BICYCLE THERAPEUTICS PLC You should read this discussion and analysis of our financial condition and consolidated results of operations together with our unaudited condensed consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited financial statements and related notes for the year endedDecember 31, 2021 , included in our Annual Report on Form 10-K for the year endedDecember 31, 2021 , or the 2021 Annual Report, which was filed with theSecurities and Exchange Commission , orSEC , onMarch 1, 2022 . Some of the information contained in this discussion and analysis or set forth elsewhere in this report, including statements of our plans, objectives, expectations and intentions, contain forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the "Risk Factors" section of this report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Please also see the section titled "Forward-Looking Statements."
Overview
We are a clinical-stage biopharmaceutical company developing a novel class of medicines, which we refer to as Bicycles, for diseases that are underserved by existing therapeutics. Bicycles are fully synthetic short peptides constrained to form two loops which stabilize their structural geometry. This constraint facilitates target binding with high affinity and selectivity, making Bicycles attractive candidates for drug development. Bicycles are a unique therapeutic modality combining the pharmacology usually associated with a biologic with the manufacturing and pharmacokinetic, or PK, properties of a small molecule. The relatively large surface area presented by Bicycles allow targets to be drugged that have historically been intractable to non-biological approaches. Bicycles are excreted by the kidney rather than the liver and have shown no signs of immunogenicity to date, which we believe together support a favorable toxicological profile. We have a novel and proprietary phage display screening platform which we use to identify Bicycles in an efficient manner. The platform initially displays linear peptides on the surface of engineered bacteriophages, or phages, before "on-phage" cyclization with a range of small molecule scaffolds which can confer differentiated physicochemical and structural properties. Our platform encodes quadrillions of potential Bicycles which can be screened to identify molecules for optimization to potential product candidates. We have used this powerful screening technology to identify our current portfolio of candidates in oncology and intend to use it in conjunction with our collaborators to seek to develop additional future candidates across a range of other disease areas. Our product candidates, BT5528, BT8009, and BT1718, are each a Bicycle® Toxin Conjugate, or BTC™. These Bicycles are chemically attached to a toxin that when administered is cleaved from the Bicycle and kills the tumor cells. We are evaluating BT5528, a second-generation BTC targeting Ephrin type A receptor 2, or EphA2, in a company-sponsored Phase I/II clinical trial and BT8009, a second-generation BTC targeting Nectin-4, in a company-sponsored Phase I/II clinical trial. In addition, BT1718 is being developed to target tumors that express Membrane Type 1 matrix metalloproteinase, or MT1 MMP, and is being investigated for safety, tolerability and efficacy in an ongoing Phase I/IIa clinical trial sponsored and fully funded by the Cancer Research UK Centre for Drug Development, orCancer Research UK . In addition, our other product candidates, BT7480 and BT7455, are each a Bicycle tumor-targeted immune cell agonist®, or Bicycle TICATM. A Bicycle TICA links immune cell receptor binding Bicycles to tumor antigen binding Bicycles. We are evaluating BT7480, a Bicycle TICA targeting Nectin-4 and agonizing CD137, in a company-sponsored Phase I/II clinical trial, and we are conducting IND-enabling studies for BT7455, an EphA2/CD137 Bicycle TICA. Our discovery pipeline in oncology includes Bicycle-based systemic immune cell agonists and Bicycle TICAs. OnOctober 7, 2021 , we announced interim results from our Phase I clinical trial of BT5528 and preliminary results from our ongoing Phase 1 clinical trial of BT8009. We observed signs of anti-tumor activity in our clinical trial of BT5528 in patients with urothelial and ovarian cancer and established a recommended Phase II dose range. OnJune 8, 2022 , we announced that the first patient had been dosed in the expansion portion of the Phase I/II study of BT5528 in urothelial and ovarian cancers, as well as in a basket cohort of other solid tumors, including non-small cell lung cancer, 31
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triple-negative breast cancer, head and neck cancer, and esophageal cancer. Enrollment in these cohorts remains ongoing.
