Promising Biotech Selling Way Under Cash Value
Contributed Opinion

We did very well with Talaris as a takeover target. My next pick here is Nkarta Inc. (NKTX:NASDAQ).

Recent Price: US$3.20

Shares Outstanding: 47 million

NKTX is a takeover target, selling below cash value as well as a potential short squeeze. As of September 30, 2023, Nkarta had cash, cash equivalents, restricted cash, and investments of US$278.4 million. So, the stock is trading well below the cash value of about $5.90.

A colleague of mine analyzed the institutional share ownership. He summarized that new owners bought 20% of the company in October, and around 10% of the company was shorted to them. He figures that 80% of the stock is unlikely to sell. With 14% of the company shorted, there's a high likelihood of a short squeeze to a cash value of around US$5.65/share, when we consider some cash burn since September 30.

It is also a takeover target for a company like Vertex Pharmaceuticals Inc. (VRTX:NASDAQ) because both Vertex and Nkarta are partnered and use the same CRISPR Therapeutics, Inc. (CRSP: NASDAQ) technology, a type of cell therapy:

• Vertex at US$407 per share has a market cap of US$105 billion
• CRISPR at US$62 has a market cap of US$5 billion
• Nkarta at US$3.00 has a market cap of only $141 million

CRISPR's gene therapy treatment got its first FDA approval. Vertex has popped higher after news on December 8 that Vertex Pharmaceuticals and CRISPR Therapeutics announced that the U.S. Food and Drug Administration (FDA) has approved CASGEVY™ (exagamglogene autotemcel [exa-cel]), a CRISPR/Cas9 genome-edited cell therapy, for the treatment of sickle cell disease (SCD) in patients 12 years and older with recurrent vaso-occlusive crises (VOCs).

This approval means that for the first time, approximately 16,000 patients with SCD may be eligible for a durable one-time therapy that offers the potential of a functional cure for their disease by eliminating severe VOCs and hospitalizations caused by severe VOCs.

"CASGEVY's approval by the FDA is momentous: it is the first CRISPR-based gene-editing therapy to be approved in the U.S. As importantly, CASGEVY is a first-in-class treatment that offers the potential of a one-time transformative therapy for eligible patients with sickle cell disease," said Reshma Kewalramani, M.D., Chief Executive Officer and President of Vertex. "I want to convey my deepest gratitude to the patients and investigators whose trust in this program paved the way for this landmark approval."

"When our company was founded, we had a vision to translate CRISPR technology into multiple breakthrough therapies. So, this U.S. approval of the first-ever medicine using CRISPR gene editing is breathtaking and a truly humbling moment for me personally and for the whole organization," said Samarth Kulkarni, Ph.D., Chairman and CEO of CRISPR Therapeutics.

CRISPR Therapeutics (Nasdaq: CRSP) is a biopharmaceutical company focused on creating transformative gene-based medicines for serious diseases. In early December, they provided an update on its immuno-oncology pipeline of CRISPR/Cas9 gene-edited allogeneic chimeric antigen receptor (CAR) T cell product candidates. And, more important expand into Autoimmune Diseases.

Nkarta is also partnered with CRISPR, but their treatment is at an earlier stage of the FDA approval process. Nkarta is a clinical-stage biotechnology company advancing the development of allogeneic, off-the-shelf natural killer (NK) cell therapies. By combining its cell expansion and cryopreservation platform with proprietary cell engineering technologies and CRISPR-based genome engineering capabilities, Nkarta is building a pipeline of future cell therapies engineered for deep therapeutic activity and intended for broad access in the outpatient treatment setting.

The company has been focusing its NKX101 therapy on acute myeloid leukemia (AML). In June 2023, Nkarta reported updated clinical data from its Phase 1 clinical trial evaluating NKX101 in patients with relapsed or refractory (r/r) AML. In patients that received NKX101 after LD comprising fludarabine and cytarabine (Flu/Ara-C), 4 of 6 achieved CR/CRi. Flu/Ara-C LD is expected to be the basis of NKX101 development moving forward. Nkarta plans to present a poster at the American Society of Hematology annual meeting in December 2023 with follow-up data on the six patients from the June 2023 report that received NKX101 after Flu/Ara-C LD.

In the short term, the stock is overbought and approaching the first resistance area. However, this hopefully provides liquidity for buyers.

Stock will most often move up to close previous gaps on the way down, and that is what I expect NKTX will do and move up between US$4.50 and US$5.00. We could do much better if there is a takeover offer and/or positive news on their therapy treatment.

Important Disclosures:

1. [Ron Struthers]: I, or members of my immediate household or family, own securities of: [Nkarta Inc.]. I determined which companies would be included in this article based on my research and understanding of the sector.
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