Arvinas, Inc. — 2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019; filed March 16, 2020. Arvinas is a clinical-stage biopharmaceutical company developing PROTAC protein degraders. It had no product-sales revenue; reported revenue came from research collaborations and licensing.
Financial performance and liquidity
| Metric | 2019 | 2018 |
|---|---|---|
| Revenue | $43.0 million | $14.3 million |
| Research and development expense | $67.2 million | $45.2 million |
| General and administrative expense | $27.3 million | $12.9 million |
| Operating loss | $51.5 million | $43.8 million |
| Net loss | $70.3 million | $41.5 million |
| Net loss per share | $2.13 | $25.45 |
| Net cash used in operating activities | $40.6 million | $16.1 million |
| Cash, cash equivalents and marketable securities, year-end | $280.9 million | $187.8 million |
| Working capital, year-end | $258.1 million | $172.7 million |
| Debt, year-end | $2.0 million | $2.2 million |
Revenue increased 200% year over year, while operating expenses rose 63%. The company remained loss-making, and operating cash use increased. Year-end current assets were $290.9 million against current liabilities of $32.8 million. Interest income was $4.6 million; debt carried a fixed 3.25% rate. No product gross margin is reported because the company had no product sales.
Fourth-quarter 2019 revenue was $4.9 million and net loss was $21.0 million, compared with $3.4 million revenue and $16.1 million net loss in fourth-quarter 2018. The 2019 net loss included a $24.7 million loss from the Oerth Bio equity-method investment.
Business, pipeline and material developments
- ARV-110: Oral androgen-receptor degrader for metastatic castration-resistant prostate cancer; Phase 1 began March 2019. The FDA granted Fast Track designation in May 2019.
- ARV-471: Oral estrogen-receptor degrader for locally advanced or metastatic ER-positive/HER2-negative breast cancer; Phase 1 began August 2019.
- Preliminary Phase 1 data reported in October 2019 showed dose-proportional exposure for ARV-110 and exposures for both candidates associated with tumor-growth inhibition in preclinical studies. At doses tested then, both were reported as well tolerated, with no dose-limiting toxicities or grade 2–4 treatment-related adverse events. These were early, limited data, not evidence of clinical efficacy.
- Arvinas reported that it expected to provide additional ARV-110 Phase 1 data in Q2 2020 and ARV-471 data in the second half of 2020. Those are management expectations stated in this filing, not subsequent results.
- Research and development spending increased by $22.0 million, including expanded platform and exploratory research. G&A increased by $14.4 million, partly reflecting public-company costs and higher stock compensation.
- Revenue included $24.7 million recognized from licensing technology to Oerth Bio, an agricultural joint venture with Bayer. Arvinas also recorded a matching $24.7 million equity-method investment loss as Oerth expensed the contributed intellectual property; the investment carrying value was reduced to zero. A further $24.7 million of the license contribution was deferred as intra-entity profit.
- Arvinas raised approximately $32.5 million from Bayer’s 2019 stock purchase and $115.0 million gross in a November 2019 follow-on offering. Bayer also made a $16.0 million contribution to Oerth as part of its $56.0 million total cash commitment; this is Oerth funding, not company cash.
Outlook, risks and contingencies
Management stated that year-end cash, cash equivalents and marketable securities were expected to fund planned operating expenses and capital expenditures into 2022. The estimate depends on assumptions and the company warned that it may need substantial additional financing. Further equity financing could dilute shareholders; other financing or licensing arrangements could restrict operations or require surrendering valuable rights. There was no committed external funding source.
- Both lead candidates were in early-stage trials; safety, efficacy, timelines, regulatory approval and commercial success remained uncertain. The filing emphasizes that preliminary results may change and may not predict later-stage outcomes.
- Arvinas relied on third-party manufacturers and had no long-term supply arrangements or redundant source for bulk drug substance. It reported a COVID-19-related delay in production of certain ARV-471 drug-substance building blocks at a China-based manufacturer, while stating it did not then anticipate an overall clinical-development delay.
- Clinical development, expansion of R&D, manufacturing, regulatory compliance and commercialization were expected to increase costs. The company had not established sales or marketing capabilities.
- Collaborations with Pfizer, Genentech and Bayer offer potential research funding, milestones and royalties, but much of the potential consideration is contingent. Partners have target-selection and termination rights, and collaboration terms limit Arvinas’s work on certain targets.
- Intellectual-property protection, competition, patient enrollment, reimbursement and drug-pricing regulation, and potential adverse effects from protein degradation are significant risks. No material legal proceedings were reported.
- Connecticut financing arrangements include location and employment covenants. Breach of specified conditions could trigger repayment obligations and liquidated damages; the 2018 state loan was $2.0 million, and up to $1.0 million may be forgivable subject to employment conditions.
Most important facts for investors to verify
- Updated clinical-trial safety, exposure and efficacy data for ARV-110 and ARV-471, including whether early tolerability findings persisted with dose escalation.
- Actual cash burn, remaining liquidity and financing needs versus management’s stated runway into 2022.
- How much future collaboration revenue is recurring research funding versus contingent options, milestones or royalties, and the accounting and cash implications of Oerth.
- Whether the ARV-471 supply delay or other manufacturing constraints affected clinical timelines or costs.
- Share-count changes and potential dilution from equity awards, follow-on financing and any future capital raises.