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 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 medicines to address targets in precision oncology and genetic disease indications, including our lead product candidates, RLY-4008, RLY-2608, GDC-1971 (formerly known as RLY-1971), and RLY-5836.
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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. InOctober 2021 , we announced initial clinical data from this trial, which suggested robust inhibition of FGFR2 in the first 49 subjects that was not observed to be limited by off-target toxicities, including hyperphosphatemia and diarrhea, as of the data cut-off date ofSeptember 9, 2021 . InDecember 2021 , we initiated expansion cohorts at a continuous 70 mg once-daily, or QD, dose, and inJanuary 2022 , theU.S. Food and Drug Administration , or FDA, granted orphan drug designation to RLY-4008 for the treatment of cholangiocarcinoma, or CCA. In the first half of 2022, we conducted an end-of-Phase 1 meeting with the FDA to discuss next steps for the clinical development of RLY-4008. Based on discussions with the FDA, we have decided to move forward with a single-arm trial design for pan-FGFR, or FGFRi, treatment-naïve, FGFR2-fusion CCA at 70 mg QD to potentially support accelerated approval. InJune 2022 , we announced the anticipated registrational path for RLY-4008 in CCA and the interim clinical data with a data cut-off date ofApril 19, 2022 that was shared with the FDA to support that potential registrational path. InSeptember 2022 , we announced additional interim clinical data for RLY-4008 with a data cut-off date ofAugust 1, 2022 that was presented at theEuropean Society for Medical Oncology Congress 2022. This interim clinical data showed an interim overall response rate, or ORR, of 88% from the FGFRi treatment-naïve, FGFR2-fusion CCA patients treated at the pivotal dose of 70 mg QD and an interim ORR of 63% across all dose levels and schedules. InOctober 2022 , theEuropean Medicines Agency , or EMA, adopted a positive opinion on the orphan drug designation application for RLY-4008 for the treatment of biliary tract cancer.
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RLY-2608. InDecember 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 PI3K?, inhibitor in clinical development, or the ReDiscover Trial. InApril 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-, PI3K?-mutated, locally advanced or metastatic breast cancer. RLY-2608 is the lead program of multiple efforts in our PI3K? franchise to discover and develop mutant selective inhibitors of PI3K?. In the fourth quarter of 2021, we announced preclinical data for RLY-2608, in which we observed that RLY-2608 preferentially bound to mutant PI3K? at a novel allosteric site discovered by the Dynamo platform. The data also suggest that projected clinically relevant doses of RLY-2608 achieved tumor regression in PIK3CA mutant in vivo xenograft mouse models representing H1047R and E545K mutations with significantly reduced impact on glucose metabolism compared to non-mutant selective active site inhibitors. The data further suggest that in preclinical models, RLY-2608 combined with standard of care therapies resulted in regressions in ER+/HER2- breast cancer. InApril 2023 , we announced initial clinical data from the ReDiscover Trial with a data cut-off date ofMarch 9, 2023 that was presented at theAmerican Association for Cancer Research Annual Meeting 2023. The initial clinical data demonstrated that RLY-2608 achieved selective target engagement at multiple predicted efficacious doses with a favorable initial safety and tolerability profile. RLY-2608 has been generally well-tolerated in the 42 patients treated as of the data cut-off date. Among the 17 patients receiving doses at target exposures (400 mg twice-daily, or BID, dose in monotherapy, 600 mg BID dose in combination with fulvestrant and 800 mg BID dose in combination with fulvestrant), the observed adverse events were mostly low-grade events that were manageable and reversible with no observed Grade 3 hyperglycemia, diarrhea or rash, which are the adverse events most commonly associated with treatment discontinuation for existing investigational and approved therapies that inhibit PI3K?. Early anti-tumor activity was seen across a range of doses and mutations, including a partial response in a breast cancer patient with twelve prior lines of therapy whose response was 12 -------------------------------------------------------------------------------- confirmed subsequent to the data cut-off date. The median treatment duration among the 27 patients with breast cancer was approximately four months with 70 percent (19/27) still on treatment as of the data cut-off date. To date, a maximum tolerated dose has not been reached and dose exploration is ongoing to determine the recommended dose(s) for the dose expansion cohorts.
