Market Overview

ArQule Reports Second Quarter 2018 Financial Results

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Conference call scheduled today at 9:00 a.m. ET

ArQule,
Inc. (NASDAQ:ARQL) today announced its financial results for the second
quarter of 2018.

For the quarter ended June 30, 2018, the Company reported net income of
$5,156,000 or $0.05 per diluted share, compared with a net loss of
$7,201,000 or $0.10 per basic share, for the second quarter of 2017. For
the six-month period ended June 30, 2018, the Company reported a net
loss of $1,376,000 or $0.02 per basic share, compared with a net loss of
$14,777,000 or $0.21 per basic share, for the six-month period ended
June 30, 2017.

As of June 30, 2018, the Company had a total of approximately
$46,075,000 in cash, equivalents and marketable securities.

Key Highlights

  • In July 2018, the Company raised approximately $70 million of gross
    proceeds in a public offering of common stock. Net proceeds will be
    used to fund its core clinical programs and for general corporate
    purposes
  • ARQ 531, our potent and reversible BTK inhibitor, demonstrated good
    oral bioavailability, pharmacokinetics and early signs of activity in
    data presented at the European Hematological Association (EHA) in June
    2018. The Phase 1 portion of the Phase 1a/b trial continues to recruit
    on schedule, and we plan to present additional data at a major
    congress later in 2018
  • A comprehensive preclinical publication on ARQ 531 has been accepted
    in a major scientific journal
  • We and our academic collaborators at Memorial Sloan Kettering have
    initiated an expansion cohort for miransertib in combination with
    anastrazole in patients with endometrial cancer, and are targeting to
    enroll up to 40 patients in this cohort
  • We and our scientific collaborators have compiled a foundational
    clinical data set from miransertib in rare diseases that we plan to
    present at the American Society of Human Genetics (ASHG) Annual
    Meeting in October

"We were gratified by the high level of interest and quality of
investors that participated in our recent public offering," said Paolo
Pucci, Chief Executive Officer of ArQule. "Our core clinical programs
continue to progress, and the capital we received in the upsized
offering significantly enhances our ability to expand our plans and to
sustain them over a longer period of time."

Brian Schwartz, M.D., Head of Research and Development and Chief Medical
Officer of ArQule said, "We are pleased with the continued progress of
our clinical programs in oncology and rare diseases. Data recently
presented at EHA on ARQ 531, our reversible BTK inhibitor, have further
validated the potential of this promising drug candidate, and we are now
planning for the next data releases in the second part of the year."

Revenues and Expenses

Revenues for the quarter ended June 30, 2018, were $13,706,000 compared
with revenues of zero for the quarter ended June 30, 2017. Research and
development revenue in the quarter ended June 30, 2018 consisted of
$13,706,000 from our April 2018 Basilea licensing agreement.

Revenues for the six months ended June 30, 2018, were $17,844,000
compared with revenues of zero for the six months ended June 30, 2017.
Research and development revenue in the six months ended June 30, 2018
consisted of $13,706,000 from our April 2018 Basilea licensing
agreement, $3,000,000 from our February 2018 Roivant licensing agreement
and $1,138,000 from our October 2017 non-exclusive license agreement for
certain library compounds.

Research and development expense in the second quarter of 2018 was
$6,787,000 compared with $4,983,000 for the second quarter of 2017.
Research and development expense increased $1.8 million in the second
quarter of 2018 primarily due to higher outsourced preclinical, clinical
and product development costs.

Research and development expense in the six-months ended June 30, 2018
was $12,599,000 compared with $10,177,000 in the six months ended June
30, 2017. The $2.4 million increase in research and development expense
in the six months ended June 30, 2018 was primarily due to higher
outsourced preclinical, clinical and product development costs.

General and administrative expense was $2,234,000 in the second quarter
of 2018 compared with $1,866,000 in the second quarter 2017. The $0.4
million increase in general and administrative expense in the three
months ended June 30, 2018 was primarily due to increased professional
fees.

