Dec. 26 (Bloomberg) -- Telik Inc.'s shares fell 70 percent, the most ever, after the company said its lead drug candidate, Telcyta for cancer, failed three late-stage trials.

Telcyta didn't prolong survival in patients with advanced non-small cell lung cancer and platinum-resistant ovarian cancer, the Palo Alto, California-based company said in a statement today. The trials were conducted in the third of three stages of testing needed for U.S. regulatory approval.

Telik, which has never shown a profit, lost as much as $605.3 million of its market value after the price dropped, based on 52.4 million shares outstanding as of Oct. 31. Chief Executive Officer Michael Wick said the company will evaluate data from the studies, which involved more than 1,200 patients, to determine how to proceed with Telcyta's development.

``We see no residual value in Telik's technology beyond Telcyta,'' said Edward Nash, an analyst at Stifel Nicolaus in New York, who lowered Telik's shares to ``sell'' from `buy.'' Nash said in a note to investors today that he didn't expect the drug to show favorable results if more trials are done.

Shares of Telik fell $11.49 to $4.77 at 4 p.m. New York Time in Nasdaq Stock Market Composite Trading, after touching $4.69 earlier. The stock has lost 4.3 percent of its value this year before today.

The company reported a $20.5 million third-quarter net loss and has $82.5 million in cash as of Sept. 30, according to regulatory filings.

Options

Two weeks ago, some investors bet heavily the stock would soon suffer a steep decline. On Dec. 12, the price of the Jan. 2007 $5 put options more than tripled to 35 cents on heavier- than-normal trading of 4,017 contracts. It wasn't until today, when the shares dropped below $5, that those options had intrinsic value.

The options gained 83 percent to 55 cents today on trading of 18,998 contracts. Each put-option contract gives the right to sell 100 shares at a certain price before expiration; each call option gives the right to buy 100 shares at a set price within a time period.

``The data from all three of these trials were unblinded only in the last few days,'' said Carol DeGuzman, a spokeswoman for Telik, in telephone interview today.

``We issued the announcement as rapidly as we could once the results were available. The results were not available to anyone'' on Dec. 12, she said. DeGuzman refused to comment on ``options activity.''

Favorite of Speculators

Options data show that Telik is a favorite of speculators. The combined put and call open interest in its stock equals 70 percent of the company's outstanding shares. Only two companies in the 255-member Russell 2000 Health Care Index have a higher percentage: Northfield Laboratories Inc. and Artherogenics Inc.

In both of those stocks, the combined open options interest is greater than the number of shares outstanding.

Three investment funds own about 55 percent of Telik's shares. Eastbourne Capital Management LLC owned 12.8 million shares, or 25 percent, and OppenheimerFunds Inc. owned 10.1 million, or 19 percent, as of their September regulatory filings. Fidelity Investments owned 5.71 million shares, or an 11 percent stake, as of October.

Rick Barry, a portfolio manager at San Rafael, California- based Eastbourne, didn't immediately return a message. Jessica Greaney, a spokeswoman for New York-based Oppenheimer, said the fund managers responsible for Telik wouldn't be available to comment today. Deborah Pont, a spokeswoman for Boston-based Fidelity, said the company doesn't comment on specific stocks.

Survival

Telik's studies for lung cancer and advanced ovarian cancer, called ASSIST I and ASSIST II, did not achieve a ``statistically significant improvement'' in overall survival, the company said. The third study, ASSIST III, failed to meet its endpoint in demonstrating effectiveness in tumor response for ovarian cancer.

While all three trials showed some tumor response in each of the investigational arms that contained Telcyta, two of the trials, ASSIST II and ASSIST III, contained ``inconsistencies'' that need to be investigated, the company said.

``We are conducting additional, detailed analyses of the data from these three trials and plan to discuss those results with our advisers to determine the next development steps,'' said Telik's Wick, who was formerly a Harvard University cancer researcher, in the statement today.

To contact the reporters on this story: Joi Preciphs in Washington at jpreciphs1@bloomberg.net; Catherine Larkin in Washington at clarkin4@bloomberg.net.

Last Updated: December 26, 2006 17:59 EST