Ebb & Flow

Nektar (NKTR) was as surprised as anyone when Pfizer (PFE) announced last week that it would end further investment in Exubera inhaled insulin and return full worldwide rights to NKTR. The biotech, which developed and provides Exubera's inhalers and powdered insulin, said it learned of the decision from PFE's 3Q earnings release last Thursday.

PFE acquired exclusive rights to Exubera from sanofi-aventis (Euronext:SAN; SNY) for $1.3 billion in January 2006. But after launching Exubera in July 2006, the pharma's first sales report in July this year revealed 2Q07 sales of only $4 million.

The product has been dogged by a lack of awareness, complaints about the size of the inhaler, requirements for lung function tests and lack of long-term safety data (see BioCentury, Aug. 27).

Last week, the pharma took $2.8 billion in pre-tax charges in the third quarter on the costs associated with exiting the product. The company attributed the quarter's 77% decline in net income - to $761 million in 3Q07 vs. 3Q06 - to the Exubera charge.

The charges include $1.1 billion in intangible assets, $661 million of inventory, $454 million of fixed assets and $584 million of other costs.

PFE said it would work with physicians to tranfer Exubera patients to other treatments over the next three months.

NKTR closed the week down $1.73 (21%) to $6.54. In a statement, it blamed the pharma's "poor performance in launching Exubera," and said it was assessing its options "to protect the interests of Nektar."

NKTR's revenue from PFE, including Exubera and contract research revenue, was $108.4 million in 1H07, accounting for 72% of the biotech's $151 million in total revenue.

The other revenue comes largely from PEGylation partnerships, including deals with Roche (SWX:ROG) for Mircera erythropoiesis-stimulating agent (ESA) approved in Europe to treat anemia in patients with chronic kidney disease, and with UCB (Euronext:UCB) for Cimzia certolizumab pegol, a pegylated humanized antibody fragment against TNF alpha under review in the U.S. and Europe to treat Crohn's disease.

At June 30, NKTR had $406.8 million cash. Its operating loss

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