10-Q
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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, 2024

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 April 26, 2024, the registrant had 132,741,677 shares of common stock, $0.001 par value per share, outstanding.

 

 

 


 

Table of Contents

Page

PART I.

FINANCIAL INFORMATION

 

1

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

 

12

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

20

Item 4.

Controls and Procedures

 

21

PART II.

OTHER INFORMATION

 

22

Item 1.

Legal Proceedings

 

22

Item 1A.

Risk Factors

 

22

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

62

Item 5.

Other Information

 

63

Item 6.

Exhibits

 

64

Signatures

 

65

 

i


 

Summary of the Material Risks Associated with Our Business

We have never successfully completed any large-scale, pivotal clinical trials, and we may be unable to do so for any product candidates we develop. Clinical product development involves a lengthy and expensive process, with an uncertain outcome. 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 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.
We rely on third parties to conduct our ongoing clinical trials of our product candidates 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 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.
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.

ii


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains express or implied "forward-looking statements," within the meaning of the Private Securities Litigation Reform Act of 1995, 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, implied or express statements about:

the initiation, enrollment, timing, progress, results, and cost of our product candidates and 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;
the identification of research priorities, reallocation of resources among programs 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, as well as the potential expected benefits therefrom;
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;

iii


 

developments relating to our competitors and our industry;
the effect of public health epidemics or outbreaks of an infectious disease and ongoing geopolitical conflicts, 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;
general economic and market conditions, including, among others, inflation, interest rates, tax rates, economic uncertainty, the actual or perceived failure or financial difficulties of additional financial institutions and economic and trade sanctions, including their effect on our results of operations; 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," "forecasts," "goal," "likely," "predicts," "potential," "projects," "will," "might," "could," "continue," or the negative of these terms or other comparable terminology. These statements are only predictions. All statements other than statements of historical facts are statements that could be deemed forward-looking statements. 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, or the SEC, 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, 2024

 

 

December 31, 2023

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

152,866

 

 

$

143,736

 

Investments

 

 

596,742

 

 

 

606,350

 

Prepaid expenses

 

 

13,188

 

 

 

16,702

 

Other current assets

 

 

7,304

 

 

 

3,315

 

Total current assets

 

 

770,100

 

 

 

770,103

 

Property and equipment, net

 

 

9,875

 

 

 

10,901

 

Operating lease assets

 

 

56,459

 

 

 

57,969

 

Restricted cash

 

 

2,707

 

 

 

2,707

 

Intangible asset

 

 

2,300

 

 

 

2,300

 

Total assets

 

$

841,441

 

 

$

843,980

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

7,973

 

 

$

9,211

 

Accrued expenses

 

 

22,362

 

 

 

14,890

 

Operating lease liabilities

 

 

5,147

 

 

 

4,964

 

Other current liabilities

 

 

1,662

 

 

 

1,204

 

Total current liabilities

 

 

37,144

 

 

 

30,269

 

Operating lease liabilities, net of current portion

 

 

47,159

 

 

 

48,502

 

Contingent consideration liability

 

 

11,374

 

 

 

13,206

 

Total liabilities

 

 

95,677

 

 

 

91,977

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Undesignated preferred stock, $0.001 par value, 10,000,000 shares authorized as of
   March 31, 2024 and December 31, 2023;
no shares issued and outstanding as of
   March 31, 2024 and December 31, 2023

 

 

 

 

 

 

Common stock, $0.001 par value; 300,000,000 shares authorized as of March 31,
   2024, and December 31, 2023;
132,300,851 and 127,462,409 shares issued
   and outstanding as of March 31, 2024 and December 31, 2023, respectively

 

 

132

 

 

 

127

 

Additional paid-in capital

 

 

2,228,759

 

 

 

2,152,654

 

Accumulated other comprehensive loss

 

 

(1,158

)

 

 

(196

)

Accumulated deficit

 

 

(1,481,969

)

 

 

(1,400,582

)

Total stockholders’ equity

 

 

745,764

 

 

 

752,003

 

Total liabilities and stockholders’ equity

 

$

841,441

 

 

$

843,980

 

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,

 

 

 

2024

 

 

2023

 

Revenue:

 

 

 

 

 

 

License and other revenue

 

$

10,007

 

 

$

226

 

Total revenue

 

 

10,007

 

 

 

226

 

Operating expenses:

 

 

 

 

 

 

Research and development expenses

 

$

82,403

 

 

$

82,827

 

Change in fair value of contingent consideration liability

 

 

(1,832

)

 

 

(1,003

)

General and administrative expenses

 

 

19,799

 

 

 

19,579

 

Total operating expenses

 

 

100,370

 

 

 

101,403

 

Loss from operations

 

 

(90,363

)

 

 

(101,177

)

Other income:

 

 

 

 

 

 

Interest income

 

 

8,951

 

 

 

6,941

 

Other income (expense)

 

 

25

 

 

 

(3

)

Total other income, net

 

 

8,976

 

 

 

6,938

 

Net loss

 

$

(81,387

)

 

$

(94,239

)

Net loss per share, basic and diluted

 

$

(0.62

)

 

$

(0.78

)

Weighted average shares of common stock, basic and diluted

 

 

130,843,013

 

