Mylan said on Wednesday that U.S. health regulators were unable to approve its generic version of GlaxoSmithKline's blockbuster inhaled lung drug Advair for the second time, as they found "minor deficiencies" in the treatment.
Shares of Mylan fell 4.5 percent to $39.80 after the bell.
Mylan did not provide details on the nature of the deficiencies cited by the U.S. Food And Drug Administration and it remains unclear whether the company will be able to resolve them and get approval this year.
The FDA has declined to approve several Advair knock-offs in the past from drugmakers including Novartis Hikma Pharmaceuticals, and Mylan itself, whose generic was rejected last year.
"I don't think this comes as a big surprise ... people realize these are all very difficult-to-make products and they're going to go through a couple of rounds at the FDA," Leerink analyst Ami Fadia told Reuters.
"They (Mylan) will actually still be at least one year ahead of competition if they got approval this year."
The news bodes well for GSK, which has dominated the lung drug market for decades and was bracing for competition by mid-2018.
Even as the British drugmaker puts more marketing muscle on its newer lung drugs, GSK reported revenue of 3,130 million pounds ($4.19 billion) from Advair last year.
Mylan said it expects to receive a formal complete response letter, typically issued to outline concerns and conditions that must be addressed to gain U.S. approval, from the FDA on June 27 and would determine what impact, if any, it would have on its full-year forecast.