One trading session after Relay Therapeutics (RLAY +7.87%) announced positive results for an investigational treatment, its shares rocketed higher on Wednesday. That rally, which saw the biotech stock rocket almost 8% higher, was aided in no small part by a pair of bullish analyst updates.
High-potential pipeline
Those new analyses came on the heels of Relay’s Tuesday release of Phase 2 results for zovegalisib, a drug that treats vascular anomalies. The company said that, across all doses of the medication, 60% of tested patients responded to treatment at the earliest time point of 12 weeks.
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These figures were well above the projections of most analysts tracking the stock. Relay added that nearly all individuals administered the drug experienced symptomatic improvements at the 12-week mark, and that zovegalisib demonstrated a positive safety and tolerability profile.
Although this was indisputably a positive development, it was mitigated by the company’s announcement that it would float a secondary issue of its common stock. Including a purchase option for the issue’s underwriters, the issue could exceed $200 million. Although this isn’t overly dilutive given Relay’s nearly $2.5 billion market cap, no investor likes share dilution.
Today’s Change
(7.87%) $0.95
Current Price
$13.02
Key Data Points
Market Cap
$2.3B
Day’s Range
$11.62 – $13.55
52wk Range
$2.75 – $17.32
Volume
6.5M
Avg Vol
3.3M
Gross Margin
73.28%
Two bulls get more bullish
Yet not one, but two professional Relay-watchers felt compelled to significantly raise their price targets on the stock. Barclays’ Peter Lawson upped his to $27 per share from $21, while Silvan Turkcan of Citizens JMP moved his to $21 from $19. Both maintained their buy recommendations on the shares.
These far better-than-expected results are, in my view, enough reason to invest in the highly promising biotech. I wouldn’t worry at all about share dilution, and I’d feel confident owning stock of a company developing a medication that has shown such promise.
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