<SUBMISSION>
<ACCESSION-NUMBER>0001047469-04-007339
<TYPE>424B5
<PUBLIC-DOCUMENT-COUNT>2
<FILING-DATE>20040310
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>NEKTAR THERAPEUTICS
<CIK>0000906709
<ASSIGNED-SIC>2834
<IRS-NUMBER>943134940
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>424B5
<ACT>33
<FILE-NUMBER>333-108859
<FILM-NUMBER>04660803
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>150 INDUSTRIAL RD
<CITY>SAN CARLOS
<STATE>CA
<ZIP>94070
<PHONE>6506313100
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>150 INDUSTRIAL ROAD
<CITY>SAN CARLOS
<STATE>CA
<ZIP>94070
</MAIL-ADDRESS>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>INHALE THERAPEUTIC SYSTEMS INC
<DATE-CHANGED>19980723
</FORMER-COMPANY>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>INHALE THERAPEUTIC SYSTEMS
<DATE-CHANGED>19940303
</FORMER-COMPANY>
</FILER>
<DOCUMENT>
<TYPE>424B5
<SEQUENCE>1
<FILENAME>a2129340z424b5.htm
<DESCRIPTION>424B5
<TEXT>
<HTML>
<HEAD>

</HEAD>
<BODY BGCOLOR="#FFFFFF" LINK=BLUE  VLINK=PURPLE>
<BR>
<FONT SIZE=3 ><A HREF="#04PAL1099_1">QuickLinks</A></FONT>
<font size=3> -- Click here to rapidly navigate through this document</font>
<P ALIGN="RIGHT"><FONT SIZE=2><B>Filed Pursuant to Rule 424(b)(5)<BR>
Registration No. 333-108859  </B></FONT></P>

<P><FONT SIZE=2><B> PROSPECTUS SUPPLEMENT<BR>
(To Prospectus dated September&nbsp;29, 2003)  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=4><B>9,500,000 Shares  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=5><B>Nektar Therapeutics  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=5><B>
<IMG SRC="g285866.jpg" ALT="GRAPHIC" WIDTH="216" HEIGHT="51">
  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=4><B>Common Stock  </B></FONT></P>

<HR NOSHADE ALIGN="CENTER" WIDTH="120">

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This is a public offering of common stock of Nektar Therapeutics. We are offering 9,500,000 shares of our common stock. Our common stock is traded
on the Nasdaq National Market under the symbol "NKTR". On March&nbsp;8, 2004, the last reported sale price of our common stock on the Nasdaq National Market was $22.13 per share. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=3><I>Investing in our common stock involves risks. See "Risk Factors" beginning on page S-5 of this prospectus
supplement.</I></FONT></P>

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<TH WIDTH="62%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Per Share</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Total</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>Price to public</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>21.00</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>199,500,000</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>Underwriting discounts and commissions</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>0.29</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>2,755,000</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>Proceeds, before expenses, to Nektar Therapeutics</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>20.71</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>196,745,000</FONT></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have granted the underwriter the right to purchase up to 1,425,000 additional shares of our common stock to cover over-allotments. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus supplement. Any representation to the contrary is a criminal offense.</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lehman
Brothers expects to deliver the shares of common stock on or about March&nbsp;12, 2004. </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=5><B>LEHMAN BROTHERS  </B></FONT></P>

<P><FONT SIZE=2>March&nbsp;8, 2004 </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
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<BR></FONT><FONT SIZE=2><B>TABLE OF CONTENTS    <BR>    </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>Prospectus Supplement  </B></FONT></P>

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<TH WIDTH="91%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>Page</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="91%"><FONT SIZE=2>Prospectus Supplement Summary</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>S-1</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="91%"><FONT SIZE=2>Risk Factors</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>S-5</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="91%"><FONT SIZE=2>Forward-Looking Statements</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>S-20</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="91%"><FONT SIZE=2>Use of Proceeds</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>S-21</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="91%"><FONT SIZE=2>Dilution</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>S-21</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="91%"><FONT SIZE=2>Underwriting</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>S-23</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="91%"><FONT SIZE=2>Where You Can Find More Information</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>S-25</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="91%"><FONT SIZE=2>Legal Matters</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>S-26</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="91%"><FONT SIZE=2>Experts</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>S-26</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2><B>Prospectus  </B></FONT></P>

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<TH WIDTH="92%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="5%" ALIGN="CENTER"><FONT SIZE=1><B>Page</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>About this Prospectus</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>i</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Nektar Therapeutics</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Cautionary Factors That May Affect Future Results</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Forward-Looking Statements</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>The Securities We May Offer</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>3</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Ratio of Earnings to Fixed Charges</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>4</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Use of Proceeds</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>5</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Description of Capital Stock</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>5</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Description of Debt Securities</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>11</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Description of Warrants</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>17</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Legal Ownership of Securities</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>19</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Plan of Distribution</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>23</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Legal Matters</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>24</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Experts</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>24</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Where You Can Find More Information</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>24</FONT></TD>
</TR>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>You should rely only on the information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus. We have not
authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. You should assume that the
information appearing in this prospectus supplement and the accompanying prospectus, as well as information that we have previously filed with the Securities and Exchange Commission and incorporated
by reference, is accurate only as of the date of the applicable document. The descriptions set forth in this prospectus supplement replace and supplement, where inconsistent, the description of the
general terms and provisions set forth in the accompanying prospectus.</I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>The distribution of this prospectus supplement and the accompanying prospectus and the offering of the common stock in certain jurisdictions may be restricted by
law. If you possess this prospectus supplement and the accompanying prospectus, you should find out about and observe these restrictions. This prospectus supplement and the accompanying prospectus are
not an offer to sell the common stock and are not soliciting an offer to buy the common stock in any jurisdiction where the offer or sale is not permitted or where the person making the offer or sale
is not qualified to do so or to any person to whom it is not permitted to make such offer or sale.</I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>All Nektar brand and product names are trademarks or registered trademarks of Nektar Therapeutics, in the United States and other countries. All other trade
names, trademarks and service marks appearing in this prospectus supplement and the accompanying prospectus are the property of their respective holders. We do not intend our use or display of other
parties' trade names, or trademarks or service marks to imply a relationship with, or endorsement or sponsorship of, us by these other parties.</I></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>i</FONT></P>

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<A NAME="toc_cg1099_1"> </A>
<BR></FONT><FONT SIZE=2><B>PROSPECTUS SUPPLEMENT SUMMARY    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><I>This is only a summary of the prospectus supplement. You should read the entire prospectus supplement and accompanying prospectus,
including "Risk Factors" and our consolidated financial statements and related notes, as well as the documents incorporated by reference in this prospectus supplement and accompanying prospectus,
before making an investment decision. Unless otherwise expressly stated or the context indicates otherwise, all references to "Nektar," "we," "our," "ours" and "us" refer to Nektar Therapeutics and
its consolidated subsidiaries.</I></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="cg1099_nektar_therapeutics"> </A>
<A NAME="toc_cg1099_2"> </A>
<BR></FONT><FONT SIZE=2><B>Nektar Therapeutics    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nektar Therapeutics is in the business of improving therapeutics through improved drug delivery. Each of our three technology platforms has the ability to enhance
therapeutics based on the technology and the particular application of the technology. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are working to become one of the world's leading drug delivery products based companies by providing a portfolio of technologies and expertise that is intended to enable us and our
pharmaceutical and biotechnology partners to improve drug performance throughout the drug development process. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
mission is to provide drug delivery technologies that enable the development and manufacture of superior therapeutics that make a difference in patients' lives. Primarily, we want to
partner with pharmaceutical and biotechnology companies seeking to improve and differentiate their marketed products as well as the products in their pipelines. In addition to our partner-funded
programs, we have started applying our technologies independently through internal early-stage product development efforts. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
technologies are designed to improve either the performance of a drug molecule (</FONT><FONT SIZE=2><I>e.g.</I></FONT><FONT SIZE=2>, bioavailability, safety, efficacy, stability,
targeting, etc.) or how the drug is delivered (</FONT><FONT SIZE=2><I>e.g.</I></FONT><FONT SIZE=2>, enabling new dosage form or delivery profile that improves how the therapeutic can treat patients).
We currently have three technology platforms: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><B>Nektar Advanced PEGylation Technology</B></FONT><FONT SIZE=2>&#151;using advanced PEGylation (covalent chemical attachment of polyethylene
glycol, or PEG, chains to drug substances) and PEG-based delivery systems to enhance the efficacy and performance of several drug classes, including macromolecules such as peptides and
proteins, smaller sized molecular compounds and other drugs. Nektar Advanced PEGylation Technology has been approved for use in five products in the U.S. and in another product approved only in
Europe.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><B>Nektar Pulmonary Technology</B></FONT><FONT SIZE=2>&#151;using our pulmonary expertise in drug formulation and inhalers for systemic and local
lung therapies. Nektar Pulmonary Technology is focused on the formulation of molecules and delivery devices for inhalation. Through this technology we are working to improve or enable drug delivery
and improve therapeutic outcomes for large and small molecules for systemic and local lung therapies.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><B>Nektar Supercritical Fluid Technology</B></FONT><FONT SIZE=2>&#151;using a single step particle formulation process that is intended to yield
consistent powder particles that can be incorporated into a final dosage form such as tablets or capsules. Nektar Supercritical Fluid Technology uses proprietary particle engineering methods designed
to develop drug formulations to obtain precision and consistency in particle formulation or to develop beneficial new formulations, including taste-masking of products and improving the
bioavailability of products. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
strategy is to enable our pharmaceutical and biotechnology partners' drugs through partner-funded programs, and to selectively fund internal early-stage proprietary products with a
view to finding a pharmaceutical or biotechnology company partner prior to late stage clinical development. Our goal </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>S-1</FONT></P>

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<P><FONT SIZE=2>is
to leverage our technology investments over a large pipeline that allows us to realize value by advancing our partners' and our proprietary products. As we identify the technologies and markets in
which we see opportunities to establish leadership positions, we intend to continue to develop or acquire technologies intended to capitalize on such opportunities. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
currently have collaborations ongoing with more than 25 biotechnology and pharmaceutical companies, of which 21 are announced. Our product pipeline includes 5 products approved in the
United States, 1 additional product approved in Europe, 4 products in Phase III trials, and 12 products in Phase I and Phase II trials. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>S-2</FONT></P>

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<BR></FONT><FONT SIZE=2><B>The Offering    <BR>    </B></FONT></P>

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<TD WIDTH="31%" VALIGN="TOP"><FONT SIZE=2>Common stock offered by Nektar</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="TOP"><FONT SIZE=2>9,500,000 shares</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="31%"><FONT SIZE=2><BR>
Over-allotment option</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2><BR>
Up to 1,425,000 shares that may be purchased by the underwriter solely to cover over-allotments.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="31%" VALIGN="TOP"><FONT SIZE=2><BR>
Approximate number of shares of common stock outstanding immediately after this offering</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="TOP"><FONT SIZE=2><BR>
70,570,266 shares</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="31%"><FONT SIZE=2><BR>
Use of proceeds</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2><BR>
We estimate that we will receive net proceeds of approximately $196,245,000 ($225,756,750 if the underwriter exercises its over-allotment option in full) from the sale of 9,500,000 shares of common stock that we are offering, after deducting the
underwriting discounts and commissions and estimated expenses payable by us. We anticipate using the net proceeds from this offering for general corporate purposes, which may include: investing in or accelerating various product development programs,
including Exubera; undertaking potential acquisitions; developing technologies; and retiring our outstanding debt. See "Use of Proceeds" below.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="31%" VALIGN="TOP"><FONT SIZE=2><BR>
Nasdaq National Market symbol</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="TOP"><FONT SIZE=2><BR>
NKTR</FONT></TD>
</TR>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You
should carefully review the information appearing under the caption "Risk Factors" in this prospectus supplement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have never declared or paid any cash dividends on our common stock. We intend to retain our funds to finance the growth and development of our business and do not anticipate paying
any cash dividends in the foreseeable future. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
number of shares to be outstanding after this offering is based on our shares outstanding as of February&nbsp;29, 2004 and assumes that the underwriter's over-allotment
option is not exercised. As of February&nbsp;29, 2004, we had 61,070,266 shares of common stock outstanding, excluding: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>14,448,446
shares of common stock subject to outstanding options at a weighted average exercise price of $16.57 per share;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>56,000
shares of common stock issuable upon exercise of warrants outstanding at a weighted average price of $17.79 per share;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>17,111,704
shares of common stock issuable upon conversion of our outstanding convertible subordinated notes and debentures as well as our outstanding convertible preferred
stock; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>4,428,825
shares available for future grant under our stock option plans and employee stock purchase plans. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>S-3</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1099_recent_developments"> </A>
<A NAME="toc_de1099_1"> </A>
<BR></FONT><FONT SIZE=2><B>Recent Developments    <BR>    </B></FONT></P>

<P><FONT SIZE=2><I>Proposed Redemption of Convertible Subordinated Notes due 2010  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;8, 2004, we announced our intention to call all of our 3.0% convertible subordinated notes due 2010 for redemption at a redemption price equal to
100% of the principal amount of such notes, plus accrued and unpaid interest to the redemption date. As of February&nbsp;29, 2004, we had $133.3&nbsp;million principal amount of 3.0% convertible
subordinated notes due 2010 outstanding. The notes are currently convertible, at the option of the holders, into shares of our common stock at a conversion price of $11.35 per share, equivalent to a
conversion rate of approximately 88.1057 shares per $1,000 principal amount of the notes. Because the last reported sale price of our common stock on the Nasdaq National Market on March&nbsp;8, 2004
was $22.13 per share, which is in excess of the conversion price, we expect that the holders of the 2010 notes would convert the notes into common stock instead of allowing us to redeem them for cash.
Assuming all of the 2010 notes outstanding as of February&nbsp;29, 2004 were converted into common stock, we would be required to issue approximately 11.7&nbsp;million shares of our common stock.
In addition, we would be required to pay the holders of the 2010 notes an aggregate of approximately $10.0&nbsp;million in cash or common stock under the terms of the 2010 notes. </FONT></P>


<P><FONT SIZE=2><I>Exubera  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;4, 2004, we reported that Pfizer&nbsp;Inc. and Aventis announced that the European Medicines Evaluation Agency, or EMEA, has accepted the filing
of a marketing authorization application for Exubera. The filing was submitted by Pfizer and Aventis. Exubera is a dry powder form of insulin that is inhaled into the lungs prior to eating. Inhaled
insulin closely mimics the normal physiological insulin response to meals, by quickly being absorbed into the bloodstream to reduce meal-related spikes in glucose levels. Pfizer and
Aventis are seeking approval to market Exubera for adult patients with type 1 and type 2 diabetes. The two companies have been working with the U.S. Food and Drug Administration, or FDA, to determine
the appropriate timing for submission of the Exubera new drug application in the U.S. The determination of when, if ever, to file for marketing approval in the U.S. or any other market will be made by
Pfizer at its discretion. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>S-4</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
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<A NAME="toc_de1099_2"> </A>
<BR></FONT><FONT SIZE=2><B>RISK FACTORS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><I>An investment in the common stock offered by this prospectus supplement involves a high degree of risk. You should carefully consider the
following factors and other information in this prospectus supplement and the accompanying prospectus and the documents incorporated or deemed to be incorporated by reference in this prospectus
supplement and the accompanying prospectus before deciding to purchase our common stock. Any of the following factors could materially and adversely affect our business, operating results or financial
condition. In that case, the value of our common stock could decline and you may lose part or all of your investment.</I></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1099_risks_relating_to_our_business"> </A>
<A NAME="toc_de1099_3"> </A>
<BR></FONT><FONT SIZE=2><B>Risks Relating to Our Business    <BR>    </B></FONT></P>

<P><FONT SIZE=2><B>If our collaborative partners that we depend on to obtain regulatory approvals and commercialization of our products are not successful, or if such collaborations fail, then
our product development or commercialization of our products may be delayed or unsuccessful.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because we are in the business of developing technology for improving drug formulations and methods for drug delivery, and licensing these technologies to
companies that make and sell drugs, we do not have the people and other resources to do the following things: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>synthesize
active pharmaceutical ingredients to be used as medicines;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>design
and conduct large scale clinical studies;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>prepare
and file documents necessary to obtain government approval to sell a given drug product; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>market
and sell our products when and if they are approved. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When
we sign a collaborative development agreement or license agreement to develop a product with a drug or biotechnology company, the drug or biotechnology company agrees to do some or
all of the things described above. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reliance
on collaborative relationships poses a number of risks, including: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
potential inability to control whether and the extent to which our collaborative partners will devote sufficient resources to our programs or products;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>disputes
which may arise in the future with respect to the ownership of rights to technology and/or intellectual property developed with collaborative partners;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>disagreements
with collaborative partners which could lead to delays in or termination of the research, development or commercialization of product candidates, or result in
litigation or arbitration;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
potential for contracts with our collaborative partners to fail to provide significant protection or to be effectively enforced if one of these partners fails to
perform. Collaborative partners have considerable discretion in electing whether to pursue the development of any additional products and may pursue alternative technologies or products either on
their own or in collaboration with our competitors;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
potential for collaborative partners with marketing rights to choose to devote fewer resources to the marketing of our products than they do to products of their own
development;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>risks
related to the ability of our collaborative partners to pay us; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
potential for collaborative partners to terminate their agreements with us unilaterally for any or no reason. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>S-5</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Given
these risks, there is a great deal of uncertainty regarding the success of our current and future collaborative efforts. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have entered into collaborations in the past that have been subsequently terminated. If other collaborations are suspended or terminated, our ability to commercialize certain of our
other proposed products could also be negatively impacted. If these efforts fail, our product development or commercialization of products could be delayed and our financial position and results of
operations would be significantly harmed. </FONT></P>

