Relay Therapeutics Inc (NASDAQ: RLAY) shares climbed 5.8% in premarket trading Monday following an upgrade from Oppenheimer that lifted the stock's rating from Perform to Outperform and established a $14.00 price target.
In his report, analyst Matt Biegler highlighted the potential for Relay's mutant-selective inhibitor zovegalisib to benefit from any underperformance by a competing agent, gedatolisib, when data from the VIKTORIA-1 clinical trial are released. Biegler wrote that the VIKTORIA-1 readout "will underperform expectations, and may even fail," an outcome he says could open a more favorable competitive window for Relay's program.
Biegler elaborated on the competitive dynamic by suggesting that if gedatolisib's triplet therapy yields mPFS results that are "less than 'teenage'," it would set a relatively achievable benchmark for Relay's competing triplet that includes zovegalisib. The analyst also drew a parallel between gedatolisib and everolimus, indicating the possibility of similar limitations in PI3K inhibition.
"We think anything less than 'teenage' mPFS for the gedatolisib triplet would create a beatable bar for Relay, who is developing a competing triplet with zovegalisib," Biegler wrote in his research note.
The report noted that Relay's shares had been pressured since October, when initial VIKTORIA-1 results from the wild-type cohort exceeded market expectations. Oppenheimer's view is that reproducing that level of success in PI3K-mutant patients may be more challenging for gedatolisib, particularly in light of recent clinical precedents from competing treatments.
Oppenheimer's $14.00 price target implies substantial upside from Relay's prevailing trading levels and reflects the firm's assessment that Relay could be well positioned within targeted cancer therapies if competitive dynamics unfold as the analyst anticipates.
Market reaction - Shares rose in premarket trade on the back of the analyst upgrade and the implied potential for improved competitive positioning for zovegalisib.
Analyst thesis - Biegler's upgrade hinges on the expectation that gedatolisib's VIKTORIA-1 readout will disappoint in PI3K-mutant patients, lowering the efficacy bar for Relay's competing regimen.
Outlook - The $14.00 target reflects Oppenheimer's confidence in Relay's prospects should competitive trial results favor Relay's positioning.