PART I - FINANCIAL INFORMATION Presents the company's unaudited financial statements and management's analysis for the quarter [Item 1. Financial Statements](index=7&type=section&id=Item%201.%20Financial%20Statements.) This section presents the unaudited condensed consolidated financial statements for the three months ended March 31, 2024, including Balance Sheets, Statements of Operations and Comprehensive Loss, Statements of Shareholders' Equity, and Statements of Cash Flows Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $456,997 | $526,423 | | Total current assets | $515,962 | $561,868 | | Total assets | $547,143 | $595,344 | | Total current liabilities | $49,510 | $69,537 | | Total liabilities | $191,095 | $224,412 | | Total shareholders' equity | $356,048 | $370,932 | Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Account | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Collaboration revenues | $19,530 | $4,896 | | Research and development | $34,864 | $32,211 | | General and administrative | $16,382 | $14,488 | | Loss from operations | $(31,716) | $(41,803) | | Net loss | $(26,563) | $(39,064) | | Net loss per share, basic and diluted | $(0.62) | $(1.30) | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(70,869) | $(46,411) | | Net cash used in investing activities | $(12) | $(2,099) | | Net cash provided by financing activities | $1,871 | $2,718 | | Net decrease in cash | $(69,426) | $(45,339) | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's business, liquidity position, accounting policies, and significant agreements - The company is a clinical-stage biopharmaceutical firm developing 'Bicycle® molecules' with key programs including BT8009, BT5528, and BT7480. As of March 31, 2024, it had cash and cash equivalents of **$457.0 million** and believes this is sufficient to fund operations for at least the next twelve months[25](index=25&type=chunk)[26](index=26&type=chunk)[30](index=30&type=chunk) - The company benefits from the UK's R&D tax relief program. In Q1 2024, this resulted in a **$15.3 million** reduction to R&D expenses, which included a **$9.7 million** benefit from a retroactive increase in the reimbursement rate enacted in February 2024[39](index=39&type=chunk)[41](index=41&type=chunk) Collaboration Revenue Breakdown (in thousands) | Partner | Q1 2024 Revenue | Q1 2023 Revenue | | :--- | :--- | :--- | | Bayer | $818 | $0 | | Novartis | $1,247 | $0 | | Ionis | $5,854 | $2,784 | | Genentech | $11,611 | $2,112 | | **Total** | **$19,530** | **$4,896** | - In January 2024, a decision was made with Genentech to discontinue research on Collaboration Program 3. This led to the recognition of **$10.4 million** in revenue during Q1 2024, including **$7.5 million** from the expiration of related material rights[163](index=163&type=chunk) - The company has **$30.0 million** in borrowings outstanding under a loan agreement with Hercules Capital, with interest-only payments until April 1, 2025[54](index=54&type=chunk) - The company has contingent future milestone payment obligations to Cancer Research UK and other third parties totaling **$111.2 million** and **$105.1 million**, respectively. These are not recorded on the balance sheet as they are not considered probable[203](index=203&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=70&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's business strategy, clinical program progress, and financial results, highlighting increased collaboration revenue and a reduced net loss [Overview](index=70&type=section&id=Overview) The company is a clinical-stage biopharmaceutical firm developing novel Bicycle® molecules, with a pipeline focused on oncology and key candidates BT8009 and BT7480 - The company's lead product candidate, BT8009, is being evaluated in an ongoing Phase I/II trial and a new Phase II/III registrational trial called Duravelo-2, which began recruiting patients in Q1 2024[215](index=215&type=chunk)[219](index=219&type=chunk) - The FDA granted Fast Track Designation to BT8009 for previously treated locally advanced or metastatic urothelial cancer in January 2023[216](index=216&type=chunk) - The company's discovery pipeline includes next-generation BTCs, Bicycle radionuclide conjugates (BRCs™), and Bicycle TICA molecules[215](index=215&type=chunk) [Results of Operations](index=84&type=section&id=Results%20of%20Operations) For Q1 2024, collaboration revenue significantly increased, leading to an improved net loss despite rising R&D and G&A expenses Comparison of Operations (in thousands) | Account | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Collaboration revenues | $19,530 | $4,896 | $14,634 | | Research and development | $34,864 | $32,211 | $2,653 | | General and administrative | $16,382 | $14,488 | $1,894 | | Net loss | $(26,563) | $(39,064) | $12,501 | - The **$14.6 million** increase in collaboration revenue was primarily driven by a **$9.5 million** increase from the Genentech agreement (due to discontinuation of a program) and a **$3.1 million** increase from the Ionis agreement[260](index=260&type=chunk)[263](index=263&type=chunk) - R&D expenses increased by **$2.7 million**. This was mainly due to a **$12.4 million** increase in costs for the BT8009 program's new Phase II/III trial, offset by an **$8.2 million** increase in UK R&D tax incentives[265](index=265&type=chunk) [Liquidity and Capital Resources](index=88&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2024, the company had **$457.0 million** in cash and cash equivalents, deemed sufficient for at least the next 12 months of operations - The company had cash and cash equivalents of **$457.0 million** as of March 31, 2024, which is expected to fund operations for at least 12 months from the filing date[229](index=229&type=chunk)[285](index=285&type=chunk) - Net cash used in operating activities increased to **$70.9 million** in Q1 2024 from **$46.4 million** in Q1 2023, primarily due to increased operational activities, including upfront payments for the Phase II/III Duravelo-2 registrational trial, and changes in working capital[272](index=272&type=chunk) - The company has an outstanding loan of **$30.0 million** with Hercules and may draw up to an additional **$45.0 million**. It also has an at-the-market (ATM) equity offering program, though no sales were made under it in Q1 2024[276](index=276&type=chunk)[277](index=277&type=chunk) [Quantitative and Qualitative Disclosure About Market Risk](index=96&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk) The company's primary market risks are interest rate sensitivity on cash and debt, and foreign currency exchange risk from UK operations - The company is exposed to interest rate risk on its **$457.0 million** of cash and cash equivalents and its **$30.0 million** of variable-rate debt. The debt's interest rate is capped at **9.05%**[294](index=294&type=chunk)[296](index=296&type=chunk) - The company is exposed to foreign currency risk as its UK subsidiaries use GBP as their functional currency, while the consolidated financial statements are presented in USD. Exchange rate fluctuations can impact reported results[297](index=297&type=chunk)[299](index=299&type=chunk) [Controls and Procedures](index=98&type=section&id=Item%204.%20Controls%20and%20Procedures) The company's disclosure controls and procedures were effective as of March 31, 2024, with no material changes in internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures were effective as of March 31, 2024[300](index=300&type=chunk) - No changes in internal control over financial reporting occurred during the quarter ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, internal controls[301](index=301&type=chunk) PART II - OTHER INFORMATION Details legal proceedings, risk factors, and other required disclosures for the reporting period [Legal Proceedings](index=100&type=section&id=Item%201.%20Legal%20Proceedings.) The company states that it is not currently subject to any material legal proceedings - The company is not currently a party to any material legal proceedings[303](index=303&type=chunk) [Risk Factors](index=100&type=section&id=Item%201A.%20Risk%20Factors.) This section outlines significant risks that could adversely affect the company's business, including financial, operational, and intellectual property challenges - The company has a history of significant operating losses, with an accumulated deficit of **$538.3 million** as of March 31, 2024, and expects to incur increasing losses for the foreseeable future[305](index=305&type=chunk)[317](index=317&type=chunk) - The business is substantially dependent on the success of its BTC® and TICA® programs, which represent a new category of medicines and may face heightened regulatory scrutiny[306](index=306&type=chunk)[352](index=352&type=chunk) - The company relies on third parties for manufacturing its product candidates and for conducting clinical trials, which introduces risks related to supply, quality, and regulatory compliance[314](index=314&type=chunk)[533](index=533&type=chunk)[541](index=541&type=chunk) - The company faces risks related to protecting its intellectual property, including the potential for patents to be found invalid and the possibility of costly infringement lawsuits[315](index=315&type=chunk)[558](index=558&type=chunk)[590](index=590&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=215&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) This item is marked as 'Not Applicable' in the report - Not Applicable[664](index=664&type=chunk) [Defaults Upon Senior Securities](index=217&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities.) This item is marked as 'Not Applicable' in the report - Not Applicable[666](index=666&type=chunk) [Mine Safety Disclosures](index=217&type=section&id=Item%204.%20Mine%20Safety%20Disclosures.) This item is marked as 'Not Applicable' in the report - Not Applicable[666](index=666&type=chunk) [Other Information](index=217&type=section&id=Item%205.%20Other%20Information.) The company reports that none of its directors or officers adopted or terminated any Rule 10b5-1 trading plans during the last fiscal quarter - During the last fiscal quarter, no directors or officers adopted or terminated any contracts, instructions, or written plans for the purchase or sale of the company's securities[666](index=666&type=chunk) [Exhibits](index=218&type=section&id=Item%206.%20Exhibits.) This section lists the exhibits filed with the quarterly report, including an amendment to the collaboration agreement with Ionis Pharmaceuticals, CEO and CFO certifications, and XBRL data files - The report includes several exhibits, such as Amendment No. 4 to the Collaboration and License Agreement with Ionis Pharmaceuticals, Inc., and certifications by the Principal Executive Officer and Principal Financial Officer[668](index=668&type=chunk)

[Executive Summary & Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Highlights) Bicycle Therapeutics reported significant preclinical and clinical progress, with multiple abstracts accepted for major oncology meetings, continued R&D pipeline advancements, and a strong cash position projected to fund operations into 2026 [Recent Business Progress Highlights](index=1&type=section&id=Recent%20Business%20Progress%20Highlights) Bicycle Therapeutics reported multiple preclinical and clinical abstracts accepted for major oncology meetings, continued R&D pipeline progress with numerous data readouts expected in 2H 2024, and a key executive promotion - Multiple preclinical and clinical abstracts accepted for presentation at 2024 ASCO Annual Meeting and AACR Annual Meeting, underscoring the breadth of Bicycle platform technology and pipeline[1](index=1&type=chunk) - Continued progress across research and development (R&D) pipeline, with numerous clinical data readouts and updates expected in 2H 2024[1](index=1&type=chunk) - Mike Hannay, D.Sc., FRPharmS, promoted to Chief Product and Supply Chain Officer[1](index=1&type=chunk) [First Quarter 2024 Financial Highlights](index=1&type=section&id=First%20Quarter%202024%20Financial%20Highlights) The company ended Q1 2024 with **$457.0 million** in cash and cash equivalents, which is projected to fund operations into 2026 Cash and Cash Equivalents (Q1 2024 vs. Q4 2023) | Metric | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $457.0 million | $526.4 million | - Expected to provide financial runway into 2026[1](index=1&type=chunk) [First Quarter 2024 and Recent Events](index=1&type=section&id=First%20Quarter%202024%20and%20Recent%20Events) The company initiated the Phase 2/3 Duravelo-2 trial, presented clinical and preclinical data at major oncology conferences, promoted a key executive, and scheduled investor relations activities [Clinical and Preclinical Development Updates](index=1&type=section&id=Clinical%20and%20Preclinical%20Development%20Updates) The company initiated the Phase 2/3 Duravelo-2 registrational trial for BT8009 in metastatic urothelial cancer and presented clinical and preclinical data at ASCO and AACR, highlighting the versatility of its Bicycle platform [ASCO Annual Meeting Presentations](index=1&type=section&id=ASCO%20Annual%20Meeting%20Presentations) Two abstracts were accepted for poster presentation at the 2024 ASCO Annual Meeting, detailing clinical pharmacokinetics and the ongoing Duravelo-2 trial for BT8009 - Two abstracts accepted for poster presentation at the 2024 American Society for Clinical Oncology (ASCO) Annual Meeting[2](index=2&type=chunk) - First abstract to examine clinical pharmacokinetics and safety of Bicycle Toxin Conjugates (BTC molecules)[2](index=2&type=chunk) - Second abstract to outline the ongoing Phase 2/3 clinical trial, Duravelo-2, of BT8009 in metastatic urothelial cancer (mUC)[2](index=2&type=chunk) [AACR Annual Meeting Presentations](index=1&type=section&id=AACR%20Annual%20Meeting%20Presentations) Three posters were presented at the AACR Annual Meeting 2024, showcasing preclinical data on BTC, NK-TICA, and Bicycle TICA molecules for solid tumors, emphasizing platform versatility - Three posters presented at the American Association for Cancer Research (AACR) Annual Meeting 2024[3](index=3&type=chunk) - Shared preclinical data on BTC molecules for solid tumors, Natural Killer Tumor-Targeted Immune Cell Agonist (NK-TICA) molecules, and Bicycle Tumor-Targeted Immune Cell Agonist (Bicycle TICA) molecules[3](index=3&type=chunk) - Posters underscore the breadth of the company's platform technology and its capabilities to produce different modalities to target cancer[3](index=3&type=chunk) [R&D Pipeline Progress](index=1&type=section&id=R%26D%20Pipeline%20Progress) The company initiated the Phase 2/3 Duravelo-2 registrational trial for BT8009 and continues to assess BT8009, BT5528, and BT7480 in Phase 1/2 clinical trials, with updates planned for its BRC™ pipeline - Initiated the Phase 2/3 Duravelo-2 registrational trial for BT8009 in mUC, with patient enrollment ongoing[4](index=4&type=chunk) - Continues to assess BT8009, BT5528, and BT7480 in Phase 1/2 clinical trials across a variety of tumor types[4](index=4&type=chunk) - Plans to provide updates from its wholly owned Bicycle Radio Conjugate (BRC™) pipeline[4](index=4&type=chunk) [Corporate Updates](index=2&type=section&id=Corporate%20Updates) Mike Hannay was promoted to Chief Product and Supply Chain Officer, recognized for significantly advancing the company's manufacturing capabilities and priorities, including preparations for the potential commercial launch of BT8009 - Mike Hannay, D.Sc., FRPharmS, promoted to Chief Product and Supply Chain Officer[5](index=5&type=chunk) - Advanced the company's chemistry, manufacturing and controls (CMC) capabilities and drug manufacturing priorities, including preparations and buildout for the potential commercial launch of BT8009[5](index=5&type=chunk) [Investor Relations](index=2&type=section&id=Investor%20Relations) Bicycle Therapeutics management will participate in a fireside chat at the Citizens JMP Life Sciences Conference on May 13, 2024 - Bicycle Therapeutics management will participate in a fireside chat at the Citizens JMP Life Sciences Conference on May 13, 2024[6](index=6&type=chunk) [First Quarter 2024 Financial Results](index=2&type=section&id=First%20Quarter%202024%20Financial%20Results) Bicycle Therapeutics reported a net loss of **$26.6 million** for Q1 2024, an improvement from the prior year, driven by increased collaboration revenues and controlled operating expenses, while cash and cash equivalents decreased to **$457.0 million** [Cash and Liquidity](index=2&type=section&id=Cash%20and%20Liquidity) Cash and cash equivalents decreased to **$457.0 million** as of March 31, 2024, from **$526.4 million** at the end of 2023, primarily due to cash used in operating activities, including upfront payments for the Duravelo-2 trial Cash and Cash Equivalents (Q1 2024 vs. Q4 2023) | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $456,997 | $526,423 | - Decrease primarily due to cash used in operating activities, including upfront payments associated with the initiation of the Phase 2/3 Duravelo-2 registrational trial[7](index=7&type=chunk) [Operating Expenses](index=2&type=section&id=Operating%20Expenses) R&D expenses increased to **$34.9 million** in Q1 2024, mainly due to higher clinical program expenses for BT8009 and personnel costs, partially offset by decreased expenses for other programs and a one-time tax credit. G&A expenses also rose to **$16.4 million** due to increased personnel-related costs Operating Expenses (Q1 2024 vs. Q1 2023) | Expense Category | Q1 2024 (in thousands) | Q1 2023 (in thousands) | Change (Q1 2024 vs Q1 2023) | | :--- | :--- | :--- | :--- | | Research and development | $34,864 | $32,211 | +$2,653 | | General and administrative | $16,382 | $14,488 | +$1,894 | | Total operating expenses | $51,246 | $46,699 | +$4,547 | - R&D increase primarily due to increased clinical program expenses for BT8009 development and increased personnel-related expenses, offset by decreased expenses for Bicycle TICA and BT5528 development, and **$8.2 million** of one-time, incremental retroactive U.K. R&D tax credits[7](index=7&type=chunk) - G&A increase primarily due to an increase in personnel-related costs[8](index=8&type=chunk) [Net Loss and EPS](index=2&type=section&id=Net%20Loss%20and%20EPS) Bicycle Therapeutics reported a net loss of **$26.6 million**, or **$(0.62)** per share, for Q1 2024, an improvement compared to a net loss of **$39.1 million**, or **$(1.30)** per share, in Q1 2023 Net Loss and EPS (Q1 2024 vs. Q1 2023) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net loss | $(26,563) | $(39,064) | | Net loss per share, basic and diluted | $(0.62) | $(1.30) | Collaboration Revenues and Interest Income (Q1 2024 vs. Q1 2023) | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | | :--- | :--- | :--- | | Collaboration revenues | $19,530 | $4,896 | | Interest income | $5,624 | $2,929 | [About Bicycle Therapeutics](index=3&type=section&id=About%20Bicycle%20Therapeutics) Bicycle Therapeutics is a clinical-stage biopharmaceutical company developing novel Bicycle molecules, which are synthetic peptides designed for high-affinity and selective target binding, with a pipeline focused on oncology and partnerships exploring other therapeutic areas [Company Overview and Technology](index=3&type=section&id=Company%20Overview%20and%20Technology) Bicycle Therapeutics is a clinical-stage biopharmaceutical company developing Bicycle molecules, which are fully synthetic short peptides constrained with small molecule scaffolds to form two loops, enabling high-affinity and selective target binding - Clinical-stage biopharmaceutical company developing a novel class of medicines, referred to as Bicycle molecules, for diseases that are underserved by existing therapeutics[9](index=9&type=chunk) - Bicycle molecules are fully synthetic short peptides constrained with small molecule scaffolds to form two loops that stabilize their structural geometry, facilitating target binding with high affinity and selectivity[9](index=9&type=chunk) [Pipeline and Partnerships](index=3&type=section&id=Pipeline%20and%20Partnerships) The company's pipeline includes BT8009 (targeting Nectin-4), BT5528 (targeting EphA2), and BT7480 (targeting Nectin-4 and agonizing CD137) in clinical trials. It is also developing Bicycle Radio Conjugates (BRC™) and collaborating on therapies beyond oncology - Evaluating BT8009, a Bicycle Toxin Conjugate (BTC) targeting Nectin-4; BT5528, a BTC targeting EphA2; and BT7480, a Bicycle Tumor-Targeted Immune Cell Agonist (Bicycle TICA) targeting Nectin-4 and agonizing CD137, in company-sponsored clinical trials[9](index=9&type=chunk) - Developing Bicycle Radio Conjugates (BRC™) for radiopharmaceutical use[9](index=9&type=chunk) - Through various partnerships, exploring the use of Bicycle technology to develop therapies for diseases beyond oncology[9](index=9&type=chunk) [Forward Looking Statements](index=3&type=section&id=Forward%20Looking%20Statements) This section contains standard forward-looking statements regarding anticipated R&D progress, clinical trial advancements, data timing, therapeutic potential, and financial runway, along with disclaimers about inherent uncertainties and risks that could cause actual results to differ - Statements regarding anticipated progress across R&D pipeline, advancement of product candidates (BT8009, BT5528, BT7480), progression of clinical trials, and timing of data announcements[11](index=11&type=chunk) - Includes statements on the development of potential radiopharmaceutical or other product candidates through partnerships, therapeutic potential in oncology and other applications, and expected financial runway[11](index=11&type=chunk) - Disclaims obligation to update forward-looking statements and highlights various factors and risks that could cause actual results to differ materially, as described in SEC filings[11](index=11&type=chunk) [Financial Statements](index=4&type=section&id=Financial%20Statements) This section presents the unaudited condensed consolidated statements of operations and comprehensive loss, along with key balance sheet data, for the periods ended March 31, 2024, and December 31, 2023 [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) The unaudited condensed consolidated statements of operations detail collaboration revenues, operating expenses (R&D, G&A), loss from operations, other income/expense, net loss before income tax, benefit from income taxes, and net loss for the three months ended March 31, 2024, and 2023 Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) | | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :--- | :--- | :--- | | Collaboration revenues | $19,530 | $4,896 | | Operating expenses: | | | | Research and development | 34,864 | 32,211 | | General and administrative | 16,382 | 14,488 | | Total operating expenses | 51,246 | 46,699 | | Loss from operations | (31,716) | (41,803) | | Other income (expense): | | | | Interest income | 5,624 | 2,929 | | Interest expense | (821) | (808) | | Total other income (expense), net | 4,803 | 2,121 | | Net loss before income tax provision | (26,913) | (39,682) | | Benefit from income taxes | (350) | (618) | | Net loss | $(26,563) | $(39,064) | | Net loss per share, basic and diluted | $(0.62) | $(1.30) | | Weighted average ordinary shares outstanding, basic and diluted | 42,560,091 | 30,001,725 | [Balance Sheets Data](index=5&type=section&id=Balance%20Sheets%20Data) The unaudited balance sheets data provides key financial positions including cash and cash equivalents, working capital, total assets, and total shareholders' equity as of March 31, 2024, and December 31, 2023 Balance Sheets Data (Unaudited) | | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $456,997 | $526,423 | | Working capital | 466,452 | 492,331 | | Total assets | 547,143 | 595,344 | | Total shareholders' equity | 356,048 | 370,932 | [Contacts](index=5&type=section&id=Contacts) This section provides contact information for investor relations and media inquiries - Investor Relations Contact: Stephanie Yao, SVP, Investor Relations and Corporate Communications, ir@bicycletx.com, 857-523-8544[15](index=15&type=chunk) - Media Contact: Deborah Elson, Argot Partners, media@bicycletx.com, 212-600-1902[15](index=15&type=chunk)

CAMBRIDGE, England & BOSTON--(BUSINESS WIRE)--Bicycle Therapeutics plc (NASDAQ: BCYC), a biopharmaceutical company pioneering a new and differentiated class of therapeutics based on its proprietary bicyclic peptide (Bicycle®) technology, today announced the acceptance of three abstracts for poster presentation at the American Association for Cancer Research (AACR) Annual Meeting 2024, taking place in San Diego on April 5-10. Poster Presentation Details: Title: Bicycle Toxin Conjugates® for the treatment o ...

