arvn-20240930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________

FORM 10-Q

__________________________________________

(Mark One)


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

For the quarterly period ended September 30, 2024


o			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

__________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.001 per share

ARVN

The Nasdaq Stock Market LLC

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 ý No o

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 ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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	ý	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	o
		Emerging growth company	o

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. o

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

As of October 25, 2024, the registrant had 68,713,098 shares of common stock, $0.001 par value per share, outstanding.

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		Page
PART I.	FINANCIAL INFORMATION	2

Item 1.	Financial Statements (Unaudited)	2
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Operations and Comprehensive Loss	3
	Condensed Consolidated Statements of Changes in Stockholders’ Equity	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	36

PART II.	OTHER INFORMATION	37

Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 5.	Other Information	38
Item 6.	Exhibits	39

Signatures		40

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “predict,” “project,” “target,” “potential,” “goals,” “will,” “would,” “could,” “should,” “continue” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

The forward-looking statements in this Quarterly Report on Form 10-Q include, among other things, statements about:

•the initiation, timing, progress and results of our current and any future clinical trials of vepdegestrant, ARV-102 and ARV-393 and current trials of ARV-766, which we are transitioning to Novartis Pharma AG, and bavdegalutamide (ARV-110), including statements regarding the period during which the results of the clinical trials will become available;

•the timing of, and our ability to obtain, marketing approval of our product candidates and the ability of our product candidates to meet existing or future regulatory standards;

•the potential receipt of payments based on achievement of milestones under our collaborations, including our collaboration with Pfizer Inc. entered into in July 2021;

•potential receipt of payments based on the achievement of milestones related to ARV-766 and future royalties under our license agreement with Novartis Pharma AG;

•our plans to pursue research and development of other product candidates;

•the filing of an investigational new drug application for our kirsten rat sarcoma GD12 program;

•the potential advantages of our platform technology and our product candidates;

•the extent to which our scientific approach and platform technology may potentially address a broad range of diseases and disease targets;

•the potential receipt of revenue from future sales of our product candidates;

•the rate and degree of market acceptance and clinical utility of our product candidates;

•our estimates regarding the potential market opportunity for our product candidates;

•our sales, marketing and distribution capabilities and strategy;

•our ability to establish and maintain arrangements for manufacture of our product candidates;

•our ability to enter into additional collaborations with third parties;

•our intellectual property position;

•our estimates regarding expenses, future revenues, capital requirements and needs for additional financing;

•the impact of government laws and regulations; and

•our competitive position.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in our Annual Report on Form 10-K for the year ended December 31, 2023, filed on February 27, 2024, and this Quarterly Report on Form 10-Q, particularly in the “Risk Factors” sections, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do

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not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may differ materially from what we expect. We do not assume any obligation to update any forward-looking statements except as required by applicable law.

Throughout this Quarterly Report on Form 10-Q, references to the “Company,” “Arvinas,” “we,” “us,” and “our,” refer to Arvinas, Inc. and its consolidated subsidiaries, except where the context requires otherwise, or any one or more of them as the context may require, and “board of directors” refers to the board of directors of Arvinas, Inc.

The Arvinas name and logo are our trademarks. We also own the service mark and the registered U.S. trademark for PROTAC®. This Quarterly Report on Form 10-Q contains references to our trademarks and service marks and to those belonging to other entities. Solely for convenience, trademarks and trade names referred to in this Quarterly Report on Form 10-Q, including logos, artwork and other visual displays, may appear without the ® or ™ symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other entities’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other entity.

iii

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

ARVINAS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (unaudited)


(dollars and shares in millions, except per share amounts)	September 30, 2024		December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	85.2	$	311.7
Restricted cash	—		5.5
Marketable securities	1,036.4		949.3
Accounts receivable	7.3		—
Other receivables	7.5		7.2
Prepaid expenses and other current assets	13.1		6.5
Total current assets	1,149.5		1,280.2
Property, equipment and leasehold improvements, net	6.8		11.5
Operating lease right of use assets	1.0		2.5
Collaboration contract asset and other assets	9.8		10.4
Total assets	$	1,167.1	$	1,304.6
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued liabilities	$	75.9	$	92.2
Deferred revenue	199.2		163.0

