Arcus (RCUS) Q4 2025 Earnings Call Transcript

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DATE

Wednesday, Feb. 25, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Terry J. Rosen
• President — Juan C. Jaen
• Chief Financial Officer — Robert Goeltz
• Chief Operating Officer — Jennifer Jarrett
• Chief Medical Officer — Richard Marcus

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TAKEAWAYS

• Cash position -- $1 billion at quarter-end, up from $841 million at the prior quarter’s end, driven by a $288 million November financing.
• GAAP revenue -- $33 million for the quarter, compared to $26 million for the previous quarter, primarily from the Gilead collaboration.
• Guided full-year 2026 revenue -- $45 million to $55 million projected, per management guidance.
• R&D expenses -- $121 million this quarter, down from $141 million in the preceding quarter.
• General & administrative expenses -- $26 million, slightly down from $27 million in the previous quarter.
• Stock-based compensation -- $15 million in the quarter, up from $14 million quarter-on-quarter.
• Cash runway -- Management said, "We expect our cash and investments will enable us to fund operations until at least 2028."
• Casdatifan monotherapy efficacy -- Confirmed Objective Response Rate (ORR) increased to 45% in the 100 mg QD ARC-20 cohort from the prior 35%, approximately double that observed with belzutafan in the comparable setting.
• Pooled casdatifan ORR -- Improved to 35%, up from 31% at last update, exceeding belzutafan’s reported range.
• Casdatifan median progression-free survival (PFS) -- 15.1 months in the 100 mg cohort (17.8 months median follow-up), notably longer than belzutafan’s 5.6 months in the same clinical context.
• Primary progression rate (casdatifan+zimberelimab, early-line) -- 9% in the first 23 of 30 patients; belzutafan cited with 35% primary progression as monotherapy in Phase 3.
• PEAK-1 Phase 3 trial status -- Enrollment ongoing and "designed to get casdatifan approved and to patients as quickly as possible"; targeting completion by year-end.
• First-line strategy -- Management intends to develop casdatifan regimens avoiding TKIs, specifically testing combinations with anti–PD-1 and other non-TKI agents.
• Immunology pipeline progression -- Two small-molecule programs (MRGPRX2 antagonist and TNF inhibitor) expected to enter clinical studies within twelve months and by late 2026/early 2027, respectively.
• RCC market opportunity -- Management cited annual RCC drug sales exceeding $10 billion and projected to grow to $13 billion by 2030, with casdatifan’s peak sales estimated at $5 billion across first- and second-line RCC.

RISKS

• Management stated, "The magnitude of this decrease will be in part determined by the results of the futility analysis for STAR-121"; if STAR-121 is discontinued, there could be clinical and resource impacts.
• Adjuvant setting described as a “very high bar from a safety perspective,” and as a lower clinical development priority, potentially limiting near-term indications.
• Terry J. Rosen acknowledged, "Operationally, it is fairly minimal because the study is basically fully enrolled," but stopping the study may reduce future R&D activities and associated spending.

SUMMARY

Arcus Biosciences (NYSE:RCUS) reported a material increase in late-line casdatifan efficacy, citing a 45% ORR and a median PFS of 15.1 months, both outpacing belzutafan in the same population. Management articulated a clear strategy to accelerate market entry via the PEAK-1 Phase 3 trial, structured to achieve timely completion and regulatory submission. The company underscored RCC as a multibillion-dollar commercial opportunity and positioned casdatifan’s differentiated profile for expanded use in first-line, TKI-sparing regimens. Upcoming catalysts include mature data sets from casdatifan combination cohorts and the potential advancement of two immunology programs into clinical development. Financially, the cash position rose sharply, and operating expense reduction is anticipated pending STAR-121 outcomes, establishing operational flexibility through 2028.

• Enrollment across multiple geographies for ARC-20 has increased to approximately thirty sites in four countries, building trial efficiency and rapid cohort expansion.
• Jennifer Jarrett said, "casdatifan could be a $5 billion drug in first- and second-line RCC alone, and to be clear, this is a revenue opportunity to Arcus Biosciences," indicating high retention of economics outside Asia.
• First-line regimen selection will be determined by data from multiple ARC-20 cohorts, including anti–PD-1 and anti–CTLA-4 arms, with the aim to initiate a frontline Phase 3 trial by year-end.
• ARC-20 biomarker analyses revealed a “soft correlation between baseline [EPO] levels being higher and the extent of reduction,” supporting HIF2α inhibitor mechanistic differentiation.
• Strategic collaborations, notably with AstraZeneca, remain focused on leveraging casdatifan in PD-1/CTLA-4–containing regimens and expanding market reach, while preserving company rights outside Japan and Southeast Asia.

INDUSTRY GLOSSARY

• HIF2α inhibitor: Small molecule targeting hypoxia-inducible factor 2 alpha, a transcription factor implicated in clear cell renal cell carcinoma progression.
• Objective response rate (ORR): Percentage of patients with measurable tumor size reduction as defined by clinical trial criteria.
• Progression-free survival (PFS): Median time during which patients’ disease does not worsen in a clinical study.
• Primary progression: Disease progression at or before the first scan after treatment initiation; reflects lack of initial benefit from therapy.
• TKI: Tyrosine kinase inhibitor, a class of cancer drugs commonly used in renal cell carcinoma.
• ARC-20: Arcus’s internal Phase 1b/2 trial platform for casdatifan regimens.
• PEAK-1: Arcus’s Phase 3 registrational clinical trial evaluating casdatifan plus cabozantinib vs. cabozantinib in immune therapy–experienced clear cell RCC.
• STAR-121: Clinical study referenced as having an impending futility analysis, impacting future expense guidance and potentially development direction.
• MRGPRX2 antagonist: Experimental small molecule that inhibits the Mas-related G Protein–Coupled Receptor X2, targeted for allergic and inflammatory diseases.

