Biogen Idec said after markets closed Wednesday that it ended its review of strategic options after failing to receive any definitive takeover bids.
Shares of the company lost more than a quarter of their value in late electronic trading.
Sources told CNBC that potential suitors were concerned about past problems with Biogen's drug Tysabri, which the company has recently reintroduced.
At $23 billion in market capitalization prior to Wednesday's announcement, Biogen is much larger than Medimmune, another pharmaceutical concern that was recently acquired by AstraZeneca.
Biogen had put itself up for sale in October, in part at the urging of activist investor Carl Icahn, who holds a significant stake in the company.
Shares of Biogen had jumped in the past two days amid market rumors that a deal was imminent. The stock closed at $75.88, up 49 cents, on Nasdaq. After Biogen announced that it ended the auction, shares of Biogen fell below $55 in after-hours trading.
"I would have guessed that there would have been at least a bidder. Obviously the market really doesn't like the fact that the press release doesn't provide any indication of any interest at any price. It's going to be a bit ugly tomorrow," said Eric Schmidt, an analyst with Cowen and Co.
The auction had failed to get much interest as potential suitors had trouble justifying the high price tag at a time of jittery financial markets, sources familiar with the situation previously told Reuters.
The sale process also had been complicated by Biogen's various drug partnerships, as well as market turmoil that has made it more difficult to obtain financing to fund a deal, the sources had said.
Biogen has a pact with Genentech for the drug Rituxan, as well as with Elan
"They're very Tysabri-dependent," Schmidt said. "They've got this very bullish outlook out there for 2010 but it's not clear if anyone believes them and only time will tell what the incidence of side effects associated with that drug are. I think that's the key and maybe the reason they couldn't elicit more acquisition interest."
Analysts had initially predicted that a winning bid for Biogen would be in the range of $25 billion to $30 billion.
Biogen said it will continue to operate as an independent company.
-- Reuters contributed to this report.