Nektar Therapeutics Looking To Rebuild Faith In Its Now Early-Stage Pipeline

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Cash is king successful biotech, and arsenic agelong arsenic you person capable rate (or capable investors consenting to springiness you more), you tin enactment successful nan biotech moreover aft crushing objective defeats. Such is nan lawsuit pinch Nektar (NASDAQ:NKTR), its 2 lead early-stage objective compounds, and its $500M heap of cash. It's been a while since Nektar has had a meaningful objective success, and aft nan failure of bempeg crushed nan institution successful 2022, nan institution really needs immoderate objective wins.

The adjacent awesome update should beryllium nan Phase II read-out connected nan ISLAND-SLE study that partner Lilly (LLY) is conducting successful moderate-to-severe lupus pinch nan company's compound rezpedgaldesleukin ("Rezpeg"). Prior information person had immoderate contradictions and mixed signals (not uncommon for mini studies), but location were signs pointing to efficacy and a beardown consequence present would decidedly rebuild immoderate confidence. Further retired is simply a early Phase II study successful atopic dermatitis, arsenic good arsenic read-outs successful 2024 connected nan company's lead oncology denotation NKTR-255, a supplier that nan institution is positioning a imaginable efficacy booster to proven oncology compounds.

As is nan lawsuit pinch astir early-stage biotechs, nan likelihood are agelong and nan imaginable rewards are high. Simply derisking Rezpeg successful lupus to a 50/50 changeable could double nan stock value from here, and some lupus and atopic dermatitis are reliable targets. The oncology programme could likewise thrust important value, though nan way grounds of narcotics developed arsenic companions for existing checkpoint inhibitors aliases different treatments has been comparatively poor.

Will ISLAND Be A Resort Or A Shipwreck?

The astir important arena connected nan Nektar timeline correct now is nan upcoming read-out from Lilly's Phase II ISLAND-SLE study of Rezpeg successful moderate-to-severe lupus. Lilly enrolled 280 patients for 3 dosing levels, and nan superior endpoint for this study is nan percent of patients who execute a four-point aliases amended simplification successful their Systemic Lupus Erythematosus Disease Activity Index 2000 (SLEDAI) score.

A Phase Ib study of nan supplier successful mild lupus suggested worthwhile efficacy, pinch 7 of 18 patients successful nan 2 highest dosing groups (out of four) seeing a four-point aliases greater betterment successful their Cutaneous Lupus Disease Area and Severity Index Activity (or CLASI-A) score. Unfortunately, location was nary observed improvements successful SLEDAI, but it was a very little study and it takes clip for those benefits to appear.

I'm utilizing a 15% chance of occurrence successful this proceedings successful my study of Nektar. Given that nan ISLAND study is enrolling much terrible patients than nan anterior study and location hasn't been immoderate follow-up accusation connected that Phase Ib cohort (at slightest to my knowledge), I deliberation nan efficacy seen successful Phase Ib can't beryllium credited arsenic much than "encouraging", and I'd statement that SLE has proven to beryllium a very difficult illness successful nan past.

The mean supplier successful Phase II studies has a 30% chance of going connected to Phase III and a 15% chance of yet getting approved. Given nan trouble of SLE arsenic an indication, nan different diligent enrollment criteria, and nan different endpoint, I deliberation utilizing an mean chance of occurrence is astir apt generous astatine this point. Should nan ISLAND travel up pinch bully efficacy and safety, it could adhd $3/share to Nektar's stock value conscionable based connected a 50/50 chance of succeeding successful Phase III, and a successful Phase III programme could position nan supplier for complete $1 cardinal successful sales, and perchance meaningfully much arsenic I judge presently approved lupus narcotics person been commercially constricted by less-than-ideal efficacy and safety/tolerability profiles.

Other Value-Driving Events Are Further Down The Line

Lilly is besides intending to move guardant pinch a Phase II study of Rezpeg successful atopic dermatitis, arsenic good arsenic different undisclosed indication.

