Participants

Vivian Wu; Associate Director, Investor Relations and Corporate Affairs; Nektar Therapeutics

Howard Robin; President, Chief Executive Officer, Director; Nektar Therapeutics

Brian Kotzin; Interim Chief Medical Officer; Nektar Therapeutics

Jonathan Zalevsky; Chief Research and Development Officer; Nektar Therapeutics

Sandra Gardiner; Chief Financial Officer; Nektar Therapeutics

Yasmeen Rahimi; Analyst; Piper Sandler & Co.

Julian Harrison; Analyst; BTIG LLC

Jay Olson; Analyst; Oppenheimer & Co. Inc

Roger Song; Analyst; Jefferies LLC

Mayank Mamtani; Analyst; B. Riley Securities, Inc.

Arthur He; Analyst; H.C. Wainwright & Co., LLC

Presentation

Operator

Good day and thank you for standing by. Welcome to the Nektar Therapeutics fourth quarter 2024 financial results conference call.
(Operator Instructions) Please be advised that today's conference is being recorded.
I would not like to hand the conference over to your speaker today. Vivian Wu. Please go ahead.

Vivian Wu

Thank you, Crystal, and good afternoon, everyone. Thank you for joining us today.
With us on the call are Howard Robin, our President and Chief Executive Officer; Dr. Jonathan Zalevsky, our Chief Research and Development Officer; Dr. Brian Kotzin, our interim Chief Medical Officer; and Sandra Gardiner, our Chief Financial Officer.
On today's call, we expect to make forward-looking statements regarding our business, including statements regarding the therapeutic potential and future development plans for drug candidates and research programs. The timing of the initiation of clinical studies and availability of clinical data for drug candidates, the timing of plans for future clinical data presentations, the formation, future development plans or success of our collaboration agreements, financial guidance, and certain other statements regarding the future of our business.
Because forward-looking statements relate to the future, they are subject to uncertainties and risks that are difficult to predict, many of which are outside of our control. Our actual results may differ materially from these statements. Important risks and uncertainties are set forth in our Form 10-Q that was filed on November 8, 2024, 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.
With that said, I would like to hand the call over to our President and CEO, Howard Robin. Howard?

Howard Robin

Thank you, Vivian. Thank you all for joining us today.
2024 was a productive year for Nektar, and I'm very proud of our team for executing on important clinical development milestones for our lead autoimmune pipeline program, rezpegaldesleukin, also known as REZPEG. The achievement of these clinical development goals prepares us for meaningful data catalysts for REZPEG in 2025.
Earlier this year, we announced the enrolment completion for both our Nektar sponsored Phase IIB studies. Our 400 patient resolved AD trial and ectopic dermatitis opened enrolment in October of '23 and completed enrolment in just 14 months. Our 90 patient resolved AA study in alopecia areata opened in March of 2024 and completed enrolment in roughly one year.
Both studies were completed on schedule in highly competitive clinical trial landscapes for both indications, which I think demonstrates the enthusiasm from patients and physicians for REZPEG's novel mechanism of action and for the data that has been generated to date.
Jay Z will discuss in a minute some of the unique operational features of our studies that are designed to minimize clinical operational risk. We look forward to data from both trials in ectopic dermatitis, alopecia areata in the second quarter and fourth quarter of this year, respectively.
Now in the US alone, there are over 15 million people living with moderate to severe ectopic dermatitis, and we know that less than 10% of those patients who could receive biologic treatments for this chronic skin disorder are actually receiving treatment. New mechanisms are the key to growing this underserved market.
This belief also extends to alopecia areata. According to the National Alopecia Areata Foundation, nearly 7 million people in the US alone have or will develop the disease and a treatment market that is estimated to reach 5.2 billion in the United States and Europe by 2023.
This disorder significantly affects the quality of life for patients, and the approved JAK inhibitor therapies with their high relapse rates are not durable and can carry significant potential safety risks. With REZPEG, we hope to offer a more durable treatment option in the form of a novel immunomodulating mechanism.
And moving on to type 1 diabetes. We recently announced the clinical trial agreement with Trial, an international clinical trial network at the forefront of diabetes research in which they will conduct and fund a Phase II clinical trial to investigate REZPEG in 66 patients with new onset type 1 diabetes. We're proud to support Trialett's mission of advancing innovative mechanisms aimed at slowing or stopping the progression of this disease. Nearly 2 million people in the US have type 1 diabetes, and the disease incidence continues to rise at a rate of 3% to 5% per year. And Brian will talk more about this later in the call.
And turning to the progress we've made with our pre-clinical programs. Over the past year, we expanded the company's pre-clinical pipeline in immunology and inflammation. First, we continue to advance our novel TNFR2 agonist antibody program, NKTR-0165. IND enabling studies are ongoing with the goal of preparing for an IND submission in the second half of 2025.
Last year, we presented the first preclinical data at EULAR, showing that this antibody demonstrated selective enhancement of Treg cell function. Given the importance of TNFR receptor 2 agonism in a number of autoimmune diseases, NKTR-0165 could potentially be developed in autoimmune diseases such as multiple sclerosis, ulcerative colitis and vitiligo.
We're also designing a pipeline of bispecific molecules that pair TNFR2 agonism with other antibody targets, and we're planning for the first bispecific in this program to be ready for an IND-enabling studies within the second -- next quarter. We look forward to providing more color on our early pipeline as these programs progress, and JZ will discuss more on this later.
Now before I turn to the R&D discussion, I want to reintroduce Brian Kotzin, who we announced last month would be returning to Nektar to lead the development of REZPEG as Interim Chief Medical Officer. Brian has over 40 years of expertise in immunology and has extensive development and management experience. He has also been supporting the clinical development of REZPEG in various capacities since 2017 and his intimate familiarity with this program has provided a seamless transition.
And before I hand the call over to Brian, I want to highlight that Nektar remains in a strong financial position with a cash runway that extends into the fourth quarter of 2026, ending 2024 with $269 million in cash and investments on hand.
I'm going to ask Brian to share a few comments on his enthusiasm for REZPEG and also comment on our recent announcement for the program in type 1 diabetes, before we turn it over to JZ to review more details on REZPEG's ongoing Phase IIb studies and our early pipeline programs. Brian?

