Episode Details

Revolution Medicines, Inc. (RVMD) Q2 2026 — R&D $394.9M UP 76%. G&A $110.2M UP 172%. Net loss $644.4M. Loss per share $3.06 vs a $2.04 bar. Cash $3.94B. Product revenue: zero. RVMD lost $3.06 a share against a $2.04 bar - but $151.0M of that is a non-cash mark on EQRx warrants the 10-Q says rose 'as a result of an increase in our share price in 2026'. The loss got bigger because the stock went up. Ex-warrant, the loss is $2.34. THE CALL: AVOID (4/5, THE SCIENCE IS NOT THE QUESTION. THE PRICE IS.) — base-case value ~$90.0 vs ~$197.3 today. KEY METRICS: - CALL: AVOID 4/5, base-case fair value ~$90 vs the $197.30 pre-print close (-54%), and below the Street's $194.09 average. Base $90 (risk-adjusted peak sales $11.2B, 2027 launch, peak 2034, 42% FCF margin at scale, 11% discount, plus $3.44B net cash); bull $157 (70% of the unrisked $22.0B at 9%); bear $5. Run it backwards and the $38.85B of enterprise value already requires about $21.4B of peak annual sales. - THE MISS IS THE STOCK GOING UP. Net loss $644.4M vs $247.8M; loss per share $3.06 vs a $2.04 consensus. $151.0M of that is a non-cash change in the fair value of the EQRx warrant liability - $0.72 a share, 70% of the $1.02 gap - and the 10-Q states it occurred 'as a result of an increase in our share price in 2026'. Ex-warrant loss per share is $2.34. The warrant liability went $18.5M to $185.3M in six months, and the warrants EXPIRE in December 2026. - G&A UP 172% IS THE REAL DISCLOSURE, NOT R&D. G&A went $40.6M to $110.2M (+172%) against R&D's $224.1M to $394.9M (+76%). The release attributes it to commercial preparation and headcount: the company says it has achieved U.S. commercial launch readiness and has shipped daraxonrasib to more than 2,000 patients via an FDA-cleared Expanded Access Program since May. That is ~$440M a year of commercial cost locked in for a drug with an ACCEPTED NDA, not an approval. - THE ROYALTY STACK NOBODY MODELS. Royalty Pharma has paid $500M in two tranches for 4.55% of net sales up to $2B, 2.50% from $2-4B and 1.00% from $4-8B; drawing the remaining $750M takes it to 7.80%/4.55%/2.40%. Separately, the secured term loan's FIRST $250M tranche is REQUIRED to be drawn within 45 days of an FDA approval in metastatic PDAC, at 3-month SOFR (3.50% floor) + 5.75%, secured on substantially all assets. Approval triggers a compulsory ~9.25% draw. - THE BALANCE SHEET IS THE PRODUCT. Cash and marketable securities $3,938M vs $2,026M at Dec 31 - from an April offering of 12,147,887 shares at $142.00 plus $500M of 0.50% converts due 2033 ($198.80 conversion price), and a $250M Royalty Pharma tranche in May. Operating cash use was $741.5M in H1 vs $416.2M. FY26 opex guidance $2.1-2.2B against H1 opex of $950.4M implies ~$600M a quarter in H2. Shares went 197.0M to 214.2M in six months, +8.8%. - THE SCIENCE IS REAL - AND IT IS THE COMPANY'S OWN DISCLOSURE, NOT OURS. Phase 3 RASolute 302 in previously treated metastatic pancreatic cancer: median overall survival 13.2 months vs 6.7 on chemotherapy, hazard ratio 0.40 - presented in an ASCO 2026 plenary and published in the New England Journal of Medicine. The FDA has accepted the NDA and RASolve 301 in RAS-mutant NSCLC reads out in 2027. No clinical claim here is ours. What to watch: UP: an FDA approval with a broad label, positive RASolve 301 data in 2027, or a first-line readout from RASolute 303. BEAR: a complete response letter or narrow label, G&A past $500M annualised without an approval, or another equity raise inside twelve months. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.