Executive Summary / Key Takeaways

• Nektar Therapeutics is strategically focused on advancing its immunology pipeline, particularly the first-in-class regulatory T cell (Treg) stimulator, rezpegaldesleukin (REZPEG), aiming to address the underlying immune imbalance in autoimmune diseases.
• REZPEG is currently in two pivotal Phase 2b studies for moderate-to-severe atopic dermatitis (topline induction data expected June 2025) and severe-to-very severe alopecia areata (topline data expected December 2025), with a new Phase 2 study in Type 1 diabetes initiated via a TrialNet collaboration.
• The company's differentiated technology, including proprietary PEGylation and novel antibody design, underpins its pipeline, offering potential advantages like selective immune modulation and improved pharmacokinetics compared to existing or competing therapies.
• Financially, Nektar is managing its resources through a period of transition, marked by the strategic sale of its manufacturing facility, which bolstered its cash position to approximately $220.7 million as of March 31, 2025, extending its cash runway into Q4 2026 to fund key data milestones.
• Key factors for investors to watch are the upcoming REZPEG Phase 2b data readouts, progress in the NKTR-0165 IND-enabling studies, potential new collaboration agreements, and the outcome of the ongoing litigation with Eli Lilly (LLY).

Setting the Scene: Nektar's Evolution and Strategic Pivot

Nektar Therapeutics operates within the dynamic and highly competitive biopharmaceutical landscape, specifically targeting areas of significant unmet medical need in immunology and oncology. The company's journey has evolved from a technology licensing model, leveraging its proprietary PEGylation platform to enable partners' products, to a clinical-stage entity focused on developing its own pipeline of novel immunomodulatory agents. This strategic pivot, solidified through recent restructuring efforts, centers on applying a deep understanding of immunology to create therapies that selectively fine-tune immune responses.

At the heart of Nektar's current strategy is the belief that modulating key immune pathways can offer differentiated and potentially curative approaches to complex diseases. This is particularly evident in their focus on regulatory T cells (Tregs), which play a critical role in maintaining immune tolerance and preventing autoimmune attacks. The company's technological foundation, built over decades, provides a crucial competitive edge in designing molecules with tailored pharmacological properties.

Technological Edge: Engineering Immune Balance

Nektar's differentiated technology is a cornerstone of its pipeline, particularly in its lead immunology programs. The company has extensive expertise in polymer conjugation (PEGylation) and novel protein/antibody engineering, which it applies to create drug candidates with optimized profiles.

REZPEG (rezpegaldesleukin), a lead asset, exemplifies this approach. It is designed as a selective IL-2 receptor agonist that preferentially stimulates the proliferation and function of Tregs. Unlike native IL-2, which broadly activates various immune cells including effector T cells and NK cells, REZPEG is engineered to bias signaling towards the IL-2 receptor complex predominantly expressed on Tregs. This selective activation is intended to restore immune balance without causing widespread immune activation, a key differentiator from earlier, less selective IL-2 approaches. While specific quantifiable data on the degree of Treg selectivity versus other cell types is not publicly detailed, the stated mechanism aims to achieve this preferential effect. The PEGylation technology is also noted for its role in optimizing the pharmacokinetic profile, potentially enabling less frequent dosing, although specific half-life extension metrics compared to non-PEGylated versions were not provided. The goal is to provide a therapy that not only treats symptoms but addresses the underlying immune dysregulation.

Building on its Treg expertise, Nektar is also advancing NKTR-0165, a novel TNFR2 agonist antibody. TNFR2 is highly expressed on Tregs and is implicated in maintaining Treg function, particularly in non-lymphoid tissues. Nektar's preclinical data for NKTR-0165 highlights its high specificity for signaling through TNFR2 on Tregs. A notable technological aspect mentioned is its ability to signal through the multimeric TNFR2 receptor as a single-arm monovalent antibody, which management describes as a unique attribute for a TNFR2 agonist antibody. This design aims to potentiate Treg function and lineage stability, potentially offering a complementary or alternative approach to REZPEG for various autoimmune conditions. The stated goal for this program is to complete IND-enabling studies and submit an IND in 2025. Furthermore, Nektar is leveraging this TNFR2 agonist specificity to design bispecific molecules (e.g., NKTR-0166), pairing TNFR2 agonism with other antibody targets to create novel multi-mechanistic therapies, with NKTR-0166 advancing into preclinical studies.

