Nektar Therapeutics Annual Report 2017

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549 Form 10-K ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.For the fiscal year ended December 31, 2017or☐TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.For the transition period from toCommission File Number: 0-24006 NEKTAR THERAPEUTICS(Exact name of registrant as specified in its charter) Delaware 94-3134940(State or other jurisdiction ofincorporation or organization) (IRS EmployerIdentification No.)455 Mission Bay Boulevard SouthSan Francisco, California 94158(Address of principal executive offices and zip code)415-482-5300(Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which RegisteredCommon Stock, $0.0001 par value NASDAQ Global Select MarketSecurities registered pursuant to Section 12(g) of the Act:None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90days) Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submittedand posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submitand post such files). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growthcompany. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. : Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ (Do not check if a smaller reporting company) Smaller reporting company ☐Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a) of the Exchange Act.Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2) Yes ☐ No ☒The approximate aggregate market value of voting stock held by non-affiliates of the registrant, based upon the last sale price of the registrant’s common stock on the lastbusiness day of the registrant’s most recently completed second fiscal quarter, June 30, 2017, as reported on the NASDAQ Global Select Market, was approximately$3,028,667,056. This calculation excludes approximately 941,915 shares held by directors and executive officers of the registrant. Exclusion of these shares does not constitute adetermination that each such person is an affiliate of the registrant.As of February 22, 2018, the number of outstanding shares of the registrant’s common stock was 160,922,921.DOCUMENTS INCORPORATED BY REFERENCEPortions of registrant’s definitive Proxy Statement to be filed for its 2018 Annual Meeting of Stockholders are incorporated by reference into Part III hereof. Such ProxyStatement will be filed with the Securities and Exchange Commission within 120 days of the end of the fiscal year covered by this Annual Report on Form 10-K. NEKTAR THERAPEUTICS2017 ANNUAL REPORT ON FORM 10-KTABLE OF CONTENTS Page PART I Item 1.Business4Item 1A.Risk Factors32Item 1B.Unresolved Staff Comments46Item 2.Properties46Item 3.Legal Proceedings47Item 4.Mine Safety Disclosures47 PART II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities48Item 6.Selected Financial Data50Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations51Item 7A.Quantitative and Qualitative Disclosures About Market Risk63Item 8.Financial Statements and Supplementary Data64Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure98Item 9A.Controls and Procedures98Item 9B.Other Information99 PART III Item 10.Directors, Executive Officers and Corporate Governance100Item 11.Executive Compensation100Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters100Item 13.Certain Relationships and Related Transactions and Director Independence100Item 14.Principal Accountant Fees and Services100 PART IV Item 15.Exhibits and Financial Statement Schedules101Signatures106 2Forward-Looking StatementsThis report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E ofthe Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are “forward-looking statements” for purposes of thisannual report on Form 10-K, including any projections of market size, earnings, revenue, milestone payments, royalties, sales or other financial items, anystatements of the plans and objectives of management for future operations (including, but not limited to, preclinical development, clinical trials andmanufacturing), any statements related to our financial condition and future working capital needs, any statements regarding potential future financingalternatives, any statements concerning proposed drug candidates, any statements regarding the timing for the start or end of clinical trials or submission ofregulatory approval filings, any statements regarding future economic conditions or performance, any statements regarding the success of our collaborationarrangements, timing of commercial launches and product sales levels by our collaboration partners and future payments that may come due to us under thesearrangements, any statements regarding our plans and objectives to initiate or continue clinical trials, and any statements of assumptions underlying any ofthe foregoing. In some cases, forward-looking statements can be identified by the use of terminology such as “may,” “will,” “expects,” “plans,” “anticipates,”“estimates,” “potential” or “continue,” or the negative thereof or other comparable terminology. Although we believe that the expectations reflected in theforward-looking statements contained herein are reasonable, such expectations or any of the forward-looking statements may prove to be incorrect and actualresults could differ materially from those projected or assumed in the forward-looking statements. Our future financial condition and results of operations, aswell as any forward-looking statements, are subject to inherent risks and uncertainties, including, but not limited to, the risk factors set forth in Part I, Item 1A“Risk Factors” below and for the reasons described elsewhere in this annual report on Form 10-K. All forward-looking statements and reasons why results maydiffer included in this report are made as of the date hereof and we do not intend to update any forward-looking statements except as required by law orapplicable regulations. Except where the context otherwise requires, in this annual report on Form 10-K, the “Company,” “Nektar,” “we,” “us,” and “our”refer to Nektar Therapeutics, a Delaware corporation, and, where appropriate, its subsidiaries.TrademarksThe Nektar brand and product names, including but not limited to Nektar®, contained in this document are trademarks and registered trademarks ofNektar Therapeutics in the United States (U.S.) and certain other countries. This document also contains references to trademarks and service marks of othercompanies that are the property of their respective owners. 3PART IItem 1.BusinessNektar Therapeutics is a research-based biopharmaceutical company that discovers and develops innovative medicines in areas of high unmet medicalneed. Our research and development pipeline of new investigational drugs includes treatments for cancer, autoimmune disease and chronic pain. We leverageour proprietary and proven chemistry platform to discover and design new drug candidates. These drug candidates utilize our advanced polymer conjugatetechnology platforms, which are designed to enable the development of new molecular entities that target known mechanisms of action. We refer to our drugcandidates where we retain at least U.S. commercial rights as “proprietary programs” and our other drug candidate programs that we have licensed U.S. andpotentially other commercial rights to collaboration partners as “collaboration partner programs.”Our Proprietary ProgramsImmuno-oncology (I-O)In the area of I-O, we are developing medicines that target biological pathways, which stimulate and sustain the body’s immune response in order tofight cancer. We are developing medicines designed to directly or indirectly modulate the activity of key immune cells, such as cytotoxic T cells and naturalkiller (NK) cells, to increase their numbers and improve their function to recognize and attack cancer cells.NKTR-214, our lead I-O candidate, is a biologic with biased signaling through one of the IL-2 receptor subunits (CD 122) that can stimulateproliferation and growth of tumor-killing immune cells in the tumor micro-environment and increase expression of PD-1 on these immune cells.On September 21, 2016, we entered into a Clinical Trial Collaboration Agreement (BMS Agreement) with Bristol-Myers Squibb Company (BMS),pursuant to which we and BMS are collaborating to conduct Phase 1/2 clinical trials evaluating NKTR-214 and BMS’ human monoclonal antibody thatbinds PD-1, known as Opdivo® (nivolumab), as a potential combination treatment regimen in at least five tumor types and eight indications, and such otherclinical trials evaluating the combined therapy as may be mutually agreed upon by the parties (each, a Combined Therapy Trial). Under the BMS Agreement,BMS is responsible for 50% of all out-of-pocket costs reasonably incurred by us in connection with third party contract research organizations, laboratories,clinical sites and institutional review boards. Each party is otherwise responsible for its own internal costs, including internal personnel costs, incurred inconnection with each Combination Therapy Trial. Interim data from the dose-escalation phase of the trial was presented at the 2017 Society forImmunotherapy of Cancer (SITC) meeting in November 2017. We identified the Phase 2 dose for NKTR-214 and we are currently enrolling subjects inthe expansion phase of the study.On February 13, 2018, we entered into a Strategic Collaboration Agreement (the BMS Collaboration Agreement) with BMS, pursuant to which we andBMS will jointly develop NKTR-214, including, without limitation, in combination with BMS’s Opdivo® (nivolumab) and Opdivo® plus Yervoy®(ipilimumab), and other compounds of BMS, us or any third party. The parties have agreed to jointly commercialize NKTR-214 on a worldwide basis. BMSwill pay us a non-refundable upfront cash payment of $1.0 billion and purchase $850.0 million of shares of our common stock at a purchase price of $102.60per share pursuant to a Share Purchase Agreement (Purchase Agreement). We are eligible to receive additional cash payments of a total of up to $1.43 billion upon achievement of certain development and regulatorymilestones and a total of up to $350.0 million upon achievement of certain sales milestones. We will book all worldwide sales and revenue for NKTR-214. We will share global commercialization profits and losses with BMS for NKTR-214, with Nektar sharing 65% and BMS sharing 35% of the net profitsand losses. BMS will lead commercialization for combinations of NKTR-214 with BMS proprietary medicines, and we will lead all other commercializationefforts for NKTR-214. We will have the final decision-making authority regarding the pricing for NKTR-214. NKTR-214 will be sold on a stand-alone basisand there will be no fixed-dose combinations or co-packaging without the consent of both parties.Under the BMS Collaboration Agreement, we and BMS will collaborate to develop and conduct clinical studies of NKTR-214 pursuant to a jointdevelopment plan, which initially includes a series of registration-enabling trials in more than 20 indications in nine tumor types and may be updated andexpanded only upon mutual agreement of the parties. The parties will share the development costs for NKTR-214 in combination regimens based on eachparty’s relative ownership interest in the compounds included in the regimens. Nektar’s share of such development costs are limited to an annual cap of$125.0 million. Neither party will develop a therapy using an IL-2 agonist in combination with a small or large molecule that binds to the PD(L)-1 target (andin certain indications the anti-CTLA4 target), in indications included in the joint development plan (each, a Competing Combination), whether alone or incollaboration with any third party, during a limited exclusivity period from the closing date under the BMS Collaboration Agreement until the later of (i) thefirst commercial sale of NKTR-214 or (ii) the third anniversary of the closing date, but each party may develop a Competing Combination on its own (but notin collaboration with any third party) during the three years after the end of the4foregoing limited exclusivity period. If a registration-enabling study included in the joint development plan does not have the first patient enrolled prior tothe date which is 14 months from the closing date, subject to allowable delays, the indication covered by that study is no longer subject to the aboveexclusivity. Other than as described above, Nektar may independently develop and commercialize NKTR-214 either alone or in combination with otherNektar proprietary compounds or third party compounds.The closing date under the BMS Collaboration Agreement will occur simultaneously with the closing under the Purchase Agreement, which is subjectto the expiration or early termination of the waiting period (and any extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 andother customary closing conditions. The closings are expected to occur during the second quarter of 2018, upon which the BMS Collaboration Agreementwill supersede and replace the existing BMS Agreement.On May 22, 2017, we announced a research collaboration that is currently underway bewteen Nektar and Takeda Pharmaceutical Company Limited(Takeda) to evaluate NKTR-214 with five compounds from Takeda’s cancer portfolio.On September 12, 2017, we announced that we had begun dosing in a clinical study evaluating the efficacy and safety of NKTR-214 in combinationwith approved checkpoint inhibitors, TECENTRIQ® (atezolizumab) and KEYTRUDA® (pembrolizumab). This study is planned to enroll patients into twoseparate arms concurrently with the first arm evaluating NKTR-214 in combination with atezolizumab in up to 30 patients, and the second arm evaluatingNKTR-214 in combination with pembrolizumab in up to 30 patients. This study is not impacted by the BMS Collaboration Agreement and we plan tocontinue this study through completion. In addition to the existing clinical programs, we plan to continue to advance a broad clinical development program, both on our own or incollaboration with other potential partners, to explore the potential of combining NKTR-214 with therapies such as cancer vaccines, adoptive cell therapy,small molecules, and other biological agents in order to generate novel immune-oncology approaches.NKTR-262 is a small molecule agonist that targets toll-like receptors (TLRs) found on innate immune cells in the body. NKTR-262 is designed tostimulate the innate immune system and promote maturation and activation of antigen-presenting cells (APC), such as dendritic cells, which are critical toinduce the body’s adaptive immunity and create antigen-specific cytotoxic T cells. NKTR-262 is being developed as an intra-tumoral injection incombination with systemic NKTR-214 in order to induce an abscopal response and achieve the goal of complete tumor regression in cancer patients treatedwith both therapies. We filed an IND for NKTR-262 in December 2017 and a Phase 1 clinical trial is expected to start before the end of the first quarter of2018.NKTR-255 is a biologic that targets the interleukin-15 pathway in order to activate the body’s innate and adaptive immunity. Signaling of the IL-15pathway induces the proliferation and growth of CD8 memory T cells so the body’s immune system retains the ability to identify cancer cells if they re-growin the body. NKTR-255 has also been shown to stimulate NK cell development. NKTR-255 is currently advancing through preclinical development.ImmunologyIn February 2017 we submitted an investigational new drug application (IND) for a new biologic that we are developing, NKTR-358, which isdesigned to correct the underlying immune system imbalance in the body that occurs in patients with autoimmune disease. The breakdown of mechanismsassuring recognition of self and non-self is what underlies all autoimmune diseases. A failure of the body's self-tolerance mechanisms is known to result frompathogenic auto reactive T lymphocytes. By increasing the number of regulatory T cells (which are specific immune cells in the body that modulate theimmune system and prevent autoimmune disease by maintaining self-tolerance), these pathogenic auto reactive T cells can be reduced and the proper balanceof effector and regulatory T cells can be achieved to restore the body's self-tolerance mechanisms. There is consistent evidence that suboptimal regulatory Tcell numbers and their lack of activity play a significant role in a myriad of autoimmune diseases. NKTR-358 is designed to optimally target the IL-2 receptorcomplex in order to stimulate proliferation and growth of regulatory T cells. NKTR-358 is being developed as a once or twice monthly self-administeredinjection for a number of autoimmune diseases.On July 23, 2017, we entered into a worldwide license agreement with Eli Lilly and Company (Lilly) to co-develop NKTR-358. We received an initialpayment of $150.0 million in September 2017 and are eligible for up to an additional $250.0 million for development and regulatory milestones. We will beresponsible for completing Phase 1 clinical development and certain drug product development and supply activities. We will also share Phase 2development costs with Lilly, with 75% of those costs borne by Lilly and 25% of the costs borne by us. We will have the option to contribute funding toPhase 3 development on an indication-by-indication basis, ranging from zero to 25% of the global Phase 3 development costs. We are eligible for tieredroyalties on global sales up to the low twenties that escalate based upon our level of our contribution to Phase 3 development costs and the level of globalproduct annual sales. Lilly will be responsible for all costs of global commercialization and we will have an option to co-promote in the U.S. under certainconditions. In March 2017, we began the first Phase 1 dose-finding trial of NKTR-358 to evaluate single-ascending doses of NKTR-358 in approximately 50healthy patients. The study is still ongoing. The Phase 1 multiple-ascending dose5trial to evaluate NKTR-358 in patients with systemic lupus erythematosus (SLE) is expected to be initiated in the second quarter of 2018.Pain - NKTR-181NKTR-181 is a novel mu-opioid analgesic drug candidate for chronic pain conditions. NKTR-181 is currently in Phase 3 clinical development, whichwe call the SUMMIT Phase 3 program, which includes the SUMMIT-07 efficacy study, a human abuse potential (HAP) study, and the SUMMIT-LTS long-term safety study. On March 20, 2017, we announced that NKTR-181 met its primary and secondary endpoints in the SUMMIT-07 Phase 3 efficacy study. We enrolledthe first patient in the first SUMMIT-07 study in February 2015, and we completed enrollment in the study in late 2016. The SUMMIT-07 study comparedtwice-daily dosing of NKTR-181 tablets to placebo in the treatment of over 600 patients with moderate to severe chronic low back pain who were new toopioid therapy (opioid-naïve). SUMMIT-07 evaluated four analgesic doses of NKTR-181 (100 mg, 200 mg, 300 mg and 400 mg). Patients in the trialachieved an average pain score reduction of over 65% (from 6.73 at screening to 2.32 at randomization) during the dose titration period. The primary efficacyendpoint of the study demonstrated significantly improved chronic back pain relief with NKTR-181 compared to placebo (p=0.0019). Key secondaryendpoints of the study also achieved high statistical significance. The study demonstrated that NKTR-181 had a favorable safety profile and was welltolerated.On July 18, 2017, we announced positive top-line data for our pivotal human abuse potential study (HAP) for NKTR-181. The HAP study wasdesigned to confirm and assess the relative oral abuse potential of NKTR-181, at its maximum analgesic therapeutic, dose (400 mg) studied in the SUMMIT-07 trial and at a supratherapeutic dose (3 times to 12 times greater than the analgesic dose range of 100 mg to 400 mg used in the SUMMIT-07 trial),compared to common therapeutic doses of oxycodone (40 mg and 60 mg) in 54 healthy non-dependent recreational drug users. For the primary endpoint ofDrug Liking, NKTR-181 (400 mg and 600 mg) rated less likable compared to oxycodone 40 mg and 60 mg (p<0.0001), and a supratherapeutic dose ofNKTR-181 (1200 mg) rated less likable than oxycodone 60 mg (p=0.0071). Key secondary endpoints of Area Under Effect for Drug Liking (0-1 hours, 0-2hours, 0-3 hours), Drug High and Take Drug Again scores met statistical significance for all doses of NKTR-181 (1200 mg, 600 mg, 400 mg) compared tooxycodone (60 mg).The SUMMIT Phase 3 program also includes a 52-week long-term safety study, which we call SUMMIT-LTS. SUMMIT-LTS is evaluating the long-term safety and tolerability of NKTR-181 in 638 patients (opioid-naïve and opioid-experienced) with moderate to severe chronic low pain or chronic non-cancer pain. The study was completed in December 2017. Following our success of the SUMMIT-07 Phase 3 efficacy study and the HAP study, we are seeking a partner to support future development andcommercialization activities for NKTR-181. We have completed pre-NDA meetings with FDA and we are currently planning to file an NDA for NKTR-181 inthe first half of 2018.Oncology - ONZEALDTMONZEALDTM (also known as NKTR-102, etirinotecan pegol) is our next-generation topoisomerase I inhibitor proprietary drug candidate. On March17, 2015, we announced top-line data from a Phase 3 clinical study for ONZEALDTM, which we call the BEACON study (BrEAst Cancer Outcomes withNKTR-102), as a single-agent therapy for women with advanced metastatic breast cancer. The BEACON study compared ONZEALDTM to an active controlarm comprised of a single chemotherapy agent of physician’s choice (TPC) in patients who were heavily pre-treated with a median of three prior therapies formetastatic disease. In a top-line analysis of 852 patients from the trial, ONZEALDTM provided a 2.1 month improvement in median overall survival over TPC(12.4 months for patients receiving ONZEALDTM compared to 10.3 months for patients receiving TPC). Based on a stratified log-rank analysis, the primaryendpoint measuring the Hazard Ratio (HR) for survival in the ONZEALDTM group compared to the active control arm was 0.87 with a p-value of 0.08, whichdid not achieve statistical significance. Secondary endpoints in the BEACON study included objective response rate and progression-free survival, which didnot achieve statistical significance in the study. We also announced that we observed a significant overall survival benefit in two pre-specified subgrouppopulations—patients with a history of brain metastases and patients with baseline liver metastases at study entry. We have explored future regulatory and development paths forward for ONZEALDTM with the European Union (EU) and U.S. health authorities. InEurope, we met with the National Authorities in Sweden and the United Kingdom, as well as the European Medicines Agency (EMA) to discuss the BEACONdata. In June 2016, we filed a Marketing Authorization Application (MAA) for conditional approval of ONZEALDTM for adult patients with advanced breastcancer who have brain metastases and began enrolling in the ATTAIN study, which compares the overall survival in patients with breast cancer and brainmetastases treated with ONZEALDTM versus physicians treatment of choice. On July 21, 2017, we were informed by the EMA’s Committee for MedicinalProducts for Human Use (CHMP) that it had adopted a negative opinion for the conditional marketing authorization application for ONZEALDTM in theEuropean Union. On July 26, 2017, we filed a request for re-examination of the opinion adopted by the CHMP (the “CHMP Appeal”) but such request wasnot successful. On December 6, 2017, we received a notice from Daiichi Sankyo Europe6GmbH (Daiichi), exercising its right to terminate the Collaboration and License Agreement between us and Daiichi (the Daiichi Collaboration Agreement),which termination became effective on February 4, 2018. As a result of the termination, we made a $12.5 million termination payment to Daiichi in December2017, and all rights and licenses granted to Daiichi under the Daiichi Collaboration Agreement reverted exclusively to Nektar. The Phase 3 study (ATTAIN)in breast cancer patients having brain metastases is ongoing. Collaboration Partner ProgramsIn 2014, we achieved the first approval of one of our proprietary drug candidates, MOVANTIK® (naloxegol), under a global license agreement withAstraZeneca AB (AstraZeneca). MOVANTIK® is an oral peripherally-acting opioid antagonist, for the treatment of opioid-induced constipation, or OIC, aside effect caused by chronic administration of prescription opioid pain medicines. AstraZeneca markets and sells MOVANTIK® in the United States incollaboration with Daiichi Sankyo, Inc. (Daiichi Inc.). Kyowa Hakko Kirin Co. Ltd. (Kirin) has exclusive marketing rights to MOVENTIG® (the naloxegolbrand name in the EU) in the EU, Iceland, Liechtenstein, Norway and Switzerland.We have a collaboration with Baxalta Incorporated, (a wholly-owned subsidiary of Shire plc) to develop and commercialize PEGylated drugcandidates with the objective of providing new long-acting therapies for hemophilia patients. Under this collaboration, we worked with Baxalta to developADYNOVATE® (previously referred to as BAX 855), an extended half-life recombinant factor VIII (rFVIII) treatment for Hemophilia A based on ADVATE®[Antihemophilic Factor (Recombinant)]. ADYNOVATE®, was first approved by the United States Food and Drug Administration (FDA) in late 2015 for use inadults and adolescents, aged 12 years and older, who have Hemophilia A. In December 2016 the FDA expanded the approval of ADYNOVATE® for thetreatment of Hemophilia A in pediatric patients under 12 years of age, and for the use in surgical settings for both adult and pediatric patients. In March 2016,ADYNOVATE® was approved in Japan for patients aged 12 years and older with Hemophilia A and in November 2017 that approval was extended to includepediatric patients under 12 years of age, and those undergoing surgery. In late 2016, ADYNOVATE® (marketed as ADYNOVI) was approved in Switzerlandfor use in Hemophilia A patients aged 12 years and older and in March 2017, ADYNOVI was approved for use in pediatric patients. In November 2016,ADYNOVATE® was approved in Canada for patients 12 years of age and older for the treatment of Hemophilia A, including for perioperativemanagement. In March 2017, ADYNOVATE® was approved in Australia for use in adult and pediatric patients with Hemophilia A. In September 2017,ADYNOVATE® was approved in Colombia for use in children and adults with Hemophilia A In January 2018, ADYNOVATE® (marketed as ADYNOVI) wasapproved in the European Union for on-demand and prophylactic use in patients 12 years and older with Hemophilia A. In January 2018, ADYNOVATE®was also approved in S. Korea for use in children and adults with Hemophilia A. We retained our right to receive royalties on net sales of the Cipro DPI (Cipro Dry Powder Inhaler, previously called Cipro Inhale), pursuant to a drugdevelopment program with Bayer Schering Pharma AG (Bayer Schering) that we transferred to Novartis as part of the 2008 pulmonary asset divestituretransaction. In August 2012, Bayer Schering initiated a global Phase 3 program called RESPIRE for the Cipro DPI product candidate in patients with non-cystic fibrosis bronchiectasis (NCFB). In September 2016, Bayer Schering presented data from the first Phase 3 trail (RESPIRE 1) at the 2016 EuropeanRespiratory Society Annual Meeting which showed in the 14 days on/off regimen, the RESPIRE 1 trial met its primary endpoints of significantly prolongedtime to first exacerbation and significantly reduced frequency of exacerbations versus placebo. The top-line results of the second Phase 3 trial (RESPIRE 2)were presented at the American Thoracic Society 2017 International Conference. A pooled analysis of the primary efficacy results from RESPIRE 1 andRESPIRE 2 is positive and the data from both RESPIRE 1 and RESPIRE 2 indicate that Cipro DPI has a positive safety profile. On November 16, 2017, theAntimicrobial Drugs Advisory Committee of the FDA voted not to recommend Cipro DPI to be approved for the treatment of non-cystic fibrosis. BayerSchering has informed us that they are discontinuing development of Cipro DPI in NCFB for the time being as they evaluate possible future options for thisasset. We have a license, manufacturing and supply agreement with UCB Pharma (UCB) for dapirolizumab pegol, a monovalent pegylated Fab antibodyfragment against the CD40 ligand (CD40L), being developed for the treatment of autoimmune diseases, including systemic lupus erythematosus (SLE) forwhich the candidate is entering Phase 2 development with UCB partner Biogen Inc. We also have a number of license, manufacturing and supply agreementswith other leading biotechnology and pharmaceutical companies, including Amgen, Inc., Allergan, Inc., Merck & Co., Inc. and Pfizer, Inc. More than 10products using our PEGylation technology have received regulatory approval in the U.S. or the EU. There are also a number of other products in clinicaldevelopment that incorporate our advanced polymer conjugate technologies.Corporate InformationWe were incorporated in California in 1990 and reincorporated in Delaware in 1998. We maintain our executive offices at 455 Mission Bay BoulevardSouth, San Francisco, California 94158, and our main telephone number is (415) 482-5300. Our website is located at www.nektar.com. The informationcontained in, or that can be accessed through, our website is not part of, and is not incorporated in, this Annual Report on Form 10-K.7Our Technology PlatformAs a leader in the polymer conjugation field, we have advanced our technology platform to include new advanced polymer technologies that can betailored in specific and customized ways with the objective of optimizing and significantly improving the profile of a wide range of molecules, includingmany classes of drugs targeting numerous disease areas. Polymer conjugation or PEGylation has been a highly effective technology platform for thedevelopment of therapeutics with significant commercial success, such as Amgen’s Neulasta® (pegfilgrastim) and Roche’s PEGASYS® (PEG-interferon alfa-2a). Nearly all of the PEGylated drugs approved over the last fifteen years were enabled with our PEGylation technology through our collaborations andlicensing partnerships with a number of well-known biotechnology and pharmaceutical companies. PEGylation is a versatile technology as a result ofpolyethylene glycol (PEG) being a water soluble, amphiphilic, non-toxic, non-immunogenic compound that has been shown to safely clear from the body. Itsprimary use to date has been in currently approved biologic drugs to favorably alter their pharmacokinetic or pharmacodynamic properties. However, in spiteof its widespread success in commercial drugs, there are some limitations with the first-generation PEGylation approaches that have been used with biologics.For example, these techniques cannot be used successfully to create small molecule drugs which could potentially benefit from the application of thetechnology. Other limitations of the early applications of PEGylation technology include sub-optimal bioavailability and bioactivity, and its limited abilityto be used to fine-tune properties of the drug, as well as its inability to be used to create oral drugs.With our expertise and proprietary technology in polymer conjugation, we have created the next generation of PEGylation technology. Our advancedpolymer conjugation technology platform is designed to overcome the limitations of the first generation of the technology platform and to allow the platformto be utilized with a broader range of molecules across many therapeutic areas. We have also developed robust manufacturing processes for generatingsecond generation PEGylation reagents that allow us to utilize the full potential of these newer approaches.Our advanced polymer conjugate technology platforms have the potential to offer one or more of the following benefits: •improve efficacy or safety of a drug as a result of better pharmacokinetics, pharmacodynamics, longer half-life and sustained exposure of thedrug; •improve targeting or binding affinity of a drug to its target receptors with the potential to improve efficacy and reduce toxicity or drugresistance; •improve solubility of a drug; •enable oral administration of parenterally-administered drugs, or drugs that must be administered intravenously or subcutaneously, andincrease oral bioavailability of small molecules; •prevent drugs from crossing the blood-brain barrier, or reduce their rate of passage into the brain, thereby limiting undesirable central nervoussystem effects; •reduce first-pass metabolism effects of certain drug classes with the potential to improve efficacy, which could reduce the need for othermedicines and reduce toxicity; •reduce the rates of drug absorption and of elimination or metabolism by improving stability of the drug in the body and providing it with moretime to act on its target; •differentially alter binding affinity of a drug for multiple receptors, improving its selectivity for one receptor over another; and •reduce immune response to certain macromolecules with the potential to prolong their effectiveness with repeated doses.We have a broad range of approaches that we may use when designing our own drug candidates, some of which are further described below.Small Molecule Stable Polymer ConjugatesOur customized approach for small molecule polymer conjugates allows for the fine-tuning of the physicochemical and pharmacological properties ofsmall molecule oral drugs to potentially increase their therapeutic benefit. In addition, this approach can enable oral administration of subcutaneously orintravenously delivered small molecule drugs that have low bioavailability when delivered orally. The benefits of this approach can also include: improvedpotency, modified biodistribution with enhanced pharmacodynamics, and reduced transport across specific membrane barriers in the body, such as the blood-brain barrier. An example of reducing transport across the blood-brain barrier is MOVANTIK®, an orally-available peripherally-acting opioid antagonist thatis approved in the United States and the EU. An additional example of the application of membrane transport, specifically slowing transport across the blood-brain barrier is NKTR-181, an orally-available mu-opioid analgesic molecule that is currently in Phase 3 clinical development.8Small Molecule Pro-Drug Releasable Polymer ConjugatesThe pro-drug polymer conjugation approach can be used to optimize the pharmacokinetics and pharmacodynamics of a small molecule drug tosubstantially increase its efficacy and improve its side effect profile. We are currently using this platform with oncolytics, which typically have sub-optimalhalf-lives that can limit their therapeutic efficacy. With our releasable polymer conjugate technology platform, we believe that these drugs can be modulatedfor programmed release within the body, optimized bioactivity and increased sustained exposure of active drug to tumor cells in the body.Large Molecule Polymer Conjugates (Proteins and Peptides)Our customized approaches with large molecule polymer conjugates have enabled numerous successful PEGylated biologics on the market today.Based on our knowledge of the technology and biologics, our scientists have designed novel hydrolyzable linkers that in many cases can be used to optimizebioactivity. Through rational drug design, a protein or peptide’s pharmacokinetics and pharmacodynamics can be substantially improved and its half-life canbe significantly extended. An example of this is Baxalta’s ADYNOVATE®, a longer-acting (PEGylated) form of a full-length recombinant factor VIII (rFVIII)protein, which was approved by the FDA in November 2015 for use in adults and adolescents, aged 12 years and older, who have Hemophilia A. In December2016, Shire plc announced the FDA approved ADYNOVATE® for use in surgical settings for both adults and pediatric patients, and that the FDA alsoapproved ADYNOVATE® for the treatment of Hemophilia A in pediatric patients under 12 years of age.More recently, our scientists have shown that we can also optimize relative receptor binding characteristics of large molecule conjugates. Forinstance, the cytokine Interleukin-2 (IL-2) has two different receptor complexes in the body that cause opposing effects on the immune system. We haveengineered different novel conjugates of IL-2 with optimized differential receptor binding to the IL-2 receptor categories in the immune system. By biasingthe receptor binding of these molecules in complementary ways, we have made two different drug candidates: NKTR-214, which selectively activates effectorT cells, which kill tumors; and NKTR-358, which selectively activates regulatory T cells, which can reduce the pathological immune activation thatunderlies many autoimmune diseases. Large Molecule Pro-Drug Releasable Polymer Conjugates (Cytokines)Our customized approaches with large molecule polymer conjugates have expanded to include a new approach with biologics, in particular cytokines,which utilizes the polymer as a means to bias action to a certain receptor or receptor sub-type. In addition, a cytokine’s pharmacokinetics andpharmacodynamics can be substantially improved and its half-life can be significantly extended. An example of this is NKTR-214, which is a CD122-biasedimmune-stimulatory cytokine with an every two or every three-week dosing schedule.Antibody Fragment Polymer ConjugatesThis approach uses a large molecular weight PEG conjugated to antibody fragments in order to potentially improve their toxicity profile, extend theirhalf-life and allow for ease of synthesis with the antibody. The specially designed PEG replaces the function of the fragment crystallizable (Fc) domain of fulllength antibodies with a branched architecture PEG with either stable or degradable linkage. This approach can be used to reduce antigenicity, reduceglomerular filtration rate, enhance uptake by inflamed tissues, and retain antigen-binding affinity and recognition. There is currently one approved producton the market that utilizes our technology with an antibody fragment, CIMZIA® (certoluzimab pegol), which was developed by our partner UCB Pharma andis approved for the treatment of Crohn’s Disease, psoriatic arthritis and ankylosing spondylitis in the U.S. and rheumatoid arthritis in the U.S. and EU.Our StrategyThe key elements of our business strategy are described below:Advance Our Proprietary Clinical Pipeline of Drug Candidates that Leverage Our Advanced Polymer Conjugate PlatformOur objective is to create value by advancing our lead drug candidates through various stages of clinical development. To support this strategy, wehave significantly expanded and added expertise to our internal preclinical, clinical development and regulatory departments. A key component of ourdevelopment strategy is to potentially reduce the risks and time associated with drug development by capitalizing on the known safety and efficacy ofexisting drugs and drug candidates as well as established pharmacologic targets and drugs directed to those targets. For many of our novel drug candidates,we may seek to study the drug candidates in indications for which the parent drugs have not been studied or approved. We believe that the improvedcharacteristics of our drug candidates will provide meaningful benefit to patients compared to the existing therapies. In addition, in certain instances we havethe opportunity to develop new treatments for patients for which the parent drugs are not currently approved.9Ensure Future Growth of our Proprietary Pipeline through Internal Research Efforts and Advancement of our Preclinical Drug Candidates intoClinical TrialsWe believe it is important to maintain a diverse pipeline of new drug candidates to continue to build on the value of our business. Our discoveryresearch organization is continuing to identify new drug candidates by applying our technology platform to a wide range of molecule classes, includingsmall molecules and large proteins, peptides and antibodies, across multiple therapeutic areas. We continue to advance our most promising research drugcandidates into preclinical development with the objective of advancing these early-stage research programs to human clinical studies over the next severalyears.Enter into Strategic and High-Value Partnerships to Bring Certain of Our Drug Candidates to MarketWe decide on a drug candidate-by-drug candidate basis, how far to advance clinical development (e.g. Phase 1, 2 or 3) and whether to commercializeproducts on our own, or seek a partner, or pursue a combination of these approaches. When we determine to seek a partner, our strategy is to enter intocollaborations with leading pharmaceutical and biotechnology companies to fund further clinical development, manage the global regulatory filing process,and market and sell drugs in one or more geographies. The options for future collaboration arrangements range from comprehensive licensing andcommercialization arrangements to co-promotion and co-development agreements with the structure of the collaboration depending on factors such as thestructure of economic risk sharing, the cost and complexity of development, marketing and commercialization needs, therapeutic area and geographiccapabilities.Continue to Build a Leading Intellectual Property Estate in the Field of Polymer Conjugate Chemistry across Therapeutic ModalitiesWe are committed to continuing to build on our intellectual property position in the field of polymer conjugate chemistry. To that end, we have acomprehensive patent strategy with the objective of developing a patent estate covering a wide range of novel inventions, including among others, polymermaterials, conjugates, formulations, synthesis, therapeutic areas, methods of treatment and methods of manufacture.Nektar Proprietary ProgramsThe following table summarizes our proprietary drugs and drug candidates that have either received regulatory approval or are being developed by usor in collaboration with other pharmaceutical companies or independent investigators. The table includes the type of molecule or drug, the target indicationsfor the drug candidate, and the status of the clinical development program. Drug Candidate Target Indication Status(1) ONZEALDTM (next-generationtopoisomerase I inhibitor) Advanced metastatic breast cancer in patients withbrain metastases Phase 3 NKTR-181 (orally-available mu-opioidanalgesic molecule) Moderate to severe chronic pain Phase 3 NKTR-214 (CD122-biased immune-stimulatory cytokine) Oncology Phase 1/2 in at least eight potential solid tumorindications NKTR-358 Autoimmune Disease Phase 1 NKTR-262 Solid Tumors IND Filed NKTR-255 Immuno-Oncology Research/Preclinical (1)Status definitions are:Phase 3 or Pivotal — product in large-scale clinical trials conducted to obtain regulatory approval to market and sell the drug (these trials aretypically initiated following encouraging Phase 2 trial results).Phase 2 — a drug candidate in clinical trials to establish dosing and efficacy in patients.Phase 1 — a drug candidate in clinical trials, typically in healthy subjects, to test safety.Research/Preclinical — a drug candidate is being studied in research by way of in vitro studies and/or animal studies10Overview of Nektar Proprietary ProgramsImmuno-Oncology (I/O)NKTR-214 (cytokine immunostimulatory therapy)NKTR-214 is a CD122-biased immune-stimulatory cytokine designed to preferentially activate the IL-2 beta sub-receptors and gamma sub-units ofthe IL-2 receptor in order to proliferate tumor-killing T cells within the body (CD8-positive effector T cells and natural killer T cells) without stimulatingregulatory T cells (CD4-positive T cells). This receptor selectivity is intended to increase efficacy and improve safety over existing immunostimulatorycytokine drugs. Under a research collaboration with The University of Texas MD Anderson Cancer Center, in December 2015 we commenced a Phase 1 study toevaluate NKTR-214 as a monotherapy in a variety of tumor types to evaluate safety and efficacy, and define the recommended Phase 2 dose of NKTR-214 inpatients with solid tumors. In addition, the study also assessed the safety profile of NKTR-214, the immunologic effect of NKTR-214 on tumor-infiltratinglymphocytes and other immune activation markers in both blood and tumor tissue, the pharmacokinetic and pharmacodynamic profile of NKTR-214. Interimdata from this dose-escalation monotherapy trial was presented at the 2016 Society for Immunotherapy of Cancer (SITC) meeting in November 2016. The development program for NKTR-214 includes combinations with a number of therapeutic approaches where we believe there is a strong biologicrationale for complimentary mechanisms of action. On September 21, 2016, we entered into a Clinical Trial Collaboration Agreement with BMS, pursuant towhich we and BMS are collaborating to conduct Phase 1/2 clinical trials evaluating NKTR-214 and BMS’ human monoclonal antibody that binds PD-1,known as Opdivo® (nivolumab), as a potential combination treatment regimen in five tumor types and eight potential indications, and such other clinicaltrials evaluating the combined therapy as may be mutually agreed upon by the parties (each, a Combined Therapy Trial). The dose expansion portion of thePhase 1/2 program evaluating NKTR-214 in combination with Opdivo® is currently enrolling patients at multiple clinical sites. In the first phase of thePIVOT-02 study, we evaluated the clinical benefit, safety, and tolerability of combining NKTR-214 with Opdivo® in thirty-eight patients. Interim data fromthe dose-escalation phase of the trial was presented at the 2017 SITC meeting in November 2017. We identified the recommended Phase 2 dose for NKTR-214 in combination with Opdivo® and are currently enrolling subjects in the expansion phase of the study. The second phase of the expansion cohorts isevaluating the safety and efficacy of combining NKTR-214 with Opdivo®. Under the Clinical Trial Collaboration Agreement, BMS is responsible for 50% ofall out-of-pocket costs reasonably incurred in connection with third party contract research organization, laboratories, clinical sites and institutional reviewboards. Each party will otherwise be responsible for its own internal costs, including internal personnel costs, incurred in connection with each CombinedTherapy Trial. Nektar and BMS will use commercially reasonable efforts to manufacture and supply its compound for each Combined Therapy Trial and willbear the costs related thereto.On February 13, 2018, we entered into the BMS Collaboration Agreement with BMS, pursuant to which we and BMS will jointly develop NKTR-214,including, without limitation, in combination with BMS’s Opdivo® (nivolumab) and Opdivo® plus Yervoy® (ipilimumab), and other compounds of BMS, usor any third party. The parties have agreed to jointly commercialize NKTR-214 on a worldwide basis. BMS will pay us a non-refundable upfront cashpayment of $1 billion and purchase $850.0 million of shares of our common stock at a purchase price of $102.60 per share pursuant to a Share PurchaseAgreement (Purchase Agreement). We are eligible to receive additional cash payments of a total of up to $1.43 billion upon achievement of certaindevelopment and regulatory milestones and a total of up to $350.0 million upon achievement of certain sales milestones. We will book all worldwide salesand revenue for NKTR-214. We will share global commercialization profits and losses with BMS for NKTR-214, with Nektar sharing 65% and BMS sharing35% of the net profits and losses. BMS will lead commercialization for combinations of NKTR-214 with BMS proprietary medicines, and we will lead allother commercialization efforts for NKTR-214. We will have the final decision-making authority regarding the pricing for NKTR-214. NKTR-214 will besold on a stand-alone basis and there will be no fixed-dose combinations or co-packaging without the consent of both parties.Under the BMS Collaboration Agreement, we and BMS will collaborate to develop and conduct clinical studies of NKTR-214 pursuant to a jointdevelopment plan, which initially includes a series of registration-enabling trials in more than 20 indications in nine tumor types and may be updated andexpanded only upon mutual agreement of the parties. The parties will share the development costs for NKTR-214 in combination regimens based on eachparty’s relative ownership interest in the compounds included in the regimens. Nektar’s share of such development costs are limited to an annual cap of$125.0 million. Neither party will develop any Competing Combination, whether alone or in collaboration with any third party, during a limited exclusivityperiod from the closing date under the BMS Collaboration Agreement until the later of (i) the first commercial sale of NKTR-214 or (ii) the third anniversaryof the closing date, but each party may develop a Competing Combination on its own (but not in collaboration with any third party) during the three yearsafter the end of the foregoing limited exclusivity period. If a registration-enabling study included in the joint development plan does not have the firstpatient enrolled prior to the date which is 14 months from the closing date, subject to allowable delays, the indication covered by that study is no longersubject to the above exclusivity. Other than as described above, Nektar may independently develop and commercialize NKTR-214 either alone or incombination with other Nektar proprietary compounds or third party compounds.11The closing under the BMS Collaboration Agreement will occur simultaneously with the closing under a Share Purchase Agreement entered intobetween us and BMS on February 13, 2018, which is subject to the expiration or early termination of the waiting period (and any extension thereof) under theHart-Scott-Rodino Antitrust Improvements Act of 1976 and other customary closing conditions. The closings are expected to occur during the second quarterof 2018, upon which the BMS Collaboration Agreement will supersede and replace the existing Clinical Trial Collaboration Agreement.In addition to the clinical trials in collaboration with BMS, we also plan to initiate a broad clinical development program, both on our own or incollaboration with other potential partners, to explore the potential of combining NKTR-214 with therapies such as cancer vaccines, adoptive cell therapy,small molecules, and other biological agents in order to generate novel immune-oncology approaches. NKTR-262NKTR-262 is a small molecule agonist that targets toll-like receptors (TLRs) found on innate immune cells in the body. NKTR-262 is designed toovercome the body’s dysfunction of antigen-presenting cells (APC), such as dendritic cells, which are critical to induce the body’s adaptive immunity andcreate antigen-specific cytotoxic T cells. NKTR-262 is being developed as a single intra-tumoral injection to be administered at the start of therapy withNKTR-214 in order to induce an abscopal response and achieve the goal of complete tumor regression in cancer patients treated with both therapies. We filedan IND for NKTR-262 in December 2017 and expect to begin enrolling patients in the initial Phase 1 study before the end of the first quarter of 2018. NKTR-255NKTR-255 is a memory T cell stimulating cytokine designed to engage the IL-15 pathway to induce long-term T cell activation and improve thequality of T cell memory response to treat cancer. Through optimal engagement of the IL-15Rα/IL-2Rγ receptor complex, NKTR-255 stimulates proliferationand survival of CD8+ T cells, natural killer (NK) cells and enhances formation of long-term immunological memory which may lead to sustained anti-tumorimmune response. Native rhIL-15 is rapidly cleared from the body and must be administered frequently and in high doses limiting its utility due to toxicity.NKTR-255 is designed with IL-15 receptor alpha specificity to optimize biological activity and is uniquely engineered to provide optimal exposure and animproved safety profile.Immunology NKTR-358 is designed to correct the underlying immune system imbalance in the body which occurs in patients with autoimmune disease. Currentsystemic treatments for autoimmune disease, including corticosteroids and anti-TNF agents, suppress the immune system broadly and come with severe sideeffects. NKTR-358 targets the CD25 sub-receptor in the interleukin-2 pathway in order to stimulate proliferation and growth of regulatory T cells, which arespecific immune cells in the body that modulate the immune system and prevent autoimmune disease by maintaining self-tolerance. On July 23, 2017, we entered into the Lilly Agreement, pursuant to which we and Lilly will co‑develop NKTR-358. Under the terms of the LillyAgreement, we received an initial payment of $150.0 million in September 2017 and are eligible for up to $250.0 million in additional development andregulatory milestones. We will be responsible for completing Phase 1 clinical development and certain drug product development and supply activities. Wewill also share Phase 2 development costs with Lilly, with 75% of those costs borne by Lilly and 25% of the costs borne by us. We will have the option tocontribute funding to Phase 3 development on an indication-by-indication basis, ranging from zero to 25% of the global Phase 3 development costs. We areeligible to receive up to double-digit sales royalty rates that escalate based upon our contribution to Phase 3 development cost and the level of globalproduct annual sales. Lilly will be responsible for all costs of global commercialization and we will have an option to co-promote in the U.S. under certainconditions.In February 2017 we filed an IND for NKTR-358 and we are currently enrolling patients in the initial Phase 1 dose-finding trial of NKTR-358 toevaluate single-ascending doses of NKTR‑358 in approximately 50 healthy patients. The Phase 1 multiple-ascending dose trial is expected to be initiated inthe second quarter of 2018 to evaluate NKTR‑358 in patients with systemic lupus erythematosus and other indications.Pain - NKTR-181 (mu-opioid analgesic molecule for chronic pain)NKTR-181 is an orally-available novel mu-opioid analgesic molecule in development as a long-acting analgesic to treat chronic pain. NKTR-181 isdesigned with the objective to address the abuse liability and serious central nervous system (CNS) side effects associated with current opioid therapies.NKTR-181 was created using Nektar’s proprietary polymer conjugate technology, which provides it with a long-acting profile and slows its entry into theCNS. The abuse deterrent properties of NKTR-181 are inherent to its novel molecular structure and do not rely on a formulation approach to prevent itsconversion into a more abusable form of an opioid. In May 2012, the FDA granted Fast Track designation for the NKTR-181 development program. 12In June 2012, we initiated a Phase 2 clinical study to evaluate the efficacy, safety and tolerability of NKTR-181 in patients with moderate to severechronic pain from osteoarthritis of the knee. The Phase 2 clinical study utilized a double-blind, placebo-controlled, randomized withdrawal, enrichedenrollment study design. The study enrolled 295 opioid-naïve patients with osteoarthritis of the knee who were not getting adequate pain relief from theircurrent non-opioid pain medication. Patients who qualified during the baseline period entered a titration phase, during which they were titrated on NKTR-181 tablets administered orally twice-daily until a dose was reached that provided a reduction of at least 20% in the patient’s pain score as compared to thepatient’s own baseline. Patients that achieved this level of analgesia were then randomized on a 1:1 basis to either continue to receive their analgesic dose ofNKTR-181 or to receive placebo for up to 25 days. The primary endpoint of the study was the average change in a patient’s pain score from baseline to theend of the double-blind, randomized treatment period. In the first half of 2013, we conducted a human abuse liability study, or HAL study, for NKTR-181. In this study, NKTR-181 had highly statisticallysignificant lower "drug liking" scores and reduced "feeling high" scores as compared to oxycodone at all doses tested (p < 0.0001). On June 19, 2013, wepresented data from the HAL study at the 2013 Annual Meeting of The College on Problems of Drug Dependence in San Diego, California. On September 26, 2013, we announced results from this Phase 2 efficacy study. Of the 295 patients that entered the study, only 9 patients(representing 3% of the patient population) were unable to achieve meaningful pain relief with NKTR-181. A total of 213 patients achieved an average 40%reduction in pain and entered the randomized phase of the study. NKTR-181 performed as expected as an opioid analgesic throughout the study with patientscontinuing to show a reduction in pain scores throughout the randomized phase of the study. However, patients who were randomized to placebo did notshow the expected increase in pain scores observed in similar enriched enrollment, randomized withdrawal studies. This unusual lack of a placebo reboundcaused the Phase 2 study to miss the primary endpoint in the study.In October 2014, we engaged in an end-of-Phase 2 meeting for NKTR-181 with the FDA, which included discussions of the design of the Phase 3clinical study program. We enrolled the first patient in the first Phase 3 efficacy study, which we call SUMMIT-07 in February 2015 and we completedenrollment in the study in the fourth quarter of 2016. In this study, we randomized patients with chronic low back pain in an enriched enrollment randomizedwithdrawal design which included a qualifying screening period, an open-label titration period where NKTR-181 was given to all patients, followed by a 12-week double-blind randomized period where subjects were randomized on a 1:1 basis to receive either NKTR-181 or placebo. On February 29, 2016, weincreased the sample size of this trial by approximately 200 patients following a pre-specified sample size assessment by the independent analysis center(IAC) after approximately fifty percent of the initially planned 416 patients completed the study. The protocol for the NKTR-181 study defined only twopossible outcomes for this pre-planned blinded interim sample size assessment: (1) if the conditional powering at the midpoint of the trial fell between 50-85%, the sample size was to be increased by approximately 200 patients; or (2) if the conditional powering fell below 50%, or above 85%, the sample sizewas not to be changed. The IAC’s determination was nondiscretionary and was based upon our determination of pre-defined acceptable power to detect astatistically significant difference between NKTR-181 and placebo based on the primary efficacy endpoint. In January 2017, we started enrollment in asecond human abuse liability study where we are assessing abuse liability of supra-therapeutic doses of NKTR-181 in order to further evaluate NKTR-181 forlabeling and scheduling purposes. On March 20, 2017, we announced that NKTR-181 met its primary and secondary endpoints in the SUMMIT-07 Phase 3efficacy Study. On July 18, 2017, we announced positive top-line data for our pivotal human abuse potential study for NKTR-181, which we call the HAPstudy. The SUMMIT Phase 3 program also includes a 52-week long-term safety study, which we call SUMMIT-LTS. SUMMIT-LTS is evaluating the long-term safety and tolerability of NKTR-181 in over 600 patients (opioid-naïve and opioid-experienced) with moderate to severe chronic low pain or chronicnon-cancer pain. The study was completed in December 2017. Following our success of the SUMMIT-07 Phase 3 efficacy study and the HAP study, we are seeking a partner to support future development andcommercialization activities for NKTR-181. We have completed pre-NDA meetings with the FDA to discuss plans for an NDA submission and we arecurrently planning to file an NDA for NKTR-181 in the first half of 2018.According to a 2011 report from the National Academy of Sciences, chronic pain conditions, such as osteoarthritis, back pain and cancer pain, affect atleast 100 million adults in the U.S. annually and contribute to over $300 billion a year in lost productivity. Opioids are considered to be the most effectivetherapeutic option for pain. However, opioids cause significant problems for physicians and patients because of their serious side effects such as respiratorydepression and sedation, as well as the risks they pose for addiction, abuse, misuse, and diversion. The FDA has cited prescription opioid analgesics as beingat the center of a major public health crisis of addiction, misuse, abuse, overdose and death. According to the American Society of Addiction Medicine 2016report, there are 1.9 million Americans which have a substance use disorder involving prescription pain relievers. This same report attributes 18,893 overdosedeaths in 2015 were related to prescription pain relievers.13Oncology - ONZEALDTM (next generation, long-acting topoisomerase I inhibitor)ONZEALDTM (previously known as NKTR-102 or etirinotecan pegol) is our next-generation topoisomerase I inhibitor proprietary drug candidate. In2015, we announced top-line data from a Phase 3 clinical study for ONZEALDTM, which we call the BEACON study (BrEAst Cancer Outcomes withONZEALDTM), as a single-agent therapy for women with advanced metastatic breast cancer. The BEACON study compared ONZEALDTM to an activecontrol arm comprised of a single chemotherapy agent of physician’s choice (TPC) in patients who were heavily pre-treated with a median of three priortherapies for metastatic disease. In a top-line analysis of 852 patients from the trial, ONZEALDTM provided a 2.1 month improvement in median overallsurvival over TPC (12.4 months for patients receiving ONZEALDTM compared to 10.3 months for patients receiving TPC). Based on a stratified log-rankanalysis, the primary endpoint measuring the hazard ratio for survival in the ONZEALDTM group compared to the active control arm was 0.87 with a p-valueof 0.08, which did not achieve statistical significance. Secondary endpoints in the BEACON study included objective response rate and progression-freesurvival, which did not achieve statistical significance in the study. We also announced that we observed a significant overall survival benefit in two pre-specified subgroups—patients with a history of brain metastases and patients with baseline liver metastases at study entry.We have also conducted clinical studies for ONZEALDTM in other solid tumor settings. In 2013, we completed a Phase 2 clinical study forONZEALDTM in approximately 170 patients with platinum-resistant/refractory ovarian cancer. We also initiated a Phase 2 clinical study of ONZEALDTMmonotherapy versus irinotecan in second-line metastatic colorectal cancer patients with the KRAS mutant gene. The Phase 2 clinical study was designed toenroll 174 patients with metastatic colorectal cancer. In February 2014, we decided to close enrollment in this study after 80 patients were randomized due tochallenges in recruiting new patients because the comparator arm of this study, single-agent irinotecan, is not the common standard of care for second linemetastatic colorectal therapy in the U.S. or EU. We also conducted a Phase 1 dose-escalation clinical study which enrolled 26 patients to evaluate ONZEALDTM in combination with 5-Fluorouracil(5-FU)/leucovorin in refractory solid tumor cancers. The chemotherapy agent 5-FU is currently used as a part of a combination treatment regimen forcolorectal cancer in combination with irinotecan, which is also known as the FOLFIRI regimen. On January 18, 2014, we presented data from this study at the2014 Gastrointestinal Cancers Symposium in San Francisco, California. In addition to the clinical study of ONZEALDTM being conducted by us, we havealso provided support for four investigator-initiated Phase 2 studies being conducted for ONZEALDTM. On August 7, 2012, we announced a Phase 2investigator-initiated clinical study of ONZEALDTM in patients with bevacizumab (Avastin)-resistant high-grade glioma being conducted at the StanfordCancer Institute. In May 2013, the study completed enrollment of 20 patients with high-grade glioma who had received a median of three prior lines oftherapy before enrolling in the study. A separate investigator-initiated clinical study is also being conducted at Stanford to evaluate ONZEALDTM inpatients with brain metastasis from primary lung cancer. On February 5, 2013, we announced a Phase 2 investigator-initiated clinical study of ONZEALDTMin patients with metastatic and recurrent non-small cell lung cancer being conducted at the Abramson Cancer Center of the University of Pennsylvania. OnOctober 24, 2013, we announced a Phase 2 investigator-initiated clinical study of ONZEALDTM in patients with relapsed or refractory small-cell lung cancerat the Roswell Park Cancer Institute.We have explored future regulatory and development paths forward for ONZEALDTM with the EU and U.S. health authorities. In Europe, we met withthe National Authorities in Sweden and the United Kingdom, as well as the EMA to discuss the BEACON data. In June 2016, we filed an MAA forconditional approval of ONZEALDTM for adult patients with advanced breast cancer who have brain metastases treated with ONZEALDTM versus physicianstreatment of choice in the ATTAIN trial. On July 21, 2017, we were informed by the EMA’s Committee for Medicinal Products for Human Use (CHMP) that ithad adopted a negative opinion for the conditional marketing authorization application for ONZEALD™ in the EU. On July 26, 2017, we filed a request forre-examination of the opinion adopted by the CHMP (the “CHMP Appeal”) but we were informed by the CHMP in November 2017 that our request was notsuccessful. On December 6, 2017 we received notice of termination from Daiichi exercising its right to terminate the Daiichi Collaboration Agreement, whichtermination became effective on February 4, 2018. As a result of the termination, we made a $12.5 million termination payment to Daiichi in December 2017,and all rights and licenses granted to Daiichi under the Daiichi Collaboration Agreement reverted exclusively to Nektar. The Phase 3 study (ATTAIN) inbreast cancer patients having brain metastases is ongoing. According to the American Cancer Society and World Health Organization, more than 1.4 million women worldwide are diagnosed with breast cancerglobally every year. The chance of developing invasive breast cancer at some time in a woman’s life is a little less than one in eight (approximately 12%). In2017, the American Cancer Society estimates there will be 252,710 new cases of invasive breast cancer diagnosed in the U.S. and about 40,610 women willdie from breast cancer. Anthracyclines and taxanes are the among the most active and widely used chemotherapeutic agents for breast cancer, but theincreased use of these agents at an early stage of disease often renders tumors resistant to these drugs by the time the disease recurs, thereby reducing thenumber of treatment options for metastatic disease. There are currently no FDA-approved topoisomerase I inhibitors indicated to treat breast cancer.14Collaboration Partner ProgramsThe following table outlines our collaborations with a number of pharmaceutical companies that currently license our intellectual property and, insome cases, purchase our proprietary PEGylation materials for their drug products. More than ten products using our PEGylation technology have receivedregulatory approval in the U.S. or Europe. There are also a number of other candidates that have been filed for approval or are in various stages of clinicaldevelopment. These collaborations generally contain one or more elements including a license to our intellectual property rights and manufacturing andsupply agreements under which we may receive manufacturing revenue, milestone payments, and/or royalties on commercial sales of drug products. Drug Primary or TargetIndications DrugMarketer/Partner Status(1) MOVANTIK® (naloxegol tablets) Opioid-induced constipation in adultpatients with chronic non-cancer pain AstraZeneca AB Approved MOVENTIG® (brand name for MOVANTIK®in Europe) Opioid-induced constipation in adultpatients who have an inadequateresponse to laxatives AstraZeneca AB Approved ADYNOVATE® (previously referred to asBAX 855, PEGylated rFVIII) Hemophilia A Shire plc Approved ADYNOVI® (brand name for ADYNOVATE®in Europe) Hemophilia A Shire plc Approved Somavert® (pegvisomant) Acromegaly Pfizer Inc. Approved Neulasta® (pegfilgrastim) Neutropenia Amgen Inc. Approved PEG-INTRON® (peginterferon alfa-2b) Hepatitis-C Merck (through its acquisitionof Schering-PloughCorporation) Approved Macugen® (pegaptanib sodium injection) Age-related macular degeneration Valeant PharmaceuticalsInternational, Inc. Approved CIMZIA® (certolizumab pegol) Rheumatoid arthritis UCB Pharma Approved * CIMZIA® (certolizumab pegol) Crohn’s disease UCB Pharma Approved * CIMZIA® (certolizimab pegol) Psoriasis/Ankylosing Spondylitis UCB Pharma Approved * MIRCERA® (C.E.R.A.) (ContinuousErythropoietin Receptor Activator) Anemia associated with chronickidney disease in patients on dialysisand patients not on dialysis F. Hoffmann-La Roche Ltd Approved **SEMPRANA® Migraine Allergan, Inc. Filed for approval in U.S. Dapirolizumab Pegol Systemic Lupus Erythematosus UCB Pharma (Biogen) Phase 2 PEGPH20 Pancreatic, Non-Small Cell LungCancer, and other multiple tumortypes Halozyme Therapeutics, Inc. Phase 1, 2, and 3 Longer-acting blood clotting proteins Hemophilia Baxalta Research/Preclinical (1)Status definitions are:Approved — regulatory approval to market and sell product obtained in one or more of the U.S., EU or other countries.Filed — an application for approval and marketing has been filed with the applicable government health authority.15Phase 3 or Pivotal — product in large-scale clinical trials conducted to obtain regulatory approval to market and sell the drug(these trials are typically initiated following encouraging Phase 2 trial results).Phase 2 — a drug candidate in clinical trials to establish dosing and efficacy in patients.Phase 1 — a drug candidate in clinical trials, typically in healthy subjects, to test safety.Research/Preclinical — a drug candidate is being studied in research by way of in vitro studies and/or animal studies*In February 2012, we sold our rights to receive royalties on future worldwide net sales of CIMZIA® effective as of January 1, 2012.