Connetics Corp. on Monday said the U.S. Food and Drug Administration rejected the company's experimental acne gel, forcing it to cut 2005 profit and revenue targets and sending its stock down 27%.
Shares of Connetics, whose experimental antifungal drug was rejected by the FDA last year, were down $5.64 to $15.13 in heavy trading, their lowest price in two years.
It was the biggest percentage loser on Nasdaq.
The FDA noted in its so-called non-approvable letter to Connectics that cancer risks were seen in mice exposed to its acne drug, known as Velac. The FDA did not cite any other reasons for the rejection, Connetics said.
"We remain committed to bringing Velac to market, and will be working with FDA representatives to determine what is required to do so," said Thomas Wiggans, chief executive of the Palo Alto-based company.
As a result of the latest setback, Connetics cut its 2005 revenue forecast to $182 million to $188 million from its previous forecast of $195 million to $206 million. It projected earnings per share for 2005 of 66 cents to 70 cents, down from 88 cents to 92 cents.
The FDA rejected Connectics' antifungal drug Extina last year, saying it was not effective for treatment of seborrheic dermatitis.
The company last week, however, said it would begin a final trial of Extina in the third quarter and hopes to resubmit its U.S. marketing application for the medication by the end of 2006 if the study succeeds.
Despite its recent difficulties, Unterberg Towbin analyst Angela Larson reaffirmed her "buy" rating on Connetics, saying company profit should jump 30% annually for the next three years because of sales growth of four dermatology drugs already on the market and upcoming launches of several other skin treatments.
And "I believe Velac will get to market within a couple of years," although Connetics will probably have to conduct another animal cancer trial to satisfy FDA safety concerns, she said.