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Nektar Therapeutics Reports Financial Results for the Second Quarter of 2014

Companies mentioned in this article: Nektar Therapeutics

SAN FRANCISCO, July 31, 2014 /PRNewswire/ -- Nektar Therapeutics (Nasdaq: NKTR) today reported its financial results for the second quarter ended June 30, 2014.

Cash and investments in marketable securities at June 30, 2014 were $301.4 million as compared to $309.1 million at March 31, 2014.

"The second half of 2014 will be an exciting time for Nektar as we look forward to significant milestones for a number of our late-stage clinical programs," said Howard W. Robin, President and Chief Executive Officer of Nektar. "The first of these is the potential US and EU approvals of Movantik(TM) with our partner AstraZeneca. If approved, Movantik would be the first oral targeted therapy approved for opioid induced constipation, a debilitating condition that occurs in up to 80%* of the 69 million chronic pain patients worldwide. Our partner Baxter has completed dosing in their Phase 3 study for BAX 855, a longer-acting PEGylated Factor VIII therapy to treat hemophilia A and plans to file the BLA in the U.S. by the end of this year. In our proprietary pipeline, we are on track for topline results from the Phase 3 breast cancer study for NKTR-102 in Q1 2015."

Revenue in the second quarter of 2014 was $28.5 million as compared to $33.9 million in the second quarter of 2013. Year-to-date revenue for 2014 was $48.3 million as compared to $56.9 million in the first half of 2013. The decrease in revenue in the second quarter and first half of 2014 as compared to the same periods in 2013 is primarily due to decreased manufacturing activity. Revenue included non-cash royalty revenue, related to our 2012 royalty monetization, of $4.8 million and $10.6 million in the second quarter and first half of 2014, respectively, and $3.8 million and $8.2 million in the second quarter and first half of 2013, respectively. This non-cash royalty revenue is offset by non-cash interest expense.

Total operating costs and expenses in the second quarter of 2014 were $51.4 million as compared to $66.5 million in the second quarter of 2013. Total operating costs and expenses in the first half of 2014 were $107.6 million as compared to $134.6 million in the first half of 2013. Total operating costs and expenses decreased primarily as a result of decreased research and development (R&D) expense, as well as decreased cost of goods sold associated with decreased manufacturing activity.

Research and development expense in the second quarter of 2014 was $36.7 million as compared to $52.2 million in the second quarter of 2013. For the first half of 2014, R&D expense was $75.0 million as compared to $97.8 million in the first half of 2013. R&D expense was lower in the second quarter and first half of 2014 as compared to the same periods in 2013 primarily because of reduced expenses for the Phase 3 study of etirinotecan pegol (NKTR-102) in metastatic breast cancer, which completed enrollment in the third quarter of 2013. Additionally, R&D expense in the second quarter and first half of 2013 included costs related to the Phase 2 study of NKTR-181, which was completed in 2013. These decreases in R&D expense in 2014 were partially offset by costs for the preparation for the start of Phase 3 for NKTR-181, the ongoing Phase 1 study of NKTR-171, and the continued production of devices for the ongoing Phase 3 studies of Amikacin Inhale.

General and administrative expense was $9.6 million in the second quarter of 2014 as compared to $9.2 million in the second quarter of 2013. G&A expense in the first half of 2014 was $19.5 million as compared to $20.1 million in the first half of 2013.

Non-cash interest expense incurred in connection with the 2012 royalty monetization was $5.1 million and $10.5 million in the second quarter and first half of 2014, respectively, as compared to $5.5 million and $11.0 million in the second quarter and first half of 2013, respectively.

Net loss in the second quarter of 2014 was $32.6 million or $0.26 loss per share as compared to $42.7 million or $0.37 loss per share in the second quarter of 2013. Net loss in the first half of 2014 was $78.8 million or $0.63 loss per share as compared to $97.8 million or $0.85 loss per share in the first half of 2013.

The company also announced upcoming presentations at the following medical meetings and scientific congresses during the third and fourth quarters of 2014:

Global Cancer Conference 2014, Hyderabad, India:

    --  Oral Abstract Title: "NKTR-214: A long-acting, engineered immunotherapy
        shows excellent therapeutic efficacy in multiple syngeneic mouse tumor
        models both alone and in combination with checkpoint inhibition",
        Addepalli, M., et al.
        --  Date: September 15-17, 2014

IASP 15(th) World Congress on Pain, Buenos Aires, Argentina:

    --  Abstract/Poster Title: "Multi-dimensional pathway analysis reveals
        unique pharmacological signatures of kappa opioid receptor agonists",
        Brew, C., et al.
        --  Date: October 10, 2014, 9:30 a.m. Argentina Time

Society for Neuroscience, Washington, DC:

    --  Abstract/Poster Title: "SEO-16: An orally active opioid analgesic with
        rapid onset of activity and reduced CNS side effects", Harrison, S., et
        --  Poster Session 244: "Opioids and other analgesics"
        --  Date: November 16, 2014, 1:00 p.m. -- 5:00 p.m. Eastern Time

Conference Call to Discuss Second Quarter 2014 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, Thursday, July 31, 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: The web broadcast of the conference call will be available for replay through Monday, September 1, 2014.

