The prospects for a viable market in inhaled insulin therapies were looking markedly thinner this week after Eli Lilly pulled the plug on its joint development programme with drug delivery specialist Alkermes for AIR Insulin.
Lilly is taking an estimated $90-$120m charge ($0.05-$0.07 per share) to earnings in the first quarter to terminate development of the inhaled insulin incorporating Alkermes' proprietary AIR pulmonary technology. The decision scraps a seven-year effort that has seen Lilly recruit thousands of diabetes patients for clinical trials.
It comes only weeks after Novo Nordisk dropped its own AERx inhaled insulin system from late development, at a cost of DKK1.3bn ($0.267bn), having concluded the product was unlikely to offer significant clinical or convenience benefits over insulin injections with pen devices.
What now looks unavoidably like a domino effect started in October 2007, when Pfizer put the seal on months of speculation by scrapping its ill-received inhaled insulin pioneer, Exubera, sustaining write-down charges of $2.8bn.
Following the successful completion of more than 10 Phase I and II clinical trials, Air Insulin has been working through an extensive international Phase III programme in patients with type 1 and type 2 diabetes, scheduled to finish this year. That programme will now wind down, with patients on AIR Insulin transitioning to other suitable therapies.
"Without the prospect of a new drug application, keeping the patient foremost in mind, it would not be consistent with our medical principles to continue the clinical trials," Lilly stated. The company was expecting to file for US approval of AIR Insulin in 2009.
As with the Novo Nordisk product, which also reached Phase III before it was dropped, safety was not the issue with AIR Insulin.
Lilly said its decision to terminate the development and licence agreement signed with Alkermes in April 2001 was "not a result of any observations during AIR Insulin trials relating to the safety of the product", but rather reflected "increasing uncertainties in the regulatory environment and a thorough evaluation of the evolving commercial and clinical potential of the product compared to existing therapies".
According to president and chief operating officer Dr John Lechleiter, the decision, "though difficult, is the right one to make at this time. Over the past several months we have conducted a thorough review of all aspects of our efforts to develop our AIR Insulin product and have now made the decision that it would be inappropriate for the company to continue development activities in connection with this project."
All the same, Lilly has come some way since last October, when it insisted Exubera's fall from grace would not knock AIR Insulin off course. "We don't make our decisions based on what other companies do but we do look at the need of patients and the need of the market and the value the product will provide, and we feel confident AIR Insulin will meet an unmet medical need," the company declared at that point.
And Lilly seemed to have good cause for optimism. Whereas Exubera was widely criticised for being too large and cumbersome, the AIR Insulin inhaler was roughly the size of a marker pen. Nor had the questionable effects on lung function that hampered Exubera's take-up by physicians been seen in clinical trials of Lilly's product.
Spokesman Mark Taylor acknowledged that, while the successive retreats of Pfizer and Novo Nordisk from the inhaled insulin market were not the "primary reason" for Lilly discarding AIR Insulin, they did provide some pointers as to the overall commercial opportunity in the category and the difficulty of establishing that particular class of therapy.
In regulatory terms, he noted, the company was seeing a tendency towards requiring longer clinical trials for inhaled insulin products - for example, 18- or even 24-month studies as opposed to 12 months previously. There were also indications that in future longer-term trials would be required in the post-marketing phase.
While the US Food and Drug Administration was being "very certain" in this respect - albeit taking its time to do so - elsewhere there was a good deal of uncertainty about how the regulatory landscape might shape up for the new category, Taylor told In-PharmaTechnologist.com.
He confirmed that no lung function problems had been observed in clinical trials with AIR Insulin, either by Lilly or the independent study monitoring board. But some of the cost, reimbursement and patient affinity issues raised around inhaled insulins in general had "absolutely" played into the company's assessment of its product's commercial prospects, Walker said.
With smaller and less intimidating needles now available, people were "not as reluctant" to use them as they once were, diminishing the "patient pull" for inhaled insulin, he noted. Moreover, Lilly was expecting payer and reimbursement conditions in the new category to be "very strict".
If these parties were "not able to see a clear clinical benefit" - as opposed to just a convenience advantage - in inhaled insulin, then it would have been hard to achieve the kind of reimbursement levels Lilly would have looked for, Walker commented.
The $90-$120m charge Lilly is taking to extricate itself from the AIR Insulin programme includes impairment of company assets, wind-down costs for clinical trials and certain development activities, as well as further expenses for a US patient assistance programme that will provide current clinical trial participants with "appropriate financial support" for medication and diagnostic supplies until the end of 2008. As things stand, Lilly is not expecting to have to pay a termination fee to Alkermes.
In the meantime, Alkermes is left holding the baby. The termination of its development and licence agreement with Lilly, which takes effect 90 days from the announcement on 7 March, will put all intellectual property rights licensed to Lilly under the agreement back in its partner's hands. Moreover, Alkermes has the right to purchase all regulatory submissions and related data owned by Lilly that were generated under the agreement.
What the company will do with these assets is not immediately clear, particularly given the already denuded state of what was once regarded as a blockbuster opportunity. The limp performance of Exubera and the decision of three companies in turn to cut and run have left some analysts convinced there is nothing left to play for.
Others believe, though, that a niche still exists for inhaled insulin, for all the qualms expressed over design, affordability and safety in long-term use - not to mention the additional burden on healthcare professionals of teaching patients to use the devices, and the practicality of a delivery route that requires 5-10 times the injected dose to achieve the same effect.
Alkermes was reluctant to say anything beyond its statement that the company was "evaluating the impact of the termination of the AIR Insulin programme on its business and will provide further details following a comprehensive business analysis".
Lily's exit also closes down the AIR Insulin supply agreement signed in December 2006, which made Alkermes the exclusive commercial manufacturer and supplier of AIR Insulin powder for the AIR Insulin system.
Part of that arrangement was that Lilly would fund all operating costs for the portion of Alkermes' commercial-scale production facility used to manufacture AIR Insulin products, as well as funding, designing, constructing and validating a second production line at the facility.
In an earlier update on the AIR Insulin programme, which prefigured Lilly's announcement by revealing that the company was "evaluating its business case for AIR Insulin" and was expected to "make a decision to discontinue the programme in the next week", Alkermes indicated a willingness to continue with the Phase III programme regardless of Lilly's commercial intentions.
"While Lilly may elect not to commercialise AIR Insulin, Alkermes believes that the Phase III safety and efficacy trials should be completed," it stated. "Data from these studies will provide patients, physicians and the scientific community with long-awaited and important data for the evaluation of new diabetes medications."
Whether Alkermes has the resources to carry on development of AIR Insulin without an immediate partner should emerge once the company has taken a closer look at its options. With Lilly now out of the running, roping in another company prepared to commit to what looks increasingly like a commercial long shot could be problematic.
That is also the challenge facing MannKind, whose Technosphere Insulin System is also advancing through Phase III trials. Once lost in the glare of the big-hitters, MannKind now finds itself the leading contender for a potential market that is either barely tapped or barely alive.