CAMBRIDGE, Mass.—Eli Lilly & Co., one of the biggest makers of insulin, has been planning a risky new business venture: making the high-tech devices that deliver insulin to diabetes patients.

In a research laboratory Lilly opened here in 2015, scientists have been developing a wearable, automated insulin-delivery device designed to reduce the decision-making and guesswork of conventional insulin injections. They are also developing a “smart pen” injection device that can wirelessly transmit dosing information to a patient’s phone, to ensure proper dosing.

Lilly’s previously undisclosed projects, for which the company has enlisted several design and device-firm partners, including the inventor of the Segway scooter, is an unusual example of diversification at a time when much of the drug industry is moving in the opposite direction—shedding nondrug businesses to focus on pharmaceuticals.

Indianapolis-based Lilly, the first company to mass produce insulin in 1923, faces competitive pressures including the expected arrival of lower-cost copies of its top-selling insulin, Humalog. And it sees growth in the market for advanced insulin-delivery devices.

Enrique Conterno, head of Lilly’s diabetes business, said he believed Lilly’s insulin business would become “obsolete” if the company remained largely an insulin provider without delivery systems.


“Do we want to be just an insulin provider that just goes into a system, or do we want to be the integrator of the system?” he said at the Cambridge lab this month. “To me, it’s clear where the business is going.” ​Lilly’s insulin products currently generate about 20% of the company’s total revenue.

Still, the projects are a risky bet because Lilly will compete with medical-device heavyweights like Medtronic PLC, which received U.S. marketing approval for an automated insulin-delivery device last year.

Medtronic’s product is the only one of its kind on the market, but other companies including Roche Holding AG, Insulet Corp. and Tandem Diabetes Care Inc. are developing automated pump systems, too.

Danielle Antalffy, an analyst with Leerink Partners, said competition in the diabetes-device field is fierce, with several companies racing to develop insulin-delivery systems that advance toward a so-called “artificial pancreas,” or a device that would completely remove patient decision-making from insulin delivery.

“ Do we want to be just an insulin provider that just goes into a system, or do we want to be the integrator of the system? ” — Enrique Conterno, head of Lilly’s diabetes business

Lilly has been introducing new drugs for diabetes and other diseases such as cancer and psoriasis​ in recent years to try to offset​ a wave of​sales-eroding ​patent expirations for former top-selling drugs. ​ While results have improved since 2014, Lilly faces more challenges ahead including expected generic competition for erectile-dysfunction drug Cialis next year. Its stock price has risen 8.5% in the past 12 months, less than rivals such as Novo Nordisk A/S and Sanofi SA and below the 11% gain in the NYSE Arca Pharmaceutical index.


Mr. Conterno declined to specify how much Lilly is spending on its device program, but said “it’s a major effort.” Lilly expects it will take about two to three years to get the devices to market, if they succeed in patient studies and pass muster with regulators. The company expects to begin clinical trials in December. Lilly declined to discuss its pricing plans.

The company has outside help with the project. Deka Research and Development Corp., the R&D firm led by Dean Kamen, inventor of the Segway scooter, is designing the pump for Lilly’s product. Lilly has also tapped Dexcom Inc. to supply devices that attach to a patient’s skin to monitor blood-glucose levels continuously.

And last year, Lilly acquired a privately held Montreal startup, Class AP, to gain software algorithm technology that will make decisions about how much insulin to inject, and when. Lilly hasn’t previously disclosed these deals. The companies declined to disclose financial terms.

About 30 million Americans have diabetes, according to the Centers for Disease Control and Prevention. Keeping blood sugar in a healthy range can help prevent immediate risks such as passing out, and reduce long-term complications such as vision loss and kidney disease.


Lilly’s Cambridge lab occupies two floors of a new six-story building on the edge of Massachusetts Institute of Technology’s campus. Lilly has hired about 40 people for the lab including mechanical engineers, material scientists and industrial designers.

Deka’s Mr. Kamen, who was visiting Lilly’s lab on a recent afternoon, reached into his shirt pocket and pulled out a prototype of the pump—a white disk about the size of a shoe-polish tin. The disk carries a 3-day supply of insulin and is attached to a tube that delivers the drug into the abdomen. A patient could carry the disk in a pocket, he said.

The current version of the Dexcom glucose monitor is about 1 ½ inches long and can adhere to the abdomen or upper buttocks, with a small wire that pierces the skin to sense glucose levels. Patients will be able to control the system using an app on their phones, Lilly said.

Write to Peter Loftus at peter.loftus@wsj.com