Full Conference Call Transcript

our CEO, Terry Rosen, to begin.

Terry Rosen: Thanks very much, Holly, and thank you, everyone, for joining us this afternoon. 2026 is going to be a transformative year for Arcus Biosciences, Inc. As you know, we have been focused on establishing casdatifan as the unequivocal best-in-class HIF2α inhibitor and the new standard of care for clear cell renal cell carcinoma. This year is going to be another substantial year for data presentations, as well as the advancement and expansion of our Phase 3 clinical program for casdatifan. I want to emphasize, particularly to those who are new to Arcus Biosciences, Inc. or casdatifan, that the advantages of casdatifan are well understood. That is all connected from the earliest days of its design and development.

The advantages derive from dramatic differentiation of casdatifan’s PK/PD profile. These are evident in the highly quantitative and reproducible differentiation on the primary biomarker for HIF2α inhibition, EPO production, and the manifestation is improvement on all key efficacy measures. Casdatifan hits the target harder, hits it earlier. Just this week, we shared updated data from our ARC-20 cohorts evaluating casdatifan monotherapy in late-line clear cell RCC. We are also thrilled that Dr. Tony Choueiri will be presenting his data this weekend at ASCO GU. I am going to discuss these data in more detail today. But suffice it to say, the bottom line is that single-agent casdatifan continues to achieve unprecedented ORR and PFS in late-line clear cell RCC.

It is not only relative to data for belzutafan, the only currently marketed HIF2α inhibitor, but also relative to data for standard-of-care TKIs. This can be seen very clearly on slide 7 of our corporate deck. Importantly, casdatifan achieves these outcomes without the debilitating toxicities associated with TKIs. In addition to the clinical data, the ASCO GU presentation will include biomarker data that further reinforce the confidence in the differentiation of casdatifan versus belzutafan. Also, at ASCO GU, we are going to see the detailed results from the Phase 3 LightSpark-011 study. This evaluated belzutafan plus lenvatinib versus cabozantinib in IO-experienced clear cell RCC.

These data should be both validating and highly de-risking for our ongoing Phase 3 PEAK-1 study, which is evaluating casdatifan plus cabo in a similar setting and with the same control arm. With both our own data and the belzutafan data being presented, this ASCO GU will be an extremely important event for the inhibitor class, firmly establishing it as a key standard of care in the treatment of RCC. We believe HIF2α inhibitors will have a place in every line of treatment for RCC, and casdatifan is extremely well positioned to be the HIF2α inhibitor of choice across all settings.

In fact, as we will describe later, we believe the profile of casdatifan will enable a unique frontline regimen that will transform the patient journey in the setting and could translate into a multibillion-dollar commercial opportunity. Our first Phase 3 study for casdatifan, PEAK-1, is enrolling and is designed to get casdatifan approved and to patients as quickly as possible. This represents our fast-to-market strategy. There is already a high level of excitement driving enrollment in PEAK-1, and the strength of our new ARC-20 data, coupled with the further validation of HIF2α inhibition in earlier-line settings from the LightSpark data, will amplify the enthusiasm for the study.

By combining our best-in-class HIF2α inhibitor with the most widely used TKI, cabozantinib, we believe we will capture substantial share of the IO-experienced setting. Now I would like to spend a few minutes on our frontline strategy because this is going to be a huge focus for us throughout 2026. Our frontline strategy is enabled by the consistently low rate of primary progression that has been observed with casdatifan across settings. This is shown very clearly on slide 20 of our corporate presentation. Primary progression reflects the proportion of patients whose disease progresses at or before the first scan.

It is important for this rate to be as low as possible, particularly in early-line treatment, because patients with primary progression do not get an opportunity to benefit from therapy. This is devastating for both patients and their doctors. In contrast to the low rates for casdatifan, belzutafan is associated with a very high rate of primary progression, 35% as monotherapy in its Phase 3 trial. The manifestation of this key differentiation is that in frontline RCC, belzutafan will likely always require combination with a TKI to keep primary progression low. In fact, Merck’s Phase 3 study in the frontline setting is evaluating exactly that: lenvatinib, belzutafan, pembrolizumab.

That is a pretty non–patient-friendly regimen in the context of quality of life. A TKI-free regimen, on the other hand, is much more desirable for both patients and clinicians. The most common feedback that we receive from investigators is that, given casdatifan’s profile, the use of a TKI can likely be put off for years. This offers a far better option for patients that would greatly improve their quality of life. Therefore, our frontline strategy is to develop casdatifan without a TKI, and specifically with a backbone of casdatifan plus anti–PD-1, which we can build upon with a third non-TKI mechanism. We plan to execute on this strategy quickly and efficiently using our ARC-20 study.

It is probably a good time to explain how we have and will continue to leverage ARC-20 to drive our development strategy for casdatifan. First, with four monotherapy cohorts in 121 patients of efficacy data in late-line clear cell RCC, ARC-20 enables us to clearly demonstrate that casdatifan is the best-in-class HIF2α inhibitor. Second, with these four monotherapy cohorts, which were designed to satisfy Project OPTIMAs, we have established that 100 mg once a day is the optimal going-forward dose of casdatifan. Finally, the design allows us to rapidly and efficiently enroll cohorts to evaluate casdatifan-based combinations in other settings. We now have around 30 sites across four countries active in the study, and this drives efficiency.

We first utilized this with the casdatifan plus cabo cohort, where we quickly generated data to support our first Phase 3 study, PEAK-1. We then added three new cohorts, approximately 90 patients in total, to demonstrate the feasibility of using casdatifan without a TKI in early-line settings. One of these cohorts is the casdatifan plus zimberelimab cohort, which is fully enrolled and for which we have already shared a primary progression rate of 9% for the first 23 of 30 patients. With the low rate of primary progression across all settings, we and our investigator advisers are convinced that the ideal frontline therapy is a TKI-sparing casdatifan regimen.

