Stock Analysis & Valuation Relay Therapeutics, Inc. (RLAY)

• Previous Close: $7.66
• Sector Valuation Confidence Level: High

Valuation method	Value, $	Upside, %
Artificial intelligence (AI)	24.84	224
Intrinsic value (DCF)	2.84	-63
Graham-Dodd Method		n/a
Graham Formula	118.25	1444

Strategic Investment Analysis

Company Overview

Relay Therapeutics, Inc. (NASDAQ: RLAY) is a clinical-stage precision medicine company revolutionizing drug discovery through its innovative focus on protein motion. Headquartered in Cambridge, Massachusetts, Relay Therapeutics leverages cutting-edge computational and experimental techniques to develop small molecule therapies targeting oncology and genetic diseases. The company's lead candidates include RLY-4008, an FGFR2 inhibitor for solid tumors, RLY-2608, a mutant-PI3Kα inhibitor, and RLY-1971, an SHP2 inhibitor in Phase 1 trials. With strategic collaborations like those with D.E. Shaw Research and Genentech, Relay Therapeutics combines advanced computational modeling with traditional drug discovery to address high unmet medical needs. Operating in the high-growth biotechnology sector, Relay Therapeutics stands out for its unique approach to understanding protein dynamics, positioning it as a potential leader in precision oncology therapies.

Investment Summary

Relay Therapeutics presents a high-risk, high-reward investment opportunity in the precision medicine space. The company's innovative approach to drug discovery, focusing on protein motion, differentiates it from traditional biotech firms. However, as a clinical-stage company with no approved products, Relay Therapeutics is not yet profitable, reporting a net loss of $337.7 million in its latest fiscal year. Its lead candidates, particularly RLY-4008 and RLY-2608, show promise in addressing significant oncology markets, but clinical trial risks remain substantial. The company's $124.3 million in cash provides some runway, but additional financing may be needed. Investors should weigh the potential for breakthrough therapies against the inherent risks of biotech investing, including clinical trial failures and regulatory hurdles.

Competitive Analysis

Relay Therapeutics competes in the crowded precision oncology space but differentiates itself through its unique focus on protein motion and allosteric drug discovery. The company's computational platform, developed in collaboration with D.E. Shaw Research, allows for novel insights into protein dynamics that traditional drug discovery approaches might miss. This could potentially lead to more effective and selective therapies. However, Relay faces significant competition from larger, more established oncology-focused biopharma companies with deeper pipelines and greater resources. The company's relatively narrow focus on FGFR2, PI3Kα, and SHP2 inhibitors means its success is heavily dependent on these specific programs. While its approach is scientifically innovative, the clinical and commercial validation of its platform remains unproven. Relay's collaborations with Genentech provide some validation of its technology but also highlight its reliance on partners for development capabilities. The company's ability to advance its pipeline independently while maintaining its technological edge will be crucial for long-term competitiveness.

Major Competitors

• Bristol-Myers Squibb Company (BMY): Bristol-Myers Squibb is a pharmaceutical giant with a strong oncology portfolio, including Opdivo and Yervoy. While much larger than Relay, BMY's focus on immuno-oncology complements rather than directly competes with Relay's targeted therapy approach. BMY has greater resources but may lack Relay's specialized focus on protein motion.
• Novartis AG (NVS): Novartis has a broad oncology pipeline including targeted therapies like Kisqali. The company's scale and commercial infrastructure far exceed Relay's, but Novartis may be less focused on the niche protein motion approach that defines Relay's platform.
• Roche Holding AG (RHHBY): Roche, through its Genentech subsidiary, is a leader in targeted cancer therapies. While Genentech is a collaborator on RLY-1971, Roche otherwise represents significant competition in the FGFR and PI3K inhibitor space with approved products and advanced pipelines.
• ArQule, Inc. (ARQL): ArQule (now part of Merck) was a clinical-stage biotech focused on kinase inhibitors, making it a closer peer to Relay in terms of size and focus. Its acquisition highlights the potential for Relay as a takeover target but also removes a potential partner.
• Loxo Oncology (LOXO): Now part of Eli Lilly, Loxo was a leader in precision oncology before its acquisition. Loxo's success with targeted therapies like Vitrakvi sets a high bar for Relay's aspirations in precision medicine.