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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019.
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-38916
BICYCLE THERAPEUTICS PLC
(Exact name of registrant as specified in its charter)
England and Wales
(State or Other Jurisdiction of Incorporation or Organization)
Not Applicable
(I.R.S. Employer Identification No.)
B900, Babraham Research Campus
Cambridge, United Kingdom
(Address of Principal Executive Offices)
CB22 3AT
(Zip Code)
Registrant’s telephone number, including area code +44 1223 261503
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Ordinary shares, nominal value £0.01 per share*
American Depositary Shares, each representing one
ordinary share, nominal value £0.01 per share
n/a
BCYC
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
* Not for trading, but only in connection with the listing of the American Depositary Shares on the NASDAQ Global Select Market.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth
company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☐
Smaller reporting company ☒
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value (approximate) of the registrant’s voting and non-voting common equity held by non-affiliates based on the closing price per American
Depositary Share, or ADS, of the registrant’s ADSs on The Nasdaq Global Select Market on June 30, 2019 (the last business day of the registrant’s most recently completed
second fiscal quarter) was $114,461,603.
As of March 5, 2020, the registrant had 17,994,772 ordinary shares, nominal value £0.01 per share, outstanding.
Documents Incorporated by Reference:
Portions of the registrant’s definitive proxy statement, or Proxy Statement, for its 2020 Annual Meeting of Stockholders, which the registrant intends to file pursuant to
Regulation 14A with the Securities and Exchange Commission not later than 120 days after the registrant’s fiscal year ended December 31, 2019, are incorporated by reference
into Part III of this Annual Report on Form 10-K.
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SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS.
This Annual Report on Form 10‑K contains forward-looking statements which are made pursuant to the safe
harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements may be identified by such forward-
looking terminology as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,”
“potential,” “continue” or variations of these words or similar expressions that are intended to identify forward-looking
statements, although not all forward-looking statements contain these words. Any forward-looking statement involves
known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance
or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or
implied by such forward-looking statement. Forward-looking statements include statements, other than statements of
historical fact, about, among other things:
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the initiation, timing, progress and results of our preclinical studies and clinical trials, and our research and
development programs;
our ability to advance our product candidates into, and successfully complete, clinical trials;
our reliance on the success of our product candidates in our Bicycle Toxin Conjugate (“BTC”), tumor-targeted
immune cell agonist programs, and our other pipeline programs;
our ability to utilize our screening platform to identify and advance additional product candidates into clinical
development;
the timing or likelihood of regulatory filings and approvals;
the commercialization of our product candidates, if approved;
our ability to develop sales and marketing capabilities;
the pricing, coverage and reimbursement of our product candidates, if approved;
the implementation of our business model, strategic plans for our business, product candidates and
technology;
the scope of protection we are able to establish and maintain for intellectual property rights covering our
product candidates and technology;
our ability to operate our business without infringing the intellectual property rights and proprietary
technology of third parties;
cost associated with defending intellectual property infringement, product liability and other claims;
regulatory development in the United States, under the laws and regulations of England and Wales, and other
jurisdictions;
estimates of our expenses, future revenues, capital requirements and our needs for additional financing;
the potential benefits of strategic collaboration agreements and our ability to enter into strategic
arrangements;
our ability to maintain and establish collaborations or obtain additional grant funding;
the rate and degree of market acceptance of any approved products;
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developments relating to our competitors and our industry, including competing therapies;
our ability to effectively manage our anticipated growth;
our ability to attract and retain qualified employees and key personnel;
our expectations regarding the period during which we qualify as an emerging growth company under the
Jumpstart Our Business Startups Act (“JOBS Act”);
statements regarding future revenue, hiring plans, expenses, capital expenditures, capital requirements and
share performance; and
other risks and uncertainties, including those listed under the caption “Risk Factors.”
Although we believe that we have a reasonable basis for each forward-looking statement contained in this Annual
Report on Form 10‑K, these statements are based on our estimates or projections of the future that are subject to known and
unknown risks and uncertainties and other important factors that may cause our actual results, level of activity,
performance, experience or achievements to differ materially from those expressed or implied by any forward-looking
statement. These risks, uncertainties and other factors are described in greater detail under the caption “Risk Factors” in
Part I. Item 1A and elsewhere in this Annual Report on Form 10‑K. As a result of the risks and uncertainties, the results or
events indicated by the forward-looking statements may not occur. Undue reliance should not be placed on any forward-
looking statement.
In addition, any forward-looking statement in this Annual Report represents our views only as of the date of this
annual report and should not be relied upon as representing our views as of any subsequent date. We anticipate that
subsequent events and developments may cause our views to change. Although we may elect to update these forward-
looking statements publicly at some point in the future, we specifically disclaim any obligation to do so, except as required
by applicable law. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers,
dispositions, joint ventures or investments we may make.
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Special Note Regarding Forward Looking Statements
PART I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
PART IV
Item 15. Exhibits and Financial Statement Schedules
Signatures
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ITEM 1. BUSINESS.
PART I
We are a clinical‑stage biopharmaceutical company developing a novel and differentiated 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 is designed to confer 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 initial internal programs are focused on oncology indications with high unmet medical need. Our lead product
candidate, BT1718, is a Bicycle Toxin Conjugate, or BTC. This Bicycle is being developed to target tumors that express
Membrane Type 1 matrix metalloprotease, or MT1‑MMP. The Bicycle is chemically attached to a toxin that when
administered is cleaved from the Bicycle and kills the tumor cells. BT1718 is being investigated for safety, tolerability and
efficacy in an ongoing Phase I/IIa clinical trial in collaboration with, and fully funded by, the Centre for Drug Development
of Cancer Research UK, or CRUK. We are also evaluating BT5528, a second-generation BTC targeting Ephrin type‑A
receptor 2, or EphA2, in a Company-sponsored Phase I/II study and are conducting Investigational New Drug application,
or IND, ‑enabling activities for BT8009, a BTC targeting Nectin-4. Our discovery pipeline in oncology includes Bicycle-
based systemic immune cell agonists and Bicycle tumor-targeted immune cell agonists (TICAs™).
Beyond oncology, we are collaborating with biopharmaceutical companies and organizations in therapeutic areas
where we believe our proprietary Bicycle screening platform can identify therapies to treat diseases with significant unmet
medical need. Our partnered programs outside of oncology include collaborations for anti‑bacterial, cardiovascular,
ophthalmology and respiratory indications.
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The following table summarizes key information about our programs:
We were founded in 2009 based on innovative science conducted by Sir Greg Winter and Professor Christian
Heinis. Sir Greg Winter is a pioneer in monoclonal antibodies and, in 2018, was awarded a Nobel Prize in chemistry for the
invention of the technology underpinning our proprietary phage display screening platform that we use to identify Bicycles.
From our founding through December 31, 2019, we have generated substantial intellectual property, including four patent
families directed to novel scaffolds, 16 patent families directed to our platform technology, 69 patent families directed to
bicyclic peptides and related conjugates, and seven patent families directed to clinical indications and other properties of
development assets. The work we have conducted in developing Bicycles and our proprietary screening platform have
created substantial know‑how that we believe provides us with a competitive advantage.
Our management team includes veterans in drug development with executive experience at leading
pharmaceutical companies including GlaxoSmithKline, Novartis and Pfizer. Our board of directors and scientific advisory
board include industry experts and seasoned investors, with extensive experience in immuno‑oncology.
Our Strategy
Our mission is to become a leading biopharmaceutical company by pioneering Bicycles as a novel therapeutic
modality to treat diseases that are inadequately addressed with existing treatment modalities. Specifically, we seek to
execute on the following strategy to maximize the value of our novel technology and pipeline:
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Progress our most advanced candidates, BT1718 and BT5528, through clinical development. BT1718 is
being investigated in an ongoing Phase I/IIa clinical trial sponsored by CRUK. We intend to advance
development of this candidate aggressively across oncology indications in which the target MT1‑MMP is
expressed. We expect CRUK to initiate expansion cohorts in the Phase IIa portion of the Phase I/IIa study in
2020. Bicycle is also evaluating BT5528 in an ongoing company-sponsored Phase I/II trial in patients with
solid tumors.
Advance BT8009 into clinical development. We intend to progress our IND‑enabling activities for BT8009
to advance this program into clinical development for oncology indications in 2020. Based on promising
observations from our preclinical models, we believe Nectin‑4 is an attractive target for cytotoxin delivery
and that Bicycles provide a promising delivery modality.
Continue IND-enabling activities for our lead TICA program, BT7480. BT7480 is a Bicycle tumor-targeted
immune cell agonist (TICA) targeting Nectin-4 and agonizing CD137. The constrained nature of Bicycles
confers high affinity and selectivity and enables us to link tumor targeting Bicycles to Bicycles that agonize
CD137, providing tumor-specific effects. In preclinical experiments with BT7480, we have
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observed that these characteristics promote powerful anti-tumor activity. We expect to progress our IND-
enabling activities for BT7480 in 2020.
Pursue clinical development of our discovery programs. We intend to continue our ongoing discovery
activities to screen and select promising candidates for oncology indications. For example, our discovery
pipeline includes systemic and tumor-targeted immune cell agonists, from which we expect to identify
additional development candidates.
Leverage our powerful proprietary screening platform and novel Bicycle modality to grow our pipeline.
Our novel and proprietary phage display screening platform allows us to rapidly and efficiently identify
potential candidates for development. We can incorporate a wide range of small molecule scaffolds into
Bicycles to increase diversity and confer differentiated physicochemical and structural properties. We have
used our powerful Bicycle screening platform to identify our current pipeline of promising BTCs and immune
cell agonists, and intend to use it to develop a broader pipeline of diverse product candidates.
Collaborate strategically with leading organizations to access enabling technology and expertise in order to
expand the application of our novel Bicycle modality to indications beyond oncology. We are collaborating
with leading biopharmaceutical companies and organizations to apply our novel Bicycle modality to other
disease areas, including neurological, anti‑bacterial, cardiovascular, ophthalmological and respiratory
indications. We may opportunistically enter into additional collaborations in the future to apply our
technology to areas of unmet medical need.
If approved, maximize the commercial potential of our product candidates by either establishing our own
sales and marketing infrastructure or doing so through collaborations with others. Subject to receiving
marketing approval, we intend to pursue the commercialization of our product candidates either by building
internal sales and marketing capabilities or doing so through opportunistic collaborations with others.
The Bicycle Opportunity
Introduction to Bicycles
Bicycles are fully synthetic, short peptides consisting of nine to 20 amino acids constrained to form two loops
which stabilize the structural geometry of the peptide and facilitate target binding with high affinity and selectivity.
Bicycles represent a unique therapeutic class, combining the pharmacological properties normally associated with a
biologic with the manufacturing and PK advantages of a small molecule, with no signs of immunogenicity observed to
date.
Drugs must bind to target proteins with high affinity and selectivity to achieve a therapeutic effect, while
minimizing undesired effects on other proteins and physiological functions. Peptides exist in a number of folded states,
only a few of which are able to bind to target proteins, and a key challenge for peptide therapeutics is designing structures
that achieve these goals. We have designed our molecules to be highly constrained by linking a chemical connector
compound, also known as a scaffold, to particular amino acids in the peptide chain. The resulting cyclized molecule, which
we refer to as a Bicycle, is locked in the preferred state to bind to the target proteins.
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Schematic of the Creation of a Cyclized Molecule Resulting in a Bicycle
We have expanded the diversity of the chemical space we can cover from approximately 10 potential molecules
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in 2009 to 10 today. We have applied our novel Bicycle modality to a growing range of targets, from a single target in
2009 to more than 105 today. We can create a wide range of Bicycles by varying four parameters:
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the number of amino acids in the two loops;
the amino acid composition at each position;
the symmetry of the two loops; and
the small molecule scaffold used to cyclize the Bicycle.
Properties of Bicycles as Therapeutic Agents
Bicycles have a large surface area available for target binding, which is designed to allow for high affinity and
selectivity to the designated target. As short sequences of amino acids, or peptides, they have a low molecular weight,
typically ranging from 1.5 kDa to 2.0 kDa. Bicycles have a readily adjustable PK profile with good plasma stability and
rapid distribution from the vasculature into the extracellular space. This PK profile enables rapid tissue penetration and a
renal route of elimination that minimizes liver exposure. Toxicity issues are observed with small molecules that are
metabolized and eliminated by the liver. Bicycle peptides, by contrast, are not subject to metabolism or elimination by the
liver but are metabolized in the peripheral circulation or kidney with subsequent rapid excretion in the
urine. Consequently, by increasing excretion in urine, the liver exposure is minimized and the risk of liver toxicity is
reduced. The modular nature of Bicycles allows us to optimize therapeutic molecules for specific targets. To date, we have
observed no signs of immunogenicity.
Compared to biologics, Bicycles have a lower cost of production and a simpler manufacturing process, and are
recognized by regulatory authorities as small molecule new chemical entities. Bicycles can be readily identified to drug a
wide spectrum of targets and target classes, including many that have so far been undruggable with small molecules, such
as protein‑protein interactions. Our novel and proprietary screening platform allows us to screen Bicycles against molecular
targets rapidly and efficiently, affording potentially reduced timelines and costs compared to other high‑throughput
screening approaches. Leveraging our platform, we can rapidly and efficiently identify a compound for development in as
few as six months with the historical average time being 12 months after a target has been selected.
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The figure shown below is the x‑ray diffraction crystal structure of a bicyclic peptide binding to EphA2
ligand‑binding domain.
The selectivity of the Bicycle for EphA2 as compared to other Eph family members with similar structure and
sequence homology was determined using surface plasmon resonance. No binding was observed to any of the family
members tested up to the maximum concentration feasible, limited by concentration of protein sample. This illustrates the
high selectivity that we expect of Bicycle/target interaction.
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Properties of Bicycles May Translate into Potential Therapeutic and Other Advantages
Comparison of Bicycles to Other Common Classes of Therapeutics
Our Proprietary Bicycle Screening Platform
We utilize our novel and proprietary phage display screening platform to identify Bicycles that are potentially
useful in medicine. We have used this technology to identify our current pipeline, and intend to leverage it to develop a
broader portfolio of product candidates to address unmet medical needs across a wide range of diseases.
Phages are bacteria‑infecting viruses consisting of genetic material wrapped in a protein coat. Phages can be
harnessed to identify Bicycles by splicing DNA into the genome of a phage so that the linear peptides that encode Bicycles
are presented on the surface of the phage. Our founder Sir Greg Winter, a pioneer in phage display, applied this
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technology and added a cyclization step that forms Bicycles from these linear peptides. This technology underpins our
novel and proprietary screening platform.
Our screening process self‑selects for Bicycles that are amenable to attachment, commonly referred to as
conjugation, to other molecular payloads such as cytotoxins, innate immune agonists or other Bicycles. Bicycles can be
linked together with synthetic ease to create complex molecules with combinatorial pharmacology. Alternatively, Bicycles
in the form of multimers can also be used as standalone therapeutics, such as those that we are exploring in our systemic
and tumor-targeted immune cell agonist programs. We believe that the flexibility of our Bicycles and our powerful
screening platform allow new therapeutics to be rapidly conceived and reduced to practice to potentially serve diverse
therapeutic applications across a wide range of indications.
Schematic of our Proprietary Bicycle Screening Process
We have optimized our proprietary Bicycle screening platform, enabling the technique to be applied to a diverse
range of over 105 challenging targets to date, successfully identifying Bicycles for over 80% of these targets, some of
which are intractable to small molecules. During these screens, Bicycles with diverse pharmacologies were identified,
including enzyme inhibitors, receptor antagonists, agonists (partial, full and supra) and neutral site binders. Neutral site
binders often bind to entirely novel sites on target proteins, previously undescribed in the scientific literature. These binders
can be useful when conjugated with therapeutic payloads since they allow antigen‑targeted payload delivery without
impacting target function.
Our Product Candidates
Our portfolio of internal product candidates is directed to oncology applications where we believe they have the
potential to treat a broad spectrum of cancers. We are collaborating with biopharmaceutical companies and organizations in
other therapeutic areas, where we believe our proprietary Bicycle screening platform can identify therapies to treat diseases
with significant unmet medical need.
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Our Pipeline
The following table summarizes key information about our pipeline programs.
Our Oncology Programs
We believe Bicycles are an ideal vehicle to deliver small molecule payloads to tumors, both as potent cytotoxins in
the case of BTCs, as well as small molecule agonists of the immune system in the case of our Bicycle‑targeted immune cell
agonists. We believe that Bicycle conjugates can offer improved performance as compared to antibody‑mediated delivery.
In addition to their use as drug conjugates, Bicycles can also be configured for use as standalone therapeutics in
the form of multimers. We have identified Bicycles that have been observed to directly interact with CD137, a key immune
cell co‑stimulatory molecule. We believe our CD137‑targeting Bicycles may overcome limitations inherent in
antibody‑mediated approaches and have the potential to be converted into simple tumor-targeted immune cell‑engaging
Bicycle molecules.
Bicycle Toxin Conjugates
Within our BTC programs, we are developing BT1718 (carrying a DM1 cytotoxin payload), which is designed to
target MT1‑MMP expressing tumors. BT1718 is currently being investigated for safety, tolerability and efficacy in an
ongoing Phase I/IIa clinical trial that is being conducted in collaboration with CRUK. We are evaluating BT5528, our first
second-generation BTC that targets EphA2 and carries a monomethyl auristatin E, or MMAE, cytotoxin payload, in an
ongoing, company-sponsored Phase I/IIa clinical trial to assess safety, tolerability and efficacy in patients with solid
tumors. We are conducting IND‑enabling activities for BT8009, a BTC that targets Nectin‑4 and also carries an MMAE
cytotoxin payload. Studies have demonstrated that MT1‑MMP, EphA2 and Nectin‑4 are overexpressed in many cancer cell
types with high unmet medical needs, including lung cancer, breast, gastric, endometrial, sarcoma pancreatic, bladder,
ovarian, esophageal and other cancers. Studies have also shown that tumor overexpression in each of these targets has been
associated with poor prognosis in specific cancers. We therefore believe our BTC candidates may address a wide range of
cancer types with significant unmet medical need.
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Background
The discovery of monoclonal antibodies enabled the development of antibody drug conjugates, or ADCs. ADCs
link antibodies that target tumor‑associated antigens to potent cytotoxins through a process known as conjugation. ADCs
are designed to selectively and potently destroy cancer cells by combining the targeting capability of antibodies with the
cancer‑killing ability of cytotoxins. Despite the growing use of ADCs in treating cancer and high interest in ADC
development programs, we believe there are significant challenges to ADCs. The large molecular size of the antibody
impairs the penetration of ADCs into tumors. ADCs are generally required to internalize into tumor cells after binding to
internalizing tumor antigens to the surface. Finally, the relatively long systemic exposure and subsequent liver clearance
generally associated with ADCs result in dose‑limiting toxicities such as hematological, liver and gastrointestinal toxicities,
and neuropathies.
Properties of Bicycle Toxin Conjugates
We believe the properties of our BTCs may address the challenges associated with ADCs and therefore that our
approach has the potential to offer substantial benefits, including:
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Extensive and rapid tumor penetration. Bicycles have been observed in our preclinical studies to penetrate
tumors more rapidly and exhibited increased penetration to poorly perfused regions of the tumor when
compared to a comparator antibody. Clinical data from three post‑dose tumor biopsies in patients from our
ongoing Phase I/IIa trial of BT1718 is consistent with preclinical observations that the cytotoxin payload
DM1 rapidly penetrated the tumor.
Retention in tumors. In preclinical studies a tumor antigen targeting Bicycle was observed to be retained in
the tumor for at least 120 hours after dosing. Preliminary clinical data observed to date from our ongoing
Phase I/IIa trial of BT1718 is consistent with preclinical observations of post‑dose tumor retention. Biopsies
taken from three patients following the infusion of BT1718 exhibited retention of the cytotoxin payload DM1
in the tumor at concentrations consistent with preclinical data.
Short systemic half‑life and renal elimination. Bicycles have been observed in clinical and preclinical
studies to have a short systemic half‑life of approximately 20‑30 minutes. Due to their small size, Bicycles are
able to exit the tissue rapidly and are excreted through the kidneys rather than the liver, which we expect will
support a favorable toxicity profile.
No requirement for internalization. Unlike ADCs, which require cellular internalization for activity, BTCs
do not require internalization into the cell, and therefore potentially can target a wider range of tumor
antigens.
Access to non‑expressing tumor cells. The toxin in our BTCs is liberated in the extracellular space, enabling
cell‑killing adjacent cells that do not express the specific target through a toxin bystander effect. In our
preclinical studies, we observed activity for BTCs even in tumors that were heterogeneous for target
expression.
Larger toxin payload. Despite the small size of Bicycles, they are able to carry a larger dose of toxin per unit
mass than a comparator ADC. Therefore, we believe that Bicycles can deliver a higher concentration of the
linked toxin to increase the probability of tumor killing.
· Manufacturing. The fully synthetic process by which Bicycles are manufactured facilitates ease and
consistency of manufacturing and improved formulation compared to ADCs.
In order to compare the ability of a Bicycle conjugate and an antibody conjugate to penetrate a tumor, using
positron emission tomography, or PET, imaging, we compared a radiolabeled Bicycle to an antibody directed at the same
target in a preclinical rodent study. As shown in the figure below, we observed that 15% to 20% of the injected dose per
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gram was detected after administration of the Bicycle in the tumor at 40 to 60 minutes, with no antibody detectable in the
tumor during this time. We also observed accumulation of the balance of the Bicycles in the bladder and kidneys, indicating
rapid renal excretion. In contrast, the antibody was detected in the vasculature.
PET Imaging Revealing Payload Delivery in a Mouse Model
In addition, in a preclinical rodent study using photoacoustic imaging, we observed that Bicycles were retained in
the tumor for 24 hours and at levels substantially in excess of those observed with a comparator antibody.
The figure below summarizes the results of a preclinical rodent xenograft model that investigated payload
concentrations over time in different organ systems after administration of a BTC. In this model, we observed the toxin
payload was retained in the target‑expressing tumor over time but was rapidly eliminated from other tissues.
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Payload Concentrations Over Time in Different Organ Systems After Administration of a BTC
We believe these data demonstrate the potential of BTCs to have long‑term sustained activity and to limit the
toxicity that is associated with ADCs.
BT1718
Our lead product candidate, BT1718, is a BTC that we are developing for oncology indications. The molecule is
comprised of our MT1‑MMP targeting Bicycle, a hindered disulphide cleavable linker and a cytotoxin DM1 payload.
Schematic of BT1718
MT1‑MMP is a matrix metalloprotease involved in tissue remodeling and is generally expressed at relatively low
levels in normal adult tissues. MT1‑MMP has an established role in cell invasion and metastasis, and we believe that
MT1‑MMP is an attractive target for cytotoxin delivery due to its high level of expression on stromal and tumor cell
subsets in various cancers.
In our preclinical studies, we observed that BT1718 was associated with the greatest anti‑tumor effect when
membrane expression of MT1‑MMP was high (as quantified by fluorescence activated cell sorting, or FACS). Tumors with
lower levels of expression of MT1‑MMP were observed to have reduced levels of response to BT1718. We are
collaborating with leading cancer researchers to determine MT1‑MMP expression levels across a panel of tumor types,
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which will help inform patient selection for further clinical development. One of the goals of our clinical trials is to better
understand the relationship between the level of target expression and activity of BT1718.
Effect of MT1‑MMP Expression on BT1718 Activity Across Preclinical Xenograft Models
We are not aware of any other cytotoxin conjugates in development that target MT1‑MMP.
Preclinical Experience
BT1718 has been dosed in multiple species, including rodents and non‑human primates. In in vivo preclinical
studies, we observed dose‑dependent anti‑tumor activity following administration of BT1718 with disease stabilization or
regression in multiple xenograft models across tumor types including lung, breast, gastric, head and neck, fibrosarcoma and
colorectal. These models utilized an endpoint of tumor volume, as calculated from standard caliper measurements of
subcutaneous tumor and measured through the course of the preclinical study and at the end of the preclinical study to
evaluate the activity of BT1718. A 3 mg/kg dose of BT1718 administered biweekly was observed to be associated with
stable disease or tumor regression in several models. Further, the highest dose of BT1718 tested, 10 mg/kg administered
biweekly, was observed to be associated with complete regressions in the majority of MT1‑MMP‑expressing xenograft
tumors tested, with most mice remaining tumor‑free for up to 60 days after the last dose, following which the study ended.
In addition, weekly dosing of 6.4 mg/kg of BT1718 (corresponding to a 19.2 mg/m human equivalent dose) was observed
to be associated with significant anti‑tumor activity or complete responses in a range of cell line derived xenograft models,
including HT1080, HCC1806 and EBC‑1.
2
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Mouse Dose to Human Equivalent Dose Conversion
Effect of Administration of BT1718 in Cell Line Derived Xenograft Models
Patient‑derived xenograft, or PDX, models are designed to capture patient responses to oncology therapy in a
heterogeneous cohort of patients with solid tumors with 80‑100% correlation between the PDX and patient response.
BT1718 was also evaluated in two lung adenocarcinoma PDX models, one sensitive to, and one resistant to, docetaxel, a
marketed chemotherapy medication. In both cases, we observed that BT1718 treatment at a dose of 3 mg/kg administered
twice per week was associated with a significant reduction of tumor volume. Further, a 10 mg/kg dose of BT1718
administered twice per week was associated with complete and durable regression of tumors. In the docetaxel resistant
model, we observed that BT1718 at both doses tested was associated with statistically significant responses, whereas
docetaxel, at its maximum‑tolerated dose, was not. To determine whether data is statistically significant, we use a
“p‑value,” which represents the probability that random chance could explain the results. Generally, a p‑value less than
0.05 is considered statistically significant, and may be supportive of a finding of efficacy by regulatory authorities.
However, regulatory authorities, including the FDA and EMA, do not rely on strict statistical significance thresholds as
criteria for marketing approval and maintain the flexibility to evaluate the overall risks and benefits of a treatment. If not
otherwise specified, we used a conventional 5% or lower p‑value (p < 0.05) to define statistical significance for the clinical
trials and studies and data presented in this prospectus. These models utilized an endpoint of tumor volume, as calculated
from standard caliper measurements of subcutaneous tumor and measured through the course of the preclinical study and at
the end of the preclinical study to evaluate the activity of BT1718.
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Effect of BT1718 on Tumor Volume in Preclinical Patient‑Derived Xenograft Models
BT1718 was also evaluated in murine syngeneic tumor models in combination with checkpoint inhibitors. BT1718
in combination with anti‑cytotoxic T‑lymphocyte‑associated protein 4, or anti‑CTLA‑4, antibody was associated with
significant anti‑tumor activity including complete responses, enhanced survival and development of immunogenic memory
in the CT26 syngeneic tumor model. Development of immunologic memory was determined as a failure to establish tumor
growth after tumor cell implantation in animals that had been cured 60 days after treatment initiation with either BT1718 in
combination with anti‑CTLA‑4 (8/10 mice) or anti‑CTLA‑4 monotherapy (4/10 mice). Furthermore, BT1718 in
combination with anti‑PD‑1 antibody was associated with significant anti‑tumor activity and enhanced survival in the
syngeneic tumor model.
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Effect of BT1718 Combination Therapy with Anti‑CTLA‑4 Antibody or Anti‑PD‑1 Antibody
in Preclinical Syngeneic Mouse Tumor Models
We also evaluated the PK profile of BT1718 in several in vivo preclinical studies. In these studies, we observed
that BT1718 exhibited a consistent PK profile across species, as well as behavior consistent with our expectations of a
BTC, including a volume of distribution approximately equal to extracellular fluid, rapid clearance and a short systemic
half‑life. These studies utilized an endpoint of tumor volume, as calculated from standard caliper measurements of
subcutaneous tumor and measured through the course of the preclinical study and at the end of the preclinical study to
evaluate the activity of BT1718.
Pharmacokinetic Profile of BT1718
Clearance
Volume of
distribution Terminal half‑life
1
(t /2; hours)
Preclinical Species
Mouse
Rat
Non‑Human Primate
Clinical Development
(CLp; mL/min/kg) (Vss; L/kg)
8.4
9.4
8.0
0.20
0.29
0.20
0.3
0.6
0.4
Ongoing Phase I/IIa First in Human Clinical Trial
BT1718 is being investigated in an ongoing Phase I/IIa open label dose escalation and expansion clinical trial
sponsored by CRUK. The Phase I part of this trial evaluates up to 40 patients with advanced solid tumors in two dosing
regimens at three sites in the United Kingdom.
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The Phase I part of this clinical trial evaluates the safety and tolerability of BT1718 in patients with advanced
solid tumors, regardless of tumor MT1‑MMP expression levels, and establishes a recommended Phase II dose. The Phase I
part of the trial has evaluated two dosing schedules, twice per week and once per week, each as one‑hour intravenous
infusions. In addition, BT1718 and toxin PK profiles, preliminary efficacy, pharmacodynamic and predictive biomarkers
are being explored.
The Phase IIa part of the trial will evaluate BT1718 in patients with tumors that express MT1-MMP at the
recommended Phase II dose based on the findings from the Phase I part of the trial. We will determine tumor types for
investigation in this part of the trial in conjunction with CRUK. To determine tumor types of interest, a clinically validated
MT1‑MMP immunohistochemistry assay, or IHC, developed in collaboration with CRUK, was used to screen tumor tissue
microarrays, or TMA, from multiple tumor types selected based on literature reports of high expression of MT1‑MMP,
including breast, lung, sarcoma, gastric, ovarian, endometrial, bladder, and esophageal cancers. The Phase IIa part will be
conducted at up to six sites in the United Kingdom. We plan to enroll patients in up to four expansion cohorts administered
with our once‑weekly dose. Each cohort will evaluate 16 patients with a specified tumor type determined using the results
of the MT1‑MMP IHC TMA analysis.
The endpoints for the Phase IIa part of this clinical trial will be safety and preliminary efficacy in patients with
tumors expressing MT1‑MMP. Archived or fresh tumor samples from all enrolled patients will be collected and tested for
MT1‑MMP expression using the clinically validated IHC and associations with tumor and stromal expression and clinical
response will be explored. Biopsies of tumors will be mandatory in a subset of patients in this part of the study in order to
evaluate tumor PK and pharmacodynamic biomarkers of response to BT1718.
The Phase I part of the clinical trial commenced in early 2018. 15 patients across six cohorts have been dosed and
2
evaluated on the twice-weekly schedule, with doses ranging from 0.6 mg/m to 9.6 mg/m . As of February 13, 2020, 24
patients across five cohorts have been dosed and evaluated in the once-weekly schedule with doses ranging from 9.6 mg/m
to 32 mg/m . With once-weekly dosing, which is the expected schedule for the Phase IIa portion of the study, BT1718 has
appeared generally tolerable, with generally manageable adverse events at doses believed to be in the therapeutic range
based on preclinical data. We expect CRUK to initiate expansion cohorts in the Phase IIa portion of the Phase I/IIa study in
2020.
2
2
2
DM1 delivery has been demonstrated in tumor biopsies at early timepoints (2 out of 3 patients). Concentrations of
DM1 in the clinical tumor biopsy samples are consistent with preclinical data obtained at doses that gave partial (4.2
mg/m2) and full (14.4 mg/m2) tumor regression in mouse xenograft models. In the phase IIa part of the study, additional
tumor biopsies will be taken at later timepoints to further evaluate DM1 retention.
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DM1 Levels in Clinical and Preclinical Tumor Samples
BT5528
BT5528 is a BTC designed to target EphA2. The molecule is comprised of our EphA2 targeting Bicycle, a
valine‑citrulline, or val‑cit, cleavable linker and a cytotoxin MMAE payload.
Schematic of BT5528
EphA2 is a member of the Ephrin superfamily of receptor tyrosine kinases regulating cell migration, adhesion,
proliferation and differentiation. EphA2 is expressed at relatively low levels in normal adult tissues, but is overexpressed in
numerous difficult to treat tumors including lung, breast, bladder, gastric, ovarian, endometrial, cervical, melanoma,
esophageal, pancreatic, and glioma. In both cell‑derived and patient‑derived preclinical models, we observed anti‑tumor
activity signals following administration of our EphA2 toxin conjugates, which correlated with EphA2 expression, as
determined by FACS studies.
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Effect of EphA2 Expression on BT5528 Activity Across Preclinical Xenograft Models
EphA2 has previously been pursued by other companies utilizing ADCs. However, significant safety concerns,
including bleeding events and liver toxicity, were observed in preclinical studies and early clinical development, which
resulted in the discontinuation of development. For example, in a Phase I clinical trial of MEDI‑547, an EphA2-targeting
ADC, an increase in the liver enzyme ALT and AST was observed in half of the dosed patients and bleeding events were
observed in five out of six patients, in each case within two to eight days following a single dose. The bleeding events
observed in humans from the clinical trial were consistent with findings from the preclinical studies in other species,
including primates.
We believe EphA2 is an attractive target for our BTCs due to the potential of Bicycles to overcome the safety
concerns observed with ADCs. In our preclinical PK and toxicokinetic studies, we observed a short half‑life and volume of
distribution similar to BT1718. We observed that the accumulation of MMAE in the tumor tissue led to mitotic arrest of
tumor cells and tumor regression was evident within days of administration. Due to the shorter half‑life, improved
penetration into solid tumors and kidney elimination, we believe that BT5528 could address the challenges of ADCs.
Similar to the strategy for selecting indications for BT1718, we plan to screen tumor TMAs using a clinically validated
EphA2 IHC, in a CAP accredited and CLIA certified laboratory, to prioritize those indications with high EphA2 protein
expression for clinical investigation.
Preclinical Experience
BT5528 has been evaluated in preclinical studies in multiple species, including rodents and non‑human primates.
In our preclinical studies, BT5528 was not observed to have a significant effect on clotting parameters and did not exhibit
abnormal liver function at tolerated doses. We also observed no bleeding events in primates at toxin equivalent doses over
150‑fold higher than the clinical dose of an ADC with the same amino acid sequence and with the same linker‑toxin
combination and average drug/antibody ratio as MEDI‑547 used in patients. These studies utilized an endpoint of tumor
volume, as calculated from standard caliper measurements of subcutaneous tumor, measured through course of experiment
and at experiment end to evaluate the activity of BT5528.
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In in vivo preclinical studies, we observed dose‑dependent anti‑tumor activity following administration of BT5528
with disease stabilization or regression in multiple xenograft models representing tumor types including lung, breast,
gastric, fibrosarcoma, prostate, ovarian and esophageal, with activity correlating with EphA2 expression. We observed that
a dose of 1 mg/kg of BT5528 administered weekly was associated with stable disease or tumor regression in several
models. Complete regressions were observed in the majority of EphA2‑expressing xenograft tumors in mice administered
2 mg/kg or 3 mg/kg of BT5528 weekly, with most mice remaining tumor‑free for more than 60 days after dose cessation,
following which the study was ended. These studies utilized an endpoint of tumor volume, as calculated from standard
caliper measurements of subcutaneous tumor and measured through the course of the preclinical study and at the end of the
preclinical study to evaluate the activity of BT5528. In separate pharmacokinetic studies, the concentration of MMAE toxin
was determined in the tumor and plasma following a single intravenous administration of 0.5 mg/kg of BT5528, indicating
the efficient delivery of MMAE to the tumor by BT5528.
As shown in the figure below, we observed that BT5528 displayed superior activity to an EphA2-targeting ADC in
a mouse PDX model. In this model, the tumors were large (approximately 1,000 mm ) at the commencement of dosing.
The tumor was derived from a docetaxel resistant non‑small cell lung cancer from a 74 year‑old male smoker with
moderate EphA2 expression. BT5528 was dosed once weekly. BT5528 was also evaluated in two pancreatic ductal
adenocarcinoma (PDAC) PDX models. BT5528 treatment at a weekly dose of 3 mg/kg was associated with a significant
reduction of tumor volume. We also compared the distribution of an EphA2 BTC and an EphA2 ADC using PET imaging
in a preclinical rodent study. The Bicycle was detected in the tumor at 60 minutes, as well as in the bladder and kidneys. In
contrast, the antibody was not detected in the tumor at 60 minutes but was restricted to the vasculature.
3
Effect of BT5528 on Tumor Volume in Preclinical Patient‑Derived Xenograft Models
Docetaxel resistant NSCLC model
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Clinical Development
In November 2019, Bicycle announced that the first patient had been dosed in the Phase I dose escalation portion
of a Company-sponsored Phase I/II clinical trial of BT5528 in patients with advanced solid tumors associated with EphA2
expression. The Phase I/II multi-center, open-label trial will evaluate BT5528 administered once-weekly as a single agent
and in combination with nivolumab. The Phase I portion is a dose escalation primarily designed to assess the safety and
tolerability of BT5528 and to determine a recommended Phase II dose. Following selection of a recommended Phase II
dose, a Phase II dose expansion portion will be initiated with the primary objective of evaluating the clinical activity of
BT5528. The study will be conducted across sites in the U.S. and the UK. The Phase I dose escalation remains ongoing.
BT8009
BT8009 is a BTC designed to target Nectin‑4. The molecule is comprised of our Nectin‑4 targeting Bicycle, a
val‑cit cleavable linker, and a cytotoxin MMAE payload.
Schematic of BT8009
Nectin‑4 (also known as PVRL4) is a cell adhesion molecule from the Nectin and Nectin‑like family, members of
which are integral to the formation of the homotypic and heterotypic cell junctions. Nectin‑4 has been shown to be
overexpressed in tumor cells and is believed to play a role in tumor cell growth and proliferation. High in normal
embryonic and fetal tissue, Nectin‑4 declines in adulthood, showing a limited distribution in healthy tissues. However,
Nectin‑4 is expressed on tumor cells in numerous cancer types including bladder, breast, gastric, lung and ovarian. In
addition, we believe the favorable characteristics of BTC‑targeted therapies may address some of the challenges in treating
pancreatic cancer.
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We have observed that BT8009 efficiently delivered MMAE to the tumor and had a broad spectrum of activity
that correlated with Nectin‑4 expression, as determined by FACS studies or RNA levels.
Effect of Nectin‑4 Expression on BT8009 Activity Across Preclinical Xenograft Models
We are aware of one Nectin‑4 ADC program in development, enfortumab vedotin, which is being jointly
conducted by Seattle Genetics and Astellas and, in December 2019, received approval from the U.S. Food and Drug
Administration (FDA) as a treatment for patients with locally advanced or metastatic urothelial cancer following treatment
with platinum-based chemotherapy and a PD-1 or PD-L1 inhibitor. Similar to the strategy for selecting indications for
BT1718 and BT5528, we plan to screen tumor TMAs using a clinically validated Nectin‑4 IHC to prioritize indications
with high Nectin‑4 protein expression for clinical investigation.
Our IND‑enabling preclinical studies for BT8009 are currently ongoing.
Preclinical Experience
In in vivo preclinical studies, we observed that BT8009 was associated with dose‑dependent anti‑tumor activity
with disease stabilization or regression in multiple xenograft models representing tumor types including lung, breast, and
esophageal cancers. We observed that BT8009 activity was correlated with either Nectin‑4 protein or mRNA expression.
We observed that a dose of 3 mg/kg of BT8009 administered weekly was associated with complete regression in multiple
models. We also observed complete regression of large (1,000 mm starting volume) MDA‑MB‑468 breast cancer tumors at
a dose of 5mg/kg given every 14 days. In two models, there was no observed tumor regrowth at 59 days after the last
administration, following which the study was ended. These studies utilized an endpoint of tumor volume, as calculated
from standard caliper measurements of subcutaneous tumor and measured through the course of the preclinical study and at
the end of the preclinical study to evaluate the activity of BT8009.
3
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In head-to-head preclinical studies comparing BT8009 to an ADC with the same amino acid sequence and with
the same linker‑toxin combination and average drug/antibody ratio as enfortumab vedotin, BT8009 displayed comparable
or superior activity to the ADC in three cell‑derived xenograft studies and five PDX models. These studies utilized an
endpoint of tumor volume, as calculated from standard caliper measurements of subcutaneous tumor and measured through
the course of the preclinical study and at the end of the preclinical study to evaluate the activity of BT8009.
The figure below illustrates results from a preclinical non‑small cell lung cancer cell‑derived xenograft. In that
model, we observed that BT8009 showed a superior activity at early time points compared to high dose administration of
an ADC with the same amino acid sequence and with the same linker‑toxin combination and average drug/antibody ratio as
enfortumab vedotin. We also observed that administration of BT8009 was associated with complete regression of the
tumor. In other models we have observed superior activity of BT8009 over docetaxel and doxorubicin as measured by a
decrease in tumor volume.
Effect of BT8009 on Tumor Volume in a Preclinical Non‑Small Cell Lung
Cancer‑Derived Xenograft Model
Bicycle Immune Cell Agonist
Approaches that activate cytotoxic T‑cells and other types of cells used in a body’s immune response have been
observed to improve outcomes in cancer. However, prolonged immune activation can be toxic and lead to T‑cell
exhaustion, which is a challenge amplified by the long half‑life of antibodies and biologics that are often used in these
treatment approaches. We believe the differentiated properties of Bicycles may allow us to develop molecules with a
pharmacodynamically distinct and improved profile over existing therapies.
We are aware of anti‑CD137 antibodies undergoing clinical testing, including urelumab being developed by
Bristol‑Myers Squibb, which produced single agent responses but also severe liver toxicity, and utomilumab being
developed by Pfizer, which exhibited minimal clinical activity with less toxicity. We are developing immune cell agonists,
designed to trigger an immune response to tumors. We have identified potent Bicycle agonists of CD137, a
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tumor necrosis factor receptor, or TNFR, family member. We believe that Bicycles represent a differentiated approach to
target CD137 that may confer several advantages over existing modalities due to the small size and PK characteristics of
Bicycles. Our Bicycle immune cell agonists are designed to circumvent the limitations of antibody and biologic therapies,
such as liver toxicity and limited efficacy, and to better enable combination therapy. Bicycle immune cell agonists can be
formed by conjugating multiple copies of a CD137 Bicycle to form multimers or by utilizing a bi‑specific format in which
CD137 Bicycles are linked to Bicycles that bind to tumor antigens, inhibit checkpoint proteins or otherwise activate the
immune system. We believe we are currently the only company that has fully chemically synthetic multivalent or tumor-
targeted CD137 agonists.
Properties of Bicycle Immune Cell Agonists
In order to agonize the CD137 receptor, cross‑linking of a trimeric receptor is required. As a result, we are
developing multivalent systemic and tumor-targeted molecules that cross‑link the receptor into an active form in a tumor
cell independent or dependent manner as shown in the image below.
Schematic of Proposed CD137 Bicycle Agonists
These Bicycle CD137 agonists feature the following favorable pharmacological characteristics for
immuno‑oncology therapeutics. We believe these characteristics have the potential to overcome the limitations of
antibodies and fusion proteins.
·
·
·
Simplicity and small size. Our systemic and tumor-targeted immune cell agonizing Bicycles are chemically
synthesized and are very small in comparison to other molecules targeting the CD137 receptor. For example,
the approximate molecular weight of urelumab is 146 kDa. In contrast, the molecular weight of our
multivalent and tumor-targeted Bicycles are in the range of approximately 4 kDa to 15 kDa, which is designed
to facilitate the rapid penetration of the therapeutic into tumor tissue.
Tunable PK. Bicycles are amenable to chemical modifications that allow the PK to be fine‑tuned. We believe
this enables the development of molecules with the optimal balance of prolonged CD137 agonism, but with
rapid enough elimination from systemic circulation to avoid the undesired toxicities of CD137, as has been
observed with urelumab. In addition, this tunable half‑life is expected to enable different sequences of
therapeutics to be evaluated in the clinic potentially reducing the risk of overlapping toxicities.
Renal elimination. Rapid renal elimination may avoid liver toxicity observed with other CD137 agonists in
development.
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· Modular. The modular nature of Bicycles permits the presentation of CD137 binders in various orientations
and in combination with other Bicycles allowing us to design molecules with a range of activities. We believe
that we can select the optimal activity profile to avoid the weak efficacy seen with the utomilumab molecule
or the overstimulation of CD137 by urelumab that resulted in systemic toxicity.
·
Tumor targeting. Combining CD137-binding Bicycles with Bicycles that bind to tumor targets potentially
affords an additional level of safety as compared to systemically active agonists such as urelumab. The
clustering and activation of CD137 occurs only when the tumor-targeting Bicycle binds to both the tumor
antigen target and CD137. Therefore, we expect the tumor targeted agonists will achieve a higher degree of
activation locally in the tumor but will have significantly reduced or no activity in healthy tissues that do not
express the tumor antigen.
Comparison of the Features of our Bicycle Immune Cell Agonists to Biological Immune Cell Modulators
Preclinical Experience
Multivalent CD137 Immune Cell Agonists
We observed that simple multivalent Bicycle CD137 agonists displayed potent activity in preclinical cell‑based
assays. Several Bicycle CD137 agonists displayed comparable or higher fold induction compared to the natural ligand
(CD137L) in an engineered reporter cell assay whereby CD137 activation leads to production of a luminescence signal. We
also observed Bicycles stimulated the release of the cytokine IL‑2, a marker of immune response, from primary human
T‑cells. In additional in vivo studies, we observed that CD137-binding Bicycles increased the cytotoxic T‑cell infiltration in
tumor tissue. The Bicycles did not significantly change the expression of CD137 on tumoral T‑cells while urelumab led to a
decrease in the target cell population. We believe this increased cytotoxic T‑cell infiltration correlates with the anti‑tumor
activity of the Bicycle CD137 agonists.
Bicycle Tumor-Targeted Immune Cell Agonists (TICAs)
We have linked immune cell receptor binding Bicycles to tumor antigen binding Bicycles to form TICAs. We have
found this approach to be generalizable across tumor antigen and immune cell receptors. We constructed CD137-targeting
TICA molecules and observed that these bi‑specific Bicycles agonize the CD137 receptor only in the presence of cells that
express the appropriate tumor antigen. Additionally, we have constructed TICA molecules with Bicycles that bind to
another member of the TNF family of T‑cell costimulatory receptors TNFRSF4, also known as OX40. As shown in the
figure below, TICA molecules combining our Nectin‑4 or EphA2 tumor antigen binding Bicycles and CD137 or OX40
binding Bicycles stimulated the release of the cytokine IL‑2 or IFN(cid:0) from human PBMCs when in co‑culture with tumor
cells that express appropriate receptor (Nectin‑4 or EphA2). In co‑culture with cells lacking Nectin‑4
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expression, or when non-binding Bicycles are incorporated (such as BCY12759) there was no activity observed. This is an
example of how both the immune cell binding and tumor cell binding Bicycles can be readily interchanged in the context of
our synthetic TICA molecules to generate novel and targeted immune agonists for further study.
Modularity of TICAs
In our preclinical development of TICA molecules, we have observed an ability to tune molecules based on
simple chemical changes, which we believe is an inherent advantage of our Bicycle platform‑based approach to bi‑specifics
compared to other modalities. As an example of this, activity of two different Nectin‑4/CD137 TICA molecules is shown
below. BCY10000 was observed to have a higher affinity CD137 binding Bicycle than BCY8854, yielding increased
activity and potency in a CD137 assay.
Tunable Activity of CD137 TICAs
We also observed that the pharmacokinetic properties of TICA molecules can be tuned through chemical changes.
The figure below shows the plasma concentrations over time of three Nectin-4/CD137 TICA molecules after i.v. infusion
into rats at a dose of 3 mg/kg. BCY11863 demonstrates a longer circulation time than BCY10000 and BCY10572. This
data shows that the properties of the TICAs can be modulated to extend the duration of exposure in vivo.
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Tunable Pharmacokinetics of CD137 TICAs
In additional studies, we observed that a tumor-targeted Nectin‑4/CD137 agonist at two concentrations increased
the proliferation of T cells and stimulated the release of the cytokine IL‑2 and other immune markers in cultures from
patient‑derived tumors harboring Nectin‑4 expression.
CD137 and Nectin‑4 Expression in Patient Samples
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As shown in the figure below, we have also observed that an EphA2/CD137 TICA, BCY12491, is capable of
eliciting high levels of pro-inflammatory cytokine interferon gamma when incubated with human derived PBMCs in the
presence of MC38 tumor cells expressing EphA2, while a non-binding control molecule, BCY13626, exhibits no activity.
Activity of EphA2 TICA in vitro
In further studies, we have observed that intermittent dosing of BCY12491 leads to a robust anti-tumor activity in
syngeneic MC38 mouse model using humanized CD137 (huCD137) C57BL/6 mice. Administration of BCY12491 in six
intravenous biweekly doses over a period of 17 days at 5 mg/kg lead to substantial tumor regressions, including two out of
six complete responses (CRs). In addition, administration of BCY13626, a non-binding analog of BCY12491 had no
impact on tumor growth rates.
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Activity of EphA2 TICA in vivo
We believe that our ability to rapidly generate and test TICA molecules and their simple molecular format may
form the basis of additional programs in the future. In addition to the immune cell and tumor targets that we have already
investigated, we are also planning to screen for, or have started to screen for, Bicycles that target the NK cell receptors
FcgRIIIA and NKp46 as well as additional immune cell and tumor specific antigens.
BT7480
BT7480 is a TICA that targets CD137 and Nectin-4. BT7480 exhibits potent CD137 agonism in an engineered
CD137 reporter assay system that correlates with Nectin-4 surface expression on the co-cultured tumor cells. In addition,
BT7480 induces robust production of interleukin-2 (IL-2) and interferon gamma (IFNg) in primary PBMC/tumor cell co-
culture assays. This activity is strictly dependent on the tumor cells expressing Nectin-4 and on the ability of the TICA to
bind to both of its targets, Nectin-4 and CD137. In the figure below, BT7480 induces IL-2 and IFN(cid:0) at sub nanomolar
concentrations when incubated with human PBMCs and the Nectin-4 expressing human tumor cell line HT1376.
BT7480 produces IL-2 and IFNg in coculture with PBMC and HT1376
Additionally, we have observed that intermittent dosing of BT7480 leads to a robust anti-tumor activity in
syngeneic MC38 mouse model, engineered to overexpress Nectin-4, using humanized CD137 (huCD137) C57BL/6 mice.
Administration of BT7480 in six intravenous biweekly doses over a period of 17 days at 1.5 or 5 mg/kg lead to substantial
tumor regressions, including five out of six complete responses at 1.5 mg/kg and six out of six complete responses at 5
mg/kg (CRs). In addition, animals that were complete responders in the experiment were subsequently re-challenged with
the same tumor cell implantation and no tumor growth was observed, implying development of immunogenic memory.
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Effect of BT7480 on Tumor Volume in a Preclinical Syngeneic Model with Nectin-4 Expressing MC38 Tumors in
C57BL/6 Mice
Our IND‑enabling preclinical studies for BT7480 are currently ongoing.
Beyond Oncology
We have entered into several collaborations outside of our internal focus in oncology to leverage the broad
applicability of Bicycles. Our strategic collaborations are based on the ability of Bicycles to address a wide variety of
targets and we are working with collaborators with deep therapeutic expertise outside of oncology to enable us to more
efficiently develop novel medicines for patients.
AstraZeneca. In November 2016, we entered into a research collaboration agreement with AstraZeneca AB, or
AstraZeneca, with a focus on targets within respiratory, cardiovascular and metabolic disease.
Sanofi (formerly Bioverativ). In August 2017, we entered into a collaboration agreement with Bioverativ, Inc.,
(which was acquired by Sanofi in March 2018, or Sanofi), in the field of non‑malignant hematology, including hemophilia.
This collaboration was terminated during 2019.
Oxurion. In August 2013, we entered into a research collaboration and license agreement with Oxurion NV
(formerly ThromboGenics NV), or Oxurion, focused on ophthalmology. The lead molecule of the partnership is THR‑149,
a novel plasma kallikrein inhibitor, for the treatment of diabetic macular edema. A Phase I clinical trial of THR‑149 was
completed in July 2019. The Phase I clinical trial, conducted by Oxurion, was an open-label, multi-center, non-randomized
study to evaluate the safety of a single intravitreal injection of THR-149 at three ascending dose levels in 12 subjects with
visual impairment due to center-involved DME. The study also investigated changes to patients’ best corrected visual
acuity (BCVA). A rapid onset of action was observed from Day 1, with an increasing average improvement in BCVA of up
to 7.5 letters at Day 14. This activity was maintained with an average improvement in BCVA of 6.5 letters at Day 90
following a single injection of THR-149.
Our Collaborations
Cancer Research UK
BT1718
In December 2016, we entered into a clinical trial and license agreement with Cancer Research Technology
Limited and CRUK. Pursuant to the agreement, as amended in March 2017 and June 2018, CRUK’s Centre for Drug
Development will sponsor and fund a Phase I/IIa clinical trial of our lead product candidate, BT1718, in patients with
advanced solid tumors.
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CRUK is responsible for designing, preparing, carrying out and sponsoring the clinical trial at its cost. We are
responsible for supplying agreed quantities of GMP materials for the study, the supply of which has been completed. In the
event that additional quantities are needed, we will provide CRUK with all reasonable assistance to complete the
arrangements necessary for the generation and supply of such additional GMP materials but CRUK will be responsible for
supplying and paying for such additional quantities of GMP materials.
We granted to CRUK a license to our intellectual property in order to design, prepare for, sponsor, and carry out
the clinical trial. We retain the right to continue the development of BT1718 during the clinical trial. Upon the completion
of the Phase I/IIa clinical study, 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, Cancer Research Technology Limited may elect to receive an 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) less certain costs, as
defined by the agreement. The CRUK 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 CRUK agreement can be terminated by either party upon an insolvency event, material breach of the terms of
the contract, or upon a change in control (and the new controlling entity generates its revenue from the sale of tobacco
products). CRUK may terminate the arrangement for safety reasons or if it determines that the objectives of the clinical
trial will not be met, in which case, if the study is terminated by CRUK prior to the completion of the Phase I dose
escalation part of the study for such reasons, or if CRUK refuses release of any additional quantities of GMP materials, or
if the parties cannot agree upon a plan to supply the additional quantities of GMP materials, we will be obligated to refund
50% of the costs and expenses incurred or committed by CRUK to perform the clinical trial. If the study is terminated by
CRUK for an insolvency event, a material breach by us, or if we are acquired by an entity that generates its revenue from
the sale of tobacco products, we will reimburse CRUK in full for all costs paid or committed in connection with the clinical
trial and no further license payments, where applicable, shall be due. In such case where we are acquired by an entity that
generates its revenue from the sale of tobacco products, CRUK will not be obliged to grant a license to us in respect of the
results of the clinical trial and we will assign or grant to Cancer Research Technology Limited an exclusive license to
develop and commercialize the product without Cancer Research Technology Limited being required to make any payment
to us.
BT7401
In December 2019, we entered into a clinical trial and license agreement with Cancer Research Technology
Limited and CRUK. Pursuant to the agreement, CRUK’s Centre for Drug Development will fund and sponsor development
of BT7401 from current preclinical studies through the completion of a Phase IIa trial in patients with advanced solid
tumors.
We granted to CRUK a license to our intellectual property in order for CRUK to design, prepare for, sponsor, and
carry out the clinical trial and all necessary preclinical activities to support the trial. We retain the right to continue the
development of BT7401 during the clinical trial. Upon the completion of the Phase I/IIa clinical study, 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 contain BT7401 or all the pharmaceutically active
parts of BT7401, we will assign or grant to Cancer Research Technology Limited an exclusive license to develop and
commercialize the product on a revenue sharing basis (in which case we will receive tiered royalties of 55% to 80% of the
net revenue depending on the stage of development when the license is granted) less certain costs, as defined in the
agreement. The CRUK agreement contains additional future milestone payments upon the achievement of development,
regulatory and commercial milestones, payable in cash, with an aggregate total value of up to $60.3 million for each
licensed product, as well as royalty payments based on a single digit percentage on net sales of
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products developed, and sublicense royalties to the CRUK in the low double digit percentage of sublicense income
depending on the stage of development when the license is granted.
The CRUK agreement can be terminated by either party upon an insolvency event, material breach of the terms of
the contract, or upon a change in control (and the new controlling entity generates its revenue from the sale of tobacco
products), or upon written notice by either party prior to the last cycle of treatment has been completed under the clinical
trial. If the study is terminated by us prior to the filing of a clinical trial authorization, or by the CRUK for an insolvency
event or a material breach by us prior to the start of a clinical trial, we will reimburse CRUK for certain costs paid or
committed prior to the start of the clinical trial. In such case where we are acquired by an entity that generates its revenue
from the sale of tobacco products, CRUK will not be obliged to grant a license to us in respect of the results of the clinical
trial and we will assign or grant to Cancer Research Technology Limited an exclusive license to develop and
commercialize the product without Cancer Research Technology Limited being required to make any payment to us.
Non‑Oncology Collaborators
Dementia Discovery Fund
In May 2019, we entered into a collaboration with the Dementia Discovery Fund, or DDF, to use Bicycle
technology for the discovery and development of novel therapeutics for dementia. DDF is a specialized venture capital
fund focused on discovering and developing novel therapies for dementia. In October 2019, the collaboration with DDF
was expanded to include Oxford University’s Oxford Drug Discovery Institute (ODDI). Under the terms of the agreement,
Bicycle and DDF will collaborate to identify Bicycles that bind to clinically validated dementia targets. ODDI will then
profile these Bicycles in a range of target-specific and disease-focused assays to assess their therapeutic potential. If
promising lead compounds are identified, DDF, ODDI and Bicycle will establish a jointly‑owned new company to advance
the compounds through further development towards commercialization. The jointly‑owned company will receive a royalty
and milestone‑bearing assignment and license of intellectual property from Bicycle for this purpose.
Sanofi (formerly Bioverativ)
In August 2017, we entered into a research collaboration agreement with Bioverativ Inc., which was acquired by
Sanofi in March 2018, or Sanofi, in the field of non‑malignant hematology. The Sanofi collaboration agreement targeted
two disease areas, with an option to add a third. We used our Bicycle screening platform to perform research and
development services for the programs and Sanofi could select, under one or more license collaborations, products for each
program.
Under the Sanofi agreement, we were obligated to perform research activities on each active research program,
under mutually agreed upon research plans. The research and development services for each program (including for clarity
the third, optional program) consisted of two stages. The first was an initial stage of screening and optimization to identify
high affinity Bicycle binders and optimization of early drug like properties and was led by Bicycle. If lead compounds were
identified, the second stage included chemical optimization and testing of these compounds in disease relevant biological
assays, conducted jointly by us and Sanofi, in preparation for lead collaboration product nomination. Each collaboration
program had a maximum initial period of three years, unless a program was abandoned or extended for up to one year by
Sanofi. Sanofi could, at its sole discretion, approve any compound to be progressed into drug development and upon the
selection of a collaboration product for each collaboration program, must have paid a $5.0 million payment (or $7.0 million
if such product includes certain additional enabling intellectual property developed by us in the course of the collaboration)
in order to obtain worldwide development and exploitation rights for that collaboration product. Sanofi would lead
preclinical and clinical development, as well as subsequent marketing and commercialization.
Under the terms of the Sanofi collaboration agreement, we granted to Sanofi, for each collaboration program, a
non‑exclusive, sublicensable (through multiple tiers), worldwide license under certain of our intellectual property to
conduct the activities assigned to Sanofi in the applicable research plan for the duration of the applicable research term, but
for no other purpose and we have agreed not to, directly or indirectly, by ourselves or in collaboration with others,
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screen the Bicycle platform for compounds that bind to a target that is the subject of the Sanofi collaboration or otherwise
perform any work related to or disclose such a target until the earliest of the filing acceptance for the first regulatory
approval in a major market with respect to the collaboration program, termination or abandonment of such collaboration
program or the seventh anniversary of the first date of the research term for the collaboration program.
Under the terms of the Sanofi collaboration agreement, we received a $10.0 million up front cash payment.
Additionally, prior to the initiation of the research plan for each of the first two collaboration programs, Sanofi made a
non‑refundable payment of $1.4 million for the sickle cell program and $2.8 million for the hemophilia program as
payment for our services during the respective Bicycle Research Term for each program. During the Joint Research Term,
Sanofi was obligated to fund our services at a minimum of $0.7 million and fund certain external costs incurred by us of up
to $1.0 million per year. In addition, Sanofi is required to make certain other milestone payments to us upon the
achievement of specified development, regulatory and commercial milestones. More specifically, for each collaboration
program, we are eligible to receive, inclusive of the $5.0 to $7.0 million milestone payment described above, between
$47.5 million and $67.0 million in development milestone payments. We were also eligible to receive up to $104.0 million
in regulatory milestone payments for each collaboration product. In addition, we were eligible to receive up to
$55.0 million in commercial milestone payments, on a collaboration program by collaboration program basis. In addition,
to the extent any of the collaboration products covered by the licenses granted to Sanofi were commercialized, we would be
entitled to receive tiered royalty payments of mid‑single digits to low‑teen digits based on a percentage of net sales.
Royalty payments are subject to certain reductions, including for instances where Sanofi faces generic competition in
certain countries.
Either party could terminate the agreement if the other party has materially breached or defaulted in the
performance of any of its material obligations and such breach or default continued after the specified cure period. Either
party could terminate the agreement in the event of the commencement of any proceeding in or for bankruptcy, insolvency,
dissolution or winding up by or against the other party that is not dismissed or otherwise disposed of within a specified
time period. In the event of a breach, the collaboration agreement could be terminated by either party in its entirety, or, if
the breach was limited to a country or countries, with respect to the country or countries to which the breach applies. Sanofi
may terminate the agreement, entirely or on a program by program, licensed product by licensed product or country by
country basis, for convenience.
Sanofi was also provided with an option to obtain screening services on the additional program upon making an
option fee payment in addition to a non‑refundable payment as payment for our services during the respective Bicycle
Research Term. The option expired in November 2018 unexercised. Sanofi exercised its right to terminate the sickle cell
program in March 2019. Effective October 23, 2019, Sanofi terminated the Sanofi Collaboration Agreement. We own the
material intellectual property rights developed under the sickle cell and hemophilia programs and are currently evaluating
whether to advance it as an internal program, seek a collaborator or cease work on the program.
AstraZeneca
In November 2016, we entered into a research collaboration agreement with AstraZeneca AB. The collaboration is
focused on the research and development of Bicycle peptides that bind to an undisclosed number of biological targets for
the treatment of respiratory, cardiovascular and metabolic diseases. After discovery and initial optimization of such Bicycle
peptides, AstraZeneca will be responsible for all research and development, including lead optimization and drug candidate
selection. AstraZeneca receives development, commercialization and manufacturing license rights with regard to any
selected drug candidate(s).
Under the AstraZeneca collaboration agreement, Bicycle is obligated to use commercially reasonable efforts to
perform research activities, under mutually agreed upon research plans. The research plans includes two discrete parts, on a
research program by research program basis: (i) the Bicycle Research Term, which is focused on the generation of Bicycle
peptide libraries using our peptide drug discovery platform, to be screened against selected biological targets, with the goal
of identifying compounds that meet agreed criteria set by the parties, and (ii) the AZ Research Term, during which
AstraZeneca may continue research activities with the goal of identifying compounds that satisfy the relevant
pharmacological and pharmaceutical criteria for clinical testing. AstraZeneca may, at its sole discretion, approve
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any compound to be progressed into drug development and, upon the selection of each drug candidate, AstraZeneca is to
pay a milestone of $8 million.
Each research program is to continue for an initial period of three years, referred to as the research term, including
one year for the Bicycle Research Term and two for the AZ Research Term. AstraZeneca may extend the research term for
each research program by twelve months (or fifteen months, if needed to complete certain toxicology studies). The research
term for a specific program can be shorter if it is ceased due to a screening failure, a futility determination, or abandonment
by AstraZeneca. AstraZeneca has certain substitution rights should a screening failure or futility determination be reached.
but is obligated to fund these additional efforts related to substitution.
Under the terms of the AstraZeneca collaboration agreement, we granted to AstraZeneca the right and license
(with the right to sublicense) to certain background, foreground and platform intellectual property, for the duration of the
agreement, to the extent reasonably necessary or useful for AstraZeneca to conduct the activities that are assigned to it in
the applicable research plan or that are reasonably necessary or useful or the purpose of researching, developing or
exploiting resulting compounds and products. We have agreed not to, directly or indirectly, by ourselves or in collaboration
with others, screen the Bicycle platform for compounds that bind to a target that is the subject of the AstraZeneca
collaboration or otherwise perform any work related to or disclose such a target until the earlier of the tenth anniversary of
the date on which such target was selected or the dosing of the first patient in the first Phase III clinical trial for a product
that modulates such collaboration target.
The activities under the AstraZeneca collaboration agreement are governed by a joint steering committee and joint
project team each formed by an equal number of representatives from our company and AstraZeneca. The joint steering
committee oversees and reviews each research program and the activities of the joint program team. Among other
responsibilities, the joint steering committee monitors the research progress and ensures open and frequent exchange
between the parties regarding research program activities.
AstraZeneca receives development and commercialization licenses associated with each designated drug
candidate, and owes a milestone fee of $8 million for the first drug candidate selected from each research program. In
addition, AstraZeneca is required to make certain other milestone payments to us upon the achievement of specified
development, regulatory and commercial milestones. More specifically, for each research program, we are eligible to
receive, in addition to the milestone fee described above, up to $162 million in development, regulatory and commercial
milestones on a research program by research program basis, for a total of up to $170 million in milestone payments per
research program. We are eligible to receive these milestone payments for up to six research programs. In addition, to the
extent any of the drug candidates covered by the licenses conveyed to AstraZeneca are commercialized, we would be
entitled to receive tiered royalty payments of mid‑single digits based on a percentage of net sales. Royalty payments are
subject to certain reductions, including in certain countries where AstraZeneca faces generic competition. In total, we could
receive more than $1 billion in milestone payments and royalties under the collaboration agreement.
Either party may terminate the AstraZeneca collaboration agreement if the other party has materially breached or
defaulted in the performance of any of its material obligations and such breach or default continues after the specified cure
period. In the event of a breach, the collaboration agreement may be terminated in its entirety, or, if the breach is limited to
a country or countries, with respect to the country or countries to which the breach applies. Either party may terminate the
AstraZeneca collaboration agreement in the event of the commencement of any proceeding in or for bankruptcy,
insolvency, dissolution or winding up by or against the other party that is not dismissed or otherwise disposed of within a
specified time period. AstraZeneca may terminate the AstraZeneca collaboration agreement, entirely or on a licensed
product by licensed product or country by country basis, for convenience.
Under the AstraZeneca collaboration agreement, AstraZeneca was granted an option to nominate additional targets
on the same contractual terms as the initial targets. In May 2018, AstraZeneca made an irrevocable election to exercise the
additional target option, giving AstraZeneca the option to designate additional targets, for $5.0 million that was paid by
AstraZeneca to us in January 2019.
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Oxurion (formerly ThromboGenics)
In August 2013, we entered into a research collaboration and license agreement with Oxurion NV (formerly
ThromboGenics NV), or Oxurion. Under the Oxurion collaboration agreement, we are responsible for identifying Bicycle
peptides related to the collaboration target, human plasma kallikrein, for use in various ophthalmic indications. Oxurion is
responsible for further development and product commercialization after the defined research screening is performed by us.
The collaboration includes two stages. During Stage I, which has been completed, we were obligated to perform
specific research activities in accordance with the research plan focused on screening the target using our Bicycle platform
to identify compounds that meet the criteria set by the parties. During Stage II, which is ongoing, Oxurion has continued
research activities on selected Bicycle peptides with the goal of identifying compounds for further development and
commercialization. We are not obligated or expected to perform any research services during Stage II of the research plan.
THR‑149 has been selected as a development compound under the Oxurion collaboration agreement.
We granted certain worldwide intellectual property rights to Oxurion for the development, manufacture and
commercialization of licensed compounds associated with plasma kallikrein.
The Oxurion collaboration agreement provided an upfront payment of €1.0 million and potential additional
research and development funding, at an agreed upon FTE rate, should the research effort require more than one FTE or the
research plan be amended or extended by Oxurion. In addition, Oxurion is required to make certain milestone payments to
us upon the achievement of specified research, development, regulatory and commercial milestones. More specifically, for
each collaboration compound, we are eligible to receive up to €8.3 million in research and development milestone
payments, from which we have received €1.8 million as of December 31, 2019, in connection with the development of
THR‑149, and up to €16.5 million in regulatory milestone payments (e.g., €5 million for granting of first regulatory
approval in either the US or EU for the first indication). In addition, to the extent any of the collaboration products covered
by the licenses granted to Oxurion are commercialized, we would be entitled to receive tiered royalty payments of
mid‑single digits based on a percentage of net sales. Royalty payments are subject to certain reductions. Also, if Oxurion
grants a sublicense to a third party for rights to the program for non‑ophthalmic use prior to the filing of an IND, we would
be entitled to receive payments in the double digits (no higher than first quartile) based on a percentage of non‑royalty
sublicensing income. If Oxurion grants a sublicense to a third party for rights to the program for non‑opthalmic use after
the filing of an IND, we would be entitled to receive payments of mid‑single digits to low teen‑digits.
Either party may terminate the Oxurion collaboration agreement if the other party has breached any of its material
obligations and such breach continues after the specified cure period. Either party may terminate the Oxurion collaboration
agreement in the event of the commencement of any proceeding in or for bankruptcy, insolvency, dissolution or winding up
by or against the other party. Oxurion may terminate the Oxurion collaboration agreement for convenience. We may
terminate the Oxurion collaboration agreement if Oxurion challenges the validity of any licensed patents or opposes the
grant of a licensed patent.
In November 2017, we entered into an amendment to the Oxurion collaboration agreement. This amendment
provides for additional research services to be performed by us related to the identification of additional Bicycles binding
to the target for Oxurion, in its discretion, to select as development compounds. We were obligated to perform the work in
accordance with an amended research plan under Stage I of the collaboration and were funded at a specified FTE rate, plus
any direct out of pocket expenses, and Oxurion will be responsible for Stage II research and any development after the
selection of a development compound. We completed Stage I of the research plan during 2018. Additional milestones were
added for the potential additional licensed compounds, consistent with those of the initial Oxurion collaboration agreement.
Additionally, the tiered royalty rates for all licensed compounds other than THR‑149 was increased by one percentage
point. We are not obligated or expected to perform any research services during Stage II of the collaboration.
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Founder Royalty Arrangements
We have entered into two royalty agreements with our founders, Christian Heinis, John Tite, and Sir Greg Winter,
and our initial investors, Atlas Venture Fund VIII LP, Novartis Bioventures LTD. Pursuant to the first royalty agreement,
we are obligated to pay an aggregate royalty percentage in the low single digits on net sales arising from products licensed
under the Oxurion collaboration agreement. Pursuant to the second royalty agreement, we are obligated to pay an aggregate
royalty percentage in the low single digits on net sales arising from products licensed under the AstraZeneca collaboration
agreement.
Intellectual Property
Overview
We strive to protect and enhance the proprietary technology, inventions, and improvements that are commercially
important to the development of our business, including our Bicycle platform. This includes seeking, maintaining, and
defending patent rights, whether developed internally or licensed from third parties, which are directed to the use of our
Bicycle platform and composition of matter involved in the platform, composition of matter and use of product candidates,
and other inventions that are important to our business. We have four patent families directed to novel scaffolds, and 16
patent families directed to our platform technology, including the composition of matter of Bicycle binders and method of
treatment of related indications, including cancer. For example, a patent family directed to the composition of matter of
Bicycle binders and method of treatment of related indications, including cancer, was issued in the United States and
Europe, and is pending in several other jurisdictions. The issued patents from this family, and the pending patent
applications if issued, are expected to expire in 2034, before patent term extensions, if any. We have 69 patent families
directed to the composition of matter of bicyclic peptides and related conjugates, and seven patent families directed to
methods of using bicyclic peptide conjugates for treating various indications. For example, two patent families directed to
the composition of matter of one of our product candidates, BT1718, and methods of use for treating cancer are pending in
certain jurisdictions, which if issued, would expire in 2035 and 2037, respectively. We also rely on trade secrets and
know‑how that may be important for the development of our business. This includes aspects of our proprietary technology
platform and our continuing technological innovation to develop, maintain, and strengthen our position in the field of
peptide, peptidomimetic, and small molecule‑based therapeutics. We additionally may rely on regulatory protection
afforded through data exclusivity, market exclusivity and patent term extensions where available.
Our commercial success may depend in part on our ability to obtain and maintain patent and other proprietary
protection for our product candidates, technology and know‑how, defend and enforce our patents; prevent others from
infringing our proprietary rights, preserve the confidentiality of our trade secrets, and to operate without infringing the
proprietary rights of others.
Our ability to stop third parties from making, having made, using, selling, offering to sell or importing our
products may depend on the extent to which we have rights under valid and enforceable licenses, patents or trade secrets
that cover these activities. In some cases, these rights may need to be enforced by third party licensors. With respect to both
licensed and company‑owned intellectual property, we cannot be sure that patents will be granted with respect to any of our
pending patent applications or with respect to any patent applications filed by us in the future, nor can we be sure that any
of our existing patents or any patents that may be granted to us in the future will be commercially useful in protecting our
commercial products and methods of manufacturing the same. For more information, please see “Risk Factors — Risks
Related to Our Intellectual Property.”
We seek to protect our proprietary position in a variety of ways, including by pursuing patent protection in certain
jurisdictions where it is available. For example, we file U.S. and certain foreign patent applications related to our
proprietary technology, inventions and improvements that are important to the development of our business. We also intend
to seek patent protection or rely upon trade secret rights to protect other technologies that may be used to discover and
validate targets and that may be used to identify and develop novel products. We seek protection, in part, through
confidentiality and proprietary information agreements. We are a party to various other license agreements that give us
rights to use specific technologies in our research and development.
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The term of individual patents depends upon the legal term of the patents in the countries in which they are
obtained. In most countries in which we file, the patent term is 20 years from the earliest date of filing a non‑provisional
patent application related to the patent. A U.S. patent also may be accorded a patent term adjustment, or PTA, under certain
circumstances to compensate for delays in obtaining the patent caused by the United States Patent and Trademark Office. In
some instances, such a PTA may result in a U.S. patent term extending beyond 20 years from the earliest date of filing a
non‑provisional patent application related to the U.S. patent. In addition, in the United States, the term of a U.S. patent that
covers an FDA‑approved drug may also be eligible for patent term extension, which permits patent term restoration as
compensation for the patent term lost during the FDA regulatory review process. The Hatch‑Waxman Act permits a patent
term extension of up to five years beyond the expiration of the patent. The length of the patent term extension is related to
the length of time the drug is under regulatory review. Patent term extension cannot extend the remaining term of a patent
beyond a total of 14 years from the date of product approval and only one patent applicable to an approved drug may be
extended. Similar provisions are available in Europe and other foreign jurisdictions to extend the term of a patent that
covers an approved drug. In the future, if and when our products receive FDA approval, we expect to apply for patent term
extensions on patents covering those products. We plan to seek patent term extensions to any of our issued patents in any
jurisdiction where these are available, however there is no guarantee that the applicable authorities, including the FDA in
the United States, will agree with our assessment of whether such extensions should be granted, and if granted, the length
of such extensions.
Company‑Owned Intellectual Property
As of December 31, 2019, our patent portfolio included four patent families directed to novel scaffolds, 16 patent
families directed to our platform technology, 69 patent families directed to bicyclic peptides and related conjugates, and
seven patent families directed to clinical indications and other properties of development assets. In total, as of December
31, 2019, we owned 90 patents in the U.S. and in Australia, Canada, China, Europe, Hong Kong, Japan, New Zealand,
Russia and Singapore, with terms expiring at various dates in February 2029 to November 2037 exclusive of potential
patent term adjustment and/or patent term extension.
In addition, as of December 31, 2019, we had 162 patent applications pending in the U.S. and in Argentina,
Australia, Brazil, Canada, China, Europe, Hong Kong, India, Japan, Korea, New Zealand, Russia, Singapore, Taiwan, and
Venezuela, as well as pending international applications under the Patent Cooperation Treaty (PCT), and any patents that
may be issued from these patent applications are generally expected to have terms that will expire at various dates in
February 2029 to December 2040 subject to possible patent term extensions and/or patent term adjustments.
Trade Secret Protection
Finally, we may rely, in some circumstances, on trade secrets to protect our technology. We anticipate relying on
trade secrets to protect the know‑how behind our Bicycle platform. However, trade secrets can be difficult to protect. We
seek to protect our technology and processes, in part, by entering into confidentiality agreements with our employees,
consultants, scientific advisors and contractors. We also seek to preserve the integrity and confidentiality of our data and
trade secrets by maintaining physical security of our premises and physical and electronic security of our information
technology systems. While we have confidence in these individuals, organizations and systems, agreements or security
measures may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may
otherwise become known or be independently discovered by competitors. To the extent that our consultants, contractors or
collaborators use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or
resulting know‑how and inventions. For further information, please see “Risk Factors — Risks Related to Our Intellectual
Property.”
Competition
The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense
competition and a strong emphasis on proprietary products. While we believe that our technologies, knowledge, experience
and scientific resources provide us with competitive advantages, we face potential competition from many different
sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions and
governmental agencies and public and private research institutions. Any product candidates that we
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successfully develop and commercialize will compete with existing therapies and new therapies that may become available
in the future.
There are a number of currently marketed products and product candidates in preclinical research and clinical
development by third parties for the various oncology applications that we are targeting. For example, a number of
multinational companies as well as large biotechnology companies, including Astellas Pharma, Inc., Seattle Genetics, Inc.,
AstraZeneca, and GlaxoSmithKline plc, are developing programs for the targets that we are exploring for our BTC
programs. Furthermore, Agenus Inc., Bristol‑Myers Squibb Company, Pfizer Inc., and Roche Holding AG, or Roche, have
or are developing programs for CD137, and Amgen Inc., Pieris Pharmaceuticals, Inc. and Roche are developing
bi‑specifics. In addition, we are aware that technologies for drug discovery, including peptide‑based medicines, continue to
advance rapidly, which may compete with our own screening technology or render it obsolete.
Many of our competitors, either alone or with their strategic partners, have substantially greater financial,
technical and human resources than we do and significantly greater experience in the discovery and development of
product candidates, obtaining FDA and other regulatory approvals of products and the commercialization of those products.
Accordingly, our competitors may be more successful than we may be in discovering product candidates, obtaining
approval for drugs and achieving widespread market acceptance. Our competitors’ drugs may be more effective, or more
effectively marketed and sold, than any drug we may commercialize and may render our product candidates obsolete or
non‑competitive before we can recover the expenses of developing and commercializing any of our product candidates. We
anticipate that we will face intense and increasing competition as new drugs enter the market and advanced technologies
become available.
Sales and Marketing
Subject to receiving marketing approval, we intend to pursue the commercialization of our product candidates
either by building internal sales and marketing capabilities or through opportunistic collaborations with others.
We plan to build a marketing and sales management organization to create and implement marketing strategies for
any products that we market through our own sales organization and to oversee and support our sales force. The
responsibilities of the marketing organization would include developing educational initiatives with respect to approved
products and establishing relationships with researchers and practitioners in relevant fields of medicine.
Manufacturing
Each of our Bicycles is entirely synthetic. We believe the synthetic nature of our product candidates allow for a
more cost effective and scalable manufacturing process compared to biologics. In addition, this property of Bicycles allows
for the manufacturing of product candidates of consistent pharmaceutical quality with favorable stability characteristics.
Based on our experience, we believe that the manufacturing of Bicycles can be made to be well controlled, reproducible
and scalable.
We operate an outsourced model for the manufacture of our product candidates, and contract with good
manufacturing practice, or GMP, licensed pharmaceutical contract development and manufacturing organizations, both for
the synthesis of each drug substance component, and the formulation and packaging of the finished drug product. We
selected these organizations based on their experience, capability, capacity and regulatory status. We do not own or operate
GMP manufacturing facilities, nor do we currently plan to build our own GMP manufacturing capabilities for the
production of candidates for clinical or commercial use.
We currently engage five third‑party manufacturers to provide clinical supplies of our product candidates, three
third‑party manufacturers to provide non‑clinical supplies of our product candidates and three third‑party manufacturers to
provide fill‑finish services. Projects are managed by a specialist team of our internal staff, which is designed to promote
compliance with the technical aspects and regulatory requirements of the manufacturing process.
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Government Regulation
Government authorities in the United States, at the federal, state and local level, and in other countries and
jurisdictions, including the European Union, extensively regulate, among other things, the research, development, testing,
manufacture, quality control, approval, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution,
marketing, post‑approval monitoring and reporting, and import and export of pharmaceutical products. The processes for
obtaining regulatory approvals in the United States and in foreign countries and jurisdictions, along with subsequent
compliance with applicable statutes and regulations and other regulatory authorities, require the expenditure of substantial
time and financial resources.
Review and Approval of Drugs in the United States
In the United States, the FDA regulates drugs and devices under the Federal Food, Drug, and Cosmetic Act, or
FDCA, and implementing regulations. The failure to comply with applicable U.S. requirements at any time during the
product development process, approval process or after approval may subject an applicant and/or sponsor to a variety of
administrative or judicial sanctions, including refusal by the FDA to approve pending applications, withdrawal of an
approval, imposition of a clinical hold, issuance of warning letters and other types of letters, product seizures, total or
partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution,
disgorgement of profits, or civil or criminal investigations and penalties brought by the FDA and the Department of Justice
or other governmental entities. In addition, an applicant may need to recall a product.
An applicant seeking approval to market and distribute a new drug product in the United States must typically
undertake the following:
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completion of nonclinical, or preclinical, laboratory tests, animal studies and formulation studies in
compliance with the FDA’s good laboratory practice, or GLP, regulations;
submission to the FDA of an IND, which must take effect before human clinical trials may begin;
approval by an independent IRB representing each clinical site before each clinical trial may be initiated;
performance of adequate and well‑controlled human clinical trials in accordance with good clinical practices,
or GCP, to establish the safety and efficacy of the proposed drug product for each indication;
preparation and submission to the FDA of a new drug application, or NDA;
review of the product by an FDA advisory committee, where appropriate or if applicable;
satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which
the product, or components thereof, are produced to assess compliance with current Good Manufacturing
Practices, or cGMP, requirements and to assure that the facilities, methods and controls are adequate to
preserve the product’s identity, strength, quality and purity;
satisfactory completion of FDA audits of clinical trial sites to assure compliance with GCPs and the integrity
of the clinical data;
payment of user fees and securing FDA approval of the NDA; and
compliance with any post‑approval requirements, including Risk Evaluation and Mitigation Strategies, or
REMS, and post‑approval studies required by the FDA.
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Preclinical Studies
Preclinical studies include laboratory evaluation of the purity and stability of the manufactured drug substance or
active pharmaceutical ingredient and the formulated drug or drug product, as well as in vitro and animal studies to assess
the safety and activity of the drug for initial testing in humans and to establish a rationale for therapeutic use. The conduct
of preclinical studies is subject to federal regulations and requirements, including GLP regulations. The results of the
preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and plans
for clinical trials, among other things, are submitted to the FDA as part of an IND. Some long‑term preclinical testing, such
as animal tests of reproductive adverse events and carcinogenicity, may continue after the IND is submitted.
Human Clinical Trials in Support of an NDA
Clinical trials involve the administration of the investigational product to human subjects under the supervision of
qualified investigators in accordance with GCP requirements, which include, among other things, the requirement that all
research subjects provide their informed consent in writing before their participation in any clinical trial. Clinical trials are
conducted under written study protocols detailing, among other things, the inclusion and exclusion criteria, the objectives
of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A protocol for
each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. An IND
automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or
questions related to a proposed clinical trial and places the trial on clinical hold. In such a case, the IND sponsor and the
FDA must resolve any outstanding concerns before the clinical trial can begin. The FDA can place an IND on full or partial
clinical hold at any point in development, and depending upon the scope of the hold, clinical trial(s) may not restart until
resolution of the outstanding concerns to the FDA’s satisfaction.
In addition, an IRB representing each institution participating in the clinical trial must review and approve the plan
for any clinical trial before it commences at that institution, and the IRB must conduct a continuing review and reapprove
the study at least annually. The IRB must review and approve, among other things, the study protocol and informed consent
information to be provided to study subjects. An IRB must operate in compliance with FDA regulations. Information about
certain clinical trials must be submitted within specific timeframes to the National Institutes of Health for public
dissemination on their ClinicalTrials.gov website.
Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined:
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Phase I. The drug is initially introduced into healthy human subjects or, in certain indications such as cancer,
patients with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism,
distribution, excretion and, if possible, to gain an early indication of its effectiveness and to determine optimal
dosage.
Phase II. The drug is administered to a limited patient population to identify possible adverse effects and
safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to
determine dosage tolerance and optimal dosage.
Phase III. The drug is administered to an expanded patient population, generally at geographically dispersed
clinical trial sites, in well‑controlled clinical trials to generate enough data to evaluate the efficacy and safety
of the product for approval, to establish the overall risk‑benefit profile of the product and to provide adequate
information for the labeling of the product.
Phase IV. Post‑approval studies may be conducted after initial marketing approval. These studies are used to
gain additional experience from the treatment of patients in the intended therapeutic indication.
Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more
frequently if serious adverse events occur. In addition, IND safety reports must be submitted to the FDA for any of the
following: serious and unexpected suspected adverse reactions; findings from other studies or animal or in vitro
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testing that suggest a significant risk in humans exposed to the drug; and any clinically important increase in the case of a
serious suspected adverse reaction over that listed in the protocol or investigator brochure. Phase I, Phase II and Phase III
clinical trials may not be completed successfully within any specified period, or at all. Furthermore, the FDA or the sponsor
may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are
being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its
institution, or an institution it represents, if the clinical trial is not being conducted in accordance with the IRB’s
requirements or if the drug has been associated with unexpected serious harm to patients. The FDA will typically inspect
one or more clinical sites to assure compliance with GCP and the integrity of the clinical data submitted.
Concurrent with clinical trials, companies often complete additional animal studies and must also develop
additional information about the chemistry and physical characteristics of the drug as well as finalize a process for
manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process
must be capable of consistently producing quality batches of the drug candidate and, among other things, the applicant
must develop methods for testing the identity, strength, quality, purity, and potency of the final drug. Additionally,
appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the drug
candidate does not undergo unacceptable deterioration over its shelf life.
Review of an NDA by the FDA
Assuming successful completion of required clinical testing and other requirements, the results of the preclinical
studies and clinical trials, together with detailed information relating to the product’s chemistry, manufacture, controls and
proposed labeling, among other things, are submitted to the FDA as part of an NDA requesting approval to market the drug
product for one or more indications. Under federal law, the submission of most NDAs is additionally subject to substantial
user fees, and the sponsor of an approved NDA is also subject to annual program user fees. These fees are typically
increased annually.
The FDA conducts a preliminary review of an NDA within 60 days of its receipt and informs the sponsor whether
the application is sufficiently complete to permit substantive review. The FDA may request additional information rather
than accept an NDA for filing. In this event, the application must be resubmitted with the additional information. The
resubmitted application is also subject to review before the FDA accepts it for filing. Once the submission is accepted for
filing, the FDA begins an in‑depth substantive review. The FDA has agreed to specified performance goals in the review
process of NDAs. Most such applications are meant to be reviewed within ten months from the date of filing, and most
applications for “priority review” products are meant to be reviewed within six months of filing. The review process may
be extended by the FDA for three additional months to consider new information or clarification provided by the applicant
to address an outstanding deficiency identified by the FDA following the original submission.
Before approving an NDA, the FDA typically will inspect the facility or facilities where the product is or will be
manufactured. These pre‑approval inspections may cover all facilities associated with an NDA submission, including drug
component manufacturing (such as active pharmaceutical ingredients), finished drug product manufacturing, and control
testing laboratories. The FDA will not approve an application unless it determines that the manufacturing processes and
facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within
required specifications. Additionally, before approving an NDA, the FDA will typically inspect one or more clinical sites to
assure compliance with GCP.
In addition, as a condition of approval, the FDA may require an applicant to develop a REMS. REMS use risk
minimization strategies beyond the professional labeling to ensure that the benefits of the product outweigh the potential
risks. To determine whether a REMS is needed, the FDA will consider the size of the population likely to use the product,
seriousness of the disease, expected benefit of the product, expected duration of treatment, seriousness of known or
potential adverse events, and whether the product is a new molecular entity. REMS can include medication guides,
physician communication plans for healthcare professionals, and elements to assure safe use, or ETASU. ETASU may
include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain
circumstances, special monitoring, and the use of patient registries. The FDA may require a REMS
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before approval or post‑approval if it becomes aware of a serious risk associated with use of the product. The requirement
for a REMS can materially affect the potential market and profitability of a product.
The FDA is required to refer an application for a novel drug to an advisory committee or explain why such referral
was not made. Typically, an advisory committee is a panel of independent experts, including clinicians and other scientific
experts, that reviews, evaluates and provides a recommendation as to whether the application should be approved and under
what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such
recommendations carefully when making decisions.
Fast Track, Breakthrough Therapy and Priority Review Designations
The FDA is authorized to designate certain products for expedited review if they are intended to address an unmet
medical need in the treatment of a serious or life‑threatening disease or condition. These programs are Fast Track
designation, Breakthrough Therapy designation and priority review designation.
Specifically, the FDA may designate a product for Fast Track review if it is intended, whether alone or in
combination with one or more other products, for the treatment of a serious or life‑threatening disease or condition, and it
demonstrates the potential to address unmet medical needs for such a disease or condition. For Fast Track products,
sponsors may have greater interactions with the FDA and the FDA may initiate review of sections of a Fast Track product’s
application before the application is complete. This rolling review may be available if the FDA determines, after
preliminary evaluation of clinical data submitted by the sponsor, that a Fast Track product may be effective. The sponsor
must also provide, and the FDA must approve, a schedule for the submission of the remaining information and the sponsor
must pay applicable user fees. However, the FDA’s time period goal for reviewing a Fast Track application does not begin
until the last section of the application is submitted. In addition, the Fast Track designation may be withdrawn by the FDA
if the FDA believes that the designation is no longer supported by data emerging in the clinical trial process.
Second, a product may be designated as a Breakthrough Therapy if it is intended, either alone or in combination
with one or more other products, to treat a serious or life‑threatening disease or condition and preliminary clinical evidence
indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically
significant endpoints, such as substantial treatment effects observed early in clinical development. The FDA may take
certain actions with respect to Breakthrough Therapies, including holding meetings with the sponsor throughout the
development process; providing timely advice to the sponsor regarding development and approval; involving more senior
staff in the review process; assigning a cross‑disciplinary project lead for the review team; and taking other steps to design
the clinical trials in an efficient manner.
Third, the FDA may designate a product for priority review if it is a product that treats a serious condition and, if
approved, would provide a significant improvement in safety or effectiveness. The FDA determines, on a case‑by‑case
basis, whether the proposed product represents a significant improvement when compared with other available therapies.
Significant improvement may be illustrated by evidence of increased effectiveness in the treatment of a condition,
elimination or substantial reduction of a treatment‑limiting adverse reaction, documented enhancement of patient
compliance that is expected to lead to improvement in serious outcomes, and evidence of safety and effectiveness in a new
subpopulation. A priority designation is intended to direct overall attention and resources to the evaluation of such
applications, and to shorten the FDA’s goal for taking action on a marketing application from ten months to six months.
Accelerated Approval Pathway
The FDA may grant accelerated approval to a product for a serious or life‑threatening condition that provides
meaningful therapeutic advantage to patients over existing treatments based upon a determination that the product has an
effect on a surrogate endpoint that is reasonably likely to predict clinical benefit. The FDA may also grant accelerated
approval for such a condition when the product has an effect on an intermediate clinical endpoint that can be measured
earlier than an effect on irreversible morbidity or mortality, or IMM, and that is reasonably likely to predict an effect on
irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the
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condition and the availability or lack of alternative treatments. Products granted accelerated approval must meet the same
statutory standards for safety and effectiveness as those granted traditional approval.
For the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory measurement,
radiographic image, physical sign, or other measure that is thought to predict clinical benefit, but is not itself a measure of
clinical benefit. Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints. An
intermediate clinical endpoint is a measurement of a therapeutic effect that is considered reasonably likely to predict the
clinical benefit of a product, such as an effect on IMM. The FDA has limited experience with accelerated approvals based
on intermediate clinical endpoints, but has indicated that such endpoints generally may support accelerated approval where
the therapeutic effect measured by the endpoint is not itself a clinical benefit and basis for traditional approval, if there is a
basis for concluding that the therapeutic effect is reasonably likely to predict the ultimate clinical benefit of a product.
The accelerated approval pathway is most often used in settings in which the course of a disease is long and an
extended period of time is required to measure the intended clinical benefit of a product, even if the effect on the surrogate
or intermediate clinical endpoint occurs rapidly. Thus, accelerated approval has been used extensively in the development
and approval of products for treatment of a variety of cancers in which the goal of therapy is generally to improve survival
or decrease morbidity and the duration of the typical disease course requires lengthy and sometimes large trials to
demonstrate a clinical or survival benefit.
The accelerated approval pathway is usually contingent on a sponsor’s agreement to conduct, in a diligent manner,
additional post‑approval confirmatory studies to verify and describe the product’s clinical benefit. As a result, a product
candidate approved on this basis is subject to rigorous post‑marketing compliance requirements, including the completion
of Phase IV or post‑approval clinical trials to confirm the effect on the clinical endpoint. Failure to conduct required
post‑approval studies, or confirm a clinical benefit during post‑marketing studies, would allow the FDA to withdraw the
product from the market on an expedited basis. All promotional materials for product candidates approved under
accelerated regulations are subject to prior review by the FDA.
The FDA’s Decision on an NDA
On the basis of the FDA’s evaluation of the NDA and accompanying information, including the results of the
inspection of the manufacturing facilities, the FDA may issue an approval letter or a complete response letter. An approval
letter authorizes commercial marketing of the product with specific prescribing information for specific indications. A
complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing
or information in order for the FDA to reconsider the application. If and when those deficiencies have been addressed to the
FDA’s satisfaction in a resubmission of the NDA, the FDA will issue an approval letter. The FDA has committed to
reviewing such resubmissions in two or six months depending on the type of information included. Even with submission
of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for
approval.
If the FDA approves a product, it may limit the approved indications for use for the product, require that
contraindications, warnings or precautions be included in the product labeling, require that post‑approval studies, including
Phase IV clinical trials, be conducted to further assess the drug’s safety after approval, require testing and surveillance
programs to monitor the product after commercialization, or impose other conditions, including distribution restrictions or
other risk management mechanisms, including REMS, which can materially affect the potential market and profitability of
the product. The FDA may prevent or limit further marketing of a product based on the results of post‑market studies or
surveillance programs. After approval, many types of changes to the approved product, such as adding new indications,
manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and
approval.
Post‑Approval Requirements
Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation
by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting,
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product sampling and distribution, advertising and promotion and reporting of adverse experiences with the product. After
approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to
prior FDA review and approval. There also are continuing, annual program user fee requirements for any marketed
products, as well as new application fees for supplemental applications with clinical data.
In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs
are required to register their establishments with the FDA and state agencies, and are subject to periodic unannounced
inspections by the FDA and these state agencies for compliance with cGMP requirements. Changes to the manufacturing
process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also
require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements
upon the NDA holder and any third‑party manufacturers that the NDA holder may decide to use. Accordingly,
manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain
cGMP compliance.
Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and
standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously
unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing
processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new
safety information; imposition of post‑market studies or clinical trials to assess new safety risks; or imposition of
distribution or other restrictions under a REMS program. Other potential consequences include, among other things:
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restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the
market or voluntary product recalls;
fines, warning letters or holds on post‑approval clinical trials;
refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation
of product approvals;
product seizure or detention, or refusal to permit the import or export of products; or
injunctions or the imposition of civil or criminal penalties.
The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the
market. Drugs generally may be promoted only for the approved indications and in accordance with the provisions of the
approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of
off‑label uses, and a company that is found to have improperly promoted off‑label uses may be subject to significant
liability.
In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing
Act, or PDMA, which regulates the distribution of drugs and drug samples at the federal level, and sets minimum standards
for the registration and regulation of drug distributors by the states. Both the PDMA and state laws limit the distribution of
prescription pharmaceutical product samples and impose requirements to ensure accountability in distribution.
Companion Diagnostics
We may employ companion diagnostics to help us to more accurately identify patients within a particular subset,
both during our clinical trials and in connection with the commercialization of our product candidates that we are
developing or may in the future develop. Companion diagnostics can identify patients who are most likely to benefit from a
particular therapeutic product; identify patients likely to be at increased risk for serious side effects as a result of treatment
with a particular therapeutic product; or monitor response to treatment with a particular therapeutic product for
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the purpose of adjusting treatment to achieve improved safety or effectiveness. Companion diagnostics are regulated as
medical devices by the FDA and, as such, require either clearance or approval prior to commercialization. The level of risk
combined with available controls to mitigate risk determines whether a companion diagnostic device requires Premarket
Approval Application, or PMA, approval or is cleared through the 510(k) premarket notification process. For a novel
therapeutic product for which a companion diagnostic device is essential for the safe and effective use of the product, the
companion diagnostic device should be developed and approved or 510(k)‑cleared contemporaneously with the therapeutic.
The use of the companion diagnostic device will be stipulated in the labeling of the therapeutic product.
Abbreviated New Drug Applications for Generic Drugs
In 1984, with passage of the Hatch‑Waxman Amendments to the FDCA, Congress authorized the FDA to approve
generic drugs that are the same as drugs previously approved by the FDA under the NDA provisions of the statute. To
obtain approval of a generic drug, an applicant must submit an abbreviated new drug application, or ANDA, to the agency.
In support of such applications, a generic manufacturer may rely on the preclinical and clinical testing previously
conducted for a drug product previously approved under an NDA, known as the reference‑listed drug, or RLD.
Specifically, in order for an ANDA to be approved, the FDA must find that the generic version is identical to the
RLD with respect to the active ingredients, the route of administration, the dosage form, and the strength of the drug. At the
same time, the FDA must also determine that the generic drug is “bioequivalent” to the innovator drug. Under the statute, a
generic drug is bioequivalent to a RLD if “the rate and extent of absorption of the drug do not show a significant difference
from the rate and extent of absorption of the listed drug.”
Upon approval of an ANDA, the FDA indicates whether the generic product is “therapeutically equivalent” to the
RLD in its publication “Approved Drug Products with Therapeutic Equivalence Evaluations,” also referred to as the
“Orange Book.” Physicians and pharmacists consider a therapeutic equivalent generic drug to be fully substitutable for the
RLD. In addition, by operation of certain state laws and numerous health insurance programs, the FDA’s designation of
therapeutic equivalence often results in substitution of the generic drug without the knowledge or consent of either the
prescribing physician or patient.
Under the Hatch‑Waxman Amendments, the FDA may not approve an ANDA until any applicable period of
non‑patent exclusivity for the RLD has expired. The FDCA provides a period of five years of non‑patent data exclusivity
for a new drug containing a new chemical entity. For the purposes of this provision, a new chemical entity, or NCE, is a
drug that contains no active moiety that has previously been approved by the FDA in any other NDA. An active moiety is
the molecule or ion responsible for the physiological or pharmacological action of the drug substance. In cases where such
NCE exclusivity has been granted, an ANDA may not be filed with the FDA until the expiration of five years unless the
submission is accompanied by a Paragraph IV certification, which states the proposed generic drug will not infringe the
already approved product’s listed patents or that such patents are invalid or unenforceable, in which case the applicant may
submit its application four years following the original product approval.
The FDCA also provides for a period of three years of exclusivity if the NDA includes reports of one or more new
clinical investigations, other than bioavailability or bioequivalence studies, that were conducted by or for the applicant and
are essential to the approval of the application. This three‑year exclusivity period often protects changes to a previously
approved drug product, such as a new dosage form, route of administration, combination or indication. Three‑year
exclusivity would be available for a drug product that contains a previously approved active moiety, provided the statutory
requirement for a new clinical investigation is satisfied. Unlike five‑year NCE exclusivity, an award of three‑year
exclusivity does not block the FDA from accepting ANDAs seeking approval for generic versions of the drug as of the date
of approval of the original drug product. The FDA typically makes decisions about awards of data exclusivity shortly
before a product is approved.
Hatch‑Waxman Patent Certification and the 30‑Month Stay
Upon approval of an NDA or a supplement thereto, NDA sponsors are required to list with the FDA each patent
with claims that cover the applicant’s product or an approved method of using the product. Each of the patents listed by
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the NDA sponsor is published in the Orange Book. When an ANDA applicant files its application with the FDA, the
applicant is required to certify to the FDA concerning any patents listed for the reference product in the Orange Book,
except for patents covering methods of use for which the ANDA applicant is not seeking approval. An applicant who
submits a section 505(b)(2) NDA, which is for new or improved formulations or new uses of previously approved drug
products and where at least one or more of the investigations relied upon by the applicant for approval were not conducted
by or for the applicant and for which the applicant has not obtained a right of reference or use from the person by or for
whom the investigations were conducted, also must certify to the FDA concerning any patents listed for the approved
product in the Orange Book to the same extent that an ANDA applicant would.
Specifically, the applicant must certify with respect to each patent that:
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the required patent information has not been filed;
the listed patent has expired;
the listed patent has not expired, but will expire on a particular date and approval is sought after patent
expiration; or
the listed patent is invalid, unenforceable or will not be infringed by the new product.
A certification that the new product will not infringe the already approved product’s listed patents or that such
patents are invalid or unenforceable is called a Paragraph IV certification. If the applicant does not challenge the listed
patents or indicates that it is not seeking approval of a patented method of use, the ANDA application will not be approved
until all the listed patents claiming the referenced product have expired (other than method of use patents involving
indications for which the ANDA applicant is not seeking approval).
If the ANDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice
of the Paragraph IV certification to the NDA and patent holders once the ANDA has been accepted for filing by the FDA.
The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV
certification. The filing of a patent infringement lawsuit within 45 days after the receipt of a Paragraph IV certification
automatically prevents the FDA from approving the ANDA until the earlier of 30 months after the receipt of the
Paragraph IV notice, expiration of the patent, or a decision in the infringement case that is favorable to the ANDA
applicant.
Orphan Drug Designation and Exclusivity
Under the Orphan Drug Act, the FDA may designate a drug product as an “orphan drug” if it is intended to treat a
rare disease or condition (generally meaning that it affects fewer than 200,000 individuals in the United States, or more in
cases in which there is no reasonable expectation that the cost of developing and making a drug product available in the
United States for treatment of the disease or condition will be recovered from sales of the product). A company must
request orphan product designation before submitting an NDA. If the request is granted, the FDA will disclose the identity
of the therapeutic agent and its potential use. Orphan product designation does not convey any advantage in or shorten the
duration of the regulatory review and approval process.
If a product with orphan status receives the first FDA approval for the disease or condition for which it has such
designation or for a select indication or use within the rare disease or condition for which it was designated, the product
generally will be receiving orphan product exclusivity. Orphan product exclusivity means that the FDA may not approve
any other applications for the same product for the same indication for seven years, except in certain limited circumstances.
Competitors may receive approval of different products for the indication for which the orphan product has exclusivity and
may obtain approval for the same product but for a different indication. If a drug or drug product designated as an orphan
product ultimately receives marketing approval for an indication broader than what was designated in its orphan product
application, it may not be entitled to exclusivity.
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Pediatric Studies and Exclusivity
Under the Pediatric Research Equity Act of 2003, an NDA or supplement thereto must contain data that are
adequate to assess the safety and effectiveness of the drug product for the claimed indications in all relevant pediatric
subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and
effective. With enactment of the Food and Drug Administration Safety and Innovation Act, or FDASIA, in 2012, sponsors
must also submit pediatric study plans prior to the assessment data. Those plans must contain an outline of the proposed
pediatric study or studies the applicant plans to conduct, including study objectives and design, any deferral or waiver
requests, and other information required by regulation. The applicant, the FDA, and the FDA’s internal review committee
must then review the information submitted, consult with each other, and agree upon a final plan. The FDA or the applicant
may request an amendment to the plan at any time.
