Arvinas LLC(ARVN) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents Arvinas, Inc.'s unaudited condensed consolidated financial statements as of June 30, 2023, reflecting a net loss of $148.5 million and approximately $1.0 billion in cash and marketable securities Condensed Consolidated Balance Sheets As of June 30, 2023, total assets decreased to $1,083.5 million from $1,268.8 million, driven by reduced marketable securities, while total liabilities and equity also declined Condensed Consolidated Balance Sheet Highlights (in millions) | Balance Sheet Item | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash, cash equivalents, and marketable securities | $1,038.8 | $1,205.3 | | Total Assets | $1,083.5 | $1,268.8 | | Liabilities & Equity | | | | Deferred Revenue (Current & Non-current) | $540.6 | $623.7 | | Total Liabilities | $619.9 | $703.9 | | Total Stockholders' Equity | $463.6 | $564.9 | Condensed Consolidated Statements of Operations and Comprehensive Loss Revenue increased to $87.0 million for the six months ended June 30, 2023, but rising operating expenses led to a net loss of $148.5 million Statement of Operations Summary (in millions, except per share data) | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Revenue | $87.0 | $60.3 | | Research and development | $198.6 | $139.2 | | General and administrative | $50.7 | $44.5 | | Loss from operations | $(162.3) | $(123.4) | | Net loss | $(148.5) | $(133.4) | | Net loss per common share | $(2.78) | $(2.51) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities increased to $179.9 million for the six months ended June 30, 2023, offset by $187.2 million from investing activities Cash Flow Summary (in millions) | Cash Flow Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(179.9) | $(135.7) | | Net cash provided by investing activities | $187.2 | $117.6 | | Net cash provided by financing activities | $2.0 | $3.0 | | Net increase (decrease) in cash | $9.3 | $(15.1) | Notes to Condensed Consolidated Financial Statements Detailed notes cover accounting policies, significant collaboration revenues, a $10.0 million contract dispute accrual, and a prior period error correction for the Oerth Bio joint venture - The company is a clinical-stage biotechnology firm focused on therapies that degrade disease-causing proteins and has not yet generated revenue from product sales. Operations are financed through equity sales, collaborations, grants, and debt[26][31] - As of June 30, 2023, the company had $540.6 million in deferred revenue from its collaboration agreements, with $110.2 million anticipated for recognition in the remainder of 2023[48][49] - The company accrued $10.0 million as of June 30, 2023, related to an early-stage contract dispute, with the ultimate resolution and possible range of loss currently unknown[95] - A prior period error related to the Oerth Bio joint venture accounting was corrected, adjusting previously reported revenue and loss from equity method investment for the three and six months ended June 30, 2022, without impacting net loss or EPS[90][91][93] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses business overview, clinical program developments, financial results, and liquidity, with $87.0 million revenue, $198.6 million R&D expenses, and a $148.5 million net loss for H1 2023 Overview Arvinas, a clinical-stage biotech, is advancing PROTAC degraders like Vepdegestrant (Phase 3), Bavdegalutamide, and ARV-766, while expanding its preclinical pipeline with planned IND/CTA submissions by year-end 2023 - Vepdegestrant (ARV-471): The study-lead in of the VERITAC-3 Phase 3 trial in combination with palbociclib for first-line ER+/HER2- breast cancer has been initiated, and enrollment continues in the VERITAC-2 Phase 3 monotherapy trial[105][107] - Bavdegalutamide (ARV-110): A global Phase 3 trial for mCRPC with specific AR tumor mutations is planned for initiation in the second half of 2023[112] - ARV-766: Showed promising activity in heavily pre-treated mCRPC patients, with 42% of those with AR LBD mutations achieving PSA50, and a Phase 1b/2 combination trial with abiraterone is anticipated in the second half of 2023[115][116] - Pipeline Expansion: The company expects to submit an IND/CTA for its BCL6 and LRRK2 PROTAC degraders by year-end 2023 and advance at least two additional programs into IND/CTA-enabling studies[119] Results of Operations Revenue increased by $26.7 million to $87.0 million, while R&D expenses rose by $59.4 million to $198.6 million, leading to a $15.1 million higher net loss for the six months ended June 30, 2023 Financial Results Comparison (in millions) | Item | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change | | :--- | :--- | :--- | :--- | | Revenue | $87.0 | $60.3 | $26.7 | | Research and development expenses | $(198.6) | $(139.2) | $(59.4) | | General and administrative expenses | $(50.7) | $(44.5) | $(6.2) | | Net loss | $(148.5) | $(133.4) | $(15.1) | - The increase in revenue for the first six months of 2023 was primarily driven by a $40.1 million increase from the Vepdegestrant (ARV-471) Collaboration Agreement with Pfizer[153] R&D Expenses by Program (in millions) | Program | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | AR program | $38.4 | $27.4 | | ER program | $59.7 | $34.9 | | Other research and development | $100.5 | $76.9 | | Total R&D | $198.6 | $139.2 | Liquidity and Capital Resources With approximately $1.0 billion in cash and marketable securities as of June 30, 2023, the company expects to fund operations into 2026, despite $179.9 million net cash used in operating activities - The company had cash, cash equivalents, restricted cash, and marketable securities totaling approximately $1.0 billion as of June 30, 2023[174] - Management believes the current cash position will be sufficient to fund planned operating expenses and capital expenditure requirements into 2026[174] Cash Flow Summary (in millions) | Cash Flow Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(179.9) | $(135.7) | | Net cash provided by investing activities | $187.2 | $117.6 | | Net cash provided by financing activities | $2.0 | $3.0 | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate sensitivity on its cash and marketable securities, while its $1.0 million fixed-rate debt mitigates related risk - The company's main market risk is interest rate sensitivity on its cash, cash equivalents, and marketable securities, with interest income for the six months ended June 30, 2023, increasing to $16.6 million from $2.9 million in the prior year due to higher interest rates[179] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of June 30, 2023, the CEO and CFO concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level[181] - No changes occurred during the quarter ended June 30, 2023, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[182] PART II. OTHER INFORMATION Legal Proceedings The company is not currently a party to any material legal proceedings, though it may encounter litigation in the ordinary course of business - As of the filing date, Arvinas is not a party to any material legal proceedings[184] Risk Factors Investors are directed to the Annual Report on Form 10-K for comprehensive risk factors, as no new material risks are presented in this quarterly report - The company directs investors to review the risk factors disclosed in its Annual Report on Form 10-K filed on February 23, 2023, for a comprehensive understanding of the risks involved in investing in its common stock[185] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity securities were issued during the three and six months ended June 30, 2023 - There were no sales of unregistered equity securities during the second quarter of 2023[186] Other Information No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the second quarter of 2023 - No directors or officers adopted or terminated a Rule 10b5-1 trading plan during the quarterly period covered by this report[187] Exhibits This section lists exhibits filed with the Form 10-Q, including lease and collaboration agreement amendments, and officer certifications - Exhibits filed include the Sixth Amendment to a lease with Science Park Development Corporation and the First Amendment to the Collaboration and License Agreement with Bayer AG[189]