What happened

Shares of Nektar Therapeutics (NKTR 2.75%), a mid-sized biotech developing novel drugs to address unmet needs, had another great month. It rose 22.8% in March, according to data from S&P Global Market Intelligence. The company's fourth-quarter earnings call contained a couple of positive updates that encouraged investors to push the stock.

So what 

The company shared some positive results from a kidney cancer trial with NKTR-214, an experimental immune-response simulator that appears to work well with Opdivo from Bristol-Myers Squibb (BMY 0.35%). In February, the big pharma signed a gargantuan deal that leaves Nektar eligible for $1.78 billion in various milestones plus 65% of any global profits that emerge from the tie-up. Updated results from 14 kidney cancer patients treated with the combination suggest there could be a lot of profits to split down the road.

Person drawing an upward sloping chart in the air with their fingers.

Image source: Getty Images.

In November, Nektar showed us an early 46% response rate among a small group of kidney cancer patients treated with NKTR-214 in combination with Opdivo. That response rate had risen to 57% in January, and an additional couple of patients brought the response rate to 71%, with all responses confirmed.

Nektar also announced plans to submit an application package for a chronic pain candidate with limited abuse potential. NKTR-181 aced a back-pain study last year and a pivotal human-abuse liability trial, both of which will support an application package that management plans to submit in the second quarter.

Now what

Demand for effective pain relief with low abuse potential is as strong as ever. If Nektar earns approval to market its painkiller specifically as an abuse-deterrent solution, blockbuster sales probably wouldn't be far behind.

On the oncology front, Incyte's unfortunate epacadostat failure makes NKTR-214 a lot more attractive to Bristol-Myers and several peers that have drugs like Opdivo that could use a boost. Nektar and Bristol will begin trials expected to enroll around 15,000 patients across nine tumor types. If positive results keep rolling in, expect more deep-pocketed drugmakers to come calling with open checkbooks.