Arvinas, Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Arvinas is a clinical-stage biopharmaceutical company developing protein-degradation therapies. It reported no product-sale revenue; collaboration agreements were its revenue source.
Financial performance and position
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $30.3 million | $9.3 million | $85.8 million | $20.4 million |
| Research and development expense | $77.5 million | $40.6 million | $216.7 million | $118.5 million |
| General and administrative expense | $20.0 million | $16.0 million | $64.5 million | $42.8 million |
| Net loss | $66.2 million | $46.8 million | $199.6 million | $138.0 million |
| Basic and diluted loss per share | $1.24 | $0.94 | $3.76 | $2.81 |
- Revenue increased primarily from the Pfizer ARV-471 collaboration. No product sales or product gross margin were reported.
- Operating loss was $67.2 million for Q3 and $195.4 million for the nine-month period. Interest income helped offset losses; income tax expense was $2.2 million and $10.1 million, respectively.
- Cash, cash equivalents, restricted cash and marketable securities totaled $1.276 billion at September 30, 2022, versus $1.507 billion at December 31, 2021. Marketable securities were $1.138 billion; cash, cash equivalents and restricted cash were $138.1 million.
- Nine-month operating cash flow was negative $202.3 million, compared with positive $595.1 million in 2021. The prior-year inflow reflected the large Pfizer ARV-471 upfront payment recorded as deferred revenue. Investing activities provided $223.4 million, mainly from net maturities and sales of securities; financing activities provided $4.2 million.
- Deferred revenue was $657.7 million at quarter-end. Total liabilities were $713.3 million and stockholders’ equity was $621.5 million. Long-term debt was $1.0 million.
- Available-for-sale securities had $24.8 million in unrealized losses at quarter-end; nine-month comprehensive loss was $219.8 million.
Material changes and management outlook
- Nine-month R&D expense rose $98.2 million year over year, driven by expanded clinical and manufacturing activity, platform and exploratory research, and personnel. G&A rose $21.7 million, including higher personnel, stock-based compensation, insurance, taxes and professional fees.
- Management said quarter-end liquid resources were expected to fund planned operating expenses and capital expenditures for multiple additional years beyond 2024, but cautioned that this estimate depends on assumptions and capital could be used sooner.
- Management expects significant expenses and operating losses for the foreseeable future and says substantial additional funding will be needed. Potential funding sources include equity, debt and collaborations; none is a committed external funding source.
- Pipeline plans included a global Phase 3 bavdegalutamide trial in 2023, additional ARV-471 studies including planned Phase 3 trials with Pfizer, and Phase 2 expansion of ARV-766. The filing also described plans to submit two IND/CTA applications by year-end 2023. These are forward-looking plans, not assurances of completion.
- Under the ARV-471 collaboration, Pfizer and Arvinas generally share development costs equally; Arvinas may receive up to $1.4 billion in regulatory and sales milestones, contingent on specified achievements. Revenue recognition and tax timing related to this collaboration contributed to 2022 income tax expense.
- A planned 160,000-square-foot facility is expected to be occupied in 2024. Its ten-year lease has annual base rent ranging from $7.7 million to $8.8 million once occupied; $5.5 million of restricted cash collateralizes a letter of credit.
Risks, contingencies and unusual items
Key risks include clinical-trial success and timing, regulatory approval, manufacturing and commercialization execution, competition, intellectual-property protection, and the need for future financing. COVID-19 had no material adverse financial impact identified through September 30, 2022, but its future effect on operations and trial timing remained uncertain. The company reported no material legal proceedings and no matter for which it believed a material loss was reasonably probable. It also disclosed contingent milestone and payment obligations under collaborations and a companion-diagnostic agreement. Connecticut assistance agreements impose location covenants through 2024 and 2028, with repayment penalties for breach.
Important facts for investors to verify
- Whether trial progress, enrollment and planned 2023 milestones remain on schedule, especially for ARV-471 and bavdegalutamide.
- Whether the stated cash runway beyond 2024 remains supportable as clinical and R&D spending increases.
- How collaboration revenue, deferred revenue, cost-sharing and any future milestone receipts evolve; milestone payments are contingent.
- The effect of continuing operating cash burn, stock-based compensation and potential future equity issuance on liquidity and dilution.
- Whether the new facility’s timing and lease costs, tax obligations and Connecticut location covenants change materially.