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arvn-10q_20180930.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2018

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________________ to ____________________

Commission File Number: 001-38672

ARVINAS, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware	47-2566120
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
5 Science Park 395 Winchester Ave. New Haven, Connecticut	06511
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (203) 535-1456

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Small reporting company	☒
		Emerging growth Company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 01, 2018, the registrant had 32,350,972 shares of common stock, $0.001 par value per share, outstanding.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION	2
Item 1.	Financial Statements (Unaudited)	2
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of Comprehensive Income (Loss)	3
	Condensed Consolidated Statements of Redeemable Convertible Preferred Units/Shares and Changes in Members’/Shareholders’ Equity	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	24
PART II.	OTHER INFORMATION	25
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	60
Item 6.	Exhibits	61
Signatures		62

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Arvinas, INC. (SUCCESSOR TO aRVINAS hOLDING cOMPANY, llc) and Subsidiaries

Condensed Consolidated Balance Sheets (unaudited)

	September 30, 2018			December 31, 2017
Assets
Current assets:
Cash and cash equivalents	$	6,191,004		$	30,912,391
Marketable securities		83,602,865			8,258,982
Account receivable		—			25,000,000
Other receivable		2,178,878			1,040,452
Prepaid expenses and other current assets		3,545,309			316,903
Total current assets		95,518,056			65,528,728
Property, equipment and leasehold improvements, net		3,347,242			1,298,881
Other assets		20,760			20,760
Total assets	$	98,886,058		$	66,848,369
Liabilities and stockholders'/members’ equity
Current liabilities:
Accounts payable	$	1,300,760		$	596,527
Accrued expenses		4,851,146			3,545,936
Deferred revenue		13,501,056			13,553,136
Current portion of long-term debt		194,669			159,265
Total current liabilities		19,847,631			17,854,864
Deferred revenue		40,713,950			48,545,625
Long term debt, net of current portion		2,000,000			151,122
Preferred unit warrant liability		—			50,888
Total liabilities		62,561,581			66,602,499
Commitments and Contingencies
Series A redeemable convertible preferred units, no par value, at redemption value, 22,463,665 units issued and outstanding at December 31, 2017		—			19,768,025
Series B redeemable convertible preferred units, no par value, at redemption value, 24,977,489 units issued and outstanding at December 31, 2017		—			41,712,407
Series A redeemable convertible preferred stock, $0.001 par value, at redemption value, 22,573,781 shares issued and outstanding at September 30, 2018		111,132,408			—
Series B redeemable convertible preferred stock, $0.001 par value, at redemption value, 24,977,489 shares issued and outstanding at September 30, 2018		122,965,984			—
Series C redeemable convertible preferred stock, $0.001 par value, at redemption value, 16,467,066 shares issued and outstanding at September 30, 2018		81,068,464			—
Stockholders’/Members’ equity:
Common units, no par value, 1,897,544 units issued and outstanding		—			6,167
Incentive units, no par value, 3,066,734 units issued as of December 31, 2017		—			1,186,419
Common stock, $0.001 par value; 3,683,639 shares issued and outstanding as of September 30, 2018		3,684			—
Accumulated deficit		(286,176,753	)		(62,417,397	)
Additional paid-in capital		7,377,913			—
Accumulated other comprehensive loss		(47,223	)		(9,751	)
Total members’/stockholders’ equity		(278,842,379	)		(61,234,562	)
Total liabilities and members’/stockholders’ equity	$	98,886,058		$	66,848,369

See accompanying notes

Arvinas, INC. (SUCCESSOR TO aRVINAS hOLDING cOMPANY, llc) and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited)

Consolidated Statements of Operations	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Revenue	$	3,375,264		$	1,668,861		$	10,883,755		$	5,006,583
Operating expenses:
Research and development		13,149,879			7,222,897			30,631,531			22,102,713
General and administrative		4,284,231			857,310			7,110,723			2,357,119
Total operating expenses		17,434,110			8,080,207			37,742,254			24,459,832
Loss from operations		(14,058,846	)		(6,411,346	)		(26,858,499	)		(19,453,249	)
Other income (expenses)
Other income, net		160,100			607			418,494			1,030
Change in fair value of preferred unit warrant		—			1,546			(193,779	)		4,338
Interest income		523,338			24,140			1,273,988			165,606
Interest expense		(12,264	)		(12,219	)		(32,804	)		(38,905	)
Total other income		671,174			14,074			1,465,899			132,069
Loss before income taxes		(13,387,672	)		(6,397,272	)		(25,392,600	)		(19,321,180	)
Benefit from income taxes		—			—			—			—
Net loss		(13,387,672	)		(6,397,272	)		(25,392,600	)		(19,321,180	)
Change in fair value of redeemable convertible preferred stock/units		(112,050,609	)		—			(198,366,756	)		—
Net loss attributable to common shares/units	$	(125,438,281	)	$	(6,397,272	)	$	(223,759,356	)	$	(19,321,180	)
Net loss per common share/unit, basic and diluted	$	(62.38	)	$	(3.37	)	$	(115.62	)	$	(10.18	)
Weighted average common shares/units outstanding, basic and diluted		2,010,807			1,897,544			1,935,299			1,897,544

