Arvinas LLC(ARVN) - 2021 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Presents unaudited consolidated financial statements, management's discussion, market risk, and internal controls Item 1. Financial Statements (Unaudited) Presents unaudited consolidated financial statements, showing increased net loss and decreased assets for Q1 2021 Condensed Consolidated Balance Sheets Total assets decreased to $681.8 million, driven by lower cash, while liabilities and equity also declined Condensed Consolidated Balance Sheets (in thousands) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $346,068 | $588,373 | | Marketable securities | $305,203 | $100,158 | | Total current assets | $664,657 | $703,088 | | Total assets | $681,772 | $717,369 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $40,372 | $49,085 | | Total liabilities | $66,474 | $75,111 | | Total stockholders' equity | $615,298 | $642,258 | | Total liabilities and stockholders' equity | $681,772 | $717,369 | Condensed Consolidated Statements of Operations and Comprehensive Loss Net loss increased to $41.0 million due to higher operating expenses, despite stable revenues Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Revenue | $5,539 | $6,240 | | Research and development | $34,867 | $21,727 | | General and administrative | $12,319 | $7,925 | | Total operating expenses | $47,186 | $29,652 | | Loss from operations | ($41,646) | ($23,412) | | Net loss | ($40,964) | ($21,739) | | Net loss per common share, basic and diluted | ($0.84) | ($0.56) | Condensed Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity decreased to $615.3 million, primarily due to net loss, partially offset by equity compensation - Stockholders' equity decreased by $27.0 million during the first quarter of 2021, from $642.3 million to $615.3 million[20] - Key changes included a net loss of $41.0 million, offset by stock-based compensation of $10.3 million and proceeds from stock option exercises of $4.5 million[20] Condensed Consolidated Statements of Cash Flows Cash and equivalents decreased by $242.3 million due to increased cash used in operations and investing Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($38,968) | ($16,950) | | Net cash (used in) provided by investing activities | ($207,817) | $42,495 | | Net cash provided by financing activities | $4,481 | $1,350 | | Net (decrease) increase in cash and cash equivalents | ($242,305) | $26,895 | | Cash and cash equivalents, end of the period | $346,068 | $36,106 | Notes to Unaudited Condensed Consolidated Financial Statements Notes detail accounting policies, revenue recognition from collaborations, and significant subsequent events - The company is a clinical-stage biopharmaceutical firm and expects to incur additional operating losses and negative cash flows for the foreseeable future[25] - As of March 31, 2021, the company determined there were no material adverse impacts from the COVID-19 pandemic on its financial position, but the full future extent is uncertain[26] - The company has collaboration agreements with Bayer, Pfizer, and Genentech, which are its primary sources of revenue[28][31][34] - As of March 31, 2021, the company had $42.5 million in unsatisfied performance obligations (deferred revenue) expected to be recognized over the next three years[28][31][34] - Subsequent to the quarter end, in April 2021, the company was granted $1.0 million in loan forgiveness from the State of Connecticut[76] - In May 2021, the company entered into a lease for approximately 160,000 square feet of laboratory and office space to be occupied in 2024, with annual base rent ranging from $6.3 million to $7.2 million over a ten-year period[77] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses PROTAC platform, financial results, and liquidity, noting increased losses and sufficient cash into 2024 Overview Arvinas is a clinical-stage biopharma company advancing PROTAC platform candidates in clinical trials - The company's lead product candidates are ARV-110 (for prostate cancer) and ARV-471 (for breast cancer), both of which are in Phase 1/2 clinical trials[81][82] - A Phase 1 trial for a third candidate, ARV-766, for metastatic castration-resistant prostate cancer, is expected to be initiated in the first half of 2021[83] - The company expects to continue incurring significant operating losses for the next several years, with a net loss of $41.0 million for Q1 2021[87] Financial Operations Overview Revenue is from collaborations, with R&D expenses expected to increase substantially as clinical trials advance - All revenue to date has been generated through research collaboration and license agreements with Genentech, Pfizer, and Bayer[90][91][95][97] Research and