The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all
pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data
requirements. Additional requirements and procedures relating to deferral requests and requests for extension of deferrals
are contained in FDASIA. Unless otherwise required by regulation, the pediatric data requirements do not apply to products
with orphan designation.
Pediatric exclusivity is another type of non‑patent marketing exclusivity in the United States and, if granted,
provides for the attachment of an additional six months of marketing protection to the term of any existing regulatory
exclusivity, including the non‑patent and orphan exclusivity. This six‑month exclusivity may be granted if an NDA sponsor
submits pediatric data that fairly respond to a written request from the FDA for such data. The data do not need to show the
product to be effective in the pediatric population studied; rather, if the clinical trial is deemed to fairly respond to the
FDA’s request, the additional protection is granted. If reports of requested pediatric studies are submitted to and accepted
by the FDA within the statutory time limits, whatever statutory or regulatory periods of exclusivity or patent protection
cover the product are extended by six months. This is not a patent term extension, but it effectively extends the regulatory
period during which the FDA cannot approve another application.
Patent Term Restoration and Extension
A patent claiming a new drug product may be eligible for a limited patent term extension under the
Hatch‑Waxman Amendments, which permits a patent restoration of up to five years for patent term lost during product
development and the FDA regulatory review. The restoration period granted is typically one‑half the time between the
effective date of an IND and the submission date of an NDA, plus the time between the submission date of an NDA and the
ultimate approval date. Patent term restoration cannot be used to extend the remaining term of a patent past a total of
14 years from the product’s approval date. Only one patent applicable to an approved drug product is eligible for the
extension, and the application for the extension must be submitted prior to the expiration of the patent in question. A patent
that covers multiple drugs for which approval is sought can only be extended in connection with one of the approvals. The
U.S. Patent and Trademark Office reviews and approves the application for any patent term extension or restoration in
consultation with the FDA.
Europe/Rest of World Regulation
In addition to regulations in the United States, there are a variety of regulations in other jurisdictions governing,
among other things, clinical trials, commercial sales and distribution of medicinal products. Even if FDA approval of a
particular product is obtained, it must still obtain the requisite approvals from regulatory authorities in foreign countries
prior to the commencement of clinical trials or marketing of the product in those countries. Certain countries outside of the
United States have a similar process that requires the submission of a clinical trial application much like the IND prior to
the commencement of human clinical trials. Currently in the European Union, for example, a clinical trial application must
be submitted to each country’s national regulatory authority in which the clinical trial is to take place, together with an
independent ethics committee, much like the FDA and IRB, respectively. It is expected, however, that the Clinical Trials
Regulation 536/2014 shall start to apply during the course of 2020. This new Regulation takes direct effect in each
European Union Member State and seeks to simplify and streamline the approval of clinical trials in the European Union,
for example, by allowing the clinical trial sponsor to submit a single application for approval of a
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clinical trial across the EU via a new EU Portal. The new Regulation also aims to streamline and simplify the rules on
safety reporting and introduces enhanced transparency requirements, such as mandatory submission of a summary of the
clinical trial results to a new EU Database.
Medicinal products can only be commercialized in the European Economic Area after a marketing authorization,
or MA, has been obtained. There are two types of marketing authorizations:
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The centralized MA, which is issued by the European Commission through the Centralized Procedure, based
on the opinion of the Committee for Medicinal Products for Human Use of the European Medicines Agency,
or EMA, and which is valid throughout the entirety of the EEA. The Centralized Procedure is mandatory for
certain types of products, such as biotechnology medicinal products, orphan medicinal products, and
medicinal products indicated for the treatment of AIDS, cancer, neurodegenerative disorders, diabetes,
auto‑immune and viral diseases. The Centralized Procedure is optional for products containing an active
substance not authorized in the EEA before May 20, 2004, for products that constitute a significant
therapeutic, scientific or technical innovation or for which a centralized authorization would be in the interest
of patients.
National MAs, which are issued by the competent authorities of the Member States of the EEA and only
cover their respective territory, are available for products not falling within the mandatory scope of the
Centralized Procedure. Where a product has already been authorized for marketing in a Member State of the
EEA, this National MA can be recognized in another Member State through the Mutual Recognition
Procedure. If the product has not received a National MA in any Member State at the time of application, it
can be approved simultaneously in various Member States through the Decentralized Procedure.
Under the above described procedures, before granting the MA, the EMA or the competent authorities of the
Member States of the EEA make an assessment of the risk‑benefit balance of the product on the basis of scientific criteria
concerning its quality, safety and efficacy.
The European Union also provides opportunities for market exclusivity. For example, in the European Union,
upon receiving marketing authorization, innovative medicinal products generally receive eight years of data exclusivity and
an additional two years of market exclusivity. If granted, data exclusivity prevents regulatory authorities in the European
Union from referencing the innovator’s data to assess a generic or biosimilar application. During the additional two-year
period of market exclusivity, a generic or biosimilar marketing authorization can be submitted, and the innovator’s data
may be referenced, but no generic or biosimilar product can be marketed until the expiration of the market exclusivity.
Products receiving orphan designation, can receive ten years of market exclusivity, during which time no similar medicinal
product for the same indication may be placed on the market. An orphan product’s market exclusivity may be reduced to
six years if, at the end of the fifth year, it is established that the criteria for orphan drug designation are no longer met, in
other words, when it is shown on the basis of available evidence that the product is sufficiently profitable not to justify
maintenance of market exclusivity. Additionally, marketing authorization may be granted to a similar product for the same
indication at any time if:
·
·
·
the second applicant can establish that its product, although similar, is safer, more effective or otherwise
clinically superior;
the applicant consents to a second orphan medicinal product application; or
the applicant cannot supply sufficient quantities of the orphan medicinal product.
The criteria for designating an “orphan medicinal product” in the European Union are similar in principle to those
in the United States. Under Article 3 of Regulation (EC) 141/2000, a medicinal product may be designated as orphan if (1)
it is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition; (2) either
(a) such condition affects no more than five in 10,000 persons in the European Union when the application is made, or (b)
the product, without the benefits derived from orphan status, would not generate sufficient return in the European Union to
justify investment; and (3) there exists no satisfactory method of diagnosis, prevention
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or treatment of such condition authorized for marketing in the European Union, or if such a method exists, the product will
be of significant benefit to those affected by the condition, as defined in Regulation (EC) 847/2000. Orphan medicinal
products are eligible for financial incentives such as reduction of fees or fee waivers and scientific assistance for study
proposals. The application for orphan drug designation must be submitted before the application for marketing
authorization. The applicant will receive a fee reduction for the marketing authorization application if the orphan drug
designation has been granted, but not if the designation is still pending at the time the marketing authorization is submitted.
Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval
process.
In the European Union, companies developing a new medicinal product must agree to a Paediatric Investigation
Plan, or PIP, with the EMA and must conduct pediatric clinical trials in accordance with that PIP, unless a deferral or
waiver applies, (e.g., because the relevant disease or condition occurs only in adults). The MA application for the product
must include the results of pediatric clinical trials conducted in accordance with the PIP, unless a waiver applies, or a
deferral has been granted, in which case the pediatric clinical trials must be completed at a later date. Products that are
granted a marketing authorization on the basis of the pediatric clinical trials conducted in accordance with the PIP are
eligible for a six month extension of the protection under a supplementary protection certificate (if any is in effect at the
time of approval) or, in the case of orphan medicinal products, a two year extension of the orphan market exclusivity. This
pediatric reward is subject to specific conditions and is not automatically available when data in compliance with the PIP
are developed and submitted. For other countries outside of the European Union, such as certain countries in Eastern
Europe, Latin America or Asia, the requirements governing the conduct of clinical trials, product approval, pricing and
reimbursement vary from country to country. In all cases, the clinical trials are to be conducted in accordance with GCP
and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.
Pharmaceutical Coverage, Pricing and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of products approved by the FDA and
other government authorities. Sales of products will depend, in part, on the extent to which third‑party payors, including
government health programs in the United States such as Medicare and Medicaid, commercial health insurers and managed
care organizations, provide coverage, and establish adequate reimbursement levels for, such products. The process for
determining whether a payor will provide coverage for a product may be separate from the process for setting the price or
reimbursement rate that the payor will pay for the product once coverage is approved. Third‑party payors are increasingly
challenging the prices charged, examining the medical necessity, and reviewing the cost‑effectiveness of medical products
and services and imposing controls to manage costs. Third‑party payors may limit coverage to specific products on an
approved list, or formulary, which might not include all of the approved products for a particular indication.
In order to secure coverage and reimbursement for any product approved for sale, a company may need to conduct
expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost‑effectiveness of the product,
in addition to the costs required to obtain FDA or other comparable regulatory approvals. Nonetheless, product candidates
may not be considered medically necessary or cost effective. Additionally, a payor’s decision to provide coverage for a
drug product does not imply that an adequate reimbursement rate will be approved. Further, no uniform policy for coverage
and reimbursement exists in the United States. Third‑party payors often rely upon Medicare coverage policy and payment
limitations in setting their own reimbursement rates, but also have their own methods and approval process apart from
Medicare determinations. Therefore one payor’s determination to provide coverage for a drug product does not assure that
other payors will also provide coverage for the drug product. Third‑party reimbursement may not be sufficient to maintain
price levels high enough to realize an appropriate return on investment in product development.
The containment of healthcare costs also has become a priority of federal, state and foreign governments and the
prices of drugs have been a focus in this effort. Governments have shown significant interest in implementing
cost‑containment programs, including price controls, restrictions on reimbursement and requirements for substitution of
generic products. Adoption of price controls and cost‑containment measures, and adoption of more restrictive policies in
jurisdictions with existing controls and measures, could further limit our net revenue and results. Coverage policies and
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third‑party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained
for one or more products for which a company or its collaborators receive regulatory approval, less favorable coverage
policies and reimbursement rates may be implemented in the future.
Additionally, we may develop companion diagnostic tests for use with our product candidates. Companion
diagnostic tests require coverage and reimbursement separate and apart from the coverage and reimbursement for their
companion pharmaceutical or biological products. Similar challenges to obtaining coverage and reimbursement, applicable
to pharmaceutical products, will apply to companion diagnostics.
Outside the United States, ensuring adequate coverage and payment for our product candidates will face
challenges. Pricing of prescription pharmaceuticals is subject to governmental control in many countries. Pricing
negotiations with governmental authorities can extend well beyond the receipt of regulatory marketing approval for a
product and may require us to conduct a clinical trial that compares the cost effectiveness of our product candidates or
products to other available therapies. The conduct of such a clinical trial could be expensive and result in delays in our
commercialization efforts.
In the European Union, pricing and reimbursement schemes vary widely from country to country. Some countries
provide that drug products may be marketed only after a reimbursement price has been agreed. Some countries may require
the completion of additional studies that compare the cost‑effectiveness of a particular drug candidate to currently available
therapies. For example, the European Union provides options for its member states to restrict the range of drug products for
which their national health insurance systems provide reimbursement and to control the prices of medicinal products for
human use. European Union member states may approve a specific price for a drug product or it may instead adopt a
system of direct or indirect controls on the profitability of the company placing the drug product on the market. Other
member states allow companies to fix their own prices for drug products, but monitor and control company profits. The
downward pressure on health care costs in general, particularly prescription drugs, has become intense. As a result,
increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross‑border
imports from low‑priced markets exert competitive pressure that may reduce pricing within a country. Any country that has
price controls or reimbursement limitations for drug products may not allow favorable reimbursement and pricing
arrangements.
Other Healthcare Laws and Regulations
Healthcare providers and third‑party payors play a primary role in the recommendation and prescription of drug
products that are granted regulatory approval. Arrangements with providers, consultants, third‑party payors and customers
are subject to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain our business
and/or financial arrangements. Such restrictions under applicable federal and state healthcare laws and regulations, include,
without limitation, state and federal anti‑kickback, fraud and abuse, false claims, privacy and security, price reporting and
physician sunshine laws. Some of our pre‑commercial activities are subject to some of these laws.
The federal Health Care Program Anti‑Kickback Statute, or Anti‑Kickback Statute, prohibits any person or entity,
including a prescription drug manufacturer or a party acting on its behalf, from, among other things, knowingly and
willfully, directly or indirectly, soliciting, receiving, offering, or providing any remuneration that is intended to induce the
referral of business, including the purchase, order or recommendation or arranging of, any good or service for which
payment may be made under a federal healthcare program, such as Medicare or Medicaid. The term “remuneration” has
been broadly interpreted to include anything of value. The Anti‑Kickback Statute has been interpreted to apply to
arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers, formulary managers, and
beneficiaries on the other. Although there are a number of statutory exceptions and regulatory safe harbors protecting some
common activities from prosecution, the exceptions and safe harbors are drawn narrowly. Practices that involve
remuneration that may be alleged to be intended to induce prescribing, purchases or recommendations may be subject to
scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all of the requirements of a particular
applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the Anti‑Kickback
Statute. Instead, the legality of the arrangement will be evaluated on a case‑by‑case basis based on a cumulative review of
all its facts and circumstances. Several courts have interpreted the statute’s intent
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requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal
healthcare covered business, the Anti‑Kickback Statute has been violated. In addition, a person or entity does not need to
have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. Moreover, a
claim including items or services resulting from a violation of the Anti‑Kickback Statute constitutes a false or fraudulent
claim for purposes of the federal civil False Claims Act.
The federal civil False Claims Act prohibits, among other things, any person or entity from knowingly presenting,
or causing to be presented, for payment to, or approval by, federal programs, including Medicare and Medicaid, claims for
items or services, including drugs, that are false or fraudulent or not provided as claimed. Persons and entities can be held
liable under these laws if they are deemed to “cause” the submission of false or fraudulent claims by, for example,
providing inaccurate billing or coding information to customers or promoting a product off‑label. In addition, any of our
future activities relating to the reporting of wholesaler or estimated retail prices for our products, the reporting of prices
used to calculate Medicaid rebate information and other information affecting federal, state and other third‑party payor
reimbursement for our products, and the sale and marketing of our products, are subject to scrutiny under this law. Penalties
for federal civil False Claims Act violations may include up to three times the actual damages sustained by the government,
plus significant mandatory civil penalties for each separate false claim, the potential for exclusion from participation in
federal healthcare programs, and, although the federal False Claims Act is a civil statute, False Claims Act violations may
also implicate various federal criminal statutes.
The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created new federal criminal
statutes that prohibit among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud
any healthcare benefit program, including private third‑party payors, knowingly and willfully embezzling or stealing from a
healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and
willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent
statement in connection with the delivery of or payment for healthcare benefits, items or services. Like the Anti‑Kickback
Statute a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to
have committed a violation. Also, many states have similar fraud and abuse statutes or regulations that may be broader in
scope and may apply regardless of payor, in addition to items and services reimbursed under Medicaid and other state
programs. Additionally, to the extent that any of our product candidates, if approved, are sold in a foreign country, we may
be subject to similar foreign laws.
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH,
and their implementing regulations, including the final omnibus rule published on January 25, 2013, mandates, among
other things, the adoption of uniform standards for the electronic exchange of information in common healthcare
transactions, as well as standards relating to the privacy and security of individually identifiable health information, which
require the adoption of administrative, physical and technical safeguards to protect such information. Among other things,
HITECH makes HIPAA’s security standards directly applicable to business associates, defined as independent contractors
or agents of certain healthcare providers, healthcare clearinghouses and health plans, known as covered entities, that create,
receive or obtain protected health information in connection with providing a service for or on behalf of a covered entity.
HITECH also increased the civil and criminal penalties that may be imposed against covered entities and business
associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to
enforce HIPAA and seek attorney’s fees and costs associated with pursuing federal civil actions. In addition, certain state
and foreign laws govern the privacy and security of health information in certain circumstances, some of which are more
stringent than HIPAA and many of which differ from each other in significant ways and may not have the same effect, thus
complicating compliance efforts.
The U.S. federal transparency requirements under the Patient Protection and Affordable Care Act, as amended by
the Health Care and Education Reconciliation Act, or collectively, ACA, including the provision commonly referred to as
the Physician Payments Sunshine Act imposed, among other things, new annual reporting requirements for covered
manufacturers for certain payments and other transfers of value provided to physicians, as defined by such law, and
teaching hospitals, as well as certain ownership and investment interests held by physicians and their immediate family
members. Beginning in 2022, covered manufacturers also will be required to report information regarding payments and
transfers of value provided to, as well as ownership and investment interests held by, during the previous year,
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physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, and certified nurse‑midwives.
In addition, we may be subject to certain analogous state and foreign laws of each of the above federal healthcare
laws. In some instances, such laws may be broader in scope than its federal counterpart, such as certain state anti-kickback
and false claims laws, which may apply to claims involving healthcare items or services reimbursed by non-
governmental third party payors, including private insurers. In addition, certain states and local jurisdictions also mandate
implementation of compliance programs, impose restrictions on drug manufacturer marketing practices or require the
tracking and reporting of gifts, compensation or other remuneration to physicians and other healthcare professionals.
Additionally, we may be subject to state and foreign laws governing the privacy and security of health information in some
circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus
complicating compliance efforts.
Because we intend to commercialize products that could be reimbursed under a federal healthcare program and
other governmental healthcare programs, we intend to develop a comprehensive compliance program that establishes
internal control to facilitate adherence to the rules and program requirements to which we will or may become subject.
Although the development and implementation of compliance programs designed to establish internal control and facilitate
compliance can mitigate the risk of investigation, prosecution, and penalties assessed for violations of these laws, the risks
cannot be entirely eliminated.
If our operations are found to be in violation of any of such laws or any other governmental regulations that apply
to us, we may be subject to penalties, including, without limitation, significant administrative, civil and criminal penalties,
damages, fines, disgorgement, imprisonment, contractual damages, reputational harm, diminished profits and future
earnings, the curtailment or restructuring of our operations, exclusion from participation in federal and state healthcare
programs, including Medicare and Medicaid, additional reporting requirements and/or oversight if we become subject to a
corporate integrity agreement or similar agreement to resolve allegations of non‑compliance with these laws, and individual
imprisonment, any of which could adversely affect our ability to operate our business and our financial results.
Healthcare Reform
There have been a number of federal and state proposals during the last few years regarding the pricing of
pharmaceutical and biopharmaceutical products, government control and other changes to the healthcare system in the
United States.
By way of example, the United States and state governments continue to propose and pass legislation designed to
reduce the cost of healthcare. In March 2010, the United States Congress passed the ACA, which, among other things,
includes changes to the coverage and payment for drug products under government health care programs. Among the
provisions of the ACA of importance to our potential drug candidates are:
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·
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an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs
and biologic products, apportioned among these entities according to their market share in certain government
healthcare programs;
expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer
Medicaid coverage to certain individuals with income at or below 133% of the federal poverty level, thereby
potentially increasing a manufacturer’s Medicaid rebate liability;
expansion of manufacturers’ rebate liability under the Medicaid Drug Rebate Program by increasing the
minimum rebate for both branded and generic drugs and revising the definition of “average manufacturer
price,” or AMP, for calculating and reporting Medicaid drug rebates on outpatient prescription drug prices;
a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are
calculated for drugs that are inhaled, infused, instilled, implanted or injected;
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·
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expansion of the types of entities eligible for the 340B drug discount program;
establishment of the Medicare Part D coverage gap discount program by requiring manufacturers to now
provide a 70% point‑of‑sale‑discount off the negotiated price of applicable brand drugs to eligible
beneficiaries during their coverage gap period as a condition for the manufacturers’ outpatient drugs to be
covered under Medicare Part D;
a new Patient‑Centered Outcomes Research Institute to oversee, identify priorities in, and conduct
comparative clinical effectiveness research, along with funding for such research; and
establishment of a Center for Medicare and Medicaid Innovation at CMS to test innovative payment and
service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug
spending.
There remain judicial and Congressional challenges to certain aspects of the ACA, as well as efforts by the Trump
administration to repeal or replace certain aspects of the ACA. Since January 2017, President Trump has signed two
Executive Orders and other directives designed to delay the implementation of certain provisions of the ACA or otherwise
circumvent some of the requirements for health insurance mandated by the ACA. Concurrently, Congress has considered
legislation that would repeal or repeal and replace all or part of the ACA. While Congress has not passed comprehensive
repeal legislation, it has enacted laws that modify certain provisions of the ACA such as removing or delaying penalties,
starting January 1, 2019, for not complying with the Affordable Care Act’s individual mandate to carry health insurance,
eliminating the implementation of certain ACA‑mandated fees, and increasing the point‑of‑sale discount that is owed by
pharmaceutical manufacturers who participate in Medicare Part D. On December 14, 2018, a Texas U.S. District Court
Judge ruled that the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress as
part of the Tax Act. Additionally, on December 18, 2019, the U.S. Court of Appeals for the 5th Circuit upheld the District
Court ruling that the individual mandate was unconstitutional and remanded the case back to the District Court to
determine whether the remaining provisions of the ACA are invalid as well. It is unclear how this decision, future
decisions, subsequent appeals, and other efforts to repeal and replace the ACA will impact the ACA and our business.
Other legislative changes have been proposed and adopted in the United States since the ACA was enacted. For
example, in August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions
by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at
least $1.2 trillion for the years 2012 through 2021, was unable to reach required goals, thereby triggering the legislation’s
automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to
providers of 2% per fiscal year, which went into effect in April 2013 and, due to legislative amendments, will remain in
effect through 2029 unless additional Congressional action is taken. In January 2013, President Obama signed into law the
American Taxpayer Relief Act of 2012, which, among other things, further reduced Medicare payments to several
providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period
for the government to recover overpayments to providers from three to five years.
Also, there has been heightened governmental scrutiny recently over the manner in which drug manufacturers set
prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted federal
and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship
between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for
drug products. At the federal level, the Trump administration’s budget proposal for fiscal year 2020 contained further drug
price control measures that could be enacted during the budget process or in other future legislation, including, for
example, measures to permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow
some states to negotiate drug prices under Medicaid, and to eliminate cost sharing for generic drugs for low-income
patients. For example, the Trump administration released a “Blueprint” to lower drug prices and reduce out of pocket costs
of drugs that contains additional proposals to increase manufacturer competition, increase the negotiating power of certain
federal healthcare programs, incentivize manufacturers to lower the list price of their products and reduce the out of pocket
costs of drug products paid by consumers. For example, in May 2019, CMS issued a final rule to allow Medicare
Advantage plans the option to use step therapy for Part B drugs beginning January
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1, 2020. This final rule codified CMS’s policy change that was effective January 1, 2019. Although a number of these, and
other measures may require authorization to become effective, Congress and the Trump administration have each indicated
that it will continue to seek new legislative and/or administrative measures to control drug costs.
There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and
state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. Such
reforms could have an adverse effect on anticipated revenues from product candidates that we may successfully develop
and for which we may obtain regulatory approval and may affect our overall financial condition and ability to develop
product candidates.
Brexit and the Regulatory Framework in the United Kingdom
On June 23, 2016, the electorate in the United Kingdom voted in favor of leaving the European Union, commonly
referred to as Brexit, and the United Kingdom officially withdrew from the European Union on January 31, 2020. The
United Kingdom and the European Union are currently in a transition period during which the United Kingdom and the
European Union are negotiating additional arrangements, including their future trading arrangement. The United Kingdom
has stated that it wants the transition period to expire, and the future trading terms to be agreed, by December 31, 2020.
Since the regulatory framework for pharmaceutical products in the United Kingdom covering quality, safety and
efficacy of pharmaceutical products, clinical trials, marketing authorization, commercial sales and distribution of
pharmaceutical products is derived from EU directives and regulations, immediately following Brexit, it is expected that
the United Kingdom’s regulatory regime will remain aligned with EU regulations. It remains to be seen how, if at all,
Brexit will impact regulatory requirements for product candidates and products in the United Kingdom. In the longer term,
Brexit could materially impact the future regulatory regime which applies to products and the approval of product
candidates in the United Kingdom.
Employees
As of December 31, 2019, we had 72 full‑time or part‑time employees, including 31 with M.D. or Ph.D. degrees.
Of these employees, 58 employees are engaged in research and development activities and 14 employees are engaged in
general and administrative activities. None of our employees are represented by labor unions or covered by collective
bargaining agreements. We consider the relationship with our employees to be good.
Corporate Information
In 2009, we were incorporated as a limited liability company under the laws of England and Wales. In 2017, we
effected a reorganization to create a new holding company which, in connection with our IPO, was re-registered as a public
limited company named Bicycle Therapeutics plc. Bicycle Therapeutics plc is the parent company of three wholly owned
subsidiaries, two of which are based in Cambridge, England and one of which has its principal office in Lexington,
Massachusetts, that will carry on our business.
The English subsidiaries are BicycleTx Limited and BicycleRD Limited, and the U.S. subsidiary is Bicycle
Therapeutics Inc. Our principal executive offices are located at B900, Babraham Research Campus, Cambridge, CB22 3AT,
United Kingdom, and our phone number is +44 1223 261503.
Available Information
Our website address is http://www.bicycletherapeutics.com. We make available on our website, free of charge, our
Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K and any
amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934,
as amended, or the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or
furnish it to, the Securities and Exchange Commission, or the SEC. The SEC maintains a website that contains reports,
proxy and information statements and other information regarding our filings at www.sec.gov. The information
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found on our website is not incorporated by reference into this Annual Report on Form 10-K or any other report we file
with or furnish to the SEC.
Item 1A
Risk Factors.
Investing in our American Depositary Shares, or ADSs, involves a high degree of risk. The following information
about these risks, together with the other information appearing elsewhere in this Annual Report on Form 10-K, including
our consolidated financial statements and related notes thereto, should be carefully considered before a decision to invest
in our ADSs. The occurrence of any of the following risks could have a material adverse effect on our business, financial
condition, results of operations and future growth prospects or cause our actual results to differ materially from those
contained in forward-looking statements we have made in this report and those we may make from time to time. Additional
risks that are currently unknown to us or that we currently believe to be immaterial may also impair our business. In these
circumstances, the market price of our ADSs could decline and holders of our ADSs may lose all or part of their
investment. We cannot provide assurance that any of the events discussed below will not occur.
Risks Related to Our Financial Position and Need for Additional Capital
We have a history of significant operating losses and expect to incur significant and increasing losses for the
foreseeable future, and we may never achieve or maintain profitability.
We do not expect to generate revenue or profitability that is necessary to finance our operations in the short
term. Since inception, we have incurred recurring losses, including losses of $30.6 million, $21.8 million and $16.3 million
for the years ended December 31, 2019, 2018 and 2017, respectively. In addition, our accumulated deficit as of December
31, 2019 was $100.6 million. To date, we have not commercialized any products or generated any revenues from the sale of
products, and absent the realization of sufficient revenues from product sales, we may never attain profitability in the
future. We have devoted substantially all of our financial resources and efforts to research and development, including
preclinical studies and our clinical trials. Our net losses may fluctuate significantly from quarter to quarter and year to
year. Net losses and negative cash flows have had, and will continue to have, an adverse effect on our shareholders’ equity
(deficit) and working capital.
We anticipate that our expenses will increase substantially if and as we:
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continue to develop and conduct clinical trials with respect to our lead product candidate, BT1718, and our
other product candidates in our Bicycle Toxin Conjugate, or BTC, tumor-targeted immune cell agonist
programs, and our other pipeline programs;
initiate and continue research, preclinical and clinical development efforts for any future product candidates;
seek to discover and develop additional product candidates and further expand our clinical product pipeline;
seek marketing and regulatory approvals for any product candidates that successfully complete clinical trials;
require the manufacture of larger quantities of product candidates for clinical development and, potentially,
commercialization;
· maintain, expand and protect our intellectual property portfolio;
·
expand our research and development infrastructure, including hiring and retaining additional personnel, such
as clinical, quality control and scientific personnel;
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·
·
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establish sales, marketing, distribution and other commercial infrastructure in the future to commercialize
products for which we obtain marketing approval, if any;
add operational, financial and management information systems and personnel, including personnel to
support our product development and commercialization and help us comply with our obligations as a public
company; and
add equipment and physical infrastructure to support our research and development.
Our ability to become and remain profitable depends on our ability to generate revenue. Generating product
revenue will depend on our or any of our collaborators’ ability to obtain marketing approval for, and successfully
commercialize, one or more of our product candidates. Successful commercialization will require achievement of key
milestones, including completing clinical trials of our product candidates, obtaining marketing approval for these product
candidates, manufacturing, marketing and selling those products for which we, or any of our collaborators, may obtain
marketing approval, satisfying any post-marketing requirements and obtaining reimbursement for our products from private
insurance or government payors. Because of the uncertainties and risks associated with these activities, we are unable to
accurately predict the timing and amount of revenues, and if or when we might achieve profitability. We and any
collaborators may never succeed in these activities and, even if we do, or any collaborators do, we may never generate
revenues that are large enough for us to achieve profitability. Even if we do achieve profitability, we may not be able to
sustain or increase profitability on a quarterly or annual basis.
Our revenue to date has been primarily generated from our research collaborations with AstraZeneca AB, or
AstraZeneca, Bioverativ Inc. (acquired by Sanofi), or Bioverativ, Oxurion NV (formerly ThromboGenics NV), or Oxurion,
and Dementia Discovery Fund, or DDF. There can be no assurance that we will generate revenue from these collaborations
in the future.
Our failure to become and remain profitable would depress the market price of our ADSs and could impair our
ability to raise capital, expand our business, diversify our product offerings or continue our operations. If we continue to
suffer losses, investors may not receive any return on their investment and may lose their entire investment.
Our limited operating history may make it difficult for holders of our ADSs or ordinary shares to evaluate the success of
our business to date and to assess our future viability.
Our business commenced operations in 2009. Our operations to date have been limited to financing and staffing
our company, developing our technology, conducting preclinical research and early-stage clinical trials for our product
candidates and pursuing strategic collaborations to advance our product candidates. We have not yet demonstrated an
ability to successfully conduct late-stage clinical trials, obtain marketing approvals, manufacture a commercial-scale
product, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for
successful product commercialization. Accordingly, any current or prospective holder of our ADSs or ordinary shares
should consider our prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by
companies in the early stages of development, especially clinical-stage biopharmaceutical companies such as ours. Any
predictions made about our future success or viability may not be as accurate as they would be if we had a longer operating
history or a history of successfully developing and commercializing pharmaceutical products.
We may encounter unforeseen expenses, difficulties, complications, delays and other known or unknown factors in
achieving our business objectives. We will eventually need to transition from a company with a development focus to a
company capable of supporting commercial activities. We may not be successful in such a transition.
We expect our financial condition and operating results to continue to fluctuate significantly from quarter to
quarter and year to year due to a variety of factors, many of which are beyond our control and reliance should not be made
upon the results of any quarterly or annual periods as indications of future operating performance.
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We may need substantial additional funding, and if we are unable to raise capital when needed, we could be forced to
delay, reduce or eliminate our product discovery and development programs or commercialization efforts.
Developing pharmaceutical products, including conducting preclinical studies and clinical trials, is a very time-
consuming, expensive and uncertain process that takes years to complete. For example, in the years ended December 31,
2019, 2018 and 2017, we used $28.6 million, $26.1 million, and $1.4 million, respectively, in net cash for our operating
activities, substantially all of which related to research and development activities. We expect our expenses to increase in
connection with our ongoing activities, particularly as we initiate new clinical trials of, initiate new research and preclinical
development efforts for and seek marketing approval for, our current product candidates or any future product candidates.
In addition, if we obtain marketing approval for any of our product candidates, we may incur significant commercialization
expenses related to product sales, marketing, manufacturing and distribution to the extent that such sales, marketing,
manufacturing and distribution are not the responsibility of a collaborator. Furthermore, we expect to incur significant
additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional
funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms,
we may be forced to delay, reduce or eliminate our research and development programs or any future commercialization
efforts.
We will be required to expend significant funds in order to advance the development of the product candidates in
our pipeline, as well as other product candidates we may seek to develop. In addition, while we may seek one or more
collaborators for future development of our product candidates, we may not be able to enter into a collaboration for any of
our product candidates for such indications on suitable terms, on a timely basis or at all. In any event, our existing cash will
not be sufficient to fund all of the efforts that we plan to undertake or to fund the completion of development of any of our
product candidates. Accordingly, we will be required to obtain further funding through public or private equity offerings,
debt financings, collaborations and licensing arrangements or other sources. We do not have any committed external
source of funds. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise
capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business
strategy.
We believe that our existing cash of $92.1 million as of December 31, 2019, will enable us to fund our operating
expenses and capital expenditure requirements for at least 12 months from the date of filing of this Annual Report on Form
10-K. Our estimate may prove to be wrong, and we could use our available capital resources sooner than we currently
expect. Further, changing circumstances, some of which may be beyond our control, could cause us to consume capital
significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned. Our future
funding requirements, both short-term and long-term, will depend on many factors, including:
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the scope, progress, timing, costs and results of clinical trials of, and research and preclinical development
efforts for, our current and future product candidates;
our ability to enter into, and the terms and timing of, any collaborations, licensing or other arrangements;
our ability to identify one or more future product candidates for our pipeline;
the number of future product candidates that we pursue and their development requirements;
the outcome, timing and costs of seeking regulatory approvals;
the costs of commercialization activities for any of our product candidates that receive marketing approval to
the extent such costs are not the responsibility of any collaborators, including the costs and timing of
establishing product sales, marketing, distribution and manufacturing capabilities;
subject to receipt of marketing approval, revenue, if any, received from commercial sales of our current and
future product candidates;
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our headcount growth and associated costs as we expand our research and development and establish a
commercial infrastructure;
the costs of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual
property rights including enforcing and defending intellectual property related claims; and
the costs of operating as a public company.
Raising additional capital may cause dilution to our existing shareholders or holders of our ADSs, restrict our
operations or cause us to relinquish valuable rights.
We may seek additional capital through a combination of public and private equity offerings, debt financings,
strategic partnerships and alliances, licensing arrangements or monetization transactions. To the extent that we raise
additional capital through the sale of equity, convertible debt securities or other equity-based derivative securities, the
ownership interest of existing holders of our ADSs or ordinary shares will be diluted and the terms may include liquidation
or other preferences that adversely affect existing holders’ rights. Any indebtedness we incur would result in increased
fixed payment obligations and could involve restrictive covenants, such as limitations on our ability to incur additional
debt, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could
adversely impact our ability to conduct our business. Furthermore, the issuance of additional securities, whether equity or
debt, by us, or the possibility of such issuance, may cause the market price of our ADSs to decline and existing
shareholders may not agree with our financing plans or the terms of such financings. If we raise additional funds through
strategic partnerships and alliances, licensing arrangements or monetization transactions with third parties, we may have to
relinquish valuable rights to our technologies, or our product candidates, or grant licenses on terms unfavorable to us.
Adequate additional financing may not be available to us on acceptable terms, or at all. If we are unable to raise additional
funds when needed, we may be required to delay, limit, reduce or terminate our product development or future
commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to
develop and market ourselves.
Risks Related to the Discovery, Development and Regulatory Approval of Our Product Candidates
We are substantially dependent on the success of our internal development programs and of our product candidates
from our BTC and tumor-targeted immune cell agonist programs which may not successfully complete clinical trials,
receive regulatory approval or be successfully commercialized.
Our future success will depend heavily on the success of our internal development programs and of product
candidates from our BTC and tumor-targeted immune cell agonist programs.
Within our BTC program, we are investigating BT1718 for safety, tolerability and efficacy in an ongoing
Phase I/IIa clinical trial in collaboration with the Centre for Drug Development of Cancer Research UK, or CRUK. Upon
the completion of the Phase I/IIa clinical trial for BT1718, we have the right to obtain a license to the results of the clinical
trial from CRUK upon the payment of a milestone, in cash and ordinary shares with a combined value in a mid-six digit
dollar amount. If we do not exercise our right to obtain a license to the results of the clinical trial or we fail to obtain a
license, our ability to continue development of BT1718 would be negatively impacted. BT1718 is designed to target
tumors that express MT1-MMP. In addition, we are evaluating BT5528, our first second-generation BTC that targets
EphA2 and carries a monomethyl auristatin E, or MMAE cytotoxin payload, in an ongoing, company-sponsored Phase I/II
clinical trial to assess safety, tolerability and efficacy in patients with solid tumors. We are also developing BT8009,
targeting Nectin-4, and BT7480, which is a tumor-targeted immune cell agonist targeting Nectin-4 and agonizing CD137,
for oncology indications. These target proteins have an established role in cell invasion and metastasis and are
overexpressed in many solid tumors. There can be no assurance our BTCs or Bicycle tumor-targeted immune cell agonists
will ever demonstrate evidence of safety or effectiveness for any use or receive U.S. or E.U. regulatory approval in any
indication. Even if clinical trials show positive results, there can be no assurance that the U.S. Food and Drug
Administration, or FDA, in the U.S., European Medicines Agency, or EMA, in Europe or similar regulatory authorities will
approve our BTCs or any of our other product candidates for any given indication for several potential reasons, including
the failure to follow Good Clinical Practice, or GCP, a negative assessment of the risks and
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benefits, insufficient product quality control and standardization, failure to have Good Manufacturing Practices, or GMP,
compliant manufacturing facilities, or the failure to agree with regulatory authorities on clinical endpoints.
Our ability to successfully commercialize our BTCs, tumor-targeted immune cell agonists, and our other product
candidates will depend on, among other things, our ability to:
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successfully complete preclinical studies and clinical trials;
receive regulatory approvals from the FDA, the EMA and other similar regulatory authorities;
establish and maintain collaborations with third parties for the development and/or commercialization of our
product candidates, or otherwise build and maintain strong development, sales, distribution and marketing
capabilities that are sufficient to develop products and launch commercial sales of any approved products;
obtain coverage and adequate reimbursement from payors such as government health care systems and
insurance companies and achieve commercially attractive levels of pricing;
secure acceptance of our product candidates from physicians, health care payors, patients and the medical
community;
produce, through a validated process, in manufacturing facilities inspected and approved by regulatory
authorities, including the FDA, sufficiently large quantities of our product candidates to permit successful
commercialization;
· manage our spending as expenses increase due to clinical trials and commercialization; and
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obtain and enforce sufficient intellectual property rights for any approved products and product candidates.
Of the large number of drugs in development in the pharmaceutical industry, only a small percentage result in the
submission of a new drug application, or NDA, to the FDA and even fewer are approved for
commercialization. Furthermore, even if we do receive regulatory approval to market our product candidates, any such
approval may be subject to limitations on the indicated uses or patient populations for which we may market the
product. Accordingly, even if we are able to obtain the requisite financing to continue to fund our development programs,
we cannot provide assurance that our product candidates will be successfully developed or commercialized. If we are
unable to develop, or obtain regulatory approval for, or, if approved, to successfully commercialize our product candidates,
we may not be able to generate sufficient revenue to continue our business.
We are at a very early stage in our development efforts, our product candidates and those of our collaborators represent
a new category of medicines and may be subject to heightened regulatory scrutiny until they are established as a
therapeutic modality.
Bicycles® represent a new therapeutic modality of peptide compounds intended to combine targeting abilities of
antibodies with performance of small molecules. Our product candidates may not demonstrate in patients any or all of the
pharmacological benefits we believe they may possess. We have not yet succeeded and may never succeed in
demonstrating efficacy and safety for these or any other product candidates in clinical trials or in obtaining marketing
approval thereafter.
Regulatory authorities do not have experience with Bicycles and may require evidence of safety and efficacy that
goes beyond what we and our collaborators have included in our development plans. In such a case, development of
Bicycle product candidates may be more costly or time-consuming than expected, and our candidate products and those of
our collaboration partners may not prove to be viable.
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If we are unsuccessful in our development efforts, we may not be able to advance the development of our product
candidates, commercialize products, raise capital, expand our business or continue our operations.
Our product candidates and those of our collaborators will need to undergo preclinical and clinical trials that are time
consuming and expensive, the outcomes of which are unpredictable, and for which there is a high risk of failure. If
preclinical or clinical trials of our or their product candidates fail to satisfactorily demonstrate safety and efficacy to the
FDA, the EMA and any other comparable regulatory authority, additional costs may be incurred or delays experienced
in completing, the development of these product candidates, or their development may be abandoned.
The FDA in the United States, the EMA in the European Union and the European Economic Area, and any other
comparable regulatory authorities in other jurisdictions must approve new product candidates before they can be marketed,
promoted or sold in those territories. We have not previously submitted an NDA to the FDA or similar drug approval
filings to comparable foreign regulatory authorities for any of our product candidates. We must provide these regulatory
authorities with data from preclinical studies and clinical trials that demonstrate that our product candidates are safe and
effective for a specific indication before they can be approved for commercial distribution. We cannot be certain that our
clinical trials for our product candidates will be successful or that any of our other product candidates will receive approval
from the FDA, the EMA or any other comparable regulatory authority.
Preclinical studies and clinical trials are long, expensive and unpredictable processes that can be subject to
extensive delays. We cannot guarantee that any clinical trials will be conducted as planned or completed on schedule, if at
all. It may take several years and require significant expenditures to complete the preclinical studies and clinical trials
necessary to commercialize a product candidate, and delays or failure are inherently unpredictable and can occur at any
stage. We may also be required to conduct additional clinical trials or other testing of our product candidates beyond the
trials and testing that we contemplate, which may lead to us incurring additional unplanned costs or result in delays in
clinical development. In addition, we may be required to redesign or otherwise modify our plans with respect to an
ongoing or planned clinical trial, and changing the design of a clinical trial can be expensive and time consuming. An
unfavorable outcome in one or more trials would be a major setback for our product candidates and for us. An unfavorable
outcome in one or more trials may require us to delay, reduce the scope of or eliminate one or more product development
programs, which could have a material adverse effect on our business, financial position, results of operations and future
growth prospects.
Many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also
ultimately lead to the denial of marketing approval for our product candidates. The FDA, EMA or any other comparable
regulatory authority may disagree with our clinical trial design and our interpretation of data from clinical trials, or may
change the requirements for approval even after it has reviewed and commented on the design for our clinical trials.
In connection with clinical trials of our product candidates, we face a number of risks, including risks that:
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a product candidate is ineffective or inferior to existing approved products for the same indications;
a product candidate causes or is associated with unacceptable toxicity or has unacceptable side effects;
patients may die or suffer adverse effects for reasons that may or may not be related to the product candidate
being tested;
the results may not confirm the positive results of earlier trials;
the results may not meet the level of statistical significance required by the FDA, the EMA or other relevant
regulatory agencies to establish the safety and efficacy of our product candidates for continued trial or
marketing approval; and
our collaborators may be unable or unwilling to perform under their contracts.
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Furthermore, we sometimes estimate for planning purposes the timing of the accomplishment of various scientific,
clinical, regulatory and other product development objectives. These milestones may include our expectations regarding
the commencement or completion of scientific studies, clinical trials, the submission of regulatory filings or
commercialization objectives. From time to time, we may publicly announce the expected timing of some of these
milestones, such as the completion of an ongoing clinical trial, the initiation of other clinical programs, the receipt of
marketing approval or a commercial launch of a product. The achievement of many of these milestones may be outside of
our control. All of these milestones are based on a variety of assumptions, which may cause the timing of achievement of
the milestones to vary considerably from our estimates. If we fail to achieve milestones in the timeframes we expect, the
commercialization of our product candidates may be delayed, we may not be entitled to receive certain contractual
payments, which could have a material adverse effect on our business, financial position, results of operations and future
growth prospects.
We may find it difficult to enroll patients in our clinical trials, which could delay or prevent us from proceeding with
clinical trials of our product candidates.
Identifying and qualifying patients to participate in clinical trials of our product candidates is critical to our
success. The timing of our clinical trials depends on our ability to recruit patients to participate as well as the completion
of required follow-up periods. Patients may be unwilling to participate in our clinical trials because of negative publicity
from adverse events related to novel therapeutic approaches, competitive clinical trials for similar patient populations, the
existence of current treatments or for other reasons. Enrollment risks are heightened with respect to certain indications that
we may target for one or more of our product candidates that may be rare diseases, which may limit the pool of patients
that may be enrolled in our planned clinical trials. The timeline for recruiting patients, conducting trials and obtaining
regulatory approval of our product candidates may be delayed, which could result in increased costs, delays in advancing
our product candidates, delays in testing the effectiveness of our product candidates or termination of the clinical trials
altogether.
We may not be able to identify, recruit and enroll a sufficient number of patients, or those with the required or
desired characteristics, to complete our clinical trials in a timely manner. For example, due to the nature of the indications
that we are initially targeting, patients with advanced disease progression may not be suitable candidates for treatment with
our product candidates and may be ineligible for enrollment in our clinical trials. Therefore, early diagnosis in patients
with our target diseases is critical to our success. Patient enrollment and trial completion is affected by factors including
the:
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size of the patient population and process for identifying subjects;
design of the trial protocol;
eligibility and exclusion criteria;
safety profile, to date, of the product candidate under study;
perceived risks and benefits of the product candidate under study;
perceived risks and benefits of our approach to treatment of diseases;
availability of competing therapies and clinical trials;
severity of the disease under investigation;
degree of progression of the subject’s disease at the time of enrollment;
proximity and availability of clinical trial sites for prospective subjects;
ability to obtain and maintain subject consent;
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risk that enrolled subjects will drop out before completion of the trial;
patient referral practices of physicians; and
ability to monitor subjects adequately during and after treatment.
In addition, clinical testing of BT1718 is currently taking place outside of the United States. Our ability to
successfully initiate, enroll and complete a clinical trial in any foreign country is subject to numerous risks unique to
conducting business in foreign countries, including:
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difficulty in establishing or managing relationships with academic partners or contract research organizations,
or CROs, and physicians;
different standards for the conduct of clinical trials;
the absence in some countries of established groups with sufficient regulatory expertise for review of
protocols related to our novel approach;
our inability to locate qualified local consultants, physicians and partners; and
the potential burden of complying with a variety of foreign laws, medical standards and regulatory
requirements, including the regulation of pharmaceutical and biotechnology products and treatment.
If we have difficulty enrolling a sufficient number of patients to conduct our clinical trials as planned, we may
need to delay, limit or terminate ongoing or planned clinical trials, any of which would have an adverse effect on our
business, financial condition, results of operations and prospects.
Results of preclinical studies and early clinical trials may not be predictive of results of future clinical trials.
The outcome of preclinical studies and early clinical trials may not be predictive of the success of later clinical
trials, and interim results of clinical trials do not necessarily predict success in the results of completed clinical
trials. Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage
clinical trials after achieving positive results in earlier development, and we could face similar setbacks. For example, the
Phase I/IIa trial of BT1718 is being conducted by CRUK at up to seven sites in the United Kingdom, and the findings may
not be replicated in future trials at global clinical trial sites in a later stage clinical trial conducted by us or our
collaborators. The design of a clinical trial can determine whether its results will support approval of a product and flaws
in the design of a clinical trial may not become apparent until the clinical trial is well advanced. We have limited
experience in designing clinical trials and may be unable to design and execute a clinical trial to support marketing
approval.
Preclinical and clinical data are often susceptible to varying interpretations and analyses. Many companies that
believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to
obtain marketing approval for the product candidates. Even if we, or any collaborators, believe that the results of clinical
trials for our product candidates warrant marketing approval, the FDA or comparable foreign regulatory authorities may
disagree and may not grant marketing approval of our product candidates.
In some instances, there can be significant variability in safety or efficacy results between different clinical trials
of the same product candidate due to numerous factors, including changes in trial procedures set forth in protocols,
differences in the size and type of the patient populations, changes in and adherence to the dosing regimen and other
clinical trial protocols and the rate of dropout among clinical trial participants. If we fail to receive positive results in
clinical trials of our product candidates, the development timeline and regulatory approval and commercialization prospects
for our most advanced product candidates, and, correspondingly, our business and financial prospects would be negatively
impacted.
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Failure to successfully validate, develop and obtain regulatory approval for companion diagnostics could harm our
drug development strategy.
We may employ companion diagnostics to help us more accurately identify patients within a particular subset,
both during our clinical trials and in connection with the commercialization of our product candidates that we are
developing or may in the future develop. Companion diagnostics are subject to regulation by the FDA and comparable
foreign regulatory authorities as medical devices and require separate regulatory approval prior to commercialization. We
do not develop companion diagnostics internally and thus we will be dependent on the sustained cooperation and effort of
our third-party collaborators in developing and obtaining approval for these companion diagnostics. There can be no
guarantees that we will successfully find a suitable collaborator to develop companion diagnostics. We and our
collaborators may encounter difficulties in developing and obtaining approval for the companion diagnostics, including
issues relating to selectivity/specificity, analytical validation, reproducibility, or clinical validation. Any delay or failure by
our collaborators to develop or obtain regulatory approval of the companion diagnostics could delay or prevent approval of
our product candidates. In addition, our collaborators may encounter production difficulties that could constrain the supply
of the companion diagnostics, and both they and we may have difficulties gaining acceptance of the use of the companion
diagnostics in the clinical community. If such companion diagnostics fail to gain market acceptance, our ability to derive
revenues from sales of any products, if approved, will be adversely affected. In addition, the diagnostic company with
whom we contract may decide to discontinue selling or manufacturing the companion diagnostic that we anticipate using in
connection with development and commercialization of our product candidates or our relationship with such diagnostic
company may otherwise terminate. We may not be able to enter into arrangements with another diagnostic company to
obtain supplies of an alternative diagnostic test for use in connection with the development and commercialization of our
product candidates or do so on commercially reasonable terms, which could adversely affect and/or delay the development
or commercialization of our product candidates.
Our current or future product candidates may cause undesirable side effects or have other properties when used alone
or in combination with other approved products or investigational new drugs that could halt their clinical development,
prevent their marketing approval, limit their commercial potential or result in significant negative consequences.
Undesirable or clinically unmanageable side effects could occur and cause us or regulatory authorities to interrupt,
delay or halt clinical trials and could result in a more restrictive label or the delay or denial of marketing approval by the
FDA or comparable foreign regulatory authorities. Results of our trials could reveal a high and unacceptable severity and
prevalence of side effects or unexpected characteristics. As of February 13, 2020, the most recent date for which
information has been provided by the CRUK, the most common treatment-related adverse events (>15%, n=39) in subjects
exposed to BT1718 in the ongoing Phase I/IIa clinical trial were anemia, diarrhea, nausea, vomiting, fatigue, alanine
aminotransferase increase, aspartate aminotransferase increase, gamma-glutamyltransferase increase, decreased appetite,
lethargy, peripheral neuropathy, and weight decrease.
If unacceptable side effect profiles arise in the development of our product candidates, we, the FDA or comparable
foreign regulatory authorities, the Institutional Review Boards, or IRBs, or independent ethics committees at the
institutions in which our studies are conducted, or the Data Safety Monitoring Board, or DSMB, could suspend or terminate
our clinical trials or the FDA or comparable foreign regulatory authorities could order us to cease clinical trials or deny
approval of our product candidates for any or all targeted indications. Treatment-related side effects could also affect
patient recruitment or the ability of enrolled subjects to complete the trial, or result in potential product liability claims. In
addition, these side effects may not be appropriately recognized or managed by the treating medical staff. We may be
required to train medical personnel using our product candidates to understand the side effect profiles for our clinical trials
and upon any commercialization of any of our product candidates. Inadequate training in recognizing or managing the
potential side effects of our product candidates could result in patient injury or death. Any of these occurrences may
prevent us from achieving or maintaining market acceptance of the affected product candidate and may harm our business,
financial condition and prospects significantly.
Our product candidates are currently undergoing safety testing in the form of Phase I/IIa clinical trials. None of
our products have completed this testing to date. While our current and future product candidates will undergo safety
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testing to the extent possible and, where applicable, under such conditions discussed with regulatory authorities, not all
adverse effects of drugs can be predicted or anticipated. Unforeseen side effects could arise either during clinical
development or, if such side effects are rarer, after our products have been approved by regulatory authorities and the
approved product has been marketed, resulting in the exposure of additional patients. So far, we have not demonstrated,
and we cannot predict if ongoing or future clinical trials will demonstrate, that BT1718, or any other of our product
candidates are safe in humans.
Moreover, clinical trials of our product candidates are conducted in carefully defined sets of patients who have
agreed to enter into clinical trials. Consequently, it is possible that our clinical trials may indicate an apparent positive
effect of a product candidate that is greater than the actual positive effect, if any, or alternatively fail to identify undesirable
side effects. If, following approval of a product candidate, we, or others, discover that the product is less effective than
previously believed or causes undesirable side effects that were not previously identified, any of the following
consequences could occur:
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regulatory authorities may withdraw their approval of the product or seize the product;
we, or any collaborators, may need to recall the product, or be required to change the way the product is
administered or conduct additional clinical trials;
additional restrictions may be imposed on the marketing of, or the manufacturing processes for, the particular
product;
we may be subject to fines, injunctions or the imposition of civil or criminal penalties;
regulatory authorities may require the addition of labeling statements, such as a boxed warning or a
contraindication;
we, or any collaborators, may be required to create a medication guide outlining the risks of the previously
unidentified side effects for distribution to patients;
we, or any collaborators, could be sued and held liable for harm caused to patients;
the product may become less competitive; and
our reputation may suffer.
If any of our current or future product candidates fail to demonstrate safety and efficacy in clinical trials or do not
gain marketing approval, we will not be able to generate revenue and our business will be harmed. Any of these events
could harm our business and operations, and could negatively impact the price of our ADSs.
We may not be successful in our efforts to identify or discover additional product candidates.
Although we intend to utilize our Bicycle screening platform to explore other therapeutic opportunities in addition
to the product candidates that we are currently developing, we may fail to identify other product candidates for clinical
development for a number of reasons. For example, our research methodology may not be successful in identifying
potential product candidates or those we identify may be shown to have harmful side effects or other characteristics that
make them unmarketable or unlikely to receive regulatory approval. A key part of our strategy is to utilize our screening
technology to identify product candidates to pursue in clinical development. Such product candidates will require
additional, time-consuming development efforts prior to commercial sale, including preclinical studies, clinical trials and
approval by the FDA and/or applicable foreign regulatory authorities. All product candidates are prone to the risks of
failure that are inherent in pharmaceutical product development. If we fail to identify and develop additional potential
product candidates, we may be unable to grow our business and our results of operations could be materially harmed.
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We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on
product candidates or indications that may be more profitable or for which there is a greater likelihood of success.
Because we have limited financial and managerial resources, we intend to focus on developing product candidates
for specific indications that we identify as most likely to succeed, in terms of both their potential for marketing approval
and commercialization. As a result, we may forego or delay pursuit of opportunities with other product candidates or for
other indications that may prove to have greater commercial potential.
Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable
market opportunities. Our spending on current and future research and development programs and product candidates for
specific indications may not yield any commercially viable product candidates. If we do not accurately evaluate the
commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product
candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more
advantageous for us to retain sole development and commercialization rights to the product candidate.
We face potential product liability, and, if successful claims are brought against us, we may incur substantial liability
and costs. If the use of our product candidates harms patients, or is perceived to harm patients even when such harm is
unrelated to our product candidates, our regulatory approvals could be revoked or otherwise negatively impacted and
we could be subject to costly and damaging product liability claims.
The use of our product candidates in clinical trials and the sale of any products for which we obtain marketing
approval expose us to the risk of product liability claims. Product liability claims might be brought against us by patients,
healthcare providers, pharmaceutical companies or others selling or otherwise coming into contact with our
products. There is a risk that our product candidates may induce adverse events. If we cannot successfully defend against
product liability claims, we could incur substantial liability and costs. In addition, regardless of merit or eventual outcome,
product liability claims may result in:
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the impairment of our business reputation;
the withdrawal of clinical trial participants;
substantial monetary awards to patients or other claimants;
costs due to related litigation;
the distraction of management’s attention from our primary business;
the inability to commercialize our product candidates; and
decreased demand for our product candidates, if approved for commercial sale.
We believe our product liability insurance coverage is sufficient in light of our current commercial and clinical
programs; however, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to
protect us against losses due to liability. We intend to expand our insurance coverage each time we commercialize an
additional product; however, we may be unable to obtain product liability insurance on commercially reasonable terms or
in adequate amounts. On occasion, large judgments have been awarded in class action lawsuits based on drugs or medical
treatments that had unanticipated adverse effects. A successful product liability claim or series of claims brought against us
could cause our ADS price to decline and, if judgments exceed our insurance coverage, could adversely affect our results of
operations and business.
Patients with the diseases targeted by certain of our product candidates, such as our lead indications in oncology,
are often already in severe and advanced stages of disease and have both known and unknown significant pre-existing and
potentially life-threatening health risks. During the course of treatment, patients may suffer adverse events, including
death, for reasons that may be related to our product candidates. Such events could subject us to costly
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litigation, require us to pay substantial amounts of money to injured patients, delay, negatively impact or end our
opportunity to receive or maintain regulatory approval to market our products, or require us to suspend or abandon our
commercialization efforts. Even in a circumstance in which we do not believe that an adverse event is related to our
products, the investigation into the circumstance may be time-consuming or inconclusive. These investigations may
interrupt our sales efforts, delay our regulatory approval process, or impact and limit the type of regulatory approvals our
product candidates receive or maintain. As a result of these factors, a product liability claim, even if successfully defended,
could have a material adverse effect on our business, financial condition or results of operations.
We may seek designations for our product candidates with the FDA and other comparable regulatory authorities that
are intended to confer benefits such as a faster development process or an accelerated regulatory pathway, but there
can be no assurance that we will successfully obtain such designations. In addition, even if one or more of our product
candidates are granted such designations, we may not be able to realize the intended benefits of such designations.
The FDA and other comparable regulatory authorities offer certain designations for product candidates that are
intended to encourage the research and development of pharmaceutical products addressing conditions with significant
unmet medical need. These designations may confer benefits such as additional interaction with regulatory authorities, a
potentially accelerated regulatory pathway and priority review. There can be no assurance that we will successfully obtain
such designation for any of our other product candidates. In addition, while such designations could expedite the
development or approval process, they generally do not change the standards for approval. Even if we obtain such
designations for one or more of our product candidates, there can be no assurance that we will realize their intended
benefits.
For example, we may seek a Breakthrough Therapy Designation for one or more of our product candidates. A
breakthrough therapy is defined as a therapy that is intended, alone or in combination with one or more other therapies, to
treat a serious or life-threatening disease or condition, if preliminary clinical evidence indicates that the therapy may
demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as
substantial treatment effects observed early in clinical development. For therapies that have been designated as
breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify
the most efficient path for clinical development while minimizing the number of patients placed in ineffective control
regimens. Therapies designated as breakthrough therapies by the FDA are also eligible for accelerated
approval. Designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe one
of our product candidates meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead
determine not to make such designation. In any event, the receipt of a Breakthrough Therapy Designation for a product
candidate may not result in a faster development process, review or approval compared to therapies considered for approval
under conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even if one or more of
our product candidates qualify as breakthrough therapies, the FDA may later decide that such product candidates no longer
meet the conditions for qualification.
We may also seek Fast Track Designation for some of our product candidates. If a therapy is intended for the
treatment of a serious or life-threatening condition and the therapy demonstrates the potential to address unmet medical
needs for this condition, the therapy sponsor may apply for Fast Track Designation. The FDA has broad discretion whether
or not to grant this designation, so even if we believe a particular product candidate is eligible for this designation, there
can be no assurance that the FDA would decide to grant it. Even if we do receive Fast Track Designation, we may not
experience a faster development process, review or approval compared to conventional FDA procedures, and receiving a
Fast Track Designation does not provide assurance of ultimate FDA approval. The FDA may withdraw Fast Track
Designation if it believes that the designation is no longer supported by data from our clinical development program.
We may seek priority review designation for one or more of our product candidates, but we might not receive such
designation, and even if we do, such designation may not lead to a faster regulatory review or approval process.
If the FDA determines that a product candidate offers a treatment for a serious condition and, if approved, the
product would provide a significant improvement in safety or effectiveness, the FDA may designate the product
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candidate for priority review. A priority review designation means that the goal for the FDA to review an application is six
months, rather than the standard review period of ten months. We may request priority review for our product
candidates. The FDA has broad discretion with respect to whether or not to grant priority review status to a product
candidate, so even if we believe a particular product candidate is eligible for such designation or status, in particular if such
product candidate has received a Breakthrough Therapy Designation, the FDA may decide not to grant it. Moreover, a
priority review designation does not result in expedited development and does not necessarily result in expedited regulatory
review or approval process or necessarily confer any advantage with respect to approval compared to conventional FDA
procedures. Receiving priority review from the FDA does not guarantee approval within the six-month review cycle or at
all.
Obtaining and maintaining marketing approval of our current and future product candidates in one jurisdiction does
not mean that we will be successful in obtaining marketing approval of our current and future product candidates in
other jurisdictions.
Obtaining and maintaining marketing approval of our current and future product candidates in one jurisdiction
does not guarantee that we will be able to obtain or maintain marketing approval in any other jurisdiction, while a failure or
delay in obtaining marketing approval in one jurisdiction may have a negative effect on the marketing approval process in
others. For example, even if the FDA grants marketing approval of a product candidate, comparable regulatory authorities
in foreign jurisdictions must also approve the manufacturing, marketing and promotion of the product candidate in those
countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods
different from, and greater than, those in the United States, including additional preclinical studies or clinical trials as
clinical studies conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. In many
jurisdictions outside the United States, a product candidate must be approved for reimbursement before it can be approved
for sale in that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to
approval. We do not have experience in obtaining reimbursement or pricing approvals in international markets.
Obtaining marketing approvals and compliance with regulatory requirements could result in significant delays,
difficulties and costs for us and could delay or prevent the introduction of our products in certain countries outside of the
United Kingdom and the United States. If we fail to comply with the regulatory requirements in international markets
and/or receive applicable marketing approvals, our target market will be reduced and our ability to realize the full market
potential of our product candidates will be harmed.
The withdrawal of the United Kingdom from the European Union, commonly referred to as “Brexit,” may adversely
impact our ability to obtain regulatory approvals of our product candidates in the European Union, result in restrictions
or imposition of taxes and duties for importing our product candidates into the European Union, and may require us to
incur additional expenses in order to develop, manufacture and commercialize our product candidates in the European
Union.
Following the result of a referendum in 2016, the United Kingdom left the European Union on January 31, 2020,
commonly referred to as Brexit. Pursuant to the formal withdrawal arrangements agreed between the United Kingdom and
the European Union, the United Kingdom will be subject to a transition period until December 31, 2020, or the Transition
Period, during which European Union rules will continue to apply. Negotiations between the United Kingdom and the
European Union are expected to continue in relation to the customs and trading relationship between the United Kingdom
and the European Union following the expiry of the Transition Period.
The potential impact on our results of operations and liquidity resulting from Brexit remains unclear. The actual
effects of Brexit will depend upon many factors and significant uncertainty remains with respect to the terms of the
ultimate resolution of the Brexit negotiations.
Since a significant proportion of the regulatory framework in the United Kingdom applicable to our business and
our product candidates is derived from European Union directives and regulations, Brexit, following the Transition Period,
could materially impact the regulatory regime with respect to the development, manufacture, importation, approval and
commercialization of our product candidates in the United Kingdom or the European Union. For example, as a result of
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the uncertainty surrounding Brexit, the EMA relocated to Amsterdam from London. Following the Transition Period, the
United Kingdom will no longer be covered by the centralized procedures for obtaining European Union-wide marketing
authorization from the EMA and, unless a specific agreement is entered into, a separate process for authorization of drug
products, including our product candidates, will be required in the United Kingdom, the potential process for which is
currently unclear. Any delay in obtaining, or an inability to obtain, any marketing approvals, as a result of Brexit or
otherwise, would prevent us from commercializing our product candidates in the United Kingdom and/or the European
Union and restrict our ability to generate revenue and achieve and sustain profitability. If any of these outcomes occur, we
may be forced to restrict or delay efforts to seek regulatory approval in the United Kingdom and/or European Union for our
product candidates, which could significantly and materially harm our business.
Risks Related to Commercialization of Our Product Candidates and Other Regulatory Compliance Matters
Even if we complete the necessary preclinical studies and clinical trials, the marketing approval process is expensive,
time consuming and uncertain and may prevent us or any collaborators from obtaining approvals for the
commercialization of some or all of our product candidates. As a result, we cannot predict when or if, and in which
territories, we, or any collaborators, will obtain marketing approval to commercialize a product candidate.
The process of obtaining marketing approvals, both in the United States and abroad, is lengthy, expensive and
uncertain. It may take many years, if approval is obtained at all, and can vary substantially based upon a variety of factors,
including the type, complexity and novelty of the product candidates involved. Securing marketing approval requires the
submission of extensive preclinical and clinical data and supporting information to regulatory authorities for each
therapeutic indication to establish the product candidate’s safety and efficacy. Securing marketing approval also requires
the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by,
the regulatory authorities. The FDA or other regulatory authorities may determine that our product candidates are not safe
and effective, only moderately effective or have undesirable or unintended side effects, toxicities or other characteristics
that preclude our obtaining marketing approval or prevent or limit commercial use. Any marketing approval we ultimately
obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not
commercially viable.
In addition, changes in marketing approval policies during the development period, changes in or the enactment or
promulgation of additional statutes, regulations or guidance or changes in regulatory review for each submitted product
application, may cause delays in the approval or rejection of an application. Regulatory authorities have substantial
discretion in the approval process and may refuse to accept any application or may decide that our data are insufficient for
approval and require additional preclinical, clinical or other studies. Varying interpretations of the data obtained from
preclinical and clinical testing could delay, limit or prevent marketing approval of a product candidate. We cannot
commercialize a product until the appropriate regulatory authorities have reviewed and approved the product
candidate. Even if our product candidates demonstrate safety and efficacy in clinical trials, the regulatory agencies may not
complete their review processes in a timely manner, or we may not be able to obtain regulatory approval. Additional delays
may result if an FDA Advisory Committee or other regulatory authority recommends non-approval or restrictions on
approval. In addition, we may experience delays or rejections based upon additional government regulation from future
legislation or administrative action, or changes in regulatory agency policy during the period of product development,
clinical trials and the review process. Any marketing approval we ultimately obtain may be limited or subject to
restrictions or post-approval commitments that render the approved product not commercially viable.
Moreover, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from
time to time and receive compensation in connection with such services. Under certain circumstances, we may be required
to report some of these relationships to the FDA or other regulatory authority. The FDA or other regulatory authority may
conclude that a financial relationship between us and a principal investigator has created a conflict of interest or otherwise
affected interpretation of the study. The FDA or other regulatory authority may therefore question the integrity of the data
generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized. This could result
in a delay in approval, or rejection, of our marketing applications by the FDA or other regulatory authority, as the case may
be, and may ultimately lead to the denial of marketing approval of one or more of our product candidates.
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In addition, regulatory agencies may not approve the labeling claims that are necessary or desirable for the
successful commercialization of our product candidates. For example, regulatory agencies may approve a product
candidate for fewer or more limited indications than requested or may grant approval subject to the performance of post-
marketing studies. Regulators may approve a product candidate for a smaller patient population, a different drug
formulation or a different manufacturing process, than we are seeking. If we are unable to obtain necessary regulatory
approvals, or more limited regulatory approvals than we expect, our business, prospects, financial condition and results of
operations may suffer.
Any delay in obtaining or failure to obtain required approvals could negatively impact our ability to generate
revenue from the particular product candidate, which likely would result in significant harm to our financial position and
adversely impact the price of our ADSs.
We currently have no marketing, sales or distribution infrastructure with respect to our product candidates. If we are
unable to develop our sales, marketing and distribution capability on our own or through collaborations with marketing
partners, we will not be successful in commercializing our product candidates.
We currently have no marketing, sales or distribution capabilities and have limited sales or marketing experience
within our organization. If one or more of our product candidates is approved, we intend either to establish a sales and
marketing organization with technical expertise and supporting distribution capabilities to commercialize that product
candidate, or to outsource this function to a third party. There are risks involved with either establishing our own sales and
marketing capabilities and entering into arrangements with third parties to perform these services.
Recruiting and training an internal commercial organization is expensive and time consuming and could delay any
product launch. Some or all of these costs may be incurred in advance of any approval of any of our product candidates. If
the commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is
delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization
expenses. This may be costly and our investment would be lost if we cannot retain or reposition our sales and marketing
personnel. In addition, we may not be able to hire a sales force in the United States or other target market that is sufficient
in size or has adequate expertise in the medical markets that we intend to target.
Factors that may inhibit our efforts to commercialize our product candidates on our own include:
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the inability to recruit, train and retain adequate numbers of effective sales and marketing personnel;
the inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to
prescribe any future product that we may develop;
the lack of complementary treatments to be offered by sales personnel, which may put us at a competitive
disadvantage relative to companies with more extensive product lines; and
unforeseen costs and expenses associated with creating an independent sales and marketing organization.
If we enter into arrangements with third parties to perform sales, marketing and distribution services, our product
revenue or the profitability to us from these revenue streams is likely to be lower than if we were to market and sell any
product candidates that we develop ourselves. In addition, we may not be successful in entering into arrangements with
third parties to sell and market our product candidates or may be unable to do so on terms that are favorable to us. We
likely will have little control over such third parties and any of them may fail to devote the necessary resources and
attention to sell and market our product candidates effectively. If we do not establish sales and marketing capabilities
successfully, either on our own or in collaboration with third parties, we may not be successful in commercializing our
product candidates.
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The market opportunities for any current or future product candidate we develop, if and when approved, may be
limited to those patients who are ineligible for established therapies or for whom prior therapies have failed, and may
be small.
Cancer therapies are sometimes characterized as first-line, second-line, or third-line, and the FDA often approves
new therapies initially only for third-line use. When cancer is detected early enough, first-line therapy, usually
chemotherapy, hormone therapy, surgery, radiation therapy, immunotherapy or a combination of these, is sometimes
adequate to cure the cancer or prolong life without a cure. Second- and third-line therapies are administered to patients
when prior therapy is not effective. We may initially seek approval of BT1718, BT5528, and any other product candidates
we develop as a therapy for patients who have received one or more prior treatments. Subsequently, for those products that
prove to be sufficiently beneficial, if any, we would expect to seek approval potentially as a first-line therapy, but there is
no guarantee that product candidates we develop, even if approved, would be approved for first-line therapy, and, prior to
any such approvals, we may have to conduct additional clinical trials.
The number of patients who have the cancers we are targeting may turn out to be lower than
expected. Additionally, the potentially addressable patient population for our current programs or future product candidates
may be limited, if and when approved. Even if we obtain significant market share for any product candidate, if and when
approved, if the potential target populations are small, we may never achieve profitability without obtaining marketing
approval for additional indications, including use as first- or second-line therapy.
Even if we receive marketing approval of a product candidate, we will be subject to ongoing regulatory obligations and
continued regulatory review, which may result in significant additional expense and we may be subject to penalties if
we fail to comply with regulatory requirements or experience unanticipated problems with our products, if approved.
Any marketing approvals that we receive for any current or future product candidate may be subject to limitations
on the approved indicated uses for which the product may be marketed or the conditions of approval, or contain
requirements for potentially costly post-market testing and surveillance to monitor the safety and efficacy of the product
candidate. The FDA may also require a Risk Evaluation and Mitigation Strategy, or REMS, as a condition of approval of
any product candidate, which could include requirements for a medication guide, physician communication plans or
additional elements to ensure safe use, such as restricted distribution methods, patient registries and other risk minimization
tools. If the FDA or a comparable foreign regulatory authority approves a product candidate, the manufacturing processes,
labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion, import and export and record
keeping for the product candidate will be subject to extensive and ongoing regulatory requirements. These requirements
include, among others, submissions of safety and other post-marketing information and reports, registration, as well as
continued compliance with current Good Manufacturing Practice, or cGMP, and Good Clinical Practice, or GCP, for any
clinical trials that we conduct post-approval, and prohibitions on the promotion of an approved product for uses not
included in the product’s approved labeling. The FDA and other agencies actively enforce the laws and regulations
prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label may be
subject to significant liability. However, physicians may, in their independent medical judgment, prescribe legally available
products for off-label uses. The FDA does not regulate the behavior of physicians in their choice of treatments but the FDA
does restrict manufacturer’s communications on the subject of off-label use of their products.
Later discovery of previously unknown problems with any approved candidate, including adverse events of
unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply
with regulatory requirements, may result in, among other things:
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restrictions on the labeling, distribution, marketing or manufacturing of the product, withdrawal of the
product from the market, or product recalls;
untitled and warning letters, or holds on clinical trials;
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refusal by the FDA to approve pending applications or supplements to approved applications we filed or
suspension or revocation of license approvals;
requirements to conduct post-marketing studies or clinical trials;
restrictions on coverage by third-party payors;
fines, restitution or disgorgement of profits or revenues;
suspension or withdrawal of marketing approvals;
product seizure or detention, or refusal to permit the import or export of the product; and
injunctions or the imposition of civil or criminal penalties.
The FDA’s and other regulatory authorities’ policies may change and additional government regulations may be
enacted that could prevent, limit or delay marketing approval of a product. We cannot predict the likelihood, nature or
extent of government regulation that may arise from future legislation or administrative action, either in the United States
or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or
policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have
obtained and we may not achieve or sustain profitability.
We face significant competition and if our competitors develop and market products that are more effective, safer or
less expensive than the product candidates we develop, our commercial opportunities will be negatively impacted.
The life sciences industry is highly competitive. We are currently developing therapeutics that will compete, if
approved, with other products and therapies that currently exist, are being developed or will in the future be developed,
some of which we may not currently be aware.
We have competitors both in the United States and internationally, including major multinational pharmaceutical
companies, established biotechnology companies, specialty pharmaceutical companies, universities and other research
institutions. Many of our competitors have significantly greater financial, manufacturing, marketing, product development,
technical and human resources than we do. Large pharmaceutical companies, in particular, have extensive experience in
clinical testing, obtaining marketing approvals, recruiting patients and manufacturing pharmaceutical products. These
companies also have significantly greater research and marketing capabilities than we do and may also have products that
have been approved or are in late stages of development, and collaborative arrangements in our target markets with leading
companies and research institutions. Established pharmaceutical companies may also invest heavily to accelerate discovery
and development of novel compounds or to in-license novel compounds that could make the product candidates that we
develop obsolete. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more
resources being concentrated among a smaller number of our competitors. As a result of all of these factors, our
competitors may succeed in obtaining patent protection and/or marketing approval or discovering, developing and
commercializing products in our field before we do.
There is a large number of companies developing or marketing treatments for cancer, including many major
pharmaceutical and biotechnology companies. These treatments consist both of small molecule drug products, such as
traditional chemotherapy, as well as novel immunotherapies. For example, a number of multinational companies as well as
large biotechnology companies, including Astellas Pharma Inc., Seattle Genetics, Inc., AstraZeneca and
GlaxoSmithKline plc, are developing programs for the targets that we are exploring for our BTC programs. Furthermore,
Agenus Inc., Bristol-Myers Squibb Company, Pfizer Inc., Roche Holding AG, or Roche, have or are developing programs
for CD137, and Amgen Inc., Pieris Pharmaceuticals, Inc. and Roche are developing bi-specific antibodies.
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Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize
products that are safer, more effective, have fewer or less severe effects, are more convenient, have a broader label, are
marketed more effectively, are reimbursed or are less expensive than any products that we may develop. Our competitors
also may obtain FDA, EMA or other marketing approval for their products more rapidly than we may obtain approval for
ours, which could result in our competitors establishing a strong market position before we are able to enter the
market. Even if the product candidate we develop achieve marketing approval, they may be priced at a significant
premium over competitive products if any have been approved by then, resulting in reduced competitiveness.
Smaller and other early stage companies may also prove to be significant competitors. These third parties
compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites
and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our
programs. In addition, the biopharmaceutical industry is characterized by rapid technological change. If we fail to stay at
the forefront of technological change, we may be unable to compete effectively. Technological advances or products
developed by our competitors may render our product candidates obsolete, less competitive or not economical.
The commercial success of any current or future product candidate will depend upon the degree of market acceptance
by physicians, patients, payors and others in the medical community.
We have never commercialized a product, and even if we obtain any regulatory approval for our product
candidates, the commercial success of our product candidates will depend in part on the medical community, patients, and
payors accepting products based on our Bicycle peptides in general, and our product candidates in particular, as effective,
safe and cost-effective. Any product that we bring to the market may not gain market acceptance by physicians, patients,
payors and others in the medical community. Physicians are often reluctant to switch their patients from existing therapies
even when new and potentially more effective or convenient treatments enter the market. Further, patients often acclimate
to the therapy that they are currently taking and do not want to switch unless their physicians recommend switching
products or they are required to switch therapies due to lack of reimbursement for existing therapies.
The degree of market acceptance of these product candidates, if approved for commercial sale, will depend on a
number of factors, including:
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the potential efficacy and potential advantages over alternative treatments;
the frequency and severity of any side effects, including any limitations or warnings contained in a product’s
approved labeling;
the frequency and severity of any side effects resulting from follow-up requirements for the administration of
our product candidates;
the relative convenience and ease of administration;
the willingness of the target patient population to try new therapies and of physicians to prescribe these
therapies;
the strength of marketing and distribution support and timing of market introduction of competitive products;
publicity concerning our products or competing products and treatments; and
sufficient third-party insurance coverage and adequate reimbursement.
Even if a product candidate displays a favorable efficacy and safety profile in preclinical studies and clinical trials,
market acceptance of the product, if approved for commercial sale, will not be known until after it is launched. Our efforts
to educate the medical community and payors on the benefits of our product candidates may require
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significant resources and may never be successful. Such efforts to educate the marketplace may require more resources
than are required by the conventional technologies marketed by our competitors, particularly due to the novelty of our
Bicycle approach. If these products do not achieve an adequate level of acceptance, we may not generate significant
product revenue and may not become profitable.
If the market opportunities for our product candidates are smaller than we believe they are, our product revenues may
be adversely affected and our business may suffer.
We currently focus our research and product development on treatments for oncology indications and our product
candidates are designed to target specific tumor antigens. Our understanding of both the number of people who have these
diseases, as well as the subset of people with these diseases who have the potential to benefit from treatment with our
product candidates, are based on estimates. These estimates may prove to be incorrect and new studies may reduce the
estimated incidence or prevalence of these diseases. Patient identification efforts also influence the ability to address a
patient population. If efforts in patient identification are unsuccessful or less impactful than anticipated, we may not
address the entirety of the opportunity we are seeking.
In addition, the tumor antigens that our product candidates target may not be expressed as broadly as we
anticipate. Further, if companion diagnostics are not developed alongside our product candidates, testing patients for the
tumor antigens may not be possible, which would hamper our ability to identify patients who could benefit from treatment
with our product candidates.
As a result, the number of patients we are able to identify in the United States, the European Union and elsewhere
may turn out to be lower than expected, may not be otherwise amenable to treatment with our products or patients may
become increasingly difficult to access, all of which would adversely affect our business, financial condition, results of
operations and prospects.
The insurance coverage and reimbursement status of newly-approved products is uncertain. Failure to obtain or
maintain adequate coverage and reimbursement for any of our product candidates, if approved, could limit our ability
to market those products and decrease our ability to generate revenue.
We expect the cost of our product candidates to be substantial, when and if they achieve market approval. The
availability and extent of reimbursement by governmental and private payors is essential for most patients to be able to
afford expensive treatments. Sales of our product candidates will depend substantially, both domestically and abroad, on
the extent to which the costs of our product candidates will be paid by private payors, such as private health coverage
insurers, health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or
reimbursed by government health care programs, such as Medicare and Medicaid. We may not be able to provide data
sufficient to gain acceptance with respect to coverage and reimbursement. If reimbursement is not available, or is available
only at limited levels, we may not be able to successfully commercialize our product candidates, even if approved. Even if
coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain
pricing sufficient to realize a sufficient return on our investment.
There is significant uncertainty related to the insurance coverage and reimbursement of newly approved
products. In the United States, the principal decisions about coverage and reimbursement for new medicines are typically
made by the Centers for Medicare & Medicaid Services, or CMS, an agency within the U.S. Department of Health and
Human Services, as the CMS decides whether and to what extent a new medicine will be covered and reimbursed under
Medicare. Private payors tend to follow CMS to a substantial degree. It is difficult to predict what CMS will decide with
respect to coverage and reimbursement for novel products such as ours, as there is no body of established practices and
precedents for these new products. Coverage and reimbursement by a third-party payor may depend upon a number of
factors, including the third-party payor’s determination that use of a product is: (1) a covered benefit under its health plan;
(2) safe, effective and medically necessary; (3) appropriate for the specific patient; (4) cost-effective; and (5) neither
experimental nor investigational. In the United States, no uniform policy of coverage and reimbursement for products
exists among third-party payors. As a result, the coverage determination process is often a time-consuming and costly
process that will require us to provide scientific and clinical support for the use of our products to each payor separately,
with no assurance that coverage and adequate reimbursement will be applied
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consistently or obtained in the first instance. Even if we obtain coverage for a given product, the resulting reimbursement
payment rates might not be adequate for us to achieve or sustain profitability or may require co-payments that patients find
unacceptably high. Third-party payors may limit coverage to specific drug products on an approved list, also known as a
formulary, which might not include all of the approved drugs for a particular indication.
Additionally, third-party payors may not cover, or provide adequate reimbursement for, long-term follow-up
evaluations required following the use of product candidates. Patients are unlikely to use our product candidates unless
coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our product
candidates. Because our product candidates may have a higher cost of goods than conventional therapies, and may require
long-term follow-up evaluations, the risk that coverage and reimbursement rates may be inadequate for us to achieve
profitability may be greater. There is significant uncertainty related to insurance coverage and reimbursement of newly
approved products. It is difficult to predict at this time what third-party payors will decide with respect to the coverage and
reimbursement for our product candidates.
We or our collaborators will be required to obtain coverage and reimbursement for companion diagnostic tests
separate and apart from the coverage and reimbursement we seek for our product candidates, once approved. There is
significant uncertainty regarding our and our collaborators ability to obtain coverage and adequate reimbursement for any
companion diagnostic test for the same reasons applicable to our product candidates.
Moreover, increasing efforts by governmental and third-party payors in the United States and abroad to cap or
reduce healthcare costs may cause such organizations to limit both coverage and the level of reimbursement for newly
approved products and, as a result, they may not cover or provide adequate payment for our product candidates. There has
been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing
practices. Specifically, there have been several recent U.S. Congressional inquiries and proposed federal and state
legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs
under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government
program reimbursement methodologies for drugs. We expect to experience pricing pressures in connection with the sale of
any of our product candidates due to the trend toward managed healthcare, the increasing influence of health maintenance
organizations, cost containment initiatives and additional legislative changes.
Outside the United States, certain countries, including a number of member states of the European Union, set
prices and reimbursement for pharmaceutical products, or medicinal products, as they are commonly referred to in the
European Union. These countries have broad discretion in setting prices and we cannot be sure that such prices and
reimbursement will be acceptable to us or our collaborators. If the regulatory authorities in these jurisdictions set prices or
reimbursement levels that are not commercially attractive for us or our collaborators, our revenues from sales by us or our
collaborators, and the potential profitability of our drug products, in those countries would be negatively affected. An
increasing number of countries are taking initiatives to attempt to reduce large budget deficits by focusing cost-cutting
efforts on pharmaceuticals for their state-run health care systems. These international price control efforts have impacted
all regions of the world, but have been most drastic in the European Union. Additionally, some countries require approval
of the sale price of a product before it can be lawfully marketed. In many countries, the pricing review period begins after
marketing or product licensing approval is granted. To obtain reimbursement or pricing approval in some countries, we, or
any collaborators, may be required to conduct a clinical trial that compares the cost-effectiveness of our product to other
available therapies. As a result, we might obtain marketing approval for a product in a particular country, but then may
experience delays in the reimbursement approval of our product or be subject to price regulations that would delay our
commercial launch of the product, possibly for lengthy time periods, which could negatively impact the revenues we are
able to generate from the sale of the product in that particular country.
Moreover, efforts by governments and payors, in the United States and abroad, to cap or reduce healthcare costs
may cause such organizations to limit both coverage and level of reimbursement for new products approved and, as a
result, they may not cover or provide adequate reimbursement for our product candidates. There has been increasing
legislative and enforcement interest in the United States with respect to specialty drug practices. Specifically, there have
been several recent U.S. Congressional inquiries and proposed federal and state legislation designed to, among other things,
bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship
between pricing and manufacturer patient programs, and reform government program reimbursement
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methodologies for drugs. We expect to experience pricing pressures in connection with the sale of any of our product
candidates, due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and
additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and
other treatments, has become very intense. As a result, increasingly high barriers are being erected to the entry of new
products.
If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory
levels, our business could be harmed.
If the FDA or comparable foreign regulatory authorities approve generic versions of any of our product candidates that
receive marketing approval, or such authorities do not grant such products appropriate periods of data exclusivity
before approving generic versions of such products, the sales of such products could be adversely affected.
Once a NDA is approved, the product covered thereby becomes a “reference-listed drug” in the FDA’s
publication, “Approved Drug Products with Therapeutic Equivalence Evaluations,” or the Orange Book. Manufacturers
may seek approval of generic versions of reference-listed drugs through submission of abbreviated new drug applications,
or ANDAs, in the United States. In support of an ANDA, a generic manufacturer generally must show that its product has
the same active ingredient(s), dosage form, strength, route of administration and conditions of use or labeling as the
reference-listed drug and that the generic version is bioequivalent to the reference-listed drug, meaning, in part, that it is
absorbed in the body at the same rate and to the same extent. Generic products may be significantly less costly to bring to
market than the reference-listed drug and companies that produce generic products are generally able to offer them at lower
prices. Thus, following the introduction of a generic drug, a significant percentage of the sales of any branded product or
reference-listed drug may be typically lost to the generic product, and the price of the branded product may be lowered.
The FDA may not accept for review or approve an ANDA for a generic product until any applicable period of
non-patent exclusivity for the reference-listed drug has expired. The Federal Food, Drug, and Cosmetic Act, or FDCA,
provides a period of five years of non-patent exclusivity for a new drug containing a new chemical entity, or
NCE. Specifically, in cases where such exclusivity has been granted, an ANDA may not be filed with the FDA until the
expiration of five years unless the submission is accompanied by a Paragraph IV certification that a patent covering the
reference-listed drug is either invalid or will not be infringed by the generic product, in which case the applicant may
submit its application four years following approval of the reference-listed drug. It is unclear whether the FDA will treat
the active ingredients in our product candidates as NCEs and, therefore, afford them five years of NCE data exclusivity if
they are approved. If any product we develop does not receive five years of NCE exclusivity, the FDA may approve
generic versions of such product three years after its date of approval, subject to the requirement that the ANDA applicant
certifies to any patents listed for our products in the Orange Book. Three year exclusivity is given to a non-NCE drug if the
NDA includes reports of one or more new clinical investigations, other than bioavailability or bioequivalence studies, that
were conducted by or for the applicant and are essential to the approval of the NDA. Manufacturers may seek to launch
these generic products following the expiration of the applicable marketing exclusivity period, even if we still have patent
protection for our product.
Competition that our products may face from generic versions of our products could negatively impact our future
revenue, profitability and cash flows and substantially limit our ability to obtain a return on our investments in those
product candidates.
We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws health
information privacy and security laws, and other health care laws and regulations. If we are unable to comply, or have
not fully complied, with such laws, we could face substantial penalties.
If we obtain FDA approval for any of our product candidates and begin commercializing those products in the
United States, our operations will be directly, or indirectly through our prescribers, customers and purchasers, subject to
various federal and state fraud and abuse laws and regulations, including, without limitation, the federal Health Care
Program Anti-Kickback Statute, or Anti-Kickback Statute, the federal civil and criminal False Claims Act and Physician
Payments Sunshine Act and regulations. These laws will impact, among other things, our proposed sales, marketing and
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educational programs. In addition, we may be subject to patient privacy laws by both the federal government and the states
in which we conduct our business. The laws that will affect our operations include, but are not limited to:
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the Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and
willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe or rebate),
directly or indirectly, overtly or covertly, in cash or in kind, to induce, or in return for, either the referral of an
individual, or the purchase, lease, order, arrangement, or recommendation of any good, facility, item or
service for which payment may be made, in whole or in part, under a federal healthcare program, such as the
Medicare and Medicaid programs. “Remuneration” has been interpreted broadly to include anything of
value. A person or entity does not need to have actual knowledge of the Anti-Kickback Statute or specific
intent to violate it to have committed a violation. In addition, the government may assert that a claim
including items or services resulting from a violation of the Anti-Kickback Statute constitutes a false or
fraudulent claim for purposes of the federal False Claims Act, or FCA, or federal civil money penalties. The
Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers
on the one hand and prescribers, purchasers, and formulary managers on the other. There are a number of
statutory exceptions and regulatory safe harbors protecting some common activities from prosecution;
the federal civil and criminal false claims laws, including the FCA, and civil monetary penalty laws, which
impose criminal and civil penalties against individuals or entities for, among other things: knowingly
presenting, or causing to be presented, to the federal government, claims for payment that are false or
fraudulent; knowingly making, using or causing to be made or used, a false statement of record material to a
false or fraudulent claim or obligation to pay or transmit money or property to the federal
government. Manufacturers can be held liable under the FCA even when they do not submit claims directly
to government payors if they are deemed to “cause” the submission of false or fraudulent claims. The FCA
also permits a private individual acting as a “whistleblower” to bring actions on behalf of the federal
government alleging violations of the FCA and to share in any monetary recovery;
the beneficiary inducement provisions of the CMP Law, which prohibits, among other things, the offering or
giving of remuneration, which includes, without limitation, any transfer of items or services for free or for
less than fair market value (with limited exceptions), to a Medicare or Medicaid beneficiary that the person
knows or should know is likely to influence the beneficiary’s selection of a particular supplier of items or
services reimbursable by a federal or state governmental program;
the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created new
federal criminal statutes that prohibit a person from knowingly and willfully executing, or attempting to
execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent
pretenses, representations or promises, any of the money or property owned by, or under the custody or
control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and
willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially
false, fictitious, or fraudulent statements or representations in connection with the delivery of, or payment for,
healthcare benefits, items or services relating to healthcare matters; similar to the Anti-Kickback Statute, a
person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to
have committed a violation;
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009,
and their respective implementing regulations, which impose requirements on certain healthcare providers,
health plans, and healthcare clearinghouses, known as covered entities, as well as their respective business
associates, individuals and entities that perform services on their behalf that involve the use or disclosure of
individually identifiable health information, relating to the privacy, security and transmission of individually
identifiable health information;
the U.S. federal transparency requirements under the Patient Protection and Affordable Care Act, as amended
by the Health Care and Education Reconciliation Act, or collectively, ACA, including the
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provision commonly referred to as the Physician Payments Sunshine Act, which requires applicable
manufacturers of drugs, devices, biologics and medical supplies for which payment is available under
Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually
to CMS information related to payments or other transfers of value made to physicians (defined to include
doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and
investment interests held by the physicians described above and their immediate family members. Beginning
in 2022, applicable manufacturers also will be required to report information regarding payments and
transfers of value provided, as well as ownership and investment interests held, during the previous year to
physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, and certified
nurse-midwives;
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federal government price reporting laws, which require us to calculate and report complex pricing metrics in
an accurate and timely manner to government programs; and
federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and
activities that potentially harm consumers.
Additionally, we are subject to state and foreign equivalents of each of the healthcare laws and regulations
described above, among others, some of which may be broader in scope and may apply regardless of the payer. Many U.S.
states have adopted laws similar to the Anti-Kickback Statute and FCA, and may apply to our business practices, including,
but not limited to, research, distribution, sales or marketing arrangements and claims involving healthcare items or services
reimbursed by non-governmental payors, including private insurers. In addition, some states have passed laws that require
pharmaceutical companies to comply with the April 2003 Office of Inspector General Compliance Program Guidance for
Pharmaceutical Manufacturers and/or the Pharmaceutical Research and Manufacturers of America’s Code on Interactions
with Healthcare Professionals. Several states also impose other marketing restrictions or require pharmaceutical companies
to make marketing or price disclosures to the state. There are ambiguities as to what is required to comply with these state
requirements and if we fail to comply with an applicable state law requirement we could be subject to significant
penalties. Finally, there are state and foreign laws governing the privacy and security of health information, many of which
differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
Because of the breadth of these laws and the narrowness of the statutory exceptions and regulatory safe harbors
available, it is possible that some of our business activities could be subject to challenge under one or more of such
laws. Law enforcement authorities are increasingly focused on enforcing fraud and abuse laws, and it is possible that some
of our practices may be challenged under these laws. Efforts to ensure that our current and future business arrangements
with third parties, and our business generally, will comply with applicable healthcare laws and regulations will involve
substantial costs. If our operations, including our arrangements with physicians and other healthcare providers, some of
whom receive share options as compensation for services provided, are found to be in violation of any of such laws or any
other governmental regulations that apply to us, we may be subject to penalties, including, without limitation, significant
administrative, civil and criminal penalties, damages, fines, disgorgement, contractual damages, reputational harm,
diminished profits and future earnings, the curtailment or restructuring of our operations, imprisonment, exclusion from
participation in federal and state healthcare programs (such as Medicare and Medicaid), additional reporting requirements
and/or oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-
compliance with these laws, and individual imprisonment, any of which could adversely affect our ability to operate our
business and our financial results. Any action for violation of these laws, even if successfully defended, could cause a
pharmaceutical manufacturer to incur significant legal expenses and divert management’s attention from the operation of
the business. Prohibitions or restrictions on sales or withdrawal of future marketed products could materially affect
business in an adverse way.
Healthcare legislative reform measures may have a negative impact on our business and results of operations.
In the United States and some foreign jurisdictions, there have been, and continue to be, several legislative and
regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval
of product candidates, restrict or regulate post-approval activities, and affect our ability to profitably sell any
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product candidates for which we obtain marketing approval. Changes in regulations, statutes or the interpretation of
existing regulations could impact our business in the future by requiring, for example: (i) changes to our manufacturing
arrangements, (ii) additions or modifications to product labeling, (iii) the recall or discontinuation of our products,
(iv) restriction on coverage, reimbursement, and pricing for our products, (v) transparency reporting obligations regarding
transfers of value to health care professionals or (vi) additional record-keeping requirements. If any such changes were to
be imposed, they could adversely affect our business, financial condition and results of operations.
Among policy makers in the United States and elsewhere, there is significant interest in promoting changes in
healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. In the
United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by
major legislative initiatives. In March 2010, the Affordable Care Act, or ACA, was passed, which substantially changed the
way healthcare is financed by both the government and private insurers, and significantly impacts the U.S. pharmaceutical
industry. The ACA, among other things, subjected biological products to potential competition by lower-cost biosimilars,
created a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are
calculated for drugs that are inhaled, infused, instilled, implanted or injected, increased the minimum Medicaid rebates
owed by manufacturers under the Medicaid Drug Rebate Program and extended the rebate program to individuals enrolled
in Medicaid managed care organizations, established annual fees and taxes on manufacturers of certain branded
prescription drugs, and created a new Medicare Part D coverage gap discount program, in which manufacturers must agree
to offer 70% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their
coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D.
Since January 2017, President Trump has signed two Executive Orders and other directives designed to delay the
implementation of certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance
mandated by the ACA. One Executive Order directs federal agencies with authorities and responsibilities under the ACA to
waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal
or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or
medical devices. The second Executive Order terminates the cost- sharing subsidies that reimburse insurers under the ACA.
Several state Attorneys General filed suit to stop the administration from terminating the subsidies, but their request for a
restraining order was denied by a federal judge in California on October 25, 2017. Further, on June 14, 2018, U.S. Court of
Appeals for the Federal Circuit ruled that the federal government was not required to pay more than $12 billion in ACA
risk corridor payments to third-party payors who argued were owed to them. The case was appealed to the U.S. Supreme
Court, which heard oral arguments in December 2019, but has not yet issued a ruling. The full effects of this gap in
reimbursement on third-party payors, the viability of the ACA marketplace, providers, and potentially our business, are not
yet known.
Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the ACA.
While Congress has not passed comprehensive repeal legislation, several bills affecting implementation of certain taxes
under the ACA have been signed into law. The Tax Cuts and Jobs Act of 2017, or the Tax Act, includes a provision that
repealed, effective January 1, 2019, the tax-based shared responsibility payment imposed by the Affordable Care Act on
certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as
the “individual mandate.” In addition, the 2020 federal spending package permanently eliminates, effective January 1,
2020, the ACA-mandated “Cadillac” tax on high-cost employer-sponsored health coverage and medical device tax and,
effective January 1, 2021, also eliminates the health insurer tax. The Bipartisan Budget Act of 2018, or the BBA, among
other things, amended the Affordable Care Act, effective January 1, 2019, to close the coverage gap in most Medicare drug
plans, commonly referred to as the “donut hole.” In December 2018, CMS published a final rule permitting further
collections and payments to and from certain Affordable Care Act qualified health plans and health insurance issuers under
the Affordable Care Act risk adjustment program in response to the outcome of federal district court litigation regarding the
method CMS uses to determine this risk adjustment. On December 14, 2018, a U.S. District Court Judge in the Northern
District of Texas, or the Texas District Court Judge, ruled that the individual mandate is a critical and inseverable feature of
the Affordable Care Act, and therefore, because it was repealed as part of the Tax Cuts and Jobs Act of 2017, the remaining
provisions of the Affordable Care Act are invalid as well. Additionally, on December 18, 2019, the U.S. Court of Appeals
for the 5th Circuit upheld the District Court ruling that the individual mandate was unconstitutional and remanded the case
back to the District Court to
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determine whether the remaining provisions of the ACA are invalid as well. It is unclear how this decision, future
decisions, subsequent appeals, and other efforts to repeal and replace the ACA will impact the ACA and our business.
In addition, other legislative changes have been proposed and adopted since the ACA was enacted. These changes
include aggregate reductions to Medicare payments to providers of 2% per fiscal year pursuant to the Budget Control Act
of 2011, which began in 2013, and due to subsequent legislative amendments to the statute, including the BBA, will remain
in effect through 2029 unless additional Congressional action is taken. The American Taxpayer Relief Act of 2012, among
other things, further reduced Medicare payments to several providers, including hospitals and cancer treatment centers, and
increased the statute of limitations period for the government to recover overpayments to providers from three to five years.
There has been increasing legislative and enforcement interest in the United States with respect to specialty drug
pricing practices. Specifically, there have been several recent U.S. Congressional inquiries and proposed federal and state
legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs
under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government
program reimbursement methodologies for drugs. At the federal level, the Trump administration’s budget proposal for
fiscal year 2020 contained further drug price control measures that could be enacted during the budget process or in other
future legislation, including, for example, measures to permit Medicare Part D plans to negotiate the price of certain drugs
under Medicare Part B, to allow some states to negotiate drug prices under Medicaid, and to eliminate cost sharing for
generic drugs for low-income patients. Additionally, the Trump administration released a “Blueprint” to lower drug prices
and reduce out of pocket costs of drugs that contains additional proposals to increase manufacturer competition, increase
the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their
products and reduce the out of pocket costs of drug products paid by consumers. The Department of Health and Human
Services, or HHS, has solicited feedback on some of these measures and, at the same, has implemented others under its
existing authority. For example, in May 2019, CMS issued a final rule to allow Medicare Advantage plans the option to use
step therapy for Part B drugs beginning January 1, 2020. This final rule codified CMS’s policy change that was effective
January 1, 2019. While some of these and other measures may require additional authorization to become effective,
Congress and the Trump administration have each indicated that it will continue to seek new legislative, administrative and
executive measures, including the President’s issuance of future executive orders, to control drug costs. At the state level,
legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and
biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product
access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation
from other countries and bulk purchasing.
Further, on May 30, 2018, the Trickett Wendler, Frank Mongiello, Jordan McLinn, and Matthew Bellina Right to
Try Act of 2017, or the Right to Try Act, was signed into law. The law, among other things, provides a federal framework
for certain patients to access certain investigational new drug products that have completed a Phase 1 clinical trial and that
are undergoing investigation for FDA approval. Under certain circumstances, eligible patients can seek treatment without
enrolling in clinical trials and without obtaining FDA permission under the FDA expanded access program. There is no
obligation for a pharmaceutical manufacturer to make its drug products available to eligible patients as a result of the Right
to Try Act.
We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation,
administrative or executive action. We expect that these and other healthcare reform measures that may be adopted in the
future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for
any approved drug, which could have an adverse effect on customers for our product candidates. Any reduction in
reimbursement from Medicare or other government programs may result in a similar reduction in payments from private
payors.
There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and
state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. The
implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate
revenue, attain profitability, or commercialize our products. Such reforms could have an adverse effect on anticipated
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revenue from product candidates that we may successfully develop and for which we may obtain regulatory approval and
may affect our overall financial condition and ability to develop product candidates.
We are subject to the U.K. Bribery Act 2010, or the Bribery Act, the U.S. Foreign Corrupt Practices Act of 1977, as
amended, or the FCPA, and other anti-corruption laws, as well as export control laws, import and customs laws,
trade and economic sanctions laws and other laws governing our operations.
Our operations are subject to anti-corruption laws, including the Bribery Act, the FCPA, the U.S. domestic bribery
statute contained in 18 U.S.C. §201, the U.S. Travel Act, and other anti-corruption laws that apply in countries where we
do business. The Bribery Act, the FCPA and these other laws generally prohibit us, our employees and our intermediaries
from authorizing, promising, offering, or providing, directly or indirectly, improper or prohibited payments, or anything
else of value, to government officials or other persons to obtain or retain business or gain some other business
advantage. Under the Bribery Act, we may also be liable for failing to prevent a person associated with us from
committing a bribery offense. We and our commercial partners operate in a number of jurisdictions that pose a high risk of
potential Bribery Act or FCPA violations, and we participate in collaborations and relationships with third parties whose
corrupt or illegal activities could potentially subject us to liability under the Bribery Act, FCPA or local anti-corruption
laws, even if we do not explicitly authorize or have actual knowledge of such activities. In addition, we cannot predict the
nature, scope or effect of future regulatory requirements to which our international operations might be subject or the
manner in which existing laws might be administered or interpreted.
We are also subject to other laws and regulations governing our international operations, including regulations
administered by the governments of the United Kingdom and the United States, and authorities in the European Union,
including applicable export control regulations, economic sanctions and embargoes on certain countries and persons, anti-
money laundering laws, import and customs requirements and currency exchange regulations, collectively referred to as the
Trade Control laws.
There is no assurance that we will be completely effective in ensuring our compliance with all applicable anti-
corruption laws, including the Bribery Act, the FCPA or other legal requirements, including Trade Control laws. If we are
not in compliance with the Bribery Act, the FCPA and other anti-corruption laws or Trade Control laws, we may be subject
to criminal and civil penalties, disgorgement and other sanctions and remedial measures, and legal expenses, which could
have an adverse impact on our business, financial condition, results of operations and liquidity. Likewise, any investigation
of any potential violations of the Bribery Act, the FCPA, other anti-corruption laws or Trade Control laws by the United
Kingdom, United States or other authorities could also have an adverse impact on our reputation, our business, results of
operations and financial condition.
Our activities in the United States subject us to various laws relating to foreign investment and the export of certain
technologies, and our failure to comply with these laws or adequately monitor the compliance of our suppliers and
others we do business with could subject us to substantial fines, penalties and even injunctions, the imposition of which
on us could have a material adverse effect on the success of our business.
Because we have a U.S. subsidiary and substantial operations in the United States, we are subject to U.S. laws that
regulate foreign investments in U.S. businesses and access by foreign persons to technology developed and produced in the
United States. These laws include section 721 of the Defense Production Act of 1950, as amended by the Foreign
Investment Risk Review Modernization Act of 2018, and the regulations at 31 C.F.R. Parts 800 and 801, as amended,
administered by the Committee on Foreign Investment in the United States; and the Export Control Reform Act of 2018,
which is being implemented in part through Commerce Department rulemakings to impose new export control restrictions
on “emerging and foundational technologies” yet to be fully identified. Application of these laws, including as they are
implemented through regulations being developed, may negatively impact our business in various ways, including by
restricting our access to capital and markets; limiting the collaborations we may pursue; regulating the export our products,
services, and technology from the United States and abroad; increasing our costs and the time necessary to obtain required
authorizations and to ensure compliance; and threatening monetary fines and other penalties if we do not.
