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After Exubera, Uncertainty Reigns

Bullish analysts knew diabetes was growing at a significant rate, and they felt others could make a simpler device than the cumbersome inhaler from Pfizer's partner Nektar Therapeutics (NKTR - Get Report). They also figured that Exubera familiarize the Food and Drug Administration with inhaled insulin devices, accelerating future regulatory review.

After FDA approval, however, Exubera was hit by launch delays, manufacturing problems and a time-consuming educational effort for doctors and patients.

Insurers balked at paying for a product that was more expensive, but not more effective, than traditional insulin. After a big, last-ditch consumer marketing campaign produced little impact, Pfizer dropped Exubera, stopped work on a new inhaler and returned Exubera's rights to Nektar.

"It has now become clear that true convenience in the form of a discreet portable device is required in order to win over patients," Dr. Nick Karachalis, a cardiovascular analyst for the independent research firm Datamonitor, said last week. "A true therapeutic advantage compared to traditionally administered insulin needs to be proven to secure reimbursement."

Datamonitor has long been skeptical of Exubera, even when some sell-side analysts were predicting peak annual sales of $2 billion. "While inhalable insulins will see a reasonable level of uptake, they aren't the sure-fire blockbuster they were hyped to be," the firm said 12 months ago.

Some analysts still make the case for inhaled insulin. Exubera's epitaph is "too soon to write, in our view," Forman told clients last week. "Diabetes is a war over decades that's bigger than the battles over financial results or any one company's fortunes."

Others, though, are pessimistic. "If Pfizer felt that a smaller second-generation device had a chance of becoming a blockbuster, we do not think Pfizer would have abandoned the entire concept," says Jon LeCroy, of Natixis Bleichroeder, in a research report. "We do not see significant differentiation in the inhaled programs currently in development to allow any of them to be a blockbuster, especially in light of multiple players in the market."

Even the easiest-to-use inhaler must cope with crucial financial and medical issues. Will insurers reimburse for inhaled insulin if it costs more but doesn't work better than the injected version? And what about side effects, especially how long-term use of inhaled insulin affects the lungs?

Exubera patients had to undergo lung-function tests, and the product's label had warnings about potential side effects. Some people, such as smokers and those with lung ailments, were prohibited from using Exubera.
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