SEC Filing | Nektar Therapeutics

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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


☐	TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 0-24006

NEKTAR THERAPEUTICS

(Exact name of registrant as specified in its charter)

Delaware

94-3134940

(State or other jurisdiction of
incorporation or organization)

(IRS Employer
Identification No.)

455 Mission Bay Boulevard South

San Francisco, California 94158

(Address of principal executive offices)

415-482-5300

(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value	NKTR	NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of outstanding shares of the registrant’s Common Stock, $0.0001 par value, was 190,770,566 on October 31, 2023.

NEKTAR THERAPEUTICS

INDEX


	Summary of Risks	4

PART I: FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements — Unaudited:	6
	Condensed Consolidated Balance Sheets — September 30, 2023 and December 31, 2022	6
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and 2022	7
	Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2023 and 2022	8
	Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2023 and 2022	9
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022	10
	Notes to Condensed Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37

PART II: OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	61
Item 3.	Defaults Upon Senior Securities	61
Item 4.	Mine Safety Disclosures	61
Item 5.	Other Information	61
Item 6.	Exhibits	62
Signatures		64

Forward-Looking Statements

This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are “forward-looking statements” for purposes of this Quarterly Report on Form 10-Q, including any projections of market size, earnings, revenue, milestone payments, royalties, sales or other financial items, any statements of the plans and objectives of management for future operations (including, but not limited to, preclinical development, clinical trials and manufacturing), any statements related to our financial condition and future working capital needs, any statements related to our strategic reorganization and cost restructuring plans, any statements regarding potential future financing alternatives, any statements concerning proposed drug candidates and our future research and development plans, any statements regarding the timing for the start or end of clinical trials or submission of regulatory approval filings, any statements regarding future economic conditions or performance, any statements regarding the initiation, formation, or success of any collaboration arrangements, commercialization activities and product sales levels and future payments that may come due to us under these arrangements, any statements regarding our plans and objectives to initiate or continue clinical trials, any statements related to potential, anticipated, or ongoing litigation and any statements of assumptions underlying any of the foregoing. In some cases, forward-looking statements can be identified by the use of terminology such as “believe,” “may,” “will,” “expects,” “plans,” “anticipates,” “estimates,” “potential” or “continue,” or the negative thereof or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, such expectations or any of the forward-looking statements may prove to be incorrect and actual results could differ materially from those projected or assumed in the forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to inherent risks and uncertainties, including, but not limited to, the risk factors set forth in Part I, Item 1A “Risk Factors” below and for the reasons described elsewhere in this Quarterly Report on Form 10-Q. All forward-looking statements and reasons why results may differ included in this report are made as of the date hereof and we do not intend to update any forward-looking statements except as required by law or applicable regulations. Except where the context otherwise requires, in this Quarterly Report on Form 10-Q, the “Company,” “Nektar,” “we,” “us,” and “our” refer to Nektar Therapeutics, a Delaware corporation, and, where appropriate, its subsidiaries.

Trademarks

The Nektar brand and product names, including but not limited to Nektar®, contained in this document are trademarks and registered trademarks of Nektar Therapeutics in the United States (U.S.) and certain other countries. This document also contains references to trademarks and service marks of other companies that are the property of their respective owners.

Summary of Risks

We are providing the following cautionary discussion of risk factors, uncertainties and assumptions that we believe are relevant to our business. These are factors that, individually or in the aggregate, we think could cause our actual results to differ materially from expected and historical results and our forward-looking statements. We note these factors for investors as permitted by Section 21E of the Exchange Act and Section 27A of the Securities Act. Investors in Nektar Therapeutics should carefully consider the risks described below before making an investment decision. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider this section to be a complete discussion of all potential risks or uncertainties that may substantially impact our business. Moreover, we operate in a competitive and rapidly changing environment. New factors emerge from time to time and it is not possible to predict the impact of all of these factors on our business, financial condition or results of operations.