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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, orSHP2 , as a monotherapy in patients with advanced or metastatic solid tumors. We completed enrollment of this trial in 2022. InDecember 2020 , we entered into a global collaboration and license agreement withGenentech, Inc. , a member of the Roche Group, orGenentech , for the development and commercialization of RLY-1971 (now referred to as GDC-1971), or the Genentech Agreement.Genentech initiated the cohort of GDC-1971 in combination with GDC-6036, its KRAS G12C inhibitor, in a Phase 1b trial inJuly 2021 , and a Phase 1b trial of GDC-1971 in combination with atezolizumab, its PD-L1 antibody, inAugust 2022 .
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RLY-5836. As a demonstration of our commitment to PI3K? as a target, we have also developed a second preclinical molecule, RLY-5836, which is a selective and chemically distinct pan-mutant PI3K?. Preclinical data suggest that projected clinically relevant doses of RLY-5836 were associated with tumor regression in PIK3CA mutant xenograft mouse models representing H1047R and E545K mutations, the same models evaluated with RLY-2608. We completed Investigational New Drug, or IND, enabling studies for RLY-5836 in 2022. InApril 2023 , we initiated our first-in-human clinical trial for RLY-5836 in patients with advanced solid tumors with a PI3K? mutation. 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 four lead product candidates described above, we have two discovery stage programs as part of our HR+/HER2- breast cancer franchise, including RLY-2139, a selective cyclin dependent kinase 2, or CDK2, inhibitor, and a rationally designed estrogen receptor alpha, or ER?, degrader. We also have five additional discovery stage programs across both precision oncology and genetic disease indications. 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 inMay 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, convertible debt, and proceeds from public offerings of our common stock. We have also received an aggregate of$105.0 million in connection with the Genentech Agreement throughMarch 31, 2023 . InSeptember 2022 , we completed a public offering, or theSeptember 2022 Offering, of 11,320,755 shares of common stock at an offering price of$26.50 per share. We received proceeds of$284.7 million , which was net of$15.3 million in underwriting discounts and commissions, as well as other offering expenses. InOctober 2021 , we completed a public offering, or theOctober 2021 Offering, of 15,188,679 shares of common stock, including the exercise in full of the underwriters' option to purchase an additional 1,981,132 shares, at an offering price of$26.50 per share. We received proceeds of$382.2 million , which was net of$20.3 million in underwriting discounts and commissions, as well as other offering expenses. InJuly 2020 , we closed our initial public offering, or IPO, and issued 23,000,000 shares of our common stock at a price of$20.00 per share for proceeds of$425.3 million , which was net of$34.7 million in underwriting discounts and commissions, as well as other offering expenses. Prior to our IPO, we had received gross proceeds of approximately$520.0 million from sales of preferred stock and issuance of convertible debt. OnApril 15, 2021 , we entered into an Agreement and Plan of Merger, or the Merger Agreement, and onApril 22, 2021 , we acquiredZebiAI 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 (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. InDecember 2020 , we entered into the Genentech Agreement withGenentech for the development and commercialization of GDC-1971 (formerly known as RLY-1971). Under the terms of the Genentech Agreement, we received$75.0 million in an upfront payment in 2021, as well as$30.0 million in milestone payments fromGenentech throughMarch 31, 2023 . We are eligible to receive an additional$5.0 million in near-term payments; and, if we do not opt into aU.S. profit/cost share, up to$685.0 million in additional development, commercialization and sales-based milestones for GDC-1971; and tiered royalties on annual global net sales (on a country-by-country basis), anticipated to be in the low-to-mid-teens, subject to reductions in certain circumstances. Additionally, we are eligible to receive additional royalties in the event of regulatory approval of GDC-1971 andGenentech's compound, GDC-6036, that directly binds to and inhibits KRAS G12C, in combination. We have the right to opt-in to a 50/50U.S. profit/cost share and, if we do opt into theU.S. 13 -------------------------------------------------------------------------------- profit/cost share, we are eligible to receive up to$410.0 million in additional commercialization and sales-based milestones for GDC-1971 outside of theU.S. and tiered royalties on annual net sales outside of theU.S. (on a country-by-country basis), anticipated to be in the low-to-mid-teens, subject to reduction in certain circumstances. We also retain the right to develop GDC-1971 in combination with our FGFR2 and PI3K? 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. We do not believe that such factors had a material adverse impact on our results of operations during the three months endedMarch 31, 2023 and 2022. 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$94.2 million and$62.0 million for the three months endedMarch 31, 2023 and 2022, respectively. As ofMarch 31, 2023 , we had an accumulated deficit of$1.2 billion . These losses have resulted primarily from costs incurred in 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 increasing operating losses for at least the next several years.
