ArQule Announces Third Quarter Fiscal 2009 Results

The Company reported a net loss of $8,088,000 or $0.18 per share, for
the quarter ended September 30, 2009, compared to a net loss of
$11,281,000, or $0.26 per share, for the quarter ended September 30,
2008. For the nine-month period ended September 30, 2009, the Company
reported a net loss of $26,268,000 or $0.60 per share, compared to a net
loss of $41,235,000, or $0.94 per share, for the same period in 2008.

At September 30, 2009, the Company had a total of $178,106,000 in cash,
equivalents and marketable securities, which includes $47,750,000 drawn
down in 2008 under notes payable that are collateralized by the
Company's auction rate securities. Net of these notes, at September 30,
2009, the Company had a total of $130,356,000.

Recent Operational Highlights

ARQ 197:

--
Completion of patient enrollment in the Phase 2 non-small cell lung
cancer (NSCLC) trial testing the combination therapy of ARQ 197 and
erlotinib;

--
Initiation of patient enrollment in a Phase 2 trial with ARQ 197 in
hepatocellular carcinoma (HCC);

--
Designation of ARQ 197 as an orphan medical product for the treatment
of soft tissue sarcoma by the European Medicines Evaluation Agency
(EMEA);

--
Continued patient enrollment as planned in the Phase 2 monotherapy
trial with ARQ 197 in Microphthalmia Transcription Factor
(MiT)-associated tumors;

--
Progress in combination safety trials of ARQ 197 with sorafenib and
ARQ 197 with gemcitabine, with potential target indications of HCC and
pancreatic cancer, respectively.

Pipeline:

--
Continued dose escalation in a Phase 1 trial with ARQ 621;

--
Acceptance of an abstract highlighting the discovery of fibroblast
growth factor receptor (FGFR) inhibitors for presentation at the 2009
AACR-EORTC-NCI Molecular Targets and Cancer Therapeutics Conference.

"Progress in our clinical development program with ARQ 197 is being made
across four indications and three combination regimens," said Paolo
Pucci, chief executive officer of ArQule. "Notably, we have completed
patient enrollment in our Phase 2 trial in non-small cell lung cancer
ahead of schedule, and we expect to have data from this trial available
in the first half of 2010.

"We also expect to complete enrollment in our Phase 2 MiT trial late
this year, and we recently initiated enrollment in a Phase 2 trial in
hepatocellular carcinoma following the successfully completed evaluation
of patients in a safety trial," said Mr. Pucci. "ARQ 197 combination
therapy safety trials with sorafenib and gemcitabine are proceeding as
well.

"We recently received notification that the EMEA has designated ARQ 197
as an orphan medical product for the treatment of soft tissue sarcoma,"
said Mr. Pucci. "Future interactions with regulatory authorities,
combined with the evaluation of clinical data from our MiT trial
expected to be available in early 2010, will inform our decisions
related to the possible advancement of this program.

"Our Phase 1, dose escalation trial with ARQ 621, an inhibitor of the
Eg5 kinesin motor protein, is progressing well," said Mr. Pucci. "We
continue to increase dosing and expect to complete this trial early next
year.

"With a presentation at the AACR-EORTC-NCI meeting later this month, we
will introduce our newest program," said Mr. Pucci. "This program is
focused on the development of potent, small molecule inhibitors of the
fibroblast growth factor receptor (FGFR) based upon the independent
application of our proprietary kinase discovery technology. Pending
successful pre-clinical development, we expect to file an
Investigational New Drug (IND) application with a lead candidate from
this program in 2010.

"Our oncology-focused, ArQule Kinase Inhibitor Platform (AKIP(TM))
collaboration with Daiichi Sankyo Co., Ltd. continues to move forward,"
said Mr. Pucci. "The range and stages of our clinical and pre-clinical
activities position us for a number of potential inflection points
beginning in the first half of 2010."

Revenues and Expenses

The Company reported total revenues of $6,436,000 for the quarter ended
September 30, 2009, compared to revenues of $2,664,000 for the quarter
ended September 30, 2008. Revenues for the nine months ended September
30, 2009 were $17,912,000, compared to revenues of $8,774,000 for the
nine months ended September 30, 2008. Increased revenues for the 2009
periods were primarily due to revenues from the Company's agreements
with Daiichi Sankyo Co., Ltd. for ARQ 197 and the AKIP(TM) discovery
collaboration, both signed in late 2008. Revenues for both years include
revenue from the Company's agreement with Kyowa Hakko Kirin Co., Ltd.

For the quarter ended September 30, 2009, the Company reported total
costs and expenses of $14,481,000, compared to total costs and expenses
of $14,284,000 for the quarter ended September 30, 2008. Total costs and
expenses for the nine months ended September 30, 2009 were $45,356,000,
compared to $52,639,000 for the same period in 2008.

Research and development costs for the three and nine-month periods
ended September 30, 2009 were $11,347,000 and $35,359,000 respectively,
compared with $10,788,000 and $39,220,000 for the 2008 three and
nine-month periods. The decrease in research and development expense in
the nine-month period ended September 30, 2009 was primarily due to
clinical trial costs in 2008 related to ARQ 501 that did not recur in
2009, lower personnel-related costs, and executive transition costs that
did not recur in 2009.

General and administrative costs for the three and nine-month periods
ended September 30, 2009 were $3,134,000 and $9,997,000, respectively,
compared with $3,496,000 and $13,419,000 for the 2008 three and
nine-month periods. The decrease in general and administrative costs in
the 2009 three-month period was primarily due to lower personnel related
costs. The decrease in general and administrative costs in the 2009
nine-month period was principally due to lower personnel related costs
and to non-cash, stock-based compensation costs incurred in 2008 related
to the Company's employment agreements with its previous and current
chief executive officers.