General and administrative expense was $4,585,000 in the six months
ended June 30, 2018 compared with $3,940,000 in the six months ended
June 30, 2017. The $0.6 million increase in general and administrative
expense in the six months ended June 30, 2018 was primarily due to
increased professional fees and labor related costs.

2018 Updated Financial Guidance

As a result of the July 2018 stock offering and the prior conversion of
our preferred stock into 8,370,000 shares of common stock, we have
updated our 2018 guidance. For 2018, ArQule now expects revenue to range
between $21 and $23 million. Net use of cash is expected to range
between $28 and $30 million for the year. Net loss is expected to range
between $10 and $14 million, and net loss per share to range between
$(0.10) and $(0.14) for the year. ArQule expects to end 2018 with
between $100 and $102 million in cash and marketable securities.

Conference Call and Webcast

ArQule will
hold its second quarter 2018 financial results call today, August 1,
2018 at 9:00 a.m. ET. The live webcast can be accessed in the "Investors
& Media" section of our website, www.arqule.com,
under "Events & Presentations." You may also listen to the call by
dialing (877) 868-1831 within the U.S. or (914) 495-8595 outside
the U.S. A replay will be available two hours after the completion of
the call and can be accessed in the "Investor and Media" section of our
website, www.arqule.com,
under "Events
& Presentations
."

About ArQule

ArQule is a biopharmaceutical company engaged in the research and
development of targeted therapeutics to treat cancers and rare diseases.
ArQule's mission is to discover, develop and commercialize novel small
molecule drugs in areas of high unmet need that will dramatically extend
and improve the lives of our patients. Our clinical-stage pipeline
consists of five drug candidates, all of which are in targeted,
biomarker-defined patient populations, making ArQule a leader among
companies our size in precision medicine. ArQule's pipeline includes:
ARQ 531, an orally bioavailable, potent and reversible inhibitor of both
wild type and C481S-mutant BTK, in Phase 1 for patients with B-cell
malignancies refractory to other therapeutic options; Miransertib (ARQ
092), a selective inhibitor of the AKT serine/threonine kinase, in a
phase 1/2 company-sponsored study for Overgrowth Diseases, in a Phase 1
study for ultra-rare Proteus syndrome conducted by the National
Institutes of Health (NIH), and in Phase 1b in combination with the
hormonal therapy, anastrozole, in patients with advanced endometrial
cancer; ARQ 751, a next generation AKT inhibitor, in Phase 1 for
patients with AKT1 and PI3K mutations; Derazantinib, a multi-kinase
inhibitor designed to preferentially inhibit the fibroblast growth
factor receptor (FGFR) family, in a registrational trial for iCCA; and
ARQ 761, a β-lapachone analog being evaluated as a promoter of
NQO1-mediated programmed cancer cell necrosis, in Phase 1/2 in multiple
oncology indications in partnership with the University of Texas
Southwestern Medical Center. ArQule's current discovery efforts are
focused on the identification and development of novel kinase
inhibitors, leveraging the Company's proprietary library of compounds.

