Arcus Biosciences, Inc. 10-K

Item 8. Financial Statements and Supplementary Data ARCUS BIOSCIENCES, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm (PCAOB ID No. 42) 75 Audited Consolidated Financial Statements Consolidated Statements of Operations 77 Consolidated Statements of Comprehensive Loss 78 Consolidated Balance Sheets 79 Consolidated Statements of Stockholders’ Equity 80 Consolidated Statements of Cash Flows 81 Notes to Consolidated Financial Statements 82 74 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Arcus Biosciences, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Arcus Biosciences, Inc. (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 25, 2026 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 75 Table of Contents Accounting for agreements with Gilead Sciences, Inc. Description of the Matter As described in Notes 3 and 5 to the consolidated financial statements, the Company has ongoing Option, License and Collaboration Agreements with Gilead Sciences, Inc., a related party, referred to as the "Gilead Agreements", which resulted in the recognition of $240 million of revenue for the year ended December 31, 2025 and $78 million of deferred revenue at December 31, 2025. Of the revenue recognized under the Gilead Agreements in 2025, $224 million related to amounts recognized when services are performed, based on the level of effort expended in a given period in relation to the total effort expected to be incurred to satisfy the applicable performance obligation. Management periodically updates its estimates of the total effort expected to be incurred to satisfy such performance obligations, with any changes in estimate potentially changing the amount of revenue previously recognized and/or the amount to be recognized in future periods. Auditing the estimated effort to be incurred to satisfy such performance obligations is complex due to the extent of data compiled and judgments applied by the Company. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls addressing the risks of material misstatement relating to the Company’s process for estimating the total effort expected to be incurred to satisfy the identified performance obligations pursuant to the Gilead Agreements. Our audit procedures included, among others, obtaining and reading applicable board and committee meeting minutes, inquiring of research and development personnel, including program managers, and testing the completeness and accuracy of the data used by management to estimate the total effort expected to be incurred to satisfy the identified performance obligations pursuant to the Gilead Agreements. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2016. San Mateo, California February 25, 2026 76 Table of Contents ARCUS BIOSCIENCES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share amounts) Year Ended December 31, 2025 2024 2023 Revenues: License and development services (Includes $ 214 , $ 207 and $ 75 from a related party) $ 221 $ 222 $ 80 Other collaboration (Includes $ 26 , $ 36 and $ 37 from a related party) 26 36 37 Total revenues 247 258 117 Operating expenses: Research and development (Includes $ 25 , ($ 39 ) and ($ 110 ) payments to/(from) a related party) 523 448 340 General and administrative (Includes $ 5 , $ 2 and $ — payments to a related party) 110 120 117 Impairment of long-lived assets (see Note 14, Leases) — 20 — Total operating expenses 633 588 457 Loss from operations ( 386 ) ( 330 ) ( 340 ) Non-operating income (expense): Interest and other income, net 41 52 41 Interest expense ( 8 ) ( 4 ) ( 2 ) Total non-operating income, net 33 48 39 Loss before income taxes ( 353 ) ( 282 ) ( 301 ) Income tax expense — ( 1 ) ( 6 ) Net loss $ ( 353 ) $ ( 283 ) $ ( 307 ) Net loss per share: Basic and diluted $ ( 3.29 ) $ ( 3.14 ) $ ( 4.15 ) Shares used to compute net loss per share: Basic and diluted 107.4 90.1 74.0 See accompanying notes. 77 Table of Contents ARCUS BIOSCIENCES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (In millions) Year Ended December 31, 2025 2024 2023 Net loss $ ( 353 ) $ ( 283 ) $ ( 307 ) Other comprehensive income — — 7 Comprehensive loss $ ( 353 ) $ ( 283 ) $ ( 300 ) See accompanying notes. 78 Table of Contents ARCUS BIOSCIENCES, INC. CONSOLIDATED BALANCE SHEETS December 31, 2025 and 2024 (In millions, except per share amounts) December 31, 2025 2024 ASSETS Current assets: Cash and cash equivalents $ 222 $ 150 Marketable securities 759 828 Receivable from collaboration partners ($ — and $ 6 from a related party) 11 20 Prepaid expenses and other current assets 15 18 Total current assets 1,007 1,016 Long-term marketable securities 29 14 Property and equipment, net 40 47 Other noncurrent assets 63 73 Total assets $ 1,139 $ 1,150 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable ($ 24 and $ — to a related party) $ 42 $ 18 Deferred revenue ($ 35 and $ 85 to a related party) 35 85 Other current liabilities 154 123 Total current liabilities 231 226 Deferred revenue, noncurrent ($ 43 and $ 234 to a related party) 43 234 Long-term debt 99 48 Other noncurrent liabilities 135 157 Commitments (Note 17) Stockholders’ equity: Common stock and additional paid-in capital: $ 0.0001 par value per share; 400.0 shares authorized; 125.3 shares in 2025 and 92.2 shares in 2024 issued and outstanding 2,116 1,617 Accumulated deficit ( 1,485 ) ( 1,132 ) Total stockholders’ equity 631 485 Total liabilities and stockholders’ equity $ 1,139 $ 1,150 See accompanying notes. 79 Table of Contents ARCUS BIOSCIENCES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Years ended December 31, 2025, 2024 and 2023 (In millions) Number of shares of common stock Common stock and additional paid-in capital Accumulated deficit Accumulated other comprehensive income (loss) Total stockholders’ equity Balance at December 31, 2022 72.9 $ 1,206 $ ( 542 ) $ ( 7 ) $ 657 Issuance of common stock (see Note 3, Related party - Gilead Sciences, Inc. and Note 15, Stockholders' Equity) 1.2 25 — — 25 Issuance of common stock in connection with our equity award programs 1.4 7 — — 7 Stock-based compensation — 73 — — 73 Other comprehensive income — — — 7 7 Net loss — — ( 307 ) — ( 307 ) Balance at December 31, 2023 75.5 1,311 ( 849 ) — 462 Issuance of common stock (see Note 3, Related party - Gilead Sciences, Inc. and Note 15, Stockholders' Equity) 15.2 228 — — 228 Issuance of common stock in connection with our equity award programs 1.5 2 — — 2 Stock-based compensation — 76 — — 76 Net loss — — ( 283 ) — ( 283 ) Balance at December 31, 2024 92.2 1,617 ( 1,132 ) — 485 Issuance of common stock (see Note 3, Related party - Gilead Sciences, Inc. and Note 15, Stockholders' Equity) 30.8 429 — — 429 Issuance of common stock in connection with our equity award programs 2.3 10 — — 10 Stock-based compensation — 60 — — 60 Net loss — — ( 353 ) — ( 353 ) Balance at December 31, 2025 125.3 $ 2,116 $ ( 1,485 ) $ — $ 631 See accompanying notes. 80 Table of Contents ARCUS BIOSCIENCES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) Year Ended December 31, 2025 2024 2023 Cash flow from operating activities Net loss $ ( 353 ) $ ( 283 ) $ ( 307 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 60 76 73 Depreciation and amortization 10 10 8 Noncash lease expense 7 7 8 Impairment on right-of use assets — 20 — Amortization of discounts on marketable securities ( 13 ) ( 25 ) ( 19 ) Other items, net 1 3 2 Changes in operating assets and liabilities: Receivable from collaboration partners ($ 6 , $ 14 and $ 19 from a related party) 9 28 15 Other assets ($ — , $ 6 and ($ 4 ) from a related party) 5 22 ( 14 ) Accounts payable ($ 24 , $ — , and $ — to a related party) 24 3 ( 1 ) Deferred revenue (($ 240 ), ($ 56 ) and ($ 77 ) to a related party) ( 240 ) ( 56 ) ( 68 ) Other liabilities 8 25 ( 3 ) Net cash used in operating activities ( 482 ) ( 170 ) ( 306 ) Cash flow from investing activities Purchases of marketable securities ( 1,076 ) ( 1,043 ) ( 788 ) Proceeds from maturities of marketable securities 1,073 929 982 Proceeds from sales of marketable securities 71 36 24 Purchases of property and equipment ( 2 ) ( 6 ) ( 24 ) Net cash provided by (used in) investing activities 66 ( 84 ) 194 Cash flow from financing activities Proceeds from issuance of common stock ($ 14 , $ 228 and $ 20 from a related party), net 429 228 25 Proceeds from debt issuances, net 49 47 — Proceeds from issuance of common stock pursuant to equity award plans 10 9 8 Payments of employee taxes related to net settlement of equity awards — ( 7 ) — Net cash provided by financing activities 488 277 33 Net increase (decrease) in cash, cash equivalents and restricted cash 72 23 ( 79 ) Cash, cash equivalents and restricted cash at beginning of period 153 130 209 Cash, cash equivalents and restricted cash at end of period $ 225 $ 153 $ 130 Supplemental disclosure of cash flow information Income taxes paid $ — $ — $ 5 Interest paid $ 7 $ 1 $ — Non-cash investing and financing activities: Unpaid portion of property and equipment purchases included in Accounts payable and Other current liabilities $ — $ — $ 2 See accompanying notes. 81 Table of Contents ARCUS BIOSCIENCES, INC. Notes to Consolidated Financial Statements Note 1. Organization, liquidity and capital resources Organization Arcus Biosciences, Inc. (referred to as "Arcus," "we," "our," "us," or the "Company") is 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. We operate and manage our business as one reportable and operating segment, which is the business of developing and commercializing highly differentiated therapies that have a meaningful impact on patients. See Note 18, Segments of business, for more information. Liquidity and Capital Resources As of December 31, 2025, we had cash, cash equivalents and marketable securities of $ 1.0 billion, which we believe will be sufficient to fund our planned operations for a period of at least twelve months following the date of filing of this Annual Report. Note 2. Summary of significant accounting policies Basis of Presentation The Consolidated Financial Statements, which include the accounts of Arcus as well as its wholly owned subsidiaries, have been prepared in accordance with U.S. GAAP and include all adjustments necessary for the fair presentation of the Company’s financial position for the periods presented. All intercompany transactions and balances have been eliminated in consolidation. We assess whether we are the primary beneficiary of a Variable Interest Entity ("VIE") at the inception of the arrangement and at each reporting date. This assessment is based on our power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and our obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. We do not have any significant interests in any variable interest entities of which we are the primary beneficiary. Use of Estimates The preparation of the Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures. We base our estimates on historical experience and on various market-specific and other relevant assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Estimates are assessed and updated each period to reflect current information. Actual results may differ materially from those estimates. Collaborative Arrangements We assess whether our licensing and other agreements are collaborative arrangements based on whether they involve joint operating activities and whether both parties have active participation in the arrangement and are exposed to significant risks and rewards. For arrangements that we determine are collaborations, we identify each distinct performance obligation, and then determine whether a customer relationship exists for that distinct performance obligation. If we determine a performance obligation within the collaborative arrangement to be with a customer, we apply our revenue accounting policy. If a portion of a distinct bundle of goods or services within the collaborative arrangement is not with a customer, we apply recognition and measurement based on an analogy to authoritative accounting literature or, if there is no appropriate analogy, a reasonable, rational, and consistently applied accounting policy election. See Note 4, License and collaborations, for more information. 