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Item 7. Management’s Discussion and Analysis

2026-02-25 compared with 2025-02-25 · 127 added, 127 removed, 149 unchanged (63% of the section changed)

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Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section of this Annual Report titled "Risk Factors."

We are a clinical-stage biopharmaceutical company focused on creating best-in-class therapies.

Using our robust and highly efficient drug discovery capability, we have created a significant portfolio of investigational products which are in clinical development, with our most advanced molecule, an anti-TIGIT antibody, now in multiple Phase 3 registrational studies targeting lung and GI cancers.

Our deep portfolio of novel small molecules and enabling antibodies allows us to create highly differentiated therapies, which we are developing to treat multiple large indications.

We expect our clinical-stage portfolio to continue to expand and to include molecules targeting immuno-oncology, cancer cell-intrinsic and immunological pathways.

Our vision is to create, develop and commercialize highly differentiated therapies that have a meaningful impact on patients.

We are a late clinical-stage biopharmaceutical company focused on developing differentiated molecules for patients with cancer and inflammatory and autoimmune diseases.

Our most advanced molecules are in Phase 3 registrational studies for various cancer indications and we expect our next wave of clinical-stage molecules to come from our inflammation and autoimmune disease programs.

Our vision is to leverage our internal small-molecule discovery capabilities to create, develop and commercialize highly differentiated therapies that can have a meaningful impact on patients.

Significant Developments

The following is a summary of significant developments affecting our business since the filing of our Annual Report on Form 10-K for the year ended December 31, 2023:

The following is a summary of significant developments affecting our business since the filing of our Annual Report for the year ended December 31, 2024:

Corporate Developments

• In February 2025, we announced that Gilead's time-limited exclusive option rights to our HIF-2α program (including casdatifan) have expired.

As a result, Gilead has no future rights to casdatifan and we retain full global development and commercial rights, subject to Taiho’s option right for the Taiho Territory.

• In February 2025, we issued through an underwritten offering, 13.6 million shares of our common stock at a price of $11.00 per share, for total gross proceeds of approximately $150 million, before deducting underwriting discounts, commissions and offering expenses.

• In October 2024, we entered into a clinical collaboration with AstraZeneca to evaluate casdatifan, our investigational HIF-2α inhibitor, in combination with volrustomig, AstraZeneca’s investigational PD-1/CTLA-4 bispecific antibody, in IO-naive patients with ccRCC.

AstraZeneca will operationalize the study.

• In July 2024, Taiho exercised its option for quemliclustat, our investigational small molecule CD73 inhibitor, for the Taiho Territory, and in October 2024, opted to participate in the global Phase 3 trial of quemliclustat, PRISM-1, and became obligated to reimburse us for their portion of the global study costs.

As a result, Taiho will operationalize the Japanese sites for the global Phase 3 PRISM-1 study evaluating quemliclustat in pancreatic cancer.

In February 2025, Taiho dosed their first patient in Japan for PRISM-1.

• In January 2024, we amended the Stock Purchase Agreement with Gilead, pursuant to which Gilead made an equity investment of $320 million through the purchase of our common stock at $21.00 per share.

HIF-2⍺ Program

• In February 2025, we presented clinical data from three monotherapy expansion cohorts of ARC-20 in a rapid oral session at the 2025 American Society of Clinical Oncology ("ASCO") Genitourinary Symposium.

At the time of data cut-off (January 3, 2025), observations from the expansion cohorts included:

◦ A 9.7-month mPFS was reached for the 50mg twice-a-day (BID) casdatifan monotherapy cohort;

mPFS was not yet reached for other cohorts.

◦ Confirmed objective response rate ("ORR") ranged from 25% to 33%, with 2 of the cohorts exceeding 30% (including one partial response that confirmed after the data cut-off).

◦ Rates of primary progressive disease (progression at or before their first disease assessment) ranged from 14% to 19%.

Most patients (81-87%) experienced disease control with either a partial response or stable disease and were still on treatment.

Anti-TIGIT Program

• In November 2024, we presented results at the Society for Immunotherapy of Cancer ("SITC") annual meeting from Part 1 of ARC-10, a randomized study evaluating domvanalimab plus zimberelimab in PD-L1-high NSCLC, which showed:

◦ A 36% reduction in risk of death (hazard ratio=0.64) was observed for domvanalimab plus zimberelimab compared to that of zimberelimab alone.

◦ Zimberelimab reached a median overall survival of two years, and the median overall survival for domvanalimab plus zimberelimab was not reached.

◦ Treatment-related adverse events leading to treatment discontinuation were low (10.5%) for the combination of domvanalimab and zimberelimab.

• In June 2024, we presented updated data at the ASCO Annual Meeting from Arm A1 of the Phase 2 EDGE-Gastric study which showed 12.9 months mPFS for domvanalimab plus zimberelimab and chemotherapy in first-line upper GI adenocarcinomas, which exceeded historical benchmarks for anti-PD-1 plus chemotherapy.

Adenosine-Pathway Programs

• In October 2024, we initiated PRISM-1, a Phase 3 trial of quemliclustat combined with gemcitabine/nab-paclitaxel versus gemcitabine/nab-paclitaxel in pancreatic cancer.

