Billionaire Stanley Druckenmiller Added to Revolution Medicines Before Its FDA Win. Is the Stock Still a Buy After a 134% Run?

Revolution Medicines (RVMD) has recently gained significant attention from investors after its U.S. FDA approval for Rasonque, a medicine designed to treat pancreatic cancer. This biotech stock has seen a remarkable 134% increase in value this year. Notably, Duquesne Family Office, led by billionaire Stanley Druckenmiller, boosted its stake in Revolution Medicines by 26.5% in the second quarter.

This surge in popularity has investors questioning whether the stock remains a good purchase, given its impressive performance. Rasonque's approval is a significant milestone for Revolution Medicines, as it targets a long-considered "undruggable" cancer mechanism. In clinical trials, Rasonque outperformed standard chemotherapy in terms of overall survival, achieving 13.2 months versus 6.7 months for the standard of care.

This breakthrough has the potential to become the new standard of care in the U.S. for this indication, with a relatively affordable price tag of around $478,000 per year. The market for Rasonque is substantial, with an estimated 55,000 annual diagnoses in the U.S. alone, and a historical 19,000 transitioning to second-line treatments.

At current prices, Revolution Medicines' market cap is around $40 billion, but it has experienced a decline following the approval, likely due to profit-taking. Assuming a 12% required rate of return and a forward price-to-sales ratio of 4 by 2031, the company would need to generate $17.62 billion in revenue in 2032 to justify its current market cap.

Based on estimates, Rasonque could generate $15.1 billion in revenue by 2034, primarily from pancreatic cancer treatments. However, the biotech industry is notoriously volatile, and potential setbacks could impact the stock's future performance. Despite these concerns, Revolution Medicines' innovative approach and promising pipeline make its stock more attractive now than it was previously.