# Revolution Medicines, Inc. (RVMD) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Revolution Medicines, Inc.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1628171/000095017025027736/rvmd-20241231.htm
Accession: 0000950170-25-027736
Filing date: 2025-02-26
Report date: 2024-12-31
Extracted from a substantive MD&A body after the formal Item 7 span was a TOC or reference stub.
Confidence: high

Company profile: /company/RVMD/
All MD&A years: /company/RVMD/mda/
Previous year: /company/RVMD/mda/fy2023/ (FY 2023)
Next year: /company/RVMD/mda/fy2025/ (FY 2025)

Overview

We are a clinical-stage precision oncology company developing novel targeted therapies for RAS-addicted cancers. We possess sophisticated structure-based drug discovery capabilities built upon deep chemical biology and cancer pharmacology know-how and innovative, proprietary technologies that enable the creation of small molecules tailored to unconventional binding sites. Guided by our understanding of genetic drivers and adaptive resistance mechanisms in cancer, we deploy precision medicine approaches to inform innovative monotherapy and combination regimens.

Our research and development pipeline comprises RAS(ON) inhibitors that bind directly to RAS variants, which we refer to as RAS(ON) Inhibitors, and RAS companion inhibitors that target key nodes in the RAS pathway or associated pathways. Our RAS(ON) Inhibitors are designed to be used as monotherapy, in combination with other RAS(ON) Inhibitors and/or in combination with RAS companion inhibitors or other therapeutic agents.

RAS(ON) Inhibitors

Our RAS(ON) Inhibitors are based on our proprietary tri-complex technology platform, which enables a highly differentiated approach to inhibiting the active, GTP-bound form of RAS, which we refer to as RAS(ON). We are developing a portfolio of compounds that we believe were the first RAS(ON) Inhibitors to use this mechanism of action. We believe that direct inhibitors of RAS(ON) suppress cell growth and survival and are less susceptible to adaptive resistance mechanisms recognized for RAS(OFF) inhibitors.

We are evaluating our RAS(ON) Inhibitors alone and in combination with other drugs and investigational drug candidates, particularly in-pathway agents. We believe tailored RAS(ON) Inhibitors will be useful to serve the diverse landscape of RAS-addicted cancers optimally. We believe that in some cases, patients may experience maximal clinical benefit from the broad activity of our RAS(ON) multi-selective inhibitor, daraxonrasib (RMC-6236), if approved. In others, we believe treatment with a RAS(ON) mutant-selective inhibitor may be optimal. We further believe that in some cases, it could be beneficial to combine daraxonrasib with a RAS(ON) mutant-selective inhibitor, with daraxonrasib functioning as the backbone of these RAS(ON) Inhibitor doublets. In addition, we believe that in some cases, combination of our RAS(ON) Inhibitors with standard of care therapies, including immunotherapies, may be optimal.

We are advancing a deep pipeline of RAS(ON) Inhibitors, including daraxonrasib (RMC-6236), our RAS(ON) multi-selective inhibitor; elironrasib (RMC-6291), our G12C-selective inhibitor; and zoldonrasib (RMC-9805), our G12D-selective inhibitor. Together, we consider these three clinical-stage candidates as the first wave of RAS(ON) inhibitors that we are advancing through clinical development. We also currently plan to advance RMC-5127 (G12V) into clinical development. In addition, we have other preclinical-stage RAS(ON) inhibitor clinical development opportunities, including the RAS(ON) mutant-selective inhibitors RMC-0708 (Q61H) and RMC-8839 (G13C).

Daraxonrasib (RMC-6236)

Daraxonrasib (RMC-6236), our RAS(ON) multi-selective inhibitor, is designed as an oral, RAS-selective tri-complex inhibitor of multiple RAS(ON) variants containing cancer driver mutations at all three of the major RAS mutation hotspot positions (G12, G13 and Q61). Daraxonrasib inhibits all three major RAS isoforms, suppressing the mutant cancer driver and cooperating wild-type RAS proteins.

A global, randomized Phase 3 registrational trial of daraxonrasib in the second-line (2L) treatment of patients with metastatic pancreatic ductal adenocarcinoma (PDAC), which we call the RASolute 302 study, is ongoing. In the RASolute 302 study, we are randomizing patients in a 1:1 ratio to receive either daraxonrasib at a dose of 300 mg daily or the investigator’s choice of chemotherapy. The RASolute 302 study has a nested trial design allowing for a hierarchical sequence of statistical analysis, with patients with tumors harboring RAS G12X mutations serving as the core population which will be tested first and all enrolled patients serving as the secondary population. We believe this nested design and hierarchical testing increases the probability of trial success based on the core population while creating an opportunity to gain approval for a broader population. Patients in the RASolute 302 study will be evaluated for the dual primary endpoints of progression-free survival (PFS) and overall survival (OS) in the core

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population, with secondary endpoints including PFS and OS in the secondary population and objective response rate (ORR) and quality of life measures. We currently expect to substantially complete enrollment of the RASolute 302 study in 2025, to enable an expected clinical readout in 2026.