In our ongoing Phase I clinical trial of BT8009, we observed signs of anti-tumor activity in urothelial cancer patients and presented updated results onApril 11, 2022 . The Phase I clinical trial remains ongoing. Enrollment in the ongoing Phase IIa portion of a Phase I/IIa clinical trial of BT1718 sponsored and fully funded byCancer Research UK has been ongoing. Enrollment in the BT7480 Phase I trial is ongoing and is progressing on schedule during the dose escalation portion of the clinical trial. Beyond our wholly owned oncology portfolio, we are collaborating with biopharmaceutical companies and organizations in therapeutic areas in which we believe our proprietary Bicycle screening platform can identify therapies to treat diseases with significant unmet medical need. Our partnered programs include collaborations in immuno-oncology, anti-infective, cardiovascular, ophthalmology, dementia, central nervous system, neuromuscular and respiratory indications. COVID-19 Business Update We continue to closely monitor the ongoing COVID-19 situation. We have allowed our non-laboratory-based employees to return to the office, however, many non-laboratory-based employees continue to work remotely. In light of continually changing circumstances regarding infection rates and local government recommendations, or if additional restrictions emerge as a result of COVID-19 variants, we may be required to suspend or reverse efforts to return to the office in the future. With respect to clinical development, our CROs have taken measures to utilize remote and virtual approaches, as necessary, including remote patient monitoring where possible, to maintain patient safety and trial continuity and to preserve trial integrity. Changes in circumstances related to the ongoing COVID-19 pandemic could result in pauses in or other impacts on enrollment. We could also see an impact on the ability to report trial results, or interact with regulators, ethics committees or other important agencies due to limitations in regulatory authority employee resources or otherwise. In addition, we cannot guarantee that our CROs or other third parties will continue to perform their contractual duties in a timely and satisfactory manner. If additional new variants of COVID-19 emerge, we could experience significant disruptions to our clinical development timelines, which would adversely affect our business, financial condition, results of operations and growth prospects. As for our third-party manufacturers, distributors and other partners, we are working closely with them to manage our supply chain activities and mitigate potential disruptions to our clinical trial materials and supplies as a result of the ongoing COVID-19 pandemic. We currently expect to have adequate global supply of clinical trial materials and supplies to support our current clinical trial activities. However, we could experience disruptions to our supply chain and operations, and associated delays in the manufacturing and supply of our products, which would adversely impact our ability to provide investigational product to our clinical trial sites and to generate sales of and revenues from our approved products, if approved. Our laboratories in theUnited Kingdom andthe United States remain operational.
Financial Overview
Since our inception, we have devoted substantially all of our resources to developing our Bicycle platform and our product candidates, BT5528, BT8009, BT1718, BT7480, BT7455 and BT7401, conducting research and development of our product candidates and preclinical programs, raising capital and providing general and administrative support for our operations. To date, we have financed our operations primarily with proceeds from the sale of our American Depositary Shares, or ADSs, ordinary shares, and convertible preferred shares, proceeds received from upfront payments, research and development payments, and development milestone payments from our collaboration agreements with Ionis Pharmaceuticals, Inc., or Ionis,Genentech Inc. , orGenentech , theDementia Discovery Fund , or DDF, Sanofi (formerlyBioverativ Inc. ),AstraZeneca AB , or AstraZeneca and Oxurion NV, or Oxurion; and borrowings pursuant to our debt facility with Hercules Capital, Inc., or Hercules. From our inception in 2009 throughJune 30, 2022 , we have received gross proceeds of$558.2 million from the sale of ADSs, ordinary shares and convertible preferred shares, including the proceeds from our initial public offering, follow-on offering and at-the- 32 Table of Contents
market, or ATM, offering program; and$125.2 million of cash payments under our collaboration revenue arrangements, including$46.6 million from Ionis,$44.0 million fromGenentech ,$1.7 million from DDF,$10.3 million from AstraZeneca,$15.0 million from Sanofi, and$6.6 million from Oxurion; and borrowings of$30.0 million pursuant to our Loan and Security Agreement, or Loan Agreement, with Hercules. We do not have any products approved for sale and have not generated any revenue from product sales. Since our inception, we have incurred significant operating losses. Our ability to generate product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of one or more of our product candidates. Our net losses were$26.8 million and$54.4 million for the three and six months endedJune 30, 2022 , respectively. As ofJune 30, 2022 , we had an accumulated deficit of$272.8 million . These losses have resulted primarily from costs incurred in connection with research and development activities and general and administrative costs associated with our operations. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. We anticipate that our expenses and capital requirements will increase substantially in connection with our ongoing activities, particularly as we advance the preclinical activities and clinical trials of our product candidates and, if any product candidates are approved, pursue the commercialization of such product candidates by building internal sales and marketing capabilities. We expect that our expenses and capital requirements will increase substantially if and as we:
? continue our development of our product candidates, including conducting future
clinical trials of BT5528, BT8009, BT7480 and BT1718;
? progress the preclinical and clinical development of BT7455 and BT7401;
? seek to identify and develop additional product candidates;
develop the necessary processes, controls and manufacturing data to obtain
? marketing approval for our product candidates and to support manufacturing to
commercial scale;
? develop, maintain, expand and protect our intellectual property portfolio;
? seek marketing approvals for our product candidates that successfully complete
clinical trials, if any;
hire and retain additional personnel, such as non-clinical, clinical,
? pharmacovigilance, quality assurance, regulatory affairs, manufacturing,
distribution, legal, compliance, medical affairs, commercial and scientific
personnel;
? acquire or in-license other products and technologies;
expand our infrastructure and facilities to accommodate our growing employee
? base, including adding equipment and infrastructure to support our research and
development; and
add operational, financial and management information systems and personnel,
? including personnel to support our research and development programs and any
future commercialization efforts.
We do not expect to generate revenue from product sales unless and until we
successfully complete development and obtain marketing approval for one or more
of our product candidates, which we expect will take many years and is subject
to significant uncertainty. We have no commercial-scale manufacturing facilities
of our own, and all of our manufacturing activities have been and are planned to
be contracted out to third parties. Additionally, we currently utilize
third-party contract research organizations, or CROs, to carry out our clinical
development activities. If we seek to obtain marketing approval for any of our
product candidates from which we obtain promising results in
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clinical development, we expect to incur significant commercialization expenses as we prepare for product sales, marketing, manufacturing, and distribution.
