On Wednesday, H.C. Wainwright adjusted its price target for Relay Therapeutics (NASDAQ:RLAY) shares, a clinical-stage precision medicine company, reducing it to $18.00 from the previous $20.00. The firm has maintained a Buy rating on the stock.
The revision follows Relay's announcement on Tuesday that Roche (RHBBY; not rated) has decided to end the collaboration and license agreement for RLY-1971, a SHP2 inhibitor. Roche has not provided a reason for the termination, which Relay has indicated was without cause.
Under the initial agreement signed on December 11, 2020, Relay received $121.8 million from Roche's Genentech division. This sum included a $75 million upfront payment, $45 million in milestone payments, and reimbursement for certain research and development expenses. Despite the termination, the financial impact on Relay includes these substantial payments received during the partnership.
In response to Roche's decision, H.C. Wainwright has removed the risk-adjusted revenue projections for RLY-1971 from its discounted cash flow-based valuation model.
This conservative approach reflects the current situation, in which the future revenue potential of RLY-1971 is uncertain, given the termination of the agreement with Roche.
The analyst at H.C. Wainwright reiterated their confidence in Relay Therapeutics by maintaining a Buy rating despite the lowered price target. The new 12-month price target of $18 is based on the adjusted valuation model, which now excludes the contributions from RLY-1971.
InvestingPro Insights
As Relay Therapeutics (NASDAQ:RLAY) faces the termination of its collaboration with Roche, investors are keen to understand the company's financial health and stock performance. According to real-time data from InvestingPro, Relay Therapeutics has a market capitalization of $1.19 billion and a price to book ratio of 1.6 as of the last twelve months leading up to Q1 2024. Despite the challenges, the company shows a remarkable revenue growth of 2873.65% during the same period.
InvestingPro Tips highlight that Relay Therapeutics holds more cash than debt on its balance sheet, which is a positive sign for financial stability. However, analysts at InvestingPro have noted that the company is rapidly burning through cash and does not expect it to be profitable this year. For investors looking for more in-depth analysis, there are an additional 12 InvestingPro Tips available, which can provide further insights into Relay's financial and stock performance. Interested readers can use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription for more detailed tips and metrics.
These insights can be particularly useful in assessing the potential impact of the recent developments on Relay's stock. With the company's strong return over the last three months, despite the volatility and the lack of profitability over the last twelve months, investors should keep a close eye on how these factors will influence Relay's strategic decisions and market position in the precision medicine industry.
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