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

Okay. Good afternoon. My name is Peter Lawson. I'm one of the biotech analysts at Barclays. Welcome to Barclays Global Healthcare Conference in Miami and really pleased to have from stage with me the management team from Arcus. I should also mention if you want to ask questions, raise your hand, and also IB and Bloomberg and some of my associates that do ping us if you have anything. And with that, I'd love to introduce Arcus. And so we've got Terry Rosen, CEO; Jen Jarrett, Chief Operating Officer.

Love to kind of go through definitely HIF2-alpha since it's very prominent part of the story at the moment. And then, of course, gastric and 73 and lung cancer. But I guess on HIF2-alpha, what should we expect to see in the expansion data for RCC in the second half? And what would we see in terms of durability as well?

Great. So let me give a little background into that program. So we've had a HIF2 inhibitor program ongoing for some time. I think it's been a pretty broad interest but in our last earnings call, we talked about our dose escalation data and give a bit about the expansion study that's ongoing and that we'll be talking about a medical conference in the second half of this year. Go to frame the HIF2 alpha program. Really, what we're focused on is a molecule that's an improvement upon Merck's HIF2 inhibitor belzutifan. It's an interesting field because from our standpoint, from our portfolio molecules, it's really given what we've generated to date, we feel very confident that this molecule is a drug. And at this point, it's how do we execute, how are we going to compete with Merck, how are we going to develop it. But so what are the data that we have and what are the data that we're planning to share. So at that earnings call, we primarily focused on our dose escalation data. And the key takeaway from that is that there's a pharmacodynamic marker for HIF2 inhibition, its production of erythropoletin from the kidney. Pelotons used it, Merck use it, we use it. It's a very robust marker. It doesn't have to do with the mechanism of action in the tumor. On the other hand, it's absolutely linked to the AE profile of the molecule. So if you inhibit HIF2 what you see is an inhibition of HIF2 mediated erythropoietin production, and that can lead to anemia. But what's nice is that nature introduced a break there where that HIF2 component only represents about 60% to 80% of your total erythropoietin. So the key thing that we established there is that if you look at the Merck clinically used dose of 120 milligrams, that has a PD effect of basically just being on the cost and actually inhibiting fully that maximal HIF2 mediated production of erythropoietin. What we showed is that we can achieve that same PD effect with 20 milligrams of what we call casdatifan, that's our HIF2 inhibitor. And what we're dosing going forward is 100 milligrams. We also established a very nice linear dose-proportional pharmacokinetic profile, so we get 5x the exposure. So essentially, we're a fivefold of PD equivalent of that Merck's clinical adults. So that's the first thing. We talked about effects and there were 4 clear cell RCC patients. That's the target patient population at this point for the program. There were 4 patients in the escalations. They did see clinical benefit. But what we also talked about -- and this gets to Peter's question, finally, we had initiated a expansion cohorts that was just clear cell RCC patients. So we have 30 patients that was fully enrolled and with those 30 patients at the end of November. At the time of our earnings call, what we could already see is that from a response rate standpoint, we were essentially equivalent. If you took all 30 patients in that denominator to what Merck in their pivotal study, what's called LITESPARK-005 had achieved at the study. But the difference is that if you look at where we stand in the maturity of the data, the Merck median time to response is about 3.8 months. 70% of our patients in this study only had 1 to 2 scans. So you're basically talking 6 weeks to 12 weeks on treatment. So what we also had in addition to those patients that had responded double-digit patients that were already showing tumor reductions, stable disease with the opportunity to convert to a response. The second thing that's important is that in that registrational trial, there was a high level of primary progression. So basically, over 30% of the patients which was inferior even to the control in the study didn't reach the initial scan before they progressed. That's something that won't change, and we've already seen a better number of that. And it's something -- if we've had our first day at board for this program. Investigators felt there could be an important point of differentiation. The other key points of differentiating that we're looking at is depth of response, kinetics of response and finally PFS. The belzutifan PFS is in the order of 5.5 months. So what you should expect to see in that second half will be a very mature data set with about 7 months of follow-up, potentially early read on PFS definitely mature ORR, a sense of the kinetics of response as well as what those numbers were for that primary progression. I think I probably don't miss anything, right.

I think you've addressed half my questions...

Yes, the question.

So there's what, is that 50 milligram, 100-milligram dose and the 150-milligram dose, what, you're taking 100 forwards. Just walk us through?

