Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-39385 RELAY THERAPEUTICS, INC. (Exact Name of Registrant as Specified in its Charter) Delaware 47-3923475 ( ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents Relay Therapeutics, Inc.'s unaudited consolidated financial statements, including balance sheets, operations, and cash flows, highlighting net losses - The company is a **clinical-stage precision medicines company** focused on targeted oncology, with lead product candidates **RLY-4008** and **RLY-1971**, both in **Phase 1 clinical trials**[32](index=32&type=chunk) - The company closed its **Initial Public Offering (IPO)** on **July 20, 2020**, issuing **23,000,000 shares** for net proceeds of approximately **$424.8 million**, converting **61,992,534 shares** of preferred stock[37](index=37&type=chunk)[53](index=53&type=chunk) [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) Total assets decreased to **$348.0 million** by June 30, 2020, from **$393.1 million** at December 31, 2019, primarily due to reduced investments Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $137,053 | $41,954 | | Investments | $175,153 | $313,862 | | Total current assets | $315,865 | $360,536 | | **Total assets** | **$348,035** | **$393,068** | | **Liabilities & Stockholders' Deficit** | | | | Total current liabilities | $12,765 | $11,986 | | **Total liabilities** | **$35,646** | **$35,725** | | Convertible preferred stock | $537,781 | $537,781 | | Total stockholders' deficit | ($225,392) | ($180,438) | | **Total liabilities, convertible preferred stock, and stockholders' deficit** | **$348,035** | **$393,068** | [Consolidated Statements of Operations and Comprehensive Loss](index=7&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Net loss for the six months ended June 30, 2020, increased to **$51.6 million** from **$31.7 million** in 2019, due to higher operating expenses Consolidated Statements of Operations (in thousands) | Line Item | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Research and development expenses | $21,666 | $16,397 | $43,363 | $29,643 | | General and administrative expenses | $6,053 | $3,508 | $10,814 | $6,664 | | **Total operating expenses** | **$27,719** | **$19,905** | **$54,177** | **$36,307** | | Loss from operations | ($27,719) | ($19,905) | ($54,177) | ($36,307) | | Interest income | $998 | $2,368 | $2,570 | $4,645 | | **Net loss** | **($26,724)** | **($17,537)** | **($51,610)** | **($31,719)** | | Net loss per share, basic and diluted | ($6.06) | ($5.28) | ($12.06) | ($9.90) | [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities was **$43.2 million**, while investing activities provided **$138.0 million**, leading to a **$95.1 million** net cash increase Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | ($43,178) | ($25,869) | | Net cash provided by (used in) investing activities | $138,019 | ($361,997) | | Net cash provided by financing activities | $258 | $5,717 | | **Net increase (decrease) in cash, cash equivalents and restricted cash** | **$95,099** | **($382,149)** | [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail accounting policies, IPO, share-based payments, and commitments, including an amended **D.E. Shaw Research** agreement and a reverse stock split - On **June 15, 2020**, the company amended its Collaboration and License Agreement with **D.E. Shaw Research**, extending the term to **August 16, 2025**, and increasing the annual fee from **$1.0 million** to **$7.9 million**[63](index=63&type=chunk)[128](index=128&type=chunk) - In the first quarter of 2020, the company issued performance-based stock options to purchase **1,960,547 shares** of common stock, recognizing **$2.6 million** in stock-based compensation expense in Q2 2020[60](index=60&type=chunk) - On **July 8, 2020**, the company effected a **one-for-3.55092 reverse stock split** of its common stock, with all share and per-share amounts retroactively adjusted[73](index=73&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition and operations, covering business overview, COVID-19 impact, performance, liquidity, and capital resources, highlighting **$424.8 million** IPO proceeds - The company is a **clinical-stage precision medicines company** using its **Dynamo platform** to focus on targeted oncology, with lead candidates **RLY-1971** and **RLY-4008** in **Phase 1 clinical trials**[77](index=77&type=chunk)[78](index=78&type=chunk) - The company closed its **IPO** on **July 20, 2020**, raising net proceeds of **$424.8 million**, with management believing existing capital is sufficient to fund operations into **2023**[80](index=80&type=chunk)[85](index=85&type=chunk)[119](index=119&type=chunk) - The **COVID-19 pandemic** has presented challenges, but the company initiated the **Phase 1 trial for RLY-4008** and continued enrollment for **RLY-1971** without anticipated interruptions[81](index=81&type=chunk)[82](index=82&type=chunk) [Results of Operations](index=22&type=section&id=Results%20of%20Operations) Operating losses increased significantly year-over-year for both three and six-month periods ended June 30, 2020, due to higher R&D and G&A expenses Comparison of Results of Operations (in thousands) | Period | Research and Development | General and Administrative | Net Loss | | :--- | :--- | :--- | :--- | | **Three Months Ended June 30, 2020** | $21,666 | $6,053 | ($26,724) | | **Three Months Ended June 30, 2019** | $16,397 | $3,508 | ($17,537) | | **Six Months Ended June 30, 2020** | $43,363 | $10,814 | ($51,610) | | **Six Months Ended June 30, 2019** | $29,643 | $6,664 | ($31,719) | - The increase in **R&D expenses** for the six months ended June 30, 2020, was driven by a **$5.4 million** increase in employee-related costs (including **$1.6 million** in stock-based compensation), a **$5.3 million** increase in outside services, and **$2.7 million** in clinical trial expenses for **RLY-1971**[106](index=106&type=chunk) [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) The company held **$312.2 million** in cash and investments as of June 30, 2020, funded by preferred stock and a **$424.8 million** IPO, with capital expected to fund operations into **2023** Summary of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Cash used in operating activities | ($43,178) | ($25,869) | | Cash provided by (used in) investing activities | $138,019 | ($361,997) | | Cash provided by financing activities | $258 | $5,717 | - The company expects expenses to increase substantially due to clinical trials for **RLY-1971** and **RLY-4008**, development of the **RLY-PI3K1047 program**, and costs associated with operating as a public company[118](index=118&type=chunk)[121](index=121&type=chunk) [Contractual Obligations and Commitments](index=27&type=section&id=Contractual%20Obligations%20and%20Commitments) Material contractual obligations remain largely unchanged, except for an amended **D.E. Shaw Research** agreement, extending its term to **August 2025** and increasing the annual fee to **$7.9 million** - The Amended and Restated Collaboration and License Agreement with **D.E. Shaw Research** extended the term to **August 16, 2025**, and increased the annual fee from **$1.0 million** to **$7.9 million**[128](index=128&type=chunk) - Under the **D.E. Shaw Research** agreement, the company is obligated to pay potential development and regulatory milestone payments up to **$7.3 million** per target for the first three products, plus sales milestones and royalties[127](index=127&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Primary market risk is interest rate sensitivity on investments, with a **100 basis point** change not expected to be material; foreign currency risk is not material - The company's primary market risk is interest rate sensitivity on its cash equivalents and investments, with a hypothetical **100 basis point** adverse movement not expected to have a material impact[135](index=135&type=chunk) - Foreign currency exchange risk is **not considered material** as operations are primarily in the United States and expenses are generally denominated in U.S. dollars, with no hedging engaged[137](index=137&type=chunk)[139](index=139&type=chunk) [Item 4. Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of June 30, 2020, with no material changes in internal control over financial reporting, despite remote work - The CEO and CFO concluded that as of June 30, 2020, the company's disclosure controls and procedures were **effective** at a reasonable assurance level[141](index=141&type=chunk) - There were **no changes** in internal control over financial reporting during the quarter ended June 30, 2020, that have materially affected, or are reasonably likely to materially affect, internal controls[142](index=142&type=chunk) - The transition to a remote work environment due to the COVID-19 pandemic has **not materially changed** the company's internal control over financial reporting[143](index=143&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=29&type=section&id=Item%201.%20Legal%20Proceedings) As of June 30, 2020, the company was not a party to any material litigation or legal proceedings - The company was **not a party to any material litigation or legal proceedings** as of June 30, 2020[144](index=144&type=chunk) [Item 1A. Risk Factors](index=30&type=section&id=Item%201A.%20Risk%20Factors) This section outlines significant investment risks, including limited operating history, funding needs, clinical and regulatory uncertainties, third-party reliance, IP, and stock-related factors [Risks Related to Financial Position, Business, and Industry](index=30&type=section&id=Risks%20Related%20to%20Financial%20Position%2C%20Business%2C%20and%20Industry) Risks include limited operating history, **$241.1 million** accumulated net losses, need for substantial additional funding, and challenges from its novel drug discovery platform - The company has a **limited operating history**, has incurred **net losses** each year since inception, and had an accumulated deficit of **$241.1 million** as of June 30, 2020[146](index=146&type=chunk) - The company will require **substantial additional funding** for its development and commercialization efforts, and failure to raise capital could force delays or elimination of programs[153](index=153&type=chunk) - The company's **novel mechanism of action** may result in **greater R&D expenses**, **regulatory delays**, and the discovery of unanticipated adverse effects[182](index=182&type=chunk)[183](index=183&type=chunk) [Risks Related to Reliance on Third Parties](index=42&type=section&id=Risks%20Related%20to%20Reliance%20on%20Third%20Parties) High dependence on third parties, including **D. E. Shaw Research** for its computational platform, CROs for clinical trials, and single-source manufacturers for APIs, poses significant risks - The company collaborates with **D. E. Shaw Research (DESRES)** for its computational protein modeling, which depends on DESRES's proprietary supercomputer, **Anton 