When Nektar Therapeutics' (NASDAQ:NKTR) CEO says that his marketed diabetes compound, Exubera, is "one of the worst performing products for a new launch" that he can recall, then you know things aren't going well for Nektar.

Nektar reported its first-quarter financial results last week. Revenue jumped 22% quarter over quarter, but investors shouldn't read too much into this top-line growth, because $26 million of its $85 million in revenue was thanks to a change in the way that Nektar is accounting for its Exubera manufacturing revenue. Even with an extra 60 days' worth of Exubera revenue because of this accounting change, Nektar still posted a loss of $26 million this quarter.

Excluding the extra 60 days of manufacturing revenue, guidance for Exubera revenue in 2007 remains in the same range, between $110 million and $130 million. Management ratcheted down expectations going forward, saying that revenue from manufacturing will decline in 2008 as a result of the lower-than-expected patient demand for the compound. There are currently 3,000 to 4,000 patients on the drug.

In order to reduce its cash burn rate going forward, Nektar's management talked about plans to reduce spending annually by at least $60 million. No details of the plan were announced yet, except that it wouldn't entail cutting back on the drug pipeline.

Nektar's management is blaming marketing partner Pfizer (NYSE:PFE) for the slow Exubera sales launch. But whatever the reason for the slow rollout, Pfizer and Exubera are working against the clock; competing inhaled insulin products from MannKind (NASDAQ:MNKD) and Alkermes (NASDAQ:ALKS) are still on track with their development and could be on the market in the coming years.

In the conference call, Nektar's management repeatedly tried to stress that the company was about more than just Exubera and analysts shouldn't focus on that drug alone when looking at Nektar's future. With the Exubera launch going so sour, though, until Nektar's drug pipeline compounds start to produce some robust study results, for better or worse the near- and intermediate-term outlook on Nektar's health is going to be judged on the success or failure of Exubera.

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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. Pfizer is an Inside Value recommendation. The Fool has a disclosure policy.