As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances, charitable and governmental grants, monetization transactions or licensing arrangements. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back, or discontinue the development and commercialization of one or more of our product candidates. Both the ongoing COVID-19 pandemic and theRussia -Ukraine war have resulted in a significant disruption of global financial markets. If the disruption persists and deepens, whether as a result of these events or otherwise, we could experience an inability to access additional capital. Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations. As ofJune 30, 2022 , we had cash and cash equivalents of$372.8 million . We believe that our existing cash will enable us to fund our operating expenses and capital expenditure requirements for at least 12 months from the date of filing of this Quarterly Report on Form 10-Q. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our available capital resources sooner than we expect. See "- Liquidity and Capital Resources" and "Capital Resources and Funding Requirements."
Components of Our Results of Operations
Collaboration Revenues
To date, we have not generated any revenue from product sales and we do not expect to generate any revenue from product sales for the foreseeable future. Our revenue primarily consists of collaboration revenue under our arrangements with our collaboration partners, including amounts that are recognized related to upfront payments, milestone payments and option exercise payments, and amounts due to us for research and development services. In the future, revenue may include additional milestone payments and option exercise payments, and royalties on any net product sales under our collaborations. We expect that any revenue we generate will fluctuate from period to period as a result of the timing and amount of license, research and development services, milestone
and other payments. Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research and development activities, including our discovery efforts, and the development of our product candidates, which include:
? employee-related expenses including salaries, benefits, and share-based
compensation expense;
expenses incurred under agreements with third parties that conduct research and
? development, preclinical activities, clinical activities and manufacturing on
our behalf;
? the cost of consultants;
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? the cost of lab supplies and acquiring, developing and manufacturing
preclinical study materials and clinical trial materials;
? costs related to compliance with regulatory requirements; and
facilities, depreciation, and other expenses, which include direct and
? allocated expenses for rent and maintenance of facilities, and other operating
costs.
Research and development costs are expensed as incurred. Costs for certain activities are recognized based on an evaluation of the progress to completion of specific tasks. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our condensed consolidated financial statements as a prepaid expense or accrued research and development expenses. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are capitalized. The capitalized amounts are expensed as the related goods are delivered or the services are performed.
Our direct external research and development expenses are tracked on a program-by-program basis and consist of costs, such as fees paid to consultants, contractors and contract manufacturing organizations, or CMOs, in connection with our preclinical and clinical development activities. Costs incurred after a product candidate has been designated and that are directly related to the product candidate are included in direct research and development expenses for that program. Costs incurred prior to designating a product candidate are included in other discovery and platform related expense. We do not allocate employee costs, costs associated with our discovery efforts, laboratory supplies, and facilities, including depreciation or other indirect costs, to specific product development programs because these costs are deployed across multiple product development programs and, as such, are not separately classified. InDecember 2016 , we entered into a Clinical Trial and License Agreement withCancer Research Technology Limited , or CRTL andCancer Research UK , pursuant to which the Cancer Research UK Centre for Drug Development is sponsoring and funding a Phase I/IIa clinical trial for our product candidate, BT1718, in patients with advanced solid tumors.Cancer Research UK has designed and prepared and is carrying out and sponsoring the clinical trial at its own cost. Upon the completion of the Phase I/IIa clinical trial, we have the right to obtain a license to the results of the clinical trial upon the payment of a milestone, in cash and ordinary shares, with a combined value in the mid six digit dollar amount. If such license is not acquired, or if it is acquired and the license is terminated and we decide to abandon development of all products that deliver cytotoxic payloads to the MT1 target antigen, CRTL may elect to receive an assignment and exclusive license to develop and commercialize the product on a revenue sharing basis (in which case we will receive tiered royalties of 70% to 90% of the net revenue depending on the stage of development when the license is granted is less certain costs, as defined in the agreement). The Cancer ResearchUK Agreement contains additional future milestone payments upon the achievement of development, regulatory and commercial milestones, payable in cash and shares, with an aggregate total value of$50.9 million , as well as royalty payments based on a single digit percentage on net sales of products developed. The Cancer ResearchUK Agreement can be terminated by either party upon an insolvency event, material breach of the terms of the contract, upon a change in control involving a tobacco related entity, and in certain other specified circumstances, and includes provisions that require the repayment of costs toCancer Research UK upon certain termination events. The costs incurred byCancer Research UK are recorded as a liability in accordance with ASC 730, Research and Development as the payments are not based solely on the results of the research and development having future economic benefit. The accrual of the liability is recorded as incremental research and development expense in the condensed consolidated statements of operations and comprehensive loss. Upon the completion of the Phase IIa part of the clinical trial, we expect research and development expenses to increase significantly as we expect to fund the continued development of BT1718, as well as incur additional development milestone payments. Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and 35
