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

Good morning. My name is Peter Lawson. Welcome to Barclays Global Healthcare Conference in Miami. I'm really pleased to have with us -- up on the stage with us, Arcus. So we've got management team. We've got Terry Rosen, CEO, Co-Founder; and Jennifer Jarrett, COO.

And I guess the first question would be really around -- I guess you've answered this multiple times around ARC-7, kind of underperformance, kind of how you think about the -- your PD-1 versus other PD-1s. And I know this -- you've got some historical perspective as well around that and how those have changed over time.

Sure. So we don't think the anti-PD-1 is underperforming in any way. We think zimberelimab, looks just like KEYTRUDA, looks like the other anti-PD-1s and without spending a ton of time on it. There's historical data from its approval in China run by Gloria for classical Hodgkin's lymphoma, where it looks as good or better than KEYTRUDA. There's a cervical data set where it looks as good or better. And then in this particular trial, you could just spend time looking at all the differences across all the studies, including with KEYTRUDA, looking different from its cells in terms of how the patient population has evolved, how patients are selected for trials, the differences across trials, the differences in time between scans, in trials that's actually [indiscernible] one of your competitors did a very nice analysis on that. And then I think the most compelling illustration of the differences in whether you want to call it real-world data or real-world clinical trial data would be the recent study that Glaxo reported out where they ran KEYTRUDA plus chemo versus the Glaxo TESARO PD-1 plus chemo, essentially the KEYNOTE-189 study, and you see a change there in PFS, historically, that was like 9 months or key driven. Now it's like 6-point-something months, then we would just look at the data and point people to the combination in ARC-7 that where you see a 12-month PFS for the doublet hazard ratio of 0.55 within the trial, and that 12 months PFS looking better than any PFS that's reported for any anti-PD-1 study, including KEYNOTE-189 of anti-PD-1 or KEYTRUDA plus chemo. So we think we feel like complete confidence. And I think when we talk to investigators, they stress the same confidence in the performance.

Got it. And then the updated data at ASCO. How much do you -- what should we be looking for? And what metrics changed do you think?

Why don't you say a little bit about both, Jenn.

Yes. So we're thinking through that now. And obviously, Gilead will be a big part of that in terms of the fact that we're going to present. It's only about a 5-minute presentation, so it's not particularly long. So it's going to be little bit short and sweet, but one data set that we're certainly going to look at is just looking at the same data set that we presented at ASCO Plenary for the [ interim data set ] of about 43 patients per arm, enrolling that forward to generate a more mature look at the data. And then obviously, we'll be looking at the 150 patients as well. This time, because the data is going to be more mature, we'll also -- maybe be able to share a few new efficacy measures. So -- and we said last time, every efficacy measure we looked at, we did see an improvement from the dom combinations versus zim, some of those metrics we didn't provide just because they weren't super mature, but they'll be a bit more mature this time around. So I think like 12-month PFS. So those are other things that we're considering presenting. And we're doing biomarker analysis. I'm not sure we're going to have enough time to really get into the weeds of the biomarker analysis, but that's something else we're thinking about. And then also just saying about things like is the difference when you look at PD-L1 testing status, central versus local lab, does different levels of PD-L1 results in higher efficacy with the TIGIT antibody. So there's all sorts of things that we could present, and we're sorting through that now.

Good. Would you end up having like Analyst Day or some of the...

Yes. It's a competitor, unfortunately but we are doing [ a deal with another bank ]. They just started marketing it about a week ago or [indiscernible] that evening. And so you had the idea to be able to share more information and more context where we think given it's not going to be a particularly long presentation.

Would there be a press release or something to...

Yes, look out for the press release. So 2 things, first of all, there's no abstract, so a little bit different than your typical ASCO presentation. We don't have to submit an abstract. There's not going to be an abstract that's made public prior to the ASCO Plenary session or ASCO session. So ASCO will be the first time that people see anything. The actual presentation is, I think Saturday late morning, and then there would be a press release most likely concurrent with that. And then like I said, we will have the event that evening where we'll be able to share some more information.

