Lilly hopes to bloom through Nektar attraction

Nektar Therapeutics has worked hard to build a pipeline and distance itself from its past as an inhaled insulin developer, and today it got a major endorsement from Lilly in the form of a $150m signing fee for NKTR-358, an asset barely into phase I.

The fee makes it into biotech’s 20 most lucrative up-front payments for deals struck at phase I and earlier, EvaluatePharma data show (see table below). For Lilly to have handed over such a generous amount for an asset that has yet to show any clinical activity shows remarkable faith, which is presumably founded on NKTR-358’s mechanism of action.

NKTR-358’s potential lies in autoimmune diseases such as lupus, but unlike many other many other treatments it does not damp down immune response simply by inhibiting cytokines. Rather, Nektar’s aim is to stimulate regulatory T cells, or Tregs, whose function is to inhibit effector T cell activity.

Nektar had made much of this, at this month’s World Congress on Inflammation speculating that NKTR-358 could become the first therapeutic whose action could result in direct manipulation of Tregs.

Precedents

Nevertheless, there are precedents: in January Celgene paid $300m, with up to $475m in future contingent payments, to acquire Delinia, a private company also focusing on treating inflammation and autoimmune diseases.

Delinia was also targeting Treg upregulation, and its lead asset, DEL106, was a fusion protein incorporating an IL-2 mutein. Amgen is known also to have worked on IL-2 muteins, patent data reveal, and has an IL-2 mutein fusion protein, AMG 592, in phase I.

NKTR-358’s precise mode of action has not been disclosed, but Nektar suggests that it works in a similar way, targeting the IL-2 receptor complex in a way that stimulates proliferation and growth of Tregs. Expansion of Tregs, along with suppression of antigen-driven inflammation, has been shown preclinically, and clearly this was enough for Lilly to sign on the dotted line.

In addition to the $150m handed across by the big pharma group $250m is due in undisclosed development and regulatory milestones. Nektar will continue to fund a phase I dose-finding trial that started in March, and is on the hook for a quarter of phase II costs.

By signing fee alone – the most important initial measure of the size of a biotech licensing deal – the Lilly/Nektar tie-up ranks as joint 16th among disclosed licensing deals done at phase I or earlier.

Of course, many of these will not be directly comparable, given that some, like the Celgene/Juno tie-up, additionally involved a large equity element, and the future payments will differ based on the terms of each deal and the milestones involved.

However, it is undeniable that Lilly has given Nektar a major endorsement, sending the latter’s stock up 5% in early trade today. Nektar shares are up over 80% since the start of the year, largely as a result of data with its abuse-proof painkiller NKTR-181, but also on data with a pipeline asset, the CD122 agonist NKTR-214, being presented at Asco.

NKTR-214 is in trials combined with Bristol-Myers Squibb’s Opdivo, and Roche’s Tecentriq, but as an asset it remains unpartnered. Clearly investors will be hoping for more licensing deals from Nektar.

To contact the writer of this story email Jacob Plieth in London at [email protected] or follow @JacobPlieth on Twitter