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What changed in NEKTAR THERAPEUTICS's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of NEKTAR THERAPEUTICS's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+248 added−259 removedSource: 10-K (2024-03-05) vs 10-K (2023-02-28)

Top changes in NEKTAR THERAPEUTICS's 2023 10-K

248 paragraphs added · 259 removed · 164 edited across 6 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

80 edited+26 added−26 removed206 unchanged
Biggest changeClinical trials for any of our drug candidates could be delayed for a variety of reasons, including: • delays in obtaining regulatory authorization to commence a clinical study; • delays in reaching agreement with applicable regulatory authorities on a clinical study design; • for drug candidates (such as rezpegaldesleukin) partnered with other companies, delays caused by our partner; • delays caused by the COVID-19 pandemic (see also the risk factor in this Item 1A titled “ Our business could be adversely affected by the effects of health epidemics, including the recent COVID-19 pandemic ”). 21 • imposition of a clinical hold by the FDA or other health authorities, which may occur at any time including after any inspection of clinical trial operations or trial sites; • suspension or termination of a clinical study by us, our partners, the FDA or foreign regulatory authorities due to adverse side effects of a drug on subjects in the trial; • delays in recruiting suitable patients to participate in a trial; • delays in having patients complete participation in a trial or return for post-treatment follow-up; • clinical sites dropping out of a trial due to the detriment of enrollment rates; • delays in manufacturing and delivery of sufficient supply of clinical trial materials; • changes in regulatory authorities policies or guidance applicable to our drug candidates; and • delays caused by changing standards of care or new treatment options.
Biggest changeClinical trials for any of our drug candidates could be delayed for a variety of reasons, including: • delays in obtaining regulatory authorization to commence a clinical study; • delays in reaching agreement with applicable regulatory authorities on a clinical study design; • for drug candidates currently or previously partnered with other companies, delays caused by our partner; • delays caused by public health epidemics (see also the risk factor in this Item 1A titled “ Our business could be adversely affected by the effects of health epidemics ”); • imposition of a clinical hold by the FDA or other health authorities, which may occur at any time including after any inspection of clinical trial operations or trial sites; • suspension or termination of a clinical study by us, our partners, the FDA or foreign regulatory authorities due to adverse side effects of a drug on subjects in the trial; • delays associated with clinical site activations; • delays in recruiting suitable patients to participate in a trial; • delays in having patients complete participation in a trial or return for post-treatment follow-up; • clinical sites dropping out of a trial due to the detriment of enrollment rates; • delays in manufacturing and delivery of sufficient supply of clinical trial materials; • changes in regulatory authorities policies or guidance applicable to our drug candidates • delays caused by changing standards of care or new treatment options; and • delays associated with third parties, such as a past collaboration partner, failing to provide us with all the necessary documents, data and materials necessary to conduct clinical trials.
These collaboration agreements contain complex commercial terms, including: • clinical development and commercialization obligations that are based on certain commercial reasonableness performance standards that can often be difficult to enforce if disputes arise as to adequacy of our partner’s performance; • research and development performance and reimbursement obligations for our personnel and other resources allocated to partnered biologic candidate development programs; • clinical and commercial manufacturing agreements, some of which are priced on an actual cost basis for products supplied by us to our partners with complicated cost allocation formulas and methodologies; 31 • intellectual property ownership allocation between us and our partners for improvements and new inventions developed during the course of the collaboration; • royalties on drug sales based on a number of complex variables, including net sales calculations, geography, scope of patent claim coverage, patent life, generic competitors, bundled pricing and other factors; and • indemnity obligations for intellectual property infringement, product liability and certain other claims.
These collaboration agreements contain complex commercial terms, including: • clinical development and commercialization obligations that are based on certain commercial reasonableness performance standards that can often be difficult to enforce if disputes arise as to adequacy of our partner’s performance; • research and development performance and reimbursement obligations for our personnel and other resources allocated to partnered biologic candidate development programs; • clinical and commercial manufacturing agreements, some of which are priced on an actual cost basis for products supplied by us to our partners with complicated cost allocation formulas and methodologies; • intellectual property ownership allocation between us and our partners for improvements and new inventions developed during the course of the collaboration; • royalties on drug sales based on a number of complex variables, including net sales calculations, geography, scope of patent claim coverage, patent life, generic competitors, bundled pricing and other factors; and • indemnity obligations for intellectual property infringement, product liability and certain other claims.
Our past revenue generated from collaboration agreements is not necessarily indicative of our future revenue. If any of our existing or future collaboration partners fails to develop, obtain regulatory approval for, 27 manufacture or ultimately commercialize any biologic candidate under our collaboration agreement, our business, financial condition, and results of operations could be materially and adversely affected.
Our past revenue generated from collaboration agreements is not necessarily indicative of our future revenue. If any of our existing or future collaboration partners fails to develop, obtain regulatory approval for, manufacture or ultimately commercialize any biologic candidate under our collaboration agreement, our business, financial condition, and results of operations could be materially and adversely affected.
As a result, changes in international trade policy, changes in trade agreements and the imposition of tariffs or sanctions by the U.S. or other countries could materially adversely affect our results of operations and financial condition. 38 Our business could be negatively impacted by corporate citizenship and sustainability matters.
As a result, changes in international trade policy, changes in trade agreements and the imposition of tariffs or sanctions by the U.S. or other countries could materially adversely affect our results of operations and financial condition. Our business could be negatively impacted by corporate citizenship and sustainability matters.
Our reliance on collaboration partners poses a number of significant risks to our business, including risks that: • we have very little control over the timing and level of resources that our collaboration partners dedicate to commercial marketing efforts such as the amount of investment in sales and marketing personnel, general 24 marketing campaigns, direct-to-consumer advertising, product sampling, pricing agreements and rebate strategies with government and private payers, manufacturing and supply of drug product, and other marketing and selling activities that need to be undertaken and well executed for a drug to have the potential to achieve commercial success; • collaboration partners with commercial rights may choose to devote fewer resources to the development or marketing of our partnered drugs than they devote to their own drugs or other drugs that they have in-licensed; • we have very little control over the timing and amount of resources our partners devote to development programs in one or more major markets; • disagreements with partners could lead to delays in, or termination of, the research, development or commercialization of drug candidates or to litigation or arbitration proceedings; • disputes may arise or escalate in the future with respect to the ownership of rights to technology or intellectual property developed with partners; • we do not have the ability to unilaterally terminate agreements (or partners may have extension or renewal rights) that we believe are not on commercially reasonable terms or consistent with our current business strategy; • partners may be unable to pay us as expected; • partners may terminate their agreements with us unilaterally for any or no reason, in some cases with the payment of a termination fee penalty and in other cases with no termination fee penalty; and • partners may respond to natural disasters or health epidemics, such as the COVID-19 pandemic, by ceasing all or some of their development responsibilities (including the responsibility to clinical develop our drug candidates).
Our reliance on collaboration partners poses a number of significant risks to our business, including risks that: 21 Table of Contents • we have very little control over the timing and level of resources that our collaboration partners dedicate to commercial marketing efforts such as the amount of investment in sales and marketing personnel, general marketing campaigns, direct-to-consumer advertising, product sampling, pricing agreements and rebate strategies with government and private payers, manufacturing and supply of drug product, and other marketing and selling activities that need to be undertaken and well executed for a drug to have the potential to achieve commercial success; • collaboration partners with commercial rights may choose to devote fewer resources to the development or marketing of our partnered drugs than they devote to their own drugs or other drugs that they have in-licensed; • we have very little control over the timing and amount of resources our partners devote to development programs in one or more major markets; • disagreements with partners could lead to delays in, or termination of, the research, development or commercialization of drug candidates or to litigation or arbitration proceedings; • disputes may arise or escalate in the future with respect to the ownership of rights to technology or intellectual property developed with partners; • we do not have the ability to unilaterally terminate agreements (or partners may have extension or renewal rights) that we believe are not on commercially reasonable terms or consistent with our current business strategy; • partners may be unable to pay us as expected; • partners may terminate their agreements with us unilaterally for any or no reason, in some cases with the payment of a termination fee penalty and in other cases with no termination fee penalty; and • partners may respond to natural disasters or health epidemics, such as the COVID-19 pandemic, by ceasing all or some of their development responsibilities (including the responsibility to clinical develop our drug candidates).
From time to time, we are involved in legal proceedings where we or other third parties are enforcing or seeking intellectual property rights, invalidating or limiting patent rights that have already been allowed or issued, or otherwise asserting 34 proprietary rights through one or more potential legal remedies.
From time to time, we are involved in legal proceedings where we or other third parties are enforcing or seeking intellectual property rights, invalidating or limiting patent rights that have already been allowed or issued, or otherwise asserting proprietary rights through one or more potential legal remedies.
As immunotherapy represent a relatively new approach to treatment of autoimmune disorders and cancer and few have successfully completed late stage development, drug development in this area entails substantial risks and uncertainties that include rapidly changing standards of care, identifying contribution of components when therapeutic combinations are employed, patient enrollment competition, evolving regulatory frameworks to evaluate regimens, and varying risk-benefit profiles of competing therapies, any or all of which could have a material and adverse impact on the probability of success of our drug candidates.
As immunotherapy represents a relatively new approach to treatment of autoimmune disorders and cancer and few have successfully completed late stage development, drug development in this area entails substantial risks and uncertainties that include rapidly changing standards of care, identifying contribution of components when therapeutic combinations are employed, patient enrollment competition, evolving regulatory frameworks to evaluate regimens, and varying risk-benefit profiles of competing therapies, any or all of which could have a material and adverse impact on the probability of success of our drug candidates.
Preliminary and interim data from our clinical studies that we announce or publish from time to time are subject to audit and verification procedures that could result in material changes in the final data and may change as more patient data become available. 23 From time to time, we publish preliminary or interim data from our clinical studies.
Preliminary and interim data from our clinical studies that we announce or publish from time to time are subject to audit and verification procedures that could result in material changes in the final data and may change as more patient data become available. From time to time, we publish preliminary or interim data from our clinical studies.
These include several requirements relating to, for example, (i) obtaining, in some situations, the consent of the individuals to whom the personal data relates, (ii) the information provided to 35 the individuals about how their personal information is used, and (iii) ensuring the security and confidentiality of the personal data.
These include several requirements relating to, for example, (i) obtaining, in some situations, the consent of the individuals to whom the personal data relates, (ii) the information provided to the individuals about how their personal information is used, and (iii) ensuring the security and confidentiality of the personal data.
We will 28 also need to verify, such as through a manufacturing comparability study, that any new manufacturing process will produce our product according to the specifications previously submitted to or approved by the FDA or another regulatory authority.
We will also need to verify, such as through a manufacturing comparability study, that any new manufacturing process will produce our product according to the specifications previously submitted to or approved by the FDA or another regulatory authority.
While we believe that our cash position will be sufficient to meet our liquidity requirements through at least the next 12 months, our future capital requirements will depend upon numerous unpredictable factors, including: • the cost, timing and outcomes of clinical studies and regulatory reviews of our drug candidates, particularly rezpegaldesleukin; • if and when we receive potential milestone payments and royalties from our existing collaborations if the drug candidates subject to those collaborations achieve clinical, regulatory or commercial success; • the progress, timing, cost and results of our clinical development programs; • the success, progress, timing and costs of our efforts to implement new collaborations, licenses and other transactions that increase our current net cash, such as the sale of additional royalty interests held by us, term loan or other debt arrangements, and the issuance of securities; • the number of patients, enrollment criteria, primary and secondary endpoints, and the number of clinical studies required by the regulatory authorities in order to consider for approval our drug candidates and those of our collaboration partners; • our general and administrative expenses, capital expenditures and other uses of cash; and 25 • disputes concerning patents, proprietary rights, or license and collaboration agreements that could negatively impact our receipt of milestone payments or royalties or require us to make significant payments arising from licenses, settlements, adverse judgments or ongoing royalties.
