Nektar Announces Third Quarter 2005 Financial Results

-- Exubera(R) receives positive recommendations in Europe and US; FDA extends review period by 3 months;

-- Two proprietary products in clinic address unmet need for prevention of lung infections;

-- New high-value Baxter agreement to develop PEGylated therapeutic forms of blood clotting proteins;

-- Chiron and Nektar advance TIP to Phase III;

-- Aerogen acquisition broadens Nektar pulmonary leadership;

-- Company strengthens balance sheet.

Nektar Therapeutics (Nasdaq:NKTR) announced today its financialresults for the third quarter ended September 30, 2005.

The Company reported total revenue of $36.4 million for the threemonths ended September 30, 2005 compared to $28.5 million for thethree months ended September 30, 2004. In the third quarter of 2005,product and royalty revenue was $8.5 million compared to $5.0 millionin the third quarter of 2004, and contract revenue totaled $23.7million compared to $23.6 million in the third quarter of 2004. Nektaralso reported that in the third quarter of 2005 the Company received$4.2 million from Pfizer for Exubera(R) (inhaled insulin)commercialization readiness for reimbursement of certain agreed uponoperating costs related to the Exubera drug powder manufacturingfacility in preparation for commercial production.

Nektar reported a net loss of $23.8 million or $(0.28) per sharefor the three months ended September 30, 2005 compared to a net lossof $20.5 million or $(0.24) per share for the three months endedSeptember 30, 2004.

For the nine months ended September 30, 2005, Nektar reportedtotal revenue of $93.4 million compared to $82.9 million for the ninemonths ended September 30, 2004. For the nine months ended September30, 2005, product and royalty revenue was $20.3 million compared to$15.7 million for the nine months ended September 30, 2004, andcontract research revenue totaled $62.7 million compared to $67.2million for the nine months ended September 30, 2004. Exuberacommercialization readiness totaled $10.3 million for the first ninemonths of 2005.

For the nine months ended September 30, 2005, Nektar reported anet loss of $76.9 million or $(0.90) per share compared to a net lossfor the nine months ended September 30, 2004 of $82.6 million or$(1.08) per share.

As of September 30, 2005, the Company reported cash, cashequivalents and short-term investments of approximately $620.3 millioncompared to $378.5 million as of June 30, 2005. The cash, cashequivalents and short-term investments include the net proceeds fromthe sale of $315 million aggregate principal amount of its 3.25%convertible subordinated notes due 2012.

Substantial Progress Made

"This quarter Nektar achieved multiple milestones, including therecommendations for Exubera approval, announcement of two proprietaryproducts, and new partner activities," said Ajit S. Gill, presidentand chief executive officer.

Exubera Approval Recommended in the EU and US; FDA Extends ReviewPeriod 3 Months

"The recommendations of the approval of Exubera in the US and theEU are significant milestones. The next steps for Exubera are finalapprovals from both regulatory agencies," said Gill.

-- On September 8, 2005, a US Food and Drug Administration (FDA) advisory committee panel recommended the approval of Exubera (insulin (rDNA origin) powder for oral inhalation), an inhaleable, rapid-acting powder insulin for the treatment of adults with type 1 and type 2 diabetes. While the FDA usually follows the advice of its advisory committees, it is not obligated to do so.

-- On October 13, 2005, the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Evaluation Agency (EMEA) issued a positive opinion recommending approval of Exubera. The European Commission is expected to act upon that recommendation early next year.

-- On October 28, 2005, the FDA notified Pfizer and sanofi-aventis that it is extending its original review period for Exubera by three months.

Nektar pioneered the advanced pulmonary technology for Exubera,including the inhaler, the formulation for the powdered insulin, andthe manufacturing processes for making and packaging the powderedinsulin.

Nektar Proprietary Products Target Local Lung Infections inSeriously Ill Patients; Aerogen Acquisition Broadens PulmonaryLeadership

"Nektar announced two proprietary products that highlight how ourtechnology and expertise can generate unique product opportunities forNektar that will enable us to build a high-value pipeline. These newproducts could help reduce mortality rates from fungal and bacteriallung infections while reducing the costs of patient treatment. Becausethey focus on improving existing medicines, they offer a lower riskprofile with potential excellent returns-on-investment compared withtypical new drug development programs," said Gill.

