ArQule Reports Second Quarter 2006 Financial Results.WOBURN, Mass. -- ArQule, Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : ARQL) today announced its financial results for the second quarter of 2006. For the quarter ended June 30, 2006, the Company reported a net loss of $7,575,000 or $0.21 per share, compared with a net loss of $2,427,000, or $0.07 per share, for the second quarter of 2005. For the six-month period ended June 30, 2006, the Company reported a net loss of $3,288,000, or $0.09 per share, compared to a net loss of $3,871,000, or $0.11 per share, for the six-month period ended June 30, 2005. The Company reported total revenues of $6,570,000 for the quarter ended June 30, 2006, compared to revenues of $13,454,000 for the second quarter of 2005. Revenues for the six months ended June 30, 2006 were $30,022,000, compared to revenues of $27,397,000 for the six months ended June 30, 2005. Compound development revenues for both the 2006 and 2005 periods related primarily to chemistry services provided by the Company to Pfizer Inc. The decreased revenues in the second quarter of 2006 followed the Company's previously announced decision to exit the chemistry services business upon conclusion of the Pfizer agreement in May 2006. Research and development revenue in the 2006 and 2005 quarters related primarily to financial support from Hoffmann-La Roche related to the Company's ongoing development of products in its E2F E2F E-Mail to Fax cancer therapy program. Total costs and expenses for the quarter ended June 30, 2006 were $15,410,000, compared to $16,129,000 for the second quarter of 2005. Total costs and expenses for the six months ended June 30, 2006 were $35,917,000, compared to $32,019,000 for the same period in 2005. Cost of compound development revenue for the three and six-month periods ended June 30, 2006, relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the production of compounds for Pfizer, totaled $2,526,000 and $8,345,000, respectively, compared with $7,674,000 and $15,027,000 for the three and six-month periods ended June 30, 2005. Research and development costs for the three and six-month periods ended June 30, 2006 were $9,567,000 and $20,093,000, respectively, compared with $6,217,000 and $12,070,000 for the 2005 three and six-month periods. Marketing, general and administrative costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. for the three and six-month periods ended June 30, 2006 were $2,781,000 and $4,981,000, respectively, compared with $2,238,000 and $4,922,000 for the 2005 three and six-month periods. For the three and six-month periods ended June 30, 2006, the Company recorded restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. of $536,000 and $2,498,000 related to employee severance associated with the termination of its chemistry services business. As of June 30, 2006 all affected employees have been separated from the Company, and the termination benefits are expected to be fully paid by December 31, 2006. On January 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards No. 123(R) related to share-based awards. As a result, the Company recorded charges of $896,000 and $1,775,000 in the quarter and six months ended June 30, 2006, respectively, to reflect share-based compensation expense, which is reflected in compound development cost of revenue, research and development expenses and marketing, general and administrative expenses. At June 30, 2006, the Company had a total of approximately $119,919,000 in cash and marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has . Operational Review "We are pleased with the patient enrollment in our clinical programs based upon our two lead scientific platforms, checkpoint pathway activation and c-Met inhibition," said Dr. Stephen A. Hill, president and chief executive officer of ArQule. "With regard to our checkpoint pathway activation program, patients are being actively enrolled in Phase 2 trials with ARQ (Automatic Repeat reQuest) A method of handling communications errors in which the receiving station requests retransmission if an error occurs. ARQ - Automatic Repeat Request 501 as monotherapy monotherapy /mono·ther·a·py/ (-ther´ah-pe) treatment of a condition by means of a single drug. mon·o·ther·a·py n. Treatment of a disorder with a single drug. in leiomyosarcoma and as combination therapy with gemcitabine in pancreatic cancer pancreatic cancer Malignant tumour of the pancreas. Risk factors include smoking, a diet high in fat, exposure to certain industrial products, and diseases such as diabetes and chronic pancreatitis. Pancreatic cancer is more common in men. . "We expect to initiate patient enrollment in a second Phase 2 monotherapy trial with ARQ 501 in head and neck cancer in the near future," said Dr. Hill. "We also plan to begin a Phase 2 combination therapy trial with ARQ 501 and paclitaxel paclitaxel /pac·li·tax·el/ (pak?li-tak´sel) an antineoplastic that promotes and stabilizes polymerization of microtubules, isolated from the Pacific yew tree (Taxus brevifolia); in ovarian cancer ovarian cancer Malignant tumour of the ovaries. Risk factors include early age of first menstruation (before age 12), late onset of menopause (after age 52), absence of pregnancy, presence of specific genetic mutations, use of fertility drugs, and personal history of breast later in the year. With regard to our c-Met inhibition program, patient enrollment continues on schedule in a Phase 1 clinical trial phase 1 clinical trial Phase 1 study. See Phase study. with ARQ 197, an orally administered small molecule, at three centers in the U.S. "During the quarter, we also reported updated data from Phase 1 combination therapy trials with ARQ 501 and chemotherapeutic agents This is a list of specific pharmacologic agents that are known to be of use in the treatment of cancer, otherwise known as chemotherapeutic agents. This list is organized by "type" of agent, though the subsections are not necessarily definitive and are subject to revision. ," said Dr. Hill. "These studies demonstrate clinical tolerability tol·er·a·ble adj. 1. Capable of being tolerated; endurable. 2. Fairly good; passable. See Synonyms at average. tol , favorable pharmacokinetics pharmacokinetics /phar·ma·co·ki·net·ics/ (fahr?mah-ko-ki-net´iks) the action of drugs in the body over a period of time, including the processes of absorption, distribution, localization in tissues, biotransformation, and excretion. and promising signs of anti-tumor activity in patients with a range of advanced solid tumors." Conference Call and Webcast ArQule will hold a conference call at 9:00 a.m. eastern time today, July 27, 2006. Dr. Stephen A. Hill, president and chief executive officer, and Louise A. Mawhinney, chief financial officer, will lead the call.