<P><FONT SIZE=2><B>If Pfizer does not file an NDA for approval of Exubera in the U.S., if the FDA or the EMEA does not timely approve any NDA or equivalent European regulatory submission for
Exubera, or if our collaboration with Pfizer is discontinued prior to the commercial launch of Exubera, then our financial position and results of operations will be significantly harmed.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are developing with Pfizer an inhaleable version of insulin, Exubera, for the treatment of Type 1 and Type 2 diabetes that will be administered using our
Pulmonary Technology. Exubera is currently in extended Phase III clinical trials. We currently depend on Pfizer as the source of a significant portion of our revenues. For each of the years ended
December&nbsp;31, 2003 and 2002, revenue from Pfizer accounted for 59% of our revenue. In March&nbsp;2004, Pfizer and Aventis announced that the EMEA has accepted the filing of a marketing
authorization application for Exubera. However, there can be no assurance that Exubera will be approved for marketing or commercial use in the European Union ("E.U.") Delays in the filing with the FDA
of a new drug application ("NDA") for Exubera will result in a delay in marketing approval in the U.S., and there can be no assurance that even if the NDA submission is filed, Exubera will be approved
for marketing and commercial use in the U.S. Among the factors that may delay the filing or approval of the NDA, the approval by the EMEA to market Exubera in the E.U., or the commercial launch of
Exubera in the U.S. or the E.U., or that may impact a decision to proceed at all with respect to any of the foregoing, are the following: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Pfizer
is currently conducting studies to generate controlled long-term safety data with respect to Exubera, in particular its effect on lung function, and the
results of the studies may impact the filing of regulatory submissions or regulatory approvals.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Pfizer
and its partner, Aventis, have been working with the FDA to determine the appropriate timing for submission of the Exubera NDA in the U.S. The results of any
discussions with the FDA with respect to the requirements for and timing of the submission of an NDA may impact the filing or approval of the NDA.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>We
may experience difficulties with respect to the processing of the dry powder formulation of inhaleable insulin, and the filling and packaging of the inhaleable insulin
powder for Exubera. We may not be able to transfer the filling and packaging technology to Pfizer for the large scale commercial production of Exubera.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>We,
with our contract manufacturers, may experience difficulties with respect to the production of the pulmonary inhaler device for Exubera, including the design, scale up
and automation of the commercial manufacture of the pulmonary inhaler device for Exubera, and any such difficulties may delay the filing and approval of the NDA or the approval to market in the E.U.
Our contract manufacturers may also experience difficulties with respect to manufacturing the device in high volumes for commercial use.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Pfizer
may elect for marketing or other reasons, to delay or not proceed with the filing of regulatory submissions for Exubera, or if approved following any such filing, the
commercial launch of Exubera. </FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
determination as to whether or when an NDA is filed with respect to Exubera will be made by Pfizer in its discretion. If the filing or approval of the NDA is substantially delayed
beyond the internal </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>S-6</FONT></P>

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<P><FONT SIZE=2>estimates
we have made for purposes of budgeting and resource allocation, we may not have the financial ability to continue supporting the Exubera program or be able to meet our contractual
obligations relating to the commercial launch of Exubera. In the event of any such delay, we may also elect to divert resources away from Exubera related activities or otherwise reduce our activities
relating to the Exubera program. Any material delay in the filing for regulatory approval or material delay in receiving regulatory approval (which in some countries includes pricing approval), or
failure to receive regulatory approval for Exubera at all, would affect our contract research revenue from Pfizer, may result in the payment by us of substantial reimbursements to the contract
manufacturers of our proprietary inhaler device with respect to the capital they have deployed in support of such activity, and would significantly harm our financial position and results of
operations. Furthermore, should the collaboration with Pfizer be discontinued, our financial position and results of operations may be substantially harmed. </FONT></P>


<P><FONT SIZE=2><B>If we fail to establish future successful collaborative relationships, then our financial results may suffer and our product development efforts may be delayed or unsuccessful.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We intend to seek future collaborative relationships with pharmaceutical and biotechnology partners to fund some of our research and development expenses and to
develop and commercialize potential products. Further, we anticipate that the timing of drug development programs under existing collaborative agreements with our partners will continue to affect our
revenues from such agreements. We may not be able to negotiate acceptable collaborative arrangements in the future, and any arrangements we do negotiate may not be successful. If we fail to establish
additional collaborative relationships, we will be required to undertake research, development, marketing, and manufacturing of our proposed products at our own expense or discontinue or reduce these
activities. </FONT></P>

<P><FONT SIZE=2><B>If we are unable to establish successful collaborative relationships for our early-stage proprietary product development, then our financial results may suffer and our product
development efforts may be delayed or unsuccessful.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We intend to seek future collaborative relationships with pharmaceutical and biotechnology partners to fund some clinical trials and other development expenses
associated with the development and commercialization of products developed through our Proprietary Products Group. We may not be able to negotiate acceptable collaborative arrangements in the future
with respect to these products, and any arrangements we do negotiate may not be successful. If we fail to establish these collaborative relationships, we will have expended significant funds of our
own in developing these products, and not
get a return on our investment. We may then be required to undertake further development, marketing, and manufacturing of these products at our own expense or discontinue or reduce these activities
altogether. As a result, failure to establish successful collaborative relationships for these products with pharmaceutical and biotechnology partners will cause our financial results to suffer and
delay or terminate the development of such products. </FONT></P>

<P><FONT SIZE=2><B>If our drug delivery technologies are not commercially feasible, then our revenues and results of operations will be impacted negatively.  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are in an early stage of development with respect to many of our products. There is a risk that our technologies will not be commercially feasible. Even if our
technologies are commercially feasible, they may not be commercially accepted across a range of large and small molecule drugs. We have tested 13 drug formulations based on our Pulmonary Technology in
humans. None of the products using our Pulmonary Technology have been approved for marketing; Exubera is in Phase III and some other products are in Phase I clinical trials. Our Advanced PEGylation
Technology has been incorporated in five products that the FDA has approved for marketing and one additional product approved in Europe, and 11 others are in clinical trials. Our Supercritical Fluid
Technology is also </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>S-7</FONT></P>

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<P><FONT SIZE=2>primarily
in an early stage of feasibility. Our potential products require extensive research, development and preclinical and clinical testing. Our potential products also may involve lengthy
regulatory reviews and require regulatory approval before they can be sold. We do not know if, and cannot provide assurance that, any of our potential products will prove to be safe and effective,
accomplish the objectives that we and our collaborative partners are seeking through the use of our technologies, meet regulatory standards or continue to meet such standards if already approved.
There is a risk that we and our collaborative partners may not be able to produce any of our potential products in commercial quantities at acceptable costs, or market them successfully. Failure to
achieve commercial feasibility, demonstrate safety, achieve clinical efficacy, obtain regulatory approval or, together with partners, successfully market products will negatively impact our revenues
and results of operations. </FONT></P>

<P><FONT SIZE=2><B>If our research and development efforts are delayed or unsuccessful, then we will experience delay or be unsuccessful in having our products commercialized, and our business
will suffer.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except for our products that have already been approved by the FDA or other regulatory agencies, our product candidates are still in research and development,
including preclinical testing and clinical trials. Preclinical testing and clinical trials are long, expensive and uncertain processes. It may take us or our collaborators several years to complete
this testing, and failure can occur at any stage in the process. Success in preclinical testing and early clinical trials does not ensure that later clinical trials will be successful. A number of
companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in later stage clinical trials, even after promising results in earlier trials. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
clinical trial may fail to produce results satisfactory to us, our collaborative partners or the FDA. Preclinical and clinical data can be interpreted in different ways, which could
delay, limit or prevent regulatory approval or commercialization. Negative or inconclusive results or adverse medical events during a clinical trial could cause a clinical trial to be repeated or a
program to be terminated. We typically rely on collaborative partners and third-party clinical investigators to conduct clinical trials of our products and, as a result, we may face additional
delaying factors outside our control. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
do not know if any of our research and development efforts, including preclinical testing or clinical trials, will adhere to our planned schedules or be completed on a timely basis or
at all. Typically, there is a high rate of attrition for product candidates in preclinical and clinical trials. </FONT></P>

<P><FONT SIZE=2><B>If our drug delivery technologies do not satisfy certain basic feasibility requirements such as total system efficiency, then our products may not be competitive.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may not be able to achieve the total system efficiency for products based on our Pulmonary Technology that is needed to be competitive with alternative routes
of delivery or formulation technologies. We determine total system efficiency by the amount of drug loss during manufacture, in the delivery system, and in reaching the ultimate site at which the drug
exhibits its activity. We would not consider a drug to be a good candidate for development and commercialization using our Pulmonary Technology if drug loss is excessive at any one stage or
cumulatively in the manufacturing and delivery process. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
ability to efficiently attach PEG polymer chains to a drug molecule is the initial screen for determining whether drug formulations using our Advanced PEGylation Technology are
commercially feasible. We would not consider a drug formulation to be a good candidate for development and commercialization using our Advanced PEGylation Technology if we could not efficiently attach
a PEG polymer chain to such drug without destroying or impairing the drug's activity. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
our Supercritical Fluid Technology, solubility characteristics of a drug and the solvents, which may be incorporated in the manufacturing process, provide the initial screen for
whether drug formulations using this technology are commercially feasible. We would not consider a drug to be a </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>S-8</FONT></P>

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<P><FONT SIZE=2>good
candidate for this technology if its solubility characteristics were such that the application of our technology results in very low efficiency in manufacturing of drug powders. </FONT></P>


<P><FONT SIZE=2><B>If our drug formulations are not stable, then we will not be able to develop or commercialize products.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may not be able to identify and produce powdered or other formulations of drugs that retain the physical and chemical properties needed to work effectively
with our inhaler devices for deep lung delivery using our Pulmonary Technology, or through other methods of drug delivery using our Advanced PEGylation or Supercritical Fluid Technology. Formulation
stability is the physical and chemical stability of the drug over time and under various storage, shipping and usage conditions. Formulation stability will vary with each drug formulation and the type
and amount of ingredients that are used in the formulation. Since our drug formulation technology is new and largely unproven, we do not know if our drug formulations will retain the needed physical
and chemical properties and performance of the drugs. Problems with formulated drug powder stability in particular would negatively impact our ability to develop products based on our Pulmonary
Technology or Supercritical Fluid Technology, or obtain regulatory approval for or market such products. </FONT></P>

<P><FONT SIZE=2><B>If our drug delivery technologies are not safe, then regulatory approval of our products may not be obtained, or our products may not be developed or marketed.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We or our collaborative partners may not be able to prove that potential products using our drug delivery technologies are safe. Our products require lengthy
laboratory, animal and human testing. Many of our products are in preclinical testing or the early stage of human testing. Since many of our products are in an early stage of testing and have not
completed clinical trials, we cannot be certain that these products, and our technology that developed these products, are safe or will not produce unacceptable adverse side effects. The safety of our
formulations will vary with each drug and the ingredients used in our formulation. If any product is found not to be safe, the product will not be approved for marketing or commercialization. </FONT></P>

<P><FONT SIZE=2><B>If product liability lawsuits are brought against us, we may incur substantial liabilities.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The manufacture, testing, marketing and sale of medical products entail an inherent risk of product liability. If product liability costs exceed our liability
insurance coverage, we may incur substantial liabilities. Whether or not we were ultimately successful in 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. 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. </FONT></P>

<P><FONT SIZE=2><B>If the products using our Pulmonary Technology do not provide consistent doses of medicine, then we will not be able to develop, and our partners will not be able to obtain
regulatory approval for and commercialize, products.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may not be able to provide reproducible dosing of stable formulations of drug compounds. Reproducible dosing is the ability to deliver a consistent and
predictable amount of drug into the bloodstream over time both for a single patient and across patient groups. Reproducible dosing of drugs based on our Pulmonary Technology requires the development
of: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>an
inhalation or other device that consistently delivers predictable amounts of dry powder to the deep lung;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>accurate
unit dose packaging of dry powder; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>moisture
resistant packaging. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>S-9</FONT></P>

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<UL>
<UL>
</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since
our Pulmonary Technology is still in development and is yet to be used in commercialized products, we cannot be certain that we will be able to develop reproducible dosing of any
potential product. The failure to do so means that we would not consider such a product as a good candidate for development and commercialization. </FONT></P>


<P><FONT SIZE=2><B>If we or our partners do not obtain regulatory approval for our products on a timely basis, then our revenues and results of operations may be affected negatively.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There is a risk that we or our partners will not obtain regulatory approval (which in some countries includes pricing approval) for our unapproved products on a
timely basis, or at all. Our unapproved products must undergo rigorous animal and human testing and an extensive FDA mandated or equivalent foreign authorities' review process. This process generally
takes a number of years and requires the expenditure of substantial resources. The time required for completing such testing and
obtaining such approvals is uncertain. The FDA and other U.S. and foreign regulatory agencies also have substantial discretion to terminate clinical trials, require additional testing, delay or
withhold registration and marketing approval and mandate product withdrawals including recalls. The FDA has approved for marketing five products using our Advanced PEGylation Technology for specific
uses in the United States. Further, another product using our Advanced PEGylation Technology has been approved in Europe. Even though our partners have obtained regulatory approval for some of our
products, these products and our manufacturing processes are subject to continued review by the FDA and other regulatory authorities. Even if our partners receive regulatory approval of a product, the
approval may limit the indicated uses for which our partners may market the product. In addition, our partners' marketed products, our manufacturing facilities and we, as the manufacturer in certain
instances, will be subject to continual review and periodic inspections. Later discovery from such review and inspection of previously unknown problems may result in restrictions on our partners'
products or on us, including withdrawal of our partners' products from the market. The failure to obtain timely regulatory approval of our partners' products, any product marketing limitations or a
product withdrawal would negatively impact our revenues and results of operations. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, we may encounter delays or rejections based upon changes in FDA regulations or policies, including policies relating to current good manufacturing practice compliance, or
"cGMP," during the period of product development. We may encounter similar delays in other countries. </FONT></P>

<P><FONT SIZE=2><B>If our technologies cannot be integrated successfully to bring products to market, then our ability to develop, and our partners' ability to obtain approval or market our
products, may be delayed or unsuccessful.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may not be able to integrate all of the relevant technologies to provide complete drug delivery and formulation systems. In particular, our development of
drugs based on our Pulmonary Technology relies upon the following several different but related technologies: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>dry
powder formulations;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>dry
powder processing technology;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>dry
powder packaging technology; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>deep
lung delivery devices. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
other technologies may face similar challenges relating to the integration of drug formulation, processing, packaging and delivery device technologies. At the same time we must: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>establish
collaborations with partners;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>perform
laboratory and pre-clinical testing of potential products; and </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>S-10</FONT></P>

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<UL>
</UL>
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<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>scale-up
our manufacturing processes. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
must accomplish all of these steps without delaying any aspect of technology development. Any delay in one component of product or business development could delay our ability to
develop, and our partners' ability to obtain approval or market products using our delivery and formulation technologies. </FONT></P>


<P><FONT SIZE=2><B>If we are not able to manufacture our products in commercially feasible quantities or at commercially feasible costs, then our products will not be successfully commercialized.  </B></FONT></P>

<P><FONT SIZE=2><I>Nektar Advanced PEGylation Technology and Supercritical Fluid Technology  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except for the five approved products and the one additional product approved in Europe incorporating our Advanced PEGylation Technology, all of the drug
formulations which incorporate our Advanced PEGylation Technology and Supercritical Fluid Technology are in various stages of feasibility testing or human clinical trials. We are currently expanding
our Advanced PEGylation Technology manufacturing capacity and anticipate having to add additional Supercritical Fluid Technology manufacturing capacity. If we are not able to scale-up to
large clinical trials or commercial manufacturing for products incorporating either of these technologies in a timely manner or at a commercially reasonable cost, we risk not meeting our customers'
supply requirements or our contractual obligations. Our failure to solve any of these problems could delay or prevent late stage clinical testing and commercialization of our products and could
negatively impact our revenues and results of operations. </FONT></P>

<P><FONT SIZE=2><I>Nektar Pulmonary Technology  </I></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except for the one product incorporating our Pulmonary Technology that has been filed for approval in Europe, all of the drug formulations which incorporate our
Pulmonary Technology are in various stages of human clinical trials or feasibility testing </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Powder Processing.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We have no experience manufacturing powder products for commercial purposes. With respect to drugs based
on our Pulmonary Technology, we have only performed powder processing on the scale needed for testing formulations, and for early stage and larger clinical trials. We may encounter manufacturing and
control problems as we attempt to scale-up powder processing facilities. We may not be able to achieve such scale-up in a timely manner or at a commercially reasonable cost, if
at all, and the powder processing system we implement may not be applicable for other drugs. Our failure to solve any of these problems could delay or prevent some late stage clinical testing and
commercialization of our products and could negatively impact our revenues and results of operations. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
date, we rely primarily on two particular methods of powder processing. There is a risk that these technologies will not work with all drugs or that the cost of drug production with
this processing will preclude the commercial viability of certain drugs. Additionally, there is a risk that any alternative powder processing methods we may pursue will not be commercially practical
for aerosol drugs or that we will not have, or be able to acquire the rights to use, such alternative methods. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Powder Packaging.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our fine particle powders and small quantity packaging utilized for drugs based on our Pulmonary Technology
require special handling. We have designed and qualified automated filling equipment for small and moderate quantity packaging of fine powders. We face significant technical challenges in
scaling-up an automated filling system that can handle the small dose and particle sizes of our powders in commercial quantities. There is a risk that we will not be able to
scale-up our automated filling equipment in a timely manner or at commercially reasonable costs. Any failure or delay in such scale-up would delay product development or bar
commercialization of products based on our Pulmonary Technology and would negatively impact our revenues and results of operations. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>S-11</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
can be no assurance we will be able to manufacture products on our autofiller system in a timely manner or at a commercially reasonable cost; any delay or failure in further
developing such technology would delay product development or inhibit commercialization of our products and would have a materially adverse effect on us. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nektar Pulmonary Inhaler Device.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We face many technical challenges in developing our pulmonary inhaler device to work with a
broad range of drugs, to produce such devices in sufficient quantities, and to adapt the devices to different powder formulations. Our pulmonary inhaler device being used with Exubera is still in
clinical testing. Additional design and development work may be required to optimize the device for regulatory approval, field reliability, or other issues that may be important to its commercial
success. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additional
design and development work may lead to a delay in regulatory approval and delay efforts to seek regulatory approval for any product that incorporates the device or the time
the device could be ready for commercial launch. In addition, we are attempting to develop a smaller inhaler device, which presents particular technical challenges. There is a risk that we will not
successfully achieve any of these challenges. Our failure to overcome any of these challenges would negatively impact our revenues and results of operations. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
late stage clinical trials and initial commercial production, we intend to use one or more contract manufacturers to produce our pulmonary inhaler devices. There is a risk that we
will not be able to maintain arrangements with our contract manufacturers on commercially acceptable terms or at all, or effectively scale-up production of our pulmonary inhaler devices
through contract manufacturers. Our failure to do so would negatively impact our revenues and results of operations. Dependence on third parties for the manufacture of our pulmonary inhaler devices
and their supply chain may adversely affect our cost of goods and ability to develop and commercialize products on a timely or competitive basis. Because our manufacturing processes and those of our
contract manufacturers are very complex and subject to lengthy governmental approval processes, alternative qualified production sources or capacity may not be available on a timely basis or at all.
Disruptions or delays in our manufacturing processes or those of our contract manufacturers for existing or new products could result in increased costs, loss of revenues or market share, or damage to
our reputation. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
is no assurance that devices designed by us and built by contract manufacturers will be approved or will meet approval requirements on a timely basis or at all, or that any of our
device development will be successful or commercially viable. </FONT></P>

<P><FONT SIZE=2><B>If Pfizer is not able to fill the bulk drug powders for Exubera in commercially feasible quantities, then Exubera will not be successfully commercialized, which would
negatively impact our revenues and results of operations.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have developed a high capacity automated filling unit capable of filling blisters on a production scale for moderate and large volume products using our
Pulmonary Technology. The technology for the high capacity automated filling unit has been transferred to Pfizer who will have the responsibility of packaging and filling the bulk drug powders for
Exubera. There are significant technical challenges in scaling-up an automated filling system that can handle the small dose and particle sizes of our powders in commercial quantities. In
addition, there is the additional risk that Pfizer has no backup manufacturing facility for this process. Any failure or delay in the manufacturing facility or process would delay product development
or bar commercialization of Exubera and would negatively impact our revenues and results of operations. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>S-12</FONT></P>

