ArQule to focus on drug discovery

By Naomi Aoki, Globe Staff

After nearly a decade of using its expertise in chemistry to help other companies discover drugs, ArQule Inc. yesterday announced its intention to invest more heavily in its own drug discovery efforts.

Stephen Hill, the president and chief executive of the Woburn company, said an expansion of a partnership last month with pharmaceutical giant Pfizer Inc. put ArQule in the financial position to speed its transition from a service company to a drug discovery outfit.

''We believe this is a significant inflection point for the company,'' Hill said. ''We now have the financial sustainability to support the drug discovery effort and allow us to embark upon this next stage. And we have a portfolio in place that has great potential.''

The collaboration with Pfizer could be worth up to $345 million to ArQule over seven years. Under the pact, ArQule will supply Pfizer with tens, even hundreds, of thousands of compounds that will be screened for their potential as drugs.

As part of this transition, however, Hill warned investors the company will let lapse some existing partnerships and forgo future opportunities that do not advance its goal of becoming a drug discovery company.

Although the company anticipates revenues to reach between $61 million and $63 million this year as compared to $58 million last year, Hill said, it will not be focused on growing revenue as it has in the past. Instead it plans to use its revenues and cash reserves to fill and advance its drug portfolio.

The company began building its own drug discovery programs a year and a half ago in the areas of pain, incontinence, and inflammation. It also has joint drug discovery efforts with Acadia and Genome Therapeutics Corp. in obesity, Parkinson's disease, and antibiotics.

In 2000, the company invested $18.5 million in research and development. That amount grew to more than $28 million last year and is expected to reach more than $35 million in 2002.

Hill said the company plans to develop drugs through the second phase of human testing and then find partners to conduct the final phase of testing, gain approval and market the drugs. ''We have a portfolio that we can now afford to take through the next 12 months and beyond under our own finances,'' Hill said. ''If we wish to partner some of our activities, we can choose partnerships that allow us to retain a significant share of the downstream benefits.''

ArQule shares fell 51 cents to $13.96 on the Nasdaq Stock Market.