The drug, TH-302, is Threshold's only drug and the development comes close on the heels of similar trial results from other cancer drugmakers who have also struggled to improve overall survival rates.

Some analysts, however, said investors had overreacted.

By midday, the shares had almost halved their losses but were still down 19 percent at $7.02. The stock is the day's top percentage loser on the Nasdaq.

Overall survival is considered an important indicator for potential cancer treatments.

The company's stock had jumped 42 percent on February 21 after it said TH-302 improved progression-free survival, quoting data from the same study.

Progression-free survival indicates a drug's effect on tumor growth, while overall survival is a more direct measure of a patient's chances of survival.

Threshold Pharma said the mid-stage study did not have its main goal as a statistically significant improvement in the overall survival rates and was not designed to measure them.

It said it will go ahead with a late-stage trial along with its partner Germany's Merck KGaA.

"Today's results do not change our expectation for the results of the late-stage trial," McNicoll, Lewis, & Vlak analyst George B Zavoico said, adding that the late-stage trial will have overall survival as a key endpoint.

In February, the company had licensed TH-302 to Merck, sharing its development rights for different kinds of cancer, except soft tissue sarcoma.

Threshold is currently testing TH-302 in additional clinical studies, including a late-stage trial to treat patients with soft tissue sarcoma.

In December, drugmaker Endocyte Inc said its experimental cancer treatment did not improve overall survival of patients in a study, wiping off 65 percent of its market capitalization in a single day.

Similarly, Celgene Corp scrapped a late-stage study of its product Revlimid for prostate cancer after it was determined that it would not extend survival.

According to the American Cancer Society, an estimated 43,920 new cases of pancreatic cancer and 37,390 deaths are expected to occur in the United States in 2012, the company said.

(Reporting by Vidya P L Nathan, Adithya Venkatesan; Editing by Joyjeet Das and Sreejiraj Eluvangal)

• A Permanent Economic Emergency