Revolution Medicines, Inc. (NASDAQ:RVMD) Q4 2023 Earnings Call Transcript

Revolution Medicines, Inc. (NASDAQ:RVMD) Q4 2023 Earnings Call Transcript February 26, 2024

Revolution Medicines, Inc. misses on earnings expectations. Reported EPS is $-1.14 EPS, expectations were $-0.86. Revolution Medicines, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day and thank you for standing by. Welcome to Revolution Medicine's Fourth Quarter and Full Year 2023 Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Erin Graves, Senior Director of Corporate Communications and Investor Relations, please go ahead.

Erin Graves: Thank you, and welcome, everyone, to the Fourth Quarter and Full Year 2023 Earnings Call. Joining me on today's call are Dr. Mark Goldsmith, Revolution Medicine's Chairman and Chief Executive Officer, and Jack Anders, our Chief Financial Officer. Dr. Wei Lin our Chief Medical Officer will join us for the Q&A portion of today's call. As we begin, I would like to note that our presentation will include statements regarding the current beliefs of the company with respect to our business that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These statements are subject to a number of assumptions, risks, and uncertainties. Actual results may differ materially from these statements and except as required by law, the company undertakes no obligation to revise or update any forward-looking statements.

I encourage you to review the legal disclaimer in our corporate presentation and our earnings press release, as well as all of the company's filings with the SEC concerning these and other matters. With that, I will turn the call over to Dr. Mark Goldsmith, Revolution Medicine's Chairman and Chief Executive Officer. Mark?

Mark Goldsmith: Thanks, Erin. Good afternoon, everyone, and thank you for joining us. We will keep our prepared remarks brief today in light of the corporate presentation we provided at the Morgan Healthcare Conference in January. Today, I'll review highlights of our company progress and lay out several important 2024 milestones for our pioneering RAS(ON) inhibitor pipeline, and Jack Anders will provide highlights of our financial results. 2023 was a transformative year for Revolution Medicine. First, we disclosed the preliminary clinical profiles of two unprecedented targeted RAS(ON) inhibitors, RMC-6236, a RAS(ON) multi-selective inhibitor, and RMC-6291, a RAS(ON) G12C-selective inhibitor as evaluated in Phase 1/1b trials in patients with RAS-mutated cancers.

Initial safety, tolerability, and anti-tumor activity data reported at the Triple Meeting and ESMO Congress showed that both investigational drugs have highly differentiated clinical profiles, suggesting substantial promise for patients and supporting their continued development. We also announced in September that we had dosed our first patient in the Phase 1/1b trial of RMC-9805, an oral and covalent oral G12D selective inhibitor, our third distinguished RAS(ON) inhibitor in clinical development. As I'll summarize momentarily, this important progress with our first wave of RAS(ON) inhibitors provide significant momentum heading into this year's plans and we believe serves as validation of the RAS(ON) inhibitor platform and deep pipeline more broadly.

A scientist in a white lab coat measuring liquid in a beaker in the biotechnology lab.

Second, we ended 2023 with a particularly strong balance sheet, bolstered by the EQRx acquisition that fuels our ambitious plans, aiming to maximize clinical impact and drive shareholder value. With a strong pipeline and financial position, we have three strategic priorities for 2024. First, building on strong clinical momentum with our boldest and most mature investigational drug with broad potential. Our highest priority in 2024 is to propel single agent RMC-6236 into its first pivotal trial. We are currently working toward the goal of launching randomized controlled trials against standard-of-care chemotherapy for patients with RAS-mutated non-small cell lung cancer or pancreatic ductal adenocarcinoma, and we expect that these efforts will command the largest share of our resources this year.

Encouragingly, at the JPMorgan conference, we disclosed that with ongoing follow-up since ESMO, the RMC-6236 safety profile had remained relatively stable, including at 300 milligrams per day, with relatively few dose interruptions or discontinuations. In the non-small cell lung cancer cohort, we reported favorable trends for aggregate objective response rate across doses into the low to mid-40s range and that were trending even higher in the 300-milligram cohort. In the pancreatic ductal adenocarcinoma cohort, we reported favorable trends for aggregate ORR into the mid-20s, and that were trending even higher in the 300-milligram cohort. We are now focused on the 300-milligram dose and below for both lung and pancreatic cancer and continue to follow these patients as we develop a more mature data set to determine progression-free survival or PFS.

We began preparing our regulatory packages for dose selection and monotherapy pivotal trials that we plan to initiate in the second half of 2024. Beyond advancing into late stage development in second-line lung and pancreatic cancers, our second strategic priority for 2024 is to expand the reach of RMC-6236. We began evaluating the impact of single agent 6236 in patients with tumors harboring RAS mutations beyond the G12X mutations that had been the focus of the dose escalation, mainly G13X and Q61X mutations. Likewise, we're studying 6236 in patients with tumor types beyond lung and pancreatic cancer, including colorectal cancer, melanoma, and gynecologic cancers. We anticipate disclosing initial clinical PK safety, tolerability, and activity data from the genotype and tumor type cohorts in the second or third quarter of 2024.

