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Nektar Therapeutics Reports Fourth Quarter and Year-End 2008 Financial Results

SAN CARLOS, Calif., Feb. 24 /PRNewswire-FirstCall/ -- Nektar Therapeutics (Nasdaq: NKTR) today reported its financial results for the fourth quarter and year ended December 31, 2008.

"2008 was a transformational year for Nektar," said Howard W. Robin, President and Chief Executive Officer of Nektar. "Using our unique polymer conjugation chemistry platform, we advanced numerous proprietary drug candidates into clinical and preclinical development. Further, we significantly strengthened our financial position with the sale of pulmonary delivery assets and the buy-back of $100 million of convertible debt at a substantial discount. Nektar is exceptionally well-positioned as we enter 2009."

Fourth Quarter and Year-End 2008 Financial Results

Nektar completed two significant transactions during the fourth quarter of 2008:

- - The company repurchased $100.0 million of its 3.25% convertible subordinated notes for $47.8 million. As a result, the company recognized a gain of $50.1 million in the fourth quarter, net of transaction costs of $1.0 million and accelerated amortization of our deferred financing costs of $1.1 million.

- - Nektar completed the divestiture of certain of its pulmonary delivery assets to Novartis for $115.0 million on December 31, 2008. As a result of the completion of this transaction, the company recognized a gain of $69.6 million in the fourth quarter of 2008.

Cash, cash equivalents, and short-term investments at December 31, 2008 were $379.0 million.

Revenue for the three month period ended December 31, 2008 was $28.4 million compared to revenue of $65.8 million in the fourth quarter of 2007. For the twelve months of 2008, revenue was $90.2 million as compared to $273.0 million in the same period of 2007. This decrease in revenue is primarily the result of lower product manufacturing revenues due to the termination of the company's inhaled insulin collaboration with Pfizer in late 2007.

Research and development expense was $154.4 million in 2008 as compared to $153.6 million for 2007. Included in the $154.4 million of overall research and development spending is approximately $82.0 million of new investments in Nektar preclinical and clinical development programs.

Nektar has also continued to make improvements to its operating efficiencies as compared to a year ago. For the twelve months ended December 31, 2008, the company's general and administrative expense was $51.5 million as compared to $57.3 million for the same period a year ago.

Net income for the quarter ended December 31, 2008 was $76.8 million or $0.83 per share, compared to net income of $39.0 million or $0.42 per share in the fourth quarter of 2007. For the year 2008, the company reported a net loss of $34.3 million or $0.37 per share, compared to a net loss of $32.8 million or $0.36 per share for 2007.

Conference Call to Discuss Fourth Quarter and Year-End 2008 Financial Results

The company also announced that due to scheduling considerations, the conference call to review results will now be held on March 2, 2009 at 2 PM Pacific Time. Details are below:

Howard Robin, president and chief executive officer, and John Nicholson, chief financial officer, will host a conference call beginning at 5:00 p.m. Eastern Time (ET)/2:00 p.m. Pacific Time (PT) on Monday, March 2, 2009.

A live audio-only Webcast of the conference call can be accessed through a link that is posted on the home page and Investor Relations section of the Nektar website:

        To access the conference call, follow these instructions:
        Dial: 800.561.2718 (U.S.); 617.614.3525 (international)
        Participant Passcode: 32041145 (Howard Robin is the host)

An audio replay will also be available shortly after the call and will remain so through March 16, 2009.

        To access the replay, follow these instructions:
        Dial: 888-286-8010 (U.S.); 617-801-6888 (international)
        Participant Passcode: 44161634

About Nektar

Nektar Therapeutics is a biopharmaceutical company developing novel therapeutics based on its PEGylation and advanced polymer conjugate technology platforms. Nektar's technology and drug development expertise have enabled nine approved products for partners, which include leading biopharmaceutical companies. Nektar is also developing a robust pipeline of its own high-value therapeutics that addresses unmet medical needs by leveraging and expanding its technology platforms to improve and enable molecules. For more information on Nektar Therapeutics, please visit

