ArQule And Daiichi Sankyo Present Final Phase 2 Results For ARQ 197 C-Met Inhibitor in Non-Small Cell Lung Cancer at ASCO

ARQ 197 in combination with erlotinib showed promising overall survival, consistent with efficacy signal seen in progression-free survival

WOBURN, Massachusetts and TOKYO, June 7, 2010 - ArQule, Inc. (NASDAQ: ARQL) and Daiichi Sankyo Co., Ltd. (TSE
4568) today announced the presentation of data from a Phase 2 clinical trial
at the 2010 Annual Meeting of the American Society of Clinical Oncology
(ASCO) showing encouraging overall survival (OS) results with ARQ 197 in
combination with erlotinib among patients with advanced, refractory non-small
cell lung cancer.

One hundred sixty-seven patients participated in this Phase 2,
double-blind, randomized, signal generation trial. All patients were EGFR
(epidermal growth factor receptor) inhibitor-naïve, but had progressed after
at least one prior chemotherapy regimen. Patients were randomized one-to-one
to receive either the combination of ARQ 197 plus erlotinib or placebo plus
erlotinib. The primary endpoint of the study was comparison of
Progression-Free Survival (PFS) between treatment arms; secondary endpoints
included PFS in pre-defined patient subsets, overall survival, overall
response rate, and safety.

The ASCO presentation (Abstract No: LBA7502), given by Joan H.
Schiller, M.D., Chief, Division of Hematology and Oncology at the University
of Texas Southwestern Medical Center, included data showing that median OS in
the intent to treat (ITT) population (n = 167) was 36.6 weeks in the ARQ 197
plus erlotinib arm, compared with 29.4 weeks in the erlotinib plus placebo
arm, an improvement of 24 percent (unadjusted hazard ratio = 0.88, p = 0.50)
as one of the secondary endpoints.

In the pre-defined sub-group of patients with non-squamous
cell carcinoma histology (n = 117), median OS was 43.1 weeks in the treatment
arm, compared with 29.4 weeks in the placebo arm, an improvement of 47
percent (unadjusted hazard ratio = 0.72, p = 0.19). Based on an exploratory
Cox regression analysis, the difference in median OS achieved statistical
significance (p < 0.05) in this sub-group when adjusting for imbalances in
key prognostic factors that included EGFR status and KRAS status, both of
which favored the placebo arm.

As previously announced, the ARQ 197 plus erlotinib
combination demonstrated a 66 percent improvement in the primary endpoint,
median Progression-Free Survival (PFS), although the difference in PFS
between the two arms did not achieve statistical significance (p = 0.24,
hazard ratio = 0.81) by applying a log-rank test. Improvement in median PFS
was more pronounced in the pre-defined sub-group of patients with
non-squamous histology (n = 117).

"These data from a well controlled trial signal potential
patient benefit, with promising overall survival and prolonged
progression-free survival," said Dr. Schiller. "In addition, the combination
of ARQ 197 plus erlotinib was shown to be well tolerated, with manageable
side effects similar to erlotinib alone."

The trial design allowed patients who failed on erlotinib
monotherapy to cross over into the erlotinib plus ARQ 197 arm. Of the 23
cross-over patients who were evaluable for response, two had a partial
response per Response Evaluation Criteria in Solid Tumors (RECIST) and nine
had stable disease.

"These OS results are consistent with the previously reported
PFS findings in both the ITT population and patients with non-squamous
histology, which gives us additional confidence in the strength of the signal
in this trial," said Glenn Gormley, MD, PhD, Chief Scientific Officer &
President, Daiichi Sankyo Pharma Development. "The full set of data will now
help guide planning for next-stage clinical development activities, as well
as discussions with regulatory authorities."

About c-Met and ARQ 197

ARQ 197 is an orally available, small molecule inhibitor of
the c-Met receptor tyrosine kinase. Erlotinib, marketed as Tarceva(TM), is an
inhibitor of the EGFR tyrosine kinase.

ARQ 197 is also currently being evaluated in clinical trials
as a single agent and in combination with other anti-cancer therapies in a
number of indications, including c-Met-associated soft-tissue sarcomas,
hepatocellular carcinoma, pancreatic adenocarcinoma, germ cell tumors and
colorectal cancer.

The American Cancer Society's estimates of the impact of lung
cancer in the U.S. during 2009 include approximately 219,000 new cases (both
non-small cell and small cell) and 159,000 deaths resulting from the disease,
accounting for 28 percent of all cancer deaths. Lung cancer is the leading
cause of cancer death among both men and women.

When abnormally activated, the c-Met receptor tyrosine kinase
plays multiple roles in aspects of human cancer, including cancer cell
growth, survival, angiogenesis, invasion and metastasis. Pre-clinical data
have demonstrated that ARQ 197 inhibits c-Met activation in a range of human
tumor cell lines and shows anti-tumor activity against several human tumor
xenografts. In clinical trials to date, treatment with ARQ 197 has been well
tolerated and has resulted in tumor responses and prolonged stable disease
across broad ranges of tumors and doses.

On December 19, 2008, ArQule and Daiichi Sankyo, Co., Ltd.
signed a license, co-development and co-commercialization agreement to
co-develop ARQ 197 in the U.S., Europe, South America and the rest of the
world, excluding Japan, China (including Hong Kong), South Korea and Taiwan,
where Kyowa Hakko Kirin Co., Ltd. has exclusive rights for development and
commercialization.

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 clinical development, is ARQ 197, an inhibitor of the
c-Met receptor tyrosine kinase. The Company is also conducting 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 B-RAF 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. The
most advanced AKIP(TM) program is focused on the discovery of inhibitors of
fibroblast growth factor receptor (FGFR).

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 progress of the Company's clinical trials, including its Phase
2 trial with ARQ 197 in non-small cell lung cancer (NSCLC) and trials which
may be conducted by Daiichi Sankyo and/or Kyowa Hakko Kirin under their
agreements with the Company. 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 early stage clinical trial results is not necessarily indicative of
clinical efficacy and does not ensure that later stage or larger scale
clinical trials will be successful. For example, ARQ 197 may not demonstrate
promising therapeutic effect; in addition, this compound may not demonstrate
an appropriate safety profile in further pre-clinical testing and in current,
later stage or larger scale clinical trials 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 its partner 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 or that
regulatory authorities may disagree with the Company's view of the data or
require additional data, information or studies. In addition, the planned
timing of initiation and completion of clinical trials for ARQ 197 are
subject to the ability of the Company or Daiichi Sankyo, its partner, and
Kyowa Hakko Kirin, a licensee of ARQ 197, to enroll patients, enter into
agreements with clinical trial sites and investigators, and other technical
hurdles and issues that may not be resolved. Moreover, Daiichi Sankyo has
certain rights to unilaterally terminate the ARQ 197 license, co-development
and co-commercialization agreement. Drug development involves a high degree
of risk. Only a small number of research and development programs result in
the commercialization of a product. Furthermore, ArQule may not have the
financial or human resources to pursue drug discovery successfully in the
future. 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.

Contact: William B. Boni, ArQule, Inc., VP, Investor Relations/Corp. Communications, +1(781)-994-0300, www.ArQule.com, Dr. Michaela Paudler-Debus, DAIICHI SANKYO EUROPE GmbH, Corporate Communications and Public Affairs, +49(0)-89-7808-685; Patients, physicians and other healthcare professionals
seeking additional information regarding trials involving ARQ 197 may call
+1-800-373-7827.