ArQule and Daiichi Sankyo Expand Drug Discovery Collaboration in Oncology

WOBURN, Massachusetts, October 12, 2010 - ArQule, Inc. (NASDAQ: ARQL) and Daiichi Sankyo Co., Ltd. (TSE
4568) today announced the expansion of their research, development and
license agreement for the discovery of novel kinase inhibitors in the field
of oncology. This expanded agreement establishes a third therapeutic target,
with an option for a fourth, in the field of oncology, and it includes a
two-year extension based on the application of the proprietary ArQule Kinase
Inhibitor Platform (AKIP(TM)) technology.

"This technology has provided us with a unique and innovative
approach for discovery in the treatment of cancer," said Dr. Hideyuki
Haruyama, the Global Head of Research, Daiichi Sankyo. "We expect that the
expansion of this collaboration will produce other drug candidates and lay
the foundation for future growth in this field."

Consistent with the existing AKIP collaboration, the economic
terms provided for in the expanded agreement include payments for research
support, licensing fees for compounds discovered as a result of this
research, milestone payments related to clinical development, regulatory
review and sales, and tiered royalty payments on net sales of each product.
Daiichi Sankyo will have an option to license compounds directed to the
targets defined under the agreement following the completion of certain
pre-clinical studies. ArQule retains the option to co-commercialize any
resulting licensed products in the U.S.

"Our initial drug discovery collaboration has identified a
development candidate for one target, and we are optimizing advanced lead
compounds for the other target," said Dr. Thomas C.K. Chan, chief scientific
officer of ArQule. "The expansion of this collaboration will continue to
deploy AKIP technology to discover inhibitors with novel modes of action for
additional oncology targets over the next two years."

About the ArQule Kinase Inhibitor Platform (AKIP(TM))

Kinases play pivotal roles in modulating diverse cellular
activities and have been implicated as important mediators of certain forms
of cancer and other diseases. The AKIP(TM) technology is based on a novel
binding mode that leads to inhibition of target kinases by small molecules
that do not compete with adenosine triphosphate (ATP). ArQule has identified
binding sites in more than 200 kinases involved in multiple therapeutic areas
that are amenable to such non-ATP competitive inhibition.

ArQule's ability to rationally design novel kinase inhibitors
that encompass new chemical spaces allows for an expanding intellectual
property estate. The Company believes that non-ATP competitive small molecule
inhibitors may have fewer off-target side effects and utility in a broad
range of human diseases.

About ArQule

ArQule is a biotechnology company engaged in the research and
development of next-generation, small-molecule cancer therapeutics. The
Company's targeted, broad-spectrum products and research programs are focused
on key biological processes that are central to human cancers. ArQule's lead
product, in Phase 2 and upcoming Phase 3 clinical development, is ARQ 197, an
inhibitor of the c-Met receptor tyrosine kinase. The Company has also
initiated Phase 1 clinical testing with ARQ 621, designed to inhibit the Eg5
kinesin motor protein. The Company's pre-clinical pipeline includes a
compound designed to inhibit the BRAF kinase. ArQule's current discovery
efforts, which are based on the ArQule Kinase Inhibitor Platform (AKIP(TM)),
are focused on the identification of novel kinase inhibitors that are potent,
selective and do not compete with ATP (adenosine triphosphate) for binding to
the kinase.

About Daiichi Sankyo

The Daiichi Sankyo Group is dedicated to the creation and
supply of innovative pharmaceutical products to address the diversified,
unmet medical needs of patients in both mature and emerging markets. While
maintaining its portfolio of marketed pharmaceuticals for hypertension,
hyperlipidemia, and bacterial infections, the Group is engaged in the
development of treatments for thrombotic disorders and focused on the
discovery of novel oncology and cardiovascular-metabolic therapies.
Furthermore, the Daiichi Sankyo Group has created a "Hybrid Business Model,"
which will respond to market and customer diversity and optimize growth
opportunities across the value chain. For more information, please visit
www.daiichisankyo.com.

Daiichi Sankyo, Inc., headquartered in Parsippany, New Jersey,
is a member of the Daiichi Sankyo Group. For more information on Daiichi
Sankyo, Inc., please visit www.dsi.com.

This press release contains forward-looking statements
regarding the Company's ArQule Kinase Inhibitor Platform (AKIP(TM)) and its
related agreement with Daiichi Sankyo. These statements are based on the
Company's current beliefs and expectations, and are subject to risks and
uncertainties that could cause actual results to differ materially. Positive
information about pre-clinical results does not ensure that later stage
pre-clinical or clinical development will be successful. For example, targets
for the kinase research may not prove to be therapeutically relevant.
Compounds developed through application of the AKIP(TM) platform may not
demonstrate positive activity in pre-clinical in vivo or in vitro testing or
in subsequent clinical trials; in addition, they may not demonstrate an
appropriate safety profile later development as a result of known or as yet
unanticipated side effects. The results achieved in later stage trials may
not be sufficient to meet applicable regulatory standards. Problems or delays
may arise during clinical trials or in the course of developing, testing or
manufacturing these compounds that could lead the Company or Daiichi Sankyo
to discontinue development. Even if later stage clinical trials are
successful, the risk exists that unexpected concerns may arise from analysis
of data or from additional data or that obstacles may arise or issues be
identified in connection with review of clinical data with regulatory
authorities. Regulatory authorities may disagree with the Company's or
Daiichi Sankyo's view of the data or require additional data or information
or additional studies. Drug development involves a high degree of risk. Only
a small number of research and development programs result in the
commercialization of a product. Positive pre-clinical data may not be
supported in later stages of development. Furthermore, ArQule may not have
the financial or human resources to successfully pursue drug discovery in the
future. Daiichi Sankyo may not exercise its option to license compounds even
if the compounds show initial promise. For more detailed information on the
risks and uncertainties associated with the Company's drug development and
other activities, see the Company's periodic reports filed with the
Securities and Exchange Commission. The Company does not undertake any
obligation to publicly update any forward-looking statements.

    Contacts:

    William B. Boni                      Toshiaki Sai
    VP, Investor Relations/Corp.         Corporate Officer, Corporate
    Communications                       Communications
    ArQule, Inc.                         Daiichi Sankyo, Co., Ltd. (Japan)
    +1-781-994-0300                      +81-3-6225-1126

William B. Boni, VP, Investor Relations/Corp., Communications, ArQule, Inc., +1-781-994-0300; Toshiaki Sai, Corporate Officer, Corporate, Communications, Daiichi Sankyo, Co., Ltd. (Japan), +81-3-6225-1126