This press release contains forward-looking statements that reflect the company's current views regarding the potential of the company's pipeline of proprietary drug candidates, the value and potential of the company's technology, and the company's financial position. These forward-looking statements involve numerous risks and uncertainties, including but not limited to: (i) the company's proprietary product candidates and those of its collaboration partners are in various stages of clinical development and the risk of failure is high and can unexpectedly occur at any stage of development prior to regulatory approval for numerous reasons including safety and efficacy findings; (ii) the timing or success of the commencement or end of clinical trials and commercial launch of partnered products may be delayed or unsuccessful due to slower than anticipated patient enrollment, drug manufacturing challenges, changing standards of care, clinical trial design, clinical outcomes, or delay or failure in obtaining regulatory approval in one or more important markets; (iii) the company's patent applications for its proprietary or partner product candidates may not issue, patents that have issued may not be enforceable, or intellectual property licenses from third parties may be required in the future; and (iv) the outcome of any future intellectual property or other litigation related to the company's proprietary product candidates or complex commercial agreements. Other important risks and uncertainties are detailed in the company's reports and other filings with the Securities and Exchange Commission, including its most recent Quarterly Report on Form 10-Q and Annual Report on Form 10-K. Actual results could differ materially from the forward-looking statements contained in this press release. The company undertakes no obligation to update forward-looking statements, whether as a result of new information, future events or otherwise.

     Jennifer Ruddock, 650-631-4954
     Nektar Therapeutics

     Susan Noonan, 212-966-3650
     SAN Group

                             NEKTAR THERAPEUTICS
                 (In thousands, except per share information)

                                       Three-Months Ended  Twelve-Months Ended
                                           December 31,       December 31,
                                          2008     2007      2008      2007
       Product sales and royalties       $12,400  $26,702   $41,255  $180,755
       Collaboration and other            15,952   39,071    48,930    92,272
    Total revenue                         28,352   65,773    90,185   273,027

    Operating costs and expenses:
       Cost of goods sold                 10,196   17,387    28,216   137,696
       Other cost of revenue                 -      6,661     6,821     9,821
       Research and development           45,279   39,310   154,417   153,575
       General and administrative         13,835   14,233    51,497    57,282
       Impairment of long lived assets     1,458   28,396     1,458    28,396
       Gain on sale of pulmonary
        assets                           (69,572)     -     (69,572)      -
       Gain on termination of
        agreements, net                      -    (79,178)      -     (79,178)
       Litigation settlement                 -      1,583       -       1,583
    Total operating costs and expenses     1,196   28,392   172,837   309,175

    Income (Loss) from operations         27,156   37,381   (82,652)  (36,148)

    Non-operating income (expense):
      Interest income                      1,917    5,757    12,495    22,201
      Interest expense                    (3,357)  (4,230)  (15,192)  (18,638)
      Other income (expense), net           (425)     944        58     1,133
      Gain on extinguishment of debt      50,149      -      50,149       -
    Total non-operating income            48,284    2,471    47,510     4,696

    Income (Loss) before provision for
     income taxes                         75,440   39,852   (35,142)  (31,452)

    Provision (benefit) for income taxes  (1,342)     809      (806)    1,309

    Net income (loss)                    $76,782  $39,043  $(34,336) $(32,761)

    Basic and diluted net earnings
     (loss) per share                      $0.83    $0.42    $(0.37)   $(0.36)

    Shares used in computing basic and
     diluted net earnings (loss) per
     share (1)                            92,473   92,211    92,407    91,876

    Notes to Consolidated Statements of Operations

    (1)  For the three-months ended December 31, 2008, there were
         approximately 81 dilutive shares which did not change earnings per

                             NEKTAR THERAPEUTICS
                         CONSOLIDATED BALANCE SHEETS
                                (In thousands)

                                                December 31,      December 31,
                                  ASSETS            2008            2007 (1)
    Current assets:
      Cash and cash equivalents                  $155,584           $76,293
      Short-term investments                      223,410           406,060
      Accounts receivable, net of allowance        11,161            21,637
      Inventory                                     9,319            12,187
      Other current assets                          6,746             7,106
         Total current assets                     406,220           523,283