CAMBRIDGE, England & BOSTON--(BUSINESS WIRE)--Bicycle Therapeutics plc (NASDAQ: BCYC), a biopharmaceutical company pioneering a new and differentiated class of therapeutics based on its proprietary bicyclic peptide (Bicycle®) technology, today reported financial results for the fourth quarter and full year ended December 31, 2023, and provided recent corporate updates. “2023 was a pivotal year for our company, during which we achieved significant progress across our Nectin-4 and EphA2 clinical oncology p ...

PART I [Business](index=6&type=section&id=Item%201.%20Business) Bicycle Therapeutics develops novel Bicycle® molecules, synthetic peptides combining biologic pharmacology with small molecule properties, primarily in oncology - The company's core technology is the Bicycle® molecule, a novel therapeutic modality combining the high affinity and selectivity of biologics with the manufacturing and pharmacokinetic advantages of small molecules[9](index=9&type=chunk) - Bicycle's proprietary phage display screening platform can screen quadrillions of potential Bicycle molecules to efficiently identify candidates for development[10](index=10&type=chunk) - The company's internal pipeline is focused on oncology, with lead candidates including BT8009 (Nectin-4 BTC), BT5528 (EphA2 BTC), and BT7480 (Nectin-4/CD137 TICA), all in Phase I/II or Phase II/III clinical trials[11](index=11&type=chunk) - Strategic collaborations with major biopharmaceutical companies like Bayer, Novartis, Genentech, and Ionis are key to applying Bicycle technology to other disease areas such as radiopharmaceuticals, CNS, and neuromuscular diseases[12](index=12&type=chunk)[33](index=33&type=chunk) [Our Strategy](index=8&type=section&id=Our%20Strategy) The company's strategy focuses on pioneering Bicycle molecules, advancing lead candidates, expanding the pipeline, and forming strategic collaborations beyond oncology - Advance lead candidates BT8009, BT5528, and BT7480 through clinical development, with **BT8009 in a Phase II/III registrational trial**[17](index=17&type=chunk) - Progress discovery programs, including next-generation BTCs, BRCs, and Bicycle TICA molecules, into clinical development[18](index=18&type=chunk) - Utilize the proprietary screening platform to efficiently identify and develop a diverse pipeline of product candidates[19](index=19&type=chunk) - Form strategic collaborations to apply Bicycle technology to indications beyond oncology and maximize commercial potential through internal capabilities or partnerships[20](index=20&type=chunk) [The Bicycle Advantage](index=10&type=section&id=The%20Bicycle%20Advantage) Bicycle molecules are highly constrained synthetic peptides offering high affinity, rapid tumor penetration, and renal elimination, reducing toxicity risk - Bicycle molecules combine the pharmacological properties of biologics with the manufacturing and pharmacokinetic advantages of small molecules[22](index=22&type=chunk) - Key properties include a low molecular weight (1.5-2.0 kDa), rapid tissue penetration, and renal elimination, which minimizes liver exposure and potential toxicity[24](index=24&type=chunk) - The proprietary screening platform, based on technology developed by Nobel laureate Sir Greg Winter, can screen over 10^20 potential molecules and has successfully identified binders for over **85% of the 150+ targets screened since the IPO**[23](index=23&type=chunk)[27](index=27&type=chunk)[29](index=29&type=chunk) [Our Product Candidates](index=12&type=section&id=Our%20Product%20Candidates) The company's pipeline focuses on oncology, featuring internal Bicycle Toxin Conjugates (BTCs) and Tumor-Targeted Immune Cell Agonists (TICAs), alongside partnered programs Key Program Status | Program | Target/Type | Stage | Status | | :--- | :--- | :--- | :--- | | **Internal Programs** | | | | | BT8009 | Nectin-4 BTC | Phase I/II/III | Ongoing Phase I/II and active Phase II/III registrational trial (Duravelo-2) | | BT5528 | EphA2 BTC | Phase I/II | Ongoing Phase I/II clinical trial | | BT7480 | Nectin-4/CD137 TICA | Phase I/II | Ongoing Phase I/II clinical trial | | BT7455 | EphA2/CD137 TICA | Preclinical | IND-enabling activities in process | | **Partnered Programs** | | | | | BT1718 | MT1-MMP BTC | Phase I/IIa | Phase I/IIa trial in collaboration with Cancer Research UK | - BT8009 received FDA Fast Track Designation for previously treated metastatic urothelial cancer and was selected for the FDA's CMC Development and Readiness Pilot Program[35](index=35&type=chunk)[36](index=36&type=chunk) - BT5528 is being developed for EphA2-expressing tumors, a target where previous antibody-drug conjugates (ADCs) faced safety issues (bleeding, liver toxicity) that BT5528 is designed to overcome due to its different PK/PD profile[56](index=56&type=chunk)[57](index=57&type=chunk) - The company is developing Bicycle Radionuclide Conjugates (BRCs) and has collaborations in this area with the German Cancer Research Center (DKFZ), Novartis, and Bayer[33](index=33&type=chunk)[78](index=78&type=chunk) [Our Collaborations](index=31&type=section&id=Our%20Collaborations) The company has established strategic collaborations with partners like Bayer, Novartis, Ionis, Genentech, and Cancer Research UK to expand its Bicycle platform beyond internal oncology focus - **Bayer:** Collaboration to discover and develop radiopharmaceutical compounds incorporating Bicycle constructs for up to three oncology targets[86](index=86&type=chunk) - **Novartis:** Collaboration to discover and develop compounds incorporating Bicycle constructs for two specified oncology targets[89](index=89&type=chunk) - **Ionis:** Collaboration to use TfR1 Bicycle molecules for the targeted delivery of oligonucleotide compounds for CNS and neuromuscular diseases[90](index=90&type=chunk) - **Genentech:** Discovery collaboration focused on developing Bicycle peptides against multiple immuno-oncology targets[91](index=91&type=chunk) - **Cancer Research UK:** Funding and sponsorship for the clinical development of BT1718 (Phase I/IIa) and BT7401 (through Phase IIa)[96](index=96&type=chunk)[97](index=97&type=chunk) [Intellectual Property](index=37&type=section&id=Intellectual%20Property) The company protects its Bicycle platform, product candidates, and related technologies through a robust patent portfolio, trade secrets, and know-how - As of December 31, 2023, the company's patent portfolio included **93 patent families**: 3 for novel scaffolds/linkers, 10 for platform technology, 61 for bicyclic peptides/conjugates, and 19 for later inventions[105](index=105&type=chunk) - The company owned approximately **344 patents** and had **567 pending patent applications** globally, with expected patent expirations ranging from February 2029 to December 2044, excluding potential term extensions[108](index=108&type=chunk) - Specific patent families cover key product candidates: BT8009 (at least 8 families, expiring 2039-2044), BT5528 (at least 5 families, expiring 2038-2044), BT1718 (at least 6 families, expiring 2035-2040), and BT7480 (at least 10 families, expiring 2038-2044)[105](index=105&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk) - The company also relies on trade secrets to protect its know-how, particularly for the Bicycle platform, using confidentiality agreements and security measures[111](index=111&type=chunk) [Competition](index=41&type=section&id=Competition) The company faces intense competition from major pharmaceutical and biotechnology companies, academic institutions, and research organizations, many with greater resources - The company competes with major pharmaceutical and biotech companies that have greater financial, technical, and human resources[114](index=114&type=chunk) - Specific competition exists for the company's targets, including Pfizer's (formerly Seagen) marketed Nectin-4 antibody-drug conjugate, which competes with BT8009[113](index=113&type=chunk) - Many companies are also pursuing development programs for CD137, a target for the company's TICA platform[113](index=113&type=chunk) [Manufacturing](index=43&type=section&id=Manufacturing) Bicycle Therapeutics operates a fully outsourced manufacturing model, contracting with multiple GMP-licensed contract development and manufacturing organizations (CDMOs) - The company utilizes a fully outsourced model for manufacturing, contracting with multiple GMP-licensed CDMOs for both drug substance and finished drug product[118](index=118&type=chunk) - Bicycle molecules are entirely synthetic, which is expected to enable a more cost-effective, scalable, and reproducible manufacturing process compared to biologics[117](index=117&type=chunk) [Government Regulation](index=43&type=section&id=Government%20Regulation) The company is subject to extensive government regulation in the U.S., EU, UK, and other jurisdictions, covering all stages of pharmaceutical product development and marketing - In the U.S., the FDA regulates drugs under the FDCA, requiring a multi-step process including preclinical studies, an IND application, and three phases of clinical trials before an NDA can be submitted for approval[120](index=120&type=chunk)[121](index=121&type=chunk)[126](index=126&type=chunk) - The FDA offers expedited programs such as Fast Track, Breakthrough Therapy, and Accelerated Approval for drugs addressing serious conditions with unmet medical needs, which can speed up development and review[135](index=135&type=chunk)[137](index=137&type=chunk)[141](index=141&type=chunk) - In the EU, marketing authorization is obtained through a centralized procedure via the EMA or national procedures, with the Clinical Trials Regulation (CTR) harmonizing clinical trial authorizations[174](index=174&type=chunk)[179](index=179&type=chunk)[180](index=180&type=chunk) - Following Brexit, the UK's MHRA is the standalone regulator for Great Britain, requiring separate marketing authorizations from the EU, with the Windsor Framework expected to reintegrate Northern Ireland into a UK-only regulatory environment by 2025[237](index=237&type=chunk)[241](index=241&type=chunk)[350](index=350&type=chunk) [Employees and Human Capital](index=83&type=section&id=Employees%20and%20Human%20Capital) As of December 31, 2023, the company had 284 employees, with a majority in R&D, and focuses on attracting and retaining a diverse workforce through competitive compensation and development opportunities - As of December 31, 2023, the company had **284 full-time or part-time employees**, with **107 holding M.D. or Ph.D. degrees**[244](index=244&type=chunk) - The workforce is split between the UK (**175 employees**) and the US (**109 employees**), with a majority (**223**) engaged in R&D activities[244](index=244&type=chunk) - Human capital objectives include attracting and retaining a diverse workforce through competitive compensation, benefits, equity participation, and career development programs[246](index=246&type=chunk)[247](index=247&type=chunk)[250](index=250&type=chunk) [Risk Factors](index=87&type=section&id=Item%201A.%20Risk%20Factors) This section outlines numerous risks, including financial losses, funding needs, dependence on lead candidates, novelty of Bicycle molecules, clinical trial failures, regulatory hurdles, competition, intellectual property challenges, and reliance on third parties - **Financial Risks:** The company has a history of significant operating losses (**$180.7 million in 2023**) and may never achieve profitability, requiring substantial additional funding to continue operations[255](index=255&type=chunk)[267](index=267&type=chunk) - **Development & Regulatory Risks:** The business is substantially dependent on the success of its BTC and TICA programs, with Bicycle molecules representing a new class of medicine that may face heightened regulatory scrutiny, and candidates could cause undesirable side effects[256](index=256&type=chunk)[257](index=257&type=chunk)[259](index=259&type=chunk) - **Commercial & Competition Risks:** The company faces significant competition from larger, better-funded companies, and the commercial success of any approved product depends on market acceptance by physicians and payors, with adequate insurance reimbursement being uncertain[262](index=262&type=chunk) - **Operational & IP Risks:** The company relies on third parties for manufacturing and clinical trials, increasing risks of delays and supply issues, and faces challenges in obtaining and maintaining sufficient patent protection for its products and technology[264](index=264&type=chunk)[265](index=265&type=chunk) [Unresolved Staff Comments](index=203&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) Not applicable, as the company reports no unresolved staff comments [Cybersecurity](index=203&type=section&id=Item%201C.%20Cybersecurity) The company manages cybersecurity risks through an information security program, overseen by a multidisciplinary team and the Audit Committee, with governance by an Information Risk Assessment Committee (IRAC) - The company has implemented processes to identify, assess, and manage material risks from cybersecurity threats, maintaining an Information Security Management System (ISMS) to ISO27001 standards[593](index=593&type=chunk)[595](index=595&type=chunk) - Governance is managed by an Information Risk Assessment Committee (IRAC) composed of senior finance, legal, operations, and IT members, with oversight from the board's Audit Committee, which receives regular reports[601](index=601&type=chunk)[602](index=602&type=chunk) - The company relies on third-party service providers for critical functions and manages associated risks through a vendor management process that includes reviewing cybersecurity practices and imposing contractual obligations[597](index=597&type=chunk) [Properties](index=205&type=section&id=Item%202.%20Properties) The company leases approximately 45,000 sq. ft. in Cambridge, UK, 11,000 sq. ft. in Lexington, MA, and 23,000 sq. ft. in Cambridge, MA, which are sufficient for current needs - The company leases three primary office and laboratory facilities: **~45,000 sq. ft. in Cambridge, UK**; **~11,000 sq. ft. in Lexington, MA**; and **~23,000 sq. ft. in Cambridge, MA**[603](index=603&type=chunk) [Legal Proceedings](index=207&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently subject to any material legal proceedings - As of the report date, the company is not a party to any material legal proceedings[604](index=604&type=chunk) [Mine Safety Disclosures](index=207&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Not applicable PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=208&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's American Depositary Shares (ADSs) trade on The Nasdaq Global Select Market under "BCYC," with approximately 45 ordinary share holders and one ADS holder as of February 15, 2024 - The company's ADSs trade on The Nasdaq Global Select Market under the ticker "**BCYC**"[607](index=607&type=chunk) - As of February 15, 2024, there were approximately **45 holders of record of ordinary shares** and **one holder of record of ADSs**[608](index=608&type=chunk) [Reserved]](index=208&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=209&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) For 2023, the company reported a net loss of **$180.7 million**, driven by increased R&D expenses, while collaboration revenues rose to **$27.0 million**, with **$526.4 million** in cash and cash equivalents expected to fund operations for at least 12 months Financial Performance Summary (2023 vs 2022) | Metric | 2023 (in thousands) | 2022 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Collaboration Revenues | $26,976 | $14,463 | $12,513 | | Research and Development Expenses | $156,496 | $81,609 | $74,887 | | General and Administrative Expenses | $60,426 | $49,507 | $10,919 | | Net Loss | $(180,664) | $(112,717) | $(67,947) | - The increase in R&D expenses was primarily due to higher clinical program costs for BT8009's Phase I/II and Phase II/III trials, increased discovery and platform expenses, and higher employee-related costs from increased headcount[655](index=655&type=chunk) - The increase in collaboration revenue was driven by recognition of revenue from agreements with Genentech (**$8.4 million increase**), Novartis (**$1.9 million**), Ionis (**$1.4 million**), and Bayer (**$1.2 million**)[654](index=654&type=chunk) - As of December 31, 2023, the company had cash and cash equivalents of **$526.4 million**, which is believed to be sufficient to fund operations and capital expenditures for at least the next 12 months[624](index=624&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=241&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to interest rate risk on its variable-rate debt and foreign currency exchange risk from operations in USD and GBP, without currently using hedging instruments - **Interest Rate Risk:** The company's cash and cash equivalents are subject to interest rate fluctuations, and its **$30.0 million** in debt with Hercules has a variable interest rate, currently capped at **9.05%**[704](index=704&type=chunk)[705](index=705&type=chunk)[707](index=707&type=chunk) - **Foreign Currency Exchange Risk:** The company operates in both USD and GBP, and fluctuations between these currencies affect consolidated financial statements upon translation and remeasurement, with exchange gains/losses recorded in G&A expenses[708](index=708&type=chunk)[709](index=709&type=chunk) [Financial Statements and Supplementary Data](index=243&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for 2023, 2022, and 2021, along with the independent auditor's report - The independent auditor, PricewaterhouseCoopers LLP, issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting as of December 31, 2023[745](index=745&type=chunk) Consolidated Balance Sheet Highlights (As of Dec 31, 2023) | Account | Amount (in thousands) | | :--- | :--- | | Cash and cash equivalents | $526,423 | | Total Assets | $595,344 | | Total Liabilities | $224,412 | | Total Shareholders' Equity | $370,932 | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=243&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) None [Controls and Procedures](index=243&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2023, a conclusion attested to by the independent auditor - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2023[713](index=713&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2023, based on the COSO framework[715](index=715&type=chunk) - The independent registered public accounting firm has audited and attested to the effectiveness of the company's internal control over financial reporting as of December 31, 2023[716](index=716&type=chunk) [Other Information](index=246&type=section&id=Item%209B.%20Other%20Information) During the last fiscal quarter, Chairman Pierre Legault adopted a Rule 10b5-1 trading plan for the potential sale of 266,014 ordinary shares - On October 11, 2023, Chairman Pierre Legault adopted a Rule 10b5-1 trading plan for the sale of **266,014 ordinary shares**[719](index=719&type=chunk)[722](index=722&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=246&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) Not applicable PART III [Directors, Executive Officers and Corporate Governance](index=246&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's definitive proxy statement for its 2024 Annual General Meeting - Information regarding directors, executive officers, and corporate governance is incorporated by reference from the forthcoming 2024 Proxy Statement[720](index=720&type=chunk)[721](index=721&type=chunk)[726](index=726&type=chunk) [Executive Compensation](index=248&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's definitive proxy statement for its 2024 Annual General Meeting - Information regarding executive compensation is incorporated by reference from the forthcoming 2024 Proxy Statement[728](index=728&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=248&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership of beneficial owners and management, as well as equity compensation plan details, is incorporated by reference from the company's definitive proxy statement for its 2024 Annual General Meeting - Information regarding security ownership and equity compensation plans is incorporated by reference from the forthcoming 2024 Proxy Statement[729](index=729&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=248&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding related party transactions and director independence is incorporated by reference from the company's definitive proxy statement for its 2024 Annual General Meeting - Information regarding related transactions and director independence is incorporated by reference from the forthcoming 2024 Proxy Statement[730](index=730&type=chunk) [Principal Accountant Fees and Services](index=248&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding fees paid to the principal accountant and pre-approval policies is incorporated by reference from the company's definitive proxy statement for its 2024 Annual General Meeting - Information regarding principal accountant fees and services is incorporated by reference from the forthcoming 2024 Proxy Statement[731](index=731&type=chunk) PART IV [Exhibits and Financial Statement Schedules](index=249&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements, financial statement schedules, and exhibits filed as part of the Annual Report on Form 10-K, including the Independent Registered Public Accounting Firm's Report and consolidated financial statements - This section contains the list of all financial statements and exhibits filed with the 10-K report[733](index=733&type=chunk) [Form 10-K Summary](index=255&type=section&id=Item%2016.%20Form%2010-K%20Summary) None

