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ArQule (NASDAQ:ARQL) shares got slammed for over 56% today with very heavy volume on news that the company was going to discontinue phase III trials designated as the "MARQUEE" trial. This was supposed to be the phase III trial that would provide data to bring ArQule's flagship drug ARQ 197 (tivantinib) closer to a NDA application for the treatment of non-small cell lung carcinoma (NSCLC).

The recommendation came from a data monitoring committee, which pointed to clinical trial data that had been collected thus far. ARQ 197 was unlikely to reach its primary endpoint. If they are (or were) right, they avoided a very big waste of time and money for ArQule and its shareholders.

Lets hope they were right about this, because ArQule is utterly devastated right now as both a company and a stock.

ArQule's tivantinib caught my attention because it has a mechanism of action that is similar to the brainchild of Exelixis (NASDAQ:EXEL), cabozantinib (also called XL-184). Tivantinib is an inhibitor of the protein c-MET, which has recently been discovered as a potential avenue used by cancer cells that are starved for access to patient's blood vessels.

Angiogenesis is the method by which tumor cells trigger abnormal blood vessel growth that is used to feed new cells. The creation of new cancer cells is the most direct method of cancer progression, and causes metastasis in new tissue (resulting in death).

Angiogenic inhibitors are cancer drugs that attempt to block a tumor's efforts to create these new blood vessels. A protein known as VEGF (Vascular Endothelial Growth Factor) is one of the main targets of angiogenic inhibitors. Since VEGF has been targeted by angiogenic inhibitors before, the new generation had to try something different.

As pointed out earlier, Tivantinib inhibits c-MET. Cabozantinib inhibits both c-MET and VEGF. While there are other compounds that target c-MET, it's important to note that Exelixis's cabozantinib (XL-184) requires the efficacy of c-MET inhibition in cancer to be a blockbuster compound. Tivantinib's failed phase III trials gives some indication that the hype over c-MET inhibition may be misguided, to a greater or lesser extent.

Having said that, cabozantinib did pass phase III trials for Medullary Thyroid Cancer (MTC) and has submitted its NDA for that designation. After receiving fast-track status by the FDA, it was given a PDUFA date of November 29, 2012. Exelixis and its shareholders are also in anticipation of results from COMET-1. This phase III trial is going to allow an NDA submission for cabozantinib in the treatment of metastatic castration-resistant prostate cancer, which is a very lucrative target.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: As ArQule Investors Panic, Watch Exelixis Too