2021 Annual Report
To Our Shareholders:
I am pleased to report that Arvinas made tremendous progress in 2021.
We began the year with a great deal of confidence after the exciting interim data for our estrogen receptor (ER)
degrader, ARV-471, and our androgen receptor (AR) degrader, bavdegalutamide (ARV-110), presented in
December 2020. These positive results not only validated our PROTAC® platform, but also positioned ARV-471
and bavdegalutamide as potentially significant advances for the treatment of patients with breast and prostate
cancers.
That momentum continued throughout 2021 as we realized significant milestones with those two lead programs.
Our novel PROTAC® Discovery Engine platform has driven our promising pipeline, and we believe it remains
the most advanced and successful platform in protein degradation. Our accomplishments to date set the stage for
Arvinas to begin three planned pivotal trials in 2022, one with bavdegalutamide and two with ARV-471.
In July, we entered a transformational global collaboration with Pfizer to co-develop and co-commercialize
ARV-471. Together, we intend to develop ARV-471 as an endocrine backbone therapy of choice in breast
cancer, from the adjuvant setting through late-line metastatic disease. This collaboration will accelerate the
development of ARV-471 by leveraging Pfizer’s global reach and expertise in breast cancer. It also strengthens
our ability to continue to develop new and important PROTAC® degraders in additional disease areas with high
unmet need.
In December, we presented updated and compelling ARV-471 Phase 1 dose escalation data that reinforced
ARV-471’s favorable tolerability profile and anti-tumor activity in patients with locally advanced or metastatic
ER-positive/human epidermal growth factor receptor 2 (HER2)-negative breast cancer (ER+/HER2-). Together
with Pfizer, we intend to advance ARV-471 into two Phase 3 trials by the end of 2022.
Also in December, we shared our first-ever preclinical data from our B-cell lymphoma 6 protein (BCL6)
program, which highlighted our PROTAC® degrader’s efficacy in models of diffuse B-cell lymphoma (DLBCL).
We look forward to sharing more data on our BCL6 and other preclinical programs as we progress towards
clinical development. We are committed to delivering four investigational new drug applications by the end of
2023.
2022 is off to an exciting start. In February, we presented completed Phase 1 dose escalation data and interim
Phase 2 data with bavdegalutamide, currently being evaluated in men with metastatic castration-resistant prostate
cancer. This update provided further evidence of clinical benefit and identified a particularly robust response in
tumors with a specific genetic mutation, suggesting the potential for an accelerated pathway for
bavdegalutamide, and we intend to initiate a pivotal trial by the end of 2022. We are enthusiastic about the
potential bavdegalutamide could have for patients with prostate cancer, initially in a genetically defined
population, and ultimately in a broader population.
We anticipate that the remainder of 2022 will be rich with progress, including the initiation of three planned
pivotal trials, ongoing progress with our preclinical programs, and additional data readouts from our clinical
programs. I am proud to lead such a talented group of professionals who are ready to execute on our ambitious
plans. We remain steadfast in our goal to build a global, fully integrated biopharmaceutical company bringing
new medicines to patients with serious diseases. I extend my sincerest gratitude to all Arvinas employees,
patients, clinical collaborators, and shareholders – your support continues to drive our success.
John Houston
President and Chief Executive Officer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
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(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM
TO
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Commission File Number: 001-38672
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ARVINAS, INC.
(Exact name of registrant as specified in its Charter)
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Delaware
(State or other jurisdiction of
incorporation or organization)
5 Science Park
395 Winchester Ave.
New Haven, Connecticut
(Address of principal executive offices)
47-2566120
(I.R.S. Employer
Identification No.)
06511
(Zip Code)
Registrant’s telephone number, including area code: (203) 535-1456
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Securities registered pursuant to Section 12(b) of the Act:
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(Title of each class)
CCommon stock, par value $$0.001 per share
Trading
Symbol(s)
ARVN
(Name of each exchange on which registered)
The Nasdaq Global Select Market LLC
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES x NO o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES o NO x
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 forf
requirements for the past 90 days. YES x 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 x 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.
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
Large Accelerated Filer
Non-accelerated filer
x
o
Accelerated filer
Smaller reporting company
Emerging growth company
o
o
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period forf
or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effective
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report.☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO x
As of June 30, 2021, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the Common
Stock held by non-affiliaff
date. The number of shares of registrant’s Common Stock, $0.001 par value per share, outstanding as of February 23, 2022 was 53,046,576.
tes of the registrant was approximately $$3,457.3 millio ,n based on the closing price of the registrant’s Common Stock on such
complying with any new
ness of its internal
ff
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Annual Report incorporates by reference information from the definitive Proxy Statement forff
Stockholders, which is expected to be filed with the Securities and Exchange Commission not later than 120 days after
December 31, 2021.
ff
the registrant’s 2022 Annual Meeting of
the registrant’s fiscal year ended
Table of Contents
PART I
Item 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Cff
omments
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
[Reserved]
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure
Controls and Procedures
Item 9B.
Other Inforff mation
Item 9C.
Disclosure Regarding Foreign Jurisdictions That Prevent Inspection
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Item 16.
Directors, Executive Officers
ff
and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Exhibits, Financial Statement Schedules
Form 10-K Summary
Page
5
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1
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements that involve substantial risks and
uncertainties. All statements, other than statements of historical facts, contained in this Annual Report on Form
10-K, 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 forff ward-looki
ng statements contain these identifying words.
rr
The forward-looking statements in this Annual Report on Form 10-K include, among other things,
statements about:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
the initiation, timing, progress and results of our current and future clinical trials of ARV-RR 110, now
named bavdegalutamide, ARV-RR 471 and ARV-RR 766, 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 bavdegalutamide, ARV-RR 471 and
ARV-RR 766, and the ability of bavdegalutamide, ARV-471,
to meet existing or future regulatory standards;
ARV-RR 766 and our other product candidates
VV
the potential achievement of milestones and receipt of payments under our collaborations, including
our collaboration with Pfizer Inc., or Pfizer, entered into in July 2021, or the ARV-RR 471 Collaboration;
our plans to pursue research and development of other product candidates;
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 forff
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 COVID-19 on our business and operations;
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
ff 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 this Annual
Report on Form 10-K, particularly in the “Risk Factors” section, that we believe could cause actual results or
events to diffeff
ng statements do
not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we
may make.
ard-looking statements that we make. Our forff ward-looki
r materially from the forwff
rr
You should read this Annual Report on Form 10-K and the documents that we have filed as exhibits to
this Annual Report on Form 10-K completely and with the understanding that our actual future results may be
materially differe
statements except as required by applicable law.
nt from what we expect. We do not assume any obligation to update any forward-looking
ff
2
Throughout this Annual Report on Form 10-K, the “Company,” “Arvinas,” “we,” “us,” and “our,” except
where the context requires otherwise, referff
of them as the context may require, and “our board of directors” refers to the board of directors of Arvinas, Inc.
to Arvinas, Inc. and its consolidated subsidiaries, or any one or more
We use Arvinas, the Arvinas logo, and other marks as trademarks in the United States and other
countries. This Annual Report on Form 10-K 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 Annual
Report on Form 10-K, 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.
Risk Factor Summary
Our business is subject to a number of risks that if realized could materially affect
ff
our business,
prospects, operating results and financial condition. These risks are discussed more fully in the “Risk Factors”
section of this Annual Report on Form 10-K. These risks include the following:
• We have incurred significant losses since our inception. To date, we have not generated any
revenue from product sales and may never be profitable. We expect to incur losses over at least the
next several years and may never achieve or maintain profitability. Our net losses totaled $191.0
million, $119.3 million and $70.3 million for the years ended December 31, 2021, 2020, and 2019,
respectively.
• We will need substantial additional funding. If we are unable to raise capital when needed, we may
be required to delay, limit, reduce or terminate our research, product development programs or any
future commercialization efforts
would otherwise prefer to develop and market ourselves.
or grant rights to develop and market product candidates that we
ff
•
The ongoing COVID-19 pandemic has and may continue to affeff ct our ability to initiate and complete
preclinical studies, delay the initiation of our planned clinical trials or future clinical trials, disrupt
regulatory activities, disrupt our manufacturing and supply chain or have other adverse effects
our business and operations. We cannot be certain what the overall impact of the COVID-19
pandemic will be on our business, and it has the potential to materially and adversely affect
business, financial condition, results of operations and prospects.
our
on
ff
ff
• Our approach to the discovery and development of product candidates based on our PROTAC
technology platform is unproven, which makes it difficult to predict the time, cost of development
and likelihood of successfully developing any products.
• We have a limited operating history that may make it difficult to evaluate the success of our
business to date and to assess our future viability and are early in our development effoff
initiated our first Phase 1 clinical trials forff
in 2019, and we initiated a Phase 1 clinical trial of ARV-766
ARV-RR 471, and ARV-766
preclinical development.
our product candidates, bavdegalutamide and ARV-RR 471,
in 2021. Each of the bavdegalutamide,
clinical trials remain ongoing. All of our other product candidates are still in
rts. We
VV
VV
• We cannot be certain of the timely completion or outcome of our preclinical testing and clinical
trials. The results of preclinical studies may not be predictive of the results of clinical trials, and the
results of early-stage clinical trials may not be predictive of the results of later-stage clinical trials. In
addition, interim and preliminary data from our clinical trials that we announce from time to time may
change as more patient data becomes available and are subject to audit and verification
procedures that could result in material changes in the final data. If we are unable to obtain, or
there are delays in obtaining, required regulatory approvals, we will not be able to commercialize
our product candidates, our business will be materially harmed and our ability to generate revenue
from product sales will be materially impaired.
• We faceff
substantial competition, which may result in others discovering, developing or
commercializing products before or more successfully than we do.
3
• We rely, and expect to continue to rely, on third party manufacturing organizations for the
manufacture of both drug substance and finished drug product for our product candidates for
preclinical testing and clinical trials, and we expect to continue to do so forff
reliance on third parties may increase the risk that we will not have sufficient quantities of our
product candidates or products or such quantities at an acceptable cost or quality, which could
delay, prevent or impair our development or commercialization efforts.
ff
commercialization. This
•
If we are unable to obtain and maintain patent protection for our technology and products or if the
scope of the patent protection obtained is not sufficient
ff
commercialize technology and products similar or identical to ours, and our ability to successfully
commercialize our technology and products may be impaired, and we may not be able to compete
effect
ly broad, our competitors could develop and
ively in our market.
ff
4
Item 1. Business.
Overvirr ew
PART I
We are a clinical-stage biopharmaceutical company dedicated to improving the lives of patients
to engineer proteolysis targeting chimeras, or PROTACTT
ng from debilitating and life-threatening diseases through the discovery, development and
sufferi
ff
commercialization of therapies to degrade disease-causing proteins. We use our PROTAC Discovery Engine,
our proprietary technology platformff
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 PROTACTT
technology has the potential to address a broad range of
intracellular disease targets, including those representing the up to 80% of proteins that currently cannot be
addressed by existing small molecule therapies, commonly referred to as “undruggable” targets. We are using
our PROTACTT
target diseases in oncology (including immuno-oncology), neuroscience, and other therapeutic areas. Our three
lead product candidates are bavdegalutamide, ARV-RR 471 and ARV-RR 766.
Discovery Engine to build an extensive pipeline of protein degradation product candidates to
targeted protein
Bavdegadd
lutamide (ARV-110)
VV
We are developing bavdegalutamide, an investigational orally bioavailable PROTAC protein degrader
targeting the androgen receptor protein, or AR, forff
the treatment of men with metastatic castration-resistant
prostate cancer, or mCRPC. We initiated a Phase 1 clinical trial of bavdegalutamide designed to assess the
safety, tolerability and pharmacokinetics of bavdegalutamide and also includes measures of anti-tumor activity
as secondary endpoints, including reduction in prostate specific antigen, or PSA, a well-recognized biomarker of
prostate cancer progression. We received Fast Track designation for bavdegalutamide for mCRPC in May
2019. We have completed dose escalation in the Phase 1 clinical trial. In the fourth quarter of 2020, we initiated
rth quarter
ARDENT, tTT he Phase 2 single agent expansion portion of the bavdegalutamide clinical trial. In the fouff
of 2021, we initiated a Phase 1b clinical trial of bavdegalutamide in combination with abiraterone for the
treatment of men with mCRPC. In the first half of 2022, we intend to initiate discussions with the U.S. Food and
Drug Administration, or FDA, about the potential forff
an accelerated approval pathway with bavdegalutamide in
molecularly defined mCRPC and finalize a partnership for a companion diagnostic. In the second half of 2022,
we plan to initiate a pivotal trial evaluating bavdegalutamide in patients with mCRPC who have progressed on
or after novel hormonal agents and have tumors that harbor AR T878X/H875Y tumor mutations. We anticipate
that future studies will be planned to explore the potential to treat earlier-line patients with AR-dependent tumors
who may benefit from bavdegalutamide therapy.
VV
ARV-471
We are developing ARV-RR 471, an investigational orally bioavailable PROTACTT
protein degrader targeting
TT
the estrogen receptor protein, or ER, for the treatment of patients with locally advanced or metastatic ER
positive / HER2 negative breast cancer. We initiated a Phase 1 clinical trial of ARV-RR 471 designed to assess the
safety, tolerability and pharmacokinetics of ARV-RR 471, which also includes measures of anti-tumor activity as
rth quarter of 2020, we initiated a Phase 1b cohort expansion of ARV-RR 471 in
secondary endpoints. In the fouff
combination with Ibrance® (palbociclib). We have completed dose escalation in the Phase 1 clinical trial. In the
first quarter of 2021, we initiated VERITAC,
the Phase 2 single agent expansion cohort of the ARV-RR 471 clinical
trial. In July 2021, we entered into a collaboration agreement with Pfizer, pursuant to which we granted Pfizer
worldwide coexclusive rights to develop and commercialize ARV-RR 471. In December 2021, we presented data
from the dose escalation portion of the Phase 1/2 clinical trial at the San Antonio Breast Cancer Symposium. In
the second
dosed at 200 and 500 mg)mg) and present
AAddit
patients with metastatic breast cancer, initiate a Phase 1b combination trial with cyyclin-dependent kinase, or
CCDK, inhibitors or other t gargeted therapies, initiate a Phase 2 clinical trial in patients with ear yly breast cancer in
the ne
monot
oadjuvant sett ging and initiate two Phase 3 clinical trials in patients with metastatic breast cancer as a
herapy and in combination.
Phase 2 dose expansion (w(with patients
y
study with palbociclib.
in combination with everolimus in
ionally, in 2022, we plan to initiate a Phase 1b clinical trial with ARV-471
fof 2022, we plan to present data ffrom the VERIT CACTT
fa from the Phase 1b combination
fsaf yety dat
fhalf
VV
y
y
j
5
VV
ARV-766
We are developing ARV-RR 766, an investigational orally bioavailable PROTACTT
protein degrader targeting
the AR for the treatment of men with mCRPC. In preclinical studies, ARV-RR 766 degraded all tested resistance-
driving point mutations of AR, including L702H, a mutation associated with treatment with abiraterone and other
AR-pathway therapies, which bavdegalutamide did not degrade in preclinical studies. In 2021, we initiated a
Phase 1 clinical trial for ARV-RR 766 designed to assess the safety, tolerability and pharmacokinetics of ARV-RR 766,
which also includes measures of anti-tumor activity as secondary endpoints, including reduction in PSA. In the
second half of 2022, we plan to present Phase 1 dose escalation data and initiate a Phase 2 expansion trial for
the treatment of men with mCRPC.
Each of bavdegalutamide, ARV-RR 471 and ARV-RR 766 has demonstrated potent and selective protein
degradation in our preclinical studies. We believe favorable clinical trial results in these initial oncology
programs could provide validation of our platform as a new therapeutic modality forff
diseases caused by dysregulated intracellular proteins regardless of therapeutic area.
the potential treatment of
We have designed and optimized our PROTACTT
Discovery Engine for the discovery of PROTACTT
targeted protein degraders to tag a target protein for degradation through the ubiquitin proteasome
therapeutics to address diseases caused by abnormal proteins or aberrant protein expression. We engineer our
PROTACTT
system, one of the cell’s natural protein disposal systems, and then to iteratively degrade additional target
protein molecules. The PROTACTT
Discovery Engine includes advanced screening capabilities, including in-
house high-throughput and deoxyribonucleic acid, or DNA, -encoded library screening abilities that are tailored
to the needs of incorporation into PROTACTT
Following selection and identification, we use tools including predictive computational modeling and privileged
linkers that allow the potential for increased potency and selectivity. Finally, we have utilized our own proprietary
PROTAC-specific optimization strategies, which we refer to as the Arvinas Rules, to create PROTACTT
degraders
that, for example, are capable of being delivered through multiple routes of administration, including oral
delivery, as well as PROTACTT
targeted protein degraders that are able to penetrate the blood brain barrier.
protein degraders and to optimize their drug-like properties.
In addition to our clinical product candidates, we are expanding our pipeline by utilizing our platform to
potentially address currently undruggable targets. Unlike existing small molecule inhibitor therapies, our
PROTACTT
y
targeted protein degraders can degrade proteins using any available binding site, including low-affinit
active binding sites or non-functional binding sites, bringing biological utility to ligands that would otherwise be
ineffect
ive. While some gene-based medicines are also seeking to address undruggable targets, our PROTAC
ff
targeted protein degraders confer the advantages of traditional small molecule therapies, such as broad tissue
distribution, multiple routes of administration, including oral delivery, a well-established development pathway
and relative ease of manufacturing.
ff
We are further diversifying
ff
our pipeline by developing new PROTACTT
targeted protein degraders against
ff
advantages to existing therapeutic modalities. For
targets for which we believe protein degradation offers
example, we are pursuing targets for the treatment of neurodegenerative diseases, including tauopathies, which
are diseases associated with an aggregation of tau proteins in the brain, such as Alzheimer’s disease. We have
engineered PROTACTT
targeted protein degraders that, in preclinical studies, have successfully achieved blood
brain barrier penetration, a key step in developing drugs with the potential to treat neurodegenerative targets.
technology may be advantageous. In an
We believe there are many other indications for which our PROTACTT
effort
ff
or Pfizer; Genentech, Inc. and F. Hoffman-La Roche Ltd, collectively referred to as Genentech; and Bayer AG,
or Bayer, address targets across multiple therapeutic areas.
technology, our ongoing strategic collaborations with Pfizer Inc.,
to realize the full potential of our PROTACTT
We have been a leader in the field of directed protein degradation using chimeric small molecules since
our founding in 2013. We have assembled a scientific team with extensive know-how and translational medicine
expertise to develop PROTACTT
third-party studies. Our management team draws on extensive experience in all phases of drug discovery and
development gained at large pharmaceutical and biotechnology companies to continue to advance our product
pipeline and expand the capabilities of our platform.
targeted protein degraders with features not previously disclosed in published
6
Our Strategy
Our goal is to discover, develop, and commercialize therapies that improve the lives of patients
ng from cancer, neurological disorders and other serious diseases. We engineer PROTAC protein
ff
sufferi
degraders that are designed to selectively remove disease-causing proteins, and we believe that our proprietary
PROTACTT
technology is a new therapeutic modality with the potential to provide distinct advantages over
existing therapies and to address a broad range of targets, including undruggable proteins. The key elements of
our strategy are to:
•
•
•
•
•
Advance clinical development of our lead programs, which address the well-understood
oncology targets AR and ER. Our strategy for our PROTACTT
platform includes the initial pursuit of
oncology targets with well-understood biology, well-characterized disease models and established
biomarkers. We are conducting a Phase 2 dose expansion clinical trial for bavdegalutamide and a
Phase 1b clinical trial of bavdegalutamide in combination with abiraterone in men with mCRPC; a
Phase 2 dose expansion clinical trial for ARV-RR 471 and a Phase 1b cohort expansion for ARV-RR 471 in
combination with Ibrance® (palbociclib) in patients with locally advanced or metastatic ER positive /
HER2 negative breast cancer; and a Phase 1 dose escalation clinical trial for ARV-RR 766 in men with
mCRPC. We believe favorable clinical trial results in these initial oncology programs would validate
the broader therapeutic potential of our PROTACTT
technology and PROTACTT
Discovery Engine.
Utilize our PROTAC Discovery Engine platform to address undruggable and difficult-to-drug
targets. We are applying our platform to develop treatments forff
undruggable targets. Our platform enables us to build PROTAC targeted protein degraders with the
potential to degrade these proteins through the cell’s natural protein degradation process using any
available binding site, including low-affinit
y active binding sites or non-functional binding sites,
bringing biological utility to ligands that would otherwise be inactive. We also believe that many
“difficult
ff
apply our PROTAC Discovery Engine.
-to-drug” targets, where prior approaches are inadequate, will also provide opportunities to
diseases associated with
ff
Develop new therapeutics with distinct advantages over existing modalities, including gene-
based medicines. We intend to address targets forff which we believe protein degradation and the
tunable features of our PROTACTT
advantages compared to existing
targeted protein degraders offer
therapeutic modalities. For example, unlike gene-based medicines, our PROTAC targeted protein
degraders confer the advantages of traditional small molecule therapies, such as broad tissue
distribution, multiple routes of administration, including oral delivery, a well-established development
pathway and relative ease of manufacturing. In addition, we have engineered PROTAC targeted
protein degraders that, in preclinical studies, have successfully achieved blood brain barrier
penetration, creating potential opportunities for our PROTACTT
diseases. We also believe there are many other indications for which our technology may be
ff
advantageous, including autoimmune, anti-infecti
technology in neurodegenerative
ve and inflammatory conditions.
ff
Selectively collaborate to realize the full potential of our platform. We are using our PROTACTT
Discovery Engine to build an extensive pipeline of product candidates. Our co-development/co-
commercialization collaboration with Pfizer has the potential to accelerate and broaden global
development and commercialization of ARV-RR 471. In an effoff
rt to realize the full potential of our
PROTACTT
technology, our ongoing strategic collaborations with Bayer, Genentech and Pfizer
address targets across multiple therapeutic areas. In addition to these collaborations in human
therapeutics, we established a joint venture called Oerth Bio LLC, or Oerth, with Bayer to pursue
our PROTACTT
collaborations with leading biopharmaceutical companies with specialized capabilities or know-how,
including global development and commercial expertise and capabilities for those products for
which we retain full development and commercialization rights. We believe this selective approach
to collaboration will further broaden the therapeutic reach of our PROTAC technology, as well as
complement and expand our internal development expertise.
technology in agricultural applications. We plan to continue to selectively pursue
Continue to expand the capabilities of our PROTAC Discovery Engine and the breadth of our
intellectual property portfolio. We are investing in our research and development activities to
expand the capabilities of our PROTACTT
Discovery Engine and the breadth of our intellectual
property portfolio. This includes: research into novel E3 ligases, key proteins in the ubiquitin
proteasome system, that may have tissue-specific or disease-specific features; the discovery of
novel binding ligands; the discovery of orally bioavailable and blood brain barrier penetrant
7
composition of matter in the United States and other countries for
PROTAC protein degraders; and improvement of our PROTAC targeted protein degrader design
and optimization processes. We have exclusive worldwide rights to our platform technology, as well
as issued patents forff
bavdegalutamide and ARV-RR 471 and patent applications pending for composition of matter in the
United States and key countries for our bavdegalutamide, ARV-RR 471 and ARV-RR 766 product
candidates and patent applications pending for composition of matter in the United States and key
countries for our exploratory programs. We also have patents and pending patent applications for
broad platform coverage for other PROTAC targeted protein degraders using specific E3 ligases.
Our Product Pipeline
Our platformff
has generated several promising degradation product candidates that may be capable of
targeting diseases in a wide range of organ systems and tissues. We and our collaborators have initiated
programs across multiple therapeutic areas with the goal of developing and delivering life-changin
patients in need. Our lead therapeutic programs are summarized in the table below.
ff
g therapies to
/ER+/HER2-, es
BCCL6, B-cell lymphoma 6 protein; KRAS, Kirsten rat sarcoma; HPK1, hematopoietic progenitor kinase 1; mHTT, mTT
tor+/human epidermal ggrowth ffactor receptor 2-; mC CCRPC, metastatic castration-resistant prostate cancer;
utant huntingtin.
gtrogen recep
/
In addition to the programs above and our early-stage development collaborations with Bayer,
Genentech, and Pfizer, we are conducting exploratory research and development work on multiple other
undisclosed targets.
Our Focus
The Role of Proteinsii
in Disease
Human cells produce tens of thousands of differe
ff
nt proteins, the entirety of which is referred to as the
proteome. Proteins are responsible forff many structural, functional and regulatory processes in cells.
8
Proteins are large, complex biomolecules made through a series of steps based on instructions carried
from DNA, the genetic “blueprint” within the cell. Generally, sequences of DNA are converted into messenger
ribonucleic acid, or mRNA, during a process called transcription. mRNA provides the template that specifies the
assembly of a particular sequence of amino acids into proteins during a process known as translation. The
amino acid sequence dictates, among other things, the conformat
ion, or 3-D shape, of the resulting protein.
Proteins can have complex shapes, with multiple chains of amino acids folding together in some cases to reach
a final form. The final form of the protein, as well as the timing, location and concentration of its expression
within the cell, is essential to the protein’s intended function.
ff
In healthy cells, the transcription and translation processes contribute to producing properly folded
proteins in the right amounts and at the correct times to ensure normal cell health and function. This balance
can be disrupted by a variety of events and factors, such as cellular stress, genetic mutations and
transcriptional or translational errors, which can then lead to cellular overexpression, abnormal production rates,
misfolding or mutations of proteins. When proteins are overexpressed or mutated, a wide variety of diseases
can result. For example, it is well documented that overexpression of androgen receptor, a nuclear hormone
receptor, is implicated in prostate cancer. Similarly, overexpression of estrogen receptor is known to be
associated with breast cancer. In neurodegenerative diseases, abnormal deposition of misfolded or aggregated
proteins in the brain, including the intraneuronal aggregation of the microtubule-associated protein tau, are
associated with Alzheimer’s disease. Recent genomic advances continue to implicate the role of specific
proteins in many disease states.
There are multiple therapeutic approaches, both approved and in development, to treat diseases
caused by abnormal proteins or aberrant protein expression. Each operates at a differen
the protein, as illustrated in the following graphic:
ff
t point in the lifecycle of
Small Molecule InhII
ibitors, Gene Therapy
rr
and Gene Editing
Traditional small molecules seek to block or inhibit the expression or function of an errant protein. While
there are numerous examples of safe and effective small molecule therapies, their effiff cacy can be limited by
weak or incomplete binding of the therapeutic molecule to the relevant binding site on the protein, the cell’s
ability to counteract the inhibitory effeff ct of the drug by producing more of the protein, mutation of the target, or
evolution of the cell to rely on alternate pathways. These cellular responses often result in a need forff
dosing levels, which can in turn introduce safety challenges from off-t
ff arget and toxic effects,
or drug resistance.
higher
ff
9
Gene therapy approaches act by augmenting the errant protein with normal protein by using viral
vectors to introduce DNA from an exogenous source that codes for a functional protein. While there have been
promising advances in this field, the fundamental approach is limited by delivery, expression efficacy
treatment conditioning, durability and manufacturing challenges that curtail the practical utility of gene therapy.
, pre-
ff
Gene editing or gene silencing approaches such as CRISPR/Cas9, RNA interference and antisense act
by either correcting or inactivating, or knocking out, the gene that would otherwise be transcribed and translated
to express the errant protein. By correcting or knocking out the gene, the errant protein is never made,
preventing its downstream negative effect
occurs at the DNA level and is believed to be irreversible. While there are examples of approved therapies in
this field that have the potential to correct specific genetic defects,
generally faceff
manufacturing hurdles.
ff
delivery, stability, biodistribution, specificity and selectivity challenges, in addition to significant
s. In the case of CRISPR/Cas9, the resulting modification of the gene
gene editing and gene silencing approaches
ff
Protei
rr
n Dii
egradatiodd
n
When proteins become old, mutated, misfolded or simply have served their purpose, they are naturally
degraded by the body through the ubiquitin proteasome system in which cells mark or tag a particular protein for
disposal by attaching several molecules of the small regulatory protein ubiquitin to the protein to be disposed.
This process generally proceeds along the following steps in rapid sequence:
•
•
The E1 enzyme activates ubiquitin, which is then transferred to an E2 enzyme.
An E3 ubiquitin ligase, or E3 ligase, transfers the ubiquitin from the E2 enzyme to a specific target
protein.
• Once a chain of at least four ubiquitins are attached to the target protein, the proteasome
recognizes the polyubiquinated protein.
•
The proteasome breaks down or degrades the protein into its amino acid components.
Several therapeutic approaches work at the protein level by modulating the ubiquitin proteasome
system to harness the cell’s natural protein disposal system to degrade and remove a protein. Degradation can
be induced by inhibiting chaperone molecules such as HSP90, which are known to facilitate correct protein
folding, resulting in tagging misfolded proteins for degradation. HSP90 inhibitors, however, have shown limited
efficaff
cy in the clinic to date.
Some degraders use an approach that causes a conformff
ational change in a specifically targeted
ed protein, which triggers the cell’s innate protein degradation system to dispose of
protein, resulting in a misfoldff
the misfolded protein. Although these compounds have shown efficacy
those proteins able to adopt a non-native state, leaving a wide array of protein targets unaddressed. The only
currently marketed protein degrader utilizing this mechanism, the breast cancer therapy fulvestrant, requires
intramuscular administration, further limiting its convenience and pharmacokinetic profile.
, they only induce the degradation of
ff
Chimeric small molecules use a diffeff
rent protein degradation approach. Instead of causing improper
folding or inhibiting molecules that facilitate proper folding of the target protein, chimeric small molecules directly
recruit an E3 ligase to tag specifically targeted proteins with ubiquitin, signaling the proteasome to degrade the
targeted protein. Our PROTACTT
targeted protein degraders take this approach to protein degradation.
PROTACTT
Targeted
rr
Protein
rr
Degradersdd — Our Approach
rr
rr
to Protei
n Dii
dd
egradation
We have engineered our PROTACTT
targeted protein degraders to utilize the cell’s naturally occurring
targeted protein degraders are chimeric small molecules with two operative ends—one,
protein disposal system, directing the proteasome to recognize and degrade specific proteins associated with
disease. Our PROTACTT
a ligand that binds to the protein targeted for degradation, and the other, a ligand that binds to an E3 ligase.
These two ligands are connected by a chemical chain linker. Our PROTACTT
targeted protein and the E3 ligase together into a three-component grouping known as a trimer complex to
facilitate the transfer of ubiquitin to the target protein. Once four ubiquitins are attached in a chain to the target
protein, the proteasome recognizes and degrades the protein. The entire cycle from the format
ion of the trimer
complex, which can occur in a period of nanoseconds, to degradation of the target protein by the proteasome
targeted protein degraders bring the
ff
10
happens over a period of minutes. After
target protein molecule with ubiquitin through formation of the trimer complex, it can move on to another target
protein molecule to conduct the degradation process again, potentially completing this cycle hundreds of times
beforeff
targeted protein degraders’ iterative mechanism of action.
eventually being metabolized or eliminated from the cell. We refer to this recycling as our PROTAC
targeted protein degrader facilitates the tagging of a
our PROTACTT
ff
The figure below depicts our PROTACTT
-induced cycle from E3 ligase binding and target protein
recruitment, to trimer formation and ubiquitin transfer, to degradation of the target protein by the proteasome, to
the release of ubiquitin and PROTACTT
targeted protein degrader for further degradation cycles.
Our Discoveryvv
Platform — PROTAC Discoveryvv
Engineii
We have designed and optimized our PROTACTT
Discovery Engine for the discovery of PROTACTT
Discovery Engine includes advanced screening capabilities, including in-house high-
targeted protein degrader therapeutics to address diseases caused by abnormal proteins or aberrant protein
expression. The PROTACTT
throughput and DNA-encoded library screening abilities that are tailored to the needs of incorporation into
PROTACTT
use tools including predictive computational modeling and privileged linkers that allow the potential for
increased potency and selectivity. Finally, we have utilized our own proprietary Arvinas Rules to create PROTAC
degraders that, for example, are capable of being delivered through multiple routes of administration, including
targeted protein degraders that are able to penetrate the blood brain barrier.
oral delivery, as well as PROTACTT
protein degraders and to optimize their drug-like properties. Following selection and identification, we
Designi
tt
and OptO imizat
iott n of our PROTAC TarTT geted
rr
Protein
rr
Degradersdd
As genomic knowledge and advances in genome mapping have increased, the understanding of
proteins implicated in diseases has similarly increased. We undertake a rigorous evaluation process to prioritize
protein targets forff which we believe our PROTAC approach can achieve different
patients over existing modalities. Our PROTACTT
know-how, and intellectual property and comprises three stages:
Discovery Engine is built from nearly 20 years of experience,
iated clinical outcomes for
ff
11
Ligase Selection and Ligand Identification
•
•
E3 KnowledgeBase - The human body has more than 600 E3 ligases, and we select ligands for
E3 ligases from our proprietary library for incorporation into our PROTACTT
degraders. We continue to research additional E3 ligases that are expressed in specific tissues or
diseases, and identify or discover associated binding ligands, to create novel PROTAC protein
degraders that recruit E3 ligases with targeted expression patterns, such as tumor or central
nervous system-localized E3 ligases, that may be beneficial for the development of targeted cancer
and neurologic therapies. We believe our success with the diverse set of E3 ligases that we are
currently employing and the binders of other E3 ligases that we are researching provide us with a
rent technical characteristics.
competitive advantage as we develop a range of products with diffeff
targeted protein
targeted
Advanced Screening Capabilities - We select ligands for incorporation into our PROTACTT
protein degraders from a variety of sources. The ligands we select, which target the desired protein
for degradation or E3 ligase for incorporation into our PROTAC targeted protein degraders, may
include (1) de novo ligands discovered through high-throughput screening, biophysical directed
binding approaches, virtual or in silico computer-based screening, and affinit
identification through our in-house DNA-encoded libraries that that are tailored to the needs of
incorporation into PROTACTT
ligands that are known to bind protein targets but may have faced therapeutic limitations that we
believe our PROTAC technology can overcome, such as lack of potency or function, metabolic
instability or off-tff arget effect
protein degraders and to optimize their drug-like properties or (2)
y-based hit
s.
ff
ff
Rapid PROTAC Design
•
•
•
•
Zone of Ubiquitination - Bringing the targeted protein and the E3 ligase together into a trimer
complex is necessary but not sufficient
informat
ubiquitin, and we design PROTAC degraders to exploit this knowledge.
ion to predict precisely which lysine residues on the target protein can be “tagged” with
for degradation. We use structural and biochemical
ff
ff
ANGLE: Arvinas Next Generation Linker Evolution - We connect the selected protein-targeting
ligands and E3 ligase ligands with our privileged chemical linkers. Linker selection is critical for
rapid identification of protein degraders and can introduce function and selectivity to a nonfunctional
or nonselective binding ligand upon incorporation into a PROTAC targeted protein degrader
molecule. Linker composition can also be used to modulate properties of our PROTACTT
protein degraders, such as membrane permeability, aqueous solubility, metabolic stability and
biodistribution. We select from a proprietary library of conformat
ff
the efficient
ionally privileged linkers to enable
formation of the trimer complex essential to ubiquitin transfer and protein degradation.
targeted
ff
Predictive Computational Modeling - We use trimer structure-based computational modeling and
design algorithms to rapidly identify potent degraders.
Proteomics - A PROTACTT
proteomics capabilities that enable us to understand that specificity in precise detail and iterate
quickly to optimize the selectivity of our PROTACTT
degrader is often more selective than the targeting warhead. We have
degraders for the protein target.
Turning Degraders into Drugs
•
•
Arvinas Rules - Optimization of traditional small molecule agents tends to focus on guidelines that
increase the chances of such molecules having sufficient
permeability and solubility to make them
orally bioavailable. Chimeric small molecules, including our PROTAC targeted protein degraders,
are larger than traditional small molecule therapeutics, such that the conventional optimization
parameters prevalent in traditional drug discovery do not readily apply. As such we have developed
and apply our own proprietary Arvinas Rules for our PROTACTT
targeted protein degraders. Through
our Arvinas Rules, we have made PROTAC targeted protein degraders that are orally bioavailable
and that cross the blood brain barrier.
ff
Deep knowledge of in vivo PK/PD and efficacy relationships - Our understanding of molecular
features that impact PROTACTT
create PROTACTT
to rapidly progress from target identification to PROTACTT
degraders with drug-like properties and activities. We can use this understanding
biodistribution and target degradation, in the body, enables us to
optimization and development.
12
Key Featuresrr
of Our PROTAC TargTT
eted Proterr
in Degradersrr
In the design, optimization and development of our PROTACTT
targeted protein degraders, we focus on
targeted protein
the following key features that we believe are critical to successfully engineering PROTACTT
degrader therapeutics with potentially robust application across multiple indications and therapeutic areas:
potency, selectivity, and deliverability and versatility. We have harnessed these features to successfully target
and degrade a wide range of protein classes, including nuclear proteins, transcription factors, epigenetic
modulators, membrane proteins, cytosolic proteins and high molecular weight neuroprotein aggregates.
Potency
The potency of our PROTACTT
technology is driven by two key characteristics: the iterative mechanism of
our PROTACTT
targeted protein degraders and the ability to turn weak binders into potent degraders.
Iterativett Mechanism
Our PROTACTT
targeted protein degraders behave iteratively to repeatedly induce the ubiquitination and
targeted
subsequent degradation of proteins. As a result, protein degradation may be observed with PROTACTT
protein degrader concentrations much lower than those required for typical small molecule inhibition, even
operating at picomolar concentrations. We expect that the high cellular potency of PROTACTT
degrader could provide the possibility of removal of proteins at levels equivalent to the knock out effect
by gene-based medicines currently being explored. Our PROTACTT
significant therapeutic advantages, including low doses, low drug exposures and practical dosing intervals,
potentially mitigating toxicity and tolerability risks.
targeted protein degraders offer
ff
potentially
targeted protein
ff
intended
The iterative mechanism of our PROTACTT
targeted protein degraders potentially leads to more complete
and lasting inactivation of downstream signaling in cells. In oncology, this translates into improved inhibition of
tumor cell growth and reduces the likelihood of cell compensation through activation of alternative proteins, a
targeted protein degraders to
common risk associated with small molecule inhibitors. This enables PROTACTT
operate in a broad therapeutic space between desired degradation-induced pharmacology and unwanted
inhibition-induced effect
s.
ff
Once the pre-existing reservoir of the targeted protein is depleted, our PROTACTT
targeted protein
degraders only need to degrade newly resynthesized protein to maintain their effect.
resynthesis rate of the protein, this may be achievable with low tissue concentrations of PROTACTT
protein degrader, which could lead to safety benefits and opportunities for flexible dosing regimens.
Depending on the
ff
targeted
ii
Weak Binders
Become Potent Degraders
Using our platform and know-how, we are able to engineer potent PROTAC targeted protein degraders
that do not require a high degree of binding strength to their targets. This contrasts with small molecule
inhibitors, which require strong binding to a target protein and function by continually occupying the protein’s
active site. The potency of our PROTAC targeted protein degraders is determined by a number of kinetic
factors: formation of the trimer complex, rapid ubiquitination, trafficking
proteasome and release of the PROTACTT
degradation. As a result, a PROTACTT
maintain a deep and prolonged suppression of protein levels, leading to the desired pharmacological effect.
This provides opportunities to use our PROTAC technology to repurpose small molecules that only weakly bind
to their target to create potent degraders as PROTACTT
targeted protein degrader with a low level of target protein occupancy can
targeted protein degrader to enter another iterative cycle of
of the ubiquitinated target to the
targeted protein degraders.
ff
ff
13
For example, we have published experiments where we built PROTACTT
targeted protein degraders from
tinib-based PROTACTT
1, which happened to further weaken the binding affinit
ity is measured by KD, or equilibrium dissociation constant. In this case, we observed that PROTACTT
the known protein kinase inhibitor foretinib, which is a relatively weak binder to the protein p38α, a protein
implicated in immune disorders and heart disease. We constructed a foreff
degrader we refer to as PROTACTT
affinff
exhibited a tenfold reduction in binding affinff
μM. Despite the significantly weaker binding affinit
y, PROTACTT
DC50, a concentration that results in half maximal degradation, of 210 nanomolar, or nM, which means that its
degradation potency is approximately 50-foldff
blot of cells treated with increasing concentrations (left tff o right) of foret
(non-degrading) version of PROTACTT
1. The decreasing presence of the p38α protein is depicted by a lighter
shade of the p38α band in the western blot as the doses of the PROTAC 1 increase. This demonstrates our
ability to use a weak binder to create a potent PROTAC targeted protein degrader. Based on our experience, we
believe that with additional medicinal chemistry effoff
targeted protein degrader could be further increased.
better than its binding strength. The figure below shows a western
ity relative to foretinib, decreasing from 1 micromolar, or μM, to 11
rt, the degradation potency of this weak-binding PROTAC
1 achieved potent degradation of p38α with a
inib, the PROTAC 1, and an inactivated
y to p38α. Binding
targeted protein
1
ff
ff
ff
Selectivity
When a ligand is incorporated into a PROTACTT
targeted protein degrader, the trimer complex initiated by
targeted protein degrader often causes the ligand’s selectivity to increase, meaning that the
the PROTACTT
degradation profile of a PROTACTT
of the ligand alone. By minimizing the binding of a ligand to off-tff arget proteins and maximizing selectivity forff
target protein, our PROTACTT
normal, healthy proteins and unwanted drug effect
a
targeted protein degraders may reduce the potential for incidental degradation of
targeted protein degrader can be even more selective than the binding profile
s and toxicity.
ff
We published experiments in which a ligand binding to 133 kinases degraded fewer than ten proteins
when incorporated into a PROTACTT
below on the left depicts foret
The figure on the right depicts cells treated with a foretinib-based PROTACTT
only a small subset of cellular proteins (lower left qff uadrant of the graph) as shown by mass spectrometry
analysis.
targeted protein degrader with limited additional modification. The figure
inib binding to 133 protein kinases as measured by a competitive binding assay.
targeted protein degrader degrading
ff
14
With further modification, and based on our experience, we believe it is possible to engineer
promiscuous binders such as this into more selective protein degraders, and when starting with less
target protein degraders.
promiscuous, yet still unselective, binders, identify very selective PROTACTT
This selectivity allows for engineering of PROTACTT
targeted protein degraders that degrade only the
mutated and unwanted protein, while sparing the normal, or wild-type, protein that may be necessary for healthy
function. For example, we have demonstrated degradation of abnormal, but not wild-type, forms of the BRAF
protein using a PROTACTT
outside the cell to the cell’s nucleus and is part of a pathway that regulates cell proliferation, different
migration and apoptosis. Mutations of BRAF, however, have been associated with a number of different
cancers. As shown in the figure below, our PROTACTT
depicted by a lighter shade in the columns labeled 300 nM, representative of each of the three classes of BRAF
mutations, while not degrading the wild-type BRAF, as depicted by an unchanging shade in each of the columns
shown on the western blot.
targeted protein degrader. Wild-type BRAF helps transmit chemical signals from
iation,
targeted protein degrader degraded BRAF mutants, as
ff
1hMito is a protein this particular PROTACTT
control to ensure total protein is equivalent in each lane.
targeted protein degrader is not targeted to degrade, and is included as a
Delivell
rabilityll
and Versatiliii ty
Our PROTACTT
targeted protein degraders have the potential for delivery through multiple routes of
administration to reach target proteins, and certain of our PROTAC targeted protein degraders are capable of
penetrating the blood brain barrier. In addition, the broad expression of the E3 ligases we target and the
potential to turn weak binding ligands into potent degraders allows the application of our PROTACTT
develop treatments for diseases associated with proteins that cannot be addressed by existing small molecule
therapies.
technology to
Deliverabilityt
We have developed PROTACTT
targeted protein degraders that are capable of being delivered orally,
intravenously, subcutaneously and intrathecally, among other routes of administration, as well as PROTACTT
targeted protein degraders that are able to penetrate the blood brain barrier. The multiple routes of delivery for
our PROTACTT
example, oral delivery can offer
approaches such as gene-based medicines that allows for more convenient treatment. Further, oral
administration avoids risks of adverse events associated with intravenous or intramuscular administration, such
as the potential for infection and blood clots at the infusion site.
targeted protein degraders potentially provide many attractive clinical dosing options. For
rentiating, competitive and commercial advantage over other therapeutic
a diffeff
ff
yt
Versatilit
rr
We believe our PROTACTT
targeted protein degraders may have potential application in a wide range of
therapeutic areas because the E3 ligases we currently target are expressed widely across tissue types. Ligands
that bind to some proteins may be of only weak affinit
allow the degradation of proteins through such low affinit
ff
Our ability to design weak binding PROTACTT
ubiquitination and subsequent degradation of targeted proteins has the potential to expand the number of
disease-causing proteins targeted for drug development to include undruggable targets. We believe that
rendering these targets druggable forff
Discovery Engine.
y. However, we believe that our PROTAC technology will
y active binding sites or non-functional binding sites.
the first time represents the true breadth and potential of our PROTACTT
targeted protein degraders that nonetheless initiate rapid
ff
15
We conducted an experiment designed to demonstrate that non-functional binding sites, analogous to
those that may be present on proteins considered undruggable, can be used to target proteins for degradation
by PROTACTT
targeted protein degraders. The figure below depicts a structural model of the Abl tyrosine kinase.
This protein kinase possesses an enzymatic active site that is inhibited by the marketed small molecule,
imatinib. The Abl kinase also has a second, non-functional active site, called an allosteric site, in its structure
that can bind a diffeff
rent small molecule, named GNF-2, which despite binding allosterically (with a relatively
weak KD of 500 nM), inhibits only the wild type protein (C-Abl), but not BCR-Abl-a mutated form of Abl
implicated in chronic myelogenous leukemia.
When GNF-2 is converted into a PROTAC targeted protein degrader and used to treat cells, both BCR-
ff
ively degraded. The figure below shows western blots of cells treated by increasing
Abl and C-Abl are effect
concentrations of our PROTAC targeted protein degrader and shows decreasing presence of each of BCR-Abl
and C-Abl protein (depicted by a lighter shade of the BCR/Abl and C-Abl band in the western blot). Downstream
signaling, as denoted by reduction of phosphorylated Stat5 (pStat5), is subsequently inhibited.
1Tubulin is a protein the GNF-2 PROTACTT
control to ensure total protein is equivalent in each lane.
targeted protein degrader is not targeted to degrade, and is included as a
16
PROTAC-induced degradation may offeff
r a solution for undruggable proteins because only binders, not
functional inhibitors, are needed to facilitate E3 ligase recruitment and initiation of the degradation process. The
probability of finding a suitable ligand using binding-site-agnostic screening is increased because the function of
the ligand itself is not required. As a result, there is the potential for PROTACTT
generate therapeutics from poorly selective ligands, weak-affinit
biologically active.
y ligands, or ligands that may not be intrinsically
targeted protein degraders to
ff
Our Programs
Bavdegadd
lutamide for the Treatmen
TT
t of Men with Metastatic Castration-Resistan
ii
t Prostate
PP
Cancer
We are developing bavdegalutamide, an orally bioavailable, AR degrading PROTACTT
targeted protein
degrader, forff
the treatment of men with mCRPC. Bavdegalutamide demonstrated activity in preclinical models
of AR overexpression and AR mutations, both common mechanisms of resistance to current standard-of-care
agents in men with prostate cancer. We believe that the different
bavdegalutamide, including its iterative activity, has the potential to translate into significantly improved clinical
outcomes over current standard-of-care
iated PROTAC pharmacology of
agents.
ff
ff
ff
Prostate
rr
Cancer
In the United States, prostate cancer is both the second most prevalent cancer in men and the second
leading cause of cancer death in men. Current estimates predict that one in nine men will be diagnosed with
prostate cancer in his lifetime. The American Cancer Society estimates that in 2022 there will be over 268,000
new cases of prostate cancer in the United States and approximately 34,500 deaths from the disease. Men with
mCRPC have a poor prognosis and a predicted survival rate of fewer than two years from the initial time of
progression.
Treatment options for prostate cancer depend on many different
ff
factors, including the stage of the
cancer. Castration-resistant prostate cancer is defined by disease progression despite androgen deprivation
therapy, or ADT, aTT nd is oftenff
indicated by rising levels of PSA. In making treatment evaluations, physicians
monitor disease burdens in several ways, including changes in PSA levels. Increased PSA blood levels are
considered by many physicians as indicative of cancer progression, and alternative treatment options may be
considered. Current standard of care for men with castration-resistant prostate cancer provides that patients
should initially receive a combination of ADT and either abiraterone, which works by decreasing androgen
levels, or enzalutamide, which works by blocking androgen binding to AR. If the disease progresses despite
these second-generation hormonal therapies, chemotherapy is considered the next treatment option. Treatment
with chemotherapy is generally postponed for as long as possible due to the potential for severe side effects
including neuropathies, nausea, diarrhea, decreased mental capacity and increased risk of infections.
ff
ff
Androgen receptor remains the principal driver of castration-resistant prostate cancer progression
during the transition from localized to metastatic disease, with AR gene amplification occurring in 40% to 60% of
patients, amplification of a transcription regulatory region upstream of the AR gene occurring in 70% to 87% of
patients, and AR point mutations occurring in approximately 15% of patients. Between 15% to 25% of patients
do not respond to either abiraterone or enzalutamide and the vast majorit
ultimately become resistant, resulting in limited survival. There remains meaningful unmet medical need in the
treatment paradigm of mCRPC, including a significant underserved set of patients who are or become resistant
to current therapies. Based on our preclinical data, we believe our PROTAC targeted protein degraders may
overcome these known resistance mechanisms and create meaningful clinical benefit for patients.
y of the responsive patients will
a
Preclinicii
al Development
We have conducted a comprehensive preclinical program to study bavdegalutamide as a potential
treatment forff men with mCRPC.
In in vitro models, bavdegalutamide degraded 95% to 98% of AR in multiple cell lines typically used in
prostate cancer research.
17
Bavdegalutamide is also highly selective for AR. A proteomic analysis of VCaP cells treated in vitro with
bavdegalutamide at a 10 nM concentration for eight hours demonstrated that only AR was degraded from the
nearly 4,000 measured proteins.
Importantly, in addition to AR degradation and selectivity, we have observedrr
in preclinical studies the
ability of bavdegalutamide to potently inhibit prostate cancer cell growth and reduce PSA levels. In addition to
guiding treatment decisions, reduction in PSA is often an indicator of the effect
iveness of treatment in clinical
trials, however, it is not recognized as a surrogate endpoint for purposes of regulatory approval. For example,
bavdegalutamide demonstrated equivalent reduction in PSA to enzalutamide at ten-fold lower concentration
levels in an in vitro inhibition study of PSA synthesis in Lymph Node Cancer of the Prostate cells, which are
androgen-sensitive human prostate adenocarcinoma cells, that have been engineered to overexpress AR.
ff
In in vivo mouse models, bavdegalutamide has inhibited AR-dependent tumor growth in a statistically
significant manner. Bavdegalutamide exhibited superior tumor growth inhibition compared to enzalutamide in
both castrated and intact (non-castrated) xenograft mff
odels derived from VCaP cell lines.
To assess the ability of bavdegalutamide to treat enzalutamide-resistant cancers, we conducted in vivo
odel. These VCaP tumors acquired
studies of bavdegalutamide in an enzalutamide-resistant VCaP xenograft mff
resistance to enzalutamide after being continuously propagated in castrated, enzalutamide treated mice for
approximately three years. This resistance can be seen in the figure below, as tumors in mice dosed with
enzalutamide grew at nearly the same rate as tumors in mice dosed only with the drug vehicle - a control similar
to dosing a placebo. Orally delivered bavdegalutamide significantly inhibited tumor growth, described as tumor
growth inhibition, or TGI, in these enzalutamide-resistant VCaP tumors.
Vehicle
ARV-110, 10 mpk PO, qd
Enzalutamide, 20 mpk PO, qd
ARV-110, 3 mpk PO, qd
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We have also conducted preclinical studies of bavdegalutamide for enzalutamide-insensitive cancers.
We conducted an in vivo study using a tumor line derived directly from a patient, referred to as a patient derived
xenograft,ff or PDX, model. This model is derived from a tumor from a patient not treated with enzalutamide but
that is insensitive to enzalutamide. This insensitivity can be seen in the figure below, as tumors in mice dosed
with enzalutamide grew at only a slightly slower rate than tumors in mice dosed only with the drug vehicle. In
contrast, orally delivered bavdegalutamide significantly inhibited tumor growth in these enzalutamide-insensitive
tumors, achieving a TGI value of 100%. Further, PSA levels in the plasma of mice following 20 days of
18
bavdegalutamide dosing significantly decreased in comparison to those dosed with only the drug vehicle or
enzalutamide.
Vehicle
Enzalutamide, 20 mpk PO, qd
ARV-110, 10 mpk PO, qd
)
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We believe the activity of bavdegalutamide in the above VCaP and PDX models may closely reflect
enzalutamide resistance or insensitivity in the clinic and shows the potential for treatment of patients whose
tumors have become resistant to, or demonstrate intrinsic resistance to, a current standard-of-care
agent.
ff
Bavdegalutamide has also reduced the levels of PSA in plasma comparable to levels achieved with
enzalutamide in a different
ff
VCaP xenograft mff
ouse model but at a lower dosing level.
We conducted investigational new drug, or IND,-enabling Good Laboratory Practice, or GLP, toxicology
studies with bavdegalutamide in rats and dogs to support advancement of bavdegalutamide into clinical
development. Both study designs called for animals to be treated once daily, orally for 28 days, followed by a
14-day recovery period for high dose animals. We believe both studies provide favorable safety margins of
approximately five to ten times higher than the anticipated therapeutic doses.
In the rat study, a no observed adverse effect
ff
level, or NOAEL, of 40 milligrams per kilogram, or mpk,
the mid-dose, in female animals and 120 mpk, the high dose, in male animals was identified. All findings
observed in male high-dose animals were considered reversible by the study director. Atrophy of the prostate
and seminal vesicles was noted in male animals at all dose levels and we believe is attributable to the
pharmacologic activity of bavdegalutamide.
In the dog study, the NOAEL was 10 mpk per day, the mid-dose. The high dose of 30 mpk per day
exceeded the maximum tolerated dose, and dosing in this group was stopped prior to the planned completion to
allow for collection of reversibility data. Elevations in liver function enzymes noted in some mid- and high-dose
animals were considered reversible by the study director, and non-adverse as they were without microscopic
correlates. In addition, at all dose levels, including animals receiving vehicle only, gastrointestinal alteration such
as loose and abnormally colored stools were noted. Decreased prostate weights were noted in all male animals
and we believe are attributable to the pharmacologic activity of bavdegalutamide.
Our Phase 1/2 Clini
ii cal Trial
rr
In 2019, we initiated dosing in a Phase 1 clinical trial of bavdegalutamide. Our Phase 1 trial is designed
as an open label, dose-escalation study of bavdegalutamide in men with mCRPC whose disease has
19
progressed on at least two prior systemic therapies, one of which must have been enzalutamide or abiraterone.
The Phase 1 trial is designed to primarily investigate the safety and tolerability of bavdegalutamide. Secondary
endpoints include characterization of bavdegalutamide’s pharmacokinetic profile and preliminary assessment of
biochemical and clinical activity based on evaluation of PSA levels, and radiographic measurement of evaluable
lesions. The anti-tumor effect
Evaluation Criteria in Solid Tumors, or RECIST, a standardized set of rules for response assessment based on
tumor shrinkage which is widely used in oncology clinical trials. We also will evaluate exploratory markers of
disease burden, such as circulating tumor cell enumeration, as exploratory endpoints of the trial.
s of bavdegalutamide in measurable lesions will be assessed using Response
ff
A potential drug-drug interaction between bavdegalutamide and rosuvastatin, or ROS, was identified
during the trial. One patient receiving 280 mg bavdegalutamide experienced a Grade 4 dose-limiting toxicity of
elevated aspartate transaminase/alanine transaminase, or AST/AL// T,LL liver enzymes followed by acute renal
failure. The second patient, receiving 70 mg bavdegalutamide, experienced a Grade 3 AST/ALT elevation,
which resolved after the removal of ROS, and the patient was retreated with bavdegalutamide. Follow-up
exploratory findings indicate that ROS concentrations, but not bavdegalutamide concentrations, were elevated
in both patients who had liver function test increases. Subsequent in vitro transport pump studies indicated that
bavdegalutamide inhibited breast cancer resistant pump transporter, of which ROS is a substrate. Following the
initial data that supported a potential interaction with ROS, concomitant use of ROS was precluded. Six other
patients had, as of the April 20, 2020 data cut-off,ff
adverse events.
received concomitant non-ROS statins without AST/AL// TLL
In the first and third quarters of 2020, we amended the protocol ffor our Phase 1 clinical trial ffor
bavdegalutamide. These amendments included the addition fof a Phase 2 expansion cohort B. ased on our
observations of a molecularly defined, late-line population with a particularly strong response to
bavdegalutamide, we designed our Phase 2 dose expansion to assess bavdegalutamide in four specific
subgroups: patients with tumors with AR T878X and/or H875Y mutations but excluding other AR variants;
patients with tumors with wild-type AR or AR alterations other than T878X, H875Y, LYY 702H, and AR-V7; patients
with tumors with AR L702H or AR-V; and patients with biomarker agnostic tumors with no more than one prior
novel AR-directed therapy, such as enzalutamide or abiraterone, and no prior chemotherapy.
ff
of 420 mg daily.
In the fourt
h quarter of 2020, we initiated the ARDENT Phase 2 expansion portion of the trial at a dose
In February 2022, we announced completed Phase 1 and interim Phase 2 ARDENT data forff
bavdegalutamide with a data cut-off dff ate of December 20, 2021. We reported that bavdegalutamide showed
reduced PSA levels of greater than or equal to than 50%, or PSA50, in 46% of the 28 patients with tumors
harboring AR T878X/H875Y (T878X = T878A or T878S) mutations. These results also demonstrated PSA
declines and tumor regressions in patients without tumors harboring AR T878X/H875Y mutations, suggesting
an opportunity to develop bavdegalutamide more broadly in prostate cancer.
As of the data cut-off date, 195 patients were enrolled across the Phase 1/2 clinical trial (71 in Phase 1;
124 in Phase 2).
The Phase 1 dose escalation trial evaluated bavdegalutamide at doses ranging from 35–700 mg, once-
daily, or 210–420 mg twice-daily, in patients with mCRPC and two or more prior therapies (including abiraterone
and/or enzalutamide).
Patients in the ongoing ARDENT study are enrolled in one of four
subgroups: patients with tumors with
AR T878X and/or H875Y mutations and excluding AR L702H mutations and AR-V7 splice variants; patients with
tumors with wild-type AR or AR alterations other than T878X, H875Y, LYY 702H, AR-V7; patients with tumors with
AR L702H mutations or AR-V7 splice variants, which are variants of AR that bavdegalutamide did not degrade
preclinically; and patients with biomarker agnostic tumors with only one prior novel hormonal agent, or NHA,
and no prior chemotherapy.
ff
The ARDENT Phase 2 dose expansion trial is administered at a starting recommended Phase 2 dose,
or RP2D, of 420 mg, once-daily. Patients in the ARDENT trial received a median of four prior lines of therapy
with 100% receiving at least one NHA (64% abiraterone, 75% enzalutamide or other AR inhibitor, 39% both
abiraterone and an AR inhibitor) and 31% receiving at least one chemotherapy regimen.
20
Efficacy Measures
We presented efficaff
cy measures on a combined basis for patients in both the completed Phase 1 dose
escalation trial and the interim analysis from the ongoing ARDENT Phase 2 dose expansion trial. In the
biomarker defined (“more pretreated”) subgroups, we observed the following:
•
•
•
In eight patients with tumors with AR T878X and/or H875Y mutations but excluding other AR
variants, PSA50=75%; PSA decline of more than 30%, or PSA30, =75%
In 44 patients with tumors with wild-type AR or AR alterations other than T878X, H875Y, LYY 702H, or
AR-V7, PSA50=11%; PSA30=20%
In 25 patients with tumors with AR L702H or AR-V7, PSA50=4%; PSA30=20%
In the biomarker agnostic (“less pretreated”) subgroup comprising 27 patients with no more than one
prior NHA and no prior chemotherapy, the PSA50 response rate was 22% and the PSA30 response rate was
26%.
In biomarker-evaluable patients treated at or above the RP2D and with tumors harboring AR T878X/
H875Y mutations (across all subgroups and thus regardless of prior therapy regimens or other mutations;
n=28), the PSA50 response rate was 46% and the PSA30 response rate was 57%.
Of seven RECIST-evaluable patients across the Phase 1 and Phase 2 trials with tumors harboring AR
T878X/H875Y mutations, two had confirmed durable partial responses. These patients were on treatment for
approximately nine months (ongoing as of the data cut-off)ff and ten months; the duration of treatment ranged
from eight weeks to 44 weeks, with three of the seven patients continuing on treatment as of the data cutoff off
December 20, 2021.
f
Twelve (43%) of the 28 patients with AR T878X/H875Y-posit
YY
ive mutations received bavdegalutamide for
24 weeks or more, with nine patients ongoing as of the data cutoff.ff
PSA reductions and evidence of anti-tumor activity as measured by RECIST were observed across all
subgroups regardless of mutation status, including tumors not harboring AR T878X/875Y mutations.
RECIST responses were seen in patients with tumors lacking AR T878X/H875Y mutations (one
confirmed and three unconfirmed RECIST responses).
The “less pretreated” subgroup (n=27) had a similar molecular profile—as assessed by circulating
tumor DNA analysis—to the more pretreated, biomarker-defined subgroups in the ARDENT trial. These
similarities included both AR variations (point mutations and AR-V7 splice variants) and non-AR mutations
frequently associated with poor outcomes (e.g., TP53, BRCA1). Six of the 27 patients (22%) had PSA50
reductions, and this PSA50 rate was similar to that observed collectively in the “more pretreated” subgroups
(16%; n=77). Four of the six “less pretreated” patients with PSA50 declines had tumors with AR T878X/H875Y
mutations.