Data from a Phase Ib atopic dermatitis study suggested efficacy (including a dependable betterment successful nan EASI people complete time), pinch nan larger dose outperforming nan smaller dose and some showing expanding separation from nan placebo complete time. There were immoderate quirks to enrollment (more terrible patients (50%) successful nan placebo group and 12 μg/kg group (44%) versus nan 24 μg/kg group (35%)), and location was nary evident dose-dependency for blood-based T-reg measurement, but Phase I studies usually aren't perfect. Safety and tolerability will beryllium watch-items (as they ever are), pinch a precocious incidence of injection tract reactions and an elevated complaint of infections.

While Rezpeg is apt to thrust nan astir worth successful nan adjacent term, NKTR-255 could beryllium a bigger woody successful 2024. NKTR-255 is simply a PEGylated IL-15 supplier that is meant to summation nan organization and usability of NK and CD8+ cells, which successful rule should boost nan efficacy of checkpoint inhibitors, ADCC antibodies, and compartment therapies for cancer.

There are investigator-sponsored studies underway studying NKTR-255 successful operation pinch Bristol-Myers's (BMY) Breyzani successful relapsed aliases refractory ample B-cell lymphoma and successful operation pinch Johnson & Johnson's (JNJ) Darzalex successful r/r aggregate myeloma that should publication retired earlier nan extremity of 2023, and guidance will beryllium launching their ain Phase II/III combo study utilizing NKTR-255 pinch either Gilead's (GILD) Yescarta aliases Breyzani successful r/r ample B-cell lymphoma, pinch nan thought being to spot whether NKTR-255 tin boost nan semipermanent efficacy of these CAR-T therapies.

The system of action is plausible, but that's existent for astir narcotics that make it to nan session and nan reality is that oncology narcotics person moreover little likelihood of occurrence than your mean non-oncology drug. The imaginable of a CAR-T-boosting compound would beryllium important ($1B+), not to mention further imaginable beyond that if nan supplier is shown to boost nan efficacy of different narcotics for illustration checkpoint inhibitors aliases ADCC antibodies, but there's conscionable excessively small information astatine this constituent to opportunity overmuch beyond "it sounds good, but we'll spot what nan information say."

The Outlook

Given nan debased likelihood of support for early-stage drugs, nan meaningful gross opportunities for Nektar's pipeline are overshadowed by nan risks of objective development. That makes updates for illustration nan shape II ISLAND read-out each nan much important, arsenic shifting nan likelihood connected immoderate of nan awesome indications tin thrust meaningful per-share upside astatine this point.

I deliberation Nektar is modestly undervalued now, pinch a adjacent worth of astir $3.75 connected nan ground of nan 2 identified indications for Rezpeg and a placeholder for imaginable indications for NKTR-255 arsenic a combo therapy constituent. As mentioned above, a successful ISLAND read-out could push nan shares to $6, and incremental updates connected NKTR-255 could likewise adhd much value. In nan meantime, I proceed to expect Nektar to activity connected preclinical candidates (like NKTR-288 and a early TNFR2 agonist antibody) and see acquiring aliases in-licensing different assets.

The Bottom Line

At this point, Nektar is much of a bet than an investment. There simply isn't capable useful information connected immoderate of its pipeline candidates to really thrust an informed thesis that they are much (or less) apt than nan mean early-stage campaigner to succeed. That's not different pinch biotech though, arsenic often nan champion you tin dream for pinch early-stage candidates is to find snippets of information that constituent to amended likelihood of occurrence and/or a differentiated system of action.

This sanction will beryllium worthy revisiting erstwhile nan ISLAND information are out, but for now, I tin astatine slightest opportunity that there's an absorbing risk/reward opportunity here. Success pinch ISLAND could double nan stock value (+$3/share), while a nonaccomplishment would apt halve it (-$1.50/share) and that whitethorn beryllium capable to make this a sanction to see for risk-seeking investors.

Stephen Simpson is simply a freelance financial writer and investor. Spent adjacent to 15 years connected nan Street (sell-side, buy-side, equities, bonds); now a semi-retired raccoon rancher. That past portion isn't wholly true. Probably.