Current portion of operating lease liabilities	0.8		1.9
Total current liabilities	275.9		257.1
Deferred revenue	304.5		386.2
Long-term debt	0.6		0.8
Operating lease liabilities	0.1		0.5
Total liabilities	581.1		644.6
Commitments and Contingencies (Note 13)
Stockholders’ equity:
Preferred stock, $0.001 par value, zero shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively	—		—
Common stock, $0.001 par value; 68.7 and 68.0 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively	0.1		0.1
Accumulated deficit	(1,486.5)		(1,332.7)
Additional paid-in capital	2,068.3		1,995.7
Accumulated other comprehensive income (loss)	4.1		(3.1)
Total stockholders’ equity	586.0		660.0
Total liabilities and stockholders’ equity	$	1,167.1	$	1,304.6

See accompanying notes to the condensed consolidated financial statements

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ARVINAS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited)


(dollars and shares in millions, except per share amounts)	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Consolidated Statements of Operations	2024		2023		2024		2023
Revenue	$	102.4	$	34.6	$	204.2	$	121.6
Operating expenses:
Research and development	86.9		85.9		264.9		284.5
General and administrative	75.8		22.6		131.3		73.3
Total operating expenses	162.7		108.5		396.2		357.8
Loss from operations	(60.3)		(73.9)		(192.0)		(236.2)
Other (expense) income
Other expense, net	(2.6)		—		(2.7)		(1.1)
Interest income, net	14.3		10.0		41.9		26.6

Total other (expense) income	11.7		10.0		39.2		25.5
Net loss before income taxes and loss from equity method investment	(48.6)		(63.9)		(152.8)		(210.7)
Income tax (expense) benefit	(0.6)		—		(1.0)		0.7
Loss from equity method investment	—		(0.1)		—		(2.5)
Net loss	$	(49.2)	$	(64.0)	$	(153.8)	$	(212.5)
Net loss per common share, basic and diluted	$	(0.68)	$	(1.18)	$	(2.14)	$	(3.97)
Weighted average common shares outstanding, basic and diluted	72.1		54.1		71.9		53.6


(dollars in millions)	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Consolidated Statements of Comprehensive Loss	2024		2023		2024		2023
Net loss	$	(49.2)	$	(64.0)	$	(153.8)	$	(212.5)
Other comprehensive loss:
Unrealized gain on available-for-sale securities	7.9		3.0		7.2		10.0
Comprehensive loss	$	(41.3)	$	(61.0)	$	(146.6)	$	(202.5)

See accompanying notes to the condensed consolidated financial statements

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ARVINAS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited)


(dollars and shares in millions)	Common			Accumulated Deficit		Additional Paid-in Capital		Accumulated Other Comprehensive (Loss) Income		Total Stockholders' Equity
For the Three Months Ended September 30, 2024 and 2023	Shares	Amount
Balance as of June 30, 2024	68.6	$	0.1	$	(1,437.3)	$	2,041.2	$	(3.8)	$	600.2
Stock-based compensation	—	—		—		24.7		—		24.7
Net loss	—	—		(49.2)		—		—		(49.2)

Issuance of common stock under equity incentive plans	0.1	—		—		2.4		—		2.4

Unrealized gain on available-for-sale securities	—	—		—		—		7.9		7.9
Balance as of September 30, 2024	68.7	$	0.1	$	(1,486.5)	$	2,068.3	$	4.1	$	586.0
Balance as of June 30, 2023	53.4	$	0.1	$	(1,113.9)	$	1,589.6	$	(12.2)	$	463.6
Stock-based compensation	—	—		—		16.7		—		16.7
Net loss	—	—		(64.0)		—		—		(64.0)

Issuance of common stock under equity incentive plans	0.1	—		—		1.9		—		1.9
Common stock issued, net of issuance costs of $1.1	1.5	—		—		36.0		—		36.0
Unrealized gain on available-for-sale securities	—	—		—		—		3.0		3.0
Balance as of September 30, 2023	55.0	$	0.1	$	(1,177.9)	$	1,644.2	$	(9.2)	$	457.2


(dollars and shares in millions)	Common			Accumulated Deficit		Additional Paid-in Capital		Accumulated Other Comprehensive (Loss) Income		Total Stockholders' Equity
For the Nine Months Ended September 30, 2024 and 2023	Shares	Amount
Balance as of December 31, 2023	68.0	$	0.1	$	(1,332.7)	$	1,995.7	$	(3.1)	$	660.0
Stock-based compensation	—	—		—		64.9		—		64.9
Net loss	—	—		(153.8)		—		—		(153.8)

