Shares of biotech firm
collapsed in pre-market trading on Friday after the company revealed in an earnings call Thursday night that there had been manufacturing issues in two batches of experimental cancer drugs Nektar gave to patients in a trial.
Analysts at JPMorgan, Jefferies, and Mizuho Securities downgraded the Nektar Therapeutics stock (ticker: NKTR) to Hold after the call. The company also appeared to signal a narrowing of its development collaboration with
“While it is difficult to say which disclosure is most disappointing, the combination leaves us with a more cautious near-term outlook,” JPMorgan analyst Jessica Fye wrote in a Friday note.
The back story. Nektar stock is down 50.5% over the past 12 months through Thursday’s close. In February 2018, Bristol-Myers said it would pay $1.85 billion in a collaboration deal with the company to work on an experimental cancer drug called NKTR-214.
What’s new. On Thursday night, company executives acknowledged manufacturing issues in the NKTR-214 used in a trial.
“These two early manufacturing lots are known as lots two and five and at the time of their production beginning in 2016,” CEO Howard Robin said on a call with analysts. “It was early on in the manufacturing campaign and these lots were within the manufacturing controls and release specifications. As such, we did not detect any meaningful variability upon their release.
Robin said that company had noticed that patients treated with certain batches of NKTR-214 responded better than those treated with other batches, which led to the discovery. The disclosure appears to have shaken investors
The company reported quarterly revenue of $23.3 million, below consensus estimates of $26.6 million, according to FactSet.
Nektar stock was down 37% in pre-market trading on Friday, to $18.55 per share.
Looking forward. “Investor and investigator confidence in the management is likely diminished, as is typical when quality-issues are announced, though we find reasons to both increase and decrease our confidence in the team,” SVB Leerink analyst Daina Graybosch wrote late Thursday, noting that the company had made personnel changes after the issue was discovered, and that the Food and Drug Administration had granted special status to the drug even after knowing about the issue.
Graybosch maintained her Market Perform rating on the stock.
JP Morgan’s Fye, who was among the analysts to drop the company to Neutral from Overweight, wrote that the stock is in a “challenging position.”
“Ultimately, while we continue to believe the emerging immunology/I-O pipeline at Nektar holds potential for significant value creation to the extent de-risking data continues to read out, we find it difficult to identify a catalyst near-term to reverse the negative sentiment,” she wrote.
Write to Josh Nathan-Kazis at firstname.lastname@example.org