82 Table of Contents Revenues We recognize revenue when a customer obtains control of promised goods or services in a contract for an amount that reflects the consideration we expect to receive in exchange for those goods or services. For contracts with customers, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy each performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. 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 addition, variable consideration such as milestone payments are evaluated to determine if they are constrained and, therefore, excluded from the transaction price. We then allocate the total transaction price proportionally to each performance obligation based on their estimated standalone selling prices. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. We currently do not have product sales and our revenues are derived from research, collaboration and license arrangements with strategic partners. Such arrangements may require us to deliver various rights, services and/or goods, including intellectual property rights/licenses, R&D services, manufacturing services and/or commercialization services. The underlying terms of these arrangements may generally include consideration to Arcus in the form of one or more of the following: (i) nonrefundable, up-front license fees; (ii) milestone payments related to the achievement of developmental, regulatory, or commercial goals; (iii) royalties on net sales of licensed products; (iv) fees attributable to options to intellectual property; and (v) profit sharing. In arrangements involving more than one performance obligation, each performance obligation is evaluated to determine whether it qualifies as distinct based on whether (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available and (ii) the good or service is separately identifiable from other promises in the contract. The consideration under the arrangement is then allocated to each separate distinct performance obligation based on its respective relative stand-alone selling price. The estimated selling price of each deliverable reflects our best estimate of what the selling price would be if the deliverable was regularly sold by us on a stand-alone basis or by using an adjusted market assessment approach if selling price on a stand-alone basis is not available. The consideration allocated to each distinct performance obligation is recognized as revenue when control of the related goods is transferred or services are performed. We evaluate each performance obligation to determine if it can be satisfied at a point in time or over time as services are performed. For performance obligations that are determined to be satisfied over time we determine an appropriate method of measuring progress for purposes of recognizing revenue. Consideration associated with at-risk substantive performance milestones is recognized as revenue when it is probable that a significant reversal of the cumulative revenue recognized will not occur. For arrangements that include sales-based royalties, including milestone payments based on sales thresholds, and for which the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, we have not recognized any royalty revenue resulting from any of our arrangements. The accounting for these arrangements requires us to develop estimates and assumptions that require judgment. These estimates may include items such as forecasted revenues or costs, development timelines, discount rates, and probabilities of technical and regulatory success. Actual results may differ materially from those estimates. See Note 5, Revenues, for more information. Research and Development Expenses R&D costs are expensed as incurred and primarily include: salaries, benefits and other staff-related costs; facilities and overhead costs; third-party service provider costs for preclinical and clinical studies; laboratory supplies and equipment maintenance costs; consulting; payments under collaborative and other arrangements including milestone payments, licenses and fees; expense reimbursements to collaboration partners; and other related expenses. Under certain collaborative arrangements, we are reimbursed for a portion of the R&D expenses, including costs of drug supplies. When these R&D expenses are incurred under a reimbursement or cost sharing model with a collaboration partner, we record the related reimbursements as a reduction of R&D expense in our Consolidated Statements of Operations. Acquired in-process R&D projects with no alternative future use are recorded in R&D expense upon acquisition. 83 Table of Contents Net payment or reimbursement of R&D costs is recognized when the obligations are incurred and as we become entitled to the cost recovery. See Note 4, License and collaborations, for more information. Clinical trial costs are a significant component of R&D expenses. Our clinical studies are primarily performed by third-party CROs. We monitor levels of performance under each significant contract including the extent of patient enrollment and other activities and accrue costs for clinical studies performed over the service periods specified in the contract. We adjust our estimates, if required, based upon our ongoing review of the level of effort and costs actually incurred by the CROs. All of our material CRO contracts are terminable by us upon written notice, and we are generally only liable for actual services completed by the CRO and certain noncancellable expenses incurred at termination. General and Administrative Expenses G&A expenses relate to: finance; human resources; legal and other administrative activities which consist primarily of salaries, benefits and other staff-related costs; facilities and overhead costs; legal expenses; and other general and administrative costs. G&A expenses also include G&A cost reimbursements and costs sharing under our collaborative R&D arrangements. Stock-Based Compensation We provide stock-based compensation in the form of various types of equity-based awards, including Restricted Stock Units ("RSUs") and stock options. The fair values of RSUs and stock options, which are subject to service conditions and vesting, are recognized as compensation expense on a straight-line basis over the service period net of forfeitures as they occur. See Note 8, Stock-based compensation, for more information. Income Taxes We provide for income taxes under the asset and liability method. Current income tax expense or benefit represents the amount of income taxes expected to be payable or refundable for the current year. Deferred income tax assets and liabilities are determined based on differences between the financial statement reporting and tax bases of assets and liabilities and NOLs and credit carryforwards, measured using the enacted tax rates and laws that will be in effect when such items are expected to reverse. Deferred income tax assets are reduced, as necessary, by a valuation allowance when we determine it is more likely than not that some or all of the tax benefits will not be realized. We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by tax authorities. We assess all material positions taken in any income tax return, including all significant uncertain positions, in all tax years that are still subject to assessment or challenge by relevant taxing authorities. As of each balance sheet date, unresolved uncertain tax positions must be reassessed, and we will determine whether (i) the factors underlying the sustainability assertion have changed and (ii) the amount of the recognized tax benefit is still appropriate. We include any penalties and interest expense related to income taxes as a component of other expense and interest income, net, as necessary. See Note 6, Income taxes, for more information. Cash Equivalents Cash equivalents consist of marketable securities having an original maturity of three months or less at the time of purchase. Marketable Securities We consider our interest-bearing securities investment portfolio as available-for-sale, and accordingly, these investments are recorded at fair value, with unrealized gains and losses recorded in Accumulated Other Comprehensive Income. See Note 10, Cash, cash equivalents and marketable securities, and Note 16, Fair value measurements, for more information. Property and Equipment Property and equipment is recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets, ranging from three to ten years . Leasehold improvements are amortized over the shorter of their estimated useful lives or the related lease term. We review property and equipment for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. See Note 11, Property and equipment, for more information. 84 Table of Contents Debt Issuance Costs Debt issuance costs consist of costs incurred to obtain long-term financing. These costs are classified on the Consolidated Balance Sheets as a direct deduction from the carrying amount of the related debt liability and amortized as interest expense in the Consolidated Statement of Operations using the effective interest rate method. Leases We determine whether an arrangement is or contains a lease at contract inception. Operating lease right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of the lease payments over the lease term, which is the non-cancelable period stated in the contract adjusted for any options to extend or terminate when it is reasonably certain that we will exercise that option. Right-of-use assets are adjusted for prepaid lease payments, lease incentives and initial direct costs incurred. Operating lease expense for the minimum lease payments is recognized on a straight-line basis over the lease term and includes both lease and non-lease components due to our election to account for these components as a single lease component. When our operating leases do not provide an implicit interest rate, we generally utilize our incremental borrowing rate, based on the information available at the commencement date to determine the lease liability. We do not recognize the right-of-use assets and liabilities for leases with lease terms of one year or less with payments recognized as operating expenses on a straight-line basis over the lease term. We sublease parts of our facilities to third parties and recognize sublease income on a straight-line basis over the sublease term. We evaluate the underlying assets for impairment at sublease inception. See Note 14, Leases, for more information. Fair Value of Financial Instruments We apply fair value accounting for all financial and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. We define fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities which are required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risks. See Note 16, Fair value measurements, for more information. Other Significant Accounting Policies Our other significant accounting policies are described in the remaining appropriate notes to the Consolidated Financial Statements. Recently Adopted Accounting Pronouncements In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. We adopted this guidance beginning with this Annual Report, resulting in increased disclosures in our Notes to Consolidated Financial Statements. See Note 6. Income Taxes, for more information. Recently Issued Accounting Pronouncements Not Yet Adopted In November 2024, the FASB issued ASU 2024-03 — Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40) — Disaggregation of Income Statement Expenses. This ASU requires disclosure, in the notes to financial statements, of specified information about certain costs and expenses. We plan to adopt this guidance beginning with our 2027 Annual Report to be filed in early 2028 and all quarterly and Annual Reports thereafter. We expect the adoption of this standard to result in increased disclosures in our Notes to our Consolidated Financial Statements. In September 2025, the FASB issued ASU 2025-07 — Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606): Derivatives Scope Refinements and Scope Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract. This ASU refines the scope of the guidance on derivatives in Topic 815 and clarifies the guidance on share-based payments from a customer in ASC 606. The standard will become effective for the fiscal year ending December 31, 2027, with early adoption permitted. We are currently assessing the potential impact of this new standard on our Consolidated Financial Statements. 