ArQule Inc. (NASDAQ: ARQL) is a biopharmaceutical company engaged in the research and development of targeted therapeutics to treat cancers and rare diseases.
On May 7th, the company announced financial and business updates for the quarter ended March 31, 2018. After a very strong 2017 scientifically, execution in 2018 continues to be at a high level, highlighted by continuing progress across all pipeline assets. The company is approaching therapeutic levels in the dosing of patients in the Phase 1a/b trial with its BTK inhibitor, ARQ 531, and look forward to presenting a comprehensive data set from that trial later.
The AKT program is also progressing well in both rare diseases and oncology. ARQL is launching an expansion of the Phase 1b trial with miransertib plus anastrozole in patients with advanced endometrial cancers and is executing its registrational strategy for Proteus and PROS.
Upcoming Catalysts: More recently, on June 7th, the company announced that clinical data from the company-sponsored ARQ 531-101 Phase 1 dose escalation study in subjects with relapsed or refractory hematologic malignancies would be presented on June 15, 2018, at the EHA Congress in Stockholm, Sweden. ARQL looks like an exciting player ahead of this presentation. Also, Biotech plays like this could show massive moves when they have a positive catalyst.
Near to medium term catalysts:
Financial Guidance: As a result of the April 2018 exclusive license agreement with Basilea, the company’ guidance for 2018 is being updated. For 2018, ArQule now expects revenue to range between $14 and $17 million. Net use of cash is expected to range between $27 and $29 million for the year. Net loss is expected to range between $16 and $21 million, and net loss per share to range between $(0.18) and $(0.24) for the year. ArQule expects to end 2018 with between $40 and $42 million in cash and marketable securities. As per management with financial support from their license agreements and the one-year extension of loan agreement will be sufficient to finance operations into 2020.
The company continues to build on the momentum that it created during 2017 with presentations of important data at the recent AACR meeting and the licensing of derazantinib to its partner, Basilea. This new partnership further supports ARQL’ mid-term strategy by allowing it to develop derazantinib in ways that they could not have done on their own and by strengthening their balance sheet thus enabling them to focus more on BTK and ATK programs in potential fast-to-market settings.
Considering recent developments, analysts see promise in the company and believe it will provide a robust fundamental appeal to the investors as well as momentum players trading the stock. Several brokerage firms have initiated coverage on the company, and the stock currently has an average rating of “Buy” and a consensus price target of $7.80.
About the Company: ArQule is a biopharmaceutical company engaged in the research and development of targeted therapeutics to treat cancers and rare diseases. ArQule’s mission is to discover, develop and commercialize novel small molecule drugs in areas of high unmet need that will extend and improve the lives of patients.
Pipeline: The company’ clinical-stage pipeline consists of five drug candidates, all of which are in targeted, biomarker-defined patient populations, making ArQule one of the promising player in precision medicine.
Summary of Pipeline and Program Goals:
Key recent highlights:
- ARQ 531, a potent and reversible BTK inhibitor, demonstrated good oral bioavailability and pharmacokinetics in data presented at the American Association for Cancer Research (AACR) on April 15, 2018. The Phase 1a portion of the Phase 1a/b trial continues to recruit on schedule with no safety concerns, and ARQL plan to present more advanced data shortly.
- Miransertib, the lead proprietary AKT inhibitor, was featured in an oral presentation at AACR in which it showed positive signs of activity in hormone-sensitive tumors with AKT1 or PI3K dysregulation. The Phase 1b trial of miransertib with anastrozole in patients with advanced endometrial cancer produced one complete response and three partial responses out of 8 patients and continues to recruit.
- Miransertib has been granted Orphan Drug Designation by EMA for the rare disease, Proteus syndrome. The company continues to make progress with its registrational strategy in Proteus syndrome; in addition, the company is progressing its rare disease expansion strategy with the Phase 1/2 trial in PROS and Proteus syndrome which is recruiting on schedule.
The Company granted Basilea Pharmaceutica Ltd. (“Basilea”) an exclusive license to develop and commercialize derazantinib, its pan-FGFR inhibitor, in all parts of the world except the People’s Republic of China, Hong Kong, Macau and Taiwan, where the Company has licensed rights to Sinovant Sciences, Ltd., a subsidiary of Roivant Sciences Ltd. Terms of the transaction include a $10 million upfront payment, an additional $326 million in regulatory and commercial milestones, and royalties on net sales ranging from single to double digits; Basilea will be responsible for all costs and expenses of development, manufacture, and commercialization in its territory.
First Quarter 2018 Results:
Earnings: Revenues for the quarter ended March 31, 2018, were $4,138,000 compared with revenues of zero for the quarter ended March 31, 2017. Research and development revenue in the quarter ended March 31, 2018, consisted of $3,000,000 from the February 2018 Roivant licensing agreement and$1,138,000 from its October 2017 non-exclusive license agreement for certain library compounds.
Profitability: Company reported a net loss of $6,532,000 or $0.07 per share for the quarter ended March 31, 2018, compared with a net loss of $7,576,000 or $0.11 per share for the quarter ended March 31, 2017.
Liquidity: At March 31, 2018, the Company had a total of approximately $42,884,000 in cash equivalence in marketable securities.
Key risk factors:
- Successful completion of the upcoming milestones/Catalysts would lead future direction for the company. Any adversities related to these future milestones might adversely impact the overall investor sentiments.
- ARQL is still an early stage entity and has not yet generated revenue and will likely operate at a loss as it grows its market position and seeks ways to monetize it. The company’ prospects are dependent on ARQ-531, which might have limited sales potential initially.
- ARQL has a history of operating losses. Therefore, any time or cost overrun in its ongoing R&D activities and its impact on business & financial profile will remain a key business sensitivity factor.
- Company’ ability to maintain its liquidity and financial flexibility to fund its incremental capital requirements. Also, even if the company achieves timely financial closure, it could lead to significant dilution risk for the existing investors.
- On Friday, June 8th, 2018, ARQL closed at $5.33, on an average volume of 1.4 million shares exchanging hands. Market capitalization is $508.99 million. Current RSI is strong at 68.61
- In the past 52 weeks, shares of ARQL have traded as low as $0.94 and as high as $6.07.
- At $5.33, shares of ARQL are trading significantly above its 50-day moving average (MA) at $3.42 and above its 200-day moving average (MA) at $1.98
- The present support and resistance levels for the stock are at $4.88 & $5.98 respectively.
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