ArQule says partner halts cancer drug trial, shares slide

(Reuters) - Biotechnology company ArQule Inc said Japan's Kyowa Hakko Kirin Co, which holds development rights to an ArQule cancer drug in parts of Asia, suspended patient enrollment in a late-stage trial to treat lung cancer.

Shares of Woburn, Massachusetts-based ArQule fell 28 percent to a more than 9-month low of $4.81 on the Nasdaq on Wednesday. The stock, which was the biggest percentage loser on the exchange, later recouped some of the losses to trade down at $5.25.

Kyowa, which is conducting the trial in Japan, South Korea and Taiwan, followed the recommendation of an independent safety review committee in Japan after suspected cases of interstitial lung disease, which can cause scarring of lung tissue.

The safety committee has requested additional information on the cases, ArQule said. Treatment of patients already enrolled would continue during the committee's review.

The trial was investigating the use of ArQule's drug, tivantinib, in combination with Roche Holding AG's FDA-approved drug Tarceva, generically known as erlotinib, compared with a combination of erlotinib and placebo, to treat patients with non-squamous non-small cell lung cancer.

Analysts expect enrollment to the trial, named ATTENTION, to resume shortly and does not expect it to affect other trials on the drug.

ArQule is developing the drug with another Japanese drugmaker Daiichi Sankyo Inc in a late-stage trial named MARQUEE for the same indication with about 1,000 patients in the United States, Europe, South America and other territories not covered by the Kyowa agreement,

"The side-effect mentioned is seen with Roche's Tarceva. As long as MARQUEE isn't delayed, the timeline for United States and European Union approvals should be unchanged as well," RBC Capital Markets analyst Adnan Butt said.

Results from the MARQUEE trial are expected later in the year.

"If positive results are reported from MARQUEE, it will completely eclipse the news of the clinical hold on ATTENTION," MLV & Co analyst George Zavoico told Reuters.

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.

(Reporting By Vrinda Manocha in Bangalore; Editing by Rodney Joyce and Sriraj Kalluvila)