Arcus Biosciences, Inc. (RCUS)·Q4 2024 Earnings Summary

Executive Summary

• Q4 revenue was $36M, up 16% YoY (from $31M) but down sequentially from $48M in Q3; GAAP EPS was $(1.03) vs $(1.08) YoY and $(1.00) in Q3 .
• Collaboration and license revenue from Gilead ($28M license/dev + $8M other) drove the quarter; net loss was $(94)M as R&D spend remained elevated on late-stage programs .
• Liquidity strengthened: year-end cash/investments were $992M, further bolstered by a $150M equity raise in Feb-2025; management now expects funding through initial pivotal readouts for domvanalimab, quemliclustat, and casdatifan (STAR-221, PRISM-1, PEAK-1) .
• Strategic pivot: Gilead’s option to casdatifan expired; Arcus retains full global rights and is accelerating development—Phase 3 PEAK-1 (casdatifan+cabo) is expected to initiate in Q2 2025; mid-2025 combo safety/initial efficacy readout and fall-2025 mature mono data are key catalysts .

What Went Well and What Went Wrong

What Went Well

• Casdatifan momentum: new ARC-20 data showed low primary PD (14–19%), cORR ≥30% in two cohorts, and 9.7-month median PFS at 50mg BID, supporting best-in-class potential versus published HIF-2α data; management: “casdatifan’s potential best-in-class profile” .
• Capital and optionality: $992M cash at year-end (pre-offering) and a $150M financing provide runway to execute pivotal plans; CEO: “We are extremely well capitalized…allocate greater resources to maximizing the potential of casdatifan” .
• Execution on pipeline: multiple 2025–2026 data/readout milestones reaffirm near-term catalysts (mid-2025 casdatifan+cabo initial data; 2025 EDGE-Gastric OS; 2026 STAR-221 Phase 3 readout) .

What Went Wrong

• Sequential revenue decline vs Q3 (timing-driven collaboration/licensing): Q4 $36M vs Q3 $48M; net loss widened sequentially to $(94)M (vs $(92)M in Q3) as late-stage R&D intensity persisted .
• R&D up YoY: Q4 R&D $111M vs $93M in Q4’23 on higher casdatifan enrollment and Gilead-led domvanalimab studies; reimbursements were largely flat YoY despite rising gross costs .
• Partner decision risk: Gilead did not opt in to casdatifan (option expired), shifting full development responsibility to Arcus despite subsequent equity raise to support the plan .

Financial Results

P&L (oldest → newest)

Revenue breakdown

Balance sheet snapshot

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Given the strong efficacy and preferable safety profile relative to standard-of-care VEGFR tyrosine kinase inhibitors, we believe casdatifan can play an important role in the treatment of every patient diagnosed with ccRCC.” — Terry Rosen, CEO .
• “Arcus completed a $150 million financing and continues to be well positioned to advance its pipeline with $992 million in cash, cash equivalents and marketable securities as of December 31, 2024.” .
• “We are extremely well capitalized to execute on these plans, and we continue to evaluate and pursue opportunities to conserve capital and allocate greater resources to maximizing the potential of casdatifan.” — Terry Rosen .
• “Owning the rights to casdatifan represents a transformational change for Arcus… enabling us to rapidly advance casdatifan and maintain the momentum for this program…” — Terry Rosen .

Q&A Highlights

• Gilead opt-in and strategy: Gilead’s casdatifan option expired; Arcus emphasized strategic benefits of retaining full rights and noted meaningful Gilead participation in the Feb-18 equity offering .
• PEAK-1 endpoint rationale: PFS is the registrational endpoint in post-IO RCC; Arcus argued dual primary (OS) can increase size/complexity without necessity if PFS is strong .
• Combo expectations and timing: Mid-2025 casdatifan+cabo update to focus on safety and ORR (too early for PFS); aim to maintain full doses and manage tolerability to avoid “TKI+IO” dose-intensity pitfalls .
• Competitive positioning: Preference for cabo vs lenvatinib as TKI backbone; expectation of both tolerability and efficacy edges vs belzutifan combos (e.g., LITESPARK-011 context) .

Estimates Context

• Wall Street consensus (S&P Global) for Q4’24 EPS and revenue was unavailable at time of writing due to data access limits; therefore, we cannot formally assess Street beat/miss. As a proxy, management’s prior revenue outlook of “~$30M” was exceeded by the actual $36M in Q4 .
• If you’d like, we can refresh S&P Global estimates once access resets and update the beat/miss analysis accordingly.

Key Takeaways for Investors

• Near-term catalysts cluster in 2025–2026: mid-2025 casdatifan+cabo (safety/initial efficacy) and EDGE-Gastric OS; 2026 STAR-221 first Phase 3 readout. These are the likely stock drivers over the next 12–18 months .
• Casdatifan data continue to de-risk a best-in-class HIF-2α profile (lower primary PD, higher cORR, longer PFS vs published benchmarks), with Phase 3 PEAK-1 start in Q2’25—expanding Arcus’s late-stage pipeline under full ownership .
• Funding position is solid post $150M raise; YE’24 cash of $992M plus offering supports execution through key pivotal readouts, reducing financing overhang near term .
• Sequential revenue volatility remains inherent given collaboration recognition cadence; investors should focus on R&D execution and readout timelines rather than quarterly revenue noise .
• Partner dynamics have simplified: without Gilead in casdatifan, Arcus gains control/optionality (including commercial), but also assumes full cost; strong cash and staged partnerships (AZ, Taiho) help mitigate risk .
• Watch study design choices that could enhance probability of success (PFS endpoint in PEAK-1; cabo backbone; Fc-silent TIGIT in chemo settings) relative to peers’ experiences .

Appendix: Additional Details

• Q4 revenue mix: $28M license/dev from Gilead collaboration and $8M other collaboration revenue tied to ongoing rights access; timing drives quarter-to-quarter variability .
• Full-year 2024 note: $20M impairment of long-lived assets recognized in 2024 (no impairment in Q4), reflecting portfolio pruning amid pipeline focus .
• Clinical program matrix (oncology, multiple tumor types) and 2025 initiations (ARC-20 expansions; AZ eVOLVE 1b) provide multi-pronged optionality beyond RCC .