Risks to our business are more fully described below in Item 1A in this Form 10-Q, which risks include, among others:

•

Risks Related to our Research and Development Efforts:

clinical drug development is a lengthy and uncertain process and we may not be able to generate and develop successful drug candidates for commercial use;

we are highly dependent on the success of rezpegaldesleukin (previously referred to as NKTR-358) and NKTR-255 and our business will be significantly harmed if either rezpegaldesleukin or NKTR-255 do not continue to advance in clinical studies;

the outcomes from competitive immunotherapy clinical trials, and the discovery and development of new therapies could have a material and adverse impact on the value of our pipeline;

significant competition for our polymer conjugate chemistry technology platforms and our products and drug candidates could make our technologies, drug products or drug candidates obsolete or uncompetitive;

preliminary and interim data from our clinical studies are subject to audit and verification procedures that could result in material changes in the final data and may change as more patient data become available; and

clinical trials for any of our drug candidates could be delayed for a variety of reasons.

•

Risks Related to our Financial Condition and Capital Requirements:

there is no guarantee that our strategic reorganization plan and cost restructuring plans will achieve their intended benefits and we may need to undertake additional cost-saving measures;

we have substantial future capital requirements and there is a risk we may not have access to sufficient capital to meet our current business plan;

a significant source of our revenue has been derived from our collaboration agreements, and if we are unable to establish and maintain collaboration partnerships with attractive commercial terms, including significant development milestones and research and development cost-sharing, our business, results of operations and financial condition could suffer; and

we expect to continue to incur substantial net losses from operations and may not achieve or sustain profitability in the future.

•

Risks Related to our Collaboration Partners:

we are highly dependent on advancing rezpegaldesleukin in clinical trials, and while we believe we currently have the materials that are necessary for us to continue clinical development of rezpegaldesleukin, our ability to perform important development activities will be significantly harmed if Eli Lilly and Company fails to continue to cooperate with us in the transfer of rezpegaldesleukin;

we may rely on academic and private non-academic institutions to conduct investigator-sponsored clinical studies or trials of our product candidates and any failure by the investigator-sponsor to meet its obligations with respect to the clinical development of our product candidates may delay or impair our ability to obtain regulatory approval or commercialize for our product candidates; and

we depend on third parties to conduct laboratory experiments, preclinical studies and clinical trials for our biologic candidates and any failure of those parties to fulfill their obligations according to our instructions and protocol standards could harm our research and development plans and adversely affect our business.

•

Risks Related to Supply and Manufacturing:

if we or our contract manufacturers are not able to manufacture drugs or drug substances in sufficient quantities that meet applicable quality standards, our business, financial condition and results of operations could be harmed; and

we purchase some of the starting material for drugs and drug candidates from a single source or a limited number of suppliers, and the partial or complete loss of one of these suppliers could cause delays, loss of revenue and contract liability.

•

Risks Related to Intellectual Property, Litigation and Regulatory Concerns:

we or our partners may not obtain regulatory approval for our drug candidates on a timely basis, or at all;

patents may not issue from our patent applications for our drug candidates, patents that have issued may not be enforceable, or additional intellectual property licenses from third parties may be required, which may not be available to us on commercially reasonable terms; and

from time to time, we are involved in legal proceedings and may incur substantial litigation costs and liabilities that could adversely affect our business, financial condition and results of operations.

In addition to the above-mentioned risks, our business is subject to a number of additional risks faced by businesses generally.

