Nektar Announces First Quarter 2006 Results

-- Highlights include approval of Exubera(R) (insulin human (rDNA origin)) Inhalation Powder in the U.S. and EU with first launch in Germany in mid-May; the filing for approval of two partner products with Nektar technology; and presentation of clinical data for Amphotericin B Inhalation Powder product

Nektar Therapeutics (Nasdaq:NKTR) announced today its financialresults for the first quarter ended March 31, 2006.

The company reported revenue of $29.0 million for the firstquarter of 2006, compared to $28.5 million for the first quarter of2005. In the first quarter of 2006, product and royalty revenue was$12.4 million compared to $6.4 million in the first quarter of 2005,including only one month of revenue recognized from Exubera productsales, as a result of a 60-day acceptance condition on product salesto Pfizer. Each of the remaining quarters in 2006 will have threemonths of Exubera product sales to Pfizer. Contract research revenuetotaled $14.8 million in the first quarter of 2006 compared to $19.5million in the first quarter of 2005 primarily related to lowerExubera contract research payments from Pfizer.

The company reported a net loss of $33.5 million or $(0.38) pershare for the first quarter of 2006 compared to a net loss of $26.2million or $(0.31) per share for the first quarter of 2005. The netloss in the first quarter of 2006 includes $5.0 million ofnon-severance stock-based compensation expense as a result of theimplementation of FAS 123R during the quarter. In addition, the lossalso included $3.9 million of severance costs, including $2.2 millionof stock-based severance compensation, related to the retirement ofthe former president and chief executive officer and other personnel.

As of March 31, 2006, Nektar reported cash, cash equivalents,short-term investments, and investments in marketable securitiestotaling approximately $528.1 million compared to approximately $566.4million as of December 31, 2005.

"With the approval of Exubera and the progress of our proprietaryand partner product pipelines, we are well positioned for futuregrowth and success," said Robert B. Chess, chairman of the board, andacting president and chief executive officer. "To help us achievesuccess over the next few years, I am spending my time as interimpresident and CEO to focus the company on building those components ofour business that will result in the highest shareholder value and onmanaging our underlying cost structure. Our most important prioritiesare to meet the manufacturing demand for Exubera inhalers and powderedinsulin; expand our long-term leadership position in inhaled insulin;and manage the clinical development of our proprietary products."

Financial Outlook for 2006

Today the company is updating its guidance provided on February28, 2006 in the press release announcing its fourth quarter andyear-end 2005 results, including an increase in the amount of FAS 123Rnon-severance stock-based compensation charges and increased severanceand restructuring expenses. In summary, Nektar expects:

-- Revenue for 2006 in the range of $160 to $190 million, including $60 to $80 million manufacturing and royalty revenue related to Exubera, with the majority of the revenue being generated by manufacturing sales to Pfizer.

-- GAAP net loss of $135 to $150 million, and a non-GAAP net loss of $100 to $115 million. Non-GAAP net loss excludes $20 million of FAS 123R non-severance stock based compensation charges, and expenses of approximately $15 million of special charges related to restructuring and severances. The 2006 net loss estimate may change as the company continues to evaluate potential restructuring activities in 2006. See supplemental table attached to this press release entitled "Reconciliation of Non-GAAP Projected Financial Guidance for 2006."

-- Cash, cash equivalents, and short-term investments and investments in marketable securities at the end of the year of approximately $415 to $440 million.

Recent Highlights

Exubera Approved in the U.S. and EU; German launch mid-May

On January 26, 2006, the European Commission approved Exubera forthe treatment of adults with type 1 and type 2 diabetes. On January27, 2006, the U.S. Food and Drug Administration (FDA) approved Exuberafor the treatment of adults with type 1 and type 2 diabetes. Nektarpartnered with Pfizer to develop the inhalers and the powdered insulinformulation for Exubera. Nektar will receive revenue from Pfizer forthe manufacture of all the Exubera Inhalers and insulin release units,and for some of the insulin powder processing. In addition, Nektarwill receive revenue from royalties as a percentage of Pfizer'send-product sales.

Nektar is also reporting today that Pfizer will be initiating thefirst launch of Exubera(R) in Germany in mid-May.

Nektar Presents Encouraging Clinical Data for Amphotericin BInhalation Powder

Nektar presented promising clinical data from Phase I clinicaltrials of the company's Amphotericin B Inhalation Powder product atthe 2nd Advances Against Aspergillosis Meeting, February 22-25, 2006in Athens, Greece. The objective of the study was to investigate thetolerability and pharmacokinetics of pulmonary administration ofamphotericin B. Single doses of up to 25 mg of amphotericin B werewell tolerated by the healthy subjects.

In addition, Nektar presented pre-clinical data both at theAdvances Against Aspergillosis Meeting as well as at the Focus onFungal Infections 16th Annual Meeting, March 8-10, 2006 in Las Vegas.These data indicated that Nektar's Amphotericin B Inhalation Powder,given in a single prophylactic inhalation dose, prevented fungal(Aspergillus fumigatus) infection-induced morbidity and mortality inan immunosuppressed animal model.

