Gilead & Arcus Join Forces For 10-Year Cancer Deal, Arcus Down 15% In Pre-Market


Gilead Sciences (GILD) and Arcus Biosciences (RCUS), an oncology-focused biopharma, have announced a 10-year partnership to co-develop and co-commercialize current and future therapeutic product candidates in Arcus’s pipeline.

The agreement will also provide ongoing funding to support Arcus’s research and development programs. On the news GILD shares stayed flat in Wednesday’s pre-market, while RCUS dropped 15%.

“We are very pleased to build on Gilead’s growing presence in immuno-oncology,” said Daniel O’Day, CEO of Gilead. “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.”

Upon closing, Arcus will receive a $175M upfront payment and a $200M equity investment from Gilead. Arcus is also eligible to receive up to $1.225B in opt-in and milestone payments. This includes immediate rights to zimberelimab, as well as the right to opt-in to Arcus clinical candidates, upon payment of an opt-in fee ranging from $150M to $275M.

If Gilead opts-in to the program for the investigational anti-TIGIT monoclonal antibody AB154, Arcus can receive up to $500M in future U.S. regulatory approval milestones.

Gilead will obtain exclusive rights to commercialize any programs outside of the US, for which it will pay tiered royalties from high-teens to low twenties. Gilead will also provide up to $400M in ongoing research and development support over the collaboration term, and can appoint two directors to Arcus’s board.

The $200M equity investment will be priced at $33.54 per share. Gilead will also have the right to purchase additional shares from Arcus, up to 35% over the next five years, at a 20% premium at the time the option is exercised, or, if greater, the initial purchase price per share.

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

Shares in GILD are up 13% year-to-date, and analysts have a cautious outlook on the stock. The Hold analyst consensus is made up of 8 recent buy ratings vs 16 hold ratings and 4 sell ratings, while the $79 average price target  indicates 8% upside potential lies ahead. (See Gilead stock analysis on TipRanks)

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