Issuance of common stock under equity incentive plans	0.7	—		—		7.7		—		7.7

Unrealized gain on available-for-sale securities	—	—		—		—		7.2		7.2
Balance as of September 30, 2024	68.7	$	0.1	$	(1,486.5)	$	2,068.3	$	4.1	$	586.0
Balance as of December 31, 2022	53.2	$	0.1	$	(965.4)	$	1,549.4	$	(19.2)	$	564.9
Stock-based compensation	—	—		—		54.9		—		54.9
Net loss	—	—		(212.5)		—		—		(212.5)

Issuance of common stock under equity incentive plans	0.3	—		—		3.9		—		3.9
Common stock issued, net of issuance costs of $1.1	1.5	—		—		36.0		—		36.0
Unrealized gain on available-for-sale securities	—	—		—		—		10.0		10.0
Balance as of September 30, 2023	55.0	$	0.1	$	(1,177.9)	$	1,644.2	$	(9.2)	$	457.2

See accompanying notes to the condensed consolidated financial statements

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ARVINAS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (unaudited)


	For the Nine Months Ended September 30,
(dollars in millions)	2024		2023
Cash flows from operating activities:
Net loss	$	(153.8)	$	(212.5)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	3.5		3.6
Net accretion of bond discounts/premiums	(17.1)		(11.6)

Loss on sale of marketable securities	—		0.9
Amortization of right-of-use assets	1.5		1.4
Amortization of collaboration contract asset	3.6		2.0
Net loss on disposal of property, plant and equipment	2.6		—
Stock-based compensation	64.9		54.9
Changes in operating assets and liabilities:
Accounts receivable	(7.3)		(14.7)
Other receivables	(0.3)		2.2
Prepaid expenses and other current assets	(6.4)		12.3
Collaboration contract asset	(3.0)		—
Accounts payable and accrued liabilities	(16.3)		16.0
Operating lease liability	(1.6)		(1.5)
Deferred revenue	(45.5)		(117.7)
Net cash used in operating activities	(175.2)		(264.7)
Cash flows from investing activities:
Purchases of marketable securities	(600.8)		(665.7)
Maturities of marketable securities	538.0		873.4
Sales of marketable securities	—		52.3
Purchases of property, equipment and leasehold improvements	(1.5)		(2.8)
Proceeds from disposal of property, equipment and leaseholds improvements	0.1		—
Net cash (used in) provided by investing activities	(64.2)		257.2
Cash flows from financing activities:
Repayments of long-term debt	(0.3)		—
Proceeds from issuance of common stock	—		37.1
Payment of common stock issuance costs	—		(1.1)
Proceeds from exercise of stock options and issuance of ESPP shares	7.7		3.9
Net cash provided by financing activities	7.4		39.9
Net (decrease) increase in cash, cash equivalents and restricted cash	(232.0)		32.4
Cash, cash equivalents and restricted cash, beginning of the period	317.2		86.8
Cash, cash equivalents and restricted cash, end of the period	$	85.2	$	119.2
Supplemental disclosure of cash flow information:

Cash paid for taxes	$	1.6	$	9.1

See accompanying notes to the condensed consolidated financial statements

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ARVINAS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (unaudited)

1. Nature of Business and Basis of Presentation

Arvinas, Inc. and its subsidiaries (“Arvinas” or the "Company”) is a clinical-stage biotechnology company dedicated to improving the lives of patients suffering from debilitating and life-threatening diseases.

The accompanying unaudited condensed consolidated financial statements include the accounts of Arvinas, Inc. and its subsidiaries. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X under the Securities Exchange Act of 1934, as amended (“Exchange Act”). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to U.S. Securities and Exchange Commission (“SEC”) rules. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation have been included. The condensed consolidated balance sheet as of December 31, 2023 has been derived from the Company's audited consolidated financial statements as of that date. The financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2023, forming part of Arvinas’ 2023 Annual Report on Form 10-K filed with the SEC on February 27, 2024.

The preparation of the Company’s unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amount of assets, liabilities, revenue and expenses. These estimates include assumptions and judgments based on historical experience, current conditions, future expectations and other factors the Company considers reasonable. These estimates are reviewed on an ongoing basis and revised as necessary. Actual results could differ from these estimates.

