On Thursday, Citi maintained its Buy rating on Arcus Biosciences (NYSE:RCUS) and increased the price target to $46 from the previous $38. The adjustment reflects a positive outlook on the company's cancer treatment, cas, which is expected to play a more vital role in the investment thesis for Arcus Biosciences.
The analyst at Citi highlighted that the clinical data for cas, although still in development, suggests a favorable balance of benefits and risks. This has led to cas being incorporated into Citi's financial model for post-immuno-oncology clear cell renal cell carcinoma (ccRCC) with a predicted 65% probability of success (PoS). The pricing is anticipated to be in line with competitor drug belzutifan (belz), and a 2028 launch in the United States is expected.
Investors had previously expressed curiosity about management's qualitative assessments of cas compared to belz, particularly regarding objective response rate (ORR) and primary progression. The recent data presentation has provided clarity and appears to align with expectations that the ORR would be around 30%, with primary progression potentially in the low-20s or teens.
The Citi analyst reiterated the Buy rating, suggesting that the updated information presents a favorable moment for investors to reassess Arcus Biosciences, especially those who may have been skeptical due to uncertainties surrounding the TIGIT class of drugs. With the new price target set at $46, Citi signals confidence in the potential market performance of Arcus Biosciences' cas.
In other recent news, Arcus Biosciences has reported significant strides in its Q1 2024 performance, with GAAP revenue of $145 million exceeding consensus estimates, and cash reserves of $1.1 billion. This financial health was driven by an $11 million increase in collaboration revenues. The company also announced a strategic partnership with AstraZeneca (NASDAQ:AZN), which is expected to bolster the development of Arcus's novel bispecific antibody, Volrustomig. This partnership was met with positive reactions from Truist Securities, which maintained a Buy rating on Arcus Biosciences.
Analysts have also been active in reviewing Arcus Biosciences. BofA Securities maintained its Neutral rating, with a price target of $22.00, citing early-stage data on casdatifan and the strong commercial infrastructure of Merck as potential challenges. Similarly, H.C. Wainwright initiated coverage on Arcus Biosciences with a Neutral rating and a price target of $20.00, expressing caution about the upcoming data releases for the company's drug candidates.
Despite a pause on Roche's Phase 2/3 SKYSCRAPER-06 study, Cantor Fitzgerald maintained an Overweight rating on Arcus Biosciences, indicating a shift in focus from non-small cell lung cancer to upper gastrointestinal cancers.
InvestingPro Insights
Arcus Biosciences (NYSE:RCUS) presents an intriguing investment case, as highlighted by recent InvestingPro data and tips. The company's revenue growth is particularly noteworthy, with a substantial 104.13% increase over the last twelve months as of Q2 2024. This aligns with the article's focus on the company's promising cancer treatment, cas, which could be a key driver of future growth.
InvestingPro Tips reveal that Arcus holds more cash than debt on its balance sheet, which could provide financial flexibility as it continues to develop its cancer treatments. Additionally, analysts anticipate sales growth in the current year, supporting Citi's optimistic outlook on the company's prospects.
However, investors should note that Arcus is currently not profitable, with a negative gross profit margin of -38.46% over the last twelve months. This is consistent with the InvestingPro Tip indicating that the company is quickly burning through cash, which is not uncommon for biotech firms in the development stage.
For those considering an investment in Arcus Biosciences, it's worth noting that InvestingPro offers 11 additional tips that could provide further insights into the company's financial health and market position.
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