Arcus Biosciences, Inc. (RCUS) Earnings Call Transcript & Summary

Okay. I guess, good morning or good afternoon, depending on where you're situated in the world. Welcome to Barclays Global Healthcare Conference. I'm Peter Lawson. I'm one of the biotech analysts at Barclays. Just wanted to thank everyone for taking time out of the day today. [Operator Instructions] And it gives me great pleasure to introduce management team from Arcus today. So we've got of course, Terry Rosen, CEO; Bill Grossman, CMO; Juan Jaen, the President of Research. And we've also got Kaytee Bock as well from IR. So thank you so much for joining us.

I guess I'll kick it off just with a general question I've been asking all our companies just like -- I guess, over 200, 300 oncology companies out there. What's your point of differentiation you think the company has -- that Arcus has that others perhaps don't have or try to imitate?

Well, sure. So thank you, Peter, and thanks, everyone, who's joined. I'll really try to be brief since we have so much going on, and I know you have a lot of questions. Arcus is building itself for the long term. We look to be a long-term independent company. We've got 5 molecules in the clinic. We're very focused on intra portfolio combinations. We brought an anti PD-1 antibody very early in the genesis of the company. We have 2 anti-TIGIT antibodies that we're moving along. We have very unique molecules that interdict the ATP adenosine pathway. We feel they're both best-of-class and first-of-class opportunities. One that blocks the actions of adenosine, one that blocks the formation of adenosine. We have some phenomenal collaborations, the one I'd highlight most is one with Gilead. It's a very enabling collaboration, certainly enhances our opportunity to compete and compete aggressively with a number of very major players, whether they're Merck, whether they're Roche Genentech, whether they're AstraZeneca. The programs we work on, they're very ubiquitous. The biology is ubiquitous. So we're across a broad array of not only molecules but clinical trials. We have a number of important readouts this year. I'd say it's a transformational year for us. We started in January with data from AB680 in pancreatic cancer, very exciting. We're building on that. A long list of readouts from our AB928 adenosine receptor blocker that will continuous data flow throughout this year. And of course, a lot of excitement around our anti-TIGIT program. We'll have an interim analysis in the second quarter from an ongoing 3-arm trial that we think is very important in that particular field. And we just started a registrational trial around our anti-TIGIT. I'd also just point out in that trial, it will also be seeking approval of our anti-PD-1 monotherapy. So I would say that probably the biggest distinguishing feature from early-stage companies is the breadth of what we're working on, the opportunity of what we're working on. And at the time we are in our evolution, where I think this year is going to just be loaded with all sorts of exciting randomized data readouts. So I'll stop there, and I'm sure you have a good list of questions.

Yes. Thank you so much. Since just on the anti-TIGIT, the kind of the go, no-go interim analysis. That's more of a kind of a press release essentially with we're moving ahead and maybe an open versus actually seen data just to make that super crazy myself?

Yes, absolutely. So we'll give non ambiguous readout, just as you said, at the interim analysis in the second quarter. And then we'll present in the second half of the year, we will present those data in detail the first opportunity in a medical conference.

When we see that data, I guess, it could be something like ESMO. Do you think it's more of a company-sponsored event. But when we do, will that be -- what's the best benchmark? Is it Roche? Is it Merck? What's the best way to think through that as a comparator?

Yes. So first of all, it will be a medical conference, but I'll -- I think there's comparators in both sense because there's historical data when you think about just -- you're trying to beat really KEYTRUDA plus chemo but not bringing that baggage of chemo. And then, of course, Genentech has put out Phase II data that sets a bar for that anti-TIGIT plus anti-PDX, I'll let Bill comment a bit more on how to think about it.

As Terry mentioned, we'll be targeting a medical conference in the second half of this year, more information on which one in the future. But yes, we believe the randomized CITYSCAPE data from Merck and Genentech, it's probably the best data set that's known in the public forum to date being a placebo-controlled randomized trial of approximate 125 patients. It's really the largest data set out there so far. And I think we all believe that they have established some very clear signals of early clinical benefit in high population in that TPS period in population with the combination. So that's kind of the directional bar that we'll be looking at to achieve as well.

