Arvinas, Inc. — 2022 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a standalone fourth-quarter report. Arvinas is a clinical-stage biotechnology company developing PROTAC protein degraders. Its principal clinical programs target estrogen receptor in breast cancer (ARV-471) and androgen receptor in prostate cancer (bavdegalutamide/ARV-110 and ARV-766). No product has been approved, and the company has not generated product-sales revenue.
Financial performance and liquidity
| Metric (USD millions, except per-share data) | 2022 | 2021 |
|---|---|---|
| Revenue, primarily collaboration revenue | $131.4 | $53.6 |
| Research and development expense | $315.0 | $180.4 |
| General and administrative expense | $79.6 | $61.6 |
| Operating loss | $(263.2) | $(188.4) |
| Net loss | $(282.5) | $(191.0) |
| Basic and diluted loss per share | $(5.31) | $(3.82) |
| Net cash from (used in) operating activities | $(273.5) | $559.4 |
- Revenue rose $77.8 million, mainly from recognition of ARV-471 collaboration revenue and previously constrained Oerth Bio-related revenue. One collaborator represented 88% of 2022 revenue.
- R&D expense increased $134.6 million, reflecting greater investment in the platform and exploratory programs and in the AR and ER programs. G&A increased $18.0 million.
- Cash, cash equivalents, restricted cash and marketable securities totaled approximately $1.2 billion at year-end, down from approximately $1.5 billion. Management estimated this would fund planned operating expenses and capital requirements into 2026; that estimate depends on assumptions and actual spending may be higher.
- Operating cash flow shifted from $559.4 million provided in 2021 to $273.5 million used in 2022, principally as deferred revenue declined. The 2021 figure included a substantial increase in deferred revenue associated with the Pfizer ARV-471 agreement.
- Current assets were $1,240.2 million and current liabilities were $295.1 million. Deferred revenue totaled $623.7 million, including current and long-term portions. Long-term debt was $1.0 million, at a fixed 3.25% rate.
- Interest income was $12.0 million in 2022, versus $1.8 million in 2021. Income tax expense was $20.9 million, primarily associated with tax recognition of collaboration revenue and required capitalization of research costs. Accumulated deficit was $965.4 million.
- Gross margin is not a meaningful disclosed operating measure for this development-stage business; the filing reports operating expenses and losses instead.
Material developments and outlook
- ARV-471: The company and Pfizer began the Phase 3 VERITAC-2 trial for second-line and later ER-positive/HER2-negative metastatic breast cancer. Initial Phase 2 VERITAC data, with a June 2022 cutoff, showed a 38% clinical benefit rate among 71 patients and preliminary median progression-free survival of 3.7 months overall. These are interim clinical results, not evidence of approval or commercial efficacy.
- In the ARV-471/palbociclib Phase 1b combination study, the company reported approximately 50% higher mean palbociclib exposure than historical fasted-state data and Grade 3/4 neutropenia in 76% of patients in the 200 mg ARV-471/125 mg palbociclib arm. The companies and FDA aligned on a Phase 3 lead-in to assess lower palbociclib doses with 200 mg ARV-471. Initiation of the first-line combination Phase 3 trial was expected in the second half of 2023.
- Bavdegalutamide (ARV-110): The company expected to initiate a global Phase 3 trial for mCRPC with AR T878/H875 mutations in the second half of 2023 and complete enrollment in its Phase 1b abiraterone combination trial during that period. It had previously received FDA Fast Track designation. An earlier potential interaction with rosuvastatin led the company to prohibit concomitant use.
- ARV-766: A Phase 2 expansion trial began in the second half of 2022. The company expected to report Phase 1 dose-escalation data in the second quarter of 2023 and anticipated a further early-stage trial of either ARV-766 or bavdegalutamide in the second half of 2023.
- Pipeline goals: Management expected to submit IND or CTA applications for BCL6 and LRRK2 degraders by year-end 2023 and advance at least two additional programs into IND/CTA-enabling studies. These are forward-looking expectations, not completed milestones.
- Collaboration and funding: Pfizer paid $650 million upfront for worldwide co-exclusive ARV-471 rights; Arvinas and Pfizer share development costs and, generally, commercialization profits and losses equally. Up to $1.4 billion in additional contingent milestones are possible, but are not assured. The company continues to expect losses and negative operating cash flows for the foreseeable future and may need additional financing.
Risks, contingencies and unusual items
- Clinical and regulatory outcomes are uncertain; the PROTAC approach is novel, and early or interim trial findings may change as data mature. None of the candidates has established safety or effectiveness for its investigational use.
- Arvinas relies on third parties for clinical trials and manufacturing and has no long-term supply arrangements for key candidates. Delays, quality problems or supply interruptions could impede development.
- Collaborators have significant influence over program execution and may terminate agreements under specified terms. Milestone and royalty revenue depends on future development, approvals and sales.
- The filing records a $7.0 million accrual, primarily for an early-stage contract dispute. The possible loss range could not be estimated; the filing’s statement that there were no material legal proceedings should be read alongside this accrued contingency.
- The company corrected an immaterial prior-period accounting error relating to Oerth Bio, adjusting 2021 and 2020 revenue and equity-method losses by equal amounts; net loss and loss per share were unchanged.
- A new New Haven lease for approximately 160,000 square feet is expected to commence occupancy in 2024; base rent is expected to range from $7.7 million to $8.8 million annually over ten years. The company also has Connecticut location covenants tied to state assistance agreements.
- Auditors issued unqualified opinions on the financial statements and internal control over financial reporting. The critical audit matter involved estimating prepaid and accrued third-party R&D costs.
Most important facts for investors to verify
- Whether ARV-471 Phase 3 trials progress on schedule and how the palbociclib dose lead-in affects safety and trial design.
- Updated, mature efficacy and safety data for ARV-471, bavdegalutamide and ARV-766, including the relevant patient subgroups and treatment settings.
- Actual cash burn, investment maturities and collaboration-cost sharing relative to management’s runway estimate through 2026.
- Progress toward the stated 2023 IND/CTA and clinical-trial milestones, and any subsequent revisions to management’s outlook.
- Resolution and potential cost of the accrued contract dispute, and the accounting, cash-flow and dilution implications of any future financing or collaboration changes.