ArQule Announces Third Quarter Fiscal 2012 Results

  ArQule Announces Third Quarter Fiscal 2012 Results

          Conference call scheduled today at 9:00 a.m. eastern time

Business Wire

WOBURN, Mass. -- November 01, 2012

ArQule, Inc. (NASDAQ: ARQL) today reported its results of operations for the
fiscal quarter and nine months ended September 30, 2012.

The Company reported a net loss of $431,000 or $0.01 per share for the quarter
ended September 30, 2012, compared to a net loss of $2,260,000 or $0.04 per
share for the quarter ended September 30, 2011. For the nine-month period
ended September 30, 2012, the Company reported a net loss of $5,576,000 or
$0.09 per share, compared to a net loss of $14,530,000 or $0.28 per share for
the same period in 2011.

At September 30, 2012, the Company had a total of $140,158,000 in cash,
equivalents and marketable securities.

Recent Operational Developments

Tivantinib (ARQ 197)

  *Agreement with the U.S. FDA on a Special Protocol Assessment (SPA) for the
    design of a pivotal Phase 3 trial of tivantinib as single agent therapy in
    patients with hepatocellular carcinoma (HCC);
  *Recommendation by the Data Monitoring Committee (DMC) of the MARQUEE trial
    of tivantinib and erlotinib to stop the study early for futility following
    a planned interim analysis;
  *Discontinuation of the ATTENTION trial of tivantinib and erlotinib in
    Asia.

Earlier-stage pipeline

  *Advancement of ARQ 087, an inhibitor of fibroblast growth factor receptor
    (FGFR), toward clinical testing.

“Recent developments in the tivantinib non-small cell lung cancer clinical
development program have re-focused our near-term efforts on the commencement
of a Phase 3 trial with tivantinib as single agent therapy in second-line
HCC,” said Paolo Pucci, chief executive officer of ArQule. “We will be
conducting this trial under the recently announced SPA, and our determination
to pursue this trial in a timely fashion is fueled by the recognition of the
high unmet need among patients suffering from this disease.

“The MARQUEE trial, fully enrolled early this year, will be stopped for
futility at the interim analysis following the recommendation of the DMC,
which was focused on the primary endpoint of overall survival in the
intent-to-treat population,” said Mr. Pucci. “Data will continue to be
compiled to a mature cut-off point, and patients who were on study drug
treatment at the time of the DMC recommendation will have the opportunity to
remain on treatment at their physician’s discretion. Following final database
compilation and analyses, complete trial results will be presented in a
scientific forum.

“With respect to the ATTENTION trial, Kyowa is discontinuing that study as
announced earlier this week based on a recommendation by the trial’s Safety
Review Committee,” said Mr. Pucci. “Complete data from the trial are expected
in the second half of 2013.

“Our financial position continues to be strong,” said Mr. Pucci, “and we
expect to conclude this year with between $127 million and $130 million in
cash, equivalents and marketable securities.”

Revenues and Expenses

The Company reported total revenues of $10,944,000 for the quarter ended
September 30, 2012, compared to revenues of $11,954,000 for the quarter ended
September 30, 2011. Revenues for the nine months ended September 30, 2012 were
$31,271,000, compared to revenues of $30,806,000 for the nine months ended
September 30, 2011.

The $1.0 million revenue decrease in the three month period is due to revenue
decreases of $4.6 million from the $10million milestone payment received from
Kyowa Hakko in the third quarter of2011 and $3.0 million from the Company’s
Daiichi Sankyo AKIP™ agreement, partially offset by an increase of $0.6
million from the Company’s Daiichi Sankyo ARQ 092 agreement, and lower
contra-revenue of $6.0 million associated with the Daiichi Sankyo tivantinib
agreement.

The $0.5 million revenue increase in the nine month period is due to lower
contra-revenue of $11.3 million associated with the Company’s Daiichi Sankyo
tivantinib agreement, and revenue increases of $1.2 million from the Daiichi
Sankyo AKIP™ agreement and $2.2 million from the Daiichi Sankyo ARQ 092
agreement. These revenue increases were partially offset by a $10.2 million
decrease in revenue recognized on the $25 million MARQUEE milestone payment
received from Daiichi Sankyo in the first quarter of 2011 and a $4.0 million
decrease in revenue recognized on the $10million milestone payment received
from Kyowa Hakko in the third quarter of2011.

