Bicycle Therapeutics(BCYC) - 2020 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements The company reported widening net losses for the three and six months ended June 30, 2020, with total assets increasing to $118.6 million and liabilities growing to $47.6 million, largely due to deferred revenue Condensed Consolidated Balance Sheets As of June 30, 2020, total assets increased to $118.6 million driven by cash and R&D incentives, while total liabilities significantly grew to $47.6 million due to deferred revenue, leading to a decrease in shareholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Assets | | | | Cash | $96,910 | $92,117 | | Total current assets | $112,531 | $104,146 | | Total assets | $118,602 | $110,194 | | Liabilities and Shareholders' Equity | | | | Deferred revenue (current & long-term) | $33,082 | $5,657 | | Total current liabilities | $16,978 | $8,821 | | Total liabilities | $47,576 | $16,996 | | Total shareholders' equity | $71,026 | $93,198 | | Total liabilities and shareholders' equity | $118,602 | $110,194 | Condensed Consolidated Statements of Operations and Comprehensive Loss For Q2 and the six months ended June 30, 2020, the company reported widening net losses of $12.1 million and $23.4 million respectively, primarily due to increased research and development and general and administrative expenses Statement of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Collaboration revenues | $1,571 | $1,522 | $2,700 | $7,906 | | Research and development | $7,958 | $6,537 | $15,728 | $12,813 | | General and administrative | $6,196 | $2,973 | $11,197 | $6,375 | | Loss from operations | $(12,583) | $(7,988) | $(24,225) | $(11,282) | | Net loss | $(12,115) | $(10,217) | $(23,438) | $(16,720) | | Net loss per share | $(0.67) | $(1.40) | $(1.30) | $(4.08) | Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities significantly improved to $8.8 million for the six months ended June 30, 2020, primarily due to a $29.0 million increase in deferred revenue from the Genentech collaboration, resulting in a cash balance of $96.9 million Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $8,813 | $(12,809) | | Net cash used in investing activities | $(621) | $(881) | | Net cash provided by financing activities | $12 | $59,129 | | Effect of exchange rate changes on cash | $(3,411) | $(283) | | Net increase in cash | $4,793 | $45,156 | | Cash at end of period | $96,910 | $108,536 | - The significant positive shift in operating cash flow was mainly due to a $29.0 million increase in deferred revenue, primarily from the upfront payment received from the Genentech collaboration[16][239] Notes to Condensed Consolidated Financial Statements The notes detail the company's clinical-stage biopharmaceutical business, the significant impact of the $30 million Genentech collaboration, ongoing R&D partnerships, contingent litigation liabilities, and an $18.5 million capital raise post-quarter end - The company is a clinical-stage biopharmaceutical company developing a novel class of medicines called Bicycles®, with initial programs focused on oncology and lead candidates including BT1718, BT5528, and BT8009[18] - The company believes its existing cash will be sufficient to fund operating expenses and capital expenditure requirements for at least twelve months from the report's issuance date[23] - In February 2020, the company entered into a major collaboration with Genentech, receiving a $30.0 million upfront payment, which significantly boosted deferred revenue and cash flow[127][128] - The company is involved in ongoing litigation with Pepscan Systems B.V. regarding a terminated patent license agreement, which could impact the commercialization of its lead product candidate, BT1718[169] - Subsequent to the quarter end, on July 7, 2020, the company sold 1,192,713 ADSs for gross proceeds of $18.5 million under its at-the-market (ATM) offering program[182] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's clinical-stage pipeline and the impact of COVID-19, noting increased net losses for Q2 2020 driven by higher expenses, a $30 million Genentech upfront payment, and a projected 12-month cash runway with anticipated future funding needs Results of Operations Collaboration revenue remained flat for Q2 2020 but decreased for the six-month period, while both research and development and general and administrative expenses significantly increased, leading to widening net losses for both periods Comparison of Results for the Three Months Ended June 30 (in thousands) | Account | 2020 | 2019 | Change | | :--- | :--- | :--- | :--- | | Collaboration revenues | $1,571 | $1,522 | $49 | | Research and development | $7,958 | $6,537 | $1,421 | | General and administrative | $6,196 | $2,973 | $3,223 | | Net loss | $(12,115) | $(10,217) | $(1,898) | R&D Expense Breakdown for the Three Months Ended June 30 (in thousands) | Program | 2020 | 2019 | Change | | :--- | :--- | :--- | :--- | | BT1718 (MT1) | $74 | $299 | $(225) | | BT5528 (EphA2) | $1,487 | $1,441 | $46 | | BT8009 (Nectin-4) | $1,090 | $941 | $149 | | Tumor-targeted immune cell agonist | $1,776 | $— | $1,776 | | Total R&D Expenses | $7,958 | $6,537 | $1,421 | Liquidity and Capital Resources The company, historically funded by equity and collaborations, held $96.9 million in cash as of June 30, 2020, which management expects to fund operations for at least 12 months, though substantial additional capital will be required for pipeline advancement and commercialization, with COVID-19 posing a funding risk - As of June 30, 2020, the company had $96.9 million in cash[257] - Management believes existing cash will fund operating expenses and capital requirements for at least 12 months from the filing date[290] - The company will need substantial additional funding to support continuing operations and its growth strategy, which it expects to finance through equity offerings, debt, or collaborations[200][246] Quantitative and Qualitative Disclosure About Market Risk The company's primary market risks are interest rate sensitivity on its $96.9 million cash balance and significant foreign currency exchange risk between the U.S. dollar and British Pound Sterling, with no current hedging activities - The company holds $96.9 million in cash, primarily in interest-bearing savings accounts, exposing it to interest rate risk, though management does not believe a 1% change would have a material effect[257] - Significant foreign currency exchange risk exists, particularly between the U.S. dollar and the British Pound Sterling, as UK subsidiaries operate in GBP while the parent company's functional currency is USD[258] - The company does not currently engage in currency hedging activities[261] Controls and Procedures As of June 30, 2020, management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting identified during the quarter - Management concluded that as of June 30, 2020, the company's disclosure controls and procedures were effective[261] - No material changes to internal control over financial reporting were identified during the second quarter of 2020[262] PART II - OTHER INFORMATION Legal Proceedings The company is involved in significant legal proceedings with Pepscan Systems B.V., including an appealed Dutch Court of Appeal ruling on a terminated patent license agreement and ongoing opposition proceedings against key European patents - On February 18, 2020, the Dutch Court of Appeal ruled that Pepscan was entitled to terminate a license agreement with BicycleRD and granted a worldwide injunction against BicycleRD exploiting the licensed patents[268] - BicycleRD has appealed the Court of Appeal's decision to the Dutch Supreme Court and is preparing for further proceedings, including on its patent invalidity claim[268] - Pepscan has also filed opposition proceedings against two of the company's key European patents (EP 2 257 624 and EP 2 474 613), which are currently under appeal at the European Patent Office[271][273] Risk Factors The company faces substantial risks including a history of losses and future capital needs, high dependency on novel product candidates with uncertain clinical and regulatory pathways, COVID-19 impacts, reliance on third parties, critical intellectual property litigation, and commercialization challenges - Financial Risks: The company has a history of significant losses ($124.0 million accumulated deficit) and will need substantial additional funding to continue operations, which may not be available on attractive terms[275][276][287] - Development & Regulatory Risks: Success is substantially dependent on its BTC and tumor-targeted immune cell agonist programs. Bicycles® are a new therapeutic modality and may face heightened regulatory scrutiny. Clinical trial outcomes are uncertain and patient enrollment can be difficult, a risk exacerbated by the COVID-19 pandemic[296][302][313] - Third-Party & IP Risks: The company relies on third parties for manufacturing and clinical trials (e.g., CRUK for BT1718). It is involved in critical litigation with Pepscan over a terminated license and patent validity, which could harm its IP position and ability to commercialize BT1718[469][476][522] - Operational & Commercialization Risks: The company has no sales or marketing infrastructure. The withdrawal of the UK from the EU (Brexit) creates regulatory and operational uncertainty. The COVID-19 pandemic could adversely affect operations, clinical trials, and access to capital[356][370][449] Unregistered Sales of Equity Securities and Use of Proceeds In April 2020, warrants for 71,450 ordinary shares were exercised, and as of June 30, 2020, approximately $37.3 million of the $56.4 million net proceeds from the 2019 IPO had been utilized for R&D and general corporate purposes - On April 15, 2020, warrants were exercised for 71,450 ordinary shares in a private transaction[627] - As of June 30, 2020, the company has used approximately $37.3 million of the $56.4 million net proceeds from its 2019 IPO, primarily for R&D on its pipeline candidates and for working capital[630]