Nektar Therapeutics Annual Report 2010

FY2010 Annual Report · Nektar Therapeutics

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Advancing Medicine
Through Innovative
Chemistry

Annual Report 2010

Nektar Therapeutics is a biopharmaceutical company developing novel therapeutics based on
its PEGylation and advanced polymer conjugation technology platforms. Nektar has a robust R&D
pipeline of potentially high-value therapeutics in oncology, pain and other areas. In the area of pain,
Nektar has an exclusive worldwide license agreement with AstraZeneca for NKTR-118, an
investigational drug candidate, being evaluated in Phase 3 clinical studies as a once-daily, oral
tablet for the treatment of opioid-induced constipation. The agreement also includes NKTR-119, an
earlier stage development program that is a co-formulation of NKTR-118 and an opioid analgesic.
NKTR-181, the company’s wholly-owned novel mu-opioid analgesic molecule, is being evaluated in
Phase 1 clinical studies. In oncology, NKTR-102, a proprietary novel topoisomerase I-inhibitor, is
being evaluated in Phase 2 clinical studies for the treatment of breast, ovarian and colorectal
cancers. NKTR-105, a novel anti-mitotic agent, is in a Phase 1 clinical study in cancer patients with
refractory solid tumors.

Nektar’s technology has enabled seven approved products in the U.S. or Europe through
partnerships with leading biopharmaceutical companies, including UCB’s Cimzia® for
Crohn’s disease and rheumatoid arthritis, Roche’s PEGASYS® for hepatitis C and
Amgen’s Neulasta® for neutropenia.

Nektar has a deep and diverse portfolio of product candidates in different
stages of clinical development. We are focused on dramatically improving the
therapeutic index and clinical utility of therapeutics. Our advanced polymer
conjugate technologies have broad applicability and enable us to explore a
steady stream of new product candidates in research.

Research &
Preclinical

Phase 1

Phase 2

Phase 3

Product/Partner/Indication

Oral NKTR-118/
Opioid-Induced Constipation

NKTR-061/
(Amikacin Inhale)/Gram-negative Pneumonias

NKTR-102
Metastatic Breast Cancer

NKTR-102
Platinum-Resistant Ovarian Cancer

NKTR-102
Metastatic Colorectal Cancer Patients with KRAS Mutation

NKTR-105
Solid Tumors

NKTR-181
Moderate to Severe Pain

Oral NKTR-119/
(Opioid Combos)/Analgesic

NKTR-194
Mild to Moderate Pain

NKTR-171
Neuropathic Pain

NKTR-107
Cytotoxic Solid Tumors

NKTR-140
(Protease Inhibitor)/HIV

NKTR-125
Antihistamine

pg. 1

Howard W. Robin
President and Chief Executive Officer

pp. 2–3

Dear Shareholders,

The past year was one of great progress for Nektar Therapeutics.
We achieved important milestones that demonstrated our abil-
ity to successfully advance a diverse pipeline of potentially
high-value small molecule medicines based upon our polymer
conjugate technology platform.

One of the most exciting events for us over the last year was the
initiation of the comprehensive global Phase 3 program for
NKTR-118 to treat opioid-induced constipation. There were over
250 million opioid prescriptions written for treatment of acute
and chronic pain in 2010 in the United States and up to half of
patients on opioids experience significant constipation. As
a result, it is a highly challenging problem that significantly
impacts patient quality of life and increases healthcare utiliza-
tion. In our Phase 2 study, oral NKTR-118 effectively reversed
opioid-induced constipation without interfering with the desired
analgesic effect of the opioid therapy. With multiple Phase 3
studies underway, AstraZeneca is on track for planned regula-
tory filings in 2013.

In 2010, we completed the first two Phase 2 clinical studies for
NKTR-102, our lead oncology product candidate. NKTR-102 is
an exciting drug with tremendous promise. It is a next-genera-
tion topoisomerase I inhibitor that has a markedly improved
pharmacokinetic profile with a much longer half-life than first
generation topo I inhibitors. This unique profile, enabled by
our technology, allows for a lower initial peak concentration
combined with sustained exposure of drug to tumors.
Preliminary results from our Phase 2 studies demonstrated
highly promising results in both platinum-resistant ovarian can-
cer and metastatic breast cancer. These data led to NKTR-102
being recognized at a number of significant medical meetings
in 2010. We are very excited about the growing visibility of
NKTR-102 in the oncology community and we believe it has the
potential to be a very important new chemotherapeutic agent.
A significant goal for us over the coming year is to advance
NKTR-102 into Phase 3 development.

Nektar Therapeutics 2010 Annual Report

Another key accomplishment in the past year was the intro-
duction and rapid advancement of a new drug candidate
emanating from our oral small molecule polymer conjugate
technology, NKTR-181. NKTR-181 is designed to be a next-
generation opioid with a controlled rate of entry into the brain.
This should provide highly effective analgesia without the
CNS side effects associated with rapid brain entry.

Opioids, which are a $10 billion market today, are very potent
painkillers and absolutely essential to managing both acute
and chronic pain. While these drugs are critical, they can also
be very dangerous. The FDA is very concerned about the
growing healthcare problem around opioid use, including the
conversion of opioid re-formulations to rapid-acting opioids.
With NKTR-181, we have the potential to address the prob-
lems with opioids with a brand new opioid molecular structure
that is specifically designed to enter the brain at a slow rate
to effectively treat moderate to severe pain with reduced
euphoria and other CNS side effects. One of the main con-
cerns that physicians have with opioid therapies and why they
are reluctant to prescribe them to patients with chronic pain is
because of the potential for addiction and respiratory death. If
we can demonstrate that NKTR-181 achieves good analgesic
efficacy with reduced side effects, we believe NKTR-181
could become a physician’s opioid of choice. It is important to
remember that NKTR-181 is not a re-formulation of an existing
opioid. NKTR-181 is a new chemical entity, next-generation
opioid and we have found no conditions using either kitchen
chemistries or more sophisticated lab chemistry in which
NKTR-181 can be altered into a more rapid-acting opioid.

We started our Phase 1 program with NKTR-181 in the first
quarter of 2011. The Phase 1 program includes two studies
that will identify an analgesic dose range for NKTR-181. We
are also looking at CNS side effects such as euphoria, seda-
tive potential and respiratory depression. Phase 2 studies are
planned to start in the first half of 2012.

This past year’s achievements set the stage for what I believe
will be an incredibly exciting future for Nektar as multiple new
medicines enter pivotal Phase 3 clinical trials and new drug
candidates are identified to advance into the clinic. We are
highly focused on building a pipeline that is diversified and
addresses highly-attractive commercial opportunities. We
recently completed a public offering of our common stock
that yielded net proceeds of $220 million. This additional cap-
ital allows us to advance our late-stage programs at the same
time as we continue to leverage our platform to bring forth
new product candidates. To that end, we have a goal to file at
least one new IND each year.

Our commitment to R&D, combined with the proven power
and flexibility of our advanced polymer conjugate platform
technology, has generated a deep pipeline of both clinical and
preclinical programs. In just a few short years, we have built a
pipeline with more than 20 product candidates ranging from
the earliest stages of research through Phase 3 studies. This
tremendous progress would not have been possible without
the extraordinary dedication of our employees who share in a
singular commitment to create exciting new medicines and
improve the lives of many patients.

2011 promises to be another year of important progress
for our company as we focus on executing on our goals
and advance an impressive pipeline of potentially high-
value therapeutics. Thank you for your continued support
as shareholders.

Sincerely,

Howard W. Robin
President and Chief Executive Officer

Nektar Therapeutics 2010 Annual Report

NKTR-118—Phase 3 Clinical Development

About Opioid-Induced Constipation (OIC) In the US alone, there were over 175 million opioid
prescriptions written for long-term use in 2010.1 Opioid-induced constipation is widely recognized
as one of the most common side effects of long-term opioid treatment, occurring in 40–50% of
patients on opioids.2 OIC can significantly impact quality of life and increase healthcare utilization.3,4

NKTR-118 is being developed as a once-daily oral tablet designed to relieve opioid-induced constipation without
affecting pain relief. Nektar has an exclusive worldwide license agreement with AstraZeneca for NKTR-118, which is currently
in Phase 3 clinical studies. The first regulatory filings based on the program are planned for 2013.

Oral NKTR-118 Significantly Increased Frequency of Bowel
Movements and Preserved Analgesia
Treatment effect sustained over 28-day treatment period (p=0.002 for 25 mg dose and p<0.0001 for 50 mg dose)

Placebo First Week of Treatment

NKTR-118 First Week of Treatment

P=NS

P=0.002

P=0.0001

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5 mg Oral QD
N=72

25 mg Oral QD
N=60

50 mg Oral QD
N=76

SBMs 1.6
per week

The results from a 208-patient Phase 2 study demonstrated that oral NKTR-118 effectively reverses opioid-induced constipation
without interfering with the desired analgesic effect of the opioid therapy. Oral, once-daily doses of NKTR-118 achieved
statistically significant results on the primary endpoint of increasing spontaneous bowel movements in both the 25 and 50 mg
dose cohorts versus placebo. These results were sustained over the entire 28-day treatment period. The most commonly
reported side-effects from this Phase 2 study of NKTR-118 were gastrointestinal-related effects, which were transient.

NKTR-119, an oral co-formulation of NKTR-118 and an opioid analgesic, is also being developed under the agreement with
AstraZeneca and is in earlier stages of development.

1. IMS Health
2. Panchal, et al. Int J Clin Pract. 2007;61(7): 1181-1187.
3. Bell T, et al. J Pain. 2007;8(4):S71. Abstract 882.
4. Bell T, et al. J Pain. 2007;8(4):S75. Abstract 897.

pp. 4–5

We are developing the next generation of novel therapies in pain and cancer and other important indications

We leverage our unique technology platform to enable a wide range of therapeutic candidates

Nektar Therapeutics 2010 Annual Report

NKTR-102—Phase 2 Clinical Development

NKTR-102 is in Phase 2 clinical development for patients with solid tumor malignancies, including
breast, ovarian and colorectal cancers. Each year, approximately 3 million patients worldwide are
diagnosed with one of these types of cancer.5

Breast and ovarian cancers are among the leading causes of cancer death in women and together
will account for an estimated 45,000 deaths in the U.S. annually. Colorectal cancer is the third
most commonly diagnosed cancer and the third leading cause of cancer death in both men and
women in the U.S. and accounts for 51,000 deaths in the U.S. annually.6

NKTR-102 is a next-generation topoisomerase I inhibitor with a unique pharmacokinetic profile that provides a continuous con-
centration of active drug with reduced peak concentrations.

NKTR-102 was invented by Nektar using its advanced polymer conjugate technology platform, and is the first oncology product
candidate to leverage Nektar’s releasable polymer technology platform. First generation topoisomerase I inhibitors are typically
cleared from the body within a few hours of dosing, resulting in a lower tumor exposure to the active metabolite and therefore,
potentially limiting their efficacy.

In 2010, Nektar completed a Phase 2 study of NKTR-102 in platinum-resistant ovarian cancer and in metastatic breast cancer.
NKTR-102 is currently preparing for Phase 3 development in breast and ovarian cancers, and a Phase 2 study is ongoing.
In colorectal cancer, a Phase 1 study and a Phase 2 study are ongoing.

NKTR-102: A Next-Generation Topoisomerase I Inhibitor
– NKTR-102 has an active metabolite with half-life of ~50 days
– Continuous long-term exposure with markedly reduced peak concentrations
Irinotecan

NKTR-102

blunted C-max

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6. American Cancer Society, 2010.

6
Time (weeks)

Continuous
exposure
of drug to
tumor cells

pp. 6–7

Nektar Therapeutics 2010 Annual Report

NKTR-181—Phase 1 Clinical Development

According to the American Pain Society, the prevalence of chronic pain in the United States is
estimated to be 35.5% or 105 million people. Opioid analgesics are considered to be the most
effective therapeutic option for pain, with over $10 billion a year in sales in the U.S. alone.7,8 However,
opioids cause significant problems because of serious side effects such as sedation and the risks
they pose for addiction, abuse, misuse, and diversion. A 2010 report from the Centers for Disease
Control (CDC) notes that emergency room visits tied to the abuse of prescription painkillers is at
an all-time high, having increased 111 percent over a five-year period.9

NKTR-181 is a next generation, novel opioid analgesic drug that was developed using Nektar’s small molecule polymer conjugate
technology. NKTR-181 is being developed to effectively treat pain while addressing the abuse liability and serious CNS side
effects associated with currently available opioid therapies.

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5 mg /kg oral

NKTR-181: Preclinical Studies
Demonstrated Reduced
Brain Entry Rate with Equal
Analgesia to Oxycodone
– Reduced brain entry rate lowers potential for
euphoria, sedation and respiratory depression

– NKTR-181 in vivo efficacy equivalent to
oxycodone in multiple preclinical pain models

– Preclinical models of mu-opioid analgesics
highly predictive of efficacy in humans

NKTR-181 was uniquely designed to cross the blood-brain barrier at a substantially slower rate than other opioid therapies. The
unique molecular design of the polymer-drug conjugate also prevents conversion of NKTR-181 into a rapid-acting opioid.

With a reduced rate of entry into the CNS, NKTR-181 has the potential to greatly reduce the euphoria that underlies opioid
abuse liability and dependence, as well as the serious CNS-related side-effects of respiratory depression and sedation.

NKTR-181 is in Phase 1 clinical studies to study the pharmacokinetics, pharmacology, safety and efficacy of this new opioid
candidate. The primary objective of the Phase 1 studies is to establish the effective analgesic dose range of NKTR-181 associated
with minimal CNS side effects.

7. IMS, NSP, NPA and Defined Health 2010 Estimates.
8. Melnikova, I, Pain Market, Nature Reviews Drug Discovery, Volume 9, 589-90 (August 2010).
9. Morbidity and Mortality Weekly Report (MMWR), Emergency Department Visits Involving Nonmedical Use of Selected Prescription Drugs—United States, 2004–2008,

59(23);705-709 (June 2010).

pp. 8–9

We combine our knowledge of a drug’s mechanism with our understanding of medicinal polymer chemistry

Nektar Therapeutics 2010 Annual Report

Partnering Success

is well-respected as a partner-of-choice with
the world’s leading pharmaceutical and biotechnology
companies. Our technology is used in many of today’s
top-selling commercial drugs.

Select list of Nektar partners:

All Nektar brand and product names are trademarks or registered trademarks
of Nektar Therapeutics in the United States and other countries.

Third-party trademarks appearing in this annual report are owned by their
respective companies.

pg. 10

Form 10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the fiscal year ended December 31, 2010

TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from

Commission File Number: 0-24006

NEKTAR THERAPEUTICS

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

94-3134940
(IRS Employer
Identification No.)

455 Mission Bay Boulevard South
San Francisco, California 94158
(Address of principal executive offices and zip code)

415-482-5300
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Name of Each Exchange on Which Registered

Common Stock, $0.0001 par value

NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant

is a well-known seasoned issuer, as defined in Rule 405 of the Securities

Act. Yes ¥

No n

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the

Act. Yes n

No ¥

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days) Yes ¥

No n

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the
No n
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes n
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained herein,
and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. ¥

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of
the Exchange Act. (Check one):

Large accelerated filer ¥

Accelerated filer n

Non-accelerated filer n
(Do not check if a smaller reporting company)

Smaller reporting company n

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2) Yes n
No ¥
The approximate aggregate market value of voting stock held by non-affiliates of the registrant, based upon the last sale price of the
registrant’s common stock on the last business day of the registrant’s most recently completed second fiscal quarter, June 30, 2010 (based
upon the closing sale price of the registrant’s common stock listed as reported on the NASDAQ Global Select Market), was
approximately $1,134,446,342. This calculation excludes approximately 375,281 shares held by directors and executive officers of
the registrant. Exclusion of these shares does not constitute a determination that each such person is an affiliate of the registrant.

As of February 25, 2011, the number of outstanding shares of the registrant’s common stock was 113,753,566.

Portions of registrant’s definitive Proxy Statement to be filed for its 2011 Annual Meeting of Stockholders are incorporated by
reference into Part III hereof. Such Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the
end of the fiscal year covered by this Annual Report on Form 10-K.

DOCUMENTS INCORPORATED BY REFERENCE

NEKTAR THERAPEUTICS

2010 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

PART I

Item 1.
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3.
[Removed and Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4.

PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 6.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . .
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure . .
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III

Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Item 12.
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 13. Certain Relationships and Related Transactions and Director Independence . . . . . . . . . . . . . .
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 14.

Page

4
27
42
42
42
43

43
45
46
59
60
97
97
98

98
98

98
98
99

Item 15. Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

99
103

PART IV

Forward-Looking Statements

This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of
1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). All statements other than statements of historical fact are “forward-looking statements” for
purposes of this annual report on Form 10-K, including any projections of earnings, revenue or other financial items,
any statements of the plans and objectives of management for future operations (including, but not limited to, pre-
clinical development, clinical trials and manufacturing), any statements concerning proposed drug candidates or
other new products or services, any statements regarding future economic conditions or performance, any
statements regarding the success of our collaboration arrangements, any statements regarding our plans and
objectives to initiate Phase 3 clinical trials, and any statements of assumptions underlying any of the foregoing. In
some cases, forward-looking statements can be identified by the use of terminology such as “may,” “will,”
“expects,” “plans,” “anticipates,” “estimates,” “potential” or “continue,” or the negative thereof or other comparable
terminology. Although we believe that the expectations reflected in the forward-looking statements contained
herein are reasonable, such expectations or any of the forward-looking statements may prove to be incorrect and
actual results could differ materially from those projected or assumed in the forward-looking statements. Our future
financial condition and results of operations, as well as any forward-looking statements, are subject to inherent risks
and uncertainties, including, but not limited to, the risk factors set forth in Part I, Item 1A “Risk Factors” below and
for the reasons described elsewhere in this annual report on Form 10-K. All forward-looking statements and reasons
why results may differ included in this report are made as of the date hereof and we do not intend to update any
forward-looking statements except as required by law or applicable regulations. Except where the context otherwise
requires, in this annual report on Form 10-K, the “Company,” “Nektar,” “we,” “us,” and “our” refer to Nektar
Therapeutics, a Delaware corporation, and, where appropriate, its subsidiaries.

Trademarks

The Nektar brand and product names, including but not limited to Nektar», contained in this document are
trademarks, registered trademarks or service marks of Nektar Therapeutics in the United States (U.S.) and certain
other countries. This document also contains references to trademarks and service marks of other companies that
are the property of their respective owners.

Item 1. Business

PART I

We are a clinical-stage biopharmaceutical company developing a pipeline of drug candidates that utilize our
PEGylation and advanced polymer conjugate technology platforms, which are designed to improve the benefits of
drugs for patients. Our current proprietary product pipeline is comprised of drug candidates across a number of
therapeutic areas including oncology, pain, anti-infectives, anti-viral and immunology. Our research and devel-
opment activities involve small molecule drugs, peptides and other potential biologic drug candidates. We create
our innovative drug candidates by using our proprietary advanced polymer conjugate technologies and expertise to
modify the chemical structure of drugs to create new molecular entities. Polymer chemistry is a science focused on
the synthesis or bonding of polymer architectures with drug molecules to alter the properties of the molecule when it
is bonded with polymers. Additionally, we may utilize established pharmacologic targets to engineer a new drug
candidate relying on a combination of the known properties of these targets and our proprietary polymer chemistry
technology and expertise. Our drug candidates are designed to improve the pharmacokinetics, pharmacodynamics,
half-life, bioavailability, metabolism or distribution of drugs and improve the overall benefits and use of a drug for
the patient. Our objective is to apply our advanced polymer conjugate technology platform to create new drugs in
multiple therapeutic areas.

Each of our drug candidates is a proprietary new chemical or biological entity that addresses large potential
markets. We are developing drug candidates that can be delivered by either oral or subcutaneous administration.
Our most advanced proprietary product candidate, NKTR-118 (oral PEG-naloxol), is a peripheral opioid antagonist
that is currently being evaluated for the treatment of opioid-induced constipation. In September 2009, we entered
into a license agreement with AstraZeneca AB for the global development and commercialization of NKTR-118
and NKTR-119. NKTR-119 is an early stage research and development program that is designed to combine
various opioids with NKTR-118.

Our other lead drug candidate, NKTR-102, a topoisomerase I inhibitor-polymer conjugate, is currently being
evaluated in three separate Phase 2 clinical trials for ovarian, breast and colorectal cancers. In June 2010, we
announced that we expanded the Phase 2 clinical study by 50 patients in platinum resistant/refractory ovarian
cancer to evaluate NKTR-102 in a subset of women who had progressed after prior treatment with Doxil. On
March 1, 2011, we announced that we intended to further expand this Phase 2 clinical study by up to an additional
60 patients. The Phase 2 clinical study for NTKR-102 in metastatic breast cancer is fully enrolled and is expected to
be completed in 2011. The Phase 2 clinical trial in colorectal cancer is still enrolling patients. In December 2010, we
announced that we would advance NKTR-102 into Phase 3 development in metastatic breast cancer and we are also
exploring various Phase 3 clinical trial alternatives for NKTR-102 in platinum resistant/refractory ovarian cancer.
We are also currently conducting a Phase 1 clinical trial for NKTR-105 (PEGylated docetaxel) for patients with
refractory solid tumors. In addition, we have a number of early stage programs in research and preclinical
development.

We have a number of license, manufacturing and supply agreements for our technology with leading
biotechnology and pharmaceutical companies, including Affymax, Amgen, Baxter, Roche, Merck (through its
acquisition of Schering Plough), Pfizer and UCB Pharma. A total of seven products using our PEGylation
technology platform have received regulatory approval in the U.S. or Europe, and are currently marketed by our
collaboration partners. There are also a number of other products in clinical development that incorporate our
advanced PEGylation and advanced polymer conjugate technology platforms.

We have a collaboration with Bayer Healthcare LLC to develop BAY41-6551 (NKTR-061, Amikacin Inhale),
which is an inhaled solution of amikacin, an aminoglycoside antibiotic. We originally developed the liquid aerosol
inhalation platform and product and entered into a collaboration agreement with Bayer Healthcare LLC in August
2007 for its further development and commercialization. BAY41-6551 completed Phase 2 development and we and
Bayer are currently preparing for the start of a Phase 3 clinical study. Bayer and Nektar have been working together
to prepare for the pivotal studies of BAY41-6551 following the consummation of the collaboration in August 2007.
The program is behind schedule. The reason for this is that Bayer and Nektar decided to finalize the design of the

device for commercial manufacturing prior to initiating Phase 3 clinical development with the objective of
commencing Phase 3 clinical trials as soon as possible following completion of this work.

On December 31, 2008, we completed the sale and transfer of certain pulmonary technology rights, certain
pulmonary collaboration agreements and approximately 140 of our dedicated pulmonary personnel and operations
to Novartis Pharma AG. We retained all of our rights to BAY41-6551 and certain rights to receive royalties on net
sales of the Cipro Inhale (also known as Ciprofloxacin Inhaled Powder or CIP) program with Bayer Schering
Pharma AG that we transferred to Novartis as part of the transaction. We also retained certain intellectual property
rights to patents specific to inhaled insulin.

Corporate Information

We were incorporated in California in 1990 and reincorporated in Delaware in 1998. We maintain our
executive offices at 455 Mission Bay Boulevard South, San Francisco, California 94158, and our main telephone
number is (415) 482-5300. Our website is located at www.nektar.com. The information contained in, or that can be
accessed through, our website is not part of, and is not incorporated in, this Annual Report.

Our Technology Platform

With our expertise as a leader in the PEGylation field, we have advanced our technology platform to include
first-generation PEGylation as well as new advanced polymer conjugate chemistries that can be tailored in very
specific and customized ways with the objective of optimizing and significantly improving the profile of a wide
range of molecules including many classes of drugs useful in many disease areas. PEGylation has been a highly
effective technology platform for the development of therapeutics with significant commercial success, such as
Roche’s PEGASYS» (PEG-interferon alfa-2a) and Amgen’s Neulasta» (pegfilgrastim). The majority of PEGylated
drugs approved over the last fourteen years were enabled with our PEGylation technology through our collab-
orations and licensing partnerships with a number of pharmaceutical companies. PEGylation is a versatile
technology since PEG (polyethylene glycol) is a water soluble, amphiphilic, non-toxic, non-immunogenic com-
pound that is safely cleared from the body. Its primary use to date has been in currently approved biologic drugs to
favorably alter their pharmacokinetic or pharmacodynamic properties. However, in spite of its widespread success
in commercial drugs, there are limitations with the first-generation PEGylation approaches used with biologics.
Earlier PEGylation approaches were limited, in that they could not be used successfully to improve small molecule
drugs, antibody fragments and peptides, all of which could potentially benefit from the application of the
technology. Other limitations of the early approaches of PEGylation technology include resulting sub-optimal
bioavailability and bioactivity, and its limited ability to be used to fine-tune properties of the drug, as well as its
inability to be used to create oral drugs.

With our expertise and proprietary technology in PEGylation, we have created the next generation of
PEGylation technology. Our advanced polymer conjugate technology platform is designed to overcome the
limitations of the first generation of the technology platform and allow the platform to be utilized with a broader
range of molecules across many therapeutic areas.

Both our PEGylation and advanced polymer conjugate technology platforms have the potential to offer one or

more of the following benefits:

(cid:129) improve efficacy or safety in certain instances as a result of better pharmacokinetics, pharmacodynamics,

longer half-life and sustained exposure of the drug;

(cid:129) improve targeting or binding affinity of a drug to its target receptors with the potential to improve efficacy

and reduce toxicity or drug resistance;

(cid:129) improve solubility of a drug;

(cid:129) enable oral administration of parenterally-administered drugs, or drugs that must be administered intra-

venously or subcutaneously, and increase oral bioavailability of small molecules;

(cid:129) prevent drugs from crossing the blood-brain barrier, or reduce their rate of passage into the brain, limiting

undesirable central nervous system effects;

(cid:129) reduce first-pass metabolism effects of certain drug classes with the potential to improve efficacy, which

could reduce the need for other medicines and reduce toxicity;

(cid:129) reduce the rates of drug absorption and of elimination or metabolism by improving stability of the drug in the

body and providing it with more time to act on its target; and

(cid:129) reduce immune response to certain macromolecules with the potential to prolong their effectiveness with

repeated doses.

We have a broad range of approaches that we may use when designing our own drug candidates, some of which

are outlined below:

Small Molecule Stable Polymer Conjugates

Our customized approaches for small molecule polymer conjugates allows for the fine-tuning of the
physicochemical and pharmacological properties of small molecule oral drugs to potentially increase their
therapeutic benefit. In addition, this approach can enable oral administration of subcutaneously or intravenously
delivered small molecule drugs that havelow bioavailability when delivered orally. The benefits of this approach
can also include: improved potency, increased oral bioavailability, modified biodistribution with enhanced
pharmacodynamics, and reduced transport across specific membrane barriers in the body, such as the blood-brain
barrier. A primary example of the application of membrane transport inhibition, specifically reducing transport
across the blood-brain barrier is NKTR-118 (oral PEG-naloxol), a novel peripheral opioid antagonist that
completed Phase 2 clinical development in 2009. An example of a drug candidate that uses this approach to
avoid first-pass metabolism is NKTR-140, a protease inhibitor in the early stages of discovery research.

Small Molecule Pro-Drug Releasable Polymer Conjugates

The pro-drug polymer conjugation approach can be used to optimize the pharmacokinetics and pharmaco-
dynamics of a small molecule drug to substantially increase both its efficacy and side effect profile. We are currently
using this platform with oncolytics, which typically have sub-optimal half-lives that can limit their therapeutic
efficacy. With our technology platform, we believe that these drugs can be modulated for programmed release
within the body, optimized bioactivity and increased sustained exposure of active drug to tumor cells in the body.
We are using this approach with the two oncolytic candidates in our pipeline, NKTR-102, a topoisomerase I
inhibitor-polymer conjugate currently in Phase 2 clinical development, and NKTR-105, a polymer conjugate form
of docetaxel that is currently in Phase 1 clinical development.

Large Molecule Polymer Conjugates (Proteins and Peptides)

Our customized approaches with large molecule polymer conjugates have enabled numerous successful
PEGylated biologics on the market today. We are using our advanced polymer conjugation technology-based
approach to enable peptides, which are much smaller in size than other biologics, such as proteins and antibody
fragments. We are in the early stages of discovery research with a number of peptides that utilize this proprietary
approach. Peptides are important in modulating many physiological processes in the body. Some of the benefits of
working with peptides are: they are small, more easily optimized, and can be rapidly investigated for therapeutic
potential. However, peptide drug discovery has been slowed by the extremely short half-life and limited
bioavailability of these molecules.

Based on our knowledge of the technology and biologics, our scientists have designed a novel hydrolyzable
linker that can be used to optimize the bioactivity of a peptide. Through rational drug design and the use of our
approach, a peptide’s pharmacokinetics and pharmacodynamics can be substantially improved and its half-life can
be significantly extended. The approach can also be used with proteins and larger molecules.

Antibody Fragment Polymer Conjugates

This approach uses a large molecular weight polyethylene glycol (PEG) conjugated to antibody fragments in
order to potentially improve their toxicity profile, extend their half-life and allow for ease of synthesis with the
antibody. The specially designed PEG replaces the function of the Fc domain of full length antibodies with a

branched architecture PEG with either stable or degradable linkage. This approach can be used to reduce
antigenicity, reduce glomerular filtration rate, enhance uptake by inflamed tissues, and retain antigen-binding
affinity and recognition. There is currently one approved product on the market that utilizes our technology with an
antibody fragment, CIMZIA» (certoluzimab pegol), which was developed by our partner UCB Pharma and is
approved for the treatment of Crohn’s Disease in the U.S. and Rheumatoid Arthritis in the U.S. and Europe.

Our Strategy

The key elements of our business strategy are described below:

Advance Our Internal Clinical Pipeline of Drug Candidates that Leverage Our PEGylation and Advanced
Polymer Conjugate Chemistry Platform

Our objective is to create value by advancing our lead drug candidates through various stages of clinical
development. To support this strategy, over the past three years we have significantly expanded and added expertise
to our internal clinical development and regulatory departments. A key component of our development strategy is to
potentially reduce the risks and time associated with drug development by capitalizing on the known safety and
efficacy of approved drugs as well as established pharmacologic targets and drugs directed to those targets. For
many of our novel drug candidates, we may seek approval in indications for which the parent drugs have not been
studied or approved. We believe that the improved characteristics of our drug candidates will provide meaningful
benefit to patients compared to the existing therapies, and allow for approval to provide new treatments for patients
for which the parent drugs are not currently approved.

Ensure Future Growth of our Pipeline through Internal Research Efforts and Advancement of our
Preclinical Drug Candidates into Clinical Trials

We believe it is important to maintain a diverse pipeline of new drug candidates to continue to build on the
value of our business. Our discovery research organization is identifying new drug candidates by applying our
technology platform to a wide range of molecule classes, including small molecules and large proteins, peptides and
antibodies, across multiple therapeutic areas. We continue to advance our most promising early research drug
candidates into preclinical development with the objective to advance these early stage research programs to human
clinical studies over the next several years.

Enter into Strategic and High-Value Partnerships to Bring Certain of Our Drug Candidates to Market

We decide on a product-by-product basis whether to continue development into Phase 3 pivotal clinical trials
and commercialize products on our own, or seek a partner, or pursue a combination of these approaches. For
example, in December 2010, we decided that we would move NKTR-102 into Phase 3 development prior to
completing a collaboration for this drug candidate. When we determine to seek a partner, our strategy is to enter into
collaborations with leading pharmaceutical and biotechnology companies to fund further clinical development,
manage the global regulatory filing process, and market and sell drugs in one or more geographies. The options for
future collaboration arrangements range from comprehensive licensing and commercialization arrangements to co-
promotion and co-development agreements with the structure of the collaboration depending on factors such as the
cost and complexity of development, marketing and commercialization needs, therapeutic area and geographic
capabilities.

Continue to Build a Leading Intellectual Property Estate in the Field of PEGylation and Polymer
Conjugate Chemistry across Therapeutic Modalities

We are committed to continuing to build on our intellectual property position in the field of PEGylation and
polymer conjugate chemistry. To that end, we have a comprehensive patent strategy with the objective of
developing a patent estate covering a wide range of novel inventions including among others, polymer materials,
conjugates, formulations, synthesis, therapeutic areas and methods of treatment.

Nektar Proprietary Internal Drug Candidates in Clinical Development

The following table summarizes our proprietary product candidate pipeline and Nektar-discovered drug
candidates that are being developed by us or in partnerships with pharmaceutical companies. The table includes the
type of molecule or drug, the target indications for the product or product candidate, and the clinical trial status of
the program.

Drug Candidate/Program

Target Indications

Status(1)

NKTR-118 (oral PEG-naloxol)

Opioid-induced constipation

BAY41-6551 (Amikacin Inhale,

Gram-negative pneumonias

formerly NKTR-061)
NKTR-102 (topoisomerase I

inhibitor-polymer conjugate)

NKTR-102

NKTR-105 (PEGylated docetaxel)
NKTR-119 (Opioid/NKTR-118

combinations)

Metastatic breast cancer

Platinum-resistant/refractory
ovarian cancer
Second-line colorectal cancer in
patients with the KRAS gene
mutation
Solid tumors
Pain

NKTR-181 (abuse deterrent,
tamper-resistant opioid)

Pain

NKTR-194 (non-scheduled opioid) Mild to moderate pain
NKTR-171 (tricyclic
antidepressant)

Neuropathic pain

NKTR-140 (protease inhibitor

HIV

candidate)

(1) Status definitions are:

Completed Phase 2 (Partnered
with AstraZeneca AB)
Completed Phase 2 (Partnered
with Bayer Healthcare LLC)*
Phase 2

Phase 2

Phase 1
Research/Preclinical (Partnered
with AstraZeneca AB)
Research/Preclinical

Research/Preclinical
Research/Preclinical

Research/Preclinical

Phase 3 or Pivotal — product in large-scale clinical trials conducted to obtain regulatory approval to market
and sell the drug (these trials are typically initiated following encouraging Phase 2 trial results).

Phase 2 — product in clinical trials to establish dosing and efficacy in patients.

Phase 1 — product in clinical trials, typically in healthy subjects, to test safety. In the case of oncology drug
candidates, Phase 1 clinical trials are typically conducted in cancer patients.

Research/Preclinical — product is being studied in research by way of in-vitro studies and/or animal studies.
* This product candidate uses a liquid aerosol technology platform that was transferred to Novartis in the
pulmonary asset sale transaction that was completed on December 31, 2008. As part of that transaction, we
retained an exclusive license to this technology for the development and commercialization of this drug
candidate originally developed by us.

Approved Drugs and Drug Candidates Enabled By Our Technology through Licensing Collaborations

The following table outlines our collaborations with a number of pharmaceutical companies that license our
technology, including Amgen, Merck (formerly Schering-Plough), Baxter, UCB Pharma and F. Hoffmann-
La Roche. A total of seven products using our PEGylation technology have received regulatory approval in the
U.S. or Europe. There are also a number of other candidates that have been filed for approval or are in various stages
of clinical development. These collaborations generally contain one or more elements including license rights to our
proprietary technology, manufacturing and supply agreements under which we may receive manufacturing revenue,
milestone payments, and/or product royalties on commercial sales.

Drug

Primary or Target
Indications

Drug
Marketer/Partner

Status(1)

Neulasta» (pegfilgrastim)
PEGASYS» (peginterferon alfa-2a)

Neutropenia
Hepatitis-C

Somavert» (pegvisomant)
PEG-INTRON» (peginterferon alfa-2b)

Acromegaly
Hepatitis-C

Macugen» (pegaptanib sodium

injection)

CIMZIA» (certolizumab pegol)

MIRCERA» (C.E.R.A.) (Continuous
Erythropoietin Receptor Activator)

CIMZIA» (certolizumab pegol)

HematideTM (synthetic peptide-based,
erythropoiesis- stimulating agent)

LevadexTM
Cipro Inhale

CIMZIA» (certoluzimab pegol)
BAX-855 (pegylated rFVIII)
Longer-acting blood clotting proteins

(1) Status definitions are:

Age-related
macular
degeneration
Crohn’s disease

Anemia associated
with chronic kidney
disease in patients
on dialysis and
patients not on
dialysis
Rheumatoid
arthritis
Anemia

Migraine
Cystic fibrosis lung
infections
Psoriasis
Hemophilia A
Hemophilia

Amgen Inc.
F. Hoffmann-La Roche
Ltd
Pfizer Inc.
Merck (formerly
Schering-Plough
Corporation)
Eyetech, Inc.

Approved
Approved

Approved

UCB Pharma

F. Hoffmann-La Roche
Ltd

Approved in U.S.
and Switzerland
Approved in U.S.
and EU (Launched
only in the EU)*

UCB Pharma

Affymax, Inc.

MAP Pharmaceuticals
Bayer Schering Pharma
AG
UCB Pharma
Baxter
Baxter

Approved in U.S.
and EU
Phase 3

Phase 3
Phase 2**

Phase 2
Research/Preclinical
Research/Preclinical

Approved — regulatory approval to market and sell product obtained in the U.S., EU and other countries.

Filed — products for which a New Drug Application (NDA) or Biologics License Application (BLA) has been
filed.

Phase 2 — product in clinical trials to establish dosing and efficacy in patients.

Phase 1 — product in clinical trials, typically in healthy subjects, to test safety.

Research/Preclinical — product is being studied in research by way of vitro studies and/or animal studies

* Amgen Inc. prevailed in a patent lawsuit against F. Hoffmann-La Roche Ltd and as a result of this legal ruling

Roche is currently prevented from marketing MIRCERA» in the U.S until July 2014.

** This product candidate was developed using our proprietary pulmonary delivery technology that was trans-
ferred to Novartis in an asset sale transaction that closed on December 31, 2008. As part of the transaction,
Novartis assumed our rights and obligations for our Cipro Inhale agreements with Bayer Schering Pharma AG;
however, we maintained the rights to receive certain royalties on commercial sales of Cipro Inhale if the product
candidate is approved.

With respect to all of our collaboration and license agreements with third parties, please refer to Item 1A, Risk
Factors, including without limitation, “We are a party to numerous collaboration agreements and other significant
agreements which contain complex commercial terms that could result in disputes, litigation or indemnification
liability that could adversely affect our business, results of operations and financial condition.”

Overview of Selected Nektar Proprietary Drug Development Programs and Significant Partnered Drug
Development Programs

NKTR-118 and NKTR-119, License Agreement with AstraZeneca AB

In September 2009, we entered into a global license agreement with AstraZeneca AB pursuant to which we
granted AstraZeneca a worldwide, exclusive, perpetual, royalty-bearing license under our patents and other
intellectual property to develop, market and sell NKTR-118 and NKTR-119. Under the terms of this agreement,
AstraZeneca made a license payment to us of $125.0 million and AstraZeneca has responsibility for all activities
and bear all costs associated with research, development and commercialization for NKTR-118 and NKTR-119.
For NKTR-118 and NKTR-119, we are eligible to receive significant development milestones and significant sales
milestones if the products achieve certain annual commercial sales levels. For both NKTR-118 and NKTR-119, we
are also entitled to significant double-digit royalty payments, varying by country of sale and annual net sales. Our
right to receive royalties (subject to certain adjustments) in any particular country will expire upon the later of
(a) specified period of time after the first commercial sale of the product in that country or (b) the expiration of
patent rights in that particular country.

