Arcus Biosciences Inc
For the period ended Sep 30, 2024. Filed Nov 6, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 6, 2024
RCUS$18.28+3.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-08.
0001724521-24-000138
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-06.
0001724521-24-000160
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 94 previous paragraphs and 99 current paragraphs.
64 unchanged; 18 reworded; 16 added; 10 removed; 2 previous and 1 current paragraphs rearranged.
Tables are not compared: 4 previous and 4 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (16)
Current report
•In October 2024, we entered into a clinical collaboration with AstraZeneca to evaluate casdatifan, our investigational HIF-2α inhibitor, in combination with volrustomig, AstraZeneca’s investigational PD-1/CTLA-4 bispecific antibody, in IO-naive patients with clear cell renal carcinoma ("ccRCC"). AstraZeneca will operationalize the study.
Current report
•In October 2024, we presented the first clinical data for casdatifan from the 100mg and 50mg expansion cohorts of ARC-20, a Phase 1/1b study in metastatic ccRCC. Observations from the 100mg daily expansion cohort included an objective response rate ("ORR") of 34% (two responses are pending confirmation; 25% confirmed ORR), a low rate of primary progression of 19%, and a high disease control rate of 81%. The median progression-free survival (PFS) had not been reached at the time of the data cutoff.
Current report
•In November 2024, we announced results from Part 1 of ARC-10, a randomized study evaluating domvanalimab plus zimberelimab in PD-L-1 high NSCLC, and will be presented at the Society for Immunotherapy of Cancer ("SITC") annual meeting later in November:
Current report
▪A 36% reduction in risk of death (hazard ratio=0.64) was observed for domvanalimab plus zimberelimab compared to that of zimberelimab alone.
Current report
▪Zimberelimab reached a median overall survival of two years, and the median overall survival for domvanalimab plus zimberelimab was not reached.
Current report
▪Treatment-related adverse events leading to treatment discontinuation were low (10.5%) for the combination of domvanalimab and zimberelimab.
Current report
CD73 Program
Current report
•In October 2024, we initiated PRISM-1, a Phase 3 trial of quemliclustat combined with gemcitabine/nab-paclitaxel versus gemcitabine/nab-paclitaxel in pancreatic cancer.
Current report
The increase in Total revenues for the three months ended September 30, 2024 was primarily driven by Taiho's exercise of its option for the license of quemliclustat for the Taiho Territory of$15 million, which was recognized as revenue upon the delivery of the license in the third quarter of 2024.
Current report
*Study discontinued or completed
Current report
** Quemliclustat moved from early-stage development and preclinical program to a late-stage development program in the third quarter 2024
Current report
G&A expenses were flat for the three months ended September 30, 2024.
Current report
In August 2024, we obtained a $250 million term loan facility from Hercules Capital, Inc. (“Hercules”). Under the terms of the term loan facility, $50 million was drawn at closing and an additional $100 million is committed and fully available at Arcus’s sole option in minimum increments of $25 million. A second tranche of $100 million will be available to support strategic initiatives, subject to future approval by Hercules. See Note 11 to our Condensed Consolidated Financial Statements in Item 1 for further discussion.
Current report
Contractual Obligations and Commitments
Current report
There have been no material changes to our contractual obligations outside the ordinary course of business during the three and nine months ended September 30, 2024, as compared to those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023, other than the following:
Current report
We are obligated to make principal loan payments and an end of term charge under the loan and security agreement with Hercules that we entered into on August 27, 2024. See Note 11 to our Condensed Consolidated Financial Statements in Item 1 for further discussion.
Removed paragraphs (10)
Previous report
•In June 2024, we presented updated data at the ASCO Annual Meeting from Arm A1 of the Phase 2 EDGE-Gastric study which showed 12.9 months median progression-free survival ("PFS") for domvanalimab plus zimberelimab and chemotherapy in first-line upper GI adenocarcinomas, which exceeded historical benchmarks for anti-PD-1 plus chemotherapy.
