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Arcus Biosciences Announces Second Quarter 2018 Financial Results and Recent Corporate Updates

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- Initiated the Phase 1/1b program for AB928 combinations; Initial
dose-escalation data for all four combinations expected in the first
half of 2019 -

- Initiated the Phase 1 trial for AB154, the Company's anti-TIGIT
antibody -

- Selected the dose of AB122, the Company's anti-PD-1 antibody, to be
used in initial combination trials of AB122 -

- Ended the quarter with $277.5 million in cash and investments -

Arcus Biosciences, Inc. (NYSE:RCUS), a clinical-stage biopharmaceutical
company focused on creating innovative cancer immunotherapies, today
announced financial results for the second quarter ended June 30, 2018
and recent corporate updates.

"We are pleased with the progress we have made in advancing our
molecules into studies in patients with three product candidates now in
clinical development," said Terry Rosen, Ph.D., Chief Executive Officer
at Arcus. "We continue to believe that AB928, our dual adenosine
receptor antagonist, has the potential to significantly enhance the
activity of anti-PD-1 antibodies as well as certain chemotherapies and
have designed our clinical program for AB928 to demonstrate the
potential of these combinations in multiple tumor types where the
adenosine pathway is believed to play a critical role. The program will
include extensive biomarker analysis to identify biomarkers that may be
predictive of response and to demonstrate that changes in immune markers
correlate with responses and are consistent with AB928's mechanism. We
look forward to reporting initial safety, biomarker and clinical data
for our AB928 combinations in patients in the first half of 2019."

Pipeline Updates

AB928 (dual A2aR/A2bR
antagonist)

  • Reported the unblinded safety results from the Phase 1
    double-blinded, randomized, placebo-controlled trial for AB928 in
    healthy volunteers.
    AB928 was found to be safe and well
    tolerated at all doses evaluated, including the highest dose tested of
    200 mg once daily (QD) (with food). At the AACR Annual Meeting in
    April 2018, the Company presented pharmacodynamic data demonstrating
    that an AB928 dose between 75 mg and 150 mg QD should be sufficient to
    achieve greater than 90% inhibition of the adenosine 2a receptor (A2aR)
    pathway.
  • Initiated dosing of patients in dose-escalation trial to
    evaluate AB928 in combination with AB122.
    This trial is
    designed to identify the recommended dose of AB928 that can be
    combined with a fixed dose of AB122 for the AB928 + AB122 expansion
    cohorts in the AB928 Phase 1/1b program. Dosing began
    with 75 mg QD of AB928 and 240 mg of AB122 every two weeks (Q2W).
    Subsequent dose-escalation cohorts will evaluate doses of 150 mg and
    200 mg QD of AB928, or intermediate doses, in combination with 240 mg
    Q2W of AB122.
  • Preparing to initiate Phase 1/1b trials to evaluate AB928 in
    combination with three different chemotherapy regimens.
    Each
    trial will evaluate AB928 in combination with a chemotherapy regimen
    that is considered a standard of care for each tumor type:

--AB928 in combination with Doxil® in triple negative breast cancer
(TNBC) and ovarian cancer
--AB928 in combination with mFOLFOX in
colorectal and gastroesophageal cancers
--AB928 in combination with
carboplatin/pemetrexed and pembrolizumab in non-small cell lung cancer
(NSCLC)

Each of these chemotherapy regimens induces immunogenic cell death (a
hallmark of which is the generation of significant amounts of
adenosine), and therefore their anti-cancer activity is believed to be
enhanced by A2aR antagonism. The trials will begin with a
dose-escalation portion to identify the recommended dose of AB928 for
each chemotherapy regimen, which will be followed by expansion
cohorts. The dose-escalation portion will enroll patients with the same
tumor types as the expansion cohorts. The Company also plans to evaluate
other AB928 combinations, e.g. AB928 + AB122, in these trials.

  • Initiated development of an immunohistochemistry assay with a
    leading cancer diagnostic company to be used in Arcus's clinical
    trials for AB928 and future clinical trials of AB680.
    This
    assay will test for expression of multiple proteins, including PD-L1
    and CD73, as well as CD8+ T cells, in the Company's Phase 1/1b program
    for AB928.

AB122 (anti-PD-1 antibody)

  • Continued dosing in the ongoing Phase 1 dose-escalation trial in
    cancer patients in Australia.
    The Company has identified 240
    mg as the recommended dose for AB122 when administered every two weeks
    and is currently enrolling patients in additional cohorts to explore
    other dosing schedules.
  • Preparing to initiate an expansion cohort to evaluate AB122 as a
    monotherapy in NSCLC.
    The objective of this cohort is to
    confirm that the clinical activity of AB122 is similar to that of
    approved anti-PD-1 antibodies in NSCLC patients.