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development expenses will continue to increase for the foreseeable future as a result of our expanded portfolio of product candidates and as we: (i) continue the clinical development and seek to obtain marketing approval for our product candidates, including BT5528, BT8009, BT7480 and BT1718; (ii) initiate clinical trials for our product candidates, including BT7455; and (iii) build our in-house process development and analytical capabilities and continue to discover and develop additional product candidates. The successful development of our product candidates is highly uncertain. As such, at this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the remainder of the development of these product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from our product candidates. This is due to the numerous risks and uncertainties associated with developing products, including the uncertainty of:
whether our business will be adversely affected by the ongoing COVID-19
pandemic, which could materially affect our operations, delay our research
? efforts and clinical trials and cause significant disruption in the operations
and business of third-party manufacturers, contract research organizations, or
CROs, other service providers, and collaborators with whom we conduct business;
and
completing research and preclinical and clinical development of our product
? candidates, including conducting future clinical trials of BT5528, BT8009,
BT7480 and BT1718;
? progressing the preclinical and clinical development of BT7455 and BT7401;
? establishing an appropriate safety profile with IND-enabling studies to advance
our preclinical programs into clinical development;
? identifying new product candidates to add to our development pipeline;
? successful enrollment in, and the initiation and completion of clinical trials;
? the timing, receipt and terms of any marketing approvals from applicable
regulatory authorities;
? commercializing the product candidates, if and when approved, whether alone or
in collaboration with others;
? establishing commercial manufacturing capabilities or making arrangements with
third party manufacturers;
? the development and timely delivery of commercial-grade drug formulations that
can be used in our clinical trials;
? addressing any competing technological and market developments, as well as any
changes in governmental regulations;
negotiating favorable terms in any collaboration, licensing or other
? arrangements into which we may enter and performing our obligations under such
arrangements;
maintaining, protecting and expanding our portfolio of intellectual property
? rights, including patents, trade secrets and know-how, as well as obtaining and
maintaining regulatory exclusivity for our product candidates;
? continued acceptable safety profile of the drugs following approval; and
? attracting, hiring and retaining qualified personnel.
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A change in the outcome of any of these variables with respect to the
development of a product candidate could mean a significant change in the costs
and timing associated with the development of that product candidate. For
example, the FDA, EMA or another regulatory authority may require us to conduct
clinical trials beyond those that we anticipate will be required for the
completion of clinical development of a product candidate, or we may experience
significant trial delays due to patient enrollment or other reasons, including
the impacts of the ongoing COVID-19 pandemic, in which case we would be required
to expend significant additional financial resources and time on the completion
of clinical development. Changes in circumstances related to the ongoing
COVID-19 pandemic could result in pauses in or other impacts on enrollment. In
addition, we may obtain unexpected results from our clinical trials and we may
elect to discontinue, delay or modify clinical trials of some product candidates
or focus on others. Identifying potential product candidates and conducting
preclinical testing and clinical trials is a time-consuming, expensive and
uncertain process that takes years to complete, and we may never generate the
necessary data or results required to obtain marketing approval and achieve
product sales. In addition, our product candidates, if approved, may not achieve
commercial success.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and other related costs, including share-based compensation, for personnel in our executive, finance, corporate and business development and administrative functions. General and administrative expenses also include professional fees for legal, patent, accounting, auditing, tax and consulting services, insurance, travel expenses and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs. Foreign currency transactions in currencies different from the functional currency of ourU.K. entities are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange differences resulting from the settlement of such transactions and from the translation at period-end exchange rates in foreign currencies are recorded in general and administrative expense in the statement of operations and comprehensive loss. As such, our operating expenses may be impacted by future changes in exchange rates. See "Quantitative and Qualitative Disclosures About Market Risks" for further discussion. We expect that our general and administrative expenses will increase in the future as we increase our general and administrative headcount to support our continued research and development and potential commercialization of our portfolio of product candidates. We also expect to continue to incur increased expenses associated with being a public company including costs of accounting, audit, information systems, legal, intellectual property, regulatory and tax compliance services, director and officer insurance and investor and public
relations. Other Income (Expense), net Interest Income
Interest income consists primarily of interest earned on our cash held in operating accounts.