NKTR-118 (oral PEG-naloxol), which combines our stable polymer conjugate technology with naloxol, a
derivative of the opioid-antagonist drug naloxone, completed Phase 2 development in 2009. NKTR-118 is designed
for the treatment of opioid-induced constipation or opioid bowel dysfunction. Results from the Phase 2 clinical
study were presented in October 2009 at an oral plenary session of the American College of Gastroenterology 2009
Annual Clinical Meeting. The data presented from the Phase 2 study showed that NKTR-118 achieved the primary
endpoint of change from baseline in spontaneous bowel movements in patients taking opiates. The study also
showed there was no apparent reversal of opioid-mediated analgesia with any of the NKTR-118 dose groups, as
measured by no change in Numeric Rating Scale (NRS) pain scores and no increase in mean daily opiate use. The
most commonly reported side effects from this Phase 2 clinical study of NKTR-118 were dose dependent
gastrointestinal-related effects. AstraZeneca has informed us that they intend to start the Phase 3 clinical study
for NKTR-118 in the first quarter of 2011.

NKTR-119 is an early stage drug development program that is intended to combine NKTR-118 with selected
opioids, with the goal of treating pain without the side effect of constipation traditionally associated with opioid
therapy. AstraZeneca has agreed to use commercially reasonable efforts to develop one product based on
NKTR-119 and has the right to develop multiple products based on NKTR-119.

According to the American Pain Society and IMS Health, over 200 million opioid prescriptions are filled in the
U.S. annually with annual worldwide sales of opioids exceeding $10 billion. Depending on the population studied
and the definitions used, constipation occurs in up to 90% of patients taking opioids. Currently, there are no specific
oral drugs approved or specifically indicated to treat opioid induced constipation or opioid bowel dysfunction.

BAY41-6551 (Amikacin Inhale, formerly NKTR-061), Agreement with Bayer Healthcare LLC

In August 2007, we entered into a co-development, license and co-promotion agreement with Bayer
Healthcare LLC (Bayer) to develop a specially-formulated Amikacin (BAY41-6551, Amikacin Inhale, formerly

NKTR-061). Under the terms of the agreement, Bayer is responsible for most future clinical development and
commercialization costs, all activities to support worldwide regulatory filings, approvals and related activities,
further development of formulated Amikacin and final product packaging for BAY41-6551. We are responsible for
all future development of the nebulizer device used in BAY41-6551 through the completion of Phase 3 clinical trials
and for clinical and commercial manufacturing and supply of the nebulizer device. We have engaged third party
contract manufacturers to perform our device manufacturing obligations for this program. Under the terms of the
agreement, we are entitled to development and sales milestone payments upon achievement of certain annual sales
targets. We are also entitled to royalties based on annual worldwide net sales of BAY41-6551. Our right to receive
these royalties in any particular country will expire upon the later of ten years after the first commercial sale of the
product in that country or the expiration of certain patent rights in that particular country, subject to certain
exceptions. The agreement expires in relation to a particular country upon the expiration of all royalty and payment
obligations between the parties related to such country. Subject to termination fee payment obligations, Bayer also
has the right to terminate the agreement for convenience. In addition, the agreement may also be terminated by
either party for certain product safety concerns, the product’s failure to meet certain minimum commercial profile
requirements or uncured material breaches by the other party. For certain Bayer terminations, we may have
reimbursement obligations to Bayer.

BAY41-6551 is in clinical development to treat Gram-negative pneumonias, including Hospital-Acquired
(HAP), Healthcare-Associated, and Ventilator-Associated pneumonias. Gram-negative pneumonias are often the
result of complications of other patient conditions or surgeries. Gram-negative pneumonia carries a mortality risk
that can exceed 50% in mechanically-ventilated patients and accounts for a substantial proportion of the
pneumonias in intensive care units today. BAY41-6551 is designed to be an adjunctive therapy to the current
antibiotic therapies administered intravenously as standard of care. The targeted aerosol delivery platform in
BAY41-6551 delivers the antimicrobial agent directly to the site of infection in the lungs. This product candidate
can be integrated with conventional mechanical ventilators or used as a hand-held ‘off-vent’ device for patients no
longer requiring breathing assistance. This product candidate has completed Phase 2 clinical development.

Bayer and Nektar have been working together to prepare for the pivotal studies of BAY41-6551 following the
consummation of the collaboration in August 2007. The program is behind schedule. The reason for this is that
Bayer and Nektar decided to finalize the design of the device for commercial manufacturing prior to initiating Phase
3 clinical development with the objective of commencing Phase 3 clinical trials as soon as possible following
completion of this work. Please refer to Item 1A, Risk Factors, “If we or our partners are not able to manufacture
drugs or drug substances in quantities and at costs that are commercially feasible, we may fail to meet our
contractual obligations or our proprietary and partnered product candidates may experience clinical delays or
constrained commercial supply which could significantly harm our business.”

NKTR-102 (topoisomerase I inhibitor-polymer conjugate)

We are developing NKTR-102, a novel topoisomerase I inhibitor-polymer conjugate that was designed using
our advanced polymer conjugate technology platform. This product candidate is currently in Phase 2 clinical
development in multiple cancer indications including breast, ovarian, and colorectal. By applying our proprietary
pro-drug polymer conjugate technology to irinotecan, NKTR-102 has the potential to be a more effective and
tolerable anti-tumor agent. Irinotecan, also known as Camptosar», is a topoisomerase I inhibitor used for the
treatment of solid tumors. Using a proprietary approach that directly conjugates the drug to a multi-arm polymer
architecture to create a new molecular entity, NKTR-102 has a unique pharmacokinetic and pharmacodynamic
profile that has demonstrated anti-tumor activity in patients in clinical trials conducted to date by us.

The NKTR-102 Phase 2 study in metastatic breast cancer patients is an open label, randomized, study
evaluating two treatment schedules of single-agent NKTR-102 (145 mg/m2 every 14 days or every 21 days).
Patients enrolled in the study included those with metastatic breast cancer with prior taxane therapy. The study’s
primary endpoint is objective response rate (ORR) per RECIST 1.0 (standard criteria measuring tumor response)
with certain secondary endpoints including safety, as well as progression-free survival and overall survival. The
study was fully enrolled as of April 2010; however there are patients who continue to be monitored in the Phase 2
trial and therefore we do not expect to have final results until late 2011 or later depending upon patient outcomes.

We have begun the planning of a comparative Phase 3 clinical study for single-agent NKTR-102 in metastatic breast
cancer patients and plan to start this study in late 2011.

Breast cancer is a significant health problem for women worldwide. The American Cancer Society estimated
that about 207,090 new cases of invasive breast cancer were diagnosed and nearly 39,840 women died of breast
cancer in the United States in 2010. Breast cancer is the most common cancer among women in the United States,
other than skin cancer. It is the second leading cause of cancer death in women, after lung cancer. Worldwide, about
1.3 million new cases of breast cancer are diagnosed annually.

The NKTR-102 Phase 2 study in women with platinum-resistant/refractory ovarian cancer is an open label,
randomized, study evaluating two treatment schedules of single-agent NKTR-102 (145 mg/m2 every 14 days or
every 21 days). Each schedule originally followed a two-stage Simon design and a total of 71 patients were initially
enrolled and dosed. Median lines of prior therapy for women enrolled into the original study was three, with forty-
seven percent of the women having received prior treatment with pegylated liposomal doxorubicin (PLD). The
primary endpoint of the study was ORR based on RECIST 1.0. Secondary endpoints in the study included best
clinical response, clinical benefit, CA-125 response (a known ovarian cancer blood marker) safety, progression-free
survival and overall survival. In 2010, we announced that we are expanding this Phase 2 study to include
approximately 50 additional women who had previously received PLD therapy to continue to evaluate the every
21-day dose schedule of single-agent NKTR-102 in this subset of women. On March 1, 2011, we announced that we
intended to further expand this Phase 2 clinical study by approximately 60 patients. This expansion study is
designed to give us the potential to determine whether we would make an early submission of an NDA to the Food
and Drug Administration (FDA) for NKTR-102. The determination of whether to submit an NDA will depend on
our analysis of results from the study overall including the expanded dataset in the subset of women who had
received prior PLD therapy as well as FDA requirements at that time and any guidance received by us from the
FDA. We are evaluating various randomized controlled clinical study designs to further develop NKTR-102 in
patients with ovarian cancer. Please refer to Item 1A, Risk Factors, “The results from the expanded Phase 2 clinical
trial for NKTR-102 in women with platinum-resistant/refractory ovarian cancer are unlikely to result in a review or
approval of an NDA, and the future results from this trial are difficult to predict.”

Ovarian cancer is also a significant health problem for women worldwide. According to the American Cancer
Society, in 2010, there were an estimated 21,880 new cases of ovarian cancer diagnosed and an estimated 13,850
deaths from ovarian cancer in the United States. Ovarian cancer ranks fifth in cancer deaths among women,
accounting for more deaths than any other cancer of the female reproductive system. Historically, less than 40% of
women with ovarian cancer are cured. About 230,000 women globally are diagnosed each year with ovarian cancer.

A NKTR-102 Phase 2 clinical study was initiated in early 2009 to evaluate the efficacy and safety of
NKTR-102 monotherapy versus irinotecan in second-line colorectal cancer patients with the KRAS mutant gene.
The primary endpoint of the Phase 2 placebo-controlled trial of NKTR-102 in colorectal cancer is progression-free
survival as compared to standard irinotecan monotherapy. According to recent data presented at the American
Society of Clinical Oncology in 2010, it is estimated that up to 43.5% of colorectal cancer cases have this mutation
in the KRAS gene and do not respond to EGFR-inhibitors, such as cetuximab. The Phase 2 clinical study is designed
to enroll 174 patients with metastatic colorectal cancer. The study is still enrolling and we do not currently have an
estimate for the projected end of this trial. Patient enrollment in this study has been challenging due to the fact that
the comparator arm of this study, single-agent irinotecan, is not the common standard of care for second line
metastatic colorectal therapy in the United States or European Union. In June 2010, we announced the start of a
Phase 1 dose-escalation clinical study designed to enroll up to approximately 40 patients to evaluate NKTR-102 in
combination with 5-fluorouracil (5-FU)/leucovorin in refractory solid tumor cancers. The chemotherapy agent 5-
FU is currently used as a part of a combination treatment regimen for colorectal cancer in combination with
irinotecan, which is also known as the FOLFIRI regimen.

Colorectal cancer is the third most commonly diagnosed cancer and the second leading cause of cancer death
in the U.S. According to the American Cancer Society, nearly 142,750 new cases of colon and rectal cancer were
diagnosed in the U.S. in 2010, and about 50,000 people will die annually of the disease. Worldwide, over 1.2 million
people are diagnosed annually with colorectal cancer. Most metastatic colorectal cancer patients have recurrence
within two years and require retreatment with chemotherapy regimens. The majority of metastatic colorectal cancer

patients receive irinotecan-based regimens, primarily in combination with 5-FU/leucovorin. Colorectal cancer is
the third leading cause of cancer-related deaths in the United States when men and women are considered
separately, and the second leading cause when both sexes are combined. It was expected to cause about 51,370
deaths (26,580 in men and 24,790 in women) during 2010 in the U.S. Worldwide, according to the World Health
Organization, there are 690,000 deaths annually from colorectal cancers.

NKTR-105 (PEGylated docetaxel)

NKTR-105 is a PEGylated conjugate form of docetaxel, an anti-neoplastic agent belonging to the taxoid family
that acts by disrupting the microtubular network in cells. Docetaxel is a major chemotherapy agent approved for use in
five different cancer indications: breast, non-small cell lung, prostate, gastric, and head and neck. Annual sales of
docetaxel exceeded $2 billion in 2009. Anti-cancer agents, such as docetaxel, typically have suboptimal pharma-
cokinetic profiles which can limit their therapeutic value. Docetaxel frequently causes neutropenia. Patients are
advised that the treatment with corticosteroids is required in conjunction with docetaxel dosing and some neutropenia
patients require pre-treatment with corticosterioids. Our advanced polymer conjugation technology can be used to
optimize the bioactivity of these drugs and increase the sustained exposure of active drug to tumor cells in the body.

NKTR-105 is currently being evaluated in a Phase 1 clinical trial in cancer patients. The study is assessing the
safety, pharmacokinetics, and anti-tumor activity of NKTR-105 in patients with refractory solid tumors who have
failed all prior available therapies. We do not intend to advance NKTR-105 into a Phase 2 clinical trial in 2011.

NKTR-181 (abuse deterrent, tamper-resistant opioid)

NKTR-181 is being developed as a safer, mu opioid analgesic with reduced potential for abuse and fewer side
effects than traditional opioid therapies. The drug candidate was engineered to cross the blood-brain barrier at a
substantially slower rate than the reference opioid. With a reduced rate of entry into the CNS, NKTR-181 has the
potential to substantially reduce not only the euphoria that underlies opioid abuse liability and dependence but also
the serious CNS-related side effects of respiratory depression and sedation. We filed an Investigational New Drug
application (IND) with the FDA and plan to begin Phase 1 clinical studies in the first part of 2011. The IND is
currently under review by the FDA and until the 30-day review period has elapsed, there is the possibility that the
start of the Phase 1 clinical study may be delayed until any and all issues raised by the FDA have been addressed in a
satisfactory manner.

According to the American Pain Society, the prevalence of chronic pain in the United States is estimated to be
35.5% of the population or 105 million people. Chronic pain costs more than $100 billion per year in direct health-care
expenditures and lost work time. Opioids are considered to be the most effective therapeutic option for pain and have
over $10 billion a year in sales in the U.S. alone according to IMS Health. However, opioids cause significant problems
for physicians and patients because of their serious side effects such as respiratory depression and sedation, as well as
the risks they pose for addiction, abuse, misuse, and diversion. The FDA has cited prescription opioid analgesics as
being at the center of a major public health crisis of addiction, misuse, abuse, overdose and death. A 2010 recent report
from the Center for Disease Control and Prevention (CDC) notes that emergency room visits tied to the abuse of
prescription painkillers is at an all-time high, having increased 111% over a five-year period.

Overview of Select Technology Licensing Collaborations and Programs

We have a number of product candidates in clinical development and approved products in collaboration with our
partners that use our technology or involve rights over which we have patents or other proprietary intellectual property.
In a typical collaboration involving our PEGylation technology, we license our proprietary intellectual property
related to our PEGylation technology or proprietary conjugated drug molecules in consideration for upfront payments,
development milestone payments and royalties from sales of the resulting commercial product as well as sales
milestones. In certain cases, we also manufacture and supply our proprietary PEGylation materials to our partners.

HematideTM, Agreement with Affymax, Inc.

In April 2004, we entered into a license, manufacturing and supply agreement with Affymax, Inc. (Affymax),
under which we granted Affymax a worldwide, non-exclusive license to certain of our proprietary PEGylation

technology to develop, manufacture and commercialize Hematide. We currently manufacture our proprietary
PEGylation materials for Affymax on a fixed price basis subject to annual adjustments. Affymax has an option to
convert this manufacturing pricing arrangement to cost plus at any time prior to the date the NDA for Hematide is
submitted to the FDA. In addition, Affymax is responsible for all clinical development, regulatory and commer-
cialization expenses and we are entitled to development milestones and royalties on net sales of Hematide. We will
share a portion of our future royalty payments with Enzon Pharmaceuticals, Inc. Our right to receive royalties in any
particular country will expire upon the later of ten years after the first commercial sale of the product in that country
or the expiration of patent rights in that particular country. The agreement expires on a country-by-country basis
upon the expiration of Affymax’s royalty obligations. The agreement may also be terminated by either party for the
other party’s continued material breach after a cure period or by us in the event that Affymax challenges the validity
or enforceability of any patent licensed to them under the agreement.

LEVADEXTM, Agreement with MAP Pharmaceuticals

In June 2004, we entered into a license agreement with MAP Pharmaceuticals which includes a worldwide,
exclusive license, to certain of our patents and other intellectual property rights to develop and commercialize a
formulation of dihydroergotamine for administration to patients via the pulmonary or nasal delivery route. Under
the terms of the agreement, we have the right to receive certain development milestone payments and royalties
based on net sales of LEVADEX. Our right to receive royalties in any particular country will expire upon the later of
(i) ten years after first commercial sale in that country, (ii) the date upon which the licensed know-how becomes
known to the general public, and (iii) expiration of certain patent claims, each on a country-by-country basis. Either
party may terminate the agreement upon a material, uncured default of the other party.

Hemophilia Programs, Agreement with Subsidiaries of Baxter International (including BAX-855)

In September 2005, we entered into an exclusive research, development, license and manufacturing and supply
agreement with Baxter Healthcare SA and Baxter Healthcare Corporation (Baxter) to develop products with an
extended half-life for the treatment and prophylaxis of Hemophilia A patients using our PEGylation technology. In
December 2007, we expanded our agreement with Baxter to include the license of our PEGylation technology and
proprietary PEGylation methods with the potential to improve the half-life of any future products Baxter may
develop for the treatment and prophylaxis of Hemophilia B patients. Under the terms of the agreement, we are
entitled to research and development funding, and we manufacture our proprietary PEGylation materials for Baxter
on a cost plus basis. Baxter is responsible for all clinical development, regulatory, and commercialization expenses.
In relation to Hemophilia A, we are entitled to development milestone payments and royalties on net sales varying
by product and country of sale. Our right to receive these royalties in any particular country will expire upon the
later of ten years after the first commercial sale of the product in that country or the expiration of patent rights in
certain designated countries or in that particular country. In relation to Hemophilia B, we are entitled to
development and sales milestone payments and royalties on net sales varying by product and country of sale.
Our right to receive these royalties in any particular country will expire upon the later of twelve years after the first
commercial sale of the product in that country or the expiration of patent rights in certain designated countries or in
that particular country. The agreement expires in relation to a particular product and country upon the expiration of
all of Baxter’s royalty obligations related to such product and country. The agreement may also be terminated by
either party for the other party’s material breach or insolvency, provided that such other party has been given a
chance to cure or remedy such breach or insolvency. Subject to certain limitations as to time, and possible
termination fee payment obligations, Baxter also has the right to terminate the agreement for convenience. We have
the right to terminate the agreement or convert Baxter’s license from exclusive to non-exclusive in the event Baxter
fails to comply with certain diligence obligations.

Cipro Inhale, Agreement with Bayer Schering Pharma AG Assigned to Novartis as of December 31, 2008

We were a party to a collaborative research, development and commercialization agreement with Bayer
Schering Pharma AG related to the development of an inhaled powder formulation of Ciprofloxacin for the
treatment of chronic lung infections caused by Pseudomonas aeruginosa in cystic fibrosis patients. As of
December 31, 2008, we assigned the agreement to Novartis Pharma AG in connection with the closing of the

pulmonary asset sale transaction. We maintain the right to receive certain potential royalties in the future based on
net product sales if Cipro Inhale receives regulatory approval and is successfully commercialized.

Overview of Select Licensing Partnerships for Approved Products

Neulasta», Agreement with Amgen, Inc.

In July 1995, we entered into a non-exclusive supply and license agreement (1995 Agreement) with Amgen, Inc.,
pursuant to which we license our proprietary PEGylation technology to be used in the development and manufacture
of Neulasta. Neulasta selectively stimulates the production of neutrophils that are depleted by cytotoxic chemotherapy,
a condition called neutropenia that makes it more difficult for the body to fight infections. On October 29, 2010, we
amended and restated the 1995 Agreement by entering into a supply, dedicated suite and manufacturing guarantee
agreement (2010 Agreement) and an amended and restated license agreement with Amgen Inc. and Amgen
Manufacturing., Limited (together referred to as Amgen). Under the terms of the 2010 Agreement, we guarantee
the manufacture and supply of our proprietary PEGylation materials (Polymer Materials) to Amgen in an existing
manufacturing suite to be used exclusively for the manufacture of Polymer Materials for Amgen in our manufacturing
facility in Huntsville, Alabama. This supply arrangement is on a non-exclusive basis (other than the use of the
manufacturing suite and certain equipment) whereby we are free to manufacture and supply the Polymer Materials to
any other third party and Amgen is free to procure the Polymer Materials from any other third party. Under the terms of
the 2010 Agreement, we received a $50.0 million upfront payment in 2010 in return for guaranteeing supply of certain
quantities of Polymer Materials to Amgen and the Additional Rights described below, and Amgen will pay
manufacturing fees calculated based on fixed and variable components applicable to the Polymer Materials ordered
by Amgen and delivered by us. Amgen has no minimum purchase commitments. If quantities of the Polymer
Materials ordered by Amgen exceed specified quantities (with each specified quantity representing a small portion of
the quantity that we historically supplied to Amgen), significant additional payments become payable to us in return
for guaranteeing supply of additional quantities of the Polymer Materials.

The term of the Agreement runs through October 29, 2020. In the event we become subject to a bankruptcy or
insolvency proceeding, we cease to own or control the manufacturing facility in Huntsville, Alabama, we fail to
manufacture and supply the Polymer Materials or certain other events occur, Amgen or its designated third party will
have the right to elect, among certain other options, to take title to the dedicated equipment and access the manufacturing
facility to operate the manufacturing suite solely for the purpose of manufacturing the Polymer Materials (Additional
Rights). Amgen may terminate the 2010 Agreement for convenience or due to an uncured material default by us. Either
party may terminate the 2010 Agreement in the event of insolvency or bankruptcy of the other party.

PEGASYS», Agreement with F. Hoffmann-La Roche Ltd

In February 1997, we entered into a license, manufacturing and supply agreement with F. Hoffmann-La Roche
Ltd and Hoffmann-La Roche Inc. (Roche), under which we granted Roche a worldwide, exclusive license to use
certain PEGylation materials to manufacture and commercialize a certain class of products, of which PEGASYS is
the only product currently commercialized. PEGASYS is approved in the U.S., E.U. and other countries for the
treatment of Hepatitis C and is designed to help the patient’s immune system fight the Hepatitis C virus. As a result
of Roche exercising a license extension option in December 2009, beginning in 2010 Roche has the right to
manufacture all of its requirements for our proprietary PEGylation materials for PEGASYS and we supply raw
materials or perform additional manufacturing, if any, only on a back-up basis. The agreement expires on the later of
January 10, 2015 or the expiration of our last relevant patent containing a valid claim.

Somavert», Agreement with Pfizer, Inc.

In January 2000, we entered into a license, manufacturing and supply agreement with Sensus Drug Devel-
opment Corporation (subsequently acquired by Pharmacia Corp. in 2001 and then acquired by Pfizer, Inc. in 2003),
for the PEGylation of Somavert (pegvisomant), a human growth hormone receptor antagonist for the treatment of
acromegaly. We currently manufacture our proprietary PEGylation reagent for Pfizer on a price per gram basis. The
agreement expires on the later of ten years from the grant of first marketing authorization in the designated territory,
which occurred in March 2003, or the expiration of our last relevant patent containing a valid claim. In addition,

Pfizer may terminate the agreement if marketing authorization is withdrawn or marketing is no longer feasible due
to certain circumstances, and either party may terminate for cause if certain conditions are met.

PEG-Intron», Agreement with Merck (through its acquisition of Schering-Plough Corporation)

In February 2000, we entered into a manufacturing and supply agreement with Schering-Plough Corporation
(Schering) for the manufacture and supply of our proprietary PEGylation materials to be used by Schering in
production of a pegylated recombinant human interferon-alpha (PEG-Intron). PEG-Intron is a treatment for patients
with Hepatitis C. Schering was acquired by and become a wholly-owned subsidiary of Merck & Co., Inc. We
currently manufacture our proprietary PEGylation materials for Schering on a price per gram basis. In December
2010, the parties amended the manufacturing and supply agreement to provide for a transition plan to an alternative
manufacturer and extension of the term through the successful manufacturing transition or December 31, 2018 at
the latest. The amended agreement provided for a one-time payment and milestone payments as well as increased
consideration for any future manufacturing performed by us.

Macugen», Agreement with Eyetech, Inc.

In 2002, we entered into a license, manufacturing and supply agreement with Eyetech, Inc. (Eyetech), pursuant
to which we license our proprietary PEGylation technology for the development and commercialization of
Macugen», a PEGylated anti-vascular endothelial growth factor aptamer currently approved in the U.S. and
E.U. for use in treating age-related macular degeneration. We currently manufacture our proprietary PEGylation
materials for Eyetech on a price per gram basis. Under the terms of the agreement, we will receive royalties on net
product sales in any particular country for the longer of ten years from the date of the first commercial sale of the
product in that country or the duration of patent coverage. We share a portion of the payments received under this
agreement with Enzon Pharmaceuticals, Inc. The agreement expires upon the expiration of our last relevant patent
containing a valid claim. In addition, Eyetech may terminate the agreement if marketing authorization is withdrawn
or marketing is no longer feasible due to certain circumstances, and either party may terminate for cause if certain
conditions are met.

CIMZIA», Agreement with UCB Pharma

In December 2000, we entered into a license, manufacturing and supply agreement for CIMZIA» (certolizumab
pegol, CDP870) with Celltech Chiroscience Ltd., which was acquired by UCB Pharma (UCB) in 2004. Under the
terms of the agreement, UCB is responsible for all clinical development, regulatory, and commercialization expenses.
We have the right to receive manufacturing revenue on a cost-plus basis and royalties on net product sales. We are
entitled to receive royalties on net sales of the CIMZIA» product in any particular country for the longer of ten years
from the first commercial sale of the product in that country or the expiration of patent rights in that particular country.
We share a portion of the payments we receive from UCB with Enzon Pharmaceuticals, Inc. CIMZIA» is currently
approved in the treatment of Crohn’s Disease in the U.S and the treatment of rheumatoid arthritis in the EU. UCB is
also conducting Phase 2 clinical trials on CIMZIA» for psoriasis. The agreement expires upon the expiration of all of
UCB’s royalty obligations, provided that the agreement can be extended for successive two year renewal periods upon
mutual agreement of the parties. In addition, UCB may terminate the agreement should it cease the development and
marketing of CIMZIA» and either party may terminate for cause under certain conditions.

MIRCERA» (C.E.R.A.) (Continuous Erythropoietin Receptor Activator), Agreement with
F. Hoffmann-La Roche Ltd

In December 2000, we entered into a license, manufacturing and supply agreement with F. Hoffmann-
La Roche Ltd and Hoffmann-La Roche Inc. (Roche), which was amended and restated in its entirety in December
2005. Pursuant to the agreement, we license our proprietary PEGylation materials for use in the development and
manufacture of Roche’s MIRCERA» product. MIRCERA» is a novel continuous erythropoietin receptor activator
indicated for the treatment of anemia associated with chronic kidney disease in patients on dialysis and patients not
on dialysis. We are entitled to receive royalties on net sales of the MIRCERA» product in any particular country for
the longer of ten years from the first commercial sale of the product in that country or the expiration of patent rights

in that particular country. The agreement expires upon the expiration of all of Roche’s royalty obligations, unless
earlier terminated by Roche for convenience or by either party for cause under certain conditions.

In May 2007, MIRCERA» was approved in the EU and the product was subsequently launched by Roche in the
EU in August of 2007. In November 2007, the FDA approved Roche’s Biologics License Application (BLA) for
MIRCERA» but the product has not been launched in the U.S. as a result of patent-related issues. In October 2008, a
federal district court ruled in favor of Amgen Inc. in a patent infringement lawsuit involving MIRCERA» and issued
a permanent injunction which prevents Roche from marketing or selling MIRCERA» in the U.S. even though the
FDA approved MIRCERA». In December 2009, the U.S. District Court for the District of Massachusetts entered a
final judgment and permanent injunction and Roche and Amgen entered into a settlement and limited license
agreement which allows Roche to begin selling MIRCERA» in the U.S. in July 2014.

Significant Developments in our Business that Occurred in 2008

Exit from the Inhaled Insulin Programs

In 1995, we entered into a collaborative development and licensing agreement with Pfizer to develop and
market Exubera» and, in 2006 and 2007, we entered into a series of interim letter agreements with Pfizer to develop
a next generation form of dry powder inhaled insulin and proprietary inhaler device, also known as NGI. In January
2006, Exubera received marketing approval in the U.S. and EU for the treatment of adults with Type 1 and Type 2
diabetes. Under the collaborative development and licensing agreement, Pfizer had sole responsibility for mar-
keting and selling Exubera. We performed all of the manufacturing of the Exubera dry powder insulin, and we
supplied Pfizer with the Exubera inhalers through third party contract manufacturers (Bespak Europe Ltd. and Tech
Group North America, Inc.). We recorded no revenue from Pfizer related to these activities for the years ended
December 31, 2010, 2009, and 2008.

On October 18, 2007, Pfizer announced that it was exiting the Exubera business and gave notice of termination
under our collaborative development and licensing agreement. On November 9, 2007, we entered into a termination
agreement and mutual release with Pfizer. Under this agreement we received a one-time payment of $135.0 million
in November 2007 from Pfizer in satisfaction of all outstanding contractual obligations under our then-existing
agreements relating to Exubera and NGI. All agreements between Pfizer and us related to Exubera and NGI, other
than the termination agreement and mutual release and a related interim Exubera manufacturing maintenance letter,
terminated on November 9, 2007. In February 2008, we entered into a termination agreement with Bespak and Tech
Group pursuant to which we paid an aggregate of $40.2 million in satisfaction of outstanding accounts payable and
termination costs and expenses that were due under the Exubera inhaler contract manufacturing agreement. We also
entered into a maintenance agreement with both Pfizer and Tech Group to preserve key personnel and manufac-
turing capacity to support potential future Exubera inhaler manufacturing if we found a new partner for the inhaled
insulin program.

On April 9, 2008, we announced that we had ceased all negotiations with potential partners for Exubera and
NGI as a result of new data analysis from ongoing clinical trials conducted by Pfizer which indicated an increase in
the number of new cases of lung cancer in Exubera patients who were former smokers as compared to patients in the
control group who were not former smokers. In April 2008, we ceased all spending associated with maintaining
Exubera manufacturing capacity and any further NGI development, including, but not limited to, terminating the
Exubera manufacturing capacity maintenance arrangements with Pfizer and Tech Group.

Asset Sale to Novartis

On December 31, 2008, we completed the sale of certain assets related to our pulmonary business, associated
technology and intellectual property to Novartis Pharma AG and Novartis Pharmaceuticals Corporation (together
referred to as Novartis) for a purchase price of $115.0 million in cash (Novartis Pulmonary Asset Sale). Under the
terms of the transaction, we transferred to Novartis certain assets and obligations related to our pulmonary
technology, development and manufacturing operations including:

(cid:129) dry powder and liquid pulmonary technology platform including but not limited to our pulmonary inhalation

devices, formulation technology, manufacturing technology and related intellectual property;

(cid:129) capital equipment, information systems and facility lease obligations for our pulmonary development and

manufacturing facility in San Carlos, California;

(cid:129) manufacturing and associated development services payments for the Cipro Inhale program;

(cid:129) manufacturing and royalty rights to the Tobramycin Inhalation Powder (TIP) program through the termi-

nation of our collaboration agreement with Novartis;

(cid:129) certain other interests that we had in two private companies; and

(cid:129) approximately 140 of our personnel primarily dedicated to our pulmonary technology, development

programs, and manufacturing operations.

In addition, we retained all of our rights to BAY41-6551, partnered with Bayer Healthcare LLC, certain royalty
rights for the Cipro Inhale development program partnered with Bayer Schering Pharma AG, and certain
intellectual property rights specific to inhaled insulin.

In connection with the Novartis Pulmonary Asset Sale, we also entered into an Exclusive License Agreement
with Novartis Pharma. Pursuant to the Exclusive License Agreement, Novartis Pharma granted back to us an
exclusive, irrevocable, perpetual, non-transferable, royalty-free and worldwide license under certain specific patent
rights and other related intellectual property rights acquired by Novartis Pharma from Nektar in the transaction, as
well as certain improvements or modifications thereto that are made by Novartis Pharma after the closing. Certain
of such patent rights and other related intellectual property rights relate to our development program for inhaled
vancomycin or are necessary for us to satisfy certain of our continuing contractual obligations to third parties,
including in connection with development, manufacture, sale, and commercialization activities related to BAY41-
6551. We also entered into a service agreement pursuant to which we have subcontracted to Novartis certain
services to be performed related to our partnered program for BAY41-6551 and a transition services agreement
pursuant to which Novartis and we will provide each other with specified services for limited time periods following
the closing of the Novartis Pulmonary Asset Sale to facilitate the transition of the acquired assets and business from
us to Novartis.

Government Regulation

The research and development, clinical testing, manufacture and marketing of products using our technologies
are subject to regulation by the FDA and by comparable regulatory agencies in other countries. These national
agencies and other federal, state and local entities regulate, among other things, research and development activities
and the testing (in vitro, in animals, and in human clinical trials), manufacture, labeling, storage, recordkeeping,
approval, marketing, advertising and promotion of our products.

The approval process required by the FDA before a product using any of our technologies may be marketed in
the U.S. depends on whether the chemical composition of the product has previously been approved for use in other
dosage forms. If the product is a new chemical entity that has not been previously approved, the process includes the
following:

(cid:129) extensive preclinical laboratory and animal testing;

(cid:129) submission of an Investigational New Drug application (IND) prior to commencing clinical trials;

(cid:129) adequate and well-controlled human clinical trials to establish the safety and efficacy of the drug for the

intended indication; and

(cid:129) submission to the FDA of an NDA for approval of a drug, a BLA for approval of a biological product or a
Premarket Approval Application (PMA) or Premarket Notification 510(k) for a medical device product (a 510(k)).

If the active chemical ingredient has been previously approved by the FDA, the approval process is similar,
except that certain preclinical tests relating to systemic toxicity normally required for the IND and NDA or BLA may
not be necessary if the company has a right of reference to such data or is eligible for approval under Section 505(b)(2)
of the Federal Food, Drug, and Cosmetic Act or the biosimilars provisions of the Public Health Services Act.

Preclinical tests include laboratory evaluation of product chemistry and animal studies to assess the safety and
efficacy of the product and its chosen formulation. Preclinical safety tests must be conducted by laboratories that
comply with FDA good laboratory practices (GLP) regulations. The results of the preclinical tests for drugs,
biological products and combination products subject to the primary jurisdiction of the FDA’s Center for Drug
Evaluation and Research (CDER) or Center for Biologics Evaluation and Research (CBER) are submitted to the
FDA as part of the IND and are reviewed by the FDA before clinical trials can begin. Clinical trials may begin
30 days after receipt of the IND by the FDA, unless the FDA raises objections or requires clarification within that
period.

Clinical trials involve the administration of the drug to healthy volunteers or patients under the supervision of a
qualified, identified medical investigator according to a protocol submitted in the IND for FDA review. Drug
products to be used in clinical trials must be manufactured according to current good manufacturing practices
(cGMP). Clinical trials are conducted in accordance with protocols that detail the objectives of the study and the
parameters to be used to monitor participant safety and product efficacy as well as other criteria to be evaluated in
the study. Each protocol is submitted to the FDA in the IND.

Apart from the IND process described above, each clinical study must be reviewed by an independent
Institutional Review Board (IRB) and the IRB must be kept current with respect to the status of the clinical study.
The IRB considers, among other things, ethical factors, the potential risks to subjects participating in the trial and
the possible liability to the institution where the trial is conducted. The IRB also reviews and approves the informed
consent form to be signed by the trial participants and any significant changes in the clinical study.

Clinical trials are typically conducted in three sequential phases. Phase 1 involves the initial introduction of the
drug into healthy human subjects (in most cases) and the product generally is tested for tolerability, pharmaco-
kinetics, absorption, metabolism and excretion. Phase 2 involves studies in a limited patient population to:

(cid:129) determine the preliminary efficacy of the product for specific targeted indications;

(cid:129) determine dosage and regimen of administration; and

(cid:129) identify possible adverse effects and safety risks.

If Phase 2 trials demonstrate that a product appears to be effective and to have an acceptable safety profile,
Phase 3 trials are undertaken to evaluate the further clinical efficacy and safety of the drug and formulation within
an expanded patient population at geographically dispersed clinical study sites and in large enough trials to provide
statistical proof of efficacy and tolerability. The FDA, the clinical trial sponsor, the investigators or the IRB may
suspend clinical trials at any time if any one of them believes that study participants are being subjected to an
unacceptable health risk. In some cases, the FDA and the drug sponsor may determine that Phase 2 trials are not
needed prior to entering Phase 3 trials.

Following a series of formal and informal meetings between the drug sponsor and the regulatory agencies, the
results of product development, preclinical studies and clinical studies are submitted to the FDA as an NDA or BLA
for approval of the marketing and commercial shipment of the drug product. The FDA may deny approval if
applicable regulatory criteria are not satisfied or may require additional clinical or pharmaceutical testing or
requirements. Even if such data are submitted, the FDA may ultimately decide that the NDA or BLA does not satisfy
all of the criteria for approval. Additionally, the approved labeling may narrowly limit the conditions of use of the
product, including the intended uses, or impose warnings, precautions or contraindications which could signif-
icantly limit the potential market for the product. Further, as a condition of approval, the FDA may impose post-
market surveillance, or Phase 4, studies or risk evaluation and mitigation strategies. Product approvals, once
obtained, may be withdrawn if compliance with regulatory standards is not maintained or if safety concerns arise
after the product reaches the market. The FDA may require additional post-marketing clinical testing and
pharmacovigilance programs to monitor the effect of drug products that have been commercialized and has the
power to prevent or limit future marketing of the product based on the results of such programs. After approval,
there are ongoing reporting obligations concerning adverse reactions associated with the product, including
expedited reports for serious and unexpected adverse events.

Each manufacturing establishment producing drug product for the U.S. market must be registered with the
FDA and typically is inspected by the FDA prior to NDA or BLA approval of a drug product manufactured by such
establishment. Establishments handling controlled substances must also be licensed by the U.S. Drug Enforcement
Administration. Manufacturing establishments of U.S. marketed products are subject to inspections by the FDA for
compliance with cGMP and other U.S. regulatory requirements. They are also subject to U.S. federal, state, and
local regulations regarding workplace safety, environmental protection and hazardous and controlled substance
controls, among others.

A number of the drugs we are developing are already approved for marketing by the FDA in another form or
using another delivery system. We believe that, when working with drugs approved in other forms, the approval
process for products using our alternative drug delivery or formulation technologies may involve less risk and
require fewer tests than new chemical entities do. However, we expect that our formulations will often use
excipients not currently approved for use. Use of these excipients will require additional toxicological testing that
may increase the costs of, or length of time needed to, gain regulatory approval. In addition, as they relate to our
products, regulatory procedures may change as regulators gain relevant experience, and any such changes may
delay or increase the cost of regulatory approvals.

For product candidates currently under development utilizing pulmonary technology, the pulmonary inhaler
devices are considered to be part of a drug and device combination for deep lung delivery of each specific molecule.
The FDA will make a determination as to the most appropriate center and division within the agency that will
assume primary responsibility for the review of the applicable applications, which would consist of an IND and an
NDA or BLA where CDER or CBER are determined to have primary jurisdiction or an investigational device
exemption application and PMA or 510(k) where the Center for Devices and Radiological Health (CDRH) is
determined to have primary jurisdiction. In the case of our product candidates, CDER in consultation with CDRH
could be involved in the review. The assessment of jurisdiction within the FDA is based upon the primary mode of
action of the drug or the location of the specific expertise in one of the centers.

