RELAY THERAPEUTICS, INC. You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q. This discussion and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. As a result of many factors, including those factors set forth in the "Risk Factors" section of this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
We are a clinical-stage precision medicines company transforming the drug discovery process 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 disparate 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. Our initial focus is on enhancing small molecule therapeutic discovery in targeted oncology and genetic disease indications.
We are advancing a pipeline of medicines to address targets in precision oncology, including our lead product candidates, RLY-4008, RLY-2608 and RLY-1971.
•
RLY-4008. In the third quarter of 2020, we initiated a first-in-human clinical
trial for RLY-4008, a potent, selective and oral small molecule inhibitor of
fibroblast growth factor receptor 2, or FGFR2, for patients with advanced or
metastatic FGFR2-altered solid tumors. In
•
RLY-2608. In
•
RLY-1971. We initiated a Phase 1 clinical trial for RLY-1971, our inhibitor of
Src homology region 2 domain-containing phosphatase-2, or
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 disease indications. In addition to the three product candidates
described above, we have over five discovery stage programs across both
precision oncology and genetic disease. We announced three of these discovery
stage programs in
11
--------------------------------------------------------------------------------
We were incorporated in
In
In
On
In
The ongoing COVID-19 pandemic has presented a substantial public health and
economic challenge around the world and continues to affect our employees,
patients, communities and business operations. The extent to which the COVID-19
pandemic may continue to affect our operations or those of our third-party
partners, including our preclinical studies or clinical trial operations, will
depend on future developments, which are highly uncertain and cannot be
predicted with confidence, including the severity and duration of additional
variant outbreaks, vaccination rates where we or our third party partners
conduct operations, and the actions to contain COVID-19 or treat its impact,
among others. The continued spread of COVID-19 globally could adversely impact
our preclinical or clinical trial operations in
Additionally, 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 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. We do not believe that such factors had a material adverse impact on our
results of operations during the three and six months ended
12
--------------------------------------------------------------------------------
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
We anticipate that our expenses will increase substantially if and as we:
•
conduct our current and future clinical trials of RLY-4008 and RLY-2608;
•
conduct additional preclinical research and development of RLY-5836, our PI3K? mutant selective inhibitor, CDK2 inhibitor and ER? degrader programs and other 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
13
--------------------------------------------------------------------------------
Components of our Results of Operations
Revenue
To date, our revenue consists primarily of amounts related to the License
Agreement with
Operating Expenses
Research and Development Expenses
Research and development expenses include:
•
salaries, benefits and other employee related costs, including stock-based compensation expense, for personnel engaged in research and development functions;
•
costs of outside consultants, including their fees, stock-based 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 most advanced development programs, RLY-1971, RLY-4008 and RLY-2608, are in first-in-human clinical trials. We have over five discovery stage programs across both precision oncology and genetic disease indications. 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 includes salary, wages, stock-based 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 RLY-4008, RLY-2608 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-
•
significant and changing government regulation and regulatory guidance;
14
--------------------------------------------------------------------------------
•
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 the ongoing COVID-19
pandemic or a similar public health crisis or the changing political conditions
such as the current conflict between
•
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.
Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will continue to increase for the foreseeable future as we continue to conduct clinical trials of RLY-4008 and RLY-2608, as well as identify and develop additional product candidates.
A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant trial delays due to patient enrollment or other reasons, we would be required to expend significant additional financial resources and time on the completion of clinical development.
In-process research and development expenses consist of the cost of acquiring in-process research and development assets that have no alternative future use, specifically in connection with our acquisition of ZebiAI. We do not expect to record incremental expenses in connection therewith in future periods.
Loss on Initial Consolidation of Variable Interest Entity
Loss on initial consolidation of variable interest entity consists of the difference between total consideration transferred and the fair value of net assets acquired and liabilities assumed in connection with our acquisition of ZebiAI. We do not expect to record incremental losses in connection therewith in future periods.