Brian Kotzin

Thank you, Howard. It's great to be back at Nektar. As Howard mentioned, I've had the great pleasure to work on REZPEG since 2017, even continuing as a strategic advisor since retiring in 2023. When Howard and JZ called me with the opportunity to work on this program with my colleagues at Nektar again, I was very enthusiastic to help. I have a great passion for the potential of boosting regulatory T cells in autoimmune disease, and REZPEG is the most advanced IL-2 Treg stimulating mechanism in the field.
Having closely worked for several years on its clinical development, I believe it has the potential to truly address unmet needs for safe and durable therapeutic options for patients battling atopic dermatitis, alopecia areata and now type 1 diabetes.
As Howard mentioned, we recently announced a collaboration agreement with TrialNet to evaluate REZPEG in a Phase II placebo-controlled clinical trial in patients with new onset type 1 diabetes. I have had great interest in pursuing REZPEG in this indication since it first entered the clinic, and I'm very excited to work with some of my colleagues at TrialNet on this new clinical study.
In type 1 diabetes patients, there is a dysregulation of the balance between regulatory T cells and pathogenic autoreactive T cells, which leads the autoreactive T cells to destroy insulin-producing beta cells in the pancreas. Studies in mouse models and early human research of low-dose IL-2 and other agents have shown that boosting Tregs can lead to the preservation of insulin-producing beta cells. This preservation of endogenous insulin secretion is key to improving long-term health outcomes and quality of life for patients with this disease. This is why I'm so excited about the work that TrialNet is recommending for REZPEG.
The proposed placebo-controlled TrialNet study will enrol approximately 66 patients, while they still have preserved -- partially preserved beta cell function and insulin production. We will start evaluation in adult patients and move to pediatric and adult patients in different phases of the study. TrialNet's goal is to initiate the study later this year.
And with that, I'd like to hand the call to JZ.

