AstraZeneca shares plunged more than 15 per cent in early trading in London, causing it to become the biggest faller on the FTSE 100, after it said trials of a lung cancer treatment had not met expectations.
The failure of the hugely anticipated lung cancer drug study, dubbed Mystic, was described as "pretty much the worst case scenario" by one analyst.
Earnings for the second quarter were in line with expectations. Sales came in at $4.9m, down 10 per cent on the same period last year, and earnings per share were 87 cents per share, slightly ahead of the 80 cents expected.
"Second quarter financials are unlikely to be in focus this morning following the news that the Phase 3 Mystic trial has missed all of its endpoints (including Imfinzi mono and the Imfinzi/treme combo)..." said analysts at Shorecap.
The pharmaceutical giant had hoped the next-generation drug Imfinzi (also called Durvalumab) could be more effective than chemotherapy. But the results of the study showed it failed to slow the progression of the disease - a major setback.
Separately Astra will partner with rival Merck to jointly develop and commercialise another cancer drug, Lynparza, landing $1.6bn from the deal upfront and potential for up to $8.5bn in the long term.
Both firms and other large drug makers such as Roche and Bristol-Myers Squibb are working on cutting-edge immunotherapy drugs.
Astra boss Pascal Soriot, who was last week forced to deny rumours he was leaving the company and is in the midst of turning around the pharma giant had said a failure of the study would be a "substantial setback".
Read more: A "new era" of cancer treatment is beginning