Nektar Therapeutics' (NASDAQ:NKTR) partner AstraZeneca (NYSE: AZN) picked the wrong time to release trial results on their developmental drug naloxegol. As the Food and Drug Administration announced a crackdown on a similar drug, Nektar's shares plunged almost 14% last week before rebounding. Were investors right to run, or could a short-term stumble lead to long-term gains?

In basic terms, Nektar is a pharmaceutical company that specializes in polymer technologies that help peptide drugs function better. That business model led Nektar to team up with companies including AstraZeneca, MAP Pharmaceuticals, and Affymax (OTC:AFFY). Here are three things to watch with this biotech stock.

1. Will the FDA require a new safety trial?
Nektar is partnered with AstraZeneca on naloxegol, which treats the constipation that commonly accompanies opioid painkiller use. Rivals Salix Pharmaceuticals (NASDAQ: SLXP) and Progenics (NASDAQ:PGNX) offer a similar product, Relistor, that recently ran afoul of the FDA. The agency expressed concerns about Relistor's heart risks, and it's requiring the drug to complete a lengthy safety trial.

It's possible that naloxegol will face a similar fate. The trial results announcement suggested that Nektar and AstraZeneca's drug demonstrated no heart risk during testing, but the FDA might not be satisfied with the risk testing that Nektar and AstraZeneca are completing. An additional safety trial could delay the drug's release, and it also wouldn't guarantee that the FDA would grant a green light in the end.

As Monday's performance suggests, there's a lot of volatility associated with this one drug. A go-ahead would send the share price soaring, but poor results from an extended safety trial may weigh heavily on shares.

2. Breast cancer drug on the fast track
It's not all bad news at Nektar. The FDA recently awarded a fast-track designation to Nektar's phase 3 drug etirinotecan pegol, a treatment for metastatic breast cancer. This status is given to drugs that treat serious medical conditions fulfilling an unmet need, and it could lead to a priority review.

Etirinotecan pegol is comprised of a potent topo I inhibitor, which kills cancer cells, linked to a polymer that is able to reduce the drug's exposure to healthy cells. Nektar is exploring additional indications, or conditions that the compound could treat, including phase 2 trials for types of colorectal and ovarian cancers. According to Nektar, these specific conditions are diagnosed in approximately 3 million people worldwide per year.

This drug is one of Nektar's rare solo projects, and a win would make the company viable from more than a technology-licensing standpoint.

3. Partnership potential  
Nektar has a number of pharmaceutical partnerships and licenses in place involving its technology. The exact details of the rights and earnings split vary.

There are two additional phase 3 partnerships for which Nektar has at least royalty agreements if the drugs make it to market. The company's already filed a new drug application  for MAP's licensed migraine inhalant Levadex. And Takeda has a marketing application under consideration in Europe for U.S.-approved renal anemia drug Omontys, which is produced by Affymax using Nektar’s proprietary PEGylation technology.

The product portfolio doesn't exactly advertise blockbusters with a big, blinking sign. But it contains a fair amount of diversity, and the partnership nature of most of Nektar's products helps spread its risk.

Foolish final thoughts
Shares of Nektar are currently up a little more than 7% year to date. The market may have overreacted to the recent FDA news, but valid concerns persist regarding the company's current state. Its fundamentals are a mixed bag, and its proprietary products aren't hitting the market anytime soon. Investors may consider holding on to Nektar for the moment and wait to see what will happen with the constipation and breast cancer drugs.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.