Bicycle Therapeutics plc — Q3 2019 Form 10-Q
Period: Quarter and nine months ended September 30, 2019. Unaudited results are presented in U.S. dollars; financial figures below are in millions unless stated otherwise. Bicycle is a clinical-stage biotechnology company with no approved products or product-sales revenue.
Business context and pipeline
The company develops synthetic bicyclic-peptide medicines. Its oncology programs include BT1718, in a CRUK-funded Phase I/IIa trial; BTC candidates BT5528 and BT8009; and tumor-targeted immune-cell agonist BT7480. The company also conducts partnered research in other therapeutic areas.
Financial results and liquidity
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Collaboration revenue | $0.614 | $1.610 | $8.520 | $6.079 |
| Research and development expense | $6.078 | $5.642 | $18.891 | $14.268 |
| General and administrative expense | $4.789 | $2.325 | $11.164 | $6.015 |
| Net loss | $9.482 | $7.692 | $26.202 | $15.205 |
| Operating cash used | Not provided quarterly | Not provided quarterly | $23.694 | $17.224 |
There is no product-sales revenue, so product gross margin is not applicable. Cash was $95.954 million at September 30, 2019, versus $63.380 million at December 31, 2018; current assets were $110.250 million and current liabilities $8.835 million. The company reported no debt. Accumulated deficit was $96.144 million.
Financing provided $58.318 million in cash during the first nine months, primarily from the IPO. The filing reports IPO net proceeds of approximately $56.4 million in its notes and approximately $57.0 million in the cash-flow discussion. Capital expenditures were $1.164 million.
Material changes versus comparable periods
- Q3 collaboration revenue fell $0.996 million year over year, chiefly because Sanofi research revenue had largely run its course and Oxurion research services did not recur; new DDF revenue partly offset the decline.
- Nine-month collaboration revenue rose $2.441 million, primarily reflecting $5.3 million recognized when Sanofi declined its sickle-cell option, plus a $1.0 million material-transfer agreement and DDF revenue; lower Oxurion revenue partly offset these items.
- Nine-month operating expenses increased $9.772 million. R&D rose with platform, personnel and candidate-development spending; G&A increased with headcount, professional fees, foreign-exchange losses and public-company costs.
- IPO proceeds strengthened cash and converted preferred shares into ordinary shares. The company had 17,902,869 ordinary shares outstanding at September 30.
Outlook, risks and unusual items
- Management expects operating losses and expenses to rise as programs advance, and says cash should fund operating expenses and capital needs for at least 12 months from issuance of the interim statements. The company expects to need substantial additional funding; there is no assurance it can obtain it on acceptable terms.
- Effective October 23, 2019, Sanofi terminated its collaboration. The company expects to recognize approximately $4.5 million of deferred revenue related to the hemophilia option in Q4 2019; this is a one-time collaboration accounting item, not product revenue.
- Warrant remeasurement contributed $5.377 million of other expense in the first nine months. The warrant liability was reclassified to equity at the IPO, so the company expects no further remeasurement expense for those warrants.
- BT1718 remains an early-stage clinical program. The filing describes treatment-related adverse events in the ongoing trial, including gastrointestinal, fatigue, liver-enzyme and neuropathy events; clinical efficacy and safety remain uncertain.
- The company disclosed a material weakness in internal control over financial reporting involving review of warrant-liability valuations; disclosure controls were not effective at quarter-end. Remediation was ongoing. The weakness had led to restatements of prior-period financial statements.
- Pepscan litigation concerns the company’s patent license; management said a loss was not probable or estimable. An adverse outcome could affect rights relevant to BT1718. The filing also notes challenges to European platform patents.
- Foreign-exchange exposure is material: Q3 2019 included a $0.8 million foreign-exchange loss. The company did not hedge currency exposure. Other risks include clinical-trial failure or delay, reliance on collaborators and third-party manufacturers, intellectual-property disputes, and uncertainty related to Brexit.
Important facts for investors to verify
- Cash runway assumptions, subsequent cash use and timing or terms of any additional financing.
- Progress, safety findings and data from BT1718 and advancement of BT5528, BT8009 and BT7480.
- Q4 recognition of Sanofi-related deferred revenue and the effect of the collaboration termination on future partnered revenue.
- Remediation and testing of internal controls after the disclosed material weakness and prior restatements.
- Status and potential consequences of the Pepscan dispute and European patent challenges.
- Reconciliation of the IPO proceeds amounts reported in different sections of the filing.