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Biotech / Medical : INHL - Inhale Therapeutics - Pulmonary Insulin!
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To: deeno who wrote (212)8/5/2004 2:18:04 PM
From: deeno  Read Replies (1) of 225
 
Merrill

NKTR; $10.00; C-1-9
12-Month Price Objective: $28.00 (10-Mar-2004)
EPS (Dec): 2003A -$1.34; 2004E -$0.97; 2005E -$0.77
GAAP EPS (Dec): 2003A -$1.18; 2004E -$1.30; 2005E -$0.87
Event
Nektar has come under severe selling pressure today upon a story coming from an unnamed
source, which indicates that Exubera may not be approvable by European agencies at this
time.
Analysis
A story released on Reuters earlier today from the online medical news service Agence de
Presse Medicale reports that Exubera may “not be licensable at this time”, citing an unnamed
source. Neither NKTR nor Pfizer have commented on this story at this time.
The minutes of the Meeting of the Committee on Safety of Medicines of the Medicines and
Healthcare Products Regulatory Agency of the UK held on May 27 2004, state that the
Committee considered:
“A centralised application for which the United Kingdom were not the rapporteur. The
application is for the treatment of diabetes. The Committee endorsed the view of the
rapporteurs that this drug was not licensable at this time and raised further major objections.
Five Members declared no-personal non-specific interests, but did not debar them from taking
part in the proceedings”.
At this point we are unable to determine the identity of the drug in question. In the event that
it is Exubera, we would like to know the steps required to resubmit the application, and the
time needed for this process.
Recommendation
At present, in the absence of any comment by the companies, our rating and price objective
are unchanged. We would review this rating and price objective as soon as we hear from
Nektar and Pfizer. Nektar’s valuation is very highly leveraged to revenues from Exubera,
which was filed in March 2004 in Europe. Our current price objective of $28.00 is based on
forecast global Exubera sales of $1.8 billion in 2009 (estimated to be the fourth full year of
sales), EPS 2009E of $1.95, 20% discount rate and a 30x multiple (consistent with the
average of a group of profitable biotechnology companies). A one year delay results in a
price objective of $23.00, while a two year delay results in a price objective of $15.00. Risk
factors include further delays to Exubera that could result in reduced cash reserves, and

delays in clinical and regulatory progress for other
proprietary and partnered products.
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