Eli Lilly drops inhaled insulin program

By Ransdell Pierson

NEW YORK (Reuters) - Eli Lilly & Co said on Friday it will terminate development of an inhaled insulin treatment for diabetes, which it was conducting in partnership with Alkermes Inc, after deciding that product's commercial potential was not strong.

Biotechnology company Alkermes said earlier in the day that it expected Lilly to drop out of their program to develop an inhaled insulin treatment for diabetes, sending Alkermes shares down more than 9 percent.

Lilly's decision marks the third setback in recent months for inhaled insulin formulations, once deemed potential blockbuster products because of their greater convenience than standard injectable insulin.

Cambridge, Massachusetts-based Alkermes, which makes the alcohol addiction drug Vivitrol, said Lilly has the right to terminate its license to the inhaled treatment, Air Insulin, at its discretion.

"While Lilly may elect not to commercialize Air Insulin, Alkermes believes that the phase 3 safety and efficacy trials should be completed," Alkermes said in a statement.

After Lilly's announcement, the company said it was evaluating the impact of the termination, which will become effective in 90 days.

Indianapolis-based Lilly said its decision was not due to safety concerns, "but rather was a result of increasing uncertainties in the regulatory environment, and a thorough evaluation of the evolving commercial and clinical potential of the product compared to existing medical therapies."

Lilly Chief Operating Officer John Lechleiter said in a statement that the company is beginning the process of halting ongoing clinical studies.