Palatin's shares fell as much as 5 percent to $0.61 in early trade on the NYSE Amex.

In June, AstraZeneca said an allergic reaction had prompted the company to stop an early-stage trial on the same compound, codenamed AZD2820.

Following the incident, Astra conducted investigations and review and decided to stop developing the compound further, Palatin said.

"While not confirmed, it could not be excluded that the serious adverse event was linked to AZD2820," Palatin said in a statement.

AZD2820 is one of the many compounds that are undergoing pre-clinical testing under a broad research collaboration between the two companies to develop obesity treatments.

"AstraZeneca has informed us that they remain committed to the advancement of collaboration compounds for treatment of obesity," Palatin's chief executive Carl Spana said.

(Reporting by Zeba Siddiqui in Bangalore; Editing by Sreejiraj Eluvangal)

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