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<P><FONT SIZE=2><B>If we are not able to manufacture our dry powder inhaler device in commercially feasible quantities or at commercially feasible costs, then our Pulmonary Technology products
may not be successfully commercialized.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to our inhaler device being used with Exubera, we are developing a breath actuated compact dry powder inhaler device ("DPI"). We are developing the
DPI device to be appropriate for the delivery of either large or small molecules for short-term use. We face many unique technical challenges in developing the DPI device to work with a
broad range of drugs, producing the DPI device in sufficient quantities and adapting the DPI device to different powder formulations. Our DPI device is still in clinical testing and production
scale-up work is ongoing. Further design and development will be required to obtain regulatory approval for the DPI device, enable commercial manufacturing, insure field reliability or
manage other issues that may be important to its commercial success. Such additional design and development work may lead to a delay in efforts to seek regulatory approval for any product that
incorporates the DPI device, or could delay the timeframe within which the device could be ready for commercial launch. There is a risk that we will not successfully achieve any of these challenges.
Our failure to overcome any of these challenges would negatively impact our revenues and results of operations. </FONT></P>

<P><FONT SIZE=2><B>We depend on sole or exclusive suppliers for our pulmonary inhaler devices, bulk active pharmaceutical ingredients and PEG polymer chains and if such suppliers fail to supply
when required, then our product development efforts may be delayed or unsuccessful.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We agreed to subcontract the manufacture of our pulmonary inhaler devices used with Exubera before commercial production. We have identified contract
manufacturers that we believe have the technical capabilities and production capacity to manufacture such device and which can meet the requirements of cGMP. We are not certain that we will be able to
maintain satisfactory contract manufacturing on commercially acceptable terms, if at all. Our failure to maintain ongoing commercial relationships with our existing contract manufacturers may subject
us to significant reimbursement obligations upon termination of such relationships. Our dependence on third parties for the manufacture of our pulmonary inhaler devices may negatively impact our cost
of goods and our ability to develop and commercialize products based on our Pulmonary Technology on a timely and competitive basis. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the most part, we obtain the bulk active pharmaceutical ingredients we use to manufacture products using our technologies from sole or exclusive sources of supply. For example, with
respect to our source of bulk insulin, we have entered into a collaborative agreement with Pfizer that has, in turn, entered into an agreement with Aventis to manufacture regular human insulin. Under
the terms of their agreement, Pfizer and Aventis agreed to construct a jointly owned manufacturing plant in Frankfurt, Germany. Until needed, Pfizer will provide us with insulin from Aventis's
existing plant. We have also entered into an agreement with one supplier for the supply of PEG polymer chains we use in our products that incorporate our Advanced PEGylation Technology. NOF
Corporation is our sole supplier of pharmaceutical grade PEGylation materials pursuant to an agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
our sole or exclusive source suppliers fail to provide either active pharmaceutical ingredients or PEGylation materials in sufficient quantities when required, our revenues and
results of operations will be negatively impacted. </FONT></P>

<P><FONT SIZE=2><B>If the market does not accept products using our drug delivery technologies, then our revenues and results of operations will be adversely affected.  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The commercial success of our potential products depends upon market acceptance by health care providers, third-party payors like health insurance companies and
Medicare and patients. Our products </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>S-13</FONT></P>

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<P><FONT SIZE=2>under
development use new drug delivery technologies and there is a risk that the market will not accept our potential products. Market acceptance will depend on many factors, including: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
safety and efficacy of products demonstrated in clinical trials;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>favorable
regulatory approval and product labeling;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
frequency of product use;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
ease of product use;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
availability of third-party reimbursement;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
availability of alternative technologies; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
price of our products relative to alternative technologies. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
is a risk that health care providers, patients or third-party payors will not accept products using our drug delivery and formulation technologies. If the market does not accept
our potential products, our revenues and results of operations would be significantly and negatively impacted. </FONT></P>

<P><FONT SIZE=2><B>If our products are not cost effective, then government and private insurance plans may not pay for them and our products may not be widely accepted, which will adversely
affect our revenues and results of operations.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In both domestic and foreign markets, sales of our products under development will depend in part upon the availability of reimbursement from third-party payors,
such as government health administration authorities, managed care providers, private health insurers and other organizations. In addition, such third-party payors are increasingly challenging the
price and cost effectiveness of medical
products and services. Significant uncertainty exists as to the reimbursement status of newly approved health care products. Legislation and regulations affecting the pricing of pharmaceuticals may
change before regulatory agencies approve our proposed products for marketing. Adoption of such legislation and regulations could further limit reimbursement for medical products. A government or
third-party payor decision not to provide adequate coverage and reimbursements for our products would limit market acceptance of such products. </FONT></P>


<P><FONT SIZE=2><B>If our competitors develop and sell better drug delivery and formulation technologies, then our products or technologies may be uncompetitive or obsolete and our revenues and
results of operations will be adversely affected.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are aware of other companies engaged in developing and commercializing drug delivery and formulation technologies similar to our technologies. Some of our
competitors with regard to our Pulmonary Technology include AeroGen,&nbsp;Inc., Alkermes,&nbsp;Inc., Aradigm Corporation, and MannKind. AeroGen and Aradigm are each developing liquid drug delivery
systems, and Alkermes is working on a dry powder delivery system. Our competitors with regard to our Advanced PEGylation Technology include Valentis,&nbsp;Inc., Mountain View
Pharmaceuticals,&nbsp;Inc. and SunBio PEG-SHOP, as well as several pharmaceutical and biotechnology companies with in-house PEGylation expertise. Some of our competitors with
regard to our Supercritical Fluid Technology include Alkermes, Battelle Memorial Institute, Ethypharm SA, Ferro Corp., Lavipharm SA and RxKinetics. Some of these companies license or provide the
technology to other companies, while others are developing the technology for internal use. Many of these companies have greater research and development capabilities, experience, manufacturing,
marketing, financial and managerial resources than we do and represent significant competition for us. Acquisitions of or collaborations with competing drug delivery companies by large pharmaceutical
or biotechnology companies could enhance our competitors' financial, marketing and other resources. Accordingly, our competitors may succeed in developing competing technologies, obtaining regulatory
approval for products or gaining market acceptance before us. Developments by </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>S-14</FONT></P>

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<P><FONT SIZE=2>others
could make our products or technologies uncompetitive or obsolete. Our competitors may introduce products or processes competitive with or superior to our products or processes. </FONT></P>

<P><FONT SIZE=2><B>If any of our patents are invalid or pending patents do not issue or following issuance are deemed not valid, then we may lose key intellectual property right protection. If
our products infringe on third-party's rights, then we will suffer adverse effects on our ability to develop and commercialize products as well as our revenues and results of operations.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have filed patent applications covering certain aspects of our inhalation devices, powder processing technology, powder formulations and deep lung route of
delivery for certain molecules as well as for our Advanced PEGylation and Supercritical Fluid Technology, and we plan to file additional patent
applications. As of December&nbsp;31, 2003, we had 651 issued U.S. and foreign patents that cover certain aspects of our technologies and we have a number of patent applications pending. There is a
risk that many of the patents applied for will not issue, or that any patents that issue or have issued will not be held valid and enforceable. Enforcing our patent rights would be time consuming and
costly. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
access or our partners' access to the drugs to be formulated using our technologies will affect our ability to develop and commercialize our technologies. Many drugs, including
powder formulations of certain drugs that are presently under development by us, and our drug formulation technologies are subject to issued and pending U.S. and foreign patents that may be owned by
competitors. We know that there are issued patents and pending patent applications relating to the formulation and delivery of large and small molecule drugs, including several for which we are
developing formulations using our various technologies. This situation is highly complex, and the ability of any one company, including us, to commercialize a particular drug is unpredictable. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
intend generally to rely on the ability of our partners to provide access to the drugs that we formulate for deep lung and other forms of delivery. There is a risk that our partners
will not be able to provide access to such drug candidates. Even if our partners provide such access, there is a risk that third parties will accuse, and possibly a court or a governmental agency will
determine, our partners or us to be infringing a third-party's patent rights, and we will be prohibited from working with the drug or be found liable for damages that may not be subject to
indemnification, or we may choose to pay such third party royalties under a license to such patent rights. Any such restriction on access to drug candidates, liability for damages or payment of
royalties would negatively impact our revenues and results of operations. </FONT></P>

<P><FONT SIZE=2><B>We may incur material litigation costs, which may adversely affect our business and results of operations.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From time to time, we are party to various litigation matters, including several which relate to our patent and intellectual property rights. We cannot predict
with certainty the eventual outcome of any pending litigation or potential future litigation, and we might have to incur substantial expense in defending these or future lawsuits or indemnifying third
parties with respect to the results of such litigation. </FONT></P>

<P><FONT SIZE=2><B>If earthquakes, tornadoes, hurricanes and other catastrophic events strike, our business may be negatively affected.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our corporate headquarters, including a substantial portion of our research and development operations, are located in the San Francisco Peninsula, a region known
for seismic activity. A significant natural disaster such as an earthquake could have a material adverse impact on our business, operating results, and financial condition. There are no backup
facilities for some of our manufacturing operations located in the San Francisco Peninsula. Certain of our other facilities, such as our facility in Huntsville, Alabama and those of certain of our
collaborative partners located elsewhere may also be </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>S-15</FONT></P>

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<P><FONT SIZE=2>subject
to catastrophic events such as hurricanes and tornadoes, any of which could have a material adverse effect on our business, operating results, and financial condition. </FONT></P>

<P><FONT SIZE=2><B>Investors should be aware of industry-wide risks, which are applicable to us and may affect our revenues and results of operations.  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to the risks associated specifically with us described above, investors should also be aware of general risks associated with drug development and the
pharmaceutical and biotechnology industries. These include, but are not limited to: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>changes
in and compliance with government regulations;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>handling
and disposal of hazardous materials;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>workplace
health and safety requirements;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>hiring
and retaining qualified people; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>insuring
against product liability claims. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2><B>If we do not generate sufficient cash flow through increased revenues or raising additional capital, then we may not be able to meet our substantial debt obligations.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2003, we had approximately $360.0&nbsp;million in long-term convertible subordinated notes and debentures,
$31.7&nbsp;million in non-current capital lease obligations and $12.0&nbsp;million in other long-term liabilities. Our substantial long-term indebtedness, which
totaled $403.7&nbsp;million as of December&nbsp;31, 2003, has and will continue to impact us by: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>making
it more difficult to obtain additional financing; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>constraining
our ability to react quickly in an unfavorable economic climate. </FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Currently
we are not generating positive cash flow. Delay in the approval of Exubera, or other adverse occurrences related to our product development efforts, will adversely impact our
ability to meet our obligations to repay the principal amounts on our convertible subordinated notes and debentures when due. In addition, if the market price of our common stock is below the related
conversion price, holders of the related outstanding convertible subordinated notes and debentures will not likely convert such securities to equity in accordance with their existing terms. If we are
unable to satisfy our debt service requirements, substantial liquidity problems could result. As of December&nbsp;31, 2003 we had cash, cash equivalents and short-term investments of
approximately $286.0&nbsp;million. We expect to use a substantial portion of these assets to fund our on-going operations over the next few years. As of December&nbsp;31, 2003, we had
approximately $360.0&nbsp;million outstanding convertible subordinated notes and debentures, of which $7.7&nbsp;million, $183.0&nbsp;million and $169.3&nbsp;million in principal amount will
mature in 2006, 2007 and 2010, respectively. Moreover, on March&nbsp;8, 2004, we announced our intention to call for redemption all of our outstanding 3.0% convertible subordinated notes due 2010.
We cannot assure you that we will in fact call those convertible notes for redemption or, if we do call those notes for redemption, that they will be converted into common stock by the holders. Any
requirement that we make substantial cash payments to redeem the notes would have a material adverse effect on our results of operations, financial condition and liquidity. We may not generate
sufficient cash from operations to repay our convertible subordinated notes and debentures (assuming they do not convert into shares of our common stock) or satisfy any other of these obligations when
they become due and may have to raise additional funds from the sale of equity or debt securities or otherwise restructure our obligations in order to do so. There can be no assurance that any such
financing or restructuring will be available to us on commercially acceptable terms, if at all. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>S-16</FONT></P>

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<P><FONT SIZE=2><A
NAME="page_di1099_1_17"> </A> </FONT></P>

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<P><FONT SIZE=2><B>If we cannot raise additional capital our financial condition may suffer.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our capital needs may change as a result of numerous factors, and may result in additional funding requirements. In addition, we may choose to raise additional
capital due to market conditions or strategic considerations. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of such securities
could result in dilution to our stockholders. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have no material credit facility or other material committed sources of capital. To the extent operating and capital resources are insufficient to meet future requirements, we will
have to raise additional funds to continue the development and commercialization of our technologies and products. Such funds may not be available on favorable terms, or at all. In particular, our
substantial leverage may limit our ability to obtain additional financing. In addition, as an early stage biotechnology company, we do not qualify to issue investment grade debt and therefore any
financing we do undertake will likely involve the issuance of equity, convertible debt instruments and/or high-yield debt. These sources of capital may not be available to us in the event
we require additional financing. If adequate funds are not available on reasonable terms, we may be required to curtail operations significantly or obtain funds by entering into financing, supply or
collaboration agreements on unattractive terms. Our inability to raise capital could negatively impact our business. </FONT></P>

<P><FONT SIZE=2><B>If we fail to manage our growth effectively, our business may suffer.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our ability to offer commercially viable products, achieve our expansion objectives, manage our growth effectively and satisfy our commitments under our
collaboration agreements depends on a variety of factors, all of which must be successfully managed. Key factors include our ability to develop products internally, enter into strategic partnerships
with collaborators, attract and retain skilled employees and effectively expand our internal organization to accommodate anticipated growth including integration of any potential businesses that we
may acquire. If we are unable to manage some or all of these factors effectively, our business could grow too slowly or too quickly to be successfully sustained, thereby resulting in material adverse
effects on our business, financial condition and results of operations. </FONT></P>

<P><FONT SIZE=2><B>If we acquire additional companies, products or technologies, we may not be able to effectively integrate personnel and operations and such failure may disrupt our business and
results of operations.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have acquired companies, products and/or technologies in the past, and may continue to acquire or make investments in complementary companies, products or
technologies in the future. We may not receive the anticipated benefits of these acquisitions or investments. We may face risks relating to difficult integrations of personnel, technology and
operations, uncertainty whether any integration will be successful and whether earnings will be negatively affected, and potential distractions to our management with respect to these acquisitions. In
addition, our earnings may suffer because of acquisition-related costs. </FONT></P>

<P><FONT SIZE=2><B>We expect to continue to lose money for the next few years and may not reach profitability if our products do not generate sufficient revenue.  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have never had a profitable year and, through December&nbsp;31, 2003, we have an accumulated deficit of approximately $596.0&nbsp;million. We expect to
continue to incur substantial and potentially increasing losses over at least the next few years as we expand our research and development efforts, testing activities and manufacturing operations, and
as we further expand our late stage clinical and early commercial production facilities. Most of our potential products are in the early stages of development. Except for the approved products
incorporating our Advanced PEGylation Technology, </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>S-17</FONT></P>

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<A NAME="page_di1099_1_18"> </A>
<BR>

<P><FONT SIZE=2>we
have generated no revenues from product sales. Our revenues to date have consisted primarily of payments under short-term research and feasibility agreements and development contracts. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
achieve and sustain profitable operations, we must, alone or with others, successfully develop, obtain regulatory approval for, manufacture, introduce, market and sell products using
our drug delivery technologies. There is risk that we will not generate sufficient product or contract research revenue to become profitable or to sustain profitability. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di1099_risks_relating_to_this_offering"> </A>
<A NAME="toc_di1099_1"> </A>
<BR></FONT><FONT SIZE=2><B>Risks Relating to this Offering    <BR>    </B></FONT></P>

<P><FONT SIZE=2><B>We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We cannot specify with certainty the particular uses of the net proceeds we will receive from this offering. Our management will have broad discretion in the
application of the net proceeds, including for any of the purposes described in "Use of Proceeds." The failure by our management to apply these proceeds effectively could harm our business. </FONT></P>

<P><FONT SIZE=2><B>We expect our stock price to remain volatile.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our stock price is volatile. In the twelve-month period ending February&nbsp;29, 2004, based on closing prices on the Nasdaq National Market, our stock price
ranged from $4.46 to $19.36. We expect our stock price to remain volatile. A variety of factors may have a significant effect on the market price of our common stock, including: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>clinical
trial results or product development delays or delays in product approval or launch;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>announcements
by collaboration partners as to their plans or expectations related to products using our technologies;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>announcement
or termination of collaborative relationships by us or our competitors;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>fluctuations
in our operating results;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>developments
in patent or other proprietary rights;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>announcements
of technological innovations or new therapeutic products;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>governmental
regulation;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>public
concern as to the safety of drug formulations developed by us or others; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>general
market conditions. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
litigation brought against us as a result of this volatility could result in substantial costs and a diversion of our management's attention and resources, which could negatively
impact our financial condition, revenues, results of operations and the price of our common stock. </FONT></P>

<P><FONT SIZE=2><B>Anti-takeover provisions in our charter documents and under Delaware law may make it more difficult to acquire us, even though such acquisitions may be beneficial
to our stockholders.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>establishment
of a classified board of directors such that not all members of the board may be elected at one time; </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>S-18</FONT></P>

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<UL>
<UL>
</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>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;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>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;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>prohibition
on stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of stockholders;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>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
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>limitations
on who may call a special meeting of stockholders. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>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. </FONT></P>

<P><FONT SIZE=2><B>Future sales of our common stock in the public market could adversely affect the trading price of our common stock and our ability to raise funds in new stock offerings.  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Future sales of substantial amounts of our common stock in the public market, or the perception that such sales could occur, could adversely affect prevailing
trading prices of our common stock and could impair our ability to raise capital through future offerings of equity or equity related securities. As of February&nbsp;29, 2004, we had 61,070,266
shares of common stock outstanding, excluding: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>14,448,446
shares of common stock reserved for issuance upon exercise of options outstanding under our stock option plans;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>56,000
shares of our common stock reserved for issuance upon exercise of outstanding warrants;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>17,111,704
shares of common stock reserved for issuance upon conversion of our outstanding convertible subordinated notes and debentures as well as our outstanding
convertible preferred stock; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>4,428,825
additional shares reserved for future issuance under our stock option and stock purchase plans. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
cannot predict the effect, if any, that future sales of shares of common stock, or the availability of shares of common stock for future sale, will have on the trading price of our
common stock prevailing from time to time. Sales of substantial amounts of common stock or the perception that such sales could occur, may adversely affect prevailing market prices for our common
stock. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>S-19</FONT></P>

