Bicycle Therapeutics plc — Q2 2019 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2019. Unaudited results; dollar amounts below are U.S. dollars. Bicycle is a clinical-stage biotechnology company with no approved products or product-sale revenue.
Business context and development
The company is developing its Bicycle peptide platform, with oncology candidates BT1718, BT5528 and BT8009. BT1718 is in a Phase I/IIa trial sponsored and funded by Cancer Research UK; BT5528 and BT8009 were in IND-enabling work. As of August 7, six twice-weekly and four once-weekly dose cohorts had been evaluated, with dose escalation ongoing. Management expected preliminary BT1718 Phase I data in the second half of 2019.
Financial performance and liquidity
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Collaboration revenue | $1.5m | $1.7m | $7.9m | $4.5m |
| Research and development expense | $6.5m | $4.9m | $12.8m | $8.6m |
| General and administrative expense | $3.0m | $1.7m | $6.4m | $3.7m |
| Operating loss | $(8.0)m | $(5.0)m | $(11.3)m | $(7.8)m |
| Net loss | $(10.2)m | $(5.0)m | $(16.7)m | $(7.5)m |
| Net loss per share, basic and diluted | $(1.40) | $(11.85) | $(4.08) | $(18.38) |
Revenue was entirely collaboration-related; no product sales were recorded. Six-month revenue rose mainly because Sanofi-related revenue included $5.3m recognized after Sanofi declined its sickle-cell license option, plus $1.0m from a material transfer agreement and new DDF collaboration revenue. Q2 revenue was slightly lower year over year, reflecting lower Sanofi and Oxurion revenue, partly offset by the material transfer agreement and DDF.
R&D expense increased as BT5528 and BT8009 advanced through preclinical work, discovery/platform spending grew, and headcount expanded. G&A rose with personnel, professional fees and costs of operating as a public company. Six-month net loss also included $5.4m of warrant-liability fair-value expense; following the May IPO, the warrants were exercised or reclassified to equity, and no warrant liability remained at June 30.
Cash was $108.5m at June 30, up from $63.4m at December 31, 2018. Operating cash use was $12.8m and investing cash use was $0.9m for the first half; financing provided $59.1m, primarily from the IPO and a Series B2 share issuance. The company reported no debt outstanding. Current assets were $120.5m and current liabilities $9.4m. Management expected cash to fund operating expenses and capital expenditure requirements for at least 12 months from issuance of the interim statements, while warning that substantial additional funding will be needed over time.
Material changes and unusual items
- The May 2019 IPO raised approximately $56.5m net proceeds, according to the IPO disclosure. Preferred shares converted into ordinary shares; the company reported 17,900,731 ordinary shares outstanding as of August 7, 2019.
- Sanofi’s decision not to exercise the sickle-cell license option led to recognition of $5.3m of previously deferred revenue in the first half. Management said it did not expect Sanofi to select a hemophilia candidate and expected related deferred revenue to be recognized upon termination of that collaboration.
- The company adopted lease accounting in January 2019, recording right-of-use assets and lease liabilities; it reported $2.2m of operating lease liabilities at June 30.
- Management said disclosure controls and procedures were not effective because of a previously identified material weakness in review of warrant-liability valuations. Remediation efforts were ongoing.
Outlook, risks and contingencies
Management expected expenses and losses to increase as it advances clinical and preclinical programs, expands operations and incurs public-company costs. The filing cautions that cash-runway estimates rely on assumptions and that capital may be required sooner than expected. Funding may require equity, debt, collaborations or licensing; additional equity could dilute shareholders, and alternative arrangements could require surrendering rights.
Key risks include clinical and regulatory failure or delay, adverse effects, patient enrollment, reliance on collaborators and contract manufacturers, and protection of intellectual property. The company disclosed ongoing Pepscan litigation over a patent license and related European patent oppositions; it had not recorded a litigation liability, stating a loss was not considered probable or estimable. It also recorded a $1.3m liability related to the Cancer Research UK trial agreement. Foreign-exchange exposure, Brexit uncertainty and the absence of currency hedging were additional disclosed risks.
Most important facts for investors to verify
- BT1718 trial progress, safety findings and timing of the preliminary data expected in the second half of 2019.
- Actual cash burn, future financing needs and whether cash runway remains consistent with management’s estimate.
- Revenue sustainability: the extent to which first-half collaboration revenue depended on the one-time Sanofi option-related recognition and material transfer agreement.
- Progress and timing of IND-enabling work for BT5528 and BT8009, and the resources needed to advance them.
- Status of the Pepscan litigation and patent challenges, and remediation of the disclosed internal-control material weakness.