Revolution Medicines Publishes First IPO Filing

Summary

• Revolution Medicines has filed to raise $100 million in an IPO, although that is a typical placeholder figure.
• The firm is advancing a pipeline of drug candidates target the RAS and mTOR cancer pathways.
• RVMD has an enviable investment and collaboration relationship with pharma giant Sanofi.
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Quick Take

Revolution Medicines (NASDAQ:RVMD) has filed to raise $100 million in an IPO of its common stock, according to an S-1 registration statement.

The company is a clinical stage biopharma developing treatments for cancers with an emphasis on the RAS and mTOR signaling pathways.

RVMD has a significant partnership collaboration with investor Sanofi (SNY), and I await more information about management's proposed pricing and valuation expectations.

Company & Technology

Redwood City, California-based Revolution was founded to advance a pipeline of drug candidates for the treatment of a variety of cancers, including solid tumors.

Management is headed by President and CEO Mark Goldsmith, M.D., Ph.D, who has been with the firm since November 2014 and was previously President and CEO of Constellation Pharmaceuticals.

Below is a brief overview video of SHP2 inhibitor aspects:

Source: ecancer

The firm's lead candidate, RMC-4630, is currently in Phase 1/2 trials and is an SHP2 inhibitor that seeks to overcome resistance to current RTKi cancer treatment regimens.

Below is the current status of the company's drug development pipeline:

Source: S-1

Investors in the firm have invested at least $305 million and include Third Rock Ventures, The Column Group, and Sanofi Research Invest (SNY).

Market & Competition

According to a 2019 market research report by ResearchandMarkets, the global market for solid tumor cancer treatment was more than $121 billion in 2018 and is expected to reach $424 billion by 2027. This represents a forecast very strong CAGR (Compound Annual Growth Rate) of 15.0% from 2019 to 2027.

Key elements driving this expected growth are an increase in breast cancer incidence as well as lung cancer due to rising air pollution and the number of cigarette smokers worldwide. North America accounts for 33.6% of demand for solid tumor cancer treatments followed by Europe at 30.2% and the Asia Pacific region at 19.5%.

Major competitive vendors that provide or are developing treatments include:

• Amgen (AMGN)

• Bristol-Myers Squibb (BMY)

• AstraZeneca (AZN)

• Jacobio Pharmaceuticals

• Johnson & Johnson (JNJ)

• Eli Lilly (LLY)

• F. Hoffmann La-Roche

• Boehringer Ingelheim

• Gilead Sciences (GILD)

• Merck & Co. (MRK)

• Novartis (NVS)

• Pfizer (PFE)

• Olympus Medical Systems

Financial Status

Revolution's recent financial results show some collaboration revenue but otherwise are typical of a clinical stage biopharma in that they feature large R&D and G&A costs associated with advancing the firm's pipeline of drug candidates.

Below are the company's financial results for the past two and ¾ years (Audited PCAOB for full years):

Source: Company registration statement

As of September 30, 2019, the company had $136.3 million in cash and $69.1 million in total liabilities. (Unaudited, interim)

IPO Details

Revolution intends to raise $100 million in gross proceeds from an IPO of its common stock, although the final amount may be different.

No existing shareholders have indicated an interest to purchase shares at the IPO price. This element is typical of successful life science IPOs, so I would expect to see some form of investor 'support' in a future filing.

Management says it will use the net proceeds from the IPO as follows:

to fund the development of our multiple RAS programs, including our RAS(ON) portfolio and SOS1 program, through completion of IND-enabling studies for one or more development candidates;

to fund the development of our 4EBP1/mTORC1 program through completion of IND-enabling studies for RMC-5552;

net of reimbursement from Sanofi, to fund our share of research costs for the SHP2 program; and

the remaining proceeds for other general corporate purposes, which may include the hiring of additional personnel, capital expenditures and the costs of operating as a public company.

Management's presentation of the company roadshow is not available.

Listed bookrunners of the IPO are J.P. Morgan, Cowen, SVB Leerink, and Guggenheim Securities.

Commentary

Revolution is seeking funding to advance its pipeline of RAS programs through clinical development. The firm's lead candidate is in Phase 1/2 trials, and its trial expenses are being reimbursed by collaboration partner and investor Sanofi. The Sanofi relationship is a strong positive for the IPO, as it is uncommon for life science firm IPO candidates to have a significant and deep partnership/collaboration relationship with a major pharma firm such as Sanofi.

The market opportunity for the treatment of tumor is large and forecast to grow at a high rate, likely owing to the aging of the world's population and growing incidence of tumors.

Life science companies with significant collaboration partnerships represent potentially compelling opportunities for IPO investors with a longer time horizon, as the partner firm's interest, resources and 'stamp of approval' count for validation in my opinion.

I look forward to learning more about Revolution's IPO pricing and valuation assumptions and will provide an opinion when we find out those details from management.

Expected IPO Pricing Date: To be announced.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.