SEC Filing | Revolution Medicines

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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___ to ___

Commission File Number: 001-39219

Revolution Medicines, Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware	47-2029180
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
700 Saginaw Drive Redwood City, CA	94063
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (650) 481-6801

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock $0.0001 Par Value per Share	RVMD	The Nasdaq Stock Market LLC (Nasdaq Global Select Market)
Warrants to purchase 0.1112 shares of common stock expiring 2026	RVMDW	The Nasdaq Stock Market LLC (Nasdaq Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 2 2024, the registrant had 167,038,943 shares of common stock, $0.0001 par value per share, outstanding (excluding 5,560,000 contingent earn-out shares).

Table of Contents


		Page
Special Note Regarding Forward Looking Statements		ii
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements (unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss	2
	Condensed Consolidated Statements of Stockholders’ Equity	3
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29

PART II.	OTHER INFORMATION	31
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	80
Item 3.	Defaults Upon Senior Securities	80
Item 4.	Mine Safety Disclosures	80
Item 5.	Other Information	80
Item 6.	Exhibits	82
	Signatures	83

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements concerning our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business, operations and financial performance and condition. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that are in some cases beyond our control and may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would,” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

•

the scope, progress, results and costs of developing our product candidates or any other future product candidates, and conducting preclinical studies and clinical trials;

•

the scope, progress, results and costs related to the research and development of our pipeline;

•

the timing of and costs involved in obtaining and maintaining regulatory approval for any of current or future product candidates, and any related restrictions, limitations and/or warnings in the label of an approved product candidate;

•

our expectations regarding the potential market size and size of the potential patient populations for our product candidates and any future product candidates, if approved for commercial use;

•

our ability to maintain and establish new collaborations, licensing or other arrangements and the financial terms of any such agreements;

•

our commercialization, marketing and manufacturing capabilities and expectations;

•

the rate and degree of market acceptance of our product candidates, as well as the pricing and reimbursement of our product candidates, if approved;

•

the implementation of our business model and strategic plans for our business, product candidates and technology, including additional indications for which we may pursue;

•

the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates, including the projected term of patent protection;

•

our expectations regarding our ability to obtain, maintain, enforce and defend our intellectual property protection for our product candidates;

•

estimates of our expenses, future revenue, capital requirements, our needs for additional financing and our ability to obtain additional capital;

•

developments and projections relating to our competitors and our industry, including competing therapies and procedures;

•

regulatory and legal developments in the United States and foreign countries;

•

the performance of our third-party suppliers and manufacturers;

•

our ability to attract and retain key scientific or management personnel; and

•

other risks and uncertainties, including those listed under the caption “Risk Factors.”

We have based these forward-looking statements largely on management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate and management’s beliefs and assumptions and are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties and assumptions described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein until after we distribute this Quarterly Report on Form 10-Q, whether as a result of any new information, future events or otherwise.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and you are cautioned not to unduly rely upon these statements.

Investors and others should note that we may announce material business and financial information to our investors using our investor relations website (ir.revmed.com), Securities and Exchange Commission (SEC) filings, webcasts, press releases and conference calls. We use these mediums, including our website, to communicate with our members and public about our company, our products and other issues. It is possible that the information that we make available may be deemed to be material information. We therefore encourage investors and others interested in our company to review the information that we make available on our website.

iii

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

REVOLUTION MEDICINES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

(unaudited)


