Let's circle back around to the Relay Therapeutics pipeline update from June 27. Before we do, I have to be a little sneaky with headlines during our soft launch on Ko-fi. Solt DB investment research will cover companies that aren't recommended for investment, so I don't want to telegraph conviction or sentiment to non-members through headlines. In other words, the headlines might be a little dull for the time being.

Earlier this week Relay Therapeutics published updated data from the lead drug candidate, RLY-4008 (FGFR2), and provided an ambitious roadmap for treating genetically-defined breast cancers. Part of that roadmap includes a duplicative PI3K-alpha program that may signal turbulence in the franchise, although after listening to the webcast I think the "fast follower" approach is a sound strategic decision.

Let's take a closer look at these three updates. Here's the quickie update from earlier in the week. If you have questions, then please email me directly at invest@soltdb.com

Dynamo Validation Runs Through RLY-4008

The strategic decision to focus on FGFR2-altered cancers with the first wholly-owned program created with Dynamo looks wiser with each data update. The initial development focus is cholangiocarcinoma (CCA), a type of cancer affecting bile ducts in the liver. It doesn't present the largest patient population with only about 1,000 new cases each year in the United States. However, it represents an established market with multiple approved therapies available. Considering none are selective for FGFR2 specifically and each suffers from tolerability challenges, it's the perfect target to quickly validate Dynamo and motion-based drug design (MBDD).

The latest data are impressive relative to a phase 1 clinical trial. At the time of the October 2021 data readout, RLY-4008 delivered a partial response (PR) rate of 50% in individuals with FGFR2-fusion CCA who had never received treatment with an FGFR inhibitor.

• Nerds in lab coats refer to this patient population as FGFRi-naïve FGFR2-fusion CCA.
• "FGFRi-naïve" means they've never been treated with an FGFR inhibitor, while "FGFR2-fusion" refers to the specific type of genetic alteration. There are also mutations and amplifications.
• A partial response (PR) is defined as a tumor reduction of at least 30%.

In the June 2022 research report, I attempted to ground investors by suggesting the PR rate would decline in larger studies. After all, the initial response data included observations from only six patients. That may turn out to be too cautious.

Relay Therapeutics announced that the PR rate increased to 62% (8/13 patients) in this patient population. That included a PR rate of 100% (4/4 patients) in individuals who received 70 mg once daily, which is the dose that was selected for the phase 2 clinical trial.

This provides two points of validation for Dynamo. First, 70 mg once daily was the highest dose tested in the exploratory phase 1 clinical trial. The superior selectivity of RLY-4008 allows doctors to administer a high dose to maximize efficacy, and still manage side effects. This is essentially the company's thesis for using MBDD.

• Patients mostly experienced side effects caused by inhibiting FGFR2 – stomatitis (sore mouth), dry mouth, nail toxicities, and hand-foot syndrome – while largely avoiding the side effects that limit non-selective FGFR inhibitors.
• Of the 115 individuals included in the data cutoff (there are multiple cohorts aside from FGFRi-naïve FGFR2-fusion CCA), only 14% experienced hyperphosphatemia (elevated phosphate levels) and only 10% experienced diarrhea. That compares to 90% to 94% and 24% to 47%, respectively, for approved and late-stage FGFR inhibitors.
• Of the 58 individuals included in the data cutoff who received any once-daily dose, only 19% needed to reduce doses. That included 36% of individuals receiving 70 mg once daily. However, no patients discontinued treatment due to side effects. That compares to 23% to 74% of patients who needed to reduce or discontinue dosing with approved and late-stage FGFR inhibitors.

Second, a PR rate of 62% is dominating. For comparison, the current benchmark is Pemazyre with a PR rate of 36%, although the soon-to-be-approved futibatinib delivered a PR rate of 42% in a late-stage study. Relay Therapeutics has plenty of breathing room either way.

I hesitate to say this, but the PR rate could increase further in the phase 2 clinical trial with all patients receiving the 70 mg once-daily dose. That's kind of mind boggling. RLY-4008 might be able to nearly double the PR rate of the next-best treatment option. If it achieves that, then there's no longer a competitive landscape. The market would belong to Relay Therapeutics.