Having finalized the study protocol, we are now activating sites for a global, randomized Phase 3 registrational trial comparing daraxonrasib versus docetaxel in patients with locally advanced or metastatic RAS-mutated non-small cell lung cancer (NSCLC) who have been treated with immunotherapy and platinum-containing chemotherapy, which we call the RASolve 301 study. In the RASolve 301 study, we are randomizing patients in a 1:1 ratio to receive either daraxonrasib or docetaxel. The RASolve 301 study has a nested trial design allowing for a hierarchical sequence of statistical analysis, with patients with tumors harboring RAS G12X (other than G12C) mutations serving as the core population which will be tested first, and all enrolled patients serving as the secondary population. We believe this nested design and hierarchical testing increases the probability of trial success based on the core population while creating an opportunity to gain approval for a broader population. Patients in the RASolve 301 study will be evaluated for the dual primary endpoints of PFS and OS in the core population, with secondary endpoints including PFS and OS in the secondary population and ORR and quality of life measures.

We currently expect to initiate a global, randomized Phase 3 daraxonrasib monotherapy study in patients with first-line (1L) metastatic PDAC in the second half of 2025. We also currently expect to initiate a global, randomized Phase 3 monotherapy study of daraxonrasib as adjuvant treatment for patients with resectable PDAC in the second half of 2025.

On December 2, 2024 we reported updated clinical safety, tolerability, and activity data for daraxonrasib from our first-in-human monotherapy study of daraxonrasib, which we refer to as the RMC-6236-001 study, in patients with previously treated RAS-mutant PDAC as of a data cutoff date of July 23, 2024. We believe these data showed that daraxonrasib was generally well tolerated and demonstrated encouraging antitumor activity that supported our initiation of the RASolute 302 study.

Also on December 2, 2024, we reported clinical safety and tolerability data as of a September 30, 2024 data cutoff date for daraxonrasib from the RMC-6236-001 study in patients with NSCLC with tumors harboring RAS mutations. We also reported clinical activity data as of a September 30, 2024 data cutoff date for daraxonrasib from the RMC-6236-001 study in patients with NSCLC with tumors harboring RAS G12X mutations who had received one or two prior lines of therapy which must have included prior immunotherapy and platinum chemotherapy administered either concurrently or sequentially, but not docetaxel, a study population matching the planned RASolve 301 enrollees. We believe these data showed that daraxonrasib was generally well tolerated and demonstrated encouraging antitumor activity that supported our initiation of the RASolve 301 study.

Based on our observations from the RMC-6236-001 study and our preclinical observations, we believe there is a potential opportunity to evaluate daraxonrasib combinations in earlier lines of therapy in multiple tumor types, and we are currently evaluating several exploratory combination regimens that include daraxonrasib in order to assess the potential for development in these settings. These combinations include daraxonrasib with pembrolizumab, daraxonrasib with elironrasib, daraxonrasib with zoldonrasib and daraxonrasib with standard of care chemotherapy agents.

On December 2, 2024, we disclosed initial clinical safety and tolerability data as of a data cutoff date of October 28, 2024 from our clinical study of the combination of daraxonrasib with pembrolizumab, which we believe showed the combination was generally well tolerated with limited hepatotoxicity.

Also on December 2, 2024, we disclosed initial clinical safety, tolerability and activity data as of a data cutoff date of October 28, 2024 from our clinical study of the combination of daraxonrasib with elironrasib, which we believe showed the combination was generally well tolerated and provide initial proof-of-mechanism for a RAS(ON) inhibitor doublet in patients with colorectal cancer (CRC) who were previously treated with KRAS(OFF) G12C inhibitors. We believe these preliminary data observations support continued development of RAS(ON) inhibitor doublets in a broad range of tumor types and earlier lines of therapy, including 1L patients with NSCLC carrying RAS G12C tumors.

In April 2024, at the American Association for Cancer Research (AACR) Annual Meeting 2024, we reported individual case studies from the RMC-6236-001 study that showed examples of objective responses to daraxonrasib in patients with tumor types beyond PDAC or NSCLC, specifically patients with melanoma and with CRC.

Elironrasib (RMC-6291)

Elironrasib (RMC-6291) is designed as a RAS(ON) oral tri-complex G12C-selective inhibitor. It is designed to exhibit subnanomolar potency for suppressing RAS pathway signaling and growth of RAS G12C-bearing cancer cells and is engineered to be highly selective for RAS G12C over wild-type RAS and other cellular targets. Elironrasib is designed to be differentiated from

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first-generation KRAS(OFF) G12C inhibitors, which sequester the KRAS(OFF) G12C form, by its mechanism of directly inhibiting the RAS(ON) G12C form.

On October 13, 2023, we reported interim preliminary safety and anti-tumor data from our ongoing first-in-human study of elironrasib, which we refer to as the RMC-6291-001 study, as of an October 5, 2023 data cut-off date, which we believe provide preliminary evidence of clinically meaningful differentiation of elironrasib from KRAS(OFF) G12C inhibitors.

We are evaluating several exploratory combination regimens that include elironrasib in order to assess the potential for development in earlier lines of therapy. These combinations include elironrasib with pembrolizumab and, as discussed in the “Daraxonrasib (RMC-6236)” section above, elironrasib with daraxonrasib. We are also planning a combination study of elironrasib with both daraxonrasib and pembrolizumab.

On December 2, 2024, we disclosed initial clinical safety, tolerability and activity data for the combination of daraxonrasib with elironrasib, as discussed in the “Daraxonrasib (RMC-6236)” section above.

Also on December 2, 2024, we disclosed clinical safety and tolerability data as of a data cutoff date of October 28, 2024 for the combination of elironrasib with pembrolizumab, which we believe showed the combination was generally well tolerated with limited hepatotoxicity.