	June 30,			December 31,
	2024			2023
Assets
Current assets:
Cash and cash equivalents	$	275,713		$	696,148
Marketable securities		1,315,002			1,156,807
Accounts receivable		—			1,254
Prepaid expenses and other current assets		34,015			25,072
Total current assets		1,624,730			1,879,281
Property and equipment, net		25,284			22,865
Operating lease right-of-use asset		75,305			77,149
Intangible assets, net		57,205			57,739
Goodwill		14,608			14,608
Restricted cash		3,031			3,031
Other noncurrent assets		8,274			7,032
Total assets	$	1,808,437		$	2,061,705
Liabilities and stockholdersʼ equity
Current liabilities:
Accounts payable	$	29,319		$	61,788
Accrued expenses and other current liabilities		67,681			74,694
Operating lease liability, current		8,332			7,369
Total current liabilities		105,332			143,851
Deferred tax liability		3,115			3,115
Operating lease liability, noncurrent		79,079			80,575
Warrant liabilities		1,407			6,512
Other noncurrent liabilities		656			1,458
Total liabilities		189,589			235,511
Commitments and contingencies (Note 8)
Stockholdersʼ equity:
Preferred stock, $0.0001 par value; 10,000,000 shares authorized at June 30, 2024 and December 31, 2023, respectively; none issued and outstanding at June 30, 2024 and December 31, 2023, respectively		—			—
Common stock, $0.0001 par value; 300,000,000 shares authorized as of June 30, 2024 and December 31, 2023, respectively; 171,206,508 and 170,234,594 shares issued as of June 30, 2024 and December 31, 2023, respectively; 165,646,508 and 164,674,594 shares outstanding as of June 30, 2024 and December 31, 2023, respectively		16			16
Additional paid-in capital		3,007,639			2,963,342
Accumulated other comprehensive income (loss)		(1,863	)		544
Accumulated deficit		(1,386,944	)		(1,137,708	)
Total stockholdersʼ equity		1,618,848			1,826,194
Total liabilities and stockholdersʼ equity	$	1,808,437		$	2,061,705

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

REVOLUTION MEDICINES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except share and per share data)

(unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Revenue:
Collaboration revenue	$	—		$	3,824		$	—		$	10,838
Total revenue		—			3,824			—			10,838
Operating expenses:
Research and development		134,932			97,981			252,953			166,928
General and administrative		21,711			14,640			44,549			27,864
Total operating expenses		156,643			112,621			297,502			194,792
Loss from operations		(156,643	)		(108,797	)		(297,502	)		(183,954	)
Other income, net:
Interest income		21,487			10,499			45,247			17,558
Other income (expense), net		16			—			(2,793	)		—
Change in fair value of warrant liabilities and contingent earn-out shares		1,907			—			5,812			—
Total other income, net		23,410			10,499			48,266			17,558
Loss before income taxes		(133,233	)		(98,298	)		(249,236	)		(166,396	)
Benefit from income taxes		—			—			—			—
Net loss	$	(133,233	)	$	(98,298	)	$	(249,236	)	$	(166,396	)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.81	)	$	(0.92	)		(1.51	)	$	(1.65	)
Weighted-average common shares used to compute net loss per share, basic and diluted		165,141,936			106,884,185			164,935,542			100,891,375

Comprehensive loss:
Net loss	$	(133,233	)	$	(98,298	)	$	(249,236	)	$	(166,396	)
Other comprehensive gain (loss):
Unrealized gain (loss) on investments, net		(665	)		(695	)		(2,407	)		529
Comprehensive loss	$	(133,898	)	$	(98,993	)	$	(251,643	)	$	(165,867	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

REVOLUTION MEDICINES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

(unaudited)


