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

My name is Peter Lawson. I'm one of the biotech analysts at Barclays and I've had the pleasure for the last 5 years or so covering Arcus Biosciences. And up on stage with me, I've got Terry Rosen, CEO; and Jennifer Jarrett, the Chief Operating Officer. And I'll be moderating the Q&A.

I've been asking our companies kind of just on the macro level, any impact you're worried about anticipating from tariffs on the supply chain and I guess going back to COVID, I guess that helped insulate the company as well?

So far we're keeping a close eye on everything and, as you know, like by the day it's sort of a moving target. But right now we're not anticipating anything major that would be an impact from the tariffs.

Got you. And then FDA interactions, has there been any change at all?

Not at all, 0. So maybe they're letting people go in other areas or withholding funding in other areas. So we're having a lot of ongoing interactions with the FDA as we speak and have seen 0 impact.

No kind of incoming resumes from the FDA or NIH?

Not for real for sure. But no, not that I've seen.

Okay. And then NIH spend, I know that's kind of essentially a very large negative if you think about it longer term, but anything near term that could like trickle through to clinical trials?

No. I mean we're not working with NIH or whatever it is. Everything that we're doing is with institutional side so we expect 0 impact from anything that might be happening along.

Honestly, our trial enrollments across the board is going quite well and so nothing that we anticipate.

Okay. Perfect. And then I guess if we think about your pipeline, HIF-2 alpha I guess combination data in the middle of this year. What should we expect from that? How much follow-up data should we see?

Yes. So what's nice about how the ARC-20 study has been designed is there's a lot of different cohorts and we're looking at a lot of different things within that study. And so as a result of that, there should be a very steady flow of data really over the next 2 years. And so the next data set that we've been talking about presenting will be around midyear and so that will be the first look at the cohort that's evaluating cas plus cabozantinib. It will probably include efficacy data around 25 patients. The safety database will probably be a little bit bigger just because I think on the efficacy side, we'll probably focus on patients that had a certain number of scans. We want to give people a broader a look at the safety as possible because we know that that's important to people and so far the safety is looking really good. Later in the year, we expect to present more mature data from the monotherapy cohorts that were the original cohorts that were enrolled as part of ARC-20. And then as we go into next year, we should have more mature data from the cas-cabo cohort. Maybe even later this year, we have some more mature data from that cohort. And then we've added some new cohorts to ARC-20 and so next year we would actually start to generate some data from those other cohorts as well. But back to this year, as I said, the 2 data sets to focus on will be the one around midyear for cas-cabo and then later in the year for cas mono where we'll have more mature data and maybe we'll have PFS from the 50 mg QD cohort at that time.

And so that's the key thing you need to focus on for the combo data is PFS or...?

More mature ORR. So as we've seen like ORR can increase over time, responses can happen late with this mechanism. So it will be more mature ORR and then PFS for the cohorts that we did not have mature PFS for at the ASCO GU presentation to the extent we've hit a median. We still have not hit a median for the 50 mg QD or for the 100 mg QD.

Right. Perfect. That kind of brings me on to the next question just about I guess the current cas level of like what 100 milligram dose in the combination. Is there any need or desire to push it higher or bring it down or kind of how should we think about that dose going forwards?

Yes. We're very, very comfortable with the 100 mg QD dose. We've talked about that with the FDA. We had a meeting with them last year. They were comfortable with that dose. We're starting to see some data from the 150 mg monotherapy cohort. There's nothing in the data set that would tell us that we should be going with a higher dose. And as we've been saying, we think 50 mg QD is getting towards the top of the dose response curve and the flat part of the dose response curve, but we probably are squeezing a bit more efficacy out of the 100 mg QD dose, but we don't think we're going to get a whole lot going to 150 mg.

Got you. Okay. And then the combo versus the mono, what does that do? What's the benefit? Is it response rates? Is it duration?

Yes, it's going to be all of those things. I mean duration of response is something. The response for this mechanism is so long that that's something I don't think we're going to know for a while, but we do expect to see an improvement in duration of response. As we said, just going back to the monotherapy expansion cohorts; when we presented that data, we had 26 responders across the 3 cohorts. Only 2 of those responders had progressed. So duration of response both for cas mono and cas-cabo is going to be incredibly long, but we do expect to show improvement on the other measurements. You mentioned ORR and PFS. ORR would obviously be the most near-term ones that we'd be able to demonstrate. PFS will take a while to mature, but we do expect to show improvement on both those metrics and then ultimately overall survival.

Got you. Okay. Do you have a goal in mind for the improvement around ORR or DCR or prevention of...?