 

 

121,320,865

 

Other comprehensive (loss) income:

 

 

 

 

 

 

Unrealized holding (loss) gain

 

 

(962

)

 

 

4,618

 

Total other comprehensive (loss) income

 

 

(962

)

 

 

4,618

 

Total comprehensive loss

 

$

(82,349

)

 

$

(89,621

)

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

 

 

Income/(Loss)

 

 

Deficit

 

 

Equity

 

Balances at December 31, 2023

 

 

127,462,409

 

 

$

127

 

 

$

2,152,654

 

 

$

(196

)

 

$

(1,400,582

)

 

$

752,003

 

Issuance of common stock through Private Placement, net

 

 

2,500,000

 

 

 

3

 

 

 

29,800

 

 

 

 

 

 

 

 

 

29,803

 

Issuance of common stock via At-the-Market Offerings, net

 

 

1,889,597

 

 

 

2

 

 

 

17,930

 

 

 

 

 

 

 

 

 

17,932

 

Issuance of common stock through exercise of stock options

 

 

236,367

 

 

 

 

 

 

1,187

 

 

 

 

 

 

 

 

 

1,187

 

Vesting of restricted stock units

 

 

212,478

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock compensation expense

 

 

 

 

 

 

 

 

27,188

 

 

 

 

 

 

 

 

 

27,188

 

Unrealized loss on investments

 

 

 

 

 

 

 

 

 

 

 

(962

)

 

 

 

 

 

(962

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(81,387

)

 

 

(81,387

)

Balances at March 31, 2024

 

 

132,300,851

 

 

$

132

 

 

$

2,228,759

 

 

$

(1,158

)

 

$

(1,481,969

)

 

$

745,764

 

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Par Value

 

 

Capital

 

 

Income/(Loss)

 

 

Deficit

 

 

Equity

 

Balances at December 31, 2022

 

 

121,112,234

 

 

$

121

 

 

$

2,019,126

 

 

$

(10,420

)

 

$

(1,058,609

)

 

$

950,218

 

Issuance of common stock through exercise of stock options

 

 

255,918

 

 

 

 

 

 

1,297

 

 

 

 

 

 

 

 

 

1,297

 

Vesting of restricted stock units

 

 

108,506

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock compensation expense

 

 

 

 

 

 

 

 

21,518

 

 

 

 

 

 

 

 

 

21,518

 

Unrealized gain on investments

 

 

 

 

 

 

 

 

 

 

 

4,618

 

 

 

 

 

 

4,618

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(94,239

)

 

 

(94,239

)

Balances at March 31, 2023

 

 

121,476,658

 

 

$

121

 

 

$

2,041,941

 

 

$

(5,802

)

 

$

(1,152,848

)

 

$

883,412

 

See accompanying notes.

3


 

Relay Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(81,387

)

 

$

(94,239

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Stock compensation expense

 

 

27,188

 

 

 

21,518

 

Depreciation expense

 

 

1,395

 

 

 

1,197

 

Net amortization of premiums and discounts on investments

 

 

(3,665

)

 

 

(2,017

)

Change in fair value of contingent consideration liability

 

 

(1,832

)

 

 

(1,003

)

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

 

 

 

20

 

Contract asset

 

 

 

 

 

(32

)

Prepaid expenses and other current assets

 

 

(475

)

 

 

16

 

Operating lease assets and liabilities, net

 

 

350

 

 

 

415

 

Accounts payable

 

 

102

 

 

 

1,400

 

Accrued expenses and other liabilities

 

 

8,001

 

 

 

5,595

 

Net cash used in operating activities

 

 

(50,323

)

 

 

(67,130

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(1,780

)

 

 

(1,915

)

Purchases of investments

 

 

(190,784

)

 

 

(97,815

)

Proceeds from maturities of investments

 

 

203,095

 

 

 

175,044

 

Net cash provided by investing activities

 

 

10,531

 

 

 

75,314

 

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from issuance of common stock through Private Placement, net

 

 

29,803

 

 

 

 

Proceeds from issuance of common stock via At-the-Market Offerings, net

 

 

17,932

 

 

 

 

Proceeds from issuance of common stock through exercise of stock options

 

 

1,187

 

 

 

1,297

 

Net cash provided by financing activities

 

 

48,922

 

 

 

1,297

 

Net increase in cash, cash equivalents, and restricted cash

 

 

9,130

 

 

 

9,481

 

Cash, cash equivalents, and restricted cash at beginning of period

 

 

146,443

 

 

 

154,372

 

Cash, cash equivalents, and restricted cash at end of period

 

$

155,573

 

 

$

163,853

 

Supplemental disclosure of non-cash activities:

 

 

 

 

 

 

Periodic change to additions of property and equipment in current liabilities

 

$

(1,411

)

 

$

(402

)

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

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

 

 

(in thousands)

 

Cash and cash equivalents

 

$

152,866

 

 

$

161,275

 

Restricted cash

 

 

2,707

 

 

 

2,578

 

Cash, cash equivalents, and restricted cash per statements of cash flows

 

$

155,573

 

 

$

163,853

 

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 medicine company transforming the drug discovery process by combining leading-edge computational and experimental technologies with the goal of bringing life-changing therapies to patients. As the Company believes it is among the first of a new breed of biotech created at the intersection of complementary techniques and technologies, the Company aims to push the boundaries of what’s possible in drug discovery. The Company’s Dynamo™ platform integrates an array of leading-edge computational and experimental approaches designed to drug protein targets that have previously been intractable or inadequately addressed. The Company’s initial focus is on enhancing small molecule therapeutic discovery in targeted oncology and genetic disease indications. The Company’s lead product candidates, RLY-2608, RLY-4008 (lirafugratinib), and GDC-1971 (migoprotafib, formerly known as RLY-1971), are in clinical development. The Company also has more than seven active discovery stage programs across both precision oncology and genetic diseases.

