(Reuters) - Biotechnology company ArQule Inc said it will discontinue a late-stage trial of the lung cancer drug it is co-developing with Japan's Daiichi Sankyo Co Ltd after an interim analysis showed the drug would not improve overall survival, sending ArQule's shares down as much as 60 percent.
ArQule's shares plunged to $1.98, a four-year low, on Tuesday morning. The stock was the top percentage loser on the Nasdaq.
"This is their single-most important asset. The drug may be dead, which may leave the company trading down to cash," said Chad Messer, an analyst with Needham & Company.
ArQule, which had a market capitalization of about $311 million before Tuesday's announcement, had cash, cash equivalents and short-term marketable securities of about $75 million as of June 30. It had long-term marketable securities of about $72 million.
ArQule tied up with Daiichi Sankyo in December 2008 to co-develop tivantinib in the U.S., Europe, South America and other countries. Another Japanese company, Kyowa Hakko Kirin Co, holds development rights to the drug in parts of Asia.
In August, Kyowa suspended patient enrollment in a late-stage trial, named ATTENTION, after an independent safety review committee in Japan suspected cases of interstitial lung disease, which can cause scarring of lung tissue.
The trial with Daiichi, named MARQUEE, was testing tivantinib in combination with Roche Holding AG's FDA-approved drug Tarceva on 1,000 patients previously treated for non-small cell lung cancer, the most common type of lung cancer.
Non-small cell lung cancer occurs when malignant cells form in the tissues of the lungs. Current treatments do not cure the disease, according to the National Cancer Institute.
"Because of the results of the MARQUEE trial, Kyowa now has an additional issue to consider in deciding whether or not they should proceed with their ATTENTION trial," MLV & Co analyst George Zavoico said.
Daiichi said on Tuesday that it will continue to investigate tivantinib in other tumor types.
While the interim analysis of the Daiichi trial showed statistically significant improvement in progression-free survival of patients on the drug tivantinib, the benefit did not carry to overall survival, the companies said in a statement.
Progression-free survival indicates a drug's effect on tumor growth, while overall survival is a more direct measure of a patient's chances of survival.
There were no safety concerns reported, according to the interim analysis.
(Reporting by Adithya Venkatesan in Bangalore; Editing by Sreejiraj Eluvangal and Roshni Menon)