Zoldonrasib (RMC-9805)

Zoldonrasib (RMC-9805) is designed as a RAS(ON) oral tri-complex G12D-selective inhibitor. It is designed to exhibit low nanomolar potency for suppressing RAS pathway signaling and growth of RAS G12D-bearing cancer cells and is engineered to covalently inactivate RAS G12D irreversibly.

On October 25, 2024, we reported preliminary clinical safety, tolerability and activity data as of a data cutoff date of September 2, 2024 from our first-in-human monotherapy study of zoldonrasib, which we refer to as the RMC-9805-001 study in patients with previously treated solid tumors harboring KRAS G12D mutations.

We believe that these data support our ongoing development of zoldonrasib as a single agent and in combination with other therapies, including with daraxonrasib. An exploratory combination study of zoldonrasib with daraxonrasib is ongoing. We currently expect to disclose additional zoldonrasib clinical safety and antitumor activity data in the second quarter of 2025.

We currently expect to initiate one or more pivotal combination studies in 2026 that incorporate either zoldonrasib or elironrasib and currently expect to share clinical data supporting these plans in the second or third quarter of 2025.

RMC-5127

RMC-5127 is designed as a RAS(ON) oral G12V-selective inhibitor. It is designed to exhibit picomolar potency for suppressing RAS pathway signaling and growth of RAS G12V-bearing cancer cells and is engineered for selective inhibition of RAS G12V over other RAS isoforms via non-covalent binding interactions. We currently expect to advance RMC-5127 to a clinic-ready stage in 2025 and to initiate a first-in-human dose escalation clinical trial of RMC-5127 in 2026.

RMC-0708

RMC-0708 is designed as a RAS(ON) oral Q61H-selective inhibitor. It is designed to exhibit picomolar potency for suppressing RAS pathway signaling and growth of RAS Q61H-bearing cancer cells and is engineered for selective inhibition of RAS Q61H over other RAS isoforms via non-covalent binding interactions. Clinical development of RMC-0708 is subject to our continuing assessment of our portfolio priorities.

RMC-8839

RMC-8839 is designed as a RAS(ON) oral G13C-selective inhibitor. It is designed to exhibit picomolar potency for suppressing RAS pathway signaling and growth of KRAS G13C-bearing cancer cells and is engineered to covalently inactivate KRAS G13C for irreversible inhibition. Clinical development of RMC-8839 is subject to our continuing assessment of our portfolio priorities.

Other Development Opportunities

We have developed RAS companion inhibitors that are designed to suppress cooperating targets and pathways that sustain RAS-addicted cancers. These compounds include RMC-4630, which is designed as a potent and selective inhibitor of SHP2; RMC-5552,

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which is designed as a selective inhibitor of mTORC1 signaling in tumors; and RMC-5845, which is designed to target SOS1 a protein that plays a key role in converting RAS(OFF) to RAS(ON) in cells. Additional clinical development of our RAS companion inhibitors is subject to our continuing assessment of our portfolio priorities.

We are also developing preclinical next-generation programs that are designed to sustain our innovation platform beyond our current development-stage assets.

Acquisition of EQRx, Inc.

On November 9, 2023 (the Closing Date), we completed the acquisition of EQRx, Inc. (the EQRx Acquisition), pursuant to the Agreement and Plan of Merger, dated as of July 31, 2023 (the Merger Agreement). Pursuant to the Merger Agreement, EQRx, LLC survived as our wholly owned subsidiary.

On the Closing Date, each share of EQRx, Inc. common stock issued and outstanding immediately prior to the completion of the EQRx Acquisition was converted into the right to receive 0.1112 shares of our common stock. Outstanding stock options, restricted stock units and restricted stock awards of EQRx, Inc. were also converted into our common stock subject to the terms of the Merger Agreement. We issued 54.8 million shares of our common stock and paid $4.0 million in taxes to satisfy statutory income tax withholding obligations in conjunction with the EQRx Acquisition.

As a result of the EQRx Acquisition, we acquired $1.1 billion in net cash, cash equivalents and marketable securities after deducting estimated EQRx wind-down and transaction costs.

For additional information regarding the terms of the EQRx Acquisition, see “Note 3. Acquisition” in the “Notes to Consolidated Financial Statements” contained in Part II, Item 8 of this Annual Report on Form 10-K.

Aethon Collaboration

In March 2024, we entered into a collaboration agreement with Aethon Therapeutics, Inc. (Aethon) pursuant to which Aethon is conducting research related to use of novel bispecific antibodies to mount an immune attack directed at the cancer cells targeted by our RAS(ON) Inhibitors (the Aethon Collaboration Agreement). Pursuant to the Aethon Collaboration Agreement, we agreed to reimburse Aethon for preclinical activities, and we have an option to conduct any clinical or commercial development that may arise from the collaboration.

Financial Operations Overview

Collaboration revenue

Collaboration revenue consisted of revenue under the Sanofi Agreement for our SHP2 program. We received a $50.0 million upfront payment from Sanofi in July 2018 and received reimbursement for research and development services. The Sanofi Agreement was terminated in June 2023.

For further information on our revenue recognition policies, see “Note 2. Summary of significant accounting policies” in the “Notes to Consolidated Financial Statements” contained in Part II, Item 8 of this Annual Report on Form 10-K.

