By Brady Huggett

ArQule Inc. both extended and expanded its working relationship with Pfizer Inc., using new guidelines that could earn ArQule up to $345 million through 2008. For ArQule, it¿s now not about winding down the year so much as it is preparing for what¿s ahead.

The original deal between Woburn, Mass.-based ArQule and New York-based Pfizer, signed in the summer of 1999, brought ArQule $16 million up front and had a potential value of $117 million, although both sums were to be spread over time, said ArQule¿s CEO and president, Stephen Hill. (See BioWorld Today, July 22, 1999.)

¿We got $16 million up front, but we are recognizing that over four years,¿ he said. ¿When we did that deal, we said it was $117 million [total potential] over four years, and it was evenly split over those four years.¿ Although that $117 million was hinged on ArQule¿s performance, Hill said his company nailed down tasks at every turn and earned the maximum it could until the deal expansion.

Building on those successful years, Pfizer made the deal richer. It will make an initial $10 million equity investment in ArQule and may increase that stake by another $8 million, based on milestones. ArQule now can eye potential payments ranging from $120 million to $345 million over the next seven years.

ArQule will provide expanded lead generation capabilities to Pfizer and will transfer, on a nonexclusive basis, its library design and informatics platform. The companies will work together to tweak the platform to enhance the process of lead generation and ArQule may collaborate with Pfizer on lead optimization. Also, Pfizer will honor committed payments related to the agreed transfer of ArQule¿s AMAP technology, as per the original agreement.

¿Which we technically have done,¿ Hill told BioWorld Today, referring to the AMAP transfer. ¿We will continue what we were doing before. But we have the potential to increase the number of compounds that we make for [Pfizer]. We will be more involved in the compound library design, more involved in idea generation and the design of the compounds that get made.¿

The agreement calls for a certain amount of compounds to be delivered by ArQule ¿ each compound meeting standards set forth by Pfizer. The delivery of those compounds will dictate the money ArQule receives, Hill said.

¿It¿s not funny money,¿ he said. ¿It¿s all on delivery. It¿s all within our responsibility. It is up to what we do, not dependent on what happens outside our control.¿ When ArQule delivers the specified compounds, it gets paid, regardless of how those compounds fare in the clinic, Hill said, calling the situation ¿a nice position to be in.¿

While Hill said he believes, based on the success since 1999, that ArQule should get to the higher end of the money range, the nonexclusive nature of the library design and informatics platform agreement means ArQule can work elsewhere.

¿One of the important aspects of this is that we are not looking to be just Pfizer¿s chemistry department,¿ Hill said. ¿This by no means takes up all our resources.¿

ArQule collaborates with pharmaceutical and biotechnology companies to synthesize and optimize small molecules. Its strategy is to become a full-blown chemistry-based drug discovery company. Following ArQule¿s press conference concerning the expanded deal, Hill had an employee meeting to detail the news, complete with video conferencing for those employees not located in Woburn. The assembly left employees ¿enthused and excited,¿ Hill said.

¿It¿s a great way to start the year; it¿s a beginning, not an ending,¿ he said, adding that the real work in deals like this is done by employees. ¿They deserved the credit for this, not the senior management. Anytime I can send a big thank you¿ to our employees and their families, that is something I want to do.¿

ArQule¿s stock (NASDAQ:ARQL) jumped $3.74 Friday, or 30.6 percent, to close at $15.95.

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