By Frances Bishopp

Staff Writer

In a drug discovery collaboration with a potential payout of $100 million, ArQule Inc. has signed on with Wyeth-Ayerst Pharmaceuticals to use its Mapping Array and Directed Array programs to identify and optimize a minimum of 15 compounds from Wyeth-Ayerst's leads.

The deal, which is ArQule's 18th collaboration and largest to date, includes a $2 million equity investment. Under the five-year collaboration, the equity investment will be based on the market price of ArQule stock over the first six months of 1998 plus a premium. Wyeth-Ayerst, of Radnor, Pa., eventually will own approximately 80,000 shares of ArQule stock, which is less than a 1 percent stake in the company.

In addition to the equity investment, Wyeth-Ayerst, a division of American Home Products Corp., of Madison, N.J., will pay yearly subscription fees totaling $26 million over the five-year period.

Cumulative payments to ArQule, of Medford, Mass., including fees and milestones, but excluding royalties, could hit the $100 million mark as compounds enter clinical trials and if five of those compounds reach the product approval stage.

Eric Gordon, president and CEO of ArQule, told BioWorld Today the two companies expect more than five compounds to reach the market, which would boost the value of the collaboration beyond $100 million.

ArQule' shares (NASDAQ:ARQL) closed Thursday at $18.50, up $1.250. The company has approximately 11.8 million shares outstanding.

Analyst Michael King, of Vector Securities International, of Deerfield, Ill., said ArQule will be to drug discovery and development what Incyte Pharmaceuticals Inc., of Palo Alto, Calif., has become to the genomics industry: a high-quality provider of value-added products that speed the drug development process and substantially increase the return to those partners with the foresight to use this powerful technology.

"ArQule is more than just a combinatorial chemistry company and is better described as an integrated drug discovery company with the ability to discover and optimize lead compounds directly to the preclinical stage," King said.

ArQule provides its partners with two types of synthesized compounds: Mapping Array compound sets, which are arrays of diverse, small-molecule compounds used for screening against biological targets, and Directed Array compound sets, which are arrays of analogues of a particular lead compound synthesized for the purpose of optimizing that lead compound.

Using its automated molecular assembly plant system and structure-activity relationship (SAR) data regarding biological targets and modular molecular components, ArQule produces quantities of pure, small organic compounds in logically structured spatially addressable arrays.

Unlike traditional synthetic chemistry and current combinatorial chemistry approaches to drug discovery, ArQule's arrays are created by using structure-guided and rational drug design tools to select and assemble molecular building blocks with properties likely to exhibit biological activity.

ArQule's compound arrays are designed around certain core structures or themes. Each compound in the array is different from the adjacent compounds as a result of a single structural modification.

Each ArQule array omits compounds closely analogous to other compounds in the array, using representative diversity to create a virtual library of hundreds of times as many compounds as are in the array.

Drug developers are able to realize significant savings by screening the thousands of compounds to each ArQule array rather than the millions of compounds it represents.

Wyeth-Ayerst will receive a minimum of 200,000 single, novel, pure compounds per year and a minimum of 1 million over the five-year period.

Gordon explained that Mapping Array is the starting point of generating a field of activity from which conclusions are drawn on how to go forward into lead optimization.

The Mapping Array is connected to the Directed Array in that you need to have a starting point of identifying a series of compounds that show some activity against a biological target, Gordon explained.

Each Mapping Array represents about 25 different themes or compound sets. The Mapping Array, once the screen has been done against the biological targets, provides a relational database, a full field of activity, he continued.

With the starting point of this field of data, Gordon said, you move into the Directed Array program, taking all the features you want to optimize in that compound, along with all of our accumulated experience of working in that field of biological targets, and immediately turn around an analogue set of potentially 5,000 compounds. This begins a process of iteratively screening the desired features in a continuous process until the most desired compounds achieve the endpoints.

"Competing technologies only give you one point of activity; potentially, we get 200,000 points of activity against every target," Gordon said. "What normally has taken four to six years with hundreds of chemists, we are doing in weeks with one or two." he added.

Pharmaceutical, Biotech Alliances Formed

ArQule, which has approximately 60 lead optimization programs with other collaborators, is expanding its technology and will have the facilities to handle "significantly more," Gordon said.

Besides Wyeth-Ayerst, ArQule is collaborating with Monsanto, of St. Louis; the Solvay Group, of Brussels; Abbott Laboratories, of Abbott Park, Ill.; Pharmacia Biotech AB, of Uppsala, Sweden, a subsidiary of Pharmacia & Upjohn, of Kalamazoo, Mich.; and Roche Bioscience, of Palo Alto, Calif., a division of Roche Holding Ltd., of Basel, Switzerland.

"Every one of our collaborations has expanded and a number of them are quite successful," Gordon said.

ArQule has initiated joint drug discovery programs with biotechnology companies that have a variety of technologies: Aurora Biosciences, of La Jolla, Calif. (mammalian cell-based assays); Cadus Pharmaceuticals Corp., of Tarrytown, N.Y., and Sugen Inc., of Redwood City, Calif. (signal transduction); Cubist Pharmaceuticals Inc., of Cambridge, Mass. (infectious diseases); ICAgen Inc., of Durham, N.C. (ion channel receptors); Scriptgen Pharmaceuticals Inc., of Medford, Mass. (RNA/protein interaction); Signal Pharmaceuticals Inc., of San Diego (gene transcription/transcription factors); T Cell Sciences Inc., of Needham, Mass. (T cell activation/inhibition); Genzyme Corp., of Cambridge, Mass. (infectious diseases, autoimmune/inflammatory diseases and cancer); and FibroGen Inc., of South San Francisco (anti-scarring drugs).

ArQule, which, Gordon said, could break even this year, raised $34.5 million at its initial public offering in October 1996 and $23 million in a secondary offering. The company has approximately $59 million in cash. *