Yes. So right now, we're focused on at that 100-milligram dose. We've actually already fully enrolled the 150-milligram dose. So in thinking about project optimize, the go-forward dose, and I described how we got to that through the pharmacodynamic analysis, our go-forward dose is 100 milligrams. And we're also going to have data from the 50-milligram dose, it will be far or less mature. I don't think we represent date at the medical conference, but we probably will speak to it. We'll have enough of a feeling. As a matter of fact, we already had seen even by the time we shared the 50-milligram sort of peak. We know that 50-milligram dose was looking pretty good. We will be doing a 150-milligram dose and will likely if that goes then we'll probably do a 200-milligram dose as well. I should mention, Peter, one other thing when you think about this program because we are on a trajectory. None of these are decision-making data from a Phase III standpoint. So we are on a trajectory to get a Phase III study up and going by early next year. And it really represents another key point of differentiation from Merck. So the studies that we're going to be running are going to be combination space. They're going to be initially with TKI. Merck's TKI partners, lenvatinib. I think it's well recognized in the field and certainly with investigators, it's a difficult drug to administer. It's probably one of the lease favor TKIs in the field, but it is what Merck has. And we'll be using either zanza, cabo and/or across our study. So that's another point of differentiation will be on the combination partner, much less toxic as well.

Got you. And why are the different doses? Why up to 200?

Simply in the anticipation of discussions with FDA, they tend to want to see a lower dose, and they tend to want to see a higher dose. I think the optimist concept was more focused on safety. But when you look at a drug like casdatifan, it's really in the context of cancer about as safer mechanism that you can get. As I said, the primary AE is on target and that's anemia. But we want to be prepared to have discussions where we've gone above the dose that we're going forward as well as shown something different in the dose that's lower.

Got you. What do you need to see in data sets, whether it's in the second half to move forward? It sounds like you're already moving forward, but...

So let's move now up and active in voice and maybe Jen can jump in here talking about what...

My answers are little shorter. So we'll get very quickly. But so as Terry was saying, and I do think we're at a point -- based on everything that we've seen so far, like we have a lot of confidence in moving forward. And so we're starting to get back to the point of looking at data as decision-making. And right now, we're moving very aggressively forward towards being able to start a Phase III in the first half of next year. That said, we know investors are going to be looking for certain things. So the best benchmark study to look at is LITESPARK-005. So that was a Phase III study that supported the approval of belzutifan and third line clear cell RCC. So a similar setting to what we're exploring in our 20. In that study, they served about a 21%, 22% ORR. And I think maybe even more importantly, they saw a 33% or so primary progressive disease rate. So those are patients that progressed at or before their first scan. And those are like -- those are your work performing patients, and that's exactly what you don't want to see in a cancer study. And so in addition to potentially improving upon ORR, we also think there's an opportunity to improve upon primary progressive disease and to be able to bring the disease under control more quickly. And actually, when we talk to investigators, they almost point to that as like being the real Achilles' heel of belzutifan is something that can be approved upon because obviously, your goal is to try to bring the tumor growth under control as quickly as possible. So those are probably the 2 things that people are going to be most focused on is does our ORR look better than that 21% and then just the primary progressive disease rate looks lower. And back to Terry's point on what we said on our earnings call, we've already said that our primary progressive disease rate is lower than what we've seen in LITESPARK-005. Given that you know what that answer is going to be at your first scan and everyone in our study has now had their initial scan, that number should not change. And so we already know that we should beat the LITESPARK-005 number. So now obviously just watching the ORR very carefully.

Yes. Does that all point to a really good PFS number that could blow the 5.5 out of water or...

Yes. I mean if we see improvement in ORR and then an improvement in a primary progressive disease rate, then that should definitely translate into an improvement in PFS. One thing that I'd also say the nuances even though in our 20, we are looking at that third-line patient population that belzutifan is currently improved in. We will not pursue that from a Phase III study perspective. So Merck has that on their label. It's a relatively smallish market opportunity. So we're really going to focus on trying to get to that second line and potentially first-line setting as quickly as possible. So even though this is a great proof-of-concept study, it will help us be able to tease out the potential areas of differentiation relative to belzutifan. We probably will not take it forward in that sort of line setting. And one other thing I think is important to note as you compare -- sorry, our data set to LITESPARK-005 is while it's a fairly similar setting, our study patient population is a little less healthy. In LITESPARK-005, patients were eligible if they had 1 to 3 prior lives. If you have more than 3, you were not eligible. In our study, you need to just have more than 1. And so we have patients on the study that have had 6 prior lives, 6 prior lives, et cetera. So about 15 patients, about half the patients have had 3 prior lives or more.

