On Wednesday, H.C. Wainwright adjusted its price target on Relay Therapeutics (NASDAQ:RLAY), dropping it to $16.00 from the previous $20.00, while still recommending the stock as a Buy. The stock, which has declined over 60% year-to-date and is trading near its 52-week low of $4.37, maintains strong analyst support with a consensus Buy rating.
The revision followed the announcement that Relay Therapeutics had finalized a global licensing agreement for its FGFR2 inhibitor, lirafugratinib, with Elevar Therapeutics, a subsidiary of HLB Inc . (KOSDAQ:KQ:028300).Want deeper insights? InvestingPro subscribers have access to 13 additional analyst insights and comprehensive financial metrics for RLAY.
Under the terms of the agreement, Elevar Therapeutics will receive worldwide development and commercialization rights for lirafugratinib. They are tasked with taking over all future development work, including the filing of New Drug Applications (NDAs), continuing clinical development, and the global commercialization for FGFR2-driven cholangiocarcinoma (CCA) and other solid tumors with FGFR2 alterations. Relay Therapeutics stands to gain up to $75 million in upfront and regulatory milestone payments, with the possibility of an additional $425 million in commercial milestone payments. They are also entitled to tiered royalties, which could reach the low-teens percentage of sales.
The agreement comes after lirafugratinib demonstrated significant efficacy in clinical trials, with a 73% objective response rate (ORR) and a median duration of response (mDOR) of 11.2 months in FGFRi-naïve, FGFR2-positive CCA patients treated with doses of 70mg or higher. These results were presented at the American Society of Clinical Oncology (ASCO) 2023 conference.
Furthermore, at the recommended Phase 2 dose of 70mg daily, lirafugratinib achieved an 88.2% ORR in FGFR2 fusion or rearrangement positive, FGFRi-naive CCA patients, with a 100% ORR in a subset of these patients.
The drug also showed a 37% confirmed ORR and a mDOR of 7.3 months across 14 different solid tumor types harboring FGFR2 fusion or rearrangement, excluding CCA, in patients who had received a median of two prior treatments. Despite these promising clinical outcomes, the analyst cited the royalty rate agreed upon in the licensing deal as the reason for the reduced price target.
The new 12-month price target reflects these adjustments. With a market capitalization of $735 million and a strong balance sheet showing more cash than debt, Relay maintains financial flexibility despite burning through cash rapidly.Discover more with InvestingPro, which offers exclusive access to detailed financial health metrics, Fair Value analysis, and comprehensive Pro Research Reports for over 1,400 US stocks, including RLAY.
In other recent news, Relay Therapeutics has seen significant developments in its financial position and drug trials. Leerink Partners adjusted its price target on Relay Therapeutics shares to $18.00 from $19.00, maintaining an Outperform rating despite the reduction. This comes after Relay Therapeutics' recent licensing agreement with Elevar Therapeutics.
The deal, which includes an upfront payment of $75 million and potential for up to $425 million in additional commercial milestone payments, sees Elevar taking over the clinical development, regulatory submission, and global commercialization rights for the drug candidate lirafugratinib.
Moreover, the U.S. Food and Drug Administration approved Roche's Itovebi (inavolisib) for a specific breast cancer treatment, which includes Relay Therapeutics' drug candidate. This approval was based on the successful outcomes of the Phase 3 INAVO120 trial. Relay Therapeutics' Phase 1 ReDiscover trial also demonstrated promising results, leading to adjustments in analysts' outlooks.
Analyst firms, including H.C. Wainwright, Stifel, and Jefferies, have maintained or upgraded their ratings for Relay Therapeutics. However, Oppenheimer downgraded their rating due to concerns about the selectivity profile of RLY-2608. Additionally, Relay Therapeutics initiated a $200 million underwritten public offering of its common stock. The company's financial position as of the second quarter of 2024 reported a cash position of approximately $688 million, expected to fund operations into 2026.
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