Last Update 24 Jan 26

Fair value Decreased 0.67%

RCUS: Future Upside Will Be Driven By 12 Month Efficacy Advantage

Analysts have modestly trimmed their fair value estimate for Arcus Biosciences to US$33.00 per share. This reflects updated assumptions on slower revenue growth, a slightly higher discount rate, and stronger projected margins and P/E multiples supported by recent casdatifan data and mixed, but generally constructive, Street research.

Analyst Commentary

Street research on Arcus Biosciences is split, with some firms leaning into the casdatifan opportunity and others highlighting timing and risk around the broader pipeline. Together, these views frame a debate around how quickly the story can translate into revenues and how much of the future pipeline is already reflected in the share price.

Bullish Takeaways

Bullish analysts point to casdatifan as a key value driver, citing its positioning as a potent and selective HIF 2alpha inhibitor in advanced clear cell renal cell carcinoma with an estimated total addressable market of about 17,400 patients in the US and EU and around US$1.7b in risk adjusted peak sales.
Recent ARC 20 Phase 1 results in second line settings, with an overall response ratio of 31% for monotherapy and 46% for the combination regimen, are seen as supportive of the fair value case and a reason for higher price targets.
Updated third quarter data showing modified progression free survival of 12.2 months at a median follow up of 15.2 months and an objective response rate of 31% in heavily pretreated clear cell renal cell carcinoma patients, along with cabo combination data presented at ASCO 2025, are viewed as differentiating casdatifan versus belzutifan and potentially supporting premium P/E multiples.
Some bullish analysts also highlight five emerging inflammatory and high risk oncology programs, including NSCLC and PDAC, as potential upside that is not fully incorporated into current valuations.

Bearish Takeaways

Bearish analysts see a more balanced risk and reward at current share levels, arguing that recent gains and higher targets already price in a meaningful portion of the casdatifan opportunity.
There is concern that investor focus remains heavily concentrated on casdatifan, which raises execution risk if future clinical updates do not match current expectations.
Some cautious views stem from the cadence of news flow, with expectations for only incremental casdatifan updates in 2026, which could limit near term catalysts for share re rating.
The five additional oncology and inflammatory programs are sometimes treated as longer dated or higher risk, so not all analysts are willing to ascribe full credit for them in current fair value estimates.

What's in the News

Arcus outlined its 2026 priorities for casdatifan and its inflammation and immunology portfolio, including at least three casdatifan data readouts across late line and early line clear cell renal cell carcinoma settings and progress on small molecule I&I programs such as MRGPRX2 and TNF (Key Developments).
The company and partner Gilead discontinued the Phase 3 STAR-221 study in first line gastric and esophageal cancers after an interim analysis showed the domvanalimab based regimen did not improve overall survival versus nivolumab plus chemotherapy, with resources shifting toward casdatifan and I&I programs (Key Developments).
Arcus completed a US$250.025m follow on equity offering of 13,700,000 common shares priced at US$18.25, with multiple banks added as co lead underwriters on the deal (Key Developments).
Several lock up agreements on common stock, restricted stock units and stock options are scheduled to end on 30 December 2025, covering a 61 day period following a prospectus supplement dated 30 October 2025 (Key Developments).
For full year 2025, Arcus issued guidance for GAAP revenue in the range of US$225m to US$235m (Key Developments).

Valuation Changes

Fair Value Estimate was trimmed slightly from US$33.22 to US$33.00 per share, reflecting updated modeling assumptions.
The Discount Rate moved modestly higher from 7.09% to 7.14%, indicating a slightly higher required return in the updated analysis.
Revenue Growth was reset from 13.63% to 0.93%, pointing to a much more conservative outlook on future top line expansion in the model.
Net Profit Margin was raised from 16.03% to 16.96%, reflecting expectations for somewhat stronger long term profitability.
Future P/E increased from 82.4x to 110.6x, implying a higher multiple being used on projected earnings within the fair value framework.

Arcus Biosciences is focusing on casdatifan's late-stage development, promising significant differentiation and competitive advantage in the RCC market.
Strong financial partnerships and a long cash runway ensure sustained R&D investment and potential earnings growth through strategic planning.
Regulatory uncertainties, adverse event risks, competition, and strategic shifts may challenge Arcus Biosciences' financial outlook and market positioning.

Catalysts

About Arcus Biosciences

A clinical-stage biopharmaceutical company, develops and commercializes cancer therapies in the United States.What are the underlying business or industry changes driving this perspective?

Arcus Biosciences is prioritizing the launch of its late-stage development program for the HIF-2 alpha inhibitor, casdatifan, which has shown significant efficacy differentiation relative to existing market competitors. This could enhance future revenue through competitive advantage in the RCC market.
The company plans to present further data throughout 2025 from ongoing studies, which are expected to demonstrate favorable outcomes such as improved overall response rate (ORR) and progression-free survival (PFS). These outcomes could significantly impact future revenue growth as the positive data could drive market share gains.
Arcus Biosciences is advancing several Phase 3 trials, including the PEAK-1 study for casdatifan in combination with cabozantinib, targeting a substantial patient population that represents a multi-billion dollar market opportunity. Successful trials would bolster projected revenue streams.
The strategy to target first-line gastric cancer with the STAR-221 study, and lung cancer with STAR-121 and PACIFIC-8 trials, addresses large market opportunities with potential first-mover advantages. Positive results could lead to increased earnings through product differentiation and expanded market access.
Arcus has secured strong financial partnerships and maintains a cash runway supported into mid-2027, enabling sustained R&D investment and operational activities. This financial stability supports potential earnings growth through long-term strategic planning and execution.

Arcus Biosciences Earnings and Revenue Growth

Arcus Biosciences Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Arcus Biosciences's revenue will grow by 7.7% annually over the next 3 years.
Analysts are not forecasting that Arcus Biosciences will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Arcus Biosciences's profit margin will increase from -113.7% to the average US Biotechs industry of 16.1% in 3 years.
If Arcus Biosciences's profit margin were to converge on the industry average, you could expect earnings to reach $52.5 million (and earnings per share of $0.4) by about September 2028, up from $-298.0 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 85.5x on those 2028 earnings, up from -4.2x today. This future PE is greater than the current PE for the US Biotechs industry at 15.5x.
Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 6.81%, as per the Simply Wall St company report.

Arcus Biosciences Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

There is ongoing uncertainty and risks surrounding the regulatory approval process for new therapies, such as dom-zim and casdatifan, which could delay potential revenue streams and impact financial projections in the coming years.
Higher rates of immune-related adverse events reported for Fc-enabled TIGIT antibodies might limit market acceptance and patient uptake for similar treatments, potentially affecting earnings.
Competition from other pharmaceutical companies, particularly Merck's advancements with belzutifan combinations, could pressure Arcus's market share and impact revenue growth.
The reliance on cash runway projections assumes consistent funding scenarios and clinical milestones that may not materialize as expected, leading to financial strain and impacting net margins.
The strategic decision to terminate the ARC-10 study and focus resources on STAR-121 may pose execution risks if the new focus areas don't achieve clinical success, thereby affecting future revenue streams.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $28.364 for Arcus Biosciences based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $47.0, and the most bearish reporting a price target of just $12.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $327.1 million, earnings will come to $52.5 million, and it would be trading on a PE ratio of 85.5x, assuming you use a discount rate of 6.8%.
Given the current share price of $11.64, the analyst price target of $28.36 is 59.0% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Analyst Sentiment Improves on Arcus Biosciences as Price Targets Rise with Strong Trial Data