Business context and reporting period
Revolution Medicines, Inc. filed this unaudited Form 10-Q for the quarter and six months ended June 30, 2021. It is a clinical-stage precision oncology company developing targeted therapies for RAS-driven cancers; it had no approved products and no product-sale revenue. Unless noted otherwise, financial amounts below are in U.S. dollars and millions.
Financial performance and position
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Collaboration revenue | $8.7 | $10.0 | $18.8 | $21.6 |
| Research and development expense | $45.9 | $32.9 | $86.8 | $60.4 |
| General and administrative expense | $7.3 | $5.1 | $14.0 | $10.3 |
| Total operating expenses | $53.2 | $38.0 | $100.8 | $70.6 |
| Net loss | $(44.3) | $(27.2) | $(81.5) | $(46.7) |
| Net loss per share, basic and diluted | $(0.60) | $(0.46) | $(1.13) | $(1.11) |
| Cash used in operating activities | Not separately presented for quarter | $(71.3) | $(48.0) |
At June 30, 2021, cash and cash equivalents were $195.6 million and marketable securities were $450.7 million, totaling $646.3 million. Current assets were $661.0 million and current liabilities $45.8 million. Total liabilities were $89.0 million, including $32.5 million of operating lease liabilities; the filing reports no borrowings. Accumulated deficit was $347.0 million. The company reported no product-sales revenue, so conventional gross-margin measures are not meaningful.
Material changes versus the prior comparable period
- Q2 collaboration revenue declined 13% year over year, primarily because lower SHP2 clinical-trial costs were reimbursed by Sanofi. Six-month revenue also declined 13%, reflecting lower clinical-trial and manufacturing costs.
- R&D expense increased 40% in Q2 and 44% for the six months, driven mainly by greater preclinical contract research, materials and manufacturing costs, higher headcount, and stock-based compensation.
- G&A expense rose 43% in Q2 and 36% for the six months, primarily due to stock-based compensation and increased staffing.
- Net loss widened to $44.3 million in Q2 from $27.2 million, and to $81.5 million for the six months from $46.7 million. Six-month operating cash use increased to $71.3 million from $48.0 million.
- Cash, cash equivalents and marketable securities increased from $440.7 million at December 31, 2020 to $646.3 million at June 30, 2021, mainly reflecting $281.1 million of net proceeds from a February 2021 common-stock offering. Shares outstanding increased to 73.6 million from 66.6 million at year-end.
Outlook, management commentary, risks and unusual items
- Management said existing cash, cash equivalents and marketable securities were expected to fund planned operations for at least 12 months after the financial statements’ issuance. The company expects expenses to rise as it advances its pipeline and stated it will require substantial additional funding; no specific revenue or earnings guidance was provided.
- Pipeline milestones described included plans to submit INDs for RMC-6291 and RMC-6236 in the first half of 2022, nominate a third RAS(ON) inhibitor candidate in the second half of 2021, and report initial RMC-5552 data in 2022. RMC-5845 was expected to be IND-ready in the second half of 2021, but the company no longer expected to submit its IND that year.
- In July 2021, the company and Sanofi deprioritized RMC-4630-02 and stopped enrolling patients. In the cobimetinib combination arm, the filing described acceptable tolerability but limited activity: one confirmed partial response among 11 evaluable NSCLC patients and stable disease as the best response among 25 evaluable colorectal cancer patients. The osimertinib combination arm was also stopped after the parties did not identify a tolerable dose and schedule.
- In August 2021, Sanofi and the company added the planned RMC-4630-03 study to their development plan. Sanofi will reimburse 50% of study costs; the company’s unreimbursed share may be reimbursed through a future buy-in payment if Sanofi uses the study data to support a marketing application.
- RMC-4630 development depends materially on Sanofi, which can terminate the collaboration for convenience subject to notice. Sanofi reimburses substantially all SHP2 research and development costs under the agreement, subject to stated exceptions; milestone payments are contingent and were not included in reported transaction price.
- COVID-19 had temporarily delayed enrollment at some RMC-4630 trial sites and could disrupt trial timelines, suppliers, contract manufacturers and CROs. The company also highlighted clinical, regulatory, financing, competition, manufacturing and intellectual-property risks, as well as the unproven nature of its RAS(ON) approach.
- The company reported no material legal proceedings, no material COVID-19 impact on its Q2 financial statements, and effective disclosure controls as of June 30, 2021. Contractual lease obligations totaled $44.6 million undiscounted; Cambridge lease payments are included without offset for sublease receipts.
Important facts for investors to verify
- Whether the $646.3 million liquidity position and management’s stated runway remain sufficient as R&D spending increases.
- Actual enrollment, safety, efficacy and timing for ongoing RMC-4630 and RMC-5552 studies, including the RMC-4630-03 study and the consequences of deprioritizing RMC-4630-02.
- Whether the stated preclinical and IND timelines for RMC-6291, RMC-6236 and RMC-5845 are achieved.
- Sanofi’s continued funding and development commitment, future milestone eligibility, and any changes to the collaboration’s cost-sharing or scope.
- Potential further share dilution and the effect of stock-based compensation; 6.0 million options and 0.4 million unvested restricted stock units were outstanding at June 30, 2021.
- Clinical-trial and supply-chain effects from COVID-19, as well as the ability to secure additional capital on acceptable terms if needed.