Relay Therapeutics(RLAY) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) The company reported total assets of $799.4 million and a net loss of $77.1 million for Q1 2025, with revenue from a new agreement and reduced R&D expenses Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | Cash, cash equivalents, and investments | $710,355 | $781,323 | | Total Assets | $799,362 | $871,296 | | Total Liabilities | $78,281 | $93,504 | | Total Stockholders' Equity | $721,081 | $777,792 | Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :--- | :--- | :--- | | License and other revenue | $7,679 | $10,007 | | Research and development expenses | $73,809 | $82,403 | | General and administrative expenses | $18,739 | $19,799 | | Loss from operations | $(84,869) | $(90,363) | | Net loss | $(77,065) | $(81,387) | | Net loss per share, basic and diluted | $(0.46) | $(0.62) | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | $(73,210) | $(50,323) | | Net cash provided by investing activities | $42,465 | $10,531 | | Net cash provided by financing activities | $0 | $48,922 | - The company is a clinical-stage precision medicine company focused on targeted oncology and genetic diseases, with RLY-2608 as its lead product candidate in clinical development[31] - The collaboration agreement with Genentech terminated in January 2025, resulting in $0 revenue from this source in Q1 2025 compared to $10.0 million in Q1 2024[69][71][72] - A new exclusive license agreement with Elevar Therapeutics for lirafugratinib (RLY-4008) generated $7.7 million in Q1 2025 revenue from upfront and material transfer payments[73][75] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's pipeline advancement, reporting a Q1 2025 net loss of $77.1 million and a strong liquidity position of $710.4 million projected to fund operations into 2029 - The lead product candidate, RLY-2608, is in the ReDiscover Trial for breast cancer and a global Phase 2 trial for PIK3CA-related overgrowth spectrum (PROS) initiated in Q1 2025[84][88] Comparison of Operations for the three months ended March 31 (in thousands) | Item | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | License and other revenue | $7,679 | $10,007 | $(2,328) | | Research and development expenses | $73,809 | $82,403 | $(8,594) | | General and administrative expenses | $18,739 | $19,799 | $(1,060) | | Net loss | $(77,065) | $(81,387) | $4,322 | - Research and development expenses decreased by $8.6 million year-over-year due to strategic streamlining of the research organization[122] - As of March 31, 2025, the company held $710.4 million in cash, cash equivalents, and investments, projected to fund operations into 2029[142] - In Q1 2024, the company raised $48.9 million through various financing activities, with no financing activities in Q1 2025[140] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate sensitivity on its investment portfolio, with minimal foreign currency exposure and no outstanding debt - The primary market risk is interest income sensitivity from its investment portfolio, with a hypothetical 100 basis point adverse movement in interest rates not expected to have a material impact[152] - Foreign currency exchange risk is not considered material as operations are primarily U.S.-based and denominated in U.S. dollars[154] - As of March 31, 2025, the company had no outstanding debt, eliminating interest rate risk related to debt[153] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[157] - No material changes occurred in internal control over financial reporting during the quarter ended March 31, 2025[158] PART II. OTHER INFORMATION Legal Proceedings The company is a nominal defendant in a stockholder derivative lawsuit filed in December 2024, alleging excessive compensation to directors and officers - A derivative complaint was filed on December 18, 2024, alleging excessive compensation awarded to certain directors and officers from 2021 to 2023[162] - The company is unable to predict the outcome or any reasonably possible loss related to this matter[162] Risk Factors The company faces extensive risks including clinical development uncertainty, reliance on third parties, significant capital needs, intellectual property challenges, and complex regulatory environments Risks Related to Clinical Development and Commercialization The company faces inherent risks in clinical development, including trial uncertainties, patient enrollment challenges, and the potential for early-stage data not to predict later success - The company has never successfully completed any large-scale, pivotal clinical trials and may be unable to do so for any product candidates[164] - Positive data from preclinical or early clinical studies are not necessarily predictive of later clinical study results[178] - The company faces substantial competition, potentially leading to others more successfully discovering, developing, or commercializing products[201] - Failure to obtain or maintain adequate insurance coverage and reimbursement