Arcus Biosciences Inc

Previous wording

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited Condensed Consolidated Financial Statements and related notes in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our audited Consolidated Financial Statements and related notes thereto for the year ended December 31, 2023, included in our Annual Report on Form 10-K filed with the SEC on February 21, 2024. This discussion and other parts of this report contain forward-looking statements that involve risk and uncertainties, such as statements of our plans, objectives, expectations, and intentions. Further, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. Our actual results could differ materially from those discussed in these forward-looking and other statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section of this report titled “Risk Factors.”

Current wording

The discussion contained herein and other parts of this report contain forward-looking statements that involve risk and uncertainties, such as statements of our plans, objectives, expectations, and intentions. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “design,” “intend,” “expect,” “could,” “plan,” “potential,” “predict,” “seek,” “should,” “would” or the negative version of these words and similar expressions are intended to identify forward-looking statements. Such statements reflect our beliefs and opinions on the relevant subject based upon information available to us as of the date of this Quarterly Report on Form 10-Q. While we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. Our actual results could differ materially from those discussed in these forward-looking and other statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section of this report titled “Risk Factors.”

Previous wording

We are a clinical-stage biopharmaceutical company focused on creating best-in-class therapies. Using our robust and highly efficient drug discovery capability, we have created a significant portfolio of investigational products which are in clinical development, with our most advanced molecule, an anti-TIGIT antibody, now in multiple Phase 3 registrational studies targeting lung and gastrointestinal cancers. Our deep portfolio of novel small molecules and enabling antibodies allows us to create highly differentiated therapies, which we are developing to treat multiple large indications. We expect our clinical-stage portfolio to continue to expand and to include molecules targeting immuno-oncology, cancer cell-intrinsic and immunological pathways. Our vision is to create, develop and commercialize highly differentiated therapies that have a meaningful impact on patients.

Current wording

We are a clinical-stage biopharmaceutical company focused on creating best-in-class therapies. Using our robust and highly efficient drug discovery capability, we have created a significant portfolio of investigational products which are in clinical development, with our most advanced molecule, an anti-TIGIT antibody, now in multiple Phase 3 registrational studies targeting lung and GI cancers. Our deep portfolio of novel small molecules and enabling antibodies allows us to create highly differentiated therapies, which we are developing to treat multiple large indications. We expect our clinical-stage portfolio to continue to expand and to include molecules targeting immuno-oncology, cancer cell-intrinsic and immunological pathways. Our vision is to create, develop and commercialize highly differentiated therapies that have a meaningful impact on patients.

Previous wording

•As of April 2024, we had completed enrollment of the 100mg daily (n=30) and the 50mg daily (n=30) casdatifan expansion cohorts. We have also initiated enrollment of the 150mg daily (n=30) casdatifan expansion cohort in ccRCC. The 50mg and 150mg expansion cohort data will be used to satisfy U.S. Food and Drug Administration ("FDA") requirements related to dose optimization.

Current wording

•As of July 2024, we had completed enrollment of three expansion cohorts in ccRCC: 50mg, 100mg and 150mg. The 50mg and 150mg expansion cohort data will be used to satisfy U.S. Food and Drug Administration ("FDA") requirements related to dose optimization. We have subsequently re-opened enrollment of the 100mg expansion cohort and we expect to enroll approximately 120 patients in total across the three doses.

Previous wording

Impairment charges consist of impairment of right-of-use assets resulting from updated plans for a portion of our office space.

Current wording

Impairment charges consist of impairment of right-of-use assets resulting from updated plans in the first quarter 2024 for a portion of our office space.

Previous wording

The increase in Total revenues for the three months ended March 31, 2024 was primarily driven by: increased revenues from license and development services due to a cumulative catch-up to revenue of $107 million as a result of the Third Gilead Collaboration Agreement Amendment based on the updated transaction price and measure of progress for the partially satisfied performance obligations; and increased R&D services under our Taiho and Gilead collaborations.

Current wording

The increase in Total revenues for the six months ended June 30, 2024 was primarily driven by increased revenues from license and development services due to a cumulative catch-up to revenue of $107 million as a result of the Third Gilead Collaboration Agreement Amendment based on the updated transaction price and measure of progress for the partially satisfied performance obligations; and increased R&D services under our Taiho and Gilead collaborations.

Previous wording

The increase in R&D expenses for the three months ended March 31, 2024 as compared to 2023 was primarily driven by higher costs to support our expanding late-stage development program activities, driven by higher enrollment in our Phase 3 studies, and the timing of manufacturing activities. Our growing headcount drove an increase in compensation and personnel costs, including a $1 million increase in non-cash stock-based compensation. The overall increase was partially offset by reduced spend in our early-stage development and preclinical program activities due to fewer Phase 2 studies and lower clinical manufacturing costs due to the timing of manufacturing activities.

Current wording

The increase in R&D expenses for the six months ended June 30, 2024 was primarily driven by higher costs to support our expanding late-stage development program activities, driven by higher enrollment in our Phase 3 studies, and the timing of manufacturing activities. Our growing headcount drove an increase in compensation and personnel costs, including an $2 million increase in non-cash stock-based compensation. The overall increase was partially offset by reduced spend in our early-stage development and preclinical program activities due to fewer Phase 2 studies and lower clinical manufacturing costs due to the timing of manufacturing activities.

Previous wording

The increase in G&A expenses for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, was primarily driven by increased compensation related to higher headcount and our 2024 stock awards, and costs to obtain the Third Gilead Agreement Amendment.

