Arcus Biosciences Announces That Taiho Pharmaceutical Has Exercised Its Option to Develop and Commercialize AB928 in Its Territories

Arcus Biosciences, Inc. (NYSE:RCUS), a clinical-stage biopharmaceutical
company focused on creating innovative cancer immunotherapies, today
announced that Taiho Pharmaceutical Co., Ltd. (Taiho) exercised its
option under the Option and License Agreement entered into in September
2017 (Taiho Agreement) 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 addition to an
option exercise payment, Arcus is eligible to receive clinical and
regulatory milestones totaling up to $130 million as well as
commercialization milestones and royalties on net sales for this program.

“We are pleased that Taiho has decided to exercise their option just as
we are initiating our Phase 1/1b program for AB928 in the U.S. and
Australia,” said Terry Rosen, Ph.D., CEO at Arcus. “We believe that
Taiho’s decision to exercise their option to this program at this early
stage reflects their recognition that AB928, the first adenosine 2
receptor antagonist in clinical development to be specifically designed
for the oncology setting, has significant potential to treat a broad
array of tumor types. We are confident that Taiho’s expertise and
capabilities in oncology, as well as their experience co-promoting
Keytruda® in Japan, make them the ideal partner to bring AB928 to cancer
patients as quickly as possible in their territories.”

“Our collaboration with Arcus is an important relationship for Taiho, as
we expand our oncology franchise in Japan and other important
territories in Asia,” said Masayuki Kobayashi, President and
Representative Director at Taiho. “We have been impressed by Arcus’s
small molecule drug discovery capabilities, the quality of their
clinical candidates and the scientific rigor of their candidate
selection process. AB928 appears to have the ideal properties to block
the immuno-suppressive effects of adenosine in the tumor
microenvironment. We look forward to working with Arcus on the
development of this important new immuno-oncology mechanism for the
treatment of multiple tumor types.”

About the Taiho Agreement

Arcus and Taiho entered into an option and license agreement in
September 2017. Taiho will provide $35.0 million of cash payments to
Arcus during the first three years of the agreement in exchange for an
exclusive option, over a five-year period, to in-license the development
and commercialization rights to clinical stage product candidates from
Arcus’s portfolio for Japan and certain other territories in Asia
(excluding China). Taiho is obligated to pay an option exercise payment
for each option exercise of between $3.0 million to $15.0 million, with
the amount dependent on the development stage of the applicable Arcus
program for which the option is exercised. In addition, Taiho is
obligated to pay to Arcus clinical, regulatory and commercialization
milestones up to $275.0 million per program as well as royalties ranging
from high single digits to mid-teens on net sales in Taiho’s territories.

About AB928

AB928 is an orally bioavailable, highly potent antagonist of the
adenosine 2a and 2b receptors. The activation of these receptors by
adenosine interferes with the activity of key populations of immune
cells and inhibits an optimal anti-tumor immune response. By blocking
these receptors, AB928 has the potential to reverse adenosine-induced
immune suppression within the tumor microenvironment. AB928 was designed
specifically for the oncology setting, with a profile that includes
potent activity in the presence of high concentrations of adenosine and
a minimal shift in potency due to non-specific protein binding, both
essential properties for efficacy in the tumor microenvironment. AB928
has other attractive features, including high penetration of tumor
tissue and low penetration through the healthy blood-brain barrier. In a
Phase 1 trial in healthy volunteers, AB928 has been shown to be safe and
well tolerated and to have pharmacokinetic and pharmacodynamic profiles
consistent with a once-daily dosing regimen.

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 will be evaluated in
combination with other agents in multiple tumor types in a Phase 1/1b
program, and an anti-PD-1 antibody, which is being evaluated in a Phase
1 trial and will be tested in combination with Arcus’s other product
candidates. Arcus’s other programs include a small molecule inhibitor of
CD73 and an anti-TIGIT antibody, both of which are 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, the potential for AB928 to treat a broad array of
tumor types, 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,
the applicability of early studies to Arcus’s clinical development
program and the emergence of drug-related adverse events in Arcus’s
clinical trials with AB928. Risks and uncertainties facing Arcus are
described more fully in Arcus’s quarterly report on Form 10-Q for the
quarter ended March 31, 2018 filed on May 9, 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.

Keytruda® is a registered trademark of Merck.

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