Arvinas, Inc. (ARVN) Earnings Call Transcript & Summary

All right, everyone. I think we'll get started here with the afternoon session. My name is Derek Archila. I'm one of the Wells Fargo biotech analysts. Very excited to have the Arvinas team here. From the company, we have John Houston, Chief Executive Officer; as well as Noah Berkowitz, the Chief Medical Officer from the company. So gentlemen, thanks for joining us and look forward to the discussion.

Thanks for the invite.

Good to be here.

So yes, maybe to start off, kind of set us the -- give us a 1,000-foot view in terms of like what's going on at Arvinas right now and ultimately, what we should be paying attention to for the next 12 months?

Absolutely. I mean it's certainly been a significant year of change and transition. Leading into it, we're very excited by the fact that we're going to have the first pivotal data for a PROTAC ever with vepdegestrant. And we had that data set. It was positive. But clearly, the market reaction and ultimately, the reaction from Pfizer said that it wasn't positive enough. So that was kind of a mix of real excitement of getting positive data with a disappointment at the reaction to it overall. And that spurred a number of next steps for us because clearly, when you see your stock price go down, we had a reaction where we had to restructure, downsize, reduce our burn rate, extend our runway, get into a beginning of a negotiation with Pfizer about what comes next for vepdegestrant because they made the statement around that time that they didn't want to do further development. They didn't want to do a second-line combination. They didn't want to do a first-line combination. So we're left with the assets sitting waiting for approval in the second-line monotherapy setting. So we've been in dialogue with them, still ongoing, still going well that'll clarify exactly what comes next for vepdegestrant. That will involve 1 or 2 or 3 things that could occur. One scenario is the asset stays with Pfizer and they launch it and the economics tilt from 50-50 to something more favorable to Pfizer or it could go the other way. They handle the asset, the economics go our way more favorably. And in that scenario, we've clearly said we wouldn't launch it on our own because we don't have that capability, we'd find a third party to do it. There's also a third option where the companies stay in the 50-50 and both jointly decide to out-license the asset to a third party. Either way, what we're going to find is that we'll be in a position where we aim to monetize vepdegestrant and reduce the costs associated with it significantly. And that should allow a lot of clarity for investors over the coming months and allow them to look at the rest of our portfolio, which is really exciting. And if you will, a reset into Phase I and early Phase II with our LRRK2 program, our BCL-6 program and a KRAS G12C program and also with a couple of more programs coming in behind that. The other transition is myself announcing I'm going to be stepping down. So we're looking for a new CEO. The initial idea behind that when I thought about it about 1.5 years ago was that we'd find a commercially focused CEO. And really, that would allow the company to move into that space. We're not going to be doing that now. So the new CEO will have a strong R&D profile, BD investor transaction and investor interaction profile. But I'm looking forward to that happening, the fact I can get a break, but also getting the -- something to really drive the company forward through this next phase.

Got you. All very helpful. So I guess as we think about some of the scenarios that you just highlighted around vepdegestrant, I guess, what level of cost savings can you pull if, again, we're not thinking about vepdegestrant anymore to kind of reallocate to the other pipeline?

Yes. I mean, obviously, any cost that we had associated or planned for a launch would not be there. We would not be bringing in a sales force. We wouldn't need the small commercial effort that we have right now. The development costs are all gone because we're not developing it any further. So there's substantial savings. And part of that allowed us to do some of the reorganization already that allowed us to extend our runway. Post any kind of agreement with Pfizer, we'll probably have an opportunity to relook at that as well. No, there's going to be -- there will be savings, no doubt about it. And we'll be able to share that when we get through the deal and see what the nature of it is.

Got you. So I guess does that mean we should expect potentially pushing out the cash runway even further? Or is this already kind of baked in?

Well, no, no. I mean, my CFO would kill me if I actually announced there was a kind of change the guidance. But I mean, clearly, we've got money into the second half of '28. If we do any kind of further cost savings, that could obviously help that greatly. I mean the whole aim is to reduce our run rate for sure and to give us more optionality to hit milestones over the next 2 or 3 years and get it back into the normal sequence where you get data, you go to the market and you're able to raise cash.

Got you. I mean do you think it's fair to say like the decision to -- whichever way it goes is going to be dictated by approval and label? Like do we need to wait that long? Or is that something that could be hashed out beforehand?