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If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or
penalties or incur costs that could have a material adverse effect on the success of our business.
We are subject to numerous environmental, health and safety laws and regulations, including those governing
laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our
operations involve the use of hazardous and flammable materials, including chemicals and biological materials. Our
operations also produce hazardous waste products. We generally contract with third parties for the disposal of these
materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of
contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages,
and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines
and penalties. Furthermore, environmental laws and regulations are complex, change frequently and have tended to
become more stringent. We cannot predict the impact of such changes and cannot be certain of our future compliance. In
addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and
regulations. These current or future laws and regulations may impair our research, development or production
efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.
Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to
injuries to our employees resulting from the use of hazardous materials or other work-related injuries, this insurance may
not provide adequate coverage against potential liabilities. In addition, we may incur substantial costs in order to comply
with current or future environmental, health and safety laws and regulations. These current or future laws and regulations
may impair our research, development or production efforts. Failure to comply with these laws and regulations also may
result in substantial fines, penalties or other sanctions or liabilities, which could materially adversely affect our business,
financial condition, results of operations and prospects.
Risks Related to Our International Operations
As a company based outside of the United States, we are subject to economic, political, regulatory and other risks
associated with international operations.
As a company based in the United Kingdom, our business is subject to risks associated with conducting business
outside of the United States. Many of our suppliers and clinical trial relationships are located outside the United
States. Accordingly, our future results could be harmed by a variety of factors, including:
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economic weakness, including inflation, or political instability in particular non-U.S. economies and markets;
differing and changing regulatory requirements for product approvals;
differing jurisdictions could present different issues for securing, maintaining or obtaining freedom to operate
in such jurisdictions;
potentially reduced protection for intellectual property rights;
difficulties in compliance with different, complex and changing laws, regulations and court systems of
multiple jurisdictions and compliance with a wide variety of foreign laws, treaties and regulations;
changes in non-U.S. regulations and customs, tariffs and trade barriers;
changes in non-U.S. currency exchange rates of the pound sterling, U.S. dollar, euro and currency controls;
changes in a specific country’s or region’s political or economic environment, including the implications of
the recent decision of the United Kingdom to withdraw from the European Union;
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trade protection measures, import or export licensing requirements or other restrictive actions by
governments;
differing reimbursement regimes and price controls in certain non-U.S. markets;
negative consequences from changes in tax laws;
compliance with tax, employment, immigration and labor laws for employees living or traveling abroad,
including, for example, the variable tax treatment in different jurisdictions of options granted under our share
option schemes or equity incentive plans;
workforce uncertainty in countries where labor unrest is more common than in the United States;
litigation or administrative actions resulting from claims against us by current or former employees or
consultants individually or as part of class actions, including claims of wrongful terminations, discrimination,
misclassification or other violations of labor law or other alleged conduct;
difficulties associated with staffing and managing international operations, including differing labor relations;
production shortages resulting from any events affecting raw material supply or manufacturing capabilities
abroad; and
business interruptions resulting from geo-political actions, including war and terrorism, natural disasters,
including earthquakes, typhoons, floods and fires, or public health crises, including outbreaks of novel
coronavirus or H1N1 flu.
Any or all of these factors could have a material adverse impact on our business, financial condition and results of
operations.
The novel coronavirus outbreak could impact our business.
In December 2019, a novel strain of coronavirus was reported in China. This virus has now spread to numerous
other countries, including the United Kingdom and the United States. While we do not currently have significant operations
in geographical locations where the coronavirus was initially reported to be most prevalent, we source certain research and
development, consulting and other services and supplies from vendors in Asia and in Italy, where the coronavirus has
become increasingly prevalent. We cannot reasonably estimate at this time the impact, if any, that the coronavirus may have
on our business or operations. The extent to which the coronavirus impacts our business will depend on future
developments, which are highly uncertain and cannot be predicted, including new information which may emerge
concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact including on
financial markets or otherwise.
European data collection is governed by restrictive regulations governing the use, processing, and cross-border
transfer of personal information.
The collection and use of personal health data in the European Union is governed by the provisions of the General
Data Protection Regulation, or the GDPR, which became effective and enforceable across all then-current member states of
the European Union on May 25, 2018. In the United Kingdom, the Data Protection Act 2018 complements the GDPR.
Following the United Kingdom’s withdrawal from the European Union on January 31, 2020, pursuant to the transitional
arrangements agreed between the United Kingdom and European Union, the GDPR will continue to have effect in United
Kingdom law until December 31, 2020 in the same fashion as was the case prior to that withdrawal as if the United
Kingdom remained a member state of the European Union for such purposes. Following December 31, 2020, it is likely
that the data protection obligations of the GDPR will continue to apply to United Kingdom-based organization’s processing
of personal data in substantially unvaried form and fashion, for at least the
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short term thereafter. The GDPR enhances data protection obligations for both processors and controllers of personal data,
including by materially expanding the definition of what is expressly noted to constitute personal data, requiring additional
disclosures about how personal data is to be used, imposing limitations on retention of personal data, creating mandatory
data breach notification requirements in certain circumstances, and establishing onerous new obligations on services
providers who process personal data simply on behalf of others, as well as obligations regarding the security and
confidentiality of the personal data. The GDPR also imposes strict rules on the transfer of personal data out of the
European Economic Area to third countries (including the United States). The GDPR has expanded its reach to include
any business, regardless of its location, that processes personal data in relation to the offering of goods or services to
individuals in the European Union and/or the monitoring of their behavior. This expansion would incorporate any potential
clinical trial activities in European Union member states. The GDPR imposes special protections for “sensitive
information” which includes health and genetic information of data subjects residing in the European Union. The GDPR
grants individuals the opportunity to object to the processing of their personal information, allows them to request deletion
of personal information in certain circumstances, and provides the individual with an express right to seek legal remedies in
the event the individual believes his or her rights have been violated. Failure to comply with the requirements of the GDPR
may result in fines of up to 4% of an undertaking’s total global annual turnover for the preceding financial year, or
€ 20,000,000, whichever is greater. In addition to administrative fines, a wide variety of other potential enforcement
powers are available to competent authorities in respect of potential and suspected violations of the GDPR, including
extensive audit and inspection rights, and powers to order temporary or permanent bans on all or some processing of
personal data carried out by noncompliant actors. While we have taken steps to comply with the GDPR, and implementing
legislation in applicable member states, including by seeking to establish appropriate lawful bases for the various
processing activities we carry out as a controller, reviewing our security procedures, and entering into data processing
agreements with relevant customers and business partners, we cannot assure you that our efforts to achieve and remain in
compliance have been, and/or will continue to be, fully successful.
Legal, political and economic uncertainty surrounding the exit of the United Kingdom from the European Union may
be a source of instability in international markets, create significant currency fluctuations, adversely affect our
operations in the United Kingdom and pose additional risks to our business, revenue, financial condition, and results of
operations.
Pursuant to the formal withdrawal arrangements agreed between the United Kingdom and the European Union
following the United Kingdom’s withdrawal from the European Union on January 31, 2020, the United Kingdom will be
subject to a Transition Period during which EU rules will continue to apply. Negotiations between the United Kingdom
and the European Union are expected to continue in relation to the customs and trading relationship between the United
Kingdom and the European Union following the expiry of the Transition Period.
The lack of clarity over which EU laws and regulations will continue to be implemented in the United Kingdom
after the Transition Period (including financial laws and regulations, tax and free trade agreements, intellectual property
rights, data protection laws, supply chain logistics, environmental, health and safety laws and regulations, immigration laws
and employment laws) may negatively impact foreign direct investment in the United Kingdom, increase costs, depress
economic activity and restrict access to capital.
The uncertainty concerning the United Kingdom’s legal, political and economic relationship with the European
Union after the Transition Period may be a source of instability in the international markets, create significant currency
fluctuations, and/or otherwise adversely affect trading agreements or similar cross-border co-operation arrangements
(whether economic, tax, fiscal, legal, regulatory or otherwise).
These developments, or the perception that any of them could occur, have had, and may continue to have, a
significant adverse effect on global economic conditions and the stability of global financial markets, and could
significantly reduce global market liquidity and limit the ability of key market participants to operate in certain financial
markets. In particular, it could also lead to a period of considerable uncertainty in relation to the United
Kingdom’s financial and banking markets, as well as on the regulatory process in Europe. Asset valuations, currency
exchange rates and credit ratings may also be subject to increased market volatility.
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If the United Kingdom and the European Union are unable to negotiate acceptable trading and customs terms or if
other EU Member States pursue withdrawal, barrier-free access between the United Kingdom and other EU Member States
or among the European Economic Area, or EEA, overall could be diminished or eliminated. The long-term effects of Brexit
will depend on any agreements (or lack thereof) between the United Kingdom and the European Union and, in particular,
any arrangements for the United Kingdom to retain access to EU markets after the Transition Period.
Such a withdrawal from the European Union is unprecedented, and it is unclear how the United Kingdom’s access
to the European single market for goods, capital, services and labor within the European Union, or single market, and the
wider commercial, legal and regulatory environment, will impact our U.K. operations and customers. Our U.K. operations
service customers in the United Kingdom as well as in other countries in the European Economic Area, or EEA, and these
operations could be disrupted by Brexit, particularly if there is a change in the United Kingdom’s relationship to the single
market.
There may continue to be economic uncertainty surrounding the consequences of Brexit which could adversely
impact customer confidence resulting in customers reducing their spending budgets on our solutions, which could
adversely affect our business, revenue, financial condition, results of operations and could adversely affect the market price
of our ADSs.
Exchange rate fluctuations may materially affect our results of operations and financial condition.
Owing to the international scope of our operations, fluctuations in exchange rates, particularly between the pound
sterling and the U.S. dollar, may adversely affect us. Although we are based in the United Kingdom, we source research
and development, manufacturing, consulting and other services from the United States and the European Union and Asia
that are billed in U.S. dollars. Further, potential future revenue may be derived from abroad, particularly from the United
States. As a result, our business and the price of our ADSs may be affected by fluctuations in foreign exchange rates not
only between the pound sterling and the U.S. dollar, but also the euro, which may have a significant impact on our results
of operations and cash flows from period to period. Currently, we do not have any exchange rate hedging arrangements in
place.
Risks Related to Our Dependence on Third Parties
For certain product candidates, we depend, or will depend, on development and commercialization collaborators to
develop and conduct clinical trials with, obtain regulatory approvals for, and if approved, market and sell product
candidates. If such collaborators fail to perform as expected, the potential for us to generate future revenue from such
product candidates would be significantly reduced and our business would be harmed.
For certain products candidates, we depend, or will depend, on our development and commercial collaborators to
develop, conduct clinical trials of, and, if approved, commercialize product candidates.
Under our collaborations with AstraZeneca, Oxurion, and DDF, we are responsible for identifying and optimizing
Bicycle peptides related to collaboration targets and our collaborators are responsible for further development and product
commercialization after we complete the defined research screening and compound optimization. As part of our
collaboration with Cancer Research Technology Limited and CRUK, CRUK’s Centre for Drug Development is sponsoring
and funding a Phase I/IIa clinical trial of our lead product candidate, BT1718, in patients with advanced solid tumors, and
will sponsor and fund a Phase I/IIa study for BT7401. We depend on these collaborators to develop and, where applicable,
commercialize products based on Bicycle peptides, and the success of their efforts directly impacts the milestones and
royalties we will receive. We cannot provide assurance that our collaborators will be successful in or that they will devote
sufficient resources to the development or commercialization of their products. If our current or future collaboration and
commercialization partners do not perform in the manner we expect or fail to fulfill their responsibilities in a timely
manner, or at all, if our agreements with them terminate or if the quality or accuracy of the clinical data they obtain is
compromised, the clinical development, regulatory approval and commercialization efforts related to their and our product
candidates and products could be delayed or terminated and it could become necessary for us to assume the responsibility
at our own expense for the clinical development of such product candidates.
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Our current collaborations and any future collaborations that we enter into are subject to numerous risks,
including:
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collaborators have significant discretion in determining the efforts and resources that they will apply to the
collaborations;
collaborators may not perform their obligations as expected or fail to fulfill their responsibilities in a timely
manner, or at all;
collaborators may not pursue development and commercialization of any product candidates that achieve
regulatory approval or may elect not to continue or renew development or commercialization programs based
on preclinical studies or clinical trial results, changes in the collaborators’ strategic focus or available funding
or external factors, such as an acquisition, that divert resources or create competing priorities;
collaborators may delay preclinical studies or clinical trials, provide insufficient funding for clinical trials,
stop a preclinical study or clinical trial or abandon a product candidate, repeat or conduct new clinical trials or
require a new formulation of a product candidate for clinical testing;
we may not have access to, or may be restricted from disclosing, certain information regarding product
candidates being developed or commercialized under a collaboration and, consequently, may have limited
ability to inform our shareholders about the status of such product candidates;
collaborators could independently develop, or develop with third parties, products that compete directly or
indirectly with our product candidates if the collaborators believe that competitive products are more likely to
be successfully developed or can be commercialized under terms that are more economically attractive than
ours;
The collaborations may not result in product candidates to develop and/or preclinical studies or clinical trials
conducted as part of the collaborations may not be successful;
product candidates developed with collaborators may be viewed by our collaborators as competitive with
their own product candidates or products, which may cause collaborators to stop commercialization of our
product candidates;
a collaborator with marketing and distribution rights to one or more of our product candidates that achieve
regulatory approval may not commit sufficient resources to the marketing and distribution of any such
product candidate; and
collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary
information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or
proprietary information or expose us to potential litigation.
In addition, certain collaboration and commercialization agreements provide our collaborators with rights to
terminate such agreements, which rights may or may not be subject to conditions, and which rights, if exercised, would
adversely affect our product development efforts and could make it difficult for us to attract new collaborators. In that
event, we would likely be required to limit the size and scope of efforts for the development and commercialization of such
product candidates or products; we would likely be required to seek additional financing to fund further development or
identify alternative strategic collaborations; our potential to generate future revenue from royalties and milestone payments
from such product candidates or products would be significantly reduced, delayed or eliminated; and it could have an
adverse effect on our business and future growth prospects. Our rights to recover tangible and intangible assets and
intellectual property rights needed to advance a product candidate or product after termination of a collaboration may be
limited by contract, and we may not be able to advance a program post-termination.
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If conflicts arise with our development and commercialization collaborators or licensors, they may act in their own self-
interest, which may be adverse to the interests of our company.
We may in the future experience disagreements with our development and commercialization collaborators or
licensors. Conflicts may arise in our collaboration and license arrangements with third parties due to one or more of the
following:
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disputes with respect to milestone, royalty and other payments that are believed due under the applicable
agreements;
disagreements with respect to the ownership of intellectual property rights or scope of licenses;
disagreements with respect to the scope of any reporting obligations;
unwillingness on the part of a collaborator to keep us informed regarding the progress of its development and
commercialization activities, or to permit public disclosure of these activities; and
disputes with respect to a collaborator’s or our development or commercialization efforts with respect to our
products and product candidates.
For example, we are involved in ongoing litigation with Pepscan Systems B.V., and its affiliates, or Pepscan,
related to a non-exclusive patent license agreement that our subsidiary, BicycleRD Limited, or BicycleRD, entered into
with Pepscan in 2009. Pursuant to the patent license agreement, BicycleRD licensed rights related to the scaffold used for
Bicycles contained in certain of our product candidates, including our lead product candidate, BT1718, which is currently
in clinical trial sponsored by CRUK, and in THR-149, which has been licensed to Oxurion. The agreement required
BicycleRD to enter into a framework services agreement with Pepscan under which Pepscan would provide certain
Bicycles not produced by BicycleRD. In 2010, BicycleRD entered into such a framework services agreement. In 2015,
BicycleRD terminated the framework services agreement in accordance with its terms. Since 2015, we have ceased using
the scaffolds claimed by Pepscan in our new product candidates and have instead developed proprietary scaffold
technology of our own.
In 2016, Pepscan terminated the patent license agreement. BicycleRD instituted proceedings in the District Court
of The Hague, or the District Court, to contest the right of Pepscan to terminate the patent license agreement. BicycleRD
included a conditional claim for a ruling that the licensed patent relevant to BicycleRD’s activities is invalid. In response,
Pepscan claimed, among other things, that the termination of the framework services agreement and alleged breaches by
BicycleRD of confidentiality obligations constituted grounds for the termination of the patent license agreement. In an
interlocutory judgement delivered in April 2018, the District Court rejected Pepscan’s claim that it was entitled to terminate
the patent license agreement on the basis of a breach of a purported exclusive supply obligation. The District Court
reserved for further proceedings a decision on both the validity of the Pepscan patent and the question of whether
BicycleRD breached its confidentiality obligations.
In July 2018, Pepscan appealed the decision of the District Court and the proceedings before the District Court
were stayed pending a decision in that appeal.
On February 18, 2020, the Court of Appeal of The Hague, or the Court of Appeal, ruled that Pepscan was entitled
to terminate the license agreement and granted a worldwide injunction against BicycleRD exploiting the licensed Pepscan
patents and any related know-how, subject to a civil daily fine of EUR 25,000 in the event of non-compliance. BicycleRD
intends to appeal the decision of the Court of Appeal to the Dutch Supreme Court and is preparing for further proceedings
before the District Court, in particular concerning BicycleRD’s invalidity claim, the claim related to know-how and the
assessment of damages should a proceeding for such an assessment be initiated by Pepscan.
There can be no assurance that BicycleRD will prevail in any future proceedings. While we do not believe the
injunction applies to entities other than BicycleRD, including our collaboration partners, there can be no assurance that
Pepscan will not allege that the injunction applies to other entities.
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In addition, in January 2013, Pepscan filed a notice of opposition in respect of European patent 2 257 624, which
is a foundational patent that is directed to our technology platform. In April 2015, Pepscan filed a notice of opposition in
respect of European patent 2 474 613, which is a divisional patent that is directed to extensions of our technology
platform. As of December 31, 2019, no final decision has been issued by the European Patent Office. If we are unable to
prevail against these challenges, our intellectual property estate may be materially harmed, which would impair our ability
to establish competitive barriers to entry in the form of intellectual property protections.
Conflicts with our development and commercialization collaborators or licensors could materially adversely affect
our business, financial condition or results of operations and future growth prospects.
We rely on third parties, including independent clinical investigators and CROs, to conduct and sponsor some of the
clinical trials of our product candidates. Any failure by a third party to meet its obligations with respect to the clinical
development of our product candidates may delay or impair our ability to obtain regulatory approval for our product
candidates.
We have relied upon and plan to continue to rely upon third parties, including independent clinical investigators,
academic partners, regulatory affairs consultants and third-party CROs, to conduct our preclinical studies and clinical trials,
including in some instances sponsoring such clinical trials, and to engage with regulatory authorities and monitor and
manage data for our ongoing preclinical and clinical programs. For example, CRUK currently sponsors and funds the
Phase I/IIa clinical trial of our lead product candidate, BT1718, in patients with advanced solid tumors. We also utilize
CROs to perform toxicology studies related to our preclinical activities. While we will have agreements governing the
activities of such third parties, we will control only certain aspects of their activities and have limited influence over their
actual performance. Given the breadth of clinical therapeutic areas for which we believe Bicycles may have utility, we
intend to continue to rely on external service providers rather than build internal regulatory expertise.
Any of these third parties may terminate their engagements with us under certain circumstances. We may not be
able to enter into alternative arrangements or do so on commercially reasonable terms. In addition, there is a natural
transition period when a new contract research organization begins work. As a result, delays would likely occur, which
could negatively impact our ability to meet our expected clinical development timelines and harm our business, financial
condition and prospects.
We remain responsible for ensuring that each of our preclinical studies and clinical trials is conducted in
accordance with the applicable protocol and legal, regulatory and scientific standards, and our reliance on these third
parties does not relieve us of our regulatory responsibilities. We and our third-party contractors and CROs are required to
comply with GCP requirements, which are regulations and guidelines enforced by the FDA, the Competent Authorities of
the Member States of the EEA and comparable foreign regulatory authorities for all of our products in clinical
development. Regulatory authorities enforce these GCP requirements through periodic inspections of trial sponsors,
principal investigators and trial sites. If we fail to exercise adequate oversight over any of our academic partners or CROs
or if we or any of our academic partners or CROs do not successfully carry out their contractual duties or obligations, fail
to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to
adhere to our clinical protocols or regulatory requirements, or for any other reasons, the clinical data generated in our
clinical trials may be deemed unreliable and the FDA, the EMA or comparable foreign regulatory authorities may require
us to perform additional clinical trials before approving our marketing applications. We cannot assure you that upon a
regulatory inspection of us, our academic partners or our CROs or other third parties performing services in connection
with our clinical trials, such regulatory authority will determine that any of our clinical trials complies with GCP
regulations. In addition, our clinical trials must be conducted with product produced under applicable CGMP
regulations. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the
regulatory approval process.
Furthermore, the third parties conducting clinical trials on our behalf are not our employees, and except for
remedies available to us under our agreements with such contractors, we cannot control whether or not they devote
sufficient time, skill and resources to our ongoing development programs. These contractors may also have relationships
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with other commercial entities, including our competitors, for whom they may also be conducting clinical trials or other
drug development activities, which could impede their ability to devote appropriate time to our clinical programs. If these
third parties, including clinical investigators, do not successfully carry out their contractual duties, meet expected deadlines
or conduct our clinical trials in accordance with regulatory requirements or our stated protocols, we may not be able to
obtain, or may be delayed in obtaining, marketing approvals for our product candidates. If that occurs, we will not be able
to, or may be delayed in our efforts to, successfully commercialize our product candidates.
In addition, with respect to investigator-sponsored trials that are being or may be conducted, we do not control the
design or conduct of these trials, and it is possible that the FDA or EMA will not view these investigator-sponsored trials as
providing adequate support for future clinical trials or market approval, whether controlled by us or third parties, for any
one or more reasons, including elements of the design or execution of the trials or safety concerns or other trial results. We
expect that such arrangements will provide us certain information rights with respect to the investigator-sponsored trials,
including the ability to obtain a license to obtain access to use and reference the data, including for our own regulatory
submissions, resulting from the investigator-sponsored trials. However, we do not have control over the timing and
reporting of the data from investigator-sponsored trials, nor do we own the data from the investigator-sponsored trials. If
we are unable to confirm or replicate the results from the investigator-sponsored trials or if negative results are obtained,
we would likely be further delayed or prevented from advancing further clinical development. Further, if investigators or
institutions breach their obligations with respect to the clinical development of our product candidates, or if the data proves
to be inadequate compared to the firsthand knowledge we might have gained had the investigator-sponsored trials been
sponsored and conducted by us, then our ability to design and conduct any future clinical trials ourselves may be adversely
affected. Additionally, the FDA or EMA may disagree with the sufficiency of our right of reference to the preclinical,
manufacturing or clinical data generated by these investigator-sponsored trials, or our interpretation of preclinical,
manufacturing or clinical data from these investigator-sponsored trials. If so, the FDA or EMA may require us to obtain
and submit additional preclinical, manufacturing, or clinical data.
We intend to rely on third parties to manufacture product candidates, which increases the risk that we will not have
sufficient quantities of such product candidates or products or such quantities at an acceptable cost, which could delay,
prevent or impair our development or commercialization efforts.
We do not own or operate manufacturing facilities for the production of clinical or commercial supplies of the
product candidates that we are developing or evaluating in our development programs. We have limited personnel with
experience in drug manufacturing and lack the resources and the capabilities to manufacture any of our product candidates
on a clinical or commercial scale. We rely on third parties for supply of our product candidates, and our strategy is to
outsource all manufacturing of our product candidates and products to third parties.
In order to conduct clinical trials of product candidates, we will need to have them manufactured in potentially
large quantities. Our third-party manufacturers may be unable to successfully increase the manufacturing capacity for any
of our product candidates in a timely or cost-effective manner, or at all. In addition, quality issues may arise during scale-
up activities and at any other time. For example, ongoing data on the stability of our product candidates may shorten the
expiry of our product candidates and lead to clinical trial material supply shortages, and potentially clinical trial delays. If
these third-party manufacturers are unable to successfully scale up the manufacture of our product candidates in sufficient
quality and quantity, the development, testing and clinical trials of that product candidate may be delayed or infeasible, and
regulatory approval or commercial launch of that product candidate may be delayed or not obtained, which could
significantly harm our business.
Our use of new third-party manufacturers increases the risk of delays in production or insufficient supplies of our
product candidates as we transfer our manufacturing technology to these manufacturers and as they gain experience
manufacturing our product candidates. Even after a third-party manufacturer has gained significant experience in
manufacturing our product candidates or even if we believe we have succeeded in optimizing the manufacturing process,
there can be no assurance that such manufacturer will produce sufficient quantities of our product candidates in a timely
manner or continuously over time, or at all.
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We may be delayed if we need to change the manufacturing process used by a third party. Further, if we change
an approved manufacturing process, then we may be delayed if the FDA or a comparable foreign authority needs to review
the new manufacturing process before it may be used.
We operate an outsourced model for the manufacture of our product candidates, and contract with GMP licensed
pharmaceutical contract development and manufacturing organizations. While we have engaged several third-party
vendors to provide clinical and non-clinical supplies and fill-finish services, we do not currently have any agreements with
third-party manufacturers for long-term commercial supplies. In the future, we may be unable to enter into agreements
with third-party manufacturers for commercial supplies of any product candidate that we develop, or may be unable to do
so on acceptable terms. Even if we are able to establish and maintain arrangements with third-party manufacturers,
reliance on third-party manufacturers entails risks, including:
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reliance on third-parties for manufacturing process development, regulatory compliance and quality
assurance;
limitations on supply availability resulting from capacity and scheduling constraints of third-parties;
the possible breach of manufacturing agreements by third-parties because of factors beyond our control; and
the possible termination or non-renewal of the manufacturing agreements by the third-party, at a time that is
costly or inconvenient to us.
Third-party manufacturers may not be able to comply with cGMP requirements or similar regulatory requirements
outside the United States. Our failure, or the failure of our third-party manufacturers, to comply with applicable
requirements could result in sanctions being imposed on us, including fines, injunctions, civil penalties, delays, suspension
or withdrawal of approvals, license revocation, seizures or recalls of product candidates or products, operating restrictions
and/or criminal prosecutions, any of which could significantly and adversely affect supplies of our product candidates. In
addition, some of the product candidates we intend to develop, including BT1718, use toxins or other substances that can
be produced only in specialized facilities with specific authorizations and permits, and there can be no guarantee that we or
our manufacturers can maintain such authorizations and permits. These specialized requirements may also limit the
number of potential manufacturers that we can engage to produce our product candidates, and impair any efforts to
transition to replacement manufacturers.
Our future product candidates and any products that we may develop may compete with other product candidates
and products for access to manufacturing facilities. There are a limited number of manufacturers that operate under cGMP
requirements that might be capable of manufacturing for us.
If the third parties that we engage to supply any materials or manufacture product for our preclinical tests and
clinical trials should cease to continue to do so for any reason, we likely would experience delays in advancing these tests
and trials while we identify and qualify replacement suppliers or manufacturers and we may be unable to obtain
replacement supplies on terms that are favorable to us. In addition, if we are not able to obtain adequate supplies of our
product candidates or the substances used to manufacture them, it will be more difficult for us to develop our product
candidates and compete effectively.
Our current and anticipated future dependence upon others for the manufacture of our product candidates may
adversely affect our future profit margins and our ability to develop product candidates and commercialize any products
that receive marketing approval on a timely and competitive basis.
Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will
discover them or that our trade secrets will be misappropriated or disclosed.
Because we rely on third parties to manufacture our product candidates, and because we collaborate with various
organizations and academic institutions on the development of our product candidates, we must, at times, share
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trade secrets with them. We seek to protect our proprietary technology in part by entering into confidentiality agreements
and, if applicable, material transfer agreements, collaborative research agreements, consulting agreements or other similar
agreements with our collaborators, advisors, employees and consultants prior to beginning research or disclosing
proprietary information. These agreements typically limit the rights of the third parties to use or disclose our confidential
information, such as trade secrets.
Despite the contractual provisions employed when working with third parties, the need to share trade secrets and
other confidential information increases the risk that such trade secrets become known by our competitors, are
inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. Given
that our proprietary position is based, in part, on our know-how and trade secrets, a competitor’s discovery of our trade
secrets or other unauthorized use or disclosure would impair our competitive position and may have a material adverse
effect on our business.
In addition, these agreements typically restrict the ability of our collaborators, advisors, employees and consultants
to publish data potentially relating to our trade secrets. Our academic collaborators typically have rights to publish data,
provided that we are notified in advance and may delay publication for a specified time in order to secure our intellectual
property rights arising from the collaboration. In other cases, publication rights are controlled exclusively by us, although
in some cases we may share these rights with other parties. Despite our efforts to protect our trade secrets, our competitors
may discover our trade secrets, either through breach of these agreements, independent development or publication of
information including our trade secrets in cases where we do not have proprietary or otherwise protected rights at the time
of publication. A competitor’s discovery of our trade secrets would impair our competitive position and have an adverse
impact on our business.
Risks Related to Our Intellectual Property
If we are unable to obtain and maintain patent and other intellectual property protection for our products and product
candidates, or if the scope of the patent and other intellectual property protection obtained is not sufficiently broad, our
competitors could develop and commercialize products similar or identical to ours, and our ability to successfully
commercialize our products and product candidates may be adversely affected.
Our ability to compete effectively will depend, in part, on our ability to maintain the proprietary nature of our
technology and manufacturing processes. We rely on research, manufacturing and other know-how, patents, trade secrets,
license agreements and contractual provisions to establish our intellectual property rights and protect our products and
product candidates. These legal means, however, afford only limited protection and may not adequately protect our
rights. As of December 31, 2019, our intellectual property portfolio includes four patent families directed to novel
scaffolds, 16 patent families directed to our platform technology, 69 patent families directed to bicyclic peptides and related
conjugates, and seven patent families directed to clinical indications and other properties of development assets.
In certain situations and as considered appropriate, we have sought, and we intend to continue to seek to protect
our proprietary position by filing patent applications in the United States and, in at least some cases, one or more countries
outside the United States relating to current and future products and product candidates that are important to our
business. However, we cannot predict whether the patent applications currently being pursued will issue as patents, or
whether the claims of any resulting patents will provide us with a competitive advantage or whether we will be able to
successfully pursue patent applications in the future relating to our current or future products and product
candidates. Moreover, the patent application and approval process is expensive and time-consuming. We may not be able
to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. Furthermore,
we, or any future partners, collaborators, or licensees, may fail to identify patentable aspects of inventions made in the
course of development and commercialization activities before it is too late to obtain patent protection on them. Therefore,
we may miss potential opportunities to seek additional patent protection. It is possible that defects of form in the
preparation or filing of patent applications may exist, or may arise in the future, for example with respect to proper priority
claims, inventorship, claim scope, or requests for patent term adjustments. If we fail to establish, maintain or protect such
patents and other intellectual property rights, such rights may be reduced or eliminated. If there are material
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defects in the form, preparation, prosecution or enforcement of our patents or patent applications, such patents may be
invalid and/or unenforceable, and such applications may never result in valid, enforceable patents.
Even if they are unchallenged, our patents and patent applications, if issued, may not provide us with any
meaningful protection or prevent competitors from designing around our patent claims by developing similar or alternative
technologies or therapeutics in a non-infringing manner. For example, a third party may develop a competitive therapy that
provides benefits similar to one or more of our product candidates but that falls outside the scope of our patent
protection. If the patent protection provided by the patents and patent applications we hold or pursue with respect to our
product candidates is not sufficiently broad to impede such competition, our ability to successfully commercialize our
product candidates could be negatively affected.
Other parties, many of whom have substantially greater resources and have made significant investments in
competing technologies, have developed or may develop technologies that may be related or competitive with our
approach, and may have filed or may file patent applications and may have been issued or may be issued patents with
claims that overlap or conflict with our patent applications, either by claiming the same compositions, formulations or
methods or by claiming subject matter that could dominate our patent position. In addition, the laws of foreign countries
may not protect our rights to the same extent as the laws of the United States. As a result, any patents we may obtain in the
future may not provide us with adequate and continuing patent protection sufficient to exclude others from
commercializing products similar to our products and product candidates.
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain. No consistent
policy regarding the breadth of claims allowed in biotechnology and pharmaceutical patents has emerged to date in the
United States or in many foreign jurisdictions. In addition, the determination of patent rights with respect to
pharmaceutical compounds commonly involves complex legal and factual questions, which has in recent years been the
subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our patent
rights are highly uncertain. Our competitors may also seek approval to market their own products similar to or otherwise
competitive with our products. Alternatively, our competitors may seek to market generic versions of any approved
products by submitting ANDAs to the FDA in which they claim that our patents are invalid, unenforceable or not
infringed. In these circumstances, we may need to defend or assert our patents, or both, including by filing lawsuits
alleging patent infringement. In any of these types of proceedings, a court or other agency with jurisdiction may find our
patents invalid or unenforceable, or that our competitors are competing in a non-infringing manner. Thus, even if we have
valid and enforceable patents, these patents still may not provide protection against competing products or processes
sufficient to achieve our business objectives.
In the future, one or more of our products and product candidates may be in-licensed from third
parties. Accordingly, in some cases, the availability and scope of potential patent protection is limited based on prior
decisions by our licensors or the inventors, such as decisions on when to file patent applications or whether to file patent
applications at all. Our failure to obtain, maintain, enforce or defend such intellectual property rights, for any reason, could
allow third parties, in particular, other established and better financed competitors having established development,
manufacturing and distribution capabilities, to make competing products or impact our ability to develop, manufacture and
market our products and product candidates, even if approved, on a commercially viable basis, if at all, which could have a
material adverse effect on our business.
In addition to patent protection, we expect to rely heavily on trade secrets, know-how and other unpatented
technology, which are difficult to protect. Although we seek such protection in part by entering into confidentiality
agreements with our vendors, employees, consultants and others who may have access to proprietary information, we
cannot be certain that these agreements will not be breached, adequate remedies for any breach would be available, or our
trade secrets, know-how and other unpatented proprietary technology will not otherwise become known to or be
independently developed by our competitors. If we are unsuccessful in protecting our intellectual property rights, sales of
our products may suffer and our ability to generate revenue could be severely impacted.
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Issued patents covering our products and product candidates could be found invalid or unenforceable if challenged in
court or in administrative proceedings. We may not be able to protect our trade secrets in court.
If we initiate legal proceedings against a third-party to enforce a patent covering one of our products or product
candidates, should such a patent issue, the defendant could counterclaim that the patent covering our product or product
candidate is invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity
or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several
statutory requirements, including lack of novelty, obviousness, written description or non-enablement. Grounds for an
unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld
information material to patentability from the USPTO, or made a misleading statement, during prosecution. Third parties
also may raise similar claims before administrative bodies in the United States or abroad, even outside the context of
litigation. Such mechanisms include re-examination, post grant review, inter partes review and equivalent proceedings in
foreign jurisdictions. An adverse determination in any of the foregoing proceedings could result in the revocation or
cancellation of, or amendment to, our patents in such a way that they no longer cover our products or product
candidates. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the
validity question, for example, we cannot be certain that there is no invalidating prior art, of which the patent examiner and
we were unaware during prosecution. If a defendant or third party were to prevail on a legal assertion of invalidity or
unenforceability, we could lose at least part, and perhaps all, of the patent protection on one or more of our products and
product candidates. Such a loss of patent protection could have a material adverse impact on our business.
For example, in January 2013, Pepscan filed a notice of opposition in respect of European patent 2 257 624, which
is a foundational patent that is directed to our technology platform. In April 2015, Pepscan filed a notice of opposition in
respect of European patent 2 474 613, which is a divisional patent that is directed to extensions of our technology
platform. As of December 31, 2019, no final decision has been issued by the European Patent Office. If we are unable to
prevail against these challenges, our intellectual property estate may be materially harmed, which would impair our ability
to establish competitive barriers to entry in the form of intellectual property protections.
In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements
to protect proprietary know-how that is not patentable or that we elect not to patent, processes for which patents are
difficult to enforce and any other elements of our product candidate discovery and development processes that involve
proprietary know-how, information or technology that is not covered by patents. However, trade secrets can be difficult to
protect and some courts inside and outside the United States are less willing or unwilling to protect trade secrets. We seek
to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our
employees, consultants, scientific advisors, and contractors. We cannot guarantee that we have entered into such
agreements with each party that may have or have had access to our trade secrets or proprietary technology and
processes. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical
security of our premises and physical and electronic security of our information technology systems. While we have
confidence in these individuals, organizations and systems, agreements or security measures may be breached, and we may
not have adequate remedies for any breach.
In addition, our trade secrets may otherwise become known or be independently discovered by
competitors. Competitors and other third parties could purchase our products and product candidates and attempt to
replicate some or all of the competitive advantages we derive from our development efforts, willfully infringe,
misappropriate or otherwise violate our intellectual property rights, design around our protected technology or develop
their own competitive technologies that fall outside of our intellectual property rights. If any of our trade secrets were to be
lawfully obtained or independently developed by a competitor or other third party, we would have no right to prevent them,
or those to whom they communicate it, from using that technology or information to compete with us. If our trade secrets
are not adequately protected or sufficient to provide an advantage over our competitors, our competitive position could be
adversely affected, as could our business. Additionally, if the steps taken to maintain our trade secrets are deemed
inadequate, we may have insufficient recourse against third parties for misappropriating our trade secrets.
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We may be subject to claims challenging the inventorship or ownership of the patents and other intellectual property.
We may be subject to claims that former employees, collaborators or other third parties have an ownership interest
in the patents and intellectual property that we own or that we may own or license in the future. While it is our policy to
require our employees and contractors who may be involved in the development of intellectual property to execute
agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each
party who in fact develops intellectual property that we regard as our own or such assignments may not be self-executing or
may be breached. We could be subject to ownership disputes arising, for example, from conflicting obligations of
employees, consultants or others who are involved in developing our products or product candidates. Litigation may be
necessary to defend against any claims challenging inventorship or ownership. If we or fail in defending any such claims,
we may have to pay monetary damages and may lose valuable intellectual property rights, such as exclusive ownership of,
or right to use, intellectual property, which could adversely impact our business, results of operations and financial
condition.
Obtaining and maintaining patent protection depends on compliance with various procedural, document submission,
fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be
reduced or eliminated for non-compliance with these requirements.
Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and
applications are required to be paid to the USPTO and various governmental patent agencies outside of the United States in
several stages over the lifetime of the patents and applications. The USPTO and various non-U.S. governmental patent
agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during
the patent application process and after a patent has issued. There are situations in which non-compliance can result in
abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant
jurisdiction. The terms of one or more licenses that we enter into the future may not provide us with the ability to maintain
or prosecute patents in the portfolio, and must therefore rely on third parties to do so.
If we do not obtain patent term extension and data exclusivity for our products and product candidates, our business
may be materially harmed.
Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration
of a patent is generally 20 years from its earliest U.S. non-provisional filing date. Various extensions may be available, but
the life of a patent, and the protection it affords, is limited. Even if patents covering our product candidates are obtained,
once the patent life has expired for a product candidate, we may be open to competition from competitive products. Given
the amount of time required for the development, testing and regulatory review of new product candidates, patents
protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our patent
portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to
ours.
In the future, if we obtain an issued patent covering one of our present or future product candidates, depending
upon the timing, duration and specifics of any FDA marketing approval of such product candidates, such patent may be
eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, or
Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent extension term of up to five years as
compensation for patent term lost during the FDA regulatory review process. A patent term extension cannot extend the
remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent may be extended
and only those claims covering the approved drug, a method for using it or a method for manufacturing it may be
extended. A patent may only be extended once and only based on a single approved product. However, we may not be
granted an extension because of, for example, failure to obtain a granted patent before approval of a product candidate,
failure to exercise due diligence during the testing phase or regulatory review process, failure to apply within applicable
deadlines, failure to apply prior to expiration of relevant patents or otherwise our failure to satisfy applicable
requirements. A patent licensed to us by a third party may not be available for patent term extension. Moreover, the
applicable time period or the scope of patent protection afforded could be less than we request. If we are unable to obtain
patent term extension or the term of any such extension is less than we request, our competitors may obtain approval of
competing products following our patent expiration, and our revenue could be reduced, possibly materially.
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Changes in patent law in the United States and other jurisdictions could diminish the value of patents in general,
thereby impairing our ability to protect our products and product candidates.
Changes in either the patent laws or the interpretation of the patent laws in the United States or other jurisdictions
could increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or
defense of issued patents. On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was
signed into law. When implemented, the Leahy-Smith Act included several significant changes to U.S. patent law that
impacted how patent rights could be prosecuted, enforced and defended. In particular, the Leahy-Smith Act also included
provisions that switched the United States from a “first-to-invent” system to a “first-to-file” system, allowed third-party
submission of prior art to the USPTO during patent prosecution and set forth additional procedures to attack the validity of
a patent by the USPTO administered post grant proceedings. Under a first-to-file system, assuming the other requirements
for patentability are met, the first inventor to file a patent application generally will be entitled to the patent on an invention
regardless of whether another inventor had made the invention earlier. The USPTO developed new regulations and
procedures governing the administration of the Leahy-Smith Act, and many of the substantive changes to patent law
associated with the Leahy-Smith Act, and in particular, the first to file provisions, only became effective on March 16,
2013. It remains unclear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However,
the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our
patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect
on our business.
In addition, the patent positions of companies in the development and commercialization of biologics and
pharmaceuticals are particularly uncertain. Recent rulings from the U.S. Court of Appeals for the Federal Circuit and the
U.S. Supreme Court have narrowed the scope of patent protection available in certain circumstances and weakened the
rights of patent owners in certain situations. This combination of events has created uncertainty with respect to the validity
and enforceability of patents, once obtained. Depending on future actions by the U.S. Congress, the federal courts, and the
USPTO, the laws and regulations governing patents could change in unpredictable ways that could have a material adverse
effect on our existing patent portfolio and our ability to protect and enforce our intellectual property in the future.
We cannot provide assurance that our efforts to seek patent protection for one or more of our products and product
candidates will not be negatively impacted by the decisions described above, rulings in other cases or changes in guidance
or procedures issued by the USPTO. We cannot fully predict what impact courts’ decisions in historical and future cases
may have on the ability of life science companies to obtain or enforce patents relating to their products in the future. These
decisions, the guidance issued by the USPTO and rulings in other cases or changes in USPTO guidance or procedures
could have a material adverse effect on our existing patent rights and our ability to protect and enforce our intellectual
property in the future.
We may not be able to protect our intellectual property rights throughout the world.
Filing, prosecuting, maintaining, defending and enforcing patents on products and product candidates in all
countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries
outside the United States could be less extensive than those in the United States. The requirements for patentability may
differ in certain countries, particularly in developing countries; thus, even in countries where we do pursue patent
protection, there can be no assurance that any patents will issue with claims that cover our products. There can be no
assurance that we will obtain or maintain patent rights in or outside the United States under any future license
agreements. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as
federal and state laws in the United States. Consequently, we may not be able to prevent third parties from practicing our
inventions in all countries outside the United States, even in jurisdictions where we pursue patent protection, or from
selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors
may use our technologies in jurisdictions where we have not pursued and obtained patent protection to develop their own
products and, further, may export otherwise infringing products to territories where we have patent protection, but
enforcement is not as strong as that in the United States. These products may compete with our products and product
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candidates and our patents or other intellectual property rights may not be effective or sufficient to prevent them from
competing.
Many companies have encountered significant problems in protecting and defending intellectual property rights in
foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the
enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to biotechnology
and pharmaceutical products, which could make it difficult for us to stop the infringement of our patents or marketing of
competing products in violation of our proprietary rights generally. For example, many foreign countries have compulsory
licensing laws under which a patent owner must grant licenses to third parties. Proceedings to enforce our patent rights,
even if obtained, in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other
aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent
applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any
lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. While
we intend to protect our intellectual property rights in major markets for our products, we cannot ensure that we will be
able to initiate or maintain similar efforts in all jurisdictions in which we may wish to market our products. Accordingly,
our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant
commercial advantage from the intellectual property that we develop.
If we are sued for infringing intellectual property rights of third parties, such litigation could be costly and time
consuming and could prevent or delay us from developing or commercializing our product candidates.
Our commercial success depends, in part, on our ability to develop, manufacture, market and sell our product
candidates without infringing the intellectual property and other proprietary rights of third parties. Third parties may have
U.S. and non-U.S. issued patents and pending patent applications relating to compounds, methods of manufacturing
compounds and/or methods of use for the treatment of the disease indications for which we are developing our product
candidates. If any third-party patents or patent applications are found to cover our product candidates or their methods of
use or manufacture, we and our collaborators or sublicensees may not be free to manufacture or market our product
candidates as planned without obtaining a license, which may not be available on commercially reasonable terms, or at
all. We may also be required to indemnify our collaborators or sublicensees in such an event.
For example, BicycleRD is involved in ongoing litigation with Pepscan in relation to a patent license agreement,
pursuant to which BicycleRD licensed rights related to the scaffold used for Bicycles contained in our lead product
candidate, BT1718, which is currently in clinical trial sponsored by CRUK, and in THR-149, which has been licensed
to Oxurion. While we intend to continue to vigorously defend our rights in this proceeding, there can be no assurance that
we will prevail. If the outcome of these proceedings results in our inability to use the scaffold contained in certain of our
product candidates, our ability to commercialize the affected product candidates, including our lead product candidate
BT1718 would be impaired, which could have a material adverse effect on our business and operating results.
There is a substantial amount of intellectual property litigation in the biotechnology and pharmaceutical industries,
and we may become party to, or threatened with, litigation or other adversarial proceedings regarding intellectual property
rights with respect to our products candidates, including interference and post-grant proceedings before the USPTO. There
may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or
methods for treatment related to the composition, use or manufacture of our product candidates. We cannot guarantee that
any of our patent searches or analyses including, but not limited to, the identification of relevant patents, the scope of patent
claims or the expiration of relevant patents are complete or thorough, nor can we be certain that we have identified each
and every patent and pending application in the United States and abroad that is relevant to or necessary for the
commercialization of our product candidates in any jurisdiction. Because patent applications can take many years to issue,
there may be currently pending patent applications which may later result in issued patents that our product candidates may
be accused of infringing. In addition, third parties may obtain patents in the future and claim that use of our technologies
infringes upon these patents. Accordingly, third parties may assert infringement claims against us based intellectual
property rights that exist now or arise in the future. The outcome of intellectual property litigation is subject to
uncertainties that cannot be adequately quantified in advance. The pharmaceutical and biotechnology industries have
produced a significant number of patents, and it may not always
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be clear to industry participants, including us, which patents cover various types of products or methods of use or
manufacture. The scope of protection afforded by a patent is subject to interpretation by the courts, and the interpretation is
not always uniform. If we were sued for patent infringement, we would need to demonstrate that our product candidates,
products or methods either do not infringe the patent claims of the relevant patent or that the patent claims are invalid or
unenforceable, and we may not be able to do this. Proving invalidity is difficult. For example, in the United States,
proving invalidity requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by
issued patents. Even if we are successful in these proceedings, we may incur substantial costs and the time and attention of
our management and scientific personnel could be diverted in pursuing these proceedings, which could significantly harm
our business and operating results. In addition, we may not have sufficient resources to bring these actions to a successful
conclusion.
If we are found to infringe a third party’s intellectual property rights, we could be forced, including by court order,
to cease developing, manufacturing or commercializing the infringing product candidate or product. Alternatively, we may
be required to obtain a license from such third party in order to use the infringing technology and continue developing,
manufacturing or marketing the infringing product candidate or product. However, we may not be able to obtain any
required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-
exclusive, thereby giving our competitors access to the same technologies licensed to us; alternatively or additionally it
could include terms that impede or destroy our ability to compete successfully in the commercial marketplace. In addition,
we could be found liable for monetary damages, including treble damages and attorneys’ fees if we are found to have
willfully infringed a patent. A finding of infringement could prevent us from commercializing our product candidates or
force us to cease some of our business operations, which could harm our business. Claims that we have misappropriated
the confidential information or trade secrets of third parties could have a similar negative impact on our business.
We may be subject to claims by third parties asserting that our employees or we have misappropriated their intellectual
property, or claiming ownership of what we regard as our own intellectual property.
Many of our current and former employees, including our senior management, were previously employed at
universities or at other biotechnology or pharmaceutical companies, including some which may be competitors or potential
competitors. Some of these employees may be subject to proprietary rights, non-disclosure and non-competition
agreements, or similar agreements, in connection with such previous employment. Although we try to ensure that our
employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims
that we or these employees have used or disclosed intellectual property, including trade secrets or other proprietary
information, of any such third party. Litigation may be necessary to defend against such claims. For example, in the
ongoing litigation with Pepscan, Pepscan claimed that BicycleRD had breached certain confidentiality obligations, which
was alleged to constitute sufficient grounds for the termination of its patent license agreement with Pepscan. If we fail in
defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or
personnel or sustain damages. Such intellectual property rights could be awarded to a third party, and we could be required
to obtain a license from such third party to commercialize our technology or products. Such a license may not be available
on commercially reasonable terms or at all. Even if we are successful in defending against such claims, litigation could
result in substantial costs and be a distraction to management.
In addition, while we typically require our employees, consultants and contractors who may be involved in the
development of intellectual property to execute agreements assigning such intellectual property to us, we may be
unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as
our own, which may result in claims by or against us related to the ownership of such intellectual property. If we fail in
prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual
property rights. Even if we are successful in prosecuting or defending against such claims, litigation could result in
substantial costs and be a distraction to our senior management and scientific personnel.
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We may become involved in lawsuits to protect or enforce our patents and other intellectual property rights, which
could be expensive, time-consuming and unsuccessful.
Competitors may infringe our patents, trademarks, copyrights or other intellectual property. To counter
infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time
consuming and divert the time and attention of our management and scientific personnel. In addition, our patents may
become, involved in inventorship, priority, or validity disputes. To counter or defend against such claims can be expensive
and time-consuming, and our adversaries may have the ability to dedicate substantially greater resources to prosecuting
these legal actions than we can. Any claims we assert against perceived infringers could provoke these parties to assert
counterclaims against us alleging that we infringe their patents, in addition to counterclaims asserting that our patents are
invalid or unenforceable, or both.
In an infringement proceeding, a court may decide that a patent is invalid or unenforceable, or may refuse to stop
the other party from using the technology at issue on the grounds that our patents do not cover the technology in
question. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or
misappropriating intellectual property rights we own or control. An adverse result in any litigation proceeding could put
one or more of our owned or in-licensed patents at risk of being invalidated or interpreted narrowly. Further, because of the
substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our
confidential information could be compromised by disclosure during this type of litigation.
Even if resolved in our favor, the court may decide not to grant an injunction against further infringing activity and
instead award only monetary damages, which may or may not be an adequate remedy. Litigation or other legal proceedings
relating to intellectual property claims may cause us to incur significant expenses and could distract our personnel from
their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions, or other
interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could
have a substantial adverse effect on the price of our ADSs. Such litigation or proceedings could substantially increase our
operating losses and reduce the resources available for development activities or any future sales, marketing, or distribution
activities.
We may not have sufficient financial or other resources to conduct such litigation or proceedings
adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively
than we can because of their greater financial resources and more mature and developed intellectual property
portfolios. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have
a material adverse effect on our ability to compete in the marketplace.
If we fail to comply with our obligations under any future intellectual property licenses with third parties, we could lose
license rights that are important to our business.
In connection with our efforts to build our product candidate pipeline, we may enter into license agreements in the
future. We expect that such license agreements will impose, various diligence, milestone payment, royalty, insurance and
other obligations on us. If we fail to comply with our obligations under these licenses, our licensors may have the right to
terminate these license agreements, in which event we might not be able to market any product that is covered by these
agreements, or our licensors may convert the license to a non-exclusive license, which could negatively impact the value of
the product candidate being developed under the license agreement. Termination of these license agreements or reduction
or elimination of our licensed rights may also result in our having to negotiate new or reinstated licenses with less favorable
terms.
If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in
our marks of interest and our business may be adversely affected.
Our trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to
be infringing on other marks. We rely on both registration and common law protection for our trademarks. We may not be
able to protect our rights to these trademarks and trade names or may be forced to stop using these names, which we need
for name recognition by potential partners or customers in our markets of interest. During trademark
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registration proceedings, we may receive rejections. Although we would be given an opportunity to respond to those
rejections, we may be unable to overcome such rejections. In addition, in the USPTO and in comparable agencies in many
foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel
registered trademarks. Opposition or cancellation proceedings may be filed against our trademarks, and our trademarks
may not survive such proceedings. If we are unable to establish name recognition based on our trademarks and trade
names, we may not be able to compete effectively and our business may be adversely affected.
Risks Related to Employee Matters and Managing Growth
We only have a limited number of employees to manage and operate our business.
As of December 31, 2019, we had 72 full-time or part-time employees. Our focus on the development of our
product candidates requires us to optimize cash utilization and to manage and operate our business in a highly efficient
manner. We cannot provide assurance that we will be able to hire or retain adequate staffing levels to develop our product
candidates or run our operations or to accomplish all of the objectives that we otherwise would seek to accomplish.
Cyber-attacks or other failures in telecommunications or information technology systems could result in information
theft, data corruption and significant disruption of our business operations.
We utilize information technology, or IT, systems and networks to process, transmit and store electronic
information in connection with our business activities. As use of digital technologies has increased, cyber incidents,
including deliberate attacks and attempts to gain unauthorized access to computer systems and networks, have increased in
frequency and sophistication. These threats pose a risk to the security of our systems and networks, the confidentiality and
the availability and integrity of our data. We have been the target of cyber-attacks in the past. For example, we were
recently targeted in a phishing incident, which included email accounts being accessed by unauthorized third parties.
Promptly after discovery, we performed third-party investigations and as there was no evidence of access or acquisition of
any personal information as a result of the incident, we believe that no further action was required under U.K, E.U. (GDPR)
or U.S. federal or state law. There was no material impact to our business or financial condition. While we believe we
responded appropriately, including implementing remedial measures to stop the cyber-attacks and with the goal of
preventing similar ones in the future, there can be no assurance that we will be successful in these remedial and
preventative measures or successfully mitigating the effects of future cyber-attacks. Similarly, there can be no assurance
that our collaborators, CROs, third-party logistics providers, distributors and other contractors and consultants will be
successful in protecting our clinical and other data that is stored on their systems. Any cyber-attack or destruction or loss
of data could have a material adverse effect on our business and prospects. In addition, we may suffer reputational harm or
face litigation or adverse regulatory action as a result of cyber-attacks or other data security breaches and may incur
significant additional expense to respond appropriately to such breaches and to implement further data protection measures.
We are aware that some public companies have recently received Civil Investigative Demands from the Federal Trade
Commission, or FTC, requesting information and documents following disclosures of privacy or security incidents in SEC
filings. The FTC has taken the position that inadequately disclosing privacy and security incidents in SEC filings may be a
deceptive business practice, and the FTC has relied on SEC filings as a launching pad for incident investigations even
where the filings were not inadequate. We cannot be certain that the FTC will consider our disclosure adequate or that the
FTC will not rely on our disclosure to initiate an incident investigation.
Our future success depends on our ability to retain key employees, consultants and advisors and to attract, retain and
motivate qualified personnel.
We are highly dependent on principal members of our executive team and key employees, the loss of whose
services may adversely impact the achievement of our objectives. While we have entered into employment agreements
with each of our executive officers, any of them could leave our employment at any time. We do not maintain “key
person” insurance policies on the lives of these individuals or the lives of any of our other employees. The loss of the
services of one or more of our current employees might impede the achievement of our research, development and
commercialization objectives. Furthermore, replacing executive officers or other key employees may be difficult and
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may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills
and experience required to develop, gain marketing approval of and commercialize products successfully.
Recruiting and retaining other qualified employees, consultants and advisors for our business, including scientific
and technical personnel, will also be critical to our success. There is currently a shortage of skilled executives in our
industry, which is likely to continue. As a result, competition for skilled personnel is intense and the turnover rate can be
high. We may not be able to attract and retain personnel on acceptable terms given the competition among numerous
pharmaceutical and biotechnology companies for individuals with similar skill sets. In addition, failure to succeed in
preclinical or clinical trials may make it more challenging to recruit and retain qualified personnel.
In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in
formulating our research and development and commercialization strategy. Our consultants and advisors may be employed
by other entities and may have commitments under consulting or advisory contracts with those entities that may limit their
availability to us. If we are unable to continue to attract and retain highly qualified personnel, our ability to develop and
commercialize our product candidates will be limited.
The inability to recruit or the loss of the services of any executive, key employee, consultant or advisor may
impede the progress of our research, development and commercialization objectives.
Our employees, independent contractors, consultants, collaborators and contract research organizations may engage
in misconduct or other improper activities, including non-compliance with regulatory standards and requirements,
which could cause significant liability for us and harm our reputation.
We are exposed to the risk that our employees, independent contractors, consultants, collaborators and contract
research organizations may engage in fraudulent conduct or other illegal activity. Misconduct by those parties could
include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to us that violates: (1) FDA
regulations or similar regulations of comparable non-U.S. regulatory authorities, including those laws requiring the
reporting of true, complete and accurate information to such authorities, (2) manufacturing standards, (3) federal and state
healthcare fraud and abuse laws and regulations and similar laws and regulations established and enforced by comparable
non-U.S. regulatory authorities, and (4) laws that require the reporting of financial information or data accurately. In
particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and
regulations intended to prevent fraud, misconduct, kickbacks, self-dealing, bribery and other abusive practices. These laws
and regulations restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission,
customer incentive programs and other business arrangements. Employee or collaborator misconduct could also involve
the improper use of, including trading on, information obtained in the course of clinical trials, which could result in
regulatory sanctions and serious harm to our reputation. In May 2019, we adopted a code of conduct and business ethics,
but it is not always possible to identify and deter misconduct, and the precautions we take to detect and prevent this activity
may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental
investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws, standards or
regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our
rights, those actions could have a significant impact on our business and results of operations, including the imposition of
significant civil, criminal and administrative penalties, damages, monetary fines, possible exclusion from participation in
Medicare, Medicaid and other federal healthcare programs, additional reporting requirements and/or oversight if we
become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these
laws, imprisonment, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our
operations, any of which could have a material adverse effect on our ability to operate our business and our results of
operations.
We expect to expand our organization, and as a result, we may encounter difficulties in managing our growth, which
could disrupt our operations.
We expect to experience significant growth in the number of our employees and the scope of our operations,
particularly in the areas of drug manufacturing, regulatory affairs and sales, marketing and distribution, as well as to
support our public company operations. To manage these growth activities, we must continue to implement and improve
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our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional
qualified personnel. Our management may need to devote a significant amount of its attention to managing these growth
activities. Moreover, our expected growth could require us to relocate to geographic areas beyond those where we have
been historically located. For example, we maintain office and laboratory space in Cambridge, U.K. and in Lexington,
Massachusetts, at which many of our finance, management and administrative personnel work. Due to our limited
financial resources and the limited experience of our management team in managing a company with such anticipated
growth, we may not be able to effectively manage the expansion or relocation of our operations, retain key employees, or
identify, recruit and train additional qualified personnel. Our inability to manage the expansion or relocation of our
operations effectively may result in weaknesses in our infrastructure, give rise to operational mistakes, loss of business
opportunities, loss of employees and reduced productivity among remaining employees. Our expected growth could also
require significant capital expenditures and may divert financial resources from other projects, such as the development of
additional product candidates. If we are unable to effectively manage our expected growth, our expenses may increase
more than expected, our ability to generate revenues could be reduced and we may not be able to implement our business
strategy, including the successful commercialization of our product candidates.
Risks Related to Ownership of Our Securities
The market price of our ADSs is highly volatile, and holders of our ADSs may not be able to resell their ADSs at or
above the price at which they purchased their ADSs.
The market price of our ADSs is highly volatile. Since our initial public offering, or IPO, in May 2019, through
March 5, 2020, the trading price of our ADSs has ranged from $17.99 to $6.24. The stock market in general, and the
market for biopharmaceutical companies in particular, has experienced extreme volatility that has often been unrelated to
the operating performance of particular companies. As a result of this volatility, holders of our ADSs may not be able to
sell their ADSs at or above price at which they purchased their ADSs. The market price for our ADSs may be influenced
by many factors, including:
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adverse results or delays in preclinical studies or clinical trials;
reports of adverse events in products similar or perceived to be similar to those we are developing or clinical
trials of such products;
an inability to obtain additional funding;
failure by us to successfully develop and commercialize our product candidates;
failure by us to maintain our existing strategic collaborations or enter into new collaborations;
failure by us to identify additional product candidates for our pipeline;
failure by us or our licensors and strategic partners to prosecute, maintain or enforce our intellectual property
rights;
changes in laws or regulations applicable to future products;
changes in the structure of healthcare payment systems;
an inability to obtain adequate product supply for our product candidates or the inability to do so at acceptable
prices;
adverse regulatory decisions;
the introduction of new products, services or technologies by our competitors;
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failure by us to meet or exceed financial projections we may provide to the public;
failure by us to meet or exceed the financial projections of the investment community;
the perception of the pharmaceutical industry by the public, legislatures, regulators and the investment
community;
announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by
us, our strategic partner or our competitors;
disputes or other developments relating to proprietary rights, including patents, litigation matters and our
ability to obtain patent protection for our technologies;
additions or departures of key scientific or management personnel;
significant lawsuits, including patent or shareholder litigation;
changes in the market valuations of similar companies;
sales of our ADSs or ordinary shares by us or our shareholders in the future; and
the trading volume of our ADSs.
In addition, companies trading in the stock market in general, and Nasdaq in particular, have experienced extreme
price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these
companies. Broad market and industry factors may negatively affect the market price of our ADSs, regardless of our actual
operating performance.
We could be subject to securities class action litigation.
In the past, securities class action litigation has often been brought against a company following a decline in the
market price of its securities. This risk is especially relevant for us because pharmaceutical companies have experienced
significant stock price volatility in recent years. If we face such litigation, it could result in substantial costs and a
diversion of management’s attention and resources, which could harm our business.
An active trading market for our ADSs may not be sustained.
Prior to our IPO in May 2019, there had been no public market for our ADSs. Although our ADSs are listed on
The Nasdaq Global Select Market, an active trading market for our shares may not be sustained. If an active market for our
ADSs is not sustained, it may be difficult for holders of our ADSs to sell ADSs without depressing the market price for the
shares, or at all.
An inactive trading market may also impair our ability to raise capital to continue to fund operations by selling
additional shares and may impair our ability to acquire other companies or technologies by using our shares as
consideration.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our
business, our ADS price and trading volume could decline.
The trading market for our ADSs depends in part on the research and reports that securities or industry analysts
publish about us or our business. We do not have any control over these analysts. Although we have obtained research
coverage from certain analysts, there can be no assurance that analysts will continue to cover us or provide favorable
coverage. If one or more analysts downgrade our ADSs or change their opinion of our ADSs, our ADS price would
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likely decline. In addition, if one or more analysts cease coverage of our company or fail to regularly publish reports on us,
we could lose visibility in the financial markets, which could cause our ADS price or trading volume to decline.
Concentration of ownership of our ordinary shares (including ordinary shares in the form of ADSs) among our
existing executive officers, directors and principal shareholders may prevent new investors from influencing significant
corporate decisions.
As of December 31, 2019, our executive officers, directors, greater than 5% shareholders and their affiliates
beneficially own approximately 78.6% of our ordinary shares and ordinary shares in the form of ADSs. Depending on the
level of attendance at our general meetings of shareholders, these shareholders either alone or voting together as a group
could be in a position to determine the outcome of decisions taken at any such general meeting. Any shareholder or group
of shareholders controlling more than 50% of the share capital present and voting at our general meetings of shareholders
may control any shareholder resolution requiring a simple majority, including the appointment of board members, certain
decisions relating to our capital structure, the approval of certain significant corporate transactions and amendments to our
Articles of Association. Among other consequences, this concentration of ownership may prevent or discourage
unsolicited acquisition proposals that holders of our ADSs may believe are in their best interest as holders of our ordinary
shares or ADSs. Some of these persons or entities may have interests different than current holders of our ordinary shares
and ADSs. For example, because many of these shareholders purchased their ordinary shares at prices substantially below
the current trading price of our ADSs and have held their ordinary shares for a longer period, they may be more interested
in selling our company to an acquirer than other investors or they may want us to pursue strategies that deviate from the
interests of other shareholders.
Future sales, or the possibility of future sales, of a substantial number of our securities could adversely affect the price
of our ADSs and dilute shareholders.
Sales of a substantial number of our ADSs in the public market could occur at any time, subject to certain
restrictions described below. If our existing shareholders sell, or indicate an intent to sell, substantial amounts of our
securities in the public market, the trading price of the ADSs could decline significantly and could decline below the
current trading prices of the ADSs. In addition, ordinary shares subject to outstanding options under our equity incentive
plans and the ordinary shares reserved for future issuance under our equity incentive plans will become eligible for sale in
the public market in the future, subject to certain legal and contractual limitations.
Moreover, holders of an aggregate of approximately 11,152,664 ordinary shares have rights, subject to conditions,
to require us to file registration statements covering their shares or to include their shares in registration statements that we
may file for ourselves or other shareholders, as well as to cooperate in certain public offerings of such ordinary shares. We
have also registered our ordinary shares that we may issue under our equity compensation plans. These ordinary shares may
be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates.
We have broad discretion in the use of our cash reserves and may not use them effectively.
Our management has broad discretion to use our cash reserves and could use our cash reserves in ways that do not
improve our results of operations or enhance the value of our ordinary shares or ADSs. The failure by our management to
apply these funds effectively could result in financial losses that could have a material adverse effect on our business, cause
the price of our ADSs to decline, and delay the development of our product candidates. Pending their use, we may invest
our cash reserves in a manner that does not produce income or that loses value.
Because we do not anticipate paying any cash dividends on our ADSs in the foreseeable future, capital appreciation, if
any, will be the sole source of gains for holders of our ADSs, and they may never receive a return on their investment.
Under current English law, a company’s accumulated realized profits must exceed its accumulated realized losses
(on a non-consolidated basis) before dividends can be declared and paid. Therefore, we must have distributable profits
before declaring and paying a dividend. We have not paid dividends in the past on our ordinary shares. We
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intend to retain earnings, if any, for use in our business and do not anticipate paying any cash dividends in the foreseeable
future. As a result, capital appreciation, if any, on our ADSs will be a holder’s sole source of gains for the foreseeable
future, and holders will suffer a loss on their investment if they are unable to sell their ADSs at or above the original
purchase price.
Claims of U.S. civil liabilities may not be enforceable against us.
We are incorporated under English law. Certain members of our board of directors and senior management are
non-residents of the United States, and all or a substantial portion of our assets and the assets of such persons are located
outside the United States. As a result, it may not be possible to serve process on such persons or us in the United States or
to enforce judgments obtained in U.S. courts against them or us based on civil liability provisions of the securities laws of
the United States.
The United States and the United Kingdom do not currently have a treaty providing for recognition and
enforcement of judgments (other than arbitration awards) in civil and commercial matters. Consequently, a final judgment
for payment given by a court in the United States, whether or not predicated solely upon U.S. securities laws, would not
automatically be recognized or enforceable in the United Kingdom. In addition, uncertainty exists as to whether U.K.
courts would entertain original actions brought in the United Kingdom against us or our directors or senior management
predicated upon the securities laws of the United States or any state in the United States. Any final and conclusive
monetary judgment for a definite sum obtained against us in U.S. courts would be treated by the courts of the United
Kingdom as a cause of action in itself and sued upon as a debt at common law so that no retrial of the issues would be
necessary, provided that certain requirements are met. Whether these requirements are met in respect of a judgment based
upon the civil liability provisions of the U.S. securities laws, including whether the award of monetary damages under such
laws would constitute a penalty, is an issue for the court making such decision. If an English court gives judgment for the
sum payable under a U.S. judgment, the English judgment will be enforceable by methods generally available for this
purpose. These methods generally permit the English court discretion to prescribe the manner of enforcement.
As a result, U.S. investors may not be able to enforce against us or our senior management, board of directors or
certain experts named herein who are residents of the United Kingdom or countries other than the United States any
judgments obtained in U.S. courts in civil and commercial matters, including judgments under the U.S. federal securities
laws.
We are an “emerging growth company,” and the reduced disclosure requirements applicable to emerging growth
companies may make our ADSs less attractive to investors.
We are an emerging growth company and we will remain an emerging growth company until the earlier to occur
of (1) the last day of 2024, (2) the last day of the fiscal year in which we have total annual gross revenues of at least
$1.07 billion, (3) the last day of the fiscal year in which we are deemed to be a “large accelerated filer,” under the rules of
the U.S. Securities and Exchange Commission, or SEC, which means the market value of our equity securities that is held
by non-affiliates exceeds $700 million as of the prior June 30th, and (4) the date on which we have issued more than
$1.0 billion in non-convertible debt during the prior three-year period. For so long as we remain an EGC, we are permitted
and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are
not emerging growth companies. These exemptions include:
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not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley
Act, or Section 404;
not being required to comply with any requirement that has or may be adopted by the Public Company
Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report
providing additional information about the audit and the financial statements;
reduced disclosure obligations regarding executive compensation; and
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an exemption from the requirement to seek nonbinding advisory votes on executive compensation or golden
parachute arrangements.
We may choose to take advantage of some, but not all, of the available exemptions. We cannot predict whether
investors will find our ADSs less attractive if we rely on certain or all of these exemptions. If some investors find our
ADSs less attractive as a result, there may be a less active trading market for our ADSs and our ADS price may be more
volatile.
In addition, the JOBS Act provides that an EGC may take advantage of an extended transition period for
complying with new or revised accounting standards. This allows an EGC to delay the adoption of certain accounting
standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail
ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the
relevant dates on which adoption of such standards is required for other public companies.
Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting
company” if the market value of our ordinary shares held by non-affiliates is below $250 million (or $700 million if our
annual revenue is less than $100 million) as of June 30 in any given year, which would allow us to take advantage of many
of the same exemptions from disclosure requirements, including reduced disclosure obligations regarding executive
compensation in our periodic reports and proxy statements.
We will incur increased costs as a result of operating as a company with ADSs that are publicly traded in the United
States, and our management will be required to devote substantial time to new compliance initiatives.
As a U.S. public company, and particularly after we are no longer an EGC, we will incur significant legal,
accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act and
rules subsequently implemented by the SEC and Nasdaq have imposed various requirements on public companies,
including establishment and maintenance of effective disclosure and financial controls and corporate governance
practices. Our management and other personnel will need to devote a substantial amount of time to these compliance
initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make
some activities more time-consuming and costly. For example, we expect that these rules and regulations may make it
more difficult and more expensive for us to obtain director and officer liability insurance.
Pursuant to Section 404, we will be required to furnish a report by our management on our internal control over
financial reporting, including an attestation report on internal control over financial reporting issued by our independent
registered public accounting firm. However, while we remain an EGC, we will not be required to include an attestation
report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve
compliance with Section 404 within the prescribed period, we will be engaged in a process to document and evaluate our
internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to
dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document
the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate,
validate through testing that controls are functioning as documented and implement a continuous reporting and
improvement process for internal control over financial reporting. Despite our efforts, there is a risk we will not be able to
conclude within the prescribed timeframe that our internal control over financial reporting is effective as required by
Section 404. This could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of
our financial statements.
If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately
report our financial results or prevent fraud. As a result, shareholders could lose confidence in our financial and other
public reporting, which would harm our business and the trading price of our ADSs.
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and,
together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement
required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our
reporting obligations. In addition, any testing by us conducted in connection with Section 404, or any subsequent testing
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by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial
reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial
statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors
to lose confidence in our reported financial information, which could have a negative effect on the trading price of our
ADSs.
Our management will be required to assess the effectiveness of these controls annually. However, for as long as
we are an EGC, our independent registered public accounting firm will not be required to attest to the effectiveness of our
internal controls over financial reporting pursuant to Section 404. We could be an EGC for up to five years. An
independent assessment of the effectiveness of our internal controls over financial reporting could detect problems that our
management’s assessment might not. Undetected material weaknesses in our internal controls over financial reporting
could lead to financial statement restatements and require us to incur the expense of remediation.
Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
We are subject to certain reporting requirements of the Exchange Act. Our disclosure controls and procedures are
designed to reasonably assure that information required to be disclosed by us in reports we file or submit under the
Exchange Act is accumulated and communicated to management, recorded, processed, summarized and reported within the
time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures or internal
controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-
making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be
circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of
the controls. Accordingly, because of the inherent limitations in our control system, misstatements or insufficient
disclosures due to error or fraud may occur and not be detected.
If we are a controlled foreign corporation, there could be adverse U.S. federal income tax consequences to certain U.S.
holders.
Each “Ten Percent Shareholder” (as defined below) in a non-U.S. corporation that is classified as a “controlled
foreign corporation,” or a CFC, for U.S. federal income tax purposes generally is required to include in income for U.S.
federal tax purposes such Ten Percent Shareholder’s pro rata share of the CFC’s “Subpart F income” and investment of
earnings in U.S. property, even if the CFC has made no distributions to its shareholders. Subpart F income generally
includes dividends, interest, rents, royalties, “global intangible low-taxed income,” gains from the sale of securities and
income from certain transactions with related parties. In addition, a Ten Percent Shareholder that realizes gain from the
sale or exchange of shares in a CFC may be required to classify a portion of such gain as dividend income rather than
capital gain. A non-U.S. corporation generally will be classified as a CFC for U.S. federal income tax purposes if Ten
Percent Shareholders own (directly, indirectly or constructively through the application of attribution rules) more than 50%
of either the total combined voting power of all classes of stock of such corporation entitled to vote or of the total value of
the stock of such corporation. A “Ten Percent Shareholder” is a United States person (as defined by the Code) who owns or
is considered to own 10% or more of the total combined voting power of all classes of stock entitled to vote or 10% or
more of the total value of all classes of stock of such corporation.
We believe that we were not a CFC in the 2019 taxable year and we do not expect to be a CFC in the 2020 taxable
year. However, the determination of CFC status is complex and includes attribution rules, the application of which is not
entirely certain. U.S. Holders (as defined below) should consult their own tax advisors with respect to the potential adverse
U.S. tax consequences of becoming a Ten Percent Shareholder in a CFC. A “U.S. Holder” is a holder who, for U.S. federal
income tax purposes, is a beneficial owner of ordinary shares or ADSs and is:
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an individual who is a citizen or individual resident of the United States;
a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United
States, any state therein or the District of Columbia;
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an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
a trust if (1) a U.S. court is able to exercise primary supervision over the administration of the trust and one or
more U.S. persons have authority to control all substantial decisions of the trust or (2) the trust has a valid
election in effect to be treated as a U.S. person under applicable U.S. Treasury Regulations.
If we are a passive foreign investment company, there could be adverse U.S. federal income tax consequences to U.S.
holders.
Under the Code, we will be a passive foreign investment company, or PFIC, for any taxable year in which (1) 75%
or more of our gross income consists of passive income or (2) 50% or more of the average quarterly value of our assets
consists of assets that produce, or are held for the production of, passive income. For purposes of these tests, passive
income includes dividends, interest, gains from the sale or exchange of investment property and certain rents and
royalties. In addition, for purposes of the above calculations, a non-U.S. corporation that directly or indirectly owns at least
25% by value of the shares of another corporation is treated as holding and receiving directly its proportionate share of
assets and income of such corporation. If we are a PFIC for any taxable year during which a U.S. Holder holds our shares,
the U.S. Holder may be subject to adverse tax consequences regardless of whether we continue to qualify as a PFIC,
including ineligibility for any preferred tax rates on capital gains or on actual or deemed dividends, interest charges on
certain taxes treated as deferred and additional reporting requirements.
Based on our analysis of our income, assets, activities and market capitalization, we believe that we were not a
PFIC in the 2019 taxable year. The determination of whether we are a PFIC is a fact-intensive determination made on an
annual basis applying principles and methodologies that in some circumstances are unclear and subject to varying
interpretation. As a result, there can be no assurance regarding if we will be PFIC or will not be a PFIC in the future. In
addition, the total value of our assets for PFIC testing purposes may be determined in part by reference to the market price
of our ordinary shares or ADSs from time to time, which may fluctuate considerably. Under the income test, our status as a
PFIC depends on the composition of our income which will depend on the transactions we enter into and our corporate
structure.
We may be unable to use net operating loss and tax credit carryforwards and certain built-in losses to reduce future tax
payments or benefit from favorable U.K. tax legislation.
As an entity incorporated and tax resident in the United Kingdom, we are subject to U.K. corporate taxation on
tax-adjusted trading profits. Due to the nature of our business, we have generated losses since inception and therefore have
not paid any U.K. corporation tax. Subject to numerous utilization criteria and restrictions (including those that limit the
percentage of profits that can be reduced by carried forward losses and those that can restrict the use of carried forward
losses where there is a change of ownership of more than half the ordinary shares of the company and a major change in the
nature, conduct or scale of the trade), we expect losses to be eligible for carry forward and utilization against future
operating profits. The use of loss carryforwards in relation to U.K. profits incurred on or after April 1, 2017 will be limited
each year to £5.0 million plus an incremental 50% of U.K. taxable profits. In addition, if we were to have a major change
in the nature of the conduct of our trade, loss carryforwards may be restricted or extinguished.
As a company that carries out extensive research and development activities, we seek to benefit from one of two U.K.
research and development tax relief programs, the Small and Medium-sized Enterprises R&D Tax Credit Program, or SME
Program, and the Research and Development Expenditure program, or RDEC Program. Where available, under the SME
Program, we may be able to surrender the trading losses that arise from our qualifying research and development activities
for cash or carry them forward for potential offset against future profits (subject to relevant restrictions). The majority of
our pipeline research, clinical trials management and manufacturing development activities are eligible for inclusion within
these SME Program tax credit cash rebate claims. On October 29, 2018, the U.K. government proposed that from April 1,
2020 the amount of payable credit that a qualifying loss-making SME business can receive through R&D relief in any one
year will be capped at three times the company’s total PAYE and NICs liability for that year. An update on the proposal and
the timing of its introduction is expected from the U.K. government on or after March 11, 2020 as part of the U.K. annual
‘budget’ fiscal event.
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We may benefit in the future from the United Kingdom’s “patent box” regime, which allows certain profits
attributable to revenues from patented products (and other qualifying income) to be taxed at an effective rate of 10%. We
are the exclusive licensee or owner of several patent applications which, if issued, would cover our product candidates, and
accordingly, future upfront fees, milestone fees, product revenues and royalties could be taxed at this tax rate. When taken
in combination with the enhanced relief available on our research and development expenditures, we expect a long-term
lower rate of corporation tax to apply to us. If, however, there are unexpected adverse changes to the U.K. research and
development tax credit regime or the “patent box” regime, or for any reason we are unable to qualify for such advantageous
tax legislation, or we are unable to use net operating loss and tax credit carryforwards and certain built-in losses to reduce
future tax payments then our business, results of operations and financial condition may be adversely affected.
Future changes to tax laws could materially adversely affect our company and reduce net returns to our shareholders.
The tax treatment of the company is subject to changes in tax laws, regulations and treaties, or the interpretation
thereof, tax policy initiatives and reforms under consideration and the practices of tax authorities in jurisdictions in which
we operate, as well as tax policy initiatives and reforms related to the Organisation for Economic Co-Operation and
Development’s, or OECD, Base Erosion and Profit Shifting, or BEPS, Project, the European Commission’s state aid
investigations and other initiatives. Such changes may include (but are not limited to) the taxation of operating income,
investment income, dividends received or (in the specific context of withholding tax) dividends paid. We are unable to
predict what tax reform may be proposed or enacted in the future or what effect such changes would have on our business,
but such changes, to the extent they are brought into tax legislation, regulations, policies or practices, could affect our
financial position and overall or effective tax rates in the future in countries where we have operations, reduce post-tax
returns to our shareholders, and increase the complexity, burden and cost of tax compliance.
Tax authorities may disagree with our positions and conclusions regarding certain tax positions, resulting in
unanticipated costs, taxes or non-realization of expected benefits.
A tax authority may disagree with tax positions that we have taken, which could result in increased tax
liabilities. For example, while we believe that we operate in compliance with applicable transfer pricing laws and intend to
continue to do so, our transfer pricing procedures are not binding on applicable tax authorities. HM Revenue & Customs, or
HMRC, the Internal Revenue Service or another tax authority could challenge our allocation of income by tax jurisdiction
and the amounts paid between our affiliated companies pursuant to our intercompany arrangements and transfer pricing
policies, including amounts paid with respect to our intellectual property development. Similarly, a tax authority could
assert that we are subject to tax in a jurisdiction where we believe we have not established a taxable connection, often
referred to as a “permanent establishment” under international tax treaties, and such an assertion, if successful, could
increase our expected tax liability in one or more jurisdictions. A tax authority may take the position that material income
tax liabilities, interest and penalties are payable by us, in which case, we expect that we might contest such
assessment. Contesting such an assessment may be lengthy and costly and if we were unsuccessful in disputing the
assessment, the implications could increase our anticipated effective tax rate, where applicable.
Provisions in the U.K. City Code on Takeovers and Mergers that may have anti-takeover effects do not apply to us.
The U.K. City Code on Takeovers and Mergers, or the Takeover Code, applies to an offer for, among other things,
a public company whose registered office is in the United Kingdom if the company is considered by the Panel on
Takeovers and Mergers, or the Takeover Panel, to have its place of central management and control in the United Kingdom
(or the Channel Islands or the Isle of Man). This is known as the “residency test.” The test for central management and
control under the Takeover Code is different from that used by the U.K. tax authorities. Under the Takeover Code, the
Takeover Panel will determine whether we have our place of central management and control in the United Kingdom by
looking at various factors, primarily where the directors are resident.
In September 2019, the Takeover Panel Executive confirmed that, based on our current circumstances, we are not
subject to the Takeover Code. As a result, our shareholders are not entitled to the benefit of certain takeover offer
protections provided under the Takeover Code. We believe that this position is unlikely to change at any time in the near
future but, in accordance with good practice, we will review the situation on a regular basis and consult with the
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Takeover Panel if there is any change in our circumstances which may have a bearing on whether the Takeover Panel
would determine our place of central management and control to be in the United Kingdom.
The rights of our shareholders may differ from the rights typically offered to shareholders of a U.S. corporation.
We are incorporated under English law. The rights of holders of ordinary shares and, therefore, certain of the
rights of holders of ADSs, are governed by English law, including the provisions of the U.K. Companies Act 2006, or the
Companies Act, and by our Articles of Association. These rights differ in certain respects from the rights of shareholders
in typical U.S. corporations. The principal differences include the following:
·
·
·
·
·
·
·
under English law and our articles of association, each shareholder present at a meeting has only one vote
unless demand is made for a vote on a poll, in which case each holder gets one vote per share owned. Under
U.S. law, each shareholder typically is entitled to one vote per share at all meetings;
under English law, it is only on a poll that the number of shares determines the number of votes a holder may
cast. However, that the voting rights of ADSs are also governed by the provisions of a deposit agreement
with our depositary bank;
under English law, subject to certain exceptions and disapplications, each shareholder generally has
preemptive rights to subscribe on a proportionate basis to any issuance of ordinary shares or rights to
subscribe for, or to convert securities into, ordinary shares for cash. Under U.S. law, shareholders generally
do not have preemptive rights unless specifically granted in the certificate of incorporation or otherwise;
under English law and our articles of association, certain matters require the approval of 75% of the
shareholders who vote (in person or by proxy) on the relevant resolution (or on a poll of shareholders
representing 75% of the ordinary shares voting (in person or by proxy)), including amendments to the articles
of association. This may make it more difficult for us to complete corporate transactions deemed advisable
by our board of directors. Under U.S. law, generally only majority shareholder approval is required to amend
the certificate of incorporation or to approve other significant transactions;
in the United Kingdom, takeovers may be structured as takeover offers or as schemes of arrangement. Under
English law, if we were to be subject to the Takeover Code, a bidder seeking to acquire us by means of a
takeover offer would need to make an offer for all of our outstanding ordinary shares/ADSs. If acceptances
are not received for 90% or more of the ordinary shares/ADSs under the offer, under English law, the bidder
cannot complete a “squeeze out” to obtain 100% control of us. Accordingly, acceptances of 90% of our
outstanding ordinary shares/ADSs will likely be a condition in any takeover offer to acquire us, not 50% as is
more common in tender offers for corporations organized under Delaware law. By contrast, a scheme of
arrangement, the successful completion of which would result in a bidder obtaining 100% control of us,
requires the approval of a majority of shareholders voting at the meeting and representing 75% of the
ordinary shares voting, as well as the sanction of the U.K. court;
under English law and our articles of association, shareholders and other persons whom we know or have
reasonable cause to believe are, or have been, interested in our shares may be required to disclose information
regarding their interests in our shares upon our request, and the failure to provide the required information
could result in the loss or restriction of rights attaching to the shares, including prohibitions on certain
transfers of the shares, withholding of dividends and loss of voting rights. Comparable provisions generally
do not exist under U.S. law; and
the quorum requirement for a shareholders’ meeting is a minimum of two shareholders entitled to vote at the
meeting and present in person or by proxy or, in the case of a shareholder that is a corporation, represented by
a duly authorized officer. Under U.S. law, a majority of the shares eligible to vote must generally be present
(in person or by proxy) at a shareholders’ meeting in order to constitute a quorum. The minimum number of
shares required for a quorum can be reduced pursuant to a provision in a company’s certificate of
incorporation or bylaws, but typically not below one-third of the shares entitled to vote at the meeting.
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ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 2. PROPERTIES.
We occupy approximately 13,500 rentable square feet of office and laboratory space in Cambridge, United
Kingdom under a lease that expires in December 2021, with a five-year extension option, and an additional 11,000 rental
square feet of office and laboratory space in Lexington, Massachusetts under a lease that expires in December 2022, with a
five-year extension option. We believe that our office and laboratory spaces are sufficient to meet our current needs and
that suitable additional space will be available as and when needed.
ITEM 3. LEGAL PROCEEDINGS.
From time to time, we may become subject to various legal proceedings and claims that arise in the ordinary
course of our business activities. Other than as described below, we are not currently subject to any material legal
proceedings.
License Litigation
In 2009, our subsidiary, BicycleRD Limited, or BicycleRD, entered into a non-exclusive patent license agreement
with Pepscan Systems B.V. and its affiliates, or Pepscan, pursuant to which it licensed rights related to the scaffold used for
Bicycles contained in our lead product candidate, BT1718, which is currently in clinical trial sponsored by CRUK, and in
THR-149, which has been licensed to Oxurion. The agreement required BicycleRD to enter into a framework services
agreement with Pepscan under which Pepscan would provide certain Bicycles not produced by BicycleRD. In 2010,
BicycleRD entered into such a framework services agreement. In 2015, BicycleRD terminated the framework services
agreement in accordance with its terms. In 2016, Pepscan terminated the patent license agreement. Since 2015, we have
ceased using the scaffolds claimed by Pepscan in our new product candidates and have instead developed proprietary
scaffold technology of our own.
BicycleRD instituted proceedings in the District Court of The Hague, or the District Court, to contest the right of
Pepscan to terminate the patent license agreement. BicycleRD included a conditional claim for a ruling that the licensed
patent relevant to BicycleRD’s activities is invalid. In response, Pepscan claimed, among other things, that the termination
of the framework services agreement and alleged breaches by BicycleRD of confidentiality obligations constituted grounds
for the termination of the patent license agreement.
In a interlocutory judgement delivered in April 2018, the District Court rejected Pepscan's claim that it was
entitled to terminate the patent license agreement on the basis of a breach of a purported exclusive supply obligation. The
District Court reserved for further proceedings a decision on both the validity of the Pepscan patent and the question of
whether BicycleRD breached its confidentiality obligations. In July 2018, Pepscan appealed the decision of the District
Court and the proceedings before the District Court were stayed pending a decision in that appeal.
On February 18, 2020, the Court of Appeal of The Hague, or the Court of Appeal, ruled that Pepscan was entitled
to terminate the license agreement and granted a worldwide injunction against BicycleRD exploiting the licensed Pepscan
patents and any related know-how, subject to a civil daily fine of EUR 25,000 in the event of non-compliance. BicycleRD
intends to appeal the decision of the Court of Appeal to the Dutch Supreme Court and is preparing for further proceedings
before the District Court, in particular concerning BicycleRD’s invalidity claim, the claim related to know-how and the
assessment of damages should a proceeding for such an assessment be initiated by Pepscan.
Pending such further proceedings, BicycleRD will comply with the injunction issued by the Court of Appeal. The
injunction by its terms applies only to BicycleRD.
The patent that is the subject of these proceedings expires in February 2024.
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European Patent Opposition Proceedings
In January 2013, Pepscan filed a notice of opposition in respect of European patent 2 257 624, which is a
foundational patent that covers our technology platform. In June 2015, the European Patent Office issued a decision to
maintain this patent as granted and rejecting Pepscan's opposition. Pepscan subsequently filed a notice of appeal to revoke
the patent in its entirety, along with supporting materials. We filed a reply requesting that the appeal be dismissed. As of the
date of this Annual Report on Form 10-K, no decision has been issued by the European Patent Office in respect of this
appeal.
In April 2015, Pepscan filed a notice of opposition in respect of European patent 2 474 613, which is a divisional
patent that covers extensions of our technology platform. In February 2017, the European Patent Office issued a decision to
maintain this patent in its amended form, which upheld this patent. Pepscan subsequently filed a notice of appeal to revoke
the patent in its entirety, along with supporting materials. We also filed a Notice of Appeal contesting the amendments to
the patent required by the decision of the Opposition Division along with supporting materials. As of the filing date of this
Annual Report on Form 10-K, no decision has been issued by the European Patent Office in respect of these appeals.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
Our ordinary shares, par value £0.01 per share, are not publicly traded. Our American Depositary Shares, or
ADSs, each represent one ordinary share of Bicycle Therapeutics plc and began trading on The Nasdaq Global Select
Market on May 23, 2019 under the symbol “BCYC.” Prior to that date, there was no public trading market for our ADSs
or our ordinary shares.
Holders of Ordinary Shares
As of March 5, 2020, there were approximately 75 holders of record of our ordinary shares and one holder of record of our
ADSs. The number of beneficial owners of the ADSs in the United States is likely to be much larger than the number of
record holders of our ordinary shares in the United States.
Recent Sales of Unregistered Equity Securities
None.
Use of Proceeds from Registered Securities
On May 28, 2019, we completed our IPO of 4,333,333 ADSs at a public offering price of $14.00 per ADS for an
aggregate offering price of approximately $60.7 million. In addition, in June 2019, we issued 304,333 ADSs at a public
offering price of $14.00 per ADS for an aggregate offering price of approximately $4.3 million in connection with the
underwriters’ partial exercise of their option to purchase additional ADSs. Goldman Sachs & Co. LLC, Jefferies LLC,
Piper Jaffray & Co. and Canaccord Genuity LLC served as the underwriters of the IPO. The offer and sale of all of the
ADSs in the offering were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No.
333-231076), which was declared effective by the SEC on May 22, 2019.
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We received aggregate net proceeds from the offering of approximately $56.4 million, after deducting
underwriting discounts and commissions of $4.5 million and offering expenses of $4.0 million. No offering expenses were
paid directly or indirectly to any of our directors or officers (or their associates) or persons owning 10% or more of any
class of our equity securities or to any other affiliates.
There has been no material change in our planned use of the net proceeds from the offering as described in the
final prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act. As of December 31, 2019, we
consumed approximately $15.8 million of the net proceeds from the IPO, primarily to advance our BT1718, BT5528,
BT8009, BT7480, and other discovery development programs, as well as for continued drug discovery efforts and
translational research activities, and for working capital and other general corporate purposes. We have invested the
remaining net proceeds from our IPO in interest bearing cash accounts.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
ITEM 6. SELECTED FINANCIAL DATA.
You should read the following selected financial data together with the “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” and our consolidated financial statements and the accompanying notes
included elsewhere in this Annual Report on Form 10-K. We have derived the statements of operations data for the years
ended December 31, 2019, 2018 and 2017 and the balance sheet data as of December 31, 2019 and 2018 from our audited
consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K. We have derived the balance
sheet data as of December 31, 2017 from our audited consolidated financial statements not included in this report. Our
historical results for any prior period are not necessarily indicative of results to be expected in any future period.
Statement of Operations Data:
Collaboration revenues
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Other income (expense):
Interest and other income
Other expense, net
Total other expense, net
Net loss before income tax provision
Benefit from income taxes
Net loss
Net loss attributable to ordinary shareholders
Net loss per share attributable to ordinary shareholders, basic and diluted
Weighted average ordinary shares outstanding, basic and diluted
111
Year ended December 31,
2018
(in thousands, except share and per share data)
2019
2017
$
13,801 $
7,136 $
2,060
25,540
14,560
40,100
(26,299)
20,761
8,121
28,882
(21,746)
11,866
6,407
18,273
(16,213)
169
(665)
(496)
(22,242)
(396)
814
(5,377)
(4,563)
(30,862)
(254)
50
(119)
(69)
(16,282)
(23)
(30,608) $ (21,846) $ (16,259)
(30,608) $ (21,846) $ (16,259)
(48.81)
333,125
(49.78) $
(2.77) $
438,862
11,045,370
$
$
$
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See Note 2 within the notes to our consolidated financial statements appearing elsewhere in this Annual Report on
Form 10-K for a description of the method used to calculated basic and diluted net loss per share applicable to
ordinary shareholders.
2019
As of December 31,
2018
(in thousands)
2017
Balance Sheet Data:
Cash
Working capital
Total assets
Total deferred revenue
Warrant liability
Convertible preferred shares
Total shareholders’ equity (deficit)
$
92,117 $
95,325
110,194
5,657
—
—
67,663
62,061
74,001
14,467
4,411
96,441
93,198 $ (69,826) $ (47,184)
63,380 $
67,840
81,626
14,635
4,804
122,197
$
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
You should read this discussion and analysis of our financial condition and consolidated results of operations
together with the consolidated financial statements, related notes and other financial information included in this Annual
Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this
Annual Report on Form 10-K, 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 Annual Report on Form 10-K, 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.”
For the discussion of the financial condition and results of operations for the year ended December 31, 2018
compared to the year ended December 31, 2017, refer to "Management's Discussion and Analysis of Financial Condition
and Results of Operations—Results of Operations" and "—Liquidity and Capital Resources" included in the final
prospectus forming a part of the registration statement declared effective by the SEC in connection with our initial public
offering, or IPO, and filed pursuant to Rule 424(b) under the Securities Act on May 23, 2019.
Overview
We are a clinical‑stage biopharmaceutical company developing a novel and differentiated 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 is designed to confer 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 initial internal programs are focused on oncology indications with high unmet medical need. Our lead product
candidate, BT1718, is a Bicycle Toxin Conjugate, or BTC. This Bicycle is being developed to target tumors that express
Membrane Type 1 matrix metalloprotease, or MT1‑MMP. The Bicycle is chemically attached to a toxin that when
administered is cleaved from the Bicycle and kills the tumor cells. BT1718 is being investigated for safety, tolerability and
efficacy in an ongoing Phase I/IIa clinical trial in collaboration with, and fully funded by, the Centre for Drug Development
of Cancer Research UK, or CRUK. We are also evaluating BT5528, a second-generation BTC targeting Ephrin type‑A
receptor 2, or EphA2, in a Company-sponsored Phase I/II study and conducting Investigational New Drug application, or
IND, ‑enabling activities for BT8009, a BTC targeting Nectin-4. Our discovery pipeline in oncology includes Bicycle-
based systemic immune cell agonists and Bicycle tumor-targeted immune cell agonists (TICAs™).
Beyond oncology, we are collaborating with biopharmaceutical companies and organizations in therapeutic areas
where we believe our proprietary Bicycle screening platform can identify therapies to treat diseases with significant unmet
medical need. Our partnered programs outside of oncology include collaborations for anti‑bacterial, cardiovascular,
ophthalmology and respiratory indications.
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Financial Overview
Since our inception, we have devoted substantially all of our resources to developing our Bicycle platform and our
lead product candidates, BT1718, BT5528, BT8009, BT7480 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 ADSs and ordinary shares,
convertible preferred shares, as well as proceeds received from upfront payments, research and development payments, and
development milestone payments from our collaboration agreements with Oxurion, AstraZeneca and Sanofi. Since our
inception in 2009 through December 31, 2019, we have received gross proceeds of $193.1 million from the sale of ADSs,
ordinary shares and convertible preferred shares, including the proceeds from our initial public offering, and $30.2 million
of cash payments under our collaboration revenue arrangements, including $4.1 million from Oxurion, $9.0 million from
AstraZeneca, $15.0 million from Sanofi and $1.1 million from DDF. 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 $30.6 million, $21.8 million and $16.3 million for the years ended
December 31, 2019, 2018 and 2017, respectively. As of December 31, 2019, we had an accumulated deficit of
$100.6 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. In addition, we expect to continue to incur additional costs associated with operating as a public
company, including significant legal, accounting, investor relations and other expenses. 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 BT1718
and BT5528;
progress the preclinical and clinical development of BT8009, BT7480 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
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·
add operational, financial and management information systems and personnel, including personnel to
support our research and development programs, any future commercialization efforts and our operations as a
public company.
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 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 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.
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 of December 31, 2019, we had cash of $92.1 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 Annual
Report on Form 10-K. 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.”
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 consists of collaboration revenue under our arrangements with
AstraZeneca, Sanofi, Oxurion, and DDF, including amounts that are recognized related to upfront payments, milestone
payments, option exercise payments, and amounts due to us for research and development services. In the future, revenue
may include additional milestone payments, 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, and 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;
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·
·
·
·
·
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;
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, insurance, 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 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.
U.K. research and development tax credits and government grant funding are recorded as an offset to research and
development expense. See “—Benefit from Income Taxes.”
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.
In December, 2016, we entered into a Clinical Trial and License Agreement with the Cancer Research Technology
Limited, or CRTL and Cancer Research UK, or CRUK, whereby the CRUK’s Centre for Drug Development is sponsoring
and funding a Phase I/IIa clinical trial for our lead product candidate, BT1718, in patients with advanced solid tumors.
CRUK 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, Cancer Research Technology Limited may elect to receive an 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 CRUK 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. 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 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 obtain marketing approval for our product
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candidates, including BT1718 and BT5528; (ii) initiate clinical trials for our product candidates, including BT8009 and
BT7480 and BT7401; 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:
·
·
·
·
·
·
·
·
·
·
·
completing research and preclinical development of our product candidates, including conducting future
clinical trials of BT1718 and BT5528;
progressing the preclinical and clinical development of BT8009, BT7480 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.
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, in which case we would be required to expend significant additional financial
resources and time on the completion of clinical development. In addition, we may obtain
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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, 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 our UK 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 incur increased expenses associated with being a public company,
including costs of accounting, audit, information systems, legal, regulatory and tax compliance services, director and
officer insurance costs and investor and public relations costs.
Other Income (Expense)
Interest and Other Income
Interest and other income consists primarily of interest earned on our cash held in operating accounts.
Other Expense
Prior to our IPO, other expense, net consisted primarily of changes in the fair value associated with the
remeasurement of the warrant liability for warrants we issued to subscribe for Series A and Series B1 convertible preferred
shares. We remeasured the warrant liability at fair value at each reporting period until completion of our IPO in May 2019.
Upon the completion of the IPO, the respective warrants were exercised or converted to warrants to subscribe for ordinary
shares, and as such, we will not incur additional expense related to the remeasurement of the warrant liability in future
periods.
Benefit from Income Taxes
We are subject to corporate taxation in the United States and the United Kingdom. We have generated losses since
inception and have therefore not paid United Kingdom corporation tax. The benefit from income taxes presented in our
consolidated statements of operations and comprehensive loss represents the tax impact from our operating activities in the
United States, which generates taxable income based on intercompany service arrangements.
The research and development tax credit received in the U.K. is recorded as a reduction to research and
development expenses. The U.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 the U.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, any U.K. research and development tax credits
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generated are needed to offset a corporate income tax liability in the U.K., 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 two
U.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 by U.K. law, a portion of expenditures being carried out in relation to our pipeline
research and development, clinical trials management and manufacturing development activities are to be eligible for the
RDEC Program for the year ended December 31, 2019. We will assess whether it is possible to qualify under the more
favorable SME regime for future accounting periods, but this will be affected as a result of becoming a large company by
reference to our staff headcount and/or our financial results.
Unsurrendered U.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% of U.K. taxable profits. After accounting for tax credits receivable, we had accumulated tax losses for
carry forward in the U.K. of $41.7 million and $29.1 million as of December 31, 2019 and 2018.
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 consolidated balance
sheet.
Results of Operations
The following table summarizes our results of operations for the years ended December 31, 2019, 2018 and 2017:
Collaboration revenues
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Other income (expense):
Interest and other income
Other expense, net
Total other expense, net
Net loss before income tax provision
Benefit from income taxes
Net loss
2019
Year Ended
December 31,
2018
(in thousands)
2017
$
13,801
$
7,136
$
2,060
25,540
14,560
40,100
(26,299)
814
(5,377)
(4,563)
(30,862)
(254)
(30,608)
$
20,761
8,121
28,882
(21,746)
169
(665)
(496)
(22,242)
(396)
(21,846)
$
11,866
6,407
18,273
(16,213)
50
(119)
(69)
(16,282)
(23)
(16,259)
$
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Comparison of the Years Ended December 31, 2019 and 2018
Collaboration revenues
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Other income (expense):
Interest and other income
Other expense
Total other expense, net
Net loss before income tax provision
Benefit from income taxes
Net loss
Collaboration Revenues
December 31,
2019
2018
(in thousands)
Change
$
13,801
7,136
$
6,665
25,540
14,560
40,100
(26,299)
814
(5,377)
(4,563)
(30,862)
(254)
(30,608)
$
20,761
8,121
28,882
(21,746)
169
(665)
(496)
(22,242)
(396)
(21,846)
$
4,779
6,439
11,218
(4,553)
645
(4,712)
(4,067)
(8,620)
142
(8,762)
Collaboration revenues increased by $6.7 million during the year ended December 31, 2019 compared to the year
ended December 31, 2018, primarily due to an increase of $6.7 million of revenue from our collaboration with Sanofi. In
March 2019, Sanofi exercised its right to terminate the sickle cell program and in October 2019, Sanofi terminated the
hemophilia program, resulting in the recognition of revenue of $5.3 million and $4.7 million, respectively, for amounts
allocated to material rights when these options expired. These amounts were offset by a decrease in research services
revenue, which services were substantially completed in the second quarter of 2019. Additional increases in collaboration
revenue included an increase of $1.0 million of revenue under a material transfer agreement and an increase of $0.4 million
of revenue from a collaboration arrangement with DDF, which was entered into in May 2019. These amounts were offset
by a decrease of $1.7 million of revenue under our collaboration with Oxurion, primarily due to $1.2 million of revenue
recognized for certain development milestones achieved during the year ended December 31, 2018 that did not recur in the
year ended December 31, 2019.
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Research and Development Expenses
The following table summarizes our research and development expenses for the years presented:
BT1718 (MT1)
BT5528 (EphA2)
BT8009 (Nectin‑4)
Tumor-targeted immune cell agonist
Other discovery and platform related expense
Employee and contractor related expenses
Share-based compensation
Facility expenses
Research and development incentives
Total research and development expenses
Year Ended
December 31,
2019
2018
(in thousands)
Change
$
$
1,211 $
3,878
3,260
1,082
11,125
9,122
1,289
1,297
(6,724)
25,540 $
1,546 $
4,569
2,797
—
8,702
7,185
513
1,328
(5,879)
20,761 $
(335)
(691)
463
1,082
2,423
1,937
776
(31)
(845)
4,779
Research and development expense increased by $4.8 million in the year ended December 31, 2019 as compared
to year ended December 31, 2018, primarily due to increases of $0.5 million and $1.1 million in the BT8009 and tumor-
targeted immune cell agonist program spending, respectively, $2.4 million in other unallocated discovery and platform
related expense, $1.9 million in employee and contractor-related expense due to an increase in headcount as we expanded
our operations in the United States and the United Kingdom and $0.8 million of share-based compensation expense. These
expenses were offset by a decrease of $0.7 million in BT5528 program spending due to the timing of IND-enabling
activities in 2018, as well as an increase in research and development tax credit reimbursement of $0.8 million, due to the
corresponding increase in research and development spending in the United Kingdom.