Interest Expense
Interest expense consists primarily of interest expense for financing arrangements. OnSeptember 30, 2020 , we entered into the Loan Agreement with Hercules and borrowed$15.0 million . OnMarch 10, 2021 , we entered into the First Amendment to the Loan and Security Agreement and borrowed an additional$15.0 million . Benefit from Income Taxes We are subject to corporate taxation inthe United States and theUnited Kingdom . We have generated losses since inception and have therefore not paidU.K. corporation tax. The benefit from income taxes presented in our condensed consolidated statements of operations and comprehensive loss is mainly the result of deferred tax assets benefited inthe United States that do not have a valuation allowance against them because of profits that will be generated by an intercompany service agreement. 37
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The research and development tax credit received in theUnited Kingdom is recorded as a reduction to research and development expenses. TheU.K. research and development tax credit, as described below, is fully refundable to us after surrendering tax losses and is not dependent on current or future taxable income. As a result, we have recorded the entire benefit from theU.K. research and development tax credit as a reduction to research and development expenses and is not reflected as part of the income tax provision. If, in the future, anyU.K. research and development tax credits generated are needed to offset a corporate income tax liability in theUnited Kingdom , that portion would be recorded as a benefit within the income tax provision and any refundable portion not dependent on taxable income would continue to be recorded as a reduction to research and development expenses. As a company that carries out extensive research and development activities, we seek to benefit from one of twoU.K. research and development tax credit cash rebate regimes: The Small and Medium-sized Enterprises R&D Tax Credit Program, or SME Program, and the Research and Development Expenditure program, or RDEC Program. Qualifying expenditures largely comprise employment costs for research staff, consumables, expenses incurred under agreements with third parties that conduct research and development, preclinical activities, clinical activities and manufacturing on our behalf and certain internal overhead costs incurred as part of research projects. Based on criteria established byU.K. law, a portion of expenditures being carried out in relation to our pipeline research and development, clinical trials management and manufacturing development activities were eligible for the SME Program for the year endedDecember 31, 2021 . For the year endingDecember 31, 2022 , the payable credit claims under the SME Program in excess of £20,000 will be subject to a limitation of three times the total PAYE and NIC liability paid by the Company, unless an exception applies. That exception requires the Company to be creating, taking steps to create, or managing intellectual property, as well as having qualifying research and development expenditure in respect of connected parties which does not exceed 15% of the total claimed. We expect a portion of qualifying research and development expenditures that are subject to the research and development tax credit will decrease in future periods. UnsurrenderedU.K. losses may be carried forward indefinitely to be offset against future taxable profits, subject to numerous utilization criteria and restrictions. The amount that can be offset each year is limited to £5.0 million plus an incremental 50% ofU.K. taxable profits. Value Added Tax, or VAT, is broadly charged on all taxable supplies of goods and services by VAT-registered businesses. Under current rates, an amount of 20% of the value, as determined for VAT purposes, of the goods or services supplied is added to all sales invoices and is payable to HMRC. Similarly, VAT paid on purchase invoices is generally reclaimable from HMRC and is included as a component of prepaid and other current assets in our condensed consolidated
balance sheets.
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Results of Operations
Comparison of the Three Months Ended
The following table summarizes our results of operations for the three months
ended
Three Months Ended
June 30,
2022 2021 Change
(in thousands)
Collaboration revenues $ 4,378 $ 1,785 $ 2,593
Operating expenses:
Research and development 19,854 11,722 8,132
General and administrative 11,824 7,340 4,484
Total operating expenses 31,678 19,062 12,616
Loss from operations (27,300) (17,277) (10,023)
Other income (expense):
Interest income 908 23 885
Interest expense (883) (819) (64)Total other income (expense), net 25 (796)
821
Net loss before income tax provision (27,275) (18,073) (9,202) Benefit from income taxes (447) (160) (287) Net loss$ (26,828) $ (17,913) $ (8,915) Collaboration Revenues
Collaboration revenues increased by$2.6 million in the three months endedJune 30, 2022 , compared to the three months endedJune 30, 2021 , primarily due to increases of$2.3 million from our collaboration with Ionis entered into inJuly 2021 , and$1.2 million from our collaboration with AstraZeneca as a result of the expiration of a material right upon the termination of the collaboration activities related to the fifth target, offset by a decrease of$0.8 million from our collaboration withGenentech . 39
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Research and Development Expenses
The table below summarizes our research and development expenses for the period:
Three Months Ended June 30,
2022 2021 Change
(in thousands)
BT5528 (EphA2) $ 2,544 $ 1,486 $ 1,058
BT8009 (Nectin4) 2,419 1,870 549
BT1718 (MT1) 161 182 (21)Bicycle tumor-targeted immune cell agonists 3,175 2,225 950 Other discovery and platform related expense 4,655 4,344 311 Employee and contractor related expenses 7,168
3,812 3,356
Share-based compensation 2,642 1,089 1,553
Facility expenses 1,560 383 1,177Research and development incentives (4,470) (3,669) (801) Total research and development expenses$ 19,854 $
11,722
Research and development expenses increased by$8.1 million in the three months endedJune 30, 2022 , compared to the three months endedJune 30, 2021 , due primarily to an increase of$2.8 million in direct program spend, primarily associated with clinical program expenses for BT5528 and BT8009 and Bicycle TICA program development expenses, as well as increases of$3.4 million in employee and contractor related expenses attributable to increased headcount,$1.6 million of incremental share-based compensation expense, and$1.2 million in facilities-related expenses primarily associated with ourU.K. lease entered into inDecember 2021 . These increases were offset by$0.8 million of incremental research and development incentives, includingU.K. research and development tax credit reimbursements due to the corresponding increase in research and development spending. We begin to separately track program expenses at candidate nomination, at which point we will accumulate all direct external program costs to support that program to date. ThroughJune 30, 2022 , we have incurred approximately$23.7 million ,$22.4 million ,$14.6 million , and$16.0 million of direct external expenses for the development of the BT5528, BT8009, BT1718, and Bicycle TICA programs, respectively, since their candidate nominations.
