Revolution Medicines(RVMD) - 2021 Q2 - Quarterly Report

Part I. Financial Information Financial Statements (Unaudited) The company's unaudited financial statements for H1 2021 show increased cash and marketable securities, a wider net loss, and significant financing from a stock offering Condensed Consolidated Balance Sheets Total assets increased to $774.0 million by June 30, 2021, driven by cash and marketable securities, with stockholders' equity growing from a stock offering Condensed Consolidated Balance Sheets (in thousands) | | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $195,600 | $104,268 | | Marketable securities | $450,722 | $336,473 | | Total current assets | $661,011 | $454,122 | | Total assets | $774,046 | $567,401 | | Liabilities and Stockholders' Equity | | | | Total current liabilities | $45,801 | $47,176 | | Total liabilities | $89,040 | $92,725 | | Total stockholders' equity | $685,006 | $474,676 | | Total liabilities and stockholders' equity | $774,046 | $567,401 | Condensed Consolidated Statements of Operations For H1 2021, collaboration revenue decreased, while operating expenses, primarily R&D, significantly increased, leading to a wider net loss of $81.5 million Condensed Consolidated Statements of Operations (in thousands, except per share data) | | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Collaboration revenue | $18,829 | $21,571 | | Research and development | $86,794 | $60,375 | | General and administrative | $13,967 | $10,262 | | Total operating expenses | $100,761 | $70,637 | | Loss from operations | ($81,932) | ($49,066) | | Net loss | ($81,475) | ($46,734) | | Net loss per share - basic and diluted | ($1.13) | ($1.11) | Condensed Consolidated Statements of Cash Flows Net cash used in operations and investing activities was offset by $283.1 million from financing, leading to a $91.3 million net cash increase in H1 2021 Summary of Cash Flows (in thousands) | | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($71,327) | ($48,009) | | Net cash used in investing activities | ($120,473) | ($196,212) | | Net cash provided by financing activities | $283,132 | $252,408 | | Net increase in cash, cash equivalents and restricted cash | $91,332 | $8,187 | Notes to Condensed Consolidated Financial Statements Notes detail liquidity, Sanofi collaboration terms, public offerings, stock-based compensation, and the deprioritization of the RMC-4630-02 study - The company has incurred net operating losses since inception, with an accumulated deficit of $347.0 million as of June 30, 2021, but management believes existing cash and securities are sufficient for at least 12 months[35] - In February 2021, the company raised net proceeds of $281.1 million from an underwritten public offering of 6,666,666 shares of common stock at $45.00 per share[38] - Under the Sanofi Agreement for SHP2 inhibitors, the company received a $50 million upfront payment and could receive up to $520 million in future milestones, with revenue recognized using a cost-based input method[78][80][90] - In July 2021, the company and Sanofi deprioritized the RMC-4630-02 study, ceasing patient enrollment, and in August 2021, added the RMC-4630-03 study with Sanofi reimbursing 50% of costs[110][111] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the RAS-addicted cancer pipeline, increased R&D, decreased collaboration revenue, and confirmed liquidity for the next 12 months Business and Pipeline Overview A clinical-stage oncology firm, the company targets RAS-addicted cancers with RAS(ON) and RAS Companion Inhibitors, planning INDs for H1 2022 - The company's pipeline is divided into RAS(ON) Inhibitors, which directly target active RAS variants, and RAS Companion Inhibitors, designed for combination therapies[114] - IND submissions for two key RAS(ON) inhibitors, RMC-6291 (targeting KRASG12C) and RMC-6236 (targeting multiple RAS variants), are planned for the first half of 2022[115] - The RMC-4630-02 study, evaluating RMC-4630 with MEK inhibitor cobimetinib and EGFR inhibitor osimertinib, has been deprioritized due to insufficient clinical benefit and tolerability issues, respectively[123][124] - The Phase 1 study of RMC-5552, an mTORC1 inhibitor, began dosing in April 2021, with initial data expected in 2022[125] Results of Operations H1 2021 saw a 13% decrease in collaboration revenue, a 44% rise in R&D expenses, and a 36% increase in G&A, resulting in a significantly higher net loss Comparison of Operating Results (in thousands) | | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Collaboration