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* GSK stops project in ulcerative colitis and psoriasis
* Galapagos' main drug based on similar technology
* Shares fall to two-year low (Repeats to additional subscribers)
BRUSSELS, Aug 8 (Reuters) - Belgian biotech group Galapagos said its partner GlaxoSmithKline had stopped ajoint drug development project over concerns about adverseeffects, sending its shares to a two-year low.
Galapagos, which is developing several new drugs with largepharmaceutical firms, said Britain's GSK had decided to end workon its drug GSK2586184 for treatment of ulcerative colitis andpsoriasis after tests showed it did not combine well withcertain cholesterol drugs.
The Belgian firm said on Friday it could not comment onGSK's study because it had not seen the full results of thetest. GSK said it was considering how to proceed with theproject.
The end to this project prompted investors to worry aboutsimilar drugs, so-called JAK1 inhibitors, in the company'sdevelopment portfolio such as its most-developed drug GLPG0634.
GLPG0634 is set to become a treatment for rheumatoidarthritis which Galapagos researches jointly with U.S. groupAbbVie.
"I think investors are now worried about the company's mainproduct which is a large part of its valuation," KBC Securitiesanalyst Jan De Kerpel said.
Galapagos said it had carried out tests in the lab withGLPG0634 and had not found adverse effects related to druginteractions.
Its shares fell as much as 11 percent to their lowest levelsince the third quarter of 2012, making them the worst performeron Euronext Brussels on Friday.
Galapagos also said it expected to have more cash at the endof 2014 than initially thought, following the sale of itsservices division in the first half of the year.
It said its cash position at the end of the first half was232 million euros ($309.93 million) and it expected to have 175million euros of cash at the end of the year, just above itsoriginal 170 million target.
Excluding the sale of its services unit, the group burnedthrough 15 million euros of cash in the first half, to fund its various clinical studies and trials.
It lowered its revenue outlook for the year to 100 millioneuros from the 180 million it had forecast in March, mainlybecause of the timing of expected payments from drug developmentprogrammes.
Galapagos said it expected several test results to becomeavailable in the next 18 months, typically a stronger triggerfor the shares than quarterly results.($1=0.7486 Euros) (Reporting by Robert-Jan Bartunek; Editing by Erica Billingham)
