News Release

Eli Lilly and Company and Alkermes, Inc. have announced that they have signed a broad, mutually exclusive agreement to develop inhaled formulations of insulin, including short-acting and long-acting insulin, and other potential products for the treatment of diabetes based on the Alkermes AIR^TM pulmonary drug delivery system. The companies' decision to enter into this agreement follows the analysis of data generated in ongoing human clinical trials conducted by Alkermes of inhaled insulin formulations and the completion of a series of tests evaluating the performance of the Alkermes AIR^TM inhaler.

Under the terms of the agreement, Alkermes will receive funding for product and process development activities, milestone payments, and royalties based on product sales. In exchange, Lilly will receive exclusive worldwide rights to products resulting from the collaboration. Lilly will be responsible for conducting clinical trials, securing regulatory approvals, large-scale manufacturing and marketing on a worldwide basis.

"We will leverage the synergies created with Alkermes under our existing inhaled human growth hormone collaboration as we expand our partnership to include the development of pulmonary insulin and other diabetes care products," said Richard D. DiMarchi, Ph.D., group vice president, research technologies and product development, for Lilly. "As the global insulin leader, Lilly is committed to pursuing technologies that could greatly benefit people with diabetes by providing convenient, noninvasive alternatives for the delivery of insulin and other related products."

"We are pleased to expand our strong working relationship with Lilly to include the development of inhaled insulin and other potential products," said Richard Pops, chief executive officer of Alkermes. "Our stated intention has been to demonstrate the performance of our insulin formulations and simple inhalers in clinical trials prior to entering into a significant collaboration with a major insulin supplier. Having done so, we are particularly pleased to be working with Lilly in light of its world leadership position in insulin."

The Alkermes AIR drug delivery system is based on a novel concept, published in Science magazine in 1997, that relatively large, low-density drug particles can be inhaled into the lungs with high efficiency from simple inhaler devices. These particles have distinct physical characteristics with several potential advantages over other inhalation delivery systems. The AIR system utilizes a small, convenient delivery device, can deliver a wide range of drug doses, and has the potential to provide sustained release drug delivery as well.

Alkermes is a leader in the development of products based on sophisticated drug-delivery technologies. The company has several areas of focus, including (i) controlled, sustained release of injectable drugs lasting several days to several weeks, utilizing its ProLease^® and Medisorb^® technologies and (ii) the development of pharmaceutical products based on proprietary pulmonary drug-delivery technologies utilizing its AIR^TM technology. In addition to its Cambridge, Massachusetts, headquarters, research and manufacturing facilities, Alkermes operates research and manufacturing facilities in Ohio and a medical affairs office in Cambridge, England. Additional information about Alkermes will be reviewed during its analyst and investor day on Tuesday, April 3. The event will be webcasted live at www.alkermes.com.

Lilly, a leading innovation-driven corporation, is developing a growing portfolio of best-in-class pharmaceutical products by applying the latest research from its own worldwide laboratories and from collaborations with eminent scientific organizations. Headquartered in Indianapolis, Ind., Lilly provides answers - through medicines and information - for some of the world's most urgent medical needs. Additional information about Lilly is available at www.lilly.com.

This press release contains forward-looking statements about the potential of inhaled formulations of insulin and other potential products for the treatment of diabetes that reflect management's current beliefs. However, as with any pharmaceutical under development, there are risks and uncertainties in the process of development and regulatory review. There are no guarantees that future clinical trials will confirm the preliminary results referred to in this release or that the product will receive regulatory approvals or prove to be commercially successful. For further discussion of these and other risks and uncertainties, see Alkermes' and Lilly's filings with the United States Securities and Exchange Commission.