Merck setback has positives and negatives for Arcus Biosciences, says BofA

BofA notes Merck (MRK) and Eisai (ESAIY) announced that the Phase 3 LITESPARK-012 trial evaluating combination regimens for the first-line treatment of patients with advanced clear cell renal cell carcinoma did not meet the dual primary endpoints of progression-free survival and overall survival for the first-line treatment of patients with RCC compared to Keytruda plus Lenvima. The outcome is “a major surprise” given encouraging phase 2 data with the triplet and the news is “mixed” for Arcus Biosciences (RCUS) with read-throughs to its HIF2a drug casdatifan “difficult to interpret,” the analyst tells investors. On one hand, the firm wouldn’t be surprised if Merck’s setback is viewed as providing an opening for casdatifan, but the results also raise broader questions around the role of the mechanism of action in treatment, added the analyst, who maintains a Neutral rating and $25 price target on Arcus shares.