• In June 2024, we presented data at the ASCO Annual Meeting from ARC-9, a randomized Phase 1b/2 study evaluating etrumadenant plus zimberelimab, FOLFOX chemotherapy and bevacizumab ("EZFB") versus regorafenib in third-line metastatic colorectal cancer ("mCRC").

◦ Results showed 19.7 months median overall survival for the EZFB arm and EZFB significantly reduced the risk of death by 63% and risk of disease progression by 73% compared to regorafenib.

This is the longest median overall survival reported in third-line mCRC to date in a randomized trial.

• In November 2025, we issued through an underwritten offering, 15.8 million shares of our common stock at a price of $18.25 per share, for total gross proceeds of approximately $288 million, before deducting underwriting discounts, commissions and offering expenses.

• In October 2025, Taiho exercised its option for an exclusive license to casdatifan, an investigational small-molecule HIF-2α inhibitor, in Japan and certain other territories in Asia (excluding mainland China).

In exchange, Taiho will make an option exercise payment to us along with milestone payments upon the achievement of clinical, regulatory and commercialization milestones, and, additionally pay royalties on net sales.

HIF-2⍺ Program (casdatifan)

• In October 2025, we presented data for our HIF-2α inhibitor, casdatifan, across all four monotherapy cohorts (n=121) of the Phase 1/1b ARC-20 study in late-line metastatic kidney cancer, most of whom had progressed on at least two prior lines of therapy, including both an anti-PD-1 and a VEGFR TKI.

At the time of data cut-off (August 15, 2025), median PFS ("mPFS") was 12.2 months for the pooled analysis with 15.2 months of median follow-up and for the 100mg QD cohort (the Phase 3 PEAK-1 dose and formulation) mPFS was not reached with 12.4 months of median follow-up.

No unexpected safety signals were observed.

In February 2026, we presented updated data for the 100mg QD cohort, at 17.9 months of median follow-up, cORR increased to 45.2% with a mPFS of 15.1 months.

The mPFS for the only approved HIF-2α inhibitor (Merck’s belzutifan, based on its Phase 3 registrational trial LITESPARK-005), was 5.6 months.

• In October 2025, we announced eVOLVE-RCC02, a Phase 1b/3 study sponsored and operationalized by AstraZeneca, evaluating casdatifan plus volrustomig, AstraZeneca's investigational anti-PD-1/CTLA-4 dual checkpoint inhibitor bispecific antibody, in first-line, metastatic ccRCC, has paused recruitment.

◦ The Phase 1b portion of the study has recruited rapidly and in the context of this rapid enrollment, following observations of potentially immune-mediated AEs, none of which exceeded Grade 3, a decision was made to temporarily pause recruitment, while continuing to treat participants already enrolled into the study.

No grade 4 or 5 events were observed and the majority of AEs were grade 1 or 2.

◦ We and AstraZeneca will continue to monitor these participants to further characterize the safety profile of the combination with longer follow-up.

These data, along with any discussions with health authorities, will inform next steps for the study.

• In June 2025, we presented initial data from the ARC-20 study evaluating casdatifan plus cabozantinib that showed that nearly half of patients with metastatic cancer had a confirmed response:

◦ Treatment with casdatifan plus cabozantinib, a TKI, showed a confirmed overall response rate of 46% in patients who reached a minimum of 12 weeks (two scans) of follow-up,

◦ The combination had a manageable safety profile, and there was no meaningful overlapping toxicity for the two drugs.

TIGIT Program (domvanalimab)

• In December 2025, we announced the discontinuation of the Phase 3 STAR-221 study, conducted in partnership with Gilead and Taiho, evaluating a domvanalimab-based combination in upper gastrointestinal cancers due to futility:

◦ The decision was based on the recommendation from the Independent Data Monitoring Committee ("IDMC") following its review of data from an event-driven, pre-specified interim analysis of OS.

◦ At the interim analysis, the domvanalimab-based combination did not improve OS relative to that of nivolumab plus chemotherapy.

The safety profile for the domvanalimab-based combination was similar to that of nivolumab plus chemotherapy, and there were no new safety findings identified.

◦ Both the STAR-221 and the Phase 2 EDGE-Gastric studies will be discontinued.

• In the first half of 2026, we and Gilead expect to conduct a futility analysis of STAR-121, a Phase 3 study evaluating domvanalimab plus zimberelimab and chemotherapy in 1L non-small cell lung cancer.

Adenosine-Pathway Program (quemliclustat)

• In October 2025, we announced that we completed enrollment of PRISM-1, a Phase 3 trial of quemliclustat combined with gemcitabine/nab-paclitaxel versus gemcitabine/nab-paclitaxel in first-line metastatic pancreatic ductal adenocarcinoma, within 12 months of study initiation.

• In July 2025, we announced that quemliclustat, an investigational small-molecule CD73 inhibitor, was granted orphan drug designation by the FDA for the treatment of pancreatic cancer.

Adenosine Receptor Antagonist Program (etrumadenant)

• In the first quarter 2025, based on our strategic priorities, we decided to pause future development of etrumadenant and in June 2025, Gilead returned its license to the adenosine receptor antagonist program, which includes etrumadenant.

