Whereas Vertex Pharmaceuticals revolutionized drug discovery by pioneering and proving structure-based drug design (SBDD), Relay Therapeutics has an ambitious mission to pioneer and prove motion-based drug design (MBDD). The former approach starts with an accurate 3D structure of a disease-driving protein, then works from there to develop molecules with therapeutic potential.

The latter approach starts with an accurate 4D structure of a disease-driving protein, where the fourth dimension is time. Relay Therapeutics, founded by Vertex veterans, argues true precision medicine efforts must consider how the 3D structure of a protein changes over time. A photograph of a tree is great, but only a video reveals how the branches and leaves wave in the breeze.

The Dynamo technology platform combines dozens of experimental and computational tools, including a novel supercomputer architecture called Anton, to design drugs the most selective drugs in a given competitive landscape using MBDD.

Relay's most mature asset (lirafugratinib) nearly doubled the best response rate of the competitive landscape, 42% to 82%, in a rare liver cancer. Scoring another early win with RLY-2608 might cement the hypothesis for MBDD. Although the opportunity is much larger than for lirafugratinib and the competitive bar much lower, PI3K-alpha's role in cell metabolism has made it incredibly difficult to safely target.

Let's walk through how to interpret the results for investors and nerds in lab coats alike. The nerdy details are below, but a best-case scenario in this patient population would include an objective response rate (ORR) of at least 30%.

What is the De-Risking Event?

Before the market opens on Monday, September 9, Relay Therapeutics will host a rare conference call to discuss an interim data readout for RLY-2608 in HR+/HER2- breast cancer. For context, the company doesn't even host quarterly conference calls, choosing instead to focus on execution and allowing assets to mature.

As recently as August 2024, the company told investors to expect a landmark data readout for its PI3K-alpha inhibitor RLY-2608 in the fourth quarter. After market close on Friday, September 6, the company announced it would hold a premarket conference call on Monday, September 9 – at least one month earlier than expected.

What is PI3K-alpha?

Investors of all backgrounds can appreciate that cancer is caused by the uncontrolled growth of cells. Tumors often harbor mutations in genes that regulate cell division, cell metabolism, and cell growth. PI3K-alpha regulates how cells consume glucose, which makes it an important part of cellular metabolism in both healthy and cancerous cells. No wonder it's found in 14% of all solid tumor cancers.

That has also made it a challenging target. Scientists have struggled to selectively inhibit mutated PI3K-alpha (in cancer cells) while sparing wild-type PI3K-alpha (in healthy cells). If a drug candidate fails to discriminate between the two, then patients develop hyperglycemia, or too much glucose in the blood.

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High rates of hyperglycemia are especially troublesome for two reasons. First, PI3K-alpha inhibitors are effective at shutting down cancer growth, but dose interruptions and reductions means patients are rarely treated for long enough periods to see the benefit. Second, an estimated 50% of women with HR+/HER2- breast cancer are diabetic or prediabetic, which makes them ineligible for treatment with existing PI3K-alpha inhibitors.

It's trickier still.

In addition to selecting between mutant and wild-type PI3K-alpha proteins, a safe and effective inhibitor also needs to select against different members of the PI3K family of proteins. Each family member is called an isoform, with a slightly unique structure, and denoted by different Greek letters.

A truly selective PI3K-alpha inhibitor would have a low preference for PI3K-gamma and PI3K-delta, which are responsible for high rates of other side effects such as rash and diarrhea.

What is the Drug Candidate?

The data readout centers on RLY-2608, which is a PI3K-alpha inhibitor.

RLY-2608 is the company's most important asset because it has the potential to serve as the foundation for a broad portfolio of next-generation breast cancer assets. That may include combinations with in-house assets such as a next-generation CDK inhibitor (RLY-2139) and an estrogen receptor (ER) protein degrader (RLY-1039).

That will also include combinations with external next-generation assets. For example, a study combining RLY-2608, fulvestrant, and Pfizer's prized CDK4 inhibitor atirmociclib expects to begin enrolling patients soon.

What Makes RLY-2608 Different?

Relay Therapeutics designed RLY-2608 as the first allosteric, pan-mutant, isoform-selective PI3K-alpha inhibitor.

That means it selectively binds to mutated over wild-type proteins ("pan-mutant selective") and alpha isoforms over other family members ("isoform selective"). The term "allosteric" refers to the binding pocket where the drug candidate attaches to the protein.

