Nektar Therapeutics — 2022 Form 10-K Summary
Business context and reporting period
This is Nektar Therapeutics’ annual report for the fiscal year ended December 31, 2022; it does not provide standalone fourth-quarter results. Nektar is a clinical-stage biopharmaceutical company developing immunotherapies for autoimmune disease and cancer, alongside its polymer-conjugate technology and manufacturing collaborations. Its revenue is derived exclusively from collaboration agreements and related product, royalty, license, and service arrangements.
Important subsequent event: on February 23, 2023, Nektar reported that rezpegaldesleukin’s Phase 2 lupus study missed its primary endpoint; Lilly does not plan to advance the candidate to Phase 3 for lupus.
Key financial metrics
| Metric | 2022 | 2021 |
|---|---|---|
| Total revenue | $92.1 million | $101.9 million |
| Operating loss | $376.2 million | $446.1 million |
| Net loss | $368.2 million | $523.8 million |
| Net loss per share, diluted | $1.97 | $2.86 |
| Cash used in operating activities | $304.0 million | $412.7 million |
| Research and development expense | $218.3 million | $400.3 million |
- Revenue comprised $20.3 million of product sales, $69.8 million of non-cash royalty revenue from previously monetized royalties, and $1.9 million of license, collaboration and other revenue. Total revenue declined 10% year over year.
- Product gross margin was negative 6%, compared with negative 5% in 2021. The company expects negative product gross profit in 2023 under a manufacturing arrangement priced below fully burdened cost.
- Cash, cash equivalents, and marketable securities totaled $505.0 million at year-end, down from $798.8 million in 2021. Current assets were $546.0 million and current liabilities $68.2 million.
- Total liabilities were $344.0 million. These included $155.4 million net liabilities from sales of future royalties and $131.5 million of operating lease liabilities. The balance sheet shows no conventional borrowing balance at year-end.
- Stockholders’ equity was $366.6 million, down from $679.5 million. The company had an accumulated deficit of $3.20 billion.
Material changes versus 2021
- Research and development expense fell 45%, principally because bempegaldesleukin development costs were recorded for only the first quarter before the program was discontinued; wind-down costs were subsequently reported in restructuring expense.
- General and administrative expense fell 25% to $92.3 million, following workforce reductions and elimination of bempegaldesleukin pre-commercial activities.
- Nektar recorded $135.9 million of restructuring, impairment, and terminated-program costs, including $65.8 million of asset impairment, $30.9 million of severance, and $31.7 million of program wind-down costs, net of partner reimbursement.
- Net loss narrowed by $155.6 million. The comparison also reflects a $33.4 million gain from eliminating the SFJ development derivative liability, while 2021 included a $24.4 million loss on revaluation of royalty-sale liabilities.
- Cash used in operations decreased by $108.7 million. The company also sold its India research facility and consolidated San Francisco operations, vacating office and laboratory space it is seeking to sublease.
Outlook, commentary, risks, and unusual items
- Management stated that year-end liquidity was expected to fund current business plans for at least 12 months from filing. Nektar has no committed credit facility, and future funding needs depend on clinical progress, collaboration payments, costs, and access to financing.
- For 2023, management expected product sales to be consistent with 2022, general and administrative expense to decrease, and wind-down expenses to be significantly lower. It did not provide full-year revenue or earnings guidance; significant license and collaboration revenue was not expected.
- NKTR-255 remains in clinical development. Nektar expected expansion-stage data from two studies in the second half of 2023, initial data from its CAR-T study in the second half of 2024, and topline data from the JAVELIN Bladder Medley study in the second half of 2024.
- For rezpegaldesleukin, Lilly and Nektar were evaluating next steps for a planned Phase 2b atopic dermatitis study and a possible additional autoimmune indication. The lupus result and Lilly’s decision not to proceed in that indication weaken the program’s prospects and could affect milestone and royalty potential.
- Key risks include clinical failure or delay, dependence on collaboration partners—particularly Lilly—concentrated collaboration revenue, continuing losses and cash burn, potential need for additional or dilutive financing, manufacturing and single-source supply risks, and uncertainty about subleasing excess San Francisco space.
- Nektar disclosed ongoing litigation brought by Aether Therapeutics concerning alleged MOVANTIK patent infringement. It recorded no litigation liability at year-end and said it could not reasonably estimate potential future losses. Indemnification obligations may also create unquantified exposure.
- The financial statements received an unqualified audit opinion; management and the auditor reported effective internal control over financial reporting. The auditor identified cost-sharing, asset impairment, and accrued research and development expenses as critical audit matters.
Most important facts for investors to verify
- Whether NKTR-255 study enrollment, timelines, safety, and data support continued development and financing needs.
- Whether Lilly advances rezpegaldesleukin in atopic dermatitis or another indication after the failed lupus primary endpoint, and the resulting effect on milestone and royalty prospects.
- Cash burn versus the stated 12-month liquidity outlook, including any later financing, collaboration, or restructuring actions.
- Sublease progress and potential further impairment or lease-related costs for vacated San Francisco facilities.
- Underlying product sales and royalty trends, and the timing at which royalties sold to HCR may revert to Nektar under the contractual cap.
- Developments in the Aether litigation and any other material legal, indemnification, or supply contingencies.