Research and development expenses

We substantially rely on third parties to conduct our preclinical studies, clinical trials and manufacturing. We estimate research and development expenses based on estimates of services performed, and we rely on third party contractors and vendors to provide us with timely and accurate estimates of expenses of services performed to assist us in these estimates. Research and development expenses consist primarily of costs incurred for the development of our product candidates and costs associated with identifying compounds through our discovery platform, which include:

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external costs incurred under agreements with third-party contract organizations, investigative clinical trial sites that conduct research and development activities on our behalf and consultants;

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costs related to the production of preclinical, clinical and pre-launch materials, including fees paid to contract manufacturers;

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laboratory and vendor expenses related to the execution of discovery programs, preclinical and clinical trials;

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employee-related expenses, which include salaries, benefits and stock-based compensation; and

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•
facilities and other expenses, which include allocated expenses for rent and maintenance of facilities, depreciation and amortization expense, information technology and other supplies.

We expense all research and development costs in the periods in which they are incurred. Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors, collaborators and third-party service providers. Nonrefundable advance payments for goods or services to be received in future periods for use in research and development activities are deferred and recorded as prepaid assets. The prepaid amounts are then expensed as the related goods are delivered or as services are performed.

We expect our research and development expenses to increase for the foreseeable future as we continue to invest in discovering and developing product candidates and advancing product candidates into later stages of development, which may include conducting larger clinical trials. The process of conducting the necessary research and development and clinical trials to seek regulatory approval for product candidates is costly and time-consuming, and the successful development of our product candidates is highly uncertain. As a result, we are unable to determine the duration and completion costs of our research and development projects or clinical trials or if and to what extent we will generate revenue from the commercialization and sale of any of our product candidates, if approved.

General and administrative expenses

General and administrative expenses consist primarily of personnel-related costs, consultants and professional services expenses, including legal, audit, accounting and human resources services, insurance, commercial preparation activities, allocated facilities and information technology costs, and other general operating expenses not otherwise classified as research and development expenses. Personnel-related costs consist of salaries, benefits and stock-based compensation. Facilities costs consist of rent, utilities and maintenance of facilities. We expect our general and administrative expenses to increase for the foreseeable future due to anticipated increases in operating and commercial preparation activities, which may result in increases in personnel-related costs associated with increased headcount, other administrative and professional services, and related overhead needed to support these efforts.

Interest income

Interest income primarily consists of interest earned on and accretion of our cash equivalents and marketable securities.

Results of operations

Comparison of the years ended December 31, 2024 and 2023

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[["","","Years Ended December 31,"],["","","2024","","","2023","","","Increase/ (decrease)"],["","","(in thousands)"],["Revenue:"],["Collaboration revenue","","$","\u2014","","","$","11,580","","","$","(11,580",")"],["Total revenue","","","\u2014","","","","11,580","","","","(11,580",")"],["Operating expenses:"],["Research and development","","","592,225","","","","423,144","","","","169,081"],["General and administrative","","","97,299","","","","75,621","","","","21,678"],["Total operating expenses","","","689,524","","","","498,765","","","","190,759"],["Loss from operations","","","(689,524",")","","","(487,185",")","","","(202,339",")"],["Other income (expense), net:"],["Interest income","","","86,883","","","","47,482","","","","39,401"],["Other expense","","","(2,528",")","","","(303",")","","","(2,225",")"],["Change in fair value of warrant liability and contingent earn-out shares","","","4,323","","","","115","","","","4,208"],["Total other income, net","","","88,678","","","","47,294","","","","41,384"],["Loss before income taxes","","","(600,846",")","","","(439,891",")","","","(160,955",")"],["Benefit from income taxes","","","753","","","","3,524","","","","(2,771",")"],["Net loss","","$","(600,093",")","","$","(436,367",")","","$","(163,726",")"]]
[[/GREPCENT_TABLE]]

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Collaboration revenue

Collaboration revenue in 2023 consisted of revenue under the Sanofi Agreement, which was terminated in June 2023. Collaboration revenue decreased by $11.6 million, or 100%, during the year ended December 31, 2024 compared to 2023. The decrease in collaboration revenue in 2023 was a result of the termination of the Sanofi Agreement.

Research and development expenses

Our research and development efforts during the year ended December 31, 2024 were focused on our clinical development programs and our preclinical programs. The following table sets forth the components of our research and development expenses for the periods indicated:

[[GREPCENT_TABLE]]
[["","","Years Ended December 31,"],["","","2024","","","2023","","","Increase/ (decrease)"],["","","(in thousands)"],["Third-party research and development expenses:"],["Clinical Development Programs:"],["Daraxonrasib (RMC-6236)","","$","168,911","","","$","107,947","","","$","60,964"],["Elironrasib (RMC-6291)","","","55,034","","","","32,593","","","","22,441"],["Zoldonrasib (RMC-9805)","","","64,112","","","","40,657","","","","23,455"],["RAS companion inhibitors","","","6,955","","","","16,252","","","","(9,297",")"],["Preclinical programs","","","73,089","","","","65,156","","","","7,933"],["Total third-party research and development expenses","","","368,101","","","","262,605","","","","105,496"],["Salaries and other employee-related expenses","","","113,475","","","","81,658","","","","31,817"],["Stock-based compensation expense","","","50,973","","","","34,126","","","","16,847"],["Amortization of intangible assets","","","1,069","","","","1,068","","","","1"],["Other research and development costs","","","58,607","","","","43,687","","","","14,920"],["Total research and development expense","","$","592,225","","","$","423,144","","","$","169,081"]]
[[/GREPCENT_TABLE]]

Research and development expenses increased by $169.1 million, or 40%, during the year ended December 31, 2024 compared to 2023. The increase in research and development expenses during the year ended December 31, 2024 was primarily due to a $61.0 million increase in daraxonrasib expenses, primarily attributable to higher clinical trial expenses; a $31.8 million increase in salaries and other employee-related expenses due to increased headcount to support our research and development programs; a $23.5 million increase in zoldonrasib expenses, primarily attributable to higher clinical trial expenses; a $22.4 million increase in elironrasib expenses, primarily attributable to higher clinical trial expenses; a $16.8 million increase in stock-based compensation; a $14.9 million increase in other research and development expenses as a result of higher rent, utilities and information technology expenses associated with increased headcount; and a $7.9 million increase in preclinical research portfolio expenses; partially offset by a $9.3 million decrease in other RAS companion inhibitor program expenses.

