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Nektar (NKTR) Q2 Earnings Beat Estimates, Revenues Miss

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Nektar Therapeutics (NKTR - Free Report) 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 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 (BMY - Free Report) . The upfront payment was related to a license agreement related to development of bempegaldesleukin in combination with Bristol-Myers’s Opdivo or Yervoy.

Nektar stated on its earnings call that two out of the 22 lots of bempegaldesleukin used in clinical studies, evaluating the candidate in combination with Bristol-Myers’ PD-1 inhibitor Opdivo (nivolumab), were sub-optimal, which led to variance in study outcome. The sub-optimal lots also led to reduced response rate in patients. The company stated that it is enrolling additional patients in the first-line non-small cell lung cancer cohorts to avoid discrepancy due to sub-optimal batches of bempegaldesleukin and gain consistent insights. This will likely delay the completion of the study.

Nektar’s shares fell 29.4% in after-market trading on Aug 8, following the earnings release presumably due to the use of sub-optimal lots of bempegaldesleukin in PIVOT program. The stock has declined 10% so far this year against the industry’s increase of 7.5%.

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 (earlier NKTR-214), 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.

Pipeline Update

Nektar is developing several candidates across important therapeutic areas including Onzeald in breast cancer, NKTR-358 in inflammatory disease and NKTR-255 in virology and oncology indications. The company is also developing several immuno-oncology candidates, with bempegaldesleukin being its primary candidate. The company also has several collaborations with large pharma companies, including Gilead Sciences (GILD - Free Report) , Bristol-Myers and Eli Lilly (LLY - Free Report) to develop its pipeline candidates in combination with their drugs.

Nektar and its partner Lilly expect to initiate a phase Ilb study to evaluate NKTR-358 in lupus patients and multiple phase Ib studies for auto-immune and inflammatory disorders later this year. Meanwhile, the company announced that it has filed an investigational new drug application to support initiation of clinical study on NKTR-255 in patients with relapsed, refractory non-Hodgkin lymphoma or multiple myeloma. The study will start in the third quarter. Nektar has signed an agreement with Janssen, a subsidiary of J&J, for development of NKTR-255 combination therapies in oncology indications in pre-clinical studies.

Nektar and Bristol-Myers are evaluating bempegaldesleukin plus Bristol-Myers’ PD-L1 inhibitor Opdivo (nivolumab) under PIVOT program in four registrational studies as a treatment option for renal cell carcinoma,  urothelial carcinoma, melanoma in first-line setting and in second-line non-small cell lung cancer. Under the PIVOT program, the companies are also developing the combination therapy for first-line metastatic melanoma, renal cell carcinoma, bladder cancers and second-line non-small cell lung cancer. The program also includes a study on a triplet combination of bempegaldesleukin, Opdivo and Yervoy (ipilimumab). In August, the FDA granted Orphan Drug designation to the bempegaldesleukin-Opdivo combo for treating unresectable or metastatic melanoma in first-line setting.

Please note that in May, Nektar announced formation of a new wholly-owned subsidiary, Inheris Biopharma, which will be mainly responsible for the potential launch and commercialization of opioid analgesic candidate, NKTR-181. It will also focus on pipeline of pre-clinical central nervous system candidates.

In July, the company had announced that a decision on the new drug application (“NDA”) for NKTR-181 is likely to be postponed. A decision was expected on Aug 29. The company received a letter from the FDA stating that the regulatory authority will postpone the product-specific advisory committee meetings for opioid analgesics, previously slated to be held on Aug 21. However, the delay is not specifically related to NKTR-181 but due to a number of scientific and policy issues relating to this class of drugs. The company anticipates that delay in advisory committee meeting will not allow the FDA to provide its decision for NKTR-181 NDA on the scheduled date.

Nektar Therapeutics Price, Consensus and EPS Surprise

 

Nektar Therapeutics Price, Consensus and EPS Surprise

Nektar Therapeutics price-consensus-eps-surprise-chart | Nektar Therapeutics Quote

Zacks Rank

Nektar currently carries 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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