Gilead Doubles Down on Immuno-Oncology

 

Gilead Sciences and Arcus Biosciences signed a 10-year partnership deal to co-develop and co-commercialize a number of Arcus’s pipeline products. Arcus focuses on the oncology market, both immuno-oncology and cell-intrinsic pathways using both small molecules and antibodies.

Under the terms of agreement, Gilead is paying Arcus $375 million on closing, with $175 of it upfront and $200 million in equity. Arcus is eligible for up to $1.225 billion in opt-in and milestone payments based on its current clinical product candidates. In addition, Gilead gets access to the company’s current and future investigational immuno-oncology products. That includes rights to zimberelimab and the right to opt-in to all other current Arcus clinical candidates, including AB154, AB928 and AB680. The opt-in fees range from $200 million to $275 million per program.

If Gilead chooses to opt-in to the AB154 program, Arcus is eligible for up to $500 million in possible future U.S. regulatory approval milestones.

The $200 million equity investment comes to $33.54 per share. Gilead will gain the option to acquire additional shares of Arcus up to a maximum of 35% of outstanding voting stock over the course of the next five years, at a 20% premium at the time of the option, or, if greater, at the initial purchase price per share.

Gilead is much better known for its antiviral work. These days the big focus has been on COVID-19, with the company’s remdesivir the only antiviral approved under an emergency use authorization by the U.S. Food and Drug Administration (FDA). The company has an extensive portfolio in HIV and hepatitis, as well. But in recent years Gilead has been expanding heavily into the cancer space.

The deal with Arcus would greatly expand the company’s presence in oncology and immuno-oncology. Arcus recently began Phase II clinical trials of AB154 in non-small cell lung cancer, with the idea that the anti-TIGIT therapy would improve the efficacy of anti-PD-1 checkpoint inhibitors, in this case, Arcus’s zimberelimab. TIGIT is another immune checkpoint.

“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, Gilead’s chairman and chief executive officer. “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.”

Arcus has a clinical-stage pipeline of four immuno-oncology programs. Its oncology discovery pipeline has six preclinical compounds. The company currently is running 10 clinical trials, including the Phase III NSCLC trial.

In addition to the upfront, equity and milestone payments, Arcus is eligible for tiered royalties ranging from high-teens to low twenties on any eventual commercial products. Gilead picked up exclusive rights to commercialize any optioned programs outside of the U.S., although they will be subject to rights of any of Arcus’s existing partners. Gilead is also providing up to $400 million in ongoing research and development support over the length of the collaboration.

In addition, Gilead has the right to appoint two people to Arcus’s board of directors.

Before rumors of the deal in April, Arcus had a market cap of $716 million. As news leaked, shares climbed as much as 54%. Although the deal numbers are large, in March 2020, Gilead acquired Menlo Park-based Forty Seven for $4.9 billion. Forty Seven is also an immuno-oncology company.

At the time, O’Day said, “This agreement builds on Gilead’s presence in immuno-oncology and adds significant potential to our clinical pipeline.”

One of the key aspects of that deal was magrolimab, a monoclonal antibody in clinical development for several cancers, including myelodysplastic syndrome (MDS), acute myeloid leukemia (AML) and diffuse large B-cell lymphoma (DLBCL).

O’Day added, “Magrolimab complements our existing work in hematology, adding a non-cell therapy program that complements Kite’s pipeline of cell therapies for hematologic cancers.”

Gilead acquired cancer company Kite Pharma in August 2017 for $11.9 billion.

Of today’s announcement, Terry Rosen, chief executive officer of Arcus, stated, “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. 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.”