Bayer will fund all clinical development of the Amikacin product following the completion of the ongoing Phase II clinical studies currently being conducted by Nektar (other than $10 million of Phase III clinical trial costs to be reimbursed by Nektar as described above), all activities to support world-wide regulatory filings, approvals and related activities, further development of formulated Amikacin, and final product packaging. Nektar will fund the ongoing clinical development of the Amikacin product through the completion of ongoing Phase II clinical studies and the further development of the nebulizer device included in the Amikacin product through the completion of the Phase III clinical trials and scale-up for commercialization.

Bayer and Nektar will share profits (or losses) on sales of the Amikacin product in the United States such that Bayer receives 52% of product profits (or losses) and Nektar receives 48% of product profits (or losses), subject to certain adjustments. This profit sharing and co-promotion arrangement in the United States will include, among other things, Bayer and Nektar collaborating on the commercial plan, commercial launch, and the shared deployment of sales and marketing personnel and related support activities. In addition, Bayer will pay Nektar a royalty based on annual net sales of the Amikacin product made in any country outside the United States. The royalty rate varies based on the level of annual net sales of the Amikacin product, ranging from a minimum of 14% to a maximum of 30%. Nektar's right to receive the foregoing royalties will expire on a country by country basis upon the later of (a) ten years after the date of first commercial sale of the Amikacin product in that country and (b) the expiration of the last-to-expire of certain patent rights related to the Amikacin product in that country, subject to certain exceptions. Nektar retains responsibility for paying third-party royalties under intellectual property that is practiced in the development, manufacture or commercialization of the Amikacin product as of the date of the agreement.

Nektar will perform clinical manufacturing and supply Bayer with the nebulizer device and formulated Amikacin for use in clinical trials at Nektar's fully burdened manufacturing cost. For commercial manufacturing and supply of the Amikacin product, the parties will enter into a manufacturing and commercial supply agreement pursuant to which Nektar will supply Bayer with all of its requirements for the nebulizer device for the Amikacin product at 130% of Nektar's fully burdened manufacturing cost.

The information in Item 7.01 of this report, including the Exhibit 99.1 hereto, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended. The information contained herein and in the accompanying exhibit shall not be incorporated by reference into any filing with the Securities and Exchange Commission made by Nektar Therapeutics, whether made before or after the date hereof, regardless of any general incorporation language in such filing.