TICKERS: NKTR

Biotech Targets 'Blockbuster' Markets; Less-Addictive Opioid Painkiller Set for FDA Filing
Contributed Opinion

Source:

John McCamant Medical Technology Stock Letter editor John McCamant outlines the reasons behind the buy rating and target price increases for a company that, in addition to developing an alternative to addictive opioids for pain relief, has candidates targeting multiple immune disorders and cancer.

NKTR-181 Set for April NDA Filing
Nektar Therapeutics (NKTR:NASDAQ) recently met with the FDA and the agency agreed that the company can file for approval based upon a single Phase 3 trial and two HAL trials of NKTR-181. In the current global epidemic of opioid abuse, NKTR has met with members of the White House and Congress, and there is a lot of interest in NKTR-181 as it offers a major option for the tens of millions addicted to the current opioid drugs on the market.

In our view, NKTR-181 will be fast-tracked and receive an accelerated review and approval time. Labeling discussions will be discussed over time but there is no doubt there is less abuse with NKTR-181 than drugs like oxycontin.

The company is working on a corporate partner for further development and global commercialization of NKTR-181. Management stressed that partnership discussions are underway and that NKTR itself has morphed into an oncology company, hence the strategic decision to partner NKTR-181. The company's track record of forming high value-added collaborations makes us believe a sizable deal for NKTR-181 is due in the near-term, especially now that the regulatory path/timeline has been defined.

The accelerated time frame for NKTR-181 appears to be a best-case scenario for this compound.

Expect NKTR-214 to Shine at SITC
NKTR-214 is the main reason that NKTR as a whole has "morphed into an I/O company." While the data will be presented over the weekend [the annual meeting of the Society for Immunotherapy of Cancer took place Nov. 8-12], the oral presentation on Saturday will show waterfall and spider plots of all the cancer patients in the PIVOT-2 study. The initial abstract included 16 patients at the time of submission, while all 38 patients enrolled in the dose escalation cohort will be presented at the meeting.

NKTR-214 is a CD122-biased agonist. Data is from the ongoing PIVOT Phase 1/2 study, which is evaluating NKTR-214 in combination with the checkpoint inhibitor nivolumab. Six additional presentations for immuno-oncology (I/O) candidates in NKTR's pipeline will also be presented at the meeting, specifically, one additional clinical and three preclinical presentations on NKTR-214; one preclinical presentation on NKTR-255, an IL-15 memory T-cell stimulating cytokine; and one preclinical presentation on NKTR-262, a novel toll-like receptor (TLR) agonist. The abstracts are listed here at the Journal for ImmunoTherapy of Cancer's website.

Nektar will hold an analyst/investor presentation/webcast on Saturday after presenting the data. Like Incyte Corp.'s (INCY:NASDAQ) IDO, NKTR-214 appears to have a unique MOA and safety profile that offers multiple combination opportunities. Hence, the combo deal they formed with Bristol-Myers Squibb Co. (BMY:NYSE) last year, where they retained 100% of the economics by sharing trial costs.

We believe that this year's SITC will make NKTR one of the more visible I/O players in the sector (e.g., INCY, BMY, MRK, AZN, KITE, JUNO, etc.).

NKTR-358 at ACR
NKTR-358 is yet another potential first-in-class resolution therapeutic that may address the underlying immune system imbalance in patients with many immune conditions.

Data for NKTR-358 was presented on Nov. 7 at the 2017 American College of Rheumatology Annual Meeting. Here is a link to the poster showing that NKTR-358 delivers sustained, preferential activation of Tregs; in cynomolgus monkey this effect is sustained for >14 days.

As a reminder, NKTR-358 is a novel immunological therapy designed to target the interleukin (IL-2) receptor complex in the body in order to stimulate proliferation of powerful inhibitory immune cells known as regulatory T cells. By activating these cells, NKTR-358 can act to bring the immune system back into balance. This could lead to a profound clinical impact and healthy organ function in autoimmune condition.

The Eli Lilly and Co. (LLY:NYSE) collaboration signed this summer will investigate at least four difference autoimmune conditions (lupus, psoriasis, ulcerative colitis and Crohn's disease). A Phase 1 single ascending dose trial in healthy volunteers will provide PK/PD measurements. A Phase 1b trial will start in early 2018 and include both healthy volunteers and patients with lupus.

With the plethora of positive new data plus the novel opioid NKTR-181 momentum—each blockbuster markets on their own—we are raising our buy and target prices. NKTR is a BUY under $35 (from $25) with a target of $45 (from $35).

John McCamant is the editor of the Medical Technology Stock Letter, a leading investment newsletter. McCamant has spent more than 25 years on the frontlines of biotechnology investing. He has established an extensive network that includes contacts throughout the investment banking and venture capital communities. His expertise in biotechnology investments is a subject of media interest. He is frequently consulted and quoted by The Washington Post, Reuters, Bloomberg, CBS and Marketwatch.

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Disclosure:
1) John McCamant: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Nektar Therapeutics. I personally am or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: None. I determined which companies would be included in this article based on my research and understanding of the sector.
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