Relay Therapeutics, Inc. (RLAY) Earnings Call Transcript & Summary

This is our New York City Healthcare Conference, and it's a pleasure to see you all. We have the Relay management team, fresh from their flights from ASCO as I am as well. So they are full of energy and really can talk for days. But no, I'm very grateful to have the team here, especially as we're starting to see, I think, the HR-positive breast cancer space play out and understanding where there's different therapeutic opportunities. So I'm actually quite excited to have this conversation with you. Sanjiv, why don't I hand it off to you to give some intro remarks, and we'll get going.

Yes, excellent. Thanks, Akash, for the invitation, and thanks to Jefferies. We had a very productive year so far. We've shown three data sets in three large commercial opportunities. The first data set we showed was in second-line hormone receptor positive, HER2-negative breast cancer with ESMO TAT. We showed in our pivotal trial dose of 400 milligrams BID, an 11-month PFS with an oral regimen, which we're going up against capivasertib with its 5.5 months worth of PFS. So we feel very confident as we run our pivotal trial that it will be a success and that will offer patients a paradigm shift in treatment. The second data set we shared was in looking at our frontline hormone receptor positive HER2-negative breast cancer trial that we'd like to run, where we announced that we will use a novel selective, selective regimen with Zovega and atirmociclib, Pfizer's selective CDK4. And we showed what we believe to be a very clean safety profile with great efficacy in third-line patients, and we're excited to bring that into the frontline as rapidly as we possibly can. And then a couple of weeks ago at the ISSVA conference in Philadelphia, which is the largest conference for vascular anomalies, we showed what we believe to be paradigm shifting data for these patients that are chronically underserved, where we showed a 60% volumetric rate of response in a field where the traditional characteristic has been somewhere between 11% and 20% -- and so we're kind of full speed ahead now to try and execute all three pivotal trials as rapidly as we can and get these medicines to patients.

Understood. I'm going to start with the breast cancer opportunity, though I want to acknowledge, I think the orphan story is just as interesting. And frankly, I think it's had an even bigger impact in terms of your near-term stock performance, but we're fresh from ASCO. And I think we've got two really, really interesting data sets. We have finally the persevERA data. And then also we got data from Celcuity, which I think was really interesting. I wanted to just start off a bit with Celcuity. And like, look, this is -- it does look like it was an impressive PFS benefit. No additive benefit on the triplet versus the doublet. And then 11 months, when we think about the absolute benefit on PFS was kind of in the range that your team had shown. I'd love to get your take in terms of how you look at the Celcuity data. What did you learn about your own product and how it gets positioned post that data set?

Yes. I mean, obviously, as those of you who have been close to us, it has definitely been a question that we've been asking and then trying to answer for the last years. It's great to actually have the data and the experiment run in the public domain. And for those of you who didn't follow it, what they showed with their triplet regimen, which is a weekly IV regimen of gedatolisib with palbociclib and endocrine therapy, an 11-month PFS, which is an impressive result, given the standard of care there on the control arm was 5.5 months. And so we think it will be a step forward for patients. I think as we -- as it pertains to us, I think the question was, would it be a commercial headwind if we were to then launch into that market. And I think our belief is having shown now two large cohorts of patients showing with our oral regimen an 11-month PFS that it will not and that we should be able to take share from that market that Celcuity will build very rapidly as patients are going to prefer an oral regimen. I think the concern was that they were going to show 15, 18 months, whatever the numbers that were being banded around, which obviously would have been more challenging for us to compete against. So I think in terms of just how we feel about the commercial opportunity, I think we feel very confident. In terms of their triplet versus doublet, yes, it was an interesting result to see that in the end, there was potentially perceived no benefit for having a CDK4/6. Now we don't know if that's actually the conclusion. As you know, their doublet arm was there really only for a contribution of components. And so it's hard to kind of statistically be accurate that they actually have no benefit. I think our belief is what we saw in the wild-type arm is probably play out in the mutant arm and that there will probably be a little bit of benefit 1 to 2 months for having the CDK4/6 on board. But really now, it does create some confusion for prescribers, do they prescribe the triplet or the doublet given the data that has been seen there.

