When executives from


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arrive at the American Diabetes Association's annual scientific conference later this week, they can expect a barrage of questions about two drugs whose futures are anything but clear.

For Glaxo, it's Avandia, the blood-sugar control pill that has been under siege since

The New England Journal of Medicine

published research last month saying the drug's users had a higher risk of heart attacks than people who took other diabetes medications. For Pfizer, it's Exubera, the inhaled insulin whose sales have been simply dreadful.

Glaxo has been defending the safety of Avandia, its second-biggest drug, ever since the


published its article and

wrote an editorial asking the Food and drug Administration to take action. The FDA, which has convened an advisory panel for July 30, has already advocated a tougher

warning label. At a recent congressional hearing, legislators criticized Glaxo and the FDA's handling of Avandia.

The criticism has taken a toll. For the four weeks ended June 1, total U.S. prescriptions -- refills and new prescriptions -- for Avandia dropped 14% from the previous four weeks, according to the investment banking firm A.G. Edwards and the medical data-monitoring firm IMS Health. New prescriptions dropped 17.6%.

Glaxo officials recently told editorial writers at

USA Today

that total Avandia prescriptions had dropped about 10% since May 21, while new prescriptions had sunk by roughly 40%.

One beneficiary of Avandia's woes appears to be


Actos, which belongs to the same drug class. Takeda has said it will strengthen Actos' warning about cardiovascular risk. Prescriptions for Avandia are "unlikely to recover," says a recent report by S.G. Cowen, based on interviews with several endocrinologists.

For the first quarter of 2007, Avandia contributed $617 million in revenue. Two other drugs that combine Avandia's main ingredient and other diabetes medications produced $194 million. The Avandia family represents about 7% of Glaxo's corporate revenue.

Meanwhile, Exubera's sales never had very far to fall because they barely got off the ground due to

manufacturing problems, launch delays and physician reluctance to prescribe it. As of June 1, Exubera had 0.2% of total U.S. insulin prescriptions and 0.4% of new prescriptions, according to A.G. Edwards and IMS Health.

With an initial marketing campaign that was called a "disappointment" by

Pfizer executives and

worse by its partner

Nektar Therapeutics,

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, Pfizer has started a "re-launch."

This effort includes more education for physicians, extra sales representatives and an upcoming direct-to-consumer ad campaign. Pfizer hopes to prove wrong last July's comment by Hank McKinnell, the former chairman and CEO. Reporting a delay in Exubera's debut, he said Pfizer wanted to get it right because the company wouldn't get a second chance to launch the first inhaled insulin.

"The key for us

at the ADA convention will be physician feedback," says Patricia Bank, of Pacific Growth Equities, in a June 18 note to clients. She has a buy rating on Nektar, but she doesn't own shares of Pfizer and doesn't cover the stock.

Based on conversations with several diabetes specialists, Bank says the lack of long-term data about Exubera's effect on the lungs could restrain sales. Pfizer says smokers and people with lung disease shouldn't use Exubera, and it says all patients should get periodic

lung-function tests.

"We will be looking to gauge the general sentiment around pulmonary insulin as a whole and whether Pfizer's presence gives us any feeling of comfort that they remain committed to the Exubera effort," says Bank.

"Our experts do not believe the safety data that will be presented for Pfizer's Exubera will be sufficient to alleviate concerns of pulmonary fibrosis," adds Michael King, of Rodman & Renshaw, in a recent research report.

Pulmonary fibrosis is a scarring of the lungs that reduces their ability to transfer oxygen to the bloodstream. King doesn't cover Pfizer and doesn't own shares.

But Andrew Forman, of WR Hambrecht, believes Exubera will catch on thanks to Pfizer's enhanced marketing.

"If it is truly darkest before the dawn, then we believe now is the time to put money to work in Nektar," he says in a June 11 report affirming his buy rating. He doesn't own shares, and he doesn't cover Pfizer.