Nectar (NKTR) Down 12% Since Last Earnings Report: Can It Recover?

A month has passed since Nektar Therapeutics (NKTR) last reported earnings. The stock has lost about 12% in that time, underperforming the S&P 500.

Will the recent negative trend continue until the next earnings release, or is Nektar waiting for a breakout? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the key drivers.

Nektar Q2 best earnings and revenue estimates

Nektar Therapeutics reported a loss of 45 cents per share for the second quarter of 2020, narrower than the Zacks Consensus Estimate of a loss of 69 cents and a year-ago loss of 63 cents.

Quarterly revenue increased 109.4% year-over-year to $48.8 million, driven by the recognition of a significant payment from associate partner Bristol-Myers during the quarter. Revenues also surpassed the Zacks Consensus Estimate of $22.84 million.

Quarter in detail

In the second quarter, product sales increased 26.2% compared to the prior-year period to $5.5 million. Non-cash royalty revenue decreased 15.5% to $7.7 million.

Nektar’s royalty revenue increased 28.1% year-over-year to $9.4 million in the quarter.

Licensing, collaboration and other revenues were $26.3 million in the quarter, compared to $2.5 million in the year-ago quarter. The increase was due to the recognition of a $25 million milestone payment from Bristol-Myers resulting from the initiation of a registrational study of bempegaldesleukin in combination with Opdivo for the treatment of adjuvant melanoma.

Research and development expenses decreased 9.6% to $96.4 million. Notably, in the prior-year quarter, the company recorded pre-commercial manufacturing costs for NKTR-181, which were absent in the reported quarter and led to a decline in expenses. In January, the company stopped working on NKTR-181.

General and administrative expenses increased 7.8% to $24.3 million in the quarter.

Pipeline update

In an earnings call, Nektar cautioned that uncertainty surrounding Covid-19 could impact the clinical trial schedule. The company will continue to evaluate schedules throughout the year to gain greater insight into the timing and extent of the impact of Covid-19.

The company is primarily focused on the development of five immuno-oncology clinical trials, including first-line studies in bladder cancer and renal cell carcinoma with bempegaldesleukin in combination with Opdivo, the PROPEL study in bempegaldesleukin in combination with Keytruda, and the NKTR-262 REVEAL study with bempegaldesleukin and NKTR -255 studies.

How have estimates changed since then?

It turns out that new estimates have been trending downward over the past month. As a result of these changes, the consensus estimate moved by -28.57%.

VGM results

Currently, Nektar has a weak Growth Score of F, but its Momentum Score is performing slightly better at D. Plotting a somewhat similar path, the stock is given an F on the Value side, placing it in the bottom 20% quintile for this investment strategy.

Overall, the company’s overall VGM score is F. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for this company are generally on a downward trend, and the magnitude of these revisions indicates a downward shift. No wonder Nectar carries a Zacks Rank #4 (Sell). We expect a below-average rate of return on stocks in the coming months.

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