UPDATE 1-Novacea says not to develop drug after FDA lifts hold

(Recasts; adds details, stock movement)

Sept 11 (Reuters) - Novacea Inc NOVC.O said it will not develop its cancer drug Asentar even after U.S. health regulators released the clinical hold on it, sending the biopharmaceutical company's shares to a lifetime low. The company, which agreed to be acquired by privately held Transcept Pharmaceuticals Inc earlier this month, had terminated the late-stage study of Asentar in November 2007 due to an unexplained imbalance of deaths between the treatment and control arms of the trial.

The U.S. Food and Drug Administration said any future consent form must not make reference to any survival benefits observed in earlier clinical trials involving Asentar for the treatment of androgen-independent prostate cancer patients. "Following the exciting news last week regarding our proposed merger with Transcept Pharmaceuticals, and the related new direction for Novacea, we have no plans for further development of Asentar," Chief Executive John Walker said in a statement.

The company's shares, which had lost over three-fourths of their market value over the past 12 months, were down 13 percent at $1.61 in afternoon trade on Nasdaq. (Reporting by Esha Dey in Bangalore; Editing by Deepak Kannan)