Updated from 7:51 a.m. EST

The Food and Drug Administration on Friday gave its approval to Exubera, an inhaled form of insulin developed by Nektar Therapeutics ( NKTR - Get Report) and Pfizer ( PFE - Get Report), a day after the product was also cleared by European regulators.

Exubera, the first inhaled insulin approved for sale, will improve compliance among diabetics who now inject insulin to control blood sugar, the product's manufacturers say. According to the FDA, Exubera is the first new insulin delivery option introduced since insulin's discovery in the 1920s.

Nektar developed the inhalation technology to administer a dry-powder form of insulin. Pfizer and Sanofi-Aventis ( SNY - Get Report) joined in the development and marketing partnership for Exubera, but Pfizer recently bought the French company's interest in the product for $1.3 billion.

Pfizer says it has invested more than $1 billion in the development of Exubera, including plants in Germany and Indiana. The European Union approved Exubera for both type 1 and type 2 forms of diabetes, as did U.S. regulators.

Type 1 diabetes is caused by the body's inability to produce insulin, the protein hormone that helps turn sugar into fuel for the body's cells. Type 2 diabetes is caused by cells ignoring insulin or the body's failure to produce enough insulin.

Before the FDA provided official word that it had approved Exubera, Pfizer Chief Executive Hank McKinnell spiced up the proceedings on cable channel CNBC by saying he expected the FDA to approve the drug before trading opened Friday. The company then hastily rushed out a statement saying that wasn't true. Just a few hours later however, the FDA did give Exubera the green light.

Shares of Nektar tacked on 7 cents to $20.69. Pfizer gained 92 cents, or 3.7%, to $25.97.

The EU cleared the drug for treating people over age 18 whose type 2 diabetes isn't adequately controlled with other medications and who require insulin. Exubera also is approved for adults with type 1 diabetes, "in addition to long- or intermediate-acting injectable insulin, for whom the potential benefits of adding inhaled insulin outweigh the potential safety concerns," Pfizer said Thursday.

The concerns relate to the possibility of lung problems. "A small decrease in lung function may occur during Exubera treatment although symptoms might not be noticeable," Pfizer says. "This change occurs within the first months of treatment and should not worsen as treatment is continued."

Pfizer says patients should not take Exubera if they have "poorly controlled or unstable lung disease," if they smoke, or if they stopped smoking less than six months before taking the drug.

Before starting Exubera, patients must undergo a lung-function test. "This will help to find out if Exubera is the right treatment for individual patients," Pfizer says. Once a patient starts Exubera, Pfizer says a physician should recheck the patient's lung function after six months.