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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _____________to _______________

Commission File Number: 001-38419

 

Arcus Biosciences, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

47-3898435

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

3928 Point Eden Way

Hayward, California 94545

 

(Address of principal executive offices)

 

Registrant’s telephone number, including area code: (510) 694-6200

 

Securities registered pursuant to Section 12(b) of the Act:

 

Titles of Each Class

 

Trading Symbol(s)

 

Name of Each Exchange on which Registered

Common Stock, Par Value $0.0001 Per Share

 

RCUS

 

The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

 

As of October 29, 2021, the registrant had 70,249,475 shares of common stock, $0.0001 par value per share, outstanding.

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements

1

 

Condensed Consolidated Balance Sheets (unaudited)

1

 

Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited)

2

 

Condensed Consolidated Statements of Stockholders’ Equity (unaudited)

3

 

Condensed Consolidated Statements of Cash Flows (unaudited)

4

 

Notes to Condensed Consolidated Financial Statements (unaudited)

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

25

Item 4.

Controls and Procedures

25

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

26

Item 1A.

Risk Factors

26

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

56

Item 3.

Defaults Upon Senior Securities

57

Item 4.

Mine Safety Disclosures

57

Item 5.

Other Information

57

Item 6.

Exhibits

58

SIGNATURES

59

 

 

 

 

 

i


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

ARCUS BIOSCIENCES, INC.

Condensed Consolidated Balance Sheets

(unaudited)

(In thousands, except share and per share amounts)

 

 

 

September 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

179,432

 

 

$

173,415

 

Short-term investments

 

 

345,210

 

 

 

555,231

 

Receivable from collaboration partners ($617 and $943 from a related party)

 

 

871

 

 

 

1,049

 

Accrued interest receivable

 

 

2,201

 

 

 

649

 

Prepaid expenses and other current assets

 

 

17,574

 

 

 

5,471

 

Total current assets

 

 

545,288

 

 

 

735,815

 

Long-term investments

 

 

218,730

 

 

 

6,440

 

Property and equipment, net

 

 

28,818

 

 

 

10,807

 

Right-of-use assets

 

 

35,553

 

 

 

12,781

 

Restricted cash

 

 

3,005

 

 

 

203

 

Other long-term assets

 

 

7,896

 

 

 

6,246

 

Total assets

 

$

839,290

 

 

$

772,292

 

LIABILITIES

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

13,219

 

 

$

15,682

 

Accrued research and development

 

 

40,470

 

 

 

18,307

 

Other accrued liabilities

 

 

14,625

 

 

 

9,543

 

Deferred revenue, current ($67,571 and $67,571 to a related party)

 

 

74,343

 

 

 

74,571

 

Other current liabilities

 

 

209

 

 

 

3,566

 

Total current liabilities

 

 

142,866

 

 

 

121,669

 

Deferred revenue, noncurrent ($94,675 and $117,808 to a related party)

 

 

94,675

 

 

 

122,830

 

Operating lease liabilities, noncurrent

 

 

48,943

 

 

 

15,243

 

Other long-term liabilities ($9,703 and $9,703 to a related party)

 

 

10,199

 

 

 

10,246

 

Total liabilities

 

 

296,683

 

 

 

269,988

 

Commitments (Note 11)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.0001 par value, 10,000,000 shares authorized as of September 30, 2021 and December 31, 2020; no shares issued and outstanding as of September 30, 2021 and December 31, 2020

 

 

-

 

 

 

-

 

Common stock, $0.0001 par value, 400,000,000 shares authorized as of September 30, 2021 and December 31, 2020; 70,241,590 and 65,114,685 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively. Shares outstanding includes 39,142 and 1,422,784 shares issued but subject to vesting as of September 30, 2021 and December 31, 2020, respectively

 

 

7

 

 

 

6

 

Additional paid-in capital

 

 

1,097,414

 

 

 

830,438

 

Accumulated deficit

 

 

(554,722

)

 

 

(328,184

)

Accumulated other comprehensive (loss) income

 

 

(92

)

 

 

44

 

Total stockholders’ equity

 

 

542,607

 

 

 

502,304

 

Total liabilities and stockholders’ equity

 

$

839,290

 

 

$

772,292

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

1


 

ARCUS BIOSCIENCES, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(unaudited)

(In thousands, except share and per share amounts)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