							Accumulated
					Additional		Other						Total
	Common Stock				Paid-in		Comprehensive			Accumulated			Stockholdersʼ
	Shares		Amount		Capital		Income/ (Loss)			Deficit			Equity
Balance at December 31, 2023		164,674,594	$	16	$	2,963,342	$	544		$	(1,137,708	)	$	1,826,194
Issuance of common stock pursuant to stock option exercises		73,342		—		810		—			—			810
Issuance of common stock related to vesting of restricted stock units		165,078		—		—		—			—			—
Stock-based compensation expense		—		—		16,208		—			—			16,208
Net unrealized loss on marketable securities		—		—		—		(1,742	)		—			(1,742	)
Net loss		—		—		—		—			(116,003	)		(116,003	)
Balance at March 31, 2024		164,913,014	$	16	$	2,980,360	$	(1,198	)	$	(1,253,711	)	$	1,725,467
Issuance of common stock pursuant to stock option exercises		238,793		—		4,340		—			—			4,340
Issuance of common stock related to vesting of restricted stock units		303,953		—		—		—			—			—
Issuance of common stock related to employee stock purchase plan		190,748		—		3,164		—			—			3,164
Stock-based compensation expense		—		—		19,775		—			—			19,775
Net unrealized loss on marketable securities		—		—		—		(665	)		—			(665	)
Net loss		—		—		—		—			(133,233	)		(133,233	)
Balance at June 30, 2024		165,646,508	$	16	$	3,007,639	$	(1,863	)	$	(1,386,944	)	$	1,618,848

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

REVOLUTION MEDICINES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

(unaudited)


								Accumulated
						Additional		Other						Total
	Common Stock					Paid-in		Comprehensive			Accumulated			Stockholdersʼ
	Shares			Amount		Capital		Loss			Deficit			Equity
Balance at December 31, 2022		90,411,912		$	9	$	1,388,300	$	(1,780	)	$	(701,341	)	$	685,188
Issuance of common stock pursuant to stock option exercises		118,747			—		499		—			—			499
Issuance of common stock related to vesting of restricted stock units		85,891			—		—		—			—			—
Issuance of common stock from follow-on offering, net of offering costs of $21,294		15,681,818			2		323,704		—			—			323,706
Repurchase of early exercised stock		(291	)		—		—		—			—			—
Stock-based compensation expense		—			—		9,699		—			—			9,699
Net unrealized gain on marketable securities		—			—		—		1,224			—			1,224
Net loss		—			—		—		—			(68,098	)		(68,098	)
Balance at March 31, 2023		106,298,077		$	11	$	1,722,202	$	(556	)	$	(769,439	)	$	952,218
Issuance of common stock pursuant to stock option exercises		45,918			—		468		—			—			468
Issuance of common stock related to vesting of restricted stock units		174,252			—		—		—			—			—
Issuance of common stock related to employee stock purchase plan		139,967			—		2,109		—			—			2,109
Issuance of common stock upon at-the-market offering, net of issuance cost of $1,426		2,482,880			—		62,053		—			—			62,053
Stock-based compensation expense		—			—		12,980		—			—			12,980
Net unrealized loss on marketable securities		—			—		—		(695	)		—			(695	)
Net loss		—			—		—		—			(98,298	)		(98,298	)
Balance at June 30, 2023		109,141,094		$	11	$	1,799,812	$	(1,251	)	$	(867,737	)	$	930,835

