the different PD-L1 expressers. Can you talk a little bit about what you would consider as promising in terms of the delta in response rates versus pembro alone that you'd like to see and that would -- that you would take forward? And then also along with that, will the decision to move forward or not be a joint decision made by Merck and Nektar together?

Jennifer Ruddock -- Head of Corporate Affairs

Thanks, Alex. JZ, do you want to answer?

Jonathan Zalevsky -- Chief Research and Development Officer

Sure, yeah. Yeah, absolutely. Those are good questions. And so as I mentioned, the benchmarks that we talked about for single-agent pembrolizumab. So the study does have some statistical considerations built into it, such as the Fleming criteria that we talked about before. So there are some Fleming guidelines, right, that are incorporated into the trial. But another way that you could think about it, Alex, is just ways that are meaningfully different, right, than those benchmarks. So, for example, if you consider the 1% to 49% subgroup, and then you also consider the mechanism of action of BEMPEG to essentially transform the tumor microenvironment to look like a tumor that's like greater than 50. And it's kind of PD-L1 status. It's interferon gene expression, the amount of CD8 infiltrates and other things like that.

We -- you could really transform that tumor to increase the efficacy of the combination. So when we look at those benchmarks, we look at things like doubling, for example, or more the response rate in the less than 1%, for example, tripling it. So in the 20s, the mid-20s relative to 8% historical and the less than 1%. Those are the kinds of ranges that we're looking at.

And then, you also look at the whole totality of the data as well, right? We'll look at durability of the responses and we'll look at time to event, like progression and other kinds of components as well.

In terms of the decision to go to Phase 3, remember that we're running the PROPEL study on our own. We're not collaborating with Merck on that trial. And so, any decision to move forward to Phase 3 will be based on the actionability of that data from PROPEL, and that will be our decision, Nektar, to make.

Alex -- Mizuho -- Analyst

Great. Thank you.

Operator

Thank you. Our next question comes from Ben Burnett from Stifel. Your line is open.

Ben Burnett -- Stifel -- Analyst

Fantastic. Just a quick one for me. Regarding the PROPEL study and the cohort with chemo being added to the doublet, I guess, what flexibility do you have around the dose of BEMPEG? And are you dose-ranging here? Or have you already settled on the specific dose of BEMPEG?

Howard W. Robin -- President and Chief Executive Officer

Yes. Those are really good questions. And so we actually have the flexibility to evaluate doses -- different doses of BEMPEG in the PROPEL study, as you know. So that includes both a dose optimization component that we're running with just the doublet in a range of different tumor types.

And so with chemotherapy, we also have the opportunity to explore different dose levels of BEMPEG, but it's really as needed. I mean, we feel very confident in the dose that we can combine BEMPEG plus pembro with the chemo.

Ben Burnett -- Stifel -- Analyst

Okay. Great. Thank you.

Operator

Thank you. [Operator Instructions] And our next question comes from Daina Graybosch from SVB Leerink. Your line is open.

Daina Graybosch -- SVB Leerink -- Analyst

Hi. Thanks for the question. We had some recent interesting ODAC on accelerated approval of checkpoints, two, on bladder cancer. And I thought there were two points that were relevant to your plan for BEMPEG and bladder. One, there was a discussion that the avelumab approval as a first-line maintenance for platinum-sensitive patients narrows the unmet need for accelerated approval potentially from to platinum ineligible from cisplatin-ineligible.

And the second, across all the ODAC conversations was the discomfort from the FDA about using early stage checkpoint studies to confirm metastatic accelerated approval. And I wonder if you have any thoughts or any implications potentially on your accelerated approval strategy in bladder cancer.

Jennifer Ruddock -- Head of Corporate Affairs

Thank you, Daina. JZ, I'll ask you to take a stab at that one. Thank you.

Jonathan Zalevsky -- Chief Research and Development Officer

Sure. No, absolutely. Thanks, Daina, for the question. Those sets of ODAC committee meetings over several days were very interesting, right, to our entire community. We watch them very closely across all the different tumor types. So -- and certainly, all of the points that you make were points that were discussed.

And we'll have to see sort of how the end result of the ODAC and the final interpretation of the FDA's opinion on the things that they specifically didn't vote for, but that could impact us in this case.

So certainly, on the first point, the unmet need could be different with the recent approval that you mentioned. And one of the things that we always deal with whenever we're attempting an accelerated approval is that you're really judged on the totality of the data against the available standard-of-care at the time. And so even though that has changed since the time that we started the study, that will still be the situation that we'll be moving into.

And so our key point, right, is to provide the best possible data set in PIVOT-10, showing very long durability of response, showing very good ORR, ideally with the CR rate, the kind that we saw in PIVOT-02, when we treated the same patient populations. And then that's well balanced with a very acceptable safety profile so that there's a very reasonable risk-benefit profile for the FDA to make a potential accelerated approval decision.

