Bicycle Therapeutics plc — Q3 2020 Form 10-Q
Business context and reporting period. Clinical-stage biopharmaceutical company developing synthetic “Bicycle” medicines, primarily for oncology. This unaudited report covers the three and nine months ended September 30, 2020; financial statement amounts below are in U.S. dollars, generally millions unless stated otherwise. The company had no approved products and no product-sales revenue.
Financial performance and position
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Collaboration revenue | $3.842m | $0.614m | $6.542m | $8.520m |
| Research and development expense | $7.363m | $6.078m | $23.091m | $18.891m |
| General and administrative expense | $7.154m | $4.789m | $18.351m | $11.164m |
| Operating loss | $10.675m | $10.253m | $34.900m | $21.535m |
| Net loss | $10.138m | $9.482m | $33.577m | $26.202m |
| Basic and diluted loss per share | $0.52 | $0.53 | $1.81 | $3.00 |
Cash flows and liquidity. At September 30, cash was $149.842m, versus $92.117m at December 31, 2019. Current assets were $164.158m and current liabilities $17.047m. For the first nine months, operating cash used was $1.172m, investing cash used was $0.716m, and financing cash provided was $61.099m; cash increased $57.725m. Operating cash use was substantially supported by a $27.782m increase in deferred revenue, principally from Genentech’s upfront payment, so the period’s low operating cash outflow should not be assumed to represent a normalized burn rate.
Debt and capital. The company drew $15m under a new Hercules term loan on September 30; carrying value after issuance costs was $14.427m. The facility permits up to $40m in total borrowings, subject to conditions and milestones. Interest is at the greater of 8.85% or prime plus 5.60%; scheduled maturity is October 2024, with a 5% end-of-term charge. Substantially all personal property and other assets, excluding intellectual property, secure the loan. The company raised $46.3m net through its ATM program during the nine-month period. After quarter-end it sold additional ADSs for $1.8m net, completed the initial $50m ATM authorization, and registered an additional $75m capacity.
Material changes versus comparable periods
- Q3 collaboration revenue rose $3.228m year over year, mainly from a $2.4m Oxurion milestone for initiation of a Phase II THR-149 trial and $1.2m recognized from the new Genentech collaboration.
- Nine-month collaboration revenue fell $1.978m. Lower Sanofi revenue and the absence of a prior-year $1m materials-transfer payment were partly offset by Genentech revenue and the Oxurion milestone.
- Nine-month R&D expense increased $4.2m, including higher clinical and tumor-targeted immune-cell agonist program spending, personnel costs and share-based compensation. G&A expense rose $7.2m, including increased professional fees, personnel, insurance and share-based compensation.
- Nine-month net loss widened by $7.375m. The 2019 period included $5.377m of warrant-liability remeasurement expense, which did not recur in 2020; higher operating expenses and lower collaboration revenue more than offset that comparison benefit.
- Ordinary shares issued and outstanding increased to 20.936m at quarter-end from 17.994m at year-end 2019, principally reflecting the 2020 ATM issuance.
Outlook, commentary and risks
- Management expected cash to fund operating expenses and capital expenditures for at least 12 months from issuance of the interim statements, while also stating that substantial additional funding will be required. No specific revenue, earnings or cash-burn guidance was provided.
- The company expects losses and expenses to increase as it advances clinical and preclinical programs. BT1718, BT5528 and BT8009 were in early clinical trials; BT1718 enrollment, paused at UK sites in the first half because of COVID-19, resumed in Q2, with Phase IIa enrollment underway. BT5528 and BT8009 trials were enrolling in the U.S. COVID-19 could again affect enrollment, trial timelines, supply and operations.
- Genentech paid $30m upfront, plus $1m for a selected targeting arm. The company recognized $3.1m of collaboration revenue in the first nine months and had $27.6m of related deferred revenue at quarter-end. Further option fees, milestones and royalties depend on future elections and achievements and are uncertain.
- The company received a UK government grant award of $2.8m for exploratory SARS-CoV-2 research; $0.3m was recognized as a reduction of R&D expense in the first nine months.
- Material intellectual-property litigation: in February 2020, The Hague Court of Appeal ruled Pepscan could terminate its license and imposed a worldwide injunction against BicycleRD exploiting specified Pepscan patents and related know-how, subject to a daily fine for non-compliance. BicycleRD appealed to the Dutch Supreme Court and said it was complying with the injunction. The patents expire in February 2024; the company says the injunction applies to BicycleRD, but cannot assure that Pepscan will not assert broader application. The dispute relates to technology used in BT1718 and licensed to Oxurion for THR-149. Related patent challenges and proceedings remain pending.
- Other significant risks include clinical failure or adverse events, reliance on collaborators and third-party manufacturers/CROs, additional financing needs and dilution, foreign-exchange exposure, and Brexit-related regulatory and operational uncertainty. The company reported no material COVID-19 financial or operational effects at the time, but warned impacts could worsen.
Most important facts for investors to verify
- Whether cash runway assumptions remain valid as clinical, staffing and development costs rise; distinguish recurring operating cash use from the benefit of collaboration prepayments.
- Clinical enrollment, safety and progress for BT1718, BT5528 and BT8009, and the operational effects of COVID-19.
- Current status and potential consequences of the Pepscan injunction, appeals and patent challenges for BicycleRD, BT1718 and THR-149.
- Availability and conditions of the remaining Hercules borrowing capacity, including its interest cost, collateral, covenants and repayment schedule. The filing gives conflicting dates for a possible extension of the interest-only period: the debt note says the first principal payment could move to May 1, 2023, while MD&A says March 1, 2023.
- Utilization of the additional $75m ATM authorization and potential shareholder dilution, along with Genentech option exercises and other collaboration milestones that could affect future revenue.