Nektar stock drops after Pfizer pulls plug on drug

LOS ANGELES (Reuters) - Shares of Nektar Therapeutics (NKTR.O) fell as much as 17 percent in Thursday trade after its partner Pfizer Inc. (PFE.N) pulled the plug on their inhaled diabetes drug Exubera amid sluggish sales.

Exubera, which was developed by Nektar and Pfizer, was approved by U.S. regulators in January 2006.

Expanding waistlines are fueling a rise in global diabetes rates and investors were betting Exubera would quickly become a blockbuster because it allowed diabetics to control their blood sugar by inhaling insulin rather than injecting it.

"Despite our best efforts, Exubera has failed to gain the acceptance of patients and physicians," Pfizer Chief Executive Jeff Kindler said in a statement. "We have therefore concluded that further investment in this product is unwarranted."

Pfizer said it would return its worldwide Exubera rights to Nektar and work with doctors over the next three months to switch Exubera patients to other diabetes treatments.

Howard Robin, Nektar's president and chief executive, said the company learned of Pfizer's decision to abandon Exubera from a press release this morning.

"Nektar has been very disappointed in Pfizer's performance in marketing Exubera. Pfizer has publicly acknowledged its organizational difficulties and resulting poor performance in launching Exubera," Robin said.

Robin said Nektar is evaluating its options with respect to Pfizer's decision.

News of the move by Pfizer did not come as a shock to some analysts.

"We were not surprised by this decision, as prescriptions to date continue to be weak," Friedman, Billings, Ramsey & Co. analyst Jim Reddoch said in a client note.

Quarter-to-date Exubera prescription numbers were flat, suggesting another $4 million quarter for the drug, Reddoch said.

Some analysts speculated the bulky canister device used to administer the powdered drug was a turn-off to patients.

Reddoch, who maintained a market perform rating on the stock, lowered his price target on Nektar to $6 from $8. He said he sees little opportunity for shares to appreciate over the next year due to the company's early-stage pipeline.

While he maintained his estimate for a 2007 loss of $1.20 per share and his call for a loss of 27 cents per share in 2008, Reddoch cut his 2008 revenue target to $142 million from $165 million.

Shares in MannKind Corp (MNKD.O), which is also developing an inhaled insulin, fell just over 5 percent, or 58 cents, to $10.22 in afternoon trade.

Other companies, including Novo Nordisk (NOVOb.CO) as well as partners Eli Lilly (LLY.N) and Alkermes Inc (ALKS.O) are developing inhaled insulin products. Alkermes shares were down 14 cents, or less than 1 percent, to $16.90 on the Nasdaq.