Gilead enters $2B immuno-oncology deal with Arcus Biosciences

Under the 10-year deal, Gilead will have the right to option product candidates from Arcus’ pipeline, with the companies sharing responsibility for development and commercialization.

With all eyes on the American Society of Clinical Oncology’s virtual annual meeting this weekend, a company presenting two closely watched clinical trials there is making its latest push into cancer immunotherapy.

Foster City, California-based Gilead Sciences said Wednesday that it had entered a 10-year partnership with Hayward, California-based Arcus Biosciences to develop and commercialize therapies designed to treat cancers through the body’s immune system.

Under the deal, Gilead will pay Arcus $175 million upfront, as well as making a $200 million equity investment and up to $1.6 billion in potential research and development funding, opt-in and milestone payments. Gilead will option programs that the two will commercialize together with equal profit share in the U.S., with Arcus receiving double-digit royalties outside the U.S.

Shares of Arcus fell 15% on the New York Stock Exchange Wednesday following the news and closed at $27.08, but were up 2.5% from Wednesday’s closing price in Thursday afternoon trading. Gilead’s shares rose, closing on the Nasdaq at 3.3% above their opening price.

Despite the fall in Arcus’ shares, investment bank analysts’ views toward the deal were generally favorable. In a note to investors, Baird analyst Brian Skorney wrote, “Overall, we like this deal, but do not see it as thesis changing, at this point.” Gilead’s stock has a “neutral” rating from the term. Meanwhile, RBC Capital Markets’ Brian Abrahams offered a more positive view, writing that it provides Gilead with “additional pipeline expansion optionality in a space where it continues to galvanize its expertise,” giving Gilead’s shares a positive rating.

Arcus’ pipeline includes zimberelimab, a monoclonal antibody that targets PD-1; AB154, an antibody that targets TIGIT; AB680, a small-molecule inhibitor of CD73; and AB928, a small-molecule dual A2a/A2b adenosine receptor antagonist. The company’s clinical programs include trials in castrate-resistant prostate cancer, colorectal cancer, non-small cell lung cancer, triple-negative breast cancer and cancers of the kidney, pancreatic duct and other areas.

Gilead has already made several moves into immuno-oncology. Most recently, in March, it spent $4.9 billion to acquire Forty Seven, a company whose lead product candidate is the CD47-targeting antibody magrolimab, data for which will be presented at the ASCO meeting. It also owns Kite Pharma, the CAR-T cell therapy company that is also presenting data at the meeting.

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