Exhibit 99.2

Unaudited pro forma condensed consolidated financial information

     On April 28, 2005, ArQule, Inc. entered into an Agreement of Purchase and Sale whereby we agreed to sell our corporate headquarters in Woburn, Massachusetts to ARE-MA Region No. 20, LLC, an affiliate of Alexandria Real Estate Equities, Inc. (“the Purchaser”), and simultaneously leaseback the facility from the Purchaser. On May 2, 2005, we completed the transaction by conveying the real estate in exchange for the purchase price and entering into a lease with the Purchaser as landlord. Pursuant to the Purchase and Sale agreement, the Purchaser acquired two parcels of land and our headquarters building for approximately $40.1 million. Pursuant to the terms of the lease, we leased our existing facility and the land on which it is situated for a period of ten years at an initial annual rate of approximately $2.9 million, subject to annual escalations. We are also responsible for all real property taxes, and specified insurance and maintenance costs (other than repair for structural elements). We have options to extend the lease for up to an additional ten years at market rates. We will account for the leaseback as an operating lease. We did not lease the remaining adjacent parcel of land conveyed to the Purchaser.

     The following unaudited pro forma condensed consolidated balance sheet gives effect on a pro forma basis of the sale and lease transactions as if they had occurred on March 31, 2005, principally by subtracting from our historical property and equipment balance the net book value of the land and building assets sold to the Purchaser, recording a deferred gain on the sale leaseback (to be recognized over the expected lease term) and reflecting the cash proceeds net of security deposits, first month rental payments and broker commission and closing costs. The following unaudited pro forma condensed consolidated income statements for the year ended December 31, 2004 and for the three months ended March 31, 2005 give effect on a pro forma basis of the sale and leaseback transactions as if they occurred on January 1, 2004, principally by eliminating from our historical financial statements the cost of depreciating the assets sold to the purchaser and adding the cost of the lease expense, adjusted for the amortization of the deferred gain on the sale and leaseback.

     This unaudited pro forma condensed consolidated financial information is presented for informational purposes only and is not necessarily indicative of our future results or the results we would have achieved had the sale and lease transactions occurred at the dates presented. It should be read in conjunction with our consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for fiscal year ended December 31, 2004 and our quarterly report on Form 10-Q for the quarter ended March 31, 2005.

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ArQule, Inc.

Unaudited Pro Forma Condensed Consolidated Balance Sheet
March 31, 2005
(In thousands, except share data)

	ArQule			Pro Forma
	Historical			Adjustments (A)			Pro Forma
ASSETS
Current assets:
Cash and cash equivalents	$	2,000		$	37,579		$	39,579
Marketable securities		83,497			—			83,497
Accounts receivable		10,536			—			10,536
Prepaid expenses and other current assets		3,542			247			3,789
Total current assets		99,575			37,826			137,401
Property and equipment, net		44,209			(32,970	)		11,239
Other assets		748			1,604			2,352
	$	144,532		$	6,460		$	150,992
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	5,853		$	646		$	6,499
Current portion of long-term debt		118						118
Current portion of deferred revenue		11,673			—			11,673
Total current liabilities		17,644			646			18,290
Restructuring accrual, long-term portion		2,545			—			2,545
Deferred gain on sale leaseback, long-term portion		—			5,814			5,814
Deferred revenue, net of current portion		15,077			—			15,077
Total liabilities		35,266			6,460			41,726
Stockholders’ equity:
Common stock, $0.01 par value; 50,000,000 shares authorized; 34,783,477 shares issued and outstanding		348			—			348
Additional paid-in capital		300,206			—			300,206
Accumulated other comprehensive loss		(588	)		—			(588	)
Accumulated deficit		(190,700	)		—			(190,700	)
Total stockholders’ equity		109,266			—			109,266
	$	144,532		$	6,460		$	150,992

The accompanying notes are an integral part of this unaudited pro forma financial information.

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ArQule, Inc.

Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the year ended December 31, 2004
(In thousands, except per share data)

	ArQule			Pro Forma
	Historical			Adjustments (B)			Pro Forma
Revenue
Compound development revenue	$	48,675		$	—		$	48,675
Compound development revenue — related parties		768			—			768
Research and development revenue		5,012			—			5,012
Total revenue		54,455			—			54,455
Costs and expenses:
Cost of compound development revenue		31,233			583			31,816
Cost of compound development revenue-related parties		384			7			391
Research and development		20,287			354			20,641
Marketing, general and administrative		8,982			129			9,111
Restructuring credits		(424	)		—			(424	)
Total costs and expenses		60,462			1,073			61,535
Loss from operations		(6,007	)		(1,073	)		(7,080	)
Net Investment income		1,086			—			1,086
Net loss	$	(4,921	)	$	(1,073	)	$	(5,994	)
Basic and diluted net loss per share	$	(0.17	)				$	(0.21	)
Weighted average common shares outstanding – basic and diluted		28,819						28,819

The accompanying notes are an integral part of this unaudited pro forma financial information.

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ArQule, Inc.

Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the three months ended March 31, 2005
(In thousands, except per share data)

	ArQule			Pro Forma
	Historical			Adjustments (B)			Pro Forma
Revenue:
Compound development revenue	$	12,290		$	—		$	12,290
Research and development revenue		1,653			—			1,653
Total revenue		13,943			—			13,943
Costs and expenses:
Cost of compound development revenue		7,352			151			7,503
Research and development		5,853			91			5,944
Marketing, general and administrative		2,684			33			2,717
Total costs and expenses		15,889			275			16,164
Loss from operations		(1,946	)		(275	)		(2,221	)
Net investment income		504			—			504
Net loss	$	(1,442	)	$	(275	)	$	(1,717	)
Basic and diluted net loss per share	$	(0.04	)				$	(0.05	)
Weighted average common shares outstanding – basic and diluted		33,040						33,040

The accompanying notes are an integral part of this unaudited pro forma financial information.

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ArQule, Inc.
Notes to Unaudited Pro Forma Condensed Consolidated Financial Information

     1. Pro Forma Adjustments

The following adjustments have been made in preparation of the unaudited pro forma condensed consolidated financial information:

A)

These amounts reflect estimated adjustments required to ArQule’s historical balances to reflect the sale of ArQule’s headquarters building and two parcels of land, and the simultaneous leasing of the building and one parcel of land, assuming the transactions were completed on March 31, 2005. The difference between the purchase price, net of broker commission and closing costs, and the net book value of the building and land is deferred, and the short and long term portions of that deferred balance are included in “Accounts payable and accrued liabilities” and “Deferred gain on sale leaseback – long-term portion”, respectively. The net proceeds to ArQule from the sale reflect withholdings for a security deposit and prepayment of the first month’s lease payment, and payments of broker commissions and estimated closing costs.

B)

These amounts reflect estimated adjustments required to ArQule’s historical results to reflect the sale of ArQule’s headquarters building and two parcels of land, and the simultaneous leaseback of the building and one parcel of land, assuming the transactions were completed on January 1, 2004. The adjustments reflect the lease expense, net of the amortization of the deferred gain on sale leaseback, offset by the elimination of depreciation expense, as follows ($000s):

			Amortization
			of deferred
	Gross lease		gain on sale						Total
For the year ended December 31, 2004:	expense		leaseback			Depreciation expense			adjustment
Cost of compound development revenue	$	1,855	$	(329	)	$	(943	)	$	583
Cost of compound development revenue, related parties		23		(4	)		(12	)		7
Research and development		1,127		(200	)		(573	)		354
Market, general and administrative		410		(73	)		(208	)		129
Total	$	3,415	$	(606	)	$	(1,736	)	$	1,073

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			Amortization
			of deferred
	Gross lease		gain on sale						Total
For the three months ended March 31, 2005:	expense		leaseback			Depreciation expense			adjustment
Cost of compound development revenue	$	470	$	(83	)	$	(236	)	$	151
Research and development		282		(50	)		(141	)		91
Market, general and administrative		102		(18	)		(51	)		33
Total	$	854	$	(151	)	$	(428	)	$	275

Pursuant to the terms of the lease, the initial annual rate lease payment is approximately $2.9 million, subject to annual escalations. The “Gross lease expense” above reflects recognition of the total lease payments due on a straight-line basis over the initial ten year term of the lease. “Amortization of deferred gain on sale leaseback” reflects amortizing an approximate $6.1 million gain on the sale of the building and land on a straight-line basis over the initial ten year term of the lease.

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