Nektar is developing Amphotericin B Inhalation Powder to preventserious lung fungal infections that can occur in patients who areseverely immunosuppressed, specifically during treatment for acuteleukemia and organ or bone marrow transplants. By deliveringtherapeutic doses of an antifungal directly to the lungs, theAmphotericin B Inhalation Powder could prevent fatal infectionswithout toxicities typical of systemically administered antifungaldrugs. The product has FDA orphan drug designation that could providea seven-year period of exclusive marketing for the approved indicationto the first sponsor who obtains marketing approval for thatindication.

Two Partner Products Filed for Approval

On April 27, 2006, Roche announced that it has filed a marketingauthorization application (MAA) in the EU for CERA, which uses Nektartechnology, for the treatment of anemia associated with chronic kidneydisease. Previously, Roche announced on April 20, 2006, that it hassubmitted a Biological License Application (BLA) to the U.S. Food andDrug Administration (FDA) to market CERA for the treatment of anemiaassociated with chronic kidney disease including patients on dialysisand not on dialysis.

In March and April 2006, UCB announced that they submitted a BLAto the FDA and an MAA to the European Medicines Evaluation Agency forCimzia(TM), a unique PEGylated antibody fragment, for Crohn's Disease.Cimzia is also in Phase III trials for the treatment of rheumatoidarthritis.

Nine products with Nektar technology have been approved formarketing in the U.S. and/or Europe.

Conference Call Information

Robert B. Chess will host a conference call for analysts andinvestors today beginning at 2:00 p.m. Pacific Daylight Time, todiscuss further the company's performance.

Investors can access a live audio-only webcast through a link thatis posted on the Investor Relations section of Nektar's website athttp://www.nektar.com. The web broadcast of the conference call willbe available for replay through May 24, 2006.

Analysts and investors can also access the conference call livevia telephone by dialing (800) 559-2403 (U.S.); (847) 619-6534(international). The passcode is 14548843# and the host is Mr. RobertChess. An audio replay will be available shortly following the callthrough May 24, 2006 and can be accessed by dialing (877) 213-9653(U.S.); or (630) 652-3041 (International) with a passcode of14548843#. In the event that any non-GAAP financial measure isdiscussed on the conference call that is not described in the pressrelease, related information will be made available on the InvestorRelations page at the Nektar website as soon as practical after theconclusion of the conference call.

About Nektar

Nektar Therapeutics develops and enables high-value,differentiated therapeutics with its industry-leading drug deliverytechnologies, expertise and manufacturing capabilities. The world'stop biotechnology and pharmaceutical companies are developing new andbetter therapeutics using Nektar's advanced technologies and know-how.Nektar also develops its own products by applying its drug deliverytechnologies and its expertise to existing medicines to enhanceperformance, such as improving efficacy, safety and compliance.

Non-GAAP Financial Measures

The Company provides all information required in accordance withGAAP, but it believes that evaluating its ongoing results ofoperations may be difficult to understand if limited to reviewing onlyGAAP financial results. In managing the Company's business, managementreviews non-GAAP results of operations, including non-GAAP net income(loss) which excludes as applicable, stock-based compensation chargesand severance and restructuring charges to evaluate the company'songoing operating results.

Nektar management does not itself, nor does it suggest thatinvestors should, consider such non-GAAP financial measures inisolation from, or as a substitute for, GAAP financial measures. TheCompany considers and presents such non-GAAP financial measures inmeasuring, reporting, and forecast its financial results to providemanagement and investors with an additional tool to evaluate theCompany's operating results in a manner that focuses on whatmanagement believes to be the Company's ongoing business operations.Management believes that the inclusion of non-GAAP financial measuresprovides consistency and comparability with past reports of financialresults. Investors should note, however, that the non-GAAP financialmeasures used by the Company may not be the same non-GAAP financialmeasures as, and may not be calculated in the same manner as, that ofother companies with which investors may compare the financial resultsof the Company. Management believes it is useful for the Company andinvestors to review both GAAP information that includes the expensesand charges mentioned above and the non-GAAP financial measures thatexclude such special expenses and charges to have a betterunderstanding of the overall performance of the Company's business,its allocation of resources, and its ability to perform in the future.Investors are encouraged to review the related GAAP financial measuresand the reconciliation of these non-GAAP financial measures to theirmost directly comparable GAAP financial measure.