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 preclinical 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 by developing its computation and experimental approaches, 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 $1.5 billion as of March 31, 2024. The Company expects that its existing cash, cash equivalents, and investments as of March 31, 2024 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 subsidiaries, Relay Therapeutics Securities Corporation and Relay ML Discovery, LLC.

All intercompany balances and transactions have been eliminated.

5


 

Unaudited Interim Financial Information

The accompanying condensed consolidated balance sheet as of March 31, 2024, the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2024 and 2023, the condensed consolidated statements of stockholders’ equity for the three months ended March 31, 2024 and 2023, and the condensed consolidated statements of cash flows for the three months ended March 31, 2024 and 2023 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, 2024, the condensed consolidated results of its operations for the three months ended March 31, 2024 and 2023, and condensed consolidated cash flows for the three months ended March 31, 2024 and 2023. The condensed consolidated financial data and other information disclosed in these notes related to the three months ended March 31, 2024 and 2023 are unaudited. The condensed consolidated results for the three months ended March 31, 2024 are not necessarily indicative of results to be expected for the year ending December 31, 2024, 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 fair value of contingent milestone payments in connection with the acquisition of ZebiAI Therapeutics, Inc. ("ZebiAI"), the determination of the transaction price and standalone selling price of performance obligations under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("ASC 606"), the accrual of research and development and manufacturing expenses, the valuation of equity instruments, and the incremental borrowing rate for determining operating lease assets and liabilities. Estimates are periodically reviewed in light of changes in circumstances, facts, and experience.

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which is intended to provide enhancements to segment disclosures, even for entities with only one reportable segment. In particular, the standard will require disclosures of significant segment expenses regularly provided to the chief operating decision maker and included within each reported measure of segment profit and loss. The standard will also require disclosure of all other segment items by reportable segment and a description of its composition. Finally, the standard will require disclosure of the title and position of the chief operating decision maker and an explanation of how the chief operating decision maker uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. The standard is effective for annual periods beginning after December 15, 2023 and interim periods within annual periods beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of the standard on the presentation of its condensed consolidated financial statements and footnotes.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended to provide enhancements to annual income tax disclosures. In particular, the standard will require more detailed information in the income tax rate reconciliation, as well as the disclosure of income taxes paid disaggregated by jurisdiction, among other enhancements. The standard is effective for years beginning after December 15, 2024 and early adoption is permitted. The Company is currently evaluating the impact of the standard on the presentation of its condensed consolidated financial statements and footnotes.

6


 

3. Fair Value Measurements

The following tables present information about the Company’s financial assets and liabilities 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, 2024:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

(in thousands)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

148,801

 

 

$

 

 

$

 

 

$

148,801

 

Total cash equivalents

 

 

148,801

 

 

 

 

 

 

 

 

 

148,801

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasury bills

 

 

 

 

 

477,963

 

 

 

 

 

 

477,963

 

U.S. agency securities

 

 

 

 

 

118,779

 

 

 

 

 

 

118,779

 

Total investments

 

 

 

 

 

596,742

 

 

 

 

 

 

596,742

 

Total assets

 

$

148,801

 

 

$

596,742

 

 

$

 

 

$

745,543

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Contingent Milestone Payments

 

$

 

 

$

 

 

$

6,374

 

 

$

6,374

 

Total liabilities

 

$

 

 

$

 

 

$

6,374

 

 

$

6,374

 

 

 

 

Fair Value Measurements as of
December 31, 2023:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

(in thousands)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

140,466

 

 

$

 

 

$

 

 

$

140,466

 

Total cash equivalents

 

 

140,466

 

 

 

 

 

 

 

 

 

140,466

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasury bills

 

 

 

 

 

416,008

 

 

 

 

 

 

416,008

 

U.S. agency securities

 

 

 

 

 

190,342

 

 

 

 

 

 

190,342

 

Total investments

 

 

 

 

 

606,350

 

 

 

 

 

 

606,350

 

Total assets

 

$

140,466

 

 

$

606,350

 

 

$

 

 

$

746,816

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Contingent Milestone Payments

 

$

 

 

$

 

 

$

8,206

 

 

$

8,206

 

Total liabilities

 

$

 

 

$

 

 

$

8,206

 

 

$

8,206

 

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.

Fair Value of Contingent Consideration

In April 2021, the Company acquired ZebiAI.

