ArQule, Daiichi Sankyo End Lung-Cancer Trial

--Companies end late-stage trial of lead drug candidate tivantinib

--Independent committee concludes trial wouldn't meet goals

--ArQule shares down 56%

ArQule Inc. (ARQL) and Daiichi Sankyo Co. (DSNKY, 4568.TO) said they would discontinue their late-stage study of a drug to treat lung cancer because of futility, a severe setback for ArQule's lead product candidate.

Shares of ArQule plunged 56% to $2.20.

ArQule made the decision after an independent committee concluded the study wouldn't meet its primary goals of improved overall survival.

The trial evaluated the use of tivantinib, ArQule's lead product candidate, in combination with erlotinib to treat patients with certain forms non-small-cell lung cancer.

In 2008, ArQule and Daiichi Sankyo agreed to co-develop tivantinib in the U.S., Europe, South America and the rest of the world, excluding Japan, China, South Korea and Taiwan.

"Fighting cancer is a complex process in that therapies work differently in different tumor settings, so we will continue to investigate tivantinib in other tumor types," said Glenn Gormley, global head of research and development at Daiichi Sankyo.

ArQule is enrolling patients for a late-stage study of tivantinib in HCC liver-cancer patients, said Chief Executive Paolo Pucci in a conference call with investors. The trial should begin late this year or in early 2013.

In August, ArQule said partner Kyowa Hakko Kirin Co. (4151.TO) temporarily suspended patient enrollment in a separate late-stage study of tivantinib, causing ArQule's shares to drop sharply.

ArQule is studying tivantinib in several early- and mid-stage trials, including in lung cancer with KRAS mutations and colorectal cancer. Results from those trials are expected in mid-2013 and the first quarter of next year, said George Zavoico, a senior analyst at MLV & Co.

Write to Ben Fox Rubin at [e-mail] and Joseph Walker at [e-mail]

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