For investors, this technological differentiation represents Nektar's competitive moat. The ability to engineer selective immune modulators with potentially improved safety and dosing profiles could translate into significant market advantages if clinical success is achieved. The focus on Treg biology and novel targets like TNFR2 positions Nektar in areas with high unmet need and potential for first-in-class therapies, which could command premium pricing and capture meaningful market share against less targeted or less durable existing treatments.

Competitive Landscape: Carving a Niche in a Crowded Field

Nektar operates within a highly competitive biopharmaceutical market, facing established players with extensive resources and pipelines. Key competitors in the immunotherapy space include large pharmaceutical companies like Bristol-Myers Squibb (BMY), Merck (MRK), Amgen (AMGN), AstraZeneca (AZN), and Pfizer (PFE), all of whom have significant market share in oncology and immunology.

In the autoimmune space, specifically atopic dermatitis and alopecia areata, Nektar's REZPEG faces competition from approved therapies and other agents in development. For atopic dermatitis, Dupixent (Sanofi (SNY)/Regeneron (REGN)) is a leading biologic, but management notes that approximately half of patients treated with Dupixent do not benefit or become refractory, and disease often returns upon discontinuation. JAK inhibitors are also used, but carry safety risks and lack durability. Nektar positions REZPEG as a potential alternative mechanism, a Treg therapy that addresses the underlying immune imbalance, aiming for durable responses and infrequent dosing, which could differentiate it from IL-13/IL-31 inhibitors and JAKs.

In alopecia areata, JAK inhibitors are currently approved, but their lack of durability and high relapse rates upon discontinuation present a significant unmet need. Nektar believes REZPEG's Treg mechanism could offer a new treatment paradigm focused on long-term remission.

While large competitors like BMY and MRK dominate the oncology immunotherapy market with blockbuster PD-1 inhibitors (Opdivo, Keytruda), Nektar's NKTR-255 (IL-15 agonist) is being explored as a combination agent to enhance existing therapies like CAR-T cells and checkpoint inhibitors. Data suggesting NKTR-255 can improve CAR-T efficacy and lymphocyte counts with checkpoint inhibitors highlights a potential niche for combination strategies, rather than direct head-to-head competition with PD-1s as monotherapies.

Financially, Nektar's scale is significantly smaller than these large pharmaceutical companies. Comparing TTM financial ratios, Nektar's Gross Profit Margin (74.61%) is competitive with peers like BMY (71%) and AZN (81%), suggesting efficiency in its remaining revenue streams post-facility sale. However, its Operating Profit Margin (-131.01%) and Net Profit Margin (-152.49%) reflect its clinical-stage status and high R&D investment, contrasting sharply with the profitability of established players (BMY Operating Margin ~12%, Net Margin ~-19%; MRK Operating Margin ~35%, Net Margin ~27%).

Nektar's Debt/Equity Ratio (7.30) is higher than most peers (BMY ~3.13, MRK ~0.80, AZN ~0.74, PFE ~0.72, AMGN ~10.23), indicating higher financial leverage relative to equity, although its cash position provides near-term liquidity.

Nektar's competitive strategy is not to outspend or out-scale these giants, but to leverage its technological expertise to develop differentiated, first-in-class mechanisms that address specific biological pathways implicated in disease. Success hinges on demonstrating clear clinical superiority or differentiation in specific patient populations, which could make its assets attractive for collaboration or carve out a valuable market niche. The sale of the manufacturing facility and focus on R&D is a strategic response to this competitive reality, aiming to concentrate resources on value-driving pipeline milestones.

