Nektar (NKTR) Q3 Earnings & Sales Surpass, Sales View Up

Nektar Therapeutics’ (NASDAQ:NKTR) shares increased more than 10% on Nov 7 after reporting better-than-expected third-quarter results with both earnings and sales surpassing estimates.

Quarterly earnings of 37 cents beat the Zacks Consensus Estimate of 21 cents. Notably, the company reported a loss of 32 cents in the year-ago quarter.

Nektar’s shares have significantly outperformed the industry so far this year. The stock has skyrocketed 144.1% while the industry has registered an increase of 1.3%.

Quarterly revenues substantially rose 321.2% to $152.9 million from the year-ago quarter. This upside can mainly be attributed to a massive increase in license and collaboration revenues. The top line also beat the Zacks Consensus Estimate of $125 million.

Quarter in Detail

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

In the third quarter, product sales tumbled 70% to $4.4 million from $14.7 million a year ago. However, non-cash royalty revenues increased 5.2% to $8.1 million.

The company reported royalty revenues of $9.3 million, thereby registering a huge improvement of 66.1% in the third quarter compared with $5.6 million in the year-ago quarter. This uptrend was mainly on the back of royalty revenues received under a license agreement with AstraZeneca for Movantik and from Shire plc for Adynovate.

License, collaboration and other revenues came in at $131.1 million compared with $8.4 million a year ago. In the quarter, Nektar received an upfront payment of $150 million from Eli Lilly & Company for development and commercialization of NKTR-358. Of this amount, $127.6 million has been recognized this time around.

Research and development (R&D) expenses climbed 26.3% to $65.7 million, primarily due to investments in pipeline, including key candidates NKTR-358, NKTR-214 and NKTR-181.

General and administrative (G&A) expenses were up 17.5% to $12.1 million in the quarter under review.

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. Nektar also initiated a randomized phase III confirmatory study (ATTAIN) on Onzeald compared with the single-agent chemotherapy of physician’s choice in patients with advanced breast cancer, having brain metastases shortly. Positive results from the study could support a regulatory filing in the United States.

Apart from Onzeald, another candidate in the company’s immuno-oncology portfolio is NKTR-214. In September, Nektar announced initiation of phase I/II PROPEL study to evaluate the efficacy and safety of NKTR-214 in combination with Roche’s (OTC:RHHBY) Tecentriq (atezolizumab) and Merck’s (NYSE:MRK) Keytruda (pembrolizumab).

A phase I/II study evaluating NKTR-214 as a potential combination treatment regimen with Bristol-Myers Squibb’s (NYSE:BMY) Opdivo is also underway. The candidate is being examined across five tumor types (melanoma, kidney, colorectal, bladder and non-small cell lung cancer) and eight potential indications.

Another candidate, NKTR-181, is being evaluated in a phase III study for treatment of chronic pain. In July, the company reported positive top-line results from an oral human abuse potential (HAP) study, evaluating NKTR-181, to assess the opioid abuse potential compared with oxycodone. The company is planning to submit a new drug application (NDA) for the candidate by April 2018.

2017 Outlook Updated

Nektar raised its revenue outlook for 2017 to account for the $150 million upfront payment it received from Eli Lilly & Company in the reported quarter. The company now estimates revenues in the range of $250-$255 million compared with $215-$225 million, projected previously.

Cash and investments in marketable securities as of Sep 30, 2017 were $412.2 million in comparison to $389.1 million as of Dec 31, 2016. Nektar continues to expect cash for year-end 2017 at approximately $350 million.

Zacks Rank

Nektar 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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