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Topline Summary
Nkarta (NASDAQ:NKTX) is a biotech company developing cell therapies for cancer and autoimmune disease. Their direct programs are focused on harnessing the theoretical potential of targeted natural killer (NK) cells that naturally help the body fight tumors and microbes in the body. They have a strong cash pool and a commitment to reduce costs, but this is still a long way off from realizing any kind of potential.
Pipeline Overview
NKX101
This NK chimeric antigen receptor [CAR] therapy is targeted toward ligands of the NKG2D receptor. These ligands are normally not highly expressed, but under conditions of inflammation or cancerous transformation can be upregulated.
Of particular interest for this target is acute myeloid leukemia (AML), which has been shown to be governed at least in part by NKG2D signaling. A phase 1 investigate in patients with relapsed or refractory AML is ongoing, with a trial update in June indicating some very early signals of activity for NKX101. This investigate is also including patients with higher-risk MDS, which can direct to development of AML.
NKX019
This NK CAR therapy is directed against CD19, an important target in B-cell malignancies appreciate non-Hodgkin’s lymphoma. This is currently the subject of an early-stage investigate enrolling patients with different B-cell malignancies, although no results have been divulged to date.
NKX019 has also been cleared in an IND as of October to begin human studies in patients with lupus nephritis, taking them in an important non-oncology direction. However, it will be quite some time before we learn about the fortunes of this project.
Financial Overview
At the end of Q3 2023, NKTX held $281.2 million in total current assets, $38.2 million of which was held in cash and equivalents, with another $237.4 in short-term investments. Meanwhile, their loss from operations was $29.2 million for the quarter, on par with the same time period in 2022. After interest income, their net loss for the quarter was $25.6 million.
At this burn rate, the company has assets and cash to fund operations for 10 to 11 quarters, taking them well into 2026 before cash should become a serious concern, assuming they’re able to keep growth of their expenses relatively under control. Considering their announced cost control measures, this might be a reasonable expectation.
It is worth noting that the company currently has a shelf registration authorizing the sale of up to $350 million in shares from time to time, including a potential offering of up to $120 million.
Strengths and Risks
Being frank and honest, there’s not quite a lot to sink your teeth into with NKTX just yet. With studies in phase 1, no trial data coming up at ASH, and nothing really driving the stock aside from news from other NK cell companies appreciate Fate Therapeutics having setbacks and slow progress themselves. Despite hearing more and more about this approach, we seem to be in perpetual early days with this NK cell CAR T cell therapies.
Granted, NKTX has a lot of cash to continue to hold on until they achieve some kind of solidifying catalyst event. So if ever there was a time to consider this as a “ground floor” opportunity, this is it. But you should know and respect that this comes with a large risk. The tech is unproven, the main target they’re exploiting is unproven, and it might be a long time before we know. Hype from others succeeding could easily trickle into this stock, as well, but so can setbacks that have little to do with their approach.
Bottom Line Summary
NKTX presents an interesting opportunity, but for me it’s one to watch and not to buy into at this time. I would expect that any stake you take right now is going to encounter substantial dilution, with no clear indication as to whether the valuation will boost enough to overcome that loss of equity.
That said, as I write this, the company sits at a market cap of $133 million. It can go lower than this, but I also wouldn’t stake a bet on that, either. I feel the strongest play for NKTX at this time is to watch and expect. I would need to see some kind of clearer clinical data before I’d feel confident in even considering a position, but I would also not advocate that you bail out of your stake if you have one at this time.
