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Why Relay Therapeutics Is Up 30% This Week

By Cory Renauer – Oct 15, 2021 at 9:01AM

Key Points

  • Relay Therapeutics is developing precision cancer drugs that can arrest troublesome proteins with a degree of specificity previously considered impossible.
  • The stock surged this week in response to human proof-of-concept data that suggests its lead candidate, RLY-4008, works as intended.
  • Successful precision oncology startups are often acquired by deep-pocketed big pharmaceutical companies.

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Interim trial data suggests this innovative biotech start-up is on the right track.

What happened

Shares of Relay Therapeutics (RLAY -1.13%), a clinical-stage biopharmaceutical company, have risen about 30% since the stock's closing price last Friday. Investors are highly encouraged by interim clinical trial data that suggest the company's new approach to drug development can produce a new blockbuster cancer treatment.

So what 

Relay Therapeutics is developing small molecule drugs to inhibit troublesome proteins that were previously considered undruggable. The biotech stock surged this week after the company reported positive interim data from a study with RLY-4008, a treatment candidate for bile-duct cancer.

A person smiles while looking at their laptop.

Image source: Getty Images.

RLY-4008 specifically targets a protein associated with aggressive tumor growth called FGFR2, without inhibiting a similarly shaped protein called FGFR1. Previous attempts to target FGFR2 have stumbled because of off-target toxicities. So far, 49 volunteers have been treated with RLY-4008 without signs of side effects associated with less selective FGFR inhibitors in the past.

Relay Therapeutics is saving the details for an upcoming scientific conference, but the results reported on Oct. 8 also suggest it's effective. Six out of six patients with FGFR2 mutation-positive bile cancer demonstrated tumor shrinkage after treatment with RLY-4008.

Now what

In January, Relay Therapeutics' collaboration partner Roche (RHHBY -1.67%) began a phase 1 trial with RLY-1971. Roche always holds cards close to its vest but we should see top-line results from this highly selective SHP2 inhibitor by next April. 

Relay Therapeutics completed a secondary share offering on Oct. 12 that will add around $400 million to the company's cash cushion. This is probably enough to fuel operations through a pivotal study with RLY-5008, but I'll be surprised if Roche or another big pharmaceutical company doesn't make Relay Therapeutics a juicy buyout offer first.

Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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