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Nektar Therapeutics Reports Fourth Quarter and Year-End 2013 Financial Results

Companies mentioned in this article: Nektar Therapeutics

SAN FRANCISCO, Feb. 26, 2014 /PRNewswire/ -- Nektar Therapeutics (Nasdaq: NKTR) today reported its financial results for the fourth quarter and year ended December 31, 2013.

Cash and investments in marketable securities at December 31, 2013 were $262.0 million as compared to $302.2 million at December 31, 2012. The 2013 year-end cash balance does not include net proceeds of $117.2 million received from the completion of a public equity offering in January 2014.

"2014 has the potential to be a transformative year for Nektar as several of our highly valuable late-stage programs advance toward approval or filing," said Howard W. Robin, President and Chief Executive Officer of Nektar. "For naloxegol, our partner AstraZeneca has filed for regulatory approvals in the U.S., Europe and Canada. Naloxegol could be the first once-daily oral therapy approved to treat opioid-induced constipation. The Phase 3 study for BAX 855, a longer-acting PEGylated Factor VIII therapy, has completed enrollment and our partner Baxter intends to file the BLA by the end of 2014. Finally, the NKTR-102 BEACON Phase 3 study in advanced breast cancer successfully passed its interim efficacy analysis. Topline data from this pivotal study is expected by early 2015 and we intend to file NKTR-102 in both the U.S. and Europe in 2015."

Revenue for the fourth quarter of 2013 was $31.1 million as compared to $21.1 million in the fourth quarter of 2012. Revenue for the year ended December 31, 2013 was $148.9 million as compared to $81.2 million in 2012. Revenues included non-cash royalty revenue, related to our 2012 royalty monetization, of $9.3 million and $22.1 million in the fourth quarter and the full year of 2013, respectively, and $3.9 million and $10.8 million in the fourth quarter and the full year of 2012. This non-cash royalty revenue is offset by non-cash interest expense. The increase in revenue in the fourth quarter of 2013 as compared to the fourth quarter of 2012 is primarily due to increased product shipments to one of our collaboration partners. In addition, the increase in revenue in 2013 as compared to 2012 is primarily due to a $25.0 million milestone achieved in September 2013 upon the acceptance of the naloxegol MAA filing in Europe as well as a $10.0 million milestone achieved upon the initiation of Phase 3 studies for Amikacin Inhale in April 2013.

Total operating costs and expenses in the fourth quarter of 2013 were $67.0 million as compared to $64.5 million in the fourth quarter of 2012. Total operating costs and expenses for the year ended December 31, 2013 were $269.1 million as compared to $222.4 million in 2012. The increase in 2013 as compared to 2012 is due primarily to increased clinical development expenses.

Research and development expense in the fourth quarter of 2013 was $48.2 million as compared to $46.4 million for the fourth quarter of 2012. For the year ended December 31, 2013, R&D expense was $190.0 million as compared to $148.7 million in 2012. R&D expense was higher in the year ended December 31, 2013 as compared to 2012 reflecting the costs of the Phase 3 study of etirinotecan pegol (NKTR-102) in metastatic breast cancer, the Phase 2 study of NKTR-181, preparation for the Phase 3 study of NKTR-181, the Phase 1 study of NKTR-192, and the production of devices for the Phase 3 study of Amikacin Inhale.

General and administrative expense was $9.8 million in the fourth quarter of 2013 as compared to $10.9 million in the fourth quarter of 2012. G&A expense for the year ended December 31, 2013 was $40.5 million as compared to $41.6 million in 2012.

Non-cash interest expense incurred in connection with the 2012 royalty monetization was $5.7 million and $22.3 million in the fourth quarter and year ended December 31, 2013, respectively, as compared to $5.4 million and $18.1 million in the fourth quarter and year ended December 31, 2012, respectively.

Net loss for the fourth quarter ended December 31, 2013 was $47.7 million or $0.41 loss per share. Net loss for the year ended December 31, 2013 was $162.0 million or $1.40 loss per share. Net loss for the fourth quarter ended December 31, 2012 was $52.9 million or $0.46 loss per share. Net loss for the year ended December 31, 2012 was $171.9 million or $1.50 loss per share.

