ARVINAS, INC. You should read the following discussion and analysis of financial condition and
operating results together with our condensed consolidated financial statements
and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q
and our Annual Report on Form 10-K for the year ended
Overview
We are a clinical-stage biopharmaceutical company dedicated to improving the lives of patients suffering from debilitating and life-threatening diseases through the discovery, development and commercialization of therapies to degrade disease-causing proteins. We use our proprietary technology platform to engineer proteolysis targeting chimeras, or PROTAC targeted protein degraders, that are designed to harness the body's own natural protein disposal system to selectively remove disease-causing proteins. We believe that our targeted protein degradation approach is a therapeutic modality that may provide distinct advantages over existing modalities, including traditional small molecule therapies and gene-based medicines. Our small molecule PROTAC technology has the potential to address a broad range of intracellular disease targets, including those representing the up to 80% of proteins that cannot be addressed by existing small molecule therapies, commonly referred to as "undruggable" targets. We are using our PROTAC platform to build an extensive pipeline of protein degradation product candidates to target diseases in oncology, neuroscience, and other therapeutic areas.
Our two lead product candidates are ARV-110 and ARV-471. We are developing
ARV-110, a PROTAC protein degrader targeting the androgen receptor protein, or
AR, for the treatment of men with metastatic castration-resistant prostate
cancer, or mCRPC. We initiated a Phase 1 clinical trial of ARV-110 in
In
The initial data from the
The data from the
Of the 12 patients treated at 140 mg and above, circulating tumor DNA analysis
of five patients showed AR forms (L702H point mutations and AR-V7 splice
variants) not degradable by ARV-110 in preclinical studies. In the group of
seven remaining patients
One of these patients had a 74% decline from baseline in PSA and remained without progression after 30 weeks, as of the data cut-off. This patient did not have measurable disease at baseline for assessment by Response Evaluation Criteria in Solid Tumors, or RECIST, a standardized set of rules for response assessment based on tumor shrinkage. The second patient had both a deep PSA response (97% decline from baseline) and a confirmed partial RECIST response (80% decrease from baseline in tumor mass) and remains without progression after 18 weeks, as of the data cut-off. Both responses, which were in patients at the 140 mg dose, were achieved by ARV-110 despite prior treatment with enzalutamide, abiraterone, chemotherapy and other therapies. Tumors from both patients have H875Y and T878A point mutations in AR, which are known to drive resistance to current standard of care treatments and have been degraded by ARV-110 in preclinical studies. In addition to these two patients, PSA reductions were observed in other patients but did not meet a 50% reduction in PSA threshold at data cutoff, and four patients remained on ARV-110 without radiographic progression for at least 20 weeks.
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A potential drug-drug interaction between ARV-110 and rosuvastatin, or ROS, was
identified during the trial. Of the 22 patients enrolled, two had concurrent use
of ROS. One patient receiving 280 mg ARV-110 experienced a Grade 4 dose-limiting
toxicity of elevated aspartate transaminase/alanine transaminase, or AST/ALT,
liver enzymes followed by acute renal failure. The second patient, receiving 70
mg ARV-110, experienced a Grade 3 AST/ALT elevation, which resolved after the
removal of ROS, and the patient was retreated
with ARV-110. Follow-up exploratory findings indicate that ROS concentrations,
but not ARV-110 concentrations, were elevated in both patients
The data from the
Dose escalation for each of the Phase 1/2 clinical trials continues and both trials are currently ongoing. We expect to share additional clinical data from the dose escalation of the Phase 1/2 trials of ARV-110 and ARV-471 in the fourth quarter of 2020.
A novel strain of coronavirus, or COVID-19, was first identified in
We commenced operations in 2013, and our operations to date have been limited to
organizing and staffing our company, business planning, raising capital,
conducting discovery and research activities, filing patent applications,
identifying potential product candidates, undertaking preclinical studies,
establishing arrangements with third parties for the manufacture of initial
quantities of our product candidates and conducting early-stage clinical trials.
To date, we have not generated any revenue from product sales and have financed
our operations primarily through sales of our equity interests, proceeds from
our collaborations, grant funding and debt financing. Through
We are a clinical-stage company. ARV-110 and ARV-471 are each in a Phase 1/2
clinical trial and our other drug discovery activities are at the research and
preclinical development stages. Our ability to generate revenue from product
sales sufficient to achieve profitability will depend heavily on the successful
development and eventual commercialization of one or more of our product
candidates. Since inception, we have incurred significant operating losses. We
expect to continue to incur significant expenses and increasing operating losses
for at least the next several years. Our net loss was
Our total operating expenses were
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We do not expect to generate revenue from sales of any product for many years, if ever. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research or product development programs or any future commercialization efforts, or to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us.
Financial Operations Overview
Revenue
To date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the foreseeable future. Our revenues to date have been generated through research collaboration and license agreements. Revenue is recognized ratably over our expected performance period under each agreement. We expect that any revenue for the next several years will be derived primarily from our current collaboration agreements and any additional collaborations that we may enter into in the future. To date, we have not received any royalties under any of the collaboration agreements.