The Company’s Level 3 contingent consideration liability is related to $85.0 million of platform and program milestones ("Contingent Milestone Payments") payable to ZebiAI’s former equity holders upon achievement. The contingent consideration liability for the Contingent Milestone Payments is measured at fair value at each reporting date pursuant to FASB ASC Topic 480, Distinguishing Liabilities from Equity ("ASC 480"). The Company determines the fair value of the Contingent Milestone Payments based on the probability of achieving the contingent milestones and timing in connection therewith. Significant judgment is used in determining the underlying assumptions. Due to the uncertainties associated with the development of platforms and drug candidates in the pharmaceutical industry and the effects of changes in assumptions, including probability of success and related timing, the Company expects its estimates regarding the fair value of Contingent Milestone Payments to continue to change, resulting in adjustments to the fair value of the Company’s Contingent Milestone Payments. The effect of any such adjustments could be material through the date on which any contingent milestones contractually expire.

The Company also has a contingent consideration liability related to the fair value of $100.0 million in earnout payments ("Contingent Earnout Payments"). Because the Contingent Earnout Payments were not accounted for as derivatives under FASB ASC Topic 815, Derivatives and Hedging ("ASC 815"), they were only measured at fair value as of the acquisition date and are not re-assessed at fair value at each reporting period. The Contingent Earnout Payments will be adjusted when the contingency is resolved and the consideration is paid or becomes payable.

7


 


The following table reconciles the change in the contingent consideration liability:

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

 

 

(in thousands)

 

Balance at beginning of period

 

$

13,206

 

 

$

32,378

 

Change in fair value of Contingent Milestone Payments

 

 

(1,832

)

 

 

(1,003

)

 

 

$

11,374

 

 

$

31,375

 

The outstanding Contingent Milestone Payments are payable in shares of the Company's common stock based on a fixed amount assigned to each milestone and the volume weighted-average closing price of the Company’s common stock for a specified period prior to the milestone achievement. Accordingly, the number of shares of common stock to be issued upon a milestone achievement varies dependent on the Company’s common stock price. If the outstanding milestones were achieved in full on March 31, 2024, the number of shares of common stock to be issued would have been 7,656,574 based on a volume weighted-average closing price of the Company's common stock of $7.77 for a specified period prior to March 31, 2024.

4. Investments

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

 

 

March 31, 2024

 

 

 

Amortized
Cost

 

 

Unrealized
Gains

 

 

Unrealized
Losses

 

 

Fair
Value

 

 

 

(in thousands)

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasury bills

 

$

288,151

 

 

$

1

 

 

$

(586

)

 

$

287,566

 

U.S. agency securities

 

 

87,403

 

 

 

3

 

 

 

(135

)

 

 

87,271

 

Total investments with a maturity of one year or less

 

 

375,554

 

 

 

4

 

 

 

(721

)

 

 

374,837

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasury bills

 

 

190,750

 

 

 

134

 

 

 

(487

)

 

 

190,397

 

U.S. agency securities

 

 

31,596

 

 

 

 

 

 

(88

)

 

 

31,508

 

Total investments with a maturity of one to two years

 

 

222,346

 

 

 

134

 

 

 

(575

)

 

 

221,905

 

Total investments

 

$

597,900

 

 

$

138

 

 

$

(1,296

)

 

$

596,742

 

 

 

 

December 31, 2023

 

 

 

Amortized
Cost

 

 

Unrealized
Gains

 

 

Unrealized
Losses

 

 

Fair
Value

 

 

 

(in thousands)

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasury bills

 

$

314,957

 

 

$

83

 

 

$

(482

)

 

$

314,558

 

U.S. agency securities

 

 

185,672

 

 

 

24

 

 

 

(353

)

 

 

185,343

 

Total investments with a maturity of one year or less

 

 

500,629

 

 

 

107

 

 

 

(835

)

 

 

499,901

 

 

 

 

 

 

 

 

 

U.S. treasury bills

 

 

100,917

 

 

 

591

 

 

 

(58

)

 

 

101,450

 

U.S. agency securities

 

 

5,000

 

 

 

 

 

 

(1

)

 

 

4,999

 

Total investments with a maturity of one to two years

 

 

105,917

 

 

 

591

 

 

 

(59

)

 

 

106,449

 

Total investments

 

$

606,546

 

 

$

698

 

 

$

(894

)

 

$

606,350

 

The following tables summarize the Company's available-for-sale debt securities in an unrealized loss position for which an allowance for credit losses has not been recorded, aggregated by major security type and length of time in a continuous unrealized loss position:

 

 

March 31, 2024

 

 

 

Less than 12 Months

 

 

12 Months or Longer

 

 

Total

 

 

 

Fair Value

 

 

Unrealized
Losses

 

 

Fair Value

 

 

Unrealized
Losses

 

 

Fair Value

 

 

Unrealized
Losses

 

 

 

(in thousands)

 

U.S. treasury bills

 

$

366,011

 

 

$

(1,043

)

 

$

6,968

 

 

$

(30

)

 

$

372,979

 

 

$

(1,073

)

U.S. agency securities

 

 

90,898

 

 

 

(188

)

 

 

20,059

 

 

 

(35

)

 

 

110,957

 

 

 

(223

)

Total

 

$

456,909

 

 

$

(1,231

)

 

$

27,027

 

 

$

(65

)

 

$

483,936

 

 

