What happened

Shares of ArQule (NASDAQ:ARQL) rose nearly 13% today after the company announced operating results for Q1 2019. The move higher follows a more than 70% gain in March after the release of fourth-quarter and full-year 2018 operating results. Shares have now gained over 130% year-to-date. 

As a development-stage company, there wasn't much to report in terms of revenue. ArQule reported a quarterly operating loss of $10.4 million, but exited March with $92 million in cash, cash equivalents, and marketable securities. Investors and analysts were more excited about the pace of progress in the drug pipeline.

As of 1:23 p.m. EDT, the stock had settled to a 9% gain.

A man holding a white arrow cut-out pointing up.

Image source: Getty Images.

So what

ArQule's epic year-to-date rise has been driven by two factors: a sizable cash balance that should fund operations through at least 2020 and promising developments from the lead drug candidate, ARQ 531. The experimental therapy helped one individual with leukemia achieve a partial response in an early dose-escalation study. That's intriguing considering the market opportunity.

ARQ 531 is a Bruton tyrosine kinase (BTK) inhibitor that can reversibly bind to cellular targets. In other words, the drug candidate can inhibit BTK and then let go, which could significantly reduce the ability for cancer cells to develop resistance to treatment. That would mark a major advantage over BTK inhibitors on the market today that bind to their targets irreversibly, which can lead to cancer cells mutating their way to resistance. The market is staggeringly large: Imbruvica generated $6.2 billion in revenue for AbbVie and Johnson & Johnson in 2018.

Investors didn't receive any new updates from ARQ 531, but ArQule announced updates for four other drug candidates in its pipeline, which shows the depth of its development strategy. That, combined with a strong financial position, has kept the excitement over the company's future riding high.

Now what

It's important to note that ARQ 531 has a spotty clinical track record, so investors will need to wait for more detailed, later-stage trial data to be announced before getting too excited. Given the company's relatively low market cap at the beginning of the year, it's easy to see why shares have soared on recent updates. Now that its market cap is over $700 million, however, ArQule is likely going to need to deliver successful clinical results to maintain its valuation and earn an even higher one.