Consolidated Statements of Comprehensive Loss	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Net loss	$	(13,387,672	)	$	(6,397,272	)	$	(25,392,600	)	$	(19,321,180	)
Other comprehensive loss:
Unrealized gain (loss) on available-for-sale securities		49,391			9,339			(37,472	)		18,043
Comprehensive loss	$	(13,338,281	)	$	(6,387,933	)	$	(25,430,072	)	$	(19,303,137	)

See accompanying notes

Arvinas, INC. (SUCCESSOR TO aRVINAS hOLDING cOMPANY, llc) and Subsidiaries

Condensed Consolidated Statements of Redeemable Convertible Preferred Units/Shares and Changes in Members’/Stockholders’ Equity (unaudited)

	Series A						Series B						Series C						Series
	Redeemable						Redeemable						Redeemable						A, B and C
	Convertible						Convertible						Convertible						Convertible
	Preferred						Preferred						Preferred						Preferred
	Units			Amount			Units			Amount			Units			Amount			Shares		Amount
Balance at December 31, 2016		22,463,665		$	15,300,002			24,977,489		$	41,609,999			—		$	—			—	$	—
Incentive unit-based compensation		—			—			—			—			—			—			—		—
Net loss		—			—			—			—			—			—			—		—
Unrealized gain on available-for-sale securities		—			—			—			—			—			—			—		—
Balance at September 30, 2017		22,463,665		$	15,300,002			24,977,489		$	41,609,999			—		$	—			—	$	—
Balance at December 31, 2017		22,463,665		$	19,768,025			24,977,489		$	41,712,407			—		$	—			—	$	—
Incentive unit-based compensation		—			—			—			—			—			—			—		—
Exercise of Series A redeemable convertible preferred warrant		110,116			319,667			—			—			—			—			—		—
Issuance of Series C redeemable convertible preferred units		—			—			—			—			16,467,066			55,000,001			—		—
Change in redemption value of redeemable convertible preferred units		—			91,044,716			—			81,253,577			—			26,068,463			—		—
Net loss		—			—			—			—			—			—			—		—
Conversion of redeemable convertible preferred units to redeemable convertible preferred shares		(22,573,781	)		(111,132,408	)		(24,977,489	)		(122,965,984	)		(16,467,066	)		(81,068,464	)		64,018,336		315,166,856
Conversion of common and incentive units to common and restricted stock		—			—			—			—			—			—			—		—
Unrealized loss on available-for-sale securities		—			—			—			—			—			—			—		—
Balance at September 30, 2018		—		$	—			—		$	—			—		$	—			64,018,336	$	315,166,856

																						Accumulated			Total
																				Additional		Other			Members’
	Common						Common				Incentive						Accumulated			Paid-in		Comprehensive			/Stockholders'
	Units			Amount			Shares		Amount		Units			Amount			Deficit			Capital		Loss			Equity
Balance at December 31, 2016		1,897,544		$	6,167			—	$	—		9,966,886		$	941,371		$	(33,797,760	)	$	—	$	(28,679	)	$	(32,878,901	)
Incentive unit-based compensation		—			—			—		—		232,329			162,901			—			—		—			162,901
Net loss		—			—			—		—		—			—			(19,321,180	)		—		—			(19,321,180	)
Unrealized gain on available-for-sale securities		—			—			—		—		—			—			—			—		18,043			18,043
Balance at September 30, 2017		1,897,544		$	6,167			—	$	—		10,199,215		$	1,104,272		$	(53,118,940	)	$	—	$	(10,636	)	$	(52,019,137	)
Balance at December 31, 2017		1,897,544		$	6,167			—	$	—		11,927,381		$	1,186,419		$	(62,417,397	)	$	—	$	(9,751	)	$	(61,234,562	)
Incentive unit/share-based compensation		—			—			—		—		5,424,605			6,189,011			—			—		—			6,189,011
Exercise of Series A redeemable convertible preferred warrant		—			—			—		—		—			—			—			—		—			—
Issuance of Series C redeemable convertible preferred units		—			—			—		—		—			—			—			—		—			—
Change in redemption value of redeemable convertible preferred units		—			—			—		—		—			—			(198,366,756	)		—		—			(198,366,756	)
Net loss		—			—			—		—		—			—			(25,392,600	)		—		—			(25,392,600	)
Conversion of redeemable convertible preferred units to redeemable convertible preferred shares		—			—			—		—		—			—			—					—			—
Conversion of common and incentive units to common and restricted stock		(1,897,544	)		(6,167	)		3,683,639		3,684		(17,351,986	)		(7,375,430	)		—			7,377,913		—			—
Unrealized loss on available-for-sale securities		—			—			—		—		—			—			—			—		(37,472	)		(37,472	)
Balance at September 30, 2018		—		$	—			3,683,639	$	3,684		—		$	—		$	(286,176,753	)	$	7,377,913	$	(47,223	)	$	(278,842,379	)

