rlay-10q_20210331.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March, 31, 2021

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                  to                 

Commission File Number: 001-39385

 

RELAY THERAPEUTICS, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

 

47-3923475

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification No.)

 

399 Binney Street, 2nd Floor

Cambridge, MA

 

02139

(Address of principal executive offices)

 

(Zip Code)

 

(617) 370-8837

Registrant’s telephone number, including area code

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange

on which registered

Common Stock, par value $0.001 per share

 

RLAY

 

Nasdaq Global Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No   

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

  

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of May 11, 2021, the registrant had 92,382,360 shares of common stock, $0.001 par value per share, outstanding.

 

 

 

 

 


 

Table of Contents

 

 

 

 

Page

PART I.

 

FINANCIAL INFORMATION

 

 

Item 1.

 

Financial Statements (Unaudited)

 

1

 

 

Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020

 

1

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2021 and 2020

 

2

 

 

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the three months ended March 31, 2021 and 2020

 

3

 

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020

 

4

 

 

Notes to Condensed Consolidated Financial Statements

 

5

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

12

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

20

Item 4.

 

Controls and Procedures

 

20

PART II.

 

OTHER INFORMATION

 

21

Item 1.

 

Legal Proceedings

 

21

Item 1A.

 

Risk Factors

 

21

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

60

Item 5.

 

Other Information

 

60

Item 6.

 

Exhibits

 

61

Signatures

 

62

 

 

i


 

SUMMARY OF THE MATERIAL RISKS ASSOCIATED WITH OUR BUSINESS

We have never successfully completed any clinical trials, and we may be unable to do so for any product candidates we develop. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.

If we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented.

Positive results from early preclinical studies of our product candidates are not necessarily predictive of the results of later preclinical studies and any future clinical trials of our product candidates. If we cannot replicate the positive results from our earlier preclinical studies of our product candidates in our later preclinical studies and future clinical trials, we may be unable to successfully develop, obtain regulatory approval for and commercialize our product candidates.

Our current or future clinical trials may reveal significant adverse events not seen in our preclinical or nonclinical studies and may result in a safety profile that could inhibit regulatory approval or market acceptance of any of our product candidates.

Although we intend to explore other therapeutic opportunities, in addition to the product candidates that we are currently developing, we may fail to identify viable new product candidates for clinical development for a number of reasons. If we fail to identify additional potential product candidates, our business could be materially harmed.

The incidence and prevalence for target patient populations of our product candidates have not been established with precision. If the market opportunities for our product candidates are smaller than we estimate or if any approval that we obtain is based on a narrower definition of the patient population, our revenue and ability to achieve profitability will be adversely affected, possibly materially.

We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.

If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals for our product candidates, we will not be able to commercialize, or will be delayed in commercializing, our product candidates, and our ability to generate revenue will be materially impaired.

Under our Amended and Restated Collaboration and License Agreement, or the DESRES Agreement, with D. E. Shaw Research, LLC, or D. E. Shaw Research, we collaborate with D. E. Shaw Research to rapidly develop various protein models, a process that depends on D. E. Shaw Research’s use of their proprietary supercomputer, Anton 2. A termination of the DESRES Agreement could have a material adverse effect on our business, financial condition, results of operations, and prospects.

We rely on third parties to conduct our ongoing clinical trials of RLY-1971 and RLY-4008 and expect to rely on third parties to conduct future clinical trials, as well as investigator-sponsored clinical trials of our product candidates. If these third parties do not successfully carry out their contractual duties, comply with regulatory requirements or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our product candidates and our business could be substantially harmed.

We may enter into collaborations with third parties for the research, development, manufacture and commercialization of one or more of our programs or product candidates. If these collaborations are not successful, our business could be adversely affected.

We are a biopharmaceutical company with a limited operating history. We have incurred significant operating losses since our inception and anticipate that we will incur continued losses for the foreseeable future. We have no products approved for commercial sale and have not generated any revenue from product sales.

We will need to raise substantial additional funding. If we are unable to raise capital when needed, we would be forced to delay, reduce or eliminate some of our product development programs or commercialization efforts.

A pandemic, epidemic, or outbreak of an infectious disease, such as COVID-19, may materially and adversely affect our business and our financial results and could cause a disruption to the development of our product candidates.

If we are unable to adequately protect our proprietary technology or obtain and maintain patent protection for our technology and products or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully commercialize our technology and products may be impaired.

Even if we receive regulatory approval for any of our product candidates, we will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense. Additionally, our product candidates, if approved, could be subject to post-market study requirements, marketing and labeling restrictions, and even recall or market withdrawal if unanticipated safety issues are discovered following approval. In addition, we may be subject to penalties or other enforcement action if we fail to comply with regulatory requirements.