Strategic Partnerships

Gilead Sciences, Inc.

In 2020, we and Gilead entered into the Gilead Collaboration Agreement.

Under the Gilead Collaboration Agreement, Gilead obtained an exclusive license to zimberelimab and time-limited exclusive options to all of our then-current and future programs during the 10-year collaboration term.

The agreement was amended in 2021 (the "First Gilead Collaboration Agreement Amendment"), under which Gilead obtained rights to an additional four of our investigational products:

domvanalimab, etrumadenant, quemliclustat and AB308.

Gilead's time-limited exclusive option rights to our HIF-2α program (including casdatifan) have expired.

For each program to which Gilead exercised or exercises its option, the parties will co-develop globally and co-commercialize the program in the U.S., subject to certain exceptions, and Gilead will have the right to commercialize the program outside of the U.S., subject to the rights of our existing partners in certain territories.

Furthermore, we and Gilead agreed to collaborate on two oncology research programs, for which we will lead discovery and early development activities.

In 2023, we amended the Gilead Collaboration Agreement (the "Second Gilead Collaboration Agreement Amendment") to further expand the collaboration to include up to four jointly selected research-stage programs that target inflammatory diseases for which we will lead discovery and early development activities.

In the first quarter of 2024, we further amended the Gilead Collaboration Agreement (the "Third Gilead Collaboration Agreement Amendment") to provide that (i) Gilead is required 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 and (ii) we would fund certain activities, including the Phase 3 PRISM-1 study evaluating quemliclustat in pancreatic cancer .

In 2020, we and Gilead entered into the Gilead Collaboration Agreement, as amended, under which Gilead obtained an exclusive license to zimberelimab and time-limited exclusive options to all of our then-current and future programs during the collaboration term.

For each program to which Gilead exercised or exercises its option, the parties will co-develop globally and co-promote the program in the U.S., subject to certain exceptions, and Gilead will have the right to commercialize the program outside of the U.S., subject to the rights of our existing partners in certain territories.

Gilead currently has exclusive licenses to three programs—our TIGIT program, including domvanalimab, our PD-1 program, including zimberelimab, and our CD73 program, including quemliclustat.

Furthermore, we and Gilead agreed to collaborate on two oncology research programs and two jointly selected research-stage programs that target inflammatory diseases.

In each case, we will lead discovery and early development activities.

In 2024, we further amended the Gilead Collaboration Agreement to provide that we would fund certain activities, including the Phase 3 PRISM-1 study evaluating quemliclustat in pancreatic cancer.

Concurrent with the Gilead Collaboration Agreement in 2020, we also entered into the Stock Purchase Agreement and Investor Rights Agreement.

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").

Under the Stock Purchase Agreement, Gilead has the right, at its option until July 2025, to purchase up to a maximum ownership of 35% of our then-outstanding voting common stock.

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").

Under the Investor Rights Agreement, as amended, Gilead has the right to designate three individuals to be appointed to our board of directors.

The Stock Purchase Agreement expired in July 2025.

The Investor Rights Agreement was amended in 2022 and amended and restated in 2024 and provides Gilead with the right to designate three individuals, which they have exercised, to be appointed to our board of directors.

As of December 31, 2025, Gilead held approximately 25.1% of our outstanding common stock.

Gilead acquired an additional 1.4 million shares of our common stock in the February 2025 underwritten offering and subsequently held approximately 29.7% of our common stock as of February 19, 2025.

Taiho Pharmaceutical Co., Ltd.

In 2017, we entered into the Taiho Agreement pursuant to which Taiho was granted time-limited options to exclusively license for the Taiho Territory the development and commercialization rights to each of our programs that arose over a five-year period ending in September 2022.

As of December 31, 2024, Taiho has licenses for the Taiho Territory to (i) etrumadenant (the adenosine receptor antagonist program);

(ii) zimberelimab (the anti-PD-1 program);

(iii) domvanalimab and AB308 (collectively, the anti-TIGIT program);

and (iv) quemliclustat (the CD73 program).

In 2017, we entered into the Taiho Agreement pursuant to which Taiho obtained an exclusive option to in-license the development and commercialization rights to programs for which IND-enabling studies had begun during a five-year term.

These rights are geographically limited to the Taiho Territory.

As of December 31, 2025, Taiho has exercised its option to our:

(i) HIF-2α program (including casdatifan);

(ii) anti-TIGIT program (including domvanalimab);

(iii) anti-PD-1 program (including zimberelimab);

(iv) CD73 program (including quemliclustat);

and (v) adenosine receptor antagonist program (including etrumadenant).

The five-year term expired in September 2022 and Taiho retains option rights to our CD39 program (including AB598).

Other Licenses, Collaborations, and Research and Development Arrangements

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We also have clinical collaboration agreements with AstraZeneca for the Phase 3 PACIFIC-8 trial evaluating domvanalimab and durvalumab in Stage 3 NSCLC and for a Phase 1b/3 study evaluating casdatifan and volrustomig in IO-naive patients with ccRCC.

We are also party to an agreement with BVF Partners L.P.

