Things had been looking up for Progenics Pharmaceuticals (Nasdaq: PGNX) and marketing partner Wyeth (NYSE: WYE). They were gaining on a rival drug, Entereg, from Adolor (Nasdaq: ADLR) and GlaxoSmithKline (NYSE: GSK), thanks to risk-management issues leading to FDA delays.

That is, until Wednesday, when Progenics stock dropped more than 60%.

The companies had jointly announced that in a phase 3 trial, methylnaltrexone, which treats postoperative ileus (POI), a constipation-like condition after abdominal surgery, the drug didn't more quickly help to restore gastrointestinal function -- or bowel movements. It didn't even help patients get out of the hospital faster than a placebo did.

Results from a second similarly designed phase 3 trial are expected in the middle of the year, and the two companies are also conducting a phase 3 trial testing methylnaltrexone's ability to control POI after large abdominal hernias. Given the results of the most recent phase 3 trial, investors shouldn't hold their breath.

But they should hold their breath for Food and Drug Administration approval for methylnaltrexone for opioid-induced constipation (OIC). Progenics and Wyeth have been trying to get the drug approved for treating nursing-home and hospice patients who require high levels of pain killers, which makes them constipated. The duo should hear from the FDA by the end of April on whether or not they can market the drug for OIC in a subcutaneous form.

The companies are also testing an oral form of the drug for treating OIC, which should provide a larger market for the drug. That version is still in phase 2 testing, so it wouldn't be on the market anytime soon.

Progenics' near-term results are tied to methylnaltrexone because its next drug in line for FDA scrutiny is its HIV therapeutic PRO 140, which just started its first phase 2 trial. It's understandable that investors bailed when it doesn't look like methylnaltrexone works in POI, but I think the price drop might have been a little severe. A market cap under $150 million looks a wee bit low for a company that could have a drug on the market in about a month,  even if the drug will only cater to a small market.

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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Glaxo is a selection of the Income Investor newsletter. The Fool has a disclosure policy.