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements](index=7&type=section&id=Item%201.%20Financial%20Statements%2E) Presents unaudited condensed consolidated financial statements, including balance sheets, statements of operations, equity, and cash flows [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific dates | Metric | September 30, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (in thousands) | | :------------------------------------ | :-------------------------------- | :------------------------------- | :-------------------- | | Cash and cash equivalents | $572,086 | $339,154 | +$232,932 | | Total current assets | $603,036 | $369,383 | +$233,653 | | Total assets | $638,683 | $410,609 | +$228,074 | | Total current liabilities | $69,736 | $53,342 | +$16,394 | | Deferred revenue, net of current portion | $107,582 | $41,455 | +$66,127 | | Total liabilities | $222,661 | $139,826 | +$82,835 | | Total shareholders' equity | $416,022 | $270,783 | +$145,239 | | Accumulated deficit | $(462,661) | $(331,096) | -$(131,565) | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Details the company's revenues, expenses, and net loss over specific reporting periods | Metric | Three Months Ended Sep 30, 2023 (in thousands) | Three Months Ended Sep 30, 2022 (in thousands) | Change (in thousands) | | :------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | | Collaboration revenues | $5,352 | $3,040 | +$2,312 | | Research and development | $39,868 | $22,752 | +$17,116 | | General and administrative | $16,281 | $10,047 | +$6,234 | | Net loss | $(49,898) | $(28,347) | -$(21,551) | | Net loss per share, basic and diluted | $(1.26) | $(0.96) | -$(0.30) | | Metric | Nine Months Ended Sep 30, 2023 (in thousands) | Nine Months Ended Sep 30, 2022 (in thousands) | Change (in thousands) | | :------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | :-------------------- | | Collaboration revenues | $21,645 | $11,278 | +$10,367 | | Research and development | $111,799 | $56,890 | +$54,909 | | General and administrative | $45,557 | $38,830 | +$6,727 | | Net loss | $(131,565) | $(82,739) | -$(48,826) | | Net loss per share, basic and diluted | $(3.95) | $(2.79) | -$(1.16) | [Condensed Consolidated Statements of Shareholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders%27%20Equity) Outlines changes in shareholders' equity, including ordinary shares, additional paid-in capital, and accumulated deficit | Metric | December 31, 2022 (in thousands) | September 30, 2023 (in thousands) | Change (in thousands) | | :------------------------------------ | :------------------------------- | :-------------------------------- | :-------------------- | | Total Shareholders' Equity | $270,783 | $416,022 | +$145,239 | | Ordinary Shares (number) | 29,873,893 | 42,384,799 | +12,510,906 | | Additional Paid-in Capital | $601,105 | $875,248 | +$274,143 | | Accumulated Deficit | $(331,096) | $(462,661) | -$(131,565) | - The increase in total shareholders' equity was primarily driven by the issuance of ADSs and non-voting ordinary shares, net of commissions and offering expenses, totaling **$234.5 million** during the nine months ended September 30, 2023[18](index=18&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Summarizes cash inflows and outflows from operating, investing, and financing activities over specific periods | Cash Flow Activity | Nine Months Ended Sep 30, 2023 (in thousands) | Nine Months Ended Sep 30, 2022 (in thousands) | Change (in thousands) | | :------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | :-------------------- | | Net cash used in operating activities | $(13,340) | $(55,802) | +$42,462 | | Net cash used in investing activities | $(2,878) | $(17,539) | +$14,661 | | Net cash provided by financing activities | $249,641 | $804 | +$248,837 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $233,480 | $(77,211) | +$310,691 | [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations and additional information supporting the condensed consolidated financial statements [1. Nature of the business and basis of presentation](index=12&type=section&id=1.%20Nature%20of%20the%20business%20and%20basis%20of%20presentation) Describes the company's core business as a clinical-stage biopharmaceutical firm and the basis for financial statement preparation - Bicycle Therapeutics plc is a clinical-stage biopharmaceutical company focused on developing a novel class of medicines called Bicycles for diseases underserved by existing therapeutics, primarily in oncology[26](index=26&type=chunk) - The company's pipeline includes Bicycle® Toxin Conjugates (BTCs) like BT8009 (targeting Nectin-4), BT5528 (targeting EphA2), and BT1718 (targeting MT1 MMP), as well as Bicycle tumor-targeted immune cell agonists (Bicycle TICAs) like BT7480 (targeting Nectin-4 and agonizing CD137)[26](index=26&type=chunk) | Financial Metric | As of September 30, 2023 (in millions) | | :----------------- | :------------------------------------- | | Cash and cash equivalents | $572.1 | | Net losses (3 months) | $(49.9) | | Net losses (9 months) | $(131.6) | | Accumulated deficit | $(462.7) | | Net proceeds from July 2023 public offering | $215.1 | | Net proceeds from ATM program (9 months) | $34.2 | - The company expects its cash to be sufficient to fund operating expenses and capital expenditure requirements for at least **twelve months** from the issuance date of these interim financial statements, but will require additional funding for ongoing preclinical activities and clinical trials[32](index=32&type=chunk)[33](index=33&type=chunk) [2. Summary of significant accounting policies](index=14&type=section&id=2.%20Summary%20of%20significant%20accounting%20policies) Details the key accounting principles, estimates, and assumptions used in preparing the financial statements - The condensed consolidated financial statements are prepared in accordance with GAAP, with reclassification of deferred income tax benefit in prior periods to conform to current presentation[27](index=27&type=chunk) - Management's preparation of financial statements involves significant estimates and assumptions, including accruals for R&D, revenue recognition, share-based compensation, right-of-use assets/liabilities, and income taxes[36](index=36&type=chunk) - The company monitors economic uncertainties such as global health crises, monetary policy, geopolitical conflicts, inflation, and interest rates, which could impact its business and financial condition[38](index=38&type=chunk) - Accounts receivable primarily represent amounts due under collaboration agreements, with **no accounts receivable or allowance for credit losses** as of September 30, 2023[41](index=41&type=chunk) [3. Fair value of financial assets and liabilities](index=16&type=section&id=3.%20Fair%20value%20of%20financial%20assets%20and%20liabilities) Explains the valuation methods and classifications for the company's financial assets and liabilities - The carrying values of most current financial assets and liabilities approximate their fair values due to their short-term nature[45](index=45&type=chunk) - Cash equivalents, including money market funds and 30-day term deposits, are classified as **Level 1 assets**[46](index=46&type=chunk) | Metric | September 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :----------------- | :-------------------------------- | :------------------------------- | | Cash equivalents | $63,400 | $276,100 | | Restricted cash | $500 | $0 | [4. Property and equipment, net](index=18&type=section&id=4.%20Property%20and%20equipment%2C%20net) Details the company's tangible assets, including laboratory equipment, leasehold improvements, and depreciation | Category | September 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :----------------------- | :-------------------------------- | :------------------------------- | | Laboratory equipment | $15,087 | $14,872 | | Leasehold improvements | $10,547 | $10,736 | | Computer equipment and software | $537 | $441 | | Furniture and office equipment | $823 | $924 | | Less: Accumulated depreciation and amortization | $(11,395) | $(7,863) | | **Total property and equipment, net** | **$15,599** | **$19,110** | | Depreciation Expense | Three Months Ended Sep 30, 2023 (in thousands) | Nine Months Ended Sep 30, 2023 (in thousands) | | :------------------- | :--------------------------------------------- | :-------------------------------------------- | | Depreciation expense | $1,700 | $4,900 | [5. Accrued expenses and other current liabilities](index=18&type=section&id=5.%20Accrued%20expenses%20and%20other%20current%20liabilities) Outlines various short-term obligations, including employee compensation, R&D expenses, and professional fees | Category | September 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :------------------------------------ | :-------------------------------- | :------------------------------- | | Accrued employee compensation and benefits | $9,760 | $9,928 | | Accrued external research and development expenses | $18,010 | $10,859 | | Accrued professional fees | $1,319 | $1,068 | | Current portion of operating lease liabilities | $4,661 | $3,125 | | Other | $303 | $1,472 | | **Total accrued expenses and other current liabilities** | **$34,053** | **$26,452** | [6. Long-term debt](index=20&type=section&id=6.%20Long-term%20debt) Describes the company's loan agreements, outstanding balances, and future principal payment obligations - The company has a loan and security agreement with Hercules Capital, Inc., initially providing up to **$40.0 million**, with **$30.0 million** drawn[51](index=51&type=chunk)[52](index=52&type=chunk) - The loan agreement was amended to extend the interest-only period to **April 1, 2025**, and the maturity date to **July 1, 2025**, with potential for an additional **$45.0 million** in term loans[53](index=53&type=chunk) | Metric | September 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------------------- | :-------------------------------- | :------------------------------- | | Term loan payable | $30,000 | $30,000 | | End of term charge | $881 | $682 | | Unamortized debt issuance costs | $(277) | $(367) | | **Carrying value of term loan** | **$30,604** | **$30,315** | | Future Principal Payments (in thousands) | | :--------------------------------------- | | Year Ending December 31, 2023: $0 | | Year Ending December 31, 2024: $0 | | Year Ending December 31, 2025: $31,500 | | **Total: $31,500** | [7. Ordinary shares](index=22&type=section&id=7.%20Ordinary%20shares) Details the company's share capital structure, including authorized, issued, and outstanding ordinary and non-voting shares - The company's ordinary shares are divided into two classes: ordinary shares (one vote per share) and non-voting ordinary shares (no voting rights, but re-designatable to ordinary shares under certain conditions)[62](index=62&type=chunk)[63](index=63&type=chunk)[65](index=65&type=chunk) | Share Type | September 30, 2023 | December 31, 2022 | | :-------------------------- | :----------------- | :---------------- | | Authorized ordinary shares | 59,612,613 | 57,820,181 | | Issued & outstanding ordinary shares | 37,678,917 | 29,873,893 | | Issued & outstanding non-voting ordinary shares | 4,705,882 | 0 | - **No dividends** have been declared as of September 30, 2023, and December 31, 2022[66](index=66&type=chunk) [8. Share-based compensation](index=24&type=section&id=8.%20Share-based%20compensation) Explains the equity incentive plan, share option and RSU activity, and related compensation expenses - The 2020 Equity Incentive Plan allows for grants of options, stock appreciation rights, and restricted share units (RSUs) to employees, directors, and consultants, with an automatic annual increase in reserved shares[68](index=68&type=chunk)[69](index=69&type=chunk) | Metric | Three Months Ended Sep 30, 2023 (in thousands) | Nine Months Ended Sep 30, 2023 (in thousands) | | :------------------------------------ | :--------------------------------------------- | :-------------------------------------------- | | Research and development expenses | $3,357 | $11,941 | | General and administrative expenses | $4,073 | $12,724 | | **Total share-based compensation expense** | **$7,430** | **$24,665** | | Share Options Activity | As of December 31, 2022 | As of September 30, 2023 | | :--------------------- | :---------------------- | :----------------------- | | Outstanding | 5,898,888 | 7,312,020 | | Weighted Average Exercise Price | $22.45 | $23.32 | | Weighted Average Contractual Term (years) | 7.64 | 6.99 | | Unrecognized compensation expense | N/A | $58.6 million | | Weighted average period for recognition | N/A | 2.7 years | | RSU Activity | As of December 31, 2022 | As of September 30, 2023 | | :--------------------- | :---------------------- | :----------------------- | | Unvested | 187,725 | 335,104 | | Weighted-Average Grant Date Fair Value | $60.86 | $38.40 | | Unrecognized compensation expense | N/A | $11.0 million | | Weighted average period for recognition | N/A | 2.7 years | [9. Significant agreements](index=29&type=section&id=9.%20Significant%20agreements) Summarizes key collaboration and license agreements with pharmaceutical partners and their financial implications | Collaboration Partner | Three Months Ended Sep 30, 2023 (in thousands) | Nine Months Ended Sep 30, 2023 (in thousands) | | :-------------------- | :--------------------------------------------- | :-------------------------------------------- | | Bayer | $434 | $434 | | Novartis | $772 | $772 | | Ionis | $2,782 | $8,123 | | Genentech | $1,364 | $11,112 | | AstraZeneca | $0 | $1,204 | | **Total collaboration revenues** | **$5,352** | **$21,645** | | Collaboration Partner | Deferred Revenue as of Sep 30, 2023 (in thousands) | Deferred Revenue as of Dec 31, 2022 (in thousands) | | :-------------------- | :------------------------------------------------- | :------------------------------------------------- | | Bayer | $42,521 | $0 | | Novartis | $49,050 | $0 | | Ionis | $14,463 | $21,489 | | Genentech | $28,738 | $39,308 | | AstraZeneca | $0 | $1,076 | | **Total deferred revenue** | **$134,772** | **$61,873** | [Bayer Collaboration Agreement](index=29&type=section&id=Bayer%20Collaboration%20Agreement) Details the collaboration with Bayer for radiopharmaceutical compounds, including upfront payments and potential milestones - The company entered into a collaboration and license agreement with Bayer on **May 4, 2023**, focusing on radiopharmaceutical compounds for two specified targets, with an option for a third target and non-radiopharmaceutical compounds[90](index=90&type=chunk)[92](index=92&type=chunk) - Bayer made an upfront payment of **$45.0 million** and is eligible for development and regulatory/first commercial sale milestones of up to **£534.9 million** across three target programs, plus tiered royalties on net sales[94](index=94&type=chunk)[95](index=95&type=chunk) - The transaction price of **$47.5 million** (upfront fee + estimated CRO reimbursement) was allocated to combined performance obligations (license + R&D services) and material rights for various options, with revenue recognized proportionally over service periods or upon option exercise/expiry[103](index=103&type=chunk)[104](index=104&type=chunk) [Novartis Collaboration Agreement](index=35&type=section&id=Novartis%20Collaboration%20Agreement) Outlines the collaboration with Novartis for research and discovery, including upfront fees and potential milestone payments - A collaboration and license agreement was signed with Novartis on **March 27, 2023**, for research and discovery activities on two targets, granting Novartis a non-exclusive research license and potential exclusive commercialization rights[106](index=106&type=chunk)[109](index=109&type=chunk) - Novartis paid a **$50.0 million** upfront fee and is eligible for development and regulatory/first commercial sale milestones of up to **$840.0 million**, tiered sales milestones up to **$800.0 million**, and tiered royalties on net sales[110](index=110&type=chunk) - The **$50.0 million** transaction price was allocated to combined performance obligations (license + R&D services) and material rights for various options, with revenue recognized proportionally over service periods or upon option exercise/expiry[117](index=117&type=chunk)[119](index=119&type=chunk) [Ionis Agreements](index=40&type=section&id=Ionis%20Agreements) Describes the collaboration with Ionis for oligonucleotide delivery, including upfront payments and revenue recognition - The Ionis Collaboration Agreement, following an evaluation and option agreement, grants Ionis an exclusive worldwide license for TfR1 Bicycles for oligonucleotide delivery, with the company performing initial research and discovery activities[121](index=121&type=chunk)[125](index=125&type=chunk)[126](index=126&type=chunk) - Ionis made an upfront payment of **$31.0 million** (plus a **$3.0 million** credit) and is eligible for IND acceptance payments, development/regulatory milestones up to a **low double-digit million dollars per target**, and tiered royalties on net sales[128](index=128&type=chunk) - The total transaction price of **$38.0 million** (including a **$3.4 million** premium from a share purchase) was allocated to combined licenses and research/discovery obligations and material rights for IND acceptance fee credits[134](index=134&type=chunk)[139](index=139&type=chunk)[141](index=141&type=chunk) - The company recognized **$2.8 million** and **$8.1 million** in revenue from Ionis for the three and nine months ended September 30, 2023, respectively[146](index=146&type=chunk) [Genentech Collaboration Agreement](index=48&type=section&id=Genentech%20Collaboration%20Agreement) Details the collaboration with Genentech for immuno-oncology targets, including payments and program termination impacts - The Genentech Collaboration Agreement focuses on discovering and developing Bicycle peptides for immuno-oncology targets, with Genentech having options for additional targets and development candidates[147](index=147&type=chunk)[148](index=148&type=chunk) - The company received a **$30.0 million** upfront payment and **$10.0 million** for each of two expansion options exercised by Genentech, with potential for development, regulatory, and sales milestones up to **$200.0 million per program**, plus tiered royalties[148](index=148&type=chunk)[154](index=154&type=chunk) - The initial transaction price of **$31.0 million** (later increased to **$33.0 million**) was allocated to research licenses, R&D services, and material rights for various options, with revenue recognized proportionally or upon option exercise/expiry[160](index=160&type=chunk)[161](index=161&type=chunk)[162](index=162&type=chunk) - Genentech terminated Collaboration Program 1 in **June 2023**, leading to **$6.0 million** in revenue recognition from the expiration of a material right[161](index=161&type=chunk) [AstraZeneca Collaboration Agreement](index=54&type=section&id=AstraZeneca%20Collaboration%20Agreement) Summarizes the collaboration with AstraZeneca, including target options, terminations, and deferred revenue recognition - The AstraZeneca Collaboration Agreement, initiated in **November 2016**, focused on multiple targets, with AstraZeneca exercising an option for four additional targets in **May 2018** for a **$5.0 million** option fee[165](index=165&type=chunk) - AstraZeneca terminated collaboration activities for the third, sixth, fifth, and fourth targets in **October 2020, August 2021, June 2022, and April 2023**, respectively, leading to recognition of associated deferred revenue[170](index=170&type=chunk) - As of September 30, 2023, there are **no remaining research programs** under the AstraZeneca Collaboration Agreement, and **no deferred revenue remains**[170](index=170&type=chunk)[171](index=171&type=chunk) [Summary of Contract Assets and Liabilities](index=57&type=section&id=Summary%20of%20Contract%20Assets%20and%20Liabilities) Presents an overview of deferred revenue balances and revenue recognition by type from collaboration agreements | Contract Liability | January 1, 2023 (in thousands) | Additions (in thousands) | Deductions (in thousands) | September 30, 2023 (in thousands) | | :----------------- | :----------------------------- | :----------------------- | :------------------------ | :-------------------------------- | | Deferred revenue | $61,873 | $95,870 | $(21,645) | $134,772 | - As of September 30, 2023, deferred revenue balances for Bayer, Novartis, Ionis, and Genentech include significant amounts allocated to material rights, which will be recognized upon option exercise or expiry[174](index=174&type=chunk) | Revenue Type | Three Months Ended Sep 30, 2023 (in thousands) | Nine Months Ended Sep 30, 2023 (in thousands) | | :------------------------------------ | :--------------------------------------------- | :-------------------------------------------- | | Revenue based on proportional performance | $5,006 | $13,829 | | Revenue based on expiration of material rights | $346 | $7,816 | | **Total** | **$5,352** | **$21,645** | [Cancer Research UK](index=59&type=section&id=Cancer%20Research%20UK) Details agreements with Cancer Research UK for clinical development of BT1718 and BT7401, including funding and liabilities - The company has agreements with Cancer Research UK (CRUK) for the clinical development of BT1718 and BT7401[177](index=177&type=chunk)[183](index=183&type=chunk) - CRUK sponsors and funds the Phase I/IIa clinical trial for BT1718, with the company retaining rights to obtain a license to trial results upon milestone payment[177](index=177&type=chunk)[179](index=179&type=chunk) - The company recorded a liability of **$4.1 million** as of September 30, 2023, for costs incurred by CRUK for BT1718, recognized as research and development expense[181](index=181&type=chunk) - CRUK also funds and sponsors the development of BT7401 through a Phase IIa trial, with potential future milestone payments up to **$60.3 million** and royalties[183](index=183&type=chunk)[184](index=184&type=chunk) [10. Income taxes](index=61&type=section&id=10.