Investing in biopharmaceutical stocks can be a major opportunity to collect serious returns, but the risk is equally high.
The right pharmaceutical drug could be revolutionary, or not. You don’t know if there is a marketable product until the drug is created, passes testing, and gets approval.
Until the product reaches the market, the drug and, in turn, the investment the company made in that product, could be a total loss.
That said, if the drug is very novel, meaning that it solves a unique problem and there aren’t any direct alternatives, the stock could pop. It is gamble.
Buying stock in a biopharma company really comes down to how revolutionary you think a specific company can be or how promising you think one of its drugs under development could be.
Let’s give one of these biopharama stocks a closer look: Nektar Therapeutics.
What does Nektar Therapeutics do?
Nektar Therapeutics [NASDAQ: NKTR] is a research-based company that specializes in biopharmaceutical solutions for conditions and issues with few current solutions.
Nektar uses a polymer conjugate platform to discover and design new product candidates.
They target known root causes of issues and develop remedies on a molecular level.
Many of its efforts are centered on autoimmune disease, cancer, and chronic pain.
Nektar has several drugs on the market, including CIMZIA, a treatment for Crohn’s, psoriasis, and rheumatoid arthritis.
While there are several Nektar drugs under review and even more under development, here are some of the ones you should know.
Nektar’s immunology efforts are centered on correcting imbalances in the immune systems of those with autoimmune diseases.
In this realm, the company is working on a biologic it calls NKTR-358. It is an injection that recipients would self-administer one or twice a month.
Nektar has been partnered with Eli Lilly [NYSE: LLY] to co-develop the drug since July 2017. While Nektar was fully financially responsible for Phase 1 in the development, Eli Lilly [NYSE: LLY] is contracted to take on 75% of the costs in Phase 2 and 75 to 100% of development costs in Phase 3.
In exchange, Nektar could get royalties that extend to 20% of the revenue generated. The exact amount depends on the company’s fiscal participation in Phase 3.
In oncology, Nektar [NASDAQ: NKTR] is pursuing ONZEALD. Also called NKTR-102, this drug is for advanced metastatic breast cancer.
Its BECAON study (BrEAst Cancer Outcomes with NKTR-102) showed increased survival in patients that had had brain or liver metastates.
Nektar has attempted to get EU and US approval for the drug. It has not been successful to date, but the drug is still in the company’s R&D pipeline and Phase 3 of the trials for the drug continue.
Nektar is also involved in immune-oncology efforts, which seek to stimulate the body’s immune system to fight cancer. Its lead offering in this area is NKTR-214.
Nektar [NASDAQ: NKTR] has been under an agreement with Bristol-Myers Squib since 2016 to develop the drug.
This involved shared costs and ultimately led to a collaboration agreement in February 2018 that allows Nektar to receive cash payments that could total as high as $1.43 billion after the drug passes different regulatory milestones as well as different sales milestone awards. Nektar is also collaborating with Pfizer [NYSE: PFE] on NKTR-214.
Nektar is working on pain management as well. It developed NKTR-181 as a mu-opioid analgesic.
This opioid alternative was created to be equally effective and less addictive.
Is Nektar Therapeutics Stock a Buy?
Nektar Therapeutics [NASDAQ: NKTR] is currently trading at $43.48 on a 52-week range of $29.22 to $111.36.
The share price popped last year after Nektar announced early success from NKTR-214. It rose from a low around $23 per share to almost $62 and kept going.
By the time Nektar announced a deal with Bristol-Myers Squibb [NYSE: BMY] in February 2018, it was well into the $80’s and that news took it over $111 per share.
However, the company’s share price has been steadily declining since March 2018.
The company will announce its 4Q18 and 2018 annual earnings on or about 1 March 2019. Consensus estimates put Nektar’s one-year target at $78.89.
Nektar Therapeutics: Yay or Nay?
Competition in the biopharma industry is intense. New medicines and new approaches to developing those methods are discovered everyday.
There is always going to be a risk that Nektar’s efforts are thwarted before they ever hit the market. Much of what the company is doing is tied to various collaborations.
If one of those companies fail to follow through or do not execute their sides of their bargains well, Nektar could suffer. Also, there is always the risk that the drugs in this company’s pipeline could fail, even those in Phase 3.
Moreover, even if the drug is successful in its cause, it may not be able to obtain regulatory approval in one or all markets.
Right now, Nektar [NASDAQ: NKTR] is counting on the success of NKTR-214. If the company doesn’t succeed, they will lose out on billions in revenue. If it does get approval for the drug and NKTR-181 gets the same, Nektar may be in for another rally.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.