For the quarter ended September 30, 2012, the Company reported total costs and
expenses of $11,533,000, compared to total costs and expenses of $14,235,000
for the quarter ended September 30, 2011. Total costs and expenses for the
nine months ended September 30, 2012 were $37,220,000, compared to $45,559,000
for the same period in 2011.

Research and development costs for the three and nine-month periods ended
September 30, 2012 were $8,146,000 and $26,720,000 respectively, compared with
$11,108,000 and $35,337,000 for the 2011 three and nine-month periods.
Research and development expense in the three months ended September 30, 2012
decreased primarily due to lower spending of $1.6 million on outsourced
clinical and product development costs related to our Phase 1 and 2 programs
for tivantinib, $0.8 million on preclinical costs and $0.5 million on lower
labor related costs. Research and development expense in the nine months ended
September 30, 2012 decreased primarily due to lower spending of $5.2 million
on outsourced clinical and product development costs related to our Phase 1
and 2 programs for tivantinib, $2.1 million on preclinical costs and $0.9
million on lower labor related costs.

General and administrative costs for the three and nine-month periods ended
September 30, 2012 were $3,387,000 and $10,500,000, respectively, compared
with $3,127,000 and $10,222,000 for the 2011 three and nine-month periods.

Financial Guidance

The Company is revising its financial guidance for 2012 based on the following
considerations. As a result of the October 2012 decision to terminate the
MARQUEE trial, the development period for recognition of revenue from the
Company’s tivantinib collaboration agreement with Daiichi Sankyo has been
extended to June 2015. Consequently, commencing with the fourth quarter of
2012, revenue will be recognized over this new development period. In
addition, the Company anticipates a reduction in expenses in 2012 related
primarily to lower outsourced costs related to tivantinib and pre-clinical
development programs.

For 2012 ArQule expects net use of cash to range between $35 and $38 million.
Revenues are expected to range between $34 and $37 million. Net loss is
expected to range between $12 and $15 million. Net loss per share is expected
to range between $(0.20) and $(0.25) for 2012. ArQule expects to end 2012 with
between $127 and $130 million in cash and marketable securities.

Investor Conference Call

ArQule will host an investor conference call today at 9:00 a.m.

Date:    Thursday, November 1, 2012
Time:       9:00 a.m. Eastern Time

Conference Call Dial-In Numbers

Domestic:         (877) 868-1831
International:       (914) 495-8595
Webcast:             http://www.ArQule.com

A replay of the conference call will be available beginning approximately two
hours after its completion for seven days and can be accessed by dialing
toll-free 1-855-859-2056 and 1-404-537-3406 from outside the U.S. For archived
calls, the access code is 53861797.

About ArQule

ArQule is a biotechnology company engaged in the research and development of
next-generation, small-molecule cancer therapeutics. The Company’s targeted,
broad-spectrum products and research programs are focused on key biological
processes that are central to human cancers. ArQule’s lead product, in Phase 2
and Phase 3 clinical development, is tivantinib (ARQ 197), an oral, selective
inhibitor of the c-MET receptor tyrosine kinase. The Company’s pipeline
consists of ARQ 621, designed to inhibit the Eg5 kinesin motor protein, and
ARQ 736, designed to inhibit the RAF kinases. ArQule’s current discovery
efforts, which are based on the ArQule Kinase Inhibitor Platform (AKIP™), are
focused on the identification of novel kinase inhibitors that are potent,
selective and do not compete with ATP (adenosine triphosphate) for binding to
the kinase.

