ArQule reports net loss of $36,136,000 for 2009

Mar 2 2010

ArQule, Inc. (NASDAQ: ARQL) today announced its financial results for the year and for the fourth quarter ended December 31, 2009.

“We are committed to manage our resources in a highly disciplined fashion, and we will continue to conduct portfolio prioritization on a regular basis.”

The Company reported a net loss of $36,136,000, or $0.82 per share, for the year ended December 31, 2009, compared with a net loss of $50,864,000, or $1.16 per share, for the year ended December 31, 2008. For the quarter ended December 31, 2009, the Company reported a net loss of $9,868,000, or $0.22 per share, compared with a net loss of $9,629,000, or $0.22 per share, for the quarter ended December 31, 2008.

At December 31, 2009, the Company had a total of approximately $163,491,000 in cash and marketable securities, which includes $46,100,000 drawn down in 2008 under notes payable that are collateralized by the Company’s auction rate securities. Net of these notes, at December 31, 2009, the Company had a total of approximately $117,391,000 in cash and marketable securities.

Operational Highlights for 2009

ARQ 197

• Completion of patient enrollment in a randomized, placebo controlled Phase 2 trial in non-small cell lung cancer (NSCLC) testing the combination therapy of ARQ 197, an orally available, small molecule inhibitor of the c-Met receptor tyrosine kinase, and erlotinib;
• Substantial completion of patient enrollment in an open label Phase 2 trial of ARQ 197 in c-Met-associated soft tissue sarcomas;
• Advancement and expansion of the ARQ 197 clinical trial program to include the following indications: NSCLC, c-Met-associated soft tissue sarcomas, pancreatic adenocarcinoma, hepatocellular carcinoma, colorectal cancer and germ cell tumors;
• Expanded testing of ARQ 197 in combination with targeted and cytotoxic therapies, including sorafenib and gemcitabine.

Pipeline / Discovery

• Continued dose escalation in a Phase 1 trial with ARQ 621, an inhibitor of the Eg5 kinesin motor protein;
• Presentation of pre-clinical data regarding fibroblast growth factor receptor (FGFR) inhibitors;
• Progress in our AKIP™ technology collaboration with Daiichi Sankyo leading to renewed financial commitment.

Plans for 2010

ARQ 197

“Clinical progress with ARQ 197 during 2009 has laid the foundation for establishing the following objectives for 2010,” said Paolo Pucci, chief executive officer of ArQule.

• Reporting of data from Phase 2 trials in second/third line NSCLC and c-Met-associated soft tissue sarcomas in the first half of the year;
• Initiation of Phase 3 trials in NSCLC and c-Met-associated soft tissue sarcomas if the final analysis of Phase 2 data, as well as discussions with our partner, Daiichi Sankyo, and regulatory authorities, support such trials.

“We also plan an additional set of objectives related to the second wave of ARQ 197 clinical trials that has been agreed upon with our partner,” said Mr. Pucci.

• Substantial completion of patient accrual in the ongoing Phase 2 hepatocellular carcinoma trial;
• Completion of Phase 1 combination trials with gemcitabine and sorafenib;
• Accrual of patients in the recently initiated Phase 1-2 trial in colorectal cancer and Phase 2 trial in germ cell tumors.

Pipeline

• Completion of dose escalation in the ongoing Phase 1 trial of ARQ 621 in the first half of the year;
• Filing of an Investigational New Drug (IND) application for one new molecule from either our B-RAF or FGFR programs.

“Having ended 2009 with $117.4 million in cash and marketable securities, net of notes payable of $46.1 million, we believe we are in a strong position to fund these activities going forward,” said Mr. Pucci. “We are committed to manage our resources in a highly disciplined fashion, and we will continue to conduct portfolio prioritization on a regular basis.”

Revenues and Expenses

Revenues for the year ended December 31, 2009 were $25,198,000, compared with revenues of $14,141,000 for the year ended December 31, 2008. For the quarter ended December 31, 2009, revenues were $7,286,000, compared with revenues of $5,367,000 for the quarter ended December 31, 2008.

Revenues in 2009 included research and development revenue from the Company’s ARQ 197 development and AKIP™ research collaboration agreements with Daiichi Sankyo and its ARQ 197 license agreement with Kyowa Hakko Kirin. The increases in the 2009 periods were primarily due to revenue from Daiichi Sankyo.

Fiscal 2009 research and development expenses were $49,495,000, compared with $49,629,000 for fiscal 2008. Fourth quarter 2009 research and development expenses were $14,136,000, compared with $10,409,000 for fourth quarter 2008. Research and development expenses increased in the fourth quarter of 2009 primarily due to costs associated with ARQ 197 clinical programs.

General and administrative expenses for fiscal 2009 were $13,317,000, compared to $16,918,000 for fiscal 2008. Fourth quarter 2009 general and administrative costs were $3,320,000, compared with $3,499,000 for the fourth quarter 2008. The decrease in 2009 general and administrative costs was primarily due to non-recurring stock compensation costs incurred in 2008.

2010 Financial Guidance

For 2010, ArQule expects net use of cash to range between $43 and $47 million. Revenues are expected to range between $24 and $28 million. Net loss is expected to range between $34 and $38 million, and net loss per share to range between $(0.76) and $(0.84) for the year. ArQule expects to end 2010 with between $70 and $74 million in cash and marketable securities.