Pharma stock under pressure: Nektar Therapeutics (NASDAQ: NKTR)

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Nektar Therapeutics (NASDAQ: NKTR) stock fell over 9.9% (Oct 7th-11th, 2019; Finviz) after Goldman Sachs analyst Paul Choi downgraded the company. Choi has cut his price target for NKTR stock from $54 to just $16 per share due to the recent manufacturing discrepancies for bempegaldesleukin (bempeg), that have overshadowed mostly positive clinical results released since the beginning of the year. In August, Nektar Therapeutics had disclosed that it had found manufacturing problems in two batches of bempeg that were used in early-stage clinical trials for the drug candidate. None of the manufactured product is being used in ongoing clinical trials and the discovery of issues did delay development for a combination therapy with Opdivo from Bristol-Myers Squibb. It appears that the two batches of bempeg in question were not as potent as they should have been, although no differences in safety were observed. The investors are worried that Bristol-Myers Squibb could walk away from the collaboration, but the pharma giant paid a significant sum of money to study bempeg. A decision on whether to commit to additional studies using the bempeg-Opdivo combination is expected this month

On the other hand, the company has reported net loss in the second quarter of 2019 of $109.9 million as compared to a net income of $971.5 million in the second quarter of 2018. The company’s cash and investments in marketable securities at the end of June 2019 were $1.8 billion as compared to $1.9 billion at the end of December 2018.

Moreover, NKTR has delivered the revenue in the second quarter of 2019 of $23.3 million as compared to $1.088 billion in the second quarter of 2018. The revenue was lower in the second quarter and first half of 2019 as compared to the same periods in 2018 mainly due to the recognition of $1.06 billion of license revenue from the Bristol-Myers Squibb collaboration agreement in the second quarter of 2018. Total operating costs and expenses in the second quarter of 2019 were $134.3 million as compared to $114.1 million in the second quarter of 2018. R&D expense in the second quarter of 2019 was $106.7 million as compared to $88.3 million in the second quarter of 2018. R&D expense was higher in the second quarter and first half of 2019 as compared to the same periods in 2018 mainly due to the expenses for the pipeline programs, including the continued development of bempegaldesleukin in Phase 2 and registrational studies and related manufacturing costs, costs related to Phase 1 clinical studies of NKTR-358 and IND-enabling activities for NKTR-255.

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