200 million eczema sufferers. A leading drug that fails more than half of them. A cancer-causing alternative that still projects $5 billion in sales. And a tiny 60-person San Francisco biotech that may have cracked the code — with a Nobel Prize-validated mechanism the market is somehow pricing at near-zero. This week, Krzysztof goes full deep-dive on Nectar Therapeutics ($NKTR), while Luke — self-confessed biotech skeptic — has the options chain open and his wallet ready.
📊 Why the world’s most common skin disease has NO good cure yet — and why that $50B market opportunity is hiding in plain sight
💊 The cancer-warning drug that still projects $3–5B in revenue: what that tells you about how desperate patients really are
🎓 Res-peg explained without the jargon: the Nobel Prize-backed immune reset mechanism that makes $NKTR different from every other AD drug on the market
💀 The 33% single-day crash that Monkey calls ‘borderline irrational’ — and why buying that dip may have been one of the most logical trades of the year
🎯 Bull, base, and bear: a $240–$320 price target vs. today’s ~$82 — and the position sizing rules that keep this from becoming a gamble
🧠 Why the market can’t walk and chew gum: how $NKTR’s alopecia data confusion is creating a ‘free call option’ that most investors are completely missing
🌐 The imminent April catalyst that could reprice this stock overnight — and why Monkey says a negative surprise would be the real shock
Sources:
Adam May (biotech investor): https://x.com/A_May_MD
Segments:
00:00:00 The Disease Affecting 200 Million People With No Real Cure
00:05:00 What Is Atopic Dermatitis (Eczema) — And Why It’s a $50B Market
00:10:00 Why the Best Drug on the Market Only Works for Half of Patients
00:15:00 The Cancer-Warning Drug Still Projecting $5B in Sales
00:20:00 $NKTR’s Res-Peg: The Nobel Prize-Backed Mechanism Explained
00:27:00 The Phase 2 Data That Sent $NKTR From $6 to $80
00:33:00 The Alopecia Trial Disaster — And Why Monkey Says the Market Overreacted
00:43:00 Valuation Deep Dive: Is $NKTR Worth 4x From Here?
00:48:00 Upcoming Catalysts: What to Watch in April 2025 and Beyond
00:54:00 Position Sizing in Biotech — How Much Is Too Much?
01:01:00 Options Strategy for $NKTR: Calls vs. Shares vs. Selling Puts
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[00:00:00] Krystof: think about it, of this as one in 10. So again, like, like that prevalence, how’s this actually work? All that’s really happening is that the immune system is really inflamed
[00:00:11] Luke: And if people are willing to, pay for this drug that potentially kills them, it must be a really dire situation.
[00:00:19] Krystof: humans being what they are, taking an actual pill that you know is going to give you cancer is like, so anyway, the urgency basically to find a better way here is extremely high.
[00:00:31] Luke: You’re potentially helping millions of people. With alopecia and perhaps hundreds of millions of people with atopic dermatitis,
[00:00:40]
[00:00:40]
[00:00:52] Luke: Welcome to Wall Street Wildlife with your hosts, Luke the Badger Hallard and Christophe the Monkey Pikey. This week a special episode. If you call our episode.
[00:01:00] Luke: Last week, Christophe took a look at Abara on the recommendation of one of our YouTube commenters and also Nectar Therapeutics, and he preferred Nectar. So we’re going down the rabbit hole this week, and he’s gonna tell us all about this innovative biotechnology company.
[00:01:17] Krystof: Badger. I’m a little worried about this episode because I remember from our older, from our previous lives at UH, seven investing. Anytime there was a biotech presentation, your eyes would glaze over and you would, you would potentially, I saw you’ve like, almost fallen out of your chair entering badge like hibernation, going retreating into your cave to eat your acorns.
[00:01:43] Krystof: And this is a fascinating thing. You know, it’s like, it’s like in biotech, everything is so technical and there’s all this, you know, special language and for many people it’s really hard to pay attention. So I consider my job, I have one job in this episode. Can I make this an interesting story without, you know, defaulting into any of the special jargon talk?
[00:02:12] Krystof: And as I explain this investing opportunity, I really do invite you to ask questions, interrupt, say, Hey, what the hell you going on about here? And see, see whether this, uh, uh, perks anyone’s ears,
[00:02:29] Luke: Yeah, sounds good. And look, I’ve got some actual motivation because while you present on my other screen. I have got the options chain for Nectar Therapeutics open, and if, if you, if you tease me enough to want to be an owner of this thing, I’m probably gonna do some kind of options trade. Uh, the IV looks crazy.
[00:02:50] Luke: I guess it’s to be expected from a biotech stock, so maybe I’ll be like selling some puts or something. God knows what, but you can course correct all that at the end of the discussion.
[00:02:59] Krystof: right now, first of all, I’m looking at biotechs because the valuations and, uh, across the market I are still relatively high and there’s a lot of uncertainty, more or less so, biotech, you know, lives by its own, uh, successes or failures. So that’s one of my motivations. I also, in the King of the Jungle portfolio, recently sold off Coherus and I’m left with Relay Therapeutics and I added some shares of Nectar.
[00:03:28] Krystof: So, disclosure, I’m already an owner and in my own real life portfolio, I own some January 27 call options. So I am motivated for this particular equity to do well. Badge what is Nectar Therapeutics? Ticker symbol, NKTR.
[00:03:48] Krystof: let me give you the big picture badge. Imagine the disease that is three times as prevalent as psoriasis. Psoriasis is that dry, flaky skin. Uh, in skin inflammation that is fairly, you, you see it fairly often, but this is three times as big and the people, I mean, it’s awful. Um, and the leading drug that we have to cure this disease fails to deliver a 75% improvement more than for more than half the patients who take it.
[00:04:27] Krystof: So basically many people, for many people, more than 50%, there is no cure for this thing. So that’s one. Um, all other solutions. Start bringing in black box warnings of if you take this drug, you might actually develop cancer. So many people are in dire straits with this thing. And this thing technically is called atopic dermatitis.
[00:04:56] Krystof: The more common name for this is eczema. Some people call it eczema. E-C-Z-E-M-A.