Genentech License Agreement
In
Under the Restated Genentech Agreement,
At the time we entered into the original agreement with
Pfizer Collaboration Agreement
In
Under the Pfizer Collaboration Agreement, Pfizer has designated a number of initial Targets. For each identified Target, we and Pfizer will conduct a separate research program pursuant to a research plan. Pfizer may make substitutions for any of the initial Target candidates, subject to the stage of research for such Target.
In the year ended
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Bayer Collaboration Agreement
In
Under the Bayer Collaboration Agreement, we and Bayer will conduct a research program pursuant to separate research plans mutually agreed to by us and Bayer and tailored to each Target selected by Bayer. Bayer may make substitutions for any such initial Target candidates, subject to certain conditions and based on the stage of research for such Target. During the term of the Bayer Collaboration Agreement, we are not permitted, either directly or indirectly, to design, identify, discover or develop any small molecule pharmacologically-active agent whose primary mechanism of action is, by design, directed to the inhibition or degradation of any Target selected or reserved by Bayer, or grant any license, covenant not to sue or other right to any third party in the field of human disease under the licensed intellectual property for the conduct of such activities.
Under the terms of the Bayer Collaboration Agreement, we received an aggregate
upfront non-refundable payment of
Operating Expenses
Our operating expenses since inception have consisted solely of research and development costs and general and administrative costs.
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts, and the development of our product candidates, and include:
• salaries, benefits and other related costs, including stock-based
compensation expense, for personnel engaged in research and development
functions;
• expenses incurred under agreements with third parties, including contract
research organizations and other third parties that conduct research and
preclinical activities on our behalf as well as third parties that
manufacture our product candidates for use in our preclinical studies and
clinical trials;
• costs of outside consultants, including their fees, stock-based
compensation and related travel expenses;
• the costs of laboratory supplies and developing preclinical study and
clinical trial materials;
• facility-related expenses, which include direct depreciation costs of
equipment and allocated expenses for rent and maintenance of facilities and
other operating costs; and
• third-party licensing fees.
We expense research and development costs as incurred.
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We typically use our employee and infrastructure resources across our development programs, and as such, do not track all our internal research and development expenses on a program-by-program basis. The following table summarizes our research and development expenses for our AR program, ER program and all other platform and exploratory research and development costs:
For the Three Months For the Six Months
Ended June 30, Ended June 30,
(in thousands) 2020 2019 2020 2019
AR program costs $ 5,413 $ 3,093 $ 9,261 $ 5,949
ER program costs 2,570 1,605 6,692 3,399
Other research and development costs 15,433 11,303 29,190 20,843
Total research and development costs
Research and development activities are central to our business model. We expect that our research and development expenses will continue to increase substantially for the foreseeable future as we conduct clinical trials for ARV-110 and ARV-471 and continue to discover and develop additional product candidates.
We cannot reasonably estimate or determine with certainty the duration and costs of future clinical trials of ARV-110 and ARV-471 or any other product candidate we may develop or if, when, or to what extent we will generate revenue from the commercialization and sale of any product candidate for which we obtain marketing approval. We may never succeed in obtaining marketing approval for any product candidate. The successful development and commercialization of our product candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with developing drugs, including the uncertainty of:
• successful completion of preclinical studies;
• successful initiation of clinical trials;
• successful patient enrollment in and completion of clinical trials;
• receipt and related terms of marketing approvals from applicable regulatory
authorities;
• obtaining and maintaining patent and trade secret protection and regulatory
exclusivity for our product candidates;
• making arrangements with third-party manufacturers, or establishing
manufacturing capabilities, for both clinical and commercial supplies of
our product candidates;
• establishing sales, marketing and distribution capabilities and launching
commercial sales of our products, if and when approved, whether alone or in
collaboration with others;
• acceptance of our products, if and when approved, by patients, the medical
community and third-party payors;
• obtaining and maintaining third-party coverage and adequate reimbursement;
• maintaining a continued acceptable safety profile of the products following
approval; and
• effectively competing with other therapies.
A change in the outcome of any of these variables with respect to the
development of a product candidate could mean a significant change in the costs
and timing associated with the development of that product candidate. For
example, if the
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive, finance, business development and administrative functions. General and administrative expenses also include legal fees relating to intellectual property and corporate matters; professional fees for accounting, auditing, tax and consulting services; insurance costs; travel expenses; and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.