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<A NAME="page_di1099_1_20"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di1099_forward-looking_statements"> </A>
<A NAME="toc_di1099_2"> </A>
<BR></FONT><FONT SIZE=2><B>FORWARD-LOOKING STATEMENTS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This prospectus supplement and the accompanying prospectus and the documents that we have filed with the Securities and Exchange Commission ("SEC") that are
included or incorporated or deemed to be incorporated by reference in this prospectus supplement and the accompanying prospectus include "forward-looking statements" within the meaning of
Section&nbsp;27A of the Securities Act of 1933 and Section&nbsp;21E of the Securities Exchange Act of 1934. You can identify these statements by the fact that they do not relate strictly to
historical or current facts. Such statements may include words such as "may," "will," "potential," "continue," "anticipate," "estimate," "expect," "project," "intend," "plan" or "believe" or the
negative thereof and other words and terms of similar meaning. In particular, these statements include, among other things, statements relating to: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
business strategy, including our acquisition strategy;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>proposed
new products or services;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
development of our products;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
establishment and development of collaborative partnerships;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
ability to identify new potential products;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
ability to achieve commercial acceptance of our products;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
ability to scale-up our manufacturing capabilities and facilities;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
projected capital expenditures;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
liquidity;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>plans
and objectives of management for future operations;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>future
economic conditions or performance; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>any
assumptions underlying the foregoing. </FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
or all of our forward-looking statements in this prospectus supplement and the accompanying prospectus and in the documents incorporated or deemed to be incorporated by reference in
this prospectus supplement and the accompanying prospectus may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Many
factors mentioned in our discussion in this prospectus supplement and the accompanying prospectus and the documents incorporated in this prospectus supplement and the accompanying prospectus will be
important in determining future results. Consequently, no forward-looking statement can be guaranteed. Actual future results may vary materially. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
undertake no obligation to publicly update any forward looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any
additional cautionary discussion of risks and uncertainties under "Risk Factors" above and in our Forms 10-K, 10-Q and 8-K we file with the SEC. These are factors
that we believe could cause our actual results to differ materially from expected results. Other factors besides those listed here could also adversely affect us. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>S-20</FONT></P>

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NAME="page_dk1099_1_21"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dk1099_use_of_proceeds"> </A>
<A NAME="toc_dk1099_1"> </A>
<BR></FONT><FONT SIZE=2><B>USE OF PROCEEDS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We estimate that we will receive net proceeds of approximately $196,245,000 ($225,756,750 if the underwriter exercises its over-allotment option in
full) from the sale of 9,500,000 shares of common stock that we are offering, after deducting the underwriting discounts and commissions and estimated expenses payable by us. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as otherwise described below, we anticipate using the net proceeds from this offering for general corporate purposes, which may include: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>investing
in or accelerating various product development programs, including Exubera;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>undertaking
potential acquisitions;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>developing
technologies; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>retiring
our outstanding debt. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pending
the above-described uses, the net proceeds of this offering will be invested in short-term interest-bearing, investment-grade instruments. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
intend to expand our product development programs through increased investments in our current proprietary programs, initiation of new proprietary programs, and acquisition or
licensing of new
programs. We also intend to expand the technology platforms important to the development of our business through our internal efforts and through technology acquisitions. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
evaluate acquisitions on a regular basis. While we do not have any present understandings, commitments, or agreements to enter in any such acquisitions, a portion of the net proceeds
of this offering may be utilized to fund these acquisitions. However, we cannot assure you that we will be able to complete acquisitions on an advantageous basis or at all. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dk1099_dilution"> </A>
<A NAME="toc_dk1099_2"> </A>
<BR></FONT><FONT SIZE=2><B>DILUTION    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The net tangible book value of our common stock on December&nbsp;31, 2003 was approximately $23.1&nbsp;million, or $0.41 per share. Net tangible book value
per share is equal to the amount of our total tangible assets, less total liabilities, divided by the number of shares of common stock outstanding. Dilution in net tangible book value per share
represents the difference between the amount per share paid by purchasers of shares of common stock in this offering and the net tangible book value per share of our common stock immediately
afterwards. After giving effect to the sale of 9,500,000 shares of common stock offered by this prospectus supplement and after deducting the underwriting discounts and commissions and estimated
offering expenses, our net tangible book value at December&nbsp;31, 2003 would have been approximately $219.4&nbsp;million, or $3.34 per share. This represents an immediate increase in net
tangible book value of $2.93 per share to existing stockholders and an immediate dilution of $17.66 per share to new investors purchasing shares of common stock in this offering. The following table
illustrates this dilution: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="69%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="73%"><FONT SIZE=2>Public offering price per share</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>21.00</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="73%"><FONT SIZE=2>Net tangible book value per share as of December 31, 2003</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>0.41</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="73%"><FONT SIZE=2>Increase per share attributable to new investors</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2.93</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="73%"><FONT SIZE=2>Net tangible book value per share after this offering</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3.34</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="73%"><FONT SIZE=2>Dilution per share to new investors</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>17.66</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
foregoing table does not take into effect further dilution to new investors that could occur upon the exercise of outstanding options and warrants having a per share exercise price
less than the offering price per share in this offering and additional dilution that may result from the conversion of </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>S-21</FONT></P>

<HR NOSHADE>
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<A NAME="page_dk1099_1_22"> </A>
<BR>

<P><FONT SIZE=2>our
outstanding preferred stock and convertible subordinated notes and debentures, including the conversion that may occur if we redeem our outstanding 3.0% convertible subordinated notes due 2010. As
of February&nbsp;29, 2004, we had 61,070,266 shares of common stock outstanding, excluding: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>14,448,446
shares of common stock subject to outstanding options at a weighted average exercise price of $16.57 per share;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>56,000
shares of common stock issuable upon exercise of warrants outstanding at a weighted average price of $17.79 per share;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>17,111,704
shares of common stock issuable upon conversion of our outstanding convertible subordinated notes and debentures as well as our outstanding convertible preferred
stock; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>4,428,825
shares available for future grant under our stock option plans and employee stock purchase plans. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>S-22</FONT></P>

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<A NAME="page_dk1099_1_23"> </A>
<UL>
<UL>
</UL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dk1099_underwriting"> </A>
<A NAME="toc_dk1099_3"> </A>
<BR></FONT><FONT SIZE=2><B>UNDERWRITING    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the terms of an underwriting agreement, which we will file as an exhibit to our current report on Form&nbsp;8-K relating to this offering,
Lehman Brothers&nbsp;Inc. has agreed to purchase from us 9,500,000 shares of our common stock. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
underwriting agreement provides that the underwriter is obligated to purchase, subject to certain conditions, all of the shares of our common stock in the offering if any are
purchased. The conditions contained in the underwriting agreement include requirements that: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
representations and warranties made by us to the underwriter are true;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>there
has been no material adverse change in our condition or in the financial markets; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>we
deliver customary closing documents to the underwriter. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2><B>Over-Allotment Option  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have granted to the underwriter a 30-day option after the date of the underwriting agreement to purchase, in whole or in part, up to an aggregate
of 1,425,000 additional shares of our common stock at a price of $20.71 per share of common stock. Such option may be exercised to cover over-allotments made in connection with the
offering. If this option is exercised, the underwriter will be obligated, subject to certain conditions, to purchase the additional shares of common stock, and we will be obligated, pursuant to the
option, to sell the additional shares of common stock to the underwriter. </FONT></P>

<P><FONT SIZE=2><B>Commissions and Expenses  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have been advised by the underwriter that it proposes to offer the shares directly to the public at the price to public presented on the cover of this
prospectus supplement and to selected dealers at the offering price less a selling concession not in excess of $0.10 per share. After the offering, the underwriter may change the public offering price
and other offering terms. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table summarizes the underwriting discounts and commissions we will pay to the underwriter. These amounts are shown assuming both no exercise and full exercise of the
underwriter's
over-allotment option. The underwriting fee is the difference between the initial price to the public and the amount the underwriter pays us for the shares. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="72%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="61%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>No Exercise</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Full Exercise</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>Per share</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>0.29</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>0.29</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>2,755,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>3,168,250</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
estimate that the total expenses of the offering, excluding underwriting discounts and commissions payable by us, will be approximately $500,000. </FONT></P>

<P><FONT SIZE=2><B>Lock-Up Agreements  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have agreed that, for a period of 90&nbsp;days after the date of this prospectus supplement, we will not, and we will cause certain of our directors and
executive officers to not, without the prior written consent of the underwriter, to, among other things, directly or indirectly, offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or for the sale of, or lend or otherwise transfer or dispose of, any shares of our common stock or any
securities convertible into or exercisable or exchangeable for our common stock. The underwriter allowed certain exceptions to the foregoing restrictions. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>S-23</FONT></P>

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<BR>

<P><FONT SIZE=2><B>Indemnification  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have agreed to indemnify the underwriter against certain liabilities, including liabilities under the Securities Act, or to contribute to payments that may be
required to be made in respect of these liabilities. </FONT></P>

<P><FONT SIZE=2><B>Stabilization and Short Positions  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with this offering, the underwriter may engage in over-allotment, stabilizing transactions and covering transactions, or purchases for
the purpose of pegging, fixing or maintaining the price of the shares, in accordance with Regulation&nbsp;M under the Securities Exchange Act of 1934, as amended: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Over-allotment
involves sales by the underwriter of shares of common stock in excess of the number of shares the underwriter is obligated to purchase, which
creates a short position. The underwriter may close out any short position by either exercising its over-allotment option and/or purchasing shares of common stock in the open market.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Stabilizing
transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Covering
transactions involve purchases of the shares in the open market after the distribution has been completed in order to cover short positions. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with this offering, the underwriter may engage in passive market making transactions in the common stock on the Nasdaq National Market in accordance with Rule&nbsp;103 of
Regulation&nbsp;M under the Securities Exchange Act of 1934 during the period before the commencement of offers or sales of common stock and extending through the completion of distribution. A
passive market maker must display its bids at a price not in excess of the highest independent bid of the security. However, if all independent bids are lowered below the passive market maker's bid,
that bid must then be lowered when specified purchase limits are exceeded. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These
stabilizing transactions and covering transactions may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the
market price of our common stock. As a result, the price of our common stock may be higher than the price that might otherwise exist in the open market. These transactions, if commenced, may be
discontinued at any time. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Neither
we nor the underwriter make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our
common stock. In addition, neither we nor the underwriter make any representation that the underwriter will engage in these stabilizing transactions or that any transaction, once commenced, will not
be discontinued without notice. </FONT></P>

<P><FONT SIZE=2><B>Affiliates  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The underwriter and some of its affiliates have engaged in, and may in the future engage in, investment banking and other commercial dealings in the ordinary
course of business with us. They have received customary fees and commissions for these transactions. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>S-24</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_dm1099_1_25"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dm1099_where_you_can_find_more_information"> </A>
<A NAME="toc_dm1099_1"> </A>
<BR></FONT><FONT SIZE=2><B>WHERE YOU CAN FIND MORE INFORMATION    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a reporting company and file annual, quarterly and current reports, proxy statements and other information with the SEC. We have filed with the SEC a
registration statement on Form&nbsp;S-3 under the Securities Act with respect to the shares of common stock we are offering under this prospectus supplement. This prospectus supplement
and the accompanying prospectus do not contain all of the information set forth in the registration statement and the exhibits to the registration statement. For further information with respect to us
and the securities we are offering under this prospectus supplement, we refer you to the registration statement and the exhibits and schedules filed as a part of the registration statement. You may
read and copy the registration statement, as well as any other material we file with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC
at 1-800-SEC-0330 for more information about the operation of the public reference room. The SEC maintains an Internet site that contains reports, proxy and
information statements, and other information regarding issuers that file electronically with the SEC, including Nektar. The SEC's Internet site can be found at "http://www.sec.gov." </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have elected to "incorporate by reference" certain information that we file with the SEC into this prospectus supplement and the accompanying prospectus, which means: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>incorporated
documents are considered part of this prospectus supplement and accompanying prospectus;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>we
are disclosing important information to you by referring you to those documents; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>information
that we file in the future with the SEC automatically will update and supersede earlier information in or incorporated by reference in this prospectus supplement
and accompanying prospectus. </FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
that regard, any statement in the accompanying prospectus or any document incorporated by reference herein or therein shall be deemed to be modified or superseded for purposes of this
prospectus supplement and the accompanying prospectus to the extent that a statement contained in this prospectus supplement or in any subsequently filed document that also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such statements modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of
this prospectus supplement or the accompanying prospectus. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
incorporate by reference the documents listed below and any documents that we file in the future with the SEC under Section&nbsp;13(a), 13(c), 14 or 15(d) of the Exchange Act after
the date of this prospectus supplement and before the completion of this offering (other than current reports furnished under Item 9 or Item 12 of Form&nbsp;8-K): </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
annual report on Form&nbsp;10-K for the fiscal year ended December&nbsp;31, 2003 (File No.&nbsp;0-24006), filed on March&nbsp;5, 2004;
and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
description of our common stock set forth in our Registration Statement on Form&nbsp;8-A (File No.&nbsp;0-24006), as amended. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You
may request a copy of these filings, at no cost, by writing or telephoning us at the following address: </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>Nektar
Therapeutics<BR>
150 Industrial Road<BR>
San Carlos, California 94070<BR>
(650)&nbsp;631-3100<BR>
Attention: Secretary </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exhibits
to the filings will not be sent, however, unless those exhibits have specifically been incorporated by reference in this document. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>S-25</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
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<A NAME="toc_dm1099_2"> </A>
<BR></FONT><FONT SIZE=2><B>LEGAL MATTERS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The validity of the shares of common stock being offered by this prospectus supplement will be passed upon for us by Cooley Godward LLP, Palo Alto, California.
Certain partners and associates of Cooley Godward LLP own an aggregate of 3,000 shares of our common stock. Certain legal matters will be passed upon for us by Paula Kasler, our Associate General
Counsel. Sidley Austin Brown&nbsp;&amp; Wood LLP, San Francisco, California will act as counsel for the underwriter. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dm1099_experts"> </A>
<A NAME="toc_dm1099_3"> </A>
<BR></FONT><FONT SIZE=2><B>EXPERTS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ernst&nbsp;&amp; Young LLP, independent auditors, have audited our consolidated financial statements included in our Annual Report on Form&nbsp;10-K
for the year ended December&nbsp;31, 2003, as set forth in their report, which is incorporated by reference in this prospectus supplement and elsewhere in the registration statement. Our financial
statements are incorporated by reference in reliance on Ernst&nbsp;&amp; Young LLP's report, given on their authority as experts in accounting and auditing. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>S-26</FONT></P>

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<P><FONT SIZE=2><B>PROSPECTUS  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=4><B>NEKTAR THERAPEUTICS  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>$250,000,000  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> Common Stock<BR>
Preferred Stock<BR>
Debt Securities<BR>
Warrants  </B></FONT></P>

<HR NOSHADE ALIGN="CENTER" WIDTH="108">

<P><FONT SIZE=2>From time to time, we may sell common stock, preferred stock, debt securities and/or warrants. </FONT></P>

<P><FONT SIZE=2>We
will provide the specific terms of these securities in one or more supplements to this prospectus. You should read this prospectus and any prospectus supplement carefully before you invest. </FONT></P>

<P><FONT SIZE=2>Our
common stock currently trades on The Nasdaq National Market under the symbol "NKTR." The applicable prospectus supplement will contain information, where applicable, as to any other listing (if
any) on The Nasdaq National Market or any securities exchange of the securities covered by the prospectus supplement. </FONT></P>

<P><FONT SIZE=2><B>This prospectus may not be used to offer or sell any securities unless accompanied by a prospectus supplement.</B></FONT></P>

<P><FONT SIZE=2><B>Investing in our securities involves a high degree of risk. Please see the section entitled "Risk Factors" contained in our most recent annual report on
Form&nbsp;10-K, as amended, and "Cautionary Factors That May Affect Future Results" contained in our most recent quarterly report on Form&nbsp;10-Q, as filed with the
Securities and Exchange Commission, both of which are incorporated by reference herein in their entirety.</B></FONT></P>


<P><FONT SIZE=2>The
securities may be sold directly by us to investors, through agents designated from time to time or to or through underwriters or dealers. For additional information on the methods of sale, you
should refer to the section entitled "Plan of Distribution." If any underwriters are involved in the sale of any securities with respect to which this prospectus is being delivered, the names of such
underwriters and any applicable commissions or discounts will be set forth in a prospectus supplement. The net proceeds we expect to receive from such sale will also be set forth in a prospectus
supplement. </FONT></P>

<P><FONT SIZE=2><B>Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful
or complete. Any representation to the contrary is a criminal offense.  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>The date of this prospectus is September&nbsp;29, 2003 </FONT></P>

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NAME="page_bg1100_1_1"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="bg1100_table_of_contents"> </A>
<A NAME="toc_bg1100_1"> </A>
<BR></FONT><FONT SIZE=2><B>TABLE OF CONTENTS    <BR>    </B></FONT></P>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="92%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="5%" ALIGN="CENTER"><FONT SIZE=1><B>Page</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>About this Prospectus</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>i</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Nektar Therapeutics</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Cautionary Factors That May Affect Future Results</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Forward-Looking Statements</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>The Securities We May Offer</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>3</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Ratio of Earnings to Fixed Charges</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>4</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Use of Proceeds</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>5</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Description of Capital Stock</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>5</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Description of Debt Securities</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>11</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Description of Warrants</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>17</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Legal Ownership of Securities</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>19</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Plan of Distribution</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>23</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Legal Matters</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>24</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Experts</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>24</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Where You Can Find More Information</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>24</FONT></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2>This
prospectus contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All of the
summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred to herein have been filed, will be filed or incorporated by reference as exhibits to the
registration statement of which this prospectus is a part, and you may obtain copies of those documents as described below under "Where You Can Find More Information." </FONT></P>

