Israel-based drugmaker Kamada Ltd said its experimental drug failed in a key trial to treat an inherited condition that raises the risk of lung and liver disease.
Kamada's stock plunged almost 35 percent in heavy trade on the Nasdaq on Friday.
"I think its clear to say they wont be able to file (for U.S. approval) off of these results, unless there's something magical they're planning to release in the third quarter," H.C. Wainwright & Co analyst Andrew Fein said.
The biotechnology company said on Friday that it planned to release detailed results of the study in the third quarter.
Fein added that he would keep expectations "modest" on the possibility of European approval, saying the company needed to conduct another study with a different trial design.
The 50-week trial was testing the inhaled drug, AAT, against a placebo in 168 patients with a type of protein deficiency. Early data showed that the treatment was not more effective than the placebo.
While Kamada's intravenous version of the drug, Glassia, is being sold by Baxter Inc in the United States, the inhalable version could offer a more targeted form of therapy, delivering the drug directly to the lungs.
The treatment is delivered using an eFlow Nebulizer System, developed by Kamada's German partner, PARI Pharma.
Glassia, Kamada's sole product on the market, is also in use in Israel, Brazil and Russia.
The common hereditary disorder, called Alpha-1 Antitrypsin deficiency, is characterized by low levels of alpha-1 antitrypsin - a protein released by white blood cells that digests bacteria and other foreign objects, primarily in the lungs.
The deficiency, often misdiagnosed as asthma or bronchitis, predisposes individuals to several conditions, including lung and liver diseases and sometimes panniculitis — a skin condition.
Fein estimated that the European market for the condition could be worth $100 million, and at least three times as much in the United States.
The disease affects 1 in 2,500 people in the United States, according to the Alpha-1 Association.
The company is also evaluating the treatment for use in cystic fibrosis, bronchiectasis and diabetes.
Kamada's shares were trading down 34 percent at $9.11 in late morning trade.
(Reporting by Natalie Grover in Bangalore; Editing by Simon Jennings)