Why Nektar Therapeutics Shares Fell 19.2% in April

By Todd CampbellMarketsFool.com

What happened

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After a big rally higher in March, following positive phase 3 trial results for the company's treatment for lower back pain, shares in Nektar Therapeutics (NASDAQ: NKTR) retrenched 19.2% in April, according to S&P Global Market Intelligence.

So what

Nektar Therapeutics reported results from phase 3 trials evaluating NKTR-181 as a treatment for chronic back pain on March 20, and those results suggest that NKTR-181 could provide an effective and safe alternative to existing opioid medications, including Oxycontin.

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The trial delivered a statistically significant improvement in pain relief compared to placebo, with average pain scores dropping by 65% from baseline. NKTR-181 also successfully met its secondary trial endpoints, with statistically significant outperformance versus placebo in reducing pain by 30% and 50%, and improvement in patient quality of life.

Importantly, NKTR-181 seems to provide that pain relief without the same risk of abuse as oxycodone. In studies, NKTR-181 was rated similarly to placebo in "drug liking" and "feeling high" scores.

Now what

Over $12 billion is spent on opioid pain medication worldwide each year, and with a major push to develop drugs that don't pose the same risk of abuse as they do, NKTR-181's market opportunity could be big.

Nektar Therapeutics has a history of developing drugs and then licensing commercialization rights to them, and it appears that will be the path forward for NKTR-181. The company is exploring its options, so investors might have to wait a bit to find out how management will proceed from here.

Overall, this is a blockbuster opportunity, and a major reason Nektar Therapeutics may be able to make good on its lofty goal of delivering sales of between $375 million and $450 million by 2021. If it can hit that target, it should be able to turn a profit, because operating expenses were $279 million last year. Given the market opportunity, and the long-term guidance, risk-tolerant investors might want to consider picking up this stock on sale.

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Todd Campbell has no position in any 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.