UPDATE 3-Safety worries hit Actelion's key sleep drug

* Were some unspecified "safety observations"

* Actelion trying to develop new drugs to diversify

* Sleep drug is one of biggest pipeline hopes

* Shares fall 4 percent

(Adds details on drug, company, rivals and updated shares)

By Sam Cage

ZURICH, Dec 21 (Reuters) - An insomnia drug from Actelion (ATLN.VX) had unspecified safety problems in a late-stage trial even though it met its main target, Europe's biggest biotech company said on Monday.

Actelion said the safety observations on almorexant, a key pipeline hope partnered with GlaxoSmithKline (GSK.L), could not be further detailed until longer-term data were available, sending shares down.

"In absence of details, the market will not be able to evaluate the risks now. Instead, there will be fear that the risk of a spectacular phase III failure has increased," said Kepler Capital Markets analyst Tero Weckroth.

Actelion's disappointing news follows a string of setbacks in the European biotech sector, underlining the risky nature of the business after Swiss peer Addex (ADXN.S) last week stopped development of its lead drug. [ID:nLDE5BE25P]

Analysts say Actelion is overly dependent on its billion-dollar-a-year heart and lung drug Tracleer and needs to establish its use for other diseases whilst bringing through more new products like almorexant to diversify. [ID:nGEE5B00FE]

More late-stage trials of almorexant would be needed before any approval, Actelion said.

Actelion shares fell 4.0 percent to 56.0 Swiss francs by 0952 GMT, while the DJ Stoxx European healthcare sector .SXDP was nearly flat. Glaxo fell 0.4 percent.

"There remains a risk in our view that these events jeopardise the drug's future development," said PiperJaffray analyst Richard Parkes.

BLOCKBUSTER POTENTIAL

Actelion, trading at 16 times forecast 2010 earnings, commands a premium over bigger drugmakers like Glaxo, Roche (ROG.VX) and Novartis (NOVN.VX) thanks to the interesting medicines coming through its pipelines.

Thomson Pharma data indicate almorexant sales hitting $580 million in 2013 -- split between Actelion and Glaxo with the Swiss group taking some $320 million -- and many analysts tip it as another potential billion-dollar per annum earner.

The drug hit its main target in the short-term study, showing superiority compared with a placebo on degree of wakening after patients had initially fallen asleep, despite the safety signals.

Competitor Sanofi-Aventis (SASY.PA) said on Monday it was stopping development of its insomnia drug eplivanserin, which was in late-stage development and could have been a competitor for almorexant. [ID:nLDE5BK02Y]

A bigger driver for Actelion, however, is likely to be new data on Tracleer due early next year against fatal lung disease idiopathic pulmonary fibrosis (IPF), an indication the company believes could more than double current sales.

"We remain cautiously optimistic on Tracleer succeeding in lung fibrosis... with a significant potential near-term financial benefit," said Jefferies analyst Peter Welford. (Additional reporting by Paul Arnold; Editing by Mike Nesbit)