Arvinas, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Arvinas is a clinical-stage biopharmaceutical company developing PROTAC protein degraders. It had no approved products and generated no product-sale revenue; reported revenue came from research collaborations and licenses.
Financial performance
| Metric ($ millions, except per-share data) | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | 24.2 | 5.5 |
| Research and development | 64.0 | 34.9 |
| General and administrative | 20.2 | 12.3 |
| Operating loss | (60.0) | (41.7) |
| Net loss | (63.4) | (41.0) |
| Net loss per share, diluted | (1.20) | (0.84) |
| Operating cash used | (57.1) | (39.0) |
Revenue increased by $18.7 million, primarily reflecting the Pfizer ARV-471 collaboration. R&D rose $29.1 million as clinical programs, platform research, personnel, and manufacturing activity expanded; G&A rose $7.9 million. The company recorded $4.5 million of income tax expense in Q1 2022, primarily due to tax treatment of collaboration revenue and research costs. Gross margin is not a meaningful reported measure for this collaboration- and research-based business, and the filing does not provide a clear value.
Liquidity, debt, and cash flow
- Cash, cash equivalents, restricted cash, and marketable securities totaled $1.43 billion at March 31, 2022, versus $1.51 billion at December 31, 2021. Marketable securities were $1.37 billion; restricted cash was $4.5 million.
- Operating activities used $57.1 million. Investing activities provided $8.6 million, mainly because maturities of securities exceeded purchases; financing activities provided $2.5 million from stock-option exercises. Cash, cash equivalents, and restricted cash declined $46.0 million during the quarter, partly reflecting movements between cash and marketable securities.
- Long-term debt was $1.0 million, bearing fixed interest at 3.25%. The company also reported $5.8 million of operating lease liabilities. A new laboratory and office lease is expected to commence in 2024, with annual base rent of $7.7–$8.8 million over ten years.
- Deferred revenue was $719.4 million. Stockholders’ equity was $723.3 million, including an accumulated deficit of $746.3 million.
Material changes and notable items
- Net loss widened by $22.4 million year over year as expense growth exceeded the increase in collaboration revenue. Weighted-average shares increased to 53.0 million from 48.6 million.
- Unrealized losses on available-for-sale securities were $14.1 million in Q1 2022, compared with $0.8 million in Q1 2021; these reduced comprehensive income and accumulated other comprehensive income.
- The Pfizer ARV-471 agreement provides for equal sharing of development costs and, generally, commercialization profits and losses, plus up to $1.4 billion in contingent regulatory and sales milestones. These are potential payments, not guaranteed revenue.
- Management said Q1 cash and securities were expected to fund planned operating expenses and capital requirements for multiple years beyond 2024, based on assumptions that could change. The company also stated that it expects significant future losses and may need additional financing.
Outlook, risks, and contingencies
Management planned to continue clinical development of bavdegalutamide, ARV-471, and ARV-766, with several trial expansions and new studies planned during 2022. Plans included pursuing FDA discussions about a potential accelerated-approval pathway for bavdegalutamide and presenting additional ARV-471 and ARV-766 data. These are forward-looking plans, not assurances of timing or success.
Key risks include clinical-trial and regulatory uncertainty, patient enrollment and trial delays, manufacturing and commercialization challenges, reliance on collaborations, and the possibility that capital needs exceed expectations or additional financing is unavailable on acceptable terms. COVID-19 had no material adverse financial impact identified as of quarter-end, but future operational effects remained uncertain. The filing reports no material legal proceedings and no material changes to the risk factors previously disclosed in the 2021 Form 10-K. The company reported effective disclosure controls.
Important facts for investors to verify
- Clinical-trial progress, safety and efficacy results, and whether stated 2022 development milestones were achieved.
- Actual revenue recognition and remaining performance obligations under collaboration agreements, including the contingent nature of Pfizer milestone payments.
- Quarterly operating cash use, investment portfolio value and unrealized losses, and whether management’s stated cash runway assumptions remain valid.
- Development-cost sharing and other financial obligations under the ARV-471 collaboration, and the timing and cost of the planned facility lease.
- Tax expense and the expected use of net operating loss and credit carryforwards, given the tax changes and valuation allowance described in the filing.