**In February 2012, we sold our rights to receive royalties on future worldwide net sales of MIRCERA® effective as of January 1, 2012 until theagreement with Roche is terminated or expires.With respect to all of our collaboration and license agreements with third parties, please refer to Item 1A, Risk Factors, including without limitation,“We are a party to numerous collaboration agreements and other significant agreements which contain complex commercial terms that could result indisputes, litigation or indemnification liability that could adversely affect our business, results of operations and financial condition.”Overview of Collaboration Partner ProgramsWe have a number of product candidates in clinical development and approved products in collaboration with our partners where we invented thedrug candidate or where our collaboration partners have licensed our proprietary intellectual property to enable one of their drug candidates. Our agreementswith collaboration partners may involve several elements including a technology license as well as the development, commercialization, and manufacturingand supply obligations. We typically receive consideration from our collaboration partners in the form of upfront payments, or milestone payments androyalties on sales. In certain cases, we also manufacture and supply our proprietary polymer materials to our partners.MOVANTIK® and MOVANTIK® Fixed-Dose Combination Products (MOVANTIK® previously referred to as naloxegol or NKTR-118 andMOVANTIK® Fixed-Dose Combination Products previously referred to as NKTR-119), License Agreement with AstraZeneca ABIn September 2009, we entered into a global license agreement with AstraZeneca AB (AstraZeneca) pursuant to which we granted AstraZeneca aworldwide, exclusive, perpetual, royalty-bearing license under our patents and other intellectual property to develop, market and sell MOVANTIK® andMOVANTIK® fixed-dose combination products. MOVANTIK® was developed using our oral small molecule polymer conjugate technology and weadvanced this drug through the completion of Phase 2 clinical studies prior to licensing it to AstraZeneca. MOVANTIK® is an orally-available peripherally-acting mu-opioid antagonist which is a medication for the treatment of opioid-induced constipation (OIC), which is a common side effect of prescriptionopioid medications. Opioids attach to specific proteins called opioid receptors. When the opioids attach to certain opioid receptors in the gastrointestinaltract, constipation may occur. OIC is a result of decreased fluid absorption and lower gastrointestinal motility due to opioid receptor binding in thegastrointestinal tract.On September 16, 2014, the FDA approved MOVANTIK® as the first once-daily oral peripherally-acting mu-opioid receptor antagonist (PAMORA)medication for the treatment of OIC in adult patients with chronic, non-cancer pain. On December 9, 2014, the European Commission, or EC, grantedMarketing Authorisation to MOVENTIG® (the naloxegol brand name in the EU) as the first once-daily oral PAMORA to be approved in the EU for thetreatment of OIC in adult patients who have had an inadequate response to laxative(s). The EC’s approval applies to all 28 EU member countries plus Icelandand Norway. AstraZeneca launched the commercial sales of MOVANTIK® in the United States in March 2015 and MOVENTIG® in Germany, the first EUmember country, in August 2015. Under the terms of our license agreement with AstraZeneca, AstraZeneca made an initial license payment of $125.0 millionto us and has responsibility for all activities and bears all costs associated with research, development and commercialization for MOVANTIK® andMOVANTIK® fixed-dose combination products. We received milestone payments of $70.0 million and $25.0 million upon the acceptance of regulatoryapproval applications of MOVANTIK® by the FDA and the EMA, respectively, in 2013. We received an additional developmental milestone payment of$35.0 million upon the FDA’s approval of MOVANTIK® in 2014 and a total of $140.0 million upon commercial launches in 2015, including $100.0 millionfor MOVANTIK® in the U.S. and $40.0 million for MOVENTIG® in Germany. We are also entitled to up to $375.0 million in sales milestones forMOVANTIK® if the program achieves certain annual commercial sales levels. For the MOVANTIK® fixed-dose combination products, we are also eligible toreceive significant development milestones as well as significant sales milestone payments if the program achieves certain annual commercial sales levels.For both MOVANTIK® and the fixed-dose combination products, we are also entitled to significant double-digit royalty payments starting at 20% of netsales in the U.S. and 18% of net sales in the EU and rest of world, varying by country of sale and level of annual net sales. On March 1, 2016, AstraZenecaannounced that it had entered into an agreement with Kyowa Hakko Kirin Co. Ltd. (Kirin), granting Kirin exclusive marketing rights to MOVENTIG® in theEU, Iceland, Liechtenstein, Norway and Switzerland. Nektar receives a 40% share of royalty payments made by Kirin to AstraZeneca will be financiallyequivalent to Nektar receiving high single-digit to low double-digit royalties depending on Kirin’s annual net sales levels. Our right to receive royalties(subject to certain adjustments) in any particular country will expire upon the later of (a) a16specified period of time after the first commercial sale of the product in that country or (b) the expiration of patent rights in that particular country.AstraZeneca has agreed to use commercially reasonable efforts to develop one MOVANTIK® fixed-dose combination product and has the right to developmultiple products which combine MOVANTIK® with opioids.There are a number of patents relevant to MOVANTIK®, some of which are listed in the FDA’s “Orange Book.” The “Orange Book” currently lists sixpatents for MOVANTIK®. Four patents (i.e., U.S. Patent Nos. 7,056,500, 7,662,365, 7,786,133 and 9,012,469) are “composition of matter patents” - one ofwhich has a patent expiry extending into 2032. In addition, two patents (i.e., U.S. Patent Nos. 8,067,431 and 8,617,530) are directed to methods of treatment.ADYNOVATE® (previously referred to as BAX 855) and Long-Acting Therapies for Hemophilia A, Agreement with Subsidiaries of BaxaltaIncorporatedIn September 2005, we entered into an exclusive research, development, license, manufacturing and supply agreement (Baxalta License Agreement)with certain subsidiaries of Baxalta (which has been acquired by Shire plc), formerly Baxter before the separation of Baxalta from Baxter in July 2015, todevelop products with an extended half-life for the treatment and prophylaxis of Hemophilia A patients using our proprietary PEGylation technology. Thefirst product in this collaboration, ADYNOVATE® (previously referred to as BAX 855), is a longer-acting (PEGylated) form of a full-length recombinantfactor VIII (rFVIII) protein. ADYNOVATE® is a full-length PEGylated longer-acting recombinant factor VIII (rFVIII) that was developed to increase the half-life of ADVATE® (Antihemophilic Factor (Recombinant) Plasma/Albumin-Free Method). We are entitled to up to $55.0 million in total development andsales milestone payments, as well as royalties on net sales varying by product and country of sale. The royalties start in the mid-single digits for net sales ofADYNOVATE® up to $1.2 billion and then in the low teens for net sales exceeding $1.2 billion. Our right to receive these royalties in any particular countrywill expire upon the later of ten years after the first commercial sale of the product in that country or the expiration of patent rights in certain designatedcountries or in that particular country.In November 2015, ADYNOVATE® was approved by the FDA for use in adults and adolescents, aged 12 years and older, who have Hemophilia A. OnNovember 30, 2015, Baxalta announced that it had initiated sales of ADYNOVATE® in the U.S. In December 2016 the FDA expanded the approval ofADYNOVATE® for the treatment of Hemophilia A in pediatric patients under 12 years of age, and for the use in surgical settings for both adult and pediatricpatients. In March 2016, ADYNOVATE® was approved in Japan for patients aged 12 years and older with Hemophilia A and in November 2017 that approvalwas extended to include pediatric patients under 12 years of age, and those undergoing surgery. In late 2016, ADYNOVATE® (marketed as ADYNOVI) wasapproved in Switzerland for use in Hemophilia A patients aged 12 years and older and in March 2017, ADYNOVI was approved for use in pediatric patients.In November 2016, ADYNOVATE® was approved in Canada for patients 12 years of age and older for the treatment of Hemophilia A, including forperioperative management. In March 2017, ADYNOVATE® was approved in Australia for use in adult and pediatric patients with Hemophilia A. InSeptember 2017, ADYNOVATE® was approved in Colombia for use in children and adults with Hemophilia A. In January 2018 ADYNOVATE® (marketed asADYNOVI) was approved in the European Union for on-demand and prophylactic use in patients 12 years and older with Hemophilia A. In January 2018,ADYNOVATE® was also approved in S. Korea for use in children and adults with Hemophilia A. In October 2017, we entered into a right to sublicense agreement with Baxalta, under which we granted to Baxalta the right to grant a nonexclusivesublicense to certain patents to a third party that were previously exclusively licensed to Baxalta under the Baxalta License Agreement. Under the right tosublicense agreement, Baxalta paid us $12.0 million in November 2017 and agreed to pay us single digit royalty payments based upon net sales of the thirdparty products covered under the sublicense throughout the term of the right to sublicense agreement.Hemophilia A, also called factor VIII (FVIII) deficiency or classic hemophilia, is a genetic disorder caused by missing or defective factor VIII, aclotting protein. According to the US Centers for Disease Control and Prevention, hemophilia occurs in approximately one in 5,000 live births and there areabout 20,000 people with hemophilia in the US. All races and ethnic groups are affected. Hemophilia A is four times as common as Hemophilia B while morethan half of patients with Hemophilia A have the severe form of hemophilia. In 2014, according to the Evaluate Group, sales of FVIII replacement productsexceeded $6.0 billion globally.Amikacin Inhale (BAY41-6551, formerly NKTR-061), Agreement with Bayer Healthcare LLCIn August 2007, we entered into a co-development, license and co-promotion agreement (Bayer Agreement) with Bayer Healthcare LLC (Bayer) todevelop a specially-formulated Amikacin (BAY41-6551, Amikacin Inhale, formerly called NKTR-061) for the treatment of gram-negative pneumonias. Underthe terms of the agreement, Bayer was responsible for most future clinical development and commercialization costs, all activities to support worldwideregulatory filings, approvals and related activities, further development of formulated Amikacin and final product packaging for Amikacin Inhale. We wereresponsible for all future development, manufacturing and supply of the nebulizer device for clinical and commercial use.17In April 2013, Bayer initiated enrollment in a global Phase 3 clinical study, which it calls INHALE, to evaluate the efficacy and safety of AmikacinInhale versus aerosolized placebo in the treatment of intubated and mechanically ventilated patients with Gram-negative pneumonia receiving standard ofcare intravenous antibiotics. On November 24, 2017, Bayer announced that the Phase 3 Amikacin Inhale clinical program did not meet its primary endpointor key secondary endpoints. On December 14, 2017, we received notice of termination from Bayer of the Bayer Agreement effective as of January 13, 2018.No payment obligations to Bayer arose as a result of the termination of the Bayer Agreement. Cipro DPI (formerly known as Cipro Inhale), Bayer Schering Pharma AGWe were a party to a collaborative research, development and commercialization agreement with Bayer Schering Pharma AG (Bayer Schering), relatedto the development of an inhaled powder formulation of ciprofloxacin delivered by way of a dry powder inhaler, Cipro DPI (formerly known as Cipro Inhale)for the treatment of chronic lung infections caused by Pseudomonas aeruginosa in cystic fibrosis patients. On December 31, 2008, we assigned the agreementto Novartis Pharma AG in connection with the completion of the pulmonary asset sale transaction. However, we retained our economic interest in the futurepotential net sales royalties if Cipro DPI is approved by health authorities and is successfully commercialized by Bayer Schering. In August 2012, BayerSchering initiated a Phase 3 clinical development program which it calls RESPIRE for Cipro DPI in patients with non-cystic fibrosis bronchiectasis (NCFB).In these patients with NCFB, the bronchial tubes are enlarged, allowing mucus to pool and making the area prone to infection. In September 2016, BayerSchering presented data from the first Phase 3 trail (RESPIRE 1) at the 2016 European Respiratory Society Annual Meeting which showed that the study metits co-primary endpoints for the every 14-day dosing arm of Cipro DPI. The second Phase 3 trial (RESPIRE 2) completed recruitment in September 2016. OnApril 5, 2017, an abstract with data from the RESPIRE 2 trial was published by the American Thoracic Society in connection with the American ThoracicSociety 2017 International Conference. A pooled analysis of the primary efficacy results of RESPIRE 1 and RESPIRE 2 is positive and the data of bothRESPIRE 1 and RESPIRE 2 indicated that Cipro DPI has a positive safety profile. On November 16, 2017, the Antimicrobial Drugs Advisory Committee ofthe FDA voted not to recommend Cipro DPI to be approved for the treatment of non-cystic fibrosis. Bayer Schering has informed us that they arediscontinuing development of Cipro DPI in NCFB for the time being as they evaluate possible future options for this asset. FOVISTA® (Anti-PDGF Therapy), Agreement with Ophthotech CorporationOn May 19, 2014, Ophthotech entered into a Licensing and Commercialization Agreement with Novartis Pharma AG to develop and commercializeFovista® and related combination products in all countries outside of the U.S. Under the original license and supply agreement entered into between us andOphthotech, we received a $19.8 million payment in June 2014 in connection with this licensing agreement. In December 2016 Ophthotech announced thattwo pivotal Phase 3 clinical trials for Fovista® failed to meet their primary endpoints. In August 2017, Opthotech announced that the third Fovista® Phase 3trial also failed to meet its primary endpoint. On October 27, 2017, we agreed to terminate our license and supply agreement with Ophthotech. PEGPH20, Agreement with Halozyme Therapeutics, Inc.In December 2006, we entered into a license agreement with Halozyme pursuant to which we granted Halozyme a worldwide, limited exclusive licenseto certain of our proprietary PEGylation technology to develop, manufacture and commercialize particular products that use our proprietary PEGylationmaterials linked only with certain qualifying hyaluronidase protein molecules including PEGPH20. According to Halozyme, certain cancers, includingpancreatic, breast, colon and prostate, have been shown to accumulate high levels of hyaluronan (HA). Halozyme’s FDA-approved, HYLENEX® recombinanthuman hyaluronidase, rHuPH20, is administered subcutaneously and temporarily and reversibly degrades HA to facilitate the absorption and dispersion ofother injected drugs or fluids and for subcutaneous fluid administration. However, rHuPH20 acts only locally at the injection site, is rapidly inactivated in thebody, and does not survive in the blood. PEGPH20 is an investigational PEGylated form of rHuPH20, under development by Halozyme to increase the half-life of the compound in the blood and allow for intravenous administration. Halozyme is currently evaluating PEGPH20 in a Phase 3 clinical studycombining PEGPH20 with ABRAXANE® (nab-paclitaxel) and gemcitabine in stage IV pancreatic ductal adenocarcinoma (PDA) (HALO 109-301), in Phase1b clinical testing for PEGPH20 with KEYTRUDA® (pembrolizumab) in non-small cell lung cancer and gastric cancer (HALO 107-101), in Phase 1b/2clinical testing for PEGPH20 with HALAVEN® (eribulin) in patients treated with up to two lines of prior therapy for HER2-negative metastatic breast cancer,in Phase 1b/2 clinical testing for PEGPH20 with Tecentriq® (atezolizumab) in patients with previously treated metastatic PDA, in Phase 1b/2 clinical testingfor PEGPH20 with Tecentriq in patients with gastric cancer and in Phase 1b/2 clinical testing for PEGPH20 with Tecentriq in patients withcholangiocarcinoma and gall bladder cancer (HALO 110-101/MATRIX). We are entitled to future development milestones and royalties on net sales subjectto reduction in the absence of patent coverage. Our right to receive royalties in any particular country will expire upon the later of twelve years after firstcommercial sale of the product or expiration of patent rights in the particular country. We also manufacture and supply Halozyme with clinical and futurecommercial supply of our proprietary PEGylation materials used in the manufacture of PEGPH20.18SEMPRANA®, Agreement with MAP Pharmaceuticals, Inc. (a wholly-owned subsidiary of Allergan, Inc.)In June 2004, we entered into a license agreement with MAP Pharmaceuticals, Inc. (MAP), which includes a worldwide, exclusive license, to certain ofour patents and other intellectual property rights to develop and commercialize a formulation of dihydroergotamine (DHE) for administration to patients viathe pulmonary or nasal delivery route, which resulted in the development of SEMPRANA®, formerly known as LEVADEX®. In 2006, we amended andrestated this agreement. Under the terms of the agreement, we have the right to receive certain milestone payments based on development criteria that aresolely the responsibility of MAP and royalties based on net sales of SEMPRANA®. Our right to receive royalties for the net sales of SEMPRANA® under thelicense agreement in any particular country will expire upon the later of (i) 10 years after first commercial sale in that country, (ii) the date upon which thelicensed know-how becomes known to the general public, and (iii) expiration of certain patent claims, each on a country-by-country basis. Either party mayterminate the agreement upon a material, uncured default of the other party.SEMPRANA® is a self-administered formulation of DHE using an inhaler device that is currently under review by the FDA. On May 26, 2011, MAPsubmitted an NDA to the FDA for SEMPRANA®. In March of 2012, the FDA issued a complete response letter to MAP identifying issues relating tochemistry, manufacturing and controls deficiencies of the product at a contracted third party manufacturer. On April 17, 2013, the FDA issued a secondcomplete response letter identifying issues related to a supplier that provided the canister filling unit for SEMPRANA®. In June 2014, Allergan whichacquired MAP as described below, announced that it had received a third complete response letter from the FDA related to specifications around contentuniformity on the improved canister filling process and on standards for device actuation. Allergan has responded to the FDA’s latest complete response letterand has stated that it continues to work with the FDA to resolve outstanding Chemistry, Manufacturing and Controls (CMC) issues.On January 28, 2011, MAP entered into a Collaboration Agreement with Allergan, Inc. (Allergan), pursuant to which Allergan received a co-exclusivelicense to market and promote SEMPRANA® to neurologists and pain specialists in the U.S. Under this arrangement, Allergan paid MAP an upfront paymentof $60.0 million. MAP was also entitled to receive up to an additional $97.0 million in the form of regulatory milestones, which includes milestones for theFDA’s acceptance of filing of the SEMPRANA® NDA and first commercial sale associated with the initial acute migraine indication. On March 1, 2013,Allergan completed a merger and acquisition transaction with MAP pursuant to which MAP become a wholly-owned subsidiary of Allergan. InDecember 2017, we, MAP and Allergan entered into a Settlement Agreement and Release. Pursuant to this agreement, Allergan paid Nektar $15.0 million inDecember 2017 in exchange for relief of any claims related to our share of payments received by MAP from Allergan as well as a specified developmentmilestone payment due to Nektar. Dapirolizumab PegolIn 2010, we entered into a license, manufacturing and supply agreement with UCB Pharma S.A., (UCB) under which we granted UCB a worldwide,exclusive license to certain of our proprietary PEGylation technology to develop, manufacture and commercialize an anti-CD40L PEGylated Fab beingdeveloped by UCB and their partner Biogen Idec, for the treatment of autoimmune disorders, including systemic lupus erythemastosus (SLE). In 2014, UCBand Biogen completed a Phase 1b randomized, double-blind, placebo-controlled clinical study in approximately 24 patients with SLE. Data from the studywas published in September 2015 at the Annual American College of Rheumatology Meeting and showed that multiple administrations of dapirolizumabpegol given over 12 weeks were well-tolerated and the safety profile supported further development of the compound. Exploratory analyses from the samestudy showed greater improvement in clinical measures of disease activity in the dapriolizumab pegol group versus placebo. In 2016, UCB initiated a multi-center, randomized, double-blind, placebo-controlled, parallel-group, dose-ranging Phase 2 clinical study followed by an observational period to evaluatethe efficacy and safety of patients with moderately to severely active SLE receiving stable standard of care medications. This Phase 2 clinical trial is currentlyrecruiting patients.Neulasta®, Agreement with Amgen, Inc.In July 1995, we entered into a non-exclusive supply and license agreement (the 1995 Agreement) with Amgen, Inc., pursuant to which we licensedour proprietary PEGylation technology to be used in the development and manufacture of Neulasta®. Neulasta® selectively stimulates the production ofneutrophils that are depleted by cytotoxic chemotherapy, a condition called neutropenia that makes it more difficult for the body to fight infections. OnOctober 29, 2010, we amended and restated the 1995 Agreement by entering into a supply, dedicated suite and manufacturing guarantee agreement (the 2010Agreement) and an amended and restated license agreement with Amgen Inc. and Amgen Manufacturing, Limited (together referred to as Amgen). Under theterms of the 2010 Agreement, we guarantee the manufacture and supply of our proprietary PEGylation materials (Polymer Materials) to Amgen in an existingmanufacturing suite to be used exclusively for the manufacture of Polymer Materials for Amgen in our manufacturing facility in Huntsville, Alabama. Thissupply arrangement is on a non-exclusive basis (other than the use of the manufacturing suite and certain equipment) whereby we are free to manufacture andsupply the Polymer Materials to any other third party and Amgen is free to procure the Polymer Materials from any other third party. Under the terms of the2010 Agreement, we received a $50.0 million upfront payment in return for guaranteeing supply of certain quantities of Polymer Materials to Amgen and theAdditional Rights19described below, and Amgen will pay manufacturing fees calculated based on fixed and variable components applicable to the Polymer Materials ordered byAmgen and delivered by us. Amgen has no minimum purchase commitments. If quantities of the Polymer Materials ordered by Amgen exceed specifiedquantities (with each specified quantity representing a small portion of the quantity that we historically supplied to Amgen), significant additional paymentsbecome payable to us in return for guaranteeing supply of additional quantities of the Polymer Materials.The term of the 2010 Agreement runs through October 29, 2020. In the event we become subject to a bankruptcy or insolvency proceeding, we ceaseto own or control the manufacturing facility in Huntsville, Alabama, we fail to manufacture and supply the Polymer Materials or certain other events occur,Amgen or its designated third party will have the right to elect, among certain other options, to take title to the dedicated equipment and access themanufacturing facility to operate the manufacturing suite solely for the purpose of manufacturing the Polymer Materials (Additional Rights). Amgen mayterminate the 2010 Agreement for convenience or due to an uncured material default by us. Either party may terminate the 2010 Agreement in the event ofinsolvency or bankruptcy of the other party.PEGASYS®, Agreement with F. Hoffmann-La Roche LtdIn February 1997, we entered into a license, manufacturing and supply agreement with F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc.(Roche), under which we granted Roche a worldwide, exclusive license to use certain intellectual property related to our PEGylation materials to manufactureand commercialize a certain class of products, of which PEGASYS® is the only product currently commercialized. PEGASYS® is approved in the U.S., EUand other countries for the treatment of Hepatitis C and is designed to help the patient’s immune system fight the Hepatitis C virus. As a result of Rocheexercising a license extension option in December 2009, beginning in 2010 Roche has the right to manufacture all of its requirements for our proprietaryPEGylation materials for PEGASYS® and we supplied raw materials or performed additional manufacturing, if any, only on a back-up basis. In connectionwith Roche’s exercise of the license extension option in December 2009, we received a payment of $31.0 million. In 2013, we delivered additional quantitiesof PEGylation materials used by Roche to produce PEGASYS® and MIRCERA® for total consideration of approximately $18.6 million. The agreementexpires on the expiration of our last relevant patent containing a valid claim. As of December 31, 2015, we no longer had any continuing manufacturing orsupply obligations under this PEGASYS® agreement.Somavert®, Agreement with Pfizer, Inc.In January 2000, we entered into a license, manufacturing and supply agreement with Sensus Drug Development Corporation (subsequently acquiredby Pharmacia Corp. in 2001 and then acquired by Pfizer, Inc. in 2003), for the PEGylation of Somavert® (pegvisomant), a human growth hormone receptorantagonist for the treatment of acromegaly. We currently manufacture our proprietary PEGylation reagent for Pfizer, Inc. on a price per gram basis.PEG-Intron®, Agreement with Merck (through its acquisition of Schering-Plough Corporation)In February 2000, we entered into a manufacturing and supply agreement with Schering-Plough Corporation (Schering) for the manufacture andsupply of our proprietary PEGylation materials to be used by Schering in production of a PEGylated recombinant human interferon-alpha (PEG-Intron). PEG-Intron is a treatment for patients with Hepatitis C. Schering was acquired by, and became a wholly-owned subsidiary of, Merck & Co., Inc. We manufacturedour proprietary PEGylation materials for Schering on a price per gram basis. In December 2010, the parties amended the manufacturing and supply agreementto provide for a transition plan to an alternative manufacturer and extension of the term through December 31, 2017. The amended agreement provided for aone-time payment and milestone payments as well as increased pricing for any future manufacturing performed by us. As of December 31, 2017, we no longerhave any continuing manufacturing or supply obligations under this agreement.Macugen®, Agreement with Valeant Pharmaceuticals International, Inc.In 2002, we entered into a license, manufacturing and supply agreement with Eyetech, Inc. (subsequently acquired by Valeant PharmaceuticalsInternational, Inc. or Valeant), pursuant to which we license certain intellectual property related to our proprietary PEGylation technology for thedevelopment and commercialization of Macugen®, a PEGylated anti-vascular endothelial growth factor aptamer currently approved in the U.S. and EU forage-related macular degeneration. We currently manufacture our proprietary PEGylation materials for Valeant on a price per gram basis. Under the terms ofthe agreement, we will receive royalties on net product sales in any particular country for the longer of ten years from the date of the first commercial sale ofthe product in that country or the duration of patent coverage. Our agreement with Valeant expires upon the expiration of our last relevant patent containinga valid claim. In addition, Valeant may terminate the agreement if marketing authorization is withdrawn or marketing is no longer feasible due to certaincircumstances, and either party may terminate for cause if certain conditions are met.20CIMZIA®, Agreement with UCB PharmaIn December 2000, we entered into a license, manufacturing and supply agreement covering our proprietary PEGylation materials for use in CIMZIA®(certolizumab pegol) with Celltech Chiroscience Ltd., which was acquired by UCB Pharma (UCB) in 2004. Under the terms of the agreement, UCB isresponsible for all clinical development, regulatory, and commercialization expenses. We also manufacture and supply UCB with our proprietary PEGylationreagent used in the manufacture of CIMZIA® on a fixed price per gram. We were also entitled to receive royalties on net sales of the CIMZIA® product for thelonger of ten years from the first commercial sale of the product anywhere in the world or the expiration of patent rights in a particular country. In February2012, we sold our rights to receive royalties on future worldwide net sales of CIMZIA® effective as of January 1, 2012 until the agreement with UCB isterminated or expires. This sale is further discussed in Note 7 of Item 8, Financial Statements and Supplementary Data. Our agreement with UCB Pharmaexpires upon the expiration of all of UCB’s royalty obligations, provided that the agreement can be extended for successive two year renewal periods uponmutual agreement of the parties. In addition, UCB may terminate the agreement should it cease the development and marketing of CIMZIA® and either partymay terminate for cause under certain conditions.MIRCERA® (C.E.R.A.) (Continuous Erythropoietin Receptor Activator), Agreement with F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc.In December 2000, we entered into a license, manufacturing and supply agreement with F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc.(Roche), which was amended and restated in its entirety in December 2005. Pursuant to the agreement, we license our intellectual property related to ourproprietary PEGylation materials for the manufacture and commercialization of Roche’s MIRCERA® product. MIRCERA® is a novel continuouserythropoietin receptor activator indicated for the treatment of anemia associated with chronic kidney disease in patients on dialysis and patients not ondialysis. As of the end of 2006, we were no longer required to manufacture and supply our proprietary PEGylation materials for MIRCERA® under ouroriginal agreement. In February 2012, we entered into a toll-manufacturing agreement with Roche under which we manufactured our proprietary PEGylationmaterial for MIRCERA®. Roche entered into the toll-manufacturing agreement with the objective of establishing us as a secondary back-up source on a non-exclusive basis through December 31, 2016. Under the terms of this agreement, Roche paid us an up-front payment of $5.0 million plus a total of $22.0million in performance-based milestone payments upon our achievement of certain manufacturing readiness, validation and production milestones,including the delivery of specified quantities of PEGylation materials, all of which were successfully completed by the end of January 2013. In 2013, wedelivered additional quantities of PEGylation materials used by Roche to produce PEGASYS® and MIRCERA® for total consideration of approximately$18.6 million. We were also entitled to receive royalties on net sales of the MIRCERA® product. In February 2012, we sold all of our future rights to receiveroyalties on future worldwide net sales of MIRCERA® effective as of January 1, 2012. This sale is further discussed in Note 7 of Item 8, Financial Statementsand Supplementary Data. As of December 31, 2016, we no longer had any continuing manufacturing or supply obligations under this MIRCERA® agreement.Government RegulationProduct Development and Approval ProcessThe research and development, clinical testing, manufacture and marketing of products using our technologies are subject to regulation by the FDAand by comparable regulatory agencies in other countries. These national agencies and other federal, state and local entities regulate, among other things,research and development activities and the testing (in vitro, in animals, and in human clinical trials), manufacture, labeling, storage, recordkeeping,approval, marketing, advertising and promotion of our products.The approval process required by the FDA before a product using any of our technologies may be marketed in the U.S. depends on whether thechemical composition of the product has previously been approved for use in other dosage forms. If the product is a new chemical entity that has not beenpreviously approved, the process includes the following: •extensive preclinical laboratory and animal testing; •submission of an IND prior to commencing clinical trials; •adequate and well-controlled human clinical trials to establish the safety and efficacy of the drug for the intended indication; •extensive pharmaceutical development for the characterization of the chemistry, manufacturing process and controls for the active ingredientand drug product; and •submission to the FDA of an NDA for approval of a drug, a Biological License Application (BLA) for approval of a biological product or aPremarket Approval Application (PMA) or Premarket Notification 510(k) for a medical device product (a 510(k)).21If the active chemical ingredient has been previously approved by the FDA, the approval process is similar, except that certain preclinical tests,including those relating to systemic toxicity normally required for the IND and NDA or BLA, and clinical trials, may not be necessary if the company has aright of reference to existing preclinical or clinical data under section 505(j) of the Federal Food, Drug, and Cosmetic Act (FDCA) or is eligible for approvalunder Section 505(b)(2) of the FDCA or the biosimilars provisions of the Public Health Services Act.Preclinical tests include laboratory evaluation of product chemistry and animal studies to assess the safety and efficacy of the product and its chosenformulation. Preclinical safety tests must be conducted by laboratories that comply with FDA good laboratory practices (GLP) regulations. The results of thepreclinical tests for drugs, biological products and combination products subject to the primary jurisdiction of the FDA’s Center for Drug Evaluation andResearch (CDER) or Center for Biologics Evaluation and Research (CBER) are submitted to the FDA as part of the IND and are reviewed by the FDA beforeclinical trials can begin. Clinical trials may begin 30 days after receipt of the IND by the FDA, unless the FDA raises objections or requires clarificationwithin that period. Clinical trials involve the administration of the drug to healthy volunteers or patients under the supervision of a qualified, identifiedmedical investigator according to a protocol submitted in the IND for FDA review. Drug products to be used in clinical trials must be manufactured accordingto current good manufacturing practices (cGMP). Clinical trials are conducted in accordance with protocols that detail the objectives of the study and theparameters to be used to monitor participant safety and product efficacy as well as other criteria to be evaluated in the study. Each protocol is submitted tothe FDA in the IND.Apart from the IND process described above, each clinical study must be reviewed by an independent Institutional Review Board (IRB) and the IRBmust be kept current with respect to the status of the clinical study. The IRB considers, among other things, ethical factors, the potential risks to subjectsparticipating in the trial and the possible liability to the institution where the trial is conducted. The IRB also reviews and approves the informed consentform to be signed by the trial participants and any significant changes in the clinical study.Clinical trials are typically conducted in three sequential phases. Phase 1 involves the initial introduction of the drug into healthy human subjects (inmost cases) and the product generally is tested for tolerability, pharmacokinetics, absorption, metabolism and excretion. Phase 2 involves studies in a limitedpatient population to: •determine the preliminary efficacy of the product for specific targeted indications; •determine dosage and regimen of administration; and •identify possible adverse effects and safety risks.If Phase 2 trials demonstrate that a product appears to be effective and to have an acceptable safety profile, Phase 3 trials are undertaken to evaluatethe further clinical efficacy and safety of the drug and formulation within an expanded patient population at geographically dispersed clinical study sites andin large enough trials to provide statistical proof of efficacy and tolerability. The FDA, the clinical trial sponsor, the investigators or the IRB may suspendclinical trials at any time if any one of them believes that study participants are being subjected to an unacceptable health risk. In some cases, the FDA andthe drug sponsor may determine that Phase 2 trials are not needed prior to entering Phase 3 trials.Following a series of formal meetings and communications between the drug sponsor and the regulatory agencies, the results of product development,preclinical studies and clinical studies are submitted to the FDA as an NDA or BLA for approval of the marketing and commercial shipment of the drugproduct. The FDA may deny approval if applicable regulatory criteria are not satisfied or may require additional clinical or pharmaceutical testing orrequirements. Even if such data are submitted, the FDA may ultimately decide that the NDA or BLA does not satisfy all of the criteria for approval.Additionally, the approved labeling may narrowly limit the conditions of use of the product, including the intended uses, or impose warnings, precautions orcontraindications which could significantly limit the potential market for the product. Further, as a condition of approval, the FDA may impose post-marketsurveillance, or Phase 4, studies or risk evaluation and mitigation strategies. Product approvals, once obtained, may be withdrawn if compliance withregulatory standards is not maintained or if safety concerns arise after the product reaches the market. The FDA may require additional post-marketingclinical testing and pharmacovigilance programs to monitor the effect of drug products that have been commercialized and has the power to prevent or limitfuture marketing of the product based on the results of such programs. After approval, there are ongoing reporting obligations concerning adverse reactionsassociated with the product, including expedited reports for serious and unexpected adverse events.Each manufacturing establishment producing the active pharmaceutical ingredient and finished drug product for the U.S. market must be registeredwith the FDA and typically is inspected by the FDA prior to NDA or BLA approval of a drug product manufactured by such establishment. Such inspectionsare also held periodically after the commercialization. Establishments handling controlled substances must also be licensed by the U.S. Drug EnforcementAdministration. Manufacturing establishments of U.S. marketed products are subject to inspections by the FDA for compliance with cGMP and otherU.S. regulatory requirements.22They are also subject to U.S. federal, state, and local regulations regarding workplace safety, environmental protection and hazardous and controlledsubstance controls, among others.For product candidates currently under development utilizing pulmonary technology, the pulmonary inhaler devices are considered to be part of adrug and device combination for deep lung delivery of each specific molecule. The FDA will make a determination as to the most appropriate center anddivision within the agency that will assume primary responsibility for the review of the applicable applications, which would consist of an IND and an NDAor BLA where CDER or CBER are determined to have primary jurisdiction or an investigational device exemption application and PMA or 510(k) where theCenter for Devices and Radiological Health (CDRH) is determined to have primary jurisdiction. In the case of our product candidates, CDER in consultationwith CDRH could be involved in the review. The assessment of jurisdiction within the FDA is based upon the primary mode of action of the drug or thelocation of the specific expertise in one of the centers.Where CDRH is determined to have primary jurisdiction over a product, 510(k) clearance or PMA approval is required. Medical devices are classifiedinto one of three classes — Class I, Class II, or Class III — depending on the degree of risk associated with each medical device and the extent of controlneeded to ensure safety and effectiveness. Devices deemed to pose lower risks are placed in either Class I or II, which requires the manufacturer to submit tothe FDA a Premarket Notification requesting permission to commercially distribute the device. This process is known as 510(k) clearance. Some low riskdevices are exempted from this requirement. Devices deemed by the FDA to pose the greatest risk, such as life-sustaining, life-supporting or implantabledevices, or devices deemed not substantially equivalent to a previously cleared 510(k) device are placed in Class III, requiring PMA approval.In situations where our partners are responsible for clinical and regulatory approval procedures, we may still participate in this process by submittingto the FDA a drug master file developed and maintained by us which contains data concerning the manufacturing processes for the inhaler device, polymerconjugation materials or drug. For our proprietary products, we prepare and submit an IND and are responsible for additional clinical and regulatoryprocedures for product candidates being developed under an IND. The clinical and manufacturing, development and regulatory review and approval processgenerally takes a number of years and requires the expenditure of substantial resources. Our ability to manufacture and market products, whether developedby us or under collaboration agreements, ultimately depends upon the completion of satisfactory clinical trials and success in obtaining marketing approvalsfrom the FDA and equivalent foreign health authorities.Sales of our products outside the U.S. are subject to local regulatory requirements governing clinical trials and marketing approval for drugs. Suchrequirements vary widely from country to country.In the U.S., under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition, which isgenerally a disease or condition that affects fewer than 200,000 individuals in the U.S. The company that obtains the first FDA approval for a designatedorphan drug for a rare disease receives marketing exclusivity for use of that drug for the designated condition for a period of seven years. In addition, theOrphan Drug Act provides for protocol assistance, tax credits, research grants, and exclusions from user fees for sponsors of orphan products. Once a productreceives orphan drug exclusivity, a second product that is considered to be the same drug for the same indication generally may be approved during theexclusivity period only if the second product is shown to be “clinically superior” to the original orphan drug in that it is more effective, safer or otherwisemakes a “major contribution to patient care” or the holder of exclusive approval cannot assure the availability of sufficient quantities of the orphan drug tomeet the needs of patients with the disease or condition for which the drug was designated. Similar incentives also are available for orphan drugs in the EU.In the U.S., the FDA may grant Fast Track or Breakthrough Therapy designation to a product candidate, which allows the FDA to expedite the reviewof new drugs that are intended for serious or life-threatening conditions and that demonstrate the potential to address unmet medical needs. Important featuresof Fast Track or Breakthrough Therapy designation include a potentially reduced clinical program and close, early communication between the FDA and thesponsor company to improve the efficiency of product development.Coverage, Reimbursement, and PricingSales of any products for which we may obtain regulatory approval depends, in part, on the coverage and reimbursement status of those products. Inthe U.S., sales of any products for which we may receive regulatory approval for commercial sale will depend in part on the availability of coverage andreimbursement from third-party payors. Third-party payors include government programs such as Medicare, Medicaid, TRICARE and the VeteransAdministration, as well as managed care providers, private health insurers and other organizations.The process for determining whether a payor will provide coverage for a product is typically separate from the process for setting the reimbursementrate that the payor will pay for the product. Third-party payors may limit coverage to specific products on an approved list or formulary which might notinclude all of the FDA-approved products for a particular indication. Third-party payors23may also refuse to include a particular branded drug on their formularies or otherwise restrict patient access to a branded drug when a less costly genericequivalent or other alternative is available. Further, private payors often follow the coverage and payment policies established by certain governmentprograms, such as Medicare and Medicaid, which require manufacturers to comply with certain rebate, price reporting, and other obligations. For example,the Medicaid Drug Rebate Program, which is part of the Medicaid program (a program for financially needy patients, among others), requires pharmaceuticalmanufacturers to enter into and have in effect a national rebate agreement with the Secretary of the Department of Health and Human Services under whichthe manufacturer agrees to report certain prices to the government and pay rebates to state Medicaid programs on outpatient drugs furnished to Medicaidpatients, as a condition for receiving federal reimbursement for the manufacturer’s outpatient drugs furnished to Medicaid patients. Further, in order for apharmaceutical product to receive federal reimbursement under Medicare Part B and Medicaid programs or to be sold directly to U.S. government agencies,the manufacturer must extend discounts to entities eligible to participate in the Public Health Service’s 340B drug pricing program.Third-party payors are increasingly challenging the prices charged for medical products and services, and examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy. Additionally, the containment of healthcare costs has become apriority of federal and state governments, and the price of therapeutics have been a focus in this effort. The U.S. government and state legislatures haveshown significant interest in implementing cost-containment programs, including price controls and restrictions on reimbursement, among other controls.Adoption of price controls or other cost-containment measures could limit coverage for or the amounts that federal and state governments or private payorswill pay for health care products and services, which could also result in reduced demand for our drug candidates or additional pricing pressures and affectour ultimate profitability. If third-party payors do not consider a product to be cost-effective compared to other available therapies, they may not cover anapproved product or, if they do, the level of payment may not be sufficient to allow us to sell our products at a profit.The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and third-party payorsfail to provide adequate coverage and reimbursement. Coverage policies and third-party reimbursement rates may change at any time. Even if favorablecoverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies andreimbursement rates may be implemented in the future.Other Healthcare Laws and RegulationsIf we obtain regulatory approval of our products, we may be subject to various federal and state laws targeting fraud and abuse in the healthcareindustry. These laws may impact, among other things, our proposed sales and marketing programs. In addition, we may be subject to patient privacyregulation by both the federal government and the states in which we conduct our business. The laws that may affect our ability to operate include: •the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering, orpaying remuneration (a term interpreted broadly to include anything of value, including, for example, gifts, discounts, and credits), directly orindirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order, orrecommendation of, an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs; •federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities fromknowingly presenting, or causing to be presented, claims for payment to Medicare, Medicaid, or other third-party payors that are false orfraudulent, or making a false statement or record material to payment of a false claim or avoiding, decreasing, or concealing an obligation topay money owed to the federal government; •provisions of the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created new federal criminal statutes,referred to as the “HIPAA All-Payor Fraud Prohibition,” that prohibit knowingly and willfully executing a scheme to defraud any healthcarebenefit program and making false statements relating to healthcare matters; •federal transparency laws, including the federal Physician Payment Sunshine Act, which require manufacturers of certain drugs and biologics totrack and disclose payments and other transfers of value they make to U.S. physicians and teaching hospitals as well as physician ownershipand investment interests in the manufacturer, and that such information is subsequently made publicly available in a searchable format on aCMS website;24 •provisions of HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementingregulations, which imposes certain requirements relating to the privacy, security and transmission of individually identifiable healthinformation; and •state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or servicesreimbursed by any third-party payor, including commercial insurers, state transparency reporting and compliance laws; and state lawsgoverning the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways andwhich may not have the same effect, thus complicating compliance efforts.The Patient Protection and Affordable Care Act, as amended by the Health Care Education Reconciliation Act (collectively, the “Affordable CareAct”), enacted in 2010, expanded the reach of the fraud and abuse laws by, among other things, amending the intent requirement of the federal Anti-KickbackStatute and the applicable criminal fraud statutes contained within 42 U.S.C. § 1320a-7b. Pursuant to the Affordable Care Act, a person or entity no longerneeds to have actual knowledge of this statute or specific intent to violate it in order to have committed a violation. In addition, the Affordable Care Actprovides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes afalse or fraudulent claim for purposes of the civil False Claims Act or the civil monetary penalties statute. Many states have adopted laws similar to thefederal Anti-Kickback Statute, some of which apply to the referral of patients for healthcare items or services reimbursed by any source, not only the Medicareand Medicaid programs.The federal False Claims Act prohibits anyone from, among other things, knowingly presenting, or causing to be presented, for payment to federalprograms (including Medicare and Medicaid) claims for items or services that are false or fraudulent. Although we would not submit claims directly topayors, manufacturers can be held liable under these laws if they are deemed to “cause” the submission of false or fraudulent claims by, for example,providing inaccurate billing or coding information to customers or promoting a product off-label. In addition, our future activities relating to the reporting ofwholesaler or estimated retail prices for our products, the reporting of prices used to calculate Medicaid rebate information and other information affectingfederal, state, and third-party reimbursement for our products, and the sale and marketing of our products, are subject to scrutiny under this law. For example,pharmaceutical companies have been prosecuted under the federal False Claims Act in connection with their alleged off-label promotion of drugs,purportedly concealing price concessions in the pricing information submitted to the government for government price reporting purposes, and allegedlyproviding free product to customers with the expectation that the customers would bill federal health care programs for the product. Penalties for a FalseClaims Act violation include three times the actual damages sustained by the government, plus mandatory civil penalties of between $10,781 and $21,916for each separate false claim, the potential for exclusion from participation in federal healthcare programs, and, although the federal False Claims Act is acivil statute, conduct that results in a False Claims Act violation may also implicate various federal criminal statutes. In addition, private individuals have theability to bring actions under the federal False Claims Act and certain states have enacted laws modeled after the federal False Claims Act.Legislative and Regulatory LandscapeFrom time to time, legislation is drafted, introduced and passed in Congress that could significantly change the statutory provisions governing thetesting, approval, manufacturing, marketing, coverage and reimbursement of products regulated by the FDA or other government agencies. In addition to newlegislation, FDA and healthcare fraud and abuse and coverage and reimbursement regulations and policies are often revised or interpreted by the agency inways that may significantly affect our business and our products. Further, the 2016 Presidential and Congressional elections and subsequent developmentshave caused the future state of many core aspects of the current health care marketplace to be uncertain, as the new Presidential Administration and Congresshave repeatedly expressed a desire to repeal all or portions of the Affordable Care Act. While specific changes and their timing are not yet apparent, theremay be significant changes to the healthcare environment in the future that could have an adverse effect on anticipated revenues from therapeutic candidatesthat we may successfully develop and for which we may obtain regulatory approval. Furthermore, federal agencies, Congress, state legislatures, and theprivacy sector have shown significant interest in implementing cost containment programs to limit the growth of health care costs, including price controls,restrictions on reimbursement and other fundamental changes to the healthcare delivery system. Any proposed or actual changes could limit coverage for orthe amounts that federal and state governments will pay for health care products and services, which could also result in reduced demand for our products oradditional pricing pressures and affect our ultimate profitability.Patents and Proprietary RightsWe own more than 250 U.S. and 800 foreign patents and a number of pending patent applications that cover various aspects of our technologies. Wehave filed patent applications, and plan to file additional patent applications, covering various aspects of our advanced polymer conjugate technologies andour proprietary product candidates. More specifically, our patents and patent applications cover polymer architecture, drug conjugates, formulations,methods of making polymers and polymer conjugates,25methods of administering polymer conjugates, and methods of manufacturing polymers and polymer conjugates. Our patent portfolio contains patents andpatent applications that encompass our advanced polymer conjugate technology platforms, some of which we acquired in our acquisition of ShearwaterCorporation in June 2001. Our patent strategy is to file patent applications on innovations and improvements to cover a significant majority of the majorpharmaceutical markets in the world. Generally, patents have a term of twenty years from the earliest priority date (assuming all maintenance fees are paid). Insome instances, patent terms can be increased or decreased, depending on the laws and regulations of the country or jurisdiction that issued the patent.In January 2002, we entered into a Cross-License and Option Agreement with Enzon, pursuant to which we and Enzon provided certain licenses toselected portions of each party’s PEGylation patent portfolio.On December 31, 2008, we completed the sale of certain assets related to our pulmonary business, associated technology and intellectual property toNovartis Pharma AG and Novartis Pharmaceuticals Corporation (together referred to as Novartis) for a purchase price of $115.0 million in cash (NovartisPulmonary Asset Sale). In connection with the Novartis Pulmonary Asset Sale, as of December 31, 2008, we entered into an exclusive license agreement withNovartis Pharma AG. Pursuant to the exclusive license agreement, Novartis Pharma AG grants back to us an exclusive, irrevocable, perpetual, royalty-free andworldwide license under certain specific patent rights and other related intellectual property rights acquired by Novartis from us in the Novartis PulmonaryAsset Sale, as well as certain improvements or modifications thereto that are made by Novartis. Certain of such patent rights and other related intellectualproperty rights relate to our development program for inhaled vancomycin or are necessary for us to satisfy certain continuing contractual obligations to thirdparties, including in connection with development, manufacture, sale, and commercialization activities related to BAY41-6551 partnered with BayerHealthcare LLC.We also rely on trade secret protection for our confidential and proprietary information. No assurance can be given that we can meaningfully protectour trade secrets. Others may independently develop substantially equivalent confidential and proprietary information or otherwise gain access to, ordisclose, our trade secrets. Please refer to Item 1A, Risk Factors, including but not limited to “We rely on trade secret protection and other unpatentedproprietary rights for important proprietary technologies, and any loss of such rights could harm our business, results of operations and financial condition.”In certain situations in which we work with drugs covered by one or more patents, our ability to develop and commercialize our technologies may be affectedby limitations in our access to these proprietary drugs. Even if we believe we are free to work with a proprietary drug, we cannot guarantee that we will not beaccused of, or determined to be, infringing a third party’s rights and be prohibited from working with the drug or found liable for damages. Any suchrestriction on access or liability for damages would have a material adverse effect on our business, results of operations and financial condition.The patent positions of pharmaceutical and biotechnology companies, such as ours, are uncertain and involve complex legal and factual issues. Therecan be no assurance that patents that have issued will be held valid and enforceable in a court of law. Even for patents that are held valid and enforceable, thelegal process associated with obtaining such a judgment is time consuming and costly. Additionally, issued patents can be subject to opposition or otherproceedings that can result in the revocation of the patent or maintenance of the patent in amended form (and potentially in a form that renders the patentwithout commercially relevant or broad coverage). Further, our competitors may be able to circumvent and otherwise design around our patents. Even if apatent is issued and enforceable, because development and commercialization of pharmaceutical products can be subject to substantial delays, patents mayexpire early and provide only a short period of protection, if any, following the commercialization of products encompassed by our patent. We may have toparticipate in interference proceedings declared by the U.S. Patent and Trademark Office, which could result in a loss of the patent and/or substantial cost tous. Please refer to Item 1A, Risk Factors, including without limitation, “If any of our pending patent applications do not issue, or are deemed invalidfollowing issuance, we may lose valuable intellectual property protection.”U.S. and foreign patent rights and other proprietary rights exist that are owned by third parties and relate to pharmaceutical compositions and reagents,medical devices and equipment and methods for preparation, packaging and delivery of pharmaceutical compositions. We cannot predict with any certaintywhich, if any, of these rights will be considered relevant to our technology by authorities in the various jurisdictions where such rights exist, nor can wepredict with certainty which, if any, of these rights will or may be asserted against us by third parties. We could incur substantial costs in defending ourselvesand our partners against any such claims. Furthermore, parties making such claims may be able to obtain injunctive or other equitable relief, which couldeffectively block our ability to develop or commercialize some or all of our products in the U.S. and abroad and could result in the award of substantialdamages. In the event of a claim of infringement, we or our partners may be required to obtain one or more licenses from third parties. There can be noassurance that we can obtain a license to any technology that we determine we need on reasonable terms, if at all, or that we could develop or otherwiseobtain alternative technology. The failure to obtain licenses if needed may have a material adverse effect on our business, results of operations and financialcondition. Please refer to Item 1A, Risk Factors, including without limitation, “We may not be able to obtain intellectual property licenses related to thedevelopment of our drug candidates on a commercially reasonable basis, if at all.”26It is our policy to require our employees and consultants, outside scientific collaborators, sponsored researchers and other advisors who receiveconfidential information from us to execute confidentiality agreements upon the commencement of employment or consulting relationships with us. Theseagreements provide that all confidential information developed or made known to the individual during the course of the individual’s relationship with us isto be kept confidential and not disclosed to third parties except in specific circumstances. The agreements provide that all inventions conceived by anemployee shall be our property. There can be no assurance, however, that these agreements will provide meaningful protection or adequate remedies for ourtrade secrets in the event of unauthorized use or disclosure of such information.Customer ConcentrationsOur revenue is derived from our collaboration agreements with partners, under which we may receive contract research payments, milestone paymentsbased on clinical progress, regulatory progress or net sales achievements, royalties or product sales revenue. The revenue generated under the LillyAgreement and the license, manufacturing and supply agreement with UCB represented 42% and 12% of our revenue, respectively, for the year endedDecember 31, 2017. No other collaboration partner accounted for more than 10% of our total revenue during the year ended December 31, 2017.BacklogPursuant to our collaboration agreements, we manufacture and supply our proprietary polymer conjugation materials. Inventory is produced and salesare made pursuant to customer purchase orders for delivery. The volume of our proprietary polymer conjugation materials actually ordered by our customers,as well as shipment schedules, are subject to frequent revisions that reflect changes in both the customers’ needs and our manufacturing capacity. In ourpartnered programs where we provide contract research services, those services are typically provided under a work plan that is subject to frequent revisionsthat change based on the development needs and status of the program. The backlog at a particular time is affected by a number of factors, includingscheduled date of manufacture and delivery and development program status. In light of industry practice and our own experience, we do not believe thatbacklog as of any particular date is indicative of future results.CompetitionCompetition in the pharmaceutical and biotechnology industry is intense and characterized by aggressive research and development and rapidly-evolving science, technology, and standards of medical care throughout the world. We frequently compete with pharmaceutical companies and otherinstitutions with greater financial, research and development, marketing and sales, manufacturing and managerial capabilities. We face competition fromthese companies not just in product development but also in areas such as recruiting employees, acquiring technologies that might enhance our ability tocommercialize products, establishing relationships with certain research and academic institutions, enrolling patients in clinical trials and seeking programpartnerships and collaborations with larger pharmaceutical companies.Science and Technology CompetitionWe believe that our proprietary and partnered products will compete with others in the market on the basis of one or more of the following parameters:efficacy, safety, ease of use and cost. We face intense science and technology competition from a multitude of technologies seeking to enhance the efficacy,safety and ease of use of approved drugs and new drug molecule candidates. A number of the drug candidates in our pipeline have direct and indirectcompetition from large pharmaceutical companies and biopharmaceutical companies. With our advanced polymer conjugate technologies, we believe wehave competitive advantages relating to factors such as efficacy, safety, ease of use and cost for certain applications and molecules. We constantly monitorscientific and medical developments in order to improve our current technologies, seek licensing opportunities where appropriate, and determine the bestapplications for our technology platforms.In the fields of advanced polymer conjugate technologies, our competitors include Biogen Idec Inc., Savient Pharmaceuticals, Inc., Dr. Reddy’sLaboratories, Ltd., Mountain View Pharmaceuticals, Inc., SunBio Corporation, NOF Corporation, and Novo Nordisk A/S (assets formerly held by NeoseTechnologies, Inc.). Several other chemical, biotechnology and pharmaceutical companies may also be developing advanced polymer conjugate technologyor technologies intended to deliver similar scientific and medical benefits. Some of these companies license intellectual property or PEGylation materials toother companies, while others apply the technology to create their own drug candidates. 27Product and Program Specific CompetitionNKTR-214 (immunostimulatory CD122-biased cytokine)There are numerous companies engaged in developing immunotherapies to be used alone, or in combination, to treat a wide range of oncologyindications targeting both solid and liquid tumors. In particular, we expect to compete with therapies with tumor infiltrating lymphocytes, or TILS, chimericantigen receptor-expressing T cells, or CAR-T, cytokine-based therapies, and checkpoint inhibitors. Potential competitors in the TIL and CAR-T spaceinclude Kite Pharma/NCI, Adaptimmune LLC, Celgene Corporation, Juno Therapeutics, and Novartis, Alkermes, Altor, and Armo in the cytokine-basedtherapies space, and Tesaro, Macrogenics, Merck, BMS, and Roche in the checkpoint inhibitor space.NKTR-358There are a number of competitors in various stages of clinical development that are working on programs which are designed to correct theunderlying immune system imbalance in the body due to autoimmune disease. In particular, we expect to compete with therapies that could be cytokine-based therapies (Symbiotix, LLC and Tizona Therapeutics), regulatory T cell therapies (Targazyme, Inc., Juno Therapeutics and Tract Therapeutics, Inc.), orIL-2-based and toleragen-based therapies (Celgene Corporation, Amgen Inc., Tolera Therapeutics, Inc., and Caladrius BioSciences, Inc.).NKTR-181 (mu-opioid analgesic molecule for chronic pain)There are numerous companies developing pain therapies designed to have less abuse potential primarily through formulation technologies andtechniques applied to existing pain therapies. Potential competitors include Acura Pharmaceuticals, Inc., Cara Therapeutics, Inc., Collegium Pharmaceutical,Inc., Egalet Ltd, Elite Pharmaceuticals, Inc., Endo Health Solutions Inc., KemPharm, Inc., Pfizer, Inc., Purdue Pharma L.P., and Teva Pharmaceutical IndustriesLtd.MOVANTIK® (previously referred to as naloxegol and NKTR-118) (orally-available peripheral opioid antagonist)There are no other once-daily oral drugs that act specifically to block or reverse the action of opioids on receptors in the gastrointestinal tract whichare approved specifically for the treatment of opioid-induced constipation (OIC) or opioid bowel dysfunction (OBD) in patients with chronic, non-cancerpain. The only approved oral treatment for opioid-induced constipation in adults with chronic, non-cancer pain is a twice daily oral therapy calledAMITIZA® (lubiprostone), which acts by specifically activating CIC-2 chloride channels in the gastrointestinal tract to increase secretions. AMITIZA® ismarketed by Sucampo Pharmaceuticals and Takeda. There is also a subcutaneous treatment and an oral treatment known as RELISTOR® which is marketedby Valeant Pharmaceuticals, Ltd (formerly Salix) under a license from Progenics Pharmaceuticals, Inc. In 2014, RELISTOR® Subjectaneous Injection wasapproved by the FDA for adult patients with chronic non-cancer pain. On July 22, 2016, Relistor (methylnaltrexone bromide) oral tablets for the treatment ofOCI in adult patients with chronic non-cancer pain was approved by FDA. Other therapies used to treat OIC and OBD include over-the-counter laxatives andstool softeners, such as docusate sodium, senna, and milk of magnesia. These therapies do not address the underlying cause of constipation as a result ofopioid use and are generally viewed as ineffective or only partially effective to treat the symptoms of OIC and OBD.There are a number of companies developing potential products which are in various stages of clinical development and are being evaluated for thetreatment of OIC and OBD in different patient populations. Potential competitors include Merck & Co., Inc., GlaxoSmithKline plc, IronwoodPharmaceuticals, Inc. in collaboration with Actavis plc, Purdue Pharma L.P. in collaboration with Shionogi & Co., Ltd., Mundipharma Int. Limited,Theravance, Inc., Develco Pharma, Sucampo Pharmaceuticals, Inc., and Takeda Pharmaceutical Company Limited.ADYNOVATE® (previously referred to as BAX 855, PEGylated rFVIII)On June 6, 2014, the FDA approved Biogen Idec ’s ELOCTATETM [Antihemophilic Factor (Recombinant), Fc Fusion Protein] for the control andprevention of bleeding episodes, perioperative (surgical) management and routine prophylaxis in adults and children with Hemophilia A. ELOCTATETM isintended to be an extended half-life Factor VIII therapy with prolonged circulation in the body with the potential to extend the interval between prophylacticinfusions. Prior to its 2014 approval, the fusion protein in ELOCTATETM was not used outside of the clinical trial setting for Hemophilia A patients. Thereare other long-acting Factor VIII programs in late-stage development for Hemophilia A patients. Bayer Healthcare and Novo Nordisk have ongoing Phase 3clinical development programs for longer acting Factor VIII proteins based on PEGylation technology approaches. These programs, if developed successfullyand approved by health authorities, would be competitors in the longer acting Factor VIII market.28ONZEALDTM (next-generation, long acting topoisomerase I inhibitor)There are a number of chemotherapies and cancer therapies approved today and in various stages of clinical development for advanced breast cancer.These therapies are only partially effective in treating advanced or metastatic breast cancer and none of them have a specific indication in either the U.S. orEurope for treatment of patients with advanced breast cancer and co-existing brain metastases. These therapies include but are not limited to: Abraxane®(paclitaxel protein-bound particles for injectable suspension (albumin bound)), Afinitor® (everolimus), Ellence® (epirubicin), Gemzar® (gemcitabine),Halaven® (eribulin), Herceptin® (trastuzumab), Ixempra® (ixabepilone), Navelbine® (vinolrebine), Xeloda® (capecitabine) and Taxotere® (docetaxel). Majorpharmaceutical or biotechnology companies with approved drugs or drugs in development for these cancers include Bristol-Myers Squibb Company, Eisai,Inc., Roche Holding Group (including its Genentech subsidiary), GlaxoSmithKline plc, Pfizer, Inc., Eli Lilly & Co., Sanofi Aventis S.A., and others.Research and DevelopmentOur total research and development expenditures can be disaggregated into the following significant types of expenses (in millions): Year Ended December 31, 2017 2016 2015 Third party and direct materials costs $125.4 $98.2 $89.3 Personnel, overhead and other costs 113.5 84.6 77.8 Stock-based compensation and depreciation 29.6 21.0 15.7 Research and development expense $268.5 $203.8 $182.8Manufacturing and SupplyWe have a manufacturing facility located in Huntsville, Alabama that is capable of manufacturing our proprietary PEGylation materials for activepharmaceutical ingredients (APIs). The facility is also used to produce APIs to support the early phases of clinical development of our proprietary drugcandidates. The facility and associated equipment are designed and operated to be consistent with all applicable laws and regulations.As we do not maintain the capability to manufacture APIs (including biologics) nor finished drug products for all of our development programs, weprimarily utilize contract manufacturers to manufacture active pharmaceutical ingredients and finished drug product for us. We source drug starting materialsfor our manufacturing activities from one or more suppliers. For the drug starting materials necessary for our proprietary drug candidate development, wehave agreements for the supply of such drug components with drug manufacturers or suppliers that we believe have sufficient capacity to meet our demands.However, from time to time, we source critical raw materials and services from one or a limited number of suppliers and there is a risk that if such supply orservices were interrupted, it would materially harm our business. In addition, we typically order raw materials and services on a purchase order basis and donot enter into long-term dedicated capacity or minimum supply arrangements. We also utilize the services of contract manufacturers to manufacture APIsrequired for later phases of clinical development and eventual commercialization for us under all applicable laws and regulations.EnvironmentAs a manufacturer of PEG reagents for the U.S. market, we are subject to inspections by the FDA for compliance with cGMP and other U.S. regulatoryrequirements, including U.S. federal, state and local regulations regarding environmental protection and hazardous and controlled substance controls, amongothers. Environmental laws and regulations are complex, change frequently and have tended to become more stringent over time. We have incurred, and maycontinue to incur, significant expenditures to ensure we are in compliance with these laws and regulations. We would be subject to significant penalties forfailure to comply with these laws and regulations.Employees and ConsultantsAs of December 31, 2017 we had 509 employees, of which 396 employees were engaged in research and development, commercial operations andquality activities and 113 employees were engaged in general administration and business development. Of the 509 employees, 432 were located in the U.S.and 77 were located in India. We have a number of employees who hold advanced degrees, such as Ph.D. None of our employees are covered by a collectivebargaining agreement, and we have experienced no work stoppages. We believe that we maintain good relations with our employees.29To complement our own expert professional staff, we utilize specialists in regulatory affairs, pharmacovigilance, process engineering, manufacturing,quality assurance, clinical development and business development. These individuals include scientific advisors as well as independent consultants.Available InformationOur website address is http://www.nektar.com. The information in, or that can be accessed through, our website is not part of this annual report onForm 10-K. Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to those reports are available,free of charge, on or through our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SecuritiesExchange Commission (SEC). The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE,Washington, D.C. 20549. Information on the operation of the Public Reference Room can be obtained by calling 1-800-SEC-0330. The SEC maintains anInternet site that contains reports, proxy and information statements and other information regarding our filings at www.sec.gov.EXECUTIVE OFFICERS OF THE REGISTRANTThe following table sets forth the names, ages and positions of our executive officers as of February 22, 2018: Name Age PositionHoward W. Robin 65 Director, President and Chief Executive OfficerStephen K. Doberstein, Ph.D. 59 Senior Vice President, Research & Development and Chief Research & Development OfficerManinder Hora, Ph.D 64 Senior Vice President, Pharmaceutical Development and Chief Technical Operations OfficerGil M. Labrucherie, J.D. 46 Senior Vice President and Chief Financial OfficerJohn Nicholson 66 Senior Vice President and Chief Operating OfficerJillian B. Thomsen 52 Senior Vice President, Finance and Chief Accounting OfficerHoward W. Robin has served as our President and Chief Executive Officer since January 2007 and has served as a member of our board of directorssince February 2007. Mr. Robin served as Chief Executive Officer, President and a director of Sirna Therapeutics, Inc., a biotechnology company, from July2001 to November 2006 and from January 2001 to June 2001, served as their Chief Operating Officer, President and as a director. From 1991 to 2001,Mr. Robin was Corporate Vice President and General Manager at Berlex Laboratories, Inc. (Berlex), a pharmaceutical products company that is a subsidiaryof Schering, AG, and from 1987 to 1991 he served as Vice President of Finance and Business Development and Chief Financial Officer of Berlex. From 1984to 1987, Mr. Robin was Director of Business Planning and Development at Berlex. He was a Senior Associate with Arthur Andersen & Co. prior to joiningBerlex. Mr. Robin serves as a director of the Biotechnology Industry Organization, the world’s largest biotechnology industry trade organization, and alsoserves as a director of BayBio, a non-profit trade association serving the Northern California life sciences community. He received his B.S. in Accounting andFinance from Fairleigh Dickinson University in 1974.Stephen K. Doberstein, Ph.D. has served as our Senior Vice President, Research & Development and Chief Research & Development Officer sinceNovember 2017. Dr. Doberstein served as Senior Vice President and Chief Scientific Officer from January 2010 to November 2017 when he was promoted toSenior Vice President, Research & Development and Chief Research & Development Officer. From October 2008 through December 2009, Dr. Dobersteinserved as Vice President, Research at Xoma (US) LLC, a publicly traded clinical stage biotechnology company. From July 2004 until August 2008, he servedas Vice President, Research at privately held Five Prime Therapeutics, Inc., a clinical stage biotechnology company. From September 2001 until July 2004,Dr. Doberstein was Vice President, Research at privately held Xencor, Inc., a clinical stage biotechnology company. From 1997 to 2000, he held variouspharmaceutical research positions at Exelixis, Inc. (Exelixis), a publicly traded clinical stage biotechnology company. Prior to working at Exelixis,Dr. Doberstein was a Howard Hughes Postdoctoral Fellow and a Muscular Dystrophy Association Senior Postdoctoral Fellow at the University of California,Berkeley. Dr. Doberstein received his Ph.D. in Biochemistry, Cell and Molecular Biology from the Johns Hopkins University School of Medicine andreceived a B.S. in Chemical Engineering from the University of Delaware.Maninder Hora, Ph.D. has served as our Senior Vice President, Pharmaceutical Development and Chief Technical Operations Officer since August2010. From July 2006 to July 2010, he held various executive positions most recently as Vice President, Product and Quality Operations at Facet BiotechCorporation (now Abbvie Biotherapeutics), a clinical stage biotechnology company, which was acquired in 2010 by Abbvie Biotherapeutics (formerlyAbbot). From 1986 to 2006, Dr. Hora held positions of increasing responsibility with Chiron Corporation (acquired in 2005 by Novartis), a pharmaceuticalcompany, serving most recently at Chiron as Vice President of Process and Product Development. Dr. Hora has also held positions at Wyeth Pharmaceuticalsand GlaxoSmithKline plc prior to joining Chiron. Dr. Hora served as a key member of various teams that successfully registered ten drugs30or vaccines in the U.S. and Europe during his professional career. Dr. Hora completed his Ph.D. in Bioengineering from the Indian Institute of Technology,Delhi, India, and was a Fulbright Scholar at the University of Washington, and received his B.S. in chemistry from the University of Jabalpur.Gil M. Labrucherie has served as our Senior Vice President and Chief Financial Officer since June 2016. Mr. Labrucherie served as our Vice President,Corporate Legal from October 2005 through April 2007 and served as our Senior Vice President, General Counsel and Secretary from April 2007 throughJune 2016 when he was promoted to Senior Vice President and Chief Financial Officer. From October 2000 to September 2005, Mr. Labrucherie was VicePresident of Corporate Development at E2open. While at E2open, Mr. Labrucherie was responsible for global corporate alliances and merger andacquisitions. Prior to E2open, he was the Senior Director of Corporate Development at AltaVista Company, an Internet search company, where he wasresponsible for strategic partnerships and mergers and acquisitions. Mr. Labrucherie began his career as an associate in the corporate practice of the law firmof Wilson Sonsini Goodrich & Rosati, P.C. Mr. Labrucherie received his J.D. from the Berkeley Law School and a B.A. from the University of CaliforniaDavis.John Nicholson has served as our Senior Vice President and Chief Operating Officer since June 2016. Mr. Nicholson joined the Company as SeniorVice President of Corporate Development and Business Operations in October 2007 and was appointed Senior Vice President and Chief Financial Officer inDecember 2007 and served as our Chief Financial Officer until June 2016 when he was promoted to Senior Vice President and Chief Operating Officer. Beforejoining Nektar, Mr. Nicholson spent 18 years in various executive roles at Schering Berlin, Inc., the U.S. management holding company of Bayer ScheringPharma AG, a pharmaceutical company. From 1997 to September 2007, Mr. Nicholson served as Schering Berlin Inc.’s Vice President of CorporateDevelopment and Treasurer. From 2001 to September 2007, he concurrently served as President of Schering Berlin Insurance Co., and from February 2007through September 2007, he also concurrently served as President of Bayer Pharma Chemicals and Schering Berlin Capital Corp. Mr. Nicholson holds aB.B.A. from the University of Toledo.Jillian B. Thomsen has served as our Senior Vice President, Finance and Chief Accounting Officer since February 2010. From March 2006 throughMarch 2008, Ms. Thomsen served as our Vice President Finance and Corporate Controller and from April 2008 through January 2010 she served as our VicePresident Finance and Chief Accounting Officer. Before joining Nektar, Ms. Thomsen was Vice President Finance and Deputy Corporate Controller ofCalpine Corporation from September 2002 to February 2006. Ms. Thomsen is a certified public accountant and previously was a senior manager at ArthurAndersen LLP, where she worked from 1990 to 2002, and specialized in audits of multinational consumer products, life sciences, manufacturing and energycompanies. Ms. Thomsen holds a Masters of Accountancy from the University of Denver and a B.A. in Business Economics from Colorado College.31Item 1A.Risk FactorsWe are providing the following cautionary discussion of risk factors, uncertainties and assumptions that we believe are relevant to our business. Theseare factors that, individually or in the aggregate, we think could cause our actual results to differ materially from expected and historical results and ourforward-looking statements. We note these factors for investors as permitted by Section 21E of the Exchange Act and Section 27A of the Securities Act. Youshould understand that it is not possible to predict or identify all such factors. Consequently, you should not consider this section to be a completediscussion of all potential risks or uncertainties that may substantially impact our business. Moreover, we operate in a competitive and rapidly changingenvironment. New factors emerge from time to time and it is not possible to predict the impact of all of these factors on our business, financial condition orresults of operations.Risks Related to Our BusinessWe are highly dependent on the success of NKTR-214, our lead I-O candidate. We are executing a broad development program for NKTR-214 andclinical and regulatory outcomes for NKTR-214, if not successful, will significantly harm our business. Our future success is highly dependent on our ability to successfully develop, obtain regulatory approval for, and commercialize NKTR-214. Ingeneral, most early stage investigatory drugs, including oncology drug candidates such as NKTR-214, do not become approved drugs. Accordingly, there isa very meaningful risk that NKTR-214 will not succeed in one or more clinical trials sufficient to support one or more regulatory approvals. To date, clinicaloutcomes from NKTR-214 have had a significant impact on our market valuation, financial position, and business prospects and we expect this to continuein future periods. If one or more clinical studies of NKTR-214 are not successful, it would materially harm our market valuation, prospects, financialcondition and results of operations. For example, upon the effective date of the strategic collaboration agreement with Bristol-Myers Squibb, we would beentitled to up to $1.43 billion in development milestones that are based upon clinical and regulatory successes from the NKTR-214 developmentprogram. Failures in NKTR-214 studies could jeopardize such milestone payments. Drug development is a long and inherently uncertain process with a high risk of failure at every stage of development.We have a number of proprietary drug candidates and partnered drug candidates in research and development ranging from the early discoveryresearch phase through preclinical testing and clinical trials. Preclinical testing and clinical studies are long, expensive, difficult to design and implementand highly uncertain as to outcome. It will take us, or our collaborative partners, many years to conduct extensive preclinical tests and clinical trials todemonstrate the safety and efficacy in humans of our product candidates. The start or end of a clinical study is often delayed or halted due to changingregulatory requirements, manufacturing challenges, required clinical trial administrative actions, slower than anticipated patient enrollment, changingstandards of care, availability or prevalence of use of a comparator drug or required prior therapy, clinical outcomes, or our and our partners’ financialconstraints.Drug development is a highly uncertain scientific and medical endeavor, and failure can unexpectedly occur at any stage of preclinical and clinicaldevelopment. Typically, there is a high rate of attrition for drug candidates in preclinical and clinical trials due to scientific feasibility, safety, efficacy,changing standards of medical care and other variables. The risk of failure increases for our drug candidates that are based on new technologies, such as theapplication of our advanced polymer conjugate technology to ONZEALDTM, NKTR-181, NKTR-214, NKTR-358, NKTR-262, NKTR-255, and other drugcandidates currently in discovery research or preclinical development. The failure of one or more of our drug candidates could have a material adverse effecton our business, financial condition and results of operations.The risk of clinical failure for any drug candidate remains high prior to regulatory approval.A number of companies have suffered significant unforeseen failures in clinical studies due to factors such as inconclusive efficacy or safety, evenafter achieving preclinical proof-of-concept or positive results from earlier clinical studies that were satisfactory both to them and to reviewing regulatoryauthorities. Clinical study outcomes remain very unpredictable and it is possible that one or more of our clinical studies could fail at any time due to efficacy,safety or other important clinical findings or regulatory requirements. The results from preclinical testing or early clinical trials of a product candidate maynot predict the results that will be obtained in later phase clinical trials of the product candidate. We, the FDA, an independent Institutional Review Board(IRB), an independent ethics committee, or other applicable regulatory authorities may suspend clinical trials of a product candidate at any time for variousreasons, including a belief that subjects participating in such trials are being exposed to unacceptable health risks or adverse side effects. Similarly, an IRB orethics committee may suspend a clinical trial at a particular trial site. If one or more of our drug candidates fail in clinical studies, it could have a materialadverse effect on our business, financial condition and results of operations.32Our results of operations and financial condition depend significantly on the ability of our collaboration partners to successfully develop and marketdrugs and they may fail to do so.Under our collaboration agreements with various pharmaceutical or biotechnology companies (other than the BMS Collaboration Agreement), ourcollaboration partner is generally solely responsible for: •designing and conducting large scale clinical studies; •preparing and filing documents necessary to obtain government approvals to sell a given drug candidate; and/or •marketing and selling the drugs when and if they are approved.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 suchas 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 marketingand 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 marketing of our partnered drugs than they devote totheir 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 product candidates orto 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 withpartners; •we do not have the ability to unilaterally terminate agreements (or partners may have extension or renewal rights) that we believe are not oncommercially reasonable terms or consistent with our current business strategy; •partners may be unable to pay us as expected; and •partners may terminate their agreements with us unilaterally for any or no reason, in some cases with the payment of a termination fee penaltyand in other cases with no termination fee penalty.Given these risks, the success of our current and future collaboration partnerships is highly unpredictable and can have a substantial negative orpositive impact on our business. If the approved drugs fail to achieve commercial success or the drugs in development fail to have positive late stage clinicaloutcomes sufficient to support regulatory approval in major markets, it could significantly impair our access to capital necessary to fund our research anddevelopment efforts for our proprietary drug candidates. If we are unable to obtain sufficient capital resources to advance our drug candidate pipeline, itwould negatively impact the value of 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 indisputes, litigation or indemnification liability that could adversely affect our business, results of operations and financial condition.We currently derive, and expect to derive in the foreseeable future, all of our revenue from collaboration agreements with biotechnology andpharmaceutical companies. These collaboration agreements contain complex commercial terms, including: •clinical development and commercialization obligations that are based on certain commercial reasonableness performance standards that canoften 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 drugcandidate development programs; •clinical and commercial manufacturing agreements, some of which are priced on an actual cost basis for products supplied by us to our partnerswith complicated cost allocation formulas and methodologies; •intellectual property ownership allocation between us and our partners for improvements and new inventions developed during the course ofthe collaboration;33 •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.We are a party to numerous significant collaboration agreements and other strategic transaction agreements (e.g., financings and asset divestitures)that contain complex representations and warranties, covenants and indemnification obligations. If we are found to have materially breached suchagreements, it could subject us to substantial liabilities and harm our financial condition.From time to time, we are involved in litigation matters involving the interpretation and application of complex terms and conditions of ouragreements. For example, in February 2015, we filed a claim against Allergan and MAP seeking monetary damages related to a dispute over the economicsharing provisions of our collaboration agreement with MAP. On December 12, 2017, Nektar, MAP and Allergan entered into a Settlement Agreement andRelease, for which MAP paid us $15.0 million in December 2017. On August 14, 2015, Enzon, Inc. filed a breach of contract claim for alleged unpaidlicensing fees (the “Enzon Litigation”). On June 26, 2017, we entered into a Second Amendment to our Cross-License and Option Agreement (“Cross-LicenseAgreement”) with Enzon in which we agreed to pay Enzon a sum of $7.0 million to satisfy all past and future obligations of royalty payments pursuant to theCross-License Agreement and to have the Enzon Litigation dismissed. The Enzon Litigation was dismissed with prejudice on June 30, 2017. In 2013, wesettled a breach of contract litigation matter with the Research Foundation of the State University of New York (SUNY) pursuant to which we paid anaggregate of $12.0 million. One or more disputes may arise or escalate in the future regarding our collaboration agreements, transaction documents, or third-party license agreements that may ultimately result in costly litigation and unfavorable interpretation of contract terms, which would have a material adverseeffect on our business, financial condition and results of operations.If we or our partners do not obtain regulatory approval for our drug candidates on a timely basis, or at all, or if the terms of any approval imposesignificant restrictions or limitations on use, our business, results of operations and financial condition will be negatively affected.We or our partners may not obtain regulatory approval for drug candidates on a timely basis, or at all, or the terms of any approval (which in somecountries includes pricing approval) may impose significant restrictions or limitations on use. Drug candidates must undergo rigorous animal and humantesting and an extensive review process for safety and efficacy by the FDA and equivalent foreign regulatory authorities. The time required for obtainingregulatory decisions is uncertain and difficult to predict. The FDA and other U.S. and foreign regulatory authorities have substantial discretion, at any phaseof development, to terminate clinical studies, require additional clinical development or other testing, delay or withhold registration and marketing approvaland mandate product withdrawals, including recalls. For example, while data from certain pre-specified subgroups in our BEACON study for etirinotecanpegol (NKTR-102) in 2015 was positive, the study did not achieve statistical significance for its primary endpoint and the FDA and European MedicinesAgency rarely approve drugs on the basis of studies that do not achieve statistical significance on the primary endpoint. Further, while the results from thePhase 3 study of NKTR-181 were positive, NKTR-181 has Fast Track designation and we intend to file an NDA following our pre-NDA meetings with FDA,the regulatory pathway for NKTR-181 remains subject to substantial uncertainty including the amount of data required to support an approval of NKTR-181. In particular, regulations concerning and controlling the access to opioid-based pharmaceuticals are strict and there is no guarantee which schedulingcategory will apply to NKTR-181 if regulatory approval is achieved. Further, regulatory authorities have the discretion to analyze data using their ownmethodologies that may differ from those used by us or our partners, which could lead such authorities to arrive at different conclusions regarding the safetyor efficacy of a drug candidate. In addition, undesirable side effects caused by our drug candidates could cause us or regulatory authorities to interrupt, delayor halt clinical trials and could result in a more restricted label or the delay or denial of regulatory approval by regulatory authorities. For example,AstraZeneca will be conducting a post-marketing, observational epidemiological study comparing MOVANTIK® to other treatments of OIC in patients withchronic, non-cancer pain and the results of this study could at some point in the future negatively impact the labeling, regulatory status, and commercialpotential of MOVANTIK®.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. Ourpartnered drugs that have obtained regulatory approval, and the manufacturing processes for these products, are subject to continued review and periodicinspections by the FDA and other regulatory authorities. Discovery from such review and inspection of previously unknown problems may result inrestrictions on marketed products or on us, including withdrawal or recall of such products from the market, suspension of related manufacturing operationsor a more restricted label. The failure to obtain timely regulatory approval of product candidates, any product marketing limitations or a product withdrawalwould negatively impact our business, results of operations and financial condition.34We have substantial future capital requirements and there is a risk we may not have access to sufficient capital to meet our current business plan. If wedo not receive substantial milestone or royalty payments from our existing collaboration agreements, execute new high value collaborations or otherarrangements, or are unable to raise additional capital in one or more financing transactions, we would be unable to continue our current level ofinvestment in research and development.As of December 31, 2017, we had cash and investments in marketable securities valued at approximately $353.2 million and had debt of $250.0million in principal of senior secured notes. In addition, as described above and in Note 14 to our Consolidated Financial Statements, in February 2018, weentered into a collaboration agreement with BMS under which BMS agreed to pay us a non-refundable upfront cash payment of $1.0 billion and a sharepurchase agreement under which BMS agreed to purchase $850.0 million of shares of our common stock. The closings under the two agreements, subject tosatisfaction of certain closing conditions, are expected to occur during the second quarter of 2018. While we believe that our cash position will be sufficientto 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 proprietary drug candidates that we have licensed to ourcollaboration partners —important examples include NKTR-214 in collaboration with BMS, Cipro DPI licensed to Bayer and NKTR-358licensed to Lilly; •the commercial launch and sales levels of products marketed by our collaboration partners for which we are entitled to royalties and salesmilestones—importantly, the level of success in marketing and selling MOVANTIK® by AstraZeneca in the U.S. and ADYNOVATE® byBaxalta globally, as well as MOVENTIG® (the naloxegol brand name in the EU) by Kirin in the EU; •if and when we receive potential milestone payments and royalties from our existing collaborations if the drug candidates subject to thosecollaborations 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 currentnet 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 regulatoryauthorities 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 negatively impact our receipt of milestonepayments or royalties or require us to make significant payments arising from licenses, settlements, adverse judgments or ongoing royalties.A significant multi-year capital commitment is required to advance our drug candidates through the various stages of research and development inorder to generate sufficient data to enable high value collaboration partnerships with significant upfront payments or to successfully achieve regulatoryapproval. In the event we do not enter into any new collaboration partnerships with significant upfront payments and we choose to continue our later stageresearch and development programs, we may need to pursue financing alternatives, including dilutive equity-based financings, such as an offering ofconvertible debt or common stock, which would dilute the percentage ownership of our current common stockholders and could significantly lower themarket value of our common stock. If sufficient capital is not available to us or is not available on commercially reasonable terms, it could require us to delayor reduce one or more of our research and development programs. If we are unable to sufficiently advance our research and development programs, it couldsubstantially impair the value of such programs and result in a material adverse effect on our business, financial condition and results of operations.While we have conducted numerous experiments using laboratory and home-based chemistry techniques that have not been able to convert NKTR-181into a rapid-acting and more abusable opioid, there is a risk that a technique could be discovered in the future to convert NKTR-181 into a rapid-acting and more abusable opioid, which would significantly diminish the value of this drug candidate.An important objective of our NKTR-181 drug development program is to create a unique opioid molecule that does not rapidly enter a patient’scentral nervous system and therefore has the potential to be less susceptible to abuse than alternative opioid therapies. To date, we have conducted numerousexperiments using laboratory and home-based chemistry techniques that have been unable to convert NKTR-181 into a rapidly-acting, more abusable form ofopioid. In the future, an alternative chemistry technique, process or method of administration, or combination thereof, may be discovered to enable theconversion of NKTR-181 into a more abusable opioid, which could significantly and negatively impact the commercial potential or diminish the value ofNKTR-181.35The commercial potential of a drug candidate in development is difficult to predict. If the market size for a new drug is significantly smaller than weanticipate, it could significantly and negatively impact our revenue, results of operations and financial condition.It is very difficult to estimate the commercial potential of product candidates due to important factors such as safety and efficacy compared to otheravailable treatments, including potential generic drug alternatives with similar efficacy profiles, changing standards of care, third party payer reimbursementstandards, patient and physician preferences, drug scheduling status, the availability of competitive alternatives that may emerge either during the long drugdevelopment process or after commercial introduction, and the availability of generic versions of our product candidates following approval by regulatoryauthorities based on the expiration of regulatory exclusivity or our inability to prevent generic versions from coming to market by asserting our patents. Inparticular, regulations concerning and controlling the access to opioid-based pharmaceuticals are strict and there is no guarantee which scheduling categorywill apply to NKTR-181 if regulatory approval is achieved. If due to one or more of these risks the market potential for a drug candidate is lower than weanticipated, it could significantly and negatively impact the commercial terms of any collaboration partnership potential for such drug candidate or, if wehave already entered into a collaboration for such drug candidate, the revenue potential from royalty and milestone payments could be significantlydiminished and this would negatively impact our business, financial condition and results of operations. We also depend on our relationships with othercompanies for sales and marketing performance and the commercialization of product candidates. Poor performance by these companies, or disputes withthese companies, could negatively impact our revenue and financial condition.If we are unable to establish and maintain collaboration partnerships on attractive commercial terms, our business, results of operations and financialcondition could suffer.We intend to continue to seek partnerships with pharmaceutical and biotechnology partners to fund a portion of our research and development capitalrequirements. The timing of new collaboration partnerships is difficult to predict due to availability of clinical data, the outcomes from our clinical studies,the number of potential partners that need to complete due diligence and approval processes, the definitive agreement negotiation process and numerousother unpredictable factors that can delay, impede or prevent significant transactions. If we are unable to find suitable partners or negotiate collaborationarrangements with favorable commercial terms with respect to our existing and future drug candidates or the licensing of our intellectual property, or if anyarrangements we negotiate, or have negotiated, are terminated, it could have a material adverse effect on our business, financial condition and results ofoperations.Preliminary and interim data from our clinical studies that we announce or publish from time to time are subject to audit and verification proceduresthat 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. Preliminary data remain subject to audit confirmation andverification procedures that may result in the final data being materially different from the preliminary data we previously published. Interim data are alsosubject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available.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 couldsignificantly harm our business prospects.Delays in clinical studies are common and have many causes, and any significant delay in clinical studies being conducted by us or our partners couldresult in delay in regulatory approvals and jeopardize the ability to proceed to commercialization.We or our partners may experience delays in clinical trials of drug candidates. We have ongoing trials evaluating NKTR-214 including a trialevaluating NKTR-214 as a potential combination treatment with BMS’s Opdivo® (nivolumab) as well as other ongoing and planned combination trials. Wealso have an ongoing Phase 1 dose-escalation study for NKTR-358 under our collaboration with Lilly, including an on-going dose-finding trial of NKTR-358 to evaluate single-ascending doses of NKTR-358 in healthy subjects, and a multiple-ascending dose trial expected to be initiated in the first half of 2018to evaluate NKTR-358 in patients with systemic lupus erythematosus. We also have ongoing trials with our partners for the following: Halozyme has trials inPancreatic, Non-Small Cell Lung Cancer and other multiple tumor types in Phase 1, 2, and 3 development. These and other clinical studies may not begin ontime, enroll a sufficient number of patients or be completed on schedule, if at all. Clinical trials for any of our product candidates could be delayed for avariety 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; •imposition of a clinical hold by the FDA or other health authorities, which may occur at any time including after any inspection of clinical trialoperations or trial sites;36 •suspension or termination of a clinical study by us, our partners, the FDA or foreign regulatory authorities due to adverse side effects of a drugon 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 to the detriment of enrollment rates; •delays in manufacturing and delivery of sufficient supply of clinical trial materials; and •changes in regulatory authorities policies or guidance applicable to our drug candidates.If the initiation or completion of any of the planned clinical studies for our drug candidates is delayed for any of the above or other reasons, theregulatory approval process would be delayed and the ability to commercialize and commence sales of these drug candidates could be materially harmed,which could have a material adverse effect on our business, financial condition and results of operations. Clinical study delays could also shorten any periodsduring which our products have patent protection and may allow our competitors to bring products to market before we do, which could impair our ability tosuccessfully commercialize our product candidates and may harm our business and results of operations.We may not be able to obtain intellectual property licenses related to the development of our drug candidates on a commercially reasonable basis, if atall.Numerous pending and issued U.S. and foreign patent rights and other proprietary rights owned by third parties relate to pharmaceutical compositions,methods of preparation and manufacturing, and methods of use and administration. We cannot predict with any certainty which, if any, patent references willbe considered relevant to our or our collaboration partners’ technology or drug candidates by authorities in the various jurisdictions where such rights exist,nor can we predict with certainty which, if any, of these rights will or may be asserted against us by third parties. In certain cases, we have existing licenses orcross-licenses with third parties; however, the scope and adequacy of these licenses is very uncertain and can change substantially during long developmentand commercialization cycles for biotechnology and pharmaceutical products. There can be no assurance that we can obtain a license to any technology thatwe determine we need on reasonable terms, if at all, or that we could develop or otherwise obtain alternate technology. If we are required to enter into alicense with a third party, our potential economic benefit for the products subject to the license will be diminished. If a license is not available oncommercially reasonable terms or at all, we may be prevented from developing and commercializing the drug, 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.The patent positions of pharmaceutical and biotechnology companies, such as ours, are uncertain and involve complex legal and factual issues. Weown more than 250 U.S. and 800 foreign patents and have a number of pending patent applications that cover various aspects of our technologies. There canbe no assurance that patents that have issued will be held valid and enforceable in a court of law. Even for patents that are held valid and enforceable, thelegal process associated with obtaining such a judgment is time consuming and costly. Additionally, issued patents can be subject to opposition or otherproceedings that can result in the revocation of the patent or maintenance of the patent in amended form (and potentially in a form that renders the patentwithout commercially relevant and/or broad coverage). Further, our competitors may be able to circumvent and otherwise design around our patents. Even ifa patent is issued and enforceable, because development and commercialization of pharmaceutical products can be subject to substantial delays, patents mayexpire early and provide only a short period of protection, if any, following the commercialization of products encompassed by our patents. We may have toparticipate in interference proceedings declared by the U.S. Patent and Trademark Office, which could result in a loss of the patent and/or substantial cost tous.We have filed patent applications, and plan to file additional patent applications, covering various aspects of our PEGylation and advanced polymerconjugate technologies and our proprietary product candidates. There can be no assurance that the patent applications for which we apply would actuallyissue as patents, or do so with commercially relevant and/or broad coverage. The coverage claimed in a patent application can be significantly reduced beforethe patent is issued. The scope of our claim coverage can be critical to our ability to enter into licensing transactions with third parties and our right toreceive royalties from our collaboration partnerships. Since publication of discoveries in scientific or patent literature often lags behind the date of suchdiscoveries, we cannot be certain that we were the first inventor of inventions covered by our patents or patent applications. In addition, there is no guaranteethat we will be the first to file a patent application directed to an invention.An adverse outcome in any judicial proceeding involving intellectual property, including patents, could subject us to significant liabilities to thirdparties, require disputed rights to be licensed from or to third parties or require us to cease using the technology in37dispute. In those instances where we seek an intellectual property license from another, we may not be able to obtain the license on a commerciallyreasonable basis, if at all, thereby raising concerns on our ability to freely commercialize our technologies or products.We are involved in legal proceedings and may incur substantial litigation costs and liabilities that will adversely affect our business, financialcondition and results of operations.From time to time, third parties have asserted, and may in the future assert, that we or our partners infringe their proprietary rights, such as patents andtrade secrets, or have otherwise breached our obligations to them. A third party often bases its assertions on a claim that its patents cover our technologyplatform or drug candidates or that we have misappropriated its confidential or proprietary information. Similar assertions of infringement could be based onfuture patents that may issue to third parties. In certain of our agreements with our partners, we are obligated to indemnify and hold harmless ourcollaboration partners from intellectual property infringement, product liability and certain other claims, which could cause us to incur substantial costs andliability if we are called upon to defend ourselves and our partners against any claims. If a third party obtains injunctive or other equitable relief against us orour partners, they could effectively prevent us, or our partners, from developing or commercializing, or deriving revenue from, certain drugs or drugcandidates in the U.S. and abroad. Costs associated with litigation, substantial damage claims, indemnification claims or royalties paid for licenses from thirdparties could have a material adverse effect on our business, financial condition and results of operations.We are involved in legal proceedings where we or other third parties are enforcing or seeking intellectual property rights, invalidating or limitingpatent rights that have already been allowed or issued, or otherwise asserting proprietary rights through one or more potential legal remedies. For example,we are currently involved in a German litigation proceeding whereby Bayer is seeking co-ownership rights in certain of our patent filings pending at theEuropean Patent Office covering, among other things, PEGylated Factor VIII which we have exclusively licensed to Baxalta. The subject matter of our patentfilings in this proceeding relates to Bayer’s PEGylated recombinant Factor VIII compound, BAY 94-9027. We believe that Bayer’s claim to an ownershipinterest in these patent filings is without merit and are vigorously defending sole and exclusive ownership rights to this intellectual property. In addition,Bayer has filed claims in the U.S. against Baxalta and Nektar. In one U.S. proceeding, Bayer alleges ADYNOVATE® infringes a Bayer patent. In another U.S.proceeding, Bayer is seeking a declaratory judgement that BAY 94-9027 does not infringe specified Nektar patents or in the alternative that the specifiedpatents are invalid. As part of its intellectual property litigation strategy relating to PEGylated Factor VIII products, Nektar has also filed claims againstBayer. We are also regularly involved in opposition proceedings at the European Patent Office where third parties seek to invalidate or limit the scope of ourallowed European patent applications covering (among other things) our drugs and platform technologies. The cost to us in initiating or defending anylitigation or other proceeding, even if resolved in our favor, could be substantial, and litigation would divert our management’s attention. Uncertaintiesresulting from the initiation and continuation of patent litigation or other proceedings could delay our research and development efforts or result in financialimplications either in terms of seeking license arrangements or payment of damages or royalties. Our manufacturing operations and those of our contract manufacturers are subject to laws and other governmental regulatory requirements, which, ifnot met, would have a material adverse effect on our business, results of operations and financial condition.We and our contract manufacturers are required in certain cases to maintain compliance with current good manufacturing practices (cGMP), includingcGMP guidelines applicable to active pharmaceutical ingredients, and with laws and regulations governing manufacture and distribution of controlledsubstances, and are subject to inspections by the FDA, the Drug Enforcement Administration or comparable agencies in other jurisdictions administeringsuch requirements. We anticipate periodic regulatory inspections of our drug manufacturing facilities and the manufacturing facilities of our contractmanufacturers for compliance with applicable regulatory requirements. Any failure to follow and document our or our contract manufacturers’ adherence tosuch cGMP and other laws and governmental regulations or satisfy other manufacturing and product release regulatory requirements may disrupt our abilityto meet our manufacturing obligations to our customers, lead to significant delays in the availability of products for commercial use or clinical study, resultin the termination or hold on a clinical study or delay or prevent filing or approval of marketing applications for our products. Failure to comply withapplicable laws and regulations may also result in sanctions being imposed on us, including fines, injunctions, civil penalties, failure of regulatoryauthorities to grant marketing approval of our products, delays, suspension or withdrawal of approvals, license revocation, seizures, administrative detention,or recalls of products, operating restrictions and criminal prosecutions, any of which could harm our business. Regulatory inspections could result in costlymanufacturing changes or facility or capital equipment upgrades to satisfy the FDA that our manufacturing and quality control procedures are in substantialcompliance with cGMP. Manufacturing delays, for us or our contract manufacturers, pending resolution of regulatory deficiencies or suspensions could havea material adverse effect on our business, results of operations and financial condition.38If we or current or future collaborators or service providers fail to comply with healthcare laws and regulations, we or they could be subject toenforcement actions and civil or criminal penalties.Although we do not currently have any products on the market, once we begin commercializing our drug candidates, we will be subject to additionalhealthcare statutory and regulatory requirements and enforcement by the federal and state governments of the jurisdictions in which we conduct our business.Healthcare providers, physicians and third-party payors play a primary role in the recommendation and prescription of any drug candidates for which weobtain marketing approval. Our future arrangements with third-party payors and customers may expose us to broadly applicable fraud and abuse and otherhealthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute ourtherapeutic candidates for which we obtain marketing approval. Restrictions under applicable federal and state healthcare laws and regulations, include thefollowing: •the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering, orpaying remuneration (a term interpreted broadly to include anything of value, including, for example, gifts, discounts, and credits), directly orindirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order, orrecommendation of, an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs; •federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities fromknowingly presenting, or causing to be presented, claims for payment to Medicare, Medicaid, or other third-party payors that are false orfraudulent, or making a false statement or record material to payment of a false claim or avoiding, decreasing, or concealing an obligation topay money owed to the federal government; •provisions of the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created new federal criminal statutes,referred to as the “HIPAA All-Payor Fraud Prohibition,” that prohibit knowingly and willfully executing a scheme to defraud any healthcarebenefit program and making false statements relating to healthcare matters; •federal transparency laws, including the federal Physician Payment Sunshine Act, which require manufacturers of certain drugs and biologics totrack and disclose payments and other transfers of value they make to U.S. physicians and teaching hospitals as well as physician ownershipand investment interests in the manufacturer, and that such information is subsequently made publicly available in a searchable format on aCMS website; •provisions of HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementingregulations, which imposes certain requirements relating to the privacy, security and transmission of individually identifiable healthinformation; and •state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or servicesreimbursed by any third-party payor, including commercial insurers, state transparency reporting and compliance laws; and state lawsgoverning the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways andwhich may not have the same effect, thus complicating compliance efforts.Ensuring that our future business arrangements with third-parties comply with applicable healthcare laws and regulations could involve substantialcosts. If our operations are found to be in violation of any such requirements, we may be subject to penalties, including civil or criminal penalties, monetarydamages, the curtailment or restructuring of our operations, or exclusion from participation in government contracting, healthcare reimbursement or othergovernment programs, including Medicare and Medicaid, any of which could adversely affect financial results. Although effective compliance programs canmitigate the risk of investigation and prosecution for violations of these laws, these risks cannot be entirely eliminated. Any action against us for an allegedor suspected violation could cause us to incur significant legal expenses and could divert our management’s attention from the operation of our business,even if our defense is successful. In addition, achieving and sustaining compliance with applicable laws and regulations may be costly to us in terms ofmoney, time and resources.If we or our contract manufacturers are not able to manufacture drugs or drug substances in sufficient quantities that meet applicable qualitystandards, it could delay clinical studies, result in reduced sales or constitute a breach of our contractual obligations, any of which could significantlyharm our business, financial condition and results of operations.If we or our contract manufacturers are not able to manufacture and supply sufficient drug quantities meeting applicable quality standards required tosupport large clinical studies or commercial manufacturing in a timely manner, it could delay our or our collaboration partners’ clinical studies or result in abreach of our contractual obligations, which could in turn reduce the potential39commercial sales of our or our collaboration partners’ products. As a result, we could incur substantial costs and damages and any product sales or royaltyrevenue that we would otherwise be entitled to receive could be reduced, delayed or eliminated. In some cases, we rely on contract manufacturingorganizations to manufacture and supply drug product for our clinical studies and those of our collaboration partners. Pharmaceutical manufacturing of drugsand devices involves significant risks and uncertainties related to the demonstration of adequate stability, sufficient purification of the drug substance anddrug product, the identification and elimination of impurities, optimal formulations, process and analytical methods validations, device performance andchallenges in controlling for all of these variables. We have faced and may in the future face significant difficulties, delays and unexpected expenses as wevalidate third party contract manufacturers required for drug and device supply to support our clinical studies and the clinical studies and products of ourcollaboration partners. Failure by us or our contract manufacturers to supply drug product or devices in sufficient quantities that meet all applicable qualityrequirements could result in supply shortages for our clinical studies or the clinical studies and commercial activities of our collaboration partners. Suchfailures could significantly and materially delay clinical trials and regulatory submissions or result in reduced sales, any of which could significantly harmour business prospects, results of operations and financial condition.Building and validating large scale clinical or commercial-scale manufacturing facilities and processes, recruiting and training qualified personneland obtaining necessary regulatory approvals is complex, expensive and time consuming. In the past, we have encountered challenges in scaling upmanufacturing to meet the requirements of large scale clinical trials without making modifications to the drug formulation, which may cause significantdelays in clinical development. Drug and device combination products are particularly complex, expensive and time-consuming to develop due to thenumber of variables involved in the final product design, including ease of patient and doctor use, maintenance of clinical efficacy, reliability and cost ofmanufacturing, regulatory approval requirements and standards and other important factors. There continues to be substantial and unpredictable risk anduncertainty related to manufacturing and supply until such time as the commercial supply chain is validated and proven.We purchase some of the starting material for drugs and drug candidates from a single source or a limited number of suppliers, and the partial orcomplete loss of one of these suppliers could cause production delays, clinical trial delays, substantial loss of revenue and contract liability to thirdparties.We often face very limited supply of a critical raw material that can only be obtained from a single, or a limited number of, suppliers, which couldcause production delays, clinical trial delays, substantial lost revenue opportunities or contract liabilities to third parties. For example, there are only alimited number of qualified suppliers, and in some cases single source suppliers, for the raw materials included in our PEGylation and advanced polymerconjugate drug formulations. Any interruption in supply or failure to procure such raw materials on commercially feasible terms could harm our business bydelaying our clinical trials, impeding commercialization of approved drugs or increasing our costs.Our revenue is 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.Our revenue is exclusively derived from our collaboration agreements, from which we receive upfront fees, contract research payments, milestone andother contingent payments based on clinical progress, regulatory progress or net sales achievements, royalties and manufacturing revenue. Significantvariations in the timing of receipt of cash payments and our recognition of revenue can result from significant payments based on the execution of newcollaboration agreements, the timing of clinical outcomes, regulatory approval, commercial launch or the achievement of certain annual sales thresholds. Theamount of our revenue derived from collaboration agreements in any given period will depend on a number of unpredictable factors, including our ability tofind and maintain suitable collaboration partners, the timing of the negotiation and conclusion of collaboration agreements with such partners, whether andwhen we or our collaboration partners achieve clinical, regulatory and sales milestones, the timing of regulatory approvals in one or more major markets,reimbursement levels by private and government payers, and the market introduction of new drugs or generic versions of the approved drug, as well as otherfactors. The application of the Accounting Standards Codification (ASC) 606, Revenue Recognition - Revenue from Contracts with Customers, which willapply beginning in the first quarter of 2018, may have a material impact on revenue recognition under our collaboration agreements. Our past revenuegenerated from collaboration agreements is not necessarily indicative of our future revenue. If any of our existing or future collaboration partners fails todevelop, obtain regulatory approval for, manufacture or ultimately commercialize any product candidate under our collaboration agreement, our business,financial condition, and results of operations could be materially and adversely affected.40If we are unable either to create sales, marketing and distribution capabilities or to enter into agreements with third parties to perform these functions,we will be unable to commercialize our product candidates successfully.We currently have no sales, marketing or distribution capabilities. To commercialize any of our drugs that receive regulatory approval forcommercialization, we must either develop internal sales, marketing and distribution capabilities, which would be expensive and time consuming, or enterinto collaboration arrangements with third parties to perform these services. If we decide to market our products directly, we must commit significantfinancial and managerial resources to develop a marketing and sales force with technical expertise and with supporting distribution, administration andcompliance capabilities. Factors that may inhibit our efforts to commercialize our products directly or indirectly with our partners include: •our inability to recruit and retain adequate numbers of effective sales and marketing personnel; •the inability of sales personnel to obtain access to or persuade adequate numbers of physicians to use or prescribe our products; •the lack of complementary products or multiple product pricing arrangements may put us at a competitive disadvantage relative to companieswith more extensive product lines; and •unforeseen costs and expenses associated with creating and sustaining an independent sales and marketing organization.If we, or our partners through our collaborations, are not successful in recruiting sales and marketing personnel or in building a sales and marketinginfrastructure, we will have difficulty commercializing our products, which would adversely affect our business, results of operations and financialcondition.To the extent we rely on other pharmaceutical or biotechnology companies with established sales, marketing and distribution systems to market ourproducts, we will need to establish and maintain partnership arrangements, and we may not be able to enter into these arrangements on acceptable terms or atall. To the extent that we enter into co-promotion or other arrangements, any revenue we receive will depend upon the efforts of third parties, which may notbe successful and over which we have little or no control—important examples of this risk include MOVANTIK® partnered with AstraZeneca andADYNOVATE® (previously referred to as BAX 855) partnered with Baxalta. In the event that we market our products without a partner, we would be requiredto build a sales and marketing organization and infrastructure, which would require a significant investment, and we may not be successful in building thisorganization and infrastructure in a timely or efficient manner.We rely on trade secret protection and other unpatented proprietary rights for important proprietary technologies, and any loss of such rights couldharm our business, results of operations and financial condition.We rely on trade secret protection for our confidential and proprietary information. No assurance can be given that others will not independentlydevelop substantially equivalent confidential and proprietary information or otherwise gain access to our trade secrets or disclose such technology, or that wecan meaningfully protect our trade secrets. In addition, unpatented proprietary rights, including trade secrets and know-how, can be difficult to protect andmay lose their value if they are independently developed by a third party or if their secrecy is lost. Any loss of trade secret protection or other unpatentedproprietary rights could harm our business, results of operations and financial condition.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, 2017, we reported a net loss of $96.7 million. If and when we achieve profitability depends upon a number of factors,including the timing and recognition of milestone and other contingent payments and royalties received, the timing of revenue under our collaborationagreements, the amount of investments we make in our proprietary product candidates and the regulatory approval and market success of our productcandidates. We may not be able to achieve and sustain profitability.Other factors that will affect whether we achieve and sustain profitability include our ability, alone or together with our partners, to: •develop drugs utilizing our technologies, either independently or in collaboration with other pharmaceutical or biotechnology companies; •effectively estimate and manage clinical development costs, particularly the cost of the clinical studies for NKTR-214, NKTR-358, NKTR-262,and NKTR-255; •receive necessary regulatory and marketing approvals; •maintain or expand manufacturing at necessary levels;41 •achieve market acceptance of our partnered products; •receive royalties on products that have been approved, marketed or submitted for marketing approval with regulatory authorities; and •maintain sufficient funds to finance our activities.If government and private insurance programs do not provide payment or reimbursement for our partnered products or proprietary products, thoseproducts will not be widely accepted, which would have a negative impact on our business, results of operations and financial condition.In both domestic and foreign markets, sales of our partnered and proprietary products that have received regulatory approval will depend in part onmarket acceptance among physicians and patients, pricing approvals by government authorities and the availability of coverage and payment orreimbursement from third-party payers, such as government programs, including Medicare and Medicaid, managed care providers, private health insurers andother organizations. However, eligibility for coverage does not necessarily signify that a drug candidate will be adequately reimbursed in all cases or at a ratethat covers costs related to research, development, manufacture, sale, and distribution. Third-party payers are increasingly challenging the price and costeffectiveness of medical products and services. Therefore, significant uncertainty exists as to the coverage and pricing approvals for, and the payment orreimbursement status of, newly approved healthcare products.Moreover, legislation and regulations affecting the pricing of pharmaceuticals may change before regulatory agencies approve our proposed productsfor marketing and could further limit coverage or pricing approvals for, and reimbursement of, our products from government authorities and third-partypayers. For example, Congress passed the Affordable Care Act in 2010 which enacted a number of reforms to expand access to health insurance while alsoreducing or constraining the growth of healthcare spending, enhancing remedies against fraud and abuse, adding new transparency requirements forhealthcare industries, and imposing new taxes on fees on healthcare industry participants, among other policy reforms. Federal agencies, Congress and statelegislatures have continued to show interest in implementing cost containment programs to limit the growth of health care costs, including price controls,restrictions on reimbursement and other fundamental changes to the healthcare delivery system. In addition, in recent years, Congress has enacted variouslaws seeking to reduce the federal debt level and contain healthcare expenditures, and the Medicare and other healthcare programs are frequently identifiedas potential targets for spending cuts. New government legislation or regulations related to pricing or other fundamental changes to the healthcare deliverysystem as well as a government or third-party payer decision not to approve pricing for, or provide adequate coverage or reimbursement of, our products holdthe potential to severely limit market opportunities of such products.We depend on third parties to conduct the clinical trials for our proprietary product candidates and any failure of those parties to fulfill theirobligations 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 forour proprietary product candidates. We rely heavily on these parties for the successful execution of our clinical trials. Though we are ultimately responsiblefor the results of their activities, many aspects of their activities are beyond our control. For example, we are responsible for ensuring that each of our clinicaltrials is conducted in accordance with the general investigational plan and protocols for the trials, but the independent clinical investigators may prioritizeother projects over ours or communicate issues regarding our products to us in an untimely manner. Third parties may not complete activities on schedule ormay not conduct our clinical trials in accordance with regulatory requirements or our stated protocols. The early termination of any of our clinical trialarrangements, the failure of third parties to comply with the regulations and requirements governing clinical trials or the failure of third parties to properlyconduct our clinical trials could hinder or delay the development, approval and commercialization of our product candidates and would adversely affect ourbusiness, results of operations and financial condition.Significant competition for our polymer conjugate chemistry technology platforms and our partnered and proprietary products and product candidatescould make our technologies, products or product candidates obsolete or uncompetitive, which would negatively impact our business, results ofoperations and financial condition.Our advanced polymer conjugate chemistry platforms and our partnered and proprietary products and product candidates compete with variouspharmaceutical and biotechnology companies. Competitors of our polymer conjugate chemistry technologies include Biogen Inc., Savient Pharmaceuticals,Inc., Dr. Reddy’s Laboratories Ltd., SunBio Corporation, Mountain View Pharmaceuticals, Inc., Novo Nordisk A/S (formerly assets held by NeoseTechnologies, Inc.), and NOF Corporation. Several other chemical, biotechnology and pharmaceutical companies may also be developing polymerconjugation technologies or technologies that have similar impact on target drug molecules. Some of these companies license or provide the technology toother companies, while others are developing the technology for internal use.42There are many competitors for our proprietary product candidates currently in development. For MOVANTIK®, there are currently several alternativetherapies used to address opioid-induced constipation (OIC) and opioid-induced bowel dysfunction (OBD), including Symproic® (naldemedine) fromShionogi and Purdue Pharma L.P., RELISTOR® Subcutaneous Injection (methylnaltrexone bromide), oral therapy Amitizia (lubiprostone), and oral and rectalover-the-counter laxatives and stool softeners such as docusate sodium, senna and milk of magnesia. In addition, there are a number of companies developingpotential products which are in various stages of clinical development and are being evaluated for the treatment of OIC and OBD in different patientpopulations, including Merck & Co., Inc., Progenics Pharmaceuticals, Inc. in collaboration with Salix Pharmaceuticals, Ltd., Purdue Pharma L.P. incollaboration with Shionogi & Co., Ltd., Mundipharma Int. Limited, Sucampo Pharmaceuticals, Inc., Develco Pharma GmbH, Alkermes plc, GlaxoSmithKlineplc, Theravance, Inc., and Takeda Pharmaceutical Company Limited. For ADYNOVATE®, on June 6, 2014, the FDA approved Biogen Idec’s Fc fusionprotein ELOCTATETM for the control and prevention of bleeding episodes, perioperative (surgical) management and routine prophylaxis in adults andchildren with Hemophilia A. Longer acting Factor VIII proteins based on polymer conjugation technology approaches are being pursued by BayerHealthcare LLC (which has filed for regulatory approval in the U.S.) and Novo Nordisk (which has an ongoing Phase 3 clinical development program). Inaddition, technologies other than those based on Fc fusion and polymer conjugation approaches (such as gene therapy) are being pursued to treat patientswith Hemophilia A. For NKTR-181, there are numerous companies developing pain therapies designed to have less abuse potential primarily throughformulation technologies and techniques applied to existing pain therapies. Potential competitors include Acura Pharmaceuticals, Inc., Cara Therapeutics,Inc., Collegium Pharmaceutical, Inc., Egalet Ltd, Elite Pharmaceuticals, Inc., Endo Health Solutions Inc., KemPharm, Inc., Pfizer, Inc., Purdue Pharma L.P.,and Teva Pharmaceutical Industries Ltd. For ONZEALDTM there are a number of chemotherapies and cancer therapies approved today and in various stagesof clinical development for breast cancer, including, but not limited to: Abraxane® (paclitaxel protein-bound particles for injectable suspension (albuminbound)), Xeloda® (capecitabine), Afinitor® (everolimus), Doxil® (doxorubicin HCl), Ellence® (epirubicin), Gemzar® (gemcitabine), Halaven® (eribulin),Herceptin® (trastuzumab), Hycamtin® (topotecan), Ibrance® (palbociclib), Ixempra® (ixabepilone), Navelbine® (vinolrebine), Iniparib, Paraplatin®(carboplatin), Taxol® (paclitaxel) and Taxotere® (docetaxel). Major pharmaceutical or biotechnology companies with approved drugs or drugs indevelopment for breast cancers include, but are not limited to, Bristol-Myers Squibb Company, Eli Lilly & Co., Roche, GlaxoSmithKline plc, Johnson andJohnson, Pfizer Inc., Eisai Inc., and Sanofi Aventis S.A. For NKTR-214, there are numerous companies engaged in developing immunotherapies to be usedalone, or in combination, to treat a wide range of oncology indications targeting both solid and liquid tumors. In particular, we expect to compete withtherapies with tumor infiltrating lymphocytes, or TILS, chimeric antigen receptor-expressing T cells, or CAR-T, cytokine-based therapies, and checkpointinhibitors. Potential competitors in the TIL and CAR-T space include Kite Pharma/NCI, Adaptimmune LLC, Celgene Corporation, Juno Therapeutics, andNovartis, Alkermes, Altor, and Armo in the cytokine-based therapies space, and Tesaro, Macrogenics, Merck, BMS, and Roche in the checkpoint inhibitorspace. For NKTR‑358, there are a number of competitors in various stages of clinical development that are working on programs which are designed to correctthe underlying immune system imbalance in the body due to autoimmune disease. In particular, we expect to compete with therapies that could be cytokine-based therapies (Symbiotix, LLC and Tizona Therapeutics), regulatory T cell therapies (Targazyme, Inc., Juno Therapeutics and Tract Therapeutics, Inc.), orIL-2-based and toleragen-based therapies (Celgene Corporation, Amgen Inc., Tolera Therapeutics, Inc., and Caladrius BioSciences, Inc.).There can be no assurance that we or our partners will successfully develop, obtain regulatory approvals for and commercialize next-generation or newproducts that will successfully compete with those of our competitors. Many of our competitors have greater financial, research and development, marketingand sales, manufacturing and managerial capabilities. We face competition from these companies not just in product development but also in areas such asrecruiting employees, acquiring technologies that might enhance our ability to commercialize products, establishing relationships with certain research andacademic institutions, enrolling patients in clinical trials and seeking program partnerships and collaborations with larger pharmaceutical companies. As aresult, our competitors may succeed in developing competing technologies, obtaining regulatory approval or gaining market acceptance for products beforewe do. These developments could make our products or technologies uncompetitive or obsolete.If product liability lawsuits are brought against us, we may incur substantial liabilities.The manufacture, clinical testing, marketing and sale of medical products involve inherent product liability risks. If product liability costs exceed ourproduct liability insurance coverage, we may incur substantial liabilities that could have a severe negative impact on our financial position. Whether or notwe are ultimately successful in any product liability litigation, such litigation would consume substantial amounts of our financial and managerial resourcesand might result in adverse publicity, all of which would impair our business. Additionally, we may not be able to maintain our clinical trial insurance orproduct liability insurance at an acceptable cost, if at all, and this insurance may not provide adequate coverage against potential claims or losses.43Our internal computer systems, or those of our CROs or other contractors or consultants, may fail or suffer security breaches, which could result in amaterial disruption of our product development programs or the theft of our confidential information or patient confidential information.Despite the implementation of security measures, our internal computer systems and those of our contract research organizations (CROs) and othercontractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunicationand electrical failures. Such events could cause interruptions of our operations. For instance, the loss of preclinical data or data from any future clinical trialinvolving our product candidates could result in delays in our development and regulatory filing efforts and significantly increase our costs. To the extentthat any disruption or security breach were to result in a loss of, or damage to, our data, or inappropriate disclosure of confidential or proprietary informationof our company or clinical patients, we could suffer or be subject to reputational harm, monetary fines, civil suits, civil penalties or criminal sanctions andrequirements to disclose the breach, and other forms of liability, and the development of our product candidates could be delayed.Our future