Got you. Do you think -- I guess, trying to read between the lines or read the tea leaves. Do you think there's -- do you think most of that activity is driven by kind of greater than 60% or 70% of TPS scores, if that's possible? Do you think is that kind of higher PD-1 expression that's driving it?

Good. Why don't you comment on that as well.

Yes. I mean, so far, the only data we have out there is really the Genentech data to kind of guide us, but that is clearly the case in the CITYSCAPE trial where really the only major clinical benefit was achieved in that greater than 50%. If there's additional potential drivers of responses in that subgroup, we haven't seen that yet. But we do know that TIGIT expression really correlates very strongly with PD-L1 expression. So that's kind of our base assumption right now is that it's going to have to be in cases where there's also a PD-L1 expression.

Okay. The -- I guess that bar that's set by TIGIT, do you think it's -- could that be artificially high because it's PD-L1? Or just try and help us kind of look through the puts and the takes in that Roche data of where your response could be or rather what's driving this higher versus lower activity?

Why don't you keep going, Bill.

All right. Sounds good. The -- as far as what the followup data shows, they're pretty consistent in the CITYSCAPE data that above 60% for the combination. I think one thing that people have noted is the potential lower-performing arm, which is in the low 20% versus historical comparisons. In mono treated patients than PD-L1 high population. So if we kind of look historically against what they showed in the atezo mono arm, versus the PD-L1 high population and other checkpoint inhibitors, we have a number of different comparisons that we think we're going to probably be, hopefully, more in line with, such as KEYNOTE-024, where there is an overall response rate of probably the highest out there of 45% and KEYNOTE-042, 39%. IMpower110 was around 38%. And they're all hitting on similar kind of PFS marks as well in those trials. So the PFS marks are around 7, 8 months range. And so those will be the kind of benchmarks. We're also kind of looking towards historical for our mono Zim arm. But then we expect to see a significant increase in the clinical benefit obtained by the doublet arm. And of course, we have our interesting triplet arm in there as well that we don't talk about a lot, but will be interested to see how that performs as well, especially in the clinical, kind of more of the PFS readout. So we'll be looking at later this year.

Do you think we should be looking at kind of that overall kind of atezo plus anti-PD-1 and anti-TIGIT as kind of the bar. Or is it that kind of delta between atezo and then the difference between atezo and atezo plus anti-TIGIT? Is there a little bit change?

Yes. I mean I believe again that hopefully our atezo -- sorry, Zim mono arm is going to be more in line with the historical comparators. So the delta that they showed was obviously much higher because of what it looked like maybe underperformance in that mono arm, although they have stated that they had real-world data to support that atezo mono arm but really, what we're really looking at is the clinical performance of the doublet to be in line with what they showed with CITYSCAPE. We expected delta, not as big of a delta as what they showed in CITYSCAPE and really it's the doublet performance that we're looking at.

The PD-L1 low populations or lower populations maybe, do you think you can drive responses in those with -- and I know your trial is not set up that way, but do you think there's a potential to kind of get TIGIT working in that population as well? Whether it is with adenosine or is it with something else? Or do you just think there's not enough correlation of activity in the lower population?

It probably is going to take another agent, whether it's adenosine or [indiscernible]. I'll let Juan speak to that. It's clearly speculative, but we definitely have thoughts on that. And it's an important population.

Yes. So our belief -- and this is based on -- or influenced by a lack of clinical data is that the PD-L1 population most likely will require a chemo backbone to free up the full benefit of PD-1 plus TIGIT combination. As Terry alluded, one of the things that -- where we think adenosine could play an important role, there's a both the clinical as well as preclinical data set implicating adenosine in adaptive resistance to PD-1 therapy. And so in that setting, and this is something that we are going to be exploring in ARC-7 by allowing PD-1 progressors to enroll in the triplet, the triple contains Etruma or adenosine receptor blocker. And so it's not really a question of PD-L1 low patients, but rather IO refractory or progressed patients, the possibility that by blocking adenosine, we may actually resensitize them if you want to immune checkpoint blockade.

