Investors are upset. Rituxan, which is already approved to treat non-Hodgkins lymphoma and rheumatoid arthritis, failed to prompt a response in patients when compared with placebo in a late-stage, 52-week study. Not only that, the drug failed to meet any of its six secondary goals. Genentech and Biogen Idec shares dove on the disclosure.

“We are disappointed in the results of this Phase II/III study, but we understood from the outset the significant challenges in developing treatments for systemic lupus erythematosus,” Hal Barron, Genentech’s senior vp of development and chief medical officer, says in a statement.

Rituxan generated sales of nearly $2.3 billion last year and the expanding its use to treat Lupus may have added another $1 billion. Meanwhile, another late-stage study on lupus nephritis patients will continue and results are expected early next year.

UPDATE: Jim Reddoch, a biotech analyst with Friedman, Billings & Ramsey, sends us this investor note about Genentech: “The negative result has implications beyond Rituxan. Genentech has been developing a second-generation anti-CD20 antibody (same mechanism as Rituxan, currently in Phase III for RA and Phase II for MS). This drug is being developed as a more benign version of Rituxan for use in patients witw non-life-threatening conditions, including the autoimmune diseases.

“The fact that Rituxan, the more potent drug, was unable to meet a single endpoint in this trial, and failed in PPMS, does not instill confidence in the prospects for the next-generation version. This removes another potential growth area from a company that is in dire need of them, as the company’s other drivers are slowing.”