- Revolution Medicines completed its IPO, raising roughly $273.7 million to fund its operations and pipeline.
- The main clinical product in the pipeline is RMC-4630, which is an SHP2 inhibitor and the central node found in the RAS cascade pathway.
- The biotech is working on developing drugs for both the RAS and mTOR signaling pathways.
- It has been able to partner its main clinical product RMC-4630 with both Sanofi and Amgen, which brings about additional explorative opportunities with the use of this SHP2 inhibitor.
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Revolution Medicines (NASDAQ:RVMD) completed an IPO a few weeks ago. It raised a total of $273.7 million. This cash on hand will help the biotech navigate through several differentiated products in its pipeline. The main product in the pipeline furthest along is RMC-4630, which is a selective inhibitor of SHP2, being developed to treat several tumor types. Then, it is targeting the very difficult mutations of RAS and RAS-ON. These are the types of mutant targets that several other big pharmaceuticals are looking to go after. What makes the RAS mutant target so difficult is that it has been "undruggable" for decades, before any headway has been made in this space. It has the cash on hand along with a diversified pipeline, and I believe it is worth a look as a speculative buy.
Key Cancer Pathways Thought To Be Undruggable
Revolution Medicines is looking to go after two pathways known as RAS and mTOR, which are responsible for key cell cancer growth and survival. These pathways have mutation nodes that are responsible for driving such cell signaling and growth for tumors. These mutation nodes are going to be targeted by the biotech and they are:
- Multiple RAS targets
These are difficult targets to go after and, as I highlighted above, are thought to have been "undruggable" for a long period of time. These types of targets are key node pathways and key oncogenic drivers of specific types of cancers.
RMC-4630 Lead Product Development Advancement
RMC-4630 is an inhibitor of SHP2. Why is that important? It is because SHP2 is the central node for the RAS signaling pathway. The SHP2 protein is encoded by the PTPN11 gene. The SHP2 protein is responsible for cell survival and growth and accomplishes such a task by upstream from receptor tyrosine kinases (RTK) to RAS. Being that the target of SPH2 is a key node in the RAS pathway, it is able to regulate both healthy cells and cancerous cells. That means the manipulation of this target can inhibit cancer from growing. Thus, oncogenic mutations that occur like KRAS, NF1 and BRAF require upstream signaling of SHP2 to drive cancer cell growth. As you can see, this is what makes RMC-4630 the perfect product to target these oncogenic mutations. By inhibiting SPH2 as the key node in the RAS pathway, cancer cell growth can be halted. What I like about this pathway targeting is the market opportunity that is possible, especially in a very large cancer market indication. For instance, SHP2 plays an important role of oncogenic cell growth and survival in up to 45% of non-small cell lung cancer (NSCLC) cases. Other cancers derived by such oncogenic mutations are:
- Colorectal cancer
- Ovarian cancer
The drug RMC-4630 is currently being explored in a phase 1 study. Specifically, it is being looked at in this study as a monotherapy treatment for several genetically defined types of tumors that use the RAS pathway.
Besides a monotherapy study, RMC-4630 already has promise in combination strategies. That's why I believe this biotech is important to look into. What do I mean by that? Well, because MEK inhibitors are used to go after such prominent mutated pathways in cancer. The problem is that MEK inhibitors as single agents have adaptive resistance that occurs when going after an oncogenic mutation such as KRAS. Then, what is in place to help? This is where RMC-4630, an SHP2 inhibitor, is placed in combination with a MEK inhibitor to prevent such adaptive resistance that occurs. That is why Revolution Medicines had initiated a phase 1/2 study also, besides the phase 1 study above. This phase 1/2 study is using RMC-4630 in combination with Roche (OTCQX:RHHBY) MEK inhibitor cobimetinib (marketed as Cotellic) to treat patients with relapsed/refractory solid tumors that express specific genetic mutations. However, both the monotherapy and combination therapy of RMC-4630 for this program are being explored in a partnership with Sanofi (SNY). It will be important to see if using the SHP2 inhibitor RMC-4630, both alone and in combination, are able to have an effect on tumors that use the RAS pathway.