Change in Fair Value of Contingent Consideration Liability
Change in fair value of contingent consideration liability consists of fluctuations in the estimated fair value of contingent milestone payments under the Merger Agreement with ZebiAI. In future periods, we expect the fair value of such contingent milestone payments to increase or decrease based on, among other things, our estimates of the probability of achieving and timing of the contingent milestone payments, as well as changes in market interest rates and the time value of money.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and other
related costs, including stock-based compensation, for personnel in our
executive, finance, corporate and business development and administrative
functions. General and administrative expenses also include legal fees relating
to patent and corporate matters; professional fees for accounting, auditing, tax
and consulting services; other expenses associated with operating as a public
company, including compliance with exchange listing and
We expect that our general and administrative expenses will increase in the future as we increase our general and administrative personnel headcount to support personnel in research and development and to support our operations generally as we increase our research and development activities and activities related to the potential commercialization of our product candidates.
Other Income, Net
Other income, net primarily consists of interest income related to interest earned on our cash, cash equivalents and investments.
15
--------------------------------------------------------------------------------
Income Taxes
Since our inception in 2015, we have not recorded any
Results of Operations
Comparison of the three months ended
The following table summarizes our results of operations for the three months
ended
Three Months Ended
June 30, Change
2022 2021
(in thousands)
License and other revenue $ 365 $ 844 $ (479 )
Operating expenses:
Research and development expenses $ 60,511 $ 45,147 $ 15,364
In-process research and development expenses - 123,000 (123,000 )
Loss on initial consolidation of variable
interest entity - 11,855 (11,855 )
Change in fair value of contingent
consideration liability 200 - 200
General and administrative expenses 17,465 14,422 3,043
Total operating expenses 78,176 194,424 (116,248 )
Loss from operations (77,811 ) (193,580 ) 115,769
Other income, net 1,023 181 842
Net loss $ (76,788 ) $ (193,399 ) $ 116,611
Revenue
We recognized revenue of approximately
Research and Development Expenses
The following summarizes our research and development expenses for the three
months ended
Three Months Ended
June 30 , Change
2022 2021
(in thousands)
External costs for programs in clinical trials
20,453 17,023 3,430
Employee related expenses 23,536 20,088 3,448
Other expenses 4,247 3,792 455
Total research and development expenses
Research and development expenses were
In-process research and development expenses of
Loss on Initial Consolidation of Variable Interest Entity
Loss on initial consolidation of variable interest entity of
16
--------------------------------------------------------------------------------
Change in Fair Value of Contingent Consideration Liability
The fair value of our contingent consideration liability for milestones under
the Merger Agreement with ZebiAI increased by
General and Administrative Expenses
General and administrative expenses were
Other Income, Net
Other income, net, was
Comparison of the six months ended
The following table summarizes our results of operations for the six months
ended
Six Months Ended
June 30, Change
2022 2021
(in thousands)
License and other revenue $ 784 $ 1,796 $ (1,012 )
Operating expenses:
Research and development expenses $ 112,178 $ 75,769 $ 36,409
In-process research and development expenses - 123,000 (123,000 )
Loss on initial consolidation of variable
interest entity - 11,855 (11,855 )
Change in fair value of contingent
consideration liability (4,395 ) - (4,395 )
General and administrative expenses 33,533 27,156 6,377
Total operating expenses 141,316 237,780 (96,464 )
Loss from operations (140,532 ) (235,984 ) 95,452
Other income, net 1,698 402 1,296
Net loss $ (138,834 ) $ (235,582 ) $ 96,748
Revenue
We recognized revenue of approximately
Research and Development Expenses
The following summarizes our research and development expenses for the six
months ended
Six Months Ended
June 30 , Change
2022 2021
(in thousands)
External costs for programs in clinical trials
37,874 29,829 8,045
Employee related expenses 44,619 31,819 12,800
Other expenses 8,694 7,154 1,540
Total research and development expenses
Research and development expenses were
17
--------------------------------------------------------------------------------
In-process research and development expenses of
Loss on Initial Consolidation of Variable Interest Entity
Loss on initial consolidation of variable interest entity of
Change in Fair Value of Contingent Consideration Liability
The fair value of our contingent consideration liability for milestones under
the Merger Agreement with ZebiAI decreased by
General and Administrative Expenses
General and administrative expenses were
Other Income, Net
Other income, net, was
Liquidity and Capital Resources
Since our inception, we have not generated any revenue from product sales and
have incurred significant operating losses. We have not yet commercialized any
products and we do not expect to generate revenue from sales of any product
candidates for several years, if ever. To date, we have principally financed our
operations through private placements of preferred stock, convertible debt and
proceeds from public offerings of our common stock. In
In
In
In
18
--------------------------------------------------------------------------------
Cash Flows
The following table summarizes our sources and uses of cash for each of the
periods presented:
Six Months Ended
June 30,
2022 2021
(in thousands)
Cash (used in) provided by operating activities
(68,996 ) (207,553 )
Cash provided by financing activities 2,879 3,176
Net decrease in cash, cash equivalents and
restricted cash $ (172,383 ) $ (185,877 )
Operating Activities
During the six months ended
During the six months ended
Investing Activities
During the six months ended
During the six months ended
Financing Activities
During the six months ended
During the six months ended
Funding Requirements
We expect our expenses to increase substantially in connection with our ongoing clinical development activities related to the potential clinical development activities of RLY-4008 and RLY-2608 and the ongoing preclinical development activities of our other programs. In addition, we continue to incur additional costs associated with operating as a public company. We expect that our expenses will increase substantially as discussed in more detail in "¾ Overview" above.