%20Income%20taxes) Explains the company's income tax provision, UK R&D tax credits, and deferred tax asset valuation allowances | Metric | Three Months Ended Sep 30, 2023 (in thousands) | Nine Months Ended Sep 30, 2023 (in thousands) | | :------------------------------------ | :--------------------------------------------- | :-------------------------------------------- | | Income tax provision (benefit) | $2,272 | $1,137 | - The company is subject to UK corporate taxation but has generated losses since inception, thus **not paying UK corporation tax**. The income tax provision primarily reflects the tax impact from US operating activities[186](index=186&type=chunk) - A change in estimate in **Q3 2023** concluded that certain US R&D expenses are not required to be capitalized under IRC Section 174, resulting in a **$2.4 million** income tax provision[189](index=189&type=chunk) - A full valuation allowance is maintained against UK deferred tax assets due to a history of cumulative net losses, while US deferred tax assets are expected to be realized[190](index=190&type=chunk)[191](index=191&type=chunk) [11. Commitments and contingencies](index=63&type=section&id=11.%20Commitments%20and%20contingencies) Outlines lease agreements for office and laboratory spaces and contingent future milestone payment obligations - The company has lease agreements for office and laboratory spaces in Cambridge, Massachusetts (**3-year term**) and Cambridge, UK (**5-year term**), and Lexington, Massachusetts (extended to **Dec 2027**)[193](index=193&type=chunk)[196](index=196&type=chunk)[198](index=198&type=chunk) | Lease Expense Component | Three Months Ended Sep 30, 2023 (in thousands) | Nine Months Ended Sep 30, 2023 (in thousands) | | :---------------------- | :--------------------------------------------- | :-------------------------------------------- | | Operating lease cost | $1,364 | $4,057 | | Variable lease cost | $566 | $2,017 | | **Total lease cost** | **$1,930** | **$6,074** | | Operating Lease Liabilities (in thousands) | | :--------------------------------------- | | Year Ending December 31, 2023: $1,394 | | Year Ending December 31, 2024: $5,654 | | Year Ending December 31, 2025: $5,740 | | Year Ending December 31, 2026: $3,271 | | Year Ending December 31, 2027: $821 | | Present value adjustment: $(1,796) | | **Total lease liabilities: $15,084** | | Less: current lease liabilities: $(4,661) | | **Long term lease liabilities: $10,423** | - The company has contingent future milestone payments totaling **$111.2 million** under CRUK arrangements and **$92.4 million** and **$1.3 million** under separate third-party agreements, which are not estimable in timing or likelihood[204](index=204&type=chunk) [12. Net loss per share](index=69&type=section&id=12.%20Net%20loss%20per%20share) Calculates basic and diluted net loss per share, considering weighted average ordinary shares outstanding | Metric | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2023 | | :------------------------------------ | :------------------------------ | :----------------------------- | | Net loss | $(49,898) | $(131,565) | | Weighted average ordinary shares outstanding | 39,576,467 | 33,291,701 | | **Net loss per share, basic and diluted** | **$(1.26)** | **$(3.95)** | - Potentially dilutive securities (options and RSUs) were excluded from diluted net loss per share calculation as their effect would be **anti-dilutive**[211](index=211&type=chunk) | Potentially Dilutive Securities | September 30, 2023 | | :------------------------------ | :----------------- | | Restricted ordinary shares | 335,104 | | Options to purchase ordinary shares | 7,312,020 | | **Total** | **7,647,124** | [13. Related party transactions](index=69&type=section&id=13.%20Related%20party%20transactions) Discloses transactions with related parties, including founder royalty agreements and consultancy services - The company has a Founder Royalty Agreement with its founders and initial investors, but **no royalties have been earned or paid to date**[206](index=206&type=chunk)[213](index=213&type=chunk) - Consultancy services were provided by an entity associated with the Chairman of the board, totaling **$49,000** for the three months and **$0.2 million** for the nine months ended September 30, 2023[213](index=213&type=chunk) [14. Geographic information](index=70&type=section&id=14.%20Geographic%20information) Provides a breakdown of property and equipment by geographic region and attribution of collaboration revenues | Geographic Region | September 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :---------------- | :-------------------------------- | :------------------------------- | | United States | $8,817 | $4,466 | | United Kingdom | $21,379 | $28,302 | | **Total** | **$30,196** | **$32,768** | - All collaboration revenues are attributed to the company's operations in the **United Kingdom**[215](index=215&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=71&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's perspective on financial condition, operations, and liquidity, comparing results for Q3 and YTD September 30, 2023 and 2022 [Overview](index=71&type=section&id=Overview) Introduces Bicycle Therapeutics as a clinical-stage biopharmaceutical company developing novel 'Bicycles' for oncology - Bicycle Therapeutics is a clinical-stage biopharmaceutical company developing 'Bicycles,' a novel class of medicines combining biologic pharmacology with small molecule properties, primarily for oncology indications[218](index=218&type=chunk) - The company utilizes a proprietary phage display screening platform to identify and optimize Bicycle candidates, including Bicycle® Toxin Conjugates (BTCs) like BT8009, BT5528, and BT1718, and Bicycle tumor-targeted immune cell agonists (Bicycle TICAs) like BT7480 and BT7455[219](index=219&type=chunk)[220](index=220&type=chunk) - BT8009 received **Fast Track Designation** from the FDA for metastatic urothelial cancer and has aligned with the FDA on a Phase II/III registrational trial (Duravelo-2) for potential accelerated approval[222](index=222&type=chunk)[224](index=224&type=chunk) [Financial Overview](index=73&type=section&id=Financial%20Overview) Summarizes funding sources, historical losses, and future capital requirements for advancing product candidates - The company has funded operations primarily through sales of shares, collaboration payments, and debt, receiving **$830.1 million** from share sales and **$233.1 million** from collaboration arrangements since inception through September 30, 2023[225](index=225&type=chunk) | Metric | Nine Months Ended Sep 30, 2023 (in millions) | | :----------------- | :------------------------------------------- | | Net losses | $(131.6) | | Accumulated deficit | $(462.7) | - Expenses and capital requirements are expected to increase substantially due to advancing preclinical activities and clinical trials, seeking marketing approvals, expanding intellectual property, and building commercial capabilities[227](index=227&type=chunk)[229](index=229&type=chunk) - As of September 30, 2023, cash and cash equivalents were **$572.1 million**, projected to fund operations for at least **12 months**, but substantial additional funding will be needed for continued operations and growth[231](index=231&type=chunk)[232](index=232&type=chunk) [Components of Our Results of Operations](index=75&type=section&id=Components%20of%20Our%20Results%20of%20Operations) Analyzes the key drivers of financial performance, including collaboration revenues and various expense categories [Collaboration Revenues](index=75&type=section&id=Collaboration%20Revenues) Discusses the sources and expected fluctuations of revenue from collaboration agreements, including upfront and milestone payments - Revenue primarily consists of collaboration revenue from upfront payments, milestone payments, option exercise payments, and research and development services[233](index=233&type=chunk) - Future revenue is expected to fluctuate based on the timing and amount of license, R&D services, milestone, and other payments, with potential for royalties on net product sales[234](index=234&type=chunk)[235](index=235&type=chunk) [Research and Development Expenses](index=77&type=section&id=Research%20and%20Development%20Expenses) Details the components of R&D expenses, accounting treatment, and expected increases due to pipeline expansion - R&D expenses include employee-related costs, third-party research and development services, consultants, lab supplies, and regulatory compliance costs[236](index=236&type=chunk) - R&D costs are expensed as incurred, with UK R&D tax credits and government grants recorded as an offset to these expenses[237](index=237&type=chunk) - The company expects R&D expenses to continue increasing due to expanded product candidate portfolio, clinical development, and building in-house capabilities[242](index=242&type=chunk) - The successful development of product candidates is highly uncertain, with numerous risks including clinical trial completion, regulatory approvals, and commercialization[243](index=243&type=chunk)[244](index=244&type=chunk)[245](index=245&type=chunk) [General and Administrative Expenses](index=81&type=section&id=General%20and%20Administrative%20Expenses) Covers G&A costs, including personnel, professional fees, and facility expenses, and expected increases - G&A expenses primarily cover salaries, share-based compensation for executive, finance, and administrative functions, along with professional fees, insurance, and facility-related costs[246](index=246&type=chunk) - Foreign currency transaction differences are recorded in G&A expense, and these expenses are expected to increase with growing headcount and public company compliance costs[247](index=247&type=chunk)[248](index=248&type=chunk) [Other Income (Expense), net](index=82&type=section&id=Other%20Income%20%28Expense%29%2C%20net) Explains interest income from cash equivalents and interest expense from the Hercules loan agreement - Interest income is primarily derived from cash held in operating accounts and cash equivalents[249](index=249&type=chunk) - Interest expense is mainly from the **$30.0 million** borrowings outstanding under the Loan Agreement with Hercules[249](index=249&type=chunk) [Provision For (Benefit From) Income Taxes](index=82&type=section&id=Provision%20For%20%28Benefit%20From%29%20Income%20Taxes) Discusses income tax provisions, UK R&D tax credits, and potential impacts of legislative changes - The company is subject to corporate taxation in the US and UK, with the provision for income taxes reflecting US operating activities and UK R&D tax credits reducing R&D expenses[250](index=250&type=chunk)[251](index=251&type=chunk) - The company benefits from UK R&D tax credit programs (SME and RDEC), which provide cash rebates for qualifying expenditures, with rates changing after **April 1, 2023**[252](index=252&type=chunk)[253](index=253&type=chunk) - Proposed UK government legislation may introduce restrictions on tax relief for sub-contracted R&D activities and potentially merge the SME and RDEC programs, impacting future claims[254](index=254&type=chunk)[255](index=255&type=chunk) [Results of Operations](index=84&type=section&id=Results%20of%20Operations) Compares the company's financial performance across key metrics for the current and prior reporting periods [Comparison of the Three Months Ended September 30, 2023 and 2022](index=84&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20September%2030%2C%202023%20and%202022) Analyzes changes in collaboration revenues, R&D, G&A expenses, and net loss for the three-month period | Metric | 3 Months Ended Sep 30, 2023 (in thousands) | 3 Months Ended Sep 30, 2022 (in thousands) | Change (in thousands) | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :-------------------- | | Collaboration revenues | $5,352 | $3,040 | +$2,312 | | Research and development expenses | $39,868 | $22,752 | +$17,116 | | General and administrative expenses | $16,281 | $10,047 | +$6,234 | | Loss from operations | $(50,797) | $(29,759) | -$(21,038) | | Interest income | $3,985 | $1,991 | +$1,994 | | Net loss | $(49,898) | $(28,347) | -$(21,551) | - Collaboration revenues increased by **$2.3 million**, driven by new collaborations with Novartis and Bayer, and increases from Ionis and Genentech[260](index=260&type=chunk) - R&D expenses rose by **$17.1 million**, primarily due to increased direct program spend for BT8009 and Bicycle TICA programs, higher employee costs, and a decrease in UK R&D tax credit reimbursement rate[262](index=262&type=chunk) - G&A expenses increased by **$6.2 million**, mainly from higher professional/consulting fees, personnel costs, share-based compensation, and an unfavorable foreign exchange impact[264](index=264&type=chunk)[266](index=266&type=chunk) [Comparison of the Nine Months Ended September 30, 2023 and 2022](index=87&type=section&id=Comparison%20of%20the%20Nine%20Months%20Ended%20September%2030%2C%202023%20and%202022) Analyzes changes in collaboration revenues, R&D, G&A expenses, and net loss for the nine-month period | Metric | 9 Months Ended Sep 30, 2023 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | Change (in thousands) | | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :-------------------- | | Collaboration revenues | $21,645 | $11,278 | +$10,367 | | Research and development expenses | $111,799 | $56,890 | +$54,909 | | General and administrative expenses | $45,557 | $38,830 | +$6,727 | | Loss from operations | $(135,711) | $(84,442) | -$(51,269) | | Interest income | $7,726 | $3,117 | +$4,609 | | Net loss | $(131,565) | $(82,739) | -$(48,826) | - Collaboration revenues increased by **$10.4 million**, primarily due to **$6.0 million** from Genentech (material right expiration), increased proportional performance revenue from Ionis, and new collaborations with Novartis and Bayer[270](index=270&type=chunk) - R&D expenses increased by **$54.9 million**, driven by higher clinical program expenses for BT8009 and Bicycle TICAs, increased employee costs, and higher facilities-related expenses, partially offset by incremental R&D incentives[272](index=272&type=chunk) - G&A expenses rose by **$6.7 million**, mainly due to increased personnel-related costs and professional/consulting fees, partially offset by a decrease in share-based compensation[273](index=273&type=chunk) [Liquidity and Capital Resources](index=91&type=section&id=Liquidity%20and%20Capital%20Resources) Examines the company's ability to meet short-term obligations and its sources of funding for future operations [Liquidity](index=91&type=section&id=Liquidity) Discusses the company's historical funding, current cash position, and projected operational runway - The company has incurred significant operating losses and negative cash flows since inception, with **no product sales revenue to date**[275](index=275&type=chunk) - Operations are financed through share sales, collaboration payments, and debt, including **$215.1 million** net from a **July 2023 public offering** and **$34.2 million** net from an ATM program during the nine months ended September 30, 2023[275](index=275&type=chunk)[276](index=276&type=chunk)[277](index=277&type=chunk) - As of September 30, 2023, the company had **$572.1 million** in cash and cash equivalents, expected to fund operations for at least **12 months**[291](index=291&type=chunk) [Cash Flows](index=92&type=section&id=Cash%20Flows) Analyzes cash movements from operating, investing, and financing activities for the nine-month period | Cash Flow Activity | Nine Months Ended Sep 30, 2023 (in thousands) | Nine Months Ended Sep 30, 2022 (in thousands) | | :------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | | Net cash used in operating activities | $(13,340) | $(55,802) | | Net cash used in investing activities | $(2,878) | $(17,539) | | Net cash provided by financing activities | $249,641 | $804 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $233,480 | $(77,211) | - The decrease in cash used in operating activities by **$42.5 million** was primarily due to increased cash flows from changes in operating assets and liabilities, driven by deferred revenue from new collaboration agreements[280](index=280&type=chunk) - Net cash provided by financing activities significantly increased to **$249.6 million**, mainly from the **July 2023 public offering** and ATM program[282](index=282&type=chunk) [Loan Agreement with Hercules](index=92&type=section&id=Loan%20Agreement%20with%20Hercules) Details the terms of the outstanding loan, interest rates, and collateral arrangements with Hercules Capital - The company has **$30.0 million** outstanding under a loan agreement with Hercules, with potential for an additional **$45.0 million** in term loans available through **December 31, 2024**[282](index=282&type=chunk) - The loan bears interest at the Wall Street Journal prime rate plus **4.55%**, with a minimum of **8.05%** and a cap of **9.05%**, and an interest-only period ending **April 1, 2025**[282](index=282&type=chunk) - The agreement includes a **5.0% end of term charge** and is collateralized by substantially all personal property and assets, excluding intellectual property[284](index=284&type=chunk) [Capital Resources and Funding Requirements](index=94&type=section&id=Capital%20Resources%20and%20Funding%20Requirements) Outlines future cash needs, financing strategies, and risks associated with funding availability and economic conditions - Future cash requirements include advancing preclinical and clinical trials, developing new product candidates, seeking marketing approvals, expanding intellectual property, and building commercial infrastructure[285](index=285&type=chunk) | Contractual Obligation | Total (in thousands) | Less than 1 year (in thousands) | 1 to 3 years (in thousands) | 3 to 5 years (in thousands) | | :--------------------- | :------------------- | :------------------------------ | :-------------------------- | :-------------------------- | | Operating lease commitments | $16,880 | $5,633 | $10,228 | $1,019 | | Debt obligations | $35,978 | $2,534 | $33,444 | $0 | | **Total** | **$52,858** | **$8,167** | **$43,672** | **$1,019** | - The company expects to finance future cash needs through equity offerings, debt financings, collaborations, and other strategic transactions, with risks of dilution and unfavorable terms[295](index=295&type=chunk) - Global economic conditions, including high inflation and rising interest rates, pose risks to funding availability and operating costs, potentially impacting the company's ability to raise capital or continue operations[296](index=296&type=chunk)[299](index=299&type=chunk) [Item 3. Quantitative and Qualitative Disclosure About Market Risk](index=99&type=section&id=Item%203.%2E%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk) This section discusses the company's exposure to market risks, specifically interest rate sensitivity on its cash and debt, and foreign currency exchange risk due to international operations [Interest Rate Sensitivity](index=99&type=section&id=Interest%20Rate%20Sensitivity) Assesses the impact of interest rate changes on the company's cash, cash equivalents, and variable-rate debt - As of September 30, 2023, the company held **$572.1 million** in cash and cash equivalents, primarily in interest-bearing savings accounts, 30-day term deposits, and money market funds[302](index=302&type=chunk) - The company's **$30.0 million** borrowings under the Hercules credit facility bear interest at a variable rate (prime rate + **4.55%**, capped at **9.05%**), currently at **9.05%**[303](index=303&type=chunk) - An immediate **one percentage point change** in interest rates is not expected to materially affect the fair value of the investment portfolio or the company's financial condition or results of operations[302](index=302&type=chunk)[303](index=303&type=chunk) [Foreign Currency Exchange Risk](index=99&type=section&id=Foreign%20Currency%20Exchange%20Risk) Discusses exposure to currency fluctuations, particularly between GBP and USD, and the lack of hedging activities - The functional currency for Bicycle Therapeutics plc and Bicycle Therapeutics Inc. is **USD**, while for BicycleTx Limited and BicycleRD Limited it is **British Pound Sterling**[304](index=304&type=chunk)[306](index=306&type=chunk) - Monetary assets and liabilities in non-functional currencies are remeasured, and exchange gains/losses are included in net loss; foreign exchange losses of **$0.7 million** and **$0.8 million** were recorded for the three and nine months ended September 30, 2023, respectively[307](index=307&type=chunk) - The company does not currently engage in currency hedging activities, making it susceptible to fluctuations in exchange rates, particularly between the **pound sterling and the U.S. dollar**[308](index=308&type=chunk) [Item 4. Controls and Procedures](index=101&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details management's evaluation of the company's disclosure controls and procedures and reports on any changes in internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=101&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Reports on the effectiveness of the company's disclosure controls and procedures as evaluated by management - As of September 30, 2023, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were **effective at the reasonable assurance level**[309](index=309&type=chunk) [Changes in Internal Control over Financial Reporting](index=101&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting%2E) Confirms no material changes in internal control over financial reporting during the reporting period - There were **no changes** in internal control over financial reporting during the quarter ended September 30, 2023, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[310](index=310&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=101&type=section&id=Item%201.