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Why Nektar Therapeutics Crashed 17.2% Today

By Todd Campbell – Updated Oct 22, 2018 at 5:49PM

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Shares in the company are slipping as short-sellers call into question one of its most important clinical-stage drugs.

What happened

After delivering a disappointing update on NKTR-214 in cancer patients this summer, Nektar Therapeutics(NKTR -6.54%) shares have been struggling. The company didn't report any news today, so a negative report issued by Plainview LLC this month may be to blamed for its 17.2% tumble today.

So what

In February, Bristol-Myers Squibb (BMY -1.12%) inked a blockbuster deal to license rights to NKTR-214 following positive data last year for NKTR-214's use alongside Bristol-Myers' Opdivo. In that deal, Bristol-Myers paid $1 billion for rights to 35% of NKTR-214's future profits, and $850 million for 8.3 million Nektar Therapeutics shares.

A person looking at a declining stock price chart holds his head with his hands.

IMAGE SOURCE: GETTY IMAGES.

Investor optimism for Nektar Therapeutics has waned since June, though, following the release of updated data for the two-drug combination at the annual American Society of Clinical Oncology (ASCO). Previously, a 64% overall response rate had reported in melanoma patients, but that response rate slipped to 50% after more patients were evaluated. The response rates of the two drugs in kidney cancer patients also slipped.

A pegylated formulation of IL-2, NKTR-214 is designed to last longer than recombinant IL-2, a cytokine that prompts the creation of lymphocytes that can battle cancer.

According to Plainview, "the clinical dose of NKTR-214 yields only 7-20% of the active AUC (drug exposure) of a standard cycle of IL-2." Furthermore, Plainview maintains that lackluster efficacy as a monotherapy in phase 1 trials doesn't bode well for the combination trial panning out. Plainview's report states that NKTR-214's "thesis and clinical data are nearly identical to the now-disproven IDO inhibitor story, and the notion that a failed monotherapy will add statistically significant value as part of a combination therapy has never worked in practice."

Now what

Only time will tell if NKTR-214 and Opdivo combination therapy can elicit response rates in large, late-stage studies that allow it to secure an FDA OK. So far, Bristol-Myers Squibb isn't backing away from the drug. A phase 3 study in advanced melanoma began in the third quarter, and phase 3 trials are also being planned in kidney cancer.

Nektar Therapeutics has had 10 abstracts accepted for presentation at next month's 2018 Society for Immunotherapy of Cancer (SITC) meeting, including an oral presentation entitled, "Immune monitoring after NKTR-214 plus nivolumab (PIVOT-02) in previously untreated patients with metastatic Stage IV melanoma." Investors may want to see how these abstracts are received before buying shares. 

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.

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Stocks Mentioned

Nektar Therapeutics Stock Quote
Nektar Therapeutics
NKTR
$3.00 (-6.54%) $0.21
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Bristol Myers Squibb Company
BMY
$71.25 (-1.12%) $0.81
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Eli Lilly and Company
LLY
$328.35 (-1.80%) $-6.03

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