AB154 (anti-TIGIT antibody)

  • Received regulatory approval to initiate a Phase 1 trial to
    evaluate the safety, pharmacokinetics, pharmacodynamics and clinical
    activity of AB154
    as monotherapy and in combination with
    AB122 in Australia.
    The dose-escalation portion will first
    evaluate increasing doses of AB154 as a monotherapy and subsequently
    in combination with AB122. Once the recommended doses for AB154 as a
    monotherapy and in combination with AB122 have been identified, the
    Company plans to initiate expansion cohorts to evaluate AB154 as a
    monotherapy and in combination with AB122 in selected tumor types. In
    the future, the Company plans to explore AB154 in combination with
    some of its other product candidates. The Company also plans to file
    an Investigational New Drug (IND) application with the U.S. Food and
    Drug Administration (FDA) in the fourth quarter of 2018 to initiate
    clinical testing of AB154 in the U.S.

AB680 (small molecule CD73 inhibitor)

  • Initiated pre-clinical development of an oral formulation of
    AB680.
    IND-enabling studies of an oral formulation of AB680
    are ongoing.

Corporate Updates

  • In July, Arcus announced that Taiho Pharmaceutical Co., Ltd. exercised
    its option under the Option and License Agreement entered into in
    September 2017 to obtain an exclusive development and
    commercialization license to the Company's adenosine receptor
    antagonist program, which includes AB928 and back-up compounds, in
    Japan and certain other territories in Asia (excluding China).
  • In June, Arcus and Infinity Pharmaceuticals announced a clinical
    collaboration to evaluate two triple combination therapies in TNBC and
    ovarian cancer. These cohorts will be incorporated into Arcus's Phase
    1/1b trial for AB928 in TNBC and ovarian cancer.
  • In June, Arcus announced the promotion of Jennifer Jarrett to Chief
    Operating Officer. Ms. Jarrett also continues to serve as the
    Company's Chief Financial Officer.

Upcoming Milestones

In the second half of 2018, the Company expects to

  • Present the final data from the Phase 1 trial of AB928 in healthy
    volunteers at a medical conference in the fall.
  • Initiate a Phase 1 trial to evaluate the safety and pharmacokinetic
    profile of AB680 in healthy volunteers.
  • Present safety, pharmacokinetic, receptor occupancy and clinical
    activity data from the ongoing Phase 1 trial of AB122.

In the first half of 2019, the Company expects to

  • Present initial data from the dose-escalation trials of AB928 + AB122
    and AB928 + chemotherapy, which will include data on safety, biomarker
    analysis and clinical activity for each of the combinations.
  • Initiate the expansion cohorts for the AB928 + AB122 and AB928 +
    chemotherapy combinations. Initial data from the expansion cohorts are
    expected in late 2019.
  • Report safety and pharmacokinetic data from the Phase 1 trial of AB680
    in healthy volunteers.
  • Initiate clinical testing of AB680 in cancer patients.

Second Quarter and Year-to-Date 2018 Financial
Results

  • Cash Position: At June 30, 2018, cash and investments (which
    include cash equivalents and both short- and long-term investments)
    were $277.5 million, compared to $175.7 million at December 31, 2017.
    The increase was primarily attributable to $124.7 million in net
    proceeds from the Company's initial public offering in March.
  • Revenues: Collaboration and license revenues for the second
    quarter ended June 30, 2018 were $1.3 million, compared to no revenue
    for the same period in 2017. Collaboration and license revenues for
    the six months ended June 30, 2018 were $2.5 million, compared to no
    revenue for the same period in 2017. The increase in revenues for both
    periods was attributable to revenues recognized from the Option and
    License Agreement the Company entered into with Taiho in September
    2017.
  • R&D Expenses: Research and development expenses for the
    second quarter ended June 30, 2018 were $13.7 million, compared to
    $7.8 million for the same period in 2017. The increase was primarily
    driven by the Company's ongoing clinical studies of AB928 and AB122,
    pre-clinical and manufacturing costs to prepare two additional
    programs, AB154 and AB680, for clinical trials, an increase in R&D
    headcount to support the Company's other programs and a milestone
    payable due to the regulatory filing for AB154. Research and
    development expenses for the six months ended June 30, 2018 were $25.4
    million, compared to $13.6 million for the same period in 2017.
  • G&A Expenses: General and administrative expenses for the
    second quarter ended June 30, 2018 were $3.5 million, compared to $1.8
    million for the same period in 2017. The increase was primarily due to
    higher legal and accounting fees and additional staff in key areas
    required to support a public company infrastructure, as well as
    increased facilities and office expenses related to our expanded
    facility in Hayward. General and administrative expenses for the six
    months ended June 30, 2018 were $6.4 million, compared to $3.3 million
    for the same period of 2017.
  • Net Loss: Net loss for the second quarter ended June 30, 2018
    was $13.5 million, compared to $9.6 million for the same period in
    2017. Net loss for the six months ended June 30, 2018 was $26.5
    million, compared to $16.8 million for the same period in 2017. The
    increase in net loss was primarily attributable to the increase in
    operating expenses noted above.

Based on its current operating plan, the Company expects that its cash
and investments as of June 30, 2018 will enable the Company to fund its
anticipated operating expenses and capital expenditure requirements into
at least the fourth quarter of 2020.

