Drug regulators said an experimental stroke preventer from Bayer and Johnson & Johnson is not ready for approval and raised questions about its effectiveness, sending Bayer shares down more than 7 percent.

"There is a lack of substantial evidence that rivaroxaban will have its desired effect when used as recommended in labeling," said Food and Drug Administration staff in documents released on Tuesday.

The FDA staff recommended the agency issue a so-called complete response letter for the drug, also known by its proposed trade name Xarelto, which means it cannot be approved without more data from the companies.

Even if approved, the agency staff said the drug should be used as a third option behind other treatments, unless the companies submit more data on effectiveness and safety.

"The wording is quite critical," said Karl-Heinz Scheunemann, an analyst with LBBW. "Should the committee agree with the recommendation -- which is not always the case -- it's safe to assume that there will be a delay in the market approval."

The FDA will make its final decision after taking into account the views of an advisory panel, which considers Xarelto on Thursday.

Xarelto is one of several promising entrants angling to replace risky clot preventer warfarin for people with dangerously irregular heart rhythms, called atrial fibrillation

AF patients' irregular heartbeats can cause blood to pool, increasing their risk of blood clots and strokes. But many are unwilling to take warfarin, which requires regular blood tests, or are unable to tolerate the decades-old medicine.

Xarelto is approved in the United States and Europe for anti-clotting in patients after knee and hip surgery, a much smaller market than stroke prevention for AF patients.

Atlantic Equities analyst Richard Purkiss said Xarelto's prospects have now significantly dimmed. Even if approved, Purkiss said, the drug will now likely only be used if patients do not benefit from warfarin and Pradaxa, a newly approved stroke medicine from privately held Boehringer Ingelheim.

The FDA review appeared to be good news for a rival treatment called Eliquis being developed by Bristol-Myers Squibb and Pfizer Inc in an anti-clotting market that could top $10 billion a year.

Eliquis, also called apixaban, showed superiority over warfarin in effectiveness, safety and saving lives in a clinical trial presented last month at a scientific meeting in Paris, affirming its place as the potential leader of the pack.

"The prospects for apixaban and Pradaxa just got better," Purkiss said after the Xarelto review.

FDA reviewers questioned whether Xarelto was as effective as warfarin, saying that in a trial comparing the two, warfarin was not given in the proper dosing.

They said for conditions such as stroke, which can cause irreversible harm, new drugs must be shown to be at least as effective as older treatments.

They also focused on risks for patients when they come off the drug. When patients stopped taking Xarelto and resumed warfarin at the end of the main clinical trial, higher risk of stroke was seen, a so-called "rebound" effect.

However, bleeding risk was the only significant issue with Xarelto on its own, the FDA staff said.

They asked the companies to conduct further trials to show Xarelto was as safe and effective as warfarin, or as compared to Pradaxa.

"It seems advisable to make rivaroxaban a third-line agent, behind both warfarin and dabigatran (Pradaxa)," FDA staff said in the documents, until the companies submit more data on Xarelto.

Johnson & Johnson said the FDA staff documents did not represent the agency's final recommendation.

"We're confident in the effectiveness of rivaroxaban for stroke prevention in patients with AF," said Ernie Knewitz, a spokesman for J&J.

Analysts from Sanford Bernstein forecast Xarelto sales of $948 million for J&J in 2015, and 800 million euros ($1.1 billion) for Bayer, which has much greater sales outside the United States.

The two companies co-developed the drug, and J&J has marketing rights in the United States.

Analysts said the market overreacted in its initial sharp drop, especially as European regulators often reach different conclusions than the FDA.

"(But) all is not lost for Xarelto in the advisory committee on Thursday," Bernstein analysts said in a note. "Panels do not always follow the recommendations of the FDA reviewers."