Nektar Therapeutics - NKTR-NNM
Buy - Price 15.73 on Nov. 15
by W.R. Hambrecht
Price target: 30. We [recently met] Nektar's founder and the former Pfizer executive who inked the Exubera deal a decade ago ....The motif of our meetings was that Exubera [inhaled insulin for diabetes] was smaller (fits easily in jacket pocket or purse) and easier to use than these investors had perceived from what has been published in the investment community. While we weren't surprised [at] this reaction...in multiple cities, languages and cultures, we wonder how much longer the gap will continue between the reality of Nektar's accomplish[ments] over 15 years, the expected U.S. and European approvals in the next few months and enormous contribution to diabetes disease-management; and Nektar's valuation that, in our view, has very cautious expectations priced into today's share price.
Nektar is trading at what we feel is a significant discount; in our view, the stock has significant upside potential with a relative low-risk profile...Of the thousands of diabetics who have taken Exubera over the past seven years in clinical trials, 85% of Type 1s and 95% of Type 2s don't want to return to injections. What does that suggest about pent-up demand and rapid market adoption? We expect Pfizer to write a big check by year end. While Nektar could not comment directly, they referred to recent comments made publicly by Pfizer's CEO that Pfizer planned to buy out Sanofi Aventis interests in Exubera.
We've estimated Pfizer could pay as much as $3 billion for the Aventis manufacturing assets and employees to make the insulin, as well as the net present value of the projected future-earnings stream Aventis is selling. We wouldn't be surprised to see Pfizer pay more, as they are cash-rich and product-poor...[we'd see this as] a positive catalyst for NKTR, as it would provide...insight into Exubera's valuation and allow Pfizer to commit more resources to Exubera launch with higher profit margins, with Sanofi out of the picture...[But] Exubera lead time could be longer than three years,
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