QRxPharma shares closed down 56¢ at 14¢ on Wednesday.

The development is seen as a major setback for Australian biotech companies trying to win approval to sell drugs in the American market.

QRxPharma chief executive John Holaday said the company's experimental pain relief drug MoxDuo, which combines opioids, morphine and oxycodone was rejected because QRxPharma was being subjected to ''excess scrutiny'', ''inconsistent explanations'', and ''higher regulatory standards'' given concerns about side effects relating to breathing difficulties and overdoses in related drugs.

A panel of experts at the US Food and Drug Administration unanimously voted that the medicine should not be approved and also that it did not provide enhanced safety compared with the opioids alone.

''The rules were changed during the course of development of this product. They ended up with a drug that they [the US Food and Drug Administration] could not understand,'' Dr Holaday said.

''They were going to hold us to higher standards and there was no precedence for the two drugs to be combined,'' he said, adding that he still believed ''we have a great drug''.

''We will press on in ways to ensure that the drug finds its way into the market … to meet the right regulatory standards,'' he said, adding that the company would keep shareholders informed of developments.

The fall is bad news for billionaire property developer Lang Walker, who has been a long-time supporter of QRxPharma and has built a stake of more than 14 million shares.

Fund management company Allan Gray, run by fund manager Simon Marais, was also a major shareholder. Last month he admitted the company would be ''probably worthless'' if MoxDuo was rejected.

Biotech companies, along with technology companies have been among the strongest sharemarket performers this year, despite recent bouts of volatility.

MoxDuo has effectively been knocked back three times. The FDA asked for more data on the drug in June 2012, and again in August 2013, as a result of a data mix-up.

While both requests sent QRxPharma's share price tumbling, neither was seen as a fatal to the company's chances of getting Moxduo approved in the key US market - where it is estimated that consumers spend $2.9 billion a year on acute pain management.

QRxPharma has previously argued that the drug would reduce the risk of breathing difficulties and would have been the first combination pill with two opioids, morphine and oxycodone.