$

(1,296

)

 

8


 

 

 

December 31, 2023

 

 

 

Less than 12 Months

 

 

12 Months or Longer

 

 

Total

 

 

 

Fair Value

 

 

Unrealized
Losses

 

 

Fair Value

 

 

Unrealized
Losses

 

 

Fair Value

 

 

Unrealized
Losses

 

 

 

(in thousands)

 

U.S. treasury bills

 

$

172,625

 

 

$

(371

)

 

$

27,822

 

 

$

(169

)

 

$

200,447

 

 

$

(540

)

U.S. agency securities

 

 

136,356

 

 

 

(207

)

 

 

36,742

 

 

 

(147

)

 

 

173,098

 

 

 

(354

)

Total

 

$

308,981

 

 

$

(578

)

 

$

64,564

 

 

$

(316

)

 

$

373,545

 

 

$

(894

)

As summarized in the tables immediately above, the Company held 79 and 70 debt securities that were in an unrealized loss position as of March 31, 2024 and December 31, 2023, respectively. The unrealized losses at March 31, 2024 and December 31, 2023 were attributable to changes in interest rates and do not represent credit losses. The Company does not intend to sell these securities and it is not more likely than not that it will be required to sell them before recovery of their amortized cost basis.

5. Common Stock

Each share of common stock entitles the stockholder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are entitled to receive dividends, as may be declared by the Company’s board of directors. As of March 31, 2024, no dividends had been declared.

At-the-Market Offering

In August 2021, the Company entered into a sales agreement (the "Sales Agreement") with Cowen and Company, LLC ("Cowen"), pursuant to which the Company may offer and sell shares of its common stock having aggregate gross proceeds of up to $300.0 million from time to time in "at-the-market" offerings through Cowen, as the Company’s sales agent.

During the three months ended March 31, 2024, the Company sold 1,889,597 shares of common stock under the Sales Agreement at a weighted-average price of $9.73 per share. The Company received $17.9 million in proceeds therefrom, which were net of $0.5 million in commissions paid to Cowen.

Private Placement

In January 2024, the Company entered into a securities purchase agreement with Nextech Crossover I SCP for the private placement of 2,500,000 shares of common stock at $12.00 per share (the "Private Placement"). The Company received $29.8 million in proceeds from the Private Placement, which were net of $0.2 million in offering expenses. The shares were registered for resale pursuant to the Company’s Registration Statement on Form S-3, filed with the SEC on August 12, 2021, and prospectus supplement relating to the shares, filed with the SEC on January 10, 2024.

6. Stock Compensation

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

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

 

 

(in thousands)

 

Research and development expenses

 

$

15,668

 

 

$

11,595

 

General and administrative expenses

 

 

11,520

 

 

 

9,923

 

 

$

27,188

 

 

$

21,518

 

 

7. 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,

 

 

 

2024

 

 

2023

 

 

 

(in thousands, except share and per share data)

 

Net loss

 

$

(81,387

)

 

$

(94,239

)

Net loss per share, basic and diluted

 

$

(0.62

)

 

$

(0.78

)

Weighted average shares of common stock, basic and diluted

 

 

130,843,013

 

 

 

121,320,865

 

For the three months ended March 31, 2024 and 2023, the weighted-average number of shares of common stock outstanding used to calculate both basic and diluted net loss per share is the same. In computing diluted net loss per share for the three months ended March 31,

9


 

2024 and 2023, the Company excluded the following potentially dilutive securities, as the effect would be anti-dilutive and reduce the net loss per share calculated for each period.

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Options outstanding to purchase common stock

 

 

15,153,332

 

 

 

15,423,928

 

Unvested and outstanding restricted stock units

 

 

10,795,081

 

 

 

3,668,923

 

 

 

 

25,948,413

 

 

 

19,092,851

 

The amounts in the table above for options and restricted stock units are presented based on amounts outstanding at each period end.

8. Collaboration and License Agreement with Genentech, Inc.

Summary of Terms

In December 2020, the Company and Genentech, Inc. ("Genentech") entered into the Collaboration and License Agreement (as amended from time to time, the "Genentech Agreement"), which granted Genentech a license to develop and commercialize migoprotafib (GDC-1971, formerly known as RLY-1971).

As of March 31, 2024, consideration under the Genentech Agreement totaled $121.8 million, which included $10.0 million paid to the Company in connection with a milestone achieved during the three months ended March 31, 2024.

The Company is eligible to receive up to an aggregate of $675.0 million in additional payments upon achievement of other specified development, commercialization, and sales-based milestones for migoprotafib worldwide, as well as tiered royalties ranging from low-to-mid teens on annual worldwide net sales of migoprotafib, on a country-by-country basis, subject to reduction in certain circumstances. Due to the nature of the payments noted, such variable consideration was constrained and excluded from the transaction price of the Genentech Agreement as of March 31, 2024.

Accounting Analysis

During the three months ended March 31, 2024 and 2023, there were no material changes to the contractual terms of the Genentech Agreement. Accordingly, there were no changes to the Company’s accounting treatment and model for recognizing revenue thereon through March 31, 2024.

During the three months ended March 31, 2024 and 2023, the Company recognized $10.0 million and $0.2 million of revenue, respectively, from the Genentech Agreement.

