10-Q: Nektar Therapeutics Reports Mixed Q2, Strong Clinical Data

Nektar Therapeutics reported a reduced quarterly net loss and positive Phase 2b data for rezpegaldesleukin, while securing significant capital post-period.

Summary

• Reported a net loss of $41.6 million for the three months ended June 30, 2025, an improvement from $52.4 million in the same period of 2024.
• Total revenue for the quarter decreased by 52% to $11.2 million, primarily due to the sale of the Huntsville manufacturing facility in December 2024, eliminating product sales and reducing non-cash royalty revenue.
• Research and development (R&D) expenses increased by 1% to $29.9 million for the quarter, driven by increased patient enrollment and site activation for rezpegaldesleukin Phase 2b studies.
• General and administrative (G&A) expenses decreased by 17% to $17.1 million for the quarter, mainly due to lower facilities expense and stock-based compensation.
• Cash and investments in marketable securities stood at $175.9 million as of June 30, 2025.
• Successfully completed an underwritten public offering on July 2, 2025, raising approximately $107.5 million in net proceeds by selling 4,893,618 shares of common stock at $23.50 per share.
• The pre-funded warrant held by TCG Crossover Fund II, L.P. for 1,666,667 shares was fully exercised in July 2025.
• Positive 16-week induction period data from the Phase 2b REZOLVE-AD trial for rezpegaldesleukin in atopic dermatitis, meeting its primary endpoint and key secondary endpoints with a consistent safety profile.
• Received FDA Fast Track designations for rezpegaldesleukin in moderate-to-severe atopic dermatitis (February 11, 2025) and severe-to-very severe alopecia areata (July 29, 2025).
• Entered into a collaboration agreement with TrialNet to evaluate rezpegaldesleukin in new onset stage 3 type 1 diabetes mellitus in a Phase 2 study, with Nektar retaining all rights.
• Reported improved complete response rate (CRR) of 73% at six months for NKTR-255 in combination with CAR-T cell therapy for large B-cell lymphoma, compared to 50% for placebo.
• A one-for-fifteen reverse stock split was effected on June 8, 2025, and authorized common stock shares were increased from 300 million to 390 million on June 6, 2025.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive. While the company continues to incur substantial losses and revenue declined due to a strategic asset sale, the positive clinical trial results for rezpegaldesleukin, coupled with Fast Track designations, represent significant progress for a key pipeline asset. The successful capital raise post-period also substantially improves the company's liquidity and extends its operational runway, mitigating immediate financial concerns. The ongoing litigation with Lilly and the inherent risks of drug development temper the overall positive outlook.

Positives

• Net loss for the three months ended June 30, 2025, improved to $41.6 million from $52.4 million in the prior year period.
• The Phase 2b REZOLVE-AD trial for rezpegaldesleukin met its primary endpoint and key secondary endpoints, demonstrating statistically significant improvements in EASI scores for atopic dermatitis patients.
• Rezpegaldesleukin received two FDA Fast Track designations, one for moderate-to-severe atopic dermatitis and another for severe-to-very severe alopecia areata, potentially accelerating development and review.
• The safety profile for rezpegaldesleukin in the REZOLVE-AD trial was consistent with previous reports, with local injection site reactions being the most common and mostly mild or moderate.
• NKTR-255 showed an improved complete response rate of 73% at six months in a Phase 2 proof-of-concept study for large B-cell lymphoma, compared to 50% for placebo.
• A successful underwritten public offering in July 2025 raised approximately $107.5 million in net proceeds, significantly strengthening the company's cash position.
• The full exercise of the TCG pre-funded warrant in July 2025 further bolstered the company's capital.
• Restructuring and impairment charges decreased significantly by 97% for the quarter and 96% for the six months, indicating reduced one-time costs related to prior restructuring plans.