2**, and termination of this agreement could materially harm the business[210](index=210&type=chunk) - The company relies on **third-party CROs** to conduct its clinical trials (including Phase 1 for **RLY-1971** and **RLY-4008**) and is responsible for ensuring their compliance with regulations[216](index=216&type=chunk)[218](index=218&type=chunk) - The company relies on **third-party contract manufacturers** for its product candidates, with APIs supplied by **single-source suppliers**, posing significant supply chain risk[224](index=224&type=chunk)[232](index=232&type=chunk) [Risks Related to Intellectual Property](index=46&type=section&id=Risks%20Related%20to%20Intellectual%20Property) Success depends on patent protection and trade secrets, but the company lacks issued patents for key programs, co-owns applications with **D. E. Shaw Research**, and faces infringement risks - The company co-owns its pending patent applications for **RLY-1971** and **RLY-4008** with **D. E. Shaw Research**, and **does not currently own or in-license any issued patents** relating to its key programs[242](index=242&type=chunk)[247](index=247&type=chunk) - The company may face legal proceedings from third parties alleging **infringement of their intellectual property rights**, which could be uncertain, expensive, and potentially halt commercialization[261](index=261&type=chunk)[262](index=262&type=chunk) - The company relies on **trade secrets and know-how**, particularly for its **proprietary compound library**, and seeks to protect them via confidentiality agreements, though effectiveness is not guaranteed[258](index=258&type=chunk) [Risks Related to Government Regulation](index=53&type=section&id=Risks%20Related%20to%20Government%20Regulation) Extensive government regulation poses risks, including ongoing product review, need for companion diagnostics for **RLY-4008**, and adverse impacts from healthcare reforms and drug pricing - Even if a product is approved, the company will be subject to **extensive ongoing regulatory requirements**, and non-compliance could result in fines, product withdrawal, or other penalties[287](index=287&type=chunk)[290](index=290&type=chunk) - The FDA has indicated that a **companion diagnostic device** will be required for **RLY-4008** if advanced in a specific biomarker-defined population, adding regulatory risk and reliance on third-party developers[297](index=297&type=chunk) - **Healthcare legislative reforms**, including potential changes to the ACA and increasing pressure on **drug pricing**, could limit reimbursement and adversely affect the company's ability to profitably sell its products[316](index=316&type=chunk)[321](index=321&type=chunk) [Risks Related to Our Common Stock](index=63&type=section&id=Risks%20Related%20to%20Our%20Common%20Stock) Risks include reduced disclosure as an **emerging growth company**, potential stock price volatility from lock-up expirations, and significant control by principal stockholders (**52.8%**) - The company is an **"emerging growth company"** and a **"smaller reporting company,"** allowing it to rely on **reduced disclosure requirements**, potentially making its common stock less attractive to some investors[347](index=347&type=chunk)[348](index=348&type=chunk)[352](index=352&type=chunk) - Executive officers, directors, and their affiliates beneficially own approximately **52.8%** of the outstanding common stock, giving them **significant control** over corporate matters[358](index=358&type=chunk) - A substantial number of shares are subject to a **180-day lock-up agreement** from the IPO, and their potential sale after expiration in **January 2021** could cause the market price to drop[357](index=357&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=68&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Reports on unregistered equity sales, including **223,881** stock options, and the use of **$424.8 million** net proceeds from the **July 15, 2020** IPO, with no material change in planned use - From April 1 to June 30, 2020, the company issued options to purchase an aggregate of **223,881 shares** of common stock to employees, directors, and consultants[373](index=373&type=chunk) - The company's IPO registration statement was declared effective on **July 15, 2020**, resulting in net proceeds of approximately **$424.8 million** after deducting underwriting discounts and expenses[374](index=374&type=chunk)[376](index=376&type=chunk) - There has been **no material change** in the planned use of IPO proceeds as described in the final prospectus[377](index=377&type=chunk) [Item 3. Defaults Upon Senior Securities](index=68&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Not applicable; the company reports no defaults upon senior securities [Item 4. Mine Safety Disclosures](index=68&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Not applicable; the company has no mine safety disclosures to report [Item 5. Other Information](index=68&type=section&id=Item%205.%20Other%20Information) None; the company reports no other information for this period [Item 6. Exhibits](index=69&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including corporate governance documents, stock plans, agreements, and officer certifications - Exhibits filed include **corporate governance documents**, **stock and incentive plans**, the **Amended and Restated Collaboration and License Agreement with D.E. Shaw Research**, and required **officer certifications**[383](index=383&type=chunk)