    Property and equipment, net                    73,578           114,420
    Goodwill                                       76,501            78,431
    Other assets                                    4,237             8,969
      Total assets                               $560,536          $725,103


    Current liabilities:
      Accounts payable                            $13,832            $3,589
      Accrued compensation                         11,570            14,680
      Accrued clinical trial expenses              17,622             2,895
      Accrued expenses to contract manufacturers      -              40,444
      Accrued expenses                              9,923             9,551
      Deferred revenue, current portion            10,010            19,620
      Other current liabilities                     5,417             7,313
         Total current liabilities                 68,374            98,092

    Convertible subordinated notes                214,955           315,000
    Capital lease obligations                      20,347            21,632
    Deferred revenue                               55,567            61,349
    Deferred gain                                   5,901             8,680
    Other long-term liabilities                     5,238             5,911
         Total liabilities                        370,382           510,664

    Commitments and contingencies

    Stockholders' equity:
      Preferred stock                                 -                 -
      Common stock                                      9                 9
      Capital in excess of par value            1,312,796         1,302,541
      Accumulated other comprehensive income        1,439             1,643
      Accumulated deficit                      (1,124,090)       (1,089,754)
         Total stockholders' equity               190,154           214,439
      Total liabilities and stockholders'
       equity                                    $560,536          $725,103

    (1) The consolidated balance sheet at December 31, 2007 has been derived
        from the audited financial statements at that date but does not
        include all of the information and notes required by generally
        accepted accounting principles in the United States for complete
        financial statements. Certain 2007 amounts have been reclassified
        between line items to conform with the 2008 presentation.

                             NEKTAR THERAPEUTICS
                                (In thousands)

                                              Twelve-Months Ended December 31,
                                                    2008              2007
    Cash flows provided by (used in) operating
    Net loss                                      $(34,336)         $(32,761)
    Adjustments to reconcile net loss to
     net cash provided by (used in)operating
      Gain on sale of pulmonary assets             (69,572)              -
      Gain on extinguishment of debt               (50,149)              -
       Depreciation and amortization                22,489            29,028
       Stock-based compensation                      9,871            14,779
       Impairment of long lived assets               1,458            28,396
       Other non-cash transactions                   1,251               109
    Changes in assets and liabilities:
       Decrease (increase) in trade accounts
        receivable                                  10,476            24,318
       Decrease (increase) in inventories            2,868             1,503
       Decrease (increase) in other assets           1,166             7,443
       Increase (decrease) in accounts payable       6,181            (3,147)
       Increase (decrease) in accrued
        compensation                                (3,382)              986
       Increase (decrease) in accrued clinical
        trial expenses                              14,727               907
       Increase (decrease) in accrued expenses to
        contract manufacturers                     (40,444)           40,444
       Increase (decrease) in accrued expenses      (1,332)           (5,200)
       Increase (decrease) in deferred revenue     (15,392)           40,863
       Increase (decrease) in other liabilities     (1,662)           (1,366)
    Net cash provided by (used in) operating
     activities                                   (145,782)          146,302

    Cash flows from investing activities:
      Proceeds from sale of pulmonary assets,
       net of transactions cost                    114,831               -
      Investment in Pearl Therapeutics              (4,236)              -
      Purchases of property and equipment          (18,855)          (32,796)
       Maturities of investments                   587,832           591,202
       Sales of investments                         70,396             2,057
       Purchases of investments                   (475,316)         (593,118)
    Net cash provided by (used in) investing
     activities                                    274,652           (32,655)

    Cash flows from financing activities:
       Issuance of common stock, net of issuance
        costs                                          384             3,780
       Payments of loan and capital lease
        obligations                                 (2,368)           (2,895)
       Repayments of convertible subordinated
        notes                                      (47,757)         (102,653)
    Net cash used in financing activities          (49,741)         (101,768)
    Effect of exchange rates on cash and
     cash equivalents                                  162               654
    Net increase in cash and cash equivalents      $79,291           $12,533

    Cash and cash equivalents at beginning of year  76,293            63,760
    Cash and cash equivalents at end of year      $155,584           $76,293

SOURCE Nektar Therapeutics
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