To access the conference call, follow these instructions:

Dial: (877) 881.2183 (U.S.); (970) 315.0453 (international)
Passcode: 73168608 (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 advanced polymer conjugate technology platform. Nektar has a robust R&D pipeline of potentially high-value therapeutics in pain, oncology and other therapeutic areas. In the area of pain, Nektar has an exclusive worldwide license agreement with AstraZeneca for Movantik(TM) (naloxegol), 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 Movantik fixed dose combination products (formerly NKTR-119), an earlier stage development program that is a co-formulation of Movantik and an opioid. NKTR-181, a novel mu-opioid analgesic molecule for chronic pain conditions, has completed Phase 2 development. 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 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 late-stage development products that leverage Nektar's proprietary technology platform include Baxter's BAX 855, a longer-acting 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

*Sources: Bell TJ et. al. Pain Med 2009;10(1):35-42, Hess B et. al. Eur J Intern Med 2011;22(5):527-531, Rosti G et. al Eur Rev Med Pharmacol Sci. 2010;14(12):1045-1050. Galvez R et. al. Aten Primaria 2014;46(1):32-39, Droney J et. al. Support Care Cancer 2008;16(5):453-459.

Movantik is a trademark of AstraZeneca.

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 Movantik(TM); the timing of the announcement of clinical results and potential regulatory filings by Baxter Healthcare for BAX 855; the timing of availability of topline overall survival data for the NKTR-102 BEACON study; 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) 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; (iv) 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; (v) patents may not issue from our patent applications for our drug candidates, patents that have issued may not be enforceable, or additional intellectual property licenses from third parties may be required; and (vi) the outcome of any existing or future intellectual property or other litigation related to our drug candidates and those of our collaboration partners. Other important risks and uncertainties set forth in our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 8, 2014. 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 Therapeutics                       (415) 482-5585

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

    Nektar Media Inquiries:

    Jodi Sievers/Nektar Therapeutics                           (415) 482-5593

                                                                                       NEKTAR THERAPEUTICS

                                                                              CONDENSED CONSOLIDATED BALANCE SHEETS

                                                                                         (In thousands)


                                            ASSETS                                                            June 30, 2014                            December 31, 2013 (1)
                                                                                                              -------------                            --------------------

    Current assets:

                         Cash and cash
                         equivalents                                                          $30,699                                        $39,067

                         investments                                                245,737                                         197,959

                         net                                                          3,047                                           2,229

                        Inventory                                                                14,111                                         13,452

                         Other current
                         assets                                                       4,629                                           5,175

                         assets                                                     298,223                                         257,882

    Restricted cash                                                                                                             25,000                                           25,000

    Property and equipment, net                                                                                                71,070                                           66,974

    Goodwill                                                                                                                     76,501                                           76,501

    Other assets                                                                                                                 7,343                                            8,170
                                                                                                                                 -----                                            -----

                         assets                                                                $478,137                                       $434,527


    Current liabilities:

                         payable                                                               $7,437                                         $9,115

                         compensation                                                11,386                                          14,254

                         expenses                                                     5,814                                           6,243

                         Accrued clinical
                         trial expenses                                13,208                     16,905

                         payable                                                                  6,917                                          6,917

                         Deferred revenue,
                         current portion                               24,766                     23,664

                         Other current
                         liabilities                                                 14,827                                          21,123

                         liabilities                                                 84,355                                          98,221

    Senior secured notes                                                                                                      125,000                                          125,000

    Capital lease obligations, less current
     portion                                                                                                                   6,025                                            8,049

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

    Liability related to sale of future royalties, less
     current portion                                                                                                        121,431                                          121,520

    Deferred revenue, less current portion                                                                                    88,918                                           82,384

    Other long-term liabilities                                                                                                17,768                                           19,256
                                                                                                                               ------                                           ------

                         liabilities                                                513,497                                         524,430

    Commitments and contingencies

    Stockholders' equity (deficit) :

                         stock                                                                        -                                             -

                         stock                                                                       12                                             11

                         Capital in excess
                         of par value                               1,776,746                  1,643,660

                         Accumulated other
                         loss                                           (887)                   (1,181)

                         deficit                                                (1,811,231)                                     (1,732,393)

                         (deficit)                                   (35,360)                  (89,903)

                         Total liabilities
                         and stockholders'
                         equity (deficit)                                                 $478,137                                       $434,527

    (1) The consolidated balance
     sheet at December 31, 2013 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)


                                        Three Months Ended                                     Six Months Ended

                                             June 30,                                              June 30,
                                             --------                                              --------

                                                                    2014                                                     2013            2014             2013
                                                                    ----                                                     ----            ----             ----


