ArQule Inc. is raising $31 million in a registered direct offering that will provide at least a year's worth of funding for the company's oncology research and development program.
Shares were priced at $5.25 each. The transaction is expected to close Friday. On Tuesday, the company's stock (NASDAQ:ARQL) lost 3 cents to close at $5.58.
As of Sept. 30, the Woburn, Mass.-based company had about $77 million in cash, cash equivalents and short-term investments, said Louise Mawhinney, ArQule's chief financial officer.
"We had given guidance publicly that we would like to sustain a two- to three-year time horizon," she said. "At the low end, we'll look at a $22 million cash burn, or a $33 million burn at the high end. So this round put an approximate year of cash burn in the bank."
The company had about 28.9 million outstanding shares before the offering, and Mawhinney said the shares involved in the offering will not exceed 20 percent of ArQule's outstanding shares.
ArQule focuses on the development of small-molecule cancer drugs based on its Activated Checkpoint Therapy (ACT) platform. ACT is designed to restore and activate cellular checkpoints that are defective in cancer.
"This is a mechanism that restores the cancer cell's ability to tell that it is defective so it knows to destroy itself," Mawhinney said. "Rather than trying to inhibit the cell cycle, the drug tells the cell it is defective and prevents replication."
ArQule is investigating indications for different tumor types. Its product ARQ 501 is in a Phase I monotherapy trial, as well as a Phase I combination trial, with Taxotere for treating solid tumors. The company expects to begin another combination trial to test ARQ 501 with gemcitabine.
In September, ArQule released an interim update in the monotherapy trial. Mawhinney said that, of 14 patients, researchers found two with stable disease and one partial response, in which the tumors appeared to have shrunk. She added that the drug has shown no apparent toxicity.
"It's difficult to say when we'll be finished [with the study] because we haven't yet reached the toxicity level," she said. "The way it works - by switching on that mechanism for cell suicide - is why it is so non-toxic."
ArQule has other products in preclinical development, and continues to advance the drug discovery efforts of its collaborators.
The company signed in April a collaboration with Basel, Switzerland-based Roche Holding Ltd., which gained an option to license ArQule's E2F program. Roche paid $15 million up front and has an option for the 501 compound and on a second compound acting on the same E2F pathway. If a drug from the E2F program reaches the market, ArQule could be in line for up to $276 million in payments, as well as royalties. Roche is making specified payments to ArQule to retain its option, Mawhinney said. (See BioWorld Today, April, 5, 2004.)
ArQule recently achieved two milestone events, triggering payments from Madison, N.J.-based Wyeth for a compound discovered through the collaborative Directed Array Program. The compound, for Alzheimer's disease, has been nominated as a development-track compound preceding an investigational new drug application to the FDA. Financial terms of the milestone payments were not disclosed.