Arcus Biosciences Secures Up to $250 Million Term Loan Facility from Hercules Capital

Rhea-AI Summary

Arcus Biosciences (NYSE:RCUS) has secured a $250 million term loan facility from Hercules Capital, enhancing its financial position and operational flexibility. The facility includes $150 million committed, with $50 million drawn at closing and $100 million available at Arcus's discretion. This non-dilutive funding will support the recently announced Phase 3 PEAK-1 study for casdatifan, Arcus's HIF-2a inhibitor for clear cell renal cell carcinoma (ccRCC). The loan matures in five years, extendable to six, with an interest-only period of four years, extendable to five based on regulatory milestones. This financial boost allows Arcus to accelerate its development program for casdatifan across multiple ccRCC settings.

Positive

• Secured $250 million term loan facility, strengthening balance sheet
• $150 million committed, with $50 million drawn and $100 million available at discretion
• Non-dilutive funding supports Phase 3 PEAK-1 study for casdatifan
• Loan terms include 4-5 year interest-only period and 5-6 year maturity
• Enables expansion and acceleration of casdatifan development program

Negative

• Loan facility is secured by substantially all company assets
• Potential increase in debt burden and interest expenses

Insights

Financial Analyst

Arcus Biosciences' $250 million term loan facility from Hercules Capital significantly bolsters its financial position. With $150 million committed and $50 million already drawn, this non-dilutive financing provides important operational flexibility. The extended interest-only period and potential maturity extension are favorable terms, allowing Arcus to focus on advancing its pipeline, particularly casdatifan. This deal demonstrates investor confidence in Arcus's potential, but also increases the company's debt obligations. The secured nature of the loan against company assets adds a layer of risk. Investors should monitor Arcus's burn rate and clinical progress to assess its ability to leverage this capital effectively without compromising long-term financial health.

Oncology Expert

The financing for Arcus Biosciences' casdatifan development is a significant move in the competitive landscape of renal cell carcinoma (RCC) treatment. As a HIF-2α inhibitor, casdatifan targets a key pathway in RCC progression. The rapid enrollment in the ARC-20 study and plans for a Phase 3 PEAK-1 study indicate strong clinical interest and potential efficacy. However, casdatifan will face competition from established HIF-2α inhibitors like belzutifan. The true test will be in demonstrating superior efficacy or safety profiles. The upcoming data presentation from the ARC-20 study will be important in assessing casdatifan's potential as a 'best-in-class' therapy. This financing allows Arcus to aggressively pursue multiple settings in ccRCC, potentially accelerating the path to market.

Biotech Industry Analyst

This financing deal underscores a trend in biotech where companies are leveraging non-dilutive debt to fund late-stage clinical programs. For Arcus, this $250 million facility provides a significant runway without immediate equity dilution, a smart move in the current market environment. The company's focus on casdatifan in ccRCC and domvanalimab in upper GI cancers shows a strategic approach to oncology, targeting areas with high unmet needs. The flexibility in the loan terms, tied to clinical milestones, aligns financial incentives with pipeline progress. However, investors should note that while this deal provides near-term cash, it also adds to long-term liabilities. The success of Arcus's clinical programs, particularly the Phase 3 trials, will be critical in justifying this increased debt load.

• Facility adds operational flexibility and provides funding for the recently announced Phase 3 PEAK-1 study for casdatifan.
• $150 million committed, of which $50 million was drawn at closing and the remaining $100 million available at Arcus's sole discretion.

HAYWARD, Calif.--(BUSINESS WIRE)-- Arcus Biosciences, Inc. (NYSE:RCUS), a clinical-stage, global biopharmaceutical company focused on developing differentiated molecules and combination therapies for people with cancer, today reported it has obtained a $250 million term loan facility from Hercules Capital, Inc. (NYSE: HTGC), a leader in customized debt financing for companies in life sciences and technology-related markets. The additional capital strengthens Arcus’s balance sheet and increases flexibility to rapidly advance casdatifan, its potential best-in-class HIF-2a inhibitor. Arcus plans to present data from ARC-20, its Phase 1/1b study of casdatifan in clear cell renal cell carcinoma (ccRCC), later this year.

“2024 has been an exciting year for us, with the completion of enrollment of STAR-221, our first Phase 3 study for domvanalimab, our Fc-silent anti-TIGIT antibody, in upper GI cancers and the rapid enrollment of the expansion portion of ARC-20, our Phase 1/1b study of casdatifan, our HIF-2a inhibitor,” said Terry Rosen, Ph.D., chief executive officer of Arcus. “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.”

