Incorporated: 1990 as Inhale Therapeutic Systems, Inc.
NAIC: 325412 Pharmaceutical Preparation Manufacturing; 339112 Surgical and Medical Instrument Manufacturing; 541710 Research and Development in the Physical Sciences and Engineering Sciences
SIC: 2834 Pharmaceutical Preparations; 3841 Surgical & Medical Instruments; 8731 Commercial Physical Research; 8733 Noncommercial Research Organizations
Nektar Therapeutics is a biopharmaceutical company that focuses on drug-delivery technologies. The company's two leading technologies involve pulmonary delivery and PEGylation technology. Nektar spent its first 15 years in business developing powdered insulin and an accompanying inhaler device, marketed by Pfizer Inc. under the name "Exubera." The company's PEGylation technology is a chemical process that improves the performance of drugs, increases their half-life, and reduces immune responses to drugs, thereby allowing longer treatment of a patient. The company's product development programs focus on diabetes, infectious disease, and oncology. Aside from its headquarters location, Nektar occupies facilities in Alabama, India, and Ireland.
Origins
After devoting nearly 20 years of his career to bringing Exubera to market, Nektar's cofounder, Dr. John S. Patton, paused to reflect on the arduous process that had led to the celebratory moment in January 2006. U.S. and European regulators had just approved the commercial sale of Exubera, the first inhaled form of insulin for use by adult diabetics. The search for answers to myriad scientific and engineering riddles was over. A genuine worldwide hunt for solutions to problems that had perplexed scientists for 80 years had ended. The successful conclusion to the exhaustive effort rested in Patton's hand: a collapsible, ten-inch-long, plastic and metal device that weighed four ounces. "Nobody thought you could do this and make it reliable," Patton said in a May 22, 2006, interview with Forbes. "It was like being the first party to cross the Sierra Nevada--a long, difficult journey."
Patton's journey began in 1985. A marine biologist by training, Patton was a professor at the University of Georgia's Marine Science and Microbiology Departments when Genentech, Inc., a San Francisco-based biotechnology company, asked for his help. Genentech sought the expertise of a distinguished scientist with a stellar academic record. Patton earned his undergraduate degree from Pennsylvania State University, his graduate degree from the University of Rhode Island, and his doctorate in biology from the University of California, San Diego. Patton also received postdoctorate fellowships in biomedicine from Harvard Medical School and the University of Lund in Sweden. Patton's education and his time at the University of Georgia shaped him into an expert in the field of peptide and protein delivery, skills that drew the attention of Genentech. Genentech hired Patton in 1985 "to find a way to get proteins into the body without needles," Patton said in an April 2004 interview with Pharmaceutical Executive. Specifically, Genentech hired Patton for his knowledge about how fish absorbed fat through their intestines, information, Genentech hoped, that would enable the company's injectable growth hormone to be taken orally. Patton, who headed up Genentech's noninvasive drug delivery department, went to work on the project, but his progress was halted when he discovered growth hormone was too large to avoid destruction in the stomach. Patton began looking for another way to administer growth hormone and realized preliminary success in 1986 when he injected liquid hormone into a rat's lungs. After noticing how well the drug was absorbed in the rat's system, he convinced Genentech management to fund further development of the pulmonary delivery method. The company applied to patent the inhaled delivery of growth factors, but four years later, after management decided to focus on other protein drugs, funding of Patton's project was cut.
When Patton left Genentech in 1990, he left with promising research and a desire to continue the work even if it meant starting his own company. He enlisted the help of Robert M. Platz, an aerosol specialist employed by the Stanford Research Institute, and, using his own money, started Nektar's predecessor, Inhale Therapeutic Systems, Inc., in July 1990. Genentech gave the two founders a license to use the company's inhaled delivery patent, provided the pair steered clear of the growth hormone business, and Patton and Platz set out, choosing to focus their pulmonary delivery work on the noninvasive delivery of insulin. Without any practical business experience, the two scientists ate through their savings to keep their business going until they could convince an investor to provide some financial aid. The partners toiled for a year, eventually producing a crude inhaler the size of a coffeepot that showed enough promise to convince Onset Ventures in 1991 to invest in Inhale Therapeutic. "I put everything into it," Patton said in his interview with Pharmaceutical Executive, referring to the money he had spent keeping his company afloat. "I went down to zero."
