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Here's Why ArQule Jumped 53.1% in June

By Maxx Chatsko - Jul 8, 2019 at 1:58PM

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The pharmaceutical pipeline shined, and the business doubled its cash position.

What happened

Shares of ArQule ( ARQL ) rose more than 53% last month, according to data provided by S&P Global Market Intelligence. The clinical-stage pharmaceutical company reported promising data from two early-stage clinical trials. ARQ 531 flashed its potential to treat a range of cancers affecting white blood cells that have stubbornly resisted other treatments, while ARQ 092 demonstrated promise in treating rare overgrowth diseases.

Management wisely took advantage of the highest stock price since the early 2000s to raise capital through a public stock offering. Surprisingly, despite the dilution, Wall Street sent shares even higher on that news. The offering could raise up to $103.5 million in gross proceeds, which is a nice chunk of change considering ArQule ended March with $92 million in cash on hand.

A businessman tossing cash money into the air.

Image source: Getty Images.

So what

There's no denying June was a great month for the business. The early results from ARQ 531 suggest that the company's approach has merit. The drug candidate is a reversible inhibitor of a protein called BTK, which is commonly expressed in white blood cell cancers such as lymphomas and leukemias. The problem is that other treatments bind to the protein permanently, which can cause the cancer to mutate resistance. ARQ 531 might alleviate that risk by letting go of its target, therefore making cancer cells more susceptible to attack for longer periods of time. Four of six patients tested achieved a partial response, including one patient who's received treatment for two years.

The data from ARQ 092 are also impressive, albeit less so. The drug candidate inhibits a protein called ATK, which causes various overgrowth syndromes and plays a role in some cancers, too. There are currently no approved ATK inhibitors on the market. Couple that with the fact that 9 of the 17 patients had stable disease after one year of treatment, and there's reason to suspect ArQule could be onto something. However, the endpoints of the next clinical trial (reduction in lesion size) might be more challenging to meet considering only 1 of the 17 patients in the preliminary data met that mark. Investors should probably temper expectations.

Meanwhile, bolstering the balance sheet is generally a solid development for an early-stage pharma company with a maturing pipeline. The business now should have enough capital to get to the stage of data readouts for ARQ 531, ARQ 092, and other drug candidates.

Now what

ArQule is now valued at a market cap of $1.3 billion. Considering the company had struggled to top $400 million for much of the last decade, that's a sign that investors are clearly optimistic about the pipeline's future. Of course, while clinical results from select early-stage trials were encouraging, investors should remember that there's a long road ahead.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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