Risks and Uncertainties

The Company is subject to a number of risks similar to other biotechnology companies in a similar stage, including, but not limited to, the need to obtain adequate additional funding, possible failure of preclinical testing or clinical trials, the need to obtain marketing approval for its product candidates, competitors developing new technological innovations, and the need to successfully commercialize and gain market acceptance of the Company’s products and to protect its proprietary technology. If the Company does not successfully obtain regulatory approval of its product candidates, it will be unable to generate revenue from product sales or achieve profitability.

To date, the Company has not generated any revenue from product sales and expects to incur additional operating losses and negative operating cash flows for the foreseeable future. The Company has financed its operations primarily through sales of assets and equity interests, proceeds from collaborations and a licensing arrangement, grant funding and debt financing. The Company had cash, cash equivalents and marketable securities of approximately $1.1 billion as of September 30, 2024.

2. Summary of Accounting Pronouncements and Significant Accounting Policies

Accounting Pronouncements

Recently Adopted Accounting Pronouncements

There have been no recently adopted accounting pronouncements that have had a material impact on the Company's unaudited condensed consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

Segment Reporting (Topic 280) - In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, “Segment Reporting - Improvements to Reportable Segment Disclosures,” which requires disclosure of incremental segment information on an annual and interim basis and also requires companies with a single reportable segment to provide all disclosures

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required by this ASU and all existing segment disclosures in Accounting Standard Codification (“ASC”) 280, “Segment Reporting.” The requirements of the ASU are effective for fiscal years beginning after December 15, 2023 and interim periods beginning after December 15, 2024. The Company is currently evaluating the impact ASU No. 2023-07 will have on its condensed consolidated financial statements.

Income Taxes (Topic 740) - In December 2023, the FASB issued ASU No. 2023-09, "Improvements to Income Tax Disclosures," which requires enhanced income tax disclosures, including specific categories and disaggregation of information in the effective tax rate reconciliation, disaggregated information related to income taxes paid, income or loss from continuing operations before income tax expense or benefit and income tax expense or benefit from continuing operations. The requirements of the ASU are effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact ASU No. 2023-09 will have on its condensed consolidated financial statements.

Significant Accounting Policies

There were no changes to the Company’s significant accounting policies during the nine months ended September 30, 2024.

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the total amounts shown in the condensed consolidated statements of cash flows for the nine months ended September 30, 2024 and 2023:


(dollars in millions)	September 30, 2024		September 30, 2023
Cash and cash equivalents	$	85.2	$	113.7
Restricted cash	—		5.5
Cash, cash equivalents and restricted cash	$	85.2	$	119.2

Restricted cash represents a letter of credit collateralized by a certificate of deposit in the same amount as was required under the terms of the Terminated Lease, as discussed below in Note 6, Right-of-Use Assets and Liabilities.

3. Research Collaboration and License Agreements

Novartis License and Asset Agreements

In April 2024, the Company entered into a transaction (the "Novartis Transaction"), including both a license agreement (the "Novartis License Agreement") and an asset purchase agreement (the "Novartis Asset Agreement") with Novartis Pharma AG ("Novartis") for the worldwide development, manufacture and commercialization of ARV-766, the Company's second generation PROTAC® androgen receptor (AR) degrader for patients with prostate cancer and for the sale of the Company's preclinical AR-V7 program. Under the terms of the agreements, Novartis is responsible for worldwide clinical development and commercialization of ARV-766 and has all research, development, manufacturing, and commercialization rights with respect to the Company’s PROTAC® protein degrader targeting AR-V7, a splice variant of the AR.

In May 2024, the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, expired with respect to the Novartis Transaction (the “HSR Termination”). As a result of the HSR Termination and satisfaction of other closing conditions, Novartis paid to the Company a one-time, upfront payment in the aggregate amount of $150.0 million in accordance with the terms of the Novartis License Agreement and the Novartis Asset Agreement. Under the terms of the Novartis License Agreement, the Company is eligible to receive up to an additional $1.01 billion as contingent payments based on specified development, regulatory and commercial milestones for ARV-766 being met, as well as tiered royalties based on worldwide net sales of ARV-766, subject to reduction under certain circumstances as provided in the

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Novartis License Agreement. There were no development, regulatory or commercial milestone payments, or sales-based royalties received through September 30, 2024.

