* Company to step back from further clinical development

* Study had been expected to pave way for approval in Europe

* Bellerophon shares drop as much as 63 pct, BioLineRx 20 pct (Adds CEO Comments, background; updates shares)

By Rosmi Shaji

July 27 (Reuters) - Bellerophon Therapeutics Inc's shares plummeted more than 60 percent on Monday after the company said an injectable heart drug it is developing under license failed in a study.

The drug, bioabsorbable cardiac matrix, was licensed from BioLineRx Ltd in 2009 after animal studies showed that it acted as a "scaffold" to support the heart wall and was likely to prevent further structural damage.

When BCM is administered after a heart attack, it flows into the damaged heart muscle where it forms a protective layer.

The drug had been widely expected to succeed, paving the way for its approval in Europe. The company has not yet started tests that would allow for sale in the United States.

"We will need to step back from further clinical development until and unless we understand a path forward," Bellerophon Chief Executive Jonathan Peacock said on a call with analysts.

Shares of Bellerophon, which went public in February, fell as much as 63 percent to a record low of $2.75, valuing the Hampton, New Jersey-based company at about $28 million.

Up to Friday's close, the stock had already fallen 36 percent from its IPO price.

U.S. listed-shares of Israel-based BioLineRx fell about 20 percent to $1.68, giving the company a market value of $92 million.

BCM is a liquid that becomes a hydrogel when there are high levels of calcium in injured tissues.

It is administered through the coronary artery using a minimally invasive surgical procedure.

The study tested BCM in 303 patients who had already suffered a heart attack and evaluated the changes in size, shape and structure of the heart.

Heart attacks are the leading cause of death in the United States, killing about half a million people a year, according to the National Institute of Health.

Bellerophon, which has a second product in mid-stage studies for breathing difficulties, said it had about $50 million of cash remaining in its coffers.

(Reporting by Rosmi Shaji in Bengaluru; Editing by Kirti Pandey and Ted Kerr)