The Big Picture. CEO Ajit Gill (right) and co-founder and chief scientific officer John Patton (left) discuss Nektar's strategy for profitability and independence.
Nektar—the drug delivery firm formerly know as Inhale—has been around for 14 years, but its pace during the last few has been dizzying. In 2001, the company made two major acquisitions that not only expanded its technology base from inhaled therapeutics to a broad range of exciting new technologies, but also gave it revenue from five products on the US market that use its technology and lined-up another four in Phase III. In 2002, Nektar brokered 11 collaborative partnerships, and in 2003, it generated $106 million in sales.
The company also established a business unit to develop proprietary drugs and changed its name in January 2003 to reflect its new strategy. Now its core technology (and longest-running project)—an inhaled insulin called Exubera, co-developed by Pfizer (and its partner Aventis)—has been filed for approval in Europe and is expected to hit the billion dollar sales mark.To some extent, the company's progress parallels the evolution of drug delivery itself. Formulation used to be an afterthought; pharma companies viewed it as a way to extend a product's lifecycle and sought out delivery partners only after sales had peaked. Now, method of delivery is the foundation for many products and is incorporated into development in very earlier stages. For biotech products in particular—proteins, peptides, and enzymes—delivery is often the most important consideration. So the choice of development partners is equally critical.
Tenacity Pays Nektar's co-founder and chief scientific officer, John Patton, PhD, a biologist with a specialty in peptide and protein delivery, is as tenacious as scientists come. In 1985, he was hired by Genentech to "find a way to get proteins into the body without needles." And he did just that. As head of Genentech's drug delivery group, he demonstrated the feasibility of systemic delivery of human growth hormone through the lungs. "But when I brought it up to the product development committee, which is the gatekeeper for spending big bucks," Patton recalls, "they said, 'This looks like a great idea, but we would rather put that money into a brand-new molecule.'"
That close call with bankruptcy doesn't bother him. "I put everything into it. I went down to zero," he says. "But when people say, 'Oh you're so brave, how did you have the nerve?' I say, 'This isn't bravery or courage. This is fun.'"
Onset Ventures, which specializes in early start-up teams, initially invested $400,000 and helped the founders find a CEO, Robert Chess (now chairman), who had been president of a dermatological company, and a consultant, Ajit Gill, who would eventually become CEO. At first glance, Gill seems an unlikely choice. He's an electrical engineer with a background in software: He worked in Kodak's Interactive Systems division and Visicorp's business development unit. But Gill needed a change, and as often happens with startups, serendipity prevailed.
"I decided I wanted to work for a company where I really care about the product," he says. "I happened to know Rob Chess, and I happened to know the investors who provided the seed financing. And the timing just happened to work out."
But once the new executive team had funding, they put serendipity behind them and geared up to make things happen.
The Other Insulin Nektar's first step was to find a partner to help it develop the inhaled insulin that Patton had been working on for years. In 1994, the company approached several major players in the insulin and various other markets, but Pfizer was the one willing to take on the project . (See "No More Needles?")
Development was slow going. In 1996, the companies announced their first Phase II data. In 1998, the American Diabetes Association called their product a "breakthrough." As Phase III trials continued, Pfizer took on Aventis as its partner in 1998 to share the expense. Finally, in March 2004, Exubera was submitted to the European Medicines Evaluation Agency (EMEA) for approval. When asked about a US application, Pfizer spokesperson Vanessa McGowan commented, "Right now we're working closely with FDA so we can put together the most robust package for filing."
Nektar executives and analysts alike believe Exubera has great potential. "If you price the product at $3 a day, all you need is seven percent of the target market, and it's a $1 billion product," Gill comments. When you consider that the number of people with diabetes is expected to double by 2025, according to the World Health Organization, the market seems wide open.
Mara Goldstein, an analyst with CIBC World Markets, is a bit more cautious: "The regulatory path of pulmonary absorption is still uncharted. But there's a little less uncertainty for the future of inhaled insulin today than there was a few years ago." But she rates the company at "sector perform" and adds, "Fundamentally, they've done a good job."
In simple terms, PEG technology binds a polyethylene glycol to a biological drug to extend its duration of action. The PEG molecule is a neutral, water soluble, nontoxic polymer that can be synthesized in many different weights and is used to thicken and/or stabilize medical products and consumer items such as cosmetics, toothpaste, and shampoo.
In the body, when bound to a drug, the molecule takes on water and begins to move rapidly to sweep away other molecules and protect the protein or peptide. (See "PEGylation: Before and After.") It not only prevents the protein drug from aggregating and producing an immune response, it also keeps the protein circulating in the body much longer than it would without the PEGylation. So PEGylated injectable drugs have a better safety profile and need to be administered less often, sometimes weekly instead of daily.
"To the body and the immune system, a PEG molecule looks pretty much like a big bubble of water," Patton says. "So it makes proteins more soluble and keeps them from sticking to each other, which is one of the causes of immune reaction. Gill explains the company's rationale for making the Shearwater acquisition: "The more we looked at it, we realized the technology was going after proteins and peptides, which is our sweet spot, our focus in the pulmonary area. And in some ways, it represented a competitor." It also represented a source of cash: Shearwater was drawing revenue from products on market using its PEGylation technology. There were three at the time of purchase, and two were approved after the merger:
For injectables, Patton says that PEG is the standard for all future macromolecule or biologic drugs. "If I was starting out as a young company with a new biological, I wouldn't even consider bringing a product on the market without PEGylation."
But acquiring the PEG technology was a strategic move that went beyond cash and competition. It also represented a way to improve Nektar's core competency: inhaled proteins. "We thought, 'What if you could deliver those drugs [PEG peptides and proteins] through the lungs?'" Gill recalls. "It would mean less frequent dosing of pulmonary delivery." So the company's proprietary unit is developing a PEGylated inhaled insulin that is essentially a long-acting version of Exubera. (No partner is on board yet.)