Forward-Looking Statements

This press release contains forward-looking statements, including
without limitation under the heading, "Key Highlights," in the quotes of
management in connection with the Company's clinical trials and planned
clinical trials, as well as under the heading, "2018 Updated Financial
Guidance," with respect to projected financial results and our ability
to fund operations with current cash and marketable securities. 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 from those set forth in this press release.
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, ARQ 531, miransertib, ARQ 751 and
derazantinib may not demonstrate promising therapeutic effect; 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 prior to the initiation of planned clinical trials, during
clinical trials or in the course of developing, testing or manufacturing
these compounds that could lead the Company or its partners and
collaborators to fail to initiate or to discontinue development. Even if
later stage clinical trials are successful, unexpected concerns may
arise from subsequent 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. Regulatory
authorities may disagree with the Company's or its collaborators' view
of data or require additional data or information or additional studies.
In addition, the planned timing of completion of clinical trials is
subject to the ability of the Company and, in certain cases, its
collaborators to enroll patients, enter into agreements with clinical
trial sites and investigators, and overcome technical hurdles and other
issues related to the conduct of the trials for which each of them is
responsible. There is a risk that these issues may not be successfully
resolved. In addition, we and our partners are utilizing a break apart
FISH diagnostic to identify patients in the trial with derazantinib in
iCCA, and are utilizing or expect to utilize diagnostic tools in other
biomarker-guided clinical trials with derazantinib, miransertib, ARQ 531
and ARQ 751. We or our collaborators may encounter difficulties in
developing and obtaining approval for companion diagnostics, including
issues relating to access to certain technologies,
selectivity/specificity, analytical validation, reproducibility, or
clinical validation. Any delay or failure by our collaborators or
ourselves to develop or obtain regulatory approval of companion
diagnostics could delay or prevent approval of our product candidates.
Moreover, each of Basilea and Sinovant, our collaborators for
derazantinib, has only a limited or no track record of drug development
in oncology.
In addition, both Basilea and Sinovant have certain
rights to unilaterally terminate their respective agreements with ArQule.

If either party were to do so, the Company might not be able to
complete development and commercialization of derazantinib. Even if
derazantinib were to show promise, our collaborators may decide not to
continue to develop it. If derazantinib is not successfully developed as
a result of any of the foregoing or other issues, risks or
uncertainties, ArQule may not receive any future milestones or royalties
under its agreements with Basilea and Sinovant.
Drug development
involves a high degree of risk. Only a small number of research and
development programs result in the commercialization of a product.
Furthermore, ArQule may not have the financial or human resources to
successfully pursue drug discovery in the future. For more detailed
information on the risks and uncertainties associated with the Company's
drug development, financial condition 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 Statement of Operations and Comprehensive Loss

(In Thousands, Except Per Share Amounts)

(Unaudited)

 
Three Months Ended
June 30,
Six Months Ended
June 30,
2018 2017 2018 2017
 
 
Research and development revenue $ 13,706 $ $ 17,844 $
 
Costs and expenses:
Research and development 6,787 4,983 12,599 10,177
General and administrative   2,234   1,866   4,585   3,940
Total costs and expenses   9,021   6,849   17,184   14,117
 
Income (loss) from operations 4,685 (6,849 ) 660 (14,117 )
 
Interest income 170 37 329 59
Interest expense (417 ) (389 ) (813 ) (719 )
Other income (expense) (1)   718     (1,552 )  
Net income (loss)   5,156   (7,201 )   (1,376 )   (14,777 )
 
Unrealized gain (loss) on marketable securities   19   (5 )   (6 )   (9 )
Comprehensive income (loss) $ 5,175 $ (7,206 ) $ (1,382 ) $ (14,786 )
 
Basic and diluted net income (loss) per share:
Basic net income (loss) per share $ 0.06 $ (0.10 ) $ (0.02 ) $ (0.21 )
Diluted net income (loss) per share $ 0.05 $ (0.10 ) $ (0.02 ) $ (0.21 )
 
Weighted average shares used in calculating:
Basic net income (loss) per share   92,241   71,149   89,691   71,143
Diluted net income (loss) per share   100,532   71,149   89,691   71,143
 

(1) Includes non-cash income (expense) associated with the change in
fair value of our preferred stock warrant liability. At June 30, 2018
there was no remaining balance in the warrant liability.

       
Balance sheet data (in thousands) (Unaudited):

June 30,
2018

December 31,
2017
 
Cash, equivalents and marketable securities- short term $ 46,075 $ 48,036
Marketable securities-long term - -
$ 46,075 $ 48,036
 
Total assets $ 50,181 $ 48,902
Stockholders' equity

$

27,244 $ 14,181
 

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