We just started enrolling a new cohort to evaluate casdatifan with anti–PD-1 and anti–CTLA-4 to support the rapid initiation and execution of our first Phase 3 study in the frontline setting. Finally, while RCC is our top priority, we have generated exciting preclinical data for casdatifan in HCC and are evaluating opportunities to pursue HCC in a cost- and resource-efficient manner. We have spent a lot of time already on casdatifan, but I want to transition now to our immunology portfolio, where there has been a lot of and growing interest. We have leveraged the same small molecule capability that created casdatifan to build an emerging portfolio of inflammation and immunology programs.

Two of these are expected to enter the clinic over the next twelve months. We are focused on addressing validated targets against which it has historically been difficult to create small molecule drugs that have optimal pharmaceutical properties. For this reason, we expect limited competition for our I&I programs, similar to what we are seeing with casdatifan. Our three most advanced molecules are an MRGPRX2 antagonist, a TNF inhibitor, and a CCR6 antagonist. Later on this call, Juan will speak in more detail about the potential differentiation of our compounds relative to others.

But before we go there, I would like to turn the call over to Richard to review the new and updated casdatifan data that we will be presenting at ASCO GU this coming weekend.

Richard Marcus: Thank you, Terry. I would like to start on slide 9 of our corporate deck, just to remind everyone about the design of our ARC-20 study. Today’s data includes updated ORR and PFS based on a data cutoff date of January 30 from the four late-line monotherapy cohorts highlighted on the slide. This is now the fourth time we are presenting data for single-agent casdatifan in this setting, and as you will see on the next few slides, the efficacy data continue to improve with longer follow-up.

Now moving to slide 10, where we show the latest ORRs for the 100 mg QD cohort, which is our going-forward dose and formulation, the confirmed ORR increased from 35% at the August data cut to 45% now. A 45% ORR in this late-line patient population is remarkable, and it is twice that observed with belzutafan in LightSpark-005. Similarly, the confirmed ORR for the pooled analysis improved from 31% to 35%, well above the range of ORRs that has been observed for belzutafan. On slide 12, we show the latest Kaplan-Meier curve for the 100 mg cohort, and you can see here this 100 mg cohort shows an impressive median PFS of 15.1 months after 17.8 months of median follow-up.

There are some patients still on treatment who are censored before the median, but even in a highly unlikely scenario where all censored patients progress at the next scan, the median PFS for this cohort would still be 14.4 months. Let us move on to the next slide, slide 13. We show the latest Kaplan-Meier curve for the pooled analysis. The median PFS remained at 12.2 months, and as you can see here, there are quite a lot of patients still on treatment beyond 12 months and even beyond 24 months. Overall, we are seeing PFS that is two to three times longer with casdatifan monotherapy than the 5.6 months observed for belzutafan in the same setting.

These data clearly support the proposition that casdatifan is the best-in-class HIF2α inhibitor, and our highest priority now is to maximize the potential of this molecule in clear cell renal cell carcinoma. I would now like to spend some time on our development plans, starting with our first Phase 3 study, PEAK-1, which is evaluating casdatifan plus cabo versus cabo in immune therapy–experienced clear cell RCC, as shown on slide 19 of our corporate deck. PEAK-1 is actively enrolling, and we are confident that the study will complete enrollment quickly. Additionally, PEAK-1 has a sole primary endpoint of PFS, which should enable a relatively short time to readout.

So this is a fast-to-market strategy that builds on top of standard of care, and based on all the data to date, we have high confidence that this study will establish casdatifan plus cabo as the new standard of care in IO-experienced clear cell RCC. Meanwhile, as Terry talked about earlier, our first-line strategy has the potential to transform the treatment paradigm for RCC. We are focused on the development of a TKI-free regimen that improves on the efficacy of IO-only therapy, and there are several opportunities for casdatifan to do this. First, the biggest limitation of anti–PD-1 plus anti–CTLA-4 therapy is that it has a relatively high rate of primary progression that is 20% to 25%.

With casdatifan’s low rate of primary progression and its orthogonal mechanism, we believe we can meaningfully improve upon this high rate of primary PD seen with the IO-only therapy. In fact, we have shown that patients who progress quickly on IO-based therapies have tumor markers that correlate with responsivity to casdatifan. Additionally, median PFS for IO-only regimens in clear cell RCC is relatively short at about 12 months. So, again, we believe we can meaningfully improve on this PFS. To determine the optimal go-forward TKI-free regimen, we are evaluating multiple casdatifan combinations in ARC-20.

These include our fully enrolled cohort evaluating casdatifan plus zimberelimab, which we believe will convincingly demonstrate the ability of casdatifan plus an anti–PD-1 to form the backbone of our first-line regimen based on both safety and efficacy. We plan to share data from this cohort in the second half of this year. Additionally, we just started a cohort to evaluate casdatifan in combination with anti–PD-1 and anti–CTLA-4. In addition to this cohort, we also plan to evaluate another TKI-free combination for casdatifan in the frontline setting, and we will share more about this in the coming months. Lastly, we continue to monitor data from the EVOLVE study evaluating casdatifan plus lorustamig, an anti–PD-1/CTLA-4 bispecific, in collaboration with AstraZeneca.

The safety and early efficacy data from all of these cohorts will inform the design of our first Phase 3 study for casdatifan in the frontline setting. We have already started planning activities to enable us to initiate a Phase 3 study as soon as we have the relevant safety and efficacy data in hand, and our goal is to initiate a Phase 3 study at the end of this year. With that, I would like to turn the call over to Jennifer to speak in more detail about the potential market opportunity for casdatifan.