As of
Because of the numerous risks and uncertainties associated with the development of RLY-4008, RLY-2608 and our other product candidates and programs, and because the extent to which we may enter into collaborations with third parties for the development of our product candidates is unknown, we are unable to estimate the timing and amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates. Our future capital requirements will depend on many factors, including:
•
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 the ongoing COVID-19
pandemic or similar public health crisis or the changing political conditions
such as the current conflict between
•
the scope, progress, results and costs of our current and future clinical trials of RLY-4008 and RLY-2608 and additional preclinical research of our other programs;
19
--------------------------------------------------------------------------------
•
the scope, progress, results and costs of drug discovery, preclinical research and clinical trials for our other product candidates;
•
the number of future product candidates that we pursue and their development requirements;
•
the costs, timing and outcome of regulatory review of our product candidates;
•
our ability to establish and maintain collaborations on favorable terms, if at all;
•
the success of any existing or future collaborations that we may enter into with third parties;
•
the extent to which we acquire or invest in businesses, products and
technologies, including entering into licensing or collaboration arrangements
for product candidates, such as our collaboration with
•
the achievement of milestones or occurrence of other developments that trigger payments under any existing or future collaboration agreements, if any;
•
the extent to which we are obligated to reimburse, or entitled to reimbursement of, clinical trial costs under any existing or future collaboration agreements, if any;
•
the costs and timing of future commercialization activities, including drug sales, marketing, manufacturing and distribution, for any of our product candidates for which we receive marketing approval, to the extent that such sales, marketing, manufacturing and distribution are not the responsibility of any collaborator that we may have at such time;
•
the amount of revenue, if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval;
•
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
•
our headcount growth and associated costs as we expand our business operations and our research and development activities; and
•
the costs of operating as a public company.
Developing pharmaceutical products, including conducting preclinical studies and clinical trials, is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval for any product candidates or generate revenue from the sale of any product candidate for which we may obtain marketing approval. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of drugs that we do not expect to be commercially available for many years, if ever. Accordingly, we will need to obtain substantial additional funds to achieve our business objectives.
Adequate additional funds may not be available to us on acceptable terms, or at all. We do not currently have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest may be diluted, and the terms of these securities may include liquidation or other preferences and anti-dilution protections that could adversely affect your rights as a common stockholder. Additional debt or preferred equity financing, if available, may involve agreements that include restrictive covenants that may limit our ability to take specific actions, such as incurring debt, making capital expenditures or declaring dividends, which could adversely impact our ability to conduct our business, and may require the issuance of warrants, which could potentially dilute your ownership interest.
If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technology, future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or collaborations, strategic alliances or licensing arrangements with third parties when needed, we may be required to delay, limit, reduce and/or terminate our product development programs or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Contractual Obligations and Commitments
There were no material changes to our contractual obligations and commitments
during the three and six months ended
20
--------------------------------------------------------------------------------
Condition and Results of Operations" in our Annual Report on Form 10-K for the
year ended
Critical Accounting Policies and Use of Estimates
Our management's discussion and analysis of financial condition and results of
operations is based on our financial statements, which have been prepared in
accordance with generally accepted accounting principles in
For a discussion of our critical accounting estimates, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in our
Annual Report on Form 10-K for the year ended
Recently Issued and Adopted Accounting Pronouncements
A description of recently issued accounting pronouncements that we have adopted
is disclosed in Note 2 to our condensed consolidated financial statements
included elsewhere in this Quarterly Report on Form 10-
© Edgar Online, source