General and administrative expenses

General and administrative expenses increased by $21.7 million, or 29%, during the year ended December 31, 2024 compared to 2023. The increase in general and administrative expenses during the year ended December 31, 2024 was primarily due to a $6.7 million increase in pre-commercial development expenses; a $4.5 million increase in salaries and other employee-related expenses due to increased headcount; a $4.5 million increase in facilities and other allocated expenses as a result of higher rent, utilities and information technology expenses associated with increased headcount; a $3.3 million increase in legal and accounting fees; and a $1.2 million increase in insurance and other fees.

Interest income

Interest income increased by $39.4 million for the year ended December 31, 2024, compared to 2023 due to a larger cash, cash equivalents and marketable securities balance and higher interest rates.

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Comparison of the years ended December 31, 2023 and 2022

[[GREPCENT_TABLE]]
[["","","Years Ended December 31,"],["","","2023","","","2022","","","Increase/ (decrease)"],["","","(in thousands)"],["Revenue:"],["Collaboration revenue","","$","11,580","","","$","35,380","","","$","(23,800",")"],["Total revenue","","","11,580","","","","35,380","","","","(23,800",")"],["Operating expenses:"],["Research and development","","","423,144","","","","253,073","","","","170,071"],["General and administrative","","","75,621","","","","40,586","","","","35,035"],["Total operating expenses","","","498,765","","","","293,659","","","","205,106"],["Loss from operations","","","(487,185",")","","","(258,279",")","","","(228,906",")"],["Other income (expense), net:"],["Interest income","","","47,482","","","","9,154","","","","38,328"],["Interest expense","","","(303",")","","","\u2014","","","","(303",")"],["Change in fair value of warrant liability and contingent earn-out shares","","","115","","","","\u2014","","","","115"],["Total other income (expense), net","","","47,294","","","","9,154","","","","38,140"],["Loss before income taxes","","","(439,891",")","","","(249,125",")","","","(190,766",")"],["Benefit from income taxes","","","3,524","","","","420","","","","3,104"],["Net loss","","$","(436,367",")","","$","(248,705",")","","$","(187,662",")"]]
[[/GREPCENT_TABLE]]

Collaboration revenue

Collaboration revenue consisted of revenue under the Sanofi Agreement, which was terminated in June 2023. Collaboration revenue decreased by $23.8 million, or 67%, during the year ended December 31, 2023 compared to 2022. The decrease in collaboration revenue in 2023 was a result of lower reimbursed expenses from Sanofi.

Research and development expenses

Research and development expenses increased by $170.1 million, or 67%, during the year ended December 31, 2023 compared to 2022. The increase in research and development expenses during the year ended December 31, 2023 was primarily due to a $72.6 million increase in daraxonrasib expenses, primarily attributable to clinical trial and clinical supply manufacturing expenses as daraxonrasib commenced clinical trials at the end of the second quarter of 2022; a $24.1 million increase in salaries and other employee-related expenses due to increased headcount to support our research and development programs; a $17.0 million increase in our preclinical research portfolio expenses; a $16.0 million increase in stock-based compensation including $3.7 million in connection with the EQRx Acquisition; a $15.8 million increase in zoldonrasib expenses, which commenced clinical trials in the third quarter of 2023; a $12.9 million increase in facilities and other allocated expenses as a result of higher rent, utilities and information technology expenses associated with increased headcount; a $12.6 million increase in elironrasib expenses, which commenced clinical trials in the third quarter of 2022; and a $8.2 million increase in employee-related expenses in connection with the EQRx Acquisition; partially offset by a $9.0 million decrease in SHP2 costs.

General and administrative expenses

General and administrative expenses increased by $35.0 million, or 86%, during the year ended December 31, 2023 compared to 2022. The increase in general and administrative expenses during the year ended December 31, 2023 was primarily due to a $14.6 million increase in stock-based compensation expense including $7.5 million in connection with the EQRx Acquisition; a $7.1 million increase in salaries and other employee-related expenses due to increased headcount; a $6.1 million increase in employee-related expenses in connection with the EQRx Acquisition; a $3.2 million increase in facilities and other allocated expenses as a result of higher rent, utilities and information technology expenses associated with increased headcount; a $2.3 million increase in legal and accounting fees; and a $1.6 million increase in pre-commercial development expenses.

Interest income

Interest income increased by $38.3 million for the year ended December 31, 2023, compared to 2022 due to a larger cash, cash equivalents and marketable securities balance and higher interest rates.

