Otonomy Inc. (NASDAQ: OTIC) saw its shares crater after the firm announced results for its Averts-1 late-stage trial of Otividex in patients with Ménière’s disease. As a result, management has decided to suspend all development activities for Otividex, including the ongoing Averts-2 trial.

The clinical trial missed its primary endpoint, which was the count of definitive vertigo days by Poisson regression analysis. Patients in both the Otividex and placebo groups showed similar reductions in the number and severity of vertigo episodes during the three-month observation period.

Additionally, patients reported a 58% reduction from baseline in vertigo frequency in month 3 compared with 55% for placebo patients.

At the end of June, the company held cash, cash equivalents and short-term investments totaling $150.5 million, with prior non-GAAP operating expense guidance of $80 million to $85 million for 2017.

David A. Weber, Ph.D., president and CEO of Otonomy, commented:

We are greatly disappointed by these results, and surprised by both the higher placebo response and lower Otividex improvement than observed in our previous trials. I would like to thank the many patients and investigators who participated in our Ménière’s clinical program. Based on these results, we are immediately suspending all development activities for Otividex including the ongoing Averts-2 trial. In addition, the company is undertaking a review of its product pipeline and commercial efforts to identify opportunities to extend its cash runway and build shareholder value.

Shares of Otonomy closed Tuesday at $20.80, with a consensus analyst price target of $40.00 and a 52-week range of $11.30 to $21.15. Following the announcement, the stock was down about 80% at $4.20 in early trading indications Wednesday.

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