Denmark’s Novo Nordisk saw its shares slip back 3.5%, the largest drop in almost a year, after the firm said that was halting development of its AERx inhaled insulin product.

The Copenhagen-headquartered group claimed that following “a detailed analysis of the future prospects for inhaled insulin and a review of the medical and commercial potential” of AERx, it has decided to discontinue all further development of the system which was in Phase III trials. The decision has nothing to do with any safety concerns, it added.

As a result of the move, the company will take a 1.3 billion kroner ($260 million) charge, while “a significant number” of people out of the 360 employed at Novo's site in Hayward, California, are expected to be made redundant.

Chief executive Lars Rebien Sorensen said "we have concluded that fast-acting inhaled insulin in the form it is known today is unlikely to offer significant clinical or convenience benefits over injections of modern insulin with pen devices” such as Novo’s own FlexPen. He added that in general, people with type 2 diabetes start insulin therapy with long-acting or premixed insulin “and experience shows that they want very simple, very convenient devices for administering their insulin. This requires a completely new approach to inhalation of insulin."

Novo’s decision comes a few months after Pfizer discontinued its inhaled insulin product Exubera after it failed to make any impact in the diabetes market. It had been thought that Exubera would be a blockbuster but second-quarter 2007 sales reached just $4 million and Pfizer finally lost patience, taking a $2.8 billion charge into the bargain.