%20Legal%20Proceedings%2E) This section confirms that the company is not currently involved in any material legal proceedings or claims - The company is **not currently subject to any material legal proceedings or claims** arising in the ordinary course of business[311](index=311&type=chunk) [Item 1A. Risk Factors](index=103&type=section&id=Item%201A.%20Risk%20Factors%2E) Outlines various risks impacting business, financial condition, and growth, covering finance, product development, commercialization, and operations - The company has a history of significant operating losses and expects increasing losses, requiring substantial additional funding, which may dilute existing shareholders or restrict operations[313](index=313&type=chunk)[326](index=326&type=chunk)[337](index=337&type=chunk) - Success is heavily dependent on internal development programs (BTC and Bicycle TICA), which are in early stages and face high risks of failure in clinical trials, regulatory approval, and commercialization[314](index=314&type=chunk)[352](index=352&type=chunk)[358](index=358&type=chunk)[361](index=361&type=chunk) - Commercialization success is uncertain, depending on market acceptance, insurance coverage, reimbursement, and intense competition from companies with greater resources[320](index=320&type=chunk)[321](index=321&type=chunk)[438](index=438&type=chunk)[445](index=445&type=chunk) [Summary of Selected Risk Factors](index=103&type=section&id=Summary%20of%20Selected%20Risk%20Factors) Highlights key risks including operating losses, funding needs, product development challenges, and market uncertainties - Key risks include significant operating losses, need for substantial additional funding, dependence on product candidate success, early development stage of medicines, difficulties in patient enrollment, and unpredictability of preclinical/early clinical trial results[313](index=313&type=chunk)[314](index=314&type=chunk)[315](index=315&type=chunk) - Other risks involve potential undesirable side effects, delays in identifying new product candidates, limited market opportunities, ongoing regulatory obligations, intense competition, and uncertainty of insurance coverage and reimbursement[316](index=316&type=chunk)[318](index=318&type=chunk)[319](index=319&type=chunk)[320](index=320&type=chunk)[321](index=321&type=chunk) [Risks Related to Our Financial Position and Need for Additional Capital](index=107&type=section&id=Risks%20Related%20to%20Our%20Financial%20Position%20and%20Need%20for%20Additional%20Capital) Addresses risks associated with historical losses, future funding requirements, potential dilution, and debt compliance - The company has a history of significant operating losses, with a net loss of **$131.6 million** for the nine months ended September 30, 2023, and an accumulated deficit of **$462.7 million**[327](index=327&type=chunk) - Substantial additional funding will be required to advance product candidates, seek marketing approvals, expand intellectual property, and build commercial infrastructure, with **no assurance of availability on favorable terms**[338](index=338&type=chunk)[339](index=339&type=chunk) - Raising additional capital may lead to **dilution for existing shareholders**, restrictive covenants from debt financing, or relinquishing valuable rights through collaborations[345](index=345&type=chunk) - Failure to comply with covenants or payment obligations under the Hercules term loan facility could result in **default, increased interest, or acceleration of repayment**, negatively impacting financial condition[346](index=346&type=chunk)[349](index=349&type=chunk) [Risks Related to the Discovery, Development and Regulatory Approval of Our Product Candidates](index=115&type=section&id=Risks%20Related%20to%20the%20Discovery%2C%20Development%20and%20Regulatory%20Approval%20of%20Our%20Product%20Candidates) Covers risks in product candidate development, clinical trials, regulatory scrutiny, patient enrollment, and potential side effects - The company's future success is heavily dependent on its BTC and Bicycle TICA programs, which may not successfully complete clinical trials, receive regulatory approval, or be commercialized[352](index=352&type=chunk)[354](index=354&type=chunk) - Product candidates represent a new category of medicines (Bicycles) and may face **heightened regulatory scrutiny**, potentially leading to increased costs or delays in development[358](index=358&type=chunk)[359](index=359&type=chunk)[360](index=360&type=chunk) - Difficulties in patient enrollment for clinical trials, especially for rare diseases, could **delay or prevent the advancement of product candidates**, increasing costs and potentially leading to trial termination[370](index=370&type=chunk)[371](index=371&type=chunk)[372](index=372&type=chunk) - Preclinical and early clinical trial results may not predict future success, and product candidates may cause **undesirable side effects**, leading to halted development, denied marketing approval, or significant negative consequences[375](index=375&type=chunk)[376](index=376&type=chunk)[383](index=383&type=chunk)[384](index=384&type=chunk) [Risks Related to Commercialization of Our Product Candidates and Other Regulatory Compliance Matters](index=137&type=section&id=Risks%20Related%20to%20Commercialization%20of%20Our%20Product%20Candidates%20and%20Other%20Regulatory%20Compliance%20Matters) Examines challenges in marketing approval, sales infrastructure, market opportunities, reimbursement, and healthcare regulations - The marketing approval process is expensive, time-consuming, and uncertain, with **no guarantee of timely approval or commercially viable terms**, potentially limiting revenue generation[417](index=417&type=chunk)[421](index=421&type=chunk)[423](index=423&type=chunk) - The company lacks internal marketing, sales, and distribution infrastructure, and building or outsourcing these capabilities is costly and risky, potentially hindering commercialization success[424](index=424&type=chunk)[425](index=425&type=chunk)[426](index=426&type=chunk)[428](index=428&type=chunk)[429](index=429&type=chunk) - Market opportunities for product candidates may be limited to specific patient populations or indications, potentially restricting profitability without approval for broader uses[430](index=430&type=chunk)[431](index=431&type=chunk)[432](index=432&type=chunk) - Failure to obtain or maintain adequate insurance coverage and reimbursement for approved products could limit market access and revenue, especially given the substantial cost of new treatments[453](index=453&type=chunk)[454](index=454&type=chunk)[456](index=456&type=chunk) - The company is subject to stringent healthcare fraud and abuse laws, privacy laws, and other regulations, with non-compliance potentially leading to **substantial penalties and reputational harm**[466](index=466&type=chunk)[468](index=468&type=chunk)[472](index=472&type=chunk) [Risks Related to Our Business and Our International Operations](index=165&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Our%20International%20Operations) Addresses risks from international operations, cybersecurity threats, IT system failures, and social media impacts - As a UK-based company with international operations, the business is exposed to economic, political, and regulatory risks, including differing regulatory requirements, intellectual property protection, and currency exchange rate fluctuations[509](index=509&type=chunk)[510](index=510&type=chunk)[525](index=525&type=chunk) - Cyber-attacks, failures in IT systems, and deficiencies in cybersecurity (internal or third-party) pose risks of information theft, data corruption, and significant business disruption, especially with increased remote work and reliance on third-party providers[513](index=513&type=chunk)[514](index=514&type=chunk)[517](index=517&type=chunk)[518](index=518&type=chunk) - Social media and AI-based platforms present new risks, including inappropriate disclosure of sensitive information, negative publicity, and potential release of proprietary information, which could harm reputation and intellectual property[523](index=523&type=chunk)[524](index=524&type=chunk) [Risks Related to Our Dependence on Third Parties](index=171&type=section&id=Risks%20Related%20to%20Our%20Dependence%20on%20Third%20Parties) Highlights risks from reliance on collaborators, CROs, manufacturers, and the protection of shared trade secrets - The company relies heavily on development and commercialization collaborators (e.g., Genentech, Ionis, Novartis, Bayer, Cancer Research UK) to develop, conduct clinical trials, and commercialize product candidates[526](index=526&type=chunk)[527](index=527&type=chunk)[529](index=529&type=chunk) - Collaborator failures to perform as expected, fulfill responsibilities, or devote sufficient resources could significantly reduce future revenue and delay or terminate product development[529](index=529&type=chunk)[530](index=530&type=chunk) - Reliance on third-party CROs and manufacturers for clinical trials and product supply increases risks of delays, insufficient quantities, quality issues, and non-compliance with cGMP requirements[539](index=539&type=chunk)[541](index=541&type=chunk)[546](index=546&type=chunk)[548](index=548&type=chunk)[553](index=553&type=chunk) - Sharing trade secrets with third parties for manufacturing and collaborations increases the risk of discovery by competitors or misappropriation, potentially impairing the company's competitive position[556](index=556&type=chunk)[557](index=557&type=chunk)[558](index=558&type=chunk)[560](index=560&type=chunk) [Risks Related to Our Intellectual Property](index=183&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) Discusses challenges in obtaining and maintaining patent protection, trade secret risks, and potential infringement lawsuits - Inability to obtain and maintain broad patent and intellectual property protection could allow competitors to develop similar products, adversely affecting commercialization efforts[561](index=561&type=chunk)[563](index=563&type=chunk) - Issued patents may be found invalid or unenforceable if challenged, and trade secrets are difficult to protect, risking loss of competitive advantage[570](index=570&type=chunk)[575](index=575&type=chunk)[576](index=576&type=chunk) - Patent term extensions and data exclusivity for products may be limited, potentially opening the door to generic competition sooner than expected[582](index=582&type=chunk)[583](index=583&type=chunk)[584](index=584&type=chunk) - Infringement lawsuits

[Special Note Regarding Forward-Looking Statements](index=4&type=section&id=SPECIAL%20NOTE%20REGARDING%20FORWARD%20LOOKING%20STATEMENTS) This section details the company's forward-looking statements, emphasizing their inherent risks and uncertainties and the company's limited obligation to update them [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This quarterly report contains numerous forward-looking statements regarding the company's future business development, including clinical trials, product candidates, regulatory approvals, commercialization, intellectual property, financial condition, and market acceptance - Forward-looking statements cover various aspects of the company's business, including the initiation, timing, progress, and results of clinical trials, the ability to advance product candidates, reliance on pipeline programs such as Bicycle® Toxin Conjugate (BTCTM) and Bicycle tumor-targeted immune cell agonist® (Bicycle TICATM), and the ability to use screening platforms to identify and advance additional product candidates[8](index=8&type=chunk) - Other forward-looking statements relate to the timing or likelihood of regulatory filings and approvals, commercialization of product candidates, development of sales and marketing capabilities, pricing, coverage, and reimbursement of product candidates, implementation of business models, scope of intellectual property protection, and the ability to operate without infringing third-party intellectual property[8](index=8&type=chunk) - The company explicitly states that despite reasonable grounds, these statements are based on estimates and projections, and actual results may differ materially due to risks, uncertainties, and other important factors described in the "Risk Factors" section. The company undertakes no obligation to publicly update these forward-looking statements unless required by applicable law[10](index=10&type=chunk)[11](index=11&type=chunk) [PART I - FINANCIAL INFORMATION](index=7&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section presents the company's condensed consolidated financial statements and management's discussion and analysis of financial condition, operating results, market risks, and controls [Item 1. Financial Statements](index=7&type=section&id=Item%201.%20Financial%20Statements.) This section presents the company's unaudited condensed consolidated financial statements, including balance sheets, statements of operations and comprehensive loss, statements of shareholders' equity, and statements of cash flows, along with related notes [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2023, the company's total assets increased to **$454,170 thousand**, primarily driven by increases in cash and cash equivalents and accounts receivable, while total liabilities also significantly rose, mainly due to deferred revenue (non-current portion), and shareholders' equity decreased Condensed Consolidated Balance Sheets | Indicator | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :----------------------------------- | :---------------------- | :---------------------- | | **Assets** | | | | Cash and cash equivalents | 340,433 | 339,154 | | Accounts receivable | 45,090 | 2,045 | | Prepaid expenses and other current assets | 10,023 | 9,022 | | R&D incentive receivables | 12,884 | 19,162 | | **Total current assets** | **408,430** | **369,383** | | Property and equipment, net | 17,572 | 19,110 | | Operating lease right-of-use assets | 16,022 | 13,658 | | Other assets | 12,146 | 8,458 | | **Total assets** | **454,170** | **410,609** | | **Liabilities and Shareholders' Equity** | | | | Accounts payable | 5,250 | 6,472 | | Accrued expenses and other current liabilities | 37,262 | 26,452 | | Deferred revenue, current portion | 29,754 | 20,418 | | **Total current liabilities** | **72,266** | **53,342** | | Long-term debt, net of discount | 30,513 | 30,315 | | Operating lease liabilities, net of current portion | 11,881 | 10,885 | | Deferred revenue, net of current portion | 115,083 | 41,455 | | Other long-term liabilities | 4,330 | 3,829 | | **Total liabilities** | **234,073** | **139,826** | | **Shareholders' Equity** | | | | Ordinary shares | 396 | 387 | | Additional paid-in capital | 633,341 | 601,105 | | Accumulated other comprehensive (loss) income | (877) | 387 | | Accumulated deficit | (412,763) | (331,096) | | **Total shareholders' equity** | **220,097** | **270,783** | | **Total liabilities and shareholders' equity** | **454,170** | **410,609** | - As of June 30, 2023, cash and cash equivalents were **$340,433 thousand**, a slight increase from **$339,154 thousand** as of December 31, 2022[14](index=14&type=chunk) - Accounts receivable significantly increased from **$2,045 thousand** as of December 31, 2022, to **$45,090 thousand** as of June 30, 2023[14](index=14&type=chunk) - Deferred revenue (non-current portion) increased from **$41,455 thousand** as of December 31, 2022, to **$115,083 thousand** as of June 30, 2023, being a primary driver of the increase in total liabilities[14](index=14&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) For the three and six months ended June 30, 2023, the company experienced significant growth in collaboration revenue, but net loss expanded due to substantial increases in research and development and general and administrative expenses, partially offset by higher interest income Condensed Consolidated Statements of Operations and Comprehensive Loss | Indicator (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :----------------------------------- | :---------------------- | :---------------------- | :---------------------- | :---------------------- | | Collaboration revenue | 11,397 | 4,378 | 16,293 | 8,238 | | Research and development expenses | 39,720 | 19,854 | 71,931 | 34,138 | | General and administrative expenses | 14,788 | 11,824 | 29,276 | 28,783 | | **Total operating expenses** | **54,508** | **31,678** | **101,207** | **62,921** | | Operating loss | (43,111) | (27,300) | (84,914) | (54,683) | | Interest income | 812 | 908 | 3,741 | 1,126 | | Interest expense | (821) | (883) | (1,629) | (1,701) | | **Net loss** | **(42,603)** | **(26,828)** | **(81,667)** | **(54,392)** | | Net loss per share (basic and diluted) | (1.41) | (0.90) | (2.71) | (1.84) | | Weighted-average ordinary shares (basic and diluted) | 30,191,693 | 29,648,564 | 30,097,234 | 29,626,974 | - For the three months ended June 30, 2023, collaboration revenue increased by **$7,019 thousand** to **$11,397 thousand** from **$4,378 thousand** in the same period of 2022[15](index=15&type=chunk)[259](index=259&type=chunk)[260](index=260&type=chunk) - For the six months ended June 30, 2023, research and development expenses increased by **$37,793 thousand** to **$71,931 thousand** from **$34,138 thousand** in the same period of 2022[15](index=15&type=chunk)[269](index=269&type=chunk)[273](index=273&type=chunk) - For the six months ended June 30, 2023, net loss increased to **$81,667 thousand** from **$54,392 thousand** in the same period of 2022[15](index=15&type=chunk)[269](index=269&type=chunk) [Condensed Consolidated Statements of Shareholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) As of June 30, 2023, total shareholders' equity was **$220,097 thousand**, a decrease from **$270,783 thousand** as of December 31, 2022, primarily due to net loss and foreign currency translation adjustments during the reporting period, partially offset by an increase in additional paid-in capital Condensed Consolidated Statements of Shareholders' Equity | Indicator (in thousands) | December 31, 2022 | June 30, 2023 | | :----------------------------------- | :------------- | :------------- | | Number of ordinary shares | 29,873,893 | 30,585,940 | | Amount of ordinary shares | 387 | 396 | | Additional paid-in capital | 601,105 | 633,341 | | Accumulated other comprehensive (loss) income | 387 | (877) | | Accumulated deficit | (331,096) | (412,763) | | **Total shareholders' equity** | **270,783** | **220,097** | - As of June 30, 2023, the number of ordinary shares increased to **30,585,940** and the amount to **$396 thousand**[19](index=19&type=chunk) - Additional paid-in capital increased from **$601,105 thousand** as of December 31, 2022, to **$633,341 thousand** as of June 30, 2023, primarily due to ADS issuance and share-based compensation expenses[19](index=19&type=chunk) - Accumulated deficit increased from **($331,096 thousand)** as of December 31, 2022, to **($412,763 thousand)** as of June 30, 2023, reflecting the net loss during the reporting period[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2023, net cash outflow from operating activities significantly decreased, primarily due to changes in accounts receivable and R&D incentive receivables, while net cash outflow from investing activities also decreased, and net cash inflow from financing activities substantially increased, mainly from ADS issuance Condensed Consolidated Statements of Cash Flows | Indicator (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :----------------------------------- | :---------------------- | :---------------------- | | Net cash outflow from operating activities | (12,315) | (49,931) | | Net cash outflow from investing activities | (2,376) | (14,555) | | Net cash inflow from financing activities | 15,010 | 645 | | Effect of exchange rate changes on cash and cash equivalents | 960 | (2,070) | | **Net increase (decrease) in cash and cash equivalents** | **1,279** | **(65,911)** | | Cash and cash equivalents at beginning of period | 339,154 | 438,680 | | **Cash and cash equivalents at end of period** | **340,433** | **372,769** | - For the six months ended June 30, 2023, net cash outflow from operating activities was **$12,315 thousand**, a significant decrease from **$49,931 thousand** in the same period of 2022, primarily due to changes in accounts receivable and R&D incentive receivables[22](index=22&type=chunk)[278](index=278&type=chunk)[279](index=279&type=chunk) - Net cash outflow from investing activities decreased from **$14,555 thousand** in the same period of 2022 to **$2,376 thousand** in the same period of 2023, mainly due to reduced purchases of property and equipment[22](index=22&type=chunk)[279](index=279&type=chunk)[280](index=280&type=chunk) - Net cash inflow from financing activities increased from **$645 thousand** in the same period of 2022 to **$15,010 thousand** in the same period of 2023, primarily driven by net proceeds from ADS issuance under the ATM program[22](index=22&type=chunk)[279](index=279&type=chunk)[280](index=280&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes to the condensed consolidated financial statements, covering key financial information such as the nature of business, accounting policies, liquidity, fair value measurements, balance sheet item details, long-term debt, equity, share-based compensation, significant collaboration agreements, income taxes, commitments and contingencies, net loss per share, related party transactions, geographic information, and subsequent events [1. Nature of the business and basis of presentation](index=11&type=section&id=1.