NKTR - CAPS does not like...

Investment Analysis Clubs Saul’s Investing Discussions
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Another perspective from a poster (who seems to know biotech) on the CAPS board. Food for thought.

many alternatives to opiods for pain which doesn’t include 181. results for stand alone opdivo, keytruda for cancer melanoma, RCC are already robust. minimal benefit for 214 combo, or even arguably, no CLEAR benefit with the addition of 214. also, 358 rights is co-developed to LLY, and god damn what a premium the market is valuating 358 for mice studies… nktr currently stands at a 12.2B valuation, while JUNO has been recently bought out for 10B. in perspective, a potential combo fluke is trading at a higher valuation than a hematology cure… run away.

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That must have been dated since NKTR market cap now over $16 BILLION.

Fuma has a nice post here attempting to place a TAM on its various potential agents:

http://discussion.fool.com/nktr-32974211.aspx?sort=whole#3301106…

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Bristol’s 1 BILLION says they know something we don’t. And that post must be old given the recent trial data for 214 showing clear benefit in patients who are and are not candidates for opdivo/keytruda. The poster needs to re-evaluate the newer data IMO including the INCREASING response rates with time. Also, is that poster aware of the huge number of patients that are not candidates for opdivo or keytruda?

No one said it wasn’t trading at a premium… that’s been discussed aplenty. NKTR is a risky investment, of that, there is no doubt. However, there IS NOT another 214 anywhere that I can find which is why the premium is there.

MC

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NKTR is a risky investment, of that, there is no doubt. However, there IS NOT another 214 anywhere that I can find which is why the premium is there.

MC

Congrats on your over 4 multiple already since just November!! Well done!

This thread was more addressing what gas NKTR still has for a new investor. You probably remember the discussion about VRTX being valued high when it was at $5 Billion…a subsequent 9 multiple from then…so it just kept going higher.

But NKTR is already at $16 Billion and I was impressed that Saul came back in quite honestly…so much has to go right henceforth to justify just the present market cap and what other examples do we have of companies that have this market cap with no drug on market?

Fuma estimated that NKTR could get to $4.5 Billion annually…at a 8 multiple, that gets one a double from here.

But then we have VRTX at $2.5 Billion revenue with a $45 Billion market cap…so that would be a 3 multiple form here for NKTR but that was also at a 16 P/S.

So MC, I know you are still in…what do you estimate the annual revenue to be assuming every drug makes it to market…the complete bull scenario?

Congrats once again!

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Few things that toyed with posting on NPI post but didn’t:

  1. I can’t really find the “13 types of cancer” opdivo & 214 are trialed in; what I did find was “first line for melanoma” and “second or third line for stage 4 NSCLC” etc- a line of therapy for a type of cancer; that sort of dampens the initial TAM I mentioned. I wanted to paint a very rosy picture on NPI for TAM, and assuming that’s a best case

  2. we keep mentioning Bristol’s $1b bet. What no one is mentioning is that bristol is buying shots on goal to keep opdivo relevant. This is an investment in combination treatments for Bristol- which everyone else is doing- so Bristol had to do something if they want to not slowly have opdivo’s market erode away. Yes, it’s about 214 to some extent, but don’t think Bristol isn’t going to go after other candidates it thinks can help preserve it’s golden goose. Preventing a ten percent market share loss in the PD1 arena over several years is worth well over a billion dollars. Yes, it’s about 214, but more importantly, this is about self preservation for Bristol. And this is something no one is talking about.

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I think it’s higher than Fuma’s estimate because 214 is being investigated in over 20 cancer types not just the 5 he listed in the post you referenced. For example, they will enroll colon cancer patients this year as well in PIVOT, Q2 I think. That TAM alone is around 9 billion currently and growing. He also states that they will have to complete a large Phase 3 trial for every cancer. That is not necessarily true. If Nektar can show the FDA very good safety (which has been the case so far) and good benefit for patients that don’t have many other options for treatment, they could get it to market while Phase 3 is ongoing or they could be granted fast track status or both. Also, the most impressive thing to me so far is the continued increased response rate of patient’s to 214 as time goes on. That just doesn’t happen in cancer treatment. It usually works in the opposite fashion. A treatment works and then doesn’t and you change it or it never worked and you try something else. 214’s improved response with time is fascinating to me.