We are an “emerging growth company” as defined in the JOBS Act and a “smaller reporting company” as defined in the Securities Exchange Act of 1934, as amended, or the Exchange Act, and may avail ourselves of reduced disclosure requirements applicable to emerging growth companies and smaller reporting companies, which could make our common stock less attractive to investors and adversely affect the market price of our common stock.

ii


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains express or implied forward-looking statements that are based on our management’s belief and assumptions and on information currently available to our management. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future operational or financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

the initiation, timing, progress, results, and cost of our research and development programs and our current and future preclinical and clinical studies, including statements regarding the timing of initiation and completion of studies or trials and related preparatory work, the period during which the results of the trials will become available, and our research and development programs;

our ability to identify research priorities and apply a risk-mitigated strategy to efficiently discover and develop product candidates, including by applying learnings from one program to other programs and from one modality to our other modalities;

our ability and the potential to successfully manufacture our drug substances, delivery vehicles, and product candidates for preclinical use, for clinical trials and on a larger scale for commercial use, if approved;

the ability and willingness of our third-party strategic collaborators to continue research and development activities relating to our development candidates and product candidates;

our ability to obtain funding for our operations necessary to complete further development and commercialization of our product candidates;

our ability to obtain and maintain regulatory approval of our product candidates;

our ability to commercialize our products, if approved;

the pricing and reimbursement of our product candidates, if approved;

the implementation of our business model, and strategic plans for our business, product candidates, and technology;

the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates and technology;

estimates of our future expenses, revenues, capital requirements, and our needs for additional financing;

the potential benefits of strategic collaboration agreements, our ability to enter into strategic collaborations or arrangements, and our ability to attract collaborators with development, regulatory and commercialization expertise;

future agreements with third parties in connection with the commercialization of product candidates and any other approved product;

the size and growth potential of the markets for our product candidates, and our ability to serve those markets;

our financial performance;

the rate and degree of market acceptance of our product candidates;

regulatory developments in the United States and foreign countries;

our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;

our ability to produce our products or product candidates with advantages in turnaround times or manufacturing cost;

the success of competing therapies that are or may become available;

our ability to attract and retain key scientific or management personnel;

the impact of laws and regulations;

developments relating to our competitors and our industry;

the effect of the COVID-19 pandemic, including mitigation efforts and economic effects, on any of the foregoing or other aspects of our business operations, including but not limited to our preclinical studies and future clinical trials; and

other risks and uncertainties, including those listed under the caption “Risk Factors.”

In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties, and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed above under “Summary of the Material Risks Associated with Our Business” and under the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual

iii


events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance. You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed with the Securities and Exchange Commission as exhibits hereto completely and with the understanding that our actual future results may be materially different from any future results expressed or implied by these forward-looking statements.

The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this Quarterly Report on Form 10-Q. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should therefore not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q.

This Quarterly Report on Form 10-Q also contains estimates, projections and other information concerning our industry, our business and the markets for our product candidates. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, we obtained this industry, business, market, and other data from our own internal estimates and research as well as from reports, research surveys, studies, and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources. While we are not aware of any misstatements regarding any third-party information presented in this Quarterly Report on Form 10-Q, their estimates, in particular as they relate to projections, involve numerous assumptions, are subject to risks and uncertainties and are subject to change based on various factors, including those discussed under the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q.

 

 

iv


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Relay Therapeutics, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

March 31,

2021

 

 

December 31,

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

262,720

 

 

$

447,646

 

Investments

 

 

463,355

 

 

 

230,415

 

Accounts receivable

 

 

 

 

 

75,000

 

Contract asset

 

 

8,606

 

 

 

7,654

 

Prepaid expenses and other current assets

 

 

7,753

 

 

 

9,385

 

Total current assets

 

 

742,434

 

 

 

770,100

 

Property and equipment, net

 

 

5,907

 

 

 

6,250

 

Operating lease assets

 

 

22,127

 

 

 

22,579

 

Restricted cash

 

 

878

 

 

 

878

 

Other assets

 

 

 

 

 

22

 

Total assets

 

$

771,346

 

 

$

799,829

 

Liabilities, Convertible Preferred Stock, and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

5,593

 

 

$

6,351

 

Accrued expenses and other current liabilities

 

 

8,867

 

 

 

5,760

 

Operating lease liabilities

 

 

1,623

 

 

 

1,521

 

Total current liabilities

 

 

16,083

 

 

 

13,632

 

Operating lease liabilities, net of current portion

 

 

22,477

 

 

 

22,901

 

Restricted stock liability

 

 

 

 

 

3

 

Total liabilities

 

 

38,560

 

 

 

36,536

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Undesignated preferred stock, $0.001 par value, 10,000,000 shares authorized as of

   March 31, 2021 and December 31, 2020; no shares issued and outstanding at

   March 31, 2021 and December 31, 2020

 

 

 

 

 

 

Common stock, $0.001 par value; 150,000,000 shares authorized at

   March 31, 2021 and December 31, 2020; 90,428,554 and 89,991,324 shares

   issued at March 31, 2021 and December 31, 2020, respectively; 90,428,554

   and 89,906,835 shares outstanding at March 31, 2021 and December 31, 2020,

   respectively

 

 

90

 

 

 

90

 

Additional paid-in capital

 

 

1,179,096

 

 

 

1,167,367

 

Accumulated other comprehensive income

 

 

12

 

 

 

64

 

Accumulated deficit

 

 

(446,412

)

 

 

(404,228

)

Total stockholders’ equity

 

 

732,786

 

 

 

763,293

 

Total liabilities, convertible preferred stock, and stockholders’ equity

 

$

771,346

 

 

$

799,829

 

 

See accompanying notes.

