About ArQule

ArQule 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 focused on key biological processes that are central to human cancers. ArQule’s lead product, in Phase 2 and Phase 3 clinical development, is tivantinib (ARQ 197), an oral, selective inhibitor of the c-MET receptor tyrosine kinase. The Company’s pipeline consists of ARQ 087, designed to inhibit fibroblast growth factor receptor (FGFR), ARQ 621, designed to inhibit the Eg5 kinesin motor protein, and ARQ 736, designed to inhibit the RAF kinases. ArQule’s current discovery efforts, which are based on the ArQule Kinase Inhibitor Platform (AKIP™), are focused on the identification of novel kinase inhibitors that are potent, selective and do not compete with ATP (adenosine triphosphate) for binding to the kinase.

This press release contains forward-looking statements regarding the Company’s clinical trials with tivantinib (ARQ 197) and other candidate compounds in earlier stages of development, as well as forward-looking statements related to the Company’s financial guidance for 2013 (including estimates of net use of cash, revenues, net loss, net loss per share and cash and marketable securities at the end of 2013), key corporate objectives for 2013, ability to fund operations with current cash and marketable securities, and its agreements with Daiichi Sankyo, Inc. These statements are based on the Company’s current beliefs and expectations, and are subject to risks and uncertainties that could cause actual results to differ materially. Positive information about pre-clinical and early stage clinical trial results does not ensure that later stage or larger scale clinical trials will be successful. For example, tivantinib, ARQ 087, ARQ 621, ARQ 736 and ARQ 092 may not demonstrate promising therapeutic effects; in addition, they may not demonstrate appropriate safety profiles in current or later stage or larger scale clinical trials as a result of known or as yet unanticipated side effects. The results achieved in later stage trials may not be sufficient to meet applicable regulatory standards or to justify further development. Problems or delays may arise during clinical trials or in the course of developing, testing or manufacturing these compounds that could lead the Company or its partners to discontinue development. Even if later stage clinical trials are successful, unexpected concerns may arise from analysis of data or from additional data. Obstacles may arise or issues may be identified in connection with review of clinical data with regulatory authorities, and regulatory authorities may disagree with the Company’s view of the data or require additional data or information or additional studies. In addition, the planned timing of initiation and completion of clinical trials for tivantinib are subject to the ability of the Company or Daiichi Sankyo, Inc., its partner, and Kyowa Hakko Kirin, a licensee of tivantinib, to enroll patients, enter into agreements with clinical trial sites and investigators, and overcome other technical hurdles and issues related to the conduct of the trials for which each of them is responsible that may not be resolved. Drug development involves a high degree of risk. Only a small number of research and development programs results in the commercialization of a product. Positive pre-clinical data may not be supported in later stages of development. Furthermore, ArQule may not have the financial or human resources to successfully pursue drug discovery in the future. Moreover, Daiichi Sankyo has certain rights to unilaterally terminate the tivantinib license, co-development and co-commercialization agreement. If it were to do so, the Company might not be able to complete development and commercialization of tivantinib on its own. For more detailed information on the risks and uncertainties associated with the Company’s drug development and other activities, see the Company’s periodic reports filed with the Securities and Exchange Commission. The Company does not undertake any obligation to publicly update any forward-looking statements.

ArQule, Inc.

Condensed Statement of Operations and Comprehensive Loss

(In Thousands, Except Per Share Amounts)

Quarter Ended December 31, Year Ended December 31,
2012 2011 2012 2011
Research and development revenue (1) $ 5,143 $ 16,504 $ 36,414 $ 47,310
Costs and expenses:
Research and development 7,246 9,674 33,966 45,011
General and administrative 3,352 3,151 13,852 13,373
Total costs and expenses 10,598 12,825 47,818 58,384
Income (loss) from operations (5,455 ) 3,679 (11,404 ) (11,074 )
Interest income 151 73 445 317
Interest expense (7 ) (7 ) (26 ) (25)
Other income, net 15 23 113 20
Net income (loss) (5,296 ) 3,768 (10,872 ) (10,762 )
Unrealized gain (loss) on marketable securities (58 ) 81 108 1
Comprehensive income (loss) $ (5,354 ) $ 3,849 $ (10,764 ) $ (10,761 )
Basic and diluted net earnings (loss) per share:
Basic earnings (loss) per share $ (0.09 ) $ 0.07 $ (0.18 ) $ (0.20 )
Diluted earnings (loss) per share $ (0.09 ) $ 0.07 $ (0.18 ) $ (0.20 )
Weighted average shares used in calculating:
Basic earnings (loss) per share 62,304 53,620 59,821 52,778
Diluted earnings (loss) per share 62,304 54,696 59,821 52,778

(1) Research and development revenue is shown net of collaboration contra-revenue of $0.2 million and $3.9 million, and $4.6 million and $19.5 million for the three and twelve months ended December 31, 2012 and 2011, respectively.
Balance sheet data (in thousands):       December 31,

        December 31, 2011
Cash, equivalents and marketable securities- short term $ 79,271 $ 68,168
Marketable securities- long term 51,328 40,475
$ 130,599 $ 108,643
Total assets $ 134,193 $ 117,051
Notes payable $ 1,700 $ 1,700
Stockholders’ equity $ 81,029 $ 29,729

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