Targacept Inc said it was stopping development of a drug to treat overactive bladder after it failed to show significant reduction in incontinence in a mid-stage study.
The company's shares fell 32 percent in extended trading after it canceled its third drug development program in eight months and said it may change the direction of its research.
Targacept said based on this and previous trial results its key technology did not appear to produce "new treatments with a meaningful improvement over the current standard of care."
Targacept's key technology is based on modulating receptors found in the central nervous system which transmit signals between various organ systems and the brain.
The company still has one compound based on this technology in clinical development to treat diabetic gastroparesis which causes the partial paralysis of the stomach.
The company stopped the development of its Alzheimer's drug this month and a schizophrenia drug last year.
CEO Stephen Hill said the company was considering a range of options including the pursuit of "non-nicotinic opportunities".
Targacept's shares closed at $3.92 on the Nasdaq.
(Reporting By Amrutha Penumudi; Editing by Don Sebastian)