There are generally two types of binding pockets:

• Orthosteric, meaning the active site of a protein. Binding here disables a protein by blocking its function.
• Allosteric, meaning an inactive site of a protein. Binding here disables a protein by bending it into a useless shape.

The company solved the first full-length structures of PI3K-alpha proteins to discover a new allosteric binding pocket more commonly present on mutated, but not wild-type, proteins. This is what drives RLY-2608's low rates of hyperglycemia.

Why is the Data Readout Important?

The data readout for Monday, September 9, includes an interim look at RLY-2608 600 mg BID combined with fulvestrant in metastatic HR+/HER2- breast cancer. Let's keep talking nerdy.

• RLY-2608 is a PI3K-alpha inhibitor
• 600 mg is the dose level
• BID is Latin for bis in die, or twice a day
• Fulvestrant inhibits the function of estrogen receptors (ER)
• Metastatic means the cancer has spread to other parts of the body
• HR+ means "hormone positive," which means tumor cells are fueled by a hormone. The hormone in this specific indication is estrogen.
• HER2- means "human epidermal growth factor receptor 2 negative," which means tumor cells have low levels of this important receptor. The receptor helps control cell growth.

If doctors had a safe and effective PI3K-alpha inhibitor that could be used in most patients, including those with prediabetes and diabetes, then it would open powerful combination treatments. The data readout on September 9 will provide a meaningful early look at RLY-2608's potential to position itself as the asset of choice.

What Does a Successful Outcome Look Like?

Based on previous communications, investors can expect Relay Therapeutics to report data for over 40 patients with advanced HR+/HER2- breast cancer who've had prior treatment with a CDK inhibitor (an important metric for differentiating patient populations) and who've been treated with RLY-2608 plus fulvestrant for at least six months.

Investors and Wall Street analysts will be watching one metric in particular: objective response rate (ORR).

An objective response in this specific tumor type is a tumor reduction of at least 30%. Therefore, the ORR measures how many patients saw a meaningful response to treatment.

The difficulty in safely inhibiting PI3K-alpha results in a relatively low bar. Results from the competitive landscape in this specific patient population:

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A best-case scenario for RLY-2608 would be an ORR of at least 30%.

That would provide meaningful separation from the competitive landscape, suggest an even higher ORR could be possible in earlier treatment lines, and support adding other molecules to the combination. For example, one competing triple combination delivered an ORR of nearly 40% by adding a CDK4/6 inhibitor into the mix. What might a more selective asset like RLY-2608 be able to achieve?

What Happens Next?

Relay Therapeutics will have additional data readouts for RLY-2608 this year, which combined will inform the direction of the company's foundational asset.

• RLY-2608 plus fulvestrant: A larger data readout including over 60 individuals at the selected 600 mg BID dose.
• RLY-2608 plus fulvestrant: A larger data readout including over 100 individuals at multiple dosing levels, including many that are no longer being pursued. This disclosure will provide the first glimpse of an important early- and mid-stage metric called median progression-free survival (mPFS).
• RLY-2608, fulvestrant, and ribociclib (CDK4/6) inhibitor: An early-stage look at initial safety for a triple combination.

Additionally, it appears increasingly likely to me that Relay Therapeutics has deprioritized lirafugratinib (RLY-4008). The company's most mature asset is well-positioned to lead its competitive landscape in FGFR2-altered cancers. However, if data for RLY-2608 are favorable, then it would make sense to monetize lirafugratinib and go all-in on developing a next-generation breast cancer portfolio across multiple assets.

Lirafugratinib could be monetized for a significant (and non-dilutive) upfront payment.

Finally, as Solt DB members learned in this month's Member Digest, Relay Therapeutics is likely to conduct a public share offering this week if the data readout is favorable. Investors can expect between 10% to 15% dilution.

Forecast & Modeling Insights

I'll update my model for Relay Therapeutics and provide insights when I review the RLY-2608 data this week.

Margin of Safety & Allocation

Relay Therapeutics is considered a Growth (Quality) position. The current modeled fair valuation for the company based on my 2024 model is below:

• Market close September 6: $6.24 per share
• Modeled Fair Valuation: $22.73 per share
• Allocation Range: Up to 15%

Relay Therapeutics reported 133.890 million shares outstanding as of August 2, 2024. The modeled fair valuation above assumes 153.973 million shares outstanding, which is equivalent to 15% dilution.

Further Reading

• August 2024 press release announcing Q2 2024 operating results
• August 2024 regulatory filing (10-Q) detailing Q2 2024 operating results
• January 2024 research note setting expectations for the year ahead

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