[00:05:04] Luke: And that’s, that’s, that’s like super common, right? I know a ton of people who have eczema.
[00:05:09] Krystof: Yeah. That’s the thing. This is a major, major problem for a lot of people. So that’s why I’m not looking in some small corner here. This is, this is potentially big, so how big badge, uh, annual sales, if you extend it far out in time could be up to $50 billion annually. So, so years perked up. Right? Huge. Who is Nectar?
[00:05:40] Krystof: What is, what is nectar? It’s actually a small little biotech in San Francisco. 60 somewhat people. And they, they might have cracked this code, so that’s why, um, I’m fascinated to tell you more about, about Nectar currently.
[00:05:57] Luke: just like transparency. So I’ve got like my fiscal ai, our our favorite investment research tool open as we chat. So this is not a new company with this one drug, right? They’ve been around for a bunch of.
[00:06:10] Krystof: Yeah. And they made a pivot. So like many biotechs, when you have a bunch of cash and one thing doesn’t work, you pivot to something else. And this is the something else. So currently about 2.2 billion market cap around 77 uh, bucks a share. So atopic dermatitis, uh, I might abbreviate to a D going forward.
[00:06:37] Krystof: Globally, 200 million people in the us, about 30 million people. If the US population is around 300 million, think about it, of this as one in 10. So again, like, like that prevalence, how’s this actually work? All that’s really happening is that the immune system is really inflamed. Uh, the T regulatory cells basically are overactive and they start attacking a person’s, uh, skin and therefore you see the rash in mild cases and then even worse in the more extreme cases.
[00:07:13] Krystof: So this is, um, yeah, it’s the immune system attacking, uh, its itself and the brakes to prevent that attack are failing. This badge is, uh, I don’t know if you saw the really excellent HBO show night of.
[00:07:36] Luke: No.
[00:07:36] Krystof: Uh, th this is, um, the lead. There was John Turturro who was playing a, a detective for somebody potentially falsely accused of a crime.
[00:07:47] Krystof: But what’s fascinating is they gave this character eczema, severe eczema, uh, metaphorically as a symbol of the failing justice system and how hard it is to get rid of or find, find, you know, the cure to a bad legal process. So this was John Turturro’s feet in that show, and you see him walking around basically itching himself all the time.
[00:08:16] Krystof: I’m starting here because I think in biotech presentations, you know, you immediately get to the cures and you immediately get to the solutions. Can you imagine having this disease where. You, your skin is erupting all the time and you’re itching all the time,
[00:08:37] Luke: Yeah. Well, I, like I said, I know like people close to me who have eczema, you know, probably not as bad as poor turturro’s feet in the photo you got on screen. But, um, but yeah, like, it doesn’t, it looks uncomfortable and it’s kind of a chronic condition, like the, you know, where they have an outbreak, like they get it in the same place and they’ve had it for.
[00:08:56] Luke: Like decades.
[00:08:57] Krystof: so, right. Uh, the mild stuff, by the way, there’s moisturizers and steroids. It’s, it’s kind of a good enough solution as you get higher up to the mod, more moderate, uh, in the more moderate the, the more moderate cases. so badge. Here’s the problem with this disease is that the current drug that is the go-to, it’s called Dupixent. It only works for about 50% of the population, but it is the safest, most effective drug that we have.
[00:09:37] Krystof: So to give you a little bit more nuance here, uh, only 36% people reach the, what’s called the EASI 90 metric, which says that basically 90% of this disease is cured. So basically, um. Good, but not good enough. And that’s the, that’s the top drug on market. Uh, the other, when that doesn’t work for people. So let’s say you take duplex and you’re still itching yourself all the time.
[00:10:13] Krystof: You could try another drug with the same exact mechanism. That’s the whole IL pathway. Uh, but if you try another drug that attacks the disease in the same way, you have a reason not to be optimistic, right? Uh, there’s another drug called nuv. It’s just not as good. And then there’s the sort of nuclear option.
[00:10:43] Krystof: They’re called JAK inhibitors. And here’s the thing about these. If you take one of these JAK inhibitor drugs, your condition gets better. It’s almost immediate, but. It attacks your immune system so much that cancer becomes a real risk. So dermatologists basically say to their patients, are you suffering?
[00:11:09] Krystof: How badly are you suffering? And if it’s to the point that your life is intolerable, that you’re willing to get cancer from it, then they’ll prescribe the jak. So basically, for many people, no real good cure yet. So this bit, the ad versus psoriasis ad is much bigger, but the psoriasis market from an investor standpoint is much bigger in terms of the revenue coming in.
[00:11:46] Krystof: Why is that? Well, because it’s just older. So people figure it out, or pharmaceuticals figure out, figured out psoriasis about 10 years ago. And in biotech, you know, once you have the new drug, it takes years for, call it the marketing and the distribution mechanism to kick in. with, uh, that borderline effective drug only started getting solved around 2017.
[00:12:16] Krystof: So it’s basically fresh to the market. So the growth curve is still early, so much bigger, but earlier in the cycle.
[00:12:23] Luke: So,
[00:12:24] Luke: so your Dex talks about low versus high patient cycling. What does that mean?
[00:12:30] Krystof: all right. So the thing about psoriasis is, as you could see from this slide, that it has a very high effect effectivity. 93% of the population basically has 75% cure. Low patient cycling means once you are on the drug. That works. You stay on that drug, so you don’t, you’re not motivated to try something else.
[00:12:52] Krystof: Whereas ad basically if, if you get the, the best class drug odds are high, that’s not gonna be good enough for you. Especially as you’re on it longer, it gets less effective. So you start trying these different methods. So basically you continue shopping around.
[00:13:12] Luke: Right.
[00:13:13] Krystof: So good for any newcomers basically, because there’s not, essentially, there’s not an established go to cure.
[00:13:20] Luke: So if I were to sort of summarize this slide back to you to see if I’ve got it. So you’ve got like psoriasis and atopic dermatitis and there’s 10 times as many sufferers of ad as there are of psoriasis, but because psoriasis has better. Therapies that are more established and more effective, then, uh, there’s more revenue being made by the companies selling psoriasis cures.