Financial Guidance

The Company previously stated that for 2009, it expects net use of cash
to range between $46 and $49 million, revenues to range between $21 and
$24 million, net loss to range between $44 and $47 million, and net loss
per share to range between $0.98 and $1.05 for the year. The Company
also stated that it expects to end 2009 with between $157 and $160
million in cash and marketable securities, which includes $47.8 million
drawn down in 2008 under notes payable that are collateralized by the
Company's auction rate securities. Net of these notes, the Company
previously stated that it expects to end 2009 with net cash and
marketable securities in a range of $109 to $112 million.

The Company believes that several factors may cause net use of cash for
the year to be favorable to guidance. Key among these are the timing of
reimbursement of development costs for ARQ 197 from Daiichi Sankyo and
cost savings initiatives that have been implemented throughout the year.
The net impact will be revenues at or above the high end of guidance,
expenses at or below the low end of guidance, and a resulting net loss
below the low end of guidance. In addition, the total of the Company's
net cash and marketable securities at year end is expected to be above
the high end of the range, which is $112 million.

Investor Conference Call
ArQule will host an investor conference call today at 9:00 a.m.
Date:                  Thursday, November 5, 2009
Time:                  9:00 a.m. Eastern Time
Conference Call Dial-In Numbers
Domestic:              (866) 770-7125
International:         (617) 213-8066
Participant Passcode:  76724058
Webcast:               http://www.ArQule.com

A replay of the conference call will be available beginning at 12:00
p.m. today for seven days and can be accessed by dialing 1-888-286-8010
from the U.S. and Canada, and 1-617-801-6888 from elsewhere. For
archived calls, the access code is 86035092.

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 cancer. ArQule's
lead product, in Phase 2 clinical development, is ARQ 197, an 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. An additional clinical-stage program includes
compounds that activate the cell's DNA damage response mechanism
mediated by the E2F-1 transcription factor. The Company's pre-clinical
pipeline includes a compound designed to inhibit the BRAF kinase.
ArQule's current discovery efforts, which are based on the ArQule Kinase
Inhibitor Platform (AKIP(TM)), 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 operating performance, such as projections about its future
results of operations and its financial condition, and its agreements
with Daiichi Sankyo Co., Ltd. and Kyowa Hakko Kirin Co., Ltd. These
statements include references to potential future milestone and royalty
payments that could result from the future development of ARQ 197 and
products generated from the company's AKIP(TM) platform. Failure to
successfully develop these products could prevent the Company from
receiving these future payments. Additional forward-looking
statements relate to the progress of the Company's clinical trials,
including Phase 1 and Phase 2 trials with ARQ 197 and a Phase 1 trial
with ARQ 621, as well as progress in the pre-clinical development of the
Company's BRAF kinase program and its AKIP(TM) discovery platform. 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 early
stage clinical trial results is not necessarily indicative of clinical
efficacy and does not ensure that later stage or larger scale clinical
trials will be successful. For example, ARQ 197 and ARQ 621 may not
demonstrate promising therapeutic effect; in addition, they may not
demonstrate an appropriate safety profile in current, 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. 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 partner to discontinue development. Even if
later-stage clinical trials are successful, the risk exists that
unexpected concerns may arise from analysis of data or from additional
data or that obstacles may arise or issues be identified in connection
with review of clinical data with regulatory authorities or that
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 ARQ 197 and ARQ 621 is subject to the ability of the Company
or in certain cases, its partners, to enroll patients, enter into
agreements with clinical trial sites and investigators, and other
technical hurdles and issues 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. Furthermore, ArQule may not have the financial or human
resources to pursue drug discovery and development successfully in the
future. For more detailed information on the risks and uncertainties
associated with the Company's drug discovery and 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 Statement of Operations
(In Thousands, Except Per Share Amounts)
(Unaudited)
                                                       Three Months Ended              Nine Months Ended
                                                       September 30,                   September 30,
                                                       2009            2008            2009            2008
Research and development revenue                       $   6,436       $   2,664       $   17,912      $   8,774
Costs and expenses:
Research and development                               11,347          10,788          35,359          39,220
General and administrative                             3,134           3,496           9,997           13,419
Total costs and expenses                               14,481          14,284          45,356          52,639
Loss from operations                                   (8,045     )    (11,620     )   (27,444     )   (43,865     )
Interest income                                        174             557             841             2,848
Interest expense                                       (169       )    (218        )   (505        )   (218        )
Other income (1)                                       352             --              1,240           --
Net loss before taxes                                  (7,688     )    (11,281     )   (25,868     )   (41,235     )
Provision for income taxes                             (400       )    --              (400        )   --
Net loss before taxes                                  $   (8,088 )    $   (11,281 )   $   (26,268 )   $   (41,235 )
Basic and diluted loss per share:
Net loss per share                                     $   (0.18  )    $   (0.26   )   $   (0.60   )   $   (0.94   )
Weighted average basic and diluted shares outstanding  44,322          43,984          44,126          43,821

(1) Net unrealized gain from auction rate securities and auction rate
put option.

Balance sheet data (in thousands):                       September 30,   December 31,
                                                         2009            2008
Cash, equivalents and marketable securities- short term  $      108,945  $      141,890
Marketable securities- long term                         69,161          64,219
                                                         $      178,106  $      206,109
Total assets                                             $      185,148  $      214,212
Notes payable                                            $      47,750   $      47,750
Stockholders' equity                                     $      20,482   $      43,467

SOURCE: ArQule, Inc.

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

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