Nektar's Amphotericin B Inhalation Powder,given in a single prophylactic inhalat

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Nektar Announces First Quarter 2006 Results

10.05.2006 20:10:00

http://finanzen.net/news/news_detail.asp?NewsNr=397348

Nektar Therapeutics (Nasdaq:NKTR)

-- Highlights include approval of Exubera® (insulin human (rDNA

origin)) Inhalation Powder in the U.S. and EU with first launch in

Germany in mid-May; the filing for approval of two partner products

with Nektar technology; and presentation of clinical data for

Amphotericin B Inhalation Powder product

Nektar Therapeutics (Nasdaq:NKTR) announced today its

financialresults for the first quarter ended March 31, 2006.

The company reported revenue of $29.0 million for the firstquarter

of 2006, compared to $28.5 million for the first quarter of2005. In

the first quarter of 2006, product and royalty revenue was$12.4

million compared to $6.4 million in the first quarter of

2005,including only one month of revenue recognized from Exubera

productsales, as a result of a 60-day acceptance condition on

product salesto Pfizer. Each of the remaining quarters in 2006 will

have threemonths of Exubera product sales to Pfizer. Contract

research revenuetotaled $14.8 million in the first quarter of 2006

compared to $19.5million in the first quarter of 2005 primarily

related to lowerExubera contract research payments from Pfizer.

The company reported a net loss of $33.5 million or $(0.38) pershare

for the first quarter of 2006 compared to a net loss of $26.2million

or $(0.31) per share for the first quarter of 2005. The netloss in

the first quarter of 2006 includes $5.0 million ofnon-severance

stock-based compensation expense as a result of theimplementation of

FAS 123R during the quarter. In addition, the lossalso included $3.9

million of severance costs, including $2.2 millionof stock-based

severance compensation, related to the retirement ofthe former

president and chief executive officer and other personnel.

As of March 31, 2006, Nektar reported cash, cash equivalents,short-

term investments, and investments in marketable securitiestotaling

approximately $528.1 million compared to approximately $566.4million

as of December 31, 2005.

" With the approval of Exubera and the progress of our proprietaryand

partner product pipelines, we are well positioned for futuregrowth

and success, " said B. Chess, chairman of the board, andacting

president and chief executive officer. " To help us achievesuccess

over the next few years, I am spending my time as interimpresident

and CEO to focus the company on building those components ofour

business that will result in the highest shareholder value and

onmanaging our underlying cost structure. Our most important

prioritiesare to meet the manufacturing demand for Exubera inhalers

and powderedinsulin; expand our long-term leadership position in

inhaled insulin;and manage the clinical development of our

proprietary products. "

Financial Outlook for 2006

Today the company is updating its guidance provided on February28,

2006 in the press release announcing its fourth quarter andyear-end

2005 results, including an increase in the amount of FAS 123Rnon-

severance stock-based compensation charges and increased

severanceand restructuring expenses. In summary, Nektar expects:

-- Revenue for 2006 in the range of $160 to $190 million, including

$60 to $80 million manufacturing and royalty revenue related to

Exubera, with the majority of the revenue being generated by

manufacturing sales to Pfizer.

-- GAAP net loss of $135 to $150 million, and a non-GAAP net loss of

$100 to $115 million. Non-GAAP net loss excludes $20 million of FAS

123R non-severance stock based compensation charges, and expenses of

approximately $15 million of special charges related to

restructuring and severances. The 2006 net loss estimate may change

as the company continues to evaluate potential restructuring

activities in 2006. See supplemental table attached to this press

release entitled " Reconciliation of Non-GAAP Projected Financial

Guidance for 2006. "

-- Cash, cash equivalents, and short-term investments and

investments in marketable securities at the end of the year of

approximately $415 to $440 million.

Recent Highlights

Exubera Approved in the U.S. and EU; German launch mid-May

On January 26, 2006, the European Commission approved Exubera forthe

treatment of adults with type 1 and type 2 diabetes. On January27,

2006, the U.S. Food and Drug Administration (FDA) approved

Exuberafor the treatment of adults with type 1 and type 2 diabetes.

Nektarpartnered with Pfizer to develop the inhalers and the powdered

insulinformulation for Exubera. Nektar will receive revenue from

Pfizer forthe manufacture of all the Exubera Inhalers and insulin

release units,and for some of the insulin powder processing. In

addition, Nektarwill receive revenue from royalties as a percentage

of Pfizer'send-product sales.

Nektar is also reporting today that Pfizer will be initiating

thefirst launch of Exubera® in Germany in mid-May.

Nektar Presents Encouraging Clinical Data for Amphotericin

BInhalation Powder

Nektar presented promising clinical data from Phase I clinicaltrials

of the company's Amphotericin B Inhalation Powder product atthe 2nd

Advances Against Aspergillosis Meeting, February 22-25, 2006in

Athens, Greece. The objective of the study was to investigate

thetolerability and pharmacokinetics of pulmonary administration

ofamphotericin B. Single doses of up to 25 mg of amphotericin B

werewell tolerated by the healthy subjects.