We begin to separately track program expenses beginning at candidate nomination and accumulate all costs
incurred to support each program to date. Through December 31, 2019, we have incurred approximately $12.9 million,
$8.4 million, $6.1 million and $1.1 million of direct expenses for the development of the BT1718, BT5528, BT8009 and
tumor-targeted immune cell agonist programs, respectively.
General and Administrative Expenses
The following table summarizes our general and administrative expenses for the years presented:
Personnel related costs
Professional and consulting fees
Other general and administration costs
Share-based compensation
Effect of foreign exchange rates
Total general and administrative expenses
Year Ended
December 31,
2019
2018
(in thousands)
Change
$
$
4,594
6,084
2,983
1,797
(898)
14,560
$
$
2,946
3,574
1,361
554
(314)
8,121
$
$
1,648
2,510
1,622
1,243
(584)
6,439
General and administrative expenses increased by $6.4 million for the year ended December 31, 2019 as
compared to the year ended December 31, 2018, primarily due to increases of $1.6 million in personnel related costs due to
an increase in headcount as we expanded our operations in the United States and the United Kingdom, $1.2 million in
share-based compensation expense as a result of an increase in fair value of our ordinary shares and share options following
our IPO, as well as $2.5 million in professional fees, including legal, human resources, marketing and
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consulting costs and $1.6 million in other general and administrative cost, including insurance costs to support our
operations as a public company. These amounts were offset by an increase of $0.6 million in gains from the effect of
foreign exchange rates during year ended December 31, 2019.
Other Expense, net
Other expense, net increased by $4.1 million for the year ended December 31, 2019, as compared to the year
ended December 31, 2018, primarily due to $4.7 million of additional expense associated with changes in the fair value of
the warrant liability and final re-measurement upon completion of the IPO, offset by higher interest income of $0.6 million
as a result of a higher cash balance due to proceeds from our IPO.
Liquidity and Capital Resources
From our inception through December 31, 2019, 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 ordinary shares (including in
the form of ADSs) and convertible preferred shares, as well as proceeds received from upfront payments, payments for
research and development services, and development milestone payments from our collaboration agreements with
AstraZeneca, Oxurion, Sanofi, and DDF.
From our inception in 2009 through December 31, 2019, we have received gross proceeds of $193.1 million from
the sale of ordinary shares (including in the form of ADSs) and convertible preferred shares, including the proceeds from
our IPO, as well as $30.2 million of cash payments under our collaboration revenue arrangements including $4.1 million
from Oxurion, $9.0 million from AstraZeneca, $15.0 million from Sanofi, and $1.1 million from DDF.
Cash Flows
The following table summarizes our cash flows for the years ended December 31, 2019, 2018 and 2017:
Net cash used in operating activities
Net cash used in investing activities
Net cash provided by financing activities
Effect of exchange rate changes on cash
Net increase (decrease) in cash
Operating Activities
2019
(28,613)
(1,555)
58,440
465
28,737
$
$
$
Year Ended
December 31,
2018
(in thousands)
$
2017
(1,415)
(1,113)
57,876
2,913
58,261
$
$
(26,078)
(1,186)
25,430
(2,449)
(4,283)
Net cash used in operating activities for the year ended December 31, 2019 included our net loss of $30.6 million,
net cash used in our operating assets and liabilities of $7.4 million and non‑cash charges of $9.4 million, which included
share‑based compensation expense of $3.1 million, depreciation and amortization of $1.0 million, and changes in the fair
value of the warrant liability of $5.4 million. Net changes in our operating assets and liabilities for the year
ended December 31, 2019, consisted primarily of a decrease in accounts receivable of $4.9 million primarily due to a
payment received from AstraZeneca for its exercise of the Additional Four Target Option, a decrease in deferred revenue of
$9.3 million, primarily due to the recognition of revenue related to the Sanofi collaboration arrangement, and a decrease in
accrued expenses and other current liabilities of $0.9 million, an increase in prepaid expenses and other assets of $3.1
million primarily due to prepaid clinical costs, offset by an increase in accounts payable of $0.2 million and an increase in
other long-term liabilities of $1.1 million.
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Net cash used in operating activities for the year ended December 31, 2018 included our net loss of $21.8 million,
net cash used in our operating assets and liabilities of $6.6 million and net non‑cash charges of $2.4 million, which
included share‑based compensation expense of $1.0 million and depreciation and amortization of $0.7 million, as well as a
changes in the fair value of our warrant liability of $0.7 million. Net changes in our operating assets and liabilities for
the year ended December 31, 2018 consisted primarily of an increase of $3.6 million in research and development
incentives receivable, an increase in accounts receivable of $0.4 million and an increase in prepaid expenses and other
assets of $1.6 million, as well as a decrease in accounts payable of $0.2 million and a decrease deferred revenue of
$3.9 million due to the recognition of revenue related to the Sanofi collaboration arrangement. These amounts were offset
by an increase in accrued expenses and other current liabilities of $2.6 million.
Investing Activities
During the years ended December 31, 2019 and 2018, we used $1.6 million and $1.2 million, respectively, of cash
in investing activities for purchases of property and equipment consisting primarily of laboratory equipment.
Financing Activities
During the year ended December 31, 2019, net cash provided by financing activities was $58.4 million, primarily
consisting of net proceeds of $57.0 million from our IPO, and net proceeds of $1.3 million from our Series B2 convertible
preferred shares issued in January 2019.
During the year ended December 31, 2018, net cash provided by financing activities was $25.4 million, consisting
of net proceeds of $26.0 million from the sale of our Series B2 convertible preferred shares issued in December 2018 offset
by payments of $0.6 million of costs related to our IPO.
Funding Requirements
We expect our expenses to increase substantially in connection 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 conducting future clinical trials of BT1718
and BT5528;
progress the preclinical and clinical development of BT8009, BT7480 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 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
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·
add operational, financial and management information systems and personnel, including personnel to
support our research and development programs, any future commercialization efforts and our operations as a
public company.
In addition, 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. Even if we are
able to generate product sales, we may not become profitable. Accordingly, we will need to obtain substantial additional
funding in connection with our continuing 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.
As of December 31, 2019, we had cash of $92.1 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 Annual
Report on Form 10-K. 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:
·
·
·
·
·
·
·
·
·
·
·
the scope, progress, results, and costs of drug discovery, preclinical development, laboratory testing, and
clinical trials for the product candidates we may develop;
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;
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 AstraZeneca, Oxurion and DDF;
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
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transactions, government contracts or other strategic transactions. To the extent that we raise additional capital through the
sale of equity, the ownership interests of our existing holders will be diluted, and the terms of these securities may include
liquidation or other preferences that adversely affect the rights of our existing equity holders. 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. If we are unable to
raise additional funds when needed, we may be required to delay, limit, reduce or terminate our product development or
future commercialization.
Contractual Obligations and Commitments
The following table summarizes our contractual obligations as of December 31, 2019 and the effects that such
obligations are expected to have on our liquidity and cash flows in future periods:
Operating lease commitments
(1)
Total
Payments due by period
Total
Less than
1 year
1 to 3 years
(in thousands)
More than
3 to 5 years
5 years
$
$
2,099 $
2,099 $
879 $
879 $
1,220 $
1,220 $
— $
— $
—
—
(1) Amounts reflect minimum payments due for our office and laboratory space leases. We have one office lease in
Cambridge, U.K. under an operating lease that expires in December 2021. We lease laboratory space in Lexington,
Massachusetts under an operating lease that expires in December 2022.
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 of contractual obligations above since the contracts are generally cancelable at any time upon less
than 90 days’ prior written notice. We are not contractually able to terminate for convenience and avoid any and all future
obligations to these vendors. Under such agreements, we are contractually obligated to make certain minimum payments to
the vendors, with the payments in the event of a termination with less than 90 days’ notice based on the timing of the
termination and the exact terms of the agreement.
Legal Proceedings
For a discussion of legal matters as of December 31, 2019, see Note 12 “Commitments and Contingencies,”
within the notes to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of financial condition and results of operations is based on our
consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of our
consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the
reported amounts of assets and liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our
consolidated financial statements. We base our estimates on historical experience, known trends and events and various
other factors that we believe are 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.
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While our significant accounting policies are described in greater detail in Note 2 to our consolidated financial
statements appearing elsewhere in the Annual Report on Form 10-K, we believe that the following accounting policies are
those most critical to the judgments and estimates used in the preparation of our consolidated financial statements.
Collaboration Revenues
Our revenues are generated primarily through collaborative arrangements and license agreements with
pharmaceutical companies. The terms of these arrangements may include (i) performing research and development services
using our bicyclic peptide screening platform with the goal of identifying compounds for further development and
commercialization, (ii) options to obtain additional research and development services or licenses for additional targets, or
to optimize product candidates, upon the payment of option fees, or (iii) the transfer of intellectual property rights
(licenses).
The terms of these arrangements typically include payment to us of one or more of the following: non‑refundable
upfront license fees; payments for research and development services; fees upon the exercise of options to obtain additional
services or licenses; payments based upon the achievement of defined collaboration objectives; future regulatory and
sales‑based milestone payments; and royalties on net sales of future products.
We recognize revenue in accordance with ASU 2014‑09, Revenue from Contracts with Customers (Topic 606)
(“ASC 606”) and all subsequent amendments. This standard applies to all contracts with customers, except for contracts
that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial
instruments.
Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in
an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.
To determine revenue recognition for arrangements that we determine are within the scope of ASC 606, we
perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the
contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the
contract; and (v) recognize revenue when, or as, we satisfy the performance obligations. We only apply the five‑step model
to contracts when it is probable that we will collect substantially all of the consideration we are entitled to in exchange for
the goods or services it transfers to the customer. As part of the accounting for these arrangements, we must make
significant judgments, including identifying performance obligations in the contract, estimating the amount of variable
consideration to include in the transaction price and allocating the transaction price to each performance obligation.
Once a contract is determined to be within the scope of ASC 606, we assess the goods or services promised within
the contract and determine those that are performance obligations. Arrangements that include rights to additional goods or
services that are exercisable at a customer’s discretion are generally considered options. We assess if these options provide
a material right to the customer and if so, they are considered performance obligations.
Performance obligations are promised goods or services in a contract to transfer a distinct good or service to the
customer. The promised goods or services in our contracts with customers primarily consist of license rights to our
intellectual property for research and development, research and development services, and options to acquire additional
research and development services or options to obtain additional licenses, such as a commercialization license for a
potential product candidate. Promised goods or services are considered distinct when: (i) the customer can benefit from the
good or service on its own or together with other readily available resources, and (ii) the promised good or service is
separately identifiable from other promises in the contract. In assessing whether promised goods or services are distinct, we
consider factors such as the stage of development of the underlying intellectual property, the capabilities of the customer to
develop the intellectual property on their own and whether the required expertise is readily available. In addition, we
consider whether the collaboration partner can benefit from a promise for its intended purpose without the receipt of the
remaining promises, whether the value of the promise is dependent on the unsatisfied promises, whether there are other
vendors that could provide the remaining promises, and whether it is separately identifiable from the remaining promises.
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We estimate the transaction price based on the amount of consideration we expect to receive for transferring the
promised goods or services in the contract. The consideration may include both fixed consideration and variable
consideration. At the inception of each arrangement that includes variable consideration, we evaluate the amount of the
potential payments and the likelihood that the payments will be received. We utilize either the most likely amount method
or expected value method to estimate variable consideration to include in the transaction price based on which method
better predicts the amount of consideration expected to be received. The amount included in the transaction price is
constrained to the amount for which it is probable that a significant reversal of cumulative revenue recognized will not
occur. At the end of each subsequent reporting period, we re‑evaluate the estimated variable consideration included in the
transaction price and any related constraint, and if necessary, adjust our estimate of the overall transaction price. Any such
adjustments are recorded on a cumulative catch‑up basis in the period of adjustment.
After determining the transaction price, we allocate it to the identified performance obligations based on the
estimated standalone selling prices. We must develop assumptions that require judgment to determine the standalone selling
price for each performance obligation identified in the contract. We utilize key assumptions to determine the standalone
selling price, which may include other comparable transactions, pricing considered in negotiating the transaction,
probabilities of technical and regulatory success and the estimated costs. Certain variable consideration is allocated
specifically to one or more performance obligations in a contract when the terms of the variable consideration relate to the
satisfaction of the performance obligation and the resulting amounts allocated to each performance obligation are consistent
with the amounts we would expect to receive for each performance obligation.
We then recognize as revenue in the amount of the transaction price that is allocated to the respective performance
obligation when (or as) each performance obligation is satisfied at a point in time or over time, and if over time based on
the use of an output or input method.
Licenses of Intellectual Property: If a license to our intellectual property is determined to be distinct from the
other promises or performance obligations identified in the arrangement, we recognize revenue from non‑refundable,
upfront fees allocated to the license when the license is transferred to the customer and the customer is able to use and
benefit from the license. For licenses that are combined with other promises, such as research and development services
and a research license, we utilize judgment to assess the nature of the combined performance obligation to determine
whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate
method of measuring progress for purposes of recognizing revenue. We evaluate the measure of progress each reporting
period and, if necessary, adjusts the measure of performance and related revenue recognition. The measure of progress, and
thereby periods over which revenue should be recognized, are subject to estimates by management and may change over
the course of the research and development and licensing agreement.
Research and Development Services: The promises under our collaboration agreements may include research and
development services to be performed by us on behalf of the partner. Payments or reimbursements resulting from our
research and development efforts are recognized as the services are performed and presented on a gross basis because we
are the principal for such efforts.
Customer Options: We evaluate customer options to obtain additional items (i.e. additional license rights) for
material rights, or options to acquire additional goods or services for free or at a discount. Optional future services that
reflect their standalone selling prices do not provide the customer with a material right and, therefore, are not considered
performance obligations and are accounted for as separate contracts. If optional future services reflect a significant or
incremental discount, they are material rights, and are accounted for as performance obligations. We allocate the
transaction price to material rights based on the relative standalone selling price, which is determined based on the
identified discount and the probability that the customer will exercise the option. Amounts allocated to a material right are
not recognized as revenue until, at the earliest, the option is exercised or expires.
Milestone Payments: Our collaboration agreements may include development and regulatory milestones. We
evaluate whether the milestones are considered probable of being reached and estimate the amounts to be included in the
transaction price using the most likely amount method. We evaluate factors such as the scientific, clinical, regulatory,
commercial, and other risks that must be overcome to achieve the particular milestone in making this assessment. If it is
probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction
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price. Milestone payments that are not within our control or the licensee’s control, such as marketing approvals, are not
considered probable of being achieved until those approvals are received. At the end of each reporting period, we
re‑evaluate the probability of achievement of such milestones and any related constraint, and if necessary, adjusts the
estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch‑up basis, which would
affect collaboration revenue and net loss in the period of adjustment.
Royalties: For sales‑based royalties, including milestone payments based on the level of sales, we determine
whether the sole or predominant item to which the royalties relate is a license. When the license is the sole or predominant
item to which the sales‑based royalty relates, we recognize revenue at the later of: (i) when the related sales occur, or
(ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially
satisfied). To date, we have not recognized any sales‑based royalty revenue resulting from our collaboration agreements.
We receive payments from customers based on billing schedules established in each contract. Up‑front payments
and fees are recorded as deferred revenue upon receipt or when due until we perform our obligations under these
arrangements. Amounts are recorded as accounts receivable when our right to consideration is unconditional, such as when
we have a contractual right to payment per the terms of the contract.
Accrued Research and Development Expenses
As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued
research and development expenses. This process involves reviewing open contracts and purchase orders, communicating
with our personnel to identify services that have been performed on our behalf and estimating the level of service
performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of
actual costs. The majority of our service providers invoice us in arrears for services performed, on a pre‑determined
schedule or when contractual milestones are met; however, some require advanced payments. We make estimates of our
accrued expenses as of each balance sheet date in the consolidated financial statements based on facts and circumstances
known to us at that time. Examples of estimated accrued research and development expenses include fees paid to:
·
·
·
·
·
vendors in connection with performing research activities on our behalf and conducting preclinical studies
and clinical trials on our behalf;
CMOs in connection with the production of preclinical and clinical trial materials;
CROs, investigative sites or other service providers in connection with clinical trials;
vendors in connection with preclinical and clinical development activities; and
vendors related to product manufacturing and development and distribution of preclinical and clinical
supplies.
We base our expenses related to preclinical studies and clinical trials on our estimates of the services received and
efforts expended pursuant to quotes and contracts with multiple CMOs, research institutions and vendors that supply,
conduct and manage preclinical studies and clinical trials on our behalf. The financial terms of these agreements are subject
to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which
payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. In
accruing service fees, we estimate the time period over which services will be performed and the level of effort to be
expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate,
we adjust the accrual or the amount of prepaid expenses accordingly. Although we do not expect our estimates to be
materially different from amounts actually incurred, our understanding of the status and timing of services performed
relative to the actual status and timing of services performed may vary and actual results could differ from our estimates.
As of December 31, 2019, there have not been any material adjustments to our prior estimates of accrued research and
development expenses.
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Share‑Based Compensation
We measure share‑based awards granted to employees and directors based on their fair value on the date of the
grant and recognize compensation expense for those awards over the requisite service period, which is generally the vesting
period of the respective award. We record the expense for awards with only service‑based vesting conditions using the
straight‑line method and account for forfeitures as they occur.
We have granted awards that include both a service condition, that vests over time, and a performance condition,
that will accelerate vesting upon the achievement of a specified collaboration revenue threshold. For equity awards that
contain both performance and service conditions, we recognize share‑based compensation expense using an accelerated
attribution model over the requisite service period when the achievement of a performance‑based milestone is probable
based on the relative satisfaction of the performance condition as of the reporting date.
The fair value of each share option is estimated using the Black-Scholes option-pricing model, which requires
inputs based on certain subjective assumptions, including the fair value of ordinary shares, the expected share price
volatility, the expected term of the award, the risk-free interest rate, and expected dividends. The assumptions used in
computing the fair value of stock option awards reflect our best estimates but involve uncertainties related to market and
other conditions, many of which are outside of our control. Changes in any of these assumptions may materially affect the
fair value of share-based awards granted and the amount of share-based compensation recognized in future periods.
Income Taxes
We account for income taxes using the asset and liability method, which requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated
financial statements or in our tax returns. Deferred tax assets and liabilities are determined on the basis of the differences
between the consolidated financial statements and tax basis of assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the
provision for income taxes. We assess the likelihood that our deferred tax assets will be recovered in the future and, to the
extent we believe, based upon the weight of available evidence, that it is more likely than not that all or a portion of the
deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense.
Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering
prudent and feasible tax planning strategies.
Research and Development Incentives and Receivable
We receive reimbursements of certain research and development expenditures, through our subsidiaries in the
United Kingdom, as part of a United Kingdom government’s research and development tax reliefs program. Under the
program, a percentage of qualifying research and development expenses incurred by our subsidiaries in the United
Kingdom are reimbursed up to 14.5% of the surrenderable losses. We assess our research and development activities and
expenditures to determine which activities and expenditures are likely to be eligible under the research and development
incentive program described above. At each period end, we estimate the reimbursement available to the Company based on
available information at the time.
We recognize income from the research and development incentives when the relevant expenditure has been
incurred, the associated conditions have been satisfied and there is reasonable assurance that the reimbursement will be
received. We record these research and development incentives as a reduction to research and development expenses in the
statements of operations and comprehensive loss, as the research and development tax credits are not dependent on us
generating future taxable income, our ongoing tax status, or tax position. The refund is denominated in pounds sterling and,
therefore, the receivable is remeasured into U.S. dollars as of each reporting date. The research and development incentives
receivable represents an amount due in connection with the above program. We recorded a reduction to research and
development expense of $6.7 million, $5.9 million and $2.9 million during the years ended December 31, 2019, 2018 and
2017, respectively.
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Emerging Growth Company Status
We are an “emerging growth company,” or EGC, as defined in the Jumpstart Our Business Startups Act of 2012,
or the JOBS Act, We will remain an EGC until the earlier of (1) the last day of the fiscal year following the fifth
anniversary of the completion of our initial public offering (December 31, 2024), (2) the last day of the fiscal year in which
we have total annual gross revenue of at least $1.07 billion, (3) the last day of the fiscal year in which we are deemed to be
a “large accelerated filer” as defined in Rule 12b‑2 under the Exchange Act, which would occur if the market value of our
ordinary shares held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of
such fiscal year or (4) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the
prior three-year period. The JOBS Act permits an EGC to take advantage of an extended transition period to comply with
new or revised accounting standards applicable to public companies until those standards would otherwise apply to private
companies. We have irrevocably elected to “opt out” of this provision and, as a result, we will comply with new or revised
accounting standards when they are required to be adopted by public companies that are not emerging growth companies.
In addition, we intend to rely on the other exemptions and reduced reporting requirements provided by the JOBS
Act. Subject to certain conditions set forth in the JOBS Act, we are entitled to rely on certain exemptions as an "emerging
growth company," we are not required to, among other things, (i) provide an auditor's attestation report on our system of
internal controls over financial reporting pursuant to Section 404(b), (ii) provide all of the compensation disclosure that
may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer
Protection Act, (iii) comply with any requirement that has or may be adopted by the Public Company Accounting
Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional
information about the audit and the financial statements (auditor discussion and analysis), and (iv) disclose certain
executive compensation-related items such as the correlation between executive compensation and performance and
comparisons of the chief executive officer's compensation to median employee compensation. These exemptions will apply
for a period of five years following the completion of this offering or until we no longer meet the requirements of being an
emerging growth company, whichever is earlier.
Off‑balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off‑balance sheet arrangements,
as defined in the rules and regulations of the SEC.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Interest Rate Sensitivity
As of December 31, 2019, we had cash of $92.1 million. Our exposure to interest rate sensitivity is impacted by
changes in the underlying U.K. and U.S. bank interest rates. Our surplus cash has been invested in interest‑bearing savings
accounts. We have not entered into investments for trading or speculative purposes. Due to the conservative nature of our
investment portfolio, which is predicated on capital preservation of investments with short‑term maturities, we do not
believe an immediate one percentage point change in interest rates would have a material effect on the fair market value of
our portfolio, and therefore we do not expect our operating results or cash flows to be significantly affected by changes in
market interest rates.
As of December 31, 2019, we had no debt outstanding and are therefore not subject to interest rate risk related to
debt.
Foreign Currency Exchange Risk
The functional currency is the currency of the primary economic environment in which an entity’s operations are
conducted. The functional currency of Bicycle Therapeutics plc and Bicycle Therapeutics Inc. is the United States dollar.
The functional currency of its wholly owned non-U.S. subsidiaries, BicycleTx Limited and BicycleRD Limited,
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is the British Pound Sterling and the consolidated financial statements are presented in United States Dollars, USD. The
functional currency of the Company’s subsidiaries is the same as the local currency.
Monetary assets and liabilities denominated in currencies other than the functional currency are remeasured into
the functional currency at rates of exchange prevailing at the balance sheet dates. Non-monetary assets and liabilities
denominated in foreign currencies are remeasured into the functional currency at the exchange rates prevailing at the date
of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of
net loss for the respective periods. Adjustments that arise from exchange rate changes on transactions denominated in a
currency other than the local currency are included in general and administrative expense in the consolidated statements of
operations and comprehensive loss as incurred. We recorded a foreign exchange gain of $0.9 million, a foreign exchange
gain of $0.3 million and a foreign exchange loss of $0.6 million for the years ended December 31, 2019, 2018 and 2017,
respectively.
For financial reporting purposes, our consolidated financial statements have been translated into U.S. dollars. We
translate the assets and liabilities of BicycleTx Limited and BicycleRD Limited into USD at the exchange rate in effect on
the balance sheet date. Revenues and expenses are translated at the average exchange rate in effect during the period and
shareholders’ equity (deficit) amounts are translated based on historical exchange rates as of the date of each transaction.
Translation adjustments are not included in determining net loss but are included in our foreign exchange adjustment
included in the consolidated statements of convertible preferred shares and shareholders’ equity (deficit) as a component of
accumulated other comprehensive income (loss).
We do not currently engage in currency hedging activities in order to reduce our currency exposure, but we may
begin to do so in the future.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements required by this item are set forth beginning on page F-1 of this Annual Report on Form
10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
Material Weakness in Our Internal Control Over Financial Reporting
In connection with the preparation of our consolidated financial statements for the year ended December 31, 2018,
we previously identified and disclosed a material weakness in our internal control over financial reporting related to the
valuation of our warrant liability. A material weakness is a deficiency, or a combination of deficiencies, in internal control
over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim
financial statements will not be prevented or detected on a timely basis. The material weakness was attributable to a
deficiency in the design and operating effectiveness of our review of the respective third-party valuation reports.
Specifically, the findings relate to our internal control infrastructure that existed as of December 31, 2017, and as of
September 30, 2018, where we did not design or implement sufficient processes, controls or other review processes to
ensure that the liquidation preferences of our Series A and Series B1 warrants per our articles of association were properly
reflected as an input in the valuations during the year ended December 31, 2017 or for the nine month period ended
September 30, 2018. As a result, the consolidated financial statements for those periods required restatement.
Remediation of Material Weakness
During the year ended December 31, 2019, we implemented measures designed to improve our internal control over
financial reporting to remediate the identified material weakness, including by: formalizing our processes and
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internal control documentation; strengthening supervisory reviews by our financial management; hiring additional qualified
accounting and finance personnel to enable the implementation of internal control over financial reporting; and segregating
duties amongst accounting and finance personnel. Our management has concluded, based on evidence obtained in
validating the design and operating effectiveness of the controls, that the efforts undertaken to enhance the design of our
controls would lead to the prevention or detection of a material misstatement of our consolidated financial statements. As
such, our management concluded that we have remediated this material weakness as of December 31, 2019.
Evaluation of Disclosure Controls and Procedures.
We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act, that are designed to ensure that information required to be disclosed in the reports that we file or submit
under the Exchange Act is (1) recorded, processed, summarized and reported, within the time periods specified in the
SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive
officer and principal financial officer, to allow timely decisions regarding required disclosure. Management recognizes that
any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of
achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of
possible controls and procedures.
Our management, with the participation of our principal executive officer and our principal financial officer,
evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2019. Based on the evaluation of
our disclosure controls and procedures as of December 31, 2019, our Chief Executive Officer and Chief Financial Officer
concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Management’s Annual Report on Internal Control Over Financial Reporting.
Due to a transition period established by SEC rules applicable to newly public companies, our management is not
required to evaluate the effectiveness of our internal control over financial reporting until after the filing of our Annual
Report on Form 10-K for the year ended December 31, 2019.
Attestation Report of the Registered Public Accounting Firm
This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm
due to an exemption for “emerging growth companies.”
Changes in Internal Control over Financial Reporting.
Other than described in the subsection entitled “Remediation of Material Weakness” above, there were no changes
in our internal control over financial reporting that occurred during our most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION.
None.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The information required by this Item 10 will be included in the sections titled “Board of Directors and Corporate
Governance” and “Information About Our Executive Officers” in our Proxy Statement and is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item 11 will be included in the sections titled “Executive Compensation” and
“Board of Directors and Corporate Governance” in our Proxy Statement and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
The information required by this Item 12 will be included in the sections titled “Security Ownership of Certain
Beneficial Owners and Management” and “Executive Compensation Plan Information” in our Proxy Statement and is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
The information required by this Item 13 will be included in the sections titled “Board of Directors and Corporate
Governance” and “Transactions with Related Persons” in our Proxy Statement and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The information required by this Item 14 will be included in Proposal 5 in the section titled “Independent
Registered Public Account Firm Fees” in our Proxy Statement and is incorporated herein by reference.
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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
PART IV
The financial statements schedules and exhibits filed as part of this Annual Report on Form 10-K are as follows:
(a)(1) Financial Statements
Reference is made to the financial statements included in Item 8 of Part II hereof.
(a)(2) Financial Statement Schedules
All other schedules are omitted because they are not required or the required information is included in the
financial statements or notes thereto.
(a)(3) Exhibits
The exhibits listed below are filed as part of this Form 10-K other than Exhibit 32.1, which shall be deemed
furnished:
Number
3.1
Description
Articles of Association (incorporated by reference to Exhibit 3.2 to Amendment No. 1 to the Company’s
Registration Statement on Form S‑1 (File No. 333‑231076), filed with the Securities and Exchange
Commission on May 13, 2019).
4.1
Form of Deposit Agreement (incorporated by reference to Exhibit 4.1 to Amendment No. 1 to the Company’s
Registration Statement on Form S‑1 (File No. 333‑231076), filed with the Securities and Exchange
Commission on May 13, 2019).
4.2
Form of American Depositary Receipt (included in Exhibit 4.1) (incorporated by reference to Exhibit 4.2 to
Amendment No. 1 to the Company’s Registration Statement on Form S‑1 (File No. 333‑231076), filed with
the Securities and Exchange Commission on May 13, 2019).
4.3
Registration Rights Agreement by and among Bicycle Therapeutics Limited and the Investors listed therein,
dated December 21, 2018 (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement
on Form S‑1 (File No. 333‑231076), filed with the Securities and Exchange Commission on April 26, 2019).
4.4
10.1+
Description of Securities.
Form of Share Option Contract of Bicycle Therapeutics Limited for employees in England (incorporated by
reference to Exhibit 10.2 to the Company’s Registration Statement on Form S‑1 (File No. 333‑231076), filed
with the Securities and Exchange Commission on April 26, 2019).
10.2+
Form of Share Option Contract of Bicycle Therapeutics Limited for employees in the United States
(incorporated by reference to Exhibit 10.3 to the Company’s Registration Statement on Form S‑1 (File No.
333‑231076), filed with the Securities and Exchange Commission on April 26, 2019).
10.3+
Rules of the Bicycle Therapeutics Share Option Plan, as amended on September 12, 2019 (incorporated by
reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q (File No. 001-38916) filed with
the Securities and Exchange Commission on November 7, 2019).
10.4+
Forms of award agreements under the Bicycle Therapeutics Share Option Plan, as amended.
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Number
10.5+
Description
2019 Employee Share Purchase Plan (incorporated by reference to Exhibit 10.5 to Amendment No. 1 to the
Company’s Registration Statement on Form S‑1 (File No. 333‑231076), filed with the Securities and
Exchange Commission on May 13, 2019).
10.6+
10.7+
Senior Executive Cash Incentive Bonus Plan (incorporated by reference to Exhibit 10.4 to Amendment No. 1
to the Company’s Registration Statement on Form S‑1 (File No. 333‑231076), filed with the Securities and
Exchange Commission on May 13, 2019).
Service Agreement, dated September 26, 2019, by and between BicycleTx Ltd. and Kevin Lee (Incorporated
by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 001-38916) filed with the Securities
and Exchange Commission on September 30, 2019).
10.8+
Amended and Restated Employment Agreement, dated September 26, 2019, by and between Bicycle
Therapeutics Inc. and Lee Kalowski (incorporated by reference to Exhibit 10.2 to the Company’s Current
Report on Form 8-K (File No. 001-38916) filed with the Securities and Exchange Commission on September
30, 2019).
10.9+
Amended and Restated Employment Agreement, dated September 26, 2019, by and between BicycleTx Ltd.
and Michael Skynner, Ph.D.
10.10+
Amended and Restated Employment Agreement, dated September 26, 2019, by and between Bicycle
Therapeutics Inc. and Nicholas Keen, Ph.D.
10.11+
Service Agreement, dated September 26, 2019, by and between BicycleTx Ltd and Nigel Crockett.
10.12+
Form of Deed of Indemnity between the Company and each of its directors (incorporated by reference to
Exhibit 10.1 to Company’s Current Report on Form 8-K (File No. 001-38916), filed with the Securities and
Exchange Commission on November 12, 2019).
10.13+
Form of Deed of Indemnity between the registrant and each of its executive officers (incorporated by
reference to Exhibit 10.2 to Company’s Current Report on Form 8-K (File No. 001-38916), filed with the
Securities and Exchange Commission on November 12, 2019).
10.14+
Non-employee Director Compensation Policy.
10.15
Contract for the Sale of Leasehold Land with Vacant Possession, by and between Convergence
Pharmaceuticals Limited and BicycleRD Limited, dated October 31, 2017, which is pursuant to the
Underlease of Ground and First Floor Premises Building 900 Babraham Research Campus Babraham
Cambridge, between Imperial College Thinkspace Limited, Convergence Pharmaceuticals Limited and
Biogen Idec Limited, dated March 2, 2017 (incorporated by reference to Exhibit 10.13 to Amendment No. 1
to the Company’s Registration Statement on Form S‑1 (File No. 333‑231076), filed with the Securities and
Exchange Commission on May 13, 2019).
10.16
Lease Agreement, by and between Bicycle Therapeutics Inc. and King 4 Hartwell Place, LLC, dated
September 26, 2017 (incorporated by reference to Exhibit 10.14 to the Company’s Registration Statement on
Form S‑1 (File No. 333‑231076), filed with the Securities and Exchange Commission on April 26, 2019).
10.17
Clinical Trial and License Agreement, by and between Bicycle Therapeutics Limited, Cancer Research
Technology Limited, and Cancer Research UK, dated December 13, 2016, as amended and restated by the
Deed of Amendment on March 31, 2017, as further amended by the Second Deed of Amendment on June 29,
2018 (incorporated by reference to Exhibit 10.15 to the Company’s Registration Statement on Form S‑1 (File
No. 333‑231076), filed with the Securities and Exchange Commission on April 26, 2019).
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Number
10.18†† Discovery Collaboration and License Agreement between BicycleTx Limited and Genentech, Inc., dated
Description
February 21, 2020.
21.1
Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 to the Company’s Registration
Statement on Form S‑1 (File No. 333‑231076), filed with the Securities and Exchange Commission on April
26, 2019).
23.1
24.1
31.1
Consent of Independent Registered Public Accounting Firm.
Power of Attorney (included on the signature page of this report).
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities
Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities
Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*
Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS XBRL Instance Document.
101.SCH XBRL Taxonomy Extension Schema Document.
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB XBRL Taxonomy Extension Label Linkbase Document.
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.
* Furnished herewith and not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), and shall not be deemed to be incorporated by reference into any filing under the
Securities Act of 1933, as amended, or the Exchange Act (whether made before or after the date of the Form 10-K),
irrespective of any general incorporation language contained in such filing.
+ Indicates a management contract or compensatory plan.
† Confidential treatment has been granted for certain portions of this exhibit. These portions have been omitted and filed
separately with the SEC.
†† Portions of this Exhibit (indicated with [***]) have been omitted as the registrant has determined that (i) the
omitted information is not material and (ii) the omitted information would likely cause competitive harm to the
registrant if publicly disclosed.
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Index to Consolidated Financial Statements of
Bicycle Therapeutics, plc
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2019 and 2018
Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2019, 2018, and
2017
Consolidated Statements of Convertible Preferred Shares and Shareholders’ Equity (Deficit) for the Years Ended
December 31, 2019, 2018 and 2017
Consolidated Statements of Cash Flows for the Years Ended December 31, 2019, 2018, and 2017
Notes to Consolidated Financial Statements
Page
F-2
F-3
F-4
F-5
F-6
F-7
F-1
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Bicycle Therapeutics plc
Opinion on the Financial Statements
We have audited the accompanying Consolidated Balance Sheets of Bicycle Therapeutics plc and its subsidiaries (the
“Company”) as of December 31, 2019 and 2018, and the related Consolidated Statements of Operations and
Comprehensive Loss, Consolidated Statements of Convertible Preferred Shares and Shareholders’ Equity (Deficit) and
Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2019, including the
related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018,
and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019 in
conformity with accounting principles generally accepted in the United States of America.
Change in accounting principle
As discussed in Note 2 to the consolidated financial statements, the Company has changed the manner in which it accounts
for leases in 2019.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to
express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting
firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our
audits also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable
basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Cambridge, United Kingdom
March 10, 2020
We have served as the Company's or its predecessor’s auditor since 2010, which includes periods before the Company
become subject to SEC reporting requirements.
F-2
Table of Contents
Bicycle Therapeutics plc
Consolidated Balance Sheets
(amounts in thousands, except share and per share data)
Assets
Current assets:
Cash
Accounts receivable
Prepaid expenses and other current assets
Research and development incentives receivable
Total current assets
Property and equipment, net
Operating lease right‑of‑use assets
Other assets
Total assets
Liabilities, convertible preferred shares and shareholders’ equity (deficit)
Current liabilities:
Accounts payable
Accrued expenses and other current liabilities
Deferred revenue, current portion
Total current liabilities
Warrant liability
Operating lease liabilities
Deferred revenue, net of current portion
Other long‑term liabilities
Total liabilities
Commitments and contingencies (Note 12)
Series A convertible preferred shares, £0.01 nominal value; no shares and 3,000,001 shares
authorized at December 31, 2019 and December 31, 2018, respectively; no shares and 2,800,001
shares issued and outstanding at December 31, 2019 and December 31, 2018, respectively
Series B1 convertible preferred shares, £0.01 nominal value: no shares and 4,690,485 shares
authorized at December 31, 2019 and December 31, 2018, respectively; no shares and 3,947,198
shares issued and outstanding at December 31, 2019 and December 31, 2018, respectively
Series B2 convertible preferred shares, £0.01 nominal value: no shares and 1,403,633 shares
authorized at December 31, 2019 and December 31, 2018, respectively; no shares and 1,323,248
shares issued and outstanding at December 31, 2019 and December 31, 2018, respectively
Shareholders’ equity (deficit):
Ordinary shares, £0.01 nominal value; 31,995,653 and 15,452,420 shares authorized at
December 31, 2019 and December 31, 2018, respectively; 17,993,701 shares issued and
outstanding at December 31, 2019; 898,675 shares issued and 814,728 shares outstanding at
December 31, 2018
Additional paid‑in capital
Accumulated other comprehensive loss
Accumulated deficit
Total shareholders’ equity (deficit)
Total liabilities, convertible preferred shares and shareholders’ equity (deficit)
December 31,
2019
2018
$
$
$
$
$
$
92,117
201
4,884
6,944
104,146
2,292
2,056
1,700
110,194
1,949
6,144
728
8,821
—
1,251
4,929
1,995
16,996
63,380
5,021
2,076
6,292
76,769
1,818
—
3,039
81,626
1,887
7,032
10
8,929
4,804
—
14,625
897
29,255
—
41,820
—
54,621
—
25,756
227
195,056
(1,535)
(100,550)
93,198
110,194
$
10
1,857
(1,751)
(69,942)
(69,826)
81,626
$
The accompanying notes are an integral part of the consolidated financial statements
F-3
Table of Contents
Bicycle Therapeutics plc
Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except share and per share amounts)
Collaboration revenues
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Other income (expense):
Interest and other income
Other expense, net
Total other expense, net
Net loss before income tax provision
Benefit from income taxes
Net loss
Net loss attributable to ordinary shareholders
Net loss per share attributable to ordinary shareholders, basic and diluted
Weighted average ordinary shares outstanding, basic and diluted
Year Ended
December 31,
2018
2019
$
13,801 $
7,136 $
25,540
14,560
40,100
(26,299)
20,761
8,121
28,882
(21,746)
2017
2,060
11,866
6,407
18,273
(16,213)
169
(665)
(496)
(22,242)
(396)
814
(5,377)
(4,563)
(30,862)
(254)
50
(119)
(69)
(16,282)
(23)
(30,608) $ (21,846) $ (16,259)
(30,608) $ (21,846) $ (16,259)
(48.81)
333,125
(49.78) $
(2.77) $
438,862
11,045,370
$
$
$
Comprehensives Loss:
Net loss
Other comprehensive income (loss):
Foreign currency translation adjustment
Total comprehensive loss
$
(30,608) $ (21,846) $ (16,259)
216
2,355
(1,820)
(30,392) $ (23,666) $ (13,904)
$
The accompanying notes are an integral part of the consolidated financial statements
F-4
Table of Contents
Bicycle Therapeutics plc
Consolidated Statements of Convertible Preferred Shares and Shareholders’ Equity (Deficit)
(In thousands, except share amounts)
Series A
Convertible
Preferred Shares
Series B1
Convertible
Preferred Shares
Series B2
Convertible
Preferred Shares
Ordinary Shares
Paid‑in
Accumulated
Other
Additional Comprehensive
Income
(Loss)
Accumulated
Deficit
Total
Shareholders’
Equity
(Deficit)
Shares
Amount Shares
Amount Shares
Amount Shares
Amount Capital
Balance at
December 31, 2016
Issuance of
convertible
preferred shares, net
of issuance costs of
$587 and fair value
of warrants to
subscribe for
convertible
preferred shares of
$3,254
Issuance of
restricted share
awards
Issuance of
ordinary shares
upon exercise of
share options
Share-based
compensation
expense
Foreign currency
translation
adjustment
Net loss
Balance at
December 31, 2017
Issuance of
convertible
preferred shares, net
of issuance costs of
$327
Issuance of
restricted share
awards
Issuance of
ordinary shares in
exchange for
surrender of vested
share options
Issuance of
ordinary shares
upon exercise of
share options
Share-based
compensation
expense
Foreign currency
translation
adjustment
Net loss
Balance at
December 31, 2018
Issuance of
convertible
preferred shares
Conversion of
convertible
preferred shares to
ordinary shares
Reclassification of
warrant liability to
additional paid-in
capital and exercise
of warrants
Issuance of ADSs
in initial public
offering, net of
underwriting
discounts,
commissions and
offering expenses of
$8.5 million
Issuance of
restricted share
awards
Issuance of
ordinary shares
upon exercise of
share options
Share-based
compensation
expense
Foreign currency
translation
adjustment
Net loss
Balance at
December 31, 2019
2,800,001 $ 41,820
— $
—
— $
—
316,215 $
4 $
323 $
(2,286) $
(31,837) $
(33,796)
—
—
3,947,198
54,621
—
—
—
—
—
—
—
—
—
—
—
48,480
1
114
—
—
—
—
—
—
4,300
—
—
—
—
—
—
—
—
—
—
401
—
—
—
—
—
—
—
—
—
115
—
401
—
—
—
—
—
—
—
—
2,800,001
41,820
3,947,198
54,621
—
—
—
—
—
—
—
—
368,995
—
—
5
—
—
838
2,355
—
—
(16,259)
2,355
(16,259)
69
(48,096)
(47,184)
—
—
—
—
1,323,248
25,756
—
—
—
—
—
—
—
—
—
95,644
1
223
—
—
—
—
—
224
—
—
—
—
—
—
340,728
4
(4)
—
—
—
—
—
—
—
—
—
9,361
—
—
—
—
—
—
—
—
—
—
800
—
—
—
—
—
800
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,800,001
41,820
3,947,198
54,621
1,323,248
25,756
814,728
—
—
10
—
—
(1,820)
—
—
(21,846)
(1,820)
(21,846)
1,857
(1,751)
(69,942)
(69,826)
—
—
—
—
80,385
1,583
—
—
—
—
—
—
(2,800,001)
(41,820)
(3,947,198)
(54,621)
(1,403,633)
(27,339) 11,647,529
146
123,634
—
—
123,780
—
—
—
—
—
—
723,992
9
10,018
—
—
10,027
—
—
—
—
—
— 4,637,666
59
56,322
—
—
—
—
—
—
83,947
2
395
—
—
—
—
—
—
85,839
1
142
—
—
—
—
—
—
—
—
2,688
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
216
—
—
56,381
—
397
—
—
143
2,688
—
(30,608)
216
(30,608)
— $
—
— $
—
— $
— 17,993,701 $
227 $ 195,056 $
(1,535) $
(100,550) $
93,198
The accompanying notes are an integral part of the consolidated financial statements
F-5
Table of Contents
Bicycle Therapeutics plc
Consolidated Statements of Cash Flows
(In thousands)
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Share-based compensation expense
Depreciation and amortization
Change in fair value of warrant liability
Changes in operating assets and liabilities:
Accounts receivable
Non-cash research and development expense
Research and development incentives receivable
Prepaid expenses and other current assets
Operating lease right‑of‑use assets
Other assets
Accounts payable
Accrued expenses and other current liabilities
Lease liabilities
Deferred revenue
Other long-term liabilities
Net cash used in operating activities
Cash used in investing activities:
Purchases of property and equipment
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from issuance of series B1 convertible preferred shares, net of issuance costs
Proceeds from issuance of series B2 convertible preferred shares, net of issuance costs
Proceeds from issuance of ADSs in initial public offering, net of issuance costs
Proceeds from the exercise of share options and sale of ordinary shares
Proceeds from the exercise of warrants
Net cash provided by financing activities
Effect of exchange rate changes on cash
Net increase (decrease) in cash
Cash at beginning of period
Cash at end of period
Supplemental disclosure of cash flow information
Cash paid for income taxes
Cash paid for amounts included in the measurement of operating lease liabilities
Purchases of property and equipment included in accounts payable and accrued
expenses
Advance billings on deferred revenue included in accounts receivable
Series B2 convertible preferred financing costs accrued but not paid
Deferred initial public offering costs accrued but not paid
Conversion of convertible preferred shares to ordinary shares upon closing of the
initial public offering
Reclassification of warrant liability to additional paid-in capital
Year Ended
December 31,
2018
2017
2019
$ (30,608) $ (21,846) $ (16,259)
3,083
960
5,381
1,023
712
665
515
332
119
4,909
—
(383)
(2,723)
712
(397)
220
(852)
(709)
(9,295)
1,089
(400)
—
(3,586)
(1,329)
—
(301)
(169)
2,557
—
—
856
(1,407)
(330)
—
(1,039)
67
1,267
—
(3,947) 14,081
383
(1,415)
543
(28,613) (26,078)
(1,555)
(1,555)
(1,186)
(1,186)
(1,113)
(1,113)
—
56,957
143
6
1,334 26,005
(576)
1
—
— 57,875
—
—
1
—
58,440 25,430 57,876
(2,449)
2,913
(4,283) 58,261
9,402
$ 92,117 $ 63,380 $ 67,663
465
28,737
63,380 67,663
$
$
$
$
$
$
117 $
891 $
76 $
— $
— $
— $
73 $
— $
— $
5,045 $
249 $
1,076 $
$ 123,780 $
$ 10,021 $
— $
— $
—
—
—
—
—
—
—
—
The accompanying notes are an integral part of the consolidated financial statements
F-6
Table of Contents
Bicycle Therapeutics plc
Notes to Consolidated Financial Statements
1. Nature of the business and basis of presentation
Bicycle Therapeutics plc (collectively with its subsidiaries, the “Company”) is a clinical‑stage biopharmaceutical
company developing a novel and differentiated class of medicines, which the Company refers to as Bicycles, for diseases
that are underserved by existing therapeutics. Bicycles are a unique therapeutic modality combining the pharmacology
usually associated with a biologic with the manufacturing and pharmacokinetic properties of a small molecule. The
Company’s initial internal programs are focused on oncology indications with high unmet medical need. The Company’s
lead product candidate, BT1718, is a Bicycle Toxin Conjugate (“BTC”) that is being developed to target tumors that
express Membrane Type 1 matrix metalloprotease. BT1718 is being investigated for safety, tolerability and efficacy in an
ongoing Phase I/IIa clinical trial in collaboration with, and fully funded by, the Centre for Drug Development of Cancer
Research UK. The Company is also evaluating BT5528, a second-generation BTC targeting Ephrin type‑A receptor 2, or
EphA2, in a Company-sponsored Phase I/II study and conducting Investigational New Drug application, or IND, ‑enabling
activities for BT8009, a BTC targeting Nectin-4. The Company’s discovery pipeline in oncology includes Bicycle-based
systemic immune cell agonists and Bicycle tumor-targeted immune cell agonists (TICAs™). Beyond oncology, the
Company is collaborating with biopharmaceutical companies and organizations in therapeutic areas that include
anti‑infective, cardiovascular, ophthalmology and respiratory indications.
The accompanying consolidated financial statements include the accounts of Bicycle Therapeutics plc and its
wholly owned subsidiaries, BicycleTx Limited, BicycleRD Limited and Bicycle Therapeutics Inc. All intercompany
balances and transactions have been eliminated on consolidation.
The accompanying consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America (“GAAP”).
Share capital reorganization
In May 2019, the Company’s board of directors and shareholders approved the reorganization of the Company’s
share capital by issuing ordinary shares as bonus shares to each holder of ordinary shares on the basis of 1.429 bonus shares
for each ordinary share in issue (having the effect of a one for 1.429 share split (without having an impact on the nominal
value of the ordinary shares)), which was effected on May 13, 2019. All issued and outstanding share and per share
amounts of ordinary shares and share options included in the accompanying consolidated financial statements have been
adjusted to reflect this share split for all periods presented. In addition, the number of ordinary shares that will be issued to
the holders of the Company’s convertible preferred shares (Note 6) and warrants to subscribe for Series A and Series B1
convertible preferred shares (Note 7) in conjunction with the closing of the initial public offering (“IPO”) has been adjusted
accordingly, as well as the number of ordinary shares over which options have been granted.
On May 22, 2019, Bicycle Therapeutics Limited (“BTL”) re-registered as a public limited company, and changed
its name to Bicycle Therapeutics plc. The Company historically conducted its business through BTL and its wholly owned
subsidiaries, BicycleTx Limited, BicycleRD Limited and Bicycle Therapeutics Inc., and, therefore the historical
consolidated financial statements previously presented the consolidated results of operations of BTL. Following the
completion of the Company’s re-registration in May 2019, the consolidated financial statements of BTL became the
historical consolidated financial statements of the Company.
Initial public offering
On May 28, 2019, the Company completed its IPO, pursuant to which it issued and sold 4,333,333 American
Depositary Shares (“ADSs”), representing the same number of ordinary shares at a public offering price of $14.00 per
ADS. In addition, in June 2019, the Company issued and sold an additional 304,333 ADSs, pursuant to the partial
F-7
Table of Contents
exercise of the underwriters’ option to purchase additional ADSs. The aggregate net proceeds received by the Company
from the IPO were $56.4 million, after deducting underwriting discounts and commissions of $4.5 million and offering
expenses of $4.0 million. Upon the closing of the IPO, all of the Company’s outstanding convertible preferred shares
automatically converted into 11,647,529 ordinary shares, on a 1:1.429 basis. In addition, warrants to subscribe for Series A
and Series B1 convertible preferred shares that were not exercised in conjunction with the IPO automatically became
warrants to subscribe for ordinary shares, and meet the criteria to be classified as shareholders’ equity (deficit). As such,
following the final remeasurement on May 28, 2019, the Company reclassified the carrying value of the warrant liability to
additional paid-in-capital in the consolidated balance sheet.
2017 Reorganization
Prior to December 2017, the development of Bicycles was conducted by Bicycle Therapeutics Limited (for the
purpose of the 2017 Reorganization referred to as “BTL OldCo.”), a limited liability company incorporated in England and
Wales on July 13, 2009, and its wholly‑owned U.S. subsidiary, Bicycle Therapeutics Inc., which was incorporated in
Delaware in April 2016. During 2017, the Company entered into a series of transactions to effect a reorganization, and
created a new holding company to facilitate its ability to pursue an IPO, Bicycle Therapeutics Limited (for the purpose of
the 2017 Reorganization referred to as “BTL NewCo.”). These transactions are collectively referred to as the 2017
Reorganization. The 2017 Reorganization was enacted through a share‑for‑share exchange pursuant to which the
shareholders of BTL OldCo. exchanged their shares for equivalent shares of BTL NewCo. Thereafter, BTL OldCo.
transferred the entire issued share capital in Bicycle Therapeutics Inc. to BTL NewCo. and certain of its assets, including
all employees, were transferred to BicycleTx Limited, a newly created subsidiary of BTL NewCo. The 2017
Reorganization was accounted for as a transaction of entities under common control. Upon completion of the 2017
Reorganization, the historical consolidated financial statements of BTL OldCo. became the historical consolidated financial
statements of the Company, which had nominal assets and liabilities and had not conducted any operations other than the
actions incidental to the share exchange and its incorporation. The Company concluded that the reorganization resulted in
no change in the material rights and preferences of each respective class of equity interests and no change in the fair value
of each respective class of equity interests before and after the reorganization.
Liquidity
The Company is subject to risks common to companies in the biotechnology industry, including but not limited to,
risks of failure of preclinical studies and clinical trials, the need to obtain marketing approval for any drug product
candidate that it may identify and develop, the need to successfully commercialize and gain market acceptance of its
product candidates, dependence on key personnel and collaboration partners, protection of proprietary technology,
compliance with government regulations, development by competitors of technological innovations, and the ability to
secure additional capital to fund operations. Product candidates currently under development will require significant
additional research and development efforts, including preclinical and clinical testing and regulatory approval prior to
commercialization. Even if the Company’s research and development efforts are successful, it is uncertain when, if ever,
the Company will realize significant revenue from product sales.
The accompanying consolidated financial statements have been prepared on the basis of continuity of operations,
realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. Since inception,
the Company has devoted substantially all of its efforts to business planning, research and development, recruiting
management and technical staff, and raising capital. The Company has funded its operations with proceeds from sales of
convertible preferred shares (Note 6) and proceeds received from its collaboration arrangements (Note 10) and most
recently, with proceeds from the IPO completed in May 2019. The Company has incurred recurring losses since inception,
including net losses of $30.6 million for the year ended December 31, 2019, $21.8 million for the year ended December 31,
2018 and $16.3 million for the year ended December 31, 2017. As of December 31, 2019, the Company had an
accumulated deficit of $100.6 million. The Company expects to continue to generate operating losses in the foreseeable
future. As of March 10, 2020, the issuance date of the annual consolidated financial statements for the year ended
December 31, 2019, the Company expects that its cash will be sufficient to fund its operating expenses and capital
expenditure requirements through at least twelve months from the issuance date of the annual consolidated financial
statements.
F-8
Table of Contents
The Company expects its expenses to increase substantially in connection with ongoing activities, particularly as
the Company advances its preclinical activities and clinical trials for its product candidates in development. Accordingly,
the Company will need to obtain additional funding in connection with continuing operations. If the Company is unable to
raise capital when needed, or on attractive terms, it could be forced to delay, reduce or eliminate its research or drug
development programs or any future commercialization efforts. Although management continues to pursue these plans,
there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the
Company to fund continuing operations, if at all.
2. Summary of Significant Accounting Policies
Use of estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting
periods. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not
limited to, the accrual for research and development expenses, revenue recognition, the fair value of ordinary shares and the
valuation of the warrant liability prior to the Company’s IPO, share-based compensation expense, and income taxes. The
Company bases its estimates on historical experience, known trends and other market‑specific or other relevant factors that
it believes to be reasonable under the circumstances. Estimates are periodically reviewed in light of reasonable changes in
circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual
results could differ from those estimates or assumptions.
Foreign currency and currency translation
The functional currency is the currency of the primary economic environment in which an entity’s operations are
conducted. On June 1, 2019, Bicycle Therapeutics plc adopted the U.S. dollar as its functional currency. Bicycle
Therapeutics plc is a holding company that has no operating activities and its primary functions are to serve as a financing
vehicle to fund the operations of the Company’s operating entities, to serve as the listing company needed to access U.S.
capital markets, and to hold investments. Therefore, its financing source is the primary indicator of its cash flows and its
functional currency. The change in functional currency from the British Pound Sterling is due to a change in the source of
Bicycle Therapeutics plc’s financing and cash flows, which following the completion of the IPO is now primarily the U.S.
Dollar (“USD”). Historically its financing had been in British Pound Sterling.
The functional currency of Bicycle Therapeutics plc’s wholly owned non-U.S. subsidiaries, BicycleTx Limited
and BicycleRD Limited, is the British Pound Sterling and the functional currency of its U.S. subsidiary, Bicycle
Therapeutics Inc. is the USD. The functional currency of the Company’s subsidiaries is the same as the local currency.
Monetary assets and liabilities denominated in currencies other than the functional currency are remeasured into
the functional currency at rates of exchange prevailing at the balance sheet dates. Non‑monetary assets and liabilities
denominated in foreign currencies are remeasured into the functional currency at the exchange rates prevailing at the date
of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of
net loss for the respective periods. Adjustments that arise from exchange rate changes on transactions denominated in a
currency other than the local currency are included in general and administrative expense in the consolidated statements of
operations and comprehensive loss as incurred. The Company recorded a foreign exchange gain of $0.9 million, a foreign
exchange gain of $0.3 million and a foreign exchange loss of $0.6 million and for the years ended December 31, 2019,
2018 and 2017, respectively.
The Company translates the assets and liabilities of BicycleTx Limited and BicycleRD Limited into USD at the
exchange rate in effect on the balance sheet date. Revenues and expenses are translated at the average exchange rate in
effect during the period. Unrealized translation gains and losses are recorded as a cumulative translation adjustment, which
is included in the consolidated statements of convertible preferred shares and shareholders’ equity (deficit) as a component
of accumulated other comprehensive loss.
F-9
Table of Contents
Concentrations of credit risk and of significant suppliers
Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of
cash and accounts receivable. The Company deposits its cash in financial institutions in amounts that may exceed federally
insured limits and has not experienced any losses on such accounts. The Company does not believe it is exposed to any
unusual credit risk beyond the normal credit risk associated with commercial banking relationships.
Accounts receivable primarily consist of amounts due under the collaboration agreements between BicycleTx
Limited and AstraZeneca AB (“AstraZeneca”) and Sanofi (formerly Bioverativ) and between BicycleRD Limited and
Oxurion NV. (“Oxurion”), formerly ThromboGenics NV. (Note 10), for which the Company does not obtain collateral. As
of December 31, 2019, the Company’s revenue to date has primarily been generated from the collaboration agreements
with AstraZeneca, Sanofi, the Dementia Discovery Fund and Oxurion.
The Company relies, and expects to continue to rely, on a small number of vendors to manufacture supplies and
raw materials for its development programs. These programs could be adversely affected by a significant interruption in
these manufacturing services or the availability of raw materials.
Cash and cash equivalents
The Company considers all highly liquid investments with original maturities of three months or less at date of
purchase to be cash equivalents. The Company had no cash equivalents at December 31, 2019 and 2018.
Accounts receivable
The Company makes judgments as to its ability to collect outstanding receivables and provides an allowance for
receivables when collection becomes doubtful. Provisions are made based upon a specific review of all significant
outstanding invoices and the overall quality and age of those invoices. To date, the Company has not had any write‑offs of
bad debt, and the Company did not have an allowance for doubtful accounts as of December 31, 2019 and 2018.
Deferred offering costs
The Company capitalizes certain legal, professional accounting and other third‑party fees that are directly
associated with in‑process equity financings as deferred offering costs until such financings are consummated. After
consummation of the equity financing, these costs are recorded in shareholders’ equity (deficit) as a reduction of proceeds
generated as a result of the offering. Should an in‑process equity financing be abandoned, the deferred offering costs will
be expensed immediately as a charge to operating expenses in the consolidated statements of operations and comprehensive
loss.
Property and equipment
Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and
amortization expense is recognized using the straight‑line method over the estimated useful lives of the respective assets as
follows:
Laboratory equipment
Leasehold improvements
Computer equipment
Furniture and office equipment
Estimated Useful Life
3 to 5 years
Lesser of lease term or useful life
3 years
5 years
Costs for capital assets not yet placed into service are capitalized as construction‑in‑progress and depreciated in
accordance with the above guidelines once placed into service. Upon retirement or sale, the cost of assets disposed of and
the related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in loss
F-10
Table of Contents
from operations. As of December 31, 2019 and 2018, there have been no significant asset retirements to date. Expenditures
for repairs and maintenance are charged to expense as incurred.
Impairment of long‑lived assets
Long‑lived assets consist of property and equipment. Long‑lived assets to be held and used are tested for
recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may
not be fully recoverable. Factors that the Company considers in deciding when to perform an impairment review include
significant underperformance of the business in relation to expectations, significant negative industry or economic trends
and significant changes or planned changes in the use of the assets. If an impairment review is performed to evaluate a
long‑lived asset group for recoverability, the Company compares forecasts of undiscounted cash flows expected to result
from the use and eventual disposition of the long‑lived asset group to its carrying value. An impairment loss would be
recognized when estimated undiscounted future cash flows expected to result from the use of an asset group are less than
its carrying amount. The impairment loss would be based on the excess of the carrying value of the impaired asset group
over its fair value, determined based on discounted cash flows. To date, the Company has not recorded any impairment
losses on long‑lived assets.
Fair value measurements
Certain assets and liabilities of the Company are carried at fair value under GAAP. Fair value is defined as the
exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between market participants on the measurement
date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of
unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the
following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered
unobservable:
·
·
·
Level 1 — Quoted prices in active markets for identical assets or liabilities.
Level 2 — Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for
similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or
liabilities, or other inputs that are observable or can be corroborated by observable market data.
Level 3 — Unobservable inputs that are supported by little or no market activity that are significant to
determining the fair value of the assets or liabilities, including pricing models, discounted cash flow
methodologies and similar techniques.
Prior to the IPO, the Company’s warrant liability was carried at fair value, determined according to the fair value
hierarchy described above (Note 3). The carrying values of accounts receivable, research and development incentives
receivable, other current assets, accounts payable and accrued expenses and other current liabilities approximate their fair
values due to the short‑term nature of these assets and liabilities.
Warrant liability
Prior to the IPO, the Company classified warrants to subscribe for Series A and Series B1 convertible preferred
shares (Note 6) as a liability on its consolidated balance sheets as these warrants to subscribe for Series A and Series B1
convertible preferred shares were free‑standing financial instruments that might have required the Company to transfer
assets upon exercise. The warrant liability was initially recorded at fair value upon the date of the warrants’ issuance and
was subsequently remeasured to fair value at each reporting date. Changes in the fair value of the warrant liability were
recognized as a component of other expense, net in the consolidated statements of operations and comprehensive loss.
Upon the closing of the IPO, warrants to subscribe for Series A and Series B1 convertible preferred shares that were not
exercised or expired in conjunction with the IPO automatically became warrants to subscribe for ordinary shares, and meet
the criteria to be classified as shareholders’ equity (deficit). As such, following the final remeasurement on May 28,
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2019, the Company reclassified the carrying value of the warrant liability to additional paid-in-capital in the consolidated
balance sheet.
Segment and geographic information
Operating segments are defined as components of a business for which separate discrete financial information is
available for evaluation by the chief operating decision maker in deciding how to allocate resources and assess
performance. The Company and its chief operating decision maker, the Company’s Chief Executive Officer, view the
Company’s operations and manages its business as a single operating segment, which is developing a unique class of
chemically synthesized medicines based on its proprietary constrained peptides.
The Company operates in two geographic regions: the United Kingdom and the United States.
Leases
The Company determines if an arrangement is a lease at inception. Operating leases are included in operating
lease right‑of‑use (“ROU”) assets, other current liabilities, and operating lease liabilities in the Company’s consolidated
balance sheet. The Company has not entered into any financing leases.
ROU assets represent the Company’s right to use and control an underlying asset for the lease term and lease
liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and liabilities are
recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s
leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available
at commencement date in determining the present value of lease payments. The ROU asset also includes lease payments
made before the lease commencement date and excludes any lease incentives. The Company’s lease terms may include
options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.
The components of a lease shall be split into three categories, if applicable: lease components (e.g., land, building,
etc.), non‑lease components (e.g., common area maintenance, maintenance, consumables, etc.), and non‑components
(e.g., property taxes, insurance, etc.). The fixed and in‑substance fixed contract consideration (including any related to
non‑components) must then be allocated based on fair values to the lease components and non‑lease components. The
Company’s facilities operating leases may have lease and non‑lease components to which the Company has elected to
apply a practical expedient to account for each lease component and related non‑lease component as one single component.
The lease component results in a right‑of‑use asset being recorded on the balance sheet. Lease expense for lease payments
is recognized on a straight‑line basis over the lease term.
Revenue recognition
The Company’s revenues are generated primarily through collaborative arrangements and license agreements with
pharmaceutical companies. The terms of these arrangements may include (i) performing research and development services
using the Company’s bicyclic peptide screening platform with the goal of identifying compounds for further development
and commercialization, (ii) options to obtain additional research and development services or licenses for additional targets,
or to optimize product candidates, upon the payment of option fees, or (iii) the transfer of intellectual property rights
(licenses).
The terms of these arrangements typically include payment to the Company of one or more of the following:
non‑refundable, upfront license fees; payments for research and development services; fees upon the exercise of options to
obtain additional services or licenses; payments based upon the achievement of defined collaboration objectives; future
regulatory and sales‑based milestone payments; and royalties on net sales of future products.
The Company recognizes revenue in accordance with ASU 2014‑09, Revenue from Contracts with Customers
(Topic 606) (“ASC 606”) and all subsequent amendments. This standard applies to all contracts with customers, except
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for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and
financial instruments.
Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in
an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.
To determine revenue recognition for arrangements that the Company determines are within the scope of
ASC 606, it performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance
obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance
obligations in the contract; and (v) recognize revenue when, or as, the Company satisfies the performance obligations. The
Company only applies the five‑step model to contracts when it is probable that the entity will collect substantially all of the
consideration it is entitled to in exchange for the goods or services it transfers to the customer. As part of the accounting for
these arrangements, the Company must make significant judgments, including identifying performance obligations in the
contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction
price to each performance obligation.
Once a contract is determined to be within the scope of ASC 606, the Company assesses the goods or services
promised within the contract and determines those that are performance obligations. Arrangements that include rights to
additional goods or services that are exercisable at a customer’s discretion are generally considered options. The Company
assesses if these options provide a material right to the customer and if so, they are considered performance obligations.
Performance obligations are promised goods or services in a contract to transfer a distinct good or service to the
customer. The promised goods or services in the Company’s contracts with customers primarily consist of license rights to
the Company’s intellectual property for research and development, research and development services, options to acquire
additional research and development services, and options to obtain additional licenses, such as a commercialization license
for a potential product candidate. Promised goods or services are considered distinct when: (i) the customer can benefit
from the good or service on its own or together with other readily available resources, and (ii) the promised good or service
is separately identifiable from other promises in the contract. In assessing whether promised goods or services are distinct,
the Company considers factors such as the stage of development of the underlying intellectual property, the capabilities of
the customer to develop the intellectual property on their own and whether the required expertise is readily available. In
addition, the Company considers whether the collaboration partner can benefit from a promise for its intended purpose
without the receipt of the remaining promises, whether the value of the promise is dependent on the unsatisfied promises,
whether there are other vendors that could provide the remaining promises, and whether it is separately identifiable from
the remaining promises.
The Company estimates the transaction price based on the amount of consideration the Company expects to
receive for transferring the promised goods or services in the contract. The consideration may include both fixed
consideration and variable consideration. At the inception of each arrangement that includes variable consideration, the
Company evaluates the amount of the potential payments and the likelihood that the payments will be received. The
Company utilizes either the most likely amount method or expected value method to estimate variable consideration to
include in the transaction price based on which method better predicts the amount of consideration expected to be received.
The amount included in the transaction price is constrained to the amount for which it is probable that a significant reversal
of cumulative revenue recognized will not occur. At the end of each subsequent reporting period, the Company re‑evaluates
the estimated variable consideration included in the transaction price and any related constraint, and if necessary, adjusts its
estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch‑up basis in the period of
adjustment.
After the transaction price is determined it is allocated to the identified performance obligations based on the
estimated standalone selling price. The Company must develop assumptions that require judgment to determine the
standalone selling price for each performance obligation identified in the contract. The Company utilizes key assumptions
to determine the standalone selling price, which may include other comparable transactions, pricing considered in
negotiating the transaction, probabilities of technical and regulatory success and the estimated costs. Certain variable
consideration is allocated specifically to one or more performance obligations in a contract when the
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terms of the variable consideration relate to the satisfaction of the performance obligation and the resulting amounts
allocated to each performance obligation are consistent with the amounts the Company would expect to receive for each
performance obligation.
The Company then recognizes as revenue in the amount of the transaction price that is allocated to the respective
performance obligation when (or as) each performance obligation is satisfied at a point in time or over time, and if over
time based on the use of an input method.
Licenses of intellectual property: If a license to the Company’s intellectual property is determined to be distinct
from the other promises or performance obligations identified in the arrangement, the Company recognizes revenue from
non‑refundable, upfront fees allocated to the license when the license is transferred to the customer and the customer is able
to use and benefit from the license. For licenses that are combined with other promises, such as research and development
services and a research license, the Company utilizes judgment to assess the nature of the combined performance obligation
to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the
appropriate method of measuring progress for purposes of recognizing revenue. The Company evaluates the measure of
progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. The
measure of progress, and thereby periods over which revenue should be recognized, are subject to estimates by
management and may change over the course of the research and development and licensing agreement.
Research and Development Services: The promises under the Company’s collaboration agreements may include
research and development services to be performed by the Company on behalf of the partner. Payments or reimbursements
resulting from the Company’s research and development efforts are recognized as the services are performed and presented
on a gross basis because the Company is the principal for such efforts.
Customer Options: The Company evaluates the customer options to obtain additional items (i.e. additional license
rights) for material rights, or options to acquire additional goods or services for free or at a discount. Optional future
services that reflect their standalone selling prices do not provide the customer with a material right and, therefore, are not
considered performance obligations and are accounted for as separate contracts. If optional future services include a
material right, they are accounted for as performance obligations. The Company determines an estimated standalone selling
price of any material rights for the purpose of allocating the transaction price. The Company considers factors such as the
identified discount and the probability that the customer will exercise the option. Amounts allocated to a material right are
not recognized as revenue until, at the earliest, the option is exercised or expires.
Milestone payments: The Company’s collaboration agreements may include development and regulatory
milestones. The Company evaluates whether the milestones are considered probable of being reached and estimates the
amount to be included in the transaction price using the most likely amount method. The Company evaluates factors such
as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the particular milestone
in making this assessment. If it is probable that a significant revenue reversal would not occur, the associated milestone
value is included in the transaction price. Milestone payments that are not within the Company’s control or the licensee’s
control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. At
the end of each reporting period, the Company re‑evaluates the probability of achievement of such milestones and any
related constraint, and if necessary, adjusts the estimate of the overall transaction price. Any such adjustments are recorded
on a cumulative catch‑up basis, which would affect collaboration revenue and net loss in the period of adjustment.
Royalties: For sales‑based royalties, including milestone payments based on the level of sales, the Company
determines whether the sole or predominant item to which the royalties relate is a license. When the license is the sole or
predominant item to which the sales‑based royalty relates, the Company recognizes revenue at the later of: (i) when the
related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been
satisfied (or partially satisfied). To date, the Company has not recognized any sales‑based royalty revenue resulting from
the Company’s collaboration agreements.
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The Company receives payments from customers based on billing schedules established in each contract. Up‑front
payments and fees are recorded as deferred revenue upon receipt or when due until the Company performs its obligations
under these arrangements. Amounts are recorded as accounts receivable when the Company’s right to consideration is
unconditional, such as when the Company has a contractual right to payment per the terms of the contract.
For a complete discussion of accounting for collaboration revenues, see Note 10, “Significant Agreements”
Government grants
From time to time, the Company may enter into arrangements with governmental entities for the purposes of
obtaining funding for research and development activities. The Company recognizes government grant funding in the
consolidated statements of operations and comprehensive loss as the related expenses being funded are incurred. The
Company classifies government grants received under these arrangements as a reduction to the related research and
development expense incurred. The Company analyzes each arrangement on a case‑by‑case basis. For the year ended
December 31, 2019, the Company recognized $0.6 million, as a reduction of research and development expense related to
government grant arrangements. There were no grant proceeds recognized for the years ended December 31, 2018 or 2017.
Research and development costs
Research and development costs are expensed as incurred. Research and development expenses consist of costs
incurred in performing research and development activities, including salaries, share‑based compensation and benefits,
travel, facilities costs, materials and laboratory supplies, and external costs of outside vendors engaged to conduct
preclinical development, clinical development activities, as well as to manufacture clinical trial materials. Facilities costs
primarily include the allocation of rent, utilities, and depreciation.
Non‑refundable prepayments for goods or services that will be used or rendered for future research and
development activities are deferred and capitalized until the related goods are delivered or the related services are
performed, or until it is no longer expected that the goods will be delivered, or the services rendered.
Research and manufacturing contract costs and accruals
The Company has entered into various research and development and manufacturing contracts, including contracts
with respect to preclinical studies and clinical trials, with companies both inside and outside of the United States. These
agreements are generally cancelable with 90 days or less notice, and related costs are recorded as research and development
expenses as incurred. The Company records accruals for estimated ongoing costs. When evaluating the adequacy of the
accrued liabilities, the Company analyzes progress of the research and development and manufacturing activities, including
the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates are made in
determining the accrued balances at the end of any reporting period. Actual results could differ from the Company’s
estimates. The Company’s historical accrual estimates have not been materially different from the actual costs.
Research and development incentives and receivable
The Company, through its subsidiaries in the United Kingdom, receives reimbursements of certain research and
development expenditures as part of a United Kingdom government’s research and development tax reliefs program. Under
the program, the Company is able to surrender trading losses that arise from qualifying research and development expenses
incurred by the Company’s subsidiaries in the United Kingdom for a tax credit of up to 14.5% of the surrenderable losses.
Management has assessed the Company’s research and development activities and expenditures to determine
which activities and expenditures are likely to be eligible under the research and development incentive program
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described above. At each period end, management estimates the reimbursement available to the Company based on
available information at the time.
The Company recognizes income from the research and development incentives when the relevant expenditure
has been incurred, the associated conditions have been satisfied and there is reasonable assurance that the reimbursement
will be received. The Company records these research and development incentives as a reduction to research and
development expenses in the statements of operations and comprehensive loss, as the research and development tax credits
are not dependent on us generating future taxable income, the Company’s ongoing tax status, or tax position. The research
and development incentives receivable represent an amount due in connection with the above program. The Company
recorded a reduction to research and development expense of $6.7 million, $5.9 million and $2.9 million during the years
ended December 31, 2019, 2018 and 2017, respectively.
Patent costs
All patent‑related costs incurred in connection with preparing, filing and prosecuting patent applications are
expensed as incurred due to the uncertainty about the recovery of the expenditure. Amounts incurred are classified as
general and administrative expenses in the consolidated statements of operations and comprehensive loss.
Share‑based compensation
The Company measures all equity awards granted to employees and directors based on the fair value on the date
of grant. Compensation expense of those awards is recognized over the requisite service period, which is generally the
vesting period of the respective award. The Company records the expense for awards with only service‑based vesting
conditions using the straight‑line method. The Company accounts for forfeitures as they occur.
The Company has granted awards with both a service condition that vest over time and a performance condition
that will accelerate vesting upon the achievement of a specified collaboration revenue threshold. For equity awards that
contain both performance and service conditions, the Company recognizes share‑based compensation expense using an
accelerated attribution model over the requisite service period when the achievement of a performance‑based milestone is
probable based on the relative satisfaction of the performance condition as of the reporting date.
For share‑based awards granted to non‑employee consultants, the measurement date for non-employee awards is
the date of grant. The compensation expense is then recognized over the requisite service period, which is the vesting
period of the respective award, without subsequent changes in the fair value of the award.
The fair value of each restricted ordinary share award is based on the fair value of the Company’s ordinary shares,
less any applicable purchase price. The fair value of each share option is estimated using the Black‑Scholes option‑pricing
model, which requires inputs based on certain subjective assumptions, including the fair value of ordinary shares, the
expected share price volatility, the expected term of the award, the risk‑free interest rate, and expected dividends.
Prior to the IPO, the Company utilized significant estimates and assumptions in determining the fair value of its
common stock. Given the absence of an active market for the Company’s ordinary shares, the board of directors determined
the estimated fair value of the Company’s equity instruments based on input from management which utilized the most
recently available independent third‑party valuation, and considering a number of objective and subjective factors,
including external market conditions affecting the biotechnology industry sector. The third party valuation reports
performed utilized various valuation methodologies in accordance with the framework of the American Institute of
Certified Public Accountants’ Technical Practice Aid, Valuation of Privately‑Held Company Equity Securities Issued as
Compensation, to estimate the fair value of its ordinary shares. Each valuation methodology includes estimates and
assumptions that require judgment. These estimates and assumptions include a number of objective and subjective factors
in determining the value of the Company’s ordinary shares at each grant date, including the following: (1) prices paid for
the Company’s convertible preferred shares, which the Company had sold to outside investors in arm’s‑length transactions,
and the rights, preferences, and privileges of the Company’s convertible preferred shares and ordinary shares; (2) the
Company’s stage of development; (3) the fact that the grants of share‑based awards
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involved illiquid securities in a private company; and (4) the likelihood of achieving a liquidity event for the ordinary
shares underlying the share‑based awards, such as an IPO or sale of the Company, given prevailing market conditions.
Expected volatility is calculated based on reported volatility data for a representative group of publicly traded
companies for which historical information was available. The historical volatility is calculated based on a period of time
commensurate with the assumption used for the expected term. The risk‑free interest rate is based on the U.S. Treasury
yield curve in effect at the time of grant commensurate with the expected term assumption. The Company uses the
simplified method, under which the expected term is presumed to be the midpoint between the vesting date and the end of
the contractual term. The Company utilizes this method due to the lack of historical exercise data and the plain nature of its
share‑based awards. The Company uses the remaining contractual term for the expected life of non‑employee awards. The
expected dividend yield is assumed to be zero as the Company has never paid dividends and has no current plans to pay
any dividends on ordinary shares.
The Company classifies share‑based compensation expense in its consolidated statements of operations and
comprehensive loss in the same manner in which the award recipient’s payroll costs are classified or in which the award
recipient’s service payments are classified.
Comprehensive loss
Comprehensive loss includes net loss as well as other changes in shareholders’ equity (deficit) that result from
transactions and economic events other than those with shareholders. The Company records unrealized gains and losses
related to foreign currency translation as a component of other comprehensive loss in the consolidated statements of
operations and comprehensive loss.
Contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties and other sources are
recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. At each
reporting date, the Company evaluates whether or not a potential loss amount or a potential loss range is probable and
reasonably estimable under the provisions of the authoritative guidelines that address accounting for contingencies. The
Company expenses costs as incurred in relation to such legal proceedings as general and administrative expense within the
consolidated statements of operations and comprehensive loss.
Income taxes
The Company accounts for income taxes using the asset and liability method, which requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the
consolidated financial statements or in the Company’s tax returns. Deferred tax assets and liabilities are determined on the
basis of the differences between the consolidated financial statements and tax basis of assets and liabilities using enacted
tax rates in effect for the year in which the differences are expected to reverse. Changes in deferred tax assets and liabilities
are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be
recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is
more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established
through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future
taxable profits expected and considering prudent and feasible tax planning strategies.
The Company accounts for uncertainty in income taxes recognized in the consolidated financial statements by
applying a two‑step process to determine the amount of tax benefit to be recognized. First, the tax position must be
evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax
position is deemed more‑likely‑than‑not to be sustained, the tax position is then assessed to determine the amount of benefit
to recognize in the consolidated financial statements. The amount of the benefit that may be recognized is the largest
amount that will more likely than not be realized upon ultimate settlement. The provision for income taxes includes the
effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net
interest and penalties.
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Net loss per share
The Company follows the two‑class method when computing net loss per share as the Company has issued shares
that meet the definition of participating securities. The two‑class method determines net loss per share for each class of
ordinary and preferred securities according to dividends declared or accumulated and participation rights in undistributed
earnings. The two‑class method requires income available to ordinary shareholders for the period to be allocated between
ordinary and preferred securities based upon their respective rights to receive dividends as if all income for the period had
been distributed.
Basic net loss per share attributable to ordinary shareholders is computed by dividing the net loss attributable to
ordinary shareholders by the weighted average number of ordinary shares outstanding for the period. Diluted net loss
attributable to ordinary shareholders is computed by adjusting net loss attributable to ordinary shareholders to reallocate
undistributed earnings based on the potential impact of dilutive securities. Diluted net loss per share attributable to ordinary
shareholders is computed by dividing the diluted net loss attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding for the period, including potential dilutive ordinary shares assuming the dilutive
effect of ordinary share equivalents.
Prior to the Company’s IPO, convertible preferred shares contractually entitled the holders of such shares to
participate in dividends but contractually do not require the holders of such shares to participate in losses of the Company.
Accordingly, in periods in which the Company reported a net loss, such losses were not allocated to such preferred
securities. In periods in which the Company reported a net loss attributable to ordinary shareholders, diluted net loss per
share attributable to ordinary shareholders is the same as basic net loss per share attributable to ordinary shareholders, since
dilutive ordinary shares are not assumed to have been issued if their effect is anti‑dilutive.
Recently adopted accounting pronouncements
In February 2016, the FASB issued ASU No. 2016‑02, Leases (Topic 842) (“ASU 2016‑02”). This guidance
revises existing practice related to accounting for leases under ASC Topic 840 Leases (“ASC 840”). ASU 2016‑02 requires
lessees to recognize most leases on their balance sheet as a right‑of‑use asset and a lease liability. The lease liability is
equal to the present value of lease payments and the right‑of‑use asset is based on the lease liability, subject to adjustment
such as for initial direct costs. For income statement purposes, the new standard retains a dual model similar to ASC 840,
requiring leases to be classified as either operating or finance. For lessees, operating leases will result in straight‑line
expense (similar to current accounting by lessees for operating leases under ASC 840). In July 2018, the FASB issued ASU
No. 2018‑11, Leases (Topic 842) Targeted Improvements, which provides an additional transition method that allows
entities to initially apply the new standard at the adoption date and recognize a cumulative‑effect adjustment to the opening
balance of retained earnings in the period of adoption without restating prior periods. The guidance is effective for annual
reporting periods beginning after December 15, 2018 and interim periods within those fiscal years, and early adoption is
permitted. The Company adopted the new standard on January 1, 2019 by applying the new lease requirements at the
adoption date without restating prior periods. In connection with the adoption of ASU 2016‑02 the Company recorded an
impact of approximately $2.7 million on its consolidated balance sheet to record right‑of‑use‑assets and $2.6 million to
record lease liabilities on January 1, 2019, which are primarily related to the lease of the Company’s corporate headquarters
in the U.K. and the lease of its office and laboratory space in Lexington, Massachusetts. The adoption of ASU 2016‑02 did
not have a material impact on the Company’s results of operations or cash flows.
In June 2018, the FASB issued ASU No. 2018‑07, Compensation — Stock Compensation: Improvements to Nonemployee
Share‑Based Payment Accounting (“ASU 2018‑07”) to simplify the accounting for share‑based payments to
non‑employees by aligning it with the accounting for share‑based payments to employees, with certain exceptions. The
new guidance expands the scope of ASC 718, Compensation — Stock Compensation, to include share‑based payments
granted to non‑employees in exchange for goods or services used or consumed in an entity’s own operations and
supersedes the guidance in ASC Topic 505‑50, Equity‑Based Payments to Non‑Employees. The guidance is effective for
public business entities in annual periods beginning after December 15, 2018 and interim periods within those years. Early
adoption is permitted. The Company adopted the new standard on January 1, 2019. The adoption did not have a material
impact on the Company’s financial position, results of operations or cash flows.
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In August 2018, the FASB issued ASU No. 2018‑15, Intangibles (Topic 350): Customer’s Accounting for
Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the
requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the
requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This standard also
requires customers to amortize the capitalized implementation costs of a hosting arrangement that is a service contract over
the term of the hosting arrangement. The Company early adopted this standard, as of April 1, 2019, on a prospective basis
for applicable implementation costs. The adoption of this standard would not have had a material impact to historical
accounting periods. The Company capitalized approximately $0.1 million of implementation cost for the year ended
December 31, 2019.
Recently Issued Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12, “Income Taxes: Simplifying the Accounting for Income
Taxes,” intended to simplify the accounting for income taxes by eliminating certain exceptions related to the approach for
intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of
deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for
franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up
in the tax basis of goodwill. The standard is effective for annual periods beginning after December 15, 2020 and interim
periods within, with early adoption permitted. Adoption of the standard requires certain changes to primarily be made
prospectively, with some changes to be made retrospectively. We are currently assessing the impact of this standard on our
financial condition and results of operations.
In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU
2016-13”). ASU 2016-13 will change how companies account for credit losses for most financial assets and certain other
instruments. For trade receivables, loans and held-to-maturity debt securities, companies will be required to recognize an
allowance for credit losses rather than reducing the carrying value of the asset. ASU 2016-13 is effective for fiscal years
beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The
Company is currently evaluating the potential impact that the adoption of ASU 2016-13 will have on the Company’s
financial position and results of operations.
3. Fair value of financial assets and liabilities
The warrant liability for warrants to subscribe for convertible preferred shares was initially recorded at fair value
upon the date of the warrants’ issuance and was subsequently remeasured to fair value at each reporting date (Note 7).
Upon the closing of the IPO on May 28, 2019, warrants that were not exercised or expired in conjunction with the IPO
automatically became warrants to subscribe for ordinary shares, and met the criteria to be classified as shareholders’ equity
(deficit). As such, following the final remeasurement on May 28, 2019, the Company reclassified the carrying value of the
outstanding warrant liability to additional paid-in-capital in the consolidated balance sheet. As such, there is no warrant
liability at December 31, 2019.
The following tables present information about the Company’s financial assets and liabilities measured at fair
value on a recurring basis (in thousands):
Liabilities:
Warrant liability
Fair Value Measurement
as of December 31, 2018 using:
Level 2
Level 3
Level 1
Total
$
$
— $
— $
— $
— $
4,804 $
4,804 $
4,804
4,804
During the years ended December 31, 2019 and 2018, there were no transfers between levels.
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4. Property and equipment, net
Property and equipment, net consisted of the following (in thousands):
Laboratory equipment
Leasehold improvements
Computer equipment and software
Furniture and office equipment
Less: Accumulated depreciation and amortization
December 31,
2019
2018
$
$
4,326 $
300
229
120
4,975
(2,683)
2,292 $
3,356
75
221
99
3,751
(1,933)
1,818
Depreciation expense was $1.0 million, $0.7 million and $0.3 million for the years ended December 31, 2019,
2018 and 2017, respectively.
5. Accrued expenses and other current liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
Accrued employee compensation and benefits
Accrued external research and development expenses
Income taxes payable
Accrued professional fees
Current portion of operating lease liabilities
Other
6. Convertible preferred shares
December 31,
2019
2018
2,514 $
2,055
1
867
640
67
6,144 $
1,610
3,814
15
1,494
—
99
7,032
$
$
The Company has issued Series A convertible preferred shares (“Series A Preferred Shares”), Series B1
convertible preferred shares (“Series B1 Preferred Shares”), and Series B2 convertible preferred shares (“Series B2
Preferred Shares”) (collectively the “Preferred Shares”).
On May 26, 2017 the Company completed the issue of 3,562,583 Series B1 Preferred Shares at a price per share
of £11.2278, for gross cash proceeds of $51.9 million. In addition, on October 27, 2017, an additional unaffiliated investor
subscribed for a further 384,615 Series B1 Preferred Shares at a price per share of £13, for gross cash proceeds of
$6.6 million. These two transactions are collectively referred to as “the Series B1 Financing”. In conjunction with the
Series B1 Financing, the Company also issued warrants to subscribe for 743,287 Series B1 Preferred Shares to the
subscribers of the Series B1 Preferred Shares (Note 7). The Company allocated a portion of the proceeds equal to the fair
value of the warrants at the date of grant to the warrant liability, and the remaining amount was allocated to the Series B1
Preferred Shares.
On December 20, 2018, the Company completed the issue of 1,323,248 Series B2 preferred shares at a price per
Series B2 preferred share of £15.55, for gross cash proceeds of $26.1 million (the “Series B2 Financing”). In conjunction
with the Series B2 Financing, the existing holders of warrants to subscribe for Series B1 preferred shares surrendered
194,911 warrants to subscribe for the same number of Series B1 preferred shares and the Company issued a further 194,911
warrants to subscribe for the same number of Series B1 preferred shares to the new investor. In conjunction with the Series
B2 Financing, the Company designated all previously outstanding Series B preferred shares as Series B1
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preferred shares. On January 3, 2019, the Company completed the issue of 80,385 Series B2 preferred shares at a price per
share of £15.55, for gross cash proceeds of $1.6 million.
Upon the closing of the IPO in May 2019, all of the Company’s outstanding convertible preferred shares
automatically converted into 11,647,529 ordinary shares on a 1:1.429 basis.
7. Warrant liability
On May 26, 2017, the Company issued 200,000 warrants to subscribe for Series A Preferred Shares at £0.01 each,
which are exercisable at any time after May 26, 2017 provided that they have not otherwise lapsed in accordance with their
terms. The warrants to subscribe for Series A Preferred Shares expire upon the earlier of (i) 10 years from their issuance
date, or (ii) upon an IPO or exit unless an exercise delay notice is provided by the Series A warrant holder, in which case
they will expire 12 months following an IPO or exit. On May 28, 2019, in conjunction with the completion of the IPO,
120,000 warrants to subscribe for Series A Preferred Shares were exercised for 171,480 ordinary shares. The holders of the
remaining 80,000 warrants provided the Company with an exercise delay notice, which are exercisable into 114,320
ordinary shares following the completion of the IPO, as adjusted for the impact of the Share Capital Reorganization (Note
1). As of December 31, 2019, 65,000 warrants are outstanding, which are exercisable into 92,885 ordinary shares.
On May 26, 2017, in conjunction with the issuance of 3,562,583 Series B1 Preferred Shares at a price per share of
£11.2278, the Company issued 627,903 warrants to subscribe for Series B1 Preferred Shares with an exercise price of
£0.01. In addition, on October 27, 2017, in conjunction with the issuance of 384,615 Series B1 Preferred Shares the
Company issued a further 115,384 warrants to subscribe for Series B1 Preferred Shares with an exercise price of £0.01. In
conjunction with the Series B2 Financing, the existing holders of warrants to subscribe for Series B1 preferred shares
surrendered 194,911 warrants to subscribe for the same number of Series B1 preferred shares and the Company issued a
further 194,911 warrants to subscribe for the same number of Series B1 preferred shares to the new investor. The transfer of
warrants between investors did not have an impact to the valuation of the warrant liability, as this represents a transaction
between shareholders and the Company did not issue any new instruments or change the rights and preferences of the
underlying warrants to subscribe for Series B1 preferred shares.
On March 7, 2019, the holders of the Series B1 warrants to subscribe for Series B1 Preferred Shares agreed that
50% of the warrants would be exercised in conjunction with the IPO and 50% of the warrants would expire. The Company
assessed this event as a modification to the terms of the Series B1 warrants and, remeasured the warrant liability
immediately before and immediately after the modification, which resulted in an incremental change in fair value of $0.1
million, which is included in other expense for the year ended December 31, 2019. On May 28, 2019, in conjunction with
the completion of the IPO, all Series B1 Preferred share warrants were exercised for 531,077 ordinary shares, as adjusted
for the impact of the Share Capital Reorganization (Note 1).
Prior to the completion of the IPO, the warrants to subscribe for Series A and Series B1 Preferred Shares were
recorded as a liability and remeasured to fair value at each reporting date (Note 3). Changes in the fair value of the warrant
liability were recognized as other expense, net in the consolidated statements of operations and comprehensive loss. Upon
the closing of the IPO on May 28, 2019, warrants that were not exercised in conjunction with the IPO automatically
became warrants to subscribe for ordinary shares, and meet the criteria to be classified as shareholders’
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equity (deficit). As such, following the final remeasurement on May 28, 2019, the Company reclassified the carrying value
of the warrant liability to additional paid-in-capital in the consolidated balance sheet.
The following table provides a roll-forward of the fair values of the Company’s warrant liability for which fair
value was determined by Level 3 inputs (in thousands):
Fair value at December 31, 2018
Change in fair value of warrant liability recorded as other expense
Conversion of warrant liability to equity upon closing of IPO and exercise of warrants
Impact of exchange rates on translation of warrant liability to USD included in accumulated other
comprehensive income (loss)
Fair value at December 31, 2019
Warrant
Liability
4,804
5,381
(10,021)
(164)
—
$
$
The warrant liability in the table above consisted of the fair value of warrants to subscribe for Series A and Series
B1 Preferred Shares (see Note 6) and, prior to the IPO, was based on significant inputs not observable in the market, which
represent a Level 3 measurement within the fair value hierarchy. The Company’s valuation of the warrants to subscribe for
Series A and Series B1 Preferred Shares utilized the Black‑Scholes option‑pricing model, which incorporates assumptions
and estimates to value the warrant liability. The Company assessed these assumptions and estimates on a quarterly basis
prior to the closing of the IPO in May 2019.
The quantitative elements associated with the Company’s Level 3 inputs impacting the fair value measurement of
the warrant liability included the fair value per share of the underlying Series A and Series B1 preferred shares or ordinary
shares at the time of final remeasurement, into which the warrants were exercisable, the remaining contractual term of the
warrants, risk‑free interest rate, expected dividend yield and expected volatility of the price of the underlying convertible
preferred shares.
The most significant assumption in the Black‑Scholes option‑pricing model impacting the fair value of the warrant
liability was the fair value of the Series A and Series B1 preferred shares, or ordinary shares at the time of final
remeasurement, into which the warrant is exercisable as of each remeasurement date. Given the absence of an active
market for the Company’s equity securities prior to the IPO, the Company determined the fair value per share of the
convertible preferred shares underlying the warrants by taking into consideration the implied value derived from an
independent third‑party valuation of the Company’s ordinary shares, adjusted for certain restrictions on the exercise of the
B1 warrants per their contractual terms. Assumptions related to the remaining term, risk-free interest rate, expected
dividend yield and expected volatility did not have an impact to the fair value of the warrants because the exercise price of
the warrants was £0.01, and the fair value of the warrant was equal to the difference between the exercise price and the fair
value regardless of the assumptions. The Company historically had been a private company and lacked company‑specific
historical and implied volatility information of its shares. Therefore, it estimated its expected share volatility based on the
historical volatility of publicly traded peer companies for a term equal to the remaining contractual term of the warrants.
The risk‑free interest rate was determined by reference to the U.S. Treasury yield curve for time periods approximately
equal to the remaining contractual term of the warrants. The Company had estimated a 0% dividend yield based on the
expected dividend yield and the fact that the Company has never paid or
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declared dividends. The following table presents the unobservable inputs to the fair value measurement of the warrant
liability:
Remeasurement upon closing
of the IPO on May 28, 2019
Series B1
Series A
December 31, 2018
Series A
Series B1
(1)
Warrants Warrants Warrants Warrants
Risk-free rate
Expected dividend yield
Expected term (years)
Expected volatility
Exercise price
Fair value of preferred shares or ordinary shares underlying the
warrant
2.2 %
— %
8.0
74.7 %
£
0.01
£
2.1 %
— %
5.8
78.2 %
0.01
2.6 %
— %
8.4
75.4 %
£
£ 0.01
2.5 %
— %
6.25
79.6 %
0.01
$
12.28
$
12.28
$ 8.61
$
4.15
(1) The fair value of the Series B1 preferred shares underlying the warrants to purchase Series B1 preferred shares at
December 31, 2018 includes a 50% probability that the warrants will be not be exercisable prior to the IPO, based on
their contractual terms.
8. Ordinary shares
Each holder of ordinary shares is entitled to one vote per ordinary share and to receive dividends when and if such
dividends are recommended by the board of directors and declared by the shareholders. As of December 31, 2019 and
2018, the Company has not declared any dividends.
As of December 31, 2019 and 2018, the Company’s authorized capital share consisted of 31,995,653 and
15,452,420 ordinary shares, respectively, with a nominal value of £0.01 per share.
9. Share‑based compensation
Employee incentive pool
2019 Share Option Plan
In May 2019, the Company adopted the 2019 Share Option Plan (the “2019 Plan”), which became effective in
conjunction with the IPO. In September 2019, the Compensation Committee of the Company’s Board of Directors
approved immaterial clarifying amendments to the 2019 Plan which did not have an impact to the consolidated financial
statements. The 2019 Plan provides for the grant of options to purchase ordinary shares and other share-based awards to
officers, employees, directors and other key persons (including consultants).
The Company has initially reserved 2,470,583 ordinary shares for future issuance under the 2019 Plan. The
number of ordinary shares reserved for issuance of the 2019 Plan will automatically increase on the first day of January,
commencing on January 1, 2020, in an amount equal to 4% of the total number of ordinary shares outstanding on the last
day of the preceding year, or a lesser number of shares determined by the Company’s board of directors, subject to
adjustment in the event of a share split, share dividend or other change in capitalization. As of December 31, 2019, there
were 872,646 shares available for issuance under the 2019 Plan. The number of shares reserved for issuance under the 2019
Plan was increased by 719,748 shares effective January 1, 2020.
Share options issued under the 2019 Share Option Plan have a 10 year contractual life, and either vest monthly
over a three year service period, or over a four‑year service period with 25% of the award vesting on the first anniversary of
the commencement date and the balance thereafter in 36 equal monthly installments. The exercise price of share options
issued under the 2019 Share Option Plan shall not be less than the fair value of ordinary shares as of the date of grant.
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Pre-IPO Share Options and restricted shares
Prior to the IPO, the Company issued share options and ordinary shares, as administered by the board of directors,
using standardized share option and share subscription agreements. To the extent such incentives were in the form of share
options, the options may have been granted pursuant to a potentially tax-favored Enterprise Management Incentive, or
EMI, scheme available to U.K. employees, directors and consultants of the Company. Upon completion of the IPO, shares
reserved for future issuance outside of the 2019 Share Option Plan were cancelled.
Options granted, as well as restricted shares granted as employee incentives prior to the IPO, typically vest over a
four‑year service period with 25% of the award vesting on the first anniversary of the commencement date and the balance
thereafter in 36 equal monthly installments and expire no later than 10 years from the date of grant.
Certain equity awards were issued in 2017 and 2018 for which 20% of the award vests upon the first anniversary
of the vesting start date, 60% vests thereafter in 36 equal monthly installments, and 20% vest upon the earlier of the fourth
anniversary of the vesting start date, or the achievement of a specified revenue threshold from the Company’s collaboration
arrangements.
Options issued to U.K. employees prior to the IPO generally had an exercise price of £0.01 per share. The exercise
price for share options granted to U.S. employees, had an exercise price that was not less than the fair value of ordinary
shares as determined by the board of directors as of the date of grant. Prior to the IPO, the Company’s board of directors
valued the Company’s ordinary shares based on input from management, considering the most recently available valuation
of ordinary share performed by an independent third‑party valuation firm as well as additional factors which may have
changed since the date of the most recent contemporaneous valuation through the date of grant.
Employee Share Purchase Plan (“ESPP”)
In May 2019, the Company adopted the 2019 Employee Stock Purchase Plan (“ESPP”), which became effective in
conjunction with the IPO. The Company initially reserved 215,000 ordinary shares for future issuance under this plan. Each
offering to the employees to purchase shares under the ESPP will begin on each June 1 and December 1 and will end on the
following November 30 and May 31, respectively. On each purchase date, which falls on the last date of each offering
period, ESPP participants will purchase ordinary shares at a price per share equal to 85% of the lesser of (1) the fair market
value of the shares on the offering date or (2) the fair market value of the shares on the purchase date. The occurrence and
duration of offering periods under the ESPP are subject to the determinations of the Company’s compensation committee.
As of December 31, 2019, there have been no offering periods to employees under ESPP.
Share‑based compensation
The Company recorded share‑based compensation expense in the following expense categories of its consolidated
statements of operations and comprehensive loss (in thousands):
Research and development expenses
General and administrative expenses
Year Ended
December 31,
2018
2019
$
$
1,286 $
1,797
3,083 $
513 $
510
1,023 $
2017
241
274
515
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Share options
The following table summarizes the Company’s option activity since December 31, 2018:
Number of
Shares
Weighted
Average
Exercise Price
Weighted
Average
Contractual
Term
(in years)
Outstanding as of December 31, 2018
Granted
Exercised
Forfeited
Outstanding as of December 31, 2019
Vested and expected to vest as of December 31, 2019
Options exercisable as of December 31, 2019
863,712 $
2,134,538
(85,839)
(278,065)
2,634,346 $
2,634,346 $
647,901 $
1.01
12.01
1.67
4.21
9.57
9.57
6.81
Aggregate
Intrinsic
Value
(in thousands)
3,292
—
—
—
6,107
6,107
2,868
8.75 $
—
—
—
9.04 $
9.04 $
8.49 $
The weighted average grant‑date fair value of share options granted during the years ended December 31, 2019,
2018 and 2017 was $6.07 per share, $3.73 per share and $1.78 per share, respectively.
For the years ended December 31, 2019, 2018 and 2017, the Company recorded share‑based compensation
expense for share options granted of $2.7 million, $0.8 million and $0.4 million, respectively. Expense for non‑employee
consultants for the years ended December 31, 2019, 2018 and 2017, was immaterial.
The aggregate intrinsic value of share options is calculated as the difference between the exercise price of the
share options and the fair value of the Company’s ordinary shares. The aggregate intrinsic value of share options exercised
during the years ended December 31, 2019, 2018 and 2017 was $0.6 million, $23,000 and $7,000 respectively.
During the year ended December 31, 2019, 2018 and 2017, the Company granted certain performance based
vesting options for the purchase of an aggregate of zero, 70,875 and 678,610 ordinary shares, respectively, for which 20%
of the award vests upon the first anniversary of the vesting start date, 60% vests thereafter in 36 equal monthly
installments, and 20% on the earlier of the fourth anniversary of the vesting start date, or the achievement of a specified
revenue threshold from the Company’s collaboration arrangements. In May 2018, the Company determined that the
performance condition became probable of achievement and recorded a cumulative catch‑up to reflect the expense as if the
vesting condition was probable of achievement at the time of the grant of the award. The Company recorded expense
of $0.1 million, $0.7 million and $0.3 million, during the year ended December 31, 2019, 2018 and 2017, respectively,
related to these awards, which includes the acceleration of vesting expense.
The following table presents, on a weighted average basis, the assumptions used in the Black‑Scholes
option‑pricing model to determine the fair value of share options granted to employees and directors:
Risk-free interest rate
Expected volatility
Expected dividend yield
Expected term (in years)
Year Ended
December 31,
2018
2019
2.1 %
77.9 %
—
5.86
2.7 %
78.6 %
—
6.07
2017
2.0 %
79.7 %
—
6.07
As of December 31, 2019, total unrecognized compensation expense related to the unvested employee and director
share‑based awards was $10.6 million, which is expected to be recognized over a weighted average period of 2.5 years.
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Restricted shares
The Company has granted restricted shares with service‑based vesting conditions. Shares of unvested restricted
shares may not be sold or transferred by the holder. These restrictions lapse according to the time‑based vesting conditions
of each award. These restricted shares are subject to repurchase rights, for aggregate consideration of £1. Accordingly, the
Company has recorded the proceeds from the issuance of restricted shares as a liability in the consolidated balance sheets
included as a component of accrued expenses and other current liabilities. The restricted share liability is reclassified into
shareholders’ (deficit) equity as the restricted shares vest.
The following table summarizes the Company’s restricted ordinary share award activity since December 31, 2018:
Unvested restricted ordinary shares as of December 31, 2018
Issued
Forfeited
Vested
Unvested restricted ordinary shares as of December 31, 2019
Weighted Average
Shares
83,947 $
—
—
(83,947)
— $
Grant-Date
Fair Value
1.93
—
—
1.93
—
In conjunction with the IPO in May 2019, the board of directors modified the vesting terms to accelerate vesting
for all then unvested restricted shares. As a result, the Company recorded $0.2 million of expense upon the modification of
the restricted shares during the year ended December 31, 2019.
For the years ended December 31, 2019, 2018 and 2017, the Company recorded share-based compensation of $0.4
million, $0.2 million, and $0.1 million, respectively, for unvested restricted shares granted.
