Relay Therapeutics(US:RLAY)2024-02-22 21:16Part I Business Relay Therapeutics is a clinical-stage precision medicine company utilizing its proprietary Dynamo™ platform to design therapies against previously intractable protein targets, focusing on oncology and genetic diseases Overview and Pipeline Relay Therapeutics is a clinical-stage precision medicine company using its Dynamo™ platform, which integrates computational and experimental methods to target protein motion for drug discovery - The company's core drug discovery approach, termed Motion-Based Drug Design®, analyzes protein motion to identify novel ways to drug targets, moving beyond the industry-standard static view of protein structures24 Clinical and Preclinical Pipeline Overview | Target/Franchise | Program | Stage | | :--- | :--- | :--- | | PI3Kα | RLY-2608 (Monotherapy, Doublet, Triplet) | Early Clinical | | FGFR2 | Lirafugratinib (RLY-4008) | Early Clinical | | SHP2 | Migoprotafib (GDC-1971) with Genentech | Early Clinical (3 ongoing combo studies) | | CDK2 | RLY-2139 | Preclinical (Paused; IND ready) | | ERα | RLY-1013 (Degrader) | Preclinical (Paused at DC) | | Solid Tumor | 2 programs | Preclinical | | Genetic Disease | 2 programs | Preclinical | Clinical Stage Programs The company is advancing three product candidates in clinical trials, including RLY-2608 for breast cancer, lirafugratinib for FGFR2-altered solid tumors, and migoprotafib in collaboration with Genentech - RLY-2608 (PI3Kα Inhibitor): The ReDiscover trial is evaluating RLY-2608 as a monotherapy, in combination with fulvestrant, and in a triplet combination for HR+, HER2–, PI3Kα-mutated breast cancer, showing a clinical benefit rate (CBR) of 86% in seven evaluable patients at the 600 mg BID dose with fulvestrant316772 - Lirafugratinib (FGFR2 Inhibitor): The ReFocus trial has completed enrollment for its pivotal cohort in FGFR2-fusion cholangiocarcinoma (CCA) and has sufficient enrollment in tumor-agnostic arms, with interim data showing confirmed objective response rates (cORRs) between 58% and 82% in treatment-naïve, FGFR2-fusion CCA patients759699 - Migoprotafib (SHP2 Inhibitor): Development is led by Genentech under a global collaboration, with three Phase 1b combination trials initiated: with its KRAS G12C inhibitor (GDC-6036), its PD-L1 antibody (atezolizumab), and with EGFR inhibitors (osimertinib or cetuximab)104 Collaborations Relay Therapeutics maintains two key strategic collaborations: one with D. E. Shaw Research for computational modeling and another with Genentech for the global development of migoprotafib - Under the DESRES Agreement, Relay pays an annual collaboration fee, increased to $9.9 million in 2021, and is obligated to pay development and regulatory milestones up to $7.3 million for each of the first three products, plus sales milestones and low single-digit royalties125126 - The Genentech Agreement for migoprotafib provided a $75.0 million upfront payment and $45.0 million in milestones through the report date, with Relay eligible for up to $675.0 million in additional milestones and tiered low-to-mid teen royalties on worldwide net sales132 Intellectual Property The company protects its technology through patents, trade secrets, and know-how, with key candidates having co-owned or wholly owned patent applications and issued patents covering composition of matter, methods of use, and manufacturing - RLY-2608 (PI3Kα): Co-owned pending U.S. and foreign patent applications covering composition of matter would expire in 2041, while wholly owned pending applications for isotopologs and solid forms would expire in 2042141142 - Lirafugratinib (FGFR2): Co-owned pending U.S. and foreign applications covering the inhibitors would expire in 2040, with wholly owned pending applications for salts and solid forms expiring in 2041143144 - Migoprotafib (SHP2): Wholly owns a U.S. patent for composition of matter scheduled to expire in 2039, with other pending applications for solid forms and manufacturing methods expiring in 2040145 Governmental Regulation The company's operations are subject to extensive regulation by the FDA and similar international authorities, covering all stages from research and development to manufacturing and commercialization - The FDA drug approval process involves extensive preclinical studies, an effective IND application, and adequate and well-controlled clinical trials (Phase 1, 2, 3) to establish safety and efficacy before an NDA can be submitted and approved155162 - The Inflation Reduction Act of 2022 (IRA) could impact the business by allowing the U.S. government to negotiate