ArQule Reports Second Quarter 2012 Financial Results

<0> Conference call scheduled today at 9:00 a.m. eastern time </0>

ArQule Reports Second Quarter 2012 Financial Results

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

ArQule, Inc. (NASDAQ: ARQL) today announced its financial results for the second quarter of 2012.

For the quarter ended June 30, 2012, the Company reported a net loss of $885,000 or $0.01 per share, compared with a net loss of $10,804,000 or $0.20 per share, for the second quarter of 2011. For the six-month period ended June 30, 2012, the Company reported a net loss of $5,145,000 or $0.09 per share, compared to a net loss of $12,270,000 or $0.24 per share, for the six-month period ended June 30, 2011.

At June 30, 2012, the Company had a total of approximately $147,068,000 in cash, equivalents and marketable securities.

“The timely completion of patient recruitment in the MARQUEE trial marks an important milestone in the development of tivantinib in non-squamous cell non-small cell lung cancer, a disease with a high unmet need for additional effective treatment options,” said Paolo Pucci, chief executive officer of ArQule. “Approximately 1,000 patients from more than 200 clinical sites worldwide are participating in this trial, which is being conducted under a Special Protocol Assessment in the U.S.

“Findings presented recently at ASCO represent the first randomized data reported in HCC with an investigational MET inhibitor as single-agent therapy in second-line treatment,” said Mr. Pucci. “Based on the positive clinical results in previously treated HCC patients with MET-high tumors, planning is underway for a Phase 3 trial in this population.”

The Company reported total revenues of $11,829,000 for the quarter ended June 30, 2012, compared to revenues of $5,447,000 for the second quarter of 2011. Revenues for the six months ended June 30, 2012 were $20,327,000 compared to revenues of $18,852,000 for the six months ended June 30, 2011.

The $6.4 million revenue increase in the 2012 three month period is due to revenue increases of $1.7 million from the Company’s Daiichi Sankyo AKIP agreement, $0.8 million from our Daiichi Sankyo ARQ 092 agreement, $0.2 million from our Kyowa Hakko Kirin tivantinib license agreement, and lower contra-revenue of $3.7 million.

The $1.5 million revenue increase in the six month period is due to increases of $4.2 million from our Daiichi Sankyo AKIP agreement, $1.6 million from our Daiichi Sankyo ARQ 092 agreement, $0.6 million from our Kyowa Hakko Kirin license agreement and lower contra-revenue of $5.3 million. These increases were partially offset by a $10.2 million decrease in revenue recognized from the $25 million MARQUEE milestone payment received from Daiichi Sankyo in the first quarter of 2011. In the six months ended June 30, 2011 when we received that milestone payment, we recognized revenue of $12.7 million compared with $2.5 million in the six months ended June 30, 2012, resulting in a revenue decrease of $10.2 million.

Total costs and expenses for the quarter ended June 30, 2012 were $12,785,000 compared to $16,388,000 for the second quarter of 2011. Total costs and expenses for the six months ended June 30, 2012 were $25,687,000 compared to $31,324,000 for the same period in 2011.

Research and development costs for the three and six-month periods ended June 30, 2012 were $9,271,000 and $18,574,000 respectively, compared with $12,836,000 and $24,229,000 for the 2011 three and six-month periods. The lower research and development costs and expenses in the 2012 periods were due to lower outsourced clinical and product development costs related to our Phase 1 and Phase 2 programs for tivantinib.

General and administrative costs for the three and six-month periods ended June 30, 2012 were $3,514,000 and $7,113,000 respectively, compared with $3,552,000 and $7,095,000 for the 2011 three and six-month periods.

As previously stated, for 2012 ArQule expects net use of cash to range between $39 and $44 million. Revenues are expected to range between $40 and $45 million. Net loss is expected to range between $15 and $20 million. Net loss per share is expected to range between $(0.25) and $(0.33) for 2012. ArQule expects to end 2012 with between $121 and $126 million in cash and marketable securities.

A replay of the conference call will be available for seven days following the call and can be accessed by dialing toll-free 855-859-2056 and outside the U.S. 404-537-3406. The replay access code is 99910692.

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 has also initiated Phase 1 clinical testing with ARQ 621, designed to inhibit the Eg5 kinesin motor protein, and with 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.

(1) Research and development revenue is shown net of collaboration contra-revenue of zero and $3.4 million and $3.7 million and $8.7 million for the three and six months ended June 30, 2012 and 2011, respectively.

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