The Five Dumbest Things on Wall Street: March 14

1. Eli Lilly's Diabetes Problem

For pharma firm Eli Lilly LLY, a safe diabetes treatment is a no-go. But if another drug causes diabetes, greenlight the thing -- provided, of course, there's a healthy sales boost in the offering.

Last Friday, Lilly announced it would cease work with Alkermes ALKS on its AIR Insulin project for an inhalable diabetes treatment. Lilly stressed in a press release that its decision was not informed by "observations ... relating to the safety of the product," but instead by "a thorough evaluation" of AIR Insulin's "commercial and clinical potential." That's not surprising: Inhalable insulin is a laughingstock on Wall Street. MannKind MNKD plummeted this week on concerns about its breathable insulin project.

To be sure, commercial concerns never arose for Zyprexa, Lilly's No. 1 drug that treats bipolar disorder and schizophrenia. The drug generated $4.8 billion in revenue last year.

It's too bad, then, that the state of Alaska has some observations of its own about Zyprexa's safety. A day after Lilly touted the safety of the now-defunct AIR Insulin, an Alaska lawsuit revealed that Zyprexa causes weight gain and blood sugar changes, which for those unaware are two indicators for diabetes.

Diabetes specialist and former FDA reviewer Dr. John Gueriguian testified that Lilly should have disclosed Zyprexa's diabetes situation in 1998. Instead, Lilly waited until 2007 to slap strong warning labels on Zyprexa bottles. Patients who can no longer regulate their blood sugar would probably agree.

Dumb-o-meter score: 95. In an internal memo about Zyprexa, Eli Lilly told its drug reps not to bring up the diabetes problem to doctors: "We will NOT proactively address the diabetes concerns," the document said.