This press release contains forward-looking statements thatreflect management's current views and expectations as to the Exuberaproduct launch, product and technology development plans and funding,current business position of the company, clinical plans andexpectations for the clinical advancement of our proprietary andpartner products, the potential for new product efficacy, safety,compliance, and economic benefits for patients, the value and riskprofile of our proprietary product programs, and financial projectionsfor the 2006 calendar year. These forward-looking statements involveuncertainties and other risks, including but not limited to: (i) thetiming and success of the Exubera commercial launch (ii) the company'sability to manufacture and supply sufficient quantities of Exubera drypowder insulin and inhalation devices to meet market demand (iii) thediscovery of any new or more severe side effects or negative efficacyfindings for Exubera or any product liability claims related thereto(iv) increased investment in our proprietary products prior to seekingpartner collaborations may adversely impact our results of operationsand financial condition (v) our success or the success of our partnersin obtaining regulatory approvals and (vi) a material negative impacton our results of operations for future periods as a result of theapplication of FAS 123R related to expensing of stock-basedcompensation. Other important risks and uncertainties are detailed inthe company's reports and other filings with the SEC, including itsmost recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q,and Current Reports on Form 8-K. Actual results could differmaterially from the forward-looking statements contained in this pressrelease. The Company undertakes no obligation to updateforward-looking statements, whether as a result of new information,future events or otherwise.

Exubera is a registered trademark of Pfizer Inc. Cimzia is atrademark of UCB.


NEKTAR THERAPEUTICS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share information)


Unaudited
-------------------
Three-Months Ended
March 31,
-------------------
2006 2005
--------- ---------


Revenue:
Contract research revenue $ 14,817 $ 19,529
Product sales and royalty revenue 12,397 6,392
Exubera commercialization readiness 1,745 2,573
--------- ---------
Total
revenue 28,959 28,494

Operating costs and expenses:
Cost of goods sold 7,500 5,255
Exubera(R) commercialization
readiness costs 1,495 2,294
Research and development 31,401 34,945
General and administrative 20,373 9,110
Amortization of other intangible
assets 1,364 982
--------- ---------
Total operating costs and expenses 62,133 52,586
--------- ---------

Loss from operations (33,174) (24,092)

Other income/(expense), net (37) (1,285)
Interest income 4,882 2,272
Interest expense (5,142) (3,060)
--------- ---------

Income/(loss) before benefit/(provision)
for income taxes (33,471) (26,165)

Benefit/(provision) for income taxes -- --
--------- ---------

Net loss $(33,471) $(26,165)
========= =========


Basic and diluted net loss per
common share $ (0.38) $ (0.31)

Shares used in computing basic and
diluted net loss per share 88,926 84,708





NEKTAR THERAPEUTICS
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)


March 31, December 31,
2006 2005
(unaudited) (1)
------------ ------------

ASSETS

Current assets:
Cash, cash equivalents and
short-term investments $479,516 $476,201
Inventory 33,180 18,627
Other current assets 36,670 25,015
------------ ------------
Total current assets 549,366 519,843

Investments in marketable securities 48,601 90,222
Property and equipment, net 140,301 142,127
Goodwill 78,431 78,431
Other intangible assets, net 11,944 13,452
Deposits and other assets 12,895 14,479
------------ ------------
$841,538 $858,554
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable and accrued
liabilities $ 56,624 $ 53,626
Capital lease obligations - current 521 482
Convertible subordinated notes and
debentures - current 36,026
Deferred revenue 17,130 15,487
------------ ------------
Total current liabilities 110,301 69,595

Convertible subordinated notes and debentures 381,627 417,653
Accrued rent 2,390 2,409
Capital lease obligations - noncurrent 20,129 20,276
Other long-term liabilities 20,285 21,810

Stockholders' equity:
Preferred stock at par -- --
Common stock at par 9 9
Capital in excess of par value 1,244,234 1,233,690
Deferred compensation -- (2,949)
Accumulated other comprehensive loss (1,734) (1,707)
Accumulated deficit (935,703) (902,232)
------------ ------------
Total stockholders' equity 306,806 326,811
------------ ------------
$841,538 $858,554
========================


(1) The balance sheet at December 31, 2005 has been derived from the
audited financial statements at that date but does not include all
of the information and footnotes required by accounting principles
generally accepted in the United States for complete financial
statements.




Supplemental Table

NEKTAR THERAPEUTICS
Reconciliation of Non-GAAP Projected Financial Guidance for 2006
In millions of dollars

Refer to the discussion of non-GAAP measures included in the
accompanying press release for additional information.



2006 Projected Financial Guidance
----------------------------------

2006 projected Exubera-related
revenue range $ 60 to $ 80
2006 projected other revenue
range 100 to 110
----------- -----------
2006 projected total revenue range $ 160 to $ 190

Projected GAAP loss from operations
range $(135) to $(150)

Non-GAAP adjustments to loss
from operations
Projected stock-based
compensation expense 20 20
(non-severance related)

Projected severance and
restructuring charges(2) 15 15
----------- -----------

Projected Non-GAAP loss from
operations range $(100) to $(115)


(2) The company expects to record $15 million in projected severance
and restructuring charges, of which approximately $11 million is
related to severance-related stock-based compensation expense.