The Dutch Regulatory Agency has declined Cosmo Pharmaceuticals’ ulcerative colitis drug Cortiment (budesonide with MMX technology), which has lead to the Italian company’s stock falling as much as 12%.

The decision was based on the “grounds of clinical relevance”, though Cosmo is still waiting for a formal letter with the full details, the company said in a statement.

Cosmo may appeal the rejection and is “assessing means” to have the Dutch Regulatory Agency review its decision.

“We believe Cortiment MMX is a clinically effective option for patients with mild to moderate ulcerative colitis and we are supported in this belief by the major key opinion leaders,” Mauro Ajani, chairman and chief executive of Cosmo, said.

Shares in the company dropped to an almost three-year low to 22.65 francs. However, analysts interviewed by Bloomberg are not ruling the drug out yet, as it is still to be reviewed by the US Food and Drug Administration, which should make a decision by 19 October.

Despite this setback, Cosmo is still in a healthy position after it reported an increase in revenues and profits in the first half of 2012. Total revenues increased by 24.4 million euros to 40.7 million euros from the same period last year. This was partly driven by an increased market share of the ulcerative colitis drug Lialda/Mezavant (melamine).