Previous report
◦The EDGE-Gastric study is evaluating the same regimen in the same setting as the STAR-221 Phase 3 study.
Previous report
•Two Phase 3 studies have completed or are expected to complete enrollment this year:
Previous report
◦STAR-221 evaluating domvanalimab plus zimberelimab and chemotherapy in PD-L1 all-comer first-line metastatic upper GI adenocarcinomas, completed enrollment in June 2024.
Previous report
◦STAR-121 evaluating domvanalimab plus zimberelimab and chemotherapy in PD-L1 all-comer first-line metastatic NSCLC, is expected to complete enrollment in 2024.
Previous report
•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 report
Adenosine-Axis Program
Previous report
•In June 2024, we presented data at the ASCO Annual Meeting from ARC-9, a randomized Phase 1b/2 study evaluating etrumadenant plus zimberelimab, FOLFOX chemotherapy and bevacizumab ("EZFB") versus regorafenib in third-line metastatic colorectal cancer (mCRC).
Previous report
◦Results showed 19.7 months median overall survival ("OS") for the EZFB arm and EZFB significantly reduced the risk of death by 63% and risk of disease progression by 73% compared to regorafenib. This is the longest median OS reported in third-line mCRC to date in a randomized trial.
Previous report
*Discontinuing further enrollment in the study
Reworded paragraphs (18)
Previous wording
•In July 2024, Taiho exercised its option for quemliclustat, our investigational small molecule CD73 inhibitor, for the Taiho Territory. As a result of this option exercise, Taiho will operationalize the Phase 3 PRISM-1 study evaluating quemliclustat in pancreatic cancer in Japan and we will receive an opt-in payment and are eligible to receive near-term milestone payments.
Current wording
•In July 2024, Taiho exercised its option for quemliclustat, our investigational small molecule CD73 inhibitor, for the Taiho Territory. As a result of this option exercise, Taiho will operationalize the Phase 3 PRISM-1 study evaluating quemliclustat in pancreatic cancer in Japan and we received an opt-in payment and are eligible to receive near-term milestone payments.
Previous wording
Non-operating income, net consists primarily of interest earned on our investments in fixed-income marketable securities and non-cash interest expense incurred under the effective interest method on our liability for sale of future royalties to BVF.
Current wording
Non-operating income, net consists primarily of interest earned on our investments in fixed-income marketable securities, interest expense on our loan financing with Hercules and non-cash interest expense incurred under the effective interest method on our liability for sale of future royalties to BVF.
Previous 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.
Current wording
The increase in Total revenues for the nine months ended September 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; increased R&D services under our Taiho and Gilead collaborations; and Taiho's exercise of its option for the license of quemliclustat for the Taiho Territory of$15 million, which was recognized as revenue upon the delivery of the license in the third quarter of 2024.
Previous wording
The increase in R&D expenses for the three 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. 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 three months ended September 30, 2024 was primarily driven by higher costs to support our expanding late-stage program activities, driven by higher enrollment in our studies, and the timing of our manufacturing activities. Our growing headcount drove an increase in compensation and personnel costs, including a $1 million increase in non-cash stock-based compensation.
Previous 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.
Current wording
The increase in R&D expenses for the nine months ended September 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 our manufacturing activities. Our growing headcount drove an increase in compensation and personnel costs, including a $3 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 lower manufacturing costs due to the timing of manufacturing activities and fewer Phase 2 studies.
Previous 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.
Current wording
The increase in G&A expenses for the nine months ended September 30, 2024 was primarily driven by increased compensation related to higher headcount and our 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 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.
Current wording
The increase in impairment expense for the nine months ended September 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 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.
Current wording
The increase in Non-operating income, net for the three and nine months ended September 30, 2024 as compared to the three and nine months ended September 30, 2023, was primarily due to increased investment yields and 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 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.
