Relay Therapeutics' Stock Price Premium Vs Peers Is Justified By Its Platform Technology, Analyst Says

Raymond James initiated coverage of Relay Therapeutics Inc RLAY with an Outperform rating and a price target of $29 based upon the stock trading at 8x our EV/5-year forward sales estimate.
The price is a premium to small-cap peers trading at 1-2x and mid-cap peers at ~3x, justified by Relay’s platform technology for identifying selective agents against validation targets in oncology and near-term potential for platform validation.
The analyst expects a marked reduction in high-grade hyperglycemia for RLY-2608 with initial Phase 1 dose escalation data, providing a wider therapeutic window compared to Novartis AG’s NVS Piqray (alpelisib).
Raymond James writes that pan-mutant inhibition with agents like RLY-2608 that have favorable selectivity over wild-type inhibition can effect greater anti-tumor activity relative to apelisib and significantly expand the utilization of the drug class.
RLY-4008 data in FGFR2 fusion cholangiocarcinoma (CCA) have provided an initial proof-of-concept for the Dynamo drug discovery platform. If the success with engineering an FGFR2 inhibitor can be replicated in PI3Kα, the value of platform validation will be significant.
The analyst says the biggest risk to the thesis will likely be addressed at the upcoming presentation of initial RLY-2608 monotherapy and fulvestrant combination dose escalation data at AACR 2023.
Price Action: RLAY shares closed higher by 13.8% at $18.22 on Thursday.

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