Is Relay Therapeutics a Buy After Promising Trial Results?

Relay Therapeutics (NASDAQ: RLAY) is a clinical-stage biotech company focused on cancers and genetic diseases, using a computational platform to identify small-molecule therapies. Relay's stock is up more than 344% over the past year, and it jumped more than 6% in the early afternoon on May 19, the day the company announced promising results for one of its drug therapies.

Relay recently presented phase 2 trial data for zovegalisib in the treatment of vascular anomalies. Zovegalisib works by blocking PIK3CA, a gene that encodes an enzyme involved in cell growth. PIK3CA mutations are often associated with cancer. Vascular anomalies are rare disorders with abnormal development of blood vessels, lymphatic vessels, and surrounding tissues.

The results showed that zovegalisib led to a volumetric response in about 60% of the 20 patients it evaluated. Responses were seen in PROS and lymphatic malformation patients, and across a spectrum of PIK3CA mutations. PROS is an umbrella term for a group of rare genetic disorders caused by mutations in the PIK3CA gene.

Given this new development, some investors may be revisiting their investment views around Relay Therapeutics. Let's look at three reasons to buy Relay Therapeutics and one not to.

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1. Relay has clinical momentum and a de-risked asset

Zovegalisib is the healthcare company's lead therapy. In February, the Food and Drug Administration granted the PI3Ka inhibitor a breakthrough therapy designation for patients with PIK3CA-mutant HR+/HER2-advanced breast cancer. The drug has already shown an impressive median progression-free survival of 11.1 months in heavily pretreated, CDK4/6-experienced patients. The new data for vascular anomalies expands its therapeutic possibilities beyond oncology.

According to Relay, there are approximately 140,000 patients with HR+/HER2- breast cancer with a PI3Kα mutation that zovegalisib could help as well as roughly 170,000 patients with vascular anomalies driven by a PI3Kα mutation, both relatively large patient populations.

Unlike many early-stage biotechs that struggle to transition into definitive registration trials, the Cambridge, Mass., company has mapped out a highly structured path to market. Relay has finished a clinical collaboration with Pfizer to supply the CDK4 inhibitor atirmociclib for a triplet combination study, pairing it with Relay's zovegalisib, previously known as RLY-2608, and hormone therapy fulvestrant in patients with PI3Kα-mutated, HR+, HER2- metastatic breast cancer. Relay is on track to initiate a crucial phase 3 frontline trial for the combination study in early 2027, advancing it toward commercial viability.

2. There's more in Relay's development portfolio

Relay has three other therapies in its pipeline besides zovegalisib: RLY-8161, which targets NRAS (a gene) solid tumors; a-Gal, designed to treat the rare genetic kidney disorder Fabry Disease; and Lirafugratinib, a cancer therapy it has licensed to Elevar Therapeutics. The drug is a selective inhibitor of FGFR2, a receptor tyrosine kinase that is frequently altered in certain cancers.

3. Relay has plenty of cash to develop its therapies

The biggest killer of clinical-stage biotechs is running out of money before finishing trials. Relay is well capitalized, reporting approximately $642 million in cash and cash equivalents. That's due partly to a successful initial public offering in 2020 that raised $400 million.

Management projects its capital will fund operations well into 2029. This timeline provides the company with a massive buffer to read out late-stage clinical data without being desperately dependent on the immediate whims of a volatile capital market.

Reason to worry? It's hard to go from pre-clinical to a profitable company

Despite its robust cash pile, Relay is a pre-revenue, clinical-stage biotech subject to extreme binary risk. Wall Street analysts project a 36% annualized revenue decline for the full year of 2026 (falling to an estimated consensus of $9.84 million), with per-share losses increasing by 5% to around $1.64.

Because the vast majority of the company's valuation is tied directly to the clinical and regulatory success of zovegalisib, any unexpected safety issue, adverse event trend in broader testing, or failure to meet primary endpoints in the upcoming phase 3 trial would result in a massive, rapid destruction of shareholder value. You're investing in a scientific hypothesis that has not yet crossed the finish line in the commercial world.

James Halley has positions in Pfizer. The Motley Fool has positions in and recommends Pfizer. The Motley Fool has a disclosure policy.