Eli Lilly and Co is halting development of one of its experimental late-stage Alzheimer's disease treatments after preliminary results from large studies showed the drug was linked to worsening of cognition and the ability to perform daily tasks.

The halting of the development of semagacestat, announced by Lilly on Tuesday, is a serious blow to the drugmaker as well as to efforts to combat the degenerative aging disease, for which the development of effective treatments has proved elusive. Lilly shares fell more than 2 percent in premarket trading after the announcement.

The preliminary results stemmed from two ongoing long-term Phase III studies, in which semagacestat was compared with placebo in more than 2,600 patients with mild-to-moderate Alzheimer's disease.

An interim analysis of the studies showed patients on semagacestat worsened with respect to cognition and the ability to perform daily tasks to a statistically significant degree greater than those on placebo. In addition, data showed semagacestat was associated with an increased risk of skin cancer.

The company said the decision did not affect the ongoing clinical trials of solanezumab, its other drug in Phase III study under development as a potential Alzheimer's treatment.

Lilly said it expected to take a third-quarter charge of 3 cents to 4 cents per share for the halt, although it affirmed its 2010 profit forecast.

Shares of Lilly were down 2.2 percent at $34.80 in trading before the market opened.