Understood. And look, is going to be -- this is a tricky question, and I'm struggling with this as well. How do you -- Forget patients. How about you? I mean you have a partnership with Pfizer with Atirmo and really interesting early data, but early data and a potential to move this into kind of a first-line setting. So has your confidence on kind of the AtirmoPIK3-alpha combo changed at all as a result of the Celcuity? And if not, why? Why does that data point not necessarily -- read across to the trials you're running?

Yes. No, it really hasn't. As we're moving into a frontline setting, we have proof today from Roche's INAVO120 trial of inavolisib in an endocrine-resistant patient population, frontline treated, where we saw doubling of PFS and an OS benefit for the triplet regimen of inavolisib with palbo and fulvestrant versus fulvestrant plus palbo. So we know from that experiment that adding a PI3K inhibitor on top of the CDK4/6 inhibitor in frontline patients can have a very meaningful efficacy benefit. Now one of the shortcomings of that trial was it was highly contrived, run in a heavily selected patient population to avoid some of the metabolic liabilities of inavolisib. And those data have, therefore, been challenging for prescribers to translate into real-world usage, and we've seen that as a headwind to uptake of inavolisib. But I think when we look at that, when we look at the fact that in endocrine-sensitive patients in frontline, patients with a PIK3CA mutation do not receive the full benefit of the CDK4/6 regimens and perform slightly poor on PFS, about a year poor than patients who are PI3K wild-type, tell us that as you get into early line breast cancer, being able to hit both the endocrine node, being able to hit the PI3K node and then being able to complement that with CDK4 inhibition is really going to be optimal for maximizing outcomes for patients.

Understood. And I do want to kind of stratify that a bit because if I remember correctly, Roche has run, I think endocrine-resistant, that triplet frontline, the sensitive population is still coming out. How do you -- and again, this will be a nice bridge to PersevERA and this topic of endocrine sensitivity. How do you expect the benefit of a PIK3 outlet triplet in a resistant versus sensitive population? I mean it sounds like you also expect the Roche trial in the sensitive population despite the safety liabilities to still read out positively.

If patients can stay on inavolisib, that's going to be the key question because the resistant, they only need to stay 15 months. When you get into the sensitive population, the statistics of the INAVO123 trial are such that the assumption for performance of the control arm, the CDK4/6 doublet in that trial is 20 months. And they're looking for about 30 months in the triplet treated arm. So they'd have to keep patients on a fairly challenging regimen for about twice as long as they did in the INAVO120 endocrine-resistant population.

Understood.

I think part of your question was how do we have confidence that in the endocrine-sensitive patient population that addiction to the pathway holds that we saw in the endocrine-resistant population. And that's probably best explained if you look at the MONALEESA-2 results of ribo plus AI in that study, we saw a good robust subset of PIK3CA mutant versus PIK3CA wild-type, and there's still a clear delta in performance there. The mutant population was about 19.5 months in that study and the wild-type population was closer to 30 months, clearly articulating that there's addiction to the PI3K-alpha mutant pathway in that patient population.

That's a great point. Now heading to the other data set, which was PersevERA. And it's interesting. I think certainly on the pharma investor side, there's this idea that frontline adjuvant for SERD is this kind of $20 billion to even $40 billion opportunity. I can tell you, I'm very much skeptical on that. I don't think we saw necessarily that same uptake with the CDK 4/6 as with the NATALEE trial. Again, major revenue contributor, but not to that level. And when I look at the Roche monotherapy data, I say, okay, maybe the Stage 2 -- like there's a subset of patients as a monotherapy, okay, that's a group. That's not $20 billion, that's $3 billion to $5 billion, right? Like substantial, but not what I think people talk about. And to me, the uptake is really the combo. But I'd love to get your take now that you've seen the persevERA data, let's start with the first biological question. Do you feel like SERDs work "in first line? Or do they work in a subset population?

