10-Q
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30ou06-30-202s

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 September 30, 2022

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 October 28, 2022, the registrant had 120,894,901 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

 

5

 

 

Notes to Condensed Consolidated Financial Statements

 

6

Item 2.

 

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

 

15

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

26

Item 4.

 

Controls and Procedures

 

26

PART II.

 

OTHER INFORMATION

 

27

Item 1.

 

Legal Proceedings

 

27

Item 1A.

 

Risk Factors

 

27

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

74

Item 5.

 

Other Information

 

74

Item 6.

 

Exhibits

 

75

Signatures

 

76

 

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 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.

ii


 

Global economic uncertainty, including the uncertainty tied to rising interest rates, and 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;

iv


 

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 current 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.

v


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Relay Therapeutics, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

September 30,
2022

 

 

December 31,
2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

354,643

 

 

$

280,119

 

Investments

 

 

699,149

 

 

 

677,954

 

Accounts receivable

 

 

241

 

 

 

403

 

Contract asset

 

 

4,876

 

 

 

4,537

 

Prepaid expenses

 

 

16,808

 

 

 

11,465

 

Other current assets

 

 

11,580

 

 

 

1,764

 

Total current assets

 

 

1,087,297

 

 

 

976,242

 

Property and equipment, net

 

 

11,390

 

 

 

6,543

 

Operating lease assets

 

 

65,153

 

 

 

20,780

 

Restricted cash

 

 

2,578

 

 

 

2,578

 

Intangible asset

 

 

2,300

 

 

 

2,300

 

Total assets

 

$

1,168,718

 

 

$

1,008,443

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

9,485

 

 

$

8,276

 

Accrued expenses

 

 

29,360

 

 

 

13,557

 

Operating lease liabilities

 

 

5,681

 

 

 

1,844

 

Deferred revenue

 

 

 

 

 

248

 

Other current liabilities

 

 

26,901

 

 

 

396

 

Total current liabilities

 

 

71,427

 

 

 

24,321

 

Operating lease liabilities, net of current portion

 

 

54,600

 

 

 

21,056

 

Contingent consideration liability

 

 

42,922

 

 

 

50,258

 

Other liabilities

 

 

 

 

 

15,000

 

Total liabilities

 

 

168,949

 

 

 

110,635

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Undesignated preferred stock, $0.001 par value, 10,000,000 shares authorized as of
   September 30, 2022 and December 31, 2021;
no shares issued and outstanding at
   September 30, 2022 and December 31, 2021

 

 

 

 

 

 

Common stock, $0.001 par value; 300,000,000 and 150,000,000 shares authorized
   at September 30, 2022 and December 31, 2021, respectively;
120,811,215 and
   
108,210,318 shares issued and outstanding at September 30, 2022 and December
   31, 2021, respectively

 

 

121

 

 

 

109

 

Additional paid-in capital

 

 

2,004,143

 

 

 

1,666,887

 

Accumulated other comprehensive loss

 

 

(13,389

)

 

 

(1,088

)

Accumulated deficit

 

 

(991,106

)

 

 

(768,100

)

Total stockholders’ equity

 

 

999,769

 

 

 

897,808

 

Total liabilities and stockholders’ equity

 

$

1,168,718

 

 

$

1,008,443

 

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
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

License and other revenue

 

$

344

 

 

$

666

 

 

$

1,128

 

 

$

2,462

 

Total revenue

 

 

344

 

 

 

666

 

 

 

1,128

 

 

 

2,462

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development expenses

 

$

66,900

 

 

$

44,974

 

 

$

179,078

 

 

$

120,743

 

In-process research and development expenses

 

 

 

 

 

 

 

 

 

 

 

123,000

 

Loss on initial consolidation of variable interest entity

 

 

 

 

 

 

 

 

 

 

 

11,855

 

Change in fair value of contingent consideration liability

 

 

3,262

 

 

 

2,000

 

 

 

(1,133

)

 

 

2,000

 

General and administrative expenses

 

 

16,074

 

 

 

14,682

 

 

 

49,607

 

 

 

41,839

 

Total operating expenses

 

 

86,236

 

 

 

61,656

 

 

 

227,552

 

 

 

299,437

 

Loss from operations

 

 

(85,892

)

 

 

(60,990

)

 

 

(226,424

)

 

 

(296,975

)

Other income:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

1,713

 

 

 

157

 

 

 

3,414

 

 

 

563

 

Other income (expense)

 

 

7

 

 

 

 

 

 

4

 

 

 

(4

)

Total other income, net

 

 

1,720

 

 

 

157

 

 

 

3,418

 

 

 

559

 

Net loss

 

$

(84,172

)

 

$

(60,833

)

 

$

(223,006

)

 

$

(296,416

)

Net loss per share, basic and diluted

 

$

(0.76

)

 

$

(0.66

)

 

$

(2.04

)

 

$

(3.20

)

Weighted average shares of common stock, basic and diluted

 

 

110,905,940

 

 

 

92,692,515

 

 

 

109,290,743

 

 

 

92,599,781

 

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding (loss) gain

 

 

(1,483

)

 

 

74

 

 

 

(12,301

)

 

 

(54

)

Total other comprehensive (loss) income

 

 

(1,483

)

 

 

74

 

 

 

(12,301

)

 

 

(54

)

Total comprehensive loss

 

$

(85,655

)

 

$

(60,759

)

 

$

(235,307

)

 

$

(296,470

)

See accompanying notes.

2


 

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

 

Issuance of common stock upon milestone achievement (Note 3)

 

 

301,939

 

 

 

 

 

 

6,203

 

 

 

 

 

 

 

 

 

6,203

 

Issuance of common stock in follow-on offering, net (Note 6)

 

 

11,320,755

 

 

 

11

 

 

 

284,733

 

 

 

 

 

 

 

 

 

284,744

 

Issuance of common stock upon exercise of stock options

 

 

242,982

 

 

 

1

 

 

 

1,120

 

 

 

 

 

 

 

 

 

1,121

 

Vesting of restricted stock units

 

 

135,061

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

13,719

 

 

 

 

 

 

 

 

 

13,719

 

Unrealized loss on investments

 

 

 

 

 

 

 

 

 

 

 

(1,483

)

 

 

 

 

 

(1,483

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(84,172

)

 

 

(84,172

)

Balances at September 30, 2022

 

 

120,811,215

 

 

$

121

 

 

$

2,004,143

 

 

$

(13,389

)

 

$

(991,106

)

 

$

999,769

 

See accompanying notes.

 

3


 

 

 

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