Revolution Medicines, Inc. — Q3 2020 Form 10-Q
Reporting period: Three and nine months ended September 30, 2020. Revolution Medicines is a clinical-stage precision oncology company developing therapies for RAS-driven cancers; it has no products approved for sale. Financial amounts below are in U.S. dollars unless stated otherwise.
Key financial metrics
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue, entirely Sanofi collaboration | $12.7 million | $12.5 million | $34.2 million | $38.0 million |
| Research and development | $34.9 million | $23.0 million | $95.2 million | $64.3 million |
| General and administrative | $5.3 million | $3.1 million | $15.6 million | $8.2 million |
| Operating loss | $27.6 million | $13.6 million | $76.6 million | $34.6 million |
| Net loss | $27.2 million | $12.8 million | $74.0 million | $33.1 million |
| Net loss per share attributable to common stockholders | $0.42 | $6.08 | $1.49 | $15.81 |
At September 30, 2020, cash and cash equivalents were $64.9 million and marketable securities were $401.3 million, totaling $466.1 million in cash, cash equivalents and marketable securities. Current assets were $482.9 million; current liabilities were $42.4 million. The filing reports no material conventional borrowings; operating lease liabilities totaled $33.3 million, with a further $0.1 million finance lease liability. Accumulated deficit was $231.3 million.
For the first nine months, operating cash use was $75.0 million, investing cash use was $297.2 million (primarily purchases of marketable securities), and financing provided $421.3 million. Financing included $250.7 million net IPO proceeds and $167.8 million net follow-on offering proceeds. No operating margin is emphasized; the company remains loss-making and research-focused.
Material changes versus the prior comparable periods
- Q3 revenue increased 1% year over year, while nine-month revenue declined 10%, reflecting changes in reimbursable Sanofi program costs, including manufacturing and clinical trial spending.
- R&D expense rose 52% in Q3 and 48% for the nine months, driven mainly by higher preclinical research, chemistry contractor, materials and manufacturing costs, plus increased headcount and stock compensation.
- G&A expense increased 72% in Q3 and 89% for the nine months, with higher public-company insurance, stock compensation, staffing, legal and accounting costs.
- Net loss increased to $74.0 million for the nine months from $33.1 million a year earlier. The year-over-year per-share comparison is substantially affected by the February 2020 IPO and conversion of preferred shares into common stock.
- IPO and follow-on proceeds lifted liquidity substantially. At IPO closing, all outstanding redeemable convertible preferred stock converted into common stock.
Outlook, management commentary and risks
- Management believes existing cash, cash equivalents and marketable securities will fund planned operations for at least 12 months following issuance of the financial statements. The company expects significant expenses and operating losses to continue and anticipates needing substantial additional funding over time.
- RMC-4630, a SHP2 inhibitor, is the most advanced candidate and is being studied in a multi-cohort Phase 1/2 program, including monotherapy and combinations. The company reported selecting recommended Phase 2 doses for monotherapy and the cobimetinib combination.
- Management said RMC-5552 was in IND-enabling development and on track to be IND-ready by year-end 2020; the company also aimed to nominate its first RAS(ON) development candidate in 2020. These are forward-looking targets, not reported outcomes.
- Sanofi is a material collaborator and the sole source of all reported revenue. The agreement provides for cost reimbursement, potential milestone payments of up to $520 million, U.S. profit/loss sharing terms to be negotiated, and ex-U.S. tiered royalties. Sanofi may terminate for convenience under specified notice terms, creating funding and program-continuity risk.
- COVID-19 had not materially affected the reported financial statements, but several RMC-4630 trial sites temporarily paused or delayed enrollment. Further disruption to enrollment, monitoring, suppliers, contract research organizations or regulators could delay development.
- Other principal risks include early-stage clinical and preclinical uncertainty, unproven RAS(ON) drug discovery, patient recruitment and safety risks, reliance on third-party manufacturing, competition, intellectual-property protection and the need for additional capital. The filing reports no litigation considered likely to have a material adverse effect and no off-balance-sheet arrangements.
- The company amended its Redwood City leases, extending the existing facility through 2030 and adding space beginning in December 2020; total undiscounted operating lease commitments were approximately $47.6 million. Management reported disclosure controls were effective at the reasonable-assurance level.
Important facts for investors to verify
- Progress, enrollment, safety and efficacy data for each RMC-4630 study, including the combination trials and any impact from COVID-19.
- Whether RMC-5552 reached IND-ready status and whether the first RAS(ON) development candidate was nominated on the stated timeline.
- Sanofi reimbursement, collaboration continuation, milestone prospects, and any negotiated U.S. profit/loss sharing terms.
- Cash burn, investment maturities and liquidity runway against the company’s expanding R&D plans and future financing needs.
- Share-count dilution from public offerings, outstanding equity awards and any future capital raises; common shares outstanding were 66.3 million at September 30, 2020.