India's Glenmark Pharmaceuticals Ltd. (532296.BY) and U.S.-based Forest Laboratories Inc. (FRX) said Wednesday their drug to treat a breathing ailment failed to meet desired targets in a mid-stage trial.

The results of the study to treat chronic obstructive pulmonary disease, or COPD, with oglemilast sent Glenmark's shares down more than 17% in initial trading. The shares pared some losses and were down 12.5% at INR228.90 on the Bombay Stock Exchange at 0655 GMT.

A once-daily treatment with oglemilast didn't show "a statistically meaningful" result in COPD patients compared with a dummy drug during lung-function tests, the companies said in a joint statement. The drug was well-tolerated at all doses studied, it added.

The study was to evaluate the efficacy and safety of the drug which was given to patients with moderate to very severe COPD, a disease that makes it hard to breathe and seen mostly in cigarette smokers.

Glenmark is seen as a front-runner among Indian drug makers which are working on developing new drugs, typically under licensing deals with foreign pharmaceutical companies that help finance costly and lengthy research.

The failure of the drug is the latest in a string of bad news for the Indian pharmaceutical company's new drug research and development business.

In October last year, Eli Lilly & Co. suspended clinical development of a Glenmark experimental drug to treat osteoarthritis pain without giving any reasons. Merck Serono, a division of Merck KGaA, earlier last year terminated a licensing pact for diabetes treatment melogliptin, saying it is getting out of diabetes research.

In 2004, Glenmark had sold the U.S. rights for oglemilast to New York-based Forest Laboratories. Teijin Pharma Ltd., which signed a deal with Glenmark in 2005, holds the license for selling the drug in Japan.

"We are, of course, disappointed that oglemilast has not been successful in this study," Howard Solomon, chairman and chief executive of Forest Laboratories, said in a statement.

Solomon said oglemilast is still being studied for the treatment of asthma, with results expected during the first quarter of 2010.

"This is a big blow for Glenmark as oglemilast was its lead experimental molecule," said Ranjit Kapadia, vice president of institutional research at HDFC Securities. "The company had pinned a lot of hopes on a positive outcome."

Angel Broking's Sarabjit Kour Nangra said Glenmark is still eligible to receive milestone payments from Forest Laboratories as the U.S. company had bought the license for oglemilast to treat both COPD and asthma.

Forest Laboratories's Solomon said his company is considering, together with Glenmark, "what further action would be useful or appropriate."

Glenmark has already received $35 million from the total expected milestone payments of $190 million from Forest Laboratories for oglemilast.

-By Rumman Ahmed, Dow Jones Newswires; 91-9845104173; rumman.ahmed@dowjones.com