Where CDRH is determined to have primary jurisdiction over a product, 510(k) clearance or PMA approval is
required. Medical devices are classified into one of three classes — Class I, Class II, or Class III — depending on the
degree of risk associated with each medical device and the extent of control needed to ensure safety and effectiveness.
Devices deemed to pose lower risks are placed in either Class I or II, which requires the manufacturer to submit to the
FDA a Premarket Notification requesting permission to commercially distribute the device. This process is known as
510(k) clearance. Some low risk devices are exempted from this requirement. Devices deemed by the FDA to pose the
greatest risk, such as life-sustaining, life-supporting or implantable devices, or devices deemed not substantially
equivalent to a previously cleared 510(k) device are placed in Class III, requiring PMA approval.

To date, our partners have generally been responsible for clinical and regulatory approval procedures, but we
may participate in this process by submitting to the FDA a drug master file developed and maintained by us which
contains data concerning the manufacturing processes for the inhaler device or drug. For our proprietary products,
we prepare and submit an IND and are responsible for additional clinical and regulatory procedures for product
candidates being developed under an IND. The clinical and manufacturing, development and regulatory review and
approval process generally takes a number of years and requires the expenditure of substantial resources. Our ability
to manufacture and market products, whether developed by us or under collaboration agreements, ultimately
depends upon the completion of satisfactory clinical trials and success in obtaining marketing approvals from the
FDA and equivalent foreign health authorities.

Sales of our products outside the U.S. are subject to local regulatory requirements governing clinical trials and

marketing approval for drugs. Such requirements vary widely from country to country.

In the U.S., under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat
a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in
the U.S. The company that obtains the first FDA approval for a designated orphan drug for a rare disease receives
marketing exclusivity for use of that drug for the designated condition for a period of seven years. In addition, the
Orphan Drug Act provides for protocol assistance, tax credits, research grants, and exclusions from user fees for
sponsors of orphan products. Once a product receives orphan drug exclusivity, a second product that is considered to
be the same drug for the same indication may be approved during the exclusivity period only if the second product is

shown to be “clinically superior” to the original orphan drug in that it is more effective, safer or otherwise makes a
“major contribution to patient care” or the holder of exclusive approval cannot assure the availability of sufficient
quantities of the orphan drug to meet the needs of patients with the disease or condition for which the drug was
designated. Similar incentives also are available for orphan drugs in the E.U.

In the U.S., the FDA may grant Fast Track designation to a product candidate, which allows the FDA to
expedite the review of new drugs that are intended for serious or life-threatening conditions and that demonstrate the
potential to address unmet medical needs. An important feature of Fast Track designation is that it emphasizes the
critical nature of close, early communication between the FDA and the sponsor company to improve the efficiency
of product development.

Patents and Proprietary Rights

We invest a significant portion of our resources in the creation and development of new drug compounds that
serve unmet needs in the treatment of patients. In doing so, we create intellectual property. As part of our strategy to
secure our intellectual property created by these efforts, we routinely apply for patents, rely on trade secret
protection, and enter into contractual obligations with third parties. When appropriate, we will defend our
intellectual property, taking any and all legal remedies available to us, including, for example, asserting patent
infringement, trade secret misappropriation and breach of contract claims. As of January 1, 2011, we owned greater
than 100 U.S. and 380 foreign patents. Currently, we have over approximately 100 patent applications pending in
the U.S. and 480 pending in other countries.

A focus area of our current drug creation and development efforts centers on our innovations in and
improvements to our PEGylation and advanced polymer conjugate technology platforms. In this area, our patent
portfolio contains patents and patent applications that encompass our PEGylation and advanced polymer conjugate
technology platforms, some of which we acquired in our acquisition of Shearwater Corporation in June 2001. More
specifically, our patents and patent applications cover polymer architecture, drug conjugates, formulations,
methods of making polymers and polymer conjugates, and methods of administering polymer conjugates. Our
patent strategy is to file patent applications on innovations and improvements to cover a significant majority of the
major pharmaceutical markets in the world. Generally, patents have a term of twenty years from the earliest priority
date (assuming all maintenance fees are paid). In some instances, patent terms can be increased or decreased,
depending on the laws and regulations of the country or jurisdiction that issued the patent.

In January 2002, we entered into a Cross-License and Option Agreement with Enzon Pharmaceuticals, Inc.,
pursuant to which we and Enzon provided certain licenses to selected portions of each party’s PEGylation patent
portfolio. In certain cases, we have the option to license certain of Enzon’s PEGylation patents for use in our
proprietary products or for sublicenses to third parties in each case in exchange for payments to Enzon based on
manufacturing profits, revenue share or royalties on net sales if a designated product candidate is approved in one or
more markets.

In connection with the Novartis Pulmonary Asset Sale, as of December 31, 2008, we entered into an exclusive
license agreement with Novartis Pharma. Pursuant to the exclusive license agreement, Novartis Pharma grants back
to us an exclusive, irrevocable, perpetual, royalty-free and worldwide license under certain specific patent rights
and other related intellectual property rights acquired by Novartis from us in the Novartis Pulmonary Asset Sale, as
well as certain improvements or modifications thereto that are made by Novartis. Certain of such patent rights and
other related intellectual property rights relate to our development program for inhaled vancomycin or are necessary
for us to satisfy certain continuing contractual obligations to third parties, including in connection with devel-
opment, manufacture, sale, and commercialization activities related to BAY41-6551 partnered with Bayer
Healthcare LLC.

The patent positions of pharmaceutical and biotechnology companies, including ours, involve complex legal
and factual issues. There can be no assurance that the patents we apply for will be issued to us or that the patents that
are issued to us will be held valid and enforceable in a court of law. Even for patents that are enforceable, we
anticipate that any attempt to enforce our patents would be time consuming and costly. Additionally, the coverage
claimed in a patent application can be significantly reduced before the patent is issued. As a consequence, we do not
know whether any of our pending patent applications will be granted with broad coverage or whether the claims that

eventually issue, or those that have issued, will be circumvented. Since publication of discoveries in scientific or
patent literature often lag behind actual discoveries, we cannot be certain that we were the first inventor of
inventions covered by our patents or patent applications or that we were the first to file patent applications for such
inventions. Moreover, we may have to participate in interference proceedings in the U.S. Patent and Trademark
Office, which could result in substantial cost to us, even if the eventual outcome is favorable. An adverse outcome
could subject us to significant liabilities to third parties, require disputed rights to be licensed from or to third parties
or require us to cease using the technology in dispute. Please refer to Item 1A, Risk Factors, including but not
limited to “We may not be able to obtain intellectual property licenses related to the development of our technology
on a commercially reasonable basis, if at all,” and “If any of our pending patent applications do not issue, or are
deemed invalid following issuance, we may lose valuable intellectual property protection.”

U.S. and foreign patent rights and other proprietary rights exist that are owned by third parties and relate to
pharmaceutical compositions and reagents, medical devices and equipment and methods for preparation, packaging
and delivery of pharmaceutical compositions. We cannot predict with any certainty which, if any, of these rights will
be considered relevant to our technology by authorities in the various jurisdictions where such rights exist, nor can
we predict with certainty which, if any, of these rights will or may be asserted against us by third parties. We could
incur substantial costs in defending ourselves and our partners against any such claims. Furthermore, parties making
such claims may be able to obtain injunctive or other equitable relief, which could effectively block our ability to
develop or commercialize some or all of our products in the U.S. and abroad and could result in the award of
substantial damages. In the event of a claim of infringement, we or our partners may be required to obtain one or
more licenses from third parties. There can be no assurance that we can obtain a license to any technology that we
determine we need on reasonable terms, if at all, or that we could develop or otherwise obtain alternative
technology. The failure to obtain licenses if needed may have a material adverse effect on our business, results of
operations and financial condition.

We also rely on trade secret protection for our confidential and proprietary information. No assurance can be
given that we can meaningfully protect our trade secrets. Others may independently develop substantially
equivalent confidential and proprietary information or otherwise gain access to, or disclose, our trade secrets.
Please refer to Item 1A, Risk Factors, including but not limited to “We rely on trade secret protection and other
unpatented proprietary rights for important proprietary technologies, and any loss of such rights could harm our
business, results of operations and financial condition.”

In certain situations in which we work with drugs covered by one or more patents, our ability to develop and
commercialize our technologies may be affected by limitations in our access to these proprietary drugs. Even if we
believe we are free to work with a proprietary drug, we cannot guarantee that we will not be accused of, or
determined to be, infringing a third party’s rights and be prohibited from working with the drug or found liable for
damages. Any such restriction on access or liability for damages would have a material adverse effect on our
business, results of operations and financial condition.

It is our policy to require our employees and consultants, outside scientific collaborators, sponsored
researchers and other advisors who receive confidential information from us to execute confidentiality agreements
upon the commencement of employment or consulting relationships with us. These agreements provide that all
confidential information developed or made known to the individual during the course of the individual’s
relationship with us is to be kept confidential and not disclosed to third parties except in specific circumstances.
The agreements provide that all inventions conceived by an employee shall be our property. There can be no
assurance, however, that these agreements will provide meaningful protection or adequate remedies for our trade
secrets in the event of unauthorized use or disclosure of such information.

Customer Concentrations

Our revenue is derived from our collaboration agreements with partners, under which we may receive contract
research payments, milestone payments based on clinical progress, regulatory progress or net sales achievements,
royalties or manufacturing revenue. AstraZeneca AB represented 68% of our total revenue during the year ended
December 31, 2010. No other collaboration partner accounted for more than 10% of our total revenue during the
year ended December 31, 2010.

Backlog

In our partnered programs where we manufacture and supply our proprietary PEGylation materials, inventory
is produced and sales are made pursuant to customer purchase orders for delivery. The volume of drug formulation
actually purchased by our customers, as well as shipment schedules, are subject to frequent revisions that reflect
changes in both the customers’ needs and product availability. In our partnered programs where we provide contract
research services, those services are typically provided under a work plan that is subject to frequent revisions that
change based on the development needs and status of the program. The backlog at a particular time is affected by a
number of factors, including scheduled date of manufacture and delivery and development program status. In light
of industry practice and our own experience, we do not believe that backlog as of any particular date is indicative of
future results.

Competition

Competition in the pharmaceutical and biotechnology industry is intense and characterized by aggressive
research and development and rapidly-evolving science, technology, and standards of medical care throughout the
world. We frequently compete with pharmaceutical companies and other institutions with greater financial,
research and development, marketing and sales, manufacturing and managerial capabilities. We face competition
from these companies not just in product development but also in areas such as recruiting employees, acquiring
technologies that might enhance our ability to commercialize products, establishing relationships with certain
research and academic institutions, enrolling patients in clinical trials and seeking program partnerships and
collaborations with larger pharmaceutical companies.

Science and Technology Competition

We believe that our proprietary and partnered products will compete with others in the market on the basis of
one or more of the following parameters: efficacy, safety, ease of use and cost. We face intense science and
technology competition from a multitude of technologies seeking to enhance the efficacy, safety and ease of use of
approved drugs and new drug molecule candidates. A number of the products in our pipeline have direct and
indirect competition from large pharmaceutical companies and biopharmaceutical companies. With our PEGy-
lation and advanced polymer conjugate technologies, we believe we have competitive advantages relating to factors
such as efficacy, safety, ease of use and cost for certain applications and molecules. We constantly monitor scientific
and medical developments in order to improve our current technologies, seek licensing opportunities where
appropriate, and determine the best applications for our technology platforms.

In the fields of PEGylation and advanced polymer conjugate technologies, our competitors include Dr. Reddy’s
Laboratories, Enzon Pharmaceuticals, Inc., SunBio Corporation, Novo Nordisk A/S (formerly assets held by Neose
Technologies, Inc.), Mountain View Pharmaceuticals, Inc., and NOF Corporation. Several other chemical, bio-
technology and pharmaceutical companies may also be developing PEGylation technology, advanced polymer
conjugate technology or technologies intended to deliver similar scientific and medical benefits. Some of these
companies license or provide the technology to other companies, while others develop the technology for internal
use.

Product and Program Specific Competition

NKTR-118 (oral PEGylated naloxol)

There are no oral drugs approved specifically for the treatment of opioid-induced constipation (OIC) or opioid
bowel dysfunction (OBD). The only approved treatment for OIC is a subcutaneous treatment known as
methylnaltrexone bromide marketed by Progenics Pharmaceuticals, Inc. in collaboration with Salix Pharmaceu-
ticals, Ltd. Other current therapies that are utilized to treat OIC and OBD include over-the-counter laxatives and
stool softeners, such as docusate sodium, senna, and milk of magnesia. These therapies do not address the
underlying cause of constipation as a result of opioid use and are generally viewed as ineffective or only partially
effective to treat the symptoms of OID and OBD.

There are a number of companies developing potential products which are in various stages of clinical
development and are being evaluated for the treatment of OIC and OBD in different patient populations. Potential
competitors include Progenics Pharmaceuticals, Inc. in collaboration with Salix Pharmaceuticals, Ltd., Adolor
Corporation, GlaxoSmithKline, Mundipharma Int. Limited, Sucampo Pharmaceuticals, Alkermes, Inc. and Takeda
Pharmaceutical Company Limited.

NKTR-102 (topoisomerase I inhibitor-polymer conjugate)

There are a number of chemotherapies and cancer therapies approved today and in various stages of clinical
development for ovarian and breast cancers including but not limited to: Avastin» (bevacizumab), Camptosar»
(irinotecan), Ellence» (epirubicin), Gemzar» (gemcitabine), Herceptin» (trastuzumab), Hycamtin» (topotecan),
Halaven» (eribulin), Paraplatin» (carboplatin), and Taxol» (paclitaxel). These therapies are only partially effective
in treating ovarian, breast or cervical cancers. Major pharmaceutical or biotechnology companies with approved
drugs or drugs in development for these cancers include Bristol-Meyers Squibb, Genentech, Inc., GlaxoSmithKline
plc, Pfizer, Inc., Eli Lilly & Co., and many others.

There are also a number of chemotherapies and cancer therapies approved today and in clinical development
for the treatment of colorectal cancer. Approved therapies for the treatment of colorectal cancer include Eloxatin»
(oxaliplatin), Camptosar» (irinotecan), Avastin» (bevacizumab), Erbitux» (cetuximab), Vectibix» (panitumumab),
Xeloda» (capecitabine), Adrucil» (fluorouracil), and Wellcovorin » (leucovorin). These therapies are only partially
effective in treating the disease. There are a number of drugs in various stages of preclinical and clinical
development from companies exploring cancer therapies or improved chemotherapeutic agents to potentially
treat colorectal cancer. If these drugs are approved, they could be competitive with NKTR-102. These include
products in development from Bristol-Myers Squibb Company, Pfizer, Inc., GlaxoSmithKline plc, Antigenics, Inc.,
F. Hoffman-La Roche Ltd, Novartis AG, Cell Therapeutics, Inc., Neopharm Inc., Meditech Research Ltd, Alchemia
Limited, Enzon Pharmaceuticals, Inc., and others.

BAY41-6551 (Amikacin Inhale, formerly NKTR-061)

There are currently no approved drugs on the market for adjunctive treatment or prevention of Gram-negative
pneumonias in mechanically ventilated patients which are also administered via the pulmonary route. The current
standard of care includes approved intravenous antibiotics which are partially effective for the treatment of either
hospital-acquired pneumonia or ventilator-associated pneumonia in patients on mechanical ventilators. These drugs
include drugs that fall into the categories of antipseudomonal cephalosporins, antipseudomonal carbepenems, beta-
lactam/beta-lactamase inhibitors, antipseudomonal fluoroquinolones, such as ciprofloxacin or levofloxacin, and
aminoglycosides, such as amikacin, gentamycin or tobramycin.

Research and Development

Our total research and development expenditures can be disaggregated into the following significant types of

expenses (in millions):

Years Ended December 31,
2010
2008
2009

Salaries and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Facility and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outside services, including Contract Research Organizations . . . . . . . . .
Supplies, including clinical trial materials . . . . . . . . . . . . . . . . . . . . . . .
Travel, lodging and meals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 37.8
7.2
13.0
33.4
13.1
2.5
1.1

$29.4
3.4
9.9
38.9
10.4
1.7
1.4

$ 58.4
4.6
25.9
40.2
19.0
3.3
3.0

Research and development expense . . . . . . . . . . . . . . . . . . . . . . . . . .

$108.1

$95.1

$154.4

Manufacturing and Supply

We have a manufacturing facility located in Huntsville, Alabama that is capable of manufacturing PEGylated
derivatives and starting materials for active pharmaceutical ingredients (APIs). The facility is also used to produce
APIs to support the early phases of clinical development of our proprietary drug candidates. The facility and
associated equipment are designed and operated to be consistent with the all applicable laws and regulations.

As we do not maintain the capability to manufacture finished drug products, we utilize contract manufacturers
to manufacture the finished drug product for us. We source drug starting materials for our manufacturing activities
from one or more suppliers. For the drug starting materials necessary for our proprietary drug candidate
development, we have agreements for the supply of such drug components with drug manufacturers or suppliers
that we believe have sufficient capacity to meet our demands. However, from time to time, we source critical raw
materials and services from one or a limited number of suppliers and there is a risk that if such supply or services
were interrupted, it would materially harm our business. In addition, we typically order raw materials and services
on a purchase order basis and do not enter into long-term dedicated capacity or minimum supply arrangements.

Prior to the closing of the Novartis Pulmonary Asset Sale on December 31, 2008, we operated a drug powder
manufacturing and packaging facility in San Carlos, California capable of producing drug powders in quantities
sufficient for clinical trials of product candidates utilizing our pulmonary technology. As part of the Novartis
Pulmonary Asset Sale, we transferred this manufacturing facility and the related operations, and Novartis hired
approximately 140 of the related supporting personnel, as of December 31, 2008.

Environment

As a manufacturer of drug products for the U.S. market, we are subject to inspections by the FDA for
compliance with cGMP and other U.S. regulatory requirements, including U.S. federal, state and local regulations
regarding environmental protection and hazardous and controlled substance controls, among others. Environmental
laws and regulations are complex, change frequently and have tended to become more stringent over time. We have
incurred, and may continue to incur, significant expenditures to ensure we are in compliance with these laws and
regulations. We would be subject to significant penalties for failure to comply with these laws and regulations.

Employees and Consultants

As of December 31, 2010, we had 408 employees, of which 299 employees were engaged in research and
development, commercial operations and quality activities and 109 employees were engaged in general admin-
istration and business development. Of the 408 employees, 318 were located in the United States and 90 were
located in India as of December 31, 2010. We have a number of employees who hold advanced degrees, such as
Ph.D.s. None of our employees are covered by a collective bargaining agreement, and we have experienced no work
stoppages. We believe that we maintain good relations with our employees.

To complement our own expert professional staff, we utilize specialists in regulatory affairs, process
engineering, manufacturing, quality assurance, clinical development and business development. These individuals
include certain of our scientific advisors as well as independent consultants.

Available Information

Our website address is http://www.nektar.com. The information in, or that can be accessed through, our website
is not part of this annual report on Form 10-K. Our annual reports on Form 10-K, quarterly reports on Form 10-Q
and current reports on Form 8-K and amendments to those reports are available, free of charge, on or through our
website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the
Securities Exchange Commission (SEC). The public may read and copy any materials we file with the SEC at the
SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the
Public Reference Room can be obtained by calling 1-800-SEC-0330. The SEC maintains an Internet site that
contains reports, proxy and information statements and other information regarding our filings at www.sec.gov.

EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth the names, ages and positions of our executive officers as of February 28, 2011:

Name

Age

Position

Howard W. Robin . . . . . . . . . . . . . . . . .
John Nicholson . . . . . . . . . . . . . . . . . . .
. . . . . . . . .
Lorianne K. Masuoka, M.D.
Stephen K. Doberstein, Ph.D.
. . . . . . . .
Gil M. Labrucherie, J.D. . . . . . . . . . . . .

Jillian B. Thomsen . . . . . . . . . . . . . . . .
Rinko Ghosh . . . . . . . . . . . . . . . . . . . . .

45
47

58 Director, President and Chief Executive Officer
59
49
52
39

Senior Vice President and Chief Financial Officer
Senior Vice President and Chief Medical Officer
Senior Vice President and Chief Scientific Officer
Senior Vice President, General Counsel and
Secretary
Senior Vice President and Chief Accounting Officer
Senior Vice President and Chief Business Officer

Howard W. Robin has served as our President and Chief Executive Officer since January 2007 and has served
as a member of our Board of Directors since February 2007. Mr. Robin served as Chief Executive Officer, President
and director of Sirna Therapeutics, Inc., a clinical-stage biotechnology company pioneering RNAi-based therapies
for serious diseases and conditions, from July 2001 to November 2006 and served as their Chief Operating Officer,
President and Director from January 2001 to June 2001. From 1991 to 2001, Mr. Robin was Corporate Vice
President and General Manager at Berlex Laboratories, Inc., the U.S. pharmaceutical subsidiary of the German
pharmaceutical firm Schering AG, and, from 1987 to 1991, he served as their Vice President of Finance and
Business Development and Chief Financial Officer. From 1984 to 1987, Mr. Robin was Director of Business
Planning and Development at Berlex and was a Senior Associate with Arthur Andersen LLP prior to joining Berlex.
Since February 2006, Mr. Robin has served as a member of the Board of Directors of Acologix, Inc., a
biopharmaceutical company focused on therapeutic compounds for the treatment of osteo-renal diseases. He
received his B.S. in Accounting and Finance from Fairleigh Dickinson University in 1974.

John Nicholson has served as our Senior Vice President and Chief Financial Officer since December 2007.
Mr. Nicholson joined the Company as Senior Vice President of Corporate Development and Business Operations in
October 2007 and was appointed Senior Vice President and Chief Financial Officer in December 2007. Before
joining Nektar, Mr. Nicholson spent 18 years in various executive roles at Schering Berlin, Inc., the U.S. man-
agement holding company of Bayer Schering Pharma AG, a pharmaceutical company. From 1997 to September
2007, Mr. Nicholson served as Schering Berlin Inc.’s Vice President of Corporate Development and Treasurer. From
2001 to September 2007, he concurrently served as President of Schering Berlin Insurance Co., and from February
2007 through September 2007, he also concurrently served as President of Bayer Pharma Chemicals and Schering
Berlin Capital Corp. Mr. Nicholson holds a B.B.A. from the University of Toledo.

Lorianne K. Masuoka, M.D. has served as our Senior Vice President and Chief Medical Officer since
November 30, 2009, and prior to that served as our Vice President of Clinical Development from August 2008 to
June 2009. From 2003 until August 2008, Dr. Masuoka served as Vice President of Clinical Development at
privately held Five Prime Therapeutics, a clinical stage biotechnology company. From 2000 until 2003, she was
Director of Oncology at Chiron Corporation, a multi-national biotechnology firm, acquired by Novartis Interna-
tional AG in April 2006. From 1994 until 2000, Dr. Masuoka held positions of increasing responsibility in clinical
research at Berlex Laboratories, Inc., the U.S. pharmaceutical subsidiary of the German pharmaceutical firm
Schering AG. Dr. Masuoka received her B.S. and M.D. from the University of California, Davis, was an American
Epilepsy Society Fellow at Yale School of Medicine and is board certified in Neurology.

Stephen K. Doberstein, Ph.D. has served as our Senior Vice President and Chief Scientific Officer since
January 2010. From October 2008 through December 2009, Dr. Doberstein served as Vice President, Research at
Xoma (US) LLC, a publicly traded clinical stage biotechnology company. From July 2004 until August 2008, he
served as Vice President, Research at privately held Five Prime Therapeutics, a clinical stage biotechnology
company. From September 2001 until July 2004, Dr. Doberstein was Vice President, Research at privately held
Xencor, Inc., a clinical stage biotechnology company. From 1997 to 2000, he held various pharmaceutical research
positions at Exelixis, Inc., a publicly traded clinical stage biotechnology company. Prior to working at Exelixis, Drr.
Doberstein was a Howard Hughes Postdoctoral Fellow and a Muscular Dystrophy Association Senior Postdoctoral

Fellow at the University of California Berkeley. Dr. Doberstein received his Ph.D. Biochemistry, Cell and
Molecular Biology from the Johns Hopkins University School of Medicine and received a B.S. in Chemical
Engineering from the University of Delaware.

Gil M. Labrucherie has served as our Senior Vice President, General Counsel and Secretary since April 2007,
responsible for all aspects of our legal affairs. Mr. Labrucherie served as our Vice President, Corporate Legal from
October 2005 through April 2007. From October 2000 to September 2005, Mr. Labrucherie was Vice President of
Corporate Development at E2open. While at E2open, Mr. Labrucherie was responsible for global corporate
alliances and merger and acquisition activity. Prior to E2open, he was the Senior Director of Corporate Devel-
opment at AltaVista Company, an Internet search company, where he was responsible for strategic partnerships and
mergers and acquisitions. Mr. Labrucherie began his career as an associate in the corporate practice of the law firm
of Wilson Sonsini Goodrich & Rosati and Graham & James (DLA Piper Rudnick). Mr. Labrucherie received his
J.D. from the Berkeley Law School and a B.A. from the University of California Davis.

Jillian B. Thomsen has served as our Senior Vice President Finance and Chief Accounting Officer since
February 2010. From March 2006 through March 2008, Ms. Thomsen served as our Vice President Finance and
Corporate Controller and from April 2008 through January 2010 she served as our Vice President Finance and Chief
Accounting Officer. Before joining Nektar, Ms. Thomsen was Vice President Finance and Deputy Corporate
Controller of Calpine Corporation from September 2002 to February 2006. Ms. Thomsen is a certified public
accountant and previously was a senior manager at Arthur Andersen LLP, where she worked from 1990 to 2002, and
specialized in audits of multinational consumer products, life sciences, manufacturing and energy companies.
Ms. Thomsen holds a Masters of Accountancy from the University of Denver and a B.A. in Business Economics
from Colorado College.

Rinko Ghosh has served as our Senior Vice President and Chief Business Officer since March 2010. He served
as our Senior Vice President, Business Development and Alliance Management from March 2008 through February
2010, our Vice President, Business Development from August 2006 until February 2008, Senior Director, Business
Development from July 2005 until July 2006, and prior to that he worked in a variety of corporate and business
development roles for us from May 2001 to June 2005. From February 2001 to April 2001, he was engaged as a
commercial development consultant at Aviron (now Medimmune/AstraZeneca) in Palo Alto. From 1999 to 2000,
Mr. Ghosh was co-Chief Executive Officer of a private biotechnology company in Asia. From 1994 to 1999, he was
engaged as a management consultant with A.T. Kearney, a global management consulting firm. From 1989 to 1992,
he worked as an environmental consultant with Environ Corporation, a human health and environmental consulting
firm. Mr. Ghosh earned his M.B.A. from the Wharton School, University of Pennsylvania, his M.S. in Environ-
mental Engineering from Vanderbilt University, and his B.S. in Chemical Engineering from the Indian Institute of
Technology, Bombay.

Item 1A. Risk Factors

We are providing the following cautionary discussion of risk factors, uncertainties and possibly inaccurate
assumptions that we believe are relevant to our business. These are factors that, individually or in the aggregate, we
think could cause our actual results to differ materially from expected and historical results and our forward-looking
statements. We note these factors for investors as permitted by Section 21E of the Exchange Act and Section 27A of
the Securities Act. You should understand that it is not possible to predict or identify all such factors. Consequently,
you should not consider this section to be a complete discussion of all potential risks or uncertainties that may
substantially impact our business.

Risks Related to Our Business

Drug development is an inherently uncertain process with a high risk of failure at every stage of
development.

We have a number of proprietary product candidates and partnered product candidates in research and
development ranging from the early discovery research phase through preclinical testing and clinical trials.
Preclinical testing and clinical trials are long, expensive and highly uncertain processes. It will take us, or our
collaborative partners, several years to complete clinical trials. Drug development is an uncertain scientific and

medical endeavor, and failure can unexpectedly occur at any stage of clinical development even after early
preclinical or mid-stage clinical results suggest that the drug candidate has potential as a new therapy that may
benefit patients and that health authority approval would be anticipated. Typically, there is a high rate of attrition for
product candidates in preclinical and clinical trials due to scientific feasibility, safety, efficacy, changing standards
of medical care and other variables. We or our partners have a number of important product candidates in mid- to
late-stage development, such as Bayer’s Amikacin Inhale, NKTR-118 (oral PEGylated naloxol) and NKTR-119,
which we partnered with AstraZeneca, and NKTR-102 (topoisomerase I inhibitor-polymer conjugate). We also
have an ongoing Phase 1 clinical trial for NKTR-105 (PEGylated docetaxel) for patients with refractory solid
tumors. Any one of these trials could fail at any time, as clinical development of drug candidates presents numerous
unpredictable and significant risks and is very uncertain at all times prior to regulatory approval by one or more
health authorities in major markets.

Even with success in preclinical testing and clinical trials, the risk of clinical failure remains high prior
to regulatory approval.

A number of companies in the pharmaceutical and biotechnology industries have suffered significant
unforeseen setbacks in later stage clinical trials (i.e., Phase 2 or Phase 3 trials) due to factors such as inconclusive
efficacy results and adverse medical events, even after achieving positive results in earlier trials that were
satisfactory both to them and to reviewing regulatory agencies. Although we announced positive preliminary
Phase 2 clinical results for NKTR-118 (oral PEGylated naloxol) in 2009, there are still substantial risks and
uncertainties associated with the future commencement and outcome of a Phase 3 clinical trial and the regulatory
review process even following our partnership with AstraZeneca. While NKTR-102 (topoisomerase I inhibitor-
polymer conjugate) continues in Phase 2 clinical development for multiple cancer indications, it is possible this
product candidate could fail in one or all of the cancer indications in which it is currently being studied due to
efficacy, safety or other commercial or regulatory factors. In 2010 and in January 2011, we announced preliminary
positive results from our Phase 2 trials for NKTR-102 in ovarian and breast cancer. These results were based on
preliminary data only, and such results could change based on final audit and verification procedures. In addition,
the preliminary results from the NKTR-102 clinical studies for ovarian and breast cancer are not necessarily
indicative or predictive of the future results from the completed ovarian or breast cancer trials, anticipated Phase 3
trials in these indications or clinical trials in the other cancer indications for which we are studying NKTR-102.
There remains a significant uncertainty as to the success or failure of NKTR-102 and whether this drug candidate
will eventually receive regulatory approval or be a commercial success even if approved by one or more health
authorities in any of the cancer indications for which it is being studied. The risk of failure is increased for our
product candidates that are based on new technologies, such as the application of our advanced polymer conjugate
technology to small molecules, including NKTR-118, NKTR-119, NKTR-102, NKTR-105 and other drug
candidates currently in the discovery research or preclinical development phases.

The results from the expanded Phase 2 clinical trial for NKTR-102 in women with platinum-resistant/
refractory ovarian cancer are unlikely to result in a review or an approval of an NDA by the FDA, and
the future results from this trial are difficult to predict.

In 2010, we expanded the NKTR-102 Phase 2 study by 50 patients in women with platinum-resistant/
refractory ovarian cancer with the potential for us to consider an early NDA submission after we evaluate these
expanded study results. On March 1, 2011, we announced that we intended to further expand this Phase 2 study by
up to an additional 60 patients. The FDA almost always requires a sponsor to conduct Phase 3 clinical trials prior to
consideration and approval of an NDA, and, as a result, review or approval of an NDA by the FDA based on the
expanded Phase 2 study prior to completion of successful Phase 3 clinical studies, if such NDA is submitted, would
be unusual and is highly unlikely. In February 2011, the FDA held a public meeting with the Oncology Drug
Products Advisory Committee and certain representatives from pharmaceutical companies to examine the out-
comes, requirements, and prerequisites for accelerated approval of oncology drugs. The FDA requirements for
accelerated approval are very stringent and also remain very uncertain and difficult to predict. Further, this
expansion of our Phase 2 study will necessarily change the final efficacy (e.g., overall response rates, progression-
free survival, overall survival) and safety (i.e., frequency and severity of serious adverse events) results, and,
accordingly, the final results in this study remain subject to substantial change and could be materially and

adversely different from previously announced results. If the clinical studies for NKTR-102 in women with
platinum-resistant/refractory ovarian cancer are not successful, it could significantly harm our business, results of
operations and financial condition.

We may not be able to obtain intellectual property licenses related to the development of our technology
on a commercially reasonable basis, if at all.

Numerous pending and issued U.S. and foreign patent rights and other proprietary rights owned by third parties
relate to pharmaceutical compositions, medical devices and equipment and methods for preparation, packaging and
delivery of pharmaceutical compositions. We cannot predict with any certainty which, if any, patent references will
be considered relevant to our or our collaborative partners’ technology or drug candidates by authorities in the
various jurisdictions where such rights exist, nor can we predict with certainty which, if any, of these rights will or
may be asserted against us by third parties. In certain cases, we have existing licenses or cross-licenses with third
parties, however the scope and adequacy of these licenses is very uncertain and can change substantially during long
development and commercialization cycles for biotechnology and pharmaceutical products. There can be no
assurance that we can obtain a license to any technology that we determine we need on reasonable terms, if at all, or
that we could develop or otherwise obtain alternate technology. If we are required to enter into a license with a third
party, our potential economic benefit for the products subject to the license will be diminished. If a license is not
available on commercially reasonable terms or at all, our business, results of operations, and financial condition
could be significantly harmed and we may be prevented from developing and selling the product.

If any of our pending patent applications do not issue, or are deemed invalid following issuance, we may
lose valuable intellectual property protection.

The patent positions of pharmaceutical, medical device and biotechnology companies, such as ours, are
uncertain and involve complex legal and factual issues. We own greater than 100 U.S. and 380 foreign patents and a
number of pending patent applications that cover various aspects of our technologies. We have filed patent
applications, and plan to file additional patent applications, covering various aspects of our PEGylation and
advanced polymer conjugate technologies and our proprietary product candidates. There can be no assurance that
patents that have issued will be valid and enforceable or that patents for which we apply will issue with broad
coverage, if at all. The coverage claimed in a patent application can be significantly reduced before the patent is
issued and, as a consequence, our patent applications may result in patents with narrow coverage that may not
prevent competition from similar products or generics. Since publication of discoveries in scientific or patent
literature often lags behind the date of such discoveries, we cannot be certain that we were the first inventor of
inventions covered by our patents or patent applications. As part of the patent application process, we may have to
participate in interference proceedings declared by the U.S. Patent and Trademark Office, which could result in
substantial cost to us, even if the eventual outcome is favorable. Further, an issued patent may undergo further
proceedings to limit its scope so as not to provide meaningful protection and any claims that have issued, or that
eventually issue, may be circumvented or otherwise invalidated. Any attempt to enforce our patents or patent
application rights could be time consuming and costly. An adverse outcome could subject us to significant liabilities
to third parties, require disputed rights to be licensed from or to third parties or require us to cease using the
technology in dispute. Even if a patent is issued and enforceable, because development and commercialization of
pharmaceutical products can be subject to substantial delays, patents may expire early and provide only a short
period of protection, if any, following commercialization of related products.

There are many laws, regulations and judicial decisions that dictate and otherwise influence the manner in
which patent applications are filed and prosecuted and in which patents are granted and enforced. Changes to these
laws, regulations and judicial decisions are subject to influences outside of our control and may negatively affect our
business, including our ability to obtain meaningful patent coverage or enforcement rights to any of our issued
patents. New laws, regulations and judicial decisions may be retroactive in effect, potentially reducing or
eliminating our ability to implement our patent-related strategies. Changes to laws, regulations and judicial
decisions that affect our business are often difficult or impossible to foresee, which limits our ability to adequately
adapt our patent strategies to these changes.

If we or our partners are not able to manufacture drugs or drug substances in quantities and at costs that
are commercially feasible, we may fail to meet our contractual obligations or our proprietary and
partnered product candidates may experience clinical delays or constrained commercial supply which
could significantly harm our business.

If we are not able to scale-up manufacturing to meet the drug quantities required to support large clinical trials
or commercial manufacturing in a timely manner or at a commercially reasonable cost, we risk delaying our clinical
trials or those of our partners and may breach contractual obligations and incur associated damages and costs, and
reduce or even eliminate associated revenues. In some cases, we may subcontract manufacturing or other services.
Pharmaceutical manufacturing involves significant risks and uncertainties related to the demonstration of adequate
stability, sufficient purification of the drug substance and drug product, the identification and elimination of
impurities, optimal formulations, process validation, and challenges in controlling for all of these factors during
manufacturing scale-up for large clinical trials and commercial manufacturing and supply. In addition, we have
faced and may in the future face significant difficulties, delays and unexpected expenses as we validate third party
contract manufacturers required for scale-up to clinical or commercial quantities. Failure to manufacture products
in quantities or at costs that are commercially feasible could cause us not to meet our supply requirements,
contractual obligations or other requirements for our proprietary product candidates and, as a result, would
significantly harm our business, results of operations and financial condition.

For instance, we entered a service agreement with Novartis pursuant to which we subcontract to Novartis
certain important services to be performed in relation to our partnered program for Amikacin Inhale with Bayer
Healthcare LLC. If our subcontractors do not dedicate adequate resources to our programs, we risk breach of our
obligations to our partners. Building and validating large scale clinical or commercial-scale manufacturing facilities
and processes, recruiting and training qualified personnel and obtaining necessary regulatory approvals is complex,
expensive and time consuming. In the past we have encountered challenges in scaling up manufacturing to meet the
requirements of large scale clinical trials without making modifications to the drug formulation, which may cause
significant delays in clinical development. Further, our drug and device combination products, such as Amikacin
Inhale and the Cipro Inhale program, require significant device design, formulation development work and
manufacturing scale-up activities. Further, we have experienced significant delays in starting the Phase 3 clinical
development program for Amikacin Inhale as we seek to finalize the device design with a demonstrated capability
to be manufactured at commercial scale. This work is ongoing and there remains significant risk in finalizing the
device until those activities are completed. Drug/device combination products are particularly complex, expensive
and time-consuming to develop due to the number of variables involved in the final product design, including ease
of patient/doctor use, maintenance of clinical efficacy, reliability and cost of manufacturing, regulatory approval
requirements and standards and other important factors. There continues to be substantial and unpredictable risk
and uncertainty related to manufacturing and supply until such time as the commercial supply chain is validated and
proven.

We will need to restructure our convertible notes or raise substantial additional capital to repay the notes
and fund operations, and we may be unable to restructure the notes or raise such capital when needed
and on acceptable terms.

