It's a classic tale: A pharmaceutical company looks for the next big drug only to have that drug fail a late-stage trial. Then shares plummet.

That's exactly what happened to specialty pharmaceutical drug company DepoMed Inc (NASDAQ: DEPO). The company announced earlier today that Gabapentin GR, its experimental drug for nerve pain caused by shingles, failed to meet its primary goal of a late-stage trial. The primary endpoint of the Phase 3 trial was to reduce average daily pain scores, which it did, but only during the initial weeks of the treatment. After that, pain scores in patients treated with the drug were "statistically lower" in comparison with a placebo. The company also said pain relief from the medicine over the course of the study was not "statistically significant," but that the medication proved effective in reducing sleep interference.

That's gotta hurt.

Gabapentin, which is an experimental altered form of Pfizer Inc's (NYSE: PFE) Neurontin, was designed to release through gastric retention, where the drug stays in the stomach and is absorbed. Due to positive Phase 2 clinical trial data, DepoMed was counting on the drug to help it compete against Pfizer's Neurontin and its even newer treatment, Lyrica, as well as other generic drug makers who market Neurontin under the chemical name gabapentin.

Don't look for DepoMed to wave the white flag yet -- the company said it didn't expect the disappointing data to interfere with other efforts to develop Gabapentin GR as a treatment for menopausal hot flashes.

On the announcement, DepoMed shares were down a whopping 60%.

Earlier this afternoon, Coley Pharmaceutical Group Inc (NASDAQ: COLY) announced that Pfizer Inc (NYSE: PFE) would discontinue the development program of an investigational drug compound - PF-3512676 - in combination with cytotoxic chemotherapy for the treatment of lung cancer. After two Phase 3 clinical trials and two Phase 2 clinical trials, an analysis by an independent Data Safety Monitoring Committee found that there was "no evidence that PF-3513676 produced additional clinical efficacy over that achieved" with cytotoxic chemotherapy alone. The DSMC said that the "risk-benefit profile did not justify continuation" of the compound trial, and Pfizer, apparently, agreed.

This news comes as a huge blow to Coley, whose main thesis drug is PF-3512676, and who is trying to become a force-to-reckon-with in the oncology field. In a statement, president and CEO Robert L. Bratzler, Ph.D., said that the announcement was "surprising, based on the signs of clinical activity observed."

On the announcement, shares of Coley were down approximately 60%. As of March 31, the company had $3.35 per share in cash. Coley will be hosting a conference call and webcast this afternoon at 4:30 p.m. (EST) to discuss this development.