SEC Filing | Revolution Medicines, Inc.

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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 March 31, 2023


☐	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)

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 May 4, 2023, the registrant had 106,313,250 shares of common stock, $0.0001 par value per share, outstanding.

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	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	26

PART II.	OTHER INFORMATION	27
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	74
Item 3.	Defaults Upon Senior Securities	74
Item 4.	Mine Safety Disclosures	74
Item 5.	Other Information	74
Item 6.	Exhibits	75
	Signatures	76

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;

•

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;

•

our expectations regarding our ability to obtain, maintain, enforce and defend our intellectual property protection for our product candidates; 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 (https://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)


	March 31,			December 31,
	2023			2022
Assets
Current assets:
Cash and cash equivalents	$	427,222		$	161,412
Marketable securities		482,578			483,531
Accounts receivable		3,995			4,673
Prepaid expenses and other current assets		8,958			10,569
Total current assets		922,753			660,185
Property and equipment, net		18,536			18,659
Operating lease right-of-use asset		54,302			55,077
Intangible assets, net		58,540			58,807
Goodwill		14,608			14,608
Restricted cash		1,737			1,737
Other noncurrent assets		2,772			2,857
Total assets	$	1,073,248		$	811,930
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	19,912		$	21,306
Accrued expenses and other current liabilities		27,368			29,446
Operating lease liability, current		5,921			6,773
Deferred revenue, current		1,434			4,459
Total current liabilities		54,635			61,984
Deferred tax liability		7,025			7,025
Operating lease liability, noncurrent		57,676			57,432
Other noncurrent liabilities		1,694			301
Total liabilities		121,030			126,742
Commitments and contingencies (Note 7)
Stockholders' equity:
Preferred stock, $0.0001 par value; 10,000,000 shares authorized at March 31, 2023 and December 31, 2022, respectively; zero shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively		—			—
Common stock, $0.0001 par value; 300,000,000 shares authorized at March 31, 2023 and December 31, 2022, respectively; 106,298,077 and 90,411,912 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively		11			9
Additional paid-in capital		1,722,202			1,388,300
Accumulated other comprehensive loss		(556	)		(1,780	)
Accumulated deficit		(769,439	)		(701,341	)
Total stockholders' equity		952,218			685,188
Total liabilities and stockholders' equity	$	1,073,248		$	811,930

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 March 31,
	2023			2022
Revenue:
Collaboration revenue	$	7,014		$	7,578
Total revenue		7,014			7,578
Operating expenses:
Research and development		68,947			56,490
General and administrative		13,224			9,037
Total operating expenses		82,171			65,527
Loss from operations		(75,157	)		(57,949	)
Other income, net:
Interest income		7,059			302
Total other income, net		7,059			302
Loss before income taxes		(68,098	)		(57,647	)
Benefit from income taxes		—			—
Net loss	$	(68,098	)	$	(57,647	)
Net loss per share attributable to common stockholders, basic and diluted		(0.72	)	$	(0.78	)
Weighted-average common shares used to compute net loss per share, basic and diluted		94,831,979			74,162,363

Comprehensive loss:
Net loss	$	(68,098	)	$	(57,647	)
Other comprehensive loss:
Unrealized gain (loss) on investments, net		1,224			(908	)
Comprehensive loss	$	(66,874	)	$	(58,555	)

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			Stockholders'
	Shares			Amount		Capital		Income/ (Loss)			Deficit			Equity/(Deficit)
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 upon follow-on offering, net of issuance cost 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

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			Stockholders'
	Shares		Amount		Capital		Loss			Deficit			Equity/(Deficit)
Balance at December 31, 2021		74,142,619	$	8	$	1,055,572	$	(376	)	$	(452,636	)	$	602,568
Issuance of common stock pursuant to stock option exercises		58,122		—		305		—			—			305
Issuance of common stock related to vesting of restricted stock units		26,931		—		—		—			—			—
Vesting of early exercised stock options		—		—		31		—			—			31
Stock-based compensation expense		—		—		6,644		—			—			6,644
Net unrealized loss on marketable securities		—		—		—		(908	)		—			(908	)
Net loss		—		—		—		—			(57,647	)		(57,647	)
Balance at March 31, 2022		74,227,672	$	8	$	1,062,552	$	(1,284	)	$	(510,283	)	$	550,993

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)


