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Gilead (GILD) Exercises Options to Three Arcus Programs

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  • GILD
  • RCUS
  • GSK
  • MRK

Biotech giant Gilead Sciences GILD and partner Arcus Biosciences, Inc. RCUS announced that the former has exercised its options for three programs in the latter’s clinical-stage portfolio. Shares of Arcus surged in response to the news.

The programs include both anti-TIGIT molecules, domvanalimab and AB308, as well as etrumadenant ((A2a/A2b Adenosine Receptor Antagonist) and quemliclustat (small Molecule CD73 Inhibitor).

Per the terms, with Gilead’s exercise of options, Arcus will receive option payments totaling $725 million. Both the companies will co-develop and share the global costs related to these programs. Gilead and Arcus will co-commercialize and equally share profits in the United States if the chosen targets achieve regulatory approval. Gilead will hold exclusive rights outside the United States subject to any rights of Arcus’s existing collaboration partners. In lieu, Arcus will obtain tiered royalties.

Domvanalimab is an Fc-silent anti-TIGIT antibody in phase II and phase III studies in non-small cell lung cancer (NSCLC) and AB308 is an Fc-enabled anti-TIGIT antibody in phase I. Etrumadenant is a dual adenosine A2a/A2b receptor antagonist in phase I and phase II studies in NSCLC, colon cancer, and prostate cancer. Quemliclustat is a small molecule CD73 inhibitor in a phase I study in metastatic pancreatic ductal adenocarcinoma (PDAC).

Gilead and Arcus entered into a 10-year collaboration in May 2020 that provided the former with immediate rights to zimberelimab and the right to opt into all other Arcus programs arising during the collaboration term. With Gilead’s early option exercises for all three programs, Gilead and Arcus amended the 2020 Agreement.

Concurrent with the May 2020 collaboration agreement, Gilead and Arcus entered into a stock purchase agreement whereby Gilead made a $200 million equity investment in Arcus. This stock purchase agreement was amended and restated in February 2021 in connection with Gilead’s increased equity stake in Arcus from 13% to 19.7%, with an additional $220 million investment.

Gilead’s stock has gained 16.4% this year against the industry's decline of 14.3%.

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The decline in its HCV business has forced Gilead to diversify into the oncology space, which promises potential despite stiff competition.

Gilead stated in the press release that it has been encouraged by early clinical data generated for each of the three programs. The early option enables Gilead to pursue potential chemotherapy-free regimens with breast cancer drug Trodelvy (sacituzumab govitecan-hziy) in combination with therapies optioned from the Arcus portfolio. The addition of three mid- to late-stage clinical programs significantly expands its oncology pipeline.

Gilead is also looking to strengthen its HIV franchise. HIIV therapy, Biktarvy, continues to drive growth despite the ongoing impact of the pandemic. However, the loss of exclusivity of Truvada and Atripla has affected the HIV franchise’s performance.

Moreover, competition is stiff in the HIV market as well from the likes of GlaxoSmithKline GSK among others.

Glaxo reported an 8% growth in its HIV franchise in the third quarter, driven by its new HIV products Dovato, Juluca, Rukobia, and Cabenuva.

To further strengthen its HIV franchise, Gilead has collaborated with a subsidiary of Merck MRK to develop and commercialize long-acting, investigational treatment combinations of Gilead’s lenacapavir and Merck’s islatravir in HIV.

Gilead and Merck recently initiated a phase II study evaluating an oral weekly combination of lenacapavir and islatravir in people who are living with HIV who are virologically suppressed on an antiretroviral therapy.

Gilead currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

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Arcus Biosciences, Inc. (RCUS) : Free Stock Analysis Report

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