ARVINAS, INC. (ARVN) stock intrinsic value fair value estimate & owner earnings analysis

Arvinas develops PROTAC protein degraders, a new class of drugs that mark disease-causing proteins for destruction. Its lead drug, vepdegestrant (brand name VEPPANU), received FDA approval on May 1, 2026 for ER-positive, HER2-negative, ESR1-mutated advanced breast cancer, ahead of the June 5, 2026 review date. It is co-owned with Pfizer under a 2021 agreement that splits development costs 50/50. Arvinas and Pfizer announced in September 2025 that they would jointly select a third party to commercialize the drug; terms have not been disclosed in the filings we reviewed. Arvinas also licensed luxdegalutamide (ARV-766) to Novartis in 2024 and holds earlier-stage neurology and oncology programs, including ARV-102. The company has not yet earned steady profits from operations. Our measure of earning power (cash from operations, less working-capital swings, stock compensation and maintenance capital spending) was negative in every year from 2019 to 2025, from about -$2.17 per share in 2019 to -$1.21 in 2025. The 2021 to 2025 median is about -$3.56 per share. Reported revenue of $262.6 million in 2025 looks large, but $242.6 million of it was the release of cash its collaboration partners had already paid in earlier years; only about $20 million was new cash, a Novartis development milestone. Because our earning-power measure strips out that release, it understates the real cash drain: cash from operations was -$273.8 million in 2025. On our measure the loss narrowed by about $1.67 per share in 2025 (from -$2.88 to -$1.21), but with no positive earnings to grow from, we value the shares from the cash on the balance sheet and the spending ahead rather than from a growth rate. What the shares are worth therefore depends on how much of the $685.4 million of cash and securities (December 31, 2025; $142.9 million cash and $542.5 million securities) is left after the company funds its research, plus anything contracted. The company says this cash funds operations into the second half of 2028. There is essentially no debt (about $0.4 million). Share count is about 64.0 million (February 20, 2026), which is about $10.7 of cash per share before any spending. Payables and leases of about $78 million must be settled along the way. What we credit. (1) The $50 million approval milestone from Pfizer, which the company reported after the May 2026 approval; it is reduced by amounts owed to Yale University, and the Yale agreement provides for up to $15 million of approval payments, so we count $35 million net. (2) The cash and the 2025 spending pace. What we leave out: any sales of VEPPANU, any royalty or profit share from a future commercial partner, further Novartis milestones (up to about $1.01 billion is contingent, and only $20.0 million has been received), and any value from the ARV-102 or other early programs. None of these has a signed dollar amount or a multi-year record, so they are worth nothing here. Bear case, about $1.42 per share. Spending continues at roughly the 2025 pace of $270 million a year through 2027, no partner money arrives beyond the Pfizer milestone, cash falls to about $180 million at the end of 2027, and the programs are wound down in 2028 after paying about $78 million of obligations. About $102 million remains, worth about $91 million today. Base case, about $2.40 per share. The same story, but management cuts spending by about a quarter in 2027 to roughly $200 million, matching the roughly 26% cut in total operating expenses achieved in 2025 ($513.6 million in 2024 to $381.1 million in 2025) after the company's restructurings. Cash at the end of 2027 is about $250 million; after obligations, about $172 million remains, worth about $153 million today. Bull case, about $3.37 per share. Handing vepdegestrant to a partner lowers Arvinas's spending (vepdegestrant had about $63 million of program-specific outside spending in 2025), so burn is about $230 million in 2026 and $190 million in 2027, and Novartis pays another $20 million milestone in 2027, like the one received in 2025. About $242 million remains after obligations, worth about $216 million today. These values are far below the cash-per-share figure because we assume the cash is spent on research and nothing from that research is credited. If management instead stopped spending early and returned cash, or if a partner deal pays a large upfront amount, the shares would be worth more; neither is contracted today. The main ways we could be wrong are the size of the vepdegestrant partner deal, Novartis milestone timing, and the possibility that the company cuts spending sooner than we assume. We could not tie the exact Yale offset against the Pfizer milestone from the filings. Margin-of-safety price. Because the company has no product sales yet and its value depends on spending decisions, the margin-of-safety price is set below even our bear case, at $1.20.