Yes. I mean it's always tough to quantify improvement, but I think what we've been saying very consistently is that cas-cabo ORR will be higher than what we've seen with cas mono as well as what's been seen for cabo mono and there's a few different studies out there. And so that is our goal to show that we can get to a higher response rate versus both agents as monotherapy. And I think when you see the waterfall chart and other graphs, I think it will show clearly that there's something more happening there than you would expect with either mechanism alone.

Okay. So at the moment, you're not kind of guiding to a success rate for the ORR?

No. I think the way you should think about our cas-cabo data, it's going to be early. But the most important thing is that you will look at those data and be able to look and say like they're going to be running a trial of cas-cabo versus cabo, it's going to look like you will believe that the trial is going to be successful and it's going to be clinically meaningful difference and I think the data will already be telling that story.

Okay. Got you. And then have you seen and will we see I guess patients that have had prior HIF-2 alpha?

No, that's easy. We're not looking at patients that have had prior HIF-2 alpha inhibitor. As a matter of fact, that patient population really doesn't exist. You're not seeing patients getting -- the approval for belzutifan is in late-line patients. So obviously you won't be having patients coming into this that have had HIF-2 inhibitor and it's not even a sort of a feasible thing at this point.

Would you assume that too dissimilar if you're not responding to HIF-2 alpha, it would just be...?

So in general, we would feel that way. However, if you think hard about it given -- now I'm talking more downstream, you could imagine since we're seeing that dramatic difference in the rate of primary progression, we see about half the rate versus belzutifan. What that tells you if that's true, that means that those 50% that are progressing on belzutifan that might not have otherwise were not intrinsically resistant to the HIF-2 alpha mechanism. So you could imagine at some point a study where you would look at for example those early progressors and that would not have represented some sort of resistance generation. And so you could imagine those patients going on to casdatifan after belzutifan and there might be some benefit there, but that's not in our near-term plans.

Okay. Perfect. And then so the data in the fall, the additional monotherapy, I think you touched upon it. But kind of what should we expect to be seeing from that? I know there's a couple of doses that we should be thinking about. And does that data in any way change the registration strategy?

So you mean anything that we see in the monotherapy or cas-cab. No. I mean we're obviously looking at the data on a regular basis. I mean there's nothing that we've seen that would change our registrational strategy. And as a reminder, our first registrational study is a study called PEAK-1 where we'll be looking at cas plus cabozantinib versus cabo. So that's why that cabo cohort is so important. As Terry was saying, first of all, obviously we want to look at safety and make sure that we can combine those 2 mechanisms safely, which so far based on everything we're seeing, we can. And then obviously you want to start to look at efficacy as the data set matures. But we're super excited about the study. It's a very simple study, about as simple as you get; 700 patient PFS endpoint. We really set up the study so that it will enroll well and enroll quickly. As an example we're using 2:1 randomization so patients have twice the likelihood of getting in the experimental arm versus the control arm, which is something both patients and clinicians like. We don't see a lot of competition out there, direct competition for patients in the study. That's something that our investigators have been pointing to as well and why they're really excited about the study and why they think the study is going to enroll quickly. And then obviously the fact that it's a PFS endpoint versus overall survival will allow us to get to an answer pretty quickly as well. So so far, not seeing anything in the data that would make us change our plans and we're as excited as ever about getting the study started and expect to start it by midyear.

So to your specific question about the monotherapy data sets that we'll show later in the year, I think they will have, as Jen said, 0 impact on registrational strategy. I think the only thing they'll do is reinforce confidence that casdatifan looks both better than belzutifan and looks better than PKI monotherapy because what you'll see is more mature data from those earlier cohorts. We'll see deepening of responses. You'll see actual where we had PFS that was immature or we couldn't even state a median PFS, PFS that's likely to be double or more than that of what's been reported for belzutifan. So it will just be confidence enhancing probably more to the external world than to ourselves or investigators, but nothing that will change any of our strategy.

Got you. And then on the safety, what should we be looking for? What's the worry? I mean I guess cabo has been a fantastic drug, but it's sometimes difficult to take just...?

Yes. Actually the data will end up showing what was anticipated, but you need to play the game to know the outcome. And there are orthogonal mechanisms, [Audio Gap] substantial AEs that you see from casdatifan like belzutifan are those that are on target anemia and more rarely hypoxia. And when you combine the 2 mechanisms, there doesn't seem to be anything that ends up being some sort of synergistic tox. And as a matter of fact, we've been looking at the clinically used dose of cabo in combination with the 100-milligram dose of casdatifan and that seems to be quite good.

