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ARVINAS, INC. (ARVN)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered a major upside surprise on revenue and EPS driven by accounting impacts from reprioritizing the vepdegestrant program: revenue was $188.8M and diluted EPS was $1.14, far above consensus; management explained the revenue step-up reflects a higher percent-complete under the Pfizer collaboration after removing two Phase 3 combo trials, not underlying commercial sales .
  • Arvinas and Pfizer will seek global approvals for vepdegestrant as second-line monotherapy in ESR1-mutant ER+/HER2- mBC; VERITAC-2 met the ESR1-mutant hazard-ratio goal and full data will be presented at ASCO, with an NDA targeted for 2H 2025; two planned Phase 3 combo trials were removed from the joint plan .
  • A company-wide restructuring (≈33% workforce reduction) and portfolio reprioritization extend cash runway into 2H 2028; management targets ≈$80M annual cost savings and ~$500M savings/avoidance over 3 years, with ~$10M one-time severance expected in Q2 .
  • Pipeline advanced: first-in-human ARV-102 (LRRK2) showed ≥50% CSF LRRK2 degradation and good tolerability; KRAS G12D degrader ARV-806 received FDA safe-to-proceed (Phase 1 in 2H 2025); ARV-393 posted strong preclinical combo data in lymphoma .

What Went Well and What Went Wrong

What Went Well

  • First-ever positive pivotal PROTAC data: “we have a high conviction that vepdegestrant can be highly competitive as a monotherapy… in the ESR1 mutant setting” and are “on track to submit a regulatory filing” .
  • Accounting-driven outperformance: Revenue increased by $163.5M YoY to $188.8M as collaboration revenue recognized stepped up after budget reductions from removing Phase 3 combos; drove operating income of $71.4M and net income of $82.9M .
  • Neuroscience validation: ARV-102 achieved brain penetration and ≥50% CSF LRRK2 reduction in humans; management emphasized differentiated biology versus inhibitors and ongoing PD patient SAD dosing .

What Went Wrong

  • Combination strategy reset: Both first-line and second-line Phase 3 vepdegestrant combination trials were removed from the joint plan, reflecting evolving treatment landscape, external data and capital allocation constraints .
  • Cost actions reflect funding environment: ~33% workforce reduction and ~$10M severance underscore pressure to extend runway; restructuring savings only fully realized by Q4 2025 .
  • Revenue quality and predictability: Q1 strength was largely a non-recurring accounting impact (percent-complete denominator reduction), not commercial traction; sequential modeling requires caution .

Financial Results

P&L and Margins (USD Millions unless noted)

MetricQ3 2024Q4 2024Q1 2025
Revenue$102.4 $59.2 $188.8
Net Income-$49.2 -$45.1 $82.9
Diluted EPS-$0.68 -$0.63 $1.14
Operating Income-$60.3 -$58.2 $71.4
Total Operating Expenses$162.7 $117.4 $117.4
EBIT Margin %-58.9% -98.3% 37.8%
Net Income Margin %-48.1% -76.1% 43.9%

Actual vs Consensus (Q1 2025)

MetricConsensusActualSurprise
Revenue ($USD Millions)$41.9*$188.8 +$146.9 (+351%)*
EPS ($USD)-$0.97*$1.14 +$2.11*
# of Estimates (Revenue / EPS)17* / 15*——

Values marked with * retrieved from S&P Global.

Revenue Composition Drivers (Q1 2025)

SourceRevenue Impact
Pfizer Vepdegestrant Collaboration (budget changes after removing Phase 3 combos)+$167.8M
Pfizer Research Collaboration (performance period changes)-$2.7M
Bayer Collaboration (termination)-$1.6M

KPIs

KPIQ1 2024Q1 2025
Cash, Cash Equivalents & Marketable Securities—$954.3M
GAAP R&D Expense$84.3M $90.8M
Non-GAAP R&D Expense$71.9M $79.3M
GAAP G&A Expense$24.3M $26.6M
Non-GAAP G&A Expense$18.0M $23.1M

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Cash RunwayMulti-yearInto 2027 (as of FY24) Into 2H 2028 Raised/Extended
Vepdegestrant Phase 3 Combos2025 planInitiate first-line (atirmociclib) and second-line (CDK4/6) in 2025 Both removed from joint plan Lowered/Removed
Restructuring SavingsFY 2025 onward—≈$80M annual savings, full impact by Q4 2025 New
One-time Restructuring ChargeQ2 2025—≈$10M severance/benefits expected in Q2 New
Vepdegestrant Regulatory Timeline2025Topline in Q1 2025; present in 2025 ASCO late-breaker; share data with regulators Q2; submit NDA 2H 2025 Clarified/Timeboxed

