Bicycle Therapeutics plc — Q2 2021 Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2021. The unaudited filing reports a clinical-stage biotechnology company developing Bicycle peptide medicines. It had no approved products and generated no product-sale revenue; reported revenue came from collaborations.
Financial performance and position
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Collaboration revenue | $1.8m | $1.6m | $3.6m | $2.7m |
| Research and development expense | $11.7m | $8.0m | $21.4m | $15.7m |
| General and administrative expense | $7.3m | $6.2m | $15.5m | $11.2m |
| Total operating expenses | $19.1m | $14.2m | $36.9m | $26.9m |
| Operating loss | $17.3m | $12.6m | $33.3m | $24.2m |
| Net loss | $17.9m | $12.1m | $34.1m | $23.4m |
| Basic and diluted loss per share | $0.74 | $0.67 | $1.48 | $1.30 |
Amounts above are losses where shown as positive values. Revenue remained small relative to operating costs. Q2 operating expenses rose $4.9m year over year, led by R&D spending; management attributed increases to clinical and discovery programs, staffing and share-based compensation, partly offset by higher R&D incentives and grants. Six-month R&D expense included $1.9m of government grant offsets, versus $0.1m in the prior-year period.
- Cash and liquidity: Cash was $198.7m at June 30, 2021, versus $136.0m at December 31, 2020. Management expected existing cash to fund operating and capital needs for at least 12 months from the financial statements’ issuance date, while warning estimates could prove incorrect and additional funding would be needed.
- Cash flow: Six-month operating cash use was $26.1m, compared with $8.8m of operating cash provided in 2020. The prior-year inflow principally reflected $29.0m of deferred revenue, including Genentech collaboration funding. Investing cash use was $0.8m; financing provided $89.6m, including $72.8m net ATM proceeds and $15.0m of new debt.
- Debt: Hercules term-loan principal totaled $30.0m; carrying value, net of discount, was $29.6m. The loan bears interest at the greater of 8.85% or 5.60% plus prime; the effective rate was 11.4%. Interest-only payments run through August 1, 2023, with scheduled maturity October 1, 2024; certain milestones could extend the interest-only period. Debt is secured by substantially all assets other than intellectual property.
- Balance sheet: Total assets were $226.0m, total liabilities $84.0m, and shareholders’ equity $142.1m. Current assets were $217.8m against current liabilities of $23.3m. Deferred revenue totaled $34.1m, primarily from collaboration arrangements.
Changes and notable developments
- Six-month collaboration revenue increased $0.9m, principally from Genentech, partly offset by lower AstraZeneca revenue. Genentech revenue was $3.1m for the first half; its deferred revenue balance was $26.9m at June 30.
- R&D expense increased $5.7m and G&A increased $4.3m year over year for the first half. The larger loss also reflected $1.3m of interest expense and lower interest income.
- During the first half, the company issued ADSs through its ATM, receiving $72.8m net, and borrowed an additional $15.0m from Hercules. Ordinary shares outstanding were 24.1m at June 30, compared with 21.1m at year-end.
- Subsequent events: On July 9, 2021, Ionis exercised its option and entered a collaboration and license agreement covering TfR1 Bicycle peptides for oligonucleotide delivery. Ionis paid a $31.0m upfront fee and made an $11.0m equity investment. In July, the company also sold 930,900 ADSs through its ATM for $29.9m net.
Outlook, risks and contingencies
No quantified revenue or earnings guidance was provided. Management expects expenses to increase as it advances clinical and preclinical programs and states that substantial additional funding will be required. Its lead programs BT5528 and BT8009 were in company-sponsored Phase I/II trials; BT1718 was in a Cancer Research UK-sponsored Phase I/IIa trial. The company also described preclinical pipeline programs and expects continued investment in research, development and infrastructure.
- Key risks include clinical-trial failure or delay, patient enrollment and safety, regulatory uncertainty for a novel therapeutic modality, reliance on CROs and third-party manufacturers, intellectual-property challenges, competition, and the need for further capital. COVID-19 had limited reported operational and financial impact at the time, but could disrupt trials, suppliers, collaborators and financing.
- Potential Cancer Research UK development, regulatory and commercial milestone payments total $111.2m across the BT1718 and BT7401 arrangements; these are contingent on future events and were not included in contractual-obligation totals. BT1718-related costs produced a $3.0m long-term liability at June 30.
- The company reported a $1.2m current liability related to the Pepscan settlement and license agreement, including a €1.0m payment due on the settlement’s first anniversary and potential future milestone payments. The parties settled worldwide intellectual-property disputes in 2020.
- The UK TICA trademark application was successfully opposed, limiting protection for key pharmaceutical and oncology goods; the U.S. application had been abandoned. The filing also describes European patent opposition proceedings.
- Management said disclosure controls were effective as of June 30, 2021, with no material change in internal control over financial reporting during the quarter. It expected to cease being an emerging growth company on December 31, 2021, increasing reporting and compliance requirements.
Investor verification priorities
- Track clinical progress, enrollment, safety findings and timelines for BT5528, BT8009 and BT1718, and the advancement of earlier-stage programs.
- Reconcile cash runway with operating cash burn, expected program spending, and the post-quarter Ionis proceeds and ATM issuance.
- Review Ionis collaboration economics, including the upfront payment, equity investment, milestones, royalties and any future revenue-recognition effects.
- Monitor Hercules loan terms, interest-rate exposure, milestone conditions for further borrowing and eventual principal payments.
- Assess collaboration revenue concentration and deferred-revenue conversion, particularly for Genentech and AstraZeneca.
- Follow contingent Cancer Research UK and Pepscan obligations, intellectual-property matters, COVID-19 disruptions and the cost of transitioning to larger-filer reporting requirements.