Pfizer's Exubera Flop
Exubera was supposed to revolutionize diabetes care. It was the first inhalable insulin product on the market, invented by biotech startup Nektar Therapeutics (NKTR) and shepherded to market by drug giant Pfizer (PFE), which predicted it would eventually bring in $2 billion a year in sales.
Analysts expected Exubera to spawn copycats, turning inhaled insulin into a $5 billion annual market. But on Oct. 18 Pfizer made a jolting turnabout, announcing it was pulling the plug on Exubera, returning all rights to Nektar, and taking a staggering $2.8 billion charge.
What went wrong? In short, Pfizer made a massive miscalculation about how patients with diabetes manage their disease. What initially attracted the company to Nektar's invention was the idea that inhaled insulin would offer an attractive alternative to patients afraid to stick themselves with needles multiple times a day. But the needle sticks really aren't that much of a hassle, many patients report, and the needles themselves have gotten so thin that they cause virtually no pain.
Anything But Popular
Exubera, on the other hand, is considerably more cumbersome. When folded out, it's about the size of a can of tennis balls—not something that can be used discreetly at a restaurant or party. Its dosage can't be adjusted as easily as injected insulin can. And it carries the risk of lung problems. "We faced the combination of breaking through the barrier of conventional insulin therapy and the burden of the product on the medical practices, and this innovation was not accepted," says Pfizer spokeswoman Vanessa Aristide in an e-mail to BusinessWeek.
Even before Pfizer introduced the drug in mid-2006, patients were blasting it (BusinessWeek.com, 7/17/06) on blogs and online discussion groups for people with diabetes. Some patients who tried it were anything but enamored. "It was never popular," says Dr. Joel Zonszein, director of the clinical diabetes center at Montefiore Medical Center in New York. The few patients who did try Exubera, he says, had to endure lung-function tests, and they struggled to figure out Exubera's dosing system. Ultimately, Zonszein says, the patients "just gave up. They preferred injected insulin."
Not surprisingly, insurance companies also balked. Exubera was never shown to be more effective than injected insulin, but it was at least 30% more expensive according to some analysts. Because managed-care companies scrutinize every new drug through the lens of cost vs. benefit, Exubera might have been doomed from the start (BusinessWeek.com, 2/15/06). A quick check on Medicare's Web site reveals that in the state of New York, for example, 143 Part D drug plans offer Exubera, but the vast majority of them place the drug in their most expensive "tier." That means Exubera patients would have to endure higher co-pays for the drug than they would have to pay for injected insulin. Since private insurers often follow Medicare's lead, it's a good bet that most of them also slotted Exubera into their most expensive drug tiers.
Pfizer Pulls Out
Pfizer's pullout had an immediate, damaging ripple effect Thursday on the small companies that contributed to Exubera's invention. Nektar's stock tumbled about 15% in early Nasdaq trading to $7 a share, down from more than $17 last December, while Britain's Consort Medical (CSRT.L), which makes the inhaler component, fell as much as 14% on the London exchange.
Not even a multimillion-dollar ad campaign could save Exubera. Pfizer has been pitching the product (BusinessWeek.com, 7/24/07) on TV and the Web since July. The company reported that Exubera only brought in sales of $12 million in the first nine months of this year. The decision to bail, says Aristide, "reflects our commitment to use our resources wisely and to be realistic when we are not seeing the results we had expected." Perhaps next time Pfizer will do a little more homework to determine whether an innovative idea truly has a market.