While we believe that our cash position will be sufficient to meet our liquidity requirements through at least the next 12 months, our future capital requirements will depend upon numerous unpredictable factors, including: • the cost, timing and outcomes of clinical studies and regulatory reviews of our drug candidates, particularly rezpegaldesleukin; • if and when we receive potential milestone payments and royalties from our existing collaborations if the drug candidates subject to those collaborations achieve clinical, regulatory or commercial success; • the progress, timing, cost and results of our clinical development programs; • the success, progress, timing and costs of our efforts to implement new collaborations, licenses and other transactions that increase our current net cash, such as the sale of additional royalty interests held by us, term loan or other debt arrangements, and the issuance of securities; 22 Table of Contents • the number of patients, enrollment criteria, primary and secondary endpoints, and the number of clinical studies required by the regulatory authorities in order to consider for approval our drug candidates and those of our collaboration partners; • our general and administrative expenses, capital expenditures and other uses of cash; and • disputes concerning patents, proprietary rights, or license and collaboration agreements that could negatively impact our receipt of milestone payments or royalties or require us to make significant payments arising from licenses, settlements, adverse judgments or ongoing royalties.
For instance, the loss of preclinical data or data from any clinical trial involving our biologic candidates could result in delays in our development and regulatory filing efforts and significantly increase our costs.
For instance, the loss or misappropriation of preclinical data or data from any clinical trial involving our biologic candidates could result in delays in our development and regulatory filing efforts and significantly increase our costs.
For NKTR-255, we believe companies that are currently researching and developing engineered IL-15 biologics and cell therapies that could compete with this drug candidate include Artiva Biotherapeutics, Fate Therapeutics, ImmunityBio, Inc., Nkarta Therapeutics, NKMax America, and Roche/Genentech (through its partnership with Xencor, Inc.).
For NKTR-255, we believe companies that are currently researching and developing engineered IL-15 biologics and cell therapies that could compete with this drug candidate include SOTIO Biotech, Inc., Artiva Biotherapeutics, Fate Therapeutics, ImmunityBio, Inc., Nkarta, Inc., NKMax America, and Roche/Genentech (through its partnership with Xencor, Inc.).
Additionally, the risk of cyber-attacks or other privacy or data security incidents may be heightened as a result of an increase in the number of employees who adopted a remote working environment during the COVID-19 pandemic, which may be less secure and more susceptible to hacking attacks.
Additionally, the risk of cyber-attacks or other privacy or data security incidents may be heightened as a result of an increase in the number of employees who adopted a remote working environment during the COVID-19 pandemic, which may be less secure and more susceptible to hacking attacks or other security compromises or breaches.
Item 1A. Risk Factors We are providing the following cautionary discussion of risk factors, uncertainties and assumptions that we believe are relevant to our business. These are factors that, individually or in the aggregate, we think could cause our actual results to differ materially from expected and historical results and our forward-looking statements.
Item 1A. Risk F actors We are providing the following cautionary discussion of risk factors, uncertainties and assumptions that we believe are relevant to our business. These are factors that, individually or in the aggregate, we think could cause our actual results to differ materially from expected and historical results and our forward-looking statements.
A variety of factors may have a significant effect on the market price of our common stock, including the risks described in this section titled “Risk Factors” and the following: • announcement of our 2022 Restructuring Plan; • announcements of data from, or material developments in, our clinical studies and those of our collaboration partners, including data regarding efficacy and safety, delays in clinical development, regulatory approval or commercial launch – in particular, the results from clinical studies of bempegaldesleukin has had a significant impact on our stock price; • the timing of outcomes from our clinical trials which can be difficult to predict particularly for clinical studies that have event-driven end points such as progression-free survival and overall survival; • announcements by collaboration partners as to their plans or expectations related to biologic candidates and approved biologics in which we have a substantial economic interest; • announcements regarding terminations or disputes under our collaboration agreements; • fluctuations in our results of operations; • developments in patent or other proprietary rights, including intellectual property litigation or entering into intellectual property license agreements and the costs associated with those arrangements; • announcements of technological innovations or new therapeutic products that may compete with our approved partnered products or products under development; • announcements of changes in governmental regulation affecting us or our competitors; 36 • litigation brought against us or third parties to whom we have indemnification obligations; • public concern as to the safety of drug formulations developed by us or others; • our financing needs and activities; and • general economic, industry and market conditions, including the impacts of rising inflation and interest rates and global geopolitical tensions.
A variety of factors may have a significant effect on the market price of our common stock, including the risks described in this section titled “Risk Factors” and the following: • announcement of our 2022 and 2023 Restructuring Plans; • announcements of data from, or material developments in, our clinical studies and those of our collaboration partners, including data regarding efficacy and safety, delays in clinical development, regulatory approval or commercial launch – in particular, the results from clinical studies of bempegaldesleukin and rezpegaldesleukin have had a significant impact on our stock price; • the timing of outcomes from our clinical trials which can be difficult to predict particularly for clinical studies that have event-driven end points such as progression-free survival and overall survival; • announcements by collaboration partners as to their plans or expectations related to biologic candidates and approved biologics in which we have a substantial economic interest; 34 Table of Contents • announcements regarding terminations or disputes under our collaboration agreements; • fluctuations in our results of operations; • developments in patent or other proprietary rights, including intellectual property litigation or entering into intellectual property license agreements and the costs associated with those arrangements; • announcements of technological innovations or new therapeutic products that may compete with our approved partnered products or products under development; • announcements of changes in governmental regulation affecting us or our competitors; • litigation brought against us or third parties to whom we have indemnification obligations; • public concern as to the safety of drug formulations developed by us or others; • our financing needs and activities; and • general economic, industry and market conditions, including the impacts of rising inflation and interest rates and global geopolitical tensions.
Any failure to follow and document our or our CMOs’ adherence to such cGMP and other laws and governmental regulations or satisfy other manufacturing and product release regulatory requirements may disrupt our ability to meet our manufacturing obligations to our customers, lead to significant delays in the availability of products for commercial use or clinical study, result in the termination or hold on a clinical study or delay or prevent filing or approval of marketing applications for our products.
Any failure to follow and document our or our CMOs’ adherence to such cGMP and other laws and governmental regulations or satisfy other manufacturing and product release regulatory requirements may disrupt our ability to meet our manufacturing obligations to our customers, lead to significant delays in the availability of products for 26 Table of Contents commercial use or clinical study, result in the termination or hold on a clinical study or delay or prevent filing or approval of marketing applications for our products.
If a license is not available on commercially reasonable terms or at all, we may be prevented from developing and commercializing the biologic, which could significantly harm our business, results of operations, and financial condition. If any of our pending patent applications do not issue, or are deemed invalid following issuance, we may lose valuable intellectual property protection.
If a license is not available on commercially reasonable terms or at all, we may be prevented from developing and commercializing the biologic, which could significantly harm our business, results of operations, and financial condition. 29 Table of Contents If any of our pending patent applications do not issue, or are deemed invalid following issuance, we may lose valuable intellectual property protection.
The early termination of any of our clinical trial arrangements, the failure of third parties to comply with the regulations and requirements governing clinical trials or the failure of third parties to properly conduct our clinical trials could hinder or delay the development, approval and commercialization of our product candidates and would adversely affect our business, results of operations and financial condition.
The early termination of any of our clinical trial arrangements, the failure of third parties to comply with the regulations and requirements governing clinical trials, the failure of third parties to properly conduct our clinical trials, or erroneously reported data could hinder or delay the development, approval and commercialization of our product candidates and would adversely affect our business, results of operations and financial condition.
We could fail to meet, or be perceived to fail to meet, the expectations of these certain investors, employees and other stakeholders concerning corporate citizenship and sustainability matters, thereby resulting in a negative impact to our business. If earthquakes or other catastrophic events strike, our business may be harmed.
We could fail to meet, or be perceived to fail to meet, the expectations of these certain investors, employees and other stakeholders concerning corporate citizenship and sustainability matters, thereby resulting in a negative impact to our business. If natural disasters or other catastrophic events strike, our business may be harmed.
Our clinical trial plans for rezpegaldesleukin, NKTR-255 and other immunomodulatory agents drug candidates face substantial competition from other 22 regimens already approved, and many more that are either ahead of or in parallel development in patient populations where we are studying our drug candidates.
Our clinical trial plans for rezpegaldesleukin, NKTR-255 and other drug candidates face substantial competition from other regimens already approved, and many more that are either ahead of or in parallel development in patient populations where we are studying our drug candidates.
The manufacturing of biologics involves significant risks and uncertainties related to the demonstration of adequate stability, sufficient purification of the drug substance and drug product, the identification and elimination of impurities, optimal formulations, process and analytical methods validations, and challenges in controlling for all of these variables.
The manufacturing of biologics involves significant 25 Table of Contents risks and uncertainties related to the demonstration of adequate stability, sufficient purification of the drug substance and drug product, the identification and elimination of impurities, optimal formulations, process and analytical methods validations, and challenges in controlling for all of these variables.
Despite the implementation of security measures, our internal computer systems and those of our partners, vendors, contract research organizations (CROs), contract manufacturing organizations (CMOs) and other contractors and consultants are vulnerable to loss, damage, denial-of-service, unauthorized access, or misappropriation.
Despite the implementation of security measures, our internal computer systems and infrastructure or those of our partners, vendors, contract research organizations (CROs), contract manufacturing organizations (CMOs) and other contractors and consultants are vulnerable to loss, damage, compromise, interruption, denial-of-service, unauthorized access, or misappropriation.
In the United States, the principal decisions about reimbursement for new medicines are typically made by the Centers for Medicare & Medicaid Services, or CMS, an agency within the U.S. Department of Health and Human Services.
In the United States, the principal decisions about reimbursement for new medicines are typically made by the Centers for Medicare & Medicaid Services, or CMS, an agency within the U.S. Department of Health and Human 23 Table of Contents Services.
Our corporate headquarters, including a substantial portion of our research and development operations, are located in the San Francisco Bay Area, a region known for seismic activity and a potential terrorist target. In addition, we own facilities for the manufacture of products using our advanced polymer conjugate technologies in Huntsville, Alabama.
Our corporate headquarters, including a substantial portion of our research and development operations, are located in the San Francisco Bay Area, a region known for seismic activity and a potential terrorist target. In addition, we own facilities for the manufacture of products using our advanced polymer conjugate technologies in Huntsville, Alabama and own and lease offices in Hyderabad, India.
Risks Related to Investment and Securities The price of our common stock has, and may continue to fluctuate significantly, which could result in substantial losses for investors and securities class action and shareholder derivative litigation. Our stock price is volatile.
The price of our common stock has, and may continue to fluctuate significantly, which could result in substantial losses for investors and securities class action and shareholder derivative litigation. Our stock price is volatile.
The patent positions of pharmaceutical and biotechnology companies, such as ours, are uncertain and involve complex legal and factual issues. We own more than 300 U.S. and 1,500 foreign patents and have a number of pending patent applications that cover various aspects of our technologies.
The patent positions of pharmaceutical and biotechnology companies, such as ours, are uncertain and involve complex legal and factual issues. We own more than 250 U.S. and 1,200 foreign patents and have a number of pending patent applications that cover various aspects of our technologies.
