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ArQule Inc. (NASDAQ:ARQL)

Q1 2008 Earnings Call

May 12, 2008 9:00 am ET

Executives

William Boni - VP of IR

Peter Lawrence - President and COO

Rob Weiskopf - VP of Finance

Analysts

Han Li - Stanford Group

Lynn - Rodman & Renshaw

George Zavoico - Cantor Fitzgerald

Howard Liang - Leerink Swann

Ren Benjamin - Rodman & Renshaw

Mark Monane - Needham and Company

Operator

Good day, ladies and gentlemen, and welcome to the ArQule First Quarter 2008 Earnings Call. My name is Silvana and I'll be your coordinator for today. At this time all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (Operator Instructions). As a reminder this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today's call, Mr. William Boni, VP of Investor Relations. You may proceed.

William Boni

Good morning, everyone. Welcome to the ArQule investor conference call, reviewing operational and financial results for the first quarter of fiscal year 2008. This is Bill Boni, and I'm the Vice President of Investor Relations and Corporate Communications of the Company.

Leading the call today will be Peter Lawrence, President and Chief Operating Officer of ArQule, who will update you on operational progress that took place during the past quarter. Rob Weiskopf, Vice President of Finance, will then provide a financial review of the quarter.

This morning we issued a press release that reported results for the fiscal quarter ended March 31, 2008. This release is available on our website at www.arqule.com.

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 Forms 10-Q and 10-K; 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 statements except to the extent required by law.

I would now like to turn the call over to Peter Lawrence.

Peter Lawrence

Thanks, Bill. Good morning, everybody. I'm pleased to report on ArQule's first quarter, highlighted by continuing progress in the development of ArQule 197, our selective small molecule inhibitor of the c-Met receptor tyrosine kinase. In March, we initiated patient dosing in Phase I, II clinical trial program with ArQule 197, which was administered in combination with erlotinib and to patients with advanced non-small cell lung cancer.

This program consists of two trials. The first is Phase I trial, in which investigators will determine the safety, tolerability and a recommended Phase II dose of ArQule 197 administered, in combination with erlotinib and inhibitor of the EGFR tyrosine kinase. Depending the completion of Phase I, we plan to initiate a Phase II multi-center, placebo controlled and randomized trial, comparing ArQule 197 plus erlotinib against placebo plus erlotinib.

The oncology community has expressed a high level of interest in this particular indication. Scientific data has shown that the development of resistance in non-small cell lung cancer tumors to therapy with EGFR inhibitors such as erlotinib maybe linked to an increase in c-Met signaling. Overcoming such resistance has been a therapeutic challenge and we believe the inhibition of c-Met may offer a new strategy in treating these tumors and extending the lives of patients.

Non-small cell lung cancers are a third indication within our Phase II clinical program with ArQule 197 in addition to MiT-driven tumors and pancreatic cancer. Patients' enrollments in these trials are continuing. Additional Phase II indications under consideration include hormone resistant prostate cancer and gastric cancer.

We will move forward with decisions regarding the timing and protocols for these trials as the year progresses. The development of ARQ 197 into Asia is also progressing. During the quarter we received the $3 million milestone payment from our partner Kyowa Hakko, marking the initiation by the Kyowa of a Phase I dose-escalation trial with this compound. We enjoy a close working relationship with Kyowa. We are pleased with their progress and their commitment for the timely development of ARQ 197 in that part of the world.

We retain proprietary rights to ARQ 197 outside of Asia, and during 2008 we will continue to explore partnering opportunities in the rest of the world. Our objective with any such partnership would be to ensure the broadest possible development plan for our molecule while preserving our participation in development and commercialization, and to achieve appropriate economics where we continue to believe is a unique and exciting compound.

Moving to our E2F-1 program: As previously reported, we have discontinued development of ARQ 171, a second generation product in this program based on the completed analysis of QTC Prolongation Data. We're currently conducting GLP toxicology studies with ARQ 761, a new chemical entity that has become the next second generation product behind ARQ 501.

ARQ 761 is a pro-drug that reverts to ARQ 501, following exposure to plasma. Attending the successful completion of toxicology testing with ARQ 761, we would expect to file an IND in the second half of 2008.

As most on the call know, our E2F-1 program is under development pursuing to collaboration with Roche. Roche has an option to license worldwide rights to products from this program, based on data from completed Phase II trials with ARQ 501 as well as recommended Phase II dose for the second generation E2F-1 product. Attending the successful completion of preclinical in Phase I clinical development of ARQ 761, we would expect to have a recommended Phase II dose for this compound in 2009.