PART I: FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements—Unaudited:

NEKTAR THERAPEUTICS

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)

(Unaudited)


	September 30, 2023			December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	64,921		$	88,227
Short-term investments		307,737			416,750
Accounts receivable		2,204			5,981
Inventory, net		15,130			19,202
Other current assets		9,033			15,808
Total current assets		399,025			545,968
Property, plant and equipment, net		19,949			32,451
Operating lease right-of-use assets		18,747			53,435
Goodwill		—			76,501
Other assets		4,523			2,245
Total assets	$	442,244		$	710,600
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	3,288		$	12,980
Accrued expenses		29,729			36,557
Operating lease liabilities, current portion		19,095			18,667
Total current liabilities		52,112			68,204
Operating lease liabilities, less current portion		102,193			112,829
Liabilities related to the sales of future royalties, net		123,610			155,378
Other long-term liabilities		4,961			7,551
Total liabilities		282,876			343,962
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.0001 par value; 10,000 shares authorized; no shares designated or outstanding at September 30, 2023 or December 31, 2022, respectively		—			—
Common stock, $0.0001 par value; 300,000 shares authorized; 190,771 shares and 188,560 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively		19			19
Capital in excess of par value		3,600,871			3,574,719
Accumulated other comprehensive loss		(6,352	)		(6,907	)
Accumulated deficit		(3,435,170	)		(3,201,193	)
Total stockholders’ equity		159,368			366,638
Total liabilities and stockholders’ equity	$	442,244		$	710,600

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

NEKTAR THERAPEUTICS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share information)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Revenue:
Product sales	$	5,822		$	4,969		$	15,198		$	15,969
Non-cash royalty revenue related to the sales of future royalties		18,167			18,342			50,860			52,167
License, collaboration and other revenue		155			314			179			1,896
Total revenue		24,144			23,625			66,237			70,032
Operating costs and expenses:
Cost of goods sold		12,431			4,972			26,485			15,402
Research and development		24,070			33,590			84,220			183,583
General and administrative		21,147			22,534			60,097			70,394
Restructuring, impairment, and costs of terminated program		11,360			16,830			49,107			124,350
Impairment of goodwill		—			—			76,501			—
Total operating costs and expenses		69,008			77,926			296,410			393,729
Loss from operations		(44,864	)		(54,301	)		(230,173	)		(323,697	)
Non-operating income (expense):
Change in fair value of development derivative liability		—			—			—			33,427
Non-cash interest expense on liabilities related to the sales of future royalties		(5,910	)		(6,953	)		(18,467	)		(21,710	)
Interest income and other income (expense), net		4,876			2,050			14,492			3,541
Total non-operating income (expense), net		(1,034	)		(4,903	)		(3,975	)		15,258
Loss before provision for income taxes		(45,898	)		(59,204	)		(234,148	)		(308,439	)
Provision (benefit) for income taxes		(61	)		(155	)		(171	)		71
Net loss	$	(45,837	)	$	(59,049	)	$	(233,977	)	$	(308,510	)

Basic and diluted net loss per share	$	(0.24	)	$	(0.31	)	$	(1.23	)	$	(1.65	)
Weighted average shares outstanding used in computing basic and diluted net loss per share		190,406			187,641			189,651			186,767

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

NEKTAR THERAPEUTICS

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Net loss	$	(45,837	)	$	(59,049	)	$	(233,977	)	$	(308,510	)
Other comprehensive income (loss):
Net unrealized gain (loss) on available-for-sale securities		196			490			1,527			(2,589	)
Net foreign currency translation loss		(98	)		(468	)		(972	)		(1,423	)
Other comprehensive income (loss)		98			22			555			(4,012	)
Comprehensive loss	$	(45,739	)	$	(59,027	)	$	(233,422	)	$	(312,522	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

NEKTAR THERAPEUTICS

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)


