UPDATE 3-Nektar signs licensing deal with AstraZeneca, shares up

* AstraZeneca to develop Nektar’s NKTR-118 and NKTR-119

* Nektar to get upfront payment of $125 mln for both drugs

* Brean Murray ups price target on Nektar stock to $12

* Shares of Nektar soar 17 pct to new 2-yr high (Adds CEO comments; updates share movement)

By Anuradha Ramanathan

BANGALORE, Sept 21 (Reuters) - Nektar Therapeutics NKTR.O said it signed a deal with AstraZeneca Plc AZN.L to develop two of its experimental drug candidates, sending shares of the biopharmaceutical company soaring to a new two-year high.

AstraZeneca will develop Nektar’s late-stage drug to treat opioid-induced constipation, NKTR-118, and NKTR-119, which is in early-stage studies to treat pain without the side effects of constipation, and bear all costs related to development, manufacturing and commercialization.

Under the worldwide license agreement, Nektar will receive an upfront payment of $125 million for both drugs regardless of any regulatory milestone hurdles.

The company intends to use this cash to fund development programs for its existing drug candidates and also plans to preserve some cash, Chief Executive Officer Howard Robin told Reuters.

Nektar’s current pipeline includes drug candidates for cancer, HIV and psoriasis.

Robin said the company is “very cautious” on how money is spent, and added that this upfront payment gives it “sufficient cushion” against the need to raise additional capital in the market.

He expects to end the year with about $390 million to $400 million in cash.

Under the AstraZeneca deal, Nektar is eligible to receive up to $235 million in aggregate payments for NKTR-118 upon the achievement of certain regulatory milestones, and additional tiered sales milestone payments of up to $375 million.

Nektar will also receive “significant” double-digit royalty payments on NKTR-118 and NKTR-119 net sales worldwide.

“While I am not able to disclose specifics of the royalty rates... we retain at least one-third ownership in our programs,” CEO Robin said in a conference call.

He sees sales potential of “well in excess of a billion dollars” for NKTR-118.

Brean Murray Carret and Co analyst Jonathan Aschoff sees the deal with AstraZeneca as a “hugely positive development for Nektar.”

The deal could make Nektar cash flow positive once the drugs get marketing approval, added Aschoff, who has a “buy” rating on the stock.

The analyst also raised his price target on the company’s shares to $12 from $10.

AstraZeneca expects to file NKTR-118 for U.S. marketing approval in 2013, Nektar said in a statement.

However, Nektar’s CEO Robin said that the timeline “is exceptionally conservative” and hopes to file the New Drug Application with the U.S. Food and Drug Administration prior to the anticipated date.

Nektar shares were trading up 10 percent at $9.33 Monday morning on Nasdaq. They touched a high of $9.91 earlier in the session. (Editing by Aradhana Aravindan)