ArQule Posts Narrower-than-Expected Q1 Loss - Analyst Blog

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ArQule ( ARQL ) reported a loss of 11 cents per share in the first quarter of 2014, narrower than the Zacks Consensus Estimate of a loss of 12 cents per share. The company had reported a loss of 9 cents in the year-ago quarter.

Revenues plummeted 52.7% to $2.7 million in the first quarter of 2014, but surpassed the Zacks Consensus Estimate of $2 million.

Quarter in Detail

The decline in quarterly revenues was primarily due to a decrease of $0.6 million each from the tivantinib program with Daiichi Sankyo as well as from its Daiichi Sankyo agreement on ARQ 092 (that ended in Jun 2013). In addition, the company also incurred a $1.8 reduction in revenues related to a one-time research project in the quarter ended Mar 31, 2013.

Research and development expenses were $6.7 million, down 17.7% from the year-ago quarter mainly due to lower labor related costs and reduced lab expenses.

General and administrative expenses decreased 4.4% to $3.2 million. ArQule exited the first quarter with cash and equivalents of $85.8 million.

We remind investors that ArQule announced a workforce reduction of approximately 25 positions in 2013 in order to accumulate cash and sustain its business into 2016, independently fund its clinical trials and effectively deploy core discovery capabilities concurrent with the second quarter results.

Outlook Reiterated

ArQule now expects revenues between $8 million and $10 million in 2014. The Zacks Consensus Estimate of $9 million is well within the guidance. ArQule anticipates net loss per share between 48 cents and 52 cents. The Zacks Consensus Estimate for 2014 hints at a loss of 49 cents.

Pipeline Update

ArQule is evaluating its lead oncology candidate, tivantinib (ARQ 197), for the treatment of hepatocellular carcinoma (HCC or liver cancer). Two phase III trials are underway on tivantinib.

The two trials include METIV-HCC, conducted by Daiichi Sankyo and ArQule, and JET-HCC (Japanese Evaluation of tivantinib in HCC) conducted by Kyowa Hakko Kirin. The METIV-HCC trial is conducted under special protocol assessment with the U.S. Food and Drug Administration (FDA) and the primary endpoint of this trial is overall survival whereas JET-HCC trial's primary endpoint is progression-free survival.

Our Take

The first quarter results did not surprise us. ArQule currently does not have any marketed product in its portfolio and tivantinib is its most advanced stage candidate. Hence, we expect investor focus on to remain on further updates on the phase III results.

ArQule currently carries a Zacks Rank #3 (Hold). Right now, Johnson & Johnson ( JNJ ), Allergan ( AGN ) and Shire ( SHPG ) look attractive. All three carry a Zacks Rank #2 (Buy).


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: AGN , ARQL , JNJ , SHPG

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