A month has gone by since the last earnings report for Nektar Therapeutics (NKTR). Shares have lost about 7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Nektar due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Nektar Q1 Earnings & Revenues Beat, Decline Y/Y
Nektar Therapeutics reported a loss of 68 cents per share for the first quarter of 2019, narrower than the Zacks Consensus Estimate of a loss of 71 cents. The company had recorded a loss of 21 cents per share in the year-ago period.
Quarterly revenues were $28.2 million compared with the year-ago figure of $38 million. The year-over-year decline in revenues was attributable to a payment of $10 million received from Takeda upon approval of Adynovi in Europe in the first quarter of 2018. The top line, however, beat the Zacks Consensus Estimate of $25.45 million.
Quarter in Detail
Nektar’s top line comprises product sales, royalty revenues, non-cash royalty revenues besides license, collaboration and other revenues.
In the first quarter, product sales declined 30.1% to $4.4 million from the year-ago period. Meanwhile, non-cash royalty revenues increased 20.8% to $8.2 million.
Nektar reported royalty revenues of $11.4 million in the quarter, registering an improvement of 2.8% from the year-ago quarter.
License, collaboration and other revenues came in at $4.2 million compared with $13.7 million in the prior year.
Research and development (R&D) expenses escalated 19.2% to $118.5 million, primarily due to investments in pipeline, including candidates bempegaldesleukin (earlier NKTR-214), NKTR-358 and NKTR-255.
General and administrative (G&A) expenses were up 33.7% to $25 million in the reported quarter primarily due to costs related to commercialization initiatives to support launch of NKTR-181 upon potential approval and higher stock-based compensation expenses.
Nektar maintained its previous revenue and operating expense guidance for 2019. The company expects full-year revenues to be $100-$110 million.
Research and development costs are expected to be between $500 million and $525 million while G&A costs are expected to be in the range of $110-$120 million.
Although the company shares research and marketing costs for its pipeline candidates with its partners, operating expenses are expected to surge in 2019 due to several ongoing clinical studies, especially for NKTR-214, and commercial initiatives for NKTR-181. The company expects to end 2019 with $1.5 billion in cash and investments, which include reimbursement of $65 million to $75 million related to development cost from Bristol-Myers. The significant cash amount boosts the prospects of Nektar as it will be able to develop its pipeline candidates for several years.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -8.9% due to these changes.
At this time, Nektar has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Nektar has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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