“Hercules is pleased to enter into this financial partnership with Arcus to help finance the company’s broad pipeline of oncology programs as well as meet its near- and long-term strategic goals,” said Cristy Barnes, managing director at Hercules Capital.

Under the terms of the term loan facility, $50 million was drawn at closing and an additional $100 million is committed and fully available at Arcus’s sole option in minimum increments of $25 million. A second tranche of $100 million will be available to support strategic initiatives, subject to future approval by Hercules. The term loan matures in five years and maturity is extendable to six years upon the initiation of Phase 3 trials for casdatifan and quemliclustat. The facility provides for an interest-only period of four years, which is extendable to five years based on the achievement of certain regulatory milestones. The loan facility is secured by substantially all the company’s assets, excluding those covered by its existing collaboration agreements.

J. Wood Capital Advisors served as sole financial advisor to the company. Latham & Watkins LLP served as legal counsel to the company. Morrison & Foerster LLP served as legal counsel to Hercules Capital.

About Arcus Biosciences

Arcus Biosciences is a clinical-stage, global biopharmaceutical company developing differentiated molecules and combination medicines for people with cancer. In partnership with industry collaborators, patients and physicians around the world, Arcus is expediting the development of first- or best-in-class medicines against well-characterized biological targets and pathways and studying novel, biology-driven combinations that have the potential to help people with cancer live longer. Founded in 2015, the company has expedited the development of multiple investigational medicines into clinical studies, including new combination approaches that target TIGIT, PD-1, the adenosine axis (CD73 and dual A2a/A2b receptor), HIF-2a, CD39, and AXL. For more information about Arcus Biosciences’ clinical and preclinical programs, please visit www.arcusbio.com.

Domvanalimab, etrumadenant, quemliclustat, and zimberelimab are investigational molecules, and neither Gilead nor Arcus has received approval from any regulatory authority for any use globally, and their safety and efficacy have not been established. Casdatifan, AB598 and AB801 are also investigational molecules, and Arcus has not received approval from any regulatory authority for any use globally, and their safety and efficacy have not been established.

Forward-Looking Statements

This press release contains forward-looking statements. All statements regarding events or results to occur in the future contained herein 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, including, but not limited to, the statements in Dr. Rosen’s quote and statements regarding: plans or expectations to disclose or present study analyses or data, including any analyses or data from ARC-20; the advancement of casdatifan across multiple settings and through Phase 3 development; the availability and use of the full term loan facility, including the second $100 million tranche. All forward-looking statements involve known and unknown risks and uncertainties and other important factors that may cause Arcus’s actual results, performance or achievements to differ significantly from those expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to risks associated with: the lender under the term-loan facility approving Arcus’s access to the second tranche of $100 million; preliminary and interim data not being guarantees that future data will be similar; the unexpected emergence of adverse events or other undesirable side effects in Arcus’s investigational products; difficulties or delays in initiating or conducting clinical trials due to difficulties or delays in the regulatory process, enrolling subjects or manufacturing or supplying product for such clinical trials; unfavorable global economic, political and trade conditions; changes in the competitive landscape for Arcus’s programs; and the inherent uncertainty associated with pharmaceutical product development and clinical trials. Risks and uncertainties facing Arcus are described more fully in the “Risk Factors” section of Arcus’s most recent periodic report filed with the U.S. Securities and Exchange Commission. 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 except to the extent required by law.

The Arcus name and logo are trademarks of Arcus Biosciences, Inc. All other trademarks belong to their respective owners.

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Investor Inquiries:

Pia Eaves

VP of Investor Relations & Strategy

(617) 459-2006

peaves@arcusbio.com

Media Inquiries:

Holli Kolkey

VP of Corporate Communications

(650) 922-1269

hkolkey@arcusbio.com

Source: Arcus Biosciences

FAQ

What is the total amount of the term loan facility Arcus Biosciences (RCUS) secured?

Arcus Biosciences secured a $250 million term loan facility from Hercules Capital.

How much of the loan facility has Arcus Biosciences (RCUS) drawn at closing?

Arcus Biosciences has drawn $50 million of the loan facility at closing.

What is the primary purpose of the loan facility for Arcus Biosciences (RCUS)?

The loan facility provides funding for the Phase 3 PEAK-1 study for casdatifan, Arcus's HIF-2a inhibitor, and supports the expansion of its development program in clear cell renal cell carcinoma (ccRCC).

What are the maturity terms of the loan facility for Arcus Biosciences (RCUS)?

The loan matures in five years, extendable to six years upon the initiation of Phase 3 trials for casdatifan and quemliclustat.