("BVF") to support the discovery and development of compounds for the treatment of inflammatory diseases.

Financial Overview

Since commencing operations in 2015, we have devoted substantially all of our efforts and financial resources to building our research and development capabilities, advancing our investigational product pipeline, and establishing our corporate infrastructure.

Since commencing operations in 2015, we have devoted substantially all of our efforts and financial resources to building our R&D capabilities, advancing our investigational product pipeline, and establishing our corporate infrastructure.

To date, we have financed our operations primarily from the sale of our equity securities;

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and debt financing.

We expect to incur substantial expenditures in the foreseeable future for the development and potential commercialization of our investigational products and ongoing internal research and development programs.

At this time, we cannot reasonably estimate the nature, timing or aggregate amount of costs for our development, potential commercialization, and internal research and development programs.

As of December 31, 2024, we had $992 million of cash, cash equivalents and marketable securities, which together with the proceeds from our equity financing in February 2025, we believe will be sufficient to fund our planned level of operations for the foreseeable future and provide funding to our initial pivotal read-outs for domvanalimab, quemliclustat and casdatifan, including STAR-221, PRISM-1 and PEAK-1.

We expect to incur substantial expenditures in the foreseeable future for the development and potential commercialization of our investigational products and ongoing internal R&D programs.

At this time, we cannot reasonably estimate the nature, timing or aggregate amount of costs for our development, potential commercialization, and internal R&D programs.

As of December 31, 2025, we had $1.0 billion of cash, cash equivalents and marketable securities.

Based on our existing business plan, we believe that our cash, cash equivalents and marketable securities will be sufficient to fund our planned level of operations until at least the second half of 2028.

Components of Operating Results

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Other collaboration revenue consists primarily of amounts recognized from the portions of the nonrefundable upfront payments received from Gilead and Taiho and allocated to performance obligations relating to their access to our investigational pipeline or our obligation to perform certain discovery and early development activities.

Revenue related to

access rights is recognized over the period of access, and revenue related to discovery and early development activities is recognized as the performance obligation is satisfied.

Revenue related to access rights is recognized over the period of access, and revenue related to discovery and early development activities is recognized as the performance obligation is satisfied.

Operating Expenses

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Our R&D expenses consist of costs incurred in connection with the R&D of our pipeline programs.

These expenses include preclinical and clinical expenses, payroll and personnel expenses, including stock-based compensation for our employees in R&D, laboratory supplies, product licenses, consulting costs, contract research, and depreciation.

These expenses include preclinical and clinical expenses, payroll and stock-based compensation for our personnel in R&D, laboratory supplies, product licenses, consulting costs, contract research, and fixed asset depreciation.

Shared facility expenses are allocated to functional groups proportionally based on usage.

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We do not allocate all our costs by investigational product, as a significant amount of R&D expenses include internal costs, such as payroll and other personnel expenses, and certain external costs that are not recorded at the investigational product level.

In particular, with respect to internal costs, several of our departments support multiple R&D programs, and we do not allocate those costs by investigational product.

The level of our future R&D investment will depend on a number of factors and uncertainties, including the breadth of the joint development program agreed to with Gilead for the optioned programs, the outcome of our efforts, and the amount of cost reimbursements or milestone payments we receive from our collaborators.

We expect our R&D expenses to increase substantially during the next few years as we pursue joint development programs with Gilead and advance these programs towards regulatory approval.

We also expect to advance new programs into the clinic.

All of this will require significant growth in our development capabilities and infrastructure.

In addition, our joint development programs with Gilead for the optioned molecules are anticipated to include a significant number of later-stage clinical trials, which typically include a larger number of subjects, are of a longer duration and include more geographic regions.

As we advance our clinical-stage programs and prepare to seek regulatory approval, we will also need to increase our late-stage manufacturing activities.

As a result, we expect our preclinical, clinical, and contract manufacturing expenses to increase significantly relative to what we have incurred to date.

In addition, under our arrangements with WuXi Biologics, Abmuno, AstraZeneca and BVF, we may incur additional clinical and regulatory milestone payments based on the development progress of our investigational products.

In particular, with respect to internal costs, several of our departments support multiple R&D programs.

The level of our future R&D investment will depend on a number of factors and uncertainties including the breadth of our clinical programs, the outcome of our efforts, and our collaboration activities.

We expect our R&D expenses to decrease in the near-term relative to what we have incurred as we wind down studies for domvanalimab, partially offset by our increased investment in the development of casdatifan and advancement of our small-molecule inflammation and immunology programs.

We solely own casdatifan and lead its global development and commercialization, working with strategic partners in certain regions.

As we advance our clinical-stage programs, including casdatifan, and prepare to seek regulatory approval, we may need to expand our late-stage development and commercial capabilities, which will require increased investment.

In addition, under our arrangements with WuXi Biologics, Abmuno and AstraZeneca, we may incur additional clinical and regulatory milestone payments based on the development progress of our investigational products.

We may also be required to pay royalties in the event of a successful product launch and our receipt of commercial revenues.

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Our G&A expenses also include professional fees for legal, consulting, and accounting services, rent and other facilities costs, fixed asset depreciation, and other general operating expenses not otherwise classified as R&D expenses.

