Item 1.01 Entry into a Material Definitive Agreement.

As previously reported, on November 7, 2008, ArQule, Inc. (the "Registrant") and Daiichi Sankyo Co., Ltd. ("Daiichi Sankyo") entered into a collaborative research, development and license agreement (the "Agreement") under which the Registrant is applying its proprietary technology and know-how to the discovery of therapeutic compounds that selectively inhibit certain kinases. The Agreement provides that, subsequent to its effective date, the parties would agree upon milestone payments and royalties to be paid for each product licensed by Daiichi Sankyo pursuant to the Agreement.

On May 25, 2009, the Registrant and Daiichi Sankyo entered into an agreement pursuant to which the parties agreed to potential future milestones and royalties. In accordance therewith, the Registrant could receive for each product selected for clinical development up to $265 million in potential development and sales milestone payments, in addition to the previously reported $15 million cash upfront payment received by the Registrant. Upon commercialization of a licensed product, the Registrant would also receive tiered double-digit royalties on its net sales.

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