[00:13:48] Luke: And because AD kind of has no real good answers for people who suffer this chronic condition, even though there’s 200 million of them, there’s no good answers. And so, uh, while the patients continue to suffer and the biotech companies and the, the established tech like biotech giants. Don’t make a huge amount of money out of this.
[00:14:09] Krystof: Yeah. Uh, here’s a different, yeah, and here’s a different way of saying or answering this high patient cycling thing. We know that the go-to ent. Uh, is going to leave many people unsatisfied, so they’re going to look for the next thing they could try. That means any newcomer has this, you know, foot in the door opportunity because people will, you know, this drives them mad.
[00:14:33] Krystof: They’re gonna go and try whatever hope they can get their hands on. So if you create any even incremental improvement on Dupixent, you’ve got a market waiting, you know, to take, you’ve got a big market waiting basically.
[00:14:51] Luke: Okay.
[00:14:52] Krystof: And so, um,
[00:14:54] Krystof: So let me, let me uh, tell you a little bit about a drug called Amab. This thing is Sanofi’s drug and it targets the OX 40 pathway, which is a different mechanism from the, from the go-to.
[00:15:16] Luke: I am just checking. That was complete gobbledy goop to me, and that’s fine.
[00:15:20] Krystof: Yeah, I’m about right. I’m about to, I’m about to explain this badge. Bear, bear, bear with me here. So put it this way, the current, uh. Pathway to curing this disease only works 50% of the time. So you have all these biopharms looking for a different pathway, right? Makes sense. There’s this big pharmaceutical company called Sanofi that made a drug that targets something called the OX 40 pathway.
[00:15:55] Krystof: Just a different pathway. Market gets excited because things are looking good, right? Data is coming in effective. Cool. And then boom, phase three studies come in and all of a sudden the, the effectiveness of the drug drops a lot from, uh, basically 29% than, uh, to 16% drop. Drop. Basically, the more patients stay on this drug, the the worst it gets.
[00:16:30] Krystof: And then. Here’s the kicker. Fairly recently, people, uh, taking this drug start developing Kaposi sarcoma, which is a rare and potentially fatal cancer. So it should make sense, right, that when you start messing with your immune response, cancer by definition is your own cells running amuck. And so what was once seen as a very, uh, hopeful drug alternative is now giving people fatal cancer.
[00:17:10] Krystof: So that is, I mean, it’s tragic, but weirdly, and this is kind of ties into the massive opportunity here, despite the cancer, uh, scares, Sanofi is still bringing this drug to the market. And projecting that this drug will still earn about three to 5 billion in revenue. So when you hear me say that badge, like what does that make you think?
[00:17:44] Luke: I mean, yeah, it’s not pretty, right? Like patient, the main, the main thing I’m taking away from this is like there’s no good answers for patients. So you end up with a ton of people just continuing to suffer. And if people are willing to, pay for this drug that potentially kills them, it must be a really dire situation.
[00:18:03] Krystof: exactly. So that’s the thing. Imagine taking, imagine selling three to 5 billion of a drug, which has a black box warning. You might get cancer from this and people still buy it.
[00:18:15] Luke: Mind you, people smoke, right?
[00:18:16] Krystof: Yeah. Although, but yeah. humans being what they are, taking an actual pill that you know is going to give you cancer is like, so anyway, the urgency basically to find a better way here is extremely high.
[00:18:32] Krystof: And so our hero made by Nectar is a drug called res peg for short. And here’s
[00:18:41] Luke: mind, hang on. No, no, no. I want you to pronounce the whole damn thing. What’s the full name?
[00:18:45] Krystof: Yeah. Isn’t that wild how the, I don’t understand who’s in charge in biotech of like come, I mean, you know, it’s like, so res peg is a first in class regulatory T-cell stimulator. The most important thing to know is that it basically stimulates the T regulatory cells that immune breaks it instead of blocking the cytokines.
[00:19:09] Krystof: So basically it’s. Yeah, it’s a breaking mechanism on an immune system that is overly stimulated. In 2025, there was a noble prize validated for this mechanism. That’s why it’s so exciting, right? So it’s brand new. It’s like the other stuff wasn’t great, the other pathways weren’t great. Let’s try this new way. And what we’ve discovered, the data coming in so far is that, uh, the, the safety of basic a thou over a thousand patients showed no serious signals, no black box risks so far. So this is great. What else? Badge the Q 12 W dosing. That just means you take it every 12 weeks, about four times a year, as opposed to regular, you know, daily routine.
[00:20:08] Krystof: So that’s huge. That’s huge. Here’s what I kind of need you to understand, that the market, I think, doesn’t quite get in biotech, you have something called one L and two L. One L is the first line of treatment, right? You have the disease, this is what you do. First res peg is setting itself up as the second line. And so the market is kind of weirdly saying, you know, second line, well, we have a first line and it’s fairly effective, but everything I told you already should make you believe that second line in this particular disease is still gonna be tried by most people. And it’s just a matter of time before they start shopping around for the second line. That makes sense. Right?
[00:21:06] Krystof: let me, let me, let me clarify one important bit because it’s gonna show up a little bit later. The other solutions so far basically act to suppress your immune system. Hence the cancer stuff, right? This novel mechanism that res peg is working with actually stimulates the immune systems own activity.
[00:21:32] Krystof: Its own cells. So it’s basically trying to rebalance your, your, your system. Not by like blocking stuff off, but by basically saying, okay, your inner T regulatory cells, let’s do a better job at controlling the, the outbursts. So I’m gonna plant this seed here. Now, if a person’s immune system can get back into balance through, call it this positive function, then you are no longer relying on the drug to basically cut something off.
[00:22:07] Krystof: You’ve actually reprogrammed your body. If res peg could generally make that happen, it actually has a shot at becoming the first line of defense. You could see the thesis already in plain sight with such a huge market opportunity here. It can succeed both on the second line and if that is good enough on the first line. And that’s billion. I mean, that’s, that’s, that’s many, many billions of dollars. So little, little foreshadowing there. okay. All right. Badge. So here on this next slide, this is kind of the summary of where we’re at with the new-ish landscape for ad uh, and the competition. So let me walk you through this chart real, real quick. The first two drugs, basically that’s what’s already selling on the market. They’re FDA approved, but as you could see, their efficacy is about 33 to 35% at about 75% cure rate.
