Relay Therapeutics(US:RLAY)2021-08-12 20:21PART I. FINANCIAL INFORMATION Presents unaudited financial statements and management's analysis of financial condition and operations Financial Statements (Unaudited) Presents unaudited condensed consolidated financial statements, including balance sheets, statements of operations, and cash flows Condensed Consolidated Balance Sheets Details assets, liabilities, and equity, showing a decrease in cash and an increase in contingent consideration liability Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $260,069 | $447,646 | | Investments | $411,151 | $230,415 | | Total current assets | $681,276 | $770,100 | | Total assets | $714,401 | $799,829 | | Liabilities & Equity | | | | Total current liabilities | $25,385 | $13,632 | | Contingent consideration liability | $48,465 | $0 | | Total liabilities | $95,872 | $36,536 | | Total stockholders' equity | $618,529 | $763,293 | Condensed Consolidated Statements of Operations and Comprehensive Loss Reports increased net loss for Q2 and H1 2021, driven by ZebiAI acquisition expenses and rising R&D Statement of Operations Summary (in thousands) | Metric | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Collaboration revenue | $844 | $0 | $1,796 | $0 | | Research and development expenses | $45,147 | $21,666 | $75,769 | $43,363 | | In-process R&D expenses | $123,000 | $0 | $123,000 | $0 | | General and administrative expenses | $14,422 | $6,053 | $27,156 | $10,814 | | Loss from operations | ($193,580) | ($27,719) | ($235,984) | ($54,177) | | Net loss | ($193,399) | ($26,724) | ($235,582) | ($51,610) | | Net loss per share, basic and diluted | ($2.10) | ($6.06) | ($2.58) | ($12.06) | Condensed Consolidated Statements of Cash Flows Shows positive operating cash flow for H1 2021 due to a large receivable payment, with significant investing activities Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $18,500 | ($43,178) | | Net cash provided by (used in) investing activities | ($207,553) | $138,019 | | Net cash provided by financing activities | $3,176 | $258 | | Net (decrease) increase in cash | ($185,877) | $95,099 | Notes to Condensed Consolidated Financial Statements Provides details on accounting policies, the ZebiAI acquisition, revenue recognition, and commitments - The company is a clinical-stage precision medicines company focused on oncology and genetic diseases, with lead candidates RLY-4008, RLY-2608, and RLY-197131 - On April 22, 2021, the company acquired ZebiAI for upfront consideration of ~$20 million in cash and 1.88 million shares of common stock, plus up to $85 million in milestone payments and up to $100 million in earnout payments52 - The ZebiAI acquisition was accounted for as an asset acquisition, resulting in a $123.0 million charge for acquired in-process research and development (IPR&D) and an $11.9 million loss on initial consolidation of a variable interest entity535455 - Under the Genentech agreement for RLY-1971, the company received a $75 million upfront payment in January 2021 and a $5 million milestone payment in May 2021, recognizing $1.74 million in revenue for H1 20215869 Management's Discussion and Analysis of Financial Condition and Results of Operations Discusses financial condition, operational results, pipeline, and ZebiAI acquisition, confirming capital sufficiency into 2024 - The company is advancing its pipeline, with RLY-4008 (FGFR2 inhibitor) and RLY-1971 (SHP2 inhibitor) in clinical trials, and IND-enabling studies initiated for RLY-2608 (PI3Kα inhibitor)87 - Key corporate developments include the global collaboration with Genentech for RLY-1971, the acquisition of ZebiAI, and a new discovery collaboration with EQRx909192 - The company believes its cash, cash equivalents, and investments of $671.2 million as of June 30, 2021, will fund operating expenses and capital expenditure requirements into 202499 Results of Operations Compares operating results for Q2 and H1 2021 vs. 2020, detailing increased net loss due to ZebiAI acquisition and R&D Comparison of Operating Results for the Three Months Ended June 30 (in thousands) | Item | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Revenue | $844 | $0 | $844 | | Research and development | $45,147 | $21,666 | $23,481 | | In-process research and development | $123,000 | $0 | $123,000 | | Loss on initial consolidation of VIE | $11,855 | $0 | $11,855 | | General and administrative | $14,422 | $6,053 | $8,369 | | Net loss | ($193,399) | ($26,724) | ($166,675) | Comparison of Operating Results for the Six Months Ended June 30 (in thousands) | Item | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Revenue | $1,796 | $0 | $1,796 | | Research and development | $75,769 | $43,363 | $32,406 | | In-process research and development | $123,000 | $0 | $123,000 | | Loss on initial consolidation of VIE | $11,855 | $0 | $11,855 | | General and administrative | $27,156 | $10,814 | $16,342 | | Net loss | ($235,582) | ($51,610) | ($183,972) | Liquidity and Capital Resources Details cash position, operating cash flow drivers, and investing activities, confirming capital sufficiency into 2024 - The company had cash, cash equivalents, and investments totaling $671.2 million as of June 30, 2021126 - Cash from operations was positive for H1 2021 due to the $75.0 million upfront payment from Genentech, received in January 2021126128 - The company expects its current capital to fund operations and capital expenditures into 2024134 Quantitative and Qualitative Disclosures About Market Risk Assesses market risk from interest rates and foreign currency, concluding no material impact from hypothetical changes - Primary market risk is interest income sensitivity on cash equivalents and investments; a hypothetical 100 basis point adverse change is not expected to have a material impact148 - Foreign currency exchange risk is limited and not considered material, with no formal hedging program implemented150 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2021, with no material changes - Management concluded that as of June 30, 2021, the company's disclosure controls and procedures were effective153 - No material changes occurred during the quarter affecting internal control over financial reporting154 PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, and other required disclosures Legal Proceedings The company reports no material litigation or legal proceedings as of June 30, 2021 - The company reports no material legal proceedings as of June 30, 2021157 Risk Factors Outlines material risks: clinical trial uncertainty, third-party reliance, funding needs, and intellectual property challenges Risks Related to Product Candidates Highlights risks of clinical trial failure, patient enrollment difficulties, and the uncertainty of novel mechanisms of action - The company has never successfully completed any clinical trials and may be unable to do so, potentially delaying or preventing marketing approval159 - Difficulties in enrolling patients in clinical trials, especially for targeted populations, could delay or prevent necessary regulatory approvals166 - Market opportunities for product candidates may be smaller than estimated, adversely affecting potential revenue and profitability187 Risks Related to Reliance on Third Parties Details dependence on D. E. Shaw Research, CROs for trials, and single-source CMOs for manufacturing - The company's drug discovery depends heavily on its collaboration with D. E. Shaw Research and their proprietary supercomputer, Anton 2; termination could be materially adverse200201 - Reliance on third-party CROs for clinical trials poses risks if they fail to perform or comply with regulations, harming regulatory approval prospects207 - Contracting with single-source suppliers for manufacturing product candidates increases risks of insufficient quantities, unacceptable costs, or development delays215220 Risks Related to Financial Position and Capital Needs Highlights limited operating history, significant losses, and need for substantial funding to avoid program delays - The company has a limited operating history, incurred significant losses since inception, and anticipates continued losses for the foreseeable future233234 - Substantial additional funding is required to continue operations; failure to raise capital could force delays, reductions, or elimination of product development programs239 Risks Related to Intellectual Property Focuses on challenges in patent protection, potential infringement claims, and co-ownership disputes with DESRES - Commercialization success depends on obtaining and maintaining sufficient patent protection for technology and products, which may be impaired if unsuccessful253 - Third parties may initiate legal proceedings alleging intellectual property infringement, with uncertain and potentially materially adverse outcomes270 - Co-owned intellectual property with D. E. Shaw Research under the DESRES Agreement could lead to disputes over rights and control255 Unregistered Sales of Equity Securities and Use of Proceeds Reports the issuance of 1.88 million common shares in a private offering for the ZebiAI acquisition on April 22, 2021 - On April 22, 2021, the company issued 1,883,487 shares of common stock to former ZebiAI security holders as part of the acquisition consideration378 Other Information This section indicates no other information to report - None379 Exhibits Lists exhibits filed with the Form 10-Q, including agreements, corporate documents, and officer certifications