Revolution Medicines, Inc. Q2 FY2022 Earnings Call

Good day. My name is Christie, and I'll be your conference facilitator today. Welcome to the Revolution Medicines Second Quarter 2022 Earnings Conference Call. Today's call is being recorded. I would now like to hand the conference over to David Arrington, Revolution Medicines' Senior Vice President of Investor Relations and Corporate Affairs for opening remarks. David, you may begin.

Thank you, and welcome, everyone, to our second quarter earnings call. Joining me on today's call are Dr. Mark Goldsmith, Revolution Medicines' Chairman and Chief Executive Officer; Dr. Steve Kelsey, the Company's President, Research and Development; and Jack Anders, our SVP of Finance and Principal Accounting Officer. 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 slide of our corporate presentation or the 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 Medicines' Chairman and Chief Executive Officer. Mark?

Good afternoon, and thank you for joining us. Today, I'll provide an update on our corporate progress and our Senior Vice President of Finance, Jack Anders will provide highlights of our financial results. In the second quarter of 2022, Revolution Medicines continued building strong momentum in the discovery and development of innovative medicines on behalf of patients with a wide range of RAS-addicted cancers, which represent 30% of all human cancers. We are advancing a deep and cohesive portfolio of RAS-targeted therapeutics, led by our development stage RAS(ON) Inhibitors. Recently, we reported significant progress across our pipeline, setting us up for an exciting period as our assets progress over the next 12 to 18 months. I'll now review a number of key achievements that reflect this recent progress regarding our pipeline of RAS(ON) Inhibitors and RAS Companion Inhibitors. First, we have advanced the first two drug candidates from our highly innovative RAS(ON) Inhibitor portfolio into clinical development. In June, we began dosing patients in a Phase 1/1b trial evaluating RMC-6236, our oral RASMULTI(ON) Inhibitor in patients with tumors bearing various KRASG12D mutations. The first patient treated with this drug candidate has advanced pancreatic cancer bearing the common KRASG12D mutation. RMC-6236, a bold compound that we have shown preclinically inhibits a wide range of RAS proteins that can drive cancer is the first development candidate from our broad collection of RAS(ON) Inhibitors to enter clinical development. And this step marks a significant milestone in our efforts to serve the unmet needs of patients with RAS-addicted cancers. Additionally, I'm pleased to report that study site activation is underway for a Phase 1/1b trial of our second oral RAS(ON) Inhibitor drug candidate, RMC-6291. And shortly, this study will begin dosing patients who have tumors harboring the KRASG12C variant. Unlike RMC-6236, RMC-6291 is designed as a highly selective covalent inhibitor of the activated RAS(ON) state of the KRASG12C variant that is common in lung and colorectal cancer. We have previously reported extensive preclinical data demonstrating its differentiated and promising antitumor profile. RMC-6291 is the first of a robust series of mutant selective RAS(ON) Inhibitors that we intend to bring into the clinic. Our third RAS(ON) Inhibitor drug candidate, RMC-9805, remains on track toward our goal of beginning clinical evaluation in mid-2023. We believe that RMC-9805 is the first oral covalent inhibitor of KRASG12D, the most common RAS variant causing human cancer, particularly pancreatic, colorectal, and lung cancers. Based on their preclinical profiles, we believe that in aggregate, this first wave of RAS(ON) Inhibitor drug candidates, RMC-6236, 6291, and 9805 has the potential to help serve the vast majority of patients with RAS-addicted cancers. Second, in support of our goal to develop optimal treatment strategies directed to RAS-addicted cancers, we continue clinical evaluation of two class-leading RAS companion inhibitors, our SHP2 Inhibitor, RMC-4630, and our mTORC1-selective inhibitor, RMC-5552, both of which have shown clinical evidence of antitumor activity. These RAS companion inhibitors are designed to be deployed primarily