Roche's option to the E2F-1 program runs through the end of 2008. They have the right to extend this option period through 2009, in exchange for financial support for further program deliverables.

We continue to review data from this program with Roche on an ongoing basis. On the preclinical front we presented four posters of the 2000 Annual Meeting of the American Association for Cancer Research in April.

These posters related to ARQ 197 into preclinical candidate in our Eg5 and B-RAF programs, and serve to validate our diverse approaches to molecular targeted cancer therapy.

We also expect to have additional data on ARQ 197, presented at ASCO. More information regarding this presentation will be available as consistent with ASCO'S disclosure timing guidelines.

We are increasingly excited about the potential of our emerging kinase inhibitor discovery platform. This platform was first suggested by insights into the novel binding mechanism of ARQ 197 to c-Met, as elucidated by crystallographic structural data.

We are now applying these insights to the discovery of novel inhibitors of other kinase targets and have been making good progress. We believe this platform offers potential for robust discovery efforts and partnering programs.

Finally, we're looking forward to welcome Paolo Pucci as the new Chief Executive Officer of ArQule. Paolo comes to ArQule from Bayer AG, where he currently serves as Senior Vice President and President in charge of the Bayer-Schering Pharmaceuticals Global Oncology/Specialized Therapeutics business unit.

He brings skills and professional experiences, expanding a broad range of product development activities. In particular, his experience with Sorafenib, a multi-kinase inhibitor, will be invaluable as we advance ARQ 197 and other product candidates into advance stages of clinical trials and toward commercialization.

Paolo is wrapping up his responsibilities with Bayer and will join us on June 9. With that, I would like turn it over to Rob Weiskopf for our financial reviews.

Rob Weiskopf

Thank you, Peter. Good morning. I would like to turn to ArQule's financial performance for the first quarter of fiscal year 2008 ended March 31. The company reported a net loss of $13.9 million or $0.32 per share for the first quarter of 2008, compared to a net loss of $14.5 million, or $0.40 per share for the first quarter of 2007. At March 31, 2008, the company had a total of approximately $119.6 million in cash equivalents and long-term marketable securities.

Revenues for the first quarter of 2008 were $3.5 million, compared to $1.6 million for the first quarter of 2007. Revenues in the 2008 quarter included the milestone payment and licensing revenue from Kyowa, which was related to ARQ 197, and financial support from Roche related to the E2F-1 program. Total cost and expenses for the first quarter of 2008 was $19.1 million, compared to $17.2 million for the first quarter of 2007.

Research and development costs for the first quarter of 2008 were $13.5 million, compared to $13.7 million for the first quarter of 2007. General and administrative costs for the first quarter of 2008 were $5.6 million, compared to $3.5 million for the first quarter of 2007. The increased 2008 G&A expenses were primarily due to non-cash stock-based compensation cost.

I would like to reiterate ArQule’s financial guidance for fiscal year 2008 as follows: As previously stated for 2008, we expect revenues to range between $10 and $10.5 million, primarily related to the ongoing partnerships with Kyowa and Roche. Net use of cash is expected to be between $55 and $60 million; net loss is expected to fall between $69 and $74 million; and net loss per share is to range between $1.57 and $1.68 for the year.

ArQule, therefore, expects to end 2008 with between $75 million and $80 million in cash and marketable securities. Please note that our guidance reflects several considerations that may evolve as the year progresses. For example, we have the ability to control the pace and timing of both outgoing and planned clinical trials, as well as the level of future capital expenditures. Additional considerations include deal-flow related to ARQ 197 and earlier stage products and technologies and further clarity regarding our auction rate security investments.

With respect to those investments, our auction rate portfolio consists of AAA credit-rated securities, primarily backed by the Federal Government. Although we have recorded a temporary impairment of $3.7 million in the first quarter of 2008, reflecting our inability to access certain of these investments, this temporary impairment reflects current illiquidity in the auction rate market, and we do not believe that it reflects on the quality of the underlying collateral. We will be tracking and reporting on the changing liquidity in the auction rate market on a quarterly basis going forward.

That concludes our financial summary, and I would now like to turn the call back to Peter.

Peter Lawrence

Okay. Thanks Rob. Operator, we'd like to open the floor now for questions and discussion.

Question-and-Answer Session

Operator

(Operator Instructions). Our first question comes from the line of from (inaudible) with Needham & Company.