Our revenue is exclusively derived from our collaboration agreements (whether based on our drug candidates or polymeric reagents), from which we receive upfront fees, research and development reimbursement and funding, milestone and other contingent payments based on clinical progress, regulatory progress or net sales achievements, royalties and product sales.
Our revenue has historically been exclusively derived from our collaboration agreements (whether based on our drug candidates or polymeric reagents), from which we receive upfront fees, research and development reimbursement and funding, milestone and other contingent payments based on clinical progress, regulatory progress or net sales achievements, royalties and product sales.
Our advanced polymer conjugate chemistry platforms and our partnered and proprietary products and drug candidates compete with various pharmaceutical and biotechnology companies. Competitors of our polymer conjugate chemistry technologies include Biogen Inc., Horizon Pharma, Dr.
Our advanced polymer conjugate chemistry platforms and our partnered and proprietary products and drug candidates compete with various pharmaceutical and biotechnology companies. Competitors of our polymer conjugate chemistry technologies include Biogen Inc., Horizon Pharma, JenKem Technology USA, Dr.
In addition, our insurance coverage may not be sufficient to compensate us for actual losses from any interruption of our business that may occur. Item 1B. Unresolved Staff Comments None.
In addition, our insurance coverage may not be sufficient to compensate us for actual losses from any interruption of our business that may occur. Item 1B. Unresol ved Staff Comments None.
In the event of an earthquake or other natural disaster, political instability, civil unrest, or terrorist event in any of these locations, our ability to manufacture and supply materials for biologic candidates in development and our ability to meet our manufacturing obligations to our customers would be significantly disrupted and our business, results of operations and financial condition would be harmed.
In the event of an earthquake or other natural disaster, catastrophic event caused by climate change, political instability, civil unrest, or terrorist event in any of these locations, our ability to manufacture and supply materials for biologic candidates in development and our ability to meet our manufacturing obligations to our customers would be significantly disrupted and our business, results of operations and financial condition would be harmed.
Healthcare providers, physicians and third-party payers play a primary role in the recommendation and prescription of any biologic candidates for which we obtain marketing approval.
Healthcare providers, physicians and 30 Table of Contents third-party payers play a primary role in the recommendation and prescription of any biologic candidates for which we obtain marketing approval.
Even if our agreement with Lilly provides us with enforcement or other curative rights to address the harm caused by Lilly’s action (or failure to act), our efforts in pursuing a remedy would be costly and time-consuming, and there is no guarantee that these efforts would succeed or be sufficient to fully address the harm.
Even if the applicable agreement provides us with enforcement or other curative rights to address the potential harm caused by Lilly’s action (or failure to act), our efforts in pursuing a remedy would be costly and there is no guarantee that these efforts would succeed or be sufficient to fully address the harm.
Our information technology systems, and those of our partners, vendors, CROs, CMOs or other contractors or consultants are also vulnerable to natural disasters, terrorism, war and telecommunication and electrical failures. Any such compromise or disruption, no matter the origin, may cause an interruption of our operations.
Our information technology systems and infrastructure, and those of our partners, vendors, CROs, CMOs or other contractors or consultants are also vulnerable to natural disasters, terrorism, war, telecommunication and electrical failures and the types of interruption, compromise and damage described above. Any such compromise or disruption, no matter the origin, may cause an interruption of our operations.
Our ability to conduct clinical trials in regions experiencing political or civil unrest could negatively affect clinical trial enrollment or the timely completion of a clinical trial.
Our ability to conduct clinical trials in regions experiencing political 36 Table of Contents or civil unrest could negatively affect clinical trial enrollment or the timely completion of a clinical trial.
However, we would not have control over the timing and reporting of the data from investigator-sponsored trials, nor would we own the data from the investigator-sponsored studies or trials.
However, we would not have control over the timing and reporting of the data from investigator-sponsored trials, nor would we own the data from the 19 Table of Contents investigator-sponsored studies or trials.
Our business could be adversely affected by the effects of health epidemics, including the recent COVID-19 pandemic. 30 Our business could be adversely affected, directly or indirectly, by health epidemics in regions where we have concentrations of clinical trial sites or other business operations, including both our own manufacturing operations as well as the manufacturing operations of third parties upon whom we rely.
Our business could be adversely affected, directly or indirectly, by health epidemics in regions where we have concentrations of clinical trial sites or other business operations, including both our own manufacturing operations as well as the manufacturing operations of third parties upon whom we rely.
We expect to continue to incur substantial losses and negative cash flow from operations and may not achieve or sustain profitability in the future. For the year ended December 31, 2022, we reported a net loss of $368.2 million.
We expect to continue to incur substantial losses and negative cash flow from operations and may not achieve or sustain profitability in the future. For the year ended December 31, 2023, we reported a net loss of $276.1 million.
As part of our business, we collect, store and transmit large amounts of confidential information, proprietary data, intellectual property and personal data.
As part of our business, we collect, store and transmit large amounts of confidential information, proprietary or other sensitive information, including intellectual property and personal data.
Furthermore, as a result of our 2022 Restructuring Plan, our employees may experience distractions or decreases in employee morale and we may experience increased levels of employee attrition and turnover, which would adversely affect our business.
Furthermore, as a result of our 2022 and 2023 Restructuring Plans, our employees may experience distractions or decreases in employee morale and we may experience increased levels of 27 Table of Contents employee attrition and turnover, which would adversely affect our business.
We also have a change of control severance benefit plan, which provides for certain cash severance, stock award acceleration and other benefits in the event our employees are terminated (or, in some cases, resign for specified reasons) following an acquisition. This severance plan could discourage a third party from acquiring us.
We also have a change of control severance benefit plan, which provides for certain cash severance, stock award acceleration and other benefits in the event our employees are terminated (or, in some cases, resign for specified reasons) following an acquisition.
We are a party to numerous collaboration agreements and other significant agreements which contain complex commercial terms that could result in disputes, litigation or indemnification liability that could adversely affect our business, results of operations and financial condition.
We are a party to numerous collaboration agreements and other significant agreements which contain complex commercial terms that could result in disputes, litigation or indemnification liability that could adversely affect our business, results of operations and financial condition. We historically derived substantially all of our revenue from collaboration agreements with biotechnology and pharmaceutical companies.
The COVID-19 pandemic has had a broad impact on global financial markets and could reduce our ability to access capital, which could in the future negatively affect our liquidity. In addition, a recession or market correction resulting from a health epidemic, including the COVID-19 pandemic, could materially affect our business and the value of our common stock.
Further, a severe and widespread epidemic may have a broad impact on global financial markets and could reduce our ability to access capital, which could in the future negatively affect our liquidity. In addition, a recession or market correction resulting from a health epidemic could materially affect our business and the value of our common stock.
In recent years, such changes have been made and changes are likely to continue to occur in the future. Future changes in tax laws could have a material adverse effect on our business, cash flow, financial condition or results of operations.
In recent years, such changes have been made and changes are likely to continue to occur in the future. Future changes in tax laws could have a material adverse effect on our business, cash flow, financial condition or results of operations. Global economic and political conditions may negatively affect us and may magnify certain risks that affect our business.
As of December 31, 2022, we had cash and investments in marketable securities valued at approximately $505.0 million.
As of December 31, 2023, we had cash and investments in marketable securities valued at approximately $329.4 million.
In addition, the loss, corruption or unauthorized disclosure of our trade 37 secrets, personal data or other proprietary or sensitive information could compromise the commercial viability of one or more of our programs, which would negatively affect our business. Also, the costs to us to investigate and mitigate cybersecurity incidents could be significant.
In addition, the loss, corruption or unauthorized disclosure or misuse of our trade secrets, personal data or other confidential and/or proprietary or sensitive information could compromise the commercial viability of one or more of our programs, which would negatively affect our business.
General Risk Factors We significantly rely on information technology systems, and any failure, inadequacy, interruption, breach, or security lapse of that technology within our internal computer systems, or those of our partners, vendors, CROs, CMOs or other contractors or consultants, may result in a material disruption of our development programs and our operations.
This severance plan could discourage a third party from acquiring us. 35 Table of Contents General Risk Factors We significantly rely on information technology systems and infrastructure, and any failure, inadequacy, damage, interruption, compromise or breach, or security lapse of that technology within our internal computer systems and infrastructure, or those of our partners, vendors, CROs, CMOs or other contractors or consultants, may result in a material disruption of our development programs and our operations and financial condition.
Since publication of discoveries in scientific or patent literature often lags behind the date of such discoveries, we cannot be certain that we were the first inventor of inventions covered by our patents or patent applications.
Since publication of discoveries in scientific or patent literature often lags behind the date of such discoveries, we cannot be certain that we were the first inventor of inventions covered by our patents or patent applications. In addition, there is no guarantee that we will be the first to file a patent application directed to an invention.
If we are found in violation of privacy and data protection laws, we may be required to pay penalties, be subjected to scrutiny by regulators or governmental entities, or be suspended from participation in government healthcare programs, which may adversely affect our business, financial condition and results of operations.
We have recorded no liability for any litigation matters in our Consolidated Balance Sheets at December 31, 2023. 32 Table of Contents If we are found in violation of privacy and data protection laws, we may be required to pay penalties, be subjected to scrutiny by regulators or governmental entities, or be suspended from participation in government healthcare programs, which may adversely affect our business, financial condition and results of operations.
For more information regarding the risks related to recently enacted and future legislation please see “ Business – Government Regulation – Legislative and Regulatory Landscape .” We expect that additional U.S. federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that the U.S. federal government will pay for healthcare drugs and services, which could result in reduced demand for our drug candidates or additional pricing pressures.
We expect that additional U.S. federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that the U.S. federal government will pay for healthcare drugs and services, which could result in reduced demand for our drug candidates or additional pricing pressures.
Clinical studies may not begin on time, enroll a sufficient number of patients or be completed on schedule, if at all.
We or our partners may experience delays in conducting clinical trials of our drug candidates. Clinical studies may not begin on time, enroll a sufficient number of patients or be completed on schedule, if at all.
In addition, there is no guarantee that we will be the first to file a patent application directed to an invention. 32 An adverse outcome in any judicial proceeding involving intellectual property, including patents, could subject us to significant liabilities to third parties, require disputed rights to be licensed from or to third parties or require us to cease using the technology in dispute.
An adverse outcome in any judicial proceeding involving intellectual property, including patents, could subject us to significant liabilities to third parties, require disputed rights to be licensed from or to third parties or require us to cease using the technology in dispute.
Increases in interest rates, especially if coupled with reduced government spending and volatility in financial markets, may further increase economic uncertainty and heighten these risks.
Increases in interest rates, especially if coupled with reduced government spending and volatility in financial markets, may further increase economic uncertainty and heighten these risks. Our business could be adversely affected by the effects of health epidemics.
If we are unable to find suitable partners or negotiate collaboration arrangements with favorable commercial terms with respect to our existing and future biologic candidates or the licensing of our intellectual property, or if any arrangements we negotiate, or have negotiated, are terminated, it could have a material adverse effect on our business, financial condition and results of operations.
If we are unable to find suitable partners or negotiate collaboration arrangements with favorable commercial terms with respect to our existing and future biologic candidates or the licensing of our intellectual property, or if any arrangements we negotiate, or have negotiated, are terminated, it could have a material adverse effect on our business, financial condition and results of operations. 24 Table of Contents Our revenue has historically been exclusively derived from our collaboration agreements, which can result in significant fluctuation in our revenue from period to period, and our past revenue is therefore not necessarily indicative of our future revenue.