Perfect. The opt-in from Gilead, what triggers that? Why haven't they opted in, you seem to talk about and...

Yes. So we've aligned with them on what the package is to inform their opt-in decision, which is a certain amount of data from our 20 and some other stuff that we're doing. So we know exactly what the trigger is going to be. We have not obviously hit that trigger yet. I'd say it's going to be within the next 12 months. We haven't -- just having very bad memories of the whole TIGIT often question phase. Yes, we probably won't provide specific guidance on when it's going to happen, but it will be within the next 12 months.

And the studies you're doing, does that go above and beyond what is written for Gilead to obtain?

Yes. I mean our 20s, we talked about there's 3 different expansion cohorts. We're now in the combination study with Exelixis, zanza, STELLAR-009. So there's a little information from that, that they want to see. But we're on a path right now to generate a lot more data than what's required for the opt-in package.

We're full steam ahead. I mean, we're excited. We hope they opt-in, we think they're interested, but this is full steam ahead in any event.

Got you. Okay. Perfect. Just I guess back to TIGIT gastric, what does success look like for PFS for gastric?

So [indiscernible] people, the study that we're talking about is a study that we call Star-221. It's a registrational study in upper GI cancers. It's actually one that we pre-invested in sort of at risk, and it's playing out quite well. We're probably 2 to 3 years ahead of any other competitors. So we're going to have a substantial first-to-market advantage in this. We reported data on a Phase II progenitor, same patient population, same combination, same setting at ASCO Plenary last year. And we're actually at ASCO going to have updated data set. So I'll remind people that what we saw that was extremely encouraging is we're basically looking at 2 subpopulation -- or a subpopulation in that study, the high PD-L1 population and the ITT population. And we saw a 6-month PFS of 93% and 77%, respectively. Recalling that the standard of care there, which is nivo chemo is a PFS that you're sort of in the order of 7 to 8 months. Obviously, anything above that, you can do your own math, what would be substantially better would be something good to see. We will have that PFS at ASCO. So the study that we're talking about here is called EDGE-Gastric. We'll have that PFS, we'll have mature ORR. And I think that's going to be a very exciting data set for us. The other thing to juxtapose with that is the registrational study has enrolled extraordinarily fast, and we actually feel there's a good chance that, that study will be fully enrolled by that time period, plus or minus a month or so. So we could very well be sharing the edge gastric data, mature PFS and at the same time, instead of saying, "Oh, we're very excited about this data." We'll be starting a Phase III study x months from now to actually saying that the registrational trial corresponding to that is fully enrolled. So when you think about that, we're definitely in sort of a pre-registrational, prelaunch pre commercialization mode for this program, given that the standard of care nivo-chemo as an OS on the order of 13 months or so. So if we're fully enrolled by the middle of the steer, you can -- we'll give guidance later in the year as to when that might read out, but you can do your own math to when that might occur.

Got you. And as we think about that kind of fitting into the treatment paradigm, would you have to do PD-1 status of these patients? How common is that?

How common is...

PD-1, it's assessment.

Yes. It's actually very common today. So about 80% of oncologists today test for PD-L1. And it's about 60 or sets a little bit lower in the gastroenterologist community. I think it probably depends a little bit on whether you're an academic center or community. My guess is in the community, they probably test less frequently. They just want to get patients on treatment as fast as possible and not wait for test results. And in that case, they just use PD-1 plus chemo and everybody, especially since nivo assay for PD-1 to safe in that setting, makes it a little bit of brainer to just give everybody PD-1 chemo.

Got you. Okay. With that -- will that change the way you kind of think about enrolling patients or just the treatment just because you have to do a PD-1 samples?

No. I mean I think it will be very similar to our situation. I mean, first of all, just a reminder on our study design for Star-221. There are sort of 2 ways for us to win. So we have dual primary end point of PD-L1 high, so CPS greater than 5 and then ITT. So let's say, we just hit in that PD-L1 high patient population, which we don't think is going to be the case. But let's say that is what happened. Like I said, 80% of people pass. So I don't think that becomes a big obstacle. Every center has PD-L1 testing there. I also think, as you know, like PD-L1 is sort of a gradient and a lot of people, especially with gastric have positive PD-L1. So gastric and like lung is more skewed towards patients being PD-L1 positive. So about 40% to 50% of patients are PD-L1 high, sort of the equivalent of greater than 50%. Another 40% or so are 1 to 5, and then it's only about 15% to 20% that are less than 1. So we think you could still possibly see this pattern where even if we don't have the broad label for ITT that people still don't want to deal with testing. They see [ dom ] as a really safe agent, you a chance to charge your patient has probably had some PD-L1 and so might as well give them to be on antibody as well.