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

REVOLUTION MEDICINES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Six Months Ended June 30,
	2024			2023
Cash flows from operating activities
Net loss	$	(249,236	)	$	(166,396	)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on disposal of fixed assets	116				1
Amortization of intangible assets		534			534
Stock-based compensation expense		35,983			22,679
Depreciation		3,182			2,428
Change in fair value of warrant liabilities and contingent earn-out shares		(5,812	)		—
Net amortization of premium or discount on marketable securities		(26,146	)		(8,428	)
Amortization of operating lease right-of-use asset		1,844			1,344
Impairment of assets		2,761			—
Changes in operating assets and liabilities:
Accounts receivable		1,254			2,163
Prepaid expenses and other current assets		(8,943	)		476
Accounts payable		(33,040	)		7,584
Accrued expenses and other current liabilities		(6,594	)		13,382
Deferred revenue		—			(4,459	)
Operating lease liability		(533	)		(949	)
Other noncurrent assets		(4,002	)		178
Other noncurrent liabilities		(95	)		(49	)
Net cash used in operating activities		(288,727	)		(129,512	)
Cash flows from investing activities
Purchases of marketable securities		(1,076,536	)		(369,272	)
Maturities of marketable securities		942,080			332,601
Purchases of property and equipment		(5,566	)		(2,877	)
Net cash used in investing activities		(140,022	)		(39,548	)
Cash flows from financing activities
Proceeds from issuance of common stock upon follow-on offering, net of issuance costs		—			323,706
Proceeds from issuance of common stock upon at-the-market offering, net of issuance costs		—			62,053
Proceeds from issuance of common stock under equity incentive plans		5,150			967
Proceeds from issuance of common stock related to employee stock purchase plan		3,164			2,109
Net cash provided by financing activities		8,314			388,835
Net increase (decrease) in cash, cash equivalents and restricted cash		(420,435	)		219,775
Cash, cash equivalents and restricted cash - beginning of period		699,179			163,149
Cash, cash equivalents and restricted cash - end of period	$	278,744		$	382,924
Reconciliation of cash, cash equivalents and restricted cash to consolidated balance sheets
Cash and cash equivalents		275,713			380,330
Restricted cash		3,031			2,594
Cash, cash equivalents and restricted cash - end of period	$	278,744		$	382,924
Supplemental disclosure of non-cash investing and financing activities
Purchases of property and equipment in accounts payable and accrued expenses and other current liabilities	$	2,762		$	2,030

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

REVOLUTION MEDICINES, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Organization

Revolution Medicines, Inc. (the Company) is a clinical-stage precision oncology company developing novel targeted therapies for RAS-addicted cancers. The Company was founded in October 2014 and is headquartered in Redwood City, California.

Liquidity

The Company has incurred net operating losses in each year since inception. As of June 30, 2024, the Company had an accumulated deficit of $1.4 billion. Management believes that its existing cash, cash equivalents and marketable securities will enable the Company to fund its planned operations for at least 12 months following the issuance date of these unaudited condensed consolidated financial statements. The Company has been able to fund its operations through the issuance and sale of common stock and redeemable convertible preferred stock, the acquisition of EQRx, Inc. (EQRx), and upfront payments and research and development cost reimbursement received under the Company’s prior collaboration agreement with Genzyme Corporation, an affiliate of Sanofi. Future capital requirements will depend on many factors, including the timing and extent of spending on research and development. There can be no assurance that, in the event the Company requires additional financing, such financing will be available at terms acceptable to the Company, if at all. Failure to generate sufficient cash flows from operations, raise additional capital and reduce discretionary spending should additional capital not become available could have a material adverse effect on the Company’s ability to achieve its business objectives.

Public offerings

In November 2021, the Company entered into a sales agreement with Cowen and Company, LLC, as amended in March 2024, to sell shares of its common stock, from time to time, with aggregate gross proceeds of up to $250 million, through an at-the-market equity offering program (the 2021 ATM Program). During the year ended December 31, 2023, the Company sold an aggregate of 2,482,880 shares of common stock under the 2021 ATM Program resulting in gross proceeds to the Company of $63.5 million. After deducting commissions and expenses of $1.4 million, net proceeds to the Company under the 2021 ATM Program were $62.1 million during the year ended December 31, 2023. During the three and six months ended June 30, 2024, the Company did not sell any shares of the Company’s common stock under the 2021 ATM Program.

In March 2023, the Company issued and sold 15,681,818 shares of its common stock in an underwritten public offering (including the exercise in full by the underwriters of their option to purchase an additional 2,045,454 shares of the Company’s common stock) at a price to the public of $22.00 per share, for net proceeds of $323.7 million, after deducting underwriting discounts and commissions of $20.7 million and expenses of $0.6 million.

Summary of significant accounting policies

Basis of presentation

The unaudited condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States (GAAP) and applicable rules of the Securities and Exchange Commission (SEC) regarding interim financial reporting and, in the opinion of management, include all normal and recurring adjustments which are necessary to state fairly the Company’s financial position and results of operations for the reported periods. The accompanying unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 26, 2024. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with such rules and regulations. The unaudited condensed consolidated financial statements for the periods ended June 30, 2024 and June 30, 2023 include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The functional and reporting currency of the Company and its subsidiaries is the U.S. dollar.

