When investing in real estate, the mantra is: "Location! Location! Location!" However, when investing in the biotech arena the proper mantra is: "Timing! Timing and Good Science!" What better example for investing in a biotech based on this criterion -- one needs to look no further than Nektar Therapeutics (NASDAQ:NKTR), located in San Francisco, California? Nektar was founded in 1990, and in the interim years, if one had been on the roller coaster, you would have had 'one heck of a ride'---from the mountain tops to the valley, with interim swings that would have even made astronauts woozy from the vacillating share prices.
Nektar is a biopharmaceutical company engaged in developing a strong pipeline of drug candidates that utilizes their PEGylations and polymer conjugate platforms. Their product pipeline is truly a broad-based offering as they have programs and partnerships in oncology, pain, anti-infective, neurology and immunology.
When the company issued an IPO on the early 1990s, the stock languished for a long period in the single digits; they even had many days in which there were no trades in the stock. But then as the technology euphoria began in the late 1990s the stock started an impressive upward march---caught up in the craziness of the boom where anything associated with technology was the pathway to riches! By the fall of 2000, the stock had reached triple digits in value and underwent a 2 for 1 stock split leaving the shares just south of $50.00.
For all of us long time investors, we remember well when the 'bubble burst'. For many of us we got the brokerage calls informing us we needed to call them back immediately as they had some margin issues they wanted to discuss with us. stock from once being a $100 + stock, splitting 2:1, by early 2002 it was back into single digits-actually reaching the $3.00 and change level. Now in the interim years since the early 2000, the stock has been on the proverbial roller coaster of giddiness to nausea.
However, as we approach the end of 2013, it is my opinion that now is the time to get back on the Nektar roller coaster for a more pleasurable ride, especially without the Thunder Mountain downward slope, just around the bend. Based on my review of I think the coming ride will be much more enjoyable and certainly providing the opportunity for a more enjoyable price appreciation for the stock.
First let me explain the recent drop from around $14.00 to the quick swoon back to single digits. This occurred on September 26, when they announced data for their novel opioid pain drug (NKTR-181), with first reaction being that it was good data, only too then realize that the desired end-point hadn't been achieved due to the lack of pain rebound in the placebo arm. However, now that time has allowed for reflection on this situation, it's my opinion that has the potential of addressing the most troublesome issue facing those who need a durable pain medication without the spectra of them becoming addicted to the drug. The opioid based pain medication market is the largest segment of the drug's given to patients in the world. Therefore, companies that can develop an opioid based pain medication without this inherit addiction issue, that company should be able to dominate this market.
NKTR-181 is a mu-opioid analgesic investigational drug candidate with a novel molecular structure designed to provide potent pain relief while reducing the serious side effects of respiratory depression, sedation and abuse potential associated with conventional opioids. NKTR-181 was uniquely designed to cross the blood-brain barrier at a substantially slower rate than other opioid therapies. With a reduced rate of entry into the CNS, NKTR-181 has the potential to eliminate not only the euphoria that underlies opioid abuse liability and dependence but also the serious CNS-related side effects of respiratory depression and sedation. The unique molecular design of the polymer drug conjugate also prevents conversion of NKTR-181 into a rapid-acting form of an opioid that can be abused. As a result, NKTR-181 has the potential to be a highly effective analgesic with a highly favorable safety profile and reduced abuse potential.
On September 26th, Nektar released the following:
Nektar Therapeutics announced the preliminary topline results from a Phase 2 study of NKTR-181 for the treatment of moderate-to-severe chronic pain in patients with osteoarthritis of the knee. The Phase 2 study utilized a double-blind, placebo-controlled, randomized withdrawal study design to assess the efficacy, safety and tolerability of NKTR-181. Of the 295 patients that entered the study, only 9 (3%) patients were unable to achieve meaningful pain relief with NKTR-181. 53 (18%) patients discontinued treatment during the titration period because of adverse events, most of which are those commonly associated with opioids. A total of 213 patients achieved an average 40% reduction in pain and entered the randomized phase of the study.
Following the titration period, patients were randomized 1:1 to either continue to receive their analgesic dose of NKTR-181 or to receive placebo for 21 days. NKTR-181 performed as expected as an opioid analgesic throughout the study with patients continuing to show a reduction in pain scores throughout the randomized phase of the study as well. However, patients who were randomized to placebo did not show the expected increase in pain scores observed in similar enriched enrollment, randomized withdrawal studies. This unusual lack of a placebo rebound caused the Phase 2 study to miss the primary endpoint in the study, which was based upon the average change in a patient's pain score from pre-randomization baseline to the end of the double-blind, randomized treatment period of the study.
