>>Nektar Announces Second Quarter 2006 Results
Thursday August 3, 4:20 pm ET
SAN CARLOS, Calif.--(BUSINESS WIRE)--Aug. 3, 2006--Nektar Therapeutics (Nasdaq:NKTR - News):
Exubera® (insulin human (rDNA origin)) Inhalation Powder introduced in U.S. by Pfizer with comprehensive education program; initial supplies available across U.S. in September; studies presented at American Diabetes Association meeting build on previous data
Nektar proprietary product, Amphotericin B Inhalation Powder, received U.S. Orphan Drug and Fast Track designation; PEGylated pain-related therapy completes proof-of-concept trial in humans
Value of Nektar PEG technology highlighted by $17.6 million payment from Affymax received in July 2006, and Phase II data for new indication for UCB's Cimzia(TM)
Nektar closed Bradford UK site as important step to focus company
Nektar Therapeutics (Nasdaq:NKTR - News) announced today its financial results for the second quarter ended June 30, 2006.
The company reported revenue of $60.2 million for the three months ended June 30, 2006, compared to $28.6 million for the three months ended June 30, 2005. In the second quarter of 2006, product sales and royalty revenue was $44.2 million, including three months of Exubera product sales to Pfizer Inc, compared to $5.5 million for the three months ended June 30, 2005, and contract research revenue totaled $14.3 million compared to $19.6 million in the three months ended June 30, 2005.
Nektar reported a GAAP net loss of $62.8 million or $(0.70) per share for the three months ended June 30, 2006 compared to a GAAP net loss of $26.9 million or $(0.32) per share for the three months ended June 30, 2005.
Nektar also reported a non-GAAP net loss for the second quarter 2006 of $24.9 million or $(0.28) per share compared to a non-GAAP net loss for the second quarter 2005 of $26.9 million or $(0.32) per share. The non-GAAP net loss in the second quarter of 2006 excludes $5.4 million of SFAS 123R non-severance stock based compensation charges, $11.1 million of severance charges, $3.7 million of restructuring charges related to the closing of Nektar UK (Bradford), and a $17.7 million charge for the settlement of litigation with the University of Alabama in Huntsville (UAH). The UAH litigation settlement charge includes an $11 million payment made by the company on June 30, 2006 and the present value at an 8% discount rate of ten annual payments of $1 million beginning on July 1, 2007. See the supplemental table attached to this press release entitled "Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures."
For the six months ended June 30, 2006, Nektar reported total revenue of $89.2 million compared to $57.0 million for the six months ended June 30, 2005. For the six months ended June 30, 2006, product sales and royalty revenue was $56.6 million, including four months of Exubera product sales to Pfizer, compared to $11.9 million for the six months ended June 30, 2005, and contract research revenue totaled $29.1 million compared to $39.1 million for the six months ended June 30, 2005.
For the six months ended June 30, 2006, Nektar reported a GAAP net loss of $96.3 million or $(1.08) per share compared to a GAAP net loss for the six months ended June 30, 2005 of $53.1 million or $(0.63) per share.
Nektar also reported a non-GAAP net loss for the first six months of 2006 of $49.3 million or $(0.55) per share compared to a non-GAAP net loss for the first six months of 2005 of $53.1 million or $(0.63) per share.
The non-GAAP net loss for the first six months of 2006 excludes $10.4 of SFAS 123R non-severance stock based compensation charges, $14.8 million of severance charges, $4.1 million of restructuring charges related to the closing of Nektar UK (Bradford), and a $17.7 million charge for settlement of litigation of the UAH litigation. See the supplemental table attached to this press release entitled "Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures."
As of June 30, 2006, Nektar reported cash, cash equivalents, short-term investments, and investments in marketable securities totaling approximately $491.1 million compared to $528.1 million as of March 31, 2006. This cash balance does not include the $17.6 million payment made in July by Affymax related to a collaboration between the two companies.
"The primary goals for Nektar over the last several months have been to meet manufacturing demand for Exubera, refocus the business to position us to achieve sustainable profitable growth and to build shareholder value, and advance our proprietary products. We have made strong progress in each of these areas," said Robert Chess, chairman, and interim president and CEO.
"First, we are pleased with our ability to produce Exubera Inhalers and powdered insulin as ordered by Pfizer. Second, closing our Bradford UK site represents an important step in aligning our spending with those activities that will drive our business. Third, our inhaled amphotericin product received both US Orphan Drug and Fast Track designation. Further, we concluded a human proof-of-concept trial for our PEG pain-related product, moving us closer to our objective of having four of our proprietary products in human clinical trials in 2007," concluded Chess.