Use of estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates, including the fair value of assets acquired and liabilities assumed and related purchase price allocation, revenue recognition, clinical accruals, income taxes, useful lives of property and equipment and intangible assets, impairment of goodwill and intangibles, impairment of in-process research and development and developed technologies, the

incremental borrowing rate for determining operating lease assets and liabilities, warrant liabilities and stock-based compensation. Estimates are based on historical experience, complex judgments, facts and circumstances available at the time and various other assumptions that are believed to be reasonable under the circumstances but are inherently uncertain and unpredictable. Actual results could materially differ from the Company’s estimates, and there may be changes to the estimates in future periods.

Concentration of credit risk and other risks and uncertainties

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash, cash equivalents and marketable securities. The Company maintains bank deposits in federally insured financial institutions and these deposits may exceed federally insured limits. The Company is exposed to credit risk in the event of a default by the financial institutions holding its bank deposits and issuers of its investments. The Company’s investment policy limits investments to money market funds, certain types of debt securities issued by the U.S. government and its agencies, certificates of deposit, corporate debt and commercial paper, and places restrictions on the credit ratings, maturities and concentration by type and issuer. The Company has not experienced any significant losses on its deposits of cash and cash equivalents or investments.

Warrants

Warrants assumed as part of the EQRx transaction as described in Note 3 contain provisions that require them to be classified as derivative liabilities in accordance with Accounting Standards Codification Topic 815, Derivatives and Hedging (ASC 815). Accordingly, at the end of each reporting period, changes in fair value during the period are recognized as a change in fair value of warrant liabilities within the consolidated statements of operations and comprehensive loss. The Company adjusts the warrant liabilities for changes in the fair value until the earlier of (a) the exercise or expiration of the warrants or (b) the redemption of the warrants, at which time the warrants will be reclassified to additional paid-in capital.

Derivative warrant liabilities are classified as noncurrent liabilities, as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.

Recent accounting pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB), under its ASC or other standard setting bodies, and adopted by the Company as of the specified effective date. No new pronouncements have been adopted by the Company for the three and six months ended June 30, 2024.

Recently announced accounting pronouncements

On March 6, 2024, the SEC issued Final Rule No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors. The rule will require registrants to provide certain climate-related information in their registration statements and annual reports. The rule requires information about a registrant’s climate-related risks that are reasonably likely to have a material impact on its business, results of operations, or financial condition. The required information about climate-related risks also includes disclosure of a registrant's greenhouse gas emissions. In addition, the rules will require registrants to present certain climate-related financial metrics in their audited financial statements. The Company is evaluating the potential impact of this rule on the condensed consolidated financial statements and related disclosures.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures (ASU 2023-07). ASU 2023-07 improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The guidance is effective for public business entities for fiscal years beginning after
December 15, 2023, and interim periods within fiscal years, beginning after December 15, 2024. Early application is permitted. The
guidance is to be applied retrospectively to all prior periods presented in the financial statements. Upon transition, the segment
expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified
and disclosed in the period of adoption. The Company is currently evaluating the impact of the standard on its condensed consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures (ASU
2023-09). ASU 2023-09 relates to rate reconciliation and income taxes paid disclosures. The guidance is effective for public business
entities for fiscal years beginning after December 15, 2024. Early application is permitted. The guidance is to be applied on a
prospective basis. The Company is currently evaluating the impact of the standard on its condensed consolidated financial statements.

Acquisition

On November 9, 2023 (the Closing Date), the Company completed the acquisition of EQRx (the EQRx Acquisition). Pursuant to the Agreement and Plan of Merger, dated as of July 31, 2023 (the Merger Agreement), EQRx, LLC survived as a wholly owned subsidiary of the Company.