Supply chain disruptions or shortages in raw materials and equipment caused by the COVID-19 pandemic may affect our ability to manufacture our products and to supply drug candidates for clinical trials.
In addition, health epidemics may cause disruptions in our supply chain or shortages in raw materials and equipment, which would affect our ability to manufacture our products and to supply drug candidates for clinical trials.
We rely on Lilly (through the Lilly Agreement) to initiate, properly conduct, and prioritize clinical trials and other development-related activities for rezpegaldesleukin. Furthermore, we will rely on Lilly to perform specified commercialization activities for rezpegaldesleukin, pursuant to our collaboration agreement.
We previously relied on Lilly (through the Lilly Agreement) to initiate, properly conduct, and prioritize clinical trials and other development-related activities for rezpegaldesleukin.
However, an unfavorable resolution could potentially have a material adverse effect on our business, financial condition, and results of operations or prospects, and potentially result in paying monetary damages.We have recorded no liability for any litigation matters in our Consolidated Balance Sheets at December 31, 2022.
However, an unfavorable resolution could potentially have a material adverse effect on our business, financial condition, and results of operations or prospects, and potentially result in paying monetary damages.
On April 25, 2022, we announced our strategic reorganization and cost restructuring plans (together, the 2022 Restructuring Plan) to prioritize key research and development efforts that will impact the Company’s future business activities, including activities involving rezpegaldesleukin, NKTR-255 and several core research programs.
Our 2022 and 2023 Restructuring Plans prioritized key research and development efforts that will impact the Company’s future business activities, including activities involving rezpegaldesleukin, NKTR-255 and several core research programs.
In addition, undesirable side effects caused by our biologic candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restricted label or the delay or denial of regulatory approval by regulatory authorities.
In addition, undesirable side effects caused by our biologic candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restricted label or the delay or denial of regulatory approval by regulatory authorities. 28 Table of Contents Even if we or our partners receive regulatory approval of a product, the approval may limit the indicated uses for which the drug may be marketed.
Additionally, promising results from earlier trials may not predict similarly favorable outcomes in subsequent trials. For example, several of our past, planned and ongoing clinical trials utilize an “open-label” trial design.
If continued development of rezpegaldesleukin is not ultimately successful, our market valuation, prospects, financial condition and results of operations would be materially harmed. Additionally, promising results from earlier trials may not predict similarly favorable outcomes in subsequent trials. For example, several of our past, planned and ongoing clinical trials utilize an “open-label” trial design.
Risks Related to Business Operations We depend on third parties to conduct the clinical trials for our biologic candidates and any failure of those parties to fulfill their obligations could harm our development and commercialization plans. We depend on independent clinical investigators, contract research organizations and other third-party service providers to conduct clinical trials for our biologic candidates.
Risks Related to Business Operations We depend on third parties to conduct the preclinical studies and clinical trials for our biologic candidates and any failure of those parties to fulfill their obligations could harm our development plans and adversely affect our business, results of operations and financial condition.
Delays in clinical studies are common and have many causes, and any significant delay in clinical studies being conducted by us or our partners could result in delay in regulatory approvals and jeopardize the ability to proceed to commercialization. We or our partners may experience delays in conducting clinical trials of our drug candidates.
One or more clinical failures of our drug candidates would jeopardize and could materially harm our business, results of operations and financial condition. 18 Table of Contents Delays in clinical studies are common and have many causes, and any significant delay in clinical studies being conducted by us or our partners could result in delay in regulatory approvals and jeopardize the ability to proceed to commercialization.
In February 2023, we announced that the Phase 2 Lupus Study of rezpegaldesleukin in SLE conducted by Lilly did not meet the study's primary endpoint and that Lilly does not intend to advance rezpegaldesleukin to Phase 3 development in SLE. One or more clinical failures of our drug candidates would jeopardize and could result in reduced, delayed or eliminated revenue.
In February 2023, we announced that the Phase 2 Lupus Study of rezpegaldesleukin in SLE conducted by Lilly did not meet the study’s primary endpoint and that Lilly did not intend to advance rezpegaldesleukin to Phase 3 development in SLE.
During the year ended December 31, 2022, based on closing prices on the NASDAQ Global Select Market, the closing price of our common stock ranged from $2.03 to $13.72 per share.
During the year ended December 31, 2023, based on closing prices on the Nasdaq Capital Market, the closing price of our common stock ranged from $0.42 to $3.15 per share.
Third parties may not complete activities on schedule or may not conduct our clinical trials in accordance with regulatory requirements or our stated protocols.
Third parties may not complete activities on schedule or may not conduct our clinical trials in accordance with regulatory requirements, such as good laboratory practice or good clinical practice, or our stated protocols and any subsequent data generated may be deemed unacceptable.
Even if we or our partners receive regulatory approval of a product, the approval may limit the indicated uses for which the drug may be marketed. Our and our partnered drugs that have obtained regulatory approval, and the manufacturing processes for these products, are subject to continued review and periodic inspections by the FDA and other regulatory authorities.
Our and our partnered drugs that have obtained regulatory approval, and the manufacturing processes for these products, are subject to continued review and periodic inspections by the FDA and other regulatory authorities.
Disruptions to the normal functioning of the FDA and other government agencies could hinder their ability to perform and carry out important roles and activities on which the operation of our business relies, which could negatively impact our business.
This could reduce the ultimate demand for our drugs or put pressure on our drug pricing, which could negatively affect our business, financial condition, results of operations and prospects. 31 Table of Contents Disruptions to the normal functioning of the FDA and other government agencies could hinder their ability to perform and carry out important roles and activities on which the operation of our business relies, which could negatively impact our business.
Additional changes that may affect our business include those governing enrollment in federal healthcare programs, reimbursement changes, rules regarding prescription drug benefits under the health insurance exchanges and fraud and abuse and enforcement.
Governmental policy can also change the commercial potential of our product candidates, including efforts to increase patient access to lower-cost generic and biosimilar drugs. Additional changes that may affect our business include those governing enrollment in federal healthcare programs, reimbursement changes, rules regarding prescription drug benefits under the health insurance exchanges and fraud and abuse and enforcement.
If an accident involving these materials or an environmental discharge were to occur, we could be held liable for any resulting damages, or face regulatory actions, which could exceed our resources or insurance coverage.
If an accident involving these materials or an environmental discharge were to occur, we could be held liable for any resulting damages, or face regulatory actions, which could exceed our resources or insurance coverage. 33 Table of Contents Risks Related to Investment and Securities We have received a notice of delisting or failure to satisfy a continued listing rule from Nasdaq.
In particular, we expect to compete with therapies that could be cytokine-based, microbiome-based, or toleragenic-based therapies (Symbiotix, LLC, Janssen, AstraZeneca, and Tizona Therapeutics), regulatory T cell therapies (Sangamo Therapeutics, Inc., Quell Therapeutics, Ltd, TxCell, Inc., Sonoma Biotherapeutics, Inc., GentiBio, Inc. Kyvema Therapeutics, Inc. and and Tract Therapeutics, Inc.), or IL-2-based-therapies (Amgen Inc., BMS, Novartis, Inc., ILTOO Pharma, Xencor, Inc.
In particular, we expect to compete with therapies that could be cytokine-based, microbiome-based, or toleragenic-based therapies (Regeneron, Leo Pharma, Eli Lilly 20 Table of Contents and Company, Galderma, Symbiotix, LLC, Janssen Pharmaceuticals, AstraZeneca), regulatory T cell therapies (Sangamo Therapeutics, Inc., Quell Therapeutics, Ltd., Sonoma Biotherapeutics, Inc.
As a result, preliminary and interim data should be viewed with caution until the final data are available. Material adverse changes in the final data could significantly harm our business prospects.
As a result, preliminary and interim data should be viewed with caution until the final data are available. Material adverse changes in the final data could significantly harm our business prospects. Risks Related to our Financial Condition and Capital Requirement Additional cost-savings measures may be necessary following implementation of our strategic reorganization plan and cost restructuring plans.
Factors payers consider in determining reimbursement are based on whether the product is (i) a covered benefit under its health plan; (ii) safe, effective and medically necessary; (iii) appropriate for the specific patient; (iv) cost-effective; and (v) neither experimental nor investigational. 26 In addition, net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payers and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States.
In addition, net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payers and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States.
We rely heavily on these parties for the successful execution of our clinical trials. Though we are ultimately responsible for the results of their activities, many aspects of their activities are 29 beyond our control.
Though we are ultimately responsible for the results of their activities, many aspects of their activities are beyond our control, such as the timing, conduct and management of data developed through these studies and trials.
Our clinical trials and those run by our collaborators or other third parties may be affected by delays in investigator recruitment, clinical site initiation, patient screening, or patient enrollment due to challenges associated with the COVID-19 pandemic.
Health epidemics, such as the COVID-19 pandemic and recent outbreak of respiratory syncytial virus (RSV) in the U.S., can negatively affect our clinical trials and those run by our collaborators or other third parties through delays in investigator recruitment, clinical site initiation, patient screening, or patient enrollment.
As the conflict in Ukraine continues, there can be no certainty regarding whether the U.S., EU or other governments will impose additional sanctions, or other economic or military measures relating to Russia. As a result of global economic and political conditions, some third-party payers may delay or be unable to satisfy their reimbursement obligations.
As a result of global economic and political conditions, some third-party payers may delay or be unable to satisfy their reimbursement obligations.
Such cybersecurity breaches may be the result of unauthorized activity by our employees and contractors, as well as by third parties who use cyberattack techniques involving malware, hacking and phishing, among others.
Cyber incidents have been increasing in frequency, levels of persistence, sophistication and intensity, and can include unauthorized activity by our employees, contractors and other third parties, as well as by third parties who use cyberattack techniques involving malware, hacking and phishing, social engineering and business email compromises, among others.
Merck & Co, through its acquisition of Pandion Therapeutics, and Sanofi SA, through its acquisition of Synthorx, Inc.).
GentiBio, Inc., Kyvema Therapeutics, Inc. and Tract Therapeutics, Inc.), or IL-2 based therapies (Amgen, Inc., BMS (through its acquisition of Delnia, Inc.), Novartis, Inc., ILTOO Pharma, Xencor, inc., Merck & Co (through its acquisition of Pandion Therapeutics), and Sanofi SA).
In connection with the 2022 Restructuring Plan, we also announced cost restructuring measures aimed at ensuring we will have significant capital to fund key programs over a multi-year time horizon. There is no guarantee that the 2022 Restructuring Plan will achieve its intended benefits or that our post-restructuring focus will be sufficient for us to achieve success.
There is no guarantee that these Restructuring Plans and their associated cost restructuring measures will achieve their intended benefits or that our post-restructuring focus will be sufficient for us to achieve success.
See also the risk factor in this Item 1A titled “ Our business could be adversely affected by the effects of health epidemics, including the recent COVID-19 pandemic. ” In addition, our operations and performance may be affected by political or civil unrest or military action, terrorist activity, and unstable governments and legal systems.
Our operations and performance may be affected by global economic and political conditions. For example, our operations and performance (or the operations and performance of our partners and service providers) may be negatively affected by political or civil unrest or military action, terrorist activity, and unstable governments and legal systems.
To date, the ongoing COVID-19 pandemic has not had a significant, long-term impact on our business. However, any prolonged or worsening effects in the progression of the COVID-19 pandemic could cause a negative impact on our clinical trial timelines, operations, financial condition and prospects.