as combination agents with direct RAS inhibitors. Our clinical collaborator Amgen recently reported encouraging preliminary evidence from its Phase 1b CodeBreaK 101 clinical study, suggesting promising and durable benefit from combining RMC-4630 with its KRASG12C inhibitor sotorasib, particularly in second-line treatment of patients with non-small cell lung cancer, who are KRASG12C inhibitor naive. We continue enrolling patients into our Phase 2 study of this combination, RMC-4630-03 in patients with KRASG12C non-small cell lung cancer. Additionally, Sanofi is now recruiting patients in its Phase 1/2 dose escalation and expansion study evaluating RMC-4630 in combination with adagrasib in patients with previously treated lung cancer bearing a KRASG12C mutation. Further, we expect to evaluate our RAS companion inhibitors in combination with our own RAS(ON) Inhibitors in the future. Now I'll shift to our corporate progress and comment on our focus for 2022 and 2023. In July, we successfully completed an equity financing raising gross proceeds of $265 million to strengthen the company's balance sheet and overall financial position to support the continued development and expansion of our product pipeline. Following this productive financing, in the remainder of 2022 and 2023, the company will take a disciplined approach to ensure successful and timely execution of the multiple development stage activities currently underway are planned. Our top priority is to deliver on important milestones during this time. In this period, we intend to concentrate our development resources on our three most advanced RAS(ON) Inhibitors, RMC-6236, 6291 and 9805 and two clinical stage RAS companion inhibitors RMC-4630 and 5552. Importantly, we maintain our strong commitment to research activities that provide critical scientific insights to support our ongoing development activities and that also leverage our proven RAS inhibition engine to generate exciting new mutant selective RAS(ON) Inhibitors with distinct profiles. We expect to nominate our next RAS(ON) Inhibitor development candidate in the second half of 2022, which will join a planned second wave of drug candidates, including RMC-8839, which we anticipate to begin clinical development after 2023. With this R&D strategy and our current cash, cash equivalents and marketable securities, extending operating runway through 2024, we expect to deliver on important milestones. In our RAS(ON) Inhibitor portfolio, upcoming milestones are as follows: to provide evidence of first-in-class single-agent activity for RMC-6236 in 2023, to announce dosing of the first patient in a monotherapy dose escalation study of RMC-6291 in the second half of 2022 and provide preliminary evidence of superior activity in 2023 and to announce dosing of the first patient in a monotherapy dose escalation study of RMC-9805 in mid-2023. In our RAS companion inhibitor portfolio, upcoming milestones are as follows: to provide top line data from the 4630-03 study of 4630 plus sotorasib in 2023 and to disclose additional evidence of single-agent activity for RMC-5552 in 2023. In summary, we remain deeply committed to our science-driven approach to treating patients with RAS-addicted cancers, and our pipeline and R&D efforts have entered an exciting and important phase. The first wave of RAS(ON) Inhibitors, which includes three differentiated drug candidates has advanced significantly with RMC-6236 now dosing patients, RMC-6291 preparing to begin dosing patients shortly and RMC-9805, continuing progress toward the clinic. Our differentiated RAS companion inhibitors have shown evidence of single-agent clinical activity along the path towards strategic combinations with direct RAS inhibitors, and the first clinical evidence has now emerged in support of RMC-4630 as a RAS companion inhibitor combined with a RAS inhibitor. As we intensify efforts to progress these assets to significant milestones in the coming period, we are also continuing to make a significant investment, pipeline expansion activities based on our productive RAS innovation engine. Building on this exciting company momentum, I'll now turn to Jack Anders, our Senior Vice President of Finance, to provide a financial update. Jack?

