On Wednesday, Leerink Partners adjusted its price target on shares of Relay Therapeutics (NASDAQ:RLAY), dropping it to $18.00 from the former $19.00. Despite the reduction, the firm maintained its Outperform rating on the stock. The adjustment comes as RLAY trades near its 52-week low of $4.37, having declined over 8.5% in the past week.
According to InvestingPro data, analyst targets for the stock range from $16 to $30, suggesting significant potential upside from current levels. The revision stems from Relay Therapeutics' recent licensing agreement with Elevar Therapeutics, which is set to take over the clinical development, regulatory submission, and global commercialization rights for the drug candidate lirafugratinib.
Relay Therapeutics has entered into a deal with Elevar Therapeutics, a subsidiary of HLB Co., Ltd. (KOSDAQ:028300), to out-license lirafugratinib, also known as RLY-4008, an FGFR2 inhibitor. According to the terms of the agreement, Relay will receive $75 million upfront and in regulatory milestones, with the potential to earn up to $425 million in additional commercial milestone payments.
The deal comes at a crucial time for Relay, which maintains a strong financial position with a current ratio of 18.42 and more cash than debt on its balance sheet, as highlighted by InvestingPro's analysis. The company will also receive tiered royalties up to a low-teens percentage.
Elevar Therapeutics will now be responsible for the continued clinical development of lirafugratinib, including the submission of the New Drug Application (NDA). The drug has shown promise in treating FGFR2-driven cholangiocarcinoma (CCA) and other FGFR2-altered solid tumors.
The latest data on lirafugratinib, presented at the EORTC-NCI-AACR "Triple Meeting" in 2024, indicated a clinical overall response rate (cORR) of 37% and a median duration of response (mDOR) of 7.3 months in patients with FGFR2 fusion or rearrangement.
The analyst at Leerink believes that this licensing decision is a judicious allocation of Relay's resources, considering the relatively small patient populations affected by FGFR2-driven cancers, which include approximately 1,500 cholangiocarcinoma patients, 2,800 breast cancer patients, and 900 gastric cancer patients in the United States.
With a market capitalization of $734.81 million and a comprehensive analysis available in the InvestingPro Research Report, investors can access detailed insights into Relay's strategic positioning and growth potential among over 1,400 top US stocks covered by the platform.
The revised price target reflects the changes made to Leerink's financial model to account for the out-licensing of lirafugratinib. Relay Therapeutics' strategic partnership is seen as a positive step in the development and potential commercialization of lirafugratinib.
In other recent news, Relay Therapeutics has seen significant developments in its drug trials and financial position. The U.S. Food and Drug Administration approved Roche's Itovebi (inavolisib) for a specific breast cancer treatment, which includes Relay Therapeutics' drug candidate.
The 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, while Oppenheimer downgraded their rating due to concerns about the selectivity profile of RLY-2608. Relay Therapeutics has also initiated a $200 million underwritten public offering of its common stock.
Relay Therapeutics' recent developments reflect the company's progress in drug development and financial forecasts. These developments include FDA approval for a partnered therapy, positive results from its own trials, and varied analyst ratings. Relay Therapeutics' 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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