The ultimate effects of health epidemics is uncertain and subject to change and these effects could have a negative impact on our clinical trial timelines, operations, financial condition and prospects.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also lease 135,936 square feet of office space in San Francisco (the Third Street Facility), under an operating lease which expires in January 2030, which previously provided additional space to support our research and development activities.
Biggest changeWe also lease 135,936 square feet of office space in San Francisco (the Third Street Facility), under an operating lease which expires in January 2030.
In connection with our 2022 Restructuring Plan, we have consolidated our San Francisco operations in our Mission Bay Facility, and we have vacated our Third Street Facility and certain laboratory and office spaces at our Mission Bay Facility.
In connection with our 2022 and 2023 Restructuring Plans, we have consolidated our San Francisco operations in our Mission Bay Facility, and we have vacated our Third Street Facility and certain laboratory and office spaces at our Mission Bay Facility.
Item 2. Properties California We lease a 155,215 square foot facility in the Mission Bay Area of San Francisco, California (Mission Bay Facility), under an operating lease which expires in January 2030. The Mission Bay Facility is our corporate headquarters and also includes our research and development operations.
Item 2. Pro perties California We lease a 155,215 square foot facility in the Mission Bay Area of San Francisco, California (Mission Bay Facility), under an operating lease which expires in January 2030. The Mission Bay Facility is our corporate headquarters.
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We are seeking to sublease the vacated spaces, while still maintaining sufficient office and laboratory space to allow our team to develop our proprietary programs.
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We have sublet approximately 29,000 square feet of office and laboratory space in our Mission Bay Facility and are seeking to sublease all of the remaining spaces in both Facilities.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings From time to time, we are subject to legal proceedings. We are not currently a party to or aware of any proceedings that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or results of operations. Item 4. Mine Safety Disclosures Not applicable. 39 PART II
Biggest changeItem 3. Legal Pr oceedings From time to time, we are subject to legal proceedings. We are not currently a party to or aware of any proceedings that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or results of operations. Item 4.
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Mine Sa fety Disclosures Not applicable. 38 Table of Contents PA RT II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe graph assumes that $100 was invested on December 31, 2017 in the common stock of the Company, the NASDAQ Composite Index, the Nasdaq Pharmaceutical Index, the RDG SmallCap Pharmaceutical Index, the NASDAQ Biotechnology Index and the RDG SmallCap Biotechnology Index and assumes reinvestment of any dividends.
Biggest changeThe graph assumes that $100 was invested on December 31, 2018 in the common stock of the Company, the NASDAQ Composite Index, the NASDAQ Biotechnology Index and the RDG SmallCap Biotechnology Index and assumes reinvestment of any dividends. The stock price performance in the graph is not intended to forecast or indicate future stock price performance. 39 Table of Contents
Securities Authorized for Issuance Under Equity Compensation Plans Information regarding our equity compensation plans as of December 31, 2022 is disclosed in Item 12 “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this Annual Report on Form 10-K and is incorporated herein by reference from our proxy statement for our 2023 annual meeting of stockholders to be filed with the SEC pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
Securities Authorized for Issuance Under Equity Compensation Plans Information regarding our equity compensation plans as of December 31, 2023 is disclosed in Item 12 “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this Annual Report on Form 10-K and is incorporated herein by reference from our proxy statement for our 2024 annual meeting of stockholders to be filed with the SEC pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
The following graph compares, for the five year period ended December 31, 2022, the cumulative total stockholder return (change in stock price plus reinvested dividends) of our common stock with (i) the NASDAQ Composite Index, (ii) the NASDAQ Biotechnology Index and (iii) the RDG SmallCap Biotechnology Index.
The following graph compares, for the five year period ended December 31, 2023, the cumulative total stockholder return (change in stock price plus reinvested dividends) of our common stock with (i) the NASDAQ Composite Index, (ii) the NASDAQ Biotechnology Index and (iii) the RDG SmallCap Biotechnology Index.
Measurement points are the last trading day of each of our fiscal years ended December 31, 2018, December 31, 2019, December 31, 2020, December 31, 2021 and December 31, 2022.
Measurement points are the last trading day of each of our fiscal years ended December 31, 2019, December 31, 2020, December 31, 2021, December 31, 2022 and December 31, 2023.
There were no sales of unregistered securities and there were no common stock repurchases made during the year ended December 31, 2022.
There were no sales of unregistered securities and there were no common stock repurchases made during the year ended December 31, 2023.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock trades on The NASDAQ Global Select Market under the symbol “NKTR.” Holders of Record As of February 21, 2023, there were approximately 148 holders of record of our common stock.
Item 5. Market for Registran t’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock trades on The NASDAQ Capital Market under the symbol “NKTR.” Holders of Record As of February 27, 2024, there were approximately 145 holders of record of our common stock.
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The stock price performance in the graph is not intended to forecast or indicate future stock price performance. 40 Item 6. Reserved

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following table presents the components of restructuring, impairment and other costs of terminated program, as further described and disclosed in Note 11 to our Consolidated Financial Statements (in thousands): Year Ended December 31, 2022 Clinical trial expense, other third-party and employee costs for the wind down of the bempegaldesleukin program $ 31,693 Severance and benefit expense 30,904 Impairment of right-of-use assets and property, plant and equipment 65,761 Loss (gain) on sale or disposal of other property, plant and equipment, net (3,326) Contract termination and other restructuring costs 10,898 Restructuring, impairment and other costs of terminated program $ 135,930 For nine-month period ended December 31, 2022, we recorded a reduction of expense of $20.8 million for the net reimbursement from BMS, primarily for clinical trial expense, other third-party and employee costs for the wind down of the bempegaldesleukin program.
Biggest changeIn connection with these events, we reported the following costs in Restructuring, impairment and ther costs of terminated program as further described and disclosed in Note 8 to our Consolidated Financial Statements (in thousands): Year Ended December 31, 2023 2022 2022 Restructuring Plan 2023 Restructuring Plan Total 2022 Restructuring Plan Clinical trial expense, other third-party and employee costs for the wind down of the bempegaldesleukin program $ 5,492 $ — $ 5,492 $ 31,693 Severance and benefit expense — 7,885 7,885 30,904 Impairment of right-of-use assets and property, plant and equipment 14,728 20,600 35,328 65,761 Loss (gain) on sale or disposal of other property, plant and equipment, net — 1,300 1,300 (3,326 ) Contract termination and other restructuring costs 1,919 34 1,953 10,898 Restructuring, impairment and costs of terminated program $ 22,139 $ 29,819 $ 51,958 $ 135,930 • Clinical trial expense, other third-party and employee costs for the wind down of the bempegaldesleukin program: The expense decreased for the year ended December 31, 2023 as compared to the year ended December 31, 2022, as we continued to wind down the bempegaldesleukin program.
However, we have sold the majority of our rights to receive royalties under these arrangements, including: • 2012 Purchase and Sale Agreement: In 2012, we sold all of our rights to receive royalties from CIMZIA ® (for the treatment of Crohn’s disease and other autoimmune indications) and MIRCERA ® (for the treatment of anemia associated with chronic kidney disease) under our collaborations with UCB Pharma and F.
However, we have sold the majority of our rights to receive royalties under these arrangements, including: • 2012 Purchase and Sale Agreement: In 2012, we sold all of our rights to receive royalties from CIMZIA ® (for the treatment of Crohn’s disease and other autoimmune indications) and MIRCERA ® (for the treatment of anemia associated with chronic kidney disease) under our collaborations with UCB Pharma (UCB) and F.
Collaborative Arrangements When we enter into collaboration agreements with pharmaceutical and biotechnology partners, we assess whether the arrangements fall within the scope of Accounting Standards Codification (ASC) 808, Collaborative Arrangements (ASC 808) based on whether the arrangements involve joint operating activities and whether both parties have active participation in the 52 arrangement and are exposed to significant risks and rewards.
Collaborative Arrangements When we enter into collaboration agreements with pharmaceutical and biotechnology partners, we assess whether the arrangements fall within the scope of Accounting Standards Codification (ASC) 808, Collaborative Arrangements (ASC 808) based on whether the arrangements involve joint operating activities and whether both parties have active participation in the arrangement and are exposed to significant risks and rewards.
However, due to the collaborative nature of our joint development and commercialization of bempegaldesleukin, we recognize the reimbursements we receive from BMS for their share of the costs that we incur for the development, manufacturing and commercialization of bempegaldesleukin as a reduction of research and development expense; general and administrative expense; or restructuring, impairment and other costs of terminated program, as applicable.
However, due to the collaborative nature of our joint development and commercialization of bempegaldesleukin, we recognize the reimbursements we receive from BMS for their share of the costs that we incur for the development, manufacturing and commercialization of bempegaldesleukin as a reduction of research and development expense; general and administrative expense; or restructuring, impairment and costs of terminated program, as applicable.
This negotiation was implemented through the Letter Agreement between RPI and us, which permitted us to enter into the Settlement Agreement with UCB in October 53 2021.
This negotiation was implemented through the Letter Agreement between RPI and us, which permitted us to enter into the Settlement Agreement with UCB in October 2021.
Debt Modification As discussed in Note 7 to our Consolidated Financial Statements, to resolve UCB’s challenges to our patents and their resulting obligation to pay us the royalties on net sales of CIMZIA ® which we had sold to RPI, RPI and UCB negotiated a reduction in the royalty term and decreased royalty rates over the remaining term.
Debt Modification As discussed in Note 5 to our Consolidated Financial Statements, to resolve UCB’s challenges to our patents and their resulting obligation to pay us the royalties on net sales of CIMZIA ® which we had sold to RPI, RPI and UCB negotiated a reduction in the royalty term and decreased royalty rates over the remaining term.
We apply our deep understanding of immunology and unparalleled expertise in polymer chemistry to create innovative drug candidates and use our drug development expertise to advance these molecules through preclinical and clinical development . Our pipeline of clinical-stage immunomodulatory agents targets the treatment of autoimmune diseases (e.g. rezpegaldesleukin) and cancer (e.g. NKTR-255).
We apply our deep understanding of immunology and unparalleled expertise in polymer chemistry to create innovative drug candidates and use our drug development expertise to advance these molecules through preclinical and clinical development. Our pipeline of clinical-stage and preclinical-stage immunomodulatory agents targets the treatment of autoimmune diseases (e.g. rezpegaldesleukin and NKTR-0165, respectively) and cancer (e.g. NKTR-255).
The level of license, collaboration and other revenue depends in part upon the estimated recognition period of the upfront payments allocated to continuing performance obligations, the achievement of milestones and other contingent events, the continuation of existing collaborations, the amount of research and development work, and entering into new collaboration agreements, if any.
The amount of revenue depends in part upon the estimated recognition period of the upfront payments allocated to continuing performance obligations, the achievement of milestones and other contingent events, the continuation of existing collaborations, the amount of research and development work, and entering into new collaboration agreements, if any.
For a discussion of these and some of the other key risks and uncertainties affecting our business, see Item 1A “Risk Factors.” With respect to financing our near-term business needs, as set forth below in “Key Developments and Trends in Liquidity and Capital Resources,” we estimate we have working capital to fund our current business plans through at least the next twelve months.
For a discussion of these and some of the other key risks and uncertainties affecting our business, see Item 1A “Risk Factors.” 42 Table of Contents With respect to financing our near-term business needs, as set forth below in “Key Developments and Trends in Liquidity and Capital Resources,” we estimate we have working capital to fund our current business plans through at least the next twelve months.
For our vacant office space on Third St., however, there is significant uncertainty as to whether or when we will be able to enter into a sublease as well as the economic terms of such subleases, if any.
