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Morningstar | Nektar's Recent Data in Bladder Cancer Doesn't Change Our Skeptical Outlook for NKTR-214

Nektar released Phase 1/2 study data of its lead immuno-oncology candidate NKTR-214 (now termed bempegaldesleukin) in combination with Bristol's Opdivo in frontline bladder cancer at the Genitourinary Cancers Symposium on Feb. 15. We don’t see anything in the results that alter our long-term outlook for the combination, and we're maintaining our fair value estimate of $39 per share and no-moat rating. Our valuation factors in a 50% likelihood of NKTR-214 and Opdivo approval in bladder cancer, with a slightly better opportunity in patients with low PD-L1 biomarker expression.

Similar to the combination's previous results in melanoma, the overall response rate (ORR) decreased from earlier studies, with 48% (13 out of 27 patients) compared with 60% (6 out of 10 patients) reported last June. The data still comes from a small number of patients, with only 27 of 41 patients (65%) deemed efficacy-evaluable for the readout. Of these 27 patients, 48% had a complete or partial response following treatment (including three unconfirmed partial responses). The results were fairly consistent regardless of PD-L1 expression, with a 45% (50%) ORR in PD-L1-negative (positive) patients.

While cross-trial comparisons rarely paint the whole picture, a 45%-plus ORR would crush previous late-stage results from PD-L1 inhibitors, especially in PD-L1-negative patients. For example, in Merck's Keynote-052 Phase 3 study, confirmed ORR was 29% in all comers but 21% (47.3%) in PD-L1-negative (positive) patients. If NKTR-214 and Opdivo's efficacy deteriorates in late stage trials, there may still be room for the combination in PD-L1-negative patients, where the bar is lower. However, we would have to see a clear benefit of the combination over checkpoint inhibitors alone. We're still unconvinced of how much NKTR-214 is adding in efficacy compared to Opdivo alone. At this point, we're still modeling equal likelihood of approval in PD-L1-negative and -positive patients for NKTR-214 and Opdivo.

Overall, safety seems to look good for the combination in frontline bladder cancer. Serious side effects were in line with previous studies, with about 15% of patients experiencing at least one serious side effect. Discontinuations were also fairly in line, with 10% (4 of 41 patients) patients stopping the trial due to side effects.