Financial Outlook for 2006
Today the company is updating its full year 2006 guidance last provided on May 10, 2006 in a press release announcing first quarter 2006 results. On July 20, 2006, Nektar increased its Exubera manufacturing and royalty revenue guidance to a range of $70 to $90 million from a range of $60 to $80 million, with most of this revenue being generated by manufacturing sales to Pfizer. Changes provided today include an increase in the total revenue and GAAP net loss estimates.
"As we stated on our conference call reporting our first quarter 2006 financial results on May 10, we continue to evaluate and restructure the company in order to focus on our core assets. As we emphasized on that call, these activities could increase our net loss estimates for 2006. In the second quarter, these activities along with the UAH litigation settlement, led to an increase in our GAAP net loss estimates for 2006. However, our estimate of our non-GAAP net loss for 2006 is unchanged," said Lou Drapeau, senior vice president of finance, and chief financial officer.
Following is a summary of Nektar's current financial guidance for the full year 2006:
Total revenue in the range of $170 to $200 million, including $70 to $90 million of Exubera manufacturing and royalty revenue, with most of the Exubera related revenue being generated by manufacturing sales to Pfizer.
GAAP net loss estimates have increased to $160 to $175 million from $135 to $150 million, primarily due to a $17.7 million charge for the settlement of the UAH litigation and additional severance amounts. The non-GAAP net loss remains at $100 to $115 million. Non-GAAP net loss excludes the $17.7 million settlement of the UAH litigation, $22 million of estimated SFAS 123R non-severance stock based compensation charges, and approximately $20 million of estimated charges related to restructuring and severances. See the supplemental table attached to this press release entitled "Reconciliation of Non-GAAP Projected Financial Guidance for 2006."
Cash, cash equivalents, and short-term investments and investments in marketable securities at the end of the year of approximately $415 to $440 million, which remains unchanged.
Recent Highlights
Exubera Progress
Exubera® (insulin human (rDNA origin)) Inhalation Powder is a product from a developmental collaboration between Pfizer and Nektar; and is marketed by Pfizer. It is approved for adults with type 1 and type 2 diabetes in the U.S., European Union (EU) and Brazil.
Nektar reported on July 20, 2006, that Pfizer is introducing Exubera in the U.S. by commencing a comprehensive physician and patient education and training program for Exubera to be rolled out in phases beginning July 24, 2006. Further, Pfizer will make initial supplies of Exubera available across the U.S. in September 2006. Pfizer has already made Exubera available in Germany and Ireland.
"As the first non-injectable insulin in the U.S., Exubera is designed to address an important unmet need for diabetes patients," said Chess. "We look forward to continuing to deliver commercial quantities of Exubera Inhalers and powder to Pfizer according to plan, and will work closely with Pfizer to build sufficient supplies to meet patient demand."
Recent studies presented by Pfizer in June 2006 build on earlier Exubera data. Nektar reported results announced by Pfizer from two ongoing studies that showed adults with type 1 or type 2 diabetes treated with Exubera experienced sustained blood sugar control over a two-year period and gained about half as much weight as those taking injected insulin. In addition, Nektar reported that Pfizer announced results from two new studies that show many people with type 2 diabetes, who should take insulin injections to improve blood sugar control, often choose to avoid injections for at least four years or more, despite insulin's proven effectiveness. These data were presented at the 66th Annual Scientific Sessions of the American Diabetes Association, June 10, 2006.
Proprietary Products
Nektar is developing its own products that leverage the company's drug delivery capabilities and its portfolio of leading technologies. The company has four proprietary products in development, three of which have already completed or are in early-stage clinical trials.
Nektar announced today that the product under development as a pain-related therapy using Nektar's PEGylated technology has completed a proof-of-concept study in humans. The company plans to conduct a second Phase I trial this year and advance to Phase II in 2007.
Announced May 22, 2006, the FDA granted Fast Track designation to Amphotericin B Inhalation Powder (ABIP) for prevention of pulmonary fungal infections in patients at risk for aspergillosis due to immunosuppressive therapy, including those receiving organ or stem cell transplants, or treated with chemotherapy or radiation for hematologic malignancies (leukemias). Amphotericin B Inhalation Powder was previously granted U.S. orphan drug designation by the FDA for the prevention of pulmonary fungal infections in patients at risk for aspergillosis due to immunosuppressive therapy. Nektar has conducted two Phase I trials and has long-term toxicity studies underway for the inhaled amphotericin product.
"The Orphan Drug and Fast Track designation by the Food and Drug Administration (FDA) for Amphotericin B Inhalation Powder is an important step toward providing a much-needed medical solution to protect against life-threatening pulmonary fungal infections," said Dr. David Johnston, Nektar senior vice president of research and development.
