Updated from 9:27 a.m. EDT

Pfizer ( PFE) has decided to abandon the disappointing inhaled insulin product Exubera, requiring it to take a massive charge that sent its third-quarter earnings down sharply from a year ago.

Net income plunged 77% to $761 million in the quarter, down from $3.36 billion a year earlier. The primary culprit was a pretax charge of $2.8 billion to end its involvement with Exubera, a diabetes treatment it created with Nektar Therapeutics ( NKTR).

"Despite our best efforts, Exubera has failed to gain the acceptance of patients and physicians," Pfizer said in a press release. "We have therefore concluded that further investment in this product is unwarranted."

The news hit Nektar hard, and its shares fell nearly 16% to $6.81. Pfizer was up 11 cents to $24.66 Thursday.

Had the charge not been a factor, Pfizer's adjusted income for the quarter would have increased 1% to $4 billion.

Earnings per share, after all items were counted, declined to 11 cents from 46 cents a year ago. Excluding items, Pfizer would have earned 58 cents in the most recent quarter. On that basis, it beat estimates by 6 cents.

Looking ahead, Pfizer slightly raised the low end of its 2007 estimates and affirmed its projections for 2008. This year, Pfizer expects to earn $2.10 to $2.15 a share on revenue of $47.5 billion to $48 billion. Previously, it was planning on a profit of $2.08 to $2.15 and a top line of $47 billion to $48 billion.

For next year, the drugmaker kept its revenue guidance of $46.5 billion to $48.5 billion and its adjusted earnings target of $2.31 to $2.45 a share.

Revenue for the third quarter fell 2% to $11.99 billion from $12.28 billion in the 2006 period, partly because Pfizer lost patent protection on two big drugs, Zoloft and Norvasc. New products and the favorable effects of the weak dollar provided something of an offset.