9. Commitments and Contingencies

Intellectual Property License

In August 2016, the Company and D.E. Shaw Research, LLC ("D.E. Shaw Research") entered into the Collaboration and License Agreement, which was most recently amended in 2023 ("DESRES Agreement"). During the three months ended March 31, 2024 and 2023, there were no material changes to the contractual terms of the DESRES Agreement. Accordingly, there were no changes to the Company’s accounting treatment thereon through March 31, 2024.

The Company assessed the milestones under the DESRES Agreement at March 31, 2024 and December 31, 2023, concluding no payments were due.

For the three months ended March 31, 2024 and 2023, the Company recorded research and development expenses of $2.5 million and $2.3 million, respectively, under the DESRES Agreement on its condensed consolidated statement of operations and comprehensive loss.

As of March 31, 2024 and December 31, 2023, the Company had prepaid balances of $3.0 million and $5.4 million, respectively, under the DESRES Agreement on its condensed consolidated balance sheets.

As of March 31, 2024 and December 31, 2023, the Company had no accrued expense and accounts payable balances under the DESRES Agreement on its condensed consolidated balance sheets.

Other Arrangements

The Company has certain other research and license arrangements and other collaborations with third parties, which provide the Company with specified research and/or development services.

10


 

10. Subsequent Events

In preparing the condensed consolidated interim financial statements as of March 31, 2024 and for the three month period then ended, the Company evaluated subsequent events for recognition and measurement purposes. The Company concluded that no events or transactions have occurred that require disclosure in the accompanying condensed consolidated financial statements.

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 medicine company transforming the drug discovery process by combining leading-edge computational and experimental technologies with the goal of bringing life-changing therapies to patients. As we believe we are among the first of a new breed of biotech created at the intersection of complementary techniques and technologies, we aim to push the boundaries of what’s possible in drug discovery. Our Dynamo™ platform integrates an array of leading-edge computational and experimental approaches designed to drug protein targets that have previously been intractable or inadequately addressed. Our initial focus is on enhancing small molecule therapeutic discovery in targeted oncology and genetic disease indications.

We have deployed our technology platform to build a pipeline of product candidates to address targets in precision medicine where there is clear evidence linking target proteins to disease and where molecular diagnostics can unambiguously identify relevant patients for treatment. We believe this approach will increase the likelihood of successfully translating a specific pharmacological mechanism into clinical benefit.

We are advancing a pipeline of medicine candidates to address targets in precision oncology and genetic disease, including our lead product candidates described below.

RLY-2608.
ReDiscover Trial. RLY-2608 is the lead program in our efforts to discover and develop mutant selective inhibitors of PI3Kα. In December 2021, we dosed the first patient in a first-in-human clinical trial for RLY-2608, the first known allosteric, pan-mutant and isoform-selective phosphoinostide 3 kinase alpha, or PI3Kα, inhibitor in clinical development, or the ReDiscover Trial. In April 2022, we initiated the second arm of the dose escalation part of this trial, evaluating RLY-2608 in combination with fulvestrant for patients with HR+, HER2–, PI3Kα-mutated, locally advanced or metastatic breast cancer. In July 2023, we initiated a dose expansion cohort in patients with PI3Kα-mutant, HR+, HER2- locally advanced or metastatic breast cancer, with patients receiving a 600 mg twice daily, or BID, dose of RLY-2608 in combination with fulvestrant. In the fourth quarter of 2023, we initiated two additional dose expansion cohorts of RLY-2608 in combination with fulvestrant – a second 600 mg BID cohort as well as one at 400 mg BID. In the fourth quarter of 2023, we also initiated a triplet combination arm with RLY-2608, fulvestrant and the cyclin dependent kinase 4/6, or CDK 4/6, inhibitor ribociclib.
Clinical Data. We believe that, overall, while the interim clinical data from the ReDiscover Trial disclosed to date are preliminary, the data support selective target engagement across doses and mutation types with an encouraging interim safety and tolerability profile.
Lirafugratinib (RLY-4008).
ReFocus Trial. Lirafugratinib, or RLY-4008, is a potent, selective and oral small molecule inhibitor of fibroblast growth factor receptor 2, or FGFR2. In the third quarter of 2020, we initiated a first-in-human clinical trial for lirafugratinib, or the ReFocus Trial, which is a two-part global trial in patients with FGFR2-altered tumors. The first part of the trial, or the dose escalation, is complete, and the second part of the trial, or the dose expansion, is ongoing at a 70 mg once daily, or QD, recommended Phase 2 dose. The dose expansion part of the trial includes four cholangiocarcinoma, or CCA, arms and three tumor agnostic (non-CCA) arms. With full enrollment of our pivotal cohort in patients with FGFR2-fusion CCA who have not previously received an FGFR inhibitor and sufficient enrollment of patients across the tumor agnostic arms that we believe will enable us to generate meaningful data, we have closed enrollment for the ReFocus Trial to allow the relevant data to mature and inform our future clinical development decisions.
Clinical Data. We believe that while the interim clinical data from the ReFocus Trial disclosed to date are preliminary, the data show interim efficacy signals in the CCA pan-FGFR, or FGFRi, treatment-naïve, FGFR2-fusion CCA cohort and non-CCA solid tumor expansion cohorts and further support our hypothesis that selective inhibition of FGFR2 can improve the treatment for patients with FGFR2-driven tumors. Additionally, the safety analysis from the interim clinical data disclosed to date for the CCA cohorts and tumor agnostic cohorts has been generally consistent. Most

