Pfizer Inc. said on Wednesday clinical studies of its insulin drug Exubera found increased cases of lung cancer, leading developer Nektar to abandon the troubled product.

Nektar shares tumbled 25 percent, while Pfizer dropped half a percent in late morning trading.

The lung-cancer revelation dealt a final setback to Exubera, which held the promise of letting diabetics avoid needle sticks. Had it been successful, the drug was expected to bring Pfizer $2 billion-a-year.

Through a clinical review it was found that 6 of the 4,740 patients treated with Exubera versus 1 of the 4,292 patients not treated with Exubera developed lung cancer, the company said. Additionally, there was a post-marketing report of lung cancer in one patient treated with the drug.

Pfizer is vigilant in monitoring adverse drug reports for all its products, including Exubera, which has shown in clinical trials to be a safe and effective medicine in the treatment of adults with type 1 or type 2 diabetes, said MD Pfizer's Chief Medical Officer Joe Feczko in a press release.

The company slapped a new warning on the drugs stating that all patients who developed lung cancer had a prior history of cigarette smoking adding it was difficult to determine if the development of lung cancer is related to the use of this product due to the few cases found.

In October 2007 Pfizer said Exubera did not meet customer's needs or the company's financial expectations leading the company to stop the market of the product but still some patients continue to take the medicine.

We are working closely with patients and their physicians to ensure the continued orderly transition from Exubera to alternative therapies said Dr. Feczko in the press release.

Meanwhile, Nektar Terapeutics which partner with Pfizer in Exubera announced today that it has stopped its search of a new marketing partner.

Pfizer said is developing new treatments for diabetes w, which the company considers as an area of huge unmet medical need.

Pfizer