Valuation of NKTR

Most of NKTR’s current marketed drugs are not worth all that much due to the dreaded “tiered” royalty compensation structure. NKTR has already spent the milestone payments.

It is something that less successful biotechs due until they can be the more successful biotech, bit it kills returns on extremely rare to succeed and enormously hard work and high risk drugs.

ISIS pharma (they changed their name for obvious reason, and at the moment I forget what it changed to, although have had a few discussions about this on the Rule Breaker board) has probably the largest and most factory like pipeline of any company in the history of the world.

However, their business strategy has been to do the same to all of their drugs, and not take the chance and wholly own anything. A recipe for mediocrity.

Fortunately NKTR is beyond that point, and is now able to behave like a more successful biotech.

There is 181 and 214 as the material drivers. All we know about 181 is we have no idea. In most other fields it would be a shoe in for approval but opioids…depends on its pricing, but does anyone have a clue as to what to expect in peak sales?

214 is more predictable. Estimates I have seen, are peak sales a little above $1 billion. However, does this make any sense at all? That seems awfully low for a drug of this magnitude. Given NKTR’s 65% cut, be nice to know what to expect for NKTR’s current valuation.

Has anyone who has held or looked into this stock for a greater duration than myself come upon any good peak sales estimates?

I do not want to rely on the rest of the pipeline to support valuation, and I would only invest in NKTR at this point if we could look at a 4x from here.

Obviously my investing style is a little more concentrated from most, so I want to understand the economics here. In my experience, a drug like 214 will peak sell at much higher than $1 billion or so a year. Perhaps these estimates are third line usage, as is the way these things usually go when initially approved even though it seems such a waste to wait for the third line of therapy. But that is for those with better expertise to devise. I am just trying to understand the economics better. Particularly from those already with 4x on their hands.

Tinker

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Tinker,

I don’t think we can know right now. I think the cap is largely dependent upon data we have yet to see. What will happen with the 13 new cohorts they are enrolling in PIVOT this year? I think the answer to your question largely lies there.

MC

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<<<I don’t think we can know right now. I think the cap is largely dependent upon data we have yet to see. What will happen with the 13 new cohorts they are enrolling in PIVOT this year? I think the answer to your question largely lies there.>>>

That is pretty much what I figured. As to analysts, above consensus is just below $1 billion a year peak sales (risk adjusted). If that were the case then NTNX is rather overvalued. However, if 214 is such a transformative drug with multiple indications then $1 billion peak sales seems ridiculously low.

Not real sure how analysts come up with such estimates. I guess using worse case scenarios for an approved drug.

I admit I have not looked in-depth at it yet. I have recently, as you may have seen on NPI, begun looking to find more risk/reward stocks that I can confidently hold that may be more undervalued than say NVDA or ANET. Undervalued, not from what the market sees, but from what the actual risk is. So I started looking at NTNX.

Tinker

I meant NKTR not NTNX. Guess I have Nutanix on my mind.

Tinker

Tinker,

I was curious after your post so I did a little digging. Opdivo in the first half of 2017 generated 2.32 billion in worldwide sales and Keytruda generated 1.47 billion. Impressive for half a year. I’d think 214, if successful in the ongoing trials, would be larger if it can get additional indications beyond lung ca and bladder CA like Keytruda and Opdivo. 214’s is more indiscriminate than the other two so one would think it could be used for almost any cancer at some point. That’s the goal it appears as they are testing it against close to 20 cancers. 1 billion does seem small.

MC

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FYI

CARLSBAD, Calif., Dec. 18, 2015 – Isis Pharmaceuticals, Inc. (ISIS) today announced that the company has changed its name to Ionis Pharmaceuticals, Inc. Ionis (pronounced "eye-OH-nis”)

Their ticker changed to IONS.

https://www.prnewswire.com/news-releases/isis-pharmaceutical…

A followup to Tinker’s OP.

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