So there's no question they work. What the question is, do they work better than our existing drugs, aromatase inhibitors. And if you go back -- so you mentioned the lidERA adjuvant trial that was monotherapy where clearly the SERD was superior to the available investigator's choice endocrine therapy in a monotherapy setting, right, where you're really just targeting the estrogen receptor node and where slightly better targeting in that case translated into a meaningful difference in terms of clinical outcomes. The challenge when you get into the combination setting is now you've got your CDK4/6 inhibitor on board, which we know from the registrational trials of the CDK4/6 inhibitors versus endocrine therapy monotherapy like transformed the outcome for patients in terms of PFS. That CDK4/6 inhibitor is driving a lot of the benefit. And I think it's challenging in that setting to have slightly better endocrine inhibition and have that translate into a meaningful difference on PFS, which is what we've seen in persevERA. Now there's some suggestion when you look at the PFS curves that there may be some late separation of the curves that could be accounted for by suppressing the emergence of ESR1 mutations with the oral SERD as opposed to the aromatase inhibitor, which would then place more into the SERENA-6 type approach where you actually use the emergence of ESR1 mutation potentially as the trigger for identifying patients who would receive the more broadly potent SERD or SERD.

Understood. So that outcome did not go, let's say, AstraZeneca's planned, but understood. Now when we think about the CDK4 because again, these are all external data sets, but directly apply to your team. We're starting to see frontline data, neoadjuvant data with atirmo. And there's also that even second-line data that they've only top line. But to me, the question is really, can we get separation faster? And then obviously, the safety benefit could that late emergence tail occur as well. What have you seen so far with CDK4 that makes your team confident that this would have a benefit over, let's say, a CDK4 biased drug like Verzenio, right? Again, because I know there's going to be extrapolation, but what data sets are you seeing that's driving your confidence on this partnership?

So, I think the main data is the data that we've generated. We know that in the frontline, tolerability is everything. These patients are going to need to be on drug for multiple years. And we know from the INAVO120 trial that the efficacy is there of adding a PI3K inhibitor to a CDK4/6 backbone. The challenge is just adding a CDK4/6 backbone to a PI3K inhibitor leads to tolerability challenges and patients just can't keep on drug and the dose intensity declines and that what's potentially going to lead to these trials not doing as well as they could. And so our data in these late-line patients, third line on average with both the selective profiles of a CDK4 selective and a PI3K selective has shown a very tolerable safe profile. And so I think in these late-line patients, if we're seeing what we're seeing, I think we feel great that when we bring this to the frontline, you will see both the dose intensity and the longevity of these patients on treatment, which will then inevitably lead to the efficacy. And I think that's what's given us confidence to put this in the front line and run this trial.

So it's really more about how many patients are still on drug right now rather than just looking at the initial response rate. Exactly. Understood. And there's a possibility -- I mean, if you look at those curves, you're at 44, there's a few patients there, which are pretty borderline. And I mean, this is a session we've even had on your vascular malformations where like we haven't seen any patient not responding to the drug. They just may have not been on the drug long enough. When you think about how that early data set with Atirmo will evolve over time, is there a potential for responses to deepen? Is there any historical precedents we can maybe point to? And in terms of data disclosure on Relay side, when can we expect another update with the Atirmo combo?

Maybe Don can take on the first one and Pete the second.

Yes. Yes. So with regard to responses deepening, I think there could be a possibility of responses deepening. We -- the data we presented or that we disclosed in April was across all of the doses that we had tested for the triplet at or below our recommended Phase II dose. So a number of those patients were treated at dose levels below what we would ultimately take into Phase III. And our experience in the fulvestrant doublet was that at some of the lower doses were active, but sometimes the responses came later. So I think in this patient population with the triplet, we'll just have to continue following the patients to see if some of those near responses on subsequent scans are able to deepen further.