In addition, Nektar presented pre-clinical data both at theAdvances

Against Aspergillosis Meeting as well as at the Focus onFungal

Infections 16th Annual Meeting, March 8-10, 2006 in Las Vegas.These

data indicated that Nektar's Amphotericin B Inhalation Powder,given

in a single prophylactic inhalation dose, prevented fungal

(Aspergillus fumigatus) infection-induced morbidity and mortality

inan immunosuppressed animal model.

Nektar is developing Amphotericin B Inhalation Powder to

preventserious lung fungal infections that can occur in patients who

areseverely immunosuppressed, specifically during treatment for

acuteleukemia and organ or bone marrow transplants. By

deliveringtherapeutic doses of an antifungal directly to the lungs,

theAmphotericin B Inhalation Powder could prevent fatal

infectionswithout toxicities typical of systemically administered

antifungaldrugs. The product has FDA orphan drug designation that

could providea seven-year period of exclusive marketing for the

approved indicationto the first sponsor who obtains marketing

approval for thatindication.

Two Partner Products Filed for Approval

On April 27, 2006, Roche announced that it has filed a

marketingauthorization application (MAA) in the EU for CERA, which

uses Nektartechnology, for the treatment of anemia associated with

chronic kidneydisease. Previously, Roche announced on April 20,

2006, that it hassubmitted a Biological License Application (BLA) to

the U.S. Food andDrug Administration (FDA) to market CERA for the

treatment of anemiaassociated with chronic kidney disease including

patients on dialysisand not on dialysis.

In March and April 2006, UCB announced that they submitted a BLAto

the FDA and an MAA to the European Medicines Evaluation Agency

forCimzia, a unique PEGylated antibody fragment, for Crohn's

Disease.Cimzia is also in Phase III trials for the treatment of

rheumatoidarthritis.

Nine products with Nektar technology have been approved formarketing

in the U.S. and/or Europe.

Conference Call Information

B. Chess will host a conference call for analysts

andinvestors today beginning at 2:00 p.m. Pacific Daylight Time,

todiscuss further the company's performance.

Investors can access a live audio-only webcast through a link thatis

posted on the Investor Relations section of Nektar's website

athttp://www.nektar.com. The web broadcast of the conference call

willbe available for replay through May 24, 2006.

Analysts and investors can also access the conference call livevia

telephone by dialing (800) 559-2403 (U.S.); (847) 619-6534

(international). The passcode is 14548843# and the host is Mr.

Chess. An audio replay will be available shortly following the

callthrough May 24, 2006 and can be accessed by dialing (877) 213-

9653(U.S.); or (630) 652-3041 (International) with a passcode

of14548843#. In the event that any non-GAAP financial measure

isdiscussed on the conference call that is not described in the

pressrelease, related information will be made available on the

InvestorRelations page at the Nektar website as soon as practical

after theconclusion of the conference call.

About Nektar

Nektar Therapeutics develops and enables high-value,differentiated

therapeutics with its industry-leading drug deliverytechnologies,

expertise and manufacturing capabilities. The world'stop

biotechnology and pharmaceutical companies are developing new

andbetter therapeutics using Nektar's advanced technologies and know-

how.Nektar also develops its own products by applying its drug

deliverytechnologies and its expertise to existing medicines to

enhanceperformance, such as improving efficacy, safety and

compliance.

Non-GAAP Financial Measures

The Company provides all information required in accordance

withGAAP, but it believes that evaluating its ongoing results

ofoperations may be difficult to understand if limited to reviewing

onlyGAAP financial results. In managing the Company's business,

managementreviews non-GAAP results of operations, including non-GAAP

net income(loss) which excludes as applicable, stock-based

compensation chargesand severance and restructuring charges to

evaluate the company'songoing operating results.

Nektar management does not itself, nor does it suggest thatinvestors

should, consider such non-GAAP financial measures inisolation from,

or as a substitute for, GAAP financial measures. TheCompany

considers and presents such non-GAAP financial measures inmeasuring,

reporting, and forecast its financial results to providemanagement

and investors with an additional tool to evaluate theCompany's

operating results in a manner that focuses on whatmanagement

believes to be the Company's ongoing business operations.Management

believes that the inclusion of non-GAAP financial measuresprovides

consistency and comparability with past reports of financialresults.

Investors should note, however, that the non-GAAP financialmeasures

used by the Company may not be the same non-GAAP financialmeasures

as, and may not be calculated in the same manner as, that ofother

companies with which investors may compare the financial resultsof

the Company. Management believes it is useful for the Company

andinvestors to review both GAAP information that includes the

expensesand charges mentioned above and the non-GAAP financial

measures thatexclude such special expenses and charges to have a

betterunderstanding of the overall performance of the Company's

business,its allocation of resources, and its ability to perform in

the future.Investors are encouraged to review the related GAAP

financial measuresand the reconciliation of these non-GAAP financial

measures to theirmost directly comparable GAAP financial measure.

