Relay Therapeutics, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. The unaudited filing covers a clinical-stage precision-medicine company with no approved products and no product-sales revenue. Its clinical-stage candidates include RLY-4008, RLY-2608, GDC-1971 (developed by Genentech under collaboration), and RLY-5836.
Financial performance and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $0.1 million | $0.4 million | $0.3 million | $0.8 million |
| Research and development expense | $88.2 million | $60.5 million | $171.0 million | $112.2 million |
| General and administrative expense | $20.1 million | $17.5 million | $39.7 million | $33.5 million |
| Operating loss | $106.1 million | $77.8 million | $207.2 million | $140.5 million |
| Net loss | $98.5 million | $76.8 million | $192.7 million | $138.8 million |
| Net loss per share | $0.81 | $0.71 | $1.59 | $1.28 |
At June 30, 2023, cash and cash equivalents were $145.9 million and investments were $725.7 million, totaling $871.6 million in cash, cash equivalents, and investments. Current assets were $884.3 million against current liabilities of $71.6 million (working capital of approximately $812.8 million). The company reported no debt outstanding. Total liabilities were $151.9 million; stockholders’ equity was $810.1 million.
Cash used in operating activities was $135.7 million for the first half of 2023, versus $106.3 million in the comparable 2022 period. Investing activities provided $126.6 million, mainly from net investment maturities; financing activities provided $3.4 million. Cash, cash equivalents, and restricted cash decreased $5.8 million. No gross margin is meaningful to the company’s current pre-commercial business.
Changes versus the prior period
- Q2 R&D expense increased $27.7 million year over year; first-half expense increased $58.9 million. Management attributed the increases chiefly to clinical-trial enrollment and external trial costs, increased headcount and stock compensation, and added lab-space costs.
- Q2 net loss increased $21.7 million year over year, while first-half net loss increased $53.9 million. Higher interest income partly offset operating losses: first-half interest income was $14.5 million versus $1.7 million in 2022.
- Revenue declined because fewer research and development services were provided under the Genentech agreement after completion of the Phase 1a RLY-1971 trial. Genentech paid $5.0 million during Q2 to satisfy the conditions associated with a previously recorded contract asset.
- Cash, cash equivalents, and investments declined from $998.9 million at December 31, 2022 to $871.6 million at June 30, 2023. Common shares outstanding increased to 121.9 million from 121.1 million.
Outlook, developments, and risks
- Management expects the June 30 cash, cash equivalents, and investments to fund operating expenses and capital requirements into the second half of 2025. This estimate depends on assumptions that could prove incorrect; additional financing will be needed to continue development and potentially commercialize products. No committed external funding source was identified.
- Management expects expenses, particularly R&D, to rise as clinical programs advance. The company has incurred losses since inception, had a $1.3 billion accumulated deficit, and expects continued losses; product revenue and profitability are uncertain.
- After quarter-end, on August 8, 2023, the company reported updated interim RLY-2608 data. In 17 patients receiving 600 mg twice daily with fulvestrant, it reported an interim clinical benefit rate of 86% among seven evaluable patients, one confirmed partial response among five efficacy-evaluable patients with measurable disease, and 15 patients still on treatment at cutoff. Across 24 efficacy-evaluable patients with measurable disease at reported doses, four partial responses were reported, three confirmed. These are interim, company-reported results and are not proof of later-stage benefit or approval.
- Key risks include clinical-trial failure, delays or enrollment challenges, unanticipated safety issues, regulatory and companion-diagnostic requirements, reliance on third-party trial and manufacturing providers, competition, and dependence on D. E. Shaw Research and its Anton 2 supercomputer for aspects of the discovery platform.
- Potential liabilities include ZebiAI contingent consideration of $29.2 million, subject to milestone-related valuation changes, and a $25.0 million Genentech-related liability that may be repayable if Relay exercises its U.S. profit/cost-share option. The filing reports no material litigation and no material subsequent events requiring financial-statement disclosure.
- Management said disclosure controls were effective as of June 30, 2023, with no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether RLY-4008, RLY-2608, and RLY-5836 trial results mature into durable, adequately controlled evidence of safety and efficacy; interim data may change.
- Whether the RLY-4008 regulatory path, including its proposed single-arm study for FGFR2-fusion cholangiocarcinoma, and required companion diagnostics can support approval.
- Whether the projected runway into the second half of 2025 remains achievable as trial spending, enrollment, and other costs evolve, and what financing may be required.
- The terms, timing, and potential dilution of future financing, including the unused $300 million at-the-market facility.
- The progress and economics of Genentech’s GDC-1971 development, including the profit/cost-share decision and related repayment liability.
- The assumptions behind the ZebiAI milestone valuation and the company’s continuing dependence on its D. E. Shaw Research collaboration.