EXCLUSIVE: Stealthy Arcus emerges with $120M to make personalized I/O therapy a reality

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Terry Rosen

Terry Rosen led Flexus Biosciences to a $1.25 billion acquisition by Bristol-Myers Squibb ($BMY) in roughly a year and a half. But now he and his team, including co-founder Juan Jaen, are aiming for an even more ambitious goal--building a major immuno-oncology biopharma from the ground up with upstart Arcus Biosciences.

The Hayward, CA-based startup was founded in May 2015, shortly after the Flexus sale, and has raised a total of about $120 million in two financings already. The company had opted to remain in stealth mode thus far.

That’s despite ample interest in the next efforts of this management team, which is comprised largely of Flexus execs--some of whom trace their roots back to Amgen, where Rosen was a longtime executive who finished his career there as VP of Therapeutic Discovery and South San Francisco site head.

Cash strategy

An obvious expression of this group’s confidence is that the first $30 million invested in Arcus came from its founders and other ‘friends and family’ investors; The Column Group, Foresite Capital, Novartis ($NVS) and Celgene ($CELG) rounded out the Series A financing that dates back to May 2015 and totaled $49.7 million. The Column Group and Celgene were both also Flexus investors.

Arcus opted to raise another $70 million this August--despite having touched very little of the Series A cash. But by late last year, early research had proven promising enough to accelerate initial research--and financing--plans.

“In May, we strategically decided to get two of our projects into the clinic in 2017. At the outset, we had thought to advance just one in 2017 and the next in 2018,” Arcus CEO Rosen told FierceBiotech in an exclusive interview. “We still had $40 million left, but we wanted to expand what we were doing and push the other programs faster.”

That oversubscribed round was expanded from an initial $50 million to accommodate the addition of new investors including GV, which led, as well as Invus, Taiho Ventures, DROIA Oncology Ventures and Stanford University, which had the right to participate as part of a technology licensing deal. All the existing investors also participated.

The startup has scaled up its hiring, with an aim of 60 employees by year end, up from the previously planned 38. Arcus has set up shop in the East Bay, in a less expensive locale than San Francisco or Silicon Valley.

Where’s I/O headed?

Beyond the general immuno-oncology frothiness, which Rosen expects will result in a lot of disappointing data in the next year or so because of poorly planned combination trials, Rosen and his team are committed to the big vision behind immuno-oncology.

“Immuno-oncology is a very unique, rare situation,” said Arcus’ Rosen. “The body should be able to kill tumors, but the reality is that most things tried in the past haven’t worked so well.”

He continued, “Recent trials with immune checkpoint inhibitors, such as PD-1 antibodies, have shown that if you can get the immune system to do what it’s supposed to do, you can treat cancer. The academic community has been working away and sorting out the biology very aggressively. … We have decades of biological research that hasn’t been translated into drug discovery.”

“This is something to double down on--we’re going to bet big,” concluded Rosen as an explanation for why he’s working to build Arcus as a long-term company. “This is the last field in which I will probably ever work.”

Arcus is working on small molecule and antibody I/O approaches with the aim of building its own internal combinations. Rosen likens the combo land-grab around I/O as likely to shape up along similar lines as the hepatitis C combo race--in which there were some major winners and losers on the path to assembling relevant combinations.

Specific targets

The company has selected its first three targets for small molecules along the ATP-adenosine pathway; CD73, CD39 and the A2A receptor. The idea is to use multiple means to discourage the extracellular enzymatic conversion of ATP, which is released by damaged or dying cells, into adenosine; the former encourages an immune response to cancer cells while the latter discourages it.

“Normally, ATP is released by cells as they die or are damaged,” explained Rosen. “It’s a signal to the rest of the immune system to mount an inflammatory response. But ATP is converted to adenosine and by converting ATP to adenosine, not only is the signal to mount an immune response reduced, but adenosine also tells the immune system to stand down.”

Arcus plans to select a clinical candidate from its CD73 program, which is expected to be its lead, during the last quarter of this year. It, along with the A2A antagonist program, are both slated to reach the clinic next year.

The startup is also doing preclinical work on monoclonal antibodies, which they expect could result in backbone cancer therapies. They are specifically intended to complement the workings of the small molecules. Arcus is aiming not just for individual candidate activity, but for a combination effect with its own as well as external drugs. The company expects to have up to three of these antibodies in the clinic in 2018.

Arcus hasn’t ruled out future deals to gain adjacent technology, such as cell-based therapies and gene editing, which could work well with its other approaches. It is going after three areas where it hopes to have best-in-class combinations: the elimination of active mechanisms of immune suppression, enhanced function of the APC (antigen presenting cells) as well as enhanced T cell, NK cell and macrophage effector activity.

Ultimately, Arcus is betting on a vision of personalized immuno-oncology treatment based on activity in a particular tumor. “Now, we are bucketing patients based on the organ of origin,” Arcus President Juan Jaen said. “What was the site of the origin of the tumor and what was the route of therapy? It’s very, very crude.”

He continued, “We’re moving toward more molecular or cellular analysis of what’s going on in their particular tumor. That presents opportunities to further customize the agent or combination of agents. A couple of decades from now, the large majority of patients can be taken down a very specific path.”