Nektar(US:NKTR)2023-02-28 21:48Financial Performance - Total revenue for the year ended December 31, 2022, was $92.1 million, a decrease of 10% from $101.9 million in 2021[226]. - Product sales decreased by 14% to $20.3 million in 2022 from $23.7 million in 2021, attributed to decreased demand from collaboration partners[226][228]. - Non-cash royalty revenue related to future royalties was $69.8 million in 2022, down 10% from $77.7 million in 2021[226]. - License, collaboration, and other revenue increased over 100% to $1.9 million in 2022 from $436,000 in 2021[226]. - Revenue from the United States was $9.8 million in 2022, a slight decrease from $10.1 million in 2021, while revenue from the rest of the world was $82.2 million, down from $91.8 million[232]. Expenses and Costs - Cost of goods sold decreased by $3,262,000 (13%) from $24,897,000 in 2021 to $21,635,000 in 2022[233]. - Product gross margin remained negative at (6%) for 2022, worsening from (5%) in 2021[233]. - Research and development expense decreased by $181,946,000 (45%) from $400,269,000 in 2021 to $218,323,000 in 2022[237]. - General and administrative expense decreased by $30,511,000 (25%) from $122,844,000 in 2021 to $92,333,000 in 2022[245]. - Restructuring, impairment, and other costs of terminated program amounted to $135,930,000, representing an increase of over 100% compared to 2021[247]. Cash and Investments - The company had approximately $505.0 million in cash and investments in marketable securities as of December 31, 2022, providing liquidity for ongoing operations[224]. - As of December 31, 2022, the company held $427.7 million of available-for-sale investments, with an average time to maturity of four months[287]. - A hypothetical 50 basis point increase in interest rates would result in an approximate $0.6 million decrease, less than 1%, in the fair value of available-for-sale securities at December 31, 2022[286]. - The company has significant cash and investment balances in India, subjecting it to foreign currency exchange risk until repatriation[288]. - The company has no credit facility or committed capital sources, and future financing depends on the success of drug development programs[262]. Drug Development and Collaborations - The drug candidate rezpegaldesleukin is in Phase 2 development, with a recent study showing improvements in SLEDAI-2K scores compared to placebo, despite not meeting the primary endpoint[218]. - NKTR-255 is being studied in multiple Phase 1 and Phase 2/3 trials, targeting various cancers and enhancing responses to existing therapies[220][221]. - The company plans to submit an Investigational New Drug (IND) filing for a lead TNFR2 agonist antibody candidate in 2024, targeting IND readiness by the end of 2023[222]. - The collaboration with Eli Lilly for rezpegaldesleukin includes potential milestone payments of up to $250.0 million and a royalty rate of up to the low twenties percent based on global product sales[217]. - The company received a $150,000,000 upfront payment from Lilly for the collaboration agreement for rezpegaldesleukin[260]. Impairment and Restructuring - The company assessed impairment of long-lived assets, determining that if anticipated undiscounted net cash flows are less than the carrying value, an impairment charge is recorded[273]. - The company recorded impairment charges based on estimates of sublease income, which may vary significantly based on market conditions[275]. - The company has implemented a restructuring plan to reduce its workforce by approximately 70%, from about 735 to 225 employees[247]. - The company has consolidated its San Francisco operations and is seeking to sublease vacated spaces, impacting its impairment evaluations[274]. Tax and Cash Flow - The provision for income taxes increased to $3,215,000 in 2022 from $557,000 in 2021, primarily due to taxes associated with closing research and development operations in India[257]. - Cash flows used in operating activities totaled $304,000,000 in 2022, down from $412,700,000 in 2021[266]. - The company expects cash flows used in operating activities to decrease in 2023 compared to 2022 due to no further costs for the wind down of the bempegaldesleukin program[267]. Revenue Recognition and Financial Instruments - The company recognizes revenue from collaboration agreements based on the nature of the payments and the involvement of collaboration partners[278]. - The company does not utilize derivative financial instruments to manage foreign exchange rate risks, exposing it to typical international operation risks[291]. - The company has not included milestones from Lilly in the transaction price due to significant uncertainties involved with clinical development and regulatory approval[279]. - Non-cash royalty revenue for the 2012 Purchase and Sale Agreement decreased due to lower net sales of CIMZIA and MIRCERA[252]. - Non-cash interest expense on liabilities related to future royalties decreased by 39% to $(28,911,000) in 2022 from $(47,313,000) in 2021[251].