LONDON (Reuters) - French drugmaker Sanofi is to stop selling an inhalable insulin developed by Mannkind, following disappointing sales of the product since its launch in February 2015.

The decision to terminate the collaboration marks a blow for the idea of delivering insulin through an inhaler, rather than by injection, and shares in U.S.-based Mannkind fell 40 percent after the companies announced the move on Tuesday.

Rights to Afrezza will revert to Mannkind from Sanofi in the next 90 to 180 days and Mannkind said it was reviewing strategic options for the product, although analysts questioned if the drug had any future.

Sanofi first signed up the rights to Afrezza in August 2014 in the hope that an inhaled insulin would boost its flagging diabetes business, although many investors were skeptical from the start.

Afrezza, which is delivered via a whistle-sized inhaler, acts more rapidly than insulin injections made by Sanofi or rivals such as Eli Lilly and Novo Nordisk, but it also carries risks.

The product can cause acute bronchospasm, or constriction of the airways of the lung, in patients with asthma and chronic obstructive pulmonary disease.

A Sanofi spokesman said Afrezza continued to suffer from a low level of prescriptions, despite substantial sales efforts.

"The product never met even modest expectations and we do not project Afrezza reaching even the lowest patient levels anticipated at the time of entering the license and collaboration agreement, while costs are projected to remain very high for a significant period of time," he said.

Afrezza was developed in the shadow of another failed inhaled insulin from Pfizer, called Exubera, which was approved in 2006 but eventually withdrawn due to poor sales.

Under the Afrezza marketing deal struck with Sanofi in 2014, Mannkind secured an upfront payment of $150 million and had the right to potential further milestone payments of up to $775 million, plus a share of profits.

Those payments, however, depended on the drug's success and Sanofi reported Afrezza sales of just 5 million euros ($5.4 million) in the first nine months of 2015.

Given such poor sales, Sanofi's decision to ditch Afrezza - albeit after an orderly transition - came as no great surprise to many analysts and the French company's shares ended 1.2 percent higher in Paris.

"We can't imagine that another legitimate diabetes company would show serious interest in this asset," JP Morgan analysts said in a note. "With little hope for resuscitating Afrezza and a dismal balance sheet (net debt), we see Mannkind in an increasingly precarious position."

(Editing by Adrian Croft, Greg Mahlich)