The fair value of employee restricted share awards vested during the years ended December 31, 2019, 2018 and
2017, based on estimated fair values of the ordinary shares underlying the restricted share awards on the day of vesting,
was $0.7 million, $0.2 million and $0.1 million, respectively.
As of December 31, 2019, there was no unrecognized compensation cost related to the unvested employee and
director restricted share awards.
10. Significant Agreements
For the years ended December 31, 2019, 2018 and 2017, the Company had collaboration agreements with
AstraZeneca, Sanofi, (formerly Bioverativ), Oxurion (formerly ThromboGenics) and the Dementia Discovery Fund. The
following table summarizes the revenue recognized in the Company’s consolidated statements of operations and
comprehensive loss from these arrangements (in thousands):
Collaboration revenues
AstraZeneca
Sanofi
Oxurion
Dementia Discovery Fund
Material transfer agreement
Total collaboration revenues
2019
Year Ended
December 31,
2018
2017
$
$
1,683
10,724
—
394
1,000
13,801
$
$
1,386
4,007
1,743
—
—
7,136
$
$
890
355
815
—
—
2,060
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AstraZeneca Collaboration Agreement
Summary of Agreement — 2016 Agreement
In November 2016, the Company entered into a Research Collaboration Agreement (the “AstraZeneca
Collaboration Agreement”) with AstraZeneca. The collaboration is focused on the research and development of Bicycle
peptides that bind to up to six biological targets. After discovery and initial optimization of such Bicycle peptides,
AstraZeneca will be responsible for all research and development, including lead optimization and drug candidate
selection. AstraZeneca has option rights, at drug candidate selection, which allow it to obtain development and exploitation
license rights with regard to such drug candidate. The initial research obligation focuses on two targets within respiratory,
cardiovascular and metabolic disease. AstraZeneca also has an option to nominate up to four additional targets at any point
up to the second anniversary of the agreement (“Additional Four Target Option”). The exercise of this option right results
in an option fee payable to the Company of $5.0 million and the research obligations and rights are consistent with the
obligations and rights related to the initial two targets discussed below.
Under the AstraZeneca Collaboration Agreement, the Company is obligated to use commercially reasonable
efforts to perform research activities on the initial two targets, under mutually agreed upon research plans. The research
plans includes two discrete parts, on a research program by research program basis: (i) the Bicycle Research Term, which is
focused on the generation of Bicycle peptide libraries using the Company’s peptide drug discovery platform, to be screened
against selected biological targets and optimization of promising compounds, with the goal of identifying compounds that
meet the criteria set by the parties, and (ii) the AZ Research Term, during which AstraZeneca may select certain
compounds and continue research activities on those compounds, at its sole expense, with the goal of identifying
compounds that satisfy the relevant pharmacological and pharmaceutical criteria for clinical testing. AstraZeneca may, at
its sole discretion, approve any compound to be progressed into drug development and, upon the selection of each drug
candidate, AstraZeneca is to pay $8.0 million as an option fee, in order to obtain worldwide development and exploitation
rights.
Each research program is to continue for an initial period of three years (the “Research Term”), including one year
for the Bicycle Research Term and two for the AZ Research Term. AstraZeneca may extend the Research Term for each
research program by twelve months (or fifteen months, if needed to complete certain toxicology studies). The Research
Term for a specific program can be shorter if it is ceased due to a screening failure, a futility determination, abandonment
by AstraZeneca, or upon selection of a drug candidate. AstraZeneca has certain substitution rights should a screening
failure or futility determination be reached but is obligated to fund these additional efforts related to substitution.
Under the terms of the AstraZeneca Collaboration Agreement, the Company granted to AstraZeneca, for each
research program, a right and license (with the right to sublicense) certain background and platform intellectual property,
for the duration of the applicable Research Term, to the extent necessary or useful for AstraZeneca to conduct the activities
assigned to it in the applicable research plan, but for no other purpose.
The activities under the AstraZeneca Collaboration Agreement are governed by a joint steering committee (“JSC”)
formed by an equal number of representatives from the Company and AstraZeneca. The JSC oversees and reviews each
research program. Among other responsibilities, the JSC monitors and reports on research progress and ensure open and
frequent exchange between the parties regarding research program activities.
AstraZeneca is obligated to fund two full time equivalents (“FTE”) during the Bicycle Research Term, for each
research program, based on an agreed upon FTE reimbursement rate. Payment is made quarterly in advance of services
being provided.
AstraZeneca has the option to obtain development and commercialization licenses associated with each designated
drug candidate in return for a fee of $8.0 million per drug candidate. In addition, AstraZeneca is required to make certain
milestone payments to the Company upon the achievement of specified development, regulatory and commercial
milestones. More specifically, for each research program, the Company is eligible to receive up to $29.0 million in
development milestone payments and up to $23.0 million in regulatory milestone payments. The
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Company is also eligible for up to $110.0 million in commercial milestone payments, on a research program by research
program basis. Development milestone payments are triggered upon initiation of a defined phase of clinical research for a
drug candidate. Regulatory milestone payments are triggered upon approval to market a product candidate by the United
States Food and Drug Administration (“FDA”) or other global regulatory authorities. Commercial milestone payments are
triggered when an approved pharmaceutical product reaches certain defined levels of net sales by the licensee. In addition,
to the extent any of the product candidates covered by the licenses conveyed to AstraZeneca are commercialized, the
Company would be entitled to receive tiered royalty payments of mid‑single digits based on a percentage of net sales.
Royalty payments are subject to certain reductions, including in certain countries where AstraZeneca faces generic
competition. Due to the uncertainty of pharmaceutical development and the high historical failure rates generally associated
with drug development, the Company may not receive any additional milestone payments or royalty payments from
AstraZeneca.
Either party may terminate the AstraZeneca Collaboration Agreement if the other party has materially breached or
defaulted in the performance of any of its material obligations and such breach or default continues after the specified cure
period. Either party may terminate the AstraZeneca Collaboration Agreement in the event of the commencement of any
proceeding in or for bankruptcy, insolvency, dissolution or winding up by or against the other party that is not dismissed or
otherwise disposed of within a specified time period. AstraZeneca may terminate the AstraZeneca Collaboration
Agreement, entirely or on a licensed product by licensed product or country by country basis, for convenience.
Accounting Analysis
The Company has identified the following performance obligations:
(i)
(ii)
research license and the related research and development services during the Bicycle Research Term for
the first target (the “Target One Research License and Related Services”),
research license and the related research and development services during the Bicycle Research Term for
the second target (the “Target Two Research License and Related Services”).
The Company concluded that the Additional Four Target Option is not a material right, as the option does not
provide a discount that AstraZeneca otherwise would not have received. The Company’s participation in the joint steering
committee was assessed as immaterial in the context of the contract. The Company has concluded that the research license
is not distinct from the research and development services during the Bicycle Research Term as AstraZeneca cannot obtain
the benefit of the research license without the Company performing the research and development services. The services
incorporate proprietary technology and unique skills and specialized expertise, particularly as it relates to constrained
peptide technology that is not available in the marketplace. As a result, for each research program, the research license has
been combined with the research and development services into a single performance obligation.
The total transaction price was initially determined to be $1.2 million, consisting solely of research and
development funding. The Company utilizes the most likely amount method to determine the amount of research and
development funding to be received. Additional consideration to be paid to the Company upon the exercise of the license
options by AstraZeneca or upon reaching certain milestones is excluded from the transaction price as they relate to option
fees and milestones that can only be achieved subsequent to the option exercise or are outside of the initial contact term.
The transaction price was allocated to the performance obligations based on the relative estimated standalone
selling prices of each performance obligation. The estimated standalone selling prices for the Target One and Target Two
Research License and Related Services is primarily based on the nature of the services to be performed and estimates of the
associated effort and costs of the services, adjusted for a reasonable profit margin what would be expected to be realized
under similar contracts. The transaction price allocated to each performance obligation was initially $0.6 million.
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The Company will recognize revenue related to amounts allocated to the Research License and Related Services
as the underlying services are performed over the one year Research Term using a proportional performance model over the
period of service using input‑based measurements of total full‑time equivalent effort incurred to date as a percentage of
total full‑time equivalent time expected and will remeasure its progress towards completion at the end of each reporting
period, which best reflects the progress towards satisfaction of the performance obligation.
In October 2017, AstraZeneca selected a replacement target for the first target, and as such a new Research Term
was started related to the Target One Research License and Related Services. In addition, both programs were extended.
The total transaction price under the arrangement increased to $2.0 million for the additional research and development
funding to be received.
For the years ended December 31, 2019, 2018 and 2017 the Company recognized $0.2 million, $1.0 million, and
$0.9 million, respectively, of collaboration revenue related to the Target One and Target Two Research License and Related
Services for its Collaboration Agreement with AstraZeneca. As of December 31, 2019 and 2018, the Company recorded
zero deferred revenue, and $8,000 of deferred revenue, respectively, in connection with the 2016 AstraZeneca
Collaboration Agreement.
May 2018 AstraZeneca Option Exercise — Additional Four Targets
Under the AstraZeneca Collaboration Agreement, AstraZeneca was granted an option to nominate up to four
additional targets at any point up to the second anniversary of the agreement (“Additional Four Target Option”). In
May 2018, AstraZeneca made an irrevocable election to exercise the Additional Four Target Option. As a result,
AstraZeneca is entitled to obtain research and development services with respect to Bicycle peptides that bind to up to four
additional targets, along with license rights to those selected targets, in exchange for an option fee of $5.0 million to be paid
by AstraZeneca to the Company in January 2019. AstraZeneca is obligated to fund two FTEs during the Bicycle Research
Term, for each research program, based on an agreed upon FTE reimbursement rate. Payment is made quarterly in advance
of services being provided. AstraZeneca has the option to obtain worldwide development and commercialization licenses
associated with each designated drug candidate in return for a fee of $8.0 million per drug candidate, upon the selection of
such drug candidate, after which AstraZeneca would be required to fund development and commercialization costs, and to
pay regulatory and commercial milestone payments and royalties to the Company as for the other products developed under
the AstraZeneca Collaboration Agreement.
Accounting Analysis
Upon the execution of the agreement, the Company has identified the following five performance obligations
associated with the AstraZeneca May 2018 Agreement:
(i)
(ii)
(iii)
(iv)
(v)
Research license and the related research and development services during the Bicycle Research Term for
the third target (the “Target Three Research License and Related Services”),
Material right associated with the development and exploitation license option for the third target
(“Target Three Material Right”),
Material right associated with the research services option, including the underlying development and
exploitation license option for the fourth target (“Target Four Material Right”),
Material right associated with the research services option, including the underlying development and
exploitation license option for the fifth target (“Target Five Material Right”), and
Material right associated with the research services option, including the underlying development and
exploitation license option for the sixth target (“Target Six Material Right”).
The Company concluded that the fourth, fifth and sixth targets available for selection are options. Upon exercise,
AstraZeneca will obtain a research license and the related research and development services and an option to a
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development and exploitation license. The Company has concluded that the research services option, including the
underlying development and exploitation license options related to each respective target results in a material right as the
option exercise fee related to the development and exploitation license contains a discount that AstraZeneca would not have
otherwise received.
The research license and the related research and development services related to the fourth, fifth and sixth targets
are not performance obligations, as they are optional services that will be performed if AstraZeneca selects additional
targets and they reflect their standalone selling prices and do not provide the customer with material rights. The Company’s
participation in the joint steering committee was assessed as immaterial in the context of the contract.
The total transaction price was initially determined to be $5.7 million, consisting of the $5.0 million option
exercise fee and research and development funding of an estimated $0.7 million. The research and development funding is
being provided based on the costs that are incurred to conduct the research and development services. The Company
utilizes the most likely amount method to determine the amount of research and development funding to be received.
Additional consideration to be paid to the Company upon the exercise of the license options by AstraZeneca or upon
reaching certain milestones are excluded from the transaction price as they relate to option fees and milestones that can
only be achieved subsequent to the license option exercise or are outside of the initial contact term.
The transaction price was allocated to the performance obligations based on the relative estimated standalone
selling prices of each performance obligation. The estimated standalone selling prices for each Research License and
Related Services obligation is primarily based on the nature of the services to be performed and estimates of the associated
effort and costs of the services, adjusted for a reasonable profit margin what would be expected to be realized under similar
contracts. The estimated standalone selling price for the material rights was determined based on the fees AstraZeneca
would pay to exercise the license options, the estimated value of the License Option using comparable transactions, and the
probability that (i) AstraZeneca would opt into the target development, and (ii) the license options would be exercised by
AstraZeneca. Based on the relative standalone selling price, the allocation of the transaction price to the separate
performance obligations is as follows (in thousands):
Performance Obligations
Target Three Research License and Related Services
Target 3 Material Right
Target 4 Material Right
Target 5 Material Right
Target 6 Material Right
Allocation of
Transaction Price
650
$
1,504
1,204
1,165
1,127
5,650
$
The Company will recognize revenue related to amounts allocated to the Target Three Research License and
Related Services as the underlying services are performed using a proportional performance model over the period of
service using input‑based measurements of total full‑time equivalent effort incurred to date as a percentage of total
full‑time equivalent time expected, which best reflects the progress towards satisfaction of the performance obligation. The
amount allocated to the material rights is recorded as deferred revenue and the Company will commence revenue
recognition upon exercise of or upon expiry of the option. The optional future research license and the related research and
development services related to the fourth, fifth and sixth targets reflect their standalone selling prices and do not provide
the customer with a material right and, therefore, are not considered performance obligations and are accounted for as
separate contracts. In June 2019, AstraZeneca selected a replacement target for the third target, and as such a new Research
Term was started related to the Target Three Research License and Related Services. The total transaction price under the
arrangement increased to $6.3 million for the additional research and development funding to be received. During the year
ended December 31, 2019, the Company commenced research and development services related to the fourth and fifth
targets.
For the year ended December 31, 2019, 2018 and 2017, the Company recognized $1.5 million, $0.4 million, and
zero, respectively, of revenue related to the Target Three Research License and Related Service, and research and
development services for the fourth target and fifth target related to the May 2018 AstraZeneca Option Exercise. As of
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December 31, 2019 and 2018, the Company recorded $4.9 million and $4.7 million, respectively, of deferred revenue in
connection with the May 2018 AstraZeneca Option Exercise and related contracts.
Sanofi Collaboration Agreement (formerly Bioverativ)
Summary of Agreement
In August 2017, the Company entered into a Collaboration Agreement with Bioverativ Inc., which was acquired
by Sanofi in March 2018 (“Sanofi”). Under the collaboration agreement with Sanofi (the “Sanofi Collaboration
Agreement”), the Company was obligated to provide research and development services focused on up to three
collaboration programs; (i) Sickle cell disease, (ii) Hemophilia, and (iii) and a third program (“Program 3”), which is an
optional program, to be defined. The Company used its bicyclic peptide screening platform to perform research and
development services for the programs and Sanofi had the ability to select a collaboration product for each program and
obtain a license to develop and exploit the selected collaboration product for an additional option fee.
Under the Sanofi Collaboration Agreement, the Company was obligated to perform research activities on the
initial two named collaboration programs, under mutually agreed upon research plans. The research and development
services for each program consist of two stages. The first was an initial stage of screening for high affinity binders and
affinity maturation of such binders to identify lead compounds led by the Company (the “BV Bicycle Research Term”).
Upon the conclusion of the BV Bicycle Research Term, Sanofi could, at is sole discretion, select a certain number of
collaboration compounds to move forward into the Joint Research Term. Upon selection of the collaboration compounds,
Sanofi was required to pay an option fee. During the Joint Research Term, the Company and Sanofi would jointly conduct
research and development activities which included lead optimization of lead compounds, in preparation for lead
collaboration product nomination (“Joint Research Term”). Sanofi could, at its sole discretion, approve any compound to be
progressed into drug development and upon the selection of each collaboration product candidate, Sanofi was obligated to
pay $5.0 million as an option fee, in order to obtain worldwide development and exploitation rights for that collaboration
product.
Each research program had an initial period of three years (the “Research Term”) unless a program was abandoned
by Sanofi or extended for up to one year. The first year of each Research Term was the BV Bicycle Research Term and the
remaining part of the Research Term, including any extensions of the Research Term, was the Joint Research Term.
Under the terms of the Sanofi Collaboration Agreement, the Company granted to Sanofi, for each collaboration
program, a non‑exclusive, sublicensable (through multiple tiers), worldwide license under certain intellectual property of
the Company to conduct the activities assigned to Sanofi in the applicable research plan for the duration of the applicable
Research Term, but for no other purpose.
The activities under the Sanofi Collaboration Agreement were governed by a joint steering committee (“JSC”)
formed by an equal number of representatives from the Company and Sanofi. The JSC oversaw, reviewed and recommend
direction of each collaboration program and variations of or modifications to the research plans.
Under the terms of the Sanofi Collaboration Agreement, the Company received a $10.0 million up‑front cash
payment. Additionally, prior to the initiation of the research plan for each collaboration program, Sanofi made a
non‑refundable payment of $1.4 million for the Sickle cell program and $2.8 million for the Hemophilia program as
payment for the Company’s services during the BV Bicycle Research Term. During the Joint Research Term, Sanofi was
obligated to fund a minimum of two FTE’s based on an agreed upon FTE reimbursement rate and fund certain external
costs incurred by the Company. Sanofi had the option to obtain development and commercialization licenses associated
with each designated collaboration product candidate in return for a fee of $5.0 million per drug candidate. In addition,
Sanofi was required to make certain milestone payments to the Company upon the achievement of specified development,
regulatory and commercial events. More specifically, for each collaboration program, the Company was eligible to receive
between $47.5 million and $67.0 million in development milestone payments for the Sickle Cell and Hemophilia programs,
respectively, and up to $104.0 million in regulatory milestone payments for each program. In addition, the Company was
eligible for up to $55.0 million in commercial milestone payments, on a research program by
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research program basis. Development milestone payments were triggered upon initiation of a defined phase of clinical
research for a collaboration product. Regulatory milestone payments were triggered upon approval to market a product
candidate by the FDA or other global regulatory authorities. Commercial milestone payments were triggered when an
approved collaboration product reaches certain defined levels of net sales by the licensee. In addition, to the extent any of
the collaboration products covered by the licenses conveyed to Sanofi were commercialized, the Company would be
entitled to receive tiered royalty payments of mid‑single digits to low double digits based on a percentage of net sales.
Royalty payments were subject to certain reductions, including for instances where Sanofi faces generic competition in
certain countries.
Under the terms of the Collaboration Agreement, Sanofi was also provided with an option to obtain screening
services on the additional Program 3 target upon making an option fee payment of $5.0 million in addition to a
non‑refundable payment of $1.4 million as payment for the Company’s services related to Program 3 during the BV
Bicycle Research Term. The option expired in November 2018 unexercised.
Either party could terminate the Sanofi Collaboration Agreement if the other party had materially breached or
defaulted in the performance of any of its material obligations and such breach or default continues after the specified cure
period. Either party could terminate the Sanofi Collaboration Agreement in the event of the commencement of any
proceeding in or for bankruptcy, insolvency, dissolution or winding up by or against the other party that is not dismissed or
otherwise disposed of within a specified time period. Sanofi could terminate the Sanofi Collaboration Agreement, entirely
or on a program by program, licensed product by licensed product or country by country basis, for convenience upon not
less than 30 days prior written notice to the Company.
Accounting Analysis
The Company identified the following four performance obligations associated with the Sanofi Collaboration
Agreement:
(i)
(ii)
(iii)
(iv)
Research License and the related research and development services during the BV Bicycle Research
Term for Sickle cell program (the “Sickle Cell Research License and Related Services”),
Research License and the related research and development services during the BV Bicycle Research
Term for Hemophilia program (the “Hemophilia Research License and Related Services”),
Material right associated with the sickle cell program development and exploitation license option
(“Sickle Cell License Option Material Right”), and
Material right associated with the hemophilia program development and exploitation license option
(“Hemophilia License Option Material Right”).
The Company concluded that the option to obtain screening services on the additional Program 3 target was not a
material right, as the option did not provide a discount that Sanofi otherwise would not have received. The Company’s
participation in the joint steering committee was assessed as immaterial in the context of the contract. Research license and
the related research and development services related to the Joint Research Term were not performance obligations at the
inception of the arrangement, as they were optional services to be performed if Sanofi selected collaboration compounds
for lead optimization. The amount paid by Sanofi for the services during the Joint Research Team did not reflect a discount
that the customer would otherwise receive and did not provide the customer with material rights.
The total transaction price was initially determined to be $14.2 million, consisting of the $10.0 million upfront
payment and non‑refundable research and development funding of $4.2 million. The Company could receive
reimbursement of FTE costs and external costs associated with work under the Joint Research Term, milestone payments
during the Joint Research Term, as well as upon exercise of the license options. These variable amounts were excluded
from the transaction price as they related to fees and milestones that could only be achieved subsequent to the exercise of
an option.
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The transaction price was allocated to the performance obligations based on the relative estimated standalone
selling prices of each performance obligation. The estimated standalone selling prices for the Research License and Related
Services was primarily based on the nature of the services to be performed and estimates of the associated effort and costs
of the services, adjusted for a reasonable profit margin what would be expected to be realized under similar contracts. The
estimated standalone selling price for the material rights was determined based on the fees Sanofi would pay to exercise the
license options, the estimated value of the license option using comparable transactions, and the probability that the license
options would be exercised by Sanofi. Based on the relative standalone selling price, the allocation of the transaction price
to the separate performance obligations was as follows (in thousands):
Performance Obligations
Sickle Cell Research License and Related Services
Hemophilia Research License and Related Services
Sickle Cell License Option Material Right
Hemophilia License Option Material Right
Allocation of
Transaction Price
1,405
$
2,811
5,286
4,698
14,200
$
The Company recognized revenue related to amounts allocated to the Sickle Cell and Hemophilia Research
License and Related Services obligations as the underlying services were performed using a proportional performance
model, over the period of service using input‑based measurements of total full‑time equivalent effort incurred to date as
a percentage of total full‑time equivalent time expected, which best reflected the progress towards satisfaction of the
performance obligation. The amount allocated to the material rights was recorded as deferred revenue, and the Company
commenced revenue recognition when the underlying option was exercised or upon expiry of the option.
During the year ended December 31, 2019, Sanofi extended the research and development services on both
programs. The arrangement consideration increased to $14.9 million. On March 28, 2019, Sanofi notified the Company that
it would not exercise the Sickle Cell License Option. In addition, the collaboration with Sanofi was terminated effective
October 23, 2019. As a result, deferred revenue related to amounts allocated to the Sickle Cell License Option Material
Right of $5.3 million and the Hemophilia License Option Material Right of $4.7 were recognized during the year ended
December 31, 2019. For the years ended December 31, 2019, 2018 and 2017, the Company recognized $10.7 million,
$4.0 million and $0.4 million, respectively, of collaboration revenue related to its collaboration with Sanofi. As of
December 31, 2019 and 2018, the Company recorded deferred revenue of zero and $9.9 million, respectively, related to its
collaboration with Sanofi, respectively.
Oxurion Collaboration Agreement
Summary of Agreement
In August 2013, the Company entered into a Research Collaboration and License Agreement (the “Oxurion
Collaboration Agreement”) with Oxurion. Under the Oxurion Collaboration Agreement, the Company is responsible for
identifying Bicycle peptides related to the collaboration target, plasma kallikrein, for use in various ophthalmic indications.
Oxurion is responsible for further development and product commercialization after the defined research screening is
performed by the Company.
Under the Oxurion Collaboration Agreement, the Company is obligated to perform specified research activities in
accordance with the research plan, which includes two stages. Stage I, now completed, focused on the screening of targets
using the Company’s Bicycle peptide discovery platform with the goal of identifying compounds that meet the criteria set
by the parties, and Stage II, now underway, during which Oxurion has continued research activities on selected Bicycle
peptides with the goal of identifying compounds for further development and commercialization. The Company is not
obligated or expected to perform any research services during Stage II of the research plan.
The Company granted certain worldwide intellectual property rights to Oxurion for the development, manufacture
and commercialization of licensed compounds associated with plasma kallikrein. The Oxurion Collaboration Agreement
provided for an upfront payment of €1.0 million and potential additional R&D funding, at an
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agreed upon FTE rate, should the research effort require more than one FTE or the research plan be amended or extended
by Oxurion. In addition, Oxurion is required to make certain milestone payments to the Company upon the achievement of
specified research, development, regulatory and commercial events. More specifically, for each collaboration program, the
Company is eligible to receive up to €8.3 million in research and development milestones of which €1.8 million has been
received as of December 31, 2019. In addition, the Company is eligible to receive up to €16.5 million upon achievement of
certain regulatory milestone payments (e.g. €5 million for granting first regulatory approval in either the United States or
EU for the first indication). In addition, to the extent any of the collaboration products covered by the licenses granted to
Oxurion are commercialized, the Company would be entitled to receive tiered royalty payments of mid‑single digits based
on a percentage of net sales. Due to the uncertainty of pharmaceutical development and the high historical failure rates
generally associated with drug development, the Company may not receive any additional milestone payments or royalty
payments from Oxurion.
Either party may terminate the Oxurion Collaboration Agreement if the other party has materially breached any of
its material obligations and such breach continues after the specified cure period. Either party may terminate the Oxurion
Collaboration Agreement in the event of the commencement of any proceeding in or for bankruptcy, insolvency,
dissolution or winding up by or against the other party that is not dismissed or otherwise disposed of within a specified
time period. Oxurion may terminate the Oxurion Collaboration Agreement, entirely or on a program by program, licensed
product by licensed product or country by country basis, for convenience upon not less than 90 days prior written notice to
the Company.
In November 2017, the parties executed the First Deed of Amendment to the Oxurion Collaboration Agreement
(“First Amendment”). The First Amendment confirms that THR‑149 has been selected as a development compound under
the Oxurion Collaboration Agreement. The First Amendment provided for additional research services to be performed by
the Company related to the identification of two additional compounds for Oxurion, in its discretion, to select as
development compounds. As for the work under the Oxurion Collaboration Agreement, the Company will perform the
work under Stage I of the research plan which will be funded at a specified FTE rate, plus any direct out of pocket
expenses, and Oxurion will be responsible for Stage II research and any development after the selection of a development
compound. Additional milestones and royalties were added for the potential additional licensed compounds, consistent with
those of the initial Oxurion Collaboration Agreement. The Company is not obligated or expected to perform any research
services during Stage II of the research plan.
Accounting Analysis
Under the Oxurion Collaboration Agreement, all licenses were granted and research services to be provided by the
Company were fully completed and revenue associated with those obligations was fully recognized prior to January 1,
2016. Under the First Amendment, the Company has identified a single performance obligation associated with the
performance of research services associated with Stage I of the research plan for which the Company will be reimbursed
for its services at a specified FTE reimbursement rate plus out of pocket costs which will be recognized on a proportional
performance basis as the associated FTE efforts and costs are incurred, which best reflects the progress towards satisfaction
of the performance obligation. None of the unpaid development or regulatory milestones have been included in the
transaction price, as all milestone are not considered probable at December 31, 2019 and December 31, 2018.
For the years ended December 31, 2019, 2018 and 2017, the Company recognized zero, $1.7 million and $0.8
million, respectively, of revenue related to its agreements with Oxurion. As of December 31, 2018, the research services
under the First Amendment were complete. The revenue recognized for the years ended December 2019, 2018 and 2017
includes zero, $1.2 million and $0.8 million, respectively, related to the achievement of developmental milestones during
the advancement of the research by Oxurion into a Phase I clinical study. There was no deferred revenue recorded as of
December 31, 2019 and 2018 in connection with the agreements with Oxurion.
Dementia Discovery Fund Agreement
In May 2019, the Company entered into a collaboration with the Dementia Discovery Fund (“DDF”) to use
Bicycle technology for the discovery and development of novel therapeutics for dementia (the “DDF Collaboration
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Agreement”). In October 2019, the collaboration with DDF was expanded to include Oxford University’s Oxford Drug
Discovery Institute (ODDI). Under the terms of the DDF Collaboration Agreement, the Company and DDF will collaborate
to identify Bicycles that bind to clinically validated dementia targets (the “DDF Research Plan”). The Company is obligated
to use commercially reasonable efforts to perform research activities under the DDF Research Plan. DDF shall not be
directly engaged in the conduct of any research activities under the arrangement. ODDI will then profile these Bicycles in a
range of target-specific and disease-focused assays to determine their therapeutic potential. The activities under the DDF
Collaboration Agreement will be governed by a project advisory panel, composed of two representatives from the
Company and DDF. The Research Advisory Panel will oversee, review and recommend direction for the Research Plans
and variations of or modifications of research plans.
The Company received an upfront payment of $1.1 million in May 2019. The Company may receive up to an
additional $0.7 million, upon achievement of certain milestones such as the identification of lead bicycle candidates with a
certain affinity, which would be used to fund additional research and development services including lead optimization.
Intellectual property created by the collaboration shall be owned by the Company, and background intellectual
property improvements shall be owned by the party from whose background intellectual property they exclusively relate. If
promising lead compounds are identified, the Company, ODDI and DDF have the option (the “DDF Option”) to establish a
jointly owned new company (“NewCo”) to advance the compounds through further development towards
commercialization. NewCo will receive a royalty and milestone-bearing assignment and license of intellectual property
from the Company for this purpose. The DDF Option is exercisable at any time until 90 days following the completion of
the Research Plan and delivery of a final report. If DDF does not elect to exercise the DDF Option during the Option
period, then DDF shall have no right in the collaboration intellectual property. NewCo will initially be owned 66% by the
Company and 34% by DDF; however, the Company shall not be entitled to exercise more than 50% of the total voting
rights related to its ownership interests. After completion of the DDF Option exercise, for a period of two years following
the option exercise, NewCo shall have the right to initiate a new research program to develop up to three additional
dementia targets, on a target by target basis, and the Company will be entitled to charge NewCo an agreed upon FTE rate
for peptide screening and optimization for the active targets.
Either party may terminate the DDF Collaboration Agreement upon providing not less than 60 days written notice.
A party may terminate the DDF Collaboration Agreement with immediate effect without notice if at any time the other
party files for protection under bankruptcy or insolvency laws, makes an arrangement for the benefit of creditors, appoints
a receiver, administrator, manager or trustee over its property, proposes a written agreement of composition or extension of
its debts, is a party to any dissolution, winding-up or liquidation, or is in material breach that has not been remedied.
Accounting Analysis
The Company identified a single performance obligation associated with the performance of research and
development services under the DDF Research Plan.
The Company concluded that the DDF Option is an immaterial obligation at the inception of the arrangement, as it
represents a right to acquire shares of NewCo that have de minimis value. The DDF Option also does not contain a material
right that otherwise would not have been received. The Company’s participation in the Research Advisory Panel was
assessed as immaterial in the context of the contract. In addition, the Company concluded that the option for NewCo to
obtain additional peptide screening and optimization services is not an obligation at the inception of the arrangement, as
they are optional services and the amount that will be paid for the services do not reflect a discount that the customer would
otherwise receive and do not provide the customer with material rights.
The total transaction price was initially determined to be $1.1 million, consisting of the upfront payment for
research and development funding. The Company may receive additional milestone payments during the DDF Research
Plan, as well as for research and development services for additional targets following the exercise of DDF Option. These
variable amounts are excluded from the transaction price as they relate to fees that can only be achieved subsequent to the
exercise of an option.
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The transaction price was allocated to the single performance obligation of research and development services.
The Company will recognize revenue as the underlying services are performed using a proportional performance model,
over the period of service using input‑based measurements of total costs, including total full‑time equivalent effort incurred
to date as a percentage of total costs expected, which best reflects the progress towards satisfaction of the performance
obligation.
For the year ended December 31, 2019, the Company recognized $0.4 million of revenue, and recorded deferred
revenue of $0.7 million for the year ended December 31, 2019 related to its collaboration with DDF.
Material Transfer Agreement
In October 2018, the Company entered into a Materials Transfer Agreement. Under the terms of the agreement,
the Company agreed to transfer bicyclic peptides (the “Materials”) to the recipient for the purpose of testing the materials
in order to evaluate the Company’s technology platform. The recipient agreed to pay the Company $1.0 million within 30
business days after receipt of the materials and related data package, which was paid to the Company in May 2019. The
agreement has a term of 14 months after delivery of the Materials and data package and may be terminated upon 45 days’
notice by the recipient. At any point during the term of the agreement and continuing through two months after the
completion of the permitted research, the recipient has the option to enter into good faith negotiations to obtain a license to
the Company’s background intellectual property and/or the Company’s interest in the new substances or developments for
the purpose of continued research and development of collaboration products.
For the year ended December 31, 2019 and 2018, the Company recognized $1.0 million and zero, respectively, of
revenue related to its Materials Transfer Agreement, as the Company concluded that the recipient has the ability to direct
the use of and obtain substantially all of the remaining benefit from the Materials upon the delivery of the Materials and the
data package.
Summary of Contract Assets and Liabilities
Up‑front payments and fees are recorded as deferred revenue upon receipt or when due until such time as the
Company satisfies its performance obligations under these arrangements. A contract asset is a conditional right to
consideration in exchange for goods or services that the Company has transferred to a customer. Amounts are recorded as
accounts receivable when the Company’s right to consideration is unconditional.
Period ended December 31, 2019
Contract assets
Contract liabilities:
Deferred revenue
Balance at
Beginning of
Period
Additions
Deductions
Impact of
Exchange
Rates
Balance at
End of
Period
$
— $
149 $
(149) $
— $
—
AstraZeneca collaboration deferred revenue
Sanofi collaboration deferred revenue
DDF collaboration deferred revenue
Total deferred revenue
$
4,727
9,908
—
14,635 $
58
—
1,114
1,172 $
(35)
(9,984)
(394)
(10,413) $
163
76
24
263 $
4,913
—
744
5,657
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The following table presents changes in the balances of the Company’s contract assets and liabilities (in
thousands):
Period ended December 31, 2018
Contract assets
Contract liabilities:
Deferred revenue
Balance at
Beginning of
Year
Additions
Deductions
Impact of
Exchange
Rates
Balance at
End of
Period
$
— $
91 $
(91) $
— $
—
AstraZeneca collaboration deferred revenue
Sanofi collaboration deferred revenue
Total deferred revenue
$
—
14,467
14,467 $
5,350
—
5,350 $
(466)
(4,006)
(4,472) $
(157)
(553)
(710) $
4,727
9,908
14,635
The contract assets represents research and development services which have been performed but have not yet
been billed, and are reduced when they are subsequently billed.
The AstraZeneca deferred revenue balance as of December 31, 2019 includes $4.9 million allocated to the Target
3, Target 4, Target 5 and Target 6 Material Rights, which will commence revenue recognition when the respective option is
exercised at the end of AZ Research Term or when the option expires. The remaining balance relates to research and
development services billed in advance that will be recognized over the Bicycle Research Term.
During the year ended December 31, 2019, 2018 and 2017, the Company recognized the following revenues as a
result of changes in the contract asset and the contract liability balances in the respective periods (in thousands):
Year Ended
December 31,
2019
2018
2017
Revenue recognized in the period from:
Revenue recognized based on proportional performance
Revenue recognized based on expiration of material rights
Total
Cancer Research UK
BT1718
$
(429) $ (4,472) $ (355)
—
$ (10,413) $ (4,472) $ (355)
(9,984)
—
On December 13, 2016, the Company entered into a Clinical Trial and License Agreement with Cancer Research
Technology Limited (“CRTL”) and Cancer Research UK (“CRUK”). Pursuant to the agreement, as amended in
March 2017 and June 2018, CRUK’s Centre for Drug Development will sponsor and fund a Phase Ia and Phase IIa clinical
trial for the Company’s lead product candidate, BT1718, a Bicycle Toxin Conjugate, in patients with advanced solid
tumors.
CRUK is responsible to design, prepare, carry out and sponsor the clinical trial at its cost. The Company is
responsible for supplying agreed quantities of GMP materials for the study, the supply of which has been completed. In the
event that additional quantities are needed, the Company will provide CRUK with all reasonable assistance to complete the
arrangements necessary for the generation and supply of such additional GMP materials but CRUK will be responsible for
supplying and paying for such additional quantities of GMP materials.
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The Company granted CRUK a license to its and its affiliates’ intellectual property in order to design, prepare for,
sponsor, and carry out the clinical trial the Company retains the right to continue the development of BT1718 during the
clinical trial. Upon the completion of the Phase I/IIa clinical study, the Company has 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 the Company
decides to abandon development of all products that deliver cytotoxic payloads to the MT1 target antigen, the CRTL may
elect to receive an exclusive license to develop and commercialize the product on a revenue sharing basis (in which case
the Company will receive tiered royalties of 70% to 90% of the net revenue depending on the stage of development when
the license is granted). The CRUK agreement contains additional future milestone payments upon the achievement of
development and regulatory 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 CRUK agreement can be terminated by either party upon an insolvency event, material breach of the terms of
the contract, or upon a change in control (and the new controlling entity generates its revenue from the sale of tobacco
products or is an affiliate of such party). CRUK may terminate the arrangement for safety reasons or if it determines that
the objectives of the clinical trial will not be met, in which case, if the study is terminated by CRUK prior to the completion
of the Phase 1a dose escalation portion of the study for such reasons or if CRUK refuses release of any additional quantities
of GMP materials or if the parties cannot agree upon a plan to supply the additional quantities of GMP materials, the
Company will be obligated to refund fifty percent of the costs and expenses incurred or committed by CRUK to perform
the clinical trial. If the study is terminated by CRUK for an insolvency event, a material breach by the Company, or if the
Company is acquired by an entity that generates its revenue from the sale of tobacco products or is an affiliate of such
party, the Company will reimburse CRUK in full for all costs paid or committed in connection with the clinical trial and no
further license payments, where applicable, shall be due. In such case where we are acquired by an entity that generates its
revenue from the sale of tobacco products or is an affiliate of such party, CRUK will not be obliged to grant a license to the
Company in respect of the results of the clinical trial and the CRT may elect to receive an exclusive license to develop and
commercialize the product without CRT being required to make any payment to the Company.
The Company concluded that the costs incurred by CRUK is a liability in accordance with ASC 730, Research
and Development, as the payment is not based solely on the results of the research and development having future
economic benefit. As such, for the year ended December 31, 2019 and 2018, the Company recorded a liability of $2.0
million and $0.8 million, respectively, which is recorded in other long‑term liabilities in the consolidated balance sheets.
The liability is recorded as incremental research and development expense in the statements of operations and
comprehensive loss.
BT7401
In December 2019, the Company entered into a clinical trial and license agreement with the Cancer Research
Technology Limited and CRUK. Pursuant to the agreement, CRUK’s Centre for Drug Development will fund and sponsor
development of BT7401 from current preclinical studies through the completion of a Phase IIa trial in patients with
advanced solid tumors.
The Company granted to CRUK a license to our intellectual property in order to design, prepare for, sponsor, and
carry out the clinical trial and all necessary preclinical activities to support the trial. The Company retains the right to
continue the development of BT7401 during the clinical trial. Upon the completion of the Phase I/IIa clinical study, the
Company has 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 the Company decides to abandon development of all products that contain BT7401 or all
the pharmaceutically active parts of BT7401, the Cancer Research Technology Limited may elect to receive an exclusive
license to develop and commercialize the product on a revenue sharing basis (in which case the Company will receive
tiered royalties of 55% to 80% of the net revenue depending on the stage of development when the license is granted) less
certain costs, as defined by the agreement. The CRUK agreement contains additional future milestone payments upon the
achievement of development, regulatory and commercial milestones, payable in cash, with an aggregate total value of up to
$60.3 million for each licensed product, as well as royalty payments based on a single
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digit percentage on net sales of products developed, and sublicense royalties to the CRUK in the very low double digit
percentage of sublicense income depending on the stage of development when the license is granted.
The CRUK agreement can be terminated by either party upon an insolvency event, material breach of the terms of
the contract, or upon a change in control (and the new controlling entity generates its revenue from the sale of tobacco
products), or upon written notice by either party prior to the last cycle of treatment has been completed under the clinical
trial. If the study is terminated by the Company prior to the filing of a clinical trial authorization, or by the CRUK for an
insolvency event or a material breach by us prior to the start of a clinical trial, the Company will reimburse CRUK for
certain costs paid or committed prior to the start of the clinical trial. In such case where the Company is acquired by an
entity that generates its revenue from the sale of tobacco products, CRUK will not be obliged to grant a license to us in
respect of the results of the clinical trial and the Cancer Research Technology Limited may elect to receive an exclusive
license to develop and commercialize the product without Cancer Research Technology Limited being required to make
any payment to the Company. There were no activities initiated under the BT7401 CRUK arrangement as of December 31,
2019, and as such there was no accounting impact as of and for the year ended December 31, 2019.
11. Income Taxes
The components of net loss before tax provision from income taxes are as follows (in thousands):
United Kingdom
United States
Total
2019
Year Ended
December 31,
2018
$(31,906) $(22,229) $(16,319)
37
$(30,862) $(22,242) $(16,282)
1,044
(13)
2017
The components of the benefit for income taxes are as follows (in thousands):
Current income tax provision (benefit)
Federal
State
Total current income tax provision (benefit)
Deferred income tax (benefit) provision
Federal
State
Total deferred income tax (benefit)
Total benefit from income taxes
F-39
Year Ended
December 31,
2018
2019
2017
$
49 $
61
110
(25) $
7
(18)
75
10
85
(295)
(69)
(364)
(167)
(211)
(378)
$ (254) $ (396) $
(58)
(50)
(108)
(23)
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A reconciliation of the benefit for income taxes computed at the statutory income tax rate to the benefit for income
taxes as reflected in the financial statement is as follows:
Benefit for income taxes at statutory rate
(Decreases) increases resulting from:
Federal tax credits
Change in valuation allowance
Net losses surrendered for research credit
Preferred share warrants
Other
Effective income tax rate
Year Ended
December 31,
2018
2019
2017
19.0 %
19 %
19 %
1.3 %
(8.0)%
(5.3)%
(3.3)%
(2.9)%
0.8 %
1.1 %
(7.2)%
(3.7)%
(0.6)%
(6.8)%
1.8 %
0.4 %
(9.4)%
(6.7)%
(1.1)%
(2.1)%
0.1 %
Significant components of the Company’s current and deferred tax assets at December 31, 2019 and 2018, were
as follows (in thousands):
Deferred tax assets:
Operating loss carryforwards
Research credit carryforwards
Operating lease liability
Accrued expenses and other
Total deferred tax assets
Deferred tax liabilities:
Operating lease right-of-use asset
Depreciation & amortization
Total deferred tax liabilities
Valuation allowance
Net deferred tax assets
Year Ended
December 31,
2019
2018
$ 7,082 $ 4,953
197
—
1,149
6,299
434
439
1,779
9,734
(422)
(326)
(748)
(8,104)
$
882 $
—
(163)
(163)
(5,621)
515
During the years ended December 31, 2019, 2018 and 2017, the Company recorded an income tax benefit of $0.3
million, $0.4 million and $23,000, respectively. The Company is subject to United Kingdom corporate taxation. Due to the
nature of its business, the Company has generated losses since inception and therefore not paid United Kingdom
corporation tax. The Company's income tax benefit is mainly the result of deferred tax assets benefited in the United States
that do not have a valuation allowance against them because of profits that will be generated by an intercompany service
agreement.
The Company regularly assesses its ability to realize its deferred tax assets. Assessing the realization of deferred
tax assets requires significant judgment. In determining whether its deferred tax assets are more likely than not realizable,
the Company evaluated all available positive and negative evidence, and weighed the evidence based on its objectivity.
After consideration of the evidence, including the Company's history of cumulative net losses in the U.K., and has
concluded that it is more likely than not that the Company will not realize the benefits of its U.K. deferred tax assets and
accordingly the Company has provided a valuation allowance for the full amount of the net deferred tax assets in the U.K.
The Company has considered the Company's history of cumulative net profits in the United states, estimated future taxable
income and concluded that it is more likely than not that the Company will realize the benefits of its United States deferred
tax assets and has not provided a valuation allowance against the net deferred tax assets in the United States. The valuation
allowance increased in the year ended December 31, 2019 by $2.5 million due to the
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corresponding increase in UK deferred tax assets, primarily due to operating loss carryforwards generated during the year
that were not surrendered for research credit utilization.
The Company recorded a valuation allowance against all of its U.K. deferred tax assets as of December 31, 2019
and 2018.
The Company intends to continue to maintain a full valuation allowance on its U.K. deferred tax assets until there
is sufficient evidence to support the reversal of all or some portion of these allowances. The release of the valuation
allowance would result in the recognition of certain deferred tax assets and an increase to the benefit for income taxes for
the period the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to
change on the basis of the level of profitability that the Company is able to actually achieve.
The benefit for income taxes shown on the consolidated statements of operations differs from amounts that would
result from applying the statutory tax rates to income before taxes primarily because of certain permanent expenses that
were not deductible, U.K., federal and state research and development credits, as well as the application of valuation
allowances against the U.K. deferred tax assets.
As of December 31, 2019, the Company had $41.7 million of U.K. operating loss carryforwards and zero of
federal and state net operating loss carryforwards. Unsurrendered U.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% of U.K. taxable profits. As of December 31, 2019, the
Company had $0.3 million and $0.2 million of federal and state research and development credit carryforwards,
respectively, that expire at various dates through 2039.
The Company recognizes, in its consolidated financial statements, the effect of a tax position when it is more
likely than not, based on the technical merits, that the position will be sustained upon examination. The Company had no
uncertain tax positions during the years ended of December 31, 2019 and 2018. There are no amounts of interest or
penalties recognized in the consolidated statement of operations or accrued on the consolidated balance sheet for any period
presented. The Company does not expect any material changes in these uncertain tax benefits within the next 12 months.
The Company files income tax returns in the United Kingdom, and in the United States for federal income taxes
and in the Commonwealth of Massachusetts for state income taxes. In the ordinary course of business, the Company is
subject to examination by tax authorities in these jurisdictions. The 2017 and 2018 tax year remains open to examination
the by HM Revenue & Customs. The statute of limitations for assessment with the Internal Revenue Service is generally
three years from filing the tax return. As such, all years since inception in the U.S. remain open to examination. The
Company is currently not under examination by jurisdictions for any tax years.
12. Commitments and Contingencies
Leases
In September 2015, the Company entered into a tenancy agreement for space in Building 260 Babraham Research
Campus, Cambridge, UK for a period of two years, beginning on October 1, 2015. The annual rent was approximately
$0.2 million plus service charges. In October 2017 this agreement was extended until January 2018 with annual rent of
approximately $0.2 million.
In January 2017, Bicycle Therapeutics Inc. entered into a lease for office and laboratory space in Cambridge,
Massachusetts for the period from February 1, 2017 to December 31, 2017. Rental payments under the lease were $19,500
per month, plus a portion of the landlords operating costs.
In September 2017, Bicycle Therapeutics Inc. entered into a lease agreement for office and laboratory space in
Lexington, Massachusetts, which commenced on January 1, 2018 and expires on December 31, 2022. Bicycle Therapeutics
Inc. has the option to extend for a successive period which is not included in the lease term as it is not
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reasonably certain that the option will be exercised. In conjunction with the lease agreement, Bicycle Therapeutics Inc. paid
a security deposit of $0.2 million as well as prepaid rent of $0.1 million for the first month of the third, fourth, and fifth
year of the lease. The deposit is recorded in other assets in the consolidated balance sheets. With the adoption of ASU
2016‑02, the Company has recorded a right‑of‑use asset (inclusive of the impact of prepaid rent) and corresponding lease
liability, by calculating the present value of lease payments, discounted at 9%, the incremental borrowing rate, over the
lease term.
In October 2017, the Company entered into a lease agreement for office and laboratory space in Building 900,
Babraham Research Campus, Cambridge, U.K., which expires on December 21, 2021. The annual rent is approximately
$0.5 million. The Company has the right to renew the lease for five years commencing December 21, 2021, which is not
included in the lease term as it is not reasonably certain that the right will be exercised. Service charges are also payable
based on floor area and are estimated to be approximately $0.1 million per year. In conjunction with the 2017 lease
agreement, the Company paid a security deposit of $0.6 million, which is recorded in other assets in the consolidated
balance sheets. With the adoption of ASU 2016‑02, the Company has recorded a right‑of‑use asset and corresponding lease
liability, by calculating the present value of lease payments, discounted at 7.75%, the incremental borrowing rate, over the
lease term.
The future minimum lease payments due under the Company’s operating leases as of December 31, 2018 under
ASC 840 were as follows (in thousands):
Year Ending December 31,
2019
2020
2021
2022
2023
$
$
888
901
915
483
—
3,187
Prior to the adoption of ASU 2016‑02 and for the year ended December 31, 2018 and 2017 the Company
recognized rent expense on a straight‑line basis over the lease period and recorded deferred rent for rent expense incurred
but not yet paid. During year ended December 31, 2018 and 2017, the Company recognized total rent expense of $1.0
million and $0.5 million, respectively.
The Company identified and assessed the following significant assumptions in recognizing the right‑of‑use assets
and corresponding lease liabilities:
·
·
·
Expected lease term — The expected lease term includes both contractual lease periods and, when applicable,
cancelable option periods when it is reasonably certain that the Company would exercise such options. The
Company has not included any option periods in the expected lease term as it is not reasonably certain that
the Company will exercise such options.
Incremental borrowing rate — The Company’s lease agreements do not provide an implicit rate. As the
Company does not have any external borrowings for comparable terms of its leases, the Company estimated
the incremental borrowing rate by comparing interest rates available in the market for similar borrowings and
third‑party quotations.
Lease and non‑lease components — In certain cases, the Company is also responsible for certain additional
charges for operating costs, including insurance, maintenance, taxes, and other costs incurred, which are
billed based on both usage and as a percentage of the Company’s share of total square footage. The amounts
paid are considered non‑lease components. The Company has elected the practical expedient which allows
the non‑lease components to be combined with the lease components. The payments for other operating costs
are considered variable lease cost and are recognized in the period in which the costs are incurred.
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The components of the Company’s lease expense, which are recorded as a component of research and
development expenses and general and administrative expenses in the consolidated statement of operations and
comprehensive loss are as follows (in thousands):
Operating lease cost
Variable lease cost
Total lease cost
Weighted‑average remaining operating lease term (years)
Weighted‑average discount rate
December 31,
2019
$
$
900
390
1,290
2.6
8.52 %
Future minimum lease payments under non-cancelable operating leases under ASC 842 as of December 31, 2019
are as follows (in thousands):
Year Ending December 31,
2020
2021
2022
2023
2024
Present value adjustment
Total lease liabilities
Less: current lease liabilities
Long term lease liabilities
$
$
$
879
777
443
—
—
(208)
1,891
(640)
1,251
The Company has entered into various agreements 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 of operating lease payments above since the contracts are generally
cancelable at any time upon less than 90 days’ prior written notice. The Company is not contractually able to terminate for
convenience and avoid any and all future obligations to these vendors. Under such agreements, the Company is
contractually obligated to make certain minimum payments to the vendors, with the payments in the event of a termination
with less than 90 days’ notice based on the timing of the termination and the exact terms of the agreement.
Legal proceedings
From time to time, the Company or its subsidiaries may become involved in various legal proceedings and claims,
either asserted or unasserted, which arise in the ordinary course of business.
In September 2016, the Company’s subsidiary, BicycleRD, filed a complaint in the District Court of the Hague
against Pepscan Systems B.V. and its affiliates (“Pepscan”) to contest the right of Pepscan to terminate a non‑exclusive
patent license agreement entered into with Pepscan in 2009 (“PLA”). BicycleRD included a conditional claim for a ruling
that the licensed patent relevant to BicycleRD’s activities is invalid. In response, Pepscan counterclaimed for injunctive
relief and unquantified damages. The Company is vigorously prosecuting its claims and defending against those of
Pepscan. The Company does not believe that a loss is probable or estimable at this time, and as such, the Company has not
recorded a liability related to the Pepscan litigation as of December 31, 2019 or 2018. Should the Company not be
successful in maintaining its rights to Pepscan’s patent or in the Company’s alternative demand that the patent be
invalidated, commercialization of the Company’s lead product could be delayed. As the Pepscan patent expires
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prior to the expected commercialization date of the product, the Company does not believe that the legal proceedings could
have a material adverse effect on the Company’s business and operating results.
Founder Royalty arrangements
At the time BicycleRD Limited was organized, BicycleRD Limited entered into a royalty agreement with its
founders and initial investors (the “Founder Royalty Agreement”). Pursuant to the Founder Royalty Agreement, the
Company will pay a royalty rate in the low single digit percentages on net product sales to its founders and initial investors,
for a period of 10 years from the first commercial sale on a country by country basis. No royalties have been earned or paid
under the royalty arrangements to date.
In accordance with the terms of the Founder Royalty Agreements, as amended in May 2017, the parties amended
the terms of the royalty arrangements to limit the future royalties payments to net sales on future products that could be
generated under the collaboration with Oxurion and AstraZeneca, in exchange for the issuance of warrants to subscribe for
200,000 Series A Preferred Shares. The Company recorded the fair value of the warrants to subscribe for Series A Preferred
Shares to the founders of $0.9 million as research and development expense during the year ended December 31, 2017, as
the licenses do not have alternative future use, in accordance with ASC Topic 730, Research and Development.
Indemnification obligations
In the ordinary course of business, the Company may provide indemnification of varying scope and terms to
vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses
arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In
addition, the Company has indemnification obligations towards members of its board of directors that will require the
Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or
service as directors or officers. The maximum potential amount of future payments the Company could be required to make
under these indemnification arrangements is, in many cases, unlimited. To date, the Company has not incurred any material
costs as a result of such indemnification obligations. The Company is not aware of any claims under indemnification
arrangements, and therefore it has not accrued any liabilities related to such obligations in its consolidated financial
statements as of December 31, 2019 and 2018.
13. Net loss per share
Basic and diluted net loss per share attributable to ordinary shareholders was calculated as follows (in thousands,
except share and per share amounts):
Numerator:
Net loss attributable to ordinary shareholders
$
(30,608) $ (21,846) $ (16,259)
Year Ended
December 31,
2019
2018
2017
Denominator:
Weighted average ordinary shares outstanding, basic and diluted
Net loss per share attributable to ordinary shareholders, basic and diluted
$
11,045,370
438,862
333,125
(2.77) $ (49.78) $ (48.81)
The Company’s potentially dilutive securities, which include share options, warrants to subscribe for ordinary
shares, and which prior to the completion of the IPO, included convertible preferred shares, warrants to subscribe for
Series A and Series B1 Preferred Shares, and unvested restricted shares, have been excluded from the computation of
diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted average number of
ordinary shares outstanding used to calculate both basic and diluted net loss per share attributable to ordinary shareholders
is the same. The Company excluded the following potentially dilutive ordinary shares, presented based on
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amounts outstanding at each period end, from the computation of diluted net loss per share attributable to ordinary
shareholders for the periods indicated because including them would have had an anti‑dilutive effect:
Convertible preferred shares (as converted to ordinary shares)
Warrants to subscribe for convertible preferred shares (as adjusted to reflect
the impact of the share capital reorganization and issuance of bonus shares
(Note 1))(1)(2)
Restricted ordinary shares
Options to purchase ordinary shares
Year Ended
December 31,
2018
2019
— 11,532,659
2017
9,641,740
1,347,953
92,885
162,466
—
2,634,346
964,538
2,727,231 13,828,271 12,116,697
1,347,953
83,947
863,712
(1) On March 7, 2019, the holders of the Series B1 warrants to subscribe for Series B1 Preferred Shares agreed that 50%
of the warrants would be exercised in conjunction with the IPO and 50% of the warrants would expire.
(2) At December 31, 2019 65,000 warrants are outstanding which are exercisable into 92,885 ordinary shares (Note 6).
14. Benefit plans
The Company established a defined‑contribution savings plan under Section 401(k) of the Code (the
“401(k) Plan”). The 401(k) Plan covers all U.S. employees and allows participants to defer a portion of their annual
compensation on a pre‑tax basis. Matching contributions to the 401(k) Plan may be made at the discretion of the
Company’s board of directors. During the years ended December 31, 2019, 2018, and 2017 the Company made
contributions totaling $0.2 million, $0.1 million and $42,000, respectively, to the 401(k) Plan.
The Company provides a pension contribution plan for its employees in the United Kingdom, pursuant to which
the Company may match employees’ contributions each year (“U.K Plan”). During the years ended December 31, 2019,
2018 and 2017 the Company made contributions totaling $0.3 million, $0.2 million and $0.2 million, respectively, to the
U.K. Plan.
15. Related party transactions
The Company has entered into Founder Royalty Agreements with its founders and initial investors (Note 12). No
royalties have been earned or paid under the Founder Royalty Agreements to date.
The Chairman of the Company’s Board of Directors is associated with Stone Sunny Isles Inc., which provided
consultancy services to the Company totaling $0.1 million during the year ended December 31, 2019.
The former Chairman of the Company’s Board of Directors is associated with 10X Capital Inc., which provided
consultancy services to the Company totaling $50,000, $0.2 million, and $0.1 million during the years ended
December 31, 2019, 2018 and 2017, respectively.
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16. Geographic information
The Company operates in two geographic regions: the United States and the United Kingdom. Information about
the Company’s long‑lived assets held in different geographic regions is presented in the table below (in thousands):
United States
United Kingdom
December 31,
2019
$ 2,017 $
2,331
$ 4,348 $
2018
498
1,320
1,818
The Company’s collaboration revenues are attributed to the operations of the Company in the United Kingdom.
17. Selected Quarterly Financial Data (Unaudited)
The following tables contain selected quarterly financial information for 2019 and 2018. The Company believes
the following information includes all recurring adjustments necessary for a fair statement of such information (in
thousands, except share and per share data):
Statements of Operations Data:
Collaboration revenues
Total operating expenses
Total other income (expense), net
Net loss before income tax provision
(Benefit from) provision for income taxes
Net loss
Net loss per share attributable to ordinary shareholders, basic
and diluted
Weighted average ordinary shares outstanding, basic and
diluted
Statements of Operations Data:
Collaboration revenues
Total operating expenses
Total other expense, net
Net loss before income tax provision
Benefit from income taxes
Net loss
Net loss per share attributable to ordinary shareholders, basic
and diluted
Weighted average ordinary shares outstanding, basic and
diluted
Three Months Ended
December 31,
September 30,
June 30,
March 31,
2019
2019
2019
2019
$
$
$
5,281 $
10,045
220
(4,544)
(138)
(4,406) $
614 $
10,867
440
(9,813)
(331)
(9,482) $
1,522 $
9,510
(2,094)
(10,082)
135
6,384
9,678
(3,129)
(6,423)
80
(10,217) $ (6,503)
(0.25) $
(0.53) $
(1.40) $
(7.80)
17,926,165
17,900,978
7,298,139
834,043
Three Months Ended
December 31,
2018
September 30,
June 30,
March 31,
2018
2018
2018
$
$
$
1,057 $
8,599
901
(6,641)
—
(6,641) $
1,610 $
7,967
(1,335)
(7,692)
—
(7,692) $
1,661 $
6,619
(21)
(4,979)
—
2,808
5,697
(41)
(2,930)
(396)
(4,979) $ (2,534)
(13.19) $
(17.73) $
(11.85) $
(6.38)
503,309
433,795
420,063
397,483
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18. Subsequent events
On February 21, 2020, the Company entered into a Discovery Collaboration and License Agreement (the
“Genentech Collaboration Agreement”) with Genentech, a member of the Roche Group. The collaboration is focused on
the discovery and development of Bicycle peptides directed to biological targets selected by Genentech and aimed at
developing up to four potential development candidates against multiple immuno-oncology targets suitable for Genentech
to advance into further development and commercialization. Bicycle will be responsible for discovery and lead
optimization of such Bicycle peptides through specified phases of the collaboration, and following drug candidate selection
Genentech will be responsible for all future research and development. The initial discovery and optimization activities will
focus on two immuno-oncology targets, potentially with additional targeting elements, and Genentech has the option to
nominate up to two additional immuno-oncology targets, potentially with additional targeting elements, to be the subject of
additional collaboration programs during a specified period following completion of certain activities under an agreed
research plan, in which case Genentech will pay to the Company an expansion fee of $10.0 million per additional
collaboration program. Genentech has the right, under certain limited circumstances, to select an alternative target to be the
subject of a collaboration program, in some cases subject to payment of an additional target selection fee.
Under the Genentech Collaboration Agreement, Genentech will make an upfront payment to the Company of
$30.0 million. The Company will perform research activities for each target under the collaboration, under a mutually
agreed upon research plan through specified collaboration phases, under the oversight of a joint research committee. For
each collaboration program, Genentech may elect, at its sole discretion, to progress development candidates into further
preclinical development and obtain exclusive worldwide development and commercialization rights for compounds
directed to the target of such collaboration program in exchange for success-based milestone payments totaling $10-12
million per collaboration program.
On a collaboration program-by-collaboration program basis, if Genentech elects to obtain exclusive development
and commercialization rights and pays the applicable success-based milestone payments, Genentech will be required to
make milestone payments to the Company upon the achievement of specified development, regulatory, and initial
commercialization milestones for products arising from each collaboration program, totaling up to $200.0 million. In
addition, the Company is also eligible to receive up to $200.0 million in sales milestone payments on a product-by-product
basis. In addition, to the extent any of the product candidates covered by the licenses conveyed to Genentech are
commercialized, the Company would be entitled to receive tiered royalty payments on net sales at percentages ranging
from the mid-single to low double-digits, subject to certain standard reductions and offsets. Royalties will be payable, on a
product-by-product and country-by-country basis, until the later of the expiration of specified licensed patents covering
such product in such country, or ten years from first commercial sale of such product in such country.
Either party may terminate the Genentech Collaboration Agreement for the uncured material breach of the other
party or in the case of insolvency. Genentech may terminate the Genentech Collaboration Agreement for convenience on
specified notice periods depending on the development stage of the applicable program, either in its entirety or on a
program-by- program basis or major market-by-major market basis.
F-47
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Dated: March 10, 2020
/s/ Kevin Lee
Bicycle Therapeutics plc
Kevin Lee, Ph.D., MBA
Chief Executive Officer (Principal Executive Officer)
/s/Lee Kalowski
Lee Kalowski, MBA
Chief Financial Officer and President (Principal Financial
and Accounting Officer)
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes and appoints Kevin Lee and Lee
Kalowski, and each of them, with full power of substitution and resubstitution and full power to act without the other, as his
or her true and lawful attorney-in-fact and agent to act in his or her name, place and stead and to execute in the name and
on behalf of each person, individually and in each capacity stated below, and to file any and all amendments to this report
on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing, ratifying and confirming all that said attorneys-in-fact and agents
or any of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report on Form 10-K has
been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.
Name
Title
/s/ Kevin Lee
Chief Executive Officer and Director
Kevin Lee, Ph.D., MBA
(Principal Executive Officer)
/s/ Lee Kalowski
Lee Kalowski, MBA
Chief Financial Officer and President
(Principal Financial and Accounting Officer)
/s/ Pierre Legault
Pierre Legault, MBA, CPA
Chairman of the Board and Director
/s/ Michael Anstey
Michael Anstey, DPhil
Director
/s/ Catherine Bingham Director
Catherine Bingham, MBA
/s/ Janice Bourque
Director
Janice Bourque, MBA
/s/ Bosun Hau
Bosun Hau
Director
/s/ Veronica Jordan
Director
Date
March 10, 2020
March 10, 2020
March 10, 2020
March 10, 2020
March 10, 2020
March 10, 2020
March 10, 2020
March 10, 2020
Table of Contents
Veronica Jordan, Ph.D.
/s/ Richard Kender
Director
Richard Kender, MBA
/s/ Carolyn Ng
Carolyn Ng, Ph.D.
Director
/s/ Sir Gregory Winter
Sir Gregory Winter, FRS
Director
March 10, 2020
March 10, 2020
March 10, 2020
Exhibit 4.4
DESCRIPTION OF THE REGISTRANT'S SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
The following describes certain material terms and provisions of the ordinary shares with nominal value of £0.01 per share of Bicycle
Therapeutics plc (“Bicycle,” the “company,” “we,” “our,” or “us”) which are represented by American Depositary Shares (“ADSs”)
with each ADS representing one ordinary share that are registered under Section 12 of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”). The description summarizes relevant provisions of English law, including the U.K. Companies Act 2006 (the
“Companies Act”). The following summary does not purport to be complete and is subject to, and is qualified in its entirety by reference
to, the applicable provisions of English law and our articles of association, a copy of which is filed as an exhibit to the Annual Report on
Form 10-K. We encourage you to read our articles of association and the applicable provisions of English law for additional
information.
General
We were incorporated pursuant to the laws of England and Wales as Bicycle Therapeutics Limited on October 27, 2017 and re-
registered as a public limited company named Bicycle Therapeutics plc on May 22, 2019. We are registered with the Registrar of
Companies in England and Wales under number 11036004, and our registered office is at Building 900 Babraham Research Campus,
Babraham, Cambridge CB22 3AT, United Kingdom.
Certain resolutions were passed by our shareholders in connection with our initial public offering, including a special resolution
approving the adoption of new articles of association that became effective upon the admission of our ADSs to trading on Nasdaq.
Issued Share Capital
Effective from May 13, 2019, the board of directors has the authority to allot new ordinary shares or to grant rights to subscribe for or to
convert any security into ordinary shares in the company up to a maximum aggregate nominal amount of £150,000. This authority runs
for five years and will expire on May 13, 2024. This is in addition to the specific authorities to allot new ordinary shares or grant rights to
subscribe for new ordinary shares in relation to our equity plans. In addition, statutory preemption rights were disapplied in respect of
new ordinary shares issued or rights to subscribe for new ordinary shares granted pursuant to such authorities.
As of December 31, 2019, the company's issued share capital consisted of 17,993,701 ordinary shares, with a nominal value of £0.01 per
share. Each issued share has been fully paid.
Ordinary Shares
Our ordinary shares have the rights and restrictions described in “Key Provisions of Our Articles of Association” below. The
following summarizes the rights of holders of our ordinary shares:
·
·
·
each holder of our ordinary shares is entitled to one vote per ordinary share on all matters to be voted on by shareholders
generally;
the holders of the ordinary shares shall be entitled to receive notice of, attend, speak and vote at our general meetings; and
holders of our ordinary shares are entitled to receive such dividends as are recommended by our directors and declared by our
shareholders.
Registered Shares
We are required by the Companies Act to keep a register of our shareholders. Under English law, the ordinary shares are deemed to
be issued when the name of the shareholder is entered in our share register. The share register therefore is prima facie evidence of the
identity of our shareholders, and the shares that they hold. The share register generally provides limited, or no, information regarding the
ultimate beneficial owners of our ordinary shares. Our share register is maintained by our registrar, Computershare Investor Services plc.
Holders of our ADSs are not treated as one of our shareholders and their names are therefore not entered in our share register. The
depositary, the custodian or their nominees will be the holder of the shares underlying our ADSs. Holders of our ADSs have a right to
receive the ordinary shares underlying their ADSs. For discussion on our ADSs and ADS holder rights, see "Description of American
Depositary Shares.”
Under the Companies Act, we must enter an allotment of shares in our share register as soon as practicable and in any event within
two months of the allotment. We also are required by the Companies Act to register a transfer of shares (or give the transferee notice of
and reasons for refusal as the transferee may reasonably request) as soon as practicable and in any event within two months of receiving
notice of the transfer.
We, any of our shareholders or any other affected person may apply to the court for rectification of the share register if:
·
·
the name of any person, without sufficient cause, is wrongly entered in or omitted from our share register; or
there is a default or unnecessary delay in entering on the register the fact of any person having ceased to be a member or on
which we have a lien, provided that such delay does not prevent dealings in the shares taking place on an open and proper basis.
Preemptive Rights
English law generally provides shareholders with preemptive rights when new shares are issued for cash; however, it is possible
for the articles of association, or shareholders in general meeting, to exclude preemptive rights. Such disapplication of preemptive rights
may be for a maximum period of up to five years from the date of adoption of the articles of association, if the exclusion is contained in
the articles of association, or from the date of the shareholder resolution, if the exclusion is by shareholder resolution. In either case, this
disapplication would need to be renewed by our shareholders upon its expiration (i.e., at least every five years). On May 13, 2019, our
shareholders approved the disapplication of preemptive rights for a period of five years from the date of approval in relation to the shares
authorised to be allotted pursuant to such resolutions, which disapplication will need to be renewed upon expiration (i.e., at least every
five years) to remain effective, but may be sought more frequently for additional five-year terms (or any shorter period).
Distributions and Dividends
Under the Companies Act, before a company can lawfully make a distribution or dividend, it must ensure that it has sufficient
distributable reserves, as determined on a non-consolidated basis. The basic rule is that a company's profits available for the purpose of
making a distribution are its accumulated, realized profits, so far as not previously utilized by distribution or capitalization, less its
accumulated, realized losses, so far as not previously written off in a reduction or reorganization of capital duly made. The requirement
to have sufficient distributable reserves before a distribution or dividend can be paid applies to us and to each of our subsidiaries that has
been incorporated under English law.
As a public company, it will not be sufficient that we have made a distributable profit for the purpose of making a distribution. An
additional capital maintenance requirement will be imposed on us to ensure that the net worth of the company is at least equal to the
amount of its capital. A public company can only make a distribution:
·
·
if, at the time that the distribution is made, the amount of its net assets (that is, the total excess of assets over liabilities) is not
less than the total of its called up share capital and undistributable reserves; and
if, and to the extent that, the distribution itself, at the time that it is made, does not reduce the amount of its net assets to less
than that total.
Disclosure of Interest in Shares
Pursuant to Part 22 of the Companies Act, a company is empowered by notice in writing to require any person whom the company
knows to be, or has reasonable cause to believe to be, interested in the company's shares or at any time during the three years
immediately preceding the date on which the notice is issued to have been so interested, within a reasonable time to disclose to the
company details of that person's interest and (so far as is within such person's knowledge) details of any other interest that subsists or
subsisted in those shares.
Under our articles of association, if a shareholder defaults in supplying the company with the required details in relation to the
shares in question, or the default shares within the prescribed period our board of directors may by notice direct that:
·
·
·
the relevant shareholder shall not be entitled in respect of the default shares to be present or vote, either in person or by proxy, at
any general meeting or separate meeting of the holders of a class of shares or upon any poll or to exercise any other right
conferred by the membership in relation to any such meeting;
where the default shares represents at least 0.25% of the issued shares of the class in question, (a) any dividend or other money
payable in respect of the default shares shall be retained by us without any liability to pay interest, and/or (b) no transfers by the
relevant shareholder of default shares (other than a transfer approved in accordance with the provisions of the company's articles
of association) may be registered, unless the shareholder himself or herself is not in default and the shareholder proves to the
satisfaction of the board of directors that no person in default as regards to supplying such information is interested in any of the
default shares; and/or
any shares held by the relevant shareholder in uncertificated form shall be converted into certificated form.
Purchase of Own Shares
English law permits a public limited company to purchase its own shares out of the distributable profits of the company or the
proceeds of a fresh issue of shares made for the purpose of financing the purchase, subject to complying with procedural requirements
under the Companies Act and provided that its articles of association do not prohibit it from doing so. Our articles of association, a
summary of which is provided above, do not prohibit us from purchasing our own shares. A public limited company must not purchase
its own shares if, as a result of the purchase, there would no longer be any issued shares of the company other than redeemable shares or
shares held as treasury shares.
Any such purchase will be either a "market purchase" or "off market purchase," each as defined in the Companies Act. A "market
purchase" is a purchase made on a "recognized investment exchange (other than an overseas exchange) as defined in the UK Financial
Services and Markets Act 2000, or FSMA. An "off market purchase" is a purchase that is not made on a "recognized investment
exchange." Both "market purchases" and "off market purchases" require prior shareholder approval by way of an
ordinary resolution. In the case of an "off market purchase," a company's shareholders, other than the shareholders from whom the
company is purchasing shares, must approve the terms of the contract to purchase shares and in the case of a "market purchase," the
shareholders must approve the maximum number of shares that can be purchased and the maximum and minimum prices to be paid by
the company.
The Nasdaq Global Market is an "overseas exchange" for the purposes of the Companies Act and does not fall within the definition
of a "recognized investment exchange" for the purposes of FSMA and any purchase made by us would need to comply with the
procedural requirements under the Companies Act that regulate "off market purchases."
A share buy-back by a company of its shares will give rise to U.K. stamp duty reserve tax and stamp duty at the rate of 0.5% of the
amount or value of the consideration payable by the company (rounded up to the next £5.00), and such stamp duty reserve tax or duty
will be paid by the company. The charge to stamp duty reserve tax will be canceled or, if already paid, repaid (generally with interest),
where a transfer instrument for stamp duty purposes has been duly stamped within six years of the charge arising (either by paying the
stamp duty or by claiming an appropriate relief) or if the instrument is otherwise exempt from stamp duty.
Our articles of association do not have conditions governing changes to our capital which are more stringent that those required by
law.
Shareholder Rights
Certain rights granted under the Companies Act, including the right to requisition a general meeting or require a resolution to be
put to shareholders at the annual general meeting, are only available to our members. For English law purposes, our members are the
persons who are registered as the owners of the legal title to the shares and whose names are recorded in our register of members. In the
case of shares held in a settlement system operated by the Depository Trust Company, or DTC, the registered member will be DTC's
nominee, Cede & Co. If a person who holds their ADSs in DTC wishes to exercise certain of the rights granted under the Companies
Act, they may be required to first take steps to withdraw their ADSs from the settlement system operated by DTC and become the
registered holder of the shares in our register of members. A withdrawal of shares from DTC may have tax implications.
Registration Rights
Certain holders of our ordinary shares are entitled to rights with respect to the registration of these securities under the Securities
Act. These rights are provided under the terms of a registration rights agreement between us and holders of the holders of the shares. The
registration rights agreement includes demand registration rights, short-form registration rights and piggyback registration rights.
Demand Registration Rights
Certain holders of our ordinary shares are entitled to demand registration rights. Under the terms of the registration rights
agreement, we will be required, upon the written request of holders of a majority of these securities to file a registration statement and
use best efforts to effect the registration of all or a portion of these shares for public resale. We are required to effect only two
registrations pursuant to this provision of the investment and shareholders' agreement.
Short-Form Registration Rights
Pursuant to the registration rights agreement, if we are eligible to file a registration statement on Form F-3 or Form S-3, upon the
written request a holder of securities at an aggregate offer price of at
least $10 million, we will be required to effect a registration of such shares. We are required to effect only two registrations in any twelve
month period pursuant to this provision of the registration rights agreement. The right to have such shares registered on Form F-3 or
Form S-3 is further subject to other specified conditions and limitations.
Piggyback Registration Rights
Pursuant to the registration rights agreement, if we register any of our securities either for our own account or for the account of
other security holders, other than in connection with our initial public offering or a registration for any employee benefit plan, corporate
reorganization, or the offer or sale of debt securities, the holders of the relevant shares (for so long as they are a party to the registration
rights agreement) are entitled to include their shares in the registration. Subject to certain exceptions contained in the registration rights
agreement, we and the underwriters may limit the number of shares included in the underwritten offering to the number of shares which
we and the underwriters determine in our sole discretion will not jeopardize the success of the offering.
Indemnification
Our registration rights agreement contains customary cross-indemnification provisions, under which we are obligated to indemnify
holders of registrable securities in the event of material misstatements or omissions in the registration statement attributable to us, and
they are obligated to indemnify us for material misstatements or omissions attributable to them.
Expiration of Registration Rights
The registration rights granted under the registration rights agreement will terminate on the earliest of (i) in respect of any holder,
at such time as the holder holds less than 1% of the Company's outstanding ordinary shares; (ii) the three anniversary of the completion
of our initial public offering and (iii) such time as all relevant ordinary shares may be sold pursuant to rule 144 during a 90-day period
without registration.
Key Provisions of Our Articles of Association
Our articles of association were approved by our shareholders in May 2019 and were effective following the completion of our
initial public offering in May 2019. A summary of certain key provisions of our articles of association is set out below. The summary
below is not a complete copy of the provisions of the Articles. For further information please refer to the full version of our articles of
association, which is included as an exhibit to this Annual Report on Form 10-K.
The articles of association contain no specific restrictions on our purpose and therefore, by virtue of section 31(1) of the
Companies Act, our purpose is unrestricted.
The articles of association contain, among other things, provisions to the following effect:
Share Capital
Our share capital consists of ordinary shares. We may issue shares with such rights or restrictions as may be determined by
ordinary resolution, including shares which are to be redeemed, or are liable to be redeemed at our option or the holder of such shares.
Voting
The shareholders have the right to receive notice of, and to vote at, our general meetings. Subject to any other provisions of our
articles of association and without prejudice to any special rights, privileges or restrictions as to voting attached to any shares forming
part of our share capital, each shareholder who is present in person (or, being a corporation, by representative) at a general meeting on a
show of hands has one vote and, on a poll, every such shareholder who is present in person (or, being a corporation, by representative) or
by proxy has one vote in respect of every share held by him.
Variation of Rights
Whenever our share capital is divided into different classes of shares, the special rights attached to any class may be varied or
abrogated either (i) with the consent in writing of the holders of three-quarters in nominal value of the issued shares of that class, (ii) with
the authority of a special resolution passed at a general meeting of the holders of the shares of that class or (iii) in any other way as
expressly provided for in relation to such rights, and may be so varied and abrogated whilst the company is a going concern.
Dividends
We may, subject to the provisions of the Companies Act and the Articles, by ordinary resolution from time to time declare
dividends to be paid to shareholders not exceeding the amount recommended by our board of directors. Subject to the provisions of the
Companies Act, in so far as, in the board of directors' opinions, our profits justify such payments, the board of directors may pay interim
dividends on any class of our shares.
Any dividend unclaimed after a period of 12 years from the date such dividend was declared or became payable shall, if the board
of directors resolve, be forfeited and shall revert to us. No dividend or other moneys payable on or in respect of a share shall bear interest
as against us.
Liquidation Preference
On a distribution of assets on a liquidation, the surplus assets remaining after payment of liabilities shall be distributed among the
holders of ordinary shares pro rata to the number of ordinary shares held irrespective of the amount paid or credited as paid on any share.
Transfer of Ordinary Shares
Each member may transfer all or any of his shares which are in certificated form by means of an instrument of transfer in any usual
form or in any other form which the board of directors may approve. Each member may transfer all or any of his shares which are in
uncertificated form by means of a relevant system in such manner provided for, and subject as provided in, the uncertificated securities
rules (as defined in our articles of association).
The board of directors may, in its absolute discretion, refuse to register a transfer of certificated shares unless:
it is for a share which is fully paid up;
(i)
(ii) it is for a share upon which the company has no lien;
(iii) it is only for one class of share;
(iv) it is in favor of a single transferee or no more than four joint transferees;
(v)
it is duly stamped or is duly certificated or otherwise shown to the satisfaction of the board of directors to be exempt from
stamp duty; and
(vi) it is delivered for registration to the registered office of the company (or such other place as the board of directors may
determine), accompanied (except in the case of a transfer by a person to whom the company is not required by law to issue
a certificate and to whom a
certificate has not been issued or in the case of a renunciation) by the certificate for the shares to which it relates and such
other evidence as the board of directors may reasonably require to prove the title of the transferor (or person renouncing)
and the due execution of the transfer or renunciation by him or, if the transfer or renunciation is executed by some other
person on his behalf, the authority of that person to do so.
The board of directors may refuse to register a transfer of uncertificated shares in any circumstances that are allowed or required
by the uncertificated securities rules and the relevant system.
Allotment of Shares and Preemption Rights
Subject to the Companies Act and to any rights attached to existing shares, any share may be issued with or have attached to it
such rights and restrictions as the company may by ordinary resolution determine, or if no ordinary resolution has been passed or so far
as the resolution does not make specific provision, as the board of directors may determine (including shares which are to be redeemed,
or are liable to be redeemed at the option of the company or the holder of such shares).
In accordance with section 551 of the Companies Act, the board of directors may be generally and unconditionally authorized to
exercise all the powers of the company to allot shares up to an aggregate nominal amount equal to the amount stated in the relevant
ordinary resolution authorizing such allotment. The authorities referred to above were passed by ordinary resolution on May 13, 2019
and remain in force as of the date of this Annual Report on Form 10-K.
The provisions of section 561 of the Companies Act (which confer on shareholders rights of preemption in respect of the allotment
of equity securities which are paid up in cash) apply to the company except to the extent disapplied by special resolution of the company.
Such preemption rights have been disapplied pursuant to the special resolution passed on May 13, 2019 and remain in force as of the date
of this Annual Report on Form 10-K.
Alteration of Share Capital
In accordance with the Companies Act, the company may, by ordinary resolution, consolidate all or any of its share capital into
shares of a larger nominal value than its existing shares, or sub-divide its shares, or any of them, into shares of a smaller amount than the
existing shares.
The company may, in accordance with the Companies Act, reduce or cancel its share capital or any capital redemption reserve or
share premium account in any manner and with and subject to any conditions, authorities and consents required by law.
Board of Directors
Unless otherwise determined by the company by ordinary resolution, the number of directors (other than any alternate directors)
shall not be less than two and shall not be subject to any maximum.
Subject to the articles of association and the Companies Act, the company may by ordinary resolution appoint a person who is
willing to act as a director and the board of directors shall have power at any time to appoint any person who is willing to act as a
director, in both cases either to fill a vacancy or as an addition to the existing board of directors.
The articles of association provide that our board of directors is divided into three classes, each of which will consist, as nearly as
possible, of one-third of the total number of directors constituting our entire board and which will serve staggered three-year terms, with
eligibility for re-appointment at the end of such term. At each annual general meeting, the successors of directors whose terms then
expire will
be elected to serve from the time of election and qualification until the third annual meeting following election.
Subject to the provisions of the Articles, the board of directors may regulate their proceedings as they deem appropriate. A director
may, and the secretary at the request of a director shall, call a meeting of the directors.
The quorum for a meeting of the board of directors shall be fixed from time to time by a decision of the board of directors, but it
must never be less than two directors and unless otherwise fixed, it is two directors.
Questions and matters requiring resolution arising at a meeting shall be decided by a majority of votes of the participating
directors, with each director having one vote. In the case of an equality of votes, the chairman will only have a casting vote or second
vote when an acquisition has been completed.
Directors shall be entitled to receive such remuneration as the board shall determine for their services to the company as directors,
and for any other service which they undertake for the company provided that the aggregate fees payable to the directors must not exceed
£1,000,000 per annum or such higher amount as may from time to time be decided by ordinary resolution. The directors shall also be
entitled to be paid all reasonable expenses properly incurred by them in connection with their attendance at meetings of shareholders or
class meetings, board of director or committee meetings or otherwise in connection with the exercise of their powers and the discharge of
their responsibilities in relation to the company.
The board of directors may, in accordance with the requirements in the Articles, authorize any matter proposed to them by any
director which would, if not authorized, involve a director breaching his duty under the Companies Act, to avoid conflicts of interests.
A director seeking authorization in respect of such conflict shall declare to the board of directors the nature and extent of his
interest in a conflict as soon as is reasonably practicable. The director shall provide the board with such details of the matter as are
necessary for the board to decide how to address the conflict together with such additional information as may be requested by the board.
Any authorization by the board of directors will be effective only if:
(i)
to the extent permitted by the Companies Act, the matter in question shall have been proposed by any director for
consideration in the same way that any other matter may be proposed to the directors under the provisions of the Articles;
(ii) any requirement as to the quorum for consideration of the relevant matter is met without counting the conflicted director
and any other conflicted director; and
(iii) the matter is agreed to without the conflicted director voting or would be agreed to if the conflicted director's and any other
interested director's vote is not counted.
Subject to the provisions of the Companies Act, every director, secretary or other officer of the company (other than an auditor) is
entitled to be indemnified against all losses and liabilities incurred by him in connection with the exercise of his or her duties or powers .
General Meetings
The company must convene and hold annual general meetings once a year in accordance with the Companies Act. Under the
Companies Act, an annual general meeting must be called by notice of at least 21 days and a general meeting must be called by notice of
at least 14 days.
No business shall be transacted at any general meeting unless a quorum is present when the meeting proceeds to business, but the
absence of a quorum shall not preclude the choice or appointment of a chairman of the meeting which shall not be treated as part of the
business of the meeting. Save as otherwise provided by the Articles, two shareholders present in person or by proxy and entitled to vote
shall be a quorum for all purposes.
Borrowing Powers
Subject to the articles of association and the Companies Act, the board of directors may exercise all of the powers of the company
to:
indemnify and guarantee;
(a) borrow money;
(b)
(c) mortgage or charge;
(d)
(e) give security either outright or as collateral security for any debt, liability or obligation of the company or of any third
create and issue debentures and other securities; and
party.
Capitalization of Profits
The directors may, if they are so authorized by an ordinary resolution of the shareholders, decide to capitalize any undivided
profits of the company not required for paying any preferential dividend (whether or not they are available for distribution), or any sum
standing to the credit of the company's share premium account or capital redemption reserve. The directors may also, subject to the
aforementioned ordinary resolution, appropriate any sum which they so decide to capitalize to the persons who would have been entitled
to it if it were distributed by way of dividend and in the same proportions.
Limitation on Owning Securities
Neither U.K. law nor our articles of association restrict in any way the ownership or voting of our shares by non-residents.
Uncertificated Shares
Subject to the Companies Act, the board of directors may permit title to shares of any class to be issued or held otherwise than by a
certificate and to be transferred by means of a "relevant system" (e.g., the CREST System or DTC) without a certificate.
The board of directors may take such steps as it sees fit in relation to the evidencing of and transfer of title to uncertificated shares,
any records relating to the holding of uncertificated shares and the conversion of uncertificated shares to certificated shares, or vice-
versa.
The company may by notice to the holder of an uncertificated share, require that share to be converted into certificated form.
The board of directors may take such other action that the board considers appropriate to achieve the sale, transfer, disposal,
forfeiture, re-allotment or surrender of an uncertified share or otherwise to enforce a lien in respect of it.
Other Relevant United Kingdom Laws and Regulations
Mandatory Bid
(i) The Takeover Code does not currently apply to the company. However if the company were to become subject to the Takeover Code
in the future, the following provisions will apply. Under the Takeover Code, where:
(a) any person, together with persons acting in concert with him, acquires, whether by a series of transactions over a period of
time or not, an interest in shares which (taken together with shares in which he is already interested, and in which persons
acting in concert with him are interested) carry 30% or more of the voting rights of a company; or
(b) any person who, together with persons acting in concert with him, is interested in shares which in the aggregate carry not
less than 30% of the voting rights of a company but does not hold shares carrying more than 50% of such voting rights and
such person, or any person acting in concert with him, acquires an interest in any other shares which increases the
percentage of shares carrying voting rights in which he is interested;
such person shall, except in limited circumstances, be obliged to extend offers, on the basis set out in Rules 9.3, 9.4 and 9.5 of the
Takeover Code, to the holders of any class of equity share capital, whether voting or non-voting, and also to the holders of any other
class of transferable securities carrying voting rights. Offers for different classes of equity share capital must be comparable; the
Takeover Panel should be consulted in advance in such cases.
(ii) An offer under Rule 9 of the Takeover Code must be in cash and at the highest price paid for any interest in the shares by the person
required to make an offer or any person acting in concert with him during the 12 months prior to the announcement of the offer.
(iii) Under the Takeover Code, a "concert party" arises where persons acting together pursuant to an agreement or understanding
(whether formal or informal and whether or not in writing) actively cooperate, through the acquisition by them of an interest in
shares in a company, to obtain or consolidate control of the company. "Control" means holding, or aggregate holdings, of an interest
in shares carrying 30% or more of the voting rights of the company, irrespective of whether the holding or holdings give de facto
control.
Squeeze-Out
(i) Under sections 979 to 982 of the Companies Act, if an offeror were to acquire, or unconditionally contract to acquire, not less than
90% of the ordinary shares of the company, it could then compulsorily acquire the remaining 10%. It would do so by sending a
notice to outstanding shareholders telling them that it will compulsorily acquire their shares, provided that no such notice may be
served after the end of: (a) the period of three months beginning with the day after the last day on which the offer can be accepted; or
(b) if earlier, and the offer is not one to which section 943(1) of the Companies Act applies, the period of six months beginning with
the date of the offer.
(ii) Six weeks following service of the notice, the offeror must send a copy of it to the company together with the consideration for the
ordinary shares to which the notice relates, and an instrument of transfer executed on behalf of the outstanding shareholder(s) by a
person appointed by the offeror.
(iii) The company will hold the consideration on trust for the outstanding shareholders.
Sell-out
(i) Sections 983 to 985 of the Companies Act also give minority shareholders in the company a right to be bought out in certain
circumstances by an offeror who has made a takeover offer. If a takeover offer relating to all the ordinary shares of the company is
made at any time before the end of the period within which the offer could be accepted and the offeror held or had agreed to acquire
not less
than 90% of the ordinary shares, any holder of shares to which the offer related who had not accepted the offer could by a written
communication to the offeror require it to acquire those shares. The offeror is required to give any shareholder notice of his right to
be bought out within one month of that right arising. The offeror may impose a time limit on the rights of minority shareholders to
be bought out, but that period cannot end less than three months after the end of the acceptance period, or, if longer a period of three
months from the date of the notice.
(ii) If a shareholder exercises his rights, the offeror is bound to acquire those shares on the terms of the offer or on such other terms as
may be agreed.
Differences in Corporate Law
The applicable provisions of the Companies Act differ from laws applicable to U.S. corporations and their shareholders. Set forth
below is a summary of certain differences between the provisions of the Companies Act applicable to us and the General Corporation
Law of the State of Delaware relating to shareholders' rights and protections. This summary is not intended to be a complete discussion
of the respective rights and it is qualified in its entirety by reference to Delaware law and English law.
Number of Directors
Under the Companies Act, a public limited
Under Delaware law, a corporation must
England and Wales
Delaware
company must have at least two directors and the
number of directors may be fixed by or in the
manner provided in a company's articles of
association.
have at least one director and the number of
directors shall be fixed by or in the manner
provided in the bylaws.
Removal of Directors
Under the Companies Act, shareholders may
Under Delaware law, any director or the
remove a director without cause by an ordinary
resolution (which is passed by a simple majority
of those voting in person or by proxy at a general
meeting) irrespective of any provisions of any
service contract the director has with the
company, provided 28 clear days' notice of the
resolution has been given to the company and its
shareholders. On receipt of notice of an intended
resolution to remove a director, the company must
forthwith send a copy of the notice to the director
concerned. Certain other procedural requirements
under the Companies Act must also be followed,
such as allowing the director to make
representations against his or her removal either
at the meeting or in writing.
entire board of directors may be removed,
with or without cause, by the holders of a
majority of the shares then entitled to vote at
an election of directors, except (i) unless the
certificate of incorporation provides
otherwise, in the case of a corporation whose
board of directors is classified, stockholders
may effect such removal only for cause, or
(ii) in the case of a corporation having
cumulative voting, if less than the entire
board of directors is to be removed, no
director may be removed without cause if the
votes cast against his removal would be
sufficient to elect him if then cumulatively
voted at an election of the entire board of
directors, or, if there are classes of directors,
at an election of the class of directors of
which he is a part.
Vacancies on the Board of
Directors
England and Wales
Under English law, the procedure by which
directors, other than a company's initial directors,
are appointed is generally set out in a company's
articles of association, provided that where two or
more persons are appointed as directors of a
public limited company by resolution of the
shareholders, resolutions appointing each director
must be voted on individually.
Annual General Meeting
Under the Companies Act, a public limited
company must hold an annual general meeting in
each six-month period following the company's
annual accounting reference date.
General Meeting
Under the Companies Act, a general meeting of
the shareholders of a public limited company may
be called by the directors.
Shareholders holding at least 5% of the paid-up
capital of the company carrying voting rights at
general meetings (excluding any paid up capital
held as treasury shares) can require the directors
to call a general meeting and, if the directors fail
to do so within a certain period, may themselves
convene a general meeting.
Delaware
Under Delaware law, vacancies and newly
created directorships may be filled by a
majority of the directors then in office (even
though less than a quorum) or by a sole
remaining director unless (i) otherwise
provided in the certificate of incorporation or
bylaws of the corporation or (ii) the
certificate of incorporation directs that a
particular class of stock is to elect such
director, in which case a majority of the other
directors elected by such class, or a sole
remaining director elected by such class, will
fill such vacancy.
Under Delaware law, the annual meeting of
stockholders shall be held at such place, on
such date and at such time as may be
designated from time to time by the board of
directors or as provided in the certificate of
incorporation or by the bylaws.
Under Delaware law, special meetings of the
stockholders may be called by the board of
directors or by such person or persons as may
be authorized by the certificate of
incorporation or by the bylaws.
Notice of General Meetings
Under the Companies Act, at least 21 days' notice
must be given for an annual general meeting and
any resolutions to be proposed at the meeting.
Subject to a company's articles of association
providing for a longer period, at least 14 days'
notice is required for any other general meeting of
a public limited company. In addition,
Under Delaware law, unless otherwise
provided in the certificate of incorporation or
bylaws, written notice of any meeting of the
stockholders must be given to each
stockholder entitled to vote at the meeting
not less than ten nor more than 60 days
before the date of the meeting and shall
specify the place, date,
Quorum
England and Wales
certain matters, such as the removal of directors
or auditors, require special notice, which is
28 days' notice. The shareholders of a company
may in all cases consent to a shorter notice period,
the proportion of shareholders' consent required
being 100% of those entitled to attend and vote in
the case of an annual general meeting and, in the
case of any other general meeting, a majority in
number of the members having a right to attend
and vote at the meeting, being a majority who
together hold not less than 95% in nominal value
of the shares giving a right to attend and vote at
the meeting.
Subject to the provisions of a company's articles
of association, the Companies Act provides that
two shareholders present at a meeting (in person
or by proxy) shall constitute a quorum.
Delaware
hour and purpose or purposes of the meeting.
The certificate of incorporation or bylaws
may specify the number of shares, the
holders of which shall be present or
represented by proxy at any meeting in order
to constitute a quorum, but in no event shall a
quorum consist of less than one third of the
shares entitled to vote at the meeting. In the
absence of such specification in the
certificate of incorporation or bylaws, a
majority of the shares entitled to vote,
present in person or represented by proxy,
shall constitute a quorum at a meeting of
stockholders.
Proxy
Under the Companies Act, at any meeting of
Under Delaware law, at any meeting of
shareholders, a shareholder may designate another
person to attend, speak and vote at the meeting on
their behalf by proxy.
stockholders, a stockholder may designate
another person to act for such stockholder by
proxy, but no such proxy shall be voted or
acted upon after three years from its date,
unless the proxy provides for a longer period.
A director of a Delaware corporation may not
issue a proxy representing the director's
voting rights as a director.
Issue of New Shares
Under the Companies Act, the directors of a
Under Delaware law, if the company's
company must not
certificate of
England and Wales
exercise any power to allot shares or grant rights
to subscribe for, or to convert any security into,
shares unless they are authorized to do so by the
company's articles of association or by an
ordinary resolution of the shareholders. Any
authorization given must state the maximum
amount of shares that may be allotted under it and
specify the date on which it will expire, which
must be not more than five years from the date the
authorization was given. The authority can be
renewed by a further resolution of the
shareholders.
Delaware
incorporation so provides, the directors have
the power to authorize the issuance of
additional stock. The directors may authorize
capital stock to be issued for consideration
consisting of cash, any tangible or intangible
property or any benefit to the company or
any combination thereof.
Preemptive Rights
Under the Companies Act, "equity securities,"
being (i) shares in the company other than shares
that, with respect to dividends and capital, carry a
right to participate only up to a specified amount
in a distribution, referred to as "ordinary shares,"
or (ii) rights to subscribe for, or to convert
securities into, ordinary shares, proposed to be
allotted for cash must be offered first to the
existing equity shareholders in the company in
proportion to the respective nominal value of their
holdings, unless an exception applies or a special
resolution to the contrary has been passed by
shareholders in a general meeting or the articles of
association provide otherwise in each case in
accordance with the provisions of the Companies
Act.
Under Delaware law, shareholders have no
preemptive rights to subscribe to additional
issues of stock or to any security convertible
into such stock unless, and except to the
extent that, such rights are expressly
provided for in the certificate of
incorporation.
Authority to Allot
Under the Companies Act, the directors of a
company must not allot shares or grant rights to
subscribe for or convert any security into shares
unless an exception applies or an ordinary
resolution to the contrary has been passed by
shareholders in a general meeting or the articles of
association provide otherwise,
Under Delaware law, if the corporation's
charter or certificate of incorporation so
provides, the board of directors has the
power to authorize the issuance of stock. The
board may authorize capital stock to be
issued for consideration consisting of cash,
any tangible or intangible property or any
England and Wales
in each case in accordance with the provisions of
the Companies Act.
Liability of Directors and Officers Under the Companies Act, any provision, whether
contained in a company's articles of association or
any contract or otherwise, that purports to exempt
a director of a company, to any extent, from any
liability that would otherwise attach to him in
connection with any negligence, default, breach
of duty or breach of trust in relation to the
company, is void. Any provision by which a
company directly or indirectly provides an
indemnity, to any extent, for a director of the
company or of an associated company against any
liability attaching to him in connection with any
negligence, default, breach of duty or breach of
trust in relation to the company of which he is a
director is also void except as permitted by the
Companies Act, which provides exceptions for
the company to (i) purchase and maintain
insurance against such liability; (ii) provide a
"qualifying third party indemnity," or an
indemnity against liability incurred by the director
to a person other than the company or an
associated company or criminal proceedings in
which he is convicted; and (iii) provide a
"qualifying pension scheme indemnity," or an
indemnity against liability incurred in connection
with the company's activities as trustee of an
occupational pension plan.
Delaware
benefit to the corporation or any combination
thereof. It may determine the amount of such
consideration by approving a formula. In the
absence of actual fraud in the transaction, the
judgment of the directors as to the value of
such consideration is conclusive.
Under Delaware law, a corporation's
certificate of incorporation may include a
provision eliminating or limiting the personal
liability of a director to the corporation and
its stockholders for damages arising from a
breach of fiduciary duty as a director.
However, no provision can limit the liability
of a director for:
(cid:0) any breach of the director's duty of
loyalty to the corporation or its
stockholders;
(cid:0) acts or omissions not in good faith or
that involve intentional misconduct or a
knowing violation of law;
(cid:0) intentional or negligent payment of
unlawful dividends or stock purchases or
redemptions; or
(cid:0) any transaction from which the director
derives an improper personal benefit.
Voting Rights
Under English law, unless a poll is demanded by
the shareholders of a company or is
Delaware law provides that, unless otherwise
provided in the certificate of incorporation,
each
England and Wales
Delaware
stockholder is entitled to one vote for each
share of capital stock held by such
stockholder.
required by the chairman of the meeting or the
company's articles of association, shareholders
shall vote on all resolutions on a show of hands.
Under the Companies Act, a poll may be
demanded by (i) not fewer than five shareholders
having the right to vote on the resolution; (ii) any
shareholder(s) representing not less than 10% of
the total voting rights of all the shareholders
having the right to vote on the resolution
(excluding any voting rights attaching to treasury
shares); or (iii) any shareholder(s) holding shares
in the company conferring a right to vote on the
resolution (excluding any voting rights attaching
to treasury shares) being shares on which an
aggregate sum has been paid up equal to not less
than 10% of the total sum paid up on all the
shares conferring that right. A company's articles
of association may provide more extensive rights
for shareholders to call a poll.
Under English law, an ordinary resolution is
passed on a show of hands if it is approved by a
simple majority (more than 50%) of the votes cast
by shareholders present (in person or by proxy)
and entitled to vote. If a poll is demanded, an
ordinary resolution is passed if it is approved by
holders representing a simple majority of the total
voting rights of shareholders present, in person or
by proxy, who, being entitled to vote, vote on the
resolution. Special resolutions require the
affirmative vote of not less than 75% of the votes
cast by shareholders present, in person or by
proxy, at the meeting.
Shareholder Vote on Certain
Transactions
The Companies Act provides for schemes of
Generally, under Delaware law, unless the
arrangement, which
certificate of
England and Wales
are arrangements or compromises between a
company and any class of shareholders or
creditors and used in certain types of
reconstructions, amalgamations, capital
reorganizations or takeovers. These arrangements
require:
(cid:0) the approval at a shareholders' or creditors'
Delaware
incorporation provides for the vote of a larger
portion of the stock, completion of a merger,
consolidation, sale, lease or exchange of all
or substantially all of a corporation's assets or
dissolution requires:
(cid:0) the approval of the board of directors;
and
meeting convened by order of the court, of a
majority in number of shareholders or
creditors representing 75% in value of the
capital held by, or debt owed to, the
shareholders or creditors or class thereof
present and voting, either in person or by
proxy; and
(cid:0) the approval by the vote of the holders
of a majority of the outstanding stock or,
if the certificate of incorporation
provides for more or less than one vote
per share, a majority of the votes of the
outstanding stock of the corporation
entitled to vote on the matter.
(cid:0) the approval of the court.
Standard of Conduct for Directors Under English law, a director owes various
statutory and fiduciary duties to the company,
including:
(cid:0) to act in the way he considers, in good faith,
would be most likely to promote the success
of the company for the benefit of its
members as a whole;
(cid:0) to avoid a situation in which he has, or can
have, a direct or indirect interest that
conflicts, or possibly conflicts, with the
interests of the company;
(cid:0) to act in accordance with the company's
constitution and only exercise his powers for
the purposes for which they are conferred;
(cid:0) to exercise independent judgment;
(cid:0) to exercise reasonable care, skill and
diligence;
(cid:0) not to accept benefits from a third party
conferred by reason of his being a director or
doing, or not doing, anything as a director;
and
Delaware law does not contain specific
provisions setting forth the standard of
conduct of a director. The scope of the
fiduciary duties of directors is generally
determined by the courts of the State of
Delaware. In general, directors have a duty to
act without self-interest, on a well-informed
basis and in a manner they reasonably
believe to be in the best interest of the
stockholders.
Directors of a Delaware corporation owe
fiduciary duties of care and loyalty to the
corporation and to its shareholders. The duty
of care generally requires that a director act
in good faith, with the care that an ordinarily
prudent person would exercise under similar
circumstances. Under this duty, a director
must inform himself of all material
information reasonably available regarding a
significant transaction. The duty of loyalty
requires that a director act in a manner he
reasonably believes to be in the best
England and Wales
(cid:0) to declare any interest that he has, whether
directly or indirectly, in a proposed or
existing transaction or arrangement with the
company.
Delaware
interests of the corporation. He must not use
his corporate position for personal gain or
advantage. In general, but subject to certain
exceptions, actions of a director are
presumed to have been made on an informed
basis, in good faith and in the honest belief
that the action taken was in the best interests
of the corporation. However, this
presumption may be rebutted by evidence of
a breach of one of the fiduciary duties.
Delaware courts have also imposed a
heightened standard of conduct upon
directors of a Delaware corporation who take
any action designed to defeat a threatened
change in control of the corporation.
In addition, under Delaware law, when the
board of directors of a Delaware corporation
approves the sale or break-up of a
corporation, the board of directors may, in
certain circumstances, have a duty to obtain
the highest value reasonably available to the
shareholders.
Shareholder Litigation
Under English law, generally, the company, rather
than its shareholders, is the proper claimant in an
action in respect of a wrong done to the company
or where there is an irregularity in the company's
internal management. Notwithstanding this
general position, the Companies Act provides that
(i) a court may allow a shareholder to bring a
derivative claim (that is, an action in respect of
and on behalf of the company) in respect of a
cause of action arising from a director's
negligence, default, breach of duty or breach of
trust and (ii) a shareholder may bring a claim for a
court order where the
Under Delaware law, a stockholder may
initiate a derivative action to enforce a right
of a corporation if the corporation fails to
enforce the right itself. The complaint must:
(cid:0) state that the plaintiff was a stockholder
at the time of the transaction of which
the plaintiff complains or that the
plaintiffs shares thereafter devolved on
the plaintiff by operation of law; and
(cid:0) allege with particularity the efforts made
by the plaintiff to obtain the action the
plaintiff desires from the directors and
the reasons
England and Wales
company's affairs have been or are being
conducted in a manner that is unfairly prejudicial
to some of its shareholders.
