Biotech Values

[drbio45]

Nektar Therapeutics (NKTR: Buy' $20 Target Price) - We View Nektar As Significantly Undervalued Investment Summary

It is a 20 sum of the parts not 50


http://www.capmarkets.com/ViewFile.asp?ID1=390641&ID2=432748277&ssid=2&directory=653&bm=0&filename=NKTR_080111.pdf


We firmly believe that the steady valuation slide for Nektar has gotten a bit out of hand. Taking a look at the parts we easily arrive at $20 per share, especially considering the relatively low clinical risk associated with Nektar’s products given that they are all improved versions of approved active agents.

§Below we list the parts on which we have chosen to focus and arrive at a valuation that is more than double the present valuation. Note that we have excluded the following: (1) NKTR-119, (2) NKTR-171 (late preclinical candidate for neuropathic pain – a drug where restricting it from the CNS would be a major safety enhancement), (3) NKTR-061 (Phase 3 ready once the inhalation device is perfected), (4) all other preclinical candidates, (5) unlikely but potential 5% peginesatide royalties, (6) NKTR-105, (7) CDP791, and (8) any potential business development income from future licensing deals.

Exhibit 1: Sum of the parts valuation

Source: Brean Murray Carret & Co research

Exhibit 2: Catalyst calendar

Source: Company documents

§Valuation. Our target price is derived using a sum-of-the-parts valuation, primarily by summing up most of the clinical-stage products and the approved products, the bias being toward products that carry, or are expected to fetch, far higher royalties than the legacy products.

§Risks. Risks to investing in Nektar include market adoption, business development, competition, and high stock price volatility.

Price
$ 6.44

52-Week High/Low
$ 16.06 - 6.20

Shares Outstanding ( mm )
113.75

Market Cap. ( mm )
$ 732.55

Average Daily Volume ( mm )
0.99