Related Party - Gilead Sciences, Inc. |
6 Months Ended |
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Jun. 30, 2025 | |
| Related Party Transactions [Abstract] | |
| Related Party - Gilead Sciences, Inc. | Related party - Gilead Sciences, Inc. In 2020, we and Gilead entered into an Option, License and Collaboration Agreement (the "Gilead Collaboration Agreement"), Common Stock Purchase Agreement (the "Stock Purchase Agreement"), and Investor Rights Agreement (the "Investor Rights Agreement"). The Gilead Collaboration Agreement was amended in 2021 (the "First Gilead Collaboration Agreement Amendment"), in 2023 (the "Second Gilead Collaboration Agreement Amendment"), in the first quarter 2024 (the "Third Gilead Collaboration Agreement Amendment") and in the second quarter 2024 (the "Fourth Gilead Collaboration Agreement Amendment"). The Stock Purchase Agreement was amended in 2021 (the "First Stock Purchase Agreement Amendment"), in 2023 (the "Second Stock Purchase Agreement Amendment"), and was amended and restated in the first quarter 2024 (the "Third Stock Purchase Agreement Amendment"). Gilead’s right to purchase shares under the Third Stock Purchase Agreement Amendment expired in July 2025. The Investor Rights Agreement was amended in 2022 (the "First Investor Rights Agreement Amendment") and was amended and restated in the first quarter 2024 (the "Second Investor Rights Agreement Amendment"). We refer to these agreements collectively as the Gilead Agreements. Stock Purchase and Investor Rights Agreements In the first quarter 2024, under the Third Stock Purchase Agreement Amendment, Gilead purchased 15.2 million shares of our common stock for total gross proceeds of $320 million, of which $87 million was determined to be a premium on the purchase of common stock and allocated to the performance obligations created by the Third Gilead Collaboration Agreement Amendment. In the first quarter 2025, through our underwritten offering, Gilead purchased 1.4 million shares of our common stock for total gross proceeds of $15 million. Gilead had the right under the Stock Purchase Agreement and the related amendments, which expired in July 2025, to purchase up to a maximum of 35% of the Company’s then-outstanding voting common stock, at a purchase price equal to the greater of a 20% premium to market (based on a trailing five-day average closing price at option exercise) or the $33.54 initial purchase price. Based on the value of our common stock at each contract closing, the right to purchase additional shares had no value. Under the Investor Rights Agreement entered into in 2020 and subsequent amendments, Gilead has: the right to designate three members of our board of directors; registration rights for shares that it purchases; and had pro rata participation rights in certain future financings that expired in July 2025. Gilead has exercised its rights to appoint all three board members and we have registered all shares purchased to date. As of June 30, 2025, Gilead held approximately 29.5% of our outstanding common stock arising from purchases in our public offerings and under the Stock Purchase Agreement and related amendments. Collaboration Agreements In 2020, we entered into the Gilead Collaboration Agreement, which gave Gilead an exclusive license to develop and commercialize zimberelimab (the anti PD-1 program) in certain markets and time-limited options to acquire exclusive licenses to develop and commercialize any of our then-current and future clinical programs arising during the 10-year collaboration term, contingent upon $100 million option continuation payments payable on each of the second, fourth, sixth and eighth anniversaries of the agreement. Upon closing of the transaction in 2020, Gilead made an upfront payment of $175 million. In 2021, we entered into the First Gilead Collaboration Agreement Amendment pursuant to which Gilead exercised its option to three programs—providing Gilead with exclusive licenses to develop and commercialize domvanalimab and AB308 (collectively, the anti-TIGIT program), etrumadenant (the adenosine receptor antagonist program) and quemliclustat (the CD73 program), in certain markets—for a total payment of $725 million that was received in 2022. The amendment also (i) provided for a slight reduction in the royalties for these three programs, such that Gilead will pay us tiered royalties as a percentage of revenues ranging from the mid-teens to the low twenties; and (ii) removed the $100 million option continuation payment that was otherwise due on the second anniversary of the Gilead Collaboration Agreement. With respect to domvanalimab, we are also eligible to receive up to $500 million in potential U.S. regulatory approval milestones. Gilead's option to acquire exclusive licenses to develop and commercialize any of our clinical programs arising during the collaboration term, on a program-by-program basis, will expire after a prescribed period following the achievement of a clinical development milestone in such program and our delivery to Gilead of the requisite data package. Gilead may exercise its option to any program at any time prior to expiration of the option and will pay Arcus an option fee of $150 million per program. For