Medicare drug prices, requiring rebates for price increases faster than inflation, and capping out-of-pocket costs for Medicare beneficiaries203 - Operations in Europe are subject to the GDPR and UK GDPR, which impose strict rules on the processing and cross-border transfer of personal data, with significant fines for non-compliance228229 Human Capital Resources As of December 31, 2023, Relay Therapeutics had 323 full-time employees, with 80% engaged in research and development, emphasizing diversity and inclusion - As of December 31, 2023, the company had 323 full-time employees, of which 140 hold M.D. or Ph.D. degrees230 - The workforce is 47% female and 53% male, with approximately 30% of leadership (VP level and above) being female, and 29% of employees identifying as being from diverse racial and ethnic groups231 Risk Factors The company faces substantial risks, including those related to its limited operating history, history of net losses, and the uncertain and expensive nature of clinical drug development - The company has a limited operating history, has never successfully completed a pivotal clinical trial, has no approved products, and has incurred significant operating losses since inception, with an accumulated deficit of $1.4 billion as of December 31, 2023242320 - The business is highly dependent on third parties for conducting clinical trials (CROs) and manufacturing product candidates (CMOs), creating risks related to performance, regulatory compliance, and supply chain continuity285294 - Substantial additional funding will be required to continue operations and advance the product pipeline, and failure to raise capital when needed could force the company to delay, reduce, or eliminate development programs327 - The company's success depends on its ability to obtain and maintain patent protection for its technology and products, as the patent landscape is uncertain and competitors could develop similar products, impairing the company's ability to commercialize its technology339 Cybersecurity Relay Therapeutics has implemented a cybersecurity risk management program overseen by the Director of IT Operations and Information Security, with governance involving senior leadership and Board oversight - The cybersecurity program is managed by the Director of IT Operations and Information Security, who reports to the VP of Information Technology and Facilities466468 - Oversight is provided by the Audit Committee of the Board of Directors, which regularly receives reports on information security risks, mitigation strategies, and cyber initiatives468470 - A Relay Information Security Council (RISC), composed of senior leaders from finance, legal, HR, and R&D, provides input on cyber strategies and assists in evaluating incidents469 Properties The company's corporate headquarters, including office and laboratory space, are located in Cambridge, Massachusetts, across two leased facilities totaling approximately 88,105 square feet - The company leases two primary facilities in Cambridge, MA: 46,631 sq. ft. at 399 Binney Street (lease expires April 2029) and 41,474 sq. ft. at 60 Hampshire Street (lease expires June 2032)472 Legal Proceedings The company is not currently a party to any legal proceedings that are expected to have a material adverse effect on its business - As of the report date, Relay Therapeutics is not involved in any material legal proceedings474 Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on the Nasdaq Global Market under the symbol "RLAY" since its IPO on July 16, 2020, and it does not anticipate paying cash dividends in the foreseeable future - The company's common stock trades on the Nasdaq Global Market under the symbol "RLAY"478 - The company has never declared or paid cash dividends and does not intend to in the foreseeable future480 Management's Discussion and Analysis of Financial Condition and Results of Operations For the year ended December 31, 2023, Relay Therapeutics reported a net loss of $342.0 million, an increase from $290.5 million in 2022, driven by higher R&D expenses, with $750.1 million in cash expected to fund operations into the second half of 2026 Results of Operations For FY 2023, revenue increased to $25.5 million from $1.4 million in FY 2022, primarily due to the Genentech agreement, while R&D expenses rose by $83.7 million to $330.0 million, resulting in a net loss of $342.0 million Comparison of Results of Operations (2023 vs. 2022) | (in thousands) | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | Change | | :--- | :--- | :--- | :--- | | License and other revenue | $25,546 | $1,381 | $24,165 | | Research and development expenses | $330,018 | $246,355 | $83,663 | | General and administrative expenses | $74,950 | $65,978 | $8,972 | | Total operating expenses | $398,546 | $300,656 | $97,890 | | Loss from operations | ($373,000) | ($299,275) | ($73,725) | | Other income, net | $31,027 | $8,766 | $22,261 | | Net loss | ($341,973) | ($290,509) | ($51,464) | Research and Development Expenses Breakdown (2023 vs. 2022) | (in thousands) | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | Change | | :--- | :--- | :--- | :--- | | External costs for programs in clinical trials | $101,055 | $51,094 | $49,961 | | External costs for platform technologies and preclinical programs | $74,474 | $80,612 | ($6,138) | | Employee related expenses | $125,471 | $93,118 | $32,353 | | Other expenses | $29,018 | $21,531 | $7,487 | | Total R&D expenses | $330,018 | $246,355 | $83,663 | Liquidity and Capital Resources As of December 31, 2023, the company had $750.1 million in cash, cash equivalents, and investments, expected to fund operations into the second half of 2026, supplemented by recent financing activities - The company ended 2023 with $750.1 million in cash, cash equivalents, and investments, which is expected to fund operations and capital expenditures into the second half of 2026511545564 Summary of Cash Flows | (in thousands) | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | | :--- | :--- | :--- | :--- | | Cash used in operating activities | ($300,316) | ($229,490) | ($74,406) | | Cash provided by (used in) investing activities | $257,634 | ($188,745) | ($479,511) | | Cash provided by financing activities | $34,753 | $289,910 | $388,090 | - In January 2024, the company raised approximately $30.0 million in gross proceeds through a private placement of 2,500,000 shares of common stock500552 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk exposure is to interest rate changes affecting its investment portfolio, with foreign currency exchange risk currently not material - The primary market risk is interest rate sensitivity on the investment portfolio, where a hypothetical 100 basis point adverse change in interest rates is estimated to not have a material impact on financial results588 - Foreign currency exchange risk is not considered material as operations are U.S.-based and expenses are generally denominated in U.S. dollars, with no formal hedging program implemented590 Financial Statements and Supplementary Data This section contains the company's audited consolidated financial statements for the fiscal years ended December 31, 2023, 2022, and 2021, along with the independent registered public accounting firm's report Report of Independent Registered Public Accounting Firm Ernst & Young LLP issued an unqualified opinion on Relay Therapeutics' consolidated financial statements and the effectiveness of its internal control over financial reporting, identifying the valuation of contingent milestone payments as a critical audit matter - The auditor, Ernst & Young LLP, issued an unqualified opinion on the consolidated financial statements and on the effectiveness of internal control over financial reporting605633 - A Critical Audit Matter was identified relating to the valuation of the Contingent Milestone Payments Liability from the ZebiAI acquisition, due to the subjective and judgmental nature of estimating the probability of milestone achievement637639640 Controls and Procedures Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2023, with no material changes identified - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2023595 - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2023, and the independent auditor issued an unqualified opinion on its effectiveness598599605 Part III Directors, Executive Officers, Corporate Governance, Executive Compensation, Security Ownership, and Principal Accounting Fees Information for Items 10 through 14, covering directors, executive officers, corporate governance, executive compensation, security ownership, and principal accounting fees, will be incorporated by reference from the company's forthcoming 2024 Proxy Statement - The information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the company's forthcoming 2024 Proxy Statement617618619 Part IV Exhibits and Financial Statement Schedules This section lists the financial statements and exhibits filed as part of the Annual Report on Form 10-K, with financial statement schedules omitted as not applicable or included elsewhere - This item provides an index of the financial statements and exhibits filed with the 10-K report627