The first take away from this data is that the drug does work as demonstrated by the fact that only 3% of the patients were unable to achieved meaningful pain reduction. A total of 213 patients achieved an average 40% reduction in their pain, and then they were randomized on a 1:1 basis to continue receiving NKTR-181 or receive a placebo for 21 days. One must remember all the patients were first titrated with NKTR-181 until they had achieved pain reduction and then half of them were given a placebo. The issue that arose was that those on placebo didn't have the expected rebound in their pain level, thus ending with the desired end point not being a meaningful separation. Also, the fact that those taking NKTR-181 didn't find that they liked the drug because of the lack of euphoria conditions that are associated with opioids, this is a positive for the essence of why the drug was developed-preventing the patient from becoming addicted to the drug.
So we have a drug that works in reducing pain and it doesn't cause the opioid euphoria conditions, leaving the need to redesign a drug trial that will compensate for the initial titrating and time frame for achieving the rebound for those who go on the placebo. In my opinion, this is a task that can be overcome. They have an excellent team of researchers and medical specialists that have extensive knowledge and treatment practices in the area of opioids. This redesign effort and the proof to date that the drug can reduce pain by 40% and isn't a drug that results in the euphoria moods for those taking it, leaves me with the belief, Nektar has the potential of a major breakthrough with their (NKTR-181) development process. This is partially supported by the fact that the ensuing price drop after the (9-26-13) press releases detailing the issue, the stock has recovered nearly all the price drop from this event.
Other factors that help me find the underlying potential for Nektar is that in the recent weeks, their partner, Astra-Zeneca (NYSE:AZN), has filed NDAs both in Europe and the United States for their drug, Naloxegol. This drug is for patients suffering opioid induced constipation, a condition that is often very common with those using opioid drugs. These filings were based on two pivotal Phase III trials including a long-term safety study for those using Naloxegol. Both of these filings have been accepted and resulted in milestone payments totaling $95 million ($70M for US and $25M for Europe). It should be noted there are claw back clauses in the contracts, with potential repayment of these milestone payments based on certain criteria for each of the respective filings. However, based on the cash on hand at the end of the last filing Q, with these payments, Nektar should have a cash and investment position of approximately $250 million dollars at the end of the year.
And finally on Naloxegol -- a key upcoming date is March 10-14, 2014. The FDA will hold an advisory panel meeting where they will discuss issues with drugs being developed for opioid-induced-constipation. It is my understanding that Nektar and Astra-Zeneca are fully prepared to address any issue that might apply to their drug. However, at this point it is my understanding they haven't been asked to attend this FDA session. I assume this could change!
The next drug in the Nektar portfolio is a drug that they fully control as no partnerships are involved. Earlier there had been the potential that Nektar would partner this drug out, however, based on recent factors, the fact that Nektar has opted to keep full control of this drug is very important. This 100% ownership could have a major impact on the potential for Nektar's success and for women suffering with breast cancer. In my opinion, NKTR could do a future partnership, but terms would be much more favorable for them at that time. The compound is known as NKTR-102.
NKTR-102, is in a Phase 3 study for metastatic breast cancer and was fully enrolled in July, 2013. The full enrollment happened much quicker than initially anticipated, indicating to me that there must have been enthusiasm among clinicians for this compound and the need for promising new anti-cancer agents to treat metastatic breast cancer.
The futility analysis for the BEACON study involving NKTR-102 will occur in early 2014 and will be conducted by an independent data monitoring committee. It is expected that final survival data from the BEACON study will be available around the end of 2014 or early 2015.
In October, 2013, NKTR-102 as a single agent in patients with relapsed or refractory small cell lung cancer were dosed, with this project being led by Dr. Alex Adjei at the Roswell Park Cancer Institute, in Buffalo, New York. Roswell Park Cancer Institute was America's first cancer center founded in 1898 by Dr. Roswell Park. The Phase 2 study is expected to enroll approximately 38 patients with either chemo sensitive or chemo resistant disease. The primary end point will be the rate of 18 week progression free survival.
