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Why Is Nektar (NKTR) Down 42.5% Since Last Earnings Report?

Zacks Equity Research

It has been about a month since the last earnings report for Nektar Therapeutics (NKTR). Shares have lost about 42.5% 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 Q2 Earnings Beat Estimates, Revenues Miss

Nektar Therapeutics reported a loss of 63 cents per share for the second quarter of 2019, narrower than the Zacks Consensus Estimate of a loss of 80 cents. The company had recorded earnings of $5.33 per share in the year-ago period. The significant decline in earnings from the year-ago quarter was due to much higher revenues in the year-ago quarter.

Quarterly revenues of $23.3 million missed the Zacks Consensus Estimate of $25.98 million. The company had recorded revenues of $1.09 billion in the year-ago quarter mainly due to recognition of $1.06 billion in upfront payment from Bristol-Myers. The upfront payment was related to a license agreement related to development of bempegaldesleukin in combination with Bristol-Myers’s Opdivo or Yervoy.

Quarter in Detail

Nektar’s top line comprises product sales, royalty revenues, non-cash royalty revenues besides license, collaboration and other revenues.

In the second quarter, product sales declined 25.9% from the year-ago period to $4.3 million.  Meanwhile, non-cash royalty revenues remained almost flat at $9.1 million.

Nektar reported royalty revenues of $7.3 million in the quarter, registering a decline of 14.2% from the year-ago quarter.

License, collaboration and other revenues came in at $2.5 million compared with $1.06 billion in the prior-year quarter, which included the aforementioned license revenues from Bristol-Myers.

Research and development expenses escalated 20.8% to $106.7 million, primarily due to investments in pipeline, including for candidates bempegaldesleukin, NKTR-358 and NKTR-255.

General and administrative expenses were up 11.3% to $22.6 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.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 7.34% due to these changes.

VGM Scores

Currently, Nektar has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. 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. 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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