(Reuters) - The U.S. Food and Drug Administration cleared Achaogen Inc’s antibiotic to treat adults with complicated urinary tract infections, but shares slumped 25 percent as the drug failed to win approval for treating bloodstream infections.

A view shows the U.S. Food and Drug Administration (FDA) headquarters in Silver Spring, Maryland August 14, 2012. REUTERS/Jason Reed/File Photo TPX IMAGES OF THE DAY

The agency cited lack of evidence of effectiveness of the drug, Zemdri, in a clinical study to treat bloodstream infections, the company said in a statement.

Investors had hoped that the drug would win approval for treating both types of infections, Wedbush analyst Robert Driscoll said.

The treatment, previously known as plazomicin, had a “breakthrough therapy” status reserved for serious diseases that do not have approved treatments in the market.

The FDA decision follows similar recommendations by its independent panel, known as AdComm, in May.

Despite the drug’s failure to win approval for treating bloodstream infections, the company expects it to be used in some cases.

“We also heard at the Ad Comm that physicians would likely consider plazomicin use in life-threatening bacterial bloodstream infections, based on their assessment of the severity of the patient’s infection,” Kenneth Hillan, president of Achaogen’s R&D, said on a call with analysts.

The company said it expected to launch Zemdri, which is also its first drug, by July.

Analyst Driscoll expects peak U.S. sales of $511 million for the drug by 2030, with Mizuho analyst Difei Yang previously pegging the price at $1,000 per day by launch time.

Complicated urinary tract infection is a painful condition, which occurs in people with functional or structural abnormalities of the urinary tract and is characterized by fever, chills and back pain.

The condition has other approved treatments in the market, including Vabomere, developed by Medicines Co’s unit Rempex Pharmaceuticals.

However, there is a push by regulators to get newer antibiotics into the market, with a number of infections growing harder to treat as older antibiotics to treat them become less effective.

“This new antibiotic will be a vital last-resort treatment for patients with complicated and life-threatening urinary tract infections,” said Tim Jinks, head of UK-based charity Wellcome Trust’s drug-resistant infections program.

Shares of the company fell 25.8 percent to a more than 1-1/2 year low of $9.04 in morning trading, more than erasing the stock’s year-to-date gains of nearly 12 percent.