<HR NOSHADE ALIGN="CENTER" WIDTH="108">

<P><FONT SIZE=2>This
prospectus is part of a registration statement we filed with the Securities and Exchange Commission (the "SEC"). You should rely only on the information we have provided or incorporated by
reference in this prospectus or any prospectus supplement. We have not authorized anyone to provide you with information different from that contained in this prospectus. No dealer, salesperson or
other person is authorized to give any information or to represent anything not contained in this prospectus. You must not rely on any unauthorized information or representation. This prospectus is an
offer to sell only the securities offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. You should assume that the information in this prospectus or any
prospectus supplement is accurate only as of the date on the front of the document and that any information we have incorporated by reference is accurate only as of the date of the document
incorporated by reference, regardless of the time of delivery of this prospectus or any sale of a security. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="bg1100_about_this_prospectus"> </A>
<A NAME="toc_bg1100_2"> </A>
<BR></FONT><FONT SIZE=2><B>ABOUT THIS PROSPECTUS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>This prospectus is part of a registration statement that we filed with the SEC using a "shelf" registration process. Under this shelf registration process, we may sell common
stock, preferred stock, debt securities and/or warrants in one or more offerings up to a total dollar amount of $250,000,000. This prospectus provides you with a general description of the securities
we may offer. Each time we sell common stock, preferred stock, debt securities and/or warrants, we will provide a prospectus supplement that will contain more specific information, as set forth below
in the section entitled "The Securities We May Offer." We may also add, update or change in the prospectus supplement any of the information contained in this prospectus. This prospectus, together
with applicable prospectus supplements, includes all material information relating to this offering. Please carefully read both this prospectus and any prospectus supplement together with the
additional information described below under "Where You Can Find More Information." </FONT><FONT SIZE=2><B>This prospectus may not be used to consummate a sale of securities unless it is accompanied
by a prospectus supplement.</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>i.</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1100_nektar_therapeutics"> </A>
<A NAME="toc_de1100_1"> </A>
<BR></FONT><FONT SIZE=2><B>NEKTAR THERAPEUTICS    <BR>    </B></FONT></P>

<P><FONT SIZE=2><B><I>Overview  </I></B></FONT></P>

<P><FONT SIZE=2>We are working to become one of the world's leading drug delivery products based companies by providing a portfolio of technologies and expertise that is intended to enable us
and our pharmaceutical and biotechnology partners to improve drug performance throughout the drug development process. Historically, drug delivery has been focused on life cycle management of older
products facing patent expiration, or on seeking product line extensions. The advent of newer technologies, including high-throughput screening, combinatorial chemistry, genomics and
proteomics, has led to an increase in the number of molecular leads for new drugs. This has led pharmaceutical companies to focus earlier in development on molecular characteristics such as toxicity,
solubility and immunogenicity to improve clinical safety and efficacy of drugs. We believe it is now recognized that drug delivery spans the entire development process, with an emphasis on applying
technologies that can optimize drug candidates, and places a premium on faster and more efficient drug development. </FONT></P>

<P><FONT SIZE=2>Our
mission is to provide drug delivery technologies that enable superior therapeutics that make a difference in patients' lives. Primarily, we want to partner with pharmaceutical and biotechnology
companies seeking to improve and differentiate the products in their pipelines. In addition to our partner-funded programs, we have started applying our technology independently through internal
early-stage proprietary product development efforts. </FONT></P>

<P><FONT SIZE=2>We
have three areas of technological focus: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><B>Nektar Molecule Engineering</B></FONT><FONT SIZE=2>&#151;using advanced PEGylation (covalent chemical attachment of polyethylene glycol, or
PEG, chains to drug substances) and PEG-based delivery systems (e.g., PEG-based gels and polymer-based encapsulating agents) to enable drug performance;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><B>Nektar Particle Engineering</B></FONT><FONT SIZE=2>&#151;using our expertise in pulmonary particle technology and supercritical fluids
technology to design and manufacture optimal drug particles; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><B>Nektar Delivery Solutions</B></FONT><FONT SIZE=2>&#151;using advanced systems for pulmonary administration to improve therapeutic outcomes. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>Our
technologies are designed to improve either the performance of a drug molecule (e.g., bioavailability, safety, efficacy, stability, targeting, etc.) or how the drug is delivered (e.g., enabling a
new dosage form or delivery profile that improves how the therapeutic can treat patients). We believe these technologies have the potential to create better performing drugs, achieve shorter product
development times and reduce the risk of product instability or inconsistency. </FONT></P>

<P><FONT SIZE=2><B><I>Corporate Information  </I></B></FONT></P>

<P><FONT SIZE=2>In January&nbsp;2003, we changed our corporate name to Nektar Therapeutics from Inhale Therapeutic Systems,&nbsp;Inc. Our principal executive offices are located at 150
Industrial Road, San Carlos, California 94070. Our telephone number is (650)&nbsp;631-3100. We maintain an Internet home page at www.nektar.com. The contents of our web page are not a
part of this prospectus. </FONT></P>

<P><FONT SIZE=2>All
Nektar brand and product names are trademarks or registered trademarks of Nektar Therapeutics, in the United States and other countries. All other trade names, trademarks and service marks
appearing in this prospectus are the property of their respective holders. We do not intend our use or display of other parties' trade names, or trademarks or service marks to imply a relationship
with, or endorsement or sponsorship of, us by these other parties. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>1.</FONT></P>

<HR NOSHADE>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1100_cautionary_factors_that_may_affect_future_results"> </A>
<A NAME="toc_de1100_2"> </A>
<BR></FONT><FONT SIZE=2><B>CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>Except for the historical information contained in this prospectus or incorporated by reference, this prospectus (and the information incorporated by reference in this
prospectus) contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed here or incorporated by reference. Factors that
could cause or contribute to such differences include, but are not limited to, those discussed in the section entitled "Risk Factors" contained in our most recent annual report on
Form&nbsp;10-K, as amended, and "Cautionary Factors That May
Affect Future Results" contained in our most recent quarterly report on Form&nbsp;10-Q filed with the SEC, both of which are incorporated herein by reference in their entirety. </FONT></P>

<P><FONT SIZE=2>Investment
in our securities involves a high degree of risk. You should consider carefully the Risk Factors and the Cautionary Factors That May Affect Future Results, as well as other information in
this prospectus and the prospectus supplement before purchasing any of our securities. Each of these factors could adversely affect our business, operating results and financial condition, as well as
adversely affect the value of an investment in our securities. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1100_forward-looking_statements"> </A>
<A NAME="toc_de1100_3"> </A>
<BR></FONT><FONT SIZE=2><B>FORWARD-LOOKING STATEMENTS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>This prospectus and the documents that we have filed with the SEC that are included or incorporated or deemed to be incorporated by reference in this prospectus include
"forward-looking statements" within the meaning of Section&nbsp;27A of the Securities Act and Section&nbsp;21E of the Securities Exchange Act of 1934. You can identify these statements by the fact
that they do not relate strictly to historical or current facts. Such statements may include words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe" and other words
and terms of similar meaning in connection with any discussion of future operating or financial performance. In particular, these statements include, among other things, statements relating to: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
business strategy, including our acquisition strategy;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
development of our products;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
establishment and development of collaborative partnerships;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
ability to identify new potential products;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
ability to achieve commercial acceptance of our products;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
ability to scale-up our manufacturing capabilities and facilities;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
use of proceeds from this offering;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
projected capital expenditures; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
liquidity. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>Any
or all of our forward-looking statements in this prospectus and in the documents incorporated or deemed to be incorporated by reference in this prospectus may turn out to be wrong. They can be
affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Many factors mentioned in our discussion in this prospectus will be important in determining future
results. Consequently, no forward-looking statement can be guaranteed. Actual future results may vary materially. </FONT></P>

<P><FONT SIZE=2>We
undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. We advise you to consult any additional cautionary
discussion of risks and uncertainties under "Risk Factors" contained in our most recent annual report on Form&nbsp;10-K, as amended, and "Cautionary Factors That May Affect Future
Results" contained in our most recent quarterly </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>2.</FONT></P>

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<P><FONT SIZE=2>report
on Form&nbsp;10-Q. These are factors that we think could cause our actual results to differ materially from expected results. Other factors besides those listed in our most recent
annual report on Form&nbsp;10-K, as amended, and quarterly report on Form&nbsp;10-Q could also adversely affect us. This discussion is provided as permitted by the Private
Securities Litigation Reform Act of 1995. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1100_the_securities_we_may_offer"> </A>
<A NAME="toc_de1100_4"> </A>
<BR></FONT><FONT SIZE=2><B>THE SECURITIES WE MAY OFFER    <BR>    </B></FONT></P>

<P><FONT SIZE=2>We may offer shares of our common stock and preferred stock, various series of debt securities and/or warrants to purchase any of such securities with a total value of up to
$250,000,000 from time to time under this prospectus at prices and on terms to be determined by market conditions at the time of offering. This prospectus provides you with a general description of
the securities we may offer. Each time we offer a type or series of securities, we will provide a prospectus supplement that will describe the specific amounts, prices and other important terms of the
securities, including, to the extent applicable: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>designation
or classification;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>aggregate
principal amount or aggregate offering price;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>maturity,
if applicable;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>rates
and times of payment of interest or dividends, if any;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>redemption,
conversion or sinking fund terms, if any;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>voting
or other rights, if any;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>conversion
prices, if any; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>important
federal income tax considerations. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>The
prospectus supplement also may add, update or change information contained in this prospectus or in documents we have incorporated by reference. </FONT></P>

<P><FONT SIZE=2>We
may sell the securities directly to or through agents, underwriters or dealers. We, and our agents or underwriters, reserve the right to accept or reject all or part of any proposed purchase of
securities. If we do offer securities through agents or underwriters, we will include in the applicable prospectus supplement: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
names of those agents or underwriters;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>applicable
fees, discounts and commissions to be paid to them; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
net proceeds to us. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2><B><I>Common Stock.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We may issue shares of our common stock from time to time. Holders of common stock are entitled to
one vote per share on all matters submitted to a vote of stockholders. Subject to any preferences of outstanding shares of preferred stock, holders of common stock are entitled to dividends when and
if declared by our board of directors. </FONT></P>

<P><FONT SIZE=2><B><I>Preferred Stock.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We may issue shares of our preferred stock from time to time, in one or more series. Our board of
directors shall determine the rights, preferences, privileges and restrictions of the preferred stock, including dividend rights, conversion rights, voting rights, terms of redemption, liquidation
preferences, sinking fund terms and the number of shares constituting any series or the designation of any series. Convertible preferred stock will be convertible into our common stock. Conversion may
be mandatory or at your option and would be at prescribed conversion rates. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>3.</FONT></P>

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<BR>

<P><FONT SIZE=2><B><I>Debt Securities.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We may offer debt securities from time to time, in one or more series, as either senior or
subordinated debt or as senior or subordinated convertible debt. The senior debt securities will rank equally with any other unsecured and unsubordinated debt. The subordinated debt securities will be
subordinate and junior in right of payment, to the extent and in the manner described in the instrument governing the debt, to all of our senior indebtedness. Convertible debt securities will be
convertible into or exchangeable for our common stock or our other securities. Conversion may be mandatory or at your option and would be at prescribed conversion rates. </FONT></P>

<P><FONT SIZE=2>The
debt securities will be issued under one or more documents called indentures, which are contracts between us and a national banking association, as trustee. In this prospectus, we have summarized
certain general features of the debt securities. We urge you, however, to read the prospectus supplements related to the series of debt securities being offered, as well as the complete indentures
that contain the terms of the debt securities. Indentures have been filed as exhibits to the registration statement of which this prospectus is a part, and supplemental indentures and forms of debt
securities containing the terms of debt securities being offered will be filed as exhibits to the registration statement of which this prospectus is a part or will be incorporated by reference from
reports we file with the SEC. </FONT></P>

<P><FONT SIZE=2><B><I>Warrants.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We may issue warrants for the purchase of common stock, preferred stock and/or debt securities in one or
more series. We may issue warrants independently or together with common stock, preferred stock and/or debt securities, and the warrants may be attached to or separate from these securities. In this
prospectus, we have summarized certain general features of the warrants. We urge you, however, to read the prospectus supplements related to the series of warrants being offered, as well as any
warrant agreement that contains the terms of the warrants. The warrant agreement and form of warrant containing the terms of the warrants being offered will be filed as exhibits to the registration
statement of which this prospectus is a part or will be incorporated by reference from reports we file with the SEC. We will evidence each series of warrants by warrant certificates that we will issue
under a separate agreement.
We will enter into the warrant agreement with a warrant agent. Each warrant agent will be a bank that we select which has its principal office in the United States and a combined capital and surplus
of at least $50,000,000. We will indicate the name and address of the warrant agent in the applicable prospectus supplement relating to a particular series of warrants. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1100_ratio_of_earnings_to_fixed_charges"> </A>
<A NAME="toc_de1100_5"> </A>
<BR></FONT><FONT SIZE=2><B>RATIO OF EARNINGS TO FIXED CHARGES    <BR>    </B></FONT></P>

<P><FONT SIZE=2>Our earnings were insufficient to cover fixed charges in each of the years in the five-year period ended December&nbsp;31, 2002 and in the six-month
periods ended June&nbsp;30, 2003 and 2002. Earnings consist of loss from continuing operations before income taxes, extraordinary items, cumulative effect of accounting changes, equity in net losses
of affiliates and fixed charges, adjusted for capitalized interest. Fixed charges consist of interest expensed and capitalized and amortized premiums, discounts and capitalized expenses related to
indebtedness. The extent to which earnings were insufficient to cover fixed charges is as follows: </FONT></P>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="35%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=14 ALIGN="CENTER"><FONT SIZE=1><B>Year Ended December 31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Six Months<BR>
Ended<BR>
June 30,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="35%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1998</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="35%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=20 ALIGN="CENTER"><FONT SIZE=1><B>(in thousands)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="35%"><FONT SIZE=1>Deficiency of earnings available to cover fixed charges</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>(107,468</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>(251,238</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(97,403</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(38,448</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(18,559</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(32,988</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(49,873</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="35%"><FONT SIZE=1>Ratio of earnings to fixed charges</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>N/A</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>N/A</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>N/A</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>N/A</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>N/A</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>N/A</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>N/A</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>4.</FONT></P>

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<BR></FONT><FONT SIZE=2><B>USE OF PROCEEDS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>Except as described in any prospectus supplement, we currently intend to use the net proceeds from the sale of our securities for general corporate purposes, which may include: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>investing
in or accelerating various product development programs;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>undertaking
potential acquisitions; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>developing
technologies. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>We
intend to expand the technology platforms important to the development of our business through our internal efforts and through technology acquisitions. We evaluate acquisitions on a regular basis.
A substantial amount of the net proceeds of this offering may be utilized to fund these acquisitions, although we currently are not planning or negotiating any such transactions. However, we cannot
assure you that we will be able to complete acquisitions on an advantageous basis or at all. Pending these uses, the net proceeds will be invested in investment-grade, interest-bearing securities. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dg1100_description_of_capital_stock"> </A>
<A NAME="toc_dg1100_2"> </A>
<BR></FONT><FONT SIZE=2><B>DESCRIPTION OF CAPITAL STOCK    <BR>    </B></FONT></P>

<P><FONT SIZE=2>The following description of our capital stock and certain provisions of our certificate of incorporation and bylaws is a summary and is qualified in its entirety by the
provisions of our certificate of incorporation and bylaws. </FONT></P>

<P><FONT SIZE=2>Our
authorized capital stock consists of 300,000,000 shares of common stock, $0.0001 par value, and 10,000,000 shares of preferred stock, $0.0001 par value, of which 3,100,000 shares have been
designated Series&nbsp;A junior participating preferred stock and 40,000 shares have been designated Series&nbsp;B convertible preferred stock. As of July&nbsp;31, 2003, there were 55,795,434
shares of common stock outstanding, no shares of Series&nbsp;A junior participating preferred stock and 40,000 shares of Series&nbsp;B convertible preferred stock outstanding. </FONT></P>

<P><FONT SIZE=2><B>Common Stock  </B></FONT></P>

<P><FONT SIZE=2>The holders of common stock are entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders. The holders of common stock are not
entitled to cumulative voting rights with respect to the election of directors, and as a consequence, minority stockholders are not able to elect directors on the basis of their votes alone. Subject
to preferences that may be applicable to any shares of preferred stock currently outstanding or issued in the future, holders of common stock are entitled to receive ratably such dividends as may be
declared by our board of directors out of funds legally available therefor. In the event of our liquidation, dissolution or winding up, holders of our common stock are entitled to share ratably in all
assets remaining after payment of liabilities and the liquidation preference of any then outstanding preferred stock. Holders of common stock have no preemptive rights and no right to convert their
common stock into any other securities. There are no redemption or sinking fund provisions applicable to the common stock. All outstanding shares of common stock are, and all shares of common stock
that may be issued under this prospectus will be, fully paid and non-assessable. </FONT></P>

<P><FONT SIZE=2><B>Preferred Stock  </B></FONT></P>

<P><FONT SIZE=2>Of the 10,000,000 shares of preferred stock authorized, we have designated 3,100,000 shares as Series&nbsp;A junior participating preferred stock and 40,000 shares as
Series&nbsp;B convertible preferred stock. Our board of directors has the authority, without further action by the stockholders, to issue up to 6,860,000 shares of preferred stock in one or more
series and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund
terms and the number of shares constituting any series or the designation of such series, without any further vote or action by stockholders. The issuance of preferred stock could adversely affect the
voting </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>5.</FONT></P>

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<P><FONT SIZE=2>power
of holders of common stock and the likelihood that such holders will receive dividend payments and payments upon liquidation and could have the effect of delaying, deferring or preventing a
change in control. </FONT></P>

<P><FONT SIZE=2><I>Series&nbsp;A Junior Participating Preferred Stock  </I></FONT></P>

<P><FONT SIZE=2>In June&nbsp;2001, our board of directors approved the adoption of a share purchase rights plan and, pursuant to its authority as described above, authorized 3,100,000 shares
of Series&nbsp;A junior participating preferred stock. A certificate of designation filed with the Secretary of State of the State of Delaware sets forth the rights, privileges and preferences of
the Series&nbsp;A junior participating preferred stock. Terms of the 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&nbsp;22, 2001 to stockholders of record on that date. Each right entitles the registered holder to purchase from us 1/100 of a share of Series&nbsp;A
junior participating preferred stock at a price of $225.00 per 1/100 of a share of Series&nbsp;A junior participating preferred stock, subject to adjustment. Each 1/100 of a share of Series&nbsp;A
junior participating 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
a share of common stock. </FONT></P>

<P><FONT SIZE=2>The
rights are not exercisable until the "distribution date" as defined in the certificate of designation for the Series&nbsp;A junior participating preferred stock. The rights will expire on
June&nbsp;1, 2011, unless the rights are earlier redeemed or exchanged by us. Each share of Series&nbsp;A junior participating preferred stock will be entitled to a minimum preferential quarterly
dividend payment of $1.00 but will be entitled to an aggregate dividend of 100 times the dividend declared per share of common stock. In the event of liquidation, dissolution or winding down, the
holders of the Series&nbsp;A junior participating preferred stock would be entitled to a minimum preferential liquidation payment of $100 per share, but would be entitled to receive an aggregate
payment equal to 100 times the payment made per share of common stock. Each share of Series&nbsp;A junior participating 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 shares of common stock are exchanged, each share of Series&nbsp;A junior participating preferred stock will be
entitled to receive 100 times the amount of consideration received per share of common stock. Because of the nature of the Series&nbsp;A junior participating preferred stock dividend and liquidation
rights, the value of 1/100 of a share of Series&nbsp;A junior participating preferred stock should approximate the value of one share of common stock. The Series&nbsp;A junior participating
preferred stock ranks junior to the Series&nbsp;B convertible preferred stock and would rank junior to any other 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. </FONT></P>