Additional Exploration Opportunity
Besides the partnership noted above with Sanofi, Revolution Medicines has been able to form a partnership with Amgen (AMGN). The reason why is so that Revolution Medicines can combine its RMC-4630 drug in combination with Amgen's AMG510. As I stated above, RMC-4630 inhibits a key node in the RAS pathway, which is SHP2. Amgen's AMG510 is used for another oncogenic mutation driver in the RAS pathway, which is KRASG12C. Thus, AMG510 is a KRAS G12C inhibitor. What's the point of this combination? Well, both RMC-4630 and AMG510 go after oncogenic mutation targets that are part of the RAS cascade pathway. Instead of Revolution Medicines targeting only one portion of this pathway, it can attempt a combination treatment to target both nodes at the same time. By doing so, it's possible that RMC-4630 and AMG510 work better in synergy to help treat patients with a specific type of cancer. Meaning, it's possible to boost the duration of clinical response or increase overall survival. Having said that, both companies are advancing a phase 1b study using RMC-4630 in combination with AMG510 to treat advanced solid tumors that harbor the KRASG12C mutation. Why the two-pronged approach? That's because cancers that have the KRASG12C mutation, and other RAS pathway mutations have one huge advantage. I briefly discussed this above, and it is resistance. They have something known as oncogene addiction. They are able to take over cell signals and restore the RAS pathway. In turn, this brings about resistance that occurs in the RAS pathway. If that happens, the cancer can resume proliferation (start to divide and spread) and start to grow out of control. The main point here is that using both inhibitors, RMC-4630 and AMG510 at the same time, they can potentially prevent such a resistance from occurring in the RAS pathway.
According to the S-1/A SEC Filing, Revolution Medicines had cash, cash equivalents and marketable securities of $136.3 million in cash. As I noted above, the biotech completed its IPO. It offered up 16.1 million shares, along with 2.1 million shares option for underwriters, at a price of $17 per share. The total gross proceeds from the offering were $273.7 million before deducting expenses. Revolution Medicines believes that the current cash on hand will be enough to fund its operations for at least 12 months following the date of this offering. That eliminates the near-term risk for any other cash raise. However, it likely won't wait until the very end to keep a significant amount of cash on hand. That means if it does raise cash, it will likely do so by early Q4 of 2020.
Risks To Business
The biggest risk of all is the RAS pathway targeting by Revolution Medicines. Enough is known to attempt to explore several drugs in the RAS and mTOR pathways, but they are still relatively new. Amgen and Mirati Therapeutics (MRTX) have seen some decent initial clinical data targeting the KRASG12C mutation. However, a lot more work needs to be done to see if their drugs can effectively treat those who harbor this mutation in non-small cell lung cancer (NSCLC) and colorectal cancer (CRC). I talked briefly about Amgen's AMG510, but Mirati has its own drug, which is MRTX849. The point here is that all these programs, including the targeting of the SHP2 node in the RAS pathway by Revolution Medicines, are only in the early-stages of testing. There is no guarantee that they will ultimately end up being successful. After all, such a pathway was thought to have been "undruggable" for decades. Finding the right drugs and or combinations to target the RAS pathway cascade isn't going to happen overnight. That means both studies noted above may not end up being successful. This goes to the second point, in that more competitors could start to crop up in this space. Mirati Therapeutics has its own ongoing programs targeting the KRAS pathway. KRAS is part of the RAS/MAPK pathway. Matter of fact, KRAS gene mutation accounts for 85% of all RAS mutations. Another risk for Revolution Medicines would be the combination study noted above with Amgen, where RMC-4630 and AMG510 are being explored in combination. Why is this the case? That's because there is another fact that shows the SHP2 is greatly sought out for. This point is proven in the partnership that Mirati Therapeutics entered into back in July of 2019 with Novartis (NVS). Mirati entered into a partnership to explore MRTX849 in combination with Novartis' SHP2 inhibitor known as TNO155. This combination will also be tested in advanced tumors that harbor the KRASG12C mutation. In other words, this combination will directly compete against RMC-4630 and AMG510.
Revolution Medicines is in good shape compared to competitors in the very same RAS mutation cancer space. That's because it goes after the RAS and mTOR signaling pathways. In terms of both these signaling pathways, the biotech has several key nodes to go after for them, which I highlighted above. They are: SHP2, multiple mutant RAS, SOS1 and mTORC1. A good thing here is that there are multiple shots on goal. Even if the SHP2 target ultimately proves to be unsuccessful, the company has several other nodes it can target. Being that these targets are relatively new in terms of scientific advancement, there might be some challenges along the way. However, Revolution Medicines completed its IPO. It now has a significant amount of cash on hand to advance several of its key products in its pipeline. I believe that such a biotech is worth a speculative buy on the premise of the scientific advancement it has made in this space alone.
This article is published by Terry Chrisomalis, who runs the Biotech Analysis Central pharmaceutical service on Seeking Alpha Marketplace. If you like what you read here and would like to subscribe to, I'm currently offering a two-week free trial period for subscribers to take advantage of. My service offers a deep-dive analysis of many pharmaceutical companies. The Biotech Analysis Central SA marketplace is $49 per month, but for those who sign up for the yearly plan will be able to take advantage of a 33.50% discount price of $399 per year.
This article was written by
Terry Chrisomalis is a private investor in the Biotech sector with years of experience utilizing his Applied Science background to generate long term value from Healthcare.
He is the author of the investing group Biotech Analysis Central which contains a library of 600+ Biotech investing articles, a model portfolio of 10+ small and mid-cap stocks with deep analysis for each, live chat, and a range of analysis and news reports to help Healthcare investors make informed decisions.
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