About Arcus Biosciences

Arcus Biosciences is a clinical-stage biopharmaceutical company focused
on creating innovative cancer immunotherapies. Arcus has several
programs targeting important immuno-oncology pathways, including a dual
adenosine receptor antagonist AB928, which is in a Phase 1/1b program to
evaluate AB928 in combination with other agents in multiple tumor types,
and an anti-PD-1 antibody AB122, which is being evaluated in a Phase 1
trial and is being tested in combination with Arcus's other product
candidates. Arcus's other programs include AB154, an anti-TIGIT
antibody, which is in a Phase 1 trial to evaluate AB154 as monotherapy
and in combination with AB122, and AB680, a small molecule inhibitor of
CD73, which is in IND-enabling studies. Arcus has extensive in-house
expertise in medicinal chemistry, immunology, biochemistry, pharmacology
and structural biology. For more information about Arcus Biosciences,
please visit www.arcusbio.com.

Forward-Looking Statements

This press release contains forward-looking statements. All statements
other than statements of historical facts contained herein, including,
but not limited to, Arcus's clinical development plans, biomarker
activities and timelines, are forward-looking statements reflecting the
current beliefs and expectations of management made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of
1995. All forward-looking statements involve known and unknown risks,
uncertainties and other important factors that may cause Arcus's actual
results, performance or achievements to differ significantly from those
expressed or implied. Factors that could cause or contribute to such
differences include, but are not limited to, the inherent uncertainty
associated with pharmaceutical product development and clinical trials,
difficulties or delays in developing and validating biomarkers and
related assays, and delays in our clinical trials due to difficulties or
delays in the regulatory process, enrolling subjects or manufacturing or
supplying product for such clinical trials. Risks and uncertainties
facing Arcus are described more fully in Arcus's quarterly report on
Form 10-Q for the quarter ended June 30, 2018 filed on August 6, 2018
with the SEC. You are cautioned not to place undue reliance on the
forward-looking statements, which speak only as of the date of this
press release. Arcus disclaims any obligation or undertaking to update,
supplement or revise any forward-looking statements contained in this
press release.

Doxil® is a registered trademark of Alza Corporation.

 
ARCUS BIOSCIENCES, INC.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts)
(unaudited)
 
  June 30,   December 31,
2018

2017(1)

ASSETS
Current assets:
Cash and cash equivalents $ 169,998 $ 98,426
Short-term investments 95,700 77,277
Prepaid expenses and other current assets 1,550 1,141
Amounts owed by a related party   193     25  
Total current assets 267,441 176,869
Long-term investments 11,792
Property, plant and equipment-net 12,513 11,230
Equity investment in related party 1,711 682
Restricted cash 203 203
Other long-term assets   205     1,502  
Total assets $ 293,865   $ 190,486  
LIABILITIES
Current liabilities
Accounts payable $ 5,388 $ 3,820
Accrued liabilities 4,342 3,137
Deferred revenue, current 5,000 5,000
Other current liabilities   1,650     769  
Total current liabilities   16,380     12,726  
Deferred revenue, noncurrent 16,087 18,587
Deferred rent 4,516 4,740
Other long-term liabilities   2,308     565  
Total liabilities   39,291     36,618  
Convertible preferred stock 226,196
Stockholders' equity (deficit) :
Common stock 4
Additional paid-in-capital 354,375 948
Accumulated deficit (99,722 ) (73,234 )
Accumulated other comprehensive loss   (83 )   (42 )
Total stockholders' equity (deficit)   254,574     (72,328 )

Total liabilities, convertible preferred stock and stockholders'
equity (deficit)

$ 293,865   $ 190,486  
 
(1) Derived from the audited financial statements for the year ended
December 31, 2017, included in the Company's Prospectus filed with
the Stock Exchange Commission, dated March 14, 2018.
 
ARCUS BIOSCIENCES, INC.
Condensed Consolidated Statements of Operations and Comprehensive
Loss
(In thousands, except share and per share amounts)
(unaudited)
 
  Three Months Ended   Six Months Ended
June 30, June 30,
2018   2017 2018   2017
Collaboration and license revenue $ 1,250 $ $ 2,500 $
Operation expenses:
Research and development 13,699 7,834 25,352 13,637
General and administrative   3,450     1,830     6,379     3,327  
Total operating expenses   17,149     9,664     31,731     16,964  
Loss from operations (15,899 ) (9,664 ) (29,231 ) (16,964 )
Interest and other income, net   2,366     114     2,743     214  
Net loss   (13,533 )   (9,550 )   (26,488 )   (16,750 )
Other comprehensive gain (loss) 14 11 (41 ) 3
Comprehensive loss $ (13,519 ) $ (9,539 ) $ (26,529 ) $ (16,747 )
Net loss per share, basic and diluted $ (0.32 ) $ (5.64 ) $ (1.01 ) $ (10.66 )

Weighted-average number of shares used to compute basic and
diluted net loss per share

  42,533,641     1,693,150     26,236,007     1,571,905  
 

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