ArQule CEO Hill to Leave Post, Remains Mum on Next Step as Firm Hunts for Replacement

It wasn’t apparent, but when I spoke to him just before Christmas, Stephen A. Hill might have been mentally packing his suitcase. In any event, Woburn, MA-based biotech ArQule (NASDAQ:ARQL) announced today that Hill will soon be leaving his CEO position for an as-yet-undisclosed destination. Hill “can’t reveal where he’s going yet, but it will probably be public within weeks rather than months,” says ArQule spokesperson William B. Boni.

While Hill will remain ArQule’s CEO for an unspecified time, COO Peter S. Lawrence will take operational responsibility for the company and will be among those considered for the CEO post. Lawrence is a former venture capitalist who joined ArQule in April 2006 and was appointed COO last October.

Boni says Hill is leaving ArQule at “as good a time as you could hope for, if you are an early-stage biotech.” The company has $100 million in the bank and this year anticipates important new data on its most advanced candidate drug, ARQ 197, one of the front runners among a keenly anticipated new class of cancer therapies called c-Met inhibitors.

Hill came to ArQule in 1999 from pharma giant F. Hoffman-La Roche, where he was Global Head of Drug Development. When I spoke to Hill last month he didn’t spill the beans about his move but made some interesting observations about the biotech industry.

According to Hill, one of the biggest challenges facing biotech now is that “the balance has tipped dramatically in favor of avoiding safety issues rather than rapidly getting drugs to patients. That increases the riskiness of drug research programs and directly affects biotech’s ability to raise capital.” At the same time, he said, “little companies are always faced with the challenge of feeding the beast—they need revenue and so must improve productivity.”

Safety problems have indeed been bedeviling the pharmaceutical industry lately. ArQule is itself currently living that dilemma: just last month the company announced that it may be facing side-effect problems around one of the new cancer compounds it has been developing with Roche. That collaboration (around a molecular pathway called E2F1) is potentially worth more than $250 million to the little biotech.

Hill has led ArQule for nine years, helping the company transform itself from a specialized chemistry services provider into a pharmaceutical company. ArQule has initiated a nationwide search for his replacement, according to Boni. “We need someone with great business acumen who can lead the company through the development phase to where we have products on the market,” Boni said.

ArQule’s stock closed today down $0.58 (about 10.4 percent), at $5.00.

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