Nektar is also developing an inhaled product for adjunctive treatment of gram negative pneumonia in mechanically-ventilated patients which is in Phase II trials. In addition, the company is working on a product in the oncology area that uses Nektar Advanced PEGylation technology.
Partner Pipeline
Nektar PEGylation technology is used in eight marketed products worldwide and two additional products filed for regulatory approval in both the U.S. and EU. "Our PEGylation technology has proven its ability to generate breakthrough products and multi-billion dollar markets for our partners," said Chess.
$17.6 Million Payment from Affymax Highlights Value of Nektar PEG Technology
Nektar announced on July 24, 2006 that the company received a cash payment of $17.6 million under a previously undisclosed collaboration with Affymax, Inc. triggered by Affymax entering into a global agreement with Takeda, Inc. to develop and commercialize Affymax's lead product candidate, Hematide(TM). Hematide utilizes Nektar Advanced PEGylation Technology and is in Phase IIb clinical trials for the treatment of anemia.
Data from Phase II trials of Cimzia(TM) for Psoriasis, a New Indication
On July 18, 2006, UCB announced significant positive results from a Phase II study of Cimzia(TM) (certolizumab pegol, CDP870) for the treatment of patients with moderate to severe psoriasis. Nektar provides its Advanced PEGylation technology for Cimzia(TM).
UCB filed for regulatory approval earlier this year for Cimzia(TM) in both the U.S. (February 2006) and the EU (April 2006) for the treatment of Crohn's Disease. UCB also stated that it has ongoing Phase III studies to investigate the efficacy and tolerability of Cimzia(TM) for rheumatoid arthritis.
Focusing the Company
Nektar announced on its first quarter financial results conference call on May 10, 2006 that the company intended to close its site in Bradford UK, which has been substantially completed as of June 30, 2006, and is an important step toward focusing the company on its core assets. Nektar previously announced that Nektar UK was deemed to be significantly impaired, which resulted in a write-off, reported as part of the company's 2005 net loss.
"A key goal for my time as interim CEO is to focus the company on those components of our business that will most increase shareholder value while managing our underlying cost structure," said Chess. "By closing our Bradford UK operations, we are taking a significant step to better control our expenses and focus our business on the three key elements of our stated strategy: (1) developing proprietary products based on our drug delivery technology; (2) Exubera and diabetes life-cycle management products, and (3) high-value partner programs."
Important Safety Information about Exubera
Patients should not take Exubera if they have poorly controlled or unstable lung disease, or if they smoke or have stopped smoking less than six months prior to starting Exubera treatment. If a patient starts smoking or resumes smoking, he or she must stop using Exubera and see a health care provider about a different treatment.
Before starting treatment with Exubera, a health care provider will carry out a simple test to check lung function. This will help to find out if Exubera is the right treatment for individual patients. Once a patient starts treatment, it is recommended that a health care provider check lung function again at six months and yearly thereafter.
Like all medicines, Exubera can cause side effects. As with all forms of insulin, a possible side effect of Exubera is low blood sugar levels.
Some patients have reported a mild cough while taking Exubera, which occurred within seconds to minutes after Exubera inhalation. Coughing occurred less frequently as patients continued to use Exubera.
In clinical trials, mean treatment group differences between Exubera and comparator showed that Exubera was associated with small, non-progressive declines in lung function relative to comparator treatments.
Conference Call Information
Robert Chess will host a conference call for analysts and investors today beginning at 2:00 p.m. Pacific time to discuss further the company's performance.
Investors can access a live audio-only webcast through a link that is posted on the Investor Relations section of Nektar's website at nektar.com. The web broadcast of the conference call will be available for replay through August 17, 2006.
Analysts and investors can also access the conference call live via telephone by dialing (800) 559-9370 (U.S.); (847) 619-6819 (international). The passcode is 15219171 and the host is Mr. Robert Chess. An audio replay will be available shortly following the call through August 17, 2006 and can be accessed by dialing (877) 213-9653 (U.S.); or (630) 652-3041 (international) with a passcode of 15219171. In the event that any non-GAAP financial measure is discussed on the conference call that is not described in the press release, related information will be made available on the Investor Relations page at the Nektar website as soon as practical after the conclusion of the conference call.<<
snip
I believe the consensus estimate of a 37 cent loss was based on the non-GAAP numbers, so the 28 cent loss beats that. Revenue beat estimates by about 50%. Take that, Cramer. Stock has pushed back over $17 this morning. Barely.
Edit: That trash talk from me obviously jinxed it. Sorry, boys.
Cheers, Tuck |