Safety at
nd Tolerability
Bavdegalutamide had a manageable tolerability profile at the RP2D. The majority of treatment-related
adverse events, or TRAEs, were Grade 1/2 and there were no Grade 4 or greater TRAEs in the 138 patients
treated at the RP2D.
TRAEs that occurred in 10% or more of patients treated at the RP2D were nausea (Gr 1: 30%; Gr 2:
16%; Gr 3: 1%), fatigue (Gr 1: 23%; Gr 2: 12%; Gr 3: 1%), vomiting (Gr 1: 20%; Gr 2: 5%; Gr 3: 1%), decreased
appetite (Gr 1: 14%; Gr 2: 11%; Gr 3: 1%), diarrhea (Gr 1: 14%; Gr 2: 4%; Gr 3: 2%), alopecia (Gr 1: 13%; Gr 2:
1%; Gr 3: N/A)// AST increased (Gr 1: 9%; Gr 2: 3%; Gr 3: 1%), weight decreased (Gr 1: 7%; Gr 2: 5%; Gr 3:
0%), and anemia (Gr 1: 4%; Gr 2: 1%; Gr 3: 5%).
TRAEs at the RP2D led to dose reduction in 11 (8%) patients and discontinuation in 12 (9%) patients.
In the first half of 2022, we intend to initiate discussions with the FDA about the potential for an
accelerated approval pathway with bavdegalutamide in molecularly defined mCRPC and finalize a partnership
for a companion diagnostic. In the second half of 2022, we plan to initiate a pivotal trial evaluating
21
bavdegalutamide in patients with mCRPC who have progressed on or after
tumors that harbor AR T878X/H875Y tumor mutations. We anticipate that future studies will be planned to
explore the potential to treat earlier-line patients with AR-dependent tumors who may benefit from
bavdegalutamide therapy.
novel hormonal agents and have
ff
VV
ARV-766
TT
for the Treatmen
t of Men with Metastatic Castration-Resistan
ii
t Prostate
PP
Cancer
We are developing ARV-RR 766 to target and degrade wild-type and mutated AR including at least one
additional, clinically relevant AR point mutation, the L702H point mutation, which bavdegalutamide did not
degrade in preclinical studies. The L702H point mutation in the ligand-binding domain of AR results in activation
of the AR by glucocorticoids and can cause resistance to a standard of care regimen. Recent studies have
reported that between approximately 2-9% of patients with mCRPC had an L702H point mutation. We initiated a
Phase 1 dose escalation clinical trial in 2021. In the second half of 2022, we plan to present Phase 1 dose
escalation data and initiate a Phase 2 expansion trial for the treatment of men with mCRPC.
Next Generation AR Degradersdd
We are developing additional PROTAC targeted protein degraders capable of degrading certain AR
a dimer with a full-length AR, and such non-identical protein dimers are
splice variants. We expect that results from our Phase 1/2 clinical trials of bavdegalutamide and ARV-RR 766 will
provide further data on the role of androgen receptor splice variant-7, or AR-V7, in prostate cancer.
Bavdegalutamide and ARV-RR 766 bind to full-length AR at its ligand-binding domain. AR-V7 is a truncated form of
AR that lacks the ligand-binding domain necessary to bind with bavdegalutamide and ARV-RR 766 and which
bavdegalutamide and ARV-RR 766 therefore do not degrade. AR functions as a dimer, a complex made up of two
individual AR proteins. AR-V7 can formff
called heterodimers. We believe that bavdegalutamide and ARV-RR 766, by degrading the full-length AR
component of the heterodimer, could successfully inactivate AR-V7-directed signaling. Although shown to form a
heterodimer preclinically, there is uncertainty as to whether AR-V7 and AR form a heterodimer in patients’
tumors. It is also possible that AR-V7 signals through V7-only dimers, which would be unaffecte
bavdegalutamide and ARV-RR 766. Although the presence of AR-V7 has been shown to correlate with a lack of
response to enzalutamide and abiraterone, a published study demonstrated that approximately 40% of patients
with AR-V7 expressing circulating tumor cells show a PSA response to enzalutamide. Given the evolving
potential role of AR-V7 in prostate cancer, as a follow-on to bavdegalutamide and ARV-RR 766, we are exploring
the identification and development of a PROTACTT
well as other AR splice variants.
targeted protein degrader that can degrade AR-V7 directly, as
d by
ff
VV
ARV-471
reast Cancer
Negative Bvv
TT
for the Treatmen
t of Patients with Locallyll Advanced or Metastatic ER PEE
ositive / HER2H
We are developing ARV-RR 471, an orally bioavailable ER degrading PROTACTT
targeted protein degrader,
as an alternative to, and potentially more potent degrader than, the intramuscular injection fulvestrant and other
selective ER degraders currently in development for the treatment of patients with locally advanced or
metastatic ER positive / HER2 negative breast cancer. Similar to our AR program, we have chosen ER
degradation as a therapeutic focus given the well-documented biology of ER signaling as a principal driver in a
high percentage of breast cancers. ARV-RR 471 has demonstrated activity in ER positive breast cancer preclinical
models. We are clinically investigating ARV-RR 471 for use as a single agent and in combination with cyclin-
dependent kinase, or CDK, 4/6 inhibitors such as palbociclib. We believe ARV-RR 471 has the potential to improve
clinical outcomes over current standards of care for patients with locally advanced or metastatic ER positive /
HER2 negative breast cancer.
Breast Cancer
In the United States, breast cancer is the second most common cancer and the second leading cause
of cancer death in women. The American Cancer Society estimates that in 2022 there will be approximately
288,000 women diagnosed with invasive breast cancer in the United States. Metastatic breast cancer accounts
for approximately 6% of newly diagnosed cases. Approximately 80% of newly diagnosed breast cancers are
ER+, with many patients developing resistance to current treatment options over time.
22
Treatment options for breast cancer depend on many different
ff
factors, including the stage of the cancer
and whether the cancer cells contain hormone receptors. Patients with locally advanced or metastatic breast
cancer are treated with systemic therapy, including hormone therapy, chemotherapy and targeted therapy, either
as single-agents or in combination. Patients with locally advanced or metastatic ER positive / HER2 negative
breast cancer are often treated with hormone therapy, such as tamoxifen or an aromatase inhibitor, sometimes
in combination with targeted drugs such as CDK4/6 inhibitors. In patients with aggressive disease or whose
disease continues to progress with a hormonal treatment regimen, chemotherapy may be prescribed. Treatment
with chemotherapy is generally postponed for as long as possible due to the potential for severe side effects
including neuropathies, nausea, diarrhea, decreased mental capacity and increased risk of infections.
ff
A current standard of care for patients with ER positive / HER2 negative locally advanced or metastatic
breast cancer is fulvestrant, an ER degrader administered as a monthly intramuscular injection, either as a
single-agent or in combination with another targeted therapy. While fulvestrant has validated the importance of
ER degradation as a therapeutic intervention, up to 50% of ER can remain when compared to baseline levels
after six months of treatment with fulvestrant, providing an opportunity forff more potent ER degraders, such as
ARV-RR 471, our PROTACTT
targeted protein degrader.
rr
Precl
inll
ical Development
We have conducted a comprehensive preclinical program to study ARV-471
VV
as a potential treatment forff
patients with locally advanced or metastatic ER positive / HER2 negative breast cancer. In our preclinical
studies, ARV-RR 471 was a superior degrader of ER compared to fulvestrant. ARV-471
tumor growth inhibition when combined with a CDK4/6 inhibitor compared to fulvestrant and the same
combination partner.
has also shown superior
VV
In in vitro models, ARV-RR 471 has induced ER degradation in multiple cell lines typically used in breast
cancer research.
In in vivo experiments ARV-471
VV
has achieved superior tumor growth inhibition and degradation
VV
ouse model. MCF-7 is a well-characterized estradiol-dependent ER positive / HER2
compared to fulvestrant. We have tested ARV-471
MCF-7 xenograft mff
negative cell line that forms
in very high tumor growth inhibition when dosed daily orally at 10 mpk and more than 80% tumor shrinkage
when dosed daily orally at 30 mpk for 28 days. At both doses, ARV-RR 471 demonstrated superior activity
compared to a clinically relevant dose of fulvestrant, which is 200 mpk twice per week for two weeks and then
once per week for two weeks.
tumors when implanted in the mammary fat pad of female mice. ARV-RR 471 resulted
for tumor growth inhibitory activity using an industry-standard
ff
ff
After
28 days of dosing in this efficacy study, the MCF-7 tumors were removed from the mice and
processed for western blots to observe the level of ER degradation induced by oral dosing of ARV-RR 471.
ARV-RR 471 reduced ER by 85%, on average, at 10 mpk as compared to the control tumors and by 89%, on
average, at 30 mpk as compared to the control tumors.
We have also conducted preclinical studies to test ARV-RR 471 in a PDX model. This model is derived from
ff
a tumor with an ESR1 mutation (Y537S), which is a mutation in the ER that occurs in patients who have been
agents such as tamoxifen or an aromatase inhibitor, such as letrozole, and has
treated with standard-of-care
been cited as a mechanism of resistance to those drugs. These studies included a comparison with fulvestrant.
In this 28-day dosing study, oral ARV-RR 471 inhibited tumor growth by 99% at the 10 mpk dosing level and by
106% at the 30 mpk dosing level which was observed to be superior at both dosing levels to a clinically relevant
was shown to reduce ER by 79% and 88% at the 10 mpk and
dose of 200 mpk of fulvestrant. Further, ARV-471
30 mpk dosing levels, respectively, compared with 63% at the 200 mpk of fulvestrant dosing level.
VV
We have also conducted studies of ARV-RR 471 in combination with palbociclib, a CDK4/6 inhibitor that is
standard of care when used together with fulvestrant. In these studies, we have achieved significant tumor
shrinkage with ARV-471
in a 28-day dosing study in MCF-7 xenografts,
superior in shrinking tumors, as compared to either palbociclib as a single agent at 60 mpk daily, or the
ff ARV-RR 471 at 30 mpk daily in combination with palbociclib was
in ER positive / HER2 negative MCF-7 xenograft mff
odels. As shown in the figure below,
VV
23
standard-of-care
weeks and then once per week for two weeks.
ff
combination of palbociclib at 60 mpk daily plus fulvestrant at 200 mpk twice per week for two
Vehicle
Fulvestrant + Palbociclib
Palbociclib
ARV-471 + Palbociclib
)
2
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e
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o
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a
e
M
800
700
600
500
400
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200
100
0
0
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24
28
Days of Treatment
We believe that ARV-RR 471 may also show compelling activity in combination with other targeted agents
currently used or in clinical trials for locally advanced or metastatic breast cancer including PI3K and mTOR
inhibitors and plan to test these combinations in preclinical models.
We conducted IND-enabli gng GGLP to
VV
advancement off ARV-471
treated once dai yly, o
rally ffor 28
and ffor the higgh dose animals
into clinical development. The
ydays, ffollowed yby a 2
yonly in the dogg stu ydy.
y
xicology studies with ARV-471
gy
VV
in rats and
designs ffor these studies called ffor animals to be
recovery period at each dose level in the rat st
8-day
y
gdogs to support
g
y
yudy
In the rat study, animals were treated at doses of 0 (vehicle control), 3, 10, 30 and 100 mpk/day. The
NOAEL was 100 mpk, the high dose. All findings observed were considered reversible by the study director.
Evidence of pharmacologic activity was noted in the reproductive organs of rats at the 3 mpk dose level and
higher. In the dog study, animals received 0 (vehicle control), 15, 45 or 90 mpk/day. The NOAEL was 90 mpk,
the high dose. All findings observed in high-dose animals were considered reversible by the study director.
Our Phase 1/2 Clini
ii cal Trial
rr
In August 2019, we initiated dosing in a Phase 1 clinical trial for ARV-RR 471. The trial is an open-label
dose-escalation study in which we expect to dose approximately 28 to 36 patients with locally advanced or
metastatic ER positive / HER2 negative breast cancer who have progressed on at least two prior endocrine
therapy regimens and a CDK4/6 inhibitor. Eligible patients may have also received up to three prior regimens of
cytotoxic chemotherapy. The protocol provides for a starting dose of 30 mg/day, administered orally.
In the ffirst an fd fourt
ff
h quarters fof 2020, we amended the protoco fl forff
our Phase 1 clinical trial ffor
AARV-RR 471, to include the Phase 2 expansion cohort and a Phase 1b cohort expansion of ARV-RR 471 in
combination with Ibrance® (palbociclib), respectively.
The dose escalation portion of our Phase 1/2 clinical trial of ARV-RR 471 is designed to assess safety,
tolerability and pharmacokinetics, or PK, of ARV-471
breast cancer, as well as measures of anti-tumor activity as secondary endpoints.
VV
in patients with locally advanced or metastatic ER+/HER2-
24
In December 2021, we announced updated data, as of the data cut-off dff ate of September 30, 2021,
from the dose escalation portion of our Phase 1/2 clinical trial.
Enrolrr
lmll ent
As of the data cut-off dff ate, 60 adult patients with locally advanced or metastatic ER+/HER2- breast
cancer were treated in the Phase 1 dose escalation portion of the trial with total daily ARV-RR 471 doses ranging
from 30 mg to 700 mg. This patient group is heavily pretreated, with a median of four prior therapies. All patients
were previously treated with CDK4/6 inhibitors; 80% of patients received prior fulvestrant; and 78% received
prior chemotherapy.
Efficac
yc
ff
Of 47 patients who were evaluable forff
clinical benefit (confirmed complete response, partial response,
or stable disease ≥ 24 weeks) the clinical benefit rate was 40%. As of the data cutoff dff ate, 14 patients were
continuing to receive study treatment, including two patients who had been on treatment for over 18 months.
Three confirmed partial responses were observed among the 38 patients with baseline RECIST measurable
disease and at least one on-treatment tumor assessment.
Safetyt
Patients were treated in the monotherapy escalation at total daily doses of 30 mg (n=3), 60 mg (n=3),
120 mg (n=7), 180/200 mg (n=11), 360 mg (n=15), 500 mg (n=17), and 700 mg was administered twice a day
(300 mg in the morning / 400 mg in the evening) (n=4). A maximum tolerated dose was not reached and no
dose limiting toxicities or Grade 3 or 4 treatment-related adverse events, or TRAEs, were observed. Of the 60
patients, 37% had Grade 1 TRAEs and 57% had Grade 2 TRAEs, and the most common TRAEs were nausea
(29%), fatigue (20%), and vomiting (10%). No Grade 1 or 2 TRAEs led to discontinuation or dose reduction of
ARV-RR 471. Four patients experienced six Grade 3 TRAEs that were potentially related to ARV-RR 471, including:
headache lasting 1-day, single occurrence of asymptomatic increased amylase and lipase, nausea and
asymptomatic QTc pTT rolongation, and post-biopsy venous embolism. The patient with the venous embolism was
the only Grade 3 patient who discontinued ARV-RR 471 due to a TRAE, and the patient with Grade 3 nausea was
the only patient with a dose reduction due to a TRAE (reduced from 500 mg to 400 mg daily).
ER Degradat
rr
iontt
In paired biopsies from 14 patients across all doses up to 500 mg daily, robust ER degradation of up to
89% was observed, regardless of ESR1 mutation status. Median and mean ER degradation across dose levels
were 67% and 64%, respectively.
Pharmacokinetics
ARV-RR 471 demonstrated a dose-related increase in plasma exposure, with doses from 30 mg to 500 mg
daily, resulting in steady-state exposure levels that exceeded the exposure associated with tumor regression in
preclinical breast cancer models. Mean exposure on day 15 exceeded the nonclinical efficacious
of 60 mg or more daily.
range at doses
ff
ARV-RR 471 currently is being evaluated as a treatment forff metastatic breast cancer in a Phase 1 dose
escalation study, a Phase 1b combination study with IBRANCE® (palbociclib), and a Phase 2 monotherapy
dose expansion study. In the second
Phase 2 dose
expansion (w(with patients dosed at 200 and 500 mg)mg) and present
fa from the Phase 1b combination
studyy with palbociclib. Addit
combination with everolimus in patients with metastatic breast cancer, initiate a Phase 1b combination trial with
CCDK inhibitors or other t gargeted therapies, initiate a Phase 2 clinical trial in patients with ear yly breast cancer in
the ne
monot
oadjuvant sett ging and initiate two Phase 3 clinical trials in patients with metastatic breast cancer as a
herapy and in combination.
ionally, in 2022, we plan to initiate a Phase 1b clinical trial with ARV-471
fof 2022, we plan to present data ffrom the VERIT CACTT
fsaf yety dat
fhalf
in
VV
y
y
j
25
Our Preclinical Programrr
s
We anticipate filing fouff
r IND applications through 2023.
Other Oncology,gg Immuno-Oncology and Undruggable TargTT
ets
We have active preclinical programs to evaluate additional established targets in oncology and immuno-
oncology, as well as other currently undruggable targets. In line with our strategy, we assess potential
exploratory programs on a target-by-target basis to decide whether our PROTAC targeted protein degraders
provide a compelling differentiated approach over standard-of-care
or other, existing or potential competing
mechanisms of action directed against a specific target. In the case of currently undruggable targets, we assess
whether the features of our PROTAC targeted protein degraders, including their potential to degrade proteins
via sites other than enzymatic active sites and the ability to initiate the degradation process using only weak
binders, offer
us opportunities to degrade those targets.
ff
ff
Our exploratory and research activity in oncology and immuno-oncology includes programs directed to
the B-cell lymphoma 6 protein (BCL6), a transcription factor implicated in B cell lymphomas; Kirsten rat sarcoma
(KRAS), an oncogenic cell growth regulator; Myc, an oncogenic transcription factor driving tumor cell
proliferation; and hematopoietic progenitor kinase 1 (HPK1), a suppressor of T cell activation.
Neurodegenerative Diseases
ff
a rapidly growing patient population and represent one of the largest unmet medical
Neurodegenerative diseases are generally progressive in nature and result in the degeneration and
often death of neurons in the brain, leading to cognitive decline, functional impairment and eventually death.
These diseases affect
needs of our time. Alzheimer’s and Parkinson’s diseases encompass the largest patient populations among the
neurodegenerative diseases. The Alzheimer’s Association estimated that 6.2 million Americans aged 65 and
older were living with Alzheimer’s dementia in 2021, and the Parkinson’s Foundation estimated that nearly one
million Americans are living with Parkinson’s disease. Alzheimer’s disease is marked by the progressive
accumulation of aggregated tau protein, while aggregation of alpha-synuclein is thought to cause Parkinson’s
disease.
Inhibitor-based therapies targeting the proteins thought to be the cause of these neurodegenerative
diseases have failed to show clinically meaningful benefit to date. While some existing products provide
symptomatic relief to Alzheimer’s and Parkinson’s patients, they have significant side effect
gradually lose their effect
disease-modifying treatments for Alzheimer’s or Parkinson’s.
iveness in treating the symptoms of the disease. Further, there are no approved
ff
ff
risks and over time
Developing PROTAC Targeted Protei
rr
n Dii
egradersdd
that Cross
rr
the Blood Brain Bii
arrier
Engineering products that cross the blood brain barrier is a highly desirable characteristic in developing
ff
ive therapeutics for patients with neurodegenerative diseases as compared with therapies delivered
effect
directly into the central nervous system, or CNS. Any product candidates for neurodegenerative disease must
reach their intended targets in the brain at exposure levels that will provide a therapeutic effect,
acceptable safety profile.
while having an
ff
Importantly, we have achieved brain penetration in preclinical models fol
ff
lowing parenteral
degrader molecules designed to specifically target pathologic oligomers of tau and α-
administration of PROTACTT
synuclein, for the treatment of Alzheimer’s disease and other tauopathies and Parkinson’s disease and other
synucleinopathies, respectively. These PROTACTT
suffici
ff
brain, and brain/plasma ratios of 0.5 to 5.0, which are comparable to approved therapeutics with CNS activity.
ent to induce degradation of the aggregated proteins, widespread penetration into different
degrader molecules achieved concentrations in the brain
parts of the
ff
Developing PROTAC Targerr
ted ProPP tein Degradersdd
that Degrade Pdd
rotePP
ins Associated withww
Neurodegedd
rr
nerativ
e Dvv
iseases
We have conducted preclinical studies to establish the potential of our PROTACTT
Discovery Engine in
the CNS forff
the treatment of neurodegenerative diseases, including tauopathies, the largest of which is
26
Alzheimer’s disease. We have demonstrated that tau PROTAC protein degrader molecules could be dosed
peripherally and degrade pathogenic tau in the brain of a mouse tauopathy model.
In preclinical studies, we have demonstrated that alpha-synuclein PROTAC degraders can specifically
degrade aggregated forms of the protein. We have conducted in vitro experiments in cells expressing the A53T
mutant form of alpha-synuclein, a mutation that causes aggregation of alpha-synuclein and early-onset
Parkinson’s diseases in patients. We treated these cells with alpha-synuclein targeting PROTAC degraders at 1
μM forff
48 hours.
In addition to our tau and alpha-synuclein programs, our neuroscience programs include a program
directed to mutant huntingtin (mHTT), a key protein target for Huntington’s disease.
Intellectual Property
Our commercial success depends in part upon our ability to secure and maintain patent and other
proprietary protection for our platform protein degradation technologies, including our PROTAC targeted protein
degrader programs, product candidates, and know-how related to our business, defendf
intellectual property rights, in particular our patent rights, preserve the confidentiality of our trade secrets, and
operate without infringing valid and enforceable
intellectual property rights of others.
and enforce
our
ff
ff
The patent positions for biopharmaceutical companies like us are generally uncertain and can involve
complex legal, scientific and factual issues. In addition, the coverage claimed in a patent application can be
significantly reduced beforeff
a patent is issued, and its scope can be reinterpreted and even challenged after
issuance. As a result, we cannot guarantee that any of our product candidates will be protected or remain
protectable by enforcff
pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will
provide sufficient
circumvented or invalidated by third parties.
proprietary protection from competitors. Any patents that we hold may be challenged,
eable patents. We cannot predict whether the patent applications we are currently
ff
As of January 31, 2022, our patent estate that we own, co-own and in-license includes 29 issued U.S.
patents, 48 granted foreign patents, and 328 pending patent applications.
PROTACTT
Patents and Patent Applications
Our PROTACTT
filings, and PROTACTT
patent portfolio is generally organized into two categories: PROTACTT
product candidate or protein target-specific patent filings.
platform patent
PROTACTT
ll
Platf
ormff
As of January 31, 2022, our PROTAC platform patent estate that we own, co-own, and in-license, and
that covers our various E3 ubiquitin ligase constructs, includes two issued U.S. patents, 21 granted foreign
patents, 12 pending U.S. patent applications and 56 pending foreign patent applications. This patent estate
covers constructs that have ligands for the VonVV Hippel Lindau, or VHL, E3 ubiquitin ligase, the cereblon, or
CRBN, E3 ubiquitin ligase, the inhibitor apoptosis protein, or IAP, E3 ubiquitin ligase, and the human mouse
double minute homolog, or MDM2, E3 ubiquitin ligase.
We exclusively license from Yale University a portfolio of patents and patent applications describing
ff
r claims encompassing PROTACTT
composition-of-matte
targeted protein degrader compounds comprised of
ligands for the VHL E3 ubiquitin ligase, as well as claims to associated methods of use. Patents have been
granted in Australia, Mexico, Russia, South Korea, and the United States, and patent applications are pending
in Australia, Brazil, Canada, China, Europe, Hong Kong, India, Japan, Mexico, South Korea, Russia and the
United States. If all appropriate maintenance fees are paid, each granted patent will expire in 2033 without
taking potential patent term extensions into account. We also co-own with YaleYY
composition-of-matte
ligands for the VHL E3 ligase. A patent has issued in the United States, and patent applications are pending in ,
Australia, Brazil, Canada, China, Europe, Hong Kong, India, Japan, Mexico, Russia, South Korea and the
United States. Our rights to this patent and these patent applications are governed by the YaleYY
Agreement described below.
targeted protein degrader compounds comprised of
r claims encompassing PROTACTT
patent applications describing
License
ff
27
We own three patent families with three pending U.S. patent applications describing composition-of-ff
matter claims covering the CRBN E3 ubiquitin ligase ligand generically, the chemical linker group generically,
and a small molecule or peptide ligand that binds to a target protein generically. We own granted patents in
Australia, China, Europe, India, Japan, Mexico, Russia, and South Korea. Patent applications are pending in
Australia, Brazil, Canada, China, Europe, Hong Kong, India, Israel, Japan, Mexico, Russia, South Korea and
the United States. If all appropriate maintenance fees are paid, each granted patent in these families will expire
no earlier than 2035 without taking potential patent term extensions into account.
We own a patent family describing composition-of-matter
ff
claims encompassing PROTACTT
targeted
protein degrader compounds comprised of ligands for the IAP E3 ubiquitin ligase as well as claims to
associated methods of use. Patent applications in this family
granted, and all appropriate maintenance fees are paid, the expiration of these patents would be in 2036 without
taking potential patent term extensions into account.
are pending in Europe and the United States. If
ff
We own a patent family describing composition-of-matter
ff
claims encompassing PROTACTT
targeted
protein degrader compounds comprised of ligands for the MDM2 E3 ubiquitin ligase as well as claims to
ff
associated methods of use. Patent applications in this family
granted in Australia. If granted, and all appropriate maintenance fees are paid, the expiration of these patents
would be in 2036, without taking potential patent term extensions into account.
are pending in Europe and the United States, and
PROTACTT
Prodrr
uct Candidat
dd
es
Our product or protein-specific patent applications were created to pursue more focused patent
exclusivity around PROTAC targeted protein degrader compounds designed to target specific proteins. As of
product patent portfolio that we own, co-own and in-license includes 24 U.S.
January 31, 2022, our PROTACTT
issued patents, 40 granted foreign patents, 58 pending U.S. patent applications, eight pending Patent
Cooperation Treaty, or PCT, aTT pplications, and 201 pending foreff
ign patent applications.
We own nine patent families describing composition-of-matte
ff
r claims encompassing PROTACTT
targeted
ff
ff
ff
r, synthetic
protein degrader compounds addressing AR and associated methods of manufacture and methods of treating
cancer. The first patent family has three issued U.S. patents, five granted foreign patents, two pending U.S.
applications, and 22 pending foreign patent applications describing composition-of-matte
intermediates, and method of use claims covering bavdegalutamide. Any patents granted in this family,
assuming all appropriate maintenance fees are paid, will expire in 2037 without taking potential patent term
extension into account. The second patent family has four pending applications in the United States, six granted
foreign patents, and 20 pending foreign applications describing alternative composition-of-matte
r claims. Any
patents granted in this family, assuming all appropriate maintenance fees are paid, will expire in 2036 without
taking potential patent term extension into account. The third patent family has one pending U.S. application
and one pending PCT application describing claims directed to additional methods of treating cancer using
bavedegalutamide. Any patents granted in this family, assuming all appropriate maintenance fees are paid, will
expire in 2040 without taking potential patent term extension into account. The fourth patent family has one
pending U.S. application, one pending PCT application, and one pending foreff
composition-of-matte
r claims directed to ARV-RR 766. Any patents granted in this family, assuming all appropriate
maintenance fees are paid, will expire in 2040 without taking potential patent term extension into account. The
fifth patent family has a pending U.S. application and one pending PCT application describing claims directed to
additional methods of treating cancer using bavdegalutamide. Any patent granted in this family, assuming all
appropriate maintenance fees are paid, will expire in 2041 without taking potential patent term extension into
account. The sixth patent family has one pending U.S. application, one pending PCT application, and one
pending foreign application describing claims directed to methods of manufacture, crystalline and ultrapure
forms, and dosage forms of bavdegalutamide. Any patent granted in this family, assuming all appropriate
maintenance fees are paid, will expire in 2041 without taking potential patent term extension into account. The
seventh patent family has one pending U.S. application and one pending PCT application describing claims
directed to methods of treating cancer with bavdegalutamide in patients with specific AR mutations. Any patents
granted in this family, assuming all appropriate maintenance fees are paid, will expire in 2041 without taking
potential patent term extension into account. The eighth patent family has two pending U.S. applications
describing methods of treating cancer with ARV-766.
appropriate maintenance fees are paid, will expire in 2042 without taking potential patent term extension into
account. The ninth patent family has one pending U.S. application and 14 pending foreign applications
describing alternative AR-based PROTAC compounds and methods of use to treat cancer. Any patents granted
Any patents granted in this family, assuming all
ign application describing
VV
28
in this family
f
patent term extension into account.
, assuming all appropriate maintenance fees are paid, will expire in 2038 without taking potential
We own seven patent families describing composition-of-matter
ff
claims encompassing PROTACTT
ff
ff
r and method of use claims covering
, assuming all appropriate maintenance fees are paid, will expire in
targeted protein degrader compounds addressing ER and associated methods of treating cancer. The first
patent family has three issued U.S. patents, two pending U.S. applications, seven granted foreign patents, and
22 pending foreign patent applications describing composition-of-matte
ARV-RR 471. Any patents granted in this family
2037 without taking potential patent term extension into account. The second patent family has one pending
U.S. application and one pending PCT application describing claims directed to methods of treating cancer
using ARV-RR 471 as a monotherapy, and also combined with an additional anti-cancer agent. Any patents granted
in this family, assuming all appropriate maintenance fees are paid, will expire in 2040 without taking potential
patent term extension into account. The third patent family has one pending U.S. application, one pending PCT
application, and two pending foreign applications describing claims directed to crystalline forms of ARV-RR 471. Any
patents granted in this family, assuming all appropriate maintenance fees are paid, will expire in 2041 without
taking potential patent term extension into account. The fourth patent family has one pending U.S. application,
one pending PCT application, and one pending foreign application describing claims directed to methods of
treating cancer with ARV-471
in patients with specific ER mutations, and methods of treating cancer with
ARV-RR 471 and additional anti-cancer agents. Any patents granted in this family, assuming all appropriate
maintenance fees are paid, will expire in 2041 without taking potential patent term extension into account. The
fifth patent family has one issued U.S. patent, one pending U.S. patent application, and two pending foreign
applications describing alternative ER-based PROTAC compounds and methods of use to treat cancer. Any
patents granted in this family, assuming all appropriate maintenance fees are paid, will expire in 2039 without
taking potential patent term extension into account. The sixth patent family has one issued U.S. patent, one
pending U.S. patent application, and 14 pending foreign applications describing alternative ER-based PROTAC
compounds and methods of use to treat cancer. Any patents granted in this family, assuming all appropriate
maintenance fees are paid, will expire in 2038 without taking potential patent term extension into account. The
seventh patent family has one pending U.S. application describing claims directed to methods of manufacture of
ARV-RR 471. Any patents granted in this family, assuming all appropriate maintenance fees are paid, will expire in
2042 without taking potential patent term extension into account.
VV
We and YaleYY
co-own seven patent families describing composition of matter claims of PROTACTT
targeted protein degrader compounds addressing certain discovery and other potential protein targets, and
associated methods of use. Patent applications for each of these are pending in the United States. In addition,
patent applications are pending at the international stage of the PCT for two of the families and with the
European Patent Office forff
License Agreement described below.
4 of the families. Our rights to these patent applications are governed by the YaleYY
We co-own with Genentech four pending U.S. patent applications, one pending PCT application, and 27
foreign patent applications directed to PROTACTT
protein. Our rights to these patent applications are governed by the Genentech License Agreement described
below.
targeted protein degrader compounds addressing a specific
The term of individual patents depends upon the legal term of the patents in the countries in which they
are obtained. In most countries in which we file, the patent term is 20 years from the earliest date of filing a non-
provisional patent application. In the United States, the term of a patent covering a drug approved by the U.S.
a patent term extension under the Hatch-Waxman
Food and Drug Administration, or FDA, may be eligible forff
Act as compensation for the loss of patent term during the FDA regulatory review process. The period of
extension may be up to five years beyond the expiration of the patent but cannot extend the remaining term of a
patent beyond a total of 14 years from the date of product approval. Only one patent among those eligible forff
an
extension may be extended. Similar provisions are available in Europe and in certain other jurisdictions to
extend the term of a patent that covers an approved drug. It is possible that issued U.S. patents covering
bavdegalutamide and ARV-RR 471 may be entitled to patent term extensions. If our product candidates receive
FDA approval, we intend to apply for patent term extensions, if available, to extend the term of patents that
cover the approved product candidates. We also intend to seek patent term extensions in any jurisdiction where
they are available; however, there is no guarantee that the applicable authorities, including the FDA, will agree
with our assessment of whether such extensions should be granted, and if granted, the length of such
extensions.
29
The United States also offeff
rs Patent Term Adjustment, or PTA, whereby a particular patent’s term is
automatically extended beyond the 20-year term if the United States Patent and Trademark Officeff
delays during the underlying patent application’s examination. However, potentially available PTA will be
reduced by any amount of delay caused by the applicant.
caused
Trade Secrets
We also rely on trade secrets, technical know-how and continuing innovation to develop and maintain
our competitive advantage. Our policy requires inventors who are identified on any company-owned patent
applications to assign rights to us. We also rely on confidentiality agreements with our employees, consultants
and other advisors to protect our proprietary informat
material confidential informat
ion. Our policy is to require third parties that receive
ion to enter into confidentiality agreements with us.
ff
ff
Trademarks
We own a U.S. service mark registration for PROTACTT
for pharmaceutical products development of new
small molecules aimed at degrading disease-causing cellular proteins for treatment in the fields of oncology,
immunology, inflammatory diseases, and central nervous system disorders. We also own a U.S. trademark
registration for the mark PROTACTT
for small molecule products aimed at degrading disease-causing cellular
proteins for treatment in the fields of oncology, immunology, inflammatory diseases, and central nervous system
disorders.
We also own U.S. and Chinese service mark registrations for ARVINAS
RR
in word and logo form for
pharmaceutical products development of new small molecules aimed at degrading disease-causing cellular
proteins for treatment in the fields of oncology, immunology, inflammatory diseases, and central nervous system
disorders.
We also own U.S. trademark and service mark registrations for ARVIRR NAS in word and logo form for
pharmaceutical preparations and pharmaceutical products development of cellular proteins for treatment in the
fields of oncology, immunology, inflammatory diseases, and central nervous system disorders. The ARVINAS
word mark is registered for pharmaceutical products development services in Australia, China, and the EU, and
is pending registration in several other countries. The ARVINAS
pharmaceutical
RR
products in Australia, Colombia, the EU, Hong Kong, India, Singapore, Taiwan, and the United Kingdom, and is
pending registration in several other countries.
word mark is also registered forff
RR
We also own U.S. service mark registrations for our “degrading dots” logo mark in both black and white
and color form for pharmaceutical products development of new small molecules aimed at degrading disease-
causing cellular proteins for treatment in the fields of oncology, immunology, inflammatory diseases, and central
nervous system disorders.
Licenses and Strategic Collaborations
Yale University License Agreement
In July 2013, we entered into a license agreement with YaleYY
the treatment or prevention of any
exclusive, worldwide license under specified intellectual property rights forff
human or animal disease in which a product mediates degradation of one or more target proteins, which we
refer to as the Field, subject
to certain exceptions. These licensed intellectual property rights arose from the
b
research conducted by Dr. Craig Crews at Yale.
pursuant to which Yale granted us an
We are obligated to use commercially reasonable effort
ff
s to implement a written plan we agreed to with
Yale setting forth a description of any research and development, testing, governmental approval and
commercialization activities relating to licensed products and our financing plans. We must update this plan on
an annual basis to indicate progress to date on the plan and a schedule of majora
commercialize licensed products.
events required to
30
Pursuant to the license agreement we paid to YaleYY
an upfront payment of $0.1 million. We are
paying Yale an annual license maintenance fee in varying amounts (ranging from the low tens-
responsible forff
thousands of dollars to the mid to high tens-thousands of dollars) until the first sale to a third party of any
the given year. As of December 31,
licensed product, which is creditable against our royalty obligations forff
2021, we have paid a total of $$0.5 million in license maintenance fees to Yale.YY We are required to pay Yale,
subject to the achievement of specified development and regulatory milestones, payments aggregating up to
approximately $3.0 million for the first licensed product and up to approximately $1.5 million for the second
licensed product. We are not required to make any milestone payments forff
first two. While the agreement remains in effect
, we are required to pay Yale low single-digit royalties on
aggregate worldwide net sales of certain licensed products, which may be subject to reductions. Yale is
guaranteed a minimum royalty payment amount (ranging from $$0.2 million to $$0.5 million)
the first sale of a licensed product that results in net sales. The gagreement requires tha wt e must also pay Yale
a mid-single digit to mid-double digit percentage of certain consideration we receive from a sublicensee for the
first licensed product we sublicense. We are also responsible forff
maintenance of the licensed patents. Finally, subject to certain conditions, all payments made by us to Yale
(except patent costs) will be tripled during the pendency of any patent challenge made by us against Yale.
costs relating to the prosecution and
any licensed products beyond the
ion for each year after
ff
We also agreed to pay for PROTACTT
targeted protein degrader research support from Yale pursuant to a
sponsored research agreement that we entered into with YaleYY
sponsored research agreement expired in April 2021. Under the sponsored research agreement, as amended,
we agreed to pay Yale an aggregate of $3.7 million over five years and as of December 31, 2021, we had paid
Yale an aggregate of approximately $$3.7 mill
direction of Professor Crews.
in July 2016 and amended in April 2018. The
ion The research was performed
by and under the supervision and
.
ff
The license agreement remains in effect
ff
until (a) for certain products, the date on which the last claim of
the licensed patents expires; and (b) for certain products, 10 years after the sale of such products. The
expiration of the last to expire patent right licensed from Yale, if it issues as a patent and all appropriate
maintenance fees are paid, is currently expected be in 2039. Either we or Yale may terminate the agreement for
the other party’s uncured material breach of certain provisions, we may terminate the agreement for
convenience upon six months’ prior notice, and Yale may terminate the agreement if we fail to make a payment
when due, fail to obtain or maintain adequate insurance coverage or fail to achieve specified financing or
regulatory milestone events. The agreement will automatically terminate if we become insolvent.
t
Genentech License Agreemen
rr
In September 2015, we entered into an Option and License Agreement with Genentech focused on
targeted protein degrader discovery and research for target proteins, or Targets, based on our
PROTACTT
proprietary platforff m technology, other than excluded Targets as described below. This collaboration was
expanded in November 2017 through an Amended and Restated Option, License and Collaboration Agreement,
which we refer to as the Restated Genentech Agreement.
The collaboration is managed by a joint research committee and a joint project team, each of which is
comprised of representatives from us and Genentech. Decisions of the joint research committee and joint
project team are made by consensus, with each party having one vote. If the joint research committee is unable
to agree, and the parties’ executives are not able to resolve the dispute, then Genentech has final decision-
making authority, subject to specified limitations.
Under the Restated Genentech Agreement, Genentech has the right to designate up to ten Targets forff
further discovery and research utilizing our PROTAC platform technology. Genentech may designate as a
Target any protein to which a PROTACTT
action, subject to certain exclusions. Genentech also has the right to remove a Target
substitute a differe
Target or in certain circumstances following commencement of research by us.
targeted protein degrader, by design, binds, to achieve its mechanism of
from the collaboration and
nt Target that is not an excluded Target at any time prior to us commencing research on such
TT
ff
Once a Target
TT
becomes subject to the collaboration, we are obligated to use diligent efforts
ff
to
undertake a research program in accordance with a research plan agreed to by the parties for such Target. We
are responsible forff
funding our activities under the research program for each Target up to the amount set forth
in the budget for such Target agreed upon by the parties in the research plan. For costs incurred in excess of
31
the budgeted amount, Genentech has the option of either having us continue the work on the Target and
reimbursing us for our costs in doing so or terminating the work on such Target.
The research program for each Target contemplates that the discovery and research work will occur in
two stages: Stage 1, in which our objective will be to identify a PROTAC targeted protein degrader that
demonstrates in vitro protein degradation of the Target; and Stage 2, in which our objective will be to
demonstrate certain in vitro and in vivo research and development activity, but not to complete toxicology
, at the conclusion of Stage 1, Genentech has
studies or other necessary IND-enabling studies. For each Target
the opportunity to continue the research program for such Target or terminate all activities on such Target. At the
conclusion of each stage, we are obligated to provide certain deliverables to Genentech, including a data
package at the end of Stage 2. Genentech has an option to obtain an exclusive worldwide license to the
applicable PROTAC targeted protein degraders directed against the applicable Target, which we refer to as
Licensed PROTACs. Each such option must be exercised within a specified time after we deliver the data
package for such Licensed PROTACTT
its cost, to use diligent efforts
sale in the United States, the European Union and Japan.
to develop and commercialize the Licensed PROTAC through first commercial
to Genentech. Once Genentech exercises an option, it is responsible, at
TT
ff
During the term of the Restated Genentech Agreement, we and our affiliat
ff
es are not permitted, either
directly or indirectly, to conduct any activities in the design, identification or discovery of any small molecule
pharmacologically active agent directed against a Target
PROTACTT
induction of proteasomal degradation of such Target.
targeted protein degraders whose intended primary mechanism of action is, by design, through
included in the collaboration, including certain
TT
Under the terms of the Restated Genentech Agreement, we received $11.0 million in 2015 and an
additional $34.5 million in 2017 in upfront payments and expansion target payments. We are eligible to receive
up to an aggregate of $27.5 million in additional expansion target payments if Genentech exercises its options
for all remaining Targets. We are also eligible to receive payments aggregating up to $44.0 million per Target
subject to the achievement of specified development milestones; payments aggregating up to $52.5 million per
Target (assuming approval of two indications) subject to the achievement of specified regulatory milestones;
and payments aggregating up to $60 million per Licensed PROTAC subject to the achievement of specified
sales milestones. These milestone payments are subject to reduction if we do not have a valid patent claim
covering the Licensed PROTACTT
sales of Licensed PROTACs, mid-single digit royalties, which may be subject to reductions.
at the time the milestone is achieved. We are also eligible to receive, on net
Unless earlier terminated, the Restated Genentech Agreement will expire upon the expiration of all
royalty periods for any Licensed PROTACs. The royalty period for each Licensed PROTAC expires on a
country-by-country basis upon either (1) the expiration of the last-to-expire valid patent claim covering such
Licensed PROTAC or (2) ten years after the first commercial sale with respect to such Licensed PROTAC,
depending on whether the sale of the Licensed PROTAC is covered by an applicable valid claim. The expiration
of the last to expire patent right licensed to Genentech, if it issues as a patent and all appropriate maintenance
fees are paid, is currently expected be in 2042. We could also obtain rights to additional patents, including
through the issuance of pending patent applications, with later expiration dates, or new Licensed PROTACs
could be added to the agreement that are subject to additional royalty terms with later expiration dates, which in
either case could extend the term of the Restated Genentech Agreement. Genentech has the right to terminate
the Restated Genentech Agreement for convenience in its entirety or with respect to a specific Target on 60
days’ prior notice. Either we or Genentech may terminate the agreement, in its entirety or with respect to a
specific Target, if the other party is in material breach and such breach is not cured within the specified cure
period. In addition, either we or Genentech may terminate the agreement in the event of specified insolvency
events involving the other party. If Genentech terminates the agreement forff
agreement as a result of Genentech’s uncured material breach or Genentech’s insolvency, all licenses we
granted to Genentech terminate (either in its entirety or with respect to a specific Target, as applicable based on
the nature of the termination). If Genentech terminates the agreement as a result of our uncured material
breach or our insolvency, all licenses that we granted to Genentech terminate (either in its entirety or with
respect to a specific Target, as applicable based on the nature of the termination), except that Genentech has
the right to elect to retain its licenses, in which case it would no longer be obligated to use diligent efforts
to
develop and commercialize the applicable Licensed PROTACs and its payment obligations to us would be
reduced.
convenience or if we terminate the
ff
32
Pfizff er Researchrr Collaboratrr
iontt
Agreement
In December 2017, we entered into a Research Collaboration and License Agreement with Pfizer
targeted protein degraders that mediate forff
setting forth our collaboration to identify or optimize PROTACTT
degradation of Targets using our proprietary platforff m technology that are identified in the agreement or
subsequently selected by Pfizer, subject to certain exclusions. We refer to this agreement as the Pfizer
Research Collaboration Agreement.
Under the Pfizer Research 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, which substitutions are limited subject to
the stage of research for such Target.
We and Pfizer are obligated to use commercially reasonable efforts
ff
to complete our respective activities
set forth in a research plan, including, in our case, the obligation to provide certain deliverables at the end of
each stage. Under the research plan, we are required to provide compound formulation and conduct
pharmacokinetic/pharmacodynamic and drug safety research and development activities in support of
screening and other activities conducted by Pfizer relating to a Target
deliverables by us for a stage, we will suspend the conduct of any further activities until Pfizer has exercised its
right to proceed. If Pfizer does not exercise such right within the applicable time period, we will cease activities
for such Target and such Target will no longer be part of the collaboration. Each party will bear its own costs in
the conduct of such activities, except that any additional work that we agree with Pfizer to perforr
research plan will be paid for by Pfizer.
. Following the provision of the
rm outside of the
TT
Pfizer has the right to exercise an option to obtain an exclusive worldwide license with respect to each
Target for a specified period of time after
exercise its option for a Target
Agreement. If Pfizer exercises such option, Pfizer will have an exclusive license to develop and commercialize
compounds directed against such Target, subject to certain diligence obligations.
, such Target is no longer subject to the Pfizer Research Collaboration
receipt of the applicable deliverables for such Target. If Pfizer does not
TT
ff
During the term of the Pfizer Research Collaboration Agreement, we and our affiliat
ff
es are not permitted,
either directly or indirectly, to develop or commercialize any pharmacologically-active agent whose primary
mechanism of action is, by design, directed to a Target
to any third party for the conduct of such activities. There are no restrictions on Pfizer from developing,
manufacturing or commercializing products, programs, technologies or processes that are similar to or may
compete with any covered by the Pfizer Research Collaboration Agreement, subject to certain limitations on
Pfizer’s right to use our confidential informat
, or grant any license, covenant not to sue or other right
ion or know-how.
TT
ff
In the year ended December 31, 2018, we received an upfront, non-refundable payment and certain
additional payments totaling $28.0 million in exchange for use of our technology license and to fund Pfizer-
related research as defined within the Pfizer Research Collaboration Agreement. We are eligible to receive up
to an additional $37.5 million in non-refundable option payments if Pfizer exercises its options for all targets
under the Pfizer Research Collaboration Agreement. We are also entitled to receive up to $225.0 million in
development milestone payments and up to $550.0 million in sales-based milestone payments forff
designated targets under the Pfizer Research Collaboration Agreement, as well as mid- to high-single digit
tiered royalties, which may be subject to reductions, on net sales of PROTACTT
products. In 2021 and 2020, we received payments totaling $1.2 million and $4.4 million, respectively. Pfizer
selected an additional target and initiated additional services totaling $$3.5 million in December 2021, which is
included in accounts receivable at December 31, 2021. There were no sales-based milestone payments or
royalties received as of December 31, 2021.
targeted protein degrader-related
all
33
Unless earlier terminated, the Pfizer Research Collaboration Agreement will expire upon the expiration
ff
the first commercial sale with respect to such product. Pfizer has the right to
of all royalty obligations thereunder. The royalty period for each product developed under the Pfizer Research
Collaboration Agreement will expire on a country-by-country basis upon the later of (1) the expiration of the last-
to-expire valid patent claim that claims or covers the composition of matter of a compound contained within
such product or (2) ten years after
terminate the Pfizer Research Collaboration Agreement for convenience in its entirety or with respect to a
specific target on 60 days’ prior notice. Either we or Pfizer may terminate the Pfizer Research Collaboration
Agreement, in its entirety or with respect to a specific target, if the other party is in material breach and such
breach is not cured within the specified cure period. In addition, either we or Pfizer may terminate the Pfizer
Research Collaboration Agreement in the event of specified insolvency events involving the other party. If Pfizer
terminates the agreement in its entirety or as a result of our uncured material breach or our insolvency, Pfizer
s forff which it has exercised an option (unless Pfizer elects otherwise),
retains its license with respect to Target
subject to reduced payment obligations.
TT
Bayer Collaboll
ration Agreement
In June 2019, we entered into a Collaboration and License Agreement with Bayer setting forth our
collaboration to identify or optimize PROTACTT
Targets using our proprietary platforff m technology, which Target
exclusions and limitations. We refer to this agreement as the Bayer Collaboration Agreement. The Bayer
Collaboration Agreement became effect
targeted protein degraders, that mediate forff
s will be selected by Bayer, subject to certain
ive in July 2019.
degradation of
TT
ff
For the identified Targets, we and Bayer will conduct a research program pursuant to separate research
plans 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.
We and Bayer are obligated to use commercially reasonable efforts
ff
to complete our respective activities
set forth in each research plan, including, in our case, the obligation to provide certain deliverables at certain
stages of the research plans. The joint steering committee established under the collaboration shall determine
whether the research program with respect to a given Target
has been completed. In the absence of any such
TT
determination by the joint steering committee, and unless otherwise agreed by the parties in writing, for each
Target for which research program activities have commenced, if no research funding is allocated to such Target
for the 12 month period commencing on July 1, 2019 or any anniversary thereof, and we refer to each as a
Research Program Year, the research program with respect to the relevant Target shall be deemed completed
as of the end of the last Research Program Year for which funding was allocated to such Target. Bayer shall pay
to the Company research funding payments of $3.0 million dollars per year in each of the first four Research
Program Years. If the Company’s costs forff
funding provided by Bayer for any Research Program Year beforeff
activities in such Research Program Year, and the Company has complied with its reporting obligations to Bayer
with respect to research program costs, the Company shall not be obligated to carry out further research
program activities for the given Research Program Year unless Bayer has agreed in writing to fund such
additional activities.
its research activities under the research plans exceed the research
completion of all relevant research program
During the term of the Bayer Collaboration Agreement, we and our affiliat
ff
es 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 forff
the conduct of such activities. There are no
restrictions on Bayer from developing, manufacturing or commercializing products, programs, technologies or
processes that are similar to or may compete with any covered by the Bayer Collaboration Agreement, subject
to certain limitations on Bayer’s right to use the Arvinas’ confidential informat
ion or know-how.
TT
ff
Under the terms of the Bayer Collaboration Agreement, we received an aggregate upfront payment of
$17.5 million in August 2019. We are entitled to receive up to an additional $12.0 million in research funding
payments, subject to increases, as described above. We are also eligible to receive up to $197.5 million in
development milestones and up to $490.0 million in sales-based milestones for all designated Targets. In
addition, we are eligible to receive, on net sales of PROTACTT
single digit to low-double digit tiered royalties, which may be subject to reductions.
targeted protein degrader-related products, mid-
34
Unless earlier terminated, the Bayer Collaboration Agreement will expire upon the expiration of all
royalty obligations thereunder. The royalty period for each product developed under the Bayer Collaboration
Agreement will expire on a country-by-country basis upon the later of (1) the expiration of the last-to-expire valid
patent claim that covers the manufacture, use or sale of such product or (2) ten years after the first commercial
sale with respect to such product. Bayer has the right to terminate the Bayer Collaboration Agreement for
convenience in its entirety or with respect to a specific target on 60 days’ prior written notice. Either the
Company or Bayer may terminate the Bayer Collaboration Agreement, in its entirety or with respect to a specific
target, if the other party is in material breach and such breach is not cured within the specified cure period. In
addition, either we or Bayer may terminate the Bayer Collaboration Agreement in the event of specified
insolvency events involving the other party. If Bayer terminates the agreement in its entirety as a result of our
uncured material breach or the Company’s insolvency, Bayer may elect in writing to retain its license with
respect to any Target
s previously identified and delivered to Bayer, subject to reduced payment obligations.
TT
Bayer Jointii Venture
In June 2019, we, Bayer and Bayer CropScience LP, or BCS, also committed to the format
venture, conditioned on terms set forth in a commitment agreement, or Commitment Agreement, among us,
BCS and a newly formed Delaware limited liability company, or Oerth. In July 2019, following the expiration of
the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, we
consummated the formation of the joint venture in which we and BCS each received an ownership interest in
Oerth initially representing 50% of the ownership interests. Oerth was formed for the purpose of researching,
developing and commercializing PROTACTT
Products, for applications in
the field of agriculture. A 15% ownership interest of Oerth was reserved for the future grant of incentive units to
service providers of Oerth.
targeted protein degraders, or PROTACTT
ion of a joint
ff
In exchange for their ownership interests in Oerth, we made an in-kind intellectual property contribution
to Oerth and BCS made an in-kind intellectual property contribution to Oerth. In addition, BCS made a $56.0
million total cash commitment to Oerth, or the TotaTT
to Oerth in connection with the JV closing.
l Cash Commitment, $16.0 million of which BCS contributed
Our and BCS’s ownership interest in Oerth, and the accompanying rights and obligations as members
of Oerth, are governed by an amended and restated limited liability company agreement, or LLC Agreement, by
and among us, BCS and Oerth. Oerth is generally governed by a board of managers, or the JV Board, which is
comprised of four voting members, two of which have been designated by us and two of which have been
designated by BCS. JV Board decisions will generally be made by majority vote of the managers, with each
manager having one vote. Certain matters will require the consent of both BCS and the Company or both of
their designated managers on the JV Board.
We, Oerth and BCS also entered into an option agreement, or the Option Agreement, pursuant to which
the parties will agree to certain procedures for, and preferential rights relating to, the possible transfer to BCS of
Product candidates researched, developed and commercialized by Oerth under the joint venture. BCS
PROTACTT
will have a right of first negotiation, and last matching rights under certain circumstances, to enter into a license
with Oerth for the exclusive right to research, develop, manufacture,
PROTACTT
receive and consider unsolicited third-party offers or seek third-party offers for the exclusive license to the
applicable PROTAC Product candidate. The Option Agreement sets forth the procedures the JV Board will
follow when considering and voting on any offers
ff
Product candidate in the field of agriculture for which it was developed. In addition, Oerth is allowed to
.
as well as the considerations on how to value any offer
use and commercialize the applicable
ff
ff
We and BCS also entered into separate service agreements, or the Services Agreements. We and BCS
will provide servirr ces to Oerth as agreed from time to time by us and BCS, as applicable, and set forth in
statements of work to be delivered under the applicable Services Agreement.
We and BCS each also entered into respective intellectual property contribution agreements, each, an
IP Contribution Agreement, with Oerth. Pursuant to the IP Contribution Agreement by and between us and
Oerth, or Company IP Contribution Agreement, in addition to certain non-exclusive licenses, we granted to
Oerth an exclusive, worldwide, fully paid-up, royalty-free license, including certain rights to sublicense, to use
certain of our PROTAC technology to research, develop, manufacture,
PROTACTT
Products in the field of agriculture.
use and commercialize and sell
ff
35
Pursuant to the IP Contribution Agreement by and between BCS and Oerth, or the BCS IP Contribution
Agreement, in addition to certain non-exclusive licenses, BCS and certain of its affiliates granted to Oerth an
exclusive, worldwide, fully paid-up, royalty-free license, including certain rights to sublicense, to use certain of
BCS’ or its affilff
complexes, and linkers that attach ubiquitin ligase binding moieties to moieties that bind to a target, to research,
develop, manufacture, use and commercialize and sell PROTAC Products in the field of agriculture.
iates’ intellectual property that covers ubiquitin ligases or moieties that bind ubiquitin ligase
The Company IP Contribution Agreement and the BCS IP Contribution Agreement also contain a non-
exclusive, worldwide, fully paid-up, royalty-free license grant from Oerth to each of us and BCS, respectively,
under various forms of intellectual property developed by Oerth to research, develop, manufacture,
use and
commercialize products outside of the field of agriculture, in each case excluding intellectual property licensed
by the other contributing party to Oerth.
ff
During the term of the joint venture and, in certain limited cases as described below, forff
ff
following the end of the term of the joint venture, neither we, Bayer nor any of our respective affiliat
research, develop, manufacture, use or commercialize in the field of agriculture any PROTAC Products whose
primary mechanism of action by design is the binding to and degradation of any Target, subject to certain
exclusions for early stage research activities and minority investments. In addition, in the event either BCS or a
third party licenses a PROTACTT
licensing party or parties to the Commitment Agreement will be prohibited from developing, commercializing or
otherwise exploiting any product utilizing PROTACTT
technology to target the same Target as that of the licensed
product candidate in the field of agriculture.
Product candidate from Oerth pursuant to the Option Agreement, the non-
one year
es may
The term of the joint venture will end upon the termination of the Commitment Agreement. We and BCS
can terminate the Commitment Agreement upon mutual written consent. Either we or BCS may terminate the
Commitment Agreement in the event of specified uncured breaches by the other party or in the event the other
party becomes subject to specified bankruptcy, winding up or similar circumstances. Either party may also
terminate upon a change of control of the other party, as defined in the Commitment Agreement. Either party
may also terminate the Commitment Agreement in the event that Oerth runs out of funds.
Upon a termination by either party for specified “bad actor” breaches of the other party, the defaulting
party will remain subject to the exclusivity provisions described above for a period of one year following such
termination.
In the event of a termination of the Commitment Agreement, all rights licensed to Oerth pursuant to the
Company IP Contribution Agreement will terminate, except for any rights licensed to BCS or third parties
pursuant to license agreements entered into by Oerth prior to termination or, in certain termination events, to
BCS to continue the research, development and commercialization of PROTACTT
Products that have reached
field candidate status. Similarly, all rights licensed to Oerth pursuant to the BCS IP Contribution Agreement will
terminate, except for any rights licensed to third parties pursuant to license agreements entered into by Oerth
prior to termination.
All intellectual property owned by Oerth will, as of the date of termination, be assigned to be owned
jointly and undividedly by the Company and BCS (with the Company’s interest to be exclusively licensed to BCS
to continue the research, development and commercialization of PROTACTT
candidate status in certain specified termination events) unless the Company or BCS terminates the
Commitment Agreement for a specified bad actor breach of the other party, in which case the intellectual
property owned by Oerth will thereafter
be owned solely and exclusively by the non-breaching party.
Products that have reached field
ff
Pfizeii
r ARV-4VV 71 Collaboratrr
iontt
Agreement
In July 2021, we entered into a collaboration agreement with Pfizer, or the ARV-RR 471 Collaboration
Agreement, pursuant to which we granted Pfizer worldwide coexclusive rights to develop and commercialize
products containing our proprietary compound ARV-RR 471, or the Licensed Products.
Under the ARV-RR 471 Collaboration Agreement, we received an upfront, non-refundable payment of $650
million. In addition, we are eligible to receive up to an additional $1.4 billion in contingent payments based on
specified regulatory and sales-based milestones for the Licensed Products. Of the total contingent payments,
36
$400 million in regulatory milestones are related to marketing approvals and $1.0 billion are related to sales-
based milestones.
We and Pfizer will share equally (50/50) all development costs (including costs forff
conducting any
clinical trials) for the Licensed Products, subject to certain exceptions. Except for certain regions described
below, we will also share equally (50/50) all profits and losses in commercialization and medical affairs
b
for the Licensed Products in all other countries, subject
to certain exceptions.
ff
activities
We will be the marketing authorization holder and, subject to marketing approval, book sales in the
United States, while Pfizer will hold marketing authorizations outside the United States. We will determine with
Pfizer 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 all profits and losses for the Licensed Products based on the role each party will
ff
be performing.
Unless earlier terminated in accordance with its terms, the ARV-RR 471 Collaboration Agreement will expire
on a Licensed Product-by-Licensed Product and country-by-country basis when such Licensed Products is no
longer commercialized or developed for commercialization in such country. Pfizer may terminate the ARV-RR 471
Collaboration Agreement for convenience in its entirety or on a region-by-region basis subject to certain notice
periods. Either party may terminate the ARV-RR 471 Collaboration Agreement for the other party’s uncured material
breach or insolvency. Subject to applicable terms of the ARV-RR 471 Collaboration Agreement, including certain
payments to Pfizer upon termination for our uncured material breach, effect
VV
Collaboration Agreement, we are entitled to retain specified licenses to be able to continue to exploit the
Licensed Products.
ive upon termination of the ARV-471
ff
Subject to specified exceptions, we and Pfizer have each agreed not to directly or indirectly research,
develop, or commercialize any competing products outside of the ARV-471
VV
in the world during the term of the ARV-RR 471 Collaboration Agreement.
Collaboration Agreement anywhere
Competition
The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies,
intense competition and a strong emphasis on intellectual property and proprietary products. While we believe
that our technology, expertise, scientific knowledge and intellectual property estate provide us with competitive
advantages, we face potential competition from many differ
ff
specialty pharmaceutical and biotechnology companies, academic institutions, governmental agencies and
public and private research institutions that conduct research, seek patent protection, and establish
collaborative arrangements forff
we compete with other companies that are focused on protein degradation, but any product candidates that we
successfully develop and commercialize will compete with existing therapies and new therapies that may
become available in the future. Moreover, our industry is characterized by the existence of large numbers of
patents and frequent allegations of patent infringement.
research, development, manufacturing, and commercialization. Not only must
ent sources, including major pharmaceutical,
Our platform and product focus is the discovery and development of protein degradation therapies
targeted protein degraders. Other companies researching chimeric small
using our small molecule PROTACTT
molecules for protein degradation include Accutar Biotechnology, Inc., C4 Therapeutics, Inc., Cullgen Inc.,
Foghorn Therapeutics, Inc., Kymera Therapeutics, Inc., Nurix Therapeutics, Inc. and Proteovant Therapeutics,
Inc. Further, several large pharmaceutical companies have disclosed preclinical or clinical investments in this
field, including AbbVie, Amgen, AstraZeneca plc, Boehringer Ingelheim, Bristol Myers Squibb Company,
GlaxoSmithKline plc, Genentech, Novartis International AG and Sanofi SA. Since 2020, some of these
biotechnology and pharmaceutical companies have announced the initation of clinical trials for targeted protein
degraders. In addition to competition from other protein degradation therapies, any products that we develop
may also face competition from other types of therapies, such as small molecule, antibody, or gene therapies.