General and Administrative Expenses
The table below summarizes our general and administrative expenses for the
period:
Three Months Ended June 30,
2022 2021 Change
(in thousands)
Personnel related costs $ 3,640 $ 2,306 $ 1,334
Professional and consulting fees 2,314 2,077 237
Other general and administration costs 2,159 1,477 682
Share-based compensation 3,031 1,486 1,545
Effect of foreign exchange rates 680
(6) 686
Total general and administrative expenses
General and administrative expenses increased by$4.5 million in the three months endedJune 30, 2022 , compared to the three months endedJune 30, 2021 . This increase is primarily due to a$1.5 million increase in share-based compensation, an increase of$1.3 million in personnel related costs due to higher headcount, an increase of$0.7 million in other general and administrative costs, including insurance expense, to support operations as a public company, and a$0.7 million unfavorable effect of foreign exchange rates. 40 Table of Contents Other Income (Expense), net Other income (expense), net increased by$0.8 million in the three months endedJune 30, 2022 , compared to the three months endedJune 30, 2021 , primarily due to interest income related interest earned on our cash equivalents held in 30-day deposit accounts.
Comparison of the Six Months Ended
The following table summarizes our results of operations for the six months
ended
Six Months Ended June 30,
2022 2021 Change
(in thousands)
Collaboration revenues $ 8,238 $ 3,593 $ 4,645
Operating expenses:
Research and development 34,138 21,415 12,723
General and administrative 28,783 15,479 13,304
Total operating expenses 62,921 36,894 26,027
Loss from operations (54,683) (33,301) (21,382)
Other income (expense):
Interest income 1,126 38 1,088
Interest expense (1,701) (1,341) (360)Total other income (expense), net (575) (1,303)
728
Net loss before income tax provision (55,258) (34,604) (20,654) Benefit from income taxes (866) (500) (366) Net loss$ (54,392) $ (34,104) $ (20,288) Collaboration Revenues Collaboration revenues increased by$4.6 million in the six months endedJune 30, 2022 , compared to the six months endedJune 30, 2021 , primarily due to increases of$4.6 million from our collaboration with Ionis entered into inJuly 2021 and$0.9 million from our collaboration with AstraZeneca as a result of the expiration of a material right upon the termination of the collaboration activities related to the fifth target, offset by a decrease of$0.7 million from our collaboration withGenentech .
Research and Development Expenses
The table below summarizes our research and development expenses for the period:
Six Months Ended June 30,
2022 2021 Change
(in thousands)
BT5528 (EphA2) $ 3,946 $ 2,824 $ 1,122
BT8009 (Nectin4) 3,633 3,496 137
BT1718 (MT1) 348 354 (6)Bicycle tumor-targeted immune cell agonists 4,698 3,466 1,232 Other discovery and platform related expense 9,094 7,624 1,470 Employee and contractor related expenses 12,750
7,694 5,056 Share-based compensation 5,006 2,299 2,707 Facility expenses 2,350 553 1,797
Research and development incentives (7,687) (6,895) (792) Total research and development expenses$ 34,138 $
21,415$ 12,723 41 Table of Contents Research and development expenses increased by$12.7 million in the six months endedJune 30, 2022 , compared to the six months endedJune 30, 2021 , due primarily to an increase of$4.0 million in direct program spend, primarily associated with clinical program expenses for BT5528, Bicycle TICA program development expenses, and increased other discovery and platform related expenses, as well as increases of$5.1 million in employee and contractor related expenses attributable to increased headcount,$2.7 million of incremental share-based compensation expense, and$1.8 million in facilities-related expenses. These increases were offset by$0.8 million of incremental research and development incentives, includingU.K. research and development tax credit reimbursements due to the corresponding increase in research and development spending.
General and Administrative Expenses
The table below summarizes our general and administrative expenses for the
period:
Six Months Ended June 30,
2022 2021 Change
(in thousands)
Personnel related costs $ 6,892 $ 4,182 $ 2,710 Professional and consulting fees 5,998 4,318
1,680
Other general and administration costs 4,235 2,845
1,390
Share-based compensation 10,865 4,097
6,768
Effect of foreign exchange rates 793 37
756
Total general and administrative expenses
General and administrative expenses increased by$13.3 million in the six months endedJune 30, 2022 , compared to the six months endedJune 30, 2021 . This increase is primarily due to a$6.8 million increase in share-based compensation expense primarily associated with our annual employee equity grants inJanuary 2022 , an increase of$2.7 million in personnel related costs due to higher headcount, an increase of$1.7 million in professional and consulting fees, an increase of$1.4 million in other general and administrative costs, including insurance expense, to support operations as a public company, and an unfavorable impact of$0.8 million due to the effect of foreign exchange rates.
Other Income (Expense), net
Other income (expense), net increased by$0.7 million in the six months endedJune 30, 2022 , compared to the six months endedJune 30, 2021 , primarily due to an increase of$1.1 million in interest income related to interest earned on our cash equivalents held in 30-day deposit accounts offset by an increase of$0.4 million in interest expense related to an incremental borrowing of$15.0 million received inMarch 2021 under the First Amendment to the Loan and Security Agreement.