Jennifer Jarrett: Thanks, Richard. I would like to start on slide 22. RCC represents a massive multibillion-dollar market opportunity for casdatifan. Sales for RCC drugs in just the major markets are over $10 billion annually today, and are anticipated to grow to $13 billion by 2030. As you can see here, historically, the market has been dominated by only two classes: IO and TKIs, with HIF2α inhibition the only new class of drugs on the horizon today. Importantly, as of today, the HIF2α inhibitor field is only a two-horse race with just belzutafan and us with casdatifan.

While Merck is slightly ahead of us, historical data has shown that in just a two-player market in oncology, second entrants have captured 42% when there is zero differentiation. And let me repeat that: this is when there is no differentiation. With efficacy differentiation, as we are seeing with casdatifan, this share can be meaningfully higher, and oncology analogs have shown that fast followers with differentiation can have share as high as 85%. Additionally, we are developing casdatifan with different combination partners than belzutafan, which should drive even further differentiation. Turning to slide 23, the sole marketed HIF2α inhibitor, belzutafan, which is currently approved only in late-line clear cell RCC, is already generating annual run-rate sales of nearly $1 billion.

While impressive, this is only scratching the surface in terms of market opportunity for a best-in-class inhibitor. For casdatifan, we are focused on earlier-line settings which have larger patient populations and longer durations of therapy, both of which will contribute to a much larger market opportunity that is multibillion dollars in size. Specifically, our PEAK-1 study is targeting the IO-experienced setting, of which there are approximately 21,000 patients in the major markets alone, more than twice the third-line patient population where belzutafan is approved today. Additionally, with the duration of therapy at least double that of belzutafan today, we expect a peak sales opportunity of $2.5 billion in the IO-experienced, or PEAK-1, setting alone.

In first line, the opportunity is even greater. With our TKI-free strategy, we believe we can take meaningful share from both IO/IO and IO/TKI regimens. Here, we estimate peak sales potential for casdatifan of $3 billion or more. All in, casdatifan could be a $5 billion drug in first- and second-line RCC alone, and to be clear, this is a revenue opportunity to Arcus Biosciences, Inc., not total addressable market. There is opportunity to expand that further with trials that support casdatifan use in other RCC settings, as well as potentially other tumor types like HCC, which Terry referenced earlier.

And as a reminder, we have all of the rights to casdatifan, including economics, other than in Japan and certain other Southeast Asia countries. So nearly 100% of casdatifan revenues would accrue to us. I will end with one slide that supports our plan to focus on a TKI-free regimen in the frontline, and that is slide 24. Here we show market research that we recently conducted to determine the preferred combination partner for casdatifan in the frontline. You can see here very clearly that the IO/IO regimen is preferred three times more than the IO/TKI regimen as a combination partner for casdatifan for all the reasons we discussed earlier today.

I would now like to turn the call over to Juan to discuss our immunology portfolio in more depth.

Juan Jaen: Thanks, Jennifer. I am happy to describe our emerging immunology portfolio. This is an area in which we have had interest and core expertise since the founding of the company. This portfolio currently includes five programs that you can see in our slide deck, reflecting the maturity of multiple years of research and compound optimization. Our strategy is simple and has been core to our approach since the very beginning of the company. Minimize biological risk by focusing on and building upon mechanisms with validated clinical activity. In general, we are focused on taking a small molecule approach to pathways where biologics have been highly successful.

This is where we believe that we have an opportunity to create the most value. We generally look for more than just the convenience of an oral drug. In fact, the value proposition for several of our programs includes an expectation of differentiated efficacy and safety relative to the approved biologics. Our portfolio includes several programs, as I mentioned before, five active ones. But today, I will focus on our MRGPRX2 and TNF inhibitor programs, which are expected to be the first to reach the clinic. Firstly, regarding our MRGPRX2 antagonist program, we plan to target both chronic urticaria as well as atopic dermatitis.

MRGPRX2, which has received a lot of attention in recent months, represents a novel and exciting target for the modulation of mast cell activity. While anti-IgE and anti–IL-4 antibodies are marketed very successfully—for example, Dupixent alone is a $15 billion drug—there is still significant unmet medical need. While the marketed antibodies help, a substantial percentage of patients do not respond well to treatment. I want to emphasize that targeting mast cells is a validated approach in allergic conditions such as chronic urticaria and allergic asthma.

A small molecule approach that targets a novel pathway for mast cell degranulation could represent a differentiated mechanism of action to address the existing clinical need, both in chronic urticaria as well as atopic dermatitis, relative to the available biologics. Our candidate molecule has been specifically designed to improve both on the potency and pharmacokinetics side of the equation relative to the early small molecule entrants into the clinic. In fact, we believe that our required clinical exposure in patients will be dramatically lower than those required for the leading small molecule currently being evaluated in clinical trials. This could translate into a potentially improved therapeutic index and potential best-in-class profile.

We expect our MRGPRX2 antagonist to enter the clinic later this year. We plan to start with a healthy volunteer Phase 1 study, to be followed quickly with a proof-of-concept study in chronic inducible urticaria. This program has the potential to generate proof-of-concept data within 9 to 12 months following entry into the clinic. Our TNF inhibitor program also represents another significant opportunity. Anti-TNF antibodies are amongst the most successful drugs ever developed. With our small molecule approach, we have the potential to develop a Humira in a pill. One of the challenges with today’s TNF antibody therapies is that they block TNF signaling at both receptor 1 and receptor 2.

However, blocking TNF receptor 2 can actually impact regulatory T cells and tissue repair, resulting in a paradoxical inflammation as a side effect in some patients. Our approach is designed to selectively prevent TNF from activating TNF receptor 1 while preserving TNF receptor 2 biology, which we expect to be an effective but safer alternative to the antibodies. Relative to the early competitor in the clinic, our molecule has been designed to have a better overall potency and human PK profile. We expect to be in the clinic with this program in late 2026 or early 2027. Similarly to the MRGPRX2 program, the TNF program also has the potential to generate proof-of-concept data fairly quickly.