Jonathan Zalevsky

Thank you, Brian. It's exciting to be working with you on a daily basis again. As Howard mentioned, we announced in January that we completed enrolment in the REZOLVE-AD Phase IIb trial in patients with atopic dermatitis in just under 14 months. We are grateful to the patients and physicians whose strong interest in this novel mechanism and proof-of-concept clinical data led to enrolment completion of this large Phase IIb study, and we look forward to reporting the top line data from the 16-week induction period in June of this year.
In February, REZPEG was granted Fast Track designation by the FDA for the treatment of adult and pediatric patients with moderate to severe atopic dermatitis. This designation allows us to collaborate closely with the agency on the design of the registrational program for REZPEG, and we'll be leveraging it as we work on our Phase III registrational strategy in atopic dermatitis.
As a reminder, the REZOLVE-AD study randomized approximately 400 biologic-naive patients with moderate to severe atopic dermatitis across three different dosing regimens of REZPEG or placebo. Guided by our Scientific Advisory Board of industry-leading dermatologists, we designed this study to ensure high-quality sites were used and implemented criteria with the goal of addressing some pitfalls in operational execution from past trials.
Patients were recruited from approximately 110 sites globally to ensure adequate geographic representation. Patients were stratified based on geographic regions as well as baseline disease severity. 67% of patients were enrolled in Europe across Poland, Bulgaria, Germany, Czechia, Spain, Croatia and Hungary. 17% enrolled in the United States and the rest were enrolled in Canada and Australia.
We had a goal to balance US recruitment due to the recent phenomenon in the last several years of a rising placebo effect observed in the US. We are very pleased with the 17% ultimate US recruitment figure, which aligns more closely with the recent winning atopic dermatitis studies in terms of site distribution.
Other important criteria that we used in the study include requiring that most of our sites be board-certified dermatologists or immunologists with prior experience participating in other atopic dermatitis studies. We also required that patients enrolled met a strict EASI threshold that was consistent in both screening and randomization, unlike some other trials that have only required EASI measurement at screening.
Reconfirming that the patients' disease severity has not changed significantly between the screening and baseline time points, allows us to reduce the potential for enrolling patients with flaring or episodic disease into the study. Patients with unstable disease or with a significant change between screening and randomization are screened then.
After randomization, patients receive either REZPEG a 24 micrograms per kilogram twice a month, 24 micrograms per kilogram once a month and 18 micrograms per kilogram twice a month or placebo for a 16-week induction treatment period. After the induction period, patients that meet an EASI-50 or better efficacy threshold to advance from induction to maintenance are re-randomized into one or two maintenance regimens at their original dose level to receive that dose on either a once a month or once every three -month regimen. The maintenance portion of the study is 36 weeks, which will, in total, provide 52 weeks of treatment duration for patients in the study.
We are following participants for one year after the conclusion of the 52-week treatment period, enabling us to evaluate REZPEG's potential for long-term remittance effect. As I just mentioned, we anticipate top line data from the 16-week induction period of this Phase IIb study in June, and we expect data from the 36-week maintenance period of the study in the first quarter of 2026.
Now turning to REZOLVE-AA study. Alopecia areata is a dermal disease in which the patient's immune system mistakenly attacks the hair follicle and disrupts the body's normal ability to keep and grow hair, leading to hair loss. There is strong rationale for REZPEG in this indication based on the role of Tregs to either prevent or downregulate the underlying pathology of the disease.
Last month, we announced enrolment completion for our 90-patient Phase IIb study in alopecia areata. The trial recruited patients across approximately 30 global sites. Patients had to present with severe to very severe disease defined as SALT 50 to SALT 100 for at least 6 months in order to be eligible for inclusion.
62% of patients were enrolled in Poland, 24% in Canada and the rest in the US Randomized patients will be treated for a period of 36 weeks and observed for up to 60 weeks in total. Our primary endpoint for this study is mean percent improvement in SALT, or the severity of alopecia tool at week 36. We will also be looking at a number of other secondary endpoints, including the proportion of patients that was observed to have varying degrees of improvement in SALT score, including the regulatory approval endpoint, SALT 20. We expect top line data from the 36-week treatment period in the fourth quarter of this year.
Turning to our preclinical programs in immunology. I'll start by talking about our novel TNFR2 agonist antibody program, NKTR-0165. TNFR2 agonism has been shown to potentiate Treg function as well as maintenance of Treg lineage stability, especially in the non-lymphoid tissue compartment. Genetic studies show that if TNFR2 is absent, the phenotypic effect is autoimmunity as well as other conditions that resemble a FOXP3 loss of function. In contrast, its presence and activation of its signaling has been associated with immune regulatory function and tissue protective effects.
The first preclinical data from this program presented last year at EULAR demonstrated that NKTR-0165 has a very high specificity for signaling through TNFR2 on Tregs and enhancing immunosuppressive activity. It also showed that the agonist we discovered are able to signal through the TNFR2 multimeric receptor single-arm monovalent antibody, which is a very novel finding for a TNFR2 agonist antibody.
We are very excited with NKTR-0165 unique and differentiated profile, and we believe it has the potential to become a first-in-class treatment for various autoimmune diseases, including multiple sclerosis, ulcerative colitis and vitiligo. And we are rapidly advancing this program into the clinic with plans to submit an IND in the second half of this year.
Since the TNFR2 agonist antibody specificities we discovered are active as single-arm antibodies, we have leveraged this to design a pipeline of TNFR2 containing bispecific molecules that pair TNFR2 agonism with other specificities. First of these is known as NKTR-0166. These assets take advantage of multiple mechanisms to bring about novel molecules to target autoimmune diseases. We will nominate the first development candidate, NKTR-0166 from this pipeline in the second quarter of this year and look forward to providing more color around this in the future.
Overall, we have observed growing interest for a selective TNFR2 agonist like NKTR-0165. And as we move forward with our IND-enabling studies and develop the bispecific pipeline, we remain open to opportunities to work with companies interested in these areas, strategize on the best path forward.
Now, before turning the call over to Sandy, I'll make a few comments on NKTR-255, our IL-15-based oncology program. Last year, we presented data on NKTR-255 that highlights its potential to augment the response and patient outcomes of a variety of cancer treatments in both solid and liquid tumors. Data published in blood, the peer-reviewed medical journal of the American Society of Hematology from Stanford's IST demonstrated that NKTR-255 when combined with Stanford's CD19, CD22 by CAR-T cell therapy, doubled the 12-month relapse-free survival rate for patients with B-cell acute lymphoblastic leukemia at 67% compared to 38% in Stanford's historical controls treated with the same CAR-T cell therapy.
At ASH, we shared supporting data showing that NKTR-255 enhanced complete response rates following CD19 directed CAR-T therapy in patients with relapsed/refractory large B-cell lymphoma. 73% of the NKTR-255 treatment group achieved a complete response at 6 months compared to 50% in the placebo group. This clinical benefit surpasses the published historical benchmark data from multiple pivotal trials and real-world meta-analyses of currently available commercial CD19 CAR-T cell therapy.
Finally, interim data presented at SITC from Dr. Steven Lin's Phase II study suggests that NKTR-255 has the potential to confer clinical benefits in patients with locally advanced non-small cell lung cancer. Results show that NKTR-255 in combination with durvalumab demonstrated a statistically significant improvement in the 8-week absolute lymphocyte count compared to historical control data. And these data strengthen our belief in NKTR-255's therapeutic potential as a new application in combination treatment with checkpoint inhibitors.
The growing body of evidence showcases its broad applicability to be combined with a variety of therapies across cancer indications. Looking ahead, we'll continue to collaborate with AbelZeta to evaluate NKTR-255 in combination with their tumor-infiltrating lymphocytes in patients with advanced non-small cell lung cancer who do not respond to anti-PD-1 therapy.
And we continue to work with Merck KGaA to evaluate NKTR-255 in combination with BAVENCIO in their Phase II JAVELIN Bladder Medley study, with the first potential PFS readout expected in the middle of this year, as this is an event-driven analysis. As we continue to generate supportive data in these combination studies, we continue to explore the best areas for continued development of this drug candidate in partnership with collaborators.
And with that, I will turn the call over to Sandy for a review of our financial guidance.

