Relay Therapeutics, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone fourth-quarter report. Unless otherwise noted, financial amounts below are in U.S. dollars.
Business context
Relay is a clinical-stage precision medicines company using its Dynamo computational and experimental drug-discovery platform, with an initial focus on oncology and genetic diseases. It has no approved products and has generated no product-sales revenue. Its three clinical-stage candidates are RLY-4008 (FGFR2), RLY-2608 (PI3Kα), and RLY-1971 (SHP2); it also reported more than five discovery-stage programs.
Key financial metrics
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $3.0 million | $82.7 million |
| Research and development expense | $172.7 million | $99.9 million |
| General and administrative expense | $57.4 million | $38.6 million |
| Total operating expenses | $367.7 million | $138.5 million |
| Loss from operations | $364.7 million | $55.8 million |
| Net loss | $363.9 million | $52.4 million |
| Cash used in operating activities | $74.4 million | $102.5 million |
- Revenue was primarily collaboration-related, not product sales. FY2020 included recognition of most of Genentech’s $85 million upfront payment; FY2021 revenue largely reflected ongoing services under that agreement.
- FY2021 net loss included $123.0 million of acquired in-process R&D expense and an $11.9 million loss on initial consolidation of ZebiAI, as well as a $2.8 million increase in the fair value of contingent milestone consideration. These acquisition-related items materially affected the year-over-year comparison.
- Cash, cash equivalents and investments totaled $958.1 million at year-end, versus $678.1 million at December 31, 2020. Total assets were $1,008.4 million; total liabilities were $110.6 million, including $22.9 million of operating lease liabilities and $50.3 million of contingent consideration. Relay reported no debt outstanding.
- Operating cash outflow was lower than in 2020, although the company reported a substantially larger accounting loss. Investing activities used $479.5 million, mainly reflecting net investment purchases and the ZebiAI acquisition; financing provided $388.1 million, including $382.2 million net proceeds from the October 2021 stock offering.
- Operating margins are not a useful indicator of product economics at this stage: revenue is collaboration-related, and the company has no product sales.
Material changes versus FY2020
- Revenue fell by $79.6 million as the substantial Genentech upfront-license revenue was recognized in 2020.
- R&D expense rose by $72.8 million, reflecting increased personnel, outside services and clinical-trial activity. G&A expense increased by $18.8 million.
- Relay acquired ZebiAI in April 2021 to add machine-learning capabilities and DNA-encoded library data. Consideration included approximately $20 million in cash, shares, and contingent payments; up to $85 million of additional milestone payments and a separate earnout tied to qualifying collaboration proceeds may also be payable.
- The October 2021 offering issued 15.19 million shares and generated $382.2 million in net proceeds. A separate $300 million at-the-market facility had no sales through year-end.
Outlook, management commentary and risks
- Management said year-end cash, cash equivalents and investments were expected to fund operations and capital requirements into at least 2025, while cautioning that the estimate depends on assumptions and that additional financing may be required. The filing provides no earnings or revenue guidance.
- RLY-4008 interim data, with a September 9, 2021 cutoff and 49 treated subjects, showed tumor-size reductions in approximately 80% of patients. In six FGFR2 fusion-positive cholangiocarcinoma patients who had not received a pan-FGFR inhibitor, three had confirmed partial responses. These are early, limited clinical results, not confirmatory evidence. Expansion cohorts began at 70 mg once daily in December 2021; the FDA granted orphan drug designation for cholangiocarcinoma in January 2022.
- RLY-2608’s first patient was dosed in December 2021. Management described encouraging preclinical results, including activity in mouse tumor models; clinical efficacy and safety remain unestablished.
- Genentech leads subsequent RLY-1971 development under the collaboration and began a Phase 1b combination cohort with its KRAS G12C inhibitor in July 2021. Relay received $75 million upfront and $20 million in milestone payments; the $15 million received in December 2021 is refundable if Relay elects the U.S. profit/cost share. Potential future milestones and royalties are contingent, not assured.
- Principal risks include clinical failure or safety findings, patient-enrollment and regulatory delays, dependence on CROs and single-source suppliers, reliance on D. E. Shaw Research and its Anton 2 supercomputer, intellectual-property uncertainty, competition, and the need for future capital. COVID-19 could disrupt trials or supply, although management said it did not then anticipate a material financial impact. No material litigation was reported.
- The financial-statement auditor issued an unqualified opinion; management and the auditor reported effective internal control over financial reporting at December 31, 2021.
Most important facts for investors to verify
- Review the maturity, response, safety and durability of RLY-4008 results beyond the small interim dataset, including follow-up from expansion cohorts.
- Track RLY-2608 and RLY-1971 clinical data, trial timelines, enrollment and any changes in development responsibilities or collaboration economics.
- Assess cash burn and runway against the stated “into at least 2025” estimate, including expected trial expansion, new facilities and potential financing or dilution.
- Check the assumptions and potential share impact of ZebiAI milestone consideration, its earnout, and the contingent liability reported at year-end.
- Confirm Genentech milestone-payment conditions, the status of the refundable $15 million, and Relay’s eventual decision on the U.S. profit/cost-share option.