Rates going up because healthy people not renewing, a vicious circle of adverse selection. In the big picture, all Obamacare does is get people to sign up for Medicaid.
I see Movantik as having several potential levels of success.
1. Initial patient uptake seems to be going well. By way of comparison, Afrezza flunks this stage from the get-go. Diet pills like Belviq and Qsymia peter out after this stage.
2. Refills. There seems to be some refill action, but it's too early to come to a conclusion. Getting it on low level formulary tiers is important, don't want price to be a barrier to use.
3. Daily use. Will Movantik be used daily or only as needed? At the risk of being called a worry-wart or worse, there were no safety studies of irregular Movantik use.
If you see evidence of off-label Movantik prescriptions for short course opioid treatment, then it's likely Movantik will be a big seller. If you see evidence of diversion/secondary market for Movantik, then it's likely to be a blockbuster.
Movantik is more important to NKTR in the short term. NKTR receives only 5% on Adynovate sales up to $1.2B. It will take several years to reach this level of sales. 20% royalty on Movantik is far more lucrative.
Generic Advate is an interesting prospect. I imagine it would be a big seller because of price in second/third world countries, not so much in US/EU.
Break even for NKTR is about $250M royalty/milestone/up-front payment revenue.
-- "refilling the reserves"
Reserves aren't supposed to be "refilled" over time. They are supposed to be an accurate reflection of anticipated future expenses. The settlement set aside is current payment for past sins and has nothing to do with the risk of mortgages the company is selling off now. The good news is that after 3/31/2017, there will be an additional 10bp of profit.
Loss reserves were boosted from $4.2M to $5.7M. Last December, they were $1.7M. I have been skeptical of SNFCA reserves in the past. So what is changing, and what will be a realistic number?
I'd also like to see a real dividend, instead of 5% dilution each year.
Life insurance and cemetery profit up, residential construction loans down (but still too high for my comfort). Company is retaining mortgage servicing rights. These will become more valuable if interest rates increase. I like it!
I have never seen the word "annual" in reference to the milestone payments for Movantik. It obviously makes a huge difference. HR would shout it every time he could if that is the case. NKTR is rewarded annually through the increased royalty rates that kick in at higher sales levels.
Who believed another pivotal study would be required for approval of 102?
Do you assume the Movamtik sales milestones are annual or cumulative? I believe it is the latter. Would that affect your analysis?
What is your breakdown by drug? The Bayer products are a black box to me. I'm not sure if they will represent a medical breakthrough, a me-too product, or an also-ran by the time they finally come to market (or even if they will pass Phase 3). The study delays don't give me a warm fuzzy feeling. Do you have any competitive analysis?
NKTR cash burn increased by 15% in 3Q15 compared to the previous year when BEACON was running, it's now approaching $60M/quarter. Movantik is the big driver... $300M of Movantik sales = $1.2B of Adynovate sales as far as NKTR royalties go. Both are $60M, but NKTR is burning well in excess of $200M/year.
You need to take the preclinical data presented by NKTR with a grain of salt. Fortunately, NKTR has kept a number of preclinical poster presentations for 102 up on their web site. 102 once appeared just as promising.
For example, look at the 2011 AACR-EORTC-NCI poster "Abstract # C209: Strong Synergistic Activity of NKTR-102 - Pegylated Liposomal Doxorubicin (PLD) Combination Therapy in a Nonclinical Model of Platinum Resistant A2780 Human Ovarian Cancer". The combo treatment was a perfect ten for ten CR's in mice, but it never reached the clinic. Other posters show the preclinical effectiveness of 102 against OC and CRC. 105 posters, when they were still online, showed similar results.
At the R&D day presentation, Diab said it was an open issue about how well 214 would work if the cancer mutated, which cancers often do. You might have a massive army of T-cells fighting the wrong battle. Yes, it is promising, but surprises always lurk in the clinic.
171 apparently marginal efficacy. I doubt NKTR will ever report the 171 Phase 1 results.
NKTR morphs over the years. Ten years ago it was an inhaled insulin company. Then with 102 and 105, it was an improved cancer drug company. After that, 181, 192 and 171 made it a pain meds company. Now with 214 it's cancer immunotherapy.
Pipeline prioritization = cash crunch coming, probably early in 2017, unless HR works some magic.
Those are good CC comments.
FWIW, Movantik is still Tier 3 on my insurance plan, with specific limits and prior authorization required. Anyone else check their coverage?