Our lead product candidates target oncologic indications. The most common methods of treating
patients in oncologic indications are surgery, radiation and drug therapy, including chemotherapy, hormone
therapy and targeted drug therapy. There are a variety of available drug therapies marketed for cancer,
including prostate cancer and breast cancer. In many cases, these drugs are administered in combination to
enhance efficacy
. Some of the currently approved drug therapies are branded and subject to patent protection,
ff
37
and others are available on a generic basis. Many of these approved drugs are well established therapies and
are widely accepted by physicians, patients and third-party payors. In general, although there has been
considerable progress over the past few decades in the treatment of cancer and the currently marketed
and
therapies provide benefits to many patients, these therapies all are limited to some extent in their efficacy
frequency of adverse events, and none of them are successful in treating all patients. As a result, the level of
morbidity and mortality from cancer remains high.
ff
In addition to currently marketed drugs, there are also several product candidates in late stage clinical
development for the treatment of oncologic indications, including for mCRPC and metastatic ER positive / HER2
negative breast cancer. These products in development include, in the case of metastatic ER positive / HER2
negative breast cancer, selective estrogen receptor degraders and may provide efficacy
, safety, convenience
and other benefits that are not provided by currently marketed therapies. As a result, they may provide
significant competition forff
any of our product candidates for which we obtain market approval.
ff
If any of our product candidates are approved for the indications for which we expect to conduct clinical
trials, they will compete with the foregoing therapies and the currently marketed drugs and potentially any drugs
in development. It is also possible that we will face competition from other biologic or pharmaceutical
approaches as well as from other types of therapies.
Many of our current or potential competitors, either alone or with their collaboration partners, have
significantly greater financial resources and expertise in research and development, manufacturing, preclinical
testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do.
These competitors also compete with us in recruiting and retaining qualified scientific and management
personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring
technologies complementary to, or necessary for, our programs. Mergers and acquisitions in the pharmaceutical
and biotechnology industries may result in even more resources being concentrated among a smaller number
of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly
through collaborative arrangements with large and established companies. These competitors also compete
with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial
sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or
necessary for, our programs. Our commercial opportunity could be reduced or eliminated if our competitors
develop and commercialize products that are saferff
more convenient or are less expensive than any products that we may develop. Our competitors also may
obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours,
which could result in our competitors establishing a strong market position beforeff
market. In addition, our ability to compete may be affected in many cases by insurers or other third-party payors
seeking to encourage the use of generic products. There are generic products currently on the market for
certain of the indications that we are pursuing, and additional products are expected to become available on a
generic basis over the coming years. If our product candidates are approved, we expect that they will be priced
at a significant premium over competitive generic products.
ive, have fewer or less severe side effect
we are able to enter the
, more effect
s, are
ff
ff
The key competitive factors affect
, safety, convenience, price, level of generic competition and availability of reimbursement.
ing the success of all our programs, if approved, are likely to be their
ff
efficacy
ff
Commercialization Plans
We have not yet established our own commercial organization or distribution capabilities because our
product candidates are still in preclinical and clinical development. Other than our discovery collaboration
all of our development programs. If any of our
agreements, we have retained commercialization rights forff
product candidates receive marketing approval, we will need to develop a plan to commercialize them in the
United States and other key markets. We currently expect that we would build our own focused, specialized
sales and marketing organization to support the commercialization in the United States of product candidates
for which we receive marketing approval and that can be commercialized with such capabilities. We expect to
utilize a variety of types of collaboration, co-promotion, distribution and other marketing arrangements with one
or more third parties to commercialize our product candidates in markets outside the United States or for
situations in which a larger sales and marketing organization is required.
38
As product candidates advance through our pipeline, our commercial plans may change. In particular,
some of our research programs target potentially larger indications. Data, the size of the development
programs, the size of the target market, the size of a commercial infrastructure and manufacturing needs may
all influence our strategies in the United States, Europe and the rest of the world.
Manufacturing and Supply
We do not own or operate, and currently have no plans to establish, any manufacturing facilities. We
rely on and expect to continue to rely on third-party contract manufacturing organizations, or CMOs, for both
drug substance and finished drug product as well as for the synthesis of compounds in our pre-clinical research
and development activities. We have engaged third-party manufacturers to supply the drug substances and
building blocks for those substances for bavdegalutamide, ARV-RR 471 and ARV-RR 766. We have also engaged third-
party manufacturers to develop and manufacture finished drug product for bavdegalutamide, ARV-RR 471 and
ARV-RR 766 that we are using and plan to use in our ongoing and planned Phase 1/2 and planned pivotal clinical
trials. We currently obtain our supplies from these manufacturers on a purchase order basis and do not have
long-term supply arrangements in place. Should any of these manufacturers
reason, we believe that there are a number of potential replacements, although we may incur some delay in
identifying and qualifying
become unavailable to us for any
such replacements.
ff
ff
All of our drug candidates are organic compounds of low molecular weight, generally called small
molecules, but which are larger than traditional small molecule therapeutics. We have selected these
compounds not only on the basis of their potential efficacy
reasonable cost of goods. In particular, our lead product candidates are manufactured
reproducible synthetic processes from readily available starting materials. The chemistry is amenable to scale
up and does not require unusual equipment in the manufacturing process. We expect to continue to develop
drug candidates that can be produced cost-effecti
and safety, but also for their ease of synthesis and
vely at contract manufacturing facilities.
using reliable and
ff
ff
ff
Government Regulation and Product Approvals
Government authorities in the United States, at the federal, state and local level, and in other countries
f
and jurisdictions, including the European Union, extensively regulate, among other things, the research,
development, testing, manufactu
re, pricing, quality control, approval, packaging, storage, recordkeeping,
labeling, advertising, promotion, distribution, marketing, sales, reimbursement, post-approval monitoring and
reporting, and import and export of biopharmaceutical products. The processes for obtaining marketing
approvals in the United States and in foreign countries and jurisdictions, along with compliance with applicable
statutes and regulations and other regulatory authorities, require the expenditure of substantial time and
financial resources.
rr
Approval
and Regulation
ll
of Drugs in the United States
tt
In the United States, drug products are regulated under the Federal Food, Drug, and Cosmetic Act, or
FDCA, and applicable implementing regulations and guidance. A company, institution, or organization which
takes responsibility for the initiation and management of a clinical development program for such products, and
for their regulatory approval, is typically referred to as a sponsor. The failure of a sponsor to comply with the
applicable regulatory requirements at any time during the product development process, including nonclinical
testing, clinical testing, the approval process or post-approval process, may result in delays to the conduct of a
study, regulatory review and approval and/or administrative or judicial sanctions.
A sponsor seeking approval to market and distribute a new drug in the United States generally must
the product candidate will be approved by the FDA:
satisfactorily complete each of the following steps beforeff
•
•
preclinical testing including laboratory tests, animal studies and formulation studies, which must be
performed
standards;
in accordance with the FDA’sAA good laboratory practice, or GLP, regulations and
ff
completion of the manufactu
of the drug substance and drug product that the sponsor intends to use in human clinical trials
along with required analytical and stability testing;
re, under current Good Manufacturing Practices, or cGMP, cP onditions,
ff
39
•
•
•
•
•
•
•
•
•
design of a clinical protocol and and submission to the FDA of an IND for human clinical testing,
which must become effect
human clinical trials may begin;
ive beforeff
ff
approval by an independent institutional review board, or IRB, representing each clinical site before
each clinical trial may be initiated;
performance of adequate and well-controlled human clinical trials to establish the safety and
efficacy
practices, or GCP;
each proposed indication, in accordance with good clinical
of the product candidate forff
ff
preparation and submission to the FDA of a new drug application, or NDA, for a drug product which
includes not only the results of the clinical trials, but also, detailed informat
manufacture and quality controls for the product candidate and proposed labeling forff
proposed indication(s);
ion on the chemistry,
one or more
ff
review of the product candidate by an FDA advisory committee, where appropriate or if applicable;
satisfactory completion of an FDA inspection of the manufacturing facility or facilit
those of third parties, at which the product candidate or components thereof are manufactured to
assess compliance with cGMP requirements and to assure that the facilities, methods and controls
are adequate to preserve the product’s identity, strength, quality and purity;
ies, including
ff
satisfactory completion of any FDA audits of the clinical trial sites to assure compliance with GCP
and the integrity of clinical data in support of the NDA;
payment of user fees and securing FDA approval of the NDA to allow marketing of the new drug
product; and
compliance with any post-approval requirements, including the potential requirement to implement
a Risk Evaluation and Mitigation Strategies, or REMS, and the potential requirement to conduct any
post-approval studies required by the FDA.
ii
linical
Precrr
Before a sponsor begins testing a product candidate with potential therapeutic value in humans, the
Studies
initial testing in humans and to establish rationale for therapeutic use. Preclinical
product candidate enters the preclinical testing stage, including in vii
and activity of the drug forff
tests include laboratory evaluations of product chemistry, formulat
evaluate, among other things, the toxicity of the product candidate. The conduct of the preclinical tests and
formulation of the compounds for testing must comply with federal
regulations and standards and the United States Department of Agriculture’s Animal Welfare Act, if applicable.
Some long-term preclinical testing, such as animal tests of reproductive adverse events and carcinogenicity,
and long-term toxicity studies, may continue after the IND is submitted.
ion and stability, as well as other studies to
and animal studies to assess the safety
regulations and requirements, including GLP
itvv rott
ff
ff
The INDII
and IRB ProPP cesses
An IND is an exemption from the FDCA that allows an unapproved product candidate to be shipped in
interstate commerce for use in an investigational clinical trial and a request for FDA authorization to administer
such investigational product to humans. Such authorization must be secured prior to interstate shipment and
of an approved NDA. In support of a request for
administration of any product candidate that is not the subject
an IND, sponsors must submit a protocol for each clinical trial and any subsequent protocol amendments must
be submitted to the FDA as part of the IND. In addition, the results of the preclinical tests, together with
manufacturing informat
among other things, must be submitted to the FDA as part of an IND. The FDA requires a 30-day waiting period
after the filing of each IND beforeff
review the IND to determine whether human research subjects will be exposed to unreasonable health risks. At
any time during this 30-day period, or thereafter
, the FDA may raise concerns or questions about the conduct of
the trials as outlined in the IND and impose a clinical hold or partial clinical hold. In this case, the IND sponsor
and the FDA must resolve any outstanding concerns beforeff
ion, analytical data, any available clinical data or literature and plans for clinical trials,
clinical trials may begin. This waiting period is designed to allow the FDA to
clinical trials can begin or recommence.
b
ff
ff
Following commencement of a clinical trial under an IND, the FDA may also place a clinical hold or
partial clinical hold on that trial. Clinical holds are imposed by the FDA whenever there is concern for patient
safety and may be a result of new data, findings, or developments in clinical, nonclinical, and/or chemistry,
40
manufacturing, and controls, or CMC. A clinical hold is an order issued by the FDA to the sponsor to delay a
proposed clinical investigation or to suspend an ongoing investigation. A partial clinical hold is a delay or
suspension of only part of the clinical work requested under the IND. For example, a specific protocol or part of
a protocol is not allowed to proceed, while other protocols may do so. No more than 30 days after imposition of
a clinical hold or partial clinical hold, the FDA will provide the sponsor a written explanation of the basis for the
hold. Following issuance of a clinical hold or partial clinical hold, an investigation may only resume after the FDA
has notified the sponsor that the investigation may proceed. The FDA will base that determination on
informat
that the investigation can proceed.
ion provided by the sponsor correcting the deficiencies previously cited or otherwise satisfying
the FDA
ff
ff
A sponsor may choose, but is not required, to conduct a foreign
ff
clinical study under an IND. When a
foreign clinical study is conducted under an IND, all FDA IND requirements must be met unless waived. When a
foreign clinical study is not conducted under an IND, the sponsor must ensure that the study complies with
certain regulatory requirements of the FDA in order to use the study as support for an IND or application for
marketing approval. Specifically, such studies must be conducted in accordance with GCP including review and
approval by an independent ethics committee, or IEC, and informff
requirements encompass both ethical and data integrity standards for clinical studies. The FDA’sAA regulations are
intended to help ensure the protection of human subjects enrolled in non-IND foreign clinical studies, as well as
the quality and integrity of the resulting data. They further help ensure that non-IND foreign studies are
conducted in a manner comparable to that required for IND studies.
ed consent from subjects. The GCP
In addition to the foregoing IND requirements, an IRB representing each institution participating in the
clinical trial must review and approve the plan for any clinical trial beforeff
it commences at that institution, and
the IRB must conduct continuing review and reapprove the study at least annually. The IRB must review and
approve, among other things, the study protocol and informed
ff
subjects. An IRB must operate in compliance with FDA regulations. An IRB can suspend or terminate approval
of a clinical trial at its institution, or an institution it represents, if the clinical trial is not being conducted in
accordance with the IRB’s requirements or if the product candidate has been associated with unexpected
serious harm to patients.
consent information to be provided to study
Additionally, some trials are overseen by an independent group of qualified experts organized by the
trial sponsor, known as a data safety monitoring board or committee, or DSMB. This group provides
authorization as to whether or not a trial may move forward at designated check points based on certain
available data from the study to which only the DSMB may access. Suspension or termination of development
during any phase of clinical trials can occur if it is determined that the participants or patients are being exposed
to an unacceptable health risk. Other reasons for suspension or termination may be made by us based on
evolving business objectives and/or competitive climate.
Expanxx
ded Access to an Investigatio
i
nal Drugrr
for Treatmen
TT
t UseUU
Expanded access, sometimes called “compassionate use,” is the use of investigational new drug
products outside of clinical trials to treat patients with serious or immediately life-threatening diseases or
conditions when there are no comparable or satisfactory alternative treatment options. The rules and
regulations related to expanded access are intended to improve access to investigational drugs for patients who
may benefit from investigational therapies. FDA regulations allow access to investigational drugs under an IND
by the company or the treating physician for treatment purposes on a case-by-case basis for: individual patients
(single-patient IND applications for treatment in emergency settings and non-emergency settings); intermediate-
size patient populations; and larger populations for use of the drug under a treatment protocol or Treatment IND
Application.
When considering an IND application for expanded access to an investigational product with the
purpose of treating a patient or a group of patients, the sponsor and treating physicians or investigators will
determine suitability when all of the following criteria apply: patient(s) have a serious or immediately life-
threatening disease or condition, and there is no comparable or satisfactory alternative therapy to diagnose,
monitor, or treat the disease or condition; the potential patient benefit justifies the potential risks of the treatment
and the potential risks are not unreasonable in the context or condition to be treated; and the expanded use of
the investigational drug for the requested treatment will not interfere initiation, conduct, or completion of clinical
41
investigations that could support marketing approval of the product or otherwise compromise the potential
development of the product.
There is no obligation for a sponsor to make its drug products available for expanded access. However,
if a sponsor has a policy regarding how it responds to expanded access requests, it must make that policy
available. This provision requires drug and biologic companies to make publicly available their policies for
expanded access for individual patient access to products intended for serious diseases. Sponsors are required
to make such policies publicly available upon the earlier of initiation of a Phase 2 or Phase 3 study; or 15 days
after the drug or biologic receives designation as a breakthrough therapy, fast track product, or regenerative
medicine advanced therapy. We received fast track designation forff
bavdegalutamide for mCRPC in May 2019.
In addition, on May 30, 2018, the Right to Try Act, was signed into law. The law, among other things,
provides a federal framework for certain patients to access certain investigational new drug products that have
completed a Phase 1 clinical trial and that are undergoing investigation for FDA approval. Under certain
circumstances, eligible patients can seek treatment without enrolling in clinical trials and without needing FDA
approval under the FDA expanded access program. There is no obligation for a drug manufacturer to make its
drug products available to eligible patients under the Right to Try Act.
Human Clini
ii cal Trials
rr
in Suppu ort orr
f an NDA
Clinical trials involve the administration of the investigational product candidate to human subjects
under the supervision of a qualified investigator in accordance with GCP requirements which include, among
other things, the requirement that all research subjects provide their informed
their
participation in any clinical trial. Clinical trials are conducted under written clinical trial protocols detailing, among
other things, the objectives of the study, inclusion and exclusion criteria, the parameters to be used in
monitoring safety and the effect
iveness criteria to be evaluated.
consent in writing beforeff
ff
ff
Human clinical trials are typically conducted in three sequential phases, but the phases may overlap or
be combined. Additional studies may also be required after approval.
Phase 1 clinical trials are initially conducted in a limited population to test the product candidate forff
safety, including adverse effects,
pharmacodynamics in healthy humans or in patients. During Phase 1 clinical trials, informat
investigational drug product’s pharmacokinetics and pharmacological effect
design of well-controlled and scientifically valid Phase 2 clinical trials.
dose tolerance, absorption, metabolism, distribution, excretion and
ff
ff
ff
s may be obtained to permit the
ion about the
ff
s and safety risks, evaluate the efficacy
Phase 2 clinical trials are generally conducted in a limited patient population to identify possible adverse
of the product candidate forff
effect
determine dose tolerance and optimal dosage. Multiple Phase 2 clinical trials may be conducted by the sponsor
to obtain informat
well controlled, closely monitored and conducted in a limited patient population.
ion prior to beginning larger and more costly Phase 3 clinical trials. Phase 2 clinical trials are
specific targeted indications and
ff
ff
Phase 3 clinical trials proceed if the Phase 2 clinical trials demonstrate that a dose range of the product
ff
ff
ve and has an acceptable safety profile. Phase 3 clinical trials are undertaken
candidate is potentially effecti
within an expanded patient population to further evaluate dosage, provide substantial evidence of clinical
efficacy
dispersed clinical trial sites. A well-controlled, statistically robust Phase 3 clinical trial may be designed to deliver
the data that regulatory authorities will use to decide whether or not to approve, and, if approved, how to
appropriately label a drug: such Phase 3 studies are referred to as “pivotal.”
and further test for safety in an expanded and diverse patient population at multiple, geographically
A clinical trial may combine the elements of more than one phase and the FDA often requires more than
one Phase 3 trial to support marketing approval of a product candidate. A company’s designation of a clinical
trial as being of a particular phase is not necessarily indicative that the study will be sufficient
requirements of that phase because this determination cannot be made until the protocol and data have been
submitted to and reviewed by the FDA. Moreover, as noted above, a pivotal trial is a clinical trial that is believed
to satisfy FDA requirements for the evaluation of a product candidate’s safetyf
used, alone or with other pivotal or non-pivotal trials, to support regulatory approval. Generally, pivotal trials are
such that it can be
to satisfy the FDA
ff
and efficacy
ff
42
Phase 3 trials, but they may be Phase 2 trials if the design provides a well-controlled and reliable assessment of
clinical benefit, particularly in an area of unmet medical need.
In some cases, the FDA may approve an NDA for a product candidate but require the sponsor to
conduct additional clinical trials to further assess the product candidate’s safety and effecti
approval. Such post-approval trials are typically referred to as Phase 4 clinical trials. These studies are used to
gain additional experience from the treatment of a larger number of patients in the intended treatment group and
to further document a clinical benefit in the case of drugs approved under accelerated approval regulations.
Failure to exhibit due diligence with regard to conducting Phase 4 clinical trials could result in withdrawal of
approval for products.
veness after
ff
In August 2018, the FDA released a draft guidance entitled “Expansion Cohorts: Use in First-In-Human
Clinical Trials to Expedite Development of Oncology Drugs and Biologics,” which outlines how sponsors can
utilize an adaptive trial design in the early stages of oncology product development (i.e., the first-in-human
clinical trial) to compress the traditional three phases of trials into one continuous trial called an expansion
cohort trial. Information to support the design of individual expansion cohorts are included in IND applications
and assessed by FDA. Expansion cohort trials can potentially bring efficiency
reduce developmental costs and time.
to product development and
ff
Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA
and more frequently if serious adverse events occur. In addition, IND safety reports must be submitted to the
FDA for any of the following: serious and unexpected suspected adverse reactions; findings from other studies
or animal or in vitro testing that suggest a significant risk to humans exposed to the product; and any clinically
important increase in the case of a serious suspected adverse reaction over that listed in the protocol or
investigator brochure. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within
any specified period, or at all. The FDA will typically inspect one or more clinical sites to assure compliance with
GCPs and the integrity of the clinical data submitted.
Finally, sponsors of clinical trials are required to register and disclose certain clinical trial informat
ff
ion on
ff
ion related to the product, patient population, phase of investigation, study sites and investigators and
a public registry (clinicaltrials.gov) maintained by the U.S. National Institutes of Health, or NIH.
informat
other aspects of the clinical trial is made public as part of the registration of the clinical trial. The failure to submit
clinical trial informat
subject to potential civil monetary penalties of up to $10,000 for each day the violation continues.
ion to clinicaltrials.gov, as required, is a prohibited act under the FDCA with violations
In particular,
ff
Manufacturingii
and Other Regulatory
ll
ii
Requiremen
ts
Concurrent with clinical trials, companies often complete additional animal studies and must also
ff
ion about the chemistry and physical characteristics of the drug as well as finalize a
develop additional informat
process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The
manufacturing process must be capable of consistently producing quality batches of the drug candidate and,
among other things, must develop methods for testing the identity, strength, quality, purity, and potency of the
final drug. Additionally, appropriate packaging must be selected and tested and stability studies must be
conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf
life.
Specifically, the FDA’sAA regulations require that pharmaceutical products be manufactured in specific
approved facilities and in accordance with cGMPs. The cGMP regulations include requirements relating to
organization of personnel, buildings and facilities, equipment, control of components and product containers and
closures, production and process controls, packaging and labeling controls, holding and distribution, laboratory
controls, records and reports and returned or salvaged products. Manufacturers and other entities involved in
the manufacture and distribution of approved pharmaceuticals are required to register their establishments with
the FDA and some state agencies, and they are subject to periodic unannounced inspections by the FDA for
compliance with cGMPs and other requirements. Inspections must follow a “risk-based schedule” that may
result in certain establishments being inspected more frequently. Manufacturers may also have to provide, on
request, electronic or physical records regarding their establishments. Delaying, denying, limiting, or refusing
inspection by the FDA may lead to a product being deemed to be adulterated. Changes to the manufacturing
ff
43
process, specifications or container closure system for an approved product are strictly regulated and often
require prior FDA approval beforeff
the investigation and correction of any deviations from cGMP and the imposition of reporting and documentation
requirements upon the sponsor and any third-party manufacturers
being implemented. The FDA’s regulations also require, among other things,
involved in producing the approved product.
ff
ii
Pediatr
icrr Studies
Under the Pediatric Research Equity Act of 2003, or PREA, an NDA or supplement thereto must contain
ff
veness of the product for the claimed indications in all
data that are adequate to assess the safety and effecti
relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for
which the product is safe and effective. Sponsors must also submit pediatric study plans prior to the
assessment data. Those plans must contain an outline of the proposed pediatric study or studies the sponsor
plans to conduct, including study objectives and design, any deferral or waiver requests and other informat
ion
required by regulation. The sponsor, the FDA, and the FDA’sAA internal review committee must then review the
informat
request an amendment to the plan at any time.
ion submitted, consult with each other and agree upon a final plan. The FDA or the sponsor may
ff
ff
For drugs intended to treat a serious or life-threat
f
ening disease or condition, the FDA must, upon the
request of a sponsor, meet to discuss preparation of the initial pediatric study plan or to discuss deferral or
waiver of pediatric assessments. In addition, the FDA will meet early in the development process to discuss
pediatric study plans with sponsors and the FDA must meet with sponsors by no later than the end-of-phase
meeting for serious or life-threat
the study plan.
1
ening diseases and by no later than ninety (90) days after the FDA’sAA receipt of
ff
ff
The FDA may, on its own initiative or at the request of the sponsor, grant deferrals
ff
for submission of
some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the
pediatric data requirements. A deferral may be granted for several reasons, including a finding that the product
or therapeutic candidate is ready for approval for use in adults beforeff
additional safety or effectiveness data needs to be collected beforeff
requires the FDA to send a PREA Non-Compliance letter to sponsors who have failed to submit their pediatric
assessments required under PREA, have failed to seek or obtain a deferral
to request approval for a required pediatric formulation. It further requires the FDA to publicly post the PREA
Non-Compliance letter and sponsor’s response. Unless otherwise required by regulation, the pediatric data
requirements do not apply to products with orphan designation, although FDA has recently taken steps to limit
what it considers abuse of this statutory exemption.
pediatric trials are complete or that
the pediatric trials begin. The law now
extension or have failed
ff
or deferral
ff
The FDA Reauthorization Act of 2017 established new requirements to govern certain molecularly
targeted cancer indications. Any company that submits an NDA three years after the date of enactment of that
statute must submit pediatric assessments with the NDA if the drug is intended for the treatment of an adult
cancer and is directed at a molecular target that FDA determines to be substantially relevant to the growth or
progression of a pediatric cancer. The investigation must be designed to yield clinically meaningful pediatric
the product.
study data regarding the dosing, safety and preliminary efficacy
pediatric labeling forff
to informff
ff
Review and Approval
rr
of an NDADD
ff
data establishing the safety and efficacy
In order to obtain approval to market a drug product in the United States, a marketing application must
be submitted to the FDA that provides sufficient
of the proposed drug
product for its intended indication. The application includes all relevant data available from pertinent preclinical
studies and clinical trials, including negative or ambiguous results as well as positive findings, together with
detailed informat
other things. Data can come from company-sponsored clinical trials intended to test the safety and
effect
investigators. To support marketing approval, the data submitted must be sufficient
cy of the drug product to the satisfaction of the FDA.
establish the safety and efficaff
iveness of a use of a product, or from a number of alternative sources, including studies initiated by
ion relating to the product’s chemistry, manufacturing, controls and proposed labeling, among
in quality and quantity to
ff
ff
ff
ff
The NDA is a vehicle through which sponsors formally propose that the FDA approve a new product forff
marketing and sale in the United States for one or more indications. Every new drug product candidate must be
the subject
of an approved NDA before it may be commercialized in the United States. Under federal law, the
b
44
b
to an application user fee, which for federal fiscal year 2022 is $3,117,218
submission of most NDAs is subject
for an application requiring clinical data. The sponsor of an approved NDA is also subject to an annual
prescription drug product program fee, which for federal fiscal year 2022 is $369,413. Certain exceptions and
some of these fees, such as an exception from the application fee for products with
waivers are available forff
orphan designation, an exception from the program fee when the program does not engage in manufacturing
the drug during a particular fiscal year and a waiver for certain small businesses.
Following submission of an NDA, the FDA conducts a preliminary review of the application within 60
ff
ly complete to permit substantive review. In the event that FDA determines that an application does not
calendar days of its receipt and it must inform the sponsor by that time or beforeff
sufficient
satisfy this standard, it will issue a Refuse to File, or RTF, determination to the sponsor. The FDA may request
additional informat
resubmitted with the additional informat
accepts it forff
ion rather than accept the application for filing. In this event, the application must be
ion. The resubmitted application is also subject to review beforeff
whether the application is
the FDA
filing.
ff
ff
Once the submission is accepted for filing, the FDA begins an in-depth substantive review. The FDA
ff
goals in the review process of NDAs. Under that agreement, 90% of
has agreed to specified performance
applications seeking approval of New Molecular Entities, or NMEs, are meant to be reviewed within ten months
from the date on which the FDA accepts the application for filing, and 90% of applications for NMEs that have
been designated for “priority review” are meant to be reviewed within six months of the filing date. For
applications seeking approval of products that are not NMEs, the ten-month and six-month review periods run
from the date that the FDA receives the application. The review process and the Prescription Drug User Fee
Act, or PDUFA,FF goal date may be extended by the FDA for three additional months to consider new informat
ion
or clarification provided by the sponsor to address an outstanding deficiency identified by the FDA following the
original submission.
ff
In connection with its review of an application, the FDA typically will inspect the facility or facilit
the product is or will be manufactured. These pre-approval inspections may cover all facilities associated with
an NDA submission, including component manufacturing, finished product manufacturing
and control testing
laboratories. The FDA will not approve an application unless it determines that the manufacturing processes
and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the
product within required specifications. Additionally, before approving an NDA, the FDA will typically inspect one
or more clinical sites to assure compliance with GCP. Under the FDA Reauthorization Act of 2017, the FDA must
implement a protocol to expedite review of responses to inspection reports pertaining to certain applications,
including applications for products in shortage or those for which approval is dependent on remediation of
conditions identified in the inspection report.
ies where
ff
ff
In addition, as a condition of approval, the FDA may require a sponsor to develop a REMS. REMS use
risk minimization strategies beyond the professional labeling to ensure that the benefits of the product outweigh
the potential risks. To determine whether a REMS is needed, the FDA will consider the size of the population
likely to use the product, seriousness of the disease, expected benefit of the product, expected duration of
treatment, seriousness of known or potential adverse events and whether the product is a new molecular entity.
The FDA may referff
an application for a novel product to an advisory committee or explain why such
referral was not made. Typically, an advisory committee is a panel of independent experts, including clinicians
and other scientific experts, that reviews, evaluates and provides a recommendation as to whether the
application should be approved and under what conditions. The FDA is not bound by the recommendations of
an advisory committee, but it considers such recommendations carefully when making decisions.
The FDA is authorized to expedite the review of applications in several ways. Under the Fast Track
program, the sponsor of a product candidate may request the FDA to designate the product for a specific
indication as a Fast Track product concurrent with or after the filing of the IND. Candidate products are eligible
for Fast Track designation if they are intended to treat a serious or life-threat
the potential to address unmet medical needs for the condition. Fast Track designation applies to the
combination of the product candidate and the specific indication for which it is being studied. In addition to other
benefits, such as the ability to have greater interactions with the FDA, the FDA may initiate review of sections of
a Fast Track application beforeff
the application is complete, a process known as rolling review.
ening condition and demonstrate
ff
45
Any product candidate submitted to the FDA for marketing, including under a Fast Track program, may
be eligible forff
therapy designation, priority review and accelerated approval.
other types of FDA programs intended to expedite development and review, such as breakthrough
•
•
•
•
tt
therapy designation.
To qualify for the breakthrough therapy program, product candidates
Breakthrough
tt
must be intended to treat a serious or life-threatening disease or condition and preliminary clinical
evidence must indicate that such product candidates may demonstrate substantial improvement on one
or more clinically significant endpoints over existing therapies. The FDA will seek to ensure the sponsor
of a breakthrough therapy product candidate receives intensive guidance on an efficient
development
program, intensive involvement of senior managers and experienced staff on a proactive, collaborative
and cross-disciplinary review and rolling review.
ff
ew. A product candidate is eligible forff
Priority r
rr
t evi
approved, it would be a significant improvement in the safety or effeff ctiveness of the treatment,
diagnosis or prevention compared to marketed products. FDA aims to complete its review of priority
review applications within six months as opposed to 10 months for standard review.
priority review if it treats a serious condition and, if
ff
ff
ff
veness in treating serious or life-ff
Accelerated approval. Drug products studied for their safety and effecti
threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may
receive accelerated approval. Accelerated approval means that a product candidate may be approved
on the basis of adequate and well controlled clinical trials establishing that the product candidate has an
on a surrogate endpoint that is reasonably likely to predict a clinical benefit, or on the basis of an
effect
effect
on a clinical endpoint other than survival or irreversible morbidity or mortality or other clinical
benefit, taking into account the severity, rarity and prevalence of the condition and the availability or lack
of alternative treatments. As a condition of approval, the FDA may require that a sponsor of a drug
product candidate receiving accelerated approval performff
clinical trials. In addition, the FDA currently requires as a condition for accelerated approval pre-
approval of promotional materials.
adequate and well controlled post-marketing
advanced therapy. With passage of the 21st Century Cures Act, or the Cures Act, in
Regenerativett
December 2016, Congress authorized the FDA to accelerate review and approval of products
designated as regenerative advanced therapies. A product is eligible for this designation if it is a
reverse or cure a serious or life-ff
regenerative medicine therapy that is intended to treat, modify,ff
threatening disease or condition and preliminary clinical evidence indicates that the product candidate
has the potential to address unmet medical needs for such disease or condition. The benefits of a
regenerative advanced therapy designation include early interactions with the FDA to expedite
development and review, benefits available to breakthrough therapies, potential eligibility forff
review and accelerated approval based on surrogate or intermediate endpoints.
priority
None of these expedited programs changes the standards for approval but they may help expedite the
development or approval process of product candidates.
FF
The FDA’
s D’
ecision on an NDADD
Afteff
r evaluating the application and all related informat
ff
ion, including the advisory committee
recommendations, if any, and inspection reports of manufacturing facilities and clinical trial sites, the FDA will
issue either a Complete Response Letter, or CRL, or an approval letter. To rTT each this determination, the FDA
must determine that the drug is effective and that its expected benefits outweigh its potential risks to patients.
This “benefit-risk” assessment is informed by the extensive body of evidence about the product’s safety and
efficff acy in the NDA. This assessment is also informed
condition and how well patients’ medical needs are addressed by currently available therapies; uncertainty
about how the premarket clinical trial evidence will extrapolate to real-world use of the product in the post-
In connection with
market setting; and whether risk management tools are necessary to manage specific risks.
this assessment, the FDA review team will assemble all individual reviews and other documents into an “action
package,” which becomes the record for FDA review. The review team then issues a recommendation, and a
senior FDA officff
by other factors, including: the severity of the underlying
ial makes a decision.
ff
46
ff
A CRL indicates that the review cycle of the application is complete, and the application will not be
approved in its present form. A CRL generally outlines the deficiencies in the submission and may require
substantial additional testing or informat
ion in order for the FDA to reconsider the application. The CRL may
require additional clinical or other data, additional pivotal Phase 3 clinical trial(s) and/or other significant and
time- consuming requirements related to clinical trials, preclinical studies or manufactu
ring. If a CRL is issued,
the sponsor will have one year to respond to the deficiencies identified by the FDA, at which time the FDA can
deem the application withdrawn or, in its discretion, grant the sponsor an additional six month extension to
respond. The FDA has committed to reviewing resubmissions in response to an issued CRL in either two or six
months depending on the type of information included. Even with the submission of this additional informat
however, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.
The FDA has taken the position that a CRL is not final agency action making the determination subject to
judicial review.
ion,
f
ff
An approval letter, on the other hand, authorizes commercial marketing of the product with specific
prescribing information for specific indications. That is, the approval will be limited to the conditions of use (e.g.,
patient population, indication) described in the FDA-approved labeling. Further, depending on the specific risk(s)
to be addressed, the FDA may require that contraindications, warnings or precautions be included in the product
labeling, require that post-approval trials, including Phase 4 clinical trials, be conducted to further assess a
product’s safety after approval, require testing and surveillance programs to monitor the product after
commercialization or impose other conditions, including distribution and use restrictions or other risk
management mechanisms under a REMS which can materially affect
product. The FDA may prevent or limit further marketing of a product based on the results of post-marketing
trials or surveillance programs. After
f
new indications, manufacturing
requirements and FDA review and approval.
ff
changes and additional labeling claims, are subject to further testing
approval, some types of changes to the approved product, such as adding
the potential market and profitability of the
ff
rr
Post-Appr
oval
-
ll
Regulation
If regulatory approval for marketing of a product or new indication for an existing product is obtained,
ff
information and comply with requirements concerning advertising and
the sponsor will be required to comply with all regular post-approval regulatory requirements as well as any
post-approval requirements that the FDA may have imposed as part of the approval process. The sponsor will
be required to report, among other things, certain adverse reactions and manufacturing problems to the FDA,
provide updated safety and efficacy
promotional labeling requirements. Manufactu
their establishments with the FDA and certain state agencies, and are subject to periodic unannounced
inspections by the FDA and certain state agencies for compliance with ongoing regulatory requirements,
including cGMP regulations, which impose certain procedural and documentation requirements upon
manufacturers. Changes to the manufacturing process are strictly regulated and often require prior FDA
approval beforeff
expend time, money and effort
regulations and other regulatory requirements.
must continue to
in the areas of production and quality control to maintain compliance with cGMP
being implemented. Accordingly, the sponsor and its third-party manufacturers
rers and certain of their subcontractors are required to register
ff
f
f
Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory
requirements is not maintained or if problems occur after the product reaches the market. Later discovery of
previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or
with manufactu
approved labeling to add new safety informat
safety risks; or imposition of distribution or other restrictions under a REMS program. Other potential
consequences include, among other things:
ring processes, or failure to comply with regulatory requirements, may result in revisions to the
ion; imposition of post-market studies or clinical trials to assess
f
ff
•
•
•
•
restrictions on the marketing or manufacturing
from the market or product recalls;
ff
of the product, complete withdrawal of the product
fines, warning letters or holds on post-approval clinical trials;
refusal of the FDA to approve pending applications or supplements to approved applications, or
withdrawal of product approvals;
product seizure or detention, or refusal to permit the import or export of products; or
47
•
injunctions or the imposition of civil or criminal penalties.
The FDA strictly regulates the marketing, labeling, advertising and promotion of prescription drug
or effeff ctiveness are prohibited beforeff
uses that are not approved by the FDA, as reflected in the product’s
products placed on the market. This regulation includes, among other things, standards and regulations for
direct-to-consumer advertising, communications regarding unapproved uses, industry-sponsored scientific and
educational activities, and promotional activities involving the Internet and social media. Promotional claims
about a drug’s safetyff
generally may not be promoted forff
prescribing information. In the United States, health care professionals are generally permitted to prescribe
drugs for such uses not described in the drug’s labeling, known as off-ff
label uses, because the FDA does not
regulate the practice of medicine. However, FDA regulations impose rigorous restrictions on manufacturers’
uses. It may be permissible, under very specific, narrow
communications, prohibiting the promotion of off-label
conditions, for a manufacturer to engage in nonpromotional, non-misleading communication regarding off-label
informat
final regulations which describe the types of evidence that the agency will consider in determining the intended
use of a drug product. In September 2021, the FDA published final regulations which describe the types of
evidence that the agency will consider in determining the intended use of a drug product.
ion, such as distributing scientific or medical journal informat
the drug is approved. Afteff
ion. In September 2021, the FDA published
r approval, a drug product
ff
ff
ff
ff
Violations of the Federal Food, Drug, and Cosmetic Act and other statutes, including the False Claims
Act, relating to the promotion and advertising of prescription drugs may lead to investigations and enforcement
actions alleging violations of federal and state healthcare fraud and abuse laws, as well as state consumer
protection laws. If a company is fouff nd to have promoted off-label
uses, it may become subject to adverse public
relations and administrative and judicial enforcement by the FDA, the Department of Justice, or the Office of the
Inspector General of the Department of Health and Human Services, as well as state authorities. This could
subject a company to a range of penalties that could have a significant commercial impact, including civil and
criminal fines and agreements that materially restrict the manner in which a company promotes or distributes
drug products. The federal government has levied large civil and criminal fines against companies for alleged
improper promotion, and has also requested that companies enter into consent decrees or permanent
injunctions under which specified promotional conduct is changed or curtailed.
ff
ff
Section 505(b)(2) NDAs
ff
NDAs forff most new drug products are based on two full clinical studies which must contain substantial
of the proposed new product for the proposed use. These applications are
evidence of the safety and efficacy
submitted under Section 505(b)(1) of the FDCA. The FDA is, however, authorized to approve an alternative type
of NDA under Section 505(b)(2) of the FDCA. This type of application allows the sponsor to rely, in part, on the
for a similar product, or published literature. Specifically, Section
FDA’sAA previous findings of safety and efficacy
505(b)(2) applies to NDAs forff
a drug forff which the investigations made to show whether or not the drug is safe
for use and effect
ive in use and relied upon by the sponsor for approval of the application “were not conducted
by or for the sponsor and for which the sponsor has not obtained a right of reference or use from the person by
or for whom the investigations were conducted.”
ff
ff
Section 505(b)(2) thus authorizes the FDA to approve an NDA based on safety and effecti
that were not developed by the sponsor. NDAs filed under Section 505(b)(2) may provide an alternate and
potentially more expeditious pathway to FDA approval for new or improved formulations or new uses of
previously approved products. If the 505(b)(2) sponsor can establish that reliance on the FDA’sAA previous
approval is scientifically appropriate, the sponsor may eliminate the need to conduct certain preclinical or clinical
studies of the new product. The FDA may also require companies to performff
measurements to support the change from the approved product. The FDA may then approve the new drug
candidate forff
for any new indication sought by the Section 505(b)(2) sponsor.
all or some of the label indications for which the referenced
product has been approved, as well as
additional studies or
veness data
f
ff
Abbreviated New Drugrr
Applpp icall
tions for Generic Drugrr
s
In 1984, with passage of the Hatch-Waxman Amendments to the FDCA, Congress established an
abbreviated regulatory scheme authorizing the FDA to approve generic drugs that are shown to contain the
same active ingredients as, and to be bioequivalent to, drugs previously approved by the FDA pursuant to
NDAs. To obtain approval of a generic drug, a sponsor must submit an abbreviated new drug application, or
48
ff
ion pertaining to the active pharmaceutical ingredient, bioequivalence, drug product formulation,
ANDA, to the agency. An ANDA is a comprehensive submission that contains, among other things, data and
informat
specifications and stability of the generic drug, as well as analytical methods, manufactu
ring process validation
data and quality control procedures. ANDAs are “abbreviated” because they generally do not include preclinical
and clinical data to demonstrate safety and effeff ctiveness. Instead, in support of such applications, a generic
manufacturer may rely on the preclinical and clinical testing previously conducted for a drug product previously
approved under an NDA, known as the reference-listed drug, or RLD.
ff
Specifically, in order for an ANDA to be approved, the FDA must find that the generic version is identical
to the RLD with respect to the active ingredients, the route of administration, the dosage form, the strength of
the drug and the conditions of use of the drug. At the same time, the FDA must also determine that the generic
drug is “bioequivalent” to the innovator drug. Under the statute, a generic drug is bioequivalent to a RLD if “the
rate and extent of absorption of the drug do not show a significant difference from the rate and extent of
absorption of the listed drug.” Upon approval of an ANDA, the FDA indicates whether the generic product is
“therapeutically equivalent” to the RLD in its publication “Approved Drug Products with Therapeutic Equivalence
Evaluations,” also referred to as the “Orange Book.” Physicians and pharmacists consider a therapeutic
equivalent generic drug to be fully substitutable for the RLD. In addition, by operation of certain state laws and
numerous health insurance programs, the FDA’sAA designation of therapeutic equivalence oftenff
substitution of the generic drug without the knowledge or consent of either the prescribing physician or patient.
results in
Under the Hatch-Waxman Amendments, the FDA may not approve an ANDA until any applicable period
the RLD has expired. The FDCA provides a period of five years of non-patent data
a new drug containing a new chemical entity. For the purposes of this provision, a new chemical
of non-patent exclusivity forff
exclusivity forff
entity, or NCE, is a drug that contains no active moiety that has previously been approved by the FDA in any
other NDA. This interpretation was confirmed with enactment of the Ensuring Innovation Act in April 2021. An
active moiety is the molecule or ion responsible forff
substance. In cases where such NCE exclusivity has been granted, an ANDA may not be filed with the FDA until
the expiration of five years unless the submission is accompanied by a Paragraph IV certification, in which case
the sponsor may submit its application four years following the original product approval.
the physiological or pharmacological action of the drug
The FDCA also provides for a period of three years of exclusivity if the NDA includes reports of one or
more new clinical investigations, other than bioavailability or bioequivalence studies, that were conducted by or
for the applicant and are essential to the approval of the application. This three-year exclusivity period often
protects changes to a previously approved drug product, such as a new dosage form, route of administration,
combination or indication. Three-year exclusivity would be available forff
previously approved active moiety, provided the statutory requirement for a new clinical investigation is satisfied.
Unlike five-year NCE exclusivity, an award of three-year exclusivity does not block the FDA from accepting
ANDAs seeking approval for generic versions of the drug as of the date of approval of the original drug product.
The FDA typically makes decisions about awards of data exclusivity shortly beforeff
a drug product that contains a
a product is approved.
The FDA must establish a priority review track for certain generic drugs, requiring the FDA to review a
drug application within eight (8) months for a drug that has three (3) or fewer approved drugs listed in the
Orange Book and is no longer protected by any patent or regulatory exclusivities, or is on the FDA’sAA drug
shortage list. The FDA is also authorized to expedite review of “competitor generic therapies” or drugs with
inadequate generic competition, including holding meetings with or providing advice to the drug sponsor prior to
submission of the application.
Hatch-Waxman Patent Certificati
ii
on and thett
30-Month Stay
Upon approval of an NDA or a supplement thereto, NDA sponsors are required to list with the FDA each
patent with claims that cover the sponsor’s product or an approved method of using the product. Each of the
patents listed by the NDA sponsor is published in the Orange Book. The FDA’sAA regulations governing patient
listings were largely codified into law with enactment of the Orange Book Modernization Act in January 2021.
When an ANDA sponsor files its application with the FDA, the sponsor is required to certify to the FDA
concerning any patents listed for the reference product in the Orange Book, except for patents covering
methods of use for which the ANDA sponsor is not seeking approval. To the extent that the Section 505(b)(2)
sponsor is relying on studies conducted for an already approved product, the sponsor is required to certify to the
FDA concerning any patents listed for the approved product in the Orange Book to the same extent that an
ANDA sponsor would.
49
Specifically, the sponsor must certify with respect to each patent that:
•
•
•
•
the required patent information has not been filed;
the listed patent has expired;
the listed patent has not expired, but will expire on a particular date and approval is sought after
patent expiration; or
the listed patent is invalid, unenforceable
ff
or will not be infringed by the new product.
A certification that the new product will not infringe the already approved product’s listed patents or that
such patents are invalid or unenforceable
is called a Paragraph IV certification. If the sponsor does not
challenge the listed patents or indicates that it is not seeking approval of a patented method of use, the
application will not be approved until all the listed patents claiming the referenced product have expired (other
than method of use patents involving indications for which the sponsor is not seeking approval).
ff
If the ANDA sponsor has provided a Paragraph IV certification to the FDA, the sponsor must also send
notice of the Paragraph IV certification to the NDA and patent holders once the ANDA has been accepted for
filing by the FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in response to the
notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days after the receipt
of a Paragraph IV certification automatically prevents the FDA from approving the ANDA until the earlier of 30
months after the receipt of the Paragraph IV notice, expiration of the patent, or a decision in the infringement
case that is favorable
to the ANDA sponsor.
ff
To the extent that the Section 505(b)(2) sponsor is relying on studies conducted for an already
approved product, the sponsor is required to certify to the FDA concerning any patents listed for the approved
product in the Orange Book to the same extent that an ANDA sponsor would. As a result, approval of a Section
505(b)(2) NDA can be stalled until all the listed patents claiming the referenced product have expired, until any
non-patent exclusivity, such as exclusivity forff
obtaining approval of a new chemical entity, listed in the Orange
the referenced product has expired, and, in the case of a Paragraph IV certification and subsequent
Book forff
patent infringement suit, until the earlier of 30 months, settlement of the lawsuit or a decision in the infringement
case that is favorable to the Section 505(b)(2) sponsor.
ii
Pediatri
c ExclEE
usivity
Pediatric exclusivity is another type of non-patent marketing exclusivity in the United States and, if
granted, provides for the attachment of an additional six months of regulatory exclusivity to the term of any
patent or existing regulatory exclusivity, including orphan exclusivity. This six-month exclusivity may be granted
if an NDA sponsor submits pediatric data that fairly respond to a written request from the FDA for such data.
The data do not need to show the product to be effect
ive in the pediatric population studied; rather, if the clinical
trial is deemed to fairly respond to the FDA’s request, the additional protection is granted. If reports of requested
pediatric studies are submitted to and accepted by the FDA within the statutory time limits, whatever statutory or
regulatory periods of exclusivity or patent protection cover the product are extended by six months. This is not a
patent term extension, but it effectively extends the regulatory period during which the FDA cannot approve
another application.
ff
Orphan Drug Designi
ation and Exclusivity
Under the Orphan Drug Act, the FDA may designate a drug product as an “orphan drug” if it is intended
to treat a rare disease or condition, generally meaning that it affects fewer than 200,000 individuals in the United
States, or more in cases in which there is no reasonable expectation that the cost of developing and making a
product available in the United States for treatment of the disease or condition will be recovered from sales of
the product. A company must seek orphan drug designation beforeff
product. If the request is granted, the FDA will disclose the identity of the therapeutic agent and its potential use.
Orphan drug designation does not shorten the PDUFA gFF
process, although it does convey certain advantages such as tax benefits and exemption from the PDUFAFF
application fee.
oal dates for the regulatory review and approval
submitting an NDA for the candidate
50
If a product with orphan designation receives the first FDA approval forff
the disease or condition for
which it has such designation or for a select indication or use within the rare disease or condition for which it
was designated, the product generally will receive orphan drug exclusivity. Orphan drug exclusivity means that
the FDA may not approve another sponsor’s marketing application for the same drug for the same condition for
seven years, except in certain limited circumstances. Orphan exclusivity does not block the approval of a
different
different
indication broader than what was designated in its orphan drug application, it may not be entitled to exclusivity.
product for the same rare disease or condition, nor does it block the approval of the same product for
conditions. If a drug designated as an orphan drug ultimately receives marketing approval for an
ff
ff
The period of market exclusivity begins on the date that the marketing application is approved by the
FDA and applies only to the disease or condition for which the product has been designated. Orphan drug
exclusivity will not bar approval of another product under certain circumstances, including if the company with
orphan drug exclusivity is not able to meet market demand or the subsequent product is shown to be clinically
superior to the approved product on the basis of greater efficacy
or safety, or providing a major contribution to
patient care. This is the case despite an earlier court opinion holding that the Orphan Drug Act unambiguously
required the FDA to recognize orphan drug exclusivity regardless of a showing of clinical superiority. Under
Omnibus legislation signed by President Trump on December 27, 2020, the requirement forff
clinical superiority applies to drug products that received orphan drug designation beforeff
amendments to the FDCA in 2017 but have not yet been approved by FDA.
a product to show
enactment of
ff
In September 2021, the Court of Appeals for the 11th Circuit held that, forff
the purpose of determining
the scope of market exclusivity, the term “same disease or condition” in the statute means the designated “rare
disease or condition” and could not be interpreted by the FDA to mean the “indication or use.” Thus, the court
concluded, orphan drug exclusivity applies to the entire designated disease or condition rather than the
“indication or use.” It is unclear how this court decision will be implemented by the FDA.
Patent TermTT
Restoration and Extension
A patent claiming a new drug product, its method of use or its method of manufacture may be eligible
for a limited patent term extension under the Hatch-Waxman Act, which permits a patent restoration of up to five
years for patent term lost during product development and the FDA regulatory review. The restoration period
granted on a patent covering a product is typically one-half the time between the effecti
ve date of the IND for
the clinical investigation is begun and the submission date of an application, plus the time between the
submission date of an application and the ultimate approval date. Patent term restoration cannot be used to
extend the remaining term of a patent past a total of 14 years from the product’s approval date. Only one patent
applicable to an approved product is eligible forff
submitted prior to the expiration of the patent in question. A patent that covers multiple products forff which
approval is sought can only be extended in connection with one of the approvals. The United States Patent and
Trademark Officeff
consultation with the FDA.
reviews and approves the application for any patent term extension or restoration in
the extension, and the application for the extension must be
ff
Health Care Law and Regulation
ll
Health care providers and third-party payors play a primary role in the recommendation and prescription
of drug products that are granted marketing approval. Arrangements with providers, consultants, third-party
payors and customers are subject to broadly applicable state and federal fraud and abuse laws and regulations
(including anti-kickback and false claims laws), patient privacy laws and regulations, and other health care laws
and regulations that may constrain business and/or financial arrangements. Restrictions under applicable
federal and state health care laws and regulations, include the following:
•
•
the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from
knowingly and willfully soliciting, offering,
cash or in kind, to induce or reward either the referral of an individual for, or the purchasing,
ordering, leasing, arranging for, or recommending the purchasing, ordering, or leasing of, any good
or service for which payment may be made, in whole or in part, under a federal health care program
such as Medicare and Medicaid;
paying, or receiving remuneration, directly or indirectly, in
ff
the federal civil and criminal false claims laws, including the civil False Claims Act, and Civil
Monetary Penalties Law, which prohibit individuals or entities from, among other things, knowingly
51
presenting, or causing to be presented, to the federal government, false or fraudulent claims for
payment or knowingly making, using or causing to made or used a false record or statement
material to a false
ff
to the federal government;
or fraudulent claim or to avoid, decrease or conceal an obligation to pay money
the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA,AA which created
additional federal criminal laws that prohibit, among other things, knowingly and willfully executing,
or attempting to execute, a scheme to defraud any health care benefit program or making false
statements relating to health care matters;
as amended by the Health Informat
HIPAA,PP
and the regulations promulgated thereunder, including 45 C.F.R. Parts 160 and 164, imposing rules
regarding privacy, security, and data breach notifications;
ion Technology for Economic and Clinical Health Act,
ff
the Foreign Corrupt Practices Act, or FCPA, which prohibits companies and their intermediaries
from making, or offering
purpose of obtaining or retaining business or otherwise seeking favorable treatment;
or promising to make improper payments to non-U.S. officials
for the
ff
ff
ff
ff
able Care Act, as amended by the Health Care Education
able Care Act, or the ACA, which requires manufacturers of drugs,
the federal physician transparency requirements known as the Physician Payments Sunshine Act,
under the Patient Protection and Afford
Reconciliation Act, or the Afford
medical devices, biological and medical supplies covered by Medicare, Medicaid, or State
Children’s Health Insurance Program to report annually to the Centers for Medicare & Medicaid
Services, or CMS, within the United States Department of Health and Human Services, information
related to payments and other transfers of value made by that entity to physicians, other healthcare
providers and teaching hospitals, as well as ownership and investment interests held by physicians,
other healtchare providers and their immediate family
members; and
ff
analogous state and foreign
laws and regulations, such as state anti-kickback and false claims
laws, which may apply to health care items or services that are reimbursed by non-government
third-party payors, including private insurers.
ff
•
•
•
•
•
Further, some state laws require pharmaceutical companies to comply with the pharmaceutical
industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal
ion related to payments to physicians and
government in addition to requiring manufacturers
other health care providers or marketing expenditures. Additionally, some state and local laws require the
registration of pharmaceutical sales representatives in the jurisdiction. State and foreign laws also govern the
privacy and security of health informf
significant ways and often are not preempted by HIPAA,PP
ation in some circumstances, many of which differ
thus complicating compliance efforts.
from each other in
to report informat
ff
ff
ff
ff
Pharmaceutical InsII urance Coveravv
ge and Health Care Reform
In the United States and markets in other countries, patients who are prescribed treatments forff
their
ff
the prescribed services generally rely on third-party payors to reimburse all
conditions and providers performing
or part of the associated health care costs. Significant uncertainty exists as to the coverage and reimbursement
status of products approved by the FDA and other government authorities. Thus, even if a product candidate is
approved, sales of the product will depend, in part, on the extent to which third-party payors, including
government health programs in the United States such as Medicare and Medicaid, commercial health insurers
and managed care organizations, provide coverage and establish adequate reimbursement levels for the
product. The process for determining whether a payor will provide coverage for a product may be separate from
the process for setting the price or reimbursement rate that the payor will pay for the product once coverage is
approved. Third-party payors are increasingly challenging the prices charged, examining the medical necessity
and reviewing the cost-effectiveness of medical products and services and imposing controls to manage costs.
Third-party payors may limit coverage to specific products on an approved list, also known as a formulary
might not include all of the approved products forff
a particular indication.
ff
, which
In order to secure coverage and reimbursement forff
any product that might be approved for sale, a
company may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical
necessity and cost-effect
comparable marketing approvals. Nonetheless, product candidates may not be considered medically necessary
ive. A decision by a third-party payor not to cover a product could reduce physician utilization once
or cost effect
iveness of the product, in addition to the costs required to obtain FDA or other
ff
ff
52
the product is approved and have a material adverse effect
condition. Additionally, a payor’s decision to provide coverage for a product does not imply that an adequate
reimbursement rate will be approved. Further, one payor’s determination to provide coverage for a product does
not assure that other payors will also provide coverage and reimbursement forff
coverage and reimbursement can differ
on sales, results of operations and financial
significantly from payor to payor.
the product, and the level of
ff
ff
The containment of health care costs also has become a priority of federal, state and foreign
governments and the prices of products have been a focuff
interest in implementing cost-containment programs, including price controls, restrictions on reimbursement and
requirements for substitution of generic products. Adoption of price controls and cost-containment measures,
and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit a
company’s revenue generated from the sale of any approved products. Coverage policies and third-party
reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained
for one or more products forff which a company or its collaborators receive marketing approval, less favorable
coverage policies and reimbursement rates may be implemented in the future.
Governments have shown significant
s in this effort.
ff
There have been a number of federal and state proposals during the last few years regarding the
pricing of pharmaceutical and biopharmaceutical products, limiting coverage and reimbursement forff
biologics and other medical products, government control and other changes to the health care system in the
United States.
drugs and
In March 2010, President Obama signed into law the Patient Protection and Affordable
ff
Care Act, as
ff
amended by the Health Care and Education Afford
ability Reconciliation Act, or collectively the ACA. In addition,
other legislative changes have been proposed and adopted in the United States since the ACA was enacted. In
August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by
Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit
reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby
triggering the legislation’s automatic reduction to several government programs. These changes included
aggregate reductions of Medicare payments to providers of up to 2% per fiscal year, which went into effect in
April 2013 and will remain in effect
or the CARES Act. These Medicare sequester reductions have been suspended through the end of March
2022. From April 2022 through June 2022 a 1% sequester cut will be in effect
thereafter
several providers and increased the statute of limitations period for the government to recover overpayments to
providers from three to five years. These laws may result in additional reductions in Medicare and other
healthcare funding and otherwise affect
may obtain regulatory approval or the frequency with which any such product candidate is prescribed or used.
. The American Taxpayer Relief Act of 2012, among other things, reduced Medicare payments to
through 2030 under the Coronavirus Aid, Relief, and Economic Security Act,
the prices we may obtain for any of our product candidates for which we
, with the full 2% cut resuming
ff
ff
ff
ff
Since enactment of the ACA, there have been, and continue to be, numerous legal challenges and
Congressional actions to repeal and replace provisions of the law. For example, with enactment of the Tax Cuts
and Jobs Act of 2017, which was signed by President Trump on December 22, 2017, Congress repealed the
“individual mandate.” The repeal of this provision, which requires most Americans to carry a minimal level of
ive in 2019. On December 14, 2018, a U.S. District Court judge in the Northern
health insurance, became effect
District of Texas ruled that the individual mandate portion of the ACA is an essential and inseverable feature of
the ACA, and therefore because the mandate was repealed as part of the Tax Act, the remaining provisions of
the ACA are invalid as well. The U.S. Supreme Court heard this case on November 10, 2020 and, on June 17,
2021, dismissed this action after finding that the plaintiffsff do not have standing to challenge the constitutionality
of the ACA. Litigation and legislation over the ACA are likely to continue, with unpredictable and uncertain
results.
ff
The Trump Administration also took executive actions to undermine or delay implementation of the
ACA, including directing federal agencies with authorities and responsibilities under the ACA to waive, deferff
,
grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or
regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of
pharmaceuticals or medical devices. On January 28, 2021, however, President Biden rescinded those orders
and issued a new executive order that directs federal agencies to reconsider rules and other policies that limit
access to healthcare, and consider actions that will protect and strengthen that access. Under this order, federal
agencies are directed to re-examine: policies that undermine protections for people with pre-existing conditions,
including complications related to COVID‑19; demonstrations and waivers under Medicaid and the ACA that
may reduce coverage or undermine the programs, including work requirements; policies that undermine the
53
Health Insurance Marketplace or other markets for health insurance; policies that make it more difficult
in Medicaid and under the ACA; and policies that reduce afford
including forff
ability of coverage or financial assistance,
dependents.
ff
ff
to enroll
The prices of prescription pharmaceuticals have also been the subject
b
of considerable discussion in the
United States. There have been several recent U.S. congressional inquiries, as well as proposed and enacted
state and federal legislation designed to, among other things, bring more transparency to pharmaceutical
pricing, review the relationship between pricing and manufacturer patient programs, and reduce the costs of
pharmaceuticals under Medicare and Medicaid.
In 2020, President Trump issued several executive orders
intended to lower the costs of prescription products and certain provisions in these orders have been
incorporated into regulations. These regulations include an interim final rule implementing a most favored
nation model for prices that would tie Medicare Part B payments forff
pharmaceuticals to the lowest price paid in other economically advanced countries, effect
ive January 1, 2021.
That rule, however, has been subject to a nationwide preliminary injunction and, on December 29, 2021, CMS
issued a final rule to rescind it. With issuance of this rule, CMS stated that it will explore all options to
incorporate value into payments forff Medicare Part B pharmaceuticals and improve beneficiaries' access to
evidence-based care.
certain physician-administered
ff
In addition, in October 2020, HHS and the FDA published a final rule allowing states and other entities
to develop a Section 804 Importation Program, or SIP, to import certain prescription drugs from Canada into the
United States. The final rule is currently the subject of ongoing litigation, but at least six states (Vermont
,
Colorado, Florida, Maine, New Mexico, and New Hampshire) have passed laws allowing forff
drugs from Canada with the intent of developing SIPs for review and approval by the FDA. Further, on
November 20, 2020, HHS finalized a regulation removing safe harbor protection for price reductions from
pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit
managers, unless the price reduction is required by law. The implementation of the rule has been delayed by
the Biden administration from January 1, 2022 to January 1, 2023 in response to ongoing litigation. The rule
also creates a new safe harbor for price reductions reflected at the point-of-sale,
for certain fixed fee arrangements between pharmacy benefit managers and manufacturers, the implementation
of which have also been delayed by the Biden administration until January 1, 2023.
as well as a new safe harbor
the importation of
VV
f
On July 9, 2021, President Biden signed Executive Order 14063, which focuses on, among other
things, the price of pharmaceuticals. The Order directs the Department of Health and Human Services, or
HHS, to create a plan within 45 days to combat “excessive pricing of prescription pharmaceuticals and enhance
domestic pharmaceutical supply chains, to reduce the prices paid by the federal government for such
pharmaceuticals, and to address the recurrent problem of price gouging.” On September 9, 2021, HHS
released its plan to reduce pharmaceutical prices. The key features of that plan are to: (a) make
pharmaceutical prices more afford
by supporting pharmaceutical price negotiations with manufacturers; (b) improve and promote competition
throughout the prescription pharmaceutical industry by supporting market changes that strengthen supply
chains, promote biosimilars and generic drugs, and increase transparency; and (c) foster scientific innovation to
promote better healthcare and improve health by supporting public and private research and making sure that
market incentives promote discovery of valuable and accessible new treatments.
able and equitable for all consumers and throughout the health care system
ff
At the state level, individual states are increasingly aggressive in passing legislation and implementing
regulations designed to control pharmaceutical product pricing, including price or patient reimbursement
constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency
measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. A
number of states, for example, require drug manufacturers and other entities in the drug supply chain, including
health carriers, pharmacy benefit managers, wholesale distributors, to disclose informat
pharmaceuticals.
bidding procedures to determine what pharmaceutical products and which suppliers will be included in their
prescription pharmaceutical and other healthcare programs. These measures could reduce the ultimate demand
for our products, once approved, or put pressure on our product pricing. We expect that additional state and
federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that
federal and state governments will pay for healthcare products and services, which could result in reduced
demand for our product candidates or additional pricing pressures.