Conference Call to Discuss Fourth Quarter and Year-End 2013 Financial Results

Nektar management will host a conference call to review the results beginning at 5:00 p.m. Eastern Time/2:00 p.m. Pacific Time today, Wednesday, February 26, 2014.

This press release and a live audio-only Webcast of the conference call can be accessed through a link that is posted on the home page and Investor Relations section of the Nektar website: http://www.nektar.com. The web broadcast of the conference call will be available for replay through Monday, March 31, 2014.

To access the conference call, follow these instructions:

Dial: (877) 881.2183 (U.S.); (970) 315.0453 (international)
Passcode: 72309374 (Nektar Therapeutics is the host)

In the event that any non-GAAP financial measure is discussed on the conference call that is not described in the press release, or explained on the conference call, related information will be made available on the Investor Relations page at the Nektar website as soon as practical after the conclusion of the conference call.

About Nektar

Nektar Therapeutics (NASDAQ: NKTR) is a biopharmaceutical company developing novel therapeutics based on its PEGylation and advanced polymer conjugation technology platforms. Nektar has a robust R&D pipeline of potentially high-value therapeutics in oncology, pain and other therapeutic areas. In the area of pain, Nektar has an exclusive worldwide license agreement with AstraZeneca for naloxegol (NKTR-118), an investigational drug candidate, which has been filed for regulatory approvals in the U.S., Europe and Canada as a once- daily, oral tablet for the treatment of opioid-induced constipation. This agreement also includes NKTR-119, an earlier stage development program that is a co-formulation of naloxegol and an opioid. NKTR-181, a novel mu-opioid analgesic molecule for chronic pain conditions, has completed Phase 2 development in osteoarthritis patients with chronic knee pain. NKTR-171, a new sodium channel blocker being developed as an oral therapy for the treatment of peripheral neuropathic pain, is in Phase 1 clinical development. In oncology, etirinotecan pegol (NKTR-102) is being evaluated in a Phase 3 clinical study (the BEACON study) for the treatment of metastatic breast cancer and is also in Phase 2 studies for the treatment of ovarian, colorectal, lung and brain cancers. In anti-infectives, Amikacin Inhale is in Phase 3 studies conducted by Bayer Healthcare as an adjunctive treatment for intubated and mechanically ventilated patients with Gram-negative pneumonia. Additional development-stage products that leverage Nektar's proprietary technology platform include Baxter's BAX 855, a long-acting PEGylated rFVIII program, which is in Phase 3 clinical development for patients with hemophilia A.

Nektar's technology has enabled eight approved products in the U.S. or Europe through partnerships with leading biopharmaceutical companies, including UCB's Cimzia(®) for Crohn's disease and rheumatoid arthritis, Roche's PEGASYS(®) for hepatitis C and Amgen's Neulasta(®) for neutropenia.

Nektar is headquartered in San Francisco, California, with additional operations in Huntsville, Alabama and Hyderabad, India. Further information about the company and its drug development programs and capabilities may be found online at http://www.nektar.com.

Cautionary Note Regarding Forward-Looking Statements
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: "anticipate," "intend," "plan," "expect," "believe," "should," "may," "will" and similar references to future periods. Examples of forward-looking statements include, among others, statements we make regarding the potential regulatory approval of naloxegol; potential future regulatory filings by Baxter Healthcare for BAX 855; the timing of availability of topline overall survival data for the NKTR-102 BEACON study and our plans for future regulatory filings if the Phase 3 data is positive; and the value and potential of our technology and research and development pipeline. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results to differ materially from those indicated in the forward-looking statements include, among others, (i) our drug candidates and those of our collaboration partners are in various stages of clinical development and the risk of failure is high and can unexpectedly occur at any stage prior to regulatory approval for numerous reasons including safety and efficacy findings even after positive findings in previous preclinical and clinical studies; (ii) the timing of the commencement or end of clinical trials and the commercial launch of our drug candidates may be delayed or unsuccessful due to regulatory delays, slower than anticipated patient enrollment, manufacturing challenges, changing standards of care, evolving regulatory requirements, clinical trial design, clinical outcomes, competitive factors, or delay or failure in ultimately obtaining regulatory approval in one or more important markets; (iii) the United States Food and Drug Administration (FDA) is currently planning to hold an advisory committee meeting in 2014 to discuss the cardiovascular safety and potential additional safety study requirements for the peripheral mu-opioid receptor antagonist class of drugs, including naloxegol, and the outcome of this advisory committee and the subsequent FDA review determinations for naloxegol will have a significant impact on the Company's financial position based on significant potential regulatory and launch milestone opportunities and potential repayment obligations; (iv) acceptance, review and approval decisions for new drug applications by health authorities is an uncertain and evolving process and health authorities retain significant discretion at all stages of the regulatory review and approval decision process; (v) scientific discovery of new medical breakthroughs is an inherently uncertain process and the future success of the application of our technology platform to potential new drug candidates is therefore highly uncertain and unpredictable and one or more research and development programs could fail; and (vi) certain other important risks and uncertainties set forth in our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 7, 2013. Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