Negatives

• Total revenue decreased by 52% for the three and six months ended June 30, 2025, primarily due to the cessation of product sales following the manufacturing facility sale.
• Net loss for the six months ended June 30, 2025, increased to $92.5 million from $89.2 million in the prior year period.
• Cash used in operating activities increased to $94.8 million for the six months ended June 30, 2025, from $85.6 million in the prior year, indicating a higher cash burn.
• Total stockholders' equity moved into a deficit of $24.2 million as of June 30, 2025, from a positive $60.7 million at December 31, 2024.
• The company is highly dependent on the success of rezpegaldesleukin, and its business would be significantly harmed if it does not continue to advance in clinical studies.
• Ongoing litigation with Eli Lilly and Company regarding the rezpegaldesleukin collaboration, with a jury trial calendared for October 27, 2025, poses a financial and operational risk.
• The company is dependent on Gannet BioChem as a single source for PEG reagents, creating supply chain risk.

Risks

• Clinical drug development is a lengthy and uncertain process, and successful drug candidates for commercial use may not be generated.
• High dependence on the success of rezpegaldesleukin; failure to advance in clinical studies would significantly harm the business.
• Outcomes from competitive immunotherapy clinical trials and discovery of new immunotherapies could materially and adversely impact pipeline value.
• Significant competition for products and drug candidates could render them obsolete or uncompetitive.
• Preliminary and interim clinical data are subject to audit and verification, potentially leading to material changes in final data.
• Clinical trials for drug candidates could be delayed due to various reasons, including site activation and patient enrollment rates.
• Dependence on third parties to conduct laboratory experiments, preclinical studies, and clinical trials, with potential harm if obligations are not fulfilled.
• No guarantee that prior strategic reorganization and cost restructuring plans will achieve intended benefits, potentially requiring additional cost-saving measures.
• Substantial future capital requirements and risk of not having access to sufficient capital to meet the current business plan.
• Significant source of revenue and R&D capital derived from collaboration agreements; inability to establish and maintain partnerships could harm the business.
• Expectation to continue incurring substantial net losses and may not achieve or sustain profitability.
• If contract manufacturers cannot produce drugs or drug substances in sufficient quantities meeting quality standards, business, financial condition, and results of operations could be harmed.
• Reliance on single or limited suppliers for starting materials could cause delays, revenue loss, and contract liability.
• Failure to obtain timely regulatory approval for drug candidates, or approval with significant restrictions, would negatively affect the business.
• Patents may not issue from applications, issued patents may not be enforceable, or additional intellectual property licenses may be required on unfavorable terms.
• Involvement in legal proceedings may incur substantial litigation costs and liabilities.
• High dependence on Eli Lilly and Company's cooperation in transferring documents, records, and data for the rezpegaldesleukin program; failure to cooperate would significantly harm development activities.
• Reliance on academic and private non-academic institutions for investigator-sponsored clinical studies; failure to meet obligations may delay or impair regulatory approval or commercialization.
• Additional cost-savings measures may be necessary following implementation of strategic reorganization and cost restructuring plans.
• Results of operations and financial condition depend significantly on collaboration partners' ability to successfully develop and market drugs.
• Inability to obtain sufficient capital resources to advance the drug candidate pipeline would negatively impact business value, results of operations, and financial condition.
• Commercial potential of drug candidates is difficult to predict; smaller than anticipated market size could negatively impact revenue.
• Dependence on relationships with other companies for sales and marketing performance; poor performance or disputes could negatively impact revenue.
• If government and private insurance programs do not provide payment or reimbursement for partnered or proprietary drugs, they will not be widely accepted.
• Inability to establish and maintain collaboration partnerships on attractive commercial terms could harm the business.
• Revenue historically derived exclusively from collaboration agreements, leading to significant fluctuations and not indicative of future revenue.
• Expectation to continue incurring substantial losses and negative cash flow from operations, and may not achieve or sustain profitability.
• Manufacturing operations of contract manufacturers are subject to laws and regulatory requirements; non-compliance would materially adversely affect the business.
• Dependence on third parties to conduct preclinical studies and clinical trials; failure to fulfill obligations could harm development plans.
• Future depends on proper management of current and future business operations and associated expenses.
• Inability to attract and retain highly qualified technical personnel due to intense competition.
• Loss of any key manager or employee may impair ability to develop products effectively.
• Inflation has increased operating costs and could negatively impact operations.
• Business could be adversely affected by the effects of future health epidemics.
• If the terms of any regulatory approval impose significant restrictions or limitations on use, business, results of operations and financial condition will be negatively affected.
• Even if orphan drug status or Breakthrough Therapy/Fast Track designations are granted, they may not lead to faster development or increase likelihood of marketing approval.
• Ongoing regulatory obligations and continued regulatory review post-approval may result in significant additional expense and penalties for non-compliance.
• Regulatory policies may change, and additional government regulations may be enacted that could prevent, limit, or delay regulatory approval.
• Numerous collaboration and other significant agreements contain complex commercial terms that could result in disputes, litigation, or indemnification liability.
• Inability to obtain intellectual property licenses related to drug candidate development on a commercially reasonable basis.
• Pending patent applications may not issue, or issued patents may be deemed invalid, leading to loss of valuable intellectual property protection.
• Reliance on trade secret protection and other unpatented proprietary rights; loss of such rights could harm the business.
• Product liability lawsuits could result in substantial liabilities.
• Failure to comply with healthcare laws and regulations could lead to enforcement actions and civil or criminal penalties.
• Healthcare legislative or regulatory reform measures may negatively impact business and results of operations.
• Disruptions to the normal functioning of the FDA and other government agencies could hinder their ability to perform important roles.
• Price of common stock has, and may continue to, fluctuate significantly, resulting in substantial losses for investors and litigation.
• Implemented anti-takeover measures make it more difficult to acquire the company, even if beneficial to stockholders.
• Significant reliance on information technology systems and infrastructure; any failure, inadequacy, damage, interruption, compromise, or breach could disrupt operations.
• Changes in tax law could adversely affect business and financial condition.
• Global economic and political conditions may negatively affect the company and magnify certain risks.
• Business could be negatively impacted by corporate citizenship and sustainability matters.
• Natural disasters or other catastrophic events could harm the business.