Financial Performance and Liquidity: Managing Through Transition

Nektar's financial performance in recent periods reflects a company in transition, streamlining operations and focusing resources on its core pipeline. For the three months ended March 31, 2025, total revenue was $10.46 million, a significant decrease from $21.64 million in the same period of 2024. This decline is primarily attributable to the cessation of product sales following the sale of the Huntsville manufacturing facility in December 2024. Revenue in Q1 2025 consisted solely of non-cash royalty revenue related to prior sales of future royalties.

Operating expenses totaled $54.99 million in Q1 2025, down slightly from $57.07 million in Q1 2024. Research and development expense increased to $30.48 million from $27.41 million, driven by increased activity in the rezpegaldesleukin Phase 2b studies. General and administrative expense also rose to $24.35 million from $20.15 million, mainly due to higher legal costs, partially offset by lower facilities and stock-based compensation expenses. The company recorded a non-cash loss from equity method investment of $4.46 million in Q1 2025, related to its equity stake in Gannet BioChem post-facility sale.

The net loss for Q1 2025 was $50.88 million, compared to $36.80 million in Q1 2024. This increased loss reflects the lower revenue base and higher operating expenses, partially offset by lower non-cash interest expense and higher interest income from investments in the prior year period.

Liquidity remains a critical focus. As of March 31, 2025, Nektar held approximately $220.7 million in cash and investments in marketable securities. This represents a decrease from $269.1 million at December 31, 2024, primarily due to cash used in operating activities ($49.05 million in Q1 2025). The sale of the Huntsville facility in December 2024 provided $64.7 million in cash (net of transaction costs) and an equity interest, significantly bolstering the cash position entering 2025. Other financing activities in 2024 included the issuance of a $30 million pre-funded warrant and a $15 million payment from HCR. The company also has access to potential additional capital through a $300 million shelf registration statement and a $75 million ATM sales agreement, though no shares had been issued under these as of March 31, 2025.

Management believes its current cash and investment position is sufficient to fund operations through at least the next twelve months from the Q1 2025 filing date (May 9, 2025) and expects the cash runway to extend into the fourth quarter of 2026. This runway is crucial for reaching key pipeline milestones. However, the company acknowledges the need for additional capital to fully fund its R&D activities and may seek further financing or collaboration agreements, which could be dilutive.

Strategic Initiatives and Outlook: Focused Execution Towards Milestones

Nektar's strategy is clearly defined: focus resources on the most promising immunology assets and drive them towards value-inflecting clinical data readouts. The outlook is heavily tied to the success of the rezpegaldesleukin (REZPEG) program.

The REZOLVE-AD Phase 2b study in moderate-to-severe atopic dermatitis is a top priority. Enrollment was completed in January 2025, and the company anticipates reporting topline data from the 16-week induction period in June 2025. This readout is critical for establishing a dose for potential Phase 3 studies and demonstrating efficacy in a large, controlled trial following promising Phase 1b results. Data from the 36-week maintenance period is expected in early 2026, which will provide insights into the durability and optimal dosing frequency for long-term control. Management has implemented specific operational measures in this trial, such as geographic enrollment mix and stringent screening criteria, to mitigate the risk of high placebo response rates observed in some other AD studies.

The REZOLVE-AA Phase 2b study in severe-to-very severe alopecia areata is also progressing, with enrollment completed in February 2025. Topline data from the 36-week treatment period is expected in December 2025. This study will evaluate REZPEG's potential to restore hair growth and, importantly, assess for long-term remission after treatment cessation, a key differentiator sought against existing JAK inhibitor therapies.

A new strategic collaboration with TrialNet, announced in February 2025, will evaluate REZPEG in a Phase 2 study in new onset stage 3 Type 1 diabetes. This collaboration is significant as TrialNet will conduct and fund the study, allowing Nektar to explore a new indication with its lead asset while retaining full rights. Initiation of this study is expected later in 2025.

Beyond REZPEG, the preclinical NKTR-0165 program is a key part of the future pipeline. Management expects to complete IND-enabling studies and submit an IND in 2025, potentially positioning this novel TNFR2 agonist for clinical trials in autoimmune diseases like multiple sclerosis or ulcerative colitis. The advancement of the NKTR-0166 bispecific program into preclinical studies also signals continued investment in early-stage innovation.

