Drug delivery firm Emisphere acted lawfully when it terminated a license with Eli Lilly for an oral parathyroid hormone treatment used to treat osteoporosis, according to a US court.

Emisphere accused Lilly of using its Eligen technology, which allows therapeutic molecules to move across membranes more effectively, for the development of other products outside the area of parathyroid hormone.

Shares in Emisphere surged by nearly a third on the news, as it clears the way for the company to follow through with a proposed license deal for oral parathyroid hormone with Swiss drugmaker Novartis.

Judge David Hamilton agreed with Emisphere’s position that Lilly was in breach of contact according to the terms of an agreement signed between the two companies in August 2004.

“Lilly decided it really did not need Emisphere any further, so it decided to pursue a secret research strategy in breach of its contractual obligations to Emisphere,” he said.

Emisphere said it will now seek monetary damages from Lilly in the case, while Lilly has said it is considering an appeal.

Lilly already sells an injectable formulation of parathyroid hormone, Forteo (teriparatide), which was launched in 2002. The product is the only version of parathyroid hormone on the market, and achieved sales of $103 million in the third quarter of 2005, a rise of 77% year-on-year.

- Separately, Lilly and drug delivery specialist Alkermes have agreed to develop an inhalable version of Forteo. The two companies are already collaborating on inhaled forms of insulin and human growth hormone. Financial details were not disclosed.