Our 12-month price target for RCUS is $46 derived using a discounted cash flow (DCF) analysis. We use a weighted average cost of capital (WACC) of 12% and a 2% terminal growth rate post 2035. The relevant patents for Arcus’s assets are expected to expire between 2035 and 2037.

We rate RCUS High Risk given the early stage and limited amount of clinical data on its products. We note the following risks to our target price being achieved: 1) Domvanalimab fails in Ph3 or is not competitive in efficacy vs. other TIGIT molecules or other CPI, 2) Etrumadenant fails or is not competitive in efficacy vs. other adenosine receptor antagonists, 3) Quemliclustat fails or is not competitive vs. other CD73 inhibitors, 4) Casdatifan fails in Ph3 or is not competitive in efficacy vs. the TKI landscape, and 5) Arcus’s products have lower-than-expected market uptake.