Nektar Therapeutics (NASDAQ:NKTR)

CAPS Rating: 2 out of 5

A biopharmaceutical company which develops breakthrough products that make a difference in patients' lives. It creates differentiated, innovative products by applying its platform technologies to established or novel medicines.

Recs

1
Player Avatar ParadigmsShift (< 20) Submitted: 4/9/2010 6:57:19 PM : Outperform Start Price: $15.01 NKTR Score: -67.28

Here’s my case for why NKTR will be at $50 by end 2010.
Two events likely to occur this year would make $50 PPS a reasonable projection.
(Though not necessarily in this order.)

A deal with Amgen on PEG reagent supply for Neulasta/Neupogena ($4.7B) at a modest 3% cut of revenue would bring in $140M. If current R&D costs are maintained, then NKTR should post positive earnings at about $1.00-$1.50/share (93.6M OS shares). Now we’re looking at a stock with fantastic growth prospects priced at 10-15X earnings. Furthermore, they’re sitting on nearly $400M in cash, enough to fund several years of operating expenses in the absence of further financing. Factor in the company will now be generating a sustainable profit, making it more appealing to a broader range of investors. This is the catalyst for a massive breakout. Also consider the shorts (7M shares, 7.5% of float) will now be scrambling to cover their positions. Double to $30.

Then comes the kicker. Lucrative partnership deal with -102 involving a $100M+ upfront payment, milestone bonuses, and double digit royalties. Is it too presumptuous to assume they’ll pull a sweet deal, as was done with -118? No! They’re sitting on a blockbuster, and they’re not going to give it away cheaply. Excellent demonstrated efficacy in ovarian cancer with potential indications in colorectal and breast cancer. Best in class for an unmet medical need. There’s no reason to think they can’t execute a similar deal, or better. When this transpires, the stock will already be red hot with substantial momentum, and benefiting from broader market awareness. Jump to $40.

Now we’re looking at a company with two partnered drug candidates and a rich pipeline. Mitigated risk. And if -102 is fast-tracked by the FDA, approvable on Phase IIB data? And progress with the non-narcotic opioid platform? A drug providing effective treatment of chronic/neuropathic pain with negligible abuse potential is (conservatively) another billion dollar ringer. The nature of their polymer-conjugation platform technology allows them to turn these concepts into reality 2-3X faster than the 12 year process for traditional drug development. On fresh news and speculation, bump to $50.

Looking further down the pike, once one of their drugs is approved and hits the pharmacy shelves, we’re looking at double-digit royalties on a $1B+ drug. In the case of -118/-119, royalties may be upwards of 20%. At earnings of $3 per share, $60/share would be reasonable for a growth company. If -102 makes it to market (and this could happen sooner than expected if it’s fast-tracked), I’d be looking for the stock price to approach $100.

The best news is, that at $15 there doesn’t appear to be much downside risk. Even if their leading candidates, -118, -119, and -102 don’t make it to market, this value could be justified by income from refurbished deals on PEG supply with Amgen (Neulasta)and Merck (PEG-Intron), coupled with the nascent value of the remaining candidates in their pipeline (pain, oncology).

This stock is truly a diamond in the rough, offering tremendous growth potential with only moderate risk. What more could you ask for?

Member Avatar 4QCAPS (< 20) Submitted: 2/5/2012 8:47:08 PM
Recs: 0

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