[00:23:26] Krystof: So fine ish. The bottom one you could see is ineffective essentially at 13%. And the second from the bottom one amli, that’s the one that has the OX 40 might cause you cancer. And there’s res peg sort. At the moment, only at phase two, but approaching the already marketed drug with a brand new, um, method of action. Make sense?
[00:24:05] Luke: Just explain this, this third column to me, ’cause maybe I’m not understanding the numbers. So DUP Dupixent is 33%, EEC 75. What does that actually mean again?
[00:24:18] Krystof: Yeah. So EASI is basically a scale that measures the severity of the disease and how, um, the higher the number, basically the, the more of the disease you have conquered. And so at 75%, you’re, you’re doing three, you’re three quarters of the way there. Yeah. And so 33% of the patients have attained that level.
[00:24:53] Luke: Okay, so, so, so the, so higher is better, but the highest numbers are still pretty bad ’cause only a third of people are getting to like a nearly cure.
[00:25:03] Krystof: yeah. Basically. So this just gives you Right, yeah. The, the, the landscape, uh, of the competition. And I guess the most important, exciting thing is again, that this pathway for res peg is different from the top two. Cool.
[00:25:21] Luke: Yeah. But 27% is not great though, right?
[00:25:26] Krystof: Uh, no, but it’s also still, uh, glad you mentioned that it’s still only in phase two and this stuff, this new, what’s it called? This new, um, method of action or MOA. Uh, if you are really trying to rebalance your immune system, it takes time. So the future data that we’re waiting on, the major catalyst really will be the data readout for people who have been on the drug for longer.
[00:25:55] Krystof: And the expectation is the longer they’re on it, the higher that number will climb.
[00:26:02] Luke: Okay.
[00:26:02] Krystof: so recently if you look at the stock chart for Nectar, you’ll see that it went from, uh, what was it, $6 something a share to now close to 80 a share. Uh, I’m not looking at the chart at the moment, but on the last Wall Street Wildlife, you know, I showed you that you, you’re buying into strength here.
[00:26:29] Krystof: And that’s because recently there was a data readout about. Res peg and we learned one, it’s becoming increasingly durable. It maintained this, this 75% rating for 71 to 83% of people. So it beat even the go-to market drug. So it’s more durable, it’s deepening responses, kept improving as time went on.
[00:27:05] Krystof: Approaching the 100% completely cleared, the, that dosage for basically four times a year works huge. And as I said, there’s, it’s, it’s showing up pretty safe. So as soon as the market saw that. Up. Up goes the value of this potential chemical
[00:27:36] Luke: So again, let me just play back a little bit. So, um, res peg, which is the real, like the drug you’re really talking about in today’s presentation about nectar. In, it’s still in phase two B trials, so that’s kind of quite early in the regulatory journey, but it’s already showing superior outcomes to the best products that are out there today.
[00:27:59] Luke: Uh, and the longer people take res peg, the better their outcomes are. And there are no safety material safety issues that have come up so far. And the reason like this is a new story is like patients in these trials have only been on it for what, like a few months maybe. So there’s, there had to date, there hasn’t been enough of this sort of, you know, a long-term user to see the really beneficial effects.
[00:28:27] Krystof: exactly. I mean, in, in plain speak, people suffer really badly for this. They’ll take whatever can, can help. And this right now is approaching the, or exceeding the number one go-to drug. But it has a different, you know, way of solving the problem. So for at least 50% of the people where the top drug isn’t doing anything for them, this is like a, you know, a holy grail potentially.
[00:28:56] Krystof: The fact that it has this really clean safety profile basically means everybody, not almost everybody is gonna wanna try this. And so, um. It’s just huge. It’s huge. Basically, you know, in investor speak, the recent data that came out is just blockbuster across every single measure, like these four, call it four, um, qualities of whether a drug will be great.
[00:29:26] Krystof: All of them proved superb or exceeded expectations. Hence the massive lift in stock price. We’ll talk about why the valuation is still severely undervalued, but that’s why the market’s catching onto this thing. But guess what, this is the weird, this is, I think if the story stopped here, uh, I might invest in this, uh, with medium enthusiasm because I’ve been around the block with biotechs and.
[00:30:03] Krystof: You know, promising data one day, but you know, who knows what, what’s around the corner. But there’s something else hiding in Nectar that made this investment case irresistible to me. Badge. There’s another disease. Allo aia, aia AA for short. I don’t know if I butchered that
[00:30:29] Luke: I think you did. ’cause I, I think I know that first word that’s alopecia, right? Which is to do with hair loss.
[00:30:35] Krystof: correct. Say, say it for us one more time.
[00:30:38] Luke: Alopecia
[00:30:39] Krystof: Alopecia aia aa. We’re gonna, we’re gonna call it po po pocket ACEs, uh, in the, in the worst way possible. a lot of people have this in the us about 800,000 people, 400,000, quite severe, and it’s expensive. Essentially what happens is that it’s the same kind of problem that the, um, ad people have where your own immune system gets too aggressive and attacks your skin, but this time it attacks your hair follicles, so therefore your hair follicles actually get destroyed by your active immune system and your hair falls out almost entirely or in patches.
[00:31:30] Krystof: So, uh, it’s not as, I suppose, unbearable in the literal sense as ad where you’re scratching yourself all the time, but it’s not great. And so what’s fascinating about this particular indication is that there are no cures that are known right now. And so, um. Nectar though sees things, you know, working well for AD and says, wait, you know, same mechanism.
[00:32:11] Krystof: Why wouldn’t we try this with aa? And then a weird thing happens. Um, let me walk you, let me walk you through this slowly. so not too long ago there was a data readout for nectar’s drug res peg and how it works for people with aa. And in biotech, you know, there’s the, there’s the call it, um, uh, what’s it called? Like there’s a line which is differentiated enough from the placebo effect that if you meet this standard, your drug is given the green light to proceed. Nectar’s results basically missed that baseline by a few percentage points.
[00:33:07] Luke: You talking about something like statistical significance of the drug versus placebo, something like that.