We have $215.0 million in outstanding convertible subordinated notes due September 2012. We do not have
sufficient resources to fund the development of the drug candidates in our current research and development
pipeline, complete late stage clinical development of NKTR-102 and repay these convertible notes. We have no
material credit facility or other material committed sources of capital. We expect the Phase 3 clinical trials of
NKTR-102 to require particularly significant resources because we anticipate bearing a majority or all of the
development costs for that drug candidate. Prior to the maturity of the notes, we plan to explore a number of
alternatives to provide for the repayment of the notes, including restructuring the notes. Despite these efforts, we
may be unable to find a commercially acceptable alternative or any alternative to repaying the notes by September
2012. Our future capital requirements will depend upon numerous factors, including:

(cid:129) the progress, timing, cost and results of our clinical development programs, including our planned further

clinical development of NKTR-102;

(cid:129) patient enrollment in our current and future clinical studies, including in particular our expected Phase 3

clinical development plans for NKTR-102;

(cid:129) whether and when we receive potential milestone payments and royalties, particularly from the product
candidates that are subject to our collaboration agreements with AstraZeneca for NKTR-118 and Bayer for
Amikacin Inhale;

(cid:129) the success, progress, timing and costs of our business development efforts to implement new business

collaborations, licenses and other strategic transactions;

(cid:129) the cost, timing and outcomes of regulatory reviews of our product candidates (e.g., NKTR-102) and those of

our collaboration partners (e.g., NKTR-118, Amikacin Inhale);

(cid:129) our general and administrative expenses, capital expenditures and other uses of cash;

(cid:129) disputes concerning patents, proprietary rights, or license and collaboration agreements;

(cid:129) the availability and scope of coverage from government and private insurance payment or reimbursement for
our drug candidates partnered with collaboration partners and any future drug candidates that may receive
regulatory approval in the future; and

(cid:129) the size, design (i.e., primary and secondary endpoints) and number of clinical studies required by the
government health authorities in order to consider for approval our product candidates and those of our
collaboration partners.

Although we believe that our cash, cash equivalents and short-term investments in marketable securities of
$315.9 million as of December 31, 2010 and the approximately $219.8 million in net proceeds received on
January 24, 2011 from a public offering of our common stock will be sufficient to meet our liquidity requirements
through at least the next 12 months, we will likely need to restructure our notes or obtain additional funds through
one or more financing or collaboration partnership transactions. If adequate funds are not available or are not
available on acceptable terms when we need them, we may need to delay or reduce one or more of our Phase 3
clinical trials of NKTR-102 or otherwise make changes to our operations to cut costs.

If we are unable either to create sales, marketing and distribution capabilities or to enter into agreements
with third parties to perform these functions, we will be unable to commercialize our products
successfully.

We currently have no sales, marketing or distribution capabilities. To commercialize any of our products that
receive regulatory approval for commercialization, we must either develop internal sales, marketing and distri-
bution capabilities, which will be expensive and time consuming, or enter into collaboration arrangements with
third parties to perform these services. If we decide to market our products directly, we must commit significant
financial and managerial resources to develop a marketing and sales force with technical expertise and with
supporting distribution, administration and compliance capabilities. Factors that may inhibit our efforts to
commercialize our products directly or indirectly with our partners include:

(cid:129) our inability to recruit and retain adequate numbers of effective sales and marketing personnel;

(cid:129) the inability of sales personnel to obtain access to or persuade adequate numbers of physicians to use or

prescribe our products;

(cid:129) the lack of complementary products or multiple product pricing arrangements may put us at a competitive

disadvantage relative to companies with more extensive product lines; and

(cid:129) unforeseen costs and expenses associated with creating and sustaining an independent sales and marketing

organization.

If we, or our partners through our collaboration, are not successful in recruiting sales and marketing
personnel or in building a sales and marketing infrastructure, we will have difficulty commercializing our
products, which would adversely affect our business, results of operations and financial condition.

To the extent we rely on other pharmaceutical or biotechnology companies with established sales, marketing
and distribution systems to market our products, we will need to establish and maintain partnership arrangements,
and we may not be able to enter into these arrangements on acceptable terms or at all. To the extent that we enter into
co-promotion or other arrangements, any revenues we receive will depend upon the efforts of third parties, which
may not be successful and are only partially in our control. In the event that we market our products without a
partner, we would be required to build a sales and marketing organization and infrastructure, which would require a
significant investment and we may not be successful in building this organization and infrastructure in a timely or
efficient manner.

If we are unable to establish and maintain collaboration partnerships on attractive commercial terms, our
business, results of operations and financial condition could suffer.

We intend to continue to seek partnerships with pharmaceutical and biotechnology partners to fund a portion of
our research and development expenses and develop and commercialize our product candidates. In September
2009, we entered into a license agreement with AstraZeneca for NKTR-118 and NKTR-119 which included an
upfront payment of $125.0 million. AstraZeneca represented 68% of our total revenue during the year ended
December 31, 2010. The timing of new collaboration partnerships is difficult to predict due to availability of clinical
data, the number of potential partners that need to complete due diligence and approval processes, the definitive
agreement negotiation process and numerous other unpredictable factors that can delay, impede or prevent
significant transactions. If we are unable to find suitable partners or to negotiate collaborative arrangements with
favorable commercial terms with respect to our existing and future product candidates or the licensing of our
technology, or if any arrangements we negotiate, or have negotiated, are terminated, our business, results of
operations and financial condition could suffer.

The commercial potential of a drug candidate in development is difficult to predict and if the market size
for a new drug is significantly smaller than we anticipated, it could significantly and negatively impact
our revenue, results of operations and financial condition.

It is very difficult to estimate the commercial potential of product candidates due to factors such as safety and
efficacy compared to other available treatments, including potential generic drug alternatives with similar efficacy
profiles, changing standards of care, third party payer reimbursement, patient and physician preferences, the
availability of competitive alternatives that may emerge either during the long drug development process or after
commercial introduction, and the availability of generic versions of our successful product candidates following
approval by health authorities based on the expiration of regulatory exclusivity or our inability to prevent generic
versions from coming to market in one or more geographies by the assertion of one or more patents covering such
approved drug. If due to one or more of these risks the market potential for a product candidate is lower than we
anticipated, it could significantly and negatively impact the commercial terms of any collaboration partnership
potential for such product candidate or, if we have already entered into a collaboration for such drug candidate, the
revenue potential from royalty and milestone payments could be significantly diminished and would negatively
impact our revenue, results of operations and financial condition.

Our revenue is exclusively derived from our collaboration agreements, which can result in significant
fluctuation in our revenue from period to period, and our past revenue is therefore not necessarily
indicative of our future revenue.

Our revenue is derived from our collaboration agreements with partners, under which we may receive contract
research payments, milestone payments based on clinical progress, regulatory progress or net sales achievements,
royalties or manufacturing revenue. Significant variations in the timing of receipt of cash payments and our
recognition of revenue can result from the nature of significant milestone payments based on the execution of new
collaboration agreements, the timing of clinical, regulatory or sales events which result in single milestone
payments and the timing and success of the commercial launch of new drugs by our collaboration partners. The

amount of our revenue derived from collaboration agreements in any given period will depend on a number of
unpredictable factors, including our ability to find and maintain suitable collaboration partners, the timing of the
negotiation and conclusion of collaboration agreements with such partners, whether and when we or our partner
achieve clinical and sales milestones, whether the partnership is exclusive or whether we can seek other partners, the
timing of regulatory approvals in one or more major markets and the market introduction of new drugs or generic
versions of the approved drug, as well as other factors.

If our partners, on which we depend to obtain regulatory approvals for and to commercialize our partnered
products, are not successful, or if such collaborations fail, the development or commercialization of our
partnered products may be delayed or unsuccessful.

When we sign a collaborative development agreement or license agreement to develop a product candidate
with a pharmaceutical or biotechnology company, the pharmaceutical or biotechnology company is generally
expected to:

(cid:129) design and conduct large scale clinical studies;

(cid:129) prepare and file documents necessary to obtain government approvals to sell a given product candidate; and/

(cid:129) market and sell our products when and if they are approved.

Our reliance on collaboration partners poses a number of risks to our business, including risks that:

(cid:129) we may be unable to control whether, and the extent to which, our partners devote sufficient resources to the

development programs or commercial marketing and sales efforts;

(cid:129) disputes may arise or escalate in the future with respect to the ownership of rights to technology or

intellectual property developed with partners;

(cid:129) disagreements with partners could lead to delays in, or termination of, the research, development or

commercialization of product candidates or to litigation or arbitration proceedings;

(cid:129) contracts with our partners may fail to provide us with significant protection, or to be effectively enforced, in

the event one of our partners fails to perform;

(cid:129) partners have considerable discretion in electing whether to pursue the development of any additional
product candidates and may pursue alternative technologies or products either on their own or in collab-
oration with our competitors;

(cid:129) partners with marketing rights may choose to devote fewer resources to the marketing of our partnered
products than they do to products of their own development or products in-licensed from other third parties;

(cid:129) the timing and level of resources that our partners dedicate to the development program will affect the timing

and amount of revenue we receive;

(cid:129) we do not have the ability to unilaterally terminate agreements (or partners may have extension or renewal
rights) that we believe are not on commercially reasonable terms or consistent with our current business
strategy;

(cid:129) partners may be unable to pay us as expected; and

(cid:129) partners may terminate their agreements with us unilaterally for any or no reason, in some cases with the

payment of a termination fee penalty and in other cases with no termination fee penalty.

Given these risks, the success of our current and future partnerships is highly unpredictable and can have a
substantial negative or positive impact on our business. We have entered into collaborations in the past that have
been subsequently terminated, such as our collaboration with Pfizer for the development and commercialization of
inhaled insulin that was terminated by Pfizer in November 2007. If other collaborations are suspended or
terminated, our ability to commercialize certain other proposed product candidates could also be negatively

impacted. If our collaborations fail, our product development or commercialization of product candidates could be
delayed or cancelled, which would negatively impact our business, results of operations and financial condition.

If we or our partners do not obtain regulatory approval for our product candidates on a timely basis, or
at all, or if the terms of any approval impose significant restrictions or limitations on use, our business,
results of operations and financial condition will be negatively affected.

We or our partners may not obtain regulatory approval for product candidates on a timely basis, or at all, or the
terms of any approval (which in some countries includes pricing approval) may impose significant restrictions or
limitations on use. Product candidates must undergo rigorous animal and human testing and an extensive FDA
mandated or equivalent foreign authorities’ review process for safety and efficacy. This process generally takes a
number of years and requires the expenditure of substantial resources. The time required for completing testing and
obtaining approvals is uncertain, and the FDA and other U.S. and foreign regulatory agencies have substantial
discretion to terminate clinical trials, require additional clinical development or other testing at any phase of
development, delay or withhold registration and marketing approval and mandate product withdrawals, including
recalls. In addition, undesirable side effects caused by our product candidates could cause us or regulatory
authorities to interrupt, delay or halt clinical trials and could result in a more restricted label or the delay or denial of
regulatory approval by regulatory authorities.

Even if we or our partners receive regulatory approval of a product, the approval may limit the indicated uses
for which the product may be marketed. Our partnered products that have obtained regulatory approval, and the
manufacturing processes for these products, are subject to continued review and periodic inspections by the FDA
and other regulatory authorities. Discovery from such review and inspection of previously unknown problems may
result in restrictions on marketed products or on us, including withdrawal or recall of such products from the market,
suspension of related manufacturing operations or a more restricted label. The failure to obtain timely regulatory
approval of product candidates, any product marketing limitations or a product withdrawal would negatively impact
our business, results of operations and financial condition.

We are a party to numerous collaboration agreements and other significant agreements which contain
complex commercial terms that could result in disputes, litigation or indemnification liability that could
adversely affect our business, results of operations and financial condition.

We currently derive, and expect to derive in the foreseeable future, all of our revenue from collaboration
agreements with biotechnology and pharmaceutical companies. These collaboration agreements contain complex
commercial terms, including:

(cid:129) clinical development and commercialization obligations that are based on certain commercial reasonable-
ness performance standards that can often be difficult to enforce if disputes arise as to adequacy of
performance;

(cid:129) research and development performance and reimbursement obligations for our personnel and other

resources allocated to partnered product development programs;

(cid:129) clinical and commercial manufacturing agreements, some of which are priced on an actual cost basis for
products supplied by us to our partners with complicated cost allocation formulas and methodologies;

(cid:129) intellectual property ownership allocation between us and our partners for improvements and new inventions

developed during the course of the partnership;

(cid:129) royalties on end product sales based on a number of complex variables, including net sales calculations,

geography, patent life, generic competitors, and other factors; and

(cid:129) indemnity obligations for third-party intellectual property infringement, product liability and certain other

claims.

On September 20, 2009, we entered into a worldwide exclusive license agreement with AstraZeneca for the
further development and commercialization of NKTR-118 and NKTR-119. In addition, we have also entered into
complex commercial agreements with Novartis in connection with the sale of certain assets related to our

pulmonary business, associated technology and intellectual property to Novartis (the Novartis Pulmonary Asset
Sale), which was completed on December 31, 2008. Our agreements with AstraZeneca and Novartis contain
complex representations and warranties, covenants and indemnification obligations that could result in substantial
future liability and harm our financial condition if we breach any of our agreements with AstraZeneca or Novartis or
any third party agreements impacted by these complex transactions. As part of the Novartis Pulmonary Asset Sale,
we entered an exclusive license agreement with Novartis Pharma pursuant to which Novartis Pharma grants back to
us an exclusive, irrevocable, perpetual, royalty-free and worldwide license under certain specific patent rights and
other related intellectual property rights necessary for us to satisfy certain continuing contractual obligations to
third parties, including in connection with development, manufacture, sale and commercialization activities related
to our partnered program for Amikacin Inhale with Bayer Healthcare LLC. We also entered into a service agreement
pursuant to which we have subcontracted to Novartis certain services to be performed related to our partner program
for Amikacin Inhale.

From time to time, we have informal dispute resolution discussions with third parties regarding the appropriate
interpretation of the complex commercial terms contained in our agreements. One or more disputes may arise or
escalate in the future regarding our collaboration agreements, transaction documents, or third-party license
agreements that may ultimately result in costly litigation and unfavorable interpretation of contract terms, which
would have a material adverse impact on our business, results of operations or financial condition.

We purchase some of the starting material for drugs and drug candidates from a single source or a
limited number of suppliers, and the partial or complete loss of one of these suppliers could cause
production delays, clinical trial delays, substantial loss of revenue and contract liability to third parties.

We often face very limited supply of a critical raw material that can only be obtained from a single, or a limited
number of, suppliers, which could cause production delays, clinical trial delays, substantial lost revenue opportunity
or contract liability to third parties. For example, there are only a limited number of qualified suppliers, and in some
cases single source suppliers, for the raw materials included in our PEGylation and advanced polymer conjugate
drug formulations, and any interruption in supply or failure to procure such raw materials on commercially feasible
terms could harm our business by delaying our clinical trials, impeding commercialization of approved drugs or
increasing operating loss to the extent we cannot pass on increased costs to a manufacturing customer.

We rely on trade secret protection and other unpatented proprietary rights for important proprietary
technologies, and any loss of such rights could harm our business, results of operations and financial
condition.

We rely on trade secret protection for our confidential and proprietary information. No assurance can be given
that others will not independently develop substantially equivalent confidential and proprietary information or
otherwise gain access to our trade secrets or disclose such technology, or that we can meaningfully protect our trade
secrets. In addition, unpatented proprietary rights, including trade secrets and know-how, can be difficult to protect
and may lose their value if they are independently developed by a third party or if their secrecy is lost. Any loss of
trade secret protection or other unpatented proprietary rights could harm our business, results of operations and
financial condition.

We expect to continue to incur substantial losses and negative cash flow from operations and may not
achieve or sustain profitability in the future.

For the year ended December 31, 2010, we reported a net loss of $37.9 million. If and when we achieve
profitability depends upon a number of factors, including the timing and recognition of milestone payments and
royalties received, the timing of revenue under our collaboration agreements, the amount of investments we make in
our proprietary product candidates and the regulatory approval and market success of our product candidates. We
may not be able to achieve and sustain profitability.

Other factors that will affect whether we achieve and sustain profitability include our ability, alone or together

with our partners, to:

(cid:129) develop products utilizing our technologies, either independently or in collaboration with other pharma-

ceutical or biotech companies;

(cid:129) effectively estimate and manage clinical development costs, particularly the cost of NKTR-102 since we

expect to bear a majority or all of such costs;

(cid:129) receive necessary regulatory and marketing approvals;

(cid:129) maintain or expand manufacturing at necessary levels;

(cid:129) achieve market acceptance of our partnered products;

(cid:129) receive royalties on products that have been approved, marketed or submitted for marketing approval with

regulatory authorities; and

(cid:129) maintain sufficient funds to finance our activities.

If we do not generate sufficient cash through restructuring our convertible notes or raising additional
capital, we may be unable to meet our substantial debt obligations.

As of December 31, 2010, we had cash, cash equivalents, and short-term investments in marketable securities
valued at approximately $315.9 million and approximately $240.4 million of indebtedness, including approxi-
mately $215.0 million in convertible subordinated notes due September 2012, $19.0 million in capital lease
obligations, and $6.4 million of other liabilities. On January 24, 2011, we completed a public offering of our
common stock with proceeds of approximately $220.4 million. Additionally, we incurred approximately
$0.6 million in legal and accounting fees, filing fees, and other offering expenses.

Our substantial indebtedness has and will continue to impact us by:

(cid:129) making it more difficult to obtain additional financing;

(cid:129) constraining our ability to react quickly in an unfavorable economic climate;

(cid:129) constraining our stock price; and

(cid:129) constraining our ability to invest in our proprietary product development programs.

Currently, we are not generating positive cash flow. If we are unable to satisfy our debt service requirements,
substantial liquidity problems could result. In relation to our convertible notes, since the market price of our
common stock is significantly below the conversion price, the holders of our outstanding convertible notes are
unlikely to convert the notes to common stock in accordance with the existing terms of the notes. If we do not
generate sufficient cash from operations to repay principal or interest on our remaining convertible notes, or satisfy
any of our other debt obligations, when due, we may have to raise additional funds from the issuance of equity or
debt securities or entry into collaboration partnerships or otherwise restructure our obligations. Any such financing
or restructuring may not be available to us on commercially acceptable terms, if at all.

If government and private insurance programs do not provide payment or reimbursement for our
partnered products or proprietary products, those products will not be widely accepted, which would have
a negative impact on our business, results of operations and financial condition.

In both domestic and foreign markets, sales of our partnered and proprietary products that have received
regulatory approval will depend in part on market acceptance among physicians and patients, pricing approvals by
government authorities and the availability of payment or reimbursement from third-party payers, such as
government health administration authorities, managed care providers, private health insurers and other organi-
zations. Such third-party payers are increasingly challenging the price and cost effectiveness of medical products
and services. Therefore, significant uncertainty exists as to the pricing approvals for, and the payment or
reimbursement status of, newly approved healthcare products. Moreover, legislation and regulations affecting

the pricing of pharmaceuticals may change before regulatory agencies approve our proposed products for marketing
and could further limit pricing approvals for, and reimbursement of, our products from government authorities and
third-party payers. A government or third-party payer decision not to approve pricing for, or provide adequate
coverage and reimbursements of, our products would limit market acceptance of such products.

We depend on third parties to conduct the clinical trials for our proprietary product candidates and any
failure of those parties to fulfill their obligations could harm our development and commercialization
plans.

We depend on independent clinical investigators, contract research organizations and other third-party service
providers to conduct clinical trials for our proprietary product candidates. Though we rely heavily on these parties
for successful execution of our clinical trials and are ultimately responsible for the results of their activities, many
aspects of their activities are beyond our control. For example, we are responsible for ensuring that each of our
clinical trials is conducted in accordance with the general investigational plan and protocols for the trial, but the
independent clinical investigators may prioritize other projects over ours or communicate issues regarding our
products to us in an untimely manner. Third parties may not complete activities on schedule or may not conduct our
clinical trials in accordance with regulatory requirements or our stated protocols. The early termination of any of our
clinical trial arrangements, the failure of third parties to comply with the regulations and requirements governing
clinical trials or our reliance on results of trials that we have not directly conducted or monitored could hinder or
delay the development, approval and commercialization of our product candidates and would adversely affect our
business, results of operations and financial condition.

Our manufacturing operations and those of our contract manufacturers are subject to governmental
regulatory requirements, which, if not met, would have a material adverse effect on our business, results
of operations and financial condition.

We and our contract manufacturers are required in certain cases to maintain compliance with current good
manufacturing practices (cGMP), including cGMP guidelines applicable to active pharmaceutical ingredients, and
are subject to inspections by the FDA or comparable agencies in other jurisdictions to confirm such compliance. We
anticipate periodic regulatory inspections of our drug manufacturing facilities and the manufacturing facilities of
our contract manufacturers for compliance with applicable regulatory requirements. Any failure to follow and
document our or our contract manufacturers’ adherence to such cGMP regulations or satisfy other manufacturing
and product release regulatory requirements may disrupt our ability to meet our manufacturing obligations to our
customers, lead to significant delays in the availability of products for commercial use or clinical study, result in the
termination or hold on a clinical study or delay or prevent filing or approval of marketing applications for our
products. Failure to comply with applicable regulations may also result in sanctions being imposed on us, including
fines, injunctions, civil penalties, failure of regulatory authorities to grant marketing approval of our products,
delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of products, operating
restrictions and criminal prosecutions, any of which could harm our business. The results of these inspections could
result in costly manufacturing changes or facility or capital equipment upgrades to satisfy the FDA that our
manufacturing and quality control procedures are in substantial compliance with cGMP. Manufacturing delays, for
us or our contract manufacturers, pending resolution of regulatory deficiencies or suspensions would have a
material adverse effect on our business, results of operations and financial condition.

Significant competition for our polymer conjugate chemistry technology platforms and our partnered and
proprietary products and product candidates could make our technologies, products or product candidates
obsolete or uncompetitive, which would negatively impact our business, results of operations and financial
condition.

Our PEGylation and advanced polymer conjugate chemistry platforms and our partnered and proprietary
products and product candidates compete with various pharmaceutical and biotechnology companies. Competitors
of our PEGylation and polymer conjugate chemistry technologies include The Dow Chemical Company, Enzon
Pharmaceuticals, Inc., SunBio Corporation, Mountain View Pharmaceuticals, Inc., Novo Nordisk A/S (formerly
assets held by Neose Technologies, Inc.), and NOF Corporation. Several other chemical, biotechnology and

pharmaceutical companies may also be developing PEGylation technologies or technologies that have similar
impact on target drug molecules. Some of these companies license or provide the technology to other companies,
while others are developing the technology for internal use.

There are several competitors for our proprietary product candidates currently in development. For Amikacin
Inhale, the current standard of care includes several approved intravenous antibiotics for the treatment of either
hospital-acquired pneumonia or ventilator-associated pneumonia in patients on mechanical ventilators. For
NKTR-118 (oral PEGylated naloxol), there are currently several alternative therapies used to address opioid-
induced constipation (OIC) and opioid-induced bowel dysfunction (OBD), including subcutaneous Relistor»
(methylnaltrexone bromide) and oral and rectal over-the-counter laxatives and stool softeners such as docusate
sodium, senna and milk of magnesia. In addition, there are a number of companies developing potential products
which are in various stages of clinical development and are being evaluated for the treatment of OIC and OBD in
different patient populations, including Adolor Corporation, GlaxoSmithKline plc, Progenics Pharmaceuticals, Inc.
in collaboration with Salix Pharmaceuticals, Ltd., Mundipharma Int. Limited, Sucampo Pharmaceuticals,
Alkermes, Inc. and Takeda Pharmaceutical Company Limited. For NKTR-102 (topoisomerase I inhibitor-polymer
conjugate), there are a number of chemotherapies and cancer therapies approved today and in various stages of
clinical development for ovarian and breast cancers including but not limited to: Avastin» (bevacizumab),
Camptosar» (irinotecan), Doxil» (doxorubicin HCl), Ellence» (epirubicin), Gemzar» (gemcitabine), Herceptin»
(trastuzumab), Hycamtin» (topotecan), Iniparib, Paraplatin» (carboplatin), and Taxol» (paclitaxel). Major phar-
maceutical or biotechnology companies with approved drugs or drugs in development for these cancers include
Bristol-Meyers Squibb, Eli Lilly & Co., Roche, GlaxoSmithKline plc, Johnson and Johnson, Pfizer, Inc., Sanofi
Aventis, and many others. There are approved therapies for the treatment of colorectal cancer, including Eloxatin»
(oxaliplatin), Camptosar» (irinotecan), Avastin» (bevacizumab), Erbitux» (cetuximab), Vectibix» (panitumumab),
Xeloda» (capecitabine), Adrucil» (fluorouracil), and Wellcovorin » (leucovorin). In addition, there are a number of
drugs in various stages of preclinical and clinical development from companies exploring cancer therapies or
improved chemotherapeutic agents to potentially treat colorectal cancer, including, but not limited to, products in
development
Inc.,
F. Hoffmann-La Roche Ltd, Novartis AG, Cell Therapeutics, Inc., Neopharm Inc., Meditech Research Ltd,
Alchemia Limited, Enzon Pharmaceuticals, Inc. and others.

from Bristol-Myers Squibb Company, Pfizer, Inc., GlaxoSmithKline plc, Antigenics,

There can be no assurance that we or our partners will successfully develop, obtain regulatory approvals for
and commercialize next-generation or new products that will successfully compete with those of our competitors.
Many of our competitors have greater financial, research and development, marketing and sales, manufacturing and
managerial capabilities. We face competition from these companies not just in product development but also in
areas such as recruiting employees, acquiring technologies that might enhance our ability to commercialize
products, establishing relationships with certain research and academic institutions, enrolling patients in clinical
trials and seeking program partnerships and collaborations with larger pharmaceutical companies. As a result, our
competitors may succeed in developing competing technologies, obtaining regulatory approval or gaining market
acceptance for products before we do. These developments could make our products or technologies uncompetitive
or obsolete.

We could be involved in legal proceedings and may incur substantial litigation costs and liabilities that
will adversely affect our business, results of operations and financial condition.

From time to time, third parties have asserted, and may in the future assert, that we or our partners infringe their
proprietary rights, such as patents and trade secrets, or have otherwise breached our obligations to them. The third
party often bases its assertions on a claim that its patents cover our technology or that we have misappropriated its
confidential or proprietary information. Similar assertions of infringement could be based on future patents that
may issue to third parties. In certain of our agreements with our partners, we are obligated to indemnify and hold
harmless our partners from intellectual property infringement, product liability and certain other claims, which
could cause us to incur substantial costs if we are called upon to defend ourselves and our partners against any
claims. If a third party obtains injunctive or other equitable relief against us or our partners, they could effectively
prevent us, or our partners, from developing or commercializing, or deriving revenue from, certain products or
product candidates in the U.S. and abroad. For instance, F. Hoffmann-La Roche Ltd, to which we license our

proprietary PEGylation reagent for use in the MIRCERA product, was a party to a significant patent infringement
lawsuit brought by Amgen Inc. related to Roche’s proposed marketing and sale of MIRCERA to treat chemotherapy
anemia in the U.S. In October 2008, a federal court ruled in favor of Amgen, issuing a permanent injunction
preventing Roche from marketing or selling MIRCERA in the U.S. In December 2009, the U.S. District court for
the District of Massachusetts entered a final judgment and permanent injunction, and Roche and Amgen entered
into a settlement and limited license agreement which allows Roche to begin selling MIRCERA in the U.S. in July
2014.

Third-party claims involving proprietary rights or other matters could also result in the award of substantial
damages to be paid by us or a settlement resulting in significant payments to be made by us. For instance, a
settlement might require us to enter a license agreement under which we pay substantial royalties or other
compensation to a third party, diminishing our future economic returns from the related product. In 2006, we
entered into a litigation settlement related to an intellectual property dispute with the University of Alabama in
Huntsville pursuant to which we paid $11.0 million and agreed to pay an additional $10.0 million in equal
$1.0 million installments over ten years ending with the last payment due on July 1, 2016. We cannot predict with
certainty the eventual outcome of any pending or future litigation. Costs associated with such litigation, substantial
damage claims, indemnification claims or royalties paid for licenses from third parties could have a material
adverse effect on our business, results of operations and financial condition.

If product liability lawsuits are brought against us, we may incur substantial liabilities.

The manufacture, clinical testing, marketing and sale of medical products involve inherent product liability
risks. If product liability costs exceed our product liability insurance coverage, we may incur substantial liabilities
that could have a severe negative impact on our financial position. Whether or not we are ultimately successful in
any product liability litigation, such litigation would consume substantial amounts of our financial and managerial
resources and might result in adverse publicity, all of which would impair our business. Additionally, we may not be
able to maintain our clinical trial insurance or product liability insurance at an acceptable cost, if at all, and this
insurance may not provide adequate coverage against potential claims or losses.

Our future depends on the proper management of our current and future business operations and their
associated expenses.

Our business strategy requires us to manage our business to provide for the continued development and
potential commercialization of our proprietary and partnered product candidates. Our strategy also calls for us to
undertake increased research and development activities and to manage an increasing number of relationships with
partners and other third parties, while simultaneously managing the expenses generated by these activities. Our
decision to bring NKTR-102 into Phase 3 trials and to bear a majority or all of the clinical development costs
substantially increases our expenses. If we are unable to manage effectively our current operations and any growth
we may experience, our business, financial condition and results of operations may be adversely affected. If we are
unable to effectively manage our expenses, we may find it necessary to reduce our personnel-related costs through
further reductions in our workforce, which could harm our operations, employee morale and impair our ability to
retain and recruit talent. Furthermore, if adequate funds are not available, we may be required to obtain funds
through arrangements with partners or other sources that may require us to relinquish rights to certain of our
technologies, products or future economic rights that we would not otherwise relinquish or require us to enter into
other financing arrangements on unfavorable terms.

We are dependent on our management team and key technical personnel, and the loss of any key
manager or employee may impair our ability to develop our products effectively and may harm our
business, operating results and financial condition.

Our success largely depends on the continued services of our executive officers and other key personnel. The
loss of one or more members of our management team or other key employees could seriously harm our business,
operating results and financial condition. The relationships that our key managers have cultivated within our
industry make us particularly dependent upon their continued employment with us. We are also dependent on the
continued services of our technical personnel because of the highly technical nature of our products and the

regulatory approval process. Because our executive officers and key employees are not obligated to provide us with
continued services, they could terminate their employment with us at any time without penalty. We do not have any
post-employment noncompetition agreements with any of our employees and do not maintain key person life
insurance policies on any of our executive officers or key employees.

Because competition for highly qualified technical personnel is intense, we may not be able to attract and
retain the personnel we need to support our operations and growth.

We must attract and retain experts in the areas of clinical testing, manufacturing, regulatory, finance, marketing
and distribution and develop additional expertise in our existing personnel. In particular, as we plan to advance
NKTR-102 into late stage development, additional highly qualified personnel will be required. We face intense
competition from other biopharmaceutical companies, research and academic institutions and other organizations
for qualified personnel. Many of the organizations with which we compete for qualified personnel have greater
resources than we have. Because competition for skilled personnel in our industry is intense, companies such as ours
sometimes experience high attrition rates with regard to their skilled employees. Further, in making employment
decisions, job candidates often consider the value of the stock options they are to receive in connection with their
employment. Our equity incentive plan and employee benefit plans may not be effective in motivating or retaining
our employees or attracting new employees, and significant volatility in the price of our stock may adversely affect
our ability to attract or retain qualified personnel. If we fail to attract new personnel or to retain and motivate our
current personnel, our business and future growth prospects could be severely harmed.

If earthquakes and other catastrophic events strike, our business may be harmed.

Our corporate headquarters, including a substantial portion of our research and development operations, are
located in the San Francisco Bay Area, a region known for seismic activity and a potential terrorist target. In
addition, we own facilities for the manufacture of products using our PEGylation and advanced polymer conjugate
technologies in Huntsville, Alabama and own and lease offices in Hyderabad, India. There are no backup facilities
for our manufacturing operations located in Huntsville, Alabama. In the event of an earthquake or other natural
disaster, political instability, or terrorist event in any of these locations, our ability to manufacture and supply
materials for drug candidates in development and our ability to meet our manufacturing obligations to our
customers would be significantly disrupted and our business, results of operations and financial condition would be
harmed. Our collaborative partners may also be subject to catastrophic events, such as hurricanes and tornadoes, any
of which could harm our business, results of operations and financial condition. We have not undertaken a
systematic analysis of the potential consequences to our business, results of operations and financial condition from
a major earthquake or other catastrophic event, such as a fire, sustained loss of power, terrorist activity or other
disaster, and do not have a recovery plan for such disasters. In addition, our insurance coverage may not be sufficient
to compensate us for actual losses from any interruption of our business that may occur.

We have implemented certain anti-takeover measures, which make it more difficult to acquire us, even
though such acquisitions may be beneficial to our stockholders.

Provisions of our certificate of incorporation and bylaws, as well as provisions of Delaware law, could make it
more difficult for a third party to acquire us, even though such acquisitions may be beneficial to our stockholders.
These anti-takeover provisions include:

(cid:129) establishment of a classified board of directors such that not all members of the board may be elected at one

time;

(cid:129) lack of a provision for cumulative voting in the election of directors, which would otherwise allow less than a

majority of stockholders to elect director candidates;

(cid:129) the ability of our board to authorize the issuance of “blank check” preferred stock to increase the number of

outstanding shares and thwart a takeover attempt;

(cid:129) prohibition on stockholder action by written consent, thereby requiring all stockholder actions to be taken at

a meeting of stockholders;

(cid:129) establishment of advance notice requirements for nominations for election to the board of directors or for

proposing matters that can be acted upon by stockholders at stockholder meetings; and

(cid:129) limitations on who may call a special meeting of stockholders.

Further, we have in place a preferred share purchase rights plan, commonly known as a “poison pill.” The
provisions described above, our “poison pill” and provisions of Delaware law relating to business combinations
with interested stockholders may discourage, delay or prevent a third party from acquiring us. These provisions may
also discourage, delay or prevent a third party from acquiring a large portion of our securities or initiating a tender
offer or proxy contest, even if our stockholders might receive a premium for their shares in the acquisition over the
then current market prices. We also have a change of control severance benefits plan which provides for certain cash
severance, stock award acceleration and other benefits in the event our employees are terminated (or, in some cases,
resign for specified reasons) following an acquisition. This severance plan could discourage a third party from
acquiring us.

Risks Related to Our Securities

The price of our common stock and convertible debt are expected to remain volatile.

Our stock price is volatile. During the year ended December 31, 2010, based on closing bid prices on The
NASDAQ Global Select Market, our stock price ranged from $9.39 to $15.88 per share. We expect our stock price to
remain volatile. In addition, as our convertible notes are convertible into shares of our common stock, volatility or
depressed prices of our common stock could have a similar effect on the trading price of our notes. Also, interest rate
fluctuations can affect the price of our convertible notes. A variety of factors may have a significant effect on the
market price of our common stock or notes, including:

(cid:129) announcements of data from, or material developments in, our clinical trials or those of our competitors,

including delays in clinical development, approval or launch;

(cid:129) announcements by collaboration partners as to their plans or expectations related to products using our

technologies;

(cid:129) announcements or terminations of collaboration agreements by us or our competitors;

(cid:129) fluctuations in our results of operations;

(cid:129) developments in patent or other proprietary rights, including intellectual property litigation or entering into

intellectual property license agreements and the costs associated with those arrangements;

(cid:129) announcements of technological innovations or new therapeutic products that may compete with our

approved products or products under development;

(cid:129) announcements of changes in governmental regulation affecting us or our competitors;

(cid:129) hedging activities by purchasers of our convertible notes;

(cid:129) litigation brought against us or third parties to whom we have indemnification obligations;

(cid:129) public concern as to the safety of drug formulations developed by us or others; and

(cid:129) general market conditions.

Our stockholders may be diluted, and the price of our common stock may decrease, as a result of the
exercise of outstanding stock options and warrants, the restructuring of our convertible notes, or the
future issuances of securities.

We may restructure our convertible notes or issue additional common stock, preferred stock, restricted stock
units or securities convertible into or exchangeable for our common stock. Furthermore, substantially all shares of
common stock for which our outstanding stock options or warrants are exercisable are, once they have been
purchased, eligible for immediate sale in the public market. The issuance of additional common stock, preferred

stock, restricted stock units or securities convertible into or exchangeable for our common stock or the exercise of
stock options or warrants would dilute existing investors and could lower the price of our common stock.

Restructuring of our convertible notes or raising additional funds by issuing equity securities could cause
significant dilution to existing stockholders; restructured or additional debt financing may restrict our
operations.

If we raise additional funds through the restructuring of our convertible notes or issuance of equity or
convertible debt securities, the percentage ownership of our stockholders could be diluted significantly, and these
restructured or newly issued securities may have rights, preferences or privileges senior to those of our existing
stockholders. If we restructure our notes or incur additional debt financing, the payment of principal and interest on
such indebtedness may limit funds available for our business activities, and we could be subject to covenants that
restrict our ability to operate our business and make distributions to our stockholders. These restrictive covenants
may include limitations on additional borrowing and specific restrictions on the use of our assets, as well as
prohibitions on the ability of us to create liens, pay dividends, redeem our stock or make investments.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

California

We lease a 102,283 square foot facility in the Mission Bay Area of San Francisco, California (Mission Bay
Facility), under an operating lease which expires in 2020. In November 2010, we moved into the Mission Bay
Facility relocating all of our functions from the San Carlos, California facility (San Carlos Facility), including our
corporate headquarters and research and development for our PEGylation and advanced polymer conjugate
technology operations. Our lease for approximately 100,000 square feet of the San Carlos Facility is under a capital
lease which expires in 2016. We are currently seeking one or more subtenants for the San Carlos Facility.

Until December 31, 2008, we leased approximately 230,000 additional square feet in San Carlos, which
housed our pulmonary manufacturing facility, as well as research and development laboratories and administrative
offices, under a lease which expired in 2012. This lease was assigned to Novartis Pharmaceuticals Corporation in
connection with our sale to Novartis of certain of our pulmonary assets on December 31, 2008.

Alabama

We currently own three facilities consisting of approximately 149,333 square feet in Huntsville, Alabama,
which house laboratories as well as administrative, clinical and commercial manufacturing facilities for our
PEGylation and advanced polymer conjugate technology operations.

India

We own a research and development facility consisting of approximately 88,000 square feet, near Hyderabad,
India. In addition, we lease approximately 3,000 square feet of facilities in or near Hyderabad, India under various
operating leases, with expiration dates in 2011.

Item 3. Legal Proceedings

From time to time, we may be subject to legal proceedings and claims in the ordinary course of business. We
are not currently a party to or aware of any proceedings or claims that we believe will have, individually or in the
aggregate, a material adverse effect on our business, financial condition or results of operations.

Item 4.

[Removed and Reserved]

PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters

Our common stock trades on the NASDAQ Global Select Market under the symbol “NKTR.” The table below
sets forth the high and low closing sales prices for our common stock as reported on the NASDAQ Global Select
Market during the periods indicated.

High

Low

Year Ended December 31, 2009:
1st Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5.79
6.94
2nd Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.47
3rd Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4th Quarter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.05
Year Ended December 31, 2010:
1st Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15.52
15.58
2nd Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15.21
3rd Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15.88
4th Quarter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 4.03
5.02
5.89
8.07

$ 9.39
11.25
11.60
12.30

Holders of Record

As of February 25, 2011, there were approximately 264 holders of record of our common stock.

Dividend Policy

We have never declared or paid any cash dividends on our common stock. We currently expect to retain any
future earnings for use in the operation and expansion of our business and do not anticipate paying any cash
dividends on our common stock in the foreseeable future.

There were no sales of unregistered securities and there were no common stock repurchases made during the

year ended December 31, 2010.