Sandra Gardiner

Thank you, JZ, and good afternoon, everyone. We ended 2024 with $269.1 million in cash and investments with no debt on our balance sheet. On December 2, 2024, we completed the sale of our Huntsville manufacturing facility for consideration of $64.7 million in cash, net of transaction costs and approximately 20% equity ownership in the new portfolio company, Gannet BioChem.
Turning to the income statement. Our revenue was $29.2 million for the fourth quarter of 2024 and $98.4 million for the full year 2024. Our R&D expenses were $28.7 million for the fourth quarter and $120.9 million for the full year. Our G&A expenses were $17.1 million for the fourth quarter and $76.8 million for the full year.
In connection with the sale of our Huntsville manufacturing facility, we recognized a gain of $40.4 million. Our non-cash interest expense for the fourth quarter was $10.2 million and $28.1 million for the full year. And our net income for the fourth quarter was $7.3 million or $0.03 basic and diluted earnings per share. For the full year 2024, our net loss was $119 million or $0.58 basic and diluted loss per share.
I will now review our 2025 financial guidance. We remain strong in our financial position and still expect our cash runway to extend into the fourth quarter of 2026. We plan to end 2025 with approximately $100 million in cash and investments.
Our revenue for the full year of 2025 is expected to be between $40 million and $50 million, which primarily includes non-cash royalties. As a result of the sale of our Huntsville manufacturing facility, we will no longer have product revenue and cost of goods sold. We anticipate full year R&D expense will range between $110 million and $120 million, including approximately $5 million to $10 million of non-cash depreciation and stock-based compensation expense.
We expect R&D expense to remain consistent with 2024 levels as we continue our Phase IIb studies in atopic dermatitis and alopecia areata. We expect G&A expense for the full year of 2025 to be between $60 million and $65 million, including approximately $5 million to $10 million of non-cash depreciation and stock-based compensation expense.
Our full year non-cash interest expense is expected to be between $15 million and $20 million. And as I stated earlier, we expect to end the year with approximately $100 million in cash and investments.
And with that, now we'll open the call for questions. Operator?