[00:33:13] Krystof: Yeah. Uh, basically it was, um, 28% of the patients on the drug had, uh, a positive effect versus about 12% or 11% on the placebo. So that was about a 17% difference. And that 17% just missed that cutoff, right? So what happened to the stock? It actually felt 33% because people were also looking at this. So this is the weird thing.
[00:33:50] Krystof: The ad on its own is undervalued, and the company could stand just on that. But you know the market being the market, there’s this other indication that could work. Data comes in, underwhelming stock drops 33%, which is an irrational, if you knew about this story, buying at that 33% dip would have been extremely logical and fundamentally sound.
[00:34:16] Krystof: But market does what it does. Stock drops 33%. Here’s the fine print that matters here. Everything in biotech is about, uh. You know how well you design the, the trials and who is involved. Long story short, people who were in the initial trials ought not have been because they were severe complications. When you take out the people that should not have been part of the trial, all of a sudden the statistical, uh, measure improves, I believe it was to 24% rather than 17, which easily clears that baseline. So
[00:35:07] Luke: But that, I mean, just to, just to sort of stand up for science, right? You know, you do a, like, science has this great thing like a called a double blind trial where the guy, you know, the clinicians administer and they don’t know if they’re giving like the placebo or the real thing. And the patients don’t know what they’re getting.
[00:35:26] Luke: And then you just look at the results. And then, you know, after the, afterwards you look at the outcomes and you say, okay, the people who got the real thing versus the people who got the placebo. And there’s no, like if you do, if you structure your trial properly, that’s really good. That’s proper irrefutable scientific evidence.
[00:35:46] Luke: If you, after the act, when you know the result, you go, oh, we’ve got this reason why these four people shouldn’t have been in the trial. Like you, you’ve basically invalidated all that data. Your trial design was bad. You, I mean, you know, I could, if I said, oh, I’ve, you know, I’ve got this innovative drug and then after I do my double perfect double blind experiment, I then, you know, ignore all the people who failed.
[00:36:11] Luke: Then, uh, then I’m probably, I could demonstrate efficacy for fricking anything.
[00:36:15] Krystof: Yeah. Bingo.
[00:36:16] Krystof: Another very obvious question to ask you about hair loss and hair growth. What do you think the big problem there is for patients who have lost hair?
[00:36:27] Luke: like social anxiety or something like that you mean?
[00:36:31] Krystof: Oh, yeah. It is that, but uh, in the most literal sense, badge growing hair takes a long time,
[00:36:38] Luke: oh, okay. Yeah. Yeah.
[00:36:39] Krystof: right? I mean, it’s, you don’t think about it, but if you’ve lost all your hair, especially if you’re a woman, it’s gonna be potentially years for it to grow back to wherever it was, right? So not, not a minor inconvenience, you could say.
[00:36:55] Krystof: So here’s a weird thing. A another reason why beyond the statistical flaws here is that res P’S method of action takes a long time because it’s resetting your immune system. And once, so it basically takes longer. If you think about it, for it to become effective and for your hair follicles to regenerate and start growing hair again.
[00:37:23] Krystof: So that’s one. So imagine you’re a patient, right? And you’re in one of these trials, you’re told that maybe this thing works, nothing humans have devised so far works, but maybe this thing, and you’re on this trial through 16 weeks and nothing is happening. What do you think 16 weeks is like? What? Four months,
[00:37:46] Luke: Yeah,
[00:37:47] Krystof: right?
[00:37:48] Krystof: And you have to keep reporting to the clinics and nor, you know, you get frustrated and you say, this doesn’t work. So you drop out of the study.
[00:37:57] Luke: but if the. Trial was well designed, um, and you told the patients, you know, it’s gonna take 50 weeks, you know, two years, three years, well then, you know, you’d only bring people into the trial that were committed for that and understood that.
[00:38:11] Krystof: Yeah, it’s a, it’s a mixture. It’s not as simple, you know, if all humans were rational, then a clear explanation like that would be enough. But when you’re actually living through it, uh, basic human behavior, impatience, frustration, doubt, then life happens. Then your insurance po you know, all these reasons why people drop out.
[00:38:32] Luke: Sure.
[00:38:33] Krystof: This, I think is potentially what’s happening with the data so far. So even though it did cross the bar technically, uh, at the point where the study ended is pretty much about where you will begin to see much more clear hair regeneration. And yet the market still does not have this data. So that’s, you know, that’s kind of a little bit of the catalyst in the pocket that, that I alluded to in our last episode on Wall Street Wildlife. Here’s the other thing, this is a safe drug as I talked about. So if you go back to what I said about ad, there are better cures out there, but doctors will be really hesitant to assign those because of the safety profile. So, Dupixent makes about 10 billion a year while the, the dangerous ones, um, basically have about 1 billion. So doctors will never, ever prioritize the dangerous thing if. Dermatologists prefer the safety one, right? Then even if, um, there’s a cure that, you know, fixes aa, the more dangerous way, this particular pathway, which requires more patients, uh, patients with a t, uh, will be the, the kind of go-to dose given by doctors, even if it’s efficacy is a little bit lower. Does that make sense? Even if it’s not as effective as, say, another drug, because it’s safer, it’s gonna become the de facto, so.
[00:40:29] Luke: Yeah, especially if like in America, your patients are like, they’re seeing like adverts for these drugs on TV and people with, you know, magical cures for their alopecia. Like, and then the patients are going to the doctors and saying, I demand this thing. Yeah. I suppose that, you know, the doctor wants to get the patient off their back so you know, all the incentives line up around giving them something that’s not gonna give them cancer.
[00:40:56] Luke: But, you know, trying to let ’em get ’em to leave the office a happy customer.