Delaware
for the plaintiff's failure to obtain the
action; or
(cid:0) state the reasons for not making the
effort.
Additionally, the plaintiff must remain a
stockholder through the duration of the
derivative suit. The action will not be
dismissed or compromised without the
approval of the Delaware Court of Chancery.
U.K. Taxation Impacts on U.S. Holders of our Ordinary Shares
The discussion below is intended as a general guide to current U.K. tax law and HM Revenue & Customs, or HMRC, published
practice applying as at the date of this filing (both of which are subject to change at any time, possibly with retrospective effect) which
related to our ordinary shares. It does not constitute legal or tax advice and does not purport to be a complete analysis of all U.K. tax
considerations relating to the holding of ordinary shares. In particular it should be noted that special rules may apply to certain persons
such as market makers, brokers, dealers or intermediaries.
Dividends
Withholding Tax
Dividends paid by the company are not subject to any withholding or deduction for or on account of U.K. tax.
Stamp Duty and Stamp Duty Reserve Tax
Issue of Ordinary Shares
No U.K. stamp duty or stamp duty reserve tax, or SDRT, is payable on the issue of the underlying ordinary shares in the company.
Transfers of Ordinary Shares
An unconditional agreement to transfer ordinary shares will normally give rise to a charge to SDRT at the rate of 0.5% of the
amount or value of the consideration payable for the transfer. The purchaser of the shares is liable for the SDRT. Transfers of ordinary
shares in certificated form are generally also subject to stamp duty at the rate of 0.5% of the amount or value of the consideration given
for the transfer (rounded up to the next £5.00). Stamp duty is normally paid by the purchaser. The charge to SDRT will be cancelled or, if
already paid, repaid (generally with interest), where a transfer instrument has been duly stamped within six years of the charge arising,
(either by paying the stamp duty or by claiming an appropriate relief) or if the instrument is otherwise exempt from stamp duty.
An unconditional agreement to transfer ordinary shares to, or to a nominee or agent for, a person whose business is or includes the
issue of depositary receipts or the provision of clearance services will generally be subject to SDRT (and, where the transfer is effected
by a written instrument, stamp duty) at a higher rate of 1.5% of the amount or value of the consideration given for the transfer unless the
clearance service has made and maintained an election under section 97A of the U.K. Finance Act 1986, or a section 97A election. It is
understood that HMRC regards the facilities of DTC as a clearance service for these purposes and we are not aware of any section 97A
election having been made by the DTC.
Based on current published HMRC practice and recent case law in respect of the European Council Directives 69/335/EEC and
2009/7/EC, or the Capital Duties Directives, no SDRT is generally payable where the transfer of ordinary shares to a clearance service or
depositary receipt system outside the European Union is an integral part of an issue of share capital (although the relevant judgment
refers to transfers which are integral to the raising of capital). In addition, a recent Court of Justice of the European Union judgment (Air
Berlin plc v. HMRC (2017)) held on the relevant facts that the Capital Duties Directives preclude the taxation of a transfer of legal title to
shares for the sole purpose of listing those shares on a stock exchange which does not impact the beneficial ownership of the shares, but,
as yet, the U.K. domestic law and HMRC's published practice remain unchanged and, accordingly, we anticipate that amounts account of
SDRT will continue to be collected by the depositary receipt issuer or clearance service. Holders of ordinary shares should consult their
own independent professional advisers before incurring or reimbursing the costs of such a 1.5% SDRT charge.
Any stamp duty or SDRT payable on a transfer of ordinary shares to a depositary receipt system or clearance service will in
practice generally be paid by the participants in the clearance service or depositary receipt system.
DESCRIPTION OF AMERICAN DEPOSITARY SHARES
Citibank, N.A. acts as the depositary bank for the American Depositary Shares. Citibank's depositary offices are located at 388
Greenwich Street, New York, New York 10013. American Depositary Shares are frequently referred to as "ADSs" and represent
ownership interests in securities that are on deposit with the depositary bank. ADSs may be represented by certificates that are commonly
known as "American Depositary Receipts" or "ADRs." The depositary bank typically appoints a custodian to safekeep the securities on
deposit. In this case, the custodian is Citibank, N.A. (London), located at Citigroup Centre, Canary Wharf, London, E14 5LB, United
Kingdom.
We have appointed Citibank as depositary bank pursuant to a deposit agreement. A copy of the deposit agreement is on file with
the SEC under cover of a Registration Statement on Form F-6 that was declared effective on May 23, 2019. You may obtain a copy of the
deposit agreement from the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 and from the SEC's website
(www.sec.gov).
We are providing you with a summary description of the material terms of the ADSs and of your material rights as an owner of
ADSs. Please remember that summaries by their nature lack the precision of the information summarized and that the rights and
obligations of an owner of ADSs will be determined by reference to the terms of the deposit agreement and not by this summary. We
urge you to review the deposit agreement in its entirety. The portions of this summary description that are italicized describe matters that
may be relevant to the ownership of ADSs but that may not be contained in the deposit agreement.
Each ADS represents the right to receive, and to exercise the beneficial ownership interests in, one ordinary share that is on deposit
with the depositary bank and/or custodian. An ADS also represents the right to receive, and to exercise the beneficial interests in, any
other property received by the depositary bank or the custodian on behalf of the owner of the ADS but that has not been distributed to the
owners of ADSs because of legal restrictions or practical considerations. We and the depositary bank may agree to change the ADS-to-
Share ratio by amending the deposit agreement. This amendment may give rise to, or change, the depositary fees payable by ADS
owners. The custodian, the depositary bank and their respective nominees will hold all deposited property for the benefit of the holders
and beneficial owners of ADSs. The deposited property does not constitute the proprietary assets of the depositary bank, the custodian or
their nominees. Beneficial ownership in the deposited property will under the terms of the deposit agreement be vested in the beneficial
owners of the ADSs. The depositary bank, the custodian and their respective nominees will be the record holders of the deposited
property represented by the ADSs for the benefit of the holders and beneficial owners of the corresponding ADSs. A beneficial owner of
ADSs may or may not be the holder of ADSs. Beneficial owners of ADSs will be able to receive, and to exercise beneficial ownership
interests in, the deposited property only through the registered holders of the ADSs, the registered holders of the ADSs (on behalf of the
applicable ADS owners) only through the depositary bank, and the depositary bank (on behalf of the owners of the corresponding ADSs)
directly, or indirectly, through the custodian or their respective nominees, in each case upon the terms of the deposit agreement.
If you become an owner of ADSs, you will become a party to the deposit agreement and therefore will be bound to its terms and to
the terms of any ADR that represents your ADSs. The deposit agreement and the ADR specify our rights and obligations as well as your
rights and obligations as owner of ADSs and those of the depositary bank. As an ADS holder you appoint the depositary bank to act on
your behalf in certain circumstances. The deposit agreement and the ADRs are governed by New York law. However, our obligations to
the holders of ordinary shares will continue to be governed by the laws of England and Wales, which may be different from the laws in
the United States.
In addition, applicable laws and regulations may require you to satisfy reporting requirements and obtain regulatory approvals in
certain circumstances. You are solely responsible for complying with such reporting requirements and obtaining such approvals. Neither
the depositary bank, the custodian, us or
any of their or our respective agents or affiliates shall be required to take any actions whatsoever on your behalf to satisfy such reporting
requirements or obtain such regulatory approvals under applicable laws and regulations.
As an owner of ADSs, we will not treat you as one of our shareholders and you will not have direct shareholder rights. The
depositary bank will hold on your behalf the shareholder rights attached to the ordinary shares underlying your ADSs. As an owner of
ADSs you will be able to exercise the shareholders rights for the ordinary shares represented by your ADSs through the depositary bank
only to the extent contemplated in the deposit agreement. To exercise any shareholder rights not contemplated in the deposit agreement
you will, as an ADS owner, need to arrange for the cancellation of your ADSs and become a direct shareholder.
The manner in which you own the ADSs (e.g., in a brokerage account vs. as registered holder, or as holder of certificated vs.
uncertificated ADSs) may affect your rights and obligations, and the manner in which, and extent to which, the depositary bank's services
are made available to you. As an owner of ADSs, you may hold your ADSs either by means of an ADR registered in your name, through
a brokerage or safekeeping account, or through an account established by the depositary bank in your name reflecting the registration of
uncertificated ADSs directly on the books of the depositary bank (commonly referred to as the "direct registration system" or "DRS").
The direct registration system reflects the uncertificated (book-entry) registration of ownership of ADSs by the depositary bank. Under
the direct registration system, ownership of ADSs is evidenced by periodic statements issued by the depositary bank to the holders of the
ADSs. The direct registration system includes automated transfers between the depositary bank and The Depository Trust Company
("DTC"), the central book-entry clearing and settlement system for equity securities in the United States. If you decide to hold your
ADSs through your brokerage or safekeeping account, you must rely on the procedures of your broker or bank to assert your rights as
ADS owner. Banks and brokers typically hold securities such as the ADSs through clearing and settlement systems such as DTC. The
procedures of such clearing and settlement systems may limit your ability to exercise your rights as an owner of ADSs. Please consult
with your broker or bank if you have any questions concerning these limitations and procedures. All ADSs held through DTC will be
registered in the name of a nominee of DTC. This summary description assumes you have opted to own the ADSs directly by means of
an ADS registered in your name and, as such, we will refer to you as the "holder." When we refer to "you," we assume the reader owns
ADSs and will own ADSs at the relevant time.
The registration of the ordinary shares in the name of the depositary bank or the custodian shall, to the maximum extent permitted
by applicable law, vest in the depositary bank or the custodian the record ownership in the applicable ordinary shares with the beneficial
ownership rights and interests in such ordinary shares being at all times vested with the beneficial owners of the ADSs representing the
ordinary shares. The depositary bank or the custodian shall at all times be entitled to exercise the beneficial ownership rights in all
deposited property, in each case only on behalf of the holders and beneficial owners of the ADSs representing the deposited property.
Dividends and Distributions
As a holder of ADSs, you generally have the right to receive the distributions we make on the securities deposited with the
custodian. Your receipt of these distributions may be limited, however, by practical considerations and legal limitations. Holders of ADSs
will receive such distributions under the terms of the deposit agreement in proportion to the number of ADSs held as of the specified
record date, after deduction of the applicable fees, taxes and expenses.
Distributions of Cash
Whenever we make a cash distribution for the securities on deposit with the custodian, we will deposit the funds with the
custodian. Upon receipt of confirmation of the deposit of the requisite funds, the depositary bank will arrange for the funds received in a
currency other than U.S. dollars to be converted
into U.S. dollars and for the distribution of the U.S. dollars to the holders, subject to English laws and regulations.
The conversion into U.S. dollars will take place only if practicable and if the U.S. dollars are transferable to the United States. The
depositary bank will apply the same method for distributing the proceeds of the sale of any property (such as undistributed rights) held
by the custodian in respect of securities on deposit.
The distribution of cash will be made net of the fees, expenses, taxes and governmental charges payable by holders under the terms
of the deposit agreement. The depositary bank will hold any cash amounts it is unable to distribute in a non-interest bearing account for
the benefit of the applicable holders and beneficial owners of ADSs until the distribution can be effected or the funds that the depositary
bank holds must be escheated as unclaimed property in accordance with the laws of the relevant states of the United States.
Distributions of Shares
Whenever we make a free distribution of ordinary shares for the securities on deposit with the custodian, we will deposit the
applicable number of ordinary shares with the custodian. Upon receipt of confirmation of such deposit, the depositary bank will either
distribute to holders new ADSs representing the ordinary shares deposited or modify the ADS-to-ordinary-share ratio, in which case each
ADS you hold will represent rights and interests in the additional ordinary shares so deposited. Only whole new ADSs will be
distributed. Fractional entitlements will be sold and the proceeds of such sale will be distributed as in the case of a cash distribution.
The distribution of new ADSs or the modification of the ADS-to-ordinary-share ratio upon a distribution of ordinary shares will be
made net of the fees, expenses, taxes and governmental charges payable by holders under the terms of the deposit agreement. In order to
pay such taxes or governmental charges, the depositary bank may sell all or a portion of the new ordinary shares so distributed.
No such distribution of new ADSs will be made if it would violate a law (e.g., the U.S. securities laws) or if it is not operationally
practicable. If the depositary bank does not distribute new ADSs as described above, it may sell the ordinary shares received upon the
terms described in the deposit agreement and will distribute the proceeds of the sale as in the case of a distribution of cash.
Distributions of Rights
Whenever we intend to distribute rights to subscribe for additional ordinary shares, we will give prior notice to the depositary bank
and we will assist the depositary bank in determining whether it is lawful and reasonably practicable to distribute rights to subscribe for
additional ADSs to holders.
The depositary bank will establish procedures to distribute rights to subscribe for additional ADSs to holders and to enable such
holders to exercise such rights if it is lawful and reasonably practicable to make the rights available to holders of ADSs, and if we
provide all of the documentation contemplated in the deposit agreement (such as opinions to address the lawfulness of the transaction).
You may have to pay fees, expenses, taxes and other governmental charges to subscribe for the new ADSs upon the exercise of your
rights. The depositary bank is not obligated to establish procedures to facilitate the distribution and exercise by holders of rights to
subscribe for new ordinary shares other than in the form of ADSs.
The depositary bank will not distribute the rights to you if:
· We do not timely request that the rights be distributed to you or we request that the rights not be distributed to you; or
· We fail to deliver satisfactory documents to the depositary bank; or
·
It is not reasonably practicable to distribute the rights.
The depositary bank will sell the rights that are not exercised or not distributed if such sale is lawful and reasonably practicable.
The proceeds of such sale will be distributed to holders as in the case of a cash distribution. If the depositary bank is unable to sell the
rights, it will allow the rights to lapse.
Elective Distributions
Whenever we intend to distribute a dividend payable at the election of shareholders either in cash or in additional shares, we will
give prior notice thereof to the depositary bank and will indicate whether we wish the elective distribution to be made available to you. In
such case, we will assist the depositary bank in determining whether such distribution is lawful and reasonably practicable.
The depositary bank will make the election available to you only if it is reasonably practicable and if we have provided all of the
documentation contemplated in the deposit agreement. In such case, the depositary bank will establish procedures to enable you to elect
to receive either cash or additional ADSs, in each case as described in the deposit agreement.
If the election is not made available to you, you will receive either cash or additional ADSs, depending on what a shareholder in
England and Wales would receive upon failing to make an election, as more fully described in the deposit agreement.
Other Distributions
Whenever we intend to distribute property other than cash, ordinary shares or rights to subscribe for additional ordinary shares, we
will notify the depositary bank in advance and will indicate whether we wish such distribution to be made to you. If so, we will assist the
depositary bank in determining whether such distribution to holders is lawful and reasonably practicable.
If it is reasonably practicable to distribute such property to you and if we provide to the depositary bank all of the documentation
contemplated in the deposit agreement, the depositary bank will distribute the property to the holders in a manner it deems practicable.
The distribution will be made net of fees, expenses, taxes and governmental charges payable by holders under the terms of the
deposit agreement. In order to pay such taxes and governmental charges, the depositary bank may sell all or a portion of the property
received.
The depositary bank will not distribute the property to you and will sell the property if:
· We do not request that the property be distributed to you or if we request that the property not be distributed to you; or
· We do not deliver satisfactory documents to the depositary bank; or
·
The depositary bank determines that all or a portion of the distribution to you is not reasonably practicable.
The proceeds of such a sale will be distributed to holders as in the case of a cash distribution.
Redemption
Whenever we decide to redeem any of the securities on deposit with the custodian, we will notify the depositary bank in advance.
If it is practicable and if we provide all of the documentation contemplated in the deposit agreement, the depositary bank will provide
notice of the redemption to the holders.
The custodian will be instructed to surrender the shares being redeemed against payment of the applicable redemption price. The
depositary bank will convert into U.S. dollars upon the terms of the deposit agreement the redemption funds received in a currency other
than U.S. dollars and will establish procedures to enable holders to receive the net proceeds from the redemption upon surrender of their
ADSs to the depositary bank. You may have to pay fees, expenses, taxes and other governmental charges upon the redemption of your
ADSs. If less than all ADSs are being redeemed, the ADSs to be retired will be selected by lot or on a pro rata basis, as the depositary
bank may determine.
Changes Affecting Ordinary Shares
The ordinary shares held on deposit for your ADSs may change from time to time. For example, there may be a change in nominal
or par value, split-up, cancellation, consolidation or any other reclassification of such ordinary shares or a recapitalization,
reorganization, merger, consolidation or sale of assets of the company.
If any such change were to occur, your ADSs would, to the extent permitted by law and the deposit agreement, represent the right
to receive the property received or exchanged in respect of the ordinary shares held on deposit. The depositary bank may in such
circumstances deliver new ADSs to you, amend the deposit agreement, the ADRs and the applicable Registration Statement(s) on
Form F-6, call for the exchange of your existing ADSs for new ADSs and take any other actions that are appropriate to reflect as to the
ADSs the change affecting the ordinary shares. If the depositary bank may not lawfully distribute such property to you, the depositary
bank may sell such property and distribute the net proceeds to you as in the case of a cash distribution.
Issuance of ADSs upon Deposit of Ordinary Shares
Upon completion of the offering, the ordinary shares being offered pursuant to the prospectus will be deposited by us with the
custodian. Upon receipt of confirmation of such deposit, the depositary bank will issue ADSs to the underwriters named in the
prospectus. After the completion of the offering, the ordinary shares that are being offered for sale pursuant to the prospectus will be
deposited by us with the custodian. Upon receipt of confirmation of such deposit, the depositary bank will issue ADSs to the
underwriters named in the prospectus.
After the closing of the offer, the depositary bank may create ADSs on your behalf if you or your broker deposit ordinary shares
with the custodian. The depositary bank will deliver these ADSs to the person you indicate only after you pay any applicable issuance
fees and any charges and taxes payable for the transfer of the ordinary shares to the custodian. Your ability to deposit ordinary shares and
receive ADSs may be limited by U.S. and English legal considerations applicable at the time of deposit.
The issuance of ADSs may be delayed until the depositary bank or the custodian receives confirmation that all required approvals
have been given and that the ordinary shares have been duly transferred to the custodian. The depositary bank will only issue ADSs in
whole numbers.
When you make a deposit of ordinary shares, you will be responsible for transferring good and valid title to the depositary bank.
As such, you will be deemed to represent and warrant that:
·
The ordinary shares are duly authorized, validly issued, fully paid, non-assessable and legally obtained.
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All preemptive (and similar) rights, if any, with respect to such ordinary shares have been validly waived or exercised.
You are duly authorized to deposit the ordinary shares. The ordinary shares presented for deposit are free and clear of any
lien, encumbrance, security interest, charge, mortgage or adverse claim, and are not, and the ADSs issuable upon such
deposit will not be, "restricted securities" (as defined in the deposit agreement).
The ordinary shares presented for deposit have not been stripped of any rights or entitlements.
If any of the representations or warranties are incorrect in any way, we and the depositary bank may, at your cost and expense, take
any and all actions necessary to correct the consequences of the misrepresentations.
Transfer, Combination and Split Up of ADRs
As an ADR holder, you will be entitled to transfer, combine or split up your ADRs and the ADSs evidenced thereby. For transfers
of ADRs, you will have to surrender the ADRs to be transferred to the depositary bank and also must:
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ensure that the surrendered ADR is properly endorsed or otherwise in proper form for transfer;
provide such proof of identity and genuineness of signatures as the depositary bank deems appropriate;
provide any transfer stamps required by the State of New York or the United States; and
pay all applicable fees, charges, expenses, taxes and other government charges payable by ADR holders pursuant to the
terms of the deposit agreement, upon the transfer of ADRs.
To have your ADRs either combined or split up, you must surrender the ADRs in question to the depositary bank with your request
to have them combined or split up, and you must pay all applicable fees, charges and expenses payable by ADR holders, pursuant to the
terms of the deposit agreement, upon a combination or split up of ADRs.
Withdrawal of Ordinary Shares Upon Cancellation of ADSs
As a holder, you will be entitled to present your ADSs to the depositary bank for cancellation and then receive the corresponding
number of underlying ordinary shares at the custodian's offices. Your ability to withdraw the ordinary shares held in respect of the ADSs
may be limited by U.S. and English law considerations applicable at the time of withdrawal. In order to withdraw the ordinary shares
represented by your ADSs, you will be required to pay to the depositary bank the fees for cancellation of ADSs and any charges and
taxes payable upon the transfer of the ordinary shares. You assume the risk for delivery of all funds and securities upon withdrawal. Once
canceled, the ADSs will not have any rights under the deposit agreement.
If you hold ADSs registered in your name, the depositary bank may ask you to provide proof of identity and genuineness of any
signature and such other documents as the depositary bank may deem appropriate before it will cancel your ADSs. The withdrawal of the
ordinary shares represented by your ADSs may be delayed until the depositary bank receives satisfactory evidence of compliance with all
applicable laws and regulations. Please keep in mind that the depositary bank will only accept ADSs for cancellation that represent a
whole number of securities on deposit.
You will have the right to withdraw the securities represented by your ADSs at any time except for:
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Temporary delays that may arise because (i) the transfer books for the ordinary shares or ADSs are closed, or (ii) ordinary
shares are immobilized on account of a shareholders' meeting or a payment of dividends.
Obligations to pay fees, taxes and similar charges.
Restrictions imposed because of laws or regulations applicable to ADSs or the withdrawal of securities on deposit.
The deposit agreement may not be modified to impair your right to withdraw the securities represented by your ADSs except to
comply with mandatory provisions of law.
Voting Rights
As a holder, you generally have the right under the deposit agreement to instruct the depositary bank to exercise the voting rights
for the ordinary shares represented by your ADSs. The voting rights of holders of ordinary shares are described in "Description of Share
Capital and Articles of Association."
At our request, the depositary bank will distribute to you any notice of shareholders' meeting received from us together with
information explaining how to instruct the depositary bank to exercise the voting rights of the securities represented by ADSs. In lieu of
distributing such materials, the depositary bank may distribute to holders of ADSs instructions on how to retrieve such materials upon
request.
If the depositary bank timely receives voting instructions from a holder of ADSs, it will endeavor to vote the securities (in person
or by proxy) represented by the holder's ADSs as follows:
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In the event of voting by show of hands, the depositary bank will vote (or cause the custodian to vote) all ordinary shares
held on deposit at that time in accordance with the voting instructions received from a majority of holders of ADSs who
provide timely voting instructions.
In the event of voting by poll, the depositary bank will vote (or cause the Custodian to vote) the ordinary shares held on
deposit in accordance with the voting instructions received from the holders of ADSs.
Securities for which no voting instructions have been received will not be voted (except (a) as set forth above in the case voting is
by show of hands, (b) in the event of voting by poll, holders of ADSs in respect of which no timely voting instructions have been
received shall be deemed to have instructed the depositary to give a discretionary proxy to a person designated by us to vote the ordinary
shares represented by such holders' ADSs; provided, however, that no such discretionary proxy shall be given with respect to any matter
to be voted upon as to which we inform the depositary that (i) we do not wish such proxy to be given, (ii) substantial opposition exists, or
(iii) the rights of holders of ordinary shares may be adversely affected, and (c) as otherwise contemplated in the deposit agreement).
Please note that the ability of the depositary to carry out voting instructions may be limited by practical and legal limitations and the
terms of the securities on deposit. We cannot assure you that you will receive voting materials in time to enable you to return voting
instructions to the depositary in a timely manner.
Fees and Charges
As an ADS holder, you will be required to pay the following fees under the terms of the deposit agreement:
Service
(cid:0) Issuance of ADSs (e.g., an issuance of ADS upon a deposit of ordinary shares, upon a change
in the ADS(s)-to-ordinary-share(s) ratio, or for any other reason), excluding ADS issuances as a
result of distributions of shares)
(cid:0) Cancellation of ADSs (e.g., a cancellation of ADSs for delivery of deposited property, upon a
change in the ADS(s)-to-ordinary-share(s) ratio, or for any other reason)
(cid:0) Distribution of cash dividends or other cash distributions (e.g., upon a sale of rights and other
entitlements)
(cid:0) Distribution of ADSs pursuant to (i) stock dividends or other free stock distributions, or
(ii) exercise of rights to purchase additional ADSs
(cid:0) Distribution of securities other than ADSs or rights to purchase additional ADSs (e.g., upon a
spin-off)
(cid:0) ADS Services
(cid:0) Registration of ADS transfers (e.g., upon a registration of the transfer of registered ownership
of ADSs, upon a transfer of ADSs into DTC and vice versa, or for any other reason)
(cid:0) Conversion of ADSs of one series for ADSs of another series (e.g., upon conversion of Partial
Entitlement ADSs for Full Entitlement ADSs, or upon conversion of Restricted ADSs (each as
defined in the Deposit Agreement) into freely transferable ADSs, and vice versa).
As an ADS holder you will also be responsible to pay certain charges such as:
Up to U.S. 5¢ per ADS issued
Fees
Up to U.S. 5¢ per ADS cancelled
Up to U.S. 5¢ per ADS held
Up to U.S. 5¢ per ADS held
Up to U.S. 5¢ per ADS held
Up to U.S. 5¢ per ADS held on the
applicable record date(s) established
by the depositary bank
Up to U.S. 5¢ per ADS (or fraction
thereof) transferred
Up to U.S. 5¢ per ADS (or fraction
thereof) converted
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taxes (including applicable interest and penalties) and other governmental charges;
the registration fees as may from time to time be in effect for the registration of ordinary shares on the share register and
applicable to transfers of ordinary shares to or from the name of the custodian, the depositary bank or any nominees upon
the making of deposits and withdrawals, respectively;
certain cable, telex and facsimile transmission and delivery expenses;
the fees, expenses, spreads, taxes and other charges of the depositary bank and/or service providers (which may be a
division, branch or affiliate of the depositary bank) in the conversion of foreign currency;
the reasonable and customary out-of-pocket expenses incurred by the depositary bank in connection with compliance with
exchange control regulations and other regulatory requirements applicable to ordinary shares, ADSs and ADRs; and
the fees, charges, costs and expenses incurred by the depositary bank, the custodian, or any nominee in connection with the
ADR program.
ADS fees and charges for (i) the issuance of ADSs, and (ii) the cancellation of ADSs are charged to the person for whom the ADSs
are issued (in the case of ADS issuances) and to the person for whom ADSs are cancelled (in the case of ADS cancellations). In the case
of ADSs issued by the depositary
bank into DTC, the ADS issuance and cancellation fees and charges may be deducted from distributions made through DTC, and may be
charged to the DTC participant(s) receiving the ADSs being issued or the DTC participant(s) holding the ADSs being cancelled, as the
case may be, on behalf of the beneficial owner(s) and will be charged by the DTC participant(s) to the account of the applicable
beneficial owner(s) in accordance with the procedures and practices of the DTC participants as in effect at the time. ADS fees and
charges in respect of distributions and the ADS service fee are charged to the holders as of the applicable ADS record date. In the case of
distributions of cash, the amount of the applicable ADS fees and charges is deducted from the funds being distributed. In the case of
(i) distributions other than cash and (ii) the ADS service fee, holders as of the ADS record date will be invoiced for the amount of the
ADS fees and charges and such ADS fees and charges may be deducted from distributions made to holders of ADSs. For ADSs held
through DTC, the ADS fees and charges for distributions other than cash and the ADS service fee may be deducted from distributions
made through DTC, and may be charged to the DTC participants in accordance with the procedures and practices prescribed by DTC and
the DTC participants in turn charge the amount of such ADS fees and charges to the beneficial owners for whom they hold ADSs. In the
case of (i) registration of ADS transfers, the ADS transfer fee will be payable by the ADS holder whose ADSs are being transferred or by
the person to whom the ADSs are transferred, and (ii) conversion of ADSs of one series for ADSs of another series, the ADS conversion
fee will be payable by the holder whose ADSs are converted or by the person to whom the converted ADSs are delivered.
In the event of refusal to pay the depositary bank fees, the depositary bank may, under the terms of the deposit agreement, refuse
the requested service until payment is received or may set off the amount of the depositary bank fees from any distribution to be made to
the ADS holder. Certain depositary fees and charges (such as the ADS services fee) may become payable shortly after the closing of the
ADS offering. Note that the fees and charges you may be required to pay may vary over time and may be changed by us and by the
depositary bank. You will receive prior notice of such changes. The depositary bank may reimburse us for certain expenses incurred by
us in respect of the ADR program, by making available a portion of the ADS fees charged in respect of the ADR program or otherwise,
upon such terms and conditions as we and the depositary bank agree from time to time.
Amendments and Termination
We may agree with the depositary bank to modify the deposit agreement at any time without your consent. We undertake to give
holders 30 days' prior notice of any modifications that would materially prejudice any of their substantial rights under the deposit
agreement. We will not consider to be materially prejudicial to your substantial rights any modifications or supplements that are
reasonably necessary for the ADSs to be registered under the Securities Act or to be eligible for book-entry settlement, in each case
without imposing or increasing the fees and charges you are required to pay. In addition, we may not be able to provide you with prior
notice of any modifications or supplements that are required to accommodate compliance with applicable provisions of law.
You will be bound by the modifications to the deposit agreement if you continue to hold your ADSs after the modifications to the
deposit agreement become effective. The deposit agreement cannot be amended to prevent you from withdrawing the ordinary shares
represented by your ADSs (except as permitted by law).
We have the right to direct the depositary bank to terminate the deposit agreement. Similarly, the depositary bank may in certain
circumstances on its own initiative terminate the deposit agreement. In either case, the depositary bank must give notice to the holders at
least 30 days before termination. Until termination, your rights under the deposit agreement will be unaffected.
After termination, the depositary bank will continue to collect distributions received (but will not distribute any such property until
you request the cancellation of your ADSs) and may sell the securities held on deposit. After the sale, the depositary bank will hold the
proceeds from such sale and any other funds then held for the holders of ADSs in a non-interest bearing account. At that point, the
depositary
bank will have no further obligations to holders other than to account for the funds then held for the holders of ADSs still outstanding
(after deduction of applicable fees, taxes and expenses).
In connection with any termination of the deposit agreement, the depositary bank may make available to owners of ADSs a means
to withdraw the ordinary shares represented by ADSs and to direct the depositary of such ordinary shares into an unsponsored American
depositary share program established by the depositary bank. The ability to receive unsponsored American depositary shares upon
termination of the deposit agreement would be subject to satisfaction of certain U.S. regulatory requirements applicable to the creation of
unsponsored American depositary shares and the payment of applicable depositary fees.
Books of Depositary
The depositary bank will maintain ADS holder records at its depositary office. You may inspect such records at such office during
regular business hours but solely for the purpose of communicating with other holders in the interest of business matters relating to the
ADSs and the deposit agreement.
The depositary bank will maintain in New York facilities to record and process the issuance, cancellation, combination, split-up
and transfer of ADSs. These facilities may be closed from time to time, to the extent not prohibited by law.
Limitations on Obligations and Liabilities
The deposit agreement limits our obligations and the depositary bank's obligations to you. Please note the following:
· We and the depositary bank are obligated only to take the actions specifically stated in the deposit agreement without
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negligence or bad faith.
The depositary bank disclaims any liability for any failure to carry out voting instructions, for any manner in which a vote
is cast or for the effect of any vote, provided it acts in good faith and in accordance with the terms of the deposit agreement.
The depositary bank disclaims any liability for any failure to determine the lawfulness or practicality of any action, for the
content of any document forwarded to you on our behalf or for the accuracy of any translation of such a document, for the
investment risks associated with investing in ordinary shares, for the validity or worth of the ordinary shares, for any tax
consequences that result from the ownership of ADSs, for the credit-worthiness of any third party, for allowing any rights
to lapse under the terms of the deposit agreement, for the timeliness of any of our notices or for our failure to give notice.
· We and the depositary bank will not be obligated to perform any act that is inconsistent with the terms of the deposit
agreement.
· We and the depositary bank disclaim any liability if we or the depositary bank are prevented or forbidden from or subject to
any civil or criminal penalty or restraint on account of, or delayed in, doing or performing any act or thing required by the
terms of the deposit agreement, by reason of any provision, present or future of any law or regulation, or by reason of
present or future provision of any provision of our articles of association, or any provision of or governing the securities on
deposit, or by reason of any act of God or war or other circumstances beyond our control.
· We and the depositary bank disclaim any liability by reason of any exercise of, or failure to exercise, any discretion
provided for in the deposit agreement or in our articles of association or in any provisions of or governing the securities on
deposit.
· We and the depositary bank further disclaim any liability for any action or inaction in reliance on the advice or information
received from legal counsel, accountants, any person presenting ordinary shares for deposit, any holder of ADSs or
authorized representatives thereof, or any
other person believed by either of us in good faith to be competent to give such advice or information.
· We and the depositary bank also disclaim liability for the inability by a holder to benefit from any distribution, offering,
right or other benefit that is made available to holders of ordinary shares but is not, under the terms of the deposit
agreement, made available to you.
· We and the depositary bank may rely without any liability upon any written notice, request or other document believed to
be genuine and to have been signed or presented by the proper parties.
· We and the depositary bank also disclaim liability for any consequential or punitive damages for any breach of the terms of
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the deposit agreement.
No disclaimer of any Securities Act liability is intended by any provision of the deposit agreement.
Nothing in the deposit agreement gives rise to a partnership or joint venture, or establishes a fiduciary relationship, among
us, the depositary bank and you as ADS holder.
Nothing in the deposit agreement precludes Citibank (or its affiliates) from engaging in transactions in which parties
adverse to us or the ADS owners have interests, and nothing in the deposit agreement obligates Citibank to disclose those
transactions, or any information obtained in the course of those transactions, to us or to the ADS owners, or to account for
any payment received as part of those transactions.
Taxes
You will be responsible for the taxes and other governmental charges payable on the ADSs and the securities represented by the
ADSs. We, the depositary bank and the custodian may deduct from any distribution the taxes and governmental charges payable by
holders and may sell any and all property on deposit to pay the taxes and governmental charges payable by holders. You will be liable for
any deficiency if the sale proceeds do not cover the taxes that are due.
The depositary bank may refuse to issue ADSs, to deliver, transfer, split and combine ADRs or to release securities on deposit until
all taxes and charges are paid by the applicable holder. The depositary bank and the custodian may take reasonable administrative actions
to obtain tax refunds and reduced tax withholding for any distributions on your behalf. However, you may be required to provide to the
depositary bank and to the custodian proof of taxpayer status and residence and such other information as the depositary bank and the
custodian may require to fulfill legal obligations. You are required to indemnify us, the depositary bank and the custodian for any claims
with respect to taxes based on any tax benefit obtained for you.
Foreign Currency Conversion
The depositary bank will arrange for the conversion of all foreign currency received into U.S. dollars if such conversion is
practical, and it will distribute the U.S. dollars in accordance with the terms of the deposit agreement. You may have to pay fees and
expenses incurred in converting foreign currency, such as fees and expenses incurred in complying with currency exchange controls and
other governmental requirements.
If the conversion of foreign currency is not practical or lawful, or if any required approvals are denied or not obtainable at a
reasonable cost or within a reasonable period, the depositary bank may take the following actions in its discretion:
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Convert the foreign currency to the extent practical and lawful and distribute the U.S. dollars to the holders for whom the
conversion and distribution is lawful and practical.
Distribute the foreign currency to holders for whom the distribution is lawful and practical.
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Hold the foreign currency (without liability for interest) for the applicable holders.
Governing Law/Waiver of Jury Trial
The deposit agreement, the ADRs and the ADSs will be interpreted in accordance with the laws of the State of New York. The
rights of holders of ordinary shares (including ordinary shares represented by ADSs) is governed by the laws of England and Wales.
AS A PARTY TO THE DEPOSIT AGREEMENT, YOU IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, YOUR RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF THE DEPOSIT
AGREEMENT OR THE ADRs AGAINST US AND/OR THE DEPOSITARY BANK. IF WE OR THE DEPOSITARY OPPOSED A
JURY TRIAL DEMAND BASED ON THE WAIVER, THE COURT WOULD DETERMINE WHETHER THE WAIVER WAS
ENFORCEABLE IN THE FACTS AND CIRCUMSTANCES OF THAT CASE IN ACCORDANCE WITH APPLICABLE CASE
LAW. HOWEVER, YOU WILL NOT BE DEEMED BY AGREEING TO THE TERMS OF THE DEPOSIT AGREEMENT TO HAVE
WAIVED OUR OR THE DEPOSITARY'S COMPLIANCE WITH U.S. FEDERAL SECURITIES LAWS AND THE RULES AND
REGULATIONS PROMULGATED THEREUNDER.
U.K. Taxation Impacts on U.S. Holders of our ADSs
The discussion below is intended as a general guide to current U.K. tax law and HM Revenue & Customs, or HMRC, published
practice applying as at the date of this filing (both of which are subject to change at any time, possibly with retrospective effect) which
relate to our ADSs. It does not constitute legal or tax advice and does not purport to be a complete analysis of all U.K. tax considerations
relating to the holding of our ADSs.
Stamp Duty and Stamp Duty Reserve Tax
Issue or Transfers of ADSs
No U.K. stamp duty or SDRT is payable on the issue or transfer of (including an agreement to transfer) ADSs in the company.
Exhibit 10.4
Bicycle Therapeutics Plc Share Option Plan
Form of Option Certificate
OPTION CERTIFICATE
THIS DEED is dated [(cid:0)] 2019
THIS DEED is made between:
(1) BICYCLE THERAPEUTICS PLC registered in England with company number 11036004 whose registered
office address is Building 900, Babraham Research Campus, Babraham, Cambridgeshire, CB22 3AT (the
“Company”); and
(2) [name of Optionholder] of [address of Optionholder] (the “Optionholder”).
BACKGROUND
(A) The Company has adopted the Bicycle Therapeutics Share Option Plan (the “Plan”) which is governed by the rules
set out in the Plan as amended from time to time (the “Plan Rules” and “Rule” shall be construed accordingly).
(B) The Company wishes to grant an option under the Plan to the Optionholder on the terms specified in this Deed
(the “Option Certificate”).
(C) The Optionholder is an [Employee/Consultant] of a Group Company (as “Group Company” is defined in the
Plan Rules).
(D) [FOR INCENTIVE STOCK OPTIONS ONLY: Status of the Option. This Option is intended to qualify as an
“incentive stock option” under Section 422 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”),
but the Company does not represent or warrant that this Option qualifies as such. The Optionholder should
consult with his or her own tax advisors regarding the tax effects of this Option and the requirements necessary to
obtain favorable income tax treatment under Section 422 of the Code, including, but not limited to, holding period
requirements. To the extent any portion of this Option does not so qualify as an “incentive stock option,” such
portion shall be deemed to be a non-qualified stock option. If the Optionholder intends to dispose or does dispose
(whether by sale, gift, transfer or otherwise) of any Shares within the one-year period beginning on the date after
the transfer of such shares to him or her, or within the two-year period beginning on the day after the grant of this
Option, he or she will so notify the Company within 30 days after such disposition.]
AGREED TERMS
1 INTERPRETATION
1.1 Terms defined in the Plan (but not defined in this Option Certificate) shall have the same meaning in this Option
Certificate as in the Plan, unless the context requires otherwise. The rules of interpretation in the Plan also apply to
the Option Certificate.
1.2 A copy of the Plan may be obtained on request.
1.3 Terms in the Option Certificate such as “you” and “your” refer to and address you in your capacity as the
Optionholder.
2 GRANT OF OPTION
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2.1 Subject to the other terms of this Option Certificate and the Plan, the Company grants you an option (the
“Option”) to acquire [(cid:0)] ordinary shares (the “Option Shares”) in the Company.
2.2 The Date of Grant of the Option is [(cid:0)].
2.3 The Exercise Price of the Option is $[(cid:0)] for each Option Share.
2.4 Subject to the Plan Rules, the Option shall normally Vest as follows:
[in equal tranches of 1/36th at the end of each calendar month following the Date of Grant.]
[in full on the Date of Grant.]
[as to ¼ of the total number of Shares under Option on the first anniversary of the Date of Grant and in
respect of the remaining number of Shares under Option in equal tranches of 1/36th at the end of each
calendar month following the first anniversary of the Date of Grant.]
3 EXERCISE OF OPTION
3.1 You may lose the ability to exercise the Option or the Option may lapse before it vests in accordance with clause
2.4 above if certain events occur, in accordance with the Plan Rules.
3.2 If you give or receive notice of termination of your employment or engagement with any Group Company you
may not exercise your Option at any time while the notice remains effective.
3.3 To exercise the Option, you should complete and submit an exercise notice in the form and manner notified to you
by the Company (which may be through an online share plan portal) and make payment (or other arrangements to
the satisfaction of the Compensation Committee) of the aggregate Exercise Price and any liability to Tax (“Tax
Liability”) due.
4 LAPSE OF THE OPTION
4.1 Other than where your Option is transferred or assigned to your personal representatives or beneficiary in the event
of your death, Options may not be transferred, assigned, pledged or charged and any purported transfer,
assignment, pledge or charge shall cause the Option to lapse immediately.
4.2 The Option will lapse on the first to occur of:
(a) any transfer or purported transfer of the Option as described in clause 4.1 above;
(b) you making or attempting to make the Option subject to a charge or any other security interest;
(c) except as otherwise provided by the Plan Rules or determined by the Compensation Committee in
accordance with the Plan Rules, the Cessation Date;
(d) the date on which you are declared bankrupt;
(e) the tenth anniversary of the Date of Grant; and
(f) any other date specified in the Plan Rules.
5 TERMS OF OPTION
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5.1 The Option is subject to the Plan Rules (which are incorporated by reference in the Option Certificate), including
Rule 6.4(h).
5.2 The Plan Rules shall take precedence over any conflicting statement about the terms of this Option Certificate.
6 TAX LIABILITY
By accepting the Option, you irrevocably agree to:
(a) pay to the Company, your employer or former employer (as appropriate) the amount of any Tax Liability;
or
(b) enter into arrangements to the satisfaction of the Company, your employer or former employer (as
appropriate) for payment of any Tax Liability.
7 OPTIONHOLDER DECLARATION
By countersigning this Option Certificate, you agree to be bound by the terms of this Option Certificate, the Plan
Rules and any Group Company policy that may be applicable to you and the Option from time to time (the
“Policies”). You have reviewed the Plan, this Option Certificate and the Policies in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option Certificate and fully understand all
provisions of the Plan Rules, this Option Certificate and the Policies. Save as otherwise provided in the Plan
Rules, you hereby agree to accept as binding, conclusive and final all decisions or interpretations of the
Compensation Committee upon any questions arising under the Plan or this Option Certificate.
This document has been executed as a deed and is delivered and takes effect on the date stated at the beginning of it.
Exhibit 10.9
DATED 26 September 2019
BicycleTX Ltd
and
Dr Michael Skynner
___________________________________________________
SERVICE AGREEMENT
___________________________________________________
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THIS AGREEMENT is made on 26 September 2019
BETWEEN:
(1) BICYCLETX LIMITED a company incorporated under the laws of England and Wales (Company Number 11036101) whose
registered office is at Building 900 Babraham Research Campus, Babraham, Cambridgeshire, CB22 3AT, United Kingdom (the
“Company”); and
(2) Dr MICHAEL SKYNNER of (the ‘‘Employee”).
IT IS AGREED as follows:
1. COMMENCEMENT OF EMPLOYMENT
1.1 Your employment commenced on 1 January 2016 and shall continue unless and until either party gives notice to the other in
accordance with paragraph 11 below. No employment with a previous employer is deemed to be continuous with your
employment with the Company.
1.2 This Agreement shall take effect on the date first written above and replaces all and any previous employment agreements
between you and the Company including (without limitation) the letter dated 23 November 2015 setting out your terms and
conditions of employment (as amended on 2 February 2018) and your statement of main terms and conditions of employment
dated 15 May 2019.
1.3 You warrant that by entering into this Agreement or any other arrangements with the Company you will not be in breach of or
subject to any express or implied terms of any contract with, or other obligation to, any third party binding on you, including,
without limitation, any notice period or the provisions of any restrictive covenants or confidentiality obligations arising out of
any employment with any other employer or former employer.
1.4 You warrant that you have the right to work in the United Kingdom and you agree to provide to the Company copies of all
relevant documents in this respect at the request of the Company. If at any time during the course of this Agreement you cease
to have the right to work in the United Kingdom the Company may immediately terminate your employment without payment
of compensation.
2. JOB TITLE
2.1 You shall serve as Chief Operating Officer (“COO”) reporting to the CEO. The nature of the Company’s business may result in
changes occurring to the content of your role from time to time. You may also be required to carry out such additional or
alternative tasks as may from time to time be reasonably required of you consistent with your executive level and job title,
provided that these do not fundamentally change or undermine your position.
2.2 You shall faithfully and diligently perform such duties as you are required to undertake from time to time and exclusively
devote the whole of your working time, skills, ability and attention to the business of the Company and use your best
endeavours to promote the interests and reputation of the Company and (where applicable) any Group Company.
2.3 The Company may require you to carry out work for, or become a director or officer of, any Group Company at any time.
3. PLACE OF WORK
The Company’s offices at Building 900, Babraham Research Campus, Babraham, Cambridge, UK or such other location as the
Company may reasonably determine. The COO position may
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require extensive international travel on business.
4. REMUNERATION
4.1 Your salary will be USD420,000 per annum paid monthly in arrears on or about the last working day of each month (less
statutory and voluntary deductions) (“Salary”). Salary will be converted to GBP and paid in GBP based on the USD/GBP Bank
of England daily spot exchange rate applicable on the date of this Agreement, with the exchange rate being revised according to
the prevailing Bank of England daily spot exchange rate applicable on 1 January of each year. Your Salary will be reviewed
annually in accordance with the Company’s practices from time to time (which is expected to be by the end of the first quarter
of each year). You will be notified in writing of any changes to your Salary or benefits.
4.2 You agree that the Company may deduct from the Salary or any other sum due to you (including any pay in lieu of notice) any
amounts due to the Company including, without limitation, any overpayment of salary, loan or advance.
4.3 For the purposes of this Agreement your earned salary shall mean the proportion of your Salary earned by and due to you in
each calendar year of employment with the Company (“Earned Salary”).
4.4 Annual Performance Bonuses:
You will be eligible to participate in the Company's discretionary annual performance related bonus scheme to a maximum
value of 40% of your Earned Salary in relation to your performance against agreed annual corporate and personal performance
objectives as set out below (the “Annual Performance Bonus”). That is, if the compensation committee (the “Compensation
Committee”) of the board of directors ("the Board”) of the Company’s parent company, Bicycle Therapeutics plc (“BTL”)
determines that you have completed all such corporate and personal objectives to its satisfaction in a given year, your bonus
would be 40% of your Earned Salary in that year, excluding any other bonuses in this offer. Such bonus may be payable in cash
or, in whole or in part, in share options in BTL, as agreed by you and the Compensation Committee following notification by
you of your preference at least 90 days prior to the normal payment date (and in the case of share options with the appropriate
HMRC valuation process (if required by the Compensation Committee) and Board approval so as to be compliant with BTL’s
share option plan rules), with due consideration for the operational requirements of the Company at that time in your role as
COO.
Any Annual Performance Bonus paid will not be pensionable and are subject to statutory applicable tax and National Insurance
deductions. Performance will be assessed by the Compensation Committee at the end of each calendar year, against annual
corporate and personal performance objectives agreed between you and the Board at the start of each calendar year, with any
such bonus being payable in the first quarter of the following year. Qualification for your Annual Performance Bonus will
require that you are employed by the Company (and have not served notice of termination of your employment to the Company)
on 31 December of the year to which your bonus entitlement applies.
5 BENEFITS
5.1 The Company currently operates a personal pension plan provided by Scottish Widows Group. The Company will pay a sum
equivalent to 12% of your basic annual earned salary into a personal pension plan selected by the Company. You may make
additional contributions if you wish, but this is not mandatory. In the event that you elect, of your own volition, to opt-out of
the Company’s pension scheme then the Company will pay you in equal monthly instalments in arrears (less statutory
deductions) a sum equivalent to the contribution that it would have
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made into your pension scheme (the “Cash Equivalent Payment”) less the Employer’s National Insurance Contribution cost
incurred by the Company as a result of making the Cash Equivalent Payment.
5.2 The Company currently operates a private healthcare scheme and subject to acceptance by the insurer on reasonable terms, you
will be entitled to join.
5.3 The Company operates a death in service scheme which you automatically join upon commencement of employment.
5.4 Further details regarding benefits will be provided upon commencement of your employment. The Company reserves the right
to replace or supplement any or all of the scheme(s) referred to in this paragraph 5, or to amend them at any time without
compensation, provided that equivalent scheme(s) providing a similar level of benefit are put in place.
6 EXPENSES
The Company shall reimburse all reasonable out of pocket expenses properly incurred by you in the performance of the duties
under this Agreement including travelling, subsistence and entertainment expenses provided you follow the Company’s
guidelines/allowances in force at the relevant time and provided that you shall, where reasonably practicable, provide the
Company with vouchers, invoices or such other evidence of such expenses as the Company may reasonably require.
7 HOURS OF WORK
7.1 Your normal working hours are Monday to Friday from 9.00 am to 5.30 pm on each working day with one hour for lunch. You
will be required to work such other hours as shall be reasonably necessary for you to perform your duties for which no further
remuneration is payable.
7.2 By entering into this Agreement you confirm, that in your capacity as Chief Operating Officer you may choose or determine the
duration of your working time and the working time limits set out in part II of the Working Time Regulations 1998 do not apply
to you.
8 HOLIDAYS
8.1 In addition to the usual public holidays you will be entitled to 25 working days paid holiday in each calendar year. The holiday
will accrue on a pro rata basis throughout each calendar year.
8.2 Holidays may only be taken at such time or times as are approved beforehand by the CEO, such approval not to be unreasonably
withheld or delayed. You must give reasonable notice of proposed holiday dates by e-mailing the CEO or delegated director in
advance, for approval.
8.3 The holiday year runs from January to December. With the agreement of the CEO, you may carry forward up to 5 days of
untaken holiday into the next holiday year. Any carried over holiday must be taken by the end of March of the following
calendar year or will be forfeited and no payment will be made in respect of any days so forfeited. You will not generally be
permitted to take more than 10 days holiday at any one time.
8.4 Upon termination of your employment you will receive pay in lieu of accrued but untaken holiday. The Company may deduct
an appropriate sum in respect of days taken in excess of your pro rata entitlement from your final remuneration on the basis that
one day’s holiday will be calculated as 1/260ths of your basic annual salary.
8.5 In the event that notice of termination of this Agreement is served by either party, the Company may require you to take any
outstanding holiday during this notice period.
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9 SICKNESS AND OTHER ABSENCE
9.1 If you are unable to attend at work by reason of sickness or injury or any unauthorised reason you must inform the Company as
soon as possible on the first day of absence (and in any event not later than 11.00 am on the first day of absence) and, in the case
of absence of uncertain duration, you must keep the Company regularly informed of your continued absence and your likely
date of return. You are expected to observe this rule very strictly since failure to do so will entitle the Company to stop payment
in respect of each day you fail to notify the Company.
9.2 If your absence, due to sickness or injury, is for less than seven (7) days, on your return to work you are required to immediately
complete a self-certification form available from the Company. If your absence continues for more than seven (7) consecutive
days (whether or not working days) you must provide the Company with a doctor's certificate from the seventh consecutive day
of sickness or injury. This doctor’s certificate must be provided to the Company promptly following the seventh consecutive day
of absence. If illness continues after the expiry of the first certificate, further certificates must be provided promptly to cover the
whole period of absence.
9.3 Subject to your compliance with the Company’s sickness absence procedures (as amended from time to time), the Company may
in its sole and absolute discretion pay full salary and contractual benefits during any period of absence due to sickness or injury
for up to an aggregate of 3 months in any fifty-two (52) week period (whether such absence is continuous or intermittent in any
calendar year). Such payment shall be inclusive of any statutory sick pay due in accordance with applicable legislation in force
at the time of absence. The Company may, in its sole and absolute discretion, extend the period of allowance in an individual
case if the circumstances so justify. Thereafter, the Company shall pay statutory sick pay or equivalent benefit to which you
may be entitled subject to your compliance with the appropriate rules.
9.4 Whether absent from work or not, you may be, but only on reasonable grounds, required to undergo a medical examination by a
Company doctor and your consent will be sought for a report to be sent to the Company.
9.5 The payment of sick pay in accordance with this paragraph 9 is without prejudice to the Company’s right to terminate this
Agreement prior to the expiry of your right to payments.
9.6 In the event you are incapable of performing your duties by reason of injuries sustained wholly or partly as a result of a third
party's actions all payments made to you by the Company as salary or sick pay shall to the extent that compensation is
recoverable from that third party constitute loans to you and shall be due and owing when and to the extent that you recover
compensation for loss of earnings from the third party.
10 GARDEN LEAVE
10.1 After notice of termination has been given by you or the Company, the Company may at its discretion require you, for all or part
of your notice period, to comply with any or all of the following instructions:
(a) not to carry out any further work for the Company or for any Group Company;
(b) to remain away from the Company’s business premises and those of any Group Company (unless given written
permission to do otherwise);
(c) not to contact any of the Company’s clients, suppliers or employees or those of any Group Company without the
Company’s prior written permission;
(d) to carry out only part of your duties, or to carry out alternative duties or special projects for the Company within your
skill set;
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(e) to co-operate in the handover of your duties and responsibilities;
(f) to resign from any offices (including as a director) you hold within the Company or any Group Company or by virtue
of your employment with us;
(g) to answer, in an honest and helpful way, such questions as the Company may reasonably ask of you;
(h) to keep the Company informed of your whereabouts and contact details and to remain reasonably contactable and
available for work.
10.2 During any such period as described in paragraph 10.1 (“Garden Leave”) the Company may appoint another person to carry out
some or all of your duties. You will continue to owe all other duties and obligations (whether express or implied including
fidelity and good faith) during Garden Leave and you shall continue to receive full pay and benefits (except that you will not
accrue any further entitlement to any cash or equity incentive awards or bonus payments in respect of the Garden Leave period).
10.3 By placing you on Garden Leave, the Company will not be in breach of this Agreement or any implied duty of any kind
whatsoever nor will you have any claim against the Company in respect of any such action.
10.4 During any period of Garden Leave you will remain readily contactable and available for work save when on paid holiday taken
in accordance with paragraph 8. In the event that you are not available for work having been requested by the Company to do
so, you will, notwithstanding any other provision of this Agreement, forfeit any right to salary and contractual benefits.
10.5 During any period of Garden Leave the Company may require you to deliver up any Confidential Information or property of the
Company or any Group Company and upon instruction, delete any emails, spreadsheets or other Confidential Information and
you will confirm your compliance with this paragraph 10.5 in writing if requested to do so by the Company.
10.6 During any period of Garden Leave the Company may require you to take any outstanding holiday entitlement.
11 NOTICE
11.1 Without prejudice to the Company’s right to summarily terminate your employment in accordance with paragraph 11.3 below
and your right to summarily terminate your employment for Good Reason in accordance with paragraph 11.4 below, either you
or the Company may terminate your employment by giving to the other not less than six months’ notice in writing.
11.2 The Company reserves the right in its sole and absolute discretion to give written notice to terminate your employment forthwith
and to make a payment to you in lieu of salary and the benefits set out in paragraph 5 of this Agreement for all or any unexpired
part of the notice period. For the avoidance of doubt, any payment in lieu made pursuant to this paragraph 11.2 will not include
any element in relation to any payment in respect of (i) any Annual Performance Bonus or (ii) any holiday entitlement that
would have otherwise accrued during the period for which the payment in lieu is made. For the further avoidance of doubt, if
the Company elects to make a Payment in Lieu after notice of termination has been given by you, this will not constitute a
termination by the Company without Cause for the purposes of paragraphs 11.7 and 11.8 below.
11.3 The Company may summarily terminate your employment hereunder (without notice) for Cause. For purposes of this
Agreement, “Cause” shall mean where you:
(a) commit gross misconduct which includes, but is not limited to, dishonesty, fraud, theft, being under the influence of
alcohol or drugs at work, causing actual or threatening
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physical harm and causing damage to Company property;
(b) commit a material breach or non-observance of your duties or any of the provisions of this Agreement, or materially
fail to observe the lawful directions of the Company, or breach any material Company policy or code of conduct,
including but not limited to the Company’s policy from time to time on matters relating to harassment;
(c) are convicted of a criminal offence (other than an offence under the road traffic legislation in the United Kingdom or
elsewhere for which a non-custodial sentence is imposed);
(d) act in a manner which in the reasonable opinion of the Company, brings the Company into disrepute or otherwise
prejudices or is in the reasonable opinion of the Company considered likely to prejudice the reputation of the
Company;
(e) in the reasonable opinion of the Company, are guilty of any serious negligence in connection with or affecting the
business or affairs of the Company;
(f) are unfit to carry out the duties hereunder because of sickness, injury or otherwise for an aggregate period of 26 weeks
in any fifty-two (52) week period even if, as a result of such termination, you would or might forfeit any entitlement to
benefit from sick pay under paragraph 9.3 above.
Any delay or forbearance by the Company in exercising any right of termination in accordance with this paragraph 11.3 will not
constitute a waiver of such right.
11.4 You may summarily terminate your employment hereunder at any time (without notice) for Good Reason after complying with
the Good Reason Process. For purposes of this Agreement, “Good Reason” shall mean that you have complied with the “Good
Reason Process” (hereinafter defined) following the occurrence of any of the following events: (i) a material diminution in your
responsibilities, authority or duties; (ii) a material diminution in your Salary; (iii) a material change in the geographic location at
which you provides services to the Company; or (iv) the material breach of this Agreement by the Company. “Good Reason
Process” shall mean that (i) you reasonably determine in good faith that a “Good Reason” condition has occurred; (ii) you notify
the Company in writing of the first occurrence of the Good Reason condition within 60 days of the first occurrence of such
condition; (iii) you cooperate in good faith with the Company’s efforts, for a period not less than 30 days following such notice
(the “Cure Period”), to remedy the condition; (iv) notwithstanding such efforts, the Good Reason condition continues to exist;
and (v) you terminate your employment (without notice) within 60 days after the end of the Cure Period. If the Company cures
the Good Reason condition during the Cure Period, Good Reason shall be deemed not to have occurred.
11.5 Your employment hereunder shall also terminate immediately upon your death.
11.6 If your employment with the Company is terminated for any reason, the Company shall pay or provide to you (or to your
authorised representative or estate) (i) any Salary earned through the Termination Date (as defined below); (ii) unpaid expense
reimbursements (subject to, and in accordance with, paragraph 6 of this Agreement); and (iii) any vested benefits you may have
under any employee benefit plan of the Company through the Termination Date, which vested benefits shall be paid and/or
provided in accordance with the terms of such employee benefit plans (collectively, the “Accrued Benefits”).
Severance Pay and Benefits Upon Termination by the Company without Cause or by the Executive for Good Reason outside the
Change in Control Period.
11.7 If your employment is terminated on account of your death or by the Company without Cause (being for any reason not covered
by paragraph 11.3), or you terminate your employment for
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Good Reason (as provided in paragraph 11.4), in either case outside of the Change in Control Period, then the Company shall
pay you the Accrued Benefits. In addition, subject to (i) your (or your authorised representative or estate signing, if the
termination is due to your death) signing a settlement agreement and a separation agreement and release (together the
“Settlement Agreements”) in a form and manner satisfactory to the Company, which shall include, without limitation, a general
release of claims against the Company and all related persons and entities, a reaffirmation of all of your continuing obligations
to the Company, including those set forth in paragraphs 13 – 15, and (in the case of the separation agreement and release) and a
seven (7) business day revocation period; and (ii) the separation agreement and release becoming irrevocable, all within 60 days
after the Termination Date (or such shorter period as set forth in the Settlement Agreements), the Company shall: (A) pay you
(or your authorised representative or estate if the termination is due to your death) an amount equal to nine (9) months of your
salary as of the Termination Date (which payment shall not be reduced by either the value of any salary paid to you during your
notice period or by any payment in lieu of notice made pursuant to paragraph 11.2); and (B) pay you (or your authorised
representative or estate if the termination is due to your death) an amount equal to the cost to the Company of providing you
with the contractual benefits under paragraph 5 for nine (9) months or, at the Company’s option, continue to provide you with
such benefits for nine (9) months.
Severance Pay and Benefits Upon Termination by the Company without Cause or by the Executive for Good Reason Within the
Change in Control Period
11.8 The provisions of this paragraph 11.8 shall apply in lieu of, and expressly supersede, the provisions of paragraph 11.7 regarding
severance pay and benefits upon a termination by the Company without Cause or by you for Good Reason if such termination of
employment occurs within 12 months after the occurrence of the first event constituting a Change in Control (such period, the
“Change in Control Period”). These provisions shall terminate and be of no further force or effect after the Change in Control
Period.
(a) Change in Control Period. If during the Change in Control Period your employment is terminated on account of your
death or by the Company without Cause (being for any reason not covered by paragraph 11.3) or you terminate your
employment for Good Reason (as provided in paragraph 11.4), then, subject to (i) your signing (or your authorised
representative or estate signing, if the termination is due to your death) a settlement agreement and a separation
agreement and release (together the Settlement Agreements) in a form and manner satisfactory to the Company, which
shall include, without limitation, a general release of claims against the Company and all related persons and entities, a
reaffirmation of all of your continuing obligations to the Company, including those set forth in paragraphs 13 – 15, and
(in the case of the separation agreement and release) and a seven (7) business day revocation period; and (ii) the
separation agreement and release becoming irrevocable, all within 60 days after the Termination Date (or such shorter
period as set forth in the Settlement Agreements):
(i) the Company shall pay you (or your authorised representative or estate if the termination is due to your death)
an amount equal to the sum of (A) your annual salary as of the Termination Date (or your annual salary in
effect immediately prior to the Change in Control, if higher) plus (B) your target annual performance bonus
amount under the Annual Bonus Plan for the then-current year (the “Change in Control Payment”), which
payment shall not be reduced by either the value of any salary paid to you during your notice period or by the
value of any payment made to you in lieu of notice pursuant to paragraph 11.2;
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(ii) the Company shall: pay you (or your authorised representative or estate if the termination is due to your
death) an amount equal to the cost to the Company of providing you with the contractual benefits under
paragraph 5 for twelve (12) months or, at the Company’s option, continue to provide you with such benefits
for twelve (12) months; and
(iii) notwithstanding anything to the contrary in any applicable option agreement or other stock-based award
agreement, all Time-Based Equity Awards shall immediately accelerate and become fully exercisable (for a
period determined in accordance with the rules of the applicable equity plan) or nonforfeitable as of the later
of (A) the Termination Date or (B) the Accelerated Vesting Date; provided that any termination or forfeiture
of the unvested portion of such Time-Based Equity Awards that would otherwise occur on the Termination
Date in the absence of this Agreement will be delayed until the Effective Date of the Settlement Agreements
and will only occur if the vesting pursuant to this subsection does not occur due to the absence of the
Settlement Agreements becoming fully effective within the time period set forth therein. Notwithstanding the
foregoing, no additional vesting of the Time-Based Equity Awards shall occur during the period between your
Termination Date and the Accelerated Vesting Date.
11.9 Definitions. For purposes of this paragraph 11, the following terms shall have the following meanings:
“Accelerated Vesting Date” means the effective date of the Settlement Agreements signed by you (or your authorised
representatives or estate if the termination is due to your death).
“Termination Date” means the date on which your employment hereunder terminates.
“Time-Based Equity Awards” means all time-based stock options and other stock-based awards subject to time based vesting
held by you.
“Change in Control” has the meaning given to that term in the Schedule to this Agreement.
12 DISCIPLINARY, DISMISSAL AND GRIEVANCE PROCEDURES
12.1 A copy of the Company’s disciplinary, dismissal and grievance procedures are set out in its employee handbook (the “Employee
Handbook”).
12.2 Any grievance concerning your employment should be taken up orally in the first instance with the CEO. If the grievance is not
resolved to your satisfaction, you should then refer it to the Chairman.
12.3 The Company reserves the right to suspend you on full pay and benefits at any time for a reasonable period to investigate any
potential disciplinary matter that it reasonably believes you may be or may have been involved in.
13 OUTSIDE EMPLOYMENT, CONFIDENTIAL INFORMATION, CONFLICTING INTERESTS AND RETURN OF
COMPANY PROPERTY
13.1 For the purposes of this paragraph 13, paragraph 10 above and paragraph 14 below the expression “Confidential Information”
shall include, but not be limited to, any and all knowledge, data or information (whether or not recorded in documentary form or
on computer disk or tape), which may be imparted in confidence or which is of a confidential nature or which you may
reasonably regard as being confidential or a trade secret by the Company, concerning the
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business, business performance or prospective business, financial information or arrangements, plans or internal affairs of the
Company, any Group Company or any of their respective customers. By way of illustration but not limitation, “Confidential
Information” includes (a) trade secrets, inventions, mask works, ideas, processes, formulas, software in source or object code,
data, records, reports, interpretations, the contents of any databases, programs, other works of authorship, know-how, materials,
improvements, discoveries, developments, technical information, designs and techniques and any other proprietary technology
and all IPRs (as defined below) therein (collectively, “Inventions”); (b) information regarding research, development, new
products, planned products, planned surveys, marketing surveys, research reports, market share and pricing statistics, marketing
and selling, business plans, financial details, budgets and unpublished financial statements, licenses, prices and costs, fee levels,
margins, discounts, credit terms, pricing and billing policies, quoting procedures, commissions, commission charges, other price
sensitive information, methods of obtaining business and other business methods, forecasts, future plans and potential strategies,
financial projections and business strategies and targets, operational plans, financing and capital-raising plans, activities and
agreements, internal services and operational manuals, methods of conducting Company business, corporate and business
accounts, suppliers and supplier information, and purchasing; (c) information regarding clients or customers and potential
clients or customers of the Company, including customer lists, client lists, names, addresses (including email), telephone,
facsimile or other contact numbers and contact names, representatives, their needs or desires with respect to the types of
products or services offered by the Company, proposals, bids, contracts and their contents and parties, the type and quantity of
products and services provided or sought to be provided to customers and potential customers of the Company and other non-
public information relating to customers and potential customers; (d) information regarding any of the Company’s business
partners and their services, including names, representatives, proposals, bids, contracts and their contents and parties, the type
and quantity of products and services received by the Company, and other non-public information relating to business partners;
(e) information regarding personnel, computer passwords, employee lists, compensation and remuneration, and employee skills;
and (f) any other non-public information which a competitor of the Company could use to the competitive disadvantage of the
Company.
13.2 You shall not, without the prior written consent of the Company, either solely or jointly, directly or indirectly, carry on or be
engaged, concerned or interested in any other trade or business, including, but not limited to, carrying on business with the
Company’s suppliers or dealers, save that nothing in this paragraph 13.2 shall prevent you from holding (with the prior written
consent of the Company, which shall not be unreasonably delayed or withheld) up to three percent (3%) of the issued equity
share capital of any company where those equity shares are listed on a recognised investment exchange (as defined in section
285 of the Financial Services and Markets Act 2000) or traded on the AIM market operated by the London Stock Exchange.
Failure to secure advance permission in accordance with this paragraph 13.2 may result in summary dismissal.
13.3 You will not (except with the prior written consent of the Board) except in the proper course of your duties during the
continuance of this Agreement (which for the avoidance of doubt shall include the use of laptops and remote working), or at any
time thereafter:
(a) disclose or use for your own or for another’s purpose or benefit any Confidential Information which you may learn
while in the employment of the Company except as required by a court of law or any regulatory body or that which
may be in or become part of the public domain other than through any act or default on your part;
(b) copy or reproduce in any form or by or on any media or device or allow others access to copy or reproduce any
documents (including without limitation letters, facsimiles and
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memoranda), disks, memory devices, notebooks, tapes or other medium whether or not eye-readable and copies thereof
on which Confidential Information may from time to time be recorded or referred to (“Documents”); or
(c) remove or transmit from the Company or any Group Company’s premises any Documents on which Confidential
information may from time to time be recorded.
13.4 Upon termination of your employment for any reason by either party, you must immediately return to the Company all
Company property including but not limited to documents, papers, records, keys, credit cards, mobile telephones, computer and
related equipment, PDA or similar device, security passes, accounts, specifications, drawings, lists, correspondence, catalogues
or the like relating to the Company’s business which is in your possession or under your control and you must not take copies of
the same without the Company’s express written authority.
14 RESTRICTIVE COVENANTS
14.1 For the purpose of this paragraph 14 the following expressions shall have the following meanings:
“Prospective Customer” shall mean any person, firm, company or other business who was to your knowledge at the
Termination Date negotiating with the Company or with any Group Company with a view to dealing with the Company or any
Group Company as a customer;
“Restricted Business” means any business which (i) carries on research in the field of constrained peptides, including, without
limitation, all work in the field of lead constrained peptide identification and optimization and pre-clinical development of
constrained peptide therapeutics or (ii) is developing a drug conjugate compound for treating cancer that targets the same target
as a drug conjugate compound in development by any Group Company;
“Restricted Customers” shall mean any person, firm, company or other business who was to your knowledge at any time in
the twelve (12) month period ending with the Termination Date a customer of the Company or any Group Company;
“Restricted Period” shall mean the period of twelve (12) months from the Termination Date;
“Restricted Territory” means anywhere in the United States or the United Kingdom or in any other country in which the
Company or any Group Company conducts business or as of the date of termination of my employment relationship had plans
to conduct business; and
“Termination Date” shall mean the date on which your employment under this Agreement terminates either due to you or the
Company terminating it in accordance with the terms of the Agreement or in breach of the terms of this Agreement.
14.2 During the course of your employment hereunder you are likely to obtain Confidential Information relating to the business of
the Company or any Group Company and personal knowledge and influence over clients, customers and employees of the
Company or any Group Company. You hereby agree with the Company that to protect the Company’s and any and all Group
Company’s business interests, customer connections and goodwill and the stability of its or their workforce, that you will not
during the Restricted Period (and in respect of sub-paragraph 14.2(f) below only, at any time):
(a) in the Restricted Territory, compete with the business of the Company or any Group Company by being directly or
indirectly employed or engaged in any capacity by any person, firm or company which engages in or provides
Restricted Business or commercial activities competitive with the Restricted Business to Restricted Customers or
Prospective Customers;
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(b) in the Restricted Territory, compete with the business of the Company or any Group Company either on your own
account or for any person, firm or company directly or indirectly by transacting business in competition with the
Restricted Business with any Restricted Customer or Prospective Customer of the Company or Group Company and
with whom you personally dealt in respect of Restricted Business in the pursuance of the employment hereunder in the
twelve (12) months prior to the Termination Date;
(c) in the Restricted Territory, compete with the business of the Company or any Group Company either on your own
account or for any person, firm or company directly or indirectly in competition with the Restricted Business by
soliciting or endeavouring to solicit or entice the business or custom of any Restricted Customer or Prospective
Customer and with whom you personally dealt in respect of Restricted Business in the pursuance of the employment
hereunder in the twelve (12) months prior to the Termination Date;
(d) either on your own account or for any person, firm or company directly or indirectly solicit or entice away or
endeavour to solicit or entice away any director or senior employee of the Company or any Group Company employed
in a managerial, scientific or technical role with whom you have had material personal dealings in the twelve (12)
months prior to the Termination Date;
(e) from the Termination Date for the purpose of carrying on any trade, or business represent or allow you to be
represented or held out as having any present association with the Company or any Group Company; and
(f) from the Termination Date carry on any trade or business whose name incorporates the word Bicycle or any deviation
or extension thereof which is likely or which may be confused with the name of the Company or any Group Company.
14.3 While the restrictions set out in paragraph 14.2 above are considered by the parties to be reasonable in all the circumstances, it is
agreed that if any one or more of such restrictions shall either taken by itself or themselves together be adjudged to go beyond
what is reasonable in all the circumstances for the protection of the legitimate interests of the Company but would be adjudged
reasonable if any particular restriction or restrictions were deleted or if any part or parts of the wording thereof were deleted,
restricted or limited in a particular manner, then the restrictions set out in paragraph 14.2 above shall apply with such deletions
or restrictions or limitations as the case may be.
14.4 For the avoidance of doubt nothing in this paragraph 14 shall prevent you from having any dealings with any Prospective
Customer or Restricted Customer in relation to any business which is not Restricted Businesses and which is not competitive
with the Restricted Business, nor from continuing to deal with any Prospective Customer or Restricted Customer where you
either have a social or business relationship unconnected to the Company and that relationship does not compete with the
Restricted Business.
14.5 The restrictions contained in paragraph 14.2 above are held by the Company for itself and on trust for any other Group
Company and shall be enforceable by the Company on their behalf or by any Group Company (at their request). You shall
during the employment hereunder enter into direct agreements with any Group Company whereby you will accept restrictions
in the same or substantially the same form as those contained in paragraph 14.2 above.
14.6 In the event that the Company exercises its rights and places you on Garden Leave under paragraph 10 above then the Restricted
Period shall be reduced by any period/s spent by you on Garden Leave prior to the Termination Date.
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14.7 During the Restricted Period you shall provide a copy of the restrictions contained at paragraph 13 above and this paragraph 14
to any employer or prospective employer or any other party with whom you become or will become engaged or provide service
or services to.
15 INTELLECTUAL PROPERTY
15.1 For the purpose of this paragraph 15 “IPRs" shall mean all trade secrets, Copyrights, trademarks and trade and business names
(including goodwill associated with any trademark or trade or business names and the right to sue for passing off or unfair
competition), service marks, mask work rights, patents, petty patents, rights in ideas, concepts, innovations, discoveries,
developments and improvements, drug formulations, technology, rights in domain names, rights in inventions, utility models,
rights in know-how (including all data, methods, processes, practices and other results of research), unregistered design rights,
registered design rights, database rights, semiconductor topography rights and other intellectual property rights recognized by
the laws of any jurisdiction or country including all applications and rights to apply for and be granted, renewals or extensions
of, and rights to claim priority from, such rights and all similar or equivalent rights or forms of protection which subsist or will
subsist now or in the future in any part of the world; the term “Copyright” means the exclusive legal right to reproduce,
perform, display, distribute and make derivative works of a work of authorship (as a literary, musical, or artistic work)
recognized by the laws of any jurisdiction or country; and the term “Moral Rights” means all paternity, integrity, disclosure,
withdrawal, special and any other similar rights recognized by the laws of any jurisdiction or country.
15.2 It is contemplated that you may in the course of your employment with the Company create, author or originate (either alone or
jointly with others) Inventions (as defined in paragraph 13.1), and/or records, reports, papers, databases, data, information,
know how, literature, drawings, graphics, typographical arrangements, designs, works, documents, publications and other
materials (in printed, electronic, or any other media or form) (together with Inventions constituting “Works”).
15.3 You will promptly disclose to the Company full details of any Inventions on their creation and provide further details,
explanations and demonstrations as the Company from time to time requests.
15.4 All IPRs subsisting in any Works shall be the exclusive property of the Company.
15.5 To the extent that such IPRs do not vest automatically in the Company by operation of law, you hereby assign and agree to
assign to the Company all of your right, title and interest in any existing and future IPRs which may subsist in any Works for
their full term of protection (including any extensions, revivals and renewals) together with the right to sue and claim remedies
for past infringement and all materials embodying these rights to the fullest extent permitted by law in any and all countries of
the world. Insofar as such IPRs do not vest automatically by operation of law or under this Agreement, the Consultant holds
legal title in these rights and inventions on trust for the Company.
15.6 To the extent permitted by law you hereby irrevocably and unconditionally waive in favour of the Company, its licensees and
successors in title, all existing and future Moral Rights (or similar rights existing in any part of the world) you may have in
respect of any Works under Chapter IV of the Copyright Designs and Patents Act 1988 in England or any similar provisions of
law in any jurisdiction, including (but without limitation) the right to be identified, the right of integrity and the right against
false attribution, and agrees not to institute, support, maintain or permit any action or claim to the effect that any treatment,
exploitation or use of such Works, Inventions or other materials infringes the Consultant's Moral Rights.
15.7 Without prejudice to the generality of paragraph 15.9 below, during your employment with the
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Company and thereafter, without limit in time, you shall at the request and expense of the Company, promptly assist the
Company:
(a) to file, prosecute, obtain and maintain registrations and applications for registration of any IPRs subsisting in, or
protecting, any Works; and
(b) to commence and prosecute legal and other proceedings against any third party for infringement of any IPRs subsisting
in, or protecting, any Works and to defend any proceedings or claims made by any third party that the use or
exploitation of any Works infringes the IPRs or rights of any third party.
15.8 You shall keep details of all Inventions confidential and shall not disclose the subject matter of any Inventions to any person
outside the Company without the prior consent of the Company. You acknowledge that any unauthorised disclosure of such
subject matter may prevent the Company from obtaining patent or registered intellectual property protection for such Invention.
15.9 Whenever requested to do so by the Company and in any event on the termination or expiry of this Agreement, you shall
promptly deliver to the Company all correspondence, documents, papers and records on all media (and all copies or abstracts of
them), recording or relating to any part of the Works and the process of their creation which are in your possession, custody or
power.
15.10 Subject to paragraph 15.11 below, during your employment with the Company and thereafter without limit in time you shall at
the request and expense of the Company promptly execute and do all acts, matters, documents and things necessary or desirable
to give the Company the full benefit of the provision of this paragraph 15. You shall not register nor attempt to register any of
the IPRs in the Works, nor any of the Inventions, unless requested to do so in writing by the Company.
15.11 Nothing in this paragraph 15 shall be construed, or have the effect of, restricting your rights under sections 39 to 43 (inclusive)
of the Patents Act 1977 (as amended from time to time).
16 LITIGATION ASSISTANCE
During the term of your employment and at all times thereafter subject always to your obligations to third parties, you shall
furnish such information and proper assistance to the Company or any Group Companies as it or they may reasonably require in
connection with the Company's intellectual property (including without limitation applying for, defending, maintaining and
protecting such intellectual property) and in connection with litigation in which it is or they are or may become a party. This
obligation on you shall include, without limitation, meeting with the Company or any Group Companies' legal advisers,
providing witness evidence, both in written and oral form, and providing such other assistance that the Company or any Group
Companies' legal advisors in their reasonable opinion determine. The Company shall reimburse you for all reasonable out of
pocket expenses incurred by you in furnishing such information and assistance and in the event you are no longer employed by
the Company a reasonable daily rate (as agreed between you and the Company for such assistance). Such assistance shall not
require you to provide assistance for more than 5 days in any calendar month. For the avoidance of doubt the obligations under
this paragraph 16 shall continue notwithstanding the termination of your employment with the Company.
17 COLLECTIVE AGREEMENTS
There are no collective agreements which directly affect your terms and conditions of employment.
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18 DATA PROTECTION
Processing of personal data and our policies
18.1 Information relating to an individual (or from which an individual may be identified) is called “personal data”.
18.2 In processing personal data, we are required to comply with the law on data protection. To help us achieve this, we have
produced a privacy notice (“Privacy Notice”). This may be found in the Employee Handbook. You must read this and comply
with it in carrying out your work.
Data protection principles
18.3 In complying with the law on data protection, we are required to comply with what are known as data protection
principles. These are summarised in our Privacy Notice. In performing your role and carrying out your responsibilities, you
must do your best to ensure that we comply with these principles.
18.4 A key element of the data protection principles is the duty to ensure that data is processed securely and protected against
unauthorised or unlawful processing or loss. Key elements include the following:
You must ensure that laptops, memory sticks, phones and other mobile devices are password protected and
encrypted. You must not take such devices outside the office without encryption. You must take care of them and keep
them secure.
You must use strong passwords, changing them when asked and not sharing them with unauthorised colleagues.
You must not access other individuals’ personal data unless in the course of your work.
Data breach – and urgent notification
18.5 If you discover a data breach, you must notify the Chairman or CFO immediately – and, if practicable, within one hour.
Depending on context, you may then need to provide further information on the circumstances of the breach.
18.6 A data breach occurs where there is destruction, loss, alteration or unauthorised disclosure of or access to personal data which is
being held, stored, transmitted or processed in any way. For example, there is a data breach if our servers are hacked or if you
lose a laptop or USB stick or send an email to the wrong person by mistake.
18.7 Failure to notify a breach or to provide information as set out above will be treated seriously and disciplinary action may be
taken.
Why we process personal data
18.8 For information on the nature of the data we process, why we process it, the legal basis for processing and related matters,
please refer to our Privacy Notice. In summary:
(a) We process personal data relating to you for the purposes of our business including management, administrative,
employment and legal purposes.
(b) We monitor our premises and the use of our communication facilities, including using CCTV cameras, monitoring
compliance with our data and IT policies, and where non-compliance is suspected, looking in a more targeted way.
18.9 The summary above is for information only. We do not, in general, rely on your consent as a legal basis for
processing. Agreeing the terms of this Agreement will not constitute your giving consent to our processing of your data.
18.10 We reserve the right to amend the documents referred to above from time to time.
19 THIRD PARTY RIGHTS
Save in respect of any rights conferred by this Agreement on any Group Company (which such
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Group Company shall be entitled to enforce), a person who is not a party to this Agreement may not under the Contracts (Rights
of Third Parties) Act 1999 enforce any of the terms contained within this Agreement.
20 DEFINITIONS
In this Agreement:
“Group Company” means a subsidiary or affiliate and any other company which is for the time being a holding company of the
Company or another subsidiary or affiliate of any such holding company as defined by the Companies Act 2006 (as amended)
and “Group Companies” will be interpreted accordingly.
21 ENTIRE AGREEMENT
These terms and conditions constitute the entire agreement between the parties and supersede any other agreement whether
written or oral previously entered into.
22 JURISDICTION AND CHOICE OF LAW
This Agreement shall be governed by and interpreted in accordance with the laws of England and Wales and the parties to this
Agreement submit to the exclusive jurisdiction of the Courts of England and Wales in relation to any claim, dispute or matter
arising out of or relating to this Agreement.
23 NOTICES
Any notices with respect to this Agreement shall be in writing and shall be deemed given if delivered personally (upon receipt),
sent by email or sent by first class post addressed, in the case of the Company, to the Company Secretary at its registered office
and in your case, addressed to your address last known to the Company.
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Schedule
Definitions
Change in Control:
means and includes each of the following:
(a) a Sale; or
(b) a Takeover.
Control:
Sale:
Takeover:
The Compensation Committee shall have full and final authority, which shall be exercised in its sole
discretion, to determine conclusively whether a Change in Control has occurred pursuant to the above
definition, the date of the occurrence of such Change in Control and any incidental matters relating thereto;
provided that any such Change in Control also qualifies as a “change in control event” as defined in Section
409A of the United States Internal Revenue Code of 1986, as amended and the regulations and other guidance
thereunder and any state law of similar effect, and any exercise of authority in conjunction with a
determination of whether a Change in Control is a “change in control event” is consistent with such regulation.
shall have the meaning given to that word by Section 719 of the UK Income Tax (Earnings and Pensions) Act
2003 and “Controlled” shall be construed accordingly.
the sale of all or substantially all of the assets of BTL.
circumstances in which any person (or a group of persons acting in concert) (the “Acquiring Person”):
(a) obtains Control of BTL as the result of making a general offer to:-
i. acquire all of the issued ordinary share capital of BTL, which is made on a
condition that, if it is satisfied, the Acquiring Person will have Control of BTL;
or
ii. acquire all of the shares in BTL; or
(b) obtains Control of BTL as a result of a compromise or arrangement sanctioned by a court under
Section 899 of the UK Companies Act 2006, or sanctioned under any other similar law of
another jurisdiction; or
(c) becomes bound or entitled under Sections 979 to 985 of the UK Companies Act 2006 (or
similar law of another jurisdiction) to acquire shares in BTL; or
(d) obtains Control of BTL in any other way, including but not limited to by way of a merger.
THIS AGREEMENT has been executed and delivered as a deed by or on behalf of the parties on the date written at the top of page 1.
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Executed as a Deed by BICYCLETX LIMITED acting by a director:
/s/ Kevin Lee
(Director)
in the presence of:
/s/ Paula Barnes
Witness Name: Paula Barnes
Witness Address:
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Executed as a Deed by MICHAEL SKYNNER:
/s/ Michael Skynner
(Michael Skynner)
in the presence of:
/s/ Gabriela Repeta
Witness Name: Gabriela Repeta
Witness Address:
Exhibit 10.10
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”) is entered
into effective as of September 26 , 2019 (the “Effective Date”), by and between Nicholas Keen (“Executive”) and
Bicycle Therapeutics Inc. (the “Company”).
th
Executive has been employed by the Company as its Chief Scientific Officer pursuant to the Employment
Agreement with the Company dated January 3, 2017, which was then amended and restated May 28, 2019
(collectively, the “Prior Agreements”).
The Company desires to continue to employ Executive and, in connection therewith, to compensate
Executive for Executive’s personal services to the Company; and
Executive wishes to continue to be employed by the Company and provide personal services to the
Company in return for certain compensation.
Accordingly, in consideration of the mutual promises and covenants contained herein, the parties agree to
the following:
1. EMPLOYMENT BY THE COMPANY.
1.1 At-Will Employment. Executive shall continue to be employed by the Company on an
“at-will” basis, meaning either the Company or Executive may terminate Executive’s employment at any time,
with or without Cause (as defined in Section 6.2(f) below), Good Reason (as defined in Section 6.2(e) below), or
advance notice. Any contrary representations that may have been made to Executive shall be superseded by this
Agreement. This Agreement shall constitute the full and complete agreement between Executive and the
Company on the “at-will” nature of Executive’s employment with the Company, which may be changed only in an
express written agreement signed by Executive and a duly authorized officer of the Company. Executive’s rights
to any salary or cash bonus following a termination shall be only as set forth in Section 6 or under any applicable
benefit or equity plan.
1.2 Position. Subject to the terms set forth herein, the Company agrees to continue to employ
Executive and Executive hereby accepts such continued employment. In addition, Executive shall continue to
serve as Chief Scientific Officer. During the term of Executive’s employment with the Company, and excluding
periods of vacation and sick leave to which Executive is entitled, Executive shall devote all business time and
attention to the affairs of the Company necessary to discharge the responsibilities assigned hereunder, and shall
use commercially reasonable efforts to perform faithfully and efficiently such responsibilities.
1.3 Duties. Executive will continue to render such business and professional services in the
performance of Executive’s duties (consistent with Executive’s position as Chief Scientific Officer) to the
Company, and for the benefit of the Company’s parent, Bicycle Therapeutics plc (“BTL”). Executive shall
continue to report to BTL’s Chief Executive Officer. For the avoidance of doubt and for ease of understanding the
intent of the arrangement, all of Executive’s services described herein shall be provided directly to the Company,
which will, in turn, continue to provide
such services to BTL pursuant to an arm’s length intra-company agreement. To the extent that Executive engages
in any services contemplated herein on BTL’s behalf that involve the execution and negotiation of legal
documents, such services will be performed in the United Kingdom. Executive shall continue to be expected to
perform Executive’s duties under this Agreement out of the Company’s office in Lexington, Massachusetts, or
such other location as assigned. In addition, Executive shall make such business trips to such places as may be
reasonably necessary or advisable for the efficient operations of the Company.
1.4 Company Policies and Benefits. The employment relationship between the parties shall
continue to be subject to the Company’s written personnel policies and procedures as they may be adopted,
revised, or deleted from time to time in the Company’s sole discretion. Executive will continue to be eligible
to participate on the same basis as similarly-situated employees in the Company’s benefit plans in effect from time
to time during Executive’s employment. Subject to the preceding sentence, the Company reserves the right to
change, alter, or terminate any benefit plan in its sole discretion. All matters of eligibility for coverage or benefits
under any benefit plan shall be determined in accordance with the provisions of such plan. Notwithstanding the
foregoing, in the event that the terms of this Agreement differ from or are in conflict with the Company’s general
employment policies or practices, this Agreement shall control.
1.5 Vacation. During the term of Executive’s employment with the Company, Executive shall
continue to accrue five weeks of paid time off per calendar year (prorated for partial years), subject to the
Company’s paid time off policy, as in effect from time to time.
1.6 Pension. During the term of Executive’s employment with the Company, Executive shall
continue to be eligible to receive up to four (4) percent of Base Salary as contributions to a safe harbor 401(k)
plan.
2. COMPENSATION.
2.1 Salary. Executive shall receive an annualized base salary of $380,000, subject to review
and increase (but not decrease) from time to time by the Company in its sole discretion, payable subject to
standard federal and state payroll withholding requirements in accordance with the Company’s standard payroll
practices (the “Base Salary”).
2.2 Bonus.
(a) During Employment. Executive shall be eligible to earn an annual performance
bonus (the “Annual Bonus”) with an annual target of 35% (the “Target Percentage”) of Executive’s then-current
Base Salary. The Annual Bonus will be based upon the assessment by the Board of Directors of the Company
(the “Board”) or a committee thereof of Executive’s performance and the Company’s attainment of targeted goals
(as set by the Company and confirmed by the Board in its reasonable good faith discretion) over the applicable
calendar year. The Annual Bonus, if any, will be subject to applicable payroll deductions and withholdings. No
amount of any Annual Bonus is guaranteed at any time, and, except as otherwise stated in Sections 6.3(a)(iii),
Executive must be an employee in good standing through the date the Annual Bonus is paid to be eligible to
receive an Annual Bonus, except as set forth in Section 6.1(a). No partial or prorated bonuses will be provided.
Subject to Section 6.3(b) related to payments upon certain terminations of
2
employment, any Annual Bonus, if earned, will be paid at the same time annual bonuses are generally paid to
other similarly-situated employees of the Company. Executive’s eligibility for an Annual Bonus is subject to
change in the discretion of the Board (or any authorized committee thereof).
(b) Upon Termination. Subject to the provisions of Section 6, in the event Executive
leaves the employ of the Company for any reason prior to the date the Annual Bonus is paid, Executive is not
eligible to earn such Annual Bonus, prorated or otherwise.
(c) Equity Awards. The equity awards held by the Executive shall continue to be
governed by the terms and conditions of the Company’s applicable equity incentive plan(s) and the applicable
award agreement(s) governing the terms of such equity awards held by the Executive (collectively, the “Equity
Documents”); provided, however, and notwithstanding anything to the contrary in the Equity Documents, Section
6.3(a)(iv) of this Agreement shall apply in the event of a termination by the Company without Cause or by the
Executive for Good Reason, in either case within 12 months after a Change in Control (as defined in Exhibit A
hereto).
2.3 Expense Reimbursement. The Company will reimburse Executive for reasonable
business expenses in accordance with the Company’s standard expense reimbursement policy, subject to any
applicable payroll withholdings and deductions (if any). For the avoidance of doubt, to the extent that any
reimbursements payable to Executive are subject to the provisions of Section 409A of the Internal Revenue Code
of 1986, as amended (the “Code”): (a) any such reimbursements will be paid no later than December 31 of the
year following the year in which the expense was incurred, (b) the amount of expenses reimbursed in one year
will not affect the amount eligible for reimbursement in any subsequent year, and (c) the right to reimbursement
under this Agreement will not be subject to liquidation or exchange for another benefit.
3. CONFIDENTIAL INFORMATION, INVENTIONS, NON-SOLICITATION AND NON-
COMPETITION OBLIGATIONS. In connection with Executive’s continued employment with the Company
and in exchange for good and valuable consideration, Executive will continue to receive and continue to have
access to the Company’s confidential information and trade secrets. Accordingly, and in consideration of the
benefits that Executive is eligible to receive under this Agreement, Executive agrees to sign the Company’s
Employee Confidential Information, Inventions, Non-Solicitation and Non-Competition Agreement (the
“Confidential Information Agreement”), attached as Exhibit B, which contains restrictive covenants and
prohibits unauthorized use or disclosure of the Company’s confidential information and trade secrets, among other
obligations. The Confidential Information Agreement contains provisions that are intended by the parties to
survive and do survive termination or expiration of this Agreement and will supersede, prospectively only, the
agreement that Executive previously signed relating to the same subject matter.
4. OUTSIDE ACTIVITIES. Except with the prior written consent of the Board, Executive will
not, while employed by the Company, undertake or engage in any other employment, occupation, or business
enterprise that would interfere with Executive’s responsibilities and the performance of Executive’s duties
hereunder except for (i) reasonable time devoted to volunteer services for or on behalf of such religious,
educational, non-profit, and/or other charitable organization as Executive may wish to serve, (ii) reasonable time
devoted to activities in the non-profit and business communities consistent with Executive’s position with the
Company, (iii) reasonable time serving as trustee, director, or advisor to any family companies or trusts, (iv) with
prior written notice to the
3
Board, reasonable time devoted to service as a member of the board of directors (or its equivalent in the case of a
non-corporate entity) of a non-competing business, or (v) provide consulting services for up to 8 hours per month;
so long as the activities set forth in clauses (i), (ii), (iii), (iv) and (v) (A) do not, individually or in the aggregate,
interfere with the performance of the Executive’s duties under this Agreement, (B) are not contrary to the interests
of the Company or its Affiliates or competitive in any way with the Company its Affiliates or (C) are not in the
field of constrained peptide drugs or therapeutics (including, without limitation, any work in the field of lead
peptide identification and optimization and pre-clinical development of constrained peptide therapeutics). In
addition, the activities set forth in clauses (i), (ii), (iii), and (iv) may not exceed, in the aggregate, 6 days of
Executive’s services per year, which permitted time commitment may be increased by the Board, in its discretion
which shall not be unreasonably withheld, to up to 12 days per year where a new specific opportunity has been
identified by Executive which would give Executive experience that is considered to be of wider benefit to the
Company. This restriction shall not, however, preclude Executive from (x) owning less than one percent (1%) of
the total outstanding shares of a publicly traded company, (y) managing Executive’s passive personal investments,
or (z) employment or service in any capacity with Affiliates of the Company. As used in this Agreement,
“Affiliates” means, at the time of determination, any “parent” or “subsidiary” of the Company as such terms are
defined in Rule 405 of the Securities Act of 1933, as amended. The Board will have the authority to determine
the time or times at which “parent” or “subsidiary” status is determined within the foregoing definition.
5. NO CONFLICT WITH EXISTING OBLIGATIONS. Executive represents that Executive’s
performance of all the terms of this Agreement and continued service as an employee of the Company do not and
will not breach any agreement or obligation of any kind made prior to Executive’s employment by the Company,
including agreements or obligations Executive may have with prior employers or entities for which Executive has
provided services. Executive has not entered into, and Executive agrees that Executive will not enter into, any
agreement or obligation, either written or oral, in conflict herewith or with Executive’s duties to the Company.
6. TERMINATION OF EMPLOYMENT. The parties acknowledge that Executive’s employment
relationship with the Company continues to be at-will. Either Executive or the Company may terminate the
employment relationship at any time, with or without Cause (as defined below) or advance notice. The provisions
in this Section govern the amount of compensation, if any, to be provided to Executive upon termination of
employment and do not alter this at-will status.
6.1 Termination by Virtue of Death or Disability of Executive.
(a) In the event of Executive’s death while employed pursuant to this Agreement, all
obligations of the parties hereunder and Executive’s employment shall terminate immediately, and the Company
shall, pursuant to the Company’s standard payroll policies and applicable law, pay to Executive’s legal
representatives the Accrued Obligations (as defined in Section 6.2(d) below) due to Executive, along with any
Special Bonus Payment (as that term is defined below).
right, upon written notice to Executive, to terminate this Agreement based on
(b) Subject to applicable state and federal law, the Company shall at all times have the
4
Executive’s Disability (as defined below). Termination by the Company of Executive’s employment based on
“Disability” shall mean termination because Executive is unable due to a physical or mental condition to perform
the essential functions of Executive’s position with or without reasonable accommodation for six (6) months in the
aggregate during any twelve (12) month period or based on the written certification by two licensed physicians of
the likely continuation of such condition for such period. This definition shall be interpreted and applied
consistent with the Americans with Disabilities Act, the Family and Medical Leave Act, and other applicable law.
In the event Executive’s employment is terminated based on Executive’s Disability, Executive will be entitled to
the Accrued Obligations due to Executive, along with any Special Bonus Payment (as that term is defined below).
(c) If the Executive’s termination due to death or Disability occurs between January 1
and the payment date of the Annual Bonus that Executive would have otherwise earned for performance in the
calendar year preceding the termination due to death or Disability, then and only then will Executive be paid the
full Annual Bonus amount that Executive would have otherwise earned for performance in such preceding
calendar year (the “Special Bonus Payment”).
6.2 Termination by the Company or Resignation by Executive.
(a) The Company shall have the right to terminate Executive’s employment pursuant to
this Section 6.2 at any time (subject to any applicable cure period stated in Section 6.2(f)) with or without Cause
or advance notice, by giving notice as described in Section 7.1 of this Agreement. Likewise, Executive can resign
from employment with or without Good Reason, by giving notice as described in Section 7.1 of this Agreement.
Executive hereby agrees to comply with the additional notice requirements set forth in Section 6.2(e) below for
any resignation for Good Reason. If Executive is terminated by the Company (with or without Cause) or resigns
from employment with the Company (with or without Good Reason), then Executive shall be entitled to the
Accrued Obligations (as defined below). In addition, if Executive is terminated without Cause or resigns for
Good Reason, and provided that such termination constitutes a “separation from service” (as defined under
Treasury Regulation Section 1.409A-1(h), without regard to any alternative definition thereunder, a “Separation
from Service”), and further provided that Executive executes and allows to become effective a separation
agreement that includes, among other terms, a general release of claims in favor of the Company and its Affiliates
and representatives and a non-competition clause, in the form presented by the Company (the “Separation
Agreement”), and subject to Section 6.2(b) (the date that the general release of claims in the Separation
Agreement becomes effective and may no longer be revoked by Executive is referred to as the “Release Date”),
then Executive shall be eligible to receive the following severance benefits (collectively the “Non-CIC Severance
Benefits”):
(i) An amount equal to nine (9) months of Executive’s then current Base
Salary, less standard payroll deductions and withholdings, paid in installments on the Company’s regular
payroll dates; and
(ii) Provided Executive or Executive’s covered dependents, as the case
may be, timely elects continued coverage under COBRA under the Company’s group health plans
following such termination, the portion of the COBRA premiums which is equal to the cost of the coverage
that the Company was paying as of the date of termination, to continue Executive’s (and Executive’s
covered dependents, as applicable) health insurance
5
coverage in effect on the termination date until the earliest of: (1) nine (9) months following the
termination date; (2) the date when Executive becomes eligible for substantially equivalent health insurance
coverage in connection with new employment or self-employment; or (3) the date Executive ceases to be
eligible for COBRA continuation coverage for any reason, including plan termination (such period from the
termination date through the earlier of (1)-(3), (the “COBRA Payment Period”)). Notwithstanding the
foregoing, if at any time the Company determines that its payment of COBRA premiums on Executive’s
behalf would result in a violation of applicable law (including, but not limited to, the 2010 Patient
Protection and Affordable Care Act, as amended by the 2010 Health Care and Education Reconciliation
Act), then in lieu of paying COBRA premiums pursuant to this Section, the Company shall pay Executive
on the last day of each remaining month of the COBRA Payment Period, a fully taxable cash payment
equal to the COBRA premium for such month, subject to applicable tax withholding, for the remainder of
the COBRA Payment Period. Nothing in this Agreement shall deprive Executive of Executive’s rights
under COBRA or ERISA for benefits under plans and policies arising under Executive’s employment by
the Company.
(b) Executive shall not receive the Non-CIC Severance Benefits pursuant to Section
6.2(a) unless Executive executes the Separation Agreement within the consideration period specified therein,
which shall in no event be more than forty-five (45) days, and until the Separation Agreement becomes effective
and can no longer be revoked by Executive under its terms. Executive’s ability to receive benefits pursuant to
Section 6.2(a) is further conditioned upon Executive: (i) returning all Company property; (ii) complying with
Executive’s post-termination obligations under this Agreement and the Confidential Information Agreement; (iii)
complying with the Separation Agreement, including without limitation any non-disparagement, non-competition,
and confidentiality provisions contained therein; and (iv) resignation from any other positions Executive holds
with the Company, effective no later than Executive’s date of termination (or such other date as requested by the
Board).
(c) The Company will not make any payments to Executive with respect to any of the
benefits pursuant to Section 6.2(a) prior to the 60th day following Executive’s date of termination. On the first
payroll date after the 60th day following Executive’s date of termination, and provided that Executive has
delivered an effective Separation Agreement, the Company will make the first payment to Executive under
Section 6.2(a)(i) and, in a lump sum, an amount equal to the aggregate amount of payments that the Company
would have paid Executive through such date had the payments commenced on Executive’s date of termination
through such 60th day, with the balance of the payments paid thereafter on the schedule described above, subject
to any delay in payment required by Section 6.6.
(d) For purposes of this Agreement, “Accrued Obligations” are (i) Executive’s accrued
but unpaid salary through the date of termination and, if required by applicable law and the Company’s applicable
policy as of the time of termination, any accrued but unused vacation through the date of termination (both of
which, for purpose of clarity, shall be paid in cash), (ii) any unreimbursed business expenses incurred by
Executive payable in accordance with the Company’s standard expense reimbursement policies, and (iii) benefits
owed to Executive under any qualified retirement plan or health and welfare benefit plan in which Executive was
a participant in accordance with applicable law and the provisions of such plan.
6
(e) For purposes of this Agreement, “Good Reason” means any of the following
actions taken by the Company without Executive’s express prior written consent: (i) a material reduction by the
Company of Executive’s Base Salary (other than in a broad based reduction similarly affecting all other members
of the Company’s executive management); (ii) the relocation of Executive’s principal place of employment,
without Executive’s consent, to a place that increases Executive’s one-way commute by more than fifty (50) miles
as compared to Executive’s then-current principal place of employment immediately prior to such relocation; or
(iii) a material reduction in Executive’s duties, authority, or responsibilities for the Company relative to
Executive’s duties, authority, or responsibilities in effect immediately prior to such reduction; provided, however,
that, any such termination by Executive shall only be deemed for Good Reason pursuant to this definition if: (1)
Executive gives the Company written notice of Executive’s intent to terminate for Good Reason within thirty (30)
days following Executive’s learning of the occurrence of the condition(s) that Executive believes constitute(s)
Good Reason, which notice shall describe such condition(s); (2) the Company fails to remedy such condition(s)
within thirty (30) days following receipt of the written notice (the “Cure Period”); and (3) Executive voluntarily
terminates Executive’s employment within thirty (30) days following the end of the Cure Period.
(f) For purposes of this Agreement, “Cause” means (i) a material breach of any
covenant or condition under this Agreement or any other agreement between the parties; (ii) any act constituting
dishonesty, fraud, immoral or disreputable conduct which is reasonably likely to cause harm (including
reputational harm) to the Company; (iii) any conduct which constitutes a felony under applicable law; (iv)
material violation of any Company policy (including but not limited to Company policies preventing harassment),
after the expiration of thirty (30) days without cure after written notice of such violation to the extent such
violation is curable; (v) refusal to follow or implement a clear, lawful and reasonable directive of Company after
the expiration of thirty (30) days without cure after written notice of such failure to the extent such failure is
curable; (vi) gross negligence or incompetence in the performance of Executive’s duties after the expiration of
thirty (30) days without cure after written notice of such failure; or (vii) breach of fiduciary duty.
(g) The benefits provided to Executive pursuant to this Section 6.2 are in lieu of, and
not in addition to, any benefits to which Executive may otherwise be entitled under any Company severance plan,
policy, or program.
(h) Any damages caused by the termination of Executive’s employment without Cause
or for Good Reason would be difficult to ascertain; therefore, the Non-CIC Severance Benefits for which
Executive is eligible pursuant to Section 6.2(a) above in exchange for the Separation Agreement is agreed to by
the parties as liquidated damages, to serve as full compensation, and not a penalty.
(i) If the Company terminates Executive’s employment for Cause, or Executive resigns
from employment with the Company without Good Reason, regardless of whether or not such termination is in
connection with a Change in Control, then Executive shall be entitled to the Accrued Obligations, but Executive
will not receive the Non-CIC Severance Benefits, the CIC Severance Benefits, or any other severance
compensation or benefit.
7
6.3 Resignation by Executive for Good Reason or Termination by the Company without
Cause (in connection with a Change in Control).