We do not receive significant reimbursements of these costs through our collaboration with Gilead.

We anticipate that our G&A expenses will increase during the next few years as we support our growing R&D activities, including due to staff expansion, and other costs associated with increased infrastructure needs.

We do not anticipate significant changes in our G&A expenses in the near term.

Impairment of Long-Lived Assets

Impairment charges consist of impairment of right-of-use assets resulting from updated plans in the first quarter 2024 for a portion of our office space.

Impairment charges consist of impairment of right-of-use assets resulting from updated plans in 2024 for a portion of our office space.

Non-Operating Income, net

Non-operating income, net consists primarily of interest earned on our investments in fixed-income marketable securities, interest expense on our loan financing with Hercules, and non-cash interest expense incurred under the effective interest method on our liability for sale of future royalties to BVF.

Non-operating income, net consists primarily of interest earned on our investments in fixed-income marketable securities, interest expense on the Hercules Agreement, and non-cash interest expense incurred under the effective interest method on our liability for sale of future royalties to BVF Partners L.P.

Results of Operations

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2024 Change Year Ended

License and development service revenue $ 222 178 % $ 80 8 % $ 74

Other collaboration revenue 36 (3) % 37 (3) % 38

License and development services $ 221 — % $ 222 178 % $ 80

Other collaboration 26 (28) % 36 (3) % 37

Total revenues 247 (4) % 258 121 % 117

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Total Revenues

The increase in Total revenues for 2024 as compared to 2023 was primarily driven by increased revenues from license and development services due to a cumulative catch-up to revenue in the first quarter 2024 of $107 million as a result of the Third Gilead Collaboration Agreement Amendment based on the updated transaction price and measure of progress for the partially satisfied performance obligations;

and Taiho's exercise of its option for the license of quemliclustat for the Taiho Territory of $15 million, which was recognized as revenue upon the delivery of the license in the third quarter of 2024.

The increase in Total revenues for 2023 as compared to 2022 was primarily driven by increased revenues from license and development services due to the progress in the research and development activities under our Taiho collaboration R&D services and our inflammation programs which commenced in 2023, partially offset by a decrease in revenue recognized for Taiho access rights which expired in 2022.

The decrease in Total revenues for 2025 as compared to 2024 was primarily driven by (i) lower revenue from the Taiho Collaboration (with $7 million in 2025 as a result of the casdatifan option exercise and amendment compared to $15 million in 2024 as a result of the quemliclustat option exercise) and (ii) lower revenue from the Gilead Collaboration based on timing and extent of our progress.

The decrease was partially offset by the higher cumulative catch-up to revenue under the Gilead Collaboration of $143 million in 2025 (relating to Gilead's return of its license to etrumadenant) compared to $107 million in 2024 (as a result of the Gilead collaboration amendment).

The increase in Total revenues for 2024 as compared to 2023 was primarily driven by a cumulative catch-up to revenue under the Gilead Collaboration of $107 million (as a result of the Gilead collaboration amendment);

and Taiho's quemliclustat option exercise of $15 million.

See Note 5, Revenues, in Part II, Item 8 for further discussion of the amount and timing of revenues recognized from our license and collaboration agreements.

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Included as of December 31, 2025

Category Description Program-Level Expenses Key Clinical

Category Description Program-Level Expenses Clinical

Late-stage development programs R&D expenses incurred related to a Phase 3 clinical program intended to result in registration of a new product.

This includes all unallocated program-level expense not directly attributable to a specific clinical trial once a molecule enters into one or more Phase 3 clinical trials.

quemliclustat** PACIFIC-8

Early-stage R&D and preclinical programs R&D expenses incurred for activities ranging from early-stage R&D and preclinical to Phase 2 clinical trials.

This includes all unallocated program-level expense not directly attributable to a specific clinical trial once the related program enters into one or more Phase 3 clinical trials.

quemliclustat**

Early-stage development and preclinical programs R&D expenses incurred for activities ranging from early-stage development and preclinical to Phase 2 clinical trials.

This includes all unallocated program-level expense not directly attributable to a specific clinical trial unless the related program has entered into one or more Phase 3 clinical trials.

quemliclustat**

VELOCITY-Lung

EDGE-Gastric*

VELOCITY-HNSCC***

Compensation and personnel costs Internal costs, such as salaries, non-cash stock-based compensation, and other personnel expenses for our R&D employees.

VELOCITY-Lung

Compensation and personnel costs Internal costs, such as salaries, non-cash stock-based compensation, and other personnel expenses for our R&D employees that are not allocated to specific programs or trials.

Other costs Facilities, depreciation, and other external costs that are not recorded at the investigational product level.

Partnership reimbursements Reimbursements from our collaboration partners for shared costs incurred by us and recognized as a reduction in R&D expense.

* Study discontinued or completed

** Quemliclustat moved from early-stage development and preclinical program to a late-stage development program in the third quarter 2024

* Study discontinued or substantially completed

** Moved from early-stage development and preclinical to a late-stage development program:

quemliclustat in the third quarter 2024 and casdatifan in the third quarter 2025.