Regulators appear intrigued. The U.S. Food and Drug Administration (FDA) will allow the company to conduct a registrational, single-arm phase 2 clinical trial in FGFRi-naïve FGFR2-fusion CCA.

• "Registrational" means RLY-4008 could request regulatory approval after the study is complete, pending results of course. A phase 3 study may not be required.
• "Single-arm" means there's no need to compare the drug candidate to an approved FGFR inhibitor. All individuals will receive RLY-4008.
• The study will enroll 100 patients total.

It may not stand out to investors, but this is the breeziest possible regulatory pathway. It's highly unusual for the FDA to allow an accelerated development timeline or a single-arm pivotal study (including phase 3) for a cancer with multiple approved treatment options with nearly similar genetic targets. Relay Therapeutics snagged permission to pursue both.

This is a testament to the company's ambitious early-stage development strategy. Many emerging drug developers will enroll a dozen or so patients in a phase 1 clinical trial for an experimental cancer treatment and then barrel into phase 2. Data collection be damned.

Relay Therapeutics has made the strategic decision to collect robust data as early as possible. It's more expensive initially, but the data can inform development or position programs for accelerated approval from regulators. If programs earn approval sooner, then long-term R&D savings and longer product life on the market would justify the initial investment many times over.

Consider the development plans for the phase 2 clinical trial, only including CCA:

• 100 individuals in a potentially pivotal cohort of FGFRi-naïve FGFR2-fusion CCA
• 50 individuals in a supportive cohort of FGFRi-treated FGFR2-fusion CCA
• 20 individuals in a supportive cohort of treatment-naïve (any treatment) FGFR2-fusion CCA
• 20 individuals in a supportive cohort of any FGFR2-mutant or FGFR2-amplified CCA

The regulatory pathway is clear and the probability of success is high, but there are no guarantees. Relay Therapeutics probably won't be able to use PR rate as the primary endpoint for the registrational phase 2 clinical trial. It will likely need to prove RLY-4008 helps patients live longer or achieve stable disease for many months. And that's just for one small population with FGFR2-altered cancers.

The company will need to collect data in FGFR2-amplifications and FGFR2-mutations across multiple types of tumors, including breast, endometrial, lung, stomach, and so on. The FDA may require larger and longer studies for those tumor types. Then again, there are currently no approved treatments for any FGFR2-altered cancer outside of CCA. That could earn a Breakthrough Therapy designation or two, which would allow the company to request accelerated approval after a phase 2 clinical trial or pursue a breezy phase 3 clinical trial design.

Image Source: June 2022 investor presentation.

The biggest opportunity remains FGFR2-altered breast cancer, which helps to explain the new focus on this tissue type  broadly.

A Strategic Focus on Breast Cancers

Relay Therapeutics expects RLY-4008 to be part of a growing number of programs focused on genetically-defined breast cancers. In fact, the lead drug candidate achieved the first-ever PR in FGFR2-altered breast cancer during its early-stage study.

The company is also developing:

• A franchise of PI3K-alpha programs including two pan-mutant ("multiple-mutations") drug candidates. I'll expand on this in the next section.
• An unnamed CDK2 inhibitor that's expected to begin a phase 1 clinical trial in Q4 2023 or Q1 2024.
• A protein degrader targeting estrogen receptor-alpha (ER-alpha) in collaboration with EQRx (NASDAQ: EQRX).

To make sense of the alphabet soup of genetic targets, it's important to point out Relay Therapeutics is specifically interested in HER2- breast cancers that are HR+ ("HR" = hormone receptor). That just means tumor cells are reliant on a hormone such as estrogen, but not HER2 (a type of growth factor, aka fertilizer for cells). Investors may be familiar with the latter genetic target, which made Herceptin one of the best-selling drugs of all-time by treating HER2+ cancers. However, the blockbuster offered no help to nearly 200,000 individuals with HER2- cancers.

So, why develop all these programs for one type of cancer? The development goal is to disrupt multiple molecular pathways used by tumor cells. The term "genetically-defined cancer" is a bit misleading because many tumors are defined by mutations in multiple genes. In other words, HR+ / HER2- tumors may also have cancer-driving mutations in PI3K-alpha and other genes. The best approach may one targeting many mutations simultaneously through combination treatments.