Securities Authorized for Issuance Under Equity Compensation Plans

Information regarding our equity compensation plans as of December 31, 2010 is disclosed in Item 12
“Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this
Annual Report on Form 10-K and is incorporated herein by reference from our proxy statement for our 2011 annual
meeting of stockholders to be filed with the SEC pursuant to Regulation 14A not later than 120 days after the end of
the fiscal year covered by this Annual Report on Form 10-K.

Performance Measurement Comparison

The material in this section is being furnished and shall not be deemed “filed” with the SEC for purposes of
Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall the material in this
section be deemed to be incorporated by reference in any registration statement or other document filed with the
SEC under the Securities Act or the Exchange Act, except as otherwise expressly stated in such filing.

The following graph compares, for the five year period ended December 31, 2010, the cumulative total
stockholder return (change in stock price plus reinvested dividends) of our common stock with (i) the NASDAQ
Composite Index, (ii) the NASDAQ Pharmaceutical Index, (iii) the RGD SmallCap Pharmaceutical Index, (iv) the
NASDAQ Biotechnology Index and (v) the RDG SmallCap Biotechnology Index. Measurement points are the last
trading day of each of our fiscal years ended December 31, 2006, December 31, 2007, December 31, 2008,

December 31, 2009 and December 31, 2010. The graph assumes that $100 was invested on December 31, 2005 in
the common stock of the Company, the NASDAQ Composite Index, the Nasdaq Pharmaceutical Index, the RGD
SmallCap Pharmaceutical Index, the NASDAQ Biotechnology Index and the RDG SmallCap Biotechnology Index
and assumes reinvestment of any dividends. The stock price performance in the graph is not intended to forecast or
indicate future stock price performance.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*

$160

$140

$120

$100

$80

$60

$40

$20

12/05

12/06

12/07

12/08

12/09

12/10

Nektar Therapeutics

RDG SmallCap Pharmaceutical

NASDAQ Pharmaceutical

NASDAQ Composite

NASDAQ Biotechnology

RDG SmallCap Biotechnology

* $100 invested on 12/31/05 in stock or index, including reinvestment of dividends.

Fiscal year ending December 31.

Item 6. Selected Financial Data

SELECTED CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except per share information)

The selected consolidated financial data set forth below should be read together with the consolidated financial
statements and related notes, “Management’s Discussion and Analysis of Financial Condition and Results of
Operations,” and the other information contained herein.

2010

Statements of Operations Data:
Revenue:
Product sales and royalties(1) . . . . . . . . . . . . . $ 34,667
124,372
License, collaboration and other revenue(2) . .

Total revenue . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating costs and expenses(3)(4) . . . . .

159,039
187,294

Loss from operations . . . . . . . . . . . . . . . . . . .
Gain on debt extinguishment . . . . . . . . . . . . .
Interest and other income (expense), net . . . . .
Provision (benefit) for income taxes . . . . . . . .

(28,255)
—
(8,802)
881

Years Ended December 31,
2008

2007

2009

2006

$ 35,288
36,643

$ 41,255
48,930

$180,755
92,272

$ 153,556
64,162

71,931
167,063

(95,132)
—
(7,640)
(253)

90,185
172,837

(82,652)
50,149
(2,639)
(806)

273,027
309,175

(36,148)
—
4,696
1,309

217,718
376,948

(159,230)
—
5,297
828

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (37,938)

$(102,519)

$ (34,336)

$ (32,761)

$(154,761)

Basic and diluted net loss per share(5) . . . . . . $
Shares used in computing basic and diluted

(0.40)

(1.11)

(0.37)

(0.36)

(1.72)

net loss per share(5) . . . . . . . . . . . . . . . . . .

94,079

92,772

92,407

91,876

89,789

2010

2009

As of December 31,
2008

2007

2006

Balance Sheet Data:
Cash, cash equivalents and

315,932
investments . . . . . . . . . . . . . . . . $
289,871
Working capital . . . . . . . . . . . . . . $
521,225
Total assets . . . . . . . . . . . . . . . . . . $
145,347
Deferred revenue . . . . . . . . . . . . . $
214,955
Convertible subordinated notes . . . $
22,585
Other long-term liabilities . . . . . . . $
Accumulated deficit . . . . . . . . . . . $(1,264,547)
90,662
Total stockholders’ equity . . . . . . . $

396,211
$
260,650
$
575,518
$
192,372
$
214,955
$
23,344
$
$(1,226,609)
102,367
$

378,994
$
337,846
$
560,536
$
65,577
$
214,955
$
25,585
$
$(1,124,090)
190,154
$

482,353
$
425,191
$
725,103
$
80,969
$
315,000
$
27,543
$
$(1,089,754)
214,439
$

466,977
$
369,457
$
768,177
$
40,106
$
417,653
$
29,189
$
$(1,056,993)
227,060
$

(1) 2007 and 2006 product sales and royalties include commercial manufacturing revenue from Exubera bulk dry

powder insulin and Exubera inhalers.

(2) 2007 and 2006 collaboration and other revenue included Exubera commercialization readiness revenue.

(3) Operating costs and expenses includes the Gain on sale of pulmonary assets of $69.6 million in 2008 and the

Gain on termination of collaborative agreements, net of $79.2 million in 2007.

(4) Basic and diluted net loss per share is based upon the weighted average number of common shares outstanding.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual
results could differ materially from those discussed here. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in this section as well as factors described in “Part I, Item 1A — Risk
Factors.”

Overview

Strategic Direction of Our Business

We are a clinical-stage biopharmaceutical company developing a pipeline of drug candidates that utilize our
PEGylation and advanced polymer conjugate technology platforms, which are designed to improve the benefits of
drugs for patients. Our current proprietary product pipeline is comprised of drug candidates across a number of
therapeutic areas, including oncology, pain, anti-infectives, anti-viral and immunology. Our research and devel-
opment activities involve small molecule drugs, peptides and other potential biologic drug candidates. We create
our innovative drug candidates by using our proprietary advanced polymer conjugate technologies and expertise to
modify the chemical structure of drugs to create new molecular entities. Polymer chemistry is a science focused on
the synthesis or bonding of polymer architectures with drug molecules to alter the properties of the molecule when it
is bonded with polymers. Additionally, we may utilize established pharmacologic targets to engineer a new drug
candidate relying on a combination of the known properties of these targets and our proprietary polymer chemistry
technology and expertise. Our drug candidates are designed to improve the pharmacokinetics, pharmacodynamics,
half-life, bioavailability, metabolism or distribution of drugs and improve the overall benefits and use of a drug for
the patient. Our objective is to apply our advanced polymer conjugate technology platform to create new drugs in
multiple therapeutic areas.

During 2010, we continued to make substantial investments to advance our pipeline of drug candidates from
early stage discovery research through clinical development. In 2010, we continued to advance Phase 2 clinical
trials for NKTR-102 (topoisomerase I inhibitor-polymer conjugate) in platinum resistant/refractory ovarian cancer,
metastatic breast cancer and metastatic colorectal cancer. The Phase 2 clinical trial in metastatic breast cancer
patients was fully enrolled in 2010 with patients continuing in the study into 2011. In 2010, we expanded the Phase
2 clinical trial by 50 patients in platinum resistant/refractory ovarian cancer patients and on March 1, 2011, we
announced that we intended to further expand this study by up to 60 additional patients. We expect this expansion
trial to continue to enroll in 2011. The Phase 2 clinical study in metastatic colorectal cancer patients is still
enrolling. Enrollment in the colorectal cancer study has been challenging due to the fact that the comparator arm of
this study, single-agent irinotecan, is not the standard of care for second line metastatic colorectal therapy in the
United States or Europe.

In December 2010, we announced that we were planning to take NKTR-102 into Phase 3 clinical development
prior to seeking a collaboration partner. We are currently planning a comparative Phase 3 clinical study for
NKTR-102 in metastatic breast cancer and plan to start this study in late 2011. In addition, we will also continue the
expanded Phase 2 clinical trial in platinum resistant/refractory patients to evaluate the potential of an early
submission of a New Drug Application to the United States Food and Drug Administration depending on our
assessment of those expanded study results. The size, scope and timing of our investment in a comparative Phase 3
clinical study in platinum resistant/refractory ovarian cancer will depend upon a number of important variables
including our evaluation of the expanded Phase 2 study results, discussions with health authorities and key opinion
leaders, evolving regulatory standards and requirements, and the estimated cost of these studies. We anticipate our
Phase 3 development plans for NKTR-102 to require substantial investment over the next several years.

Our focus on research and clinical development requires substantial investments that continue to increase as
we advance each drug candidate through each phase of the development cycle. In addition to advancing our
proprietary programs that are currently in clinical development, we are committed to continuing to make significant
investments to advance new opportunities from our earlier stage research discovery pipeline. For example, we plan
to start a Phase 1 clinical study for NKTR-181 in the first half of 2011. While we believe that our substantial
investment in research and development has the potential to create significant value if one or more of our drug
candidates demonstrates positive clinical results and/or receives regulatory approval in one or more major markets,

drug research and development is an inherently uncertain process and there is a high risk of failure at every stage
prior to approval and the timing and outcome of clinical trial results is extremely difficult to predict. Clinical
development successes and failures can have a disproportionate positive or negative impact on our scientific and
medical prospects, financial prospects, financial condition, and market value.

We have a number of existing license and collaboration agreements with third parties in which we have an
economic interest and could have a material impact on our business, results of operations and financial condition. In
particular, the future clinical and commercial success or failure of our collaboration with AstraZeneca for
NKTR-118 and NKTR-119 and our collaboration with Bayer for Amikacin Inhale will have a material impact
on our business and financial condition over the next several years. In addition, the amount of revenue that we derive
from UCB’s CIMZIA», Roche’s MIRCERA», Map’s LevadexTM and Affymax’s HematideTM, among other of our
collaboration agreements, will together have a material impact on our business, financial results and cash position.
Because drug development and commercialization is subject to numerous risks and uncertainties, there is a
substantial risk that our future revenue from one or more of these agreements will be less than we project in our
business plans.

Historically, we have entered into a number of license and supply contracts under which we manufactured and
supplied our proprietary PEGylation reagents on a cost-plus or fixed price basis. Our current strategy is to
manufacture and supply PEGylation reagents to support our proprietary drug candidates or for third party
collaborators where we have a strategic development and commercialization relationship or where we derive
substantial economic benefit. As a result, whenever possible, we are renegotiating or not seeking renewal of legacy
manufacturing supply arrangements that do not include a strategic development or commercialization component.
For example, in October 2010 we entered into a supply, dedicated suite and manufacturing guarantee agreement
with Amgen Inc. and Amgen Manufacturing, Limited, which has significantly amended economic and other terms
in the non-exclusive supply and license agreement we previously entered into with Amgen in July 1995. In addition,
in December 2010 we entered into an amended manufacturing and supply agreement with Merck (through its
subsidiary Schering) to provide for transfer to an alternative manufacturer and revised economics for an interim
supply arrangement until that transition is completed.

Key Developments and Trends in Liquidity and Capital Resources

At December 31, 2010, we had approximately $315.9 million in cash, cash equivalents, and short-term
investments and $240.4 million in indebtedness. On January 24, 2011, we completed a public offering of our
common stock with proceeds of approximately $220.4 million. Additionally, as part of the public offering, we
incurred approximately $0.6 million in legal and accounting fees, filing fees, and other offering expenses. We have
$215.0 million in outstanding convertible subordinated notes due September 2012. We do not have sufficient
resources to fund our research and development plans and repay these convertible notes. We have no material credit
facility or other material committed sources of capital. We expect the Phase 3 clinical studies of NKTR-102 to
require particularly significant resources because we anticipate bearing a majority or all of the development costs
for that drug candidate. Prior to the maturity of the convertible notes, we plan to explore a number of alternatives to
provide for the repayment of the notes, including restructuring the notes.

We have financed our operations primarily through revenue from product sales and royalties, development and
commercialization collaboration contracts and debt and equity financings. While in the past we have received a
number of significant payments from license and collaboration agreements and other significant transactions, we do
not currently anticipate receiving substantial payments for new transactions in the near future. To date we have
incurred substantial debt as a result of our issuances of subordinated notes that are convertible into our common
stock. Our substantial debt, the market price of our securities, and the general economic climate, among other
factors, could have material consequences for our financial condition and could affect our sources of short-term and
long-term funding. Our ability to meet our ongoing operating expenses and repay our outstanding indebtedness is
dependent upon our and our partners’ ability to successfully complete clinical development of, obtain regulatory
approvals for and successfully commercialize new drugs. Even if we or our partners are successful, we may require
additional capital to continue to fund our operations and repay our debt obligations as they become due. There can
be no assurance that additional funds, if and when required, will be available to us on favorable terms, if at all.

Results of Operations

Years Ended December 31, 2010, 2009, and 2008

Revenue (in thousands, except percentages)

Years Ended December 31,
2010
2009

2008

Increase/
(Decrease)
2010 vs. 2009

Increase/
(Decrease)
2009 vs. 2008

Percentage
Increase/
(Decrease)
2010 vs. 2009

Percentage
Increase/
(Decrease)
2009 vs. 2008

Product sales and

royalties . . . . . . . . . . $ 34,667

$35,288

$41,255

$ (621)

$ (5,967)

(2)%

(14)%

License, collaboration

and other . . . . . . . . .

124,372

36,643

48,930

87,729

(12,287)

Total revenue . . . . . . . . $159,039 $71,931

$90,185

$87,108

$(18,254)

239%

121%

(25)%

(20)%

Total revenue increased for the year ended December 31, 2010 compared to the year ended December 31, 2009
primarily due to the recognition of the remaining $101.4 million of the $125.0 million upfront payment received
from AstraZeneca AB for NKTR-118 and NKTR-119 in the fourth quarter of 2009. For the year ended
December 31, 2010, recognition of amounts received from AstraZeneca AB represented 68% of our total revenue.

Total revenue decreased for the year ended December 31, 2009 compared to the year ended December 31, 2008
primarily as a result of the sale of certain of our pulmonary assets to Novartis completed on December 31, 2008
(Novartis Pulmonary Asset Sale) and lower product manufacturing volumes required by our collaboration partners.
In connection with the Novartis Pulmonary Asset Sale, our collaboration agreement with Novartis for TIP was
terminated and our collaboration agreement with Bayer Schering Pharma AG for Cipro Inhale was assigned to
Novartis. For the year ended December 31, 2009, two of our partners, AstraZeneca AB and UCB Pharma,
represented 35% and 17%, respectively, of our total revenue.

Product sales and royalties

Product sales include cost-plus and fixed price manufacturing and supply agreements with our collaboration
partners. We also receive royalty revenue from certain of our collaboration partners based on their net sales once
their products are approved for commercial sale. Royalty revenues were $7.3 million, $5.2 million, and $3.5 million
for the years ended December 31, 2010, 2009, and 2008, respectively.

The decrease in product sales and royalties for the year ended December 31, 2010 compared to the year ended
December 31, 2009 is attributable to decreased product sales of $2.7 million partially offset by increased royalty
revenue of $2.1 million. The timing of shipments is based on the demand and requirements of our collaboration
partners and is not ratable throughout the year.

We expect product sales and royalties to decrease in 2011 due to decreased product sales partially offset by

increased royalty revenues.

Lower product demand from our collaboration partners resulted in decreased product sales of approximately
$7.5 million for the year ended December 31, 2009 compared to the year ended December 31, 2008. For the year
ended December 31, 2009, an increase in royalties of approximately $1.6 million partially offset the decrease in
product sales compared to the year ended December 31, 2008.

License, collaboration and other revenue

License, collaboration and other revenue includes amortization of upfront payments and performance
milestone payments received in connection with our license and collaboration agreements and reimbursed research
and development expenses. The level of license, collaboration and other revenues depends in part upon the
estimated amortization period of the upfront and milestone payments, the achievement of future milestones, the
continuation of existing collaborations, the amount of reimbursed research and development work, and the signing
of new collaborations.

For the year ended December 31, 2010, the increase in license, collaboration and other revenue compared to
the year ended December 31, 2009 is primarily attributable to recognition of the upfront payment received from
AstraZeneca for NKTR-118 and NKTR-119 in the fourth quarter of 2009, contract research and other revenue from
AstraZeneca, and the recognition of the license extension option payment received from Roche in December 2009.
Under the AstraZeneca license agreement and related technology transfer agreement, we recognized $101.4 million
and $23.6 million of the $125.0 million upfront payment and $6.5 million and $1.5 million of contract research and
other revenue for the years ended December 31, 2010 and 2009, respectively. We recognized $5.1 million and
$0.2 million, respectively, of the $31.0 million license extension option payment from Roche for the years ended
December 31, 2010 and 2009, respectively.

The decrease in license, collaboration and other revenue for the year ended December 31, 2009 compared to
the year ended December 31, 2008 is primarily attributable to elimination of any revenue from Novartis related to
TIP and from Bayer Schering Pharma AG for Cipro Inhale as a result of the Novartis Pulmonary Asset Sale. In
addition, 2008 included revenue related to a new intellectual property license agreement we entered into with Roche
and higher revenue from Bayer under our collaboration agreement for BAY41-6551. This decrease is partially off-
set by $25.1 million in revenue recognized related to our agreement with AstraZeneca for NKTR-118 and
NKTR-119.

We expect license, collaboration and other revenue to substantially decrease in 2011 due to the complete
recognition as of December 31, 2010 of the upfront payment we received under the AstraZeneca license agreement.

The timing and future success of our drug development programs and those of our collaboration partners are
subject to a number of risks and uncertainties. See “Part I, Item 1A — Risk Factors” for discussion of the risks
associated with our partnered research and development programs.

Revenue by geography

Revenue by geographic area is based on locations of our partners. The following table sets forth revenue by

geographic area (in thousands):

Years Ended December 31,
2009

2010

2008

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
European countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 29,636
129,403

$29,511
42,420

$30,800
59,385

Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$159,039

$71,931

$90,185

The increase in revenue attributable to European countries for the year ended December 31, 2010 compared to
the year ended December 31, 2009 is primarily attributable to the revenue we recognized from the AstraZeneca
collaboration transaction.

Cost of goods sold (in thousands, except percentages)

Years Ended December 31,
2010
2008
2009

Increase/
(Decrease)
2010 vs. 2009

Increase/
(Decrease)
2009 vs. 2008

Percentage
Increase/
(Decrease)
2010 vs. 2009

Percentage
Increase/
(Decrease)
2009 vs. 2008

Cost of goods sold . . . . . $25,667
9,000
Product gross profit . . . .

$30,948
4,340

$28,216
13,039

$(5,281)
4,660

$ 2,732
(8,699)

(17)%
107%

10%
(67)%

Product gross margin . . .

26%

12%

32%

The decrease in cost of goods sold during the year ended December 31, 2010 compared to the year ended
December 31, 2009 is primarily due to the $2.7 million decrease in product sales and the inclusion in cost of goods
sold in 2009 of a $2.1 million success fee that became due to one of our former consulting firms in 2009. The
increase to product gross margin during the year ended December 31, 2010 compared to the year ended
December 31, 2009 is primarily attributable to the $2.1 million increase in royalty revenues recognized in
2010 without a related cost and the $2.1 million success fee included in cost of goods sold in 2009.

The decrease to product gross margin during the year ended December 31, 2009 compared to the year ended
December 31, 2008 is primarily attributable to lower manufacturing volumes and the $2.1 million success fee that
became due to one of our former consulting firms in 2009.

As a result of the fixed cost base associated with our manufacturing activities, we expect product gross margin

to fluctuate in future periods depending on the level of manufacturing orders from our customers.

Other cost of revenue (in thousands, except percentages)

Years Ended December 31,
2009

2008

2010

Increase/
(Decrease)
2010 vs. 2009

Increase/
(Decrease)
2009 vs. 2008

Percentage
Increase/
(Decrease)
2010 vs. 2009

Percentage
Increase/
(Decrease)
2009 vs. 2008

Other cost of

revenue. . . . . . . . .

$—

$6,821

$—

$(6,821)

n/a

Other cost of revenue consists of idle Exubera manufacturing capacity costs that were incurred by us prior to
the termination of all of our inhaled insulin programs in April 2008. We do not expect to incur any additional idle
Exubera manufacturing capacity costs.

Research and development expense (in thousands, except percentages)

Years Ended December 31,
2009

2010

2008

Increase/
(Decrease)
2010 vs. 2009

Increase/
(Decrease)
2009 vs. 2008

Percentage
Increase/
(Decrease)
2010 vs. 2009

Percentage
Increase/
(Decrease)
2009 vs. 2008

Research &

development
expense . . . . . . . . .

$108,065 $95,109

$154,417

$12,956

$(59,308)

14%

(38)%

Research and development expense consists primarily of personnel costs, including salaries, benefits and
stock-based compensation, clinical study costs, including direct costs of contract research organizations (CROs)
and other vendors, direct costs of outside research, materials and supplies, licenses and fees and overhead
allocations consisting of various support and facilities related costs.

The increase in research and development expense for the year ended December 31, 2010 compared to the year
ended December 31, 2009 is primarily attributable to an $8.4 million increase in salaries and employee benefits due
to increased headcount to support our expanded clinical efforts and further investment in and development of our
research capabilities and pipeline. The increase also includes a $3.8 million increase in non-cash stock-based
compensation expense due to our higher stock price and increased headcount, a $3.1 million increase to facilities
and equipment costs primarily due to the completion of our India research facility and to the move to our new
facility in the Mission Bay Area of San Francisco, California (Mission Bay Facility), and a $2.7 million increase in
supplies, including clinical trial materials. These expense increases were partially offset by a $5.5 million decrease
in outside services, including contract research organizations, due primarily to lower expenses for the NKTR-118
and NKTR-119 programs as a result of our successful completion of Phase 2 clinical studies and collaboration with
AstraZeneca pursuant to the license agreement entered into in September 2009.

The decrease in research and development expense for the year ended December 31, 2009 compared to the
year ended December 31, 2008 is primarily attributable to the divestiture of certain pulmonary research and
development programs as part of the Novartis Pulmonary Asset Sale. Research and development expense related to
the divested pulmonary programs totaled $52.6 million for the year ended December 31, 2008 which was comprised
of facility, employee related and other costs. Additionally, in 2008 we recorded approximately $5.9 million in other
expenses related to the workforce reduction completed in February 2008 and additional severance costs related to
the Novartis Pulmonary Asset Sale.

We utilize our employee and infrastructure resources across multiple development projects as well as our
research programs directed towards identifying other product candidates based on our technology platform. The
following table shows expenses incurred for preclinical study support, contract manufacturing for clinical supplies

and clinical and regulatory services provided by third parties and direct materials costs for each of our product
candidates. The table also presents other costs and overhead consisting of personnel, facilities and other indirect
costs (in thousands):

Clinical
Study Status(1)

Years Ended December 31,
2009

2008

2010

NKTR-102 (topoisomerase I inhibitor-

polymer conjugate). . . . . . . . . . . . . . . .

Phase 2

$ 14,730

$17,509

$ 15,710

BAY41-6551 (Amikacin Inhale, formerly

NKTR-061)(2) . . . . . . . . . . . . . . . . . . . Completed Phase 2

12,606

13,482

6,033

NKTR-181 (abuse deterrent, tamper-

resistant opioid) . . . . . . . . . . . . . . . . . .

Pre-clinical

NKTR-118 (oral PEGylated naloxol)(3) . . Completed Phase 2
NKTR-105 (PEGylated docetaxel) . . . . . .
Other PEGylation product candidates . . . .
Other pulmonary product candidates(4). . .

Phase 1
Various
n/a

Total third party and direct materials

costs . . . . . . . . . . . . . . . . . . . . . . . . . .
Personnel, overhead and other costs . . . . .
Stock-based compensation and

depreciation . . . . . . . . . . . . . . . . . . . . .
Research and development expense . . . . .

4,389
3,439
2,137
7,460
—

—
9,607
2,188
7,084
105

44,761
48,736

49,975
36,672

—
16,926
3,688
5,391
10,048

57,796
82,323

14,568
$108,065

8,462
$95,109

14,298
$154,417

(1) Clinical Study Status definitions are provided in the chart found in Part I, Item 1. Business.

(2) Partnered with Bayer Healthcare LLC in August 2007. As part of the Novartis Pulmonary Asset Sale, we
retained an exclusive license to this technology for the development and commercialization of this product.

(3) Partnered with AstraZeneca AB (AstraZeneca) in 2009. In general, all development costs incurred by us after

partnering with AstraZeneca are reimbursed by AstraZeneca.

(4) Consists of costs associated with pulmonary products that have been assigned, transferred or terminated.

As shown in the table above, our most significant investments in specific development programs in 2010
included NKTR-102, BAY41-6551 (Amikacin Inhale, formerly NKTR-061), NKTR-181, NKTR-118, and NKTR-
105. In addition, we continue to actively perform research and pre-clinical development of other drug candidates
based on our proprietary advanced polymer conjugate technology platform.

We expect research and development expense will substantially increase over the next several years. We plan
to continue to advance NKTR-102 in Phase 2 clinical trials for breast, ovarian and colorectal cancers. In 2011, we
are completing our Phase 2 clinical trial in metastatic breast cancer patients and we are currently planning a
comparative Phase 3 clinical development program in metastatic breast cancer patients that we plan to start by the
end of 2011. Our expanded Phase 2 clinical trial in platinum resistant/refractory ovarian cancer patients will
continue throughout 2011. We are currently also evaluating various options for Phase 3 clinical development of
NKTR-102 in platinum resistant/refractory ovarian cancer patients. At the same time, we will also be advancing the
Phase 2 clinical study for NKTR-102 in colorectal cancer patients and we expect to continue to enroll patients
throughout 2011 and beyond. In December 2010, we announced that we intended to continue development of
NKTR-102 into Phase 3 clinical development prior to completing a collaboration partnership for this drug
candidate. As such, we will be funding all of the clinical development costs for NKTR-102 without reimbursement
from a collaboration partner for the foreseeable future. The clinical development costs for NKTR-102 will be
significant and we have not yet completed our Phase 3 planning. As a result, we do not currently have any estimate
of the dates or costs to complete the clinical development efforts for any of the cancer indications in which we are
studying NKTR-102.

In 2011, we will be investing in a Phase 1 clinical study for NKTR-181 (an abuse deterrent, tamper-resistant
opioid) that we expect to start and complete in 2011. In addition, we plan to continue to make substantial

investments to support the clinical and commercial manufacturing preparation and scale-up for the inhaler devices
to supply Bayer for the Amikacin Inhale program. Under our collaboration agreement with Bayer, we are
responsible for all clinical and commercial supply of the inhaler devices for Amikacin Inhale. We do not expect
to have any significant future research and development costs associated with NKTR-118 and NKTR-119 as
AstraZeneca is responsible for all further development and commercialization costs for these drug candidates.

In addition to our programs that will be in clinical development in 2011, we believe it is important to continue
our substantial investment in a diverse pipeline of new drug candidates to continue to build on the value of our
business. Our discovery research organization is identifying new drug candidates by applying our technology
platform to a wide range of molecule classes, including small molecules and large proteins, peptides and antibodies,
across multiple therapeutic areas. We plan to continue to advance our most promising early research drug
candidates into preclinical development with the objective to advance these early stage research programs to
human clinical studies over the next several years.

Our expenditures on current and future preclinical and clinical development programs are subject to numerous
uncertainties in timing and cost to completion. In order to advance our product candidates through clinical
development, the product candidates are tested in numerous preclinical safety, toxicology and efficacy studies. We
then conduct clinical trials for our drug candidates that take several years to complete. The cost and time required to
complete clinical trials may vary significantly over the life of a clinical development program as a result of a variety
of factors, including but not limited to:

(cid:129) the number of patients required to fully enroll a clinical trial;

(cid:129) the length of time required to enroll clinical trial participants;

(cid:129) the number and location of sites included in the clinical trials;

(cid:129) the clinical trial designs required by the health authorities (i.e. primary and secondary end points);

(cid:129) the potential for changing standards of care for the target patient population;

(cid:129) the competition for patient recruitment from competitive drug candidates being studied in the same clinical

setting;

(cid:129) the costs of producing supplies of the product candidates needed for clinical trials and regulatory

submissions;

(cid:129) the safety and efficacy profile of the drug candidate;

(cid:129) the use of clinical research organizations to assist with the management of the trials; and

(cid:129) the costs and timing of, and the ability to secure, regulatory approvals.

Furthermore, our strategy includes entering into collaborations with third parties to participate in the
development and commercialization of some of our drug candidates such as NKTR-118, NKTR-119, and Amikacin
Inhale. In these situations, the clinical trial process for a drug candidate and the estimated completion date will
largely be under the control of that third party and not under our control. We cannot forecast with any degree of
certainty which of our product candidates will be subject to future collaborations or how such arrangements would
affect our development plans or capital requirements.

The risks and uncertainties associated with our research and development projects are discussed more fully in
Item 1A — Risk Factors. As a result of the uncertainties discussed above, we are unable to determine with any
degree of certainty the duration and completion costs of our research and development projects, anticipated
completion dates or when and to what extent we will receive cash inflows from a collaboration arrangement or the
commercialization of a drug candidate.

General and administrative expense (in thousands, except percentages)

Years Ended December 31,
2010
2008
2009

Increase/
(Decrease)
2010 vs. 2009

Increase/
(Decrease)
2009 vs. 2008

Percentage
Increase/
(Decrease)
2010 vs. 2009

Percentage
Increase/
(Decrease)
2009 vs. 2008

General & administrative

expense . . . . . . . . . . . $40,986

$41,006

$51,497

$(20)

$(10,491)

—%

(20)%

General and administrative expenses are associated with administrative staffing, business development,

finance, marketing, and legal.

General and administrative expenses for the year ended December 31, 2010 remained at a consistent level
compared to the year ended December 31, 2009. In 2011, we expect general and administrative expenses to increase
modestly compared to 2010.

The decrease in general and administrative expenses for the year ended December 31, 2009 compared to the
year ended December 31, 2008 is primarily attributable to decreased employee compensation costs of $4.1 million,
decreased professional fees of $4.3 million, and decreased marketing costs of $1.5 million due to our election to
terminate our co-promotion rights and obligations under the collaboration agreement with Bayer for Amikacin
Inhale.

Impairment of long lived assets (in thousands except percentages)

Years Ended December 31,
2010
2009

2008

Increase/
(Decrease)
2010 vs. 2009

Increase/
(Decrease)
2009 vs. 2008

Percentage
Increase/
(Decrease)
2010 vs. 2009

Percentage
Increase/
(Decrease)
2009 vs. 2008

Impairment of long-lived
assets . . . . . . . . . . . . .

$12,576

$—

$1,458

$12,576

$(1,458)

n/a

During the year ended December 31, 2010, we relocated all of our operations previously located in San Carlos,
California, including our corporate headquarters, to our Mission Bay Facility in San Francisco, California. This
event triggered an impairment test to be performed for the remaining assets located in San Carlos and an impairment
charge of $12.6 million was recognized as a result. We determined the carrying value of the San Carlos facility
exceeded its fair value based on a discounted cash flow model.

During the year ended December 31, 2008, impairment of long lived assets included an impairment charge of
$1.5 million related to a specialized dryer designed for our PEGylation manufacturing facility. The dryer was not
functioning properly and was not being used in operations. We determined the carrying value of the manufacturing
equipment exceeded the fair value based on a discounted cash flow model.

Gain on sale of pulmonary assets (in thousands except percentages)

Years Ended December 31,
2008

2009

2010

Increase/
(Decrease)
2010 vs. 2009

Increase/
(Decrease)
2009 vs. 2008

Percentage
Increase/
(Decrease)
2010 vs. 2009

Percentage
Increase/
(Decrease)
2009 vs. 2008

Gain on sale of pulmonary

assets . . . . . . . . . . . . . . .

$—

$69,572

$—

$(69,572)

n/a

On December 31, 2008, we sold certain of our pulmonary assets to Novartis for $115.0 million. The gain on
sale of pulmonary assets includes the purchase price received from Novartis less the net book value of property and
equipment of $37.3 million, an equity investment in Pearl Therapeutics, Inc. of $2.7 million, transaction costs of
$4.6 million, and other costs of $0.9 million.

Interest income (in thousands except percentages)

Years Ended December 31,
2010
2008
2009

Increase/
(Decrease)
2010 vs. 2009

Increase/
(Decrease)
2009 vs. 2008

Percentage
Increase/
(Decrease)
2010 vs. 2009

Percentage
Increase/
(Decrease)
2009 vs. 2008

Interest income . . . . . . . . .

$1,545 $3,688

$12,495

$(2,143)

$(8,807)

(58)%

(70)%

The decreases in interest income for the years ended December 31, 2010 and 2009 compared to the previous
years were primarily attributable to lower interest rates earned on our cash, cash equivalents, and available-for-sale
investments.

Interest expense (in thousands except percentages)

Years Ended December 31,
2009

2010

2008

Increase/
(Decrease)
2010 vs. 2009

Increase/
(Decrease)
2009 vs. 2008

Percentage
Increase/
(Decrease)
2010 vs. 2009

Percentage
Increase/
(Decrease)
2009 vs. 2008

Interest expense . . . . . .

$11,174

$12,176

$15,192

$(1,002)

$(3,016)

(8)%

(20)%

The decrease in interest expense during the year ended December 31, 2010 compared to the year ended
December 31, 2009 is primarily attributable to the complete amortization of deferred financing costs during 2010
from our 3.25% convertible subordinated notes due September 2012 and decreased interest expense from capital
leases. We expect the interest expense in 2011 to remain at a level consistent with 2010.

We repurchased $100.0 million par value of our 3.25% convertible subordinated notes in the fourth quarter of
2008. This resulted in a lower average balance of notes outstanding and a corresponding decrease in interest
expense in 2009 compared to 2008.

Gain on debt extinguishment (in thousands except percentages)

Years Ended December 31,
2008

2009

2010

Increase/
(Decrease)
2010 vs. 2009

Increase/
(Decrease)
2009 vs. 2008

Percentage
Increase/
(Decrease)
2010 vs. 2009

Percentage
Increase/
(Decrease)
2009 vs. 2008

Gain on debt

extinguishment . . . . . . . .

$—

$50,149

$—

$(50,149)

n/a

During the three months ended December 31, 2008, we repurchased approximately $100.0 million in par value
of our 3.25% convertible subordinated notes for an aggregate purchase price of $47.8 million. The recognized gain
on debt extinguishment is net of transaction costs of $1.0 million and accelerated amortization of our deferred
financing costs of $1.1 million.

Liquidity and Capital Resources

We have financed our operations primarily through revenue from product sales, royalties and research and
development contracts, as well as public and private placements of debt and equity. As of December 31, 2010, we
had cash, cash equivalents and investments in marketable securities of $315.9 million and indebtedness of
$240.4 million, including $215.0 million of convertible subordinated notes, $19.0 million in capital lease
obligations and $6.4 million in other liabilities. Additionally at December 31, 2010, we had letter of credit
arrangements with certain financial institutions and vendors, including our landlord, totaling $2.4 million. These
letters of credit will expire during 2011 and are secured by investments of similar amounts. On January 24, 2011, we
completed a public offering of our common stock with proceeds of approximately $220.4 million. Additionally, as
part of the public offering, we incurred approximately $0.6 million in legal and accounting fees, filing fees, and
other offering expenses.

We will likely not have sufficient capital to fund the development of the drug candidates in our current research
and development pipeline, fund late stage clinical development of NKTR-102 and repay the $215.0 million
convertible notes when they become due in September 2012. We have no material credit facility or other material
committed sources of capital. We expect the Phase 3 clinical trials of NKTR-102 to require particularly significant

resources because we anticipate bearing a majority or all of the development costs for that drug candidate. Prior to
the maturity of the convertible notes, we plan to explore a number of alternatives to provide for the repayment of the
convertible notes, including restructuring the convertible notes. Despite these efforts, we may be unable to find a
commercially acceptable alternative or any alternative to repaying the notes by September 2012. Please refer to
Part I, Item 1A, Risk Factors, “We will need to restructure our convertible notes or raise substantial additional
capital to repay the notes and fund operations, and we may be unable to restructure the notes or raise such capital
when needed and on acceptable terms.”

Due to the potential for continued uncertainty in the credit markets in 2011, we may experience reduced
liquidity with respect to some of our short-term investments. These investments are generally held to maturity,
which is less than one year. However, if the need arose to liquidate such securities before maturity, we may
experience losses on liquidation. As of December 31, 2010, we held $298.2 million of available-for-sale invest-
ments, excluding money market funds, with an average time to maturity of 145 days. Based on our available cash
and our expected operating cash requirements, we do not intend to sell these securities and it is more likely than not
that we will not be required to sell these securities before we recover the amortized cost basis. To date we have not
experienced any liquidity issues with respect to these securities, but should such issues arise, we may be required to
hold some, or all, of these securities until maturity. We believe that, even allowing for potential liquidity issues with
respect to these securities, our remaining cash and cash equivalents and short-term investments will be sufficient to
meet our anticipated cash needs for at least the next twelve months.

Cash flows from operating activities

During the year ended December 31, 2010, net cash used in operating activities totaled $55.9 million, which
primarily consisted of spending on operating costs and expenses and includes $7.0 million for interest payments on
our convertible subordinated notes, and was partially offset by a $50.0 million upfront payment received from
Amgen under the supply, dedicated suite and manufacturing guarantee agreement that we entered into with Amgen
in October 2010. We expect that cash flows used in operating activities, excluding upfront payments received, if
any, will increase in 2011 as a result of increased spending on our proprietary research and development programs.

During the year ended December 31, 2009, net cash provided by operating activities totaled $39.7 million,
which included the $125.0 million upfront payment received from AstraZeneca under the license agreement we
entered into for NKTR-118 and NKTR-119 and a $31.0 million license extension payment received from Roche in
December 2009.

During the year ended December 31, 2008, net cash used for our operating activities was $145.8 million, which
included a number of significant items including a $10.0 million clinical development milestone received from
Bayer Healthcare LLC under our collaboration agreement for Amikacin Inhale, payments by us to Bespak Europe
Ltd. and Tech Group North America, Inc. of $40.2 million for amounts due under termination agreements with these
Exubera inhaler device contract manufacturers, all of which was recorded as an expense in 2007, $6.8 million paid
to maintain Exubera manufacturing capacity through April 2008, and $5.4 million for severance, and employee
benefits in connection with our workforce reduction plans.

Cash flows from investing activities

We purchased $31.5 million, $16.4 million, and $18.9 million of property and equipment in the years ended
December 31, 2010, 2009, and 2008, respectively. Additionally, we made advanced payments on property and
equipment purchases of $4.3 million in the year ended December 31, 2009. Our capital expenditures increased in
2010, as we constructed the leasehold improvements for the Mission Bay Facility and completed our research and
development facility in Hyderabad, India. We expect our capital expenditures to decrease in 2011 compared to
2010.

On December 31, 2008, we completed the sale of certain pulmonary assets to Novartis for a purchase price of
$115.0 million. We paid $0.2 million in transaction costs related to the sale during the year ended December 31,
2008 and $4.4 million in transaction costs during the year ended December 31, 2009. In addition, in July 2008, we
invested $4.2 million in Pearl Therapeutics Inc. (Pearl). In 2007, we granted Pearl a limited field intellectual
property license to certain of our proprietary pulmonary delivery technology. In connection with the Novartis

Pulmonary Asset Sale, we transferred our ownership interest in Pearl to Novartis and assigned the Pearl intellectual
property license to Novartis.