Now, to the next part, I think one of the real eye-opening things about that ODAC was kind of the overall success of confirmatory studies in general over accelerated approvals. And if you even dissect that from solid tumor versus liquid tumors, I mean it's an even greater kind of situation. So, I do think that the FDA's position on these things might potentially be impacted, which was the nature of all of those ODAC meetings. But for now, we're really just going to have to wait and see and determine how exactly it would impact us, if at all. Thanks for the questions.

Daina Graybosch -- SVB Leerink -- Analyst

Thank you.

Operator

Thank you. And our next question comes from Arlinda Lee from Canaccord. Your line is open.

Arlinda Lee -- Canaccord -- Analyst

Hey guys. Thanks for taking my questions. On 255, can you talk about the -- I know you've answered some of this before, but on the two scans, so that means if the interval is at least two weeks, then it's going to be essentially, if somebody has responded early that they would be a confirmed response and then that duration would be at least nine weeks? I'm wondering roughly how many patients do you think might be at that point?

And then secondly, I was curious about your earlier stage stuff on other cytokines and platforms beyond chemistries, what kind of things would you find interesting? And maybe additive or complementary to what you have now? Thank you.

Jennifer Ruddock -- Head of Corporate Affairs

Thank you, Arlinda. JZ, do you want to talk through the 255 data that we -- these studies

Jonathan Zalevsky -- Chief Research and Development Officer

Yes, I'm not entirely sure I understood the question. But in 255, we're evaluating patients in either heme or in solid tumor. And then depending on the nature of the gem malignancy, such as NHL or multiple myeloma, they're evaluated differently, right?

We use Lugano criteria for the NHL patients and the myeloma working group criteria for evaluating patients with multiple myeloma, and then focus on more of the cyst kind of a back in the solid tumor setting.

But we're very excited with the data that we're seeing from the 255 studies at both of them. We're able to dose escalate very effectively. We're seeing all the cellular population changes that we expect to see. And we're seeing both systemic as well as local effects that we're observing in patients treated with NKTR-255.

To me, also one of the most interesting and I think really profound things is that, remember, in a lot of the patients that we've been treating with multiple myeloma, they're really advanced to the point that they have significant bone marrow dysfunction and damage.

And many of these patients actually have a whole range of cellular deficiencies already as a result of the advanced multiple myeloma eroding the bone marrow in the patients. And even in patients that have compromised marrow, 255 is still able to elevate NK cells and CD8 T cells, inducing output even in the face of such advanced disease.

So we think those are extremely encouraging signs, seeing with our IL-15 program agonist. And we're very excited to not just continue with these ongoing studies, but also to present some of that data in the second half of this year.

Now in terms of some of the things we're doing in research and discovery. So one of the things that I mentioned earlier, is we -- earlier this year, we announced a discovery collaboration with a company called Biolojic Design.

And they're a company that specializes in a very unique antibody engineering. They actually use a computational approach. It's an AI-guided protein engineering approach. They have a lot of fun times working with antibodies and the kinds of protein engineering that Biolojic uses is really compelling.

So we're working with them in order to target very important immunological targets, and we're using an antibody approach to address them. So this is one example of using a totally different modality. And we have additional uses that we're also exploring.

Some of them involve a combination of various chemical modifications to proteins, additional chemical modifications to polymers, non-PEG based polymers as well, that we can use to change both the geometry of proteins as well as the kind of multimeric state proteins to induce different kinds of signaling.

But these are all the kinds of things that we're doing in the chemistry labs and in our basic research facility. And I'm excited as those things move forward with the additional INDs to come in the future as well.

Operator

Thank you. And that does conclude our question-and-answer session for today's conference. I'd now like to turn the call back over to Howard Robin for any closing remarks.

Howard W. Robin -- President and Chief Executive Officer

Well, thank you, everyone, for joining us today. And I'd like to thank our employees for their continued dedication and consistent efforts during these very, very challenging times, and their dedication to advancing our clinical studies while keeping our business on track is impressive, and we're very grateful for their contributions.

As I stated earlier, we are well positioned with a strong balance sheet and an important portfolio of immuno-oncology and immunology programs, many of which are the most advanced in their field. And we thank our shareholders for their ongoing support and look forward to continuing to provide you with updates on our programs. And we hope that you and your families continue to stay safe and healthy. So thank you very much. Appreciate it.

Operator

[Operator Closing Remarks]

Duration: 60 minutes

Call participants:

Jennifer Ruddock -- Head of Corporate Affairs

Howard W. Robin -- President and Chief Executive Officer

Jonathan Zalevsky -- Chief Research and Development Officer

Brian L. Kotzin -- Interim Chief Medical Officer and Head, Development

Gil M. Labrucherie -- Chief Operating Officer and Chief Financial Officer

Peter Lawson -- Barclays -- Analyst

Jay Olson -- Oppenheimer -- Analyst

Jessica Fye -- JPMorgan -- Analyst

Alex -- Mizuho -- Analyst

Ben Burnett -- Stifel -- Analyst

Daina Graybosch -- SVB Leerink -- Analyst

Arlinda Lee -- Canaccord -- Analyst

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