In addition, regional healthcare organizations and individual hospitals are increasingly using
ion about pricing of
ff
54
Review and Appropp
val of Medicidd nal
ii
Prodrr ucts in the European UniUU on
In order to market any product outside of the United States, a company must also comply with
numerous and varying regulatory requirements of other countries and jurisdictions regarding quality, safety and
efficff acy and governing, among other things, clinical trials, marketing authorization, commercial sales and
distribution of products. Whether or not it obtains FDA approval for a product, a sponsor will need to obtain the
necessary approvals by the comparable non-U.S. regulatory authorities beforeff
marketing of the product in those countries or jurisdictions. The approval process ultimately varies between
countries and jurisdictions and can involve additional product testing and additional administrative review
periods. The time required to obtain approval in other countries and jurisdictions might differ
than that required to obtain FDA approval. Regulatory approval in one country or jurisdiction does not ensure
regulatory approval in another, but a failure
jurisdiction may negatively impact the regulatory process in others. Specifically, however, the process governing
approval of medicinal products in the European Union, or EU, generally follows the same lines as in the United
States. It entails satisfactory completion of preclinical studies and adequate and well-controlled clinical trials to
establish the safety and efficacy
of the product for each proposed indication. It also requires the submission to
the relevant competent authorities of a marketing authorization application, or MAA,AA and granting of a marketing
authorization by these authorities beforeff
or delay in obtaining regulatory approval in one country or
the product can be marketed and sold in the EU.
it can commence clinical trials or
from and be longer
ff
ff
ff
Clinical Trial
TT
Approval
On January 31, 2022, the new Clinical Trials Regulation (EU) No 536/2014 became effecti
ff
ve in the
and streamlining the authorization, conduct and transparency of clinical trials in the European Union.
European Union and replaced the prior Clinical Trials Directive 2001/20/EC. The new regulation aims at
ff
simplifying
Under the new coordinated procedure for the approval of clinical trials, the sponsor of a clinical trial to be
conducted in more than one Member State of the European Union, or EU Member State, will only be required to
submit a single application for approval. The submission will be made through the Clinical Trials Information
System, a new clinical trials portal overseen by the EMA and available to clinical trial sponsors, competent
authorities of the EU Member States and the public.
The new regulation did not change the preexisting requirement that a sponsor must obtain prior
approval from the competent national authority of the EU Member State in which the clinical trial is to be
conducted. If the clinical trial is conducted in differe
these EU Member States must provide their approval for the conduct of the clinical trial. Furthermore, the
sponsor may only start a clinical trial at a specific study site after the applicable ethics committee has issued a
favorable opinion.
nt EU Member States, the competent authorities in each of
ff
Parties conducting certain clinical trials must, as in the United States, post clinical trial informat
ff
ion in the
EU at the EudraCT website: https://eu//
dract.ema.europa.eu..
PRIME Designation in the EU
In March 2016, the European Medicines Agency, or EMA, launched an initiative to facilitate
development of product candidates in indications, oftenff
rare, forff which few or no therapies currently exist. The
PRIority MEdicines, or PRIME, scheme is intended to encourage drug development in areas of unmet medical
need and provides accelerated assessment of products representing substantial innovation reviewed under the
centralized procedure. Products from small- and medium-sized enterprises, or SMEs, may qualify f
entry into the PRIME scheme than larger companies. Many benefits accrue to sponsors of product candidates
with PRIME designation, including but not limited to, early and proactive regulatory dialogue with the EMA,
frequent discussions on clinical trial designs and other development program elements, and accelerated
marketing authorization application assessment once a dossier has been submitted. Importantly, a dedicated
Agency contact and rapporteur from the Committee for Human Medicinal Products, or CHMP, oP r Committee for
Advanced Therapies, or CAT,AA are appointed early in PRIME scheme facilitating increased understanding of the
product at EMA’s Committee level. A kick-off mff
multidisciplinary experts at the EMA to provide guidance on the overall development and regulatory strategies.
eeting initiates these relationships and includes a team of
earlier
ff orff
55
Pediadd tricrr Studies
Prior to obtaining a marketing authorization in the European Union, sponsors must demonstrate
compliance with all measures included in an EMA-approved Paediatric Investigation Plan, or PIP, covering all
subsets of the pediatric population, unless the EMA has granted a product-specific waiver, a class waiver, or a
deferral for one or more of the measures included in the PIP. The respective requirements for all marketing
authorization procedures are laid down in Regulation (EC) No 1901/2006, the so-called Paediatric Regulation.
This requirement also applies when a company wants to add a new indication, pharmaceutical form or route of
administration for a medicine that is already authorized. The Paediatric Committee of the EMA, or PDCO, may
grant deferrals for some medicines, allowing a company to delay development of the medicine for children until
there is enough information to demonstrate its effectiveness and safety in adults. The PDCO may also grant
waivers when development of a medicine for children is not needed or is not appropriate, such as for diseases
that only affect
amended, the EMA determines that companies actually comply with the agreed studies and measures listed in
each relevant PIP.
the elderly population. Before an MAA can be filed, or an existing marketing authorization can be
ff
Marketingii
Authorization
To obtain a marketing authorization forff
a product under EU regulatory systems, a sponsor must submit
an MAA either under a centralized procedure administered by the EMA, or one of the procedures administered
by competent authorities in the EU Member States (decentralized procedure or mutual recognition procedure). A
marketing authorization may be granted only to a sponsor established in the EU. Regulation (EC) No 1901/2006
provides that prior to obtaining a marketing authorization in the EU, sponsors have to demonstrate compliance
with all measures included in an EMA-approved PIP covering all subsets of the pediatric population, unless the
EMA has granted (1) a product-specific waiver, (2) a class waiver or (3) a deferral for one or more of the
measures included in the PIP.
The centralized procedure provides for the grant of a single marketing authorization by the European
Commission that is valid across the European Economic Area (i.e. the EU as well as Iceland, Liechtenstein and
Norway). Pursuant to Regulation (EC) No 726/2004, the centralized procedure is compulsory for specific
products, including forff medicines produced by certain biotechnological processes, products designated as
orphan medicinal products, advanced therapy medicinal products and products with a new active substance
indicated for the treatment of certain diseases, including products for the treatment of cancer. For products with
a new active substance indicated for the treatment of other diseases and products that are highly innovative or
for which a centralized process is in the interest of patients, the centralized procedure may be optional. The
centralized procedure may at the request of the applicant also be used in certain other cases.
Under the centralized procedure, the CHMP is responsible for conducting the initial assessment of a
ff
ion or
product and for several post-authorization and maintenance activities, such as the assessment of modifications
or extensions to an existing marketing authorization. Under the centralized procedure in the EU, the maximum
timeframe for the evaluation of an MAA is 210 days, excluding clock stops, when additional informat
written or oral explanation is to be provided by the applicant in response to questions of the CHMP. Accelerated
evaluation might be granted by the CHMP in exceptional cases, when a medicinal product is of major interest
from the point of view of public health and in particular from the viewpoint of therapeutic innovation. If the CHMP
accepts such request, the time limit of 210 days will be reduced to 150 days but it is possible that the CHMP
can revert to the standard time limit for the centralized procedure if it considers that it is no longer appropriate to
conduct an accelerated assessment. At the end of this period, the CHMP provides a scientific opinion on
whether or not a marketing authorization should be granted in relation to a medicinal product. Within 15
calendar days of receipt of a final opinion from the CHMP, tP he European Commission must prepare a draftff
decision concerning an application for marketing authorization. This draft dff ecision must take the opinion and
any relevant provisions of EU law into account. Before arriving at a final decision on an application for
centralized authorization of a medicinal product the European Commission must consult the Standing
Committee on Medicinal Products forff Human Use. The Standing Committee is composed of representatives of
the EU Member States and chaired by a non-voting European Commission representative. The European
Parliament also has a related “droit de regard.” The European Parliament’s role is to ensure that the European
Commission has not exceeded its powers in deciding to grant or refuse to grant a marketing authorization.
The European Commission may grant a so-called “marketing authorization under exceptional
circumstances.” Such authorization is intended for products forff which the sponsor can demonstrate that it is
56
unable to provide comprehensive data on the efficff acy and safety under normal conditions of use, because the
indications for which the product in question is intended are encountered so rarely that the sponsor cannot
reasonably be expected to provide comprehensive evidence, or in the present state of scientific knowledge,
comprehensive information cannot be provided, or it would be contrary to generally accepted principles of
medical ethics to collect such information. Consequently, marketing authorization under exceptional
circumstances may be granted subject to certain specific obligations, which may include the following:
•
•
•
the sponsor must complete an identified program of studies within a time period specified by the
competent authority, the results of which form the basis of a reassessment of the benefit/risk profile;
the medicinal product in question may be supplied on medical prescription only and may in certain
cases be administered only under strict medical supervision, possibly in a hospital and in the case
of a radiopharmaceutical, by an authorized person; and
the package leaflet and any medical informat
to the fact that the particulars available concerning the medicinal product in question are as yet
inadequate in certain specified respects.
ion must draw the attention of the medical practitioner
ff
A marketing authorization under exceptional circumstances is subject to annual review to reassess the
risk-benefit balance in an annual reassessment procedure. Continuation of the authorization is linked to the
annual reassessment and a negative assessment could potentially result in the marketing authorization being
suspended or revoked. The renewal of a marketing authorization of a medicinal product under exceptional
circumstances, however, fol
lows the same rules as a “normal” marketing authorization. Thus, a marketing
authorization under exceptional circumstances is granted for an initial five years, afteff
will become valid indefinitely, unless the EMA decides that safety grounds merit one additional five-year
renewal.
r which the authorization
ff
The European Commission may also grant a so-called “conditional marketing authorization” prior to
obtaining the comprehensive clinical data required for an application for a full marketing authorization. Such
conditional marketing authorizations may be granted for product candidates (including medicines designated as
orphan medicinal products), if (i) the risk-benefit balance of the product candidate is positive, (ii) it is likely that
the sponsor will be in a position to provide the required comprehensive clinical trial data, (iii) the product fulfills
an unmet medical need and (iv) the benefit to public health of the immediate availability on the market of the
medicinal product concerned outweighs the risk inherent in the fact that additional data are still required. A
conditional marketing authorization may contain specific obligations to be fulfilled by the marketing authorization
holder, including obligations with respect to the completion of ongoing or new studies, and with respect to the
collection of pharmacovigilance data. Conditional marketing authorizations are valid for one year, and may be
renewed annually, if the risk-benefit balance remains positive, and after an assessment of the need for
additional or modified conditions and/or specific obligations. The timelines for the centralized procedure
described above also apply with respect to the review by the CHMP of applications for a conditional marketing
authorization.
The EU medicines rules expressly permit the EU Member States to adopt national legislation prohibiting
or restricting the sale, supply or use of any medicinal product containing, consisting of or derived from a specific
type of human or animal cell, such as embryonic stem cells. While the products we have in development do not
make use of embryonic stem cells, it is possible that the national laws in certain EU Member States may prohibit
or restrict us from commercializing our products, even if they have been granted an EU marketing authorization.
Unlike the centralized authorization procedure, the decentralized marketing authorization procedure
requires a separate application to, and leads to separate approval by, the competent authorities of each EU
Member State in which the product is to be marketed. This application is identical to the application that would
be submitted to the EMA for authorization through the centralized procedure. The reference EU Member State
prepares a draft assessment and drafts of the related materials within 120 days after receipt of a valid
application. The resulting assessment report is submitted to the concerned EU Member States who, within 90
days of receipt, must decide whether to approve the assessment report and related materials. If a concerned
EU Member State cannot approve the assessment report and related materials due to concerns relating to a
potential serious risk to public health, disputed elements may be referred
decision is binding on all EU Member States.
to the European Commission, whose
ff
57
The mutual recognition procedure similarly is based on the acceptance by the competent authorities of
the EU Member States of the marketing authorization of a medicinal product by the competent authorities of
other EU Member States. The holder of a national marketing authorization may submit an application to the
competent authority of an EU Member State requesting that this authority recognize the marketing authorization
delivered by the competent authority of another EU Member State.
ll
Regulatory
Data Protection in the EU
In the EU, innovative medicinal products approved on the basis of a complete independent data
ff orff
package qualify f
eight years of data exclusivity upon marketing authorization and an additional two years of
market exclusivity pursuant to Directive 2001/83/EC. Regulation (EC) No 726/2004 repeats this entitlement for
medicinal products authorized in accordance the centralized authorization procedure. Data exclusivity prevents
the innovator’s data to
ff
sponsors for authorization of generics of these innovative products from referencing
assess a generic (abridged) application forff
a period of eight years. During an additional two-year period of
market exclusivity, a generic marketing authorization application can be submitted and authorized, and the
innovator’s data may be referenced, but no generic medicinal product can be placed on the EU market until the
expiration of the market exclusivity. The overall ten-year period will be extended to a maximum of 11 years if,
during the first eight years of those ten years, the marketing authorization holder obtains an authorization for
one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are
held to bring a significant clinical benefit in comparison with existing therapies. Even if a compound is
considered to be a new chemical entity so that the innovator gains the prescribed period of data exclusivity,
another company nevertheless could also market another version of the product if such company obtained
marketing authorization based on an MAA with a complete independent data package of pharmaceutical tests,
preclinical tests and clinical trials.
Periorr ds of Authorization and Renewalsll
A marketing authorization has an initial validity forff
five years in principle. The marketing authorization
may be renewed after five years on the basis of a re-evaluation of the risk-benefit balance by the EMA or by the
competent authority of the EU Member State. To tTT his end, the marketing authorization holder must provide the
EMA or the competent authority with a consolidated version of the file in respect of quality, safety and efficacy,
including all variations introduced since the marketing authorization was granted, at least six months beforeff
marketing authorization ceases to be valid. The European Commission or the competent authorities of the EU
Member States may decide, on justified grounds relating to pharmacovigilance, to proceed with one further five-
year period of marketing authorization. Once subsequently definitively renewed, the marketing authorization
shall be valid for an unlimited period. Any authorization which is not followed by the actual placing of the
medicinal product on the EU market (in case of centralized procedure) or on the market of the authorizing EU
Member State within three years after authorization ceases to be valid (the so-called sunset clause).
the
ii
Pediatri
c ExclEE
usivity
If a sponsor obtains a marketing authorization in all EU Member States, or a marketing authorization
granted in the centralized procedure by the European Commission, and the study results forff
population are included in the product information, even when negative, the medicine is then eligible forff
additional six-month period of qualifying patent protection through extension of the term of the Supplementary
Protection Certificate, or SPC.
the pediatric
an
Orphan Drugrr
Designi
ation and Exclusivity
Regulation (EC) No. 141/2000, as implemented by Regulation (EC) No. 847/2000 provides that a drug
ff
ing not more than five in ten thousand persons in the EU when the application is made, or (2) a life-
can be designated as an orphan drug by the European Commission if its sponsor can establish: that the product
is intended for the diagnosis, prevention or treatment of (1) a life-threat
ening or chronically debilitating condition
affect
threatening, seriously debilitating or serious and chronic condition in the EU and that without incentives it is
unlikely that the marketing of the drug in the EU would generate sufficff
ient return to justify the necessary
investment. For either of these conditions, the spnsor must demonstrate that there exists no satisfactory
of diagnosis, prevention or treatment of the condition in question that has been authorized in the EU or, if such
method exists, the drug will be of significant benefit to those affect
ed by that condition.
method
ff
ff
f
58
Once authorized, orphan medicinal products are entitled to 10 years of market exclusivity in all EU
Member States and in addition a range of other benefits during the development and regulatory review process
including scientific assistance for study protocols, authorization through the centralized marketing authorization
procedure covering all member countries and a reduction or elimination of registration and marketing
authorization fees. However, marketing authorization may be granted to a similar medicinal product with the
same orphan indication during the 10-year period with the consent of the marketing authorization holder for the
original orphan medicinal product or if the manufacturer of the original orphan medicinal product is unable to
supply sufficient
same orphan indication if this product is saferff
orphan medicinal product. The period of market exclusivity may, in addition, be reduced to six years if it can be
demonstrated on the basis of available evidence that the original orphan medicinal product is sufficient
profitable not to justify maintenance of market exclusivity.
quantities. Marketing authorization may also be granted to a similar medicinal product with the
ive or otherwise clinically superior to the original
, more effect
ly
ff
ff
ff
Patent Term Extensions in the European Union and Other Jurisdic
ii
tions
The European Union also provides for patent term extension through Supplementary Protection
Certificates, or SPCs. The rules and requirements for obtaining a SPC are similar to those in the United States.
An SPC may extend the term of a patent for up to five years after its originally scheduled expiration date and
can provide up to a maximum of fifteen years of marketing exclusivity forff
a drug. These periods can be
extended for six additional months if pediatric exclusivity is obtained, which is described in detail below.
Although SPCs are available throughout the European Union, sponsors must apply on a country-by-country
basis. Similar patent term extension rights exist in certain other foreign jurisdictions outside the European
Union.
ll
Regulatory
ii
Requiremen
ts after a MarkMM etingtt
Authorization has been Obtained
In case an authorization for a medicinal product in the EU is obtained, the holder of the marketing
authorization is required to comply with a range of requirements applicable to the manufacturing, marketing,
promotion and sale of medicinal products. These include:
•
•
•
Compliance with the EU’s stringent pharmacovigilance or safety reporting rules must be ensured.
These rules can impose post-authorization studies and additional monitoring obligations.
The manufacturing of authorized medicinal products, for which a separate manufacturer
mandatory, must also be conducted in strict compliance with the applicable EU laws, regulations
and guidance, including Directive 2001/83/EC, Directive 2003/94/EC, Regulation (EC) No 726/2004
and the European Commission Guidelines for Good Manufacturing Practice. These requirements
include compliance with EU cGMP standards when manufacturing medicinal products and active
pharmaceutical ingredients, including the manufacture of active pharmaceutical ingredients outside
of the EU with the intention to import the active pharmaceutical ingredients into the EU.
’s license is
ff
The marketing and promotion of authorized drugs, including industry-sponsored continuing medical
education and advertising directed toward the prescribers of drugs and/or the general public, are
strictly regulated in the EU notably under Directive 2001/83EC, as amended, and are also subject
to EU Member State laws. Direct-to-consumer advertising of prescription medicines is prohibited
across the EU.
Brexit and the Regulatory
ll
Frameworkww
in the United Kingii dom
The United Kingdom’s withdrawal from the EU took place on January 31, 2020. The EU and the United
Kingdom reached an agreement on their new partnership in the Trade and Cooperation Agreement, or the
Agreement, which was applied provisionally beginning on January 1, 2021 and which entered into forff ce on May
1, 2021. The Agreement focuses primarily on free trade by ensuring no tariffsff or quotas on trade in goods,
, the EU and the United Kingdom will formff
including healthcare products such as medicinal products. Thereafter
two separate markets governed by two distinct regulatory and legal regimes. As such, the Agreement seeks to
minimize barriers to trade in goods while accepting that border checks will become inevitable as a consequence
that the United Kingdom is no longer part of the single market. As of January 1, 2021, the Medicines and
Healthcare products Regulatory Agency, or the MHRA, became responsible for supervising medicines and
medical devices in Great Britain, comprising England, Scotland and Wales under domestic law whereas
ff
59
Northern Ireland continues to be subject to EU rules under the Northern Ireland Protocol. The MHRA will rely on
the Human Medicines Regulations 2012 (SI 2012/1916) (as amended), or the HMR, as the basis for regulating
medicines. The HMR has incorporated into the domestic law the body of EU law instruments governing
medicinal products that pre-existed prior to the United Kingdom’s withdrawal from the EU.
ff
Furthermore, while the Data Protection Act of 2018 in the United Kingdom that “implements” and
complements the European Union’s General Data Protection Regulation, or GDPR, has achieved Royal Assent
ive in the United Kingdom, it is still unclear whether transfer of data from the
on May 23, 2018 and is now effect
European Economic Area, or EEA, to the United Kingdom will remain lawful under GDPR. The Trade and
Cooperation Agreement provides for a transitional period during which the United Kingdom will be treated like a
European Union member state in relation to processing and transfers of personal data forff
January 1, 2021. This may be extended by two further months. After
“third country” under the GDPR unless the European Commission adopts an adequacy decision in respect of
transfers of personal data to the United Kingdom. The United Kingdom has already determined that it considers
all of the EU 27 and EEA member states to be adequate forff
the purposes of data protection, ensuring that data
ff
flows from the United Kingdom to the EU/EEA remain unaffect
such period, the United Kingdom will be a
four months from
ed.
ff
General Data Protection Regulation
ll
ff
The collection, use, disclosure, transfer, or other processing of personal data regarding individuals in
ive on May 25, 2018. The
the EU, including personal health data, is subject to the GDPR which became effect
GDPR is wide-ranging in scope and imposes numerous requirements on companies that process personal data,
including requirements relating to processing health and other sensitive data, obtaining consent of the
individuals to whom the personal data relates, providing information to individuals regarding data processing
activities, implementing safeguards to protect the security and confidentiality of personal data, providing
notification of data breaches, and taking certain measures when engaging third-party processors. The GDPR
also imposes strict rules on the transfer of personal data to countries outside the EU, including the U.S., and
permits data protection authorities to impose large penalties for violations of the GDPR, including potential fines
of up to €20 million or 4% of annual global revenues, whichever is greater. The GDPR also confers a private
right of action on data subjects and consumer associations to lodge complaints with supervisory authorities,
seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR.
Compliance with the GDPR will be a rigorous and time-intensive process that may increase the cost of doing
business or require companies to change their business practices to ensure full compliance.
Prici
rr ngii
Decisioii
ns for Approved Produ
rr
cts
In the EU, pricing and reimbursement schemes vary widely from country to country. Some countries
human use. EU Member States may approve a specific price for a product or it may
provide that products may be marketed only after a reimbursement price has been agreed. Some countries may
require the completion of additional studies that compare the cost-effectiveness of a particular product
candidate to currently available therapies or so-called health technology assessments, in order to obtain
reimbursement or pricing approval. For example, EU Member States have the option to restrict the range of
products forff which their national health insurance systems provide reimbursement and to control the prices of
medicinal products forff
instead adopt a system of direct or indirect controls on the profitability of the company placing the product on
the market. Other EU Member States allow companies to fix their own prices for products, but monitor and
control prescription volumes and issue guidance to physicians to limit prescriptions. Recently, many countries in
the EU have increased the amount of discounts required on pharmaceuticals and these efforts
as countries attempt to manage health care expenditures, especially in light of the severe fiscal and debt crises
experienced by many countries in the EU. The downward pressure on health care costs in general, particularly
prescription products, has become intense. As a result, increasingly high barriers are being erected to the entry
of new products. Political, economic and regulatory developments may further complicate pricing negotiations,
and pricing negotiations may continue after reimbursement has been obtained. Reference
various EU Member States, and parallel trade, i.e., arbitrage between low-priced and high-priced EU Member
States, can further reduce prices. There can be no assurance that any country that has price controls or
reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing
arrangements for any products, if approved in those countries.
pricing used by
could continue
ff
ff
60
Employees and Human Capital
As of December 31, 2021, we had approximately 280 full-time employees. Of these full-time
g g
employees, approximatelyy 220 emp yloyees were
possessing advanced degrees, and approximatelye 60 were engaged in general and administrative activities.
None of our employees are represented by a labor union or covered by a collective bargaining agreement. We
consider our relationship with our employees to be good.
engaged in research and development activities, with 180
g
We recognize that attracting, motivating and retaining talented employees is vital to our success. We
value the health and wellness of our employees. It is our goal to deliver innovative programs that provide
choice, quality and value. We aim to create an equitable, inclusive and empowering environment in which our
employees can grow and advance their careers, with the overall goal of developing, expanding and retaining
our workforce
ability to attract, engage and retain a diverse group of employees. Our efforts
passionate workforce include providing competitive compensation and benefits packages.
to support our current pipeline and future business goals. Our success also depends on our
to recruit and retain a diverse and
ff
ff
Our human capital resources objectives include, as applicable, identifying, recruiting, retaining,
incentivizing and integrating our existing and additional employees. The principal purposes of our equity
incentive plans are to attract, retain and motivate selected employees, consultants and directors through the
granting of stock-based compensation awards. We offer
ff
resources to help employees manage their health, finances and life outside of work.
a comprehensive benefits program that provides
Available Information
Our website address is www.arvinas.com. Through our website, we make available free of charge our
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and
amendments to those reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Exchange Act of
1934, as amended, or the Exchange Act. We make these reports available through our website as soon as
reasonably practicable after we electronically file such reports with, or furnish such reports to, the Securities and
Exchange Commission, or the SEC. We also make available, free of charge on our website, the reports filed
with the SEC by our executive officers, directors and 10% stockholders pursuant to Section 16 under the
Exchange Act as soon as reasonably practicable after copies of those filings are provided to us by those
persons. In addition, we regularly use our website to post information regarding our business, product
development programs and governance, and we encourage investors to use our website, particularly the
informat
ion in the section entitled “Investors + Media,” as a source of informat
ion about us.
ff
ff
The information on our website is not incorporated by reference into this Annual Report on Form 10-K
and should not be considered to be a part of this Annual Report on Form 10-K. Our website address is included
in this Annual Report on Form 10-K as an inactive technical reference only.
The SEC also maintains a website containing reports, proxy materials and informat
ff
ion statements,
among other information, at http://www.sec.gov.
Item 1A. Risk Factors.
tt
Investing in oii
iestt
ur common stock involves a high degree of risk.
described below together with all of the other informat
nd the relat
and uncertaint
Form 10-K, including our consolidated financial
Annual Report on Form 10-K, bKK efore deciding to invest in our common stock. If any of the followin
actually occur, our busineii
event, tt hett
ii
.
price of our common stock could decline and you might lose all or part of your investment
You should carefullyff
iontt
in this Aii
t
contained
ed notes appearing elsewhere in t
ss, prospects,tt operatingtt
nnual Report on
ii histt
could sufferff materially. In such
consider the risksii
statet ments att
nd financial
conditiontt
results att
rr
trading
rr
g risks
rr
rr
tt
ff
ii
ii
Risks Related to Our Financial Position and Need For Additional Capital
We have incurredrr
signi
several years and may never achieve ovv
ificant losses since our incii
ii
r maintain
eption. We expect to incur losses over at least the nextee
profita
biliii ty.
rr
Our net losses totaled $$191.0 mill
ion $119.3 million and $70.3 million for the years ended
,
December 31, 2021, 2020, and 2019, respectively. As of December 31, 2021, we had an accumulated deficit of
61
.
ion To date, we have not generated any revenue from product sales and have financed our
$$682.9 mill
operations primarily through sales of our equity interests, proceeds from our collaborations, grant funding and
debt financing. We are still in the early stages of development of our product candidates, and we have not
completed development of any product candidates. We expect to continue to incur significant expenses and
increasing operating losses for at least the next several years. We anticipate that our expenses will increase
substantially if and as we:
•
•
•
•
•
•
•
•
•
•
continue a Phase 1/2 clinical trial of our product candidate bavdegalutamide (ARV-RR 110) and a
Phase 1b clinical trial of bavdeglutamide in combination with abiraterone for the treatment of men
with metastatic castration-resistant prostate cancer, or mCRPC, and initiate one or more additional
Phase 1b cohort expansions of bavdegalutamide in combination with standard of care agents, in
men with mCRPC;
continue a Phase 1/2 clinical trial of our product candidate ARV-471
ARV-RR 471 in combination with palbociclib, and initiate an additional Phase 1b cohort expansion in
combination with a standard of care agent, each in patients with locally advanced or metastatic ER
positive / HER2 negative breast cancer and initiate a window of opportunity study in early breast
cancer;
and a Phase 1b clinical trial of
VV
continue a Phase 1 clinical trial of our product candidate ARV-766
a planned Phase 2 cohort expansion trial in 2022;
VV
in men with mCRPC, and initiate
apply our PROTAC Discovery Engine to advance additional product candidates into preclinical and
clinical development;
expand the capabilities of our PROTACTT
Discovery Engine;
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 forff 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
a public company.
and support our operations as
ff
Our expenses could increase beyond our expectations if we are required by the U.S. Food and Drug
Administration, or FDA, the European Medicines Agency, or EMA, or other regulatory authorities to perform
trials in addition to those that we currently expect, or if there are any delays in establishing appropriate
manufacturing arrangements for or in completing our clinical trials or the development of any of our product
candidates.
Because of the numerous risks and uncertainties associated with pharmaceutical product development,
we are unable to accurately predict the timing or amount of increased expenses we will incur or when, if ever,
we will be able to achieve profitability. Even if we do achieve profitability, we may not be able to sustain or
increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress
the value of our company and could impair our ability to raise capital, expand our business, maintain our
research and development effort
ur product offeri
the value of our company could also cause our stockholders to lose all or part of their investment.
ngs or even continue our operations. A decline in
s, diversify off
ff
ff
We have nevervv generated revenue from produ
rr
ct sales and may never be profita
rr
ble.
We initiated clinical development of our first two product candidates in 2019 and initiated clinical
development of our third product candidate in 2021 and we expect that it will be many years, if ever, before we
have a product candidate ready for commercialization. We may never succeed in these activities and, even if
we do, may never generate revenues that are significant enough to achieve profitability. To become and remain
profitable, we must succeed in developing, obtaining marketing approval for and commercializing products that
generate significant revenue. This will require us to be successful in a range of challenging activities, including
62
completing preclinical testing and clinical trials of our product candidates, discovering additional product
candidates, establishing arrangements with third parties for the manufacture of clinical supplies of our product
candidates, obtaining marketing approval for our product candidates and manufacturing, marketing and selling
any products forff which we may obtain marketing approval.
If one or more of the product candidates that we develop is approved for commercial sale, we anticipate
incurring significant costs associated with commercializing any approved product candidate. Even if we are able
to generate revenues from the sale of any approved products, we may not become profitable and may need to
obtain additional funding to continue operations.
We willii need substantial addid tional fundindd g. If we are urr
requiredii
our researc
commercializa
to delay, limit,
ii
reduce or terminate
tion efforts.
rr
ii
ii
nable to raisrr
h or product development programs
e capitaltt when needed, we may be
or future
rr
We expect our expenses to increase substantially in connection with our ongoing activities, particularly
as we continue our ongoing and initiate our planned clinical trials of bavdegalutamide, ARV-RR 471 and ARV-RR 766,
advance our other oncology and neurodegenerative programs and continue research and development and
initiate additional clinical trials of and potentially seek marketing approval for our lead programs and our other
product candidates. In addition, if we obtain marketing approval for any of our product candidates, we expect to
incur significant commercialization expenses related to product manufactu
distribution. We have incurred, and expect to continue to incur, additional costs associated with operating as a
public company. 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 may be required
to delay, limit, reduce or terminate our research, product development programs or any future commercialization
effort
ff
market ourselves.
s or grant rights to develop and market product candidates that we would otherwise prefer to develop and
ring, marketing, sales and
ff
We had cash, cash equivalents, restricted cash and marketable securities of approximately $1.5 billion
as of December 31, 2021. We believe that our cash, cash equivalents, restricted cash and marketable securities
as of December 31, 2021 will enable us to fund our planned operating expenses and capital expenditure
requirements multiple additional years beyond 2024. We have based this estimate on assumptions that may
prove to be wrong, and we could use our capital resources sooner than we currently expect. Our future capital
requirements will depend on many factors, including:
•
•
•
•
•
•
•
•
•
the progress, costs and results of our ongoing clinical trials for bavdegalutamide, ARV-RR 471 and
ARV-RR 766 and any future clinical development of bavdegalutamide, ARV-RR 471 and ARV-RR 766;
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, Inc., or Pfizer; Genentech, Inc. and F. Hoffmff an
LaRoche Ltd., collectively referred to as Genentech; and Bayer AG, or 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;
ff
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
ff
our ability to establish additional collaboration arrangements with other biotechnology or
pharmaceutical companies on favorable terms, if at all, for the development or commercialization of
our product candidates.
63
Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-
consuming, expensive and uncertain process that takes years to complete, and we may never generate the
necessary data or results required to obtain marketing approval and achieve product sales. In addition, our
product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be
derived from sales of products that we do not expect to be commercially available forff many years, if at all.
Accordingly, we will need to obtain substantial additional funds to achieve our business objectives. Adequate
additional funds may not be available to us on acceptable terms, or at all. In addition, we may seek additional
capital due to favorable market conditions or strategic considerations, even if we believe we have sufficient
funds for our current or future operating plans.
ff
g additidd onal capital may cause diluii
tion to our stockholders, restri
rr
ct our operations or reqrr uireii us
Raisinii
to relinll quish righi
ts to our technologies or prodrr uct candidates.
Until such time, if ever, as we can generate substantial revenue from product sales, we expect to
rings, debt financings, collaborations, strategic
finance our cash needs through a combination of equity offeff
alliances and marketing, distribution or licensing arrangements. Although we may receive potential future
payments under our collaborations with Pfizer, Genentech and Bayer, we do not currently have any committed
external source of funds. 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
Debt financing and 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.
our stockholders’ rights as common stockholders.
ff
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.
Our limi
ll
business to date and to assess our futuff
ted operatinrr
g history may make it difficult forff
re viabiliii ty.
our stockholders to evaluate the success of our
We commenced operations in 2013, and our operations to date have been limited to organizing and
staffinff g 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. In 2019, we initiated our first Phase 1 clinical trial forff
bavdegalutamide, and later in 2019 and 2021, we initiated our Phase 1 clinical trial of our product candidates
ARV-RR 471 and ARV-RR 766, respectively. All of our other product candidates are still in preclinical development. We
have not yet demonstrated our ability to successfully complete any clinical trials, obtain marketing approvals,
manufacture a commercial scale product, or arrange for a third party to do so on our behalf, or conduct sales,
marketing and distribution activities necessary for successful product commercialization. Consequently, any
predictions stockholders make about our future success or viability may not be as accurate as they could be if
we had a longer operating history.
a product candidate,
In addition, as a young business, we may encounter unforeff
seen expenses, difficulties, complications,
delays and other known and unknown factors. We will need to transition at some point from a company with a
research and development focus to a company capable of supporting commercial activities. We may not be
successful in such a transition.
We expect our financial condition and operating results to continue to fluctuate significantly from quarter
to quarter and year to year due to a variety of factors, many of which are beyond our control. Accordingly,
stockholders should not rely upon the results of any quarterly or annual periods as indications of future
operating performance.
ff
64
tt
The ongoing COVID-1VV
tt
t o init
9 pandemdd
, disdd rupt regulatll ory activities or have other adverse
current or future preclinical studies or clinical trialsrr
this pandemic may continue
effecff
tt
ddition,
effects ott
, whicww h could result in adverserr
economies worldwide
tt
vv
to adversely
s and operations.
n our busines
ts on our business and operations
ic has and may continue
e and complete
our ability t
ff
to affect
impact
. In aII
iat
rr
tt
ii
ii
The ongoing COVID-19 pandemic has caused many governments to implement measures to slow the
spread of the outbreak through quarantines, travel restrictions, heightened border scrutiny, and other measures.
The outbreak and government measures taken in response have also had a significant impact, both direct and
indirect, on businesses and commerce, as worker shortages have occurred; supply chains have been disrupted;
facilities and production have been suspended; and demand for certain goods and services, such as medical
services and supplies, has spiked, while demand for other goods and services, such as travel, has fallen.
The
future progression of the outbreak and its effect
s on our business and operations are uncertain.
ff
f
We and our contract manufacturing organizations, or CMOs, and contract research organizations, or
t our ability to initiate and complete preclinical studies or clinical trials
CROs, may face disruptions that may affecff
including disruptions at our facilities or disruptions in procuring items that are essential for our research and
development activities, including, for example, raw materials used in the manufacturing of our product
candidates, laboratory supplies for our preclinical studies and clinical trials, or animals that are used for
preclinical testing, in each case, for which there may be shortages because of ongoing efforts
to address the
outbreak. For example, our New Haven-based laboratories were closed for part of March through May 2020
which limited the biology work we could conduct for our early-stage research programs and increased our
reliance on CROs. We and our CROs and CMOs may face disruptions related to our ongoing clinical trials or
future clinical trials arising from delays in investigational new drug, or IND,-enabling studies, manufacturing
disruptions, and the ability to obtain necessary institutional review board or other necessary site approvals, as
For example, in the first quarter
well as other delays at clinical trial sites, including delays related to site staffing.
of 2020, production of certain building blocks for the drug substance used in the manufacture of ARV-RR 471 were
delayed at one of our China-based manufacturers. The response to the COVID-19 pandemic may redirect
resources with respect to regulatory and intellectual property matters in a way that would adversely impact our
ability to progress regulatory approvals and protect our intellectual property. In addition, we may face
impediments to regulatory meetings and approvals due to measures intended to limit in-person interactions.
ff
ff
ff
The pandemic has already caused significant disruptions in the financial markets, and may continue to
cause such disruptions, which could impact our ability to raise additional funds through public offerings
also impact the volatility of our stock price and trading in our stock. Moreover, it is possible the pandemic will
significantly impact economies worldwide, which could result in adverse effect
s on our business and operations.
We cannot be certain what the overall impact of the COVID-19 pandemic will be on our business and it has the
potential to adversely affect
our business, financial condition, results of operations and prospects.
and may
ff
ff
ff
Changes in tax laws oww r in t
financial conditidd on.
ii hett
ir implementation or interpretation may adversely al
ffect our business and
ff
Changes in tax law may adversely affect
our business or financial condition. The Tax Cuts and Jobs Act
of 2017, commonly referred to as the TCJA, as amended by the Coronavirus Aid, Relief, and Economic Security
Act, or CARES Act, significantly revises the U.S. Internal Revenue Code of 1986, as amended, or the Code.
The TCJA contains, among other things, significant changes to corporate taxation, including a reduction of the
corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, the limitation of the tax deduction for net
interest expense to 30% of adjusted earnings (except for certain small businesses), the limitation of the
deduction for net operating losses to 80% of current-year taxable income and elimination of net operating loss
carrybacks, in each case, for losses arising in taxable years beginning after December 31, 2017 (though any
such net operating losses may be carried forward indefinitely and such net operating losses arising in taxable
years beginning before January 1, 2021 are generally eligible to be carried back up to five years), the imposition
of a one-time taxation of offshore
elimination of U.S. tax on foreign earnings (subject to certain important exceptions), the allowance of immediate
deductions for certain new investments instead of deductions for depreciation expense over time, and the
modification or repeal of many business deductions and credits.
earnings at reduced rates regardless of whether they are repatriated, the
ff
In addition to the CARES Act, as part of Congress’s response to the COVID-19 pandemic, economic
relief legislation has been enacted in 2020 and 2021 containing tax provisions. Regulatory guidance under the
65
TCJA and such additional legislation is and continues to be forthcoming, and such guidance could ultimately
increase or lessen the impact of these laws on our business and financial condition. Also, as a result of the
changes in the U.S. presidential administration and control of the U.S. Senate in 2021, additional tax legislation
may be enacted; any such additional legislation could have an impact on our company. In addition, it is
uncertain if and to what extent various states will conformff
to the TCJA and additional tax legislation.
t not be able to utiliii zeii
We mighi
research and development taxtt
a significant portion of our net operatingii
credit
carryforwards.
rr
loss carryforwards add
nd
As of December 31, 2021, we had federal net operating loss carryforwards of $$373.6 million, state and
local net operat ging loss carryforwards
credit carryforwards
operating loss and tax credit carryforwards
ff
ff
carryforwards fof $$346.9 million and federal and state research and development tax
fof $$15.2 million and $$3.4 million, respectively
ively. To tTT he extent they expire unused, these net
will not be available to offset
ff
our future income tax liabilities.
In addition, under Section 382 of the Code, and corresponding provisions of state law, if a corporation
undergoes an “ownership change,” which is generally defined as a greater than 50% change, by value, in its
equity ownership by certain stockholders over a three-year period, the corporation’s ability to use its pre-change
net operating loss carryforwards and other pre-change tax attributes to offset
limited. We believe our federal net operating losses are subject to an annual limitation as a result of changes in
the Company’s ownership, as defined by Code Section 382, in July 2018 and December 2020. Notwithstanding
the limitations, we expect the federal net operating losses to be fully available under Section 382 within the next
two years, subject
in the future as a result of subsequent changes in our stock ownership, some of which may be outside of our
control. If we determine that an ownership change has occurred and our ability to use our historical net
operating loss and tax credit carryforwards is materially limited, it would harm our future operating results by
effect
to any other limitations under the Code. In addition, we may experience ownership changes
ively increasing our future tax obligations.
its post-change income may be
b
ff
ff
There is also a risk that due to regulatory changes, such as suspensions on the use of net operating
ff
reasons, our existing net operating losses could expire or otherwise become
future income tax liabilities. As described above in “Changes in tax laws or in their
ff
losses, or other unforeseen
unavailable to offset
implementation or interpretation may adversely affect
amended by the CARES Act, includes changes to U.S. federal tax rates and the rules governing net operating
loss carryforwards that may significantly impact our ability to utilize our net operating losses to offsff et taxable
income in the future. In addition, state net operating losses generated in one state cannot be used to offsff et
income generated in another state. For these reasons, even if we attain profitability, we may be unable to use a
material portion of our net operating losses and other tax attributes.
our business and financial condition,” the TCJA, as
ff
Risks Related to the Discovery and Development of Our Product Candidates
Our approach to thett
technology platform
ii
likel
ll
dd
ihll ood of successfully dl
evel
oping any prodrr ucts.
discoii
very and development of product candiddd ates
is unproven, whiww ch makes it difficult to predict the time,
based on our PROTAC
cost of devel
ii
dd
dd
opment and
Our PROTACTT
technology platformff
is a relatively new technology. Our future success depends on the
targeted protein degraders, had been tested in humans. No product candidates of this
successful development of this novel therapeutic approach. Prior to the initiation of our Phase 1 clinical trial for
bavdegalutamide, no product candidates that use a chimeric small molecule approach to protein degradation,
such as our PROTACTT
type have been approved in the United States or Europe, and the data underlying the feasibility of developing
chimeric small molecule-based therapeutic products is both preliminary and limited. We have not yet succeeded
and may not succeed in demonstrating the efficacy
or in obtaining marketing approval thereafter
and we have not yet completed assessment of the safety of any product candidate in humans. As such, there
may be adverse effect
ff
predict at this time.
ff
. We have not yet completed a clinical trial of any product candidate
s from treatment with any of our current or future product candidates that we cannot
and safety of any of our product candidates in clinical trials
ff
As a result of these factors, it is more diffiff cult for us to predict the time and cost of product candidate
development, and we cannot predict whether the application of our PROTAC Discovery Engine, or any similar
or competitive protein degradation platforff ms, will result in the development, and marketing approval of any
products. Any development problems we experience in the future related to our PROTACTT
Discovery Engine or
66
any of our research programs may cause significant delays or unanticipated costs or may prevent the
development of a commercially viable product. Any of these factors may prevent us from completing our
preclinical studies or any clinical trials that we may initiate or commercializing any product candidates we may
develop on a timely or profitable basis, if at all.
We are err
experience significant delaysll
in our devel
arlyrr
dd
opment efforts.
rr
in doing so, our busines
ii
If we are unable to commerciali
e materiall
ii
zeii
ii y hl
s wilww l bll
our product candidates or
armed.dd
We are early in our development effort
ff
s. In 2019, we initiated our first Phase 1 clinical trial forff
a product
candidate, bavdegalutamide, and later in 2019 and 2021, we initiated our Phase 1 clinical trials of our product
candidates ARV-RR 471 and ARV-RR 766, respectively. All of our other product candidates are still in preclinical
development. Our ability to generate revenue from product sales, which we do not expect will occur for many
years, if ever, will depend heavily on the successful development and eventual commercialization of one or
more of our product candidates. The success of our product candidates will depend on several factors, including
the following:
•
•
•
•
•
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 forff
product candidates;
our
• 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
ff
approval; and
•
effectively competing with other therapies.
If we do not achieve one or more of these factors in a timely manner or at all, we could experience
significant delays or an inability to successfully commercialize our product candidates, which would materially
harm our business.
pment involves a lengthy and expenxx
Drug develovv
unexpected costs or experience delays
develovv
dd
ii
pment and commerciali
zatio
ii
n of our prodrr uct candidates.
in completing, or ultimatel
ii
e unable to complete, the
rocess, with an uncertain oii
y bl
sive pvv
utcome. We may incur
We initiated Phase 1 clinical development of our product candidates bavdegalutamide and ARV-RR 471 in
ff
VV
in 2021. All of our other product candidates are in preclinical
ive or safe in humans or will receive marketing approval. Before
2019 and a Phase 1 clinical trial for ARV-766
development. The risk of failure for our product candidates is high. We are unable to predict when or if any of
our product candidates will prove effect
obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must conduct
extensive clinical trials to demonstrate the safety and efficaff
can commence clinical trials for a product candidate, we must complete extensive preclinical testing and studies
that support our planned INDs in the United States or similar applications in other jurisdictions. We cannot be
certain of the timely completion or outcome of our preclinical testing and studies and cannot predict if the FDA
or similar regulatory authorities outside the United States will accept our proposed clinical programs or if the
outcome of our preclinical testing and studies will ultimately support the further development of our programs.
cy of our product candidates in humans. Before we
Clinical testing is expensive, difficult to design and implement, can take many years to complete and is
uncertain as to the outcome. A failure of one or more clinical trials can occur at any stage of testing. We may
67
experience numerous unforeseen
ability to receive marketing approval or commercialize our product candidates, including:
events during, or as a result of, clinical trials that could delay or prevent our
ff
•
•
•
•
•
•
•
•
•
•
•
regulators or institutional review boards may not authorize us or our investigators to commence a
clinical trial or conduct a clinical trial at a prospective trial site;
we may experience delays in reaching, or fail to reach, agreement on acceptable clinical trial
contracts or clinical trial protocols with prospective trial sites;
clinical trials of our product candidates may produce negative or inconclusive results, and we may
decide, or regulators may require us, to conduct additional clinical trials or abandon product
development programs;
the number of patients required for clinical trials of our product candidates may be larger than we
anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may
drop out of these clinical trials at a higher rate than we anticipate;
our third-party contractors may fail to comply with regulatory requirements or meet their contractual
obligations to us in a timely manner, or at all;
we may have to suspend or terminate clinical trials of our product candidates for various reasons,
including a finding that the participants are being exposed to unacceptable health risks;
regulators or institutional review boards may require that we or our investigators suspend or
terminate clinical trials for various reasons, including noncompliance with regulatory requirements;
our product candidates may have undesirable side effeff cts or other unexpected characteristics,
causing us or our investigators, regulators or institutional review boards to suspend or terminate the
trials;
unforeseen global instability, including political instability or instability from an outbreak of pandemic
or contagious disease, such as the COVID-19 pandemic, in or around the countries in which we
conduct our clinical trials, could delay the commencement or timing of completion of our clinical
trials;
the cost of clinical trials of our product candidates may be greater than we anticipate; and
the supply or quality of our product candidates or other materials necessary to conduct clinical trials
of our product candidates may be insuffiff cient or inadequate.
If we are required to conduct additional clinical trials or other testing of our product candidates beyond
those that we currently contemplate, if we are unable to successfully complete clinical trials of our product
candidates or other testing, if the results of these trials or tests are not positive or are only modestly positive or if
there are safety concerns, we may:
•
•
•
•
•
•
be delayed in obtaining marketing approval for our product candidates;
not obtain marketing approval at all;
obtain approval for indications or patient populations that are not as broad as intended or desired;
obtain approval with labeling that includes significant use or distribution restrictions or safety
warnings;
be subject to additional post-marketing testing requirements; or
have the product removed from the market after
ff
obtaining marketing approval.
Our product development costs will also increase if we experience delays in preclinical studies or
clinical trials or in obtaining marketing approvals. We do not know whether any of our preclinical studies or
clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all.
Significant preclinical study or clinical trial delays also could shorten any periods during which we may have the
exclusive right to commercialize our product candidates or allow our competitors to bring products to market
beforeff
we do and impair our ability to successfully commercialize our product candidates and may harm our
business and results of operations.
68
Further, cancer therapies are sometimes characterized as first-line, second-line, or third-line, and the
FDA often approves new therapies initially only for third-line use. When cancer is detected early enough, first-
line therapy, usually hormone therapy, surgery, radiation therapy or a combination of these, is sometimes
adequate to cure the cancer or prolong life without a cure. Second- and third-line therapies are administered to
patients when prior therapy is not effect
ARV-RR 766 are in patients who have received prior treatments. Subsequently, forff
sufficient
candidates we develop, even if approved, may not be approved for first-line therapy, and, prior to any such
approvals, we may have to conduct additional clinical trials.
ly beneficial, if any, we would expect to seek approval potentially as a first-line therapy, but any product
ive. Our current clinical trials for bavdegalutamide, ARV-RR 471 and
those products that prove to be
ff
ff
e events,tt undesirable side effecff
If serious adversvv
the development of any prodrr uct candidates we mww
further clinll
ical development of thott
rr
se produ
ct candidates.
ts, or unexpected
ay develop, we may need to abandon or limit
characteristics
dd
are identifi
ed during
our
xx
ii
ii
Other than our ongoing early clinical trials of bavdegalutamide, ARV-RR 471 and ARV-RR 766, we have not
evaluated any product candidates in human clinical trials. It is impossible to predict when or if any product
candidates we may develop will prove safe in humans. There can be no assurance that our PROTAC
technology will not cause undesirable side effeff cts.
A potential risk in any protein degradation product is that healthy proteins or proteins not targeted for
degradation will be degraded or that the degradation of the targeted protein in itself could cause adverse
events, undesirable side effects,
not targeted for degradation could be degraded using our PROTAC technology in any of our ongoing, planned
or future clinical studies. There is also the potential risk of delayed adverse events followin
PROTACTT
or unexpected characteristics. It is possible that healthy proteins or proteins
technology.
g treatment using our
ff
ff
If any product candidates we develop are associated with serious adverse events, or undesirable side
ff
s, or have characteristics that are unexpected, we may need to abandon their development or limit
effect
development to certain uses or subpopulations in which the adverse events, undesirable side effects
characteristics are less prevalent, less severe, or more acceptable from a risk-benefit perspective, any of which
would have a material adverse effect
on our business, financial condition, results of operations, and prospects.
Many product candidates that initially showed promise in early-stage testing for treating cancer or other
diseases have later been fouff nd to cause side effect
candidates or limited their competitiveness in the market.
s that prevented further clinical development of the product
or other
ff
ff
ff
The resrr ults of early-stag
Initialii success in clinll
rr s.ll
or in later stage trial
l
e clinical trials all
tt
ical trials
nd preclinicii
al studies may not be predictive of future results.
may not be indicative of results obtained when these trials are completed
The results of preclinical studies may not be predictive of the results of clinical trials, and the results of
early-stage clinical trials may not be predictive of the results of the later-stage clinical trials. In addition, initial
success in clinical trials may not be indicative of results obtained when such trials are completed. In particular,
the small number of patients in our ongoing early clinical trials may make the results of these trials less
predictive of the outcome of later clinical trials. For example, even if successful, the results of the dose-
escalation or expansion portions of our Phase 1/2 clinical trials of bavdegalutamide and ARV-RR 471 and our
Phase 1 clinical trial of ARV-RR 766 may not be predictive of the results of further clinical trials of these product
candidates or any of our other product candidates. Moreover, preclinical and clinical data are often susceptible
to varying interpretations and analyses, and many companies that have believed their product candidates
satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing
performed
approval of their products. Our current or future clinical trials may not ultimately be successful or support further
clinical development of any of our product candidates. There is a high failure rate for product candidates
proceeding through clinical trials. A number of companies in the pharmaceutical and biotechnology industries
have suffere
d significant setbacks in clinical development even after achieving encouraging results in earlier
studies. Any such setbacks in our clinical development could materially harm our business and results of
operations.
ff
ff
69
top-lineii
Interimrr
and prelrr
time may change as more patient datdd a btt
procedu
inary data fromrr
imll
rr
res that could result in materialii changes in the final data.tt
our clinical trialsrr
that weww announce or publish fromff
time to
ecome availab
vv
le and are subject to auditdd and verivv
fication
From time to time, we may publish interim top-line or preliminary data from our clinical trials. Interim
data from clinical trials are subject to the risk that one or more of the clinical outcomes may materially change
as patient enrollment continues and more patient data become available. For example, the initial safety,
tolerability, pharmacokinetic and effiff cacy data that we have disclosed in connection with our ongoing Phase 1/2
clinical trials of bavdegalutamide and ARV-RR 471 may not be indicative of the full results of those trials obtained
upon completion. Preliminary or top-line data also remain subject to audit and verification procedures that may
result in the final data being materially different
from the preliminary data we previously published. As a result,
ff
interim and preliminary data should be viewed with caution until the final data are available. Adverse differences
between preliminary or interim data and final data could significantly harm our reputation and business
prospects.
ff
If we experience delays
pp
necessary marketingii
dd
or difficulties in the enrollme
ll
approva
ls could be delayed or preven
nt of patients in clinical trialsrr
rr
ted.
, our receiptii of
We may not be able to initiate or continue clinical trials forff
our product candidates if we are unable to
locate and enroll a sufficff
ient number of eligible patients to participate in these trials as required by the FDA or
similar regulatory authorities outside of the United States. In particular, we are conducting a Phase 1/2 clinical
trial of bavdegalutamide for men with mCRPC, a Phase 1/2 clinical trial of ARV-RR 471 for patients with locally
advanced or metastatic ER positive / HER2 negative breast cancer, and a Phase 1 clinical trial of ARV-RR 766 for
men with mCRPC. We cannot predict how difficult
Therefore, our ability to identify and enroll eligible patients for bavdegalutamide, ARV-RR 471 and ARV-RR 766 clinical
trials may be limited or may result in slower enrollment than we anticipate. In addition, some of our competitors
have ongoing clinical trials for product candidates that treat the same indications as our product candidates, and
patients who would otherwise be eligible forff
competitors’ product candidates. Patient enrollment is affect
our clinical trials may instead enroll in clinical trials of our
ed by other factors including:
it will be to enroll patients forff
trials in these indications.
ff
ff
•
•
•
•
•
•
•
•
•
the severity of the disease under investigation;
the eligibility criteria forff
the trial in question;
the perceived risks and benefits of the product candidates under study;
ff
the effort
ff
s to facilit
ate timely enrollment in clinical trials;
the availability of competing therapies;
the patient referral
ff
practices of physicians;
the burden on patients due to inconvenient procedures;
the ability to monitor patients adequately during and after treatment; and
the proximity and availability of clinical trial sites for prospective patients.
In April 2020, we announced that, as a result of the COVID-19 pandemic, two trial sites for our ongoing
Phase 1/2 clinical trial of bavdegalutamide had publicly announced pauses in patient enrollment for clinical
trials, including our trials. In addition, one trial site for our ongoing Phase 1/2 clinical trial of ARV-RR 471 had a
pause in patient enrollment for clinical trials, including our trial. While the pauses at each of the trial sites have
been liftedff
clinical trials if patients are affect
clinical trial sites because of the outbreak. For example, we experienced a short delay in the enrollment forff
cohort of our ARV-471
, we may nonetheless face difficulties recruiting or retaining patients in our ongoing and planned
l of traveling to, or are unable to travel to, our
trial as a result of screening slowdowns attributable to COVID-19.
ed by the virus or are fearfurr
VV
ff
one
Our inability to enroll a sufficff
ient number of patients forff
our clinical trials would result in significant
delays and could require us to abandon one or more clinical trials altogether. Enrollment delays in our clinical
trials may result in increased development costs for our product candidates, which would cause the value of our
company to decline and limit our ability to obtain additional financing.
70
We may expend our limll
capitaltt
greater likll elihood
izll e on product candidates or indic
of success.
ll
ii
ited resources to pursue a particul
rr
ations
tt
that may be more prr
arll prodrr uct candidate or indicationtt
rofitable or for which ther
and fail
ff
rr s aii
e i
tt
to
Because we have limited financial and managerial resources, we focuff
s on research programs and
product candidates that we identify for specific indications. As a result, we may forego or delay pursuit of
opportunities with other product candidates or for other indications that later prove to have greater commercial
potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or
profitable market opportunities. Our spending on current and future research and development programs and
product candidates for specific indications may not yield any commercially viable products. If we do not
accurately evaluate the commercial potential or target market for a particular product candidate, we may
relinquish valuable rights to that product candidate through collaboration, licensing or other royalty
arrangements in cases in which it would have been more advantageous for us to retain sole development and
commercialization rights to such product candidate.
evel
oping and may continuii
dd
We are drr
drugs. If the FDA oDD
other drugs, or revoke their approv
issues ariserr
with the drugs
be unable to obtain approv
r similar regulatory
pp
rr
ll
dd
e to devel
op our product candidates in combinatio
n witww h ott
rr
f thett United States do not approve
rr
or if safety, efficacy, manufacturing or suppu ly
ate in combination with our product candidates, we may
we choose to evaluvv
authorities outside odd
alvv of such drugs,
ther
these
pp
ii
alvv of or market our products.
We are currently conducting clinical trials of bavdegalutamide and ARV-RR 471, and intend to conduct
VV
rth quarter of 2020, we initiated a Phase 1b cohort
for the treatment of patients with locally advanced or metastatic ER positive / HER2
other clinical trials for each of bavdegalutamide and ARV-RR 471 and potentially other product candidates, in
combination with other therapies. For example, in the fouff
expansion with ARV-471
negative breast cancer for use in combination with palbociclib, a CDK4/6 inhibitor that is currently approved for
the treatment of patients with breast cancer, and in the fourth quarter of 2021, we initiated a Phase 1b clinical
trial of bavdegalutamide for the treatment of men with mCRPC in combination with abiraterone, a hormone
therapy drug that is currently approved for the treatment of patients with prostate cancer. We did not develop or
obtain marketing approval for, nor do we manufacture or sell, any of the currently approved drugs that we are or
may study in combination with bavdegalutamide or ARV-RR 471. If the FDA or similar regulatory authorities outside
of the United States revoke their approval of the drug or drugs in combination with which we determine to
develop ARV-RR 471, we will not be able to market bavdegalutamide or ARV-RR 471 in combination with such revoked
drugs.
If safety or efficff acy issues arise with any of these drugs, we could experience significant regulatory
delays, and the FDA or similar regulatory authorities outside of the United States may require us to redesign or
terminate the applicable clinical trials. If the drugs we use are replaced as the standard of care for the
indications we choose for bavdegalutamide or ARV-RR 471, the FDA or similar regulatory authorities outside of the
United States may require us to conduct additional clinical trials. In addition, if manufacturing or other issues
result in a shortage of supply of the drugs with which we determine to combine with bavdegalutamide or
ARV-RR 471, we may not be able to complete clinical development of bavdegalutamide or ARV-RR 471 on our current
timeline or at all.
Even if bavdegalutamide or ARV-RR 471 were to receive marketing approval or be commercialized for use
in combination with other existing drugs, we would continue to be subject to the risks that the FDA or similar
regulatory authorities outside of the United States could revoke approval of the drug used in combination with
bavdegalutamide or ARV-RR 471 or that safety, efficacy, manufacturing or supply issues could arise with these
existing drugs. Combination therapies are commonly used for the treatment of cancer, and we would be subject
to similar risks if we develop any of our other product candidates for use in combination with other drugs or for
indications other than cancer. This could result in our own products being removed from the market or being
less successful commercially.
We may not be successful in oii
ur efforts to identi
dd
fy or discii over additional potentialii prodrr uct candidates.
A key element of our strategy is to apply our PROTACTT
Discovery Engine to address a broad array of
targets and new therapeutic areas. The therapeutic discovery activities that we are conducting may not be
successful in identifying product candidates that are useful in treating cancer or other diseases. Our research
71
programs may initially show promise in identifying
candidates for clinical development for a number of reasons, including:
ff
potential product candidates, yet fail to yield product
•
•
potential product candidates may, on further study, be shown to have harmful side effect
characteristics that indicate that they are unlikely to be drugs that will receive marketing approval or
achieve market acceptance; or
s or other
ff
potential product candidates may not be effeff ctive in treating their targeted diseases.
Research programs to identify new product candidates require substantial technical, financial and
and resources on a potential product candidate that
human resources. We may choose to focus our efforts
ultimately proves to be unsuccessful. If we are unable to identify suitable product candidates for preclinical and
clinical development, we will not be able to obtain revenues from sale of products in future periods, which likely
would result in significant harm to our financial position and adversely impact our stock price.
ff
We face substantial competitiott n, which may result in others
commerciali
tt
g products before or more successfully t
discoii
l hatt n we dww o.
zinii
ii
veringii
, dgg eveloping or
The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies,
intense competition and a strong emphasis on proprietary products. We face and will continue to face
competition from third parties that use protein degradation, antibody therapy, inhibitory nucleic acid, gene
editing or gene therapy development platforms and from companies focused on more traditional therapeutic
modalities, such as small molecule inhibitors. The competition is likely to come from multiple sources, including
major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions,
government agencies and public and private research institutions.
We are aware of several biotechnology companies focused on developing chimeric small molecules for
protein degradation including Accutar Biotechnology, Inc., C4 Therapeutics, Inc., Cullgen Inc., Foghorn
Therapeutics, Inc., Kymera Therapeutics, Inc., Nurix Therapeutics, Inc. and Proteovant Therapeutics, Inc.