%20Nature%20of%20the%20business%20and%20basis%20of%20presentation) The company is a clinical-stage biopharmaceutical company focused on developing novel Bicycle drugs, primarily for oncology indications, and has incurred continuous losses since inception, with an accumulated deficit of **$412.8 million** as of June 30, 2023, but expects existing cash to support operations for at least the next 12 months - The company focuses on developing Bicycle drugs, a novel therapeutic modality combining the pharmacology of biologics with the manufacturing and pharmacokinetic properties of small molecules, with primary internal programs concentrated in oncology indications[26](index=26&type=chunk) - As of June 30, 2023, the company had **$340.4 million** in cash and cash equivalents, which is expected to be sufficient to fund operating expenses and capital expenditure requirements for at least the next 12 months[28](index=28&type=chunk)[29](index=29&type=chunk) Net Loss | Period | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :------------------- | :------------------- | :------------------- | :------------------- | | Net loss (in millions) | 42.6 | 26.8 | 81.7 | 54.4 | - As of June 30, 2023, the company had an accumulated deficit of **$412.8 million** and expects to continue to incur operating losses for the foreseeable future[29](index=29&type=chunk) [2. Summary of significant accounting policies](index=12&type=section&id=2.%20Summary%20of%20significant%20accounting%20policies) This section outlines the company's accounting policies, which have not materially changed since the 2022 annual report, emphasizing management's estimates and assumptions in financial statement preparation and the potential impact of current economic uncertainties on operations, while also disclosing accounts receivable accounting and the absence of significant new accounting standard adoptions - The company's significant accounting policies have not changed since its 2022 annual report, but deferred income tax benefit in the condensed consolidated statements of cash flows was reclassified to conform to current presentation[27](index=27&type=chunk)[32](index=32&type=chunk) - The preparation of financial statements requires management to make estimates and assumptions, primarily involving research and development expenses, revenue recognition, share-based compensation expense, valuation of right-of-use assets and liabilities, and income taxes (including valuation allowance for deferred tax assets)[33](index=33&type=chunk) - The company currently faces economic uncertainties, including global health crises, monetary and fiscal policies, bank failures, geopolitical instability, inflation, rising interest rates, and foreign currency fluctuations, and continuously monitors their potential impact on its business[34](index=34&type=chunk) - Accounts receivable primarily arise from collaboration agreements, and the company estimates credit losses based on its judgment of collectability and review of all significant outstanding invoices; as of June 30, 2023, accounts receivable primarily stemmed from the Bayer Consumer Care AG collaboration agreement, with no write-offs or credit loss provisions recorded[39](index=39&type=chunk) [3. Fair value of financial assets and liabilities](index=14&type=section&id=3.%20Fair%20value%20of%20financial%20assets%20and%20liabilities) This section describes the fair value measurement of the company's financial assets and liabilities, categorized by fair value hierarchy, noting that most short-term assets and liabilities have book values approximating their fair values, and long-term debt fair value is determined using unobservable Level 3 inputs, with no recurring fair value measurements at the reporting period end - Financial assets and liabilities are categorized into three levels based on the fair value hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[41](index=41&type=chunk) - The carrying amounts of cash and cash equivalents, accounts receivable, R&D incentive receivables, prepaid expenses and other current assets, accounts payable, and accrued expenses and other current liabilities approximate their fair values due to their short-term nature[42](index=42&type=chunk) - As of June 30, 2023, and December 31, 2022, the carrying value of long-term debt approximated its fair value, which was determined using unobservable Level 3 inputs, including quoted interest rates from lenders with similar terms[42](index=42&type=chunk) Cash Equivalents Composition | Period | Cash Equivalents (in thousands) | | :--- | :------------------ | | June 30, 2023 | 3,800 | | December 31, 2022 | 276,100 | [4. Property and equipment, net](index=16&type=section&id=4.%20Property%20and%20equipment,%20net) As of June 30, 2023, the company's property and equipment, net, was **$17,572 thousand**, a decrease from **$19,110 thousand** as of December 31, 2022, with laboratory equipment and leasehold improvements being major components, and depreciation expense significantly increasing during the reporting period Property and Equipment, Net | Category (in thousands) | June 30, 2023 | December 31, 2022 | | :------------------- | :------------- | :------------- | | Laboratory equipment | 15,763 | 14,872 | | Leasehold improvements | 10,917 | 10,736 | | Computer equipment and software | 484 | 441 | | Furniture and office equipment | 850 | 924 | | **Total** | **28,014** | **26,973** | | Less: Accumulated depreciation and amortization | (10,442) | (7,863) | | **Property and equipment, net** | **17,572** | **19,110** | - As of June 30, 2023, approximately **$0.4 million** of laboratory equipment was not yet in use, compared to **$2.3 million** as of December 31, 2022[47](index=47&type=chunk) Depreciation Expense | Period | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :------------------- | :------------------- | :------------------- | :------------------- | | Depreciation expense (in millions) | 1.6 | 0.6 | 3.2 | 1.0 | [5. Accrued expenses and other current liabilities](index=16&type=section&id=5.%20Accrued%20expenses%20and%20other%20current%20liabilities) As of June 30, 2023, the company's total accrued expenses and other current liabilities were **$37,262 thousand**, a significant increase from **$26,452 thousand** as of December 31, 2022, primarily driven by increases in accrued external research and development expenses and the current portion of operating lease liabilities Accrued Expenses and Other Current Liabilities | Category (in thousands) | June 30, 2023 | December 31, 2022 | | :----------------------- | :------------- | :------------- | | Accrued employee compensation and benefits | 7,131 | 9,928 | | Accrued external R&D expenses | 20,629 | 10,859 | | Accrued professional fees | 1,911 | 1,068 | | Current portion of operating lease liabilities | 4,680 | 3,125 | | Accrued income taxes | 1,906 | 970 | | Other | 1,005 | 502 | | **Total** | **37,262** | **26,452** | - Accrued external R&D expenses increased from **$10,859 thousand** as of December 31, 2022, to **$20,629 thousand** as of June 30, 2023, being the main factor in the growth of total accrued expenses[49](index=49&type=chunk) - The current portion of operating lease liabilities increased from **$3,125 thousand** as of December 31, 2022, to **$4,680 thousand** as of June 30, 2023[49](index=49&type=chunk) [6. Long-term debt](index=16&type=section&id=6.%20Long-term%20debt) The company's loan agreement with Hercules Capital, Inc. has been amended multiple times, extending the interest-only period to April 1, 2025, and the maturity date, resulting in a long-term debt carrying value of **$30,513 thousand** as of June 30, 2023, with an effective interest rate of **10.8%**, secured by most of the company's personal property and assets, excluding intellectual property, and without financial covenants - The company's loan agreement with Hercules Capital, Inc. has been amended multiple times, extending the interest-only period to April 1, 2025, and the maturity date to July 1, 2025[54](index=54&type=chunk) - The loan bears interest at the Wall Street Journal Prime Rate plus **4.55%**, with a minimum annual interest rate of **8.05%** and a maximum of **9.05%**[54](index=54&type=chunk) - As of June 30, 2023, the effective interest rate for the Hercules loan was **10.8%**[56](index=56&type=chunk) Long-term Debt Composition | Category (in thousands) | June 30, 2023 | December 31, 2022 | | :------------------- | :------------- | :------------- | | Term loan payable | 30,000 | 30,000 | | End of term fee | 818 | 682 | | Unamortized debt issuance costs | (305) | (367) | | **Term loan carrying value** | **30,513** | **30,315** | Future Principal Repayment Schedule | Year Ending December 31 | Amount (in thousands) | | :------------------- | :------------- | | 2023 | — | | 2024 | — | | 2025 | 31,500 | | **Total** | **31,500** | [7. Ordinary shares](index=20&type=section&id=7.%20Ordinary%20shares) As of June 30, 2023, the company had **30,585,940** ordinary shares issued and outstanding, having issued and sold American Depositary Shares (ADSs) through its ATM program, generating net proceeds of **$12.1 million** and **$14.8 million** for the three and six months ended June 30, 2023, respectively, and has not declared any dividends - As of June 30, 2023, the company had **30,585,940** ordinary shares issued and outstanding, with a nominal value of **£0.01** per share[14](index=14&type=chunk) - As of June 30, 2023, the company's authorized share capital was **59,612,613** ordinary shares, compared to **57,820,181** ordinary shares as of December 31, 2022[62](index=62&type=chunk) ADS Issuance under ATM Program | Period | Number of ADSs Issued | Gross Proceeds (in millions) | Net Proceeds (in millions) | | :--- | :---------- | :---------------- | :---------------- | | Three Months Ended June 30, 2023 | 520,000 | 12.5 | 12.1 | | Six Months Ended June 30, 2023 | 620,000 | 15.3 | 14.8 | - The company has not declared any dividends[61](index=61&type=chunk) [8. Share-based compensation](index=20&type=section&id=8.%20Share-based%20compensation) The company grants share-based compensation to employees and directors through its 2020 Equity Incentive Plan and 2019 Employee Share Purchase Plan, with total unrecognized share-based compensation expenses of **$65.3 million** (stock options) and **$13.9 million** (restricted stock units) as of June 30, 2023, expected to be recognized over weighted-average periods of **2.8** and **2.9 years**, respectively, and both R&D and G&A share-based compensation expenses increased during the reporting period - Under the 2020 Equity Incentive Plan, as of June 30, 2023, there were **4,595,604** stock options and **402,970** restricted stock units (RSUs) outstanding[69](index=69&type=chunk) - The share reserve for the 2020 Plan increased by **1,493,694** shares on January 1, 2023, with **860,637** shares available for issuance as of June 30, 2023[67](index=67&type=chunk) Share-based Compensation Expense | Expense Category (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :----------------------- | :------------------- | :------------------- | :------------------- | :------------------- | | Research and development expenses | 3,988 | 2,642 | 8,584 | 5,006 | | General and administrative expenses | 4,205 | 3,031 | 8,651 | 10,865 | | **Total** | **8,193** | **5,673** | **17,235** | **15,871** | - As of June 30, 2023, total unrecognized compensation expense for employee and director stock options was **$65.3 million**, expected to be recognized over a weighted-average period of **2.8 years**[79](index=79&type=chunk) - As of June 30, 2023, total unrecognized compensation expense for restricted stock units (RSUs) was **$13.9 million**, expected to be recognized over a weighted-average period of **2.9 years**[82](index=82&type=chunk) [9. Significant agreements](index=26&type=section&id=9.%20Significant%20agreements) The company has entered into several significant collaboration agreements with biopharmaceutical companies (including Ionis, Genentech, AstraZeneca, Bayer, and Novartis) and Cancer Research UK, involving R&D services, licensing, milestone payments, and royalties, which are primary sources of revenue, and this section details the terms, accounting analysis, and financial impact of these agreements, including substantial deferred revenue from new Bayer and Novartis collaborations Collaboration Revenue Breakdown | Collaborator (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :------------------- | :------------------- | :------------------- | :------------------- | :------------------- | | Ionis | 2,557 | 2,255 | 5,341 | 4,569 | | Genentech | 7,636 | 872 | 9,748 | 2,346 | | Dementia Discovery Fund | — | 86 | — | 158 | | AstraZeneca | 1,204 | 1,165 | 1,204 | 1,165 | | **Total collaboration revenue** | **11,397** | **4,378** | **16,293** | **8,238** | - For the six months ended June 30, 2023, total collaboration revenue was **$16,293 thousand**, a significant increase from **$8,238 thousand** in the same period of 2022[84](index=84&type=chunk) [Bayer Collaboration Agreement](index=28&type=section&id=Bayer%20Collaboration%20Agreement) On May 4, 2023, the company entered into a collaboration and license agreement with Bayer to develop radiopharmaceutical compounds for two specific targets, with a potential expansion to a third, for which Bayer paid a **$45.0 million** upfront payment and may pay additional milestone payments and tiered royalties, and the accounting analysis identified multiple performance obligations and significant rights, resulting in **$44.5 million** of deferred revenue as of June 30, 2023 - On May 4, 2023, the company entered into a collaboration and license agreement with Bayer to develop radiopharmaceutical compounds for two specific targets, with an option to expand to a third target[86](index=86&type=chunk) - Bayer paid a **$45.0 million** upfront payment and may pay up to **£534.9 million** in development and regulatory/first commercial sale milestone payments, plus tiered royalties ranging from low-single-digit to very-low-double-digit percentages[88](index=88&type=chunk)[89](index=89&type=chunk) - The accounting analysis identified two combined performance obligations related to the license and R&D services, and several significant rights related to target replacement options, radiopharmaceutical candidate development options, non-radiopharmaceutical compound development options, and the option to expand to a third target[94](index=94&type=chunk) - As of June 30, 2023, the company recorded **$44.5 million** in deferred revenue from the Bayer collaboration agreement[100](index=100&type=chunk) [Novartis Collaboration Agreement](index=33&type=section&id=Novartis%20Collaboration%20Agreement) On March 27, 2023, the company entered into a collaboration and license agreement with Novartis to develop compounds for two specific targets, for which Novartis paid a **$50.0 million** non-refundable upfront payment and may pay up to **$840.0 million** in development and regulatory milestone payments, plus tiered royalties, and the accounting analysis identified multiple performance obligations and significant rights, resulting in **$51.6 million** of deferred revenue as of June 30, 2023 - On March 27, 2023, the company entered into a collaboration and license agreement with Novartis to develop compounds for two specific targets[101](index=101&type=chunk)[103](index=103&type=chunk) - Novartis paid a **$50.0 million** non-refundable upfront payment and may pay up to **$840.0 million** in development and regulatory/first commercial sale milestone payments, plus tiered royalties ranging from high-single-digit to very-low-double-digit percentages[104](index=104&type=chunk) - The accounting analysis identified two combined performance obligations related to the research license and R&D services, and several significant rights related to target replacement options, radiopharmaceutical candidate development options, and non-radiopharmaceutical candidate development options[108](index=108&type=chunk) - As of June 30, 2023, the company recorded **$51.6 million** in deferred revenue from the Novartis collaboration agreement[116](index=116&type=chunk) [Ionis Agreements](index=38&type=section&id=Ionis%20Agreements) The company entered into an evaluation and option agreement and subsequent collaboration and license agreements with Ionis Pharmaceuticals, Inc., focusing on developing TfR1 Bicycles for oligonucleotide compound delivery, for which Ionis paid a **$31.0 million** upfront payment and may pay milestone payments and royalties, and the agreements have been amended multiple times to add additional research services, resulting in **$17.7 million** of deferred revenue as of June 30, 2023 - The company entered into an evaluation and option agreement and subsequent collaboration and license agreements with Ionis, focusing on developing TfR1 Bicycles for oligonucleotide compound delivery[117](index=117&type=chunk)[120](index=120&type=chunk)[123](index=123&type=chunk) - Ionis paid a **$31.0 million** non-refundable upfront payment and may pay low-single-digit million dollar IND acceptance fees, development and regulatory milestone payments, and low-single-digit percentage tiered royalties[125](index=125&type=chunk) - The agreements have been amended multiple times, including the Ionis Amendment in December 2021 and the Third Ionis Amendment in April 2023, adding additional research services and corresponding consideration[126](index=126&type=chunk)[141](index=141&type=chunk) - As of June 30, 2023, the company recorded **$17.7 million** in deferred revenue from the Ionis collaboration agreement, Ionis Amendment, and Ionis Evaluation and Option Agreement[143](index=143&type=chunk) [Genentech Collaboration Agreement](index=46&type=section&id=Genentech%20Collaboration%20Agreement) On February 21, 2020, the company entered into a collaboration and license agreement with Genentech to discover and develop Bicycle peptides for immuno-oncology targets, for which Genentech paid a **$30.0 million** upfront payment and has exercised two extension options, each for **$10.0 million**, and the agreement involves multiple milestone payments and tiered royalties, resulting in **$31.1 million** of deferred revenue as of June 30, 2023, and **$6.0 million** of revenue recognized due to the expiration of a significant right upon termination of Genentech Collaboration Project 1 - On February 21, 2020, the company entered into a collaboration and license agreement with Genentech to discover and develop Bicycle peptides for immuno-oncology targets[144](index=144&type=chunk) - Genentech paid a **$30.0 million** upfront payment and has exercised two extension options, each for **$10.0 million**, to add additional collaboration programs[145](index=145&type=chunk) - Genentech may pay up to **$200.0 million** in development, regulatory, and first commercialization milestone payments, plus tiered royalties ranging from mid-single-digit to low-double-digit percentages[149](index=149&type=chunk)[150](index=150&type=chunk)[152](index=152&type=chunk) - As of June 30, 2023, the company recorded **$31.1 million** in deferred revenue from the Genentech collaboration agreement and recognized **$6.0 million** in revenue due to the expiration of a significant right upon termination of Genentech Collaboration Project 1[161](index=161&type=chunk)[165](index=165&type=chunk) [AstraZeneca Collaboration Agreement](index=52&type=section&id=AstraZeneca%20Collaboration%20Agreement) In November 2016, the company entered into a research collaboration agreement with AstraZeneca, initially focusing on two targets in respiratory, cardiovascular, and metabolic diseases, which were later terminated in 2020 and 2021, and AstraZeneca exercised options for four additional targets in 2018, paying **$5.0 million** in option fees, and as of June 30, 2023, all research programs have been terminated, related deferred revenue recognized, and no remaining research programs exist under the agreement - In November 2016, the company entered into a research collaboration agreement with AstraZeneca, initially focusing on two targets, which were later terminated in 2020 and 2021[166](index=166&type=chunk) - AstraZeneca exercised options for four additional targets in 2018, paying **$5.0 million** in option fees for R&D services and licensing rights[166](index=166&type=chunk)[167](index=167&type=chunk) - As of June 30, 2023, all research programs have been terminated, related deferred revenue recognized, and no remaining research programs exist under the company's collaboration agreement with AstraZeneca[171](index=171&type=chunk)[172](index=172&type=chunk) AstraZeneca Collaboration Agreement Transaction Price Allocation | Performance Obligation (in thousands) | Transaction Price Allocation | | :----------------------------------- | :------------- | | Target Three Research License and Related Services | 650 | | Target Three Significant Right | 1,504 | | Target Four Significant Right | 1,204 | | Target Five Significant Right | 1,165 | | Target Six Significant Right | 1,127 | [Cancer Research UK Collaboration](index=57&type=section&id=Cancer%20Research%20UK) The company has two clinical trial and license agreements with Cancer Research UK (CRUK) for BT1718 and BT7401, with CRUK funding and sponsoring these clinical trials, and for BT1718, the company recognized a **$4.1 million** liability as of June 30, 2023, as part of R&D expenses, while for BT7401, the company does not consider it a liability as payments are solely based on R&D outcomes generating future economic benefits - The company entered into an agreement with CRUK for CRUK to fund and sponsor the Phase I/IIa clinical trial of BT1718 for advanced solid tumors[178](index=178&type=chunk) - The company retains the right to continue developing BT1718 during the clinical trial and has an option to license the clinical trial results upon completion, subject to milestone payments[180](index=180&type=chunk) - As of June 30, 2023, the company recorded a **$4.1 million** liability for the BT1718 agreement, included in other long-term liabilities and as part of R&D expenses[182](index=182&type=chunk) - The company also has a clinical trial and license agreement with CRUK for BT7401, with CRUK funding and sponsoring its development from preclinical studies through Phase IIa trials, and the company does not consider this agreement a liability as payments are solely based on R&D outcomes generating future economic benefits[184](index=184&type=chunk)[185](index=185&type=chunk)[186](index=186&type=chunk) [10. Income taxes](index=59&type=section&id=10.