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.
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.'"
So in 1990, Patton left Genentech to start his own company, where he could continue his pulmonary delivery research, this
time with insulin. He and his partner Bob Platz, an aerosol specialist from Stanford Research Institute (SRI), had no real
business experience, and, at first, venture capitalists were reluctant to invest in the enterprise. For a year, they struggled
to keep the company afloat with their own money, while cold calling investors. "Then at the 11th hour, after all my savings
and everything was gone, Onset Ventures funded us," Patton says.
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."
Pegging Its Future on PEG
Nektar's next move was to expand its core technology. First, it acquired the small-molecule pulmonary capability (PulmoSpheres)
and particle processing technology of San Diego–based Alliance Pharmaceuticals in 1999. Then in 2001, it bought both UK-based
Bradford Particle Design and Alabama-based Shearwater with its portfolio of PEGylation products.
PEGylation: Before and After. In the body, when bound to a protein or peptide, the PEG molecule"a polymer that can be synthesized
at many molecular weights"takes on water, and begins to move rapidly to sweep away other molecules and protect the drug. The
photo on the left shows a normal protein molecule; the one on the right has been PEGylated.
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:
- Amgen's Neulasta (pegfilgrastim) for neutropenia (low white blood cell count)
- Roche's Pegasys (peginterferon alpha-2a) to treat hepatitis C
- Schering-Plough's PegIntron (peginterferon alpha-2b) also for hepatitis C
- Pfizer's Somavert (pegylated human growth hormone receptor antagonist) indicated for acromegaly (pituitary tumor)
- Bristol-Myers Squibb's Definity, an ultrasound contrast agent.
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.)