Date & Time: Thursday, July 27, 2006 at 9:00 a.m., Eastern Time
Conference Call Numbers
Toll Free: 866.713.8565
Toll: 617.597.5324
Code: ArQule
Webcast: www.arqule.com
A replay of the conference call will be available for five days and can be accessed by dialing toll-free 888.286.8010, and outside the U.S. 617.801.6888. The access code is 85879182. About ArQule ArQule, Inc. 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 designed to affect key biological processes that are central to cancer. ArQule's lead clinical-stage products have been generated from two scientific platforms. The first of these, Activated Checkpoint Therapy(SM) (ACT), is designed to kill cancer cells cells once believed to be peculiar to cancers, but now know to be epithelial cells differing in no respect from those found elsewhere in the body, and distinguished only by peculiarity of location and grouping. See also: Cancer selectively while sparing normal cells through direct activation of DNA DNA: see nucleic acid. DNA or deoxyribonucleic acid One of two types of nucleic acid (the other is RNA); a complex organic compound found in all living cells and many viruses. It is the chemical substance of genes. damage response/checkpoint pathways. The Company's lead ACT program, based on the E2F1 pathway, is partnered with Roche. ArQule's second cancer platform, Cancer Survival Protein modulation, has generated a clinical-stage product designed to inhibit a molecule known as c-Met, which plays multiple roles in cancer cell growth, survival, invasion, angiogenesis angiogenesis /an·gio·gen·e·sis/ (-jen´e-sis) vasculogenesis; development of blood vessels either in the embryo or in the form of neovascularization or revascularization. an·gi·o·gen·e·sis n. and metastasis metastasis /me·tas·ta·sis/ (me-tas´tah-sis) pl. metas´tases 1. transfer of disease from one organ or part of the body to another not directly connected with it, due either to transfer of pathogenic microorganisms or to . For more information, please visit www.arqule.com. This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. as defined in the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995, which provides a safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. for forward-looking statements made by or on behalf of ArQule. ArQule and its representatives may from time to time make written or oral forward-looking statements, including statements contained in this press release. Generally, the words "believe," "expect," "intend," "estimate," "anticipate," "will" and similar expressions identify forward-looking statements. All statements which address operating performance, events or developments that ArQule expects or anticipates will occur in the future, such as projections about its future results of operations or its financial condition, research, development and commercialization of its products and anticipated trends in its business are forward-looking statements within the meaning of the Reform Act. Actual results, including results of ongoing and anticipated clinical trials, may differ materially from those projected in the forward-looking statements or historical performance due to numerous risks and uncertainties that exist in ArQule's operations, research and development efforts and the general business environment, including without limitation: compounds in clinical trials based on the ACT platform or other, proprietary platforms may not prove to be safe or efficacious ef·fi·ca·cious adj. Producing or capable of producing a desired effect. See Synonyms at effective. [From Latin effic ; current and future clinical studies may encounter enrollment difficulties and the commencement of anticipated clinical trials may be delayed or the trials may never commence; the results of clinical trials may be disappointing and not lead to commercial products; preclinical preclinical /pre·clin·i·cal/ (-klin´i-k'l) before a disease becomes clinically recognizable. pre·clin·i·cal adj. 1. efforts associated with the product pipeline may fail or prove disappointing; animal xenograft xenograft /xeno·graft/ (zen´o-graft) a graft of tissue transplanted between animals of different species; it may be concordant, preclinical studies preclinical studies, n.pl a term used to describe research done before a clinical study. May be laboratory or epidemiologic research. may be unpredictive of human response; collaborators may terminate their agreements with ArQule because ArQule may fail to satisfy the prescribed terms of the collaboration or for other reasons; and, the risks and uncertainties described in ArQule's filings with the Securities and Exchange Commission. Drug development involves a high degree of risk. Only a small number of research and development programs result in the commercialization of a product. The forward-looking statements contained herein represent the judgment of ArQule as of the date of this report. ArQule disclaims any intent or obligation to update any forward-looking statement except to the extent required by law.
ArQule, Inc.
Condensed Statement of Operations
(In Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
---------- -------- -------- --------
Revenue:
Compound development revenue $4,918 $11,802 $26,718 $24,093
Research and development
revenue 1,652 1,652 3,304 3,304
---------- -------- -------- --------
Total revenue 6,570 13,454 30,022 27,397
---------- -------- -------- --------
Costs and expenses:
Cost of revenue - compound
development 2,526 7,674 8,345 15,027
Research and development 9,567 6,217 20,093 12,070
Marketing, general and
administrative 2,781 2,238 4,981 4,922
Restructuring charge 536 - 2,498 -
---------- -------- -------- --------
Total costs and expenses 15,410 16,129 35,917 32,019
---------- -------- -------- --------
Loss from operations (8,840) (2,675) (5,895) (4,622)
Net investment income 1,265 498 2,607 1,001
Loss on investment - (250) - (250)
---------- -------- -------- --------
Net loss $(7,575) $(2,427) $(3,288) $(3,871)
========== ======== ======== ========
Basic and diluted net loss per
share $(0.21) $(0.07) $(0.09) $(0.11)
========== ======== ======== ========
Weighted average common shares
outstanding - basic and diluted 35,460 34,953 35,386 34,003
========== ======== ======== ========
June 30, December 31,
Balance sheet data (in thousands): 2006 2005
--------------------------------------------- ----------- ------------
Cash, cash equivalents and marketable
securities $119,919 $140,643
Working capital 106,414 105,646
Total assets 130,974 156,684
Stockholders' equity 104,858 105,458
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