Revolution Medicines, Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. Unaudited consolidated results. Revolution Medicines is a clinical-stage precision oncology company developing therapies for RAS-addicted cancers; it has no approved products and has not generated product-sales revenue.
Financial performance and position
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $0 | $3.4 million | $10.8 million | $20.1 million |
| Research and development expense | $107.7 million | $69.5 million | $274.7 million | $186.9 million |
| General and administrative expense | $15.5 million | $10.4 million | $43.4 million | $29.7 million |
| Net loss | $108.4 million | $73.3 million | $274.8 million | $192.2 million |
| Net loss per share, basic and diluted | $0.99 | $0.87 | $2.65 | $2.47 |
As of September 30, 2023, cash and cash equivalents were $358.4 million and marketable securities were $454.8 million, totaling $813.2 million. Total current assets were $824.5 million and current liabilities were $85.5 million. The company reported no borrowings; operating lease liabilities totaled $62.8 million. Accumulated deficit was $976.2 million.
For the first nine months, operating cash use was $230.0 million, investing cash provided was $37.8 million, and financing cash provided was $389.8 million. Financing included $323.7 million net proceeds from a March public offering and $62.1 million net proceeds from ATM sales. Cash, cash equivalents and restricted cash increased by $197.6 million to $360.8 million. The filing does not present commercial margins; revenue was collaboration-based.
Material changes versus the prior comparable period
- Q3 R&D expense rose 55% year over year; nine-month R&D expense rose 47%, mainly reflecting clinical trial and clinical supply costs for RMC-6236, RMC-6291 and RMC-9805, higher preclinical spending, headcount, facilities and stock-based compensation.
- G&A expense increased 49% for Q3 and 46% for the nine-month period, with increases in employee costs, stock-based compensation and facilities-related expenses.
- Collaboration revenue fell to zero in Q3 and declined 46% for the nine-month period. The Sanofi collaboration terminated in June 2023, ending further reimbursement obligations; milestone and royalty obligations under that agreement expired on termination.
- Interest income increased to $10.9 million for Q3 and $28.5 million for the nine months, reflecting higher interest rates and a larger investment balance.
- Shareholders’ equity increased to $837.5 million from $685.2 million at December 31, 2022, principally reflecting equity offerings, partly offset by losses. Shares outstanding rose to 109.5 million from 90.4 million.
Outlook, developments and risks
- Management said existing cash, cash equivalents and marketable securities should fund planned operations for at least 12 months following issuance of the financial statements. It expects R&D and G&A expenses to increase and expects to need substantial additional funding; future financing may be unavailable or dilutive.
- The July 2023 EQRx merger agreement provides for an all-stock acquisition, subject to customary conditions and stockholder approvals. The filing expected closing in November 2023. The transaction was expected to issue approximately 55 million Revolution Medicines shares, excluding warrants and earn-out shares; the merger terms also include a variable share calculation. The merger agreement limited ATM sales to $50 million before completion.
- Management aimed to initiate a global Phase 3 RMC-6236 trial in previously treated RAS-mutated NSCLC in 2024, subject to regulatory feedback. A potential Phase 3 PDAC trial was under consideration, with a decision dependent on further follow-up and dose optimization. Combination-trial planning was also underway.
- After quarter-end, the company reported preliminary clinical updates for RMC-6236 and RMC-6291, including tolerability and early signs of activity. These were interim data, subject to change as trials continue; they are not established efficacy or approval outcomes.
- Key risks include clinical and regulatory failure or delay, patient enrollment and manufacturing constraints, competition, uncertain intellectual-property protection, the need for further capital, and risks that the EQRx transaction may not close or deliver expected benefits. The company reported no litigation expected by management to have a material adverse effect and no off-balance-sheet arrangements.
Important facts for investors to verify
- Latest trial data, safety, durability of response and dose selection for RMC-6236, RMC-6291 and RMC-9805; distinguish interim findings from final results.
- Status and final terms of the EQRx acquisition, including closing, cash acquired, share issuance, warrants and resulting dilution.
- Subsequent cash burn and financing needs, particularly after Sanofi reimbursement ended; the stated runway is a management estimate.
- Clinical-trial timelines and regulatory feedback for planned RMC-6236 studies, including whether the 2024 targets remain achievable.
- Current cash and investment balances, and the implications of long-term lease commitments and continued expense growth.