Shares of Depomed Inc fell as much as 29 percent to their lowest in a year, after the specialty pharmaceutical company said its experimental drug to treat menopausal hot flashes showed mixed results in a late-stage study.

The trial data for the drug, Serada, could be a setback for Depomed’s plans to get the drug quickly to market to bolster its revenue stream, a bulk of which it currently gets from its diabetes drug Glumetza.

The company markets Glumetza in the United States along with Santarus Inc, while Depomed’s other FDA-approved product - pain drug Gralise - was launched recently.

For the quarter ended June 30, Glumetza sales were $16.2 million, out of a total revenue of $21.2 million.

On Thursday, the company said the study measured the frequency and severity of hot flashes experienced by patients after four weeks and 12 weeks of treatment with Serada.

The study met three of the four primary goals, but didn’t meet its secondary ones.

Depomed also said it intended to discuss the late-stage results with the U.S. Food and Drug Administration, and possible pathways to filing an application seeking marketing approval for the Serada.

“We are not optimistic about the outcome of the discussion with the FDA, and we believe it is not likely that the agency will buy into the approach,” Auriga USA analyst Difei Yang wrote in a research note.

Auriga cut its price target on the Depomed’s stock to $7 from $10, but reiterated the “buy” rating.

“With $3 per share in cash, we believe the fair valuation based on Glumetza and Gralise alone is $7,” Yang said.

Roth Capital Partners analyst Scott Henry said a $1-$2 per share hit on the company’s stock seemed reasonable due to the clinical setback to the Serada program.

However, the analysts said the Depomed stock had appeal for long-term investors at the current lower valuation.

Roth Capital’s Henry maintained the “buy” rating on the stock, while Yang said he would let the dust settle for the next few days and be aggressive buyers at the $4.00-$4.50 levels.

Depomed’s shares were down 24 percent at $4.81 in morning trade on Nasdaq. They had touched a low of $4.45 earlier in the session.

(Reporting by Shailesh Kuber; Editing by Sriraj Kalluvila, Maju Samuel)

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(Reuters)