We anticipate that our expenses will increase substantially if and as we:
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conduct our current and future clinical trials of RLY-4008, RLY-2608, and RLY-5836;
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conduct additional preclinical research and development of RLY-2139, our CDK2 inhibitor, and ER? degrader programs and other early-stage programs;
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initiate and continue research and preclinical and clinical development of our other product candidates;
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seek to identify additional product candidates;
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pursue marketing approvals for any of our product candidates that successfully complete clinical trials, if any;
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establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval;
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require the manufacture of larger quantities of our product candidates for clinical development and potentially commercialization;
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obtain, maintain, expand and protect our intellectual property portfolio;
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acquire or in-license other drugs and technologies;
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hire and retain additional clinical, regulatory, quality and scientific personnel;
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build out new facilities or expand existing facilities to support our ongoing development activity; and
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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.
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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 $937.8 million as of
March 31, 2023 will enable us to fund our operating expenses and capital
expenditure requirements into 2025. 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. We recognize our revenue as the performance obligations are satisfied under the Genentech Agreement.
Operating Expenses
Research and Development Expenses
Research and development expenses include:
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salaries, benefits, and other employee related costs, including stock-based compensation expense, for personnel engaged in research and development functions;
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costs of outside consultants, including their fees, stock-based compensation, and related travel expenses;
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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;
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costs of acquiring, developing, and manufacturing clinical trial materials and lab supplies;
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costs related to compliance with regulatory requirements; and
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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, RLY-4008, RLY-2608, GDC-1971, and RLY-5836, are in
clinical development. We also have two additional discovery stage programs as
part of our HR+/HER2- breast cancer franchise, including RLY-2139, our CDK2
inhibitor, and a rationally designed ER? degrader. We also have five additional
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 include 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.
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--------------------------------------------------------------------------------The duration, costs, and timing of clinical trials and development of our product candidates will depend on a variety of factors, including:
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the scope, rate of progress, expense, and results of our preclinical development activities, any future clinical trials of RLY-4008, RLY-2608, RLY-5836, or other product candidates and other research and development activities that we may conduct;
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uncertainties in clinical trial design and patient enrollment or drop out or discontinuation rates;
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establishing an appropriate safety and efficacy profile with IND-enabling studies;
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the initiation and completion of future clinical trial results;
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the timing, receipt, and terms of any approvals from applicable regulatory
authorities including the FDA and non-
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significant and changing government regulation and regulatory guidance;
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potential additional studies requested by regulatory agencies;
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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;
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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 lingering effects of the COVID-19 pandemic or a similar public health crisis or the changing political conditions, such as the ongoing conflict betweenRussia andUkraine and related global economic sanctions;
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the expense of filing, prosecuting, defending, and enforcing any patent claims and other intellectual property rights; and
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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, RLY-2608, and RLY-5836, 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.
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 the contingent milestones and timing in connection therewith, as well as, to a lesser extent, 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 andSecurities and Exchange Commission , orSEC , requirements, director and officer insurance costs, and investor and public relations costs; travel expenses; and facility-related expenses, which include depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs. 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, and as we increase our research and development activities and activities related to the potential commercialization of our product candidates. 16 --------------------------------------------------------------------------------
Other Income, Net
Other income, net primarily consists of interest income related to interest earned on our cash, cash equivalents, and investments.