*** Head and Neck Squamous Cell Carcinoma ("HNSCC")

The following table summarizes our R&D expenses by category (in millions):

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Total research and development $ 523 17 % $ 448 32 % $ 340

The increase in R&D expenses for 2024 as compared to 2023 was primarily driven by higher costs to support our expanding late-stage development program activities, driven by higher enrollment in our Phase 3 studies for domvanalimab and the initiation of the quemliclustat Phase 3 trial PRISM-1, and the timing of our manufacturing activities.

Our growing headcount drove an increase in compensation and personnel costs, including a $3 million increase in non-cash stock-based compensation.

Our partnership reimbursements were flat compared to the prior year despite the increases in gross costs, due to increases in Gilead-led activities and programs fully funded by us.

The increase in R&D expenses for 2023 as compared to 2022 was primarily driven by higher costs to support our expanding late-stage development program activities, including standard-of-care therapeutic purchases, partially offset by lower clinical manufacturing costs due to the timing of activities.

Our growing headcount drove an increase in compensation and personnel costs, including a $2 million increase in non-cash stock-based compensation.

The overall increase was partially offset by reduced spend in our early-stage R&D and preclinical program activities due to fewer Phase 2 studies and higher clinical manufacturing costs in 2022 to support expanding study activities.

The increase in R&D expenses for 2025 as compared to 2024 was primarily driven by (i) higher late-stage development costs, driven by increased enrollment and clinical activities in our Phase 3 studies for casdatifan and quemliclustat, partially offset by lower costs for our Phase 3 studies for domvanalimab, and (ii) higher early-stage development costs, driven by our Phase 2 studies for casdatifan.

Increases in compensation and personnel costs were partially offset by a $7 million decrease in non-cash stock-based compensation.

Our partnership reimbursements decreased compared to the prior year, primarily due to Gilead-led activities representing a larger share of total joint development costs and an increase in programs fully funded by us.

The increase in R&D expenses for 2024 as compared to 2023 was primarily driven by (i) higher costs of our late-stage development activities, driven by our Phase 3 studies for domvanalimab and the initiation of the quemliclustat Phase 3 trial, and (ii) the timing of our manufacturing activities.

Increases in compensation and personnel costs were due to an increase in headcount, including a $3 million increase in non-cash stock-based compensation.

Our partnership reimbursements were relatively flat compared to the prior year.

General and Administrative Expenses

The decrease in G&A expenses for 2025 as compared to 2024 was primarily driven by decreases in compensation and personnel costs driven by a $9 million decrease in non-cash stock-based compensation, partially offset by an increase in expenses shared under the Gilead Collaboration.

The increase in G&A expenses for 2024 as compared to 2023 was primarily driven by the increased complexity of supporting our expanding clinical pipeline and partnership obligations.

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The overall increase in G&A expenses was partially offset by income from subleases of space in our Brisbane office.

The increase in G&A expenses for 2023 as compared to 2022 was primarily driven by the increased complexity of supporting our expanding clinical pipeline and partnership obligations.

Our growing headcount and our 2023 stock awards drove an increase in employee compensation costs, including $6 million in increased non-cash stock-based compensation.

Impairment of Long-Lived Assets

The increase in impairment expense for 2024 was due to our sublease of a portion of our office space, resulting in an impairment charge of $20 million, compared to no similar impairment in the prior year.

The impairment expense for 2024 was the result of our sublease of a portion of our office space.

Non-Operating Income, net

The increase in Non-operating income, net for 2024 as compared to 2023 was primarily due to higher interest income resulting from increased investment yields and higher average portfolio balances as compared to the prior year, driven by $320 million received from Gilead in the first quarter 2024 under the amended Stock Purchase Agreement.

The increase in Non-operating income, net for 2023 as compared to 2022 was primarily due to higher interest income resulting from increased investment yields as compared to the prior year.

The decrease in Non-operating income, net for 2025 as compared to 2024 was primarily due to lower interest income resulting from decreased investment yields and lower average portfolio balances as compared to the prior year and increased interest expense from our long-term debt agreement which we entered into in 2024, with an additional $50 million drawn in the second quarter 2025.

Income Tax Expense

The decrease in Income tax expense for 2025 as compared to 2024 was primarily due to a decrease in state income tax compared to the prior year.

The decrease in Income tax expense for 2024 as compared to 2023 was primarily due to a decrease in taxable income compared to the prior year.

The increase in Income tax expense for 2023 as compared to 2022 was primarily due to an increase in taxable income compared to the prior year.

The Income tax expense for each of the years shown considers the impact of the capitalization of R&D expenses for income tax purposes due to changes in U.S.

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government treasury and agency obligations, investments in corporate securities and certificates of deposit.

Based on our existing business plan, we believe that our cash, cash equivalents, and marketable securities as of December 31, 2024, which together with the proceeds from our equity financing in February 2025, we believe will be sufficient to fund our planned level of operations for the foreseeable future and provide funding to our initial pivotal read-outs for domvanalimab, quemliclustat and casdatifan including STAR-221, PRISM-1 and PEAK-1.

Based on our existing business plan, we believe that our cash, cash equivalents, marketable securities as of December 31, 2025 will be sufficient to fund our planned level of operations until at least the second half of 2028.