Cash flows used in financing activities

We received proceeds from issuance of common stock related to our employee option and stock purchase plans
of $8.9 million, $4.8 million, and $0.4 million in the years ended December 31, 2010, 2009, and 2008, respectively.

During the year ended December 31, 2008, we repurchased approximately $100.0 million in par value of our
3.25% convertible subordinated notes for an aggregate purchase price of $47.8 million. The $215.0 million of
3.25% convertible subordinated notes outstanding at December 31, 2010, are due in September 2012.

On January 24, 2011, we completed a public offering of our common stock with proceeds of approximately
$220.4 million. Additionally, we incurred approximately $0.6 million in legal and accounting fees, filing fees, and
other offering expenses.

Contractual Obligations

Obligations(1)
Convertible subordinated notes, including

Total

Payments Due by Period
2-3 Yrs
2012-2013

G=1 Yr
2011

4-5 Yrs
2014-2015

2016+

interest . . . . . . . . . . . . . . . . . . . . . . . . $228,927
29,580
21,320
10,205
6,000

Capital leases, including interest(2) . . . . .
Operating leases(3) . . . . . . . . . . . . . . . . .
Purchase commitments(4) . . . . . . . . . . . .
Litigation settlement, including interest . .

$ 6,986
4,919
—
10,205
1,000

$221,941
10,155
—
—
2,000

$ — $ —
4,034
10.472
16,144
5,176
—
—
1,000
2,000

$296,032

$23,110

$234,096

$17,648

$21,178

(1) The above table does not include certain commitments and contingencies which are discussed in Note 7 of

Item 8. Financial Statements and Supplementary Data.

(2) These amounts primarily result from our office space lease at 201 Industrial Road in San Carlos, California
under capital lease arrangements. As of November 29, 2010, we have ceased use of this space as a result of the
relocation of all of our functions, including our corporate headquarters and an R&D center, to our Mission Bay
Facility. We currently intend to sublease the San Carlos space, but have not been relieved of any obligations of
the terms of this lease, which is discussed in Note 6 of Item 8. Financial Statements and Supplementary Data.

(3) In November 2010, we moved into our Mission Bay Facility, which includes our corporate headquarters and an
R&D center at 455 Mission Bay Boulevard South in San Francisco, California. Under the terms of the sublease
we entered into with Pfizer Inc. on September 30, 2009 for the Mission Bay Facility, we will begin making non-
cancelable lease payments in 2014. The sublease is discussed in Note 6 of Item 8. Financial Statements and
Supplementary Data.

(4) Substantially all of this amount was subject to open purchase orders as of December 31, 2010 that were issued
under existing contracts. This amount does not represent minimum contract termination liability for our
existing contracts.

Given our current cash requirements, we forecast that we will have sufficient cash to meet our net operating
expense requirements and contractual obligations at least through December 31, 2011. We plan to continue to invest
in our growth and our future cash requirements will depend upon the timing and results of these investments. Our
capital needs will depend on many factors, including continued progress in our research and development programs,
progress with preclinical and clinical trials of our proprietary and partnered drug candidates, our ability to
successfully enter into additional collaboration agreements for one or more of our proprietary drug candidates or
intellectual property that we control, the time and costs involved in obtaining regulatory approvals, the costs of
developing and scaling our clinical and commercial manufacturing operations, the costs involved in preparing,

filing, prosecuting, maintaining and enforcing patent claims, the need to acquire licenses to new technologies and
the status of competitive products.

To date we have incurred substantial debt as a result of our issuances of subordinated notes that are convertible
into our common stock. Our substantial debt, the market price of our securities, and the general economic climate,
among other factors, could have material consequences for our financial condition and could affect our sources of
short-term and long-term funding. Our ability to meet our ongoing operating expenses and repay our outstanding
indebtedness is dependent upon our and our partners’ ability to successfully complete clinical development of,
obtain regulatory approvals for and successfully commercialize new drugs. Even if we or our partners are
successful, we may require additional capital to continue to fund our operations and repay our debt obligations
as they become due. There can be no assurance that additional funds, if and when required, will be available to us on
favorable terms, if at all.

Off Balance Sheet Arrangements

We do not utilize off-balance sheet financing arrangements as a source of liquidity or financing.

Critical Accounting Policies

The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles
(GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.

We base our estimates on historical experience and on various other assumptions that we believe to be
reasonable under the circumstances, the results of which form our basis for making judgments about the carrying
value of assets and liabilities that are not readily apparent from other sources, and evaluate our estimates on an
ongoing basis. Actual results may differ from those estimates under different assumptions or conditions. We have
determined that for the periods reported in this report, the following accounting policies and estimates are critical in
understanding our financial condition and results of our operations.

Revenue Recognition

License, collaboration and other research revenue is recognized based on the facts and circumstances of each
contractual agreement and includes amortization of upfront fees. We defer income under contractual agreements
when we have further obligations that indicate that a separate earnings process has not been completed. Upfront fees
are recognized ratably over the expected performance period under each arrangement. Management makes its best
estimate of the period over which we expect to fulfill our performance obligations, which may include technology
transfer assistance, clinical development activities, or manufacturing activities through the commercial life of the
product. Given the complexities and uncertainties of research and development collaborations, significant judgment
is required by management to determine the duration of the performance period.

As of December 31, 2010, we had $46.5 million of deferred upfront fees related to five research and
collaboration agreements that are being amortized over 6 to 24 years, or an average of 12 years. For our research and
collaboration agreements, our performance obligations may span the life of the agreement. For these, the shortest
reasonable period is the end of the development period (estimated to be 4 to 6 years) and the longest period is the
contractual life of the agreement, which is generally 10-12 years from the first commercial sale. Given the statistical
probability of drug development success in the bio-pharmaceutical industry, drug development programs have only
a 5% to 10% probability of reaching commercial success. If we had determined a longer or shorter amortization
period was appropriate, our annual upfront fee amortization for these agreements could be as low as $4.0 million or
as high as $17.0 million.

As of December 31, 2010, we also had $95.2 million of deferred upfront fees related to five license and supply
agreements that are being amortized over periods from 2 and 10 years. Our performance obligations for these
agreements may include technology transfer assistance and/or back-up manufacturing and supply services for a
specified period of time; therefore, the time estimated to complete the performance obligations related to licenses is

either specified or is much shorter than research and collaboration agreements. We may experience delays in the
execution of technology transfer plans, which may result in a longer amortization period for applicable agreements.

Our original estimates are periodically evaluated to determine if circumstances have caused the estimates to

change and if so, amortization of revenue is adjusted prospectively.

Stock-Based Compensation

We use the Black-Scholes option valuation model adjusted for the estimated historical forfeiture rate for the
respective grant to determine the estimated fair value of our stock-based compensation arrangements on the date of
grant (grant date fair value) and expense this value ratably over the service period of the option or performance
period of the Restricted Stock Unit award (RSU). The Black-Scholes option pricing model requires the input of
highly subjective assumptions. Because our employee stock options have characteristics significantly different
from those of traded options, and because changes in the subjective input assumptions can materially affect fair
value estimates, in management’s opinion, the existing models may not provide a reliable single measure of the fair
value of our employee stock options or common stock purchased under our employee stock purchase plan. In
addition, management continually assesses the assumptions and methodologies used to calculate the estimated fair
value of stock-based compensation. Circumstances may change and additional data may become available over
time, which could result in changes to the assumptions and methodologies, and which could materially impact our
fair value determination, as well as our stock-based compensation expense.

Clinical Trial Accruals

We record accruals for the estimated costs of our clinical trial activities performed by third parties. We accrue
costs associated with the start-up and reporting phases of the clinical trials ratably over the estimated duration of the
start-up and reporting phases. If the actual timing of these phases varies from the estimate, we will adjust the accrual
prospectively. We accrue costs associated with treatment phase of clinical trials based on the total estimated cost of
the clinical trials and are expensed ratably based on patient enrollment in the trials.

Recent Accounting Pronouncements

FASB Accounting Standards Update 2009-13, Revenue Recognition (Topic 605) — Multiple-Deliverable
Revenue Arrangements

In October 2009, the Financial Accounting Standards Board (FASB) published Accounting Standards Update
(ASU) 2009-13, which amends the criteria to identify separate units of accounting within Subtopic 605-25,
“Revenue Recognition-Multiple-Element Arrangements”. The revised guidance also expands the disclosure
required for multiple-element revenue arrangements. FASB ASU No. 2009-13 is effective for fiscal years beginning
on or after June 15, 2010, and may be applied retrospectively for all periods presented or prospectively to
arrangements entered into or materially modified after the adoption date. We do not expect this ASU will have a
material impact on our financial position or results of operations when we adopt it on January 1, 2011. However, the
adoption of this guidance may result in revenue recognition patterns for agreements entered into or modified after
adoption that are materially different from those recognized under the existing multiple-element guidance.

FASB ASU 2010-17, Revenue Recognition — Milestone Method (Topic 605): Milestone Method of
Revenue Recognition

In April 2010, the FASB codified the consensus reached in Emerging Issues Task Force Issue No. 08-09,
“Milestone Method of Revenue Recognition.” FASB ASU No. 2010-17 provides guidance on defining a milestone
and determining when it may be appropriate to apply the milestone method of revenue recognition for research and
development transactions. FASB ASU No. 2010 — 17 is effective for fiscal years beginning on or after June 15,
2010, and is effective on a prospective basis for milestones achieved after the adoption date. We do not expect this
ASU will have a material impact on our financial position or results of operations when we adopt it on January 1,
2011.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate and Market Risk

The primary objective of our investment activities is to preserve principal while at the same time maximizing
yields without significantly increasing risk. To achieve this objective, we invest in liquid, high quality debt
securities. Our investments in debt securities are subject to interest rate risk. To minimize the exposure due to an
adverse shift in interest rates, we invest in short-term securities and maintain a weighted average maturity of one
year or less.

A hypothetical 50 basis point increase in interest rates would result in an approximate $0.6 million decrease,
less than 1%, in the fair value of our available-for-sale securities at December 31, 2010. This potential change is
based on sensitivity analyses performed on our investment securities at December 31, 2010. Actual results may
differ materially. The same hypothetical 50 basis point increase in interest rates would have resulted in an
less than 1%, in the fair value of our available-for-sale securities at
approximate $0.8 million decrease,
December 31, 2009.

Due to the potential for continued uncertainty in the credit markets in 2011, we may experience reduced
liquidity with respect to some of our short-term investments. These investments are generally held to maturity,
which is less than one year. However, if the need arose to liquidate such securities before maturity, we may
experience losses on liquidation. As of December 31, 2010, we held $298.2 million of available-for-sale invest-
ments, excluding money market funds, with an average time to maturity of 145 days. To date we have not
experienced any liquidity issues with respect to these securities, but should such issues arise, we may be required to
hold some, or all, of these securities until maturity. We believe that, even allowing for potential liquidity issues with
respect to these securities, our remaining cash and cash equivalents and short-term investments will be sufficient to
meet our anticipated cash needs for at least the next twelve months. We have the ability and intent to hold our debt
securities to maturity when they will be redeemed at full par value. Accordingly, we consider unrealized losses to be
temporary and have not recorded a provision for impairment.

Foreign Currency Risk

The majority of our revenue, expense, and capital purchasing activities are transacted in U.S. dollars. However,
since a portion of our operations consists of research and development activities outside the United States, we have
entered into transactions in other currencies, primarily the Indian Rupee, and we therefore are subject to foreign
exchange risk.

Our international operations are subject to risks typical of international operations, including, but not limited
to, differing economic conditions, changes in political climate, differing tax structures, other regulations and
restrictions, and foreign exchange rate volatility. We do not utilize derivative financial instruments to manage our
exchange rate risks.

Item 8. Financial Statements and Supplementary Data

NEKTAR THERAPEUTICS

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets at December 31, 2010 and 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations for each of the years in the three year period ended

Page

61
63

December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Stockholders’ Equity for each of the years in the three year period ended

December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Cash Flows for each of the years in the three year period ended

December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

66
67

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of Nektar Therapeutics

We have audited the accompanying consolidated balance sheets of Nektar Therapeutics as of December 31,
2010 and 2009, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each
of the three years in the period ended December 31, 2010. Our audits also included the financial statement schedule
listed in the Index at Item 15(a)(2). These financial statements and schedule are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial statements and schedule based on our
audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the
consolidated financial position of Nektar Therapeutics at December 31, 2010 and 2009, and the consolidated
results of its operations and its cash flows for each of the three years in the period ended December 31, 2010, in
conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), Nektar Therapeutics’ internal control over financial reporting as of December 31, 2010, based on
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organiza-
tions of the Treadway Commission and our report dated March 1, 2011 expressed an unqualified opinion thereon.

Palo Alto, California
March 1, 2011

/s/ ERNST & YOUNG LLP

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of Nektar Therapeutics

We have audited Nektar Therapeutics’ internal control over financial reporting as of December 31, 2010, based
on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria). Nektar Therapeutics’ management is responsible
for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of
internal control over financial reporting included in the accompanying Management’s Annual Report on Internal
Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over
financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s
assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

In our opinion, Nektar Therapeutics maintained, in all material respects, effective internal control over

financial reporting as of December 31, 2010, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated balance sheets of Nektar Therapeutics as of December 31, 2010 and 2009, and the
related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the
period ended December 31, 2010 of Nektar Therapeutics and our report dated March 1, 2011 expressed an
unqualified opinion thereon.

Palo Alto, California
March 1, 2011

/s/ ERNST & YOUNG LLP

NEKTAR THERAPEUTICS

CONSOLIDATED BALANCE SHEETS

ASSETS

Current assets:

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net of allowance of nil at December 31, 2010 and 2009. .
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued clinical trial expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue, current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Convertible subordinated notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital lease obligations, less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue, less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred gain. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commitments and contingencies
Stockholders’ equity:

December 31,

2010

2009

(In thousands, except per share
information)

17,755
298,177
25,102
7,266
5,679

353,979
89,773
76,501
972
521,225

7,194
9,252
12,144
8,540
20,584
6,394

64,108
214,955
17,014
124,763
4,152
5,571

430,563

49,597
346,614
4,801
6,471
6,183

413,666
78,263
76,501
7,088
575,518

3,066
10,052
14,167
4,354
115,563
5,814

153,016
214,955
18,800
76,809
5,027
4,544

473,151

Preferred stock, 10,000 shares authorized Series A, $0.0001 par value;
3,100 shares designated; no shares issued or outstanding at either
December 31, 2010 or 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Common stock, $0.0001 par value; 300,000 authorized; 94,517 shares and
93,281 shares issued and outstanding at December 31, 2010 and 2009,
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital in excess of par value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

9
1,354,232
968
(1,264,547)
90,662

9
1,327,942
1,025
(1,226,609)
102,367

Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

521,225

575,518

The accompanying notes are an integral part of these consolidated financial statements.

NEKTAR THERAPEUTICS

CONSOLIDATED STATEMENTS OF OPERATIONS

2010

Years Ended December 31,
2009
(In thousands, except per share
information)

2008

Revenue:

Product sales and royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,667
124,372
License, collaboration and other revenue . . . . . . . . . . . . . . . . . . . . . .

$ 35,288
36,643

$ 41,255
48,930

Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating costs and expenses:

159,039

71,931

90,185

Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of long-lived assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of pulmonary assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .

25,667
—
108,065
40,986
12,576
—

30,948
—
95,109
41,006
—
—

28,216
6,821
154,417
51,497
1,458
(69,572)

Total operating costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

187,294

167,063

172,837

Loss from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(28,255)

(95,132)

(82,652)

Non-operating income (expense):

Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,545
(11,174)
827
—

3,688
(12,176)
848
—

12,495
(15,192)
58
50,149

Total non-operating income (expense), net . . . . . . . . . . . . . . . . . . . . . . .

(8,802)

(7,640)

47,510

Loss before provision (benefit) for income taxes. . . . . . . . . . . . . . . . . . .
Provision (benefit) for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(37,057)
881

(102,772)
(253)

(35,142)
(806)

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (37,938)

$(102,519)

$ (34,336)

Basic and diluted net loss per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

(0.40)

(1.11)

(0.37)

Shares used in computing basic and diluted net loss per share . . . . . . . . .

94,079

92,772

92,407

The accompanying notes are an integral part of these consolidated financial statements.

NEKTAR THERAPEUTICS

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Common
Shares

Par Value

Capital in
Excess of
Par Value

Accumulated Other
Comprehensive
Income/(Loss)

Accumulated
Deficit

Total
Stockholders’
Equity

(In thousands)

Balance at December 31, 2007. . . . . . . . . . .
Stock option exercises and RSU release . . . . .
Stock-based compensation . . . . . . . . . . . . .
Shares issued for Employee Stock Purchase

Plan . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss . . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive loss . . . . . . . . . . . . . . . . . .

Balance at December 31, 2008. . . . . . . . . . .
Stock option exercises and RSU release . . . . .
Stock-based compensation . . . . . . . . . . . . .
Shares issued for Employee Stock Purchase

Balance at December 31, 2009. . . . . . . . . . .
Stock option exercises and RSU release . . . . .
Stock-based compensation . . . . . . . . . . . . .
Shares issued for Employee Stock Purchase

92,301
146
—

56
—
—

92,503
742
—

36
—
—

93,281
1,176
—

60
—
—

$ 9
—
—

—
—
—

$ 9
—
—

—
—
—

$ 9
—
—

—
—
—

$1,302,541
122
9,871

262
—
—

$1,312,796
4,696
10,326

124
—
—

$1,327,942
8,340
17,399

551
—
—

$1,643
—
—

—
(204)
—

$1,439
—
—

—
(414)
—

$1,025
—
—

—
(57)
—

$(1,089,754)
—
—

$ 214,439
122
9,871

—
—
(34,336)

262
(204)
(34,336)
(34,540)

$(1,124,090)
—
—

$ 190,154
4,696
10,326

—
—
(102,519)

124
(414)
(102,519)
(102,933)

$(1,226,609)
—
—

$ 102,367
8,340
17,399

—
—
(37,938)

551
(57)
(37,938)
(37,995)

Balance at December 31, 2010. . . . . . . . . . .

94,517

$ 9

$1,354,232

$ 968

$(1,264,547)

$ 90,662

The accompanying notes are an integral part of these consolidated financial statements.

NEKTAR THERAPEUTICS

CONSOLIDATED STATEMENTS OF CASH FLOWS

2010

Years Ended December 31,
2009
(In thousands)

2008

Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net loss to net cash (used in) provided by operating

activities:

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-cash transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of pulmonary assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of long-lived assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Changes in assets and liabilities:

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued clinical trial expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses to contract manufacturers . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (37,938)

$(102,519)

$ (34,336)

16,551
17,399
198
—
—
12,576

(20,301)
(795)
577
4,274
(800)
(2,023)
—
1,683
(47,025)
(247)

14,881
10,326
(657)
—
—
—

6,034
2,848
(200)
(8,046)
(1,518)
(3,455)
—
(4,191)
126,795
(559)

22,489
9,871
1,251
(69,572)
(50,149)
1,458

10,476
2,868
1,166
6,181
(3,382)
14,727
(40,444)
(1,332)
(15,392)
(1,662)

Net cash (used in) provided by operating activities . . . . . . . . . . . . . . . . . . . . . . .

$ (55,871)

$ 39,739

$(145,782)

Cash flows from investing activities:

Purchases of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advance payments for property and equipment . . . . . . . . . . . . . . . . . . . . . . . .
Maturities of investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of pulmonary assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in Pearl Therapeutics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(31,457)
—
475,813
15,479
(443,122)
—
—

(16,390)
(4,312)
310,707
17,318
(451,918)
(4,440)
—

(18,855)
—
588,168
70,060
(475,316)
114,831
(4,236)

Net cash provided by (used in) investing activities . . . . . . . . . . . . . . . . . . . . . . . .

$ 16,713

$(149,035)

$ 274,652

Cash flows from financing activities:

Issuance of common stock, net of issuance costs . . . . . . . . . . . . . . . . . . . . . . .
Payments of loan and capital lease obligations . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments of convertible subordinated notes . . . . . . . . . . . . . . . . . . . . . . . . .

8,891
(1,356)
—

4,820
(1,285)
—

384
(2,368)
(47,757)

Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . . . . . . . . .

7,535

3,535

$ (49,741)

Effect of exchange rates on cash and cash equivalents . . . . . . . . . . . . . . . . . . . . .

(219)

(226)

162

Net (decrease) increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . .

$ (31,842)

$(105,987)

$ 79,291

Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . .

49,597

155,584

76,293

Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 17,755

$ 49,597

$ 155,584

Supplemental disclosure of cash flows information:
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 10,599

$ 11,225

$ 14,702

Cash paid for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

407

Supplemental schedule of non-cash investing and financing activities:
Property and equipment acquired through capital leases . . . . . . . . . . . . . . . . . . . .

195

743

812

— $

—

The accompanying notes are an integral part of these consolidated financial statements.

NEKTAR THERAPEUTICS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010

Note 1 — Organization and Summary of Significant Accounting Policies

Organization

We are a clinical-stage biopharmaceutical company headquartered in San Francisco, California and incor-
porated in Delaware. We are developing a pipeline of drug candidates that utilize our PEGylation and advanced
polymer conjugate technology platforms designed to improve the therapeutic benefits of drugs.

Basis of Presentation, Principles of Consolidation and Use of Estimates

Our consolidated financial statements include the financial position, results of operations and cash flows of our
wholly-owned subsidiaries: Nektar Therapeutics AL, Corporation (Nektar AL), Nektar Therapeutics (India) Private
Limited, Nektar Therapeutics UK, Ltd. (Nektar UK) and Aerogen, Inc. All intercompany accounts and transactions
have been eliminated in consolidation. The merger of Nektar AL, an Alabama corporation, with and into its parent
corporation, Nektar Therapeutics, was made effective July 31, 2009. As of the effective date, the separate existence
of the Alabama corporation ceased, and all rights, privileges, powers and franchises of the Alabama corporation are
vested in Nektar Therapeutics, the surviving corporation. On December 2, 2010, we completed the dissolution of
Aerogen, Inc. and all remaining assets were transferred to Nektar Therapeutics.

Our consolidated financial statements are denominated in U.S. dollars. Accordingly, changes in exchange rates
between the applicable foreign currency and the U.S. dollar will affect the translation of each foreign subsidiary’s
financial results into U.S. dollars for purposes of reporting our consolidated financial results. Translation gains and
losses are included in accumulated other comprehensive loss in the stockholders’ equity section of the balance
sheet. To date, such cumulative translation adjustments have not been material to our consolidated financial
position. Aggregate gross foreign currency transaction gains (losses) recorded in operations for the years ended
December 31, 2010, 2009, and 2008 were not material.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles
(GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. On
an ongoing basis, we evaluate our estimates, including those related to deferred revenue recognition periods,
inventories, the impairment of investments and long-lived assets, restructuring and contingencies, stock-based
compensation, and litigation, amongst others. We base our estimates on historical experience and on other
assumptions that management believes are reasonable under the circumstances. These estimates form the basis for
making judgments about the carrying values of assets and liabilities when these values are not readily apparent from
other sources.

Cash, Cash Equivalents, and Investments, and Fair Value of Financial Instruments

We consider all investments in marketable securities with an original maturity of three months or less to be
cash equivalents. Investments are designated as available-for-sale and are carried at fair value, with unrealized gains
and losses reported in stockholders’ equity as accumulated other comprehensive income (loss). The disclosed fair
value related to our investments is based primarily on the reported fair values in our period-end brokerage
statements. We independently validate these fair values using available market quotes and other information.
Investments with maturities greater than one year from the balance sheet date, if any, are classified as long-term.

Interest and dividends on securities classified as available-for-sale, as well as amortization of premiums and
accretion of discounts to maturity, are included in interest income. Realized gains and losses and declines in value of
available-for-sale securities judged to be other-than-temporary, if any, are included in other income (expense). The
cost of securities sold is based on the specific identification method.

NEKTAR THERAPEUTICS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The carrying value of cash, cash equivalents, and investments approximates fair value and is based on quoted

market prices.

Accounts Receivable and Significant Customer Concentrations

Our customers are primarily pharmaceutical and biotechnology companies that are located in the U.S. and
Europe. Our accounts receivable balance contains billed and unbilled trade receivables from product sales and
royalties and collaborative research and development agreements. We provide for an allowance for doubtful
accounts by reserving for specifically identified doubtful accounts. We generally do not require collateral from our
customers. We perform a regular review of our customers’ payment histories and associated credit risk. We have not
experienced significant credit losses from our accounts receivable. At December 31, 2010, two different customers
represented 66% and 21%, respectively, of our accounts receivable. At December 31, 2009, four different customers
represented 30%, 29%, 13%, and 13%, respectively, of our accounts receivable.

Inventory and Significant Supplier Concentrations

Inventory is determined on a first-in, first-out basis and stated net of reserves at the lower of cost or market.
Inventory costs include direct materials, direct labor, and manufacturing overhead. Supplies inventory related to
research and development activities are expensed when purchased.

We are dependent on our suppliers and contract manufacturers to provide raw materials, drugs and devices of
appropriate quality and reliability and to meet applicable regulatory requirements. In certain cases, we rely on
single sources of supply. Consequently, in the event that supplies are delayed or interrupted for any reason, our
ability to develop and produce our products could be impaired, which could have a material adverse effect on our
business, financial condition and results of operation.

Property and Equipment

Property and equipment are stated at cost. Major improvements are capitalized, while maintenance and repairs
are expensed when incurred. Manufacturing, laboratory and other equipment are depreciated using the straight-line
method generally over estimated useful lives of three to seven years. Leasehold improvements and buildings are
depreciated using the straight-line method over the shorter of the estimated useful life or the remaining term of the
lease.

We periodically review our property and equipment for recoverability whenever events or changes in
circumstances indicate that the carrying value may not be recoverable. Generally, an impairment loss would be
recognized if the carrying amount of an asset exceeds the sum of the discounted cash flows expected to result from
the use and eventual disposal of the asset (See Note 12).

Goodwill

Goodwill represents the excess of the price paid for another entity over the fair value of the assets acquired and
liabilities assumed in a business combination. We test for impairment in the fourth quarter of each year using an
October 1 measurement date, as well as at other times when impairment indicators exist or when events occur or
circumstances change that would indicate the carrying amount may not be fully recoverable.

We are organized in one reporting unit and have evaluated the goodwill for the Company as a whole. Goodwill
is tested for impairment using a two-step approach. The first step is to compare the fair value of our net assets,
including assigned goodwill, to the book value of our net assets, including assigned goodwill. If the fair value is
greater than our net book value, the assigned goodwill is not considered impaired. If the fair value is less than our net
book value, we perform a second step to measure the amount of the impairment, if any. The second step would be to
compare the book value of our assigned goodwill to the implied fair value of our goodwill. We did not recognize any
goodwill-related impairment charges during 2010, 2009, or 2008.

NEKTAR THERAPEUTICS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Revenue Recognition

Product sales and royalties

Product sales are primarily derived from cost-plus and fixed price manufacturing and supply agreements with
our collaboration partners and revenue is recognized in accordance with the terms of the related agreement. We have
not experienced any significant returns from our customers.

Generally, we are entitled to royalties from our partners based on their net sales of approved products. We
recognize royalty revenue when the cash is received or when the royalty amount to be received is estimable and
collection is reasonably assured.

License, collaboration and other

We enter into license agreements and collaborative research and development arrangements with pharma-
ceutical and biotechnology partners that may involve multiple deliverables. Our arrangements may contain one or
more of the following elements: upfront fees, contract research and development, milestone payments, manufac-
turing and supply, royalties, and license fees. Each deliverable in the arrangement is evaluated to determine whether
it meets the criteria to be accounted for as a separate unit of accounting or whether it should be combined with other
deliverables. Revenue is recognized for each element when there is persuasive evidence that an arrangement exists,
delivery has occurred, the price is fixed or determinable, and collection is reasonably assured.

Upfront fees received for license and collaborative agreements are recognized ratably over our expected
performance period under the arrangement. Management makes its best estimate of the period over which we
expect to fulfill our performance obligations, which may include technology transfer assistance, clinical devel-
opment activities, and manufacturing activities from development through the commercialization of the product.
Given the uncertainties of research and development collaborations, significant judgment is required to determine
the duration of the performance period.

Milestone payments received are deferred and recognized as revenue ratably over the period of time from the
achievement of the milestone and our estimated date on which the next milestone will be achieved. Management
makes its best estimate of the period of time until the next milestone is reached. Final milestone payments are
recorded and recognized upon achieving the respective milestone, provided that collection is reasonably assured.

The original estimated amortization periods for upfront fees and milestone payments are periodically
evaluated to determine if circumstances have caused the estimate to change and if so, amortization of revenue
is adjusted prospectively.

Shipping and Handling Costs

We record costs related to shipping and handling of product to customers in cost of goods sold.

Stock-Based Compensation

Stock-based compensation arrangements include stock option grants and restricted stock unit (RSU) awards
under our equity incentive plans and shares issued under our Employee Stock Purchase Plan (ESPP), in which
employees may purchase our common stock at a discount to the market price.

We use the Black-Scholes option valuation model, adjusted for the estimated historical forfeiture rate, for the
respective grant to determine the estimated fair value of the option or RSU award on the date of grant (grant date fair
value) and the estimated fair value of common stock purchased under the ESPP. The Black-Scholes option pricing
model requires the input of highly subjective assumptions. Because our employee stock options have characteristics
significantly different from those of traded options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management’s opinion, the existing models may not provide a reliable

NEKTAR THERAPEUTICS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

single measure of the fair value of our employee stock options or common stock purchased under the ESPP.
Management will continue to assess the assumptions and methodologies used to calculate the estimated fair value of
stock-based compensation. Circumstances may change and additional data may become available over time, which
could result in changes to these assumptions and methodologies, and which could materially impact our fair value
determination.

We expense the value of the portion of the option or award that is ultimately expected to vest on a straight line
basis over the requisite service periods in our Consolidated Statements of Operations. Stock-based compensation
expense for purchases under the ESPP are recognized based on the estimated fair value of the common stock during
each offering period and the percentage of the purchase discount. Expense amounts are allocated among inventory,
cost of goods sold, research and development expenses, and general and administrative expenses based on the
function of the applicable employee.

Research and Development Expense

Research and development costs are expensed as incurred and include salaries, benefits and other operating
costs such as outside services, supplies and allocated overhead costs. We perform research and development for our
proprietary drug candidates and technology development and for certain third parties under collaboration agree-
ments. For our proprietary drug candidates and our internal technology development programs, we invest our own
funds without reimbursement from a third party. Costs associated with the treatment phase of clinical trials are
accrued based on the total estimated cost of the clinical trials and are expensed ratably based on patient enrollment
in the trials. Costs associated with the start-up and reporting phases of the clinical trials are expensed ratably over
the duration of the reporting and start-up phases.

Net Loss Per Share

Basic net loss per share is calculated based on the weighted-average number of common shares outstanding
during the periods presented. For all periods presented in the Consolidated Statements of Operations, the net loss
available to common stockholders is equal to the reported net loss. Basic and diluted net loss per share are the same
due to our historical net losses and the requirement to exclude potentially dilutive securities which would have an
anti-dilutive effect on net loss per share. The weighted average of these potentially dilutive securities has been
excluded from the diluted net loss per share calculation and is as follows (in thousands):

Convertible subordinated notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9,989
9,338

9,989
10,653

13,804
14,147

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,327

20,642

27,951

Years Ended December 31,
2010
2008
2009

Income Taxes

We account for income taxes under the liability method; under this method, deferred tax assets and liabilities
are determined based on differences between financial reporting and tax reporting bases of assets and liabilities and
are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to
reverse. Realization of deferred tax assets is dependent upon future earnings, the timing and amount of which are
uncertain. We record a valuation allowance against deferred tax assets to reduce their carrying value to an amount
that is more likely than not to be realized.

We utilize a two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate
the tax position for recognition by determining if the weight of available evidence indicates that it is more likely
than not that the position will be sustained upon tax authority examination, including resolution of related appeals or

NEKTAR THERAPEUTICS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50%
likely of being realized upon ultimate settlement.

Comprehensive loss

Comprehensive loss is the change in stockholders’ equity from transactions and other events and circum-
stances other than those resulting from investments by stockholders and distributions to stockholders. The
Company’s other comprehensive loss is comprised of net loss, gains and losses from the foreign currency
translation of the assets and liabilities of our India subsidiary, and unrealized gains and losses on investments.

Recent Accounting Pronouncements

FASB Accounting Standards Update 2009-13, Revenue Recognition (Topic 605) — Multiple-Deliverable
Revenue Arrangements

FASB ASU 2010-17, Revenue Recognition — Milestone Method (Topic 605): Milestone Method of Revenue
Recognition

Note 2 — Cash, Cash Equivalents, and Available-For-Sale Investments

Cash, cash equivalents, and available-for-sale investments are as follows (in thousands):

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term investments (less than one year to maturity) . . . . . . . . . . . . .

$ 17,755
298,177

$ 49,597
346,614

Total cash, cash equivalents, and available-for-sale investments . . . . . . .

$315,932

$396,211

Estimated Fair Value at

December 31,
2010

December 31,
2009

NEKTAR THERAPEUTICS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Our portfolio of cash, cash equivalents, and available-for-sale investments includes (in thousands):

Estimated Fair Value at

December 31,
2010

December 31,
2009

Obligations of U.S. corporations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations of U.S. government agencies . . . . . . . . . . . . . . . . . . . . . . .
U.S. corporate commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations of U.S. states and municipalities . . . . . . . . . . . . . . . . . . . . .
Cash and money market funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$190,527
25,289
82,361
—
17,755

$160,458
125,731
71,923
4,995
33,104

Total cash, cash equivalents, and available-for-sale investments . . . . . . .

$315,932

$396,211

We invest in liquid, high quality debt securities. Our investments in debt securities are subject to interest rate
risk. To minimize the exposure due to an adverse shift in interest rates, we invest in short-term securities and
maintain a weighted average maturity of one year or less. At December 31, 2010 and December 31, 2009, the
average portfolio duration was approximately five months and the contractual maturity of any single investment did
not exceed twelve months.

Gross unrealized gains and losses were not significant at December 31, 2010 and 2009. The gross unrealized
losses were primarily due to changes in interest rates on fixed income securities. Based on our available cash and our
expected operating cash requirements we do not intend to sell these securities and it is more likely than not that we
will not be required to sell these securities before we recover the amortized cost basis. Accordingly, we believe there
are no other-than-temporary impairments on these securities and have not recorded a provision for impairment.

During the years ended December 31, 2010, 2009, and 2008, we sold available-for-sale securities totaling
$15.5 million, $17.3 million and $70.1 million, respectively, and realized gains of less than $0.1 million,
$0.1 million, and $0.1 million in 2010, 2009, and 2008, respectively.

At December 31, 2010 and 2009, we had letter of credit arrangements with certain financial institutions and
vendors, including our landlord, totaling $2.4 million and $2.9 million, respectively. These letters of credit are
secured by investments of similar amounts.

The following table represents the fair value hierarchy for our financial assets measured at fair value on a

recurring basis as of December 31, 2010 and 2009 (in thousands):

As of December 31, 2010:

Level 1

Level 2

Level 3

Total

Money market funds . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. corporate commercial paper . . . . . . . . . . . . . . . . .
Obligations of U.S. corporations . . . . . . . . . . . . . . . . .
Obligations of U.S. government agencies . . . . . . . . . . .

—
$16,028
—
82,361
— 190,527
25,289
—

Cash equivalents and available-for-sale investments . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$16,028

$298,177

$—
—
—
—

$—

Cash, cash equivalents, and available-for-sale

investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 16,028
82,361
190,527
25,289

$314,205
1,727

$315,932

NEKTAR THERAPEUTICS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of December 31, 2009:

Level 1

Level 2

Level 3

Total

Cash equivalents and available-for-sale investments . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash, cash equivalents, and available-for-sale

investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
$24,585
—
71,923
— 160,458
— 125,731
4,995
—

$24,585

$363,107

$—
—
—
—
—

$—

$ 24,585
71,923
160,458
125,731
4,995

$387,692
8,519

$396,211

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for
similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are
observable or can be corroborated by observable market data for substantially the full term of the assets
or liabilities.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair

value of the assets or liabilities.

Note 3 — Inventory

Inventory consists of the following (in thousands):

December 31,

2010

2009

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,101
Work-in-process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
1,165
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$5,937
—
534

Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,266

$6,471

Inventory is manufactured upon receipt of firm purchase orders from our licensing partners. Inventory includes
direct materials, direct labor, and manufacturing overhead and is determined on a first-in, first-out basis. Inventory
is stated at the lower of cost or market and is net of reserves of $4.0 million and $3.3 million as of December 31,
2010 and December 31, 2009, respectively. Reserves are determined using specific identification plus an estimated
reserve for potential defective or excess inventory based on historical experience or projected usage.

NEKTAR THERAPEUTICS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 4 — Property and Equipment

Property and equipment consist of the following (in thousands):

December 31,

2010

2009

Building and leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 73,150
31,871
Laboratory equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,386
Manufacturing equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22,803
Furniture, fixtures and other equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 62,973
27,195
10,982
16,876

Depreciable Property and equipment at cost . . . . . . . . . . . . . . . . . . . . . . . . .
Less: accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

141,210
(53,994)

118,026
(54,400)

Depreciable Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . .
Construction-in-progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

87,216
2,557

63,626
14,637

Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 89,773

$ 78,263

Building and leasehold improvements include our commercial manufacturing, clinical manufacturing,
research and development and administrative facilities and the related improvements to these facilities. Laboratory
and manufacturing equipment include assets that support both our manufacturing and research and development
efforts. Construction-in-progress includes assets being built to enhance our manufacturing and research and
development facilities. Property and equipment includes assets acquired through capital leases (See Note 6).

During 2010 and 2009, we made advance payments of nil and $4.3 million for equipment that had not been
received by December 31, 2010 and December 31, 2009, respectively. These advances were classified as Other
Assets on our Consolidated Balance Sheets.

Depreciation expense, including depreciation of assets acquired through capital leases, for the years ended

December 31, 2010, 2009, and 2008 was $14.8 million, $12.7 million, and $19.8 million, respectively

On November 29, 2010, we relocated all of our operations formerly located in San Carlos, California,
including our corporate headquarters, to our Mission Bay Facility in San Francisco, California. This event triggered
a $12.6 million impairment charge for the remaining assets located in San Carlos, which was recognized in
November 2010 (see Note 12).

Note 5 — Convertible Subordinated Notes

The outstanding balance of our convertible subordinated notes is as follows (in thousands):

Semi-Annual
Interest Payment Dates

December 31,

2010

2009

3.25% Notes due September 2012 . . . . . . . . . . . March 28, September 28

$214,955

Our convertible subordinated 3.25% notes due September 2012 (Notes) are unsecured and subordinated in
right of payment to any future senior debt. Costs related to the issuance of these Notes are recorded in other assets in
our Consolidated Balance Sheets and are generally amortized to interest expense on a straight-line basis over the
contractual life of the Notes. Net unamortized deferred financing costs related to the issuance of the Notes were nil
and $1.0 million as of December 31, 2010 and 2009, respectively.

