ArQule's agreement with Tokyo biotech Kyowa to develop and commercialize Phase I oncology molecule ARQ 197 in Asia will give the firm a much-needed cash infusion to support the product's development in the U.S.

The deal, announced April 27, includes $123 million in upfront and potential development milestone payments to ArQule - $30 million in cash up front, as well as undisclosed sales milestone payments. ArQule also will receive double-digit royalties from Kyowa on net sales of ARQ 197 once the compound launches in Asia.

"Principally, [the Kyowa alliance] provides ArQule with significant near-and long-term benefits and also quite a bit of optionality by providing a large up-front cash payment and excellent near-term milestones, which shore up our balance sheet," ArQule Exec VP Peter Lawrence said during a same-day conference call.

The Woburn, Mass., company has one other partner in the oncology arena, Roche, with which it signed a strategic alliance in 2004 for its E2F-targeted compounds. One of the compounds covered by the agreement - ARQ 501 - is currently in Phase II (Also see "Roche/ArQule Enter E2F Oncology Alliance; Roche Licensing Likely At Phase II" - Pink Sheet, 2 April, 2004.).

While the Roche deal is worth upwards of $300 million, the firm has received only $21.8 million to date, according ArQule, and in addition, the agreement would only allow the company to copromote the products in the U.S.

The alliance with Kyowa creates "a relationship with an outstanding development partner in a critical region while allowing ArQule to preserve exclusive rights to ARQ 197 in the rest of the world to allow us maximum flexibility about how we decide to develop this important product," Lawrence pointed out.

"The deal is quite large, possibly the largest of its type, so it sets a very high hurdle for anyone else seeking to acquire rights outside of Asia for ArQule, to the extent that we choose to go down that path," he added.

Kyowa's expertise in oncology is one reason ArQule chose the company as a partner. Cancer products comprise about 37 percent of the firm's pharmaceuticals business, and pharma represents roughly 42 percent of its overall business, he noted.

Under terms of the exclusive licensing agreement, Kyowa gains rights to ARQ 197, which is a c-Met inhibitor, in Japan, China, South Korea and Taiwan.

Kyowa "will be conducting a program within the territories for which they are responsible, which they will fund, [and] which they believe will give them the best chance for rapid approval within those markets," ArQule Chief Executive Officer Stephen Hill explained.

An additional benefit of the agreement is the availability of any data generated by Kyowa.

"We are beginning to appreciate that [ARQ 197] is probably very broadly applicable against a very wide range of different tumors," Hill said.

"So clearly we have a relationship here with Kyowa where we will not need to duplicate work unnecessarily, so if there are indications which they intend to pursue which will be relevant outside their territories then there will be no need for us to duplicate that work and vice versa."

Kyowa has products in development for oncology, urinary incontinence and Parkinson's disease in the U.S. The firm's U.S. subsidiary submitted an NDA for istradefylline (KW-6002) for treatment of Parkinson's disease April 25.

- Brooke McManus (b.mcmanus@elsevier.com)

This article is reprinted from "The Pink Sheet" DAILY, April 27, 2007

ArQule Gets $30 Million Up Front From Kyowa In Oncology Deal

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