depends on the proper management of our current and future business operations and their associated expenses.Our business strategy requires us to manage our business to provide for the continued development and potential commercialization of our proprietaryand partnered drug candidates. Our strategy also calls for us to undertake increased research and development activities and to manage an increasing numberof relationships with partners and other third parties, while simultaneously managing the capital necessary to support this strategy. If we are unable to manageeffectively our current operations and any growth we may experience, our business, financial condition and results of operations may be adversely affected. Ifwe are unable to effectively manage our expenses, we may find it necessary to reduce our personnel-related costs through reductions in our workforce, whichcould harm our operations, employee morale and impair our ability to retain and recruit talent. Furthermore, if adequate funds are not available, we may berequired to obtain funds through arrangements with partners or other sources that may require us to relinquish rights to certain of our technologies, productsor future economic rights that we would not otherwise relinquish or require us to enter into other financing arrangements on unfavorable terms.We are dependent on our management team and key technical personnel, and the loss of any key manager or employee may impair our ability todevelop our products effectively and may harm our business, operating results and financial condition.Our success largely depends on the continued services of our executive officers and other key personnel. The loss of one or more members of ourmanagement team or other key employees could seriously harm our business, operating results and financial condition. The relationships that our keymanagers have cultivated within our industry make us particularly dependent upon their continued employment with us. We are also dependent on thecontinued services of our technical personnel because of the highly technical nature of our products and the regulatory approval process. Because ourexecutive officers and key employees are not obligated to provide us with continued services, they could terminate their employment with us at any timewithout penalty. We do not have any post-employment noncompetition agreements with any of our employees and do not maintain key person life insurancepolicies on any of our executive officers or key employees.Because competition for highly qualified technical personnel is intense, we may not be able to attract and retain the personnel we need to support ouroperations and growth.We must attract and retain experts in the areas of clinical testing, manufacturing, research, regulatory and finance, and may need to attract and retainmarketing and distribution experts and develop additional expertise in our existing personnel. We face intense competition from other biopharmaceuticalcompanies, research and academic institutions and other organizations for qualified personnel. Many of the organizations with which we compete forqualified personnel have greater resources than we have. Because competition for skilled personnel in our industry is intense, companies such as ourssometimes experience high attrition rates with regard to their skilled employees. Further, in making employment decisions, job candidates often consider thevalue of the stock options they are to receive in connection with their employment. Our equity incentive plan and employee benefit plans may not beeffective in motivating or retaining our employees or attracting new employees, and significant volatility in the price of our stock may adversely affect ourability to attract or retain qualified personnel. If we fail to attract new personnel or to retain and motivate our current personnel, our business and futuregrowth prospects could be severely harmed.If earthquakes or other catastrophic events strike, our business may be harmed.Our corporate headquarters, including a substantial portion of our research and development operations, are located in the San Francisco Bay Area, aregion known for seismic activity and a potential terrorist target. In addition, we own facilities for the manufacture of products using our advanced polymerconjugate technologies in Huntsville, Alabama and own and lease offices in Hyderabad, India. There are no backup facilities for our manufacturingoperations located in Huntsville, Alabama. In the event of an earthquake or other natural disaster, political instability, or terrorist event in any of theselocations, our ability to manufacture and supply materials for drug candidates in development and our ability to meet our manufacturing obligations to ourcustomers would be44significantly disrupted and our business, results of operations and financial condition would be harmed. Our collaborative partners may also be subject tocatastrophic events, such as earthquakes, floods, hurricanes and tornadoes, any of which could harm our business, results of operations and financialcondition. We have not undertaken a systematic analysis of the potential consequences to our business, results of operations and financial condition from amajor earthquake or other catastrophic event, such as a fire, sustained loss of power, terrorist activity or other disaster, and do not have a recovery plan forsuch disasters. In addition, our insurance coverage may not be sufficient to compensate us for actual losses from any interruption of our business that mayoccur.We have implemented certain anti-takeover measures, which make it more difficult to acquire us, even though such acquisitions may be beneficial toour stockholders.Provisions of our certificate of incorporation and bylaws, as well as provisions of Delaware law, could make it more difficult for a third party to acquireus, even though such acquisitions may be beneficial to our stockholders. These anti-takeover provisions include: •establishment of a classified board of directors such that not all members of the board may be elected at one time; •lack of a provision for cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to electdirector candidates; •the ability of our board to authorize the issuance of “blank check” preferred stock to increase the number of outstanding shares and thwart atakeover attempt; •prohibition on stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of stockholders; •establishment of advance notice requirements for nominations for election to the board of directors or for proposing matters that can be actedupon by stockholders at stockholder meetings; and •limitations on who may call a special meeting of stockholders.Further, provisions of Delaware law relating to business combinations with interested stockholders may discourage, delay or prevent a third party fromacquiring us. These provisions may also discourage, delay or prevent a third party from acquiring a large portion of our securities or initiating a tender offeror proxy contest, even if our stockholders might receive a premium for their shares in the acquisition over the then-current market prices. We also have achange of control severance benefit plan, which provides for certain cash severance, stock award acceleration and other benefits in the event our employeesare terminated (or, in some cases, resign for specified reasons) following an acquisition. This severance plan could discourage a third party from acquiring us.The price of our common stock is expected to remain volatile.Our stock price is volatile. During the year ended December 31, 2017, based on closing prices on The NASDAQ Global Select Market, the closingprice of our common stock ranged from $11.75 to $60.50 per share. We expect our stock price to remain volatile. A variety of factors may have a significanteffect on the market price of our common stock, including the risks described in this section titled “Risk Factors” and the following: •announcements of data from, or material developments in, our clinical studies and those of our collaboration partners, including data regardingefficacy and safety, delays in clinical development, regulatory approval or commercial launch – in particular, data from clinical studies ofNKTR-214 has had a significant impact on our stock price; •announcements by collaboration partners as to their plans or expectations related to drug candidates and approved drugs in which we have asubstantial 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 licenseagreements and the costs associated with those arrangements; •announcements of technological innovations or new therapeutic products that may compete with our approved products or products underdevelopment; •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;45 •our financing needs and activities; and •general market conditions.At times, our stock price has been volatile even in the absence of significant news or developments. The stock prices of biotechnology companies andsecurities markets generally have been subject to dramatic price swings in recent years.The indenture governing our 7.75% senior secured notes imposes significant operating and financial restrictions on us and our subsidiaries that mayprevent us from pursuing certain business opportunities and restrict our ability to operate our business.On October 5, 2015, we issued $250.0 million in aggregate principal amount of 7.75% senior secured notes due October 2020. The indenturegoverning the senior secured notes contains covenants that restrict our and our subsidiaries’ ability to take various actions, including, among other things: •incur or guarantee additional indebtedness or issue disqualified capital stock or cause certain of our subsidiaries to issue preferred stock; •pay dividends or distributions, redeem equity interests or subordinated indebtedness or make certain types of investments; •create or incur liens; •transfer, sell, lease or otherwise dispose of assets and issue or sell equity interests in certain of our subsidiaries; •incur restrictions on certain of our subsidiaries’ ability to pay dividends or other distributions to the Company or to make intercompany loans,advances or asset transfers; •enter into transactions with affiliates; •engage in any business other than businesses which are the same, similar, ancillary or reasonably related to our business as of the date of theindenture; and •consummate a merger, consolidation, reorganization or business combination, sell, lease, convey or otherwise dispose of all or substantially allof our assets or other change of control transaction.This indenture also requires us to maintain a minimum cash and investments in marketable securities balance of $60.0 million. We have certainreporting obligations under the indenture regarding cash position and royalty revenue. The indenture specifies a number of events of default, some of whichare subject to applicable grace or cure periods, including, among other things, non-payment defaults, covenant defaults, cross-defaults to other materialindebtedness, bankruptcy and insolvency defaults, non-payment of material judgments, loss of any material business license, criminal indictment of theCompany, and certain civil forfeiture proceedings involving material assets of the Company. Our ability to comply with these covenants will likely beaffected by many factors, including events beyond our control, and we may not satisfy those requirements. Our failure to comply with our obligations couldresult in an event of default under our other indebtedness and the acceleration of our other indebtedness, in whole or in part, could result in an event ofdefault under the indenture governing the senior secured notes.The restrictions contained in the indenture governing the senior secured notes could also limit our ability to plan for or react to market conditions,meet capital needs or otherwise restrict our activities or business plans and adversely affect our ability to finance our operations, enter into acquisitions or toengage in other business activities that would be in our interest. Item 1B.Unresolved Staff CommentsNone. Item 2.PropertiesCaliforniaWe lease a 129,732 square foot facility in the Mission Bay Area of San Francisco, California (Mission Bay Facility), under an operating lease whichexpires in January 2030. The Mission Bay Facility is our corporate headquarters and also includes our research and development operations.46AlabamaWe currently own five facilities consisting of approximately 175,000 square feet in Huntsville, Alabama, which house laboratories as well asadministrative, clinical and commercial manufacturing facilities for our PEGylation and advanced polymer conjugate technology operations as well asmanufacturing of APIs for early clinical studies.In July 2012, we consolidated our U.S.-based research activities into our Mission Bay Facility and ceased use of one of our buildings located inHuntsville that was dedicated to research activities. We are currently seeking a buyer for the land and building.IndiaWe own a research and development facility consisting of approximately 88,000 square feet, near Hyderabad, India. In addition, we leaseapproximately 1,600 square feet of office space in Hyderabad, India, under a three-year operating lease that will expire in 2018. Item 3.Legal ProceedingsFrom 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 DisclosuresNot applicable. 47PART II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesOur common stock trades on The NASDAQ Global Select Market under the symbol “NKTR.” The table below sets forth the high and low closing salesprices for our common stock as reported on The NASDAQ Global Select Market during the periods indicated. High Low Year Ended December 31, 2016: 1st Quarter $16.20 $11.00 2nd Quarter 16.28 13.09 3rd Quarter 19.68 14.09 4th Quarter 17.48 11.85 Year Ended December 31, 2017: 1st Quarter $24.20 $11.75 2nd Quarter 22.57 17.54 3rd Quarter 24.00 17.79 4th Quarter 60.50 23.02 Holders of RecordAs of February 22, 2018, there were approximately 177 holders of record of our common stock.Dividend PolicyWe have never declared or paid any cash dividends on our common stock. We currently expect to retain any future earnings for use in the operationand expansion of our business and do not anticipate paying any cash dividends on our common stock in the foreseeable future.There were no sales of unregistered securities and there were no common stock repurchases made during the year ended December 31, 2017.Securities Authorized for Issuance Under Equity Compensation PlansInformation regarding our equity compensation plans as of December 31, 2017 is disclosed in Item 12 “Security Ownership of Certain BeneficialOwners and Management and Related Stockholder Matters” of this Annual Report on Form 10-K and is incorporated herein by reference from our proxystatement for our 2018 annual meeting of stockholders to be filed with the SEC pursuant to Regulation 14A not later than 120 days after the end of the fiscalyear covered by this Annual Report on Form 10-K.48Performance Measurement ComparisonThe material in this section is being furnished and shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act orotherwise subject to the liability of that section, nor shall the material in this section be deemed to be incorporated by reference in any registration statementor other document filed with the SEC under the Securities Act or the Exchange Act, except as otherwise expressly stated in such filing.The following graph compares, for the five year period ended December 31, 2017, the cumulative total stockholder return (change in stock price plusreinvested dividends) of our common stock with (i) the NASDAQ Composite Index, (ii) the NASDAQ Pharmaceutical Index, (iii) the RDG SmallCapPharmaceutical Index, (iv) the NASDAQ Biotechnology Index and (v) the RDG SmallCap Biotechnology Index. Measurement points are the last trading dayof each of our fiscal years ended December 31, 2013, December 31, 2014, December 31, 2015, December 31, 2016 and December 31, 2017. The graphassumes that $100 was invested on December 31, 2012 in the common stock of the Company, the NASDAQ Composite Index, the Nasdaq PharmaceuticalIndex, the RDG SmallCap Pharmaceutical Index, the NASDAQ Biotechnology Index and the RDG SmallCap Biotechnology Index and assumes reinvestmentof any dividends. The stock price performance in the graph is not intended to forecast or indicate future stock price performance.49Item 6.Selected Financial DataSELECTED CONSOLIDATED FINANCIAL INFORMATION(In thousands, except per share information)The selected consolidated financial data set forth below should be read together with the consolidated financial statements and related notes,“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the other information contained herein. Year Ended December 31, 2017 2016 2015 2014 2013 Statements of Operations Data: Revenue: Product sales $32,688 $55,354 $40,155 $25,152 $44,846 Royalty revenue 33,527 19,542 2,967 329 1,148 Non-cash royalty revenue related to sale of future royalties(1) 30,531 30,158 22,058 21,937 22,055 License, collaboration and other revenue 210,965 60,382 165,604 153,289 80,872 Total revenue 307,711 165,436 230,784 200,707 148,921 Total operating costs and expenses(2) 367,353 278,291 260,155 217,192 269,051 Loss from operations (59,642) (112,855) (29,371) (16,485) (120,130)Non-cash interest expense on liability related to sale of future royalties(1) (18,869) (19,712) (20,619) (20,888) (22,309)Interest income (expense) and other income (expense), net (17,565) (20,081) (16,602) (17,055) (17,329)Loss on extinguishment of debt — — (14,079) — — Provision (benefit) for income taxes 616 876 506 (512) 2,245 Net loss $(96,692) $(153,524) $(81,177) $(53,916) $(162,013)Basic and diluted net loss per share(3) $(0.62) $(1.10) $(0.61) $(0.42) $(1.40)Weighted average shares outstanding used in computing basic and diluted net loss per share(3) 155,953 139,596 132,458 126,783 115,732 As of December 31, 2017 2016 2015 2014 2013 Balance Sheet Data: Cash, cash equivalents and investments in marketable securities $353,220 $389,102 $308,944 $262,824 $262,026 Working capital $270,657 $353,730 $288,805 $224,153 $159,661 Total assets $508,866 $568,871 $498,642 $441,621 $434,527 Deferred revenue $37,970 $66,239 $83,854 $101,384 $106,048 Senior secured notes, net $245,207 $243,464 $241,699 $125,000 $125,000 Liability related to the sale of future royalties(1) $94,655 $105,950 $116,029 $120,471 $128,520 Other long-term liabilities $5,992 $7,223 $10,813 $18,204 $25,775 Accumulated deficit $(2,117,941) $(2,021,010) $(1,867,486) $(1,786,309) $(1,732,393)Total stockholders’ equity (deficit) $87,828 $88,125 $6,429 $36,332 $(89,903) (1)In February 2012, we sold all of our rights to receive future royalty payments on net sales of UCB’s CIMZIA® and Roche’s MIRCERA®. As describedin Note 7 to our Consolidated Financial Statements, this royalty sale transaction has been recorded as a liability that amortizes over the estimatedroyalty payment period. As a result of this liability accounting, even though the royalties from UCB and Roche are remitted directly to the purchaserof these royalty interests starting in the second quarter of 2012, we will continue to record non-cash revenue for these royalties and related non-cashinterest expense.(2)Operating costs and expenses in 2017 includes $16.0 million for the impairment of equipment and related costs resulting from the termination of theAmikacin Inhale development program.(3)Basic and diluted net loss per share is based upon the weighted average number of common shares outstanding.50The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially fromthose discussed here. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this section as well asfactors described in “Part I, Item 1A — Risk Factors.” Item 7.Management’s Discussion and Analysis of Financial Condition and Results of OperationsOverviewStrategic Direction of Our BusinessNektar Therapeutics is a research-based biopharmaceutical company that discovers and develops innovative new medicines in areas of high unmetmedical need. Our research and development pipeline of new investigational drugs includes treatments for cancer, autoimmune disease and chronic pain. Weleverage our proprietary and proven chemistry platform to discover and design new drug candidates. These drug candidates utilize our advanced polymerconjugate technology platforms, which are designed to enable the development of new molecular entities that target known mechanisms of action.We continue to make significant investments in building and advancing our pipeline of proprietary drug candidates as we believe that this is the beststrategy to build stockholder value. Described below are certain key events and activities where we are making investments in advancing our research anddevelopment pipeline. •On February 13, 2018, we entered into a Strategic Collaboration Agreement (BMS Collaboration Agreement) with Bristol-Myers SquibbCompany (BMS), pursuant to which we and BMS will jointly develop NKTR-214, our lead immuno-oncology drug candidate, in combinationwith BMS’s Opdivo® (nivolumab) and Opdivo® plus Yervoy® (ipilimumab), in more than 20 indications across nine tumor types, as well aspotential combinations with other anti-cancer agents from BMS, us and third parties. We also entered into a Share Purchase Agreement(Purchase Agreement) with BMS, pursuant to which BMS has agreed to purchase $850.0 million of shares of our common stock at a purchaseprice of $102.60 per share. The closings under the two agreements, subject to satisfaction of certain closing conditions, are expected to occurduring the second quarter of 2018. •In early 2017, we commenced a broad clinical development program for NKTR-214, our lead immuno-oncology drug candidate incombination with other immuno-oncology agents including Opdivo® (nivolumab) as part of our broad Phase 1/2 clinical collaboration withBMS in five tumor types and eight potential indications, a dose-escalation study with atezolizumab, and numerous preclinical collaborationprograms. •In the last half of 2017 we completed enrollment in the dose-escalation phase of the NKTR-214 study evaluating NKTR-214 in combinationwith Opdivo® (nivolumab) in patients with melanoma, renal cell carcinoma and non-small cell lung cancer which we call the PIVOT-02 study.On November 11, 2017 we announced interim data from the dose-escalation phase of the PIVOT-02 Phase 1/2 study. We have identified thePhase 2 dose for NKTR-214 and are currently enrolling subjects in the expansion phase of the study. •On May 22, 2017, we announced a research collaboration that will allow Nektar and Takeda Pharmaceutical Company Limited (Takeda) toevaluate NKTR-214 with five compounds from Takeda’s cancer portfolio. •On September 12, 2017, we announced that we had begun dosing in a clinical study evaluating the efficacy and safety of NKTR-214 incombination with approved checkpoint inhibitors, TECENTRIQ® (atezolizumab) and KEYTRUDA® (pembrolizumab). •In February 2017, we filed an investigational new drug (IND) application for NKTR-358, our autoimmune disease drug candidate. We beganthe Phase 1 clinical study to evaluate single-ascending doses of NKTR-358 in healthy volunteers in March 2017. This study is designed toestablish a range of dose levels and evaluate pharmacokinetics and safety. A Phase 1 multiple-ascending dose trial is expected to be initiated inthe second quarter of 2018 in lupus patients. On July 24, 2017, we entered into a license agreement with Lilly to co-develop NKTR-358. •On March 20, 2017, we announced that NKTR-181, met its primary and secondary endpoints in the SUMMIT-07 Phase 3 efficacy study. OnJuly 18, 2017, we announced positive top-line data for our pivotal human abuse potential study (the HAP study) for NKTR-181. The HAPstudy was designed to assess the relative oral abuse potential of NKTR-181 at its highest tested therapeutic dose as well as at the highest doseto which patients have been exposed in our long-term safety study and at a supratherapeutic dose compared to common therapeutic doses ofoxycodone, a Schedule II opioid. Following the success of the SUMMIT-07 Phase 3 efficacy study and the HAP study, we are seeking a partnerto support future development and commercialization activities for NKTR-181. We are currently planning to file the NDA for NKTR-181 in thefirst half of 2018. 51 •We filed the IND for NKTR-262 in December 2017 and expect to begin enrolling patients in the initial Phase 1 study by the end of the firstquarter of 2018. We are also completing preclinical research for NKTR-255 with the goal of advancing this program into the clinic in 2019.The level of our future research and development investment will depend on a number of trends and uncertainties including clinical outcomes, futurestudies required to advance programs to regulatory approval, and the economics related to potential future collaborations that may include up-frontpayments, development funding, milestones, and royalties.We also have significant milestone and royalty economic interests in approved drugs and drug candidates in late stage development with ourcollaboration partners. With AstraZeneca, we have a collaboration for MOVANTIK®, an oral peripherally-acting mu-opioid antagonist for the treatment ofopioid-induced constipation in adult patients with non-cancer pain. MOVANTIK® is approved by health authorities in the United States, European Union,and many other countries. We have a collaboration with Baxalta (a wholly-owned subsidiary of Shire plc) for ADYNOVATE®, that was approved by the FDAin late 2015 for use in adults and adolescents, aged 12 years and older, who have Hemophilia A. ADYNOVATE® is approved by health authorities in theUnited States, European Union, and many other countries. Our business is subject to significant risks, including the risks inherent in our development efforts, the results of our clinical trials, our dependence onthe marketing efforts by our collaboration partners, uncertainties associated with obtaining and enforcing patents, the lengthy and expensive regulatoryapproval process and competition from other products. For a discussion of these and some of the other key risks and uncertainties affecting our business, seeItem 1A "Risk Factors" of this Annual Report on Form 10-K.While the approved drugs and clinical development programs described above are key elements of our future success, we believe it is criticallyimportant that we continue to make substantial investments in our earlier-stage drug candidate pipeline. We have several drug candidates in earlier stageclinical development or being explored in research that we are preparing to advance into the clinic in future years. We are also advancing several other drugcandidates in preclinical development in the areas of cancer immunotherapy, immunology, and other therapeutic indications. We believe that our substantialinvestment in research and development has the potential to create significant value if one or more of our drug candidates demonstrates positive clinicalresults, receives regulatory approval in one or more major markets and achieves commercial success, drug research and development is an inherentlyuncertain process and there is a high risk of failure at every stage prior to approval and the timing and outcome of clinical trial results are extremely difficultto predict. 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 value.Historically, we have entered into a number of license and supply contracts under which we manufactured and supplied our proprietary polymerreagents on a fixed price or cost-plus basis. Our current strategy is to manufacture and supply polymer reagents to support our proprietary drug candidates orour third-party collaborators where we have a strategic development and commercialization relationship or where we derive substantial economic benefit.Key Developments and Trends in Liquidity and Capital ResourcesWe estimate that we have working capital to fund our current business plans through at least March 1, 2019. At December 31, 2017, we hadapproximately $353.2 million in cash and investments in marketable securities and had debt of $250.0 million in principal of senior secured notes due inOctober 2020. In addition, as described above and in Note 14 to our Consolidated Financial Statements, in February 2018, we entered into a collaborationagreement with BMS under which BMS will pay us a non-refundable upfront cash payment of $1.0 billion and a share purchase agreement under which BMSwill purchase $850.0 million of shares of our common stock. The closings under the two agreements, subject to satisfaction of certain closing conditions, areexpected to occur during the second quarter of 2018.52Results of OperationsYears Ended December 31, 2017, 2016, and 2015Revenue (in thousands, except percentages) Year Ended December 31, Increase/(Decrease) Increase/(Decrease) PercentageIncrease/(Decrease) PercentageIncrease/(Decrease) 2017 2016 2015 2017 vs.2016 2016 vs.2015 2017 vs.2016 2016 vs.2015 Product sales $32,688 $55,354 $40,155 $(22,666) $15,199 (41)% 38%Royalty revenue 33,527 19,542 2,967 13,985 16,575 72% > 100%Non cash royalty revenue related to sale of future royalties 30,531 30,158 22,058 373 8,100 1% 37%License, collaboration and other revenue 210,965 60,382 165,604 150,583 (105,222) > 100% (64)%Total revenue $307,711 $165,436 $230,784 $142,275 $(65,348) 86% (28)% Our revenue is derived from our collaboration agreements, under which we may receive product sales revenue, royalties, license fees, milestone andother contingent payments and/or contract research payments. Revenue is recognized when there is persuasive evidence that an arrangement exists, deliveryhas occurred, the price is fixed or determinable, and collection is reasonably assured. The amount of upfront fees received under our license and collaborationagreements allocated to continuing obligations, such as manufacturing and supply commitments, is generally recognized ratably over our expectedperformance period under the arrangement. As a result, there may be significant variations in the timing of receipt of cash payments and our recognition ofrevenue. We make our best estimate of the period over which we expect to fulfill our performance obligations. Given the uncertainties in research anddevelopment collaborations, significant judgment is required by us to determine the performance periods.Product salesProduct sales include predominantly fixed price manufacturing and supply agreements with our collaboration partners and are the result of firmpurchase orders from those partners. The timing of shipments is based solely on the demand and requirements of our collaboration partners and is not ratablethroughout the year.Product sales decreased for the year ended December 31, 2017 compared to the year ended December 31, 2016 primarily due to decreased productdemand from our collaboration partner Ophthotech related to its drug candidate Fovista®. Product sales increased for the year ended December 31, 2016compared to the year ended December 31, 2015 primarily as a result of increased product demand from Ophthotech. In December 2016, Ophthotechannounced that two pivotal Phase 3 clinical trials for Fovista® failed to meet their primary endpoints. In the year ended December 31, 2017, we recognized$10.4 million of product sales to Ophthotech based on prior binding purchase commitments. In August 2017, Ophthotech announced that the third Fovista®Phase 3 trial also failed to meet its primary endpoint and, in October 2017, our agreement with Ophthotech was terminated. We expect product sales in 2018to decrease compared to 2017 primarily due to the termination of the Ophthotech agreement.Royalty revenueWe receive royalty revenue from certain of our collaboration partners based on their net sales of commercial products. Royalty revenue received incash increased for the years ended December 31, 2017 and 2016 compared to the years ended December 31, 2016 and 2015, respectively, due primarily to thecommercial launch by AstraZeneca of MOVANTIK® in the U.S. in March 2015 and MOVENTIG® in the EU in August 2015 and the launch ofADYNOVATE® by Baxalta in the U.S. in November 2015. We expect royalty revenue in 2018 will increase as compared to 2017 due to royalties we expectto receive as a result of sales growth of these partnered products.As part of its approval of MOVANTIK®, the FDA required AstraZeneca to perform a post-marketing, observational epidemiological study comparingMOVANTIK® to other treatments of OIC in patients with chronic, non-cancer pain. As a result, the royalty rate payable to us from net sales of MOVANTIK®in the U.S. by AstraZeneca can be reduced by up to two percentage points to fund 33% of the external costs incurred by AstraZeneca to fund such postapproval study, subject to a $35.0 million aggregate cap. As of December 31, 2017, our cumulative share of the post-approval study expenses has been $0.7million. Any costs incurred by AstraZeneca can only be recovered by the reduction of the royalty paid to us. In no case can amounts be recovered by thereduction of a contingent payment due from AstraZeneca to us or through a payment from us to AstraZeneca.53Non-cash royalty revenue related to sale of future royaltiesIn February 2012, we sold all of our rights to receive future royalty payments on CIMZIA® and MIRCERA®. As described in Note 7 to ourConsolidated Financial Statements, this royalty sale transaction has been recorded as a liability that amortizes over the estimated royalty payment period. Asa result of this liability accounting, even though the royalties from UCB and Roche are remitted directly to the purchaser of these royalty interests, we willcontinue to record revenue for these royalties. We expect non-cash royalties from net sales of CIMZIA® and MIRCERA® in 2018 to increase marginallycompared to 2017.License, collaboration and other revenueLicense, collaboration and other revenue includes the recognition of upfront payments, milestone and other contingent payments received inconnection with our license and collaboration agreements and certain research and development activities. The level of license, collaboration and otherrevenue depends in part upon the estimated amortization period of the upfront payments, the achievement of milestones and other contingent events, thecontinuation of existing collaborations, the amount of research and development work, and entering into new collaboration agreements, if any.License, collaboration and other revenue increased for the year ended December 31, 2017 compared to the year ended December 31, 2016 primarilydue to the recognition of $130.1 million of the $150.0 million upfront payment we received in September 2017 from our collaboration agreement with Lillyfor NKTR-358 as described in Note 10 to our Consolidated Financial Statements. In addition, in the three months ended December 31, 2017, we recognized$38.0 million related to the termination of our collaboration agreements with Bayer, Ophthotech, and Daiichi as described in Note 10 to our ConsolidatedFinancial Statements. These increases in 2017 were partially offset by the recognition of $28.0 million in March 2016 for our 40% share of the $70.0 millionsublicense payment received by AstraZeneca from Kirin.License, collaboration and other revenue decreased for the year ended December 31, 2016 compared to the year ended December 31, 2015 primarily asa result of the recognition in March 2015 of the $100.0 million milestone payment received from AstraZeneca as a result of the U.S. commercial launch ofMOVANTIK® and the $40.0 million milestone payment received from AstraZeneca in August 2015 as a result of the EU commercial launch of MOVENTIG®partially offset by the recognition in 2016 of a $28.0 million payment received from AstraZeneca described above.We currently expect, subject to our adoption of ASC 606 and completion of our determination of revenue to be recognized related to the BMSCollaboration Agreement executed in February 2018, that our license, collaboration and other revenue from existing collaboration agreements will increasein 2018 compared to 2017.The timing and future success of our drug development programs and those of our collaboration partners are subject to a number of risks anduncertainties. See “Part I, Item 1A — Risk Factors” for discussion of the risks associated with the complex nature of our collaboration agreements.Revenue by geography (in thousands)Revenue by geographic area is based on the locations of our partners. The following table sets forth revenue by geographic area: Year Ended December 31, 2017 2016 2015 United States $190,810 $39,147 $40,400 Europe 116,901 126,289 190,384 Total revenue $307,711 $165,436 $230,784 The increase in revenue attributable to the United States for the year ended December 31, 2017 compared to the year ended December 31, 2016 isprimarily attributable to the recognition of $130.1 million of the $150.0 million upfront payment we received in September 2017 from our collaborationagreement with Lilly for NKTR-358. The decrease in revenue attributable to European countries for the year ended December 31, 2016 compared to the yearended December 31, 2015 is primarily attributable to decreased milestone and other contingent payments from our existing European based collaborationpartners, including the recognition in 2015 of a total of $140.0 million payments from AstraZeneca in connection with its commercial launches ofMOVANTIK® described above. 54Cost of goods sold (in thousands, except percentages) Year Ended December 31, Increase/(Decrease)2017 vs. Increase/(Decrease)2016 vs. PercentageIncrease/(Decrease)2017 vs. PercentageIncrease/(Decrease)2016 vs. 2017 2016 2015 2016 2015 2016 2015 Cost of goods sold $30,547 $30,215 $34,102 $332 $(3,887) 1% (11)%Product gross profit 2,141 25,139 6,053 (22,998) 19,086 (91)%> 100%Product gross margin 7% 45% 15% As noted above, our strategy is to manufacture and supply polymer reagents to support our proprietary drug candidates or our third-party collaboratorswhere we have a strategic development and commercialization relationship or where we derive substantial economic benefit. We have elected to only enterinto and maintain those manufacturing relationships associated with long-term collaboration agreements which include multiple sources of revenue, whichwe view holistically and in aggregate. We have a predominantly fixed cost base associated with our manufacturing activities, which generally results insimilar total cost of goods sold amounts each year. As a result, our product gross profit and margin are significantly impacted by the mix and volume ofproducts sold in each period.Cost of goods sold during the year ended December 31, 2017 was consistent with the year ended December 31, 2016. Cost of goods sold decreasedduring the year ended December 31, 2016 compared to the year ended December 31, 2015 primarily due to the mix of product sales, which resulted indecreases to cost of goods sold even though product sales increased during the same period. The decrease in product gross profit and product gross margin during the year ended December 31, 2017 compared to the year ended December 31,2016 is primarily due to decreased product sales as well as a less favorable product mix in 2017 compared to 2016. In particular, we have a manufacturingarrangement with a partner that includes a fixed price which is less than the fully burdened manufacturing cost for the reagent, and we expect this situation tocontinue with this partner in future years. There were more shipments to this partner relative to shipments to other customers during the year ended December31, 2017 compared to the year ended December 31, 2016. The improvement in product gross profit and product gross margin during the year endedDecember 31, 2016 compared to the year ended December 31, 2015 is primarily due to a more favorable product mix. In particular, the increased demandfrom our collaboration partners in 2016 resulted in product sales where we have a relatively higher gross margin. This increased margin was partially offset bythe manufacturing arrangement mentioned above. In addition to product sales from reagent materials supplied to the partner where our sales are less than ourfully burdened manufacturing cost, we also receive royalty revenue from this collaboration. In the years ended December 31, 2017, 2016 and 2015, theroyalty revenue from this collaboration exceeded the related negative gross profit. We expect product gross margin to continue to fluctuate in future periods depending on the level and mix of manufacturing orders from our customers.We currently expect product gross margin to decrease in 2018 as compared to 2017 and gross margin may be negative in 2018 as a result of the anticipateddecrease in product sales described above.Research and development expense (in thousands, except percentages) Year Ended December 31, Increase/(Decrease)2017 vs. Increase/(Decrease)2016 vs. PercentageIncrease/(Decrease)2017 vs. PercentageIncrease/(Decrease)2016 vs. 2017 2016 2015 2016 2015 2016 2015 Research and development expense $268,461 $203,801 $182,787 $64,660 $21,014 32% 11% Research and development expense consists primarily of clinical study costs, direct costs of outside research, materials, supplies, licenses and fees aswell as personnel costs (including salaries, benefits, and stock-based compensation). Research and development expense also includes certain overheadallocations consisting of support and facilities-related costs. Where we perform research and development activities under a clinical joint developmentcollaboration, such as our collaboration with Bristol-Myers Squibb, we record the cost reimbursement from our partner as a reduction to research anddevelopment expense when reimbursement amounts are due to us under the agreement.Research and development expense increased during the year ended December 31, 2017 compared to the year ended December 31, 2016 and includesincreased costs for our clinical development of NKTR-214, NKTR-358, NKTR-262, and preclinical activities for NKTR-255. In addition, the increase inresearch and development expense during the year ended December 31, 2017 compared with the year ended December 31, 2016 includes increased costsrelated to personnel and outside services. Research and development55expense increased during the year ended December 31, 2016 compared to the year ended December 31, 2015 primarily due to costs incurred in our NKTR-214 clinical and NKTR-358 pre-clinical programs as well as increased headcount costs, partially offset by a decrease in our ONZEALDTM program costs.We utilize our employee and infrastructure resources across multiple development and research programs. The following table shows expensesincurred for clinical and regulatory services, clinical supplies, and preclinical study support provided by third parties as well as direct materials costs for eachof our drug candidates. The table also presents other costs and overhead consisting of personnel, facilities and other indirect costs (in thousands): Clinical Year Ended December 31, StudyStatus(1) 2017 2016 2015 NKTR-181 (mu-opioid analgesic molecule for chronic pain) Phase 3 $41,680 $46,783 $45,307 NKTR-214 (cytokine immunostimulatory therapy)(2) Phase 1/2 33,834 16,118 8,637 ONZEALDTM (topoisomerase I inhibitor-polymer conjugate) Phase 3 15,052 14,940 19,295 BAY41-6551 (Amikacin Inhale)(3) Phase 3 10,977 10,995 9,947 NKTR-358 Phase 1 10,607 5,695 132 NKTR-255 Pre-clinical 4,881 1,297 76 NKTR-262 Phase 1 4,837 11 — Other product candidates Various 3,500 2,358 5,917 Total third party and direct materials costs 125,368 98,197 89,311 Personnel, overhead and other costs 113,466 84,563 77,752 Stock-based compensation and depreciation 29,627 21,041 15,724 Research and development expense $268,461 $203,801 $182,787 (1)Clinical Study Status definitions are provided in the chart found in Part I, Item 1. Business.(2)The amount for the year ended December 31, 2017 includes $7.8 million of clinical study cost reimbursements from BMS under our collaboration. Noreimbursement amounts were recorded in 2016 and 2015.(3)We partnered this program with Bayer Healthcare LLC in August 2007. As part of the Novartis Pulmonary Asset Sale in 2008, we retained an exclusivelicense to this technology for the development and commercialization of this drug candidate. In November 2017, Bayer announced that its two Phase3 studies of Amikacin Inhale both failed to meet their primary and secondary endpoints and, in December 2017, Bayer terminated our collaboration todevelop Amikacin Inhale.We expect research and development expense to increase significantly in 2018 compared to 2017 primarily as a result of the development of NKTR-214 under the BMS Collaboration Agreement. In 2018, we plan to continue and expand a broad clinical development program for NKTR-214. Under theBMS Collaboration Agreement, we and BMS will jointly develop NKTR-214 in combination with BMS’s Opdivo® (nivolumab) and Opdivo® plus Yervoy®(ipilimumab), in more than 20 indications across nine tumor types, as well as potential combinations with other anti-cancer agents from BMS, us and thirdparties. In addition, we are collaborating with Lilly to develop NKTR-358 and are continuing its Phase 1 clinical development program in 2018. We haveinitiated start-up activities on our Phase 1/2 program for NKTR-262 and plan to enroll the initial patients in the second quarter of 2018. We plan to file anIND for NKTR-255 in 2019. The timing and amount of our future clinical investments will vary significantly based upon our evaluation of ongoing clinicalresults and the structure, timing, and scope of potential collaboration partnerships (if any) for these programs. We plan to file an NDA for NKTR-181 in thefirst half of 2018 and plan to pursue a collaboration to secure a development and commercialization partner to fund further development for NKTR-181through direct program funding, up-front payments, milestones, or a combination thereof. In addition, we expect non-cash stock-based compensation expenseto increase in 2018 due to the increase in our stock price.In addition to our drug candidates that we plan to evaluate in clinical development during 2018 and beyond, we believe it is vitally important tocontinue our substantial investment in a pipeline of new drug candidates to continue to build the value of our drug candidate pipeline and our business. Ourdiscovery research organization is identifying new drug candidates by applying our polymer conjugation technology platform to a wide range of moleculeclasses, including small molecules and large proteins, peptides and antibodies, across multiple therapeutic areas. We plan to continue to advance our mostpromising early research drug candidates into preclinical development with the objective to advance these early stage research programs to human clinicalstudies over the next several years.Our expenditures on current and future preclinical and clinical development programs are subject to numerous uncertainties in timing and cost tocompletion. In order to advance our drug candidates through clinical development, each drug candidate must be56tested in numerous preclinical safety, toxicology and efficacy studies. We then conduct clinical studies for our drug candidates that take several years tocomplete. The cost and time required to complete clinical trials may vary significantly over the life of a clinical development program as a result of a varietyof factors, including but not limited to: •the number of patients required for a given clinical study design; •the length of time required to enroll clinical study participants; •the number and location of sites included in the clinical studies; •the clinical study designs required by the health authorities (i.e. primary and secondary endpoints as well as the size of the study needed todemonstrate efficacy and safety outcomes); •the potential for changing standards of care for the target patient population; •the competition for patient recruitment from competitive drug candidates being studied in the same clinical setting; •the costs of producing supplies of the product candidates needed for clinical trials and regulatory submissions; •the safety and efficacy profile of the drug candidate; •the use of clinical research organizations to assist with the management of the trials; and •the costs and timing of, and the ability to secure, approvals from government health authorities.Furthermore, our strategy includes the potential of entering into collaborations with third parties to participate in the development andcommercialization of some of our drug candidates such as those collaborations that we have already completed for NKTR-214 and MOVANTIK®. In thesesituations, the clinical development program and process for a drug candidate and the estimated completion date will largely be under the control of thatthird party and not under our control. We cannot forecast with any degree of certainty which of our drug candidates will be subject to future collaborations orhow such arrangements would affect our development plans or capital requirements.The risks and uncertainties associated with our research and development projects are discussed more fully in Item 1A — Risk Factors. As a result ofthe uncertainties discussed above, we are unable to determine with any degree of certainty the duration and completion costs of our research anddevelopment projects, anticipated completion dates or when and to what extent we will receive cash inflows from a collaboration arrangement or thecommercialization of a drug candidate.General and administrative expense (in thousands, except percentages) Year Ended December 31, Increase/(Decrease)2017 vs. Increase/(Decrease)2016 vs. PercentageIncrease/(Decrease)2017 vs. PercentageIncrease/(Decrease)2016 vs. 2017 2016 2015 2016 2015 2016 2015 General and administrative expense $52,364 $44,275 $43,266 $8,089 $1,009 18% 2% General and administrative expense includes the cost of administrative staffing, business development, marketing, finance, and legal activities.General and administrative expense increased during the year ended December 31, 2017 compared with the year ended December 31, 2016 primarily due toincreased costs related to personnel, facilities and outside services. General and administrative expense increased marginally during the year ended December31, 2016 compared to the year ended December 31, 2015. In 2018, we expect general and administrative expenses to increase compared to 2017, includingan increase in non-cash stock-based compensation expense due to the increase in our stock price.Interest expense (in thousands, except percentages) Year Ended December 31, Increase/(Decrease)2017 vs. Increase/(Decrease)2016 vs. PercentageIncrease/(Decrease)2017 vs. PercentageIncrease/(Decrease)2016 vs. 2017 2016 2015 2016 2015 2016 2015 Interest expense $22,085 $22,468 $18,282 $(383) $4,186 (2)% 23%Non-cash interest expense on liability related to sale of future royalties $18,869 $19,712 $20,619 $(843) $(907) (4)% (4)% 57Interest expense for the year ended December 31, 2017 decreased marginally compared with the year ended December 31, 2016 due to decreasedinterest expense from our capital leases. Interest expense for the year ended December 31, 2016 increased compared to the year ended December 31, 2015 dueprimarily to our secured notes transaction completed in October 2015. As is further described in Note 5 to our Consolidated Financial Statements, on October5, 2015, we issued $250.0 million in aggregate principal amount of 7.75% senior secured notes due October 2020 and used a portion of the proceeds fromthese notes to redeem the $125.0 million in aggregate principal amount of 12.0% senior secured notes due July 2017. Interest on the 7.75% senior securednotes is calculated based on actual days outstanding over a 360-day year. We expect interest expense in 2018 to decrease marginally compared to 2017.Non-cash interest expense on the liability related to sale of future royalties for the years ended December 31, 2017 and 2016 decreased marginally ascompared to the years ended December 31, 2016 and 2015, respectively, due to the decrease in 2017 and 2016, respectively, of the average balance of therelated liability as that liability balance amortizes. On February 24, 2012, we sold all of our rights to receive future royalty payments on CIMZIA® andMIRCERA® in exchange for $124.0 million. As described in Note 7 to our Consolidated Financial Statements, this royalty sale transaction has been recordedas a liability that amortizes over the estimated royalty payment period as CIMZIA® and MIRCERA® royalties are remitted directly to the purchaser. Weimpute interest on the transaction and record interest expense at the effective interest rate, which we estimated to be approximately 17% from inception to2017. During the three month period ended December 31, 2017, as a result of increases in the forecasted sales of CIMZIA®, our estimate of the effectiveannual interest rate over the life of the agreement increased to approximately 17.6%, which results in a prospective interest rate of 21%. There are a numberof factors that could materially affect the estimated interest rate, in particular, the amount and timing of royalty payments from future net sales of CIMZIA®and MIRCERA®, and we will assess this estimate on a periodic basis. As a result, future interest rates could differ significantly and any such change ininterest rate will be adjusted prospectively. Unless we adjust our estimated interest rate, we expect non-cash interest expense on the liability related to sale offuture royalties for 2018 to increase marginally compared with 2017 as a result of the increase of the estimated prospective interest rate noted above.Impairment of equipment and other costs for terminated program As described in Note 4 to our Consolidated Financial Statements, in December 2017, Bayer terminated our collaboration to develop AmikacinInhale. As a result of the termination of the program, in the year ended December 31, 2017, we wrote off program-specific manufacturing equipment with anet book value of $15.1 million. In addition, in the year ended December 31, 2017, we incurred approximately $0.9 million of other program terminationcosts related to our manufacturing obligations.Loss on Extinguishment of DebtAs a result of the secured note financing transaction in October 2015 discussed above, in the year ended December 31, 2015, we recognized a $14.1million loss on extinguishment of our 12% notes, which consists of a $11.3 million redemption premium payment, $1.2 million of incremental interest paidat redemption to the 12% note holders and the write-off of $1.6 million of unamortized issuance costs on the 12% notes.Liquidity and Capital ResourcesWe have financed our operations primarily through revenue from product sales, royalties and strategic collaboration agreements, as well as publicoffering and private placements of debt and equity securities. At December 31, 2017, we had approximately $353.2 million in cash and investments inmarketable securities and had debt of $250.0 million in principal of senior secured notes due in October 2020. We estimate that we have working capital to fund our current business plans through at least March 1, 2019. We expect the clinical development ofour proprietary drug candidates including NKTR-214, NKTR-358, NKTR-262, NKTR-255, NKTR-181, and ONZEALDTM will continue to require significantinvestment in order to continue to advance in clinical development with the objective of entering into a collaboration partnership or obtaining regulatoryapproval. In the past, we have received a number of significant payments from collaboration agreements and other significant transactions. In July 2017, weentered into a collaboration agreement for NKTR-358 with Lilly, under which we received a $150.0 million upfront payment. Subject to the closing of theBMS Collaboration Agreement and the Purchase Agreement, BMS will pay us a non-refundable upfront cash payment of $1.0 billion and purchase $850.0million of shares of our common stock at a purchase price of $102.60 per share. We have no credit facility or any other sources of committed capital. In thefuture, we expect to receive increasing royalties from commercial sales of products such as MOVANTIK®, MOVENTIG® and ADYNOVATE® as theycontinue to increase sales. We also expect potential substantial payments from future collaboration transactions if drug candidates in our pipeline achievepositive clinical or regulatory outcomes. Our current business plan is also subject to significant uncertainties and risks as a result of, among other factors,clinical and regulatory outcomes for NKTR-214, the sales levels of products for which we are entitled to royalties such as MOVANTIK®, MOVENTIG® and58ADYNOVATE®, clinical program outcomes, whether, when and on what terms we are able to enter into new collaboration transactions, expenses being higherthan anticipated, unplanned expenses, cash receipts being lower than anticipated, and the need to satisfy contingent liabilities, including litigation mattersand indemnification obligations.The availability and terms of various financing alternatives substantially depend on many factors including the success or failure of drug developmentprograms in our pipeline, including NKTR-214, NKTR-181, NKTR-358, NKTR-262, and NKTR-255 as well as other early stage development programs. Theavailability and terms of financing alternatives and any future significant payments from existing or new collaborations depend on the positive outcome ofongoing or planned clinical studies, whether we or our partners are successful in obtaining regulatory authority approvals in major markets, and if approved,the commercial success of these drugs, as well as general capital market conditions. We will pursue various financing alternatives as needed to continue tofund our research and development activities and to fund the expansion of our business as appropriate.Due to the potential for adverse developments in the credit markets, we may experience reduced liquidity with respect to some of our investments inmarketable securities. These investments are generally held to maturity, which, in accordance with our investment policy, is less than two years. However, ifthe need arises to liquidate such securities before maturity, we may experience losses on liquidation. At December 31, 2017, the average time to maturity ofthe investments held in our portfolio was approximately eight months. To date we have not experienced any liquidity issues with respect to these securities.We believe that, even allowing for potential liquidity issues with respect to these securities, our remaining cash and investments in marketable securities willbe sufficient to meet our anticipated cash needs for at least the next twelve months.Cash flows from operating activitiesCash flows used in operating activities for the year ended December 31, 2017 totaled $80.4 million, which includes $225.3 million of net operatingcash uses as well as $19.6 million for interest payments on our senior secured notes and the $12.5 million termination payment to Daiichi in December 2017related to our ONZEALDTM collaboration arrangement in Europe, partially offset by the receipt of $150.0 million upfront payment in September 2017 fromour collaboration agreement with Lilly for NKTR-358, the receipt of $12.0 million in November 2017 related to our collaboration agreement with Baxaltaand the receipt of $15.0 million in December 2017 resulting from a settlement agreement related to our collaboration agreement with MAP Pharmaceuticals,Inc.Cash flows used in operating activities for the year ended December 31, 2016 totaled $117.0 million, which includes $158.3 million of net operatingcash uses as well as $19.7 million for interest payments on our senior secured notes, partially offset by the receipt of $31.0 million of payments fromAstraZeneca related to its sub-license to Kirin, the receipt of a $20.0 million upfront payment in August 2016 from Daiichi related to our ONZEALDTMcollaboration arrangement in Europe, as well as the receipt of a $10.0 million milestone in January 2016 from our Baxalta collaboration agreement, whichwas recorded in accounts receivable in our Consolidated Balance Sheet at December 31, 2015.Cash flows used in operating activities for the year ended December 31, 2015 totaled $73.1 million, which includes $196.3 million of net operatingcash uses as well as $18.8 million for interest payments on our senior secured notes, partially offset by the receipt of $142.0 million of milestones and othercontingent payments from collaboration agreements. We expect that cash flows used in operating activities, excluding upfront, milestone and other contingent payments received, if any, will increase inthe full year of 2018 compared to 2017 primarily as a result of increased research and development expenses.Cash flows from investing activitiesWe paid $9.7 million, $6.4 million, and $11.2 million to purchase property, plant and equipment in the years ended December 31, 2017, 2016, and2015, respectively. We expect our capital expenditures in 2018 to increase compared to 2017.Restricted cash of $25.0 million was required to be maintained in a separate account until July 1, 2015 under the terms of our 12% senior securednotes due July 2017. This restriction expired on July 1, 2015 and the restricted funds were returned to us.Cash flows from financing activitiesOn October 24, 2016, we completed the issuance and sale of 14,950,000 shares of our common stock in an underwritten public offering with totalproceeds of approximately $189.7 million after deducting the underwriting commissions and discounts of approximately $12.1 million. In addition, weincurred approximately $0.4 million in legal and accounting fees, filing fees, and other costs in connection with this offering.59On October 5, 2015, we issued $250.0 million in aggregate principal amount of 7.75% senior secured notes due 2020. The notes bear interest at a rateof 7.75% per annum payable in cash quarterly in arrears on January 15, April 15, July 15, and October 15 of each year. In connection with the issuance of thenotes, we paid $8.7 million of transaction and facility fees paid to the purchasers of the notes and other direct costs, which were capitalized as a debt discountand issuance costs and are recorded as a reduction to the note payable liability. On October 5, 2015, we used a portion of the proceeds from these notes toredeem the $125.0 million in aggregate principal amount of 12.0% senior secured notes due in 2017. In addition, on October 5, 2015, we paid accruedinterest of $3.3 million and made a $12.5 million redemption payment, which includes $1.2 million additional interest paid to the 12% note holders atredemption. We received proceeds from issuance of common stock related to our employee option and stock purchase plans of $59.5 million, $20.3 million, and$32.2 million in the years ended December 31, 2017, 2016, and 2015, respectively.Contractual Obligations (in thousands) Payments Due by Period Total <=1 Yr2018 2-3 Yrs2019-2020 4-5 Yrs2021-2022 2023+ Obligations(1) 7.75% senior secured notes due October 2020, including interest $308,394 $19,644 $288,750 $— $— Operating leases(2) 106,250 5,965 11,395 17,763 71,127 Purchase commitments(3) 16,456 16,456 — — — $431,100 $42,065 $300,145 $17,763 $71,127 (1)The above table does not include certain commitments and contingencies which are discussed in Note 8 of Item 8. Financial Statements andSupplementary Data.(2)These amounts primarily result from our Mission Bay Facility lease, which expires in 2030. The lease is discussed in Note 6 of Item 8. FinancialStatements and Supplementary Data.(3)Substantially all of this amount was subject to open purchase orders as of December 31, 2017 that were issued under existing contracts. This amountdoes not represent minimum contract termination liabilities for our existing contracts.Off Balance Sheet ArrangementsWe do not utilize off-balance sheet financing arrangements as a source of liquidity or financing.Critical Accounting PoliciesThe preparation and presentation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities atthe date of the financial statements and the reported amounts of revenues and expenses during the reporting period.We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the resultsof which form our basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources, and evaluateour estimates on an ongoing basis. Actual results may differ materially from those estimates under different assumptions or conditions. We have determinedthat for the periods in this report, the following accounting policies and estimates are critical in understanding our financial condition and the results of ouroperations.Revenue RecognitionLicense, collaboration and other research revenue is recognized based on the facts and circumstances of each contractual agreement and includesamortization of upfront fees. We defer income under contractual agreements when we have further obligations that indicate that a separate earnings processhas not been completed. The amount of upfront fees and other payments received under our license and collaboration agreements that are allocated to ourcontinuing obligations are generally recognized ratably over our expected performance period under each arrangement. Management makes its best estimateof the period over which we expect to fulfill our performance obligations, which may include technology transfer assistance, research and developmentactivities, or manufacturing activities through the completion of clinical development or the termination or expiration of the collaboration agreement. Giventhe complexities and uncertainties of collaboration arrangements, significant judgment is required by management60to determine the duration of the performance period. Our original estimates are periodically evaluated to determine if circumstances have caused theestimates to change and if so, amortization of revenue is adjusted prospectively.In addition, at the inception of each new multiple-element arrangement or the material modification of an existing multiple-element arrangement, weallocate arrangement consideration to all units of accounting based on the relative selling price method, generally based on our best estimate of selling price(ESP). The objective of ESP is to determine the price at which we would transact a sale if the product or service was sold on a stand-alone basis. We determineESP for the elements in our collaboration arrangements by considering multiple factors including, but not limited to, technical complexity of theperformance obligation and similarity of elements to those performed under previous arrangements. Since we apply significant judgment in arriving at theESPs, any material changes would significantly affect the allocation of the total consideration to the different elements of a multiple element arrangement.Clinical Trial AccrualsWe record accruals for the estimated costs of our clinical study activities performed by third parties. The financial terms of these agreements aresubject to negotiation, vary from contract to contract and may result in uneven payment flows to our vendors. Payments under the contracts depend on factorssuch as the achievement of certain events, successful enrollment of patients and completion of certain clinical trial activities. We generally accrue costsassociated with the start-up and reporting phases of the clinical studies ratably over the estimated duration of the start-up and reporting phases. We generallyaccrue costs associated with the treatment phase of clinical studies based on the total estimated cost of the treatment phase on a per patient basis and weexpense the per patient cost ratably over the estimated patient treatment period based on patient enrollment in the studies. In specific circumstances, such asfor certain time-based costs, we recognize clinical trial expenses using a methodology that we consider to be more reflective of the timing of costs incurred.Advance payments for goods or services that will be used or rendered for future research and development activities are capitalized as prepaid expenses andrecognized as expense as the related goods are delivered or the related services are performed. We base our estimates on the best information available at thetime. However, additional information may become available to us which may allow us to make a more accurate estimate in future periods. In this event, wemay be required to record adjustments to research and development expenses in future periods when the actual level of activity becomes more certain. Suchincreases or decreases in cost are generally considered to be changes in estimates and will be reflected in research and development expenses in the periodidentified.Stock-Based CompensationWe use the Black-Scholes option pricing model for each respective grant to determine the estimated fair value of stock options on the date of grant(grant date fair value). We expense the estimated fair value of each award ratably over the expected service period of the award and recognize forfeitures asthey occur. The Black-Scholes option pricing model requires the input of highly subjective assumptions. These variables include, but are not limited to, ourstock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. Because our employee stock optionshave characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect fairvalue estimates, in management’s opinion, the existing models may not provide a reliable single measure of the fair value of our employee stock options.Management continually assesses the assumptions and methodologies used to calculate the estimated fair value of stock-based compensation. In addition, forawards that vest upon the achievement of performance milestones, we estimate whether the awards will vest and the vesting period based on our evaluation ofthe probability of achievement of each respective milestone and the related estimated date of achievement. Circumstances may change and additional datamay become available over time, which could result in changes to the assumptions and methodologies, and which could materially impact our fair valuedetermination, as well as our stock-based compensation expense.Non-cash Interest Expense on Liability Related to Sale of Future RoyaltiesIn February 2012, we sold all of our rights to receive future royalty payments from sales of the CIMZIA® and MIRCERA® drug products marketed byUCB and Roche, respectively. Although we are required to make payments to the purchaser (RPI) only in certain situations, including the event of our breachof a representation, warranty or covenant in the Purchase and Sale Agreement that gives rise to a liability in accordance with the terms and conditions of suchagreement, this royalty sale transaction was recorded as a liability (Royalty Obligation) that we will amortize using the interest method over the estimated lifeof the Purchase and Sale Agreement. As a result, we impute interest on the transaction and record interest expense at the estimated interest rate. Our estimateof the interest rate under the agreement is based on the amount of royalty payments to be received by RPI over the life of the arrangement and payments weare required to make to RPI under the agreement. We will periodically assess the expected royalty payments to RPI from UCB and Roche using acombination of historical results and forecasts from market data sources. To the extent such payments are greater or less than our initial estimates or thetiming of such payments is materially different than our original estimates, we will prospectively adjust the amortization of the Royalty Obligation. There area number of factors that could materially affect the amount and timing of royalty payments from CIMZIA® and MIRCERA®, most of which are not within ourcontrol. Such factors include, but are not limited to, changing standards of care, the introduction of competing products, manufacturing or other delays,biosimilar competition, intellectual property matters, adverse events that result in health authority imposed restrictions on the use of the drug products,significant changes in foreign exchange rates as the royalties remitted to RPI are made in U.S. dollars (USD)61while significant portions of the underlying sales of CIMZIA® and MIRCERA® are made in currencies other than USD, and other events or circumstancesthat result in reduced royalty payments from CIMZIA® and MIRCERA®, all of which would result in a reduction of non-cash royalty revenue and non-cashinterest expense over the life of the Royalty Obligation. Conversely, if sales of CIMZIA® and MIRCERA® are higher than expected, non-cash royaltyrevenue and non-cash interest expense would be greater over the term of the Royalty Obligation. During the three month period ended December 31, 2017, asa result of increases in the forecasted sales of CIMZIA®, our estimate of the effective annual interest rate over the life of the agreement increased from 17% toapproximately 17.6%, which results in a prospective interest rate of 21%. If we had determined that the interest rate used in 2017 should have been onepercentage point higher than our quarterly estimates during 2017, the non-cash interest expense recognized in the year ended December 31, 2017 and theRoyalty Obligation balance as of December 31, 2017 would have increased by $1.1 million. If we had determined that the interest rate used in 2017 shouldhave been 21% during 2017, the non-cash interest expense recognized in the year ended December 31, 2017 and the Royalty Obligation balance as ofDecember 31, 2017 would have increased by $3.5 million.Recent Accounting PronouncementsIn May 2014, the FASB issued guidance codified in Accounting Standards Codification (ASC) 606, Revenue Recognition — Revenue from Contractswith Customers, which supersedes the guidance in ASC 605, Revenue Recognition, and is effective for public companies for annual and interim periodsbeginning after December 15, 2017. The FASB has issued numerous updates that provide clarification on a number of specific issues as well as requiringadditional disclosures. We plan to adopt the standard in the first quarter of 2018 using the modified retrospective method.The new guidance requires the application of a five-step model to determine the amount and timing of revenue to be recognized and requires that werecognize revenue in a manner that reasonably reflects the delivery of our goods or services to customers in return for expected consideration. To achieve thiscore principle, the guidance provides the following steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in thecontract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when(or as) the entity satisfies a performance obligation. Under ASC 606, companies may need to use more judgment and make more estimates than under ASC605 in the application of this five-step process.We are continuing to assess the impact of the new guidance on our accounting policies and procedures and are evaluating the new requirements asapplied to existing collaboration agreements, both in terms of the cumulative adjustment to opening accumulated deficit and our subsequent recognition ofrevenue. Since each collaboration agreement is unique, we will separately assess each agreement (see Note 10 for a discussion of our existing collaborationagreements) under the new standard. We anticipate that the adoption of ASC 606 will have the following impact to our revenue recognition for acollaboration agreement:(i) Changes in revenue recognition for distinct licenses of functional intellectual property may result in a timing difference of revenue recognitionbetween the current literature and ASC 606. For certain of our arrangements, the value associated with the licenses and certain other deliverables havebeen assessed as one unit of accounting and recognized over a period of time in which services are rendered or made available to our customerpursuant to revenue recognition guidance in effect for such arrangements at the time such arrangements commenced. For certain other arrangements,under current ASC 605 guidance, we identified the value of the license as a separate unit of accounting and recognize revenue upon issuance of thelicense. Under ASC 606, we may continue to recognize revenue for such licenses upon delivery of the license.