85 Table of Contents Note 3. Related party - Gilead Sciences, Inc. In 2020, we and Gilead entered into the Gilead Collaboration Agreement, the Stock Purchase Agreement, and 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 2024 (the "Third Gilead Collaboration Agreement Amendment"), in 2024 (the "Fourth Gilead Collaboration Agreement Amendment") and in 2025 (the "Fifth 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 2024 (the "Third Stock Purchase Agreement Amendment"). The Investor Rights Agreement was amended in 2022 (the "First Investor Rights Agreement Amendment") and was amended and restated in 2024 (the "Second Investor Rights Agreement Amendment"). We refer to these agreements collectively as the Gilead Agreements. Stock Purchase and Investor Rights Agreements In 2020, under the Stock Purchase Agreement, Gilead purchased 6.0 million shares of our common stock for total gross proceeds of $ 200 million, of which $ 91 million was determined to be a premium on the purchase of common stock and allocated to the performance obligations created by the Gilead Collaboration Agreement. In 2021, under the First Stock Purchase Agreement Amendment, Gilead purchased 5.7 million shares of our common stock for total gross proceeds of $ 220 million. In 2023, under the Second Stock Purchase Agreement Amendment, Gilead purchased 1.0 million shares of our common stock for total gross proceeds of $ 20 million. In 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 December 31, 2025, Gilead held approximately 25.1 % of our outstanding common stock. 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. 86 Table of Contents 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 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-promote 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 2024, we entered into the Third Gilead Collaboration Agreement Amendment. The Third Gilead Collaboration Agreement Amendment, among other things, (i) required Gilead to pay the $ 100 million option continuation payment due on the fourth anniversary of the Gilead Collaboration Agreement, which was received in 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 of 2026, and (iv) provides that we will fund certain other activities. All other terms of the existing collaboration agreements, remain unchanged. In the first quarter 2025, Gilead's time-limited exclusive option rights to our HIF-2α program, which includes casdatifan, expired. In the second quarter 2025, Gilead returned its license to the adenosine receptor antagonist program, which includes etrumadenant. As of December 31, 2025, Gilead has licenses to domvanalimab, AB308, quemliclustat and zimberelimab. 87 Table of Contents For the years ended December 31, 2025, 2024 and 2023; we recognized revenue under the Gilead Agreements of $ 240 million, $ 243 million and $ 112 million, respectively. For the year ended December 31, 2025, we recognized net expense to Gilead of $ 30 million, and for the years ended December 31, 2024 and 2023, we recognized net reimbursements from Gilead of $ 37 million and $ 110 million, respectively, in Operating expense, allocated between R&D and G&A based upon the activity that generated the net expense or reimbursement. At December 31, 2025, we had a net payable to Gilead of $ 24 million, recorded in Accounts payable on our Consolidated Balance Sheet. At December 31, 2024, we had a net receivable from Gilead of $ 6 million, recorded in Receivable from collaboration partners on our Consolidated Balance Sheet. For a more detailed discussion on revenues recognized under the Gilead Agreements, see Note 5, Revenues, for more information. Note 4. License and collaborations We enter into licensing agreements, strategic collaborations and other similar arrangements with third parties for the development and commercialization of certain investigational products. These arrangements: may be collaborative and involve two or more parties who are active participants in the operating activities of the collaboration and are exposed to significant risks and rewards depending on the commercial success of the activities; are performed with no guarantee of either technological or commercial success; and are each unique in nature. Such arrangements may include: non-refundable upfront payments; payments for options to acquire certain rights; potential development and regulatory milestone payments and/or sales-based milestone payments; royalty payments; revenue or profit-sharing arrangements; expense reimbursements; and cost-sharing arrangements. See Note 2, Summary of significant accounting policies, for additional discussion of how revenues are recognized under these types of arrangements. Operating expenses for costs incurred pursuant to these arrangements are reported in their respective expense line items in the Consolidated Statements of Operations, net of any payments due to or reimbursements due from our collaboration partners, with such reimbursements being recognized at the time the party becomes obligated to pay. Our significant arrangements are discussed below. For a more detailed discussion on revenues recognized under these arrangements, see Note 5, Revenues. Gilead Collaboration See Note 3, Related party - Gilead Sciences, Inc., for more information. Taiho Collaboration In 2017, we entered into an agreement with Taiho pursuant to which Taiho obtained an exclusive option to in-license development and commercialization rights to programs for the Taiho Territory for which IND-enabling studies had begun during a five-year term which ended in September 2022, for an upfront payment of $ 35 million. For each option to a program that Taiho exercises, except for casdatifan (the HIF-2α program) discussed below, they will be obligated to make a payment of $ 3 million to $ 15 million, depending on the development stage of the optioned program. Upon exercise, Taiho is solely responsible for continued development and commercialization in the Taiho Territory, unless they opt to participate in a global study, in which case they would become obligated to reimburse us for their portion of the global study costs. In addition, for each optioned program we would be eligible to receive clinical and regulatory milestones of up to $ 130 million and commercial milestone payments of up to $ 145 million with the achievement of certain sales thresholds in the Taiho Territory. We will also receive royalties ranging from high single-digits to mid-teens on net sales of licensed products in the Taiho Territory. Royalties will be payable by product and country commencing on the first commercial sale and ending upon the later of: (a) 10 years; and (b) expiration of the last-to-expire valid claim of our patents covering the manufacture, use or sale. 88 Table of Contents In 2022, Taiho opted to participate in two global Phase 3 trials of domvanalimab and zimberelimab combinations, STAR-121 and STAR-221, and became obligated to reimburse us for their portion of the global study costs, and to make milestone payments contingent upon successfully satisfying the related clinical milestones. The clinical milestones for domvanalimab and zimberelimab for the STAR-221 study were met in 2023, and Taiho became obligated to pay us $ 28 million which has been fully received. The clinical milestones for domvanalimab and zimberelimab for the STAR-121 study were met in 2024 and Taiho became obligated to pay us $ 26 million, of which $ 16 million was received in 2024 and the remaining $ 10 million was received in 2025. In 2024, Taiho 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 and in the first quarter 2025, Taiho dosed their first patient in Japan for PRISM-1, and became obligated to make milestone payments totaling $ 19 million of which $ 12 million was received in 2025 and the remaining $ 7 million is due in the first quarter 2026. Due to the nature of this arrangement, these clinical milestones were determined to be advance cost sharing payments for a portion of the related global study R&D costs under the collaboration and are deferred and recognized as a reduction in R&D expense as the related global studies are performed, calculated as an estimated percentage of completion based on the estimated total effort for the programs. In 2024, Taiho exercised its option for the CD73 program (including quemliclustat) for the Taiho Territory, for an option payment of $ 15 million. In the fourth quarter 2025, Taiho exercised its option for HIF-2α inhibitor program (including casdatifan) for the Taiho Territory , for an option payment of $ 15 million. We and Taiho concurrently entered into the Second Amendment where we will lead development for two indications in Japan and we may also be eligible to receive clinical and regulatory milestones of up to $ 172 million, commercial milestone payments of up to $ 145 million with the achievement of certain sales thresholds in the Taiho Territory and royalties ranging from high single-digits to mid-teens on net sales of the licensed product in the Taiho Territory. We will be responsible for the global study costs. See Note 5, Revenues, for more information. As of December 31, 2025, Taiho has licenses for the Taiho Territory to (i) HIF-2α inhibitor 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). Under this arrangement, for the years ended December 31, 2025, 2024 and 2023, we recognized (i) revenue of $ 7 million, $ 15 million and $ 5 million, respectively and (ii) reimbursements, including amounts related to advance cost share payments, of $ 34 million, $ 28 million, and $ 8 million, respectively, as a reduction in R&D expense. At December 31, 2025 and 2024, we had $ 10 million and $ 14 million, respectively, related to this arrangement recorded in Receivable from collaboration partners on our Consolidated Balance Sheets. At December 31, 2025, we had liabilities of $ 44 