Relay Therapeutics, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; balance-sheet comparisons are to December 31, 2020. The financial statements are unaudited. Relay is a clinical-stage precision-medicines company with no approved products and no product-sales revenue.
Key financial metrics
| Metric | Q1 2021 | Q1 2020 or comparison |
|---|---|---|
| Revenue | $0.95 million | $0 |
| Research and development expense | $30.6 million | $21.7 million |
| General and administrative expense | $12.7 million | $4.8 million |
| Total operating expenses | $43.4 million | $26.5 million |
| Net loss | $42.2 million | $24.9 million |
| Net loss per share, basic and diluted | $0.47 | $5.99 |
| Cash, cash equivalents and investments | $726.1 million at March 31 | $678.1 million at December 31 |
| Net cash from operating activities | $46.6 million provided | $22.3 million used |
| Debt | None outstanding | — |
Revenue was collaboration revenue from Genentech, not product sales. The filing does not provide a clear gross-margin measure; reported revenue is small relative to operating expenses. Operating cash flow benefited substantially from collecting the $75 million Genentech receivable in January, so it should not be read as evidence of positive underlying operating economics. Cash and investments totaled $726.1 million at quarter-end; management estimated available funds, after the $20 million cash portion of the ZebiAI acquisition, would support planned operations into 2024, subject to assumptions. Current liabilities were $16.1 million and total liabilities $38.6 million.
Material changes versus the prior comparable period
- Net loss increased $17.3 million year over year. R&D expense rose $8.9 million, primarily from higher employee costs and stock-based compensation, clinical-trial activity, and outside services. G&A expense rose $8.0 million, mainly from personnel and stock-based compensation and insurance.
- Stock-based compensation increased to $9.7 million from $1.5 million, including $5.5 million in G&A and $4.2 million in R&D.
- Interest income fell to $0.2 million from $1.6 million, primarily due to lower interest rates.
- Quarter-end cash and cash equivalents declined to $262.7 million from $447.6 million, while investments increased to $463.4 million from $230.4 million. The cash-flow statement’s $184.9 million decrease in cash, cash equivalents and restricted cash principally reflects investment purchases net of maturities.
- Common shares outstanding were 90.4 million at March 31, versus 89.9 million at year-end. The filing reports 92.4 million shares outstanding as of May 11, 2021.
Business, outlook and significant developments
- Lead programs RLY-1971 and RLY-4008 were enrolling patients in first-in-human clinical trials. Relay expected its RLY-PI3K1047 program to be in IND-enabling studies by the end of 2021 and reported five additional discovery-stage programs.
- Under the Genentech collaboration for RLY-1971, Relay collected a $75 million upfront payment in January 2021 and received a $5 million IND-transfer milestone in May, after completing the transfer in April. The filing says up to $20 million in near-term payments remained potentially available, along with additional development, commercialization and sales milestones and tiered royalties. Relay may elect a 50/50 U.S. profit/cost share; that choice changes the potential economics.
- On April 15, 2021, Relay entered into an agreement to acquire ZebiAI. Consideration was approximately $85 million upfront—about $20 million cash and $65 million in Relay shares—plus up to $85 million in stock-based milestones and a share of certain ZebiAI-platform partnering proceeds, subject to a $100 million cap. This was a subsequent event, not a Q1 expense.
- On May 12, 2021, Relay amended its D. E. Shaw Research agreement, increasing the annual fee from $7.9 million to approximately $9.9 million starting August 16, 2021. The agreement depends in part on D. E. Shaw Research’s proprietary Anton 2 supercomputer. Q1 R&D expense under the agreement was $1.8 million.
- Management said COVID-19 precautions could affect clinical-trial timelines, but reported continued enrollment and no anticipated enrollment interruptions at the time of filing.
- Relay expects expenses and losses to grow as it advances clinical and preclinical programs, expands operations and bears public-company costs. It has no product-sales revenue and says additional financing may be needed; its runway estimate is based on assumptions and could prove shorter than expected.
Principal risks and contingencies
- Both clinical-stage assets remain early in development. Relay has never completed a clinical trial and warns that preclinical or early clinical findings may not predict later safety or efficacy; trials can be delayed, unsuccessful or halted.
- Patient recruitment, COVID-19 disruption, regulatory requirements—including a potential companion diagnostic for RLY-4008—and reliance on CROs, manufacturers and single-source API suppliers could delay development.
- Relay relies on D. E. Shaw Research for key computational capabilities; termination, service limitations, intellectual-property disputes or rising costs could impair platform development.
- The Genentech agreement may be terminated for convenience by Genentech. Milestones and royalties depend on development, regulatory and commercial outcomes; the U.S. profit/cost-share election entails different costs and returns.
- Relay faces substantial competition, patent and intellectual-property risks, and uncertainty around future financing. Equity financing could dilute shareholders; debt or collaborations could impose restrictions or require rights concessions.
- The filing reports no litigation or legal proceedings that management considered probable to have a material adverse effect as of March 31, 2021, and no material changes to contractual obligations during the quarter.
Important facts for investors to verify
- Progress, enrollment, safety findings and timelines for the RLY-1971 and RLY-4008 trials, and the status of RLY-PI3K1047 IND-enabling work.
- Cash runway assumptions and the effect of ongoing operating costs, the ZebiAI acquisition payments and potential future financing.
- Final ZebiAI purchase adjustments, milestone conditions, share issuance and any proceeds-sharing obligations.
- Genentech milestone conditions, royalty terms, potential additional payments and Relay’s decision deadline and economics for the U.S. profit/cost-share option.
- The increased D. E. Shaw Research annual fee, agreement duration and the company’s reliance on this collaboration.