Nektar's Rezpegaldesleukin: A Breakthrough in Atopic Dermatitis or a Litigation Trap?

The atopic dermatitis (AD) market is on the cusp of a seismic shift. Nektar Therapeutics' rezpegaldesleukin, a novel Treg-boosting therapy, has delivered Phase 2b data that could redefine treatment paradigms. With impressive efficacy, a differentiated mechanism, and FDA Fast Track designation, the drug appears poised to disrupt a crowded landscape dominated by monoclonal antibodies like dupilumab. Yet looming over this potential triumph is a high-stakes intellectual property (IP) dispute with former partner Eli Lilly. For investors, the question is clear: Can Nektar capitalize on its scientific triumph, or will litigation derail its path to commercial success?

A Novel Mechanism, Stunning Efficacy

Rezpegaldesleukin is the first therapy to directly target regulatory T cells (Tregs), a subset of immune cells critical for suppressing inflammation. Unlike existing biologics, which block inflammatory cytokines like IL-4 or IL-13, rezpegaldesleukin amplifies the body's natural anti-inflammatory machinery by stimulating Treg proliferation. This dual-action approach—reducing inflammation while bolstering immune regulation—has translated into striking results.

In the Phase 2b REZOLVE-AD trial, all three tested doses of rezpegaldesleukin outperformed placebo across primary and secondary endpoints. The highest dose (24 µg/kg every two weeks) achieved a 61% improvement in the Eczema Area and Severity Index (EASI) score at week 16, versus 31% for placebo (p<0.001). Even more compelling, nearly a quarter of patients on the high dose achieved a ≥90% reduction in EASI (EASI-90), a threshold rarely met by existing therapies. Rapid symptom relief was evident within days, with itch scores dropping significantly early on.

The drug's safety profile, while not flawless, appears manageable. Injection-site reactions were common but mild, and serious adverse events were rare (≤3.8% across arms). Crucially, there were no increases in infections like conjunctivitis or oral ulcers, which have plagued some biologics. This could position rezpegaldesleukin as a safer, more tolerable option for patients weary of long-term immune suppression.

A $20 Billion Market Awaiting Disruption

The AD market is already vast and growing. With 250 million sufferers globally, it's expected to hit $20 billion by 2030, fueled by rising awareness and better diagnosis. Current therapies—topical steroids, JAK inhibitors, and anti-IL-4/13 antibodies—have limitations: steroids carry long-term risks, JAKs face black-box warnings for serious infections, and biologics require frequent injections or infusions.

Rezpegaldesleukin's Treg-centric approach could carve a unique niche. Its rapid onset and durable responses—particularly in the maintenance phase of the trial, where patients on q4w or q12w dosing sustained benefits—suggest it might offer superior convenience compared to weekly JAK pills or monthly biologics. If approved, it could attract the 40% of patients who fail existing treatments, as well as those seeking a mechanism-based alternative.

Analysts have already priced in optimism. Nektar's stock surged 40% on the Phase 2b data release, valuing the company at over $4 billion. But this optimism hinges on rezpegaldesleukin's ability to distinguish itself in pivotal trials. With top-line data from the Phase 3 program expected in 2026, investors will scrutinize whether the drug's efficacy and safety hold in larger, more diverse populations.

The Elephant in the Room: The Eli Lilly Litigation

Nektar's path to commercialization is shadowed by its contentious split with Eli Lilly. The two companies once jointly developed rezpegaldesleukin under a 2015 agreement, but their partnership dissolved in 2020 after disagreements over the drug's direction. The fallout left unresolved IP issues: Lilly retains rights to patents critical for rezpegaldesleukin's formulation, while Nektar holds development and commercialization rights.

Legal battles over royalties, geographic exclusivity, and manufacturing could delay regulatory submissions or force Nektar to share profits. Even if Nektar prevails, the uncertainty could deter partners needed for global commercialization. “The litigation is a Sword of Damocles,” notes one analyst. “If resolved unfavorably, Nektar might have to pay Lilly a percentage of sales or cede territories, significantly diluting its returns.”

Investment Considerations: Risk and Reward in Tandem

For investors, rezpegaldesleukin's potential is undeniable. If approved, it could command peak sales of $1.5–2 billion, especially if it expands into other Treg-deficient conditions like alopecia areata (where interim data from the REZOLVE-AA trial is expected in Q4 2025). Its mechanism also hints at broader applicability in autoimmune diseases, though such extensions are speculative.

However, the risks are equally stark. The Lilly litigation, while not yet impairing development, could become a financial and operational albatross. Additionally, the AD market is fiercely competitive. Regeneron's (REGN) dupilumab, already approved, has a robust safety profile and a decade of real-world data. JAK inhibitors like Pfizer's (PFE) abrocitinib and Lilly's upadacitinib face regulatory scrutiny but remain widely prescribed. Rezpegaldesleukin must prove not just efficacy, but a compelling value proposition in a crowded space.

The Bottom Line: A High-Reward, High-Risk Bet

Nektar's rezpegaldesleukin represents a paradigm shift in AD treatment, with data that could make it a blockbuster. But its success depends on navigating the Lilly litigation and proving itself in Phase 3 trials. For aggressive investors, the stock's current valuation—based on Phase 2b results alone—may already reflect too much optimism. A safer approach might be to wait for clarity on the legal front and confirmatory Phase 3 data.

In the meantime, the AD market's unmet needs remain vast, and rezpegaldesleukin's Treg mechanism offers a fresh solution. Should the drug overcome its hurdles, Nektar's stock could ascend to new heights. But investors must remember: breakthroughs are only breakthroughs if they survive the battlefield of business and law.

Investment Recommendation: Hold for now. Consider a long position once the Eli Lilly litigation is resolved and Phase 3 data confirms efficacy. Monitor stock price sensitivity to upcoming trial results and legal updates closely.

This analysis balances rezpegaldesleukin's scientific promise against its strategic risks, offering investors a roadmap to navigate this high-stakes opportunity.