We are very excited about the potential for our immunology programs to provide improved options for patients, and we are working to move these into the clinic as rapidly as possible. With that, I would now like to hand it over to Bob to review our financials.

Bob Goeltz: Thanks, Juan. Our cash at the end of the fourth quarter was $1 billion as compared to $841 million as of the end of the third quarter. Our cash position was bolstered by proceeds from our $288 million financing in November. Turning to our financial results for the quarter, we recognized GAAP revenue for the fourth quarter of $33 million, which compares to $26 million for the third quarter. Our revenue is primarily driven by our collaboration with Gilead. Our R&D expenses for the fourth quarter were $121 million as compared to $141 million in the third quarter. G&A expenses were $26 million for the fourth quarter compared to $27 million for the third quarter.

Total non-cash stock-based compensation was $15 million for the fourth quarter compared to $14 million for the third quarter. Shifting gears to guidance for 2026, we expect to recognize GAAP revenue of $45 million to $55 million for the full year 2026. As we discussed on prior calls, we expect operating expenses to decrease meaningfully in 2026 as compared to 2025. The magnitude of this decrease will be in part determined by the results of the futility analysis for STAR-121, which will be conducted in the next couple of months. Accordingly, we expect to provide more detailed R&D expense guidance in connection with our Q1 call.

We expect our cash and investments will enable us to fund operations until at least 2028. For more details regarding our financial results, please refer to our earnings press release from earlier today and our 10-Ks. I will now turn it back over to Terry.

Terry Rosen: Thanks very much, Bob. I am going to end on slide 33 and spend a bit of time on our upcoming news flow for 2026. As I mentioned at the beginning of the call, this is going to be another huge year for casdatifan data. Those data are both going to reinforce the confidence in its best-in-class profile and provide greater clarity on our first-line development strategy. Later this year, we will have at least two additional data presentations for casdatifan. First, we will be presenting updated data from the casdatifan plus cabo cohort.

We will do that either at an investor event or medical meeting, by which time we will have a minimum of 12 months follow-up on all patients. The aim here is to be able to provide a relatively mature and meaningful dataset, including Kaplan-Meier curves. Also later this year, we will share new data from the casdatifan plus zimberelimab cohort of ARC-20. This is intended to demonstrate the safety and early efficacy of the combination and to establish casdatifan plus anti–PD-1 as the backbone for our first-line combination. There is also a lot happening on the development front. For PEAK-1, our first Phase 3 study for casdatifan, our goal is to complete enrollment by year-end.

We are also adding first-line combination cohorts to ARC-20 to determine the optimal regimen for our first Phase 3 study in the frontline setting, and this will enable us to initiate our second Phase 3 study for casdatifan at the end of this year. We also expect to advance our two lead programs targeting inflammation and autoimmune disease into the clinic by early next year. With that, I would like to thank everybody for joining us. We appreciate your interest and your continued support of Arcus Biosciences, Inc., and we are happy to open the call for questions.

Operator: Thank you. When preparing to ask your question, please ensure your device is unmuted locally. Our first question comes from Salem Syd from Mizuho. Your line is now open. Please go ahead.

Salem Syd: Great. Thanks for the question, and congrats on the data at ASCO GU. Just one from us. I appreciate all the color around the first-line strategy. The numbers that you provided here on primary PD and PFS, are there any particular trials that you are looking at just so we can start to think about the right IO/IO benchmarks here as you move away from TKI-based regimens? And second to that, any thoughts on what you would like to see in terms of improvement from those benchmarks? Thanks so much.

Richard Marcus: Sure. That is a good question. As we move into this TKI-sparing regimen, the focus should really go to ipi/nivo. There is a lot of data out there on ipi/nivo. Those of you who were at ASCO last year know that there was basically a decade of follow-up. The reason is ipi/nivo is the number one therapy that is utilized in the frontline, and it is roughly in a third to 35% of patients. One of the reasons it is growing, but one of the reasons that it is not used even more is the rate of primary progression, and that is on the order of 20% to 25%. Second, it has a relatively short PFS.

It is on the order of 12 months or so. Those numbers become very clear, simple lines to put in the sand where obviously we want to demonstrate meaningful improvement. I would emphasize that it is all going to start with that rate of primary progression. We believe it is exciting that we have even shown with anti–PD-1 alone we are looking at potentially single-digit rate of primary progression. We will have more to say on that later this year. Those form a good place to start the conversation around benchmarks. Yeah.

Just with a specific study to look at, CheckMate-214, which was the registrational study for ipi/nivo in frontline RCC, and then the other study to look at that had an ipi/nivo arm was COSMIC-313. Interestingly, the key efficacy measures—so rate of PD, PFS, OS, etc.—were all very, very similar across those two studies.

Salem Syd: Okay. Super helpful. Thanks so much.

Operator: Thank you. Our next question comes from Lee Wotzek from Cantor. Your line is now open. Please go ahead.

Daniel Bronder: Hey. This is Daniel Bronder on for Lee. Congrats on the data update as well from our end. We are just curious to hear where you are at with the volru plus casdatifan run-in the frontline study that is being operationalized by AstraZeneca. I know you had mentioned that it was paused as you were looking at the data, but any more color about when it might open again, if it is going to open again?

Terry Rosen: Thanks. What the question is referring to is the collaboration that we have with AstraZeneca that is looking at a combination of casdatifan and their bispecific anti–PD-1/anti–CTLA-4 antibody. As you stated, that study was paused, but the patients on the study continued. They were dosed down in terms of the dose of volru. They also saw continued use of casdatifan. We are learning quite a bit about that—anti–PD-1/anti–CTLA-4 combined with casdatifan—and it is looking good. Since that dose down, we have not seen any additional immunities, and I will remind you those looked very volru—very anti–CTLA-4–like. We have not seen those since there has been the dosing down. One important thing is we did not see any primary progression there.

