Arvinas, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Arvinas is a clinical-stage biopharmaceutical company developing PROTAC protein degraders. It has no approved products and has generated no product-sale revenue; reported revenue comes from research collaborations and licenses.
Financial highlights
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | $5.5 million | $6.2 million |
| Research and development expense | $34.9 million | $21.7 million |
| General and administrative expense | $12.3 million | $7.9 million |
| Operating loss | $41.6 million | $23.4 million |
| Net loss | $41.0 million | $21.7 million |
| Basic and diluted loss per share | $0.84 | $0.56 |
| Net cash used in operating activities | $39.0 million | $16.9 million |
Cash, cash equivalents and marketable securities totaled $651.3 million at March 31, 2021, versus $688.5 million at December 31, 2020. The filing says this capital was expected to fund operating expenses and capital requirements into 2024, subject to assumptions that could prove inaccurate. Total assets were $681.8 million and stockholders’ equity was $615.3 million. Debt was $2.0 million, at a fixed 3.25% interest rate. The filing does not provide a clear gross-margin figure; product sales have not begun.
Changes versus prior-year quarter
- Revenue declined $0.7 million, primarily because a collaborator added targets, extending the revenue recognition period.
- R&D expense rose $13.2 million, reflecting greater platform and exploratory research, clinical and manufacturing costs, and personnel costs. G&A expense increased $4.4 million, including higher personnel, facility, insurance and professional costs.
- Net loss widened by $19.2 million. Management attributed lower other income principally to reduced interest income and lower Connecticut research-credit refunds.
- Operating cash use increased $22.0 million. Investing cash use was $207.8 million, mainly because marketable-security purchases exceeded maturities; this was largely a shift from cash into investments rather than operating burn.
Outlook, risks and notable items
- ARV-110 and ARV-471 were in Phase 1/2 trials; the company initiated the VERITAC Phase 2 expansion for ARV-471 in February 2021. Arvinas planned to initiate a Phase 1 trial of ARV-766 in the first half of 2021. These are plans stated in the filing, not reported outcomes.
- Management expects substantial increases in R&D and operating losses and no product-sale revenue for many years, if ever. The company expects to need substantial additional financing; no committed external funding source was identified.
- Key risks include clinical, regulatory, manufacturing, enrollment, intellectual-property and commercialization uncertainty, as well as dependence on collaboration arrangements. A prolonged COVID-19 disruption could delay trials or preclinical work; management reported no material adverse effect on results or financial position as of March 31, 2021.
- Collaboration contract liabilities (deferred revenue) were $42.6 million at March 31, 2021, expected to be recognized over the remainder of 2021 through 2023. Potential future collaboration milestones and royalties are contingent, not guaranteed revenue.
- Subsequent to quarter-end, Connecticut notified the company that $1.0 million of its state loan was forgiven. Also in May 2021, the company entered a lease for about 160,000 square feet of space expected to be occupied in 2024, with annual base rent of approximately $6.3–$7.2 million over a ten-year period. A $3.5 million letter of credit is collateralized by a certificate of deposit.
- Existing Connecticut assistance agreements include obligations to remain in the state; breach may trigger repayment and liquidated damages. The company reported no material legal proceedings, no off-balance-sheet arrangements, and effective disclosure controls.
Important facts for investors to verify
- Progress, safety and efficacy data, enrollment and timing for ARV-110, ARV-471 and ARV-766 trials.
- Cash runway assumptions, quarterly operating cash burn and whether additional financing will be required.
- Collaboration milestones, partner decisions and the timing of deferred-revenue recognition; distinguish contingent milestone potential from contracted or earned revenue.
- Cost and obligations under the new laboratory lease, including any tenant-improvement allowance increases and related security-deposit changes.
- Impact of stock-based compensation, which was $10.3 million in Q1 2021, and potential dilution from equity awards and future financing.