Arqule and Daiichi-Sankyo form R&D partnership for cancer drug development

ArQule and Daiichi Sankyo have entered into a binding letter of intent for an exclusive license, co-development and co-commercialization agreement under which they shall collaborate to conduct research, clinical trials and the market launch of ARQ 197 in human cancer indications in the US, Europe, South America and the rest of the world, excluding Japan, China (including Hong Kong), South Korea and Taiwan, where Kyowa Hakko Kirin has exclusive rights for development and commercialization.

The binding letter of intent provides for a $60 million cash upfront licensing payment from Daiichi Sankyo to ArQule. In addition, the binding letter of intent includes significant development and sales milestone payments. ArQule and Daiichi Sankyo will share equally the costs of Phase II and Phase III clinical studies, with ArQule’s share of Phase III costs payable solely from milestone and royalty payments by Daiichi Sankyo. Upon commercialization, ArQule will receive tiered royalties from Daiichi Sankyo on net sales of ARQ 197.

ArQule retains the option to participate in the commercialization of ARQ 197 in the US The final contract based on the binding letter of intent, including the terms above, is expected to be signed in December 2008. The upfront payment provided for in the binding letter of intent will be paid upon the later of December 8, 2008 or the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

ArQule and Daiichi Sankyo have also entered into research collaboration, exclusive license and co-commercialization agreement under which ArQule will apply its proprietary technology and know-how from its ArQule’s kinase inhibitor discovery platform (AKIP) for the discovery of therapeutic compounds that selectively inhibit certain kinases. The agreement defines two such kinase targets, and Daiichi Sankyo will have an option to license compounds directed to these targets following the completion of certain preclinical studies.

The agreement provides for a $15 million upfront payment, undisclosed payments in research support for the first and second years of the collaboration, licensing fees for compounds discovered as a result of this research, milestone payments related to clinical development, regulatory review and sales, and royalty payments. ArQule retains the option to co-commercialize licensed products in the US. On a combined basis, the two deals include $75 million in cash upfront to ArQule from Daiichi Sankyo.