Unidentified Analyst

Hi, good morning. This is (inaudible) from Needham & Company. My first question is clinical, in terms for ARQ 197 single agent versus combination trials, what do you think makes for a good combination trial, a combination or makes profile good in a particularly tumor type?

Peter Lawrence

I guess I’d say that ARQ 197 because of its selectivity and therefore it's benign side effect profile, vendors are attractive in any number of potential combination therapies, we think both with cytotoxic and another targeted agents. It’s really just a matter of doing the work to determine, which of those combinations makes the most sense for us. We're driven not only by the prospect of combinations, but also testing the drug in the appropriate tumor types, we think c-Met plays an important role in the growth of those tumors.

So, for example the study with erlotinib is based on -- it is based on data that we have reviewed as well as data that we've generated. And we think there are a number of compelling reasons to move ahead in that particular trial. In terms of prostate cancer, which I mentioned earlier, we're also looking at the possibility of the combination of ARQ with cytotoxic agent like [Dosatec] so there are reasons to believe that could be very compelling combination.

I think we really have more opportunities than we have resources both human and financial to pursue. So, we look at the literature, we do our own testing, we talk to key opinion leaders and that's how we determine, where we go ahead. Dr. Tom Chan is with me and Tom, I don't know if you want to comment any further.

Tom Chan

No. I think Peter had very nicely captured some of the way that the field has looked for that combination, the first and foremost to be sure that the toxic side effects do not synergize. So, I think that's exactly what Peter has captured and I think that’s how we are going to proceed.

Unidentified Analyst

Well, thank you very much. I have just a quick question on your auction rate securities. What's the total amount that you own and the second question on that, it sounds like mark-to-market in your cash position that's reported. Is that correct?

Peter Lawrence

I think that's right. I’ll let Rob jump in. So, we do have an account with approximately $62 million or so and it we've already gained some liquidity to that through a loan -- UBS is the holder of that account. They have provided a loan at what I’d call a very attractive rate. I think there is going to be our 10-Q. So, I guess, I can say with that right, Rob.

Rob Weiskopf

Correct.

Peter Lawrence

It’s a $15 million loan. We're talking about extending that. And we're not overly concerned about this issue currently; John Wayne came out on Friday and said that he thinks this market is going to clear up in the next 12 months. We're not being pollyannaish about it. We're talking to a number of sources, both investment banks and specialist. We're talking to some of our lead investors about the issue and we are seeking the best way use to get immediate liquidity. So, obviously we don’t want to let the issue hang out there. But I think we're taking all the appropriate steps that we need to manage the issue.

Unidentified Analyst

Well, thank you very much for taking my questions.

Peter Lawrence

You're welcome.

Operator

And the next question comes from the line of Han Li from Stanford Group. You may proceed.

Han Li - Stanford Group

Yes, good morning. Couple of questions one on the 197, can you give us update on patient enrollment for the Phase II study in MiT and also pancreatic cancer?

Peter Lawrence

Well, we haven't been doing that and what I said is and we will eventually -- we will let you know when the trials are enrolled. But I think what we have said historically with respect to pancreatic a study like that should take anywhere from four to eight or nine months to enroll and I'm talking hypothetically and so given that we've started to enroll back in November.

If our study was like other studies you can I think project out, when it might be fully enrolled. And with respect to MiT, what I have said in the past is we have pulled out all the staffs in terms of getting as many patients enrolled as practicable as possible really. Working with sarcoma society and other third parties as well as directly to ensure enrollment that is a personal goal of mine it’s very important for the patient. It’s very important for the company, obviously.

It’s tricky because there are roughly 2000 patients in the world. So, you have to work hard to get those patients. I do think that there is lot of excitement about the drug in that patient population. There was a wonderful article published in what is it, Bill? In the Texas newspaper that talked about a patient, who had put on the drug and patient are excited. So, I think what we said about that it’s a 45 patient trial as currently designed and that we hope to have that enrolled by the end of the year.

Han Li - Stanford Group

Okay. So, the earliest time we can see the MiT data, Phase II data could be sometime in ‘09?

Peter Lawrence

No, I think certainly by -- I don’t want to give a specific date, but I think we are going to probably have to talk about that data at some point this year, what I would say. I’d hope that we have the large enough body of data towards some point in the second half of the year to able to report, if not on a final basis, on an interim basis certainly.

Han Li - Stanford Group

Okay. And how many patients do you plan to enroll for the pancreatic cancer trial?

Peter Lawrence

It’s currently designed to have 36 patients in each arm 72 total.

