Arcus Biosciences, Inc. (RCUS) September 9, 2026 Conference Transcript

The fifth session of the first day of the back-to-school biopharma summit that Citi is hosting here in New York City. I'm Miguel Nachamavitz. I'm one of the biotech analysts. Our next session is with Arcus Biosciences, so it's really a pleasure to have with me the CFO, Bob Galtz, and also Pia Eves, who's the head of IR and strategy. So welcome, both of you. Appreciate it. and so you know a lot is a lot is happening obviously in the in the space you have you're generating a lot of new data sets and I understand you have some some new slides as well that would be helpful in sort of framing the the very significant data update in October that you're uh that you're planning um so so bob maybe just to start you know kind of tell us what's on deck for for october at a high level um and then we can kind of walk through like the 1l data the 2l the 2l uh strategy and and you know how you're thinking about the phase three strategies for

everything perfect yeah no happy to do that and thanks for having us um uh maybe just before i jump into Casdatafan really briefly just to remind folks about the company. So Arcus is a company that is based on very high quality drug discovery, particular emphasis on high quality small molecule drug discovery. We like to focus on areas where there are targets that have good biologic validation. And we think that there's a real opportunity for a very high quality molecule. That's clearly the case with casdatafan. I know we're going to focus on casdatafan today, and we'll jump right into it. Just a quick reminder, the rest of the portfolio for us, we also have a drug that's targeting CD73 that's in a pivotal pancreatic cancer study. In the update for this conference, we also indicated that we expect an interim analysis in the fourth quarter this year on that pancreatic cancer study. So we're looking forward to seeing data from QEMLI, which is that compound in PDAC pretty shortly. And then we also have a really exciting early stage immunology portfolio of largely small molecules that's moving along in the first program and MRG PRX2 inhibitor is now in a healthy volunteer study in the clinic. So shifting to CasDatafan, which is definitely the focus for investors right now. Um, you know, quick reminder, the program, uh, one of the reasons why we're really excited about the program is that the target HIF2 alpha of casatafan has been validated by a molecule from Merck, um, belzutafan. Um, it's had three successful phase three studies, light spark five in the late line monotherapy light spark 11 and second line, uh, in combination with lenvatinib, and then also in adjuvant therapy in combination with pembrolizumab. So good validation for the target, not drug in the late-line monotherapies are doing sales of roughly around a run rate of a billion dollars a year. However, that molecule does have a liability that's pretty well characterized, which is that it has absorption-limited pharmacokinetics. And so that aspect means that as you increase doses beyond the dose that's approved and that they've been using for their clinical trials, 120 milligrams, you only get incrementally higher exposures. So, you know, back to kind of the core of Arcus of looking at developing very high quality small molecules, you know, our goal was to see if more could be taken from the target HIF-2 if you actually didn't have that liability. And so casdatafan has dose proportional and linear pharmacokinetics, and we're essentially, in our clinical trials, utilizing a dose that has roughly five-fold the pharmacodynamic effect of belzutafan. In late-line monotherapy, what we saw was that that resulted in a very substantial increase in response rate and progression-free survival, progression-free survival, for example, 12 to 15 months versus 5.6 months from LightSpark 5, which was their pivotal study. And we also see a substantially lower rate of primary progression, which is progression by the first scan, which is a particular problem in clear cell RCC, where the primary progression rate can be a third or greater for an agent-like um for like like belzutafan so that's sort of where we are right now and um our first pivotal study um for castatafan will be combining castatafan plus cabozantinib which is the standard of care in second line clear cell rcc versus cabozantinib that's pivotal study is uh enrolling and uh we've we've indicated we expect to have this study enrolled around the end of this year. The enrollment's going very well. We're excited about that. And then our frontline strategy will be to combine casdatafin with IPI and NEVO, which is one of the preferred regimens in the frontline. We can talk about the nuances of what regimens are in the frontline and the sort of pros and cons to each as we get into the details. And so that'll be our second pivotal study. The first one's called Peak 1. That is the second line study. The second one's Peak 20, which is the frontline study. And that brings us to a very meaty update that we'll have in October. We're going to have an investor event on October 20th. And we'll be updating data and providing new data across multiple lines of therapy. So we will be providing data on the late line monotherapy. We'll be providing data on the second line in combination with cabozantinib and then also the front line. So I'll walk through each of those lines of treatment and the data that we'll have and kind of how we're thinking about each of those relatively quickly. And we can jump into as much detail on each of those fronts. For those that are following online, we do have some slides that are incorporated in our corporate deck on our website, and they're available in the appendix to the slide deck, which show the details of the data that we'll be presenting in October. So let me start with the latest line of therapy first, and then I'll work my way earlier because this will be the kind of the maturity of the data. So in the late line monotherapy, I already indicated that we've presented what we believe is really compelling response rate data and progression-free survival data already that's pretty mature and I think is, you know, indicated to many that they believe casdodafan is clearly differentiated from belzudafan. The new piece of data that we'll have at our October update is for the first time we'll be sharing overall survival data and a Kaplan-Meier curve there. So why is that important? Belzutafan in their three pivotal studies hasn't demonstrated an overall survival benefit yet. In the second line in LightSpark 11, they came quite close. They had a hazard ratio of 0.85 with a p-value of 0.06 on overall survival. And overall survival, while PFS is the registrational endpoint, would obviously be a massive differentiator from a commercialization perspective, both in the U.S. in terms of label, but also ex-U.S. to open up reimbursement. So, we think demonstrating that the molecule could bring an overall survival benefit in late-line monotherapy, you know, has the potential to read through to multiple lines of therapy. So in the late line, we'll have 28 months of median follow-up. The benchmark here from LightSpark 5 was 21 months of OS. And so obviously, we'll be able to look at the Kaplan-Meier curve for our data and compare it to that benchmark and see whether or not it appears that there's a difference relative to what we've seen from Belzutafam.