[00:41:01] Krystof: This is the slide that kind of summarizes what I was just saying. Um, it’s an exciting time for anybody with these diseases because you know you have a novel pathway that’s safer and it just might take a little more time. But once this is out in the open and you know, the sales reps can. Forewarn people that patience is required here. The the opportunity is absolutely tremendous. You just don’t want a black box warning on your, on any drug you take is kind of, it’s as simple as that. And you know, so this is, uh, this is a summary of summary why the data looked way worse than it actually was. So the, the, the big catalyst and why I wanted to, um, get this episode out as soon as possible badge is because the, call it continuation data, it’s called maintenance data, is due to release in April for aa. And so this is, so if we already know that the, say the drug was kind of met that barrier, but there were the statistic. Statistical wonkiness, but that the drug actually improves the longer you are on it. But so many people dropped off right at the cutoff of the data we just had. The expectation that I have at the moment is that it would be, um, actually a very negative surprise, truly if the data came in worse than we had already seen given the new method of action. And so any day now, really, I’m expecting there to be a press release that says, yeah, the longer you’re on res peg for aa, the better it’s going to work.
[00:43:05] Luke: But let’s just zooming out to big picture again. You’ve got 200 million potential patients with ad uh, with, uh. Like eczema essentially, and then you, but you’ve got 800,000 so far, fewer patients with alopecia, but it’s the alopecia story that’s kind of driving the narrative, but almost big picture that’s kind of irrelevant to the potential revenue and benefit of the destruct.
[00:43:34] Krystof: Well, this is the, the weird thing, uh, I’m backing up to this slide. Fundamentally ad is the mammoth tam, 50 billion or so, just absolutely an enormous right? But, um, alopecia is about 2 billion potentially.
[00:43:56] Luke: Okay.
[00:43:57] Krystof: And if it’s the only cure, right? The market right now is kind of having this weird schizophrenic reality, like we know it’s ad that we’re after, but then when the AA data appeared to be underwhelming, the stock drops 33%, completely irrational. And so at the moment, it’s still as though alopecia is entirely valued at zero when you take both together. So I kind of think about this from an investor standpoint as you have great shot on goal with ad, but you’re again, this quote unquote free call option with alopecia, which itself could justify the entire market cap at the moment for Nectar. And the market’s kind of confused because it’s just overreacting left and right to all kinds of red herrings in the end.
[00:44:55] Luke: Well, you know, uh, like a confused market and Red Herrings and weird signals is a great place to be when you go down the rabbit hole. As a biotech investor, I guess.
[00:45:06] Krystof: Exactly, so, right. This is why, um, I put so much time into this particular one because the more I went over the sort of, um, realities on the ground, this is not just about, you know, you have one drug and you hope it will solve a serious problem. The data is already there. Right now. It’s just as always, you have to wait and hope that it continues to be good.
[00:45:32] Krystof: But it’s this strange inability for the market to kind of walk and chew gum at the same time where you’re, you know, you’re dealing with two really big segments. They’re both really promising. One is being treated as though the other one that doesn’t exist, you know, and that’s probably due to. I call it for short market manipulation, but you know, anytime you have traders involved and you can make money on the way down, all kinds of overreactions that are silly.
[00:46:03] Krystof: So let’s look at this slide. The wild card. I alluded to this a little bit already, so let me maybe summarize it. Uh, every current drug for AD you have to keep taking because of the mechanism. If in fact, res peg rebalances your immune system enough, you stop taking the drug that would make this the one L treatment. If that were to happen badge, this stock not only gains value based on say, the two L treatment, which might be. Now I’m throwing out some numbers. It could be a four x right now is my, my sense of the, to the four x undervalued just on sw say be remaining the two L. If in the beginning of 27 when the data comes out, it could prove it be, it’s becoming a one L option as good, if not even a little better than Dupixent. This is, this is, you know, uh, life-changing gains kind of territory. And, and I hate to say it’s like pie in the sky kind of thinking this is not what I, I would base my investment case on, yet the breadcrumbs are already there, that it’s not impossible. That could be the case. So a hundred percent, like, you know, I have the slides say the probabilities, 30 to 50% decent ish odds.
[00:47:43] Krystof: But zero, zero asymmetry captured in the price. So what are the catalysts at the moment? Actually, before the catalyst, let me slow my role, let me talk to you about, um, let me talk to you about the company and the valuation with a little more specifics. Right now, you should have one question that anybody investing in biotech has. How much cash do you have left and how much are you gonna dilute us? So at the moment, we have about seven 20 million in cash and we’re burning through approximately, call it two twenty five per year. That gives us about three years of runway with serious data coming in within, call it the next nine months.
[00:48:51] Krystof: Now, yes, it’s true. Then you have to go to phase three and so on and so forth. But the market is forward looking and when you’re going after such a big pie, uh, I don’t think this takes three years for the market to, you know, remain asymmetrically, undervalued if the data in 27 is good. So cash check. Here’s the other weird thing I wanna mention here. Here. Currently at the moment, there’s a, um, company called KYMR, or that’s the ticker symbol. Anyway, they have a $9 billion enterprise value. You know what they’re offering essentially. Um, an an oral version of the pill that duplicate makes. So the old method of action, the one that only cures about 50%, not cures, but ameliorates 50%. So it is basically valued four times as highly is nectar.
[00:49:57] Luke: And just, just to confirm that that company, that’s like its main revenue driver, it doesn’t have like a whole bunch of other stuff.
[00:50:04] Krystof: Correct.
[00:50:06] Krystof: And it’s actually two years behind nectar’s own pipeline. So this is what I’m saying, there’s asymetry and potential valuation, but then you ask yourself, why would a company two years behind that’s only basically offering a slightly improved method of intake, be valued four times as big as nectar?
[00:50:30] Krystof: I mean, it could be that that company is an obvious short and it should not be valued that much. Or Nectar is severely undervalued by, by comparison.
[00:50:45] Luke: well that’s something we should stick that on our like list of things to talk about at some point. Like if this drug is successful, which companies go to zero.
[00:50:54] Krystof: Yeah. Good call. Uh, I already mentioned this earlier. The big, uh, farm Sanofi drug has worse eff efficacy, and it has the cancer warning. It’s still projecting three to 5 billion in peak sales. So you do a little bit of math, and here’s what we’re looking at, right? Let’s say data remains strong for res peg, you have about peak sales of 3 billion for ad. You have peak sales of about 1.5 billion for aa. You combine them together, that’s four and a half billion. You put a multiple of about 1.5 to two, which is standard, and you have, uh, a valuation of about 8 billion. So with that basic math of about 8 billion, two x the, the sales, you’re looking at, uh, a valuation that’s about 400% higher from today. So share price would be between two 40 and three 20 a share. I bought my shares, uh, for King of the Jungle at about 77. Um, that’s the bull case.