(ii) For other consideration, including milestone payments or contingent payments from our collaboration partners, under our current accountingpolicy, we recognize such payments as revenue in the period that the payment-triggering event occurred or is achieved. The new revenue standard,however, may require us to recognize these payments before the payment-triggering event is completely achieved, subject to management’sassessment of whether it is probable that the triggering event will be achieved and that a significant reversal in the amount of cumulative revenuerecognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.(iii) We will recognize revenue for sales-based royalties and commercial sales-based milestones in the period of the related sale based on estimates,rather than recording them as reported by the customer.We currently estimate that, upon adoption on January 1, 2018, we will record an adjustment to decrease our accumulated deficit by approximately$11.0 million to $13.0 million for amounts that would be recognized as of December 31, 2017 under ASC 606, but are not recognized under the current ASC605 guidance. This estimated adjustment primarily consists of approximately $11.0 million for the accrual of royalties due to us related to net sales in thethree months ended December 31, 2017 that we would have recognized in 2018 under current guidance. The estimated adjustment also includes up toapproximately $2.0 million related to the recognition of the unamortized portion of upfront payments under ASC 606 that are required to be deferred as ofDecember 31, 2017 under current guidance. We will finalize our assessments in the first quarter of 2018 as we adopt ASC 606.62In February 2016, the FASB issued guidance to amend a number of aspects of lease accounting, including requiring lessees to recognize almost allleases with a term greater than one year as a right-of-use asset and corresponding liability, measured at the present value of the lease payments. The guidancewill become effective for us beginning in the first quarter of 2019 and is required to be adopted using a modified retrospective approach. Early adoption ispermitted. We are currently evaluating the impact of the adoption of this standard. Item 7A.Quantitative and Qualitative Disclosures About Market RiskInterest Rate and Market RiskThe primary objective of our investment activities is to preserve principal while at the same time maximizing yields without significantly increasingrisk. To achieve this objective, we invest in liquid, high quality debt securities. Our investments in debt securities are subject to interest rate risk. Tominimize the exposure due to an adverse shift in interest rates, we invest in short-term securities and maintain a weighted average maturity of one year or less.A hypothetical 50 basis point increase in interest rates would result in an approximate $1.1 million decrease, less than 1%, in the fair value of ouravailable-for-sale securities at December 31, 2017. This potential change is based on sensitivity analyses performed on our investment securities atDecember 31, 2017. Actual results may differ materially. The same hypothetical 50 basis point increase in interest rates would have resulted in anapproximate $0.8 million decrease, less than 1%, in the fair value of our available-for-sale securities at December 31, 2016.As of December 31, 2017, we held $347.3 million of available-for-sale investments, excluding money market funds, with an average time to maturityof eight months. To date we have not experienced any liquidity issues with respect to these securities, but should such issues arise, we may be required tohold some, or all, of these securities until maturity. We believe that, even allowing for potential liquidity issues with respect to these securities, our remainingcash, cash equivalents, and investments in marketable securities will be sufficient to meet our anticipated cash needs for at least the next twelve months.Based on our available cash and our expected operating cash requirements, we currently do not intend to sell these securities prior to maturity and it is morelikely than not that we will not be required to sell these securities before we recover the amortized cost basis. Accordingly, we believe there are no other-than-temporary impairments on these securities and have not recorded any provisions for impairment.Foreign Currency RiskThe majority of our revenue, expense, and capital purchasing activities are transacted in U.S. dollars. However, since a portion of our operationsconsists of research and development activities outside the United States, we have entered into transactions in other currencies, primarily the Indian Rupee,and we therefore are subject to foreign exchange risk.Our international operations are subject to risks typical of international operations, including, but not limited to, differing economic conditions,changes in political climate, differing tax structures, other regulations and restrictions, and foreign exchange rate volatility. We do not utilize derivativefinancial instruments to manage our exchange rate risks.63Item 8.Financial Statements and Supplementary DataNEKTAR THERAPEUTICSINDEX TO CONSOLIDATED FINANCIAL STATEMENTS PageReports of Independent Registered Public Accounting Firm65Consolidated Balance Sheets at December 31, 2017 and 201667Consolidated Statements of Operations for each of the three years in the period ended December 31, 201768Consolidated Statements of Comprehensive Loss for each of the three years in the period ended December 31, 201769Consolidated Statements of Stockholders’ Equity for each of the three years in the period ended December 31, 201770Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 201771Notes to Consolidated Financial Statements7264Report of Independent Registered Public Accounting FirmTo the Stockholders and the Board of Directors of Nektar TherapeuticsOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Nektar Therapeutics (the “Company”) as of December 31, 2017 and 2016, the relatedconsolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended December 31,2017, and the related notes. In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Companyat December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, inconformity with U.S. generally accepted accounting principles.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’sinternal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control-Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 1, 2018 expressed an unqualifiedopinion thereon.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financialstatements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Companyin accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing proceduresto assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also includedevaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financialstatements. We believe that our audits provide a reasonable basis for our opinion./s/ Ernst & Young LLP We have served as the Company’s auditor since 1993.Redwood City, CaliforniaMarch 1, 201865Report of Independent Registered Public Accounting FirmTo the Stockholders and the Board of Directors of Nektar TherapeuticsOpinion on Internal Control over Financial ReportingWe have audited Nektar Therapeutics’ internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In ouropinion, Nektar Therapeutics (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,based on the COSO criteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidatedbalance sheets of the Company as of December 31, 2017 and 2016, the related consolidated statements of operations, comprehensive loss, stockholders’equity and cash flows for each of the three years in the period ended December 31, 2017, and the related notes and our report dated March 1, 2018 expressedan unqualified opinion thereon.Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness ofinternal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Ourresponsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firmregistered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and theapplicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether effective internal control over financial reporting was maintained in all material respects.Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing andevaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considerednecessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.Definition and Limitations of Internal Control Over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate./s/ Ernst & Young LLP Redwood City, CaliforniaMarch 1, 2018 66NEKTAR THERAPEUTICSCONSOLIDATED BALANCE SHEETS(In thousands, except par value information) December 31, 2017 2016 ASSETS Current assets: Cash and cash equivalents $4,762 $59,640 Short-term investments 291,370 329,462 Accounts receivable, net of allowance of nil at December 31, 2017 and 2016 5,014 15,678 Inventory 10,726 11,109 Other current assets 14,948 10,063 Total current assets 326,820 425,952 Long-term investments 57,088 — Property, plant and equipment, net 47,463 65,601 Goodwill 76,501 76,501 Other assets 994 817 Total assets $508,866 $568,871 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $4,782 $2,816 Accrued compensation 8,263 18,280 Accrued clinical trial expenses 9,461 7,958 Other accrued expenses 10,064 4,711 Interest payable 4,198 4,198 Liability related to refundable upfront payment — 12,500 Deferred revenue, current portion 18,949 14,352 Other current liabilities 446 7,407 Total current liabilities 56,163 72,222 Senior secured notes, net 245,207 243,464 Liability related to the sale of future royalties, net 94,655 105,950 Deferred revenue, less current portion 19,021 51,887 Other long-term liabilities 5,992 7,223 Total liabilities 421,038 480,746 Commitments and contingencies Stockholders’ equity: Preferred stock, $0.0001 par value; 10,000 shares authorized; no shares designated, issued or outstanding at December 31, 2017 or 2016 — — Common stock, $0.0001 par value; 300,000 shares authorized; 159,524 shares and 153,212 shares issued and outstanding at December 31, 2017 and 2016, respectively 15 15 Capital in excess of par value 2,207,865 2,111,483 Accumulated other comprehensive loss (2,111) (2,363)Accumulated deficit (2,117,941) (2,021,010)Total stockholders’ equity 87,828 88,125 Total liabilities and stockholders’ equity $508,866 $568,871 The accompanying notes are an integral part of these consolidated financial statements. 67NEKTAR THERAPEUTICSCONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per share information) Year Ended December 31, 2017 2016 2015 Revenue: Product sales $32,688 $55,354 $40,155 Royalty revenue 33,527 19,542 2,967 Non-cash royalty revenue related to sale of future royalties 30,531 30,158 22,058 License, collaboration and other revenue 210,965 60,382 165,604 Total revenue 307,711 165,436 230,784 Operating costs and expenses: Cost of goods sold 30,547 30,215 34,102 Research and development 268,461 203,801 182,787 General and administrative 52,364 44,275 43,266 Impairment of equipment and other costs for terminated program 15,981 — — Total operating costs and expenses 367,353 278,291 260,155 Loss from operations (59,642) (112,855) (29,371)Non-operating income (expense): Interest expense (22,085) (22,468) (18,282)Non-cash interest expense on liability related to sale of future royalties (18,869) (19,712) (20,619)Loss on extinguishment of debt — — (14,079)Interest income and other income (expense), net 4,520 2,387 1,680 Total non-operating expense, net (36,434) (39,793) (51,300)Loss before provision for income taxes (96,076) (152,648) (80,671)Provision for income taxes 616 876 506 Net loss $(96,692) $(153,524) $(81,177)Basic and diluted net loss per share $(0.62) $(1.10) $(0.61)Weighted average shares outstanding used in computing basic and diluted net loss per share 155,953 139,596 132,458 The accompanying notes are an integral part of these consolidated financial statements. 68NEKTAR THERAPEUTICSCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS(In thousands) Year Ended December 31, 2017 2016 2015 Net loss $(96,692) $(153,524) $(81,177)Other comprehensive income (loss): Net unrealized gain (loss) on available-for-sale investments, net of tax (533) 79 (226)Net foreign currency translation gain (loss) 785 (272) (377)Other comprehensive income (loss), net of tax 252 (193) (603)Comprehensive loss $(96,440) $(153,717) $(81,780) The accompanying notes are an integral part of these consolidated financial statements. 69NEKTAR THERAPEUTICSCONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY(In thousands) CommonShares ParValue Capital inExcess ofPar Value AccumulatedOtherComprehensiveIncome/(Loss) AccumulatedDeficit TotalStockholders’Equity Balance at December 31, 2014 131,216 $13 $1,824,195 $(1,567) $(1,786,309) $36,332 Shares issued under equity compensation plans 4,073 — 32,208 — — 32,208 Stock-based compensation — — 19,669 — — 19,669 Other comprehensive loss — — — (603) — (603)Net loss — — — — (81,177) (81,177)Balance at December 31, 2015 135,289 13 1,876,072 (2,170) (1,867,486) 6,429 Sale of common stock, net of issuance costs of $439 14,950 2 189,274 — — 189,276 Shares issued under equity compensation plans 2,973 — 20,287 — — 20,287 Stock-based compensation — — 25,850 — — 25,850 Other comprehensive loss — — — (193) — (193)Net loss — — — — (153,524) (153,524)Balance at December 31, 2016 153,212 15 2,111,483 (2,363) (2,021,010) 88,125 Shares issued under equity compensation plans 6,312 — 59,528 — — 59,528 Stock-based compensation — — 36,615 — — 36,615 Other comprehensive loss — — 239 252 (239) 252 Net loss — — — — (96,692) (96,692)Balance at December 31, 2017 159,524 $15 $2,207,865 $(2,111) $(2,117,941) $87,828 The accompanying notes are an integral part of these consolidated financial statements. 70NEKTAR THERAPEUTICSCONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands) Year Ended December 31, 2017 2016 2015 Cash flows from operating activities: Net loss $(96,692) $(153,524) $(81,177)Adjustments to reconcile net loss to net cash used in operating activities: Non-cash royalty revenue related to sale of future royalties (30,531) (30,158) (22,058)Non-cash interest expense on liability related to sale of future royalties 18,869 19,712 20,619 Stock-based compensation 36,615 25,850 19,669 Depreciation and amortization 14,741 15,351 12,855 Loss from redemption premium and incremental interest on 12% senior secured notes — — 12,500 Write-off of deferred financing costs on 12% senior secured notes — — 1,579 Impairment of equipment from terminated program 15,081 — — Other non-cash transactions (881) (2,185) (2,365)Changes in operating assets and liabilities: Accounts receivable, net 10,664 4,269 (16,340)Inventory 383 237 1,606 Other assets (4,800) (312) (825)Accounts payable 2,074 518 (412)Accrued compensation (10,017) 12,282 249 Accrued clinical trial expenses 1,503 (262) 512 Other accrued expenses 5,774 191 (2,278)Interest payable — — (2,719)Liability related to refundable upfront payment (12,500) 12,500 — Deferred revenue (28,269) (17,615) (17,530)Other liabilities (2,428) (3,878) 3,032 Net cash used in operating activities (80,414) (117,024) (73,083)Cash flows from investing activities: Purchases of investments (404,425) (334,659) (297,608)Maturities of investments 347,743 253,682 226,923 Sales of investments 37,549 4,969 42,544 Release of restricted cash — — 25,000 Purchases of property, plant and equipment (9,676) (6,392) (11,195)Net cash used in investing activities (28,809) (82,400) (14,336)Cash flows from financing activities: Payment of capital lease obligations (5,131) (5,945) (5,187)Proceeds from shares issued under equity compensation plans 59,522 20,287 32,208 Issuance of common stock, net of issuance costs — 189,276 — Proceeds from issuance of 7.75% senior secured notes, net of issuance costs — — 241,262 Repayment of 12% senior secured notes — — (125,000)Payment of redemption premium and incremental interest on 12% senior secured notes — — (12,500)Net cash provided by financing activities 54,391 203,618 130,783 Effect of exchange rates on cash and cash equivalents (46) (124) (159)Net increase (decrease) in cash and cash equivalents (54,878) 4,070 43,205 Cash and cash equivalents at beginning of year 59,640 55,570 12,365 Cash and cash equivalents at end of year $4,762 $59,640 $55,570 Supplemental disclosure of cash flow information: Cash paid for interest $20,116 $20,589 $20,225 Cash paid for income taxes $556 $757 $860The accompanying notes are an integral part of these consolidated financial statements.71NEKTAR THERAPEUTICSNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017 Note 1 — Organization and Summary of Significant Accounting PoliciesOrganizationWe are a research-based biopharmaceutical company headquartered in San Francisco, California and incorporated in Delaware. We are developing apipeline of drug candidates that utilize our advanced polymer conjugate technology platforms, which are designed to enable the development of newmolecular entities that target known mechanisms of action. Our research and development pipeline of new investigational drugs includes treatments forcancer, autoimmune disease and chronic pain.Our research and development activities have required significant ongoing investment to date and are expected to continue to require significantinvestment. As a result, we expect to continue to incur substantial losses and negative cash flows from operations in the future. We have financed ouroperations primarily through cash generated from licensing, collaboration and manufacturing agreements and financing transactions. At December 31, 2017,we had approximately $353.2 million in cash and investments in marketable securities and had debt of $250.0 million in principal of senior secured notesdue in October 2020. Basis of Presentation, Principles of Consolidation and Use of EstimatesOur consolidated financial statements include the financial position, results of operations and cash flows of our wholly-owned subsidiaries: NektarTherapeutics (India) Private Limited and Nektar Therapeutics UK Limited. All intercompany accounts and transactions have been eliminated inconsolidation.Our Consolidated Financial Statements are denominated in U.S. dollars. Accordingly, changes in exchange rates between the applicable foreigncurrency and the U.S. dollar will affect the translation of each foreign subsidiary’s financial results into U.S. dollars for purposes of reporting our consolidatedfinancial results. Translation gains and losses are included in accumulated other comprehensive income (loss) in the stockholders’ equity section of theConsolidated Balance Sheets. To date, such cumulative translation adjustments have not been significant to our consolidated financial position. Aggregategross foreign currency transaction gains (losses) recorded in operations for the years ended December 31, 2017, 2016, and 2015 were not significant.The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires managementto make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date ofthe consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Accounting estimates and assumptionsare inherently uncertain. Actual results could differ materially from those estimates and assumptions. Our estimates include those related to estimated sellingprices of deliverables in collaboration agreements, estimated periods of performance, the net realizable value of inventory, the impairment of investments, theimpairment of goodwill and long-lived assets, contingencies, accrued clinical trial expenses, estimated non-cash royalty revenue and non-cash interestexpense from our liability related to our sale of future royalties, stock-based compensation, and ongoing litigation, among other estimates. We base ourestimates on historical experience and on other assumptions that management believes are reasonable under the circumstances. These estimates form the basisfor making judgments about the carrying values of assets and liabilities when these values are not readily apparent from other sources. As appropriate,estimates are assessed each period and updated to reflect current information and any changes in estimates will generally be reflected in the period firstidentified.ReclassificationsCertain items previously reported in specific financial statement captions have been reclassified to conform to the current period presentation,including as a result of the adoption of new accounting guidance related to the classification of deferred tax assets described below. Such reclassifications donot materially impact previously reported revenue, operating loss, net loss, total assets, liabilities or stockholders’ equity.Cash, Cash Equivalents, and Investments, and Fair Value of Financial InstrumentsWe consider all investments in marketable securities with an original maturity of three months or less when purchased to be cash equivalents.Investments in securities with remaining maturities of less than one year, or where our intent is to use the investments to fund current operations or to makethem available for current operations, are classified as short-term investments. Investments in securities with remaining maturities of over one year areclassified as long-term investments.72Investments are designated as available-for-sale and are carried at fair value, with unrealized gains and losses reported in stockholders’ equity asaccumulated other comprehensive income (loss). The disclosed fair value related to our cash equivalents and investments is based on market prices from avariety of industry standard data providers and generally represent quoted prices for similar assets in active markets or have been derived from observablemarket data.Interest and dividends on securities classified as available-for-sale, as well as amortization of premiums and accretion of discounts to maturity, areincluded in interest income. Realized gains and losses and declines in value of available-for-sale securities judged to be other-than-temporary, if any, areincluded in other income (expense). The cost of securities sold is based on the specific identification method.Our cash, cash equivalents, short-term investments and long-term investments are exposed to credit risk in the event of default by the third parties thathold or issue such assets. Our cash, cash equivalents, short-term investments and long-term investments are held by financial institutions that managementbelieves are of high credit quality. Our investment policy limits investments to fixed income securities denominated and payable in U.S. dollars such as U.S.government obligations, money market instruments and funds, and corporate bonds and places restrictions on maturities and concentrations by type andissuer. Accounts Receivable and Significant Customer ConcentrationsOur customers are primarily pharmaceutical and biotechnology companies that are located in the U.S. and Europe and with whom we have multi-yeararrangements. Our accounts receivable balance contains billed and unbilled trade receivables from product sales, milestones, other contingent payments androyalties, as well as time and materials based billings from collaborative research and development agreements. When appropriate, we provide for anallowance for doubtful accounts by reserving for specifically identified doubtful accounts. We generally do not require collateral from our customers. Weperform a regular review of our customers’ credit risk and payment histories, including payments made subsequent to year-end. We have not experiencedsignificant credit losses from our accounts receivable. At December 31, 2017, four different customers represented 43%, 20%, 19% and 14%, respectively, ofour accounts receivable. At December 31, 2016, three different customers represented 39%, 32%, and 13%, respectively, of our accounts receivable.Inventory and Significant Supplier ConcentrationsInventory is generally manufactured upon receipt of firm purchase orders from our collaboration partners. Inventory includes direct materials, directlabor, and manufacturing overhead and cost is determined on a first-in, first-out basis. Inventory is valued at the lower of cost or net realizable value anddefective or excess inventory is written down to net realizable value based on historical experience or projected usage. Inventory related to our research anddevelopment activities is expensed when purchased.We are dependent on our suppliers and contract manufacturers to provide raw materials, drugs and devices of appropriate quality and reliability and tomeet applicable contract and regulatory requirements. In certain cases, we rely on single sources of supply of one or more critical materials. Consequently, inthe event that supplies are delayed or interrupted for any reason, our ability to develop and produce our drug candidates or our ability to meet our supplyobligations could be significantly impaired, which could have a material adverse effect on our business, financial condition and results of operations.Long-Lived AssetsProperty, plant and equipment are stated at cost. Major improvements are capitalized, while maintenance and repairs are expensed when incurred.Manufacturing, laboratory and other equipment are depreciated using the straight-line method generally over estimated useful lives of three to ten years.Buildings are depreciated using the straight-line method generally over the estimated useful life of twenty years. Leasehold improvements are amortizedusing the straight-line method over the shorter of the estimated useful life or the remaining term of the lease.Goodwill represents the excess of the price paid for another entity over the fair value of the assets acquired and liabilities assumed in a businesscombination. We are organized in one reporting unit and evaluate the goodwill for the Company as a whole. Goodwill has an indefinite useful life and is notamortized, but instead tested for impairment at least annually in the fourth quarter of each year using an October 1 measurement date.We assess the impairment of long-lived assets whenever events or changes in business circumstances indicate that the carrying amounts of the assetsmay not be fully recoverable. When such events occur, we determine whether there has been an impairment in value by comparing the carrying value of theasset with its fair value, as measured by the anticipated undiscounted net cash flows associated with the asset. In the case of goodwill impairment, marketcapitalization is generally used as the measure of fair value. If an impairment in value exists, the asset is written down to its estimated fair value. 73Revenue RecognitionOur revenue is derived from our arrangements with pharmaceutical and biotechnology collaboration partners and may result from one or more of thefollowing: upfront and license fees, payments for contract research and development, milestone and other contingent payments, manufacturing and supplypayments, and royalties. Our performance obligations under our collaborations may include licensing our intellectual property, manufacturing and supplyobligations, and research and development obligations. In order to account for the multiple-element arrangements, we identify the deliverables includedwithin the arrangement and evaluate which deliverables represent separate units of accounting. Analyzing the arrangement to identify deliverables requiresthe use of judgment, and each deliverable may be an obligation to deliver goods or services, a right or license to use an asset, or another performanceobligation. Revenue is recognized separately for each identified unit of accounting when the basic revenue recognition criteria are met: there is persuasiveevidence that an arrangement exists, delivery has occurred, the price is fixed or determinable, and collection is reasonably assured.At the inception of each new multiple-element arrangement or the material modification of an existing multiple-element arrangement, we allocate allconsideration received under multiple-element arrangements to all units of accounting based on the relative selling price method, generally based on our bestestimate of selling price (ESP). The objective of ESP is to determine the price at which we would transact a sale if the product or service was sold on a stand-alone basis. We determine ESP for the elements in our collaboration arrangements by considering multiple factors including, but not limited to, technicalcomplexity of the performance obligation and similarity of elements to those performed under previous arrangements. Since we apply significant judgment inarriving at the ESPs, any material change in our estimates would significantly affect the allocation of the total consideration to the different elements of amultiple element arrangement.Product salesProduct sales are primarily derived from fixed price manufacturing and supply agreements with our collaboration partners. Our products are tested foradherence to technical specifications prior to shipment, accordingly, we have not experienced any significant returns from our customers.Royalty revenueGenerally, we are entitled to royalties from our collaboration partners based on the net sales of their approved drugs that are marketed and sold in oneor more countries where we hold royalty rights. We recognize royalty revenue when the cash is received or when the royalty amount to be received isestimable and collection is reasonably assured. With respect to the non-cash royalties related to our sale of future royalties described in Note 7, revenue isrecognized when estimable, otherwise, revenue is recognized during the period in which the related royalty report is received, which generally occurs in thequarter after the applicable product sales are made.License, collaboration and other revenueThe amount of upfront fees and other payments received by us in license and collaboration arrangements that are allocated to continuing performanceobligations, such as manufacturing and supply obligations, is deferred and generally recognized ratably over our expected performance period under eachrespective arrangement. We make our best estimate of the period over which we expect to fulfill our performance obligations, which may include technologytransfer assistance, research activities, clinical development activities, and manufacturing activities from research and development through thecommercialization of the product. Given the uncertainties of these collaboration arrangements, significant judgment is required to determine the duration ofthe performance period and this estimate is periodically re-evaluated. Upon the termination of each of our license and collaboration arrangements and if noadditional services are required to be performed by us, all non-refundable, non-creditable amounts previously deferred from the arrangement are recognizedas revenue.Contingent consideration received from the achievement of a substantive milestone is recognized in its entirety in the period in which the milestone isachieved, which we believe is consistent with the substance of our performance under our various license and collaboration agreements. A milestone isdefined as an event (i) that can only be achieved based in whole or in part either on the entity’s performance or on the occurrence of a specific outcomeresulting from the entity’s performance, (ii) for which there is substantive uncertainty at the date the arrangement is entered into that the event will beachieved, and (iii) that would result in additional payments being due to the entity. A milestone is substantive if the consideration earned from theachievement of the milestone is consistent with our performance required to achieve the milestone or the increase in value to the collaboration resulting fromour performance, relates solely to our past performance, and is reasonable relative to all of the other deliverables and payments within the arrangement.74Our license and collaboration agreements with our partners provide for payments to us upon the achievement of development milestones, such as thecompletion of clinical trials or regulatory submissions, approvals by regulatory authorities, and commercial launches of drugs. Given the challenges inherentin developing and obtaining regulatory approval for drug products and in achieving commercial launches, there was substantial uncertainty whether anysuch milestones would be achieved at the time of execution of these licensing and collaboration agreements. In addition, we evaluated whether thedevelopment milestones met the remaining criteria to be considered substantive. As a result of our analysis, we consider our remaining developmentmilestones under all of our license and collaboration agreements to be substantive and, accordingly, we recognize as revenue payments received from eachmilestone only if and as such milestone is achieved.Our license and collaboration agreements with certain partners also provide for contingent payments to us based solely upon the performance of therespective partner. For such contingent amounts, we recognize the payments as revenue when earned under the applicable contract, which is generally uponcompletion of performance by the respective partner, provided that collection is reasonably assured.Our license and collaboration agreements with our partners also provide for payments to us upon the achievement of specified sales volumes ofapproved drugs. We consider these payments to be similar to royalty payments and we recognize such sales-based payments upon achievement of such salesvolumes, provided that collection is reasonably assured.Shipping and Handling CostsWe recognize costs related to shipping and handling of product to customers in cost of goods sold.Research and Development ExpenseResearch and development costs are expensed as incurred and include salaries, benefits and other operating costs such as outside services, suppliesand allocated overhead costs. We perform research and development for our proprietary drug candidates and technology development and for certain thirdparties under collaboration agreements. For our proprietary drug candidates and our internal technology development programs, we invest our own fundswithout reimbursement from a third party. Where we perform research and development activities under a clinical joint development collaboration, such asour collaboration with Bristol-Myers Squibb, we record the cost reimbursement from our partner as a reduction to research and development expense whenreimbursement amounts are due to us under the agreement.We record accruals for the estimated costs of our clinical trial activities performed by third parties. The financial terms of these agreements are subjectto negotiation, vary from contract to contract and may result in uneven payment flows to our vendors. Payments under the contracts depend on factors such asthe achievement of certain events, successful enrollment of patients, and completion of certain clinical trial activities. We generally accrue costs associatedwith the start-up and reporting phases of the clinical trials ratably over the estimated duration of the start-up and reporting phases. We generally accrue costsassociated with the treatment phase of clinical trials based on the total estimated cost of the treatment phase on a per patient basis and we expense the perpatient cost ratably over the estimated patient treatment period based on patient enrollment in the trials. In specific circumstances, such as for certain time-based costs, we recognize clinical trial expenses using a methodology that we consider to be more reflective of the timing of costs incurred. Advancepayments for goods or services that will be used or rendered for future research and development activities are capitalized as prepaid expenses and recognizedas expense as the related goods are delivered or the related services are performed. We base our estimates on the best information available at the time.However, additional information may become available to us which may allow us to make a more accurate estimate in future periods. In this event, we may berequired to record adjustments to research and development expenses in future periods when the actual level of activity becomes more certain. Such increasesor decreases in cost are generally considered to be changes in estimates and will be reflected in research and development expenses in the period identified.Stock-Based CompensationStock-based compensation arrangements include stock option grants and restricted stock unit (RSU) awards under our equity incentive plans, as wellas shares issued under our Employee Stock Purchase Plan (ESPP), through which employees may purchase our common stock at a discount to the marketprice.We use the Black-Scholes option pricing model for the respective grant to determine the estimated fair value of the option on the date of grant (grantdate fair value) and the estimated fair value of common stock purchased under the ESPP. The Black-Scholes option pricing model requires the input of highlysubjective assumptions. These variables include, but are not limited to, our stock price volatility over the term of the awards, and actual and projectedemployee stock option exercise behaviors. Because our employee stock options have characteristics significantly different from those of traded options, andbecause changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models may notprovide a reliable75single measure of the fair value of our employee stock options or common stock purchased under the ESPP. The fair value of an RSU is equal to the closingprice of our common stock on the grant date. Management will continue to assess the assumptions and methodologies used to calculate the estimated fairvalue of stock-based compensation. Circumstances may change and additional data may become available over time, which could result in changes to theseassumptions and methodologies, and which could materially impact our fair value determination.We expense the value of the portion of the option or award on a straight line basis over the requisite service periods in our Consolidated Statements ofOperations and recognize forfeitures of options and awards as they occur. For options and awards that vest upon the achievement of performance milestones,we estimate the vesting period based on our evaluation of the probability of achievement of each respective milestone and the related estimated date ofachievement. Stock-based compensation expense for purchases under the ESPP is recognized over the respective six-month purchase period. Expenseamounts are recorded in cost of goods sold, research and development expense, and general and administrative expense based on the function of theapplicable employee. Stock-based compensation charges are non-cash charges and as such have no impact on our reported cash flows.Net Loss Per ShareBasic net loss per share is calculated based on the weighted-average number of common shares outstanding during the periods presented. For allperiods presented in the Consolidated Statements of Operations, basic and diluted net loss per share are the same due to our net losses and the requirement toexclude potentially dilutive securities which would have an anti-dilutive effect on net loss per share. During 2017, 2016 and 2015, potentially dilutivesecurities consisted of common shares underlying outstanding stock options and RSUs. There were weighted average outstanding stock options and RSUs of20.6 million, 19.9 million and 21.1 million during the years ended December 31, 2017, 2016 and 2015, respectively. Income TaxesWe account for income taxes under the liability method. Under this method, deferred tax assets and liabilities are determined based on differencesbetween the financial reporting and tax reporting bases of assets and liabilities and are measured using enacted tax rates and laws that are expected to be ineffect when the differences are expected to reverse. Realization of deferred tax assets is dependent upon future earnings, the timing and amount of which areuncertain. We record a valuation allowance against deferred tax assets to reduce their carrying value to an amount that is more likely than not to be realized.When we establish or reduce the valuation allowance related to the deferred tax assets, our provision for income taxes will increase or decrease, respectively,in the period such determination is made.We utilize a two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition bydetermining if the weight of available evidence indicates that it is more likely than not that the position will be sustained upon tax authority examination,including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount of benefit,determined on a cumulative probability basis, that is more than 50% likely of being realized upon ultimate settlement.Comprehensive lossComprehensive loss is the change in stockholders’ equity from transactions and other events and circumstances other than those resulting frominvestments by stockholders and distributions to stockholders. Our other comprehensive income (loss) is comprised of net loss, gains and losses from theforeign currency translation of the assets and liabilities of our India and UK subsidiaries, and unrealized gains and losses on investments in available-for-salesecurities.Adoption of New Accounting PrincipleIn March 2016, the Financial Accounting Standards Board (FASB) issued guidance to simplify several aspects of employee share-based paymentaccounting, including forfeitures, income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cashflows. This guidance was effective for our interim and annual periods beginning January 1, 2017. As a result of the adoption of this guidance, as of January 1,2017, we recorded a $0.2 million charge to our accumulated deficit in our Consolidated Balance Sheet related to our election to recognize forfeitures ofawards as they occur. In addition, prior to adoption of this guidance, tax attributes related to stock option windfall deductions were not recorded until theyresulted in a reduction of cash tax payable. As of December 31, 2016, the excluded windfall deductions for federal and state purposes were $20.6 million and$9.8 million, respectively. Upon adoption, we recognized the excluded windfall deductions as a deferred tax asset on a tax-effected basis with acorresponding increase in the valuation allowance.In November 2015, the FASB issued guidance to require that deferred tax assets and liabilities be classified as noncurrent on the balance sheet.Previous guidance required deferred tax assets and liabilities to be separated into current and noncurrent amounts on the76balance sheet. Accordingly, as of January 1, 2017, we reclassified $0.3 million from other current assets to our other assets balance. This reclassification wasapplied retrospectively to these balances in our Consolidated Balance Sheet as of December 31, 2016.Recent Accounting PronouncementsIn May 2014, the FASB issued guidance codified in Accounting Standards Codification (ASC) 606, Revenue Recognition — Revenue from Contractswith Customers, which supersedes the guidance in ASC 605, Revenue Recognition, and is effective for public companies for annual and interim periodsbeginning after December 15, 2017. The FASB has issued numerous updates that provide clarification on a number of specific issues as well as requiringadditional disclosures. We plan to adopt the standard in the first quarter of 2018 using the modified retrospective method.The new guidance requires the application of a five-step model to determine the amount and timing of revenue to be recognized and requires that werecognize revenue in a manner that reasonably reflects the delivery of our goods or services to customers in return for expected consideration. To achieve thiscore principle, the guidance provides the following steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in thecontract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when(or as) the entity satisfies a performance obligation. Under ASC 606, companies may need to use more judgment and make more estimates than under ASC605 in the application of this five-step process.We are continuing to assess the impact of the new guidance on our accounting policies and procedures and are evaluating the new requirements asapplied to existing collaboration agreements, both in terms of the cumulative adjustment to opening accumulated deficit and our subsequent recognition ofrevenue. Since each collaboration agreement is unique, we will separately assess each agreement (see Note 10 for a discussion of our existing collaborationagreements) under the new standard. We anticipate that the adoption of ASC 606 will have the following impact to our revenue recognition for acollaboration agreement:(i) Changes in revenue recognition for distinct licenses of functional intellectual property may result in a timing difference of revenue recognitionbetween the current literature and ASC 606. For certain of our arrangements, the value associated with the licenses and certain other deliverables havebeen assessed as one unit of accounting and recognized over a period of time in which services are rendered or made available to our customerpursuant to revenue recognition guidance in effect for such arrangements at the time such arrangements commenced. For certain other arrangements,under current ASC 605 guidance, we identified the value of the license as a separate unit of accounting and recognize revenue upon issuance of thelicense. Under ASC 606, we may continue to recognize revenue for such licenses upon delivery of the license.(ii) For other consideration, including milestone payments or contingent payments from our collaboration partners, under our current accountingpolicy, we recognize such payments as revenue in the period that the payment-triggering event occurred or is achieved. The new revenue standard,however, may require us to recognize these payments before the payment-triggering event is completely achieved, subject to management’sassessment of whether it is probable that the triggering event will be achieved and that a significant reversal in the amount of cumulative revenuerecognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.(iii) We will recognize revenue for sales-based royalties and commercial sales-based milestones in the period of the related sale based on estimates,rather than recording them as reported by the customer.We currently estimate that, upon adoption on January 1, 2018, we will record an adjustment to decrease our accumulated deficit by approximately$11.0 million to $13.0 million for amounts that would be recognized as of December 31, 2017 under ASC 606, but are not recognized under the current ASC605 guidance. This estimated adjustment primarily consists of approximately $11.0 million for the accrual of royalties due to us related to net sales in thethree months ended December 31, 2017 that we would have recognized in 2018 under current guidance. The estimated adjustment also includes up toapproximately $2.0 million related to the recognition of the unamortized portion of upfront payment amounts under ASC 606 that are required to be deferredas of December 31, 2017 under current guidance. We will finalize our assessments in the first quarter of 2018 as we adopt ASC 606.In February 2016, the FASB issued guidance to amend a number of aspects of lease accounting, including requiring lessees to recognize almost allleases with a term greater than one year as a right-of-use asset and corresponding liability, measured at the present value of the lease payments. The guidancewill become effective for us beginning in the first quarter of 2019 and is required to be adopted using a modified retrospective approach. Early adoption ispermitted. We are currently evaluating the impact of the adoption of this standard.77Note 2 — Cash and Investments in Marketable SecuritiesCash and investments in marketable securities, including cash equivalents, are as follows (in thousands): Estimated Fair Value at December 31,2017 December 31,2016 Cash and cash equivalents $4,762 $59,640 Short-term investments 291,370 329,462 Long-term investments 57,088 — Total cash and investments in marketable securities $353,220 $389,102We invest in liquid, high quality debt securities. Our investments in debt securities are subject to interest rate risk. To minimize the exposure due to anadverse shift in interest rates, we invest in securities with maturities of two years or less and maintain a weighted average maturity of one year or less. As ofDecember 31, 2017, $57.1 million of our total investments had maturities between one and two years and, as of December 31, 2016, all of our investmentshad maturities of one year or less.Gross unrealized gains and losses were not significant at either December 31, 2017 or 2016. During the years ended December 31, 2017, 2016 and2015, we sold available-for-sale securities totaling $37.5 million, $5.0 million, and $42.5 million, respectively, and realized gains and losses were notsignificant in any of those periods.Under the terms of our 7.75% senior secured notes due October 2020, we are required to maintain a minimum cash and investments in marketablesecurities balance of $60.0 million. Our portfolio of cash and investments in marketable securities includes (in thousands): Estimated Fair Value at Fair ValueHierarchyLevel December 31,2017 December 31,2016 Corporate notes and bonds 2 $216,253 $156,044 Corporate commercial paper 2 128,096 160,920 Obligations of U.S. government agencies 2 2,977 13,749 Available-for-sale investments 347,326 330,713 Money market funds 1 302 51,104 Certificate of deposit N/A 1,132 2,930 Cash N/A 4,460 4,355 Total cash and investments in marketable securities $353,220 $389,102 Level 1 —Quoted prices in active markets for identical assets or liabilities.Level 2 —Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices foridentical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observablemarket data for substantially the full term of the assets or liabilities.Level 3 —Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.During the years ended December 31, 2017, 2016 and 2015 there were no transfers between Level 1 and Level 2 of the fair value hierarchy.At December 31, 2017 and 2016, we had letter of credit arrangements in favor of a landlord and certain vendors totaling $1.1 million and $2.4 million,respectively. These letters of credit are secured by investments of similar amounts.78Note 3 — InventoryInventory consists of the following (in thousands): December 31, 2017 2016 Raw materials $1,796 $2,055 Work-in-process 4,843 7,311 Finished goods 4,087 1,743 Total inventory $10,726 $11,109Note 4 — Property, Plant and EquipmentProperty, plant and equipment consists of the following (in thousands): December 31, 2017 2016 Building and leasehold improvements $81,444 $75,137 Laboratory equipment 31,214 27,424 Furniture, fixtures and other equipment 27,800 26,590 Manufacturing equipment 20,695 44,237 Depreciable property, plant and equipment at cost 161,153 173,388 Less: accumulated depreciation and amortization (115,090) (111,243)Depreciable property, plant and equipment, net 46,063 62,145 Construction-in-progress 1,400 3,456 Property, plant and equipment, net $47,463 $65,601Building and leasehold improvements include our manufacturing, research and development and administrative facilities and the relatedimprovements to these facilities. Laboratory and manufacturing equipment include assets that support both our manufacturing and research and developmentefforts. Construction-in-progress includes assets being built to enhance our manufacturing and research and development efforts.Depreciation and amortization expenses on property, plant and equipment, including depreciation of assets acquired through capital leases, for theyears ended December 31, 2017, 2016, and 2015 was $12.6 million, $13.2 million, and $11.4 million, respectively.In November 2017, Bayer announced that the Phase 3 Amikacin Inhale clinical program did not meet its primary endpoint or key secondary endpointsand, in December 2017, Bayer terminated our related collaboration agreement. Under this collaboration, we were responsible for the development,manufacturing and supply of our proprietary nebulizer device included in the Amikacin product and had acquired specific manufacturing equipment for thispurpose. As a result of the termination of the program, in the three months ended December 31, 2017, we wrote off program specific manufacturing equipmentwith an original cost of $23.4 million and a net book value of $15.1 million. We expect to complete the disposal of this equipment in the first quarter of2018. In addition, in the three months ended December 31, 2017, we incurred approximately $0.9 million of other program termination costs related to ourmanufacturing obligations.Note 5 — Senior Secured NotesOn October 5, 2015, we completed the sale and issuance of $250.0 million in aggregate principal amount of 7.75% senior secured notes due 2020 (the“Notes”). The Notes are secured by a first-priority lien on substantially all of our assets and bear interest at a rate of 7.75% per annum payable in cashquarterly in arrears on January 15, April 15, July 15, and October 15 of each year. Interest is calculated based on actual days outstanding over a 360 day year.The Notes will mature on October 5, 2020, at which time the outstanding principal will be due and payable.In connection with the issuance of the Notes, we paid fees and expenses of $8.9 million, of which $8.7 million of transaction and facility fees paiddirectly to the purchasers of the Notes and other direct issuance costs were capitalized as a debt discount and issuance costs and are recorded as a reduction tothe senior secured notes, net liability balance in our Consolidated Balance Sheet. The unamortized balance of these costs is $4.8 million at December 31,2017 and will be amortized to interest expense over the remainder of the five year term of the Notes. 79On October 5, 2015, we used a portion of the proceeds from the Notes to redeem the $125.0 million in aggregate principal amount of 12.0% seniorsecured notes due in 2017 (12% Notes). In addition, on October 5, 2015, we paid $3.3 million of accrued interest on the 12% Notes and made a $12.5 millionredemption payment, which includes $1.2 million of additional interest paid to the note holders at redemption. As a result, we received $100.3 million in netproceeds in connection with these transactions. In addition, as a result of these transactions, in the year ended December 31, 2015, we recognized a $14.1million loss on extinguishment of our 12% Notes, which consists of the $11.3 million redemption premium and $1.2 million of incremental interest paid tothe note holders and the write-off of $1.6 million of unamortized issuance costs.The agreement, pursuant to which the Notes were issued, contains customary covenants, including covenants that limit or restrict our ability to incurliens, incur indebtedness, declare or pay dividends, redeem stock, issue preferred stock, make certain investments, merge or consolidate, make dispositions ofassets, or enter into certain new businesses or transactions with affiliates, but do not contain covenants related to future financial performance. In particular,the Notes agreement requires us to maintain a minimum cash and investments in marketable securities balance of $60.0 million during the term of the Notes.The Notes agreement provides that, beginning on October 5, 2017, we may redeem some or all of the Notes, subject to certain prepayment premiums andconditions. If we experience certain change of control events, the holders of the Notes will have the right to require us to purchase all or a portion of the Notesat a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest to the date of purchase. In addition, upon certainasset sales, we may be required to offer to use the net proceeds thereof to purchase some of the Notes at 100% of the principal amount thereof, plus accruedand unpaid interest to the date of purchase.As of December 31, 2017, based on a discounted cash flow analysis using Level 3 inputs including financial discount rates, we believe the $250.0million in principal amount of the Notes is consistent with its fair value.Note 6 — LeasesOperating LeasesIn August 2017, we entered into a Lease Agreement (the “Lease”) with ARE-San Francisco No. 19, LLC (ARE) and terminated our sublease with Pfizer,Inc., effectively extending our lease term from 2020 to 2030 for our 129,732 square foot corporate office and R&D facility located at 455 Mission BayBoulevard, San Francisco, California (the “Mission Bay Facility”).The term of the Lease commenced on September 1, 2017, and will expire January 31, 2030, subject to our right to extend the term of the Lease for twoconsecutive five-year periods. The monthly base rent for the Mission Bay Facility will escalate over the term of the Lease at various intervals. During theterm of the Lease, we are responsible for paying our share of operating expenses specified in the Lease, including insurance costs and taxes. The Lease alsoobligates Nektar to rent from ARE a total of an additional approximately 23,000 square feet of space at the Mission Bay Facility at specified delivery dates.The Lease includes various covenants, indemnities, defaults, termination rights, security deposits and other provisions customary for lease transactions of thisnature. In addition to the Lease, we have entered into other operating leases for locations in San Francisco and India.We recognize rent expense on a straight-line basis over the lease period. For the year ended December 31, 2017, rent expense was approximately $4.7million and for the years ended December 31, 2016, and 2015, rent expense was approximately $3.2 million in each year. As of December 31, 2017 and 2016,we had total deferred rent balances of $6.0 million and $6.6 million, respectively, which are recorded in other current and other long-term liabilities in ourConsolidated Balance Sheets.Our future minimum lease payments for our operating leases at December 31, 2017 are as follows (in thousands): Year ending December 31, 2018 $5,965 2019 5,511 2020 5,884 2021 8,739 2022 9,024 2023 and thereafter 71,127 Total future minimum lease payments $106,250 Capital LeasesDuring the year ended December 31, 2017, we repaid the $5.1 million due under our capital leases on our Consolidated Balance Sheet as of December31, 2016 and have no capital lease balances as of December 31, 2017. 80Note 7 — Liability Related to the Sale of Future RoyaltiesOn February 24, 2012, we entered into a Purchase and Sale Agreement (the Purchase and Sale Agreement) with RPI Finance Trust (RPI), an affiliate ofRoyalty Pharma, pursuant to which we sold, and RPI purchased, our right to receive royalty payments (the Royalty Entitlement) arising from the worldwidenet sales, from and after January 1, 2012, of (a) CIMZIA®, under our license, manufacturing and supply agreement with UCB Pharma (UCB), and(b) MIRCERA®, under our license, manufacturing and supply agreement with F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc. (together referred to asRoche). We received aggregate cash proceeds of $124.0 million for the Royalty Entitlement. As part of this sale, we incurred approximately $4.4 million intransaction costs, which will be amortized to interest expense over the estimated life of the Purchase and Sale Agreement. Although we sold all of our rightsto receive royalties from the CIMZIA® and MIRCERA® products, as a result of our ongoing manufacturing and supply obligations related to the generationof these royalties, we will continue to account for these royalties as revenue, and we recorded the $124.0 million in proceeds from this transaction as aliability (Royalty Obligation) that will be amortized using the interest method over the estimated life of the Purchase and Sale Agreement.The following table shows the activity within the liability account during the year ended December 31, 2017 and for the period from the inception ofthe royalty transaction on February 24, 2012 (inception) to December 31, 2017 (in thousands): Year endedDecember 31,2017 Period frominception toDecember 31,2017 Liability related to the sale of future royalties—beginning balance $108,584 $— Proceeds from sale of future royalties — 124,000 Payments from Nektar to RPI — (10,000)Non-cash CIMZIA® and MIRCERA® royalty revenue (30,531) (137,531)Non-cash interest expense recognized 18,869 120,453 Liability related to the sale of future royalties – ending balance 96,922 96,922 Less: unamortized transaction costs (2,267) (2,267)Liability related to the sale of future royalties, net $94,655 $94,655Pursuant to the Purchase and Sale Agreement, in March 2014 and March 2013, we were required to pay RPI $7.0 million and $3.0 million,respectively, as a result of worldwide net sales of MIRCERA® for the 12 month periods ended December 31, 2013 and 2012 not reaching certain minimumthresholds. The Purchase and Sale Agreement does not include any other potential payments related to minimum net sales thresholds and, therefore, we donot expect to make any further payments to RPI related to this agreement.During the years ended December 31, 2017, 2016 and 2015, we recognized $30.5 million, $30.2 million, and $22.1 million, respectively, in non-cashroyalties from net sales of CIMZIA® and MIRCERA®, and we recorded $18.9 million, $19.7 million and $20.6 million, respectively, of related non-cashinterest expense.As royalties are remitted to RPI from Roche and UCB, the balance of the Royalty Obligation will be effectively repaid over the life of the agreement.In order to determine the amortization of the Royalty Obligation, we are required to estimate the total amount of future royalty payments to be received byRPI. The sum of these amounts less the $124.0 million proceeds we received will be recorded as interest expense over the life of the Royalty Obligation.From inception until 2017, our estimate of this total interest expense resulted in an effective annual interest rate of approximately 17%. We periodicallyassess the estimated royalty payments to RPI from UCB and Roche and to the extent the amount or timing of such payments is materially different than ouroriginal estimates, we will prospectively adjust the amortization of the Royalty Obligation. During the three month period ended December 31, 2017, as aresult of increases in the forecasted sales of CIMZIA®, our estimate of the effective annual interest rate over the life of the agreement increased to 17.6%,which results in a prospective interest rate of 21%. There are a number of factors that could materially affect the amount and timing of royalty payments from CIMZIA® and MIRCERA®, most of whichare not within our control. Such factors include, but are not limited to, changing standards of care, the introduction of competing products, manufacturing orother delays, biosimilar competition, intellectual property matters, adverse events that result in governmental health authority imposed restrictions on the useof the drug products, significant changes in foreign exchange rates as the royalties remitted to RPI are made in U.S. dollars (USD) while significant portions ofthe underlying sales of CIMZIA® and MIRCERA® are made in currencies other than USD, and other events or circumstances that could result in reducedroyalty payments from CIMZIA® and MIRCERA®, all of which would result in a reduction of non-cash royalty revenues and the non-cash interest expenseover the life of the Royalty Obligation. Conversely, if sales of CIMZIA® and MIRCERA® are more than81expected, the non-cash royalty revenues and the non-cash interest expense recorded by us would be greater over the term of the Royalty Obligation.In addition, the Purchase and Sale Agreement grants RPI the right to receive certain reports and other information relating to the Royalty Entitlementand contains other representations and warranties, covenants and indemnification obligations that are customary for a transaction of this nature. To ourknowledge, we are currently in compliance with these provisions of the Purchase and Sale Agreement; however, if we were to breach our obligations, wecould be required to pay damages to RPI that are not limited to the purchase price we received in the sale transaction.Note 8 — Commitments and ContingenciesPurchase CommitmentsIn the normal course of business, we enter into various firm purchase commitments related to contract manufacturing, clinical development and certainother items. As of December 31, 2017, these commitments were approximately $16.5 million, all of which are expected to be paid in 2018.Legal MattersFrom time to time, we are involved in lawsuits, arbitrations, claims, investigations and proceedings, consisting of intellectual property, commercial,employment and other matters, which arise in the ordinary course of business. We make provisions for liabilities when it is both probable that a liability hasbeen incurred and the amount of the loss can be reasonably estimated. Such provisions are reviewed at least quarterly and adjusted to reflect the impact ofsettlement negotiations, judicial and administrative rulings, advice of legal counsel, and other information and events pertaining to a particular case.Litigation is inherently unpredictable. If any unfavorable ruling were to occur in any specific period, there exists the possibility of a material adverse impacton the results of our operations of that period and on our cash flows and liquidity. On August 14, 2015, Enzon, Inc. filed a breach of contract complaint in the Supreme Court of the State of New York (Court) claiming damages of $1.5million (plus interest) for unpaid licensing fees (the “Enzon Litigation”) through the date of the complaint. Enzon alleged that we failed to pay a post-patentexpiration immunity fee related to one of the licenses. On June 26, 2017, we entered into a Second Amendment to the Cross-License and Option Agreement(Cross-License Agreement) with Enzon in which we agreed to pay Enzon a sum of $7.0 million to satisfy all past and future obligations of royalty paymentspursuant to the Cross-License Agreement and to have the Enzon Litigation dismissed. The Enzon Litigation was dismissed with prejudice on June 30, 2017.We paid $3.5 million in June 2017 and the remaining $3.5 million in December 2017. Of the total $7.0 million consideration, $1.4 million represents ouraccrued royalty liability to Enzon related to commercial sales of certain products from January 2017 through June 2017 recorded in cost of goods sold foryear ended December 31, 2017. In addition, $2.3 million was recorded as a prepaid royalty asset for estimated future commercial sales of certain productsthrough the term of the applicable underlying Enzon patents expiring in March 2018, which Nektar will amortize over this period. As of December 31, 2017,the unamortized prepaid royalty balance is $0.6 million and is included in other current assets. We recorded the remaining $3.3 million of consideration ingeneral and administrative expense in the year ended December 31, 2017. No liability was recorded for this matter on our Consolidated Balance Sheets as ofDecember 31, 2016. Royalty ExpenseAfter the termination of our royalty obligations under the Enzon agreement discussed above, we will have no third party licenses that require us to payroyalties based on our sales of certain products and/or on our recognition of royalty revenue under certain of our collaboration agreements. Royalty expense,which is reflected in cost of goods sold in our Consolidated Statements of Operations, was approximately $3.1 million, $3.7 million, and $2.8 million for theyears ended December 31, 2017, 2016, and 2015, respectively.Foreign OperationsWe operate in a number of foreign countries. As a result, we are subject to numerous local laws and regulations that can result in claims made byforeign government agencies or other third parties that are often difficult to predict even after the application of good faith compliance efforts.Indemnification ObligationsDuring the course of our normal operating activities, we have agreed to certain contingent indemnification obligations as further described below. Theterm of our indemnification obligations is generally perpetual. There is generally no limitation on the potential amount of future payments we could berequired to make under these indemnification obligations. To date, we have not incurred82significant costs to defend lawsuits or settle claims based on our indemnification obligations. If any of our indemnification obligations is triggered, we mayincur substantial liabilities. Because the aggregate amount of any potential indemnification obligation is not a stated amount, the overall maximum amountof any such obligations cannot be reasonably estimated. No liabilities have been recorded for these obligations on our Consolidated Balance Sheets as ofDecember 31, 2017 or 2016.Indemnifications in Connection with Commercial AgreementsAs part of our collaboration agreements with our partners related to the license, development, manufacture and supply of drugs based on ourproprietary technologies and drug candidates, we generally agree to defend, indemnify and hold harmless our partners from and against third party liabilitiesarising out of the agreement, including product liability (with respect to our activities) and infringement of intellectual property to the extent the intellectualproperty is developed by us and licensed to our partners.As part of the sale of our royalty interest in the CIMZIA® and MIRCERA® products, we and RPI made representations and warranties and entered intocertain covenants and ancillary agreements which are supported by indemnity obligations. Additionally, as part of our pulmonary asset sale to Novartis in2008, we and Novartis made representations and warranties and entered into certain covenants and ancillary agreements which are supported by an indemnityobligation. In the event it is determined that we breached certain of the representations and warranties or covenants and agreements made by us in any suchagreements, we could incur substantial indemnification liabilities depending on the timing, nature, and amount of any such claims.Indemnification of Underwriters and Initial Purchasers of our SecuritiesIn connection with our sale of equity and senior secured debt securities, we have agreed to defend, indemnify and hold harmless our underwriters orinitial purchasers, as applicable, as well as certain related parties from and against certain liabilities, including liabilities under the Securities Act of 1933, asamended.Director and Officer IndemnificationsAs permitted under Delaware law, and as set forth in our Certificate of Incorporation and our Bylaws, we indemnify our directors, executive officers,other officers, employees, and other agents for certain events or occurrences that may arise while in such capacity. The maximum potential amount of futurepayments we could be required to make under this indemnification is unlimited; however, we have insurance policies that may limit our exposure and mayenable us to recover a portion of any future amounts paid. Assuming the applicability of coverage, the willingness of the insurer to assume coverage, andsubject to certain retention, loss limits and other policy provisions, we believe any obligations under this indemnification would not be material, other thanan initial $1.8 million per incident for merger and acquisition related claims, $1.8 million per incident for securities related claims and $0.5 million perincident for non-securities related claims retention deductible per our insurance policy. However, no assurances can be given that the covering insurers willnot attempt to dispute the validity, applicability, or amount of coverage without expensive litigation against these insurers, in which case we may incursubstantial liabilities as a result of these indemnification obligations. Note 9 — Stockholders’ EquityPreferred StockWe have authorized 10,000,000 shares of Preferred Stock with each share having a par value of $0.0001. As of December 31, 2017 and 2016, nopreferred shares are designated, issued or outstanding.Common StockOn October 24, 2016, we completed the issuance and sale of 14,950,000 shares of our common stock in an underwritten public offering with totalproceeds of approximately $189.7 million after deducting the underwriting commissions and discounts of approximately $12.1 million. In addition, weincurred approximately $0.4 million in legal and accounting fees, filing fees, and other costs in connection with this offering. 