License revenue ($0, $55,096, $0 and $55,096 from a related party)

 

$

-

 

 

$

55,096

 

 

$

-

 

 

$

55,096

 

Collaboration revenue ($7,711, $7,684, $23,133 and $7,684 from a related party)

 

 

9,461

 

 

 

9,434

 

 

 

28,383

 

 

 

12,934

 

Total revenues

 

 

9,461

 

 

 

64,530

 

 

 

28,383

 

 

 

68,030

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development (($756), ($2,971), ($6,856) and ($2,971) from a related party)

 

 

71,254

 

 

 

51,801

 

 

 

206,412

 

 

 

110,636

 

General and administrative

 

 

16,343

 

 

 

11,177

 

 

 

48,990

 

 

 

29,617

 

Total operating expenses

 

 

87,597

 

 

 

62,978

 

 

 

255,402

 

 

 

140,253

 

Income (loss) from operations

 

 

(78,136

)

 

 

1,552

 

 

 

(227,019

)

 

 

(72,223

)

Non-operating income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest and other income, net

 

 

161

 

 

 

270

 

 

 

481

 

 

 

1,218

 

Gain on deemed sale from equity method investee

 

 

-

 

 

 

-

 

 

 

-

 

 

 

613

 

Share of loss from equity method investee

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(613

)

Total non-operating income, net

 

 

161

 

 

 

270

 

 

 

481

 

 

 

1,218

 

Net income (loss)

 

 

(77,975

)

 

 

1,822

 

 

 

(226,538

)

 

 

(71,005

)

Other comprehensive income (loss)

 

 

(46

)

 

 

(63

)

 

 

(136

)

 

 

17

 

Comprehensive income (loss)

 

$

(78,021

)

 

$

1,759

 

 

$

(226,674

)

 

$

(70,988

)

Net income (loss) per share, basic

 

$

(1.11

)

 

$

0.03

 

 

$

(3.28

)

 

$

(1.37

)

Weighted-average number of shares used to
   compute basic net income (loss) per share

 

 

70,110,138

 

 

 

62,599,193

 

 

 

68,990,290

 

 

 

51,852,247

 

Net income (loss) per share, diluted

 

$

(1.11

)

 

$

0.03

 

 

$

(3.28

)

 

$

(1.37

)

Weighted-average number of shares used to
   compute diluted net income (loss) per share

 

 

70,110,138

 

 

 

65,145,707

 

 

 

68,990,290

 

 

 

51,852,247

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

2


 

ARCUS BIOSCIENCES, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited)

(In thousands, except share amounts)

 

 

 

 

 

 

 

Common stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Accumulated
Other
Comprehensive

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

Balance at December 31, 2019

 

 

44,212,195

 

 

$

4

 

 

$

369,100

 

 

$

(205,326

)

 

$

64

 

 

$

163,842

 

Issuance of common stock upon exercise of stock options

 

 

59,939

 

 

 

-

 

 

 

643

 

 

 

-

 

 

 

-

 

 

 

643

 

Vesting of early exercised stock options

 

 

77,388

 

 

 

-

 

 

 

220

 

 

 

-

 

 

 

-

 

 

 

220

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

3,462

 

 

 

-

 

 

 

-

 

 

 

3,462

 

Other comprehensive income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

224

 

 

 

224

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(27,753

)

 

 

-

 

 

 

(27,753

)

Balance at March 31, 2020

 

 

44,349,522

 

 

$

4

 

 

$

373,425

 

 

$

(233,079

)

 

$

288

 

 

$

140,638

 

Issuance of common stock in public offering, net of $21,629 offering costs (2,200,000 shares and $56,738, net of $3,762 offering costs, from a related party)

 

 

12,650,000

 

 

 

2

 

 

 

326,244

 

 

 

-

 

 

 

-

 

 

 

326,246

 

Issuance of common stock upon exercise of stock options

 

 

216,286

 

 

 

-

 

 

 

1,751

 

 

 

-

 

 

 

-

 

 

 

1,751

 

Vesting of early exercised stock options

 

 

64,501

 

 

 

-

 

 

 

216

 

 

 

-

 

 

 

-

 

 

 

216

 

Issuance of common stock under Employee Stock Purchase Plan

 

 

91,859

 

 

 

-

 

 

 

607

 

 

 

-

 

 

 

-

 

 

 

607

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

4,470

 

 

 

-

 

 

 

