Revolution Medicines, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Financial statements are unaudited. The company is a clinical-stage precision oncology business with no approved products or product-sales revenue; collaboration revenue is from its Sanofi SHP2 program. Unless noted otherwise, figures are in U.S. dollars and millions.
Financial performance and position
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Collaboration revenue | $9.1 | $8.7 | $16.7 | $18.8 |
| Research and development expense | $61.0 | $45.9 | $117.5 | $86.8 |
| General and administrative expense | $10.2 | $7.3 | $19.2 | $14.0 |
| Operating loss | $(62.1) | $(44.5) | $(120.0) | $(81.9) |
| Net loss | $(61.2) | $(44.3) | $(118.9) | $(81.5) |
| Basic and diluted loss per share | $(0.82) | $(0.60) | $(1.60) | $(1.13) |
| Net cash used in operating activities | — | $(110.9) | $(71.3) |
There is no conventional product gross margin disclosed; revenue is collaboration revenue, and the company has not generated product sales. No income-tax benefit was recorded. Interest income was $0.9 million for Q2 and $1.2 million for the first half of 2022.
At June 30, 2022, cash and cash equivalents were $105.8 million and marketable securities were $355.7 million, totaling $461.4 million in cash, cash equivalents and marketable securities. Total assets were $632.8 million, total liabilities $134.0 million, and accumulated deficit $571.5 million. The filing reports no borrowings; operating lease liabilities totaled $65.0 million. Management said available cash, cash equivalents and marketable securities were expected to fund planned operations for at least 12 months following issuance of the financial statements.
Changes versus the prior comparable period
- Q2 revenue rose 5% year over year, while first-half revenue fell 11%, primarily due to lower SHP2 development costs.
- Q2 R&D expense increased 33%; first-half R&D expense increased 35%, reflecting higher external research and manufacturing costs, increased headcount and related facilities costs, stock compensation, and RMC-6236 clinical-trial spending.
- Q2 G&A expense increased 40%; first-half G&A expense increased 38%, mainly from stock compensation, personnel and legal and accounting costs.
- Q2 net loss widened by $16.9 million; first-half net loss widened by $37.4 million. Operating cash use increased $39.5 million in the first half.
- Cash, cash equivalents and marketable securities decreased from $577.1 million at December 31, 2021 to $461.4 million at June 30, 2022. First-half investing cash flow was a net inflow of $106.4 million, largely reflecting maturities exceeding purchases of marketable securities; it should not be read as operating cash generation.
Outlook, commentary and key risks
- Management expects R&D and G&A spending to increase as the company advances its pipeline and expands operations. It expects to need substantial additional funding in the future; financing may not be available on acceptable terms, and equity financing could dilute shareholders.
- Pipeline milestones stated as expectations: RMC-6236 had begun monotherapy dose escalation, with initial evidence of single-agent activity expected in 2023; first-patient dosing for RMC-6291 was expected in the second half of 2022, with preliminary activity evidence expected in 2023; first-patient dosing for RMC-9805 was planned for mid-2023. RMC-4630-03 topline data and additional RMC-5552 single-agent evidence were expected in 2023. The company had not set a first-patient dosing timeline for RMC-8839.
- Sanofi reimburses eligible SHP2 program costs under the collaboration, but the company bears 50% of RMC-4630-03 costs and any designated RevMed Study costs; Sanofi may terminate the agreement for convenience. Milestone payments are contingent and were not included in the recognized transaction price at June 30, 2022.
- COVID-19 had caused temporary enrollment interruptions at some RMC-4630 clinical sites; further trial or supply delays remain possible. The company also cited clinical and regulatory uncertainty, patient-enrollment and manufacturing risks, competition, intellectual-property risks, and possible impacts from the Russia-Ukraine conflict.
- Subsequent event: In July 2022, the company sold 13.225 million shares at $20 per share, raising $248.0 million net of stated underwriting discounts and estimated expenses. This provides additional funding but dilutes existing shareholders. As of August 4, 2022, 87,697,561 common shares were outstanding.
- The company reported no material litigation and said disclosure controls and procedures were effective as of June 30, 2022. It reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Actual clinical-trial progress, enrollment, safety and efficacy data versus the stated development timelines, particularly for RMC-6236, RMC-6291 and RMC-4630-03.
- Future cash consumption and whether the July offering, Sanofi reimbursements and any future financing support the operating plan; the stated runway estimate is based on June 30 resources.
- Sanofi’s ongoing development decisions, reimbursement obligations, milestone conditions and termination rights, including the future development plan beyond 2022.
- The dilution impact of the July share offering and outstanding equity awards; the filing listed 18.1 million shares reserved or subject to outstanding awards at June 30.
- Potential clinical-site, third-party manufacturing, regulatory, competition and intellectual-property developments that could delay or limit the pipeline.