Revolution Medicines, Inc. — Q1 2022 Form 10-Q
Business context and reporting period. For the three months ended March 31, 2022, Revolution Medicines was a clinical-stage precision oncology company developing therapies for RAS-driven cancers. It had no products approved for sale and generated no product-sales revenue; collaboration revenue came from its Sanofi SHP2 program. Financial statements are unaudited.
Key financial metrics
| Metric | Q1 2022 | Q1 2021 or comparison |
|---|---|---|
| Collaboration revenue | $7.6 million | $10.1 million; down 25% |
| Research and development expense | $56.5 million | $40.9 million; up 38% |
| General and administrative expense | $9.0 million | $6.7 million; up 35% |
| Operating loss | $57.9 million | $37.4 million |
| Net loss | $57.6 million, or $0.78 per share | $37.2 million, or $0.53 per share |
| Operating cash flow | $(55.2) million | $(37.2) million |
| Cash, cash equivalents and marketable securities | $518.8 million at March 31 | $577.1 million at December 31, 2021 |
| Total liabilities | $131.8 million | $135.4 million at December 31, 2021 |
Cash and marketable securities declined by $58.3 million from year-end. The company reported no interest expense in Q1 2022 and no conventional borrowings; operating lease liabilities totaled $65.9 million. Profit margins are not meaningful given the company’s development-stage operations and losses.
Material changes and cash flows
- Net loss increased by $20.5 million year over year as operating expenses rose while collaboration revenue declined. Management attributed the revenue decrease to lower Sanofi SHP2 development-cost reimbursements.
- R&D growth reflected higher preclinical and third-party costs, headcount and employee-related costs, facilities costs and stock-based compensation. G&A growth primarily reflected higher stock-based compensation, personnel costs and legal and accounting fees.
- Cash used in operations increased to $55.2 million. Investing activities provided $44.0 million, largely from net maturities of marketable securities; financing activities provided $0.3 million from equity-plan issuances. Q1 2021 financing had included $281.7 million of net proceeds from a public offering.
- Accumulated deficit was $510.3 million. Management said existing cash, cash equivalents and marketable securities were expected to fund planned operations for at least 12 months following issuance of the financial statements. The company also stated it expects to need substantial additional funding in the future.
Outlook, programs and risks
- Pipeline milestones: RMC-6236 had an IND submitted; first-patient dosing was expected in mid-2022, with evidence of single-agent activity expected in 2023. RMC-6291 IND submission was planned for the first half of 2022, with first-patient dosing expected in the second half and preliminary evidence in 2023. First-patient dosing was expected in mid-2023 for RMC-9805 and late 2023 or early 2024 for RMC-8839.
- RMC-4630: The company expected to complete enrollment in its Phase 2 combination study with sotorasib in the second half of 2022 and report preliminary clinical-benefit evidence in that half, with additional evidence expected in 2023. Sanofi reimburses most approved SHP2 development-plan costs, but agreed to reimburse 50% of costs for this study.
- Other programs: Additional RMC-5552 single-agent evidence was expected in 2023. RMC-5845 was ready for IND preparation, but the company was still evaluating whether to advance it.
- Collaboration dependence: Sanofi has broad rights over the SHP2 program and may terminate the agreement under specified terms, including for convenience. Termination could remove reimbursements and potential milestone, profit-share and royalty benefits and could increase the company’s funding needs.
- Operating and development risks: Management cited clinical-trial enrollment and execution uncertainty, competition, dependence on third-party manufacturers and research organizations, and the possibility that early clinical or preclinical results will not predict later outcomes. COVID-19 had caused temporary enrollment delays at some clinical sites; the Russia-Ukraine conflict could affect European trial sites. The company reported no material COVID-19 impact on its Q1 financial statements.
- Other items: No material litigation was reported, no subsequent events were identified, and management concluded disclosure controls were effective at the reasonable-assurance level. The company had an at-the-market equity program with up to $250 million in gross proceeds available and issued no shares under it in Q1 2022.
Investor verification priorities
- Track actual clinical milestones and data against the company’s stated trial timelines, particularly RMC-6236 and RMC-4630.
- Assess cash burn, investment balances and runway as R&D spending rises, including the effect of future Sanofi reimbursements and any additional financing.
- Review the Sanofi agreement’s reimbursement, termination, milestone and commercialization provisions, including the cost-sharing arrangement for RMC-4630-03.
- Monitor clinical-site enrollment, manufacturing and supply constraints, and possible disruption from COVID-19 or geopolitical events.
- Consider potential dilution from the available ATM program and equity compensation; common shares outstanding were 74,245,139 as of May 4, 2022.