revenue | $18,829 | $21,571 | ($2,742) | -13% | | Research and development | $86,794 | $60,375 | $26,419 | 44% | | General and administrative | $13,967 | $10,262 | $3,705 | 36% | | Net loss | ($81,475) | ($46,734) | ($34,741) | 74% | - The $26.4 million increase in R&D expenses for the first half of 2021 was primarily due to an $18.6 million rise in third-party costs for the preclinical research portfolio, including chemistry CRO, material sourcing, and manufacturing costs[155] Liquidity and Capital Resources The company held $646.3 million in cash and securities as of June 30, 2021, bolstered by a $281.1 million public offering, ensuring liquidity for 12 months - The company held $646.3 million in cash, cash equivalents, and marketable securities as of June 30, 2021[166] - A public offering in February 2021 provided net proceeds of $281.1 million[164] - Management believes existing cash resources are sufficient to fund operations for at least 12 months from the report date[169] Summary of Cash Flows (Six Months Ended June 30, 2021, in thousands) | Cash Flow Activity | Amount | | :--- | :--- | | Net cash used in operating activities | ($71,327) | | Net cash used in investing activities | ($120,473) | | Net cash provided by financing activities | $283,132 | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations on its $646.3 million portfolio, with minor foreign currency exposure, neither deemed material - The company's main market risk is interest rate sensitivity on its $646.3 million portfolio of cash, cash equivalents, and marketable securities, but due to short-term maturities, the impact of interest rate changes is not expected to be material[191][192] - The company has limited exposure to foreign currency risk through vendor contracts in foreign currencies and does not currently engage in formal hedging[193] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2021, with no material changes to internal control over financial reporting - Management concluded that as of June 30, 2021, the company's disclosure controls and procedures were effective to a reasonable assurance level[195] - No changes occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[196] Part II. Other Information Risk Factors Key risks include early development stage, history of losses, dependence on product development and Sanofi collaboration, intense competition, and COVID-19 impacts - Financial and Operational Risks: The company is a clinical-stage entity with a limited operating history, significant losses ($347.0 million accumulated deficit), and no approved products, requiring substantial additional financing to continue operations[211][212][216] - Development and Regulatory Risks: The business depends on the successful development of its product candidates, an inherently uncertain process, and its novel approach of targeting RAS(ON) proteins is unproven, with preclinical results not predicting clinical success[223][252][253] - Collaboration Risks: The company is heavily dependent on its collaboration with Sanofi for the development and commercialization of RMC-4630, and Sanofi has the right to terminate the agreement for convenience, which would materially harm the business[335][336] - Competition Risks: The company faces significant competition from major pharmaceutical and biotech companies with greater resources and more advanced programs, particularly in targeting KRAS mutations[287][289] - COVID-19 Pandemic Risks: The pandemic could significantly disrupt business by delaying clinical trials, affecting patient enrollment, and impacting the supply chain for clinical materials[205][207] - Intellectual Property Risks: The company's success depends on its ability to obtain and maintain patent protection for its product candidates, a costly and uncertain process, as competitors could develop similar products if IP protection is insufficient[369] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity sales occurred this quarter, and the $250.7 million net IPO proceeds remain unchanged in their planned use - There were no unregistered sales of equity securities in the quarter[460] - The company confirmed no material change in the planned use of proceeds from its February 2020 IPO, which raised approximately $250.7 million net[461][462] Exhibits The company lists exhibits filed with the 10-Q report, including a letter agreement with Sanofi and certifications from the CEO and CFO - A key exhibit filed is a Letter Agreement and Amendment with Genzyme Corporation (a Sanofi affiliate), dated August 5, 2021[468]