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Nektar (NKTR) Q4 Earnings Beat, NKTR-181 Review Extended

Zacks Equity Research

Nektar Therapeutics NKTR reported a loss of 57 cents per share for the fourth quarter of 2018, narrower than the Zacks Consensus Estimate of a loss of 70 cents. The company had recorded a loss of 21 cents per share in the year-ago period.

Quarterly revenues were $39.8 million compared with the year-ago figure of $95.5 million. The significant decrease in revenues was attributable to $60.0 million of non-recurring revenues recorded in the third quarter of 2017 related to a new sublicense agreement, a contract settlement agreement and the recognition of deferred revenues. The top line, however, beat the Zacks Consensus Estimate of $25.97 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 fourth quarter, product sales declined 44% to $4.4 million from the year-ago period.  Non-cash royalty revenues also decreased 2.1% to $9 million.

Nektar reported royalty revenues of $12.1 million in the quarter, registering an improvement of 26.2% from $9.2 million a year ago.

License, collaboration and other revenues came in at $14.4 million compared with $68.9 million in the prior year.

Research and development (R&D) expenses escalated 33.8% to $108.9 million, primarily due to investments in pipeline, including candidates bempegaldesleukin (earlier NKTR-214), NKTR-358, NKTR-262 and NKTR-255. It also included costs related to filing of a new drug application (“NDA”) for NKTR-181 and pre-commercial manufacturing.

Nektar is looking to get NKTR-181, an opioid analgesic, approved for the treatment of chronic low back pain. A decision from the FDA was expected by May 29, 2019. However, the company announced on its earnings call that the FDA has extended the review period by three months. A decision is now expected by Aug 29, 2019. The FDA extended the review period due to submission of additional preclinical abuse liability data, which it had requested earlier.

General and administrative (G&A) expenses were up 93.5% to $23.8 million in the reported quarter primarily due to higher stock-based compensation expenses.

Full-Year Results

Nektar reported total revenues of $1.2 billion in 2018 compared with $307.8 million in the year-ago period. The significant increase was due to an upfront payment from Bristol-Myers BMY related to a collaboration agreement. The company reported earnings of $3.78 per share in 2018 against a loss of 62 cents in 2017.

Nektar’s stock was down 1.3% in after-market trading on Feb 28, most likely due to delay in FDA’s decision on the approval of NKTR-181. Shares of Nektar have lost 54.1% in the past year.

2019 Guidance

Nektar provided revenue and operating expenses guidance for 2019. The company expects full-year revenues to be $100-$110 million, which will include $40-$45 million from royalties related to Takeda’s Adynovate and AstraZeneca’s Movantik and $32 million in non-cash royalty revenues related to UCB’s Cimzia and Roche’s Mircera.

Although the company shares research and marketing costs for its pipeline candidates with its partners, operating expenses are expected to surge in 2019 due several ongoing clinical studies, especially for NKTR-214, and commercial initiatives for NKTR-181. 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.

The company expects to end 2019 with $1.5 billion in cash and investments, which include reimbursement of development cost from Bristol-Myers. The significant cash amount boosts the prospect of Nektar as it will be able to continue developing its pipeline candidates for several years.

Pipeline Update

Nektar is developing several candidates across important therapeutic areas including Onzeald in breast cancer and NKTR-255 in virology indications. The company is also developing several immuno-oncology candidates, with bempegaldesleukin being its primary candidate.

In December, the company entered into a research collaboration with Gilead Sciences GILD to develop its IL-15 agonist, NKTR-255, in combination with the latter’s antiretroviral therapies. Gilead will completely fund the pre-clinical studies.

In the same month, Nektar and partner, Bristol-Myers, initiated a phase III study – PIVOT-09 – and a registrational study – PIVOT-10 – to evaluate bempegaldesleukin plus Opdivo (nivolumab) for treating renal cell carcinoma and urothelial carcinoma, respectively. Under the PIVOT program the companies are currently developing the combination therapy for first-line metastatic melanoma, renal cell carcinoma and bladder cancers, and second-line non-small cell lung cancer. The program will also develop a triplet combination of bempegaldesleukin, Opdivo and Yervoy (ipilimumab).

In November, the company entered into a clinical collaboration with Pfizer PFE to develop doublet or triplet combination therapies of bempegaldesleukin in several cancer indications including metastatic castration-resistant prostate cancer and squamous cell carcinoma of the head and neck. Per the terms of the agreement, Pfizer will initiate a phase Ib/II study in 2019 to evaluate combination therapies of its cancer drugs/candidates Bavencio (avelumab) and talazoparib or Xtandi (enzalutamide) with bempegaldesleukin.

Onzeald is currently being evaluated in a phase III (ATTAIN) study for the treatment of adults with advanced breast cancer, having brain metastases.

Nektar Therapeutics Price, Consensus and EPS Surprise

 

Nektar Therapeutics Price, Consensus and EPS Surprise | Nektar Therapeutics Quote

Zacks Rank

Nektar currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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