Arcus Biosciences Inc

Previous wording

We currently have multiple clinical programs focused on unique targets including TIGIT, PD-1, adenosine A2a and A2b receptors, CD73, CD39, HIF-2α, and AXL. In 2020, we entered into the Gilead Collaboration Agreement with Gilead to strategically advance our portfolio through a collaborative relationship. The Gilead Collaboration Agreement provides Gilead with an exclusive license to our anti-PD-1 program (including zimberelimab) and time-limited exclusive option rights to our clinical programs, which they have exercised for our anti-TIGIT program (including domvanalimab), adenosine receptor antagonist program (including etrumadenant) and CD73 program (including quemliclustat). For all such optioned programs, we are co-developing investigational products with Gilead.

Current wording

We currently have seven clinical programs focused on unique targets including HIF-2α, TIGIT, PD-1, adenosine A2a and A2b receptors, CD73, CD39, and AXL. In 2020, we entered into the Gilead Collaboration Agreement with Gilead to strategically advance our portfolio through a collaborative relationship. The Gilead Collaboration Agreement provides Gilead with an exclusive license to our anti-PD-1 program (including zimberelimab) and time-limited exclusive option rights to our clinical programs, which they have exercised for our anti-TIGIT program (including domvanalimab), adenosine receptor antagonist program (including etrumadenant) and CD73 program (including quemliclustat). For all such optioned programs, we are co-developing investigational products with Gilead. Our HIF-2α program (including casdatifan) is no longer subject to Gilead’s option under the Gilead Collaboration Agreement and Gilead has no further rights to the program.

Previous wording

cas: casdatifan; chemo: chemotherapy; dom: domvanalimab; etruma: etrumadenant; gem/nab-pac: gemcitabine/nab-paclitaxel; nivo: nivolumab; pembro: pembrolizumab; quemli: quemliclustat; RCC: renal cell carcinoma; rego: regorafenib; zanza: zanzalintinib; zim: zimberelimab

Current wording

cabo: cabozantinib; cas: casdatifan; chemo: chemotherapy; dom: domvanalimab; etruma: etrumadenant; gem/nab-pac: gemcitabine/nab-paclitaxel; IO: immuno-oncology; nivo: nivolumab; pembro: pembrolizumab; quemli: quemliclustat; RCC: renal cell carcinoma; rego: regorafenib; zanza: zanzalintinib; zim: zimberelimab.

Previous wording

Our license and development services revenue consists of amounts recognized from the portions of the nonrefundable upfront and milestone payments received from Gilead and Taiho and allocated to performance obligations for licenses or R&D activities performed by us as we develop our investigational products under the terms of our collaboration agreements. License and development services revenues are recognized based upon the timing of the delivery of a license or service if delivery is complete, or based on estimates of each performance obligation's percentage of completion at the period end if it is still in process. We calculate percentage of completion as a ratio of effort incurred to date on each performance obligation to the total estimated effort to be incurred to satisfy that performance obligation.

Current wording

Our license and development services revenue consists of amounts recognized from the portions of the nonrefundable upfront payments received from Gilead and Taiho and allocated to performance obligations for licenses or R&D activities performed by us as we develop our investigational products under the terms of our collaboration agreements. License and development services revenues are recognized based upon the timing of the delivery of a license or service if delivery is complete, or based on estimates of each performance obligation's percentage of completion at the period end if it is still in process. We calculate percentage of completion as a ratio of effort incurred to date on each performance obligation to the total estimated effort to be incurred to satisfy that performance obligation.

Previous wording

Other collaboration revenue consists primarily of amounts recognized from the portions of the nonrefundable upfront payments received from Gilead and allocated to performance obligations relating to their access to our investigational pipeline or our obligation to perform certain discovery and early development activities. Revenue related to access rights is recognized over the period of access, and revenue related to discovery and early development activities is recognized as the performance obligation is satisfied.

Current wording

Other collaboration revenue consists primarily of amounts recognized from the portions of the nonrefundable upfront payments received from Gilead and Taiho and allocated to performance obligations relating to their access to our investigational pipeline or our obligation to perform certain discovery and early development activities. Revenue related to access rights is recognized over the period of access, and revenue related to discovery and early development activities is recognized as the performance obligation is satisfied.

Previous wording

Our R&D expenses consist of expenses incurred in connection with the R&D of our pipeline programs. These expenses include preclinical and clinical expenses, payroll and personnel expenses, including stock-based compensation for our employees, laboratory supplies, product licenses, consulting costs, contract research, and depreciation. Shared facility expenses are allocated to functional groups proportionally based on usage. Under certain collaboration agreements we agree to share R&D expenses with our partners. Such cost sharing arrangements may result in receiving reimbursement from our partners or require that we reimburse our partners for qualified expenses. We expense both internal and external R&D costs as they are incurred. We record advance payments for services that will be used or rendered for future R&D activities as prepaid expenses and recognize them as an expense as the related services are performed. We recognize reimbursement for shared costs incurred by us and reimbursed by our partners as a reduction in R&D expense.

