Bicycle Therapeutics plc — Q2 2023 Form 10-Q
Business context and reporting period. The clinical-stage biotechnology company develops Bicycle peptide medicines, with its internal pipeline focused principally on oncology. This unaudited report covers the three and six months ended June 30, 2023. Bicycle had no approved products and generated no product-sales revenue; revenue came from collaborations.
Financial highlights
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Collaboration revenue | $11.4 million | $4.4 million | $16.3 million | $8.2 million |
| Research and development expense | $39.7 million | $19.9 million | $71.9 million | $34.1 million |
| General and administrative expense | $14.8 million | $11.8 million | $29.3 million | $28.8 million |
| Operating loss | $43.1 million | $27.3 million | $84.9 million | $54.7 million |
| Net loss | $42.6 million | $26.8 million | $81.7 million | $54.4 million |
| Basic and diluted net loss per share | $1.41 | $0.90 | $2.71 | $1.84 |
- Cash and liquidity: Cash and cash equivalents were $340.4 million at June 30, 2023, versus $339.2 million at December 31, 2022. Current assets were $408.4 million and current liabilities $72.3 million. Management expected June-end cash to fund operating expenses and capital spending for at least 12 months from the filing date, subject to assumptions.
- Cash flow: Net cash used in operating activities was $12.3 million for the first half, compared with $49.9 million in 2022. Investing activities used $2.4 million, primarily for property and equipment; financing activities provided $15.0 million, mainly from ATM share sales. The operating cash-flow figure was affected by working-capital movements; the filing reports a $52.4 million positive receivables adjustment even though balance-sheet receivables rose to $45.1 million from $2.0 million. The text does not clearly reconcile this difference.
- Debt: Hercules term-loan principal was $30.0 million, with a $30.5 million carrying value. Interest was capped at 9.05%; the interest-only period runs through April 1, 2025, and maturity is July 1, 2025. Up to $45 million of additional borrowing is available subject to conditions.
- Deferred revenue: Total collaboration deferred revenue was $144.8 million at June 30, up from $61.9 million at year-end, principally reflecting the new Bayer and Novartis agreements. This is not equivalent to recognized revenue.
Material changes and notable items
- Q2 collaboration revenue increased by $7.0 million year over year; first-half revenue rose by $8.1 million. A major driver was Genentech-related revenue recognized when Genentech terminated Collaboration Program #1 and an associated option expired. The company recognized $6.0 million in Q2 from that option expiry, making the revenue increase partly dependent on a non-recurring event.
- R&D expense rose sharply, primarily reflecting higher clinical and program spending, including BT8009’s Phase II expansion, Bicycle TICA development, discovery/platform work, increased staffing, and facilities costs. Management also cited increased BT5528 spending for the first half.
- In March 2023, Bicycle entered a Novartis collaboration with a $50 million upfront payment, received in April. In May it entered a Bayer collaboration with a $45 million upfront payment, received in July. Neither agreement contributed recognized revenue in the reported periods; much of the consideration was recorded as deferred revenue.
- After quarter-end, the July 17 public offering of ADSs and non-voting ordinary shares generated approximately $215.5 million in net proceeds. The transaction increased the share count and diluted existing holders. This financing is subsequent to the June 30 balance sheet.
- Other unusual items included a $0.3 million fee and loss associated with terminating a U.K. lease, and $1.2 million of AstraZeneca revenue recognized following termination of the remaining target program. No AstraZeneca research programs remained at June 30.
Outlook, commentary and risks
- Management expects continuing operating losses and substantially higher expenses as clinical and preclinical programs advance. It does not expect product-sales revenue for the foreseeable future and says additional funding will be needed to support continuing operations, notwithstanding the post-quarter financing.
- BT8009’s Phase II expansion was ongoing. Management cited anti-tumor activity in early clinical results presented in February 2023 and noted FDA Fast Track Designation for monotherapy in previously treated locally advanced or metastatic urothelial cancer. Trial enrollment and development remain uncertain. BT5528 and BT7480 were also in company-sponsored Phase I/II trials; BT1718 was in a Cancer Research UK-sponsored and funded Phase I/IIa trial.
- Principal risks include clinical-trial safety, efficacy and enrollment uncertainty; regulatory approval and commercialization risk; reliance on collaborators, CROs and third-party manufacturers; intellectual-property and competition risks; potential need for further financing and dilution; and foreign-exchange, macroeconomic and cybersecurity exposures. The filing reports no material legal proceedings and states that disclosure controls were effective.
Important facts for investors to verify
- How much of reported collaboration revenue is repeatable service revenue versus revenue triggered by option expirations or program terminations, particularly the Genentech item.
- The receivables cash-flow reconciliation: the cash-flow statement’s positive adjustment does not appear readily consistent with the reported increase in accounts receivable and the $45 million Bayer advance billing included in receivables.
- Cash runway and expected spending after incorporating the July offering proceeds, the Bayer payment, clinical-program costs and the company’s stated need for future funding.
- Clinical-trial progress, enrollment, safety and efficacy updates for BT8009, BT5528 and BT7480, and the status and rights relating to BT1718.
- The terms and conditions for drawing additional Hercules debt, its repayment schedule, and the dilution and voting implications of the July issuance of ADSs and non-voting shares.