In addition, we've initiated combination drug cohorts to examine options for reaching into first-line treatment settings. For example, we began evaluating RMC-6236 in combination with a checkpoint inhibitor, a combination that is likely required for advancing into first-line treatment for lung cancer. We anticipate disclosing initial data in the second half of 2024 with establishing safety of these combinations as the main focus. Our third priority for the year is to qualify our RAS(ON) mutant selective inhibitors for late stage development, RMC-6291, our G12C selective inhibitor, and RMC-9805, our G12D selective inhibitor. At the Triple Meeting in October, we reported preliminary results with RMC-6291 monotherapy supporting clinically meaningful differentiation at doses that were generally well-tolerated.

Based on dose optimization work that has been completed, further study of RMC-6291 as a single agent continues at 200 milligrams bid. As a major next step for RMC-6291, we have initiated our first RAS(ON) inhibitor doublet trial with RMC-6236 in patients with advanced KRASG12C mutated cancers. Patients are currently being treated in the dose escalation portion of the trial and we anticipate disclosing initial clinical PK, safety, tolerability, and activity data in the second half of 2024. We've also begun treating patients with RMC-6291 and a checkpoint inhibitor to assess the safety of this combination. For our G12D selective inhibitor, RMC-9805, we shared at the JP Morgan conference that oral bioavailability of RMC-9805 has been confirmed in patients.

We've seen pharmacokinetics consistent with expectations from our preclinical data, including dose-dependent increases in plasma exposure on once daily dosing. We've cleared several dose levels with good tolerability and no dose-limiting toxicities have been reported thus far. We anticipate disclosing initial safety and activity data in the second half of 2024. Finally, these ambitious clinical development priorities for advancing our first wave of RAS(ON) inhibitors are made possible by our strong balance sheet, which now includes approximately $1.1 billion of cash from the acquisition of EQRx that closed in November. With our compelling pipeline, innovation engine, and financial position, we aim to continue building and solidifying our position as an industry leader in developing targeted medicines for patients living with RAS-addicted cancers for many years to come.

I'd like to now turn the call over to Jack Anders, our Chief Financial Officer, to provide the fourth quarter and full-year financial update. Jack?

Jack Anders: Thank you, Mark. We are pleased to strengthen our balance sheet with the acquisition of EQRx, which added approximately $1.1 billion in net cash proceeds after estimated post-closing winddown and transition costs. We ended the year with $1.85 billion in cash and investments, which is expected to fund planned operations into 2027 based on our current operating plan. Q4 and full year 2023 financial results included $26.9 million in operating expenses associated with the winddown of EQRx, which primarily consisted of non-recurring accounting charges associated with employee-related termination expenses and stock-based compensation expense resulting from the acceleration of EQRx equity awards in conjunction with the closing of the transaction.

These were mostly one-time accounting charges specific to the close of the transaction in 2023 and are not expected to repeat in 2024. Collaboration revenue was $0.7 million for the fourth quarter of 2023 compared to $15.3 million for the prior year quarter and $11.6 million for full year 2023 compared to $35.4 million for the prior year. Decrease in revenue was due to the termination of the company's collaboration agreement with Sanofi in 2023. Total operating expenses for the fourth quarter of 2023 increased to $180.7 million, largely driven by R&D expenses, which totaled $148.5 million. Total operating expenses for full year 2023 increased to $498.8 million with R&D expenses increasing to $423.1 million. As noted earlier, our Q4 and full year 2023 operating expenses included $26.9 million in expenses associated with the winddown of EQRx. The remaining increase in total operating expenses for Q4 and full year 2023 was primarily due to an increase in clinical supply manufacturing and clinical trial expenses for our ongoing clinical development programs, increase in personnel-related expenses related to additional headcount and an increase in stock-based compensation expense.

Net loss for the fourth quarter of 2023 was $161.5 million or $1.14 per share. For the full year, net loss was $436.4 million or $3.86 per share. Turning to financial guidance for 2024, we expect full year GAAP net loss to be between $480 million and $520 million, which includes estimated non-cash stock-based compensation expense of $70 million to $80 million. The increase in expected GAAP net loss for 2024 is a result of increased expenses associated with the progression of our ongoing clinical development programs. I'll now turn the call back over to Mark.

Mark Goldsmith: Thank you, Jack. In summary, in 2024, we at Rev Med have ambitious plans to deliver on clear priorities for our pioneering RAS(ON) inhibitor portfolio building on tremendous momentum coming out of 2023 and enabled by a strong balance sheet and a highly talented and motivated team. We remain committed to discovering, developing, and delivering innovative targeted therapies for patients living with RAS-addicted cancers. On behalf of our organization, I'd like to extend our deep appreciation to our patients, clinical investigators, scientific and business collaborators, advisors, and shareholders. This concludes our prepared remarks for today, and I'll now turn the call over to the operator for the Q and A session.

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