Relay Therapeutics teased multiple potential combinations among its emerging programs, although the most important is PI3K-alpha with CDK2.

Image Source: June 2022 investor presentation.

HR+ / HER2- breast cancer is commonly aided by mutations in PI3K-alpha and the CDK family of genes. While there are approved CDK4/6 inhibitors, they're less effective when treating tumors with high levels of CDK2. Relay Therapeutics used Dynamo to develop a selective CDK2 inhibitor that spares other members of the protein family. It was very similar to the development of RLY-4008 and the need to avoid other FGFR proteins. Early preclinical data combining the company's PI3K-alpha (RLY-2608) and CDK2 inhibitor (unnamed) suggest they have a synergistic effect.

The development goal of the ER-alpha drug candidate ("estrogen receptor," a target for treating HR+ cancers where the hormone is estrogen) is to replace endocrine therapy, which is part of treatment for nearly all HR+ cancers.

• Relay Therapeutics designed a bifunctional protein degrader. This is the same "molecular glue" approach used by Monte Rosa Therapeutics (NASDAQ: GLUE).
• However, bifunctional degraders are a bit more complicated than a competing approach based on PROTAC, which is used by Kymera Therapeutics (NASDAQ: KYMR) and Arvinas (NASDAQ: ARVN).

Although both approaches can work, I think PROTAC has a better chance of being the future of the protein degradation field. I'm also not terribly confident in the EQRx collaboration so far. Relay Therapeutics can always opt out of the partnership, return rights to the ER-alpha program, or acquire rights to the ER-alpha program. We'll see.

Whereas RLY-5836 and the CDK2 inhibitor are expected to begin clinical trials by 2023, the ER-alpha inhibitor program will only select a development candidate in 2023, which means a clinical trial may not start until 2024.

What About the PI3K-alpha Franchise?

Relay Therapeutics announced it was developing a pan-mutant PI3K-alpha inhibitor called RLY-5836. The only problem is that it recently started an ambitious phase 1 clinical trial for RLY-2608, which is also a pan-mutant inhibitor of the same genetic target. What's going on?

Management said it thinks RLY-5836 could be more selective than RLY-2608. Unfortunately, that increases the odds the first drug candidate will be abandoned.

Developing multiple drugs aimed at the same target is called a "fast follower" approach. It's commonly deployed when large markets are involved. PI3K-alpha represents the single-largest untapped opportunity in precision medicine and will be the cornerstone of combination therapies in HR+ / HER2- breast cancers, so it makes strategic sense to study a next-generation program simultaneously. The alternative approach to drug development – choose one, wait for results, fail in mid-stage studies, and then hit the reset button years later – would be much too costly.

Although this means the PI3K-alpha franchise may be about 12 months to 24 months further from reaching market, RLY-5836 is expected to begin a phase 1 clinical trial in 2023. That's about as fast of a fast follower as possible.

It's also worth pointing out the company could pursue both drug candidates. Maybe RLY-2608 can earn approval, launch, and start seeding the wide-open market opportunity, then RLY-5836 can launch 12 to 24 months later as a better option for combinations -- and just in time to sync up with the CDK2 inhibitor. This is relatively common in drug development, but perhaps a bit less likely in this case.

What's an Attractive Entry?

The current risk/reward for Relay Therapeutics is considered favorable overall. This is considered an investment-grade Growth (Quality) position. An attractive entry for Relay Therapeutics is estimated at:

• Attractive valuation: $2.5 billion / ~$23 per share
• Consider prioritizing: <$2.0 billion / ~$18.50 per share
• Feel good adding up to: $3.0 billion / ~$27.50 per share

The valuation estimates above are based on 108.6 million shares outstanding as of April 29th, 2022. They account for the revaluation of the biotech sector and tightening financial conditions that began in early 2022. Investors are cautioned against using 2021 valuations as a benchmark or for comparison. Additionally, these estimates and suggested entry points are provided for investors with a long-term mindset, not traders.

‍Further Reading

• Press release for October 2021 data readout
• Press release for June 2022 data readout and pipeline update
• Presentation for June 2022 data readout and pipeline update

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