SEC Filing | Relay Therapeutics

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10-Q

06-30-202s

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 June 30, 2022


☐	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 July 29, 2022, the registrant had 108,898,083 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		1
	Condensed Consolidated Statements of Operations and Comprehensive Loss		2
	Condensed Consolidated Statements of Stockholders’ Equity		3
	Condensed Consolidated Statements of Cash Flows		4
	Notes to Condensed Consolidated Financial Statements		5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		11
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		21
Item 4.	Controls and Procedures		21
PART II.	OTHER INFORMATION		23
Item 1.	Legal Proceedings		23
Item 1A.	Risk Factors		23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		67
Item 5.	Other Information		67
Item 6.	Exhibits		68
Signatures			69

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 data from preclinical or early clinical studies of our product candidates are not necessarily predictive of the results of later clinical studies and any future clinical trials of our product candidates. If we cannot replicate the positive data from our preclinical or early clinical studies of our product candidates in our future clinical trials, we will 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 other nonclinical studies or early clinical data and may result in a safety profile that would 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 delays occur 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, RLY-4008 and RLY-2608 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 contract with third parties for the manufacture of our product candidates for preclinical development, clinical testing, and expect to continue to do so for commercialization. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or products or such quantities at an acceptable cost or quality, which could delay, prevent or impair our development or commercialization efforts.

•

We have and may enter into other 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.

•

The ongoing COVID-19 pandemic has impacted our business and any future pandemic, epidemic, or outbreak of an infectious disease could similarly affect our business and our financial results and could cause further disruption to the development of our product candidates.

•

Global economic uncertainty or political instability could adversely affect our business, financial condition or results of operations.

•

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 will 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.

iii

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;

•

the identification of research priorities and application of 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;

•

the potential safety and efficacy of our product candidates and the therapeutic implications of clinical and preclinical data;

•

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

•

our relationships with our third-party strategic collaborators and their ability to continue research and development activities relating to our development candidates and product candidates;

•

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

•

our plans to seek regulatory approval of our product candidates;

•

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 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 with 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 on our business and programs;

•

developments relating to our competitors and our industry;

•

the effect of the ongoing COVID-19 pandemic and the current conflict between Russia and Ukraine, 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,” “can,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “projects,” “will,” “might,” “could,” “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”, those listed below 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 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.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Relay Therapeutics, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited)


	June 30, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	107,736		$	280,119
Investments		730,254			677,954
Accounts receivable		288			403
Contract asset		4,764			4,537
Prepaid expenses and other current assets		12,751			13,229
Total current assets		855,793			976,242
Property and equipment, net		8,922			6,543
Operating lease assets		19,828			20,780
Restricted cash		2,578			2,578
Intangible asset		2,300			2,300
Total assets	$	889,421		$	1,008,443
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	4,296		$	8,276
Accrued expenses		22,108			13,557
Operating lease liabilities		2,002			1,844
Deferred revenue		83			248
Other current liabilities		15,413			396
Total current liabilities		43,902			24,321
Operating lease liabilities, net of current portion		20,019			21,056
Contingent consideration liability		45,863			50,258
Other liabilities		—			15,000
Total liabilities		109,784			110,635
Commitments and contingencies (Note 8)
Stockholders’ equity:
Undesignated preferred stock, $0.001 par value, 10,000,000 shares authorized as of June 30, 2022 and December 31, 2021; no shares issued and outstanding at June 30, 2022 and December 31, 2021		—			—
Common stock, $0.001 par value; 300,000,000 and 150,000,000 shares authorized at June 30, 2022 and December 31, 2021, respectively; 108,810,478 and 108,210,318 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively		109			109
Additional paid-in capital		1,698,368			1,666,887
Accumulated other comprehensive loss		(11,906	)		(1,088	)
Accumulated deficit		(906,934	)		(768,100	)
Total stockholders’ equity		779,637			897,808
Total liabilities and stockholders’ equity	$	889,421		$	1,008,443

See accompanying notes.

