ARVN - Arvinas: Nothing Interesting In The Near Term

2023-06-12 18:02:57 ET

Summary

• Arvinas, Inc. has exciting science, but data has been a disappointment.
• There are no near-term major catalysts for Arvinas.
• Arvinas has a lot of cash, and is trading nearly at cash.

I used to hold Arvinas, Inc. ( ARVN ) for a while, but not anymore. It had a few things going for it - the science originated in the lab of Craig Crews of Yale, early papers on PROTACs were exciting, as was early data, and Pfizer Inc. (PFE) signed a $1bn+ deal with Arvinas.

If you look at these things critically, though, you can see the circularity and interdependence of these things. Dr Crews discovered PROTACs stemming from his 2001 work on proteolysis inducing proteins. PROTAC is well known because of Dr. Crews, but Dr. Crews is well-known because of PROTACs, although he purified and cloned MEK1 as a graduate student and was recognized for that as well. Early papers and ER degradation data might have seemed more interesting than they were because they originated at Dr Crews’ lab in Yale, and Pfizer may have signed that large deal because of the same connection, even though they signed after the phase 1 data. My point here is this: without positive clinical outcomes data, just a famous name does not help investors in the long run, as we are seeing here, at least till date.

Without Craig Crews’ name, Arvinas would have grown normally, a small, less-than-$300mn company doing R&D work. Then, if it had produced positive clinical outcomes data, the stock would have gone up. Right now, though, with that legacy, Arvinas has too much baggage. Sure, that legacy helped produce the cash, but that cash was not deservedly won; it is like appraising the child because of how great the father is. This cash may help it survive a few failures, but eventually, the market will figure it out, and investors will suffer.

This lengthy diatribe is just one more warning to my readers not to trust a company without data. I too make this mistake sometimes, so it is a learning process for me, too. Even biomarker or surrogate data is often not enough - we need to see that patients actually benefit.

I covered ARVN 6 times in the last couple of years. My first article introduced the company and discussed their phase 1 data. This data was for estrogen receptor degrader ARV-471, which targets heavily pretreated ER+ breast cancer. There was considerable preclinical data, and the phase 1 data also showed a tolerable molecule with a very high level of degradation of ER. That level was higher than what is generally seen in Faslodex, the standard of care in this setting. In one patient dosed at 120 mg who had extensive prior therapy and ESR1 mutation, 50% reduction in lesion per RECIST was observed. There was just this one PR among 14 patients at that time. This data is more important than mere ER degradation data.

ARV-110, the company’s other asset, targets metastatic castrate-resistant prostate cancer (mCRPC). Although trials have been held for broad mCRPC populations, certain molecularly-defined patient populations have shown higher response rates. Thus, patients with T878 or H875 mutations in Androgen Receptors showed a PSA reduction of more than 50%, including one with PR confirmed by RECIST and tumor size reduction of 80%. That data was, however, confounded by data from two other patients with wild-type (unmutated) AR who also had PSA reductions over 50%. Interestingly, ARV-100 was able to show high PSA reductions in patients refractory to various standards of care like ENZ and ABI, chemotherapy, bicalutamide, radium-223, and others.

In November, Arvinas released more data from ARV-471 monotherapy and in combination with Pfizer’s palbociclib, which saw a Clinical Benefit Rate or CBR of 38%. Now, CBR is not a strong endpoint, as we have discussed before. There were very few partial responses and no complete responses in the trial. Arvinas seems to have this singular problem in either of its trials - it keeps choosing weak endpoints - PSA reduction in mCRPC and CBR in Breast Cancer - as if it does not dare test its molecules in stronger endpoints, clinical outcomes that really matter for patients. Another weak aspect of the data is that the drugs do not do well where it matters more, it just does decently where it doesn’t matter as much, as we saw with its effect in ESR1 mutant disease, where what was really needed was efficacy in wild-type disease.

As I noted , three other points of worry:

ARV-471’s median PFS, too, was distinctly worse than competing SERDs, which have shown mPFS as high as 6.5 months against ARV-471’s 3.5 months. Moreover, AstraZeneca’s ( AZN ) intramuscularly delivered SERD, Faslodex, which has consistently shown competitive data, is now off-patent, putting pressure on emerging candidates.

Five patients witnessed Grade 3/4 treatment-related adverse events. There were one and two discontinuations in the 200 mg and 500 mg cohorts, respectively. That too is a point of worry.

That last issue cropped up again in its combo therapy cohort. Data showed high incidence of grade 3/4 neutropenia in January:

However, the incidence of grade 3/4 neutropenia, a known dose-related adverse reaction linked to palbociclib, stood at 76% for 200 mg ARV-471 and 125 mg palbociclib (n=21), with one patient discontinuing the treatment.

While the company stated that this is manageable with dose reductions of palbociclib, the market wasn’t happy and the stock tanked on the news.

Financials

ARVN has a market cap of $1.3bn and a cash balance of $1.1bn. Research and development expenses were $95.3 million for the quarter ended March 31, 2023, while general and administrative expenses were $24.9 million. These costs are on the higher side for a company like Arvinas. This gives them a cash runway of about 8 quarters, but with this much amount of cash, better money management could have improved that runway further.

Bottom Line

Like I said, Arvinas, Inc. has turned out to be something of an anticlimax for me. I still like the science; however, data hasn’t been very strong so far. This could quickly change, if they produce really outstanding data in their breast cancer phase 3 trial. But catalysts are few in the near term, so I am not expecting a price rise in the near term. I will continue to stay on the sidelines with Arvinas, Inc.

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