    Nektar Investor Inquiries:


    Jennifer Ruddock/Nektar             (415)
     Therapeutics                      482-5585


    Susan Noonan/SA Noonan              (212)
     Communications, LLC               966-3650



    Nektar Media Inquiries:


    Brianne Cannon/MSL                      (415)
                                        512-0770


                                                                                                                                      
                                                                                                                                      
                                                        NEKTAR THERAPEUTICS
                                                                                                                                      
                                               CONDENSED CONSOLIDATED BALANCE SHEETS
                                                                                                                                      
                                                           (In thousands)
                                                                                                                                      
                                                            (Unaudited)
                                                                                                          
                         ASSETS                         December 31, 2013                  December 31,
                                                                                               2012             (1)
                                                           -----------------              -------------
                                                                                                                                      
    Current assets:
                                                                                                                                          
      Cash and cash
       equivalents                                                             $39,067                                       $25,437
                                                                                                                    
      Short-term
       investments                                                   197,959                     251,757
                                                                                                                    
      Accounts
       receivable, net                                                 2,229                       5,805
                                                                                                                    
      Inventory                                                       13,452                      18,269
                                                                                                                    
      Other current
       assets                                                          5,175                      13,363
                                                                       -----                      ------
                                                                                                                                            
                                                    Total current assets                         257,882                     314,631
                                                                                                                                      
                                                                                                                                            
    Restricted cash                                                                               25,000                      25,000
                                                                                                                                           
    Property and equipment, net                                                                   66,974                      72,215
                                                                                                                                            
    Goodwill                                                                                      76,501                      76,501
                                                                                                                                            
    Other assets                                                                                   8,170                       9,443
                                                                                                   -----                       -----
                                                                                                                                      
      Total assets                                                            $434,527                    $497,790
                                                                              ========                    ========
                                                                                                                                      
                                                                                                          
    LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
                                                                                                                                      
                                                                                                                    
    Current liabilities:
                                                                                                                                          
      Accounts payable                                                          $9,115                                        $2,863
                                                                                                                    
      Accrued
       compensation                                                   14,254                       8,773
                                                                                                                    
      Accrued expenses                                                 6,243                       8,008
                                                                                                                    
      Accrued clinical
       trial expenses                                                 16,905                      17,500
                                                                                                                    
      Deferred revenue,
       current portion                                                23,664                      21,896
                                                                                                                    
      Interest payable                                                 6,917                       7,083
                                                                                                                    
      Liability related
       to sale of
       future
       royalties,
       current portion                                                 7,000                       3,000
                                                                                                                    
      Other current
       liabilities                                                    14,123                       9,414
                                                                      ------                       -----
                                                                                                                                            
                                                     Total current
                                                     liabilities                                  98,221                      78,537
                                                                                                                                      
                                                                                                                                           
    Senior secured notes                                                                         125,000                     125,000
                                                                                                                                           
    Capital lease obligations, less current
     portion                                                                                       8,049                      11,607
                                                                                                                                           
    Liability related to receipt of refundable
     milestone payment                                                                            70,000                           -
                                                                                                                                           