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We expect that our general and administrative expenses will increase in the
future as we increase our personnel headcount to support increased research and
development activities relating to our product candidates. We also expect to
incur increased expenses associated with being a public company, including costs
of accounting, audit, legal, regulatory and tax-related services associated with
maintaining compliance with
Interest Income (Expense)
Interest income consists of interest earned on our cash, cash equivalents and
short-term investments. Interest income has increased in 2020 as we invest our
excess cash from the proceeds of our public offerings. Interest expense consists
of interest paid or accrued on our outstanding debt. Interest expense was
approximately
Income Taxes
Since our inception in 2013, we have not recorded any
As of
Critical Accounting Policies and Use of Estimates
Our management's discussion and analysis of financial condition and results of
operations is based on our condensed consolidated financial statements, which
have been prepared in accordance with generally accepted accounting principles
in
For a discussion of our significant accounting policies and recent accounting
pronouncements, see Note 2 to our condensed consolidated financial statements
appearing elsewhere in this Quarterly Report on Form 10-Q and Note 2 to the
financial statements included in our consolidated financial statements as of
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Results of Operations
Comparison of Three Months Ended
Revenues
Revenues for the three months ended
Research and Development Expenses
Research and development expenses for the three months ended
General and Administrative Expenses
General and administrative expenses were
Other Income (Expenses)
Other income was
Comparison of Six Months Ended
Revenues
Revenues for the six months ended
Research and Development Expenses
Research and development expenses for the six months ended
General and Administrative Expenses
General and administrative expenses were
Other Income (Expenses)
Other income was
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Liquidity and Capital Resources
Sources of Liquidity
We do not currently have any approved products and have never generated any
revenue from product sales. To date, we have financed our operations primarily
through the sale of equity interests and through payments from collaboration
partners, grant funding and loans from the
Cash Flows
Our cash, cash equivalents and marketable securities totaled
The following table summarizes our sources and uses of cash for the period
presented:
For the Six Months
Ended June 30,
(in thousands) 2020 2019
Net cash used in operating activities
307
Increase in cash and cash equivalents
Operating Activities
Net cash used in operating activities for the six months ended
Net cash used in operating activities for the six months ended
Investing Activities
Net cash provided by investing activities for the six months ended
Net cash provided by investing activities for the six months ended
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Financing Activities
Net cash provided by financing activities for the six months ended
Net cash provided by financing activities for the six months ended
Funding Requirements
Since our inception, we have incurred significant operating losses. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future as we advance the preclinical and clinical development of our product candidates. In addition, we expect to continue to incur additional costs associated with operating as a public company.
Specifically, we anticipate that our expenses will increase substantially if and as we:
• continue a Phase 1/2 clinical trial of our product candidate, ARV-110, in
men with mCRPC;
• continue a Phase 1/2 clinical trial of our product candidate, ARV-471, in
patients with locally advanced or metastatic ER positive / HER2 negative
breast cancer;
• apply our PROTAC platform to advance additional product candidates into
preclinical and clinical development;
• expand the capabilities of our PROTAC platform;
• seek marketing approvals for any product candidates that successfully
complete clinical trials;
• ultimately establish a sales, marketing and distribution infrastructure and
scale up external manufacturing capabilities to commercialize any products
for which we may obtain marketing approval;
• expand, maintain and protect our intellectual property portfolio;
• hire additional development, including clinical and regulatory, and
scientific personnel; and
• add operational, financial and management information systems and personnel
to support our research, product development and future commercialization
efforts and support our operations as a public company.
As of
• the progress, costs and results of our Phase 1/2 clinical trial for ARV-110
and our Phase 1/2 clinical trial for ARV-471 and any future clinical
development of ARV-110 and ARV-471;
• the scope, progress, costs and results of preclinical and clinical
development for our other product candidates and development programs;
• the number of, and development requirements for, other product candidates
that we pursue, including our other oncology and neurodegenerative research
programs;
• the success of our collaborations with Pfizer, Genentech and Bayer;
• the costs, timing and outcome of regulatory review of our product candidates;
• the costs and timing of future commercialization activities, including
product manufacturing, marketing, sales and distribution, for any of our
product candidates for which we receive marketing approval;
• the revenue, if any, received from commercial sales of our product
candidates for which we receive marketing approval;
• the costs and timing of preparing, filing and prosecuting patent
applications, maintaining and enforcing our intellectual property rights
and defending any intellectual property-related claims; and
• our ability to establish collaboration arrangements with other
biotechnology or pharmaceutical companies on favorable terms, if at all,
for the development or commercialization of our product candidates.
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As a result of these anticipated expenditures, we will need to obtain
substantial additional financing in connection with our continuing operations.
Until such time, if ever, as we can generate substantial revenue from product
sales, we expect to finance our cash needs through a combination of equity
offerings, debt financings, collaborations, strategic alliances and marketing,
distribution or licensing arrangements. Although we may receive potential future
payments under our collaborations with Pfizer,
To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders' ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders' rights as common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends.
If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us.
Borrowings
In
In
In
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements.
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Emerging Growth and Smaller Reporting Company Status
We are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and a "smaller reporting company," as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended. As such, we are permitted to and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not similarly situated. As an emerging growth company, the JOBS Act allows us to delay adoption of new or revised accounting standards applicable to public companies until such standards are made applicable to private companies. However, we have irrevocably elected not to avail ourselves of this extended transition period for complying with new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
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