	Three Months Ended March 31,
	2023			2022
Cash flows from operating activities
Net loss	$	(68,098	)	$	(57,647	)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on disposal of fixed assets	1				19
Amortization of intangible assets		267			267
Stock-based compensation expense		9,699			6,644
Depreciation and amortization		1,205			901
Net amortization of premium or discount on marketable securities		(3,577	)		648
Amortization of operating lease right-of-use asset		1,061			1,122
Changes in operating assets and liabilities:
Accounts receivable		678			546
Prepaid expenses and other current assets		1,611			(3,416	)
Accounts payable		(1,050	)		(492	)
Accrued expenses and other current liabilities		(1,752	)		(2,114	)
Deferred revenue		(3,025	)		(1,836	)
Operating lease liability		(894	)		(719	)
Other noncurrent assets		90			(114	)
Other noncurrent liabilities		1,393			1,031
Net cash used in operating activities		(62,391	)		(55,160	)
Cash flows from investing activities
Purchases of marketable securities		(193,097	)		(111,818	)
Maturities of marketable securities		198,851			157,732
Purchases of property and equipment		(1,758	)		(1,889	)
Net cash provided by investing activities		3,996			44,025
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 under equity incentive plans		499			305
Net cash provided by financing activities		324,205			305
Net increase (decrease) in cash, cash equivalents and restricted cash		265,810			(10,830	)
Cash, cash equivalents and restricted cash - beginning of period		163,149			110,234
Cash, cash equivalents and restricted cash - end of period	$	428,959		$	99,404
Reconciliation of cash, cash equivalents and restricted cash to consolidated balance sheets
Cash and cash equivalents		427,222			97,667
Restricted cash		1,737			1,737
Cash, cash equivalents and restricted cash - end of period	$	428,959		$	99,404
Supplemental disclosure of non-cash investing and financing activities
Vesting of early exercised options and restricted stock	$	—		$	31
Purchases of property and equipment in accounts payable and accrued expenses and other current liabilities		744			1,672
Right-of-use assets obtained in exchange for operating lease liabilities		286			—
Unpaid/deferred offering costs		7			89

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 focused on developing targeted therapies to inhibit frontier targets in 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 March 31, 2023, the Company had an accumulated deficit of $769.4 million. 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 in addition to upfront payments and research and development cost reimbursement received under the Company’s 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 (Cowen) 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 (ATM). During the year ended December 31, 2021, the Company sold an aggregate of 339,302 shares of common stock under the ATM resulting in gross proceeds of $10.4 million. After deducting commissions and expenses of $0.3 million, net proceeds to the Company for the year ended December 31, 2021 were $10.1 million. During the year ended December 31, 2022, the Company sold an aggregate of 2,385,846 shares of common stock under the ATM resulting in gross proceeds of $51.3 million. After deducting commissions and expenses of $1.4 million, net proceeds to the Company for the year ended December 31, 2022 were $49.9 million. During the three months ended March 31, 2023, the Company did not issue shares of the Company’s common stock under the ATM.

In July 2022, the Company issued and sold 13,225,000 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 1,725,000 shares of the Company’s common stock) at a price to the public of $20.00 per share, for net proceeds of $248.1 million, after deducting underwriting discounts and commissions of $15.9 million and expenses of $0.5 million.

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, 2022 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 27, 2023. 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 March 31, 2023 and March 31, 2022 include the accounts of the Company and its wholly owned subsidiary, Warp Drive Bio, Inc. (Warp Drive). All intercompany balances and transactions have been eliminated in consolidation. The functional and reporting currency of the Company and its subsidiary 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 those related to revenue recognition, clinical accruals, valuation of in-process research and development and developed technologies, 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 and stock-based compensation. The extent to which the COVID-19 pandemic may directly or indirectly impact the Company’s business, financial condition and results of operations is highly uncertain and subject to change. The Company considered the potential impact of the COVID-19 pandemic on its estimates and assumptions and there was not a material impact to the Company’s unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2023. 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’s cash is held at a limited number of financial institutions in the United States, which management believes to be of high credit quality. Such deposits may, at times, exceed federally insured limits. The Company invests in money market funds, U.S. government debt securities, U.S. government agency bonds, commercial paper and corporate bonds. The Company has not experienced any losses on its deposits of cash and cash equivalents.

The Company is subject to credit risk as its receivable and collaboration revenue are entirely related to its collaboration agreement with Sanofi. For more information, see Note 8, “Sanofi collaboration agreement.”

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 months ended March 31, 2023.

Fair value measurements

The carrying amounts of the Company’s certain financial instruments, including cash equivalents, 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 4 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:


	March 31, 2023
	Total		Level 1		Level 2		Level 3
	(in thousands)
Assets:
Money market funds(1)	$	290,427	$	290,427	$	—	$	—
Commercial paper(1, 2)		280,074		—		280,074		—
U.S. and Canadian government and agency securities(1, 2)		325,207		—		325,207		—
Corporate bonds(1, 2)		16,946		—