Liquidity and Capital Resources
Liquidity
From our inception throughJune 30, 2022 , we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from our operations. We do not expect to generate significant revenue from sales of any products for several years, if at all. To date, we have financed our operations primarily with proceeds from the sale of our ADSs, ordinary shares, and convertible preferred shares; proceeds received from upfront payments, payments for research and development services, and development milestone payments pursuant to collaboration agreements with Ionis,Genentech , DDF, AstraZeneca, Sanofi and Oxurion; and borrowings pursuant to our Loan Agreement. 42 Table of Contents From our inception in 2009 throughJune 30, 2022 , we have received gross proceeds of$558.2 million from the sale of ADSs, ordinary shares, and convertible preferred shares, including the proceeds from our IPO and our ATM offering program;$125.2 million of cash payments under our collaboration revenue arrangements including,$46.6 million from Ionis,$44.0 million fromGenentech ,$1.7 million from DDF,$10.3 million from AstraZeneca,$15.0 million from Sanofi and$6.6 million from Oxurion; and$30.0 million in borrowings pursuant to our Loan Agreement. We do not have any products approved for sale and have not generated any revenue from product sales.
Cash Flows
The following table summarizes our cash flows for each of the periods presented:
Six Months Ended June 30,
2022 2021
Net cash used in operating activities$ (49,931) $ (26,077) Net cash used in investing activities (14,555)
(794)
Net cash provided by financing activities 645
89,611
Effect of exchange rate changes on cash (2,070)
8
Net (decrease) increase in cash and cash equivalents
Operating Activities Net cash used in operating activities for the six months endedJune 30, 2022 , was$49.9 million as compared to$26.1 million for the six months endedJune 30, 2021 . The increase in cash used in operations is primarily due to an increase in net loss of$20.3 million as described in the Results of Operations above, offset by an increase in non-cash expenses, including$9.5 million of share-based compensation expense, and an increase in cash used by changes in our operating assets and liabilities. The increase in cash used in operating activities was associated with changes in our operating assets and liabilities, primarily driven by changes in accounts receivable of$14.9 million , including a$10.0 million receivable triggered as a result of theGenentech exercise of an expansion option inJune 2022 , prepaid expenses and other current assets of$2.7 million based on timing of payments, offset by changes in deferred revenue of$3.6 million and accrued expenses and other current liabilities of$3.8 million .
Investing Activities
During the six months endedJune 30, 2022 and 2021, we used$14.6 million and$0.8 million , respectively, of cash in investing activities for purchases of property and equipment, consisting primarily of leasehold improvements and laboratory equipment.
Financing Activities
During the six months ended
During the six months endedJune 30, 2021 , net cash provided by financing activities was$89.6 million , primarily consisting of net proceeds from our ATM of$72.8 million and borrowings of$15.0 million under our Loan Agreement with Hercules. 43 Table of Contents Loan Agreement We have an outstanding Loan Agreement, as amended from time to time, with Hercules as agent, consisting of (i) outstanding term loans of$30.0 million and (ii) subject customary conditions, additional term loans of up to an aggregate of$45.0 million , which are available throughDecember 31, 2024 , but have not yet been drawn. Borrowings under the Loan Agreement bear interest at an annual rate equal to the lesser of (x) the greater of (i) 8.05% and (ii) the prime rate as reported in theWall Street Journal plus 4.55% and (y) 9.05%. The interest-only period ends onApril 1, 2025 . We may prepay all or any portion greater than$5.0 million of the outstanding borrowings, subject to a prepayment premium equal to 1.5% prior toDecember 31, 2023 . The Loan Agreement also provides for an end of term charge, payable upon maturity or the repayment of obligations under the Loan Agreement, equal to 5.0% of the principal amount repaid. In connection with the Loan Agreement, we granted Hercules a security interest in substantially all of our personal property and other assets, other than our intellectual property. In addition, the Loan Agreement contains customary affirmative and restrictive covenants and representations and warranties, as well as customary events of default. For additional information on the Hercules Loan Agreement, see Note 6. Long-term debt and Note 15. Subsequent events of our condensed consolidated financial statements.
Capital Resources and Funding Requirements
Our material cash requirements include expenses associated with our ongoing activities, particularly as we advance the preclinical activities and clinical trials of our product candidates and as we:
continue our development of our product candidates, including continuing
? current clinical trials and conducting future clinical trials of BT5528,
BT8009, BT7480 and BT1718;
? progress the preclinical and clinical development of BT7455 and BT7401;
? seek to identify and develop additional product candidates;
develop the necessary processes, controls and manufacturing data to seek to
? obtain marketing approval for our product candidates and to support
manufacturing of product to commercial scale;
? develop, maintain, expand and protect our intellectual property portfolio;
? seek marketing approvals for any of our product candidates that successfully
complete clinical trials, if any;
hire and retain additional personnel, such as non-clinical, clinical,
? pharmacovigilance, quality assurance, regulatory affairs, manufacturing,
distribution, legal, compliance, medical affairs, finance, commercial and
scientific personnel;
? acquire or in-license other products and technologies;
expand our infrastructure and facilities to accommodate our growing employee
? base, including adding equipment and infrastructure to support our research and
development; and
add operational, financial and management information systems and personnel,
? including personnel to support our research and development programs, and any
future commercialization efforts.
If we obtain marketing approval for any product candidate that we identify and
develop, we expect to incur significant commercialization expenses related to
product sales, marketing, manufacturing, and distribution to the extent that
such sales, marketing, and distribution are not the responsibility of our
collaboration partners.
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The following table summarizes our material contractual obligations as of June
30, 2022 , and the effects that such obligations are expected to have on our
liquidity and cash flows in future periods. For additional information, see Note
11. Commitments and continencies of our condensed consolidated financial
statements.
