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Nektar’s (NKTR) Shares Fall Post Wider Q2 Loss, Revenues Lag


Nektar Therapeutics’ NKTR shares have declined almost 9% since Aug 8 after the company reported second-quarter results. The biotech reported a wider-than-expected loss while sales missed estimates.

Nektar’s second-quarter 2017 loss of 39 cents per share was wider than the Zacks Consensus Estimate of a loss of 35 cents. This reported loss was also wider than the year-ago loss of 36 cents per share.

Nektar’s shares have significantly outperformed the industry so far this year. The company’s shares have surged 46.3% while the industry has registered a decrease of 4.1%.

Quarterly revenues rose 5.5% to $34.6 million from the year-ago quarter. This increase in revenues can mainly be attributed to the rise in product sales and royalty revenues. However, the top line missed the Zacks Consensus Estimate of $36 million.

Quarter in Detail

The top line comprised product sales, royalty revenues, non-cash royalty revenues, license, collaboration and other revenues.

In the second quarter, product sales increased 21.7% to $15.7 million from $12.9 million a year ago. However, non-cash royalty revenues decreased 18.5% to $6.6 million.

The company reported royalty revenues of $7.4 million, registering a huge improvement of 111.4% in the second quarter compared with $3.5 million in the year-ago quarter. This was mainly thanks to royalty revenues from Movantik sales.

License, collaboration and other revenues came in at $4.8 million, down 42.2% compared with $8.3 million a year ago. This fall in revenues can mainly be attributed to the recognition of $3.2 million, received from Daiichi Sankyo for the sublicense of Onzeald (formerly known as NKTR-102) in Europe in second-quarter 2016.

Research and development (R&D) expenses climbed 15.1% to $60.3 million, primarily due to investments in pipeline, including key candidates, NKTR-358 and NKTR-181.

General and administrative (G&A) expenses were up 45.5% to $16 million. This massive jump can mainly be attributed to a payment of $7 million for settlement of a litigation regarding a cross-license agreement with Enzon, Inc., a Florida-based pharma company.

Pipeline Update

The most advanced candidate in the company’s portfolio is Onzeald, currently under accelerated assessment in the EU for treatment of adults with advanced breast cancer, having brain metastases. However, the company was informed last month by the Committee for Medicinal Products for Human Use (CHMP) that it had adopted a negative opinion for the conditional marketing application for the candidate in the EU. Subsequently, in the same month, the company filed a request for examining the opinion adopted by the CHMP.

Apart from Onzeald, another candidate in the company’s immuno-oncology portfolio is NKTR-214. A phase I/II study evaluating NKTR-214 as a potential combination treatment regimen with Bristol-Myers Squibb’s BMY Opdivo is underway. During the second quarter, Nektar announced that it has started dosing patients in the trial and plans to enroll up to 260 patients in eight target cancer indications. The company expects to report initial data from the dose-escalation part of the study soon.

Notably, in May, Nektar announced a research collaboration agreement with Japanese pharma company, Takeda Pharmaceuticals, to explore the combination of NKTR-214 with five oncology compounds from Takeda’s cancer portfolio.

Last month, Nektar announced that it has entered into a strategic collaboration contract with Eli Lilly and Company LLY to co-develop NKTR-358 (phase I study ongoing) for treatment of a number of autoimmune and other chronic inflammatory conditions.

2017 Outlook Updated

Nektar raised its revenue outlook for 2017 to account for a $150 million upfront payment it expects to receive from Lilly. The company now estimates revenue in the range of $215-$225 million compared with $145-$155 million, projected previously.

Driven by the same reason, Nektar also raised its expected cash position for the year ending 2017 with approximately $350 million compared with $225 million, estimated previously.

Nektar Therapeutics Price, Consensus and EPS Surprise

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

Zacks Rank & Key Picks

Nektar currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the health care sector is Enzo Biochem, Inc. ENZ, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Enzo Biochem’s loss per share estimates narrowed from 12 cents to 7 cents for 2017 and from 11 cents to 3 cents for 2018 over the last 60 days. The company came up with a positive earnings surprise in all the trailing four quarters with an average beat of 55.83%. The stock surged 58.3% so far this year.

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