Question and Answer Session

Operator

(Operator Instructions)
Yasmeen Rahimi, Piper Sandler.

Yasmeen Rahimi

I'm very much looking forward to the data across both of the studies for this year. I guess, the first question is, you guys have shown in the earlier stage really phenomenal dose responses in the EASI scores. So I would love to understand how you're thinking about dose response across the three dose arms?
And then secondly, if you could just maybe remind us what is the criteria or responder analysis defined for patients to be eligible to go from the induction phase to the maintenance phase? And I'll jump back in the queue.

Howard Robin

JZ, do you want to take that call -- that answer -- -- question?

Jonathan Zalevsky

Sure. Yeah. So the first question about the dose response. So we addressed that with three different cohorts that address both dose level and regimen. So two of our dose cohorts evaluated the 24 microgram per kilogram dose. One of those evaluated that dose twice a month, the other cohort at once a month. And we changed the frequency there because that was designed to model the pharmacodynamic profile of the Tregs that we measure in the blood. And so that's why we wanted to have the same Cmax on time with different exposures in the once a month versus twice a month setting. So that was the goal there to assess that based on the PK/PD knowledge.
And then we also selected 18 micrograms per ml dose twice a month. That dose is higher than the 12 microgram per kilogram that we used in the Phase Ib study. We felt that, that dose 12, while it did separate a little bit from placebo, a little bit on the lower efficacy side, so we wanted to evaluate a higher dose level than 12 micrograms per kilogram in the Phase IIb. And that's why we chose 18 micrograms per kilogram, halfway between 12 and 24 were from the Phase Ib study. So that's our expectations around the design of the Phase IIb.
And then in terms of the criteria for patients moving from the induction to the maintenance arms of the study, at the end of the 16-week inductions, patients that have an EASI-50 or better response are eligible to be rerandomized to enter into the maintenance. And then in the maintenance, they're rerandomized to stay on the same dose level that they were on in the induction portion of the study. But now the regimen is either once a month or once every three months. So we use that EASI-50 criteria for advancement from induction to maintenance.

Operator

Julian Harrison, BTIG.

Julian Harrison

First, on the Phase IIb atopic dermatitis data expected next quarter. I'm wondering if you could talk about what kind of efficacy bar either on EASI or IGA you think would be commercially viable and worthwhile to advance REZPEG into pivotal development?

Howard Robin

Yeah, that's a good question. I think we've done a lot of homework in that area, especially recognizing that the -- Amgen just released its data on OX40. So I'll let JZ give you a more thorough answer on that.

Jonathan Zalevsky

Yeah. Thanks, Julian. So we definitely see at least 2 different versions of activity. Obviously, like there's ranges of EASI that are active and that are desirable to achieve and also the separation from placebo, both features are very important.
We like what we saw in our Phase Ib study, right? We saw both a dramatic separation from placebo in terms of placebo adjusted and also an 83% change from baseline. So we're looking to replicate that kind of data in our Phase IIb. But we also acknowledge that as a drug with a novel mechanism and an agent that's already shown a remittive effect, as we've shown in the Phase Ib, that even efficacy in the range of Dupixent, the standard of care currently, would also be a very successful outcome for us.
We're definitely aware of the recent results in the field, including Amgen's ROCA data. And I think that data is probably considered a little bit underwhelming by some of the folks that have addressed and looked at that data. And we think that we're in a great position to replicate the Phase Ib results that we had with REZPEG.

Howard Robin

And always remember that this isn't a zero-sum game, and it really is a quite underserved market with a very serious disease and having a novel mechanism is certainly going to be appreciated by patients and physicians, I'm sure of that.

Julian Harrison

And then one more, if I may. I'm curious how you're thinking about your rights to dapirolizumab in light of the recent litifilimab royalty monetization? Are there any differences compared to litifilimab that are worth noting?

Howard Robin

JZ, do you want to comment on that?

Jonathan Zalevsky

Yes. There are different mechanisms of action, of course, right? One is the BDCA2 inhibitor that's targeting more of the plasmacytoid arm. And of course, that drug has shown activity in both systemic lupus and cutaneous lupus. It seems like it has maybe even more potential in the cutaneous form of the disease. Whereas DAPI, right, is a CD40 ligand targeting agent, right? So it addresses different mechanisms of action. And then -- so that's mechanistically, both of the drugs have demonstrated, I think, impressive results in Phase II. And obviously, DAPI has positive Phase III data as well.
All right, excellent, thank you.