83Equity Compensation PlansAt December 31, 2017, we had 26,761,122 reserved shares of common stock, all of which are reserved for issuance under our equity compensationplans as summarized in the following table (share numbers in thousands): Plan Category Number ofSecurities tobe IssuedUpon Exerciseof OutstandingOptions &Vesting of RSUs(a) Weighted-AverageExercise Priceof OutstandingOptions(b) Number ofSecuritiesRemainingAvailable forIssuance UnderEquityCompensationPlans(ExcludingSecuritiesReflectedin Column(a)(c) Equity compensation plans approved by security holders(1) 20,999 $20.55 5,360 Equity compensation plans not approved by security holders 402 $11.01 — Total 21,401 $20.35 5,360 (1)Includes shares of common stock available for future issuance under our ESPP as of December 31, 2017.2017 Performance Incentive PlanOur 2017 Performance Incentive Plan (2017 Plan) was adopted by the Company’s board of directors (Board of Directors) on March 28, 2017 and wasapproved by our stockholders on June 14, 2017. On the date of approval, any shares of our common stock that were available for issuance under our 2012Performance Incentive Plan (2012 Plan) ceased to be available for future grants.Subject to the terms of the 2017 Plan, 8,300,000 shares of our common stock, reduced by the number of shares of common stock subject to awardsgranted under the 2012 Plan on or after March 31, 2017 and prior to the adoption of the 2017 Plan, were initially available for awards under the 2017 Plan.Shares issued in respect of any “full-value award” granted under the 2017 Plan will be counted against the share limit described in the preceding sentence as1.5 shares for every one share actually issued in connection with the award. Shares that are subject to or underlie awards which expire or for any reason arecancelled or terminated, are forfeited, fail to vest, or for any other reason are not paid or delivered under the 2017 Plan or any Prior Plan (as defined below)will again be available for subsequent awards under the 2017 Plan (with any such shares subject to full-value awards increasing the 2017 Plan’s share limitbased on the full-value award ratio described above or, in the case of an award granted under a Prior Plan, the full-value award ratio set forth in such PriorPlan). Notwithstanding the foregoing, shares that are exchanged by a participant or withheld by the Company to pay the exercise price of an award grantedunder the 2017 Plan, as well as any shares exchanged or withheld to satisfy the tax withholding obligations related to any award, will not be available forsubsequent awards under the 2017 Plan.The purpose of the 2017 Plan and our other incentive plans is to promote the success of the Company by providing an additional means for us toattract, motivate, retain and reward directors, officers, employees, and other eligible persons through the grant of awards. Equity-based awards are alsointended to further align the interests of award recipients and our stockholders. The 2017 Plan authorizes stock options, stock appreciation rights, stockbonuses, restricted stock, performance stock, stock units, phantom stock or similar rights to purchase or acquire shares, and other forms of awards granted ordenominated in our common stock or units of the Company’s common stock, as well as cash bonus awards. Members of the Board of Directors, officers oremployees, certain consultants and advisors of the Company and its subsidiaries are eligible to receive awards under the 2017 Plan. Pursuant to the 2017Plan, we granted or issued non-qualified stock options and RSUs to employees, officers, and non-employee directors during 2017. The requisite serviceperiod for stock options granted to our employees under the 2017 Plan as well as our Prior Plans is generally four years; the requisite service period for stockoptions granted to our directors is generally one year. The requisite service period for RSUs granted under the 2017 Plan and our Prior Plans is generally threeyears for employees and one year for directors. The 2017 Plan will terminate on March 27, 2027, unless earlier terminated by the Board of Directors. The maximum term of a stock option or stockappreciation right under the 2017 Plan and our Prior Plans is eight years from the date of grant. The per share exercise price of an option generally may not beless than the fair market value of a share of the Company’s common stock on The NASDAQ Stock Market on the date of grant.84Other Equity Incentive PlansIn addition to the 2017 Plan, we have other equity incentive plans under which options and restricted stock units granted remain outstanding but nonew options or restricted stock units may be granted either as a result of the effectiveness of the 2017 Plan or the expiration of such other plan. These otherequity incentive plans include: (i) the 2012 Plan which was adopted by the Board of Directors on April 4, 2012 and approved by our stockholders on June28, 2012, amended on June 16, 2015 by approval of our stockholders to make available for award grants 7,000,000 additional shares, and replaced by the2017 Plan; (ii) the 2008 Equity Incentive Plan (2008 Plan) which was adopted by the Board of Directors on March 20, 2008 and approved by ourstockholders on June 6, 2008; (iii) the 2000 Equity Incentive Plan (2000 Plan) which was adopted by the Board of Directors on April 19, 2000 by amendingand restating our 1994 Equity Incentive Plan, and which expired on February 9, 2010; and (iv) the 1998 Non-Officer Equity Incentive Plan which wasadopted by our Board of Directors on August 18, 1998, and amended and restated in its entirety and renamed the 2000 Non-Officer Equity Incentive Plan onJune 6, 2000 (2000 Non-Officer Plan and collectively with the 2012 Plan, the 2008 Plan and the 2000 Plan, the Prior Plans).Pursuant to the Prior Plans, we previously granted or issued incentive stock options to employees and officers and non-qualified stock options, rightsto acquire restricted stock, restricted stock units, and stock bonuses to employees, officers, non-employee directors, and consultants. Pursuant to the 2000Non-Officer Plan, we previously granted or issued non-qualified stock options, rights to acquire restricted stock and stock bonuses to employees andconsultants who are neither officers nor directors of Nektar.Employee Stock Purchase PlanIn February 1994, our Board of Directors adopted the Employee Stock Purchase Plan (ESPP) pursuant to section 423(b) of the Internal Revenue Codeof 1986. Under the ESPP, 2,500,000 shares of our common stock have been authorized for issuance. The terms of the ESPP provide eligible employees withthe opportunity to acquire an ownership interest in Nektar through participation in a program of periodic payroll deductions for the purchase of our commonstock. Employees may elect to enroll or re-enroll in the ESPP on a semi-annual basis. Stock is purchased at 85% of the lower of the closing price on the firstday of the enrollment period or the last day of the enrollment period.401(k) Retirement PlanWe sponsor a 401(k) retirement plan whereby eligible employees may elect to contribute up to the lesser of 60% of their annual compensation or thestatutorily prescribed annual limit allowable under Internal Revenue Service regulations. The 401(k) plan permits us to make matching contributions onbehalf of all participants, up to a maximum of $4,000 per participant. For the years ended December 31, 2017, 2016, and 2015, we recognized $1.6 million,$1.1 million, and $0.9 million, respectively, of compensation expense in connection with our 401(k) retirement plan.Change in Control Severance PlanOn December 6, 2006, our Board of Directors approved a Change of Control Severance Benefit Plan (CIC Plan). This CIC Plan has subsequently beenamended a number of times by our Board of Directors with the most recent amendment occurring on April 5, 2011. The CIC Plan is designed to make certainbenefits available to our eligible employees in the event of a change of control of Nektar and, following such change of control, an employee’s employmentwith us or a successor company is terminated in certain specified circumstances. We adopted the CIC Plan to support the continuity of the business in thecontext of a change of control transaction. The CIC Plan was not adopted in contemplation of any specific change of control transaction.Under the CIC Plan, in the event of a change of control of Nektar and a subsequent termination of employment initiated by us or a successor companyother than for Cause (as defined in the CIC Plan) or initiated by the employee for a Good Reason Resignation (as defined in the CIC Plan) in each case withintwelve months following a change of control transaction, (i) the Chief Executive Officer would be entitled to receive cash severance pay equal to 24 monthsbase salary plus annual target incentive pay, the extension of employee benefits over this severance period and the full acceleration of unvested outstandingequity awards, and (ii) our Senior Vice Presidents and Vice Presidents (including Principal Fellows) would each be entitled to receive cash severance payequal to twelve months base salary plus annual target incentive pay, the extension of employee benefits over this severance period and the full accelerationof unvested outstanding equity awards. In the event of a change of control of Nektar and a subsequent termination of employment initiated by the Companyor a successor company other than for Cause within twelve months following a change of control transaction, all other employees would each be entitled toreceive cash severance pay equal to 6 months base salary plus a pro-rata portion of annual target incentive pay, the extension of employee benefits over thisseverance period and the full acceleration of each such employee’s unvested outstanding equity awards. Under the CIC Plan, as amended, non-employeedirectors would also be entitled to full acceleration of vesting of all outstanding stock awards in the event of a change of control transaction.85Note 10 — License and Collaboration AgreementsWe have entered into various collaboration agreements including license agreements and collaborative research, development and commercializationagreements with various pharmaceutical and biotechnology companies. Under these collaboration arrangements, we are entitled to receive license fees,upfront payments, milestone and other contingent payments, royalties, sales milestone payments, and payments for the manufacture and supply of ourproprietary PEGylation materials and/or for research and development activities. All of our collaboration agreements are generally cancelable by our partnerswithout significant financial penalty. Our costs of performing these services are generally included in research and development expense, except that costsfor product sales to our collaboration partners are included in cost of goods sold.In accordance with our collaboration agreements, we recognized license, collaboration and other revenue as follows (in thousands): Year Ended December 31, Partner Agreement 2017 2016 2015 Eli Lilly and Company NKTR-358 $130,087 $— $— Ophthotech Corporation(1) Fovista® 19,123 1,408 1,398 Bayer Healthcare LLC(1) BAY41-6551 (AmikacinInhale) 17,931 1,429 1,919 Baxalta Incorporated / Shire ADYNOVATE® 11,443 650 10,694 MAP Pharmaceuticals, Inc. / Allergan SEMPRANA® 11,000 — — Amgen, Inc. Neulasta® 5,000 5,000 5,000 AstraZeneca AB MOVANTIK® andMOVANTIK® fixed-dosecombination program 4,600 33,000 130,000 Daiichi Sankyo Europe GmbH(1) ONZEALDTM (NKTR-102) 3,811 3,690 — Roche(1) PEGASYS® and MIRCERA® — 7,685 12,816 Other 7,970 7,520 3,777 License, collaboration and otherrevenue $210,965 $60,382 $165,604 (1)These collaboration agreements were completed as of December 31, 2017.As of December 31, 2017, our collaboration agreements with partners included potential future payments for development milestones totalingapproximately $305.5 million, including amounts from our agreements with Lilly and Baxalta described below. In addition, under our collaborationagreements we are entitled to receive other contingent payments, including contingent sales milestones and royalty payments, as described below.86Eli Lilly and Company (Lilly): NKTR-358Effective August 23, 2017, we entered into a worldwide license agreement with Eli Lilly and Company (Lilly) to co-develop NKTR-358, a novelimmunological drug candidate that we invented. Under the terms of the agreement we (i) received an initial payment of $150.0 million in September 2017and are eligible for up to $250.0 million in additional development milestones, (ii) will co-develop NKTR-358 with Lilly with Nektar responsible forcompleting Phase 1 clinical development and certain drug product development and supply activities, (iii) will share with Lilly Phase 2 development costswith 75% of those costs borne by Lilly and 25% of the costs borne by Nektar, (iv) will have the option to contribute funding to Phase 3 development on anindication-by-indication basis ranging from zero to 25% of development costs, and (v) will have the opportunity to receive up to double-digit sales royaltyrates that escalate based upon our Phase 3 development cost contribution and the level of annual global product sales. Lilly will be responsible for all costsof global commercialization, and we will have an option to co-promote in the U.S. under certain conditions. A portion of the development milestones may bereduced by 50% under certain conditions, related to the final formulation of the approved product and the timing of prior approval (if any) of competitiveproducts with a similar mechanism of action, which could reduce these milestone payments by 75% if both conditions occur.The agreement will continue until Lilly no longer has any royalty payment obligations to us or, if earlier, the termination of the agreement inaccordance with its terms. The agreement may be terminated by Lilly for convenience, and may also be terminated under certain other circumstances,including material breach.We identified our license grant to Lilly, our ongoing Phase 1 clinical development obligation, our drug product development obligation and ourobligation to supply clinical trial materials as the significant, non-contingent deliverables under the agreement and concluded that each of these deliverablesrepresents a separate unit of accounting. The valuation of each unit of accounting involves significant estimates and assumptions, including but not limitedto, expected market opportunity and pricing, assumed royalty rates, clinical trial costs, timelines and likelihood of success; in each case these estimates andassumptions covering long time periods. We determined the best estimate of the selling price for the license based on a discounted cash flow analysis ofprojected revenues from NKTR-358 and development and commercial costs using a discount rate based on a market participant’s weighted average cost ofcapital adjusted for forecasting risk. We determined the best estimate of selling prices for Phase 1 clinical development, drug product development andclinical supply deliverables based on the nature of the services to be performed and estimates of the associated efforts and third-party rates for similarservices.Based on these estimates at agreement inception, the $150.0 million upfront payment was allocated $125.9 million to the license, $17.6 million tothe Phase 1 clinical development and $6.5 million to the drug product development based on our estimate of their relative selling prices. We did not allocateany of the upfront arrangement consideration to the clinical trial material supply obligations as we will receive incremental consideration when we deliversuch materials. We recognized license revenue upon the effective date of the arrangement in August 2017. We will recognize revenue related to Phase 1clinical development and drug product development activities using the proportionate performance method as services are provided over the estimatedservice period, which we estimate will continue until the end of 2019. As a result, during the year ended December 31, 2017, we recognized $125.9 million ofrevenue related to the license and $4.2 million of revenue related to Phase 1 clinical development and drug product development activities. We recorded theremaining $19.9 million related to Phase 1 clinical development and drug product development activities as deferred revenue as of December 31, 2017.Ophthotech Corporation: Fovista®On October 27, 2017, we terminated our license and supply agreement with Ophthotech Corporation (Ophthotech) dated September 2006, pursuant towhich Ophthotech received a worldwide, exclusive license to certain of our proprietary PEGylation technology to develop, manufacture and sell Fovista®.Under the terms of our agreement, we were the exclusive supplier of all of Ophthotech’s clinical and commercial requirements for our proprietary PEGylationreagent used in Fovista®. The termination of our agreement with Ophthotech followed Opthotech’s previous announcements, in December 2016 and August2017, that their three pivotal Phase 3 studies investigating the superiority of Fovista® therapy in combination with Lucentis® therapy compared to Lucentis®monotherapy and evaluating Fovista® in combination with Eylea® or Avastin® compared to Eylea® or Avastin® monotherapy for the treatment of wet age-related macular degeneration (AMD) did not achieve the pre-specified primary endpoints.Under our agreement with Ophthotech, in June 2014, we received a $19.8 million payment from Ophthotech in connection with its licensingagreement with Novartis. In addition, in January 2017, we received a $12.7 million advance payment from Ophthotech, which included $10.4 million forreagent shipments recognized in the second quarter of 2017 as well as approximately $2.3 million for 2017 minimum purchase requirements. As a result ofthe termination of this agreement, we recognized the remaining $18.0 million of deferred revenue from this arrangement in the three months ended December31, 2017.87Bayer Healthcare LLC: BAY41-6551 (Amikacin Inhale)In December 2017, Bayer Healthcare LLC (Bayer) terminated our co-development, license and co-promotion agreement entered into in August 2007to develop a specially-formulated inhaled Amikacin. Under this agreement, we were responsible for development, manufacturing and supply of ourproprietary nebulizer device included in the Amikacin product. Bayer was responsible for most clinical development and commercialization activities andcosts, all activities and costs to support worldwide regulatory filings, approvals and related activities, further development of Amikacin Inhale and finalproduct packaging and distribution. The termination of this agreement followed Bayer’s announcement in November 2017 that the Phase 3 Amikacin Inhaleclinical program for the treatment of intubated and mechanically ventilated patients with Gram-negative pneumonia did not meet its primary endpoint or keysecondary endpoints.Under this collaboration, we received an upfront payment of $40.0 million (which was paid to us in 2007) and milestone payments totaling$30.0 million (the last of which was paid to us in 2013). As a result of the termination of the agreement, we recognized the remaining $16.8 million ofdeferred revenue related to this arrangement in the three months ended December 31, 2017.Baxalta Incorporated: HemophiliaWe are a party to an exclusive research, development, license and manufacturing and supply agreement with Baxalta Incorporated (Baxalta), asubsidiary of Shire plc, entered into in September 2005 to develop products designed to improve therapies for Hemophilia A patients using our PEGylationtechnology. Under the terms of the agreement, we are entitled to research and development funding for our active programs, which are now complete forFactor VIII, and are responsible for supplying Baxalta with its requirements of our proprietary materials. Baxalta is responsible for all clinical development,regulatory, and commercialization expenses. The agreement is terminable by the parties under customary conditions.This Hemophilia A program includes ADYNOVATE®, which was approved by the FDA in November 2015 for use in adults and adolescents, aged 12years and older, who have Hemophilia A, and is now marketed in the U.S. As a result of the FDA’s approval, we earned a $10.0 million developmentmilestone in November 2015. Under the terms of this agreement, we are also entitled to a $10.0 million development milestone due upon marketingauthorization in the EU, which was achieved in January 2018. In addition, we are entitled to sales milestones upon achievement of annual sales targets androyalties based on annual worldwide net sales of products resulting from this agreement. In October 2017, we entered into a right to sublicense agreement with Baxalta under which we granted to Baxalta the right to grant a nonexclusivesublicense to certain patents that were previously exclusively licensed to Baxalta under our 2005 agreement. Under the right to sublicense agreement,Baxalta paid us $12.0 million in November 2017 and agreed to pay us single digit royalty payments based upon net sales of the products covered under thesublicense throughout the term of the agreement. We determined that this right to sublicense agreement should be considered a material modification of the existing arrangement described above. Wehave identified our grant of the right to sublicense and our ongoing obligation to supply PEGylation materials specified in the 2005 agreement as theundelivered units of accounting in the arrangement. We made our best estimates of the selling price of these deliverable and recognized the $11.0 millionallocated to the right to sublicense and allocated $1.0 million to our ongoing supply obligation unit of accounting. As of December 31, 2017, we havedeferred revenue of approximately $1.0 million related to this agreement, which we expect to recognize through January 2028, the estimated end of oursupply obligations under the arrangement.MAP Pharmaceuticals, Inc.: SEMPRANA®In August 2006, we entered into a restated and amended license agreement with MAP Pharmaceuticals, Inc. (MAP) under which we granted a license totechnology used by MAP in the development of its drug candidate SEMPRANA®, a potential treatment for chronic migraine headache. Under ouragreement, we are entitled to development milestone payments, royalties and a share of sublicensing payments received by MAP. In January 2011, MAPannounced a collaboration with Allergan, Inc. (Allergan) to co-promote SEMPRANA®, under which MAP has received upfront and sublicensing paymentstotaling $80.0 million from Allergan. In 2013, Allergan acquired MAP and MAP became a wholly-owned subsidiary of Allergan.In January 2015, we filed a breach of contract action against Allergan and MAP. In December 2017, we, Allergan and MAP entered into a SettlementAgreement and Release. Pursuant to this agreement, Allergan paid Nektar $15.0 million in December 2017 in exchange for relief of any claims related to ourshare of payments received by MAP from Allergan as well as a specified development milestone payment due to Nektar. We have no continuing performanceobligations under the MAP agreement. As a result, in the year ended December 31, 2017, we recognized $11.0 million as license revenue related to our shareof payments due to us under the MAP agreement and recorded the remaining $4.0 million, which primarily represents the reimbursement of legal88expenses, as a gain on settlement recorded in general and administrative expenses. As of December 31, 2017, we have no deferred revenue related to thisagreement.Amgen, Inc.: Neulasta®In October 2010, we amended and restated an existing supply and license agreement by entering into a supply, dedicated suite and manufacturingguarantee agreement (the amended and restated agreement) and a license agreement with Amgen Inc. and Amgen Manufacturing, Limited (together referredto as Amgen). Under the terms of the amended and restated agreement, we guarantee the manufacture and supply of our proprietary PEGylation materials(Polymer Materials) to Amgen in an existing manufacturing suite to be used exclusively for the manufacture of Polymer Materials for Amgen (theManufacturing Suite) in our manufacturing facility in Huntsville, Alabama (the Facility). This supply arrangement is on a non-exclusive basis (other than theuse of the Manufacturing Suite and certain equipment) whereby we are free to manufacture and supply the Polymer Materials to any other third party andAmgen is free to procure the Polymer Materials from any other third party. Under the terms of the amended and restated agreement, we received a $50.0million payment in the fourth quarter of 2010 in return for our guaranteeing the supply of certain quantities of Polymer Materials to Amgen includingwithout limitation the Additional Rights described below and manufacturing fees that are calculated based on fixed and variable components applicable tothe Polymer Materials ordered by Amgen and delivered by us. Amgen has no minimum purchase commitments. If quantities of the Polymer Materials orderedby Amgen exceed specified quantities, significant additional payments become payable to us in return for our guaranteeing the supply of additionalquantities of the Polymer Materials.The term of the amended and restated agreement ends on October 29, 2020. In the event we become subject to a bankruptcy or insolvency proceeding,we cease to own or control the Facility, we fail to manufacture and supply or certain other events, Amgen or its designated third party will have the right toelect, among certain other options, to take title to the dedicated equipment and access the Facility to operate the Manufacturing Suite solely for the purposeof manufacturing the Polymer Materials. Amgen may terminate the amended and restated agreement for convenience or due to an uncured material default byus.As of December 31, 2017, we have deferred revenue of approximately $14.2 million related to this agreement, which we expect to recognize throughOctober 2020, the estimated end of our obligations under this agreement.AstraZeneca AB: MOVANTIK® (naloxegol oxalate), previously referred to as naloxegol and NKTR-118, and MOVANTIK® fixed-dose combination program,previously referred to as NKTR-119In September 2009, we entered into an agreement with AstraZeneca AB (AstraZeneca) under which we granted AstraZeneca a worldwide, exclusivelicense under our patents and other intellectual property to develop, market, and sell MOVANTIK® and MOVANTIK® fixed-dose combination program.AstraZeneca is responsible for all research, development and commercialization and is responsible for all drug development and commercialization decisionsfor MOVANTIK® and the MOVANTIK® fixed-dose combination program. AstraZeneca paid us an upfront payment of $125.0 million, which we received inthe fourth quarter of 2009 and which was fully recognized as of December 31, 2010. In addition, we have received the payments described further belowbased on development events related to MOVANTIK® completed solely by AstraZeneca. We are entitled to receive up to $75.0 million of commercial launchcontingent payments related to the MOVANTIK® fixed-dose combination program, based on development events to be pursued and completed solely byAstraZeneca. In addition, we are entitled to significant and escalating double-digit royalty payments and sales milestone payments based on annualworldwide net sales of MOVANTIK® and MOVANTIK® fixed-dose combination products.On September 16, 2014, the United States Food and Drug Administration (FDA) approved MOVANTIK® for the treatment of opioid-inducedconstipation (OIC) in adult patients with chronic, non-cancer pain. On December 9, 2014, AstraZeneca announced that MOVENTIG® (the naloxegol brandname in the European Union or EU) had been granted Marketing Authorisation by the European Commission (EC) for the treatment of opioid-inducedconstipation (OIC) in adult patients who have had an inadequate response to laxative(s). In March 2015, we received and recognized a $100.0 million non-refundable payment resulting from the U.S. commercial launch of MOVANTIK®. In March 2015, we agreed to pay AstraZeneca a total of $10.0 million tofund U.S. television advertising in consideration for certain additional commercial information rights. We recorded this $10.0 million obligation as a liabilityand made the initial $5.0 million payment to AstraZeneca in July 2015 and the remaining $5.0 million payment in July 2016. We determined that this $10.0million obligation should be recorded as a reduction of revenue, which we recorded in 2015. In August 2015, we received and recognized as revenue anadditional $40.0 million non-refundable payment triggered by the first commercial sale of MOVENTIG® in Germany.On March 1, 2016, AstraZeneca announced that it had entered into an agreement with ProStrakan Group plc, a subsidiary of Kyowa Hakko Kirin Co.Ltd. (Kirin), granting Kirin exclusive marketing rights to MOVENTIG® in the EU, Iceland, Liechtenstein, Norway and Switzerland. Under the terms ofAstraZeneca’s agreement with Kirin, Kirin made a $70.0 million upfront payment to AstraZeneca and will make additional payments based on achievingmarket access milestones, tiered net sales royalties, as well as sales milestones. Under our license agreement with AstraZeneca, we will share the upfrontpayment, market access milestones,89royalties and sales milestones from Kirin with AstraZeneca receiving 60% and Nektar receiving 40%. This payment sharing arrangement is in lieu of otherroyalties payable by AstraZeneca to us and a portion of the sales milestones as described below. Our 40% share of royalty payments made by Kirin toAstraZeneca will be financially equivalent to us receiving high single-digit to low double-digit royalties dependent on the level of Kirin’s net sales. Kirin’sMOVENTIG® net sales will be included for purposes of achieving the annual global sales milestones payable to us by AstraZeneca and will also be includedfor purposes of determining the applicable ex-U.S. royalty rate, from the tier schedule in our AstraZeneca license agreement, that will be applied to ex-U.S.sales outside of the Kirin territory. The global sales milestones under our license agreement with AstraZeneca will be reduced in relation to the amount ofKirin MOVENTIG® net sales that contribute to any given annual sales milestone target. As a result, in April 2016, we received 40% (or $28.0 million) of the$70.0 million payment received by AstraZeneca from Kirin. In the years ended December 31, 2017 and 2016, we recognized a total of $4.6 million and $33.0million, respectively, related to our share of such license-related payments made to AstraZeneca. As of December 31, 2017, we do not have deferred revenuerelated to our agreement with AstraZeneca.Daiichi Sankyo Europe GmbH: ONZEALDTM (etirinotecan pegol), also referred to as NKTR-102In December 2017, Daiichi Sankyo Europe GmbH (Daiichi) terminated our collaboration and license agreement made effective in May 2016, underwhich we granted Daiichi exclusive commercialization rights in the European Economic Area, Switzerland, and Turkey (collectively, the European Territory)to ONZEALDTM (etirinotecan pegol). Daiichi was responsible for all commercialization activities in the European Territory and we were responsible forsupplying Daiichi with ONZEALDTM and for funding and conducting a Phase 3 confirmatory trial in patients with advanced breast cancer who have brainmetastases, which was initiated in the fourth quarter of 2016. Daiichi terminated the agreement after the European Medicines Agency’s Committee forMedicinal Products for Human Use confirmed in November 2017 that it declined the conditional marketing authorization application for ONZEALDTM inthe EU. Under the terms of the agreement, Daiichi paid us a $20.0 million up-front payment in August 2016, of which $12.5 million was refundable to Daiichiif conditional approval was not achieved and the agreement was terminated. This $12.5 million contingent termination payment from us to Daiichi wasrecorded in our liability related to refundable upfront payment balance in our Consolidated Balance Sheet at December 31, 2016 and was paid to Daiichi inDecember 2017.In 2016, we allocated the $7.5 million non-refundable portion of the $20.0 million upfront payment from Daiichi to the license grant and ourdevelopment service deliverables based on their relative estimated selling prices. As a result, we recognized $3.7 million of revenue in 2016 from thisarrangement, primarily related to the delivery of the license. As a result of the termination of the arrangement, we recognized the remaining $3.2 million ofdeferred revenue in the three months ended December 31, 2017. Roche: PEGASYS® and MIRCERA®In February 2012, we entered into a toll-manufacturing agreement with Roche under which we agreed to manufacture the proprietary PEGylationmaterial used by Roche to produce MIRCERA®. Roche entered into the toll-manufacturing agreement with the objective of establishing us as a secondaryback-up supply source on a non-exclusive basis. Under the terms of our toll-manufacturing agreement, Roche paid us a total of $27.0 million, includingamounts for the delivery of specified quantities of PEGylation materials, all of which were completed as of January 2013. In addition, in 2013, we deliveredadditional quantities of PEGylation materials used by Roche to produce PEGASYS® and MIRCERA® for total consideration of $18.6 million. As ofDecember 31, 2016, we no longer had any continuing manufacturing or supply obligations under this MIRCERA® agreement and, therefore, we have nodeferred revenue related to this agreement.In February 1997, we entered into a license, manufacturing and supply agreement with Roche, under which we granted Roche a worldwide, exclusivelicense to certain intellectual property related to our proprietary PEGylation materials used in the manufacture and commercialization of PEGASYS®. Ourperformance obligations under this PEGASYS® agreement ended on December 31, 2015.Bristol-Myers Squibb: NKTR-214On September 21, 2016, we entered into a Clinical Trial Collaboration Agreement (Clinical Trial Agreement) with Bristol-Myers Squibb Company(BMS), pursuant to which we and BMS collaborated to conduct Phase 1/2 clinical trials evaluating our IL-2-based CD122-biased agonist, known as NKTR-214, and BMS’ human monoclonal antibody that binds PD-1, known as Opdivo® (nivolumab), as a potential combination treatment regimen in five tumortypes and eight indications, and such other clinical trials evaluating the combined therapy as may be mutually agreed upon by the parties (each, aCombination Therapy Trial).We acted as the sponsor of each Combination Therapy Trial. Under the Clinical Trial Agreement, BMS was responsible for 50% of all out-of-pocketcosts reasonably incurred in connection with third party contract research organizations, laboratories, clinical90sites and institutional review boards. We recorded cost reimbursement payments to us from BMS as a reduction to research and development expense and wehave recorded a total of $7.8 million of such reimbursements in the year ended December 31, 2017 and since the inception of our collaboration. Each partywas otherwise responsible for its own internal costs, including internal personnel costs, incurred in connection with each Combination Therapy Trial. Nektarand BMS used commercially reasonable efforts to manufacture and supply NKTR-214 and Opdivo® (nivolumab), respectively, for each CombinationTherapy Trial with each party bearing its own costs related thereto.Ownership of, and global commercial rights to, NKTR-214 remain solely with us under the Clinical Trial Agreement. If we wish to license the right tocommercialize NKTR-214 in one of certain major market territories prior to September 30, 2018 (Exclusivity Expiration Date), we must first negotiate withBMS, for a period of three months (Negotiation Period), to grant an exclusive license to develop and commercialize NKTR-214 in any of these major marketterritories. If we do not reach an agreement with BMS for an exclusive license within the Negotiation Period, we will be free to license any right to NKTR-214to other parties in any territory worldwide except that in the event that we receive a license offer from a third party during a period of 90 calendar days afterthe end of the Negotiation Period, we will provide BMS ten business days to match the terms of such third-party offer. After the Exclusivity Expiration Date,we are free to license NKTR-214 without any further obligation to BMS. Each party grants to the other party a non-exclusive, worldwide (subject to certainexceptions in the case of the license granted by BMS), non-transferable and royalty-free research and development license to such licensing party’s patentrights, technology and regulatory documentation to use its compound solely to the extent necessary to discharge its obligations under the Clinical TrialAgreement with respect to the conduct of the Combination Therapy Trials. The Clinical Trial Agreement will be superseded and replaced by the Strategic Collaboration Agreement entered into between us and BMS onFebruary 13, 2018 (BMS Collaboration Agreement), which is summarized in Note 14, if and when the BMS Collaboration Agreement becomes effective.OtherIn addition, as of December 31, 2017, we have a number of other collaboration agreements, including with our collaboration partners UCB andHalozyme, under which we are entitled to up to a total of $45.5 million of development milestones upon achievement of certain development objectives, aswell as sales milestones upon achievement of annual sales targets and royalties based on net sales of commercialized products, if any. However, given thecurrent phase of development of the potential products under these collaboration agreements, we cannot estimate the probability or timing of achieving thesemilestones. As of December 31, 2017, we have deferred revenue of approximately $2.9 million related to these other collaboration agreements, which weexpect to recognize through 2020, the estimated end of our obligations under those agreements. Note 11 — Stock-Based CompensationWe issue stock-based awards from our equity incentive plans, which are more fully described in Note 9. Stock-based compensation expense wasrecognized as follows (in thousands): Year Ended December 31, 2017 2016 2015 Cost of goods sold $2,333 $1,620 $1,142 Research and development 21,252 13,093 9,207 General and administrative 13,030 11,137 9,320 Total stock-based compensation $36,615 $25,850 $19,669As of December 31, 2017, total unrecognized compensation costs of $211.8 million related to unvested stock-based compensation arrangements areexpected to be recognized as expense over a weighted-average period of 2.1 years.91Black-Scholes AssumptionsThe following table lists the Black-Scholes option-pricing model assumptions used to calculate the fair value of employee and director stock options: Year Ended December 31, 2017 2016 2015 Average risk-free interest rate 2.0% 1.4% 1.6%Dividend yield 0.0% 0.0% 0.0%Average volatility factor 54.2% 51.7% 50.8%Average weighted average expected life 5.3 years 5.3 years 5.3 yearsThe average risk-free interest rate is based on the U.S. treasury yield curve in effect at the time of grant for periods commensurate with the expected lifeof the stock-based award. We have never paid dividends, nor do we expect to pay dividends in the foreseeable future; therefore, we used a dividend yield of0.0%. Our estimate of expected volatility is based on the daily historical trading data of our common stock at the time of grant over a historical periodcommensurate with the expected life of the stock-based award. We estimated the weighted-average expected life based on the contractual and vesting termsof the stock options, as well as historical cancellation and exercise data.Stock-based compensation expense resulting from our ESPP was not significant in the years ended December 31, 2017, 2016, and 2015.Summary of Stock Option ActivityThe table below presents a summary of stock option activity under our equity incentive plans (in thousands, except for price per share and contractuallife information): NumberofShares Weighted-AverageExercisePriceper Share Weighted-AverageRemainingContractualLife(in Years) AggregateIntrinsicValue(1) Outstanding at December 31, 2016 19,413 $12.01 Options granted 5,322 40.56 Options exercised (5,284) 10.88 Options forfeited & canceled (625) 13.69 Outstanding at December 31, 2017 18,826 $20.35 5.15 $741,257 Exercisable at December 31, 2017 10,504 $11.95 3.57 $501,818 (1)Aggregate intrinsic value represents the difference between the exercise price of the option and the closing market price of our common stock onDecember 31, 2017.The weighted-average grant-date fair value per share of options granted during the years ended December 31, 2017, 2016, and 2015 was $20.08,$6.54, and $6.55, respectively. The total intrinsic value of options exercised during the years ended December 31, 2017, 2016, and 2015 was $84.0 million,$17.9 million, and $20.5 million, respectively. The estimated fair value of options vested during the years ended December 31, 2017, 2016, and 2015 was$19.3 million, $16.7 million, and $16.8 million, respectively.92Summary of RSU ActivityA summary of RSU award activity is as follows (in thousands except for per share amounts): Units Issued Weighted-AverageGrantDate FairValue AggregateIntrinsicValue(1) Balance at December 31, 2016 2,248 $13.53 Granted 1,405 54.14 Vested and released (875) 14.05 Forfeited and canceled (200) 13.14 Balance at December 31, 2017 2,578 $35.52 $153,941 (1)Aggregate intrinsic value represents the difference between the grant price of the award, which is zero, and the closing market price of our commonstock on December 31, 2017.Note 12 — Income TaxesLoss before provision for income taxes includes the following components (in thousands): Year Ended December 31, 2017 2016 2015 Domestic $(97,938) $(155,375) $(81,931)Foreign 1,862 2,727 1,260 Loss before provision for income taxes $(96,076) $(152,648) $(80,671) Provision for Income TaxesThe provision for income taxes consists of the following (in thousands): Year Ended December 31, 2017 2016 2015 Current: Federal $— $— $— State 1 (1) (1)Foreign 580 992 529 Total Current 581 991 528 Deferred: Federal — — — State — — — Foreign 35 (115) (22)Total Deferred 35 (115) (22)Provision for income taxes $616 $876 $506 93Income tax provision related to continuing operations differs from the amount computed by applying the statutory income tax rate of 35% to pretaxloss as follows (in thousands): Year Ended December 31, 2017 2016 2015 U.S. federal provision (benefit) At statutory rate $(33,627) $(53,427) $(28,235)Tax law changes 248,155 — — Non-cash interest expense on liability related to sale of future royalties 6,604 6,899 7,217 Non-deductible officers' compensation 2,547 220 184 Change in valuation allowance (186,124) 51,981 22,210 Stock-based compensation (20,665) 528 674 Sale of future royalties (8,236) — — Research credits (8,038) (4,543) (4,529)Foreign tax deduction — — 1,773 Other — (782) 1,212 Provision for income taxes $616 $876 $506Tax Law ChangesThe U.S. Tax Cuts and Jobs Act (the Tax Act) was enacted on December 22, 2017. The Tax Act reduces the U.S. federal corporate tax rate from 35% in2017 to 21% in 2018, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred andcreates new taxes on certain foreign sourced earnings. At December 31, 2017, we have not completed our accounting for the tax effects of enactment of theTax Act; however, in certain cases, as described below, we have made a reasonable estimate of the effects on our existing deferred tax balances and the one-time transition tax.Deferred Tax Assets and LiabilitiesDeferred income taxes reflect the net tax effects of loss and credit carryforwards and temporary differences between the carrying amount of assets andliabilities for financial reporting purposes and the amounts used for income tax purposes. We remeasured certain deferred tax assets and liabilities based onthe rates at which they are expected to reverse in the future, which includes the change in the federal rate to 21%. Significant components of our deferred taxassets for federal and state income taxes are as follows (in thousands): December 31, 2017 2016 Deferred tax assets: Net operating loss carryforwards $364,864 $508,406 Research and other credits 94,103 74,917 Stock-based compensation 14,552 26,357 Property, plant and equipment 6,848 6,882 Reserves and accruals 5,659 12,269 Capitalized research expenses 5,497 11,587 Deferred revenue 3,796 23,035 Sale of future royalties — 1,611 Other 1,156 750 Deferred tax assets before valuation allowance 496,475 665,814 Valuation allowance for deferred tax assets (496,191) (665,514)Total deferred tax assets 284 300 Total deferred tax liabilities — — Net deferred tax assets $284 $300Realization of our deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Because of our lack ofU.S. earnings history, the net U.S. deferred tax assets have been fully offset by a valuation allowance. The valuation allowance decreased by $169.3 millionduring the year ended December 31, 2017 and increased by $52.5 million and $17.3 million during the years ended December 31, 2016 and 2015,respectively. The decrease in the valuation allowance for year ended December 31, 2017 is primarily due to the change in the federal rate. The valuationallowance includes approximately94$35.6 million of income tax benefit at both December 31, 2017 and December 31, 2016 related to stock-based compensation that will be included in incometax expense in our Consolidated Statement of Operations when realized.The one-time transition tax is based on our total post-1986 earnings and profits (E&P) that we previously deferred from U.S. income taxes. As ofDecember 31, 2017, we estimate that there is negative E&P on an aggregate basis and we have not recorded a provisional amount for any one-time transitiontax triggered by the Tax Act. We have not yet completed our calculation of the total post-1986 E&P for these foreign subsidiaries. Further, the transition taxis based in part on the amount of those earnings held in cash and other specified assets. This amount may change when we finalize the calculation of post-1986 foreign E&P previously deferred from U.S. federal taxation and finalize the amounts held in cash or other specified assets. No additional income taxeshave been provided for any remaining undistributed foreign earnings not subject to the transition tax, or any additional outside basis difference inherent inthese entities, as these amounts continue to be indefinitely reinvested in foreign operations. Net Operating Loss and Tax Credit CarryforwardsAs of December 31, 2017, we had a net operating loss carryforward for federal income tax purposes of approximately $1,610.3 million, portions ofwhich will begin to expire in 2018. As of December 31, 2017, we had a total state net operating loss carryforward of approximately $474.0 million, portionsof which will begin to expire in 2019. Utilization of some of the federal and state net operating loss and credit carryforwards are subject to annual limitationsdue to the “change in ownership” provisions of the Internal Revenue Code of 1986 and similar state provisions.We have federal research credits of approximately $64.0 million, which will begin to expire in 2019 and state research credits of approximately $33.3million which have no expiration date. We have federal orphan drug credits of $17.7 million which will begin to expire in 2026. These tax credits are subjectto the same limitations discussed above.Unrecognized tax benefitsWe have incurred net operating losses since inception. Our policy is to include interest and penalties related to unrecognized tax benefits, if any,within the provision for income taxes in the consolidated statements of operations. If we are eventually able to recognize our uncertain positions, oureffective tax rate may be reduced. We currently have a full valuation allowance against our U.S. net deferred tax asset which would impact the timing of theeffective tax rate benefit should any of these uncertain tax positions be favorably settled in the future. Any adjustments to our uncertain tax positions wouldresult in an adjustment of our net operating loss or tax credit carry forwards rather than resulting in a cash outlay. The decrease in the unrecognized taxbenefits in 2015 primarily relates to a California Supreme Court decision relating to the calculation of apportionment of income.We file income tax returns in the U.S., California, Alabama, and India. Because of net operating losses and research credit carryovers, substantially allof our domestic tax years remain open and subject to examination. We are currently under examination in India for the fiscal years ending 2009 and 2016.We have the following activity relating to unrecognized tax benefits (in thousands): December 31, 2017 2016 2015 Beginning balance $18,413 $17,384 $27,522 Tax positions related to current year Additions: Federal 1,206 530 529 State 1,666 499 443 Reductions — — — Tax positions related to prior year Additions: Federal — — — State — — — Foreign — — — Reductions (802) — (11,110)Settlements — — — Lapses in statute of limitations — — — Ending balance $20,483 $18,413 $17,38495Although it is reasonably possible that certain unrecognized tax benefits may increase or decrease within the next twelve months, we do not anticipateany significant changes to unrecognized tax benefits over the next twelve months. During the years ended December 31, 2017, 2016 and 2015, no significantinterest or penalties were recognized relating to unrecognized tax benefits.Note 13 — Segment ReportingWe operate in one business segment which focuses on applying our technology platforms to improve the performance of established drugs and todevelop novel drug candidates. Our business offerings have similar economics and other characteristics, including the nature of products and manufacturingprocesses, types of customers, distribution methods and regulatory environment. We are comprehensively managed as one business segment by our ChiefExecutive Officer. Our revenue is derived primarily from clients in the pharmaceutical and biotechnology industries. Lilly and UCB represented 42% and 12% of ourrevenue, respectively, for the year ended December 31, 2017. Revenue from AstraZeneca, UCB, Ophthotech and Roche represented 29%, 21%, 19% and 11%of our revenue, respectively, for the year ended December 31, 2016. Revenue from AstraZeneca and UCB represented 57% and 13% of our revenue,respectively, for the year ended December 31, 2015 .Revenue by geographic area is based on the locations of our partners. The following table sets forth revenue by geographic area (in thousands): Year Ended December 31, 2017 2016 2015 United States $190,810 $39,147 $40,400 Europe 116,901 126,289 190,384 Total revenue $307,711 $165,436 $230,784 At December 31, 2017, $41.7 million, or approximately 88%, of the net book value of our property, plant and equipment was located in the UnitedStates and $5.8 million, or approximately 12%, was located in India. At December 31, 2016, $48.8 million, or approximately 74%, of the net book value ofour property, plant and equipment was located in the United States, $10.4 million, or approximately 16% was located at contract manufacturers in Germanyand the Netherlands, $5.6 million, or approximately 9%, was located in India, and $0.8 million or approximately 1%, was located in other countries.Note 14 — Subsequent EventOn February 13, 2018, we entered into the BMS Collaboration Agreement with BMS, pursuant to which we and BMS will jointly develop NKTR-214,including, without limitation, in combination with BMS’s Opdivo® (nivolumab) and Opdivo® plus Yervoy® (ipilimumab), and other compounds of BMS, usor any third party. The parties have agreed to jointly commercialize NKTR-214 on a worldwide basis. BMS will pay us a non-refundable upfront cashpayment of $1.0 billion. We are eligible to receive additional cash payments of a total of up to $1.43 billion upon achievement of certain development andregulatory milestones and a total of up to $350.0 million upon achievement of certain sales milestones. We will book all worldwide sales and revenue forNKTR-214. We will share global commercialization profits and losses with BMS for NKTR-214, with Nektar sharing 65% and BMS sharing 35% of the netprofits and losses. BMS will lead commercialization for combinations of NKTR-214 with BMS proprietary medicines, and we will lead all othercommercialization efforts for NKTR-214. We will have the final decision-making authority regarding the pricing for NKTR-214. NKTR-214 will be sold on astand-alone basis and there will be no fixed-dose combinations or co-packaging without the consent of both parties. Under the BMS CollaborationAgreement, we and BMS will collaborate to develop and conduct clinical studies of NKTR-214 pursuant to a joint development plan, which initiallyincludes a series of registration-enabling trials in more than 20 indications in nine tumor types and may be updated and expanded only upon mutualagreement of the parties. The parties will share the development costs for NKTR-214 in combination regimens based on each party’s relative ownershipinterest in the compounds included in the regimens.Pursuant to a Share Purchase Agreement entered into by us and BMS on February 13, 2018 (Purchase Agreement), BMS has also agreed to purchase8,284,600 shares of our common stock for total cash consideration of $850.0 million, or $102.60 per share. The closing of the share purchase is subject to theexpiration or early termination of the waiting period (and any extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and othercustomary closing conditions. The closings of the BMS Collaboration Agreement and the Purchase Agreement will be simultaneous and are expected tooccur during the second quarter of 2018. 96Note 15 — Selected Quarterly Financial Data (Unaudited)The following table sets forth certain unaudited quarterly financial data. In our opinion, the unaudited information set forth below has been preparedon the same basis as our audited information and includes all adjustments necessary to present fairly the information set forth herein. We have experiencedfluctuations in our quarterly results and expect these fluctuations to continue in the future. Due to these and other factors, we believe that quarter-to-quartercomparisons of our operating results will not be meaningful, and you should not rely on our results for any one quarter as an indication of our futureperformance. Certain items previously reported in specific financial statement captions have been reclassified to conform to the current period presentation.Such reclassifications have not materially impacted previously reported total revenues, operating loss or net loss. All data is in thousands except per shareinformation. Year Ended December 31, 2017 Year Ended December 31, 2016 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Product sales $4,756 $15,693 $4,448 $7,791 $14,099 $12,867 $14,698 $13,690 Total revenue $24,728 $34,589 $152,928 $95,466 $58,882 $32,768 $36,336 $37,450 Cost of goods sold $6,131 $8,989 $5,674 $9,753 $8,870 $7,708 $7,033 $6,604 Research and development expenses $61,058 $60,260 $65,714 $81,429 $49,268 $52,350 $51,951 $50,232 Operating income (loss) $(54,437) $(50,656) $69,485 $(24,034) $(9,484) $(38,325) $(32,901) $(32,145)Net income (loss) $(63,866) $(59,871) $60,871 $(33,826) $(19,498) $(48,603) $(43,224) $(42,199)Net income (loss) per share(1) Basic $(0.42) $(0.39) $0.39 $(0.21) $(0.14) $(0.36) $(0.32) $(0.28)Diluted $(0.42) $(0.39) $0.37 $(0.21) $(0.14) $(0.36) $(0.32) $(0.28) (1)Quarterly loss per share amounts may not total to the year-to-date loss per share due to rounding. 97Item 9.Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNone. Item 9A.Controls and ProceduresDisclosure Controls and ProceduresWe maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Actof 1934 (Exchange Act) reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that suchinformation is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allowtimely decisions regarding required financial disclosure.As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management,including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls andprocedures pursuant to Exchange Act Rule 13a-15. Based upon, and as of the date of, this evaluation, the Chief Executive Officer and the Chief FinancialOfficer concluded that our disclosure controls and procedures were effective. Accordingly, management believes that the financial statements included in thisreport fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.Management’s Annual Report on Internal Control over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined inExchange Act Rule 13a-15(f). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance with GAAP.Our management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2017. In making its assessment ofinternal control over financial reporting, management used the criteria described in Internal Control — Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission (2013 Framework).Based on our evaluation under the framework described in Internal Control — Integrated Framework, our management concluded that our internalcontrol over financial reporting was effective as of December 31, 2017.The effectiveness of our internal control over financial reporting as of December 31, 2017 has been audited by Ernst & Young LLP, an independentregistered public accounting firm, as stated in their report, which is included herein.Changes in Internal Control Over Financial ReportingWe continuously seek to improve the efficiency and effectiveness of our internal controls. This results in refinements to processes throughout theCompany. There was no change in our internal control over financial reporting during the quarter ended December 31, 2017, which was identified inconnection with our management’s evaluation required by Exchange Act Rules 13a-15(f) and 15d-15(f) that has materially affected, or is reasonably likely tomaterially affect, our internal control over financial reporting.98Inherent Limitations on the Effectiveness of ControlsOur management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures orour internal control over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provideonly reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, noevaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. Theseinherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake.Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of thecontrol. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be noassurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate becauseof changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effectivecontrol system, misstatements due to error or fraud may occur and not be detected.Item 9B.Other InformationNone. 99PART III Item 10.Directors, Executive Officers and Corporate GovernanceInformation relating to our executive officers required by this item is set forth in Part I — Item 1 of this report under the caption “Executive Officers ofthe Registrant” and is incorporated herein by reference. The other information required by this Item is incorporated by reference from the definitive proxystatement for our 2018 Annual Meeting of Stockholders to be filed with the SEC pursuant to Regulation 14A (Proxy Statement) not later than 120 days afterthe end of the fiscal year covered by this Form 10-K under the captions “Corporate Governance and Board of Directors,” “Proposal 1 — Election of Directors”and “Section 16(a) Beneficial Ownership Reporting Compliance.” Joseph J. Krivulka, who had served as our director since March 2005, passed away onFebruary 17, 2018, resulting in a vacancy on the Board of Directors. The Board of Directors has not yet nominated an individual to fill this vacancy.Information regarding our audit committee financial expert will be set forth in the Proxy Statement under the caption “Audit Committee,” whichinformation is incorporated herein by reference.We have a Code of Business Conduct and Ethics applicable to all employees, including the principal executive officer, principal financial officer andprincipal accounting officer or controller, or persons performing similar functions. The Code of Business Conduct and Ethics is posted on our website atwww.nektar.com. Amendments to, and waivers from, the Code of Business Conduct and Ethics that apply to any of these officers, or persons performingsimilar functions, and that relate to any element of the code of ethics definition enumerated in Item 406(b) of Regulation S-K will be disclosed at the websiteaddress provided above and, to the extent required by applicable regulations, on a current report on Form 8-K.As permitted by SEC Rule 10b5-1, certain of our executive officers, directors and other employees have or may set up a predefined, structured stocktrading program with their broker to sell our stock. The stock trading program allows a broker acting on behalf of the executive officer, director or otheremployee to trade our stock during blackout periods or while such executive officer, director or other employee may be aware of material, nonpublicinformation, if the trade is performed according to a pre-existing contract, instruction or plan that was established with the broker when such executiveofficer, director or employee was not aware of any material, nonpublic information. Our executive officers, directors and other employees may also trade ourstock outside of the stock trading programs set up under Rule 10b5-1 subject to our securities trading policy.Item 11.Executive CompensationThe information required by this Item is included in the Proxy Statement and incorporated herein by reference.Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersThe information required by this Item is included in the Proxy Statement and incorporated herein by reference.Item 13.Certain Relationships and Related Transactions and Director IndependenceThe information required by this Item is included in the Proxy Statement and incorporated herein by reference.Item 14.Principal Accountant Fees and ServicesThe information required by this Item is included in the Proxy Statement and incorporated herein by reference. 100PART IV Item 15.Exhibits and Financial Statement Schedules (a)The following documents are filed as part of this report: (1)Consolidated Financial Statements:The following financial statements are filed as part of this Annual Report on Form 10-K under Item 8 “Financial Statements and Supplementary Data.” PageReports of Independent Registered Public Accounting Firm 65 Consolidated Balance Sheets at December 31, 2017 and 2016 67 Consolidated Statements of Operations for each of the three years in the period ended December 31, 2017 68 Consolidated Statements of Comprehensive Loss for each of the three years in the period ended December 31, 2017 69 Consolidated Statements of Stockholders’ Equity for each of the three years in the period ended December 31, 2017 70 Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2017 71 Notes to Consolidated Financial Statements 72 (2)Financial Statement Schedules:All financial statement schedules have been omitted because they are not applicable, or the information required is presented in our consolidatedfinancial statements and notes thereto under Item 8 of this Annual Report on Form 10-K. (3)Exhibits.Except as so indicated in Exhibit 32.1, the following exhibits are filed as part of, or incorporated by reference into, this Annual Report on Form 10-K. ExhibitNumber Description of Documents 2.1(1) Asset Purchase Agreement, dated October 20, 2008, by and between Nektar Therapeutics, a Delaware corporation, AeroGen, Inc., aDelaware corporation and wholly-owned subsidiary of Nektar Therapeutics, Novartis Pharmaceuticals Corporation, a Delaware corporation,and Novartis Pharma AG, a Swiss corporation.+ 3.1(2) Certificate of Incorporation of Inhale Therapeutic Systems (Delaware), Inc. 3.2(3) Certificate of Amendment of the Amended Certificate of Incorporation of Inhale Therapeutic Systems, Inc. 3.3(4) Certificate of Ownership and Merger of Nektar Therapeutics. 3.4(5) Certificate of Ownership and Merger of Nektar Therapeutics AL, Corporation with and into Nektar Therapeutics. 3.5(6) Amended and Restated Bylaws of Nektar Therapeutics. 4.1 Reference is made to Exhibits 3.1, 3.2, 3.3, 3.4, and 3.5. 4.2(4) Specimen Common Stock certificate. 4.3(7) Indenture dated October 5, 2015 by and between Nektar Therapeutics and Wilmington Trust, National Association, and TC Lending, LLCincluding the form of 7.75% Senior Secured Note due 2020. 10.1(8) 2000 Equity Incentive Employee Stock Purchase Plan, as amended and restated.++ 10.2(8) 2000 Non-Officer Equity Incentive Plan, as amended and restated.++ 10.3(8) 2008 Equity Incentive Plan, as amended and restated.++ 10.4(8) Discretionary Incentive Compensation Policy++ 101ExhibitNumber Description of Documents10.5(8) Amended and Restated Change of Control Severance Benefit Plan.++ 10.6(9) 2012 Performance Incentive Plan.++ 10.7(10) Forms of Stock Option Agreement, Performance Stock Option Agreement, Restricted Stock Unit Agreement and Performance RestrictedStock Unit Agreement under the 2012 Performance Incentive Plan.++ 10.8(11) 2017 Performance Incentive Plan.++ 10.9(25) Forms of Stock Option Agreement, Performance Stock Option Agreement, Non-Employee Director Stock Option Agreement, RestrictedStock Unit Agreement, Performance Restricted Stock Unit Agreement, and Non-Employee Director Restricted Stock Unit Agreement underthe 2017 Performance Incentive Plan.++ 10.10(12) Employee Stock Purchase Plan, as amended and restated.++ 10.11(13) Amended and Restated Compensation Plan for Non-Employee Directors.++ 10.12(14) 401(k) Retirement Plan.++ 10.13(15) Form of Severance Letter for executive officers of the company.++ 10.14(1) Amended and Restated Letter Agreement, executed effective on December 1, 2008, with Howard W. Robin.++ 10.15(1) Amended and Restated Letter Agreement, executed effective on December 1, 2008, with John Nicholson.++ 10.16(16) Letter Agreement, executed effective on December 10, 2009, with Stephen K. Doberstein, Ph.D.++ 10.17(17) Letter Agreement dated as of May 14, 2014, by and between Nektar Therapeutics and Ivan Gergel, M.D.++ 10.18(25) Separation and General Release Agreement dated as of December 20, 2017, by and between Nektar Therapeutics and Ivan Gergel, M.D.++ 10.19(15) Amended and Restated Built-to-Suit Lease between Nektar Therapeutics and BMR-201 Industrial Road LLC, dated August 17, 2004, asamended on January 11, 2005 and July 19, 2007. 10. 20(18) Lease Agreement dated August 4, 2017, as amended by the First Amendment to Lease dated as of August 29, 2017, by and between ARE-San Francisco No. 19, LLC and Nektar Therapeutics. 10.21(19) Settlement Agreement and General Release, dated June 30, 2006, by and between The Board of Trustees of the University of Alabama, TheUniversity of Alabama in Huntsville, Nektar Therapeutics AL, Corporation (a wholly-owned subsidiary of Nektar Therapeutics), NektarTherapeutics and J. Milton Harris. 10.22(1) Exclusive Research, Development, License and Manufacturing and Supply Agreement, by and among Nektar AL Corporation, BaxterHealthcare SA, and Baxter Healthcare Corporation, dated September 26, 2005, as amended.+ 10.23(1) Exclusive License Agreement, dated December 31, 2008, between Nektar Therapeutics, a Delaware corporation, and Novartis Pharma AG,a Swiss corporation.+ 10.24(16) Supply, Dedicated Suite and Manufacturing Guarantee Agreement, dated October 29, 2010, by and among Nektar Therapeutics, AmgenInc. and Amgen Manufacturing, Limited.+ 10.25(20) License Agreement by and between AstraZeneca AB and Nektar Therapeutics, dated September 20, 2009.+ 10.26(21) Collaboration and License Agreement dated as of May 30, 2016, by and between Daiichi Sankyo Europe GmbH and Nektar Therapeutics. 10.27(22) Clinical Trial Collaboration Agreement dated as of September 21, 2016, by and between Bristol-Myers Squibb Company and NektarTherapeutics 10.28(18) License Agreement effective as of August 23, 2017, by and between Eli Lilly and Company and Nektar Therapeutics. 10.29(7) Purchase Agreement dated September 30, 2015 by and among Nektar Therapeutics and TC Lending, LLC and TAO Fund, LLC. 10.30(7) Pledge and Security Agreement dated October 5, 2015 by and among Nektar Therapeutics and TC Lending, LLC. 102ExhibitNumber Description of Documents10.31(23) Purchase and Sale Agreement, dated as of February 24, 2012, between Nektar Therapeutics and RPI Finance Trust.+ 10.32(24) Amendment No. 1 to License Agreement dated effective as of August 8, 2013, by and between Nektar Therapeutics and AstraZeneca AB.+ 21.1(25) Subsidiaries of Nektar Therapeutics. 23.1(25) Consent of Independent Registered Public Accounting Firm. 24 Power of Attorney (reference is made to the signature page). 31.1(25) Certification of Nektar Therapeutics’ principal executive officer required by Rule 13a-14(a) or Rule 15d-14(a). 31.2(25) Certification of Nektar Therapeutics’ principal financial officer required by Rule 13a-14(a) or Rule 15d-14(a). 32.1* Section 1350 Certifications. 101** The following materials from Nektar Therapeutics’ Annual Report on Form 10-K for the year ended December 31, 2017, formatted inXBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii)Consolidated Statements of Comprehensive Loss, (iv) Consolidated Statements of Stockholders’ Equity, (v) Consolidated Statements ofCash Flows, and (vi) Notes to Consolidated Financial Statements. +Confidential treatment with respect to specific portions of this Exhibit has been requested, and such portions are omitted and have been filedseparately with the SEC.++Management contract or compensatory plan or arrangement.*Exhibit 32.1 is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended,or otherwise subject to the liability of that section, nor shall such exhibit be deemed to be incorporated by reference in any registration statement orother document filed under the Securities Act of 1933, as amended, or the Securities Exchange Act, except as otherwise stated in such filing.**XBRL information is filed herewith.(1)Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Annual Report on Form 10-K for the year ended December 31, 2008.(2)Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.(3)Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2000.(4)Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K, filed on January 23, 2003.(5)Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Annual Report on Form 10-K for the year ended December 31, 2009.(6)Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K, filed on April 15, 2014.(7)Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K, filed on October 6, 2015.(8)Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Annual Report on Form 10-K for the year ended December 31, 2011.