1


Relay Therapeutics, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share data)

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

Revenue:

 

 

 

 

 

 

 

 

Collaboration revenue

 

$

952

 

 

$

 

Total revenue

 

 

952

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development expenses

 

$

30,622

 

 

$

21,700

 

General and administrative expenses

 

 

12,735

 

 

 

4,758

 

Total operating expenses

 

 

43,357

 

 

 

26,458

 

Loss from operations

 

 

(42,405

)

 

 

(26,458

)

Other income (expense):

 

 

 

 

 

 

 

 

Interest income

 

 

226

 

 

 

1,572

 

Other expense

 

 

(5

)

 

 

 

Total other income (expense), net

 

 

221

 

 

 

1,572

 

Net loss

 

$

(42,184

)

 

$

(24,886

)

Net loss per share, basic and diluted

 

$

(0.47

)

 

$

(5.99

)

Weighted average shares of common stock, basic and diluted

 

 

90,197,579

 

 

 

4,153,791

 

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

Unrealized holding (loss) gain

 

 

(52

)

 

 

1,069

 

Total other comprehensive (loss) income

 

 

(52

)

 

 

1,069

 

Total comprehensive loss

 

$

(42,236

)

 

$

(23,817

)

 

See accompanying notes.

 

2


 

Relay Therapeutics, Inc.

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(In thousands, except share and per share data)

(Unaudited)

 

 

 

Convertible Preferred

Stock

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

Equity

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Par value

 

 

Capital

 

 

Income

 

 

Deficit

 

 

(Deficit)

 

Balances at December 31, 2020

 

 

 

 

$

 

 

 

89,906,835

 

 

$

90

 

 

$

1,167,367

 

 

$

64

 

 

$

(404,228

)

 

$

763,293

 

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

437,230

 

 

 

 

 

 

2,055

 

 

 

 

 

 

 

 

 

2,055

 

Vesting of restricted common stock

 

 

 

 

 

 

 

 

84,489

 

 

 

 

 

 

3

 

 

 

 

 

 

 

 

 

3

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,671

 

 

 

 

 

 

 

 

 

9,671

 

Unrealized loss on investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(52

)

 

 

 

 

 

(52

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(42,184

)

 

 

(42,184

)

Balances at March 31, 2021

 

 

 

 

$

 

 

 

90,428,554

 

 

$

90

 

 

$

1,179,096

 

 

$

12

 

 

$

(446,412

)

 

$

732,786

 

 

 

 

 

Convertible Preferred

Stock

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

Equity

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Par value

 

 

Capital

 

 

Income

 

 

Deficit

 

 

(Deficit)

 

Balances at December 31, 2019

 

 

212,642,857

 

 

$

537,781

 

 

 

4,037,476

 

 

$

4

 

 

$

8,715

 

 

$

325

 

 

$

(189,482

)

 

$

(180,438

)

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

85,845

 

 

 

 

 

351

 

 

 

 

 

 

 

 

351

 

Vesting of restricted common stock

 

 

 

 

 

 

 

 

210,516

 

 

 

 

 

 

98

 

 

 

 

 

 

 

 

 

98

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,455

 

 

 

 

 

 

 

 

 

1,455

 

Unrealized gain on investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,069

 

 

 

 

 

 

1,069

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(24,886

)

 

 

(24,886

)

Balances at March 31, 2020

 

 

212,642,857

 

 

$

537,781

 

 

 

4,333,837

 

 

$

4

 

 

$

10,619

 

 

$

1,394

 

 

$

(214,368

)

 

$

(202,351

)

 

See accompanying notes.