<P><FONT SIZE=2><I>Series&nbsp;B Convertible Preferred Stock  </I></FONT></P>

<P><FONT SIZE=2>In January&nbsp;2002, our board of directors, pursuant to its authority as described above, authorized 40,000 shares of Series&nbsp;B convertible preferred stock. In
connection with a strategic alliance with Enzon Pharmaceuticals,&nbsp;Inc., we entered into a preferred stock purchase agreement pursuant to which we sold to Enzon and Enzon purchased from us 40,000
shares of non-voting Series&nbsp;B convertible preferred stock at a purchase price of $1,000 per share for an aggregate purchase price of $40,000,000. A certificate of designation filed
with the Secretary of State of the State of Delaware sets forth the rights, privileges and preferences of the Series&nbsp;B convertible preferred stock. Pursuant to the certificate of designation,
the Series&nbsp;B convertible preferred stock does not have voting rights. The Series&nbsp;B convertible preferred stock is convertible, in whole or in part, into that number of shares of our
common stock equal to the quotient of $1,000 per share divided by the conversion price. The "conversion price" shall initially be equal to $22.79 per share or 125% of the closing price and at no time
can the Series&nbsp;B convertible preferred stock convert into shares of common stock at a discount to the closing price. The "closing price" equals $18.23 per share and was based upon the average
of our closing bid prices as listed on The Nasdaq National Market for the 20 trading days preceding the date of the closing of the transaction. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>6.</FONT></P>

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<P><FONT SIZE=2>The
Series&nbsp;B convertible preferred stock is convertible at the option of the holder after the first anniversary of the original issuance of the Series&nbsp;B convertible preferred stock,
which was January&nbsp;7, 2002, or, if earlier, upon a "change in control" (as defined in the certificate of designation). Except with respect to an automatic conversion as described below, the
conversion price shall be equal to 125% of the closing price until the third anniversary of the original issue date of the Series&nbsp;B convertible preferred stock, which will be January&nbsp;7,
2004. Upon the third anniversary of the original issue date, the conversion price shall be adjusted to be equal to either (i)&nbsp;the closing price, in the event that the average of the closing bid
prices of our common stock as quoted on The Nasdaq National Market for the 20 trading days preceding the third anniversary of the original issuance (the "Future Price") is less than or equal to the
closing price; (ii)&nbsp;the Future Price (as defined above) if the Future Price is greater than the closing price but less than 125% of the closing price; or (iii)&nbsp;125% of the closing price
if the Future Price is equal to or greater than 125% of the closing price. </FONT></P>

<P><FONT SIZE=2>To
the extent not previously converted, the Series&nbsp;B convertible preferred stock will automatically convert into shares of our common stock, based on the then effective conversion price, upon
the earliest of (i)&nbsp;the fourth anniversary of the original issue date; (ii)&nbsp;immediately prior to an "asset transfer" or "acquisition" (as defined in the certificate of designation); or
(iii)&nbsp;with the consent of the holders of a majority of the then outstanding Series&nbsp;B convertible preferred stock immediately prior to our liquidation, dissolution or winding up. In the
event of an automatic conversion pursuant to an asset transfer, acquisition or liquidation, the adjustment mechanism described above will be applied immediately prior to the automatic conversion. </FONT></P>

<P><FONT SIZE=2>In
the event of our liquidation, dissolution or winding down, either voluntary or involuntary, following the payment of any distributions due the holders of any class of capital stock or series of
preferred stock that ranks senior to the Series&nbsp;B convertible preferred stock, the holders of the Series&nbsp;B convertible preferred stock shall be entitled to receive, prior and in
preference to any distribution of any of our assets or surplus funds to the holders of our common stock or any class of capital stock or series of preferred stock
that does not rank senior to or on parity with the Series&nbsp;B convertible preferred stock, an amount per share (as adjusted for any combinations, consolidations, stock distributions or stock
dividends with respect to the Series&nbsp;B convertible preferred stock) equal to up to $1,000. </FONT></P>

<P><FONT SIZE=2><I>Additional Preferred Stock  </I></FONT></P>

<P><FONT SIZE=2>We will fix the rights, preferences, privileges and restrictions of the preferred stock of each series in the certificate of designation relating to that series. We will
incorporate by reference as an exhibit to the registration statement that includes this prospectus or as an exhibit to a current report on Form&nbsp;8-K, the form of any certificate of
designation that describes the terms of the series of preferred stock we are offering before the issuance of the related series of preferred stock. This description will include: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
title and stated value;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
number of shares we are offering;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
liquidation preference per share;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
purchase price;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
dividend rate, period and payment date and method of calculation for dividends;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>whether
dividends will be cumulative or non-cumulative and, if cumulative, the date from which dividends will accumulate;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
procedures for any auction and remarketing, if any;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
provisions for a sinking fund, if any; </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>7.</FONT></P>

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<UL>
</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
provisions for redemption or repurchase, if applicable, and any restrictions on our ability to exercise those redemption and repurchase rights;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>any
listing of the preferred stock on any securities exchange or market;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>whether
the preferred stock will be convertible into our common stock, and, if applicable, the conversion price, or how it will be calculated, and the conversion period;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>whether
the preferred stock will be exchangeable into debt securities, and, if applicable, the exchange price, or how it will be calculated, and the exchange period;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>voting
rights, if any, of the preferred stock;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>preemption
rights, if any;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>restrictions
on transfer, sale or other assignment, if any;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>whether
interests in the preferred stock will be represented by depositary shares;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>a
discussion of any material or special United States federal income tax considerations applicable to the preferred stock;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
relative ranking and preferences of the preferred stock as to dividend rights and rights if we liquidate, dissolve or wind up our affairs;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>any
limitations on issuance of any class or series of preferred stock ranking senior to or on a parity with the series of preferred stock as to dividend rights and rights if
we liquidate, dissolve or wind up our affairs; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>any
other specific terms, preferences, rights or limitations of, or restrictions on, the preferred stock. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>If
we issue shares of preferred stock under this prospectus, the shares will be fully paid and nonassessable and will not have, or be subject to, any preemptive or similar rights. </FONT></P>

<P><FONT SIZE=2>The
Delaware General Corporation Law provides that the holders of preferred stock will have the right to vote separately as a class on any proposal involving fundamental changes in the rights of
holders of that preferred stock. This right is in addition to any voting rights that may be provided for in the applicable certificate of designation. </FONT></P>


<P><FONT SIZE=2>The
issuance of preferred stock, whether pursuant to this offering or otherwise, could adversely affect the voting power, conversion or other rights of holders of common stock. Preferred stock could
be issued quickly with terms calculated to delay or prevent a change in control of our company or make removal of management more difficult. Additionally, the issuance of preferred stock may have the
effect of decreasing the market price of common stock. </FONT></P>

<P><FONT SIZE=2><B>Registration Rights  </B></FONT></P>

<P><FONT SIZE=2>As of the date hereof, AFAC Equity L.P. has the right to include 72,419 shares of our common stock purchased pursuant to purchase agreements in certain public offerings of our
common stock for our account or the account of other security holders, for registration in certain registration statements filed by us with the SEC. AFAC Equity L.P. has included 72,419 shares of our
common stock for registration in a shelf registration statement filed with the SEC on September&nbsp;17, 2003 with respect to the resale of our 3% convertible subordinated notes due in
June&nbsp;2010 and the common stock issuable upon the conversion of the notes. We are required to pay all expenses in connection with such registration. Enzon has the right to require </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>8.</FONT></P>

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<P><FONT SIZE=2>us
to register shares of our common stock issued upon conversion of the Series&nbsp;B convertible preferred stock issued pursuant to the purchase agreement relating to its equity investment. We are
required to pay all expenses in connection with such registration. Pfizer has the right to include shares of our common stock purchased pursuant to the purchase agreement relating to its equity
investment in the first firmly underwritten public offering of our common stock effected after January&nbsp;18, 2000. We are required to pay all expenses in connection with such registration,
excluding the fees of counsel for Pfizer. Baxter has the right to include shares of our common stock purchased pursuant to the purchase agreement relating to its equity investment in any firmly
underwritten public offering of our common stock effected prior to March&nbsp;1, 2004. We are required to pay all expenses in connection with such registration, excluding fees of counsel for Baxter. </FONT></P>


<P><FONT SIZE=2>We
filed a shelf registration statement on September&nbsp;17, 2003, with respect to the resale of our 3% convertible subordinated notes due in June&nbsp;2010 and the common stock issuable upon
conversion of the notes. We will pay all expenses in connection with such registration. </FONT></P>

<P><FONT SIZE=2><B>Anti-Takeover Effects of Provisions of Delaware Law and Our Charter Documents.  </B></FONT></P>

<P><FONT SIZE=2><I>Rights Plan  </I></FONT></P>

<P><FONT SIZE=2>We are subject to certain anti-takeover provisions under our share purchase rights plan. The rights issued and issuable pursuant to our share purchase rights plan
trade with our common stock and are not currently exercisable. Under certain circumstances, the rights initially become exercisable for 1/100 share of our Series&nbsp;A junior participating
preferred stock. The plan also provides that: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>if
a third party acquires more than 20% of our common stock, the rights holders, other than the third party, would have the right to purchase a certain number of shares of
our common stock at a discount;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>if
we are acquired in a merger or other business combination transaction or 50% or more of our consolidated assets or earning power are sold, the rights holders would have
the right to acquire a certain number of shares of the common stock of the acquiring company at a discount; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
board of directors may, under certain circumstances, exchange each right, other than those held by such third party, for one share of our common stock. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>The
provisions described above 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 then current market prices. </FONT></P>

<P><FONT SIZE=2><I>Certificate of Incorporation  </I></FONT></P>

<P><FONT SIZE=2>Our certificate of incorporation provides for our board of directors to be divided into three classes, with staggered three-year terms. As a result, only one class
of directors will be elected at each annual meeting of stockholders, with the other classes continuing for the remainder of their respective three-year terms. Stockholders have no
cumulative voting rights, and the stockholders representing a majority of the shares of common stock outstanding are able to elect all of the directors. </FONT></P>

<P><FONT SIZE=2>Our
certificate of incorporation also requires that any action required or permitted to be taken by our stockholders must be effected at a duly called annual or special meeting of the stockholders and
may not be effected by a consent in writing and that the stockholders may amend our bylaws or adopt new bylaws, only by the affirmative vote of 66<SUP>2</SUP>/<SMALL>3</SMALL>% of the outstanding voting
securities. A special meeting of the stockholders may be called by our Chairman, our Chief Executive Officer, a resolution adopted by a majority of the total number of authorized directors or
stockholders owning 10% or more of the outstanding voting capital stock. These provisions may have the effect of delaying, deferring or preventing a change in control. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>9.</FONT></P>

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<P><FONT SIZE=2>The
classification of our board of directors and lack of cumulative voting will make it more difficult for our existing stockholders to replace our board of directors as well as for another party to
obtain control of
us by replacing our board of directors. Since our board of directors has the power to retain and discharge our officers, these provisions could also make it more difficult for existing stockholders or
another party to effect a change in management. </FONT></P>

<P><FONT SIZE=2>These
and other provisions may have the effect of deterring hostile takeovers or delaying changes in control or management. These provisions are intended to enhance the likelihood of continued
stability in the composition of our board of directors and in the policies of our board of directors and to discourage certain types of transactions that may involve an actual or threatened change in
control. </FONT></P>

<P><FONT SIZE=2>These
provisions are designed to reduce our vulnerability to an unsolicited acquisition proposal. The provisions also are intended to discourage certain tactics that may be used in proxy rights.
However, such provisions could have the effect of discouraging others from making tender offers for our shares and, as a consequence, such provisions also may inhibit fluctuations in the market price
of our shares that could result from actual or rumored takeover attempts. Such provisions also may have the effect of preventing changes in our management. </FONT></P>

<P><FONT SIZE=2><I>Section&nbsp;203 of the Delaware General Corporation Law  </I></FONT></P>

<P><FONT SIZE=2>We are subject to Section&nbsp;203 of the Delaware General Corporation Law, which, subject to certain exceptions, prohibits a Delaware corporation from engaging in any
business combination with any interested stockholder for a period of three years following the time that such stockholder became an interested stockholder, unless: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>prior
to such time, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an
interested holder;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>upon
consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding those shares owned (a)&nbsp;by persons who are directors
and also officers and (b)&nbsp;by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a
tender or exchange offer; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>at
or subsequent to such time, the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by
written consent, by the affirmative vote of at least 66<SUP>2</SUP>/<SMALL>3</SMALL>% of the outstanding voting stock which is not owned by the interested stockholder. </FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2>In
general, Section&nbsp;203 defines "business combination" to include the following: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>any
merger or consolidation involving the corporation and the interested stockholder;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>any
sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>subject
to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>any
transaction involving the corporation that has the effect of increasing the proportionate share of the stock or any class or series of the corporation beneficially owned
by the interested stockholder; or </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>10.</FONT></P>

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<UL>
<UL>
</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>In
general, Section&nbsp;203 defines "interested stockholder" as an entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person
affiliated with or controlling or controlled by such entity or person. </FONT></P>

<P><FONT SIZE=2><I>Certain Transactions  </I></FONT></P>

<P><FONT SIZE=2>Our bylaws provide that we will indemnify our directors and officers, employees and other agents to the fullest extent permitted by Delaware law. We are also empowered under
our bylaws to enter into indemnification contracts with our directors and officers and to purchase insurance on behalf of any person whom we are required or permitted to indemnify. </FONT></P>


<P><FONT SIZE=2>In
addition, our certificate of incorporation provides that the liability of our directors for monetary damages shall be eliminated to the fullest extent permissible under Delaware law. Pursuant to
Delaware law, our directors shall not be liable for monetary damages for breach of the directors' fiduciary duty of care to us and our stockholders. However, this provision does not eliminate the duty
of care, and in appropriate circumstances, equitable remedies such as injunctive or other forms of nonmonetary relief that will remain available under Delaware law. In addition, each director will
continue to be subject to liability for (i)&nbsp;breach of the directors duty of loyalty to us or our stockholders, (ii)&nbsp;acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii)&nbsp;violating Section&nbsp;174 of the Delaware General Corporation Law, or (iv)&nbsp;any transaction from which the director derived an improper
personal benefit. The provision also does not affect a director's responsibilities under any other law, such as the federal securities laws or state or federal environmental laws. </FONT></P>

<P><FONT SIZE=2><B>Transfer Agent and Registrar  </B></FONT></P>

<P><FONT SIZE=2>Mellon Investor Services LLC is the transfer agent and registrar for our common stock. Mellon Investor Services's address is 235 Montgomery Street, 23rd Floor, San Francisco,
CA 94104 and telephone number is (415)&nbsp;743-1422. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dg1100_description_of_debt_securities"> </A>
<A NAME="toc_dg1100_3"> </A>
<BR></FONT><FONT SIZE=2><B>DESCRIPTION OF DEBT SECURITIES    <BR>    </B></FONT></P>

<P><FONT SIZE=2>The following description, together with the additional information we include in any applicable prospectus supplements, summarizes the material terms and provisions of the
debt securities that we may offer under this prospectus. While the terms we have summarized below will apply generally to any future debt securities we may offer, we will describe the particular terms
of any debt securities that we may offer in more detail in the applicable prospectus supplement. The terms of any debt securities we offer under a prospectus supplement may differ from the terms we
describe below. </FONT></P>

<P><FONT SIZE=2>We
will issue the senior notes under the senior indenture which we will enter into with the trustee named in the senior indenture. We will issue the subordinated notes under the subordinated indenture
which we will enter into with the trustee named in the subordinated indenture. We have filed forms of these documents as exhibits to the registration statement which includes this prospectus. We use
the term "indentures" to refer to both the senior indenture and the subordinated indenture. </FONT></P>

<P><FONT SIZE=2>The
indentures will be qualified under the Trust Indenture Act of 1939. We use the term "debenture trustee" to refer to either the senior trustee or the subordinated trustee, as applicable. </FONT></P>

<P><FONT SIZE=2>The
following summaries of material provisions of the senior notes, the subordinated notes and the indentures are subject to, and qualified in their entirety by reference to, all the provisions of the
indenture applicable to a particular series of debt securities. Except as we may otherwise indicate, the terms of the senior indenture and the subordinated indenture are identical. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>11.</FONT></P>

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<P><FONT SIZE=2><B>General  </B></FONT></P>

<P><FONT SIZE=2>We will describe in each prospectus supplement the following terms relating to a series of debt securities: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
title;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
principal amount being offered, and if a series, the total amount authorized and the total amount outstanding;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>any
limit on the amount that may be issued;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>whether
or not we will issue the series of debt securities in global form, and if so, the terms and who the depository will be;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
maturity date;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
principal amount due at maturity, and whether the debt securities will be issued with original issue discount;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>whether
and under what circumstances, if any, we will pay additional amounts on any debt securities held by a person who is not a United States person for tax purposes, and
whether we can redeem the debt securities if we have to pay such additional amounts;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
annual interest rate, which may be fixed or variable, or the method for determining the rate and the date interest will begin to accrue, the dates interest will be
payable and the regular record dates for interest payment dates or the method for determining such dates;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>whether
or not the debt securities will be secured or unsecured, and the terms of any secured debt;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
terms of the subordination of any series of subordinated debt;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
place where payments will be payable;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>restrictions
on transfer, sale or other assignment, if any;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
right, if any, to defer payment of interest and the maximum length of any such deferral period;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
date, if any, after which the conditions upon which, and the price at which, we may, at our option, redeem the series of debt securities pursuant to any optional or
provisional redemption provisions and the terms of those redemptions provisions;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
date, if any, on which, and the price at which we are obligated, pursuant to any mandatory sinking fund or analogous fund provisions or otherwise, to redeem, or at the
holder's option to purchase, the series of debt securities and the currency or currency unit in which the debt securities are payable;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>whether
the indenture will restrict our ability to pay dividends, or will require us to maintain any asset ratios or reserves;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>whether
we will be restricted from incurring any additional indebtedness or issuing additional securities; </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>12.</FONT></P>

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<UL>
<UL>
</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>a
discussion of any material or special United States federal income tax considerations applicable to the debt securities;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>information
describing any book-entry features;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>provisions
for a sinking fund purchase or other analogous fund, if any;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>any
provisions for payment of additional amounts for taxes and any provision for redemption, if we must pay such additional amount with respect to any debt security;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>whether
the debt securities are to be offered at a price such that they will be deemed to be offered at an "original issue discount" as defined in paragraph&nbsp;(a) of
Section&nbsp;1273 of the Internal Revenue Code;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
denominations in which we will issue the series of debt securities, if other than denominations of $1,000 and any integral multiple thereof; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>any
other specific terms, preferences, rights or limitations of, or restrictions on, the debt securities, including any additional events of default or covenants provided
with respect to the debt securities, and any terms which may be required by us or advisable under applicable laws or regulations. </FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2><B>Conversion or Exchange Rights  </B></FONT></P>

