Eli Lilly and Co. is returning rights for a phase II diabetes drug for which it paid $7 million to Toronto-based Transition Therapeutics Inc., after deciding against carrying the candidate into phase III development. The setback, which follows a disappointing phase II/III outcome for Transition's lead neuropsychiatric drug last year, sent the company's U.S. and Canadian-listed shares to 52-week lows as the company pondered its next step.