 

 

3


 

Relay Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(42,184

)

 

$

(24,886

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

9,671

 

 

 

1,455

 

Depreciation expense

 

 

919

 

 

 

859

 

Net amortization of premiums and discounts on investments

 

 

153

 

 

 

(321

)

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

1,632

 

 

 

261

 

Lease assets and liabilities, net

 

 

130

 

 

 

105

 

Accounts payable

 

 

(811

)

 

 

(2,338

)

Accrued expenses and other liabilities

 

 

3,060

 

 

 

2,531

 

Accounts receivable

 

 

75,000

 

 

 

 

Contract asset

 

 

(952

)

 

 

 

Other assets

 

 

22

 

 

 

 

Net cash provided by (used in) operating activities

 

 

46,640

 

 

 

(22,334

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(476

)

 

 

(1,020

)

Purchases of investments

 

 

(619,320

)

 

 

(55,609

)

Proceeds from maturities of investments

 

 

386,175

 

 

 

107,000

 

Net cash provided by (used in) investing activities

 

 

(233,621

)

 

 

50,371

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock upon exercise of stock options

 

 

2,055

 

 

 

351

 

Net cash provided by financing activities

 

 

2,055

 

 

 

351

 

Net (decrease) increase in cash, cash equivalents and restricted cash

 

 

(184,926

)

 

 

28,388

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

448,524

 

 

 

42,832

 

Cash, cash equivalents and restricted cash at end of period

 

$

263,598

 

 

$

71,220

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Property and equipment additions included in accounts payable and accrued expenses

 

$

100

 

 

$

51

 

Reclassification of restricted stock liability to additional paid-in capital

 

$

3

 

 

$

98

 

 

Reconciliation of Cash, Cash Equivalents and Restricted Cash from Balance Sheets to Statement of Cash Flows

 

 

 

March 31,

2021

 

 

March 31,

2020

 

Cash and cash equivalents

 

$

262,720

 

 

$

70,342

 

Restricted cash

 

 

878

 

 

 

878

 

Total cash, cash equivalents and restricted cash as shown on condensed consolidated

   statements of cash flows

 

$

263,598

 

 

$

71,220

 

 

See accompanying notes.

 

4


 

Relay Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements

(In thousands, except share and per share data)

(Unaudited)

1. Nature of Business and Basis of Presentation

Relay Therapeutics, Inc. (the “Company”) was incorporated in Delaware on May 4, 2015 and is headquartered in Cambridge, Massachusetts. The Company is a clinical-stage, precision medicines company transforming the drug discovery process with the goal of bringing life-changing therapies to patients. The Company is among the first of a new breed of biotech created at the intersection of disparate disciplines. The Company’s Dynamo™ platform integrates an array of leading-edge computational and experimental approaches to effectively drug protein targets that have previously been intractable. The Company’s initial focus is on enhancing small molecule therapeutic discovery in targeted oncology and genetic disease. The Company is advancing its pipeline of medicines to address targets in precision oncology, including its lead product candidates, RLY-4008 and RLY-1971, as well as its PI3Kα mutant selective program, known as the RLY-PI3K1047 program. The Company initiated a Phase 1 clinical trial for RLY-1971 in patients with advanced solid tumors in the first quarter of 2020 and a first-in-human clinical trial of RLY-4008 enriched for patients with advanced solid tumors having oncogenic FGFR2 alterations in the third quarter of 2020. In December 2020, the Company entered into the Collaboration and License Agreement (the “Genentech Agreement”) with Genentech, Inc. (“Genentech”), a member of the Roche Group, for the development and commercialization of RLY-1971, as further discussed in Note 5.

The Company is subject to risks common to companies in the biotechnology industry including, but not limited to, new technological innovations, protection of proprietary technology, dependence on key personnel, compliance with government regulations and the need to obtain additional financing. Product candidates currently under development will require significant additional research and development efforts, including extensive pre-clinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance-reporting capabilities.

The Company’s product candidates are in development. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees and consultants.

The Company has devoted substantially all of its resources to developing its product candidates, including RLY-1971 and RLY-4008, and the RLY-PI3K1047 program by developing its innovative computational and experimental approaches on protein motion, building its intellectual property portfolio, business planning, raising capital and providing general and administrative support for these operations.

The Company has incurred net operating losses since inception and had an accumulated deficit of $446,412 as of March 31, 2021. The Company expects that its existing cash, cash equivalents and investments as of March 31, 2021 will enable it to fund its planned operating expenses and capital expenditure requirements for at least one year from the date of the issuance of these condensed consolidated financial statements. The future viability of the Company is dependent on its ability to generate cash from operating activities or to raise additional capital to finance its operations. The Company’s failure to raise capital as and when needed could have a material adverse effect on its financial condition and ability to pursue its business strategies. The Company may not be able to obtain financing on acceptable terms, or at all, and the Company may not be able to enter into license or collaboration arrangements or obtain government grants. The terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders. If the Company is unable to obtain funding, the Company could be forced to delay, reduce or eliminate its research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects. In the event the Company requires additional funding, there can be no assurance that it will be successful in obtaining sufficient funding on terms acceptable to the Company to fund its continuing operations, if at all.

2. Significant Accounting Policies

Basis of presentation

The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim information and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for reporting on Form 10-Q. The Company’s condensed consolidated financial statements include the accounts of Relay Therapeutics, Inc. and its wholly-owned subsidiary, Relay Therapeutics Securities Corporation. All intercompany balances and transactions have been eliminated.

