Nektar Therapeutics (NASDAQ:NKTR) announced data last week that could become a breakthrough in the largest healthcare market in the U.S. – but how much is this “breakthrough” worth to you? The company has a proven technology and is looking to own the pain management market by removing the risk of addiction.
A Future Leader In A Massive Market
On June 19, Nektar Therapeutics (NASDAQ:NKTR) announced that NKTR-181 rated similarly to a placebo in “drug liking” and “feeling high” scores compared to oxycodone in its human abuse liability study. NKTR-181 is a non-addictive opioid painkiller that is currently being tested in Phase 2 trials.
The word “opioid” is almost always linked to abuse and/or addiction, as opioid drug overdose rates have more than tripled since 1990. In fact, opioid abuse is the fastest growing drug problem in the U.S., with more than 12 million people reported using painkillers for non-medical purposes.
Nektar Therapeutics (NASDAQ:NKTR)’s NKTR-181 is an opioid, but uses Nektar’s technology to change the delivery of the drug. For example, peak levels of concentration are reached in just 11 minutes with oxycodone, allowing for easy abuse with excessive dosing.
With NKTR-181, it takes 2.9 hours to reach peak levels, and the molecular structure of the drug itself has been redesigned to be “tamper-resistant,” meaning it’s unlikely that abusers would find a way to circumvent its slow entry.
For the last five years companies have attempted various methods to fight the war on prescription drug abuse. This is a massive market in every sense of the word. Hydrocodone is the most prescribed drug in the U.S., with more than 130 million scripts annually, and oxycodone also ranks in the top 20 with more than 50 million scripts. In total, the world market for pain management is estimated at $35 billion; very close to that of the diabetes market.
Currently, Oxycontin dominates this market in revenue, with $3.5 billion in annual sales, and that’s growing at a double digit rate. However, this “pain market” also consists of drugs that were developed to aid in the addiction market, which was created due to the pain market. Reckitt Benckiser Group Plc (LON:RB)’s drug Suboxone is an opioid antagonist, or a partial opioid, that blocks the same receptors as oxy/hydrocodone but with a lower dosage that prevents the “high” feeling.
Suboxone was introduced to the market in 2002 and now generates $1.5 billion in annual revenue, growing at 30% year-over-year. Since its introduction, Reckitt Benckiser Group Plc (LON:RB)’s stock has risen 375%. However, its entire health segment is Suboxone, which makes up more than 15% of its total sales and 40% of its profits.
More Than Just Pain Management
Drugs such as Suboxone and Methadone only exist because of the viscous cycle of use, abuse, and recover that plague so many who take opioid medications. Nektar Therapeutics (NASDAQ:NKTR)’s drug could leave a major footprint in the industry, as a drug that helps patients eliminate their pain, but removes the risk associated with addiction. If we use the $3.5 billion in annual revenue from OxyContin to project peak sales, then Nektar Therapeutics (NASDAQ:NKTR), with a $1.2 billion market capitalization, could produce significant gains.