URGENT! IPO RVMD
Last day for filing applications: 02/11/2020 (tomorrow)
Volume of placement: $ 150 million
IPO capitalization: $ 793.5 million
Number of employees: 90
Underwriters: J.P. Morgan / Cowen / SVB Leerink / Guggenheim Securities
Date of the auction: 13-02-2020 (Thursday)
▪ Revolution Medicines – This company specializes in the development of drugs for precision oncology. At the moment, the company’s development is at the clinical stage.
▪ In 2017, Revolution Medicines abandoned the antifungal drug development initiative and re-became an oncology company.
▪ RMC-4630 is the only drug in the clinical phase and goes through the 1⁄2 phase of clinical trials. This drug is being developed in conjunction with Sanofi. Also in November 2019, a cooperation was signed with Amgen.
▪ As of November 6, 2019, 63 of the 66 patients included in the study received the drug. Also according to the company, there are early signs that RMC-4630 is antitumor active against non-small cell cancer. In one patient, the tumor volume decreased by 45%.
▪ Sanofi compensates most of the development of RMC-4630 (at the end of Q3, Sanofi paid $ 83.5 million, which includes an advance payment, R&D expenses).
▪ In total, the company raised $ 211 million. Among the shareholders of the company are: Third Rock Ventures, The Column Group and Sanofi Research Invest. In 2018, the company was acquired – Warp Drive Bio.
▪ Potential market: in 2018, the potential market for cancer treatment (solid tumor) amounted to 121 billion, and by 2027 the forecast is 424 billion (CAGR 15%). The growth drivers are breast cancer, lung cancer (due to the growth of smokers and air pollution) and an aging population.
Revolution Medicines (RVMD) intends to raise $150 million from the sale of its common stock, according to an amended registration statement.
The company is in Phase 1/2 trials for the development of treatments for various types of cancers.
RVMD has produced promising early results for its lead candidate, has strong collaboration relationships and a large and growing market, so RVMD may be worth considering for long-term hold life science investors.
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 (CNST).
Below is a brief overview video of SHP2 inhibitor aspects:
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:
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:
Bristol Myers Squibb (BMY)
Johnson & Johnson (JNJ)
Eli Lilly (LLY)
F. Hoffman La-Roche
Gilead Sciences (GILD)
Merck & CO. (MRK)
Olympus Medical Systems
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)
RVMD intends to sell 10 million shares of common stock at a midpoint price of $15.00 per share for gross proceeds of approximately $150.0 million, not including the sale of customary underwriter options.
No existing shareholders have indicated an interest to purchase shares at the IPO price. The absence of this typical element of investor support for life science IPO is a negative signal for prospective IPO investors.
Assuming a successful IPO at the midpoint of the proposed price range, the company’s enterprise value at IPO would approximate $793 million.
Excluding effects of underwriter options and private placement shares or restricted stock, if any, the float to outstanding shares ratio will be approximately 18.9%.
Per the firm’s most recent regulatory filing, it plans to use the net proceeds as follows:
Approximately $100 million 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;
Approximately $10 million to fund the development of our 4EBP1/mTORC1 program through completion of IND-enabling studies for RMC-5552;
Approximately $1 million, 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 underwriters of the IPO are J.P. Morgan, Cowen, SVB Leerink, and Guggenheim Securities.
RVMD is seeking an above-average IPO amount of $150 million to advance its pipeline through trials.
Its lead candidate, RMC-4630, is in Phase 1 / 2 stage trials for the treatment of solid tumors. It appears that normal Phase 1 reactions were observed with the 60+ cohort of trial patients, so the drug doesn’t present any untoward safety problems when delivered on an intermittent dosing schedule.
A Phase 1b/2 study is underway in conjunction with another drug and the firm has not determined when it will publish results.
The market opportunity for treatment of advanced solid tumors is large and expected at a strong rate given the world’s aging population and increasing incidence of cancer.
RVMD has strong commercial collaborations with Sanofi and Amgen, which are very positive in my view for the firm’s scientific potential.
As to valuation, management is seeking a high valuation at a proposed enterprise value of $793 million. This is above the typical range for a similar biopharma firm at this stage of development.
However, given the firm’s promising early results, its strong collaboration relationships and the extremely large market potential, RVMD looks to be a strong IPO candidate.