This press release contains forward-looking statements regarding the Company’s
clinical trials with tivantinib (ARQ 197) and other candidate compounds in
earlier stages of development, as well as forward-looking statements related
to the Company’s financial guidance for 2012 (including estimates of net use
of cash, revenues, net loss, net loss per share and cash and marketable
securities at the end of 2012) and its agreements with Daiichi Sankyo Co.,
Ltd. and Kyowa Hakko Kirin Co., Ltd. These statements are based on the
Company’s current beliefs and expectations, and are subject to risks and
uncertainties that could cause actual results to differ materially. Positive
information about pre-clinical and early stage clinical trial results does not
ensure that later stage or larger scale clinical trials will be successful.
For example, tivantinib, ARQ 092 (an AKT inhibitor), ARQ 621 (an Eg5
inhibitor), ARQ 736 (a RAF kinases inhibitor) and ARQ 087 (an FGFR inhibitor)
may not demonstrate promising therapeutic effects; in addition, they may not
demonstrate appropriate safety profiles in current or later stage or larger
scale clinical trials as a result of known or as yet unanticipated side
effects. The results achieved in later stage trials may not be sufficient to
meet applicable regulatory standards or to justify further development.
Problems or delays may arise during clinical trials or in the course of
developing, testing or manufacturing these compounds that could lead the
Company or its partners to discontinue development. Even if later stage
clinical trials are successful, unexpected concerns may arise from analysis of
data or from additional data. Obstacles may arise or issues may be identified
in connection with review of clinical data with regulatory authorities, and
regulatory authorities may disagree with the Company’s view of the data or
require additional data or information or additional studies. In addition, the
planned timing of initiation and completion of clinical trials for tivantinib
is subject to the ability of the Company or Daiichi Sankyo, its partner, and
Kyowa Hakko Kirin, a licensee of tivantinib, to enroll patients, enter into
agreements with clinical trial sites and investigators, and overcome other
technical hurdles and issues related to the conduct of the trials for which
each of them is responsible that may not be resolved. Drug development
involves a high degree of risk. Only a small number of research and
development programs result in the commercialization of a product. Positive
pre-clinical data may not be supported in later stages of development.
Furthermore, ArQule may not have the financial or human resources to
successfully pursue drug discovery in the future. Moreover, Daiichi Sankyo has
certain rights to unilaterally terminate the tivantinib license,
co-development and co-commercialization agreement. If it were to do so, the
Company might not be able to complete development and commercialization of
tivantinib on its own. For more detailed information on the risks and
uncertainties associated with the Company’s drug development and other
activities, see the Company’s periodic reports filed with the Securities and
Exchange Commission. The Company does not undertake any obligation to publicly
update any forward-looking statements.

ArQule,Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
                                
                                  Three Months Ended    Nine Months Ended
                                  September 30,         September 30,
                                  2012       2011       2012       2011
                                  (In Thousands, Except Per Share Data)
                                                                             
Research and development          $ 10,944   $ 11,954   $ 31,271   $ 30,806
revenue
                                                                             
Costs and expenses:
Research and development            8,146      11,108     26,720     35,337
General and administrative         3,387     3,127     10,500    10,222
Total costs and expenses           11,533    14,235    37,220    45,559
                                                                             
Loss from operations                (589   )   (2,281 )   (5,949 )   (14,753 )
                                                                             
Interest income                     150        77         294        244
Interest expense                    (7     )   (6     )   (19    )   (18     )
Other income (expense)              15         (50    )   98         (3      )
                                                                     
Net loss                           (431   )  (2,260 )  (5,576 )  (14,530 )
                                                                             
Unrealized gain (loss) on          273       (144   )  166       (80     )
marketable securities
Comprehensive loss                $ (158   ) $ (2,404 ) $ (5,410 ) $ (14,610 )
                                                                             
Basic and diluted net loss per
share:
Net loss per share                $ (0.01  ) $ (0.04  ) $ (0.09  ) $ (0.28   )
                                                                             
Weighted average basic and
diluted common shares              62,224    53,534    58,987    52,495
outstanding

                                                  September 30,   December 31,
Balance sheet data (in thousands):                              2011
                                                  2012
                                                                  
Cash, equivalents and marketable securities-      $   82,760      $   68,168
short term
Marketable securities- long term                  57,398          40,475
                                                  $   140,158     $   108,643
                                                                  
Total assets                                      $   144,675     $   117,051
                                                                      
Notes payable                                     $   1,700       $   1,700
                                                                      
Stockholders’ equity                              $   85,371      $   29,729

Contact:

ArQule, Inc.
William B. Boni, 781-994-0300
VP, Investor Relations/
Corp. Communications
www.ArQule.com
 
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