The disappointing news pushed Icos' stock down $4.48 to $25.20.
Sepsis occurs when the body's immune system overreacts to infection, triggering a series of inflammatory reactions that can shut down vital organs. Developing successful medicines for sepsis has been difficult because the cascade of inflammatory reactions has made it difficult to pinpoint a target that can prevent them.
"It's a very difficult disease to treat," said Leerink Swann & Co. analyst Bill Tanner. "Nothing has worked with the exception of (Eli) Lilly's drug Xigris."
Xigris became the first drug approved for sepsis last year. Chiron, Aventis and Xoma have tried and failed to develop a sepsis medicine. In one high-profile failure, an antibody developed by Centocor failed in a late-stage clinical trial, erasing two-thirds of that company's stock value the day after the announcement.
Pafase was designed to inactivate a protein involved in the inflammatory reactions that lead to sepsis.
An earlier trial of 240 patients showed great promise: The death rate after 28 days for those with Pafase was 21 percent compared with 44 percent of those on a placebo. Patients on Pafase were also less likely to develop severe respiratory problems and were able to reduce time spent in intensive-care wards.
The results were so promising, Icos invested in a 2,500 patient pivotal trial at 150 clinical sites to confirm the results, and serve as the basis for Food and Drug Administration approval.
Earlier this year, an independent board looking at the study's progress cleared it to go forward. Because the trial was apparently going well and enrolling patients quickly, Icos said last month that it was spending more on it than expected, which partly pushed the company's projected net loss to more than $160 million for this year.
Icos received more promising news last month with the European approval of Cialis, its impotence drug set to challenge Viagra. Some analysts, however, said Pafase could have been an even bigger potential moneymaker, because it appeared to be a life-saving drug for a disease with few treatment options.
Icos is developing another sepsis treatment called IC14, which targets a different protein involved in inflammation, spokeswoman Lacy Fitzpatrick said. The drug is in the second stage of testing.
About 750,000 people are diagnosed with sepsis annually, and about 215,000 of them die from it. The condition has been estimated to cost the U.S. healthcare system nearly $17 billion a year.
Information from Seattle Times reporter Luke Timmerman is included in this report.