each program that Gilead opts in to, both companies will co-develop and equally share global development costs, subject to certain opt-out rights that we have, caps on our spending and related subsequent adjustments, and certain other exceptions. For each program, provided we have not exercised our opt-out rights, we have the option to co-promote in the U.S. with equal sharing of related profits and losses. Gilead has the right to exclusively commercialize outside of the U.S., subject to the rights of our existing partners in any territories and will pay us tiered royalties as a percentage of revenues ranging from the high teens to the low twenties. Under the First Gilead Collaboration Agreement Amendment, Gilead also has option rights to two oncology research programs for which we will lead discovery and early development activities. With respect to these two research programs, Gilead has the right to exercise its option, on a program-by-program basis, either (i) upon our completion of certain investigational new drug ("IND")-enabling activities for an option payment of $60 million or (ii) following the achievement of a clinical development milestone for an option payment of $150 million. In 2023, we entered into the Second Gilead Collaboration Agreement Amendment pursuant to which we expanded our collaboration to provide Gilead with options to license up to four jointly selected research-stage programs that target inflammatory diseases for which we will lead discovery and early development activities. We will receive an upfront payment of $17.5 million for each initiated program and Gilead will have an option to license each program at two separate, prespecified time points. For the first two research programs, Gilead has the right, on a program-by-program basis, either (i) to exercise its option upon our completion of certain IND-enabling activities for an option payment of $45 million or (ii) to extend its option and exercise it following the achievement of a clinical development milestone for an option payment of $150 million. If Gilead exercises its option at the earlier time point for the first two programs, we would be eligible to receive up to $375 million in regulatory and commercial milestone payments as well as tiered royalties for each optioned program. For any other program option exercise by Gilead, the parties would have rights to co-develop and share global development costs and to co-commercialize and share profits in the U.S. for that program. We received a total upfront payment of $35 million for an initial two research programs in 2023. Gilead’s options to the other two research programs, as amended under the Fourth Gilead Collaboration Agreement Amendment expired in May 2025. In the first quarter 2024, we entered into the Third Gilead Collaboration Agreement Amendment. The Third Gilead Collaboration Agreement Amendment, among other things, (i) requires Gilead to pay the $100 million option continuation payment due on the fourth anniversary of the Gilead Collaboration Agreement, which was received in the third quarter 2024 (ii) provides that we will operationalize and fund the Phase 3 PRISM-1 study evaluating quemliclustat in pancreatic cancer subject to Gilead's right to reinstate the study as part of the parties' joint development activities upon regulatory approval, (iii) provides that we will solely fund our share of PACIFIC-8, subject to Gilead’s right to reinstate PACIFIC-8 as part of the parties’ joint development activities for the TIGIT Program in the first quarter 2026, and (iv) provides that we will fund certain other activities. All other terms of the existing collaboration agreements, remain unchanged. As of June 30, 2025, Gilead has licenses to domvanalimab, AB308, quemliclustat and zimberelimab. In the second quarter 2025, Gilead returned its license to the adenosine receptor antagonist program, which includes etrumadenant. In the first quarter 2025, Gilead's time-limited exclusive option rights to our HIF-2α program, which includes casdatifan, expired. For the three and six months ended June 30, 2025, under the Gilead Agreements we recognized revenue of $160 million and $188 million, respectively, and for the three and six months ended June 30, 2024, we recognized revenue of $36 million and $177 million, respectively. For the three and six months ended June 30, 2025, we recognized net expense to Gilead of $13 million and $8 million, respectively, and for the three and six months ended June 30, 2024, we recognized net reimbursements from Gilead of $14 million and $30 million, respectively, in Operating expense, allocated between R&D and General and Administrative ("G&A") based upon the activity that generated the expense. At June 30, 2025 we had a net $13 million payable to Gilead, recorded in Accounts payable on our Condensed Consolidated Balance Sheets. At June 30, 2025 and December 31, 2024, we had $4 million and $6 million, respectively, receivable from Gilead, recorded in Receivable from collaboration partners on our Condensed Consolidated Balance Sheets. For a more detailed discussion on revenues recognized under the Gilead Agreements, see Note 5, Revenues, for more information.
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