Exhibit 10.1

AGREEMENT ON MILESTONE PAYMENTS AND ROYALTIES

This AGREEMENT ON MILESTONE PAYMENTS AND ROYALTIES is entered into by and between ArQule, Inc. and Daiichi Sankyo Co., Ltd. (collectively, the “Parties”).

WHEREAS, the Parties have entered into that certain Collaborative Research, Development and License Agreement (the “Agreement”) on November 7, 2008;

WHEREAS, Section 5.4 of the Agreement provides that the Parties shall negotiate in good faith and reach agreement on an amendment to the Agreement or a separate agreement to be executed by the Parties setting forth certain milestone payments and royalties to be paid under the License Agreement for each Licensed Product that is Developed and Commercialized under the Agreement and/or a License Agreement and additional provisions relating thereto; and

WHEREAS, the Parties have agreed upon the milestone events, the amount of milestone payments and sales milestone payments, and the royalty rates at this time, and to negotiate other provisions later.

NOW, THEREFORE, in consideration of the mutual prom