LONDON (Reuters) - Biodel (BIOD.O: Quote, Profile, Research) shares plunged nearly 70 percent on Monday after a Phase III clinical trial cast doubt about its diabetes drug VIAject.

A study of people with Type 2 diabetes met a Phase III trial goal after six months by showing VIAject was as effective in controlling blood sugar compared with Eli Lilly's (LLY.N: Quote, Profile, Research) Humulin.

But a separate Phase III study of volunteers with Type 1 diabetes would not have met the same goal if the company had not excluded data from India.

U.S.-based Biodel also said 24 people dropped out of the two trials due to pain where the drug was injected.

William Ho, a Bank of America Equity Research analyst, said the problems in India could make investors wary about how the U.S. Food and Drug Administration would view the drug.

"Biodel plans to meet with the FDA to discuss the results," Ho wrote in a note to investors. "We are unsure how the FDA will respond to the analysis of the Type 1 study or if it will result in a delay in regulatory filing."

Leerink Swann analyst Jonas Alsenas said the FDA could require repeating the Type 1 study, leading to a delay for the drug of at least a year.

"We remain confident of the ultimate clinical and commercial prospects of VIAject and believe the problems are eminently fixable, though they could results in significant delays," Alsenas said in a research note.

The two studies aimed to show that Biodel's VIAject was as effective as Humulin at controlling blood sugar levels in people with diabetes.