Sources of Liquidity

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Risk Factors" for a discussion of the factors that could impact our liquidity.

Under the Stock Purchase Agreement, Gilead has the right, at its option, to purchase additional shares from us, up to a maximum ownership of 35% of our then-outstanding voting common stock, from time to time until July 2025.

In the first quarter 2024, we further amended and restated the Stock Purchase Agreement and sold 15.2 million shares of our common stock to Gilead at a purchase price of $21.00 per share for total gross proceeds of $320 million.

Of the $320 million equity investment, $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.

As of December 31, 2024, Gilead held approximately 32.6% of our outstanding common stock arising from purchases in our 2020 public offering and purchases under the Stock Purchase Agreement and the related amendments.

Gilead acquired an additional 1.4 million shares of our common stock in the February 2025 underwritten offering and subsequently held approximately 29.7% of our common stock as of February 19, 2025.

In 2023, we entered into an equity distribution agreement pursuant to which we may, from time to time, sell shares of our common stock having an aggregate offering price of up to $200 million.

We had no activity during the year ended December 31, 2024, and during the year ended December 31, 2023, we issued and sold under this agreement 0.2 million shares of our common stock for total net proceeds of $5 million.

See Note 15, Stockholders’ equity, in Part II, Item 8 for further discussion.

In the third quarter 2024, we obtained a $250 million term loan facility from Hercules Capital, Inc.

("Hercules").

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.

In 2024, we obtained a $250 million term loan facility from Hercules.

Under the terms of the term loan facility, $50 million was drawn at closing, $50 million was drawn in the second quarter 2025 and an additional $50 million is committed and fully available at our sole option in minimum increments of $25 million.

Additional tranches totaling $100 million will be available to support strategic initiatives, subject to the achievement of certain clinical and regulatory milestones.

See Note 13, Long-term debt, in Part II, Item 8 for further discussion.

In February 2025, we issued through an underwritten offering, 13.6 million shares of our common stock at a price of $11.00 per share, for total gross proceeds of approximately $150 million, before deducting underwriting discounts, commissions and offering expense.

In 2024, we amended and restated the Stock Purchase Agreement and sold 15.2 million shares of our common stock to Gilead at a purchase price of $21.00 per share for total gross proceeds of $320 million.

See Note 3, Related party - Gilead Sciences, Inc., in Part II, Item 8 for further discussion.

In 2025, we issued, through two underwritten offerings, 29.4 million shares of our common stock for total gross proceeds of approximately $438 million, before deducting underwriting discounts, commissions and offering expense.

See Note 15, Stockholders’ equity, in Part II, Item 8 for further discussion.

Material Cash Requirements

We expect to incur substantial expenditures in the foreseeable future as we expand our pipeline and advance our investigational products through clinical development, the regulatory approval process and, if approved, commercial launch activities.

For example, in the near term we expect to incur substantial expenses relating to our ongoing and planned clinical trials, the development and validation of our manufacturing processes, and other preclinical, research and discovery development activities.

These expenditures will be partially offset by reimbursements for shared expenses from our collaborations, primarily the Gilead collaboration, for certain expenses incurred on their optioned programs.

We expect to incur substantial expenditures in the foreseeable future as we invest in our pipeline, and advance our investigational products, including casdatifan and quemliclustat, through clinical development, the regulatory approval process and, if approved, commercial launch activities.

See "Contractual Obligations and Commitments" for more information regarding our cash requirements from known contractual commitments.

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Operating Activities

Net cash used in operating activities for 2024 was $170 million as compared to net cash used in operating activities of $306 million for the same period in the prior year.

The change in operating cash flows is primarily due to the receipt of the $100 million option continuation payment from Gilead in the third quarter 2024, the $87 million under the Third Gilead Collaboration Agreement Amendment in the first quarter 2024, and the receipt of $45 million in total from Taiho for development milestones and its opt-in on quemliclustat, partially offset by higher R&D expenditures.

Net cash used in operating activities for 2023 was $306 million as compared to net cash provided by operating activities of $438 million for the prior year.

The change in operating cash flows is primarily due to $725 million received from Gilead in 2022 under the Gilead Collaboration Agreement.

Net cash used in operating activities was $482 million for 2025 as compared to $170 million for 2024.

The change in operating cash flows is primarily due to (i) higher R&D expenditures in 2025 compared to 2024, which contributed to the increased net loss, and (ii) the receipt of $37 million in collaboration payments in 2025 (from Taiho) compared to $232 million in 2024 ($187 million from Gilead and $45 million from Taiho).

Net cash used in operating activities was $170 million for 2024 as compared to $306 million for 2023.

The change in operating cash flows is primarily due to the receipt of $232 million in collaboration payments in 2024 ($100 million option continuation payment from Gilead, $87 million under the Gilead Collaboration amendment, and $45 million from Taiho for development milestones and opt-in payments).

The change was partially offset by higher R&D expenditures in 2024 compared to 2023.

See Note 3, Related party - Gilead Sciences, Inc., and Note 4, License and collaborations in Part II, Item 8 for additional information on collaboration payments.