Got you. And so is that how we should think about that control, not the triplet arm that you've also got? I mean does the adenosine, does that kind of help drive better durability or depth of response in the PD-L1 right population?

So that -- I mean -- and that's an important component. It's probably -- the world -- world's been very focused on the doublet. But the triplet, it sort of serves 2 roles. So one that Juan mentioned, those patients that progress on anti-PD-1 therapy alone, where there is nothing for those patients. So they -- and clearly, this is a high CD73 tumor. There's a lot of adenosine. So that's been implicated. And so far as the triplet per se, so this is a 3 arm, 50 patient per arm study. The hypothesis there is that adenosine is inhibiting the action of anything. Adenosine makes sure immune cells go to sleep, that's physics. And so whether it manifests itself as advantage to durability or to response rate or to both, there's a rationale for both of those. So that's one of the things that we're looking to see as this study plays out. We think that may take -- they may not be as obvious at the interim analysis. We'll see how -- we'll see. It's a -- this is -- this will be the first data set that comments on that question.

Okay. So that -- for the interim analysis then, so we should really be focused around the TIGIT plus PD-1 kind of arms as opposed to thinking we see a signal or maybe do you think potentially don't even have any commentary about the triplet arm in the go, no-go decision?

We'll comment on it. I mean, because we'll clearly be continuing with that in our ARC-7. Keep in mind, we've already initiated ARC-10, a registrational trial, as I mentioned before for both our anti-PD-1 and the anti-PD-1 plus anti-TIGIT in the non-small cell lung high PD-L1 setting, I think that it remains to be seen what we might learn about the triplet arm. The one thing we know we won't learn is durability. So clearly, this just given the early stage of things, this will be in our analysis on all of the arms.

Got you. Where could -- where do you think the TIGIT program could go outside lung? I know you've got the -- I don't know if you want to call it the backup molecule there, you've got the second TIGIT -- anti-TIGIT?

Yes. So I'll comment on what we're already doing, and then I'll let Bill maybe speculate a little bit further. So as you know, we're -- we have a collaboration with AstraZeneca that will study AB154 plus Durva in stage 3 lung. So we felt, together with Gilead, that it made all the sense in the world to put that trial from an execution standpoint in the hands of AstraZeneca. They have the standard of care. They have the expertise. They have the investigators, and they have -- they're super motivated. So great partner to give us an opportunity to be first in that setting. We are thinking about a number of other settings. I'll just comment since you mentioned, you alluded to AB308. So AB308, which as a functional Fc, gives us the option to think about moving into certain hematological malignancies where TIGIT's actually found on the tumor cells themselves. So there's no examples of that in solid tumor setting but things like multiple myeloma, for example, that could be a place where we might go. We haven't decided for sure yet. When you think about our partner, Gilead, they have macro, they're obviously interested in heme as well. So that may be a place we go with AB308. Now I'll just let Bill comment a bit more. Clearly, as the year plays out, we'll disclose more specifics about our -- the totality of the anti-TIGIT strategy, but Bill can make a few comments on where we see other opportunities for AB154.

Yes. We believe not only the heme indications for AB308, like Terry mentioned upcoming. But we believe there's a lot of potential indications where the combination could really be evaluated. Many of the GI tumors, such as head and neck and gastric, esophageal have really high co expression of PD-L1 and TIGIT. And so there's plenty of other solid tumors that are not too far behind, which is breast, renal cell melanoma. I would probably bring up too, we have shown one very, very interesting patient in our ongoing Phase Ib study in combination with Dom and Zim as an esophageal patient. It was a fourth line patient that continues to have a pretty remarkable response, and this is a patient that came in post-FOLFOX and Carbo/Pac radiation as well as pembro and had progression, their best response in all those studies with stable disease, and this patient continues on therapy now in cycle 15. And at least initially had been documented to have a low PD-L1 expression. So I think we have some interesting patients originating from that Phase Ib and some of those indications are ones that we'll continue to follow-up on potential future pivotal trials.

