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Is a Beat in Store for Nektar (NKTR) This Earnings Season?

Zacks Equity Research

We expect Nektar Therapeutics NKTR to beat expectations when it reports second-quarter 2019 results on Aug 8, after market close. In the last reported quarter, the company delivered a positive earnings surprise of 4.23%.

While the company surpassed the Zacks Consensus Estimate in three of the last four quarters, it matched the same once, with the average beat being 8.83%.

Shares of the company have lost 13.4% so far this year against the industry’s increase of 7.5%.

Let’s see how things are shaping up for this announcement.

Factors at Play

Nektar earns revenues from proprietary PEGylation material sales to partners and royalties on sales of partnered drugs like AstraZeneca’s Movantik and Takeda’s Adynovate. Royalty revenues displayed an upward trend in the past few quarters and the momentum is likely to continue in the soon-to-be reported quarter.

The company’s lead candidate, bempegaldesleukin (previously NKTR-214; an immuno-stimulatory CD122-biased agonist), is expected to be in focus on the second-quarter earnings call. Nektar has collaborations with multiple drug companies to develop bempegaldesleukin in combination with their cancer candidates including Pfizer’s PFE Bavencio/ talazoparib or Bavencio/Xtandi. A phase III study is evaluating bempegaldesleukin in combination with Bristol-Myers’ BMY Opdivo for treating first-line advanced melanoma patients. The company also has a late-stage candidate, Onzeald, which is being developed for pain management. Nektar is also developing NKTR-358 for auto-immune disorders and NKTR-255 for virology indications.

These studies are likely to drive research and development costs higher in the second quarter. Investors will likely focus on the progress of clinical studies, especially bempegaldesleukin, on the second-quarter earnings call.

Nektar’s analgesic candidate, NKTR-181, is under FDA review for treating chronic low back pain in patients new to any opioid therapy. A decision is expected later this month. In May, the company formed a new wholly-owned subsidiary, Inheris Biopharma, which will mainly be responsible for the potential launch and commercialization of NKTR-181.

We expect the company to provide details on the launch plan, following potential approval of NKTR-181 and the path forward for Inheris Biopharma.

Earnings Whispers

Our proven model indicates that Nektar is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate (loss of 79 cents) and the Zacks Consensus Estimate (loss of 80 cents), stands at +1.43%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Nektar has a Zacks Rank #3. The combination of a positive Earnings ESP and a favorable Zacks Rank makes us reasonably confident of an earnings beat.

Note that we caution against stocks with a Zacks Rank #4 (Sell) or 5 (Strong Sell) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Nektar Therapeutics Price and Consensus

 

Nektar Therapeutics Price and Consensus

Nektar Therapeutics price-consensus-chart | Nektar Therapeutics Quote

Another Stock That Warrants a Look

Here is a biotech stock that you may also want to consider, as our model shows that it has the right combination of elements to post an earnings beat in its upcoming release.

Regeneron Pharmaceuticals, Inc. REGN has an Earnings ESP of +3.64% and a Zacks Rank #3. The company is scheduled to release second-quarter results on Aug 6. You can see the complete list of today’s Zacks #1 Rank stocks here.

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