So pretty simple in the late line. You mentioned that in that late line, you had, you know, low teens, low to mid teens, PFS. So that should give people some framework for thinking about where OS goes.

Yeah, we're cautiously optimistic for sure. Absolutely. We think that there's a good potential here. And we think it's really, frankly, the potential for the mechanism. It's just we think a lot of the belzutafan data indicates what belzutafan can achieve, not what a great HIF2-alpha inhibitor can achieve. And so, you know, across all of the efficacy metrics in the late line, you know, we're hoping to see what a really good HIF2 inhibitor can achieve. And so we've already seen it for PFS, and to your point, we think that bodes well for potential OS as well.

So very excited about that update. um good just just the 21 months uh do we have a reference point on pfs for that number as well or or not or is that harder to it was so it was five uh 5.6 months okay that so yeah that's what i'm getting at that you know 5.6 translated to essentially 21 now you have third 12 15 like the math should suggest should suggest something north of 21 if things cooperate yeah uh we we yeah i think we agree with that and um you know we're cautiously optimistic we'll see how the data look yeah yeah okay yeah so that's late line yep so that's a lot of patients that's a big chunk of

yeah exactly it's 120 we always look at there's um for project optimist we looked at three doses um uh that range in pharmacodynamic effect from essentially two and a half to seven and a half times the PD effect of belzutafan. And what we generally observed was consistent efficacy. And so we generally look at that pooled data set as sort of the best indicator of truth. Within that, the tier point with PFS, the range was 12 to 15 months. But we think, you know, the pooled data, which is close to 13 months, is probably the best indicator. So if you think about 13 months and we'll see what that brings in terms of OS. Right. Okay.

Yep.

Okay. So marching on then. Marching on to second line. So second line, again, as I mentioned, we're in the midst of enrolling our pivotal study with casdatafam plus cabazantinib versus cabazantinib. We shared very early data roughly a year ago, response rate data from that particular arm of patients. And it wasn't the complete arm of patients. There's 44 patients there. Now we'll have about 20 months of median follow-up. And, you know, there's a number of different benchmarks to look at in the second line. Obviously, the most, the most, the easiest thing to look at would be the LightSpark 11 pivotal study from Merck, which, as a reminder, compared Belzutifan plus Merck's TKI lenvatinib versus covazantinib. And there they had, you know, 0.7 hazard ratios. So the study did pretty well. And obviously, presumably will result in an approval. It's under review, I believe, currently with FDA.