Income Taxes
Since our inception in 2015, we have not recorded anyU.S. federal or state income tax benefits for the net losses we have incurred in any year or for our earned research and development tax credits due to our uncertainty of realizing a benefit from those items. 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 March 31, Change
2023 2022
(in thousands)
License and other revenue $ 226 $ 419 $ (193 )
Operating expenses:
Research and development expenses $ 82,827 $ 51,667 $ 31,160
Change in fair value of contingent
consideration liability (1,003 ) (4,595 ) 3,592
General and administrative expenses 19,579 16,068 3,511
Total operating expenses 101,403 63,140 38,263
Loss from operations (101,177 ) (62,721 ) (38,456 )
Other income, net 6,938 675 6,263
Net loss $ (94,239 ) $ (62,046 ) $ (32,193 )
Revenue
We recognized revenue of approximately $0.2 million and $0.4 million for the
three months ended March 31, 2023 and 2022, respectively. The decrease of $0.2
million was primarily due to the decrease in research and development services
provided under the Genentech Agreement, as we are nearing completion of the
Phase 1a clinical trial of RLY-1971.
Research and Development Expenses
The following summarizes our research and development expenses for the three
months ended
Three Months Ended March 31, Change
2023 2022
(in thousands)
External costs for programs in clinical
trials $ 25,043 $ 8,716 $ 16,327
External costs for platform technologies and
preclinical programs 20,769 17,421 3,348
Employee related expenses 30,451 21,083 9,368
Other expenses 6,564 4,447 2,117
Total research and development expenses $ 82,827 $
51,667
Research and development expenses were$82.8 million for the three months endedMarch 31, 2023 compared to$51.7 million for the three months endedMarch 31, 2022 . The increase of$31.2 million was due to$16.3 million of additional external costs in connection with the ongoing enrollment of our clinical trials for RLY-4008 and RLY-2608,$9.4 million of additional employee related costs from increased headcount, including an increase in stock-based compensation expense of$4.5 million ,$3.3 million of additional external costs for platform technologies and preclinical programs, and$2.1 million of other expenses, primarily for facility expenses associated with additional lab space.
Change in Fair Value of Contingent Consideration Liability
Change in fair value of our contingent consideration liability for milestones under the Merger Agreement with ZebiAI was a decrease of$1.0 million for the three months endedMarch 31, 2023 compared to a decrease of$4.6 million for the three months endedMarch 31, 2022 . The fluctuation of$3.6 million was primarily attributable to changes in the assumptions underlying the fair value measurement between periods, which we expect to continue in future periods. 17 --------------------------------------------------------------------------------
General and Administrative Expenses
General and administrative expenses were
Other Income, Net
Other income, net, was$6.9 million for the three months endedMarch 31, 2023 compared to$0.7 million for the three months endedMarch 31, 2022 . The increase of$6.2 million was primarily a result of changes in interest rates.
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. InJuly 2020 , we closed our initial public offering and issued 23,000,000 shares of common stock for proceeds of$425.3 million , which was net of$34.7 million in underwriting discounts and commissions, as well as other offering expenses. Prior to our initial public offering, we received gross proceeds of$520.0 million from sales of preferred stock and issuance of convertible debt. We received an upfront payment of$75.0 million fromGenentech pursuant to the Genentech Agreement inJanuary 2021 , as well as$30.0 million in milestone payments throughMarch 31, 2023 . As ofMarch 31, 2023 , we had cash, cash equivalents, and investments of$937.8 million . InAugust 2021 , we filed a universal shelf registration statement on Form S-3ASR with theSEC , or the 2021 Shelf, to register for sale an amount of our common stock, preferred stock, debt securities, warrants and/or units in one or more offerings, which became effective upon filing with theSEC (File No. 333-258768). InAugust 2021 , we entered into a sales agreement, or Sales Agreement, withCowen 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. We agreed to pay Cowen a commission of up to 3.0% of the gross proceeds of any shares sold by Cowen under the Sales Agreement. There have been no shares of our common stock sold under the Sales Agreement as ofMarch 31, 2023 . InOctober 2021 , we completed theOctober 2021 Offering of 15,188,679 shares of common stock, including the exercise in full of the underwriters' option to purchase an additional 1,981,132 shares, at an offering price of$26.50 per share. We received proceeds of$382.2 million , which was net of$20.3 million in underwriting discounts and commissions, as well as other offering expenses. InSeptember 2022 , we completed theSeptember 2022 Offering of 11,320,755 shares of common stock at an offering price of$26.50 per share. We received proceeds of$284.7 million , which was net of$15.3 million in underwriting discounts and commissions, as well as other offering expenses.