Unaudited Interim Financial Information

The accompanying condensed consolidated balance sheet as of March 31, 2021, the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2021 and 2020, the condensed consolidated statements of convertible preferred

5


stock and stockholders’ equity (deficit) for the three months ended March 31, 2021 and 2020, and the condensed consolidated statements of cash flows for the three months ended March 31, 2021 and 2020 are unaudited. The unaudited condensed consolidated interim financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s condensed consolidated financial position as of March 31, 2021 and the condensed consolidated results of its operations and cash flows for the three months ended March 31, 2021 and 2020. The condensed consolidated financial data and other information disclosed in these notes related to the three months ended March 31, 2021 and 2020 are unaudited. The condensed consolidated results for the three months ended March 31, 2021 are not necessarily indicative of results to be expected for the year ending December 31, 2021, any other interim periods, or any future year or period.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, the accrual of research and development and manufacturing expenses, the valuation of equity instruments, the determination of the transaction price and standalone selling price of performance obligations under Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, and the incremental borrowing rate for determining the operating lease assets and liabilities. Estimates are periodically reviewed in light of changes in circumstances, facts and experience.

The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition, including expenses, clinical trials and research and development costs, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat COVID-19, as well as the economic impact on local, regional, national and international markets. The Company has made estimates of the impact of COVID-19 within its financial statements and there may be changes to those estimates in future periods. Actual results could differ from the Company’s estimates.

Recently Adopted Accounting Pronouncements

Effective January 1, 2021, the Company adopted Accounting Standards Update (“ASU”) No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-16). This standard amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity and amends the related earnings per share (“EPS”) guidance. The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements or disclosures.

Effective January 1, 2021, the Company adopted ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify the accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends certain aspects of the existing guidance to improve consistent application. The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements or disclosures.

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This standard requires that credit losses be reported using an expected losses model rather than the incurred losses model that is currently used, and it establishes additional disclosure requirements related to credit risks. For available-for-sale securities with expected credit losses, this standard now requires allowances to be recorded instead of reducing the amortized cost of the investment.

In November 2019, the FASB subsequently issued ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, (“ASU 2019-10”) whereby the effective date of this standard for smaller reporting companies was deferred to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and early adoption is still permitted. The Company is assessing the impact of ASU 2016-13 on the condensed consolidated financial statements and does not expect it to have a material impact.

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that the Company adopts as of the specified effective date. The Company qualifies as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 and has elected to use the extended transition period related to complying with new or revised accounting standards, which means that when a standard is issued or revised and it has different effective dates for public and nonpublic companies, the Company can adopt the new or revised standard at the time nonpublic companies adopt the new or revised standard and can do so until such time that the Company either (i) irrevocably elects to “opt out” of such extended transition period or (ii) no longer qualifies as an emerging growth company.

6


3. Fair Value of Financial Assets

The following tables present information about the Company’s financial assets measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values:

 

 

 

Fair Value Measurements as of

March 31, 2021:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

262,220

 

 

$

 

 

$

 

 

$

262,220

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

US treasury bills

 

 

 

 

 

233,402

 

 

 

 

 

 

233,402

 

US agency securities

 

 

 

 

 

229,953

 

 

 

 

 

 

229,953

 

Total investments

 

 

 

 

 

463,355

 

 

 

 

 

 

463,355

 

Total

 

$

262,220

 

 

$

463,355

 

 

$

 

 

$

725,575

 

 

 

 

Fair Value Measurements as of

December 31, 2020:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

447,146

 

 

$

 

 

$

 

 

$

447,146

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

US treasury bills

 

 

 

 

 

33,026

 

 

 

 

 

 

33,026

 

US agency securities

 

 

 

 

 

197,389

 

 

 

 

 

 

197,389

 

Total investments

 

 

 

 

 

230,415

 

 

 

 

 

 

230,415

 

Total

 

$

447,146

 

 

$

230,415

 

 

$

 

 

$

677,561

 

 

In determining the fair value of its investments at each date presented above, the Company relied on quoted prices for similar securities in active markets or using other inputs that are observable or can be corroborated by observable market data. The Company did not have any financial assets or liabilities that required Level 3 inputs during any of the periods presented in the accompanying condensed consolidated financial statements.