Payments due by period
Less than More than
Total 1 year 1 to 3 years 3 years to 5 years 5 years
(inthousands)
Operating lease commitments (1)$ 17,940 $ 3,858 $ 8,005 $ 5,666$ 411 Debt obligations (2) 37,562 2,889 34,673 - - Total$ 55,502 $ 6,747 $ 42,678 $ 5,666$ 411
Amounts reflect minimum payments due for our office and laboratory space
leases. We have two office leases in
(1) with lease terms through
(2) Amounts in table reflect the contractually required principal, interest, and
the final payment under the Loan Agreement with Hercules as of
In the ordinary course of business, we enter into various agreements with contract research organizations to provide clinical trial services, with contract manufacturing organizations to provide clinical trial materials, and with vendors for preclinical research studies, synthetic chemistry and other services for operating purposes. These payments are not included in the table above since the contracts are generally cancelable with advanced written notice, generally with a notice period of 90 days or less. From the time of notice until termination, we are contractually obligated to make certain minimum payments to the vendors, based on the timing of the notification and the exact terms of the agreement. Our arrangements with CRUK provide for additional future milestone payments upon the achievement of development, regulatory and commercial milestones, payable in cash and shares, with an aggregate total value of$111.2 million , as well as royalty payments based on a single digit percentage on net sales of products developed. In addition, inNovember 2020 , we entered into a settlement and license agreement withPepscan Systems B.V. , and its affiliates, or Pepscan, regarding our use of Pepscan's CLIPS peptide technology, which agreement provides for additional future milestone payments by us upon the achievement of development, regulatory and commercial milestones, with an aggregate total value of$92.4 million . We have not included future payments under this agreement in the table of contractual obligations above since these obligations are contingent upon future events. As ofJune 30, 2022 , we were unable to estimate the timing or likelihood of achieving these milestones. As ofJune 30, 2022 , we had cash and cash equivalents of$372.8 million . We expect that our existing cash will enable us to fund our operating expenses and capital expenditure requirements for at least 12 months from the date of filing of this Quarterly Report on Form 10-Q. We have based our estimates on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development of product candidates and programs, and because the extent to which we may enter into collaborations with third parties for development of our product candidates is unknown, we are unable to estimate the timing and amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates. Our future capital requirements will depend on many factors, including:
our ability to raise capital in light of the impacts of the ongoing COVID-19
? pandemic, the
events on the global financial markets;
the scope, progress, results, and costs of drug discovery, preclinical
? development, laboratory testing, and clinical trials for the product candidates
we may develop;
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our ability to enroll clinical trials in a timely manner and to quickly resolve
? any delays or clinical holds that may be imposed on our development programs,
particularly in light of the ongoing COVID-19 pandemic;
? the costs associated with our manufacturing process development and evaluation
of third-party manufacturers and suppliers;
? the costs, timing and outcome of regulatory review of our product candidates;
the costs of preparing and submitting marketing approvals for any of our
? product candidates that successfully complete clinical trials, and the costs of
maintaining marketing authorization and related regulatory compliance for any
products for which we obtain marketing approval;
the costs of preparing, filing, and prosecuting patent applications,
? maintaining and enforcing our intellectual property and proprietary rights, and
defending intellectual property-related claims;
the costs of future activities, including product sales, medical affairs,
? marketing, manufacturing, and distribution, for any product candidates for
which we receive marketing approval;
the terms of our current and any future license agreements and collaborations;
? and the extent to which we acquire or in-license other product candidates,
technologies and intellectual property.
? the success of our collaborations with Ionis,
Oxurion and other partners;
? our ability to establish and maintain additional collaborations on favorable
terms, if at all; and
? the costs of operating as a public company.
Until such time, if ever, that we can generate product revenue sufficient to achieve profitability, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, monetization transactions, government contracts or other strategic transactions. To the extent that we raise additional capital through the sale of equity, ownership interests of existing holders of our ADSs and ordinary shares will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of holders of our ADSs or ordinary shares. If we raise additional funds through collaboration agreements, strategic alliances, licensing arrangements, monetization transactions, or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves. Future debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. Any debt or equity financing that we raise may contain terms that are not favorable to us or our shareholders. Both the ongoing COVID-19 pandemic and the rapidly evolving conflict betweenRussia andUkraine have resulted in significant disruptions to global financial markets. If these disruptions persist or deepen, we could experience an inability to access additional capital, which could in the future negatively affect our operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce, or eliminate our research and development programs or future commercialization efforts.
Critical Accounting Estimates
Our management's discussion and analysis of financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance withU.S. GAAP. The preparation of our condensed consolidated financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, revenue, costs and expenses, and related disclosures. We base our estimates on historical experience, known trends and events and various other factors that we believe are 46
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reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.
Our critical accounting policies are described under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Estimates" in our 2021 Annual Report, which was filed with theSEC onMarch 1, 2022 . If actual results or events differ materially from the estimates, judgments and assumptions used by us in applying these policies, our reported financial condition and results of operations could be materially affected. Other than as disclosed in Note 2 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, there have been no significant changes to our critical accounting estimates from those described in our 2021 Annual Report.
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