(Reuters) – Otonomy Inc said on Wednesday it suspended developing its drug for Meniere’s disease, a chronic disorder of the inner ear, after it failed a late-stage trial, sending the drugmaker’s shares plummeting in premarket trade.
San Diego-based Otonomy’s stock fell 81.5 percent to $3.85 in trading before the bell.
Meniere’s typically affects one ear, causing vertigo, a persistent ringing in the ear, and ultimately, permanent loss of hearing. The disease affects about 600,000 Americans.
The U.S. Food and Drug Administration (FDA) has so far not approved any specific drug for Meniere’s, but compounded steroids are routinely used to treat patients.
These steroids, however, often require many repeat injections. Patients are also restricted from moving or swallowing for up to thirty minutes once the steroid is taken, to ensure the drug stays in the inner ear.
Otonomy’s drug, Otividex, is a formulation of an existing steroid designed to become a viscous gel upon injection, allowing for a quicker, five-minute procedure.
Otividex missed the trial’s main goal of significantly reducing the number and severity of vertigo episodes over a three-month period when compared with a placebo.
The drug also failed to meet the study’s key secondary goals, Otonomy said.
“At this point, we have no explanation for the unequivocal negative result,” the company said on a call with analysts, adding it planned to further analyze the data to investigate what went wrong.
Otonomy said it would also suspend its ongoing European trial in Meniere’s disease patients.
Before Wednesday’s trial results, analysts had largely believed both trials would succeed.
Cowen and Co analyst Ken Cacciatore said on Tuesday that if approved, Otividex could account for a $500 million market opportunity in the United States alone.
The delivery technology used by Otividex is already used by Otonomy’s FDA-approved antibiotic for an ear infection that generated about $300,000 in second-quarter sales.
Otonomy also withdrew its annual operating costs forecast, pending an internal review of its product pipeline.
The company had estimated adjusted operating expenses of $80 million to $85 million for 2017.
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