Relay Therapeutics, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; filed May 5, 2022. Relay is a clinical-stage precision medicines company with no approved products and no product-sales revenue. Its lead candidates—RLY-4008, RLY-2608 and RLY-1971—were in early clinical development.
Financial performance and position
| Metric | Q1 2022 | Q1 2021 or comparison |
|---|---|---|
| Revenue | $0.4 million | $1.0 million |
| Research and development expense | $51.7 million | $30.6 million |
| General and administrative expense | $16.1 million | $12.7 million |
| Net loss | $62.0 million; $0.57 per share | $42.2 million; $0.47 per share |
| Operating cash flow | $(49.2) million | $46.6 million provided |
| Cash, cash equivalents and investments | $898.2 million | At March 31, 2022 |
At quarter-end, cash and cash equivalents were $119.4 million and investments were $778.7 million. Current assets were $915.8 million and current liabilities were $41.7 million. The company reported no debt outstanding. Accumulated deficit was $830.1 million. There were no product-sales margins to report; the filing does not provide a meaningful gross margin measure.
Changes versus the prior period
- Revenue declined by $0.5 million, primarily because Q1 2021 included revenue associated with transfer of active pharmaceutical ingredient that did not recur.
- R&D expense increased $21.0 million, mainly from higher employee costs, clinical trial activity and preclinical development. Management cited increased headcount and additional clinical trial expense among the principal drivers.
- Net loss increased $19.9 million. Higher operating expenses were partly offset by a $4.6 million noncash gain from a reduction in the fair value of ZebiAI contingent milestone consideration and increased interest income.
- Operating cash flow shifted from $46.6 million provided to $49.2 million used. The prior-year period included a large favorable change in accounts receivable; Q1 2022 cash use primarily reflected the net loss.
- Unrealized investment losses rose to $9.2 million from $1.1 million at year-end 2021, attributed to interest-rate changes, not credit losses. These losses were recorded in other comprehensive loss.
Outlook, commentary and risks
- Management stated that $898.2 million of cash, cash equivalents and investments was expected to fund operating expenses and capital expenditure requirements into at least 2025. This estimate depends on assumptions and could prove incorrect. The financial-statement note separately states that resources would cover planned needs for at least one year from issuance of the statements.
- The company expects expenses to rise as it advances clinical and preclinical programs and continues to expand operations. It anticipates continued losses and will need additional financing over time; no committed external funding source was identified.
- Relay reported that RLY-4008 had received FDA orphan drug designation for cholangiocarcinoma. RLY-2608’s combination dose-escalation arm began in April 2022, after the reporting period. The filing describes early-stage development and emphasizes that preclinical and preliminary clinical results may not predict later outcomes.
- Key risks include clinical failure or delay, patient enrollment and safety issues, reliance on third-party trial and manufacturing providers, single-source supply exposure, and reliance on D. E. Shaw Research and its Anton 2 supercomputer for aspects of the discovery platform. COVID-19, supply-chain constraints, inflation, economic uncertainty and the Russia-Ukraine conflict could also disrupt operations.
- ZebiAI-related contingent milestone liability was $45.7 million at quarter-end; the company recorded a $4.6 million fair-value decrease during the quarter. Up to $85 million of milestone payments may be payable in shares if milestones are achieved. Separate earnout payments of up to $100 million are contingent on qualifying partnership receipts.
- The Genentech agreement provides potential additional milestones and royalties for RLY-1971; terms include a possible U.S. profit/cost-share election. Q1 revenue from the agreement was approximately $0.2 million. No material legal proceedings were reported, and management said disclosure controls were effective.
Important facts for investors to verify
- Whether the stated runway into at least 2025 remains supportable as trial activity, staffing and cash burn evolve, and how to interpret the separate one-year statement in the financial-statement note.
- Updated clinical data, safety, enrollment and development timelines for RLY-4008, RLY-2608 and RLY-1971, including the April 2022 RLY-2608 trial expansion.
- Quarterly cash burn and investment values, including sensitivity to interest rates; the reported investment losses were unrealized and attributed to rates.
- Potential dilution and obligations from ZebiAI milestone shares and earnouts, and the terms and use of the $300 million at-the-market sales facility, under which no shares had been sold as of March 31, 2022.
- Progress and economics of the Genentech and EQRx collaborations, including any future milestones, cost-sharing decisions or changes in partner-led development.