The Novartis License Agreement will expire on a country-by-country basis (or, in certain cases, a region-by-region basis) until the expiration of the applicable royalty term for such country (or region, as applicable). The Novartis License Agreement contains customary termination provisions, including that either party may terminate the Novartis License Agreement (a) upon the material breach of the other party or (b) in the event the other party experiences an insolvency event. Additionally, Novartis may terminate the Novartis License Agreement for convenience or upon a safety or regulatory issue.

The Company determined that the Novartis License Agreement and the Novartis Asset Agreement entered into with Novartis concurrently should be evaluated as a combined contract in accordance with ASC 606, Revenue from Contracts with Customers. The Company determined the fair value of the assets sold under the Novartis Asset Agreement to be $20.0 million, which was recognized at the time of sale as revenue, and the fair value of the Novartis License Agreement to be $130.0 million, which is being recognized as revenue over the total estimated period of performance during the technology transfer period, as defined in the agreement, based on the cost incurred input method. Under the Novartis License Agreement, Novartis will also reimburse the Company for development costs incurred during the technology transfer period, which will be recognized as revenue as costs are incurred.

As a direct result of the Company’s entry into the Novartis Transaction, the Company incurred direct and incremental costs to obtain the contract, paid to a financial advisor, totaling $3.0 million. In accordance with ASC 340, Other Assets and Deferred Costs, the Company recognized an asset of $3.0 million in collaboration contract asset and other assets in the condensed consolidated balance sheet at inception of the Novartis License Agreement and the Novartis Asset Agreement, which is being amortized as general and administrative expense over the total estimated period of performance under the Novartis License Agreement and the Novartis Asset Agreement.

Vepdegestrant (ARV-471) Collaboration Agreement

In July 2021, the Company entered into a Collaboration Agreement with Pfizer Inc. (“Pfizer”) (the “Vepdegestrant (ARV-471) Collaboration Agreement”) pursuant to which the Company granted Pfizer worldwide co-exclusive rights to develop and commercialize products containing the Company’s proprietary compound vepdegestrant (the “Licensed Products”). Under the Vepdegestrant (ARV-471) Collaboration Agreement, the Company received an upfront, non-refundable payment of $650.0 million. In addition, the Company is eligible to receive up to an additional $1.4 billion in contingent payments based on specific regulatory and sales-based milestones for the Licensed Products. Of the total contingent payments, $400.0 million in regulatory milestones are related to marketing approvals and $1.0 billion are related to sales-based milestones. There were no regulatory or sales-based milestone payments received through September 30, 2024.

The Company and Pfizer share equally all development costs, including costs of conducting clinical trials, for the Licensed Products, subject to certain exceptions. Except for certain regions described below, the parties will also share equally all profits and losses in commercialization and medical affairs activities for the Licensed Products in all other countries, subject to certain exceptions.

The Company will be the marketing authorization holder in the United States and, subject to marketing approval, book sales in the United States, while Pfizer will hold marketing authorizations outside the United States. The parties will determine which, if any, regions within the world will be solely commercialized by one party, and in such region the parties will adjust their share of profits and losses for the Licensed Products based on the role each party will be performing.

As a direct result of the Company’s entry into the Vepdegestrant (ARV-471) Collaboration Agreement, the Company incurred direct and incremental costs to obtain the contract, paid to a financial advisor, totaling $12.9 million. In accordance with ASC 340, Other Assets and Deferred Costs, the Company recognized an asset of $12.9 million in collaboration contract asset and other assets in the condensed consolidated balance sheet at inception of the Vepdegestrant (ARV-471) Collaboration Agreement, which is being amortized as general and administrative expense over the total estimated period of performance under the Vepdegestrant (ARV-471) Collaboration Agreement.

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Bayer Collaboration Agreement

In June 2019, the Company and Bayer AG entered into a Collaboration and License Agreement (the “Bayer Collaboration Agreement”) setting forth the Company’s collaboration with Bayer AG to identify or optimize proteolysis targeting chimeras ("PROTAC® targeted protein degraders") that mediate the degradation of target proteins. Under the terms of the Bayer Collaboration Agreement, the Company received an upfront, non-refundable payment of $17.5 million in exchange for the use of the Company’s technology license. The Company also received an additional $12.0 million from Bayer AG from inception through 2023, including $1.5 million received during the nine months ended September 30, 2023. These payments are being recognized over the total estimated period of performance.