Onset Ventures initially invested $400,000 in Inhale Therapeutic, enough to keep the business going but only a small fraction of the capital that would be needed to develop Patton's inhaled delivery device. Onset Venture also proved to be a useful contributor to the managerial side of the start-up's business, relieving Patton from having to play the twin roles of head executive and chief scientist. The venture-capital firm helped Patton find a qualified chief executive officer, introducing him to Robert B. Chess, who had held management positions at semiconductor manufacturer Intel Corp. and Metaphor, a computer software company. Before joining Inhale Therapeutic at the end of 1991, Chess served as president of a dermatological company, Penederm Inc., and as an associate deputy director in the White House Office of Policy Development.
Pioneering Research and Development
With his seed money in place and a seasoned executive to handle the business side of Inhale Therapeutic's operation, Patton turned to the daunting task at hand, the goal that had eluded scientists since the 1925 discovery that insulin could be absorbed through the lungs. Patton turned to experts from a wide variety of disciplines, recruiting scientists and engineers specializing in pharmaceutics, mechanical engineering, fluid dynamics, aerodynamics, and combustion science. Once gathered together at the company's laboratories in San Carlos, California, the Inhale Therapeutic team directed its diverse talent on making Patton's vision a reality. First, they had to find a way to turn liquid insulin into a powder, a formidable challenge because insulin only remained biologically active in a liquid state. The powder had to consist of uniform particles small enough to navigate the serpentine route through the mouth, the throat, and the trachea, but large enough so they could not be easily exhaled. The research and development team was aiming for particles two microns wide, or one one-thousandth the width of a pinhead. Once the dry powder had been developed, the delivery device had to be engineered. It needed to operate without batteries, at room temperature, and be able to explode the air inside its breathing chamber at speeds up to 900 miles per hour (household aerosol sprays, by comparison, travel at about four miles per hour). Earlier attempts at developing an insulin inhaler required up to 60 breaths for the patient to receive the correct dose. Inhale Therapeutic's device had to deliver a complete dose within one second.
The Inhale Therapeutic research team hit the road and took to the air to find the solutions to the array of challenges it faced. The company's multi-disciplinary task force fanned across the globe, studying ancient Chinese seeds, plants in the Mexican desert, and manufacturing methods used in instant coffee production, powdered milk production, aviation aerodynamics, truck fuel injector design, and the manufacture of industrial vacuum pumps. The far-flung research efforts, aimed at finding a way to make dry insulin and a device to administer the powdered drug, gained critical financial support in 1995, when pharmaceutical behemoth Pfizer Inc. agreed to collaborate with Inhale Therapeutic. Pfizer, in the decade to follow, would contribute more than $1 billion to fund the development of what became known as Exubera, an investment that gave the company the rights to market the product. Inhale Therapeutic conducted hundreds of hours of computer simulations and tested more than a dozen formulations of dried insulin before discovering the right recipe, a mixture of insulin, glycine (an amino acid), citrate (the salt of an organic acid found in humans), and mannitol (a sugar used in intravenous products). Clinical trials ensued, as Pfizer and Inhale Therapeutic entered the lengthy and costly process of gaining approval from the U.S. Food and Drug Administration (FDA) and its European counterpart, the European Medicines Evaluation Agency (EMEA). When Exubera received regulatory approval from both bodies in January 2006, Patton's "long journey" ended, but he already had begun to head out in several different directions, pursuing scientific objectives that turned Inhale Therapeutic into Nektar.
Acquisitions in 2001 Lead to Name Change in 2003
By the end of the 1990s, Inhale Therapeutic's narrow focus on inhaled insulin had exacted a heavy financial toll on the company. The company lived off contract research revenue and posted substantial losses every year during its first decade of business, racking up a cumulative net loss of $94 million. With Pfizer taking much of the responsibility for shepherding Exubera through the regulatory approval process, the time had come for Inhale Therapeutic to explore other business opportunities. The company decided to focus on its expertise in drug delivery and apply its technology to other drugs and to different types of delivery methods. "We looked at drug delivery from drug discovery to commercialization," an Inhale Therapeutic senior executive explained in a June 2003 interview with Manufacturing Chemist. "We decided that the best way to accelerate our growth is to take the mature technologies that we have and use them to create differentiated products."