And on the disclosure, we've guided to showing additional triplet data in the first half of next year. I think what to expect with that update would be obviously more follow-up from the dose-finding portion of the study that we've already reported on. But we've also since moved into dose expansions as we've talked about in that disclosure at the recommended -- the potential recommended Phase III of 150 milligrams zovega, 300 atirmo. So we'll show at that point in time, the data we have from some of those expansion cohorts also. So it would be a good level of maturity from the dose-finding data and then early data from the expansion cohorts.

Understood. I mean, could that update next year, could we start seeing signs on PFS? And like, I mean, is that still going to be mostly just focused on duration of response, focused on ORR and -- but are we going to get enough maturity where you could start to see differentiation versus what you would expect in kind of a first-line standard of care setting?

Yes. If we continue to just isolate the dose-finding portion of the study, that portion would have over a year follow-up at that point in time. And so it's possible to potentially start to estimate a median PFS point estimate.

But with the caveat that we're in median third-line patients right now. So there'd have to be a correction. It's...

Understood. Another tough question in terms of how to design these studies. But again, I selfishly ask because we're trying to figure it out. When you think about powering and your expectations on, let's just say, CDK4/6 plus AI in a frontline population, I mean, if we think about it in the broader population, okay, it can be about 25 months, but we've seen that PIK3-alpha mutated patients seem to have worse prognostic outcomes where PFS might actually be more like 18 months. What's the right assumption in terms of the comparator arm for your Phase III design? How do you power that?

Yes. So we have a few different data points to look at. The one I just cited recently was the MONALEESA-2 study where they did good sub-characterization of the mutated population. And in that study, you saw 19.5 months of median PFS. Additionally, in the INAVO123 study, they have posted their statistical plan on CTIS, and they are assuming a 20-month performance in the control arm for that study. And you would imagine they have pretty good real-world information and the fact that they own and Foundation Medicine. And then the most recent data set we could look at a little bit too is in the VIKTORIA-1 data that was just reported. They did give the median duration of treatment on the -- of the first-line metastatic therapy that those patients were just on. And you saw somewhere between 17 and 22 months of median PFS there too -- or median duration of treatment not a perfect one, but again, all as you're saying, kind of triangulating back to about that 19, 20 months.

Okay. And when you think about powering for a Phase III to show kind of a clinically meaningful effect, I mean, we're thinking PFS? Are we thinking OS? Like what are we thinking on hazard ratios for both of those endpoints?

Yes. I think we'll fall short of giving the precise hazard ratios, but I think the way to think about it is we've done some primary market research asking physicians what would be a clinically meaningful improvement against that 20 months in those patients. And generally, the answer is about 6 months. And so I think from a -- obviously, the primary endpoint in these studies is progression-free survival. We will certainly be conservative in how we power this to make sure we have enough powering for OS as a key secondary. And knowing that the threshold for clinically meaningful improvement is about 6 months, all these things will go into our statistical assumptions.

Understood. I mean -- but bottom line, I mean, if in a frontline population that's not PIK3-alpha mutated, it's 25 months, you're saying, look, we're going to fix that problem, and then let's hope CDK4 can add something on beyond. But that's -- is that the right way to think about this?

Yes. Our hypothesis is not at all based upon Atirmo needing to add anything new or different on the efficacy side, simply that it needs to be safer. And I think the data we have to date is very supportive of that.

Now as we think about -- let's go maybe on to the vascular malformation side because I think, again, it's an incredibly important part of that story. And Sanjiv, I want you to talk about this in terms of ROI because I don't think that gets talked about enough. Help us understand how much additional capital will you really need to get this to the commercial stage onto the market when we think about PROS versus the broader kind of population, what is that -- what's the capital cost? What's the time lines as your base case right now?