Interesting. So in that instance, that is kind of tend to route in the low PD-1 expression demand?

Yes. And some of the big questions is how much the impact the prior chemo or radiation had on some of that. We don't have necessarily a pre biopsy immediately coming in. But to Juan's earlier points, we think that some of the potential to go after the lower PD-L1 population could be in various combinations, such as chemo or radiation as well.

Okay. Are there other tissues for -- or other indications that Dom would be suitable?

Bill, I mean, you mentioned a couple. Is there any things you want to sort of highlight?

I'll probably just highlight again, the GI cancers where there's really high co expression. We think that the combination really will be most beneficial in those type of tumor indications where you have co expression in both. And it's -- right now, the question is, can you go beyond the PD-L1 high population. Merck is -- it's obviously a new trial to see if just the doublet chemo-free can actually work in the lower PD-L1 expressing population. So that will be one to watch out for. And then we have some additional trials. One just hit clinicaltrials.gov today with a collaboration -- I'm going to look at the checkpoint progress patients to see if we can also have this triplet combination work. As Juan mentioned, we have that third arm in ARC-7. So we'll have another trial looking at that possibility of extending the benefit of the doublet in populations.

Maybe in the last few minutes, I should switch gears a little bit, just around, I guess, Etruma and CD73, kind of how should we think about how those programs evolve. I don't know if it's adenosine getting cooler and CD73 kind of heating up? Or how we should think about the development plans? Or just is it consolidating really for a tumor where it could potentially play?

No. So I think the way we've always thought about it is activity with either one really bodes well for the entire pathway. So the activity for one suggests that adenosine is important in that setting. And the fact that this is such a ubiquitous mechanism, CD73 -- just tumors are decorated with CD73. So what that tells you is it's important in one setting, it's not there for an accident. We know it confers a survival advantage to the tumor. So we think this blows -- starts to blow the field open, and that's how we see the whole year as playing out. We think the 680 data, they're early, but if they continue as we've seen to date, it's the tip of the iceberg. And then depending on situations where there are certain tumor settings, for example, prostate, and we're already looking at both AB928 and AB928 plus 680 there in prostate as an example where there's a CD73 independent mechanism for production of adenosine from adenosine monophosphate. So you can imagine where the receptor blocker or a combination of the receptor blocker plus the synthesis inhibitor could be advantageous. So we're expanding our effort around AB680. We're introducing it into our ARC-9 platform study in colorectal cancer. AB928, we'll have a number of readouts. ARC-4, our EGF receptor mutant non-small cell lung cancer trial will have data in the second half of this year, as I mentioned. We'll have data from ARC-6, the prostate platform in the middle or early second half of next year. And we'll be sharing some data from ARC-3, which was the progenitor of ARC-9 in colorectal cancer at AACR. We shared data last year. This will be the survival data. So we feel there's going to be a plethora of data this year that really sheds huge light on this. With respect to ARC-8, I'll just say it's all speculative now, but the expansion part of that trial with 680, given all of the enthusiasm and the investigator enthusiasm in the positive signal that we saw in that dose escalation phase, it's enrolling game busters in an expansion -- in the expansion part of that. We'll be opening a control arm in it. If it continues to look good by some time later this summer, we'll probably be in discussions with the FDA as to what would look like the smartest path forward. And conceivably, we could be in a registrational trial early next year. Our behaviors were ramping up activity there. We are thinking of other settings. And even on the CMC and we're making sure that nothing is rate-limiting other than the generation of the right clinical data. So we think both of those are symbiotic, synergistic, whatever you want to pick is the word. But the key thing is, if either of those suggests activity, it implies an importance of adenosine, and then we think there's going to be a place in the arm or artery for both types of molecules.

Great. Thank you so much. Terry, Bill, Juan, Kaytee, pleasure always speaking to you guys. Thanks for joining us for the global conference at Barclays. And I know we could speak for much longer, but I just want to hand the line back over to the operator. Thank you so much.

Thank you, Peter, and thanks, everybody, who joined in as well.

Thank you.