Thank you, Mark. We are pleased to have strengthened our balance sheet in July with the upsized public offering of common stock, raising gross proceeds of $264.5 million. Net proceeds were approximately $248 million after deducting underwriting discounts, commissions and estimated offering costs. Our cash and investment balance as of June 30, 2022, was $461.4 million, which does not include proceeds from the financing. As a result of the financing and concentration of our development resources as described earlier by Mark, we are updating our cash runway guidance and now expect our current cash and investment balance to fund planned operations through 2024. We have updated our 2022 financial guidance and lowered the top end of our 2022 GAAP net loss range by $10 million. We now expect full year 2022 GAAP net loss to be between USD260 million and USD280 million. We are also lowering our estimated non-cash stock-based compensation expense for the year and now expect full year 2022 non-cash stock-based compensation expense to be between USD30 million and USD35 million. Turning to the quarter. Revenue from our collaboration agreement with Sanofi was $9.1 million in the second quarter of 2022 compared to $8.7 million in the prior year period. Total operating expenses for the second quarter of 2022 were $71.2 million, and increased by 34% over the prior year period. The increase in operating expenses was largely due to expenses associated with our preclinical portfolio, increased headcount and related facilities and infrastructure costs and stock-based compensation expense. Net loss for the second quarter of 2022 was $61.2 million or $0.82 per share. And that concludes the financial update. I'll now turn the call back over to Mark.

Thanks, Jack. Revolution Medicines continues robust efforts to outsmart RAS-addicted cancers and with recent scientific and business progress, we believe that the company is in an excellent position to fulfill our mission on behalf of cancer patients. This concludes our prepared remarks for today. And I'll now turn the call over to the operator for the Q&A session. Operator?

And your first question comes from the line of Marc Frahm with Cowen & Company. Your line is open.

Thank you for taking my questions. Prioritization and ensuring you effectively demonstrate ship to and the companions on one side makes a lot of sense. However, I hope you find some efficacy signals with the direct RAS inhibitors. Mark, how do you evaluate the pros and cons of using your limited resources to quickly expand on that positive signal with combinations versus using it as proof-of-concept for the platform and then potentially falling behind with options like the G13C and other more targeted inhibitors?

On exhibitor, which is our highest priority to move additional RAS(ON) inhibitors in the clinic, or to expand out the work around the inhibitors has been shown to be active as monotherapy. Is that your question?

Yes.

Yes. You know, I'm not sure we're going to have to make a choice. At that point, you know, clearly, once one has a clinical signal, the priority is going to be to move that asset forward and develop as quickly as possible supporting package to move into, you know, a registration program ending towards an approval. So we'll do whatever it takes to pull that off. But I also think a fair point is that amongst these three initial RAS(ON) inhibitors that are going into the clinic, while they do cover the vast majority of RAS-addicted cancers in aggregate, there is also real opportunity for specialized additional, you know, inhibitors that are targeting specific mutants beyond those. And you mentioned G13C, we've talked about and included in our pipeline, reference to other mutants that are of interest to us. So those are important, too. I don't think they'll really compete for resources at that stage. You know, we're continued company growth, I think this decision to be very focused, you know, to be honest, is to be very focused on five assets in the clinic. It's not as if we paired that to a small program. You know, there's a lot going on, but we know that all eyes are on, you know, these first three RAS(ON) inhibitors, and also to see the best companion inhibitors mature. And so we just want to make sure that we are sufficiently focused. I think it's less about resources and more about concentrating our intellectual bandwidth and effort around those things at this stage.

Okay. That's helpful. And then can you just remind us what you can view as gating from these initial trials with 636 and 691 before you might work on 691 - before you might bring in the ship to inhibitor and start dosing the combination.

Okay. Yes, maybe that's a question Steve Kelsey wants to comment on it. I think the question is, what would trigger expansion into combinations which, you know, Margaret mentioned, but I think we've had to improve both RMC-4630 and RMC-5552 and also, of course, Anti-PD1, immunologic checkpoint inhibitors.

Yes, that's a great question. I believe our current strategy is to initiate the combination programs as soon as possible. This leads us to consider what information we need before we can proceed. At a basic level, we need enough data to feel confident that we have an effective drug because there's little value in combining with something that isn't active. Additionally, we need a clear understanding of the schedule since it becomes challenging to manage combinations if we're assessing multiple variables, and we prefer not to test different schedules in combination. Those are the two key aspects we need to grasp. However, even with our expectations regarding RAS and its validation as a target for single-agent therapy, we have always felt that combinations would ultimately yield the most significant impact. Starting these combinations as early as possible should give us an advantage as we develop optimal treatment regimens for pivotal trials, especially for the first-line treatment of any RAS mutations, which are pertinent to three major types of epithelial cancers all seeking the best therapies.