Cash Flows
The following table summarizes our sources and uses of cash for each of the
periods presented:
Three Months Ended March 31,
2023 2022
(in thousands)
Cash used in operating activities $ (67,130 ) $ (49,173 )
Cash provided by (used in) investing activities 75,314 (112,384 )
Cash provided by financing activities 1,297 883
Net increase (decrease) in cash, cash equivalents, and restricted cash $ 9,481$ (160,674 ) Operating Activities During the three months endedMarch 31, 2023 , we used$67.1 million of cash on operating activities, primarily resulting from our net loss of$94.2 million , offset by non-cash charges of$19.7 million and cash provided by changes in our operating assets and liabilities of$7.4 million . During the three months endedMarch 31, 2022 , we used$49.2 million on operating activities, primarily resulting from our net loss of$62.0 million , offset by non-cash charges of$10.5 million and cash provided by changes in our operating assets and liabilities of$2.4 million . 18 --------------------------------------------------------------------------------
Investing Activities
During the three months endedMarch 31, 2023 , net cash provided by investing activities was$75.3 million , primarily consisting of$77.2 million in proceeds from net maturities of investments, offset by$1.9 million for the acquisition of property and equipment. During the three months endedMarch 31, 2022 , we used$112.4 million of cash on investing activities, primarily consisting of$109.6 million in net purchases of investments and$2.8 million for the acquisition of property and equipment.
Financing Activities
During the three months endedMarch 31, 2023 , net cash provided by financing activities was$1.3 million , consisting of$1.3 million in proceeds from the exercise of stock options. During the three months endedMarch 31, 2022 , net cash provided by financing activities was$0.9 million , primarily consisting of$0.9 million in proceeds from the exercise of stock options.
Funding Requirements
We expect our expenses to increase substantially in connection with our ongoing clinical development activities related to RLY-4008, RLY-2608, and RLY-5836 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 ofMarch 31, 2023 , we had cash, cash equivalents, and investments of$937.8 million . We believe that our existing cash, cash equivalents, and investments will enable us to fund our operating expenses and capital expenditure requirements into 2025. 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. Because of the numerous risks and uncertainties associated with the development of RLY-4008, RLY-2608, RLY-5836, 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:
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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 public health epidemics or outbreaks of infectious disease, such as COVID-19, or changing political conditions, such as the ongoing conflict betweenRussia andUkraine and related global economic sanctions;
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the scope, progress, results, and costs of our current and future clinical trials of RLY-4008, RLY-2608, and RLY-5836 and additional preclinical research of our other programs;
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the scope, progress, results, and costs of drug discovery, preclinical research, and clinical trials for our other product candidates;
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the number of future product candidates that we pursue and their development requirements;
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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 the Genentech Agreement;
•
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;
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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 months endedMarch 31, 2023 . For more information on our contractual obligations and commitments, please refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year endedDecember 31, 2022 , as well as Note 9, Commitments and Contingencies, of the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
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 inthe United States , or GAAP. The preparation of our condensed consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions. 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 endedDecember 31, 2022 filed with theSEC onFebruary 23, 2023 , the notes to our audited financial statements appearing in our Annual Report on Form 10-K, and the notes to the financial statements appearing elsewhere in this Quarterly Report on Form 10-Q. There have been no material changes to these critical accounting policies and estimates throughMarch 31, 2023 from those discussed in our Annual Report on Form 10-K for the year endedDecember 31, 2022 . 20 --------------------------------------------------------------------------------
Recently Issued and Adopted Accounting Pronouncements
From time to time, new accounting pronouncements are issued that the Company adopts as of the specified effective date. The Company does not believe that the adoption of any recently issued standards have or may have a material impact on its condensed consolidated financial statements and disclosures.
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