Got you. We gave her breakfast. Just -- and then I guess in the context of Roche's data, how do you think that plays out? Do you think the OS, what's your sense there?

Yes. I mean we take everything they said at face value. We think it's probably best case scenario from what we've been thinking that there -- they've seen a numerical difference. They -- we expect that as they go to OS, they've suggested that they think they will have a data set that allows them approval. We sort of look at their data in the vacuum at this point. We think the field is moving along such that SKY-1 is no longer going to be the center of the solar system. Merck has a very large [indiscernible], in their last earnings talked about how anti-TIGIT is going to be a very meaningful part of what they're doing going forward. As you know, they have a co-formulation. They're running multiple Phase II trials. Our data set, again, we're running for registrational trials. So we'll see if there's anything interesting to be learned from them, but we just kind of view that they're going to be one player and that's probably the delta in terms of their advantage from a timing standpoint may be different than the -- they obviously didn't knock the ball out of the park with their combination based upon whatever their trials. So we'll learn more probably by the end of the year, but nothing in that data set is driving any of our planning.

Is there anything from, I guess, Merck's large footprint in TIGIT that's going to inspire you or something you want to...

Not really because they -- to date, they've shared -- they were able to keep their cards pretty close to their vest. The thing that we find encouraging just is that they're obviously seeing a lot of their own data. What's interesting, I think, is when we were talking about the field, AstraZeneca, who'd seen all of our data, also, in their last earnings talked about being more aggressive with their bispecific. Clearly, they've seen all of our data, however much that influenced or not, but they're bispecific, it is Fc silent anti-TIGIT components. So we're monitoring everybody else. We're thinking about, as time moves along, I think the questions are going to move away from what do you think SKY-1 is going to be versus how do you plan to convert -- compete versus Merck? How do you see your differences? Where are your opportunities? We are running STAR-121 PD-L1 all-comer trial that's being executed by Gilead. STAR-221 in GI, where we have an opportunity to be first. We think there are differences between the Fc silent and Fc functional antibodies. And we think there are differences even when it comes to Merck between our co-administration that we're planning to use versus the co-form that they're using. So a lot to talk about and the competitive situation, I think, as the year evolves that the conversation may switch more to that direction than what do you think SKY-1 is going to be.

Got you. And just as we think about these combinations and fixed dose and bispecifics, how do you think that kind of plays out? How will physicians use the TIGIT?

I think in the end and this is the feedback that we hear, we -- recently a couple of weeks ago, we had an investigator meeting with, I would say, is recent -- the lead of the group, as you might have in the non-small cell lung cancer arena and with a very substantial knowledge of anti-TIGIT. And essentially, these combinations are by the time they're developed , they'll be thought of as like a single entity, and they'll be judged on their own performance. So here's an example of a differentiation. We did a lot of research when we thought about whether we wanted to go for co-administration or co-formulation. And all of the feedback we got suggested that the physicians really didn't like co-formulation. It takes away the flexibility of titrating out one of the agents, for example, if you see an AE, it forces you to put a dose in that bag that may be determined but not necessarily the most optimal reasons that may just be that since you know you're going to have it in that bag, you want to ensure that you don't get into any liability. So all of the feedback that we've heard is that, that combination, how it performs against versus the historical standard of care, that will determine an update in all 4 of our registrational trials, we are using what's considered to be the global standard of care. So we feel real good about the trial design and then what that leads to in terms of the ability for uptake -- that approval.

How far behind Roche or Merck, do you think you are?

Do you want to comment on how we look at that?