Okay. Thank you. Very helpful.

Thanks Marc.

Your next question comes from the line of Alec Stranahan with Bank of America. Your line is open.

Hi, thank you, guys. Thanks for taking the question. Just a couple from us. The combo data looks quite good from CodeBreaK 101 and tolerability, dose escalation, no grade for adverse events? I guess, could you give us a sense of what dose of RMC-4630 is being taken forward in this context, but I imagine your own study could help further inform this, but it sounds like perhaps the highest 200 mg dose could be the one you ultimately go with. And as a follow up to that, is your expectation that response rates could even improve, say, beyond 50% in the G12C inhibitor naive patients at sort of the set dose and the expansion phase? And then my second question, you know, with your fifth RAS(ON) asset nominated later this year, how are you guys approaching which RAS(ON) to prioritize. To precise of end markets, unmet need, drug ability of the target, potential for combos, I guess, what's sort of leading your decision making here? Thanks.

Alec, thanks very much. I think maybe Steve can address the first two questions, the two-part question, and maybe then I'll comment on the RAS(ON).

Yes. Nothing has really changed from the last earnings call. The study design for the RMC-4630-03 study, which is the one that we are sponsoring, which is a global Phase 2 study and it's completely restricted to patients who have not previously received the KRAS inhibitor. The plan all along was to do a safety running of the 140-milligram dose level and then dose escalate to 200 and keep expanding at the 200 dose level until we either got a very clear RAS signal or that we ran into issues with tolerability at that dose level. And that's still the plan, and we're still enrolling. That study is moving along. I don't - we haven't disclosed any data as to where we are, but it's rolling along very nicely right now. Your question about whether or not the response rate is more than 50%. Well, I think we would say, there are two things, I think, that we would say. One is, of course, it's possible that the response rate for the combination will be 100%. The initial signals that were presented at the World Lung Congress even though the number of patients was very small, if you actually just look at the four patients who were treated at the 140 and 200-milligram dose level, which are the two doses being tested in the 03 study, there were only four patients who with lung cancer that were G12C naive and were treated with either of those two dose levels and three of them responded. So that gives you a 75% response rate, even though that the denominator is only four. So the confidence is around that 75% extremely wide, of course. The other thing to bear in mind is, of course, that just increasing the response rate is probably insufficient, partly because really what patients and investigators want is durability and partly because any pivotal trial that we would do with that combination, response rate wouldn't be the primary endpoint, it would be progression-free survival. So we have to keep a very close eye, not just on the percentage of patients with - who have tumors that shrink but also on the temporal endpoints as well. The number of patients with stable disease and the durability of that stable disease is just as important as the number of patients who have a resist PR.

And this is Mark. I'll comment on your second question, which was how will we choose which additional inhibitors who would advance or how will we prioritize them. It's a very complicated question - or it's a simple question with a complicated answer. There are a lot of different dimensions to consider. The real strategy here, which I hope we conveyed but it's worth reiterating is that we're not taking the foot off the accelerator of creating these new assets. That work is still very vigorous. And essentially, what we're doing is creating a basket of additional development candidates. The first one in the basket is, of course, 8839 on G13C, but there are others that will come behind that, as you pointed out, our next one this year, and one would imagine there will be more to come after that. And so with that basket, we'll get to choose and we'll prioritize. One of the important considerations here is we're going to learn a lot from 6236, 6291 and 9805. And the - those are three very distinct molecules with very distinct features, and we will run a great deal from the early clinical experience with those. And I think that may guide us as to genotypes where the unmet need remains the highest after we see something from these three. It may guide us to which genotypes are most sensitive to RAS inhibitors. It may guide us to covalence versus non-covalence selectivity versus multiple targets, et cetera. So there are a lot of really important scientific and clinical questions buried into the signals that we'll get from these. And I'm sure that, that will significantly impact us probably more so than, let's say, market size or something like that, but I would roll that out as some consideration. But I think the main thing we focus on tends to be probability, what's the likelihood that a given asset will actually provide clinical benefit in a given situation. And that's the kind of information we'll learn from the first three RAS(ON) inhibitors.