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 & Q4 2024)Current Period (Q1 2025)Trend
Vepdegestrant VERITAC-2 monotherapyTopline expected 4Q24/1Q25; co-primary endpoints (PFS ITT & ESR1-mutant) ESR1-mutant HR exceeded prespecified ≤0.6; ASCO late-breaker; filing “in coming months” Progressing to regulatory submission
Combo strategyPlan to initiate first-line (atirmociclib) and second-line CDK4/6 Phase 3 in 2025 Removed both Phase 3 combo trials; adding Pfizer KAT6+vep cohort in an ongoing Phase 1 Deprioritized combos; focused monotherapy
Cost discipline/cash runwayRunway into 2027 Restructuring extends runway to 2H 2028; ~$80M annual savings; ~$500M savings/avoidance over 3 years Strengthened financial flexibility
ARV-102 (LRRK2)Preclinical CNS penetration; Phase 1 HV ongoing HV data: ≥50% CSF LRRK2 reduction; PD SAD dosing begun; MAD to start 2H 2025 Clinical momentum; human PD readouts in 2H
ARV-393 (BCL6)Phase 1 enrolling; preclinical promise Strong preclinical combo regressions with SOC chemo/biologics and targeted SMIs; clinical enrolling Building combo rationale
ARV-806 (KRAS G12D)IND planned in 2025 IND cleared; Phase 1 planned in 2H 2025 Transitioning to clinic
Supply chain—Pfizer supplies vepdegestrant from Ireland; no supply issues noted Stable

Management Commentary

  • CEO on VERITAC-2 significance: “first ever positive pivotal data for a PROTAC degrader… moving towards filing and registration” and “best-in-class monotherapy… ESR1 mutant setting” .
  • CFO on revenue mechanics: percent-of-completion accounting under the Pfizer collaboration drove higher Q1 revenue after budget reductions from removing trials; not indicative of product sales .
  • CEO on combo removal rationale: “based on… external data results, evolving treatment landscape… we have aligned with Pfizer to remove [first-line and second-line] Phase III combination studies” .
  • CMO on ARV-102 differentiation: degraders eliminate scaffolding/GTPase/kinase functions, achieving ≥50% CSF LRRK2 reduction with acceptable safety .

Q&A Highlights

  • Market sizing and positioning: Second-line ESR1-mutant opportunity ~25k new patients/year in US; Orserdu captures ~⅓; vepdegestrant aims for best-in-class profile .
  • Commercial build: Targeted sales force for ~6,000 oncologists driving 70–80% of scripts; U.S. launch co-led with Pfizer .
  • Regulatory/NDA timing: Pre-NDA meeting held; moving ahead; NDA targeted 2H 2025 post-ASCO .
  • Combo data cadence: Abemaciclib combo showed encouraging activity and tolerability; broader DDI concerns fading; KAT6 combo to be explored in all-comers Phase 1 .
  • Cost savings phasing: Severance in Q2; meaningful savings start in Q3 with full run-rate by Q4 .

Estimates Context

  • Q1 2025 results far exceeded consensus due to collaboration accounting: revenue $188.8M vs $41.9M* and EPS $1.14 vs -$0.97*, driving significant headline beats; management emphasized the non-recurring accounting nature .
  • With combo Phase 3 trials removed, Street models likely adjust R&D/SG&A trajectories (lower spend) and pipeline timelines while focusing on monotherapy filing and potential 2026 U.S. launch cadence .

Values marked with * retrieved from S&P Global.

Consensus vs Actual Detail (Q1 2025)

MetricConsensusActualCommentary
Revenue ($USD Millions)$41.9*$188.8 Driven by percent-complete revenue step-up after vepdegestrant program budget reductions
EPS ($USD)-$0.97*$1.14 Operating income $71.4M and higher collaboration revenue recognition

Key Takeaways for Investors

  • The Q1 beat is largely accounting-driven; model lower, more normalized collaboration revenue going forward; focus on monotherapy regulatory path rather than expecting recurring revenue of this magnitude .
  • VERITAC-2 ESR1-mutant success and ASCO late-breaker positioning support the NDA in 2H 2025; the next stock-moving catalyst is ASCO data disclosure and clarity on label scope (ESR1-mutant vs broader) .
  • Cost actions materially extend runway into 2H 2028, reducing financing risk; watch savings phasing (Q3/Q4 impact) and the ~$10M Q2 restructuring charge .
  • Pipeline breadth provides optionality: ARV-102 (first-in-human CNS degrader) and ARV-806 (KRAS G12D) entering/advancing clinical stages can diversify value beyond vepdegestrant .
  • Combination strategy reset lowers near-term spend and execution risk; monitor KAT6+vep exploratory combo and evolving first-line landscape (SERD+CDK4/6 readouts) for future combo reconsideration .
  • Commercial readiness with Pfizer appears on-track for a targeted launch in ESR1-mutant second-line mBC; supply chain stable and co-promotion structure supports scale .
  • Near-term trading: ASCO data, regulatory interactions, and any NDA submission updates are key catalysts; medium-term thesis hinges on monotherapy approval and disciplined capital allocation under extended runway .