4. Investments

 

The fair value of available-for-sale investments by type of security was as follows:

 

 

 

March 31, 2021

 

 

 

Amortized

Cost

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair

Value

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S treasury bills

 

$

42,198

 

 

$

10

 

 

$

 

 

$

42,208

 

U.S agency securities

 

 

48,997

 

 

 

9

 

 

 

 

 

 

 

49,006

 

Total investments with a maturity of one year or less

 

 

91,195

 

 

 

19

 

 

 

 

 

 

91,214

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S treasury bills

 

 

191,234

 

 

 

 

 

 

 

(40

)

 

 

191,194

 

U.S agency securities

 

 

180,914

 

 

 

33

 

 

 

 

 

 

 

180,947

 

Total investments with a maturity of one to two years

 

 

372,148

 

 

 

33

 

 

 

(40

)

 

 

372,141

 

Total investments

 

$

463,343

 

 

$

52

 

 

$

(40

)

 

$

463,355

 

7


 

 

 

 

December 31, 2020

 

 

 

Amortized

Cost

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair

Value

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S treasury bills

 

$

29,997

 

 

$

21

 

 

$

 

 

$

30,018

 

U.S agency securities

 

 

20,996

 

 

5

 

 

 

 

 

 

21,001

 

Total investments with a maturity of one year or less

 

 

50,993

 

 

 

26

 

 

 

 

 

 

51,019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S treasury bills

 

 

3,008

 

 

 

 

 

 

 

 

 

3,008

 

U.S agency securities

 

 

176,350

 

 

38

 

 

 

 

 

 

176,388

 

Total investments with a maturity of one to two years

 

 

179,358

 

 

 

38

 

 

 

 

 

 

179,396

 

Total investments

 

$

230,351

 

 

$

64

 

 

$

 

 

$

230,415

 

 

5. Collaboration and License Arrangement with Genentech

On December 11, 2020, the Company entered into the Genentech Agreement, which granted Genentech a license to develop and commercialize RLY-1971. RLY-1971 is currently being developed in a Phase 1a clinical trial for patients with advanced solid tumors (the “Phase 1a Trial”). Unless Genentech elects to exercise its option to conduct the remainder of the ongoing Phase 1a Trial, the Company is responsible for the completion of this trial. Genentech is responsible for conducting all subsequent clinical development of RLY-1971. The Company is also responsible for the one-time transfer of the active pharmaceutical ingredient (“API”) and other materials related to RLY-1971 to Genentech.

Under the Genentech Agreement, the Company received a non-refundable upfront payment of $75,000, which was due upon completion of certain technology transfer activities and was reflected as accounts receivable on the consolidated balance sheet at December 31, 2020. The Company collected this amount in full in January 2021. In April 2021, the Company completed the transfer of the Investigational New Drug ("IND") application for RLY-1971 to Genentech upon which the Company received payment for the associated non-refundable milestone payment of $5,000 in May 2021. The Company is eligible to receive up to $20,000 in additional near-term milestone payments. The Company is also eligible to receive up to an aggregate of an additional $695,000 upon the achievement of specified development, commercialization and sales-based milestones for RLY-1971 worldwide as well as tiered royalties ranging from low-to-mid teens on annual worldwide net sales of RLY-1971, on a country-by-country basis, subject to reduction in certain circumstances.

The Company has the option, exercisable one time at the Company’s sole discretion, to (a) fund half of the development costs of RLY-1971 in the United States, (b) share half of the net profits or net loss of commercializing RLY-1971 in the U.S. (the “Profit/Cost Share”) and (c) be eligible to receive up to an aggregate of an additional $410,000 upon the achievement of specified commercialization and sales-based milestones for RLY-1971 outside of the United States and tiered royalties ranging from low-to-mid teens on annual net sales of RLY-1971 outside of the United States, on a country-by-country basis, subject to reduction in certain circumstances. The Company may elect to opt-out of further participation in the Profit/Cost Share at any time prior to the third anniversary of the first commercial sale of RLY-1971 in the U.S, in which case the financial terms would revert to the terms applicable as if the Company had not opted into the Profit/Cost Share as of the effective opt-out date.

Genentech may terminate the Genentech Agreement for convenience and the Company may terminate the Genentech Agreement under certain limited circumstances. Unless otherwise terminated, the Genentech Agreement will remain in effect until the expiration of all Genentech’s royalty payment obligations to the Company.

Accounting Analysis

Identification of the Contract

The Company concluded that Genentech is a customer in this arrangement and as such, the arrangement falls within the scope of the revenue recognition guidance in ASC 606.

Identification of Performance Obligations

At the commencement of the Genentech Agreement, the Company identified the following performance obligations in the agreement:

 

License to develop and commercialize RLY-1971 and the related know-how;

 

Research and development services to complete the Phase 1a Trial for RLY-1971; and

 

Transfer of API and other materials related to RLY-1971

8


 

The Company determined that the performance obligations outlined above are both capable of being distinct and distinct within the context of the contract given such rights and activities are independent of each other. The license can be used by Genentech without the research and development services or API outlined above, and similarly those services and inventory provide distinct benefit to Genentech within the context of the contract, separate from the license.