For the full year 2025, Nektar provides specific financial guidance:

• Revenue: Approximately $40 million (primarily non-cash royalties).
• R&D Expense: $110 million to $120 million (consistent with 2024 levels, reflecting ongoing Phase 2b trials).
• G&A Expense: $60 million to $65 million (expected to decrease from 2024).
• Non-cash Interest Expense: Approximately $20 million.
• Loss from Equity Method Investment: Approximately $10 million (non-cash).
• Cash and Investments at year-end 2025: Approximately $100 million.
• Cash Runway: Extends into Q4 2026.

This guidance underscores the company's focused spending on R&D to reach critical data milestones while managing G&A costs. The projected year-end cash balance and runway are sufficient to support the current plan through the anticipated REZPEG readouts, which are the primary catalysts for potential value creation and future financing opportunities.

Risks and Challenges: Navigating the Path Forward

Despite a clear strategic focus and upcoming milestones, Nektar faces significant risks inherent in the biopharmaceutical industry.

• Clinical Trial Success: The most prominent risk is the outcome of the ongoing REZPEG Phase 2b studies. While Phase 1b data was promising, results from earlier trials do not guarantee success in later, larger studies. Clinical trials can fail at any stage due to efficacy, safety, or other factors. Failure of either the AD or AA study would severely impact the investment thesis and future prospects.
• Regulatory Approval: Even with positive clinical data, there is no guarantee of timely regulatory approval. The FDA and other agencies have substantial discretion and may require additional studies or impose significant restrictions on approved products.
• Competition: The markets Nektar targets are highly competitive. Success depends on demonstrating meaningful differentiation and clinical benefit compared to existing and emerging therapies. Competitors with greater resources could advance their programs more quickly or achieve superior outcomes.
• Capital Requirements: While the current cash runway extends into Q4 2026, Nektar will require significant additional capital to fund potential Phase 3 trials for REZPEG or advance other pipeline candidates through later-stage development. There is no guarantee that financing will be available on commercially reasonable terms, which could lead to delays or cessation of programs.
• Reliance on Third Parties: Nektar relies heavily on CROs, CMOs (including Gannet BioChem for PEG reagents), and collaboration partners to conduct studies, manufacture supplies, and potentially commercialize products. Failure by these third parties to perform their obligations could cause significant delays or harm the business.
• Litigation: The ongoing litigation with Eli Lilly introduces uncertainty and potential costs, although Nektar believes it has a strong case and does not expect to owe Lilly money.
• Nasdaq Listing: The company received a Nasdaq deficiency notice regarding its minimum bid price. Failure to regain compliance could result in delisting, impacting stock liquidity and the ability to raise capital.
• Stock Price Volatility: The stock price is highly volatile, influenced by clinical data, regulatory news, financing activities, and general market conditions, which could result in substantial losses for investors.

Conclusion

Nektar Therapeutics is at a pivotal juncture, having streamlined its operations and focused its resources on a core immunology pipeline led by rezpegaldesleukin. The company's differentiated technology, particularly its expertise in selective immune modulation via Treg stimulation and novel antibody design, provides a foundation for potential first-in-class therapies in areas of high unmet need like atopic dermatitis, alopecia areata, and Type 1 diabetes.

The strategic divestiture of the manufacturing facility has strengthened the balance sheet, providing a cash runway into late 2026 that is expected to fund the company through critical Phase 2b data readouts for REZPEG in 2025. These upcoming milestones represent the primary catalysts for validating the investment thesis and unlocking future value. While the competitive landscape is challenging and significant risks remain, particularly concerning clinical trial success and future capital requirements, Nektar's focused strategy and unique technological approach position it to potentially deliver differentiated therapies. Investors should closely monitor the REZPEG data readouts, progress of the NKTR-0165 program, and the company's ability to secure strategic partnerships to support the advancement of its pipeline.