Since the launch of its lead drug, Exubera, has gotten off to a much more sour start than expected, Nektar Therapeutics
Nektar plans on implementing $65 million in annual operating expenditure reductions to help reduce the cash burn on its $400 million stash of cash and investments. The cuts in spending will come mostly from research and development expenditures, but there will also be a healthy amount of general and administrative expense reduction as well.
Considering that inhalable insulin product Exubera has become "one of the worst-performing products for a new launch" according to Nektar's CEO, and there are no other products on the near-term horizon to bring Nektar to profitability, it makes sense for the company to conserve its cash until its internal drug programs can get closer to market.
It's tough to understand how cutting R&D expenditures will allow Nektar "to accelerate the development of its proprietary (drug) pipeline," as the company said in a press release. If the cost-cutting is not having any meaningful impact on the development of Nektar's pipeline, then it's good to see the company try to slim down its operational spending.
Normally, cuts to R&D spending have the opposite effect, though, and if these cuts are not affecting operations in any serious negative way, it begs the question as to why they weren't done sooner. The full impact of the reduced spending will be felt in 2008 and beyond, but for better or worse, investors are getting a slimmer Nektar that will require less cash burn until its phase 2 programs can produce meaningful study results.
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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a disclosure policy.
