Nektar Therapeutics: Substantial Unlocked Value In The NKTR-358 Franchise

In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time – none, zero. Youd be amazed at how much Warren reads – and at how much I read. My children laugh at me. They think Im a book with a couple of legs sticking out.

– Charlie Munger

Nektar Therapeutics (NASDAQ:NKTR) is one of the most robust growers we have encountered in all our years of analytical research: this is due to many catalysts powering the firm. One, the company inked the $1.85 billion collaborative deal with Bristol-Myers Squibb (NYSE:BMY) on February 14 for the investigation of NKTR-214 in 20 different cancer indications. Nearly two months thereafter (on April 12), the company announced the dosing of the first patient in the REVEAL trial that created substantial value to this investing thesis. Nevertheless, all recent developments are minuscule compared to what will come. In this research, well elucidate the latest catalyst to give Nektar substantial upside in the long haul.

Figure 1: Nektar stock chart (Source: StockCharts)

Fundamental Analysis

Notably, we wish to provide a brief overview of Nektar for new investors. Operating out of San Francisco, CA, the company is leveraging on its expertise in polymer chemistry to develop an extremely vast and enriched pipeline (as shown in figure 2). We explicated in the prior research:

The structural adeptness of its polymer platform enabled the company to extensively customize the therapeutic behavior of many drugs. And, the targeting of well-understood pathways maximized the chances of finding molecules that have clinically meaningful benefits. At the heart of the pipeline is NKTR-214 (a CD-122 agonist), which is the first immuno-oncology (I-O) agent to both increase tumor-infiltrating lymphocytes (TILs) and to enhance PD-1 expression in human immune cells. NKTR-214 can uniquely complement checkpoint inhibitors and other anti-cancer mechanisms. Many patients have tumors that do not express PD-L1 (in which, they receive limited benefits from the treatment with checkpoint inhibitors); hence, these patients can benefit greatly from NKTR-214. That aside, we are highly interested in NKTR-262 – a novel toll-like receptor (TLR) enhancer that stimulates the bodys innate immune (defense) response to create antigen-specific T cells to fight cancer.

Figure 2: Therapeutic pipeline (Source: Dr. Tran BioSci).

On May 8, Nektar disclosed that the company has commenced the dosing of patients afflicted by systemic lupus erythematosus (SLE) in a phase 1b clinical study assessing the efficacy and safety of NKTR-358. As the first-in-class regulatory T-cell stimulator, the said drug selectively promotes the proliferation of regulatory T-cells (T-regs) needed to ameliorate the imbalance in autoimmune diseases like SLE.

We often referred to thymus (T) cells as the generals of the immune system due to their crucial roles in fighting cancers and infectious diseases. In other words, T-cells direct the activities of other immune players. Accordingly, there are various types of T-cells. As follows, killer (CD8) T-cells are responsible for the direct destruction of tumors and viruses. CD4 (helper) T-cells are involved in the intelligence gathering and memory storage (to enable the defense system to quickly launch a massive campaign when faced by the same antigen encountered previously). As for T-regs, they modulate the activities of other T-cells. And in regulating this population of specialized cells, NKTR-358 helps to restore the aforesaid imbalance seen in autoimmune diseases.

To better appreciate the ramifications of NKTR-358, lets assess the underlying science of SLE. As an autoimmune disease, SLE occurs when the body mistakenly developed antibodies against the double-stranded deoxyribonucleic acid (DNA) and the histone proteins (used to pack those genetic materials). Consequently, the patients exhibit a plethora of symptoms affecting nearly all bodily organs. Nevertheless, the constitutional symptoms (fatigue, joint pain, fever, and night sweats) are quite common. A differentiating feature is the butterfly rash found between the nasal bridge (as depicted in figure 3). Treatment-wise, the standard of care is with a low-dose steroid (prednisone) to calm the immune system, thereby deterring it from attacking the body. Notwithstanding, prolonged steroid use leads to significant adverse effects, such as bone thinning, truncal obesity, and opportunistic infections.

Figure 3: SLE rash (Source: MedicineNet)

As alluded, NKTR-358 is uniquely special because it represents a novel and unique approach toward managing SLE that is unprecedented. By targeting the interleukin-2 (IL2) complex, NKTR-358 induces T-reqs production (to suppress other immune cells). This selectivity confers great advantages in both efficacy and safety. In preclinical studies, NKTR-358 demonstrated the stellar ability to inhibit antigen-driven inflammation in a skin hypersensitivity model. The said molecule also exhibited the ability to reduce SLE progressing in a mouse paradigm.

As regards the clinical trial mentioned, the phase 1b study is a double-blinded, randomized, placebo-controlled assessment of the efficacy and safety, pharmacokinetics, and immunological effects of multiple ascending doses of NKTR-358 in 50 patients afflicted by SLE. In addition, the decrease in SLE flare will be closely monitored. Encouraged by the recent development, the SVP in charge of NKTR-358, Dr. Brian Kotzin, expressed:

NKTR-358 has the potential to address the immune system imbalance that underlies autoimmune diseases such as lupus by driving the expansion and functional activity of Tregs to restore immune homeostasis in the body. We are excited about the start of the clinical study and the potential of NKTR-358 to provide a positive benefit for patients with SLE.

Final Remarks

Harnessing the power of the highly adaptable polymer chemistry, Nektar is galvanizing an extremely enriched and vast pipeline of potential powerful blockbusters. The recent advancement of NKTR-358 is a highly promising catalyst (because it is a novel molecule with the potential to capture the gargantuan $45.5 billion market). If the clinical outcomes in the foreseeable future are as good as we anticipated, Nektar can become an acquisition target for other large biosciences such as Gilead Sciences (NASDAQ:GILD), Novartis (NYSE:NVS), Sanofi (NYSE:SNY), Merck (NYSE:MRK), and Johnson & Johnson (NYSE:JNJ). Risk-wise, it is too early in the innovation process to come to a definitive conclusion relating to the efficacy and safety of NKTR-358. And a negative data reporting for the said drug can cause the stock to tumble 30%.

Authors Notes: Were honored that you took the time to read our market intelligence. Founded by Dr. Hung Tran, MD, MS, CNPR, (in collaborations with Analyst Vu, and other PhDs), Integrated BioSci Investing (IBI) is delivering stellar returns. To name a few, Nektar, Spectrum, Atara, and Kite procured over 343%, 128%, 227%, and 83% profits, respectively. Our secret sauce is extreme due diligence with expert data analysis. The service features a once-weekly exclusive Alpha-Intelligence article, daily analysis/consulting, and model portfolios. Of note, there is an IBI version of this article that is a higher-level intelligence with extensive details, in which we published in advanced and exclusively for our subscribers. And we invite you to subscribe to our marketplace now to lock in the current price and save money for the future.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I like to inform our readers of Seeking Alpha’s recent policy change, in which the company implemented the paywall (not only to my articles, but to all articles that are published over 10-day). This is in place as the company is, after all, a business. And, the revenues from ads are not adequate to support the high-quality research that the company is providing. If you are a REAL-TIME FOLLOWER, you will be notified immediately of our new research for you to continue to benefit from our due diligence. You can also gain access to all of my old articles and much more by taking the 2-week FREE trial of my marketplace, Integrated BioSci Investing.