Future Outlook

The company expects to continue incurring substantial losses and negative cash flows from operations, requiring significant investment in its pipeline. R&D expenses for rezpegaldesleukin are projected to increase in 2025 as activities supporting a Phase 3 trial commence. Development expense for NKTR-0165 is expected to slightly increase, while NKTR-255 development expense is anticipated to decrease. The company believes its current cash and investments, supplemented by recent capital raises, are sufficient to fund operations for at least the next twelve months. Future capital requirements are highly dependent on clinical trial outcomes, milestone payments, and the ability to secure new collaboration partnerships or financing.

Management Comments

• "We continue to make significant investments in building and advancing our pipeline of drug candidates as we believe that this is the best strategy to build long-term shareholder value."
• "We remain on track for a topline data readout from the Phase 2b RESOLVE-AA study in the second half of 2025."
• "We expect research and development expense for rezpegaldesleukin for full year 2025 to increase as compared to 2024, as we commence certain activities to support a Phase 3 trial for this program."
• "We expect general and administrative expense for full year 2025 to be comparable to full year 2024."
• "We estimate that we have working capital to fund our current business plans for at least the next twelve months from the date of filing."

Industry Context

Nektar Therapeutics operates in the highly competitive and rapidly evolving biopharmaceutical industry, specifically focusing on immunotherapy for autoimmune diseases and cancer. The positive Phase 2b data for rezpegaldesleukin in atopic dermatitis, coupled with Fast Track designations, positions it as a potential first-in-class resolution therapeutic in a crowded autoimmune market. The company faces intense competition from other cytokine-based, microbiome-based, and cell therapies. Its strategy of advancing a proprietary pipeline while seeking collaboration agreements is common in the industry to manage high R&D costs and risks. The successful capital raise is critical for a clinical-stage company to extend its runway and fund ongoing trials, especially given the inherent uncertainties and high failure rates in drug development.

Management Changes

Corporate Governance

Legal Proceedings

• A complaint was filed on August 7, 2023, in the United States District Court for the Northern District of California against Eli Lilly and Company, alleging breach of contract and breach of implied covenant of good faith and fair dealing.
• Eli Lilly and Company filed counterclaims alleging breach of specified confidentiality provisions and defamation.
• Both parties have filed motions for summary judgment, with decisions pending.
• A jury trial is calendared to begin on October 27, 2025.
• No liability has been recorded for any litigation matters in the Condensed Consolidated Balance Sheets at June 30, 2025, or December 31, 2024.

