According to a report by the Racing Post UK, defending Prix de l'Arc de Triomphe winner Danedream is for all intents and purposes out of this year's Arc. The cause of her defection isn't an injury to her or a decision to run in different race. Instead, the Arc winner will not be able to travel to France due to an outbreak of an equine disease known commonly as "swamp fever" at the training center where Danedream is stabled.

From the Racing Post UK:

All horses stabled around the German course – their number is thought to be in the region of 350 and 400 – were placed in lockdown on Monday night as crisis meetings took place to discuss a travel ban that would prevent Danedream leaving Cologne.

The quarantine will not only keep Danedream out of the Arc but also the Breeders' Cup Turf. According to that same report from the Racing Post, horses will likely be restricted from leaving Cologne "for months".

Swamp fever, or it's clinical name - Equine Infectious Anemia ("EIA") - is "a viral disase that attacks a horse's immune system", according to Horse & Hound. Further information from Horse & Hound:

EIA is often fatal to horses but does not affect humans. Symptoms include a reoccurring fever and anaemia. However, horses can also carry the virus without displaying any clinical signs and once they have become carriers, they remain infectious for life.

...

Blood-sucking insects, such as horse flies, are the most common transmitters of the virus.

An official decision on Danedream running in the Arc has not yet been made but, given the circumstances, it seems unlikely that she'll be allowed to travel given the severity of the disease.