After getting hammered following a disappointing update on the efficacy of NKTR-214 in cancer patients, shares in Nektar Therapeutics (NASDAQ:NKTR) rebounded following a bullish presentation by management at an investor conference on Wednesday. Today, investors used yesterday's bounce as an opportunity to sell, and as a result, shares lost 11.7% of their value.
In that deal, Bristol-Myers received 35% of NKTR-214's potential profit in exchange for $1 billion upfront. Bristol-Myers also agreed to pay Nektar Therapeutics up to $1.78 billion in milestones and bought $850 million in Nektar Therapeutics shares.
Optimism shifted to pessimism when Nektar Therapeutics updated NKTR-214's efficacy at the annual American Society of Clinical Oncology (ASCO) last week. The data reported last year showed a 64% overall response rate (ORR) in melanoma patients who were given NKTR-214 and Opdivo, but the data at ASCO showed that the ORR fell to 50% after more patients were enrolled in the trial.
Some concerns were alleviated Wednesday when management told investors at Jefferies Healthcare Conference that Bristol-Myers was advancing NKTR-214 into phase 3 studies in melanoma, kidney cancer, and bladder cancer. Furthermore, it said it hasn't given up yet on pursuing partners for NKTR-181, a novel pain drug that it filed for Food and Drug Administration (FDA) approval of last month.
NKTR-181 could be an important new alternative to traditional opioid pain medications because, unlike drugs like Oxycontin, it passes through the blood brain barrier slowly to avoid the euphoric highs that can lead to addiction and opioid abuse. Investors had given up on the likelihood of a licensing deal on NKTR-181 after Nektar said earlier this year it was filing for approval on its own. Therefore, the resurfacing of the potential for a deal is bullish.
Nevertheless, investors are taking a more measured view of the company's opportunity today. Yes, someone could license NKTR-181, but there's considerable uncertainty surrounding the opioid class of drugs, and that may keep bidders at bay. More importantly, until there's data showing ORR has stabilized for NKTR-214, investors are likely to worry that it will end up falling shy of previous sky-high expectations.
Overall, while Nektar Therapeutics' share price has been more than cut in half since its peak in March, its market cap still is above $9 billion. That's arguably a bit rich given the question marks associated with NKTR-181 and NKTR-214.
Todd Campbell has no position in any of the stocks mentioned. His clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.