Current wording

The increase in G&A expenses for the six months ended June 30, 2024 was primarily driven by increased compensation related to higher headcount and our 2024 stock awards, including a $1 million increase in non-cash stock-based compensation, and costs to obtain the Third Gilead Agreement Amendment.

Previous wording

The increase in impairment expense was due to our 2024 evaluation of a portion of our office space that we expect to sublease, resulting in an impairment charge of $20 million for the three months ended March 31, 2024, compared to no similar impairment in the prior quarter.

Current wording

The increase in impairment expense for the six months ended June 30, 2024 was due to our 2024 evaluation of a portion of our office space that we expect to sublease, resulting in an impairment charge of $20 million, compared to no similar impairment in the prior year.

Previous wording

The increase in Non-operating income, net for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, was primarily due to higher interest income resulting from increased investment yields as compared to the prior year.

Current wording

The increase in Non-operating income, net for the three and six months ended June 30, 2024 as compared to the three and six months ended June 30, 2023, was primarily due to higher average portfolio balances driven by $320 million received from Gilead in January 2024.

Previous wording

The decrease in Income tax expense for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, was primarily due to taxable income in the prior year.

Current wording

The decrease in Income tax expense for the three and six months ended June 30, 2024 as compared to the three and six months ended June 30, 2023, was primarily due to taxable income in the prior year.

Previous wording

Under the Stock Purchase Agreement, Gilead has the right, at its option, to purchase additional shares from us, up to a maximum ownership of 35% of our then-outstanding voting common stock, from time to time until July 2025. In 2024, we further amended and restated the Stock Purchase Agreement and sold 15.2 million shares of our common stock to Gilead at a purchase price of $21.00 per share for total gross proceeds of $320 million of which $87 million was allocated to the performance obligations under the Third Gilead Collaboration Agreement Amendment. As of March 31, 2024, Gilead held approximately 33.1% of our outstanding common stock arising from purchases in our May 2020 public offering and purchases under the Stock Purchase Agreement and the related amendments.

Current wording

Under the Stock Purchase Agreement, Gilead has the right, at its option, to purchase additional shares from us, up to a maximum ownership of 35% of our then-outstanding voting common stock, from time to time until July 2025. In January 2024, we further amended and restated the Stock Purchase Agreement and sold 15.2 million shares of our common stock to Gilead at a purchase price of $21.00 per share for total gross proceeds of $320 million of which $87 million was allocated to the performance obligations under the Third Gilead Collaboration Agreement Amendment. As of June 30, 2024, Gilead held approximately 32.9% of our outstanding common stock arising from purchases in our May 2020 public offering and purchases under the Stock Purchase Agreement and the related amendments.

Previous wording

In 2023, we entered into an equity distribution agreement pursuant to which we may, from time to time, sell shares of our common stock having an aggregate offering price of up to $200 million. During the three months ended March 31, 2024, there were no sales of our common stock under the equity distribution agreement.

Current wording

In 2023, we entered into an equity distribution agreement pursuant to which we may, from time to time, sell shares of our common stock having an aggregate offering price of up to $200 million. During the six months ended June 30, 2024, there were no sales of our common stock under the equity distribution agreement.

Previous wording

Net cash used in operating activities was $2 million for the three months ended March 31, 2024 compared to $98 million for the same period in the prior year. The change in operating cash flows is primarily due to the receipt of $87 million from Gilead under the Third Gilead Collaboration Agreement Amendment that was allocated to revenue and the receipt of $30 million from Taiho for development milestones partially offset by higher R&D expenditures.

Current wording

Net cash used in operating activities was $96 million for the six months ended June 30, 2024 compared to $155 million for the same period in the prior year. The change in operating cash flows is primarily due to the receipt of $87 million from Gilead under the Third Gilead Collaboration Agreement Amendment that was allocated to revenue and the receipt of $30 million from Taiho for development milestones partially offset by higher R&D expenditures.

Previous wording

Cash used in investing activities for the three months ended March 31, 2024 was primarily due to net purchases of marketable securities totaling $165 million.

Current wording

Cash used in investing activities for the six months ended June 30, 2024 was primarily due to net purchases of marketable securities of $102 million.

Previous wording

Cash provided by investing activities for the three months ended March 31, 2023 was primarily due to net proceeds from marketable securities of $132 million.

Current wording

Cash provided by investing activities for the six months ended June 30, 2023 was primarily due to net proceeds from marketable securities of $163 million.

Previous wording

Cash provided by financing activities for the three months ended March 31, 2024 was due to net proceeds of $228 million from issuance of our common stock to Gilead under the Third Stock Purchase Agreement Amendment and proceeds of $1 million for stock issued under our equity award plans.

Current wording

Cash provided by financing activities for the six months ended June 30, 2024 was due to net proceeds of $228 million from issuance of our common stock to Gilead under the Third Stock Purchase Agreement Amendment and proceeds of $4 million for stock issued under our equity award plans.

Previous wording

Cash provided by financing activities for the three months ended March 31, 2023 was due to net proceeds of $1 million for stock issued under our equity award plans.

Current wording

Cash provided by financing activities for the six months ended June 30, 2023 was due to net proceeds of $20 million for shares purchased by Gilead in accordance with the Second Stock Purchase Agreement Amendment and proceeds of $4 million for stock issued under our equity award plans.

Previous wording

A hypothetical 10% change in the updated standalone selling prices related to Third Gilead Collaboration Agreement Amendment would have changed the cumulative catch-up to revenue recognized during the current period by as much as $3 million.

Current wording

A hypothetical 10% change in the updated standalone selling prices related to Third Gilead Collaboration Agreement Amendment would have changed the cumulative catch-up to revenue recognized during the current year to date period by as much as $3 million.