Accordingly, for our vacant office space on Third St., there is significant uncertainty as to whether or when we will be able to enter into a sublease as well as the economic terms of such subleases, if any.
In addition to our drug candidates that we plan to evaluate in clinical development during 2023 and beyond, we believe it is vitally important to continue our substantial investment in a pipeline of new drug candidates to continue to build the value of our drug candidate pipeline and our business.
In addition to our drug candidates that we plan to evaluate in clinical development during 2024 and beyond, we believe it is vitally important to continue our substantial investment in a pipeline of new drug candidates to continue to build the value of our drug candidate pipeline and our business.
Since no active, traded markets exist for arrangements of this nature, we concluded that the 2020 Purchase and Sale Arrangement was economically similar enough to the modified 2012 Purchase and Sale Agreement to use as a basis for the discount rate because the products under both arrangements are well established drugs and the duration of the arrangements are similar.
Since no 51 Table of Contents active, traded markets exist for arrangements of this nature, we concluded that the 2020 Purchase and Sale Arrangement was economically similar enough to the modified 2012 Purchase and Sale Agreement to use as a basis for the discount rate because the products under both arrangements are well established drugs and the duration of the arrangements are similar.
We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates on an ongoing basis.
We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying value of assets and 49 Table of Contents liabilities that are not readily apparent from other sources. We evaluate our estimates on an ongoing basis.
Accordingly, if our estimates for the time to enter the sublease and estimated free rent periods were longer (shorter), the impairment charge would be higher (lower), and if our estimates for the rental rates were lower (higher), the impairment charge would be higher (lower).
Accordingly, if our estimates for the time to enter the sublease and estimated free rent periods were longer (shorter), the impairment charge would be greater (smaller), and if our estimates for the rental rates were lower (higher), the impairment charge would be greater (smaller).
Given the current office lease market rental conditions in San Francisco and the larger Bay Area, our estimates are subject to significant uncertainty.
Given the current office and life sciences lease market rental conditions in San Francisco and the larger Bay Area, our estimates are subject to significant uncertainty.
We have concluded that our collaboration agreements with BMS and Lilly fall within the scope of ASC 808. We concluded that the upfront and milestone payments under these arrangements fall within the scope of ASC 606 and therefore recognize these payments as revenue in license, collaboration and other revenue.
We have concluded that our collaboration agreements with BMS and Lilly fall within the scope of ASC 808. We concluded that the upfront and milestone payments under these arrangements fall within the scope of ASC 606 and therefore 50 Table of Contents recognize these payments as revenue in license, collaboration and other revenue.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed here.
Item 7. Management’s Discussion and Analysi s of Financial Condition and Results of Operations The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed here.
For the remaining three quarters of 2022, we reported direct employee costs supporting the wind down of the bempegaldesleukin program in restructuring, impairment and other costs of terminated program.
For the remaining three quarters of 2022 and all of 2023, we reported direct employee costs supporting the wind down of the bempegaldesleukin program in restructuring, impairment and costs of terminated program.
Cash flows from invest i ng activities During the years ended December 31, 2022 and 2021, the maturities and sales of our investments, net of purchases, totaled $358.3 million and $217.8 million, respectively, which we used to fund our operations.
Cash flows from invest i ng activities During the years ended December 31, 2023 and 2022, the maturities and sales of our investments, net of purchases, totaled $139.2 million and $358.3 million, respectively, which we used to fund our operations.
As part of our impairment evaluation of each vacated space, we separately compared the estimated undiscounted income to the net book value of the related long-term assets, which include right-of-use assets and certain property, plant and equipment, primarily leasehold improvements (collectively, sublease assets).
As part of our evaluation of each sublease space, we separately compare the estimated undiscounted sublease income, as described above, for each sublease to the net book value of the related long-term assets, which include right-of-use assets and certain property, plant and equipment, primarily for leasehold improvements (collectively, sublease assets).
Determination of these key assumptions is complex and highly judgmental. For certain impairment charges, we used the terms of active sublease negotiations or agreements to estimate sublease income. However, for our facility at 360 Third.
Determination of these key assumptions is complex and highly judgmental. For certain impairment charges, we used the terms of active sublease negotiations or agreements to estimate sublease income.
We generally do not believe that we would update the transaction price before events that are outside of our control occur, such as the release of clinical trial results, regulatory acceptance of a BLA or similar filing or regulatory approval.
Due to the significant uncertainties involved with clinical development and regulatory approval, we generally do not believe that we would update the transaction price before events that are outside of our control occur, such as the release of clinical trial results, regulatory acceptance of a BLA or similar filing or regulatory approval.
Our discovery research organization is identifying new drug candidates across a wide range of molecule classes, including small molecules and large proteins, peptides and antibodies. We also plan from time to time to evaluate opportunities to in-license potential drug candidates from third parties to add to our drug discovery and 46 development pipeline.
We continue our interest in identifying new drug candidates across a wide range of molecule classes, including small molecules and large proteins, peptides and antibodies, across multiple therapeutic areas. We also plan from time to time to evaluate opportunities to in-license potential drug candidates from third parties to add to our drug discovery and development pipeline.
At December 31, 2022, we had approximately $505.0 million in cash and investments in marketable securities. Results of Operations Years Ended December 31, 2022 and 2021 The results of operations for the years ended December 31, 2022 and 2021 is presented below.
At December 31, 2023, we had approximately $329.4 million in cash and investments in marketable securities. Results of Operations The results of operations for the years ended December 31, 2023 and 2022 is presented below.
Cash flows from operating activities Cash flows used in operating activities for the years ended December 31, 2022 and 2021 totaled $304.0 million and $412.7 million, respectively.
Cash flows from operating activities Cash flows used in operating activities for the years ended December 31, 2023 and 2022 totaled $192.6 million and $304.0 million, respectively.
We are continuing our oncology clinical collaboration with Merck KGaA and Pfizer Inc. to evaluate the maintenance regimen of NKTR-255 in combination with 42 avelumab, a PD-L1 inhibitor, in patients with locally advanced or metastatic urothelial carcinoma in the Phase II JAVELIN Bladder Medley study.
We are continuing our oncology clinical collaboration with Merck KGaA to evaluate the maintenance regimen of NKTR-255 in combination with avelumab, a PD-L1 inhibitor, in patients with locally advanced or metastatic urothelial carcinoma in the Phase II JAVELIN Bladder Medley study. We expect to receive topline data from the study in the second half of 2024.
The following table presents expenses incurred for clinical and regulatory services, clinical supplies, and preclinical study support provided by third parties as well as contract manufacturing costs for each of our drug candidates.
The following table presents expenses incurred for direct third-party costs, including clinical and regulatory services, contract manufacturing, clinical supplies, and preclinical study support for each of our drug candidates.
As discussed in Note 11, in connection with our 2022 Restructuring Plan, we have consolidated our San Francisco operations in our Mission Bay Facility, and we have vacated our Third St. Facility and certain laboratory and office spaces at our Mission Bay Facility.
As discussed in Note 8, in connection with our 2022 and 2023 Restructuring Plan, we have consolidated our San Francisco operations in our Mission Bay Facility, and we have vacated our Third St. Facility and certain laboratory and office spaces at our Mission Bay Facility. We have decided to sublease all of our leased spaces in the Third St.
In the future, we have the opportunity to receive up to $250.0 million in milestone payments under our collaboration agreement with Lilly. 50 Our current business is subject to significant uncertainties and risks as a result of, among other factors, clinical and regulatory outcomes for rezpegaldesleukin and NKTR-255; the sales levels for those products (for both wholly owned products such as NKTR-255 and for licensed products such as rezpegaldesleukin for which we are entitled to royalties), if and when they are approved; whether, when and on what terms we are able to enter into new collaboration transactions; expenses being higher than anticipated; unplanned expenses and the need to satisfy contingent liabilities, including litigation matters and indemnification obligations; and cash receipts, including sublease income, being lower than anticipated.
Our current business is subject to significant uncertainties and risks as a result of, among other factors, clinical and regulatory outcomes for rezpegaldesleukin and NKTR-255; the sales levels for those products, if and when they are approved; whether, when and on what terms we are able to enter into new collaboration transactions; expenses being higher 48 Table of Contents than anticipated, unplanned expenses and the need to satisfy contingent liabilities, including litigation matters and indemnification obligations; and cash receipts, including sublease income, being lower than anticipated.
In addition to our collaboration with Lilly, we have received upfront and milestone payments under a number of other previous collaboration agreements, several of which have resulted in approved drugs, for which we may continue to manufacture the polymer reagents used in the production of the drug products and may be entitled to royalties for net sales of these approved drugs.
Several of our historical collaboration agreements have resulted in approved drugs, for which we may continue to manufacture the polymer reagents used in the production of the drug products and may be entitled to royalties for net sales of these approved drugs.
St., which represents the substantial majority of our impairment charges for the year ended December 31, 2022, we developed our estimates of the time to enter into a sublease and sublease payments, including estimated free rent periods, based on current real estate trends and market conditions.
However, for the most significant impairment charges we recorded, we developed our estimates of the time to enter into a sublease and sublease payments, including estimated free rent periods, based on current real estate trends and market conditions.
Under the BMS Collaboration Agreement, BMS generally bears 67.5% of development costs for bempegaldesleukin in combination with Opdivo ® and 35% of costs for manufacturing bempegaldesleukin. 45 As discussed in Note 1 to our Consolidated Financial Statements, in April 2022, BMS and we decided to discontinue development of bempegaldesleukin in combination with Opdivo ® and will wind down the various clinical trials under the BMS Collaboration Agreement, and we also decided to discontinue all other development of bempegaldesleukin.
As discussed in Note 1 to our Consolidated Financial Statements, in April 2022, BMS and we decided to discontinue development of bempegaldesleukin in combination with Opdivo ® , and we have also decided to discontinue all other development of bempegaldesleukin. BMS and we have each substantially wound down our respective clinical trials under the BMS Collaboration Agreement.
We cannot forecast with any degree of certainty which of our drug candidates will be subject to future collaborations or how such arrangements would affect our development plans or capital requirements.
We cannot forecast with any degree of certainty which of our drug candidates will be subject to future collaborations or how such arrangements would affect our development plans or capital requirements. 46 Table of Contents General and Administrative Expense General and administrative expense includes the cost of administrative staffing, commercial, finance and legal activities.
We continue to advance our most promising research drug candidates into preclinical development with the objective of advancing these early-stage research programs to human clinical studies over the next several years. Our lead research program is focused on developing a tumor necrosis factor (TNF) receptor 2 (TNFR2) agonist antibody.
We continue to advance our most promising research drug candidates into preclinical development with the objective of advancing these early-stage research programs to human clinical studies over the next several years.
However, if the need arises to liquidate such securities before maturity, we may experience losses on liquidation. To date we have not experienced any liquidity issues with respect to these securities.
These investments are generally held to maturity, which, in accordance with our investment policy, is less than two years. However, if the need arises to liquidate such securities before maturity, we may experience losses on liquidation. To date we have not experienced any liquidity issues with respect to these securities.
Business. (2) In April 2022, BMS and we terminated the development of the bempegaldesleukin program. Accordingly, development expenses for bempegaldesleukin are reported in research and development expense for the first quarter of 2022 and for the full year of 2021.
Definitions are provided in Part I, Item 1. Business. (2) In April 2022, BMS and we terminated the development of the bempegaldesleukin program. We report development expenses for bempegaldesleukin in research and development expense for the first quarter of 2022.
