Nektar Therapeutics (NASDAQ:NKTR) is one of the week’s biggest winners in biotech so far, with the company soaring during the Monday session on the release of a fresh round of data from its lead trial. At the week’s open, Nektar went for a little over $15 a share. By Monday close, this had risen to $22 a share, a close to 45% gain during the session.

Here is a look at what drove the action, and what we expect next from the company.

So it’s all rooted in pain management. As we’ve noted on a number of occasions in the past, there is a large potential market waiting for a company that can bring a viable alternative to addictive opioid therapies in the pain management space. Opioid abuse is an epidemic in the US, and costs the government billions of dollars annually. The FDA has stated that it is  on the lookout for said alternative, and this has much of the biotech space (complete both big and small) scrambling to come up with a solution.

Nektar’s attempt is a drug called NKTR-181, and it is this drug that is behind the gains seen this week. The mechanism of action behind the drug (and behind its ability to provide pain relief without inducing the euphoria that is commonly associated with opioid use) is rooted in a relatively simple concept. Opioid drugs work by activating receptors in the central nervous system (this is how they stop pain) but they also activate receptors in the brain (and this is how they induce euphoria). Nektar has designed NKTR-181 Two work on the central nervous system, but not to be able to pass through the blood brain barrier (or at least, do so very slowly). Because it doesn’t pass through the blood brain barrier as fast as standard of care opioid therapies do, it (theoretically) shouldn’t induce euphoria. A human abuse study that pitched it against oxycodone reinforced this latter hypothesis, and the company was left to produce data that supports thesis. And that’s what it just did.

The data just released came from a phase 3 designed to prove that NKTR-181 can provide more effective pain relief than placebo, while also maintaining a clean safety and tolerability profile. Patients were split into two groups, both of which were initially treated with NKTR-181, but subsequent to initial treatment, one was treated with placebo and the other with active drug. At the end of a 12-week blinded dosing regimen, pain scores for the patients in the placebo arm rose by 1.46, while those for the patients in the active arm rose by 0.92. The data was statistically significant, and the take away is that the drug works as expected. Combined with the human abuse potential study numbers, it looks as though the drug is a shoo-in for approval, and that’s why the company is gaining strength as it is.

So, what is next?

Well, this isn’t a traditional NDA, commercialization, type situation. Instead of taking the drug forward itself, Nektar wants to find a partner that’s willing to foot the bill for commercialization. It’s not really surprising, and is something we have seen the company do previously, so the question becomes, who would be a reasonable suitor, and what is in it for Nektar as and when it plays out?

We saw a similar situation at the turn of the decade with another Nektar drug, a drug called Movantik in an opioid induced constipation indication. As part of the deal that underpinned Movantik’s commercialization, Nektar picked up a milestone payment of $100 million from AstraZeneca plc (ADR) (NYSE:AZN) on the back of the first commercial sale of the drug, and as per the terms of the deal, was eligible for $375 million in sales milestones. We expect a similar deal with this one, perhaps even with AstraZeneca, but likely with some slightly higher numbers in play, based on the potential market for 181 versus that of Movantik.

In terms of near-term price action, chances are we will see a short-term correction as traders take profits off the table (those that were in purely as a binary data play) but then a return to the upside action as the company moves towards striking a deal with big pharma.