I mean I think in contrast to breast cancer, which is a well-established market where we see capivasertib closing on $1 billion of sales and the trials that we're running both in the second and the front line, it's a very kind of definite kind of path to market. You kind of know what the trials are, they are 500 patients in the second line. You know the kinds of sales forces that are out there in the U.S. So I think that world is relatively clear. This one is a little bit more opaque. But I think what we can tell you is the historical trials here have been relatively small. Novartis retrospective chart review of 37 patients was what they got accelerated approval on and their confirmatory trial was just over 100 patients. And so obviously, we showed 32 patients worth of data last week on the safety, 20 on the efficacy, and we're continuing to enroll at a rapid rate. So to answer your question, it could be a very rapid pathway to an accelerated approval and then the confirmatory trials are in the zone of 100 patients at the upper end here. So this could move both very rapidly and with relatively modest dollars. And then on the commercial build, it's relatively similar. There are only a small number of vascular anomaly centers in each kind of large European country, and there's probably somewhere between 20 to 30 in the U.S. And so you could probably build yourself a relatively modest commercial presence and footprint here to generate significant revenues. And so all in all, on one side, it seems very attractive in that it's very small numbers of dollars here. The kind of unknown on this side, obviously, is how actually we build this market because it's a nascent market. It's not a kind of very kind of well-developed market as we see on the breast cancer. And so the dynamics of both are attractive to us. One is well-trodden pathway, very clear, just produce the data, get share of voice, generate market share. And the other one is a huge potential for us with relatively modest dollars. But it may take a little bit of time to develop that to fruition.

Understood. I mean just to put a finer point on that, would it be fair to say the amount of additional capital needed to get from the clinical trials, we're talking about $50 million.

Yes I think that's a fair estimate. It's kind of between $50 million and $100 million worth of investment.

$50 million to $100 million terms of running the clinical trials. And then in terms of sales force build, I mean, if we look at historical precedents, we're thinking about maybe something $100 million in terms of annualized run rate. I mean...

Yes, probably less than that.

Even less than that. Interesting. Now you gave really encouraging early data. There's going to be more cohorts that enrolled. There's going to be more subtypes and then there's also an FDA discussion to really be had. So let's start with kind of where are you in terms of your dialogue with the FDA? Have you had initial conversation after this top line press release? Any updates there?

Yes. So we're currently guiding that we will have a regulatory interaction this year and come back to the Street later this year with the outcome -- output from that interaction. The goal there is to have a conversation around what would be required -- if accelerated approval is available to us, which we think it is and then what would be required to accomplish that. And the two key questions there are going to be around dose and the end required to support accelerated approval. And our going-in assumption there will be that we would pull together both PROS and at least pull together PROS and lymphatic malformations. And so that's where we have a number of topics to try to get through with them, and we would come back and report the outcome of that later this year.

Understood. And can you -- I know -- what I think would be very helpful is, can you kind of prospectively lay out the outcomes because there seems to be kind of three. One is, all right, we have data in PROS. That's what we're going to let you do the expansion in, which seems to be, I think, a bit restrictive. There's the one that I think your team hints is probably most likely, which is we'll go after at least the two subtypes to the two biggest markets, and we'll say, hey, we have enough -- we show consistency of data in both of these malformations and let us run a confirmatory trial. There and then in VM, we may have to run another separate study. And then there's the other outcome where, look, you can run a trial in all three. First of all, is that the right framework? And then when you set investor expectations, what's the reasonable base case right now?

