Arcus Biosciences (RCUS) shares have a favorable setup following Merck's (MRK) belzutifan phase 3 failure in Litespark-012, with Wedbush Securities saying the readout does not represent negative readthrough for Arcus' casdatifan and highlights a differentiated profile in clear cell renal cell carcinoma, or RCC.

The brokerage said in a Tuesday note that the Merck data do not impact Arcus' TKI-free frontline strategy and that casdatifan remains supported by a more optimal development approach and stronger comparative efficacy versus belzutifan.

Wedbush also said recent weakness following the discontinuation of Arcus' domvanalimab program has created an attractive entry point ahead of upcoming clinical data readouts, reinforcing a favorable setup for the stock.

The firm reiterated its outperform rating on the stock and price target of $41 per share.

Price: 23.31, Change: +0.57, Percent Change: +2.51