Current wording

Our R&D expenses consist of costs incurred in connection with the R&D of our pipeline programs. These expenses include preclinical and clinical expenses, payroll and personnel expenses, including stock-based compensation for our employees in R&D, laboratory supplies, product licenses, consulting costs, contract research, and depreciation. Shared facility expenses are allocated to functional groups proportionally based on usage. Under certain collaboration agreements we agree to share R&D expenses with our partners. Such cost sharing arrangements may result in receiving reimbursement from our partners or require that we reimburse our partners for qualified expenses. We expense both internal and external R&D costs as they are incurred. We record advance payments for services that will be used or rendered for future R&D activities as prepaid expenses and recognize them as an expense as the related services are performed. We recognize reimbursement for shared costs incurred by us and reimbursed by our partners as a reduction in R&D expense as the underlying costs are incurred.

Previous wording

We do not allocate our costs by investigational product, as a significant amount of R&D expenses include internal costs, such as payroll and other personnel expenses, and certain external costs that are not recorded at the investigational product level. In particular, with respect to internal costs, several of our departments support multiple R&D programs, and we do not allocate those costs by investigational product.

Current wording

We do not allocate all our costs by investigational product, as a significant amount of R&D expenses include internal costs, such as payroll and other personnel expenses, and certain external costs that are not recorded at the investigational product level. In particular, with respect to internal costs, several of our departments support multiple R&D programs, and we do not allocate those costs by investigational product.

Previous wording

The level of our future R&D investment will depend on a number of factors and uncertainties, including the breadth of the joint development program agreed to with Gilead for the optioned programs, the outcome of our efforts, and the amount of cost reimbursements or milestone payments we receive from our collaborators. We expect our R&D expenses to increase substantially during the next few years as we pursue joint development programs with Gilead and advance these programs towards regulatory approval. We also expect to advance new programs into the clinic. All of this will require significant growth in our development capabilities and infrastructure. In addition, our joint development programs with Gilead for the optioned molecules are anticipated to include a significant number of later-stage clinical trials, which typically include a larger number of subjects, are of a longer duration and include more geographic regions. As we advance our clinical-stage programs and prepare to seek regulatory approval, we will also need to increase our late-stage manufacturing activities. As a result, we expect our preclinical, clinical, and contract manufacturing expenses to increase significantly relative to what we have incurred to date.

Current wording

The level of our future R&D investment will depend on a number of factors and uncertainties, including the breadth of the joint development program agreed to with Gilead for the optioned programs, the outcome of our efforts, and the amount of cost reimbursements or milestone payments we receive from our collaborators. We expect our R&D expenses to peak in 2025 and then decline meaningfully during the next few years as we advance our programs towards regulatory approval. We also expect to advance new programs into the clinic. All of this will require significant growth in our development capabilities and infrastructure. In addition, our joint development programs with Gilead for the optioned molecules are anticipated to include a significant number of later-stage clinical trials, which typically include a larger number of subjects, are of a longer duration and include more geographic regions. As we advance our clinical-stage programs and prepare to seek regulatory approval, we will also need to increase our late-stage manufacturing activities. As a result, we expect our preclinical, clinical, and contract manufacturing expenses to increase significantly relative to what we have incurred to date.

Previous wording

In addition, under our arrangements with WuXi Biologics, Abmuno, AstraZeneca and BVF, we may incur additional clinical and regulatory milestone payments based on the development progress of our investigational products. We may also be required to pay royalties in the event of a successful product launch and our receipt of commercial revenues. Therefore, we are unable to predict the timing or the final cost to complete our clinical programs or validation of our manufacturing and supply processes and delays may occur due to numerous factors. Factors that could cause or contribute to delays or additional costs include, but are not limited to, those discussed in “Item 1A. Risk Factors” of the Quarterly Report.

Current wording

In addition, under our arrangements with WuXi Biologics, Abmuno and AstraZeneca, we may incur additional clinical and regulatory milestone payments based on the development progress of our investigational products. We may also be required to pay royalties in the event of a successful product launch and our receipt of commercial revenues. Therefore, we are unable to predict the timing or the final cost to complete our clinical programs or validation of our manufacturing and supply processes and delays may occur due to numerous factors. Factors that could cause or contribute to delays or additional costs include, but are not limited to, those discussed in “Item 1A. Risk Factors” of the Quarterly Report.