Determination of Transaction Price

The Company determined the transaction price for the Genentech Agreement to be $85,720, which includes both fixed and variable consideration amounts. The total transaction price of $85,720 is comprised of (i) the $75,000 fixed, non-refundable upfront payment, (ii) a $5,000 non-refundable milestone payment due upon the transfer of the IND application to Genentech, (iii) a $5,000 non-refundable milestone payment due upon completion of the Phase 1a Trial for RLY-1971 and (iv) $720 of estimated variable consideration related to reimbursements due from Genentech for research and development services. No additional development milestone payments and no regulatory milestone payments are included in the transaction price as all such payments are fully constrained. As part of management’s evaluation of the constraint, the Company considered numerous factors, including the consideration that achievement of the milestones is outside of the Company’s control, contingent upon Genentech’s efforts and the receipt of regulatory approval and subject to scientific risks of success.

Allocation of Transaction Price to Performance Obligations

The Company allocated the transaction price of $85,720 based on the stand-alone selling prices (“SSP”) of each of the performance obligations as follows:

 

$82,512 million for the transfer of the license

 

$2,891 million for research and development services; and

 

$317 million for the transfer of API.

The SSP for the license was determined using an approach that considered discounted, probability-weighted cash flows related to the license transferred. The Company also reviewed comparable market transactions in determining the SSP of the license. The SSP for the research and development services as well as the transfer of API were based on estimates of the associated effort and cost of these services and cost to manufacture API, adjusted for a reasonable profit margin that would be expected to be realized under similar contracts.

Recognition of Revenue

The Company is recognizing revenue for each of the three performance obligations as follows:

 

The Company recognized revenue related to the license at a point in time upon transfer of the license to Genentech. The Company recognized the full amount allocated to the license and related know-how in the fourth quarter of 2020 because the Company had transferred the license upon execution of the Genentech Agreement.

 

The Company is satisfying the research and development performance obligation for RLY-1971 as the research and development services are performed. The research and development services performance obligation consists of the Company completing the Phase 1a clinical trial initiated in the first quarter of 2020. The Company recognizes revenue related to the research and development services over time using a cost-based input method by calculating actual costs incurred to date at each period end relative to total estimated costs expected to be incurred to fulfill the performance obligation. Revenue recognized during the three months ended March 31, 2021 related to the R&D services amounts to $778.

 

The Company recognized the full amount of revenue allocated to the transfer of API in the first quarter of 2021 upon transfer to Genentech in the amount of $317. There was no revenue recognized related to this performance obligation during the year ended December 31, 2020.  

During the three months ended March 31, 2021, the Company recognized an aggregate of $952 of revenue from the Genentech Agreement related to the R&D services and the transfer of inventory to Genentech. At March 31, 2021, the Company recorded a contract asset in the amount of $8,606, which is classified as a current asset, on the balance sheet. The contract asset relates to the amount of revenue recognized for which the right to payment is contingent upon conditions other than the passage of time, such as the completion of future milestone activities.

6. Common Stock

The Company issued restricted shares of common stock to its founders and non-employees. In addition, the Company issued restricted shares of common stock upon the early exercise of stock options under the Company’s 2016 Stock Option and Grant Plan (the “2016 Stock Plan”). The restrictions on the common shares generally lapse over four years. The Company included the proceeds from the sale of the restricted shares of common stock as a restricted stock liability on the accompanying condensed consolidated balance sheets. Amounts are reclassified to additional paid-in capital as the restrictions lapse. The Company has the right to repurchase any unvested shares of restricted common stock at the original cost in the event of termination.

9


 

7. Share-Based Payments

In 2016, the Company adopted the 2016 Stock Plan. On July 8, 2020, the Company’s stockholders approved the 2020 Stock Option and Incentive Plan (the “2020 Stock Plan”), which became effective on the date immediately prior to the effectiveness of the Company’s registration statement on Form S-1 for its IPO. The 2020 Stock Plan provides for the issuance of up to 8,376,080 of share-based awards.

Subsequent to July 20, 2020, no further awards will be made under the 2016 Stock Plan and all future equity-based awards are granted under the 2020 Stock Plan. To the extent outstanding options granted under the 2016 Plan are cancelled, forfeited or otherwise terminated without being exercised and would otherwise have been returned to the share reserve under the 2016 Plan, the number of shares underlying such awards will be available for future grant under the 2020 Stock Plan. All of the Company’s employees, officers, directors and consultants are eligible to be granted options, restricted stock units and other stock-based awards under the terms of the 2020 Stock Plan. There were 11,252,710 share-based awards available for grant at March 31, 2021.

Stock-based compensation expense included in the Company’s condensed consolidated statements of operations and comprehensive loss is as follows:

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

Research and development expenses

 

$

4,151

 

 

$

897

 

General and administrative expenses

 

 

5,520

 

 

 

558

 

 

 

$

9,671

 

 

$

1,455

 

 

As of March 31, 2021, total unrecognized compensation cost related to the unvested stock options was $134,829, which is expected to be recognized over a weighted average period of 2.84 years.

