Tekla Life Sciences Fund (HQL) frequently makes the cut as my Top Pick for more conservative investo...
Top Picks 2020: Nektar Therapeutics (NKTR)
01/14/2020 5:00 am EST
The company is positioned for a flow of significant catalysts in 2020 from their broad diversified pipeline of drug development candidates for pain management, cancer and inflammation.
Its drug candidate for pain management, NKTR-181, is expected to have an FDA Ad Com panel in early 2020 which in our view, will be followed by an FDA approval. ‘181 is a novel mu opioid that selectively avoids causing euphoria (the cause of opioid abuse) while still preventing pain.
The company is currently in discussions with possible partners for ‘181 as it would need a large sales force to launch a novel pain drug that may help address the opioid crisis as the compound provides pain relief without euphoria.
‘181 currently represents zero value in most Wall Street models for the stock, despite the recent positive development with the imminent scheduling of an FDA AdCom meeting. In our view, ‘181 will receive FDA approval which will serve as a significant stock catalyst in 2020.
Bempeg which targets IL-2 is NKTR’s lead cancer drug development candidate and is currently in broad Phase III development in combination with their partner Bristol-Myer Squibb (BMY), which has the approved cancer drug Opdivo.
The most recent updated efficacy results with longer follow-up are now approaching a median of 19 months in heavily pre-treated melanoma patients. Interestingly, some patients who had partial responses to Bempeg/Opdivo have now improved to complete response— a classic immune oncology (I/O) sign of efficacy.
Another important signal is that more than half of the patients continue in the study without evidence their tumors are growing again, suggesting that the B/O combo in newly diagnosed melanoma patients could be more effective and durable than when Opdivo is used alone or when combined with Yervoy in later stage patients.
Lastly, the NKTR combo continues to have an excellent safety profile compared to the significant toxicity seen with the Yervoy combo.
Bempeg is a very important cancer drug candidate being developed in combination with Opdivo. Currently only 33% of cancer patient respond to the miracle drug Opdivo which turns immune systems back on to fight cancer. Bempeg has the potential to open door for the other 60%-70% cancer patients that cannot be currently treated with Opdivo representing a multi-billion drug opportunity.
BMS has voted strongly by giving NKTR $2 billion for the rights to co-develop Bempeg in combo with their drug Opdivo. The markets are also starting to realize the huge potential of IL-2 targeted drugs as THOR was bought for $2.5 billion and a huge premium (172%) by Sanofi for their Phase I IL-2 drug candidate and their I/O platform.
The company recently announced updated results from the first-in-human Phase 1a study of NKTR-358, a novel T regulatory (Treg) cell stimulator in development for the treatment of autoimmune and other chronic inflammatory conditions.
The data support the drug candidate’s expanded development by partner Eli Lilly (LLY) which is being evaluated in a multiple ascending dose (MAD) study in patients with systemic lupus erythematosus and two additional double-blind, randomized, placebo-controlled Phase 1B studies in adults with psoriasis and atopic dermatitis.
‘358 has huge potential as it would turn of inflammation before it can cause disease and would basically represent a cure for any autoimmune disease.
NKTR is positioned for numerous catalysts in 2020 with ‘181 and Bempeg leading the way. A positive FDA panel for ‘181 will begin to unlock huge value for the company as they own 100% of the potential block buster.
The Bempeg/Opdivo combo will have multiple Phase II/III read outs in 2020 and the huge cancer meeting ASCO in May could be significant for NKTR’s stock. In our view, the resurrection of NKTR’s stock is just beginning and will become fully recognized by Wall Street in 2020.
(Editor's note: John McCamant's Top Pick in 2019 was The Medicines Company (MDCO); the stock is up 343% following a takeover announcement by Novartis (NVS). The biotech expert notes, "The takeover will prove to be an astute acquisition at a very attractive price. The roughly $10 billion price tag is a reminder of the high value placed on innovation in biotechnology.")
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