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It hasn’t exactly been a stellar couple of months for shares and options on Nektar Therapeutics (NKTR). The stock, which I hold in my Jubak Picks portfolio, is down 23.1% since it hit a high of $108.44 on March 8. The August 17, 2018 call options with a strike of $90 I bought on February 25, 2018 in my Volatility Portfolio are now down 39%. The stock looks like it may have stabilized at $77/$78 and it has edged higher to close at $83.40 today, May 15, after a gain of 3.05%, but the recent “progress” has been “limping” to anyone used to the gains this stock racked up in 2017.

I think what you need to profit from Nektar shares or options now is some understanding of why the stock has struggled over the last two months. And, armed with that understanding, some patience as it takes longer than expected for positive catalysts to kick in.

First, the stock has been weak while financial markets worried that the delay in submitting the new drug application for NKTR181, the company’s non-addictive opioid pain killer, meant that there was something wrong. Expectations were that the application build be submitted to the U.S. Food and Drug Administration in April–and that didn’t happen. In its first quarter conference call on May 10, however, Nektar confirmed that there company would submit NKTR181 to the FDA in May. The company has used the extra time to fine tune the application using guidance from several pre-submission meetings with the agency. The news in the conference call has decidedly helped the stock–which is up 8.5% since May 10. And the submission of the new drug application will be another step in reducing skepticism in the market after the April delay. I’d like to remind readers that Nektar retains all the rights to this new drug and since the company is sitting on more than $2 billion in cash after its deal with Bristol-Myers Squibb for NKTR214, Nektar has the cash to take NKTR181 to market.  That would give shareholders a big stake in a potentially huge drug opportunity. A submission of a new drug application for NKTR181 would suggest potential approval by the end of 2018.

Second, about NKTR214. After the recent failure of Incyte’s (INCY) combo trials with Merck’s Keytruda cancer drug, the market has ceded the race to Keytruda–which means that it has devalued Nektar’s combination trials with Bristol-Myers’ Opdivo–and has downgraded drug candidates in the immune-oncology space in general. In think both reactions are overdone. While Keytruda has built up an impressive lead in the immune-oncology space–which is one reason I added Merck to my Dividend Portfolio recently–I think there’s still good opportunity for a second drug, potentially Opdivo, to carve out a large franchise in specific cancers. And I think that the approach of fighting cancers by boosting the ability of the body’s immune system to fight the cancer virus remains entirely valid–it is obviously a difficult technology to turn into a useful drug. But the idea that Keytruda has found the one immune system tweak that will work best for all cancers is, well, I’d call it absurd. We’ll know a lot more about Nektar’s immuno-oncology drug candidates after the ASCO (American Society of Clinical Oncology) meeting on June 1-5. ASCO releases the abstracts that will be presented at the meeting over the next couple of weeks (abstracts are due on May 16. Right now Nektar is likely to present the results of new expanded trials on NKTR214 (an additional 130-150 patients over a longer period of time.) Nektar has indicated that the additional patients will be focused on melanoma, kidney, lung, and bladder cancer. The company and partner Bristol-Myers will also reveal the designs for Phase 3 trials for kidney cancer and melanoma for a combination of NKTR214 and Opdivo with the trials scheduled to begin in the third quarter. It’s possible that the companies will also release news on plans to trial the combination in lung cancer at the conference. Bristol-Myers has committed to a total of 22 trials in 15,000 patients in nine tumor types for the NKTR214/Opdivo combination. That’s a huge commitment and would certainly indicate that Bristol-Myers believes that the combination has best in class potential for major cancers.

The news that Nektar has filed its new drug application for the NKTR181 pain killer is a likely near-term catalyst as is the ASCO meeting in early June. I think Nektar will repay your patience here.

Full disclosure: I own shares and options on Nektar in my personal portfolios.