NEKTAR THERAPEUTICS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Gain on Extinguishment of Debt

During the fourth quarter of 2008, we repurchased $100.0 million par value of the Notes for $47.8 million. The
recognized gain on debt extinguishment of $50.1 million is net of transaction costs of $1.0 million and accelerated
amortization of deferred financing costs of $1.1 million.

Conversion and Redemption

The Notes are convertible at the option of the holder at any time on or prior to maturity into shares of our
common stock. The Notes have a conversion rate of 46.4727 shares per $1,000 principal amount, which is equal to a
conversion price of approximately $21.52 per share. Additionally, at any time prior to maturity, if a fundamental
change as defined in the Note agreement occurs, we may be required to pay a make-whole premium on notes
converted in connection therewith by increasing the applicable conversion rate.

We may redeem the Notes in whole or in part for cash at a redemption price equal to 100% of the principal
amount of the Notes plus any accrued but unpaid interest if the closing price of the common stock has exceeded
150% of the conversion price for at least 20 days in any consecutive 30 day trading period.

Note 6 — Leases

Capital Leases

We lease office space and office equipment under capital lease arrangements. The gross carrying value by
major asset class and accumulated depreciation as of December 31, 2010 and 2009 are as follows (in thousands):

December 31,

2010

2009

Building and leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,117
195
Furniture, fixtures and other equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 23,960
—

Total assets recorded under capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,312

23,960

Less: accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(54)

(10,072)

Net assets recorded under capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,258

$ 13,888

We lease office space at 201 Industrial Road in San Carlos, California under capital lease arrangements. Under
the terms of the lease, rent increases up to 3% annually and the lease termination date is October 5, 2016. As of
November 29, 2010, we have ceased use of this space as a result of the relocation of our San Carlos operations and
corporate headquarters to San Francisco, California. We currently intend to sublease the San Carlos space, but have
not been relieved of any obligations under the terms of this lease. As a result of our relocation, an impairment test
was performed for the building and related leasehold improvements located in San Carlos that resulted in an
impairment charge of $12.6 million that was recognized in November 2010 (see Note 12).

NEKTAR THERAPEUTICS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Future minimum payments for our capital leases at December 31, 2010 are as follows (in thousands):

Years ending December 31,
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 4,919
5,026
5,129
5,192
5,280
4,034

Total minimum payments required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 29,580

Less: amount representing interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(10,589)

Present value of future payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 18,991
(1,977)

Non-current portion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 17,014

Operating Leases

On September 30, 2009, we entered into an operating sublease (Sublease) with Pfizer, Inc. for a 102,283 square
foot facility located at 455 Mission Bay Boulevard, San Francisco, California (Mission Bay Facility). Upon
completion of construction of the Mission Bay Facility, we moved in on November 29, 2010. The Mission Bay
Facility includes a research and development center with biology, chemistry, pharmacology, and clinical devel-
opment capabilities, as well as all of the functions previously located in San Carlos, California, including our
corporate headquarters.

Under the terms of the Sublease, we will begin making non-cancelable lease payments in 2014, after the
expiration of a free rent period that runs through August 1, 2014. The Sublease term commenced in August 2010
and is 114 months and ends on January 30, 2020. Monthly base rent will start at $2.95 per square foot and will
escalate over the term of the sublease at various intervals to $3.42 per square foot in the final period of the Sublease
term. Rent expense is being recognized ratably from April 2010, the inception of our tenant improvement
construction period, through the end of the Sublease term. In addition, throughout the term of the Sublease,
we are responsible for paying certain costs and expenses specified in the Sublease, including insurance costs and a
pro rata share of operating expenses and applicable taxes for the Mission Bay Facility.

Our future minimum lease payments under the Sublease are as follows (in thousands):

$ —
—
—
1,509
3,667
16,144

Total future minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$21,320

We recognize rent expense on a straight-line basis over the lease period. For the years ended December 31,
2010, 2009, and 2008, rent expense for operating leases was approximately $2.2 million, $0.7 million, and
$3.5 million, respectively.

NEKTAR THERAPEUTICS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 7 — Commitments and Contingencies

Royalty Expense

We have third party licenses that require us to pay royalties based on our shipment of certain products and/or on
our receipt of royalty payments under our collaboration agreements. Royalty expense, which is reflected in cost of
goods sold in our Consolidated Statements of Operations, was approximately $2.2 million, $3.9 million, and
$4.8 million for the years ended December 31, 2010, 2009, and 2008, respectively. The overall maximum amount of
these obligations is based upon sales of the applicable products and cannot be reasonably estimated.

Other Commitments

In the normal course of business we enter into various firm purchase commitments related to contract
manufacturing, clinical development and certain other items. As of December 31, 2010, these commitments were
approximately $10.2 million, all of which were expected to be paid in 2011.

Legal Matters

From time to time, we are involved in lawsuits, arbitrations, claims, investigations and proceedings, consisting
of intellectual property, commercial, employment and other matters, which arise in the ordinary course of business.
We make provisions for liabilities when it is both probable that a liability has been incurred and the amount of the
loss can be reasonably estimated. Such provisions are reviewed at least quarterly and adjusted to reflect the impact
of settlement negotiations, judicial and administrative rulings, advice of legal counsel, and other information and
events pertaining to a particular case. Litigation is inherently unpredictable. If any unfavorable ruling were to occur
in any specific period, there exists the possibility of a material adverse impact on the results of operations of that
period or on our cash flows and liquidity.

Indemnifications in Connection with Commercial Agreements

As part of our collaboration agreements with our partners related to the license, development, manufacture and
supply of drugs based on our proprietary technologies, we generally agree to defend, indemnify and hold harmless
our partners from and against third party liabilities arising out of the agreement, including product liability (with
respect to our activities) and infringement of intellectual property to the extent the intellectual property is developed
by us and licensed to our partners. The term of these indemnification obligations is generally perpetual any time
after execution of the agreement. There is generally no limitation on the potential amount of future payments we
could be required to make under these indemnification obligations.

As part of our pulmonary asset sale to Novartis that closed on December 31, 2008, we and Novartis made
representations and warranties and entered into certain covenants and ancillary agreements which are supported by
an indemnity obligation. In the event it were determined that we breached any of the representations and warranties
or covenants and agreements made by us in the transaction documents, we could incur an indemnification liability
depending on the timing, nature, and amount of any such claims.

To date we have not incurred costs to defend lawsuits or settle claims related to these indemnification
obligations. If any of our indemnification obligations is triggered, we may incur substantial liabilities. Because the
obligated amount under these agreements is not explicitly stated, the overall maximum amount of the obligations
cannot be reasonably estimated. No liabilities have been recorded for these obligations on our Consolidated Balance
Sheets as of December 31, 2010 or 2009.

Indemnification of Underwriters and Initial Purchasers of our Securities

In connection with our sale of equity and convertible debt securities, we have agreed to defend, indemnify and
hold harmless our underwriters or initial purchasers, as applicable, as well as certain related parties from and against

NEKTAR THERAPEUTICS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

certain liabilities, including liabilities under the Securities Act of 1933, as amended. The term of these indem-
nification obligations is generally perpetual. There is no limitation on the potential amount of future payments we
could be required to make under these indemnification obligations. We have never incurred costs to defend lawsuits
or settle claims related to these indemnification obligations. If any of our indemnification obligations are triggered,
however, we may incur substantial liabilities. Because the obligated amount of this agreement is not explicitly
stated, the overall maximum amount of the obligations cannot be reasonably estimated. Historically, we have not
been obligated to make significant payments for these obligations, and no liabilities have been recorded for these
obligations in our Consolidated Balance Sheets as of December 31, 2010 or 2009.

Director and Officer Indemnifications

As permitted under Delaware law, and as set forth in our Certificate of Incorporation and our Bylaws, we
indemnify our directors, executive officers, other officers, employees, and other agents for certain events or
occurrences that may arise while in such capacity. The maximum potential amount of future payments we could be
required to make under this indemnification is unlimited; however, we have insurance policies that may limit our
exposure and may enable us to recover a portion of any future amounts paid. Assuming the applicability of
coverage, the willingness of the insurer to assume coverage, and subject to certain retention, loss limits and other
policy provisions, we believe any obligations under this indemnification would not be material, other than an initial
$500,000 per incident for securities related claims and $250,000 per incident for non-securities related claims
retention deductible per our insurance policy. However, no assurances can be given that the covering insurers will
not attempt to dispute the validity, applicability, or amount of coverage without expensive litigation against these
insurers, in which case we may incur substantial liabilities as a result of these indemnification obligations. Because
the obligated amount of this agreement is not explicitly stated, the overall maximum amount of the obligations
cannot be reasonably estimated. Historically, we have not been obligated to make significant payments for these
obligations, and no liabilities have been recorded for these obligations in our Consolidated Balance Sheets as of
December 31, 2010 or 2009.

Note 8 — Stockholders’ Equity

Preferred Stock

We have authorized 10,000,000 shares of Preferred Stock with each share having a par value of $0.0001. Of
these shares, 3,100,000 shares are designated Series A Junior Participating Preferred Stock (Series A Preferred
Stock). The remaining shares are undesignated. We have no preferred shares issued and outstanding as of
December 31, 2010 or 2009.

Series A Preferred Stock

On June 1, 2001, the Board of Directors approved the adoption of a Share Purchase Rights Plan. Terms of the
Rights Plan provide for a dividend distribution of one preferred share purchase right for each outstanding share of
our Common Stock. The Rights have certain anti-takeover effects and will cause substantial dilution to a person or
group that attempts to acquire us on terms not approved by our Board of Directors. The dividend distribution was
payable on June 22, 2001 to the stockholders of record on that date. Each Right entitles the registered holder to
purchase from us one one-hundredth of a share of Series A Preferred Stock at a price of $225.00 per one one-
hundredth of a share of Series A Preferred Stock, subject to adjustment. Each one one-hundredth of a share of
Series A Preferred Stock has designations and powers, preferences and rights, and the qualifications, limitations and
restrictions which make its value approximately equal to the value of one share of common stock.

The Rights are not exercisable until the Distribution Date (as defined in the Certificate of Designation for the
Series A Preferred Stock). The Rights will expire on June 1, 2011 unless earlier redeemed or exchanged by us. Each
share of Series A Preferred Stock will be entitled to a minimum preferential quarterly dividend payment of $1.00, or
if greater than $1.00, will be entitled to an aggregate dividend of 100 times the dividend declared per share of

NEKTAR THERAPEUTICS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Common Stock. In the event of liquidation, the holders of the Series A Preferred Stock would be entitled to $100 per
share or, if greater than $100, an aggregate payment equal to 100 times the payment made per share of Common
Stock. Each share of Series A Preferred Stock will have 100 votes, voting together with the Common Stock. Finally,
in the event of any merger, consolidation or other transaction in which our Common Stock is exchanged, each share
of Series A Preferred Stock will be entitled to receive 100 times the amount of consideration received per share of
Common Stock. The Series A Preferred Stock would rank junior to any other future series of preferred stock. Until a
Right is exercised, the holder thereof, as such, will have no rights as a stockholder, including, without limitation, the
right to vote or to receive dividends.

Reserved Shares

At December 31, 2010, we have reserved shares of common stock for issuance as follows (in thousands):

Convertible subordinated notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity compensation plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

As of December 31,
2010

9,989
27,263

37,252

Equity Compensation Plans

The following table summarizes information with respect to shares of our common stock that may be issued

under our existing equity compensation plans as of December 31, 2010 (share number in thousands):

Plan Category

Equity compensation plans
approved by security
holders(2). . . . . . . . . . . . . . . .

Equity compensation plans not

approved by security holders . .

Total . . . . . . . . . . . . . . . . . . . . .

Number of Securities to be
Issued Upon Exercise of
Outstanding Options
& Vesting of RSUs
(a)(1)

Weighted-Average
Exercise Price of
Outstanding Options
(b)

Number of Securities Remaining
Available for Issuance Under
Equity Compensation Plans
(Excluding Securities Reflected
in Column(a))
(c)

10,028

7,069

17,097

$9.12

$9.84

$9.40

9,232

909

10,141

(1) Does not include options to purchase 25,546 shares of our common stock we assumed in connection with the

acquisition of Shearwater Corporation (with a weighted-average exercise price of $0.03 per share).

(2) Includes shares of common stock available for future issuance under our ESPP as of December 31, 2010.

2008 Equity Incentive Plan

Our 2008 Equity Incentive Plan (2008 Plan) was adopted by the Board of Directors on March 20, 2008 and was
approved by our stockholders on June 6, 2008. The purpose of the 2008 Equity Incentive Plan is to attract and retain
qualified personnel, to provide additional incentives to our employees, officers, consultants and employee directors
and to promote the success of our business. Pursuant to the 2008 Plan, we may grant or issue incentive stock options
to employees and officers and non-qualified stock options, rights to acquire restricted stock, restricted stock units,
and stock bonuses to consultants, employees, officers and non-employee directors.

The maximum number of shares of our common stock that may be issued or transferred pursuant to awards
under the 2008 Plan is 9,000,000 shares. Shares issued in respect of any stock bonus or restricted stock award

NEKTAR THERAPEUTICS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

granted under the 2008 Plan will be counted against the plan’s share limit as 1.5 shares for every one share actually
issued in connection with the award. The 2008 Plan will terminate on March 20, 2018, unless earlier terminated by
the Board of Directors.

The maximum term of a stock option under the 2008 Equity Incentive Plan is eight years, but if the optionee at
the time of grant has voting power of more than 10% of our outstanding capital stock, the maximum term of an
incentive stock option is five years. The exercise price of stock options granted under the 2008 Plan must be at least
equal to 100% (or 110% with respect to holders of more than 10% of the voting power of our outstanding capital
stock) of the fair market value of the stock subject to the option as determined by the closing price of our common
stock on the Nasdaq Global Market on the date of grant.

To the extent that shares are delivered pursuant to the exercise of a stock option, the number of underlying
shares as to which the exercise related shall be counted against the applicable share limits of the 2008 Plan, as
opposed to only counting the shares actually issued. Shares that are subject to or underlie awards which expire or for
any reason are cancelled or terminated, are forfeited, fail to vest or for any other reason are not paid or delivered
under the 2008 Plan will again be available for subsequent awards under the 2008 Plan.

2000 Equity Incentive Plan

On April 19, 2000, our Board of Directors adopted the 2000 Equity Incentive Plan (2000 Plan) by amending
and restating our 1994 Equity Incentive Plan. On February 9, 2010, the 2000 Plan expired. As a result, no new
options may be granted, but existing options granted remain outstanding. The purpose of the 2000 Equity Incentive
Plan was to attract and retain qualified personnel, to provide additional incentives to our employees, officers,
consultants and employee directors and to promote the success of our business. Pursuant to the 2000 Plan, we
granted or issued incentive stock options to employees and officers and non-qualified stock options, rights to
acquire restricted stock, restricted stock units, and stock bonuses to consultants, employees, officers and non-
employee directors.

The maximum term of a stock option under the 2000 Plan is eight years, but if the optionee at the time of grant
has voting power of more than 10% of our outstanding capital stock, the maximum term of an incentive stock option
is five years. The exercise price of incentive stock options granted under the 2000 Equity Incentive Plan must be at
least equal to 100% (or 110% with respect to holders of more than 10% of the voting power of our outstanding
capital stock) of the fair market value of the stock subject to the option as determined by the closing price of our
common stock on the Nasdaq Global Market on the date of grant.

2000 Non-Officer Equity Incentive Plan

The 1998 Non-Officer Equity Incentive Plan was adopted by our Board of Directors on August 18, 1998, and
was amended and restated in its entirety and renamed the 2000 Non-officer Equity Incentive Plan on June 6, 2000
(2000 Non-Officer Plan). The purpose of the 2000 Non-Officer Plan is to attract and retain qualified personnel, to
provide additional incentives to employees and consultants and to promote the success of our business. Pursuant to
the 2000 Non-Officer Plan, we may grant or issue non-qualified stock options, rights to acquire restricted stock and
stock bonuses to employees and consultants who are neither Officers nor Directors of Nektar. The maximum term of
a stock option under the 2000 Non-Officer Plan is eight years. The exercise price of stock options granted under the
2000 Non-Officer Plan are determined by our Board of Directors by reference to the closing price of our common
stock on the Nasdaq Global Market.

Non-Employee Directors’ Stock Option Plan

On February 10, 1994, our Board of Directors adopted the Non-Employee Directors’ Stock Option Plan under
which options to purchase up to 400,000 shares of our Common Stock at the then fair market value may be granted

NEKTAR THERAPEUTICS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

to our non-employee directors. There were no remaining options available for grant under this plan as of
December 31, 2009.

Restricted Stock Units

During the years ended December 31, 2010, 2009 and 2008, we issued RSU awards to certain officers, non-
employees, directors, employees and consultants. RSU awards are similar to restricted stock in that they are issued
for no consideration; however, the holder generally is not entitled to the underlying shares of common stock until the
RSU award vests. Also, because the RSU awards are issued for $0.01 per share, the grant-date fair value of the
award is equal to the intrinsic value of our common stock on the date of grant. The RSU awards were issued under
both the 2000 Plan and the 2000 Non-Officer Plan and are settled by delivery of shares of our common stock on or
shortly after the date the awards vest.

Beginning with shares granted during 2005, each RSU award depletes the pool of options available for grant

under our equity incentive plans by a ratio of 1:1.5.

Employee Stock Purchase Plan

In February 1994, our Board of Directors adopted the ESPP pursuant to section 423(b) of the Internal Revenue
Code of 1986. Under the ESPP, 1,500,000 shares of our common stock have been authorized for issuance. The terms
of the ESPP provide eligible employees with the opportunity to acquire an ownership interest in Nektar through
participation in a program of periodic payroll deductions for the purchase of our common stock. Employees may
elect to enroll or re-enroll in the ESPP on a semi-annual basis. Stock is purchased at 85% of the lower of the closing
price on the first day of the enrollment period or the last day of the enrollment period.

401(k) Retirement Plan

We sponsor a 401(k) retirement plan whereby eligible employees may elect to contribute up to the lesser of
60% of their annual compensation or the statutorily prescribed annual limit allowable under Internal Revenue
Service regulations. The 401(k) plan permits us to make matching contributions on behalf of all participants, up to a
maximum of $3,000 per participant. For the years ended December 31, 2010, 2009, and 2008, we recognized
$1.0 million, $0.8 million, and $1.1 million, respectively, of compensation expense in connection with our 401(k)
retirement plan.

Change in Control Severance Plan

On December 6, 2006, our Board of Directors approved a Change of Control Severance Benefit Plan (CIC
Plan) and on February 14, 2008, October 21, 2008, September 14, 2010, and December 7, 2010, our Board of
Directors amended and restated the CIC Plan. The CIC Plan is designed to make certain benefits available to
eligible employees of the Company in the event of a change of control of the Company and, following such change
of control, an employee’s employment with the Company or a successor company is terminated in certain specified
circumstances. We adopted the CIC Plan to support the continuity of the business in the context of a change of
control transaction. The CIC Plan was not adopted in contemplation of any specific change of control transaction. A
brief description of the material terms and conditions of the CIC Plan is provided below.

Under the CIC Plan, in the event of a change of control of the Company and a subsequent termination of
employment initiated by the Company or a successor company other than for Cause (as defined in the CIC Plan) or
initiated by the employee for a Good Reason Resignation (as defined in the CIC Plan) in each case within twelve
months following a change of control transaction, (i) the Chief Executive Officer would be entitled to receive cash
severance pay equal to 24 months base salary plus annual target incentive pay, the extension of employee benefits
over this severance period and the full acceleration of unvested outstanding equity awards, and (ii) the Senior Vice
Presidents and Vice Presidents (including Principal Fellows) would each be entitled to receive cash severance pay

NEKTAR THERAPEUTICS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

equal to twelve months base salary plus annual target incentive pay, the extension of employee benefits over this
severance period and the full acceleration of unvested outstanding equity awards. In the event of a change of control
of the Company and a subsequent termination of employment initiated by the Company or a successor company
other than for cause within twelve months following a change of control transaction, all other employees would
each be entitled to receive cash severance pay equal to 6 months base salary plus a pro-rata portion of annual target
incentive pay, the extension of employee benefits over this severance period and the full acceleration of each such
employee’s unvested outstanding equity awards.

On December 6, 2006, our Board of Directors approved an amendment to all outstanding stock awards held by
non-employee directors to provide for full acceleration of vesting in the event of a change of control transaction.

Note 9 — License and Collaboration Agreements

We have entered into various license agreements and collaborative research and development agreements with
pharmaceutical and biotechnology companies. Under these arrangements, we are entitled to receive license fees,
upfront payments, milestone payments when and if certain development or regulatory milestones are achieved,
and/or reimbursement for research and development activities. All of our research and development agreements are
generally cancelable by our partners without significant financial penalty to the partner. Our costs of performing
these services are included in Research and development expense.

In accordance with these agreements, we recorded License, collaboration and other revenue as follows (in

thousands):

Partner

Agreement

AstraZeneca AB . . . . . . . . . . . . . . . NKTR-118 and NKTR-119
Hoffmann — La Roche . . . . . . . . . . Pegasys
Bayer Healthcare LLC . . . . . . . . . . BAY41-6651 (Amikacin Inhale,

formerly NKTR-061)

Amgen, Inc.
Novartis Vaccines and Diagnostics,

. . . . . . . . . . . . . . . . . Neulasta

Inc.

. . . . . . . . . . . . . . . . . . . . . .

Tobramycin inhalation powder
(TIP)

Bayer Schering Pharma AG . . . . . . Cipro Inhale (CIP)
Other . . . . . . . . . . . . . . . . . . . . . . .

License, collaboration and other

revenue. . . . . . . . . . . . . . . . . . . .

AstraZeneca AB

NKTR-118 and NKTR-119

Years Ended December 31,
2009

2010

2008

$107,854
5,131

$25,073
214

$ —
1,000

3,300
833

—
—
7,254

4,928
—

564
—
5,864

10,054
—

13,723
11,653
12,500

$124,372

$36,643

$48,930

On September 20, 2009, we entered into a License Agreement with AstraZeneca AB, a Swedish corporation
(AstraZeneca), under which we granted AstraZeneca a worldwide, exclusive, perpetual, royalty-bearing, and
sublicensable license under our patents and other intellectual property to develop, sell and otherwise commercially
exploit NKTR-118 and NKTR-119. AstraZeneca is responsible for all costs associated with research, development
and commercialization and will control product development and commercialization decisions for NKTR-118 and
NKTR-119. Under the terms of the agreement, AstraZeneca paid us an upfront payment of $125.0 million, which
we received in the fourth quarter of 2009, of which we recognized $101.4 million and $23.6 million as License,
collaboration and other revenue in the years ended December 31, 2010 and 2009, respectively. As of December 31,
2010, we have completed our obligations under the license agreement and related manufacturing technology
transfer agreement. We are also entitled to development milestones and sales milestones upon achievement of

NEKTAR THERAPEUTICS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

certain annual sales targets and royalties based on annual worldwide net sales of NKTR-118 and NKTR-119
products. We recognized $6.5 million and $1.5 million in reimbursements from AstraZeneca for technology
transfer, clinical supply, and other contract development services during the years ended December 31, 2010 and
2009, respectively.

F. Hoffmann- La Roche Ltd and Hoffmann-LaRoche Inc.

PEGASYS

In February 1997, we entered into a license, manufacturing and supply agreement with F. Hoffmann-La Roche
Ltd and Hoffmann-La Roche Inc. (Roche), under which we granted Roche a worldwide, exclusive license to use
certain PEGylation materials in the manufacture of PEGASYS. As a result of Roche exercising a license extension
option in December 2009, Roche has the right to manufacture all of its requirements for our proprietary PEGylation
materials for PEGASYS and we would perform additional manufacturing, if any, only on an as-requested basis. In
connection with Roche’s exercise of the license option extension in December 2009, we received a payment of
$31.0 million of which we have recognized $5.1 million and $0.2 million during the years ended December 31,
2010 and 2009, respectively. As of December 31, 2010, we have deferred revenue of approximately $25.7 million
related to this agreement, which we expect to recognize over the period through which we are required to provide
back-up manufacturing and supply services on an as-requested basis.

Bayer Healthcare LLC

BAY41-6651 (Amikacin Inhale, formerly NKTR-061)

On August 1, 2007, we entered into a co-development, license and co-promotion agreement with Bayer
Healthcare LLC (Bayer) to develop a specially-formulated inhaled Amikacin. We are responsible for any future
development of the nebulizer device included in the Amikacin product through the completion of Phase 3 clinical
trial, scale-up for commercialization, and commercial manufacturing and supply. Bayer is responsible for most
future clinical development and commercialization costs, all activities to support worldwide regulatory filings,
approvals and related activities, further development of Amikacin Inhale and final product packaging. We received
an upfront payment of $40.0 million in 2007 and performance milestone payments of $20.0 million, of which the
second milestone of $10.0 million will be used to reimburse Bayer for Phase 3 clinical trial costs, and we have
recognized as revenue $3.3 million, $5.0 million, and $10.1 million during the years ended December 31, 2010,
2009, and 2008, respectively. As of December 31, 2010, we have deferred revenue of approximately $30.5 million,
which we expect to amortize through July 2021, the estimated end of the life of the agreement. We are entitled to
development milestones and sales milestones upon achievement of certain development milestones and annual
sales targets and royalties based on annual worldwide net sales of Amikacin Inhale.

Amgen, Inc.

Neulasta

On October 29, 2010, we amended and restated an existing supply agreement by entering into a supply,
dedicated suite and manufacturing guarantee agreement and a license agreement with Amgen Inc. and Amgen
Manufacturing, Limited (together referred to as Amgen). Under the terms of the amended and restated agreement,
we guarantee the manufacture and supply of our proprietary PEGylation materials (Polymer Materials) to Amgen in
an existing manufacturing suite to be used exclusively for the manufacture of Polymer Materials for Amgen (the
Manufacturing Suite) in Nektar’s manufacturing facility in Huntsville, Alabama (Facility). This supply arrange-
ment is on a non-exclusive basis (other than the use of the Manufacturing Suite and certain equipment) whereby
Nektar is free to manufacture and supply the Polymer Materials to any other third party and Amgen is free to
procure the Polymer Materials from any other third party. Under the terms of the agreement, Nektar received a
$50.0 million payment in return for Nektar guaranteeing its supply of certain quantities of Polymer Materials to

NEKTAR THERAPEUTICS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Amgen including without limitation the Additional Rights described below and manufacturing fees that are
calculated based on fixed and variable components applicable to the Polymer Materials ordered by Amgen and
delivered by Nektar. Amgen has no minimum purchase commitments. If quantities of the Polymer Materials
ordered by Amgen exceed specified quantities, significant additional payments become payable to Nektar in return
for Nektar guaranteeing its supply of additional quantities of the Polymer Materials.

The term of the amended and restated supply agreement runs through October 29, 2020. In the event we
become subject to a bankruptcy or insolvency proceeding, we cease to own or control the Facility, we fail to
manufacture and supply or certain other events, Amgen or its designated third party will have the right to elect,
among certain other options, to take title to the dedicated equipment and access the Facility to operate the
Manufacturing Suite solely for the purpose of manufacturing the Polymer Materials (the Additional Rights).
Amgen may terminate the amended and restated agreement for convenience or due to an uncured material default
by us.

We recognized $0.8 million of the $50.0 million upfront payment as revenue during the year ended
December 31, 2010. As of December 31, 2010, we have deferred revenue of approximately $49.2 million, which
we expect to amortize through October 2020, the estimated end of our obligations under the agreement.

Novartis

Tobramycin inhalation powder (TIP)

We were party to a collaborative research, development and commercialization agreement with Novartis
Vaccines and Diagnostics, Inc. related to the development of Tobramycin inhalation powder (TIP) for the treatment
of lung infections caused by the bacterium Pseudomonas aeruginosa in cystic fibrosis patients, which was
terminated on December 31, 2008 in connection with the Novartis Pulmonary Asset Sale. As part of the termination
we relinquished our rights to future research and development funding and milestone payments as well as to any
future royalty payments or manufacturing revenue. Prior to the termination, we were reimbursed for the cost of
work performed on a revenue per annual full-time equivalent (FTE) basis, plus out of pocket third party costs.
Revenue recognized approximated the cost associated with these reimbursable services and was nil, $0.6 million,
and $14.3 million during the years ended December 31, 2010, 2009, and 2008, respectively.

Bayer Schering Pharma AG

Cipro Inhale

We were party to a collaborative research, development and commercialization agreement with Bayer
Schering Pharma AG related to the development of an inhaled powder formulation of Cipro Inhale for the
treatment of chronic lung infections caused by Pseudomonas aeruginosa in cystic fibrosis patients. As of
December 31, 2008, we assigned this agreement to Novartis Pharma AG although we retained our economic
interest in the right to receive potential royalties in the future based on net product sales if Cipro Inhale receives
regulatory approval and is successfully commercialized (See Note 10). Prior to the termination, we were reimbursed
for the cost of work performed on a revenue per annual FTE basis and out of pocket third party costs, as well as
milestone and upfront fees. Revenue recognized approximated the cost associated with these reimbursable services
and totaled nil, nil, and $10.3 million during the years ended December 31, 2010, 2009, and 2008, respectively.

Note 10 — Novartis Pulmonary Asset Sale

NEKTAR THERAPEUTICS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

to the asset purchase agreement entered between Novartis and us, we transferred to Novartis certain assets and
obligations related to our pulmonary technology, development and manufacturing operations including:

(cid:129) dry powder and liquid pulmonary technology platform including but not limited to our pulmonary inhalation

devices, formulation technology, manufacturing technology and related intellectual property;

(cid:129) manufacturing and associated development services payments for the Cipro Inhale program;

(cid:129) manufacturing and royalty rights to the TIP program;

(cid:129) capital equipment, information systems and facility lease obligations for our pulmonary development and

manufacturing facility in San Carlos, California;

(cid:129) certain other interests that we had in two private companies, Pearl Therapeutics, Inc. and Stamford Devices

Limited; and

(cid:129) approximately 140 of our personnel primarily dedicated to our pulmonary technology, development
programs, and manufacturing operations, whom Novartis hired immediately following the closing of the
transaction.

We have retained all of our rights to Amikacin Inhale partnered with Bayer, certain royalty rights on
commercial sales of Cipro Inhale by Bayer Schering Pharma AG, the rights to inhaled vancomycin development
program, and certain intellectual property rights specific to inhaled insulin. We also entered into a service
agreement pursuant to which we have subcontracted to Novartis certain services to be performed related to
Amikacin Inhale and a transition services agreement in which Novartis and we each provided each other with
specified services for a limited time period following the closing of the Novartis Pulmonary Asset Sale to facilitate
the transition of the acquired assets and business from us to Novartis.

Gain on sale of pulmonary assets

On December 31, 2008, we recognized a Gain on sale of pulmonary assets for certain assets sold to Novartis,

which is comprised of the following (in thousands):

Year Ended
December 31, 2008

Proceeds from sale of certain pulmonary assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transaction costs(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net book value of property and equipment sold . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity investment in Pearl Therapeutics, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill related to pulmonary assets sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net

$115,000
(4,609)
(37,291)
(2,658)
(1,930)
1,060

Gain on sale of pulmonary assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 69,572

(1) Transaction costs of $4.4 million related to the Novartis Pulmonary Asset Sale were paid in 2009.

Additional Costs

In addition to the transaction costs recorded as part of the gain, we recognized approximately nil, $0.1 million
and $2.7 million of additional costs in connection with the Novartis Pulmonary Asset Sale for the years ended
December 31, 2010, 2009 and 2008, respectively, of one-time employee termination and other costs that were
recorded in Research and development expense in our Consolidated Statement of Operations. All costs incurred
have been paid as of December 31, 2010.

NEKTAR THERAPEUTICS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 11 — Termination of Pfizer Agreements and Inhaled Insulin Program

On November 9, 2007, we entered into a termination agreement and mutual release of our collaborative
development and license agreement with Pfizer and all other related agreements (Pfizer agreements). Under the
termination agreement, we received a one-time payment of $135.0 million in November 2007 from Pfizer in
satisfaction of all outstanding contractual obligation under our existing agreements related to inhaled insulin
development and commercialization. Contractual obligations included billed and unbilled product sales and
contract research revenue through November 9, 2007, outstanding accounts receivable and unrecovered capital
costs as of November 9, 2007, and contract termination costs.

On February 12, 2008, we entered into a Termination and 2008 Continuation Agreement (TCA) with Tech
Group North America, Inc. (Tech Group) pursuant to which the manufacturing and supply agreement for the
Exubera inhaler device (Exubera Inhaler MSA) was terminated in its entirety and we agreed to pay Tech Group
$13.8 million in termination costs and $4.8 million in satisfaction of outstanding accounts payable. As part of the
TCA, we agreed to compensate Tech Group to retain a limited number of core Exubera inhaler manufacturing
personnel and its dedicated Exubera inhaler manufacturing facility for a limited period in 2008. We also entered into
a letter agreement with Pfizer to retain a limited number of Exubera manufacturing personnel at Pfizer’s Terre
Haute, Indiana, manufacturing facility during March and April 2008.

On February 14, 2008, we entered into a Termination and Mutual Release Agreement with Bespak Europe Ltd.
(Bespak) pursuant to which the Exubera Inhaler MSA was terminated in its entirety and we agreed to pay Bespak
£11.0 million, or approximately $21.6 million, including $3.0 million in satisfaction of outstanding accounts
payable and $18.6 million in termination costs and expenses that were due and payable under the termination
provisions of the Exubera Inhaler MSA, which included reimbursement of inventory, inventory purchase com-
mitments, unamortized depreciation on property and equipment, severance costs and operating lease commitments.

On April 9, 2008, we announced that we had ceased all negotiations with potential partners for Exubera and the
next generation inhaled insulin program as a result of new data analysis from ongoing clinical trials conducted by
Pfizer which indicated an increase in the number of new cases of lung cancer in Exubera patients who were former
smokers as compared to patients in the control group who were former smokers. Following the termination of our
inhaled insulin programs on April 9, 2008, we terminated our continuation agreements with Tech Group and Pfizer.

Idle Exubera Manufacturing Capacity Costs

Idle Exubera manufacturing capacity costs, which are recognized as a component of Other cost of revenue,
include costs payable to Pfizer and Tech Group under our continuation agreements and internal salaries, benefits
and stock-based compensation related to Exubera commercial manufacturing employees, overhead at our San Car-
los manufacturing facility, including rent, utilities and maintenance and depreciation of property and equipment.
We incurred these costs from the termination of the Pfizer Agreements on November 9, 2007 through the
termination of our inhaled insulin programs in April 2008. For the years ended December 31, 2010, 2009 and 2008,
we recognized idle Exubera manufacturing capacity costs of nil, nil, and $6.8 million, respectively.

Note 12 — Impairment of Long Lived Assets

During the years ended December 31, 2010, 2009, and 2008, we recorded charges for the impairment of long-

lived assets of $12.6 million, nil, and $1.5 million, respectively.

On November 29, 2010, we ceased use of the San Carlos facility as a result of our relocation to the Mission Bay
Facility. The remaining assets at the San Carlos location consist of the building capital lease and related leasehold
improvements, which we currently intend to sublease through the lease termination date. As a result of our
relocation, we performed an impairment analysis on these assets. We concluded that the carrying values of the
building and leasehold improvements exceeded their fair values based on a probability-weighted discounted cash

NEKTAR THERAPEUTICS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

flow model of the future estimated net sublease income and recorded an impairment loss of $12.6 million. As of
December 31, 2010, the remaining net book value of these assets is $2.1 million.

During 2008, we determined that a specialized dryer used in our PEGylation manufacturing facility was not
functioning properly and was not being used in operations currently. We performed an impairment analysis and
determined the carrying value of the dryer exceeded its fair value based on a discounted cash flow model. As a
result, we recorded an impairment loss for the related net book value of $1.5 million.

Note 13 — Workforce Reduction Plans

In an effort to reduce ongoing operating costs and improve our organizational structure, efficiency and
productivity, we executed workforce reduction plans in May 2007 (2007 Plan) and February 2008 (2008 Plan)
designed to streamline the Company, consolidate corporate functions, and strengthen decision-making and
execution. The 2007 Plan and 2008 Plan reduced our workforce by approximately 290 full-time employees; both
plans were substantially complete at December 31, 2008. For the years ended December 31, 2010, 2009, and 2008
workforce reduction charges, comprised of severance, medical insurance, and outplacement services, were as
follows (in thousands):

Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$—
Other cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Research and development expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
General and administrative expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

Total workforce reduction charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$—

$—
—
—
—

$—

$ 148
1,221
3,087
517

$4,973

Years Ended December 31,
2010
2008

2009

Note 14 — Stock-Based Compensation

We issued stock-based awards from our equity incentive plans, which are more fully described in Note 8.

Stock-based compensation cost was recorded as follows (in thousands):

Years Ended December 31,
2009

2010

2008

Cost of goods sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

915
7,218
9,266

295
3,377
6,654

$ 269
4,642
4,960

Total stock-based compensation costs . . . . . . . . . . . . . . . . . . . . . . . .

$17,399

$10,326

$9,871

For the years ended December 31, 2010, 2009, and 2008, we recorded approximately $0.5 million,
$0.8 million, and $2.2 million, respectively, of stock-based compensation expense related to modifications of
certain stock grants in connection with employment separation agreements. Generally, the modifications extended
the option holder’s exercise period beyond the 90 day period after termination and accelerated a portion of the
option holder’s unvested grants. Stock-based compensation charges are non-cash charges and as such have no
impact on our reported cash flows.

As of December 31, 2010, total unrecognized compensation expense of $37.1 million related to unvested
stock-based compensation arrangements is expected to be recognized over a weighted-average period of 1.87 years.

NEKTAR THERAPEUTICS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Black-Scholes Assumptions

The following tables list the Black-Scholes option-pricing model assumptions used to calculate the fair value

of employee stock options and ESPP purchases.

Year Ended December 31,
2010

Year Ended December 31,
2009

Year Ended December 31,
2008

Employee
Stock Options

ESPP

Employee
Stock Options

ESPP

Employee
Stock Options

ESPP

Average risk-free interest

rate . . . . . . . . . . . . . . . .
Dividend yield . . . . . . . . . .
Volatility factor . . . . . . . . .
Weighted average expected
life . . . . . . . . . . . . . . . .

1.8%
0.0%
62.7%

0.2%
0.0%
47.8%

1.6%
0.0%
61.0%

0.3%
0.0%
82.4%

2.5%
0.0%
51.6%

2.0%
0.0%
72.3%

4.9 years

0.5 years

4.9 years

0.5 years

5.0 years

0.5 years

The average risk-free interest rate is based on the U.S. treasury yield curve in effect at the time of grants for
periods commensurate with the expected life of the stock-based award. We have never paid dividends, nor do we
expect to pay dividends in the foreseeable future; therefore, we used a dividend yield of 0.0%. Our estimate of
expected volatility is based on the daily historical trading data of our common stock over a historical period
commensurate with the expected life of the stock-based award.

For the year ended December 31, 2010, we estimated the weighted-average expected life based on the
contractual and vesting terms of the stock options, as well as historic cancellation and historic exercise data. For the
years ended December 31, 2009 and 2008, the weighted-average expected life was determined using the “sim-
plified” method, in which the expected life was based on the average of the vesting term and the contractual life of
the option, as permitted under Staff Accounting Bulletin Topic 14.D.2. We used this method because we believed
that applying historical data for options and awards during these years was not a true reflection of future exercise
patterns and timelines. The change in method did not result in a significant difference in weighted average expected
life.

