DAIICHI SANKYO and Arqule enter Into Strategic R&D Partnership to Progress Novel Compounds to Target Cancer

Munich (ots) -

Product development agreement focused on ARQ 197, c-Met inhibitor,
with discovery collaboration directed toward novel kinase
inhibitors

ArQule, Inc. (NASDAQ: ARQL) and DAIICHI SANKYO Co., Ltd. (TSE:
4568) today announced that they have entered into two agreements that
form the basis of a strategic relationship for the development and
discovery of novel oncology therapeutics.

ArQule and DAIICHI SANKYO will co-develop ARQ 197, a proprietary,
orally administered, small molecule inhibitor of the c-Met receptor
tyrosine kinase, to treat cancer. In addition, ArQule and DAIICHI
SANKYO will advance the application of ArQule's kinase inhibitor
discovery platform (AKIP[TM]) to develop a new generation of highly
selective, anti-cancer kinase inhibitors intended to ensure a
long-term presence in this therapeutic category. On a combined basis,
the two deals include $75 million in cash upfront to ArQule from
DAIICHI SANKYO.

"We are delighted to welcome DAIICHI SANKYO as a partner in our
shared quest to bring innovative cancer therapeutics to patients and
their physicians," said Paolo Pucci, chief executive officer of
ArQule. "With this announcement, we complete the ARQ 197 partnership
process and set the stage to bring the ARQ 197 development program to
the next level. We are also very pleased to broaden this relationship
by welcoming DAIICHI SANKYO as our first partner for ArQule's
AKIP[TM] platform.

"For ArQule, this strategic relationship will achieve several
product development, scientific and financial objectives," said Mr.
Pucci. "First, it will allow us to optimize a clinical program with
ARQ 197 that elicits the full therapeutic potential of this highly
selective c-Met inhibitor. Second, it supports and further validates
the application of our proprietary technology platform to the
discovery of a new generation of selective inhibitors of kinases
implicated in cancer. Finally, it provides meaningful, non-dilutive
infusions of cash, as well as an opportunity for cost sharing."

"DAIICHI SANKYO looks forward to being able to collaborate with
ArQule to realize differentiated and innovative approaches in the
treatment of these devastating diseases," said Takashi Shoda,
president and chief executive officer of DAIICHI SANKYO Co., Ltd.
"This strategic partnership is the next important milestone for
DAIICHI SANKYO to solidify a strong and viable pipeline in oncology."

ARQ 197 Agreement Summary

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 U.S., Europe, South America and the
rest of the world, excluding Japan, China (including Hong Kong),
South Korea and Taiwan, where Kyowa Hakko Kirin Co., Ltd. (Kyowa) 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 2 and Phase 3 clinical studies, with
ArQule's share of Phase 3 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 U.S. 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
5, 2008 or the expiration or termination of the applicable waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976.

Kinase Inhibitor Discovery Agreement Summary

ArQule and DAIICHI SANKYO have entered into a research
collaboration, exclusive license and co-commercialization agreement
under which ArQule will apply its proprietary technology and know-how
from its AKIP[TM] platform 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 pre-clinical 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 U.S.

About ARQ 197 and c-Met ARQ 197 is a selective inhibitor of c-Met,
a receptor tyrosine kinase. When abnormally activated, c-Met plays
multiple roles in aspects of human cancer, including cancer cell
growth, survival, angiogenesis, invasion and metastasis. Pre-clinical
data have demonstrated that ARQ 197 inhibits c-Met activation in a
range of human tumor cell lines, including clear cell sarcoma, and
shows anti-tumor activity against several human tumor xenografts. In
clinical studies to date, treatment with ARQ 197 has been well
tolerated and has resulted in tumor responses and prolonged stable
disease across broad ranges of tumors and doses.

About ArQule's Kinase Inhibitor Discovery Platform Insights into
the binding of ARQ 197 to c-Met formed the basis of ArQule's
discovery platform, which the Company is leveraging to design a new
type of kinase inhibitors. These compounds will be intended to
selectively inhibit each targeted kinase potently, selectively and
without competing with ATP (adenosine triphosphate, an energy source
for cells). The Company is assessing the potential of multiple
kinases as targets for this drug discovery platform, named AKIP[TM],
and is applying the platform to discover and validate compounds that
inhibit these kinase targets with mechanisms similar to that of ARQ
197.

About DAIICHI SANKYO DAIICHI SANKYO is a global pharmaceutical
company that focuses on researching and marketing innovative
medications. The company was created in 2005 through the merger of
two traditional Japanese enterprises, Daiichi and Sankyo. With net
sales of more than 5.4 billion EUR in fiscal year 2007, DAIICHI
SANKYO is one of the world's 20 leading pharmaceutical companies. The
company's world headquarters is in Tokyo, and its European base is
located in Munich. DAIICHI SANKYO has affiliates in 11 European
countries and has been one of the strongest Japanese pharmaceutical
companies located in Europe since it set up European production
facilities and marketing offices in 1990. The company's research
activities focus on the areas of cardiovascular diseases, hematology,
diabetes, anti-infectives and cancer. Its aim is to develop
medications that are "best" in their class or to create new classes
of pharmaceutical drugs.

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 cancer. ArQule's lead product, which is in clinical-stage
development, is ARQ 197, an inhibitor of the c-Met receptor tyrosine
kinase. An additional clinical-stage program includes compounds that
activate the cell's DNA damage response mechanism mediated by the
E2F-1 transcription factor. The Company's most advanced pre-clinical
development programs are focused on compounds that inhibit the Eg5
kinesin spindle protein and the BRAF kinase. ArQule's current
discovery efforts are focused on the identification of novel kinase
inhibitors that are potent, selective and do not compete with ATP
(adenosine triphosphate), an energy source for cells.

Originaltext: DAIICHI SANKYO EUROPE GmbH
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Contact:
Olaf Lamberz
Corporate Communications
Phone +49(0)89/78 08-442
+49 (0) 172 / 88 70 153
olaf.lamberz@daiichi-sankyo.eu