NKTR, my thoughts

I’ve been doing a lot of digging on NKTR thanks to a post from Jim a few months ago and GauchoChris has a position as well I believe. After my initial research I bought a 2% position which is now almost 3.5% by growth only with no additional purchases since November. I have since done a more in depth look into the company and its pipeline. Here are my thoughts:

Current therapies on the market:

  1. Movantik – For opioid induced constipation (Have you had your Movantik moment?) – Direct to consumer advertising is just terrible sometimes.
  2. Adynovate – Hemophiia A treatment

I didn’t do a lot of research on their current therapies. From what I could tell, they are bringing in money mostly through licensing their therapies but they are burning cash quickly as well. Last quarter looked great on paper but mostly because of an upfront payment for research study collaboration with Bristol Myers. I’m not going to detail financials in this post. I will leave that to those more qualified than I. However, I will say after all of my research that I believe this company will be bought by Bristol Myers Squibb, it just makes sense to me. I have no idea for how much but I will show you the why below. I also thought Gilead would buy KITE because it just made sense… I’m not tooting my own horn but you can usually see how well one companies agents gel with another and I see that again in this case.

Also, my formatting did not convert over well so please forgive me. I tried to edit this to reflect how I originally put it into Word to no avail. This was fun for me and I learned a ton. I’m a cardiologist, not an oncologist so I had to refresh a lot of my memory and learn quite a few new things. PD-1 wasn’t known to exist when I did my oncology rotations as a resident many years ago.

Drugs in trial/being studied

  1. NKTR – 102 (Onzeald) -->Phase 3 trial
    -The first long-acting topoisomerase I-inhibitor that concentrates in the tumor. It is under “accelerated assessment” in the EU for treating adults with advanced breast cancer AND brain mets.
    -Should receive a response from EU in 1st half of 2018
    -Currently in a phase 3 confirmatory study in the US (ATTAIN Trial)
    i. Versus a single chemo agent of treating physicians choice
    ii. Advanced breast CA with brain mets, 10-30% of breast CA patients get brain mets
    with 1.7 million new cases of breast CA per year diagnosed worldwide and 250k in
    the US. These are sick people being studied in this trial.

  2. NKTR – 181–> Phase 3 trial
    -Alternative opioid for chronic pain
    -Phase 3 study in July 2017 regarding abuse potential vs. oxycodone
    i. Granted fast track designation by the FDA as a result
    ii. NDA to be submitted Q2 2018
    iii. What is the TAM?
    a. IV Tylenol a competitor for inpatient business?
    b. Great to have a drug that has a side effect treated with one of your other drugs
    (constipation–>Movantik) and also a pain med for their cancer patients. Genius.
    iv. Is this truly a new therapy or the same old opiate story in the end?
    a. Data says it’s better, much less abuse potential

  3. NKTR -214
    -CD122 based agonist, an investigational immuno-stimulatory therapy designed to expand and
    activate specific cancer-fighting T cells and natural killer (NK) cells directly in the
    tumor micro-environment and increase expression of cell-surface PD-1 on these immune
    cells. NKTR-214 preferentially binds to the CD122 receptor on the surface of cancer-
    fighting immune cells in order to stimulate their proliferation. This is meant to be
    complimentary therapy with PD-L1 inhibitors (aka, checkpoint inhibitors)
    i. Do not confuse PD-1 and PD-L1, they are not the same and I did not miss a letter
    but they are related, the former being the receptor and the latter being the
    ligand (L) that binds the receptor
    ii. PD-L1 inhibitors, or checkpoint inhibitors, are great but most solid tumor
    cancers do not express PD-L1 so they do not receive the benefits of this therapy.
    PD-L1 inhibitors work by blocking a signal that would have prevented activated T
    cells from attacking the cancer, thus allowing the immune system to clear the
    cancer. In other words, the cancer is making a protein to prevent it’s
    detection… smart cancer… and this therapy blocks that ability…smart people.
    iii. PD-1 is the receptor on the T-cell the PD-L1 or PD-L2 would bind to which
    prevents it’s activation
    iv. The PD receptors and ligands protect us against autoimmunity so you can see what
    their side effects will likely be. Same as with any autoimmune disorder you can
    think of, lupus like symptoms, hepatitis, endocrine issues, skin rashes, etc.
    -Solid tumor treatment (lung, renal cell, melanoma) Phase 1, 2 trials in combo with Opdivo
    (Bristol Myers Squibb drug for multiple solid tumors, a checkpoint inhibitor).
    Fortunately, in this trial there were no treatment discontinuations due to adverse events
    (AEs) or study deaths. Fuma will be happy about that!
    i. (Bristol Myers Squibb and Nektar are equally sharing costs of the combined
    therapy trials. Nektar maintains its global commercial rights to NKTR-214.
    II. Current trials ongoing are PIVOT 1/2, EXCEL and PROPEL. All studying NKTR-214 in
    combo with another agent in advanced solid tumor cancer except EXCEL which is a
    dose escalation study.