Even though it is small n, things were looking in the direction that we find and expected to be the case. At this point, I cannot say anything further on plans. We are discussing those with AstraZeneca in real time. It is important to recognize that from a probability standpoint, while we continue to learn from the study and anything we do will inform what we do in Phase 3, the thing to be knocked off the pedestal going in is that we recognize that ipi plus anti–PD-1 combined with casdatifan is what anything would need to beat. Our intent is that the ipi/nivo plus casdatifan arm is open now in ARC-20.

It will enroll fast, we will get the data that we need, and that will inform what we do in our Phase 3 study. Thank you.

Operator: Our next question comes from Daina Graybosch from Leerink Partners. Your line is now open.

Gil: Hi, everyone. You have got Gil on for Daina. Thanks for the question, and congrats on the data. It looks really great. In your biomarker analyses, you mentioned that the deeper reductions were correlated with responses. Is this due to higher baseline EPO? In other words, do patients generally reach a similar numeric EPO level after treatment? I have one follow-up.

Terry Rosen: I will let Juan give you some comments on that. There is what I would describe as a soft correlation between baseline levels being higher and the extent of reduction. Both of those, we interpret as reflecting the extent of HIF2α activity in those tumors. The tumors that have a stronger HIF2α signal tend to present with higher EPO levels, and those also tend to be the patients that display the deepest and more sustained reductions.

Gil: Got it. When you are looking at these biomarkers, did you also look at VEGF and other genes that might also be downstream of HIF2?

Juan Jaen: Yes. There are other soluble peripheral markers that we will be disclosing later this year that are regulated by HIF and are well known to be—each one of them independently—negative prognostics in this setting.

Terry Rosen: One thing I would emphasize also about the biomarker work that I think is important for people to recognize: This is most important in supporting the overall understanding and tying to mechanism of the activity, but in this particular case, there is no sense that we would ever think about having or needing a selection criteria based on the biomarker. What I will remind you is that probably 80-plus percent, 90-some-odd percent of patients with clear cell RCC have some level of HIF2 as a driver. So when we report on these type of data, what you are actually seeing is while there is correlation, even those patients with lower levels do benefit.

We get a pretty continuous spectrum of benefit throughout those patients as opposed to some sort of binary cutoff that you might be seeing.

Gil: Got it. Thank you.

Operator: Our next question comes from Richard Law from Goldman Sachs. Your line is now open.

Jane: Hi. This is Jane on for Rich. Congrats on the progress. We have two questions about the upcoming presentation at ASCO GU this weekend. First, Merck will present detailed results of belzutafan plus lenvatinib in the Phase 3 LightSpark-011, which may set the bar in second line. What are your thoughts and expectations for LightSpark-011? My second question is, Merck is also running a study of belzutafan plus zanzalintinib in the Phase 1b/2 KEYMAKER-U03. They have a TIP poster this weekend. What is your view on this combo strategy versus casdatifan plus cabo? Thank you.

Terry Rosen: Let me start with expectations around LightSpark-011. From everything that Merck put out—they obviously said that the study was successful—and any body language that you might infer, we think the data are going to look quite good, and we are excited about that. We think a couple of things. First off, it is really providing important validation for the field in an earlier-line setting, and we feel great knowing that we have the better HIF2 inhibitor and we are going on top of what is the standard of care, cabo, insofar as TKI, versus lenvatinib, and we have the same control arm. From our perspective, we have no knowledge of anything quantitative, but we expect good data.

The better the Merck data, honestly, the better we feel. It will be better for patients and better for Arcus Biosciences, Inc. because we think we are going to outperform them with both of the molecules in our combination. The second part—when I said there are two important things—is all of our investigators have emphasized this point. We recognize we have a lot of tailwinds in terms of enrolling PEAK-1, but for a number of reasons, the positive data that they will present is going to really help us to drive enrollment. As I mentioned, we are looking to be fully enrolled by the end of this year. We think the LightSpark data will help us very much.

I will make a couple of comments on zanzalintinib, and I will see if Jennifer or Richard want to add anything more on top of it. We just simply do not see zanzalintinib as being a key changer, at least in clear cell RCC at this point. We think cabo is the clear standard of care. Not only does it have a great profile, but the reality is it is very entrenched. It is used a lot, clinicians know how to use it, they know how to deal with the AEs, and they are very comfortable with it. We think cabo is the TKI of choice.

Richard Marcus: One note on KEYMAKER-U03 that you are asking about: the presentation is just the TIP from the KEYMAKER study, which is just a Phase 1b/2 platform study. There is no data that is going to be presented for belzutafan. It is a trial-in-progress poster.

Jane: Right. Yes. It is a TIP poster. Thank you so much. This is super helpful.

Operator: Thank you. Our next question comes from Asthika Goonewardene from Truist. Your line is now open. Please go ahead.

Cardi: Hi. Good afternoon, everyone. This is Cardi on for Asthika from Truist. Thank you for the questions. First question on ARC-20 monotherapy: the last update had ORR somewhere in the 30% range, and now you are showing improvement in the mid-40s. How much of that was due to deepening responses, and at what time point were you seeing responses start to deepen?

Terry Rosen: It is definitely all due to deepening of response. I like the question because it goes back—we share a lot of data and we share almost in real time—and one of the slides we have included shows how those data have evolved over time. We also pointed out at the earliest time point, with this mechanism and also the safety profile, it is very clear that responses can occur even out past a year. The responses occur at all sorts of different time points. Stable disease patients also continue to do very well. The question about DOR has not come up. What I can say is we are not close to a DOR.

So patients, once they get past that initial scan, do very well, and that is why we are seeing the PFS we are talking about. There are no generalities in terms of where those responses may occur. I would emphasize, even when we have seen patients that have generated their initial response at past a year, it is meaningful. These are genuine deepening of response. The way we interpret it is that people are not used to looking at oncology mechanisms that have a relatively benign safety profile. What I mean by that is they are not poisoning you while they are reducing the size of your tumor.

