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ArQule Shares Drop on Lung Cancer Drug Safety Concern

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The biotech company's Japanese partner suspended a clinical trial after reports of a suspected lung condition in patients. The drug candidate tivantinib has been considered a promising therapy by some Wall Street analysts.

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MINYANVILLE ORIGINAL Shares of cancer drug developer ArQule (ARQL) are dropping after the company disclosed problems with a clinical trial being conducted in Asia. ArQule's development partner Kyowa Hakko Kirin of Japan suspended patient enrollment in a late-stage human study of the lung cancer drug tivantinib due to safety concerns.

Kyowa took the action at the recommendation of a safety panel monitoring the trial due to suspected cases of a condition known as interstitial lung disease, according to an ArQule securities filing. The condition is characterized by lung scarring, which can be fatal. Patients already enrolled in the study will continue to be treated while the safety review is conducted, ArQule says in its securities filing. The drug is being tested with Roche's cancer drug Tarceva in one set of patients and with Tarceva and a placebo in another group.

Tivantinib is ArQule's lead product. In addition to lung cancer, the drug is being tested for liver and colon cancers. Another Japanese company, Daiichi Sankyo, is co-developing the drug with ArQule worldwide except in Asia where Kyowa would have sales rights if the product is approved.

ArQule shares dropped 26% to $4.99 in early morning trading Wednesday, wiping out all of this year's gains. Before Wednesday's drop, the stock had risen 56% in the past 12 months.

Stifel Nicolaus analyst Joel Sendek lowered his 12-month price target for ArQule to $10 from $13, but cautioned that a number of factors may have contributed to the safety issue. He still rates the stock a buy.

Some analysts have praised ArQule's drug for its success so far in clinical trials and point to the multiple indications the drug targets. With $147 million in cash and liquid investments as of June 30, the company also has plenty of money to continue its studies. In a note earlier this month, Leerink Swann analyst Howard Liang said that ArQule had enough cash to complete at least five mid- to late-stage studies of tivantinib in three tumor types through early 2014.

Data from a separate lung cancer study are expected this year. Other study results may be out later this year or early 2013.

Tivantinib, an oral medicine, aims to block an enzyme known as c-Met, which plays a role in the growth and spread of cancer. ArQule sees potential to treat multiple types of cancer.

Twitter: @brettchase

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