After Exubera, Uncertainty Reigns

Long before Pfizer's(PFE) decision to stop selling Exubera, Wall Street was already having second thoughts about inhaled insulin.

Now, with Exubera's failure, analysts are sharpening their focus on competing products, none of which are expected to reach the market until 2009 or 2010 at the earliest.

The brightest spotlight is on companies with experimental products in late-stage clinical trials. Do they keep spending hundreds of millions of dollars in the belief that they can do a better job than Pfizer, which just took a $2.8 billion pretax charge to drop inhaled insulin?

Exubera's inability to catch on "negatively impacts the other inhaled insulin products in development as it was necessary for Pfizer to ease the barriers in the marketplace for later entrants to be successful," says the independent publication BioMedTracker, which analyzes drug and biotechnology developments.

"We are lowering our estimates for all the drugs in the inhaled insulin market," the research publication said Oct. 18. "We think at least some of the new entrants will do better than Exubera, because some of its unpopularity was likely due to its bulky device and difficult dosing."

Although many observers had turned sour on Exubera well before last week, at one time, after it received U.S. regulatory approval in January 2006, there was considerable enthusiasm for it and its competitors.

Despite Exubera's big lead, analysts initially viewed its endorsement as good for the Eli Lilly(LLY) partnership with Alkermes (ALKS), Novo Nordisk(NVO), and MannKind(MNKD). Their experimental products are in late-stage clinical testing.

Enthusiasm was bolstered by analysts' belief in company-sponsored studies that said many diabetics wanted an alternative to injectable insulin.

"Some -- certainly including this analyst -- may have overestimated the motivation of diabetics to adopt the clinical and disease management advantages [based on] market research," says Andrew Forman, of WR Hambrecht, in a research report to clients.