Rational Exuberance

Pfizer (NYSE: PFE  ) provided an extensive update yesterday on its development pipeline. The depth and breadth of the firm's list of projects is truly impressive, and includes 222 programs and 142 novel compounds. Even the world's biggest pharmaceutical company, though, can't achieve its goals on its own.

That's where Nektar Therapeutics (Nasdaq: NKTR  ) comes in. Nektar is in a class of companies known as drug delivery technology providers that includes Motley Fool Hidden Gems recommendation Flamel Technologies (Nasdaq: FLML  ) . These outfits represent a critical piece in future drug development, by making the delivery of medicines easier or improving drugs' effectiveness.

Pfizer mentioned in its update yesterday that it will file with the Food and Drug Administration for U.S. approval of Exubera, an inhaled form of insulin that utilizes Nektar's pulmonary delivery technology, in 2005. The disclosure eased uncertainty surrounding the treatment's future, and the drug delivery specialist's stock promptly surged, closing up 23% yesterday.

It's easy to see why investors are so excited: According to Reuters, some analysts estimate that the first approved form of inhaled form of insulin could bring in $2 billion in sales. Nektar would receive an undisclosed piece of that revenue in the form of royalty payments.

Nor is Exubera the only project Nektar is working on. The firm has a separate collaboration with Pfizer for an early stage treatment, as well as late stage partnerships with Roche and UCB. Further, Nektar has a track record of successful alliances, having helped develop approved drugs with Amgen (Nasdaq: AMGN  ) , Bristol-Myers Squibb (NYSE: BMY  ) and Schering-Plough (NYSE: SGP  ) , among others.

Unfortunately, Nektar has continued to bleed red ink, mostly due to large investments in research and development. However, if Exubera is approved, these losses are likely to vanish. Further, the company boasts $427 million in cash and investments and just $174 million in debt. Given these factors, Nektar's future looks sweet.

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Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.

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