An application to license the world's first medicine to be produced from a GM animal has been turned down.
More supporting evidence will be needed
Atryn is an anti-clotting agent and would have been used by people with an inherited disease leaving them prone to developing blood clots.
A company had engineered the goats so they produced the drug in their milk.
The European Medicines Agency said the company applying for the licence had failed to demonstrate the benefits of the drug outweighed its risks.
Potential recipients of Atryn number around 1 in 5,000 in the UK.
Sufferers are born missing one copy of the anti-thrombin gene, resulting in underproduction of this protein in their bodies and leaving them vulnerable to blood clots.
Normally, patients are maintained on blood thinners such as Warfarin; but if they are giving birth or undergoing surgery this is deemed too risky, and they are given replacement anti-thrombin.
The only current source for this is from human blood plasma.
While there have never been any contamination problems with anti-thrombin products, fears about the possible transmission of diseases, such as vCJD, as has been seen with whole blood, make doctors unwilling to expose their patients to plasma products unless they have no choice.
GTC Biotherapeutics, based in the US, genetically modified goats to contain a human gene that codes for anti-thrombin. The transgenic goats are then able to produce the protein in their milk.
Geoffrey Cox, chief executive of the company, said: "It takes just 18 months to produce a lactating animal and in a single year one goat produces the equivalent of 90,000 blood collections."
The goat-derived drug was studied in 14 patients with the inherited disease: five were given Atryn during surgery and nine were given the drug during childbirth.
But the European Medicines Agency said it was not inclined to give the drug a licence at this stage because the research had not looked at enough surgical cases, and the childbirth studies could not be used in support.
The agency also said that not enough evidence was produced to show if trial patients were developing an unfavourable immune response to the drug.
In the late 1990s, biotech investors went wild for the promise of living, breeding drug producers, delivering products at a fraction of the cost of a traditional biotech factory, but delivery of these products has been slow to come to market.
This latest decision marks a further setback in moving these transgenic drugs from bench to bedside.