Han Li - Stanford Group

Okay and lung cancer?

Peter Lawrence

Lung cancer, so we have the run-in study that’s going on what I call the run-in study, which is the Phase I study just testing the safety of ARQ 197 with erlotinib. So far we haven’t seen anything that causes any concern. I am looking over Tom, he shaking his head. I am sure that’s the case. So, we are encouraged about what we are seeing there in terms of the safety profile, as soon as that’s done, we will start enrolling the large trial.

And I've said, this trial could be, if we go for overall survival, it’s going to be a very large trial. We've talked about numbers in excess of 300, if it’s progression free survival, it could be powered with a much smaller number, maybe about half of that. So, we're in conversation with FDA and we're going do what makes sense both from a company standpoint, from a resource standpoint, from a milestone standpoint.

There are both practical patient and business decisions that are going to be taken into consideration, before we make a final decision about the size of the program. But we have the sites lined up, and we are fairly for a long in that and once we have reached final conclusion, I will be reporting that to you and others.

Han Li - Stanford Group

Okay. And the lung cancer trial could be potential registration trial?

Peter Lawrence

Potentially.

Han Li - Stanford Group

Okay.

Peter Lawrence

So, we're looking at – we have looked at what it would take for a power trial both with overall survival and with progression-free survival. And needless to say, at the end of the day, we will run the statistics and it is our intention no matter, which direction we go to at least have the possibility of it being a registration trial. But at the end of the day, that will depend up on the success that we have in the trial and it will be review issue by the FDA, but we are looking at both trial designs to be statistically powered.

Han Li - Stanford Group

Okay. One last question, this is on the E2F program. Are you under contractual obligation to continue to develop a second generation E2F compound?

Peter Lawrence

I think that the way -- let me turn the question around and put it to you this way. The work that we're doing with 761, which is the next second generation compound is work that we would do whether Roche were involved or not. It is not high cost and we are very interested in the molecule. I think that because of the QTc prolongation we saw with 171 and because of that the delay and when I think a number of people thought Roche might be making decision.

It's easy to conclude that maybe E2F-1 is not going to have a bright future. We don't know what the future of E2F-1 is, but I remain very encouraged by the fact that 501 is an interesting molecule and it showed a lot of activity, what I've said in the past, as we're looking for a version of 501 that has a better therapeutic window and we're hoping that 761 is that molecule and that's we're testing now.

So, GLP toxic is not expensive and it won't be particularly expensive to run a phase I trial with 761, to see if does have a better therapeutic window than 501. So, I remain excited about saying, what 761 looks like in man. So, that was a test that ArQule would run or a program that ArQule would run with or without Roche and its one that is not particularly expensive given the upside if we do see a broader therapeutic window.

Han Li - Stanford Group

Got it, thanks.

Peter Lawrence

You're welcome.

Operator

And the next question comes from the line of Ren Benjamin of Rodman & Renshaw. You may proceed.

Lynn - Rodman & Renshaw

Hi. This is actually [Lynn] on behalf of Ren and thank you for taking my questions. My first question just a follow-up question for the non-small cell lung cancer program. When do you expect you might report some data on the phase I portion of the trial?

Peter Lawrence

You know, Lin, we haven't even discussed when we would release that information. The phase I portion of the trial was testing safety. So, although we're trying to enrich the population for lung cancer patients, we're also testing the safety and another tumor types, because the whole purpose of the trial is safety. So, we can get the big study often running as quickly as possible. We didn't want to limit to adjust lung cancer patients because we wanted to get the safety data as quickly as possible.

So, it really depends on, whether there is anything other than the clean safety profile that is statistically relevant. So, if there is I'm sure we'll talk about it if there is and we'll just move into the big trial.

Lynn - Rodman & Renshaw

Okay. And also regarding the bigger Phase II trial, you mentioned, this Phase II trial you want to be sufficiently power, so that you can attack difference between the two arms. What will be your basis for the statistical assumptions, if you don't have in that efficacy data to see the combination (Inaudible).

Peter Lawrence

Go ahead Tom, if you would like.

Tom Chan

Yeah, this is Tom Chan. Hi, Lin and how you're doing?

Lynn - Rodman & Renshaw

Good. Thank you.

Tom Chan

I think the way to look at it is, if we need to -- if the FDA advises that they are interested in looking at overall survival. I think the calculation is a little bit different than if they said that progression-free survival is a rational endpoint. So, at this moment, we really can't take -- I mean statistical power is 2.9 and then you make sure however is less than '05, but it all depends on what endpoint will end up designing the study and that's the moving part is currently ongoing right now.

