Amgen, its partner on the project, announced late on Friday it was ending a collaboration to develop brodalumab after suicidal thoughts were observed in patients taking the medicine.

Shares in AstraZeneca fell 1 percent on Tuesday in the wake of the news, following a long holiday weekend in Britain.

Deutsche Bank analyst Richard Parkes said the setback was a surprise and terminating the drug's development would hit long-term consensus forecasts for AstraZeneca's earnings by around 2 percent.

Although the British group said it was still considering whether to scrap the product or continue on its own, the drug's prospects now seem badly tarnished with Amgen declaring that safety concerns would likely result in restricted use.

AstraZeneca and Amgen have been sharing development of brodalumab since 2012 as a treatment for psoriasis, psoriatic arthritis and axial spondyloarthritis. It works by blocking a molecule involved in inflammation called interleukin-17 (IL-17).

Novartis already markets a psoriasis drug called Cosentyx that binds to a related protein, IL-17A, without any problems involving suicidal thoughts, and Eli Lilly has a rival in development.

Barclays analysts said AstraZeneca might still decide to continue development on its own, but with the Novartis drug showing a clean bill of health and Eli Lilly aiming to submit its IL-17 for approval by mid-year "the commercial perspectives are clearly very challenging."

AstraZeneca gave its long-term $45 billion sales forecast a year ago when it was fending off a takeover bid by Pfizer . It said at the time that estimates for annual brodalumab sales were between $500 million and $1.5 billion.

The company made $26 billion of revenues last year.