-

 

 

 

4,470

 

Other comprehensive loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(144

)

 

 

(144

)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(45,074

)

 

 

-

 

 

 

(45,074

)

Balance at June 30, 2020

 

 

57,372,168

 

 

$

6

 

 

$

706,713

 

 

$

(278,153

)

 

$

144

 

 

$

428,710

 

Issuance of common stock and rights to purchase additional shares to related party in accordance with Gilead Purchase Agreement, net of $1,931 offering costs

 

 

5,963,029

 

 

 

-

 

 

 

107,468

 

 

 

-

 

 

 

-

 

 

 

107,468

 

Issuance of common stock upon exercise of stock options

 

 

30,039

 

 

 

-

 

 

 

270

 

 

 

-

 

 

 

-

 

 

 

270

 

Vesting of early exercised stock options

 

 

60,209

 

 

 

-

 

 

 

208

 

 

 

-

 

 

 

-

 

 

 

208

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

6,002

 

 

 

-

 

 

 

-

 

 

 

6,002

 

Other comprehensive loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(63

)

 

 

(63

)

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,822

 

 

 

-

 

 

 

1,822

 

Balance at September 30, 2020

 

 

63,425,445

 

 

$

6

 

 

$

820,661

 

 

$

(276,331

)

 

$

81

 

 

$

544,417

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2020

 

 

63,691,901

 

 

$

6

 

 

$

830,438

 

 

$

(328,184

)

 

$

44

 

 

$

502,304

 

Issuance of common stock and rights to purchase additional shares in accordance with Amended and Restated Gilead Purchase Agreement, net of $55 offering costs

 

 

5,650,000

 

 

 

1

 

 

 

220,295

 

 

 

-

 

 

 

-

 

 

 

220,296

 

Issuance of common stock upon exercise of stock options
and vesting of restricted stock

 

 

200,828

 

 

 

-

 

 

 

1,885

 

 

 

-

 

 

 

-

 

 

 

1,885

 

Vesting of early exercised stock options

 

 

54,039

 

 

 

-

 

 

 

183

 

 

 

-

 

 

 

-

 

 

 

183

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

12,761

 

 

 

-

 

 

 

-

 

 

 

12,761

 

Other comprehensive loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(46

)

 

 

(46

)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(72,593

)

 

 

-

 

 

 

(72,593

)

Balance at March 31, 2021

 

 

69,596,768

 

 

$

7

 

 

$

1,065,562

 

 

$

(400,777

)

 

$

(2

)

 

$

664,790

 

Issuance of common stock upon exercise of stock options
and vesting of restricted stock

 

 

269,369

 

 

 

-

 

 

 

843

 

 

 

-

 

 

 

-

 

 

 

843

 

Vesting of early exercised stock options

 

 

36,245

 

 

 

-

 

 

 

175

 

 

 

-

 

 

 

-

 

 

 

175

 

Issuance of common stock under Employee Stock Purchase Plan

 

 

140,408

 

 

 

-

 

 

 

1,394

 

 

 

-

 

 

 

-

 

 

 

1,394

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

13,367

 

 

 

-

 

 

 

-

 

 

 

13,367

 

Other comprehensive loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(44

)

 

 

(44

)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(75,970

)

 

 

-

 

 

 

(75,970

)

Balance at June 30, 2021

 

 

70,042,790

 

 

$

7

 

 

$

1,081,341

 

 

$

(476,747

)

 

$

(46

)

 

$

604,555

 

Issuance of common stock upon exercise of stock options and vesting of restricted stock

 

 

125,182

 

 

 

-

 

 

 

1,318

 

 

 

-

 

 

 

-

 

 

 

1,318

 

Vesting of early exercised stock options

 

 

34,476

 

 

 

-

 

 

 

170

 

 

 

-

 

 

 

-

 

 

 

170

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

14,585

 

 

 

-

 

 

 

-

 

 

 

14,585

 

Other comprehensive loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(46

)

 

 

(46

)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(77,975

)

 

 

-

 

 

 

(77,975

)

Balance at September 30, 2021

 

 

70,202,448

 

 

$

7

 

 

$

1,097,414

 

 

$

(554,722

)

 

$

(92

)

 

$

542,607

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

3


 

ARCUS BIOSCIENCES, INC.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(In thousands)

 

 

 

Nine Months Ended

 

 

 

September 30,