On the Closing Date, each share of EQRx common stock issued and outstanding immediately prior to the completion of the EQRx Acquisition was converted into the right to receive 0.1112 shares of the Company’s common stock. Outstanding stock options, restricted stock units and restricted stock awards of EQRx were also converted into the Company’s common stock, subject to the terms of the Merger Agreement. The Company issued 54.8 million shares of the Company’s common stock and paid $4.0 million in taxes to satisfy statutory income tax withholding obligations in conjunction with the EQRx Acquisition.

The EQRx Acquisition provided the Company with additional financing through the acquisition of EQRx’s cash, cash equivalents, and marketable securities, which comprised the majority of the net assets acquired from EQRx. As the Company primarily acquired these monetary assets, the EQRx Acquisition was accounted for as a capital-raising transaction with an asset acquisition component. EQRx does not meet the definition of a business under Financial Accounting Standards Board’s Accounting Standards Codification Topic 805, Business Combinations (ASC 805), due to the fair value of EQRx, excluding cash and cash equivalents, as of the date of the EQRx Acquisition, being concentrated primarily in one asset class, marketable securities.

Under the asset acquisition method of accounting, the purchase consideration was allocated and recorded by the Company on a fair value basis to the net assets acquired on the Closing Date. Any excess fair value of net assets of EQRx over the cost of the acquisition following determination of the actual purchase consideration is allocated to EQRx’s qualifying assets under ASC 805. As there were no qualifying assets acquired the excess fair value of net assets under ASC 805 was recorded to equity, as a capital-raising transaction. Because EQRx had wound down the majority of its research and development activities and its operations by the time of the Closing Date, the net assets being acquired are primarily comprised of cash and cash equivalents and marketable securities.

The following table reflects the consideration transferred by the Company:


	Amount
	(in thousands)
Fair value of shares of combined company to be owned by EQRx stockholders (1)	$	1,096,826
Less: Fair value of EQRx equity awards converting to Revolution Medicines common stock attributable to post-combination service	$	(11,150	)
Taxes paid by Revolution Medicines on behalf of EQRx to satisfy statutory income tax withholding obligations		4,026
Fair value of warrants		6,907
Fair value of contingent earn-out shares		490
Purchase price	$	1,097,099

(1) Represents the fair value of approximately 54.8 million shares of Revolution Medicines common stock issued, calculated using the per share price of Revolution Medicines common stock of $20.02 as of November 9, 2023.

The following table summarizes the fair value of the assets acquired and liabilities assumed as of the Closing Date:


	Amount
	(in thousands)
Cash and cash equivalents	$	860,918
Marketable securities		313,878
Prepaid expenses and other current assets		12,084
Restricted cash		633
Other noncurrent assets		2,912
Accounts payable		(6,893	)
Accrued expenses and other current liabilities		(30,506	)
Net assets acquired	$	1,153,026

The excess fair value of net assets acquired over the purchase price was $55.9 million and was recorded to additional paid-in capital.

The following table calculates the excess of fair value of assets acquired over the purchase consideration under asset acquisition accounting:


	Amount
	(in thousands)
Purchase price	$	1,097,099
Less: net assets acquired		(1,153,026	)
Remaining excess fair value of net assets acquired over the purchase price	$	(55,927	)

Transaction costs of $20.7 million incurred by the Company to complete the EQRx Acquisition were accounted for as a direct reduction to the Company’s additional paid-in capital, as these costs were primarily incurred to issue Revolution Medicines common stock as part of the capital-raising transaction.

In connection with the EQRx Acquisition, certain unvested outstanding stock options, restricted stock units and restricted stock awards of EQRx were accelerated and converted into the Company’s common stock. As a result, the fair-value of the unvested portion of the accelerated EQRx equity awards of $11.2 million was recognized as a post-combination expense and included in stock-based compensation expense for the year ended December 31, 2023.