That was PFS, 9.7.

Yeah, the median PFS was 14.7, I believe, versus 10.7 for the control arm for covazantinib. Yeah, 0.7 hazard ratio. Importantly, the hazard ratio improved from 0.75 to 0.7 from the first interim to the second interim, largely because what you see from HIF2-alpha inhibition is a tail effect to some degree. um patients that either achieve stable disease sustained stable disease or a response generally tend to have very durable activity with if two inhibitor and so a lot of the hazard ratio sort of happens on the tail side of the curve so while the landmark pfs numbers are important we try to emphasize that um uh the totality of the curve is important because the tail is where if two really sort of seems to demonstrate a significant impact. So the important point for this particular data set in the second line is that the patient demographics are important to pay attention to. So LightSpark 11, for a couple of reasons, probably deviates pretty substantially from what folks would expect from a real-world patient population. The first main reason is that they enrolled patients that had received or did not enroll patients that had received prior lenvatinib or kavazantinib therapy because those were both of those two agents were in the two respective arms. Which is one of the drawbacks of having a different TKI in both arms.

Correct. Both populations.

Yes, yes, exactly. So it's you're excluding both of those. So in the front line, so these would be the patients leading into the second line. So in the front line, patients typically see one of three TKIs combined with anti-PD-1, so lenvatinib, cabozantinib, or exitinib, or they receive ipinevo. And so 70% of the frontline market is sort of fragmented with the anti-PD-1 TKI, 30% is ipinevo. And we'll get to that later. Yeah. And so the, the, if you think of roughly two thirds of the TKI 70% are essentially being excluded from your incoming population, that's, it's a pretty substantial portion of what you would anticipate to be the real world frontline that you're excluding from your patient population. The other piece that's important is that they still enrolled roughly half their patients with prior TKI exposure, which would seem unusual if you were to think that that was all exitinib. It turns out that it wasn't. The manuscript for LightSpark 11 was just published in the last couple of weeks. And half of the patients that had prior TKI exposure had exposure to the first generation TKI. So these are sinitinib and pazopinib. And patients, you know, that have experienced those agents probably have a pretty, have a different prognostic outcome versus those that have gotten the more potent TKIs like a cabozantinib or a lemvatinib. Um, in particular, the one piece I point to is that obviously you wouldn't have cabozantinib treatment after cabozantinib, but for patients that receive lenvatinib in the frontline, there's a couple of small real world studies done by high quality academic institutions that have shown that, um, patients that receive cabozantinib therapy after treatment with, with lenvatinib in the frontline do particularly poorly. So they have PFS of four to six months and an OS of under a year, which is obviously much worse than you would typically expect in this patient population. In contrast to the LightSpark 11 patient population, I think ours is probably a little bit closer to that real-world representation. So we did enroll seven of our 44 patients that received prior lenvatinib therapy, for example. and we don't have the same representation from the first generation TKIs as well. So the patient populations are a little bit different. When we share our update in October, we'll be sharing, obviously, response rate data, PFS Kaplan-Meier curves, and we'll also be sharing an OS Kaplan-Meier curve with 20 months of maturity OS for cabozantinib is just over that 21 months. So back to the point I made about the late line, we'll have an early sense for how we're seeing for performance in the second line. And that could obviously be compared to both LightSpark at 11, as well as the Cabo benchmarks. And then we'll also look at each of these metrics with the relevant patient demographic. So looking at prior TKI treatment, prior lenvatinib treatment specifically, because that one has such a poor prognostic, and then prior ipinevo treatment, because there's good benchmarks for each of those. And in our slides in our deck, we have all the relevant benchmarks called out for each of those patient populations.

And the prior azopinib and sinitinib, which is a very small contribution?

