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Why Is Nektar (NKTR) Up 12% Since Last Earnings Report?

Zacks Equity Research

A month has gone by since the last earnings report for Nektar Therapeutics (NKTR). Shares have added about 12% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Nektar due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Nektar Q1 Earnings & Revenues Top Estimates

Nektar Therapeutics reported an adjusted loss of 53 cents per share for the first quarter of 2020, narrower than the Zacks Consensus Estimate of a loss of 81 cents and the year-ago loss of 69 cents. Adjusted loss excludes a negative impact of 25 cents per share for impairment charges and additional costs related to the discontinuation of the NKTR-181 program.

Quarterly revenues were up 79.2% year over year to $50.6 million owing to the recognition of a milestone payment during the quarter. Revenues also beat the Zacks Consensus Estimate of $44.94 million.

Quarter in Detail

In the first quarter, product sales decreased 21.7% from the year-ago period to $3.4 million.  Non-cash royalty revenues were up 20.2% to $9.9 million.

Nektar’s royalty revenues decreased 14.7% year over year to $9.7 million in the quarter.

License, collaboration and other revenues were $27.5 million in the quarter compared with $4.2 million in the year-ago quarter. The increase was due to the recognition of a $25-million milestone payment from Bristol-Myers triggered by the initiation of the registrational study of Nektar’s bempegaldesleukin plus Bristol-Myers’ Opdivo in muscle-invasive bladder cancer.

Research and development expenses decreased 8% to $109 million. Notably, the company had recorded pre-commercial manufacturing costs for NKTR-181 in the year-ago quarter, which was not present in the reported quarter and led to the decline in expenses. The company discontinued the development of NKTR-181 in January.

General and administrative expenses rose 4.8% to $26.2 million in the reported quarter.

Pipeline Update

On the earnings call, the company stated that clinical studies in oncology conducted by the company have not experienced any significant delays. However, the company cautioned that uncertainties concerning COVID-19 may delay late-stage studies or enrollment of new patients in clinical studies in the future. Moreover, it expects a delay of approximately three months related to the previously anticipated timelines for certain earlier-stage studies, including the phase I/II PROPEL study evaluating bempegaldesleukin in combination with Merck’s Keytruda in patients with select advanced or metastatic solid tumors.

Meanwhile, the company expects a delay of three to six months in the anticipated timeline of its partner-sponsored clinical studies.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

Currently, Nektar has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. However, 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.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Nektar has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.



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