    Liability related to sale of future
     royalties, less current portion                                                             121,520                     128,266
                                                                                                                                           
    Deferred revenue, less current portion                                                        82,384                      96,551
                                                                                                                                           
    Other long-term liabilities                                                                   19,256                      10,811
                                                                                                  ------                      ------
                                                                                                                                            
                                                    Total liabilities                            524,430                     450,772
                                                                                                                                      
                                                                                                                    
    Commitments and contingencies
                                                                                                                                      
                                                                                                                    
    Stockholders' equity (deficit) :
                                                                                                                                          
      Preferred stock                                                               -                                            -
                                                                                                                    
      Common stock                                                        11                          11
                                                                                                                    
      Capital in excess
       of par value                                                1,643,660                   1,617,744
                                                                                                                    
      Accumulated other
       comprehensive
       loss                                                           (1,181)                       (357)
                                                                                                                    
      Accumulated
       deficit                                                    (1,732,393)                 (1,570,380)
                                                                  ----------                  ----------
                                                                                                                                            
                                                     Total stockholders'
                                                     equity (deficit)                            (89,903)                     47,018
                                                                                                                                          
      Total liabilities
       and
       stockholders'
       equity (deficit)                                                       $434,527                                      $497,790
                                                                              ========                                      ========
                                                                                                                                      
                                                                                                                                      
    (1) The consolidated balance sheet at December 31, 2012 has been derived from the audited financial statements at that date but
     does not include all of the information and notes required by generally accepted accounting principles in the United States for
     complete financial statements.
                                                                                                                                      

                                                                 NEKTAR THERAPEUTICS

                                                   CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                                     (In thousands, except per share information)

                                                                     (Unaudited)


                          Three Months Ended               Twelve Months Ended

                             December 31,                      December 31,
                             ------------                      ------------

                                             2013                               2012                    2013       2012
                                             ----                               ----                    ----       ----



    Revenue:

          Product
           sales                           $8,040                            $10,405                 $44,846    $35,399

          Royalty
           revenue                            118                                908                   1,148      4,874

          Non-cash
           royalty
           revenue
           related to
           sale of
           future
           royalties                        9,311                              3,896                  22,055     10,791

          License,
           collaboration
           and other
           revenue                         13,677                              5,937                  80,872     30,127
                                           ------                              -----                  ------     ------

    Total
     revenue                               31,146                             21,146                 148,921     81,191


    Operating
     costs and
     expenses:

          Cost of
           goods sold                       8,960                              7,290                  38,509     30,428

          Research
           and
           development                     48,248                             46,373                 190,010    148,675

          General and
           administrative                   9,832                             10,864                  40,532     41,614

          Impairment
           of long-
           lived
           assets                               -                                  -                       -      1,675

    Total
     operating
     costs and
     expenses                              67,040                             64,527                 269,051    222,392
                                           ------                             ------                 -------    -------


    Loss from
     operations                           (35,894)                           (43,381)               (120,130)  (141,201)


    Non-
     operating
     income
     (expense):

          Interest
           income                              93                                450                     732      2,315

          Interest
           expense                         (4,565)                            (4,682)                (18,453)   (15,489)

          Non-cash
           interest
           expense on
           liability
           related to
           sale of
           future
           royalties                       (5,665)                            (5,416)                (22,309)   (18,057)

          Other
           income
           (expense),
           net                                  7                                 70                     392        983
                                              ---                                ---                     ---        ---

    Total non-
     operating
     expense,
     net                                  (10,130)                            (9,578)                (39,638)   (30,248)


    Loss before
     provision
     for income
     taxes                                (46,024)                           (52,959)               (159,768)  (171,449)


    Provision
     (benefit)
     for income
     taxes                                  1,635                                (33)                  2,245        406
                                            -----                                ---                   -----        ---

    Net loss                             $(47,659)                          $(52,926)              $(162,013) $(171,855)
                                         ========                           ========               =========  =========


    Basic and
     diluted
     net loss
     per share                             $(0.41)                            $(0.46)                 $(1.40)    $(1.50)


    Weighted
     average
     shares
     outstanding
     used in
     computing
     basic and
     diluted
     net loss
     per share                            116,259                            115,179                 115,732    114,820