(a) In the event that the Company terminates Executive’s employment without Cause
or Executive resigns for Good Reason within twelve (12) months following the effective date of a Change in
Control (“Change in Control Termination Date”), then Executive shall be entitled to the Accrued Obligations
and, subject to Executive’s compliance with Section 6.2(b) above, Executive shall be eligible to receive the
following severance benefits (collectively the “CIC Severance Benefits”), subject to the terms and conditions set
forth in Section 6.3(b):
(i) An amount equal to twelve (12) months of Executive’s then current
Base Salary, less standard payroll deductions and withholdings, paid in installments on the Company’s
regular payroll dates; and
(ii) Provided Executive or Executive’s covered dependents, as the case
may be, timely elects continued coverage under COBRA under the Company’s group health plans
following such termination, the portion of the COBRA premiums which is equal to the cost of the coverage
that the Company was paying as of the date of termination, to continue Executive’s (and Executive’s
covered dependents, as applicable) health insurance coverage in effect on the termination date until the
earliest of: (1) twelve (12) months following the termination date; (2) the date when Executive becomes
eligible for substantially equivalent health insurance coverage in connection with new employment or self-
employment; or (3) the date Executive ceases to be eligible for COBRA continuation coverage for any
reason, including plan termination (such period from the termination date through the earlier of (1)-(3), (the
“CIC COBRA Payment Period”). Notwithstanding the foregoing, if at any time the Company determines
that its payment of COBRA premiums on Executive’s behalf would result in a violation of applicable law
(including, but not limited to, the 2010 Patient Protection and Affordable Care Act, as amended by the 2010
Health Care and Education Reconciliation Act), then in lieu of paying COBRA premiums pursuant to this
Section, the Company shall pay Executive on the last day of each remaining month of the CIC COBRA
Payment Period, a fully taxable cash payment equal to the COBRA premium for such month, subject to
applicable tax withholding, for the remainder of the CIC COBRA Payment Period. Nothing in this
Agreement shall deprive Executive of Executive’s rights under COBRA or ERISA for benefits under plans
and policies arising under Executive’s employment by the Company;
(iii) A lump sum cash payment in an amount equal to the full Annual
Bonus calculated at the Target Percentage for the year in which the termination occurs, subject to standard
payroll deductions and withholdings; and
(iv) Effective as of Executive’s Change in Control Termination Date (and
notwithstanding anything to the contrary in the applicable equity incentive plan(s) and the applicable award
agreement(s) governing the terms of such equity awards), the vesting and exercisability of all outstanding
equity awards held by Executive immediately prior to the Change in Control Termination Date shall be
accelerated in full, and otherwise shall be administered in accordance with the applicable equity incentive
plan(s) and the applicable award agreement(s) governing the terms of such equity awards.
8
(b) The Company will not make any payments to Executive with respect to any of the
benefits pursuant to Section 6.3(a) prior to the 60th day following Executive’s date of termination. On the first
payroll date after the 60th day following Executive’s date of termination, and provided that Executive has
delivered an effective Separation Agreement, the Company will (i) make the first payment to Executive under
Section 6.2(a)(i) and, in a lump sum, an amount equal to the aggregate amount of payments that the Company
would have paid Executive through such date had the payments commenced on Executive’s date of termination
through such 60th day, with the balance of the payments paid thereafter on the schedule described above; and (ii)
make the lump sum payment specified in Section 6.3(a)(iii) that has not yet been made due to this Section 6.3(b),
in the cases of (i) and (ii) subject to any delay in payment required by Section 6.6.
(c) The benefits provided to Executive pursuant to this Section 6.3 are in lieu of, and
not in addition to, any benefits to which Executive may otherwise be entitled under any Company severance plan,
policy, or program. For avoidance of doubt, Executive shall not be eligible for both CIC Severance and Non-CIC
Severance.
(d) Any damages caused by the termination of Executive’s employment without Cause
or for Good Reason in connection with a Change in Control would be difficult to ascertain; therefore, the CIC
Severance Benefits for which Executive is eligible pursuant to Section 6.3(a) above in exchange for the
Separation Agreement is agreed to by the parties as liquidated damages, to serve as full compensation, and not a
penalty.
6.4 Cooperation With the Company After Termination of Employment. Following
termination of Executive’s employment for any reason, Executive shall reasonably cooperate with the Company in
all matters relating to the winding up of Executive’s pending work including, but not limited to, any litigation in
which the Company is involved, and the orderly transfer of any such pending work to such other executives as
may be designated by the Company; provided, that the Company agrees that the Company (a) shall make
reasonable efforts to minimize disruption of Executive’s other activities, and (b) shall reimburse Executive for all
reasonable expenses incurred in connection with such cooperation.
6.5 Effect of Termination. Executive agrees that should Executive’s employment be
terminated for any reason, Executive shall be deemed to have resigned from any and all positions with the
Company, including, but not limited to, a position on the Board and all positions with any and all subsidiaries and
Affiliates of the Company.
6.6 Application of Section 409A.
(a) It is intended that all of the compensation payable under this Agreement, to the
greatest extent possible, either complies with the requirements of Section 409A of the Code and the regulations
and other guidance thereunder and any state law of similar effect (collectively, “Section 409A”) or satisfies one or
more of the exemptions from the application of Section 409A, and this Agreement will be construed in a manner
consistent with such intention, incorporating by reference all required definitions and payment terms.
termination of employment constitutes a Separation from Service. For purposes of
(b) No severance payments will be made under this Agreement unless Executive’s
9
Section 409A (including, without limitation, for purposes of Treasury Regulations Section 1.409A-2(b)(2)(iii)),
Executive’s right to receive any installment payments under this Agreement (whether severance payments or
otherwise) shall be treated as a right to receive a series of separate payments and, accordingly, each installment
payment hereunder shall at all times be considered a separate and distinct payment.
(c) To the extent that any severance payments are deferred compensation under Section
409A, and are not otherwise exempt from the application of Section 409A, then, to the extent required to comply
with Section 409A, if the period during which Executive may consider and sign the Separation Agreement spans
two calendar years, the severance payments will not begin until the second calendar year. If the Company
determines that the severance benefits provided under this Agreement constitutes “deferred compensation” under
Section 409A and if Executive is a “specified employee” of the Company, as such term is defined in Section
409A(a)(2)(B)(i) of the Code at the time of Executive’s Separation from Service, then, solely to the extent
necessary to avoid the incurrence of the adverse personal tax consequences under Section 409A, the timing of the
severance will be delayed as follows: on the earlier to occur of (a) the date that is six months and one day after
Executive’s Separation from Service, and (b) the date of Executive’s death, the Company will: (i) pay to
Executive a lump sum amount equal to the sum of the severance benefits that Executive would otherwise have
received if the commencement of the payment of the severance benefits had not been delayed pursuant to this
Section 6.6(c); and (ii) commence paying the balance of the severance benefits in accordance with the applicable
payment schedule set forth in Sections 6.2 and 6.3. No interest shall be due on any amounts deferred pursuant to
this Section 6.6(c).
(d) To the extent required to avoid accelerated taxation and/or tax penalties under
Section 409A, amounts reimbursable to Executive under this Agreement shall be paid to Executive on or before
the last day of the year following the year in which the expense was incurred and the amount of expenses eligible
for reimbursement (and in-kind benefits provided to Executive) during any one year may not effect amounts
reimbursable or provided in any subsequent year. The Company makes no representation that compensation paid
pursuant to the terms of this Agreement will be exempt from or comply with Section 409A and makes no
undertaking to preclude Section 409A from applying to any such payment.
6.7 Excise Tax Adjustment.
(a) If any payment or benefit Executive will or may receive from the Company or
otherwise (a “280G Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of
the Code, and (ii) but for this Section, be subject to the excise tax imposed by Section 4999 of the Code (the
“Excise Tax”), then any such 280G Payment provided pursuant to this Agreement (a “Payment”) shall be equal to
the Reduced Amount. The “Reduced Amount” shall be either (x) the largest portion of the Payment that would
result in no portion of the Payment (after reduction) being subject to the Excise Tax, or (y) the largest portion, up
to and including the total, of the Payment, whichever amount (i.e., the amount determined by clause (x) or by
clause (y)), after taking into account all applicable federal, state, and local employment taxes, income taxes, and
the Excise Tax (all computed at the highest applicable marginal rate), results in Executive’s receipt, on an after-tax
basis, of the greater economic benefit notwithstanding that all or some portion of the Payment may be subject to
the Excise Tax. If a reduction in a Payment is required pursuant to the preceding sentence and the Reduced
Amount is determined pursuant to clause (x) of
10
the preceding sentence, the reduction shall occur in the manner (the “Reduction Method”) that results in the
greatest economic benefit for Executive. If more than one method of reduction will result in the same economic
benefit, the items so reduced will be reduced pro rata (the “Pro Rata Reduction Method”).
(b) Notwithstanding any provision of this Section 6.7 to the contrary, if the Reduction
Method or the Pro Rata Reduction Method would result in any portion of the Payment being subject to taxes
pursuant to Section 409A that would not otherwise be subject to taxes pursuant to Section 409A, then the
Reduction Method and/or the Pro Rata Reduction Method, as the case may be, shall be modified so as to avoid the
imposition of taxes pursuant to Section 409A as follows: (A) as a first priority, the modification shall preserve to
the greatest extent possible, the greatest economic benefit for Executive as determined on an after-tax basis; (B) as
a second priority, Payments that are contingent on future events (e.g., being terminated without Cause), shall be
reduced (or eliminated) before Payments that are not contingent on future events; and (C) as a third priority,
Payments that are “deferred compensation” within the meaning of Section 409A shall be reduced (or eliminated)
before Payments that are not deferred compensation within the meaning of Section 409A.
(c) Unless Executive and the Company agree on an alternative accounting firm or law
firm, the accounting firm engaged by the Company for general tax compliance purposes as of the day prior to the
effective date of the Change in Control transaction shall perform the foregoing calculations. If the accounting
firm so engaged by the Company is serving as accountant or auditor for the individual, entity, or group effecting
the Change in Control transaction, the Company shall appoint a nationally recognized accounting or law firm to
make the determinations required by this Section 6.7. The Company shall bear all expenses with respect to the
determinations by such accounting or law firm required to be made hereunder. The Company shall use
commercially reasonable efforts to cause the accounting or law firm engaged to make the determinations
hereunder to provide its calculations, together with detailed supporting documentation, to Executive and the
Company within fifteen (15) calendar days after the date on which Executive’s right to a 280G Payment becomes
reasonably likely to occur (if requested at that time by Executive or the Company) or such other time as requested
by Executive or the Company.
(d) If Executive receives a Payment for which the Reduced Amount was determined
pursuant to clause (x) of Section 6.7(a) and the Internal Revenue Service determines thereafter that some portion
of the Payment is subject to the Excise Tax, Executive agrees to promptly return to the Company a sufficient
amount of the Payment (after reduction pursuant to clause (x) of Section 6.7(a)) so that no portion of the
remaining Payment is subject to the Excise Tax. For the avoidance of doubt, if the Reduced Amount was
determined pursuant to clause (y) of Section 6.7(a), Executive shall have no obligation to return any portion of the
Payment pursuant to the preceding sentence.
7. GENERAL PROVISIONS.
7.1 Notices. Any notices required hereunder shall be in writing and shall be deemed effectively
given: (a) upon personal delivery to the party to be notified, (b) when sent by electronic mail or confirmed
facsimile if sent during normal business hours of the recipient, and if not, then on the next business day, (c) five
(5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one
(1) day after deposit with a nationally
11
recognized overnight courier, specifying next day delivery, with written verification of receipt. All
communications shall be sent to the Company at its primary office location and to Executive at Executive’s
address as listed on the Company payroll or (if notice is given prior to Executive’s termination of employment) to
Executive’s Company-issued email address, or at such other address as the Company or Executive may designate
by ten (10) days’ advance written notice to the other.
7.2 Severability. Whenever possible, each provision of this Agreement will be interpreted in
such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be
invalid, illegal, or unenforceable in any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality, or unenforceability will not affect any other provision or any other jurisdiction, but this
Agreement will be reformed, construed, and enforced in such jurisdiction as if such invalid, illegal, or
unenforceable provisions had never been contained herein.
7.3 Waiver. If either party should waive any breach of any provisions of this Agreement,
Executive or the Company shall not thereby be deemed to have waived any preceding or succeeding breach of the
same or any other provision of this Agreement.
7.4 Complete Agreement. This Agreement (including Exhibits A and B), and any other
separate agreement relating to equity awards constitute the entire agreement between Executive and the Company
with regard to the subject matter hereof and supersede any prior oral discussions or written communications and
agreements, including the Prior Agreements. This Agreement is entered into without reliance on any promise or
representation other than those expressly contained herein, and it cannot be modified or amended except in
writing signed by Executive and an authorized officer of the Company.
7.5 Counterparts. This Agreement may be executed by electronic transmission and in
separate counterparts, any one of which need not contain signatures of more than one party, but all of which taken
together will constitute one and the same Agreement.
7.6 Headings. The headings of the sections hereof are inserted for convenience only and shall
not be deemed to constitute a part hereof nor to affect the meaning thereof.
7.7 Successors and Assigns. The Company shall assign this Agreement and its rights and
obligations hereunder in whole, but not in part, to any company or other entity with or into which the Company
may hereafter merge or consolidate or to which the Company may transfer all or substantially all of its assets, if in
any such case said company or other entity shall by operation of law or expressly in writing assume all obligations
of the Company hereunder as fully as if it had been originally made a party hereto, but may not otherwise assign
this Agreement or its rights and obligations hereunder. Executive may not assign or transfer this Agreement or
any rights or obligations hereunder, other than to Executive’s estate upon Executive’s death.
7.8 Choice of Law. All questions concerning the construction, validity, and interpretation of
this Agreement will be governed by the laws of the Commonwealth of Massachusetts.
12
the
then applicable JAMS rules (at
7.9 Resolution of Disputes. To ensure the timely and economical resolution of disputes that
may arise in connection with Executive’s employment with the Company, Executive and the Company agree that
any and all disputes, claims, or causes of action arising from or relating to the enforcement, breach, performance,
negotiation, execution, or interpretation of this Agreement, or Executive’s employment, or the termination of
Executive’s employment, including but not limited to all statutory claims, will be resolved pursuant to the Federal
Arbitration Act, 9 U.S.C. §1-16, and to the fullest extent permitted by law, by final, binding and confidential
arbitration by a single arbitrator conducted in Boston, Massachusetts by Judicial Arbitration and Mediation
Services Inc. (“JAMS”) under
the following web address:
https://www.jamsadr.com/rules-employment-arbitration/); provided, however, this arbitration provision shall not
apply to sexual harassment claims to the extent prohibited by applicable law. A hard copy of the rules will be
provided to Executive upon request. By agreeing to this arbitration procedure, both Executive and the
Company waive the right to resolve any such dispute through a trial by jury or judge or administrative
proceeding. In addition, all claims, disputes, or causes of action under this provision, whether by Executive or
the Company, must be brought in an individual capacity, and shall not be brought as a plaintiff (or claimant) or
class member in any purported class or representative proceeding, nor joined or consolidated with the claims of
any other person or entity. The arbitrator may not consolidate the claims of more than one person or entity, and
may not preside over any form of representative or class proceeding. To the extent that the preceding sentences
regarding class claims or proceedings are found to violate applicable law or are otherwise found unenforceable,
any claim(s) alleged or brought on behalf of a class shall proceed in a court of law rather than by arbitration. The
Company acknowledges that Executive will have the right to be represented by legal counsel at any arbitration
proceeding. Questions of whether a claim is subject to arbitration under this Agreement shall be decided by the
arbitrator. Likewise, procedural questions which grow out of the dispute and bear on the final disposition are also
matters for the arbitrator. The arbitrator shall: (a) have the authority to compel adequate discovery for the
resolution of the dispute and to award such relief as would otherwise be permitted by law; (b) issue a written
arbitration decision, to include the arbitrator’s essential findings and conclusions and a statement of the
award; (c) be authorized to award any or all remedies that Executive or the Company would be entitled to seek in
a court of law; and (d) is authorized to award attorneys’ fees to the prevailing party. Subject to the foregoing
sentence, the Company shall bear all JAMS’ arbitration fees, and each party is responsible for its own attorneys’
fees. Nothing in this Agreement is intended to prevent either Executive or the Company from obtaining injunctive
relief in court to prevent irreparable harm pending the conclusion of any such arbitration. Any awards or orders in
such arbitrations may be entered and enforced as judgments in the federal and state courts of any competent
jurisdiction. To the extent applicable law prohibits mandatory arbitration of sexual harassment claims, in the
event Executive intends to bring multiple claims, including a sexual harassment claim, the sexual harassment
claim may be publicly filed with a court, while any other claims will remain subject to mandatory arbitration.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the parties have executed this Amended and Restated Employment Agreement on
the day and year first written above.
BICYCLE THERAPEUTICS INC.
By: /s/ Lee Kalowski
Name: Lee Kalowski
Title:
President & CFO
EXECUTIVE:
/s/ Nicholas Keen
Nicholas Keen
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Exhibit A
CHANGE IN CONTROL
“Change in Control” means and includes each of the following:
(a) a Sale; or
(b) a Takeover.
The Compensation Committee of the Board of BTL shall have full and final authority, which shall
be exercised in its sole discretion, to determine conclusively whether a Change in Control has
occurred pursuant to the above definition, the date of the occurrence of such Change in Control and
any incidental matters relating thereto; provided that any such Change in Control also qualifies as a
“change in control event” as defined in Section 409A of the United States Internal Revenue Code
of 1986, as amended and the regulations and other guidance thereunder and any state law of similar
effect, and any exercise of authority in conjunction with a determination of whether a Change in
Control is a “change in control event” is consistent with such regulation.
“Control” shall have the meaning given to that word by Section 719 of the UK Income Tax (Earnings and
Pensions) Act 2003 and “Controlled” shall be construed accordingly.
“Sale” means the sale of all or substantially all of the assets of BTL.
“Takeover” means circumstances in which any person (or a group of persons acting in concert) (the
“Acquiring Person”):
(a) obtains Control of BTL as the result of making a general offer to:-
i. acquire all of the issued ordinary share capital of BTL, which is made on a
condition that, if it is satisfied, the Acquiring Person will have Control of BTL; or
ii. acquire all of the shares in BTL; or
(b) obtains Control of BTL as a result of a compromise or arrangement sanctioned by a court
under Section 899 of the UK Companies Act 2006, or sanctioned under any other similar
law of another jurisdiction; or
(c) becomes bound or entitled under Sections 979 to 985 of the UK Companies Act 2006 (or
similar law of another jurisdiction) to acquire shares in BTL or
(d) obtains Control of BTL in any other way, including but not limited to by way of a merger.
EMPLOYEE CONFIDENTIAL INFORMATION, INVENTIONS, NON-SOLICITATION AND NON-
COMPETITION AGREEMENT
Exhibit B
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Exhibit 10.11
DATED 26 September 2019
BicycleTX Ltd
and
Nigel Crockett
___________________________________________________
SERVICE AGREEMENT
___________________________________________________
THIS AGREEMENT is made on 26 September 2019
BETWEEN:
(1) BICYCLETX LIMITED a company incorporated under the laws of England and Wales (Company Number 11036101) whose
registered office is at Building 900 Babraham Research Campus, Babraham, Cambridgeshire, CB22 3AT, United Kingdom (the
“Company”); and
(2) NIGEL CROCKETT of (the ‘‘Employee”).
IT IS AGREED as follows:
1. COMMENCEMENT OF EMPLOYMENT
1.1 This Agreement shall take effect 26 September 2019 (the “Effective Date”).
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1.2 Your employment shall commence on 26 September 2019 and shall continue unless and until either party gives notice to the
other in accordance with paragraph 11 below. No employment with a previous employer is deemed to be continuous with your
employment with the Company.
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1.3 You warrant that by entering into this Agreement or any other arrangements with the Company you will not be in breach of or
subject to any express or implied terms of any contract with, or other obligation to, any third party binding on you, including,
without limitation, any notice period or the provisions of any restrictive covenants or confidentiality obligations arising out of
any employment with any other employer or former employer.
1.4 You warrant that you have the right to work in the United Kingdom and you agree to provide to the Company copies of all
relevant documents in this respect at the request of the Company. If at any time during the course of this Agreement you cease
to have the right to work in the United Kingdom the Company may immediately terminate your employment without payment
of compensation.
2. JOB TITLE
2.1 You shall serve as Chief Business Officer (“CBO”) reporting to the CEO. The nature of the Company’s business may result in
changes occurring to the content of your role from time to time. You may also be required to carry out such additional or
alternative tasks as may from time to time be reasonably required of you consistent with your executive level and job title,
provided that these do not fundamentally change or undermine your position.
2.2 You shall faithfully and diligently perform such duties as you are required to undertake from time to time and exclusively devote
the whole of your working time, skills, ability and attention to the business of the Company and use your best endeavours to
promote the interests and reputation of the Company and (where applicable) any Group Company.
2.3 The Company may require you to carry out work for, or become a director or officer of, any Group Company at any time.
3. PLACE OF WORK
The Company’s offices at Building 900, Babraham Research Campus, Babraham, Cambridge,
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UK or such other location as the Company may reasonably determine. The CBO position may require extensive international
travel on business.
4. REMUNERATION
4.1 Your salary will be USD370,000 per annum paid monthly in arrears on or about the last working day of each month (less
statutory and voluntary deductions) (“Salary”). Salary will be converted to GBP and paid in GBP based on the USD/GBP Bank
of England daily spot exchange rate applicable on the date of this Agreement, with the exchange rate being revised according to
the prevailing Bank of England daily spot exchange rate applicable on 1 January of each year. Your Salary will be reviewed
annually in accordance with the Company’s practices from time to time (which is expected to be by the end of the first quarter
of each year). You will be notified in writing of any changes to your Salary or benefits.
4.2 You agree that the Company may deduct from the Salary or any other sum due to you (including any pay in lieu of notice) any
amounts due to the Company including, without limitation, any overpayment of salary, loan or advance.
4.3 For the purposes of this Agreement your earned salary shall mean the proportion of your Salary earned by and due to you in
each calendar year of employment with the Company (“Earned Salary”).
4.4 Annual Performance Bonuses:
You will be eligible to participate in the Company's discretionary annual performance related bonus scheme to a maximum
value of 35% of your Earned Salary in relation to your performance against agreed annual corporate and personal performance
objectives as set out below (the “Annual Performance Bonus”). That is, if the compensation committee (the “Compensation
Committee”) of the board of directors (the “Board”) of the Company’s parent company, Bicycle Therapeutics plc (“BTL”)
determines that you have completed all such corporate and personal objectives to its satisfaction in a given year, your bonus
would be 35% of your Earned Salary in that year, excluding any other bonuses in this offer. Such bonus may be payable in cash
or, in whole or in part, in share options in BTL, as agreed by you and the Compensation Committee following notification by
you of your preference at least 90 days prior to the normal payment date (and in the case of share options with the appropriate
HMRC valuation process (if required by the Compensation Committee) and Board approval so as to be compliant with BTL’s
share option plan rules), with due consideration for the operational requirements of the Company at that time in your role as
CBO.
Any Annual Performance Bonus paid will not be pensionable and are subject to statutory applicable tax and National Insurance
deductions. Performance will be assessed by the Compensation Committee at the end of each calendar year, against annual
corporate and personal performance objectives agreed between you and the Board at the start of each calendar year, with any
such bonus being payable in the first quarter of the following year. Qualification for your Annual Performance Bonus will
require that you are employed by the Company (and have not served notice of termination of your employment to the Company)
on 31 December of the year to which your bonus entitlement applies.
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4.5 Equity Incentives
BTL has established the Bicycle Therapeutics 2019 Share Option Plan (the “Option Plan”).
On or as soon as practicable following the Effective Date, it is intended that you will be granted an option under the Option Plan
to acquire 107,417 ordinary shares in the capital of BTL (“Shares”) (representing approximately 0.6% of the Company’s issued
share capital as at the Effective Date).
In addition, and conditional on completion of a transaction on terms set out below, you will be granted a second option under the
Option Plan, such option being one of:
(a) an option to acquire 44,757 Shares (representing approximately 0.25% of the Company’s issued share capital as at the
Effective Date) granted as soon as practicable following the completion of a transaction approved by the Board on terms which
include an upfront payment of at least USD30,000,000 and per product downstream milestone payments of at least
USD300,000,000; or
(b) an option to acquire 22,378 Shares (representing approximately 0.125% of the Company’s issued share capital as at the
Effective Date) granted as soon as practicable following the completion of a transaction approved by the Board on terms which
include an upfront payment of USD24,000,000 and per product downstream milestone payments of USD240,000,000; or
(c) an option to acquire such number of Shares (falling between 0.125% and 0.25% of the Company’s issued share capital
as at the Effective Date as the Board shall determine in its absolute discretion) granted as soon as practicable following
completion of a transaction approved by the Board on terms which include an upfront payment greater than USD24,000,000 but
less than USD 30,000,000, and per product downstream milestone payments greater than USD240,000,000 but less than USD
300,000,000.
Any options granted under this paragraph 4.5 shall be subject to (i) the approval of the Board and/or the Compensation
Committee; (ii) the rules of the Option Plan (as amended from time to time); and (iii) the terms of the option grant
documentation which will be provided to you following such grant.
5 BENEFITS
5.1 The Company currently operates a personal pension plan provided by Scottish Widows Group. The Company will pay a sum
equivalent to 12 % of your basic annual earned salary into a personal pension plan selected by the Company. You may make
additional contributions if you wish, but this is not mandatory. In the event that you elect, of your own volition, to opt-out of
the Company’s pension scheme then the Company will pay you in equal monthly instalments in arrears (less statutory
deductions) a sum equivalent to the contribution that it would have made into your pension scheme (the “Cash Equivalent
Payment”) less the Employer’s National Insurance Contribution cost incurred by the Company as a result of making the Cash
Equivalent Payment.
5.2 The Company currently operates a private healthcare scheme and subject to acceptance by the insurer on reasonable terms, you
will be entitled to join.
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5.3 The Company operates a death in service scheme which you automatically join upon commencement of employment.
5.4 Further details regarding benefits will be provided upon commencement of your employment. The Company reserves the right
to replace or supplement any or all of the scheme(s) referred to in this paragraph 5, or to amend them at any time without
compensation, provided that equivalent scheme(s) providing a similar level of benefit are put in place.
6 EXPENSES
The Company shall reimburse all reasonable out of pocket expenses properly incurred by you in the performance of the duties
under this Agreement including travelling, subsistence and entertainment expenses provided you follow the Company’s
guidelines/allowances in force at the relevant time and provided that you shall, where reasonably practicable, provide the
Company with vouchers, invoices or such other evidence of such expenses as the Company may reasonably require.
7 HOURS OF WORK
7.1 Your normal working hours are Monday to Friday from 9.00 am to 5.30 pm on each working day with one hour for lunch. You
will be required to work such other hours as shall be reasonably necessary for you to perform your duties for which no further
remuneration is payable.
7.2 By entering into this Agreement you confirm, that in your capacity as Chief Business Officer you may choose or determine the
duration of your working time and the working time limits set out in part II of the Working Time Regulations 1998 do not apply
to you.
8 HOLIDAYS
8.1 In addition to the usual public holidays you will be entitled to 25 working days paid holiday in each calendar year. The holiday
will accrue on a pro rata basis throughout each calendar year.
8.2 Holidays may only be taken at such time or times as are approved beforehand by the CEO, such approval not to be unreasonably
withheld or delayed. You must give reasonable notice of proposed holiday dates by e-mailing the CEO or delegated director in
advance, for approval.
8.3 The holiday year runs from January to December. With the agreement of the CEO, you may carry forward up to 5 days of
untaken holiday into the next holiday year. Any carried over holiday must be taken by the end of March of the following
calendar year or will be forfeited and no payment will be made in respect of any days so forfeited. You will not generally be
permitted to take more than 10 days holiday at any one time.
8.4 Upon termination of your employment you will receive pay in lieu of accrued but untaken holiday. The Company may deduct
an appropriate sum in respect of days taken in excess of your pro rata entitlement from your final remuneration on the basis that
one day’s holiday will be calculated as 1/260ths of your basic annual salary.
8.5 In the event that notice of termination of this Agreement is served by either party, the Company may require you to take any
outstanding holiday during this notice period.
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9 SICKNESS AND OTHER ABSENCE
9.1 If you are unable to attend at work by reason of sickness or injury or any unauthorised reason you must inform the Company as
soon as possible on the first day of absence (and in any event not later than 11.00 am on the first day of absence) and, in the case
of absence of uncertain duration, you must keep the Company regularly informed of your continued absence and your likely
date of return. You are expected to observe this rule very strictly since failure to do so will entitle the Company to stop payment
in respect of each day you fail to notify the Company.
9.2 If your absence, due to sickness or injury, is for less than seven (7) days, on your return to work you are required to immediately
complete a self-certification form available from the Company. If your absence continues for more than seven (7) consecutive
days (whether or not working days) you must provide the Company with a doctor's certificate from the seventh consecutive day
of sickness or injury. This doctor’s certificate must be provided to the Company promptly following the seventh consecutive day
of absence. If illness continues after the expiry of the first certificate, further certificates must be provided promptly to cover the
whole period of absence.
9.3 Subject to your compliance with the Company’s sickness absence procedures (as amended from time to time), the Company
may in its sole and absolute discretion pay full salary and contractual benefits during any period of absence due to sickness or
injury for up to an aggregate of 3 months in any fifty-two (52) week period (whether such absence is continuous or intermittent
in any calendar year). Such payment shall be inclusive of any statutory sick pay due in accordance with applicable legislation in
force at the time of absence. The Company may, in its sole and absolute discretion, extend the period of allowance in an
individual case if the circumstances so justify. Thereafter, the Company shall pay statutory sick pay or equivalent benefit to
which you may be entitled subject to your compliance with the appropriate rules.
9.4 Whether absent from work or not, you may be, but only on reasonable grounds, required to undergo a medical examination by a
Company doctor and your consent will be sought for a report to be sent to the Company.
9.5 The payment of sick pay in accordance with this paragraph 9 is without prejudice to the Company’s right to terminate this
Agreement prior to the expiry of your right to payments.
9.6 In the event you are incapable of performing your duties by reason of injuries sustained wholly or partly as a result of a third
party's actions all payments made to you by the Company as salary or sick pay shall to the extent that compensation is
recoverable from that third party constitute loans to you and shall be due and owing when and to the extent that you recover
compensation for loss of earnings from the third party.
10 GARDEN LEAVE
10.1 After notice of termination has been given by you or the Company, the Company may at its discretion require you, for all or part
of your notice period, to comply with any or all of the following instructions:
(a) not to carry out any further work for the Company or for any Group Company;
(b) to remain away from the Company’s business premises and those of any Group
5
Company (unless given written permission to do otherwise);
(c) not to contact any of the Company’s clients, suppliers or employees or those of any Group Company without the
Company’s prior written permission;
(d) to carry out only part of your duties, or to carry out alternative duties or special projects for the Company within your
skill set;
(e) to co-operate in the handover of your duties and responsibilities;
(f) to resign from any offices (including as a director) you hold within the Company or any Group Company or by virtue
of your employment with us;
(g) to answer, in an honest and helpful way, such questions as the Company may reasonably ask of you;
(h) to keep the Company informed of your whereabouts and contact details and to remain reasonably contactable and
available for work.
10.2 During any such period as described in paragraph 10.1 (“Garden Leave”) the Company may appoint another person to carry
out some or all of your duties. You will continue to owe all other duties and obligations (whether express or implied including
fidelity and good faith) during Garden Leave and you shall continue to receive full pay and benefits (except that you will not
accrue any further entitlement to any cash or equity incentive awards or bonus payments in respect of the Garden Leave period).
10.3 By placing you on Garden Leave, the Company will not be in breach of this Agreement or any implied duty of any kind
whatsoever nor will you have any claim against the Company in respect of any such action.
10.4 During any period of Garden Leave you will remain readily contactable and available for work save when on paid holiday taken
in accordance with paragraph 8. In the event that you are not available for work having been requested by the Company to do
so, you will, notwithstanding any other provision of this Agreement, forfeit any right to salary and contractual benefits.
10.5 During any period of Garden Leave the Company may require you to deliver up any Confidential Information or property of the
Company or any Group Company and upon instruction, delete any emails, spreadsheets or other Confidential Information and
you will confirm your compliance with this paragraph 10.5 in writing if requested to do so by the Company.
10.6 During any period of Garden Leave the Company may require you to take any outstanding holiday entitlement.
11 NOTICE
11.1 Without prejudice to the Company’s right to summarily terminate your employment in accordance with paragraph 11.3 below
and your right to summarily terminate your employment for Good Reason in accordance with paragraph 11.4 below, either you
or the Company may terminate your employment by giving to the other not less than six months’ notice in writing.
11.2 The Company reserves the right in its sole and absolute discretion to give written notice to
6
terminate your employment forthwith and to make a payment to you in lieu of salary and the benefits set out in paragraph 5 of
this Agreement for all or any unexpired part of the notice period. For the avoidance of doubt, any payment in lieu made
pursuant to this paragraph 11.2 will not include any element in relation to any payment in respect of (i) any Annual Performance
Bonus or (ii) any holiday entitlement that would have otherwise accrued during the period for which the payment in lieu is
made. For the further avoidance of doubt, if the Company elects to make a Payment in Lieu after notice of termination has been
given by you, this will not constitute a termination by the Company without Cause for the purposes of paragraphs 11.7 and 11.8
below.
11.3 The Company may summarily terminate your employment hereunder (without notice) for Cause. For purposes of this
Agreement, “Cause” shall mean where you:
(a) commit gross misconduct which includes, but is not limited to, dishonesty, fraud, theft, being under the influence of
alcohol or drugs at work, causing actual or threatening physical harm and causing damage to Company property;
(b) commit a material breach or non-observance of your duties or any of the provisions of this Agreement, or materially
fail to observe the lawful directions of the Company, or breach any material Company policy or code of conduct,
including but not limited to the Company’s policy from time to time on matters relating to harassment;
(c) are convicted of a criminal offence (other than an offence under the road traffic legislation in the United Kingdom or
elsewhere for which a non-custodial sentence is imposed);
(d) act in a manner which in the reasonable opinion of the Company, brings the Company into disrepute or otherwise
prejudices or is in the reasonable opinion of the Company considered likely to prejudice the reputation of the
Company;
(e) in the reasonable opinion of the Company, are guilty of any serious negligence in connection with or affecting the
business or affairs of the Company;
(f) are unfit to carry out the duties hereunder because of sickness, injury or otherwise for an aggregate period of 26 weeks
in any fifty-two (52) week period even if, as a result of such termination, you would or might forfeit any entitlement to
benefit from sick pay under paragraph 9.3 above.
Any delay or forbearance by the Company in exercising any right of termination in accordance with this paragraph 11.3 will not
constitute a waiver of such right.
11.4 You may summarily terminate your employment hereunder at any time (without notice) for Good Reason after complying with
the Good Reason Process. For purposes of this Agreement, “Good Reason” shall mean that you have complied with the “Good
Reason Process” (hereinafter defined) following the occurrence of any of the following events: (i) a material diminution in your
responsibilities, authority or duties; (ii) a material diminution in your Salary; (iii) a material change in the geographic location at
which you provides services to the Company; or (iv) the material breach of this Agreement by the Company. “Good Reason
Process” shall mean that (i) you reasonably determine in good faith that a “Good Reason” condition has occurred; (ii) you
notify the Company in writing of the first occurrence of the Good
7
Reason condition within 60 days of the first occurrence of such condition; (iii) you cooperate in good faith with the Company’s
efforts, for a period not less than 30 days following such notice (the “Cure Period”), to remedy the condition; (iv)
notwithstanding such efforts, the Good Reason condition continues to exist; and (v) you terminate your employment (without
notice) within 60 days after the end of the Cure Period. If the Company cures the Good Reason condition during the Cure
Period, Good Reason shall be deemed not to have occurred.
11.5 Your employment hereunder shall also terminate immediately upon your death.
11.6 If your employment with the Company is terminated for any reason, the Company shall pay or provide to you (or to your
authorised representative or estate) (i) any Salary earned through the Termination Date (as defined below); (ii) unpaid expense
reimbursements (subject to, and in accordance with, paragraph 6 of this Agreement); and (iii) any vested benefits you may have
under any employee benefit plan of the Company through the Termination Date, which vested benefits shall be paid and/or
provided in accordance with the terms of such employee benefit plans (collectively, the “Accrued Benefits”).
Severance Pay and Benefits Upon Termination by the Company without Cause or by the Executive for Good Reason outside the
Change in Control Period.
11.7 If your employment is terminated on account of your death or by the Company without Cause (being for any reason not covered
by paragraph 11.3), or you terminate your employment for Good Reason (as provided in paragraph 11.4), in either case outside
of the Change in Control Period, then the Company shall pay you the Accrued Benefits. In addition, subject to (i) your (or your
authorised representative or estate signing, if the termination is due to your death) signing a settlement agreement and a
separation agreement and release (together the “Settlement Agreements”) in a form and manner satisfactory to the Company,
which shall include, without limitation, a general release of claims against the Company and all related persons and entities, a
reaffirmation of all of your continuing obligations to the Company, including those set forth in paragraphs 13 – 15, and (in the
case of the separation agreement and release) and a seven (7) business day revocation period; and (ii) the separation agreement
and release becoming irrevocable, all within 60 days after the Termination Date (or such shorter period as set forth in the
Settlement Agreements), the Company shall: (A) pay you (or your authorised representative or estate if the termination is due to
your death) an amount equal to nine (9) months of your salary as of the Termination Date (which payment shall not be reduced
by either the value of any salary paid to you during your notice period or by any payment in lieu of notice made pursuant to
paragraph 11.2); and (B) pay you (or your authorised representative or estate if the termination is due to your death) an amount
equal to the cost to the Company of providing you with the contractual benefits under paragraph 5 for nine (9) months or, at the
Company’s option, continue to provide you with such benefits for nine (9) months.
Severance Pay and Benefits Upon Termination by the Company without Cause or by the Executive for Good Reason Within the
Change in Control Period
11.8 The provisions of this paragraph 11.8 shall apply in lieu of, and expressly supersede, the provisions of paragraph 11.7 regarding
severance pay and benefits upon a termination by the Company without Cause or by you for Good Reason if such termination of
employment occurs within 12 months after the occurrence of the first event constituting a Change in Control (such period, the
“Change in Control Period”). These provisions shall terminate and be of no further
8
force or effect after the Change in Control Period.
(a) Change in Control Period. If during the Change in Control Period your employment is terminated on account of your
death or by the Company without Cause (being for any reason not covered by paragraph 11.3) or you terminate your
employment for Good Reason (as provided in paragraph 11.4), then, subject to (i) your signing (or your authorised
representative or estate signing, if the termination is due to your death) a settlement agreement and a separation
agreement and release (together the Settlement Agreements) in a form and manner satisfactory to the Company, which
shall include, without limitation, a general release of claims against the Company and all related persons and entities, a
reaffirmation of all of your continuing obligations to the Company, including those set forth in paragraphs 13 – 15, and
(in the case of the separation agreement and release) and a seven (7) business day revocation period; and (ii) the
separation agreement and release becoming irrevocable, all within 60 days after the Termination Date (or such shorter
period as set forth in the Settlement Agreements):
(i) the Company shall pay you (or your authorised representative or estate if the termination is due to your death)
an amount equal to the sum of (A) your annual salary as of the Termination Date (or your annual salary in
effect immediately prior to the Change in Control, if higher) plus (B) your target annual performance bonus
amount under the Annual Bonus Plan for the then-current year (the “Change in Control Payment”), which
payment shall not be reduced by either the value of any salary paid to you during your notice period or by the
value of any payment made to you in lieu of notice pursuant to paragraph 11.2;
(ii) the Company shall: pay you (or your authorised representative or estate if the termination is due to your death)
an amount equal to the cost to the Company of providing you with the contractual benefits under paragraph 5
for twelve (12) months or, at the Company’s option, continue to provide you with such benefits for twelve
(12) months; and
(iii) notwithstanding anything to the contrary in any applicable option agreement or other stock-based award
agreement, all Time-Based Equity Awards shall immediately accelerate and become fully exercisable (for a
period determined in accordance with the rules of the applicable equity plan) or nonforfeitable as of the later
of (A) the Termination Date or (B) the Accelerated Vesting Date; provided that any termination or forfeiture
of the unvested portion of such Time-Based Equity Awards that would otherwise occur on the Termination
Date in the absence of this Agreement will be delayed until the Effective Date of the Settlement Agreements
and will only occur if the vesting pursuant to this subsection does not occur due to the absence of the
Settlement Agreements becoming fully effective within the time period set forth therein. Notwithstanding the
foregoing, no additional vesting of the Time-Based Equity Awards shall occur during the period between your
Termination Date and the Accelerated Vesting Date.
11.9 Definitions. For purposes of this paragraph 11, the following terms shall have the following meanings:
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“Accelerated Vesting Date” means the effective date of the Settlement Agreements signed by you (or your authorised
representatives or estate if the termination is due to your death).
“Termination Date” means the date on which your employment hereunder terminates.
“Time-Based Equity Awards” means all time-based stock options and other stock-based awards subject to time based vesting
held by you.
“Change in Control” has the meaning given to that term in the Schedule to this Agreement.
12 DISCIPLINARY, DISMISSAL AND GRIEVANCE PROCEDURES
12.1 A copy of the Company’s disciplinary, dismissal and grievance procedures are set out in its employee handbook (the “Employee
Handbook”).
12.2 Any grievance concerning your employment should be taken up orally in the first instance with the CEO. If the grievance is not
resolved to your satisfaction, you should then refer it to the Chairman.
12.3 The Company reserves the right to suspend you on full pay and benefits at any time for a reasonable period to investigate any
potential disciplinary matter that it reasonably believes you may be or may have been involved in.
13 OUTSIDE EMPLOYMENT, CONFIDENTIAL INFORMATION, CONFLICTING INTERESTS AND RETURN OF
COMPANY PROPERTY
13.1 For the purposes of this paragraph 13, paragraph 10 above and paragraph 14 below the expression “Confidential Information”
shall include, but not be limited to, any and all knowledge, data or information (whether or not recorded in documentary form or
on computer disk or tape), which may be imparted in confidence or which is of a confidential nature or which you may
reasonably regard as being confidential or a trade secret by the Company, concerning the business, business performance or
prospective business, financial information or arrangements, plans or internal affairs of the Company, any Group Company or
any of their respective customers. By way of illustration but not limitation, “Confidential Information” includes (a) trade
secrets, inventions, mask works, ideas, processes, formulas, software in source or object code, data, records, reports,
interpretations, the contents of any databases, programs, other works of authorship, know-how, materials, improvements,
discoveries, developments, technical information, designs and techniques and any other proprietary technology and all IPRs (as
defined below) therein (collectively, “Inventions”); (b) information regarding research, development, new products, planned
products, planned surveys, marketing surveys, research reports, market share and pricing statistics, marketing and selling,
business plans, financial details, budgets and unpublished financial statements, licenses, prices and costs, fee levels, margins,
discounts, credit terms, pricing and billing policies, quoting procedures, commissions, commission charges, other price sensitive
information, methods of obtaining business and other business methods, forecasts, future plans and potential strategies, financial
projections and business strategies and targets, operational plans, financing and capital-raising plans, activities and agreements,
internal services and operational manuals, methods of conducting Company business, corporate and business accounts, suppliers
and supplier information, and purchasing; (c) information regarding clients or customers and potential clients or customers of
the Company, including customer lists, client
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lists, names, addresses (including email), telephone, facsimile or other contact numbers and contact names, representatives,
their needs or desires with respect to the types of products or services offered by the Company, proposals, bids, contracts and
their contents and parties, the type and quantity of products and services provided or sought to be provided to customers and
potential customers of the Company and other non-public information relating to customers and potential customers; (d)
information regarding any of the Company’s business partners and their services, including names, representatives, proposals,
bids, contracts and their contents and parties, the type and quantity of products and services received by the Company, and other
non-public information relating to business partners; (e) information regarding personnel, computer passwords, employee lists,
compensation and remuneration, and employee skills; and (f) any other non-public information which a competitor of the
Company could use to the competitive disadvantage of the Company.
13.2 You shall not, without the prior written consent of the Company, either solely or jointly, directly or indirectly, carry on or be
engaged, concerned or interested in any other trade or business, including, but not limited to, carrying on business with the
Company’s suppliers or dealers, save that nothing in this paragraph 13.2 shall prevent you from holding (with the prior written
consent of the Company, which shall not be unreasonably delayed or withheld) up to three percent (3%) of the issued equity
share capital of any company where those equity shares are listed on a recognised investment exchange (as defined in section
285 of the Financial Services and Markets Act 2000) or traded on the AIM market operated by the London Stock Exchange.
Failure to secure advance permission in accordance with this paragraph 13.2 may result in summary dismissal.
13.3 You will not (except with the prior written consent of the Board) except in the proper course of your duties during the
continuance of this Agreement (which for the avoidance of doubt shall include the use of laptops and remote working), or at any
time thereafter:
(a) disclose or use for your own or for another’s purpose or benefit any Confidential Information which you may learn
while in the employment of the Company except as required by a court of law or any regulatory body or that which
may be in or become part of the public domain other than through any act or default on your part;
(b) copy or reproduce in any form or by or on any media or device or allow others access to copy or reproduce any
documents (including without limitation letters, facsimiles and memoranda), disks, memory devices, notebooks, tapes
or other medium whether or not eye-readable and copies thereof on which Confidential Information may from time to
time be recorded or referred to (“Documents”); or
(c) remove or transmit from the Company or any Group Company’s premises any Documents on which Confidential
information may from time to time be recorded.
13.4 Upon termination of your employment for any reason by either party, you must immediately return to the Company all
Company property including but not limited to documents, papers, records, keys, credit cards, mobile telephones, computer and
related equipment, PDA or similar device, security passes, accounts, specifications, drawings, lists, correspondence, catalogues
or the like relating to the Company’s business which is in your possession or under your control and you must not take copies of
the same without the Company’s express written authority.
11
14 RESTRICTIVE COVENANTS
14.1 For the purpose of this paragraph 14 the following expressions shall have the following meanings:
“Prospective Customer” shall mean any person, firm, company or other business who was to your knowledge at the
Termination Date negotiating with the Company or with any Group Company with a view to dealing with the Company or any
Group Company as a customer;
“Restricted Business” means any business which (i) carries on research in the field of constrained peptides, including, without
limitation, all work in the field of lead constrained peptide identification and optimization and pre-clinical development of
constrained peptide therapeutics or (ii) is developing a drug conjugate compound for treating cancer that targets the same target
as a drug conjugate compound in development by any Group Company;
“Restricted Customers” shall mean any person, firm, company or other business who was to your knowledge at any time in
the twelve (12) month period ending with the Termination Date a customer of the Company or any Group Company;
“Restricted Period” shall mean the period of twelve (12) months from the Termination Date;
“Restricted Territory” means anywhere in the United States or the United Kingdom or in any other country in which the
Company or any Group Company conducts business or as of the date of termination of my employment relationship had plans
to conduct business; and
“Termination Date” shall mean the date on which your employment under this Agreement terminates either due to you or the
Company terminating it in accordance with the terms of the Agreement or in breach of the terms of this Agreement.
14.2 During the course of your employment hereunder you are likely to obtain Confidential Information relating to the business of
the Company or any Group Company and personal knowledge and influence over clients, customers and employees of the
Company or any Group Company. You hereby agree with the Company that to protect the Company’s and any and all Group
Company’s business interests, customer connections and goodwill and the stability of its or their workforce, that you will not
during the Restricted Period (and in respect of sub-paragraph 14.2(f) below only, at any time):
(a) in the Restricted Territory, compete with the business of the Company or any Group Company by being directly or
indirectly employed or engaged in any capacity by any person, firm or company which engages in or provides
Restricted Business or commercial activities competitive with the Restricted Business to Restricted Customers or
Prospective Customers;
(b) in the Restricted Territory, compete with the business of the Company or any Group Company either on your own
account or for any person, firm or company directly or indirectly by transacting business in competition with the
Restricted Business with any Restricted Customer or Prospective Customer of the Company or Group Company and
with whom you personally dealt in respect of Restricted Business in the pursuance of the employment hereunder in the
twelve (12) months prior to the Termination Date;
12
(c) in the Restricted Territory, compete with the business of the Company or any Group Company either on your own
account or for any person, firm or company directly or indirectly in competition with the Restricted Business by
soliciting or endeavouring to solicit or entice the business or custom of any Restricted Customer or Prospective
Customer and with whom you personally dealt in respect of Restricted Business in the pursuance of the employment
hereunder in the twelve (12) months prior to the Termination Date;
(d) either on your own account or for any person, firm or company directly or indirectly solicit or entice away or
endeavour to solicit or entice away any director or senior employee of the Company or any Group Company employed
in a managerial, scientific or technical role with whom you have had material personal dealings in the twelve (12)
months prior to the Termination Date;
(e) from the Termination Date for the purpose of carrying on any trade, or business represent or allow you to be
represented or held out as having any present association with the Company or any Group Company; and
(f) from the Termination Date carry on any trade or business whose name incorporates the word Bicycle or any deviation
or extension thereof which is likely or which may be confused with the name of the Company or any Group Company.
14.3 While the restrictions set out in paragraph 14.2 above are considered by the parties to be reasonable in all the circumstances, it is
agreed that if any one or more of such restrictions shall either taken by itself or themselves together be adjudged to go beyond
what is reasonable in all the circumstances for the protection of the legitimate interests of the Company but would be adjudged
reasonable if any particular restriction or restrictions were deleted or if any part or parts of the wording thereof were deleted,
restricted or limited in a particular manner, then the restrictions set out in paragraph 14.2 above shall apply with such deletions
or restrictions or limitations as the case may be.
14.4 For the avoidance of doubt nothing in this paragraph 14 shall prevent you from having any dealings with any Prospective
Customer or Restricted Customer in relation to any business which is not Restricted Businesses and which is not competitive
with the Restricted Business, nor from continuing to deal with any Prospective Customer or Restricted Customer where you
either have a social or business relationship unconnected to the Company and that relationship does not compete with the
Restricted Business.
14.5 The restrictions contained in paragraph 14.2 above are held by the Company for itself and on trust for any other Group
Company and shall be enforceable by the Company on their behalf or by any Group Company (at their request). You shall
during the employment hereunder enter into direct agreements with any Group Company whereby you will accept restrictions
in the same or substantially the same form as those contained in paragraph 14.2 above.
14.6 In the event that the Company exercises its rights and places you on Garden Leave under paragraph 10 above then the Restricted
Period shall be reduced by any period/s spent by you on Garden Leave prior to the Termination Date.
14.7 During the Restricted Period you shall provide a copy of the restrictions contained at paragraph 13 above and this paragraph 14
to any employer or prospective employer or any other party
13
with whom you become or will become engaged or provide service or services to.
15 INTELLECTUAL PROPERTY
15.1 For the purpose of this paragraph 15 “IPRs” shall mean all trade secrets, Copyrights, trademarks and trade and business names
(including goodwill associated with any trademark or trade or business names and the right to sue for passing off or unfair
competition), service marks, mask work rights, patents, petty patents, rights in ideas, concepts, innovations, discoveries,
developments and improvements, drug formulations, technology, rights in domain names, rights in inventions, utility models,
rights in know-how (including all data, methods, processes, practices and other results of research), unregistered design rights,
registered design rights, database rights, semiconductor topography rights and other intellectual property rights recognized by
the laws of any jurisdiction or country including all applications and rights to apply for and be granted, renewals or extensions
of, and rights to claim priority from, such rights and all similar or equivalent rights or forms of protection which subsist or will
subsist now or in the future in any part of the world; the term “Copyright” means the exclusive legal right to reproduce,
perform, display, distribute and make derivative works of a work of authorship (as a literary, musical, or artistic work)
recognized by the laws of any jurisdiction or country; and the term “Moral Rights” means all paternity, integrity, disclosure,
withdrawal, special and any other similar rights recognized by the laws of any jurisdiction or country.
15.2 It is contemplated that you may in the course of your employment with the Company create, author or originate (either alone or
jointly with others) Inventions (as defined in paragraph 13.1), and/or records, reports, papers, databases, data, information,
know how, literature, drawings, graphics, typographical arrangements, designs, works, documents, publications and other
materials (in printed, electronic, or any other media or form) (together with Inventions constituting “Works”).
15.3 You will promptly disclose to the Company full details of any Inventions on their creation and provide further details,
explanations and demonstrations as the Company from time to time requests.
15.4 All IPRs subsisting in any Works shall be the exclusive property of the Company.
15.5 To the extent that such IPRs do not vest automatically in the Company by operation of law, you hereby assign and agree to
assign to the Company all of your right, title and interest in any existing and future IPRs which may subsist in any Works for
their full term of protection (including any extensions, revivals and renewals) together with the right to sue and claim remedies
for past infringement and all materials embodying these rights to the fullest extent permitted by law in any and all countries of
the world. Insofar as such IPRs do not vest automatically by operation of law or under this Agreement, the Consultant holds
legal title in these rights and inventions on trust for the Company.
15.6 To the extent permitted by law you hereby irrevocably and unconditionally waive in favour of the Company, its licensees and
successors in title, all existing and future Moral Rights (or similar rights existing in any part of the world) you may have in
respect of any Works under Chapter IV of the Copyright Designs and Patents Act 1988 in England or any similar provisions of
law in any jurisdiction, including (but without limitation) the right to be identified, the right of integrity and the right against
false attribution, and agrees not to institute, support, maintain or
14
permit any action or claim to the effect that any treatment, exploitation or use of such Works, Inventions or other materials
infringes the Consultant's Moral Rights.
15.7 Without prejudice to the generality of paragraph 15.9 below, during your employment with the Company and thereafter, without
limit in time, you shall at the request and expense of the Company, promptly assist the Company:
(a) to file, prosecute, obtain and maintain registrations and applications for registration of any IPRs subsisting in, or
protecting, any Works; and
(b) to commence and prosecute legal and other proceedings against any third party for infringement of any IPRs subsisting
in, or protecting, any Works and to defend any proceedings or claims made by any third party that the use or
exploitation of any Works infringes the IPRs or rights of any third party.
15.8 You shall keep details of all Inventions confidential and shall not disclose the subject matter of any Inventions to any person
outside the Company without the prior consent of the Company. You acknowledge that any unauthorised disclosure of such
subject matter may prevent the Company from obtaining patent or registered intellectual property protection for such Invention.
15.9 Whenever requested to do so by the Company and in any event on the termination or expiry of this Agreement, you shall
promptly deliver to the Company all correspondence, documents, papers and records on all media (and all copies or abstracts of
them), recording or relating to any part of the Works and the process of their creation which are in your possession, custody or
power.
15.10 Subject to paragraph 15.10 below, during your employment with the Company and thereafter without limit in time you shall at
the request and expense of the Company promptly execute and do all acts, matters, documents and things necessary or desirable
to give the Company the full benefit of the provision of this paragraph 15. You shall not register nor attempt to register any of
the IPRs in the Works, nor any of the Inventions, unless requested to do so in writing by the Company.
15.11 Nothing in this paragraph 15 shall be construed, or have the effect of, restricting your rights under sections 39 to 43 (inclusive)
of the Patents Act 1977 (as amended from time to time).
16 LITIGATION ASSISTANCE
During the term of your employment and at all times thereafter subject always to your obligations to third parties, you shall
furnish such information and proper assistance to the Company or any Group Companies as it or they may reasonably require in
connection with the Company's intellectual property (including without limitation applying for, defending, maintaining and
protecting such intellectual property) and in connection with litigation in which it is or they are or may become a party. This
obligation on you shall include, without limitation, meeting with the Company or any Group Companies' legal advisers,
providing witness evidence, both in written and oral form, and providing such other assistance that the Company or any Group
Companies' legal advisors in their reasonable opinion determine. The Company shall reimburse you for all reasonable out of
pocket expenses incurred by you in furnishing such information and assistance and in the event you are no longer employed by
the Company a reasonable daily rate (as agreed between you and the Company for such assistance). Such
15
assistance shall not require you to provide assistance for more than 5 days in any calendar month. For the avoidance of doubt
the obligations under this paragraph 16 shall continue notwithstanding the termination of your employment with the Company.
17 COLLECTIVE AGREEMENTS
There are no collective agreements which directly affect your terms and conditions of employment.
18 DATA PROTECTION
Processing of personal data and our policies
18.1 Information relating to an individual (or from which an individual may be identified) is called “personal data”.
18.2 In processing personal data, we are required to comply with the law on data protection. To help us achieve this, we have
produced a privacy notice (“Privacy Notice”). This may be found in the Employee Handbook. You must read this and comply
with it in carrying out your work.
Data protection principles
18.3 In complying with the law on data protection, we are required to comply with what are known as data protection
principles. These are summarised in our Privacy Notice. In performing your role and carrying out your responsibilities, you
must do your best to ensure that we comply with these principles.
18.4 A key element of the data protection principles is the duty to ensure that data is processed securely and protected against
unauthorised or unlawful processing or loss. Key elements include the following:
(a) You must ensure that laptops, memory sticks, phones and other mobile devices are password protected and
encrypted. You must not take such devices outside the office without encryption. You must take care of them and keep
them secure.
(b) You must use strong passwords, changing them when asked and not sharing them with unauthorised colleagues.
(c) You must not access other individuals’ personal data unless in the course of your work.
Data breach – and urgent notification
18.5 If you discover a data breach, you must notify the Chairman or CFO immediately – and, if practicable, within one hour.
Depending on context, you may then need to provide further information on the circumstances of the breach.
18.6 A data breach occurs where there is destruction, loss, alteration or unauthorised disclosure of or access to personal data which is
being held, stored, transmitted or processed in any way. For example, there is a data breach if our servers are hacked or if you
lose a laptop or USB stick or send an email to the wrong person by mistake.
16
18.7 Failure to notify a breach or to provide information as set out above will be treated seriously and disciplinary action may be
taken.
Why we process personal data
18.8 For information on the nature of the data we process, why we process it, the legal basis for processing and related matters,
please refer to our Privacy Notice. In summary:
(a) We process personal data relating to you for the purposes of our business including management, administrative,
employment and legal purposes.
(b) We monitor our premises and the use of our communication facilities, including using CCTV cameras, monitoring
compliance with our data and IT policies, and where non-compliance is suspected, looking in a more targeted way.
18.9 The summary above is for information only. We do not, in general, rely on your consent as a legal basis for
processing. Agreeing the terms of this Agreement will not constitute your giving consent to our processing of your data.
18.10 We reserve the right to amend the documents referred to above from time to time.
19 THIRD PARTY RIGHTS
Save in respect of any rights conferred by this Agreement on any Group Company (which such Group Company shall be
entitled to enforce), a person who is not a party to this Agreement may not under the Contracts (Rights of Third Parties) Act
1999 enforce any of the terms contained within this Agreement.
20 DEFINITIONS
In this Agreement:
“Group Company” means a subsidiary or affiliate and any other company which is for the time being a holding company of the
Company or another subsidiary or affiliate of any such holding company as defined by the Companies Act 2006 (as amended)
and “Group Companies” will be interpreted accordingly.
21 ENTIRE AGREEMENT
These terms and conditions constitute the entire agreement between the parties and supersede any other agreement whether
written or oral previously entered into.
22 JURISDICTION AND CHOICE OF LAW
This Agreement shall be governed by and interpreted in accordance with the laws of England and Wales and the parties to this
Agreement submit to the exclusive jurisdiction of the Courts of England and Wales in relation to any claim, dispute or matter
arising out of or relating to this Agreement.
17
23 NOTICES
Any notices with respect to this Agreement shall be in writing and shall be deemed given if delivered personally (upon receipt),
sent by email or sent by first class post addressed, in the case of the Company, to the Company Secretary at its registered office
and in your case, addressed to your address last known to the Company.
18
Schedule
Definitions
Change in Control:
means and includes each of the following:
(a) a Sale; or
(b) a Takeover.
Control:
Sale:
Takeover:
The Compensation Committee shall have full and final authority, which shall be exercised in its sole discretion,
to determine conclusively whether a Change in Control has occurred pursuant to the above definition, the date
of the occurrence of such Change in Control and any incidental matters relating thereto; provided that any such
Change in Control also qualifies as a “change in control event” as defined in Section 409A of the United States
Internal Revenue Code of 1986, as amended and the regulations and other guidance thereunder and any state
law of similar effect, and any exercise of authority in conjunction with a determination of whether a Change in
Control is a “change in control event” is consistent with such regulation.
shall have the meaning given to that word by Section 719 of the UK Income Tax (Earnings and Pensions) Act
2003 and “Controlled” shall be construed accordingly.
the sale of all or substantially all of the assets of BTL.
circumstances in which any person (or a group of persons acting in concert) (the “Acquiring Person”):
(a) obtains Control of BTL as the result of making a general offer to:-
i. acquire all of the issued ordinary share capital of BTL, which is made on a condition that, if it is
satisfied, the Acquiring Person will have Control of BTL; or
ii. acquire all of the shares in BTL; or
(b) obtains Control of BTL as a result of a compromise or arrangement sanctioned by a court under
Section 899 of the UK Companies Act 2006, or sanctioned under any other similar law of another
jurisdiction; or
(c) becomes bound or entitled under Sections 979 to 985 of the UK Companies Act 2006 (or similar law of
another jurisdiction) to acquire shares in BTL; or
(d) obtains Control of BTL in any other way, including but not limited to by way of a merger.
19
THIS AGREEMENT has been executed and delivered as a deed by or on behalf of the parties on the date written at the top of page 1.
Executed as a Deed by BICYCLETX LIMITED acting by a director:
/s/ Kevin Lee
(Director)
in the presence of:
/s/ Phil Jeffrey
Witness Name:
Witness Address:
Phil Jeffrey
20
Executed as a Deed by NIGEL CROCKETT:
/s/ Nigel Crockett
(Nigel Crockett)
in the presence of:
/s/ Paula Barnes
Witness Name:
Witness Address:
Paula Barnes
21
BICYCLE THERAPEUTICS PLC
NON-EMPLOYEE DIRECTOR COMPENSATION POLICY
AS AMENDED THROUGH DECEMBER 17, 2019
Exhibit 10.14
This Non-Employee Director Compensation Policy (the “Policy”) has been established in order to attract and
retain non-employee directors who have the knowledge, skills and experience to serve as a member of the Board
of Directors (the “Board”) of Bicycle Therapeutics plc (the “Company”). Directors who are employees of the
Company or any of its subsidiaries will receive no additional compensation for their service as directors.
All equity awards granted in accordance with this Policy shall be granted under the Company’s then-current
equity incentive plan (or director equity incentive plan, if any).
A. EQUITY AWARDS
At the next scheduled meeting of the Board or the Compensation Committee, as applicable, following a non-
employee director’s initial election to the Company’s Board, the Board or the Compensation Committee of the
Board shall grant such non-employee director an option to purchase 32,000 ordinary shares (the “Initial Grant”).
Initial Grants will vest in equal tranches of 1/36 at the end of each calendar month following the date of grant,
subject to continued service by the director as of such vesting date.
th
In addition, in January of each year, the Board or the Compensation Committee of the Board will grant to each
non-employee director (other than the Chair) who has not announced an intention either to resign from the Board
or not to stand for election at the next annual general meeting of shareholders an option to purchase 16,000
ordinary shares, and the Chair will be granted an option to purchase 32,000 ordinary shares (the “Annual Grant”).
If a new non-employee director joins the Board following the date of grant of the Annual Grant in any calendar
year, such non-employee director will be granted a pro-rata portion of the next Annual Grant, based on the time
between his or her appointment and the date of such Annual Grant. Annual Grants shall be vested in full as of the
date of grant.
B. CASH FEES
Each non-employee director will receive an annual cash fee for service on the Board and for service on each
committee of which the director is a member. The chairs of the Board and of each committee will receive higher
fees for such service. The amounts of the fees paid to each non-employee director for service on the Board and for
service on each committee of the board of directors on which the director is a member are as follows:
Board of Directors
Audit Committee
Compensation Committee
Nominating and Corporate Governance Committee
Strategic Committee
Member
Annual
Fee
Chair
Annual
Fee
$
$
$
$
$
40,000 £
8,500 $
6,500 $
4,000 $
30,000
5,000
20,000
14,000
8,000
N/A
These fees are payable in arrears in twelve equal monthly installments, subject to deduction of applicable income
tax or national insurance which the Company is required by law to deduct and any other statutory deductions,
provided that (i) the amount of such payment shall be prorated for any portion of such month during which the
director was not serving and (ii) no fee shall be payable in respect of any period prior to the date of the Company’s
initial public offering.
C. EXPENSES
The reasonable expenses incurred by non-employee directors in connection with attendance at Board or
committee meetings or other Company-related activities will be reimbursed upon submission of appropriate
documentation.
D. ADMINISTRATION
This Program shall be administered by the Compensation Committee, which shall have the power to interpret
these provisions and approve changes from time to time as it deems appropriate.
[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) WOULD BE
COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED.
Exhibit 10.18
DISCOVERY COLLABORATION AND LICENSE
AGREEMENT
between
BICYCLETX LIMITED
and
GENENTECH, INC.
Dated as of February 21, 2020
ARTICLE 1
ARTICLE 2
2.1
2.2
2.3
2.4
2.5
ARTICLE 3
3.1
3.2
3.3
ARTICLE 4
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
ARTICLE 5
5.1
5.2
5.3
5.4
5.5
5.6
ARTICLE 6
6.1
6.2
6.3
6.4
TABLE OF CONTENTS
DEFINITIONS
DISCOVERY COLLABORATION AND ACTIVITIES
Collaboration Overview
Discovery Research Plan
Phases of the Collaboration
Discovery Research Activities
Discovery Progression Decision Points
TARGET NOMINATION AND SUBSTITUTION
Target Nomination
Target Substitution
Genentech Reserved Targets
COLLABORATION MANAGEMENT
Joint Research Committee
General Provisions Applicable to the JRC
Decisions
Limitations on Authority
Alliance Manager
Discontinuation of the JRC
Interactions Between a Committee and Internal Teams
Working Groups
Expenses
DEVELOPMENT AND REGULATORY
Development of Licensed Products following Dev Go
Additional Discovery Activities After Dev Go Notice
Transfer of CMC Materials [***]
Technology Transfer Following Dev Go
Subcontracting
Regulatory Matters
COMMERCIALIZATION
In General
Commercialization Diligence
Product Trademarks
Commercial Supply of Compounds or Licensed Products
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1
23
23
23
23
27
28
32
32
34
36
36
36
37
38
39
39
39
39
39
40
40
40
40
41
42
42
43
44
44
44
44
44
ARTICLE 7
7.1
7.2
7.3
7.4
7.5
7.6
7.7
7.8
ARTICLE 8
8.1
8.2
8.3
8.4
8.5
8.6
8.7
8.8
8.9
8.10
8.11
8.12
8.13
8.14
8.15
8.16
8.17
ARTICLE 9
9.1
9.2
9.3
9.4
9.5
TABLE OF CONTENTS
(continued)
GRANT OF RIGHTS
Grants to Genentech
Grants to Bicycle
Residual Knowledge
Sublicenses
Distributorships
Retention of Rights
No Implied Licenses
Exclusivity
PAYMENTS AND RECORDS
Upfront Payment
Target Nomination; Targeting Arms
Target Substitution
Discovery Milestones
Development, Regulatory and First Commercial Sale Milestones
Sales-Based Milestones
Royalties
Royalty Payments and Reports
Mode of Payment
No Exclusion for a Bona Fide Claim
Withholding Taxes
Taxes
Interest on Late Payments
Audit
Audit Dispute
Confidentiality
No Other Compensation
INTELLECTUAL PROPERTY
Ownership of Intellectual Property
United States Law
Assignment Obligation
Patent Prosecution and Maintenance
Patent Enforcement
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44
44
45
45
46
46
46
46
46
47
47
47
48
48
48
50
50
52
53
53
53
54
54
54
54
54
55
55
55
55
55
56
60
9.6
9.7
9.8
9.9
9.10
9.11
ARTICLE 10
10.1
10.2
ARTICLE 11
11.1
11.2
11.3
11.4
11.5
11.6
ARTICLE 12
12.1
12.2
12.3
12.4
12.5
ARTICLE 13
13.1
13.2
13.3
13.4
13.5
13.6
ARTICLE 14
14.1
14.2
14.3
TABLE OF CONTENTS
(continued)
Infringement Claims by Third Parties
Invalidity or Unenforceability Defenses or Actions
Third Party Licenses
Product Trademarks
Inventor’s Remuneration
Common Interest
PHARMACOVIGILANCE AND SAFETY
Pharmacovigilance
Notification requirements
CONFIDENTIALITY AND NON-DISCLOSURE
Confidentiality Obligations
Permitted Use or Disclosures
Use of Name
Press Releases
Publications
Destruction of Confidential Information
REPRESENTATIONS AND WARRANTIES
Mutual Representations and Warranties
Additional Representations and Warranties of Bicycle
Additional Representations,Warranties and Covenants of Genentech
Covenants of Bicycle
DISCLAIMER OF WARRANTIES
INDEMNIFICATION; INSURANCE
Indemnification of Bicycle
Indemnification of Genentech
Notice of Claim
Control of Defense
Limitation of Liability
Insurance
TERM AND TERMINATION
Term
Termination For Convenience
Termination for Uncured Material Breach
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62
62
63
63
64
64
64
64
64
64
64
65
66
67
67
68
68
68
69
70
70
71
71
71
71
71
72
72
72
73
73
73
74
14.4
14.5
14.6
14.7
14.8
14.9
ARTICLE 15
15.1
15.2
15.3
15.4
15.5
15.6
15.7
15.8
15.9
15.10
15.11
15.12
15.13
15.14
15.15
15.16
15.17
15.18
15.19
SCHEDULES
Schedule 1.60
Schedule 1.66
Schedule 1.69
Schedule 1.81
Schedule 1.111
Schedule 1.113
Schedule 1.120
TABLE OF CONTENTS
(continued)
Termination for Insolvency
Rights in Bankruptcy
Effects of Termination
Rights in Lieu of Termination
Termination of Terminated Territory
Accrued Rights; Surviving Obligations
MISCELLANEOUS
Force Majeure
Export Control
Assignment
Effects of a Change of Control
Severability
Governing Law, Jurisdiction and Service
Dispute Resolution
Notices
Entire Agreement; Amendments
English Language
Waiver and Non-Exclusion of Remedies
No Benefit to Third Parties
Further Assurance
Relationship of the Parties
Performance by Affiliates
Counterparts; Facsimile Execution
References
Schedules
Construction
Dev Go Criteria for the Initial Collaboration Targets
Discovery Construct Threshold Criteria
Initial Discovery Research Plan
Existing Targeting Arms
Genentech Reserved Targets
Genentech Specified Countries
Hit Success Criteria for the Initial Collaboration Targets
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79
80
80
81
81
81
82
82
82
82
83
84
85
85
85
85
85
86
86
86
86
86
86
Initial Collaboration Targets
LSR Go Criteria for the Initial Collaboration Targets
Schedule 1.128
Schedule 1.150
Schedule 2.3.2 Part 1 Genentech Targeting Arms of Interest
Schedule 2.3.2 Part 2 [***] Terms of the [***] License
Schedule 2.3.2 Part 3 Targeting Arm Criteria applicable to the [***] Targeting Arm
Schedule 12.2.1
Schedule 15.7.3
Existing Patents
Arbitration
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DISCOVERY COLLABORATION AND LICENSE AGREEMENT
This Discovery Collaboration and License Agreement (the “Agreement”) is made and entered into effective
as of February 21, 2020 (the “Effective Date”) by and between BicycleTx Limited, a company incorporated in England and
Wales (“BicycleTx”), and Genentech, Inc., a Delaware corporation (“Genentech”). BicycleTx and Genentech are referred
to herein individually as a “Party” and collectively as the “Parties”.
RECITALS
WHEREAS, BicycleTx owns or controls certain intellectual property rights with respect to a proprietary phage
display discovery platform and related technology for the identification and optimization of Bicycles (as defined herein)
suitable for development and commercialization as therapeutic products;
WHEREAS, the Parties desire to collaborate to conduct certain Discovery Research Activities (as defined herein) to
generate Bicycles directed to targets selected by Genentech, and to advance the resulting constructs into further pre-clinical
development and potential clinical development and commercialization as product candidates; and
WHEREAS, BicycleTx wishes to grant to Genentech, and Genentech wishes to receive, a license under such
intellectual property rights to develop and commercialize products incorporating such Bicycles and resulting constructs in
the Territory (as defined herein), in each case in accordance with the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and the mutual promises and conditions hereinafter set
forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties,
intending to be legally bound, do hereby agree as follows:
ARTICLE 1
DEFINITIONS
Unless otherwise specifically provided herein, the following terms shall have the following meanings:
1.1 “Accounting Standards” means, with respect to a Party and its Affiliates, either (a) International Financial
Reporting Standards (“IFRS”) or (b) United States generally accepted accounting principles (“GAAP”), in either case ((a)
or (b)) that are used at the applicable time, and as consistently applied, by such Party or any of its Affiliates.
1.2 “Acquisition” means, with respect to a Party, a merger, acquisition (whether of all of the stock or all or
substantially all of the assets of a Person or any operating or business division of a Person) or similar transaction by or with
the Party, other than a Change of Control of the Party.
1.3 “Additional Discovery Activities” has the meaning set forth in Section 5.2.
1.4 “Adverse Ruling” has the meaning set forth in Section 14.3.2.
1.5 “Affiliate” means, with respect to a Party, any Person that, directly or indirectly, through one (1) or more
intermediaries, controls, is controlled by or is under common control with such Party. For purposes of this definition,
“control” and, with correlative meanings, the terms “controlled by” and “under common control with” means (a) the
possession, directly or indirectly, of the power to direct the
management or policies of a Person, whether through the ownership of voting securities, by contract relating to voting rights
or corporate governance, or otherwise; or (b) the ownership, directly or indirectly, of more than fifty percent (50%) of the
voting securities or other ownership interest of a Person (or, with respect to a limited partnership or other similar entity, its
general partner or controlling entity). Anything to the contrary in this paragraph notwithstanding, [***] shall not be deemed
an Affiliate of Genentech unless Genentech provides written notice to BicycleTx of its desire to include [***] as Affiliate(s)
of Genentech.
1.6 “Agreement” has the meaning set forth in the preamble hereto.
1.7 “Alliance Manager” has the meaning set forth in Section 4.5.
1.8 “Antigen Target” means a Target expressed by cells or tissues of interest and (a) may comprise (but is not
limited to) proteins expressed within the tumor microenvironment, by tumor cells, or by immune cells and (b) is intended to
provide a localization address rather than a functional and/or immunomodulatory response.
1.9 “Applicable Law” means federal, state, local, national and supra-national laws, statutes, rules, and
regulations, including any rules, regulations, guidelines, or other requirements enacted by a government authority, including
Regulatory Authorities, major national securities exchanges or major securities listing organizations, that may be in effect
from time to time during the Term and applicable to the performance by a Party of its obligations, or exercise of its rights,
under this Agreement.
1.10 “Audit Expert” has the meaning set forth in Section 8.15.
1.11 “Bankruptcy Code” has the meaning set forth in Section 14.5.1.
1.12 “Bicycle” means a monomeric peptide or peptide derivative crosslinked via a central scaffold to form a
conformationally constrained structure with more than one cyclic component.
1.13 “Bicycle Construct” means a molecule that contains (a) a Bicycle that is specifically directed to or capable
of binding a Modulator Target, with or without (b) a Targeting Arm.
1.14 “BicycleTx” has the meaning set forth in the preamble hereto.
1.15 “BicycleTx Background Know-How” means all Know-How that (a) is Controlled by BicycleTx or any of
its Affiliates on the Effective Date or during the Term as a result of performing activities outside the scope of this Agreement
and (b) is [***] for (i) the discovery, validation, characterization, and testing of Bicycle Constructs or (ii) Exploiting any
Compound or Licensed Product.
1.16 “BicycleTx Background Patents” means all Patents that (a) are Controlled by BicycleTx or any of its
Affiliates on the Effective Date or during the Term and (b) solely Cover BicycleTx Background Know-How.
1.17 “BicycleTx Collaboration Invention” has the meaning set forth in Section 1.45.
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1.18 “BicycleTx Collaboration Know-How” means all Collaboration Know-How that is generated by or on
behalf of BicycleTx or its Affiliates solely or jointly with a Third Party, including all Know-How in BicycleTx Collaboration
Inventions.
1.19 “BicycleTx Collaboration Patents” means all Patents that Cover BicycleTx Collaboration Inventions.
1.20 “BicycleTx Future Independent Targeting Arm” means any Targeting Arm Controlled by BicycleTx
during the Term and developed or acquired by BicycleTx independently of activities under this Agreement.
1.21 “BicycleTx Future In-License Agreement” means any agreement entered into during the Term by and
between BicycleTx and a Third Party with respect to [***] that are [***] in connection with the Discovery Research
Activities, under which Third Party agreement BicycleTx or its Affiliates are required to make payments to such Third Party
as a result of practicing such [***], as such agreements may be amended from time-to-time. Notwithstanding the foregoing,
[***].
1.22 “BicycleTx Indemnitees” has the meaning set forth in Section 13.1.
1.23 “BicycleTx IP” has the meaning set forth in Section 7.1.1.
1.24 “BicycleTx Know-How” means all BicycleTx Background Know-How, BicycleTx Platform Know-How,
BicycleTx Product Know-How, and BicycleTx Collaboration Know-How.
1.25 “BicycleTx Option” has the meaning set forth in Section 14.6.1(c).
1.26 “BicycleTx Other Constructs” has the meaning set forth in Section 9.4.1(b).
1.27 “BicycleTx Patents” means all BicycleTx Background Patents, BicycleTx Platform Patents, BicycleTx
Product Patents, and BicycleTx Collaboration Patents.
1.28 “BicycleTx Platform” means Know-How, Patents and other intellectual property rights that are Controlled
by BicycleTx or any of its Affiliates on the Effective Date or during the Term that claim or Cover (a) [***] Bicycles [***],
(b) Bicycles, or any component thereof ([***]) and (c) [***] Bicycles, or components thereof.
1.29 “BicycleTx Platform Know-How” means all Know-How that (a) is (i) Controlled by BicycleTx or any of
its Affiliates on the Effective Date, or (ii) Controlled by BicycleTx or its Affiliates, or generated in the performance of
activities under this Agreement by or on behalf of either Party during the Term, and (b) relates to the BicycleTx Platform or
any component of the BicycleTx Platform, but [***] Compound or Licensed Product.
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1.30 “BicycleTx Platform Patents” means all Patents that (a) are Controlled by BicycleTx or any of its
Affiliates on the Effective Date or during the Term and (b) Cover (i) BicycleTx Platform Know-How or (ii) a Platform
Invention. For clarity, “BicycleTx Platform Patents” excludes any and all Product Patents.
1.31 “BicycleTx Product Know-How” means all Product Know-How that is generated by or on behalf of
BicycleTx or its Affiliates, solely or jointly with a Third Party, including all Know-How in Product Inventions solely
invented by or on behalf of BicycleTx or its Affiliates.
1.32 “BicycleTx Product Patents” means all Patents that Cover Product Invention solely invented by or on
behalf of BicycleTx or its Affiliates.
1.33 “Breach Cure Period” has the meaning set forth in Section 14.3.1.
1.34 “Breach Notice” has the meaning set forth in Section 14.3.1.
1.35 “Breaching Party” has the meaning set forth in Section 14.3.1.
1.36 “Business Day” means a day other than a Saturday or Sunday on which banking institutions in San
Francisco, California and London, England are open for business.
1.37 “Calendar Quarter” means each successive period of three (3) calendar months commencing on January 1,
April 1, July 1 and October 1, except that the first Calendar Quarter of the Term shall commence on the Effective Date and
end on the day immediately prior to the first to occur of January 1, April 1, July 1 or October 1 after the Effective Date, and
the last Calendar Quarter shall end on the last day of the Term.
1.38 “Calendar Year” means each successive period of twelve (12) calendar months commencing on January 1
and ending on December 31, except that the first Calendar Year of the Term shall commence on the Effective Date and end
on December 31 of the year in which the Effective Date occurs and the last Calendar Year of the Term shall commence on
January 1 of the year in which the Term ends and end on the last day of the Term.
1.39 “Change of Control” means, with respect to a Party: (a) that any Third Party acting alone or as part of a
group acquires directly or indirectly the beneficial ownership of any voting securities of such Party, or if the percentage
ownership of such Party in the voting securities of such Party is increased through stock redemption, cancellation or other
recapitalization, and immediately after such acquisition or increase such Third Party is, directly or indirectly, the beneficial
owner of outstanding voting securities representing more than fifty percent (50%) of the total voting power of all of the then
outstanding voting securities of such Party; (b) a merger (whether by contract, by statute or by operation of law),
consolidation, recapitalization or reorganization of such Party is consummated, other than any such transaction in which
stockholders or equity holders of such Party immediately prior to such transaction beneficially own, directly or indirectly, at
least fifty percent (50%) of the voting securities of the surviving entity (or its parent entity) immediately following such
transaction; (c) that the stockholders or equity holders of such Party approve a plan of complete liquidation of such Party; or
(d) the sale or disposition to a Third Party of all or substantially all of such Party’s assets taken as a whole. For purposes of
this definition, “beneficial ownership” shall have the meaning accorded in the U.S. Securities Exchange Act of 1934 and the
rules of the U.S. SEC under this Agreement in effect as of the Execution Date. Notwithstanding the foregoing, (i) a
transaction solely to change the domicile of a Party; (ii) the consummation of an initial public offering;
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or (iii) any merger or consolidation between a Party and one or more Affiliates shall not constitute a Change of Control.
1.40 “Change of Control Group” means, with respect to a Party, the Person or entity, or group of Persons or
entities, that is the acquirer of, or successor to, a Party in connection with a Change of Control, together with all of the
affiliates of such Persons or entities in each case that are not Affiliates of such Party immediately prior to the closing of such
Change of Control of such Party.
1.41 “[***] Targeting Arm” means the Genentech Targeting Arm directed to the [***] Antigen Target.
1.42 “Clinical Data” means all information with respect to any Discovery Construct or Licensed Product, in each
case that is made, collected, or otherwise generated under or in connection with Clinical Studies, including any data
(including raw data), reports, and results with respect thereto.
1.43 “Clinical Trial” means a human clinical study (a) in which Licensed Product is administered to human
subjects and (b) that is designed to (i) establish that a pharmaceutical product is reasonably safe for continued testing; (ii)
investigate the safety and efficacy of the pharmaceutical product for its intended use, and to define warnings, precautions
and adverse reactions that may be associated with the pharmaceutical product in the dosage range to be prescribed; (iii)
support Regulatory Approval of such pharmaceutical product or label expansion of such pharmaceutical product; or (iv)
obtain or maintain marketing approval and for a purpose other than to obtain, support or maintain Regulatory Approval,
including any and all post-marketing commitments.
1.44 “CMC Activities” means, with respect to activities directed to the generation of chemistry, manufacturing
and controls information and data for a Licensed Product, Lead Discovery Construct or Development Candidate, as
applicable, required by Applicable Law to be included or referenced in, or that otherwise supports, an IND or Drug
Approval Application for such Licensed Product.
1.45 “Collaboration Invention” means an Invention, other than a Platform Invention, that is first discovered,
made, conceived, or reduced to practice under this Agreement. A Collaboration Invention may be discovered, made,
conceived or reduced to practice solely by or on behalf of BicycleTx (“BicycleTx Collaboration Invention”), solely by or
on behalf of Genentech (“Genentech Collaboration Invention”), or jointly by or on behalf of BicycleTx and Genentech
(whether by such Party’s employees or by Third Parties performing services for either Party) (“Joint Collaboration
Invention”).
1.46 “Collaboration Know-How” means all Know-How other than BicycleTx Platform Know-How that is
generated in the performance of activities under this Agreement, including all Know-How in Collaboration Inventions.
1.47 “Collaboration Patent” means a Patent that Covers one or more Collaboration Inventions. For clarity, a
Patent that Covers a Collaboration Invention that also incorporates, as applicable BicycleTx Background Know-How or
Genentech Background Know-How, will be deemed a Collaboration Patent.
1.48 “Collaboration Program” has the meaning set forth in Section 2.1.
1.49 “Collaboration Target” means (a) the Initial Collaboration Targets, (b) each Modulator Target for which
Genentech exercises its Expansion Option pursuant to Section 3.1.1(b), in each case of (a)
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and (b) as may be substituted pursuant to Section 3.2, and (c) each Antigen Target to which a Targeting Arm incorporated
within a Discovery Construct pursuant to Section 2.3.2 is directed.
1.50 “Combination Product” means (a) a single pharmaceutical formulation containing as its active ingredients
both (i) a Compound and (ii) one or more other therapeutically or prophylactically active ingredients that are not
Compounds (each such other therapeutically or prophylactically active ingredient, a “Non-Compound Active Agent”) or
(b) a combination therapy comprised of (i) a Compound and (ii) one or more other therapeutically or prophylactically active
products containing at least one Non-Compound Active Agent, whether priced and sold together in a single package
containing such multiple products or packaged separately but sold together for a single price, in each case (a) and (b),
including all dosage forms, formulations, presentations, line extensions, and package configurations.
1.51 “Commercialization” means any and all activities directed to the preparation for sale of, offering for sale
of, or sale of a Compound or Licensed Product, including activities related to marketing, promoting, selling, distributing,
importing and exporting such Compound or Licensed Product, and interacting with Regulatory Authorities regarding any of
the foregoing. When used as a verb, “to Commercialize” and “Commercializing” means to engage in Commercialization,
and “Commercialized” has a corresponding meaning.
1.52 “Commercially Reasonable Efforts” means, with respect to the performance of Development,
Commercialization, or Manufacturing activities with respect to a Compound or a Licensed Product, the carrying out of such
activities using efforts and resources [***], taking into account [***] would take into account, including [***], the nature
and extent of [***] required. For clarity, [***].
1.53 “Compound” means any Development Candidate or other Discovery Construct that has met the Discovery
Construct Threshold. The term Compound also includes any and all Modified Compounds.
1.54 “Confidential Information” means any information provided orally, visually, in writing or other form by or
on behalf of one (1) Party (or an Affiliate or representative of such Party) to the other Party (or to an Affiliate or
representative of such other Party) in connection with this Agreement, whether prior to, on, or after the Effective Date,
including information relating to the terms of this Agreement, the identities of a Collaboration Target (including Genentech
Reserved Targets), the Discovery Construct or any Licensed Product (including the Regulatory Documentation and
regulatory data), any Exploitation of
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any Discovery Construct or any Licensed Product, any Know-How with respect thereto developed by or on behalf of the
disclosing Party or its Affiliates, or the scientific, regulatory or business affairs or other activities of either
Party. Notwithstanding the foregoing, (a) Joint Collaboration Know-How shall be deemed to be the Confidential
Information of both Parties, and both Parties shall be deemed to be the receiving Party and the disclosing Party with respect
thereto, and (b) all Regulatory Documentation owned by Genentech pursuant to Section 5.6.1 shall be deemed to be the
Confidential Information of Genentech, and Genentech shall be deemed to be the disclosing Party and BicycleTx shall be
deemed to be the receiving Party with respect thereto. In addition, all information disclosed by BicycleTx to Genentech
under the Non-Disclosure Agreement between the Parties, dated [***], (the “Prior NDA”) shall be deemed to be
BicycleTx’s Confidential Information disclosed hereunder, and all information disclosed by Genentech to BicycleTx under
the Prior NDA shall be deemed to be Genentech’s Confidential Information disclosed hereunder.
1.55 “Control” means, with respect to any Know-How, Regulatory Documentation, material, Patent or other
property right, the possession of the right, whether directly or indirectly, and whether by ownership, license, covenant not to
sue or otherwise (other than by operation of the license and other grants in Sections 7.1 or 7.2), to grant a license, sublicense
or other right to or under such Know-How, Regulatory Documentation, material, Patent or other property right, as provided
for herein without violating the terms of any agreement or other arrangement with any Third Party.
1.56 “Cover” means (as an adjective or as a verb including conjugations and variations such as “Covered”,
“Coverage” or “Covering”), with respect to a particular subject matter at issue and a relevant Patent, that, in the absence of
a license under or ownership of such Patent, the developing, making, using, offering for sale, promoting, selling, exporting
or importing of such subject matter would infringe one or more Valid Claims of such Patent or, as to a pending claim
included in such Patent, the developing, making, using, offering for sale, promoting, selling, exporting or importing of such
subject matter would infringe such Patent if such pending claim were to issue in an issued Patent. The determination of
whether any given subject matter is Covered by a particular Valid Claim shall be made on a country-by-country basis.
1.57 “Development” means all activities related to research, pre-clinical and other non-clinical testing, test
method development and stability testing, toxicology, formulation, process development, manufacturing scale-up,
qualification and validation, quality assurance/quality control, Clinical Trials, including Manufacturing in support thereof,
statistical analysis and report writing, the preparation and submission of Drug Approval Applications, regulatory affairs with
respect to the foregoing and all other activities necessary or reasonably useful or otherwise requested or required by a
Regulatory Authority as a condition or in support of obtaining or maintaining a Regulatory Approval. When used as a verb,
“Develop” means to engage in Development. For purposes of clarity, Development shall include any submissions and
activities required in support thereof, required by Applicable Laws or a Regulatory Authority as a condition or in support of
obtaining a pricing or reimbursement approval for an approved Licensed Product.
1.58 “Development Candidate” has the meaning set forth in Section 2.3.1(d).
1.59 “Dev Go” means [***] approval of a Compound (or a program directed to such Compound following the
completion of the Lead Validation Phase for commencement of IND-enabling studies [***].
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1.60 “Dev Go Criteria” means, on a Collaboration Program-by-Collaboration Program basis, the criteria [***]
to be achieved by a Discovery Construct in such Collaboration Program at the time of delivery of the Dev Go Data
Package. The Dev Go Criteria for the Initial Collaboration Targets as of the Effective Date are set forth on Schedule 1.60.
1.61 “Dev Go Data Package” has the meaning set forth in Section 2.5.2(a).
1.62 “Dev Go Data Package Acceptance Date” has the meaning set forth in Section 2.5.2(d).
1.63 “Dev Go Notice” has the meaning set forth in Section 2.5.2(d)
1.64 “Dev Go Review Period” has the meaning set forth in Section 2.5.2(d).
1.65 “Discovery Construct” has the meaning set forth in Section 2.3.1(b).
1.66 “Discovery Construct Threshold” means, with regard to each Modulator Target, the threshold criteria that
Discovery Constructs must meet in order to be included in a LSR Go Data Package and be eligible for further research and
development in the subsequent phases of the collaboration, as set forth on Schedule 1.66.
1.67 “Discovery Phase” has the meaning set forth in Section 2.3.1.
1.68 “Discovery Research Activities” means the research and Development activities set forth in a Discovery
Research Plan to be performed by BicycleTx.
1.69 “Discovery Research Plan” means the research plan setting forth (a) the activities (and estimated timelines)
for (i) for the identification, evaluation and validation of Bicycle Constructs directed to a Collaboration Target suitable for
progression as Discovery Constructs, (ii) evaluation, validation and optimization of Targeting Arms directed to Antigen
Targets, if requested by Genentech, and (iii) characterization, prioritization and optimization of such Discovery Constructs,
[***], to identify and validate one or more lead Discovery Constructs suitable to progress into further pre-clinical and
clinical Development, and (b) the data, results and information required to be included in (i) the LSR Go Data Package and
(ii) the Dev Go Data Package, in each case ((a) and (b)) including the applicable LSR Go Criteria or Dev Go Criteria and as
the same may be amended from time to time in accordance with the terms hereof.
1.70 “Dispute” has the meaning set forth in Section 15.7.
1.71 “Distributor” has the meaning set forth in Section 7.5.
1.72 “Dollars” or “$” means United States Dollars.
1.73 “Drug Approval Application” means an NDA, or any corresponding foreign application in the Territory,
including, with respect to the European Union, a Marketing Authorization Application (a “MAA”) filed with the EMA or
with the applicable Regulatory Authority of a country in Europe with respect to the mutual recognition or any other national
approval procedure.
1.74 “Effective Date” means the effective date as set forth in the preamble hereto.
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1.75 “EMA” means the European Medicines Agency and any successor agency(ies) or authority having
substantially the same function.
1.76 “European Major Market” means [***].
1.77 “Evaluation Completion Notice” has the meaning set forth in Section 2.3.1(a).
1.78 “Evaluation Phase” has the meaning set forth in Section 2.3.1(a).
1.79 “Exclusivity Obligations” has the meaning set forth in Section 7.8.1.
1.80 “Existing Patents” has the meaning set forth in Section 12.2.1.
1.81 “Existing Targeting Arms” means the Targeting Arms Controlled by BicycleTx as of the Effective Date
that are directed to the Antigen Targets set forth on Schedule 1.81.
1.82 “Expansion Option” has the meaning set forth in Section 3.1.1(b).
1.83 “Expansion Option Period” means the period [***].
1.84 “Expert” means a person with no less than [***] experience and expertise having occupied at least one
[***], but excluding any and all current or former employees and consultants of either Party. Such person shall be fluent in
the English language.
1.85 “Expert Committee” has the meaning set forth in Section 1.166.
1.86 “Exploit” or “Exploitation” means to make, have made, import, export, use, have used, sell, have sold, or
offer for sale, including to Develop, Commercialize, register, Manufacture, have Manufactured, hold, or keep (whether for
disposal or otherwise), or otherwise dispose of.
1.87 “FDA” means the United States Food and Drug Administration and any successor agency(ies) or authority
having substantially the same function.
1.88 “FFDCA” means the United States Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 301 et seq., as
amended from time to time, together with any rules, regulations and requirements promulgated thereunder (including all
additions, supplements, extensions, and modifications thereto).
1.89 “Field” means all uses.
1.90 “First Commercial Sale” means, with respect to a Licensed Product and a country, the first sale for
monetary value for use or consumption by the end user of such Licensed Product in such country after Regulatory Approval
for such Licensed Product has been obtained in such country. Sales prior to receipt of Regulatory Approval for such
Licensed Product, such as so-called “treatment IND sales”, “named patient sales”, and “compassionate use sales” shall not
be construed as a First Commercial Sale.
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1.91 “First-in-Human Clinical Trial” means the first-ever human Clinical Trial in any country conducted in
accordance with good clinical practices (as defined under Applicable Law) that is intended to initially evaluate a Licensed
Product with respect to safety, tolerability, pharmacological effects and determination of maximum tolerated dose or
recommended dose of such Licensed Product for subsequent human clinical trials as the primary endpoint, or that would
otherwise satisfy requirements of 21 CFR 312.21(a), or its foreign equivalent.
1.92 “FPFD” means, with respect to a Licensed Product and a Clinical Trial, the first dosing of the first patient
with such Licensed Product in such Clinical Trial.
1.93 “FTE” means a full-time equivalent person-year, based upon a total of no less than [***] working hours per
year, pro-rated as necessary, undertaken in connection with the conduct of research in a Discovery Research Plan. In no
circumstance can the work of any given person exceed one (1) FTE.
1.94 “Future Rights” has the meaning set forth in Section 9.8.
1.95 “Gatekeeper” has the meaning set forth in Section 3.1.5.
1.96 “Genentech” has the meaning set forth in the preamble hereto.
1.97 “Genentech Antigen Target” has the meaning set forth in Section 2.3.2(d).
1.98 “Genentech Background Know-How” means all Know-How that (a) is Controlled by Genentech or any of
its Affiliates on the Effective Date or during the Term as a result of performing activities outside the scope of this Agreement
and (b) is [***] for Exploiting any Compound or Licensed Product.
1.99 “Genentech Background Patents” means all Patents that are (a) Controlled by Genentech or any of its
Affiliates on the Effective Date or during the Term and (b) solely Cover Genentech Background Know-How.
1.100 “Genentech CMC Know-How” means Genentech Background Know-How and Genentech Collaboration
Know-How that is related to CMC Activities.
1.101 “Genentech Collaboration Invention” has the meaning set forth in Section 1.45.
1.102 “Genentech Collaboration Know-How” means all Collaboration Know-How that is generated by or on
behalf of Genentech or its Affiliates solely or jointly with a Third Party, including all Know-How in Genentech
Collaboration Inventions.
1.103 “Genentech Collaboration Patents” means all Patents that Cover Genentech Collaboration Inventions.
1.104 “Genentech ESPC” has the meaning set forth in Section 2.5.2(b).
1.105 “Genentech Indemnitees” has the meaning set forth in Section 13.2.
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1.106 “Genentech In-License Agreement” means any agreement entered into during the Term between
Genentech and a Third Party with respect to such [***] for the Exploitation of any Compound (within the limits of the
license granted pursuant to Section 7.1) or Licensed Product (excluding any Third Party Patents solely relating to any Non-
Compound Active Agent in a Combination Product), and under which Third Party agreement Genentech or its Affiliates are
required to make payments to such Third Party as a result of practicing [***] in connection with the Exploitation of a
Compound or Licensed Product, including any agreement entered into pursuant to Section 9.8, as such agreements may be
amended from time-to-time.
1.107 “Genentech Know-How” means all Genentech Background Know-How, Genentech Product Know-How,
and Genentech Collaboration Know-How.
1.108 “Genentech Patents” means all Genentech Background Patents, Genentech Product Patents, and Genentech
Collaboration Patents.
1.109 “Genentech Product Know-How” means all Product Know-How that is generated by or on behalf of
Genentech or its Affiliates solely or jointly with a Third Party, including all Know-How in Product Inventions solely
invented by or on behalf of Genentech or its Affiliates.
1.110 “Genentech Product Patents” means Patents that Cover Product Inventions solely invented by or on behalf
of Genentech or its Affiliates.
1.111 “Genentech Reserved Targets” means the Targets set forth on Schedule 1.111.
1.112 “Genentech RRC” has the meaning set forth in Section 2.5.1(b).
1.113 “Genentech Specified Countries” has the meaning set forth in Schedule 1.113 and as may be updated by
Genentech from time to time through written notification to BicycleTx.
1.114 “Genentech Targeting Arm of Interest” has the meaning set forth in Section 2.3.2(c).
1.115 “Genentech Targeting Arms” has the meaning set forth in Section 2.3.2(d).
1.116 “Genentech Withholding Tax Action” has the meaning set forth in Section 8.11.2.
1.117 “Generic Entry” has the meaning set forth in Section 8.7.3(a).
1.118 “Generic Product” means, with respect to a particular Licensed Product that has received Regulatory
Approval in a regulatory jurisdiction in the Territory and is being marketed and sold by Genentech or any of its Affiliates or
Sublicensees in such jurisdiction, a pharmaceutical product that (a) is sold in such jurisdiction by a Third Party that is not an
Affiliate, licensee or Sublicensee of Genentech, and did not purchase or acquire such product in a chain of distribution that
included Genentech or any of its Affiliates or Sublicensees, (b) has received Regulatory Approval in such jurisdiction for at
least one of the same Indications as such Licensed Product as a “generic drug,” “generic medicinal product,” “bioequivalent”
or similar designation of interchangeability by the applicable Regulatory Authority in such jurisdiction pursuant to an
expedited, abbreviated or bibliographic approval process in accordance with the then-current rules and regulations in such
jurisdiction, where such approval referred to or relied on (A) the approved NDA for such Licensed Product held by
Genentech, its Affiliate or a Sublicensee in such
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jurisdiction or (B) the data contained or incorporated by reference in such approved NDA for such Licensed Product in such
jurisdiction.
1.119 “Hit” has the meaning set forth in Section 2.3.1(a).
1.120 “Hit Success Criteria” means the criteria [***] applied during the Hit Evaluation Phase to determine
whether one (1) or more Bicycle Constructs directed to a given Collaboration Target(s) have met the proof of principle
threshold.
1.121 “Hit Validation Completion Date” has the meaning as set forth in Section 3.2.4.
1.122 “Hit Validation Phase” has the meaning set forth in Section 2.3.1(b).
1.123 “IND” means an application filed with a Regulatory Authority for authorization to commence Clinical
Studies, including (a) an Investigational New Drug Application as defined in the FFDCA or any successor application or
procedure filed with the FDA, (b) any equivalent thereof in other countries or regulatory jurisdictions, (e.g., a Clinical Trial
Application (CTA) in the European Union) and (c) all supplements, amendments, variations, extensions and renewals thereof
that may be filed with respect to the foregoing.
1.124 “Indemnification Claim Notice” has the meaning set forth in Section 13.3.
1.125 “Indemnified Party” has the meaning set forth in Section 13.3.
1.126 “Indemnitee” has the meaning set forth in Section 13.3.
1.127 “Indication” means each separate and distinct disease, disorder, illness, health condition, or interruption,
cessation or disruption of a bodily function, system, tissue type or organ, for which Regulatory Approval is required. For
clarity, [***].
1.128 “Initial Collaboration Targets” means the Modulator Targets set forth on Schedule 1.128.
1.129 “Initial Discovery Research Plan” has the meaning set forth in Section 2.2.
1.130 “Initial Reversion Package” has the meaning set forth in Section 14.6.1(b).
1.131 “Initial Reversion Package Period” has the meaning set forth in Section 14.6.1(b).
1.132 “Initial Substitution Period” has the meaning set forth in Section 3.2.1.
1.133 “Intellectual Property” has the meaning set forth in Section 14.5.1.
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1.134 “Intermediate Substitution Fee” has the meaning set forth in Section 3.2.4.
1.135 “Internal Development Program” means a bona fide internal program of BicycleTx, pursuant to which
BicycleTx is conducting research, development and/or commercialization activities in connection with Bicycles or Bicycle
Constructs directed to a [***] Target [***].
1.136 “Invention” means any invention, process, method, utility, formulation, composition of matter, article of
manufacture, material, creation, discovery, development, or finding, or any improvement thereof, whether or not patentable,
including all Intellectual Property rights therein.
1.137 “Inventory” means, at the applicable date, all then-existing clinical and non-clinical grade drug product,
active pharmaceutical ingredient, intermediates and raw materials for Compounds in the possession or control of Bicycle, as
well as any other existing materials (such as Compound reference standards and retention samples), drug delivery systems
and packaging for the manufacture or testing of such Compounds and associated Licensed Products.
1.138 “Joint Collaboration Invention” has the meaning set forth in Section 1.45.
1.139 “Joint Collaboration Know-How” means all Collaboration Know-How that is generated by or on behalf of
both Parties or their Affiliates (including any such Know-How developed with a Third Party), including all Know-How in
Joint Collaboration Inventions.
1.140 “Joint Collaboration Patents” means all Patents that Cover Joint Collaboration Inventions.
1.141 “JRC” has the meaning set forth in Section 4.1.1.
1.142 “Know-How” means all commercial, technical, scientific, and other know‑how and information, Inventions,
discoveries, trade secrets, knowledge, technology, methods, processes, practices, formulae, amino acid sequences, nucleotide
sequences, instructions, skills, techniques, procedures, ideas, designs, drawings, computer programs, specifications, data and
results (including biological, chemical, pharmacological, toxicological, pharmaceutical, physical and analytical, preclinical,
clinical, safety, manufacturing and quality control data (including regulatory data, study designs, and protocols), reagents
and materials (including assays and compounds)in all cases, whether or not confidential, proprietary, or patentable, in
written, electronic, or any other form now known or hereafter developed, but expressly excluding all Patents.
1.143 “Lead Discovery Construct” has the meaning set forth in Section 2.3.1(d).
1.144 “Lead Generation Phase” has the meaning set forth in Section 2.3.1(c).
1.145 “Lead Validation Phase” has the meaning set forth in Section 2.3.1(d).
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1.146 “LIBOR” means the London Interbank Offered Rate for deposits in United States Dollars having a maturity
of one (1) month published by the British Bankers’ Association, as adjusted from time to time on the first London business
day of each month.
1.147 “Licensed Product” means any product, including any Combination Product, comprising or containing a
Compound, in any and all forms, presentations, delivery systems, dosage forms and strengths, and formulations.
