Gilead Sciences (GILD) Signs $2 Billion Deal With Arcus Biosciences (RCUS)

By Amit Chowdhry ● May 28, 2020
  • Gilead Sciences (NASDAQ:GILD) and Arcus Biosciences (NYSE:RCUS) announced a ten-year agreement for co-developing and co-commercializing next-generation cancer immunotherapies

Gilead Sciences (NASDAQ:GILD) and Arcus Biosciences (NYSE:RCUS) announced a ten-year agreement for co-developing and co-commercializing next-generation cancer immunotherapies. This agreement will also provide ongoing funding to support Arcus’s research and development programs.

Arcus has been building an extensive and diverse portfolio of investigational products that target important mechanisms involved in tumor evasion of the immune system as well as developing drug candidates that target cell-intrinsic pathways important for cancer growth and metastasis. And in addition to small molecule products, Arcus is also advancing antibody products that target immune checkpoint receptors, including PD-1 and TIGIT. Plus Arcus currently has a clinical-stage pipeline of four immuno-oncology programs as well as an active oncology discovery pipeline with six preclinical compounds that target critical biological pathways.

A major component of Arcus’s strategy is the development of intra-portfolio combinations that include small-molecule and antibody product candidates. And Arcus has 10 ongoing clinical studies of molecules in its portfolio, including a randomized Phase 2 study in first-line non-small cell lung cancer evaluating combinations of three Arcus product candidates — which includes AB154 (an investigational anti-TIGIT monoclonal antibody), AB928 (an investigational A2aR/A2bR antagonist), and investigational anti-PD-1 monoclonal antibody zimberelimab (AB122).

“We are very pleased to build on Gilead’s growing presence in immuno-oncology with this important new strategic collaboration with Arcus,” said Daniel O’Day, Chairman and Chief Executive Officer, Gilead Sciences. “Gilead is committed to accessing the world’s best innovation in immuno-oncology and our agreement with Arcus further demonstrates that commitment. By gaining access to its broad, diverse pipeline and Arcus’s clear strengths in discovery and development, we believe that our partnership with Arcus will significantly accelerate our progress in developing transformative new therapies for cancer.”

As part of the agreement, Arcus will receive $375 million upon closing, consisting of a $175 million upfront payment and a $200 million equity investment from Gilead. And Arcus is eligible to receive up to $1.225 billion in opt-in and milestone payments with respect to its current clinical product candidates.

And Gilead will gain access to Arcus’s current and future investigational immuno-oncology products through the agreement as Gilead continues to expand its presence in the field. This includes immediate rights to zimberelimab as well as the right to opt-in to all other current Arcus clinical candidates — which include AB154, AB928 and AB680 upon payment of an opt-in fee that ranges from $200 million to $275 million per program after delivery of a qualifying data package. And if Gilead opts-in to the AB154 program, Arcus is eligible to receive up to $500 million in potential future U.S. regulatory approval milestones.

Gilead is going to receive the right to opt-in to all other programs that emerge from Arcus’s research portfolio over the next 10 years upon payment of an opt-in fee of $150 million per program after Arcus’s delivery of a qualifying data package.

When Gilead exercises its option for a program — unless Arcus opts out according to terms of the agreement — the companies will co-develop and share global development costs and will co-commercialize and share profits in the United States. And Gilead will obtain exclusive rights to commercialize any optioned programs outside of the U.S., subject to any rights of Arcus’s existing partners and for which Gilead will pay to Arcus tiered royalties ranging from high-teens to low twenties. Plus Gilead will further provide ongoing research and development support of up to $400 million over the collaboration term.

“We believe Gilead is an ideal partner for Arcus with its focus on thoughtful and purposeful science, vision to provide transformational therapies in the oncology setting and deeply experienced scientific leadership,” explained Terry Rosen, PhD, Chief Executive Officer at Arcus. “This collaboration will allow us to act as one team to maximize the clinical and commercial potential of Arcus’s therapeutic development candidates, greatly amplifying and expediting the opportunities in our pipeline and discovery programs. At the same time, this partnership structure facilitates Arcus’s path to becoming an independent, fully integrated biopharmaceutical company.”

Gilead will also have the right to appoint two individuals to Arcus’s Board of Directors upon closing of the transaction.

Gilead’s $200 million equity investment will be at a price per share of $33.54. And Gilead will have the right to purchase additional shares from Arcus, up to a maximum of 35% of the outstanding voting stock of Arcus over the course of the next five years at a 20% premium at the time Gilead exercises such option (or if greater) at the initial purchase price per share.

This deal is expected to close in the third quarter of 2020 and is subject to applicable antitrust clearance under the Hart-Scott Rodino Antitrust Improvements Act and other customary closing conditions.