    Product sales and royalty revenue                        $5,891                                                  $10,675         $11,808          $22,810

    Non-cash royalty revenue related
     to sale of future royalties                              4,837                                                    3,828          10,610            8,221

    License, collaboration and other
     revenue                                                 17,785                                                   19,359          25,866           25,835
                                                             ------                                                   ------          ------           ------

    Total revenue                                             28,513                                                   33,862          48,284           56,866

    Operating costs and expenses:

    Cost of goods sold                                        5,108                                                    5,011          13,015           16,672

    Research and development                                 36,702                                                   52,230          75,040           97,848

    General and administrative                                9,619                                                    9,226          19,547           20,057

    Total operating costs and expenses                       51,429                                                   66,467         107,602          134,577
                                                             ------                                                   ------         -------          -------

    Loss from operations                                   (22,916)                                                (32,605)       (59,318)        (77,711)

    Non-operating income (expense):

    Interest income                                              132                                                      209             266              523

    Interest expense                                         (4,488)                                                 (4,656)        (9,021)         (9,301)

    Non-cash interest expense on
     liability related to sale of
     future royalties                                       (5,134)                                                 (5,485)       (10,521)        (11,028)

    Other income (expense), net                                (36)                                                     (6)            142              123
                                                                ---                                                      ---             ---              ---

    Total non-operating expense, net                        (9,526)                                                 (9,938)       (19,134)        (19,683)

    Loss before provision for income
     taxes                                                 (32,442)                                                (42,543)       (78,452)        (97,394)

    Provision for income taxes                                  195                                                      205             386              417
                                                                ---                                                      ---             ---              ---

    Net loss                                                $(32,637)                                               $(42,748)      $(78,838)       $(97,811)
                                                             ========                                                 ========        ========         ========

    Basic and diluted net loss per
     share                                                  $(0.26)                                                 $(0.37)        $(0.63)         $(0.85)
                                                             ======                                                   ======          ======           ======

    Weighted average shares outstanding
     used in computing basic and
     diluted net loss per share                             127,040                                                  115,544         125,301          115,427
                                                            =======                                                  =======         =======          =======

                                                                     NEKTAR THERAPEUTICS

                                                       CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                       (In thousands)


                                                                                                                          Six Months Ended June 30,

                                                                                                                                      2014                      2013
                                                                                                                                      ----                      ----

    Cash flows from operating activities:

    Net loss                                                                                                 $(78,838)           $(97,811)

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

    Non-cash royalty revenue related to sale of
     future royalties                                                                                                      (10,610)                     (8,221)

    Non-cash interest expense on liability related to sale of
     future royalties                                                                                                      10,521                       11,028

    Stock-based compensation                                                                                                8,525                        8,601

    Depreciation and amortization                                                                                           6,519                        7,281

    Other non-cash transactions                                                                                               865                          159

    Changes in operating assets and liabilities:

    Accounts receivable, net                                                                                                (818)                       (236)

    Inventory                                                                                                               (659)                     (2,210)

    Other assets                                                                                                              738                        5,508

    Accounts payable                                                                                                      (1,818)                       2,631

    Accrued compensation                                                                                                  (2,868)                       2,314

    Accrued expenses                                                                                                        (314)                       3,280

    Accrued clinical trial expenses                                                                                       (3,697)                       (565)

    Interest payable                                               -               (166)

    Deferred revenue                                                                                                        7,636                      (2,818)

    Other liabilities                                                                                                     (6,557)                     (1,223)
                                                                                                                           ------                       ------

    Net cash used in operating activities                                                                                (71,375)                    (72,448)

    Cash flows from investing activities:

    Maturities of investments                                                                                             118,777                      200,477

    Purchases of investments                                                                                            (166,496)                   (109,400)

    Purchases of property and equipment                                                                                   (5,192)                       (794)
                                                                                                                           ------                         ----

    Net cash (used in) provided by investing activities                                                                  (52,911)                      90,283

    Cash flows from financing activities:

    Payment of capital lease obligations                                                                                  (1,650)                     (1,466)

    Repayment of proceeds from sale of future royalties                                                                   (7,000)                     (3,000)

    Issuance of common stock, net of issuance costs                                                                       116,601                            -

    Proceeds from shares issued under equity compensation plans                                                             7,961                        2,621
                                                                                                                            -----                        -----

    Net cash provided by (used in) financing activities                                                                   115,912                      (1,845)

    Effect of exchange rates on cash and cash equivalents                                                                       6                            5
                                                                                                                              ---                          ---

    Net (decrease) increase in cash and cash equivalents                                                                  (8,368)                      15,995

    Cash and cash equivalents at beginning of period                                                                       39,067                       25,437

    Cash and cash equivalents at end of period               $30,699              $41,432
                                                             =======              =======

    Supplemental disclosure of cash flow information:

    Cash paid for interest                                                                            $8,622     $9,070
                                                                                                      ======     ======

SOURCE Nektar Therapeutics