12


 

treatment emergent adverse events were expected FGFR2 on-target, low-grade, monitorable, manageable and largely reversible.
Migoprotafib (GDC-1971, formerly known as RLY-1971). In the first quarter of 2020, we initiated a Phase 1a clinical trial for RLY-1971, our inhibitor of Src homology region 2 domain-containing phosphatase-2, or SHP2, as a monotherapy in patients with advanced or metastatic solid tumors. We completed enrollment of this trial in 2022. In December 2020, we entered into a global collaboration and license agreement with Genentech, Inc., a member of the Roche Group, or Genentech, for the development and commercialization of RLY-1971 (now referred to as migoprotafib, or GDC-1971), or the Genentech Agreement. Genentech initiated the cohort of migoprotafib in combination with GDC-6036, its KRAS G12C inhibitor, in a Phase 1b trial in July 2021. Genentech also initiated a Phase 1b trial of migoprotafib in combination with atezolizumab, its PD-L1 antibody, in August 2022, as well as a Phase 1b trial of migoprotafib in combination with either osimertinib or cetuximab, EGFR inhibitors, in July 2023.

While our initial focus is on precision oncology, we believe our Dynamo platform may also be broadly applied to other areas of precision medicine, such as genetic diseases. In addition to the clinical stage product candidates described above, we have more than seven active discovery stage programs across both precision oncology and genetic diseases. We are focused on using the novel insights derived from our approach to transform the lives of patients suffering from debilitating and life-threatening diseases through the discovery, development and commercialization of our therapies.

We were incorporated in May 2015. We have devoted substantially all of our resources to developing our lead product candidates, developing our innovative computational and experimental approaches on protein motion, building our intellectual property portfolio, business planning, raising capital, and providing general and administrative support for these operations. To date, we have principally financed our operations through private placements of preferred stock and common stock, convertible debt, and proceeds from public offerings of our common stock. We have also received an aggregate of $121.8 million in connection with the Genentech Agreement through March 31, 2024.

In August 2021, we entered into a sales agreement, or the Sales Agreement, with Cowen and Company, LLC, or Cowen, pursuant to which we may offer and sell shares of our common stock having aggregate gross proceeds of up to $300.0 million from time to time in "at-the-market" offerings through Cowen, as our sales agent, or At-the-Market Offerings. As of March 31, 2024, we have sold 4,915,669 shares of common stock under the Sales Agreement, from which we have received $48.2 million in proceeds, which were net of $1.2 million in commissions paid to Cowen.

In January 2024, we entered into a securities purchase agreement with Nextech Crossover I SCP for the private placement of 2,500,000 shares of common stock at $12.00 per share, or the Private Placement. We received $29.8 million in proceeds from the Private Placement, which were net of $0.2 million in offering expenses.

On April 15, 2021, we entered into an Agreement and Plan of Merger, or the Merger Agreement, and on April 22, 2021, we acquired ZebiAI Therapeutics, Inc., or ZebiAI. Pursuant to the Merger Agreement, upfront consideration included (a) payment of approximately $20.0 million in cash and (b) issuance of 1,914,219 shares of our common stock at an aggregate fair value of $61.8 million, both transferred to ZebiAI’s former stockholders, option holders, and warrant holders, or the ZebiAI Holders, upon closing. In addition, (i) the ZebiAI Holders are eligible to receive up to $85.0 million in payments upon the achievement of certain platform or program milestones, payable in shares of our common stock, or the Contingent Milestone Payments, a portion of which was paid to the ZebiAI Holders in 2022 and 2023, and (ii) we will pay 10% of payments we receive 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 $100.0 million, payable in cash to the ZebiAI Holders.

In December 2020, we entered into the Genentech Agreement with Genentech for the development and commercialization of migoprotafib. Under the terms of the Genentech Agreement, we received $75.0 million in an upfront payment in 2021, as well as $45.0 million in milestone payments from Genentech as of March 31, 2024. We are eligible to receive up to an aggregate of $675.0 million in additional payments upon the achievement of other specified development, commercialization, and sales-based milestones for migoprotafib worldwide, as well as tiered royalties ranging from low-to-mid teens on annual worldwide net sales of migoprotafib, on a country-by-country basis, subject to reduction in certain circumstances. Furthermore, we are also eligible to receive additional royalties in the event of regulatory approval of migoprotafib and Genentech’s compound, GDC-6036, that directly binds to and inhibits KRAS G12C, in combination. Finally, we retain the right to develop migoprotafib in combination with our FGFR2 and PI3Kα programs.

Inflation generally affects us by increasing our employee-related costs and clinical trial expenses, as well as other operating expenses. Our financial condition and results of operations may also be impacted by other factors we may not be able to control, such as public health crises, global supply chain disruptions, uncertain global economic conditions, global trade disputes or political instability as further discussed in the section "Risk Factors" in this Quarterly Report on Form 10-Q. We do not believe that such factors had a material adverse impact on our results of operations during the three months ended March 31, 2024 and 2023.

