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Eli Lilly Drops Inhalable-Insulin Product March, 2008

Eli Lilly and Co. is becoming the latest drug maker to abandon the once-promising concept of inhalable insulin for diabetic patients

Lilly said late Friday that it is canceling trials of its AIR insulin product, which it was developing in concert with Alkermes Inc., of Cambridge, Mass. Alkermes earlier in the day had said it expected Lilly to discontinue developing the product. Both companies said the decision wasn't based on safety issues related to AIR.

A Lilly withdrawal comes on the heels of two other blows to inhaled insulin, a concept that promised to offer diabetes sufferers more convenience and comfort than using a needle and syringe.

Pfizer Inc. pulled out of its partnership to sell an insulin inhaler called Exubera in October, taking a $2.8 billion charge. Exubera had sold poorly because of its unwieldy size and long-term safety concerns about ingesting the medicine through the lungs. At one point, executives at the New York company had estimated Exubera sales could total $2 billion a year.

Denmark's NovoNordisk A/S also discontinued studying an insulin inhaler, called AERx, in January.

Still, Lilly had recently reiterated its commitment to AIR, whose potential advantage was that it was going to be as small as a cellphone. On a call with investors on Oct. 18, John Lechleiter, Lilly's president and chief operating officer -- and soon to be chief executive -- responded to questions about Exubera by saying, "We believe there's a place for more convenient administration of insulin . . . . We're not backing away an inch from either the program that we've got currently now in the middle of Phase III or our plans to go forward and file, I believe in 2009."

Mark Taylor, a Lilly spokesman, said the Indianapolis company's about-face comes in part from "new uncertainties in the regulatory environment."

A Lilly exit leaves Mannkind Corp., of Valencia, Calif., as the last major player in this field. Mannkind on Friday affirmed its commitment to its inhaler, which is in Phase III studies and which the company expects to submit for Food and Drug Administration approval by the end of the year.

Insulin production is expensive, requiring specialized facilities to turn insulin crystals into a powder or liquid, and marketing an inhaler requires making both the medicine and the device to deliver it. And because the lungs deliver insulin to the bloodstream less efficiently than a needle does, more of the drug must be made available to patients with inhalers. The company expects to take a charge of between $90 million and $120 million in the first quarter of 2008 -- much less than Pfizer's $2.8 billion. Mr. Taylor says that is largely because Lilly will be able to use the stores of bulk insulin produced in other insulin products.

Lilly first signed on with Alkermes in 2001 but expanded the deal early last year to construct and operate a second manufacturing line. AIR is in the midst of multiple Phase III clinical trials, the largest and most expensive studies drug companies run to get products approved by the FDA. Although Alkermes had called on Lilly to continue the trials, Lilly said it would halt the 10 studies now under way.

Lilly has the right to terminate its license to AIR at its discretion.

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