Arvinas, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Arvinas is a clinical-stage biotechnology company developing protein-degrading therapies; it has no approved products and has generated no product-sales revenue. Amounts below are in millions of dollars unless stated otherwise.
Financial performance and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $34.6 | $33.2 | $121.6 | $93.6 |
| Research and development expense | $85.9 | $77.5 | $284.5 | $216.7 |
| General and administrative expense | $22.6 | $20.0 | $73.3 | $64.5 |
| Operating loss | $(73.9) | $(64.3) | $(236.2) | $(187.6) |
| Net loss | $(64.0) | $(66.2) | $(212.5) | $(199.6) |
| Net loss per share | $(1.18) | $(1.24) | $(3.97) | $(3.76) |
- Q3 revenue increased 4% year over year; nine-month revenue rose 30%, primarily reflecting recognition of collaboration revenue, especially under the Pfizer vepdegestrant agreement. Revenue is not from product sales.
- Q3 net loss narrowed by $2.2 million, principally as higher interest income and lower Oerth Bio equity-method losses offset increased operating expenses. Nine-month net loss widened by $12.9 million as operating costs grew.
- Q3 and nine-month operating expenses exceeded revenue; the filing does not present a product gross margin. Higher R&D spending reflected clinical-trial, drug-manufacturing, platform research, personnel and infrastructure costs.
- Cash, cash equivalents, restricted cash and marketable securities totaled approximately $1.0 billion at September 30, 2023, versus approximately $1.2 billion at December 31, 2022. This includes $884.8 million of marketable securities and $5.5 million of restricted cash.
- For the first nine months, operating cash use was $264.7 million, investing cash provided was $257.2 million, and financing cash provided was $39.9 million. Financing included $36.0 million net proceeds from an at-the-market stock sale.
- Total debt was $1.0 million, at a fixed 3.25% rate. Current liabilities were $317.3 million, including $224.2 million of current deferred revenue; total deferred revenue was $506.1 million.
Material changes and business developments
- Nine-month R&D expense increased $67.8 million year over year; G&A expense increased $8.8 million. Management cited expanded clinical programs, additional platform investment, and higher personnel and infrastructure costs.
- Management said cash and marketable securities should fund planned operating expenses and capital requirements into 2026, based on assumptions that may prove incorrect. It expects continued operating losses and negative operating cash flows, and says additional financing will be needed over time.
- Arvinas and Pfizer share vepdegestrant development costs equally. The collaboration includes up to $1.4 billion in potential regulatory and sales milestones; none had been received through September 30, 2023.
- In October 2023, Arvinas said it would prioritize a planned Phase 3 trial of ARV-766 for metastatic castration-resistant prostate cancer (mCRPC), rather than the previously planned bavdegalutamide Phase 3 trial. It expected to discuss alignment on ARV-766’s Phase 3 program with regulators by Q2 2024.
Outlook, risks and unusual items
- Management expected continued enrollment in vepdegestrant trials, including Phase 3 VERITAC-2 and the VERITAC-3 study lead-in; completion of VERITAC-2 enrollment was expected in the second half of 2024. A vepdegestrant combination trial with a Pfizer CDK4 inhibitor was expected to start in Q4 2023.
- For ARV-766, the company expected continued Phase 2 expansion, with progression-free survival data anticipated in 2024, and planned a Phase 1b/2 combination trial with abiraterone. It also expected discussions with regulators on the planned Phase 3 program by Q2 2024.
- Management expected to submit an IND or CTA for its BCL6 and LRRK2 programs by year-end 2023 and advance at least two additional programs into IND/CTA-enabling studies. These are forward-looking plans, not assured outcomes.
- Clinical and regulatory outcomes, trial enrollment and costs, manufacturing, competition, intellectual property, and access to future financing are significant risks. Arvinas cautioned that actual results may differ materially from its forward-looking statements.
- The company recorded a $10.0 million accrual, primarily for an early-stage contract dispute. The possible loss range could not be estimated; the means of resolution were unknown. Separately, the filing states that Arvinas was not party to any material legal proceedings.
- The 2022 comparative results were adjusted to correct an immaterial Oerth Bio equity-method accounting error. The adjustment increased reported revenue and operating loss by equal amounts and did not affect net loss, loss per share, cash flows or equity.
- Arvinas completed a Q3 ATM issuance of approximately 1.45 million shares for $36.0 million net proceeds, contributing to dilution. Shares outstanding were 55.0 million at September 30, 2023, versus 53.2 million at December 31, 2022.
Important facts for investors to verify
- Whether the approximately $1.0 billion liquidity balance and management’s runway estimate into 2026 remain adequate as trial spending and cash burn evolve.
- Progress, enrollment, safety and data timing for vepdegestrant and ARV-766, and the regulatory path and rationale for prioritizing ARV-766 over a bavdegalutamide Phase 3 trial.
- How collaboration revenue and deferred revenue recognition affect reported revenue and cash flows, and whether any milestone or royalty payments are achieved.
- Developments and potential financial exposure from the accrued $10.0 million contract dispute, for which the filing provides no estimable loss range.
- Future financing needs, use of the remaining ATM capacity, and resulting shareholder dilution.