It's a small contribution in our cohort. It was half of the TKI or about quarter of the patient population in LightSpark 11.

The point there is that the over-representation or high representation of PASO and Sinitinib in LightSpark 11 drove what specifically?

It's most likely slightly better performance from Kabazantinib than what you would expect if you had Exitinib therapy, for example. So in general, like I think, so their PFS for their kavazantinib treatment arm at 10.7 months, I think it's fair to say is on the higher end of kavazantinib benchmarks that have been put up. And I think that we would expect that our patient population is a tougher patient population prognostically, and we would expect that in our pivotal study, peak one, that our control arm would not perform the same because we're including these patients that are tougher to treat.

Right. Okay. So you had, for the Pembrolenva, you had patients, you had more patients that would be expected to do worse, and you had less patients that would be expected to do better with the PASO. So that's working both, working in the same direction. Correct.

Now, there's one thing that actually from, so if we talk about that's the prognostics of the patient population, the one piece that I probably would highlight is we actually are cautiously optimistic about the potential for the benefit that casdatafine can bring to these TKI-treated patients, and in particular, I point to one specific piece of data. So Merck has shared data in their late-line monotherapy that shows that the more prior TKI treatment a patient has received, the worse they do on belzutafan therapy. We've indicated, and we'll share the specific data at our October event, that we do not see the same meaningful differences with casdatafan treatment. So, for example, patients that have received two lines or three lines of prior TKI don't do worse than patients that have received one line of prior TKI in a meaningful way. We think that's likely because of the connectedness of HIF-2 to, you know, the mechanism for a VEGF-TKI. So one thing that we note is that when you treat patient with a VEGF-TKI, it results in elevated HIF-2 levels. I mentioned before that Belzutafan, one of the challenges with the molecule is the absorption-limited PK. so we're hitting the target essentially five times harder so we think that in the event you have higher levels of HIF-2 castataphan may be better positioned to address those higher HIF-2 levels and to cover the target in that regard and deliver good efficacy and that may be why we see the effect that we see okay so so the punch line being that essentially from at least a hazard ratio perspective, these underserved patients that receive prior TKI may have the potential to do better with casdatafan than they might have done with belzutafan.

Okay. That all makes sense. So you're going to potentially have a sort of better, these patients should do a little, when you think about the phase three trial, the peak one trial, your expectation is that you would have a weaker pfs on in the space in the control arm and that yeah and then the potential to generate more hazard ratio obviously in the experimental arm right yeah okay um that makes sense um okay and then you want to move to the yeah front line because the further the front line you know we've been getting questions which you've been receiving as well just in terms of the strategy, in terms of the comp there, about the IIO versus TKI, which, as you noted, is the majority of the frontline use, but the IIO is certainly a significant fraction as well.

