Revolution Medicines, Inc. — Q2 2023 Form 10-Q
Business context and reporting period. This unaudited report covers the quarter and six months ended June 30, 2023. Revolution Medicines is a clinical-stage precision oncology company developing targeted therapies for RAS-driven cancers. It has no approved products and has not generated product-sales revenue; reported revenue is from collaboration activities.
Financial performance and position
| Metric | Three months ended June 30, 2023 | Six months ended June 30, 2023 |
|---|---|---|
| Revenue | $3.8 million | $10.8 million |
| Research and development expense | $98.0 million | $166.9 million |
| General and administrative expense | $14.6 million | $27.9 million |
| Net loss | $98.3 million | $166.4 million |
| Net loss per share, basic and diluted | $0.92 | $1.65 |
| Cash used in operating activities | Not separately reported for the quarter | $129.5 million |
At June 30, 2023, cash and cash equivalents were $380.3 million and marketable securities were $529.2 million, or $909.5 million combined. Total assets were $1.074 billion; total liabilities were $142.9 million, including $63.3 million of operating lease liabilities. The filing reports no borrowings. Stockholders’ equity was $930.8 million and accumulated deficit was $867.7 million. No gross margin is presented; given the company’s clinical-stage status and minimal collaboration revenue, operating margins are not a meaningful indicator of product economics.
For the six months, investing activities used $39.5 million and financing activities provided $388.8 million, primarily from the March public offering and at-the-market (ATM) share sales. Cash, cash equivalents and restricted cash increased by $219.8 million to $382.9 million. The company stated that its cash, cash equivalents and marketable securities were expected to fund planned operations for at least 12 months after the filing date.
Material changes versus prior comparable periods
- Q2 revenue fell 58% year over year to $3.8 million; six-month revenue declined 35% to $10.8 million, reflecting lower Sanofi reimbursements.
- Q2 R&D expense rose 61% to $98.0 million; six-month R&D expense increased 42% to $166.9 million. The company cited increased RMC-6236 and RMC-6291 clinical and manufacturing costs, preclinical investment, staffing, facilities and stock compensation.
- Q2 net loss widened to $98.3 million from $61.2 million; six-month net loss increased to $166.4 million from $118.9 million. Higher interest income partly offset operating losses.
- The company raised $323.7 million net in a March follow-on offering and $62.1 million net through ATM sales during the first half. Common shares outstanding increased to 109.1 million from 90.4 million at year-end 2022.
Outlook, management commentary and risks
- The Sanofi collaboration agreement terminated in June 2023. Sanofi reimbursement, milestone and royalty obligations ended; the agreement’s licenses became fully paid-up, royalty-free, perpetual and irrevocable, with rights and obligations reverting to Revolution Medicines. Collaboration revenue is therefore not a continuing source on the former terms.
- Management expected R&D and G&A spending to increase as programs advance, and said substantial additional funding would be needed in the future. It cautioned that financing may not be available on acceptable terms.
- Management expected to report updated RMC-6236 clinical activity and initial RMC-6291 findings in October 2023; first-patient dosing for RMC-9805 was expected in the second half of 2023. Planning was underway for potential RMC-6236 pivotal trials in 2024 and a RMC-6236/RMC-6291 combination study potentially beginning in early 2024. These are forward-looking plans, not assured outcomes.
- On July 31, 2023, the company agreed to acquire EQRx in an all-stock transaction, subject to stockholder approvals and other customary conditions, with closing anticipated in November 2023. Consideration includes 7,692,308 shares plus additional shares based on $870 million divided by a price set at a 6% discount to a specified five-day volume-weighted average price. The filing notes execution, integration, transaction-cost and dilution risks; the amount of net cash ultimately received is uncertain. The merger agreement also limits further ATM sales to $50 million before completion.
- Key risks include clinical and regulatory uncertainty, patient enrollment and manufacturing challenges, competition, dependence on third parties, need for additional capital, and potential EQRx transaction failure. The company reported no litigation expected by management to have a material adverse effect. It also reported effective disclosure controls and no material change in internal control over financial reporting.
Important facts for investors to verify
- Whether subsequent RMC-6236, RMC-6291 and RMC-9805 clinical updates support the company’s stated development plans, including safety, efficacy and trial timing.
- Whether the EQRx acquisition closes, its final share consideration and net cash contribution, and resulting dilution and integration costs.
- How the end of Sanofi reimbursements affects revenue and R&D funding needs, and whether the stated liquidity runway remains adequate as spending increases.
- Future cash burn, financing activity and share-count changes, including any further ATM issuance.
- Lease commitments: the company reported $107.1 million of undiscounted future lease payments and planned to take possession of additional Redwood City space in late 2023.