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Relay Therapeutics Inks $85M Deal To Buy ZebiAI

Relay Therapeutics, a clinical-stage precision medicine company announced the acquisition of ZebiAI, a pioneer in applying massive experimental DNA encoded library data sets to power machine learning for drug discovery (ML-DEL). The cash-and-stock deal is worth $85 million.

Through this acquisition, Relay Therapeutics (RLAY) expects to enhance the application of machine learning across the Dynamo platform to potentially fast-track the finding of novel medicines against intractable targets, the company said.

Per the terms of the deal, the company will pay $20 million in cash and $65 million in Relay Therapeutics common stock. Furthermore, the company is liable to pay an additional $85 million in the form of common stock to ZebiAI stockholders in platform and program-related milestone payments.

Additionally, ZebiAI shareholders will become eligible to receive up to $100 million if Relay Therapeutics signs any partnership or collaboration agreement associated with the ZebiAI’s platform.

Relay Therapeutics expects its cash position to be adequate enough to fund its operating plans through 2024 once the acquisition is finalized.

Relay Therapeutics CEO Sanjiv Patel said, “The combination of ZebiAI’s approach with our Dynamo platform has the potential to predict more drug-like chemical starting points, reduce cycle time to compound optimization, and ultimately, increase the number and range of programs that can be developed in parallel.” (See Relay Therapeutics stock analysis on TipRanks)

On March 26, H.C. Wainwright analyst Robert Burns maintained a Buy rating and a price target of $57 (76% upside potential) on the stock following the company’s full-year 2020 results.

Burns increased his full-year net loss projection for 2021 to $1.94 per share compared to his previous net loss estimate of $1.88 per share.

According to the analyst, “Relay ended 2020 with roughly $678M in cash, cash equivalents and marketable securities, which should be sufficient to provide an operational runway into 2024.”

Wall Street analysts are cautiously optimistic about the stock’s outlook. The Moderate Buy consensus rating breaks down into 2 Buy ratings versus 1 Hold rating. The average analyst price target stands at $53 and implies upside potential of approximately 64% to current levels.

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