million related to certain advance cost sharing payments under this arrangement recorded in Other liabilities, allocated between current and noncurrent based on the expected timing of future recognition. AstraZeneca Collaboration In 2020, we entered into a collaboration with AstraZeneca to evaluate domvanalimab, our investigational anti-TIGIT antibody, in combination with AstraZeneca’s durvalumab in a registrational Phase 3 clinical trial in patients with unresectable Stage 3 NSCLC, known as the PACIFIC-8 trial. The terms of this agreement were amended in 2024. Under the collaboration, as amended, each company will retain existing rights to their respective molecules and any future commercial economics. AstraZeneca will conduct the trial, and each company will supply their respective investigational product to support the trial. We may incur milestones of up to $ 24 million upon the achievement of certain clinical trial progress milestones or under certain circumstances if the agreement is terminated early and we will reimburse AstraZeneca annually for a portion of the trial costs. The portion of the costs that we consider to be unavoidable are accrued as incurred and milestones that are deemed probable of occurring are accrued in advance of the achievement of the milestone. Prior to January 2024, the PACIFIC-8 trial formed part of the Arcus and Gilead joint development program for domvanalimab and our portion of the trial costs were shared with Gilead. Under the Third Gilead Collaboration Agreement Amendment, we agreed to 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. For the years ended December 31, 2025, 2024, and 2023, we recognized as R&D expense $ 20 million, $ 14 million, and $ 6 million, respectively, under this arrangement. At December 31, 2025 and 2024, we have recognized a total liability of $ 12 million and of $ 26 million, respectively, related to our obligation to AstraZeneca including milestones, recorded in Other current liabilities and Other noncurrent liabilities on our Consolidated Balance Sheets based on the expected timing of payment. 89 Table of Contents WuXi Biologics License – anti-PD-1 In 2017, we entered into an agreement with WuXi Biologics which, as amended, provides us with exclusive rights to (i) develop, use and manufacture products that include an anti-PD-1 antibody, including zimberelimab, worldwide and (ii) commercialize any such products worldwide, except in Greater China. As of December 31, 2025, under this arrangement we may incur (i) additional regulatory milestone payments of up to $ 50 million, and commercialization milestone payments of up to $ 375 million, (ii) tiered royalties that range from the high single-digits to low teens on net sales of the licensed products and (iii) fees related to any sublicenses. For the years ended December 31, 2025, 2024, and 2023, we did not have any milestones or royalties due under this arrangement. WuXi Biologics License – anti-CD39 In 2020, we entered into an agreement with WuXi Biologics, under which we obtained the exclusive worldwide license to develop and commercialize anti-CD39 antibodies discovered under this arrangement. As of December 31, 2025, under this arrangement we may incur additional clinical and regulatory milestone payments of up to $ 14 million and royalty payments in the low single digits on net sales of the licensed products. For the years ended December 31, 2025 and 2024, we did not have any milestones or royalties due under this arrangement. For the year ended December 31, 2023, we incurred a development milestone of $ 1 million under this arrangement, which was recognized as R&D expense. Abmuno License In 2016, we entered into an agreement with Abmuno, under which we obtained the exclusive worldwide license to develop, use, manufacture, and commercialize products that include an anti-TIGIT antibody, including domvanalimab. As of December 31, 2025, under this arrangement we may incur additional clinical, regulatory and commercialization milestone payments of up to $ 88 million. For the years ended December 31, 2025, 2024, and 2023, we did not have any milestones or royalties due under this arrangement. Note 5. Revenues The following table summarizes our revenues by collaboration, category of revenue, and the method of recognition (in millions): Year Ended December 31, Over time Point in time 2025 2024 2023 Gilead Collaboration License and development services * $ 214 $ 207 $ 75 R&D services * 10 8 4 Access rights * 16 28 33 Taiho Collaboration License * 7 15 — Other * — — 5 Total revenues $ 247 $ 258 $ 117 Total revenues from collaborations $ 214 $ 207 $ 80 Total revenues from a customer $ 33 $ 51 $ 37 Revenues from Gilead accounted for 97 %, 94 % and 96 % of Total revenues for the years ended December 31, 2025, 2024 and 2023, respectively. 90 Table of Contents The following table summarizes the revenue recognized as a result of changes in the deferred revenue balance (in millions): Year Ended December 31, 2025 2024 2023 Revenue recognized from amounts in deferred revenue at the beginning of the period $ 240 $ 243 $ 108 We had $ 78 million and $ 319 million of deferred revenue remaining on our Consolidated Balance Sheets at December 31, 2025 and 2024, respectively, allocated between current and noncurrent based on the expected timing of future recognition. Revenue from the Gilead Collaboration 2024 Third Gilead Collaboration Agreement In 2024, we entered into the Third Gilead Collaboration Agreement Amendment, which we determined was a change in scope and price of the arrangement and we accounted for this as both a modification of the existing contract and the creation of a new contract. Under the applicable accounting rules for such contract modifications, we did not adjust the accounting for completed performance obligations that were distinct from the modified goods or services. Accordingly, we allocated the updated transaction price to the new, remaining unsatisfied and partially satisfied performance obligations (both from the existing contract and the modification) and updated the measure of progress as of the modification date which resulted in a cumulative catch-up to revenue of $ 107 million in the year ended December 31, 2024. This cumulative catch-up reduced net loss per share, basic and diluted, in the year ended December 31, 2024 by $ 1.19 , see Note 3, Related party - Gilead Sciences, Inc., for more information. The following table summarizes the transaction price (in millions): Transaction price Amount Premium from Third Stock Purchase Agreement Amendment 87 Option continuation payment received in the third quarter of 2024 100 Deferred revenue as of January 2024 335 Total transaction price $ 522 Our assessment of the updated transaction price for the Third Gilead Collaboration Agreement Amendment included an analysis of amounts we expected to receive, which at contract amendment consisted of: $ 100 million option continuation payment that Gilead committed to and paid in 2024 for continued access to our pipeline; $ 87 million allocated from the premium from the Third Stock Purchase Agreement Amendment; and $ 335 million deferred revenue remaining from the First Gilead Collaboration Agreement Amendment effective December 2021. We determined the entire $ 522 million to be the allocable transaction price as of the amendment closing date, due to the history of timely payments by Gilead. The following table summarizes the allocation of the updated transaction price to the remaining unsatisfied and partially satisfied performance obligations (in millions): Allocation to performance obligations Distinct Combined Amount License and development services * 378 Development services * 33 Access rights and option continuation periods * 77 Rights to certain studies * 34 Total transaction price $ 522 91 Table of Contents 2025 Termination of rights to etrumadenant In the second quarter 2025, Gilead terminated its rights to etrumadenant (the adenosine receptor antagonist program), which we determined was a significant reduction in the scope of the arrangement, which met the accounting definition of a contract modification and we accounted for this as both a modification of the existing contract and the creation of a new contract. Under the applicable accounting rules for such contract modifications, we did not adjust the accounting for completed performance obligations that were distinct from the modified goods or services. Accordingly, we allocated the updated transaction price of $ 256 million, which was comprised of the deferred revenue remaining as of the modification date, to the remaining unsatisfied and partially satisfied performance obligations and updated the measure of progress as of the modification date, which resulted in a cumulative catch-up to revenue of $ 143 million in the year ended December 31, 2025. This cumulative catch-up reduced net loss per share, basic and diluted, in the year ended December 31, 2025 by $ 1.33 . See Note 3, Related party - Gilead Sciences, Inc., for more information. The following table summarizes the allocation of the updated transaction price to the remaining unsatisfied and partially satisfied performance obligations (in millions): Allocation to performance obligations Distinct Combined Amount License and development services * $ 192 Development services * 17 Access right and option continuation periods * 30 Rights to certain studies * 17 Total transaction price $ 256 We accounted for each performance obligation as follows: License and Development Services - Etrumadenant, Quemliclustat and Domvanalimab Under the Gilead Collaboration Agreement, Gilead obtained options to the exclusive rights: to our adenosine receptor antagonist program, etrumadenant; to our CD73 program, quemliclustat; and to our anti-TIGIT program, domvanalimab and AB308. Effective December 2021, under the First Gilead Collaboration Agreement Amendment, Gilead exercised these options and obtained exclusive licenses to these programs for a total non-refundable payment totaling $ 725 million. We determined the standalone selling price of each license using a discounted cash flow method and the R&D services for each program, using an expected cost-plus margin approach. For domvanalimab, we determined that the license was distinct based on an evaluation of the delivery of the license, noting that the program was in the later stages of development and the ongoing R&D services do not significantly modify or customize the related intellectual property. Accordingly, we recognized the allocated transaction price as revenue in the year ended December 31, 2021. For etrumadenant and quemliclustat programs, we determined that the license and R&D services were combined at the inception of the agreement based on an evaluation of the delivery of the license, due to the early stage of the technology and the specialized nature of our know-how. We recognize the amounts allocated to R&D services for domvanalimab and the combined license and R&D for etrumadenant and quemliclustat as each performance obligation is satisfied, calculated as an estimated percentage of completion based on management's estimated total effort for each program. We recognized $ 214 million (including the cumulative catch-up of $ 143 million), $ 207 million (including the cumulative catch-up of $ 107 million), and $ 75 million in the years ended December 31, 2025, 2024 and 2023, respectively, within License and development services revenue in our Consolidated Statements of Operations. Access Rights and Option Continuation Periods Under the Gilead Collaboration Agreement entered into in 2020 and related amendments, Gilead has exclusive access to our current programs as well as any future programs for a period of ten years , contingent upon option continuation payments totaling $ 300 million, consisting of a $ 100 million payment on each of the fourth (paid in third quarter 2024), sixth, and eighth anniversaries of the Gilead Collaboration Agreement. Failure to pay the non-obligatory option continuation payments will result in Gilead’s loss of certain rights to access and obtain licenses to the programs arising from our R&D pipeline. 