Bicycle Therapeutics plc — Q2 2020 Form 10-Q
Reporting period: Three and six months ended June 30, 2020. Amounts below are in U.S. dollars. Bicycle is a clinical-stage biotechnology company with no approved products or product sales; revenue is from collaborations.
Key financial metrics
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Collaboration revenue | $1.6m | $1.5m | $2.7m | $7.9m |
| Research and development expense | $8.0m | $6.5m | $15.7m | $12.8m |
| General and administrative expense | $6.2m | $3.0m | $11.2m | $6.4m |
| Operating loss | $12.6m | $8.0m | $24.2m | $11.3m |
| Net loss | $12.1m | $10.2m | $23.4m | $16.7m |
| Basic and diluted loss per share | $0.67 | $1.40 | $1.30 | $4.08 |
- At June 30, cash was $96.9m, up from $92.1m at December 31, 2019; current assets were $112.5m and current liabilities $17.0m. Total liabilities were $47.6m, including $33.1m of deferred revenue. The company reported no debt outstanding.
- First-half operating cash flow was positive $8.8m, compared with cash use of $12.8m in the prior-year period. This primarily reflected a $29.0m increase in deferred revenue, principally from Genentech’s upfront payment, and should not be read as recurring cash generation. Investing cash use was $0.6m; financing provided $0.01m. Foreign-exchange effects reduced cash by $3.4m.
- Accumulated deficit was $124.0m. No product revenue or product-sale margins were reported.
Changes versus the prior comparable periods
- Q2 revenue rose slightly, by $0.05m, as Genentech collaboration revenue offset the absence of a $1.0m one-time materials-transfer payment recognized in Q2 2019.
- First-half revenue fell $5.2m, primarily because Sanofi collaboration revenue was lower by $6.0m and the prior year included the $1.0m materials-transfer payment; Genentech contributed $1.9m in first-half 2020 revenue.
- Operating expenses increased $4.6m in Q2 and $7.7m in the first half. Higher R&D program and personnel costs and higher public-company, professional, and share-based compensation costs contributed to the increase.
- Net loss widened by $1.9m in Q2 and $6.7m in the first half. The 2019 comparisons included warrant-liability remeasurement expense ($2.2m in Q2 and $5.4m in the first half); no such expense was recorded in 2020.
- First-half 2019 cash flow included $57.8m net IPO proceeds; first-half 2020 financing cash flow was minimal. The 2020 operating cash-flow improvement chiefly reflects collaboration cash received in advance of revenue recognition.
Outlook, business developments and risks
- Management expected June 30 cash to fund operating expenses and capital needs for at least 12 months from the filing date, while warning that substantial additional funding will be needed and expenses are expected to rise. No formal revenue or earnings guidance was provided.
- Genentech agreement signed in February 2020 included $30.0m upfront plus $1.0m for a selected targeting arm. The company recognized $1.9m in first-half revenue and had $27.7m deferred revenue at June 30. Potential option, milestone and royalty payments are contingent on future events.
- On July 7, 2020, after quarter-end, Bicycle sold 1,192,713 ADSs under its ATM program for $18.5m gross and $17.6m net proceeds. The ATM permits sales of up to $50m in aggregate, subject to the agreement.
- COVID-19 temporarily paused new-patient enrollment at all CRUK BT1718 trial sites during the first half; the pause had been lifted by the filing date and Phase IIa enrollment was underway. BT5528 enrollment continued in the United States. Management reported limited impacts to date but warned of potential enrollment, supply-chain, operational and financing disruptions.
- The company planned to begin a company-sponsored Phase I/II BT8009 trial in 2020. BT1718’s trial is sponsored and funded by CRUK; BT5528 is in a company-sponsored Phase I/II trial.
- Material intellectual-property contingency: in February 2020, the Hague Court of Appeal ruled that Pepscan could terminate a patent license and issued a worldwide injunction against BicycleRD’s use of the licensed Pepscan patents and related know-how. BicycleRD appealed to the Dutch Supreme Court and said it would comply with the injunction. The company stated the injunction applies to BicycleRD, but Pepscan could assert broader application. The related patent expires in February 2024. A separate European patent appeal hearing was scheduled for December 16, 2020.
- The company also disclosed clinical-development, regulatory, third-party manufacturing and collaboration risks, and the possibility that additional capital may not be available on acceptable terms. Management reported disclosure controls were effective as of June 30, 2020.
Important facts for investors to verify
- Cash runway assumptions, cash use after June 30, and the net proceeds and potential dilution from ATM sales.
- BT1718 enrollment and trial progress after the COVID-related pause, BT5528 enrollment, and the timing and execution of the planned BT8009 trial.
- Developments in the Pepscan litigation and European patent oppositions, including any effects on product or platform rights.
- How collaboration milestones, options and deferred revenue convert into recognized revenue and cash, especially under the Genentech agreement.
- Whether rising development and public-company costs, clinical delays, or funding-market changes alter the stated cash runway.