Yes. I mean, Roche is obviously ahead of everybody with the PD-L1 high subset. That said, it went from feeling like sort of 3 years ahead of everyone, obviously, but the gap is narrowing. This analysis keeps getting kicked out, but they're still probably going to be in the lead in the PD-L1 high patient population. I'd say the settings that we probably care the most about just because of the size of the market opportunity is the first time by an all-comer patient population. So that's the patient population that we're pursuing with STAR-121. That's the study that Gilead is operationalizing. Roche has a study, which is SKY-6, and that same patient population, the difference is that was a Phase II converted to a Phase III. So I think there's some risk to the study may be underpowered. The other thing that's different about that study versus what we're doing is we're only targeting non-squamous cell patients, excluded squamous cell patients for some reason. We're also looking at all patients. Merck is running a similar study. We're probably a little bit behind them, but we're trying to be right on their coattails. And so we think it will be sort of a race between us and Merck in that setting. And then the other setting that we care a lot about and study that we're very excited about is STAR-221, which is looking at dom plus zim plus chemo and first-line gastric and esophageal adenocarcinoma cancer. So we are the only one today with the Phase III study in that setting, so we should have the lead. There's a ton of interest in that study, just to view that there's an unmet need, actually, the ARC-7 data, interestingly, even though it's lung cancer. It has generated a lot of interest in the GI community in the combination. So that's the study that could potentially enroll pretty quickly. And like I said, we're the only one in the Phase III right now. AstraZeneca interestingly enough to start with the Phase II with their PD-1 TIGIT bispecific in that setting, randomized Phase II. So they're obviously also interested in the setting, but we're obviously going to have a big lead over them.

Perfect. I'd love to move on to CD73 and kind of what we should expect next from 73 and...

Sure. So the next readout here, you'll recall, we are running a trial called ARC-8, that's in pancreatic cancer. And we've reported out -- initially, we saw some very exciting data early in the dose escalation, dose expansion phase. And then the -- what we had designed was a randomized study. And the randomized study was designed to tease out whether anti-PD-1 was doing anything. So we essentially get anti-PD-1, CD73 inhibitor, quemli and then gem-Abraxane versus the triplet where you're lacking the anti-PD-1. Along the way, we took an early look, and we reported that we weren't seeing big differences between the arms, but that we were going to let everything go to overall survival. We're very close to having those data now and later this year, we'll share those. So that's part of it, if you think of our whole identity footprint, etruma in ARC-6 and ARC-9 prostate and colorectal and then quemli in frontline pancreatic cancer. All of those are relatively large Phase II studies and they're all randomized and they'll all be reporting outward. We're actually excited about all 3 of them and that will be coming later this year.

Got you. Just with the -- I guess lack of or not sharing significant difference you mentioned before kind of low expectations with first line? Is that how we should be thinking about that?

Not necessarily. So we'll see what the data reveals. So the key thing to keep in mind there is the difference between those arms is going to be reflecting how important anti-PD1 is in that combination. So if you saw OS advantages in both arms that were similar, what that would be pointing you towards would be something where you might be thinking about gem-Abraxane plus CD73 inhibition alone. So I remind people, historically, when you look at gem-Abraxane, there are a lot of data out there and across studies in its approval Phase III study gem-Abraxane, the OS was on the order of 8.5 months or so. There's a lot of studies that you can probably think of it is ranging from somewhere from 8 to like 11 months or so. And so we'll have a very good sort of historical data set, I think the FDA feels as well that gem-Abraxane is very well understood. We're looking to see in all of these studies, not just a small difference, but something that would be very clinically meaningful. So we'll wait and see.

Got you. It's that -- how do you think about the kind of first line versus second line opportunity for 73?

At this point, we're just focused on the first line. We'll see how that reads out.

And then -- so you mentioned ARC-6 and adenosine kind of what should we expect? How much data would we get to see, how many patients in?

Yes. So ARC-6 is about 70 patients, that's 35 patients per arm. So that is second line CRPC patients that have failed a novel hormonal therapy. It is a randomized study in comparison with the standard of care with [ nab-paclitaxel ]. So we have to worry less about like what would this show versus the comparator because we'll have the comparator in the study. So that's the prostate cancer study. And then [indiscernible] we'll opt the colorectal cancer study, so that's ARC-9. That's actually a pretty big data set that's over 200 patients. There we have two different cohorts. We have a second-line cohort and the third-line cohort. So what's nice is that you have two independent data sets that will hopefully both prove that etruma is active in that setting. The second-line cohort is looking at etruma plus zim plus chemo versus chemo. And then the third-line setting is looking at etruma plus zim plus chemo versus regorafenib, which is the standard of care in that setting. So again, randomized study, so we worry less about like what would you expect to see with the comparator.