The Company was also eligible to receive up to $197.5 million in development milestone payments and up to $490.0 million in sales-based milestone payments for all designated target proteins. In addition, the Company was eligible to receive, on net sales of PROTAC targeted protein degrader-related products, mid-single digit to low-double digit tiered royalties, which were subject to reductions. There were no development or sales-based milestone payments or royalties received through September 30, 2024.

Pursuant to notice from Bayer AG in accordance with the terms of the Bayer Collaboration Agreement, the Bayer Collaboration Agreement was terminated effective August 12, 2024.

Pfizer Research Collaboration Agreement

In December 2017, the Company entered into a Research Collaboration and License Agreement with Pfizer (the “Pfizer Research Collaboration Agreement”). Under the terms of the Pfizer Research Collaboration Agreement, the Company received an upfront, non-refundable payment and certain additional payments totaling $28.0 million in 2018 in exchange for use of the Company’s technology license and to fund Pfizer-related research as defined within the Pfizer Research Collaboration Agreement. These payments are being recognized as revenue over the total estimated period of performance. The Company is eligible to receive up to an additional $37.5 million in non-refundable option payments if Pfizer exercises its options for all target proteins under the Pfizer Research Collaboration Agreement.

The Company is also entitled to receive up to $225.0 million in development milestone payments and up to $550.0 million in sales-based milestone payments for all designated target proteins under the Pfizer Research Collaboration Agreement, as well as tiered royalties based on sales. During the nine months ended September 30, 2023, the Company received payments totaling $1.0 million for additional target proteins and services which are being recognized as revenue over the total period of performance. There were no sales-based milestone payments or royalties received through September 30, 2024.

Restated Genentech Agreement

In November 2017, the Company entered into an Amended and Restated Option, License, and Collaboration Agreement (the “Restated Genentech Agreement”) with Genentech, Inc. and F. Hoffman-La Roche Ltd. (together "Genentech"), amending a previous Genentech agreement entered into in September 2015. Under the Restated Genentech Agreement, the Company received additional upfront, non-refundable payments of $34.5 million (in addition to $11.0 million received under the previous agreement in 2015) to fund Genentech-related research. Upfront non-refundable payments were recognized as revenue over the performance period.

The Company is eligible to receive up to $44.0 million per target protein in development milestone payments, $52.5 million in regulatory milestone payments and $60.0 million in commercial milestone payments based on sales as well as tiered royalties based on sales. There were no development, regulatory or commercial milestone payments or royalties received through September 30, 2024.

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Changes in the Company's contract balances for the nine months ended September 30, 2024 and 2023 were as follows:


(dollars in millions)	September 30, 2024		September 30, 2023
Accounts receivable related to collaborations
Beginning balance	$	—	$	1.0
Additions	8.7		21.7
Payments received	(1.4)		(7.0)
Ending balance	$	7.3	$	15.7
Accounts payable related to collaborations
Beginning balance	$	13.1	$	5.0
Additions	43.5		31.0
Payments made	(42.3)		(6.7)
Ending balance	$	14.3	$	29.3
Contract assets: Collaboration contract asset
Beginning balance	$	9.4	$	10.7
Additions	3.0		—
Amortization	(3.6)		(2.0)
Ending balance	$	8.8	$	8.7
Contract liabilities: Deferred revenue
Beginning balance	$	549.2	$	623.7
Additions to collaboration agreements	130.0		1.5
Revenue recognized from balances held at the beginning of the period	(82.0)		(119.1)
Revenue recognized from new collaborations	(93.5)		—
Ending balance	$	503.7	$	506.1

During the nine months ended September 30, 2023, the Company changed its estimate of the duration of the performance period under the Bayer Collaboration Agreement and Pfizer Research Collaboration Agreement as a result of updated research timelines. The changes in accounting estimate resulted in a decrease in revenue and net income of $8.2 million and a decrease in net loss per share of $0.15 for the nine months ended September 30, 2023. The reversed revenue related to the Bayer Collaboration Agreement was fully recognized through September 30, 2024. The reversed revenue related to the Pfizer Research Collaboration Agreement will continue to be recognized in future periods as the Company continues to advance on the performance obligation under the updated collaboration timeline. During each of the three months ended September 30, 2024 and 2023 and the nine months ended September 30, 2024, no changes in accounting estimates related to the Company's collaborations were recorded.