NEKTAR THERAPEUTICS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Summary of Stock Option Activity

The table below presents a summary of stock option activity under our equity incentive plans (in thousands,

except for price per share and contractual life information):

Balance at December 31, 2007 . . . . . . . . . . . . . . . .
Options granted . . . . . . . . . . . . . . . . . . . . . . . . .
Options exercised. . . . . . . . . . . . . . . . . . . . . . . .
Options forfeited & canceled . . . . . . . . . . . . . . .

Balance at December 31, 2008 . . . . . . . . . . . . . . . .
Options granted . . . . . . . . . . . . . . . . . . . . . . . . .
Options exercised. . . . . . . . . . . . . . . . . . . . . . . .
Options forfeited & canceled . . . . . . . . . . . . . . .

Outstanding at December 31, 2009. . . . . . . . . . . . .
Options granted . . . . . . . . . . . . . . . . . . . . . . . . .
Options exercised. . . . . . . . . . . . . . . . . . . . . . . .
Options forfeited & canceled . . . . . . . . . . . . . . .

Number
of
Shares

12,212
6,180
(39)
(4,802)

13,551
4,608
(714)
(3,437)

14,008
5,267
(1,151)
(1,225)

Weighted-
Average
Exercise
Price
per Share

Weighted-
Average
Remaining
Contractual
Life (in Years)

Aggregate
Intrinsic
Value(1)

$15.62
6.02
5.72
12.93

$12.13
5.53
6.58
15.53

$ 9.41
11.93
7.25
22.31

Outstanding at December 31, 2010. . . . . . . . . . . . .

16,899

$ 9.40

Vested & expected to vest at December 31, 2010 . .
Exercisable at December 31, 2010 . . . . . . . . . . . . .

15,817
8,409

$ 9.37
$ 9.55

5.34

5.27
4.51

$70,443

$66,818
$37,901

(1) Aggregate Intrinsic Value represents the difference between the exercise price of the option and the closing

market price of our common stock on December 31, 2010.

The weighted-average grant-date fair value of options granted during the years ended December 31, 2010,
2009, and 2008 was $6.30, $2.86, and $2.79, respectively. The total intrinsic value of options exercised during the
years ended December 31, 2010, 2009, and 2008 was $6.8 million, $1.4 million, and nil, respectively. The estimated
fair value of options vested during the years ended December 31, 2010, 2009, and 2008 was $14.7 million,
$9.0 million, and $9.8 million, respectively.

RSU Awards

We issued RSU awards to certain officers and employees; the RSU awards granted in 2006 vest upon
achievement of pre-determined performance milestones, while the RSU awards granted in 2007 and 2008 have a
time-based vesting schedule. We expense the grant date fair value of the RSU awards ratably over the expected
service or performance period.

We granted 1,088,300 performance-based RSU awards in 2006, which included three pre-determined
milestones. The first performance milestone was achieved and the RSU awards were vested and released in
2007. In 2007, we determined the second performance milestone would not be achieved and we reversed previously
recorded compensation expense of $2.8 million. We currently expect the third milestone will be achieved in 2013. If
our actual experience in future periods differs from these current estimates, we may change our estimate of the
period in which the milestone will be achieved and prospectively adjust the amortization period of the stock based
compensation expense associated with these awards.

NEKTAR THERAPEUTICS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

A summary of RSU award activity is as follows (in thousands except for per share amounts):

Units Issued

Weighted-Average
Grant-Date
Fair value

Aggregate
Intrinsic
Value(1)

Balance at December 31, 2007 . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Released . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited & canceled . . . . . . . . . . . . . . . . . . . . . . . . .

Balance at December 31, 2008 . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Released . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited & canceled . . . . . . . . . . . . . . . . . . . . . . . . .

Balance at December 31, 2009 . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Released . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited & canceled . . . . . . . . . . . . . . . . . . . . . . . . .

Balance at December 31, 2010 . . . . . . . . . . . . . . . . . . . .

735
48
(107)
(411)

265
35
(28)
(37)

235
22
(25)
(9)

223

$ 5.26

$ 8.37

$11.66

$2,868

(1) Aggregate Intrinsic Value represents the difference between the grant price of the award and the closing market

price of our common stock on December 31, 2010.

Note 15 — Income Taxes

For financial reporting purposes, “Loss before provision for income taxes,” includes the following components

(in thousands):

Years Ended December 31,
2009

2008

2010

Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(39,321)
2,264
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(103,295)
523

$(69,350)
34,208

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(37,057)

$(102,772)

$(35,142)

NEKTAR THERAPEUTICS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Provision (Benefit) for Income Taxes

The provision (benefit) for income taxes consists of the following (in thousands):

Years Ended December 31,
2010
2008
2009

Current:

Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1
2
698

$(522)
(28)
352

$(970)
(69)
519

Total Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

701

(198)

(520)

Deferred:

Total Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
—
180

180

—
—
(55)

(55)

—
—
(286)

(286)

Provision (benefit) for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$881

$(253)

$(806)

In 2010, we received a federal tax refund of $0.5 million relating to fiscal year 2009 as a result of the American

Recovery and Reinvestment Act of 2009, which allowed us to utilize previously recorded deferred tax assets.

Income tax provision (benefit) related to continuing operations differs from the amount computed by applying

the statutory income tax rate of 35% to pretax loss as follows (in thousands):

Years Ended December 31,
2009

2008

2010

U.S. federal benefit

At statutory rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(12,970)
2
State taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,123
Change in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . .
86
Foreign tax differential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,833)
Unrecognized tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Expiring tax attributes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Capital lease true-up. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Foreign subsidiary investment . . . . . . . . . . . . . . . . . . . . . . . . .
473
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(35,970)
(28)
34,327
114
(882)
1,569
—
—
617

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

881

(253)

$(12,300)
(69)
29,768
(11,754)
(2,366)
1,508
(1,431)
(4,777)
615-
(806)

Deferred Tax Assets and Liabilities

Deferred income taxes reflect the net tax effects of loss and credit carryforwards and temporary differences
between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for

NEKTAR THERAPEUTICS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

income tax purposes. Significant components of our deferred tax assets for federal and state income taxes are as
follows (in thousands):

December 31,

2010

2009

Deferred tax assets:

Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and other credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalized research expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserve and accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 331,749
49,657
5,797
31,411
11,167
4,895
28,157
4,275

$ 321,874
48,186
6,905
34,226
—
5,184
22,303
4,812

Deferred tax assets before valuation allowance . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance for deferred tax assets . . . . . . . . . . . . . . . . . . . . . .

467,108
(466,949)

443,490
(442,473)

Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

159

1,017

Deferred tax liabilities:

Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

(678)

Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

159

339

Realization of our deferred tax assets is dependent upon future earnings, if any, the timing and amount of which
are uncertain. Because of our lack of U.S. earnings history, the net U.S. deferred tax assets have been fully offset by
a valuation allowance. The valuation allowance increased by $24.5 million and $39.6 million during the years ended
December 31, 2010 and 2009, respectively. The valuation allowance includes approximately $35.6 million of
benefit at both December 31, 2010 and December 31, 2009 related to stock-based compensation and exercises, prior
to the implementation of ASC 515 and 718, that will be credited to additional paid in capital when realized.

Undistributed earnings of our foreign subsidiary in India are considered to be permanently reinvested and
accordingly, no deferred U.S. income taxes have been provided thereon. Upon distribution of those earnings in the
form of dividends or otherwise, we would be subject to U.S. income tax. At the present time it is not practicable to
estimate the amount of U.S. income taxes that might be payable if these earnings were repatriated.

Net Operating Loss and Tax Credit Carryforwards

As of December 31, 2010, we had a net operating loss carryforward for federal income tax purposes of
approximately $815.6 million, portions of which will begin to expire in 2011. We had a total state net operating loss
carryforward of approximately $537.9 million, which will begin to expire in 2011. Utilization of some of the federal
and state net operating loss and credit carryforwards are subject to annual limitations due to the “change in
ownership” provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitations
may result in the expiration of net operating losses and credits before utilization. During January 2011, we sold
19 million shares of our common stock to the public. We do not believe this event will create a “change in
ownership” but future stock activity in combination with the January 2011 stock issuance may create a future
ownership change. If a future change in ownership is created, we may be subject to additional limitations on the use
of our net operating losses and credits.

NEKTAR THERAPEUTICS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

We have federal research credits of approximately $23.0 million, which will begin to expire in 2019 and state
research credits of approximately $13.6 million which have no expiration date. We have federal orphan drug credits
of $12.8 million which will begin to expire in 2026. These tax credits are subject to the same limitations discussed
above.

Unrecognized tax benefits

We have incurred net operating losses since inception and we do not have any significant unrecognized tax
benefits. Our policy is to include interest and penalties related to unrecognized tax benefits, if any, within the
provision for taxes in the consolidated statements of operations. If we are eventually able to recognize our uncertain
positions, our effective tax rate would be reduced. We currently have a full valuation allowance against our net
deferred tax asset which would impact the timing of the effective tax rate benefit should any of these uncertain tax
positions be favorably settled in the future. Any adjustments to our uncertain tax positions would result in an
adjustment of our net operating loss or tax credit carry forwards rather than resulting in a cash outlay.

We file income tax returns in the U.S., California, Alabama, India and the U.K. We are currently not the subject
of any income tax examinations. Because of net operating loss and research credit carryovers, substantially all of
our tax years remain open to examination.

We have the following activity relating to unrecognized tax benefits (in thousands):

December 31,
2009

2008

2010

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$13,084

$11,660

$ 9,222

Tax positions related to current year
Additions:
Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Tax positions related to prior year
Additions: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lapses in statute of limitations . . . . . . . . . . . . . . . . . . . . . . . . . .

259
208
—

—
—
(493)
—
—

415
318
—

—
—
691
—
—
—

1,274
1,164
—

—
—
—
—
—
—

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$13,058

$13,084

$11,660

Although it is reasonably possible that certain unrecognized tax benefits may increase or decrease within the
next twelve months due to tax examination changes, settlement activities, expirations of statute of limitations, or the
impact on recognition and measurement considerations related to the results of published tax cases or other similar
activities, we do not anticipate any significant changes to unrecognized tax benefits over the next 12 months. During
the years ended December 31, 2010 and 2009, no interest or penalties were required to be recognized relating to
unrecognized tax benefits.

Note 16 — Segment Reporting

We operate in one business segment which focuses on applying our technology platforms to improve the
performance of established and novel medicines. We operate in one segment because our business offerings have
similar economics and other characteristics, including the nature of products and manufacturing processes, types of

NEKTAR THERAPEUTICS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

customers, distribution methods and regulatory environment. We are comprehensively managed as one business
segment by our Chief Executive Officer and his management team. Within our one business segment we have two
components, PEGylation technology and pulmonary technology.

Our revenue is derived primarily from clients in the pharmaceutical and biotechnology industries. Revenue
from AstraZeneca AB represented 68% of our revenue for the year ended December 31, 2010. Two of our partners,
AstraZeneca AB and UCB Pharma, represented 35% and 17%, respectively, of our total revenue during the year
ended December 31, 2009. Four of our partners, Bayer (including Bayer Healthcare LLC and Bayer Schering
Pharma AG), UCB Pharma, Novartis, and Roche represented 24%, 16%, 15%, and 14%, respectively, of our total
revenue during the year ended December 31, 2008.

Revenue by geographic area is based on the locations of our partners. The following table sets forth revenue by

geographic area (in thousands):

Years Ended December 31,
2009

2010

2008

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
European countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 29,636
129,403

$29,511
42,420

$30,800
59,385

Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$159,039

$71,931

$90,185

At December 31, 2010, $71.5 million, or approximately 80%, of the net book value of our property and
equipment was located in the United States and $18.3 million, or approximately 20%, was located in India. At
December 31, 2009, approximately $64.5 million, or approximately 82%, of the net book value of our property and
equipment of $78.3 million was located in the United States and $13.8 million, or approximately 18%, was located
in India.

Note 17 — Subsequent Event

On January 24, 2011, we completed the issuance and sale of 19,000,000 shares of our common stock. The price
to the public in this offering was $11.85 per share, and the underwriter purchased the shares from Nektar pursuant to
the Underwriting Agreement at a price of $11.60 per share. The proceeds to Nektar from this offering were
approximately $220.4 million. Additionally, we incurred approximately $0.6 million in legal and accounting fees,
filing fees, and other offering expenses.

Note 18 — Selected Quarterly Financial Data (Unaudited)

The following table sets forth certain unaudited quarterly financial data. In our opinion, the unaudited
information set forth below has been prepared on the same basis as the audited information and includes all
adjustments necessary to present fairly the information set forth herein. We have experienced fluctuations in our
quarterly results. We expect these fluctuations to continue in the future. Due to these and other factors, we believe
that quarter-to-quarter comparisons of our operating results will not be meaningful, and you should not rely on our
results for any one quarter as an indication of our future performance. Certain items previously reported in specific
financial statement captions have been reclassified to conform to the current period presentation. Such

NEKTAR THERAPEUTICS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

reclassifications have not impacted previously reported revenues, operating loss or net loss. All data is in thousands
except per share information.

Fiscal Year 2010
Q2
Q3

Fiscal Year 2009
Q2
Q3

Product sales and

royalties. . . . . . . . . . . $ 3,584 $11,154

$ 7,230 $ 12,699

$ 6,470 $ 10,525

$ 7,461 $10,832

License, collaboration

and other revenue. . . . $29,653

$31,409

$30,695 $ 32,615

$ 3,241 $ 2,463 $ 2,762 $28,177

Gross profit on product

sales . . . . . . . . . . . . . $ (712) $ 6,265

985

$ 2,462 $

844

146

$ 1,327 $ 2,023

Research and

development
expenses . . . . . . . . . . $23,286

General and

$25,600

$27,724 $ 31,455

$ 23,363 $ 24,002

$ 23,031 $24,713

administrative
expenses . . . . . . . . . . $ 9,013 $10,207

Impairment of long lived

$10,181 $ 11,585

$ 11,020 $ 9,087 $ 9,917 $10,982

assets. . . . . . . . . . . . . $ — $ — $ — $ 12,576

— $

— $ —

Operating (loss)

$ (6,225) $(20,539) $(30,298) $(30,480) $(28,859) $ (5,495)
income . . . . . . . . . . . $ (3,358) $ 1,867
Interest expense . . . . . . . $ 2,951 $ 2,909
$ 2,826 $ 2,488 $ 3,337 $ 2,948 $ 2,928 $ 2,963
Net loss. . . . . . . . . . . . . $ (6,130) $ (517) $ (8,711) $(22,580) $(31,807) $(32,069) $(30,967) $ (7,676)
Basic and diluted net

loss per share(1). . . . . $ (0.07) $ (0.01) $ (0.09) $

(0.24) $ (0.34) $

(0.35) $ (0.33) $ (0.08)

(1) Quarterly loss per share amounts may not total to the year-to-date loss per share due to rounding.

SCHEDULE II

NEKTAR THERAPEUTICS

VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEARS ENDED DECEMBER 31, 2010, 2009, and 2008

Balance at
Beginning
of Year

Charged to
Costs and
Expenses,
Net of
Reversals

Utilizations

Balance at
End
of Year

(In thousands)

Description

2010:

Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . .
Allowance for inventory reserves . . . . . . . . . . . . . . . . . . .

$ —
$3,336

2009:

Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . .
Allowance for inventory reserves . . . . . . . . . . . . . . . . . . .

$
92
$4,989

2008:

Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . .
Allowance for inventory reserves . . . . . . . . . . . . . . . . . . .

$
33
$5,772

$ —
$1,012

$ —
$2,109

$
61
$2,668

$ —
$ (366)

$ —
$3,982

$
(92)
$(3,762)

$ —
$3,336

$
(2)
$(3,451)

$
92
$4,989

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A. Controls and Procedures

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be
disclosed in our Securities Exchange Act of 1934 (Exchange Act) reports is recorded, processed, summarized and
reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated
and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required financial disclosure.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with
the participation of our management, including the Chief Executive Officer and the Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act
Rule 13a-15. Based upon, and as of the date of, this evaluation, the Chief Executive Officer and the Chief Financial
Officer concluded that our disclosure controls and procedures were effective. Accordingly, management believes
that the financial statements included in this report fairly present in all material respects our financial condition,
results of operations and cashflows for the periods presented.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial
reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with GAAP.

Our management has assessed the effectiveness of our internal control over financial reporting as of
December 31, 2010. In making its assessment of internal control over financial reporting, management used
the criteria described in Internal Control — Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.

Based on our evaluation under the framework described in Internal Control — Integrated Framework, our
management concluded that our internal control over financial reporting was effective as of December 31, 2010.

The effectiveness of our internal control over financial reporting as of December 31, 2010 has been audited by

an independent registered public accounting firm, as stated in their report, which is included herein.

Changes in Internal Control Over Financial Reporting

We continuously seek to improve the efficiency and effectiveness of our internal controls. This results in
refinements to processes throughout the Company. There was no change in our internal control over financial
reporting during the quarter ended December 31, 2010, which was identified in connection with our management’s
evaluation required by Exchange Act Rules 13a-15(f) and 15d-15(f) that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.

Inherent Limitations on the Effectiveness of Controls

Our management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our
disclosure controls and procedures or our internal control over financial reporting will prevent all error and all fraud.
A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the control system are met. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the
company have been detected. These inherent limitations include the realities that judgments in decision making can
be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be
circumvented by the individual acts of some persons, by collusion of two or more people or by management

override of the control. The design of any system of controls also is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals
under all potential future conditions. Over time, controls may become inadequate because of changes in conditions,
or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Information relating to our executive officers required by this item is set forth in Part I — Item 1 of this report
under the caption “Executive Officers of the Registrant” and is incorporated herein by reference. The other
information required by this Item is incorporated by reference from the definitive proxy statement for our 2011
Annual Meeting of Stockholders to be filed with the SEC pursuant to Regulation 14A (Proxy Statement) not later
than 120 days after the end of the fiscal year covered by this Form 10-K under the captions “Corporate Governance
and Board of Directors,” “Proposal 1 — Election of Directors” and “Section 16(a) Beneficial Ownership Reporting
Compliance.”

Information regarding our audit committee financial expert will be set forth in the Proxy Statement under the

caption “Audit Committee,” which information is incorporated herein by reference.

We have a Code of Business Conduct and Ethics applicable to all employees, including the principal executive
officer, principal financial officer and principal accounting officer or controller, or persons performing similar
functions. The Code of Business Conduct and Ethics is posted on our website at www.nektar.com. Amendments to,
and waivers from, the Code of Business Conduct and Ethics that apply to any of these officers, or persons
performing similar functions, and that relate to any element of the code of ethics definition enumerated in
Item 406(b) of Regulation S-K will be disclosed at the website address provided above and, to the extent required by
applicable regulations, on a current report on Form 8-K.

As permitted by SEC Rule 10b5-1, certain of our executive officers, directors and other employees have or may
set up a predefined, structured stock trading program with their broker to sell our stock. The stock trading program
allows a broker acting on behalf of the executive officer, director or other employee to trade our stock during
blackout periods or while such executive officer, director or other employee may be aware of material, nonpublic
information, if the trade is performed according to a pre-existing contract, instruction or plan that was established
with the broker during a non-blackout period and when such executive officer, director or employee was not aware
of any material, nonpublic information. Our executive officers, directors and other employees may also trade our
stock outside of the stock trading programs set up under Rule 10b5-1 subject to our blackout periods and insider
trading rules.

Item 11. Executive Compensation

The information required by this Item is included in the Proxy Statement and incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters

The information required by this Item is included in the Proxy Statement and incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions and Director Independence

The information required by this Item is included in the Proxy Statement and incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

The information required by this Item is included in the Proxy Statement and incorporated herein by reference.

PART IV

Item 15. Exhibits, Financial Statement Schedules

(a) The following documents are filed as part of this report:

(1) Consolidated Financial Statements:

The following financial statements are filed as part of this Annual Report on Form 10-K under Item 8

“Financial Statements and Supplementary Data.”

Page

61
63

2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Stockholders’ Equity for each of the three years in the period ended

December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Cash Flows for each of the three years in the period ended December 31,

2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

66
67

(2) Financial Statement Schedules:

Schedule II, Valuation and Qualifying Accounts and Reserves, is filed as part of this Annual Report on
Form 10-K under Item 8 “Financial Statements and Supplementary Data”. All other financial statement schedules
have been omitted because they are not applicable, or the information required is presented in our consolidated
financial statements and notes thereto under Item 8 of this Annual Report on Form 10-K.

(3) Exhibits.

Except as so indicated in Exhibit 32.1, the following exhibits are filed as part of, or incorporated by reference

into, this Annual Report on Form 10-K.

Exhibit
Number

2.1(1)

3.1(2)
3.2(3)

3.3(4)
3.4(5)
3.5(6)
3.6(7)

3.7(8)
4.1
4.2(6)

Description of Documents

Exhibit
Number

4.3(4)

4.4(4)
4.5(9)

4.6(9)

Description of Documents

Rights Agreement, dated as of June 1, 2001, by and between Nektar Therapeutics and Mellon Investor
Services LLC, as Rights Agent.
Form of Right Certificate.
Indenture, dated September 28, 2005, by and between Nektar Therapeutics, as Issuer, and J.P. Morgan
Trust Company, National Association, as Trustee.
Registration Right Agreement, dated as of September 28, 2005, among Nektar Therapeutics and entities
named therein.
1994 Non-Employee Directors’ Stock Option Plan, as amended.++
1994 Employee Stock Purchase Plan, as amended and restated.++
2000 Non-Officer Equity Incentive Plan, as amended and restated.++

10.1(10)
10.2(11)
10.3(21)
10.4(13) Form of 2000 Non-Officer Equity Incentive Plan Stock Option Agreement (Nonstatutory Stock

Option).++

10.5(13) Form of 2000 Non-Officer Equity Incentive Plan Stock Option Agreement (Nonstatutory (Unapproved)

Stock Option).++

10.6(14) Forms of 2000 Non-Officer Equity Incentive Plan Restricted Stock Unit Grant Notice and Restricted

Stock Unit Agreement.++
2000 Equity Incentive Plan, as amended and restated.++

10.7(21)
10.8(15) Form of Stock Option Agreement under the 2000 Equity Incentive Plan.++
10.9(14) Forms of Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement under the 2000

Equity Incentive Plan.++

10.10(16) Form of Non-Employee Director Stock Option Agreement under the 2000 Equity Incentive Plan.++
10.11(16) Form of Non-Employee Director Restricted Stock Unit Agreement under the 2000 Equity Incentive

Plan.++

10.12(21) Amended and Restated Compensation Plan for Non-Employee Directors.++
10.13(12) 401(k) Retirement Plan.++
10.14(21) 2011 Discretionary Incentive Compensation Policy.++
10.15(21) Amended and Restated Change of Control Severance Benefit Plan.++
10.16(21) 2008 Equity Incentive Plan.++
10.17(1) Forms of Stock Option Grant Notice and of Stock Option Agreement under the 2008 Equity Incentive

Plan.++

10.18(1) Forms of Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement under the 2008

Equity Incentive Plan.++

10.19(16) Form of Severance Letter for executive officers of the company.++
10.20(1) Amended and Restated Letter Agreement, executed effective on December 1, 2008, with Howard W.

Robin.++

10.21(1) Amended and Restated Letter Agreement, executed effective on December 1, 2008, with John

Nicholson.++

10.22(21) Letter Agreement, executed effective on December 10, 2009, with Stephen K. Doberstein, Ph.D.++
10.23(17) Separation and General Release Agreement between Nektar Therapeutics and Randall W.

Moreadith, M.D., Ph.D., dated November 23, 2009++

10.24(19) Separation and General Release Agreement between Nektar Therapeutics and Bharatt M.

Chowrira, Ph.D., J.D., dated December 23, 2010.++

100

Exhibit
Number

Description of Documents

10.27(18) Settlement Agreement and General Release, dated June 30, 2006, by and between The Board of Trustees
of the University of Alabama, The University of Alabama in Huntsville, Nektar Therapeutics AL
Corporation (a wholly-owned subsidiary of Nektar Therapeutics), Nektar Therapeutics and J. Milton
Harris.

10.28(21) Co-Development, License and Co-Promotion Agreement, dated August 1, 2007, between Nektar

Therapeutics (and its subsidiaries) and Bayer Healthcare LLC, as amended.+

10.29(1) Exclusive Research, Development, License and Manufacturing and Supply Agreement, by and among
Nektar AL Corporation, Baxter Healthcare SA, and Baxter Healthcare Corporation, dated September 26,
2005, as amended.+

10.30(1) Exclusive License Agreement, dated December 31, 2008, between Nektar Therapeutics, a Delaware

corporation, and Novartis Pharma AG, a Swiss corporation.+

10.31(21) Supply, Dedicated Suite and Manufacturing Guarantee Agreement, dated October 29, 2010, by and

among Nektar Therapeutics, Amgen Inc. and Amgen Manufacturing, Limited.+

10.32(20) License Agreement by and between AstraZeneca AB and Nektar Therapeutics, dated September 20,

2009.+

21.1(21) Subsidiaries of Nektar Therapeutics.
23.1(21) Consent of Independent Registered Public Accounting Firm.
24
Power of Attorney (reference is made to the signature page).
31.1(21) Certification of Nektar Therapeutics’ principal executive officer required by Rule 13a-14(a) or

Rule 15d-14(a).

31.2(21) Certification of Nektar Therapeutics’ principal financial officer required by Rule 13a-14(a) or

Rule 15d-14(a).
32.1*(21) Section 1350 Certifications.

+ Confidential treatment with respect to specific portions of this Exhibit has been requested, and such portions

are omitted and have been filed separately with the SEC.

++ Management contract or compensatory plan or arrangement.

* Exhibit 32.1 is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall
such exhibit be deemed to be incorporated by reference in any registration statement or other document filed
under the Securities Act of 1933, as amended, or the Securities Exchange Act, except as otherwise stated in
such filing.

(1) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Annual Report on Form 10-K for

the year ended December 31, 2008.

(2) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for

the quarter ended June 30, 1998.

(3) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for

the quarter ended June 30, 2000.

(4) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K, filed

on June 4, 2001.

(5) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K, filed

on January 8, 2002.

(6) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K, filed

on January 23, 2003.

(7) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Annual Report on Form 10-K for

the year ended December 31, 2009.

101

(8) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K, filed

on December 12, 2007.

(9) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K, filed

on September 28, 2005.

(10) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for

the quarter ended June 30, 1996.

(11) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Registration Statement on Form S-8

(No. 333-98321), filed on August 19, 2002.

(12) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for

the quarter ended June 30, 2004.

(13) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Registration Statement on Form S-8

(No. 333-71936), filed on October 19, 2001, as amended.

(14) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Annual Report on Form 10-K, as

amended, for the year ended December 31, 2005.

(15) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for

the quarter ended September 30, 2000.

(16) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for

the quarter ended September 30, 2007.

(17) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K, filed

on November 30, 2009.

(18) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for

the quarter ended June 30, 2006.

(19) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K, filed

on December 30, 2010.

(20) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for

the quarter ended September 30, 2009.

(21) Filed herewith.

102

Pursuant to the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City and County of San Francisco, State of California
on March 1, 2011.

SIGNATURES

By: /s/

JOHN NICHOLSON

John Nicholson
Senior Vice President and Chief Financial Officer

By: /s/

JILLIAN B. THOMSEN

Jillian B. Thomsen
Senior Vice President and Chief Accounting Officer

POWER OF ATTORNEY

KNOW ALL PERSON BY THESE PRESENTS, that each person whose signature appears below constitutes
and appoints John Nicholson and Jillian B. Thomsen and each of them, as his or her true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead,
in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and to file the same,
with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Com-
mission, granting unto said attorneys-in-fact and agents and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he or she might or could do in person, hereby ratify and confirming all that said attorneys-in-
fact and agents, or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed

by the following persons in the capacities and on the dates indicated:

Signature

Title

Date

/s/ HOWARD W. ROBIN
Howard W. Robin

/s/

JOHN NICHOLSON
John Nicholson

/s/

JILLIAN B. THOMSEN
Jillian B. Thomsen

/s/ ROBERT B. CHESS
Robert B. Chess

/s/ R. SCOTT GREER
R. Scott Greer

Chief Executive Officer, President and
Director (Principal Executive Officer)

March 1, 2011

Senior Vice President and Chief Financial
Officer (Principal Financial Officer)

March 1, 2011

Senior Vice President Finance and Chief
Accounting Officer (Principal Accounting
Officer)

Director, Chairman of the Board of
Directors

Director

103

March 1, 2011

Signature

Title

Date

/s/

JOSEPH J. KRIVULKA
Joseph J. Krivulka

/s/ CHRISTOPHER A. KUEBLER
Christopher A. Kuebler

/s/ LUTZ LINGNAU
Lutz Lingnau

/s/ SUSAN WANG
Susan Wang

/s/ ROY A. WHITFIELD
Roy A. Whitfield

/s/ DENNIS L. WINGER
Dennis L. Winger

Director

March 1, 2011

104

Except as so indicated in Exhibit 32.1, the following exhibits are filed as part of, or incorporated by reference

into, this Annual Report on Form 10-K.

Description of Documents

Exhibit
Number

2.1(1)

3.1(2)
3.2(3)

3.3(4)
3.4(5)
3.5(6)
3.6(7)

3.7(8)
4.1
4.2(6)
4.3(4)

4.4(4)
4.5(9)

4.6(9)

Asset Purchase Agreement, dated October 20, 2008, by and between Nektar Therapeutics, a Delaware
corporation, AeroGen,
Inc., a Delaware corporation and wholly-owned subsidiary of Nektar
Therapeutics, Novartis Pharmaceuticals Corporation, a Delaware corporation, and Novartis Pharma
AG, a Swiss corporation.+
Certificate of Incorporation of Inhale Therapeutic Systems (Delaware), Inc.
Certificate of Amendment of the Amended Certificate of Incorporation of Inhale Therapeutic Systems,
Inc.
Certificate of Designation of Series A Junior Participating Preferred Stock of Nektar Therapeutics
Certificate of Designation of Series B Convertible Preferred Stock of Nektar Therapeutics.
Certificate of Ownership and Merger of Nektar Therapeutics.
Certificate of Ownership and Merger of Nektar Therapeutics AL, Corporation with and into Nektar
Therapeutics.
Amended and Restated Bylaws of Nektar Therapeutics.
Reference is made to Exhibits 3.1, 3.2, 3.3, 3.4, 3.5, 3.6 and 3.7.
Specimen Common Stock certificate.
Rights Agreement, dated as of June 1, 2001, by and between Nektar Therapeutics and Mellon Investor
Services LLC, as Rights Agent.
Form of Right Certificate.
Indenture, dated September 28, 2005, by and between Nektar Therapeutics, as Issuer, and J.P. Morgan
Trust Company, National Association, as Trustee.
Registration Right Agreement, dated as of September 28, 2005, among Nektar Therapeutics and entities
named therein.
1994 Non-Employee Directors’ Stock Option Plan, as amended.++
1994 Employee Stock Purchase Plan, as amended and restated.++
2000 Non-Officer Equity Incentive Plan, as amended and restated.++

10.1(10)
10.2(11)
10.3(21)
10.4(13) Form of 2000 Non-Officer Equity Incentive Plan Stock Option Agreement (Nonstatutory Stock

Option).++

10.5(13) Form of 2000 Non-Officer Equity Incentive Plan Stock Option Agreement (Nonstatutory (Unapproved)

Stock Option).++

10.6(14) Forms of 2000 Non-Officer Equity Incentive Plan Restricted Stock Unit Grant Notice and Restricted

Stock Unit Agreement.++
2000 Equity Incentive Plan, as amended and restated.++

10.7(21)
10.8(15) Form of Stock Option Agreement under the 2000 Equity Incentive Plan.++
10.9(14) Forms of Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement under the 2000

Equity Incentive Plan.++

Plan.++

105

Exhibit
Number

Description of Documents

10.18(1) Forms of Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement under the 2008

Equity Incentive Plan.++

10.19(16) Form of Severance Letter for executive officers of the company.++
10.20(1) Amended and Restated Letter Agreement, executed effective on December 1, 2008, with Howard W.

Robin.++

10.21(1) Amended and Restated Letter Agreement, executed effective on December 1, 2008, with John

Nicholson.++

10.22(21) Letter Agreement, executed effective on December 10, 2009, with Stephen K. Doberstein, Ph.D.++
10.23(17) Separation and General Release Agreement between Nektar Therapeutics and Randall W.

Moreadith, M.D., Ph.D., dated November 23, 2009.++

10.24(19) Separation and General Release Agreement between Nektar Therapeutics and Bharatt M.

Chowrira, Ph.D., J.D., dated December 23, 2010.++

10.25(16) Amended and Restated Built-to-Suite Lease between Nektar Therapeutics and BMR-201 Industrial
Road LLC, dated August 17, 2004, as amended on January 11, 2005 and July 19, 2007.
10.26(20) Sublease, dated as of September 30, 2009, by and between Pfizer Inc. and Nektar Therapeutics.+
10.27(18) Settlement Agreement and General Release, dated June 30, 2006, by and between The Board of Trustees
of the University of Alabama, The University of Alabama in Huntsville, Nektar Therapeutics AL
Corporation (a wholly-owned subsidiary of Nektar Therapeutics), Nektar Therapeutics and J. Milton
Harris.

10.28(21) Co-Development, License and Co-Promotion Agreement, dated August 1, 2007, between Nektar

Therapeutics (and its subsidiaries) and Bayer Healthcare LLC, as amended.+

10.30(1) Exclusive License Agreement, dated December 31, 2008, between Nektar Therapeutics, a Delaware

corporation, and Novartis Pharma AG, a Swiss corporation.+

10.31(21) Supply, Dedicated Suite and Manufacturing Guarantee Agreement, dated October 29, 2010, by and

among Nektar Therapeutics, Amgen Inc. and Amgen Manufacturing, Limited.+

10.32(20) License Agreement by and between AstraZeneca AB and Nektar Therapeutics, dated September 20,

2009.+

Rule 15d-14(a).

31.2(21) Certification of Nektar Therapeutics’ principal financial officer required by Rule 13a-14(a) or

Rule 15d-14(a).
32.1*(21) Section 1350 Certifications.

+ Confidential treatment with respect to specific portions of this Exhibit has been requested, and such portions

are omitted and have been filed separately with the SEC.

++ Management contract or compensatory plan or arrangement.

106

(1) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Annual Report on Form 10-K for

the year ended December 31, 2008.

(2) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for

the quarter ended June 30, 1998.

(3) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for

the quarter ended June 30, 2000.

(4) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K, filed

on June 4, 2001.

(5) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K, filed

on January 8, 2002.

(6) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K, filed

on January 23, 2003.

(7) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Annual Report on Form 10-K for

the year ended December 31, 2009.

(8) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K, filed

on December 12, 2007.

(9) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K, filed

on September 28, 2005.

(10) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for

the quarter ended June 30, 1996.

(11) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Registration Statement on Form S-8

(No. 333-98321), filed on August 19, 2002.

(12) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for

the quarter ended June 30, 2004.

(13) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Registration Statement on Form S-8

(No. 333-71936), filed on October 19, 2001, as amended.

(14) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Annual Report on Form 10-K, as

amended, for the year ended December 31, 2005.

(15) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for

the quarter ended September 30, 2000.

(16) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for

the quarter ended September 30, 2007.

(17) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K, filed

on November 30, 2009.

(18) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for

the quarter ended June 30, 2006.

(19) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Current Report on Form 8-K, filed

on December 30, 2010.

(20) Incorporated by reference to the indicated exhibit in Nektar Therapeutics’ Quarterly Report on Form 10-Q for

the quarter ended September 30, 2009.

(21) Filed herewith.

107

Nektar Management Team
Howard W. Robin
President and
Chief Executive Officer

Stephen K. Doberstein, Ph.D.
Senior Vice President and
Chief Scientific Officer

Rinko Ghosh
Senior Vice President and
Chief Business Officer

Maninder Hora, Ph.D.
Senior Vice President,
Pharmaceutical Development
and Manufacturing Operations

Gil M. Labrucherie
Senior Vice President,
General Counsel and Secretary

Lorianne K. Masuoka, M.D.
Senior Vice President and
Chief Medical Officer

John Nicholson
Senior Vice President and
Chief Financial Officer

Timothy A. Riley, Ph.D.
Senior Vice President,
Global Research

Dorian Rinella
Senior Vice President,
Human Resources and Facilities
Operations

Jillian B. Thomsen
Senior Vice President, Finance and
Chief Accounting Officer

Nektar Board of Directors
Robert B. Chess
Chairman of the Board,
Nektar Therapeutics and
Chairman,
OPX Biotechnologies, Inc.

R. Scott Greer
Managing Director,
Numenor Ventures, LLC

Joseph J. Krivulka
Founder and President,
Triax Pharmaceuticals

Christopher A. Kuebler
Former Chairman and
Chief Executive Officer,
Covance Inc.

Lutz Lingnau
Former Executive Board Member,
Schering AG

Howard W. Robin
President and
Chief Executive Officer,
Nektar Therapeutics

Susan Wang
Former CFO,
Solectron

Roy A. Whitfield
Former Chairman,
Incyte Corporation

Dennis Winger
Former Senior Vice President
and CFO,
Applera Corporation

Corporate Information
Corporate Headquarters
Nektar Therapeutics
455 Mission Bay Boulevard South
San Francisco, CA 94158
Telephone (415) 482-5300
Facsimile (415) 339-5300
Toll-Free (855) 482-NKTR (6587)

Annual Report on Form 10-K
Copies of Nektar’s Annual Report
on Form 10K, exclusive of exhibits,
are available without charge upon
written request to:

Investor Relations
455 Mission Bay Boulevard South
San Francisco, CA 94158

Or via email to:
investors@nektar.com; online
copies can also be obtained
at www.nektar.com under
“Investor Relations.”

Annual Meeting
The Annual Meeting of Stockholders
will be held on June 14, 2011,
2:00–3:00 p.m. (PDT)
Nektar Corporate Headquarters
455 Mission Bay Boulevard South
San Francisco, CA 94158

Corporate Counsel
O’Melveny & Myers LLP
Menlo Park, CA

Independent Auditors
Ernst & Young LLP
Palo Alto, CA

Transfer Agent and
Stockholder Services
Mellon Investor Services, LLC
525 Market Street, Suite 3500
San Francisco, CA 94105
Telephone (877) 290-2261
Outside U.S. 1 (201) 680-6578

*The preceding discussion in this annual report contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. Nektar cautions that these forward-looking statements are subject to
significant risks and uncertainties that may cause results to differ from those indicated in the forward-
looking statements. Factors that could cause or contribute to such differences include, but are not
limited to, those discussed in Part 1 of the Form 10-K included herein and filed with the Securities and
Exchange Commission for the fiscal year ended December 31, 2010 under the heading “Risk Factors.”
Nektar undertakes no obligation to update forward-looking statements, whether as a result of new
information, future events or otherwise.

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455 Mission Bay Boulevard South
San Francisco, California 94158
P: 855.482.NKTR (6587)
www.nektar.com
NASDAQ: NKTR