In a scenario where we're, say, running a process to find a new partner, clearly, waiting to see the approval will be part of it. But you can clearly move forward quite a bit with the partnering discussions to that point. Our overall survival data will be part of the kind of the FDA discussion and then you have the PDUFA in June. But we're in a good position standing today if we get this resolution to run a process, get a new partner and ideally get an approval, and we'll have a commercial launch-ready asset for anybody that actually wants to do that kind of deal.

Is your hope to get this done before you leave and you bring in a new CEO? Or it isn't?

Well, I mean, that would be nice. I don't know if we'll be able to get it done as quickly as that. Clearly, we've got to resolve Pfizer first. That's step 1. Run a process would be step 2, getting the diligence done in the asset, which probably includes looking at the OS would be step 3. So any kind of process takes several months.

Got you. So maybe like shifting gears to the early-stage pipeline. And you mentioned a couple of assets like LRRK2, BCL-6 and G12D. I mean, LRRK2 is probably one of the more further along ones. Maybe just walk us through that program and why you're so excited there.

Noah?

Sure. I'd be happy to field it. Thanks, Derek. So we're very interested in LRRK2 because we're talking about a target that is relevant for diseases like Parkinson's disease and also progressive supranuclear palsy and potentially other diseases down the road, neurodegenerative diseases. It's of interest because the genetics of LRRK2 link it very clearly to those diseases, both in terms of the diagnosis of Parkinson's disease and also the progression and rapidity of that progression of PSP. On top of that, we understand the pathway and how LRRK2 by controlling endolysosomal trafficking is responsible for the disposal of these toxic metabolites that accumulate in the brain, whether you're talking about tau or alpha-synuclein and so on. And we and others have demonstrated that if you intervene with LRRK2, you can prevent the propagation, for example, of tau in brains. So it's a well-characterized target, and it's really ripe for development. The issue is that it's the right target, but there really isn't the best drug candidate out there right now before we came around. So you have Biogen and Denali that's advancing a program, right? We know that the -- their compound is in a registration-quality Phase II study in Parkinson's disease, the LUMA study that's expected to report out next year. But there are some challenges for that study. We're hopeful that it will be positive for patients. But fundamentally, they haven't done any form of patient selection in that study in terms of LRRK2 pathway. And even if that's okay, the issue is that it's a kinase inhibitor and it only achieves 30% kinase inhibition. Now when we think about LRRK2 that's been implicated in these diseases, it's a complex protein that has kinase activity, scaffolding activity and also GTPase activity. The great thing about a degrader is that you can eliminate all of those activities, and you can profoundly impact endolysosomal function. That's what we do with our degrader. So what we've been able to show already this year, and we shared this in April at ADPD is that we have the first ever orally bioavailable brain penetrant PROTAC, in this case, targeting LRRK2 that can achieve where we see there has good PK properties with dose proportionality and accumulation in the brain. And we see that we engage LRRK2 and we degrade it in the brain. So I think we're the only company right now that has an orally bioavailable brain penetrant PROTAC that's relevant for neurodegeneration. And that's a promise of our underlying technology. But because we do this degradation, I told you about why that's potentially superior to inhibition. So that sets us up very well to pursue diseases like PSP and Parkinson's disease. And I can just update with you to close out that currently, we're enrolling patients in a Phase I Parkinson's disease study, and we'd be looking to recapitulate the data and even share a look at more downstream biomarker impact of our drug now that we're looking at patients with disease with elevated LRRK2 at baseline and more to follow as we provide guidance on those results.

Got you. I guess based on kind of what you guys know in the literature and maybe preclinical data, like what level of degradation do you really need to show efficacy in patients, do you think?

