ARQL

ArQule, Inc. (ARQL)

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ArQule Inc. (ARQL)

Q3 2008 Earnings Call

November 10, 2008 9:00 am ET

Executives

Bill Boni - VP of IR

Paolo Pucci - CEO

Peter Lawrence - President and COO

Brian Schwartz - CMO

Thomas Chan - CSO

Rob Weiskopf - VP of Finance

Analysts

Mark Monane - Needham & Company

Bret Holley - Oppenheimer & Company

Howard Liang - Leerink Swann

Han Li - Stanford Group

Joel Sendek - Lazard Capital Markets

Derek Jellinek - SIG

George Zavoico - Cantor Fitzgerald

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Third Quarter 2008 ArQule Incorporated Earnings Call. My name is Sandy, and I will be your coordinator for today.

At this time, all participants are in a listen-only mode. We will facilitate a question-and-answer session towards the end of this conference. (Operator Instructions). As a reminder this conference is being for replay purpose.

I would now like to turn the presentation over to your host for today's call, Mr. Bill Boni. Please proceed.

Bill Boni

Thank you, Sandy. Good morning, everyone. This is Bill Boni, the Vice President of Investor Relations at ArQule. I would like to welcome you to the 2008 third quarter ArQule conference call, during which we will discuss the two press releases issued by the company earlier this morning.

The first press release outlines two deals between ArQule and Daiichi Sankyo Company Limited that marked the basis of a new strategic partnership between the companies in the therapeutic area of Oncology. The second release reports results for the fiscal quarter ended September 30th, 2008.

I am here with members of ArQule's senior management team, led by Paolo Pucci, Chief Executive Officer. Also participating on the call are Peter Lawrence, President and Chief Operating Officer; Dr. Brian Schwartz, Chief Medical Officer; Dr. Thomas Chan, Chief Scientific Officer; and Rob Weiskopf, Vice President of Finance.

Before we begin, please note that we will be making forward-looking statements as defined in the Private Securities Litigation Act of 1995. Actual results may differ materially from those projected in the forward-looking statements, due to numerous risks and uncertainties that exist in ArQule's operations, development efforts and the business environment, including those factors discussed in our press release announcing this call and posted on our website. As well as in our reports on Form 10-K and 10-Q and subsequent documents filed with the Securities and Exchange Commission.

The forward-looking statements contained in this call represent the judgment of ArQule as of today. ArQule disclaims any intent or obligation to update any forward-looking statement except to the extent required by law.

I would now like to introduce the CEO of ArQule, Paolo Pucci, who will be followed by other members of the management team. We will provide an opportunity for questions and answers at the end of the call.

Paolo Pucci

Thank you Bill and good morning everybody. It is a pleasure to share with our investors the significant news that were contain in our two press releases today. We hope to be able to provide more details that we could fit in the press releases of today in our discussion of this morning.

As you have seen, ArQule has entered in two agreements with Daiichi Sankyo, the leading pharmaceutical Japanese company and one of the top 20 pharmaceuticals companies worldwide.

The first agreement is a binding letter of intent that will lead to the co-development and to some limited extent co-promotion of ARQ 197, which is our selective inhibitor of c-Met. The second is a collaborative research agreement that is focused on two targets related to our capabilities of ArQule platform, which is the ArQule kinase inhibitor platform.

The two agreements that we have signed with Daiichi Sankyo are the results of months of due diligence by both parties, and very intensive cooperation that in my opinion set the stage for a very fast update of the work that is ahead of ArQule and Daiichi Sankyo in the implementation of those two agreements.

ArQule is honored to sign these two agreements with Daiichi Sankyo, because it finds in Daiichi Sankyo a partner for whom oncology is a major corporate priority, for whom 197 is a lynchpin in realizing this priority, and for whom our kinase inhibitor platform a chip represents the potential for significant pipeline expansion in this therapeutic area.

I am confident that with our new partner, we will be a competitor in oncology. As you know, Daiichi-Sankyo already has accumulated significant expertise in oncology, having been the owner of (inaudible) in the US and elsewhere.

We believe that two deals with one partner such as Daiichi-Sankyo will create synergy, which will ultimately benefit both companies. The synergy will also enhance our understanding of our best to bring Novel inhibitors of c-Met and either kinases through the clinic and on the way to market.

Let me now offer a new few comments on the ARQ 197 deal. We view this deal as fundamentally transformative for ArQule. It offers immediate and compelling validation of the quality and the relevance of our current clinical program.

We share with our partner the commitment to execute, a development plan that goes beyond what we have announced so far. A plan that will be able to realize the full potential I should say, therapeutic potential of ARQ 197 as a mono and combination agent.

This deal would also allow ArQule to establish a founding US commercial presence that will compliment the primary commercialization effort in the US that will be carried down by a strong and growing Daiichi-Sankyo US infrastructure. This deal also marked the achievement of our key short-term goals. As we have said in the past, we were aiming to close a deal for ARQ 197 by the end of this year. It turns out that we close such deal today.

Let me also offer a few comments on our AKIP deal, which in some ways is no less interesting to us and hopefully to you all than the ARQ 197 deal. In that, this deal makes somewhat emerge with greater evidence the importance of our discovery platform.

Some of you have heard me say in our investors' conference in the past that there were two ways to make our platform emerge: one, endogenous, by bringing forward INDs fully generated through that platform; one, exogenous, by signing one such deal as the one we're signing today.

Our discovery deal with Daiichi-Sankyo focuses on the discovery and the development of novel potent and selected inhibitors with two different kinase targets in the field of oncology. The work that will be done in researching these two different kinase targets will be exclusively done on behalf of and in cooperation with Daiichi-Sankyo.

This transaction begins to have the significant potential of our proprietary technology platform by leveraging the resources of a committed strategic partner, scientific resources that we did not fully possess before the deal we have signed. We believe that the AKIP platform is a powerful discovery engine for identifying novel inhibitors of kinases that are highly specific and well-tolerated.

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