Arcus Biosciences, Inc. 2026 Q2 Earnings Call

Pia, please go ahead. Good afternoon, and thank you for joining us on today's conference call to discuss Arcus' second quarter 2026 financial results and pipeline updates.

I'd like to remind you that on this call, management will make forward-looking statements, including statements about our development strategies and our expectations regarding the advantages and opportunities afforded by our investigational products, our clinical development milestones and timelines, our projected cash runway, and our financial outlook. All statements other than historical facts reflect the current beliefs and expectations of management and involve risks and uncertainties that may cause our actual results to differ from those expressed. Those risks and uncertainties are described in our most recent quarterly report on Form 10-Q that has been filed with the SEC. For today's call, please refer to our latest corporate presentation posted in the Investors section of our website.

This afternoon, you'll hear from our CEO, Terry Rosen; CMO, Richard Marcus; President, Juan Jaen; and CFO, Bob Gelz. With that, I'll turn the call over to Terry.

Thanks very much, Pia. Thanks so much everyone for joining us this afternoon. We continue to make substantial progress in advancing our portfolio of oncology and immunology programs. Execution throughout the first half of the year has been tremendous, and this tangible productivity will be a focus of today's discussion. Our highest priority, no surprise, continues to be the advancement of casdatifan, which we believe has clear potential to be a $5 billion-$10 billion drug. The remainder of our pipeline has also been advancing quite well, and we're beginning to share the details and breadth of our other programs. These create a steady and sustainable stream of additional opportunities as well as strategic optionality. Starting with casdatifan, our next generation HIF-2 alpha inhibitor. The advancement of CAS has driven an inflection in value for Arcus, and we expect further data this year to accelerate this inflection.

Our first phase III trial, PEAK-1, evaluating CAS plus cabozantinib, the gold standard of care in second-line clear cell RCC, has tremendous investigator enthusiasm, and we remain on track to complete enrollment by the end of this year. Last year, we presented a wealth of data that demonstrated clearly casdatifan's efficacy advantages over belzutifan. Over the next six months, we will share new data that will provide clear line of sight to casdatifan's full market potential. Based upon casdatifan's superior profile as well as our development strategy, we expect CAS to become the backbone therapy for all patients in all lines of treatment in clear cell RCC, and we're maximizing that opportunity by rapidly expanding our development program.

The recent failure of Merck's LITESPARK-012 study, CAS now has no competition in the frontline space, our development plan, already ongoing, creates a clear path for CAS to consolidate what's currently fragmented frontline market as the first and only HIF-2 alpha inhibitor in this setting. We're leveraging our platform study, ARC-20, in addition to collaboration studies to support the key combination regimens we'll pursue for first-line treatments. We had our meeting with the FDA to discuss our first frontline phase III study in the setting. We're calling that PEAK-20, and we remain on track to start this registrational trial by the end of 2026. Across the development program, casdatifan is being evaluated in several different combinations across all lines of therapy.

We're doing this in both a capital and resource-efficient manner by securing partnerships, more specifically clinical collaborations, these all allow us to retain the full rights to the casdatifan program. We believe that we are the partner of choice for collaborations involving a HIF-2 alpha inhibitor. This is enabling investigation of the smartest mechanistic combinations and settings. Keep in mind, belzutifan is readily available to anyone. We do not believe it's an accident that others want to combine with casdatifan. We initiated multiple new clinical trial collaborations in the last two months. In June, we announced a collaboration with BMS to evaluate CAS in combination with pumitamig, their bispecific anti PD-L1 VEGF antibody in the first-line setting. In July, we announced a collaboration with Summit Therapeutics to evaluate CAS in combination with IVO, their bispecific anti PD-1 VEGF antibody.

Arcus will be conducting this study in a first-line cohort as part of ARC-20. This is the second of three collaborations we've executed to evaluate CAS with an anti PD-1/VEGF bispecific in the first line. Just to emphasize, we have three collaborations with anti PD-1/VEGF antibodies. In addition, in July, we also announced a collaboration with AVEO Oncology, in which we'll be combining CAS with TIVO in advanced belzutifan-experienced patients. This study will also enable our planned late line registrational study that will evaluate CAS-TIVO in both HIF-2 inhibitor-experienced as well as HIF-2 inhibitor-naive patients. Now let me spend a few minutes describing our holistic development strategy for casdatifan. Let me emphasize an important point in introducing this topic. While we believe that casdatifan will completely transform the clear cell RCC treatment paradigm, our strategy is totally consistent with the current treatment paradigm.