92 Table of Contents The standalone selling price of the ongoing R&D pipeline access and the option continuation material rights were determined using an expected cost-plus margin approach, with the option continuation material rights probability-adjusted for the likelihood of exercise. We use a time-elapsed input method to measure progress toward satisfying the access rights performance obligation, which is the method we believe most faithfully depicts our performance in transferring the promised services during the time period in which Gilead has access to our R&D pipeline. Accordingly, the revenue allocated to the initial four-year access rights performance obligation was recognized using this input method over the remaining period through July 2024, and for the fourth anniversary access rights continuation, over the two-year period commencing July 2024. For the remaining access rights option continuation periods commencing on the sixth, and eighth, anniversaries of the agreement, if Gilead elects to exercise their option, we will recognize the revenue allocated to that option together with the $ 100 million continuation payment over the new minimum access period or immediately if the option lapses. We recognized $ 16 million, $ 28 million, and $ 33 million in the years ended December 31, 2025, 2024, and 2023, respectively, within Other collaboration revenue in our Consolidated Statements of Operations. Rights to Certain Studies Effective January 2024, under the Third Gilead Collaboration Agreement Amendment, we will solely fund certain studies, but Gilead retains exclusive rights to reinstate into the collaboration each study beginning at specified time-points for a payment amount based on the cost incurred. We have determined that these are material rights and we estimated the standalone selling price of these performance obligations using a discounted cash flow method probability-adjusted for the likelihood of exercise. We will recognize the amount allocated to each right if and when the related study is reinstated into the parties' co-development plans or if the option lapses. At December 31, 2025, we had $ 17 million of deferred revenue on our Consolidated Balance Sheet related to these performance obligations. R&D Services - Inflammation Programs 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 an initial two jointly selected research-stage programs that target inflammatory diseases for which we will lead discovery and early development activities, see Note 3, Related party - Gilead Sciences, Inc., for more information. We received a total upfront payment of $ 35 million. We determined that the Second Gilead Collaboration Agreement Amendment represented a separate contract. We determined that we have two separate distinct performance obligations to perform R&D services for Gilead related to discovery and early development activities for each research program for which they have made an upfront payment and, at the amendment closing date, we allocated the transaction price of $ 35 million equally to the two performance obligations created by this amendment based upon the respective standalone selling prices. The standalone selling prices of these obligations were determined using an expected cost-plus margin approach. We recognize the amounts allocated to these services as the performance obligation is satisfied, calculated as an estimated percentage of completion based on management's estimated total effort for the program. The options to acquire additional licenses or services did not result in additional performance obligations because they did not provide a material right at contract inception, primarily due to the very early stages of the programs. We recognized revenue of $ 10 million, $ 8 million, and $ 4 million for the years ended December 31, 2025, 2024, and 2023 respectively, within Other collaboration revenue in our Consolidated Statements of Operations. Revenue from the Taiho Collaboration Quemliclustat - License In 2024, Taiho exercised its option under the collaboration arrangement and obtained an exclusive license for quemliclustat (the CD73 program) for the Taiho Territory for an option payment of $ 15 million which was received in 2024. We determined that this license was the only distinct performance obligation based on an evaluation of the delivery of the license, noting that the program was in the later stages of development and the ongoing R&D services do not significantly modify or customize the related intellectual property and we recognized the allocated transaction price upon delivery in the year ended December 31, 2024, within License and development services revenue in our Consolidated Statements of Operations. 93 Table of Contents Casdatifan In 2025, Taiho exercised its option under the collaboration arrangement and obtained an exclusive license to casdatifan (the HIF-2α inhibitor) for the Taiho Territory and concurrently entered into the second amendment whereby we will lead development for two indications in Japan including the global Phase 3 trial of casdatifan PEAK-1. In exchange, Taiho made an option exercise payment of $ 15 million which was received in fourth quarter 2025. We determined that the option exercise and amendment represented a single contract under which we have two separate distinct performance obligations, a license with a customer and R&D services for a collaborative partner related to the global study activities. The following table summarizes the allocation of the transaction price of $ 15 million to the performance obligations (in millions): Allocation to performance obligations Distinct Amount License * $ 7 R&D services * 8 Total transaction price $ 15 We accounted for each performance obligation as follows: License - Casdatifan We determined that the license for casdatifan was distinct based on an evaluation of the delivery of the license, noting that the program was in the later stages of development and the ongoing R&D services do not significantly modify or customize the related intellectual property. We determined the standalone selling price of this license using a discounted cash flow method. We recognized as revenue the allocated transaction price of $ 7 million in the year ended December 31, 2025, within License and development services revenue in our Consolidated Statements of Operations. R&D Services - Casdatifan The standalone selling price of the R&D services obligation was determined using an expected cost-plus margin approach. We recognize the amounts allocated to these services as the performance obligation is satisfied, calculated as an estimated percentage of completion based on management's estimated total effort for the program. We determined that these services are with a collaborative partner and not a customer and in accordance with our policy recognize these amounts as R&D expense reimbursements. See Note 4, License and collaborations, for more information . Note 6. Income taxes Loss before income taxes included the following (in millions): Year Ended December 31, 2025 2024 2023 Domestic $ ( 353 ) $ ( 283 ) $ ( 301 ) Foreign — 1 - Loss before income taxes $ ( 353 ) $ ( 282 ) $ ( 301 ) The provision for income taxes included the following (in millions): Year Ended December 31, 2025 2024 2023 Current provision: Federal $ — $ — $ 4 State — 1 2 Total income tax expense $ — $ 1 $ 6 94 Table of Contents Cash paid for income taxes, net of refunds consisted of the following (in millions): Year Ended December 31, 2025 2024 2023 Federal $ — $ — $ 4 State Pennsylvania $ — $ — $ 1 Total state $ — $ — $ 1 Total cash paid for income taxes, net of refunds $ — $ — $ 5 The reconciliation between the federal statutory income tax and our effective tax was as follows (in millions and as a rate): Year Ended December 31, 2025 2024 2023 Federal statutory income taxes $ ( 74 ) 21.0 % $ ( 59 ) 21.0 % $ ( 63 ) 21.0 % State taxes, net of federal benefit (1) — 0.1 % — ( 0.1 ) % 2 ( 0.8 ) % Tax credits Domestic research and development credits ( 15 ) 4.2 % ( 12 ) 4.4 % ( 14 ) 4.6 % Nontaxable or nondeductible items Equity investment ( 12 ) 3.4 % ( 12 ) 4.1 % ( 1 ) 0.4 % Stock based compensation 4 ( 1.1 ) % 5 ( 1.9 ) % 6 ( 2.1 ) % Other items 5 ( 1.4 ) % 2 ( 0.5 ) % — — % Change in valuation allowance 92 ( 26.1 ) % 77 ( 27.2 ) % 76 ( 25.1 ) % Provision for income taxes $ — 0.1 % $ 1 ( 0.2 ) % $ 6 ( 2.0 ) % (1) State taxes in Pennsylvania and New York made up the majority (greater than 50%) of the tax effect in this category for the year ended December 31, 2023. Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating losses and tax credit carryforwards. 95 Table of Contents Significant components of our deferred tax assets and liabilities were as follows (in millions): Year Ended December 31, 2025 2024 Deferred tax assets: Federal and state net operating loss carryforwards $ 39 $ 5 Research and development credits carryforwards 59 42 Stock-based compensation 26 27 Depreciation and amortization 3 3 Deferred revenue 19 45 Lease liability 22 24 Capitalized research and development costs 250 178 Other 7 6 Total deferred tax assets 425 330 Deferred tax liabilities: Right-of-use assets ( 13 ) ( 14 ) Total deferred tax liabilities ( 13 ) ( 14 ) Less valuation allowance ( 412 ) ( 316 ) Net deferred tax assets (liabilities) $ — $ — The accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of net deferred tax assets. We considered factors such as our history of operating losses, the nature of our deferred tax assets, and the timing, likelihood and amount, if any, of future taxable income during the periods in which those temporary differences and carryforwards become deductible, including amounts that may arise under the collaboration agreements with Gilead and related program opt-ins. As a result of our evaluation of these factors, including the uncertainty that exists with respect to the option fees and milestone payments, we do not believe that it is more likely than not that the deferred tax assets will be realized. Accordingly, a full valuation allowance has been established and no deferred tax asset is shown in the accompanying Consolidated Balance Sheets. The valuation allowance increased by approximately $ 96 million and $ 83 million for the years ended December 31, 2025 and 2024, respectively. The U.S. enacted the Tax Cuts and Jobs Act in December 2017, which requires companies to capitalize all of their R&D costs for U.S. tax purposes, including software development costs, incurred in tax years beginning after December 31, 2021. Beginning in 2022, for tax purposes we began capitalizing and amortizing R&D costs over a five-year period for domestic research and a fifteen-year period for international research rather than expensing these costs immediately. The OBBBA was enacted on July 4, 2025. The OBBBA contains several changes to corporate taxation, including