Yeah. And so in looking at the current frontline market, it's important to note that Ipinivo has roughly a 30% share in the frontline, despite having, in its pivotal study, the worst progression-free survival performance amongst the pivotal studies, whether it be comparing to axitinib or lenvatinib or cavazantinib. Those drugs have a median PFS of, call it, 16 to 24 months, whereas the median PFS for ipinevo is 12 months. So why does that drug, why does that combination have the best or have the best individual share in the frontline and still have a 30% share with that performance. It's because it delivers overall survival and meaningful overall survival. In fact, they just presented last year 10-year survival data, and I believe the 10-year survival data for that ipinevo regimen is, you know, on the order of 30 to 40%. So really impressive long-term overall survival, notwithstanding the Achilles heel for the therapy is progression-free survival and the fact that so many patients progress quickly. Because of the strength of our late-line monotherapy data, we think that that's the perfect place for casdatafan to play, essentially to make up for the weakness of a regimen that provides great long-term overall survival, so providing those patients with nearer-term disease control without the toxicity of the TKI. And so the good news in terms of providing an update for data when we share data in October is because of the tough first year for patients that are treated with that regimen, it doesn't take a long period of time to see if there's a difference from an efficacy perspective by bringing casdatafan into the regimen. So what data will we have? So we've completed enrollment of a cohort of about 30 patients with casdatafan plus just anti-PD-1 without the anti-CTLA-4 roughly at the beginning of this year. So we'll have about 11 months of median follow-up with 30 patients for casdatafan plus Zimbrellamab, our anti-PD-1 agent. And we'll be able to look at primary progression. We've already reported that that's 7% versus ipinevo, which is 18%. We'll look at ORR, and then we'll be able to share Kaplan-Meier curve for progression-free survival. And we'll be able to compare that to ipinevo, notwithstanding the fact that we don't have anti-CTLA-4 on board. So that's TechMate 214 is the pivotal study there. We'll also be able to compare to Keynote 427, which is monotherapy anti-PD-1, so pembrolizumab in that case, where the median PFS was seven to eight months. And, you know, the response rate was obviously lower, higher primary progressive disease than what you saw with anti-CTLA-4, anti-PD-1. So we think that those two benchmarks provide a great backdrop for sharing that first anti-PD-1 plus CAS set of data. And obviously, to the extent we start to see some differentiation, certainly from Checkmate 214 in the early go there, we think that bodes really well for the combination that then brings also anti-CTLA-4 to the game. And to that end, we just completed enrollment of our IPI plus ZimCAS cohort of 30 patients. That's the data set that will be used to provide safety to FDA to launch the pivotal study at the end of this year, peak 20 that I alluded to before. And so at the time of the investor update that we have on October 20th, we'll have more than 20 patients that will have made it through the first four cycles of therapy, which is the period of time during which ipilimumab is dosed. So that would be the period of time where there would be the most concern for toxicity from all three agents.

So, you know, we like the fact that we're going to be able to provide the efficacy with anti-PD-1 and then also be able to comment on the safety profile and early primary progression, for example, of what we're seeing with IPI on board as well. okay so so okay that's all making sense so your point is that with the cas plus zim potentially we'll see you you're you're saying you you could be competitive on pfs versus two checkmate 214 which is the double which is zim plus ipi but you're just saying cas plus zim and then of course the the standard therapy is the the double so so you're going to go into the phase three with the triple um which i gather would be even better than hopefully yeah you know

better better than the double yeah but but there is the potential for cas plus zim to be to be very competitive just with the checkmate 214 regimen we believe so absolutely because we think that like when you look at the the the dynamics of the mechanism um cas brings a component that that regimen is clearly missing in near-term disease control, together with what we hope to show in terms of the late line, in terms of overall survival. So we sort of think it's the, you know, sort of the potential for best of all worlds. So near-term disease control, long-term survival, and better tolerability than regimens that include TKI. And then, I mean, tell me on this point, obviously, I guess a lot of the docs just are very familiar with the ipi nevo combo so that's kind of their their default but but the but the idea of just doing a cas plus pd1 like a cas plus nevo frontline study is an idea right yes it is an idea and it's one that actually we explored because we think it makes a lot of sense um what we heard from investigators is that that and one of the things one of the ideas that we explored was potentially even a three-arm study that included you know it would have been ipi nevo cas um nevo CAS, and then IPI-NEVO would be the comparator arm. What we heard from physicians is that that study would be harder to enroll because there's a significant portion of the physician population that really believes the IPI adds to overall survival and they want to see the IPI on board.

So, right. Okay.

And for everyone who's sort of still going to do the cross trial comparisons and look at the frontline, you know, plus IO plus the TKI, your point is that you can avoid the TKI um get better tolerability and then make up make up the difference in terms of the the survival endpoints with the hif2 alpha yeah and i think you know if it's interesting if you look at the monotherapy data casdatafan performs the i would say the like so the disease control from a tki is different mechanistically than it is for casdatafan when you look at spider plots for casdatafan, you tend to see sort of slower tumor volume reduction, but very sustained action or activity. With a TKI, you tend to see marked tumor volume reduction, but then you can see a V-shaped curve in terms of the resistance developing and patients progressing. And so we think that casdatafan over time can give that same level of efficacy as a TKI. In fact, our monotherapy data, even on response rate and PFS is comparable or better to a TKI with much less toxicity and a better longer term profile. So we don't think there's any reason to think that it can't bring over time the same thing that TKI brings. Importantly, too, the other thing is that I would point to the TKI regimens have a PFS landmark of about 70% at the end of the first year. So that'll be an important landmark to look at as well when you look at, you know, CAS plus anti-PD-1, you know, versus like a TKI plus anti-PD-1.

