Bicycle Therapeutics(US:BCYC)2021-11-03 16:00PART I - FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) For the nine months ended September 30, 2021, Bicycle Therapeutics reported a net loss of $48.8 million, an increase from the $33.6 million loss in the same period of 2020, driven by higher research and development and general administrative expenses. Collaboration revenues grew to $7.9 million from $6.5 million year-over-year. The company's financial position strengthened, with cash increasing to $259.5 million from $136.0 million at year-end 2020, primarily due to significant financing activities, including proceeds from an at-the-market (ATM) offering and a new debt facility. Total assets grew to $281.3 million, and total liabilities increased to $110.5 million, largely from new debt and increased deferred revenue from collaboration agreements Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | Sep 30, 2021 (in thousands) | Dec 31, 2020 (in thousands) | | :--- | :--- | :--- | | Cash | $259,524 | $135,990 | | Total current assets | $272,872 | $155,723 | | Total assets | $281,333 | $161,152 | | Deferred revenue (current & long-term) | $62,507 | $35,156 | | Total liabilities | $110,510 | $65,692 | | Total shareholders' equity | $170,823 | $95,460 | Condensed Consolidated Statements of Operations Highlights (Unaudited) | Metric | Three Months Ended Sep 30, 2021 (in thousands) | Three Months Ended Sep 30, 2020 (in thousands) | Nine Months Ended Sep 30, 2021 (in thousands) | Nine Months Ended Sep 30, 2020 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Collaboration revenues | $4,333 | $3,842 | $7,926 | $6,542 | | Research and development | $10,513 | $7,363 | $31,924 | $23,091 | | General and administrative | $8,114 | $7,154 | $23,596 | $18,351 | | Loss from operations | $(14,294) | $(10,675) | $(47,594) | $(34,900) | | Net loss | $(14,678) | $(10,138) | $(48,782) | $(33,577) | | Net loss per share | $(0.59) | $(0.52) | $(2.06) | $(1.81) | Condensed Consolidated Statements of Cash Flows Highlights (Unaudited, Nine Months Ended) | Cash Flow Activity | Sep 30, 2021 (in thousands) | Sep 30, 2020 (in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | $(4,359) | $(1,172) | | Net cash used in investing activities | $(963) | $(716) | | Net cash provided by financing activities | $130,061 | $61,099 | | Net increase in cash | $123,534 | $57,725 | Note 1: Nature of the Business and Basis of Presentation Bicycle Therapeutics is a clinical-stage biopharmaceutical company developing a novel class of medicines called Bicycles, with an initial focus on oncology. The company is advancing several clinical programs: BT5528, BT8009, and BT7480, alongside the Cancer Research UK (CRUK) sponsored trial for BT1718. The company has a history of significant operating losses, with a net loss of $48.8 million for the first nine months of 2021 and an accumulated deficit of $200.3 million. Despite this, management believes existing cash is sufficient to fund operations for at least the next twelve months, supported by recent financing from an at-the-market (ATM) offering and a loan agreement with Hercules Capital - The company's initial internal programs are focused on oncology, with key candidates being BT5528 (targeting EphA2), BT8009 (targeting Nectin-4), and BT7480 (a Bicycle TICA targeting Nectin-4 and agonizing CD137). BT1718 is being investigated in a trial sponsored and funded by Cancer Research UK32 - As of September 30, 2021, the company had raised net proceeds of $150.7 million from its at-the-market (ATM) offering program34 - The company entered into a loan agreement with Hercules Capital for up to $40.0 million, of which $30.0 million was drawn as of March 10, 20213538 - The company has incurred recurring losses since inception, including a net loss of $48.8 million for the nine months ended September 30, 2021, and had an accumulated deficit of $200.3 million. Management expects cash to be sufficient to fund operations for at least twelve months from the report's issuance date40 Note 9: Significant Agreements The company's revenue is derived from collaboration agreements with Ionis, Genentech, DDF, AstraZeneca, and Oxurion. In July 2021, a significant new collaboration was established with Ionis, which included a $31.0 million upfront payment and an $11.0 million equity investment. This new agreement, along with ongoing activities with Genentech, drove an increase in deferred revenue to $62.5 million as of September 30, 2021. Revenue is recognized as performance obligations, such as R&D services and licenses, are satisfied over time Collaboration Revenues (in thousands) | Partner | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Ionis | $2,066 | $— | | Genentech | $4,142 | $3,066 | | AstraZeneca | $1,404 | $944 | | Oxurion | $— | $2,362 | | Dementia Discovery Fund | $314 | $170 | | Total | $7,926 | $6,542 | - On July 9, 2021, the company entered into a collaboration and license agreement with Ionis, receiving a $31.0 million upfront payment and a concurrent $11.0 million equity investment. The total transaction price, including a premium on the share purchase and other fees, was determined to be $38.0 million9092100 - The company's deferred revenue balance increased from $35.2 million at the beginning of 2021 to $62.5 million as of September 30, 2021, primarily due to additions from the new Ionis collaboration ($34.4 million)150 - In August 2021, AstraZeneca terminated collaboration activities related to the sixth target under an option agreement, resulting in the recognition of $1.1 million in deferred revenue143145 Note 11: Commitments and Contingencies This section details the company's primary commitments, including operating leases for its facilities in the U.S. and U.K., legal proceedings, and royalty arrangements. In June 2021, the company exercised its option to renew its Cambridge, U.K. lease for five years. A significant legal matter with Pepscan was settled in November 2020, resulting in an upfront payment and future milestone obligations. The company also has a contingent liability related to the Cancer Research UK-funded trial for BT1718 - In June 2021, the company exercised its option to renew its Cambridge, U.K. lease for five years, commencing December 12, 2021171 - The company settled litigation with Pepscan in November 2020, agreeing to pay €3.0 million upfront, €1.0 million on the first anniversary, and potential future milestones valued up to $92.4 million. A liability of $1.2 million related to this was on the balance sheet as of September 30, 2021174176 - A liability of $3.0 million was recorded as of September 30, 2021, related to costs incurred by Cancer Research UK for the BT1718 clinical trial, which the company may be obligated to repay under certain conditions158160 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, highlighting an increase in both collaboration revenues and operating expenses for the third quarter and first nine months of 2021 compared to 2020. The higher expenses were driven by advancing clinical programs, particularly BT8009, and increased headcount. The company's liquidity remains strong, with $259.5 million in cash as of September 30, 2021, which is expected to fund operations for at least the next 12 months. This position was bolstered by proceeds from an ATM offering, debt financing, and the new Ionis collaboration. The impact of COVID-19 on operations has been limited, but remains a monitored risk - The company is a clinical-stage biopharmaceutical firm developing a novel class of medicines called Bicycles. Key clinical programs include BT5528, BT8009, BT1718, and BT7480, primarily for oncology indications193195 Comparison of Results of Operations (in thousands) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Collaboration Revenues | $4,333 | $3,842 | $7,926 | $6,542 | | R&D Expenses | $10,513 | $7,363 | $31,924 | $23,091 | | G&A Expenses | $8,114 | $7,154 | $23,596 | $18,351 | | Net Loss | $(14,678) | $(10,138) | $(48,782) | $(33,577) | - The increase in R&D expenses for the nine months ended Sep 30, 2021 was primarily due to increased clinical program development for BT8009, costs for collaboration agreements, and higher employee-related expenses from increased headcount250 - As of September 30, 2021, the company had cash of $259.5 million and believes this will fund operating expenses and capital requirements for at least 12 months. This is supported by recent financing activities, including $102.6 million net from its ATM program and $15.0 million in debt proceeds in 2021213273 Item 3. Quantitative and Qualitative Disclosure About Market Risk The company's primary market risks are interest rate sensitivity and foreign currency exchange risk. Interest rate risk stems from its cash holdings and variable-rate debt, though the impact of a 1% rate change is not expected to be material. Foreign currency risk arises from its international operations, with transactions denominated in U.S. dollars, British Pounds Sterling, and Euros. The company does not currently use hedging instruments to mitigate these risks - The company is subject to interest rate risk from its $259.5 million in cash and $30.0 million in debt with Hercules. The debt has a variable rate component but is currently at its