Aug 5 (Reuters) - Novo Nordisk is making progress in the hunt for an oral form of insulin that can be given as a pill rather than an injection, marking a sliver of good news amid disappointing second-quarter results.

The Danish group, which is the world's largest producer of injectable insulin, said on Friday it would make a decision on the next step for the product later this year, following "generally encouraging" mid-stage clinical trial results.

Producing oral insulin is viewed as a holy grail of diabetes therapy, although many experts question if it is possible to produce an effective and competitive medicine that can survive the onslaught of digestive juices in the stomach.

A pill version needs a special protective coating to try and ensure that a clinically beneficial amount of the hormone gets into the body.

Novo said its experimental once-daily oral insulin OI338GT reduced blood sugar levels, while appearing safe and well tolerated, in a small Phase IIa clinical study lasting eight weeks.

"We expect to have more detailed information regarding the next step of this product in the second half of 2016," chief executive Lars Rebien Sorensen told reporters.

Novo discontinued development of another experimental oral insulin, OI320GT, due to "portfolio considerations", which some analysts said suggested OI338GT would be the product taken forward into larger trials necessary for regulatory approval.

Novo has been working on oral insulin for many years and is ahead of Big Pharma rivals in the field, although it faces competition from tiny Israeli drugmaker Oramed Pharmaceuticals , which reported success with its oral insulin in a mid-stage trial in May.

(Reporting by Ben Hirschler; Editing by Alexander Smith)