Operator

Jay Olson, Oppenheimer.

Jay Olson

Congrats on all the progress and thank you for providing this update. Maybe another question on the top line Phase II atopic dermatitis results in the second quarter. Can you just talk about the scope of data that you're planning to share in that top line release and maybe some of the secondary endpoints we should be looking for? And then also, what do you think the profile would be that would help you capture meaningful market share in the first-line setting?

Howard Robin

Yeah. I don't -- I think -- good questions. I think we haven't discussed a lot about the exact secondary endpoints at this point. I think clearly, as a novel mechanism and a completely different approach than IL-13, I would like to see a drug that's similar in activity to Dupixent with a very different biologic profile. I'll let JZ talk a little bit more about that. Go ahead, JZ.

Jonathan Zalevsky

Yeah, sure. Thanks, Jay. Yes, so just to reiterate, as Howard said, we haven't sort of guided on the specificity of the top line because obviously, as the majority of the data we would need to present at a medical meeting. But we would intend to focus, obviously, on the 16-week induction data, as we've described, and to give at least a minimum directional understanding of the performance of the drug. I think it's a bare minimum, and we can cover that more later.
And then in terms of the profile, I mean, it's pretty obvious that the greatest way to impact the share in the frontline setting is with efficacy, right? So if we are able to replicate the Phase Ib results that were really quite marked, right, quite notable, obviously, that's one of the strongest ways to impact the first-line treatment space.
But even all that aside, we're a completely different mechanism. We're not another IL-13. We're not a depleting antibody like ROCA is. We're really providing a completely different mechanism of action, and we're providing a data set that's already demonstrated the potential for really durable responses, which could translate into very, very low frequency dosing regimen, which would at minimum be highly convenient to patients. So we think there are really a number of ways that we can impact this market, and we're very excited that being a novel Treg mechanism gives us these additional avenues.

Howard Robin

Yeah, I think it's also important to point out that while Dupixent is certainly an excellent drug, no debate on that, there's a high percentage of patients failed Dupixent therapy over time. And as JZ just said, having a novel mechanism that works in a completely different fashion is something this market desperately needs. So when we wind up comparing our results to Dupixent results, certainly, I'd like to see similarities, but recognize that you're dealing with a completely different way of approaching the treatment of this disease.

Jay Olson

And if I could sneak in a question on 255. Can you just talk about any updates on timing or expectations for the interim PFS results from the JAVELIN Bladder Medley study and what we should be looking for there?

Howard Robin

We should be seeing results from that middle of this year. JZ, do you want to comment a little further?

Jonathan Zalevsky

Yeah, that's exactly right. It is event-driven, right? So you need to accumulate the PFS events. Merck gave us some guidance at the middle of the year, like summertime is about the kind of time when we might expect to see that. And then in terms of PFS events, obviously, our goal is to improve, right, on the PFS and potentially maybe even the OS of single-agent BAVENCIO in this setting, right, in the post-chemo setting. So that's obviously the objective of the study. That's what we'd like to see, that's what Merck would like to see as well. I mean, and that's how the study has been designed with BAVENCIO as an active comparator to directly test the combination of 255 plus BAVENCIO versus BAVENCIO alone.

Operator

Roger Song, Jefferies.

Roger Song

I have a quick one related to the Phase II atopic dermatitis. Given the enrolment you have completed compared to the recent atopic dermatitis trial, what's your expectation in terms of the patient baseline? And then how will that impact the -- particularly on the placebo arm, what's your expectation there?

Howard Robin

JZ or Brian, do you want to take that one?

Jonathan Zalevsky

Thanks, Roger. So one of the things that we'd really like to see is the baseline EASI to be in the range of like 25 to 30, right? Because as we've seen like other studies historically, those kind of baseline EASI scores for the entire population have generally been linked with lower overall placebo responses and also better studies. There's more dynamic range to measure from patients that are having higher EASI scores. So that's one of the things that we'd like to see in the study, something in that kind of range for baseline.
And then in terms of setting expectations for placebo, I mean, it's -- we don't know. I mean this is a blinded study. But certainly, we would like to see much, much lower placebo response rates than have been reported recently for some of the studies, including the studies that were reported last December, such as from Q32 where the placebo rate was very, very high.
One of the things that we did in our study, that I tried to cover earlier in our call, was that we really had a number of prospective features that we built into the study, such as limiting the US footprint geographically. We only had 17% of our sites in the US, focusing on Board-certified dermatologists and immunologists that had demonstrated experience working in atopic dermatitis studies as well as measuring the EASI score multiple times before drug was administered and patients were randomized. And all of those things we did prospectively in order to protect the study and ensure that ideally, we don't have a very, very high placebo response rate. So obviously, when we present the results of the top line later this year in June, we'll show what that is directly.