See accompanying notes

Arvinas, INC. (SUCCESSOR TO aRVINAS hOLDING cOMPANY, llc) and Subsidiaries

Condensed Consolidated Statements of Cash Flows (unaudited)

	Nine Months Ended September 30,
	2018			2017
Cash flows from operating activities:
Net loss	$	(25,392,600	)	$	(19,321,180	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount		13,473			13,473
Change in fair value of preferred unit warrant liability		193,779			(4,338	)
Depreciation and amortization		483,052			246,367
Net accretion of bond discounts/premiums		213,190			312,561
Non-cash compensation		6,189,011			162,901
Changes in operating assets and liabilities:
Account receivable		25,000,000			—
Other receivable		(1,138,426	)		887,835
Prepaid expenses and other current assets		(2,565,154	)		22,940
Accounts payable		704,233			(648,028	)
Accrued expenses		319,657			289,802
Deferred revenue		(7,883,755	)		(5,006,582	)
Net cash used in operating activities		(3,863,540	)		(23,044,249	)
Cash flows from investing activities:
Purchase of marketable securities		(114,393,545	)		—
Maturities of marketable securities		38,799,000			12,033,000
Sales of marketable securities		—			9,077,435
Purchase of property, equipment and leasehold improvements		(2,209,112	)		(577,859	)
Net cash provided by (used in) investing activities		(77,803,657	)		20,532,576
Cash flows from financing activities:
Repayments of long term debt		(129,191	)		(119,885	)
Proceeds from long term debt		2,000,000			—
Proceeds from sale of redeemable convertible preferred units		55,000,001			—
Proceeds from exercise of redeemable convertible preferred warrant		75,000			—
Net cash provided by (used in) financing activities		56,945,810			(119,885	)
Net decrease in cash and cash equivalents		(24,721,387	)		(2,631,558	)
Cash and cash equivalents, beginning of the period		30,912,391			5,088,548
Cash and cash equivalents, end of the period	$	6,191,004		$	2,456,990
Supplemental disclosure of cash flow information:
Purchases of property, equipment and leasehold improvements unpaid at period end	$	322,301		$	-
Deferred offering costs included in accrued expenses	$	663,252		$	-
Cash paid for interest	$	19,331		$	25,433
Change in redemption value of preferred units	$	(198,366,756	)	$	-

See accompanying notes

Arvinas, INC. (SUCCESSOR TO aRVINAS hOLDING cOMPANY, llc) and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

1. Nature of Business

Arvinas, Inc. (Arvinas) has five wholly owned subsidiaries, Arvinas Operations, Inc., Arvinas Androgen Receptor, Inc., Arvinas Estrogen Receptor, Inc., Arvinas BRD4, Inc. and Arvinas Winchester, Inc. (collectively, the Company). The Company is a biopharmaceutical company dedicated to improving the lives of patients suffering from debilitating and life-threatening diseases throughout the discovery, development and commercialization of therapies to degrade disease-causing proteins. The Company expects to incur additional operating losses and negative operating cash flows for the foreseeable future.

On October 1, 2018, the Company completed an initial public offering (IPO) in which the Company issued and sold 7,500,000 shares of common stock at a public offering price of $16.00 per share. In October 2018, the underwriters of the IPO exercised in part their option to purchase 200,482 additional shares of the Company’s common stock at an offering price of $16.00 per share. The Company’s aggregate gross proceeds from the sale of shares in the IPO, including the option, was $123.2 million before fees and expenses of $12.0 million, of which $2.8 million were recorded within Other current assets as of September 30, 2018.