	Common Shares		Par Value		Capital in Excess of Par Value		Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders’ Equity
Balance at December 31, 2021		185,468	$	19	$	3,516,641	$	(4,157	)	$	(2,832,995	)	$	679,508
Shares issued under equity compensation plans		806		—		188		—			—			188
Stock-based compensation		—		—		20,961		—			—			20,961
Comprehensive income (loss)		—		—		—		(2,375	)		(90,393	)		(92,768	)
Balance at March 31, 2022		186,274	$	19	$	3,537,790	$	(6,532	)	$	(2,923,388	)	$	607,889
Shares issued under equity compensation plans		1,131		—		467		—			—			467
Stock-based compensation		—		—		11,103		—			—			11,103
Comprehensive income (loss)		—		—				(1,659	)		(159,068	)		(160,727	)
Balance at June 30, 2022		187,405	$	19	$	3,549,360	$	(8,191	)	$	(3,082,456	)	$	458,732
Shares issued under equity compensation plans		549		—		—		—			—			—
Stock-based compensation		—		—		12,518		—			—			12,518
Comprehensive income (loss)		—		—				22			(59,049	)		(59,027	)
Balance at September 30, 2022		187,954	$	19	$	3,561,878	$	(8,169	)	$	(3,141,505	)	$	412,223


	Common Shares		Par Value		Capital in Excess of Par Value		Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders’ Equity
Balance at December 31, 2022		188,560	$	19	$	3,574,719	$	(6,907	)	$	(3,201,193	)	$	366,638
Shares issued under equity compensation plans		675		—		—		—			—			—
Stock-based compensation		—		—		10,019		—			—			10,019
Comprehensive income (loss)		—		—		—		1,226			(137,018	)		(135,792	)
Balance at March 31, 2023		189,235	$	19	$	3,584,738	$	(5,681	)	$	(3,338,211	)	$	240,865
Shares issued under equity compensation plans		884		—		18		—			—			18
Stock-based compensation		—		—		7,966		—			—			7,966
Comprehensive income (loss)		—		—		—		(769	)		(51,122	)		(51,891	)
Balance at June 30, 2023		190,119	$	19	$	3,592,722	$	(6,450	)	$	(3,389,333	)	$	196,958
Shares issued under equity compensation plans		652		—		—		—			—			—
Stock-based compensation		—		—		8,149		—			—			8,149
Comprehensive income (loss)		—		—		—		98			(45,837	)		(45,739	)
Balance at September 30, 2023		190,771	$	19	$	3,600,871	$	(6,352	)	$	(3,435,170	)	$	159,368

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

NEKTAR THERAPEUTICS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine Months Ended September 30,
	2023			2022
Cash flows from operating activities:
Net loss	$	(233,977	)	$	(308,510	)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash royalty revenue related to the sales of future royalties		(50,860	)		(52,167	)
Non-cash interest expense on liabilities related to the sales of future royalties		18,467			21,710
Change in fair value of development derivative liability		—			(33,427	)
Non-cash research and development expense		—			4,951
Stock-based compensation		26,134			44,582
Depreciation and amortization		6,163			9,848
Deferred income tax expense		(1,854	)		—
Impairment of right-of-use assets and property, plant and equipment		36,628			58,521
Impairment of goodwill		76,501			—
Provision for inventory obsolescence		4,444			—
Amortization of premiums (discounts), net and other non-cash transactions		(12,137	)		(372	)
Changes in operating assets and liabilities:
Accounts receivable		3,777			10,960
Inventory		(372	)		(3,256	)
Operating leases, net		(6,078	)		(1,423	)
Other assets		4,450			4,861
Accounts payable		(9,328	)		(4,184	)
Accrued expenses		(7,517	)		1,602
Net cash used in operating activities		(145,559	)		(246,304	)
Cash flows from investing activities:
Purchases of investments		(372,821	)		(295,439	)
Maturities of investments		494,385			626,424
Purchases of property, plant and equipment		(628	)		(5,164	)
Sale of property, plant and equipment		1,245			—
Net cash provided by investing activities		122,181			325,821
Cash flows from financing activities:
Proceeds from shares issued under equity compensation plans		18			655
Cash receipts from development derivative liability		—			750
Net cash provided by financing activities		18			1,405
Effect of foreign exchange rates on cash and cash equivalents		54			(382	)
Net increase (decrease) in cash and cash equivalents		(23,306	)		80,540
Cash and cash equivalents at beginning of period		88,227			25,218
Cash and cash equivalents at end of period	$	64,921		$	105,758
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	2,656		$	—

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