                                                        NEKTAR THERAPEUTICS

                                          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                          (In thousands)

                                                            (Unaudited)

                                                                                                                Twelve Months Ended
                                                                                                                    December 31,
                                                                                                               --------------------

                                                                                                               2013                     2012
                                                                                                               ----                     ----

    Cash flows from
     operating
     activities:

      Net loss                                                                                  $(162,013)            $(171,855)

      Adjustments to reconcile net loss to net cash
       used in operating activities:

    Non-cash
     royalty revenue
     related to sale
     of future
     royalties                                                                                              (22,055)                 (10,791)

    Non-cash
     interest
     expense on
     liability
     related to sale
     of future
     royalties                                                                                               22,309                   18,057

    Stock-based
     compensation                                                                                            17,708                   16,199

    Depreciation
     and
     amortization                                                                                            14,275                   14,508

    Impairment of
     long-lived
     assets                                                                                   -               1,675

    Other non-cash
     transactions                                                                                               664                      845

      Changes in
       operating
       assets and
       liabilities:

    Accounts
     receivable,
     net                                                                                                      3,576                     (867)

    Inventory                                                                                                 4,817                   (5,613)

    Other assets                                                                                             6,423                    6,031

    Accounts
     payable                                                                                                  6,199                     (122)

    Accrued
     compensation                                                                                             5,481                   (4,034)

    Accrued
     expenses                                                                                                (1,915)                   1,495

    Accrued
     clinical trial
     expenses                                                                                                  (595)                   5,547

    Deferred
     revenue                                                                                                (12,399)                  (9,384)

    Interest
     payable                                                                                                   (166)                   5,278

    Liability
     related to
     receipt of
     refundable
     milestone
     payment                                                                                                 70,000                        -

    Other
     liabilities                                                                                              9,164                    3,275
                                                                                                             -----                    -----

      Net cash used
       in operating
       activities                                                                                           (38,527)                (129,756)


    Cash flows from
     investing
     activities:

    Maturities of
     investments                                                                                            319,181                  307,887

    Purchases of
     investments                                                                                           (268,068)                (164,662)

    Sales of
     investments                                                                                              2,887                    5,378

    Restricted cash                                                                           -             (25,000)

    Purchases of
     property and
     equipment                                                                                               (4,091)                 (10,583)
                                                                                                            ------                  -------

      Net cash
       provided by
       investing
       activities                                                                                            49,909                  113,020


    Cash flows from
     financing
     activities:

    Payment of
     capital lease
     obligations                                                                                             (2,992)                  (2,437)

    (Repayment of)
     proceeds from
     sale of future
     royalties, net
     of $4.4 million
     of transaction
     costs in 2012                                                                                           (3,000)                 119,588

    Proceeds from
     issuance of
     senior secured
     notes, net of
     $4.5 million of
     issuance costs                                                      -      77,940

    Repayment of
     convertible
     subordinated
     notes                                                                                    -            (172,407)

    Proceeds from
     shares issued
     under equity
     compensation
     plans                                                                                                    8,208                    4,117
                                                                                                              -----                    -----

      Net cash
       provided by
       financing
       activities                                                                                             2,216                   26,801
                                                                                                             -----                   ------


      Effect of
       exchange rates
       on cash and
       cash
       equivalents                                                                                               32                       60
                                                                                                                ---                      ---

      Net increase in
       cash and cash
       equivalents                                                                                           13,630                   10,125

      Cash and cash
       equivalents at
       beginning of
       period                                                                                                25,437                   15,312

      Cash and cash
       equivalents at
       end of period                                                                    $39,067             $25,437
                                                                                        =======             =======


    Supplemental disclosure of cash flow
     information:

      Cash paid for
       interest                                                                         $17,590              $9,620
                                                                                        =======              ======

      Cash paid for
       income taxes                                                                      $1,014              $1,021
                                                                                         ======              ======

      Retirement of
       convertible
       subordinated
       notes in
       exchange for
       senior secured
       notes                                         $                   -     $42,548
                                                     =====================     =======

SOURCE Nektar Therapeutics