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Liquidity and Capital Resources

In November 2021, we entered into a sales agreement with Cowen and Company, LLC, an affiliate of TD Securities (USA) LLC (TD Cowen), as amended in March 2024, to sell shares of our common stock, from time to time, with aggregate gross proceeds of up to $250 million, through an at-the-market equity offering program (the 2021 ATM). From November 2021 to August 2024, we sold an aggregate of 6,502,078 shares of our common stock under the 2021 ATM, resulting in gross proceeds to us of $186.0 million. During the year ended December 31, 2024, we sold an aggregate of 1,294,050 shares of common stock under the 2021 ATM, resulting in gross proceeds of $60.8 million. In August 2024, we terminated the 2021 ATM and entered into a new sales agreement with TD Cowen to sell shares of our common stock, from time to time, with aggregate gross proceeds of up to $500 million, through an at-the-market equity offering program (the 2024 ATM). Through December 31, 2024, we have sold an aggregate of 1,147,893 shares of common stock under the 2024 ATM, resulting in gross proceeds of $60.4 million.

In July 2022, we issued 13,225,000 shares of our common stock in an underwritten public offering at a price to the public of $20.00 per share, for net proceeds of $248.1 million, after deducting underwriting discounts and commissions of $15.9 million and offering expenses of $0.5 million.

In March 2023, we issued 15,681,818 shares of our common stock in an underwritten public offering at a price to the public of $22.00 per share, for net proceeds of $323.7 million, after deducting underwriting discounts and commissions of $20.7 million and expenses of $0.6 million.

In November 2023, we completed the EQRx Acquisition and issued 54,786,528 shares of common stock in the transaction in which we received approximately $1.1 billion in net cash, cash equivalents and marketable securities after deducting EQRx wind-down and transition costs.

In December 2024, we issued and sold in an underwritten public offering (i) 16,576,088 shares of our common stock at a price to the public of $46.00 per share and (ii) pre‑funded warrants to certain investors to purchase an aggregate of 2,173,917 shares of our common stock at a price of $45.9999 per pre-funded warrant. Each pre-funded warrant will be exercisable from the date of issuance until fully exercised, subject to an ownership limitation. Total net proceeds from the offering were $823.0 million, after deducting underwriting discounts and commissions of $38.8 million and expenses of $0.6 million.

Our operations have been financed primarily by our public offerings of common stock, the EQRx Acquisition and $188.7 million received under the Sanofi Agreement from June 2018 through June 2023 for upfront payments and for research and development cost reimbursement.

As of December 31, 2024, we had $2.3 billion in cash, cash equivalents and marketable securities.

As of December 31, 2024, we had an accumulated deficit of $1.7 billion. Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures related to our product candidates and our pre-clinical research portfolio, and to a lesser extent, general and administrative expenditures. We expect our expenses to continue to increase in connection with our ongoing activities, particularly as we continue to advance our product candidates into later stages of development, which includes conducting larger clinical trials, and increase our efforts of preparing to become a commercial-stage company.

We believe that our existing cash, cash equivalents and marketable securities will enable us to fund our planned operations for at least 12 months following the date of this Annual Report on Form 10-K.

The timing and amount of our future funding requirements depends on many factors, including:

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the scope, progress, results and costs of researching and developing our product candidates and programs, and of conducting preclinical studies and clinical trials;

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the cost of manufacturing our current and future product candidates for clinical trials in preparation for marketing approval and in preparation for commercialization;

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the timing of, and the costs involved in, obtaining marketing approvals for our product candidates if clinical trials are successful;

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the cost of commercialization activities for any of our product candidates, whether alone or in collaboration, including marketing, sales and distribution costs if any product candidate is approved for sale;

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our ability to establish and maintain strategic licenses or other arrangements and the financial terms of such agreements;

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the costs involved in preparing, filing, prosecuting, maintaining, expanding, defending and enforcing patent claims, including litigation costs and the outcome of such litigation;

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•
the timing, receipt and amount of sales of, profit share or royalties on, our future products, if any;

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the emergence of competing cancer therapies or other adverse market developments; and

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any plans to acquire or in-license other programs or technologies.

We will require substantial additional financing for our development efforts for our current and future programs and to prepare for their potential commercialization. We do not have any committed external source of funds or other support for these activities, and we expect to finance our cash needs through a combination of public or private equity offerings, debt financings, credit or loan facilities, acquisitions, collaborations, strategic alliances, licensing arrangements and other marketing or distribution arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. If we need to raise additional capital to fund our operations, funding may not be available to us on acceptable terms, or at all. If we are unable to obtain adequate financing when needed, we may have to (i) delay, limit, reduce the scope of or terminate one or more of our preclinical studies, clinical trials, or other research and development activities or eliminate one or more of our development programs altogether; or (ii) delay, limit, reduce the scope of or terminate our efforts to establish manufacturing and sales and marketing capabilities or other activities that may be necessary to commercialize any future approved products, or reduce our flexibility in developing or maintaining our sales and marketing strategy.

Cash Flows

The following table summarizes our consolidated cash flows for the periods indicated:

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Cash used in operating activities

During the year ended December 31, 2024, cash used in operating activities of $557.4 million was attributable to a net loss of $600.1 million, partially offset by $42.3 million in non-cash charges and by a net change of $0.4 million in our operating assets and liabilities. The non-cash charges primarily consisted of stock-based compensation expense of $79.2 million, depreciation and amortization of $7.6 million, amortization of operating lease right-of-use asset of $4.2 million, offset by net amortization of premium on marketable securities of $44.6 million and change in the fair value of warrant liability and contingent earn-out shares of $4.3 million. The change in operating assets and liabilities was primarily due to a $9.7 million increase in prepaid expenses and other current assets, a $5.9 million increase in other noncurrent assets, a $6.5 million decrease in accounts payable, offset by a $22.0 million increase in accrued expenses and other current liabilities primarily related to clinical trial and clinical supply manufacturing expenses and increased personnel related expenses due to increased headcount and a $1.3 million decrease in accounts receivable.

