U.S. Markets close in 5 hrs 25 mins

Here's Why Nektar Therapeutics Plummeted 38% in August

Brian Orelli, The Motley Fool

What happened

Shares of Nektar Therapeutics (NASDAQ: NKTR) dropped 38% in August, according to data provided by S&P Global Market Intelligence, after the biotech disclosed manufacturing issues with two batches of bempegaldesleukin (bempeg), a cancer treatment that it's developing with Bristol-Myers Squibb (NYSE: BMY).

So what

While manufacturing issues are a serious problem, the disclosure could end up being a minor issue for the company:

  • The batches that had problems had lower clinical benefit; that's to be expected if they're inferior product, but it also means the actual average efficacy from the potent drug is higher than previously reported.

  • The batches with issues aren't being used in pivotal trials, the ones the Food and Drug Administration (FDA) reviews as a basis for approval.

  • Surely the FDA won't be happy about the manufacturing issues, but Nektar Therapeutics has "developed a comprehensive control strategy" to prevent manufacturing issues in the future, and it has submitted it to the agency in collaboration with Bristol-Myers Squibb.

The biggest unknown issue comes from the partnership with Bristol-Myers Squibb and whether its pharma partner will commit to additional studies combining bempeg with Bristol's Opdivo, a decision that might not come until October.

Doctor talking to a patient in an exam room

Image source: Getty Images.

Now what

Given the plethora of biotech companies available to invest in, it's understandable that investors might be a little tepid about Nektar Therapeutics' missteps. But the issues don't seem to have compromised the integrity of the data to be used for approval, and the biotech appears to have a handle on the situation.

The future of the collaboration with Bristol-Myers is certainly an unknown, but Bristol-Myers paid so much for the rights to bempeg that it seems unlikely it would give them up. And even if Bristol-Myers did, Opdivo, which targets PD-1, is in a class of drugs with plenty of competition, so Nektar could likely find another partner to team up with.

More From The Motley Fool

Brian Orelli and The Motley Fool have no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

This article was originally published on Fool.com