PART I: FINANCIAL INFORMATION This section provides an overview of the company's financial performance, position, and management's analysis for the reported period Condensed Consolidated Financial Statements This section presents the unaudited financial statements, highlighting a significant revenue decrease and shift to net loss primarily due to a non-recurring prior-year payment Condensed Consolidated Balance Sheets This section details the company's financial position, including assets, liabilities, and equity at specific reporting dates Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $85,424 | $194,905 | | Total current assets | $1,596,817 | $1,437,687 | | Total assets | $2,099,653 | $2,150,172 | | Liabilities & Equity | | | | Total current liabilities | $113,370 | $82,002 | | Total liabilities | $542,498 | $432,597 | | Total stockholders' equity | $1,557,155 | $1,717,575 | | Total liabilities and stockholders' equity | $2,099,653 | $2,150,172 | - Total assets slightly decreased from $2.15 billion at year-end 2018 to $2.10 billion at June 30, 201912 - Total stockholders' equity decreased from $1.72 billion to $1.56 billion over the same period, primarily due to the net loss incurred during the first half of 201912 Condensed Consolidated Statements of Operations This section outlines the company's revenues, expenses, and net income or loss over specific reporting periods Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $23,315 | $1,087,717 | $51,537 | $1,125,735 | | Research and development | $106,686 | $88,334 | $225,149 | $187,758 | | Income (loss) from operations | ($110,970) | $973,600 | ($231,657) | $886,861 | | Net income (loss) | ($109,909) | $971,460 | ($228,421) | $875,668 | | Diluted EPS | ($0.63) | $5.33 | ($1.31) | $4.91 | - Total revenue for the three and six months ended June 30, 2019, decreased by 98% and 95% respectively, compared to the same periods in 2018, primarily due to the recognition of $1.06 billion in license and collaboration revenue from the BMS agreement in Q2 201815141 - The company reported a net loss of $109.9 million for Q2 2019, a stark contrast to the net income of $971.5 million in Q2 2018, reflecting the impact of the non-recurring BMS revenue15 Condensed Consolidated Statements of Cash Flows This section presents the cash inflows and outflows from operating, investing, and financing activities Cash Flow Summary for Six Months Ended June 30 (in thousands) | Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | ($134,817) | $907,176 | | Net cash provided by (used in) investing activities | $13,152 | ($846,205) | | Net cash provided by financing activities | $12,200 | $845,439 | | Net increase (decrease) in cash and cash equivalents | ($109,481) | $906,363 | - Net cash used in operating activities was $134.8 million for the first six months of 2019, compared to net cash provided by operating activities of $907.2 million in the same period of 2018, with the 2018 figure primarily driven by upfront payments from BMS22165 - Financing activities in 2018 included $790.2 million from the issuance of common stock to BMS, which did not recur in 201922168 Notes to Condensed Consolidated Financial Statements These notes provide detailed disclosures on accounting policies, significant agreements, and legal matters impacting the financial statements - The company adopted the new lease accounting standard ASC 842 on January 1, 2019, resulting in the recognition of $83.5 million in right-of-use assets and $96.2 million in lease liabilities on the balance sheet3839 - A securities class action complaint was filed against the company and certain executives in October 2018, alleging misrepresentations about the efficacy and safety of NKTR-214, with no estimable potential loss or accrual recorded80 - The collaboration with BMS for NKTR-214, effective April 2018, included a $1.0 billion upfront payment and an $850.0 million equity investment, with Nektar eligible for up to $1.4 billion in milestones and sharing profits/losses (65% Nektar / 35% BMS)9092 - The collaboration with Eli Lilly for NKTR-358 included a $150.0 million upfront payment in 2017, with Nektar eligible for up to $250.0 million in additional development milestones and sharing Phase 2 development costs (25% Nektar / 75% Lilly)97 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's strategic focus on key pipeline assets, explaining the financial performance drivers and liquidity position Overview This section outlines the company's strategic priorities and key drug development programs - The company's strategic focus is on advancing its pipeline of new investigational drugs for cancer (bempegaldesleukin/NKTR-214), autoimmune disease (NKTR-358), and chronic pain (NKTR-181)119 - A broad clinical development program for NKTR-214 is being executed in collaboration with BMS, with shared development costs capped at $125 million annually for Nektar120 - An NDA for NKTR-181 was filed with a PDUFA target action date of August 29, 2019, though a postponed advisory committee meeting may delay the decision126 Results of Operations This section analyzes the company's revenue and operating expenses, explaining period-over-period changes Revenue Breakdown - Six Months