By Matthew Willett

ArQule Inc's $95 million planned merger with Camitro Corp. will add in silico predictive ADMET modeling to the ArQule platform of rational chemistry design tools, bringing the company, it said, one step closer to its goal of creating the integrated chemistry-based drug discovery company of the future.

The acquisition for 3.4 million shares is valued at about $95 million, and includes a cash payment of up to $10 million if the stock drops before the deal closes.

The merger could make ArQule, of Woburn, Mass., the leader in ADMET (absorption, distribution, metabolism, elimination, toxicity) screening, ArQule CEO and President Stephen Hill told BioWorld Today.

"There are three areas we believe are crucial to success in the future," Hill said. "The first is intelligent design of molecules, the second is high-throughput automated chemistry so we can make compounds we've designed quickly, efficiently and cost-effectively, and the third is an integrated, more efficient process for drug discovery. We have to do more things up front in parallel rather than in sequence."

He said Menlo Park, Calif.-based Camitro's predictive modeling should combine with ArQule's technology, which includes its Parallel Track Drug Discovery Program for lead generation and optimization, to increase drug discovery efficiencies.

"What Camitro has built its company around is what we believe to be the best in its class of predictive modeling for ADMET characteristics," Hill said. "They have focused on the most difficult area, metabolic interactions, and we're hoping that by integrating their technology and our technology we can improve drug discovery."

Camitro CEO Barry Selick said his company's $95 million price tag, which will include about 3.4 million ArQule shares, about 20 percent of the company, is a fair one considering Camitro's strengths.

"Camitro Corp. is a very strong company. We were just on the verge of completing a Series C round of financing with an agreed term sheet with two strong investors to lead a very significant investment in the company," Selick said. "That, combined with the breadth and depth of the technology we're offering, clearly suggests the $95 million valuation is fair and appropriate."

The deal delighted ArQule's Hill, who said Camitro could deliver positive cash flow beyond 2002.

"I think this is a really, really significant transaction in the history of ArQule, one of the, if not the, most significant actions we've taken," Hill said. "It really gives us the opportunity to create the most forward-thinking chemistry-based drug discovery company of the future, and it could really make a difference in the way drug discovery is done at a time when I believe the efficiency of drug discovery needs great improvement. This is an opportunity to do that."

ArQule's stock (NASDAQ:ARQL) closed Tuesday at $31.25, up $2.375.

In separate news, ArQule entered a collaboration with Nanodesign Inc., of Guelph, Ontario, to develop and apply a drug discovery platform that will use information about the structure of a biological target from sources such as structural genomics and binding assays to generate novel chemical designs for combinatorial libraries of drug-like molecules.