During the year ended December 31, 2023, cash used in operating activities of $350.6 million was attributable to a net loss of $436.4 million, partially offset by $49.0 million in non-cash charges and by a net change of $36.8 million in our operating assets and liabilities. The non-cash charges primarily consisted of stock-based compensation expense of $61.8 million, depreciation and amortization of $6.1 million, amortization of operating lease right-of-use asset of $3.2 million, offset by net amortization of premium on marketable securities of $22.2 million. The change in operating assets and liabilities was primarily due to a $2.6 million increase in prepaid expenses and other current assets, a $4.5 million decrease in deferred revenue associated with the Sanofi Agreement, a $1.5 million decrease in operating lease liability, a $3.9 million decrease in deferred tax liability, a $1.4 million increase in other noncurrent assets, offset by a $32.5 million increase in accounts payable, $14.7 million increase in accrued expenses and other current liabilities primarily related to clinical trial and clinical supply manufacturing expenses and increased personnel related expenses due to increased headcount and a $3.4 million decrease in accounts receivable.

During the year ended December 31, 2022, cash used in operating activities of $224.4 million was attributable to a net loss of $248.7 million and by a net change of $13.5 million in our operating assets and liabilities, partially offset by $37.8 million in non-cash charges. The non-cash charges primarily consisted of stock-based compensation expense of $31.2 million, depreciation and amortization of $5.0 million, amortization of operating lease right-of-use asset of $4.6 million offset by net amortization of premium on marketable securities of $3.1 million. The change in operating assets and liabilities was primarily due to a $3.8 million increase in prepaid expenses and other current assets primarily resulting from the timing of prepayments made for research and development activities, a $14.5 million decrease in deferred revenue associated with the Sanofi Agreement, a $2.4 million decrease in operating

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lease liability, offset by a $7.3 million increase in accounts payable, $1.5 million increase in accrued expenses and other current liabilities and a $1.3 million decrease in accounts receivable.

Cash used in investing activities

During the year ended December 31, 2024, cash used in investing activities of $554.4 million was primarily comprised of purchases of marketable securities of $2.1 billion and purchases of property and equipment of $10.3 million, offset by cash provided by maturities of marketable securities of $1.6 billion.

During the year ended December 31, 2023, cash used in investing activities of $342.6 million was primarily comprised of purchases of marketable securities of $1.1 billion and purchases of property and equipment of $7.7 million, offset by cash provided by maturities of marketable securities of $724.0 million.

During the year ended December 31, 2022, cash used in investing activities of $24.1 million was primarily comprised of purchases of marketable securities of $612.8 million and purchases of property and equipment of $10.8 million, offset by cash provided by maturities of marketable securities of $599.5 million.

Cash provided by financing activities

During the year ended December 31, 2024, cash provided by financing activities of $959.4 million was comprised of $823.0 million in net proceeds from the issuance of common stock and pre-funded warrants from the December 2024 underwritten public offering, $118.7 million in net proceeds from the issuance of common stock under the 2024 ATM and the 2021 ATM, $12.3 million in proceeds from the issuance of common stock upon the exercise of stock options and $5.0 million in proceeds from the issuance of common stock under the employee stock purchase plan.

During the year ended December 31, 2023, cash provided by financing activities of $1.2 billion was comprised of $840.8 million of cash, cash equivalents and restricted cash acquired, net of $20.7 million transaction costs in connection with the EQRx Acquisition, $323.7 million in net proceeds from the March 2023 underwritten public offering, $62.1 million in net proceeds from the issuance of common stock under the 2021 ATM, $3.3 million in proceeds from the issuance of common stock under the employee stock purchase plan and $3.3 million in proceeds from the issuance of common stock upon the exercise of stock options, offset by $4.0 million in tax payments in satisfaction of withholding tax requirements pursuant to the EQRx Acquisition.

During the year ended December 31, 2022, cash provided by financing activities of $301.4 million was comprised of $248.1 million in net proceeds from the July 2022 underwritten public offering, $49.9 million in net proceeds from the issuance of common stock under the 2021 ATM, $1.9 million in proceeds from the issuance of common stock under the employee stock purchase plan and $1.5 million in proceeds from the issuance of common stock upon the exercise of stock options.

Contractual Obligations and Commitments

We have contractual obligations related to our office and laboratory space lease in Redwood City, California, described in “Note 7. Commitments and contingencies” in the “Notes to Consolidated Financial Statements” contained in Part II, Item 8 of this Annual Report on Form 10-K.

We enter into agreements in the ordinary course of business with contract research organizations for clinical trials, contract manufacturing organizations to provide clinical trial materials and with vendors for preclinical studies and other services and products for operating purposes which are generally cancelable at any time by us upon 30 to 90 days prior written notice.

Indemnification Agreements

We enter into standard indemnification arrangements in the ordinary course of business. Pursuant to these arrangements, we indemnify, hold harmless and agree to reimburse the indemnified parties for losses suffered or incurred by the indemnified party, in connection with any trade secret, copyright, patent or other intellectual property infringement claim by any third party with respect to its technology. The term of these indemnification agreements is generally perpetual any time after the execution of the agreement. The maximum potential amount of future payments we could be required to make under these arrangements is not determinable. We have never incurred costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, we believe the fair value of these agreements is minimal.

