Why Nektar Therapeutics Shares Delivered a Stupendous 124% in November

What happened

After the company updated the timeline for filing its pain-relieving drug for approval from the Food and Drug Administration, and presented early-stage study results for its solid-tumor cancer drug at the 2017 Society for Immunotherapy of Cancer (SITC) annual meeting, Nektar Therapeutics' (NASDAQ: NKTR) shares skyrocketed 124% in November, according to S&P Global Market Intelligence.

So what

On Nov. 7, Nektar Therapeutics reported third-quarter financial results that were bolstered by a $150 million up-front payment from Eli Lilly relating to their partnership on NKTR-358, a pre-clinical-stage autoimmune-disease therapy. The company recognized $128 million of that payment, so revenue grew to $152.9 million from $36.3 million in third-quarter 2016. Operating costs were $83.4 million, up from $69.2 million year over year, and cash and investments finished the quarter at $412.2 million.

The company's financials weren't the most interesting update included in the third-quarter report, though. Instead, it was news that Nektar Therapeutics plans to file for FDA approval of NKTR-181 by next April. NKTR-181 is a mu-opioid receptor agonist that crosses the blood-brain barrier more slowly than existing opioids, and thus, results in fewer feelings of euphoria.

The company's good news continued later in the month when management reported that its NKTR-214 may help Bristol-Myers Squibb's (NYSE: BMY) Opdivo work better in some patients. NKTR-214 activates cancer-fighting T cells and natural killer cells directly in a tumor, and it boosts PD-1 expression, while Opdivo prevents cancer cells from hijacking PD-1 to avoid detection by the immune system.

In a phase 1/2 study, seven of 11 advanced treatment-naive stage 4 melanoma patients responded to the combination, and 91% had either a complete response, partial response, or stable disease. In first-line advanced kidney cancer patients, six of 13 patients responded to it, and in non-small-cell lung cancer patients, three of four patients responded to it.

Now what

Addiction risks associated with opioid use have regulators and doctors eagerly searching for new pain-treatment options, making this multibillion-dollar market ripe for disruption.

In July, management released phase-3 study data showing that NKTR-181 patients achieved an average pain score reduction of over 65% during the dose titration period and saw significantly improved chronic back-pain relief versus placebo. If all goes to plan, the FDA could be in a position to decide whether to approve NKTR-181 either late next year or early in 2019.

The data regarding NKTR-214 offers an opportunity for significant sales someday, too. PD-1 drugs, including Opdivo, are generating billions of dollars in annual sales, and drugs that can improve their efficacy could ride those coattails to significant use.

Overall, Nektar Therapeutics is still losing money, and that's not changing anytime soon. But it's clearly making progress on its pipeline, and that makes it a biotech stock worth watching in 2018.

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Todd Campbell has no position in any of the stocks mentioned. His clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.