%20Income%20taxes) The company recorded income tax benefits of **$0.5 million** and **$1.1 million** for the three and six months ended June 30, 2023, respectively, primarily from U.S. deferred tax assets, and has fully provided a valuation allowance against its U.K. deferred tax assets due to accumulated net losses, but expects to realize the benefits of its U.S. deferred tax assets Income Tax Benefit | Period | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :------------------- | :------------------- | :------------------- | :------------------- | | Income tax benefit (in millions) | 0.5 | 0.4 | 1.1 | 0.9 | - The income tax benefit primarily arises from U.S. deferred tax assets, for which no valuation allowance has been provided due to profits generated from intercompany service agreements[187](index=187&type=chunk) - Due to a history of cumulative net losses in the U.K., the company has fully provided a valuation allowance against all U.K. deferred tax assets[189](index=189&type=chunk)[191](index=191&type=chunk) - The company expects to realize the benefits of its U.S. deferred tax assets and has therefore not provided a valuation allowance against them[191](index=191&type=chunk) [11. Commitments and contingencies](index=61&type=section&id=11.%20Commitments%20and%20contingencies) The company entered into new office and laboratory lease agreements and terminated existing ones during the reporting period, leading to changes in lease liabilities and right-of-use assets, with total operating lease liabilities of **$16,561 thousand** as of June 30, 2023, and also faces future milestone payment commitments exceeding **$200 million** related to CRUK and other third-party collaborations, contingent on future events - In January 2023, the company entered into a new office and laboratory lease agreement in Cambridge, Massachusetts, for approximately three years, with annual rent of approximately **$2.1 million**[193](index=193&type=chunk) - In April 2023, the company terminated its office and laboratory lease agreement at Babraham Research Campus in Cambridge, U.K., paying **$0.3 million** in termination-related fees[195](index=195&type=chunk)[196](index=196&type=chunk) Operating Lease Expenses | Expense Category (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :------------------- | :------------------- | :------------------- | :------------------- | :------------------- | | Operating lease costs | 1,367 | 1,036 | 2,693 | 1,942 | | Variable lease costs | 803 | 328 | 1,451 | 595 | | **Total lease costs** | **2,170** | **1,364** | **4,144** | **2,537** | Operating Lease Liability Maturities (as of June 30, 2023) | Year Ending December 31 | Amount (in thousands) | | :------------------- | :------------- | | 2023 | 2,841 | | 2024 | 5,767 | | 2025 | 5,855 | | 2026 | 3,347 | | 2027 | 821 | | Present value adjustment | (2,070) | | **Total lease liabilities** | **16,561** | | Less: Current lease liabilities | (4,680) | | **Long-term lease liabilities** | **11,881** | - The company's agreements with CRUK provide for future milestone payments totaling up to **$111.2 million**, plus royalties based on net product sales, and agreements with other third parties include future milestone payments totaling **$92.4 million** and **$1.3 million**, all contingent on the achievement of future events[204](index=204&type=chunk)[206](index=206&type=chunk) [12. Net loss per share](index=65&type=section&id=12.%20Net%20loss%20per%20share) For the three and six months ended June 30, 2023, the company's basic and diluted net loss per share was **($1.41)** and **($2.71)**, respectively, with dilutive securities (stock options and restricted stock units) excluded from diluted net loss per share calculation because their effect would be anti-dilutive Net Loss Per Share | Indicator | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :----------------------------------- | :------------------- | :------------------- | :------------------- | :------------------- | | Net loss (in thousands) | (42,603) | (26,828) | (81,667) | (54,392) | | Weighted-average ordinary shares (basic and diluted) | 30,191,693 | 29,648,564 | 30,097,234 | 29,626,974 | | **Net loss per share (basic and diluted)** | **(1.41)** | **(0.90)** | **(2.71)** | **(1.84)** | - The company's potentially dilutive securities, including stock options and restricted stock units, due to their anti-dilutive effect, were excluded from the calculation of diluted net loss per share[212](index=212&type=chunk) Potentially Dilutive Ordinary Shares | Category | June 30, 2023 | June 30, 2022 | | :------------------- | :------------- | :------------- | | Restricted ordinary shares | 402,970 | 187,725 | | Options to purchase ordinary shares | 7,306,927 | 5,634,144 | | **Total** | **7,709,897** | **5,821,869** | [13. Related party transactions](index=67&type=section&id=13.%20Related%20party%20transactions) The company has a founder royalty agreement with its founders and initial investors, but no royalties have been generated or paid to date, and it also paid consulting service fees to an entity associated with its Chairman of the Board - The company has a founder royalty agreement with its founders and initial investors, but no royalties have been generated or paid to date[208](index=208&type=chunk)[214](index=214&type=chunk) - The company paid **$0.1 million** for consulting services to an entity associated with its Chairman of the Board for both the three and six months ended June 30, 2023[214](index=214&type=chunk) [14. Geographic information](index=67&type=section&id=14.%20Geographic%20information) The company operates in two geographic regions, the U.S. and the U.K., with long-lived assets of **$9,449 thousand** in the U.S. and **$24,145 thousand** in the U.K. as of June 30, 2023, and all collaboration revenue is attributed to its U.K. operations - The company operates in two geographic regions: the U.S. and the U.K[215](index=215&type=chunk) Geographic Distribution of Long-Lived Assets | Region (in thousands) | June 30, 2023 | December 31, 2022 | | :------------------- | :------------- | :------------- | | United States | 9,449 | 4,466 | | United Kingdom | 24,145 | 28,302 | | **Total** | **33,594** | **32,768** | - All of the company's collaboration revenue is attributed to its operations in the U.K[216](index=216&type=chunk) [15. Subsequent events](index=67&type=section&id=15.%20Subsequent%20events) On July 17, 2023, the company completed an underwritten public offering, issuing **6,117,648** ADSs and **4,705,882** non-voting ordinary shares, generating gross proceeds of **$230 million** and net proceeds of approximately **$215.5 million** after offering costs - On July 17, 2023, the company completed an underwritten public offering, issuing **6,117,648** ADSs and **4,705,882** non-voting ordinary shares[217](index=217&type=chunk) - The public offering price for this issuance was **$21.25** per ADS or non-voting ordinary share[217](index=217&type=chunk) - This transaction generated gross proceeds of **$230 million** for the company, with net proceeds of approximately **$215.5 million** after deducting underwriting discounts, commissions, and estimated offering expenses of **$14.5 million**[217](index=217&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=69&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) This section provides a detailed analysis of the company's financial condition and operating results, covering its business overview as a clinical-stage biopharmaceutical company, financial overview, components of operations, performance comparison for the reporting period, liquidity and capital resources, and critical accounting estimates, emphasizing its Bicycle platform and product candidate development progress, ongoing R&D investments, and future financing needs [Overview](index=69&type=section&id=Overview) The company is a clinical-stage biopharmaceutical company focused on developing Bicycle drugs, which combine the properties of biologics and small molecules, primarily for oncology indications, and it possesses a proprietary phage display screening platform, advancing multiple product candidates into clinical trials, including BT5528, BT8009, BT1718, and BT7480, with BT8009 having received FDA Fast Track designation - The company is a clinical-stage biopharmaceutical company developing novel drugs called Bicycles, which combine the pharmacological properties of biologics with the manufacturing and pharmacokinetic properties of small molecules[219](index=219&type=chunk) - The company possesses a proprietary phage display screening platform for efficient identification of Bicycles, which has been used to identify current oncology candidates[220](index=220&type=chunk) - Key product candidates include BT5528 (EphA2-targeted BTC), BT8009 (Nectin-4-targeted BTC), and BT7480 (Nectin-4-targeting and CD137-agonizing Bicycle TICA), all in Phase I/II clinical trials[221](index=221&type=chunk) - BT8009 monotherapy has received FDA Fast Track designation for the treatment of adult patients with previously treated locally advanced or metastatic urothelial carcinoma[223](index=223&type=chunk) [Financial Overview](index=71&type=section&id=Financial%20Overview) Since inception, the company has primarily financed operations through equity issuances, collaboration agreements, and loans, resulting in an accumulated deficit of **$412.8 million** as of June 30, 2023, and expects to continue incurring operating losses and requiring substantial additional capital for R&D and potential commercialization efforts, despite existing cash projected to cover the next 12 months of operations, still facing financing uncertainties - The company since inception has primarily financed operations through the sale of ordinary shares, ADSs, and convertible preferred shares, upfront payments, R&D payments, and milestone payments from collaboration agreements, and a loan agreement with Hercules Capital, Inc[226](index=226&type=chunk) Cumulative Financing (as of June 30, 2023) | Source | Amount (in millions) | | :------------------- | :------------- | | Gross proceeds from sales of ADSs, ordinary shares, and convertible preferred shares | 579.9 | | Cash payments from collaboration revenue | 188.1 | | Hercules loan | 30.0 | - As of June 30, 2023, the company had an accumulated deficit of **$412.8 million** and expects to continue to incur operating losses for the foreseeable future[227](index=227&type=chunk) - The company expects its existing cash and cash equivalents of **$340.4 million** as of June 30, 2023, to be sufficient to fund operating expenses and capital expenditure requirements for at least the next 12 months[233](index=233&type=chunk) [Components of Our Results of Operations](index=73&type=section&id=Components%20of%20Our%20Results%20of%20Operations) This section analyzes the components of the company's operating results, including collaboration revenue, research and development expenses, general and administrative expenses, and other income (expense), net, noting that collaboration revenue primarily stems from agreements, R&D expenses are the largest expenditure covering preclinical and clinical development, G&A expenses mainly comprise personnel and professional service costs, and income tax benefit primarily arises from U.S. deferred tax assets [Collaboration Revenues](index=73&type=section&id=Collaboration%20Revenues) The company currently has no product sales revenue, with future revenue primarily derived from collaboration agreements with partners, including upfront payments, milestone payments, option exercise payments, and R&D service fees, and future revenue is expected to fluctuate based on the timing and amount of licensing, R&D services, milestones, and other payments - The company currently has no product sales revenue and does not expect to generate any for the foreseeable future[234](index=234&type=chunk) - Revenue is primarily derived from collaboration agreements with partners, including upfront payments, milestone payments, and option exercise payments, as well as R&D service fees[234](index=234&type=chunk) - Future revenue may include additional milestone payments, option exercise payments, and royalties on net product sales under collaboration agreements[234](index=234&type=chunk) [Expenses](index=75&type=section&id=Expenses) The company's expenses primarily consist of research and development expenses and general and administrative expenses, with R&D being the largest expenditure, covering employee costs, third-party agreement fees, lab supplies, regulatory compliance, and facility costs, benefiting from U.K. R&D tax credits, while G&A expenses mainly include personnel costs and professional service fees, affected by exchange rate fluctuations, and both categories are expected to increase significantly in the future [Research and Development Expenses](index=75&type=section&id=Research%20and%20Development%20Expenses) Research and development expenses are the company's largest expenditure, primarily comprising employee-related costs, third-party R&D and clinical activity fees, laboratory supplies, regulatory compliance costs, and facility expenses, with R&D costs expensed as incurred and benefiting from U.K. R&D tax credits, and the company expects future R&D expenses to increase significantly to advance clinical development of product candidates and expand its pipeline - R&D expenses primarily include employee-related costs (salaries, benefits, share-based compensation), third-party R&D and clinical activity fees, consultant fees, laboratory supplies, clinical trial material procurement and manufacturing costs, and regulatory compliance costs[237](index=237&type=chunk) - R&D costs are expensed as incurred, with U.K. R&D tax credits and government grants recognized as reductions to R&D expenses[238](index=238&type=chunk) - The company expects future R&D expenses to increase significantly to advance clinical development of product candidates, initiate new clinical trials, establish internal process development and analytical capabilities, and discover and develop additional product candidates[243](index=243&type=chunk) - The Phase I/IIa clinical trial for BT1718 is funded by Cancer Research UK, and the costs incurred are recorded as a liability under ASC 730 and as part of R&D expenses[239](index=239&type=chunk)[242](index=242&type=chunk) [General and Administrative Expenses](index=79&type=section&id=General%20and%20Administrative%20Expenses) General and administrative expenses primarily include salaries and share-based compensation for executive, finance, corporate, business development, and administrative functions, as well as professional fees for legal, patent, accounting, audit, tax, and consulting services, also encompassing insurance, travel, and facility-related costs, and are affected by exchange rate fluctuations, with the company expecting these expenses to grow in the future due to increased headcount and public company compliance costs - General and administrative expenses primarily include salaries and share-based compensation for executive, finance, corporate, business development, and administrative function personnel[247](index=247&type=chunk) - These expenses also include professional fees for legal, patent, accounting, audit, tax, and consulting services, as well as insurance, travel, and facility-related costs[247](index=247&type=chunk) - Foreign currency transaction gains and losses are included in general and administrative expenses, so operating expenses may be affected by future exchange rate changes[248](index=248&type=chunk) - The company expects future general and administrative expenses to increase due to increased headcount and compliance costs as a public company[249](index=249&type=chunk) [Other Income (Expense), net](index=79&type=section&id=Other%20Income%20(Expense),%20net) Other income (expense), net, primarily includes interest income and interest expense, with interest income mainly derived from interest earned on cash and cash equivalents, and interest expense primarily from the loan agreement with Hercules Capital, Inc., while the company's income tax benefit mainly stems from U.S. deferred tax assets, and U.K. R&D tax credits are recognized as a reduction to R&D expenses [Interest Income](index=79&type=section&id=Interest%20Income) Interest income primarily consists of interest earned on cash and cash equivalents held in the company's operating accounts - Interest income primarily consists of interest earned on cash and cash equivalents held in the company's operating accounts[250](index=250&type=chunk) [Interest Expense](index=81&type=section&id=Interest%20Expense) Interest expense primarily arises from the company's financing arrangements, with **$30.0 million** in outstanding borrowings under its loan agreement with Hercules Capital, Inc. as of June 30, 2023 - Interest expense primarily arises from the company's financing arrangements[252](index=252&type=chunk) - As of June 30, 2023, the company had **$30.0 million** in outstanding borrowings under its loan agreement with Hercules Capital, Inc[252](index=252&type=chunk) [Benefit from Income Taxes](index=81&type=section&id=Benefit%20from%20Income%20Taxes) The company's income tax benefit primarily arises from U.S. deferred tax assets, for which no valuation allowance has been provided due to profits generated from intercompany service agreements, while U.K. R&D tax credits are recognized as a reduction to R&D expenses and not reflected in the income tax provision - The income tax benefit primarily arises from U.S. deferred tax assets, for which no valuation allowance has been provided due to profits generated from intercompany service agreements[253](index=253&type=chunk) - U.K. R&D tax credits are recognized as a reduction to R&D expenses and are not reflected in the income tax provision because they are fully refundable and not dependent on current or future taxable income[254](index=254&type=chunk) - The company benefits from U.K. R&D tax credit schemes, including the Small and Medium-sized Enterprise R&D Tax Relief Scheme (SME Program) and the Research and Development Expenditure Credit Scheme (RDEC Program)[255](index=255&type=chunk) [Results of Operations](index=82&type=section&id=Results%20of%20Operations) This section compares the operating results for the three and six months ended June 30, 2023, noting significant growth in both collaboration revenue and research and development expenses, leading to an expanded operating loss, partially offset by increased interest income [Comparison of the Three Months Ended June 30, 2023 and 2022](index=82&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20June%2030,%202023%20and%202022) For the three months ended June 30, 2023, collaboration revenue increased by **$7.0 million** year-over-year, primarily due to revenue recognition from the expiration of a significant right in the Genentech collaboration agreement, while R&D expenses rose by **$19.9 million** due to increased clinical program spending and personnel costs, and G&A expenses increased by **$3.0 million**, driven by professional service fees and share-based compensation, partially offset by foreign exchange impacts, leading to an expanded net loss of **$42.6 million** Operating Results Comparison (Three Months Ended June 30, 2023) | Indicator (in thousands) | 2023 | 2022 | Change | | :------------------- | :----- | :----- | :----- | | Collaboration revenue | 11,397 | 4,378 | 7,019 | | Research and development expenses | 39,720 | 19,854 | 19,866 | | General and administrative expenses | 14,788 | 11,824 | 2,964 | | Operating loss | (43,111) | (27,300) | (15,811) | | Net loss | (42,603) | (26,828) | (15,775) | - Collaboration revenue increased by **$7.0 million**, primarily due to revenue recognized from the expiration of a significant right in the Genentech collaboration agreement[260](index=260&type=chunk) - Research and development expenses increased by **$19.9 million**, primarily driven by increased BT8009 clinical program spending, Bicycle TICA program development costs, other discovery and platform-related costs, employee and contractor-related costs, and facility-related costs[263](index=263&type=chunk) - General and administrative expenses increased by **$3.0 million**, primarily due to a **$1.7 million** increase in professional and consulting fees and a **$1.2 million** increase in