(9)Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K, filed on June 17, 2015.(10)Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K filed on December 17, 2015.(11)Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K, filed on June 15, 2017.(12)Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K, filed on June 27, 2014.(13)Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Annual Report on Form 10-K for the year ended December 31, 2012.(14)Incorporated by reference to the indicated exhibit in Nektar Therapeutics Quarterly Report on Form 10-Q for the quarter ended June 30, 2004.(15)Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for the quarter ended September 30, 2007.(16)Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Annual Report on Form 10-K for the year ended December 31, 2010.(17)Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Annual Report on Form 10-K for the year ended December 31, 2014.103(18)Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for the quarter ended September 30, 2017.(19)Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.(20)Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for the quarter ended September 30, 2009.(21)Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2016.(22)Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for the quarter ended September 30, 2016.(23)Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for the quarter ended March 31, 2012.(24)Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for the quarter ended September 30, 2013. (25)Filed herewith.104Item 16.Form 10-K SummaryNone.105SIGNATURESPursuant to the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereuntoduly authorized, in the City and County of San Francisco, State of California on March 1, 2018. By:/s/ Gil M. Labrucherie Gil M. Labrucherie Senior Vice President and Chief Financial Officer By:/s/ JILLIAN B. THOMSEN Jillian B. Thomsen Senior Vice President, Finance and Chief AccountingOfficer 106POWER OF ATTORNEYKNOW ALL PERSON BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Gil M. Labrucherie andJillian B. Thomsen and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him orher and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and to file thesame, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connectiontherewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratify and confirming all that said attorneys-in-fact and agents,or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons in thecapacities and on the dates indicated: Signature Title Date /s/ Howard W. Robin Chief Executive Officer, President and Director March 1, 2018Howard W. Robin (Principal Executive Officer) /s/ Gil M. Labrucherie Senior Vice President and Chief Financial Officer March 1, 2018Gil M. Labrucherie (Principal Financial Officer) /s/ Jillian B. Thomsen Senior Vice President, Finance and Chief AccountingOfficer March 1, 2018Jillian B. Thomsen (Principal Accounting Officer) /s/ Robert B. Chess Director, Chairman of the Board of Directors March 1, 2018Robert B. Chess /s/ Jeffrey R. Ajer Director March 1, 2018Jeffrey R. Ajer /s/ R. Scott Greer Director March 1, 2018R. Scott Greer /s/ Christopher A. Kuebler Director March 1, 2018Christopher A. Kuebler /s/ Lutz Lingnau Director March 1, 2018Lutz Lingnau /s/ Roy A. Whitfield Director March 1, 2018Roy A. Whitfield /s/ Dennis L. Winger Director March 1, 2018Dennis L. Winger 107Exhibit 10.9Nektar Therapeutics2017 Performance Incentive PlanStock Option Agreement(US Optionholders) Pursuant to the Stock Option Grant Notice, which may be in such form (including electronic form) as prescribed by theAdministrator from time to time (“Option Notice”), and this Stock Option Agreement, Nektar Therapeutics (the “Company”) hasgranted to you, as of the date of grant specified in the Option Notice (the “Date of Grant”), an option under its 2017 PerformanceIncentive Plan (the “Plan”) to purchase the number of shares of the Company’s Common Stock indicated in the Option Notice at theexercise price indicated in the Option Notice. Defined terms not explicitly defined in this Stock Option Agreement but defined in thePlan shall have the same definitions as in the Plan.The details of your option are as follows:1.Vesting. Subject to the limitations contained herein, your option will vest as provided in the OptionNotice, provided that vesting will cease upon the termination of your continuous employment or service with the Company or any ofits Subsidiaries (your “Continuous Service”). Notwithstanding the foregoing, in the event your Continuous Service is terminated as aresult of your death, your option shall become fully vested and exercisable as of the date of such termination.2.Number of Shares and Exercise Price. The number of shares subject to your option and your exerciseprice per share referenced in the Option Notice may be adjusted from time to time for capitalization adjustments, as provided in thePlan.3.Exercise Restriction for Non-Exempt Employees. If you are an employee eligible for overtimecompensation under the Fair Labor Standards Act of 1938, as amended (i.e., a “Non-Exempt Employee”), you may not exercise youroption until at least six (6) months following the Date of Grant, notwithstanding any other provision of your option. 4.Method of Payment. Payment of the exercise price is due in full upon exercise of all or any part of youroption. You may elect to make payment of the exercise price in one or more of the following forms:(a)In cash or by check;(b)Provided that at the time of exercise the Common Stock is publicly traded on anationally recognized stock exchange, and subject to such procedures as the Administrator may adopt, in cash by a broker-dealeracceptable to the Company to whom you have submitted an irrevocable notice of exercise; or1US_ACTIVE-100043006.1 (c) (i) by delivery of already-owned shares of Common Stock and that are valued at fairmarket value on the date of exercise (as determined under the Plan), or (ii) a reduction in the number of shares of Common Stockotherwise deliverable to you (valued at their fair market value on the exercise date, as determined under the Plan) pursuant to theexercise of the option. “Delivery” for these purposes and for purposes of any Required Tax Payments, in the sole discretion of theCompany at the time your option is exercised, shall include delivery to the Company of your attestation of ownership of such shares ofCommon Stock in a form approved by the Company. Notwithstanding the foregoing, your option may not be exercised by tender tothe Company of Common Stock to the extent such tender would constitute a violation of the provisions of any law, regulation oragreement restricting the redemption of the Company’s stock.5.Securities Law Compliance. Notwithstanding anything to the contrary contained herein, your optionmay not be exercised unless the shares issuable upon exercise of your option are then registered under the Securities Act or, if suchshares are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registrationrequirements of the Securities Act. The exercise of your option must also comply with other applicable laws and regulationsgoverning the option, and the option may not be exercised if the Company determines that the exercise would not be in materialcompliance with such laws and regulations.6.Execution of Documents. You hereby acknowledge and agree that the manner selected by theCompany by which you indicate your consent to your Grant Notice is also deemed to be your execution of your Grant Notice and ofthis Agreement. You further agree that such manner of indicating consent may be relied upon as your signature for establishing yourexecution of any documents to be executed in the future in connection with your Award. This Agreement shall be deemed to besigned by the Company and you upon the respective signing by the Company and you of the Grant Notice to which it is attached. 7.Term. The term of your option commences on the Date of Grant and expires upon the earliest of thefollowing:(a)three (3) months after the termination of your Continuous Service for any reason otherthan death or Disability, provided that (i) if during any part of such three (3)-month period the option is not exercisable solely becauseof the condition set forth in Section 5, the option shall not expire until the earlier of the Expiration Date indicated on the Option Noticeor until it shall have been exercisable for an aggregate period of three (3) months after the termination of your Continuous Service, and(ii) if (x) you are a Non-Exempt Employee, (y) you terminate your Continuous Service within six (6) months after the Date of Grantspecified in your Option Notice, and (z) you have vested in a portion of your option at the time of your termination of ContinuousService, your option shall not expire until the earlier of (A) the later of the date that is seven (7) months after the Date of Grantspecified in your Option Notice or the date that is three (3) months after the termination of your Continuous Service or (B) theExpiration Date;2 (b)twelve (12) months after the termination of your Continuous Service due to Disability;(c)eighteen (18) months after your death if (i) your Continuous Service terminates due todeath or (ii) your death occurs within three (3) months after your Continuous Service terminates for a reason other than death; or(d)the Expiration Date indicated in the Option Notice (which shall not be later than theeighth (8th) anniversary of the Date of Grant).For purposes of the option, “Disability” means a “permanent and total disability” within the meaning of Section22(e)(3) of the Code.Note, if you are a US taxpayer and your option is an incentive stock option, to obtain the federal income taxadvantages associated with an “incentive stock option,” the Code requires that at all times beginning on the Date of Grant of youroption and ending on the day three (3) months before the date of your option’s exercise, you must be an employee of the Company ora Subsidiary, except in the event of your death or Disability. The Company has provided for extended exercisability of your optionunder certain circumstances for your benefit but cannot guarantee that your option will necessarily be treated as an “incentive stockoption” if you continue to provide services to the Company or a Subsidiary as a consultant or director after your employmentterminates or if you otherwise exercise your option more than three (3) months after the date your employment terminates.8.Exercise.(a)You may exercise the vested portion of your option during its term by delivering aNotice of Exercise (in a form designated by the Company), or by completion of such other exercise procedures as may be prescribedby the Administrator from time to time, and payment of the exercise price to the Secretary of the Company, or to such other person asthe Company may designate, during regular business hours, together with such additional documents as the Company may thenrequire.(b)By exercising your option you agree that, as a condition to any exercise of your option,the Company may require you to arrange for the payment to the Company of any required tax withholding in connection with suchexercise as described in Section 11 below.(c)If your option is an incentive stock option, by exercising your option you agree that youwill notify the Company in writing within fifteen (15) days after the date of any disposition of any of the shares of the Common Stockacquired upon exercise of your option that occurs within two (2) years after the date of your option grant or within one (1) year aftersuch shares of Common Stock are transferred upon exercise of your option.9.Transferability. Your option is not transferable, except by will or by the laws of descent anddistribution, and is exercisable during your life only by you. 3 10.Option not a Service Contract. Your option is not an employment or service contract, and nothing inyour option shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ or service of theCompany or a Subsidiary, or of the Company or a Subsidiary to continue your employment or service. In addition, nothing in youroption shall obligate the Company or any Subsidiary, their respective shareholders, boards of directors, officers or employees tocontinue any relationship that you might have as an employee, director or consultant for the Company or any Subsidiary.11.Tax Obligations.(a) You are responsible for satisfaction of all federal, state, local and foreign tax withholding obligations of theCompany and its Subsidiaries, if any, which arise in connection with the option (the “Required Tax Payments”), including,without limitation, obligations arising upon (i) the exercise, in whole or in part, of the option, (ii) the transfer, in whole or inpart, of any shares acquired upon exercise of the option, (iii) the operation of any law or regulation providing for theimputation of interest, or (iv) the lapsing of any restriction with respect to any shares acquired upon exercise of theoption. No shares of Common Stock will be issued until the Company has received a definitive agreement or otherdocumentation satisfactory to the Company, in its sole discretion, that all Required Tax Payments have been or will besatisfied by you. Regardless of whether the Company properly withholds the full amount of such Required Tax Payments,you hereby acknowledge and agree that that all obligations with respect to the Required Tax Payments shall transfer in theirentirety from the Company to you and that such liability shall be ultimately your responsibility and liability.(b) You may elect to make payment of the Required Tax Payments in one or more of the following forms:(i) In cash or by check;(ii) Provided that at the time of exercise the Common Stock is publicly traded on a nationally recognizedstock exchange, and subject to such procedures as the Administrator may adopt, in cash by a broker-dealer acceptable to the Companyto whom you have submitted an irrevocable notice of exercise; or(iii) (x) by delivery of already-owned shares of Common Stock and that are valued at fair market value onthe date of exercise (as determined under the Plan), or (y) a reduction in the number of shares of Common Stock otherwise deliverableto you (valued at their fair market value on the exercise date, as determined under the Plan) pursuant to the exercise of the option. Shares of Common Stock to be delivered or withheld may not have a Fair Market Value in excess of the minimum amount of theRequired Tax Payments. Any fraction of a share of Common Stock which would be required to satisfy any such obligation shall bedisregarded and the remaining amount due shall be paid in cash by you. (c) You hereby acknowledge that you understand that you may suffer adverse tax consequences as a result of theexercise of the option or disposition of the shares. You hereby represent that you have consulted with any tax consultantsthe you deem advisable in connection4 with the exercise of the option or disposition of the shares and that you are not relying on the Company for any taxadvice.12.Employment Conditions. In accepting the option, you acknowledge that:(a) Any notice period mandated under any applicable laws shall not be treated as service for the purpose ofdetermining the vesting of the option; and your right to receive shares of Common Stock in settlement of the option after termination asan employee, if any, will be measured by the date of your termination as an employee and will not be extended by any notice periodmandated under the applicable law. Subject to the foregoing and the provisions of the Plan, the Company, in its sole discretion, shalldetermine whether your status as an employee or other service-provider has terminated and the effective date of such termination.(b) The vesting of the option shall cease upon, and no portion of the option shall become vested following, yourtermination as an employee or other service-provider for any reason except as may be explicitly provided by the Plan or this StockOption Agreement. Unless otherwise provided in the Plan or this Stock Option Agreement, the unvested portion of the option at thetime of your termination as an employee or other service-provider will be forfeited.(c) The Plan is established voluntarily by the Company. It is discretionary in nature and it may be modified,amended, suspended or terminated by the Company at any time, subject to Section 8.6.5 of the Plan.(d) The grant of the option is voluntary and occasional and does not create any contractual or other right toreceive future grants of options, or benefits in lieu of options, even if options have been granted repeatedly in the past.(e) All decisions with respect to future option grants, if any, will be at the sole discretion of the Company.(f) You are voluntarily participating in the Plan.(g) The option is an extraordinary item that does not constitute compensation of any kind for service rendered tothe Company (or any Subsidiary), and which is outside the scope of your employment contract, if any. In addition, the option is notpart of normal or expected compensation or salary for any purpose, including, but not limited to, calculating any severance, resignation,termination, redundancy, end-of-service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.(h) The future value of the underlying shares of Common Stock is unknown and cannot be predicted withcertainty. If you obtain shares upon settlement of the option, the value of those shares may increase or decrease.(i) No claim or entitlement to compensation or damages arises from termination of the option or diminution invalue of the option or shares of Common Stock acquired upon settlement of the option resulting from your termination of employmentor service (for any5 reason whether or not in breach of the local law) and you irrevocably release the Company and each Subsidiary from any such claimthat may arise. If, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen then, bysigning this Stock Option Agreement, you shall be deemed irrevocably to have waived your entitlement to pursue such a claim.13.General Provisions.(a)Successors and Assigns. Except as provided herein to the contrary, this Stock Option Agreement shallbe binding upon and inure to the benefit of the parties to this Stock Option Agreement, their respective successors and permittedassigns.(b)No Assignment. Except as otherwise provided in this Stock Option Agreement, you shall not assignany of your rights and obligations under this Stock Option Agreement without the prior written consent of the Company, whichconsent may be withheld in its sole discretion. The Company shall be permitted to assign its rights or obligations under this StockOption Agreement, but no such assignment shall release the Company of any obligations pursuant to this Stock Option Agreement.(c)Severability. The validity, legality or enforceability of the remainder of this Stock Option Agreementshall not be affected even if one or more of the provisions of this Stock Option Agreement shall be held to be invalid, illegal orunenforceable in any respect.(d)Administration. Any determination by the Administrator in connection with any question or issuearising under the Plan or this Stock Option Agreement shall be final, conclusive, and binding on you, the Company, and all otherpersons. (e)Headings. The section headings in this Stock Option Agreement are inserted only as a matter ofconvenience, and in no way define, limit or interpret the scope of this Stock Option Agreement or of any particular section. (f)Delivery of Documents and Notices. Any document relating to participation in the Plan, or any noticerequired or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this StockOption Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery through electronicdelivery at the e-mail address, if any, provided for you by the Company, or, upon deposit in the local postal service, by registered orcertified mail, or with a nationally recognized overnight courier service with postage and fees prepaid, addressed to the other party atthe address of such party set forth in this Stock Option Agreement or at such other address as such party may designate in writing fromtime to time to the other party.6 (i)Description of Electronic Delivery. The Plan documents, which may include but do not necessarily include: the Plan, theOption Notice, this Stock Option Agreement, and any reports of the Company provided generally to the Company’s shareholders, maybe delivered to you electronically. In addition, if permitted by the Company, you may deliver electronically this Stock OptionAgreement and Notice of Exercise called for by Section 8(a) to the Company or to such third party involved in administering the Planas the Company may designate from time to time. Such means of electronic delivery may include but do not necessarily include thedelivery of a link to a Company intranet or the internet site of a third party involved in administering the Plan, the delivery of thedocument via e-mail or such other means of electronic delivery specified by the Company.(ii)Consent to Electronic Delivery. You acknowledge that you have read Section 13(f)(i) of this StockOption Agreement and consent to the electronic delivery of the Plan documents and, if permitted by the Company, the delivery of thisStock Option Agreement and Notice of Exercise, as described in Section 13(f)(i). You acknowledge that you may receive from theCompany a paper copy of any documents delivered electronically at no cost to you by contacting the Company by telephone or inwriting. You further acknowledge that you will be provided with a paper copy of any documents if the attempted electronic deliveryof such documents fails. Similarly, you understand that you must provide the Company or any designated third party administratorwith a paper copy of any documents if the attempted electronic delivery of such documents fails. You may revoke your consent to theelectronic delivery of documents described in Section 13(f)(i) or may change the electronic mail address to which such documents areto be delivered (if you have provided an electronic mail address) at any time by contacting SOProcessing@nektar.com to notify theCompany of such revoked consent or revised e-mail address by telephone, postal service or electronic mail. Finally, you understandthat you are not required to consent to electronic delivery of documents described in Section 13(f)(i).14.Governing Plan Document. Your option is subject to all the provisions of the Plan, the provisions of which arehereby made a part of your option, and is further subject to all interpretations, amendments, rules and regulations which may from timeto time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of your option and thoseof the Plan, the provisions of the Plan shall control. This Stock Option Agreement is governed by the laws of the State of Delaware.15.Clawback Policy. Your option is subject to the terms of the Company’s recoupment, clawback or similar policyas it may be in effect from time to time, as well as any similar provisions of applicable law, any of which could in certain circumstancesrequire forfeiture of the option and repayment or forfeiture of any shares of Common Stock or other cash or property received withrespect to the option (including any value received from a disposition of the shares acquired upon exercise of the option). 7 Nektar Therapeutics2017 Performance Incentive PlanPerformance Stock Option Agreement Pursuant to the Stock Option Grant Notice, which may be in such form (including electronic form) as prescribed by theAdministrator from time to time (“Option Notice”), and this Performance Stock Option Agreement, Nektar Therapeutics (the“Company”) has granted to you, as of the date of grant specified in the Option Notice (the “Date of Grant”), an option under its 2017Performance Incentive Plan (the “Plan”) to purchase the number of shares of the Company’s Common Stock indicated in the OptionNotice at the exercise price indicated in the Option Notice. Defined terms not explicitly defined in this Stock Option Agreement butdefined in the Plan shall have the same definitions as in the Plan.The details of your option are as follows:1.Vesting. Your option is subject to both the time-based and performance-based vesting requirementsprovided below in this Section 1, provided that vesting will cease upon the termination of your continuous employment or servicewith the Company or any of its Subsidiaries (your “Continuous Service”). Notwithstanding the foregoing, in the event yourContinuous Service is terminated as a result of your death, the time-based and performance-based vesting requirements shall bedeemed satisfied and your option shall become fully vested and exercisable as of the date of such termination.(a)Time-Based Vesting. Subject to Section 1(b) below, your option will vest in forty-eight(48) substantially equal monthly installments (each a “Monthly Vesting Date”) following the Vesting Commencement Date specifiedin the Option Notice, subject in each case to your Continuous Service through the applicable Monthly Vesting Date. (b)Performance-Based Vesting. Notwithstanding the vesting schedule set forth inSection 1(a), the vesting of your option is contingent upon the achievement by the Company of the performance goal set forth below inthis Section 1(b) (the “Performance Goal”) at any time during the period of five (5) years commencing on the Date of Grant (the“Performance Period”). If the Company achieves the Performance Goal during the Performance Period and your Continuous Servicewith the Company continues through the date on which the Performance Goal is achieved, your option will be vested and exercisableon the next Monthly Vesting Date following the date that the Performance Goal is achieved to the extent the time-based vestingrequirements set forth in Section 1(a) had been previously met and, as to any portion of your option that is outstanding and unvested onsuch date1, shall continue to be eligible to vest and become exercisable in accordance with the vesting schedule set forth in 1 In the event your Continuous Service terminates after the achievement of the Performance Goal but prior to the immediately followingMonthly Vesting Date, your option will be vested as to the number of shares that would have been vested as of the Monthly VestingDate that preceded the date that the Performance Goal was achieved.1 Section 1(a). In the event that the Company does not achieve the Performance Goal set forth below on or before the last day of thePerformance Period (and the option has not previously vested in connection with your death as provided above in Section 1(a) or inconnection with a corporate transaction as provided in Section 7.2 of the Plan), your option, to the extent then outstanding, willterminate on the last day of the Performance Period.The Performance Goal applicable to your option shall be the filing and acceptance by the Company, or acollaboration partner of the Company, of either a new drug application (a “NDA”) or biologics license application (a “BLA”) with theUnited States Food and Drug Administration or a marketing authorization application with the European Medicines Agency (an“MAA”) for any Proprietary Company Program (as hereinafter defined), including without limitation, any one of the following drugcandidates: (1) NKTR-181 (an oral opioid analgesic drug candidate); (2) NKTR-214 (an immuno-stimulatory CD122-biased agonist);(3) NKTR-358 (a resolution therapeutic that addresses an underlying immune system imbalance); or (4) NKTR-262 (a small moleculeagonist that targets toll-like receptors found on innate immune cells). For the purposes of the foregoing, a “Proprietary CompanyProgram” includes drug candidates for which the Company acts as the sponsor of the NDA, BLA or MAA, as the case may be, ordrug candidates licensed by the Company to a third party (and in such case the third party is the sponsor of the NDA, BLA or MAA,as the case may be) in which the Company is entitled to an average potential royalty on net sales of the drug candidate equal to orgreater than 7.5%. The “average potential royalty on net sales” is determined by the quotient of (x) the sum of the lowest and highestapplicable royalty rate payable to the Company based on net sales of the drug candidate, divided by (y) 2.2.Number of Shares and Exercise Price. The number of shares subject to your option and your exerciseprice per share referenced in the Option Notice may be adjusted from time to time for capitalization adjustments, as provided in thePlan.3.Exercise Restriction for Non-Exempt Employees. If you are an employee eligible for overtimecompensation under the Fair Labor Standards Act of 1938, as amended (i.e., a “Non-Exempt Employee”), you may not exercise youroption until at least six (6) months following the Date of Grant, notwithstanding any other provision of your option. 4.Method of Payment. Payment of the exercise price is due in full upon exercise of all or any part of youroption. You may elect to make payment of the exercise price in one or more of the following forms:(a)In cash or by check;(b)Provided that at the time of exercise the Common Stock is publicly traded on anationally recognized stock exchange, and subject to such procedures as the Administrator may adopt, in cash by a broker-dealeracceptable to the Company to whom you have submitted an irrevocable notice of exercise; or(c) (i) by delivery of already-owned shares of Common Stock and that are valued at fairmarket value on the date of exercise (as determined under the Plan), or (ii) a2 reduction in the number of shares of Common Stock otherwise deliverable to you (valued at their fair market value on the exercisedate, as determined under the Plan) pursuant to the exercise of the option. “Delivery” for these purposes and for purposes of anyRequired Tax Payments, in the sole discretion of the Company at the time your option is exercised, shall include delivery to theCompany of your attestation of ownership of such shares of Common Stock in a form approved by the Company. Notwithstandingthe foregoing, your option may not be exercised by tender to the Company of Common Stock to the extent such tender wouldconstitute a violation of the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock.5.Securities Law Compliance. Notwithstanding anything to the contrary contained herein, your optionmay not be exercised unless the shares issuable upon exercise of your option are then registered under the Securities Act or, if suchshares are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registrationrequirements of the Securities Act. The exercise of your option must also comply with other applicable laws and regulationsgoverning the option, and the option may not be exercised if the Company determines that the exercise would not be in materialcompliance with such laws and regulations.6.Execution of Documents. You hereby acknowledge and agree that the manner selected by theCompany by which you indicate your consent to your Grant Notice is also deemed to be your execution of your Grant Notice and ofthis Agreement. You further agree that such manner of indicating consent may be relied upon as your signature for establishing yourexecution of any documents to be executed in the future in connection with your Award. This Agreement shall be deemed to besigned by the Company and you upon the respective signing by the Company and you of the Grant Notice to which it is attached. 7.Term. The term of your option commences on the Date of Grant and expires upon the earliest of thefollowing:(a)three (3) months after the termination of your Continuous Service for any reason otherthan death or Disability, provided that (i) if during any part of such three (3)-month period the option is not exercisable solely becauseof the condition set forth in Section 5, the option shall not expire until the earlier of the Expiration Date indicated on the Option Noticeor until it shall have been exercisable for an aggregate period of three (3) months after the termination of your Continuous Service, and(ii) if (x) you are a Non-Exempt Employee, (y) you terminate your Continuous Service within six (6) months after the Date of Grantspecified in your Option Notice, and (z) you have vested in a portion of your option at the time of your termination of ContinuousService, your option shall not expire until the earlier of (A) the later of the date that is seven (7) months after the Date of Grantspecified in your Option Notice or the date that is three (3) months after the termination of your Continuous Service or (B) theExpiration Date;(b)twelve (12) months after the termination of your Continuous Service due to Disability;3 (c)eighteen (18) months after your death if (i) your Continuous Service terminates due todeath or (ii) your death occurs within three (3) months after your Continuous Service terminates for a reason other than death;(d)the Expiration Date indicated in the Option Notice (which shall not be later than theeighth (8th) anniversary of the Date of Grant).For purposes of the option, “Disability” means a “permanent and total disability” within the meaning of Section22(e)(3) of the Code.Note, if you are a US taxpayer and your option is an incentive stock option, to obtain the federal income taxadvantages associated with an “incentive stock option,” the Code requires that at all times beginning on the Date of Grant of youroption and ending on the day three (3) months before the date of your option’s exercise, you must be an employee of the Company ora Subsidiary, except in the event of your death or Disability. The Company has provided for extended exercisability of your optionunder certain circumstances for your benefit but cannot guarantee that your option will necessarily be treated as an “incentive stockoption” if you continue to provide services to the Company or a Subsidiary as a consultant or director after your employmentterminates or if you otherwise exercise your option more than three (3) months after the date your employment terminates.8.Exercise.(a)You may exercise the vested portion of your option during its term by delivering aNotice of Exercise (in a form designated by the Company), or by completion of such other exercise procedures as may be prescribedby the Administrator from time to time, and payment of the exercise price to the Secretary of the Company, or to such other person asthe Company may designate, during regular business hours, together with such additional documents as the Company may thenrequire.(b)By exercising your option you agree that, as a condition to any exercise of your option,the Company may require you to arrange for the payment to the Company of any required tax withholding in connection with suchexercise as described in Section 11 below.(c)If your option is an incentive stock option, by exercising your option you agree that youwill notify the Company in writing within fifteen (15) days after the date of any disposition of any of the shares of the Common Stockacquired upon exercise of your option that occurs within two (2) years after the date of your option grant or within one (1) year aftersuch shares of Common Stock are transferred upon exercise of your option.9.Transferability. Your option is not transferable, except by will or by the laws of descent anddistribution, and is exercisable during your life only by you. 10.Option not a Service Contract. Your option is not an employment or service contract, and nothing inyour option shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ or service of theCompany or a4 Subsidiary, or of the Company or a Subsidiary to continue your employment or service. In addition, nothing in your option shallobligate the Company or any Subsidiary, their respective shareholders, boards of directors, officers or employees to continue anyrelationship that you might have as an employee, director or consultant for the Company or any Subsidiary.11.Tax Obligations.(a) You are responsible for satisfaction of all federal, state, local and foreign tax withholding obligations of theCompany and its Subsidiaries, if any, which arise in connection with the option (the “Required Tax Payments”), including,without limitation, obligations arising upon (i) the exercise, in whole or in part, of the option, (ii) the transfer, in whole or inpart, of any shares acquired upon exercise of the option, (iii) the operation of any law or regulation providing for theimputation of interest, or (iv) the lapsing of any restriction with respect to any shares acquired upon exercise of theoption. No shares of Common Stock will be issued until the Company has received a definitive agreement or otherdocumentation satisfactory to the Company, in its sole discretion, that all Required Tax Payments have been or will besatisfied by you. Regardless of whether the Company properly withholds the full amount of such Required Tax Payments,you hereby acknowledge and agree that that all obligations with respect to the Required Tax Payments shall transfer in theirentirety from the Company to you and that such liability shall be ultimately your responsibility and liability.(b) You may elect to make payment of the Required Tax Payments in one or more of the following forms:(i) In cash or by check;(ii) Provided that at the time of exercise the Common Stock is publicly traded on a nationally recognizedstock exchange, and subject to such procedures as the Administrator may adopt, in cash by a broker-dealer acceptable to the Companyto whom you have submitted an irrevocable notice of exercise; or(iii) (x) by delivery of already-owned shares of Common Stock and that are valued at fair market value onthe date of exercise (as determined under the Plan), or (y) a reduction in the number of shares of Common Stock otherwise deliverableto you (valued at their fair market value on the exercise date, as determined under the Plan) pursuant to the exercise of the option. Shares of Common Stock to be delivered or withheld may not have a Fair Market Value in excess of the minimum amount of theRequired Tax Payments. Any fraction of a share of Common Stock which would be required to satisfy any such obligation shall bedisregarded and the remaining amount due shall be paid in cash by you.(c) You hereby acknowledge that you understand that you may suffer adverse tax consequences as a result of theexercise of the option or disposition of the shares. You hereby represent that you have consulted with any tax consultantsthe you deem advisable in connection with the exercise of the option or disposition of the shares and that you are not relyingon the Company for any tax advice.5 12.Employment Conditions. In accepting the option, you acknowledge that:(a) Any notice period mandated under any applicable laws shall not be treated as service for the purpose ofdetermining the vesting of the option; and your right to receive shares of Common Stock in settlement of the option after termination asan employee, if any, will be measured by the date of your termination as an employee and will not be extended by any notice periodmandated under the applicable law. Subject to the foregoing and the provisions of the Plan, the Company, in its sole discretion, shalldetermine whether your status as an employee or other service-provider has terminated and the effective date of such termination.(b) The vesting of the option shall cease upon, and no portion of the option shall become vested following, yourtermination as an employee or other service-provider for any reason except as may be explicitly provided by the Plan or this StockOption Agreement. Unless otherwise provided in the Plan or this Stock Option Agreement, the unvested portion of the option at thetime of your termination as an employee or other service-provider will be forfeited.(c) The Plan is established voluntarily by the Company. It is discretionary in nature and it may be modified,amended, suspended or terminated by the Company at any time, subject to Section 8.6.5 of the Plan.(d) The grant of the option is voluntary and occasional and does not create any contractual or other right toreceive future grants of options, or benefits in lieu of options, even if options have been granted repeatedly in the past.(e) All decisions with respect to future option grants, if any, will be at the sole discretion of the Company.(f) You are voluntarily participating in the Plan.(g) The option is an extraordinary item that does not constitute compensation of any kind for service rendered tothe Company (or any Subsidiary), and which is outside the scope of your employment contract, if any. In addition, the option is notpart of normal or expected compensation or salary for any purpose, including, but not limited to, calculating any severance, resignation,termination, redundancy, end-of-service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.(h) The future value of the underlying shares of Common Stock is unknown and cannot be predicted withcertainty. If you obtain shares upon settlement of the option, the value of those shares may increase or decrease.(i) No claim or entitlement to compensation or damages arises from termination of the option or diminution invalue of the option or shares of Common Stock acquired upon settlement of the option resulting from your termination of employmentor service (for any reason whether or not in breach of the local law) and you irrevocably release the Company and each Subsidiaryfrom any such claim that may arise. If, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction tohave arisen then, by signing this Stock6 Option Agreement, you shall be deemed irrevocably to have waived your entitlement to pursue such a claim.13.General Provisions.(a)Successors and Assigns. Except as provided herein to the contrary, this Stock Option Agreement shallbe binding upon and inure to the benefit of the parties to this Stock Option Agreement, their respective successors and permittedassigns.(b)No Assignment. Except as otherwise provided in this Stock Option Agreement, you shall not assignany of your rights and obligations under this Stock Option Agreement without the prior written consent of the Company, whichconsent may be withheld in its sole discretion. The Company shall be permitted to assign its rights or obligations under this StockOption Agreement, but no such assignment shall release the Company of any obligations pursuant to this Stock Option Agreement.(c)Severability. The validity, legality or enforceability of the remainder of this Stock Option Agreementshall not be affected even if one or more of the provisions of this Stock Option Agreement shall be held to be invalid, illegal orunenforceable in any respect.(d)Administration. Any determination by the Administrator in connection with any question or issuearising under the Plan or this Stock Option Agreement shall be final, conclusive, and binding on you, the Company, and all otherpersons. (e)Headings. The section headings in this Stock Option Agreement are inserted only as a matter ofconvenience, and in no way define, limit or interpret the scope of this Stock Option Agreement or of any particular section. (f)Delivery of Documents and Notices. Any document relating to participation in the Plan, or any noticerequired or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this StockOption Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery through electronicdelivery at the e-mail address, if any, provided for you by the Company, or, upon deposit in the local postal service, by registered orcertified mail, or with a nationally recognized overnight courier service with postage and fees prepaid, addressed to the other party atthe address of such party set forth in this Stock Option Agreement or at such other address as such party may designate in writing fromtime to time to the other party.7 (i)Description of Electronic Delivery. The Plan documents, which may include but do not necessarily include: thePlan, the Option Notice, this Stock Option Agreement, and any reports of the Company provided generally to the Company’sshareholders, may be delivered to you electronically. In addition, if permitted by the Company, you may deliver electronically thisStock Option Agreement and Notice of Exercise called for by Section 8(a) to the Company or to such third party involved inadministering the Plan as the Company may designate from time to time. Such means of electronic delivery may include but do notnecessarily include the delivery of a link to a Company intranet or the internet site of a third party involved in administering the Plan,the delivery of the document via e-mail or such other means of electronic delivery specified by the Company.(ii)Consent to Electronic Delivery. You acknowledge that you have read Section 13(f)(i) of thisStock Option Agreement and consent to the electronic delivery of the Plan documents and, if permitted by the Company, the deliveryof this Stock Option Agreement and Notice of Exercise, as described in Section 13(f)(i). You acknowledge that you may receive fromthe Company a paper copy of any documents delivered electronically at no cost to you by contacting the Company by telephone or inwriting. You further acknowledge that you will be provided with a paper copy of any documents if the attempted electronic deliveryof such documents fails. Similarly, you understand that you must provide the Company or any designated third party administratorwith a paper copy of any documents if the attempted electronic delivery of such documents fails. You may revoke your consent to theelectronic delivery of documents described in Section 1e(f)(i) or may change the electronic mail address to which such documents areto be delivered (if you have provided an electronic mail address) at any time by contacting SOProcessing@nektar.com to notify theCompany of such revoked consent or revised e-mail address by telephone, postal service or electronic mail. Finally, you understandthat you are not required to consent to electronic delivery of documents described in Section 13(f)(i).14.Governing Plan Document. Your option is subject to all the provisions of the Plan, the provisions of which arehereby made a part of your option, and is further subject to all interpretations, amendments, rules and regulations which may from timeto time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of your option and thoseof the Plan, the provisions of the Plan shall control. This Stock Option Agreement is governed by the laws of the State of Delaware.15.Clawback Policy. Your option is subject to the terms of the Company’s recoupment, clawback or similar policyas it may be in effect from time to time, as well as any similar provisions of applicable law, any of which could in certain circumstancesrequire forfeiture of the option and repayment or forfeiture of any shares of Common Stock or other cash or property received withrespect to the option (including any value received from a disposition of the shares acquired upon exercise of the option). 8 Nektar Therapeutics2017 Performance Incentive PlanStock Option Agreement(Non-Employee Directors) Pursuant to the Stock Option Grant Notice, which may be in such form (including electronic form) as prescribed by theAdministrator from time to time (“Option Notice”), and this Stock Option Agreement, Nektar Therapeutics (the “Company”) hasgranted you an option under its 2017 Performance Incentive Plan (the “Plan”) to purchase the number of shares of the Company’sCommon Stock indicated in the Option Notice at the exercise price indicated in the Option Notice. Defined terms not explicitlydefined in this Stock Option Agreement but defined in the Plan shall have the same definitions as in the Plan.The details of your option are as follows:1.Vesting. Subject to the limitations contained herein, your option will vest as provided in the OptionNotice, provided that vesting will cease upon the termination of your continuous employment or service with the Company or any ofits Subsidiaries (your “Continuous Service”). Notwithstanding the foregoing, in the event your Continuous Service is terminated as aresult of your death or Disability, your option shall become fully vested and exercisable as of the date of such termination.2.Number of Shares and Exercise Price. The number of shares subject to your option and your exerciseprice per share referenced in the Option Notice may be adjusted from time to time for capitalization adjustments, as provided in thePlan.3.Method of Payment. Payment of the exercise price is due in full upon exercise of all or any part of youroption. You may elect to make payment of the exercise price in one or more of the following forms:(a)In cash or by check;(b)Provided that at the time of exercise the Common Stock is publicly traded on anationally recognized stock exchange, and as may be permitted by the Company in its sole discretion and subject to such procedures asthe Administrator may adopt, pursuant to a “cashless exercise” with a third party who provides financing for the purposes of (or whootherwise facilitates) the purchase or exercise of awards; or(c)As permitted by the Company in its sole discretion, by (i) delivery of already-ownedshares of Common Stock either that you have held for the period required to avoid a charge to the Company’s reported earnings or thatyou did not acquire, directly or indirectly from the Company, that are owned free and clear of any liens, claims, encumbrances orsecurity interests, and that are valued at fair market value on the date of exercise (as determined under the Plan), or (ii) a reduction inthe number of shares of Common Stock1 otherwise deliverable to you (valued at their fair market value on the exercise date, as determined under the Plan) pursuant to theexercise of the option. “Delivery” for these purposes, in the sole discretion of the Company at the time your option is exercised, shallinclude delivery to the Company of your attestation of ownership of such shares of Common Stock in a form approved by theCompany. Notwithstanding the foregoing, your option may not be exercised by tender to the Company of Common Stock to theextent such tender would constitute a violation of the provisions of any law, regulation or agreement restricting the redemption of theCompany’s stock.4.Securities Law Compliance. Notwithstanding anything to the contrary contained herein, your optionmay not be exercised unless the shares issuable upon exercise of your option are then registered under the Securities Act or, if suchshares are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registrationrequirements of the Securities Act. The exercise of your option must also comply with other applicable laws and regulationsgoverning the option, and the option may not be exercised if the Company determines that the exercise would not be in materialcompliance with such laws and regulations.5.Term. The term of your option commences on the Date of Grant and expires upon the earliest of thefollowing:(a)eighteen (18) months after the termination of your Continuous Service for any reasonother than death or Disability, provided that if during any part of such eighteen (18)-month period the option is not exercisable solelybecause of the condition set forth in Section 4, the option shall not expire until the earlier of the Expiration Date indicated on theOption Notice or until it shall have been exercisable for an aggregate period of eighteen (18) months after the termination of yourContinuous Service; (b)eighteen (18) months after the termination of your Continuous Service due to Disability;(c)eighteen (18) months after your death if you die either during your Continuous Serviceor within three (3) months after your Continuous Service terminates for a reason other than death;(d)the Expiration Date indicated in the Option Notice (which shall not be later than theeighth (8th) anniversary of the Date of Grant); or(e)the eighth (8th) anniversary of the Date of Grant.For purposes of the option, “Disability” means a “permanent and total disability” within the meaning of Section22(e)(3) of the Code. 2 6.Exercise.(a)You may exercise the vested portion of your option during its term by delivering aNotice of Exercise (in a form designated by the Company), or by completion of such other exercise procedures as may be prescribedby the Administrator from time to time, and payment of the exercise price to the Secretary of the Company, or to such other person asthe Company may designate, during regular business hours, together with such additional documents as the Company may thenrequire.(b)By exercising your option you agree that, as a condition to any exercise of your option,the Company may require you to arrange for the payment to the Company of any required tax withholding in connection with suchexercise as described in Section 9 below.(c)If your option is an incentive stock option, by exercising your option you agree that youwill notify the Company in writing within fifteen (15) days after the date of any disposition of any of the shares of the Common Stockissued upon exercise of your option that occurs within two (2) years after the date of your option grant or within one (1) year after suchshares of Common Stock are transferred upon exercise of your option.7.Transferability. Your option is not transferable, except by will or by the laws of descent anddistribution, and is exercisable during your life only by you. Notwithstanding the foregoing, by delivering written notice to theCompany, in a form satisfactory to the Company, you may designate a third party who, in the event of your death, shall thereafter beentitled to exercise your option.8.Option not a Service Contract. Your option is not an employment or service contract, and nothing inyour option shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ or service of theCompany or a Subsidiary, or of the Company or a Subsidiary to continue your employment or service. In addition, nothing in youroption shall obligate the Company or any Subsidiary, their respective shareholders, boards of directors, officers or employees tocontinue any relationship that you might have as a director or consultant for the Company or any Subsidiary.9.Tax Obligations.(a) You are responsible for satisfaction of all federal, state, local and foreign tax withholding obligations of theCompany and its Subsidiaries, if any, which arise in connection with the option, including, without limitation, obligationsarising upon (i) the exercise, in whole or in part, of the option, (ii) the transfer, in whole or in part, of any shares acquiredupon exercise of the option, (iii) the operation of any law or regulation providing for the imputation of interest, or (iv) thelapsing of any restriction with respect to any shares acquired upon exercise of the option. No shares of Common Stock willbe issued until the Company has received a definitive agreement or other documentation satisfactory to the Company, in itssole discretion, that all such obligations have been or will be satisfied by you. Regardless of whether the Company properlywithholds the full amount of such obligations, you hereby acknowledge and agree that3 that all such obligations shall transfer in their entirety from the Company to you and that such liability shall beultimately your responsibility and liability.(b) You hereby authorize the Company or any of its Subsidiaries to withhold from payroll and any other amountspayable to you and otherwise agree to make adequate provision for any sums required to satisfy the federal, state, local andforeign tax obligations, if any, of the Company or any of its Subsidiaries arising in connection with the option. In the eventthat the Company determines that the tax obligations will not be satisfied by the method described above, you authorize theCompany’s designated third party plan administrator (i.e. E*Trade or such successor third party administrator as theCompany may designate from time to time), to sell a number of shares of Common Stock that are exercised under the option,which the Company determines is sufficient to generate an amount that meets the tax obligations plus additional shares, asnecessary, to account for rounding and market fluctuations, and to pay such tax withholding amounts to the Company. Theshares of Common Stock may be sold as part of a block trade with other participants of the Plan in which all participantsreceive an average price. Any adverse consequences to you resulting from the procedure permitted under this Section 9,including, without limitation, tax consequences and any loss of prospective stock appreciation, shall be your soleresponsibility and there shall be no liability to the Company for any adverse consequences of any nature whatsoever.(c) The Company may, in its discretion, permit or require you to satisfy all or any portion of the tax withholdingobligations described in this Section 9 by deducting from the shares of Common Stock otherwise deliverable to you insettlement of the option a number of shares of Common Stock having a fair market value, as determined by the Company asof the date on which the tax obligations arise, not in excess of the minimum amount of such tax obligations determined bythe applicable withholding rates.(d) You hereby acknowledge that you understand that you may suffer adverse tax consequences as a result of theexercise of the option or disposition of the shares. You hereby represent that you have consulted with any tax consultantsthe you deem advisable in connection with the exercise of the option or disposition of the shares and that you are not relyingon the Company for any tax advice.10.Employment Conditions. In accepting the option, you acknowledge that:(a) Any notice period mandated under any applicable laws shall not be treated as service for the purpose ofdetermining the vesting of the option; and your right to receive shares of Common Stock in settlement of the option after termination asan employee, if any, will be measured by the date of your termination as an employee and will not be extended by any notice periodmandated under the applicable law. Subject to the foregoing and the provisions of the Plan, the Company, in its sole discretion, shalldetermine whether your status as an employee or other service-provider has terminated and the effective date of such termination.(b) The vesting of the option shall cease upon, and no portion of the option shall become vested following, yourtermination as an employee or other service-provider for any reason except as may be explicitly provided by the Plan or this StockOption Agreement. Unless4 otherwise provided in the Plan or this Stock Option Agreement, the unvested portion of the option at the time of your termination as anemployee or other service-provider will be forfeited.(c) The Plan is established voluntarily by the Company. It is discretionary in nature and it may be modified,amended, suspended or terminated by the Company at any time, subject to Section 8.6.5 of the Plan.(d) The grant of the option is voluntary and occasional and does not create any contractual or other right toreceive future grants of options, or benefits in lieu of options, even if options have been granted repeatedly in the past.(e) All decisions with respect to future option grants, if any, will be at the sole discretion of the Company.(f) You are voluntarily participating in the Plan.(g) The option is an extraordinary item that does not constitute compensation of any kind for service rendered tothe Company (or any Subsidiary), and which is outside the scope of your employment contract, if any. In addition, the option is notpart of normal or expected compensation or salary for any purpose, including, but not limited to, calculating any severance, resignation,termination, redundancy, end-of-service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.(h) The future value of the underlying shares of Common Stock is unknown and cannot be predicted withcertainty. If you obtain shares upon settlement of the option, the value of those shares may increase or decrease.(i) No claim or entitlement to compensation or damages arises from termination of the option or diminution invalue of the option or shares of Common Stock acquired upon settlement of the option resulting from your termination of employmentor service (for any reason whether or not in breach of the local law) and you irrevocably release the Company and each Subsidiaryfrom any such claim that may arise. If, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction tohave arisen then, by signing this Stock Option Agreement, you shall be deemed irrevocably to have waived your entitlement to pursuesuch a claim.11.General Provisions.(a)Successors and Assigns. Except as provided herein to the contrary, this Stock Option Agreement shallbe binding upon and inure to the benefit of the parties to this Stock Option Agreement, their respective successors and permittedassigns.(b)No Assignment. Except as otherwise provided in this Stock Option Agreement, you shall not assignany of your under this Stock Option Agreement without the prior written consent of the Company, which consent may be withheld inits sole discretion. The Company shall be permitted to assign its rights or obligations under this Stock Option5 Agreement, but no such assignment shall release the Company of any obligations pursuant to this Stock Option Agreement.(c)Severability. The validity, legality or enforceability of the remainder of this Stock Option Agreementshall not be affected even if one or more of the provisions of this Stock Option Agreement shall be held to be invalid, illegal orunenforceable in any respect.(d)Administration. Any determination by the Administrator in connection with any question or issuearising under the Plan or this Stock Option Agreement shall be final, conclusive, and binding on you, the Company, and all otherpersons. (e)Headings. The section headings in this Stock Option Agreement are inserted only as a matter ofconvenience, and in no way define, limit or interpret the scope of this Stock Option Agreement or of any particular section. (f)Delivery of Documents and Notices. Any document relating to participation in the Plan, or any noticerequired or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this StockOption Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery through electronicdelivery at the e-mail address, if any, provided for you by the Company, or, upon deposit in the local postal service, by registered orcertified mail, or with a nationally recognized overnight courier service with postage and fees prepaid, addressed to the other party atthe address of such party set forth in this Stock Option Agreement or at such other address as such party may designate in writing fromtime to time to the other party.(i)Description of Electronic Delivery. The Plan documents, which may include but do not necessarily include: thePlan, the Option Notice, this Stock Option Agreement, and any reports of the Company provided generally to the Company’sshareholders, may be delivered to you electronically. In addition, if permitted by the Company, you may deliver electronically thisStock Option Agreement and Exercise Notice called for by Section 6(a) to the Company or to such third party involved inadministering the Plan as the Company may designate from time to time. Such means of electronic delivery may include but do notnecessarily include the delivery of a link to a Company intranet or the internet site of a third party involved in administering the Plan,the delivery of the document via e-mail or such other means of electronic delivery specified by the Company.(ii)Consent to Electronic Delivery. You acknowledge that you have read Section 11(f)(i) of thisStock Option Agreement and consent to the electronic delivery of the Plan documents and, if permitted by the Company, the deliveryof this Stock Option Agreement and exercise notice, as described in Section 11(f)(i) You acknowledge that you may receive from theCompany a paper copy of any documents delivered electronically at no cost to you by contacting the Company by telephone or inwriting. You further acknowledge that you will be provided with a paper copy of any documents if the attempted electronic deliveryof such documents fails. Similarly, you understand that you must provide the Company or any designated third party administratorwith a paper copy of any documents if the attempted electronic delivery of such documents fails. You may revoke your consent to theelectronic delivery of documents described in Section 11(f)(i) or may change the electronic mail address to which such documents areto be delivered (if you have provided an electronic mail address) at6 any time by notifying the Company of such revoked consent or revised e-mail address by telephone, postal service or electronicmail. Finally, you understand that you are not required to consent to electronic delivery of documents described in Section 11(f)(i).12.Governing Plan Document. Your option is subject to all the provisions of the Plan, the provisions of which arehereby made a part of your option, and is further subject to all interpretations, amendments, rules and regulations which may from timeto time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of your option and thoseof the Plan, the provisions of the Plan shall control. This Stock Option Agreement is governed by the laws of the State of Delaware.13.Clawback Policy. Your option is subject to the terms of the Company’s recoupment, clawback or similar policyas it may be in effect from time to time, as well as any similar provisions of applicable law, any of which could in certain circumstancesrequire forfeiture of the option and repayment or forfeiture of any shares of Common Stock or other cash or property received withrespect to the option (including any value received from a disposition of the shares acquired upon exercise of the option). 7 Nektar Therapeutics2017 Performance Incentive PlanRestricted Stock Unit Agreement Pursuant to your Restricted Stock Unit Grant Notice, which may be in such form (including electronic form) as prescribedby the Administrator from time to time (“Grant Notice”), and this Restricted Stock Unit Agreement (“Agreement”) (collectively, the“Award”), Nektar Therapeutics (the “Company”) has awarded to you, as of the date of grant specified in the Grant Notice (the “Dateof Grant”), pursuant to its 2017 Performance Incentive Plan (the “Plan”), the number of “Restricted Stock Units” as indicated in theGrant Notice. Defined terms not explicitly defined in this Agreement but defined in the Plan shall have the same definitions as in thePlan.The details of your Award are as follows.1.Vesting. Subject to the limitations contained herein, your Award shall vest as provided in the GrantNotice, provided that vesting will cease upon the termination of your continuous employment or service with the Company or any ofits Subsidiaries (your “Continuous Service”). Notwithstanding the foregoing, in the event your Continuous Service is terminated as aresult of your death, your Award shall become fully vested as of the date of such termination.2.Dividends. You shall not receive any payment or other adjustment in the number of Restricted StockUnits subject to this Award for dividends or other distributions that may be made in respect of the shares of Common Stock to whichyour Restricted Stock Units relate.3.Distribution of Shares of Common Stock. On or as soon as administratively practical following eachvesting of the applicable portion of the total Award pursuant to the Grant Notice or the Plan (and in all events not later than two andone-half months after the applicable vesting date), the Company will issue to you a number of shares of Common Stock equal to thenumber of Restricted Stock Units subject to your Award that vested on such date. Prior to the issuance to you of the shares ofCommon Stock subject to the Award, you shall have no direct or secured claim in any specific assets of the Company or in suchshares of Common Stock, and will have the status of a general unsecured creditor of the Company.4.Adjustments. The number of Restricted Stock Units subject to your Award may be adjusted from timeto time for capitalization adjustments, as provided in Section 7.1 of the Plan.5.Securities Law Compliance. You may not be issued any shares of Common Stock under your Awardunless the shares of Common Stock are either (i) then registered under the Securities Act or (ii) the Company has determined thatsuch issuance would be exempt from1 the registration requirements of the Securities Act. Your Award must also comply with other applicable laws and regulationsgoverning the Award, and you shall not receive such shares if the Company determines that such receipt would not be in materialcompliance with such laws and regulations.6.Execution of Documents. You hereby acknowledge and agree that the manner selected by theCompany by which you indicate your consent to your Grant Notice is also deemed to be your execution of your Grant Notice and ofthis Agreement. You further agree that such manner of indicating consent may be relied upon as your signature for establishing yourexecution of any documents to be executed in the future in connection with your Award. This Agreement shall be deemed to besigned by the Company and you upon the respective signing by the Company and you of the Grant Notice to which it is attached. 7.Restrictive Legends. The shares of Common Stock issued under your Award shall be endorsed withappropriate legends, if any, determined by the Company.8.Transferability. Your Award is not transferable, except by will or by the laws of descent anddistribution. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, youmay designate a third party who, in the event of your death, shall thereafter be entitled to receive any distribution of shares ofCommon Stock pursuant to Section 3 of this Agreement.9.Award not a Service Contract. Your Award is not an employment or service contract, and nothing inyour Award shall be deemed to create in any way whatsoever any obligation on your part to continue in the service of the Companyor a Subsidiary, or on the part of the Company or a Subsidiary to continue such service. In addition, nothing in your Award shallobligate the Company or a Subsidiary, their respective stockholders, boards of directors, officers or employees to continue anyrelationship that you might have as an employee, director or consultant for the Company or a Subsidiary.10.Unsecured Obligation. Your Award is unfunded, and as a holder of vested Restricted Stock Unitssubject to your Award, you shall be considered an unsecured creditor of the Company with respect to the Company’s obligation, ifany, to issue shares of Common Stock pursuant to Section 3 of this Agreement. As used herein, the term “Restricted Stock Unit”means a non-voting unit of measurement which is deemed for bookkeeping purposes to be equivalent to one outstanding share ofCommon Stock (subject to adjustment as provided in Section 4 of this Agreement) solely for purposes of the Award. The RestrictedStock Units shall be used solely as a device for the determination of the payment to eventually be made to you if such RestrictedStock Units vest pursuant to this Agreement. The Restricted Stock Units shall not be treated as property or as a trust fund of anykind.11.Tax Obligations.(a) The Company shall have no obligation to deliver shares of Common Stock until the tax withholding obligations of theCompany and its Subsidiaries have been satisfied by you.2 (b) Upon each applicable vesting date, the Company’s designated third party plan administrator (i.e. E*Trade or suchsuccessor third party administrator as the Company may designate from time to time), shall sell a number of shares of Common Stockthat are issued under the Award, which the Company determines is sufficient to generate an amount that meets the tax obligations plusadditional shares, as necessary, to account for rounding and market fluctuations, and shall pay such tax withholding amounts to theCompany. The shares of Common Stock may be sold as part of a block trade with other Participants of the Plan in which allParticipants receive an average price. Any adverse consequences to you resulting from the procedure permitted under this Section 11,including, without limitation, tax consequences and any loss of prospective stock appreciation, shall be your sole responsibility andthere shall be no liability to the Company for any adverse consequences of any nature whatsoever.(c) You hereby acknowledge that you understand that you may suffer adverse tax consequences as a result of yourparticipation in the Plan. You hereby represent that you have consulted with any tax consultants you deem advisable inconnection with the Award or disposition of the shares of Common Stock received under the Award and that you are notrelying on the Company for any tax advice.