At the turn of the millennium, a search was initiated for companies with technologies that could be applied across a wide range of molecules, leading to two major acquisitions that broadened the scope of Inhale Therapeutic's capabilities. In 2001, Inhale Therapeutic paid $200 million for U.K.-based Bradford Partide Design and $191 million for Alabama-based Shearwater Corp. Bradford Partide, a company formed and spun off by Bradford University, specialized in the use of supercritical fluids (gases under enough pressure and heat to take on the characteristics of a fluid) to engineer the size, shape, and properties of dry powder particles. An Inhale Therapeutic senior executive explained the reasoning behind the acquisition in an April 2004 interview with Pharmaceutical Executive. "The thinking there was that a lot of what we do in pulmonary delivery is make particles," the executive said. "And at the root of the Bradford technology was a similar capability that had some application in pulmonary delivery. But its real strength was in oral and injectable delivery, so we thought it would give us an entry into those areas." The Shearwater acquisition gave Inhale Therapeutic a portfolio of products using PEGylation technology. "To the body and the immune system," Patton explained to Pharmaceutical Executive, "a PEG molecule looks pretty much like a big bubble of water, so to make proteins more soluble and keeps them from sticking to each other, which is one of the causes of immune reaction."
The expanded capabilities of Inhale Therapeutic led to a name change for the company. In 2003, Nektar Therapeutics became the official corporate title of the San Carlos firm. "The name Nektar reflects that our leading pulmonary, injectable, and oral drug-delivery technologies coupled with our increased development capabilities, including clinical, regulatory, and product expertise, are the essential elements that enable, improve, and extend products for our biopharmaceutical partners," a company executive said in a March 2003 interview with R&D Directions.
With a new name, the company pressed forward, able to marshal its energies in a number of different directions. "We have three really solid, broad-based technologies," Nektar's vice-president of corporate development explained in a June 2003 interview with Manufacturing Chemist. "If we had one technology platform and it was applicable to only two or three molecules, our only choice to grow would be to take a molecule all the way through to approval, but our three technologies and their ability to differentiate products gives us a great opportunity." In the years leading up to the approval of Exubera, the company's more comprehensive talents were on display. Nektar formed partnerships with pharmaceutical companies such as Novartis Pharma AG, Bayer Healthcare, Hoffmann-La Roche Ltd., and more than a half-dozen other firms, collaborating on a range of treatments for afflictions such as osteoporosis, lung infections in cystic fibrosis patients, Crohn's disease, and renal anemia.
Nektar's laboratories were abuzz with activity, but there was little doubt attention turned away from the bevy of projects underway to celebrate Exubera's release in 2006. After receiving approval to market Exubera in January, Pfizer began a phased release of Exubera Inhalation Powder and the Exubera Inhaler in July. Nektar manufactured the insulin powder, for which the company received manufacturing revenues from Pfizer, and it received a product royalty based on end-product sales and Pfizer's cost of goods sold. The product sold for between $4 and $5 for a daily dose. One industry analyst projected Exubera sales to reach $2.8 billion by 2010, when the product was expected to control as much as 30 percent of the market for insulin. After 16 years, Patton's persistence had paid off, completing his metaphorical journey across the Sierra Nevada and leaving him, as Nektar's chief scientific officer, bound for new uncharted territories in the field of drug-delivery technology.
Principal Subsidiaries
Nektar Therapeutics AL, Corporation; Nektar Therapeutics UK, Ltd. (U.K.); Inhale Therapeutic Systems Deutschland GmbH (Germany); Nektar Therapeutics (India) Pvt. Ltd.; Aerogen, Inc.
Principal Competitors
Alexza Pharmaceuticals; Alkermes, Inc.; Aradigm Corporation; MannKind Corporation; Microdose Technologies Inc.; Enzon Pharmaceuticals, Inc.
Further Reading
Ayshford, Hilary, "Evolving Strategy," Manufacturing Chemist, June 2003, p. 42.
Bess, Alice, "Needle Phobia Breathes Life into Inhale," San Francisco Business Times, July 30, 1999, p. 18.
"Completed Acquisitions of UK Private Companies," Acquisitions Monthly, January 2001, p. 104.
Dolan, Kerry A., "The Impossible Made Possible," Forbes, May 22, 2006.
Ginsberg, Steve, "Inhale Hopes Drug Device Becomes a Financial Cure," San Francisco Business Times, April 30, 1999, p. 22.
Hume, Claudia, "Inhale Branches Out into Small Molecules," Chemical Specialties, March 2001, p. 7.
"Inhale Acquires Shearwater for $191MM," Chemical Market Reporter, May 28, 2001, p. 8.
Langreth, Robert, "Waiting to Inhale," Forbes, July 9, 2001, p. 160.
"New Name for Next Stage," R&D Directions, March 2003, p. 18.
Sellers, L. J., "Special Delivery," Pharmaceutical Executive, April 2004, p. 66.
"Should You Inhale?" Business Week, January 22, 2001, p. 111.
— Jeffrey L. Covell