4.NKTR – 358
-T regulatory cell stimulator
-Phase 1 trials for autoimmune diseases (Lupus, RA, psoriasis, Chron’s)
-Co-development deal with Eli Lilly and Co.
i. NKTR must complete funding for ongoing Phase 1 trial
ii. Lilly captures 75% of Phase 2 costs

5.NKTR – 262
-TLR 7/8 agonist
-Multiple solid tumors
-IND filed, Phase 1 dosing study Q1 2018

6.NKTR – 255
-IL-15 receptor agonist
IND 2018

I’m not going to go into the last 3. They are very early in development but I wanted to list them.

So here’s the skinny that I’ve come up with. The novel opiate agent is an odd drug for this company. I don’t think that it’s this companies future nor do I think it’s their golden ticket to profitability. Don’t get me wrong, I think it works, the data says so but there are a lot of obstacles in its way: poor timing for a new opiate to market given public and government perception of opioid crisis and innumerable competitors (opiate and non-opiate) to name a couple. While its not a war chest maker, it’s their future revenue to fund further research into the agents I didn’t really cover.

They seem to be focused more on cancer and immune therapy by analyzing their pipeline. BMS is a great collaborator for them to help fund clinical trial research. NKTR-102 and NKTR-214 are the future for them at least in then next 1-3 years. The synergy of NKTR-214 with BMS’s Opdivo looks good in the trials I reviewed (low #’s for now with only 38 patients so far) and as stated, no deaths with a lot of partial remission and even some complete remission. These are advanced cancers we are talking about that have failed other therapy or unable to complete traditional therapy. The synergy with BMS so far, not only in collaboration, but in how there respective agents work well together gives me the feeling BMS buys NKTR if 214 trials continue to pan out.

I realize a lot of the above is Greek. Heck, a lot of it was Greek to me a few weeks ago. I’ll answer any questions best I’m able.

MC

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Hi MC,

Great work and thanks for posting. A couple of thoughts and info:

  1. What is the TAM [of pain market]? It’s pretty huge. Global market for pain management drugs is over $40B (according to at least one market research report). I think that NKTR-181 could become a blockbuster. As I’ve stated before, I did not buy NKTR for NKTR-181.

  2. Of all the drugs in their pipeline, I think NKTR-214 offers the most promise. It can potentially work synergistically with many different checkpoint inhibitors and on top of that it can turn ineffective checkpoint inhibitors into effective therapies. There is potential for many partnerships here.

  3. I haven’t considered NKTR as a buyout target. It’s possible, but I think NKTR can become much more valuable as a stand-alone company.

  4. NKTR is now a $12B company. I like to buy stocks that I think can go up 10x. When I bought NKTR, it was only a $3.5B company. If NKTR were to go up 10x from here it would be about 50% bigger than CELG. Hard to imagine that at this time. They need to hit at least 2 blockbusters for that to happen. Nevertheless, I plan on holding my shares until the several known catalysts that should hit in 2018 hit.

Chris

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Global market for pain management drugs is over $40B
Yes, but they aren’t getting all of that of course. Do they get 2%, 5%, 10%? I just don’t know.

We agree on NKTR-214, it’s their future possible blockbuster and that’s why I dedicated so much space to it. It also has the most recent data to analyze which makes me more comfortable with the investment.

As far as buyout… I hope not but their products gel well with BMS’s cancer therapies so it makes a lot of sense.

Holding my shares as well. Thanks for the input.

MC

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Great post do you know the timelines for NKTR - 214.

“do you know the timelines for NKTR - 214”

Nektar has three clinical trials underway for this theraphy. All are in Phase 1/2 which means 214 is still a couple years out for seeking approval (my guess not the company’s) 6months to complete phase two and move to phase three and about 18 month to complete phase three , prepare results FDA/EMA application documents.

NKTR 181 is in the process of preparing phase three results documents for FDA approval.

Nicely played, Doc.

I think you are spot-on with NKTR partnering with BMS. Makes the most sense given the pipeline and synergy with Opdivo.

I get how attractive their IO assets are: have practiced immunology for the last 40+ years. Just confused as to how to attempt to partition the assets into current market cap. Any ideas?

Also, do you have any thoughts about insiders at 0.8% shares held and exercising options continually prior to recent run?

thanks

Cosmid

MC, I want to really thank you. that’s the first time that I really understand what all those letters mean. That was a very nice clear presentation, and very helpful. Thanks again,
Saul

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Thanks Saul. Would’ve been better if the MF would just let you cut and paste a document. I had no idea a space nor a tab would come over from word… just painful. Anyway, I’d hate to be a med student these days… Biochem/Immunology are probably much more intense courses than back in my day when learning the Kreb’s cycle was the worst thing imaginable.

MC

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