What is the value of 262? I don’t know. Not enough info yet. What if the combo of 214 and 262 is better than Opdivo with 214? What about the abscopal effects that have been observed? What implications does that have?

He brushed off 181 as irrelevant. That’s a mistake IMO. His TAM estimate is only a wild guess. What if it captures just 5-10% of the opiate market? That’d be pretty big because last I checked the opiate market was around 10-12 billion annually and still growing despite its recent bad press. What if it is observed to be much less addictive in clinical practice as practitioners begin prescribing than traditional opiates? What if it’s the equivalent of darvocet (off the market unfortunately) or xanax or ambien addiction potential instead of percocet? It would change the game IMO. But 181 is not why I’m invested.

Why is Bristol throwing nearly 2 billion into this company between cash and stock purchases? What do they know that we don’t? Clearly they like what they see and, make no mistake, they have seen much more than you, Saul, Chris, Fuma or me.

There are a lot of unknown’s here and that is why Fuma is steering clear and I understand that completely. He is more risk averse than I am. But it’s also why it’s only a 5% position for me. I’m willing to bet that much on it. But I really appreciate your and Fuma’s thoughts. They keep me wary and alert which is what you have to be to own this one. The worst case scenario to me is a long term side effect of 214 that has yet to be observed that changes outcome/compliance or an alternative that is cheaper/better. I’m watching for that closely.

A perfect bull case if the trials look great and they get say… 10-12 cancer indications (including melanoma, colon, renal, triple neg. breast and lung) for 214 AND 181 pans out and obtains 5% of opiate market, movantic grows at/near current rate… 10-12 billion annually seems reasonable but I just did that math in my head… I could be off a billion or two. Colon alone could add a billion or more to Fuma’s recent estimates. I still think Bristol buys NKTR in the end…

MC

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I can’t really find the “13 types of cancer” opdivo & 214 are trailed in

Phase two enrollment of PIVOT… 13 “new cohorts” which could mean any variety of things, it depends on what they mean as a “cohort”… small cell lung CA, Colon CA, Gastric CA were the ones specifically mentioned as being a part of the early part of that expansion phase in Q2. They mentioned this in the most recent CC.

Also, “8 different tumor types” in the 214/262 combo trial with 400 patients total. They didn’t mention which types of cancer in the CC for that study but I assume a similar variety as PIVOT.

Also, its almost a 2 billion dollar bet if you include the stock purchase by Bristol. Not sure it’s worth that to prevent a billion dollars over several years. It could be, I’m no accountant. But if they are, isn’t that good for NKTR as well? Do they see the writing on the wall since 214 can treat the patient regardless of PD1 status? Seems a win for NKTR either way. This is also the reason I believe Bristol buys them in the end… if the data pans out in 2018 for 214, Bristol either buys a bigger share of the company or all of it outright IMO unless NKTR just refuses to sell.

MC

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This is also the reason I believe Bristol buys them in the end… if the data pans out in 2018 for 214, Bristol either buys a bigger share of the company or all of it outright IMO unless NKTR just refuses to sell.

Having not previously looked at BMS, I’m going to go look up their market cap.

With FMI and Roche, I noted several months ago that FMI was under $3B in market cap, while Roche was over $200B, so a relatively easy amount for Roche to take on (still hasn’t happened quite yet).

So, having looked at BMS (ticker is BMY…BMS is Bristol Motor Speedway where I come from and Bemis Company on the NYSE https://finance.google.com/finance?q=NYSE%3ABMS&ei=p0KoW…), their present market cap as of today’s closing price of $66.68 is just under $109B…so not out of this world for BMY to spend ~$16+B more to own all of NKTR, but a much bigger percentage of their whole outfit than FMI would (will) be for Roche.

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It’s good for both parties. Focusing on Bristol:

Conservative estimates for Opdivo are for 10b in 2020.