In connection with the EQRx Acquisition, as of the Closing Date, all public warrants of EQRx that were outstanding and unexercised immediately prior to the Closing Date were converted into 11,039,957 publicly traded warrants (Public Warrants) and 8,693,333 private placement warrants of the Company (Private Warrants and, together with the Public Warrants, the Warrants). Each Warrant entitles the holder to purchase 0.1112 shares of the Company’s common stock, at an exercise price of $11.50 per such fractional share. The fair value of the Warrants on the Closing Date of $6.9 million was included in the purchase price. The Warrants expire in December 2026. The Public Warrants and Private Warrants met liability classification requirements because the Warrants contain provisions whereby adjustments to the settlement amount of the Warrants are based on a variable that is not an input to the fair value of a “fix-for-fixed” option and the existence of the potential for net cash settlement for the Warrant holders in the event of a tender offer. In addition, the Private Warrants are potentially subject to a different settlement amount depending upon the holder of the Private Warrants, which precludes them from being considered indexed to the entity’s own stock. Therefore, the Warrants are classified as liabilities.

Prior to the EQRx Acquisition, holders of rights to EQRx earn-out shares held in escrow were entitled to receive additional shares of EQRx common stock for no consideration upon the occurrence of certain stock price-based triggering events (the earn-out shares). The earn-out shares were converted in the same manner as all other shares of EQRx common stock under the Merger Agreement and holders of rights to earn-out shares were entitled to receive up to 5,560,000 shares of common stock of the Company, subject to the triggering events. In conjunction with the Merger Agreement, holders of rights to approximately 82% of the holders of rights to the earn-out shares signed and delivered to the Company waiver and release agreements pursuant to which, among other things, they have waived their respective rights to receive any such earn-out shares to which they may have been entitled upon the occurrence of any vesting condition described below. As a result of these waiver and release agreements, the maximum amount of Company common stock to be issued to holders of rights to earn-out shares upon the occurrence of certain triggering events was reduced to 973,976 shares. Holders of earn-out shares may receive up to 681,784 shares of the Company common stock if the common stock price is greater than or equal to $112.41 for at least 20 out of 30 consecutive trading days prior to December 17, 2024, and up to 292,192 additional shares of Company common stock if the common stock price is greater than or equal to $148.38 for at least 20 out of 30 consecutive trading days prior to December 17, 2024. The rights to the earn-out shares expire on December 17, 2024. The fair value of the earn-out shares on the Closing Date of $0.5 million was included in the purchase price.

Fair value measurements

The carrying amounts of certain of the Company’s financial instruments, including cash equivalents, marketable securities, accounts payable and accrued expenses and other current liabilities approximate fair value due to their relatively short maturities and market interest rates, if applicable. For more information, refer to Note 5 regarding the fair value of the Company’s available-for-sale securities.

Assets and liabilities recorded at fair value on a recurring basis in the consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:

Level 1—Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level 2—Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; and

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following table presents information about the Company’s financial assets that are measured at fair value and indicates the fair value hierarchy of the valuation:


	June 30, 2024
	Total		Level 1		Level 2		Level 3
	(in thousands)
Assets:
Money market funds	$	120,809	$	120,809	$	—	$	—
Commercial paper		358,815		—		358,815		—
Certificates of deposit		12,701		—		12,701		—
U.S. government and agency securities		740,616		—		740,616		—
Corporate bonds		351,012		—		351,012		—
Total	$	1,583,953	$	120,809	$	1,463,144	$	—
Liabilities:
Contingent earn-out liability		293		—		—		293
Warrant liabilities		1,407		787		620		—
Total	$	1,700	$	787	$	620	$	293


	December 31, 2023
	Total		Level 1		Level 2		Level 3
	(in thousands)
Assets:
Money market funds	$	288,757	$	288,757	$	—	$	—
Commercial paper		692,352		—		692,352		—
U.S. government and agency securities		786,406		—		786,406		—
Corporate bonds		85,218