Nektar Therapeutics said its experimental drug to treat chronic pain in patients with arthritis of the knee failed to meet its main goal in a mid-stage clinical trial.
The drugmaker's shares fell nearly 30 percent in extended trading on Thursday.
The study failed mainly because patients on placebo did not show the expected increase in pain scores observed in similar studies, Nektar said in a statement.
This lack of a placebo rebound was "unusual," the company said.
Half the 213 patients in the study were dosed with Nektar's NKTR-181 drug, while the other half was given a placebo.
"It is possible that this type of study design may not be appropriate for a drug with these types of profiles," Chief Executive Howard Robin said on a conference call with analysts.
NKTR-181 is being developed as a novel treatment for pain to have a slow rate of entry into the brain and reduce the attractiveness of the molecule as a target of abuse — something many pain medications have a tendency of.
Trading in Nektar shares was halted at 1605 on Thursday, pending the company statement. Soon after trading opened at 1640, Nektar's shares fell nearly to $9.75 in after-market.
(Reporting by Zeba Siddiqui in Bangalore)