U.S. Food and Drug Administration declined to approve Durect Corp's post-operative pain treatment, saying the application lacked enough data to prove the drug was safe.
Durect's shares fell about 30 percent after the bell.
The FDA indicated that more clinical safety studies would have to be conducted on the drug, Posidur, Durect said.
The specialty pharmaceutical company said it was evaluating the issues described in the "complete response letter", the type of letter issued by the FDA to convey that it cannot approve a drug application in its current form.
Durect's shares closed at $1.95 Wednesday on the Nasdaq.
(Reporting by Shailesh Kuber; Editing by Don Sebastian)