Relay Therapeutics, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share data)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Revenue:
License and other revenue	$	365		$	844		$	784		$	1,796
Total revenue		365			844			784			1,796
Operating expenses:
Research and development expenses	$	60,511		$	45,147		$	112,178		$	75,769
In-process research and development expenses		—			123,000			—			123,000
Loss on initial consolidation of variable interest entity		—			11,855			—			11,855
Change in fair value of contingent consideration liability		200			—			(4,395	)		—
General and administrative expenses		17,465			14,422			33,533			27,156
Total operating expenses		78,176			194,424			141,316			237,780
Loss from operations		(77,811	)		(193,580	)		(140,532	)		(235,984	)
Other income:
Interest income		1,005			180			1,701			406
Other income (expense)		18			1			(3	)		(4	)
Total other income, net		1,023			181			1,698			402
Net loss	$	(76,788	)	$	(193,399	)	$	(138,834	)	$	(235,582	)
Net loss per share, basic and diluted	$	(0.71	)	$	(2.10	)	$	(1.28	)	$	(2.58	)
Weighted average shares of common stock, basic and diluted		108,644,329			91,939,439			108,469,760			91,188,160
Other comprehensive loss:
Unrealized holding loss		(2,688	)		(76	)		(10,818	)		(128	)
Total other comprehensive loss		(2,688	)		(76	)		(10,818	)		(128	)
Total comprehensive loss	$	(79,476	)	$	(193,475	)	$	(149,652	)	$	(235,710	)

See accompanying notes.

Relay Therapeutics, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share and per share data)

(Unaudited)


	Common Stock				Additional Paid-in		Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares		Par value		Capital		Loss			Deficit			Equity
Balances at December 31, 2021		108,210,318	$	109	$	1,666,887	$	(1,088	)	$	(768,100	)	$	897,808
Issuance of common stock upon exercise of stock options		195,799		—		883		—			—			883
Vesting of restricted stock units		27,233		—		—		—			—			—
Stock-based compensation expense		—		—		13,455		—			—			13,455
Unrealized loss on investments		—		—		—		(8,130	)		—			(8,130	)
Net loss		—		—		—		—			(62,046	)		(62,046	)
Balances at March 31, 2022		108,433,350	$	109	$	1,681,225	$	(9,218	)	$	(830,146	)	$	841,970
Issuance of common stock upon exercise of stock options		182,113		—		859		—			—			859
Issuance of common stock under ESPP		79,859		—		1,137		—			—			1,137
Vesting of restricted stock units		115,156		—		—		—			—			—
Stock-based compensation expense		—		—		15,147		—			—			15,147
Unrealized loss on investments		—		—		—		(2,688	)		—			(2,688	)
Net loss		—		—		—		—			(76,788	)		(76,788	)
Balances at June 30, 2022		108,810,478	$	109	$	1,698,368	$	(11,906	)	$	(906,934	)	$	779,637


	Common Stock				Additional Paid-in		Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares		Par value		Capital		Income			Deficit			Equity
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
Issuance of common stock upon exercise of stock options		218,365		—		1,123		—			—			1,123
Vesting of restricted stock units		22,239		—		—		—			—			—
Stock-based compensation expense		—		—		16,147		—			—			16,147
Shares issued in connection with acquisition of ZebiAI		1,883,487		2		61,946		—			—			61,948
Unrealized loss on investments		—		—		—		(76	)		—			(76	)
Net loss		—		—		—		—			(193,399	)		(193,399	)
Balances at June 30, 2021		92,552,645	$	92	$	1,258,312	$	(64	)	$	(639,811	)	$	618,529

See accompanying notes.

Relay Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Six Months Ended June 30,
	2022			2021
Cash flows from operating activities:
Net loss		(138,834	)	$	(235,582	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Stock-based compensation expense		28,602			25,818
Depreciation expense		1,931			1,879
Net amortization of premiums and discounts on investments		1,227			701
Acquired in-process research and development		—			123,000
Loss on initial consolidation of variable interest entity		—			11,855
Change in fair value of contingent consideration liability		(4,395	)		—
Changes in assets and liabilities:
Accounts receivable		115			74,801
Contract asset		(227	)		3,462
Prepaid expenses and other current assets		478			4,964
Operating lease assets and liabilities, net		73			186
Other assets		—			22
Accounts payable		(4,611	)		(867	)
Accrued expenses and other liabilities		9,540			8,261
Deferred revenue		(165	)		—
Net cash (used in) provided by operating activities		(106,266	)		18,500
Cash flows from investing activities:
Purchases of property and equipment		(4,651	)