<P><FONT SIZE=2>We will set forth in the prospectus supplement the terms on which a series of debt securities may be convertible into or exchangeable for our common stock, any other of our
securities or securities of a third party. We will include provisions as to whether conversion or exchange is mandatory, at the option of the holder or at our option. We may include provisions
pursuant to which the number of shares of our common stock, any other of our securities or securities of a third party that the holders of the series of debt securities receive would be subject to
adjustment. </FONT></P>

<P><FONT SIZE=2><B>Consolidation, Merger or Sale  </B></FONT></P>

<P><FONT SIZE=2>The indentures in the forms initially filed as exhibits to the registration statement of which this prospectus is a part do not contain any covenant which restricts our ability
to merge or consolidate, or sell, convey, transfer or otherwise dispose of all or substantially all of our assets. However, any successor of ours to or acquirer of such assets must assume all of our
obligations under the indentures and the debt securities. </FONT></P>

<P><FONT SIZE=2>If
the debt securities are convertible for our other securities or securities of other entities, the person with whom we consolidate or merge or to whom we sell all of our property must make
provisions for the conversion of the debt securities into securities which the holders of the debt securities would have received if they had converted the debt securities before the consolidation,
merger or sale. </FONT></P>

<P><FONT SIZE=2><B>Events of Default Under the Indenture  </B></FONT></P>

<P><FONT SIZE=2>The following are events of default under the indentures with respect to any series of debt securities that we may issue: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>if
we fail to pay interest when due and payable and our failure continues for 90&nbsp;days and the time for payment has not been extended or deferred;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>if
we fail to pay the principal, or premium, if any, when due and payable and the time for payment has not been extended or delayed; </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>13.</FONT></P>

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<UL>
</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>if
we fail to observe or perform any other covenant contained in the debt securities or the indentures, other than a covenant specifically relating to another series of debt
securities, and our failure continues for 90&nbsp;days after we receive notice from the debenture trustee or holders of at least 25% in aggregate principal amount of the outstanding debt securities
of the applicable series; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>if
specified events of bankruptcy, insolvency or reorganization occur. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>If
an event of default with respect to debt securities of any series occurs and is continuing, other than an event of default specified in the last bullet point above, the debenture trustee or the
holders of at least 25% in aggregate principal amount of the outstanding debt securities of that series, by notice to us in writing, and to the debenture trustee if notice is given by such holders,
may declare the unpaid principal of, premium, if any, and accrued interest, if any, due and payable immediately. If an event of default specified in the last bullet point above occurs with respect to
us, the principal amount of and accrued interest, if any, of each issue of debt securities then outstanding shall be due and payable without any notice or other action on the part of the debenture
trustee or any holder. </FONT></P>

<P><FONT SIZE=2>The
holders of a majority in principal amount of the outstanding debt securities of an affected series may waive any default or event of default with respect to the series and its consequences, except
defaults or events of default regarding payment of principal, premium, if any, or interest, unless we have cured the default or event of default in accordance with the indenture. </FONT></P>


<P><FONT SIZE=2>Subject
to the terms of the indentures, if an event of default under an indenture shall occur and be continuing, the debenture trustee will be under no obligation to exercise any of its rights or
powers under such indenture at the request or direction of any of the holders of the applicable series of debt securities, unless such holders have offered the debenture trustee reasonable indemnity.
The holders of a majority in principal amount of the outstanding debt securities of any series will have the right to direct the time, method and place of conducting any proceeding for any remedy
available to the debenture trustee, or exercising any trust or power conferred on the debenture trustee, with respect to the debt securities of that series, provided that: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
direction so given by the holder is not in conflict with any law or the applicable indenture; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>subject
to its duties under the Trust Indenture Act of 1939, the debenture trustee need not take any action that might involve it in personal liability or might be unduly
prejudicial to the holders not involved in the proceeding. </FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2>A
holder of the debt securities of any series will only have the right to institute a proceeding under the indentures or to appoint a receiver or trustee, or to seek other remedies if: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
holder has given written notice to the debenture trustee of a continuing event of default with respect to that series;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
holders of at least 25% in aggregate principal amount of the outstanding debt securities of that series have made written request, and such holders have offered
reasonable indemnity to the debenture trustee to institute the proceeding as trustee; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
debenture trustee does not institute the proceeding, and does not receive from the holders of a majority in aggregate principal amount of the outstanding debt securities
of that series other conflicting directions within 90&nbsp;days after the notice, request and offer. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>These
limitations do not apply to a suit instituted by a holder of debt securities if we default in the payment of the principal, premium, if any, or interest on, the debt securities. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>14.</FONT></P>

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<P><FONT SIZE=2>We
will periodically file statements with the debenture trustee regarding our compliance with specified covenants in the indentures. </FONT></P>


<P><FONT SIZE=2><B>Modification of Indenture; Waiver  </B></FONT></P>

<P><FONT SIZE=2>We and the debenture trustee may change an indenture without the consent of any holders with respect to specific matters, including: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>to
fix any ambiguity, defect or inconsistency in the indenture;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>to
comply with the provisions described above under "Consolidation, Merger or Sale;"
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>to
comply with any requirements of the SEC in connection with the qualification of any indenture under the Trust Indenture Act of 1939;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>to
evidence and provide for the acceptance of appointment hereunder by a successor trustee;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>to
provide for uncertificated debt securities and to make all appropriate changes for such purpose;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>to
add to, delete from, or revise the conditions, limitations and restrictions on the authorized amount, terms or purposes of issuance, authorization and delivery of debt
securities of any series;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>to
add to our covenants such new covenants, restrictions, conditions or provisions for the protection of the holders, and to make the occurrence, or the occurrence and the
continuance, of a default in any such additional covenants, restrictions, conditions or provisions an event of default; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>to
change anything that does not materially adversely affect the interests of any holder of debt securities of any series. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>In
addition, under the indentures, the rights of holders of a series of debt securities may be changed by us and the debenture trustee with the written consent of the holders of at least a majority in
aggregate principal amount of the outstanding debt securities of each series that is affected. However, we and the debenture trustee may only make the following changes with the consent of each holder
of any outstanding debt securities affected: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>extending
the fixed maturity of the series of debt securities;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>reducing
the principal amount, reducing the rate of or extending the time of payment of interest, or reducing any premium payable upon the redemption of any debt securities;
or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>reducing
the percentage of debt securities, the holders of which are required to consent to any supplemental indenture. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2><B>Discharge  </B></FONT></P>

<P><FONT SIZE=2>Each indenture provides that we can elect to be discharged from our obligations with respect to one or more series of debt securities, except for obligations to: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>register
the transfer or exchange of debt securities of the series;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>replace
stolen, lost or mutilated debt securities of the series;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>maintain
paying agencies; </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>15.</FONT></P>

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<UL>
</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>hold
monies for payment in trust;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>recover
excess money held by the debenture trustee;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>compensate
and indemnify the debenture trustee; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>appoint
any successor trustee. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>In
order to exercise our rights to be discharged, we must deposit with the debenture trustee money or government obligations sufficient to pay all the principal of, any premium, if any, and interest
on, the debt securities of the series on the dates payments are due. </FONT></P>

<P><FONT SIZE=2><B>Form, Exchange and Transfer  </B></FONT></P>

<P><FONT SIZE=2>We will issue the debt securities of each series only in fully registered form without coupons and, unless we otherwise specify in the applicable prospectus supplement, in
denominations of $1,000 and any integral multiple thereof. The indentures provide that we may issue debt securities of a series in temporary or permanent global form and as book-entry
securities that will be deposited with, or on behalf of, The Depository Trust Company or another depository named by us and identified in a prospectus supplement with respect to that series. See
"Legal Ownership of Securities" for a further description of the terms relating to any book-entry securities. </FONT></P>

<P><FONT SIZE=2>At
the option of the holder, subject to the terms of the indentures and the limitations applicable to global securities described in the applicable prospectus supplement, the holder of the debt
securities of any series can exchange the debt securities for other debt securities of the same series, in any authorized denomination and of like tenor and aggregate principal amount. </FONT></P>

<P><FONT SIZE=2>Subject
to the terms of the indentures and the limitations applicable to global securities set forth in the applicable prospectus supplement, holders of the debt securities may present the debt
securities for exchange or for registration of transfer, duly endorsed or with the form of transfer endorsed thereon duly executed if so required by us or the security registrar, at the office of the
security registrar or at the office of any transfer agent designated by us for this purpose. Unless otherwise provided in the debt securities that the holder presents for transfer or exchange, we will
make no service charge for any registration of transfer or exchange, but we may require payment of any taxes or other governmental charges. </FONT></P>

<P><FONT SIZE=2>We
will name in the applicable prospectus supplement the security registrar, and any transfer agent in addition to the security registrar, that we initially designate for any debt securities. We may
at any time designate additional transfer agents or rescind the designation of any transfer agent or approve a change in the office through which any transfer agent acts, except that we will be
required to maintain a transfer agent in each place of payment for the debt securities of each series. </FONT></P>

<P><FONT SIZE=2>If
we elect to redeem the debt securities of any series, we will not be required to: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>issue,
register the transfer of, or exchange any debt securities of that series during a period beginning at the opening of business 15&nbsp;days before the day of mailing
of a notice of redemption of
any debt securities that may be selected for redemption and ending at the close of business on the day of the mailing; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>register
the transfer of or exchange any debt securities so selected for redemption, in whole or in part, except the unredeemed portion of any debt securities we are
redeeming in part. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2><B>Information Concerning the Debenture Trustee  </B></FONT></P>

<P><FONT SIZE=2>The debenture trustee, other than during the occurrence and continuance of an event of default under an indenture, undertakes to perform only those duties as are specifically
set forth in the applicable indenture. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>16.</FONT></P>

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<BR>

<P><FONT SIZE=2>Upon
an event of default under an indenture, the debenture trustee must use the same degree of care as a prudent person would exercise or use in the conduct of his or her own affairs. Subject to this
provision, the debenture trustee is under no obligation to exercise any of the powers given it by the indentures at the request of any holder of debt securities unless it is offered reasonable
security and indemnity against the costs, expenses and liabilities that it might incur. </FONT></P>

<P><FONT SIZE=2><B>Payment and Paying Agents  </B></FONT></P>

<P><FONT SIZE=2>Unless we otherwise indicate in the applicable prospectus supplement, we will make payment of the interest on any debt securities on any interest payment date to the person in
whose name the debt securities, or one or more predecessor securities, are registered at the close of business on the regular record date for the interest. </FONT></P>

<P><FONT SIZE=2>We
will pay principal of and any premium and interest on the debt securities of a particular series at the office of the paying agents designated by us, except that unless we otherwise indicate in the
applicable prospectus supplement, we will make interest payments by check which we will mail to the holder or by wire transfer to certain holders. Unless we otherwise indicate in a prospectus
supplement, we will designate the corporate trust office of the debenture trustee in the City of New York as our sole paying agent for payments with respect to debt securities of each series. We will
name in the applicable prospectus supplement any other paying agents that we initially designate for the debt securities of a particular series. We will maintain a paying agent in each place of
payment for the debt securities of a particular series. </FONT></P>

<P><FONT SIZE=2>All
money we pay to a paying agent or the debenture trustee for the payment of the principal of or any premium or interest on any debt securities which remains unclaimed at the end of two years after
such principal, premium or interest has become due and payable will be repaid to us, and the holder of the security thereafter may look only to us for payment thereof. </FONT></P>


<P><FONT SIZE=2><B>Governing Law  </B></FONT></P>

<P><FONT SIZE=2>The indentures and the debt securities will be governed by and construed in accordance with the laws of the State of New York. </FONT></P>

<P><FONT SIZE=2><B>Subordination of Subordinated Debt Securities  </B></FONT></P>

<P><FONT SIZE=2>The subordinated debt securities will be unsecured and will be subordinate and junior in priority of payment to certain of our other indebtedness to the extent described in a
prospectus supplement. The indentures in the forms initially filed as exhibits to the registration statement of which this prospectus is a part do not limit the amount of indebtedness which we may
incur and do not limit us from issuing any other secured or unsecured debt. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di1100_description_of_warrants"> </A>
<A NAME="toc_di1100_1"> </A>
<BR></FONT><FONT SIZE=2><B>DESCRIPTION OF WARRANTS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>The following description, together with the additional information we may include in any applicable prospectus supplements, summarizes the material terms and provisions of the
warrants that we may offer under this prospectus and the related warrant agreements and warrant certificates. While the terms summarized below will apply generally to any warrants that we may offer,
we will describe the particular terms of any series of warrants in more detail in the applicable prospectus supplement. If we indicate in the prospectus supplement, the terms of any warrants offered
under that prospectus supplement may differ from the terms described below. Specific warrant agreements will contain additional important terms and provisions and will be incorporated by reference as
an exhibit to the registration statement that includes this prospectus or as an exhibit to a current report on Form&nbsp;8-K. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>17.</FONT></P>

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<P><FONT SIZE=2><A
NAME="page_dk1100_1_18"> </A> </FONT> <FONT SIZE=2><B>General  </B></FONT></P>

<P><FONT SIZE=2>We will describe in the applicable prospectus supplement the terms of the series of warrants, including: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
offering price and aggregate number of warrants offered;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
currency for which the warrants may be purchased;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>if
applicable, the designation and terms of the securities with which the warrants are issued and the number of warrants issued with each such security or each principal
amount of such security;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>if
applicable, the date on and after which the warrants and the related securities will be separately transferable;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>in
the case of warrants to purchase debt securities, the principal amount of debt securities purchasable upon exercise of one warrant and the price at, and currency in
which, this principal amount of debt securities may be purchased upon such exercise;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>in
the case of warrants to purchase common stock or preferred stock, the number of shares of common stock or preferred stock, as the case may be, purchasable upon the
exercise of one warrant and the price at which these shares may be purchased upon such exercise;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
effect of any merger, consolidation, sale or other disposition of our business on the warrant agreement and the warrants;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
terms of any rights to redeem or call the warrants;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>any
provisions for changes to or adjustments in the exercise price or number of securities issuable upon exercise of the warrants;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
dates on which the right to exercise the warrants will commence and expire;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
manner in which the warrant agreement and warrants may be modified;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>federal
income tax consequences of holding or exercising the warrants;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
terms of the securities issuable upon exercise of the warrants; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>any
other specific terms, preferences, rights or limitations of or restrictions on the warrants. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>Before
exercising their warrants, holders of warrants will not have any of the rights of holders of the securities purchasable upon such exercise, including: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>in
the case of warrants to purchase debt securities, the right to receive payments of principal of, or premium, if any, or interest on, the debt securities purchasable upon
exercise or to enforce covenants in the applicable indenture; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>in
the case of warrants to purchase common stock or preferred stock, the right to receive dividends, if any, or, payments upon our liquidation, dissolution or winding up or
to exercise voting rights, if any. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>18.</FONT></P>

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<UL>
<UL>
</UL>
</UL>
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<P><FONT SIZE=2><A
NAME="page_dm1100_1_19"> </A> </FONT></P>

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<P><FONT SIZE=2><B>Exercise of Warrants  </B></FONT></P>

<P><FONT SIZE=2>Each warrant will entitle the holder to purchase the securities that we specify in the applicable prospectus supplement at the exercise price that we describe in the applicable
prospectus supplement. Unless we otherwise specify in the applicable prospectus supplement, holders of the warrants may exercise the warrants at any time up to 5:00&nbsp;P.M. New York time on the
expiration date that we set forth in the applicable prospectus supplement. After the close of business on the expiration date, unexercised warrants will become void. </FONT></P>

<P><FONT SIZE=2>Holders
of the warrants may exercise the warrants by delivering the warrant certificate representing the warrants to be exercised together with specified information, and paying the required amount to
the warrant agent in immediately available funds, as provided in the applicable prospectus supplement. We will set forth on the reverse side of the warrant certificate and in the applicable prospectus
supplement the information that the holder of the warrant will be required to deliver to the warrant agent. </FONT></P>

<P><FONT SIZE=2>Upon
receipt of the required payment and the warrant certificate properly completed and duly executed at the corporate trust office of the warrant agent or any other office indicated in the applicable
prospectus supplement, we will issue and deliver the securities purchasable upon such exercise. If fewer than all of the warrants represented by the warrant certificate are exercised, then we will
issue a new warrant certificate for the remaining amount of warrants. If we so indicate in the applicable prospectus supplement, holders of the warrants may surrender securities as all or part of the
exercise price for warrants. </FONT></P>

<P><FONT SIZE=2><B>Enforceability of Rights by Holders of Warrants  </B></FONT></P>

<P><FONT SIZE=2>Each warrant agent will act solely as our agent under the applicable warrant agreement and will not assume any obligation or relationship of agency or trust with any holder of
any warrant. A single bank or trust company may act as warrant agent for more than one issue of warrants. A warrant agent will have no duty or responsibility in case of any default by us under the
applicable warrant agreement or warrant, including any duty or responsibility to initiate any proceedings at law or otherwise, or to make any demand upon us. Any holder of a warrant may, without the
consent of the related warrant agent or the holder of any other warrant, enforce by appropriate legal action its right to exercise, and receive the securities purchasable upon exercise of, its
warrants. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dm1100_legal_ownership_of_securities"> </A>
<A NAME="toc_dm1100_1"> </A>
<BR></FONT><FONT SIZE=2><B>LEGAL OWNERSHIP OF SECURITIES    <BR>    </B></FONT></P>

<P><FONT SIZE=2>We can issue securities in registered form or in the form of one or more global securities. We describe global securities in greater detail below. We refer to those persons who
have securities registered in their own names on the books that we or any applicable trustee maintain for this purpose as the "holders" of those securities. These persons are the legal holders of the
securities. We refer to those persons who, indirectly through others, own beneficial interests in securities that are not registered in their own names, as "indirect holders" of those securities. As
we discuss below, indirect holders are not legal holders, and investors in securities issued in book-entry form or in street name will be indirect holders. </FONT></P>

<P><FONT SIZE=2><B>Book-Entry Holders  </B></FONT></P>

<P><FONT SIZE=2>We may issue securities in book-entry form only, as we will specify in the applicable prospectus supplement. This means securities may be represented by one or more
global securities registered in the name of a financial institution that holds them as depositary on behalf of other financial institutions that participate in the depositary's book-entry
system. These participating institutions, which are referred to as participants, in turn, hold beneficial interests in the securities on behalf of themselves or their customers. </FONT></P>

<P><FONT SIZE=2>Only
the person in whose name a security is registered is recognized as the holder of that security. Securities issued in global form will be registered in the name of the depositary or its
participants. Consequently, for securities issued in global form, we will recognize only the depositary as the holder of the securities, and we will make all payments on the securities to the
depositary. The depositary passes along the payments it </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>19.</FONT></P>

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<BR>

<P><FONT SIZE=2>receives
to its participants, which in turn pass the payments along to their customers who are the beneficial owners. The depositary and its participants do so under agreements they have made with one
another or with their customers or because they are legally required to do so. They are not obligated to do so under the terms of the securities. </FONT></P>

