Nektar Therapeutics' Stock Slumped in August; Here's Why

By Fool.com

What: Shares ofNektar Therapeutics , a small-cap biopharma that developsdrug candidates using its PEGylation and polymer conjugate technology for diseases such as cancer, pain, and immunology, fell by double digits in August.

NKTR data by YCharts.

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While the drugmaker's shares did slide almost in unison with the biotech industry in general, its second-quarter earnings report, released in early August, certainly didn't help matters.

In a month where investors fled cash flow negative biotechs far and wide, Nektar was unfortunate to report that its net loss in the second quarter of 2015 grew by 61% to $52.7 million, compared to a year ago. Most problematically, this quarterly net loss far exceeded consensus by a noteworthy 48%.

So what: The Street, by contrast, expected considerably lower cash outflows due to the recent launch of Nektar and AstraZeneca'sopioid-induced constipation medicineMovantik.

Although Nektar recognized $90 million in milestone payments from its collaboration with Astra from the commercial launch of Movantik in the first half of 2015, the company's operating expenses also rose markedly to$131.9 million during the same period, stemming mainly from the start of a late-stage study for its experimental chronic lower-back pain dubbed "NKTR-181" and the continuation of a late-stage study forNKTR-102 in breast cancer.

In short, Nektar's rising R&D expenses have so far been more than enough to offset the substantial upswing in revenues emanating from Movantik over the first half of 2015.

Now what: If Nektar hopes to defy this moody market going forward, it's going to need to become a cash flow positive operation on a consistent basis. The good news is that Movantik, andtheexperimental hemophilia A therapy,Adynovate, being co-developed by Nektar and Baxalta,are believed tohave enough juice to turn Nektar into a profitable business within the next two to three years. So investors will probably want to pay special attention to Adynovate's ongoing regulatory review and potential commercial launch, which the companies are targeting in the 4th quarter of 2015.

The article Nektar Therapeutics' Stock Slumped in August; Here's Why originally appeared on Fool.com.

George Budwell has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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