Business context and reporting period
Arvinas, Inc. filed this Form 10-K for the fiscal year ended December 31, 2020. The clinical-stage biopharmaceutical company develops PROTAC protein degraders. Its lead candidates are ARV-110 for metastatic castration-resistant prostate cancer (mCRPC) and ARV-471 for ER-positive/HER2-negative breast cancer. Neither candidate is approved, and the company has generated no product-sales revenue.
Financial performance and liquidity
| Metric | FY2020 | FY2019 |
|---|---|---|
| Revenue | $21.8 million | $43.0 million |
| Research and development expense | $108.4 million | $67.2 million |
| General and administrative expense | $38.3 million | $27.3 million |
| Total operating expenses | $146.7 million | $94.5 million |
| Operating loss | $124.9 million | $51.5 million |
| Net loss | $119.3 million | $70.3 million |
| Basic and diluted loss per share | $3.02 | $2.13 |
| Net cash used in operating activities | $89.8 million | $40.6 million |
Revenue came from research collaboration and license agreements; there were no product sales or collaboration royalties. Product gross margin is not applicable at this development stage. FY2019 revenue included $24.7 million recognized for a license contributed to Oerth Bio, making the year-over-year revenue comparison unusually affected by that item. FY2019 also included a $24.7 million equity-method investment loss related to Oerth.
- Cash and investments: $688.5 million at year-end 2020, comprising $588.4 million of cash and cash equivalents and $100.2 million of marketable securities, versus $280.9 million at year-end 2019.
- Liquidity outlook: Management said year-end resources were expected to fund planned operating expenses and capital requirements into 2024; this estimate depends on assumptions that may change.
- Debt: $2.0 million outstanding at year-end, at a fixed 3.25% rate. Up to $1.0 million may be forgiven subject to employment conditions under the Connecticut financing agreement.
- Financing and dilution: Net cash from financing activities was $504.7 million, primarily reflecting a December public offering and at-the-market stock sales. The company issued 6.57 million shares in the public offering at $70 per share and sold 2.59 million shares through its ATM program.
- Cash-flow context: Operating cash use rose as clinical, manufacturing, personnel and research spending increased. Investing activities provided $164.3 million, mainly from maturities and sales of marketable securities.
Material changes versus the prior year
- Revenue fell by $21.2 million, principally because 2019 included the Oerth license contribution; recurring collaboration revenue increased with a full year of Bayer collaboration activity and greater Pfizer activity.
- R&D expense increased $41.2 million, driven by expanded ARV-110 and ARV-471 clinical programs, drug manufacturing, personnel and platform research. G&A expense increased $11.0 million.
- Net loss widened by $49.0 million, while operating cash use more than doubled. The company reported an accumulated deficit of $491.9 million at year-end.
- Cash and investments increased substantially following equity financings, including the December 2020 public offering.
Pipeline, outlook and key risks
- ARV-110: The Phase 1/2 study was ongoing, with the Phase 2 ARDENT expansion initiated in October 2020. December interim data reported PSA50 responses in 2 of 5 patients with multiple AR mutations including T878 and/or H875, and in 2 of 15 patients with wild-type AR; 4 of 28 patients above the company’s predicted exposure threshold had PSA reductions greater than 50%. These are interim, early-stage findings, not confirmatory evidence of efficacy. The company expected complete dose-escalation data in 2021 and interim Phase 2 data in the second half of 2021.
- ARV-471: December interim data included one confirmed partial response among 21 dosed patients and a clinical benefit rate of 5 of 12 patients with sufficient follow-up. Paired biopsies showed ER degradation up to 90% (62% average across five biopsies). No treatment-related Grade 3 or 4 adverse events or dose-limiting toxicities had been reported by the cutoff. The company expected to complete dose escalation in the first half of 2021; the VERITAC Phase 2 expansion began in February 2021, with interim data anticipated in 2022.
- Other development plans: Arvinas expected to file an IND and begin a Phase 1 trial for ARV-766 in the first half of 2021. It anticipated IND filings for a tau program and BCL6 and another oncology-associated program in 2022. These are forward-looking plans, not completed milestones.
- Safety signal: A potential interaction between ARV-110 and rosuvastatin was associated with one Grade 4 dose-limiting toxicity involving elevated liver enzymes followed by acute renal failure, and one Grade 3 liver-enzyme elevation. Rosuvastatin use was subsequently prohibited in the trial.
- Principal risks: The PROTAC platform is unproven clinically; early trial results may not predict later outcomes; candidates may fail or cause unexpected effects; and the company expects continued losses and substantial funding needs. Other material exposures include COVID-19-related trial, laboratory and supply-chain disruptions, reliance on third-party manufacturers and CROs, competition, regulatory and reimbursement uncertainty, and patent protection challenges.
- COVID-19 and controls: New Haven laboratories were temporarily closed in 2020, clinical-site enrollment pauses occurred, and an ARV-471 building-block shipment was delayed at a China-based manufacturer. Management reported no material financial impact as of year-end, but future effects remained uncertain. Management and Deloitte concluded internal control over financial reporting was effective; the financial-statement audit opinion was unqualified.
- The company reported no material legal proceedings and no cash dividends. It stated that additional financing may be required and could dilute shareholders or require licensing rights on unfavorable terms.
Important facts for investors to verify
- Check subsequent, complete clinical data for ARV-110 and ARV-471, including patient numbers, response durability, safety, dose selection and the relevance of biomarker-defined subgroups.
- Track the rosuvastatin interaction investigation and whether other clinically important drug interactions or adverse events emerge.
- Reconcile collaboration revenue, deferred revenue and milestone expectations, noting the unusually large Oerth-related revenue and loss in 2019 and the concentration of 2020 revenue among three collaborators.
- Monitor operating cash use, clinical-program spending, equity issuance and whether the stated runway into 2024 remains supportable.
- Confirm progress against planned ARV-766, neuroscience and oncology development milestones, and assess the potential effects of manufacturing, trial-enrollment, regulatory and intellectual-property risks.