8. Net Loss Per Share

The following table summarizes the computation of basic and diluted net loss per share of the Company:

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

Net loss

 

$

(42,184

)

 

$

(24,886

)

Net loss per share, basic and diluted

 

$

(0.47

)

 

$

(5.99

)

Weighted average shares of common stock, basic and diluted

 

 

90,197,579

 

 

 

4,153,791

 

 

The Company’s potentially dilutive securities, which include Convertible Preferred Stock (prior to the IPO), options to purchase common stock, restricted stock units and unvested restricted stock, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share is the same. The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

Convertible preferred stock

 

 

 

 

 

59,883,877

 

Options to purchase common stock

 

 

8,529,232

 

 

 

7,389,770

 

Restricted stock units

 

 

357,654

 

 

 

 

Unvested restricted stock

 

 

 

 

 

453,798

 

 

 

 

8,886,886

 

 

 

67,727,445

 

 

9. Commitments and Contingencies

Intellectual Property License

The Company has a Collaboration and License Agreement with D. E. Shaw Research, LLC (“D. E. Shaw Research”) which held 9,999,999 shares of Series A preferred stock and 1,557,875 shares of Series C preferred stock at December 31, 2019. Upon the IPO these shares were converted into 3,281,253 shares of common stock, which are outstanding at March 31, 2021. The agreement provides that the parties will

10


jointly conduct research efforts with the goal of identifying and developing product candidates. The original term of the agreement was three years and required the Company to pay an annual fee of $1,000. On June 15, 2020, the Company and D. E. Shaw Research agreed to amend the Collaboration and License Agreement (the “Amended and Restated Collaboration and License Agreement”). The Amended and Restated Collaboration and License Agreement extended the term of the agreement to August 16, 2025 and increased the annual fee from $1,000 to $7,900. The Amended and Restated Collaboration and License Agreement automatically renews for successive one year periods unless either party provides at least one year notice of non-renewal, and the annual fee during each of the one year renewal terms is subject to the mutual agreement of the Company and D. E. Shaw Research. On May 12, 2021, the Company and D. E. Shaw Research amended the Amended and Restated Collaboration and License Agreement to increase the annual fee from $7,900 to $9,875, commencing on August 16, 2021.

The Company is obligated to pay potential development milestone payments under the terms of the agreement up to $7,300 per target, plus sales milestones and royalties, upon the achievement of certain specified contingent events. Such payments for achievement of development and regulatory milestones total up to $7,250 in the aggregate for each of the first three products the Company develops, and up to $6,250 in the aggregate for each product the Company develops after the first three. The Company assessed the milestone and royalty events at March 31, 2021 and concluded no such payments were due.

The Company recorded research and development expense of $1,845 and $250 under this agreement for the three months ended March 31, 2021 and 2020, respectively. At March 31, 2021 and December 31, 2020, the Company had no accrued expense balance to D. E. Shaw Research and approximately $1,500, respectively, on its condensed consolidated balance sheets. At March 31, 2021, the Company had a prepaid balance for D. E. Shaw Research of approximately $1,307 and no prepaid balance as of December 31, 2020.

Other Research Arrangements

The Company has certain other research and license arrangements with third parties, which provide the Company with research services with the goal of identifying and developing product candidates. The Company is obligated to pay development milestone payments for up to four targets, each in the range of $4,000 to $7,000, upon the achievement of certain specified contingent events. The Company assessed the milestones at March 31, 2021 and December 31, 2020, respectively, and concluded no such milestone payments were due. The Company incurred approximately $402 and $1,195 of research and development expense under these agreements for the three months ended March 31, 2021 and 2020, respectively.

10. Subsequent Events

On April 15, 2021, the Company entered into an Agreement and Plan of Merger, or the Merger Agreement, to acquire ZebiAI Therapeutics, Inc. (“ZebiAI”). Pursuant to the Merger Agreement, the Company paid ZebiAI’s former stockholders, optionholders and warrant holders (“the ZebiAI Holders”) upfront consideration in an aggregate amount of approximately $85,000, excluding customary purchase price adjustments, composed of approximately $20,000 payable in cash and approximately $65,000 payable in shares of our common stock. In addition, (i) the ZebiAI Holders will be eligible to receive up to an additional $85,000 in milestone payments upon the achievement of certain platform or program-related milestones, payable in common stock and (ii) the Company will pay to the ZebiAI Holders 10% of the payments it receives within three years of the closing date of the Merger Agreement from partnering, collaboration or other agreements related to ZebiAI’s platform up to an aggregate maximum amount of $100,000, payable in cash.

 

 

11


 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q. This discussion and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are a clinical-stage, precision medicines company transforming the drug discovery process with the goal of bringing life-changing therapies to patients. We are among the first of a new breed of biotech created at the intersection of disparate disciplines. Our Dynamo™ platform integrates an array of leading-edge computational and experimental approaches to effectively drug protein targets that have previously been intractable. Our initial focus is on enhancing small molecule therapeutic discovery in targeted oncology and genetic disease.