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Topline Summary
Arcus Biosciences (NYSE:RCUS) is a developmental biotech pursuing several different anticancer therapies, including iterations of immune checkpoint blockers with targets both established and still hypothetical. A recent presentation of a phase 2 research provides an interesting signal of the efficacy of their PD-1/TIGIT combination in patients with esophagogastric cancer, giving a lot of food for thought.
Pipeline Overview
Domvanalimab
The most advanced molecule in RCUS’s pipeline stack is domvanalimab, an antibody targeting TIGIT. This is being paired in many of their studies with an in-house anti-PD-1 antibody called zimberelimab. They have a wide variety of phase 2 and 3 studies investigating domvanalimab in lung cancer and cancers of the upper GI tract (ie, the stomach, esophagus, and the junction between the two). Both of these molecules are being developed in collaboration with Gilead Sciences (GILD), who holds their license in certain markets outlined in their agreement.
For lung cancer, the latest report was an update of the ARC-7 trial, a phase 2 research investigating zimberelimab monotherapy, zimberelimab plus domvanalimab, or zimberelimab plus domvanalimab plus RCUS’s adenosine receptor antagonist etrumadenant in patients with PD-L1-high (TPS 50% or higher). This was presented as part of the ASCO Plenary Session series back in June. Adding domvanalimab to zimberelimab appeared to improve progression-free survival (median, 9.3 vs 5.4 months; HR, 0.67; 95% CI, 0.4-1.13). Adding etrumadenant did not yield a clear improvement beyond that.
This suggests that adding an anti-TIGIT antibody to an anti-PD-1 antibody could yield more benefit in patients, potentially building on the chemotherapy-free standard of care for these patients who have high PD-L1 expression in NSCLC.
It is worth noting, however, that the 5.4 months median progression-free survival does not quite line up with that for pembrolizumab shown in the KEYNOTE-024 research back in 2016. There, an anti-PD-1 antibody alone yielded 10.3 months median PFS, which is more in line with what RCUS saw in the doublet arm. Obviously, we can’t draw any conclusions from cross-trial comparisons for a variety of reasons, but this is definitely not quite consistent with what has been shown with anti-PD-1 therapy before in this patient group.
The most momentous news for domvanalimab in this past quarter was the presentation of preliminary findings from the EDGE-Gastric research, a phase 2 trial evaluating chemotherapy plus dom plus zim in previously untreated advanced or metastatic upper GI cancers. These findings were also presented as part of the ASCO Plenary Series. Out of 41 patients, 56% had a confirmed objective response to the dom-zim-chemo combination, with another 34% achieving disease stabilization.
Notably, PD-L1 status seemed to acknowledge patients more likely to reply, but clinical activity was observed regardless of this biomarker. This is an important point, since the debate over whether to use PD-L1 to select patients for treatment with approved anti-PD-1 therapies (including pembrolizumab and nivolumab) in the first-line setting remains ongoing. Here is one review article that summarizes this debate, but it remains unsettled among experts.
Although follow-up was short in the presentation (median 8 months), rates of progression-free survival looked encouraging. In all, 77% of patients receiving the combination were alive and progression free at 6 months. This appears consistent with findings from key studies appreciate CheckMate 649 and KEYNOTE-590, which first established the chemoimmunotherapy approach as standard of care for patients with these upper GI tumors. Among patients with PD-L1-high status, the 6-month PFS rate was 93%.
The ongoing phase 3 STAR-221 trial is ongoing, with a similar design that is powered to more definitively confirm these findings.
Other pipeline candidates
RCUS is also developing the aforementioned adenosine receptor antagonist etrumadenant as part of combinations involving its immunotherapy agents in patients with NSCLC and colorectal cancer. Then there’s quemliclustat, a small molecule inhibitor of CD73, which plays a role in adenosine processing and immune regulation at the tumor level.
RCUS guides that the ARC-8 research of quemliclustat in advanced pancreatic cancer will have an initial efficacy/safety readout in early 2024.
Financial Overview
Per their Q3 2023 filing, RCUS held total assets of $1.2 billion, with $184 million in cash and equivalents and another $615 million in marketable securities, as well as $151 million in long-term marketable securities. The company recognized $32 million in licensing and collaboration revenue (almost all from their GILD partnership), set against total operating expenses of $112 million for the quarter.
After interest and other income, the net loss for the quarter was $69 million. At this cash burn rate, RCUS has a runway of approximately 13 to 14 quarters, assuming licensing revenue and operating expenses remain steady.
Strengths and Risks
RCUS’s main claim to fame at this time has to be its massive collaboration with GILD, which joins the two companies at the hip and gives GILD a major potential foothold in the massive immune checkpoint inhibitor market. From a financial and logistical perspective, this de-risks RCUS substantially, since they have years of remaining cash runway that should carry them well into maturation of their phase 2 studies, and possibly through initial readouts of their pivotal trials, as well.
The caveat to all this is that none of these trials so far provides what I would call a definitive signal about the efficacy of their anti-TIGIT antibody. A nominal look at the efficacy published so far suggests that the anti-PD-1 antibody is doing most of the lifting, and adding domvanalimab brings survival in line with previous studies of just anti-PD-1 therapy. The disclaimer, of course, is that we cannot draw conclusions from these cross-trial comparisons, but nothing they’ve shown so far makes the anti-TIGIT approach a clear slam dunk.
And make no mistake: I wouldn’t say that we should have no confidence in the studies presented so far. They’re showing interesting signals. And you could explain the discrepancies, too. Maybe the NSCLC patients recruited were in worse shape than those in KEYNOTE-024. Maybe it’s just the phenomenon of small trials giving noisy results. I’m just saying that the phase 3 trial results aren’t going to be too surprising, for good or ill. And that uncertainty is absolutely a risk at this point and helps to explain why the company is only valued at its total assets.
A strong signal of efficacy could propel them forward. However, if we continue to see results that are equivocal, I wouldn’t be surprised to see the market punish RCUS shares, where we start writing articles about how confused we are that they trading for under cash value. It happens pretty frequently with these promising but unproven biotech companies.
Bottom-Line Summary
RCUS has a lot of interesting storylines brewing right now, with an impressive list of clinical trials exploring a lot of different questions, most of which I did not cover here. This gives the company a LOT of fuel for advocate growth. However, they are valued at a high level for a developmental company, and the waiting game does not favor companies with this kind of valuation, from my observation. But the promising signals are there, and I would say this is worthy of consideration of a buy, or at least you should watch for a price entry point that makes you more comfortable.
