Functional dyspepsia is usually described as feeling either like a constant punch to the stomach or an ongoing feeling of general nausea. Investors in Canadian specialty pharmaceutical company AxcanPharma (NASDAQ:AXCA) can probably relate to those feelings today; its stock is down sharply on the announcement of a failure in an important phase 3 clinical study.

The drug in question was Itopride, a drug that the company has been developing for gastrointestinal disorders like functional dyspepsia and diabetic gastropathy. While the former malady is notoriously difficult to diagnose (I've seen estimates of incidence ranging from a couple million to 40 million people), there is no approved drug on the market, and the sales potential here was thought to be at least a few hundred million dollars per year.

Unfortunately, the company gave no meaningful clinical information, other than to say that the drug failed to meet statistical efficacy endpoints or match the results seen in an earlier phase 2 study.

At this point, the company seems to be holding out hope that subgroup analyses will turn up better news, and/or that the North American study (today's news concerns the international study) will show better results. I'm reluctant to comment, since I haven't seen any of the data, but I will say that it's rare to see one phase 3 study succeed and another fail. Even if that were the case, I'm sure the FDA would require another confirmatory phase 3 study before giving approval.

Not surprisingly, management is taking the stiff-upper-lip approach -- pointing toward the company's strong balance sheet and good cash flow generation. In the meantime, investors might take solace from the examples of companies like Elan (NYSE:ELN), AlexionPharmaceuticals (NASDAQ:ALXN), and Forest Labs (NYSE:FRX). In all three cases, short-term disappointments hammered the stock, but investors saw at least partial recoveries as the Street digested the news and realized it wasn't game-over for the business in question. Time will determine Itopride's fate, but at least Axcan is hardly a one-trick pony.

For more Foolish thoughts:

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).