This press release contains forward-looking statements thatreflect

management's current views and expectations as to the Exuberaproduct

launch, product and technology development plans and funding,current

business position of the company, clinical plans andexpectations for

the clinical advancement of our proprietary andpartner products, the

potential for new product efficacy, safety,compliance, and economic

benefits for patients, the value and riskprofile of our proprietary

product programs, and financial projectionsfor the 2006 calendar

year. These forward-looking statements involveuncertainties and

other risks, including but not limited to: (i) thetiming and success

of the Exubera commercial launch (ii) the company'sability to

manufacture and supply sufficient quantities of Exubera drypowder

insulin and inhalation devices to meet market demand (iii)

thediscovery of any new or more severe side effects or negative

efficacyfindings for Exubera or any product liability claims related

thereto(iv) increased investment in our proprietary products prior

to seekingpartner collaborations may adversely impact our results of

operationsand financial condition (v) our success or the success of

our partnersin obtaining regulatory approvals and (vi) a material

negative impacton our results of operations for future periods as a

result of theapplication of FAS 123R related to expensing of stock-

basedcompensation. Other important risks and uncertainties are

detailed inthe company's reports and other filings with the SEC,

including itsmost recent Annual Report on Form 10-K, Quarterly

Report on Form 10-Q,and Current Reports on Form 8-K. Actual results

could differmaterially from the forward-looking statements contained

in this pressrelease. The Company undertakes no obligation to

updateforward-looking statements, whether as a result of new

information,future events or otherwise.

Exubera is a registered trademark of Pfizer Inc. Cimzia is

atrademark of UCB.

NEKTAR THERAPEUTICS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share information)

Unaudited

-------------------

Three-Months Ended

March 31,

-------------------

2006 2005

--------- ---------

Revenue:

Contract research revenue $ 14,817 $ 19,529

Product sales and royalty revenue 12,397 6,392

Exubera commercialization readiness 1,745 2,573

--------- ---------

Total

revenue 28,959 28,494

Operating costs and expenses:

Cost of goods sold 7,500 5,255

Exubera® commercialization

readiness costs 1,495 2,294

Research and development 31,401 34,945

General and administrative 20,373 9,110

Amortization of other intangible

assets 1,364 982

--------- ---------

Total operating costs and expenses 62,133 52,586

--------- ---------

Loss from operations (33,174) (24,092)

Other income/(expense), net (37) (1,285)

Interest income 4,882 2,272

Interest expense (5,142) (3,060)

--------- ---------

Income/(loss) before benefit/(provision)

for income taxes (33,471) (26,165)

Benefit/(provision) for income taxes -- --

--------- ---------

Net loss $(33,471) $(26,165)

========= =========

Basic and diluted net loss per

common share $ (0.38) $ (0.31)

Shares used in computing basic and

diluted net loss per share 88,926 84,708

NEKTAR THERAPEUTICS

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

March 31, December 31,

2006 2005

(unaudited) (1)

------------ ------------

ASSETS

Current assets:

Cash, cash equivalents and

short-term investments $479,516 $476,201

Inventory 33,180 18,627

Other current assets 36,670 25,015

------------ ------------

Total current assets 549,366 519,843

Investments in marketable securities 48,601 90,222

Property and equipment, net 140,301 142,127

Goodwill 78,431 78,431

Other intangible assets, net 11,944 13,452

Deposits and other assets 12,895 14,479

------------ ------------

$841,538 $858,554

============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable and accrued

liabilities $ 56,624 $ 53,626

Capital lease obligations - current 521 482

Convertible subordinated notes and

debentures - current 36,026

Deferred revenue 17,130 15,487

------------ ------------

Total current liabilities 110,301 69,595

Convertible subordinated notes and debentures 381,627 417,653

Accrued rent 2,390 2,409

Capital lease obligations - noncurrent 20,129 20,276

Other long-term liabilities 20,285 21,810

Stockholders' equity:

Preferred stock at par -- --

Common stock at par 9 9

Capital in excess of par value 1,244,234 1,233,690

Deferred compensation -- (2,949)

Accumulated other comprehensive loss (1,734) (1,707)

Accumulated deficit (935,703) (902,232)

------------ ------------

Total stockholders' equity 306,806 326,811

------------ ------------

$841,538 $858,554

========================

(1) The balance sheet at December 31, 2005 has been derived from the

audited financial statements at that date but does not include all

of the information and footnotes required by accounting principles

generally accepted in the United States for complete financial

statements.

Supplemental Table

NEKTAR THERAPEUTICS

Reconciliation of Non-GAAP Projected Financial Guidance for 2006

In millions of dollars

Refer to the discussion of non-GAAP measures included in the

accompanying press release for additional information.

2006 Projected Financial Guidance

----------------------------------

2006 projected Exubera-related

revenue range $ 60 to $ 80

2006 projected other revenue

range 100 to 110

----------- -----------

2006 projected total revenue range $ 160 to $ 190

Projected GAAP loss from operations

range $(135) to $(150)

Non-GAAP adjustments to loss

from operations

Projected stock-based

compensation expense 20 20

(non-severance related)

Projected severance and

restructuring charges(2) 15 15

----------- -----------

Projected Non-GAAP loss from

operations range $(100) to $(115)

(2) The company expects to record $15 million in projected severance

and restructuring charges, of which approximately $11 million is

related to severance-related stock-based compensation expense.