Thank you.

Thank you.

Your next question comes from the line of Jonathan Chang with SVB Securities. Your line is open.

Hi guys. Thanks for taking my questions. First question, can you provide any color around the progress of the Phase 2 RMC-4630-03 study? Earlier in the year, the guidance was for top line data in the second half versus 2023 now. Also, can you help set expectations for how much and what kind of data could be available on the top line disclosure?

Yes. Maybe I'll answer this. At least take the first crack at it, which has to do with our notation that we will provide the next data readout will be the top line data set and that we won't provide an interim readout at the end of this year. That was really driven primarily by the fact that the CodeBreaK 101c data, we're going to be and now have been disclosed. And so in essence, one's already gotten a glimpse of what things can look like on an interim basis, and it didn't seem to us and to a number of investors speaking to us that anybody would really care about another interim update and that what was really needed is a more definitive answer, does RMC-4630 provide additive value to sotorasib in second-line non-small cell lung cancer. And we think that this study will do that, but we just didn't see any value in giving another sort of drip of data on it. I think that's the main issue. A secondary factor or second factor is the enrollment pace wasn't quite on with what we expected initially. And so we will continue to enroll some patients into the first part of 2023. And so again, not having every patient enrolled and having just a partial benefit to us didn't seem like it was meritorious.

What readouts will we provide?

Perfect. Dr. Kelsey just provided the question, and he can provide the answer.

I mean, I think the answer I gave to the last question probably sums it up as best as I can, really. The most obvious readout will be overall response rate because that is actually price endpoint of the study. But as I said, it's becoming increasingly important to us not just to look at response rate, but look at durability. I think given that the study started enrolling last September, by the time we get the response rate data on the sort of the last patient in of the progression-free survival, the duration of progression-free survival data for the first transformation relatively mature. So I think you can expect to see both absolute response rate data, durability of response and progression-free survival from the cohort. And hopefully, we will be able to make a meaningful comparison to the CodeBreaK 100 study, which was the pivotal trial of single-agent sotorasib. We try to, wherever possible, match the CodeBreaK 100 study in the design of our study so that we - specifically so that we can draw those comparisons. And I think that's hopefully what we'll be able to provide. Obviously, the other thing you'll see is the tolerability profile as well because there's been a snapshot of that provided from CodeBreaK 101c, but the heterogeneity of the patient population that was presented are weakened, doesn't really give you a robust assessment of the tolerability in that exclusively defined G12C naive non-small cell lung cancer population.

Got it. Thanks for taking my questions.

Thank you.

Your next question comes from the line of Benjamin Burnett with Stifel. Your line is open.

Hi, good afternoon. This is Neil Carnahan on for Ben, thanks for taking our question. For the Phase 1, RMC-6291. Can you characterize enrollment criteria a bit? More specifically, will patients have been previously treated with a KRAS inhibitor? Or will you be mainly pursuing patients that are KRAS inhibitor naive?

Yes, it'll be some components of both I'm sure. But maybe Steve can lay that out for you.

Yes, the answer is that the eligibility criteria for study right now are very similar to the CodeBreaK 101. So, in the initial phases of the study, pretty much anyone with any tumor harboring the future seeing the patient is eligible irrespective of whether they've received the previous KRAS inhibitors or not. As we get into the later the higher level dose escalations and certainly at the recommended dose-to-dose and schedule, we will be deliberately enrolling defined cohorts with defined - based on criteria defined by tumor histotype and whether or not they have or have not received the KRASG12C inhibitor. The primary population of interest for the study ultimately are obviously patients with lung cancer who have not received the G12C inhibitor because that way you can make a comparison against the G12C often mutant stuff. There is some reason to believe that 691 might have activity in patients who have been introduced by G12C inhibitor. That's not our primary focus as a single agent. It may become a very important focus when we start combining RMC 691 with other drugs in our portfolio, particularly RMC-6236.

Thank you.

