NEW YORK (CNN/Money) - Lead underwriters on the DOV Pharmaceuticals Inc. issue, the worst performing initial public offering in nearly two years, could opt to cancel the $65 million transaction, banking and market sources told CNN/Money Monday.

DOV Pharmaceuticals (DOVP: Research, Estimates), a drug developer, dropped 33 percent April 25, a day after it made changes to an S-1 registration statement with the Securities and Exchange Commission.

The biotech, which sold 5 million shares at $13 each via lead underwriters CIBC World Markets and Lehman Brothers, continued to drop Monday. DOV shares are off more than 40 percent below its $13 IPO offer price.

Many attributed DOV's huge drop to changes made in the company's S-1 registration statement which was filed shortly before it priced its offering last Wednesday. At 4:30 p.m. ET April 24, DOV amended its S-1 and said that it paid $10 million to Elan Pharmaceuticals, due to a joint manufacturing venture with the Irish company. DOV also said that it lost $1.3 million in 2000 to an affiliate.

Later that evening, DOV priced its IPO, raising $65 million. The next day the stock suffered through one of the worst IPO debuts in the past few years.

"Personally, I think this stinks," said analyst Ben Holmes, of MorningNotes.com. "No one had chance to review this. They owe it to investors on the IPO to have an opportunity to review [these details] so that they can go forward with the investment."

Settlement on the IPO will occur at 4 p.m. ET Tuesday when CIBC will hand DOV a check for its IPO proceeds, about $65 million. Until that time, lead underwriters on the IPO or the company itself can rescind the deal, which would clear the deal off the books and would mean no money would change hands.

The odds of DOV itself canceling the transaction is highly unlikely.

Like most biotechs, Hackensack, N.J.-based DOV is not profitable, posting $5.4 million in losses on $5.7 million in revenue for the year ended Dec. 31, compared with $5.9 million in losses on no revenue for the same time period in 2000. The 7-year-old company has a total deficit of $23.8 million, DOV said in an SEC filing.

"The company is cash hungry," Holmes said.

DOV could not be reached for comment.

CIBC or Lehman, lead underwriters on the offering, could also rescind the deal by pulling the underwriting which would make the trades null and void.

"It would become a non-event," said John Fitzgibbon, editor of IPO Desktop, "except for the shouting."

Both Lehman and CIBC declined comment.

The SEC did allow the IPO to go forward last week even after DOV made changes to its registration statement. The agency could investigate the offering but can't force DOV to give up the money, analysts said.

Even if DOV hadn't changed its S-1 at the last moment, the IPO would likely not have performed well. "It's a very tough environment for drug approvals right now," Holmes said. "It might have been as disastrous without the changes."

But even if DOV doesn't rescind the IPO, it will likely face a flurry of lawsuits.

"They are going to wind up in litigation," said Fitzgibbon. "Investors are very poor losers."

It is not unprecedented for an IPO be canceled after being priced and traded. "It's happened before," Fitzgibbon said.

The offering of Momma Tish, a Chicago-based restaurant, was canceled in 1996.

The SEC could not be reached for comment.