Bicycle Therapeutics plc — Q3 2021 Form 10-Q
Business context and period. Clinical-stage biotechnology company developing synthetic “Bicycle” medicines, with a focus on oncology and partnered discovery programs. This unaudited report covers the three and nine months ended September 30, 2021; comparisons are with the corresponding 2020 periods. The company has no approved products and has generated no product-sales revenue.
Key financial results
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Collaboration revenue | $4.3m | $3.8m | $7.9m | $6.5m |
| Research and development expense | $10.5m | $7.4m | $31.9m | $23.1m |
| General and administrative expense | $8.1m | $7.2m | $23.6m | $18.4m |
| Operating loss | $14.3m | $10.7m | $47.6m | $34.9m |
| Net loss | $14.7m | $10.1m | $48.8m | $33.6m |
| Basic and diluted loss per share | $0.59 | $0.52 | $2.06 | $1.81 |
| Net cash used in operating activities | Not separately stated for Q3 | Not separately stated for Q3 | $4.4m | $1.2m |
Balance sheet and liquidity. At September 30, cash was $259.5m, versus $136.0m at December 31, 2020; total assets were $281.3m and shareholders’ equity was $170.8m. Current assets were $272.9m and current liabilities $30.2m. Long-term debt, net of discount, was $29.8m, against $30.0m principal outstanding. The Hercules facility bears interest at 8.85% as of quarter-end; interest expense was $0.8m for Q3 and $2.2m year to date. Principal payments are scheduled to begin August 2023, or February 2024 if specified milestones are met, with maturity in October 2024.
Nine-month operating cash use was $4.4m, but this was substantially supported by a $28.5m increase in deferred revenue, principally from Ionis. Financing provided $130.1m, including $102.6m of net ATM proceeds, $15.0m of Hercules borrowing, $7.6m from the Ionis share issuance and $4.9m from option exercises. Investing cash use was $1.0m. The company stated that September 30 cash was expected to fund operating expenses and capital needs for at least 12 months from the filing date; it cautioned that this estimate depends on assumptions and that additional funding will be needed.
Material changes and management commentary
- Q3 collaboration revenue increased $0.5m year over year, mainly from $2.1m recognized under the new Ionis collaboration and $0.9m from AstraZeneca following termination of a target program, partly offset by the absence of a $2.4m Oxurion milestone recognized in 2020.
- For the first nine months, revenue rose $1.4m, while operating expenses rose $14.1m and net loss increased $15.2m year over year. R&D growth reflected higher BT8009 clinical-program spending, discovery and platform activity, headcount and share-based compensation; UK R&D incentives and grants partly offset costs.
- Ionis entered a collaboration and license agreement in July, paying $31m upfront in addition to the previously paid $3m option fee. The company also received approximately $11m for an Ionis share purchase; $3.4m of the share-price premium was included in collaboration transaction price. The agreement includes potential development, regulatory and sales milestones and low-single-digit royalties, which were not included in recognized transaction price because they were constrained.
- Cash flows from operations should be viewed in light of collaboration advance payments and deferred revenue; they do not indicate that the business is generating operating profits. Total deferred revenue was $62.5m at quarter-end.
Outlook, risks and unusual items
- Management expects losses and expenses to increase as clinical and preclinical programs advance, and does not expect product-sales revenue for several years, if ever. The filing provides no quantified revenue, earnings or cash-burn guidance beyond the stated minimum 12-month cash runway estimate.
- On October 7, 2021, the company reported preliminary signs of anti-tumor activity for BT5528 and BT8009. It reported a recommended Phase II dose range for BT5528 and plans for expansion cohorts; BT8009 dose escalation remained ongoing. These are early findings and may not predict later results.
- Enrollment in the Cancer Research UK-sponsored BT1718 Phase IIa trial was slower than expected, though management reported acceleration in the second half of 2021. COVID-19, patient recruitment, clinical outcomes and trial-material supply could disrupt development.
- Key risks include continued operating losses and reliance on additional capital; uncertain clinical efficacy, safety and regulatory approval; dependence on collaborators, CROs and outsourced manufacturers; competition, intellectual-property challenges, foreign-exchange exposure and COVID-19 effects. BT5528 and BT8009 had reported serious treatment-related adverse events in early trials, as detailed in the filing.
- The Hercules loan is secured by substantially all borrower assets other than intellectual property and contains restrictive covenants and default provisions. A default could increase interest or accelerate repayment.
- Contingencies include a $3.0m recorded liability for Cancer Research UK BT1718 trial costs and contingent Pepscan milestone payments of up to $92.4m; timing and likelihood of those future milestones were not estimable. The company reported no other material legal proceedings beyond disclosed matters. An EPO decision revoking a Dyax patent became final after no appeal was filed.
- Subsequent events: On October 15, 2021, the company sold 3.7m ADSs at $54 each, generating $201.3m gross proceeds before expenses. In October, Genentech exercised an expansion option triggering a $10m payment. A new UK lease signed November 1 has a 10-year term, a cancellation right at year five subject to conditions, and annual rent capped at approximately £2.2m.
Important facts for investors to verify
- Cash runway assumptions and the expected use of proceeds from the October offering, including how they change the financing outlook.
- Upcoming BT5528, BT8009 and BT7480 clinical data, trial expansion plans, safety findings and enrollment progress, including BT1718.
- Timing and conditions for Ionis and Genentech payments, options and milestones, and the extent to which collaboration revenue reflects cash received versus revenue recognition.
- Hercules debt terms, milestone conditions for the interest-only extension and future principal obligations.
- Potential contingent payments, including Pepscan and Cancer Research UK obligations, and the financial and operational commitments associated with the new UK lease.