In July, in what represents a strategic departure for ArQule (Medford, MA), the combinatorial chemistry specialist struck a technology transfer deal with Pfizer (Groton, CT) worth $117 million. ArQule will not only produce a microarray library exclusively for Pfizer but will also will transfer the ability to make such libraries to Pfizer over 4.5 years on a nonexclusive basis. The deal breaks new ground for ArQule, providing the company with a large amount of money that is guaranteed and not dependent on the progress of particular hit, leads or clinical candidate molecules. The state of capital markets means that even the most well-established companies are losing faith in their ability to leverage investment on the basis of possible milestone and royalty payments in the future. For ArQule the deal means that the company can claim—for the time being at least—to be bucking the trend toward commoditisation in combinatorial chemistry.
Under the terms of the deal ArQule will transfer automated machinery, software, hardware, and dedicate 20 to 40 of its 200 staff to its Medford site to teach Pfizer how to produce libraries. But after 4.5 years, the resources will be reassigned to other ArQule business (which is being moved to a new site in Woburn, MA). Although full financial details have not been disclosed, ArQule will receive $16 million upfront, and then $20-27 million per year, about half of which is guaranteed, says president and CEO Stephen Hill. The rest is dependent on putting in place a functioning system that delivers agreed numbers of molecules. "Not only is it significant revenue, but it's a profitable deal," says Hill. ArQule stock price increased 40% on record volume.
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