BTIG has initiated coverage on shares of Nektar Therapeutics (NASDAQ: NASDAQ:NKTR) with a Buy rating and a price target set at $4.00.
The firm identified a significant gap between the market valuation of Nektar and the potential of its investigational drug, rezpegaldesleukin (Rezpeg), particularly in the treatment of inflammatory and autoimmune diseases such as atopic dermatitis (AD) and alopecia areata (AA).
BTIG's analysis suggests that the market has not yet fully adjusted to the potential of Rezpeg, especially in light of upcoming Phase 2b clinical trial results for AD and AA, which are expected in the first half of 2025 and mid-2025, respectively. The firm believes that the current stock price does not reflect the promising future of the therapy.
The firm also pointed out that Nektar's previous partnership with Eli Lilly (NYSE:LLY), which ended on terms not directly related to Rezpeg's efficacy, left Nektar's stock underappreciated.
Since regaining the rights to Rezpeg, Nektar has clarified previous inaccuracies in Phase 1b data that were reported by Eli Lilly at the European Academy of Dermatology and Venereology (EADV) in 2022.
BTIG's positive outlook on Nektar is based on the expectation that Rezpeg's value will be increasingly recognized, particularly if the litigation surrounding the termination of the collaboration with Eli Lilly brings to light the actual reasons for the dissolution, which could further validate Rezpeg's merits.
InvestingPro Insights
To complement BTIG's bullish outlook on Nektar Therapeutics (NASDAQ:NKTR), recent data from InvestingPro offers additional context for investors. Despite the company's challenging financial position, with an operating income margin of -145.03% in the last twelve months as of Q2 2024, Nektar has shown resilience in its stock performance. The company has experienced a significant 107.08% year-to-date price total return, aligning with BTIG's view that the market may be starting to recognize Nektar's potential.
InvestingPro Tips highlight that Nektar "holds more cash than debt on its balance sheet" and "liquid assets exceed short-term obligations," which could provide the company with financial flexibility as it advances Rezpeg through clinical trials. However, investors should note that Nektar is "quickly burning through cash" and "analysts do not anticipate the company will be profitable this year," underscoring the importance of the upcoming clinical trial results in 2025 for the company's future prospects.
For those seeking a deeper analysis, InvestingPro offers 5 additional tips that could further inform investment decisions regarding Nektar Therapeutics.
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