Previous wording

G&A expenses consist principally of personnel-related costs including payroll and stock-based compensation for personnel in executive, finance, human resources, information technology, business and corporate development, and other administrative functions. Shared facility expenses are allocated to functional groups proportionally based on usage. Our G&A expenses also include professional fees for legal, consulting, and accounting services, rent and other facilities costs, fixed asset depreciation, and other general operating expenses not otherwise classified as R&D expenses. We do not receive significant reimbursements of these costs through our collaboration with Gilead.

Current wording

G&A expenses consist principally of personnel-related costs including payroll and stock-based compensation for personnel in executive, finance, human resources, information technology, business and corporate development, and other administrative functions. Shared facility expenses are allocated to functional groups proportionally based on usage. Our G&A expenses also include professional fees for legal, consulting, and accounting services, rent and other facilities costs, fixed asset depreciation, and other general operating expenses not otherwise classified as R&D expenses. We do not receive significant reimbursements of these costs through our collaboration with Gilead. We anticipate that our G&A expenses will be stable for the remainder of this year.

Previous 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.

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 income/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 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.

Current wording

The decrease in Total revenues for the three months ended March 31, 2025 was primarily driven by the cumulative catch-up from license and development services revenue of $107 million in the prior year 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.

Previous 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.

Current wording

The increase in R&D expenses for the three months ended March 31, 2025 was primarily driven by higher costs in our early-stage development and preclinical program activities, driven by higher enrollment in our Phase 2 studies, primarily casdatifan. Our growing headcount drove an increase in compensation and personnel costs, offset by a $2 million decrease in non-cash stock-based compensation. The overall increase was partially offset by reduced spend in our late-stage development activities due to lower manufacturing costs due to the timing of manufacturing activities.

Previous 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.

Current wording

The impairment expense for the three months ended March 31, 2024 was due to our 2024 evaluation and sublease of a portion of our office space, resulting in an impairment charge of $20 million.

Previous 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.

Current wording

The decrease in Non-operating income, net for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, was primarily due to interest expense on our long-term debt agreement which we entered into in the third quarter of 2024.

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 September 30, 2024, will be sufficient to fund our planned level of operations into mid-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, marketable securities and existing facilities as of March 31, 2025 will be sufficient to fund our planned level of operations for a period of at least twelve months following the date of filing of this report and provide funding through our initial pivotal read-outs for domvanalimab, quemliclustat and casdatifan, which include PEAK-1.

Previous 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.

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 additional funding to support our continuing operations and pursue our long-term development strategy. Until such time that we can generate significant revenue from sales of our investigational products, if ever, we may 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

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 September 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.

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 the first quarter 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 the $320 million equity investment, $87 million was determined to be a premium on the purchase of common stock and allocated to the performance obligations created by the Third Gilead Collaboration Agreement Amendment. Gilead acquired an additional 1.4 million shares of our common stock in the February 2025 underwritten offering and subsequently held approximately 29.7% of our outstanding common stock as of March 31, 2025.

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 nine months ended September 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 three months ended March 31, 2025 and 2024, there were no sales of our common stock under this agreement.

Previous wording

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 wording

In the third quarter 2024, we obtained a $250 million term loan facility from 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 our 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, Long-term debt, in Part I, Item 1, to our Condensed Consolidated Financial Statements for further discussion.

Previous 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.

Current wording

Net cash used in operating activities was $132 million for the three months ended March 31, 2025 compared to $2 million for the same period in the prior year. The change in operating cash flows is primarily due to the prior year receipt of the $87 million allocated to the performance obligations created by the Third Gilead Collaboration Agreement Amendment and the prior year receipt of $45 million from Taiho for development milestones and its opt-in on quemliclustat, partially offset by the current year receipts of $22 million for STAR-121 and PRISM-1.

Previous 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.

Current wording

Cash provided by investing activities for the three months ended March 31, 2025 was primarily due to net proceeds from marketable securities of $33 million.

Previous 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.

Current wording

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

Previous 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.

Current wording

Cash provided by financing activities for the three months ended March 31, 2025 was due to net proceeds of $142 million from issuance of our common stock under the February 2025 underwritten offering.

Previous 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.

Current 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 and proceeds of $1 million for stock issued under our equity award plans.

Previous wording

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 wording

There have been no material changes to our contractual obligations outside the ordinary course of business during the three months ended March 31, 2025, as compared to those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024.

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

Current wording

While our significant accounting policies are described in the notes to our Condensed Consolidated Financial Statements and our Annual Report on Form 10-K filed with the SEC on February 25, 2025, we believe that the accounting policy discussed below is critical to understanding our historical and future performance, as this policy relates to the more significant areas involving management's significant judgments and estimates.