Right. Okay. And so just really quickly, can you just frame the timeline? So the peak one is doing very well with enrollment. Yep. It'll be fully enrolled around the end of this year.

The peak 20? we expect to initiate the study right around the end of the year with uh enrollment beginning in the first quarter okay and can you provide any rough idea of data timelines for those two yeah so uh the obviously the the benchmark for pfs for peak one uh is nine to 11 months for cabozantinib um uh you know i think most folks have sort of guesstimated and we haven't given formal guidance yet because we don't have any event rate data yet. But most folks have guesstimated sort of the first half of 2028 from peak one, which is probably reasonable on its face. The PFS benchmark for peak 20 will be very similar. So the timeline to data should be very similar. We're optimistic that we can enroll peak 20 rapidly. So, you know, we'll see how that goes.

I mean, oh, it's a similar, even though it's frontline, it's still a similar.

It'll be very similar, very similar study size. And the PFS is only like a couple months better. So it's a very similar timeline to data.

Okay. So that's not a 2028 event.

No, it's probably, I mean, we're phase shifted in terms of start of enrollment by about a year versus peak one, a year to 15 months. So, you know, I think the easiest way to think about it is that it's sort of similarly phase shifted in terms of potential results.

So just to summarize, so these are the, so the late line, the second line, the front line, very significant data updates, anything else to watch for at the event? I mean, that's plenty, but it just, just trying to make sure we cover everything. Yeah, no, I think that's it.

I mean, I think for us, if you think about it from a very high level perspective, the The late-line monotherapy data last year, I think, engendered a lot of confidence that we have a better HIF2-alpha inhibitor than our primary competitor, who's already generated positive data in three pivotal studies. And so I think most people believe the probability of success in the PEEK-1 study is extremely high, and that that study's already been de-risked, not only because of their data, but also because we're combining with the well-accepted standard of care in that setting, going straight against the standard of care. And so really, we think that kind of from an investor perspective, when people look at the value of the company, most of the value can easily be arrived at by looking at that second line setting. We think this frontline look is going to be the first look at the frontline. When you look order of magnitude at the commercial opportunities of the two. We think the front line's, you know, roughly a two to three X, probably closer to three X the opportunity of the second line. So one and a half to $2 billion opportunity in the second line, more like a $4 billion plus opportunity in the front line. So we're excited that, you know, the data in the front line could engender confidence in that opportunity. And hopefully that's, you know, a nice opportunity.

Okay. Just one final question, which is a bit of different topic but we're asking everyone this since ai is featuring more heavily in our lives so what to what extent are you using any of the ai tools models inference structures to uh to to improve processes or do things faster at arcus yeah i'd say that you know we have an we have a team that has been very aggressive in adopting technologies where we see the benefit and so like our small molecule dark discovery team has been similarly utilizing tools where they see the benefit.

I think to some degree, input is important, right? So if you can't input into models, high quality data, you're not going to generate great output. And so for us, the place to utilize AI is in the place where the inputs are great and can actually plow through things a lot faster than we could otherwise do them. So that's been where we've really seen the uptake from our side. I think sometimes folks jump to the idea that you can solve problems where you don't even have the inputs to solve the problems yet. And for us, I think that we feel like that's a bit of a jump too far. So I'd say we're sort of in the camp of aggressively adopting where we see lots of value add.

But that's specifically for drug discovery, drug design? Yeah, absolutely.

I mean, in all aspects of plowing through data relative to drug discovery and design, for sure.

Great. OK, well, we'll be able to see you in New York on the 20th then. All right. OK, thanks.