Once these patients become stabilized and they are healthier and stronger, all those things kick in, including their own immune system, to help. That is why you may see patients that all of a sudden deepen—it may not have even always been a gradual deepen—and they start to deepen later on. You do have for this mechanism what looks very IO-like in terms of the tail. Patients that do well do well, and they do well for a long time. That is one of the reasons we feel, and I think it is justified by the data, that the market is not only going to be driven by the number of patients, but by the durability of the treatment.

We have had a lot of patients, even on single agent in the late line, out past two years. We think that in the frontline you can have patients going three, four, five years. That gets to the whole TKI-sparing strategy, where you are not just pushing off that TKI for a matter of months. You are going to dramatically change the opportunity for that patient that first presents, insofar as not having to go for TKI until many years later.

They will still ultimately get whatever benefit you might get from the TKI, but you just flip around the paradigm of no longer requiring that at the outset to get the tumor under control, but they can get that years into their therapy.

Cardi: Got it. Thank you so much. If I may, I am just going to squeeze in one more question. You have said that STAR-121 will have a futility analysis in the coming months. If you choose to discontinue STAR-121 based on that result, what is the clinical impact, and what is the impact on your R&D spend?

Terry Rosen: The clinical impact is we are already anticipating from an operational standpoint that likely will occur, but we may see something that tells us to keep going. Operationally, it is fairly minimal because the study is basically fully enrolled. The impact operationally would be that you will not be doing all that work leading up to the registration. I will let Bob comment on how we think about the expense part of that.

Bob Goeltz: The vast majority of the expense that we see for especially any of our late-stage clinical trials is incurred primarily through the enrollment cycle and as the primary portion of patient treatment is occurring. When you get to the latter parts of the trial and you have presumably seen that decrease in expense—as an example for 021 and 012021 and other studies—when we get to the latter part of the lifecycle of trials, the expense starts to drop off pretty markedly.

Cardi: Got it. That is helpful. Thank you so much.

Terry Rosen: Thank you.

Operator: Our next question comes from Yigal Nochomovitz from Citigroup. Your line is now open.

Yigal Nochomovitz: I want to probe a little bit more in terms of the frontline strategy. You have indicated that casdatifan plus zimberelimab will be the backbone of this strategy, and then the question, of course, is whether the CTLA-4 comes into the mix. With that in mind, I am just curious: when you ask oncologists, as you showed us this new market data, in that question you did not put in the question on casdatifan plus zimberelimab; you put the triple. Is the interpretation there that your base case is really to do PD-1/CTLA-4 for casdatifan, and that is where it is going to shake out?

Or is there some reasonable potential that it could end up just being what you have identified as the backbone, casdatifan plus zimberelimab?

Jennifer Jarrett: I think you actually described it really well, that right now our base case assumption is that it would be casdatifan plus ipi/nivo. Right now we are thinking of casdatifan plus the anti–PD-1/anti–CTLA-4 regimen as the backbone that we would likely build on. We will keep looking at the casdatifan plus zimberelimab data as it matures. Base case right now is casdatifan with ipi/nivo. As we talked about today, that cohort is actually now enrolling, and the idea is to generate safety data very, very quickly and, again, an early look at efficacy by looking at the rate of primary progression.

What is nice about this combination, as Terry was talking about earlier, is because ipi/nivo has a relatively high rate of primary progression, if we see early on at the first scan that rate of primary progression is coming down, that gives us a very early read on efficacy, which is nice to have.

Terry Rosen: What I will add, Yigal—and this has come up from investors and it is also a topic with investigators—the data that we have seen thus far, and obviously they were early and we showed you the primary progression, is a good start. The question sometimes comes up in the context of casdatifan: how much value does the anti–CTLA-4 bring? We are going to have an early dataset.

The way we look at it is if you think about it—and this comes up even though it was not a formal part of that analysis that Jennifer did—when you talk with investigators, including some of those who are aware of the anti–PD-1 early data, more specifically, as you could imagine, anti–PD-1 plus casdatifan in the frontline would be, from a patient standpoint, just awesome. To not have to go with anti–CTLA-4 and not have to go with a TKI would be like—comes up sometimes like a vacation. We are going to pay a lot of attention to that.

With that said, I would also put the conservative part of this that we think is important: we do not want to get too cute. If anti–PD-1 plus anti–CTLA-4 each on top of casdatifan looks similar, or maybe anti–PD-1 potentially could be there, we are still more likely than not to go for a three-arm study where we would have anti–PD-1/anti–CTLA-4 plus casdatifan versus anti–PD-1 plus casdatifan versus ipi/nivo. We are not going to get too cute and outsmart ourselves just based on early data. But we are going to give anti–PD-1 plus casdatifan its shot at the limelight if possible because it would be great for patients.

Operator: Our next question comes from Jonathan Miller from Evercore. Your line is now open.

Jonathan Miller: Hey, guys. I am not sure if you can hear me, but hopefully you can. I was going to ask on the first-line setting as well. If I could just follow up with you on the first-line setting: you say at least one Phase 3 starting this year. You are adding an additional undisclosed combo to ARC-20 in the first-line setting this year. The ipi/nivo combo is open. You just said it was your base case, but you have not committed to showing data for us ahead of making that Phase 3 decision. I just want to get a sense for, broadly speaking, how many first-line Phase 3s are you thinking about in aggregate eventually?

What are your plans for the adjuvant setting, which I noticed you did not mention except saying that casdatifan belongs in all lines of therapy? And what are your current thoughts on partnering in RCC and beyond for casdatifan and whether that unlocks additional bandwidth to do some of these late-stage designs?