Further, several large pharmaceutical companies have disclosed preclinical investments in this field, including
AbbVie, Amgen Inc., AstraZeneca plc, Boehringer Ingelheim, Bristol Myers Squibb Company, GlaxoSmithKline
plc, Genentech, Novartis International AG and Sanofi SA. Since 2020, some of these biotechnology and
pharmaceutical companies have announced the initation of clinical trials for targeted protein degraders.
Many of our current or potential competitors, either alone or with their collaboration partners, have
significantly greater financial resources and expertise in research and development, manufacturing, preclinical
testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do.
These competitors also compete with us in recruiting and retaining qualified scientific and management
personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring
technologies complementary to, or necessary for, our programs. Mergers and acquisitions in the pharmaceutical
and biotechnology industries may result in even more resources being concentrated among a smaller number
of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly
through collaborative arrangements with large and established companies. These competitors also compete
with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial
sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or
necessary for, our programs. Our commercial opportunity could be reduced or eliminated if our competitors
develop and commercialize products that are saferff
more convenient or are less expensive than any products that we may develop. Our competitors also may
obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours,
which could result in our competitors establishing a strong market position beforeff
market. In addition, our ability to compete may be affected in many cases by insurers or other third-party payors
seeking to encourage the use of generic products. There are generic products currently on the market for
certain of the indications that we are pursuing, and additional products are expected to become available on a
generic basis over the coming years. If our product candidates are approved, we expect that they will be priced
at a significant premium over competitive generic products.
ive, have fewer or less severe side effect
we are able to enter the
, more effect
s, are
ff
ff
72
If our collaboll
potential of ARV-471.
ration witww h Ptt
VV
Risks Related to Dependence on Third Parties
fizer is not successful, we may not be able to capitalizeii
on the market
In July 2021, we entered into a collaboration agreement with Pfizer, or the ARV-RR 471 Collaboration
Agreement, pursuant to which we granted Pfizer worldwide coexclusive rights to develop and commercialize
products containing our proprietary compound ARV-RR 471, or the Licensed Products. Although pursuant to the
terms of the ARV-RR 471 Collaboration Agreement, we and Pfizer will share equally (50/50) all development costs,
including costs forff
conducting clinical trials, for the Licensed Products, subject to certain exceptions, our control
over the amount and timing of resources that Pfizer dedicates to the development or commercialization of the
Collaboration Agreement will
Licensed Products is limited. Our ability to generate revenues from the ARV-471
depend, in part, on Pfizer’s ability to successfully performff
the functions assigned to it in such agreement. We
cannot predict the success of this collaboration with Pfizer, and we cannot guarantee that this collaboration will
lead to development or commercialization of the Licensed Products in the most effiff cient manner or at all.
VV
If this collaboration with Pfizer does not result in the successful development and commercialization of
Licensed Products, or if Pfizer terminates the ARV-471
convenience subject to certain notice periods, we may not receive any of the $1.4 billion in contingent payments
based on specified regulatory and sales-based milestones for the Licensed Products under the ARV-RR 471
Collaboration Agreement.
Collaboration Agreement, which it may do forff
VV
We currently depend, add nd expect to continuii
research, development, and commercializat
any such collabo
ll
those product candidates.
ii
rations are not successful, we may not be able to capitalizeii
e to depedd
iott n of certain oii
nd, odd n collabo
ll
f thett
rr
produ
rations witww h t
tt hitt
rdii
parties for the
ct candidates we may develop. If
on the market potential of
We currently have, and anticipate in the future seeking additional, third-party collaborators for the
research, development, and commercialization of some of our PROTAC programs. For example, in September
2015 we entered into a research collaboration with Genentech, which we amended and restated in November
2017; in December 2017 we entered into a research collaboration with Pfizer; in July 2019 we entered into a
research collaboration with Bayer; and in July 2021 we entered into a development and commercialization
collaboration with Pfizer. Our likely collaborators for any other collaboration arrangements include large and
mid-size pharmaceutical companies and biotechnology companies. Any such arrangements with third parties
will likely limit our control over the amount and timing of resources that our collaborators dedicate to the
development or commercialization of any product candidates we may seek to develop with them. Our ability to
generate revenues from these arrangements will depend on our collaborators’ abilities to successfully performff
the functions assigned to them in these arrangements. We cannot predict the success of any collaboration that
we enter into.
Collaborations involving our research programs or any product candidates we may develop, including
our collaborations with Pfizer, Genentech and Bayer, pose the following risks to us:
•
•
Collaborators have significant discretion in determining the efforts
to these collaborations. For example, our collaboration with Genentech is managed by a joint
research committee and joint project team, which is composed of representatives from us and
Genentech, with Genentech having final decision-making authority. Similarly, our research
collaborations with Pfizer and Bayer are managed by joint research committees composed of an
equal number of representatives from us and our collaborative partner, with our collaborative
partner having final decision-making authority.
and resources that they will apply
ff
Collaborators may not pursue development and commercialization of any product candidates we
may develop or may elect not to continue or renew development or commercialization programs
based on clinical trial results, changes in the collaborator’s strategic focus or available funding or
external factors such as an acquisition or business combination that diverts resources or creates
competing priorities.
• Genentech, Pfizer and Bayer have broad rights to select any target for protein degradation
development on an exclusive basis, even as to us, so long as not excluded by us under the terms
73
•
•
•
•
•
of each collaboration and may select targets we are considering but have not taken sufficient action
to exclude under the collaboration.
ent funding for a clinical trial program, stop a
Collaborators may delay clinical trials, provide insuffici
clinical trial or abandon a product candidate, repeat or conduct new clinical trials, or require a new
formulation of a product candidate forff
clinical testing.
ff
Collaborators could independently develop, or develop with third parties, products that compete
directly or indirectly with our products or product candidates if the collaborators believe that
competitive products are more likely to be successfully developed or can be commercialized under
terms that are more economically attractive than ours.
Collaborators with marketing and distribution rights to one or more products may not commit
resources to the marketing and distribution of such product or products.
sufficient
ff
Collaborators may not properly obtain, maintain, enforce, or defendf
proprietary rights or may use our proprietary informat
invalidate our proprietary informat
Genentech and Bayer have the first right to enforce or defend certain intellectual property rights
under the applicable collaboration arrangement with respect to particular licensed programs, and
although we may have the right to assume the enforcement
and defense of such intellectual
property rights if the collaborator does not, our ability to do so may be compromised by their
actions.
our intellectual property or
ion in such a way that could jeopardize or
ion or expose us to potential litigation. For example, Pfizer,
ff
ff
ff
Disputes may arise between the collaborators and us that result in the delay or termination of the
research, development, or commercialization of our products or product candidates or that result in
costly litigation or arbitration that diverts management attention and resources.
• We may lose certain valuable rights under circumstances identified in our collaborations, including if
we undergo a change of control.
•
•
Collaborations may be terminated and, if terminated, may result in a need for additional capital to
pursue further development or commercialization of the applicable product candidates. For
example, each of Genentech, Pfizer and Bayer can terminate its agreement with us in its entirety or
with respect to a specific target for convenience subject to specified notice periods, in certain cases
as short as 60 days, or in connection with a material breach of the agreement by us that remains
uncured for a specified period of time.
Collaboration agreements may not lead to development or commercialization of product candidates
in the most effici
in a business combination, the continued pursuit and emphasis on our product development or
commercialization program under such collaboration could be delayed, diminished, or terminated.
ent manner or at all. If a present or future collaborator of ours were to be involved
ff
If our collaborations do not result in the successful development and commercialization of products, or if
one of our collaborators terminates its agreement with us, we may not receive any future research funding or
milestone or royalty payments under the collaboration. If we do not receive the funding we expect under these
agreements, our development of product candidates could be delayed, and we may need additional resources
to develop product candidates. In addition, if one of our collaborators terminates its agreement with us, we may
to find a suitable replacement collaborator or attract new collaborators, and our development
find it more difficult
programs may be delayed or the perception of us in the business and financial communities could be adversely
affecte
d. All of the risks relating to product development, marketing approval, and commercialization described
in this Annual Report on Form 10-K apply to the activities of our collaborators.
ff
ff
We may in the future decide to collaborate with pharmaceutical and biotechnology companies for the
development and potential commercialization of any product candidates we may develop. These relationships,
or those like them, may require us to incur non-recurring and other charges, increase our near- and long-term
expenditures, issue securities that dilute our existing stockholders, or disrupt our management and business. In
addition, we could face significant competition in seeking appropriate collaborators, and the negotiation process
is time-consuming and complex. Our ability to reach a definitive collaboration agreement will depend, among
other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of
the proposed collaboration, and the proposed collaborator’s evaluation of several factors. If we license rights to
74
any product candidates we or our collaborators may develop, we may not be able to realize the benefit of such
transactions if we are unable to successfully integrate them with our existing operations and company culture.
We may seek to establishii
l
ii y r
commerciall
earr sonable terms, we may have to alter our develop
orations. If we are nrr
vv
ot able to establishii
collaboll
ii
ment and commercializa
rations on
tion plans.
additidd onal collabll
To realize the full potential of our PROTACTT
Discovery Engine and accelerate the development of
additional PROTAC programs, we plan to continue to selectively pursue collaborations with leading
biopharmaceutical companies with particular experience, including development and commercial expertise and
capabilities. We face significant competition in attracting appropriate collaborators to advance the development
of any product candidates for which we may seek a collaboration. Whether we reach a definitive agreement for
a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and
expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of
a number of factors. Those factors may include the design or results of clinical trials, the likelihood of approval
by the FDA or other regulatory authorities, the potential market for the subject product candidate, the costs and
complexities of manufacturing and delivering such product candidate to patients, the potential of competing
products, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a
challenge to such ownership without regard to the merits of the challenge, the terms of any existing
collaboration agreements, and industry and market conditions generally. The collaborator may also have the
similar indications and will have to
opportunity to collaborate on other product candidates or technologies forff
evaluate whether such a collaboration could be more attractive than one with us.
Collaborations are complex and time-consuming to negotiate, document and execute. In addition,
consolidation among large pharmaceutical companies has reduced the number of potential future collaborators.
Our existing collaboration agreements limit our ability to enter into future agreements on certain terms with
potential collaborators. For example, we have granted exclusive rights to Genentech, Pfizer and Bayer for the
discovery, development and commercialization of PROTAC targeted protein degraders directed to certain
protein targets, and during the terms of those agreements, we will be restricted from granting rights to other
parties to use our PROTAC technology for those targets. Any collaboration we enter into may limit our ability to
enter into future agreements on particular terms or covering similar target indications with other potential
collaborators.
We may not be able to negotiate collaborations on a timely basis, on acceptable terms or at all. If we
are unable to do so, we may have to curtail the development of the product candidate forff which we are seeking
to collaborate, reduce or delay its development program or one or more of our other development programs,
delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our
expenditures and undertake development or commercialization activities at our own expense. If we elect to fund
development or commercialization activities on our own, we may need to obtain additional capital, which may
not be available to us on acceptable terms or at all. If we do not have sufficient funds, we may not be able to
further develop our product candidates or bring them to market and generate revenue from product sales, which
could have an adverse effect
on our business, prospects, financial condition and results of operations.
ff
nd expect to continuii
satistt
may not performrr
e to relyrr
factorilrr y,l
We rely al
parties
rr
trials.
on third parties to conduct our clini
to meet deadlines
includingii
failiii ngii
ii
ii cal trialsrr
, and those thirdii
for the completiontt
of such
We rely and expect to continue to rely on third-party CROs to conduct our Phase 1/2 clinical trial for
bavdegalutamide, our Phase 1/2 clinical trial for ARV-RR 471, our Phase 1 clinical trial forff ARV-RR 766 and any other
planned clinical trials and currently do not plan to independently conduct any clinical trials of bavdegalutamide,
ARV-RR 471 and ARV-RR 766 or of our other product candidates. Agreements with these third parties might terminate
for a variety of reasons, including a failure to performff
arrangements, that would delay our product development activities.
by the third parties. If we need to enter into alternative
Our reliance on these third parties for research and development activities reduces our control over
these activities but does not relieve us of our responsibilities. For example, we will remain responsible forff
ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and
protocols in the applicable IND. Moreover, the FDA requires compliance with standards, commonly referred to
as good clinical practices, or GCPs, for conducting, recording and reporting the results of clinical trials to assure
75
that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial
participants are protected.
Furthermore, these third parties may have relationships with other entities, some of which may be our
competitors. If these third parties do not successfully carry out their contractual duties, meet expected deadlines
or conduct our clinical trials in accordance with regulatory requirements or our stated protocols, we will not be
able to obtain, or may be delayed in obtaining, marketing approvals for our product candidates and will not be
able to, or may be delayed in our efforts
to, successfully commercialize our product candidates.
ff
rty contract
ii
rr manufacturing organi
zatio
We rely on third-pa
ii
substance and finished drugrr
and expect to continuii
risk that we willii not have sufficient quantities of our product candidates or produ
at an acceptable cost or quality, wyy
commercializa
dd
tion. This relianc
product for our prodrr uct candiddd ates
hiww ch could delay, pyy
commercializa
revent or impii
e to do so forff
air our devel
tion efforts.
dd
rr
ii
ll
ii
ical testingii
inll
rr
for precl
rdii
parties may increase the
e on thitt
rr
cts or such quantities
and clini
ii cal trials
ns for thett manufacture of both drug
opment or
We do not own or operate, and currently have no plans to establish, any manufacturing facilities. We
rely on and expect to continue to rely on third-party CMOs for both drug substance and finished drug product as
well as the building blocks used to manufacture drug substance. This reliance on third parties may increase the
risk that we will not have sufficient quantities of our product candidates or products or such quantities at an
acceptable cost or quality, which could delay, prevent or impair our development or commercialization efforts.
ff
We may be unable to establish agreements with third-party manufacturers
terms. Even if we are able to establish agreements with third-party manufacturers,
manufacturers entails additional risks, including:
f
ff
or to do so on acceptable
reliance on third-party
•
•
•
•
reliance on the third party forff
regulatory, compliance and quality assurance;
the possible breach of the manufacturing
ff
agreement by the third party;
the possible misappropriation of our proprietary informat
how; and
ff
ion, including our trade secrets and know-
the possible termination or nonrenewal of the agreement by the third party at a time that is costly or
inconvenient for us.
We have only limited technology transfer agreements in place with respect to our product candidates,
and these arrangements do not extend to commercial supply. We acquire many key materials on a purchase
order basis. As a result, we do not have long term committed arrangements with respect to our product
candidates and other materials. If we receive marketing approval for any of our product candidates, we will need
to establish an agreement for commercial manufacture with a third party.
Third-party manufacturers may not be able to comply with current good manufacturing practices, or
cGMP, rP egulations or similar regulatory requirements outside of the United States. Our failure, or the failure of
our third-party manufactu
us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals,
license revocation, seizures or recalls of product candidates or products, operating restrictions and criminal
prosecutions, any of which could significantly and adversely affect
rers, to comply with applicable regulations could result in sanctions being imposed on
supplies of our products.
ff
ff
Our product candidates and any products that we may develop may compete with other product
candidates and products for access to manufacturing facilities. As a result, we may not obtain access to these
facilities on a priority basis or at all. There are a limited number of manufacturers that operate under cGMP
regulations and that might be capable of manufacturing for us.
ff
Any performance
failure on the part of our existing or future manufacturers could delay clinical
development or marketing approval. Some of our manufacturers are based outside of the United States,
including the manufacturers
As a result of the COVID-19 pandemic, there has been an increased risk of supply interruption with our
manufacturers and, in the first quarter of 2020, the production of certain building blocks for the drug substance
used in the manufacture of ARV-RR 471 was delayed at one of our China-based manufacturers. While this
of the building blocks for our drug substances which are based in China and India.
ff
76
production delay did not delay the overall clinical development of our product candidates, other delays in the
manufacture of building blocks, drug substance or drug products forff
could have a material adverse effect
our product candidates could arise, which
on our clinical development.
ff
If our current contract manufacturers cannot perform as agreed, we may be required to replace such
manufacturers. Although we believe that there are several potential alternative manufacturers who could
manufacture our product candidates, we may incur added costs and delays in identifying and qualifying
ff
such replacement manufacturer or be unable to reach agreement with any alternative manufacturer.
any
Our current and anticipated future dependence upon others for the manufacture of our product
candidates or products may adversely affect
products that receive marketing approval on a timely and competitive basis.
ff
our future profit margins and our ability to commercialize any
Risks Related to the Commercialization of Our Product Candidates
Even if any of our product candidates receives marketingtt
market acceptance by physicians, patients, third-pa
necessary for commercialii success.
ii
rr
approval
, ill
t may fail to achieve the degree of
rty payors and others in the medical
dd
community
If any of our product candidates receives marketing approval, it may nonetheless fail to gain sufficient
ff
market acceptance by physicians, patients, third-party payors and others in the medical community. For
example, current cancer treatments, such as chemotherapy and radiation therapy, are well established in the
medical community, and doctors may continue to rely on these treatments. If our product candidates do not
achieve an adequate level of acceptance, we may not generate significant revenue from product sales and we
may not become profitable. The degree of market acceptance of our product candidates, if approved for
commercial sale, will depend on a number of factors, including:
•
•
•
•
•
•
•
•
•
•
ff
the efficacy
and potential advantages compared to alternative treatments;
the prevalence and severity of any side effect
ff
s, in particular compared to alternative treatments;
our ability to offeff
r our products for sale at competitive prices;
the convenience and ease of administration compared to alternative treatments;
the willingness of the target patient population to try new therapies and of physicians to prescribe
these therapies;
the strength of marketing, sales and distribution support;
the availability of third-party coverage and adequate reimbursement;
the timing of any marketing approval in relation to other product approvals;
support from patient advocacy groups; and
any restrictions on the use of our products together with other medications.
If we are unable to establishii
zinii
commerciali
capabiliii ties, we may not be successful inii
.dd
g our prodrr uct candidates if and when they are approved
sales and marketingii
rr
ii
We do not have a sales or marketing infrastructure and have no experience in the sale, marketing or
distribution of biopharmaceutical products. To achieve commercial success for any product for which we obtain
marketing approval, we will need to establish sales, marketing and distribution capabilities, either ourselves or
through collaboration or other arrangements with third parties.
We currently expect that we would build our own focused, specialized sales and marketing organization
to support the commercialization in the United States of product candidates for which we receive marketing
approval and that can be commercialized with such capabilities. There are risks involved with establishing our
own sales and marketing capabilities. For example, recruiting and training a sales force
is expensive and time-
consuming and could delay any product launch. If the commercial launch of a product candidate forff which we
recruit a sales force and establish marketing capabilities is delayed or does not occur forff
ff
have prematurely or unnecessarily incurred these commercialization expenses. These efforts
and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.
any reason, we would
may be costly,
ff
77
Factors that may inhibit our effoff
rts to commercialize our products on our own include:
•
•
•
•
our inability to recruit, train and retain adequate numbers of effect
personnel;
ff
ive sales and marketing
the inability of sales personnel to obtain access to physicians or persuade adequate numbers of
physicians to prescribe any future products;
the lack of complementary products to be offered by sales personnel, which may put us at a
competitive disadvantage relative to companies with more extensive product lines; and
unforeseen costs and expenses associated with creating an independent sales and marketing
organization.
If we are unable to establish our own sales and marketing capabilities and enter into arrangements with
rm these services, our revenue from product sales and our profitability, if any, are likely to
third parties to perforr
be lower than if we were to market and sell any products that we develop ourselves. In addition, we may not be
successful in entering into arrangements with third parties to market and sell our product candidates or may be
unable to do so on terms that are acceptable to us. We likely will have little control over such third parties, and
any of these third parties may fail to devote the necessary resources and attention to sell and market our
products effectively. If we do not establish sales and marketing capabilities successfully, either on our own or in
collaboration with third parties, we will not be successful in commercializing our product candidates.
if we are able to commerciali
rr
Evenvv
unfavorable pricing regul
which would harm our busines
atioll
ii
zeii
dd
ns, third-par
s.
ii
any product candidates, thett
prodrr ucts mtt
ay become subject to
tyrr
reimburs
ii
ement practices or healthcare reform initiatives,
ii
The regulations that govern marketing approvals, pricing, coverage and reimbursement forff
new drug
ff
products vary widely from country to country. Current and future legislation may significantly change the
approval requirements in ways that could involve additional costs and cause delays in obtaining approvals.
Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the
pricing review period begins after marketing or product licensing approval is granted. To obtain reimbursement
or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-
effect
iveness of our product candidate to other available therapies. In some foreign markets, prescription
pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted.
As a result, we might obtain marketing approval for a product candidate in a particular country, but then be
subject to price regulations that delay our commercial launch of the product, possibly for lengthy time periods,
and negatively impact the revenues, if any, we are able to generate from the sale of the product in that country.
Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates,
even if our product candidates obtain marketing approval.
Our ability to commercialize any product candidates successfully also will depend in part on the extent
these products and related treatments will be available from
to which coverage and adequate reimbursement forff
government healthcare programs, private health insurers and other organizations. Government authorities and
third-party payors, such as private health insurers and health maintenance organizations, decide which
medications they will pay for and establish reimbursement levels. A primary trend in the U.S. healthcare industry
and elsewhere is cost containment. Government authorities and third-party payors have attempted to control
costs by limiting coverage and the amount of reimbursement forff
government authorities and third-party payors are requiring that drug companies provide them with
predetermined discounts from list prices and are challenging the prices charged for medical products. Coverage
and reimbursement may not be available for any product that we commercialize and, even if these are
available, the level of reimbursement may not be satisfactory. Reimbursement may affect the demand for, or the
price of, any product candidate forff which we obtain marketing approval. Obtaining and maintaining adequate
reimbursement forff
studies to justify coverage and reimbursement or the level of reimbursement relative to other therapies. If
coverage and adequate reimbursement are not available or reimbursement is available only to limited levels, we
may not be able to successfully commercialize any product candidate forff which we obtain marketing approval.
. We may be required to conduct expensive pharmacoeconomic
particular medications. Increasingly,
our products may be difficult
ff
78
There may be significant delays in obtaining coverage and reimbursement forff
newly approved drugs,
ff
coverage and reimbursement does
and coverage may be more limited than the purposes for which the drug is approved by the FDA or similar
regulatory authorities outside of the United States. Moreover, eligibility forff
not imply that a drug will be paid for in all cases or at a rate that covers our costs, including research,
development, intellectual property, manufacture, sale and distribution expenses. Interim reimbursement levels
for new drugs, if applicable, may also not be sufficient
Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may
be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing
payments forff
by government healthcare programs or private payors and by any future relaxation of laws that presently restrict
imports of drugs from countries where they may be sold at lower prices than in the United States. Third-party
payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement
policies. Our inability to promptly obtain coverage and adequate reimbursement rates from both government-
funded and private payors forff
on
any approved products that we develop could have a material adverse effect
our operating results, our ability to raise capital needed to commercialize products and our overall financial
condition.
other services. Net prices for drugs may be reduced by mandatory discounts or rebates required
to cover our costs and may not be made permanent.
ff
Product liabi
commercializa
ii
ii
tion of any products that we may develop.
liii ty lawsuits against us could cause us to incur substantial liabil
ll es and to limit
iti
ii
ii
We face an inherent risk of product liability exposure related to the testing of our product candidates in
human clinical trials and will face an even greater risk if we commercially sell any products that we may
develop. If we cannot successfully defend ourselves against claims that our product candidates or products
caused injuries, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may
result in:
•
•
•
•
•
•
•
•
•
•
decreased demand for any product candidates or products that we may develop;
termination of clinical trials;
withdrawal of marketing approval, recall, restriction on the approval or a “black box” warning or
contraindication for an approved drug;
withdrawal of clinical trial participants;
significant costs to defendf
the related litigation;
substantial monetary awards to trial participants or patients;
loss of revenue;
injury to our reputation and significant negative media attention;
reduced resources of our management to pursue our business strategy; and
the inability to commercialize any products that we may develop.
We currently hold $10.0 million in product liability insurance coverage in the aggregate, with a per
incident limit of $10.0 million, which may not be adequate to cover all liabilities that we may incur. We will need
to increase product liability insurance coverage as we expand our clinical trials and if we commence
commercialization of our product candidates. Insurance coverage is increasingly expensive. We may not be
able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that
may arise.
Risks Related to Our Intellectual Property
If we are unable to obtain and maintain
patent protecti
scope of the patent protection obtained is not sufficien
commercialize
ii
ii
commerciali
zeii
l n oii
effectively i
technology and products similar
our technology and products may be impaired,
ur market.
ff
dd
or identic
rr
ii
ii
on for our technology and products or if the
tly broadrr
, odd ur competitors could develop and
al to ours, and our abiliii ty to successfullyl
and we may not be able to compete
rr
Our commercial success depends in part on our ability to obtain and maintain patent and other
proprietary protection in the United States and other countries with respect to our proprietary technology and
79
products. We seek to protect our proprietary position by filing patent applications in the United States and
abroad related to our novel technologies and product candidates. Any disclosure to or misappropriation by third
parties of our confidential proprietary information could enable competitors to quickly duplicate or surpass our
technological achievements, thus eroding our competitive position in our market. Moreover, the patent
applications we own, co-own or license may fail to result in issued patents in the United States or in other
foreign countries.
The patent prosecution process is expensive and time-consuming, and we may not be able to file and
prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also
possible that we will fail to identify patentable aspects of our research and development output beforeff
it is too
late to obtain patent protection. Moreover, in some circumstances, we do not have the right to control the
preparation, filing and prosecution of patent applications, or to maintain the patents, covering technology that
we license from third parties. Therefore,
these patents and applications may not be prosecuted and enforced
a manner consistent with the best interests of our business.
ff
ff
in
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain,
involves complex legal and factual questions and has in recent years been the subject of much litigation. In
addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the United
States. For example, European patent law restricts the patentability of methods of treatment of the human body
more than United States law does. Publications of discoveries in the scientific literature often lag behind the
actual discoveries, and patent applications in the United States and other jurisdictions are typically not
published until 18 months after filing, or in some cases not at all. Therefore,
whether we were the first to make the inventions claimed in our owned, co-owned or licensed patents or
pending patent applications, or that we were the first inventors to file for patent protection of such inventions. As
a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly
uncertain. Our pending and future patent applications may not result in patents being issued which protect our
technology or products, in whole or in part, or which effecti
ff
technologies and products. Changes in either the patent laws or interpretation of the patent laws in the United
States and other countries may diminish the value of our patents or narrow the scope of our patent protection.
vely prevent others from commercializing competitive
we cannot know with certainty
ff
Moreover, we may be subject to a third-party preissuance submission of prior art to the United States
or the USPTO, or in addition to interference proceedings, may become involved
review, post-grant review or other post-grant proceedings
Patent and Trademark Office,
ff
in opposition, derivation, reexamination, intii er partesrr
challenging our or our licensors’ patent rights or the patent rights of others. An adverse determination in any
such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third
parties to commercialize our technology or products and compete directly with us, without payment to us, or
result in our inability to manufacture or commercialize products without infringing third-party patent rights. In
addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it
could dissuade companies from collaborating with us to license, develop or commercialize current or future
product candidates.
Our owned, co-owned and licensed patent estate includes patent applications, many of which are at an
early stage of prosecution. Even if our owned, co-owned and licensed patent applications issue as patents, they
may not issue in a formff
that will provide us with any meaningful protection, prevent competitors from competing
provide us with any competitive advantage. Our competitors may be able to circumvent our
with us or otherwise
owned, co-owned or licensed patents by developing similar or alternative technologies or products in a non-
infringing manner.
rr
The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceabilit
y, and
our owned, co-owned and licensed patents may be challenged in the courts or patent offices
States and abroad. Such challenges may result in loss of exclusivity or freedom to operate or in patent claims
being narrowed, invalidated or held unenforcff
from using or commercializing similar or identical technology and products, or limit the duration of the patent
protection of our technology and products. Given the amount of time required for the development, testing and
regulatory review of new product candidates, patents protecting such candidates might expire beforeff
or shortly
after such candidates are commercialized. As a result, our owned, co-owned and licensed patent portfolio may
rights to exclude others from commercializing products similar or identical to ours.
not provide us with sufficient
eable, in whole or in part, which could limit our ability to stop others
ff
ff
ff
in the United
80
Changes in patent laws or patent jurispr
ii
thereby impairi
udrr
our abiliii ty to protect our product candidates.
encdd
ngii
ii
e could dimdd inish the value of our patents in general,ll
Patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our
patent applications and the enforcement or defense of our issued patents. On September 16, 2011, the Leahy-
Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a
the way
number of significant changes to United States patent law. These changes include provisions that affect
patent litigation. The USPTO developed new regulations
ff
patent applications are prosecuted and may also affect
and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent
law associated with the Leahy-Smith Act, and in particular, the first-inventor-to-file provisions, became effecti
on March 16, 2013. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the
operation of our business. However, the Leahy-Smith Act and its implementation could increase the
uncertainties and costs surrounding the prosecution of our patent applications and the enforcement
of our issued patents, all of which could have a material adverse effect
Furthermore, for applications in which all claims are entitled to a priority date beforeff
interference proceeding can be provoked by a third party or instituted by the USPTO to determine who was the
first to invent any of the subject matter covered by the patent claims of our applications.
or defense
on our business and financial condition.
March 16, 2013, an
ve
ff
ff
ff
ff
Additionally, the U.S. Supreme Court has ruled on several patent cases in recent years limiting where a
patentee may file a patent infringement suit, narrowing the scope of patent protection available in certain
circumstances or weakening the rights of patent owners in certain situations, and there are other open
questions under patent law that courts have yet to decisively address. In addition to increasing uncertainty with
regard to our ability to obtain patents in the future, this combination of events has created uncertainty with
respect to the value of patents, once obtained.
Depending on decisions by Congress, the federal courts and the USPTO, the laws and regulations
our existing patents and patents that we might obtain in the future. In addition, the European patent
governing patents could change in unpredictable ways and could weaken our ability to obtain new patents or to
enforce
ff
system is relatively stringent in the type of amendments that are allowed during prosecution, but the complexity
and uncertainty of European patent laws has also increased in recent years. Complying with these laws and
regulations could limit our ability to obtain new patents in the future that may be important for our business.
ll
We may become involved in l
aws
other intellectual property, which could be expensi
xx
ii
uits to protect or enforce our patents, the patents of our licll ensors, or
ii
ve, time-co
nsuming and unsuccessful.
Competitors may infringe our issued patents, the patents of our licensors, or other intellectual property.
To counter infringement or unauthorized use, we may be required to file infringement claims, which can be
expensive, time-consuming and unpredictable. Any claims we assert against perceived infringers could provoke
these parties to assert counterclaims against us alleging that we infringe their patents. In addition, in a patent
infringement proceeding, a court may decide that a patent of ours or our licensors is invalid or unenforceable,
whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the
technology at issue on the grounds that our patents do not cover the technology in question. An adverse result
in any litigation proceeding could put one or more of our patents at risk of being invalidated, held unenforceable
or interpreted narrowly. Even if we successfully assert our patents, a court may not award remedies that
sufficient
ly compensate us forff
our losses.
in
ff
ff
ff
We may need to licll ense intellectual property from thirdii
or may not be availab
rr
ii y r
easo
l
le on commerciall
nable terms.
vv
parties, and such licll enses may not be availabl
ii
e
A third party may hold intellectual property, including patent rights, that are important or necessary to
the development of our products. It may be necessary for us to use the patented or proprietary technology of a
third party to commercialize our own technology or products, in which case we would be required to obtain a
license from such third party. A license to such intellectual property may not be available or may not be available
on commercially reasonable terms, which could have a material adverse effect
condition.
on our business and financial
ff
The licensing and acquisition of third-party intellectual property rights is a competitive practice, and
companies that may be more established, or have greater resources than we do, may also be pursuing
strategies to license or acquire third-party intellectual property rights that we may consider necessary or
81
attractive in order to commercialize our product candidates. More established companies may have a
competitive advantage over us due to their larger size and cash resources or greater clinical development and
commercialization capabilities. We may not be able to successfully complete such negotiations and ultimately
acquire the rights to the intellectual property surrounding the additional product candidates that we may seek to
acquire.
Third parties may initiateii
rights, the outcome of whiww ch would be uncertain aii
s.
success of our busines
legal proceedingii
s allegingii
ii
that we are i
intellectual proprr
nd could have avv materialii adverse effect on the
tt
ing their
ff
rr nfii
ring
ertyrr
Our commercial success depends upon our ability, and the ability of our collaborators, to develop,
manufacture, market and sell our product candidates and use our proprietary technologies without infringing the
proprietary rights of third parties. There is considerable intellectual property litigation in the biotechnology and
pharmaceutical industries, as well as administrative proceedings for challenging patents, including interference,
reexamination, and inter parterr s review proceedings beforeff
proceedings in foreff
the USPTO and oppositions and other comparable
ign jurisdictions.
We may become party to, or threatened with, future adversarial proceedings or litigation regarding
the USPTO. Third parties may assert infringement
intellectual property rights with respect to our products and technology, including interference, derivation,
reexamination or inter parterr s review proceedings beforeff
claims against us based on existing patents or patents that may be granted in the future. As the biotechnology
and pharmaceutical industries expand and more patents are issued, the risk increases that our product
candidates may give rise to claims of infringement of the patent rights of others. There may be third-party
patents of which we are currently unaware with claims to materials, formulations, methods of manufacture or
methods for treatment related to the use or manufacture
of our drug candidates. Because patent applications
can take many years to issue, there may be currently pending patent applications which may later result in
issued patents that our product candidates may infringe. In addition, third parties may obtain patents in the
future and claim that use of our technologies infringes upon these patents.
ff
If we are found by a court of competent jurisdiction to infringe a third party’s intellectual property rights,
we could be required to obtain a license from such third party to continue developing and marketing our
products and technology. However, we may not be able to obtain any required license on commercially
reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our
competitors access to the same technologies licensed to us. We could be forcff
cease commercializing the infringing technology or product. In addition, we could be found liable for monetary
damages, including treble damages and attorneys’ fees if we are found to have willfully infringed a patent. A
finding of infringement could prevent us from commercializing our product candidates or force us to cease some
of our business operations, which could materially harm our business. Claims that we have misappropriated the
confidential informat
ion or trade secrets of third parties could have a similar negative impact on our business.
ed, including by court order, to
ff
If we fail to comply with our obligll ations in our current and future intellectual property licenses and
fundingii
gements with third parties, we cww ould lose righi
ts that are important to our business.
arranrr
We are party to a license agreement with YaleYY
that provides us with the foundat
ff
ional intellectual
targeted protein degradation technology. This license agreement imposes
property rights for our PROTACTT
diligence, development and commercialization timelines and milestone payment, royalty, insurance and other
obligations on us. If we fail to comply with our obligations, including achieving specified milestone events, Yale
may have the right to terminate this license, in which event we might not be able to develop, manufacture
market any product that is covered by the intellectual property we in-license from Yale and may face other
penalties. Such an occurrence would materially adversely affect
purposes, we will likely enter into additional licensing and funding arrangements with third parties that may also
impose similar obligations on us.
our business prospects. For a variety of
or
ff
f
Termination of any of our current or future in-licenses would reduce or eliminate our rights under these
agreements and may result in our having to negotiate new or reinstated agreements with less favorable terms
or cause us to lose our rights under these agreements, including our rights to important intellectual property or
technology. Any of the foreff
could have a material adverse effect
going could prevent us from commercializing our other product candidates, which
on our operating results and overall financial condition.
ff
82
In addition to the above risks, intellectual property rights that we license in the future may include
sublicenses under intellectual property owned by third parties, in some cases through multiple tiers. The actions
of our licensors may thereforeff
compliance with all of the obligations under our license agreements. Should our licensors or any of the
upstream licensors fail to comply with their obligations under the agreements pursuant to which they obtain the
rights that are sublicensed to us, or should such agreements be terminated or amended, our ability to develop
and commercialize our product candidates may be materially harmed.
our rights to use our sublicensed intellectual property, even if we are in
affect
ff
Further, we do not have the right to control the prosecution, maintenance and enforcement of all of our
licensed and sublicensed intellectual property, and even when we do have such rights, we may require the
cooperation of our licensors and upstream licensors, which may not be forthcoming. For example, under the
Yale license, any patent applications and issued patents under the agreement remain the property of Yale,YY
Yale has the right to choose patent counsel. Our business could be adversely affecte
unable to prosecute, maintain and enforce
our licensed and sublicensed intellectual property effect
and
d if we or our licensors are
ively.
ff
ff
ff
We may be subjeb ct to claimll
we have mvv
tt
d their
own iww ntii ellectual property.
isappropriate
rr
s by thitt
rdii
parties assertingii
that our employees, consultants, contracto
rr
rs or
intellectual property,
rr
or claimingii
owneww rship of what we regard as our
We employ individuals who were previously employed at universities as well as other biotechnology or
pharmaceutical companies, including our competitors or potential competitors. We have received confidential
and proprietary information from collaborators, prospective licensees and other third parties. Although we try to
ensure that our employees do not use the proprietary informff
ation or know-how of others in their work for us, we
may be subject to claims that these employees or we have used or disclosed intellectual property, including
trade secrets or other proprietary informff
to claims that former
employers or other third parties have an ownership interest in our patents. Litigation may
be necessary to defend against these claims. We may not be successful in defending these claims, and if we
fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual
property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Even if we are
successful, litigation could result in substantial cost and reputational loss and be a distraction to our
management and other employees.
ation, of any such employee’s former
employer. We may also be subject
ff
ff
In addition, while it is our policy to require our employees, consultants and contractors who may be
involved in the development of intellectual property to execute agreements assigning such intellectual property
to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual
property that we regard as our own. Such assignment agreements may not be self-execut
breached, and we may be forced to bring claims against third parties, or defend claims they may bring against
us, to determine the ownership of what we regard as our intellectual property.
ing or may be
ff
Intellectual property l
fromrr
t
tt
their normal responsibilitii
igatt
itll
ies.
tion could cause us to spend
s
tt
substantial
resources and distract
ii
rr
our personn
el
Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims
may cause us to incur significant expenses, and could distract our technical and management personnel from
their normal responsibilities. In addition, there could be public announcements of the results of hearings,
motions or other interim proceedings or developments and if securities analysts or investors perceive these
results to be negative, it could have a substantial adverse effect
litigation or proceedings could substantially increase our operating losses and reduce the resources available
for development activities or any future sales, marketing or distribution activities. We may not have sufficient
financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may
be able to sustain the costs of such litigation or proceedings more effectively than we can because of their
greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or
other proceedings could compromise our ability to compete in the marketplace.
on the price of our common stock. Such
ff
ff
83
and maintainingii
Obtaitt ning
ii
documentartt y,rr
yy
fee payment
patent protection could be reduced or elimll
our patent
and other requiremrr
tt
s odd
ents imposed by govervv nme
n complianc
rr
ous proce
ntaltt patent offiff ces, and our
tt
tt hes
non-compliance with t
irements.tt
e witww h vtt
e requrr
rr
dural,
arivv
rr
ii
protection depend
e
inated forff
Periodic maintenance fees on any issued patent are due to be paid to the USPTO and patent officff es in
foreign countries in several stages over the lifetime of the patent. The USPTO and patent officff es in foreign
countries require compliance with a number of procedural, documentary, fee payment and other requirements
during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a
late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance
can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of a
patent or patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or
lapse of a patent or patent application include, but are not limited to, failure to respond to offiff cial actions within
prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. In
such an event, our competitors might be able to enter the market, which would have a material adverse effect
on our business.
ff
If we are urr
position wouww ld be harmed.dd
nable to protect the confidentia
dd
lity of our tradtt
e sdd
ecrets, our business and competitivevv
ion, to maintain our
In addition to seeking patents forff
some of our technology and product candidates, we also rely on trade
ff
secrets, including unpatented know-how, technology and other proprietary informat
competitive position. We seek to protect these trade secrets, in part, by entering into non-disclosure and
confidentiality agreements with parties who have access to them, such as our employees, corporate
collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other third
parties. We also enter into confidentiality and invention or patent assignment agreements with our employees
and consultants. Despite these efforts,
proprietary informat
ion, including our trade secrets, and we may not be able to obtain adequate remedies for
such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult,
expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside
of the United States are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be
lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those
to whom they communicate it, from using that technology or informat
ion to compete with us. If any of our trade
secrets were to be disclosed to or independently developed by a competitor, our competitive position would be
harmed.
any of these parties may breach the agreements and disclose our
ff
ff
ff
If we are not able to obtaintt
ii oreff
and in f
marketingii
ign countries under simil
exclusivityvv
xtee ensions in t
legislatioll
for our product candidates, our busines
patent term e
rr
arll
ii
ii
ii hett United States under the Hatch-Waxman Act
n, thereby potentiallyll extendingii
the term of our
s may be impaired.
rr
Depending upon the timing, duration and specifics of FDA marketing approval of our product
candidates, one of the U.S. patents covering each of such product candidates or the use thereof may be eligible
for a patent term extension under the Drug Price Competition and Patent TermTT
Hatch-Waxman Act. The period of extension may be up to five years beyond the expiration date of a patent but
cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval. The
Hatch-Waxman Act allows a maximum of one patent to be extended per FDA-approved product. Similar patent
term extension also may be available in certain foreign countries upon regulatory approval of our product
candidates. Nevertheless, we may not be granted patent term extension either in the United States or in any
foreign country because of, for example, failing to apply within applicable deadlines, failing to apply prior to
expiration of relevant patents or otherwise failing to satisfy applicable requirements. Moreover, the term of
extension, as well as the scope of patent protection during any such extension, afforded
authority could be less than we request.
Restoration Act of 1984, or
by the governmental
ff
If we are unable to obtain patent term extension or restoration, or the term of any such extension is less
than we request, the period during which we will have the right to exclusively market our product may be
shortened and our competitors may obtain approval of competing products following
sooner, and our revenue could be reduced, possibly materially.
our patent expiration
ff
84
We only have limited geograprr hical protection with r
protect our intellell ctual propertyrr
esprr
ghout thett world.
tt hrou
tt
rights t
rr
tt
ect to certain patents and we may not be able to
Filing, prosecuting and defending patents covering our product candidates in all countries throughout
the world would be prohibitively expensive, and our intellectual property rights in some countries outside the
United States can be less extensive than those in the United States. In-licensing patents covering our product
candidates in all countries throughout the world may similarly be prohibitively expensive, if such opportunities
are available at all. And in-licensing or filing, prosecuting and defending patents even in only those jurisdictions
in which we develop or commercialize our product candidates may be prohibitively expensive or impractical.
Competitors may use our and our licensors’ technologies in jurisdictions where we have not obtained patent
protection or licensed patents to develop their own products and, further, may export otherwise infringing
products to territories where we and our licensors have patent protection, but enforcement
that in the United States or the European Union. These products may compete with our product candidates, and
our or our licensors’ patents or other intellectual property rights may not be effective or sufficient
to prevent them
from competing.
is not as strong as
ff
ff
In addition, we may decide to abandon national and regional patent applications while they are still
pending. The grant proceeding of each national or regional patent is an independent proceeding which may
lead to situations in which applications may be reject
applications are granted by others. For example, relative to other countries, China has a heightened detailed
patentability. Furthermore, generic drug manufacturers or other competitors may
description requirement forff
challenge the scope, validity or enforceability of our or our licensors’ patents, requiring us or our licensors to
engage in complex, lengthy and costly litigation or other proceedings. Generic drug manufacturers may
develop, seek approval for and launch generic versions of our products. It is also quite common that depending
on the country, the scope of patent protection may vary for the same product candidate or technology.
ed by the relevant patent office, while substantively similar
e
ff
ies in protecting and defending proprietary rights in such jurisdictions. Moreover, the legal systems of
The laws of some jurisdictions do not protect intellectual property rights to the same extent as the laws
or regulations in the United States and the European Union, and many companies have encountered significant
difficult
certain countries, particularly certain developing countries, do not favor the enforcement
secrets or other forms of intellectual property, which could make it difficff ult forff
jurisdictions from marketing competing products in violation of our proprietary rights generally.
ff
us to prevent competitors in some
of patents, trade
Proceedings to enforff ce our patent rights in foreign
ff
jurisdictions, whether or not successful, are likely to
ff
s and attention from other aspects of our business, and
result in substantial costs and divert our effort
additionally could put our or our licensors’ patents at risk of being invalidated or interpreted narrowly, could
increase the risk of our or our licensors’ patent applications not issuing, or could provoke third parties to assert
claims against us. We may not prevail in any lawsuits that we initiate, while damages or other remedies may be
awarded to the adverse party, which may be commercially significant. If we prevail, damages or other remedies
awarded to us, if any, may not be commercially meaningful. Accordingly, our efforts
property rights around the world may be inadequate to obtain a significant commercial advantage from the
intellectual property that we develop or license. Furthermore, while we intend to protect our intellectual property
rights in our expected significant markets, we cannot ensure that we will be able to initiate or maintain similar
s to
effort
s in all jurisdictions in which we may wish to market our product candidates. Accordingly, our effort
ff
protect our intellectual property rights in such countries may be inadequate, which may have an adverse effect
ff
on our ability to successfully commercialize our product candidates in all of our expected significant foreign
markets. If we or our licensors encounter diffiff culties in protecting, or are otherwise
protecting, the intellectual property rights important for our business in such jurisdictions, the value of these
rights may be diminished and we may face additional competition in those jurisdictions.
to enforce our intellectual
precluded from effecti
vely
rr
ff
ff
ff
In some jurisdictions, compulsory licensing laws compel patent owners to grant licenses to third parties.
In addition, some countries limit the enforff ceability of patents against government agencies or government
contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the
value of such patent. If we or any of our licensors are forced to grant a license to third parties under patents
relevant to our business, or if we or our licensors are prevented from enforcing patent rights against third
parties, our competitive position may be substantially impaired in such jurisdictions.
85
Risks Related to Regulatory Approval and Marketing of Our Product Candidates and Other Legal
Compliance Matters
The regrr ulatory approvalvv process of the FDA is lengthy, time-co
and if we are urr
.dd
willii be substantiallyll harmed
tely unable to obtain marketingii
ii
appropp
tt
ltima
rr
nsuming and inherently unpredictab
le,
val for our prodrr uct candidates, our business
rr
The time required to obtain approval by the FDA is unpredictable but typically takes many years
following the commencement of clinical trials and depends upon numerous factors, including the substantial
discretion of the regulatory authorities. In addition, approval policies, regulations or the type and amount of
clinical data necessary to gain approval may change during the course of a product candidate’s clinical
development and may vary among jurisdictions. We have not obtained marketing approval for any product
candidate and it is possible that none of our existing product candidates, or any product candidates we may
seek to develop in the future will ever obtain marketing approval.
Our product candidates could fail to receive marketing approval for many reasons, including the
following:
•
•
•
•
•
•
•
•
the FDA may disagree with the design or implementation of our clinical trials;
we may be unable to demonstrate to the satisfaction of the FDA that a product candidate is safef
ff
and effect
ive for its proposed indication;
results of clinical trials may not meet the level of statistical significance required by the FDA for
approval;
we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its
safety risks;
the FDA may disagree with our interpretation of data from preclinical studies or clinical trials;
data collected from clinical trials of our product candidates may not be sufficient
submission of a New Drug Application, or NDA, to the FDA or other submission or to obtain
marketing approval in the United States;
to support the
ff
the FDA may find deficiencies with or fail to approve the manufacturing processes or facilities of
third-party manufactu
rers with which we contract for clinical and commercial supplies; and
ff
the approval policies or regulations of the FDA may significantly change in a manner rendering our
clinical data insufficient
for approval.
ff
This lengthy approval process as well as the unpredictability of future clinical trial results may result in
our failing to obtain regulatory approval to market any of our product candidates, which would significantly harm
our business, results of operations and prospects. The FDA has substantial discretion in the approval process,
and determining when or whether regulatory approval will be obtained for any of our product candidates. Even if
we believe the data collected from clinical trials of our product candidates are promising, such data may not be
sufficient
to support approval by the FDA.
ff
In addition, even if we were to obtain approval, regulatory authorities may approve any of our product
candidates for fewer or more limited indications than we request, may not approve the price we intend to charge
for our products, may grant approval contingent on the performance of costly post-marketing clinical trials, or
may approve a product candidate with a label that does not include the labeling claims necessary or desirable
for the successful commercialization of that product candidate. Any of the foregoing scenarios could materially
harm the commercial prospects forff
our product candidates.
Even if we cww omplete the necessary precl
process is expensive, time-co
ii
zation
ii
the commerciali
are delays iyy n oii
ngii
tt
btaini
candidates, and our abilityll
ical studies and clinical trials, the marketingii
nd may prevent us froff m obtaini
nsuming and uncertain aii
tt
of some or all of our product candidates. If we are not able to obtain,
approvals,ll we willii not be able to commercialize
to generate revenue willii be materiall
ll
regulatory
rr
, rgg equi
ngii
tt
l mpii
rr
aired.
ii y i
redii
inll
rr
tt
ii
approval
ll orff
approvals f
or if there
our product
Our product candidates and the activities associated with their development and commercialization,
including their design, testing, manufacture,
f
safety, efficacy, recordkeeping, labeling, storage, approval,
86
advertising, promotion, sale and distribution, export and import are subject to comprehensive regulation by the
FDA and other regulatory agencies in the United States and by the EMA and similar regulatory authorities
outside of the United States. Failure to obtain marketing approval for a product candidate will prevent us from
commercializing the product candidate. We have not submitted an application forff
approval for any of our product candidates in the United States or in any other jurisdiction.
or received marketing
As a company, we do not have experience in filing and supporting the applications necessary to gain
marketing approvals and expect to rely on third-party clinical research organizations or other third-party
consultants or vendors to assist us in this process. Securing marketing approval requires the submission of
extensive preclinical and clinical data and supporting informat
indication to establish the product candidate’s safetyf
ion about the product manufacturing process to, and inspection of manufacturing
the submission of informat
facilities by, the regulatory authorities. Our product candidates may not be effective, may be only moderately
effect
s, toxicities or other characteristics that may
preclude our obtaining marketing approval or prevent or limit commercial use. New cancer drugs frequently are
indicated only for patient populations that have not responded to an existing therapy or have relapsed.
ion to regulatory authorities for each therapeutic
. Securing marketing approval also requires
ive or may prove to have undesirable or unintended side effect
ff
and efficacy
ff
ff
ff
ff
The process of obtaining marketing approvals, both in the United States and abroad, is expensive, may
take many years, if approval is obtained at all, and can vary substantially based upon a variety of factors,
including the type, complexity and novelty of the product candidates involved. Changes in marketing approval
policies during the development period, changes in or the enactment of additional statutes or regulations, or
changes in regulatory review for each submitted product application, may cause delays in the approval or
rejection of an application. Regulatory authorities have substantial discretion in the approval process and may
for approval and require additional
refuse to accept any application or may decide that our data is insufficient
preclinical, clinical or other studies. In addition, varying interpretations of the data obtained from preclinical and
clinical testing could delay, limit or prevent marketing approval of a product candidate. Any marketing approval
we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the
approved product not commercially viable.
ff
If we experience delays in obtaining approval or if we fail to obtain approval of our product candidates,
our product candidates may be harmed and our ability to generate revenues will
the commercial prospects forff
be materially impaired.
Failure to obtain marketingii
beingii marketed abroad and may limit
approva
l in f
ii orff eign
ons wouww ld preven
rr
our abiliii ty to generate revenue fromrr
jurisdictidd
pp
rr
ii
t our produ
produ
rr
ct sales.
rr
ct candidates from
In order to market and sell our products in the European Union and many other jurisdictions, we, and
any collaborators, must obtain separate marketing approvals and comply with numerous and varying regulatory
requirements. The approval procedure varies among countries and can involve additional testing. The time
required to obtain approval may differ
substantially from that required to obtain FDA approval. The marketing
approval process outside the United States generally includes all of the risks associated with obtaining FDA
approval. We, and any collaborators, may not obtain approvals from regulatory authorities outside the United
States on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in
other countries or jurisdictions, and approval by one regulatory authority outside the United States does not
ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA.
ff
In many countries outside the United States, a product candidate must also be approved for
reimbursement before it can be sold in that country. In some cases, the price that we intend to charge for our
products, if approved, is also subject to approval. Obtaining non-U.S. regulatory approvals and compliance with
non-U.S. regulatory requirements could result in significant delays, difficulties and costs for us and any
collaborators and could delay or prevent the introduction of our product candidates in certain countries. In
addition, if we or any collaborators fail to obtain the non-U.S. approvals required to market our product
candidates outside the United States or if we or any collaborators fail to comply with applicable non-U.S.
regulatory requirements, our target market will be reduced and our ability to realize the full market potential of
our product candidates will be harmed and our business, financial condition, results of operations and prospects
may be adversely affect
ed.
ff
87
Additionally, we could face heightened risks with respect to seeking marketing approval in the United
Kingdom as a result of the withdrawal of the United Kingdom from the EU, commonly referred to as Brexit. The
United Kingdom is no longer part of the European Single Market and European Union Customs Union. As of
January 1, 2021, the Medicines and Healthcare products Regulatory Agency, or the MHRA, became responsible
for supervising medicines and medical devices in Great Britain, comprising England, Scotland and Wales under
domestic law, whereas Northern Ireland will continue to be subject to European Union rules under the Northern
Ireland Protocol. The MHRA will rely on the Human Medicines Regulations 2012 (SI 2012/1916) (as amended),
or the HMR, as the basis for regulating medicines. The HMR has been incorporated into the domestic law of
the body of European Union law instruments governing medicinal products that pre-existed prior to the United
Kingdom’s withdrawal from the European Union. Any delay in obtaining, or an inability to obtain, any marketing
approvals, as a result of Brexit or otherwise, may force us to restrict or delay efforts
to seek regulatory approval
in the United Kingdom for our product candidates, which could significantly and materially harm our business.
ff
We expect that we will be subject to additional risks in commercializing any of our product candidates
that receive marketing approval outside the United States, including tariffs,
requirements; economic weakness, including inflation, or political instability in particular foreign economies and
markets; compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;
foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and
other obligations incident to doing business in another country; and workforce
uncertainty in countries where
labor unrest is more common than in the United States.
trade barriers and regulatory
ff
ff
for thett
or other
tt
p aii
rr
ey leadershi
tt
in a timely
zedii
Inadequate fundingii
shut downs,ww
retain kii
commerciali
business functions on which thett
business.
ii
FDA,DD the SEC and other government agencies, incii
disrii uprr
tions to these agencies’ operations, could hinder their
rr
tt
nd other
manner or otherwi
personnel, preven
tt
prevent thott
ludingii
tt
se agencies from performingii
fromrr
abilitll y t
seii
t new products and services from being developed or
government
t o hire arr
nd
operation of our business may rely,l which could negatively i
act our
normal
l mpii
The ability of the FDA to review and approve new products can be affect
ff
ed by a variety of factors,
ff
including government budget and funding levels, ability to hire and retain key personnel and accept the
payment of user fees, and statutory, regulatory and policy changes. Average review times at the agency have
fluctuated in recent years as a result. Disruptions at the FDA and other agencies may also slow the time
necessary for new product candidates to be reviewed and/or approved by necessary government agencies,
which would adversely affect
agencies on which our operations may rely, including those that fund research and development activities, is
subject to the political process, which is inherently fluid and unpredictable.
our business. In addition, government funding of the SEC and other government
ff
Disruptions at the FDA and other agencies may also slow the time necessary for new product
candidates to be reviewed and/or approved by necessary government agencies, which would adversely affect
our business. For example, over the last several years the U.S. government has shut down several times and
certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical FDA, SEC and other
government employees and stop critical activities. If a prolonged government shutdown occurs, it could
significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could
have a material adverse effect
on our business. Further, future government shutdowns could impact our ability
to access the public markets and obtain necessary capital in order to properly capitalize and continue our
operations.
ff
ff
Separately, in response to the COVID-19 pandemic, a number of companies announced receipt of
complete response letters due to the FDA’s inability to complete required inspections for their applications. As of
May 26, 2021, the FDA noted it was continuing to ensure timely reviews of applications for medical products
during the ongoing COVID-19 pandemic in line with its user fee performff
ance goals and conducting mission
critical domestic and foreign inspections to ensure compliance of manufacturing facilities with FDA quality
standards. However, the FDA may not be able to continue its current pace and review timelines could be
extended, including where a pre-approval inspection or an inspection of clinical sites is required and due to the
ongoing COVID-19 pandemic and travel restrictions, the FDA is unable to complete such required inspections
during the review period. Regulatory authorities outside the U.S. may adopt similar restrictions or other policy
measures in response to the COVID-19 pandemic and may experience delays in their regulatory activities. If a
prolonged government shutdown or other disruption occurs, it could significantly impact the ability of the FDA to
timely review and process our regulatory submissions, which could have a material adverse effect
on our
ff
88
business. Future shutdowns or other disruptions could also affect
which may also impact our business by delaying review of our public filings, to the extent such review is
necessary, and our ability to access the public markets.
other government agencies such as the SEC,
ff
if we, or any collabll
Evenvv
approvalsvv
and ongoingii
our products, whiww ch could materiall
orators, obtain marketingii
regulatioll
n of our prodrr ucts may limi
ii
ii y i
l mpa
ir our abilityll
ll orff
appropp
ll
t how we, or thett
to generate revenue.
vals f
our product candidates, the terms of
y, manufacture and market
Once marketing approval has been granted, an approved product and its manufacturer
ff
and marketer
are subject to ongoing review and extensive regulation. We, and any collaborators, must thereforeff
requirements concerning advertising and promotion for any of our product candidates for which we or they
obtain marketing approval. Promotional communications with respect to prescription drugs are subject to a
ion in the product’s approved
variety of legal and regulatory restrictions and must be consistent with the informat
labeling. Thus, we, and any collaborators will not be able to promote any products we develop for indications or
uses for which they are not approved.
comply with
ff
In addition, manufacturers of approved products and those manufacturers’ facilities are required to
to cGMPs, which include requirements relating to quality control and quality assurance as well as the
comply with extensive FDA requirements, including ensuring that quality control and manufacturing procedures
conformff
corresponding maintenance of records and documentation and reporting requirements. We, our third-party
manufacturers, any collaborators and their third-party manufacturers could be subject to periodic unannounced
inspections by the FDA to monitor and ensure compliance with cGMPs.
Accordingly, assuming we, or any collaborators, receive marketing approval for one or more of our
product candidates, we, and any collaborators, and our respective third-party manufacturers will continue to
expend time, money and effort
product surveillance and quality control.
in all areas of regulatory compliance, including manufacturing, production,
ff
If we, and any collaborators, are not able to comply with post-approval regulatory requirements, we, and
any collaborators, could have the marketing approvals for our products withdrawn by regulatory authorities and
our, or any collaborators’, ability to market any future products could be limited, which could adversely affect
our
ability to achieve or sustain profitability. Further, the cost of compliance with post-approval regulations may have
a negative effect
on our operating results and financial condition.
ff
ff
We may seek certain dii
Track and Priority Review designations in t
designations, and even if we do, such designations may not lead to a faster
review or approvalvv process.
our product candidates, includingii
esignations forff
United States, but we mww
hett
ff
ii
Breakthrough TheTT rapy, Fast
ve such
rr
ll
pment or regulatory
ight not recei
develovv
We may seek certain designations for one or more of our product candidates that could expedite review
and approval by the FDA. A Breakthrough Therapy product is defined as a product that is intended, alone or in
combination with one or more other products, to treat a serious condition, and preliminary clinical evidence
indicates that the product may demonstrate substantial improvement over existing therapies on one or more
clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For
products that have been designated as Breakthrough Therapies, interaction and communication between the
FDA and the sponsor of the trial can help to identify the most efficient
path for clinical development while
minimizing the number of patients placed in ineffect
ive control regimens.
ff
ff
The FDA may also designate a product for Fast Track review if it is intended, whether alone or in
combination with one or more other products, for the treatment of a serious or life-threatening disease or
condition, and it demonstrates the potential to address unmet medical needs for such a disease or condition.
For Fast Track products, sponsors may have greater interactions with the FDA and the FDA may initiate review
of sections of a Fast Track product’s application beforeff
the application is complete. This rolling review may be
available if the FDA determines, after preliminary evaluation of clinical data submitted by the sponsor, that a
Fast Track product may be effect
ive.
ff
We may also seek a priority review designation for one or more of our product candidates. If the FDA
determines that a product candidate offers major advances in treatment or provides a treatment where no
priority review. A priority review
adequate therapy exists, the FDA may designate the product candidate forff
89
designation means that the goal for the FDA to review an application is six months, rather than the standard
review period of ten months.
These designations are within the discretion of the FDA. Accordingly, even if we believe that one of our
product candidates meets the criteria for these designations, the FDA may disagree and instead determine not
to make such designation. Further, even if we receive a designation, the receipt of such designation for a
product candidate may not result in a faster development or regulatory review or approval process compared to
products considered for approval under conventional FDA procedures and does not assure ultimate approval by
the FDA, including the Fast Track designation we received in May 2019 for bavdegalutamide for mCRPC.
In
addition, even if one or more of our product candidates qualifies for these designations, the FDA may later
decide that the product candidates no longer meet the conditions for qualification or decide that the time period
for FDA review or approval will not be shortened.