floor of 8.85%297298 - The company has significant foreign currency exchange risk as its UK subsidiaries use the British Pound Sterling (GBP) as their functional currency, while the consolidated statements are presented in U.S. Dollars (USD). Exchange rate fluctuations are recorded in general and administrative expense299300 Item 4. Controls and Procedures Based on an evaluation as of September 30, 2021, the company's management, including the Chief Executive Officer and Chief Financial Officer, concluded that its disclosure controls and procedures were effective. There were no material changes to the company's internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2021304 - No changes in internal control over financial reporting occurred during the quarter ended September 30, 2021, that have materially affected, or are reasonably likely to materially affect, internal controls305 PART II - OTHER INFORMATION Item 1. Legal Proceedings The company provides an update on European patent opposition proceedings against Dyax Corp. One of Dyax's patents was revoked, with the decision becoming final in August 2021. An appeal is pending on a second related patent, with a hearing scheduled for November 2022 - In a European patent opposition proceeding, Dyax Corp's European patent 2 374 472 was revoked, and the decision became final on August 17, 2021, as no appeal was filed310 - An appeal is ongoing regarding Dyax Corp's European patent 1 854 477, with a hearing scheduled for November 15, 2022309 Item 1A. Risk Factors The company details significant risks that could adversely affect its business. Key risks include its history of operating losses and need for future funding; dependence on the success of its novel and early-stage product candidates (BTCs and Bicycle TICAs); reliance on third parties for clinical trials and manufacturing; potential for undesirable side effects in clinical trials; and challenges in obtaining regulatory approval and market acceptance. The company also highlights risks related to intellectual property protection, competition from larger pharmaceutical companies, potential impacts from COVID-19 and Brexit, and the complexities of international operations and regulations - The company has a history of significant operating losses, with an accumulated deficit of $200.3 million as of September 30, 2021, and expects to incur increasing losses for the foreseeable future, requiring substantial additional funding313323 - The company is substantially dependent on the success of its early-stage product candidates from its BTC and Bicycle TICA programs, which represent a new category of medicine and may be subject to heightened regulatory scrutiny335341 - The company relies on third parties, such as Cancer Research UK, CROs, and CMOs, to conduct clinical trials and manufacture product candidates, which increases risks related to delays, quality control, and supply sufficiency511518 - The business faces risks from the ongoing COVID-19 pandemic, which could disrupt clinical trials, supply chains, and access to capital. Additionally, as a UK-based company, it is subject to risks associated with Brexit, including regulatory divergence and potential trade barriers469391 - The company faces significant competition and risks related to intellectual property, including the ability to obtain and maintain patent protection and the possibility of costly infringement litigation417533561 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item is reported as not applicable, indicating no unregistered sales of equity securities occurred during the reporting period - Not Applicable644 Item 3. Defaults Upon Senior Securities This item is reported as not applicable, indicating no defaults upon senior securities - Not Applicable645 Item 4. Mine Safety Disclosures This item is reported as not applicable as it is not relevant to the company's operations - Not Applicable646 Item 5. Other Information This item is reported as not applicable, indicating no other material information was required to be disclosed - Not Applicable647 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q. Key documents include the Collaboration and License Agreement with Ionis Pharmaceuticals, Inc., a related Share Purchase Agreement, and certifications by the Principal Executive Officer and Principal Financial Officer - Key exhibits filed include the Collaboration and License Agreement and the Share Purchase Agreement with Ionis Pharmaceuticals, Inc., both dated July 9, 2021648 - Standard officer certifications required under the Sarbanes-Oxley Act of 2002 (Sections 302 and 906) are also included as exhibits648