Nektar Therapeutics (NASDAQ:NKTR) is a biopharmaceutical company that focuses on developing innovative medicines in areas such as oncology, immunology, and pain management. The company aims to address unmet medical needs through its proprietary drug development platforms. However, when evaluating its financial performance, particularly its Return on Invested Capital (ROIC) compared to its Weighted Average Cost of Capital (WACC), concerns arise.
Nektar's ROIC is -63.50%, which is significantly lower than its WACC of 11.16%. This negative ROIC indicates that the company is not generating enough returns to cover its cost of capital, suggesting inefficiencies in how it utilizes its capital. This is a red flag for investors, as it implies that the company is not effectively converting its investments into profitable returns.
In comparison, Alkermes plc (NASDAQ:ALKS) shows a strong financial performance with a ROIC of 18.03% and a WACC of 6.18%. The ROIC to WACC ratio of 2.92 highlights Alkermes' ability to generate returns well above its cost of capital, indicating efficient capital utilization. This makes Alkermes a potentially more attractive investment compared to Nektar.
Neurocrine Biosciences, Inc. (NASDAQ:NBIX) and Incyte Corporation (NASDAQ:INCY) also demonstrate positive ROIC to WACC ratios of 1.78 and 2.50, respectively. These figures suggest that both companies are generating returns above their cost of capital, though not as high as Alkermes. This positions them as more efficient in capital utilization compared to Nektar.
On the other hand, Sangamo Therapeutics, Inc. (NASDAQ:SGMO) shares a similar challenge with Nektar, having a ROIC of -125.56% against a WACC of 8.02%. This results in a ROIC to WACC ratio of -15.65, indicating significant inefficiencies in capital utilization. This comparison underscores the importance of evaluating ROIC and WACC to assess a company's financial health and investment potential.
