Arcus Biosciences, Inc. Q2 FY2021 earnings call

• Strategy: Focus on creating highly potent small molecules, securing backbone antibodies, and building a broad portfolio of molecules targeting diverse mechanisms.
• Clinical Programs:
  • TIGIT Program: ARC-7 interim analysis was encouraging, with plans to continue studies as planned, advance Phase III studies with Gilead, and prepare for PACIFIC-8 trial with AstraZeneca. AB308 dose escalation and expansion cohorts progressing.
  • ATP-adenosine Programs: Etruma has 4 ongoing randomized studies; ARC-3 showed promising data in colorectal cancer; ARC-6 in prostate cancer had encouraging efficacy; ARC-8 in pancreatic cancer enrollment ahead of plan with promising data.
  • HIF-2 alpha Inhibitor: AB521 expected to enter clinic later in 2021 with superior PK profile.
• Collaborations: Partnerships with Gilead, AstraZeneca, Taiho, WuXi; Gilead's potential opt-in by year-end 2021 with significant payments and co-funding.

Revenue for the second quarter was $9.5 million, unchanged from the first quarter of 2021 and up from $1.8 million in the second quarter of 2020. The increase in revenue was due to the collaboration with Gilead. Operating expenses for the second quarter were $86 million, higher than the first quarter of 2021 ($82 million) and the second quarter of 2020 ($47 million). Noncash stock compensation accounted for $13.4 million of operating expenses in the current quarter, driven by continued advancement of the clinical pipeline and associated manufacturing costs.

• Cash runway: Current cash balance expected to fund operations through at least 2023.
• Clinical Trials: Anticipate submitting ARC-7 data this year, presenting ARC-8 updated data later in 2021, and initiating Phase III study for quemli next year. AB521 to enter clinic later in 2021.
• Gilead Opt-in: Expect Gilead to start opt-in trigger for anti-TIGIT program by year-end 2021, with potential $200 million to $275 million payments per program if opted in.

• Uncertainties around Gilead's opt-in decision for advanced clinical programs.
• Risks associated with clinical trial outcomes, including data not meeting expectations.
• Regulatory uncertainties that could impact the timeline for approvals and commercialization.

Q: Could investors regard CMO departure as a negative?

A: It's a unique circumstance, and Bill's opportunity is great; the relationship with Gilead remains strong.

Q: When is second interim for ARC-7 and will data be submitted?

A: No explicit timeline disclosed; next update likely with Gilead's decision-making.

Q: Likelihood of Gilead opting in early?

A: Gilead could opt in early, with ongoing engagement; they're watching data maturation, especially triplet activity.

Q: Details on PACIFIC-8 trial?

A: No specific details shared yet; working with AstraZeneca to start trial by year-end.

Q: Biological mechanism driving triplet synergy in ARC-7?

A: High PD-L1 lung tumors have high CD73, so removing adenosine fog enhances T cell activation.

Q: Why no monotherapy arm in ARC-8?

A: FDA believes gem-Abraxane signal is well understood, so initial study focuses on combination.