Current wording
The decrease in Income tax expense for the three and nine months ended September 30, 2024 as compared to the three and nine months ended September 30, 2023, was primarily due to taxable income in the prior year.
Previous wording
Our cash and investments are held in a variety of interest-bearing instruments, including money market funds, U.S. government treasury and agency obligations, investments in corporate securities and certificates of deposit. Based on our existing business plan, we believe that our cash, cash equivalents, and marketable securities as of June 30, 2024, will be sufficient to fund our planned level of operations into 2027.
Current wording
Our cash and investments are held in a variety of interest-bearing instruments, including money market funds, U.S. government treasury and agency obligations, investments in corporate securities and certificates of deposit. Based on our existing business plan, we believe that our cash, cash equivalents, and marketable securities as of September 30, 2024, will be sufficient to fund our planned level of operations into mid-2027.
Previous wording
To date, we have financed our operations primarily from the sale of our equity securities and upfront or milestone payments from our research, collaboration and license agreements with our strategic partners including Gilead. We will need substantial additional funding to support our continuing operations and pursue our development strategy. Until such time that we can generate significant revenue from sales of our investigational products, if ever, we expect to finance our operations through the sale of equity, debt financings or other capital sources, including existing or potential collaborations with other companies or other strategic transactions. See “Item 1A. Risk Factors” for a discussion of the factors that could impact our liquidity.
Current wording
To date, we have financed our operations primarily from the sale of our equity securities, upfront or milestone payments from our research, collaboration and license agreements with our strategic partners including Gilead and debt financing. We will need substantial additional funding to support our continuing operations and pursue our development strategy. Until such time that we can generate significant revenue from sales of our investigational products, if ever, we expect to finance our operations through the sale of equity, debt financings or other capital sources, including existing or potential collaborations with other companies or other strategic transactions. See “Item 1A. Risk Factors” for a discussion of the factors that could impact our liquidity.
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 six months ended June 30, 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 nine months ended September 30, 2024, there were no sales of our common stock under the equity distribution agreement.
Previous 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.
Current wording
Net cash used in operating activities was $70 million for the nine months ended September 30, 2024 compared to $218 million for the same period in the prior year. The change in operating cash flows is primarily due to the receipt of the $100 million option continuation payment from Gilead in August 2024, the $87 million under the Third Gilead Collaboration Agreement Amendment that was allocated to revenue, and the receipt of $45 million in total from Taiho for development milestones and its opt-in on quemliclustat, partially offset by higher R&D expenditures.
Previous 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.
Current wording
Cash used in investing activities for the nine months ended September 30, 2024 was primarily due to net purchases of marketable securities of $130 million.
Previous 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.
Current wording
Cash provided by investing activities for the nine months ended September 30, 2023 was primarily due to net proceeds from marketable securities of $184 million.
Previous 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.
Current wording
Cash provided by financing activities for the nine months ended September 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, $47 million from our borrowings under the Hercules Agreement, and proceeds of $6 million for stock issued under our equity award plans.
Previous 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.
Current wording
Cash provided by financing activities for the nine months ended September 30, 2023 was due to net proceeds of $25 million from issuance of our common stock and proceeds of $5 million for stock issued under our equity award plans.
Previous wording
While our significant accounting policies are described in the notes to our Condensed Consolidated Financial Statements, we believe that the accounting policies discussed below, together with those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023, are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s significant judgments and estimates.
Current wording
While our significant accounting policies are described in the notes to our Condensed Consolidated Financial Statements, we believe that the accounting policies discussed below, together with those disclosed in our Annual Report on
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Form 10-K for the year ended December 31, 2023, are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s significant judgments and estimates.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
The increase in Total revenues for the three months ended June 30, 2024 was primarily driven by increased revenues from license and development services from the Third Gilead Collaboration Agreement Amendment; and increased R&D services under our Taiho and Gilead collaborations.
Previous report — wording carried elsewhere
The increase in G&A expenses for the three 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.