Shares in Irish drugmaker Elan have plummeted once more after a third case of disease linked to Tysabri, its multiple sclerosis treatment.
The new treatment was tipped to be a top-seller
Elan suspended the drug after two patients were found to have caught the rare disease, one of whom later died.
The newly revealed case - which also ended with the death of the patient - could mean Tysabri never makes it back onto the market, analysts warned.
By the close of trading, Elan shares were down 56% to 2.43 euros.
The initial cases had involved patients taking both Tysabri and US firm Biogen Idec's drug Avonex, and Elan had hoped that the problem was due to an unexpected problem with the combination.
The latest, however, involves Tysabri alone.
Biogen's shares were down 11% by 1600 GMT.
In contrast Swiss firm Serono, which markets a rival multiple sclerosis drug called Rebif, saw its stock rise 3.2%.
Elan first suspended Tysabri in February after one patient using both Elan's and Biogen's drugs was found to have died of a condition called progressive multifocal leukoencephalopathy (PML).
The disease attacks the central nervous system.
A second similar case - albeit not a fatality - was identified shortly afterwards.
But the case announced on Wednesday - involving a patient who died in December 2003 during a clinical trial for treating Crohn's Disease - is the first to affect someone using Tysabri alone.
"This is bad," said Alexander Hittle, analyst at AG Edwards.
"The best hope for the drug was that (the PML cases) was in some way the result of a combination of Tysabri with Avonex, and Tysabri could be brought back onto market as a stand alone therapy.
"This is going to make it very tough for them to get Tysabri back onto the market."
In the wake of Wednesday night's news, several banks including Morgan Stanley and Piper Jaffray downgraded Elan's stock.
Tysabri, Morgan Stanley analysts warned, would "probably never return to the market."
Elan shares had plummeted 68% when the suspension was announced on 28 February.
Tysabri had been approved for use in the US last November and was widely tipped to become the world's leading multiple sclerosis treatment.
Elan is now facing months of reviews of every clinical trial patient who has taken Tysabri, as well as investigations by regulators.
The drug has been widely seen as the key to Elan's future.
The firm was once the biggest firm on the Irish stock exchange till an inquiry into its accounts in 2002 brought the group close to bankruptcy.
It has rebuilt itself since, and its shares had risen almost four-fold last year.