For long term $$$, bristol had to choose between believing one of the following:
(A) PD1 + other drugs do work well
(B) PD1 + other drugs dont work so well.

Generally, choice A seems to be the way things are panning out across PD1 trials. So, Bristol has to try to protect Opdivo, since trials with, say, Keytruda, may force Keytruda + other drugs to eat opdivo market share.

So, bristol can try and “double dip” on 214 & opdivo and stay competitive, meaning buy into 214, but risk losing $1-2b if 214 doesnt pan out. Plus side is an ability maintain & possibly grow opdivo, plus get 35% of profits from 214.

If they dont buy 214, they risk losing market share, and lose out on any potential 214 profits. Lets say Bristol did not buy 214 (or any other potential combination). Some other PD1 would come along with a good trial with their own combination therapy and rapidly become standard of care and become PD1 market leader. Looking at it that way, its silly not to partner- which is in fact what these companies with PD1 inhibitors are beginning to do. Going back to Bristol, if they lose out on even 5% of opdivo sales in 2020 (ie, someone else has a PD1 + another new drug that does well and bristol passed on 214) that 2b spent would have been lost within 4 years (and likely much sooner); plus spending more money in the future to try to recover.

This was a no brainer for a PD1 company. There’s an arms race taking place within this arena jockeying for standard of care for decades. Over time, there are tens of billions of dollars at stake.

With that said, this is all putting the cart before the horse. This is where I differ from most others posting on NKTR. I think NKTR is priced quite richly for a drug that, frankly, to me, has shown reasonable safety (so far!) but just too early to call on efficacy.

Do you want high risk, high reward with some current cushion around $100/share? buy now.
Do you want lower risk, with less reward but still be handsomely rewarded? buy when better P2 data comes out.

Want a better, less risky place for your money? buy in mongo - great earnings out right now!

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Fuma, thanks for the insight.

I agree with you on Mongo!

MC

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I havr noted several Keytruda commercial during tonight’s basketball games. The healthcare episode of Motley Fool’s Industry Focus podcast from last Wednesday (3/7) had a decent discussion of Opdivo and Keytruda and how they work via a similar pathway and may be competing almost head-to-head in some indications.

With NKTR-214 possibly coming onto the scene soon (maybe new updates tomorrow morning in Nektar’s Cowen presentation?) and possibly in tandem with Opdivo, I wonder if that might be part of the uptick in Keytruda advertising tonight during the NCAA Tourney?

Surely it isn’t a case of The Trade Desk (TTD) programmatically serving me this ad, since it is still linear TV even if I am using DVR.

-volfan84
Long NKTR
Long TTD
Short Cancer (despite being a cancer zodiac-ically)
Long pi(e)
RIP Stephen Hawking

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Here are slides from this morning’s presentation…which is apparently mostly focused on NKTR-214.

http://ir.nektar.com/static-files/de7f07a4-d680-472d-b73e-3f…

Here is a link to the events page, where the recording is already available.
http://ir.nektar.com/events-and-presentations/events

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Here is a link to the events page, where the recording is already available.
http://ir.nektar.com/events-and-presentations/events

I highly recommend the 18 to 20 minute portion of the presentation.

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Actually enlightening PDF, thanks for sharing.

Take aways that she’d some light on NKTR:

20+ indications in 9 cancers:
Renal cell, NSCLC, small cell lung, breast (think this is triple neg to start?), Melanoma, colorectal, urothrlial and sarcoma.

20 indications could mean “second line for XYZ” as one indication, and a trial looking for first line in the same cancer type as well.

I think this is one of the important parts: annual cap of $125m for development from NKTR. Not sure if this is per indication or for all 214 trials.

15,000 pts are expected to be enrolled I their p2/p3 trials across all indications. (That’s what I was looking for! Real trials! - the data should be somewhat convincing either way with that amount of enrollment)

P3 trials in melanoma and renal cell starting in 2H18. I will admit that, if… IF… One if these trials is positive, NKTR could be off to the races.

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Here are slides from this morning’s presentation…which is apparently mostly focused on NKTR-214.

Thanks volfan, very useful.
Saul