Revolution Medicines, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Revolution Medicines is a clinical-stage precision oncology company developing therapies for RAS-driven cancers. It reported no product sales; revenue was from its Sanofi collaboration. Amounts below are in millions of dollars unless otherwise indicated.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Collaboration revenue | $7.0 | $7.6 |
| Research and development expense | $68.9 | $56.5 |
| General and administrative expense | $13.2 | $9.0 |
| Total operating expenses | $82.2 | $65.5 |
| Operating loss | $(75.2) | $(57.9) |
| Interest income | $7.1 | $0.3 |
| Net loss | $(68.1) | $(57.6) |
| Net loss per share, basic and diluted | $(0.72) | $(0.78) |
| Cash used in operating activities | $(62.4) | $(55.2) |
- At March 31, 2023, cash and cash equivalents were $427.2 million and marketable securities were $482.6 million, totaling $909.8 million. Management said these resources were expected to fund planned operations for at least 12 months following the filing date.
- Current assets were $922.8 million and current liabilities were $54.6 million. Total liabilities were $121.0 million; the filing reports no borrowings. Operating lease liabilities totaled $63.6 million.
- Accumulated deficit was $769.4 million. The company remains loss-making and expects significant additional funding will be needed to advance development and prepare for potential commercialization.
- Cash, cash equivalents and marketable securities increased from $644.9 million at December 31, 2022, primarily reflecting the March public offering.
Material changes versus the prior comparable period
- Revenue decreased $0.6 million, or 7%, as Sanofi collaboration revenue declined.
- R&D expense rose $12.5 million, or 22%, primarily due to increased RMC-6236 and RMC-6291 development costs, higher staffing and facilities costs, and stock-based compensation; lower SHP2 costs partly offset the increases.
- G&A expense rose $4.2 million, or 46%, due mainly to higher personnel and stock-based compensation, legal and accounting fees, and facilities costs.
- Net loss increased $10.5 million. Higher interest income of $7.1 million, versus $0.3 million a year earlier, partly offset the larger operating loss.
- Operating cash use increased $7.2 million. Financing cash flow included $323.7 million net proceeds from a March 2023 underwritten offering of 15.7 million shares. Shares outstanding rose to 106.3 million at quarter-end from 90.4 million at year-end 2022.
Outlook, developments and risks
- Pipeline outlook: Management expected additional RMC-6236 single-agent data in mid-2023, with updates beginning in the third quarter; preliminary RMC-6291 data in the second half of 2023; and first-patient dosing in the RMC-9805 monotherapy study in mid-2023. It expected RMC-4630-03 topline data in the second half of 2023 and additional RMC-5552 single-agent evidence in the fourth quarter. These are forward-looking expectations, not reported outcomes.
- Sanofi agreement: Sanofi elected to terminate the SHP2 collaboration effective June 2023. After termination, the company expected to regain SHP2 program rights and responsibility for development decisions, while losing future reimbursement, milestone, profit-share and royalty benefits under the agreement. Transition execution and increased company-funded costs are important uncertainties.
- Facilities commitment: A March lease amendment added approximately 40,000 square feet in Redwood City and extended the lease term through December 2035, with an option to extend ten years. Possession of the new space was expected in Q4 2023. Undiscounted operating lease payments were $108.8 million.
- Principal risks: Clinical and regulatory outcomes are uncertain; early-stage results may not predict later trials; enrollment, safety, manufacturing, competition and intellectual-property challenges could delay or prevent development. The company has no approved products or product-sales revenue and may need additional capital, which may not be available on acceptable terms.
- The filing reports no material litigation, no off-balance-sheet arrangements, and effective disclosure controls as of March 31, 2023. Management noted financial-services-sector uncertainty and that cash deposits may exceed federally insured limits; it reported no material impact from COVID-19 on the quarter’s financial statements.
Key facts for investors to verify
- Whether the Sanofi transition occurred as expected, including the precise rights, obligations, cost reimbursements and continuing license terms after termination.
- Whether the stated 2023 clinical data and trial milestones were achieved, and how subsequent, fuller datasets compare with preliminary findings.
- Future R&D spending, operating cash burn and the duration of the company’s cash runway after the Sanofi funding transition.
- The effects of the March 2023 equity offering and future potential financing on share count and dilution.
- Lease commencement, occupancy and resulting costs for the additional Redwood City space.