Ended June 30 (in thousands) | Revenue Source | 2019 | 2018 | % Change | | :--- | :--- | :--- | :--- | | Product sales | $8,744 | $12,158 | (28)% | | Royalty revenue | $18,733 | $19,639 | (5)% | | Non-cash royalty revenue | $17,321 | $15,965 | 8% | | License, collaboration and other | $6,739 | $1,077,973 | (99)% | | Total revenue | $51,537 | $1,125,735 | (95)% | Operating Expenses - Six Months Ended June 30 (in thousands) | Expense Category | 2019 | 2018 | % Change | | :--- | :--- | :--- | :--- | | Cost of goods sold | $10,458 | $12,168 | (14)% | | Research and development | $225,149 | $187,758 | 20% | | General and administrative | $47,587 | $38,948 | 22% | - The 99% decrease in License, collaboration and other revenue for the six months ended June 30, 2019, is primarily due to the recognition of $1.06 billion from the BMS Collaboration Agreement in 2018141 - Research and development expense increased by 20% for the first half of 2019 compared to 2018, driven by clinical development of NKTR-214, NKTR-358, and NKTR-262, and preclinical activities for NKTR-255148149 Liquidity and Capital Resources This section discusses the company's cash position, debt, and ability to fund its operations and business plans - As of June 30, 2019, the company had approximately $1.8 billion in cash and investments in marketable securities133159 - The company has outstanding debt of $250.0 million in principal of senior secured notes due in October 2020133159 - Management estimates that current working capital is sufficient to fund business plans for at least the next twelve months133160 - Cash used in operating activities for the first six months of 2019 was $134.8 million, a significant shift from the $907.2 million cash provided by operations in the same period of 2018, which included the BMS upfront payment164165 Quantitative and Qualitative Disclosures About Market Risk This section addresses the company's exposure to market risks, such as interest rate and foreign currency fluctuations - There were no material changes to the company's market risks at June 30, 2019, compared to those reported at the end of fiscal year 2018173 Controls and Procedures This section reports on the effectiveness of the company's disclosure controls and internal control over financial reporting - Based on an evaluation as of June 30, 2019, the CEO and CFO concluded that the company's disclosure controls and procedures were effective175 - No material changes to the company's internal control over financial reporting were identified during the three months ended June 30, 2019176 PART II: OTHER INFORMATION This section covers legal proceedings, risk factors, equity security sales, and other miscellaneous disclosures Legal Proceedings This section details ongoing legal actions, including securities class action and shareholder derivative complaints, alleging misrepresentations about a key drug candidate - The company and certain executives were named in a putative securities class action complaint and shareholder derivative complaints concerning alleged misrepresentations about the efficacy and safety of NKTR-21480180 Risk Factors This section outlines significant risks, primarily focusing on drug development success, regulatory approvals, manufacturing, competition, and reliance on collaborations - The company's future success is highly dependent on the successful development, regulatory approval, and commercialization of its lead immuno-oncology candidate, NKTR-214182 - Drug development is identified as a long, inherently uncertain process with a high risk of failure at every stage, where clinical study delays are common and can jeopardize commercialization183187 - The NDA for NKTR-181 is subject to substantial uncertainty, including evolving FDA standards for approving new opioids and the potential for a delayed PDUFA decision198 - The company relies on contract manufacturers and single-source suppliers for critical materials, where any failure or interruption could delay clinical studies and harm the business191193 - The company's results depend significantly on the ability of its collaboration partners (e.g., BMS, Lilly, AstraZeneca) to successfully develop and market drugs, over which Nektar has little control203 Unregistered Sales of Equity Securities and Use of Proceeds This section reports on any unregistered sales or repurchases of the company's equity securities during the period - There were no unregistered sales of equity securities or company repurchases of its stock in the three months ended June 30, 2019257 Defaults Upon Senior Securities This section confirms whether the company has experienced any defaults on its senior securities - None258 Mine Safety Disclosures This section indicates the applicability of mine safety disclosures to the company's operations - Not applicable259 Other Information This section provides any additional material information not covered elsewhere in the report - None260 Exhibits This section lists all documents filed as exhibits, including certifications and XBRL data - The report includes required exhibits, such as officer certifications (Rule 13a-14(a), Section 1350) and Inline XBRL documents261262
Nektar(NKTR) - 2019 Q2 - Quarterly Report