Assessing Nektar Therapeutics (NASDAQ:NKTR) Stock & NKTR-181 Commercial Outlook After 42% Move

- March 20, 2017

Nektar Therapeutics (NASDAQ:NKTR) jumped 40% on Monday when its Phase 3 trial with NKTR-181 met its primary endpoint of showing statistically improved pain relief compared to placebo (p=0.0019). Secondary endpoints were also met. This follows a previous study where patients were unable to tell the difference between NKTR-181 and placebo in terms of how it makes them feel. All opioid drugs have mind-altering side effects that have created an epidemic of addiction. NKTR-181 is unique in that its not only an effective drug for treating chronic pain, but it does so without the side effects.

Early today a BNL Member asked whether “NKTR stock is a good buy following the NKTR-181 data” as part of our “request coverage” service for subscribers. In my opinion, the answer to that question is yes. I have a couple stories to explain why.

Beforehand, the following is an illustration from a company presentation last year.

Adynovate and Movantik represent Nektar’s partnered programs, and two FDA approved products. Otherwise, Nektar Therapeutics (NASDAQ:NKTR) has partnered with numerous pharmaceutical companies on the development of different drugs. The company foresees revenue between $375 and $450 million by 2021, but many believe that royalties from these programs could top $750 million depending on future data and penetration.

Otherwise, Nektar Therapeutics has a couple late stage drug candidates that are fully owned, like NKTR-102 or ONZEALD for metastatic breast cancer and, of course, NKTR-181 for chronic pain.

Prior to Monday’s move in NKTR stock, Nektar Therapeutics (NASDAQ:NKTR) supported a market capitalization of less than $2.4 billion. A strong argument can be made that NKTR stock reflected the promise and potential of its partnered programs, but did not accurately reflect that of NKTR-181. Regardless, NKTR stock jumped 40% and now supports a near $3.4 billion valuation.

My two stories to explain why NKTR-181 will succeed

At different points during my 15 year career as a sell-side analyst, I had a great deal of access to two products that I would relate to NKTR-181. One was Reckitt Benckiser Group plc (LON:RB) Suboxone and another was Pfizer’s (NYSE:PFE) Oxecta. Suboxone went on to become a multi-billion dollar juggernaut; Oxecta, you have never heard of.

Suboxone was a reinvention of the wheel. It was the combination of an opioid called buprenorphine and naloxone, also known as an antagonist. Buprenorphine had been developed by Reckitt Benckiser Group plc (LON:RB) many years prior, but it had never been used with Naloxone to treat opioid addiction. From a clinical perspective, Suboxone gave the patients an opioid to prevent withdrawal but the Naloxone prevented the user from feeling an altered state, or abusing the drug. What differs from Suboxone and other opioids like Oxycontin is that buprenorphine is in fact a different molecule.

While Oxycontin’s structural flaw is that a user must continue to take more and more as their resistance builds, regardless of abuse, buprenorphine peaks at 16 MG, and there is essentially no clinical benefit or altering effects beyond 16 MG. In my opinion, that structural difference and benefit over Oxycontin is what made Suboxone a commercial success.

Meanwhile, Oxecta used a technology to prevent the injection of dissolved tablets, snorting crushed tablets, and intentionally swallowing in excess quantities by combining a gel-like component to oxycodone. It was a commercial flop. Those on oxycodone who Pfizer was trying to treat with a safer version, did not want the drug. Plus, it was overpriced.

In my opinion, the difference from success and failure of Oxecta and Suboxone, both using opioids, is the latter used a different molecule. Too often drug companies spend resources trying to perfect the delivery of opioids. Yet always, they fail commercially. NKTR-181 is a full mu-opioid agonist molecule entirely, still an opioid, but without the euphoria effect.

When physicians are given the option to treat patients using an actual opioid, which are proven successful, while diminishing the risk of addiction, I believe there is a great chance NKTR-181 will succeed. With 19% of the U.S. population suffering from persistent pain, and both bydrocodone and oxycodone near the top as most prescribed drugs in the U.S., I’d give Nektar Therapeutics (NASDAQ:NKTR) a very good shot at achieving blockbuster sales with NKTR-181. If so, NKTR stock owners will look back on today and realize that Nektar stock was very cheap.

Here is my one big concern

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