Development Expenses by Program (in thousands) | Program | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | AR program development costs | $7,229 | $3,848 | | ER program development costs | $5,604 | $4,122 | | Other research and development costs | $22,034 | $13,757 | | Total R&D costs | $34,867 | $21,727 | - The company expects R&D expenses to continue to increase substantially as it conducts clinical trials for its lead candidates and develops its pipeline[104] Results of Operations Revenues decreased slightly, while R&D and G&A expenses significantly increased due to program investments - Revenues decreased by $0.7 million in Q1 2021 compared to Q1 2020, primarily due to a collaborator adding new targets which extended the revenue recognition period[116] - R&D expenses increased by $13.2 million year-over-year, driven by an $8.3 million increase in platform/exploratory programs, a $3.4 million increase for the AR program, and a $1.5 million increase for the ER program[117] - G&A expenses increased by $4.4 million year-over-year, primarily due to a $3.6 million increase in personnel and facility costs and a $0.8 million increase in professional fees[118] Liquidity and Capital Resources The company holds $651.3 million in cash and equivalents, sufficient to fund operations into 2024 - As of March 31, 2021, cash, cash equivalents, and marketable securities totaled $651.3 million[122] - The company believes its existing cash and marketable securities will be sufficient to fund operating expenses and capital expenditure requirements into 2024[130] Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($38,969) | ($16,950) | | Net cash (used in) provided by investing activities | ($207,817) | $42,495 | | Net cash provided by financing activities | $4,481 | $1,350 | - In April 2021, the State of Connecticut forgave $1.0 million of the $2.0 million loan provided under the 2018 Assistance Agreement[138] Quantitative and Qualitative Disclosures About Market Risk Primary market risk is interest rate sensitivity on cash and investments, with fixed-rate debt limiting exposure - The company's primary market risk is interest rate sensitivity on its interest-earning assets (cash, cash equivalents, and marketable securities)[140] - Interest income was $0.5 million for Q1 2021, down from $1.3 million in Q1 2020, reflecting lower interest rates[140] - The company's outstanding debt of $2.0 million as of March 31, 2021, has a fixed interest rate of 3.25%, limiting exposure to interest rate increases on debt[140] Controls and Procedures Management concluded disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - Based on an evaluation as of March 31, 2021, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[141] - No changes occurred in the company's internal control over financial reporting during the first quarter of 2021 that have materially affected, or are reasonably likely to materially affect, internal controls[142] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, and other significant post-period events Legal Proceedings The company is not currently a party to any material legal proceedings - As of the filing date, Arvinas is not a party to any material legal proceedings[144] Risk Factors Investors should review the detailed risk factors outlined in the company's Annual Report on Form 10-K - Investors are advised to carefully consider the risks and uncertainties discussed in the "Risk Factors" section of the company's Annual Report on Form 10-K for the year ended December 31, 2020[145] Unregistered Sales of Equity Securities and Use of Proceeds The company did not issue any unregistered equity securities during the three months ended March 31, 2021 - The company did not issue any securities that were not registered under the Securities Act during the three months ended March 31, 2021[146] Other Information Significant post-period event includes a new lease agreement for laboratory and office space in New Haven, CT - On May 4, 2021, the company's subsidiary entered into a lease for approximately 160,000 square feet of laboratory and office space in New Haven, CT, with occupancy planned for 2024[147] - The lease has an initial term of approximately ten years, with annual base rent ranging from $6.3 million to $7.2 million[148] - In connection with the lease, the company issued a letter of credit for $3.5 million as a security deposit, collateralized by a certificate of deposit of the same amount[150] Exhibits This section lists all exhibits filed with the Form 10-Q, including lease amendments and officer certifications - The filing includes exhibits such as lease amendments, CEO/CFO certifications (Rule 13a-14(a) and Section 906), and XBRL data files[152][154][156][158]