Drug developer Nastech (NASDAQ:NSTK) announced its third-quarter results on Monday and sort of updated investors on its drug pipeline.

Nastech is best known for its work in attempting to reformulate versions of existing injectable drugs into formulations that can be nasally administered. It has worked on developing nasally administered versions of Eli Lilly's (NYSE:LLY) osteoporosis treatment Forteo and Amylin Pharmaceuticals' (NASDAQ:AMLN) diabetes drug BYETTA, for example.

Nastech's lead drug candidate is the Forteo reformulation, which it has partnered with Procter & Gamble (NYSE:PG). It is in phase 2 testing as a treatment for osteoporosis, and would likely find some meaningful niche, considering the $511 million in sales Forteo brought in for Lilly in the first nine months of 2007.

Nastech can certainly boast about its prominent current and past partners -- like Merck (NYSE:MRK) and Novo Nordisk (NYSE:NVO) -- on a wide variety of reformulated nasally administered drugs. The problem is that it has not validated its technology's commercial feasibility because its drugs are in phase 2 development at the latest, save for one generic compound being bounced around the FDA's Office of Generic Drugs; the agency has already issued one not-approvable letter for this drug.

On its earnings release yesterday, Nastech guided that by the end of the first half of next year, it could have four compounds in phase 2 testing, including its nasal insulin compound, a nasal autism product, and an obesity treatment.

On the conference call, Nastech's management tried to distance the product profile of its insulin formulation from the failed blockbuster dream Exubera, formally marketed by Pfizer (NYSE:PFE). Nastech pointed out that its insulin product does not interact with the lungs, so there are no worries about its effects on pulmonary functioning, and also that its intranasal insulin compound comes in a much smaller lipstick-sized administration device.

Although these traits alone aren't enough to make its intranasal insulin a commercial success, since the drug's ability to control glucose levels still needs to be acceptable relative to the rapid-acting insulins, it should assuage some of the worries that the marketing disaster that was Exubera would lead to the end of all insulin products administered in nontraditional ways.

Nastech doesn't get a lot of analyst coverage because its compounds are so early in development and are also partially shrouded in partner confidentiality agreements. Hopefully this will all change with more phase 2 results coming out next year, so that the commercial viability of its drugs can be better evaluated and we can see if Nastech is going to be the next ALZA -- which was acquired by Johnson & Johnson for $10.5 billion -- or another failed drug developer.

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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. Pfizer is an active Inside Value pick. Eli Lilly and J&J are active Income Investor picks. The Fool has an A+ disclosure policy.