Aveo Oncology and Astellas Pharma Inc said they would end an agreement to develop Aveo's lead experimental drug that has seen a string of failures in multiple cancer indications.
Aveo, which cut 62 percent of its workforce last year to focus on developing the drug, tivozanib, as a treatment for breast and colon cancers, said in December that the drug was not likely to succeed in a mid-stage trial testing its use in colon cancer.
The companies said on Friday they would discontinue the study.
A mid-stage trial testing tivozanib as a treatment for breast cancer was stopped last month due to insufficient enrolments.
Tivozanib was rejected by U.S. health regulators in June for use in kidney cancer, citing inconsistent study results.
The termination of the collaboration will be effective August 11, after which Aveo will retain the rights to the drug, the companies said in a statement.
The two companies had signed a worldwide agreement to develop and market tivozanib outside of Asia for the treatment of a broad range of cancers in February 2011.
Cambridge, Massachusetts-based Aveo's shares have lost nearly 7 percent of their value since December 13, when the company said the drug was unlikely to succeed as a treatment for colon cancer. The stock closed at $1.75 on the Nasdaq on Thursday.
(Reporting by Natalie Grover in Bangalore; Editing by Savio D'Souza, Maju Samuel)