Lynn - Rodman & Renshaw

I see. My second question is regarding that your E2F program. Can you remind us when -- by what time Roche need to decide whether or not is going to extend the option -- extend the option, yeah?

Peter Lawrence

I’d happy to, Len. So, Roche is option runs through the end of 2008. They have a one-time rate to extend that option through the end of 2009 and exchange for a fairly what I would call discrete payment to support further program deliverables. So, by the end of this year they are going to have to make a decision as to whether or not they want to extend through the end of 2009 and get a look at the full Phase I data from the 761 Phase I trial that we expect to initiate.

Lynn - Rodman & Renshaw

I see and does that mean is Roche decided to expand it will continue to support the reimbursed R&D expenses for the Q1 or it will also take ARQ some additional?

Peter Lawrence

You should think of the extension as a payment related to reimbursement of expenses, whether it’s a 100% or some percentage I have to -- to be honest I had to go back to the contract and look at the formula, but it’s really related to the further program deliverables not some -- not a payment in excess of that.

Lynn - Rodman & Renshaw

Got it and lastly can you comment on the progress of your pipeline compound ARQ 621? And when do you think you might advance this compound into the clinic?

Peter Lawrence

I would be delighted to. We are very excited about 621 and Tom may want to make a comment as well. Toxicology testing is going well and we always said that we are going to put that in the clinic in the second half of the year.

I hate to be more specific than that, because obviously we are doing drug development work in parallel with the other work we are doing. So, there are a lot of moving parts, but my guess is we will file an IND well before the end of the year, but in the second half.

Lynn - Rodman & Renshaw

Thank you.

Peter Lawrence

You are welcome.

Operator

And the next question comes from the line of George Zavoico from Cantor Fitzgerald. You may proceed.

George Zavoico - Cantor Fitzgerald

Hi, Peter, Bill and Tom.

Peter Lawrence

Good morning, George.

George Zavoico - Cantor Fitzgerald

Good morning. Question about these non-small cell lung cancer Phase 1 trial, how many dose levels have you gone through so far. Can you comment on that or?

Peter Lawrence

No, we are not going to comment on that George, but what I’d say is that, we've gone through several and it looks good so far, that’s what I'm prepared to say. Tom, do you want to say anything more?

Tom Chan

Just a quick correction, the Phase 1 is all commerce, not just in non-small cell lung.

Peter Lawrence

Yes.

George Zavoico - Cantor Fitzgerald

Okay and so, in a sense that it recapitulates the earlier Phase I trial, commerce as well?

Peter Lawrence

Well, what we are trying to do, George, as I mentioned on the last call, we didn’t want to do just non-small cell lung, because it would have taken longer. So, we decided to test the erlotinib combination in as Tom said, all commerce, we are trying enrich for non-small cell lung patients in the trial because we like to look for signs of both safety and efficacy in those patients. But we didn’t want to spend, we wanted to reduce the amount of time to getting into the big study, and in order to do that we wanted to allow other tumor types might benefit from the combination.

George Zavoico - Cantor Fitzgerald

Okay. That makes a lot of sense, but then, again the 197 had a really benign side effect profile. So, if that happens again, which I hope it does, when do you decide you have another alternate stopping point?

Peter Lawrence

Yeah, we have an idea of how far we want to dose the drug. And I expect we're going to be talking a lot more about this probably sometime shortly after ASCO. So, I don’t what to talk about it now, but we have in mind sort of all -- where we want to get to before we stop and I think we will be able to say quite a bit about that after ASCO in the context of some of the presentations that we make there.

George Zavoico - Cantor Fitzgerald

Okay. And so, will you be talking about 197 in this trial particular ASCO then or…?

Peter Lawrence

I am looking over it, Bill. I don't thinks it's appropriate to talk a lot about yet, what we're going to be talking about at ASCO, but what I can say is, after the ASCO presentation I think that will provide a platform to talk about this particular dose ranging study and also when we expect to start the phase II study and what the dose will be in the phase II study.

George Zavoico - Cantor Fitzgerald

Okay. That's fair enough. Other question about the guidance for the net loss, your '07 net loss is about $354 million.

Peter Lawrence

Yeah.

George Zavoico - Cantor Fitzgerald

And you're guiding somewhere around $70 million, that's fairly substantial increase?

Peter Lawrence

Yeah. I think three is some non-cash in there and there might be some slight increase from the 197 phase II, but why don't I let Rob speak to that.