for approved products could limit marketability and revenue generation[206] Risks Related to Reliance on Third Parties The company's high dependence on third-party CROs and CMOs, including sole-source suppliers, creates significant risks for clinical trials, manufacturing, and supply chain continuity - The company relies on third-party CROs for clinical trials, and their unsuccessful performance could hinder regulatory approval or commercialization[211] - Contracting with third parties for manufacturing increases the risk of insufficient quantities, unacceptable cost, or quality, potentially impairing development[222] - Active pharmaceutical ingredients (API) and other starting materials are supplied by single-source suppliers, whose loss could significantly harm the business[230] - Collaboration with D.E. Shaw Research (DESRES) for protein models using their proprietary supercomputer, Anton 2, is critical, and any termination could adversely affect research[242] Risks Related to Financial Position and Capital Needs The company, a clinical-stage entity with limited operating history, had an accumulated deficit of $1.8 billion and will require substantial additional funding, which may dilute stockholders - The company, a biopharmaceutical entity with limited operating history, had an accumulated deficit of $1.8 billion as of March 31, 2025[250] - Substantial additional funding is required; failure to raise capital could force delays, reductions, or elimination of product development programs[258] - Raising additional capital may dilute stockholders, restrict operations, or necessitate relinquishing rights to technologies or product candidates[264] Risks Related to Intellectual Property The company's success relies heavily on obtaining and maintaining intellectual property protection, facing risks of patent invalidation, infringement claims, and the need to protect trade secrets - Obtaining and maintaining broad patent protection for its technology and products is uncertain but critical for commercial success[273] - Third parties may initiate legal proceedings alleging infringement of their intellectual property rights, with uncertain outcomes that could materially affect the business[292] - The company may face expensive and time-consuming lawsuits to protect or enforce its own patents and intellectual property rights[295] - Changes to patent law in the U.S. and other jurisdictions could diminish patent value and impair product candidate protection[312] Risks Related to Government Regulation and Healthcare Reform Operating in a highly regulated environment, the company faces risks from ongoing regulatory obligations, data privacy laws, healthcare reforms like the IRA, and potential FDA policy shifts impacting product development and pricing - Even with product approval, extensive ongoing regulatory obligations apply, and non-compliance can lead to significant penalties or market withdrawal[316][317] - Restrictive data privacy regulations, including GDPR and CCPA, impose significant compliance costs and risks on the company[322][328] - Healthcare legislative reforms, such as the Inflation Reduction Act of 2022 (IRA), may materially affect the business by impacting drug pricing and reimbursement[358][360] - Disruptions at the FDA and other government agencies due to funding shortages or policy changes could hinder timely product review and approval[365] Risks Related to Operations, Personnel, and Corporate Governance Internal risks include retaining key personnel, managing growth, cybersecurity threats, stock price volatility, and concentrated insider ownership, alongside anti-takeover provisions - Future success depends on retaining key executives and scientists and attracting qualified personnel in a highly competitive environment[370] - Internal IT systems are vulnerable to cybersecurity breaches, potentially disrupting development programs and compromising sensitive information[382] - The common stock's trading price has been and may remain volatile, potentially leading to securities class action litigation[394] - Executive officers, directors, and principal stockholders control approximately 42.8% of outstanding common stock, limiting other stockholders' influence on corporate matters[399] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of its equity securities during the three months ended March 31, 2025 - The company reported no unregistered sales of equity securities for the period[416] Other Information No directors or officers adopted, modified, or terminated Rule 10b5-1 trading plans during the first quarter of 2025 - During the three months ended March 31, 2025, no directors or officers adopted, modified, or terminated a Rule 10b5-1 trading plan[418] Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents and officer certifications required by the Sarbanes-Oxley Act - The report includes a list of filed exhibits, such as corporate governance documents and officer certifications required under the Sarbanes-Oxley Act (SOX)[419]