Perfect. Then is there anything coming through like claudin 18 et cetera, that's kind of changing the landscape in any way...

Nothing at all that we're -- I mean we're obviously keeping a close eye on the claudin 18.2. But Astellas was supposed to get their anti-claudin 18.2 approved in January. The approval was delayed, I think towards -- due to CMC issues. But there's 2 big obstacles as far as the claudin. One, there's a lot of toxicity, particularly GI toxicity, nausea, vomiting. So we think that's a very big issue for clinicians, patients, especially in the community setting. I mean everyone we talked to like in academic center says there's no way community centers are going to want to use this. The second thing is it's going to require the claudin 18.2 testing, and it's just going to take a while for that to roll out, especially beyond the academic centers. So we think those are 2 pill battles for the claudin 18.2. So we think there'll be some usage like there's probably a place for claudin 18.2, but we don't think of that as something that's going to take a lot of our market opportunity away.

To give you a little sense of things, the enrollment in this as opposed to normally where like you slip little, we're probably ending up -- we're going to be 6-plus months ahead of what our initial plan. So there's been a huge excitement. It's only as we generated that initial -- those initial data from EDGE-Gastric only increased. The second piece that I would say is that when you think about the Fc Silent anti-TIGIT and the fact that when you combine it, especially now like with chemo on top of anti-PD-1, essentially the safety profile so benign that when -- if you were to just look at the data, you think you were just getting the chemo or chemo plus anti-PD-1, so it brings no additional baggage. So the idea of being able to come in with something that enhances efficacy in cancer that doesn't bring any additional toxicological baggage is very exciting and chill.

As we kind of think about that Phase III, how similar the Phase II patients versus III? Is there any kind of variables that we should be contemplating?

I mean is similar as you can get public. Yes, so there's not even something I could think about on the top of my head that would make those patient populations different.

Okay. Perfect. And then CD73, I guess what does the registrational trial look like? And who will start there and...

So the registrational trial, we'll be talking to the FDA shortly about that. But our plan is that it's going to be a very simple design, you're going to have Gem/Abraxane, which is standard of care plus our CD73 inhibitor. CD73, that enzyme, its inhibition will prevent the formation of adenosine, which is highly immunosuppressive. That study would look at then just the triplet of Gem/Abraxane -- quemli versus Gem/Abraxane. I should point out in that context at AACR. So let me just remind people what we did in advance of that trial or what led to that trial was a study of quemli plus Gem/Abraxane plus or minus our anti-PD-1, where we were clearly have showed that the anti-PD-1 did not do anything. We showed a profound effect, whether it was compared to historical Gem/Abraxane or synthetic control arm that we generated. So we saw an OS of 15.7 months where depending on the data set you were to look at, you would say that Gem/Abraxane is going to be somewhere between 9 and 11 months OS. What's very interesting is this field starts to blow open and we think we'll have 3 data sets this year that in addition to our [ aid ] there's a study that Genentech ran as part of the MORPHEUS platform in pancreatic cancer, where instead of Gem/Abraxane quemli, they looked at Gem/Abraxane etruma which is our adenosine receptor inhibitor. So basically, in one case, you're blocking the actions of adenosine. In one case, you're blocking the formation of adenosine. Those data will be shared at AACR. They do have a Gem/Abraxane control arm there. And what you're going to see is a very similar profile with the very prolonged OS, while you're not even having much effect on the ORR. So same phenotype of that immunotherapy induced prolonged OS. The final piece to that, what would be another data set that we have that we have submitted for abstract hope to have it up by the middle of the year is a study where we're looking in third-line colorectal cancer. With chemotherapy, bev, etrumadenant, or A2 receptor antagonist versus regorafenib, the standard of care there. And again, what you're going to see is a confirmatory data set when you take and ameliorate the effects of adenosine when you're using immunogenic chemotherapy that you can get very profound effects on OS. So you have 3 data sets that are different in very important settings where you have immunogenic chemotherapy that really illustrates the potential for adenosine blockade.

And then so for 73, what's the real bar? Is it what you've previously seen in the Phase I, like the 15 months kind of...

Yes. So sort kind of like 9 to 11 month-ish I thing and I mean, obviously, we'll have the control arm in the study. But if you look at the more contemporary studies with the Gem/Abraxane, as the control arm or just the [ control arm ] it was about 9 to 11 months.

Great. Perfect. We hit the end of time. So thank you so much.

Great. Thank you.

Thank you.