Relay Therapeutics: A ‘Concept’ Stock (NASDAQ:RLAY)

Today, we put Relay Therapeutics, Inc. (NASDAQ:RLAY) in the spotlight. This clinical-stage precision medicines company has seen several analyst firms reissued Buy ratings on its stock so far in June. Cantor Fitzgerald also mentioned the company as a potential buyout target in March of this year. An analysis follows below.

Relay Therapeutics is headquartered just outside of Boston in Cambridge, MA. The company is focused on developing small molecule drug candidates targeting oncology and genetic disease indications. The stock currently trades just under seven bucks a share and sports an approximate market capitalization of $920 million.

The company’s develops candidates off its proprietary Dynamo Platform. Management believes using this method results in lower risk candidates targeting unmet medical needs. Leadership describes this platform as being capable of

“integrating an array of leading-edge computational and experimental approaches designed to drug protein targets that have previously been intractable or inadequately addressed.”

The company believes this approach can reduce the time to identify a viable candidate from 3 to 5 years, generally, to 18 to 24 months. An excellent article on Seeking Alpha earlier this year goes into granular detail on Relay’s developmental vision and process.

Most of the company’s pipeline consists of pre-clinical or early-stage drug candidates.

Relay Therapeutics is moving several candidates that have potentially large target markets into clinical stage development.

One of Relay Therapeutics few somewhat advanced programs is around a compound called RLY-2608. This compound is being look at part of combination therapies to treat PI3Kα-mutant, HR+, HER2- locally advanced or metastatic breast cancer.

The company is currently enrolling a study to evaluate RLY-2608 as part of a combination therapy with fulvestrant. RLY-2608 as designed to selectively inhibit the mutant form of PI3K-alpha. Data from earlier efforts around this two-drug combination therapy was encouraging (above). Updated data should be out later this year. Safety data from a trial with fulvestrant, RLY2608 and ribociclib for this indication should also be out in the second half of 2024.

If all goes well, a clinical start to the triplet combination should commence by yearend. If successful, a pivotal trial evaluating this combination could theoretically begin before the end of 2025.

Relay is also developing an FGFR inhibitor called lirafugratinib, or RLY-4008. This candidate showed positive phase 1 study results to treat intrahepatic cholangiocarcinoma, a form of bile duct cancer. An article posted in November on Seeking Alpha was quite positive on RLY-4008’s potential.

Analyst Commentary & Balance Sheet:

The analyst community is universally positive about the prospects right now. Since first quarter numbers were posted in early May, eight analyst firms including Oppenheimer and Stifel Nicolaus have reissued/assigned Buy/Overweight ratings on the stock. Price targets proffered range from $15 to $28 a share. Barclays ($15 price target) upgraded the stock to an Overweight rating on May 10th based on its risk/reward profile. The analyst there stated the company had an

“‘attractive’ catalyst path for the stock in the second half of the year, including updated data for its lead program RLY-2608 in the treatment of breast cancer.”

The company posted a net loss of $81.4 million for the first quarter but ended the quarter with nearly $750 million worth of cash and marketable securities on its balance sheet. Management stated this is sufficient to fund all planned operational activities into the second half of 2026.

Conclusion:

Relay Therapeutics, Inc. has multiple “shots on goal,” strong analyst support, and the stock is trading at less than $200 million above the net cash on its balance sheet. That said, the company is burning cash at a prodigious rate. In addition, the equity is more a “concept” stock right now, in many ways more than a clinical stage concern.

The company seems to be throwing many things at the wall to see what sticks. Obviously, the breast cancer market is a huge and growing market. However, there are already numerous established treatments by several drug giants and continuing developmental efforts by established oncology firms as well as potential new entrants.

Relay Therapeutics, Inc. is some years (and most likely at least one more capital raise) from any potential commercialization. Analyst firms seem positive on Relay’s developmental approach, but I would like to see additional positive data from more advanced studies. I then might get as enthusiastic as the analyst community seems to be around Relay Therapeutics and take a position in the stock. The company is intriguing enough that I will likely circle back on this name sometime in 2025 as more trial data is disclosed.