Due to our expected net loss in 2023, we expect income tax expense to be lower for 2023 as compared to 2022. Liquidity and Capital Resources We have financed our operations primarily through revenue from upfront and milestone payments under our strategic collaboration agreements, royalties and product sales, as well as public and private placements of debt and equity securities.
We do not expect to recognize significant reclassification adjustments in 2024. Liquidity and Capital Resources We have financed our operations primarily through revenue from upfront and milestone payments under our strategic collaboration agreements, royalties and product sales, as well as public and private placements of debt and equity securities.
We may pursue various financing alternatives to fund the expansion of our business as appropriate. As a result of our 2022 Restructuring Plan, we have executed subleases for a portion of our excess laboratory spaces and are seeking to sublease additional laboratory and office space.
We may pursue various financing alternatives to fund the expansion of our business as appropriate. As a result of our 2022 and 2023 Restructuring Plans, we are seeking to sublease all of our laboratory and office space on Mission Bay Blvd.
As of December 31, 2022, we had approximately $505.0 million in cash and investments in marketable securities. We estimate that we have working capital to fund our current business plans for at least the next twelve months from the date of filing.
We estimate that we have working capital to fund our current business plans for at least the next twelve months from the date of filing.
For the remaining three quarters of 2022, we reported clinical trial expense, other third-party costs and employee costs for the wind down of the bempegaldesleukin program, net of the reimbursement from BMS, within restructuring, impairment and other costs of terminated program in our Consolidated Statement of Operations. We utilize our employee and infrastructure resources across multiple development and research programs.
Beginning with the second quarter of 2022, we report clinical trial expense, other third-party costs and employee costs for the bempegaldesleukin program, net of the reimbursement from BMS, within restructuring, impairment and costs of terminated program in our Consolidated Statement of Operations.
Clinical development successes and failures can have a disproportionately positive or negative impact on our scientific and medical prospects, financial condition and prospects, results of operations and market opportunities. We continue to actively monitor the ongoing COVID-19 pandemic and applicable government recommendations in light of new developments.
Clinical development successes and failures can have a disproportionately positive or negative impact on our scientific and medical prospects, financial condition and prospects, results of operations and market opportunities.
In addition, we initiated a Nektar-sponsored Phase 2/3 study to evaluate NKTR-255 following Yescarta® or Breyanzi® CD19 CAR-T cell therapy in patients with large B-cell lymphoma. Two ongoing investigator sponsored trials are evaluating NKTR-255 following treatment with a CAR-T cell therapy.
We initiated a Nektar-sponsored Phase 2/3 study to evaluate NKTR-255 following Yescarta ® or Breyanzi ® CD19 CAR-T cell therapy in patients with large B-cell lymphoma, and the Fred Hutchinson Cancer Center is evaluating NKTR-255 following Breyanzi ® CD19 CAR-T cell therapy in patients with relapsed/refractory large B-cell lymphoma as an investigator 41 Table of Contents sponsored study.
We do not expect significant license, collaboration and other revenue for 2023. The timing and future success of our drug development programs and those of our collaboration partners are subject to a number of risks and uncertainties. See Item 1A.
The timing and future success of our drug development programs and those of our collaboration partners are subject to a number of risks and uncertainties. See Item 1A. Risk Factors for discussion of the risks associated with the complex nature of our collaboration agreements.
(4) The amounts include reductions of $9.8 million and $37.2 million of employee cost reimbursements from BMS under our collaboration for the quarter ended March 31, 2022 and the year ended December 31, 2021, respectively.
(3) The amounts include our 25% share of costs incurred by Lilly for the Phase 1b and Phase 2 development of rezpegaldesleukin. Lilly was responsible for 75% of costs. (4) The amounts include reductions of $9.8 million employee cost reimbursements from BMS under our collaboration for the quarter ended March 31, 2022.
For the impairment of right-of-use assets, we will continue to update our estimates based on changes in market conditions, whether or not we are able to enter into subleases and, if we do enter into subleases, the economic terms of those subleases, and we may record impairment charges in future periods as these estimates change.
We will continue to update our estimates based on changes in market conditions, whether or not we are able to enter into subleases and, if we do enter into subleases, the economic terms of such subleases, and we may record non-cash impairment charges in future periods as these estimates change. • Loss (gain) on sale or disposal of property, plant and equipment: We recognized a net gain of $3.3 million for the sale of property, plant and equipment for the full year 2022, primarily resulting from the sale of our research and development facility in India.
We have a manufacturing arrangement with a partner that includes a fixed price which is less than the fully burdened manufacturing cost for the polymer reagent, and we expect this arrangement to continue in future years. We also receive royalty revenue from this collaboration.
We have a manufacturing arrangement with UCB that includes a fixed price which is less than the fully burdened manufacturing cost for the reagent, and we expect this situation to continue in future years. As a result of this arrangement, gross margin was negative for the years ended December 31, 2023 and 2022.
Otherwise, we recorded an impairment charge by reducing the net book value of the assets to their estimated fair value, which we determined by discounting the estimated sublease cash flows using the estimated borrowing rate of a market participant subtenant, which we estimated to be 6.4% and 7.9% as of May 31, 2022 and December 31, 2022, respectively.
If such sublease income exceeds the net book value of the sublease assets, we do not record an impairment charge. Otherwise, we record an impairment charge by reducing the net book value of the sublease assets to their estimated fair value, which we determined by discounting the estimated sublease income using the estimated borrowing rate of a market participant subtenant.
Interest Income and Other Income (Expense), net (in thousands, except percentages) Year Ended December 31, Increase/ (Decrease) 2022 vs. 2021 Percentage Increase/ (Decrease) 2022 vs. 2021 2022 2021 Interest income and other income (expense), net $ 6,667 $ 2,569 $ 4,098 >100% Interest income and other income (expense), net increased for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to increases in market interest rates, which was partially offset by lower investment balances as we have utilized our cash to fund our operations.
See Note 7 to our Consolidated Financial Statements for additional information. Interest Income Interest income increased for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to increases in market interest rates, which was partially offset by lower investment balances as we have utilized our cash to fund our operations.
Accordingly, we reduced the liability to zero as of March 31, 2022 and recognized a corresponding gain in the change in fair value of development derivative liability. The agreement was subsequently terminated in May 2022.
Change in Fair Value of Development Derivative Liability We recorded a gain for the change in fair value of development derivative liability in the three months ended March 31, 2022 because we decided to discontinue the development of bempegaldesleukin, and therefore reduced the liability to zero as of March 31, 2022.
We paid $5.7 million and $15.0 million for the purchase or construction of property, plant and equipment in the years ended December 31, 2022 and 2021, respectively.
We paid $5.7 million for the purchase or construction of property, plant and equipment in the years ended December 31, 2022, and we also received $13.2 million from the sales of property, plant and equipment, primarily from the sale of our research and development facility in India during the year ended December 31, 2022.
We expect that cash flows used in operating activities, excluding upfront, milestone and other contingent payments received, if any, will decrease for 2023 as compared to 2022 because we do not expect any further costs for the wind down of the bempegaldesleukin program and the various cost restructuring activities described above to be significant.
We expect that cash flows used in operating activities, excluding upfront, milestone and other contingent payments received, if any, will increase for 2024 as compared to 2023 due to the development of rezpegaldesleukin in the Phase 2b trials discussed above.
Through optimal engagement of the IL-15 receptor complex, NKTR-255 is designed to enhance functional NK cell populations and formation of long-term immunological memory, which may lead to sustained and durable anti-tumor immune response. Preclinical findings suggest NKTR-255 has the potential to synergistically combine with antibody-dependent cellular cytotoxicity molecules as well as to enhance CAR-T therapies.
Through optimal engagement of the IL-15 receptor complex, NKTR-255 is designed to enhance functional NK cell populations and formation of long-term immunological memory, which may lead to sustained and durable anti-tumor immune response. We are continuing select developmental studies of NKTR-255 in combination with cell therapies and checkpoint inhibitors while we evaluate additional strategic partnership pathways for the program.
For the remaining three quarters of 2022, we reported third party costs for the wind down of the bempegaldesleukin program in restructuring, impairment and other costs of terminated program.
For the remaining three quarters of 2022 and all of 2023, we report third party costs for the wind down of the bempegaldesleukin program in restructuring, impairment and costs of terminated program. The amounts for the quarter ended March 31, 2022 includes a net reduction of $15.1 million for the BMS reimbursement.
The table also presents other costs and overhead consisting of personnel, facilities and other indirect costs (in thousands): Clinical Study Status (1) Year Ended December 31, 2022 2021 Bempegaldesleukin (CD122-preferential IL-2 pathway agonist) (2) Terminated 29,614 107,928 NKTR-255 (IL-15 receptor agonist) Phase 1/2 27,670 25,390 Rezpegaldesleukin (cytokine Treg stimulant) (3) Phase 1/2 11,148 9,376 Discovery research, manufacturing and other costs Various 10,812 34,200 Total clinical development, contract manufacturing and other third party costs 79,244 176,894 Personnel, overhead and other costs (4) 103,848 158,732 Stock-based compensation and depreciation 35,231 64,643 Research and development expense $ 218,323 $ 400,269 _______________________________________________________________ (1) Clinical Study Status definitions are provided in Part I, Item 1.
The table also presents other costs and overhead consisting of personnel, overhead and other indirect costs as we utilize our employee and infrastructure resources across multiple development and research programs (in thousands): 44 Table of Contents Clinical Study Year Ended December 31, Status(1) 2023 2022 Bempegaldesleukin (CD122-preferential IL-2 pathway agonist)(2) Terminated — 29,614 NKTR-255 (IL-15 receptor agonist) Phase 1/2 26,132 27,670 Rezpegaldesleukin (cytokine Treg stimulant)(3) Phase 2b 14,554 11,148 NKTR-0165 (tumor necrosis factor receptor type II agonist) Preclinical 9,345 1,804 Discovery research, manufacturing and other costs Various 1,862 9,403 Total clinical development, contract manufacturing and other third party costs 51,893 79,639 Personnel, overhead and other costs(4) 45,503 103,453 Stock-based compensation and depreciation 16,766 35,231 Research and development expense $ 114,162 $ 218,323 (1) Clinical Study Status as of December 31, 2023.
Product Sales Product sales include predominantly fixed price manufacturing and supply agreements with our collaboration partners and are the result of firm purchase orders from those partners. The timing of shipments is based solely on the demand and requirements of our collaboration partners and is not ratable throughout the year.
We recognize revenue when we transfer promised goods or services to our collaboration partners. • Product sales and Cost of goods sold: Product sales include predominantly fixed price manufacturing and supply agreements with our collaboration partners and are the result of firm purchase orders from those partners.
We believe this program has applications in a number of therapeutic indications including oncology as well as in other infectious diseases. We have historically derived all of our revenue and substantial amounts of research and development operating capital from our collaboration agreements.
We have historically derived substantially all of our revenue and significant amounts of research and development operating capital from our collaboration agreements.
Non-cash Royalty Revenue Related to Sales of Future Royalties For a discussion of our Non-cash royalty revenue, please see our discussion below “Non-Cash Royalty Revenue and Non-Cash Interest Expense.” License, Collaboration and Other Revenue License, collaboration and other revenue includes the recognition of upfront payments, milestone and other contingent payments received in connection with our license and collaboration agreements and certain research and development activities.
See Note 5 to our Consolidated Financial Statements for additional information. • License, collaboration and other revenue: License, collaboration and other revenue includes the recognition of upfront payments, milestone and other contingent payments received in connection with our license and collaboration agreements.
