Shares in UK biotech Circassia have plummeted after its flagship experimental cat allergy drug failed to hit targets in a Phase III trial.

In the study, both treatment regimens and placebo "greatly, and equally, reduced subjects' combined allergy symptom and rescue medication use score from baseline," the firm said.

But because of the "very marked placebo effect", the treatment failed to reach the study's primary endpoint. All groups had greatly improved combined score (rhinoconjunctivitis symptom score and rescue medication use score) versus baseline, with reductions of 58.2 percent for the four-dose course, 59.8 percent for the eight-dose course, and 58.5 percent in the placebo arm.

Steve Harris, Circassia's chief executive, expressed both surprise and disappointment on the data.

"Such a dramatic placebo effect was not a feature of our earlier Phase II studies. However, in this large-scale trial it eliminated the ability to identify a treatment effect despite dramatic improvements in subjects' allergy symptoms and rescue medication use."

"We will now rapidly analyse the full dataset, address the implications for our wider allergy pipeline and provide an update on the development plans for our broader business at our interim results".

On the plus side, the treatment was found to be well tolerated with a solid safety profile. Nevertheless, shares in Circassia, which is backed by UK tech investment and commercialisation group Imperial Innovations, were trading down nearly 65 percent in the aftermath of the news.

"Although these results are disappointing, we continue to be supportive long-term shareholders in Circassia," said Russ Cummings, chief executive of Imperial Innovations.

"In addition to its immunotherapy products, Circassia has a fast-growing asthma diagnostics and management platform, and a broad pipeline of respiratory products, each of which have considerable value in their own right".