Arvinas, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone fourth-quarter filing. Arvinas is a clinical-stage biopharmaceutical company developing PROTAC protein degraders; it had no product-sales revenue and no approved products.
Financial performance and position
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $46.7 million | $21.8 million |
| Research and development expense | $180.4 million | $108.4 million |
| General and administrative expense | $61.6 million | $38.3 million |
| Total operating expenses | $242.0 million | $146.7 million |
| Loss from operations | $195.3 million | $124.9 million |
| Net loss | $191.0 million | $119.3 million |
| Basic and diluted loss per share | $3.82 | $3.02 |
| Operating cash flow | $559.4 million provided | $89.7 million used |
Revenue was primarily from research collaborations, including $25.6 million recognized under the 2021 Pfizer ARV-471 agreement. The $650 million upfront payment is recognized over the collaboration’s performance period, rather than recorded entirely as 2021 revenue. There is no meaningful product gross margin disclosed because the company had no product sales; its operating model remained loss-making.
Cash, cash equivalents, restricted cash and marketable securities totaled approximately $1.5 billion at year-end 2021, versus $688.5 million at year-end 2020. This included $1.394 billion of marketable securities and $108.3 million of cash and cash equivalents. Operating cash flow benefited substantially from a $695.5 million increase in deferred revenue, largely related to Pfizer; it should not be read as recurring operating cash generation. Investing activities used $1.314 billion, mainly for net purchases of marketable securities. Financing activities provided $278.6 million. Long-term debt was $1.0 million; the remaining State of Connecticut loan bears 3.25% interest.
Accumulated deficit was $682.9 million. The company reported no income tax expense or recognized tax benefit for its losses, due to a full valuation allowance against deferred tax assets.
Material changes versus FY2020
- Revenue increased $24.9 million, principally reflecting revenue recognized under the Pfizer ARV-471 collaboration.
- R&D expense rose $72.0 million, reflecting expanded clinical programs, platform and exploratory investment, personnel costs, and clinical-trial and manufacturing costs. G&A expense increased $23.3 million.
- Net loss widened by $71.7 million to $191.0 million. Loss per share increased from $3.02 to $3.82.
- Liquidity increased substantially following the $650 million Pfizer upfront payment and Pfizer’s $350 million stock purchase. For accounting purposes, $85.4 million of the stock purchase consideration above the shares’ determined fair value was allocated to the collaboration; the reported financing cash-flow proceeds from the share issuance were $260.0 million after that allocation and issuance costs.
Outlook, programs and risks
- Pipeline: Bavdegalutamide (ARV-110) and ARV-471 were in Phase 1/2 trials; ARV-766 was in Phase 1. Management planned further dose-expansion, combination and pivotal studies during 2022, subject to trial progress and regulatory discussions. These were plans, not assurances of completion or approval.
- Subsequent clinical update: In February 2022, after the reporting year, Arvinas announced interim bavdegalutamide data with a December 20, 2021 cutoff. In 28 patients with AR T878X/H875Y-positive tumors treated at or above the recommended Phase 2 dose, PSA50 response was 46%; the filing cautions that interim results can change and early-stage results may not predict later trials.
- ARV-471 partnership: Pfizer received worldwide co-exclusive development and commercialization rights. The parties share development costs and generally share commercialization profits and losses equally, subject to contractual exceptions. Arvinas may receive up to $1.4 billion in contingent regulatory and sales milestones; these payments are conditional, not guaranteed.
- Cash runway: Management stated that year-end liquidity was expected to fund planned operating expenses and capital requirements multiple years beyond 2024, based on assumptions that may prove incorrect. It also expected substantial operating losses and rising expenses for at least several years and may need additional financing.
- Principal risks: Clinical and regulatory uncertainty for a novel technology; adverse events or ineffective trial results; competition; reliance on third-party manufacturers and research organizations; collaboration partner priorities and termination rights; patent protection and disputes; enrollment, supply-chain and COVID-19 disruption; and future reimbursement and pricing pressure.
- Unusual items: FY2021 operating cash flow was heavily influenced by deferred collaboration revenue. A $1.0 million debt forgiveness benefit followed satisfaction of employment criteria. The company also entered into a 160,000-square-foot lease for occupancy in 2024, with annual base rent expected to range from $7.7 million to $8.8 million over ten years.
The independent auditor issued an unqualified opinion on the financial statements and internal control over financial reporting. The filing identifies R&D accrual and prepaid-cost estimates, and accounting for the Pfizer ARV-471 agreement and related stock transaction, as critical audit matters. No material legal proceedings were reported.
Key facts for investors to verify
- Reconcile the $650 million Pfizer upfront payment, the $85.4 million stock-purchase fair-value allocation, recognized collaboration revenue, deferred revenue and the expected recognition schedule.
- Assess whether the sharply positive FY2021 operating cash flow reflects sustainable operations or primarily the upfront collaboration payment and deferred revenue.
- Track clinical-trial enrollment, efficacy, safety, confirmatory data and regulatory feedback for bavdegalutamide, ARV-471 and ARV-766; distinguish interim findings from later-stage evidence.
- Review the assumptions behind management’s runway estimate, planned clinical spending, future capital needs and the impact of the 2024 lease.
- Monitor Pfizer’s development and commercialization decisions, cost-sharing obligations, contingent milestones and contractual termination provisions.