Yes. So the one thing you -- a key point you mentioned there is consistency of data across these subtypes, which is something that the agency will look at. Today, we have since we've reported on four patients in lymphatic malformations, three out of the four patients responded, two of our deepest responses are coming from the lymphatic malformation patients. So I would say today, we're seeing signs of consistency of data between the PROS and the LM patients. We're not seeing a difference in safety profile across those two patient populations. And so we need to now grow that in lymphatic malformations and that consistency has to continue to stay there. But we would -- there's no drug approved systemic therapy approved for lymphatic malformations, and we believe it to be a severe unmet medical need. And so yes, our going-in hypothesis is a base case of keeping those two pooled together. Now if you landed in just an initial label in PROS and you had to separate our lymphatic malformations into a separate single-arm study for accelerated approval, perfectly fine outcome also. Alpelisib with just a PROS label and all the shortcomings of that drug, it probably treated on the neighborhood of about 5,000 patients or so since they've received accelerated approval. We know in this context, if you could have an agent that could really be used chronically, every 2,000 to 3,000 patients would be about $1 billion in peak sales. So if that's where we land for an initial label and we do sequential close-in sNDAs for lymphatic malformations and venous malformations, that's a perfectly fine outcome also.

Understood. Now I know you have, I think, four -- you had eight LM patients, four that were clinically evaluable. So we may get more data on that subtype as well, and that might feed into the discussion of kind of consistency. Can you kind of remind us what dose those other four patients are going to be on? And really how -- what's the data cut we could get with that other subgroup by the end of the year?

Yes, they're spread across the dose randomization doses, 300 -- 400, 300 and 100. And so those eight patients total from the dose randomization portion of the study, so 25% of the 32 patients fully enrolled. And then we've also started expansions. We started expansions a couple of months ago -- a month or so ago at this point. And so we'll also have patients coming in on the expansion cohorts that could be included in an update later this year. And so we could have more than those eight lymphatic.

Okay. Understood. So it sounds like more updates to come there. Maybe just, Sanjiv, this is kind of the question for you. You're in this kind of unique perspective where, again, you have -- you talk about risk adjustment and spend and then TAM. And both are very, very attractive markets. But the derisking component on the breast cancer side is certainly going to take longer than maybe the orphan side. And you're also, to a certain extent, capital constrained. How do you think about -- I mean, we've seen external financing, royalty agreements, debt agreements. What other sources of capital do you think investors should be paying attention to when you kind of counterbalance both of these opportunities? And number two, is there an appetite to maybe spin off one of these indications entirely because you feel like that could actually be a value unlock?

Okay. So we'll take those slowly. So as you know, we ended the quarter with over $600 million of cash and then we just did a $300 million financing. So we have a pretty robust balance sheet. That should take us through to having top line data on both the breast cancer and the VAs pivotal trials. And we don't imagine there'll be too much difference in the timing of those two approvals. In terms of the frontline trial, we have now money to prosecute that all the way out to the readouts of these two. So in terms of just our ability in the near term to execute and generate meaningful value-creating data, we feel pretty confident. And then I think you're in a great situation because obviously, you sit on two registrational data sets. You sit halfway through a frontline trial. And so I think all of the tools that you just listed, debt, further equity, royalty financing, partnerships, all become available to us. And so I think we feel pretty confident now of our ability to get into the next decade and commercialize in all three indications.

Understood. I'm going to sneak in one more question. Post the ASCO data set, because, again, there's multiple CDK4 players, there's multiple people looking at what to do in HR-positive. Do you feel like there's been kind of this renewed interest externally of your drug in breast cancer specifically?

I think absolutely. If you go back kind of 18, 24 months, there's a lot of unanswered questions. PI3K inhibitors, were they going to be meaningful? What would happen to the oral SEDs? Would they dominate in the front line? What about CDK6 in PI3K-alpha mutated patients, CDK4, CDK4/6 retreatment, all of these things, I think, are starting to resolve themselves. And you come back to the simple basics of 40% of patients have a PI3K-alpha mutation. In those patients, the best way to treat them in any line, early, first-line, metastatic, second line is to have a PI3K-alpha inhibitor. So I think that is becoming clearly understood by everyone in the field, providers, strategics and biotechs.

Understood. On that note, I really do appreciate it. Thanks so much.