Critical Accounting Policies, Significant Judgments and Use of Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles (U.S.

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GAAP). The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

Revenue recognition

We recognize revenue in accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (ASC 606). Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which such entity expects to receive in exchange for those goods or services. In determining the appropriate amount of revenue to be recognized as we fulfill our obligations under arrangements, we perform the following steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies the performance obligation. At contract inception, once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determine those that are performance obligations and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

We enter into collaboration agreements under which we may obtain upfront license fees, research and development funding, and development, regulatory and commercial milestone payments and royalty payments. Our performance obligations under these arrangements may include licenses of intellectual property, sales and distribution rights, research and development services, delivery of manufactured product and/or participation on joint steering committees.

Licenses of intellectual property: If the license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenue from upfront license fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses that are bundled with other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring proportional performance for purposes of recognizing revenue from non-refundable, upfront fees. We evaluate the measure of proportional performance each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

Research, development and regulatory milestone payments: At the inception of each arrangement that includes research, development, or regulatory milestone payments, we evaluate whether the milestones are considered probable of being reached and estimate the amount to be included in the transaction price. We use the most likely amount method for research, development and regulatory milestone payments. Under the most likely amount method, an entity considers the single most likely amount in a range of possible consideration amounts. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price.

Sales-based milestones and royalties: For arrangements that include sales-based milestone or royalty payments based on the level of sales, and in which the license is deemed to be the predominant item to which the sales-based milestone or royalties relate to, we recognize revenue in the period in which the sales-based milestone is achieved and in the period in which the sales associated with the royalty occur. To date, we have not recognized any sales-based milestone or royalty revenue resulting from our collaboration arrangements.

The transaction price for each collaboration agreement is determined based on the amount of consideration we expect to be entitled for satisfying all performance obligations within the agreement. Significant judgment may be required in determining the amount of variable consideration to be included in the transaction price. We use the most likely amount method to determine variable consideration and will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

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Revenue is recognized based on actual costs incurred as a percentage of total estimated costs to be incurred over the performance obligation as we fulfill our performance obligations. A cost-based input method of revenue recognition requires management to make estimates of costs to complete our performance obligations. In making such estimates, significant judgment is required to evaluate assumptions related to cost estimates. The cumulative effect of revisions to estimated costs to fulfill our performance obligations will be recorded in the period in which changes are identified and amounts can be reasonably estimated.

Accrued research and development expenses

We accrue for estimated costs of research and development activities performed by third-party service providers, which include pre-clinical studies, clinical trials and contract manufacturing activities. We record the estimated costs of research and development activities based upon the estimated services provided but not yet invoiced and include these costs in accrued expenses and other payables in our consolidated balance sheets and within research and development expense in our consolidated statements of operations. We accrue for these costs based on various factors such as estimates of the work completed and in accordance with agreements established with our third-party service providers. Further, we accrue expenses related to clinical trials based on the level of patient enrollment and activity according to the related agreement. We monitor patient enrollment levels and related activity to the extent reasonably possible and make judgments and estimates in determining the accrued balance in each reporting period. If we underestimate or overestimate the level of services performed or the costs of these services, our actual expenses could differ from our estimates. To date, we have not experienced significant changes in our estimates of preclinical studies and clinical trial accruals.

Stock-based compensation

We maintain an equity incentive plan as a long-term incentive for employees, consultants and members of our board of directors. The plan allows for the issuance of non-statutory options (NSOs), incentive stock options (ISOs), restricted stock unit awards (RSUs) to employees and NSOs and RSUs to nonemployees.

Stock-based compensation is measured using estimated grant date fair value and recognized as compensation expense over the service period in which the awards are expected to vest. The grant date fair value of an RSU award is based on our stock price on the date of grant. For options, we estimate the grant date fair value, and the resulting stock-based compensation, using the Black-Scholes option-pricing model, and we use the straight-line method for expense attribution. The Black-Scholes model requires us to make assumptions and judgments about the variables used in the calculations, including the expected term (weighted-average period of time that the options granted are expected to be outstanding), the expected volatility of our common stock, the related risk-free interest rate and the expected dividend. We have elected to recognize forfeitures of stock-based awards as they occur.

The Black-Scholes option-pricing model requires the use of highly subjective assumptions to determine the fair value of stock-based awards. These assumptions include:

•
Expected Term—The expected term is calculated using the simplified method, which is available where there is insufficient historical data about exercise patterns and post-vesting employment termination behavior. The simplified method is based on the vesting period and the contractual term for each grant, or for each vesting-tranche for awards with graded vesting. The mid-point between the vesting date and the maximum contractual expiration date is used as the expected term under this method.

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Expected Volatility—Given that we do not have sufficient trading history for our common stock, the expected volatility was estimated based on the average volatility of the Company and comparable publicly traded biotechnology companies over a period equal to the expected term of the stock option grants. The comparable companies were chosen based on their similar size, stage in the life cycle or area of specialty.

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Risk-Free Interest Rate—The risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of the option.

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Expected Dividend—We have never paid dividends on our common stock and have no plans to pay dividends on our common stock. Therefore, we used an expected dividend yield of zero.

Recent Accounting Pronouncements

For a description of the expected impact of recent accounting pronouncements, see “Note 2. Summary of significant accounting policies” in the “Notes to Consolidated Financial Statements” contained in Part II, Item 8 of this Annual Report on Form 10-K.