Arvinas, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Arvinas is a clinical-stage biopharmaceutical company developing targeted protein degraders. It has no approved products and has not generated product-sales revenue; reported revenue comes from collaboration and license agreements.
Financial performance and liquidity
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $31.3 million | $5.5 million | $55.5 million | $11.1 million |
| Research and development | $75.3 million | $43.0 million | $139.2 million | $77.9 million |
| General and administrative | $24.3 million | $14.4 million | $44.5 million | $26.7 million |
| Operating loss | $68.3 million | $51.9 million | $128.2 million | $93.5 million |
| Net loss | $70.0 million | $50.3 million | $133.4 million | $91.3 million |
| Loss per share, diluted | $1.32 | $1.03 | $2.51 | $1.87 |
- Revenue growth primarily reflected recognition of the $650 million upfront payment under the 2021 Pfizer ARV-471 collaboration; it is not product-sales growth. No sales-based milestones or royalties had been received under the collaborations.
- No product gross margin is reported. Operating expenses substantially exceeded revenue, and the company expects continued losses.
- Operating cash used was $135.7 million in the first half of 2022, versus $86.4 million in the comparable 2021 period. Capital expenditures were $3.5 million.
- At June 30, 2022, cash, cash equivalents, restricted cash and marketable securities totaled approximately $1.35 billion (reported rounded by management as $1.3 billion). Marketable securities were $1.25 billion. Total assets were $1.41 billion and stockholders’ equity was $670.6 million.
- Total debt was $1.0 million, at a fixed 3.25% rate. Deferred revenue totaled $688.0 million, including current and long-term portions.
- Six-month comprehensive loss was $150.8 million, including $17.4 million of unrealized losses on available-for-sale securities. Six-month income tax expense was $7.9 million, primarily associated with collaboration revenue recognition and tax treatment of research costs.
Material changes versus the prior period
- First-half revenue increased $44.4 million year over year, largely because of the Pfizer ARV-471 agreement.
- First-half R&D expense rose $61.3 million, reflecting expanded clinical programs, platform and exploratory research, and higher personnel and manufacturing costs. G&A expense increased $17.8 million, including higher personnel, facility, insurance and professional costs.
- Net loss widened by $42.1 million for the first half. Operating cash use increased by $49.3 million.
- Cash, cash equivalents and restricted cash declined $15.1 million in the first half; marketable-security maturities exceeded purchases, shifting funds into cash and reducing the investment balance.
Outlook, developments and risks
- Management estimated that available cash and marketable securities would fund planned operating expenses and capital needs for multiple additional years beyond 2024, but noted this depends on assumptions and capital could be used sooner than expected. The company anticipates substantial future spending and may need additional financing.
- Planned clinical milestones included a bavdegalutamide Phase 3 trial in the second half of 2023 for mCRPC with specified androgen-receptor mutations; Phase 2 expansion and combination studies for ARV-471, with two Phase 3 trials planned in the second half of 2022; and ARV-766 Phase 1 data and a Phase 2 expansion in the second half of 2022. These are forward-looking plans, not assured outcomes.
- Pfizer and Arvinas share ARV-471 development costs equally, subject to exceptions. The agreement provides for up to $1.4 billion in regulatory and sales-based milestone payments, none of which is assured.
- In June 2022, Arvinas entered an agreement with Foundation Medicine to develop a companion diagnostic for bavdegalutamide. Arvinas may owe success-based milestone payments of up to low-to-mid tens of millions of dollars, plus validation fees and pass-through costs.
- Key risks include clinical and regulatory failure or delay, commercialization and financing uncertainty, dependence on collaborators and third-party manufacturers, competition, and possible disruption to trials or research from COVID-19. The company reported no material COVID-19 impact through June 30, 2022, but future effects remain uncertain.
- A planned laboratory and office lease for space expected to be occupied in 2024 carries annual base rent of $7.7 million to $8.8 million over ten years. Connecticut assistance agreements also require the company to remain in the state through 2024 and 2028; breach may trigger repayment and damages.
- The filing reports no material legal proceedings and no material change to internal control over financial reporting; management judged disclosure controls effective at the reasonable-assurance level.
Important facts for investors to verify
- Whether clinical data support the stated timelines and planned pivotal trials, including bavdegalutamide dose selection and trial design.
- The pace of cash burn, investment maturities and unrealized securities losses, and whether management’s runway estimate remains supportable.
- How collaboration revenue recognition and shared ARV-471 costs affect reported revenue, expenses, deferred revenue and future cash flows.
- Potential tax payments, milestone obligations and costs under the Foundation Medicine agreement and facility leases.
- Availability and terms of future financing if development spending, trial timing or collaboration receipts differ from expectations.