permanent repeal of the requirement to capitalize domestic research and experimental expenditures for federal income tax purposes for taxable years beginning after December 31, 2024. The OBBBA does not have a material impact to our consolidated financial statements. At December 31, 2025, we have federal NOLs of $ 170 million that have no expiration date and research tax credits of approximately $ 59 million that begin to expire in 2041. We also have state NOLs of approximately $ 49 million that begin to expire in 2035, and state research tax credits of approximately $ 25 million that have no expiration date, and foreign research tax credits of approximately $ 3 million that have no expiration date. Use of the U.S. federal and state NOLs and credit carryforwards may be subject to a substantial annual limitation due to the ownership change provisions of U.S. tax law, as defined in IRC Sections 382 and 383, and similar state provisions. The annual limitation may result in the expiration of NOLs and credits before use. We have determined that an ownership change, as defined under IRC Section 382, occurred in previous years. While we do not expect these ownership changes to result in the expiration of NOLs and credit carryforwards prior to utilization, we are subject to an annual limitation on the use of its tax attributes. The limitation on the use of NOLs and credit carryforwards could reduce our ability to use a portion of the tax attributes to offset future taxable income. We have not been audited by the Internal Revenue Service, any state or foreign tax authority. We are subject to taxation in the U.S. and in Australia. Due to NOLs and research credit carryforwards, all of our tax years, from 2018 to 2025, remain open to U.S. federal and California state tax examinations. In addition, our fiscal years from 2021 to 2025 are open to examination in Australia. 96 Table of Contents Uncertain Tax Positions We follow the provisions of FASB Accounting Standards Codification 740-10, Accounting for Uncertainty in Income Taxes , which prescribe a comprehensive model for the recognition, measurement, presentation and disclosure in financial statements of uncertain tax positions that have been taken or are expected to be taken on a tax return. No liability related to uncertain tax positions is recorded in the Consolidated Financial Statements. The reserve for unrecognized tax benefits was approximately $ 24 million and $ 19 million at December 31, 2025, and 2024, respectively. Due to the full valuation allowance at December 31, 2025 and 2024, current adjustments to the unrecognized tax benefit will have no material impact on our effective income tax rate; any adjustments made after the valuation allowance is released will have an impact on the tax rate. Interest and penalties related to unrecognized tax benefits are included in the provision for income taxes. There were no material interest or penalties accrued at December 31, 2025 or 2024. The following table summarizes the activity related to our unrecognized tax benefits (in millions): Year Ended December 31, 2025 2024 Beginning balance $ 19 $ 13 Additions for tax positions taken in prior year 1 1 Additions for tax positions taken in current year 5 5 Statute of limitations expiration ( 1 ) — Ending balance $ 24 $ 19 As of December 31, 2025, the total amount of gross unrecognized tax benefits was $ 24 million, none of which would, if recognized, have a material impact on our effective tax rate. We do not anticipate material changes to our uncertain tax positions through the next 12 months. Note 7. Net loss per share The computation of basic net loss per share is based on the weighted-average number of our common shares outstanding during the period. The computation of diluted net loss per share is based on the weighted-average number of our common shares and dilutive potential common shares, which primarily include shares that may be issued under our stock option, RSU, and Employee Stock Purchase Plans ("ESPP") (collectively, "dilutive securities") as determined under the treasury stock method. The following table sets forth the computation of basic and diluted net loss per share (in millions, except per share data): Year Ended December 31, 2025 2024 2023 Net loss (Numerator): Net loss $ ( 353 ) $ ( 283 ) $ ( 307 ) Weighted-average shares (Denominator): Weighted-average shares for basic and diluted EPS 107.4 90.1 74.0 Net loss per share Basic and diluted $ ( 3.29 ) $ ( 3.14 ) $ ( 4.15 ) 97 Table of Contents The following table summarizes potentially dilutive securities excluded from the computation of diluted net loss per share calculations because they would have been antidilutive (in millions): At December 31, 2025 2024 2023 Common stock options issued and outstanding 16.9 15.5 13.5 Restricted stock units issued 2.9 2.2 1.5 Employee Stock Purchase Plan shares 0.5 0.3 0.3 Total potential dilutive securities 20.3 18.0 15.3 We have also excluded the effect of Gilead’s right to purchase additional shares of our common stock, which expired in July 2025, from the calculation as these rights had no intrinsic value at December 31, 2024 or 2023. Note 8. Stock-based compensation Stock-based compensation expense The following table reflects the components of stock-based compensation expense recognized in our Consolidated Statements of Operations (in millions): Year Ended December 31, 2025 2024 2023 Research and development $ 31 $ 38 $ 35 General and administrative 29 38 38 Total stock-based compensation $ 60 $ 76 $ 73 As of December 31, 2025, unrecognized compensation costs related to non-vested stock option awards and RSUs totaled $ 43 million and $ 39 million, respectively, and is expected to be recognized over a weighted average period of 2.4 years and 2.5 years, respectively. Stock Plans We grant awards to employees and nonemployees under a series of equity incentive plans (collectively, the "Stock Plans"). Awards under our Stock Plans are made with newly issued shares reserved for this purpose. 2020 Stock Plan In 2020, we adopted the 2020 Inducement Plan (the "2020 Stock Plan") for the award of stock options and other equity-based awards as an inducement to eligible individuals to enter into employment with us. As of December 31, 2025, there were 2.5 million shares available for grant under this plan. 2015 Stock Plan and 2018 Equity Incentive Plan In 2015, we adopted the 2015 Stock Plan, which we replaced in 2018 with the 2018 Equity Incentive Plan (the "2018 Equity Incentive Plan"). Any outstanding awards under the 2015 Stock Plan that subsequently expire, lapse unexercised or are forfeited to us are added to the shares reserved for issuance under the 2018 Equity Incentive Plan. The number of shares reserved for issuance will automatically increase on January 1 of each year by a number equal to or the smaller of (i) 3.6 million shares, (ii) 4 % of the shares of common stock outstanding on the last business day of the prior fiscal year, or (iii) an amount as determined by the board of directors. As of December 31, 2025, there were 3.6 million shares available for grant under this plan. On January 1, 2026, the number of shares available for issuance under the 2018 Equity Incentive Plan automatically increased by 3.6 million shares. 98 Table of Contents Employee Stock Purchase Plan In 2018, we adopted the 2018 Employee Stock Purchase Plan (the "2018 ESPP"). The 2018 ESPP provides eligible employees with the opportunity to purchase shares of common stock through payroll deductions at a price equal to 85 % of the lower of the fair market value per share on the first trading day of the applicable 24-month offering period or on the applicable purchase date. Employees are limited to a maximum purchase limit of 3,000 shares on each purchase date or $ 25,000 of shares purchased in a calendar year based on the stock price on the first day of the offering period. The 2018 ESPP is intended to constitute an "employee stock purchase plan" under IRC Section 423(b). The 2018 ESPP may be terminated by our board of directors at any time. The number of shares reserved for issuance will automatically increase on January 1 of each year by a number equal to or the smaller of (i) 1.1 million shares, (ii) 1 % of the shares of common stock outstanding on the last business day of the prior fiscal year, or (iii) an amount as determined by the board of directors. As of December 31, 2025, there were 3.0 million shares available for purchase under this plan. On January 1, 2026, the number of shares available for purchase under this Plan automatically increased by 1.1 million shares. Restricted Stock Units We grant RSUs to our employees and directors under the 2018 Equity Incentive Plan. The RSUs vest annually or quarterly over four years for employees and annually for directors. The following table summarizes information regarding our RSUs for the year ended December 31, 2025: Total RSUs (in millions) Weighted Average Grant Date Fair Value Per Share Nonvested at December 31, 2024 2.2 $ 18.07 RSUs granted 2.5 $ 13.00 RSUs vested ( 1.3 ) $ 17.11 RSUs forfeited or canceled ( 0.5 ) $ 15.94 Nonvested at December 31, 2025 2.9 $ 14.58 The total fair value of shares at vesting date during the years ended December 31, 2025, 2024 and 2023 was $ 25 million, $ 19 million and $ 13 million, respectively. Stock Options The exercise price of stock options is set at the closing price of our common stock on the grant date, and the related number of shares granted is fixed at that point in time. Awards expire 10 years from the date of grant. The following table summarizes information regarding our stock options for the year ended December 31, 2025: Shares Subject to Outstanding Options (in millions) Weighted Average Exercise Price Per Share Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in millions) Outstanding at December 31, 2024 15.5 $ 20.31 Options granted 3.4 $ 12.75 Options exercised ( 0.4 ) $ 11.60 Options forfeited or canceled ( 1.6 ) $ 22.27 Outstanding at December 31, 2025 16.9 $ 18.79 6.27 $ 118 Options vested and expected to vest as of December 31, 2025 16.9 $ 18.79 6.27 $ 118 Options exercisable as of December 31, 2025 12.4 $ 20.24 5.43 $ 77 During the years ended December 31, 2025, 2024 and 2023, the intrinsic value of shares exercised was $ 4 million, $ 1 million, and $ 3 million, respectively. 