On September 29, 2005 at its Investor Day in New York, Nektardisclosed two anti-infective products targeted at preventing locallung infections in seriously ill patients.

-- Inhaled amphotericin B product is being developed for preventing fatal pulmonary fungal infections in immunosuppressed patients to reduce the incidence, morbidity, mortality and high cost of treating these infections. Using a small proprietary pocket size inhaler, the company has conducted two Phase I trials and has long-term toxicity studies underway to support the planned pivotal trials. More than 150,000 patients annually in the US and Europe are at risk of developing often fatal and costly fungal infections in the lungs. Nektar's inhaleable amphotericin B potentially could be the first prophylactic therapy to prevent these serious infections.

-- Inhaled ICU antibiotics product is being developed for the prevention of ventilator-associated pneumonia (VAP) in the intensive care unit (ICU). VAP is a form of hospital-acquired, or nosocomial pneumonia, occurring in patients on mechanical ventilators. Nektar's novel drug-device system uses a nebulizer and Nektar proprietary adapter technology, along with a unique formulation of liquid antibiotics, to target the lungs directly with preventative doses of medicine in a ventilated patient. More than 450,000 patients in the US are at the highest risk for this disease. A proof-of-principle study sponsored by Nektar demonstrated that aerosolized antibiotics reduce the persistence of VAP after its onset by approximately half as compared to placebo.

The acquisition of Aerogen, Inc., which closed on October 20,2005, will broaden Nektar's pulmonary technology base by addingcapabilities in aerosolized liquid drugs to Nektar's leadershipposition with inhaleable powdered drugs. Initially, Nektar willincorporate Aerogen technology into its proprietary inhaled ICUantibiotics product.

Partner Pipeline Progress: New Collaboration with Baxter; Advancesin the Clinic

"We also saw progress in our partner pipeline. The newcollaboration with Baxter exemplifies the higher value Nektar can gainthrough investment in early product concept work," said Gill. "Theinitiation of Phase III trials of tobramycin inhalation powder (TIP)by Chiron is an indication that our unique powder formulation andadvanced inhaleable technologies may enable innovative therapeutics,such as TIP, to target local lung infections."

-- On September 29, 2005, Nektar announced an agreement with subsidiaries of Baxter International Inc. to develop PEGylated therapeutic forms of blood clotting proteins for patients with hemophilia, in order to reduce the frequency of injections required to treat blood clotting disorders such as hemophilia A. This agreement allows Nektar to capitalize on the internal work on PEGylated proteins to provide Baxter with a differentiated product.

-- On October 5, 2005, Chiron Corporation and Nektar announced the initiation of clinical testing in the Phase III program evaluating tobramycin inhalation powder (TIP), an investigational inhaled antibiotic. The TIP Phase III program includes two clinical trials and will evaluate the efficacy and safety of TIP in the treatment of lung infections caused by Pseudomonas aeruginosa in patients living with cystic fibrosis (CF). The first trial, called ASPIRE I, is underway.

Conference Call Information

Ajit S. Gill will host a conference call for analysts andinvestors today beginning at 2:00 p.m. Pacific Time, to discussfurther 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 November 17, 2005.

Analysts and investors can also access the conference call livevia telephone by dialing (800) 559-9370 (U.S.); (847) 619-6819(international). The passcode is 13029999 and the host is Mr. AjitGill. An audio replay will be available shortly following the callthrough November 17, 2005 and can be accessed by dialing (877)213-9653 (U.S.); or (630) 652-3041 (International) with a passcode of13029999. 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 enables high-value, differentiatedtherapeutics with its industry-leading drug delivery technologies,expertise and manufacturing capabilities. The world's topbiotechnology 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.

This release contains forward-looking information about a productcandidate which is under review by the United States Food and DrugAdministration and the European Medicines Evaluation Agency thatinvolves substantial risks and uncertainties. Such risks anduncertainties include, among other things, whether and when suchregulatory authorities will approve the product candidate, theirdecisions regarding labeling and other matters that could affect itscommercial potential as well as competitive developments.

This release contains forward-looking statements that reflectmanagement's current views as to Nektar's business strategy, productand technology development plans and funding, status of clinicaltrials, the potential of Nektar's collaborative partnerships to bringnew products to market and produce revenue, and developments inconnection with the regulatory approval process for Exubera. Theseforward-looking statements involve uncertainties and other risks thatare detailed in Nektar's reports and other filings with the SEC,including its Annual Report on Form 10-K, as amended, for the yearended December 31, 2004 and its Quarterly Report on 10-Q for thequarter ended June 30, 2005. Actual results could differ materiallyfrom these forward-looking statements.

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


Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2005 2004 2005 2004
--------- --------- --------- ---------
(unaudited) (unaudited)
Revenue:
Contract research revenue $ 23,657 $ 23,556 $ 62,737 $ 67,167
Product sales and royalty
revenue 8,450 4,990 20,313 15,737
Exubera(R) commercialization
readiness revenue 4,247 - 10,348 -
--------- --------- --------- ---------
Total revenue 36,354 28,546 93,398 82,904

Operating costs and expenses:
Cost of goods sold 6,125 4,477 16,813 13,746
Exubera(R) commercialization
readiness costs 3,075 - 8,035 -
Research and development 38,591 34,534 109,321 99,476
General and administrative 10,948 7,382 30,193 22,281
Amortization of other
intangible assets 982 981 2,945 2,944
--------- --------- --------- ---------
Total operating costs and
expenses 59,721 47,374 167,307 138,447
--------- --------- --------- ---------

Loss from operations (23,367) (18,828) (73,909) (55,543)


Gain/(loss) on extinguishment
of debt (303) - (303) (9,258)
Other income/ (expense), net (32) (128) (1,435) 303
Interest income 2,899 1,763 7,683 4,617
Interest expense (2,992) (3,259) (8,908) (22,603)
--------- --------- --------- ---------

Net loss before provision for
income taxes (23,795) (20,452) (76,872) (82,484)

(Provision) /benefit for
income taxes - - - (132)
--------- --------- --------- ---------

Net loss $(23,795) $(20,452) $(76,872) $(82,616)
========= ========= ========= =========

Basic and diluted net loss per
common share $ (0.28) $ (0.24) $ (0.90) $ (1.08)
========= ========= ========= =========

Shares used in computing basic
and diluted net loss per
common share 86,228 83,853 85,331 76,550
========= ========= ========= =========



NEKTAR THERAPEUTICS
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

September 30, December 31,
2005 2004
(unaudited)
------------- ------------
ASSETS

Current assets:
Cash, cash equivalents and short-term
investments $ 620,328 $ 418,740
Inventory 13,152 10,691
Other current assets 24,729 25,108
----------- -----------
Total current assets 658,209 454,539

Property and equipment, net 144,716 151,247
Goodwill 129,986 130,120
Other intangible assets 3,075 6,456
Deposits and other assets 10,924 2,559
----------- -----------
$ 946,910 $ 744,921
=========== ===========


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable and accrued liabilities $ 25,614 $ 24,231
Capital lease obligations - current 444 1,532
Deferred revenue 21,767 29,890
----------- -----------
Total current liabilities 47,825 55,653

Convertible subordinated debentures 417,653 173,949
Accrued rent 2,071 2,117
Capital lease obligations - noncurrent 20,419 23,568
Other long-term liabilities 24,838 22,292

Stockholders' equity:
Preferred stock at par - -
Common stock at par 9 8
Capital in excess of par 1,232,718 1,187,575
Deferred compensation (3,423) (2,764)
Accumulated other comprehensive
gain/(loss) (1,207) (356)
Accumulated deficit (793,993) (717,121)
----------- -----------
Total stockholders' equity 434,104 467,342
----------- -----------
$ 946,910 $ 744,921
=========== ===========