Research and development expense (in thousands, except percentages) Year Ended December 31, Increase/ (Decrease) 2022 vs. 2021 Percentage Increase/ (Decrease) 2022 vs. 2021 2022 2021 Research and development expense $ 218,323 $ 400,269 $ (181,946) (45) % Research and development expense consists primarily of clinical study costs, contract manufacturing costs, direct costs of outside research, materials, supplies, licenses and fees as well as personnel costs (including salaries, benefits, and stock-based compensation).
Research and Development Expense Research and development expense consists primarily of clinical study costs, contract manufacturing costs, direct costs of outside research, materials, supplies, licenses and fees as well as personnel costs (including salaries, benefits, and non-cash stock-based compensation). Research and development expense also includes certain overhead allocations consisting of support and facilities-related costs.
We continue to make significant investments in building and advancing our pipeline of drug candidates as we believe that this is the best strategy to build long-term shareholder value. 41 In April 2022, we announced new strategic reorganization and cost restructuring plans (together, the 2022 Restructuring Plan) focused on prioritizing key research and development efforts that will be most impactful to the Company’s future, including our rezpegaldesleukin (previously referred to as NKTR-358) and NKTR-255 programs and several core research programs.
We continue to make significant investments in building and advancing our pipeline of drug candidates as we believe that this is the best strategy to build long-term shareholder value.
As discussed in Note 11 to our Consolidated Financial Statements, we have implemented our 2022 Restructuring Plan to reduce our workforce by approximately 70%. As a result of our 2022 Restructuring Plan, the commercial organization was eliminated and all other bempegaldesleukin-related pre-commercialization activities ceased.
As a result of our 2022 Restructuring Plan, the commercial organization was eliminated and all other bempegaldesleukin-related commercialization activities ceased. Accordingly, as a result of these Restructuring Plans, general and administrative expense decreased for year ended December 31, 2023 as compared to the year ended December 31, 2022.
TNFR2 signaling drives immunoregulatory function and can provide a direct protective effect for tissue cells. Our focus is on TNFR2 antibody candidates that show selective Treg cell binding and signaling profiles that may be developed for treatment of autoimmune diseases.
TNFR-2 is highly expressed on Tregs, neuronal cells and endothelial cells and has been shown to potentiate the suppressive effects and overall functional properties of Tregs. Our focus on TNFR2 antibody candidates that show selective Treg cell binding and signaling profiles that may be developed for treatment of autoimmune diseases, such as ulcerative colitis, multiple sclerosis and vitiligo.
For the year ended December 31, 2021, we recorded $101.5 million as a reduction of research and development expense for the net reimbursement from BMS.
Accordingly, research and development expense decreased by $29.6 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022 for third-party costs, net of the BMS reimbursement, for the termination of the bempegaldesleukin program.
Non-cash interest expense for the 2012 Purchase and Sales Agreement decreased significantly for the year ended December 31, 2022 compared to the year ended December 31, 2021 due to the lower effective interest rate as a result of the revaluation of the liability.
Research and development expense also decreased for the year ended December 31, 2023, as compared to the year ended December 31, 2022, due to lower allocations of support and facilities-related costs, primarily as a result of these Restructuring Plans.
Due to the potential for adverse developments in the credit markets, we may experience reduced liquidity with respect to some of our investments in marketable securities. These investments are generally held to maturity, which, in accordance with our investment policy, is less than two years.
Accordingly, there is increased uncertainty as to whether or when we will be able to enter into a sublease as well as the economic terms of such subleases, if any. Due to the potential for adverse developments in the credit markets, we may experience reduced liquidity with respect to some of our investments in marketable securities.
Non-cash interest expense decreased significantly for the year ended December 31, 2022 as compared to the year ended December 31, 2021 primarily due to the decrease in the effective interest rate for the 2012 Purchase and Sale Agreement. 2012 Purchase and Sale Agreement Non-cash royalty revenue for the 2012 Purchase and Sale Agreement resulting from net sales of CIMZIA ® and MIRCERA ® for the year ended December 31, 2022 decreased as compared to the year ended December 31, 2021 due to a decrease in the net sales of CIMZIA ® and MIRCERA ® .
We expect non-cash royalty revenue to decrease for 2024 as compared to 2023 due to decrease in royalty rate from UCB, and we expect non-cash interest expense to decrease as a result of the lower liability balance.
On February 23, 2023, we announced the topline data from the Phase 2 study of rezpegaldesleukin in adult patients with systemic lupus erythematosus (SLE) (Phase 2 Lupus Study).
On October 13, 2023, we announced final efficacy data from a Phase 1b study of rezpegaldesleukin in adult patients with atopic dermatitis (Phase 1b AD Study) at the European Academy of Dermatology and Venereolgy conference.
A third investigator sponsored study is evaluating NKTR-255 in combination with darvulamab in patients with unresectable Stage 3 non-small lung cancer who have received chemoradiation.
Under the collaboration, we will contribute NKTR-255 and AbelZeta will add NKTR-255 to its ongoing AbelZeta-sponsored Phase 1 clinical trial. We also have an ongoing investigator sponsored study evaluating NKTR-255 in combination with IMFINZI (darvulumab) in patients with unresectable Stage 3 NSCLC who have received chemoradiation.
Product sales decreased for the year ended December 31, 2022, as compared to the year ended December 31, 2021, due to decreased demand from our collaboration partners. We expect product sales for 2023 to be consistent with 2022.
Accordingly, the revenue recognized in a given period is based solely on the demand and requirements of our collaboration partners and is not ratable throughout the year. We expect product sales to increase for 2024 as compared to 2023 due to increased demand from our partners with a corresponding increase in cost of goods sold.
Removed
In 2017, we entered into a worldwide license agreement with Eli Lilly and Company (Lilly) to develop and commercialize rezpegaldesleukin, pursuant to which we received an initial payment of $150.0 million and are eligible for up to an additional $250.0 million for development and regulatory milestones.
Added
In April of 2022 and 2023, we implemented the 2022 Restructuring Plan and 2023 Restructuring Plan, respectively, which both prioritized key research and development efforts that will be most impactful to the Company’s future.
Removed
We have completed our responsibilities for Phase 1 clinical development and certain drug product development and supply activities. We also share Phase 2 development costs with Lilly, with Lilly responsible for 75% and Nektar responsible for 25% of these costs.
Added
Central to both plans is the continuation of clinical development of both rezpegaldesleukin (previously referred to as NKTR-358) and NKTR-255 programs as well as our core research programs in immunology that include a separate tumor necrosis factor receptor 2 agonist antibody (NKTR-0165).
Removed
Lilly is responsible for the costs of Phase 3 development, but we retain the option to contribute up to 25% of the costs of Phase 3 development on an indication-by-indication basis in order for us to achieve the maximum royalty level under the Lilly Agreement, and further , if approved, we will have the opportunity to receive a royalty rate up to the low twenties percent based upon our Phase 3 development cost contribution and the level of annual global product sales.
Added
The final efficacy data from the Phase 1b AD study showed that patients with moderate-to-sever atopic dermatitis that were treated with rezpegaldesluekin had dose-dependent improvements in the eczema area and severity index (EASI), validated investigated global assessment (vIGA), body surface area (BSA), and itch numeric rating scale (NRS) over twelve weeks of treatment compared to placebo, which were sustained post-treatment over an additional thirty-six weeks.
Removed
We have announced our intention to exercise our option to fully fund Nektar’s 25% share of the Phase 3 development costs for rezpegaldesleukin. Rezpegaldesleukin has advanced to Phase 2 development, which our collaboration partner, Lilly, has carried out in various indications.
Added
Rezpegaldesleukin was well tolerated with no patients in the rezpegaldesleukin groups experiencing severe, serious, or fatal adverse events, and no anti-rezpegaldesleukin antibodies were detected.
Removed
The primary endpoint of the Phase 2 Lupus Study, a > 4-points reduction in Systemic Lupus Erythematosus Disease Activity Index 2000 (SLEDAI-2K) score, was not met and Lilly has notified us that it does not intend to advance rezpegaldesleukin into Phase 3 development for SLE.
Added
In late October 2023, we initiated a Phase 2b clinical study of rezpegaldesleukin in patients with moderate-to-severe atopic dermatitis, and we are targeting the initiation of a new Phase 2b clinical study in patients with alopecia areata by the end of March 2024. We also plan to explore other auto-immune indications for the development of rezpegaldesleukin.
Removed
Although the Phase 2 Lupus Study did not meet its primary endpoint, patients within the modified intent-to-treat population, defined as all patients who were randomized and received at least one dose of study medication, that were treated with rezpegaldesleukin demonstrated improvement in SLEDAI-2K score as compared to placebo.
Added
We developed rezpegaldesleukin and currently own full rights to this drug candidate.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

6 edited+0 added−1 removed6 unchanged
Biggest changeThe majority of our revenue, expense, and capital purchasing activities are transacted in U.S. dollars. However, we have contracts with contract manufacturing organizations in Europe and incur costs from sites in a variety of international locations which are paid in their respective local currencies.
Biggest changeThe majority of our revenue, expense, and capital purchasing activities are transacted in U.S. dollars. However, we have contracts with contract manufacturing organizations in Europe and incur costs from sites in a variety of international locations which are paid in their respective local currencies. Accordingly, we are subject to foreign currency exchange risk for these transactions.
A hypothetical 50 basis point increase in interest rates would result in an approximate $0.6 million decrease, less than 1%, in the fair value of our available-for-sale securities at December 31, 2022. This potential change is based on sensitivity analyses performed on our investment securities at December 31, 2022. Actual results may differ materially.
A hypothetical 50 basis point increase in interest rates would result in an approximate $0.6 million decrease, less than 1%, in the fair value of our available-for-sale securities at December 31, 2023. This potential change is based on sensitivity analyses performed on our investment securities at December 31, 2023. Actual results may differ materially.
Foreign Currency Risk As a result of the sale of our research and development facility in India, we have significant cash and investment balances in India that we intend to repatriate as part of our closure of this entity. We are subject to foreign currency exchange risk until we can repatriate these funds.
Foreign Currency Risk As a result of the sale of our research and development facility in India, we have cash and investment balances in India that we intend to repatriate as part of our closure of this entity. We are subject to foreign currency exchange risk until we repatriate these funds.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Inflation Risk We are exposed to the risk of inflation, which has increased significantly during 2022 and may result in increases to our operating expenses.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Inflation Risk We are exposed to the risk of inflation, which has increased significantly during 2023 and may result in increases to our operating expenses.
We do not believe that inflation has had a material adverse impact on our revenues or operations in any of the past three years. 55
We do not believe that inflation has had a material adverse impact on our revenues or operations in any of the past three years. 52 Table of Contents
The same hypothetical 50 basis point increase in interest rates would have resulted in an approximate $1.8 million decrease, less than 1%, in the fair value of our available-for-sale securities at December 31, 2021. As of December 31, 2022, we held $427.7 million of available-for-sale investments, excluding money market funds, with an average time to maturity of four months.
The same hypothetical 50 basis point increase in interest rates would have resulted in an approximate $0.6 million decrease, less than 1%, in the fair value of our available-for-sale securities at December 31, 2022. As of December 31, 2023, we held $294.1 million of available-for-sale investments, excluding money market funds, with an average time to maturity of three months.
Removed
Additionally, until the closure and sale of our research and 54 development facility in India, a portion of our operations consisted of research and development activities outside the United States, with transactions in the Indian Rupee. Accordingly, we are subject to foreign currency exchange risk for these transactions.

Other NKTR 10-K year-over-year comparisons