Got you. Okay. And just on to PEAK-1, you've touched upon it. Just how should we think about interim data and kind of if it's built in, what triggers it and what should we expect to be seeing for that interim?

Yes. We haven't really talked about the statistical analysis play and whether [Audio Gap] and for competitive reasons and all sorts of reasons, we probably won't. But like I said, I think the important point is it is a PFS primary endpoint, all of the alpha is on PFS. And if you look at what cabo alone has done on PFS, it's been about 10 months and you've done a good job I think of pulling together that data and actually the range has probably been about 7.5 months to 10 months. So METEOR was about 7.5 months, CONTACT-03 was 10 months and so that's the range that we'd expect for the control arm. So not a huge amount of time and that again is why we think we can get to data relatively quickly.

Got you. Okay. And I guess the anti-CTLA-4 PD-1 combination as well, kind of when do we see that data and I guess what should we be looking for? It's an interesting combination.

Yes. So the study that you're referring to is part of a clinical collaboration between us and AstraZeneca where we're combining cas with their PD-1/CTLA-4 bispecific. They presented data on their molecule about 1.5 year ago now at ESMO and RCC, which looks very, very interesting. We worked with the same investigators. Investigators are very excited about that molecule. So we are combining volru with cas as part of a study that they will be operationalizing. We haven't talked about the economics of the study. But obviously there's some cost sharing so it's a really efficient way for us to be exploring that combination and that combination will be targeting patients that are IO naive, which are essentially going to be first-line patients. So that study will start right around the same time as PEAK-1. The focus for this study will really be on safety, just again similar to what we're doing with cas-cabo right now just to make sure that those 2 mechanisms can be safely combined. We don't expect there to be any overlapping toxicities again like cas-cabo. And so we expect very much that those mechanisms will be safely combined and I think we'll talk more in the future about what we want to do next. And I think around midyear, we'll be able to say more about the study for competitive reasons. We've been pretty quiet as has AZ about what we're planning. But like I said, when we're getting the study off the ground, I think we'll be able to say a lot more exactly what our strategy is with that program and in that setting.

Got you. Okay. And being several years behind Merck, how do you -- what's the go-to-market strategy? Is it like having the right combinations? Is it just having a better molecule?

It's all of that. I think like early on we would tell people, including you, like even if our molecule looks just like theirs, we think we have a differentiated development strategy and differentiated combination partners and we still very much believe it. I think the thing that has changed is we generated more and more data from ARC-20 and so we are very, very confident now and I think the investigator community that we have a better HIF-2 alpha inhibitor. And I think Terry touched upon the efficacy data that we've seen, but we're seeing half the rate of primary progressive disease. They've seen ORRs kind of ranging from 18% to 21%. We're now clearly north of 30%. Our PFS is much longer than what's been seen with belzutifan. So we have a better backbone HIF-2 alpha inhibitor molecule and then we are also evaluating combinations that we think are going to be better than what Merck is doing. As an example, they are combining belz with lenva, which is their TKI. The challenge with lenva is that it's a more toxic TKI so I think it's going to be more difficult to combine with relative to cabo, which we're combining with. The other challenge with lenvatinib is that it's a lot more difficult and complicated to dose. It's available in a lot of different dosing regimens. So when you talk to investigators about like their experience with lenva, they would just tell you that just the titration up and down is a lot more complicated than with cabo where cabo is available 3 dosage forms; 20, 40, 60, that's it. So we think we have a better TKI combo study. The other challenge with their study is they are combining with lenva, but they're using cabo in the control arm. So if lenva underperforms cabo, that can create some issues for them in that study. And then just the last point that I'd mention, our first-line strategies are just completely different. They are combining with PD-1 and TKI. We're combining with PD-1 and CTLA-4. So we're just going after different segments of the market and we're competing, but with different combinations in the first-line setting. And again because ours is TKI-free, we think we have a better combination.

I think the way you should think about that because we get asked that question a lot and I think it's not a situation like based on actual reality. So Jen talked about the difference in the strategy. But the reality is Merck is ahead on 1 study, lenva and that study may or may not even be successful and obviously the readout has been pushed out since it was initially reported. We get asked sometimes oh but they're combining with zanza, how is that going to be? That will actually end up being behind us. So what's clearly emerging is a better molecule and then not only are our strategies differentiated, Jen said they're not even going right now with the TKI sparing regimen, which we see is the direction that the field is going to go. As I was mentioning before, we see that casdatifan is looking even better than TKI monotherapy. So we see a paradigm shift where HIF-2 alpha will be going earlier into the treatment paradigm with potentially the TKI being put off till later so patients can avoid the TKI. But we don't even really see ourselves as substantially behind Merck in general other than in that single study.