share-based compensation expense, partially offset by a **$1.1 million** favorable foreign exchange impact[265](index=265&type=chunk)[267](index=267&type=chunk) [Comparison of the Six Months Ended June 30, 2023 and 2022](index=85&type=section&id=Comparison%20of%20the%20Six%20Months%20Ended%20June%2030,%202023%20and%202022) For the six months ended June 30, 2023, collaboration revenue increased by **$8.1 million** year-over-year, mainly from Genentech and Ionis collaboration agreements, while R&D expenses significantly rose by **$37.8 million** due to increased BT8009 and BT5528 clinical program spending, Bicycle TICA program development costs, and personnel and facility-related expenses, and G&A expenses slightly increased by **$0.5 million**, driven by personnel and professional service fees, partially offset by reduced share-based compensation, leading to an expanded net loss of **$81.7 million** Operating Results Comparison (Six Months Ended June 30, 2023) | Indicator (in thousands) | 2023 | 2022 | Change | | :------------------- | :----- | :----- | :----- | | Collaboration revenue | 16,293 | 8,238 | 8,055 | | Research and development expenses | 71,931 | 34,138 | 37,793 | | General and administrative expenses | 29,276 | 28,783 | 493 | | Operating loss | (84,914) | (54,683) | (30,231) | | Net loss | (81,667) | (54,392) | (27,275) | - Collaboration revenue increased by **$8.1 million**, primarily due to **$7.4 million** in revenue recognized from the expiration of a significant right in the Genentech collaboration agreement and an **$0.8 million** increase in Ionis collaboration revenue[270](index=270&type=chunk) - Research and development expenses increased by **$37.8 million**, primarily driven by increased BT8009 and BT5528 clinical program spending, Bicycle TICA program development costs, other discovery and platform-related costs, employee and contractor-related costs, and facility-related costs[273](index=273&type=chunk) - General and administrative expenses increased by **$0.5 million**, primarily due to a **$1.6 million** increase in personnel-related costs and increased professional and consulting fees, partially offset by a **$2.2 million** decrease in share-based compensation expense[274](index=274&type=chunk) - Other income (expense), net, increased by **$2.7 million**, primarily due to a **$2.6 million** increase in interest income, benefiting from higher interest rates and interest earned on cash equivalents[275](index=275&type=chunk) [Liquidity and Capital Resources](index=87&type=section&id=Liquidity%20and%20Capital%20Resources) The company has been in an operating loss position since inception, primarily financing through equity issuances, collaboration agreements, and loans, and as of June 30, 2023, held **$340.4 million** in cash and cash equivalents, expected to support operations for at least the next 12 months, with an additional **$215.5 million** net proceeds raised from a subsequent public offering, but faces ongoing capital needs to advance product development and potential commercialization, possibly requiring further financing [Liquidity](index=87&type=section&id=Liquidity) The company has experienced operating losses and negative cash flows since inception, with no product sales revenue, relying on equity issuances, collaboration agreements, and loans for financing, and as of June 30, 2023, held **$340.4 million** in cash and cash equivalents, projected to fund operations for at least the next 12 months, with an additional **$215.5 million** net proceeds raised from a subsequent public offering - The company has been in an operating loss and negative cash flow position since inception and has not generated product sales revenue[276](index=276&type=chunk) - Primary financing sources include sales of ADSs, ordinary shares, and convertible preferred shares, upfront and milestone payments from collaboration agreements, and a loan from Hercules Capital, Inc[276](index=276&type=chunk) - As of June 30, 2023, the company had **$340.4 million** in cash and cash equivalents, expected to be sufficient to fund operating expenses and capital expenditure requirements for at least the next 12 months[289](index=289&type=chunk) - On July 17, 2023, the company completed a public offering, issuing **6,117,648** ADSs and **4,705,882** non-voting ordinary shares, generating approximately **$215.5 million** in net proceeds[277](index=277&type=chunk) [Cash Flows](index=87&type=section&id=Cash%20Flows) For the six months ended June 30, 2023, net cash outflow from operating activities significantly decreased to **$12.3 million**, primarily due to changes in accounts receivable and R&D incentive receivables, while net cash outflow from investing activities decreased to **$2.4 million**, and net cash inflow from financing activities substantially increased to **$15.0 million**, mainly from ADS issuance under the ATM program Cash Flow Summary | Category (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :----------------------------------- | :------------------- | :------------------- | | Net cash outflow from operating activities | (12,315) | (49,931) | | Net cash outflow from investing activities | (2,376) | (14,555) | | Net cash inflow from financing activities | 15,010 | 645 | | Effect of exchange rate changes on cash and cash equivalents | 960 | (2,070) | | **Net increase (decrease) in cash and cash equivalents** | **1,279** | **(65,911)** | - Net cash outflow from operating activities decreased by **$37.6 million**, primarily due to a **$27.3 million** increase in net loss, and increased non-cash expenses (share-based compensation and depreciation/amortization), but offset by a **$63.5 million** increase in cash flow from changes in operating assets and liabilities[278](index=278&type=chunk) - Net cash outflow from investing activities decreased by **$12.2 million**, primarily due to reduced purchases of property and equipment[280](index=280&type=chunk) - Net cash inflow from financing activities was **$15.0 million**, primarily from net proceeds from ADS issuance under the ATM program[280](index=280&type=chunk) [Loan Agreement with Hercules](index=89&type=section&id=Loan%20Agreement%20with%20Hercules) The company has **$30.0 million** in outstanding term loans under its agreement with Hercules Capital, Inc., with the potential for an additional **$45.0 million** under certain conditions, bearing a floating interest rate up to **9.05%** and an interest-only period until April 1, 2025, secured by most of the company's personal property and assets, excluding intellectual property, and without financial covenants, but including customary affirmative and negative covenants and events of default - The company has **$30.0 million** in outstanding term loans under its agreement with Hercules, with the potential for an additional **$45.0 million** under customary conditions, available until December 31, 2024[281](index=281&type=chunk) - The loan bears interest at the Wall Street Journal Prime Rate plus **4.55%**, with a minimum annual interest rate of **8.05%** and a maximum of **9.05%**, and an interest-only period until April 1, 2025[281](index=281&type=chunk) - The loan is secured by most of the company's personal property and assets, excluding intellectual property, and the agreement contains customary affirmative and negative covenants and events of default, but no financial covenants[281](index=281&type=chunk) [Capital Resources and Funding Requirements](index=89&type=section&id=Capital%20Resources%20and%20Funding%20Requirements) The company faces ongoing capital requirements to advance preclinical and clinical development of product candidates, seek regulatory approvals, establish commercialization capabilities, and protect intellectual property, with future funding needs dependent on R&D progress, collaboration agreements, regulatory approvals, and market acceptance, and expects to raise capital through equity issuances, debt financing, collaborations, and strategic alliances, but faces financing uncertainties and economic volatility risks - The company faces ongoing cash requirements to advance preclinical and clinical development of product candidates, including BT5528, BT8009, BT7480, BT1718, BT7455, and BT7401[282](index=282&type=chunk) - Future capital requirements will depend on various factors, including the scope of R&D, clinical trial results, regulatory approvals, commercialization costs, intellectual property protection, and personnel recruitment[291](index=291&type=chunk) - The company expects to raise capital through equity offerings, debt financings, collaborations,

Bicycle Therapeutics Investor Presentation May 2023 ...

[PART I - FINANCIAL INFORMATION](index=7&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section presents the company's unaudited financial statements and management's analysis of its financial condition and operations [Financial Statements](index=7&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Q1 2023, including balance sheets, statements of operations, cash flows, and detailed notes [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2023, total assets increased to $428.8 million, driven by accounts receivable, while total liabilities grew to $185.6 million due to deferred revenue Condensed Consolidated Balance Sheet (Unaudited, in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $293,815 | $339,154 | | Accounts receivable | $50,000 | $2,045 | | Total current assets | $381,253 | $369,383 | | **Total assets** | **$428,801** | **$410,609** | | **Liabilities & Equity** | | | | Total current liabilities | $52,995 | $53,342 | | Deferred revenue, non-current | $83,751 | $41,455 | | Total liabilities | $185,638 | $139,826 | | Total shareholders' equity | $243,163 | $270,783 | | **Total liabilities and shareholders' equity** | **$428,801** | **$410,609** | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) For Q1 2023, the company reported a net loss of $39.1 million, primarily due to a significant rise in research and development expenses Condensed Consolidated Statements of Operations (Unaudited, in thousands) | Account | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Collaboration revenues | $4,896 | $3,860 | | Research and development | $32,211 | $14,284 | | General and administrative | $14,488 | $16,959 | | Loss from operations | ($41,803) | ($27,383) | | **Net loss** | **($39,064)** | **($27,564)** | | **Net loss per share, basic and diluted** | **($1.30)** | **($0.93)** | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities significantly increased to $46.4 million in Q1 2023, leading to a decrease in cash and cash equivalents to $293.8 million Condensed Consolidated Statements of Cash Flows (Unaudited, in thousands) | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($46,411) | ($26,400) | | Net cash used in investing activities | ($2,099) | ($4,756) | | Net cash provided by financing activities | $2,718 | $450 | | **Net decrease in cash and cash equivalents** | **($45,339)** | **($31,309)** | | **Cash and cash equivalents at end of period** | **$293,815** | **$407,371** | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes provide critical details supporting the financial statements, covering accounting policies, collaboration agreements, debt, liquidity, and future commitments - The company is a clinical-stage biopharmaceutical company developing a novel class of medicines called Bicycles, with key programs including BT5528, BT8009, and BT7480 in oncology[24](index=24&type=chunk) - As of March 31, 2023, the company had cash and cash equivalents of **$293.8 million** and believes this is sufficient to fund operations for at least twelve months from the issuance date of the financial statements[26](index=26&type=chunk)[27](index=27&type=chunk) - On March 27, 2023, the company entered into a collaboration and license agreement with Novartis, which included a nonrefundable upfront payment of **$50.0 million**, received in April 2023. The company is also eligible for up to **$840.0 million** in development and regulatory milestones and up to **$800.0 million** in sales milestones[77](index=77&type=chunk)[80](index=80&type=chunk) - The company has a loan agreement with Hercules for up to **$75.0 million**, with **$30.0 million** drawn as of March 31, 2023. The interest-only period extends to April 1, 2025, with a maturity date of July 1, 2025[50](index=50&type=chunk)[54](index=54&type=chunk) - The company has potential future milestone payment obligations under its arrangements with CRUK and another third party, with an aggregate total value of **$111.2 million** and **$92.4 million**, respectively[171](index=171&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=63&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's business strategy, financial performance, and liquidity, noting increased net loss from R&D and a strong cash position [Overview](index=63&type=section&id=Overview) The company provides an overview of its clinical-stage biopharmaceutical business, focusing on its novel 'Bicycles' platform in oncology, and its funding history - The company is developing a novel class of medicines, referred to as Bicycles, which are synthetic short peptides constrained to form two loops, combining features of biologics and small molecules[187](index=187&type=chunk) - Key clinical programs include BT5528 (EphA2 BTC), BT8009 (Nectin-4 BTC), and BT7480 (Nectin-4/CD137 TICA)[189](index=189&type=chunk) - On January 4, 2023, the FDA granted Fast Track Designation to BT8009 for the treatment of adult patients with previously treated locally advanced or metastatic urothelial cancer[190](index=190&type=chunk)[191](index=191&type=chunk) - From inception through March 31, 2023, the company has received gross proceeds of **$567.2 million** from equity sales, **$137.3 million** from collaboration payments, and **$30.0 million** from debt borrowings. A **$50.0 million** upfront payment from Novartis was received in April 2023[194](index=194&type=chunk) [Results of Operations](index=77&type=section&id=Results%20of%20Operations) This section details Q1 2023 financial performance, noting increased collaboration revenues, a significant surge in R&D expenses, and a decrease in G&A Comparison of Results of Operations (in thousands) | Account | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | | :--- | :--- | :--- | :--- | | Collaboration revenues | $4,896 | $3,860 | $1,036 | | Research and development | $32,211 | $14,284 | $17,927 | | General and administrative | $14,488 | $16,959 | ($2,471) | | **Net loss** | **($39,064)** | **($27,564)** | **($11,500)** | Research and Development Expenses Breakdown (in thousands) | Program | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | | :--- | :--- | :--- | :--- | | BT5528 (EphA2) | $3,193 | $1,402 | $1,791 | | BT8009 (Nectin-4) | $5,369 | $1,214 | $4,155 | | Bicycle TICA | $4,877 | $1,523 | $3,354 | | Other discovery & platform | $8,205 | $4,439 | $3,766 | | Employee & contractor | $10,793 | $5,582 | $5,211 | | **Total R&D Expenses** | **$32,211** | **$14,284** | **$17,927** | [Liquidity and Capital Resources](index=80&type=section&id=Liquidity%20and%20Capital%20Resources) This section details the company's liquidity, including **$293.8 million** in cash, net cash used in operations, and outlines contractual obligations and future capital needs - The company had cash and cash equivalents of **$293.8 million** as of March 31, 2023, and believes this will fund operations for at least 12 months from the filing date[201](index=201&type=chunk)[247](index=247&type=chunk) - Net cash used in operating activities increased to **$46.4 million** in Q1 2023 from **$26.4 million** in Q1 2022, primarily due to a higher net loss and changes in working capital[237](index=237&type=chunk) Material Contractual Obligations as of March 31, 2023 (in thousands) | Obligation Type | Total | Less than 1 year | 1 to 3 years | 3 to 5 years | | :--- | :--- | :--- | :--- | :--- | | Operating lease commitments | $21,665 | $5,893 | $12,689 | $3,083 | | Debt obligations | $37,358 | $2,526 | $34,832 | $0 | | **Total** | **$59,023** | **$8,419** | **$47,521** | **$3,083** | - The company has contingent future milestone payment obligations to CRUK and another third party with aggregate total values of **$111.2 million** and **$92.4 million**, respectively[246](index=246&type=chunk) [Quantitative and Qualitative Disclosure About Market Risk](index=88&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk) The company identifies its main market risks as interest rate sensitivity and foreign currency exchange risk, with a foreign exchange loss of **$0.5 million** in Q1 2023 - The company's primary market risks are interest rate sensitivity and foreign currency exchange risk[258](index=258&type=chunk)[259](index=259&type=chunk) - Exposure to interest rate changes on cash equivalents and **$30.0 million** in debt is not expected to have a material effect on financial results[258](index=258&type=chunk)[259](index=259&type=chunk) - Foreign currency exchange risk arises from operations in both the U.S. (USD) and U.K. (GBP). The company recorded foreign exchange losses of **$0.5 million** for the three months ended March 31, 2023[260](index=260&type=chunk)[262](index=262&type=chunk) [Controls and Procedures](index=90&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal controls - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2023[264](index=264&type=chunk) - There were no material changes to the company's internal control over financial reporting during the quarter ended March 31, 2023[265](index=265&type=chunk) [PART II - OTHER INFORMATION](index=91&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, and other miscellaneous information pertinent to the company's operations [Legal Proceedings](index=91&type=section&id=Item%201.%20Legal%20Proceedings) The company states that it is not currently a party to any material legal proceedings - The company is not currently subject to any material legal proceedings[266](index=266&type=chunk) [Risk Factors](index=91&type=section&id=Item%201A.%20Risk%20Factors) This section outlines key risks including financial sustainability, clinical development uncertainties, third-party reliance, IP challenges, and international operational complexities - **Financial Risks:** The company has a history of significant operating losses, an accumulated deficit of **$370.2 million** as of March 31, 2023, and will require substantial additional funding to continue operations[280](index=280&type=chunk)[281](index=281&type=chunk)[290](index=290&type=chunk) - **Development and Regulatory Risks:** Success is substantially dependent on its BTC and TICA programs, which represent a new category of medicine and may face heightened regulatory scrutiny. Clinical trials are long, expensive, and their outcomes are uncertain[307](index=307&type=chunk)[312](index=312&type=chunk)[314](index=314&type=chunk) - **Third-Party Reliance:** The company relies on collaborators (e.g., Cancer Research UK, Novartis, Genentech) for development and commercialization and on third-party CROs and manufacturers, which introduces risks related to performance, supply, and quality control[471](index=471&type=chunk)[482](index=482&type=chunk)[492](index=492&type=chunk) - **Intellectual Property Risks:** The ability to compete depends on obtaining and maintaining patent protection for its technology, which is uncertain. The company may face costly litigation if sued for infringing third-party IP rights[508](index=508&type=chunk)[541](index=541&type=chunk) - **Commercialization Risks:** The company has no marketing or sales infrastructure and faces significant competition from large pharmaceutical companies. Market acceptance and adequate reimbursement for its products, if approved, are uncertain[376](index=376&type=chunk)[392](index=392&type=chunk)[405](index=405&type=chunk) - **International and Tax Risks:** As a U.K.-based company, it is subject to risks from Brexit, foreign currency fluctuations, and complex tax laws, including potential classification as a PFIC or CFC, which could have adverse U.S. tax consequences for shareholders[362](index=362&type=chunk)[470](index=470&type=chunk)[584](index=584&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=205&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item is marked as 'Not Applicable' in the report - Not Applicable[618](index=618&type=chunk) [Defaults Upon Senior Securities](index=205&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is marked as 'Not Applicable' in the report - Not Applicable[618](index=618&type=chunk) [Mine Safety Disclosures](index=205&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is marked as 'Not Applicable' in the report - Not Applicable[618](index=618&type=chunk) [Other Information](index=205&type=section&id=Item%205.%20Other%20Information) This item is marked as 'Not Applicable' in the report - Not Applicable[618](index=618&type=chunk) [Exhibits](index=205&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the quarterly report, including key executive employment agreements and the Novartis collaboration agreement - Lists filed exhibits, including amendments to several executive employment agreements and the Collaboration and Licence Agreement with Novartis Pharma AG, dated March 27, 2023[619](index=619&type=chunk) [Signatures](index=208&type=section&id=SIGNATURES) The report is duly signed on May 4, 2023, by Kevin Lee, Chief Executive Officer, and Lee Kalowski, Chief Financial Officer, on behalf of Bicycle Therapeutics plc - The report was signed by Kevin Lee, Ph.D., MBA (Chief Executive Officer) and Lee Kalowski, MBA (Chief Financial Officer and President) on May 4, 2023[624](index=624&type=chunk)

Bicycle Therapeutics Investor Presentation February 2023 ...