Operator

Mayank Mamtani, B. Riley.

Mayank Mamtani

Could you touch on -- just a related question to the last comment, JZ. Anything you can touch on the screen failure rate you've seen on this extra stringent criteria you're using and how that may compare to some other studies that have been done around screening and then randomization? And then I have a quick follow-up.

Jonathan Zalevsky

Yeah, that would be the kind of information we would share in the future when we present the results of the study.

Mayank Mamtani

And then the escape piece in the protocol, how patients go on the escape arm? Could you just remind me how that's kind of structured for induction and maintenance?
And then lastly, just high level, the read-through from AD data set to the REZOLVE-AA study, any translational markers you're looking at would be helpful to know?

Jonathan Zalevsky

Sure. Yeah. So in the way the study is designed, which was one of the expert pieces of advice also given to us by the steering committee is that when patients reach the end of the 16-week induction, if they are not better than EASI-50, then they have the option to enter into an escape arm. And the escape arm is the 24-microgram per kilogram dose of REZPEG given twice a month. Particularly good for patients, for example, a blinded study, but that might have been randomized to a placebo arm, right? It gives everyone a chance to have access to drug.
So that's how that escape arm works. And so the primary entry point is at that 16-week time point at the end of induction for patients that fail to meet the EASI-50 or better rerandomization criteria to enter maintenance.
The other way the patients can enter into the escape is during the maintenance. If for one reason or another people lose activity or lose response, then they have a second chance to enter into the escape arm. And that's really the way that it works. And it's really very standard to these kind of studies that offer an escape arm therapy to patients that are in the study.
And then in terms of other kind of questions you asked about sort of read-through. I mean, we selected alopecia really because it is a key dermatological indication, right? And as you know, with REZPEG, we've seen activity in multiple dermatological inflammatory conditions, ranging from skin manifestations in lupus, psoriasis, atopic dermatitis. And also the underlying knowledge about the biology of immune privilege and the role that Tregs play in helping to maintain and sustain that immune privilege state. We will be looking at biomarkers across both studies.
And as you saw from our publication in Nature Communications in October of last year, a number of biomarkers that we measure are induction markers because our drug is an agonist. And so I expect we'll be able to measure those induced pathways independent of underlying disease etiology of the patient. Those will just be based on the signaling of our molecule on to Tregs, for example.
So those will be some very important correlative biomarkers that we'll be collecting in the future. And we're looking forward to the readout of both of these studies. As we discussed, the first one atopic derm is coming in June for that induction. And for alopecia areata in the fourth quarter of this year, we expect to be reading out the 36-week treatment data from that study as well. so in the way the study is designed, which is one of the expert pieces of advice also given to us by the steering committee, is that when patients reach the end of the 16 week induction, If they are not better than EZ 50, then they have the option to enter into an escape arm, and the escape arm is the 24 mcg per kilogram dose of respe given twice a month.
Particularly good for patients, for example, blind study, but that might have been randomized to a placebo arm, right? It gives everyone a chance to have access to trucks. So that's how that escape arm works. And so the primary entry point is at that 16 week time point at the end of induction for patients that fail to meet the easy 50 or better re-randomization criteria to enter maintenance.
The other way the patients can enter into the escape is during the maintenance. If for one reason or another, people lose, activity or lose response, then they have a second chance to enter into the escape farm. And that's really the way that it works and it's really very standard, to these kind of studies that offer an escape arm therapy to patients that are in the study.
And then in terms of other kind of questions you asked about read through, I mean we selected alopecia really because it is a key dermatological indication, right? And as you know with REZPEGwe've seen activity in multiple dermatological inflammatory conditions ranging from, skin manifestations of lupus, psoriasis, ectopic dermatitis. And also the underlying knowledge about the biology of immune privilege and the role that T. Rex play in helping to maintain and sustain that immune privilege state.
We will be looking at biomarkers across both studies and as you saw from our publication in Nature Communications in October of last year, a number of biomarkers that we measure are induction markers because our drug is an agonist. And so I expect we'll be able to measure those kinds of induced pathways, independent of underlying disease etiology of the patient. Those will just be based on the signaling of our molecule onto T. Rex, for example.
So those will be some very important cos of biomarkers that we'll be collecting in the future. And we're looking forward, to the readout of both of these studies, as we discussed, the first one atopic derm is coming in June for that induction and for alopecia areata in the fourth quarter of this year, we expect you to be reading out the 36 week treatment data from that study as well.