Related Party Transactions

• Nektar Therapeutics holds an approximate 20% equity ownership in Gannet BioChem, an affiliate of Ampersand Management LLC, following the sale of its manufacturing facility on December 2, 2024.
• Nektar recorded $0.6 million and $0.8 million as research and development expense for services provided by Gannet BioChem for the three and six months ended June 30, 2025, respectively.
• Nektar recorded $0.5 million and $0.9 million as other income for services provided to Gannet BioChem for the three and six months ended June 30, 2025, respectively.
• As of June 30, 2025, Nektar recorded a net payable of $5.3 million to Gannet BioChem, with $4.6 million in accrued expenses and $0.7 million in accounts payable.

Stakeholder Impact

• **Shareholders:** Experienced significant dilution from the recent public offering and warrant exercise, but the capital raise provides a longer runway for pipeline development. Positive clinical data for rezpegaldesleukin could increase long-term value, while ongoing losses and litigation pose risks.
• **Employees:** The company's strategic reorganization and cost restructuring plans in 2022 and 2023 involved workforce terminations. The current focus on key R&D efforts and the ability to attract and retain talent are critical for future success.
• **Customers/Partners:** The sale of the manufacturing facility means Nektar no longer directly supplies products, but relies on Gannet BioChem for PEG reagents. Collaboration partners are crucial for funding and commercialization of drug candidates.
• **Creditors:** The company's financial position, including its cash reserves and ability to raise capital, impacts its creditworthiness. The recent capital raise improves liquidity.
• **Regulatory Authorities:** The FDA's Fast Track designations for rezpegaldesleukin indicate recognition of its potential, but ongoing regulatory review and compliance are critical for all drug candidates.

Next Steps

• Commence certain activities to support a Phase 3 trial for rezpegaldesleukin in atopic dermatitis.
• Continue IND enabling activities for NKTR-0165.
• Initiate research activities for NKTR-0166.
• Receive topline data from the Phase 2b RESOLVE-AA study in the second half of 2025.
• Receive topline data from the Phase II JAVELIN Bladder Medley study for NKTR-255 in the third quarter of 2025.
• Continue to evaluate additional strategic partnership pathways for the NKTR-255 program.
• Jury trial for the legal proceeding against Eli Lilly and Company is calendared for October 27, 2025.

Key Dates

Recommendation

Nektar Therapeutics presents a mixed but cautiously optimistic picture. The positive Phase 2b clinical data for rezpegaldesleukin in atopic dermatitis, coupled with two FDA Fast Track designations, is a significant de-risking event for a key pipeline asset and suggests potential for future value creation. The successful capital raise post-period, generating over $100 million, substantially strengthens the balance sheet and extends the company's cash runway, addressing immediate liquidity concerns. However, the company continues to incur substantial net losses, and revenue has significantly declined due to the strategic sale of its manufacturing facility. The ongoing litigation with Eli Lilly and the inherent high risks associated with clinical-stage biopharmaceutical development, including competition and regulatory uncertainties, remain significant overhangs. For a seasoned investor, the recent positive clinical and financing news provides a stronger foundation, but the company is still far from profitability and faces considerable execution risk. Therefore, a 'hold' recommendation is appropriate, acknowledging the improved prospects while remaining mindful of the substantial risks.

Keywords

Nektar Therapeutics, Biopharmaceutical, Immunotherapy, Rezpegaldesleukin, NKTR-358, Atopic Dermatitis, Alopecia Areata, Type 1 Diabetes, Clinical Trials, Phase 2b, FDA Fast Track, NKTR-255, Oncology, CAR-T Cell Therapy, IL-15 Agonist, NKTR-0165, TNFR2 Agonism, Autoimmune Diseases, SEC Filing, 10-Q, Financial Results, Capital Raise, Stock Split, Biotech Investment