Nektar beats on earnings–more importantly FDA accepts company’s new opioid for review

I wrote this post while on vacation in an effort to use this down time to catch up on earnings results that I missed during the very busy second quarter earning season. This post was written on August 18.

After the market close on Wednesday, August 8, Nectar Therapeutics (NKTR) reported earnings of $5.33 a share for the second quarter of 2018. That matched Wall Street projections. The huge jump in earnings from the 39 cents a share loss in the second quarter of 2017 was a result of Nektar’s billion dollar up front payment in April from Bristol-Myers (BMY). That drove revenue to $1.09 billion in the quarter from $34.6 million in the second quarter of 2017. Revenue from product sales, however, fell 62.6% to $5.9 million in the quarter, down from $15.7 million in the second quarter of 2017.

In past quarters when Nektar has missed on earnings or revenue, I’ve argued that neither were terribly important for a development stage biotechnology company. The product pipeline and developments on those products are what counts. And I’m going to argue the same thing this quarter even on the huge jump in revenue and earnings.

News from the product pipeline has been very solid recently. The company announced in July that the U.S. Food and Drug Administration has accepted NKTR-181, the company’s new non-addictive opioid painkiller for review with an expected deadline of May 28, 2019. Nektar’s new drug application for NKTR-181 is supported by 25 studies in 2,234 subjects and includes a 600-patient efficacy study in patients with low-back pain, a 630-patient 52-week safety study in patients with non-cancer pain, and two studies of human abuse potential. In my opinion the question isn’t whether the FDA will approve the drug–it will–but whether it might attach any conditions to the label that might slow adoption of the painkiller.

In addition in June Nektar presented positive (but not knock-out positive) data from a Phase II study evaluating NKTR-214 in combination with Opdivo in the treatment of melanoma, renal cell carcinoma, and urothelial cancer. Nektar and Brist0l-Myers are planning a phase III study in melanoma in the third quarter of 2018. In May Nektar began a phase Ib study of NKTR-358 in patients with the autoimmune disease lupus.

I own shares of Nektar Therapeutics in my Jubak Picks Portfolio. The shares are up 60% since I added them to the portfolio on November 13, 2017. I also own Nektar options, the January 18, 2019 call options with a strike price of $60 (NKTR190118C00060000) , in my Volatility Portfolio where they are down 8% since I added them to this portfolio on June 6, 2018.

Shares of Nektar were up 6.09% on Thursday, August 9, on the news.

I’m going to keep the shares in the Jubak Picks Portfolio and leave the target price at $130 a share. The options are about to move into the money and I anticipate that they will move gradually higher through the expiration date–supposing that we don’t get some big risk-off market event.

I own Nektar shares and options in my personal portfolios.