Since our inception, we have incurred significant operating losses on an aggregate basis. Our ability to generate product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of one or more of our current or future product candidates. Our net losses were $81.4 million and $94.2 million for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, we had an accumulated deficit of $1.5 billion. These losses have resulted primarily from costs incurred in

13


 

connection with research and development activities, licensing and patent investment, and general and administrative costs associated with our operations. We expect to continue to incur significant expenses, including the costs of operating as a public company, and generate significant operating losses for at least the next several years.

We anticipate that our expenses will increase substantially if and as we:

conduct our current and future clinical trials of our lead product candidates;
conduct additional preclinical research and development of our early-stage programs;
initiate and continue research and preclinical and clinical development of our other product candidates;
seek to identify additional product candidates;
pursue marketing approvals for any of our product candidates that successfully complete clinical trials, if any;
establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval;
require the manufacture of larger quantities of our product candidates for clinical development and potentially commercialization;
obtain, maintain, expand and protect our intellectual property portfolio;
acquire or in-license other drugs and technologies;
hire and retain additional clinical, regulatory, quality and scientific personnel;
build out new facilities or expand existing facilities to support our ongoing development activity; and
add operational, financial and management information systems and personnel, including personnel to support our drug development, any future commercialization efforts and our operations as a public company.

In addition, if we obtain marketing approval for any of our lead product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution.


As a result, we will need additional financing to support our continuing operations. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity or debt financings or other sources, which may include collaborations with third parties. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed, on favorable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our product candidates.

Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate revenue from product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and may be forced to reduce or terminate our operations.

We believe our cash, cash equivalents, and investments of $749.6 million as of March 31, 2024 will enable us to fund our operating expenses and capital expenditure requirements into the second half of 2026. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. We will need to raise additional capital in the future to continue developing the drugs in our pipeline and to commercialize any approved drug. We may seek to obtain additional financing in the future through the issuance of our common stock, through other equity or debt financings or through collaborations or partnerships with other companies. We may not be able to raise additional capital on terms acceptable to us, or at all, and any failure to raise capital as and when needed could compromise our ability to execute on our business plan.

Components of our Results of Operations

Revenue

To date, our revenue primarily consists of amounts related to the Genentech Agreement.

14


 

Operating Expenses

Research and Development Expenses

Research and development expenses include:

salaries, benefits, and other employee related costs, including stock compensation expense, for personnel engaged in research and development functions;
costs of outside consultants, including their fees, stock compensation, and related travel expenses;
expenses incurred under agreements with contract research organizations, or CROs, contract manufacturing organizations, or CMOs, and other vendors that conduct our clinical trials and preclinical activities;
costs of acquiring, developing, and manufacturing clinical trial materials and lab supplies;
costs related to compliance with regulatory requirements; and
facility costs, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and other supplies. We do not allocate certain internal costs, facilities, or overhead costs to specific development programs.

We expense research and development costs as the services are performed or the goods are received. We recognize costs for certain development activities, such as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations, or other information provided to us by our vendors and our clinical investigative sites. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our financial statements as prepaid expenses or accrued research and development expenses.

Our lead product candidates are in clinical development. We also have more than seven active discovery stage programs across both precision oncology and genetic diseases. Costs incurred for these programs include costs incurred to support our discovery research and translational science efforts up to the initiation of first-in-human clinical development. Platform research and other research and development activities include costs that are not specifically allocated to active product candidates, including facilities costs, depreciation expense and other costs. Employee related expenses include salary, wages, stock compensation, and other costs related to our personnel, which are not allocated to specific programs or activities.

We cannot determine with certainty the duration and costs of future clinical trials and future development costs, if, when, or to what extent we will generate revenue from the commercialization and sale of any of our product candidates for which we obtain marketing approval or our other research and development costs. We may never succeed in obtaining marketing approval for any of our product candidates.

The duration, costs, and timing of clinical trials and development of our product candidates will depend on a variety of factors, including:

the scope, rate of progress, expense, and results of our preclinical development activities, any future clinical trials of our lead product candidates, or other product candidates and other research and development activities that we may conduct;
uncertainties in clinical trial design and patient enrollment or drop out or discontinuation rates;
establishing an appropriate safety and efficacy profile with IND-enabling studies;
the initiation and completion of future clinical trial results;
the timing, receipt, and terms of any approvals from applicable regulatory authorities including the FDA and non-U.S. regulators;
significant and changing government regulation and regulatory guidance;
potential additional studies requested by regulatory agencies;
establishing clinical and commercial manufacturing capabilities or making arrangements with third-party manufacturers in order to ensure that we or our third-party manufacturers are able to make product successfully;
the impact of any business interruptions to our operations, including the timing and enrollment of patients in our planned clinical trials, or to those of our manufacturers, suppliers, or other vendors resulting from any public health crisis or ongoing geopolitical conflicts and related global economic sanctions;

15


 

the expense of filing, prosecuting, defending, and enforcing any patent claims and other intellectual property rights; and
maintaining a continued acceptable safety profile of our product candidates following approval, if any, of our product candidates.

Researc