Rob Weiskopf

Yeah, I think that we didn't revise the guidance from what we provided at the end of the year. We took a look at the numbers and I think it falls well within that range. So, I think we feel comfortable with that, the level of spending as Peter pointed out there is some significant non-cash charges related to stock compensation expense that are in there, and some depreciation as well.

George Zavoico - Cantor Fitzgerald

It sounds like most of it come up due to R&D?

Rob Weiskopf

Right.

George Zavoico - Cantor Fitzgerald

Okay. And finally you mentioned the kinase discovery platform that you now seem to be talking to other companies about, that sounds very, very interesting. Can you provide a little bit more information on that?

Peter Lawrence

Yeah, I’d very much like to because I'm personally, I think we all are as a group excited about it. I'll take a crack at it at a high level and I'll let Tom Chan to talk a little bit more about it. So, in the discovery of one and we have been working on this for a while.

The discovery of 197 led to the elucidation of a novel mode of binding to the c-Met receptor tyrosine kinase and unlike some other discoveries and although it's one of the greatest cancer drugs out there. And I'm just going to give Gleevec as an example. I don't think Gleevec provided away forward for the discovery whether what they would call Type II Kinases.

We think that the discovery of 197 and its unique mode of binding does provide away forward for looking for other types, and what we call type for molecules that are highly selective for a specific conformation. And so we are now, we have now gone after a number of targets and looked for and look at a number of drugs like substances, molecules that might act the same way as 197. It has a similar mode of binding with these other targets and we have certainly begun to see some success in that regard. So, we are excited about the prospects and with that let me turn it over to Dr. Chan.

Tom Chan

Thank you, Pete. I think in addition to what Peter just gave in which is an excellent summary. We have already worked on probably battery of maybe 15, 20 Kinases and I've identified similar, but not identical similar binding sites, whereby we can design inhibitors to bind to. And so I think over the next year or too you'll here a fair bit more of discussion and disclosure are coming out of ArQule in terms of our effort in this area. Suffice to say I think we are all very, very excited about the prospectus of having such a platform.

George Zavoico - Cantor Fitzgerald

And I would imagine that you filing patent on this a unique IP space?

Tom Chan

Yes, that’s as we speak.

Peter Lawrence

We will be getting as much IP as we can as we move forward, yes.

George Zavoico - Cantor Fitzgerald

And finally, does this come into play for your Eg5 and B-RAF kinase program did you use this platform for those discoveries?

Tom Chan

No, we did not. The Eg5 as you know as an ATPase enzyme so the inhibitor is – historic inhibitor of the ATPase enzyme and then the (inaudible) is a classical type I inhibitor of Kinase.

Peter Lawrence

So, those programs in some ways predated the work on the kinase platform so from a different discovery effort within the company?

George Zavoico - Cantor Fitzgerald

You might use this for second generation compound

Peter Lawrence

If you certainly could.

George Zavoico - Cantor Fitzgerald

Okay, terrific. Thank you very much.

Peter Lawrence

My pleasure, thank you.

Operator

(Operator Instructions). And the following question comes from the line of Howard Liang, from Leerink Swann. You may proceed.

Howard Liang - Leerink Swann

Thanks very much and good morning. I know that you can’t talk about your ASCO -- coming ASCO presentation, but I think it would be from the Royal Marsden group, the [bipod] study. Can you remind us the design of the study maybe roughly how many patients were studied in the trial?

Peter Lawrence

Well, Howard, hypothetically speaking I guess I could. So, the Royal Marsden numbers so, I can talk about the design, maybe Tom will help with the numbers because I am not going to remember the exact number of patients we tested so far, but I think I can get close. So, it was a biopsy biomarker study one purpose of the study was to look for inhibition of c-Met in human tumor tissue after receiving a dose of ARQ 197 or several doses of ARQ 197. I think that data will be presented. I have talked about that in public forums and we think that that was a success. In patients that had alleviated level of phospho-c-Met three drug in each case they showed inhibition after receiving our drugs. We thought that that was obviously very important study to run and one that we are very gratified by the results.

Second, DeBono this (Inaudible) back that Neil Rosen said the other day at your conference. And despite the fact that these are targeted agents, I think that what Neil said was targeted doesn’t necessarily need not cytotoxic and I think Neil's belief is that you should dose targeted agents up to toxic level and see what happens because that’s what makes sense with cancer drugs. And Johann DeBono, who is running that study, so at the same way we had chosen a dose for our drug 120 bid based on some pleatuing that had seen in the intermittent dosing study earlier on. And Johann really wanted to run the thing up to a maximum tolerated dose and so, we allow that to be part of the study design and he will be reporting on that and I'm not going to be able to say anything about because I'm going let him do it.