Investing Activities

Cash used in investing activities for 2024 was primarily due to net purchases of marketable securities of $78 million as we invested a portion of the cash received from Gilead in the first quarter 2024 under the Third Stock Purchase Agreement Amendment.

Cash provided by investing activities for 2025 was primarily due to net sales of marketable securities totaling $68 million.

Cash used in investing activities for 2024 was primarily due to net purchases of marketable securities of $78 million as we invested a portion of the cash received from Gilead under the amended Stock Purchase Agreement.

Cash provided by investing activities for 2023 was primarily due to net proceeds from marketable securities of $218 million, partially offset by purchases of property and equipment of $24 million.

Cash used in investing activities for 2022 was primarily due to net purchases of marketable securities of $404 million as we invested a portion of the $725 million received from Gilead in 2022 under the Gilead Collaboration Agreement.

Financing Activities

Cash used in financing activities for 2024 was due to net proceeds of $228 million from issuance of our common stock to Gilead under the Third Stock Purchase Agreement Amendment, net proceeds of $47 million from our borrowings under the Hercules Agreement, and net proceeds of $2 million for stock issued under our equity award plans.

Cash provided by financing activities for 2023 was due to net proceeds of $25 million from issuance of our common stock, primarily due to stock purchases by Gilead, and proceeds of $8 million for stock issued under our equity award plans.

Cash provided by financing activities for 2022 was primarily due to net proceeds of $23 million for stock issued under our equity award plans and $10 million received under the BVF agreement.

Cash provided by financing activities for 2025 is comprised of net proceeds of $429 million from issuance of our common stock through two underwritten offerings and our at-the-market facility, net proceeds of $49 million from our borrowings, and net proceeds of $10 million for stock issued under our equity award plans.

Cash provided by financing activities for 2024 is comprised of net proceeds of $228 million from issuance of our common stock to Gilead under the amended Stock Purchase Agreement, net proceeds of $47 million from our borrowings, and net proceeds of $2 million for stock issued under our equity award plans.

Cash provided by financing activities for 2023 is comprised of net proceeds of $25 million from issuance of our common stock, primarily due to stock purchases by Gilead, and proceeds of $8 million for stock issued under our equity award plans.

Contractual Obligations and Commitments

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See Note 4, License and collaborations, in Part II, Item 8 for further discussion.

We have a liability for sale of future royalties which consists of the current balance of estimated contingent milestone and royalty payments under the BVF agreement.

We have a liability for sale of future royalties which consists of the current balance of estimated contingent milestone and royalty payments under our agreement with BVF.

See Note 16, Fair value measurements, in Part II, Item 8 for further discussion.

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Revenue Recognition

Standalone selling price

As part of the accounting for contracts with customers, we develop assumptions that require judgment to determine the standalone selling price of each performance obligation identified in the contract.

In the first quarter 2024, we entered into the Third Gilead Collaboration Agreement Amendment, which we determined was a change in scope and price of the original contract and we accounted for this contract modification as both a modification of the existing contract and the creation of a new contract.

In the second quarter 2025, Gilead terminated its rights to etrumadenant (the adenosine receptor antagonist program).

We determined that this was a significant reduction in the scope of the arrangement, which met the definition of a contract modification.

We accounted for this contract modification as both a modification of the existing contract and the creation of a new contract.

(See Note 5, Revenues, in Part II, Item 8 for further discussion).

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Accordingly, we recognized a cumulative catch-up to revenue of $143 million based on the updated transaction price and measure of progress for the partially satisfied performance obligations.

A hypothetical 10% change in the updated standalone selling prices or the updated measure of progress as of the modification date related to Third Gilead Collaboration Agreement Amendment would have changed the cumulative catch-up to revenue recognized during the current year to date period by as much as $3 million or $32 million, respectively.

A hypothetical 10% change in the updated standalone selling prices or the updated measure of progress as of the modification date related to Third Gilead Collaboration Agreement Amendment would have changed the cumulative catch-up to revenue recognized during the current quarter and year to date period by as much as $3 million.

Changes in total estimated effort

Revenue related to certain performance obligations, R&D activities or combined license and R&D activities, that are satisfied over time could be materially impacted as a result of changes in the total estimated effort required to satisfy those obligations.

For example, if we are unable to advance an investigational product to regulatory approval or if we and Gilead agree to terminate joint development of an investigational product, this could result in a decrease in the estimated effort and cost of satisfying the related performance obligation as well as an increase in the estimated percentage of completion and a corresponding cumulative catch-up adjustment to revenue.

In contrast, development delays or increases in the total effort required to advance an investigation product could result in a decrease in the estimated percentage of completion and a corresponding reversal of revenue.

At December 31, 2025, we had $37 million in deferred revenue related to upfront cash payments for certain performance obligations related to R&D programs that are satisfied over time, of which a substantial amount would be recognized if we were unable to advance the underlying investigational product to regulatory approval or if we and Gilead were to agree to terminate development of the underlying investigational product.

A hypothetical 5% increase or decrease in the total estimated effort required to satisfy these performance obligations at December 31, 2025, would have decreased or increased the related revenue recognized by $28 million and $18 million, respectively, for the current year.

Recent Accounting Pronouncements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis