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Gilead Inks 10-Year Deal With Arcus for Immuno-oncology Drugs

Gilead Sciences, Inc. GILD announced that it has entered into a 10-year partnership with clinical-stage, oncology-focused company, Arcus Biosciences, Inc. RCUS.

The companies will co-develop and co-commercialize current and future therapeutic product candidates in Arcus’ pipeline, which includes AB154, an investigational anti-TIGIT monoclonal antibody; AB928, an investigational A2aR/A2bR antagonist; and zimberelimab (AB122), an investigational anti-PD-1 monoclonal antibody. The agreement will also provide ongoing funding to support Arcus’ research and development programs.

Financial Terms of the Partnership

Per the terms, Arcus will receive $375 million upon the closing of the agreement. This comprises a $175-MILLION upfront payment and a $200-MILLION equity investment (at a price of $33.54) from Gilead. Arcus is eligible to receive up to $1.225 billion in opt-in and milestone payments with respect to its current clinical product candidates.

Gilead will also have the right to purchase additional shares from Arcus, up to a maximum of 35% of the outstanding voting stock of the latter over the next five years.

In exchange, Gilead will gain access to Arcus’ current and future experimental immuno-oncology candidates through the agreement. Gilead will gain rights to zimberelimab and 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. Arcus is also eligible to receive up to $500 million in milestone payments, if Gilead opts-in to the AB154 program.

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

The companies will co-develop and share global development costs and co-commercialize and share profits in the United States, subject to certain conditions. Gilead will obtain exclusive rights to commercialize any optioned program outside of the United States, subject to any rights of Arcus’ existing partners. For this, Gilead will pay Arcus tiered royalties ranging from high teens to low twenties. Gilead will further provide ongoing research and development support of up to $400 million over the collaboration term.

This transaction is expected to close in the third quarter of 2020.

Terms of the Collaboration

The collaboration provides Gilead access to Arcus’ clinical and preclinical pipeline of immuno-oncology product candidates that target critical biological pathways.  

Immuno-oncology holds potential. AB928 is being evaluated in several studies across multiple indications, including prostate, colorectal, non-small cell lung, pancreatic, triple-negative breast and renal cell cancers. AB680 is in phase I development for first-line treatment of metastatic pancreatic cancer. AB154, an anti-TIGIT monoclonal antibody, is being evaluated for the first-line treatment of metastatic non-small cell lung cancer in combination with zimberelimab and AB928. Zimberelimab (AB122), an anti-PD-1 monoclonal antibody, is being evaluated in a phase Ib study as monotherapy for cancers with no approved anti-PD-1 treatment options as well as in combinations across the portfolio.

Our Take

Gilead is looking to diversify its business as its HCV business has lost sheen and the HIV business faces stiff competition from the likes of ViiV Healthcare, a joint venture of Glaxo GSK and Pfizer PFE.

Gilead earlier acquired Kite Pharma to foray into the emerging field of cell therapy.

The company’s shares gained 2.3% following the news. However, Arcus’ shares lost 19% as investors most likely felt that the deal was worth more.

Gilead’s shares have rallied 15.3% in the year so far compared with the industry’s growth of 6.8%.

 

The stock has been in the news from the onset of the year due to its promising experimental coronavirus drug, remdesivir. The FDA has granted an emergency use authorization (EUA) to remdesivir to treat COVID-19.

Gilead currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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