[00:52:21] Krystof: You know, the, be the, the base case is, phase three is fine. It’s not best in class. Peak sales are around, call it 2 billion. You have a little bit of further dilution and in this, in this scenario, you have relatively modest share price increase from today’s prices after the, the big runup. Obviously, bear case is not good because data comes in and there’s something unexpected and the stock price crashes to about cash value, uh, which will be around 25 a share, but that’s true in all biotech investments. The catalysts. We have the new beginning of phase three starting in this quarter, and then sometime in April you have the extended data for AA earnings. Not sure that that’s gonna materially matter, but who knows what the company says. Then the second half of 26, you have the phase three start for aa.
[00:53:32] Krystof: Then another big catalyst, you actually take people off the drug and you see how well they respond. If the mechanism actually resets their nervous system, if then a, then it has the only drug with a cure on the market stock would pop hugely on that. And then beginning of 27, same thing for ad. So I summarize this as catalyst is coming.
[00:54:00] Krystof: Literally some, any day now, and you know, in one year’s time you’re going to see potential huge movements in the stock.
[00:54:10] Luke: Although let’s just do a, oh, and you’ve gone to the slide right? Already. That’s great because you call these things catalysts, but let’s not forget, this is like, you know, kind of micro capish, biotech. These catalysts are really, you know, points at which the thesis either gets validated or thrown in the bid.
[00:54:29] Krystof: yeah. And so I’ll, I’ll simplify this to all our listeners, not looking at our slides. I’m heavy interested in this because of the fundamentals and the asymmetry, but you would never, I would never, ever make this, uh, oversized position like I did or have done with a ST or eos. Because, you know, the execution risks, say for manufacturing is kind of, you know, there’s, oh, problems always arise.
[00:55:08] Krystof: Problems can be solved. It’s sort of relatively out in the open for something like this. You just never know. So unless you wanna call it literal gambling, so you wanna keep your position sizes, um, I don’t know, uh, up to five, 10%, certainly no more. 10 is, is very, very aggressive depending on, you know, your own portfolio and phase of life.
[00:55:35] Krystof: But certainly under no circumstances, more than 10%, unless you’re gambling with money that you absolutely don’t need closer to 5% if you really buy the story even closer to like 2.5%. If you are, um, living off your portfolio like someone I know.
[00:55:54] Luke: Right. So even if I really bought this something. Like this would be like a sub 1% position for me ’cause I am living off my portfolio. Yep.
[00:56:05] Krystof: so badge novel mechanism. You have, you have biology’s excited about this potential way of doing things. It’s still early phase two, but the opportunity for AD is just absolutely enormous. The opportunity for AA essentially is being priced at zero. So there’s a free call option here. There’s that completely bull case scenario where this pathway takes over the number one selling drug, in which case this stock goes absolutely bazooka.
[00:56:43] Krystof: And by that we’re looking at 10 x kind of scenario where. Not 77 to share, but a thousand dollars a share. But that’s still some years away. So I wouldn’t base my investment case on that. the risks are real, and patients will be required. But if we go back to the price charts, I showed last episode, the market is already sniffing this out, and this is why you wanna invest in something like this over a company like Appela, which, you know, is, is more of the narrative rather than at the execution phase. So, man, it’s so hard doing these kinds of deep dives badge because it’s like juggling all of the, you know, all of the jargon and trying to make it not boring and condense a lot of technical details that I skipped, but having had the patience of sitting through all my yapping. Where are you at now with this opportunity?
[00:57:48] Luke: I like it. This is good. I, I try and stay away from biotech, but I do own like Novo Nordisk, albeit they’re a giant and these guys are like a, you know, few billion dollar company. I’m kind of concerned about the failure in the construction of the clinical trial for alopecia. And I wonder, you know, could they potentially have that same problem with the end of this year results for the clinical trial for ad, you know, might they suddenly start excuse making and say, oh, you know, we have patients in it that shouldn’t have been in it, or, you know, have they, do you think they’ve given themselves long enough?
[00:58:27] Luke: For AD to prove itself within the constraints of that trial.
[00:58:31] Krystof: You know, it’s, it’s weird when you’re a company that, and you know, so much is writing on, on TR trial design. It’s sometimes bizarre to me to think like how they could have. Not made it more robust, but then it is a small team, right? Versus a mega biotech. So there is that concern. Interestingly, one of those sites was in Poland of all places.
[00:58:56] Krystof: So, uh, those, those polls, those inpatient polls, uh, I’d be really, really, really surprised if having gone through that trial by fire the first time. They don’t make it more robust going forward. It’s just to, I mean, you either kind of have to be outright stupid not to, not to fix, plug up the design. And so in the end I come away thinking like, this is now about patients, you know?
[00:59:27] Krystof: And trusting that, that the data right now is just really superb and only getting better. And as long as nothing, uh, unsavory deri derails this. I right now expect the share price to slowly keep climbing with potential big jumps if the data is what I expect it to be.
[00:59:49] Luke: sure. But let’s, let’s also not forget, right? It’s a novel pathway that hasn’t been tried before. So this is not really a well understood thing. I, I forget what the numbers were for ad, but it sounded like the alopecia trial was like, you know, less than a hundred participants. That’s really small scale and you know, when that comes to the next phase, what phase three or whatever it be.
[01:00:11] Luke: There’ll be many more patients if people get cancer, for example, and people start dying, or this is like another kind of doomed therapy potentially. So, you know, this is why it is dangerous, not dangerous. It’s, uh, exciting. But the, the risk is very high when you invest in like early stage biotech, but the reward is also really high too.
[01:00:32] Krystof: Yeah. And uh, two shout outs. Uh. I’ve been now going over this company for about three months, I believe. Uh, Adam May on X is a dermatologist that put together a truly comprehensive, uh, research report on this. So if you want to get really into the granular bits, go check that out. And
[01:00:54] Krystof: I
[01:00:55] Luke: drop a, we can drop a link to that in our show notes for today.
