Relay Therapeutics, Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. Relay is a clinical-stage precision-medicine company with no approved products and no product-sale revenue. Its lead clinical programs are RLY-4008, RLY-2608, GDC-1971 (licensed to Genentech) and RLY-5836.
Financial results and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $25.2 million | $0.3 million | $25.5 million | $1.1 million |
| Research and development | $81.5 million | $66.9 million | $252.5 million | $179.1 million |
| General and administrative | $18.5 million | $16.1 million | $58.2 million | $49.6 million |
| Net loss | $65.7 million | $84.2 million | $258.5 million | $223.0 million |
| Net loss per share, basic and diluted | $0.54 | $0.76 | $2.12 | $2.04 |
| Interest income | $7.8 million | $1.7 million | $22.3 million | $3.4 million |
- Revenue quality: Q3 revenue included approximately $25.0 million recognized after Relay elected not to exercise its U.S. profit/cost-share option under the Genentech agreement. This was a non-product, collaboration-related recognition of previously constrained milestone payments; it should not be treated as recurring product revenue.
- Cash and investments: $810.6 million at September 30, 2023, comprising $151.3 million in cash and equivalents and $659.3 million in investments, versus approximately $998.9 million at December 31, 2022.
- Cash flow: Nine-month operating cash use was $211.1 million, compared with $172.4 million in 2022. Investing activities provided $198.0 million, mainly from net investment maturities; financing provided $12.8 million, including $9.4 million net ATM proceeds. Cash, cash equivalents and restricted cash declined $0.3 million to $154.0 million.
- Balance sheet: Current assets were $831.8 million and current liabilities $50.7 million. Total liabilities were $128.6 million; the filing reports no debt outstanding. Accumulated deficit was $1.317 billion.
- Margins: Product gross margin is not applicable because the company has no product sales; the filing does not provide a meaningful product-margin measure.
Material changes and operating developments
- Year-to-date R&D expense rose $73.4 million, primarily from higher clinical-trial external costs ($38.2 million) and employee-related costs ($26.1 million), including increased stock compensation. Q3 R&D increased $14.6 million year over year.
- Year-to-date net loss widened by $35.5 million, despite higher collaboration revenue and interest income, as operating expenses increased substantially.
- Management said cash, cash equivalents and investments were expected to fund operating and capital requirements into the second half of 2026; this estimate depends on assumptions and could prove too optimistic. The financial statements separately state resources are sufficient for at least one year from issuance.
- Relay sold 900,000 shares through its ATM program in Q3 for $9.4 million net. Shares outstanding were 123.2 million at quarter-end.
- Two discovery programs, RLY-2139 and an ERα degrader, remained paused. Five other discovery-stage programs were active.
Outlook, commentary and risks
- The company expects significant operating losses and rising expenses as it advances clinical programs and discovery work; it will require additional capital over time and has no committed external funding source.
- RLY-4008: management reported October 2023 interim tumor-agnostic results, based on an August 23 cutoff, including 35% ORR in FGFR2-fusion tumors excluding cholangiocarcinoma and 40% ORR in FGFR2-altered HR+/HER2− breast cancer. These are early clinical data, not proof of benefit or approval.
- RLY-2608: the company reported interim data in August 2023 from 17 breast-cancer patients at 600 mg twice daily with fulvestrant: 86% clinical benefit rate among six of seven evaluable patients and one confirmed partial response among five efficacy-evaluable patients with measurable disease. In October, it announced plans for a triplet combination with fulvestrant and a CDK4/6 inhibitor.
- GDC-1971 development is led by Genentech. Relay declined its one-time U.S. profit/cost-share option and remains eligible for up to $685 million in additional specified milestones and tiered royalties, subject to agreement terms and achievement.
- Principal risks include clinical-trial failure, delays or enrollment challenges, safety findings, regulatory and companion-diagnostic requirements, reliance on third-party CROs and manufacturers, single-source supply risks, intellectual-property protection, competition and future financing needs. The DESRES collaboration depends on D. E. Shaw Research’s proprietary Anton 2 supercomputer.
- The company reported no material litigation and no material changes to contractual obligations in the quarter. Management concluded disclosure controls were effective as of September 30, 2023.
Investor verification priorities
- Confirm the timing, maturity and full underlying patient-level data for RLY-4008 and RLY-2608, including response durability, safety and trial enrollment.
- Assess the assumptions behind the stated cash runway into the second half of 2026, projected trial costs and potential financing needs.
- Separate the one-time Genentech-related revenue recognized in 2023 from recurring operating economics; verify future milestone and royalty conditions and Genentech’s development progress.
- Track clinical-trial execution, manufacturing capacity, companion-diagnostic progress and reliance on external research and supply partners.
- Review dilution exposure, including remaining capacity under the $300 million ATM program and potential ZebiAI milestone shares.