Your next question comes from the line of Noah Eisenberg with JPMorgan Chase. Your line is open.

Hi guys, this is Noah on for Eric, thanks for taking our question. We're just wondering, given some of the data along this past weekend, do you think the observed tolerability profile of combining care as inhibitors and PD-1s, could be a class effect or specific to individual molecule?

Yes, hi Noah, thank you for your question. It's a bit challenging to determine at this moment, but several G12C inhibitors have indicated a liver signal, which is not surprising, especially when combined with a checkpoint inhibitor that can cause liver inflammation, as we have seen with LT. This combined effect makes sense when considering monotherapy LSBF analogies. Regarding your question about whether the interaction is biological or due to chemical properties, we are uncertain. However, since many first-generation G12C inhibitors share similar chemical structures or related components, it’s not unexpected that these compounds could have similar effects in the liver. Our significant question is whether this applies to our compounds, which we are focused on developing. Importantly, we started from a distinct chemical basis, targeting a different site on RAS and binding to different states of RAS, so there isn’t a direct correlation. Without a strong hypothesis explaining why a general G12C inhibitor biologically should lead to LCM ailments, we don't have a basis for this concern. Thus, we see no reason for it to impact the RVMD RAS(ON) inhibitor collection.

Great, thank you very helpful.

Thank you.

Your next question comes from the line of Michael Schmidt with Guggenheim.

Hi, this is Ede filling in for Michael. Thank you for taking our questions and congratulations on the advancements with the first two KRAS inhibitors. To start, regarding RMC-6236, you previously mentioned some preclinical rationale indicating that 6236 could serve as a targeted inhibitor for specific G12C mutants, as well as having potential as a RAS companion inhibitor. Now that the compound is in clinical trials, how do you plan to prioritize these two strategies, or will you evaluate them thoroughly after 6291 enters the clinic? Additionally, I have a quick question about 6291. It appears you are assessing both once daily and twice daily dosing in the upcoming phase one trial. What factors are you considering in testing both schedules? Does the preclinical pharmacokinetic data suggest that one might be more advantageous than the other? Thank you.

Okay, thanks for your questions. The first question, which is what's the priority with RMC-6236 to test it as monotherapy or tested as a companion inhibitor? Well, that's pretty straightforward for us, yes to evaluate it as monotherapy and demonstrate that it's tolerated and active before you really qualify it to be used as a companion inhibitor. With that said, though, you don't necessarily require a complete data package to convince that you have a path forward registration as a monotherapy before you start the RAS companion combinations. So in other words, I think we'd start that fairly soon after we have some confidence around this anti-tumor activity and how well tolerated and safe it is. I think we would look very much towards combinations with selected other RAS(ON) inhibitors. But the clearly phase in that way, the monotherapy is the thing to keep one's eyes on initially. And the second question was…

The scheduling system of 6291 daily versus the IV dosing.

I don't think we've ever talked much about PID dosing is there something? Is there something behind that question that you're that you're alluding to?

Yes, it's just based on, you know, information on ct.gov. It looks like you know both schedules are going to be evaluated. So sort just wanted to get?

The question revolves around the difference in continuous exposure between daily and twice-daily dosing. There's considerable insight on this issue regarding first-generation inhibitors of RAS(OFF) types. Without adequate coverage, there's a risk of shifting from RAS(OFF) to RAS(ON), and many in the field believe it's essential to maintain consistent coverage to prevent this conversion. While there are arguments about the long half-life of treatments, it's uncertain whether this same principle applies to RAS(ON) inhibitors, which operate on a distinct mechanism. Thus, the necessity of continuous coverage is unclear. Additionally, it's possible that RMC 691, when administered daily, may still offer sufficient coverage. This is an important aspect to consider in the protocol.

Yes got it, yes very helpful. Thank you.

Thank you.

As there are no more questions in the queue, I will turn the call back over to Dr. Goldsmith for his closing remarks.

Well, thank you, operator, and thank you to everyone for participating today and for your continued support of Revolution Medicines, have a good day.

This concludes today's conference call. You may now disconnect.