Wednesday, February 3, 2016

Seeking Alpha: Nektar Therapeutics Going Into The Decline With A Better Profile

I have no idea how long this downturn in the biotech sector will last, but Nektar Therapeutics (NASDAQ:NKTR) has survived its share in the 20-plus years of the company's existence. I also believe that the company is going into this downturn in the best shape it has been - Nektar can look forward to meaningful royalty streams from two drugs with $1 billion-plus potential, and the company has a more credible and focused pipeline.

My model suggests that the shares should be worth over $18 today, with royalties from approved drugs (AstraZeneca (NYSE:AZN)/Movantik and Baxter's (NYSE:BAX) Adynovate) making up about $9 of the valuation. Nektar's pipeline remains high-risk, but the potential of abuse-resistant painkillers and differentiated immuno-oncology drugs is meaningful, and the company seems to be making better decisions with regard to its R&D capital allocation.

It's certainly important to note that this is an ugly stretch in the biotech space and it could get worse (if not much worse) before getting better. My valuation is predicated in part on what the market has been willing to pay for approved drugs in the past, and the market can certainly undershoot those multiples during pullbacks.

Read more here:
Nektar Therapeutics Going Into The Decline With A Better Profile

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