Posted by: Audrey Erbes | October 23, 2007

So Why is Nektar Surprised?

 

I’ve been reading the obituaries on Nektar’s Exubera in the making for over a year so wasn’t surprised that Pfizer finally bailed out from the deal. But I was taken aback that Nektar seemed so stunned by the news.

 

What should a company do when their partner’s product fails in the market place after doing their best to provide support when the going got really tough? Reasonable people would expect the partner to follow through on the terms of the contract in which they entered, having recognized at the outset that the contract is a form of  prenuptial agreement when the deal was struck. It’s common knowledge that 50-60% of drug deals fail so the risk of a potential breakdown is always a possibility.

Nektar (formerly Inhale) clearly was aware of the problems their Exubera product would potentially confront when marketed. They knew it never was a total replacement for daily administration of insulin with needles—that an injection would be required at least once a day. This was ominous for any marketing person who looked beyond the hype which implied “no needles”. The wastage of 90% of the insulin in the delivery device was recognized early as a major cost/pricing and reimbursement concern. And, lastly, companies in the inhaled drug space recognized already in the 1980s how important a small attractive size was to success, especially, for child users who would need to administer the medication at school. The market knowledge that convenience was critical with administration of attention deficit drugs was out there for all companies in the drug delivery space, as was experience with growth hormone injections for children.

I was surprised about the condemnation of Pfizer as a bad partner. I don’t agree that potential partners will back away from future collaborations with Pfizer over their exit from the Nektar deal. I thought it was very generous that Pfizer stuck by Nektar (then Inhale) back in 2002 when the drug was not approvable for lack of respiratory safety data. News reports indicate the pretax exit costs totaled $2.8 billion, broken down as $1.1 billion of intangible assets, $661 million in inventory, about half a billion in fixed assets and over half a billion in other exit costs. They continued to demonstrate commitment to the product as recently as January of 2006 in a major way when they acquired Sanofi-Aventis’s rights to the drug for $1.3 billion at a time when I thought they should be bailing out. When the initial launch failed, they replaced it with another costly relaunch.

Audrey

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