Howard Liang - Leerink Swann

Okay. And number of patients?

Peter Lawrence

Number of patients, Tom?

Tom Chan

I think will probably in the range of 15 patients to 18 patients and it still accruing. So, by the time we get there, we'll probably have an interim, but it has not been found yet, so it still going on.

Peter Lawrence

I was going to say approximately 20 or so. I think Tom, refined that a little bit.

Howard Liang - Leerink Swann

Was this a melanoma trial with all commerce?

Tom Chan

It’s an all commerce trial design again just to look at basically giving a sense of how often do we see c-Met expression or over expression and then more importantly in those cases of such over expression thus 197 indicate post dose and I think the data will be presented at ASCO.

Howard Liang - Leerink Swann

They required patient biopsy, so which we assume typically those trials in involve melanoma patients.

Tom Chan

No, I think its all available sites. So, let say a GI tumor if the patient can be scoped the biopsy it can be taken by the scope.

Howard Liang - Leerink Swann

Okay, great. And I don't remember if you said anything about the transition on the one-time metastasis property of 197 when that will be presented?

Tom Chan

We do not have any specific study at this moment to look at anti-metastasis effect, not only that they are observations by our investigators, who are telling that they are observing that and as that data keep getting collected we may have additional information at this time that its not a formal study.

Peter Lawrence

And what I have said, Howard, it’s a good question because it remains something of fairly keen interest for me and others internally. It will be hard to design the study with primary end point because no drug is ever been improved for anti-metastasis effect, but we continue to do pre-clinical work.

We continue to, as Tom suggests, to look at the data from all of the work that we're doing to expect that there are any observations and as we look at studies beyond some of the once that we're currently planning like prostate and we're also looking a gastric and we'll do a gastric trial.

We've looked at breast, we looked at small-cell and we're looking at a number of other tumor types that might represent an interesting and important study, where you have traditional primary endpoints such as overall survival, but you could have secondary endpoint studying the anti-metastatic effects. So we're trying to do this in a very rational way.

Howard Liang - Leerink Swann

Okay, great. And gastric cancer, can you talk about your plan there, it's sounds like there is some interest from your partner as well whether it is will be one study or multiple studies?

Peter Lawrence

So, we have -- we've been looking a gastric for a long time. We have been speaking to the FDA about it. We do have, I would call it's more than strawman protocol. We have a protocol written for gastric cancer and we have a lot of interest in pursuing it. Personally I think that I would like to initiate the prostate study prior to initiating a gastric study at least that’s my current thinking given a key rule will be going into gastric, although we are poised to be able to go into it.

And I have to some of the studies designs we look at have been very large study, so they are very resource intensive and so given the Kyowa plans to go there I've been looking a gastric in the context of resources is currently available and something we might do for example if we were too a partner in the future.

So we've done a lot of work in that regard, but I think that there is a certain three hours that has to take place in terms of both human and financial resources. I think if we were to partner 197 my guess is that partner would be very interested in pursuing gastric fairly probably in addition to our partner Kyowa.

Howard Liang - Leerink Swann

Right and then on the pancreatic cancer trial the head-to-head versus gemcitabine I guess my question is, what is your -- I mean how do you think about. How do you think it will be a success for that trial. If you see do you have to require superiority over Gemzar there or if you so equivalent efficacy to Gemzar with that be consider a success?

Peter Lawrence

So, I guess if we saw equivalency given the side effect profile of ARQ 197 that will be very interesting to us, but we will be looking at, what we said as we are going to look at all end point. We will look at progression-free. We will look at response rate. We will look at overall survival. And it’s really a traditional Phase II design to show some signal. So, I think if we saw something like equivalency that could be very interesting and obviously if you saw more would be much more interesting?

Howard Liang - Leerink Swann

I just return to the non-small cell lung cancer the Tarceva combination study. Are you in the Phase I portion to get an idea how long this would take? Are you changing the doses of both compounds?

Peter Lawrence

No, the erlotnib dose is fixed. I mean erlotinib has a prescribed does we can’t change that its 150 mg. So, we are going with their prescribed dose. And we are going to be testing a number of different doses and looking at blood levels and other and obviously any kind of adverse events. But as I said so far we haven’t seen anything that gives us concern at all Tom is shaking his head. He is our PK/PD expert. So, I think that is an accurate statement.