Any prodrr uct candidate for whiww ch we, or any collabll
to post-marketingii
subjecb
they, experience unanticipated
restrictions or withdrawdd
t to substantialii penalties if we, or they, fail tii o comply wl
alww from the markerr
ii
orators, obtaintt marketingii
b
pp
t and we, or any collabll orators, may be
ithww regulatory r
ii
eqrr uiremen
approval
ts or if we, or
could be subject
rr
.dd
problems withww our products when and if any of them are approved
rr
Any product candidate forff which we, or any collaborators, obtain marketing approval, as well as the
manufacturing processes, post-approval clinical data, labeling, advertising and promotional activities for such
product, will be subject to continual requirements of and review by the FDA, EMA and other regulatory
authorities. These requirements include submissions of safety and other post-marketing informat
reports, registration and listing requirements, cGMP requirements relating to manufacturing, quality control,
quality assurance and corresponding maintenance of records and documents, requirements regarding the
distribution of samples to physicians and recordkeeping. Even if marketing approval of a product candidate is
granted, the approval may be subject to limitations on the indicated uses for which the product may be
marketed or to the conditions of approval, including the requirement to implement a risk evaluation and
mitigation strategy. New cancer drugs frequently are indicated only for patient populations that have not
responded to an existing therapy or have relapsed. If any of our product candidates receives marketing
approval, the accompanying label may limit the approved use of our drug in this way, which could limit sales of
the product.
ion and
ff
The FDA may also impose requirements for costly post-marketing studies or clinical trials and
ff
of the product, including the adoption and implementation of risk
surveillance to monitor the safety or efficacy
evaluation and mitigation strategies. The FDA and other agencies, including the Department of Justice, or the
DOJ, closely regulate and monitor the post-approval marketing and promotion of drugs to ensure they are
marketed and distributed only for the approved indications and in accordance with the provisions of the
approved labeling. The FDA and DOJ impose stringent restrictions on manufacturers’ communications
their approved indications, we may be subject
regarding off-label
to enforcement
marketing. Violations of the Federal Food, Drug, and Cosmetic Act and other
statutes, including the False Claims Act, relating to the promotion and advertising of prescription drugs may lead
ff
to investigations and enforcement
laws, as well as state consumer protection laws.
actions alleging violations of federal and state healthcare fraud and abuse
use, and if we do not market our products forff
action for off-label
ff
ff
ff
In addition, later discovery of previously unknown side effect
s or other problems with our products or
their manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may yield
various results, including:
ff
•
•
•
•
•
•
•
•
restrictions on such products, manufacturers or manufacturing processes;
restrictions and warnings on the labeling or marketing of a product;
restrictions on product distribution or use;
requirements to conduct post-marketing studies or clinical trials;
warning letters or untitled letters;
withdrawal of the products from the market;
refusal to approve pending applications or supplements to approved applications that we submit;
recall of products;
90
•
•
•
•
•
•
•
•
fines, restitution or disgorgement of profits or revenues;
suspension or withdrawal of marketing approvals;
damage to relationships with any potential collaborators;
unfavorable press coverage and damage to our reputation;
refusal to permit the import or export of our products;
product seizure;
injunctions or the imposition of civil or criminal penalties; or
litigation involving patients using our products.
In addition, manufactu
f
rers of approved products and those manufacturers’ facilities are required to
to cGMPs applicable to drug manufacturers or quality assurance standards applicable to medical
comply with extensive FDA requirements, including ensuring that quality control and manufacturing procedures
conformff
device manufacturers, which include requirements relating to quality control and quality assurance as well as
the corresponding maintenance of records and documentation and reporting requirements. We, any contract
manufacturers we may engage in the future, our collaborators and their contract manufacturers will also be
subject to other regulatory requirements, including submissions of safety and other post-marketing informat
and reports, registration and listing requirements, requirements regarding the distribution of samples to
clinicians, recordkeeping, and costly post-marketing studies or clinical trials and surveillance to monitor the
safety or efficff acy of the product such as the requirement to implement a risk evaluation and mitigation strategy.
ion
ff
Similar restrictions apply to the approval of our products in the EU. The holder of a marketing
authorization is required to comply with a range of requirements applicable to the manufacturing, marketing,
promotion and sale of medicinal products. These include: compliance with the EU’s stringent pharmacovigilance
or safety reporting rules, which can impose post-authorization studies and additional monitoring obligations; the
rer’s license is mandator; and
manufacturing of authorized medicinal products, for which a separate manufactu
the marketing and promotion of authorized drugs, which are strictly regulated in the EU and are also subject to
EU Member State laws.
f
ll onships with htt
Our relrr ati
applicable anti-kickback, fraud and abuse and other health care laws aww nd regulatiott ns, whiww ch could
expose us to civilvv , cll
diminii
ii
riminal and admini
ished future profits and earnings.
are providers,rr physicians and third-party payors willii be subject to
ve sanctions, contractu
al damages, reputational harm and
ii strati
ealth ctt
tt
Health care providers, physicians and third-party payors will play a primary role in the recommendation
and prescription of any drugs for which we obtain marketing approval. Our future arrangements with third-party
payors, health care providers and physicians may expose us to broadly applicable state and federal fraud and
abuse and other health care laws and regulations that may constrain the business or financial arrangements
and relationships through which we market, sell and distribute any drugs for which we obtain marketing
approval. These include the following:
•
•
•
ff
KK
Statut
te, which prohibits, among other things, persons and entities from knowingly
Anti-Kickback
and willfully soliciting, offeri
ng, paying, or receiving remuneration, directly or indirectly, in cash or in
kind, to induce or reward either the referral of an individual for, or the purchasing, ordering, leasing,
arranging for, or recommending the purchasing, ordering, or leasing of, any good or service for
which payment may be made, in whole or in part, under a federal health care program such as
Medicare or Medicaid;
False Claims Act - the federal civil and criminal false claims laws, including the civil False Claims
Act, and Civil Monetary Penalties Law, which prohibit individuals or entities from, among other
things, knowingly presenting, or causing to be presented, to the federal government, false or
fraudulent claims for payment or knowingly making, using or causing to made or used a false
or fraudulent claim or to avoid, decrease or conceal an
record or statement material to a false
obligation to pay money to the federal government, or knowingly concealing or knowingly and
improperly avoiding or decreasing an obligation to pay money to the federal government;
ff
HIPAA - the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA,AA which
created additional federal criminal statutes that prohibit, among other things, executing a scheme to
91
•
•
•
defraud any health care benefit program or making false statements relating to health care matters,
and apply regardless of the payor (e.g., public or private);
and HITECH - HIPAA,AA as amended by the Health Information Technology for Economic and
HIPAAPP
Clinical Health Act, or HITECH, and their implementing regulations, which impose obligations on
HIPAAPP
required implementation of administrative, physical and technical safeguards to maintain the
privacy and security of individually identifiable health informff
covered entities and their business associates, including mandatory contractual terms and
ation;
Transparency Requirements - the federal physician transparency requirements known as the
Physician Payments Sunshine Act, under the Patient Protection and Affordable
amended by the Health Care Education Reconciliation Act, or the ACA, which requires
manufacturers of drugs, medical devices, biological and medical supplies covered by Medicare,
Medicaid, or State Children’s Health Insurance Program to report annually to the Centers for
Medicare & Medicaid Services, or CMS, within the United States Department of Health and Human
Services,
physicians, other healthcare providers and teaching hospitals, as well as ownership and investment
interests held by physicians, other healthcare providers and their immediate family
information related to payments and other transfers of value made by that entity to
members; and
Care Act, as
rr
ff
ff
, Local and Foreign Laws - analogous state, local and foreign fraud and abuse
Analogous Statett
laws and regulations, such as state anti-kickback and false claims laws, which may be broader than
similar federal laws, can apply to claims involving health care items or services regardless of payor,
and are enforced
federal and state agencies as well as through private actions.
by many different
ff
ff
Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s
voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government
and require drug manufacturers to report information related to payments and other transfersff
physicians and other health care providers or marketing expenditures. State and foreign laws also govern the
privacy and security of health informf
significant ways and often are not pre-empted by HIPAA,PP
ation in some circumstances, many of which differ
thus complicating compliance efforts.
from each other in
of value to
ff
ff
ff
Effort
s to ensure that our business arrangements with third parties will comply with applicable health
care laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude
that our business practices may not comply with current or future statutes, regulations or case law involving
applicable fraud and abuse or other health care laws and regulations. If our operations are found to be in
violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to
significant civil, criminal and/or administrative penalties, damages, fines, individual imprisonment, disgorgement,
exclusion from government funded health care programs, such as Medicare and Medicaid, contractual
damages, reputational harm, administrative burdens, diminished profits and future earnings, additional reporting
obligations and oversight if we become subject to a corporate integrity agreement or similar agreement to
resolve allegations of non-compliance with these laws and the curtailment or restructuring of our operations. If
any of the physicians or other health care providers or entities with whom we expect to do business is found to
be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions,
including exclusions from government funded health care programs.
The provision of benefits or advantages to physicians to induce or encourage the prescription,
recommendation, endorsement, purchase, supply, order or use of medicinal products is also prohibited in the
European Union. The provision of benefits or advantages to physicians is governed by the national anti-bribery
laws of European Union Member States. In addition, payments made to physicians in certain European Union
Member States must be publicly disclosed. Moreover, agreements with physicians often must be the subject of
organization and/
prior notification and approval by the physician’s employer, his or her competent professional
or the regulatory authorities of the individual European Union Member States. These requirements are provided
in the national laws, industry codes or professional
codes of conduct, applicable in the European Union Member
States. Failure to comply with these requirements could result in reputational risk, public reprimands,
administrative penalties, fines or imprisonment.
ff
f
92
ii
e withww global privacy
ii
Complianc
liii ties to us or inhibi
liabi
ii
such requi
ii
remen
rr
vv
adverse
ts could subject
effect on our business, finanii
rr
t our abilill ty to collect and process
and data security requirements could resrr ult in aii
and thett
data globally,
us to significant fines and penalties, which may have a material
dditidd onal costs and
failure t
rr o comply with
b
rr
ll
cial condition or resurr
lts of operations.
The regulatory framework for the collection, use, safeguarding, sharing, transfer and other processing
ff
ff
future. Globally,
ion worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable
of informat
ff
virtually every jurisdiction in which we operate has established its own data security and privacy frameworks
with which we must comply. For example, the collection, use, disclosure, transfer, or other processing of
personal data regarding individuals in the European Union, including personal health data, is subject to the EU
General Data Protection Regulation, or the GDPR, which took effect across all member states of the European
Economic Area, or EEA, in May 2018. The GDPR is wide-ranging in scope and imposes numerous
requirements on companies that process personal data, including requirements relating to processing health
and other sensitive data, obtaining consent of the individuals to whom the personal data relates, providing
informat
ion to individuals regarding data processing activities, implementing safeguards to protect the security
and confidentiality of personal data, providing notification of data breaches, and taking certain measures when
engaging third-party processors. The GDPR increases our obligations with respect to clinical trials conducted in
the EEA by expanding the definition of personal data to include coded data and requiring changes to informed
consent practices and more detailed notices for clinical trial subjects and investigators. In addition, the GDPR
also imposes strict rules on the transfer of personal data to countries outside the European Union, including the
United States and, as a result, increases the scrutiny that clinical trial sites located in the EEA should apply to
transfers of personal data from such sites to countries that are considered to lack an adequate level of data
protection, such as the United States. The GDPR also permits data protection authorities to require destruction
of improperly gathered or used personal informat
ion and/or impose substantial fines for violations of the GDPR,
which can be up to four percent of global revenues or 20 million Euros, whichever is greater, and it also confers
a private right of action on data subjects and consumer associations to lodge complaints with supervisory
authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the
GDPR. In addition, the GDPR provides that EU member states may make their own further laws and regulations
limiting the processing of personal data, including genetic, biometric or health data.
ff
ff
Similar actions are either in place or under way in the United States. There are a broad variety of data
agencies at both the state
protection laws that are applicable to our activities, and a wide range of enforcement
and federal levels that can review companies for privacy and data security concerns based on general
consumer protection laws. The Federal Trade Commission and state Attorneys General all are aggressive in
reviewing privacy and data security protections for consumers. New laws also are being considered at both the
state and federal levels. For example, the California
on
ff
January 1, 2020, is creating similar risks and obligations as those created by the GDPR, though CCPA dPP
exempt certain informat
Human Subjects (the Common Rule). Many other states are considering similar legislation. A broad range of
legislative measures also have been introduced at the federal level. Accordingly, failure to comply with federal
and state laws (both those currently in effecff
t and future legislation) regarding privacy and security of personal
ion could expose us to fines and penalties under such laws. There also is the threat of consumer class
informat
actions related to these laws and the overall protection of personal data. Even if we are not determined to have
violated these laws, government investigations into these issues typically require the expenditure of significant
resources and generate negative publicity, which could harm our reputation and our business.
Consumer Privacy Act, or CCPA,PP which went into effect
oes
ion collected as part of a clinical trial subject to the Federal Policy for the Protection of
ff
ff
ff
Given the breadth and depth of changes in data protection obligations, preparing for and complying with
such requirements is rigorous and time intensive and requires significant resources and a review of our
technologies, systems and practices, as well as those of any third-party collaborators, service providers,
contractors or consultants that process or transfer personal data. The GDPR and other changes in laws or
regulations associated with the enhanced protection of certain types of sensitive data, such as healthcare data
or other personal informat
ion from our clinical trials, could require us to change our business practices and put
in place additional compliance mechanisms, may interrupt or delay our development, regulatory and
commercialization activities and increase our cost of doing business, and could lead to government
actions, private litigation and significant fines and penalties against us and could have a material
enforcement
adverse effect
on our business, financial condition or results of operations. Similarly, failure to comply with
federal and state laws regarding privacy and security of personal information could expose us to fines and
penalties under such laws. Even if we are not determined to have violated these laws, government
ff
ff
ff
93
investigations into these issues typically require the expenditure of significant resources and generate negative
publicity, which could harm our reputation and our business.
Current and future legislatioll
marketingii
appropp
obtain.
rr
n may increase the difficulty and cost for us and any collabor
ators
ll
val of and commerciali
zeii
ii
our product candidates and affect the prices
rr
to obtain
we, or they, may
In the United States and some foreign jurisdictions, there have been a number of legislative and
regulatory changes and proposed changes regarding the healthcare system that could prevent or delay
marketing approval of our product candidates, restrict or regulate post-approval activities and affect
our ability to
profitably sell any product candidates for which we obtain marketing approval. The pharmaceutical industry has
ted by legislative initiatives. Current laws,
s and has been significantly affecff
been a particular focus of these effort
as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous
coverage criteria and in additional downward pressure on the price that we receive for any FDA approved
product.
ff
ff
ff
b
In the United States, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or
the MMA, changed the way Medicare covers and pays for pharmaceutical products. The legislation expanded
Medicare coverage for prescription drugs purchased through a pharmacy by the elderly and disabled and
introduced a new reimbursement methodology based on average sales prices for physician-administered drugs.
limiting the number of drugs that will be covered in any therapeutic
In addition, this statute provides authority forff
class, subject
to certain exceptions. Cost reduction initiatives and other provisions of this statute could decrease
the coverage and price that we receive for any approved products. While the MMA applies only to drug benefits
for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in
setting their own reimbursement rates. Therefore, any reduction in reimbursement that results from the MMA
may result in a similar reduction in payments from private payors. In March 2010, then-President Obama signed
Care Act, as amended by the Health Care and Education
into law the Patient Protection and Affordable
Affor
dability Reconciliation Act, or collectively the ACA. In addition, other legislative changes have been
ff
proposed and adopted since the ACA was enacted. In August 2011, the Budget Control Act of 2011, among
other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit
Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013
through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to
several government programs. These changes included aggregate reductions to Medicare payments to
providers of up to 2% per fiscal year, which went into effect
ff
under the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act. These Medicare sequester
reductions have been suspended through the end of March 2022. From April 2022 through June 2022 a 1%
. The American Taxpayer Relief Act of
sequester cut will be in effect,
2012, among other things, reduced Medicare payments to several providers and increased the statute of
limitations period for the government to recover overpayments to providers from three to five years. These laws
may result in additional reductions in Medicare and other healthcare funding and otherwise affect
the prices we
may obtain for any of our product candidates for which we may obtain regulatory approval or the frequency with
which any such product candidate is prescribed or used.
with the full 2% cut resuming thereafter
in April 2013 and will remain in effect
through 2031
ff
ff
ff
ff
Since enactment of the ACA, there have been and continue to be, numerous legal challenges and
Congressional actions to repeal and replace provisions of the law. For example, with enactment of the Tax Cuts
for Jobs Act, or TCJA, in 2017, Congress repealed the “individual mandate.” The repeal of this provision, which
requires most Americans to carry a minimal level of health insurance, became effecti
December 14, 2018, a U.S. District Court judge in the Northern District of Texas ruled that the individual
mandate portion of the ACA is an essential and inseverable feature of the ACA and thereforeff
mandate was repealed as part of the TCJA, the remaining provisions of the ACA are invalid as well. The U.S.
Supreme Court heard this case on November 10, 2020 and on June 17, 2021, dismissed this action after finding
that the plaintiffsff do not have standing to challenge the constitutionality of the ACA. Litigation and legislation
over the ACA are likely to continue, with unpredictable and uncertain results.
ve in 2019. Further, on
because the
ff
94
The Trump Administration also took executive actions to undermine or delay implementation of the
ACA, including directing federal agencies with authorities and responsibilities under the ACA to waive, deferff
,
grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or
regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of
pharmaceuticals or medical devices. On January 28, 2021, however, President Biden rescinded those orders
and issued a new Executive Order which directs federal agencies to reconsider rules and other policies that limit
Americans’ access to health care, and consider actions that will protect and strengthen that access. Under this
Order, federal agencies are directed to re-examine: policies that undermine protections for people with pre-
existing conditions, including complications related to COVID-19; demonstrations and waivers under Medicaid
and the ACA that may reduce coverage or undermine the programs, including work requirements; policies that
undermine the Health Insurance Marketplace or other markets forff
health insurance; policies that make it more
difficult
assistance, including for dependents. This Executive Order also directs the U.S. Department of Health and
Human Services to create a special enrollment period for the Health Insurance Marketplace in response to the
COVID-19 pandemic.
to enroll in Medicaid and the ACA; and policies that reduce affordabilit
y of coverage or financial
ff
ff
We expect that these healthcare reforms, as well as other healthcare reform measures that may be
adopted in the future, may result in additional reductions in Medicare and other healthcare funding, more
rigorous coverage criteria, new payment methodologies and additional downward pressure on the price that we
receive for any approved product and/or the level of reimbursement physicians receive for administering any
approved product we might bring to market. Reductions in reimbursement levels may negatively impact the
prices we receive or the frequency with which our products are prescribed or administered. Any reduction in
reimbursement from Medicare or other government programs may result in a similar reduction in payments from
on anticipated revenue from
private payors. Accordingly, such reforms, if enacted, could have an adverse effect
product candidates that we may successfully develop and for which we may obtain marketing approval and may
affect
our overall financial condition and ability to develop or commercialize product candidates.
ff
ff
The prices of prescripti
considerab
le legislativ
dd
products, if and when approve
e avv
pp
ll
d.
ii on pharmaceuticals in the United States
ctiontt
nd executivtt e avv
s and could impact the prices
and foreign jurisdi
rr
tt
ii
we obtain for our drugrr
ctions are subject to
The prices of prescription pharmaceuticals have also been the subject
b
of considerable discussion in the
United States. There have been several recent U.S. congressional inquiries, as well as proposed and enacted
state and federal legislation designed to, among other things, bring more transparency to pharmaceutical
pricing, review the relationship between pricing and manufacturer patient programs, and reduce the costs of
In 2020, President Trump issued several executive orders
pharmaceuticals under Medicare and Medicaid.
intended to lower the costs of prescription products and certain provisions in these orders have been
incorporated into regulations. These regulations include an interim final rule implementing a most favored
nation model for prices that would tie Medicare Part B payments forff
ive January 1, 2021.
pharmaceuticals to the lowest price paid in other economically advanced countries, effect
That rule, however, has been subject to a nationwide preliminary injunction and, on December 29, 2021, CMS
issued a final rule to rescind it. With issuance of this rule, CMS stated that it will explore all options to
incorporate value into payments forff Medicare Part B pharmaceuticals and improve beneficiaries' access to
evidence-based care.
certain physician-administered
ff
In addition, in October 2020, HHS and the FDA published a final rule allowing states and other entities
to develop a Section 804 Importation Program, or SIP, to import certain prescription drugs from Canada into the
United States. The final rule is currently the subject of ongoing litigation, but at least six states (Vermont
,
Colorado, Florida, Maine, New Mexico, and New Hampshire) have passed laws allowing forff
drugs from Canada with the intent of developing SIPs for review and approval by the FDA. Further, on
November 20, 2020, HHS finalized a regulation removing safe harbor protection for price reductions from
pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit
managers, unless the price reduction is required by law. The implementation of the rule has been delayed by
the Biden administration from January 1, 2022 to January 1, 2023 in response to ongoing litigation. The rule
also creates a new safe harbor for price reductions reflected at the point-of-sale,
for certain fixed fee arrangements between pharmacy benefit managers and manufacturers, the implementation
of which have also been delayed by the Biden administration until January 1, 2023.
as well as a new safe harbor
the importation of
VV
f
95
At the state level, individual states are increasingly aggressive in passing legislation and implementing
regulations designed to control pharmaceutical and biological product pricing, including price or patient
reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and
transparency measures, and, in some cases, designed to encourage importation from other countries and bulk
purchasing. In addition, health care organizations and individual hospitals are increasingly using bidding
procedures to determine what pharmaceutical products and which suppliers will be included in their prescription
drug and other health care programs. These measures could reduce the ultimate demand for our products,
once approved, or put pressure on our product pricing. We expect that additional state and federal healthcare
reform measures will be adopted in the future, any of which could limit the amounts that federal and state
governments will pay for healthcare products and services, which could result in reduced demand for our
product candidates or additional pricing pressures.
In other countries, particularly the countries of the European Union, the pricing of prescription
pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental
authorities can take considerable time after the receipt of marketing approval for a drug. To obtain
reimbursement or pricing approval in some countries, we, or our collaborators, may be required to conduct a
iveness of our drug to other available therapies. If reimbursement of
clinical trial that compares the cost-effect
our drugs is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory
levels, our business
could be materially harmed.
ff
ff
We are srr
and other
tt
civilvv or crimin
rr
our busines
ii
ubject to anti-corruptiu on laws, as well all s export
ee
laws governing our operatiorr
sww
ns. If we fail to comply with these laws, we cww ould be subject to
ffect
control laws, customs laws, sanctions lawll
ses, which could adversel
remedialdd measures and legal expenxx
y al
vv
al penalties, other
tt
s, results of operations and finanii
cial condition.
Our operations are subject to anti-corruption laws, including the FCPA,PP the Bribery Act, and other
anticorruption laws that apply in countries where we do business and may do business in the future. The FCPA,PP
the Bribery Act, and these other laws generally prohibit us, our officers and our employees and intermediaries
from bribing, being bribed or making other prohibited payments to government officials
obtain or retain business or gain some other business advantage. We may in the future operate in jurisdictions
that pose a high risk of potential FCPA oPP
relationships with third parties whose actions could potentially subject us to liability under the FCPA,PP the Bribery
Act, or local anti-corruption laws. In addition, we cannot predict the nature, scope or effect
requirements to which our international operations might be subject or the manner in which existing laws might
be administered or interpreted.
r Bribery Act violations, and we may participate in collaborations and
or other persons to
of future regulatory
ff
ff
We are also subject to other laws and regulations governing our international operations, including
regulations administered by the governments of the United States, United Kingdom, and authorities in the
European Union, including applicable export control regulations, economic sanctions on countries and persons,
customs requirements and currency exchange regulations, which we collectively refer to as Trade Control Laws.
There is no assurance that we will be completely effect
ff
ive in ensuring our compliance with all applicable
anti-corruption laws, including the FCPA,PP the Bribery Act, or other legal requirements, including Trade Control
Laws. If we are not in compliance with the FCPA,PP the Bribery Act, and other anti-corruption laws or Trade
Control Laws, we may be subject to criminal and civil penalties, disgorgement and other sanctions and remedial
measures, and legal expenses, which could have an adverse impact on our business, financial condition,
results of operations and liquidity. The Securities and Exchange Commission, or SEC, also may suspend or bar
issuers from trading securities on U.S. exchanges for violations of the FCPA’PP s accounting provisions. Likewise,
any investigation of any potential violations of the FCPA, the Bribery Act, other anti-corruption laws or Trade
Control Laws by U.S., U.K. or other authorities could also have an adverse impact on our reputation, our
business, results of operations and financial condition.
nvironmii
If we fail to comply wl
subject to fines or penalties or incur costs that could signi
ental, hll
itww h ett
ll
ificantly harm our business.
ealth and safety laws and regulation
s, we could become
We are subjeb ct to numerous environmental, health and safety laws and regulations, including those
governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials
and wastes. From time to time and in the future, our operations may involve the use of hazardous and
96
flammable materials, including chemicals and biological materials, and may also produce hazardous waste
products. Although we contract with third parties for the disposal of these materials and waste products, we
cannot completely eliminate the risk of contamination or injury resulting from these materials. In the event of
contamination or injury resulting from the use or disposal of our hazardous materials, we could be held liable for
any resulting damages, and any liability could exceed our resources. We also could incur significant costs
associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.
We maintain workers’ compensation insurance to cover costs and expenses we may incur due to
injuries to our employees resulting from the use of hazardous materials, but this insurance may not provide
adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic
tort claims that may be asserted against us. In addition, we may incur substantial costs in order to comply with
current or future environmental, health and safety laws and regulations. Current or future environmental laws
and regulations may impair our research, development or production effort
our
business, financial condition, results of operations or prospects. In addition, failure to comply with these laws
and regulations may result in substantial fines, penalties or other sanctions.
s, which could adversely affect
ff
ff
Risks Related to Employee Matters and Managing Growth
Our futff ure success depends odd
qualified personnel.
n our abilitll y t
t o retarr
in key executivtt esvv
and to attract,
tt
retain and motivatevv
We are highly dependent on the research, development and clinical expertise of our management and
scientific teams. Although we have entered into employment agreements with our executive officers,
them may terminate their employment with us at any time. We do not maintain “key person” insurance for any of
our executives or other employees.
each of
ff
Recruiting and retaining qualified scientific, clinical, manufacturing and sales and marketing personnel
rs or other key employees
will also be critical to our success. The loss of the services of our executive officeff
could impede the achievement of our research, development and commercialization objectives and seriously
harm our ability to successfully implement our business strategy. Furthermore, replacing executive officers
key employees may be diffiff cult and may take an extended period of time because of the limited number of
individuals in our industry with the breadth of skills and experience required to successfully develop, gain
marketing approval of and commercialize products. Competition to hire from this limited pool is intense, and we
may be unable to hire, train, retain or motivate these key personnel on acceptable terms given the competition
among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience
competition for the hiring of scientific and clinical personnel from universities and research institutions. In
addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in
formulating our research and development and commercialization strategy. Our consultants and advisors may
be employed by employers other than us and may have commitments under consulting or advisory contracts
with other entities that may limit their availability to us. If we are unable to continue to attract and retain high
quality personnel, our ability to pursue our growth strategy will be limited.
and
ff
We willii need to growrr
growth, whiww ch could disdd rupt our operatiorr
ii
the size of our organi
zatio
ns.
rr
n, and we mww
ay experience diffidd culties in managing thitt sii
We expect to experience significant growth in the number of our employees and the scope of our
operations, particularly in the areas of drug development, manufacturing, regulatory affai
product candidates receives marketing approval, sales, marketing and distribution. To manage our anticipated
future growth, we must continue to implement and improve our managerial, operational and financial systems,
expand our facilities and continue to recruit and train additional qualified personnel. Future growth would impose
significant added responsibilities on members of management, including:
rs and, if any of our
ff
•
identifying, recruiting, integrating, maintaining and motivating additional employees;
• managing our internal development efforts
ff
effect
ff
ively, including the clinical and FDA review process
for bavdegalutamide, ARV-RR 471, ARV-RR 766 and any product candidate we develop, while complying
with our contractual obligations to contractors and other third parties; and
•
improving our operational, financial and management controls, reporting systems and procedures.
97
Our future financial performan
rr
ce and our ability to advance development of and, if approved,
commercialize bavdegalutamide, ARV-RR 471, ARV-RR 766 and any product candidate we develop will depend, in
part, on our ability to effectively manage any future growth. Due to our limited financial resources and the limited
experience of our management team in managing a company with such anticipated growth, we may not be able
to effect
ff
expansion of our operations may lead to significant costs and may divert our management and business
development resources. Any inability to manage growth could delay the execution of our business plans or
disrupt our operations.
ively manage the expansion of our operations or recruit and train additional qualified personnel. The
Our intern
ii
suffer security breach
programs.
rr
al computer systems, or those of any collaboll
rr
es, which could result in aii material
rators, contractors or consultants, may fail or
ptiu on of our product development
disruii
Our internal computer systems and those of any collaborators, contractors or consultants are vulnerable
to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and
telecommunication and electrical failures. Such systems are also vulnerable to service interruptions or to
security breaches from inadvertent or intentional actions by our employees, third-party vendors and/or business
partners, or from cyber-attacks by malicious third parties. Cyber-attacks are increasing in their frequency,
sophistication and intensity, and have become increasingly difficult
deployment of harmful malware, ransomware, denial-of-service
files, social engineering and other means to affect
service reliability and threaten the confidentiality, integrity and
availability of information. Cyber-attacks also could include phishing attempts or e-mail fraud to cause payments
ff
or informat
to detect. Cyber-attacks could include the
attacks, unauthorized access to or deletion of
ion to be transmitted to an unintended recipient.
ff
ff
ff
ff
While we have not experienced any such material system failure, accident or security breach to date, if
such an event were to occur and cause interruptions in our operations, it could result in a material disruption of
our development programs and our business operations, whether due to a loss of our trade secrets or other
proprietary informat
ion or other similar disruptions. For example, the loss of clinical trial data from completed or
and significantly increase our costs to
future clinical trials could result in delays in our marketing approval efforts
recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of, or
damage to, our data or applications, or inappropriate disclosure of confidential or proprietary informat
could incur liability, our competitive position could be harmed and the further development and
commercialization of our product candidates could be delayed.
ion, we
ff
ff
Our employees, indepene
dent contracto
engage in misconduct or other improprr
and requiremen
ts and insii
iderdd tradindd g lawll
rr
ii
s.ww
s,rr CROs and consultants may
rs, vendors, principal investigator
standardsdd
ll
ii
er activities, incii
non-compliance
with regulatory
ludingii
i
We are exposed to the risk that our employees, independent contractors, vendors, principal
investigators, CROs and consultants may engage in fraudulent conduct or other illegal activity. Misconduct by
these parties could include:
•
•
•
•
intentional, reckless or negligent conduct or disclosure of unauthorized activities to us that violate
the regulations of the FDA or similar foreign regulatory authorities;
healthcare fraud and abuse laws and regulations in the United States and abroad;
violations of U.S. federal securities laws relating to trading in our common stock; and
failures to reporting of financial informat
ff
ion or data accurately.
In particular, sales, marketing and business arrangements in the healthcare industry are subject to
extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive
practices. These laws and regulations regulate a wide range of pricing, discounting, marketing and promotion,
sales commission, customer incentive programs and other business arrangements. Other forms of misconduct
ion obtained in the course of clinical trials or creating fraudulent data
could involve the improper use of informat
in our preclinical studies or clinical trials, which could result in regulatory sanctions and cause serious harm to
our reputation. We have adopted a code of conduct and implement other internal controls applicable to all of our
employees, but it is not always possible to identify and deter misconduct by employees and other third parties,
and the precautions we take to detect and prevent this activity may not be effeff ctive in controlling unknown or
unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits
ff
98
ff
to comply with these laws or regulations. Additionally, we are subject to the risk that a
stemming from a failure
person could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted
against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a
significant impact on our business, including the imposition of civil, criminal and administrative penalties,
damages, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal
healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, and
curtailment of our operations, any of which could adversely affect
results of operations.
our ability to operate our business and our
ff
Risks Related to Our Common Stock
The price of our common stock is volatil
of all or part of our stockholde
rs’ invesvv
kk
ll
tment.
e and may fluctuate stt
ubstantially,l which could result in the loss
Our stock price is volatile. The stock market in general and the market for smaller biopharmaceutical
companies in particular have experienced extreme volatility that has often been unrelated to the operating
performance
of particular companies. The market price for our common stock may be influenced by many
factors, including:
ff
•
•
•
•
•
•
•
•
•
•
the degree of success of competitive products or technologies;
results of or developments in preclinical studies and clinical trials, of our product candidates or
those of our competitors;
regulatory or legal developments in the United States and other countries;
developments or disputes concerning patent applications, issued patents or other proprietary rights;
the recruitment or departure of key personnel;
the level of expenses related to any of our product candidates or clinical development programs;
the results of our effoff
product candidates;
rts to discover, develop, acquire or in-license additional technologies or
actual or anticipated changes in estimates as to financial results, development timelines or
recommendations by securities analysts;
variations in our financial results or those of companies that are perceived to be similar to us;
changes in the structure of healthcare payment systems;
• market conditions in the pharmaceutical and biotechnology sectors;
•
•
general economic, industry and market conditions; and
the other factors described in this “Risk Factors” section.
If any of the foregoing matters were to occur, or if our operating results fall
f
below the expectations of
investors or securities analysts, the price of our common stock could decline substantially. In the past, followin
g
periods of volatility in the market price of a company’s securities, securities class-action litigation often has been
instituted against that company. Such litigation, if instituted against us, could cause us to incur substantial costs
to defend such claims and divert management’s attention and resources, which could seriously harm our
business, financial condition, results of operations and prospects.
ff
Our execu
ee
abilityll
tive officers, directo
ii
rs and principal stockholders, if they choose to act together, have the
.ll
to significantly influence or control all matters submitted to stockholders for approval
rr
Our executive officers
ff
and directors, combined with our stockholders who own more than 5% of our
outstanding common stock, in the aggregate, beneficially own shares representing approximately 27% of our
capital stock. As a result, if these stockholders were to choose to act together, they would be able to significantly
influence or control all matters submitted to our stockholders for approval, as well as our management and
ff
affai
rs. For example, these persons, if they choose to act together, could significantly influence or control the
99
election of directors and approval of any merger, consolidation or sale of all or substantially all of our assets.
This concentration of ownership control may:
•
•
•
delay, defer or prevent a change in control;
entrench our management and the board of directors; or
impede a merger, consolidation, takeover or other business combination involving us that other
stockholders may desire.
sioii
Provi
ns in our corpor
rr
company, which may be beneficialii
rr
rr o repla
stockholders t
aterr
rr
ce or remove our currerr nt management.tt
charter documents, under Delaware l
rr awll
could make an acquisitio
ii
n of our
to our stockhokk
dd
lders,
more difficult and may prevent attempts by our
Provisions in our certificate of incorporation and our bylaws may discourage, delay or prevent a merger,
acquisition or other change in control of our company that stockholders may consider favorable, including
transactions in which stockholders might otherwise receive a premium for their shares. These provisions could
also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby
depressing the market price of our common stock. In addition, because our board of directors is responsible forff
appointing the members of our management team, these provisions may frustrate or prevent any attempts by
our stockholders to replace or remove our current management by making it more difficult
for stockholders to
replace members of our board of directors. Among other things, these provisions:
ff
•
•
•
•
•
•
•
•
provide for a classified board of directors such that only one of three classes of directors is elected
each year;
allow the authorized number of our directors to be changed only by resolution of our board of
directors;
limit the manner in which stockholders can remove directors from our board of directors;
provide for advance notice requirements for stockholder proposals that can be acted on at
stockholder meetings and nominations to our board of directors;
require that stockholder actions must be effect
actions by our stockholders by written consent;
ff
ed at a duly called stockholder meeting and prohibit
limit who may call stockholder meetings;
authorize our board of directors to issue preferred stock without stockholder approval, which could
be used to institute a “poison pill” that would work to dilute the stock ownership of a potential hostile
acquirer, effectively preventing acquisitions that have not been approved by our board of directors;
and
require the approval of the holders of at least 75% of the votes that all our stockholders would be
entitled to cast to amend or repeal specified provisions of our charter or bylaws.
Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203
of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our
outstanding voting stock from merging or combining with us forff
transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or
combination is approved in a prescribed manner.
a period of three years after the date of the
An active tradi
rr
ngii market for our common stock may not be sustained.
Our shares of common stock began trading on the Nasdaq Global Select Market on September 27,
2018. Given the limited trading history of our common stock, there is a risk that an active trading market for our
shares will not be sustained, which could put downward pressure on the market price of our common stock and
therefore affecff
t the ability of our stockholders to sell their shares.
100
If securities or industry arr
an adverserr
declinell
.
nalystsyy
ii
or misleading opinion
rr
regarding
our stock, okk ur stock price and tradrr
ingdd
volume could
do not publish reserr
archrr
or reports att
bout our business, or if they
tt
issue
The trading market for our common stock is influenced by the research and reports that industry or
securities analysts publish about us or our business. If no or few securities or industry analysts continue
coverage of us, the trading price for our stock could be negatively impacted. If any of the analysts who cover us
issue an adverse or misleading opinion regarding us, our business model, our intellectual property or our stock
performance,
likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we
could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to
decline.
to meet the expectations of analysts, our stock price will
or if our trials or operating results fail
ff
f
If a significant portiorr n of our total outstandingii
ificantly, evenvv
common stock could droprr
signi
shares are sold intii o thett market, the markerr
if our busines
oingii well.
s is dii
ii
t price of our
Sales of a substantial number of shares of our common stock in the public market, or the perception in
the market that the holders of a large number of shares intend to sell shares, could reduce the market price of
our common stock. Holders of a significant portion of our common stock have rights, subject to specified
conditions, to require us to file registration statements covering their shares or to include their shares in
registration statements that we may file for ourselves or other stockholders.
In July 2019, we issued 1,346,313 shares of our common stock to Bayer. On October 1, 2019, we filed
a registration statement on Form S-3 covering the resale of these shares.
In September 2021, we issued 3,457,815 shares of our common stock to Pfizer at a price of $101.22
per share, for an aggregate purchase price of approximately $350.0 million.
We have registered all shares of common stock that we may currently issue under our equity
compensation plans. These shares can be freely sold in the public market upon issuance, subject to volume,
notice and manner of sale limitations applicable to affiliat
es.
ff
We currently have on file with the SEC universal shelf registration statements on Form S-3 which allow
r and sell registered common stock, preferred stock, debt securities, depositary shares, units and/or
us to offeff
warrants from time to time pursuant to one or more offer
sale. In October 2019, we entered into an Equity Distribution Agreement, or Distribution Agreement, with Piper
Sandler & Co. (formerly
offer
ff
shelf registration statement pursuant to one or more “at the market” offerings.
Agreement in August 2021. Through the date of the termination, we sold 2,593,637 shares of common stock in
an at-the-market offeri
& Co.), or Piper Sandler, pursuant to which, from time to time, we may
and sell through Piper Sandler up to $100.0 million of the common stock registered under the universal
We terminated the Distribution
ings at prices and terms to be determined at the time of
ng for aggregate net proceeds of $64.1 million.
Piper Jaffray
ff
ff
ff
ff
ff
In Auggust 2021, we entered into an Equi yty Distribution gAgreement with Pipe Sr Sandler & C& C
ymay fofffer
ompany, or
y
and sell ffrom
Piper SSandler, and CCantor Fi gtzgerald & C& Co., or CCantor, as gagents, pursuant to which we
time to time, th
shelf
f
rough the gagents, up to $$300.0 million fof the common stock
gregistration statement pursuant to one or more "at-the-market" offfferi gngs. Du gring th ye year ended December 31,
2021, no shares were issued under this aggreement.
gregistered under the universal
g
fff
Sales of substantial amounts of shares of our common stock or other securities by our stockholders
under our universal shelf registration statement, including pursuant to our "at-the-market" offering program, or
otherwise could also dilute our stockholders.
We wilii l cll ontinue to incur increased
rr
management wilww l bll
governance practices.
rr
redii
e requi
costs as a resrr ult of operatingii
to devote substantial timeii
to new compliance
as a public company, and our
initiatives
and corporate
ii
ii
As a public company, we incur, and particularly now that we are no longer an emerging growth
company, we will further incur significant legal, accounting and other expenses that we did not incur as a private
company. The Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley, the Dodd-Frank Wall Street Reform and
101
ff
ive disclosure and financial controls and corporate governance practices. Our
Consumer Protection Act, the listing requirements of The Nasdaq Global Select Market and other applicable
securities rules and regulations impose various requirements on public companies, including establishment and
maintenance of effect
management and other personnel devote a substantial amount of time to these compliance initiatives.
Moreover, these rules and regulations have increased our legal and financial compliance costs and have made
some activities more time-consuming and costly. For example, these rules and regulations have made it more
difficult
liability insurance, which in turn could make it
more difficult
and more expensive for us to obtain director and officer
ff
for us to attract and retain qualified members of our board of directors.
ff
ff
Pursuant to Section 404 of Sarbanes-Oxley, or Section 404, we are required to furnish a report by our
management on our internal control over financial reporting beginning with our most recent annual report. ToTT
achieve compliance with Section 404 within the prescribed period, we will be engaged in a process to document
and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we
will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed
work plan to assess and document the adequacy of internal control over financial reporting, continue steps to
improve control processes as appropriate, validate through testing that controls are functioning as documented
and implement a continuous reporting and improvement process for internal control over financial reporting.
Despite our effoff
that our internal control over financial reporting is effecti
more material weaknesses, it could result in an adverse reaction in the financial markets and restrict our future
access to the capital markets due to a loss of confidence in the reliability of our financial statements.
rts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all,
ve as required by Section 404. If we identify one or
ff
i
rr
esdd
of incorporation provid
Our certificate
that the Court orr
exclusive forum for substantiallyll all dispii utes between us and our stockholders. Our certificate of
incorporr
ii
ral distri
sole and exclusive fvv orff umrr
the Securitirr es Act. These choice of forum provisi
favorable judicial foruff m forff
resolution of any complainll
t assertingtt
ons could limit
ll
ff
rs, office
rr
dispii utes with us or our dirdd ecto
our stockholders’ abiliii ty to obtain a
rs, employees or stockholders.
f the UniUU ted States of America are the
a cause of action arising
f Chancery of the Statett
ration further providesdd
that the fede
ll
of Delaware
ct courts ott
for thett
rr
ff
ii
under
willii be the
Our certificate of incorporation provides that the Court of Chancery of the State of Delaware is the
ff
rs, other employees or stockholders to the company or our
any derivative action or proceeding brought on our behalf, any action asserting a breach of
exclusive forum forff
fiduciary duty owed by our directors, officeff
stockholders, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law
or as to which the Delaware General Corporation Law confers jurisdiction on the Court of Chancery of the State
of Delaware, or any action asserting a claim arising pursuant to our certificate of incorporation or our bylaws or
governed by the internal affai
rs doctrine. Our certificate of incorporation further provides that, unless we consent
in writing to the selection of an alternative forum, the federal district courts of the United States of America shall,
to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint
asserting a cause of action arising under the Securities Act of 1933, as amended, or the Securities Act. These
choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forumff
favorable for disputes with us or our directors, officeff
discourage such lawsuits against us and our directors, officeff
rs, other employees or other stockholders.
Alternatively, if a court were to find this provision in our certificate of incorporation to be inapplicable or
unenforceable
jurisdictions, which could adversely affect
provisions would affect
and regulations thereunder, jurisdiction over which is exclusively vested by statute in the United States federal
courts, or any other claim for which United States federal courts have exclusive jurisdiction.
in an action, we may incur additional costs associated with resolving such action in other
suits brought to enforce any liability or duty created by the Exchange Act or the rules
our business and financial condition. Neither of these choice of forum
rs, other employees or other stockholders, which may
that it finds
ff
ff
ff
Because we do not anticipate
ii
ation
capital appreci
, if any, willii be our stockhokk
dd
paying any cash divide
dd
lders’
rr
ii
nds on our capital stock in the forff eseeab
sole sourcerr
of gain.
rr
le future,
We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of
our future earnings, if any, to finance the growth and development of our business. In addition, the terms of any
future debt agreements we may enter into may preclude us from paying dividends. As a result, capital
appreciation, if any, of our common stock will be our stockholders’ sole source of gain for the foreseeable
future.
ff
102
Item 1B. Unresolved Staff Cff
omments.
Not applicable.
Item 2. Properties.
We lease approximately 63,000 square feet of office and laboratory space in New Haven, Connecticut
under leases that expire in December 2024. In May 2021, we entered into a lease for approximately 160,000
square feet of office and laboratory space to be occupied in 2024. We believe that our facilities are sufficient
meet our current needs and that suitable additional space will be available as and when needed.
ff
to
Item 3. Legal Proceedings.
We are not currently a party to any material legal proceedings.
Item 4. Mine Safety Disclosures.
Not applicable.
103
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
Market Information
Our common stock has been publicly traded on the Nasdaq Global Select Market under the symbol
since September 27, 2018 in connection with our initial public offering,
or IPO. Prior to that time, there
ff
“ARVN”RR
was no public market for our common stock.
Holders
As fof Feb
ruary 23, 2022, there were approximat yely 67 holders fof
y
recor of our common stock. This
rd
number does not include beneficial owners whose shares are held by nominees in street name.
Dividend Policy
We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of
our future earnings, if any, to finance the growth and development of our business. We do not intend to pay
cash dividends in respect of our common stock in the foreseeable future. Any future determination to pay
dividends will be made at the discretion of our board of directors and will depend on various factors, including
applicable laws, our results of operations, financial condition, future prospects, then applicable contractual
restrictions and any other factors deemed relevant by our board of directors. Investors should not purchase our
common stock with the expectation of receiving cash dividends.
Recent Sales of Unregistered Securities
Other than as set forth below, we did not issue any securities that were not registered under the
Securities Act of 1933, as amended, or the Securities Act, during the year ended December 31, 2021.
In September 2021, in connection with the ARV-RR 471 Collaboration Agreement with Pfizer, we sold
3,457,815 shares of common stock to Pfizer at a price of $101.22 per share, for an aggregate purchase price of
$350 million. The shares were issued in reliance on the exemption from registration under Section 4(a)(2) of the
Securities Act of 1933, as amended, or the Securities Act, for a transaction by an issuer not involving any public
offering
within the meaning of Section 4(a)(2) of the Securities Act.
ff
Purchases of Equity Securities
We did not purchase any of our registered equity securities during the period covered by this Annual
Report on Form 10-K.
Performan
r
ce Graph
ff
The performance
graph shown below compares the quarterly change in cumulative total shareholder
return on our common shares with the Nasdaq Composite Index and the Nasdaq Biotechnology Index from
September 27, 2018 (the first date on which shares of our common stock were publicly traded) through the
quarter ended December 31, 2021. The graph assumes an investment of $100 on September 27, 2018 in our
common shares, the Nasdaq Composite Index and the Nasdaq Biotechnology Index and assumes that any
dividends are reinvested. All index values are weighted by the capitalization of the companies included in the
index. The comparisons shown in the graph below are based upon historical data. The stock price performance
included in this graph is not necessarily indicative of future stock price performance.
The following performance
graph and related informat
and Exchange Commission, or SEC, for purposes of Section 18 of the Securities Exchange Act of 1934, as
into any future filing
amended, or the Exchange Act, nor shall such informat
ion shall not be deemed to be “soliciting material” or to be “filed” with the Securities
ion be incorporated by reference
ff
ff
ff
ff
ff
ff
104
under the Exchange Act or Securities Act, except to the extent that we specifically incorporate it by reference
into such filing.
f
Comparison of Cumulative Total Return
Assumes Initial Investment of $100
December 2021
Arvinas, Inc.
Nasdaq Composite Index
Nasdaq Biotechnology Index
600
500
400
300
200
100
0
8
1
9 /3
0
0
0 /2
8
1
2 /3
0
1
1 /2
8
1
3 /3
0
0
1 /2
9
1
6 /3
0
0
0 /2
9
1
9 /0
0
0
3 /2
9
1
2 /3
0
1
1 /2
9
1
3 /3
0
0
1 /2
0
2
6 /3
0
0
0 /2
0
2
9 /3
0
0
0 /2
0
2
2 /3
0
1
1 /2
0
2
3 /3
0
0
1 /2
1
2
6 /3
0
0
0 /2
1
2
9 /3
0
0
0 /2
1
2
2 /3
0
1
7 /2
9 /2
0
1
2
0
1 /2
6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis is meant to provide
rr
material informat
ff
iontt
relevant to an
f operati
conditiontt
and results ott
ff
ii
nd uncertai
rr nt
iett s of cash flows from operations
assessment of the financial
amounts att
better view our company from management's perspective.
analysis of financial conditiontt
related notes appearingii
tt
looking statements t
tt hat
the sectiontt
materially from those anticipat
presentati
and operatingtt
elsewheww re in this Aii
tt
involve risks and uncertaint
ies.
tt
t
tt
rr ons of our company, including an evaluationtt
of the
and from outside sources, so as to allow investors to
tt
tt ogether
results t
nnual Report on Form 10-K. TKK hisTT
rr
As a result
You should read the following discussion and
ur consolidated financial statements att
forward-
discussion contains
of many factors, such as those set forth in
with ott
tt
nd the
titled “Risk Factors”rr and elsewhere in this Annual Report on Form 10-K, our actual results mtt
g statements.tt For convenience of
ww
ed in or implied by these forwff
ard-lookin
tt
r
ay diffei
tt on some of the numbers have been rounded in the text below.
Our Busines
ii
s
Overview
We are a clinical-stage biopharmaceutical company dedicated to improving the lives of patients
ng from debilitating and life-threatening diseases through the discovery, development and
sufferi
ff
commercialization of therapies to degrade disease-causing proteins. We use our PROTAC Discovery Engine,
proprietary technology platform to engineer proteolysis targeting chimeras, or PROTACTT
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
technology has the potential to address a broad range of
gene-based medicines. Our small-molecule PROTACTT
intracellular disease targets, including those representing up to the 80% of proteins that currently cannot be
targeted protein
105
addressed by existing small molecule therapies, commonly referred to as “undruggable” targets. We are using
our PROTACTT
target diseases in oncology (including immuno-oncology), neuroscience, and other therapeutic areas. Our three
lead product candidates are bavdegalutamide, ARV-RR 471, and ARV-766.
Discovery Engine to build an extensive pipeline of protein degradation product candidates to
VV
Bavdegalutamide
We are developing bavdegalutamide, an investigational orally bioavailable 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 bavdegalutamide designed to assess the
safety, tolerability and pharmacokinetics of bavdegalutamide, which also includes measures of anti-tumor
activity as secondary endpoints, including reduction in prostate specific antigen, or PSA, a well-recognized
biomarker of prostate cancer progression. We received fast track designation for bavdegalutamide for mCRPC
rth quarter of 2020, we
in May 2019. We have completed dose escalation in the Phase 1 clinical trial. In the fouff
initiated ARDENT, tTT he Phase 2 single agent expansion portion of the bavdegalutamide clinical trial. In the fouff
rth
quarter of 2021, we initiated a Phase 1b clinical trial with bavdegalutamide in combination with abiraterone for
the treatment of men with mCRPC. In the first half of 2022, we intend to initiate discussions with the U.S. Food
and Drug Administration, or FDA, about the potential for an accelerated approval pathway with bavdegalutamide
in molecularly defined mCRPC and finalize a partnership for a companion diagnostic. In the second half of
2022, we plan to initiate a pivotal trial for patients with AR T878/H875 tumor mutations. We anticipate that future
studies will be planned to explore the potential to treat earlier-line patients with AR-dependent tumors who may
benefit from bavdegalutamide therapy.
ARV-471
We are developing ARV-471,
VV
an investigational orally bioavailable PROTAC protein degrader targeting
TT
the treatment of patients with locally advanced or metastatic ER
the estrogen receptor protein, or ER, forff
positive / HER2 negative breast cancer. We initiated a Phase 1 clinical trial of ARV-RR 471 designed to assess the
safety, tolerability and pharmacokinetics of ARV-RR 471, which also includes measures of anti-tumor activity as
secondary endpoints. In the fouff
rth quarter of 2020, we initiated a Phase 1b cohort expansion of ARV-RR 471 in
combination with Ibrance® (palbociclib). We have completed dose escalation in the Phase 1 clinical trial. In the
first quarter of 2021, we initiated VERITAC,
the Phase 2 single agent expansion cohort of the ARV-RR 471 clinical
trial. In July 2021, we entered into a collaboration agreement with Pfizer, pursuant to which we granted Pfizer
worldwide coexclusive rights to develop and commercialize ARV-RR 471. In December 2021, we presented data
from the dose escalation portion of the Phase 1/2 clinical trial at the San Antonio Breast Cancer Symposium. In
the second
dosed at 200 and 500 mg) and present safety data from the Phase 1b combination study with palbociclib.
Additionally, in 2022, we plan to initiate a Phase 1b clinical trial with ARV-471
patients with metastatic breast cancer, initiate a Phase 1b combination trial with cyyclin-dependent kinase, or
CCDK, inhibitors or other t gargeted therapies, initiate a Phase 2 clinical trial in patients with early breast cancer in
the neoadjuvant setting and initiate Phase 3 clinical trials in patients with metastatic breast cancer as a
monotherapy and in combination.
fof 2022, we plan to present data from the VERITACTT
Phase 2 dose expansion (with patients
in combination with everolimus in
fhalf
VV
ARV-766
We are developing ARV-766,
VV
an investigational orally bioavailable PROTACTT
protein degrader for the
treatment of men with mCRPC. In preclinical studies, ARV-RR 766 degraded all tested resistance-driving point
mutations of AR, including L702H, a mutation associated with treatment with abiraterone and other AR-pathway
therapies, which bavdegalutamide did not degrade in preclinical studies. In 2021, we initiated a Phase 1 clinical
trial for ARV-RR 766 designed to assess the safety, tolerability and pharmacokinetics of ARV-RR 766, which also
includes measures of anti-tumor activity as secondary endpoints, including reduction in PSA. In the second half
of 2022, we plan to present Phase 1 dose escalation data and initiate a Phase 2 expansion trial for the
treatment of men with mCRPC.
Bavdegalutamide, ARV-RR 471 and ARV-RR 766 have all demonstrated potent and selective protein
degradation in our preclinical studies. We believe favorable clinical trial results in these initial oncology
programs would provide validation of our platform as a new therapeutic modality forff
diseases caused by dysregulated intracellular proteins regardless of therapeutic area.
the potential treatment of
106
OOur OOperations
AAs a result off the COCOVID-19 pandemic,
ymany companies have experienced disruptions in their
y
ymay take additional precaut
employees' well-beingg and minimize business disruption. We te
operations and in the markets theyy serve. We have instated some and
measures intended to help ensure our
shut down our laboratories in mid-March 2020 and initiated work with biologygy contract research
or CC OROs, but have since reopened our laboratories. OOur offffice-based
((parti yally remote and pa
estimates used and determined that there were no material adverse impacts on our results off operations and
ffinancial position as fof December 31, 2021. The ffull extent
remains uncertain. A p
g
business operations,
required to advance our preclinical pipeline.
rolonged outbreak could have a material adverse impact on our ffinancial results and
including the tim ging and our abilityy to complete certain clinical trials and other
rtially in-person).). We considered the impact
fof CCOOVID-19 on the assumptions and
fof the ffuture impacts fof CCOOVID-19 on our operations
working in a hyybrid ffashion
employees are
y
gorganizations,
mporarily
y
feffforts
ionary
y
g
g
y
fff
We commenced operations in 2013. Our operations to date have been limited to organizing and staffingff
our company, business planning, raising capital, conducting discovery and research activities, filing patent
applications, identifying potential product candidates, undertaking preclinical studies and clinical trials and
establishing arrangements with third parties for the manufacture of initial quantities of our product candidates.
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 December 31, 2021, we raised approximately $1.3 billion in gross proceeds from the sale of equity
instruments and the exercise of stock options, and had received an aggregate of $$774.0 million in payments
primarily from collaboration partners.
In July 2021, we entered into a collaboration agreement, or the ARV-RR 471 Collaboration Agreement, with
Pfizer Inc., or Pfizer, pursuant to which we granted Pfizer worldwide co-exclusive rights to develop and
commercialize products containing our proprietary compound ARV-RR 471, or the Licensed Products. Under the
ARV-RR 471 Collaboration Agreement, we received an upfront, non-refundable payment of $650 million. In addition,
we will be 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 million in
regulatory milestones are related to marketing approvals and $1.0 billion are related to sales-based milestones.
We and Pfizer will share equally (50/50) all development costs, including costs forff
conducting clinical
trials, for the Licensed Products, subject to certain exceptions. Except for certain regions described below, we
and Pfizer will also share equally all profits and losses in commercialization and medical affairs
Licensed Products in all other countries, subject to certain exceptions.
activities for the
ff
We 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. We
and Pfizer 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 all profits and losses for the Licensed Products based on the
role each party will be performing.
ff
In addition, in connection with the execution of the ARV-RR 471 Collaboration Agreement, in July 2021, we
and Pfizer entered into a Stock Purchase Agreement, or Pfizer Stock Purchase Agreement, forff
issuance of 3,457,815 shares of our common stock, or the Shares, to Pfizer at a price of $101.22 per share, for
an aggregate purchase price of $350 million, or the Pfizer Equity Transaction, which was consummated in
September 2021. We have determined that the fair market value of the Pfizer Equity Transaction totaled $264.6
million and allocated the $85.4 million excess purchase price to the ARV-471
Pursuant to terms of the Pfizer Stock Purchase Agreement, Pfizer has agreed not to sell or transfer the Shares
without our prior written approval for a specified time period, subject to specified exceptions.
Collaboration Agreement.
the sale and
VV
We are a clinical-stage company. Bavdegalutamide and ARV-RR 471 are each in Phase 1/2 clinical trials,
ARV-RR 766 is in a Phase 1 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
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 losses were
$191.0 million, $119.3 million and $70.3 million for the years ended December 31, 2021, 2020, and 2019,
respectively. As of December 31, 2021, we had an accumulated deficit of $$682.9 mill
to achieve profitability will
ion
.
ff
107
Our total operating expenses were $242.0 million, $146.7 million, and $94.5 million for the years ended
December 31, 2021, 2020, and 2019, respectively. We anticipate that our expenses will increase substantially
due to costs associated with our ongoing and anticipated clinical activities for bavdegalutamide, ARV-RR 471, and
ARV-RR 766, development activities associated with our other product candidates, research activities in oncology,
neurological and other disease areas to expand our pipeline, hiring additional personnel in research, clinical
trials, quality and other functional areas, increased expenses incurred with CMOs to supply us with product for
our preclinical and clinical studies and CROs forff
activities, as well as other associated costs including the management of our intellectual property portfolio.
the synthesis of compounds in our pre-clinical development
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 effort
rights to our technologies, future revenue streams, research programs or product candidates or grant licenses
on terms that may not be favorable to us.
s, or to relinquish valuable
ff
Revenue
Financial Operations Overview
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 sales-based milestone payments or royalties under any of the collaboration
agreements.
ff
Genentech License Agreement
In September 2015, we entered into an Option and License Agreement with Genentech, Inc. and F.
ff
Roche Ltd, collectively referred to as Genentech, focused on PROTAC targeted protein degrader
Hoffmann-La
discovery and research for target proteins, or Targets, based on our proprietary platform technology, other than
excluded Targets as described below. This collaboration was expanded in November 2017 through an Amended
and Restated Option, License and Collaboration Agreement, which we refer to as the Restated Genentech
Agreement.
Under the Restated Genentech Agreement, Genentech has the right to designate up to ten Targets forff
further discovery and research utilizing our PROTAC platform technology. Genentech may designate as a
Target any protein to which a PROTACTT
b
action, subject
substitute a differe
ff
Target or in certain circumstances following commencement of research by us.
targeted protein degrader, by design, binds to achieve its mechanism of
from the collaboration and
nt Target that is not an excluded Target at any time prior to us commencing research on such
to certain exclusions. Genentech also has the right to remove a Target
TT
At the time we entered into the original agreement with Genentech we received an upfront payment of
$11.0 million, and at the time we entered into the Restated Genentech Agreement, we received an additional
$34.5 million in upfront and expansion target payments. We are eligible to receive up to an aggregate of $27.5
million in additional expansion target payments if Genentech exercises its options for all remaining Targets. We
are also eligible to receive payments aggregating up to $44.0 million per Target upon the achievement of
specified development milestones; payments aggregating up to $52.5 million per Target (assuming approval of
two indications) subject to the achievement of specified regulatory milestones; and payments aggregating up to
$60.0 million per PROTACTT
achievement of specified sales milestones. These milestone payments are subject to reduction if we do not
have a valid patent claim covering the licensed PROTAC targeted protein degrader at the time the milestone is
achieved. We are also eligible to receive, on net sales of licensed PROTAC targeted protein degraders, mid-
single digit royalties, which may be subject to reductions.
targeted protein degrader directed against the applicable Target, subject to the
108
Pfizff er Researchrr Collaboratrr
iontt
Agreement
In December 2017, we entered into a Research Collaboration and License Agreement with Pfizer
targeted protein degraders that mediate forff
setting forth our collaboration to identify or optimize PROTACTT
degradation of Targets using our proprietary platforff m technology that are identified in the agreement or
subsequently selected by Pfizer, subject to certain exclusions. We refer to this agreement as the Pfizer
Research Collaboration Agreement.
Under the Pfizer Research 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 December 31, 2018, we received an upfront, non-refundable payment and certain
additional payments totaling $28.0 million in exchange for use of the technology license and to fund Pfizer-
related research as defined within the Pfizer Research Collaboration Agreement. We are eligible to receive up
to an additional $37.5 million in non-refundable option payments if Pfizer exercises its options for all targets
under the Pfizer Research Collaboration Agreement. We are also entitled to receive up to $225.0 million in
development milestone payments and up to $550.0 million in sales-based milestone payments forff
designated targets under the Pfizer Research Collaboration Agreement, as well as mid- to high-single digit
tiered royalties, which may be subject to reductions, on net sales of PROTACTT
products. In 2021 and 2020, we received payments totaling $$1.2 million and $$4.4 mill
additional targets and services.
targeted protein degrader-related
ion respectively, forff
all
,
Bayer Collaboll
t
ration Agreemen
rr
In June 2019, we entered into a Collaboration and License Agreement, or the Bayer Collaboration
iates, Bayer, setting forth our collaboration to
degradation of Targets, using our
Agreement, with Bayer AG, or, together with its controlled affilff
identify or optimize PROTACTT
proprietary platforff m technology, that are selected by Bayer, subject to certain exclusions and limitations. The
ive in July 2019.
