Gilead Sciences to Acquire Stake in Immuno-Oncology Firm Arcus Biosciences

According to Bloomberg, Gilead Sciences is preparing to acquire a partial stake in the immuno-oncology company Arcus Biosciences, although specific details remain undisclosed. Arcus was established a few years ago by the original team from Flexus, with support from major oncology giants such as Novartis and Celgene. Its core assets include the TIGIT antibody AB154 and several small-molecule immune activators. The small-molecule portfolio primarily targets the purine pathway, with clinical candidates including AB680, an inhibitor of the ATP/ADP-hydrolyzing enzyme CD73, and AB928, an antagonist of the purinergic receptor A2A. Arcus also has a PD-1 antibody, which may be an essential drug for Gilead to effectively compete in the oncology market. Following the news, Arcus’s stock price surged by 51%.

After the rapid depletion of the hepatitis C market, Gilead Sciences primarily focused on NASH and oncology, but progress has been limited thus far. Multiple drugs with different mechanisms for NASH have failed consecutively, and cell therapies have not achieved significant breakthroughs following the $12 billion acquisition of Kite. A few weeks ago, Gilead acquired Forty Seven for $4.9 billion, obtaining the CD47 antibody magrolimab, demonstrating its determination to enter the oncology market. However, remdesivir, an antiviral drug that had previously received little attention, has made Gilead a household name due to the current COVID-19 pandemic. Nevertheless, this week, two randomized controlled trials of the drug in China were terminated successively due to difficulties in patient recruitment. In the United States, two Phase III clinical trials have recently significantly increased patient enrollment and modified clinical endpoints, leading experts to suspect limited efficacy. While COVID-19 may bring greater attention to antiviral drugs, Gilead, as the most successful pharmaceutical company in the antiviral field, should find it easy to re-enter this market.

Flexus is a legendary tale in the field of immuno-oncology (IO) therapy. In 2014, less than two years after its founding and with its core product, an IDO inhibitor, still in the preclinical stage, Flexus was acquired by Bristol-Myers Squibb for $1.25 billion. This transaction is estimated to remain the record acquisition price for a preclinical small-molecule drug to this day, becoming a hallmark event of the IO bubble. Later, after the failure of the IDO inhibitor in the ECHO-301 trial brought expectations back to earth, Bristol-Myers Squibb acquired NKTR-214 for $3.6 billion and then outright purchased Celgene last year, continuing its high-stakes bet on immunotherapy. The former team from Flexus went on to establish Arcus Biosciences, which now appears poised for another high-value acquisition. Terry Rosen, the CEO at the time, stated that immunotherapy represented a highly unique and rare opportunity worth doubling down on, proving his insight to be remarkably prescient.

Under external stressors such as hypoxia, cells release ATP at levels higher than normal, and the immune system responds to changes in the ATP/purine balance. Activation of the A2A receptor suppresses the immune response; therefore, antagonists of this receptor can alleviate immunosuppression. Inhibitors of CD73 and CD39 block ATP degradation, reduce purine synthesis, and thereby diminish immunosuppressive signaling. This pathway has been a significant focus in immuno-oncology (IO). Corvus Pharmaceuticals is another biotechnology company developing drugs targeting this pathway, with its lead candidate, ciforadenant (CPI-444), currently in Phase II clinical trials. However, investor interest in this mechanism has declined substantially after Phase I combination studies with PD-L1 antibodies in solid tumors failed to demonstrate synergistic effects. Several companies are also developing CD39 and CD73 antibodies. AB154 is a TIGIT checkpoint inhibitor, and clinical trials combining it with PD-1 antibodies are currently ongoing.

Unlike the fervor during the Flexus era, when any asset capable of activating an immune response was highly sought after, industry expectations for immunotherapy have become much more rational today. Major hot targets following PD-1, such as TIM3, Lag3, IDO1, and STING, have failed to demonstrate sufficient monotherapy activity in clinical trials. This has not only necessitated a reevaluation of the immuno-oncology (IO) platform’s ability to produce effective monotherapies but also dimmed the prospects for combination therapies. Magrolimab stands out as one of the few successful drugs, despite the generally mediocre clinical performance of other CD47 antibodies and their receptor SIRPα antibodies. PD-1 inhibitors now appear to be an exceptionally successful drug emerging from a rather mediocre platform; the regression to the mean over the past few years has been a painful process for many investors. Not only have new-mechanism IO drugs largely failed to show significant monotherapy efficacy, but combination therapies with the second major IO agent, CTLA-4 antibodies, have also mostly ended in failure. Even PD-1 inhibitors themselves have frequently faced setbacks in post-marketing confirmatory trials. For solid tumors, a diverse approach to talent and therapeutic strategies is essential; one cannot place all bets solely on immunotherapy.

Original Title: Exclusive | Gilead Seeks to Acquire IO Company Arcus