Arcus Biosciences, Inc. (RCUS)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 revenue was $28.0M and GAAP EPS was $(1.14); both missed S&P Global consensus (Revenue $38.6M*, EPS $(1.08)*) as collaboration revenue normalized post-2024 catch-ups and licensing inflows; FY25 GAAP revenue guided to $75–$90M .
• Management reiterated casdatifan (HIF-2α) as the top priority, with Phase 3 PEAK-1 (casdatifan+cabozantinib vs cabozantinib) initiating in Q2 and strong investigator enthusiasm; safety/efficacy signals for the combo expected at ASCO support the trial design .
• Balance sheet remains robust with $1.005B cash, cash equivalents and marketable securities at 3/31/25, enabling funding through initial pivotal readouts (domvanalimab, quemliclustat, casdatifan) including PEAK-1 .
• Near-term catalysts: ASCO oral for casdatifan+cabozantinib (initial efficacy/safety), PEAK-1 initiation, AstraZeneca eVOLVE PD-1/CTLA-4 bispecific combo study start; medium-term: EDGE-Gastric OS data in fall 2025 and multiple ARC-20 updates .
• Narrative shift: Arcus will self-execute PEAK-1 and potentially commercialize in the U.S. (Europe partner possible); pipeline reprioritization de-emphasizes etrumadenant Phase 3 while accelerating RCC programs to maximize casdatifan’s “best-in-class” potential .

What Went Well and What Went Wrong

What Went Well

• CEO emphasized casdatifan is “unequivocally” the #1 priority with confidence in best-in-class efficacy/safety and rapid data cadence (ASCO oral for casdatifan+cabozantinib; multiple ARC-20 cohorts) .
• Strong cash position ($1.005B) and capital allocation discipline to fund key Phase 3 readouts (domvanalimab, quemliclustat, casdatifan), despite macro volatility .
• Clinician enthusiasm and early combo safety experience underpin PEAK-1 design (cabo in both arms, 2:1 randomization) and support fast enrollment; management expects advantages vs Merck’s LITESPARK-11 design .

What Went Wrong

• Revenue and EPS missed consensus as quarterly collaboration/licensing flows declined vs the unusually elevated prior-year quarter; revenue fell to $28M from $145M YoY .
• Higher R&D expenses ($122M vs $109M YoY) given increased early-stage activity and Phase 2 enrollments, driving net loss $(112)M; management noted 2025 is peak development spend year .
• Etrumadenant (ARC-9) registrational path paused pending prioritization; despite promising mCRC feedback from FDA, Phase 3 not pursued currently .

Financial Results

Values marked with * retrieved from S&P Global.

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Our #1 priority is unequivocally casdatifan… the more data that we generate, the better it looks… bring CAS to market… as quickly as possible” — Terry Rosen, CEO .
• “Key objectives [at ASCO] are to demonstrate that these two molecules can be safely combined and that we can add efficacy to cabo monotherapy” — Terry Rosen .
• “We expect 2025 to be a peak year for development expenses… both DOM-related and aggregate development expenses to decline meaningfully in 2026 and 2027” — Robert Goeltz, CFO .
• “Our plans are to execute PEAK-1 on our own… we feel very good about our ability to execute this trial” — Terry Rosen .

Q&A Highlights

• CAS pipeline prioritization: company pausing etrumadenant Phase 3 despite FDA-validated path, focusing resources on late-stage programs and emerging I&I small-molecule pipeline .
• ASCO expectations: abstract is a placeholder; oral will include ~40-patient safety population and ~25-patient efficacy set with waterfall; data are early but “compelling” .
• PEAK-1 positioning vs Merck: cabo in both arms, single PFS primary endpoint, expectation to enroll quickly and narrow readout gap vs LITESPARK-11 (Merck pushed to 2027) .
• Funding & commercialization: Arcus will self-execute PEAK-1 and intends to commercialize in U.S.; may consider European partner .
• Combo efficacy/safety: goal is additive efficacy and favorable tolerability; lack of overlapping toxicities allows continuity of therapy even with TKI dose holds .

Estimates Context

• Q1 2025 vs consensus: Revenue $28.0M vs $38.6M* (miss); EPS $(1.14) vs $(1.08)* (miss). Prior quarters were beats on both revenue and EPS as collaboration/license flows were higher .
• Implications: Street models likely need to reflect low-double-digit quarterly revenue cadence absent new collaboration catch-ups; FY25 guidance ($75–$90M) anchors expectations .

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

• Near-term catalysts are significant: ASCO CAS+cabo oral data and PEAK-1 start are potential stock drivers given best-in-class narrative; watch cORR, primary PD, and combo tolerability .
• Casdatifan strategy de-risks: cabo chosen for broad familiarity and tolerability; strong site transition from ARC-20 should accelerate enrollment .
• Revenue normalization: Collaboration revenue stepped down versus 2024 catch-ups; FY25 guide ($75–$90M) suggests limited quarterly topline; focus on OPEX trajectory into 2026–2027 .
• Domvanalimab optionality: Multiple Phase 3s (STAR-221, STAR-121, PACIFIC-8) with supportive ARC-10 and EDGE datasets; first Phase 3 readout expected 2026 .
• Balance sheet supports self-execution and selective partnerships (AstraZeneca in first-line RCC, Taiho in PRISM-1); U.S. commercialization for CAS is the base case .
• Watch FDA/regulatory dynamics but management reports “business as usual” for clinical operations; continued data cadence through 2025–2026 should refine CAS dose and combo strategy .
• Risk checks: trial execution timelines, competitive HIF-2α combos (Merck), and sustaining clinician enthusiasm; early combo safety and efficacy will be pivotal .

Notes:
- All financial and operational figures cited from Arcus Q1 2025 press release and 8-K unless otherwise noted.
- S&P Global consensus used for estimate comparisons; see asterisk-marked values. 

–; Q1 2025 8-K –]