Arcus Biosciences secures $250m loan from Hercules Capital

Arcus Biosciences has secured a significant loan agreement with Hercules Capital, potentially worth up to $250 million, contingent on the progression of its therapeutic candidates. The announcement was made after market hours on August 27. Initially, Arcus will receive $50 million at the closing of the deal, with the option to access an additional $100 million at their discretion. Subject to Hercules Capital's approval, another $100 million can be drawn. This loan, spanning five years and featuring a four-year interest-only period, could be extended by a year each if Arcus advances to Phase III trials for its cancer therapies, specifically the HIF-2α inhibitor casdatifan and the CD73 inhibitor quemlicustat, and meets certain regulatory milestones.

The agreement arrives as Arcus continues to navigate its financial recovery. The company's share price has seen a notable decline, from a high of $49.1 in November 2021 to $13.10 in November 2023. As of the market opening on August 28, the share price was $17.3, with the company's valuation standing at $1.6 billion.

Dr. Terry Rosen, CEO of Arcus, emphasized the strategic importance of this loan, stating, “This non-dilutive facility enhances our already strong cash position and enables us to expand and accelerate our development program for casdatifan across multiple settings in ccRCC (clear cell renal cell carcinoma).”

If approved, casdatifan, the HIF-2α inhibitor, is expected to enter the market by 2028, potentially generating annual global revenues of $64 million, rising to $69 million by 2030. Arcus aims to present data from their Phase I/Ib casdatifan trial ARC-20 (NCT05536141) later this year.

The loan will augment Arcus’s $1 billion cash reserves as of June 30 this year. A significant portion of this funding stems from a 10-year deal signed with Gilead Sciences in 2020. According to Arcus’s Q2 2024 report, Gilead holds the option to purchase up to 35% of Arcus stock, owning 32.9% at the end of Q2 2024, and has the right to appoint three Arcus board members. Gilead has exercised this option, with its CEO, Johanna Mercier, among the appointees.

Arcus has also secured funding through other partnerships, notably an exclusive license agreement with Taiho Pharmaceuticals for quemlicustat in Asian markets, excluding China.

Despite these financial infusions, Arcus reported net losses of $93 million in Q2 2024, an increase from $75 million in Q2 2023.

Additionally, Arcus is developing a group of investigational drugs, including the checkpoint inhibitors domvanalimab and zimberelimab. These drugs target programmed cell death protein 1 and are under development for non-small cell lung cancer in collaboration with Gilead. This collaboration includes an active Phase III trial (NCT05502237). 

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