99 Table of Contents Valuation Assumptions for Stock Options and Employee Stock Purchase Plan We utilize the Black-Scholes pricing model to estimate the fair value of stock options and shares issued under our 2018 ESPP. The following table summarizes the key assumptions used to calculate the fair value and the resulting weighted-average grant date fair value of stock options granted: Year Ended December 31, Stock Options 2025 2024 2023 Weighted average closing price of our common stock on grant date $ 12.75 $ 15.61 $ 21.21 Risk-free interest rate 3.8 % - 4.0 % 3.6 % - 4.4 % 3.6 % - 4.6 % Expected term (in years) 6.02 6.02 6.02 Volatility 75.8 % - 77.1 % 77.2 % - 77.4 % 77.7 % - 79.1 % Dividend yield — % — % — % Weighted average fair value of stock options granted $ 8.84 $ 10.91 $ 14.81 Year Ended December 31, ESPP 2025 2024 2023 Risk-free interest rate 3.5 % - 4.4 % 4.1 % - 5.4 % 4.3 % - 5.4 % Expected term (in years) 0.5 - 2 0.5 - 2 0.5 - 2 Volatility 57.6 % - 65.1 % 59.0 % - 70.0 % 61.1 % - 86.9 % Dividend yield — % — % — % Weighted average closing price of our common stock on grant date — Our awards are valued based on the closing price of our common stock on the grant date. Risk-free interest rate — The risk-free rate assumption is based on the U.S. treasury yield in effect at the time of grant for instruments with maturities similar to the expected term of our stock options. Expected term — We use the “simplified method” for estimating the expected term of options, whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the option (generally 10 years). Volatility — Our estimate of expected volatility is based on the historical volatility of our common stock price. Dividend yield — We have not issued any dividends in our history and do not expect to issue dividends over the life of the options. Note 9. Defined contribution plan We have a 401(k) defined contribution plan for all our employees which allows tax-deferred salary deductions. The Company matches, at its discretion, employee contributions. For the year ended December 31, 2025, we made contributions of $ 4 million to the plan. For each of the years ended December 31, 2024 and 2023, we made contributions of $ 3 million to the plan. 100 Table of Contents Note 10. Cash, cash equivalents and marketable securities The following table summarizes the amortized cost, gross unrealized gains and losses and the fair value of our cash, cash equivalents and marketable securities, all of which are considered available for sale, by type of securities (in millions): Types of securities as of December 31, 2025 Amortized Cost Unrealized Gain Unrealized Loss Fair Value Money market funds $ 155 $ — $ — $ 155 U.S. treasury securities 359 — — 359 Corporate securities and commercial paper 487 — — 487 Certificate of deposit 9 — — 9 Total cash, cash equivalents and marketable securities $ 1,010 $ — $ — $ 1,010 Types of securities as of December 31, 2024 Amortized Cost Unrealized Gain Unrealized Loss Fair Value Money market funds $ 120 $ — $ — $ 120 U.S. treasury securities 251 — — 251 Corporate securities and commercial paper 592 — — 592 U.S. government agency securities 5 — — 5 Certificate of deposit 24 — — 24 Total cash, cash equivalents and marketable securities $ 992 $ — $ — $ 992 The following table summarizes the fair values of our cash, cash equivalents and marketable securities by location in the Consolidated Balance Sheets and contractual maturity (in millions): Contractual Maturity As of December 31, Location in Consolidated Balance Sheets 2025 2024 Cash and cash equivalents — $ 222 $ 150 Marketable securities Within one year 759 828 Long-term marketable securities Between one and three years 29 14 Total cash, cash equivalents and marketable securities $ 1,010 $ 992 Realized gains or losses recognized on the sale of available-for-sale marketable securities were not material for the years ended December 31, 2025, 2024 and 2023. Realized gains and losses are included in Interest and other income, net, in the Consolidated Statements of Operations. The cost of a security sold is determined using the specific-identification method. We limit the credit risk associated with our investments by placing them with banks and institutions we believe are highly credit worthy and investing in highly rated investments. We held a total of 31 and 54 positions in securities which were in unrealized loss positions as of December 31, 2025 and 2024, respectively. We do not intend to sell our securities with unrealized loss positions and have concluded we will not be required to sell the securities before recovery of the amortized cost for the investment at maturity. No credit related losses have been recognized for any of the periods presented. 101 Table of Contents The following table provides a reconciliation of cash, cash equivalents, and restricted cash within the Consolidated Balance Sheets to the total shown in the Consolidated Statements of Cash Flows (in millions): As of December 31, 2025 2024 Cash and cash equivalents $ 222 $ 150 Restricted cash (included in Other noncurrent assets) 3 3 Total cash, cash equivalents and restricted cash $ 225 $ 153 Restricted cash at December 31, 2025 and 2024 represents cash balances held as security in connection with our facility lease agreements. Note 11. Property and equipment Property and equipment, net was all located in the U.S. and consisted of the following (in millions): Useful Life (in years) As of December 31, 2025 2024 Leasehold improvements 6 - 10 $ 57 $ 56 Scientific equipment 5 28 27 Furniture and equipment 3 - 5 4 4 Construction in progress — 1 1 Property and equipment, gross 90 88 Less: Accumulated depreciation and amortization ( 50 ) ( 41 ) Property and equipment, net $ 40 $ 47 Note 12. Consolidated balance sheet components Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consisted of the following (in millions): As of December 31, 2025 2024 Prepaid expenses and other assets $ 10 $ 13 Accrued interest receivable 5 5 Total prepaid expenses and other current assets $ 15 $ 18 Other Current Liabilities Other current liabilities consisted of the following (in millions): As of December 31, 2025 2024 Accrued research and development $ 89 $ 65 Accrued personnel expenses 33 31 Income taxes payable 1 1 Current portion of lease liabilities 13 12 Other 18 14 Total other current liabilities $ 154 $ 123 102 Table of Contents Note 13. Long-term deb t The following table summarizes our borrowings (in millions): As of December 31, 2025 2024 Long-term debt, non-current (Contractual maturity 2030) $ 100 $ 50 Unamortized discounts, issuance costs, charges, and payment-in-kind interest, net ( 1 ) ( 2 ) Total long-term debt $ 99 $ 48 In 2024, we and Hercules entered into the Hercules Agreement, under which Hercules agreed to lend us up to $ 250 million in term loans in various tranches subject to minimum draw requirements for each tranche. Under this agreement, $ 50 million was drawn at closing and $ 50 million was drawn in the second quarter 2025. On December 18, 2025, (the "Hercules Amendment Date"), we and Hercules entered into the Hercules Amendment which: (i) extended the maturity date by 12 months, to September 1, 2030, (ii) increased the end of term charge to 9.00 %, (iii) modified the period during which each of the remaining tranches were available to borrow, and (iv) modified the covenant requirements associated with the debt. The Hercules Amendment was evaluated in accordance with the applicable accounting standards and determined to be a debt modification, resulting in an adjustment to the effective interest rate on a prospective basis. Under the Hercules Agreement, as amended, an additional $ 50 million is committed and fully available at our sole option of which $ 25 million is available through March 15, 2026 and $ 25 million is available through September 15, 2026. The remaining $ 100 million is available as follows: $ 50 million following certain BLA-enabling clinical milestones related to our ongoing Phase 3 studies and drawable through the earlier of March 15, 2028 or 90 days following the achievement of the milestone, and $ 50 million following the FDA's approval of a BLA or NDA application for an Arcus investigational product and drawable through the earlier of December 15, 2028 or 90 days following the achievement of the milestone. Undrawn portions of any expired tranches will remain available through the loan's maturity date, subject to lender approval and the achievement of any milestones associated with the original tranches. The Hercules Agreement, as amended, has an interest-only period through September 1, 2028, after which the principal amount will be repaid in 25 monthly installments through the maturity date of September 1, 2030. The term loans bear cash interest at a rate equal to the greater of (i) 10.45 % or (ii) the prime rate plus 1.95 %. The agreement allows us to defer up to 2.0 % of the cash interest as payment-in-kind interest which is added to the principal at a 1.10 multiple and effective July 1, 2025, we have elected the maximum payment-in-kind deferral. We may prepay all or any portion of the outstanding term loans at any time, subject to a prepayment fee of: (i) 3.00 % of the principal amount prepaid if the prepayment occurs prior to the first anniversary of the Hercules Amendment Date; (ii) 2.00 % of the principal amount prepaid if the prepayment occurs on or after the first anniversary and prior to the second anniversary of the Hercules Amendment Date; or (iii) 1.00 % of the principal amount prepaid thereafter. The agreement also has an end of term charge of 9.00 % of the total amount borrowed. The Hercules Agreement, as amended, contains customary affirmative and negative covenants, including covenants that limit or restrict our ability to incur liens, incur indebtedness, make investments, pay dividends, merge or consolidate, dispose of assets, and enter into transactions with affiliates, subject to customary exceptions. We are also required to maintain a minimum cash balance of 50 % of the funded amount if our market capitalization were to fall below a certain threshold and, in the event that the outstanding principal balance exceeds $ 200 million, we will be required to meet certain net product revenue thresholds. We do not have covenant requirements associated with this agreement until July 1, 2027. The Hercules Agreement, as amended, is secured by a first priority security interest in substantially all of our assets, excluding certain intellectual property. The Hercules Agreement also contains customary events of default terms, including payment defaults, breaches of covenants, bankruptcy and insolvency events, cross-defaults to other indebtedness, material AEs, and the occurrence of a change of control. Upon the occurrence of an event of default, Hercules may declare all outstanding obligations under the Hercules Agreement to be immediately due and payable and exercise any or all of its rights and remedies, including foreclosure on the collateral securing the term loans. 103 Table of Contents The aggregate future minimum payments due under the Hercules Agreement, including principal payments, payment-in-kind interest incurred to date, and the end of term charge, are as follows (in millions): Maturity Date Amount 2028 $ 15 2029 46 2030 49 Total payments $ 110 During the years ended December 31, 2025, and 2024, we recognized $ 9 million and $ 2 million of interest expense. The effective interest rate of the debt, including amortization of the debt discount and issuance costs and payment-in-kind interest, was 12.85 % commencing with the modification which occurred in the fourth quarter 2025, compared to 13.08 % commencing with the second quarter 2025 and 13.39 % for all periods prior to the second quarter 2025. Note 14. Leases We lease our corporate headquarters, which includes approximately 151,000 square feet of executive offices, R&D, and business operations, in Hayward, California. We also lease approximately 109,000 square feet of office space in Brisbane, California. Both leases: are non-cancelable; extend through 2031; have two options, at our sole discretion, to extend each lease term for a period of eight years ; and require monthly lease payments that are subject to annual increases throughout the lease term. Subleases We subleased approximately 31,000 square feet of our Brisbane office to a third-party which commenced in October 2023. This sublease included a tenant improvement allowance to be paid by us of $ 9 million which was fully paid. This sublease is non-cancelable and extends through 2028, with the sublessee having options to extend the lease term. We have also subleased approximately 19,000 square feet of our Brisbane office to a third-party which commenced in December 2024. This sublease is non-cancelable and extends through 2031. We will receive payments from our subleases of approximately $ 3 million per year through 2028, which is then reduced to approximately $ 1 million per year through 2031. Income from our subleases is recognized on a straight-line basis as reduction of rent expense within G&A. For the years ended December 31, 2025 and 2024, we recorded gross sublease income totaling $ 4 million and $ 3 million, respectively. Operating leases At December 31, 2025 and 2024, our lease portfolio had a weighted average remaining term of 6 years and 7 years, respectively, and a weighted average discount rate of 5.2 % for both periods. The following table summarizes information related to our leases, all of which are classified as operating (in millions): As of December 31, Location in Consolidated Balance Sheets 2025 2024 Assets: Other noncurrent assets - right-of-use assets $ 58 $ 65 Liabilities: Other current liabilities - net current operating lease liabilities $ 13 $ 12 Other noncurrent liabilities - noncurrent operating lease liabilities $ 86 $ 99 In 2024, we evaluated our plans for a portion of our office space that we expected to sublease, and identified indicators of impairment to certain right-of-use assets associated with the leased space where the asset value was determined to be non-recoverable based upon a discounted cash flow analysis, resulting in an impairment charge of $ 20 million for the year ended December 31, 2024. 