Arvinas, Inc. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Arvinas is a clinical-stage biopharmaceutical company developing protein-degrading therapies. It had no product sales; reported revenue came from research collaborations and licenses.
Financial performance and position
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $5.5 million | $5.7 million | $11.1 million | $12.0 million |
| Research and development expense | $43.0 million | $23.4 million | $77.9 million | $45.1 million |
| General and administrative expense | $14.4 million | $8.8 million | $26.7 million | $16.7 million |
| Net loss | $50.3 million | $25.2 million | $91.3 million | $47.0 million |
| Net loss per share, basic and diluted | $1.03 | $0.65 | $1.87 | $1.22 |
| Net cash used in operating activities | Not separately stated for the quarter | $86.4 million | $38.4 million |
- Q2 revenue decreased about 4% year over year; six-month revenue fell about 8%. The company attributed the declines primarily to a collaborator adding targets, which extended revenue recognition over a longer period.
- Q2 R&D expense rose about 84% and G&A about 63% year over year; six-month increases were about 73% and 60%, respectively. Higher personnel and stock compensation, expanded clinical studies and drug manufacturing, and increased platform and exploratory research contributed to the increases.
- At June 30, cash, cash equivalents, restricted cash and marketable securities totaled $605.1 million, compared with $688.5 million at December 31, 2020. Current assets were $627.7 million and current liabilities $41.8 million.
- Cash, cash equivalents and restricted cash declined $535.1 million during the first half, mainly because the company invested in marketable securities; purchases exceeded maturities by $455.4 million. Marketable securities were $551.8 million at June 30.
- Total liabilities were $61.1 million, including $1.0 million of long-term debt. The company recorded $1.0 million of debt forgiveness after satisfying conditions under its Connecticut assistance agreement. No operating margin was reported; the filing presents operating losses.
Material developments, outlook and risks
- Pipeline programs included ARV-110 and ARV-471 in Phase 1/2 studies and ARV-766 in Phase 1. Management planned second-half 2021 data updates and additional combination or neoadjuvant studies. These are plans, not guaranteed outcomes.
- In July 2021, after quarter-end, Pfizer paid a $650 million upfront fee for worldwide co-exclusive development and commercialization rights to ARV-471. Arvinas may receive up to $1.4 billion in regulatory and sales milestones, including $400 million tied to marketing approvals. The companies generally share development costs and commercialization profits and losses equally, subject to exceptions.
- A separate agreement provides for Pfizer to buy 3,457,815 shares at $101.22 per share for approximately $350 million. Closing remained subject to conditions, including antitrust clearance, as of the filing. Management’s pro forma liquidity estimate of approximately $1.605 billion includes the upfront payment and anticipated equity proceeds.
- Management said June 30 liquidity was expected to fund operations and capital expenditures into 2024; including the Pfizer upfront payment and anticipated equity proceeds, it expected funding for multiple additional years. The estimate depends on assumptions and may prove inaccurate. The company expects continued operating losses and negative operating cash flows and anticipates rising R&D and other costs.
- A May 2021 lease covers approximately 160,000 square feet of laboratory and office space expected to be occupied in 2024. The company issued a $4.5 million letter of credit, collateralized by a certificate of deposit; future annual base rent is expected to be $7.7 million to $8.8 million over ten years once occupied.
- Key risks include clinical and regulatory uncertainty, trial enrollment and timing, manufacturing and commercialization challenges, reliance on collaborators (including Pfizer, which may terminate the ARV-471 agreement for convenience subject to notice), future financing needs, possible shareholder dilution, and uncertain future effects of COVID-19. Management reported no material adverse COVID-19 impact on results or financial position as of June 30, 2021. No material legal proceedings were reported.
Important facts for investors to verify
- Whether the Pfizer share purchase closed and the $350 million proceeds were received; these were conditional at the filing date.
- ARV-471 collaboration terms, cost-sharing and termination provisions, and the conditions attached to milestone payments.
- Subsequent clinical data, trial progress and any changes to management’s development plans or expected spending.
- Cash burn, investment maturities, and whether the stated runway assumptions remain supportable as clinical programs expand.
- Future lease commitments and compliance with Connecticut loan and location covenants, including potential repayment penalties.