[01:00:58] Krystof: yeah, and, um, the, uh, Stanford professor, uh, who teaches, market how markets work and how trading works and who runs his own portfolio.
[01:01:09] Krystof: Kevin Mack is also has a very high allocation to this company, and he is very risk, uh, sensitive. So, you know, as I’m poking around and I see, you know, it’s kind of confirmation bias, uh, but I know I’m not the only one like that sees like, this is a different kind of situation. You don’t see. Very often, all your warnings being true and need to simultaneously True.
[01:01:40] Luke: Good presentation. I feel like I understand the drug, I understand where the company’s at. They’ve mistepped a bit, but as you say, they’re a tiny little company, small team. Um, and the like, the big thing here is if you invest in a company like this, if they’re successful, you’re making the world a better place.
[01:01:57] Luke: You’re potentially helping millions of people. With alopecia and perhaps hundreds of millions of people with atopic dermatitis,
[01:02:06] Krystof: Yeah. Hundreds of millions. Yeah, it’s, it’s, it’s huge. One last caveat, I mentioned this briefly, but you cannot own a stock like this and be reactive because when that data, when that initial data showed up, stock dropped 33%, 55%, I think from the highs, and it turns out it was. borderline irrational. But if you had sold because you immediately opened up your portfolio and see, oh, bad data, you ha you would have missed the nuances, which basically were fine.
[01:02:46] Luke: Right.
[01:02:47] Krystof: So know the story, know the landscape,
[01:02:51] Luke: Great. Now, I, I don’t wanna put you on the spot with this, but, um, you are now Mr. Options University. So if I was interested in. In having exposure to this stock, I could just buy equities now at currently, like 82 and a half dollars, or I could do something funky with options. So what would you recommend right now, noting this is not financial advice.
[01:03:14] Krystof: Well, in King of the Jungle, I bought two shares
[01:03:18] Luke: Mm-hmm.
[01:03:18] Krystof: in my real world portfolio. I bought January calls. January 70 calls. And that’s because I have enough confidence in the data coming in over the next nine months with the strength of the chart that that’s going to continue. But that’s risky. All calls are risky.
[01:03:39] Krystof: Uh, I don’t remember at the moment if January 28 calls are available. I don’t know if you could check right now if those would be available
[01:03:47] Luke: my brokerage screen closed and I can’t open it without stopping my camera.
[01:03:52] Krystof: for someone like you badge that legitimately wants, you know, thinks long term in several years. I would say the January 28th would be the best way to get a little bit of leverage. ’cause you’re buying calls don’t have to put so much capital and you have over close to two years, over two years to, to make it happen.
[01:04:15] Luke: If the implied volatility on this is super high, which I think it was like 97%, is that not an argument for not being a buyer, being a seller of options?
[01:04:25] Krystof: Yeah, that, that’s fine. 97% is high, but there’s, you know, a bunch of companies over a hundred. So for this, it’s, you would need to check the IV rank to see where that’s relative to the company. Uh, so for biotech where, you know, it could jump massive percents overnight, that’s actually par for course, I would say.
[01:04:47] Krystof: So don’t let that dissuade you Other possible, you know, moves here, you might think, well, selling puts, but you, you don’t want to, you, you wouldn’t want to mess, do anything with puts because obviously if the data is bad, you’re gonna be buying a stock that’s now worthless.
[01:05:05] Krystof: And
[01:05:06] Krystof: so. Jam. 20 eights, I think would be my midline recommendation and or just shares outright because let me make the case for shares outright.
[01:05:16] Krystof: Actually, the opportunity is so massive. data phase three stuff, we’re looking at 28, 29. Why worry about the clock ticking with options? In any case, this could be a legitimate anchor ish position the way you have with Novo, right? You’re not right, like you look, you approach Novo as a kind of stalwart holding, right,
[01:05:43] Luke: But
[01:05:44] Krystof: because you understand that that whole side of the market, so you’re not playing games with timing.
[01:05:52] Krystof: This is in that category like a potential anchor stock, even though it’s tiny at the moment.
[01:05:58] Luke: Very good. Thank you. That’s very helpful. I will get some nectar exposure at some point in the next few days.
[01:06:05] Krystof: Awesome. Uh, to all our listeners, this was monkey’s first, you know, uh, deep dive in, in quite some time. It’s complex to do it. I know was far from perfect. The slide deck was missing some stuff. There was irregularities between my prepared script and what the decks were showing. Forgive me for the imperfections, but nonetheless, if you heard this and you thought, yeah, it’s still sort of, uh, good enough and I learned something and you encouraged me to look deeper into this company, would you let us know on the Patreons or in on the YouTubes, maybe make some suggestions about ways we could improve going forward.
[01:06:50] Krystof: It’s a work in progress.
[01:06:52] Luke: Yeah. And, and tell us what you think about the, the actual company itself. Having heard Crestor’s pitch and maybe having done some of your own research. Are you a fan of Nexar Therapeutics or. Is this one you’d pass over for your portfolio and why?
[01:07:05] Krystof: Awesome badge, so go forth.
[01:07:08] Luke: Well assume you used the excellent fiscal AI as part of your prep and research for the company. I certainly, I’m looking at it right now as you went through your, uh, three, your materials. We are big fans at Wall Street Wildlife of fiscal ai, um, now like a market leading research and stock analytics platform.
[01:07:27] Luke: It’s powering Google Finance. It has plugins into all the big LLMs, like clawed, like open ai, um, and it’s just a fantastic way of going deeper. The free version. It’s still fantastic, like you will up your game by using fiscal ai. If you wanna get the paid version of all paid plans, if you go to fiscal.ai/wildlife, you’ll get a 15% discount, no credit card required and a couple of weeks free trial.
[01:07:57] Luke: So that’s just worth checking out if you haven’t checked it. Go check it out. fiscal.ai/wildlife.
[01:08:03] Krystof: Badge. Are you a beast of an investor yet?
[01:08:06] Luke: I am nearly a beast of an investor.
[01:08:09] Krystof: Your journey? You. Your journey. Started where?
[01:08:12] Luke: Starts here.
[01:08:14] Krystof: Okay.
[01:08:15]