Howard Liang - Leerink Swann

And this is a typical sort of PK/PD designs were usually three patients per cohort and go up to MKD?

Tom Chan

Yeah. I think that’s exactly. We are collecting from the kinetics data as we dose escalates. So, the data is just beginning to come in now so we will be very interested in looking at what the data shows us?

Howard Liang - Leerink Swann

Okay. And you said you’ve done multiple doses already?

Tom Chan

Correct.

Howard Liang - Leerink Swann

Okay, great. Thanks very much.

Peter Lawrence

You are welcome. Thank you.

Operator

And the next question is a follow-up question from the line of Ren Benjamin from Rodman & Renshaw. You may proceed.

Ren Benjamin - Rodman & Renshaw

Hi. Thank you for taking my follow-up question. Just very quickly, the biomarker study will be – the data will be presented at ASCO or EORTC?

Peter Lawrence

At ASCO.

Ren Benjamin - Rodman & Renshaw

Not at EORTC, right.

Peter Lawrence

No.

Ren Benjamin - Rodman & Renshaw

Okay. Thank you.

Peter Lawrence

You're welcome.

Operator

And we have another follow-up question from line of Glenn from Needham and Company. You may proceed.

Mark Monane - Needham and Company

Thank you. Actually it’s Mark Monane for Glenn here. Good morning.

Peter Lawrence

Good morning, Mark. Mark, are you still there?

Mark Monane - Needham & Company

Yes, I am. Hold on just one second.

Peter Lawrence

Okay

Mark Monane - Needham & Company

Hi, I'm interested in your comments that you had about 197 being a platform. I think there are some mixed beliefs on the development of drugs having very specific targets hitting one target and one target only or is that the design drugs that have a hit multi kinase targets, that we seen this especially in the development of the c-Met area.

Can you comment that your pathway or does your platform technology consider one target, one drug or does it have no preference at all concerning that hitting multiple kinase just design the best are drug for given diseases?

Peter Lawrence

Well, you've asked a big question, Mark, which is not uncommon for you I think you are big thinker. So, it's tough, it’s a philosophical question. And I wish you refer back to our history as a combinatorial chemistry company. We have a million compounds sitting downstairs in the freezer and many of those are multi kinase inhibitors. And I think we have one of the better design capacities of any company, let alone a little tiny company as ArQule is and we can design multi kinase inhibitors.

I think philosophically, we are ever been we're designing selective inhibitors very interesting task going forward. We think that by being selective you can -- more aspects of drug design side effect profiles in your control and we find that very attractive, but I'm going to turn it over to Tom to talk more about that.

Tom Chan

Thank you, Pete. I think as we have already started to comment a little bit early the goal is to find drug especially if you can get into combination, whereby the toxic side effects do not synergizes. So if you have a pure kinase inhibitor that is selective than you have less of a risk of the toxic side effect synergizing or multiplying as you go.

So, for example in the case of BRAF inhibitor if you have a BRAF inhibitor does not also hit KDR then you can should you want to have a KDR effect as well, and the KDR inhibitor to whatever dose to whatever regiment that you would like. So, it just gives the oncologists much better control of personalized therapy than one side fit all and if you can not tolerate these multi kinase inhibitor, we have nothing else to do for you. I think that's a little bit limiting for the patient. So, our philosophy is that if they need multiple kinase inhibition if you have a selective group of inhibitors it’s always an advantage with oncologist to prescribe what other kinase is he or she wants to want inhabit.

Peter Lawrence

So I think that's the right answer to the question Mark. And I think if Steve Hill were still here, he would say there is probably a role for both types of drugs, right. We like our approach and that's why we're going down that path. If we can go down other paths and who knows that maybe some day we will we see a drug we really like a lot, but philosophically that's what we had it right now.

Mark Monane - Needham & Company

Thanks for the added information and we look forward to future events.

Peter Lawrence

Thank you

Tom Chan

Thank you.

Operator

And at this time we don't have any further questions. I'll pass the call over to Mr. Peter Lawrence for closing remarks

Peter Lawrence

Well. I would like to thank everybody for their time today. We look forward to presenting some interesting information as the rest of the year rolls out including at ASCO and we look forward to talking to you next quarter. Thank you very much.

Operator

Thank you ladies and gentlemen. This concludes the presentation for today. You may now disconnect.

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Source: ArQule Inc. Q1 2008 Earnings Call Transcript
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