So it's not known yet because really, it's the clinical data that correlates with those biomarkers that have to be proven. No one's gotten there yet. We do recognize that one of the differentiating features between patients with Parkinson's disease and those age-match controls when it comes to LRRK2 is that PD patients have a little more than twice the expression of LRRK2 in CSF and in brain tissue compared to patients with age-match controls. So one can envision targeting 50% reduction in that LRRK2 to bring them down to the normal level. But there's much more than LRRK2 levels. It's about target engagement, knowing that by degrading that LRRK2, maybe it's 40%, maybe it's 50%, maybe it takes 75%. And by the way, we've been able to show that we can get 75% degradation of LRRK2 in healthy volunteers. But what you want to do is when patients have inflammation from their microglia in the brain, which is part of the pathology seen in the diseases I outlined earlier, that if you can now through that degradation, interrupt that downstream signaling, show that you have significant reduction in Phospho Rab 10, look at things like CD68 markers of microglial inflammation and show that you could reduce it. When you have all those findings, you're set up, I think, to demonstrate eventually clinical benefit. Those are going to be some of our go/no-go decisions as we dose our Parkinson's disease cohort.

Got you. So maybe going back to your cohort. I guess just remind us when we would expect data. And also, how much confidence should we put on the biomarker data? Like obviously, that's a signal, but do you think that's definitive? And how that you ultimately think that will correlate down the line in terms of registrational endpoints?

Sure. So the current multiple dose cohorts that we're treating in Parkinson's disease involves 28 days of exposure. And as I had mentioned a moment ago, moving these biomarkers that are involved in the disposal of things like pathologic tau would seem to be critically important. So we expect those results and looking at the inflammatory pathways to be able to report out next year. Later this year, we're going to share some results of the SAD, which we completed recently, and we'll share what some of the PK properties of the drug look like in PD patients. We've already shown what we can do in healthy volunteers. So look at it as stepwise. But the other milestone for us is we have to complete the long-term to tox which is slated to be completed at the end of the year. And you can look for us filing an IND and therefore, preparing ourselves to get started in PSP studies in the U.S. next year. So look for IND filing early next year, which means we've completed the chronic tox, and we are sharing those results without interrupting inflammatory signaling.

Got you. I mean is there anything inherently like toxic or issues with degrading or even targeting LRRK2? Like should we -- is there any on-target stuff that we should be worried about, particularly if we're going to degrade it pretty significantly?

I think the field looks at some data that was shared by Merck, where they published some of their toxicology and also is aware of an interesting founder or a family in Italy that -- where there's some findings. So we know that there is a family where patients have -- where members of the family have a loss -- a total loss of LRRK2. So mutations in both copies of LRRK2. And this family -- and patients in that family develop pulmonary symptoms like pulmonary fibrosis, but starting at the age 30 or so. So long-term decades of no LRRK2 presence seems to lead to some type of pulmonary finding. So I'll say that's in the background on my mind. We know from the Merck compounds that were published that they had achieved -- they saw a significant amount of collagen deposition in the lung. So there's some -- there would be some concern about that, and maybe that's why Merck abandoned the program. Well, we have already shared that in our short-term tox when we compare head-to-head against those, we have minimal collagen deposition in the lung. That may be a feature of our PROTAC, which is superior to inhibitors, right? And also, we've explained the differentiating feature of the collagen itself. It may be driven by surfactant accumulation where the -- we have a different -- our surfactant composition is different than what is experienced in patients who are exposed to inhibitors -- or I'm sorry, animals that have inhibitors. So there are differences between inhibitors and degraders. We're watching what's going on with Denali. They've obviously gotten into late-stage development. They do diffusion capacity monitoring of their patients. It's something that we have included in our Phase I studies as well. We haven't seen any pattern to date. And therefore, we expect to be moving ahead full speed ahead.

Interesting. I mean do you think it's like part of the fact that maybe they don't address some sort of like the scaffolding function or the GPA? Like what do you think could be leading to that safety signal? I mean, obviously, you said Denali doesn't see effect.

Well, the safety signal itself is total loss of LRRK because we see something like that in the human -- in those patients. Why the inhibitors have more collagen than our degraders, maybe it has to do with the difference of just inhibiting kinase activity leads to some collagen accumulation or something. But by degrading and reducing and getting closer to normal or even a little below normal, the LRRK2 levels, maybe you reduce that trafficking dysfunction, you have less collagen deposition. I think it's an unknown area. It's not one we're investigating with great detail.

But haven't seen it preclinically yet or...

We haven't seen it.

Got you. Okay.

It's important to reemphasize that we're trying to do a normalization of LRRK2 as opposed to taking it down to...

Right. You're just trying to get -- you're not going to get 0. You want to get to maybe like 50% normalized.