Got you. Okay. And then TIGIT so the gastric data and kind of expectations or can you help us set expectations around the OS for the fall of this year?

Sure. So let me remind everybody, we're looking at -- our registrational study called STAR-221. It's in upper GI cancers. It's a very straightforward trial. It's dom-zim chemo versus nivo chemo. Nivo chemo is the standard of care. We reported a median PFS some time ago of around 12 to 13 months. That's actually the equivalent of the OS for the standard of care and we'll have data later in the fall where we will share the OS. We have said publicly that with 18 months of follow-up, we have well over 50% of the patients still on study. So we think that's going to look quite positive for the standard of care there. In addition to nivo chemo, there's also KEYTRUDA chemo was approved and Tisle chemo approved, very similar 13-ish month OS. So we think we have opportunity to very substantially beat that in a very clinically meaningful way. But more importantly, the Phase III study that's correlative to that STAR-221 was fully enrolled as of June of last year with 1,047 patients. So it's a very well [Audio Gap]. So you can do the math. And by the end of this year, it will be 18 months since the last patient was in. And so with the standard of care of 12 or so months, you can get a sense as to that readout. We've been guiding to a 2026 readout and we'll probably give tighter guidance as the year goes along.

Got you. And that trial over-enrolled and does that kind of help with the stats?

Yes. It did over-enroll and one of those that was enrolling I think like 100 patients, maybe more than that a month towards the end. So it was almost impossible to not over-enroll because you can't just all of a sudden stop and all the slots go away. Yes. So it did over-roll, which is obviously a good thing because it gives us a bit more power as well in the study. But the over enrollment was a function of just how quickly it was enrolling at the end.

How are you thinking about kind of the probability of success in the intent to treat versus the PD-L1 high population?

Yes. So again without going into the stats, it's probably a little bit difficult to give you a specific answer, but I think we're very optimistic on both. I think when we look at the EDGE-Gastric data, which obviously includes the ITT patient population and we've been looking at different cuts of the data. I think we're still obviously very optimistic on PD-L1 high, but also pretty optimistic on ITT. If it were to hit just in PD-L1 high, I think we're thinking about it more about PD-L1 positive versus PD-L1 high. And so we actually changed the stat plan a bit where initially just like we were, we'll look at PD-L1 greater than 5 and then ITT is dual primary endpoints. But if you hit on one of those endpoints, there's been a hierarchical analysis and we'll look at PD-L1 greater than 1. So if we do have a situation where we didn't hit an ITT for some reason, but we do hit on PD-L1 greater than 5, you then have a really good opportunity to expand the label to PD-L1 greater than 1, which is 80% of the patient population. So as a reminder, the allocation across the PD-L1 positivity is different than what you see in lung and it's very weighted towards PD-L1 greater than 1. But all that said, we're still very optimistic about ITT and we'll see the data actually pretty soon.

Got you. Okay. And would you have to do -- so if you didn't hit, would you have to do PD-L1 testing?

Regardless, there's going to be PD-L1 testing. I mean just like today. We've been doing actually a lot of work on this, but almost everybody is tested for PD-L1 just like lung and gastric today. So irrespective of what happens, like patients will likely be tested before they receive the drug.

And then there are complexities around the testing as sometimes we see with lung?

No, no. It's like it's a very routine testing that everybody is doing now.

Got you. Okay. And then what are the expectations around the control arm for 221?

Really sort of straightforward because it's been so consistent. So the nivo chemo comes in about 13 months OS and similarly it comes in around 7 months PFS even though PFS isn't the readout. And as I mentioned before, Tisle chemo and KEYTRUDA chemo also are in that 13-month range. So it's very, very clear, very consistent standard there.

Got you. And then maybe in the last few seconds. Just on CD73 kind of what should we expect? Like the translation of that Phase I into Phase III, any differences in the trial?

We think that's a great trial. So that's a little under the radar, but it's a Phase III trial in frontline pancreatic cancer. It's off to an incredibly quick start. Enrollment is great. I think it's very realistic that it could be enrolled even within a year and certainly a readout in 2026. Simple design going on top of standard of care, gem/Abraxane versus gem/Abraxane quemli, very similar to what we did previously and we think supported very well by a synthetic control arm that we had done in parallel to the initial trial as well as biomarker work that actually suggested we were doing better in patients that from a prognostic standpoint actually should have done worse, but those patients that have high adenosine. So we feel, a, very optimistic about the reproducibility of those early results; and b, that we'll have those data very near term.

Perfect. Thank you so much.

Thank you.

It was pleasure.