We're simply creating a framework that will provide HIF-2 alpha inhibitor-enhanced options that only casdatifan, with its unique profile, can offer. Basically, adding on top of the best current regimens that are favored by both physicians and patients. In the first line, we plan to develop multiple options that will make CAS the foundational medicine regardless of the selected combination partner. Our strategy is designed to provide flexibility to physicians with a HIF-2 alpha inhibitor-enhanced regimen corresponding to their preferred treatment approach for all types of clear cell RCC patients. With belzutifan's recent frontline setback, casdatifan has a clear path to become the common denominator in what's currently a fragmented frontline setting as the first HIF-2 alpha inhibitor available to these patients. A casdatifan-based TKI-sparing IO regimen is the bedrock of our first-line strategy.

It's intended to address the key limitation of ipi plus nivo, which is an approximately 20% rate of primary progression. Currently, ipi nivo represents the most commonly used frontline regimen with a market share of about 30%. We believe CAS has the potential to increase that to 50% or more. We also plan to develop a CAS-based TKI-inclusive first-line regimen for that segment of physicians who are always going to prefer to reach for TKI, especially for patients with fast-growing bulky tumors. Our partner TKI in the setting will be axitinib, well established as an effective frontline TKI and very importantly, aligning well with subsequent regimens including cabo and tevo over the long-term treatment strategy. You have to remember that when making prescribing decisions, physicians are considering how they will sequence multiple TKIs to potentially give patients 10 or more years of survival.

Combination choices are not selected in a vacuum. Lastly, in the first line, as I mentioned earlier, we're leveraging our partnerships, including with BMS and Summit, to evaluate casdatifan in combination with three different novel anti-PD-1/VEGF antibodies. We believe anti-PD-1/VEGF bispecifics may play an increasingly important role in the treatment of kidney cancer going forward. Both the PD-1 and VEGF pathways are factors in disease progression. There's strong biologic rationale for pairing them with a hard-hitting HIF-2 alpha inhibitor like casdatifan to deliver both an early treatment effect and sustained tumor suppression. The rationale for this class of bispecifics to have utility in clear cell RCC is as strong as in any setting. The combination could provide a TKI-sparing regimen that still incorporates the essential biology of the TKI, but without the baggage that's associated with the poor selectivity of the TKI class.

In the second line, CAS plus cabo is intended to build on the current second-line standard of care. This combination is now in registrational testing with our phase III PEAK-1 trial. Cabo is the most commonly prescribed TKI monotherapy in the setting. It's the TKI that physicians prefer and have greatest experience in managing AEs with the recognition of a better toxicity profile relative to that of the belzutifan combination partner, also sold by Merck, lenvatinib. Lenvah's toxicity profile is well documented with greater rates of cardiovascular toxicities. Notably in LITESPARK-011, all grade cardiac dysfunction was 7% for bel's lenva versus just 1% for cabo. Grade 3 or higher cardiac dysfunction was 5% for bel's lenva versus 0.5% for cabo. That's a big deal. That's a 10-fold difference. Keep in mind, these data are a direct comparison from a randomized study.

With CAS's superior efficacy profile versus bel's and cabo's tolerability advantages versus lenva, we expect CAS plus cabo to be the preferred HIF-2 alpha combination in the second line based on both efficacy and safety. Finally, with the announcement of our collaboration with AVEO Oncology, we're developing casdatifan plus tevo in second-line plus clear cell RCC, including in belzutifan-experienced patients. As I mentioned, this will precede a registrational trial in both HIF-2 alpha inhibitor-experienced and naive patients. At an upcoming investor event in October, we'll be sharing key ARC-20 data readouts for casdatifan. These will be in the first, second, and late-line settings. These data will provide a holistic picture that will demonstrate the potential for CAS to benefit patients across the treatment paradigm. This will be a large and comprehensive data set, including data from over 200 patients.