Pfizer's new inhalable insulin slow to catch on

NEW YORK (CNNMoney.com) -- Diabetics are holding their breath, and that may not be good news for the Pfizer, the world's biggest drugmaker.

It's been nearly a year since the FDA approved Exubera, the first inhalable form of insulin for diabetics, from Pfizer (up $0.04 to $27.01, Charts).

Some analysts hail the device as a potential blockbuster, but Exubera doesn't appear to have caught on. Pfizer still has not released sales figures for Exubera - a sign to experts that things aren't going that well. The product first entered the market in May and is now available in the U.S., Britain, Ireland and Germany.

Considering the $12 billion-plus market for diabetes treatments and the presence of more than 20 million diabetics in America, how could this launch from Pfizer and its partner Nektar Therapeutics (down $0.04 to $15.78, Charts) be so sluggish?

Since Exubera is a device that diabetics and their physicians must be trained to use, the company is conducting a controlled launch, focusing first on endocrinologists rather than general practitioners. Pfizer had planned to release Exubera to general practitioners this month, but decided to bump it back to January.

In a written statement to CNNMoney.com, Pfizer spokeswoman Vanessa Aristide said the company "has focused its education outreach to key diabetes specialists, and we are pleased with the response to Exubera." Aristide also said that powdered insulin is being manufactured for the first time "on a large scale."

"We are in the start-up phase of an innovative and complex manufacturing process and are now ramping up to planned and steady-state production rates," Aristide said. "Additional equipment is being installed and more is being fabricated to meet expected demand."

Pfizer might have more to say about Exubera at its meeting with analysts scheduled for Thursday. Or, it might not. Aristide said the analyst meeting will focus on the company's pipeline of experimental drugs that have yet to enter the market.

"From what I can tell, the uptake hasn't exactly been robust yet, and I'm not sure it's for lack of awareness," said Les Funtleyder, analyst for Miller Tabak. "Will they be able to pull it off? They're very good marketers, but if people are concerned about the side effect profile, or they're happy with existing treatments, they're probably not going to try something new."

Diabetics need to take insulin because, unlike non-diabetics, they have difficulty producing their own. Insulin helps process blood sugar into energy, and lack of insulin can result in dangerously high blood-sugar levels. Since the 1920s, diabetics have been injecting insulin, which cannot be taken in a pill form.

Pfizer promotes Exubera as a more convenient and less intrusive way of taking insulin than the more traditional injections. But this is subject to debate.

During the American Diabetes Association's conference in Washington in June, Pfizer held a press event where a diabetic said the Exubera device was more comfortable to use on a plane than the needles, while causing less intrusion to other passengers.

But a diabetic reporter who was attending the conference later said the Exubera device looked like a "bong" used to smoke marijuana, and she said it was more likely to attract unwanted attention than the needles.

How much money is Exubera expected to make? Funtleyder of Miller Tabak projected that annual sales will peak at the range of $250 million to $275 million in 2008, but added, "That may be too optimistic."

In an Oct. 26 report titled "Inhalable insulin: reality doesn't live up to the hype," Datamonitor analyst Daniel Poso projected an Exubera sales peak of about $200 million by 2015, far short of billion-dollar blockbuster status.

"Presented to great fanfare to physicians and shareholders all over the world as a sure-fire blockbuster in the making, in Datamonitor's opinion, Pfizer/Nektar's Exubera is unlikely to revolutionize therapy as some might expect," said Poso in the report, noting that Exubera would be a boon to diabetics with hemophilia, but others might find the needle too effective to give up.

Jim Reddoch, analyst for Friedman, Billings, Ramsey, maintains a more bullish Exubera projection of nearly $1.9 billion in 2010 sales, which he said is similar to consensus. Reddoch noted, in his Nov. 3 report, that Nektar expects Exubera sales to reach $1 billion by 2008.

But Reddoch seemed to be having second thoughts about the blockbuster projection, noting "we are hesitant to lower our 2006 estimates (even though it is quite obvious that demand has been lackluster, to say the least.)"

"With endos not excited by Exubera, fate rests with primary care," wrote Reddoch in his report, referring to the endocrinologists who have been Pfizer's marketing focus so far. "Pfizer did not report 3Q sales for Exubera; the company expects to 'officially' launch Exubera in January, which we think means toning down sampling and expecting strong demand from primary care docs to counter mixed sentiment from endos."

Even if Exubera does catch on with family doctors and diabetics, Pfizer faces future competition in the form of three developmental products for inhalable insulin from five companies. Poso of Datamonitor projects that, by 2010, Novo Nordisk (down $1.59 to $75.41, Charts) and Aradigm (up $0.00 to $1.04, Charts) will enter the market with AERx-iDMS, while Eli Lilly & Co. (up $0.16 to $53.74, Charts) is expected to launch its AIR system and Mannkind (down $1.35 to $15.85, Charts) is expected to launch its Technosphere.

"I would assume that we have a very crowded insulin segment by 2010," said Poso of Datamonitor.

Poso's projections for Technosphere are most bullish, considering its quick-acting effects that distinguish it from other forms of inhalable insulin by providing an "unmet need."

Poso projects annual sales for Technosphere reaching $300 million by 2015, surpassing Exubera sales of $200 million. Technosphere could grow sales further, but only by cannibalizing revenue from other competitors, said Poso, adding that Mannkind needs to find a good sales partner in order to pull this off.

"I do believe at the expense of the other insulins [Technosphere] could double or triple [the $300 million projection,]" said Poso. "But I don't think the entire inhalable insulin segment will exceed $900 million."

Peter Richardson, chief scientific officer for Mannkind, said that Technosphere is in late-stage testing and the company plans to file it to the FDA in late 2008.

The analysts quoted in this story do not own shares of stocks mentioned here, though Friedman, Billings, Ramsey makes a market in Nektar.