Arcus Biosciences Plummets 9.87%: What's Fueling the Selloff?

Summary
• Morgan Stanley downgrades RCUS to Equal Weight, slashing price target to $20.00
• Insider sales trigger pre-market gap down to $22.14, now trading at $20.91
• STAR-221 trial discontinuation removes upside optionality for domvanalimab/zimberelimab

Arcus Biosciences (RCUS) is under siege as a perfect storm of analyst skepticism, insider selling, and clinical setbacks drives a 9.87% intraday plunge. The stock trades at $20.91, down from a $22.50 intraday high, with BlackRock’s 10.4% stake adding institutional gravity to the selloff. With the biotech sector reeling and Amgen (AMGN) down 3.77%, investors are scrambling to parse whether this is a buying opportunity or a warning shot.

Morgan Stanley’s Downgrade and Clinical Setbacks Spark Panic
The selloff was catalyzed by Morgan Stanley’s downgrade from Overweight to Equal Weight, accompanied by a $20.00 price target—a 14% downside from the previous close. Analyst Terence Flynn cited a 'balanced risk-reward' after Arcus’ 60% outperformance in 2025 versus the Nasdaq Biotechnology Index. Compounding this, the discontinuation of the STAR-221 trial for gastric cancer—a key value driver—removed upside potential for domvanalimab and zimberelimab. Insider sales by President Juan Jaen and CFO Robert Goeltz further eroded confidence, with Jaen offloading 3.34% of his holdings and Goeltz 8.80%. The stock’s -7.73 P/E ratio and -6.17 EPS underscore its unprofitable reality, amplifying volatility.

Options Playbook: Capitalizing on Volatility and Technical Breakdowns
• RSI: 56.98 (neutral), MACD: 0.066 (bullish), Bollinger Bands: $20.68 (lower band) vs. $20.88 (intraday low)
• 200-day MA: $13.21 (far below current price), 52W range: $6.50–$26.40

With RSI hovering near neutrality and MACD hinting at short-term bullish momentum, the stock is trapped between a collapsing lower Bollinger Band and a 200-day MA that’s 37% below current levels. The options chain reveals two high-conviction plays: RCUS20260116P20 (put option) and RCUS20260116C22.5 (call option).

RCUS20260116P20 (strike $20, expiration 1/16/2026):
• IV: 55.87% (moderate), delta: -0.29 (moderate sensitivity), gamma: 0.187 (high sensitivity to price swings)
• Theta: -0.005 (slow time decay), turnover: 215 (liquidity)
• Leverage ratio: 59.69% (high reward potential)
• Payoff at 5% downside (ST = $20.00): $0.00 (strike matched)
• Why it stands out: High gamma and leverage make it ideal for a sharp rebound from support at $20.00.

RCUS20260116C22.5 (strike $22.50, expiration 1/16/2026):
• IV: 95.20% (elevated), delta: 0.339 (moderate), gamma: 0.117 (responsive to price swings)
• Theta: -0.093 (moderate decay), turnover: 430 (liquidity)
• Leverage ratio: 32.14% (balanced risk/reward)
• Payoff at 5% downside (ST = $20.00): $2.50 (strike - ST)
• Why it stands out: Elevated IV and moderate delta position it to capitalize on a rebound above $22.50, a key psychological level.

Action: Aggressive bulls may consider RCUS20260116C22.5 into a bounce above $22.50, while RCUS20260116P20 offers downside protection if the stock tests $20.00. Watch for a break below $20.00 to trigger a wave of stop-loss selling.

Backtest Arcus Biosciences Stock Performance
The backtest of Richland Resources (RCUS) after a -10% intraday plunge from 2022 to the present shows favorable performance metrics. The 3-Day win rate is 49.80%, the 10-Day win rate is 51.78%, and the 30-Day win rate is 57.31%, indicating a higher probability of positive returns in the short term following the event. The maximum return during the backtest period was 3.52%, which occurred on day 56, suggesting that while the stock may experience volatility, it has the potential for recovery and positive gains in the aftermath of a significant intraday plunge.

Arcus at Crossroads: Rebound or Reckoning?
The selloff has exposed Arcus’ fragile fundamentals—negative EPS, declining revenue, and a $2.3B market cap—but also created a high-conviction options setup. With the 52W low at $6.50 and a 10.4% stake held by BlackRock, the stock is unlikely to collapse further unless the STAR-121 lung cancer trial delivers another blow. Amgen’s 3.77% decline as the sector leader suggests broader biotech jitters, but Arcus’ catalysts (loan amendment, Casdatifan updates) could spark a rebound. Watch for a break above $22.50 to validate a short-term bottom or a test of $20.00 support to trigger a wave of technical selling.