Operator

Arthur He, H.C. Wainwright.

Arthur He

So JZ, thanks for the additional color on the dose regimen for the AD study. I just want to follow up a little bit on the rationale to pick those three regimen arms. So why not go for a higher dosing regimen than the 24 microgram per kilo Q2W? Yes. And then I had a follow-up on the trial as well.

Jonathan Zalevsky

Yes. Across the clinical program, we've evaluated various doses, both weight-based dosing, such as what we're using in the study and also flat dosing as was used in other studies like the lupus study. And then really, when you look at it, that gives you a range of different doses that we've established. So we've gone well above and well below.
And actually, the 24 microgram per kilogram is really an optimal dose level. It gives us all the things that we want to have from a PK/PD relationship. We engage to the target very effectively. We get a very robust Treg expansion and you can dose for a very long time at that dose level without seeing any cessation or any hysteresis in any of the pharmacodynamic responses. And from the biomarker data, that was asked earlier and that we published, you can also see a very robust induction of immune pathways that we see at that dose level. So that's really an optimal dose level that we're really focused on.

Arthur He

So -- and the second question is also regarding probably both AD and the AA study. Could you remind us how is the stratification in both study based in terms of the disease severity wise, how that could be decided for the stratification?

Jonathan Zalevsky

Yeah. So we haven't shared all of the details of the full stratification for that study. But I'll share, I think what's the most relevant and important, Arthur. So our study is enrolling the severe and very severe population. So severe people have a SALT score between 50 and 95 and very severe people are 95 to 100. And very severe people are almost like, they're like their total. They're almost, if not, in all cases, completely [bald], right?
And so our study has quite a high number that are in both categories. And one of the stratifications is to balance that between the treatment arms, right? So that's one key stratification, the severe and very severe patients, we want to balance across the treatment arms. And there'll be other ones as well that we'll present when we present the top line results from that study in the fourth quarter. But I think severe and very severe is probably what you were wondering about.

Arthur He

So how about AD study?

Jonathan Zalevsky

Yeah. Again, we haven't -- we'll share all of the full details of that later when we present the top line. But just as an example of flavor, the geographic regions is one of the important things to stratify in those studies, and that's one of our criteria.

Operator

(Operator Instructions)
Chris Shibutani, Goldman Sachs.

This is Eric on for Chris Shibutani. So I just wanted to elaborate a little more on the point you made about the biomarker analysis in the AD trial. Do you have a sense of how translatable this correlation between biomarkers and clinical outcomes are in maybe the larger trial or potentially across different patient populations? And are there plans to incorporating this biomarker in future trial designs?

Jonathan Zalevsky

Yeah. Thanks, Eric, that's a really good question. So what we were able to do in the Phase Ib atopic derm study is what I call more like descriptive analysis. We characterized the dose dependency of biomarkers analysed by an MMRM model against various covariants that we did in the analysis. And we could see pathways that were statistically changed both as a function of dose and as a function of time.
And why I consider it more of like a summary or descriptive analysis is because the study was pretty small. And actually, in the Phase Ib study, there was a high number of responders. It was not really the right data set to do a lot of correlative analysis. We did try. We tried a lot of correlative analysis, but it wasn't clear from that particular study given its small size.
Now in our Phase IIb study, this atopic dermatitis study, we're doing that again. But now the study is designed. It's much larger. And also, we have a lot more understanding about the collection time points that we learned from the Phase Ib that are more optimized in this Phase II. And also, we're collecting tape strips so that we can collect what's happening locally in the lesion against the serum biomarkers using the Olink panels and the cellular analysis by flow cytometry.
So one of our objectives translationally in this Phase II study, in addition to all of the other normal kind of efficacy and safety endpoints is we also want to dive very deeply into the translational sort of molecular phenotype of the patients and then understand any of these correlative analyses, whether they can be predictive, prognostic and so on. So that will be a very exciting data set that we'll be excited to share in the coming -- in the future.

Operator

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

Howard Robin

Well, thank you, everyone, for joining us today, and we look forward to sharing important data from our Phase IIb studies of REZPEG later this year. We remain focused on advancing our pipeline and efficiently executing each of our unique programs. I want to thank all of our employees for their hard work and diligence. And of course, I want to thank our investors for their continued support. So please stay tuned. Thank you very much.

Operator

This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.