We came across a bullish thesis on Relay Therapeutics, Inc. (RLAY) on Substack by Steve Wagner | Invest. In this article, we will summarize the bulls’ thesis on RLAY. Relay Therapeutics, Inc. (RLAY)'s share was trading at $4.78 as of Dec 12^th.

A scientist holding a test tube in the lab, surrounded by equipment used in synthetic biology and drug discovery.

Relay Therapeutics (RLAY) has unveiled promising interim data for RLY-2608, its groundbreaking allosteric PI3Kα inhibitor, in combination with fulvestrant for PI3Kα-mutated, HR+/HER2- metastatic breast cancer patients. Presented at SABCS 2024, the data underscores the potential of RLY-2608 to redefine second-line treatment standards. In the 2L setting, RLY-2608 + fulvestrant achieved a median progression-free survival (PFS) of 11.4 months, more than doubling the current standard, with an objective response rate (ORR) of 67% for patients with kinase mutations. Safety data further bolstered the profile, with minimal treatment-related adverse events (TRAEs), including a 3% rate of Grade 3 hyperglycemia—a critical differentiator for PI3Kα inhibitors.

The ongoing ReDiscover trial included heavily pre-treated patients, with 41% having undergone two or more prior therapies and 59% presenting with visceral metastases. Despite this challenging cohort, the combination therapy demonstrated high tolerability, maintained dose intensity, and impressive clinical benefit rates. With pivotal trials for RLY-2608 scheduled for 2025, Relay aims to validate its efficacy against current standards like capivasertib + fulvestrant while exploring innovative triplet therapies combining RLY-2608 with CDK4 inhibitors.

Relay is financially positioned to sustain operations through 2027/28, supported by $840 million in cash reserves. This runway should enable the company to advance its pipeline and potentially commercialize RLY-2608, which is poised to achieve blockbuster status with projected annual sales exceeding $1 billion. Despite these strengths, Relay’s market cap remains undervalued at $800 million, equivalent to its cash balance, suggesting the market is assigning little value to its assets. Comparable biotech peers often trade at multiples of projected revenues, highlighting a stark mispricing.

This disconnect between Relay’s robust data, promising pipeline, and market valuation creates a compelling opportunity. Building on these results, RLY-2608’s commercial success could significantly revalue Relay’s stock, making it an overlooked gem in the biotech sector.

Relay Therapeutics, Inc. (RLAY) is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 30 hedge fund portfolios held RLAY at the end of the third quarter which was 30 in the previous quarter. While we acknowledge the risk and potential of RLAY as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than RLAY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.