We have written previously about Nektar Therapeutics (Nasdaq: NKTR) as a chronically out-of-favor name despite having a near-term data readout and a plump treasury. In May 2024, we wrote, “A biologic with a novel mechanism targeting a monster indication with provocative proof of concept data? The fact that Nektar continues to trade at a discount to its treasury, reflecting no value for its pipeline, speaks volumes about investor apathy towards the company……We recognize that after a spectacular fall from its $18b perch, Nektar is not a well-liked company by investors. However, if investors could erase their memories and look at Nektar, specifically REZPEG, objectively, we believe there are reasons for optimism.” Investors haven’t shared our optimism around Nektar, with the stock hitting an all-time low of $0.65 last month. Then Adam May ( (@A_May_MD) came to the rescue with a thorough and insightful piece on his enthusiasm for Nektar.
Adam laid out a compelling thesis on why Nektar’s lead asset, REZPEG (rezpegaldesleukin), could succeed in the ongoing Phase 2b atopic dermatitis study (AD). He provides an excellent explanation of why REZPEG doesn’t need Dupixent-like efficacy (33% improvement in EASI-75 scores vs. placebo) to warrant advancing into Phase 3, referencing other development-stage AD assets with unique mechanisms of action that are being advanced into Phase 3 with EASI-75 placebo-adjusted scores as low as 19%.
He also provides insight into the potential value for Nektar’s royalty on dapirolizumab (being developed by UCB and Biogen) after Royalty Pharma (Nasdaq: RPRX) recently gave Biogen (Nasdaq: BIIB) $250mm for a mid-single digit royalty in an earlier-stage antibody, liftilimab, in development for the same indication as dapirolizumab, systemic lupus erythematosus. He states, “Since NKTR owns low single digit royalties on Dapi, we can now roughly conclude that NKTR’s Dapi royalty should have a new present value somewhere around half of what was just paid for Lifti, at around $125mm.” The potential value of Nektar’s dapirolizumab royalty arguably adds to the downside protection already provided by the company’s strong $275mm treasury (our estimate for YE2024 cash).
Nektar expects to have Phase 2b topline data for REZPEG in AD in 2Q2025. For those with a stomach for binary clinical readouts, this is a high-risk/high-reward scenario with asymmetric upside potential. Positive data from this Phase 2b study could multiply the stock, and although negative data undoubtedly has a downside, investors will have some insulation from the company’s strong treasury and potentially dapirolizumab. To fully appreciate the range of outcomes from this Phase 2b study, we highly recommend investors take the time to read Adam May’s piece.
Speaking Of Chronically Out of Favor….
Despite having a near-term data readout and a plump treasury, Ventyx Biosciences (Nasdaq: VTYX) is another chronically out-of-favor name. In last week’s FY2024 press release, the company reported a cash balance of $253mm while reiterating that it will have topline data from a small Phase 2 Parkinson’s study in 2Q2025 and two other Phase 2 readouts in 2H2025. However, what caught our eye from the press release was the ordering of the company’s assets and milestones. In previous quarterly updates and presentations, the company has always placed its CNS-penetrant NLRP3 inhibitor, VTX3232, and its impending Parkinson’s readout at the top of its pipeline update. Meanwhile, VTX2735, the company’s peripheral NLRP3 inhibitor and its Phase 2 recurrent pericarditis readout, always received lower billing.
In Ventyx’s FY2024 press release, VTX2735 had been moved to the top of the pipeline update. It is equally curious that VTX3232’s Parkinson’s disease program, the most imminent of the clinical readouts, has been shuffled to the bottom of the update. These changes are also reflected in the company’s corporate presentation.
Could Be Trivial, Yet Still Curious
This pipeline reprioritization may be trivial, but there’s no question that this decision was made consciously and with a purpose. The shuffling of VTX3232 for Parkinson’s to the bottom of the three 2025 readouts, given it is the most imminent, is particularly curious. This is a small, ten-patient, open-label study. The company should already know how VTX3232 is trending across this biomarker-focused study. Our initial reaction to seeing the pipeline shuffle was to question whether the biomarker data for VTX3232 were perhaps trending unfavorably. Yet, the quote from Ventyx’s CEO Raju Mohan in the press release, “We are on track to complete the Phase 2 biomarker trial of VTX3232 in Parkinson’s disease in Q2 2025 and have initiated planning for the next phase of development,” would suggest VTX3232 is thus far performing as expected.
We then wondered whether the pipeline reprioritization had any read-through for the Sanofi relationship. Recall Sanofi has a right of first negotiation for VTX3232, and CEO Mohan has previously stated that Sanofi’s interest lies predominantly in Parkinson’s and less so on obesity/cardiometabolic. Does the shuffling of Parkinson’s to the bottom of the catalyst list, while mentioning the planning for the next development phase, reflect that Sanofi’s interest in VTX3232 has diminished or that Ventyx is more seriously contemplating advancing the asset independently?
The Heart Of The Matter
Maybe this shuffle isn’t as much about VTX3232 as it is about VTX2735. After the Sanofi investment in September of last year, it is evident that Ventyx feels VTX3232 is better suited for a partner to develop, leaving the company to focus on VTX2735. Recurrent pericarditis is an indication a small company can manage on its own. Furthermore, the mechanism of anti-interleukin-1α/β, which VTX2735 indirectly targets, for the treatment of recurrent pericarditis, has been validated with the FDA approval of Kiniksa Pharmaceuticals’ (Nasdaq: KNSA) ARCALYST. Perhaps Ventyx is trying to build the investor narrative around VTX2735, expecting it to be its lead asset by the end of the year.
We are likely overanalyzing the importance of the pecking order of press release subheaders and pipeline charts. If asked, we suspect CEO Mohan will dismiss this as inconsequential. However, anyone who has worked inside a biotech company knows these decisions are made with a purpose. Investors are left to speculate on what the company may be trying to tell us…….
Called It
Last week, as part of its FY2024 update, Xenon Pharmaceuticals (Nasdaq: XENE) announced it would be initiating a pivotal program for its Kv7 potassium channel opener, azetukalner (formerly XEN1101), in bipolar depression. Bipolar depression becomes the fourth pivotal program Xenon is pursuing with azetukalner, joining focal epilepsy, primary generalized tonic-clonic seizures, and major depressive disorder. The first pivotal program to readout will be focal epilepsy in 2H2025.
On Its earning call, analysts politely questioned Xenon’s rationale for pursuing bipolar depression when Biohaven (Nasdaq: BHVN) was pursuing bipolar mania with its Kv7 opener, BHV-7000. Xenon’s CEO Ian Mortimer answered by stating, “…I think you’re referring to a competitive company that’s doing a Kv7 in bipolar mania. We think bipolar depression is the stronger scientific and mechanistic rationale…” Xenon’s Chief Medical Officer Chris Kenney added, “When I look at the difference between mania versus depression in these patients, there is an open-label extension study that was done with another Kv7 drug where we felt that the results were pretty lukewarm in terms of its improvement of mania. So I think that the story for depression in bipolar is far more compelling than the story in mania.” On Monday, in its FY2024 update, Biohaven announced that BHV-7000 failed to improve mania symptoms in its Phase 2/3 bipolar mania study. Xenon knows ion channels. They called it.