Foamix Pharmaceuticals Ltd said on Monday its experimental acne treatment failed to meet one of two main goals in a late-stage study, pushing its shares down about 42 percent.
However, the drug, FMX101, succeeded in a separate late-stage study, the Israel-based drug developer said.
FMX101, is a topical version of a decades-old acne treatment called minocycline, which already exists in an oral form, but can lead to serious side effects.
The two trials included a total of 961 patients with moderate-to-severe acne, and tested FMX101 against a placebo. Each trial had two main goals - the reduction in lesions and an assessment made by investigators using an acne severity scale.
While the drug induced a statistically significant reduction in lesion count in both trials, it met the main goal in relation to the acne scale in just one study.
"Foamix did hit three of their four endpoints in the phase 3 studies, so we think the drug works", Guggenheim Securities' Louise Chen said.
Foamix is analyzing the data and plans to discuss its next steps with the U.S. Food and Drug Administration (FDA), the company said.
It seems that a path forward depends on whether the FDA would consider the remainder of data sufficient for filing and approval, Barclays analysts said.
They questioned whether there may be a read-through to Foamix's experimental rosacea drug, FMX103, which is expected to go into a late-stage study in 2017.
Companies developing acne treatments include Dermira Inc, Allergan Plc, Novan Inc and Xenon Pharmaceuticals Inc.
Last week, Xenon said it would discontinue developing its acne drug after it failed a mid-stage study.
Separately on Monday, Allergan and Paratek Pharmaceuticals Inc said their experimental antibiotic for acne succeeded in two late-stage studies.
Foamix is also developing treatments for other skin disorders, including rosacea, impetigo and chemotherapy-induced rashes.
Acne is the most common skin condition in the United States, affecting up to 50 million annually, according to the American Academy of Dermatology.
Foamix's shares slumped as much 51.7 percent to $4.40. Up to Friday's close, the stock has risen about 52 percent in the last 12 months.
(Reporting by Natalie Grover and Divya Grover in Bengaluru; Editing by Sai Sachin Ravikumar and Shounak Dasgupta)