ArQule second-quarter net loss decreases to $8,227,000

ArQule, Inc. (NASDAQ: ARQL) today announced its financial results for the second quarter of 2010.

“This indication holds particular promise in Asia, where the incidence of gastric cancer is among the highest in the world and where it is the second most common cause of cancer-related death.”

For the quarter ended June 30, 2010, the Company reported a net loss of $8,227,000 or $0.18 per share, compared with a net loss of $8,272,000 or $0.19 per share, for the second quarter of 2009. For the six-month period ended June 30, 2010, the Company reported a net loss of $17,979,000 or $0.40 per share, compared to a net loss of $18,180,000 or $0.41 per share, for the six-month period ended June 30, 2009.

At June 30, 2010, the Company had a total of approximately $111,738,000 in cash, equivalents and marketable securities, which includes $16,200,000 drawn down in 2008 under notes payable that are collateralized by the Company's auction rate securities. Net of these notes, at June 30, 2010, the Company had a total of $95,538,000.

On July 2, 2010, the Company retired the notes payable at June 30, 2010 under its revolving credit line agreement with UBS AG following the redemption at par value of all $22.9 million of the Company's auction rate securities that had been brokered by UBS AG.

Operational Highlights

• Decision finalized to move forward with a Phase 3 trial with ARQ 197 in non-small cell lung cancer (NSCLC) and to file a Special Protocol Assessment (SPA) for this trial
• Colorectal cancer trial advanced from a Phase 1 lead-in to a double-blind, randomized Phase 2 trial
• First patient enrolled in a Phase 2 trial with ARQ 197 in gastric cancer in Asia by Kyowa Hakko Kirin, triggering a $5 million milestone payment to ArQule

"Subsequent to the end of Phase 2 meeting we had with the FDA and building upon the clear signal observed in our randomized Phase 2 trial in NSCLC, we and our partner, Daiichi Sankyo, have made the decision to move forward into Phase 3 development," said Paolo Pucci, chief executive officer of ArQule. "We are filing a Special Protocol Assessment (SPA) with the FDA for the Phase 3 trial.

"In Asia, our partner, Kyowa Hakko Kirin, has expanded its development program with ARQ 197 into gastric cancer," said Mr. Pucci. "This indication holds particular promise in Asia, where the incidence of gastric cancer is among the highest in the world and where it is the second most common cause of cancer-related death.

"Elsewhere in our pipeline, enrollment is ongoing in a Phase 1 trial with ARQ 621," said Mr. Pucci, "and pre-clinical activities are continuing as planned with a B-RAF inhibitor and an FGFR inhibitor."

Revenues and Expenses

The Company reported total revenues of $7,106,000 for the quarter ended June 30, 2010, compared to revenues of $6,056,000 for the second quarter of 2009. Revenues for the six months ended June 30, 2010 were $13,431,000, compared to revenues of $11,476,000 for the six months ended June 30, 2009. The increase in the 2010 periods was primarily due to revenue from the Company's AKIP^TM collaboration with Daiichi Sankyo Co., Ltd. The 2010 and 2009 periods also included revenue from the Company's ARQ 197 license agreements with Daiichi Sankyo Co., Ltd. and Kyowa Hakko Kirin Co., Ltd.

Total costs and expenses for the quarter ended June 30, 2010 were $15,844,000, compared to $15,881,000 for the second quarter of 2009. Total costs and expenses for the six months ended June 30, 2010 were $31,617,000, compared to $30,875,000 for the same period in 2009.

Research and development costs for the three and six-month periods ended June 30, 2010 were $12,318,000 and $24,762,000, respectively, compared with $12,678,000 and $24,012,000 for the 2009 three and six-month periods.

General and administrative costs for the three and six-month periods ended June 30, 2010 were $3,526,000 and $6,855,000 respectively, compared with $3,203,000 and $6,863,000 for the 2009 three and six-month periods.

Updated Financial Guidance

ArQule today is revising its financial guidance for 2010. ArQule expects net use of cash to range between $22 and $42 million. Revenues are expected to range between $26 and $30 million. Net loss is expected to range between $30 and $34 million, and net loss per share to range between $(0.67) and $(0.76). ArQule expects to end 2010 with between $75 and $95 million in cash and marketable securities.

Among the factors that could influence this guidance are: timing of the initiation of the planned Phase 3 trial with ARQ 197 in NSCLC; timing and receipt of milestone payments; variable spending by Daiichi Sankyo on trials with ARQ 197 and its impact on the timing of ArQule's payment of its share of related expenses; the timing of reimbursement of certain of ArQule expenses related to the clinical development of ARQ 197 and the AKIP™ discovery collaboration; and the pacing of clinical trials with ARQ 197 conducted by Kyowa Kakko Kirin and the timing of corresponding milestone payments.