H.C. Wainwright Slashes Price Target on Nektar Therapeutics (NKTR), Says ‘Optimism Has Been Eroded’

To say that expectations had soared to levels of strong enthusiasm on the San-Francisco based biotech firm Nektar Therapeutics (NASDAQ:NKTR) and its lead immuno-oncology candidate NKTR-214 would be an “understatement,” says disappointed bull, H.C. Wainwright’s Debjit Chattopadhyay. While the analyst opts to still give the asset some “benefit of doubt,” he notes that the “market may not be as forgiving,” as shares clang 34% down to the floor. The culprit for investors losing nerve and running scared from NKTR today: a disappointing data read-out at the biggest cancer research conference in the globe, the American Society of Clinical Oncology (ASCO) 2018.

In reaction, the analyst reiterates a Buy rating on NKTR stock while scaling back the price target from $125 to $97, which still implies a close to 64% upside from current levels. (To watch Chattopadhyay’s track record, click here)

Chattopadhyay boils down the fractured “euphoria” behind NKTR’s cancer drug to the following key points: “(1) lack of meaningful updates in NSCLC; (2) drop-off in ORR in RCC and melanoma, albeit potentially related to the limited median time on therapy […]; (3) growing clamor among investors for randomized studies in the post ECHO-301, I/O-I/O world; and (4) the disappearance of spider plots from Nektar’s presentation, limiting data evaluation. Given this backdrop, the NKTR-214 story is now a battleground between the bulls suggesting the responses correlate with duration and is likely to be buoyed by the compelling tolerability vs. the bears arguing that the 1Q18 updates were the highwater mark and an artifact of patients enrolled at a center, known to deliver superior outcomes. Hence, the clinical validation ball is squarely in Nektar’s court, transforming the next data update into a company defining event, in our view. Bereft of a marked uptick in response rates, urgently needed to soothe frayed nerves, believers in the story may not stick around for the Phase 3 programs to culminate in a few years.”

Moreover, the analyst poses a few questions to NKTR and its partner Bristol-Myers: 1) Will responses get deeper for patients who reveal proof of tumors shrinking by the first scan? 2) Will certain patients experience a delay in responding to the treatment? If the first question proves true, the analyst questions whether this cancer asset has the standing to take the place of standard of care. Yet, if the second question is the case here, the analyst wagers NKTR-214 has potential to rule the kingdom of I/O combinations.

Bottom line, though the analyst bets on the hypothesis of zapping cold tumors over to an immunologically active backdrop, the analyst must admit his positivity on NKTR has suffered some erosion following this ASCO misstep. Deepening of responses will prove key here and Chattopadhyay believes this could be enough to maintain bullish optimism fired up even in face of a “lukewarm” expansion cohort update.

TipRanks exhibits a strong bullish backing circling this biotech player, with all 7 analysts polled in the last 3 months rating a Buy on NKTR stock. With a return potential of nearly 14%, the stock’s consensus target price stands at $102.57.

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