104 Table of Contents For each of the years ended December 31, 2025 and 2024, we incurred lease expense of $ 17 million. For the year ended December 31, 2023, we incurred lease expense of $ 18 million. Lease costs include rent expense, which consists primarily of our proportionate share of operating expenses, property taxes, and insurance which we have elected to include in lease costs. The following table summarizes our cash and non-cash information related to our operating leases (in millions): Year Ended December 31, 2025 2024 2023 Cash paid for amounts included in measurement of lease liabilities $ 17 $ 17 $ 15 Cash received from tenant improvement allowances $ — $ — $ 9 Recognition of tenant improvement allowance receivable included in Other current liabilities $ — $ — $ 4 The following table summarizes our future minimum lease payments at December 31, 2025 (in millions): Year Ending December 31, Operating Leases 2026 $ 18 2027 18 2028 19 2029 19 2030 20 Thereafter 22 Total undiscounted future minimum lease payments $ 116 Less: Imputed interest ( 17 ) Total present value of lease liabilities $ 99 As of December 31, 2025, we have provided deposits for letters of credit totaling $ 3 million to secure our obligations under our leases, which are included in Other noncurrent assets on the Consolidated Balance Sheets. Note 15. Stockholders’ equity Common Stock We are authorized to issue up to 400.0 million shares of common stock. Gilead Stock Purchase Agreement In 2023, under the Second Stock Purchase Agreement Amendment, Gilead purchased 1.0 million shares of our common stock at the closing day purchase price of $ 19.26 per share for total gross proceeds of $ 20 million. In 2024, under the Third Stock Purchase Agreement Amendment, Gilead purchased 15.2 million shares of our common stock at a 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, see Note 5, Revenues, for more information. Net proceeds from Gilead's equity investment were $ 228 million after allocating the premium and deducting direct offering expenses of $ 5 million. Underwritten Offerings In the first quarter 2025, we sold 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. As part of this underwritten offering, Gilead purchased 1.4 million shares of our common stock for total gross proceeds of $ 15 million. In the fourth quarter 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 expense. 105 Table of Contents At-the-Market Facility 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. In 2023, we issued and sold 0.2 million shares of our common stock for total gross proceeds of $ 5 million. In 2025, we issued and sold 1.4 million shares of our common stock for total gross proceeds of $ 18 million, before deducting underwriting discounts and offering expenses. Preferred Stock We have authorized 10.0 million shares of preferred stock, par value $ 0.0001 . There was no preferred stock outstanding as of December 31, 2025 and 2024. Note 16. Fair value measurements We determine the fair value of financial and non-financial assets and liabilities using the fair value hierarchy, which establishes three levels of inputs that may be used to measure fair value, as follows: • Level 1 inputs include unadjusted quoted prices in active markets for identical assets or liabilities; • Level 2 inputs include observable inputs other than Level 1 inputs, such as quoted prices for similar assets or liabilities; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability; and • Level 3 inputs include unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the underlying asset or liability. Our Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques and significant management judgment or estimation. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following tables summarize the types of assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy (in millions): Fair value measurement as of December 31, 2025 Level 1 Level 2 Level 3 Total Assets Money market funds $ 155 $ — $ — $ 155 U.S. treasury securities — 359 — 359 Corporate securities and commercial paper — 487 — 487 Certificate of deposit — 9 — 9 Total assets measured at fair value $ 155 $ 855 $ — $ 1,010 Fair value measurement as of December 31, 2024 Level 1 Level 2 Level 3 Total Assets Money market funds $ 120 $ — $ — $ 120 U.S. treasury securities — 251 — 251 Corporate securities and commercial paper — 592 — 592 U.S. government agency obligations — 5 — 5 Certificate of deposit — 24 — 24 Total assets measured at fair value $ 120 $ 872 $ — $ 992 Liabilities Liability for sale of future royalties $ — $ — $ 21 $ 21 Total liabilities measured at fair value $ — $ — $ 21 $ 21 106 Table of Contents Liability for sale of future royalties In 2021, we entered into an agreement with BVF, under which BVF funded the discovery and development of compounds for the treatment of inflammatory diseases (the "BVF Program") for $ 15 million in non-refundable payments. In return, we were obligated to: perform R&D activities in the BVF Program; make contingent payments upon the achievement of certain clinical and regulatory milestones; and pay mid- to high-single digit royalties on any net product sales generated by this program. We account for the BVF agreement as a liability primarily because at the time the agreement was entered into we had significant continuing involvement in generating the cash flows due to BVF. In the first quarter 2025, new preclinical information led to the decision to discontinue the BVF Program which decreased the likelihood of achieving regulatory and commercial success. These changes in assumptions are accounted for prospectively, resulting in the amortization of the net carrying amount of the liability to the initial carrying amount of $ 15 million using an imputed effective interest rate of negative 6.1 %, on the unamortized portion of the liability, which will be applied until there is a change in future cash flow expectations or the debt is legally extinguished. The imputed effective interest for periods shown prior to first quarter 2025 was 10.1 %. Changes in this liability related to interest accretion are recognized in Non-operating income (expense) in the Consolidated Statements of Operations. The liability for sale of future royalties is reflected at the unamortized carrying amount and thus is no longer considered to be at fair value commencing the first quarter 2025, with the estimated fair value being immaterial. The liability is reported in Other noncurrent liabilities in the Consolidated Balance Sheets and changes were as follows (in millions): Year Ended December 31 2025 2024 Beginning balance $ 21 $ 19 Interest accretion — 2 Ending balance $ 21 $ 21 Long-term debt As of December 31, 2025 and 2024, the estimated fair value of our long-term debt approximated the carrying amount. The fair value of the long-term debt was estimated for disclosure purposes only and was determined based on other inputs that are observable, and thus categorized as Level 2 in the fair value hierarchy. Note 17. Commitments Long-term debt We are obligated to make principal loan payments and an end of term charge under the loan and security agreement with Hercules. See Note 13, Long-term debt, for more information. Standby letters of credit We have standby letters of credit up to an aggregate of $ 3 million provided as collateral for our leases. The letters of credit are secured by $ 3 million in deposits classified as restricted cash and included in Other noncurrent assets on the Consolidated Balance Sheet. At December 31, 2025 the standby letters of credit were not drawn down. Purchase commitments We have contractual arrangements with CROs and suppliers. These contracts are generally cancellable on 30 days’ notice and the obligations under these contracts arise as the services are performed. Indemnification As permitted under Delaware law and in accordance with our bylaws, we are required to indemnify our officers and directors for certain events or occurrences while the officer or director is or was serving in such capacity. We are also party to indemnification agreements with our directors and officers. We believe the fair value of the indemnification rights and agreements is minimal and accordingly, we have not recorded any liabilities as of December 31, 2025 and 2024. 107 Table of Contents Note 18. Business segment We operate and manage our business as one reportable and operating segment, which is the business of developing and commercializing highly differentiated therapies that have a meaningful impact on patients. Our chief operating decision maker ("CODM") is the Chief Executive Officer, who decides how to allocate resources and assesses segment performance based on the net loss reported in the Consolidated Statements of Operations. The table below is a summary of the segment net loss, including significant segment expenses (in millions): Year Ended December 31, 2025 Year Ended December 31, 2024 Year Ended December 31, 2023 Total revenues $ 247 $ 258 $ 117 Adjusted for expense (income): Late-stage development programs (1) 274 252 168 Early-stage development and preclinical programs (2) 141 132 128 Compensation and personnel costs 245 250 223 Depreciation and amortization 10 10 8 Impairment of long-lived assets — 20 — Interest income, net ( 33 ) ( 48 ) ( 39 ) Income tax expense — 1 6 Other segment items (3) 90 89 92 Partnership reimbursements ( 127 ) ( 165 ) ( 162 ) Segment net loss and Consolidated net loss $ ( 353 ) $ ( 283 ) $ ( 307 ) (1) 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 the related program enters into one or more Phase 3 clinical trials. (2) 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. (3) Other segment items includes non-allocated program costs and other G&A costs. Total segment assets at December 31, 2025 and 2024 were $ 1.1 billion and $ 1.2 billion, respectively. 108 Table of Contents Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None.