NKTX Stock Forecast: Nkarta Inc Stock Soars on Positive Phase I Trials of Cancer Therapies
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Biopharmaceutical companies has had a prime time in last couple of years, and various small biotech companies have suddenly come to fore after conducting positive clinical trials for treatment against Covid-19. But good old enemy of human race, Cancer, has always posed challenges and various biotech companies have achieved reasonable success in Cancer treatment in last decade, and still whenever any company announces positive clinical trial results for cancer treatment, it remains in buzz.
In this article we will discuss about Nkarta Inc from the investment perspective, looking into the positive and negative aspects of the company and concluding whether it is ripe time to include NKTX stock into portfolio or not.
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- Positive Clinical trials of Cancer Therapies- Nkarta Inc shares skyrocketed more than 100% on Monday, April 25th from $7.77 (closing on 22nd April 2022) to $18.72 (closing on 25th April 2022) on the backdrop of Phase I clinical trials of its candidates NKX101 and NKX019 to develop natural cell killers to fight against cancer. NKX101 aims to treat blood cancer acute myeloid leukemia and NKX019 fights against refractory diffuse large B cell lymphoma (DLBCL). The good thing is that 60% of the patients experienced complete response in case of NKX101 and 50% in NKX019. The figure of 50% and 60% is very important as acute myeloid leukemia has stopped responding to other treatments and even with the best chemotherapy only 12% to 18% patients experience a complete response. That means that NKX101 should get the required authorization from regulators as and when Nkarta applies for it and that will help company to commercialize the treatment in the near future. On 25th April 2022, Nkarta Inc shares caught attention and 58 million shares changed hands on a single day. To put things in perspective, average trading volume for the stock is only around 0.3 million.
- The next big thing is capital for future progress – Biotech industry is a capital intensive industry as it requires lot of cash to finance upcoming clinical trials for treatments under considerations. The same is the case with Nkarta Inc and it is going to need a big fortune before commercializing recently tested candidates NKX101 and NKX019. Luckily, management has been proactive on this front as they announced a new public offering of $13.3 million shares of total worth around $200 million on 25th April (same day of clinical trials) which closed on 28th April. Also, the good thing at this juncture for Nkarta Inc is that it has only 46.3 million shares outstanding after counting new public offer which is way less than other small cap biotech companies, for example Inovio pharmaceuticals has 217.40 million shares. That means that if it requires cash in future, it can further dilute its shares and raise the cash and it will not threaten the current shareholders value as much as it would otherwise had done.
Also Read: Moderna Stock Forecast
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NKTX Stock Forecast: Bear Case
- A loss making company with miniscule revenue- Investors and analysts many times get carried away by the positive clinical trial results from a particular company. But the balance sheet is a mirror to past and current performance of the company keeping aside the buzz created. For Nkarta Inc, the bad thing is that it has very poor balance sheet. Its income has been in negative territory since its inception and to add to it, it has reported zero revenue in last two years 2020 and 2021. The net reported income is $-91.36 million in 2020 and $-86.08 million in 2021. Although, the good thing is that it has debt of only $12.4 million which is well within the appetite of the company and its cash flow is enough to engulf that. Also, the debt to asset ratio is only 0.05 signifying reduction in debt and increase in asset value of the company in last couple of years. The company has taken care of debt but has zero revenue and it may take a while to commercialize the upcoming NKX101 and NKX019, meaning the situation is going to remain same for couple of years down the line. So Nkarta Inc has bright prospects in future, but the current situation is worrisome.
- High Dependence on NKX101 and NKX019 – A healthy pipeline of the treatments signifies the strength of a biotech company. For Nkarta Inc, the spotlight is on NKX101 and NKX019, but apart from it, there is nothing significant in the company’s pipeline for the upcoming years. Its official website shows two more candidates CD70 and NK+T, but both are in early stages of discovery and it has long way to even reach to the stage of clinical trials. That signifies that it is highly dependent on the success of its recently tested candidates NKX101 and NKX019 and if in any case it gets stuck in authorization from regulators, the shares are doomed. Also it will not require the rejection by regulators, a couple of months of non-activity on this front by management will create panic among the investors which will press sell button in that situation more often than not.
NKTX Stock Forecast: Conclusion
Nkarta Inc has a novel approach to cancer treatment. After a healthy donor donates blood, immune cells from it called natural killer (NK) are edited by the company to further enhance cancer fighting properties. This leads to the creation of cell banks, which can be used by cancer patients for multi dose and multicycle treatment. Nkarta Inc is right on money by positive clinical Phase I trials and simultaneously announcing public offer to fund the further process of authorization.
But keeping the bright prospects of these two treatments aside, there is nothing good about the company and it is a loss making with zero revenue company for last couple of years. Also, there is scarcity of treatments in pipeline to safeguard the company against the failure of two hyped candidates.
In other words, it is very risky biotech stock bet. It will require number of years for revenue generation from NKX101 and NKX019 and it is only meant for those seeking a very speculative bet.
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