Got you. What are the lessons from ARC-7 adenosine and kind of how that reads through to other indications or other combinations ?

Yes. Really -- so there were a couple of different hypotheses when we started in the adenosine program. So interestingly, one was looking at like settings where you have high CD73, but let's say, you have anti-CD1 activity like frontline [indiscernible]. The others, and this was probably our principal emphasis, and we started looking at this earlier perhaps than others. We're in settings that are really non-anti-PD-1 responsive, but you're using chemo to drive a response. And that chemo, when it kills through immunogenic cell death type of mechanism produces a ton of [indiscernible]. And so there are 2 very different hypotheses. So these 3 trials that we just talked about are ARC-6, ARC-8, ARC-9 really read on that chemo mechanism. So we'll have a good deal from that. And then with respect to ARC-7, we're still playing that out. Obviously, we weren't seeing anything differentiating either in [indiscernible] analysis 3 or 4 in terms of that PD-L1, anti-PD-1 plus anti-TIGIT. We'll see if we see anything from an overall survival standpoint. And then I'll remind you that, interestingly, in the patients where we looked at those who progressed on anti-PD-1 alone, and they were confirmed progressors, while that was a very, I'll call it, exploratory aspect of the Phase II study. We saw a couple of very interesting responses in those patients that have progressed when they went on to the triplet. So we'll see how that all plays out. But I think that the readouts from ARC-6, ARC-9 and ARC-8, we'll have really given the best opportunity to see how in this chemo type of setting where you're generating a lot of adenosine does that adenosine inhibition bring advantage. And we'll know a lot about that in the next 6 months or so.

Got you. I'd have to move on HIF-2 alpha. What we should expect to see what late this year or early next year?

Yes. So we're in the dose escalation study right now. So in the second dose escalation cohort, which is 50 mg. So we are pretty close to wrapping up that dosing cohort, and then we'll move on to 100 mg. At 100 mg AB521, we think we're getting to 4x to 5x the drug levels that Merck gets with belzutifan. So we actually think that could be our going-forward dose. We'll probably explore some higher doses just to see what we get. But we think we're pretty close to getting to our going-forward dose. As we announced in our Q4 earnings, the plan right now is to start a Phase II study in combination with another molecule in the second half of the year. And the plan is to try to start a Phase III study as quickly as possible. So going back to what could we see? We plan on trying to present some data either end of this year or early next year from the dose escalation portion of the study, and it's an all-comer study, but we are trying to enrich for clear cell RCC patients to try to give us a little bit of a sign of efficacy. But the data that will be presented would be safety, PK/PD and then hopefully some efficacy data as well. And then once we complete that escalation cohort, we will also start enrolling an expansion cohort within that same study. So that will be just clear cell RCC patients, and that will be ready in parallel to the Phase II that we'll be starting in the second half of the year. So next year, there should be a lot of data from HIF-2alpha.

Got you. And then the combos you're thinking of? I mean do...

We haven't disclosed anything yet. I mean, there's -- you can see what Merck's doing with that. And yes, I think I'll give you a sense for like the types of combos we're thinking about. But, yes, we're super excited about the program. We think we have a better molecule than belzutifan. We think we can find a better combination partner and have found a better combination partner than lenvatinib, which is what belz is being combined with. So yes, so more to come.

Okay. Perfect. And I guess just -- I guess the topical question just around SVB, kind of what's the exposure, not only there, but I guess other regional banks or...

Yes. Yes. We're all -- we had some SVB exposure. We were just on the operational cash side. We were smarter on Thursday, kind of got ahead of things and moved almost everything out of SVB going into, yes. So going into Friday, we are very -- I think as we communicated to you, we had very, very little exposure. And today, all of our operational cash investment cash sits with large global bank. We have [indiscernible] Signature, First Republic, et cetera, that we are in a very good position.

Thank you so much.

Thanks, everybody.

Thank you.