(d) Payments contemplated with respect to the Award are intended to comply with the short-term deferralexemption under Section 409A of the Code, and the provisions of this Agreement shall be construed and interpretedconsistent with that intent. Notwithstanding any contrary provision in the Plan or in the Agreement, if any provision of thePlan or the Agreement contravenes any regulations or guidance promulgated under Section 409A of the Code or couldcause the Awards to be subject to additional taxes, accelerated taxation, interest or penalties under Section 409A of theCode, the Company may, in its sole discretion and without your consent, modify the Plan and/or the Agreement: (i) tocomply with, or avoid being subject to, Section 409A of the Code, or to avoid the imposition of any taxes, acceleratedtaxation, interest or penalties under Section 409A of the Code, and (ii) to maintain, to the maximum extent practicable, theoriginal intent of the applicable provision without contravening the provisions of Section 409A of the Code. This Section11(d) does not create an obligation on the part of the Company to modify the Plan or the Agreement and does not guaranteethat the Award will not be subject to additional taxes, interest or penalties under Section 409A of the Code.12. Employment Conditions. In accepting the Award, you acknowledge that:(a) Any notice period mandated under the laws of the local jurisdiction shall not be treated as service for thepurpose of determining the vesting of the Award; and your right to receive shares of Common Stock in settlement of theAward after termination of service, if any, will be measured by the date of termination of your status as an employee and willnot be extended by any notice period mandated under the local law. Subject to the foregoing and the provisions of the Plan,the Company, in its sole discretion, shall determine whether your status as an employee has terminated and the effective dateof such termination.(b) The vesting of the Award shall cease upon, and no portion of the Award shall become vested following, yourtermination as an employee for any reason except as may be3 explicitly provided by the Plan or this Agreement. Unless otherwise provided by the Plan or this Agreement, theunvested portion of the Award at the time of your termination as an employee will be forfeited.(c) The Plan is established voluntarily by the Company. It is discretionary in nature and it may be modified,amended, suspended or terminated by the Company at any time, subject to Section 8.6.5 of the Plan.(d) The grant of the Award is voluntary and occasional and does not create any contractual or other right to receivefuture grants of Awards, or benefits in lieu of Awards, even if Awards have been granted repeatedly in the past.(e) All decisions with respect to future Award grants, if any, will be at the sole discretion of the Company.(f) You are voluntarily participating in the Plan.(g) The Award is an extraordinary item that does not constitute compensation of any kind for service of any kindrendered to the Company (or any Subsidiary), and which is outside the scope of your employment contract, if any. Inaddition, the Award is not part of normal or expected compensation or salary for any purpose, including, but not limited to,calculating any severance, resignation, termination, redundancy, end-of-service payments, bonuses, long-service awards,pension or retirement benefits or similar payments.(h) The future value of the underlying shares of Common Stock is unknown and cannot be predicted withcertainty. If you obtain shares upon settlement of the Award, the value of those shares may increase or decrease.(i) No claim or entitlement to compensation or damages arises from termination of the Award or diminution invalue of the Award or shares of Common Stock acquired upon settlement of the Award resulting from termination of yourstatus as an employee (for any reason whether or not in breach of the local law) and you irrevocably release the Companyand each Subsidiary from any such claim that may arise. If, notwithstanding the foregoing, any such claim is found by acourt of competent jurisdiction to have arisen then, by signing this Agreement, you shall be deemed irrevocably to havewaived your entitlement to pursue such a claim.13.Headings. The headings of the Sections in this Agreement are inserted for convenience only and shall not bedeemed to constitute a part of this Agreement or to affect the meaning of this Agreement.14.Severability. If all or any part of this Agreement or the Plan is declared by any court or governmental authorityto be unlawful or invalid, such unlawfulness or invalidity will not invalidate any portion of this Agreement or the Plan not declared tobe unlawful or invalid. Any Section of this Agreement (or part of such a Section) so declared to be unlawful or invalid4 will, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extentpossible while remaining lawful and valid.15.Amendment. Nothing in this Agreement shall restrict the Company’s ability to exercise its discretionaryauthority pursuant to Section 3 of the Plan; provided, however, that no such action may, without your consent, adversely affect yourrights under your Award and this Agreement. 16.Delivery of Documents and Notices. Any document relating to participation in the Plan, or any notice requiredor permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that thisAgreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery electronic delivery atthe e-mail address, if any, provided for you by the Company, or, upon deposit in the local postal service, by registered orcertified mail, or with a nationally recognized overnight courier service with postage and fees prepaid, addressed to the otherparty at the address of such party set forth in the Grant Notice or at such other address as such party may designate in writingfrom time to time to the other party.(a) The Plan documents, which may include but do not necessarily include: the Plan, this Agreement, and anyreports of the Company provided generally to the Company’s shareholders, may be delivered to you electronically. Inaddition, if permitted by the Company, you may deliver electronically the notices called for under the Agreement or the Planto the Company or to such third party involved in administering the Plan as the Company may designate from time totime. Such means of electronic delivery may include but do not necessarily include the delivery of a link to a Companyintranet or the internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or suchother means of electronic delivery specified by the Company.(b) You acknowledge that you have read this Section 16 of this Agreement and consent to the electronic deliveryof the Plan documents and, if permitted by the Company, the delivery of the notices, as described in the Agreement or thePlan. You acknowledge that you may receive from the Company a paper copy of any documents delivered electronically atno cost to you by contacting the Company by telephone or in writing. You further acknowledge that you will be providedwith a paper copy of any documents if the attempted electronic delivery of such documents fails. Similarly, you understandthat you must provide the Company or any designated third party administrator with a paper copy of any documents if theattempted electronic delivery of such documents fails. You may revoke your consent to the electronic delivery of documentsdescribed in this Section 16 or may change the electronic mail address to which such documents are to be delivered (if youhave provided an electronic mail address) at any time by contacting SOProcessing@nektar.com to notify the Company ofsuch revoked consent or revised e-mail address by telephone, postal service or electronic mail. Finally, you understand thatyou are not required to consent to electronic delivery of documents described in this Section 16.5 17.Miscellaneous.(a)The rights and obligations of the Company under your Award shall be transferable toany one or more persons or entities, and all covenants and agreements hereunder shall inure to the benefit of, and be enforceable by theCompany’s successors and assigns.(b)You agree upon request to execute any further documents or instruments necessary ordesirable in the sole determination of the Company to carry out the purposes or intent of your Award.(c)You acknowledge and agree that you have reviewed your Award in its entirety, havehad an opportunity to obtain the advice of counsel prior to executing and accepting your Award and fully understand all provisions ofyour Award.18.Governing Plan Document. Your Award is subject to all the provisions of the Plan, the provisions of which arehereby made a part of your Award, and is further subject to all interpretations, amendments, rules and regulations which may from timeto time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of your Award and thoseof the Plan, the provisions of the Plan shall control.19.Choice of Law. The interpretation, performance and enforcement of this Agreement shall be governed by thelaw of the state of Delaware without regard to such state’s conflicts of laws rules.20.Clawback Policy. The Award is subject to the terms of the Company’s recoupment, clawback or similar policyas it may be in effect from time to time, as well as any similar provisions of applicable law, any of which could in certain circumstancesrequire repayment or forfeiture of the Restricted Stock Units or any shares of Common Stock or other cash or property received withrespect to the Restricted Stock Units (including any value received from a disposition of the shares acquired upon payment of theRestricted Stock Units). 6 Nektar Therapeutics2017 Performance Incentive PlanPerformance Restricted Stock Unit Agreement Pursuant to your Restricted Stock Unit Grant Notice, which may be in such form (including electronic form) as prescribedby the Administrator from time to time (“Grant Notice”), and this Performance Restricted Stock Unit Agreement (“Agreement”)(collectively, the “Award”), Nektar Therapeutics (the “Company”) has awarded to you, as of the date of grant specified in the GrantNotice (the “Date of Grant”), pursuant to its 2017 Performance Incentive Plan (the “Plan”), the number of “Restricted Stock Units”as indicated in the Grant Notice. Defined terms not explicitly defined in this Agreement but defined in the Plan shall have the samedefinitions as in the Plan.The details of your Award are as follows.1.Vesting. Your Award is subject to both the time-based and performance-based vesting requirementsprovided below in this Section 1, provided that vesting will cease upon the termination of your continuous employment or servicewith the Company or any of its Subsidiaries (your “Continuous Service”). Notwithstanding the foregoing, in the event yourContinuous Service is terminated as a result of your death, the time-based and performance-based vesting requirements shall bedeemed satisfied and your Award shall become fully vested as of the date of such termination.(a)Time-Based Vesting. Subject to Section 1(b) below, your Award will vest in twelve(12) substantially equal installments (each a “Quarterly Vesting Date”) following the Vesting Commencement Date specified in theGrant Notice, subject in each case to your Continuous Service through the applicable Quarterly Vesting Date. (b)Performance-Based Vesting. Notwithstanding the vesting schedule set forth inSection 1(a), the vesting of your Award is contingent upon the achievement by the Company of the performance goal set forth belowin this Section 1(b) (the “Performance Goal”) at any time during the period of five (5) years commencing on the Date of Grant (the“Performance Period”). If the Company achieves the Performance Goal during the Performance Period and your Continuous Servicewith the Company continues through the date on which the Performance Goal is achieved, your Award shall be vested on the nextQuarterly Vesting Date following the date that the Performance Goal is achieved to the extent the time-based vesting requirements setforth in Section 1(a) had been previously met and, as to any portion of your Award that is outstanding and unvested on such date, shallcontinue to be eligible to vest in accordance with the vesting schedule set forth in Section 1(a). In the event that the Company does notachieve the Performance Goal set forth below on or before the last day of the Performance Period (and the Award has not previouslyvested in connection with your death as provided above in Section 1(a) or in connection with a corporate transaction as provided inSection 7.2 of the Plan), your Award, to the extent then outstanding, will terminate on the last day of the Performance Period.1 2.The Performance Goal applicable to your Award shall be the filing and acceptance by the Company, or acollaboration partner of the Company, of either a new drug application (a “NDA”) or biologics license application (a “BLA”) with theUnited States Food and Drug Administration or a marketing authorization application with the European Medicines Agency (an“MAA”) for any Proprietary Company Program (as hereinafter defined), including without limitation, any one of the following drugcandidates: (1) NKTR-181 (an oral opioid analgesic drug candidate); (2) NKTR-214 (an immuno-stimulatory CD122-biasedagonist); (3) NKTR-358 (a resolution therapeutic that addresses an underlying immune system imbalance); or (4) NKTR-262 (a smallmolecule agonist that targets toll-like receptors found on innate immune cells). For the purposes of the foregoing, a “ProprietaryCompany Program” includes drug candidates for which the Company acts as the sponsor of the NDA, BLA or MAA, as the casemay be, or drug candidates licensed by the Company to a third party (and in such case the third party is the sponsor of the NDA,BLA or MAA, as the case may be) in which the Company is entitled to an average potential royalty on net sales of the drug candidateequal to or greater than 7.5%. The “average potential royalty on net sales” is determined by the quotient of (x) the sum of the lowestand highest applicable royalty rate payable to the Company based on net sales of the drug candidate, divided by (y) 2.3.Dividends. You shall not receive any payment or other adjustment in the number of Restricted StockUnits subject to this Award for dividends or other distributions that may be made in respect of the shares of Common Stock to whichyour Restricted Stock Units relate.4.Distribution of Shares of Common Stock. On or as soon as administratively practical following theapplicable Quarterly Vesting Date of the applicable portion of the total Award pursuant to the Grant Notice or the Plan (and in allevents not later than two and one-half months after the applicable Quarterly Vesting Date), the Company will issue to you a numberof shares of Common Stock equal to the number of Restricted Stock Units subject to your Award that vested on such date; provided,however, that in the case of a termination of your Continuous Service after the achievement of the Performance Goal but prior to thenext Quarterly Vesting Date, the shares of Common Stock subject to the portion of the Award that vested upon the achievement ofthe Performance Goal and your Continuous Service through the preceding Quarterly Vesting Date, shall be issued to you no laterthan two and one-half months following your termination of Continuous Service. Prior to the issuance to you of the shares ofCommon Stock subject to the Award, you shall have no direct or secured claim in any specific assets of the Company or in suchshares of Common Stock, and will have the status of a general unsecured creditor of the Company.5.Adjustments. The number of Restricted Stock Units subject to your Award may be adjusted from timeto time for capitalization adjustments, as provided in Section 7.1 of the Plan.6.Securities Law Compliance. You may not be issued any shares of Common Stock under your Awardunless the shares of Common Stock are either (i) then registered under the Securities Act or (ii) the Company has determined thatsuch issuance would be exempt from2 the registration requirements of the Securities Act. Your Award must also comply with other applicable laws and regulationsgoverning the Award, and you shall not receive such shares if the Company determines that such receipt would not be in materialcompliance with such laws and regulations.7.Execution of Documents. You hereby acknowledge and agree that the manner selected by theCompany by which you indicate your consent to your Grant Notice is also deemed to be your execution of your Grant Notice and ofthis Agreement. You further agree that such manner of indicating consent may be relied upon as your signature for establishing yourexecution of any documents to be executed in the future in connection with your Award. This Agreement shall be deemed to besigned by the Company and you upon the respective signing by the Company and you of the Grant Notice to which it is attached. 8.Restrictive Legends. The shares of Common Stock issued under your Award shall be endorsed withappropriate legends, if any, determined by the Company.9.Transferability. Your Award is not transferable, except by will or by the laws of descent anddistribution. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, youmay designate a third party who, in the event of your death, shall thereafter be entitled to receive any distribution of shares ofCommon Stock pursuant to Section 4 of this Agreement.10.Award not a Service Contract. Your Award is not an employment or service contract, and nothing inyour Award shall be deemed to create in any way whatsoever any obligation on your part to continue in the service of the Companyor a Subsidiary, or on the part of the Company or a Subsidiary to continue such service. In addition, nothing in your Award shallobligate the Company or a Subsidiary, their respective stockholders, boards of directors, officers or employees to continue anyrelationship that you might have as an employee, director or consultant for the Company or a Subsidiary.11.Unsecured Obligation. Your Award is unfunded, and as a holder of vested Restricted Stock Unitssubject to your Award, you shall be considered an unsecured creditor of the Company with respect to the Company’s obligation, ifany, to issue shares of Common Stock pursuant to Section 4 of this Agreement. As used herein, the term “Restricted Stock Unit”means a non-voting unit of measurement which is deemed for bookkeeping purposes to be equivalent to one outstanding share ofCommon Stock (subject to adjustment as provided in Section 5 of this Agreement) solely for purposes of the Award. The RestrictedStock Units shall be used solely as a device for the determination of the payment, if any, to eventually be made to you if suchRestricted Stock Units vest pursuant to this Agreement. The Restricted Stock Units shall not be treated as property or as a trust fundof any kind.12.Tax Obligations.(a) The Company shall have no obligation to deliver shares of Common Stock until the tax withholding obligations of theCompany and its Subsidiaries have been satisfied by you.3 (b) Upon each applicable vesting date, the Company’s designated third party plan administrator (i.e. E*Trade or suchsuccessor third party administrator as the Company may designate from time to time) shall sell a number of shares of Common Stockthat are issued under the Award, which the Company determines is sufficient to generate an amount that meets the tax obligations plusadditional shares, as necessary, to account for rounding and market fluctuations, and shall pay such tax withholding amounts to theCompany. The shares of Common Stock may be sold as part of a block trade with other Participants of the Plan in which allParticipants receive an average price. Any adverse consequences to you resulting from the procedure permitted under this Section 11,including, without limitation, tax consequences and any loss of prospective stock appreciation, shall be your sole responsibility andthere shall be no liability to the Company for any adverse consequences of any nature whatsoever.(c) You hereby acknowledge that you understand that you may suffer adverse tax consequences as a result of yourparticipation in the Plan. You hereby represent that you have consulted with any tax consultants you deem advisable inconnection with the Award or disposition of the shares of Common Stock received under the Award and that you are notrelying on the Company for any tax advice.(d) Payments contemplated with respect to the Award are intended to comply with the short-term deferralexemption under Section 409A of the Code, and the provisions of this Agreement shall be construed and interpretedconsistent with that intent. Notwithstanding any contrary provision in the Plan or in the Agreement, if any provision of thePlan or the Agreement contravenes any regulations or guidance promulgated under Section 409A of the Code or couldcause the Awards to be subject to additional taxes, accelerated taxation, interest or penalties under Section 409A of theCode, the Company may, in its sole discretion and without your consent, modify the Plan and/or the Agreement: (i) tocomply with, or avoid being subject to, Section 409A of the Code, or to avoid the imposition of any taxes, acceleratedtaxation, interest or penalties under Section 409A of the Code, and (ii) to maintain, to the maximum extent practicable, theoriginal intent of the applicable provision without contravening the provisions of Section 409A of the Code. This Section11(d) does not create an obligation on the part of the Company to modify the Plan or the Agreement and does not guaranteethat the Award will not be subject to additional taxes, interest or penalties under Section 409A of the Code.13. Employment Conditions. In accepting the Award, you acknowledge that:(a) Any notice period mandated under the laws of the local jurisdiction shall not be treated as service for thepurpose of determining the vesting of the Award; and your right to receive shares of Common Stock in settlement of theAward after termination of service, if any, will be measured by the date of termination of your status as an employee and willnot be extended by any notice period mandated under the local law. Subject to the foregoing and the provisions of the Plan,the Company, in its sole discretion, shall determine whether your status as an employee has terminated and the effective dateof such termination.(b) The vesting of the Award shall cease upon, and no portion of the Award shall become vested following, yourtermination as an employee for any reason except as may be4 explicitly provided by the Plan or this Agreement. Unless otherwise provided by the Plan or this Agreement, theunvested portion of the Award at the time of your termination as an employee will be forfeited.(c) The Plan is established voluntarily by the Company. It is discretionary in nature and it may be modified,amended, suspended or terminated by the Company at any time, subject to Section 8.6.5 of the Plan.(d) The grant of the Award is voluntary and occasional and does not create any contractual or other right to receivefuture grants of Awards, or benefits in lieu of Awards, even if Awards have been granted repeatedly in the past.(e) All decisions with respect to future Award grants, if any, will be at the sole discretion of the Company.(f) You are voluntarily participating in the Plan.(g) The Award is an extraordinary item that does not constitute compensation of any kind for service of any kindrendered to the Company (or any Subsidiary), and which is outside the scope of your employment contract, if any. Inaddition, the Award is not part of normal or expected compensation or salary for any purpose, including, but not limited to,calculating any severance, resignation, termination, redundancy, end-of-service payments, bonuses, long-service awards,pension or retirement benefits or similar payments.(h) The future value of the underlying shares of Common Stock is unknown and cannot be predicted withcertainty. If you obtain shares upon settlement of the Award, the value of those shares may increase or decrease.(i) No claim or entitlement to compensation or damages arises from termination of the Award or diminution invalue of the Award or shares of Common Stock acquired upon settlement of the Award resulting from termination of yourstatus as an employee (for any reason whether or not in breach of the local law) and you irrevocably release the Companyand each Subsidiary from any such claim that may arise. If, notwithstanding the foregoing, any such claim is found by acourt of competent jurisdiction to have arisen then, by signing this Agreement, you shall be deemed irrevocably to havewaived your entitlement to pursue such a claim.14.Headings. The headings of the Sections in this Agreement are inserted for convenience only and shall not bedeemed to constitute a part of this Agreement or to affect the meaning of this Agreement.15.Severability. If all or any part of this Agreement or the Plan is declared by any court or governmental authorityto be unlawful or invalid, such unlawfulness or invalidity will not invalidate any portion of this Agreement or the Plan not declared tobe unlawful or invalid. Any Section of this Agreement (or part of such a Section) so declared to be unlawful or invalid5 will, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extentpossible while remaining lawful and valid.16.Amendment. Nothing in this Agreement shall restrict the Company’s ability to exercise its discretionaryauthority pursuant to Section 3 of the Plan; provided, however, that no such action may, without your consent, adversely affect yourrights under your Award and this Agreement. 17.Delivery of Documents and Notices. Any document relating to participation in the Plan, or any notice requiredor permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that thisAgreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery electronic delivery atthe e-mail address, if any, provided for you by the Company, or, upon deposit in the local postal service, by registered orcertified mail, or with a nationally recognized overnight courier service with postage and fees prepaid, addressed to the otherparty at the address of such party set forth in the Grant Notice or at such other address as such party may designate in writingfrom time to time to the other party.(a) The Plan documents, which may include but do not necessarily include: the Plan, this Agreement, and anyreports of the Company provided generally to the Company’s shareholders, may be delivered to you electronically. Inaddition, if permitted by the Company, you may deliver electronically the notices called for under the Agreement or the Planto the Company or to such third party involved in administering the Plan as the Company may designate from time totime. Such means of electronic delivery may include but do not necessarily include the delivery of a link to a Companyintranet or the internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or suchother means of electronic delivery specified by the Company.(b) You acknowledge that you have read this Section 16 of this Agreement and consent to the electronic deliveryof the Plan documents and, if permitted by the Company, the delivery of the notices, as described in the Agreement or thePlan. You acknowledge that you may receive from the Company a paper copy of any documents delivered electronically atno cost to you by contacting the Company by telephone or in writing. You further acknowledge that you will be providedwith a paper copy of any documents if the attempted electronic delivery of such documents fails. Similarly, you understandthat you must provide the Company or any designated third party administrator with a paper copy of any documents if theattempted electronic delivery of such documents fails. You may revoke your consent to the electronic delivery of documentsdescribed in this Section 16 or may change the electronic mail address to which such documents are to be delivered (if youhave provided an electronic mail address) at any time by contacting SOProcessing@nektar.com to notify the Company ofsuch revoked consent or revised e-mail address by telephone, postal service or electronic mail. Finally, you understand thatyou are not required to consent to electronic delivery of documents described in this Section 16.6 18.Miscellaneous.(a)The rights and obligations of the Company under your Award shall be transferable toany one or more persons or entities, and all covenants and agreements hereunder shall inure to the benefit of, and be enforceable by theCompany’s successors and assigns.(b)You agree upon request to execute any further documents or instruments necessary ordesirable in the sole determination of the Company to carry out the purposes or intent of your Award.(c)You acknowledge and agree that you have reviewed your Award in its entirety, havehad an opportunity to obtain the advice of counsel prior to executing and accepting your Award and fully understand all provisions ofyour Award.19.Governing Plan Document. Your Award is subject to all the provisions of the Plan, the provisions of which arehereby made a part of your Award, and is further subject to all interpretations, amendments, rules and regulations which may from timeto time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of your Award and thoseof the Plan, the provisions of the Plan shall control.20.Choice of Law. The interpretation, performance and enforcement of this Agreement shall be governed by thelaw of the state of Delaware without regard to such state’s conflicts of laws rules.21.Clawback Policy. The Award is subject to the terms of the Company’s recoupment, clawback or similar policyas it may be in effect from time to time, as well as any similar provisions of applicable law, any of which could in certain circumstancesrequire repayment or forfeiture of the Restricted Stock Units or any shares of Common Stock or other cash or property received withrespect to the Restricted Stock Units (including any value received from a disposition of the shares acquired upon payment of theRestricted Stock Units). 7 Nektar Therapeutics2017 Performance Incentive PlanRestricted Stock Unit Agreement(Non-Employee Directors)Pursuant to your Restricted Stock Unit Grant Notice, which may be in such form (including electronic form) as prescribedby the Committee from time to time (“Grant Notice”), and this Restricted Stock Unit Agreement (“Agreement”) (collectively, the“Award”), Nektar Therapeutics (the “Company”) has awarded you, pursuant to its 2017 Performance Incentive Plan (the “Plan”), thenumber of Restricted Stock Units as indicated in the Grant Notice. Defined terms not explicitly defined in this Agreement but definedin the Plan shall have the same definitions as in the Plan.The details of your Award are as follows.1.Vesting. Subject to the limitations contained herein, your Award shall vest as provided in the GrantNotice, provided that you continuously serve as a non-employee director of the Company through the Vesting Date (as defined in theGrant Notice). Notwithstanding the foregoing, in the event your continuous service as a non-employee director of the Company isterminated as a result of your death or Disability, your Award shall become fully vested and exercisable as of the date of suchtermination. For purposes of the immediately preceding sentence, “Disability” means a “permanent and total disability” within themeaning of 26 U.S.C. §22(e)(3).2.Dividends. You shall not receive any payment or other adjustment in the number of your RestrictedStock Units for dividends or other distributions that may be made in respect of the shares of Common Stock to which your RestrictedStock Units relate.3.Distribution of Shares of Common Stock. Restricted Stock Units granted to you hereunder shall be paid in shares of Common Stock on a one-for-one basis as soon as practicableafter (and in all events not more than two and one-half months after) the Vesting Date. In the event of a Change in Control (as definedin the Plan), the vesting of the Restricted Stock Units granted hereunder shall accelerate in full as of the closing of such transaction andshall be paid upon or as soon as practicable after (and in all events not more than two and one-half months after) the date of suchclosing.4.Adjustments. The number of Restricted Stock Units subject to your Award may be adjusted from timeto time for capitalization adjustments, as provided in Section 7.1 of the Plan.5.Securities Law Compliance. You may not be issued any shares of Common Stock under your Awardunless the shares of Common Stock are either (i) then registered under the Securities Act or (ii) the Company has determined thatsuch issuance would be exempt from1 the registration requirements of the Securities Act. Your Award must also comply with other applicable laws and regulationsgoverning the Award, and you shall not receive such shares if the Company determines that such receipt would not be in materialcompliance with such laws and regulations.6.Execution of Documents. You hereby acknowledge and agree that the manner selected by theCompany by which you indicate your consent to your Grant Notice is also deemed to be your execution of your Grant Notice and ofthis Agreement. You further agree that such manner of indicating consent may be relied upon as your signature for establishing yourexecution of any documents to be executed in the future in connection with your Award. This Agreement shall be deemed to besigned by the Company and you upon the respective signing by the Company and you of the Grant Notice to which it is attached. 7.Restrictive Legends. The shares of Common Stock issued under your Award shall be endorsed withappropriate legends, if any, determined by the Company.8.Transferability. Your Award is not transferable, except by will or by the laws of descent anddistribution. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, youmay designate a third party who, in the event of your death, shall thereafter be entitled to receive any distribution of shares ofCommon Stock pursuant to Section 3 of this Agreement.9.Award not a Service Contract. Your Award is not an employment or service contract, and nothing inyour Award shall be deemed to create in any way whatsoever any obligation on your part to continue in the service of the Companyor an Affiliate, or on the part of the Company or an Affiliate to continue such service. In addition, nothing in your Award shallobligate the Company or an Affiliate, their respective stockholders, boards of directors, officers or employees to continue anyrelationship that you might have as an employee, director or consultant for the Company or an Affiliate.10.Unsecured Obligation. Your Award is unfunded, and as a holder of vested Restricted Stock Unitssubject to your Award, you shall be considered an unsecured creditor of the Company with respect to the Company’s obligation, ifany, to issue shares of Common Stock pursuant to Section 3 of this Agreement. As used herein, the term “Restricted Stock Unit”means a non-voting unit of measurement which is deemed for bookkeeping purposes to be equivalent to one outstanding share ofCommon Stock (subject to adjustment as provided in Section 4) solely for purposes of the Award. The Restricted Stock Units shallbe used solely as a device for the determination of the payment to eventually be made to you if such Restricted Stock Units vestpursuant to this Agreement. The Restricted Stock Units shall not be treated as property or as a trust fund of any kind.11.Tax Obligations.(a) You hereby acknowledge that you understand that you may suffer adverse tax consequences as a result of yourparticipation in the Plan. You hereby represent that you have consulted with any tax consultants you deem advisable in connectionwith the Award or2 disposition of the shares of Common Stock received under the Award and that you are not relying on the Company for any tax advice.(b) Payments contemplated with respect to the Award are intended to comply with the short-term deferralexemption under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the provisions of thisAgreement shall be construed and interpreted consistent with that intent. Notwithstanding any contrary provision in the Planor in the Agreement, if any provision of the Plan or the Agreement contravenes any regulations or guidance promulgatedunder Section 409A of the Code or could cause the Awards to be subject to additional taxes, accelerated taxation, interest orpenalties under Section 409A of the Code, the Company may, in its sole discretion and without your consent, modify thePlan and/or the Agreement: (i) to comply with, or avoid being subject to, Section 409A of the Code, or to avoid theimposition of any taxes, accelerated taxation, interest or penalties under Section 409A of the Code, and (ii) to maintain, tothe maximum extent practicable, the original intent of the applicable provision without contravening the provisions ofSection 409A of the Code. This Section 11(b) does not create an obligation on the part of the Company to modify the Planor the Agreement and does not guarantee that the Award will not be subject to taxes, interest or penalties under Section409A of the Code.12. Service Conditions. In accepting the Award, you acknowledge that:(a) The vesting of the Award shall cease upon, and no portion of the Award shall become vested following, yourtermination as a director for any reason except as may be explicitly provided by the Plan or this Agreement. Unlessotherwise provided by the Plan or this Agreement, the unvested portion of the Award at the time of your termination asa director will be forfeited.(b) The Plan is established voluntarily by the Company. It is discretionary in nature and it may be modified,amended, suspended or terminated by the Company at any time, subject to Section 8 of the Plan.(c) The grant of the Award is voluntary and occasional and does not create any contractual or other right to receivefuture grants of Awards, or benefits in lieu of Awards, even if Awards have been granted repeatedly in the past.(d) All decisions with respect to future Award grants, if any, will be at the sole discretion of the Company.(e) You are voluntarily participating in the Plan.(f) The future value of the underlying shares of Common Stock is unknown and cannot be predicted withcertainty. If you obtain shares upon settlement of the Award, the value of those shares may increase or decrease.(g) No claim or entitlement to compensation or damages arises from termination of the Award or diminution invalue of the Award or shares of Common Stock acquired upon3 settlement of the Award resulting from termination of your status as a director (for any reason whether or not inbreach of the local law) and you irrevocably release the Company and each Affiliate from any such claim that may arise. If,notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen then, by signingthis Agreement, you shall be deemed irrevocably to have waived your entitlement to pursue such a claim.13.Headings. The headings of the Sections in this Agreement are inserted for convenience only and shall not bedeemed to constitute a part of this Agreement or to affect the meaning of this Agreement.14.Severability. If all or any part of this Agreement or the Plan is declared by any court or governmental authorityto be unlawful or invalid, such unlawfulness or invalidity will not invalidate any portion of this Agreement or the Plan not declared tobe unlawful or invalid. Any Section of this Agreement (or part of such a Section) so declared to be unlawful or invalid will, if possible,be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible whileremaining lawful and valid.15.Amendment. Nothing in this Agreement shall restrict the Company’s ability to exercise its discretionaryauthority pursuant to Section 3 of the Plan; provided, however, that no such action may, without your consent, adversely affect yourrights under your Award and this Agreement. 16.Delivery of Documents and Notices. Any document relating to participation in the Plan, or any notice requiredor permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that thisAgreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery electronic delivery atthe e-mail address, if any, provided for you by the Company, or, upon deposit in the local postal service, by registered orcertified mail, or with a nationally recognized overnight courier service with postage and fees prepaid, addressed to the otherparty at the address of such party set forth in the Grant Notice or at such other address as such party may designate in writingfrom time to time to the other party.(a) The Plan documents, which may include but do not necessarily include: the Plan, this Agreement, and anyreports of the Company provided generally to the Company’s shareholders, may be delivered to you electronically. Inaddition, if permitted by the Company, you may deliver electronically the notices called for under the Agreement or the Planto the Company or to such third party involved in administering the Plan as the Company may designate from time totime. Such means of electronic delivery may include but do not necessarily include the delivery of a link to a Companyintranet or the internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or suchother means of electronic delivery specified by the Company.(b) You acknowledge that you have read this Section 16 of this Agreement and consent to the electronic deliveryof the Plan documents and, if permitted by the Company, the delivery of the notices, as described in the Agreement or thePlan. You acknowledge that you may receive from the Company a paper copy of any documents delivered electronically atno4 cost to you by contacting the Company by telephone or in writing. You further acknowledge that you will beprovided with a paper copy of any documents if the attempted electronic delivery of such documents fails. Similarly, youunderstand that you must provide the Company or any designated third party administrator with a paper copy of anydocuments if the attempted electronic delivery of such documents fails. You may revoke your consent to the electronicdelivery of documents described in this Section 16 or may change the electronic mail address to which such documents areto be delivered (if you have provided an electronic mail address) at any time by notifying the Company of such revokedconsent or revised e-mail address by telephone, postal service or electronic mail. Finally, you understand that you are notrequired to consent to electronic delivery of documents described in this Section 16.17.Miscellaneous.(a)The rights and obligations of the Company under your Award shall be transferable toany one or more persons or entities, and all covenants and agreements hereunder shall inure to the benefit of, and be enforceable by theCompany’s successors and assigns.(b)You agree upon request to execute any further documents or instruments necessary ordesirable in the sole determination of the Company to carry out the purposes or intent of your Award.(c)You acknowledge and agree that you have reviewed your Award in its entirety, havehad an opportunity to obtain the advice of counsel prior to executing and accepting your Award and fully understand all provisions ofyour Award.18.Governing Plan Document. Your Award is subject to all the provisions of the Plan, the provisions of which arehereby made a part of your Award, and is further subject to all interpretations, amendments, rules and regulations which may from timeto time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of your Award and thoseof the Plan, the provisions of the Plan shall control.19.Choice of Law. The interpretation, performance and enforcement of this Agreement shall be governed by thelaw of the state of Delaware without regard to such state’s conflicts of laws rules.20.Clawback Policy. The Award is subject to the terms of the Company’s recoupment, clawback or similar policyas it may be in effect from time to time, as well as any similar provisions of applicable law, any of which could in certain circumstancesrequire repayment or forfeiture of the Restricted Stock Units or any shares of Common Stock or other cash or property received withrespect to the Restricted Stock Units (including any value received from a disposition of the shares acquired upon payment of theRestricted Stock Units). 5 Exhibit 10.18SEPARATION AND GENERAL RELEASE AGREEMENT In exchange for the terms, conditions and releases set forth below, Nektar Therapeutics (the “Company”) and Ivan Gergel,M.D. (“you”) hereby agree as follows:1. Effective Date. This Agreement will become effective on the eighth day after you sign and deliver thisAgreement to the Company (the “Effective Date”), provided that you do not revoke this Separation and General Release Agreement(this “Agreement”) before such date pursuant to Paragraph 7(c) below and provided that you sign and return this Agreement to theCompany on or before December 20, 2017. 2.Termination of Employment. Your employment as Senior Vice President, Drug Development and Chief MedicalOfficer of the Company, as well as your employment in any other capacity for the Company or any of its affiliates, shall terminate,effective December 20, 2017 (the “Termination Date”). Following the Termination Date, you shall not be authorized to transact anybusiness on behalf of the Company or any its affiliates or subsidiaries.3.Consideration. Provided that you comply with all of the terms of this Agreement, the Company shall provide youwith the following severance benefits (the “Severance Benefits”): (a) the Company will make a severance payment to you withinthree (3) business days following the Effective Date in the amount of nine hundred eighty-one thousand dollars ($981,000), less allapplicable withholdings and standard deductions; (b) subject to the provisions set forth below in Paragraph 18, your Options, to theextent outstanding and vested as of the Termination Date, will remain exercisable for an additional period of time as provided inParagraph 18; and (c) provided that you timely exercise your right to continue your health insurance coverage under the ConsolidatedOmnibus Budget Reconciliation Act of 1985 (“COBRA”), the Company will pay the monthly health insurance coverage payments foryou and your eligible dependents for a period commencing on the Termination Date and ending on the earlier to occur of (i) the twelvemonth anniversary of the Termination Date, or (ii) the date you become eligible to receive health insurance coverage from a subsequentemployer. You shall notify the Company promptly upon accepting employment with any other person or entity, but no later than threecalendar days prior to commencing such employment, and at the same time, you shall notify the Company whether you are eligible toreceive health coverage in connection with such employment. You acknowledge that the Severance Benefits represent payments thatyou would not otherwise be entitled to receive, now or in the future, without entering into this Agreement, and constitutes valuableconsideration for the promises and undertakings set forth in this Agreement. Tax Indemnification. You acknowledge and agree that the Company has made no representations or warranties regarding the taxconsequences of any amounts paid by theConfidential1 Exhibit 10.18Company to you pursuant to this Agreement. You agree to pay all federal or state taxes owed by you, if any, which are required bylaw to be paid with respect to the payments herein. 4.Payment of Salary and Expenses. On your Termination Date, the Company will pay to you all accrued andunpaid salary and an amount equaling 47 hours multiplied by your effective hourly rate as used by the Company in calculating paidtime off, which amount corresponds to any accrued but unused paid time off as of the Termination Date (collectively, the “AccruedObligations”). In the event that you have a negative paid time off balance, you agree that such amount will be deducted from theCompany’s payment to you of your Accrued Obligations. By signing below, you acknowledge and represent that, upon receiving theAccrued Obligations, you will have received all salary, wages, bonuses, accrued vacation and paid time off, and all other benefits andcompensation due to you through the Termination Date. You agree that, by the Termination Date, you will submit your finaldocumented expense reimbursement statement reflecting all business expenses you incurred through the Termination Date, if any, forwhich you seek reimbursement. The Company will reimburse you for these expenses pursuant to its regular business practice.5.Return of Property; Proprietary Information Agreement. By the Termination Date, you shall return to theCompany or destroy any and all Company property, including, but not limited to, documents (in whatever paper or electronic formthey exist), things relating to the business of the Company and all intellectual, electronic and physical property belonging to theCompany that is in your possession or control, including but not limited to any emails, documents, power point presentations, businessplans, financial plans, personnel information and/or financial statements belonging to the Company or that contain confidentialinformation of the Company. Your signature below constitutes your certification that you have returned or will return by yourTermination date all documents and other items provided to you by the Company, developed or obtained by you as a result of youremployment with the Company, or otherwise belonging to the Company. Notwithstanding the foregoing, you may keep your cellulartelephone (and corresponding telephone number for your personal use) and the Company will provide to you reasonable IT assistancein transitioning your calendar and contacts information from the Company’s network to you. You hereby reaffirm and agree toobserve and abide by the terms of your Employment Agreement, executed by you on May 16, 2014 (the “Employment Agreement,” acopy of which is attached) with the Company, specifically including the provisions therein regarding assignment of inventions,nondisclosure of the Company’s trade secrets and confidential and proprietary information, and non-solicitation of Companyemployees. The obligations under the Employment Agreement that survive the termination of your employment are specificallyincorporated herein by reference. Notwithstanding your confidentiality and non-disclosure obligations in this Agreement andotherwise, you understand that as provided by the Federal Defend Trade Secrets Act, you will not be held criminally or civilly liableunder any federal or state trade secret law for the disclosure of a trade secret made: (1) in confidence to a federal, state, or localgovernment official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspectedviolation of law; or (2) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.6.Release of Claims. You agree that the foregoing consideration represents settlement in full of all outstandingobligations owed to you by the Company and its officers,Confidential2 Exhibit 10.18directors, agents and employees, and is satisfactory consideration for the release of claims set forth herein. On behalf of yourself, andyour respective heirs, family members, executors and assigns, you hereby fully and forever release the Company and its past andpresent subsidiaries and affiliates, and each of their past, present and future officers, agents, directors, employees, investors,stockholders, administrators, attorneys, representatives, affiliates, divisions, subsidiaries, parents, predecessor and successorcorporations, and assigns (the “Releasees”), from, and agree not to sue or institute, prosecute or pursue, or cause to be instituted,prosecuted, or pursued, any claim, cause of action, charge, controversy, duty, obligation, demand, loss, cost, debt, damages, penalties,judgment, order, or liability relating to or arising out of any matters of any kind, whether presently known or unknown, suspected orunsuspected, that you may possess against any of the Releasees arising from any omissions, acts or facts that have occurred up untiland including the date you sign this Agreement (collectively “Claims”). The released Claims include, but are not limited to: (i) any andall Claims relating to or arising from your employment relationship with the Company and the termination of that relationship,including any Claims with respect to wages, bonuses, commissions, vacation pay, or any other form or amount of compensation, orany Claim arising out of your offer letter agreement, dated May 14, 2014, Employment Agreement, or the Company’s Change ofControl Severance Plan; (ii) any and all Claims relating to, or arising from, your right to receive or purchase any form of equity in theCompany or any Releasee, including, without limitation, any claims for fraud, misrepresentation, breach of fiduciary duty, breach ofduty under applicable state corporate law, and securities fraud under any state or federal law; (iii) any and all Claims for wrongfuldischarge of employment; termination in violation of public policy; discrimination; harassment; retaliation; breach of contract, bothexpress and implied; breach of a covenant of good faith and fair dealing, both express and implied; promissory estoppel; negligent orintentional infliction of emotional distress; negligent or intentional misrepresentation; negligent or intentional interference with contractor prospective economic advantage; unfair business practices; defamation; libel; slander; negligence; personal injury; assault; battery;invasion of privacy; false imprisonment; and conversion; (iv) any and all Claims for violation of any federal, state or municipal law,regulation, ordinance, constitution or common law, including, but not limited to, Title VII of the Civil Rights Act of 1964; the CivilRights Act of 1991; the Age Discrimination in Employment Act of 1967; the Americans with Disabilities Act of 1990; the Fair LaborStandards Act; the Employee Retirement Income Security Act of 1974; The Worker Adjustment and Retraining Notification Act; theSarbanes-Oxley Act; the California Fair Employment and Housing Act; the California Family Rights Act; and the California LaborCode, including, but not limited to section 201, et seq,. section 970, et seq., sections 1400-1408; and all amendments to each such Actas well as the regulations issued thereunder; and (v) any and all Claims for attorneys' fees and costs.Notwithstanding the foregoing, nothing in this Paragraph 6 shall release (i) any obligations owed by the Company expressly describedin this Agreement, (ii) any claims you may have for indemnification under any of the Company’s charter documents, or underCalifornia Labor Code Section 2802 or other applicable law, or for coverage under any of the Company’s directors and officersinsurance policies; (iii) your claims for any benefits that are vested as of the Termination Date under the Company’s health, welfare,401k or stock option plans; (iv) your claims for underlying workers’ compensation benefits; (v) any claims you may have pursuant toParagraph 7(e) of this Agreement; (vi) any claims you may have that arise after the date you sign thisConfidential3 Exhibit 10.18Agreement; or (vii) or claims you may have which the controlling law clearly state may not be released by private agreement. 7.Acknowledgment of Waiver of Claims under ADEA. You acknowledge that you are waiving and releasing anyrights you may have under the Age Discrimination in Employment Act of 1967 (“ADEA”) and that this waiver and release is knowingand voluntary. You and the Company agree that this waiver and release does not apply to any rights or claims that may arise under theADEA after the Effective Date of this Agreement. You acknowledge that the consideration given for this waiver and releaseAgreement is in addition to anything of value to which you were already entitled. You further acknowledge that you have beenadvised by this writing that: (a)you should consult with an attorney prior to executing this Agreement;(b)you have at least twenty-one (21) calendar days within which to consider this Agreement;(c)you have seven (7) calendar days following the date that you sign this Agreement to revoke theAgreement; provided, however, that any such revocation must be in writing and delivered to Howard W. Robin at the Company’sprincipal office located at 455 Mission Bay Boulevard, South, Suite 100, San Francisco, California 94158, by close of business on orbefore the seventh calendar day from the date that you sign this Agreement;(d)this Agreement shall not be effective until the eighth calendar day after you execute and do not revokethis Agreement; and(e)nothing in this Agreement prevents or precludes you from challenging or seeking a determination ingood faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties or costs from doing so,unless specifically authorized by federal law.8.Civil Code Section 1542/Unknown Claims. You represent that the release provided in this Agreement shall applyto all unknown and unanticipated injuries and/or damages. You acknowledge that you have had the opportunity to be advised by legalcounsel and you are familiar with the provisions of California Civil Code 1542, below, which provides as follows:A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITORDOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIMEOF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUSTHAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THEDEBTOR. Being aware of said code section, you agree to expressly waive any rights you may have thereunder, as well as under anystatute or common law principles of similar effect.Confidential4 Exhibit 10.189.No Pending or Future Lawsuits. You represent that you have no lawsuits, claims, or actions pending in yourname, or on behalf of any other person or entity, against the Company or any of the Releasees. You also represent that you do notintend to bring any claims on your own behalf or on behalf of any other person or entity against the Company or any of theReleasees. You also promise to opt out of any class or representative action and to take such other steps as you have the power to taketo disassociate yourself from any class or representative action seeking relief against the Company and/or any other Releasee regardingany of the claims released in this Agreement. You further promise to alert the General Counsel of the Company within two calendardays whenever you are issued a subpoena or otherwise contacted in connection with a suit or action against the Company.10.Confidentiality of Agreement. You agree to keep terms of this Agreement in the strictest confidence and, exceptas required by law, not reveal the terms of this Agreement to any persons except your immediate family, your attorney, and yourfinancial advisors (and to them only provided that they also agree to keep the information completely confidential), and in anyproceedings to enforce the terms of this Agreement. 11.Non-Disparagement. Each party agrees not to make any oral or written statement that disparages or criticizes theother party, and in your case, the Company’s management, employees, products or services, or damages the other party’s reputation orimpairs the other party’s normal operations; provided, however, that nothing in this Agreement shall prohibit either party fromproviding truthful information or testimony in response to any court order, subpoena, or government investigation, or in connectionwith any legal proceeding between the Company and you. For the purposes of this Section 11, the reference to the Company as aparty to this Agreement includes only the Company’s Section 16(b) officers and the members of its Board of Directors.12.Litigation/Audit Cooperation. Following the Termination Date, you shall reasonably cooperate with theCompany in connection with: (a) any internal or governmental investigation or administrative, regulatory, arbitral or judicialproceeding involving the Company with respect to matters relating to your employment with or service to the Company (collectively,“Litigation”); or (b) any audit of the financial statements of the Company with respect to the period of time when you were employedby the Company (“Audit”). You acknowledge that such cooperation may include, but shall not be limited to, your making yourselfavailable to the Company (or their respective attorneys or auditors) upon reasonable notice for: (i) interviews, factual investigations,and providing declarations or affidavits that provide truthful information in connection with any Litigation or Audit; (ii) appearing atthe request of the Company to give testimony without requiring service of a subpoena or other legal process; (iii) volunteering to theCompany pertinent information related to any Litigation or Audit; (iv) providing information and legal representations to the auditors ofthe Company, in a reasonable form and within a reasonable time frame, with respect to the Company’s financial statements for theperiod in which you were employed by the Company; and (v) turning over to the Company any documents relevant to any Litigationor Audit that are or may come into your possession. The Company shall pay you an hourly rate of $500.00 per hour for time spent inconnection with providing the services under this Paragraph 12 and will also reimburse you for reasonable travel expenses incurred inconnection with providing the services under thisConfidential5 Exhibit 10.18Paragraph 12, including lodging and meals, upon your submission of receipts and invoices which shall be submitted no later than thirty(30) days following the date of service. 13.Entire Agreement. Except for the offer letter agreement dated May 14, 2014, Employment Agreement dated May16, 2014 and Equity Award Agreements (as defined below in Paragraph 18), the terms of which are specifically incorporated herein,this Agreement constitutes the entire agreement between you and the Company concerning your employment with and separation fromthe Company and all the events leading thereto and associated therewith, and supersedes and replaces any and all prior agreements andunderstandings, both written and oral, concerning your relationship with the Company. 14.No Admission of Liability. This Agreement and compliance with this Agreement is not, and shall not beconstrued as, an admission by the Company of any liability or wrongdoing whatsoever, or as an admission by the Company of anyviolation of the rights of Employee or of any other person, or the violation of any order, law, statute, regulation, duty, or contract. TheCompany specifically disclaims any liability to Employee or any other person for any alleged violation of the rights of Employee orany person or for any alleged violation of any order, law, statute, duty, or contract.15.Authority. The Company represents and warrants that the undersigned has the authority to act on behalf of theCompany and to bind the Company and all who may claim through it to the terms and conditions of this Agreement. Similarly, yourepresent and warrant that you have the capacity to act on your own behalf and on behalf of all who might claim through you to bindthem to the terms and conditions of this Agreement. The Company and you each warrant and represent that there are no liens orclaims of lien or assignments in law or equity or otherwise of or against any of the claims or causes of action released herein.16.Solicitation of Employees. You agree that for a period of twelve (12) months immediately following theTermination Date, you shall not either directly or indirectly solicit, induce, recruit or encourage any of the Company's employees toterminate their employment with the Company, or attempt to solicit, induce, recruit, or encourage employees of the Company tobecome employed or engaged as a consultant, either for yourself or for any other person or entity. Furthermore, you understand andacknowledge that the Company may at its sole discretion notify any new employer of your ongoing rights and obligations under thisAgreement and the Employment Agreement.17.Material Breaches of Agreement. You acknowledge and agree that any breach of Paragraphs 5, 6, 7, 9, 11 or 16shall constitute a material breach of the Agreement and in the case of a breach by you, shall entitle the Company immediately torecover the consideration discussed in Paragraph 3 above, except as prohibited by applicable law. In the event that the Company oryou brings an action to enforce or effect their rights under this Agreement, the prevailing party shall be entitled to recover theirreasonable attorneys’ fees and expenses incurred in connection with such an action.18.Equity Interests. The Company has previously granted you various stock options to acquire 875,000 shares ofthe Company’s common stock (the “Options”). As of the Termination Date, 451,039 shares of the Company’s common stockunderlying the Options areConfidential6 Exhibit 10.18vested (the “Vested Option Shares”). Your deadline to exercise your right to acquire all or any portion of the Vested Option Shares isDecember 20, 2018. The remaining 223,961 shares of the Company’s common stock underlying the Options, as well as 36,668unvested restricted stock units, are hereby forfeited by you in accordance with the terms of your stock option and restricted stock unitagreements and related stock option and restricted stock unit notices and the applicable equity incentive plan of the Company(collectively, the “Equity Award Agreements”). You hereby acknowledge and waive that, except as set forth in Paragraph 3 and inthis Paragraph 18, you have no further right or benefits under any agreement to receive or acquire any security or derivative security inor with respect to the Company or any of its affiliates or subsidiaries.19.Waivers; Modifications. No waiver of any provision or consent to any exception to the terms of this Agreementshall be effective unless in writing and signed by the party to be bound and, then, only to the specific purpose, extent and instance soprovided. This Agreement may not be modified, amended, altered or supplemented except by the execution and delivery of a writtenagreement executed by you and an authorized representative of the Company.20.Severability. If any provision of the Agreement or the application thereof is held invalid, such invalidity shall notaffect other provisions or applications of the Agreement which can be given effect without the invalid provisions or application.21.Counterparts. The Agreement may be executed in counterparts, and each counterpart when executed shall havethe efficacy of a signed original. Photographic copies of such signed counterparts may be used in lieu of the originals for any purpose.22.Choice of Law. The Agreement shall be construed and enforced in accordance with, and governed by, the lawsof the State of California (without regard to choice of law principles). 23.Arbitration. The parties agree that any dispute regarding any aspect of this Agreement, including theconfidentiality provisions, shall be submitted exclusively to final and binding arbitration before a mutually agreed upon arbitrator inaccordance with the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1, et seq. In the event the FAA does not apply for any reason, thenthe arbitration will proceed pursuant to the California Arbitration Act, California Code of Civil Procedure § 1280, et seq. Thearbitrator shall be empowered to award any appropriate relief, including remedies at law, in equity or injunctive relief. Arbitrationproceedings shall be held in San Francisco, California or at any other location mutually agreed upon by the parties. The parties agreethat this arbitration shall be the exclusive means of resolving any dispute under this Agreement and that no other action will be broughtby them in any court or other forum. If the parties cannot agree on an arbitrator, then an arbitrator will be selected using the alternatestriking method from a list of five (5) neutral arbitrators provided by JAMS (Judicial Arbitration & Mediation Services). You will havethe option of making the first strike. Any dispute must be submitted to the other party in writing within thirty (30) days of when theparty knew or should have known of the dispute. Otherwise, the claim of such party shall be deemed waived to the maximum extentallowed by law. Each party will pay the fees for their own counsel, subject to any remedies to which that party may later be entitledunder applicable law. However, in all cases where required by applicable law, the Company will pay the arbitrator’s fees and thearbitration costs. If under applicable law the Company is notConfidential7 Exhibit 10.18required to pay the arbitrator’s fees and the arbitration costs, then such fees and costs will be apportioned equally between each set ofadverse parties.24.Public Statements. In its public statements regarding your departure, unless mutually agreed otherwise, theCompany will state only that: “The Company concluded its employment relationship with Dr. Gergel in connection with theCompany’s focus on expanding development of its broad immune-oncology pipeline” and explain generally that the parties enteredinto this Agreement to the extent required by applicable securities laws and regulations. 25.Voluntary Execution of Agreement. This Agreement is executed voluntarily and without any duress or undueinfluence on the part or behalf of the parties hereto, with the full intent of releasing all claims. The parties acknowledge that: (a) theyhave read this Agreement; (b) they understand the terms and consequences of this Agreement and of the releases it contains; and (c)they are fully aware of the legal and binding effect of this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date set forth below. AGREED AND ACCEPTED: Nektar Therapeutics Ivan Gergel, M.D. /s/ Dorian Hirth/s/ Ivan GergelBy: Dorian HirthIvan Gergel, M.D.Title: SVP, Human Resources Date: December 20, 2017Date: December20, 2017 Confidential8 Exhibit 21.1Subsidiaries of Nektar Therapeutics* Name Jurisdiction ofIncorporation orOrganizationNektar Therapeutics UK, Ltd. United KingdomNektar Therapeutics (India) Pvt. Ltd India *Includes subsidiaries that do not fall under the definition of “Significant Subsidiary” as defined under Rule 1-02(w) of Regulation S-X. Exhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the following Registration Statements:(1) Registration Statement (Form S-3 No. 333-193454) of Nektar Therapeutics, and(2) Registration Statements (Form S-8 Nos. 333-54078, 333-71936, 333-76638, 333-98321, 333-103040, 333-117975, 333-136498, 333-145259, 333-153106, 333-170371, 333-183193, 333-197781, 333-206136 and 333-218777) pertaining to the amended and restated 2000 Non-Officer Equity IncentivePlan, the 401(k) Retirement Plan, the Employee Stock Purchase Plan, the amended and restated 2000 Equity Incentive Plan, the 2008 Equity Incentive Plan,the 2012 Performance Incentive Plan, and the 2017 Performance Incentive Plan of Nektar Therapeutics; of our reports dated March 1, 2018, with respect tothe consolidated financial statements of Nektar Therapeutics and the effectiveness of internal control over financial reporting of Nektar Therapeuticsincluded in this Annual Report (Form 10-K) of Nektar Therapeutics for the year ended December 31, 2017. /s/ Ernst & Young LLPRedwood City, CaliforniaMarch 1, 2018 Exhibit 31.1CERTIFICATIONSI, Howard W. Robin, certify that:1. I have reviewed this Annual Report on Form 10-K of Nektar Therapeutics for the year ended December 31, 2017;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act rules 13a-15(f) and 15d-15(f)) for theregistrant and have:a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under mysupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles;c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting.5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting.Date: March 1, 2018 /s/ HOWARD W. ROBINHoward W. RobinChief Executive Officer, President and Director Exhibit 31.2CERTIFICATIONSI, Gil M. Labrucherie, certify that:1. I have reviewed this Annual Report on Form 10-K of Nektar Therapeutics for the year ended December 31, 2017;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act rules 13a-15(f) and 15d-15(f)) for theregistrant and have:a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under mysupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles;c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting.5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting.Date: March 1, 2018 /s/ Gil M. LabrucherieGil M. LabrucherieSenior Vice President and Chief Financial Officer Exhibit 32.1SECTION 1350 CERTIFICATIONS*Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 ofChapter 63 of Title 18 of the United States Code (18 U.S.C. § 1350), Howard W. Robin, Chief Executive Officer, President and Director of NektarTherapeutics (the “Company”), and Gil M. Labrucherie, Senior Vice President and Chief Financial Officer of the Company, each hereby certifies that, to thebest of his knowledge:1. The Company’s Annual Report on Form 10-K, for the year ended December 31, 2017, to which this Certification is attached as Exhibit 32.1 (the“Annual Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and2. The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of theCompany for the period covered by the Annual Report.Dated: March 1, 2018 /s/ Howard W. Robin /s/ Gil M. LabrucherieHoward W. Robin Gil M. LabrucherieChief Executive Officer, President and Director Senior Vice President and Chief Financial Officer *This certification accompanies the Annual Report on Form 10-K, to which it relates, is not deemed filed with the Securities and Exchange Commissionand is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities ExchangeAct of 1934, as amended (whether made before or after the date of the Form 10-K), irrespective of any general incorporation language contained insuch filing.

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