Stanford University is also evaluating NKTR-102 as a single agent in Avastin resistant glioma patients in the third line or greater setting. This study is being run by Dr. Larry Recht and Seema Nagpal and it enrolled 20 patients in about nine months. Enrollment was completed in August and there are still patients receiving drug in this study. At the recent R&D day held by Nektar, data was presented reflecting the primary end point established for this study with 55% of patients achieving at least six week progression free survival. Because this patient population has very advanced disease the expectation for this end point, based on the performance of other single agents was only 25%. Therefore, achieving the 55% level versus the expected 25% level is wonderful news concerning the potential for this drug. However, at this point I believe more supportive data is essential before we proclaim victory over this dreaded disease. The treatment for brain cancer (glioma) is fraught with obstacles. One can look at Celldex (NASDAQ:CLDX) and their recent news, where they showed promise with their data, but still didn't achieve the goal they were hoping.
The following is a brief recap for the Nektar pipeline. One would be hard pressed to find another small biotech company with a pipeline as broad as Nektar, plus one that already has drugs approved with their technology, earning Nektar a steady and growing stream of revenue.
- NDA Filed -Waiting for FDA Decision
- Naloxegol-OIC-partnered with Astra-Zeneca and current NDA filed and accepted in US and Europe.
- Levadex-Migraine---partnership with Allergan (NYSE:AGN)-NDA filed and approval issues pending, deals with manufacturing issues, not with the efficacy of the drug. FDA ruling should come down in early 2014.
Phase III Drugs:
- NKTR-102- Metastic Breast Cancer-Nektar Has Full Ownership for this drug.
- Amikacin Inhale(NKTR-061)- Gram-negative pneumonia-Partnership with Bayer (BAY)
- Ciprofloxacin DPI-Non-cystic fibrosis bronchiectasis-Partnership with Bayer
- BAX 855-Hemophilia A-Phase III fully enrolled and in partnership with Baxter (NYSE:BAX)
- Fovista- Neovascular Age-related Macular Degeneration - (Phase III data in 2014) and partnered with OphthTech (OPTH) This is a recent IPO biotech, so they apparently have the money to complete phase testing.
- REG1-Acute Coronary Syndrome (ACS)-Partnership with Regado Biosciences (RGDO) (ACS) is a huge market, however, data isn't expected until probably 2016 for (REG1)Regado is also a recent IPO biotech, so they also have a new supply of funding to further their trials.
- Nektar also has three other candidates in Phase II trials. Plus, they have 4 other drugs in either Phase Itesting or in preclinical testing.
Nektar certainly has taken investors on a roller coast ride, much of it coming in the early days of market exuberance and anything doing with technology being over inflated by stock valuations, with nothing but hopes and promises for the future. However, with major drug companies losing their exclusivity for their drugs, the proven PEGylatation and polymer conjugate platform will entice more companies seeking NKTRs service in order that the can reformulate their drug and obtain new patent coverage. For those who forgot the earlier stated mantra about biotech investing---Timing! Timing and Good Science! The Nektar technology platform has been proven time and again, as they already have a steady stream of revenue based on approved products with the likes of Roche (OTCQX:RHHBY), Amgen (NASDAQ:AMGN), Bristol-Myers-Squibb (NYSE:BMY), and Pfizer (NYSE:PFE). Their latest Q report reflected a nice surprise in this revenue stream and management indicated that this trend looks positive going forward. The latest 3rd Q nine months resulted in product revenue growth being up by 47% as compared to the same period last year. The thrust of my report on Nektar is the future and the timing that now might be the opportune time for those interested in the opportunity for getting in on a growth industry like the biotech industry, and with a company that appears to have Good Science. Now is the time you should look in depth with your own due diligence for Nektar Therapeutics .
A personal note: My interest in the biotech/medical field was piqued by my former employer (I'm now retired), as the parent company published medical textbooks and a world renowned medical journal that contained information based on a highly selective peer-review process. This journal was considered, and hopefully still is considered, the 'gold standard' for disseminating medical research and data. My personal work, with another publishing entity owned by the parent company, did not involve any work with either the medical textbooks or the medical journal.
Disclosure: I am long NKTR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Disclaimer: I own shares in Nektar. The opinions that I have expressed are mine and mine alone. The sources I have cited, it is assumed that what is stated is accurate, however, there is no guarantee on my part as to what is cited is valid. I'm not a licensed stock broker or financial advisor, and have no direct or indirect ties to Nektar, other than being a stockholder in the company.