<P><FONT SIZE=2>As
a result, investors in a book-entry security will not own securities directly. Instead, they will own beneficial interests in a global security, through a bank, broker or other
financial institution that participates in the depositary's book-entry system or holds an interest through a participant. As long as the securities are issued in global form, investors
will be indirect holders, and not holders, of the securities. </FONT></P>

<P><FONT SIZE=2><B>Street Name Holders  </B></FONT></P>

<P><FONT SIZE=2>In certain circumstances, we may terminate a global security or issue securities in non-global form. In these cases, investors may choose to hold their securities
in their own names or in "street name." Securities held by an investor in street name would be registered in the name of a bank, broker or other financial institution that the investor chooses, and
the investor would hold only a beneficial interest in those securities through an account he or she maintains at that institution. </FONT></P>


<P><FONT SIZE=2>For
securities held in street name, we will recognize only the intermediary banks, brokers and other financial institutions in whose names the securities are registered as the holders of those
securities, and we will make all payments on those securities to them. These institutions pass along the payments they receive to their customers who are the beneficial owners, but only because they
agree to do so in their customer agreements or because they are legally required to do so. They are not obligated to do so under the terms of the securities. Investors who hold securities in street
name will be indirect holders, not holders, of those securities. </FONT></P>

<P><FONT SIZE=2><B>Legal Holders  </B></FONT></P>

<P><FONT SIZE=2>Our obligations, as well as the obligations of any applicable trustee and of any third parties employed by us or a trustee, run only to the legal holders of the securities. We
do not have obligations to investors who hold beneficial interests in global securities, in street name or by any other indirect means. This will be the case whether an investor chooses to be an
indirect holder of a security or has no choice because we are issuing the securities only in global form. </FONT></P>

<P><FONT SIZE=2>For
example, once we make a payment or give a notice to the holder, we have no further responsibility for the payment or notice even if that holder is required, under agreements with depositary
participants or customers or by law, to pass it along to the indirect holders but does not do so. Similarly, we may want to obtain the approval of the holders to amend an indenture, to relieve us of
the consequences of a default or of our obligation to comply with a particular provision of the indenture or for other purposes. In such an event, we would seek approval only from the holders, and not
the indirect holders, of the securities. Whether and how the holders contact the indirect holders is up to the holders. </FONT></P>

<P><FONT SIZE=2><B>Special Considerations For Indirect Holders  </B></FONT></P>

<P><FONT SIZE=2>If you hold securities through a bank, broker or other financial institution, either in book-entry form or in street name, you should check with your own
institution to find out: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>how
it handles securities payments and notices;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>whether
it imposes fees or charges;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>how
it would handle a request for the holders' consent, if ever required;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>whether
and how you can instruct it to send you securities registered in your own name so you can be a holder, if that is permitted in the future; </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>20.</FONT></P>

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<A NAME="page_dm1100_1_21"> </A>
<UL>
<UL>
</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>how
it would exercise rights under the securities if there were a default or other event triggering the need for holders to act to protect their interests; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>if
the securities are in book-entry form, how the depositary's rules and procedures will affect these matters. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2><B>Global Securities  </B></FONT></P>

<P><FONT SIZE=2>A global security is a security which represents one or any other number of individual securities held by a depositary. Generally, all securities represented by the same global
securities will have the same terms. </FONT></P>

<P><FONT SIZE=2>Each
security issued in book-entry form will be represented by a global security that we deposit with and register in the name of a financial institution or its nominee that we select. The
financial institution that we select for this purpose is called the depositary. Unless we specify otherwise in the applicable prospectus supplement, the Depository Trust Company, New York, New York,
known as DTC, will be the depositary for all securities issued in book-entry form. </FONT></P>

<P><FONT SIZE=2>A
global security may not be transferred to or registered in the name of anyone other than the depositary, its nominee or a successor depositary, unless special termination situations arise. We
describe those situations below under "Special Situations When a Global Security Will Be Terminated." As a result of these arrangements, the depositary, or its nominee, will be the sole registered
owner and holder of all
securities represented by a global security, and investors will be permitted to own only beneficial interests in a global security. Beneficial interests must be held by means of an account with a
broker, bank or other financial institution that in turn has an account with the depositary or with another institution that does. Thus, an investor whose security is represented by a global security
will not be a holder of the security, but only an indirect holder of a beneficial interest in the global security. </FONT></P>

<P><FONT SIZE=2>If
the prospectus supplement for a particular security indicates that the security will be issued in global form only, then the security will be represented by a global security at all times unless
and until the global security is terminated. If termination occurs, we may issue the securities through another book-entry clearing system or decide that the securities may no longer be
held through any book-entry clearing system. </FONT></P>

<P><FONT SIZE=2><B>Special Considerations For Global Securities  </B></FONT></P>

<P><FONT SIZE=2>As an indirect holder, an investor's rights relating to a global security will be governed by the account rules of the investor's financial institution and of the depositary,
as well as general laws relating to securities transfers. We do not recognize an indirect holder as a holder of securities and instead deal only with the depositary that holds the global security. </FONT></P>

<P><FONT SIZE=2>If
securities are issued only in the form of a global security, an investor should be aware of the following: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>An
investor cannot cause the securities to be registered in his or her name, and cannot obtain non-global certificates for his or her interest in the securities,
except in the special situations we describe below;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>An
investor will be an indirect holder and must look to his or her own bank or broker for payments on the securities and protection of his or her legal rights relating to
the securities, as we describe above;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>An
investor may not be able to sell interests in the securities to some insurance companies and to other institutions that are required by law to own their securities in
non-book-entry form;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>An
investor may not be able to pledge his or her interest in a global security in circumstances where certificates representing the securities must be delivered to the
lender or other beneficiary of the pledge in order for the pledge to be effective; </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>21.</FONT></P>

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<UL>
<UL>
</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>The
depositary's policies, which may change from time to time, will govern payments, transfers, exchanges and other matters relating to an investor's interest in a global
security. We and any applicable trustee have no responsibility for any aspect of the depositary's actions or for its records of ownership interests in a global security. We and the trustee also do not
supervise the depositary in any way;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>The
depositary may, and we understand that DTC will, require that those who purchase and sell interests in a global security within its book-entry system use
immediately available funds, and your broker or bank may require you to do so as well; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Financial
institutions that participate in the depositary's book-entry system, and through which an investor holds its interest in a global security, may also
have their own policies affecting payments, notices and other matters relating to the securities. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>There
may be more than one financial intermediary in the chain of ownership for an investor. We do not monitor and are not responsible for the actions of any of those intermediaries. </FONT></P>

<P><FONT SIZE=2><B>Special Situations When A Global Security Will Be Terminated  </B></FONT></P>

<P><FONT SIZE=2>In a few special situations described below, the global security will terminate and interests in it will be exchanged for physical certificates representing those interests.
After that exchange, the choice of whether to hold securities directly or in street name will be up to the investor. Investors must consult their own banks or brokers to find out how to have their
interests in securities transferred to their own name, so that they will be direct holders. We have described the rights of holders and street name investors above. </FONT></P>

<P><FONT SIZE=2>The
global security will terminate when the following special situations occur: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>if
the depositary notifies us that it is unwilling, unable or no longer qualified to continue as depositary for that global security and we do not appoint another
institution to act as depositary within 90&nbsp;days;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>if
we notify any applicable trustee that we wish to terminate that global security; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>if
an event of default has occurred with regard to securities represented by that global security and has not been cured or waived. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>The
prospectus supplement may also list additional situations for terminating a global security that would apply only to the particular series of securities covered by the prospectus supplement. When
a global security terminates, the depositary, and not we or any applicable trustee, is responsible for deciding the names of the institutions that will be the initial direct holders. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>22.</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_do1100_1_23"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="do1100_plan_of_distribution"> </A>
<A NAME="toc_do1100_1"> </A>
<BR></FONT><FONT SIZE=2><B>PLAN OF DISTRIBUTION    <BR>    </B></FONT></P>

<P><FONT SIZE=2>We may sell the securities through underwriters or dealers, through agents, or directly to one or more purchasers. The prospectus supplement will describe the terms of the
offering of the securities, including: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
name or names of any underwriters, if any;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
purchase price of the securities and the proceeds we will receive from the sale;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>any
over-allotment options under which underwriters may purchase additional securities from us;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>any
agency fees or underwriting discounts and other items constituting agents' or underwriters' compensation;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>any
initial public offering price;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>any
discounts or concessions allowed or reallowed or paid to dealers; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>any
securities exchange or market on which the securities may be listed. </FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2>Only
underwriters named in the prospectus supplement are underwriters of the securities offered by the prospectus supplement. </FONT></P>


<P><FONT SIZE=2>If
underwriters are used in the sale, they will acquire the securities for their own account and may resell them from time to time in one or more transactions at a fixed public offering price or at
varying prices determined at the time of sale. The obligations of the underwriters to purchase the securities will be subject to the conditions set forth in the applicable underwriting agreement. We
may offer the securities to the public through underwriting syndicates represented by managing underwriters or by underwriters without a syndicate. Subject to certain conditions, the underwriters will
be obligated to purchase all the securities of the series offered by the prospectus supplement. Any public offering price and any discounts or concessions allowed or reallowed or paid to dealers may
change from time to time. We may use underwriters with whom we have a material relationship. We will describe in the prospectus supplement, naming the underwriter, the nature of any such relationship. </FONT></P>

<P><FONT SIZE=2>We
may sell securities directly or through agents we designate from time to time. We will name any agent involved in the offering and sale of securities and we will describe any commissions we will
pay the agent in the prospectus supplement. Unless the prospectus supplement states otherwise, our agent will act on a best-efforts basis for the period of its appointment. </FONT></P>

<P><FONT SIZE=2>We
may authorize agents or underwriters to solicit offers by certain types of institutional investors to purchase securities from us at the public offering price set forth in the prospectus supplement
pursuant to delayed delivery contracts providing for payment and delivery on a specified date in the future. We will describe the conditions to these contracts and the commissions we must pay for
solicitation of these contracts in the prospectus supplement. </FONT></P>

<P><FONT SIZE=2>We
may provide agents and underwriters with indemnification against certain civil liabilities, including liabilities under the Securities Act, or contribution with respect to payments that the agents
or underwriters may make with respect to such liabilities. Agents and underwriters may engage in transactions with, or perform services for, us in the ordinary course of business. </FONT></P>

<P><FONT SIZE=2>All
securities we offer, other than common stock, will be new issues of securities with no established trading market. Any underwriters may make a market in these securities, but will not be obligated
to do so and may discontinue any market making at any time without notice. We cannot guarantee the liquidity of the trading markets for any securities. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>23.</FONT></P>

<HR NOSHADE>
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<A NAME="page_do1100_1_24"> </A>
<BR>

<P><FONT SIZE=2>Any
underwriter may engage in overallotment, stabilizing transactions, short covering transactions and penalty bids in accordance with Regulation&nbsp;M under the Exchange Act. Overallotment
involves sales in excess of the offering size, which create a short position. Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a
specified maximum. Short covering transactions involve purchases of the securities in the open market after the distribution is completed to
cover short positions. Penalty bids permit the underwriters to reclaim a selling concession from a dealer when the securities originally sold by the dealer are purchased in a covering transaction to
cover short positions. Those activities may cause the price of the securities to be higher than it would otherwise be. If commenced, the underwriters may discontinue any of the activities at any time. </FONT></P>

<P><FONT SIZE=2>Any
underwriters who are qualified market makers on The Nasdaq National Market may engage in passive market making transactions in the securities on The Nasdaq National Market in accordance with
Rule&nbsp;103 of Regulation&nbsp;M, during the business day prior to the pricing of the offering, before the commencement of offers or sales of the securities. Passive market makers must comply
with applicable volume and price limitations and must be identified as passive market makers. In general, a passive market maker must display its bid at a price not in excess of the highest
independent bid for such security; if all independent bids are lowered below the passive market maker's bid, however, the passive market maker's bid must then be lowered when certain purchase limits
are exceeded. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="do1100_legal_matters"> </A>
<A NAME="toc_do1100_2"> </A>
<BR></FONT><FONT SIZE=2><B>LEGAL MATTERS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>The validity of the securities being offered hereby will be passed upon for us by Cooley Godward LLP, Palo Alto, California. As of the date of this prospectus, certain partners
and associates of Cooley Godward LLP own an aggregate of 3,000 shares of our common stock. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="do1100_experts"> </A>
<A NAME="toc_do1100_3"> </A>
<BR></FONT><FONT SIZE=2><B>EXPERTS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>Ernst&nbsp;&amp; Young LLP, our independent auditors, have audited our consolidated financial statements included in our Annual Report on Form&nbsp;10-K, as
amended, for the year ended December&nbsp;31, 2002, as set forth in their report, which is incorporated by reference in this prospectus and elsewhere in the registration statement. Our financial
statements are incorporated by reference in reliance on Ernst&nbsp;&amp; Young LLP's report, given on their authority as experts in accounting and auditing. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="do1100_where_you_can_find_more_information"> </A>
<A NAME="toc_do1100_4"> </A>
<BR></FONT><FONT SIZE=2><B>WHERE YOU CAN FIND MORE INFORMATION    <BR>    </B></FONT></P>

<P><FONT SIZE=2>We have filed with the SEC a registration statement on Form&nbsp;S-3 under the Securities Act with respect to the shares of common stock, preferred stock, debt
securities and/or warrants that we are offering under this prospectus. This prospectus does not contain all of the information set forth in the registration statement and the exhibits to the
registration statement. For further information with respect to us and the securities that we are offering under this prospectus, we refer you to the registration statement and the exhibits and
schedules filed as a part of the registration statement. </FONT></P>

<P><FONT SIZE=2>We
are subject to the information and reporting requirements of the Exchange Act of 1934, under which we file periodic reports, proxy statements and other information with the SEC. Copies of the
reports,
proxy statements and other information may be examined without charge at the Public Reference Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, and the SEC's Regional offices located
at 5670 Wilshire Boulevard, Los Angeles, California 90036 or on the Internet at www.sec.gov. Copies of all or a portion of such materials can be obtained from the Public Reference Section of the SEC
upon payment of prescribed fees. Please call the SEC at 800-SEC-0330 for further information about the Public Reference Room. These reports, proxy and information statements
and other information may also be inspected at the offices of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006. </FONT></P>

<P><FONT SIZE=2>We
are "incorporating by reference" specified documents that we file with the SEC, which means: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>incorporated
documents are considered part of this prospectus; </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>24.</FONT></P>

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<A NAME="page_do1100_1_25"> </A>
<UL>
<UL>
</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>we
are disclosing important information to you by referring you to those documents; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>information
that we file in the future with the SEC automatically will update and supersede earlier information in or incorporated by reference in this prospectus. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>We
incorporate by reference the documents listed below and any documents that we file in the future with the SEC under Section&nbsp;13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of
this prospectus and before the completion of the offering of the notes (other than current reports furnished under Item 9 or Item 12 of Form&nbsp;8-K): </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
annual report on Form&nbsp;10-K for the fiscal year ended December&nbsp;31, 2002, as amended;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
quarterly reports on Form&nbsp;10-Q for the fiscal quarters ended March&nbsp;31, 2003 and June&nbsp;30, 2003;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
description of our common stock set forth in our Registration Statement on Form&nbsp;8-A, as amended; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
current reports on Form&nbsp;8-K filed on January&nbsp;23, 2003, April&nbsp;22, 2003, June&nbsp;23, 2003, June&nbsp;27, 2003, July&nbsp;2, 2003,
July&nbsp;31, 2003 and August&nbsp;6, 2003 (other than reports or portions of such reports furnished under Item 9 or Item 12 of Form&nbsp;8-K). </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>You
may request a copy of these filings, at no cost, by writing or telephoning us at the following address: </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>Nektar
Therapeutics<BR>
150 Industrial Road<BR>
San Carlos, California 94070<BR>
(650)&nbsp;631-3100<BR>
Attention: Secretary </FONT></P>

<P><FONT SIZE=2>Exhibits
to the filings will not be sent, however, unless those exhibits have specifically been incorporated by reference in this document. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>25.</FONT></P>

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<BR>
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<P><FONT SIZE=2>
<hr noshade width=100% align=left size=4>
<hr noshade width=100% align=left size=1> </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=4><B>9,500,000 Shares  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=5><B>Nektar Therapeutics  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=5><B>
<IMG SRC="g285866.jpg" ALT="GRAPHIC" WIDTH="216" HEIGHT="51">
  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=4><B>Common Stock  </B></FONT></P>

<HR NOSHADE ALIGN="CENTER" WIDTH="120">
<P ALIGN="CENTER"><FONT SIZE=3><B> PROSPECTUS SUPPLEMENT  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=3><B> March&nbsp;8, 2004  </B></FONT></P>

<HR NOSHADE ALIGN="CENTER" WIDTH="120">
<P ALIGN="CENTER"><FONT SIZE=5><B>LEHMAN BROTHERS  </B></FONT></P>

<P><FONT SIZE=5><B> <hr noshade width=100% align=left size=1>
<hr noshade width=100% align=left size=4>  </B></FONT></P>

<HR NOSHADE>
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<BR>
<P><br><A NAME="04PAL1099_1">QuickLinks</A><br></P><!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_bg1099_1">TABLE OF CONTENTS</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_cg1099_1">PROSPECTUS SUPPLEMENT SUMMARY</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_cg1099_2">Nektar Therapeutics</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_ci1099_1">The Offering</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_de1099_1">Recent Developments</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_de1099_2">RISK FACTORS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_de1099_3">Risks Relating to Our Business</A></FONT><BR>

<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_di1099_1">Risks Relating to this Offering</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_di1099_2">FORWARD-LOOKING STATEMENTS</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_dk1099_1">USE OF PROCEEDS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dk1099_2">DILUTION</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dk1099_3">UNDERWRITING</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_dm1099_1">WHERE YOU CAN FIND MORE INFORMATION</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dm1099_2">LEGAL MATTERS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dm1099_3">EXPERTS</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_bg1100_1">TABLE OF CONTENTS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_bg1100_2">ABOUT THIS PROSPECTUS</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_de1100_1">NEKTAR THERAPEUTICS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_de1100_2">CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_de1100_3">FORWARD-LOOKING STATEMENTS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_de1100_4">THE SECURITIES WE MAY OFFER</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_de1100_5">RATIO OF EARNINGS TO FIXED CHARGES</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_dg1100_1">USE OF PROCEEDS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dg1100_2">DESCRIPTION OF CAPITAL STOCK</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dg1100_3">DESCRIPTION OF DEBT SECURITIES</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_di1100_1">DESCRIPTION OF WARRANTS</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_dm1100_1">LEGAL OWNERSHIP OF SECURITIES</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_do1100_1">PLAN OF DISTRIBUTION</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_do1100_2">LEGAL MATTERS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_do1100_3">EXPERTS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_do1100_4">WHERE YOU CAN FIND MORE INFORMATION</A></FONT><BR>
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</BODY>
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</TEXT>
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