ArQule: Updates To Thesis, EHA Presentation Looms

Summary

• Shares have risen by 568% since my initial article and by 81% since my January update piece.
• I provide a recap of the bullish thesis and recent events.
• Data updates for non-covalent, reversible BTK inhibitor ARQ531 have proven incrementally positive.
• Other assets provide multiple value drivers, including miransertib targeting a significant opportunity in Proteus syndrome and PROS family of overgrowth spectrum disorders.
• The stock remains a Buy for investors with long-term time horizon. Those sitting on a substantial profit could consider taking partial profits while retaining exposure for continued upside.
• Looking for a community to discuss ideas with? ROTY features a chat room of like-minded investors sharing investing ideas and strategies. Get started today »

Shares of ArQule (ARQL) have risen by 568% since I initially suggested readers purchase a pilot position due to there being "several ways to win" here. Shares have risen by 81% since my January update piece provided my outlook for 2019, as we looked forward to additional data for BTK inhibitor ARQ531 after initial signs of efficacy.

ROTY's 10-stock model account currently sports a 108% gain on its remaining shares, as we prudently took advantage of optimism ahead of upcoming data presentation at EHA (European Hematology Association) meeting to take some profits and risk off the table while retaining significant exposure for continued upside.

Chart

Figure 1: Daily advanced chart (source: finviz)

When looking at charts, clarity often comes from taking a look at distinct time frames in order to determine important technical levels to get a feel for what's going on. Today, I'd like to use the daily advanced chart above to highlight our lower risk entry point earlier this year (and the "Cliff Notes version" of our thesis).

While risk is relative in the highly volatile biotech sector, the company's cash position and other promising programs provided us a "valuation floor" that made this setup quite enticing (heads I win big, tails I lose little). A gap up in March can be observed after an encouraging Q4 update in which management disclosed an encouraging patient response in cohort 7 for the dose escalation study evaluating ARQ 531. Another spike in May can be observed with release of EHA abstract and resulting optimism (the stock has since pulled back to 20-day moving average).

Overview

In my last update article, I presented the following keys to the bullish thesis:

• Drug candidate miransertib was recipient of the Rare Pediatric Disease Designation for the treatment of Proteus syndrome, and I noted that

Analyst’s Disclosure:I am/we are long ARQL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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