The aggregate amount of the transaction price allocated to performance obligations that were unsatisfied as of September 30, 2024 totaled $503.7 million, which is expected to be recognized in the following periods:


(dollars in millions)
Remainder of 2024	$	84.1
2025	153.4
2026	105.0
2027	57.6
2028	59.8
2029	43.8

Total	$	503.7

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4. Marketable Securities and Fair Value Measurements

The Company’s marketable securities consist of corporate bonds and government securities which are adjusted to fair value as of each balance sheet date based on quoted prices, which are considered Level 2 inputs.

The following is a summary of the Company’s available-for-sale marketable securities measured at fair value on a recurring basis.


	September 30, 2024
(dollars in millions)	Valuation Hierarchy	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Corporate bonds	Level 2	$	1,028.8	$	4.4	$	(0.3)	$	1,032.9
Government securities	Level 2	3.5		—		—		3.5
Total		$	1,032.3	$	4.4	$	(0.3)	$	1,036.4


	December 31, 2023
(dollars in millions)	Valuation Hierarchy	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Corporate bonds	Level 2	$	934.4	$	1.5	$	(4.6)	$	931.3
Government securities	Level 2	18.0		—		—		18.0
Total		$	952.4	$	1.5	$	(4.6)	$	949.3

The Company generally does not intend to sell any investments prior to recovery of their amortized cost basis for any investment in an unrealized loss position. As such, the Company has classified these losses as temporary in nature.

The carrying values of accounts receivable and accounts payable and accrued liabilities approximate their fair values due to the short-term nature of these assets and liabilities.

5. Property, Equipment and Leasehold Improvements

Property, equipment and leasehold improvements consist of the following:


(dollars in millions)	September 30, 2024		December 31, 2023
Laboratory equipment	$	19.4	$	18.5
Leasehold improvements	9.3		11.5
Office equipment	2.6		2.6
Total property, equipment and leasehold improvements	31.3		32.6
Less: accumulated depreciation and amortization	(24.5)		(21.1)
Property, equipment and leasehold improvements, net	$	6.8	$	11.5

During the three and nine months ended September 30, 2024, the Company wrote-off leasehold improvements totaling $2.4 million resulting from the termination of the lease for its laboratory and office space at 101 College Street, as discussed below in Note 6, Right-of-Use Assets and Liabilities.

During the three months ended September 30, 2024 and 2023, the Company recognized depreciation and amortization expense of $1.1 million and $1.2 million, respectively. During the nine months ended September 30, 2024 and 2023, the Company recognized depreciation and amortization expense of $3.5 million and $3.6 million, respectively.

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6. Right-of-Use Assets and Liabilities

The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the condensed consolidated balance sheets.

ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit interest rate, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments, which ranges from 3.0% - 7.5%. Lease expense is recognized on a straight-line basis over the lease term. The Company considers options to extend or terminate leases in recognizing ROU assets and lease liabilities when it is reasonably certain that such options will be exercised.

In August 2024, the Company entered into a Lease Termination Agreement with 101 College Street LLC (the "Landlord"). Under the terms of the Lease Termination Agreement, the lease, by and between the Company and the Landlord, dated May 4, 2021 (as amended, the "Terminated Lease"), for certain leased premises of approximately 160,000 square feet of laboratory and office space, was terminated in full, effective August 15, 2024. The leased premises were expected to be occupied by the Company in 2025. In connection with the Lease Termination Agreement and as consideration for the Landlord’s agreement to terminate the lease for its laboratory and office space at 101 College Street in full, the Company agreed to pay to the Landlord a one-time cash termination fee in the amount of $41.5 million and wrote-off $1.9 million of prepaid rent, both of which are recognized in "Lease termination costs" on the condensed consolidated statements of operations. The Company also cancelled its previously issued letter of credit in the amount of $5.5 million.

The Company has operating leases for its corporate office, laboratories and certain equipment, which expire no later than October 2025. The leases have a weighted average remaining term of approximately nine months.

The components of lease expense were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in millions)	2024		2023		2024		2023
Operating lease cost	$	0.5	$	0.5	$	1.5	$	1.5

Supplemental cash flow information related to leases was as follows:


	Nine Months Ended September 30,
(dollars in millions)	2024		2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1.6	$	1.5

Maturities of operating lease liabilities as of September 30, 2024, were as follows:


(dollars in millions)
Remainder of 2024	$	0.4
2025	0.5





Total lease payments	0.9
Less: imputed interest	—

SEC Form 10-Q filed by Arvinas Inc.