Bayer Collaboration Agreement became effect
targeted protein degraders that mediate forff
ff
Under the Bayer Collaboration Agreement, we and Bayer 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
to any third party in the field of human disease under the licensed intellectual property forff
activities.
selected or reserved by Bayer, or grant any license, covenant not to sue or other right
the conduct of such
TT
Under the terms of the Bayer Collaboration Agreement, we received an aggregate upfront non-
refundable payment of $17.5 million, plus an additional $1.5 million in research funding payments. Bayer is
committed to fund an additional $10.5 million in research funding payments through 2022, of which $3.0 million
was received in each of the years ended December 31, 2021 and 2020, subject
costs for research activities exceed the research funding payments allocated to a Target
are met. We are also eligible to receive up to $197.5 million in development milestone payments and up to
all designated Targets. In addition, we are eligible to
$490.0 million in sales-based milestone payments forff
receive, on net sales of PROTAC targeted protein degrader-related products, mid-single digit to low-double digit
tiered royalties, which may be subject to reductions.
to potential increases if our
and certain conditions
TT
b
ii
Pfizer
VV
ARV-471
rr
Collabor
ation
ll
t
Agreemen
rr
In July 2021, we entered into the ARV-RR 471 Collaboration Agreement with Pfizer, pursuant to which we
granted Pfizer worldwide co-exclusive rights to develop and commercialize the Licensed Products.
109
Under the ARV-RR 471 Collaboration Agreement, we received an upfront, non-refundable payment of $650
million. In addition, we are eligible to receive up to an additional $1.4 billion in contingent payments based on
specified regulatory and sales-based milestones for the Licensed Products. Of the total contingent payments,
$400 million in regulatory milestones are related to marketing approvals and $1.0 billion are related to sales-
based milestones.
We and Pfizer will share equally (50/50) all development costs (including costs forff
conducting any
clinical trials) for the Licensed Products, subject to certain exceptions. Except for certain regions described
below, we will also share equally (50/50) all profits and losses in commercialization and medical affairs
for the Licensed Products in all other countries, subject to certain exceptions.
ff
activities
We will be the marketing authorization holder and, subject to marketing approval, book sales in the
United States, while Pfizer will hold marketing authorizations outside the United States. We will determine with
Pfizer 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 all profits and losses for the Licensed Products based on the role each party will
ff
be performing.
Unless earlier terminated in accordance with its terms, the ARV-471
Collaboration Agreement will expire
on a Licensed Product-by-Licensed Product and country-by-country basis when such Licensed Products are no
longer commercialized or developed forff
commercialization in such country. Pfizer may terminate the ARV-RR 471
Collaboration Agreement for convenience in its entirety or on a region-by-region basis subject to certain notice
periods. Either party may terminate the ARV-RR 471 Collaboration Agreement for the other party’s uncured material
breach or insolvency. Subject to applicable terms of the ARV-RR 471 Collaboration Agreement, including certain
payments to Pfizer upon termination for our uncured material breach, effect
VV
Collaboration Agreement, we are entitled to retain specified licenses to be able to continue to exploit the
Licensed Products.
ive upon termination of the ARV-471
VV
ff
Subject to specified exceptions, we and Pfizer have each agreed not to directly or indirectly research,
develop, or commercialize any competing products outside of the ARV-471
VV
in the world during the term of the ARV-RR 471 Collaboration Agreement.
Collaboration Agreement anywhere
Operatingii
Expense
xx
s
Our operating expenses since inception have consisted solely of research and development costs and
general and administrative costs.
Research and Development ExpeEE
nses
Research and development expenses consist primarily of costs incurred for our research activities,
including our discovery effort
ff
s, 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 studies 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.
110
We typically use our employee and infrastructure resources across our development programs, and as
such, do not track all of 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, which includes
bavdegalutamide and ARV-RR 766, ER program, which includes ARV-RR 471, and all other platform and exploratory
research and development costs:
(dollars in millions)
AR program development costs
ER program development costs
Other research and development costs
Total research and development costs
Years Ended December 31,
2021
2020
2019
$
$
41.8 $
24.4 $
30.9
107.7
17.5
66.5
180.4 $
108.4 $
12.1
6.2
48.9
67.2
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 bavdegalutamide, ARV-RR 471 and ARV-RR 766, including our ongoing Phase 1/2 clinical trials for
bavdegalutamide and ARV-RR 471 and our ongoing Phase 1 clinical trial for ARV-RR 766, and continue to discover and
develop additional product candidates. Research and development expenses related to ARV-RR 471 are shared
equally with Pfizer from July 22, 2021, the effective date of the ARV-RR 471 Collaboration Agreement. The ER
program development costs in the table above reflect the cost sharing with Pfizer.
ff
We cannot reasonably estimate or determine with certainty the duration and costs of future clinical trials
of bavdegalutamide, ARV-RR 471 and ARV-RR 766 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 forff 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 forff
product candidates;
our
• making arrangements with third-party manufactu
f
rers, or establishing manufacturing
f
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 followin
ff
g 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 FDA or another regulatory authority were to require us to conduct
clinical trials beyond those that we anticipate will be required for the completion of clinical development of a
product candidate, or if we experience significant delays in our clinical trials due to patient enrollment or
other reasons, we would be required to expend significant additional financial resources and time on the
completion of clinical development.
111
General and Admidd nisii
tratrr
ivtt e Evv
xpEE enses
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 forff
accounting, auditing, tax and consulting services; insurance costs;
travel expenses; and facilit
for rent and maintenance of facilities and other operating costs.
y-related expenses, which include direct depreciation costs and allocated expenses
ff
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 Nasdaq and Securities and Exchange Commission requirements; director and officer
investor and public relations costs.
insurance costs; and
ff
)e
Interest Income (Ex(( pense
xx
Interest income consists of interest earned on our cash, cash equivalents, restricted cash and
marketable securities. Interest income decreased in 2021 as compared to 2020 primarily due to lower interest
by a larger marketable securities balance. Interest expense consists primarily of interest
rates, partially offset
paid or accrued on our outstanding debt with the State of Connecticut.
ff
Income Taxes
SSince our inception in 2013, we have not recorded
yany U.SS. ffederal or state income tax be
fnefit
fs forff
the
net losses we have incurred in
due to our uncertaintyy off rea
operat ging loss carryforwards
carryf
ff
carryforwards
$$15.2 million and $$4.5 million, respect
yany yyear or ffor our ffederal or state earned research and development tax credits,
g
carryforwards fof $$373.6 million, which
fof $$346.9 million, and ffederal and state research and development tax credit carryfo
ft from those items. As fof December 31, 2021, we had ffederal net
rating loss
g
gbegin to expire in 2033, state and local net ope
gbegin to expire in 2033 and 2036, respecti
carryforwards fof
yvely.
lizing a ben fefi
ively, which
y
AAs fof December 31, 2021, we had ffour whollyy owned subsidiaries
gorganized as CC-corporations: Arvinas
gdrogen Receptor, Inc., Arvinas Est grogen Receptor, Inc., and Arvinas Winchester,
OOperations, Inc., Arvinas An
Inc. Prior to December 31, 2018, these subsidiaries were separat
loss carryf
ff
allowance gagainst th fe full amount
earnings hist yory, it is more l
our
carryforwards
fof the d feferred tax assets since, in the opinion off m
y
ikely than not that the ben fefits will not be realized.
g
are ggenerated ffrom the CC-corporation subsidiaries’ ffi glings. We have provided a valuation
fe filers ffor ffederal tax purposes. Net op
erating
g
anagement, based upon
g
Critical Accounting Policies and Use of Estimates
Our management’s discussion and analysis of financial condition and results of operations is based on
our consolidated financial statements, which have been prepared in accordance with generally accepted
accounting principles in the United States. The preparation of our consolidated financial statements and related
disclosures requires us to make estimates and assumptions that affect
liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our consolidated financial
statements. We base our estimates on historical experience, known trends and events and various other factors
that we believe are reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these
estimates under different
the reported amounts of assets and
assumptions or conditions.
ff
ff
While our significant accounting policies are described in more detail in the notes to our consolidated
financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe that the followin
accounting policies are those most critical to the judgments and estimates used in the preparation of our
consolidated financial statements.
ff
g
112
Revenue Recognition
We re gcognize revenue under Account ging SStandards C fCodification, or SASCC, 606, Revenue ffrom CContracrr
tstt
ustomers.rr Our revenue is generated through research collaboration and license agreements with
wit Ch Ctt
pharmaceutical partners. The terms of these agreements contain multiple goods and services which may
include (i) licenses, (ii) research and development activities and (iii) participation in joint research and
development steering committees. The terms of these agreements may include non-refundable upfront license
research and development activities, payments upon the achievement of certain
or option fees, payments forff
milestones, and royalty payments based on product sales derived from the collaboration. Under ASC 606, we
evaluate whether the license agreement, research and development services, and participation in research and
obligations. We have
development steering committees, represent separate or combined performance
ff
determined that these services within our existing contracts represent a combined single performance
obligation.
ff
The research collaboration and license agreements typically include contingent milestone payments
related to specified preclinical and clinical development milestones and regulatory milestones. These milestone
payments represent variable consideration that are not initially recognized within the transaction price as they
are fully constrained under the guidance in ASC 606. We will continue to assess the probability of significant
reversals for any amounts that become likely to be realized prior to recognizing the variable consideration
associated with these payments within the transaction price.
Revenue is recognized ratably over our expected performance
ff
period under each respective
arrangement. We make our best estimate of the period over which we expect to fulfill our performance
obligations, which includes access to technology through the license agreement and research activities. Given
the uncertainties of these collaboration arrangements, significant judgement is required to determine the
duration of the performance period.
ff
For the years ended December 31, 2021, 2020 and 2019, the transaction price allocated to the
ff
obligation identified under the individual research collaboration and license agreements
combined performance
was recognized as revenue on either a straight-line basis over the estimated performance
arrangement or over the estimated performance
Straight-line basis was considered the best measure of progress for certain agreements in which control of the
combined obligation transfers to the customers, due to the contract containing license rights to technology,
research and development services, and joint committee participation, which in totality are expected to occur
ratably over the performance period.
period under the
period based on our best estimate of costs to be incurred.
ff
ff
Our contracts may also call for certain sales-based milestone and royalty payments upon successful
commercialization of a target. In accordance with ASC 606-10-55-65, we recognize revenues from sales-based
milestone and royalty payments at the later of (i) the occurrence of the subsequent sale, or (ii) the performance
obligation to which some or all of the sales-based milestone or royalty payments has been allocated has been
satisfied (or partially satisfied). We anticipate recognizing these milestone and royalty payments if and when
subsequent sales are generated by the customer from the use of the technology. To dTT
these sales-based milestone and royalty payments has been recognized for any periods.
ate, no revenue from
ff
Amounts received prior to satisfying the above revenue recognition criteria are recorded as contract
liabilities in our accompanying consolidated balance sheets.
Research and Development Contract Costs and Accruals
As part of the process of preparing our financial statements, we are required to estimate our accrued
research and development expenses. This process involves reviewing open contracts and purchase orders,
communicating with our applicable personnel to identify services that have been performed
estimating the level of service performed
and the associated cost incurred for the service when we have not yet
been invoiced or otherwise notified of actual costs. The majority of our service providers invoice us in arrears for
services performed,
require advance payments. We make estimates of our accrued expenses as of each balance sheet date in the
financial statements based on facts and circumstances known to us at that time. We periodically confirm the
on a pre-determined schedule or when contractual milestones are met; however, some
on our behalf and
ff
ff
ff
113
accuracy of these estimates with the service providers and make adjustments, if necessary. Examples of
estimated accrued research and development expenses include fees paid to:
•
•
vendors in connection with clinical development activities; and
CROs and investigative sites in connection with pre-clinical, non-clinical, and human clinical
trials
ff
We base the expense recorded related to external research and development on our estimates of the
expended pursuant to quotes and contracts with multiple CMOs and CROs that
services received and efforts
supply, conduct and manage clinical trials on our behalf. The financial terms of these agreements are subject to
negotiation, vary from contract to contract and may result in uneven payment streams. There may be instances
in which payments made to our vendors will exceed the level of services provided and result in a prepayment of
the expense. In accruing service fees, we estimate the time period over which services will be performed
the level of effort
to be expended in each period. If the actual timing of the performance
of effort
ff
Although we do not expect our estimates to be materially different
ff
relative to the actual status and timing of services
understanding of the status and timing of services performed
performed
may vary and may result in reporting amounts that are too high or too low in any particular period. To
date, there have not been any material adjustments to our prior estimates of accrued research and development
expenses.
varies from the estimate, we adjust the accrual or the amount of prepaid expenses accordingly.
ff
of services or the level
from amounts actually incurred, our
and
ff
ff
ff
ff
New Accounting Prono
PP
uncementstt
For information on new accounting standards, see Note 2 to our consolidated financial statements
appearing elsewhere in this Annual Report on Form 10-K.
Comparisonii
of Years Ended December 31, 2021 and 2020
Results of Operations
(dollars in millions)
Revenue
Research and Development expenses
General and administrative expenses
Other Income
Net loss
Revenue
Years Ended December 31,
2021
2020
$ change
$
$
46.7 $
21.8 $
180.4
61.6
4.3
108.4
38.3
5.6
(
(191.0) $
(
)
)
(
(119.3) $
(
)
)
24.9
72.0
23.3
(1.3)
)
(71.7)
(
)
(
Revenues for the year ended December 31, 2021 were $46.7 million, compared with $21.8 million forff
the year ended December 31, 2020. The increase of $$24.9 million was primari yly due t $o $25.6 million fof revenue
ffrom the ARV-471
yby a net
y
CCollaboration gAgreement entered into du gring the third quarter
decrease in revenue due to a collaborator addingg new gtargets that extends the period fof revenue
recognition ffor
that collaboration aggreement.
ially fofffset
fff
g
fof 2021, part
VV
Research and Development ExpeEE
nses
Research and development expenses ffor the yyear ende Dd ecember 31, 2021 were $$180.4 million,
compared with $$$108.4 million ffor the yyear ended December 31, 2020. This increase fof $$$72.0 million was
p
primarilyy due to investments in our pla ftforff m and explorat yory
expenses related to our AR and ER p grograms fof $$
p
g
spending over all
all
fof our
costs and related
billings to
g
pr gograms into additional clinical trials. ER pr gogram costs were fofffset
fPfizer in accordance with our ARV-RR 471 CCollaboration gAgreement. Direct expenses related to our platfform and
$30.2 million, i
manufactu gring costs increased yby $$$$35.9 million as we expanded our AR and ER
f
fff
fof our p grograms was primarily due to increased personnel and personnel costs utilized across
yy
$16.1 million related to stock compensation expense. CClinical trial
ncluding $
gprograms fof $$$41.2 million and increases in
$17.4 million and $$13.4 million, respect
yby $$$13.4 million fof cost sha gring
gprograms fof $$
gdrug
ively. The increase in
g
y
114
explorat yory ta grgets increased yby $$18.9 million as we expanded the number
and lead optimization phases as well as more investments in our platfform d
fof protein
iscovery feffforts.
y
gtargets in the explorat yory
fff
General and Administrativ
EE
e Evv
rr
xpense
s
GGeneral and administrative expenses were $$61.6 million ffor the yyear ended December 31, 2021,
compared with $$$38.3 million ffor the yyear ended December 31, 2020. This increase fof $$23.3 million was pri
due to an increase fof personnel an fd facilit
compensation expense, and insurance, taxes and
g
fprofessional ffees off $$$4.2 million.
ymarily
ncluding $$$10.3 million related to stock
yy related costs off $$$19.2 million, i
ff
OOther Income
OOther income was $$4.3 million ffor the yyear ended December 31, 2021, compared with $$5.6 million ffor
the yyear ended December 31, 2020. This decrease fof $$1.3 million was pri
$$1.7 million ffrom marketable securityy investments as compared to the prior yyear period, and ya y
change in realized losses fof $$0.6 million, p
artially fofffset
y
the then outstan
criteria.
fff
gding loan balance, related to the SState fof CConnecticut loan, upon our
yby forgforgiveness fof debt
f
f
satisfaction
g
ear-over-year
fof $$1.0 million equal to %50% fof
y
ymarily due to lower interest income off
fof certain jjobs
Results of Operations — Years Ended December 31, 2020 and 2019
Discussion and analysis of the year ended December 31, 2020 compared to the year ended
December 31, 2019 is included under the heading "Comparison of Years Ended December 31, 2020 and 2019"
in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in
our 2020 Annual Report on Form 10-K as filed with the SEC on March 1, 2021 and incorporated by reference
into this Annual Report on Form 10-K.
f
Liquidity and Capital Resources
Sources of Liquidityt
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 State of Connecticut. Through
December 31, 2021, we had received an aggregate of $774.0 million in payments from collaboration partners,
grant funding and forgivable and partially forgivable loans from the State of Connecticut, and raised
approximately $1.3 billion in gross proceeds from the sale of equity interests and the exercise of stock options,
including:
•
October 2018: completion of our IPO, in which we issued and sold an aggregate of 7,700,482
shares of common stock for aggregate gross proceeds of $123.2 million beforeff
fees and expenses;
•
July 2019: sale of 1,346,313 shares of common stock to Bayer AG for aggregate gross
proceeds of $32.5 million;
•
November 2019: completion of a follow-on
ff
offering
ff
common stock for aggregate gross proceeds of $115.0 million beforeff
in which we issued 5,227,273 shares of
fees and expenses;
•
offering”
ff
September - December 2020: sale of 2,593,637 shares of common stock in an “at-the-market
for aggregate gross proceeds of $65.6 million beforeff
fees and expenses;
•
December 2020: completion of a follow-on
ff
offering
ff
in which we issued 6,571,428 shares of
common stock for aggregate gross proceeds of $460.0 million beforeff
fees and expenses; and
•
September 2021: issuance of 3,457,815 share of common stock to Pfizer for aggregate gross
proceeds of $350 million.
In May 2021, we entered into a lease for approximately 160,000 square feet of laboratory and officeff
space to be occupied in 2024. In connection with the signing of the lease, and at our election to increase the
landlord’s contribution to the tenant’s improvement allowance, we issued a letter of credit for $4.5 million,
115
collateralized by a certificate of deposit in the same amount. Once occupied, the base rent will range from $7.7
million to $8.8 million annually over a ten-year lease term.
In July 2021, we entered into the ARV-471
Collaboration Agreement with Pfizer, pursuant to which we
granted Pfizer worldwide co-exclusive rights to develop and commercialize the Licensed Products. Under the
ARV-RR 471 Collaboration Agreement, Pfizer made an upfront, nonrefundable payment of $650 million.
VV
In August 2021, we entered into an Equity Distribution Agreement with Piper Sandler & Company and
Cantor Fitzgerald & Co., as agents, pursuant to which we may offer
agents, up to $$300.0 million fof the common stock reggistered under the universal
pursuant to one or more ““at-the-market" offfferi gngs. During the year ended December 31, 2021, no shares were
issued under this agreement.
and sell from time to time, through the
gregistration statement
shelf
f
ff
Cash Flows
Our cash, cash equivalents, restricted cash and marketable securities totaled $1.5 billion and $688.5
million as of December 31, 2021 and 2020, respectively. We had an outstanding loan balance of $1.0 million
and $2.0 million as of December 31, 2021 and 2020, respectively.
The following table summarizes our sources and uses of cash for the period presented:
(dollars in millions)
Net cash provided by (used in) operating activities
Net cash (used in) provided by investing activities
Net cash provided by financing activities
Years Ended December 31,
2021
2020
2019
$
559.4 $
(89.7) $
(1,313.6)
278.6
164.3
504.6
(40.6)
(93.1)
139.7
Net (decrease) increase in cash, cash equivalents and
restricted cash
$
(
(475.6) $
(
)
)
579.2 $
6.0
Operatingii
Activities
Net cash provided by operating activities for the year ended December 31, 2021 totaled $559.4 million,
primarily due to an increase in deferred revenue of $695.5 million driven largely by the ARV-471
Agreement with Pfizer, a net increase in accrued expenses and accounts payable of $27.9 million, and non-
cash charges of $72.1 million, partially offset
receivable of $14.0 million related primarily to the ARV-RR 471 Collaboration Agreement, prepaid expenses related
in part to clinical trials and drug manufacturing contracts of $13.6 million, and the payment to obtain a contract
of $12.9 million related to the ARV-RR 471 Collaboration Agreement. Non-cash charges were primarily stock
compensation expense of $57.1 million, net accretion of bond discounts/premiums of $9.4 million and
depreciation and amortization of $4.8 million.
by our net loss of $191.0 million, an increase in accounts
Collaboration
VV
ff
Net cash used in operating activities for the year ended December 31, 2020 totaled $89.7 million,
resulting from our net loss of $119.3 million and a decrease in deferred revenue of $13.3 million, partially offset
by non-cash expenses of $35.6 million and an increase in accounts payable and accrued expenses of $12.8
million. Non-cash expenses included $30.2 million of stock compensation expense. The decrease in deferred
revenue is primarily due to $21.8 million of revenue recognized, partially offset
received and an accounts receivable from collaboration partners.
by $8.5 million in payments
ff
ff
Net cash used in operating activities for the year ended December 31, 2019 totaled $40.6 million,
ff
resulting from our net loss of $70.3 million and an increase in other receivables of $4.0 million, partially offset
by
non-cash expenses of $22.5 million and an increase in accounts payable and accrued expenses of $5.2 million
and deferred revenue of $4.9 million. The increase in deferred revenue is primarily due to $23.1 million in
payments received from collaboration partners, partially offset
by $18.3 million of revenue recognized.
ff
116
Invesvv
tingii
Activities
Net cash used in investing activities for the year ended December 31, 2021 totaled $1.3 billion,
attributable to purchases of marketable securities in excess of the maturities of marketable securities of $1.3
billion due in part to funds received as part of the ARV-RR 471 Collaboration Agreement and purchases of property
and equipment of $4.7 million, partially offset
by sales of marketable securities of $7.2 million.
ff
Net cash provided by investing activities for the year ended December 31, 2020 totaled $164.3 million,
attributable to the net maturities and sales of marketable securities in excess of purchases of $170.7 million,
offset
by the purchases of property and equipment of $6.4 million.
ff
Net cash used in investing activities for the year ended December 31, 2019 totaled $93.1 million,
attributable to the net investment of excess cash of $86.8 million and the purchases of property and equipment
of $6.3 million.
Finanii
cing Activities
Net cash provided by financing activities for the year ended December 31, 2021 totaled $278.6 million,
attributable to the proceeds from the issuance of shares of our common stock to Pfizer of $260.0 million (after
allocation of a portion of the proceeds to deferred revenue), net of expenses, and proceeds from the exercise of
stock options of $18.6 million.
Net cash provided by financing activities for the year ended December 31, 2020 totaled $504.6 million,
and at-the-market
ff
and offering
ff
of $496.3 million, net of combined underwriter discounts from the public offering
primarily attributable to the proceeds from sales of our common stock from our public offering
offering
$29.3 million and the proceeds from the exercise of stock options of $8.3 million.
costs of
ff
ff
Net cash provided by financing activities for the year ended December 31, 2019 totaled $139.7 million,
primarily attributable to the proceeds from the sales of our common stock, net of underwriter discounts and
offering
costs, of $137.1 million and the proceeds from the exercise of stock options of $2.8 million. We also
made $0.2 million in debt payments.
ff
Fundindd g Requiremen
ii
ts
Since our inception, we have incurred significant operating losses. We expect to continue to incur
future as we advance the preclinical
significant expenses and increasing operating losses for the foreseeable
and clinical development
fof our product candidates. In addition, we expect to continue to incur additional costs
g
associated with ope
rating as a public c
ompany.
y
ff
fecif
SSp
•
y
ically, we anticipate that our expenses will increase substant
lal
ially fif and as we:
dproduct candiddidate be avdegalutamide and a Phase 1b clinical
contiinue Pa Phhase 1/21/2 li
trial of bavdegalutamide in combination with abiraterone for the treatment of men with metastatic
castration-resistant prostate cancer, or mCRPC, and i
li
clinical
l
i
CRPmCRPCC;
expansions of bf avdegalutamide iin co bimbinatiion iwithh sta d d
ndard fof care agents, iin men iwithh
initiiate one or more addi idditi
onal PhPhase 1b1b
clinical
i
l
fof our
itri
y
i
l
i
•
•
•
•
•
c
ontinue a Phase 1/2 clinical trial of our product candidate ARV-471
ARV-RR 471 in combination with palbociclib, and initiate an additional Phase 1b cohort expansion in
combination with a standard of care agent, each in patients with locally advanced or metastatic ER
positive / HER2 negative breast cancer and initiate a window of opportunity study in early breast
cancer;
and a Phase 1b clinical trial of
VV
continue a Phase 1 clinical trial
a planned Phase 2 cohort expansion trial in 2022;
fof our product candidate ARV-766
VV
in men with mCCRPCC, and initiate
y
apply our PROOT CACTT
clinical development;
Discovery Enggine to advance additional product candidates into preclinical and
y
expand the capabilities fof our PROOT CACTT
D
iscovery Enggine;
y
seek market ging approvals ffor
yany product candidates that succe fssful yly complete clinical trials;
117
•
•
•
•
ultimat yely establish a sales, marketi gng and distribution f
manufactu gring capabilities to commercialize
yany product
approval;
f
infrastructure and scale up external
fs forff which we
ymay obtain market ging
expand, maintain and protect our intellectual propertyy portffolio;
hire additional development, in
cluding clinical and
g
gregulat yory, and scient fific personnel; and
add operational, ffinancial and managgement i fnformff
research, product development an fd future commercialization feffforts
a public c
ompany.
y
fff
ation ysystems and personnel to support our
and support our operations as
We had cash, cash equivalents, restricted cash and marketable securities of approximately $1.5 billion
as of December 31, 2021. We believe that our cash, cash equivalents, restricted cash and marketable securities
as of December 31, 2021 will enable us to fund our planned operating expenses and capital expenditure
requirements multiple additional years beyond 2024. We have based this estimate on assumptions that may
prove to be wrong, and we could use our capital resources sooner than we currently expect. Our future capital
requirements will depend on many factors, including:
•
•
•
•
•
•
•
•
•
the progress, costs and results of our ongoing clinical trials for bavdegalutamide, ARV-RR 471 and
ARV-RR 766 and any future clinical development of bavdegalutamide, ARV-RR 471 and ARV-RR 766;
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;
ff
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
ff
our ability to establish additional collaboration arrangements with other biotechnology or
pharmaceutical companies on favorable terms, if at all, for the development or commercialization of
our product candidates.
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 offeff
collaborations, strategic alliances and marketing, distribution or licensing arrangements. Although we may
receive potential future payments under our collaborations with Pfizer, Genentech and Bayer, we do not
currently have any committed external source of funds. Adequate additional funds may not be available to us on
acceptable terms, or at all. If we are unable to raise capital when needed or on attractive terms, we may be
required to delay, limit, reduce or terminate our research, product development programs or any future
ff
commercialization effort
prefer to develop and market ourselves.
s or grant rights to develop and market product candidates that we would otherwise
rings, debt financings,
To the extent that we raise additional capital through the sale of equity or convertible debt securities, the
terms of these securities may include liquidation or other preferences that adversely affect
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.
the rights of our
ff
118
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.
Borrowingii
s
In January 2014, we entered into an Assistance Agreement with the State of Connecticut, or the 2014
Assistance Agreement. Under the terms of the 2014 Assistance Agreement, we borrowed $2.5 million.
Borrowings under the 2014 Assistance Agreement were forgivable if we maintained a minimum number of full-
time jobs in the State of Connecticut for a minimum period at a minimum annual salary. Effective in March 2016,
the full principal amount under the 2014 Assistance Agreement had been forff given. While borrowings under the
2014 Assistance Agreement have been forff given, we remain subject to an ongoing covenant to be located in the
State of Connecticut through January 2024. Upon violation of this covenant, we would be required to repay the
full original funding amount of $2.5 million plus liquidated damages of 7.50%.
In June 2018, we entered into an additional Assistance Agreement with the State of Connecticut, or the
2018 Assistance Agreement, to provide funding for the expansion and renovation of laboratory and officeff
space.
Under the terms of the 2018 Assistance Agreement, we were entitled to borrow from the State of Connecticut a
maximum of $2.0 million, provided that the funding did not exceed more than 50% of the total costs of the
expansion and renovation. Borrowings under the 2018 Assistance Agreement bear an interest rate of 3.25% per
annum and interest payments are required for the first 60 months from the funding date. Interest expense
related to the 2018 Assistance Agreement is expected to be $0.1 million annually for the first five years.
Thereafter
, the loan begins to fully amortize through month 120, maturing in June 2028. The 2018 Assistance
Agreement requires that we be located in the State of Connecticut through June 2028 with a default penalty of
repayment of the full original funding amount of $2.0 million plus liquidated damages of 7.5% of the total amount
of funding received.
ff
We borrowed the full $2.0 million under the 2018 Assistance Agreement in September 2018. Up to $1.0
million of the funding can be forgiven if we meet certain employment conditions, which were met in April 2021
and we were granted loan forgiveness of $1.0 million from the State of Connecticut. At December 31, 2021,
$1.0 million remains outstanding under the 2018 Assistance Agreement.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risks in the ordinary course of our business. These risks primarily include
interest rate sensitivities. Our interest-earning assets consist of cash, cash equivalents, restricted cash and
marketable securities. Interest income earned on these assets totaled $$1.9 million in 2021. O. ur interest income
is sensitive to changes in the general level of interest rates, primarily U.S. interest rates. At December 31, 2021,
our cash equivalents consisted of bank deposits and money market funds, and our marketable securities
included interest-earning securities. Such interest-earning instruments carry a degree of interest rate risk. Our
outstanding debt was $1.0 million as of December 31, 2021 and carries a fixed interest rate of 3.25% per
annum.
Item 8. Financial Statements and Supplementary Drr
ata.
Our financial statements, together with the report of our independent registered public accounting firm,
appear on pages F-1 through F-25 fof hit s Annual Report on Form 10-K.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Crr
tt
ontrol
s all
rr
nd Procedu
res
Our management, with the participation of our Chief Executive Officeff
r and Chief Financial Offiff cer (our
principal executive officff er and principal financial officeff
disclosure controls and procedures as of December 31, 2021. The term “disclosure controls and procedures,”
r, respectively), evaluated the effect
iveness of our
ff
119
as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the
Exchange Act, means controls and other procedures of a company that are designed to ensure that inforff mation
required to be disclosed by the company in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified in the Securities and
Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be disclosed by a company in the
reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s
similar
management, including its principal executive and principal financial officers,
functions, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes
that any controls and procedures, no matter how well designed and operated, can provide only reasonable
assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the
cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls
and procedures as of December 31, 2021, our Chief Executive Officer and Chief Financial Offiff cer concluded
that, as of such date, our disclosure controls and procedures were effect
ive at the reasonable assurance level.
or persons performing
ff
ff
ff
Management’s Annual Report on Internal Controlrr overvv
Finanii
cial Reporting
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting for the company. Internal control over financial reporting is defined in Rule 13a-15(f) or
15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the
company’s principal executive and principal financial officers
management and other personnel, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements forff
external purposes in accordance with generally
accepted accounting principles and includes those policies and procedures that:
and effected by the company’s board of directors,
ff
•
•
•
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the
transactions and dispositions of the assets of the company;
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts
and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use or disposition of the company’s assets that could have a material effect
statements.
on the financial
ff
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
ff
misstatements. Therefore,
assurance with respect to financial statement preparation and presentation. Projections of any evaluation of
effect
in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
iveness to future periods are subject to the risk that controls may become inadequate because of changes
even those systems determined to be effecti
ve can provide only reasonable
ff
ff
Our management assessed the effecti
ff
veness of our internal control over financial reporting as of
December 31, 2021. In making this assessment, management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework
(2013). Based on that assessment, our management concluded that, as of December 31, 2021, our internal
control over financial reporting was effect
ive.
ff
Deloitte & Touche
TT
LLP, tP he independent registered public accounting firm that audited the consolidated
financial statements included in this Annual Report on Form 10-K, has issued an attestation report on the
iveness of internal control over financial reporting as of December 31, 2021, included below.
effect
ff
Changes in Internal Controlrr overvv
Financ
ii
ial Reporting
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act) occurred during the quarter ended December 31, 2021 that has materially affecte
is reasonably likely to materially affect,
any material impact to our internal control over financial reporting due to the COVID-19 pandemic. We are
our internal control over financial reporting. We have not experienced
ff
ff
d, or
120
continually monitoring and assessing the COVID-19 pandemic on our internal controls to minimize the impact
on their design and operating effect
iveness.
ff
121
RE OPORT OOF INDEPENDENT
GREG SISTERED PUBL CIC CCOACCOUNTINGG FIRM
To th Se Stockholders and the Board fof Directors fof Arvinas, Inc.
OOpinion on Internal CControl over Financial Reportingg
We have audited the internal control over ffinancial reporti gng fof Arvinas,
as fof December 31, 2021, based on criteria established in Internal CControl — I
g
issued yby th Ce Committee fof SSp
Company
Company maintained, in all material respects,
31, 2021, based on criteria established in Internal CControl — I
onsoring OOrgganizations fof the Tr
fff
fefffect
rr
eadway CCommission (CO(COSO).SO). In our opinion, the
y
ive internal control over ffinancial report ging as fof December
gntegrated Framework (2013)
(2013) issued yby COCOSOSO.
Company”)
Inc. and subsidiaries (th(th “e “Company”)
(2013)
gntegrated Framework (2013)
Oversight Board
We have also audited, in accordance with the standards fof the Public Company
(United SStates)s) (P(PCCAOOB),), the consolidated ffinancial statements as off and ffor th ye year ended December 31,
(Unit
2021,
bruary 28, 2022, expressed an unqualiffied opinion on those
y
fof th Ce C
ffinancial statements.
ompany and our report dated Fe
Company Account ging Oversight
y
Basi
fs for OOpinion
g
fof the effffectiveness fof internal control over ffinancial report ging, included in the
The CCompa yny’s man gagement is responsible ffor maint
ffor its assessment
Management’s Annual Report on Internal CControl over Financial Report ging. OOur responsibilityy is to express an
opinion on th Ce C
account ging ffirm r gegistered with the CPC OAOB and are required to be independent with respect to th Ce C
accordance with the SU.S. ffederal securities laws and the applicable rules and
Exch gange CCommission and the CPC OAOB.
ompany’s internal control over ffinancial report ging based on our audit. We are a public
ive internal control over ffinancial report ging and
accompanyingg
ompany in
gregulations fof th Se Securities and
aining fefffect
g
y
y
y
fff
fperformff
the audit to obtain reasonable assurance about whether
We conducted our audit in accordance with the standards fof the CPC OAOB. Those standards require that we plan
and
report ging was maintained in all material respects. OOur audit included o
control over ffinancial report ging, asse
design and operat ging fefffect
procedures as we considered
basis ffor our opinion.
ssing the risk that a material weakness exists, testi gng and evaluat ging the
such other
necessary in the circumstances. We believe that our audit provides a reasonable
feffffff ective internal control over ffinancial
anding fof internal
btaining an underst
iveness fof internal control based on the assessed risk, and
ff
fperf
orming
g
g
g
g
g
y
fff
fDefinition and Limitations off Internal CControl over Financial Reportingg
y
g
designed to provide reasonable assurance
AA c
ompany’s internal control over ffinancial report ging is a process
external purposes in
regarding the reliabil yity fof ffinancial reporti gng and the preparation fof ffinancial statement
g
ompany’s internal control over ffinancial report ging
accordance wit gh general yly accepted account ging principles. A c
includes those policies and procedures that (t (1)1) pertain to the maintenance fof records that, in reasonable detail,
accurat yely and ffai yrly
reasonable assurance that transactions are recorded as neces
in accordance wit gh general yly accepted account ging principles, and that receipts and expenditures fof the
management and directors fof the c
being made
g
company are
and (3)(3) provide reasonable assurance
regarding prevention or ti
or disposition fof the comp yany’s assets that could have a material
ompany;
y
ymely detection fof unauthorized acquisition, use,
freflect the transactions and dispositions fof the assets fof the c
ysary to permit preparation fof ffinancial statements
yonly in accordance with authorizations fof
on th fe financial statements.
ompany; (2)(2) provide
fefffect
fs forff
g
g
g
g
y
y
y
fff
Because fof its inherent limitations, internal control over ffinancial report ging
misstatements. Also,
controls
policies or procedures
ymay become inadequate because fof
yany evaluation fof
g
ymay deteriorate.
jprojections fof
subject to the risk that
changes in conditions, or that the d gegree fof compliance with the
iveness to ffuture periods are
fefffect
fff
j
ymay not prevent or detect
// /s/ Deloitte && Touche
TT
LLP
Hartfford C, Connecticut
ruary 28, 2022
Feb
y
122
Item 9B. Other Information.
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspection
Not Applicable.
123
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The inforff mation required by this Item is incorporated by reference from the information that will be
contained in our Proxy Statement for our 2022 Annual Meeting of Stockholders, which we intend to file with the
SEC within 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates pursuant to
General Instruction G(3) of Form 10-K.
We have adopted a Code of Business Conduct and Ethics that applies to our officers,
ff
including our
principal executive, financial and accounting officeff
of our Code of Business Conduct and Ethics under the “Investors + Media – Corporate Governance” section of
our website, www.arvinas.com. We intend to disclose on our website any amendments to, or waivers from, the
Code of Business Conduct and Ethics that are required to be disclosed pursuant to the disclosure requirements
of Item 5.05 of Form 8-K.
rs, and our directors and employees. We have posted the text
Item 11. Executive Compensation.
The information required by this Item is incorporated by reference from the information that will be
contained in our Proxy Statement for our 2022 Annual Meeting of Stockholders, which we intend to file with the
SEC within 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates pursuant to
General Instruction G(3) of Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
The information required by this Item is incorporated by reference from the information that will be
contained in our Proxy Statement for our 2022 Annual Meeting of Stockholders, which we intend to file with the
SEC within 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates pursuant to
General Instruction G(3) of Form 10-K.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this Item is incorporated by reference from the information that will be
contained in our Proxy Statement for our 2022 Annual Meeting of Stockholders, which we intend to file with the
SEC within 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates pursuant to
General Instruction G(3) of Form 10-K.
Item 14. Principal Accounting Fees and Services.
The information required by this Item is incorporated by reference from the information that will be
contained in our Proxy Statement for our 2022 Annual Meeting of Stockholders, which we intend to file with the
SEC within 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates pursuant to
General Instruction G(3) of Form 10-K.
124
PART IV
Item 15. Exhibits, Financial Statement Schedules.
(1)
Form 10-K:
Financial Statements - The following financial statements are filed as part of this Annual Report on
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2021 and 2020
Consolidated Statements of Operations and Comprehensive Loss for the years ended December
31, 2021, 2020, and 2019
Consolidated Statements of Changes in Stockholders’ Equity forff
the years ended December 31,
2021, 2020 and 2019
Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020, and 2019
Notes to Consolidated Financial Statements
Page
F-2
F-5
F-6
F-7
F-8
F-9
(2)
Financial Statement Schedules
All financial statement schedules have been omitted because they are not applicable, not required or
the information required is shown in the financial statements or the notes thereto.
(3)
Index to Exhibits
The following is a list of exhibits filed as part of this Annual Report on Form 10-K.
Exhibit
Numb rer
3.1
3.2
4.1
4.2
4.3
4.4
10.1+
Description
Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to
the Registrant’s Current Report on Form 8-K (File No. 001-38672) filed with the SEC on October
1, 2018).
Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to the
Registrant’s Current Report on Form 8-K (File No. 001-38672) filed with the SEC on October 1,
2018).
SSpecimen SStock CCe frtificate evi
gRegistrant's
Exhibit 4.1 to the
018).
the SSECC on A gugust 30, 2018)
g
dencing the shares fof common stock (incorporat
to
gRegistration SStatement on Form SS-1 (Fi(File No. 333-227112)12) ffiled with
(incorporated yby
freference
ff
gRights Aggreement amo gng the
gRegistration
SSeptember 26, 2018 (incorporat
Form 10-K (F(File No. 001-38672)2) ffiled with the SSECC on March 26, 2019).19).
(incorporated yby refference to Exhibit 4.2 to the
gRegistrant and the other parties thereto, dated
gRegistrant’s Annual Report on
SSecond Amended and Restated Put gAgreement amo gng the
Incorporated and the other parties thereto, dated March 29, 2018 (incorporat
gRegistration SStatement on Form SS-1 (Fi(File No. 333-2271121)
Exhibit 4.3 to the
018).
with the SSECC on A gugust 30. 2018)
(incorporated yby
gRegistrant's
gRegistrant, CConnecticut Innovations,
to
121) ffiled
freference
ff
Description of the Registrant’s Securities Registered Under Section 12 of the Exchange Act
(incorporated by reference to Exhibit 4.4 to the Registrant’s Annual Report on Form 10-K (File No.
001-38672) filed with the SEC on March 16, 2020).
Incentive SShare Plan, as amended yby First Amendment, date Od October 16, 2015, SSecond
AAmendment, dated December 22, 2016, Third Amendment, date Sd September 8, 2017, and Fourth
AAmendment, dated March 29, 2018 (incorporat
Reggistration SStatement on Form SS-1 (1 (File No. 333-227112)12) ffiled with the SSECC on A gugust 30,
2018).).
(incorporated yby refference to Exhibit 10.1 to the
gRegistrant’s
125
10.2+
10.3+
10.4+
10.5+
10.6+
10.7+
10.8+
10.9+
10.10+
10.11+
10.12
10.13
10.14
10.15
10.16
Form off Incentive SShare Award gAgreement under Incentive SShare Plan (incorporat
to Exhibit 10.2 to the
with the SSECC on A gugust 30, 2018).).
freference
gRegistrant’s Reggistration SStatement on Form SS-1 (1 (File No. 333-227112)12) ffiled
(incorporated yby
f
Form off Restricted SStock gAgreement under Incentive SShare Plan (incorporat
Exhibit 10.3 to the
with the SSECC o Sn September 14, 2018).).
gRegistrant’s Reggistration SStatement on Form SS- /1/A (F(File No. 333-227112)12) ffiled
(incorporated yby
freference
f
to
2018 SStock Incentive Plan (incorporat
gRegistration SStatement on Form SS- /1/A (F(File No. 333-227112)12) ffiled with the SSECC o Sn September 14,
2018).
2018).
(incorporated yby refference to Exhibit 10.4 to the R gegistrant’s
Form of Sf Stock OOption gAgreement under 2018 SStock Incentive Plan (incorporat
Exhibit 10.5 to the
with the SSECC o Sn September 14, 2018).18).
to
gRegistrant’s Reggistration SStatement on Form SS- /1/A (F(File No. 333-227112)12) ffiled
(incorporated yby
freference
ff
Form off Restricted SStock Unit gAgreement under 2018 SStock Incentive Plan (incorporat
freference to Exhibit 10.6 to the
ffiled with the SSECC on March 26, 2019).19).
gRegistrant’s Annual Report on Form 10-K (F(File No. 001-38672))
(incorporated yby
2018 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.6 to the Registrant’s
Registration Statement on Form S-1/A (File No. 333-227112) filed with the SEC on
September 14, 2018).
Form off Director an Od Offfficer Ind
freference to Exhibit 10.7
to the Reggistrant’s Reggistration SStatement on Form SS- /1/A (F(File No. 333-227112)12) ffiled with the SSECC
on SSeptember 14, 2018)18).
emnification gAgreement (i(incorporated yby
f
Em yployment gAgreement between the Reggistrant and John Houston, Ph.D., dated SSeptember 13,
2018 (incorporat
(incorporated yby refference to Exhibit 10.8 to the R gegistrant’s Reggistration SStatement on
For Sm S /-1/A (F(File No. 333-227112)12) ffiled with the SSECC o Sn September 14, 2018).).
Em yployment gAgreement between the Reggistrant an Sd Sean Cassidy
(incorporat
(incorporated yby refference to Exhibit 10.9 to the R gegistrant’s Reggistration SStatement on Form SS-1/1/
A (A (File No. 333-227112)12) ffiled with the SSECC o Sn September 14, 2018).18).
gAugust 28, 2018
Cassidy, dated
Empl yoyment gAgreement between the Reggistrant and Ian Tayylor, Ph.D., dated A gugust 28, 2018
(incorporated yby refference to Exhibit 10.10 to the R gegistrant’s Reggistration SStatement on Form
(incorporat
SS- /1/A (F(File No. 333-227112)12) ffiled with the SSECC o Sn September 14, 2018).).
Lease gAgreement between the Arvinas OOperations, Inc. (for
Inc.)c.) an Sd Science Park
(for
Development CCorporation, dated December 31, 2017, as amended yby First Amendment to Lease,
yMay 23, 2018, and second Amendment to Lease, dated SSeptember 4, 2018 (incorporat
dated
yby refference to Exhibit 10.12 to the R gegistrant’s Reggistration SStatement on Form S /S-1/A (A (
333-227112)12) ffiled with the SSECC o Sn September 14, 2018).).
(incorporated
// File No.
rr
ymerly Arvinas,
Third Amendment to Lease between Arvinas OOperations, Inc. (formerly
Park Development CCorporation, dated March 12, 2019 (incorporat
(incorporated yby
to the Reggistrant’s CCurrent Report on Form 8-K (Fi(File No. 001-38672)
15, 2019).19).
(formerly Arvinas, Inc.)c.) an Sd Science
freference to Exhibit 10.1
-38672) ffiled with the S CSEC on March
Fourth Amendment to Lease between Arvinas Operations, Inc. (formerly Arvinas, Inc.) and
Science Park Development Corporation, dated January 31, 2020 (incorporated by reference
Exhibit 10.14 to the Registrant’s Annual Report on Form 10-K (File No. 001-38672) filed with the
SEC on March 16, 2020).
to
f
Lease Agreement between Arvinas Operations, Inc. and Science Park Development Corporation,
dated November 15, 2019 (incorporated by reference to Exhibit 10.15 to the Registrant’s Annual
Report on Form 10-K (File No. 001-38672) filed with the SEC on March 16, 2020).
First Amendment to Lease between Arvinas Operations, Inc. and Science Park Development
Corporation, dated February 27, 2020 (incorporated by reference
Registrant’s Annual Report on Form 10-K (File No. 001-38672) filed with the SEC on March 16,
2020).
to Exhibit 10.16 to the
f
126
10.17†
10.18†
10.19
10.20†
10.21†
10.22†
10.23†
10.24†
10.25†
10.26†
10.27†
10.28†
10.29†
10.30†
yJuly 5, 2013, as amended yby Amendment No. 1, dated M yay 8, 2014, Amendment No. 2,
License gAgreement between Yale Universityy and Arvinas OOperations, Inc. (f(f
ff
ormerly
y
dated
date Od October 23, 2014, and Letter Amendment Number 3, dated April 1, 2015 (incorporat
freference to Exhibit 10.13 to the R gegistrant’s Reggistration SStatement on Form S /S-1/A (A (
333-227112)12) ffiled with the SSECC o Sn September 14, 2018).).
(incorporated yby
/// File No.
Arvinas, Inc.),c.),
ymerly Arvinas, Inc.)c.) dated
AAmendment No. 4 to License gAgreement between Yale Universityy and Arvinas OOperations, Inc.
(incorporated yby refference to Exhibit 10.16 to the
(for
(for
gRegistrant’s Annual Report on Form 10-K (K (File No. 001-38672)
1-38672) ffiled with the SSECC on March 26,
2019).
2019).
January 9, 2019 (incorporat
y
AAmended and Restate Cd Consult ging gAgreement between CraigCraig CCrews and Arvinas OOperations, Inc.
ymerly Arvinas, Inc.),c.), dated OOctober 16, 2015, as amended yby Amendment No. 1, dated A gugust
(for
(for
27, 2018 (incorporat
(incorporated yby refference to Exhibit 10.14 to the R gegistrant’s Reggistration SStatement on
018).
For Sm S-1 (F(File No. 333-227112)12) ffiled with the SSECC on A gugust 30, 2018)
CCorporat Se Sponsored Research gAgreement between Yale Universityy and Arvinas OOperations, Inc.
ymerly Arvinas, Inc.),c.), dated Julyy 1, 2016, as amended yby Amendment No. 1, dated April 1, 2018
(for
(for
(incorporat
(incorporated yby refference to Exhibit 10.15 to the R gegistrant’s Reggistration SStatement on Form
018).
SS-1 (1 (File No. 333-227112)12) ffiled with the SSECC on A gugust 30, 2018).
AAmended and Restated License and OOption gAgreement amo gng GGenentech, Inc., F. Hoffffmann-La
Roche Ltd and Arvinas OOperations, Inc. (formerly
(incorporat
(incorporated yby refference to Exhibit 10.16 to the R gegistrant’s Reggistration SStatement on Form
SS- /1/A (F(File No. 333-227112)12) ffiled with the SSECC o Sn September 14, 2018)).
(formerly Arvinas, Inc.),c.), dated November 8, 2017
ymerly Arvinas, Inc.),c.), dated December 22, 2017 (incorporat
Research CCollaboration and License gAgreement between fPfizer Inc. and Arvinas OOperations, Inc.
(for
freference to Exhibit 10.17 to
(for
the R gegistrant’s R gegistration SStatement on Form SS- /1/A (F(File No. 333-227112)12) ffiled with the SSECC
on SSeptember 14, 2018)18).
(incorporated yby
SSponsored Research gAgreement between The SSilverstein Foundation ffor Parkinson’s with GGBA
and Arvinas OOperations, Inc. (formerly
Inc.),c.), dated March 7, 2018 (incorporat
freference to Exhibit 10.18 to the R gegistrant’s Reggistration SStatement on Form S /S-1/A (A (
333-227112)12) ffiled with the SSECC o Sn September 14, 2018).).
(formerly Arvinas,
(incorporated yby
/// File No.
rr
Amendment No. 1 to Research Collaboration and License Agreement between Pfizer Inc. and
Arvinas Operations, Inc. (formerly Arvinas, Inc.), dated December 9, 2019 (incorporated by
reference to Exhibit 10.24 to the Registrant’s Annual Report on Form 10-K (File No. 001-38672)
filed with the SEC on March 16, 2020).
CCollaboration and License gAgreement between Arvinas
June 3, 2019 (incorporat
Form 10-Q (Q (File No. 001-38672)
1-38672) ffiled with th Se S CEC on
rr
gAugust 5, 2019).).
(incorporated yby refference to Exhibit 10.3 to the R gegistrant’s QQuarter yly Report on
OOperations, Inc. and
yBayer GAG, dated
CCommitment gAgreement between Arvinas OOperations, Inc., Pr
LP, dP ated June 3, 2019 (incorporat
Report on Form
Q10-Q (Fi(File No. 001-38672)
1-38672) ffiled with the S CSEC on
(incorporated yby refference to Exhibit 10.2 to the R gegistrant’s QQuarter yly
gotag CLLC, and
yBayer C
CropScience
S
gAugust 5, 2019).).
OOption gAgreement between Arvinas OOperations, Inc. and Bayyer CC
2019 (incorporat
(Fi(File No. 001-38672)
1-38672) ffiled with the SSECC on A gugust 5, 2019).19).
(incorporated yby refference to Exhibit 10.3 to the R gegistrant’s QQuarterlyy Report on Form
Q10-Q
SropScience LP, dP ated June 3,
rr
AArvinas
16, 2019 (incorporat
Q10-Q (F(File No. 001-38672)
IP CContribution gAgreement between Arvinas OOperations, Inc. and Prot gag CLLC, dated
yJuly
(incorporated yby refference to Exhibit 10.4 to the R gegistrant’s QQuarterlyy Report on Form
1-38672) ffiled with the SSECC on A gugust 5, 2019).19).
SStock Purchase gAgreement between the R gegistrant and B yayer GAG, dated June 3, 2019
(incorporat
(incorporated yby refference to Exhibit 10.5 to the R gegistrant’s QQuarterlyy Report on Form
No. 001-38672)
1-38672) ffiled with the SSECC on A gugust 5, 2019).19).
Q10-Q (F(File
Investor gAgreement between the Reggistrant and B yayer GAG, dated
freference to Exhibit 10.6 to the
ffiled with the SSECC on A gugust 5, 2019).19).
gRegistrant’s QQuarterlyy Report on Form
yJuly 16, 2019 (incorporat
(incorporated yby
Q10-Q (F(File No. 001-38672))
127
10.31†
10.32+
10.33
10.34
10.35
10.36
10.37†
10.38
10.39†
10.40
21.1*
23.1*
31.1*
31.2*
32.1**
32.2**
ymerly Arvinas, Inc.)c.) dated June 3, 2019 (incorporat
AAmendment No. 5 to License gAgreement between Yale Universityy and Arvinas OOperations, Inc.
(for
(for
gRegistrant’s QQuarterlyy Report on Form 10-Q (Q (File No. 001-38672)
2019).
2019).
(incorporated yby refference to Exhibit 10.7 to the
1-38672) ffiled with the SSECC on A gugust 5,
Em yployment gAgreement between the Reggistrant and Ronald Peck, M.D., dated
(incorporat
(incorporated yby refference to Exhibit 10.1 to the R gegistrant’s QQuarterlyy Report on Form
No. 001-38672)
1-38672) ffiled with the SSECC on April 28, 2020).20).
yJuly 18, 2019
Q10-Q (F(File
Equityy Distribution gAgreement, dated OOctober 1, 2019, yby and between the R gegistrant and Piper
fJaffrayfray
gRegistrant’s Reggistration SStatement
fff
2019).
on For Sm S-3 (F(File No. 333-234035) f) filed with the SSECC o On October 1, 2019).
& C& Co. (i(incorporated yby refference to Exhibit 1.2 to the
Fifth Amendment to Lease between Arvinas Operations, Inc. (formerly Arvinas, Inc.) and Science
Park Development Corporation, dated January 4, 2021 (incorporated by reference
to Exhibit 10.34
to the Registrant's Annual Report on Form 10-K (File No. 001-38672) filed with the SEC on March
1, 2021).
f
Arvinas, Inc.) and
Second Amendment to Lease between Arvinas Operations, Inc. (formerly
Science Park Development Corporation, dated January 4, 2021 (incorporated by reference
ff
Exhibit 10.35 to the Registrant's Annual Report on Form 10-K (File No. 001-38672) filed with the
SEC on March 1, 2021).
to
ff
Lease between 101 College Street, LLC and Arvinas Operations, Inc., dated May 4, 2021
(incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q (File
No. 001-36874) filed with the SEC on August 5, 2021).
Collaboration Agreement, dated July 21, 2021, by and between Arvinas, Inc., Arvinas Operations,
Inc., Arvinas Estrogen Receptor, Inc. and Pfizer, Inc. (incorporated by reference
to Exhibit 10.1 to
the Registrant's Current Report on Form 8-K (File No. 001-38672) filed with the SEC on July 22,
2021)
f
Stock Purchase Agreement, dated July 21, 2021, by and between Arvinas, Inc. and Pfizer, Inc.
(incorporated by reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K (File No.
001-38672) filed with the SEC on July 22, 2021).
Investor Agreement, dated July 21, 2021, by and between Arvinas, Inc. and Pfizer, Inc.
(incorporated by reference to Exhibit 10.3 to the Registrant's Current Report on Form 8-K (File No.
001-38672) filed with the SEC on July 22, 2021).
Equity Distribution Agreement, dated August 6, 2021, by and among Arvinas, Inc., Piper Sandler &
Co. and Cantor Fitzgerald & Co. (incorporated by reference to Exhibit 1.1 to the Registrant's
Current Report on Form 8-K (File No. 001-38672) filed with the SEC on August 6, 2021).
Subsidiaries of the Registrant.
Consent of Deloitte & Touche
TT
LLP, iP ndependent registered public accounting firm.
Certification of Principal Executive Officer
Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
Pursuant to Rules 13a-14(a) and 15d-14(a) under the
ff
Certification of Principal Financial Officer
Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
Pursuant to Rules 13a-14(a) and 15d-14(a) under the
ff
Certification of Principal Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
ff
Pursuant to 18 U.S.C. Section 1350, as Adopted
Certification of Principal Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
ff
Pursuant to 18 U.S.C. Section 1350, as Adopted
99.1
Audited Financial Statements of Oerth Bio, LLC, as of December 31, 2020.
101.INS*
Inline XBRL Instance Document
101.SCH*
Inline XBRL Taxonomy Extension Schema Document
101.CAL*
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*
Inline XBRL Taxonomy Extension Definition Linkbase Document
128
101.LAB*
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Date File (formatted as Inline XBRL and contained in Exhibit 101)
__
______________
__
______
*
**
†
+
Filed herewith.
Furnished herewith.
Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.
Management contract or compensatory plan or arrangement.
Item 16. Form 10-K Summary
None.
129
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
ARVINAS,
RR
INC.
Date: February 28, 2022
By:
/s/ John Houston, Ph.D.
John Houston, Ph.D.
President and Chief Executive Officer
ff
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been
signed below by the folff
lowing persons on behalf of the registrant in the capacities and on the dates indicated.
Name
Title
Date
/s/ John Houston, Ph.D.
John Houston, Ph.D.
/s/ Sean Cassidy
Sean Cassidy
/s/ Timothy Shannon, M.D.
Timothy Shannon, M.D.
/s/ Linda Bain
Linda Bain
/s/ Wendy Dixon, Ph.D.
Wendy Dixon, Ph.D.
/s/ Edward Kennedy, Jr.
Edward Kennedy, Jr.
/s/ Bradley Margus
Bradley Margus
/s/ Briggs Morrison, M.D.
Briggs Morrison, M.D.
/s/ Leslie Norwalk, Esq.
Leslie Norwalk, Esq.
/s/ Liam Ratcliffe,
Liam Ratcliffe,
ff M.D., Ph.D.
ff M.D., Ph.D.
/s/ Laurie Smaldone Alsup, M.D.
Laurie Smaldone Alsup, M.D.
President, Chief Executive Officeff
r and Director
February 28, 2022
(principal executive officff er)
Chief Financial Offiff cer
(principal financial and accounting officer)
ff
February 28, 2022
Chairman of the Board of Directors
February 28, 2022
February 28, 2022
February 28, 2022
February 28, 2022
February 28, 2022
February 28, 2022
February 28, 2022
February 28, 2022
February 28, 2022
Director
Director
Director
Director
Director
Director
Director
Director
130
Report of Independent Registered Public Accounting Firm (PCAOB ID No.34)
Consolidated Balance Sheets as of December 31, 2021 and 2020
Consolidated Statements of Operations and Comprehensive Loss for the years ended December
31, 2021, 2020 and 2019
Consolidated Statements of Changes in Stockholders’ Equity forff
the years ended December 31,
2021, 2020 and 2019
Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019
Notes to Consolidated Financial Statements
Page
F-2
F-5
F-6
F-7
F-8
F-9
F-1
RE OPORT OOF INDEPENDENT
GREG SISTERED PUBL CIC CCOACCOUNTINGG FIRM
To th Se Stockholders and the Board fof Directors fof Arvinas, Inc.
OOpinion on the Financial SStatements
y g
companying consolidated balance sheets off Arvinas, Inc. and subsidiaries (th(the
ompany") a) as off December 31, 2021 and 2020, the related consolidated statements off operations and
We have audited the ac
y
C"C
comprehensive loss,
ended December 31, 2021, and the related notes (co(collect
opinion, the ffinancial statements present ffa yirly, in all material respects, the ffinancial position fof th Ce C
ompany as
fof December 31, 2021 and 2020 and the results off its operations and its cash fflows ffor each fof the three yyears
in the period ended December 31, 2021, in confformi yty with accounti gng principles gge
United SStates off America.
changes in stockholders’ equityy, and cash fflows, ffor each fof the three yyears in the period
freferred to as th “e “ffinancial statements”).s”). In our
nerally accepted in the
ively
y
g
y
y
We have also audited, in accordance with the standards fof the Public Company
(Unit
y
(United SStates)s) (P(PCCAOOB),), the CCo
based on criteria established in Internal CControl
SSp
unqualiffied opinion on th Ce C
eadway CCommission and our report dated
ompany's internal control over ffinancial report ging.
y
Oversight Board
mpany's internal control over ffinancial report ging as fof December 31, 2021,
(2013) issued byy the CCommittee fof
tt — Integrated Framework (2013)
onsoring OrgaOrganizations fof the Tr
Company Account ging Oversight
February 28, 2022, expressed an
g
y
y
Basi
fs for OOpinion
These ffinancial statements are the responsibilityy off the Company'
express an opinion on th Ce C
ompany'
y
gregistered with the CPC OAOB and are required to be independent with respect to th Ce C
the U.SS. ffederal securities laws and the applicable rules and
CCommission and the CPC OAOB.
fs financial statements based on our audits. We are a public account ging ffirm
ompany in accordance with
Exchange
y
gregulations fof the SSecurities and
Company's man gagement O. Our responsibil yity is to
g
fperformff
the audit to obtain reasonable assurance about whether th fe financial statements are ffree fof
We conducted our audits in accordance with the standards fof the CPC OAOB. Those standards require that we
plan and
material misstatement, whether due to error or ffraud. OOur audits included performing
risks fof material misstatement
procedures that respond to those risks. SSuch procedures included exa
regarding the amounts and disclosures in the ffinancial statements. OOur audits also included evaluat ging the
account ging principles used and signif
presentation fof the ffinancial statements. We believe that our audits provide a reasonable basis ffor our opinion.
significant estimates made yby ma gnagement, as well as evaluat ging the overall
ff
fperf
orming
g
gmining, on a test basis, evidence
fof th fe financial statements, whether due to error or ffraud, and
erforming procedures to assess the
g
g
CCritical Audit Matter
The critical audit matter communicated below is a matter
statements that was communicated or required to be communicated to the audit committee and that (1)(1) relates
to accounts or disclosures that are material to the ffinancial statements and (2)(2) involved our especiallyy
challeng ging, subjject
judgments. The communication fof critical audit matters does not alter in
yway our opinion on th fe financial statements, taken as a whole, and we are not, yby communicat ging the critical
audit matter below, p
which it relates.
roviding a separate opinion on the critical audit matter or on the accounts or disclosures to
arising ffrom the current-period audit
ive, or complex j
fof the ffinancial
g
g
g
b
g
yany
Prepaid and Accrued Research and Development -
SStatements
fRefer to Note 2 in the CConsolidated Financial
CCritical Auditdd Matter Descripti
ii on
fperformff
research and development,
billing terms under these contracts do not coincide
ompany makes estimates fof the costs incurred yby third
gobligations to those third parties as fof period-end. Estimates fof
f
during the period and the outst
manufactu gring. When
y
The CCompa yny has entered into various contracts with third parties to
includingg clinical research and contract
g
with the tim ging fof when the work is pe frformed, th Ce C
parties
g
costs incurred
on a number of ff factors, includingg the Company’
clinical
provisions in the contract S. S gign fificant j
costs incurred
report ging period.