Terry Rosen: I will briefly address the partnering part and then turn it over to Jennifer to give a more fulsome answer. From a partnering standpoint, what you should expect to potentially see—and you probably will see—are clinical collaborations. At this point, we love that we basically own 100% of the casdatifan rights other than in Japan and a few other Southeast Asian countries. As you know, that gives us enormous strategic optionality. With that said, there are other mechanisms and settings that make sense, and since casdatifan is a relatively rare beast, we feel like we are in a good position to do some smart clinical collaborations under good terms.

I will let Jennifer comment more broadly on the number of Phase 3s we might do, their sequencing, and when we will disclose some data, etc. We will not make a decision without giving a sense of what drove that decision. Go ahead, Jennifer.

Jennifer Jarrett: On the Phase 3 front, obviously we have PEAK-1 that is enrolling. Our plan is to start one other Phase 3 study around year-end. That would be in the frontline setting and informed by this new cohort that we are adding that you referred to, Jonathan—the cohort that is looking at casdatifan plus anti–PD-1 plus anti–CTLA-4. You could probably make an assumption that the first Phase 3 study would be looking at that triplet versus ipi/nivo. That would probably be your base case assumption today. We will probably also add, as you were pointing out, another combination to ARC-20 to look at casdatifan, anti–PD-1 plus another mechanism—probably something that would not be a big surprise to a lot of people.

As far as whether we would take that into a Phase 3, that is very TBD right now. Right now, that first Phase 3 in the frontline setting that I mentioned is our top priority and what we would really be focusing on from a resource perspective. But we are also interested in generating some other data with that other combination as well. On the adjuvant setting, we will see what the LightSpark-022 data looks like. Right now, we probably view that as lower priority relative to certainly frontline and maybe some other things we might do with casdatifan, including HCC, just given it is not a huge market. Patients are on treatment for 12 months max.

It is a very high bar from a safety perspective in the adjuvant setting, just because these patients are doing pretty well and feeling well. A lot of times, they do not want to be on therapy and they come off therapy. We will see their data. We are always evaluating it and will continue to evaluate it. It is something that we might consider for the future.

Terry Rosen: Obviously, as the year goes along, we will continue to share, and probably into next year, we will be sharing. Our view is that HIF2 inhibition is going to be used in every line, in every setting of clear cell RCC. Our ultimate development strategy—whether it is supportive studies, etc.—is going to make sure we have covered everything with time. From a prioritization standpoint, it is PEAK-1, frontline, potentially another one next year, and then we will be surrounding those with other studies that make sense so that we are leaving no stone unturned in being able to be used and reimbursed in every line of therapy.

Jennifer Jarrett: We are continuing to look at clinical collaborations for that other new frontline option that we are thinking about, so not everything is on our dime. It is not all our resources, etc. That is important to us as well.

Jonathan Miller: Great. If I could just squeeze in one more before we run out of time. On MRGPRX2, you have mentioned a couple of times the potential for a safety delta on the basis of better potency and lower dosing. Are there specific safety signals that we should be looking at when we think about data here, and how much data from the initial cohort, especially in healthy volunteers, will you need to be able to put some bookends around what that potential safety delta might look like?

Juan Jaen: Outside of oncology, you are always one dose away from complete disaster. A well-run healthy volunteer study will give you some comfort, but you are always accumulating additional data. The default thing to always look out for—and I think that some of our competitors in the space have generated a little bit of a hint of this—when you are dealing with very high exposure of any xenobiotic, you need to look at liver function. If you go too high, you will actually start to see the liver complaining.

We think that we will be able to put way more daylight between the amount of our drug required to elicit similar pharmacology and levels where the liver is going to start to complain.

Jonathan Miller: Thank you.

Operator: Our last question comes from Emily Bodnar from H.C. Wainwright. Your line is now open. Please go ahead.

Emily Bodnar: Hi. Thanks for squeezing me in and taking the questions. It would be great if you can give us some updated expectations for the casdatifan plus cabo data later this year, given you now have pretty mature monotherapy data with median PFS of at least 12 months. How are you thinking about data for the full 45-patient dataset?

Operator: There seems to be a connection issue. We will be right back in just a moment. Emily, could you please repeat your question?

Emily Bodnar: Yes. Thank you. I was going to ask if you could give us some more updated expectations for your casdatifan plus cabo data later this year, given you now have pretty mature monotherapy PFS of over 12 months. How are you thinking about what the combo could look like in earlier-line patients in that full 45-patient data? Thanks.

Terry Rosen: Go ahead, Jennifer.

Jennifer Jarrett: As Terry said, when we present the data, the goal is to have 12 months minimum follow-up on everybody. We may not have a median PFS, but we will be able to look at a Kaplan-Meier curve and at least make some educated guesses as far as where PFS could shape up. As you know, for casdatifan mono PFS, we are seeing a range of 12 to 15 months. We will see what cabo adds. Right now, we believe very strongly that we can beat cabo alone because casdatifan mono alone looks better than cabo mono. We will build on both what casdatifan mono looks like and what cabo mono looks like.

We are excited to get this data out, and we think, like the LightSpark-011 data, it will also be very de-risking for the PEAK-1 study.

Terry Rosen: The other nice thing about LightSpark-011—just maybe obvious—but it will give a good contemporary look at what cabo alone looks like because that is the control arm. To the extent that you are thinking about benchmarks—

Jennifer Jarrett: Yes, and what gives us a lot of confidence in the casdatifan plus cabo data and the PFS is, like I said, what we are seeing with casdatifan mono. The fact that casdatifan mono looks better than cabo mono and, we think, maybe even looks better than belzutafan plus lenvatinib. We will see what the LightSpark-011 data shows.

Emily Bodnar: Great. Thank you.

Terry Rosen: Thank you.

Operator: We currently have no further questions and therefore conclude today’s call. Thank you all for joining. You may now disconnect your lines.

Terry Rosen: Thank you, Claire. Good.

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