After 10 years of investment and a recent stepped up marketing campaign, Pfizer threw in the towel on Exubera , having failed to convince physicians and patients of the convenience of the inhaled insulin product. The company announced it would discontinue sales of the diabetes drug - the first inhaled insulin to hit the market - during a third quarter 2007 sales and earnings call Oct. 18.

"Despite the best efforts of our sales, marketing and manufacturing colleagues, the product has simply not gained the acceptance of patients and physicians," CEO Jeff Kindler stated. Pfizer licensed the inhalation device from Nektar Therapeutics.

Pfizer will support physicians over the next three months as they transition patients to other drugs. Employees who have worked on the sales, marketing, medical and R&D for Exubera will be redeployed to other products that are "projected to generate higher returns," Kindler said. Those products include late-stage development projects, as well as stepped-up field force support for in-line products.

Manufacturing dedicated to Exubera will be phased out. Opportunities for redeployment in manufacturing are more limited, Kindler acknowledged, noting the company will explore alternatives for sites and employees in consultation with works councils.

Pfizer's decision to phase out Exubera hardly comes as a surprise. The inhaled insulin product got off to a rocky launch right from the start, with several delays due to manufacturing challenges with the device. Pfizer finally rolled the product out on a limited basis in September 2006, eight months after gaining FDA approval in January (¹ Also see "Exubera Launch Falls Back To Early Autumn" - Pink Sheet, 20 July, 2006.).

At the start of the year Pfizer said it was initiating a full-scale launch and "full court" press support for the product, but nonetheless, the drug failed to gain traction with physicians and patients who found the technology burdensome ranging from the required lung function testing to training on how to use the device.

Exubera generated only $12 million in sales for the year to date, CFO Frank D'Amelio reported. Pfizer's former regime had high hopes for Exubera back when it launched, predicting the product would produce $2 billion in sales annually by 2010.

Pfizer will take a pre-tax charge of $2.8 billion related to the write-off of assets associated with Exubera. The charges include $1.1 billion of intangible assets, $661 million of inventory, $454 million of fixed assets and $584 million of other costs.

As a result of the failed launch, Pfizer also is halting development of a second-generation inhaled insulin product. The company had been working on a follow-on product with a smaller, easier to use device.

Despite the potential benefits of a smaller device, Worldwide Pharmaceutical Operations President Ian Read said the barriers to the market, moving patients onto insulin earlier and the burden of the technology on physician practices was simply too great to warrant development of a follow-on product.

Pfizer's decision to back out of the therapeutic category could be viewed either opportunistically or apprehensively by other drug makers looking to take the plunge into the market, among them Eli Lilly, Novo Nordisk and Mannkind.

Lilly is evaluating its inhaled insulin candidate, AIR , in Phase III studies with its partner Alkermes, and is on track for filing in 2009. During its Q3 call the same day, President John Lechleiter reinforced Lilly's support for the product, noting, "We're not backing away an inch."

"The technology behind the approach that we're taking, we think is going to be more convenient for patients, easier to use," he said.

As a result of the $2.8 billion Exubera charge, Pfizer's net income nosedived 77 percent in the third quarter over the year-ago period to $761 million. Adjusted income, excluding purchase-accounting adjustments, acquisition-related costs, discontinued operations and other items, increased 1 percent to $3.96 billion, Pfizer reported.

Sales fell 2 percent over the quarter, to $11.99 billion, reflecting the loss of exclusivity for the antidepressant Zoloft (sertraline) and Norvasc (amlodipine).

The impact of Pfizer's decision on Exubera will be felt acutely by San Carlos, Calif.-based Nektar Therapeutics, which developed the inhaler device and the powdered insulin formulation for Exubera.

In a statement, Nektar said it was "very disappointed in Pfizer's performance in marketing Exubera." Nektar first learned of Pfizer's decision to exit the business from the company's press release, the firm noted.

"Pfizer has publicly acknowledged its organizational difficulties and resulting poor performance in launching Exubera," the company said. "We are evaluating all of our options with respect to Pfizer's Exubera announcement to protect the interests of Nektar."

Elliott Wilbur of CIBC wrote in a same-day analyst note that he expects Pfizer to "fully reimburse Nektar on Exubera-related close-down costs."

Nektar has an early-stage pipeline of drugs in development, including an inhaled amikacin antibiotic, NKTR-061, recently partnered with Bayer.

-Jessica Merrill (j.merrill@elsevier.com)

Pfizer’s Not Waiting To Exhale; Firm Takes Action By Terminating Exubera

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