Company’s kno
anding
g
g
g
during the period that are included in period-end prepaid or accrued expense balances are based
g
gwledge fof the research and development pr gograms and
manufactu gring activities associated with projjeo ct status and milestones,
f
invoicing to date, and the
g
ermining the
during the period that are included in prepaid or accrued expense balances at the end fof each
judgments and estimates are made yby th Ce C
ompany in det
y
g
We identiffied the measurement
development costs as a critical audit matter because fof the jjudggments and estimates
management to determine the status and proggress off each contract. The expense recorded related to external
expended pursuant
research and development is based fofff offf
fof the accruals and prepaid expense related to these ytypes fof research and
ff estimates as to the services received and feffforts
necessary ffor
g
y
fff
F-2
to quotes and contracts with the Company’
gorganizations that s
estimates required an increased extent
procedures to audit the prepaid and accrued expenses related to these costs.
upply, conduct and managge clinical trials on the CCompa yny’s be
and a ghigh d gegree fof auditor j
fff
fefffort
Company’s contract man fufacturi gng vendors and contract research
fhalf. A
ssessing such
g
erforming
judgment when performing
g
fof audit
y
How the CCritical Audit Matter Was Addressed in the Audit:
OOur audit procedures related to the man gagement’s estimation fof costs incurred included th fe f
ff
ollowing
g
others:
, a
gmong
•
fff
Testingg the fefffect
development expenses,
significant research and development activities perffor
signif
including th Ce C
g
y
iveness fof controls over the account ging ffor prepaid and accrued research and
ompany’s assessment and estimation fof the costs incurred ffor
rr med yby third parties
• OOn a sample basis, we tested the accrued and prepaid expense balances yby:
◦
◦
inspect ging related contracts and g
analysis fof estimated expenses incurred to date;
agreeing
g
y
ykey provisions fof the contracts to th Ce C
ompany’s
y
inspect ging correspondences ffrom the third-partyy vendors to the CCompanyy, includingg status
Company’s estimates;
reports, and
ion to the amounts used in the Company’
ff
comparing such f
g
informat
◦ meet ging with clinical and m
anufactu gring operational personnel within the CCompa yny to
f
understand the status off s gign fificant research and development activities ffor a sample fof pr joject
ff
activities, and comparingg such f
ion to the amounts used in the Company’
Company’s estimates;
informat
◦
comparing the estimated accrual balance as fof December 31, 2021, to the invoices received
fafter yyear-end to evaluate the Company’
Company’s abilityy to estimate the accrual.
g
Accounting Cg Considerations ffor ARV 471 Revenue gAgreement –
consolidated ffinancial statements
fRefer to Notes 2 and 3 in the
CCritical Auditdd Matter Descripti
ii on
g
g
pplying j
y g
judgment in de
fof ggoods and services to the customer. D
management a
ermining whether the license and collaboration gagreement and the stock purchase gagreement siggned around
The CCompa yny re gcognizes revenue on license and collaboration gagreements as t
gobligations and tran fsfer control
a new license and collaboration gagreement with Pffizer (t(the ““ARV-RR 471 CCollaboration gAgreement”),”), which resulted
in
g
det
the same time were part
gobligations in the license and
collaboration gagreement and whether th yey should be accounted ffor as combined or separate p ferformance
gobligations; and determiningg total transaction price allocated to the license and collaboration gagreement which
included the excess fof the purchase price under the stock purchase gagreement over the ffair value fof common
stock. The Company
CCollaboration gAgreement in 2021.
Company recorded total collaboration revenue of $f $25.6 million pert
termining the appropriate accounti gng ffor the aggreement includi gng:
fof a combined contract; identifyfyingg the perfformance
fperformance
ompany entered into
aining to the ARV-471
guring 2021, th Ce C
fulfill their
yhey f
ff
y
VV
g
g
rr
ff
f
fff
fefffort
AAudit ging the CCo
fof
expertise in revenue
fof the gagreement.
mpany’s account ging conclusions pertainingg to the new aggreement required an increased extent
y
and a ghigh d gegree off auditor jju gdgment, includingg the need to involve individuals with account ging
recognition account ging, due to the potential ffor jju gdgments involved in evaluat ging the terms
g
How the CCritical Audit Matter Was Addressed in the Audit:
OOur principal audit procedures related to the CCompa yny’s account ging ffor the aggreement included the ffollowingg:
•
Tested the effffectiveness fof controls over the CCompa yny’s processes ffor
treatment off the new aggreement.
assessing the account ging
g
• We tested man gagement’s iden ftification off s gign fificant terms ffor completeness, inclu
gding the ident fification
fof distinct pe frformance
gobligations within the arra gngement.
F-3
• We tested and evaluated, am gong other thinggs, the
fperformance
ff
gobligations ident fified, the estimates and
assumptions used to determine transaction price, and the allocation fof additional transaction price to
the license and collaboration gagreement.
• We tested man gagement’s calculation fof the ffair value fof the common stock issued under the stock
purchase gagreement
independent estimate as to the discount ffor lack off marketabilityy due to the contractual restrictions on
sale ffor a period off time and
ilizing internal ffair value specialists to assist in developingg an
management’s estimate.
comparing to
including ut
g
g
g
g
accuracy fof
gprogress utilized in the calculation.
g
y
management’s calculations fof revenue, includi gng tes gting the
• We tested the mathematical
inputs into the calculation fof
/ //s/ Deloitte && Touche
TT
LLP
Hartfford C, Connecticut
ruary 28, 2022
Feb
y
We have served as th Ce C
ompany's auditor since 2016.
y
F-4
ARVINAS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(dollars and sharesrr
Assets
in millions)
Current assets:
Cash and cash equivalents
Restricted cash
Marketable securities
Accounts receivable
Other receivables
Prepaid expenses and other current assets
Total current assets
Property, equipment and leasehold improvements, net
Operating lease right of use assets
Collaboration contract asset and other assets
Total assets
Liabilities and stockholders' equity
Current liabilities:
Accounts payable
Accrued expenses
Deferred revenue
Current portion of operating lease liability
Total current liabilities
Deferred revenue
Long term debt
Operating lease liability
Total liabilities
Commitments and contingencies
Stockholders' equity:
December 31,
2021
2020
$
108.3 $
4.5
1,394.3
15.0
10.7
19.7
1,552.5
12.7
3.9
12.5
588.4
—
100.2
1.0
7.4
6.1
703.1
12.3
2.0
—
$
$
1,581.6 $
717.4
31.3 $
23.1
206.2
1.1
261.7
534.3
1.0
2.9
799.9
7.1
18.9
22.2
1.0
49.2
22.9
2.0
1.1
75.2
Common stock, $0.001 par value, 53.0 and 48.5 shares issued and
outstanding as of December 31, 2021 and 2020, respectively
Accumulated deficit
Additional paid-in capital
Accumulated other comprehensive (loss) income
Total stockholders' equity
Total liabilities and stockholders' equity
—
(682.9)
1,469.2
(4.6)
781.7
$
1,581.6 $
—
(491.9)
1,133.5
0.6
642.2
717.4
See accompanying notes
F-5
ARVINAS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Loss
(dollars and sharesrr
in millions, except per share amounts)
Year Ended December 31,
Consolidated Statements of Operations
2021
2020
2019
$
46.7 $
21.8 $
Revenue
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Other income (expense)
Other income, net
Interest income
Interest expense
Total other income
Loss from equity method investment
Net loss
Net loss per common share - basic and diluted
Weighted average common shares outstanding -
basic and diluted
(dollars in millions)
Consolidated Statements of Comprehensive Loss
Net loss
Other comprehensive loss:
Unrealized (loss) gain on available-for-sale securities
Comprehensive loss
$
$
$
$
180.4
61.6
242.0
(195.3)
2.5
1.9
(0.1)
4.3
—
108.4
38.3
146.7
(124.9)
2.1
3.6
(0.1)
5.6
—
(
(191.0) $
(
)
)
(
(3.82) $
(
)
)
(
(119.3) $
(
)
)
(
(3.02) $
(
)
)
50.0
39.5
43.0
67.2
27.3
94.5
(51.5)
1.4
4.6
(0.1)
5.9
(24.7)
)
(70.3)
(
)
(
)
(2.13)
(
)
(
32.9
Year Ended December 31,
2021
2020
2019
(191.0) $
(119.3) $
(70.3)
(5.2)
0.5
(
(196.2) $
(
)
)
(
(118.8) $
(
)
)
0.3
)
(70.0)
(
)
(
See accompanying notes
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l
ARVINAS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(dollars in millions)
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash provided by (used in)
rs Ended December 31,
2021
2020
2019
$
(191.0) $
(119.3) $
(70.3)
operating activities:
Depreciation and amortization
Net accretion of bond discounts/premiums
Forgiveness of debt income
Loss (gain) on sale of marketable securities
Amortization of right to use assets
Amortization of collaboration contract asset
Stock-based compensation
Changes in operating assets and liabilities:
Accounts receivable
Other receivables
Prepaid expenses and other current assets
Collaboration contract asset
Accounts payable
Accrued expenses
Operating lease liabilities
Deferred revenue
Net cash provided by (used in) operating activities
Cash flows from investing activities:
Purchase of marketable securities
Maturities of marketable securities
Sale of marketable securities
Purchase of property, equipment and leasehold improvements
Net cash (used in) provided by investing activities
Cash flows from financing activities:
Repayments of long-term debt
Proceeds from issuance of common stock
Payment of common stock offeff
ring costs
Proceeds from sale of common stock in at-the-market offering
Payment of common stock offeff
ring costs for at-the-market offeff
ring
Proceeds from exercise of stock options
Net cash provided by financing activities
Net (decrease) increase in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash, beginning of the period
Cash, cash equivalents and restricted cash, end of the period
Supplemental disclosure of cash flow information:
Purchases of property, equipment and leasehold improvements unpaid at
period end
Cash paid for interest
4.8
9.4
(1.0)
0.2
1.2
0.4
57.1
(14.0)
(3.3)
(13.6)
(12.9)
23.7
4.2
(1.3)
695.5
559.4
(1,744.6)
428.5
7.2
(4.7)
(1,313.6)
—
264.6
(4.6)
—
—
18.6
278.6
(475.6)
588.4
3.2
1.7
—
(0.4)
0.9
—
30.2
(1.0)
(1.2)
(2.4)
—
2.0
10.8
(0.9)
(13.3)
(89.7)
(41.2)
174.1
37.8
(6.4)
164.3
—
460.0
(27.7)
65.6
(1.6)
8.3
504.6
579.2
9.2
$
$
$
112.8
$
588.4
$
0.5
0.1
$
$
0.5
0.1
$
$
1.6
0.2
—
—
0.7
—
20.1
2.8
(4.0)
(1.1)
—
1.5
3.6
(0.6)
4.9
(40.6)
(256.5)
169.7
—
(6.3)
(93.1)
(0.2)
137.7
(0.6)
—
—
2.8
139.7
6.0
3.2
9.2
0.2
0.1
See accompanying notes
F-8
ARVINAS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. Nature of Business and Basis of Presen
rr
tation
Nature of Business
Arvinas, Inc. is a clinical-stage biopharmaceutical company dedicated to improving the lives of patients
ng from debilitating and life-threatening diseases throughout the discovery, development and
sufferi
ff
commercialization of therapies to degrade disease-causing proteins. Arvinas, Inc. has four
subsidiaries; Arvinas Operations, Inc. formed in 2013, Arvinas Androgen Receptor, Inc. formed in 2015, Arvinas
Estrogen Receptor, Inc. formed in 2016, and Arvinas Winchester, Inc. formed in 2018 (collectively, the
"Company").
wholly owned
ff
Basis of Presentati
tt on
The Company's consolidated financial statements are prepared in conformit
y with accounting principles
generally accepted in the United States of America ("U.S. GAAP") and include the accounts of Arvinas, Inc. and
its wholly owned subsidiaries. All intercompany transactions have been eliminated upon consolidation. The
accounting policies used to prepare the Company's consolidated financial statements are the same as those
used to prepare the consolidated financial statements in prior years, except for the adoption of new standards
as outlined below.
ff
The preparation of the Company’s consolidated financial statements in conformit
ff
y with U.S. GAAPAA
requires management to make certain estimates and assumptions that affect the reported amounts and
disclosures in the financial statements and notes. While management believes that estimates and assumptions
used in the preparation of the consolidated financial statements and notes are appropriate, actual results could
differ
ff
Company’s revenue recognition, research and development expenses, and fair
venture, Oerth Bio LLC ("Oerth").
from those estimates. The most significant estimates are those used in the determination of the
value of its investment in a joint
ff
Concentrati
tt
on of Credit Risk and Other
tt
Risks and Uncertaint
tt
iestt
The Company is subject to a number of risks similar to other biopharmaceutical companies in the early
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, the need to successfully commercialize and gain market acceptance of the
Company’s products, and protection of proprietary technology. If the Company does not successfully obtain
regulatory approval, 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 has financed its
operations primarily through sales of equity interests, proceeds from collaborations, grant funding and debt
financing. Through December 31, 2021, the Company raised approximately $1.3 billion in gross proceeds from
the sale of equity instruments and the exercise of stock options, and had received an aggregate of $774.0
million in payments primarily from collaboration partners. The Company had cash, cash equivalents, restricted
cash and marketable securities of approximately $1.5 billion as of December 31, 2021.
2. Summary of Significant Accounting Polici
ll es
Cash and Cash Equivalents
The Company classifies as cash and cash equivalents amounts on deposit in banks and cash invested
temporarily in various instruments, primarily money market accounts, with original maturities of three months or
less at time of purchase. The carrying amounts reported in the consolidated balance sheets represent the fair
values of cash and cash equivalents.
F-9
Restricted Cash
Restricted cash represents a letter of credit collateralized by a certificate of deposit in the same amount
as required under the terms of the Company's laboratory and offiff ce space lease entered into in May 2021.
Concentration of Creditdd Risk
The Company maintains its cash in financial institution accounts that may at times exceed federally
insured limits. The cash balances in the financial institutions are insured by the Federal Deposit Insurance
Corporation ("FDIC") up to $250,000. Cash may also be maintained at commercial institutions that are not
insured by the FDIC.
For the years ended December 31, 2021 and 2020, 100% of the Company’s revenue was attributable to
three collaborators representing 68%, 17% and 15% in 2021, and 37%, 32% and 31% in 2020. For each of the
years ended December 31, 2021 and 2020, one collaborator accounted for the entire accounts receivable
balance. For the year ended December 31, 2019, 57% of the Company’s revenue was attributable to a license
contributed to Oerth, and two collaborators represented 19% and 16% of total revenue.
Marketable Securities
The Company's marketable securities are classified as available-for-sale securities and are carried at
their fair value based on the quoted market prices of the securities, with unrealized gains and losses reported as
accumulated other comprehensive income (loss), a separate component of stockholders' equity. Realized gains
and losses on available-for-sale securities are included in other income in the period earned or incurred.
Proprr
erty, Equipmii
ent, and Leasehold ImpII
rovements
Property and equipment are recorded at cost. Depreciation is calculated using the straight-line method
over the estimated useful lives, which range from three years for officeff
equipment. Maintenance and repairs which do not extend the lives of the assets are charged directly to expense
as incurred. Upon retirement or disposal, cost and related accumulated depreciation are removed from the
related accounts, and any resulting gain or loss is recognized as a component of income or loss for the period.
Leasehold improvements are recorded at cost and amortized using the straight-line method over the shorter of
the lease term or the useful life of the asset.
equipment to five years for laboratory
rr
Impairmen
t of Long-Lived Assets
The Company evaluates the carrying value of long-lived assets when indications of potential
impairments are present. The Company adjusts the carrying value of the long-lived assets if the sum of
undiscounted expected future cash flows is less than the carrying value. No such impairments were recorded
during 2021, 2020 or 2019.
Segment Information
ff
Operating segments are defined as components of an enterprise about which separate discrete
ion is available forff
informat
allocating resources. The Company, through its Chief Executive Officer
maker, views Company operations and manages the business as one operating segment. All of the Company’s
tangible assets are held in the United States and all of the Company’s revenue has been generated in the
United States.
evaluation by the chief operating decision maker in assessing performance
in his role as chief operating decision
and
ff
ff
Revenue Recognition and Deferred Revenue
Revenues from Contracts
The Company recognizes revenue under Accounting Standards Codification ("ASC") 606, Revenue
from Contracts with Customers. The Company’s revenue is generated through research collaboration and
license agreements with pharmaceutical partners. The terms of these agreements contain multiple goods and
services which may include (i) licenses, (ii) research and development activities, and (iii) participation in joint
F-10
research and development steering committees. The terms of these agreements may include non-refundable,
upfront license or option fees, payments forff
achievement of certain milestones, and royalty payments based on product sales derived from the collaboration.
Under ASC 606, the Company evaluates whether the license agreement, research and development services,
and participation in research and development steering committees, represent separate or combined
performance
represent a combined single performance
obligations. The Company has determined that these services within its existing contracts
research and development activities, payments upon the
obligation.
ff
ff
The research collaboration and license agreements typically include contingent milestone payments
related to specified preclinical and clinical development milestones and regulatory milestones. These milestone
payments represent variable consideration to be included within the transaction price using the most likely
amount method. The Company determined that the most likely amount to be recognized was zero, against
which no constraint was applied. The Company will continue to assess the probability of significant reversals for
any amounts that become likely to be realized prior to recognizing the variable consideration associated with
these payments within the transaction price.
Revenue is recognized ratably over the Company’s expected performance
ff
period under each
respective arrangement. The Company makes its best estimate of the period over which the Company expects
to fulfill the Company’s perforff mance obligations, which includes access to technology through the license
agreement and research activities. Given the uncertainties of these collaboration arrangements, significant
judgment is required to determine the duration of the performance period.
For the years ended December 31, 2021, 2020 and 2019, the transaction price allocated to the
ff
obligation identified under the individual research collaboration and license agreements
combined performance
was recognized as revenue on either a straight-line basis over the estimated performance
arrangement or over the estimated performance
incurred. Straight-line basis was considered the best measure of progress for certain agreements in which
control of the combined obligation transfers to the customers, due to the contract containing license rights to
technology, research and development services, and joint committee participation, which in totality are expected
to occur ratably over the performance period.
period based on the Company’s best estimate of costs to be
period under the
ff
ff
The Company’s contracts may also call for certain sales-based milestone and royalty payments upon
successful commercialization of a target. The Company recognizes revenues from sales-based milestone and
royalty payments at the later of a) the occurrence of the subsequent sale, or b) the performance obligation to
which some or all of the sales-based milestone or royalty payments has been allocated has been satisfied (or
partially satisfied). The Company anticipates recognizing these milestones and royalty payments if and when
subsequent sales are generated by the customer from the use of the technology. To dTT
these sales-based milestone and royalty payments has been recognized for any periods.
ate, no revenue from
Amounts received prior to satisfying the above revenue recognition criteria are recorded as contract
liabilities in the Company’s accompanying consolidated balance sheets.
The Company expenses direct and incremental costs to obtaining and fulfilling a contract as and when
incurred if the expected amortization period of the asset that would be recognized is one year or less, or if the
amount of the asset is immaterial. Otherwise, such costs are capitalized as collaboration contract assets and
amortized as general and administrative expenses over the total estimated period of performance of each
underlying contract.
The Company also recognized revenue under ASC 606 from its contribution of a license to Oerth in
2019. See Note 10.
Equity Method Investments
The Company accounts forff
investments forff which it does not have a controlling interest in accordance
with ASC 323, Investments –tt
ethod and Joint Ventures. The Company recognizes its pro-rata share of
income and losses in the investment in “Loss from equity method investment” on the consolidated statement of
operations and comprehensive loss, with a corresponding change to the investment in equity method
investment on the consolidated balance sheet until such investment is reduced to zero.
Equity Mt
F-11
Income TaxTT es
ff
rr
h in ASC 740, Accountingtt
Inc. and its wholly owned subsidiaries use the asset and liability method of accounting for
Arvinas,
income taxes, as set fort
and liabilities are recognized for the expected future tax consequence of temporary differences
carrying amounts and the tax basis of assets and liabilities and net operating loss carry forwards, all calculated
using presently enacted tax rates. A valuation allowance is established to reduce deferred tax assets to their
estimated realizable value. The Company provides a valuation allowance to the extent that it is more likely than
not that all or a portion of the deferred tax assets will not be realized.
for Income Taxes. Under this method, deferred tax assets
between the
ff
Management has evaluated the effect
of ASC 740 guidance related to uncertain income tax positions
and concluded that the Company has no s gignifn icant uncertain income tax positions at December 31, 2021 and
2020.
ff
Equity-based Compensation
The Company measures employee, board of director and consultant equity-based compensation for
stock option and restricted stock grants based on the grant date fair value of the equity awards. Equity-based
compensation expense is recognized over the requisite service period of the awards, net of estimated
forfeitures. Estimated forfeitures are updated on a periodic basis based on actual experience. For equity awards
that have a perforr
of the probability that the performance condition will be achieved.
rmance condition, the Company recognizes compensation expense based on its assessment
The Company classifies equity-based compensation expense in its consolidated statement of
operations in the same manner in which the award recipient’s salary and related costs are classified or in which
the award recipient’s service payments are classified.
Research and Development ExpeEE
nses
Research and development expenses include (i) employee-related expenses, including salaries,
benefits, travel, and stock-based compensation expense; (ii) external research and development expenses
incurred under arrangements with third parties, such as contract research organization agreements,
investigational sites, and consultants; (iii) the cost of acquiring, developing, and manufacturing clinical study
materials; (iv) costs associated with preclinical and clinical activities and regulatory operations; and (v) costs
incurred in development of intellectual property. Costs incurred in connection with research and development
activities are expensed as incurred.
The Company enters into consulting, research, and other agreements with commercial entities,
researchers, universities, and others for the provision of goods and services. Such arrangements are generally
cancellable upon reasonable notice and payment of costs incurred. Costs are considered incurred based on an
evaluation of the progress to completion of specific tasks under each contract using informat
provided by the respective vendors, including the Company’s clinical sites. These costs consist of direct and
indirect costs associated with specific projects, as well as fees paid to various entities that performff
certain
research on behalf of the Company. Depending upon the timing of payments to the service providers, the
Company recognizes prepaid expenses or accrued expenses related to these costs. These accrued or prepaid
expenses are based on management’s estimates of the work perforr
rmed under service agreements, milestones
achieved, and experience with similar contracts. The Company monitors each of these factors and adjusts
estimates accordingly.
ion and data
ff
Fair Vii
aluVV
e Measurements
ASC Topic 820, Fair Value Measurements att
nd Disclosures, requires disclosure of the fair value of
Instrumentstt , defines fair value and establishes a
ii
financial instruments held by the Company. ASC 825, Financial
three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements
for fair value measures. The three levels of valuation hierarchy are defined as follows:
Level 1— Inputs are based upon observable or quoted prices (unadjusted) for identical instruments
traded in active markets.
F-12
Level 2— Inputs are based upon quoted prices for similar instruments in active markets, quoted
prices for identical or similar instruments in markets that are not active, and model-based
valuation techniques for which all significant assumptions are observable in the market or
can be corroborated by observable
market data for substantially the full term of the assets
or liabilities. The Company’s Level 2 investments consist primarily of corporate notes and
bonds and U.S. government and agency securities.
rr
Level 3— Inputs are generally unobservable and typically reflect management’s estimates of
assumptions that market participants would use in pricing the asset or liability. The fair
values are therefore determined using model-based techniques that include option pricing
models, discounted cash flow models, and similar techniques.
In determining fair value, the Company utilizes valuation techniques that maximize the use of
observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers
counterparty credit risk in its assessment of fair value.
The Company’s marketable securities consist of corporate bonds and government securities which are
adjusted to fair value at each balance sheet date, based on quoted prices, which are considered Level 2 inputs.
During the year ended December 31, 2021, a non-recurring fair value measurement was applied to determine
the fair value of the 3,457,815 shares of the Company’s common stock (the "Shares") issued and sold to Pfizer,
Inc. ("Pfizer") under the Stock Purchase Agreement entered into between the Company and Pfizer in July 2021
(the “Pfizer Stock Purchase Agreement”) at a price of $101.22 per share, for an aggregate purchase price of up
to $350.0 million (the “Pfizer Equity Transaction”), which was consummated in September 2021. The fair value
was determined by applying the discount due to lack of marketability during the contractual lock-up period to the
public trad ging price fof the common stock, which is a Level 1 input, on the date fof sale. The Company
Company accounted
ffor the lack off marketabilityy duri gng the contractual lock-up period, yby uti
considered Level 3 inputs S. See Note 4.
lizing put option models, which are
g
Net Loss per Common Share
Basic net loss per common share is computed by dividing net loss by the weighted-average number of
common shares outstanding during the period. Diluted net loss per share is computed using the weighted-
average number of common shares outstanding during the period and, if dilutive, the weighted average number
of potential shares of common shares.
New Accounting ProPP nouncements
Recentlytt Adopted Accountingtt
Pronouncements
ff
Effeff ctive January 1, 2021, the Company adopted ASU 2019-12, Income Taxes (Topic 740): Simplif
ying
ii
for Income Taxes, (“ASU 2019-12”) which simplifies the accounting for income taxes by
the Accountingtt
removing certain exceptions to the general principles in ASC 740 and clarifies and amends existing guidance to
improve consistent application. ASU 2019-12 requires, among other requirements, the Company to recognize
as an income tax the effect of state hybrid taxes that are based on the greater of an income-based tax and a
capital-based tax. Adoption of ASU 2019-12 did not have a material impact on the Company’s financial
statements since the Company has no state income tax liabilities due to its net operating losses. Additionally,
the Company has not recorded any income tax benefits from these losses due to uncertainty of realizing the
related tax benefit.
3. Research Collabll
orationtt
and License Agreements
ARV-471 Collaboration Agreement
In July 2021, the Company entered into a collaboration agreement with Pfizer (the “ARV-RR 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 ARV-RR 471 (the “Licensed
Products”). Under the ARV-RR 471 Collaboration Agreement, the Company received an upfront, non-refundable
payment of $650.0 million. In addition, the Company will be 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
F-13
total contingent payments, $400.0 million in regulatory milestones are related to marketing approvals and
$1.0 billion are related to sales-based milestones.
The Company and Pfizer will 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 affai
b
Licensed Products in all other countries, subject
to certain exceptions.
rs activities for the
ff
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.
ff
In addition, in connection with the execution of the ARV-471
VV
Collaboration Agreement, the Company
and Pfizer entered into a Stock Purchase Agreement (the" Pfizer Stock Purchase Agreement") for the sale and
issuance of 3,457,815 shares of the Company’s common stock (the “Shares”) to Pfizer at a price of $101.22 per
share, for an aggregate purchase price of $350.0 million (the “Pfizer Equity Transaction”), less financial advisor
fees of $4.6 million, which was consummated in September 2021. Pursuant to terms of the Pfizer Stock
Purchase Agreement, Pfizer has agreed not to sell or transfer the Shares without prior written approval of the
Company for a specified time period, subject
to specified exceptions.
b
The Company determined that the ARV-RR 471 Collaboration Agreement and the Pfizer Equity Transaction
entered into with Pfizer concurrently should be evaluated as a combined contract in accordance with Accounting
Standards Codification (“ASC”) 606, Revenue fromff
with Customers. The Company determined the
tt
Contracts
fair value of the shares sold under the Pfizer Equity Transaction to be $85.4 million less than the contractual
purchase price stipulated in the agreement. In accordance with the applicable accounting guidance in ASC
815-40, Contracrr
fair value and therefore allocated the excess consideration received under the Pfizer Equity Transaction to the
ARV-RR 471 Collaboration Agreement, which along with the non-refundable payment of $650.0 million will be
recognized as revenue over the total estimated period of performance
costs to be incurred.
wn Equity, the Company determined that the sale of stock should be recorded at
based on the Company’s best estimate of
ts in Entity’s O’
ff
As a direct result of the Company’s entry into the ARV-471
VV
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, Othett
in collaboration contract asset and other assets on the consolidated balance sheet, which will be amortized as
general and administrative expense over the total estimated period of performance under the ARV-RR 471
Collaboration Agreement. During the year ended December 31, 2021, the Company recognized $0.4 million of
amortization expense.
Coststt , the Company recognized an asset of $12.9 million
r Assets and Deferred
ff
Bayeryy Collaboration Agreement
In June 2019, the Company and Bayer AG entered into a Collaboration and License Agreement (the
TT
"Bayer Collaboration Agreement") setting forth the Company’s collaboration with Bayer AG to identify or
optimize proteolysis targeting chimeras, or PROTAC®TT
of target proteins ("Target
selected by Bayer AG, subject
to certain exclusions and limitations. 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 and a $1.5 million payment to fund research activities. Bayer AG is
committed to fund an additional $10.5 million through 2022, of which $3.0 million was received in each of the
years ended December 31, 2021 and 2020. These payments are being recognized over the total estimated
period of performance.
s"), using the Company’s proprietary platform technology, which Targets will be
b
targeted protein degraders, that mediate forff
degradation
ff
The Company
Company is also eliggible to receive up to $$197.5 million in development milestone
fs forff
ypayments and up
y
ompany is
all de gsignated Ta grgets. In addition, th Ce C
g
gdegrader-related products,
mid-single gdigit to low-
to $$490.0 million in sales-based milestone
geligible to receive, on net sales fof PROOT CACTT
double gdigit tiered
milestone payments or royalties received as of December 31, 2021.
ta grgeted protein
yroyalties, which
ypayment
ymay be su jbject to reductions. There were no development or sales-based
F-14
The Company determined that the Bayer Collaboration Agreement and a Stock Purchase Agreement
entered into with Bayer AG at the same time should be evaluated as a combined contract in accordance with
ASC 606, Revenue fromff
under the Stock Purchase Agreement to be $2.9 million less than the contractual purchase price stipulated in
the agreement. In accordance with the applicable accounting guidance in ASC 815-40, Contracts in Entity’s
Own Equityt , the Company determined that the sale of stock should be recorded at fair value. Therefore,
the
Company allocated the additional $2.9 million of consideration received under the Stock Purchase Agreement to
the Bayer Collaboration Agreement and added such amount to the total transaction price.
Contracts with Customers. The Company determined the fair value of the shares sold
ff
ff
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
over the total estimated period of performance.
million in non-refundable option payments if Pfizer exercises its options for all targets 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 forff
under the Pfizer Research Collaboration Agreement, as well as tiered royalties based on sales. In 2021 and
2020, the Company received payments totaling $$1.2 millio an nd $$4.4 millio ,n respectively, which are being
recognized as revenue over the total period of performance. Pfizer selected an additional target and initiated
additional services totaling $$3.5 millio in n December 2021, which is included in accounts receivable at
December 31, 2021.There were no sales-based milestone payments or royalties received as of December 31,
2021.
The Company is eligible to receive up to an additional $37.5
all designated targets
ff
Genentech Modificat
ff
iontt
In November 2017, the Company entered into an Amended and Restated Option, License, and
Collaboration Agreement (the "Genentech Modification") with Genentech, Inc. and F. Hoffman-La Roche Ltd
(together "Genentech"), amending a previous Genentech agreement entered into in September 2015. Under the
Genentech Modification, 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
and Genentech has the right to designate up to ten targets. The Company is eligible to receive up to $27.5
million in additional expansion target payments if Genentech exercises its options on all remaining targets.
Upfront non-refundable payments are recognized as revenue over the total estimated period of performance.
The Company is eligible to receive up to $44.0 million per target 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 as of December 31, 2021.
Information about contract liabilities included as deferred revenue in the accompanying consolidated
balance sheets is as follows:
ff
(dollars in millions)
Contract liabilities
Revenues recognized in the period from:
Amounts included in deferred revenue in previous periods
December 31,
2021
2020
740.5 $
45.1
18.6 $
18.7
$
$
Changes in deferred revenue as of December 31, 2021 from 2020 were due to additions to deferred
revenue totaling $742.1 million, related primarily to the ARV-RR 471 Collaboration Agreement with Pfizer, and
recognition of revenue on various research collaboration and license agreements totaling $46.7 million.
F-15
The aggregate amount of the transaction price allocated to performance
ff
obligations that are unsatisfied
as of December 31, 2021 was $740.5 million, which is expected to be recognized in the following periods:
(dollars in millions)
2022
2023
2024
2025
2026
Thereafter
ff
Total
$
206.2
232.3
116.7
84.0
53.0
48.3
$
740.5
4. Marketable Securities and Fair Value Measurements
The following is a summary of the Company’s assets measured at fair value on a recurring basis.
Valuation
Hierarchy
Level 2
Level 2
(dollars in millions)
Corporate bonds
Corporate bonds
Government
securities
Total
December 31, 2021
Effective
Maturity
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
2022
$
784.0 $
0.0 $
(0.7) $
2023 - 2024
Level 2
2022
582.6
32.4
—
—
(3.9)
(0.1)
$
1,399.0 $
0.0 $
)
(4.7) $
(
)
(
1,394.3
Fair
Value
783.3
578.7
32.3
(dollars in millions)
Corporate bonds
Total
Valuation
Hierarchy
Level 2
Effective
Maturity
2021
December 31, 2020
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
$
$
99.6 $
99.6 $
0.6 $
0.6 $
— $
— $
100.2
100.2
The Company’s marketable securities consist of corporate bonds and government securities which are
adjusted to fair value at each balance sheet date, based on quoted prices, which are considered Level 2 inputs.
The
carrying value fof accounts receivable, accounts p yayable and accrued expenses approximate their
y g
fair value due to the short-term nature of these assets and liabilities.
Non-recurring fair
ff
value measures
In SSeptember 2021, in connection with the fPfizer SStock Purchase gAgreement, the Company valued the
f
ransfer ffor a period fof time (t(the ““lock-up period”).
common stock issued to Pfizer at ffair value. The fPfizer SStock Purchase gAgreement contains provisions
restricti gng the sale or t
period”). The result ging ffair value fof $$264.6 million
was determined yby app ylyingg the discount due to lack fof marketabil yity duringg the contractual lock-up period to the
public trad ging price fof the common stock, which is a Level 1 input, on the date off sale. The Company
Company accounted
ffor the lack off marketabilityy duri gng the contractual lock-up period, yby uti
considered Level 3 inputs. SSuch option models included th Ce C
y
based on U.SS. Tr
ompany’s historical volatilityy and the risk f-free rate
lizing put option models, which are
easury bond rates, as keyy inputs.
g
y
F-16
5. Proprr
erty, Equipmii
ent and Leasehold ImpII
rovemen
vv
ts
Property, equipment and leasehold improvements consist of the following:
(dollars in millions)
Laboratory equipment
Officeff
equipment
Leasehold improvements
Total property, equipment and leasehold improvements
Less: accumulated depreciation
Property, equipment and leasehold improvements, net
December 31,
2021
2020
$
$
13.6 $
1.4
8.4
23.4
(10.8)
12.7 $
11.1
1.2
6.1
18.4
(6.1)
12.3
Depreciation expense totaled $$4.8 millio ,n $3.2 million, and $1.6 million for the years ended
December 31, 2021, 2020, and 2019, respectively.
6. Right of UseUU Assets and Liabil
ll es
iti
ii
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 consolidated balance sheets.
ROU assets represent the right to use an underlying asset forff
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 commencement date based on the present value of lease payments over the
lease term. As the Company’s leases do not provide an implicit rate, the Company uses its incremental
ermining the present value
borrowing rate based on the information available at the commencement date in det
fof lease
recognized on
a str gaight-line basis over the lease term. Some of the Company’s leases include options to extend or terminate
the lease. The Company includes these options in the recognition of the Company’s ROU assets and lease
liabilities when it is reasonably certain that the Company will exercise the option.
borrowing rate r ganges ffrom 3.0%% – 5.1%%. Lease expense is
ypayments. The incremental
g
g
g
In May 2021, the Company entered into a lease for approximately 160,000 square feet of laboratory
and officeff
space to be occupied in 2024. In connection with the signing of the lease, and at the Company’s
election to increase the landlord’s contribution to the tenant improvement allowance, the Company issued a
letter of credit for $4.5 million, collateralized by a certificate of deposit in the same amount, which is presented
as restricted cash at December 31, 2021. Once occupied, the base rent will range from $7.7 million to $8.8
million annually over a ten-year lease term.
The Company has operating leases for its corporate fofffifff ce and certain equipment, which expire no later
than December 2024. The leases have a w geighted
average
g
remaining term fof thre ye years.
g
The components off lease expense were as ffollows:
(dollars in millions)
Operating lease cost
Year Ended December 31,
2021
2020
$
1.4 $
1.0
F-17
Supplemental cash flow inforff mation related to leases was as follows:
(dollars in millions)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
Supplemental non-cash informat
ff
ion:
Right-of-use assets obtained in exchange for new lease obligations
December 31,
2021
2020
$
$
1.2 $
3.2 $
Maturities of operating lease liabilities as of December 31, 2021 were as follows:
0.9
0.6
1.2
1.5
1.5
4.2
(0.2)
4.0
$
$
December 31,
2021
2020
$
$
12.4 $
9.5
1.2
23.1 $
9.0
8.1
1.8
18.9
(dollars in millions)
2022
2023
2024
Total lease payments
Less: imputed interest
Total
7. Accrued Expenxx
ses
Accrued expenses consisted of the following:
(dollars in millions)
Employee expenses
Research and development expenses
Professional fees and other
8. Long-Term Drr
ebt
In June 2018, the Company entered into an Assistance Agreement with the State of Connecticut (the
"2018 Assistance Agreement") to provide funding for the expansion and renovation of laboratory and officeff
space (the "Project"). Under the terms of the 2018 Assistance Agreement, the Company was entitled to borrow
from the State of Connecticut a maximum of $2.0 million, provided that the funding did not exceed more than
50% of the total Project costs. In September 2018, the Company borrowed $2.0 million under the 2018
Assistance Agreement, bearing interest at 3.25% per annum with interest payments required for the first 60
months from the funding date. Thereafter
SSeptember
can be forgiven if the Company meets certain employment conditions, as defined in the agreement, which the
Company met in April 2021 and was therefore granted loan forgiveness of $1.0 million from the State of
Connecticut. The Company may also be required to prepay a portion of the loan if the employment conditions
are not met. The 2018 Assistance Agreement requires that the Company be located in the State of Connecticut
through June 2028 with a default penalty of repayment of the full original funding amount of $2.0 million plus
liquidated damages of 7.5% of the total amount of funding received.
, the loan will begin to fully amortize through month 120, maturing in
2028 According to the terms of the 2018 Assistance Agreement, up to $1.0 million of the funding
ff
.
In connection with an Assistance Agreement with the State of Connecticut (the "Assistance Agreement")
entered into in 2014, under which all the borrowings by the Company were forgiven in accordance with the
Assistance Agreement, the Company is required to be located in the State of Connecticut through January
2024, with a default penalty of repayment of the full original funding amount of $2.5 million plus liquidated
damages of 7.5%.
F-18
Minimum future principal payments on long-term debt as of December 31, 2021 are as follows:
(dollars in millions)
2023
2024
2025
2026
Thereafter
Total
$
$
—
0.2
0.2
0.2
0.4
1.0
During the years ended December 31, 2021, 2020 and 2019, interest expense totaled $$0. ,0 $0.1 million
and $0.1 million, respectively.
9. Equity
Common Stock
In SSeptember 2021, in connection with the fPfizer SStock Purchase gAgreement, the CCompa yny issued
3,457,815 shares fof common stock to fPfizer at a price fof $101.22 per share, which resulted in gg g
proceeds fof $350 million, less ffinancial advisor ffees of $f 4.6 million T. he shares were issued in reliance on the
exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended. The CCompa yny
determined that the ARV-RR 471 CCollaboration gAgreement and the fPfizer SStock Purchase gAgreement entered into
with Pffizer concurrent yly should be evaluated as a combined contract in accordance with ASCSC 606, Revenue
ffrom CContracts wit Ch Customers, and, as a result, determined the ffair value fof the shares sold under the fPfizer
SStock Purchase gAgreement to be $$85.4 million less than the contractual purchase price stipulated in the
gagreement. In accordance with the applicable account ging gguidance in ASCSC 815-40, CContracts
Equityyt , the CCompa yny determined that the sale off stock should be recorded at ffair value and, th
the excess consideration received to the ARV-RR 471 CCollaboration gAgreement. Pursuant to terms fof the fPfizer
SStock Purchase gAgreement, Pffizer has gagreed not to sell or tr
the CCo
fansfer th Se Shares without prior written approval
mpany ffor a spec fified period, subjject
in Enti yty’ Os O’
ff
ferefore,
fecified exceptions.
to sp
aggregat ge gross
wn
allocated
fof
b
y
tt
In December 2020, th Ce C
ompany completed a public foffferi
y
fff
6,571,428 shares fof common stock at a public foffferi
ggross proceeds fof $$460.0 million beffore underwriter discounts, commissions, and offff
fff
gering costs fof $$28.1 million.
gng price fof $$70.00 per share, which resulted in gg g
gng in which the CCompa yny issued and sold
aggregate
In November 2019, th Ce C
ompany completed a public foffferi
y
fff
5,227,273 shares fof common stock at a public foffferi
ggross proceeds ffrom the sale off shares in the public foffferi
$$7.4 million.
fff
fff
gng in which the CCompa yny issued and sold
gng price fof $$22.00 per share. The CCompa yny’s gagg ggregate
gng was $$115.0 million beffore ffees and expenses fof
In June 2019, th Ce C
ompany entered into a SStock Purchase gAgreement with Bayyer AGG pursuant to which
y
y
mpany issued and sold to Bayyer GAG 1,346,313 shares fof the CCompa yny’s common stock (the(the SShares)
the CCo
ares) ffor
a contractuallyy stated purchase price fof $$32.5 million. The value fof the shares fof the CCompa yny’s common stock
was based on the ave grage fof the Company’
igning fof the
g
SStock Purchase gAgreement plus a f ffifteeff
Company’s common stock ffor the p
ydays prior to the s g
n percent premium.
receding 60
g
Equi yty Distribution gAgreements
ompany entered into an Equityy Distribution gAgreement with Pipe Sr Sandle &r &
y
gAugust 2021, th Ce C
In
Company
Company (“P(“Piper SSandler”)
ymay fofffefff
under the universal
yyear ended December 31, 2021, no shares were issued under this aggreement.
shelf
f
gregistration statement pursuant to one or more ““at-the-market" offff
r and sell ffrom time to time, thro gugh the gagents, up to $$300.0 million fof the common stock
Company
ndler”) and CCantor Fi gtzgerald & C& Co. (“C(“Cantor”),or”), as gagents, pursuant to which the Company
gregistered
gerings. Du gring the
In October 2019, the Company entered into an Equity Distribution Agreement (the "Distribution
Agreement") with Piper Sandler, pursuant to which the Company could offer
ff
and sell from time-to-time in an “at-
F-19
ring,” at its option, up to an aggregate of $100.0 million of shares of the Company’s common
the-market offeff
stock through Piper Sandler, as sales agent. During year ended December 31, 2020, the Company sold
2,593,637 shares of its common stock resulting in proceeds to the Company of $64.1 million, net of offering
costs of $1.6 million. The Company terminated the Distribution Agreement in August 2021.
Share-based Compensation
2018 Employee Stock Purchase Plan
In September 2018, the Company adopted the 2018 Employee Stock Purchase Plan (the "2018
ESPP"), with the first offering period under the 2018 ESPP commencing on January 1, 2020, by initially
providing participating employees with the opportunity to purchase an aggregate of 311,850 shares of the
Company's common stock. The number of shares of the Company's common stock reserved for issuance under
the 2018 ESPP increased, pursuant to the terms of the 2018 ESPP, bP y additional shares equal to 1% of the
Company’s then-outstanding common stock, effecti
1.5 million shares remained available forff
Company issued 19,357 and 11,046 shares, respectively, of common stock under the 2018 ESPP.
ve as of January 1 of each year. As of December 31, 2021,
purchase. During the years ended December 31, 2021 and 2020, the
ff
Incentive Svv
hare Prr
laPP n
In the Fourth Amendment to the Company’s Incentive Share Plan (the "Incentive Plan") adopted in
March 2018, the Company was authorized to issue up to an aggregate of 6,199,477 incentive units pursuant to
the Incentive Plan. Generally, incentive units were granted at no less than fair value as determined by the board
of managers and had vesting periods ranging from one to four
September 2018. In September 2018, each outstanding incentive unit was converted into a number of shares
of common stock based upon the IPO price. Certain of the shares of common stock issued in respect of
incentive units continue to be subject to vesting in accordance with the vesting schedule that was applicable to
such incentive units. As of December 31, 2021, there were 30,625 restricted shares remaining to be vested.
years. The Incentive Plan was terminated in
ff
2018 Stock Incentive Plan
In September 2018, the Company’s board of directors adopted, and the Company’s stockholders
ff
veness of
ve upon the effecti
ff
the Company’s IPO. The number of common shares initially available
approved, the 2018 Stock Incentive Plan (the "2018 Plan"), which became effecti
the registration statement on Form S-1 forff
for issuance under the 2018 Plan equaled the sum of (1) 4,067,007 shares of common stock; plus (2) the
number of shares of common stock (up to 1,277,181 shares) issued in respect of incentive units granted under
the Incentive Plan that were subject to vesting immediately prior to the effecti
statement that expire, terminate or are otherwise surrendered, cancelled, forfe
Company at their original issuance price pursuant to a contractual repurchase right; plus (3) an annual increase
on the first day of each year beginning with the year ended December 31, 2019 and continuing to, and
including, the year ending December 31, 2028, equal to the lesser of 4,989,593 shares of the Company’s
common stock, 4% of the number of shares of the Company’s common stock outstanding on the first day of the
year or an amount determined by the Company’s board of directors. As of December 31, 2021, 2.0 million
shares are available forff
issuance under the 2018 Plan. Common shares subject to outstanding equity awards
that expire or are terminated, surrendered, or cancelled without having been fully exercised or are forfeited in
whole or in part are available forff
ited or repurchased by the
veness of the registration
future grants of awards.
ff
ff
Compensationtt
Expense
For the years ended December 31, 2021, 2020 and 2019, the Company recognized $$57.1 mill
,
$30.2 million and $20.1 million, respectively, of total compensation expense for awards classified as equity
awards related to its stock options, restricted stock awards, and restricted stock units. At December 31, 2021,
there was $$55.9 million of compensation expense that is expected to be recognized over a weighted average
period off approximat yely two yyears.
ion
F-20
Stock Options
The fair value of the stock options granted during each of the years ended December 31, 2021, 2020
and 2019 was determined using the Black-Scholes option pricing model at the grant date with the following
range of assumptions:
Expected volatility
Expected term (years)
Risk free interest rate
Expected dividend yield
Exercise price
Year ended December 31,
2021
74% - 78%
5.3 - 7.0
2020
70% - 75%
5.3 - 7.0
2019
69% - 71%
5.5 - 7.0
0.5% - 1.3%
0.3% - 1.6%
1.4% - 2.7%
0 %
0 %
0 %
$66.82 - $100.40
$22.70 - $50.00
$17.29 - $37.66
Given the Company’s common stock has not been trading for a suffiff cient period of time, the Company
calculates volatility of its common stock by utilizing a weighted average of a collection of peer company
volatilities and its own common stock volatility. The expected term is calculated utilizing the simplified method.
A summary of the stock option activity under the 2018 Plan as of December 31, 2021 is presented
below. These amounts include stock options granted to employees, directors and consultants.
(dollars in millions,
except weighted averagerr
Outstanding at December 31, 2020
rr
exercise
price)
rr
Granted
Exercised
Forfeited
Outstanding at December 31, 2021
Exercisable at December 31, 2021
Options
Weighted
Average
Exercise Price
Weighted
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic Value
4,321,882 $
1,866,659 $
(773,476) $
(71,811) $
5,343,254 $
2,289,309 $
26.35
79.24
22.99
50.72
44.98
23.62
8.1 $
7.2 $
200.4
134.0
The weighted-average grant date fair
ff
value of options granted during the years ended December 31,
2021, 2020 and 2019 was $$52.
during the years ended December 31, 2021, 2020 and 2019 was $$46.9 millio ,n $19.4 million and $1.9 million,
respectively. No excess tax benefit has been recorded as a financing cash flow activity since no benefit has yet
been realized due to taxable losses incurred to date.
,85 $27.45 and $13.28, respectively. The total intrinsic value of options exercised
At December 31, 2021, $$55.6 millio on f total unrecognized compensation cost related to non-vested
stock options granted under the 2018 Plan is expected to be recognized over the next tw yo year .s
At December 31, 2021, there were 5,066,720 stock pto ions under the 2018 Plan that have vested or are
expected to vest.
F-21
tt
Restrict
ed Stock Awards
ww
A summary of the restricted stock award activity under the Incentive Plan as of December 31, 2021 is
presented below. These amounts include restricted stock granted to employees, directors and consultants.
Unvested restricted stock at December 31, 2020
Vested
Unvested restricted stock at December 31, 2021
Weighted
Average Grant
Date
Fair Value Per
Share
Shares
238,712 $
(208,087) $
30,625 $
16.00
16.00
16.00
At December 31, 2021, there were 29,739 restricted stock awards under the Incentive Plan that are
expected to vest.
tt
Restrict
ed Stock Units
A summary of restricted stock unit activity under the 2018 Plan for the year ended December 31, 2021
is presented below. These amounts include restricted stock units granted to employees.
Unvested restricted stock units at December 31, 2020
Exercised
Forfeited
Unvested restricted stock units at December 31, 2021
Weighted
Average Grant
Date
Fair Value Per
Share
Shares
133,049 $
(44,355) $
(387) $
88,307 $
20.01
20.01
19.36
20.02
At December 31, 2021, there were 80,834 restricted stock units under the 2018 Plan that have vested
or are expected to vest.
10. Equity Method Investments
In July 2019, the Company and Bayer CropScience LP ("Bayer LP") formed Oerth, a joint venture to
targeted protein degraders for applications in the field of
research, develop and commercialize PROTACTT
agriculture. Pursuant to the terms of the joint venture agreement, the Company made an in-kind intellectual
property contribution to Oerth in the form of a license to certain of the Company’s proprietary technology. Bayer
LP has made a $56.0 million total cash commitment to Oerth, of which $16.0 million was contributed to Oerth in
2019, and an in-kind intellectual property contribution. The Company and Bayer LP each hold an ownership
interest in Oerth initially representing 50% of the ownership interests. A 15% ownership interest of Oerth is
reserved for the future grants of incentive units to employees and service providers.
y
Under the jjoint venture gagreement, the CCompa yny has no
gding
mpany’s ownership interest will not be diluted ffrom ffuture contributions ffrom Bayyer LP. The Company
Company
anagement board under
yBayer LP, tP he
g
ompany and
y
ompany and Bayyer LP. A Os Oerth is jjoint yly controlled yby th Ce C
Company determined that
its 50%% interest usingg the equityy method fof account ging. The Company
and the CCo
has no exposure to ffuture losses fof OOerth. The activities fof OOerth are controlled yby a m
fof th Ce C
the jjoint control
Company
fs forff
Company account
OOerth is a variable interest en ytity and, acco
under the variable interest en ytity model and concluded that the signif
and development activities and, as the Company
ymary
Company is not the pri
Company
Company does not have the sole power to direct such activities, the
iciary.
f
y
benef
rdingly, the CCompa yny has evaluated the signifgnificant activities fof OOerth
primarily fof research
ignificant activities consist
gobligation to provide
yany additional ffun
g y
y
y
The Company
Company also provides to OOerth compensated research and development services and
administrative services thro gugh a separate gagreement. The services rendered yby th Ce C
ended December 31, 2021, 2020 and 2019 were immaterial.
ompany
y
during the yyears
g
F-22
The Company determined that the fair value of the equity interest it received in Oerth in exchange for
the license contributed totaled $49.4 million. The fair value of Oerth was determined utilizing discounted cash
flows based on reasonable estimates and assumptions of cash flows expected from Oerth.
g
Company
The Company
recognized revenue fof $$24.7 million attributable to the license contributed to OOerth and
g
ining $$24.7 million which corresponds to the CCompa yny’s %50% ownership in OOerth. The
eliminated the rema
Company determined that the amount that was eliminated represents intra-entityy p frofit which should be
Company
until realized yby OOerth. The defferral will be
the license. Until such time, the
g
the results fof operations fof the Company
licensing fof its t
g
onggoingg or central operations, as evidenced yby previous
recognizes revenue associated with
remaining $$24.7 million fof revenue is ind fefinite yly defferred and excluded ffrom
Company. The amount recoggnized as revenue was treated as such because the
ja joint venture is part
echnologyy in connection with the fformation fof
recognized fif and when OOerth
licensing gagreements.
Company’s m jajor
fof the Company’
g
g
g
g
fdeferred
OOperat ging expenses and net loss fof OOert
fh forff
th ye years ended December 31 2021, 2020 and 2019
ively. The net loss incurred in 2019 included
y
The Company’
g
totaled $$14.3 million, $$8.3 million and $$49.8 million, respect
research and development expenses equal to $$49.4 million represent ging the ffair value fof the license acquired
Company’s initial investment in OOerth was $$49.4 million which represented the ffair value fof
ffrom Arvinas.
rr
shares received in
exchange ffor the contribution fof the license. The elimination fof the intra-ent yity
component
fof the revenue resulted in a reduction in the balance fof the investment i On Oerth,
carrying value fof the investment to $$24.7 million. For th ye year ended December 31, 2019, the CCompa yny
y g
recorded equityy method losses fof $$24.7 million based on its proportionate share off ownership,
g
carrying value fof the investment to zero, and, as a result, no additional losses were recorded gagainst the
carrying value fof the investment du gring the yyears ended December 31, 2021 and 2020.
fprofit
bringing its initial
reducing its
y g
y g
g g
11. Income Taxes
The Company had no income tax expense due to operating losses incurred for the years ended
the net
December 31, 2021, 2020, and 2019. The Company had also not recorded any income tax benefits forff
operating losses incurred in each period due to its uncertainty of realizing a benefit from those items. All of the
Company’s losses beforeff
income taxes were generated in the United States.
A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate
for the years ended December 31, 2021, 2020, and 2019 were as follows:
Federal statutory rate
State taxes
Federal research tax credit
Stock compensation
Change in valuation allowance
Year ended December 31,
2021
2020
2019
21.0%
16.3 %
2.7%
(1.6)%
(38.4)%
0.0%
21.0%
(0.1)%
4.1%
(1.7)%
(23.3)%
0.0%
21.0%
(0.3)%
3.5%
(2.2)%
(22.0)%
0.0%
F-23
Deferred income taxes represent the tax effect
of transactions that are reported in different
ff
periods for
financial and tax reporting purposes. Temporary differences
and carryforwards that give rise to a significant
portion of the deferred income tax benefits and liabilities were as follows at December 31, 2021 and 2020:
ff
ff
(dollars in millions)
Deferred income tax assets:
Loss carryforwards
Tax credits
Stock compensation
Deferred revenue
Other
Total deferred income tax assets
Deferred income tax liabilities:
Property, equipment and leasehold improvements
Other
Total deferred income tax liabilities
Less valuation allowance
Net deferred income tax liability
December 31,
2021
2020
$
97.0 $
18.8
15.4
10.0
3.3
144.5
(3.6)
(1.4)
(5.0)
(139.5)
$
— $
43.1
10.1
5.0
9.0
0.1
67.3
(2.4)
—
(2.4)
(64.9)
—
The Company has provided a valuation allowance against the full amount of the deferred tax assets
story fof losses fof the CCompa yny, it is more li
primarily upon the hi
y
y
ykely
since, in the opinion of man gagement, based
than not that the be fnefits will not be realized.
AAll, or a portion fof, the
remaining valuation allowance mayy be reduced in fut
fu ure years based on an
g
assessment of earnings sufficient
$$74.6 millio an nd $27.8 million in 2021 and 2020, respectively, due increases in net operating loss
carryforwards, tax credit carryforwards, stock compensation expense, and research and development tax
credits.
to utilize these potential tax benefits. The valuation allowance increased by
ff
The Company had $$373.6 millio an nd $205.1 million of federal net operating loss carryforwards
December 31, 2021 and 2020, respectively. Federal net operating loss carryforwards as of December 31, 2017
expire at various dates through 2037 and federal net operating losses incurred in 2018 and in future years may
be carried forward indefinitely, but the deductibility of such carryforwards is limited to 80% of the Company’s
taxable income in the year in which carryforwards are used. The Company had $$346.9 millio an nd $$63.8 million
of state and local net operating loss carryforwards as of December 31, 2021 and 2020, respectively, that expire
at various dates through 2041. The Company had $$15.2 millio an nd $10.1 million of federal tax credit
carryforwards as of December 31, 2021 and 2020, respectively, which expire at various dates through 2041.
The Company had $$4.5 millio an nd $$2.7 millio on f state tax credit carryforwards
2020, respectively, which expire at various dates through 2036.
as of December 31, 2021 and
as of
ff
ff
During 2021, the Company performed
ff
a Section 382 analysis to determine whether an ownership
change occurred for tax purposes. Based on this analysis, the Company determined that ownership changes
occurred on July 31, 2018 and December 31, 2020 due to various equity offerings, vesting of restricted stock
awards, and stock option exercises. These ownership changes resulted in Section 382 limitations on the
Company’s net operating loss and tax credit carryforwards generated beforeff
the amount of the Section 382 limitations (including carryover of the unused Section 382 limitations and realized
built-in gains) exceeds the amount of the Company’s carryforwards generated beforeff
limitations will not affect
the Company's ability to fully utilize these carryforwards.
these dates. However, because
these dates, the
ff
The Company complies with the provisions of ASC 740 in accounting for its uncertain tax positions.
ASC 740 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return
should be recorded in the financial statements. Under ASC 740, the Company may recognize the tax benefit
from an uncertain tax position only if it is more likely than not that the tax position will be sustained on
F-24
examination by the taxing authorities, based on the technical merits of the position. As of December 31, 2021
and 2020, the Company had no unrecognized tax benefits.
The Company recognizes interest accrued related to unrecognized tax benefits and penalties in tax
expense. The Company had no income tax related accruals for interest and penalties at December 31, 2021
and 2020.
The Company is required to file income tax returns in the U.S. Federal and various state jurisdictions.
fof the CCompanyy’s
The Company is a state franchise taxpayer due to the Company’s loss position. As a result
net operat ging loss carryforwards,
ompany’
y
ffor all tax yyears until its net operat ging loss and tax credit carryforwyforwards are utilized or expire prior to utilization.
The CCompa yny does not current yly have
fs federal and state statutes fof limitations ggenerallyy remain open
yany ffederal or state income tax examinations in
carryforwards, th Ce C
gprogress.
For the years ended December 31, 2021, 2020, and 2019, the Company recorded a benefit from
expected cash refunds to be provided by the State of Connecticut, equal to 65% of research and development
credits, of $$1.6 millio ,n $1.8 million, and $1.4 million, respectively, which is included in Other income, net in the
accompanying consolidated statements of operations and comprehensive loss, due to the Company being a
state franchise taxpayer. The benefit results from the exchange of the state research and development tax
credit carryforwards for cash refunds. At December 31, 2021 and 2020, the Company had recorded receivables
of $$3.4 millio an nd $3.2 million, respectively, relating to research and development credits due to the Company.
12. Commitments and Contintt gencies
In July 2013, the Company entered into an exclusive license agreement, including the right to grant
University to develop protein degradation technologies. Under the license agreement, the
sublicenses, with YaleYY
Company is required to pay a minimum license maintenance royalty totaling $0.1 million per year until the first
sale to a third party of any licensed product, fol
products forff
first licensed product and approximately $1.5 million for the second licensed product, and low single-digit
royalties on aggregate worldwide net sales of certain licensed products, which may be subject to reductions,
and subject to minimum royalty payments that range from $0.2 million to $0.5 million.
the development of the protein degradation technologies totaling approximately $3.0 million for the
lowed by success-based milestones for the first two licensed
ff
13. Net Loss Per Share
Basic and diluted loss per share was calculated as follows:
in millions, except per common share arr mounts)
(dollars and sharesrr
Net loss
Weighted average common shares outstanding
- basic and diluted
Net loss per common share
- basic and diluted
$
$
Year ended December 31,
2021
2020
2019
(191.0) $
(119.3) $
(70.3)
50.0
39.5
32.9
(
(3.82) $
(
)
)
(
(3.02) $
(
)
)
)
(2.13)
(
)
(
For the years ended December 31 2021, 2020, and 2019, the folff
lowing securities have been excluded
from the computation of diluted net loss per share as their effect
ff
would have been anti-dilutive:
(shares in millions)
Stock options
Restricted stock awards
Restricted stock units
Year ended December 31,
2021
2020
2019
2.4
0.1
0.1
2.6
1.5
0.4
0.1
2.0
0.3
0.9
0.0
1.2
F-25
Arvinas, Inc.
5 Science Park
395 Winchester Ave.
New Haven, Connecticut 06511
Tel: (203) 535-1456
www.arvinas.com
Board of Directors
Timothy Shannon, M.D., General Partner, Canaan Partners
John Houston, Ph.D., President and Chief Executive Officer, Arvinas
Linda Bain, Chief Financial Officer, Codiak BioSciences
Wendy Dixon, Ph.D., Principal, Great Meadow Consultancy
Edward Kennedy, Jr., Partner and Member, Epstein Becker & Green
Bradley Margus, Executive Chairman, Cerevance
Briggs Morrison, M.D., President, Head of Research and Development, Syndax Pharmaceuticals
Leslie V. Norwalk, Esq., Strategic Counsel, Epstein Becker & Green
Liam Ratcliffe, M.D., Ph.D., Head, Access Biotechnology
Laurie Smaldone Alsup, M.D., Chief Scientific Officer and Chief Medical Officer, NDA Group
Executive Officers
John Houston, Ph.D., President and Chief Executive Officer
Sean Cassidy, Chief Financial Officer
Ronald Peck, M.D., Chief Medical Officer
Ian Taylor, Ph.D., Chief Scientific Officer