1.148 “Losses” has the meaning set forth in Section 13.1.
1.149 “LSR Go” means [***] approval of a Bicycle Construct to begin the Lead Validation Phase [***].
1.150 “LSR Go Criteria” means, on a Collaboration Program-by-Collaboration Program basis, the criteria [***]
to be achieved by a Discovery Construct in such Collaboration Program at the time of delivery of the LSR Go Data
Package. The LSR Go Criteria for the Initial Collaboration Targets as of the Effective Date are set forth on Schedule 1.150.
1.151 “LSR Go Data Package” has the meaning set forth in Section 2.5.1(a).
1.152 “LSR Go Data Package Acceptance Date” has the meaning set forth in Section 2.5.1(d).
1.153 “LSR Go Notice” has the meaning set forth in Section 2.5.1(d).
1.154 “LSR Go Review Period” has the meaning set forth in Section 2.5.1(d).
1.155 “LSR Rejected Program” has the meaning set forth in Section 2.5.1(e).
1.156 “MAA” has the meaning set forth in Section 1.73.
1.157 “Major Market” means [***]. If, for a given Licensed Product, [***] “Major Market” shall also mean
[***] for such Licensed Product. If [***] unless and until a [***] or between [***] under this Agreement), in each case for
such Licensed Product.
1.158 “Manufacture”, “Manufactured” and “Manufacturing” means all activities related to the synthesis,
making, production, processing, purifying, formulating, filling, finishing, packaging, labeling, shipping, and holding of a
Compound, any Licensed Product, or any intermediate thereof, including process development, process qualification and
validation, scale-up, pre-clinical, clinical and commercial production and analytic development, product characterization,
stability testing, quality assurance, and quality control.
1.159 “Material Proposed Terms” has the meaning set forth in Section 14.6.2(d).
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1.160 “Method of Use” has the meaning set forth in Section 1.203.
1.161 “Modified Compound” has the meaning set forth in Section 5.2.
1.162 “Modulator Target” means any Target that, when activated, induces or is expected to induce an immuno-
modulatory response in a patient.
1.163 “MTA” has the meaning set forth in Section 2.4.1.
1.164 “NDA” means a “New Drug Application”, as defined in the FFDCA, as amended, and applicable
regulations promulgated thereunder by the FDA and all amendments and supplements thereto filed with the FDA, or the
equivalent application filed with any Regulatory Authority, including all documents, data, and other information concerning
Licensed Products, which are necessary for gaining Regulatory Approval to market and sell Licensed Product in the relevant
jurisdiction.
1.165 “Negotiation Period” has the meaning set forth in Section 14.6.1(d).
1.166 “Net Sales” means, with respect to a Licensed Product in a particular period, the amount calculated by
subtracting from the Sales of such Licensed Product for such period: (i) a lump sum deduction of [***] of Sales in lieu of
those deductions that are not accounted for on a Licensed Product-by-Licensed Product basis (e.g., freight, postage charges,
transportation insurance, packing materials for dispatch of goods, custom duties); (ii) uncollectible amounts accrued during
such period on such Sales and not already taken as a gross-to-net deduction in accordance with the then currently used IFRS
in the calculation of Sales of such Licensed Product for such period; (iii) credit card fees (including, if applicable,
processing fees) accrued during such period on such Sales and not already taken as a gross-to-net deduction in accordance
with the then currently used IFRS in the calculation of Sales of such Licensed Product for such period; and (iv) government
mandated fees and taxes (but excluding taxes based on the income of the selling party) and other government charges
accrued during such period on such Sales not already taken as a gross-to-net deduction in accordance with the then currently
used IFRS in the calculation of Sales of such Licensed Product for such period, including, for example, any fees, taxes or
other charges that become due in connection with any healthcare reform, change in government pricing or discounting
schemes, or other action of a government or regulatory body. For clarity, no deductions taken in calculating Sales under
Section 1.204 may be taken a second time in calculating Net Sales.
For purposes of calculating Net Sales, all Net Sales shall be converted into Dollars in accordance with Section 8.9.
If Genentech or its Affiliates intend to sell a Combination Product in any country or other jurisdiction then the Parties shall
[***]
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If the Parties’ Alliance Managers and Senior Officers are unable to agree on [***] of such referral, then [***] shall be
determined by the following procedure: [***] each Party may present at the meeting. The [***] on both Parties. The Parties
will [***] of the Expert Committee. Unless otherwise agreed to by the Parties, the [***] may not decide on issues outside
the scope mandated under terms of this Agreement.
1.167 “Nominated Target” has the meaning set forth in Section 3.1.3.
1.168 “Non-Breaching Party” has the meaning set forth in Section 14.3.1.
1.169 “Non-Compound Active Agent” has the meaning set forth in Section 1.50.
1.170 “Option Period” has the meaning set forth in Section 14.6.1(c).
1.171 “Party” and “Parties” has the meaning set forth in the preamble hereto.
1.172 “Patents” means (a) all national, regional and international patents and patent applications, including
provisional patent applications, (b) all patent applications filed either from such patents, patent applications or provisional
applications or from an application claiming priority from either of these, including divisionals, continuations, continuations-
in-part, provisionals, converted provisionals and continued prosecution applications, (c) any and all patents that have issued
or in the future issue from the foregoing patent applications ((a) and (b)), including utility models, petty patents and design
patents and certificates of invention, (d) any and all extensions or restorations by existing or future extension or restoration
mechanisms, including revalidations, reissues, re-examinations and extensions (including any pediatric exclusivity and other
such exclusivities that are attached to patents, patent term extensions, supplementary protection certificates and the like) of
the foregoing patents or patent applications ((a), (b), and (c)), and (e) any similar rights, including so-called pipeline
protection or any importation, revalidation, confirmation or introduction patent or registration patent or patent of additions to
any of such foregoing patent applications and patents.
1.173 “Person” means an individual, sole proprietorship, partnership, limited partnership, limited liability
partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association,
joint venture or other similar entity or organization, including a government or political subdivision, department or agency of
a government.
1.174 “Phase II Clinical Trial” means a Clinical Trial in any country that would satisfy the requirements of 21
C.F.R. § 312.21(b).
1.175 “Phase III Clinical Trial” means a Clinical Trial in any country that would satisfy the requirements of 21
C.F.R. § 312.21(c).
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1.176 “Pivotal Clinical Trial” means either (a) a Clinical Trial the principal purpose of which is to demonstrate
clinically and statistically the efficacy and safety of a Licensed Product for one or more Indications in order to obtain
Regulatory Approval of such Licensed Product for such Indication(s), as further defined in 21 C.F.R. §312.21 or (b) a
Clinical Trial of a Licensed Product on a sufficient number of subjects that, prior to commencement of such trial, satisfies
both of the following ((i) and (ii)): (i) such trial is designed to establish that such Licensed Product has an acceptable safety
and efficacy profile for its intended use, and to determine warnings, precautions, and adverse reactions that are associated
with such Licensed Product in the dosage range to be prescribed, which trial is intended to support Regulatory Approval of
such Licensed Product; and (ii) such trial is a registration trial sufficient to support the filing of a Drug Approval Application
for such Licensed Product in the U.S., Japan, or a European Major Market, as evidenced by (A) an agreement with or
statement from the FDA or the EMA on a ‘Special Protocol Assessment’ or equivalent, or (B) other guidance or minutes
issued by the FDA or EMA, for such registration trial.
1.177 “Platform Invention” means an Invention that (a) is generated in the performance of activities under this
Agreement, (b) relates to the BicycleTx Platform or any component of the BicycleTx Platform, and (c) [***] a Compound or
Licensed Product.
1.178 “PMDA” means Japan’s Pharmaceuticals and Medical Devices Agency and any successor agency(ies) or
authority having substantially the same function.
1.179 “POP Achievement” has the meaning set forth in Section 2.3.1(b).
1.180 “POP Achievement Date” means the date of the JRC meeting at which POP Achievement is confirmed,
[***], or the date that the Parties mutually agree in writing that POP Achievement has occurred, if earlier.
1.181 “Prior NDA” has the meaning set forth in Section 1.54.
1.182 “Product Infringement” has the meaning set forth in Section 9.5.1(a).
1.183 “Product Labeling” means, with respect to a Licensed Product in a country or other jurisdiction in the
Territory, (a) the Regulatory Authority‑approved full prescribing information for such Licensed Product for such country or
other jurisdiction, including any required patient information, and (b) all labels and other written, printed, or graphic matter
upon a container, wrapper, or any package insert utilized with or for such Licensed Product in such country or other
jurisdiction.
1.184 “Product Invention” means, on a Compound-by-Compound and Licensed Product-by-Licensed Product
basis, a Collaboration Invention that [***] relates to a Compound, Discovery Construct, Development Candidate and/or a
Licensed Product.
1.185 “Product Know-How” means, on a Compound-by-Compound and Licensed Product-by-Licensed Product
basis, all Collaboration Know-How that is [***] related to such Compound and/or Licensed Product, including all Know-
How in Product Inventions.
1.186 “Product Patents” means (a) all Patents that Cover any Product Invention and (b) the Patents deemed
Product Patents pursuant to Section 9.4.1(b).
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1.187 “Product Trademarks” means the Trademark(s) to be used by Genentech or its Affiliates or its or their
respective Sublicensees for the Development or Commercialization of Licensed Products in the Territory and any
registrations thereof or any pending applications relating thereto in the Territory (excluding, in any event, any trademarks,
service marks, names or logos that include any corporate name or logo of the Parties or their Affiliates).
1.188 “Proposed Target” has the meaning set forth in Section 3.1.2.
1.189 “Proposed Terms” has the meaning set forth in Section 14.6.2(d).
1.190 “Publishing Notice” has the meaning set forth in Section 11.5.2.
1.191 “Publishing Party” has the meaning set forth in Section 11.5.2.
1.192 “Redacted Agreement” shall have the meaning set forth in Section 11.2.2.
1.193 “Regulatory Approval” means, with respect to a country or other jurisdiction in the Territory, all approvals
(including Drug Approval Applications), licenses, registrations, or authorizations of any Regulatory Authority necessary to
Commercialize a Discovery Construct or Licensed Product in such country or other jurisdiction, and including pricing or
reimbursement approval in such country or other jurisdiction solely where such pricing and reimbursement approval is
legally required for the sale of such Licensed Product.
1.194 “Regulatory Authority” means any applicable supra-national, federal, national, regional, state, provincial,
or local governmental or regulatory authority, agency, department, bureau, commission, council, or other entities (e.g., the
FDA, EMA and PMDA) regulating or otherwise exercising authority with respect to activities contemplated in this
Agreement, including the Exploitation of the Discovery Constructs or Licensed Products in the Territory.
1.195 “Regulatory Documentation” means all (a) applications (including all INDs and Drug Approval
Applications), registrations, licenses, authorizations, and approvals (including Regulatory Approvals), (b) correspondence
and reports submitted to or received from Regulatory Authorities (including minutes and official contact reports relating to
any communications with any Regulatory Authority) and all supporting documents with respect thereto, including all
regulatory drug lists, advertising and promotion documents, adverse event files, and complaint files, and (c) Clinical Data
and data contained or relied upon in any of the foregoing, in each case ((a), (b), and (c)) to the extent relating to a Discovery
Construct or Licensed Product.
1.196 “Relative Commercial Value” has the meaning set forth in Section 1.166.
1.197 “Research Term” means, on a Collaboration Program-by-Collaboration Program basis, the period of time
in which the Discovery Research Plan for such Collaboration Program shall be conducted, (a) commencing, as the case may
be, [***] and (b) ending upon the earlier of [***].
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1.198 “Reversion Agreement” has the meaning set forth in Section 14.6.1(d).
1.199 “Reversion Packages” has the meaning set forth in Section 14.6.1(b).
1.200 “Reversion Proceeding” shall have the meaning set forth in Section 14.6.2.
1.201 “Reversion Rights” has the meaning set forth in Section 14.6.1(c).
1.202 “Reversion Terms” has the meaning set forth in Section 14.6.1(d).
1.203 “Royalty Term” means, with respect to each Licensed Product and each country or other jurisdiction in the
Territory, the period beginning on the date of the First Commercial Sale of such Licensed Product in such country or other
jurisdiction, and ending on the latest to occur of (a) the tenth (10 ) anniversary of the First Commercial Sale of such
Licensed Product in such country or other jurisdiction or (b) the expiration date of the last Valid Claim of any Joint
Collaboration Patent or any BicycleTx Patent that Covers [***].
th
1.204 “Sales” means, for a Licensed Product in a particular period, the sum of the amounts calculated pursuant to
Sections 1.204.1 and 1.204.2:
1.204.1 The amount stated in the Roche Holding AG “Sales” line (or its equivalent, regardless of
description) of its externally published audited consolidated financial statements with respect to such Licensed Product for
such period (excluding sales to any Sublicensees that are not Affiliates of Genentech) (or, if audited financial statements are
not prepared for such period, the corresponding amount as reasonably determined for unaudited financial statements for such
period, which amounts, and associated royalties and reports, shall be reconciled with an audited financial statement at such
time as an audited financial statement for a period covering such period is prepared). This amount reflects the gross invoice
price at which such Licensed Product was sold or otherwise disposed of (other than for use as clinical supplies or free
samples) by Genentech and its Affiliates to such Third Parties (excluding sales to any Sublicensees that are not Affiliates of
Genentech) in such period reduced by gross-to-net deductions, if not previously deducted from such invoiced amount, taken
in accordance with the then currently used IFRS, to the extent any such gross-to net deductions are actually allowed. By
way of example, the gross-to-net deductions taken in accordance with IFRS as of the Effective Date and actually taken and
consistently applied across all of Genentech’s products (including Licensed Products) include the following:
[***]
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[***]
For purposes of clarity, sales by Genentech and its Affiliates to any Sublicensee shall be excluded from the calculation of
“Sales” so long as the subsequent resale by a Sublicensee to a Third Party shall be included in the calculation of “Sales” as
set forth in Section 1.204.2
1.204.2 For Sublicensees that are not Genentech Affiliates (and excluding compulsory sublicensees, which
shall not be considered Sublicensees as that term is used throughout this Agreement), the sales amounts reported to
Genentech and its Affiliates in accordance with the applicable sublicense agreement contractual terms and such
Sublicensee’s then-currently used Accounting Standards consistently applied across all of such Sublicensee’s products, so
long as such reported amounts are not materially less than what the calculation of Sales would have been if such sales had
been made by Genentech and calculated in accordance with Section 1.204.1. For the purpose of clarity, any sales reported to
Genentech in accordance with a compulsory sublicense agreement (i.e., a sublicense granted to a Third Party through the
order, decree, or grant of a governmental authority having competent jurisdiction authorizing such Third Party to make, use,
sell, offer for sale, import and export a Licensed Product in such jurisdiction) shall be excluded from the calculation of
“Sales”.
1.205 “Secondary Reversion Package” has the meaning set forth in Section 14.6.1(b).
1.206 “Secondary Reversion Package Period” has the meaning set forth in Section 14.6.1(b).
1.207 “Segregate” means with respect to a Segregation Product, to segregate the development and
commercialization activities relating to such Segregation Product in the Field from Development and Commercialization
activities with respect to Compounds and Licensed Products under this Agreement, including to ensure that: (a) [***]; and
(b) [***].
1.208 “Segregation Product” means any pharmaceutical or biologic product, process, service or therapy that is
directed to any Modulator Target that is the subject of any Collaboration Program hereunder, for any Indication.
1.209 “Senior Officer” means, with respect to BicycleTx, its [***] or his/her designee, and with respect to
Genentech, it [***] or his/her designee.
1.210 “Sublicensee” means a Person, other than an Affiliate or a Distributor, that is granted a sublicense by
Genentech under the grants in Section 7.1 as provided in Section 7.4.
1.211 “Substitute Target” has the meaning set forth in Section 3.2.1.
1.212 “Target” means [***] or similar information, such as its [***]. Such Target shall be deemed to include (a)
[***]
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[***]; and (b) [***].
1.213 “Target Acceptance Date” has the meaning set forth in Section 3.1.3.
1.214 “Target Availability Notice” has the meaning set forth in Section 3.1.3.
1.215 “Target Exclusivity Period” has the meaning set forth in Section 7.8.2.
1.216 “Targeting Arm” means a Bicycle directed to an Antigen Target.
1.217 “Targeting Arm Criteria” has the meaning set forth in Section 2.3.2(j).
1.218 “Targeting Arm Data Package” has the meaning set forth in Section 2.3.2(j).
1.219 “Targeting Arm Data Package Acceptance Date” has the meaning set forth in Section 2.3.2(j).
1.220 “Targeting Arm Notice” has the meaning set forth in Section 2.3.2(k).
1.221 “Targeting Arm Review Period” has the meaning set forth in Section 2.3.2(k).
1.222 “Target Nomination Fee” has the meaning set forth in Section 3.1.1(e).
1.223 “Target Nomination Notice” has the meaning set forth in Section 3.1.3.
1.224 “Target Substitution” has the meaning set forth in Section 3.2.
1.225 “Term” has the meaning set forth in Section 14.1.
1.226 “Terminated Asset” means, on a Collaboration Program-by-Collaboration Program basis, with respect to a
Collaboration Program that is terminated by either Party under ARTICLE 14 following Genentech’s delivery of a Dev Go
Notice, each Compound, Discovery Construct, Development Candidate and Licensed Product directed to the Terminated
Target that is the subject of such Collaboration Program.
1.227 “Terminated Target” means a Collaboration Target that is (a) the subject of a Collaboration Program that
has been terminated for any reason pursuant to ARTICLE 14, (b) the subject of a Collaboration Program for which
Genentech has elected not to deliver (or otherwise did not timely deliver) a LSR Go Notice or a Dev Go Notice, as
applicable, or (c) no longer included within a Collaboration Program following a Target Substitution.
1.228 “Terminated Territory” means (a) each Major Market with respect to which this Agreement is terminated
by BicycleTx pursuant to Section 14.3.3, (b) each country with respect to which the Agreement is terminated by Genentech
pursuant to Section 14.2 or 14.3.1, or (c) if this Agreement is terminated in its entirety, the entire Territory.
1.229 “Territory” means the entire world.
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1.230 “Third Party” means any Person other than BicycleTx, Genentech and their respective Affiliates.
1.231 “Third Party Claims” has the meaning set forth in Section 13.1.
1.232 “Third Party Negotiations” means ongoing negotiations with a Third Party on a research plan and/or
financial or other deal terms, [***].
1.233 “Third Party Provider” has the meaning set forth in Section 5.5.
1.234 “Trademark” means any word, name, symbol, color, scent, design, designation or device or any
combination thereof that functions as a source identifier, including any trademark, trade dress, brand mark, service mark,
trade name, brand name, logo, business symbol or domain name, whether or not registered.
1.235 “Unavailable Target(s)” means any [***] Target that is not available for nomination as a Collaboration
Target by Genentech under this Agreement because such [***] Target is (a) the subject of an active, executed written
agreement with a Third Party granting a license, or other rights with respect to Bicycle Constructs or products intended for
use against such [***] Targets that would prevent BicycleTx from granting the rights to Genentech set forth in this
Agreement, (b) the subject of an Internal Development Program, or (c) [***] such [***] Target.
1.236 “Unblocking License” means:
(a) a non-exclusive, royalty-free, sublicenseable, worldwide license under [***];
Construct directed to a Terminated Target; and
(b) solely in the case of a termination of this Agreement under ARTICLE 14, a [***] Bicycle
(collectively, the Patents in (a) through (c), the “Unblocking Patents”),
(c) an [***] license under Genentech’s interest in and to all Joint Collaboration Patents
in each case of (a) through (c) for the sole purpose of, and solely to the extent necessary to Exploit Bicycle Constructs
directed to the applicable Terminated Target, provided that the licenses set forth above shall expressly exclude any grant of
rights to (i) any Non-Compound Active Agents that are Covered by such Unblocking Patents and (ii) [***]. For clarity,
Genentech [***].
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1.237 “Unblocking Patents” has the meaning set forth in Section 1.236.
1.238 “United States” or “U.S.” means the United States of America and its territories and possessions (including
the District of Columbia and Puerto Rico).
1.239 “United States – United Kingdom Income Tax Convention” means the Convention between the
government of the United States of America and the government of the United Kingdom of Great Britain and Northern
Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and
Capital Gains.
1.240 “Valid Claim” means a claim of any issued and unexpired Patent whose validity, enforceability, or
patentability has not been rendered invalid by any of the following: (a) irretrievable lapse, abandonment, revocation,
dedication to the public, or disclaimer; or (b) a holding, finding, or decision of invalidity, unenforceability, or non-
patentability by a court, governmental agency, national or regional patent office, or other appropriate body that has
competent jurisdiction, such holding, finding, or decision being final and unappealable or unappealed within the time
allowed for appeal.
1.241 “Working Group” has the meaning set forth in Section 4.8.
ARTICLE 2
DISCOVERY COLLABORATION AND ACTIVITIES
2.1 Collaboration Overview. For each Collaboration Target, BicycleTx shall perform Discovery Research
Activities in connection with Bicycle Constructs directed to such Collaboration Target with or without a Targeting Arm
(each, a “Collaboration Program”) pursuant to a Discovery Research Plan. The Discovery Research Activities are aimed
at generating Bicycle Constructs that are directed to the applicable Collaboration Target and suitable to progress through
Genentech’s LSR Go and Dev Go, in order to select and advance a Development Candidate into further pre-clinical and
clinical Development and Commercialization as a Licensed Product.
2.2 Discovery Research Plan. The Discovery Research Plan for the Initial Collaboration Targets as of the
Effective Date (the “Initial Discovery Research Plan”) is as attached hereto as Schedule 1.69. Subject to ARTICLE 4, the
Parties may amend the Initial Discovery Research Plan or any subsequent Discovery Research Plan for subsequent
Collaboration Targets upon agreement of the JRC.
2.3 Phases of the Collaboration.
2.3.1 Modulator Targets. In general, for each Modulator Target that is the subject of a Collaboration
Program, the Discovery Research Activities under the Discovery Research Plan will be divided into the following stages
(each, a “Discovery Phase”):
(a) BicycleTx will perform an initial evaluation and feasibility screen to generate Bicycles
suitable for binding the specified Modulator Target, which screen will be focused on generating a series of alternative
Bicycle Constructs that are directed to and capable of binding the applicable Modulator Target, and are considered suitable
for further evaluation as potential Discovery Constructs (each such Bicycle Construct, a “Hit” and such discovery phase, the
“Evaluation Phase”). BicycleTx will notify Genentech in writing (which may be through the JRC) promptly following
completion of the Evaluation Phase for each Modulator Target, which shall include details of the Hits
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identified in such Evaluation Phase (the “Evaluation Completion Notice”) in order for Genentech to determine whether or
not it wishes to exercise its substitution right under Section 3.2.
(b) If the Evaluation Phase results in one (1) or more Hits, BicycleTx will perform a full
validation screen of the identified Hits, initially evaluating such Hits against the Hit Success Criteria (such phase, the “Hit
Validation Phase”). The Hit Success Criteria for the Initial Collaboration Targets are set forth in Schedule 1.120. The Hit
Success Criteria for additional Modulator Targets shall be substantially similar in form and content to the criteria set forth in
Schedule 1.120, [***]. Bicycle Constructs that achieve the Hit Success Criteria will be deemed to have met the proof-of-
principle threshold (the achievement of proof-of-principle by one or more Bicycle Constructs, the “POP Achievement” for
the applicable Modulator Target). Bicycle Constructs that reach POP Achievement will be progressed by BicycleTx through
the remainder of the validation screens and completion of the Hit Validation Phase. Bicycle Constructs that successfully
complete the Hit Validation Phase will be deemed “Discovery Constructs”.
(c) Following completion of the Hit Validation Phase, BicycleTx will perform characterization,
prioritization and optimization of each such Discovery Construct in accordance with the Discovery Research Plan (the
“Lead Generation Phase”) to identify one or more lead Discovery Constructs [***]. Following completion of the Lead
Generation Phase for Discovery Constructs directed to a given Modulator Target, BicycleTx will submit to Genentech the
LSR Go Data Package in accordance with Section 2.5.1(a).
(d) If Genentech determines, in its sole discretion, to progress Discovery Research Activities
beyond LSR Go, the Parties will select one or more lead Discovery Constructs (a “Lead Discovery Construct”) to be the
subject of initial pre-clinical Development by BicycleTx, [***], in each case as further set forth in the Discovery Research
Plan (such phase, the “Lead Validation Phase”). The Lead Validation Phase may be performed on (i) a Discovery
Construct directed solely to a Modulator Target, or (ii) a Discovery Construct directed to a Modulator Target that also
incorporates a Targeting Arm ([***]). Following completion of the Lead Validation Phase for one or more Lead Discovery
Constructs directed to a given Collaboration Target, BicycleTx will submit to Genentech the Dev Go Data Package in
accordance with Section 2.5.2(a) in order for Genentech to determine whether it wishes to progress such Lead Discovery
Construct into further pre-clinical Development, [***]. Any Discovery Construct selected by Genentech to progress into
further pre-clinical Development following the Lead Validation Phase, including any Modified Compound will be
designated a “Development Candidate”.
2.3.2 Antigen Targets; Targeting Arms.
(a) Subject to Genentech’s substitution rights under Section 3.2, Genentech has the right to
select, in its sole discretion, a total of up to four (4) Antigen Targets as Collaboration Targets for Targeting Arms under this
Agreement (i.e., one (1) Antigen Target for each Collaboration Program), as set forth in the remainder of this Section 2.3.2.
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(b) BicycleTx will evaluate and utilize [***] Targeting Arms in each Collaboration Program
according to the Discovery Research Plan. If [***] Targeting Arm is incorporated into a Licensed Product, then Section
8.5.2 applies.
(c) In addition, Genentech may request that BicycleTx evaluate and utilize other Targeting
Arms in Collaboration Programs. If such request is for a BicycleTx Future Independent Targeting Arm, then, if the
applicable Targeting Arm is also listed in Part 1 of Schedule 2.3.2 (“Genentech Targeting Arms of Interest”), then
BicycleTx will evaluate such a Genentech Targeting Arm of Interest according to the applicable Discovery Research Plan,
and [***]. If such requested Targeting Arm is not listed as a Genentech Targeting Arm of Interest, but is a BicycleTx Future
Independent Targeting Arm, such BicycleTx Future Independent Targeting Arm shall be subject to confirmation of the
availability of the applicable Antigen Target pursuant to Section 3.1.3 or Section 3.1.5, as applicable. For clarity, [***] upon
selection of the applicable Antigen Target, if available, and BicycleTx will evaluate such other BicycleTx Future
Independent Targeting Arm according to the applicable Discovery Research Plan, provided that [***].
(d) Genentech may request that BicycleTx evaluate and utilize Targeting Arms directed to
Antigen Targets selected by Genentech and which are not targeted by any Existing Targeting Arm or BicycleTx Future
Independent Targeting Arm pursuant to Section 2.3.2(c) (“Genentech Antigen Target”). Genentech shall make an inquiry
regarding the availability of such Genentech Antigen Target pursuant to Section 3.1.3 or Section 3.1.5, as applicable. For
clarity, [***] upon selection of such Genentech Antigen Target, if available, and BicycleTx will evaluate such other
BicycleTx Future Independent Targeting Arm according to the applicable Discovery Research Plan, provided that the
generation of Targeting Arms directed to Genentech Antigen Targets (“Genentech Targeting Arms”) shall be subject to the
payments set forth in Section 8.2.2.
(e) BicycleTx may [***]. If BicycleTx desires to [***].
(f) Genentech may [***]. If Genentech [***].
may [***]
(g) Without limiting the generality of the foregoing Sections 2.3.2(e) and 2.3.2(f), both Parties
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[***] basis, without [***]. At Genentech’s request, BicycleTx shall [***] that exists as of the Targeting Arm Data Package
Acceptance Date for the [***].
(h) Notwithstanding the last sentence of Section 2.3.2(f), from the Effective Date until [***]
(the “[***] Option Period”), Genentech has the option to [***] Targeting Arm (“[***] Products”) outside this Agreement
(the “[***] Option”, and the associated license, the “[***] License”). For clarity, the right under the [***] License [***],
and does not include the right to [***] basis. Genentech may exercise the [***] Option by providing written notice to
BicycleTx (“[***] Option Notice”) any time within the [***] Option Period. Following BicycleTx’s receipt of the [***]
Option Notice during the [***] Option Period, the Parties shall negotiate in good faith for a period of [***] terms of the
[***] License, which shall be [***].
(i) Notwithstanding the last sentence of Section 2.3.2(e), after the earlier of the date of (i)
[***] Targeting Arm (and subject to Section 7.8)] and (ii) [***], BicycleTx may [***], provided that BicycleTx notifies
Genentech in writing [***] within [***] from Genentech therefor. If BicycleTx [***] a Third Party to use the [***]
Targeting Arm, then BicycleTx shall provide Genentech with [***] Genentech of [***] within [***] after receipt of an
invoice from Genentech therefor.
(j) The Discovery Research Activities for each such Targeting Arm will proceed through the
Evaluation Phase, Hit Validation Phase and Lead Generation Phase in substantially the same manner as for Modulator
Targets, with BicycleTx evaluating, validating, and optimizing Targeting Arms directed to such Antigen Target, and
evaluating activity of such Targeting Arm in connection with the applicable Discovery Construct in accordance with the
amended Discovery Research Plan. Following the completion of the Lead Generation Phase for a Targeting Arm, BicycleTx
will provide Genentech, through the JRC, with a data package of information and data relating to the combination of such
Targeting Arm with the selected Discovery Construct and confirmation that the Targeting Arm has met the criteria [***],
which shall be [***] Targeting Arm, [***] (the “Targeting Arm Criteria”, such Targeting Arm Criteria applicable for the
[***] Targeting Arm being set forth in Part 3 of Schedule 2.3.2, and each such data package, a “Targeting Arm Data
Package”). During the [***] period immediately following delivery of a Targeting Arm Data Package, or such longer
period as the Parties may agree in writing, Genentech may (i) identify data or
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information that Genentech considers is missing from such Targeting Arm Data Package, and request in writing that
BicycleTx provides such missing information or data, and (ii) make reasonable inquiries of BicycleTx for further
clarification and information in connection with the data and information included in such Targeting Arm Data Package, or
the achievement of the Targeting Arm Criteria. With respect to (A) any data or information identified as missing from such
Targeting Arm Data Package, BicycleTx shall update such Targeting Arm Data Package to include any such missing
information and shall deliver a revised Targeting Arm Data Package [***] after the receipt of such request from Genentech;
and (B) Genentech’s other inquiries, BicycleTx will [***]; provided that in the case of (B), BicycleTx shall not be required
to perform any additional assays or analyses or generate any additional data in connection with such requests. The Targeting
Arm Data Package shall be deemed complete upon the later of (1) the delivery to Genentech of a complete Targeting Arm
Data Package containing the information identified by Genentech in subclause (i) and confirmation by the JRC that the
Targeting Arm Criteria have been met, or (2) the expiration of such [***] review period (the “Targeting Arm Data Package
Acceptance Date”).
(k) Genentech shall determine, in its sole discretion, within [***] following the Targeting Arm
Data Package Acceptance Date (the “Targeting Arm Review Period”), whether it wishes to progress the applicable
Discovery Construct into initial pre-clinical Development activities with the incorporation of the evaluated Targeting
Arm. Genentech shall notify BicycleTx in writing of its decision (the “Targeting Arm Notice”) prior to the expiration of
the Targeting Arm Review Period, and if such decision is in the affirmative BicycleTx shall thereafter progress such
Discovery Construct (including such Targeting Arm) into the Lead Validation Phase, and the applicable Collaboration
Program shall be deemed to include such Targeting Arm and the applicable Antigen Target to which it is directed.
2.4 Discovery Research Activities.
2.4.1 For each Collaboration Program (including any Substitute Target or activities with respect to a
Targeting Arm), BicycleTx shall carry out the Discovery Research Activities for each Discovery Phase. BicycleTx shall
perform the Discovery Research Activities in good scientific manner, in accordance with this Agreement, and in compliance
with all Applicable Law, and shall use diligent efforts to complete the activities for each Collaboration Target set forth in the
Discovery Research Plan during the applicable Research Term. Through the JRC, Genentech shall provide reasonable
intellectual assistance requested by BicycleTx in connection with its performance of the Discovery Research Activities.
Genentech, at is sole discretion, may also agree to perform certain Discovery Research Activities pursuant to mutual
agreement of the JRC. If applicable, Genentech shall perform all such Discovery Research Activities in good scientific
manner in accordance this Agreement, and in compliance with all Applicable Law. BicycleTx may agree from time to time
to transfer materials, including any Bicycle Constructs or Discovery Constructs to Genentech, to enable Genentech to
perform certain Discovery Research Activities. BicycleTx’s agreement for any such transfer shall not be unreasonably
withheld, conditioned or delayed and shall be performed under the terms of a material transfer agreement (the “MTA”),
which MTA shall provide that (a) such materials may only be used in connection with the Discovery Research Activities
Genentech has agreed to perform, during the period set forth in such MTA, and (b) no modification or reverse engineering of
any materials by or on behalf of Genentech will be permitted, except to the extent expressly set forth in such MTA. The
Parties shall negotiate in good faith and agree upon the form of such MTA [***].
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2.4.2 If, with respect to a given Collaboration Program, the JRC concludes that the Discovery Research
Activities for such Collaboration Program will not be completed by the end of the applicable Research Term as defined in
Section 1.197(b)(i), then the Parties may via the JRC mutually agree to extend such Research Term for an additional period
of time so as to permit the completion of the remaining Discovery Research Activities, and BicycleTx shall [***] (provided
that the remaining [***], provided that [***] in connection with such extension [***], then [***] extension [***]. BicycleTx
shall conduct Discovery Research Activities concurrently on up to [***] Collaboration Targets, provided that [***], then the
foregoing [***].
2.4.3 Following the completion of the Discovery Research Activities for each Discovery Phase for each
Collaboration Program, BicycleTx shall deliver to Genentech, through the JRC, the results and data arising from such
Discovery Phase and set forth to be delivered to the JRC in the applicable Discovery Research Plan. In addition, (a)
following the completion of the Lead Generation Phase for each Collaboration Program, BicycleTx shall deliver to
Genentech the LSR Go Data Package in order for Genentech to determine whether to progress the applicable Collaboration
Program into the Lead Validation Phase, as further set forth in Section 2.5.1, and (b) following the completion of the Lead
Validation Phase for each Collaboration Program, BicycleTx shall deliver to Genentech the Dev Go Data Package in order
for Genentech to determine whether to progress the applicable Collaboration Program into further pre-clinical Development
activities, as further set forth in Section 2.5.2.
2.5 Discovery Progression Decision Points.
2.5.1 LSR Go.
(a) Promptly following the completion of the Lead Generation Phase for each Collaboration
Program, BicycleTx will notify Genentech and provide the JRC with a draft data package that BicycleTx intends to submit
in order for Genentech to make a decision regarding LSR Go, which data package will include the following information
and data relating to all Discovery Constructs generated under such Collaboration Program that meet the Discovery Construct
Threshold: (i) [***] for inclusion in such data package, (ii) the results of the testing and analyses performed to characterize
and prioritize such Discovery Constructs during the Lead Generation Phase, including the performance against and
confirmation (or otherwise) of achievement of the LSR Go Criteria, (iii) BicycleTx’s recommendations for selection of a
Lead Discovery Construct from those Discovery Constructs that met the Discovery Construct Threshold, and (iv) any results
and data generated in the performance of the Hit Validation Phase (to the extent not already provided to Genentech) (each
such data package, an “LSR Go Data Package”).
(b) The Parties will discuss the draft LSR Go Data Package at the applicable JRC meeting, and
within [***] following such JRC meeting, Genentech may (i) identify data or information that Genentech reasonably
considers is missing from such draft LSR Go Data Package, and
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request in writing that BicycleTx provides such missing information or data, and (ii) make reasonable inquiries of BicycleTx
for further clarification and information in connection with the data and information included in such draft LSR Go Data
Package, and the basis for BicycleTx’s analyses or designation of any Lead Discovery Constructs. For clarity, [***]. With
respect to any data or information identified as missing from such draft LSR Go Data Package, BicycleTx shall promptly
update such draft LSR Go Data Package to include any such missing information or provide responses to Genentech’s other
inquiries, provided that BicycleTx shall not be required to perform any additional assays or analyses or generate any
additional data in connection with such requests. If the Parties agree at the JRC meeting that the draft LSR Go Data Package
is complete, or if Genentech makes no requests for additional information under subclause (i) or (ii) within the [***] period
following such JRC meeting, then the LSR Go Data Package will be deemed to be in final form, and Section 2.5.1(d) will
apply.
(c) If Genentech requests further information in connection with the draft LSR Go Data
Package pursuant to Section 2.5.1(b), BicycleTx shall notify Genentech when such information is available and the Parties
shall schedule a further meeting of the JRC no later than [***] following such notice to Genentech to consider such revised
draft LSR Go Data Package. Unless Genentech identifies, at the time of such JRC meeting, further information that is
reasonably required to be included (in which case Section 2.5.1(b) shall apply again to such review and provision of
information), the LSR Go Data Package shall be deemed complete at such JRC meeting.
(d) Genentech shall schedule a meeting [***] as soon as practicable following the date of the
JRC meeting at which the LSR Go Data Package is deemed final (or expiration of the [***] period for requests for additional
information under Section 2.5.1(b), if applicable), and shall notify BicycleTx of the date of such meeting. Genentech may,
[***], (i) identify data or information [***] missing from the LSR Go Data Package, and request in writing that BicycleTx
provides such missing information or data, and (ii) make reasonable inquiries of BicycleTx for further clarification and
information in connection with the data and information included in such LSR Go Data Package, the achievement (or
otherwise) of the LSR Go Criteria, and the basis for BicycleTx’s analyses or designation of any Lead Discovery Constructs.
With respect to any data or information reasonably identified [***] as missing from such LSR Go Data Package, or
responses to Genentech’s inquiries, BicycleTx shall promptly provide such responses or update such LSR Go Data Package
to include any such missing information and shall deliver a revised LSR Go Data Package as soon as reasonably
practicable. The LSR Go Data Package shall be deemed complete upon the later of (A) the delivery [***] of a complete
LSR Go Data Package containing the additional information requested [***], as confirmed in writing by Genentech, and (B)
the expiration of such [***] review period (the “LSR Go Data Package Acceptance Date”). Genentech shall determine, in
its sole discretion, within [***] following the LSR Go Data Package Acceptance Date (the “LSR Go Review Period”),
whether the applicable Discovery Constructs have achieved LSR Go and are suitable to advance into initial pre-clinical
Development activities. Genentech shall notify BicycleTx in writing of its decision (the “LSR Go Notice”) prior to the
expiration of the LSR Go Review Period, and if such decision is in the affirmative Genentech shall also designate in such
LSR Go Notice the one or more Lead Discovery Construct(s) for such Collaboration Target.
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(e) On a Collaboration Program-by-Collaboration Program basis, if Genentech does not timely
deliver a LSR Go Notice for such Collaboration Program (a “LSR Rejected Program”), BicycleTx shall have the right
thereafter to conduct research, Development and Commercialization in connection with the Discovery Constructs and
Compounds directed to the applicable Terminated Target, and to grant rights to Third Parties to conduct any of the foregoing
activities based on the data and information included in the LSR Go Data Package provided to Genentech for such LSR
Rejected Program without further obligations to Genentech. Notwithstanding the foregoing, if BicycleTx [***] period
following the expiration of the LSR Go Review Period, [***], as follows: (i) BicycleTx shall provide written notice to
Genentech within such [***] period of [***] applicable LSR Go Data Package, (ii) Genentech shall have a period of [***] in
which to [***] of this Agreement, (iii) Genentech may [***] period, and BicycleTx shall [***], (iv) if Genentech provides
such notice, Genentech shall [***] following the date of such notice, [***] such LSR Rejected Program if Genentech [***]
for such LSR Rejected Program, and (v) effective upon the date of the [***], (A) such LSR Rejected Program shall once
again become a Collaboration Program, (B) all of the terms of this Agreement, including, for clarity, the exclusivity
provisions in Section 7.8, shall once again apply to such Collaboration Program.
2.5.2 Dev Go.
(a) Promptly following the completion of the Lead Validation Phase for each Collaboration
Program, BicycleTx will notify Genentech and provide the JRC with a draft data package that BicycleTx intends to submit
in order for Genentech to make a decision regarding Dev Go, which data package will include the following information and
data relating to the Lead Discovery Constructs for such Collaboration Program: (i) [***] for inclusion in such data package,
(ii) the results of the testing and analyses performed to characterize and prioritize such Lead Discovery Constructs during the
Lead Validation Phase, including the performance against and confirmation (or otherwise) of achievement of the Dev Go
Criteria, (iii) the Compounds for such Collaboration Program, (iv) BicycleTx’s recommendations for Development
Candidate selection, and (v) any results and data generated in the performance of the Lead Validation Phase (to the extent
not already provided to Genentech) (each such data package, a “Dev Go Data Package”).
(b) The Parties will discuss the draft Dev Go Data Package at the applicable JRC meeting, and
within [***] following such JRC meeting, Genentech may (i) identify data or information that Genentech reasonably
considers is missing from such draft Dev Go Data Package, and request in writing that BicycleTx provides such missing
information or data, and (ii) make reasonable inquiries of BicycleTx for further clarification and information in connection
with the data and information included in such draft Dev Go Data Package, the achievement or otherwise of the Dev Go
Criteria, and the basis for BicycleTx’s analyses or designation of any Development Candidates included therein. For clarity,
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[***]. With respect to any data or information identified as missing from such draft Dev Go Data Package, BicycleTx shall
promptly update such draft Dev Go Data Package to include any such missing information or provide responses to
Genentech’s other inquiries, provided that BicycleTx shall not be required to perform any additional assays or analyses or
generate any additional data in connection with such requests. If the Parties agree at the JRC meeting that the draft Dev Go
Data Package is complete, or if Genentech makes no requests for additional information under subclause (i) or (ii) within the
[***] period following such JRC meeting, then the Dev Go Data Package will be deemed to be in final form, and Section
2.5.2(d) will apply.
(c) If Genentech requests further information in connection with the draft Dev Go Data
Package pursuant to Section 2.5.2(b), BicycleTx shall notify Genentech when such information is available and the Parties
shall schedule a further meeting of the JRC no later than [***] following such notice to Genentech to consider such revised
draft Dev Go Data Package. Unless Genentech identifies, at the time of such JRC meeting, further information that is
reasonably required to be included (in which case Section 2.5.2(b) shall apply again to such review and provision of
information), the Dev Go Data Package shall be deemed complete at such JRC meeting.
(d) Genentech shall schedule a meeting [***] as soon as practicable following the date of the
JRC meeting at which the Dev Go Data Package is deemed final (or expiration of the [***] period for requests for additional
information under Section 2.5.2(b), if applicable), and shall notify BicycleTx of the date of such meeting. Genentech may,
[***], (i) identify data or information [***] missing from the Dev Go Data Package, and request in writing that BicycleTx
provides such missing information or data, and (ii) make reasonable inquiries of BicycleTx for further clarification and
information in connection with the data and information included in such Dev Go Data Package, and the basis for
BicycleTx’s analyses or designation of any Development Candidates included therein. With respect to any data or
information [***] missing from such Dev Go Data Package, or responses to Genentech’s inquiries, BicycleTx shall promptly
provide such responses or update such Dev Go Data Package to include any such missing information and shall deliver a
revised Dev Go Data Package as soon as reasonably practicable. The Dev Go Data Package shall be deemed complete upon
the later of (A) the delivery [***] of a complete Dev Go Data Package containing the additional information requested
[***], as confirmed in writing by Genentech, and (B) the expiration of such [***] review period (the “Dev Go Data
Package Acceptance Date”). Genentech shall determine, in its sole discretion, within [***] following the Dev Go Data
Package Acceptance Date (the “Dev Go Review Period”), whether the applicable Discovery Constructs have achieved Dev
Go and are suitable to advance into further pre-clinical Development activities. Genentech shall notify BicycleTx in writing
of its decision (the “Dev Go Notice”) prior to the expiration of the Dev Go Review Period, and if such decision is in the
affirmative Genentech shall also designate in such Dev Go Notice one or more Development Candidates for such
Collaboration Target.
2.5.3 Termination of Discovery Research Activities for a Collaboration Program. If Genentech
determines in its sole discretion at either the LSR Go or Dev Go decision points that it does not wish to pursue further
Discovery Research Activities or Development in connection with a given
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Collaboration Program, it shall provide written notice to BicycleTx of such decision, and as of and following the date of
such notice: (a) BicycleTx’s Exclusivity Obligations with respect to the applicable Collaboration Target(s) and Collaboration
Program(s) pursuant to Section 7.8 shall terminate, and subject to Genentech’s rights under Section 2.5.1(e), such
Collaboration Target shall become a Terminated Target, (b) all rights and licenses granted to Genentech by BicycleTx in
connection with such Collaboration Program will terminate, except that (i) [***], and (ii) [***] in connection with the
Terminated Target. For clarity, if Genentech provides no response in writing to BicycleTx before the expiration of the LSR
Go Review Period, or the Dev Go Review Period, as applicable, Genentech will be deemed to have terminated such
Collaboration Program, effective as of the expiration date of the LSR Go Review Period, or the Dev Go Review Period, as
applicable.
ARTICLE 3
TARGET NOMINATION AND SUBSTITUTION
3.1 Target Nomination.
3.1.1 Modulator Target Nomination. Genentech has the right to select, in its sole discretion, a total of
up to four (4) Modulator Targets as Collaboration Targets under this Agreement, in each case, as set forth in the remainder of
this Section 3.1.1.
be included as the subject of initial Discovery Research Activities under this Agreement.
(a) As of the Effective Date, Genentech has selected the two (2) Initial Collaboration Targets to
(b) Subject to this ARTICLE 3, including Genentech’s substitution and exchange rights
hereunder, during the Expansion Option Period, Genentech has the right to select, in its sole discretion, a total of up to two
(2) additional Modulator Targets as Collaboration Targets to be the subject of initial Discovery Research Activities under
this Agreement, and potential Development and Commercialization of Discovery Constructs and Licensed Products
incorporating such Discovery Constructs (each, an “Expansion Option”). Genentech may exercise each Expansion Option
by (i) selecting such additional Modulator Targets from the list of Genentech Reserved Targets, or (ii) nominating any other
Modulator Target pursuant to Section 3.1.3, provided that if such Nominated Target is an Unavailable Target, such
Expansion Option shall not be deemed exercised.
(c) Notwithstanding Section 3.1.1(b), (i) if Genentech does not exercise an Expansion Option
within [***], all Expansion Options will expire, and Genentech shall thereafter have no further right to nominate any
additional Collaboration Targets to be the subject of Discovery Research Activities under this Agreement. For clarity, the
total number of Genentech Reserved Targets prior to Genentech’s exercise of any Expansion Option may not exceed two
(2). Genentech shall be deemed to have timely exercised its Expansion Option(s) if
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Genentech has delivered the Target Nomination Notice within the applicable time period specified in this Section 3.1.1(c),
even if BicycleTx delivers the Target Availability Notice only after the expiry of such time period. For clarity, if Genentech
has timely exercised an Expansion Option and BicycleTx indicates in the Target Availability Notice that the Modulator
Target requested by Genentech in such Target Nomination Notice is an Unavailable Target, then Genentech may, within
[***] after receipt of such Target Availability Notice, deliver a subsequent Target Nomination Notice for a different
Modulator Target, even if such subsequent Target Nomination Notice is delivered after the expiry of the applicable time
period set forth in this Section 3.1.1(c).
(d) Subject to [***] Section 3.1.1(c), if Genentech wishes to select a Genentech Reserved
Target as a Collaboration Target, Genentech shall notify BicycleTx in writing, and upon payment of the Target Nomination
Fee as set forth in Section 3.1.1(e), such Genentech Reserved Target shall automatically become a Collaboration Target
hereunder.
Genentech shall pay to BicycleTx a one-time payment (the “Target Nomination Fee”) as set forth in Section 8.2.1.
(e) For each additional Modulator Target selected by Genentech pursuant to this Section 3.1.1,
3.1.2 Target Proposal. Prior to nomination of a Target (whether pursuant to Section 3.1.3 or Section
3.2), Genentech may, in its discretion, disclose a Target it is considering for potential nomination (a “Proposed Target”) to
BicycleTx and request in writing that BicycleTx confirm whether the Proposed Target is an Unavailable Target. BicycleTx
shall notify Genentech in writing, within [***], whether such Nominated Target is an Unavailable Target. Notwithstanding
anything herein to the contrary, (a) Genentech shall have no obligation to nominate any Proposed Targets, and (b) in no way
shall a request by Genentech with respect to a Proposed Target under this Section 3.1.2 be deemed to be a nomination of the
Target as a Collaboration Target (and such Target shall not be considered nominated unless and until it is formally nominated
in accordance with the terms and conditions set forth in Section 3.1.3).
3.1.3 Target Nomination Process. To nominate a Modulator Target or Antigen Target other than a
Genentech Reserved Target as a Collaboration Target, Genentech shall provide BicycleTx with a confidential written
description of the applicable Modulator Target or Antigen Target (the “Nominated Target”), including, [***] such
Modulator Target or Antigen Target (the “Target Nomination Notice”). Within [***] following BicycleTx’s receipt of the
Target Nomination Notice with respect to a Nominated Target, BicycleTx shall verify whether such Nominated Target is on
its list of Unavailable Targets and notify Genentech in writing (“Target Availability Notice”). If the Target Availability
Notice indicates that the Nominated Target is not on the list of Unavailable Targets, then, within [***] of such Target
Availability Notice, the Parties will negotiate and mutually agree upon a Discovery Research Plan for such Nominated
Target. Any such Discovery Research Plan shall be substantially similar in form and content to the Discovery Research
Plan(s) for the previous Collaboration Target(s), including the Initial Discovery Research Plan, [***]. Thereafter, such
Nominated Target shall be designated as a “Collaboration Target” on the date when (a) the Parties have agreed on such
Discovery Research Plan, and (b) Genentech has paid the applicable Target Nomination Fee (the “Target Acceptance
Date”), and the Parties will have all rights and obligations hereunder in connection with such Collaboration Target
(including exclusivity in accordance with Section 7.8) as of the Target Acceptance Date.
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3.1.4 Target Nomination Process for Adding a Target to the Genentech Reserved Target List. The
nomination of an additional Target to the Genentech Reserved Target list shall follow the procedure set forth in Section 3.1.3
mutatis mutandis, except that (a) for clarity, such nomination of an additional Target to the Genentech Reserved Target list
shall [***], (b) the Parties shall [***] at the time it is added to the Genentech Reserved Target list, and (c) at the time
Genentech adds a Target to the Genentech Reserved Target list, it shall [***].
3.1.5 Gatekeeper. If either Party desires, at any time following the Effective Date, to make confidential
inquiries regarding the availability of Modulator Targets or Antigen Targets (i.e. other than through the process set forth in
Section 3.1.3), such Party shall notify the other Party in writing thereof. As soon as reasonably practicable following receipt
of such notice, and in any case within [***] following receipt of such notice, BicycleTx shall engage an independent Third
Party mutually agreeable to the Parties (the “Gatekeeper”) for the purposes of performing the applicable functions set forth
in Section 3.1.2 and Section 3.1.3, including (a) maintaining a list of Unavailable Targets and (b) issue the Target
Availability Notice. The [***]. Such engagement shall be on terms consistent with this Agreement and mutually agreeable
to the Parties, including provisions relating to confidentiality. The identity of the Unavailable Targets shall be deemed the
Confidential Information of BicycleTx, and the identity of the Genentech Reserved Targets (if any), Proposed Targets, and
Nominated Targets shall be deemed the Confidential Information of Genentech. Following the appointment of a Gatekeeper,
(i) all references in Section 3.1.3 regarding disclosure by one Party to the other Party shall instead be deemed to refer to
disclosure to or by the Gatekeeper by or to the applicable Party, mutatis mutandis, and (ii) BicycleTx shall notify the
Gatekeeper of the Unavailable Targets promptly, but in no event later than [***]. Upon receipt of such notification, the
Gatekeeper shall update the list of Unavailable Targets accordingly.
3.2 Target Substitution. Genentech shall have the right, from time to time during the Term, to substitute a
different Modulator Target (or Targeting Arm, as applicable) in place of an existing Collaboration Target (each, a “Target
Substitution”) solely as set forth below:
3.2.1 [***] Substitution Right [***]. Subject to Section 3.2.7, [***] Genentech shall have the one-time
right [***], to substitute during a period of [***] following the date of the receipt by Genentech [***] (the “Initial
Substitution Period”), another available [***] Target, [***] (each, a “Substitute Target”), [***]. Such Substitute Target
shall be nominated using mutatis mutandis the Target nomination process set forth in Section 3.1.3 or Section 3.1.4, as
applicable. For clarity, [***] the nomination of the Substitute Target shall be effective as of Genentech’s receipt of the
Target Availability Notice.
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3.2.2 [***] Substitution Right [***]. Subject to Section 3.2.6 and Section 3.2.7, [***], Genentech shall
have the one-time-right [***] during a period following the [***] to nominate a Substitute Target, [***]. Such Substitute
Target shall be nominated using mutatis mutandis the Target nomination process set forth in Section 3.1.3 or Section 3.1.4,
as applicable. For clarity, [***] the nomination of the Substitute Target shall be effective as of Genentech’s receipt of the
Target Availability Notice.
3.2.3 [***] Substitution Right [***]. Subject to Section 3.2.7, [***] Genentech shall have the one-time
right [***] during a period of [***] following the date [***], to nominate a Substitute Target [***]. Such Substitute Target
shall be nominated using mutatis mutandis the Target nomination process set forth in Section 3.1.3 or Section 3.1.4, as
applicable. For clarity, [***] the nomination of the Substitute Target shall be effective as of Genentech’s receipt of the
Target Availability Notice.
3.2.4 [***] Substitution Right [***]. Subject to Section 3.2.6 and Section 3.2.7, [***], Genentech shall
have the one-time-right [***], during the period between [***], to nominate a Substitute Target. Such Substitute Target shall
be nominated using mutatis mutandis the Target nomination process set forth in Section 3.1.3 or Section 3.1.4, as applicable,
but [***].
3.2.5 [***] Substitution. [***], Genentech shall have a one-time right, [***], to nominate a Substitute
Target [***]. Genentech may exercise such right at any time during [***]. Any substitution of a Target [***] will follow the
Target nomination process set forth in Section 3.1.4. Following a substitution [***], the applicable Substitute Target [***].
3.2.6 Limitations on Substitution Right. Genentech may not (a) substitute a Target for any Modulator
Target that was already designated as a Collaboration Target as a result of the operation of this Section 3.2, or (b) perform
[***] Target Substitutions [***] Collaboration Program under [***].
3.2.7 Effects of Target Substitution. Following any Target Substitution as set forth in this Section 3.2,
the applicable Substitute Target will become a Collaboration Target hereunder effective as of the newly established Target
Acceptance Date for such Substitute Target and, effective as of such
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newly established Target Acceptance Date, (a) the Parties will have all rights and obligations under this Agreement in
connection with such Substitute Target as a Collaboration Target and (b) the replaced Modulator Target shall become a
Terminated Target and shall no longer be a Collaboration Target. Following any Target Substitution, Genentech shall grant,
and hereby does grant, effective upon the applicable Target Acceptance Date for the new Modulator Target, to BicycleTx
and its Affiliates, as applicable, an Unblocking License for the applicable Terminated Target.
3.3 Genentech Reserved Targets. From the Effective Date until the earlier of (a) the expiration of the
Expansion Option Period, or (b) the date upon which Genentech exercises its second Expansion Option, BicycleTx shall not,
and shall cause its Affiliates not to, option, license, authorize, appoint, or otherwise enable any Third Party to, directly or
indirectly, develop, commercialize or manufacture any Bicycle Construct, product, service, or therapy that is directed to any
Genentech Reserved Target or otherwise enter into any arrangement or take any other action that would preclude a
Genentech Reserved Target from being designated as a Collaboration Target hereunder. Upon the earlier of the dates set
forth in subclause (a) or (b), the Genentech Reserved Target list will no longer apply.
ARTICLE 4
COLLABORATION MANAGEMENT
4.1 Joint Research Committee.
4.1.1 Formation. Within [***] after the Effective Date, the Parties shall establish a joint research
committee (the “JRC”). The JRC shall consist of [***] representatives from each of the Parties (with the number of such
representatives at each Party’s election, but with each Party collectively having one (1) vote). Each representative shall have
the requisite experience and seniority to enable such person to make decisions on behalf of the applicable Party with respect
to the issues falling within the decision making authority of the JRC. From time to time, each Party may substitute one (1)
or more of its representatives to the JRC on written notice to the other Party. Each Party shall select from its representatives
a representative who will chair the JRC jointly with the selected representative from the other Party. Each Party may replace
its co-chairperson from time to time by informing the other Party in writing.
4.1.2 Specific Responsibilities. The JRC shall develop the strategies for and oversee the Discovery
Research Activities in accordance with the applicable Discovery Research Plan for each Collaboration Program, and shall
serve as a forum for the coordination of such activities. In particular, the JRC shall:
(a) serve as a discussion forum in relation to potential Modulator Targets and Antigen Targets
for inclusion as potential Collaboration Targets (including respective Substitute Targets, if any) during any period when the
Parties have not elected to appoint a Gatekeeper;
Discovery Research Plan for each Collaboration Target, and review and approve any amendments thereto;
(b) periodically (no less often than [***]) review and serve as a forum for discussing the
(c) oversee the conduct and progress of the Discovery Research Activities (including the need
for potential amendments to the LSR Go and Dev Go Criteria), and discuss and agree upon any activities to be allocated for
performance by Genentech (if any);
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the LSR Go Criteria, (iii) the Dev Go Criteria, and (iv) the Targeting Arm Criteria;
(d) monitor the achievement of (i) the Hit Success Criteria determining POP Achievement, (ii)
(e) monitor the completion of the activities and the generation of the data required to be
included in the LSR Go Data Package and the Dev Go Data Package, as applicable in order to confirm whether all
components of the LSR Go Data Package and the Dev Go Data Package, as applicable, are complete [***];
discuss and agree upon the contents of the LSR Go Data Package [***];
(f) prior to the commencement of the Lead Generation Phase for a Collaboration Program,
discuss and agree upon the contents of the Dev Go Data Package [***];
(g) prior to the commencement of the Lead Validation Phase for a Collaboration Program,
Discovery Construct or Development Candidate pursuant to Section 5.2;
(h) discuss the scope of any modifications or improvements requested by Genentech to any
Activities;
(i) serve as a forum for discussion of results from the conduct of the Discovery Research
(j) extend the Research Term as provided in Section 2.4.2;
and discovery and other JRC related information and Know-How as contemplated under this Agreement;
(k) establish secure access methods (such as secure databases) for each Party to access research
Section 5.3 or Section 5.4;
(l) monitor and implement the transfer of CMC materials to Genentech, whether pursuant to
(m) monitor and implement the technology transfer to Genentech pursuant to Section 5.4; and
writing, except where in conflict with any provision of this Agreement.
(n) perform such other functions as are set forth herein or as the Parties may mutually agree in
4.2 General Provisions Applicable to the JRC.
4.2.1 Meetings and Minutes. The JRC shall meet [***], either in person or by tele-/videoconference
with the venue of the in person meetings alternating between locations designated by BicycleTx and locations designated by
Genentech. At least [***] the JRC representatives shall meet in person, unless otherwise agreed by the Parties. The Alliance
Manager shall be permitted to attend any such JRC meetings. The chairperson of the JRC shall be responsible for calling
meetings on no less than [***] notice. Each Party shall make all proposals for agenda items and shall provide all appropriate
information with respect to such proposed items at least [***] in advance of the applicable meeting; provided
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that under exigent circumstances requiring input by the JRC, a Party may provide its agenda items to the other Party within a
shorter period of time in advance of the meeting, or may propose that there not be a specific agenda for a particular meeting,
so long as the other Party consents to such later addition of such agenda items or the absence of a specific agenda for such
meeting. The chairpersons of the JRC (or their designee) shall prepare and circulate minutes of each meeting within [***]
after the meeting for the Parties’ review and approval. The Parties shall agree on the minutes of each meeting promptly, but
in no event later than within [***] following circulation of the draft minutes.
4.2.2 Procedural Rules. The JRC shall have the right to adopt such standing rules as shall be necessary
for its work, so long as such rules are not inconsistent with this Agreement. A quorum of the JRC shall exist whenever there
is present at a meeting at least one (1) representative appointed by each Party. Representation by proxy shall be
allowed. The JRC shall take action by consensus of the representatives present at a meeting at which a quorum exists, with
each Party having a single vote irrespective of the number of representatives of such Party in attendance, or by a written
resolution signed by at least one (1) representative appointed by each Party. Employees or consultants of either Party that
are not representatives of the Parties on the JRC may attend meetings of the JRC; provided that such attendees (a) shall not
vote or otherwise participate in the decision-making process of the JRC, and (b) are bound by obligations of confidentiality
and non-disclosure equivalent to those set forth in ARTICLE 11.
4.3 Decisions.
4.3.1 Decision Making Authority. The JRC shall decide matters within its responsibilities pursuant to
Section 4.1.2.
4.3.2 Consensus; Good Faith. The members of the JRC shall in good faith cooperate with one another
and shall endeavor to seek agreement with respect to issues to be decided by the JRC.
4.3.3 Final Decision Right; Dispute Resolution. If the JRC cannot, or does not, reach consensus on an
issue, then (a) BicycleTx shall have final say on [***]; (b) [***] Genentech shall have final say on [***]; and (c) neither
Party shall have final say on [***] that would [***]. In each of case Section 4.3.3(c)(i) and 4.3.3(c)(ii) above, the status quo
shall persist unless and until the Parties’ mutually agree. If the JRC does not reach consensus on [***], then the dispute shall
first be referred to the Senior Officers of the Parties, who shall confer in good faith on the resolution of the issue. If the
Senior Officers are unable to reach consensus on [***] for a given Collaboration Program, [***] provided: (1) any additional
Discovery Research Activities resulting from such [***], (2) any additional Discovery Research Activities resulting from
[***] shall not [***], (3) the [***] shall not [***]
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[***] and (4) BicycleTx shall [***]. If BicycleTx [***], Genentech may [***] by Genentech. Notwithstanding the
foregoing, neither Party shall use its final decision-making authority to (x) impose any requirement on the other Party to
undertake obligations beyond those for which it is responsible or to forgo any of its rights under this Agreement, (y) require
the other Party to violate any Applicable Law, ethical requirement, or any agreement it may have with any Third Party, or (z)
amend the terms and conditions of this Agreement. Disputes arising between the Parties in connection with or relating to this
Agreement or any document or instrument delivered in connection herewith, and that are outside of the decision-making
authority of the JRC, shall be finally resolved pursuant to Section 15.7.
4.4 Limitations on Authority. Each Party shall retain the rights, powers, and discretion granted to it under this
Agreement and no such rights, powers, or discretion shall be delegated to or vested in the JRC unless such delegation or
vesting of rights is expressly provided for in this Agreement or the Parties expressly so agree in writing. The JRC shall not
have the power to amend, modify, or waive compliance with this Agreement, which may only be amended or modified as
provided in Section 15.9 or compliance with which may only be waived as provided in Section 15.11.
4.5 Alliance Manager. Each Party shall appoint a person who shall oversee contact between the Parties for all
matters between meetings of the JRC and shall have such other responsibilities as the Parties may agree in writing after the
Effective Date (each, an “Alliance Manager”). Each Party may replace its Alliance Manager at any time by notice in
writing to the other Party.
4.6 Discontinuation of the JRC. Following the date upon which [***] for a given Collaboration Program
[***], the JRC shall have no further responsibilities or authority under this Agreement with respect to that Collaboration
Target and the associated Compounds and Licensed Products. Once the applicable [***], the JRC will be considered fully
dissolved by the Parties. Notwithstanding the above, if BicycleTx agrees to conduct Additional Discovery Activities
pursuant to Section 5.2, the JRC shall be reinstated to oversee such Additional Discovery Activities until the completion
thereof.
4.7 Interactions Between a Committee and Internal Teams. The Parties recognize that each Party possesses
an internal structure (including various committees, teams and review boards) that will be involved in administering such
Party’s activities under this Agreement. Nothing contained in this Article shall prevent a Party from making routine day-to-
day decisions relating to the conduct of those activities for which it has a performance or other obligation hereunder, in each
case in a manner consistent with the then-current applicable Discovery Research Plan and the terms and conditions of this
Agreement.
4.8 Working Groups. From time to time, the JRC may establish and delegate duties to sub-committees or
directed teams (each, a “Working Group”) on an “as-needed” basis to oversee particular projects or activities (for example,
joint project team, joint finance group, and/or joint intellectual property group). Each such Working Group shall be
constituted and shall operate as the JRC determines; provided that each Working Group shall have equal representation from
each Party, unless otherwise mutually agreed. Working Groups may be established on an ad hoc basis for purposes of a
specific project or on such other basis as the JRC may determine. Each Working Group and its activities shall be subject to
the oversight, review and approval of, and shall report to, the JRC. In no event shall the authority of the
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Working Group exceed that specified for the JRC. All decisions of a Working Group shall be by consensus. Any
disagreement between the designees of Genentech and BicycleTx on a Working Group shall be referred to the JRC for
resolution.
4.9 Expenses. Each Party shall be responsible for all travel and related costs and expenses for its members and
other representatives to attend meetings of, and otherwise participate on, the JRC or any Working Group.
ARTICLE 5
DEVELOPMENT AND REGULATORY
5.1 Development of Licensed Products following Dev Go. For each Collaboration Program, following
Genentech’s delivery of the Dev Go Notice, except for any activities that BicycleTx agrees to conduct in accordance with
Section 5.2, Genentech shall have the sole right to Develop and Manufacture, including seeking Regulatory Approvals for,
Compounds and Licensed Products directed to the applicable Collaboration Target(s) in the Field and in the Territory, in
each case at Genentech’s sole expense. On a Collaboration Program-by-Collaboration Program basis, following the date of
the Dev Go Notice for such Collaboration Program and delivery to Genentech of the applicable Compound(s) and the
completion of the technology transfer pursuant to Section 5.4.1, Genentech shall use Commercially Reasonable Efforts to
Develop and obtain Regulatory Approval for a Licensed Product comprising or containing a Development Candidate arising
from such Collaboration Program in at least one Indication for use in each Major Market. Genentech shall have the right to
satisfy its diligence obligations under this Section 5.1 through its Affiliates or Sublicensees. For each Collaboration Target,
following the date of [***], Genentech will provide to BicycleTx [***] reports within [***] summarizing the key
Development activities undertaken and summarizing the results achieved with respect to the applicable Discovery
Constructs and Licensed Products [***]. Following the delivery of each report, Genentech will make appropriate personnel
available to BicycleTx during business hours and on reasonable advanced notice to answer reasonable questions regarding
the information contained in such report, [***].
5.2 Additional Discovery Activities After Dev Go Notice. On a Collaboration Program-by-Collaboration
Program basis, at any time following Genentech’s delivery of a Dev Go Notice for the then-current Development Candidate
for such Collaboration Program, Genentech may request that BicycleTx provide certain reasonable research and
development assistance (a) to [***] and/or (b) [***] (all such activities in (a) and (b), the “Additional Discovery
Activities”). If Genentech makes such a reasonable request, BicycleTx shall consider such request and, [***] such
Additional Discovery Activities, provided that Genentech shall compensate BicycleTx for BicycleTx’s [***] costs ([***])
incurred in the performance of such Additional Discovery Activities. For clarity, [***]
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[***] such Additional Discovery Activities. If, as a result of any such Additional Discovery Activities Genentech selects an
alternative Compound to advance into further pre-clinical Development, such alternative Compound will thereafter be
deemed the Development Candidate for the applicable Collaboration Target. Notwithstanding the foregoing, if BicycleTx
does not agree to conduct any such Additional Discovery Activities ([***]), Genentech may conduct such Additional
Discovery Activities (or have a Third Party conduct such Additional Discovery Activities) and if, as a result of Genentech’s
or its designated Third Party’s performance of such Additional Discovery Activities, Genentech selects an alternative
Compound to further modify and advance into further pre-clinical Development, such alternative compound shall be deemed
a “Modified Compound”, provided that Genentech (itself or through its Affiliate or Third Party) shall not be permitted to
select any Modified Compound to advance into further Development activities unless such Modified Compound (i) [***]
and (ii) is directed to and binds the same Collaboration Target as the applicable Compound. For clarity, (x) [***] under this
Agreement, [***], in each case [***] and, (y) [***] under this Agreement [***].
5.3 Transfer of CMC Materials [***]. On a Collaboration Program-by-Collaboration Program
basis, Genentech may request [***], that BicycleTx conduct a manufacturing technology transfer to enable Genentech to
conduct certain CMC Activities in connection with Compounds and Licensed Products arising from such Collaboration
Program [***]. Genentech’s request shall include a summary of the CMC Activities that Genentech intends to conduct
(which shall be reasonable for the stage of development of the applicable Collaboration Program), and the Parties shall, prior
to any transfer, agree upon a plan for the transfer of CMC materials necessary for such specified CMC Activities. For
clarity, [***]. BicycleTx shall initiate such transfer within [***] following the receipt of such request (and following
agreement on the plan for such CMC Activities), which shall include a transfer of [***] to enable Genentech or Genentech’s
designees to conduct the CMC Activities to be conducted by Genentech. BicycleTx shall [***] such transfer of CMC
materials, provided that (i) if Genentech [***], then Genentech shall [***], and (ii) if Genentech [***], Genentech shall
[***]. For clarity, Genentech shall [***] at Genentech’s request for CMC Activities [***]
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[***]. Furthermore, if Genentech [***], BicycleTx may elect to buy any Compound and/or materials resulting from such
CMC Activities ([***]) at Genentech’s [***] cost to manufacture. Inventory and any CMC materials that BicycleTx or
BicycleTx’s designees are to provide to Genentech shall be shipped [***].
5.4 Technology Transfer [***]. On a Collaboration Target-by-Collaboration Target basis following
Genentech’s delivery of the Dev Go Notice for the applicable Collaboration Program:
5.4.1 As soon as reasonably practicable following Genentech’s delivery of the applicable Dev Go Notice
(and in any event not more than [***]), BicycleTx shall, and shall cause its Affiliates to, without additional compensation,
disclose and make available to Genentech (which obligation may include granting personnel designated by Genentech
controlled access to an electronic data room), in such form as maintained by BicycleTx in the ordinary course of business,
BicycleTx Know-How and Joint Know-How (to the extent such Joint Know-How is in BicycleTx’s possession), and a list of
the BicycleTx Patents and Joint Collaboration Patents, in each case to the extent [***] for the Exploitation of the
Compounds for such Collaboration Program. For clarity, the BicycleTx Know-How provided pursuant to this Section 5.4.1
shall include BicycleTx Know-How [***] to perform CMC Activities in respect of the relevant Development Candidate
[***].
5.4.2 BicycleTx shall provide Genentech [***] in order to transfer to Genentech the BicycleTx Know-
How and Joint Collaboration Know-How required to be produced pursuant to Section 5.4.1. Without prejudice to the
generality of the foregoing, if [***] are reasonably requested by Genentech [***], BicycleTx shall [***] mutually agreed by
the Parties. BicycleTx shall provide up to [***] to Genentech pursuant to this Section 5.4.2. For any [***] requested by
Genentech and provided by BicycleTx in excess of [***], Genentech shall reimburse BicycleTx [***].
5.5 Subcontracting. Each Party shall have the right to subcontract any of its Development activities to a Third
Party (a “Third Party Provider”); provided that solely with respect to Third Party Providers performing services that are
[***], BicycleTx shall [***] to such Third Party Provider and the activities to be subcontracted. Genentech shall [***] set
forth in this Section5.5 above; provided that [***]. BicycleTX shall obtain a written undertaking from each Third Party
Provider that it will comply with the applicable terms and conditions of this Agreement, including the confidentiality
provisions of ARTICLE 11.
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5.6 Regulatory Matters.
5.6.1 Regulatory Activities.
(a) As between the Parties, Genentech, at its sole expense, shall have the sole right to prepare,
obtain, and maintain the Drug Approval Applications (including the setting of the overall regulatory strategy therefor), other
Regulatory Approvals and other regulatory submissions, including INDs, and to conduct communications with the
Regulatory Authorities, for Compounds or Licensed Products in the Territory. Upon Genentech’s request [***], BicycleTx
shall provide Genentech with reasonable assistance in obtaining Regulatory Approvals for the Licensed Products, including
providing necessary documents or other materials required by Applicable Law to obtain such Regulatory Approvals,
provided that [***], and provided further that nothing in this Section 5.6.1 shall obligate BicycleTx to generate any
additional data or other Know-How.
(b) All Regulatory Documentation (including all Regulatory Approvals and Product Labeling)
specifically relating to Compounds or Licensed Products with respect to the Territory shall be owned by, and shall be the
sole property and held in the name of, Genentech or its designated Affiliate, Sublicensee or designee. BicycleTx shall duly
execute and deliver, or cause to be duly executed and delivered, such instruments and shall do and cause to be done such acts
and things, including the filing of such assignments, documents, and instruments, as may be necessary under, or as
Genentech may reasonably request in connection with this Section 5.6.
5.6.2 Recalls. Genentech shall notify BicycleTx promptly following its determination that any event,
incident, or circumstance has occurred that may result in the need for a recall, market suspension, or market withdrawal of a
Licensed Product in the Territory, and shall include in such notice the reasoning behind such determination and any
supporting facts. Genentech (or its Sublicensee) shall have the right to make the final determination whether to voluntarily
implement any such recall, market suspension, or market withdrawal in the Territory. If a recall, market suspension, or
market withdrawal is mandated by a Regulatory Authority in the Territory, Genentech (or its Sublicensee) shall initiate such
a recall, market suspension, or market withdrawal in compliance with Applicable Law. For all recalls, market suspensions or
market withdrawals undertaken pursuant to this Section 5.6.2, Genentech (or its Sublicensee) shall be solely responsible for
the execution thereof, and BicycleTx shall reasonably cooperate in all such recall efforts, at Genentech’s request and
expense.
5.6.3 Records. Each of BicycleTx and Genentech shall, and shall ensure that its Third Party Providers,
maintain records in sufficient detail and in good scientific manner appropriate for patent and regulatory purposes, and in
compliance with Applicable Law, which shall be complete and accurate and shall properly reflect all work done and results
achieved in the performance of its Discovery Research Activities and Development activities hereunder, which shall record
only such activities and shall not include or be commingled with records of activities outside the scope of this
Agreement. Such records shall be retained by BicycleTx or Genentech, as the case may be, for at least [***] after the
termination of this Agreement, or for such longer period as may be required by Applicable Law.
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ARTICLE 6
COMMERCIALIZATION
6.1 In General. Genentech (itself or through its Affiliates or Sublicensees) shall have the sole right to
Commercialize Compounds and Licensed Products in the Territory at its own cost and expense.
6.2 Commercialization Diligence. For each Collaboration Target, Genentech shall use Commercially
Reasonable Efforts to Commercialize one Licensed Product in each Major Market following receipt of Regulatory Approval
therefor in such Major Market, provided that (a) the Commercialization of Licensed Product [***], and (b) Genentech shall
have the right to satisfy its diligence obligations under this Section 6.2 through its Affiliates and Sublicensees. With respect
to a particular Collaboration Target, if Genentech [***] Compound or Licensed Product directed to such Collaboration
Target, [***] Compound or Licensed Product directed to such Collaboration Target.
6.3 Product Trademarks. Genentech shall have the sole right to determine and own the Product Trademarks to
be used with respect to the Exploitation of the Licensed Products on a worldwide basis. [***] with respect thereto or use
[***] the Product Trademarks. Notwithstanding the foregoing, to the extent required by Applicable Law in a country or
other jurisdiction in the Territory, the promotional materials, packaging, and Product Labeling for the Licensed Products
used by Genentech and its Affiliates in connection with the Licensed Products in such country or other jurisdiction shall
contain (a) the corporate name of BicycleTx (and to the extent required, BicycleTx grants Genentech a license, with the right
to sublicense, to use the same for such purpose), and (b) the logo and corporate name of the manufacturer (if other than
Genentech or an Affiliate).
6.4 Commercial Supply of Compounds or Licensed Products. As between the Parties, Genentech shall have
the sole right, at its expense, to Manufacture (or have Manufactured) and supply Compounds and Licensed Products for
commercial sale in the Territory by Genentech and its Affiliates and Sublicensees.
7.1 Grants to Genentech.
ARTICLE 7
GRANT OF RIGHTS
7.1.1 Effective upon Genentech’s delivery to BicycleTx of a Dev Go Notice pursuant to Section 2.5.2(d),
on a Collaboration Program-by-Collaboration Program basis, BicycleTx (on behalf of itself and its Affiliates) hereby grants
to Genentech an exclusive (including with regard to BicycleTx and its Affiliates, except as provided in Section 7.6) license,
with the right to grant sublicenses in accordance with Section 7.4, under (a) the BicycleTx Patents and BicycleTx Know-
How, and (b) BicycleTx’s interest in the Joint Collaboration Patents and in the Joint Collaboration Know-How (collectively,
the “BicycleTx
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IP”) that is reasonably necessary or useful to Exploit the Compounds and corresponding Licensed Products in the Field in
the Territory.
7.1.2 Effective upon the Effective Date or, as the case may be, upon the applicable Target Acceptance
Date and during the Research Term under this Agreement, BicycleTx hereby grants to Genentech, on a Collaboration Target-
by-Collaboration Target basis, a limited, non-exclusive, royalty-free license, without the right to grant sublicenses (but, for
clarity, with the right to subcontract), under the BicycleTx IP solely to enable Genentech to perform Discovery Research
Activities to be conducted by Genentech pursuant to Section 2.4.1 (if any) and to perform CMC Activities to be conducted
by Genentech pursuant to Section 5.3 (if any).
7.2 Grants to Bicycle. Effective upon the Effective Date and during the Research Term (and thereafter for the
performance of Additional Discovery Activities pursuant to Section 5.2.), Genentech hereby grants to BicycleTx, on a
Collaboration Target-by-Collaboration Target basis, a non-exclusive, royalty-free license, without the right to grant
sublicenses (other than to permitted subcontractors of BicycleTx in accordance with Section 5.5), under the Genentech
Patents, Genentech Know-How, and Genentech’s interests in the Joint Collaboration Patents and the Joint Collaboration
Know-How solely for purposes of performing BicycleTx’s obligations under, and as set forth in, the Discovery Research
Plan(s).
7.3 Mutual Grants. Each Party hereby grants to the other Party a perpetual, irrevocable, non-exclusive, royalty-
free, and fully paid-up license for all internal research purposes, without the right to grant sublicenses, under [***] a
Collaboration Program hereunder, excluding [***] (a) in connection with [***], (b) solely with respect to [***], provided
that [***], or (c) solely with respect to [***] as part of the [***], provided that [***]. It is understood and agreed that no
commercial license is granted by either Party under this Section 7.3 (including but not limited to any license or other right to
sell, offer for sale or otherwise commercialize any Compounds). It is further understood that the Parties shall have the right
to [***] activities. Notwithstanding anything to the contrary herein, the Parties [***] the use of [***], and as such each
Party agrees that the [***]; provided that: (a) [***] such use; (b) the foregoing [***], and will not be [***](i) a right to
[***], or (ii) a [***]; and (c) [***] outside this Agreement.
- 45 -
7.4 Sublicenses. Genentech shall have the right to grant sublicenses, through multiple tiers of sublicensees,
under the licenses granted in Section 7.1 to its Affiliates and Third Parties; provided that (a) each such sublicense shall be
consistent with the terms and conditions of this Agreement, including terms of confidentiality and non-use no less restrictive
than those set forth in this Agreement, (b) Genentech may not grant to any Third Party any rights to prosecute or enforce any
BicycleTx Background Patents or BicycleTx Collaboration Patents, and (c) Genentech shall remain directly liable to
BicycleTx with respect to its obligations under this Agreement and for the performance and acts and omissions of all
sublicensees. As soon as reasonably practicable (but in any case within [***]) after the execution of any such sublicense
agreement, Genentech shall provide BicycleTx with written notice thereof, including the identity of the Sublicensee and the
scope of the license granted.
7.5 Distributorships. Genentech shall have the right, in its sole discretion, to appoint its Affiliates, and
Genentech and its Affiliates shall have the right, in their sole discretion, to appoint any Third Party, in the Territory or in any
country or other jurisdiction of the Territory, to distribute, market, and sell the Licensed Products. If Genentech or its
Affiliates appoints such a Third Party that does not have rights to, and does not, Manufacture any Licensed Product (except
solely to package or label such Licensed Product purchased in bulk form from Genentech or its Affiliates), such Third Party
shall be a “Distributor” for purposes of this Agreement.
7.6 Retention of Rights. Notwithstanding the exclusive licenses granted to Genentech pursuant to Section
7.1.1 during the Term, BicycleTx shall retain all rights under the BicycleTx Background Patents, the BicycleTx
Collaboration Patents, the BicycleTx Background Know-How, the BicycleTx Collaboration Know-How, BicycleTx’s
interests in the Joint Collaboration Patents and in the Joint Know-How, Regulatory Approvals and any other Regulatory
Documentation (i) to perform, and to subcontract pursuant to Section 5.5 its obligations under this Agreement, (ii) to Exploit
any and all Existing Targeting Arms and BicycleTx Future Independent Targeting Arms, in connection with any Target
(including any Modulator Target or Antigen Target) other than a Collaboration Target, (iii) for any purpose outside the scope
of the licenses and rights granted under Section 7.1, including to develop, manufacture and commercialize any products or
services other than Compounds and Licensed Products, subject to Section 7.8. For clarity, nothing in this Section 7.6 shall
imply that BicycleTx may retain any right with regard to Genentech Reserved Targets prior to the expiry of the Expansion
Options as set forth in Section 3.1.1(c).
7.7 No Implied Licenses. Except as expressly provided herein, BicycleTx grants no other right or license to
Genentech hereunder, including any rights or licenses to the BicycleTx Background Patents, the BicycleTx Program Patents,
the BicycleTx Background Know-How, the BicycleTx Program Know-How, BicycleTx’s interests in the Joint
Collaboration Patents and the Joint Collaboration Know-How, or any other Patent or intellectual property rights not
otherwise expressly granted herein. Except as expressly provided herein, Genentech grants no other right or license to
BicycleTx hereunder, including any rights or licenses to the Genentech Background Patents, the Genentech Collaboration
Patents, the Genentech Background Know-How, the Genentech Collaboration Know-How, or any other Patent or intellectual
property rights not otherwise expressly granted herein.
7.8 Exclusivity.
7.8.1 With respect to each Modulator Target, during the applicable Target Exclusivity Period, neither
BicycleTx nor any of its Affiliates shall (a) on BicycleTx’s behalf or on behalf of (or in collaboration with) a Third Party,
use BicycleTx IP or otherwise conduct activities to discover, design or identify compounds that bind to or modulate such
Modulator Target, or (b) either directly or indirectly,
- 46 -
appoint or otherwise authorize or facilitate any Third Party to perform any of the activities set forth in the foregoing clause
(a) (collectively, the “Exclusivity Obligations”). Notwithstanding the foregoing, the conduct by BicycleTx or its Affiliates
of any of the foregoing activities with respect to any compound that binds to or modulates a Modulator Target, where (i)
[***], and (ii) [***], shall not be deemed to be a breach of the Exclusivity Obligations.
7.8.2 For each Modulator Target, the Exclusivity Obligations shall commence (a) on the Effective Date
for the Initial Collaboration Targets and initial Genentech Reserved Targets, (b) on the date a new Genentech Reserved
Target is added to the list for Genentech Reserved Targets pursuant to Section 3.1.4, (c) on the Target Acceptance Date for a
Target deemed a Collaboration Target as a result of Genentech’s exercise of an Expansion Option pursuant to Section
3.1.1(b), and (d) on the applicable Target Acceptance Date for a Substitute Target. The Exclusivity Obligations shall
continue (x) for each Collaboration Target, until the earlier of (i) [***] Collaboration Target or (ii) the termination of this
Agreement with respect to the applicable Collaboration Program pursuant to Section 2.5.3 or Section 14.2, (y) for Genentech
Reserved Targets, until the expiration of the Expansion Options as set forth in Section 3.1.1(c), and (z) for all Targets under
this Agreement, until the termination of this Agreement in its entirety. The period in which the Exclusivity Obligations are in
effect is referred to as the “Target Exclusivity Period”.
ARTICLE 8
PAYMENTS AND RECORDS
8.1 Upfront Payment. Within fifteen (15) Business Days after the Effective Date, Genentech shall pay
BicycleTx an one-time, non-refundable, non-creditable payment in the amount of Thirty Million Dollars ($30,000,000).
8.2 Target Nomination; Targeting Arms.
8.2.1 Promptly following the exercise of an Expansion Option by Genentech pursuant to Section 3.1.1
and after the Parties’ agreement on the applicable Discovery Research Plan for such Nominated Target, BicycleTx shall
issue an invoice for payment of a Target Nomination Fee of Ten Million Dollars ($10,000,000), and Genentech shall pay to
BicycleTx such Target Nomination Fee within [***] following receipt of such invoice. For clarity, the maximum aggregate
amount payable by Genentech under this Section 8.2.1 is Twenty Million Dollars ($20,000,000) (i.e., if Genentech exercises
both Expansion Options under Section 3.1.1(b) and as a result two (2) Nominated Targets become Collaboration Targets).
8.2.2 Simultaneous with or promptly following BicycleTx’s delivery of the Target Availability Notice for
a Genentech Antigen Target, BicycleTx shall issue an invoice for payment of [***] for activities to be performed by
BicycleTx on a Targeting Arm directed to such Genentech Antigen Target, and Genentech shall pay to BicycleTx such
amount within [***] following receipt of such invoice.
8.2.3 Promptly following the Targeting Arm Data Package Acceptance Date for a given Targeting Arm,
BicycleTx shall issue an invoice for payment by Genentech of [***], and Genentech shall pay to BicycleTx such amount
within [***] following receipt of such invoice.
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8.3 Target Substitution. Promptly following the receipt by Genentech of the Target Availability Notice for a
[***], BicycleTx shall issue an invoice to Genentech for an [***], and Genentech shall pay to BicycleTx such [***]
following receipt of such invoice.
8.4 Discovery Milestones. In partial consideration of the rights granted by BicycleTx to Genentech hereunder
and subject to the terms and conditions set forth in this Agreement, Genentech shall pay to BicycleTx a non-refundable
milestone payment after the achievement of each of the following milestones for the first Compound or Licensed Product, as
applicable, for each Collaboration Target (irrespective of whether such Collaboration Target is an initially nominated
Collaboration Target or a Substitute Target). Upon the achievement of each of the following milestone events, BicycleTx
shall promptly issue an invoice for the applicable milestone payment and Genentech shall pay such milestone payment
within [***] after receipt of such invoice from BicycleTx. Such milestone payments shall be as follows:
8.4.1 upon the delivery of the LSR Go Notice for each Modulator Target, [***];
8.4.2 upon the delivery of the Dev Go Notice for each Initial Collaboration Target, [***]; and
8.4.3 upon the delivery of the Dev Go Notice for each Modulator Target other than the Initial
Collaboration Targets, [***].
8.5 Development, Regulatory and First Commercial Sale Milestones.
8.5.1 Development, Regulatory and First Commercial Sale Milestone Payments. In partial
consideration of the rights granted by BicycleTx to Genentech hereunder and subject to the terms and conditions set forth in
this Agreement, on a Modulator Target-by-Modulator Target basis, Genentech shall pay to BicycleTx a non-refundable
milestone payment after the achievement of each of the following milestones for the first Licensed Product directed to a
given Modulator Target, calculated as follows:
Development Milestone [***]
Milestone Payment Amount
[***]
[***]
[***]
[***]
[***]
[***]
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[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
8.5.2 If the first Licensed Product directed to a given Modulator Target also incorporates [***] Targeting
Arm, then for the first such Licensed Product incorporating such [***] Targeting Arm, the milestone payment for the
Development Milestone #2 in the table above [***] shall be [***] instead of [***].
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8.5.3 Development Milestones [***] set forth in the table above shall only be payable once for a given
Modulator Target. Notwithstanding Section 8.5.1, Development Milestones #3-13 set forth in the table above shall each be
payable for [***] Licensed Product targeting the same Modulator Target. If the Licensed Product contains a [***] of a
[***], then the amount of each milestone payment above shall be [***] for such Modified Compound.
8.5.4 On a Modulator Target-by-Modulator Target basis, if a development milestone payment set forth in
this Section 8.5 for a Licensed Product becomes due before an earlier listed development milestone payment for such
Licensed Product, then the earlier listed development milestone payment shall become payable upon the achievement of the
later listed development milestone.
8.5.5 Genentech shall notify BicycleTx within [***] after achieving any milestone set forth in the table
above. Following such notice BicycleTx shall promptly issue an invoice for the corresponding milestone payment and
Genentech shall pay the development milestone payment within [***] after receipt of such invoice from BicycleTx.
8.6 Sales-Based Milestones. In partial consideration of the rights granted by BicycleTx to Genentech hereunder
and subject to the terms and conditions set forth in this Agreement, on a Licensed Product-by-Licensed Product basis,
Genentech shall pay to BicycleTx the following non-refundable milestone payments due within [***] after the end of the
Calendar Quarter in which such milestone was achieved with respect to Net Sales of each Licensed Product calculated as
follows: [***].
Each milestone payment in this Section 8.6 shall be payable only upon the first achievement of such milestone for a given
Licensed Product. The maximum aggregate amount payable by Genentech pursuant to this Section 8.6 for each Licensed
Product is Two Hundred Million Dollars ($200,000,000).
8.7 Royalties.
8.7.1 Royalty Rates. As further consideration for the rights granted to Genentech hereunder, subject to
Section 8.7.3, commencing upon the First Commercial Sale of a Licensed Product in the Territory, on a Licensed Product-
by-Licensed Product basis, Genentech shall pay to BicycleTx a non-refundable royalty on Net Sales of each Licensed
Product in the Territory (excluding Net Sales of each Licensed Product in any country or other jurisdiction in the Territory
for which the Royalty Term for such
- 50 -
Licensed Product in such country or other jurisdiction has expired) during each Calendar Year at the following rates:
Calendar Year Net Sales in the Territory of a given Licensed
Product in a Calendar Year
Royalty Rate
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
8.7.2 Royalty Term. Genentech shall have no obligation to pay any royalty with respect to Net Sales of
any Licensed Product in any country or other jurisdiction after the Royalty Term for such Licensed Product in such country
or other jurisdiction has expired.
8.7.3 Reductions. Notwithstanding the foregoing:
(a) If following the first market entry of a Generic Product of a Licensed Product in a given
country in the Territory during the Royalty Term for such Licensed Product in such country, there has been in any Calendar
Quarter after such entry a decline of the Sales of such Licensed Product in such country greater than [***] of the average
level of the Sales of such Licensed Product achieved in such country [***] immediately preceding such Calendar Quarter
(such percentage drop in Sales following the first market entry of a Generic Product, a “Generic Entry”), then, except as set
forth in Section 8.7.3(c) below, the applicable royalty rate on the Net Sales of such Licensed Product in such country shall be
reduced to [***] for the remainder of the applicable Royalty Term for such Licensed Product in such country.
(b) Genentech shall be entitled to deduct from any royalties payable hereunder with respect to a
Licensed Product for a particular country or other jurisdiction [***] of all [***] paid under Genentech In-License
Agreements with respect to such Licensed Product for such country or other jurisdiction; provided that in no case shall such
deduction effectively reduce such royalties set forth in Section 8.7.1 below the royalties that would be payable under the
royalty rates set forth in Section 8.7.3(d). [***]
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[***], subject to the preceding proviso.
(c) If in a given country in the Territory in a Calendar Quarter during the Royalty Term for a
Licensed Product such Licensed Product is not Covered by a Valid Claim of a [***] that Covers [***] such Licensed
Product in such country, the royalty rate set forth in Section 8.7.1 with respect to such Licensed Product in such country
shall be replaced by the royalty rates set forth in Section 8.7.3(d) for such Calendar Quarter; provided that following the
tenth (10 ) anniversary of the First Commercial Sale of a Licensed Product in a country, if the last Valid Claim of a [***]
that Covers such Licensed Product in such country only Covers [***] such Licensed Product, then [***].
th
(d) Except as set forth in Section 8.7.3(a), the cumulative reductions set forth in this Section
8.7.3 shall not reduce the royalties payable to BicycleTx on any Licensed Product in any Calendar Quarter to less than the
amounts set forth in the table below at each royalty tier.
Calendar Year Net Sales in the Territory of a given
Licensed Product in a Calendar Year
Royalty Floor
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
8.8 Royalty Payments and Reports. Genentech shall calculate all amounts payable to BicycleTx pursuant to
Section 8.7 at the end of each Calendar Quarter, which amounts shall be converted to Dollars, in accordance with Section
8.9. Genentech shall pay to BicycleTx the royalty amounts due with respect to a given Calendar Quarter within [***] after
the end of such Calendar Quarter. Each payment of royalties due to BicycleTx shall be accompanied by a statement of the
amount of Net Sales of each Licensed Product in each country or other jurisdiction the Territory during the applicable
Calendar Quarter (including such amounts expressed in local currency and as converted to Dollars) and a calculation of the
amount of royalty payment due on such Net Sales for such Calendar Quarter and whether any sales milestone under Section
8.6 has been achieved.
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8.9 Mode of Payment. All payments to either Party under this Agreement shall be made by deposit of Dollars
in the requisite amount to such bank account as the receiving Party may from time to time designate by written notice to the
paying Party. For the purpose of calculating any sums due under, or otherwise reimbursable pursuant to, this Agreement
(including the calculation of Net Sales expressed in currencies other than Dollars), a Party shall convert any amount
expressed in a foreign currency into Dollar equivalents using its, its Affiliate’s or Sublicensee’s standard conversion
methodology consistent with Accounting Standards.
8.10 [***]. For clarity, [***].
8.11 Withholding Taxes.
8.11.1 Withholding Amounts. If any sum due to be paid to either Party hereunder is subject to any
withholding or similar tax, the Parties shall use their commercially reasonable efforts to do all such acts and to sign all such
documents as will enable them to take advantage of any applicable double taxation agreement or treaty. In the event there is
no applicable double taxation agreement or treaty, or if an applicable double taxation agreement or treaty reduces but does
not eliminate such withholding or similar tax, the payor shall remit such withholding or similar tax to the appropriate
government authority, deduct the amount paid from the amount due to payee and secure and send to payee the best available
evidence of the payment of such withholding or similar tax. Except as otherwise provided in this Agreement, any such
amounts deducted by the payor in respect of such withholding or similar tax shall be treated as having been paid by the
payor for purposes of this Agreement. If withholding or similar taxes are paid to a government authority, each Party will
provide the other such assistance as is reasonably required to obtain a refund of the withheld or similar taxes, or to obtain a
credit with respect to such taxes paid.
8.11.2 Withholding Actions. Notwithstanding the foregoing, the Parties acknowledge and agree that if
Genentech (or its assignee pursuant to Section 15.3) is required by Applicable Law to withhold taxes in respect of any
amount payable under this Agreement, and if such withholding obligation arises as a result an assignment of this Agreement
as permitted under Section 15.3, [***], then notwithstanding anything to the contrary herein, any such [***]. BicycleTx
shall [***]. Notwithstanding the foregoing, the Parties acknowledge and agree that as of the date of this Agreement and
under Applicable Laws, no withholding tax will be applicable to payments made to BicycleTx pursuant to this Agreement
[***].
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8.12 Taxes. BicycleTx shall pay all sales, turnover, income, revenue, value added, and other taxes levied on
account of any payments accruing or made to BicycleTx under this Agreement. If provision is made in law or regulation of
any country for withholding of taxes of any type, levies or other charges with respect to any royalty or other amounts
payable under this Agreement to BicycleTx, then Genentech shall promptly pay such tax, levy or charge for and on behalf of
BicycleTx to the proper governmental authority, and shall promptly furnish BicycleTx with receipt of payment. Genentech
shall be entitled to deduct any such tax, levy or charge actually paid from royalty or other payment due to BicycleTx or be
promptly reimbursed by BicycleTx if no further payments are due to BicycleTx. Each Party agrees to reasonably assist the
other Party in claiming exemption from such deductions or withholdings under double taxation or similar agreement or
treaty from time to time in force and in minimizing the amount required to be so withheld or deducted.
8.13 Interest on Late Payments. If any payment due to either Party under this Agreement is not paid when due,
then such paying Party shall pay interest thereon (before and after any judgment, but excluding the period during which
termination is tolled pursuant to Section 14.3.1) at [***], such interest to run from the date on which payment of such sum
became due until payment thereof in full together with such interest.
8.14 Audit. Genentech shall, shall cause its Affiliates to, and shall use commercially reasonable efforts to cause
its Sublicensees to keep complete and accurate books and records pertaining to Net Sales of Licensed Products in sufficient
detail to calculate all amounts payable hereunder. At the request and expense of BicycleTx, Genentech shall permit an
independent public accounting firm of nationally recognized standing designated by BicycleTx and reasonably acceptable to
Genentech, at reasonable times during normal business hours and upon [***] prior written notice, to audit the books and
records maintained pursuant to this Section 8.14 to ensure the accuracy of all reports and payments made hereunder. Such
examinations may not (a) be conducted for any Calendar Year more than [***] after the end of such Calendar Year, (b) be
conducted more than once in any [***] period or (c) be repeated for any Calendar Year. The accounting firm shall disclose to
BicycleTx only whether the reports are correct or not, and the specific details concerning any discrepancies. No other
information shall be shared with BicycleTx. Except as provided below, the cost of an audit pursuant to this Section 8.14 shall
be borne by BicycleTx, unless the audit reveals an underpayment owed by Genentech of more than [***] from the reported
amounts, in which case Genentech shall bear the cost of such audit.
8.15 Audit Dispute. In the event of any good faith dispute with respect to any audit under Section 8.14,
BicycleTx and Genentech shall work in good faith to promptly resolve the disagreement. If the Parties are unable to reach a
mutually acceptable resolution of any such dispute within [***], the dispute shall be submitted for resolution to a certified
public accounting firm jointly selected by each Party’s certified public accountants or to such other Person as the Parties
shall mutually agree (the “Audit Expert”). The decision of the Audit Expert shall be final and the costs of such decision-
making as well as the initial audit shall be borne between the Parties in such manner as the Audit Expert shall
determine. Not later than [***] after such decision and in accordance with such decision, Genentech shall pay any
underpaid amounts or BicycleTx shall reimburse any overpaid payments, as applicable.
8.16 Confidentiality. The receiving Party shall use all information subject to review under this ARTICLE 8 only
for the purpose of verifying royalty statements and payment amounts and treat all such information as Confidential
Information in accordance with the confidentiality provisions of ARTICLE 11 and the Parties shall cause the Audit Expert
and the independent public accounting firm of nationally
- 54 -
recognized standing designated by BicycleTx pursuant to Section 8.14 to enter into a reasonably acceptable confidentiality
agreement with Genentech obligating such firm to retain all such financial information in confidence pursuant to such
confidentiality agreement.
8.17 No Other Compensation. Each Party hereby agrees that the terms of this Agreement fully define all
consideration, compensation and benefits, monetary or otherwise, to be paid, granted or delivered by one (1) Party to the
other Party in connection with the transactions contemplated herein. Neither Party previously has paid or entered into any
other commitment to pay, whether orally or in writing, any of the other Party’s employees, directly or indirectly, any
consideration, compensation or benefits, monetary or otherwise, in connection with the transaction contemplated herein.
ARTICLE 9
INTELLECTUAL PROPERTY
9.1 Ownership of Intellectual Property.
9.1.1 Ownership of Background Intellectual Property. As between the Parties, (a) BicycleTx shall
own all right, title, and interest in and to any and all BicycleTx Background Patents and BicycleTx Background Know-How,
and (b) Genentech shall own all right, title, and interest in and to any and all Genentech Background Patents and Genentech
Background Know-How.
9.1.2 Collaboration Inventions.
(a) Sole Ownership. As between the Parties, (i) BicycleTx shall own all right, title, and interest
in and to any and all BicycleTx Platform Know-How, BicycleTx Platform Patents, BicycleTx Collaboration Know-How and
BicycleTx Collaboration Patents (including all BicycleTx Product Inventions, BicycleTx Product Know-How, and
BicycleTx Product Patents) and (ii) Genentech or an Affiliate designated by Genentech shall own all right, title, and interest
in and to any and all Genentech Collaboration Know-How and Genentech Collaboration Patents (including all Genentech
Product Inventions, Genentech Product Know-How, and Genentech Product Patents).
(b) Joint Ownership. The Parties shall jointly own all Joint Collaboration Inventions. Each
Party shall own an equal, undivided interest in any and all Joint Collaboration Inventions, Joint Collaboration Know-How
and Joint Collaboration Patents. Subject to the licenses granted under Section 7.1 and Section 7.2, and BicycleTx’s
Exclusivity Obligations hereunder, each Party shall have the right to Exploit the Joint Collaboration Patents and Joint
Collaboration Know-How without a duty of seeking consent from or accounting to the other Party.
9.2 United States Law. The determination of whether an Invention is discovered, made, conceived or reduced
to practice by a Party for the purpose of allocating proprietary rights (including Patent, copyright or other intellectual
property rights) therein, shall, for purposes of this Agreement, be made in accordance with Applicable Law in the United
States.
9.3 Assignment Obligation.
(a) Each Party shall cause all Persons who perform activities for such Party under this
Agreement to be under an obligation to assign (or, if such Party is unable to cause such Person to agree to such assignment
obligation despite such Party’s using commercially reasonable efforts to negotiate such assignment obligation, provide a
license under) their rights in any information and inventions
- 55 -
resulting therefrom to such Party, except where Applicable Law requires otherwise and except in the case of governmental,
not-for-profit and public institutions which have standard policies against such an assignment (in which case a suitable
license, or right to obtain such a license, shall be obtained).
(b) Genentech will promptly disclose to BicycleTx in writing any Platform Inventions, any
BicycleTx Platform Know-How, Collaboration Know-How, Collaboration Inventions, Product Know-How and Product
Inventions made by Persons (other than BicycleTx) who perform activities for Genentech under this Agreement. Genentech,
for itself and on behalf of its Affiliates, hereby assigns (and to the extent such assignment can only be made in the future,
hereby agrees to assign) to BicycleTx all of its right, title and interest in and to any and all Platform Inventions (and any
BicycleTx Platform Know-How and BicycleTx Platform Patents relating thereto). Genentech will execute and record
assignments and other necessary documents consistent with such ownership promptly upon request.
(c) BicycleTx will promptly disclose to Genentech in writing, any Collaboration Know-How,
Collaboration Inventions, Product Know-How and Product Inventions made by Persons who perform activities for
BicycleTx under this Agreement.
(d) Each Party will promptly disclose to the other Party, in writing, the conception, discovery,
development, generation, making or creation of any Joint Collaboration Know-How or Joint Collaboration Inventions made
by Persons who perform activities for it under this Agreement. Each Party will execute and record assignments and other
necessary documents consistent with such ownership promptly upon request.
9.4 Patent Prosecution and Maintenance.
9.4.1 BicycleTx Background Patents and BicycleTx Platform Patents. BicycleTx shall have the sole
right, but not the obligation, through the use of internal or outside counsel of its choice, to prepare, file, prosecute, and
maintain the BicycleTx Background Patents and BicycleTx Platform Patents worldwide, at BicycleTx’s sole cost and
expense.
(a) After Dev Go for a given Collaboration Program, BicycleTx shall keep Genentech
reasonably informed regarding each BicycleTx Background Patent or BicycleTx Platform Patent that (a) includes claims that
relate to use of the BicycleTx Platform in connection with the Compound(s) for such Collaboration Program; and/or (b)
Covers any Compound or Licensed Product (but which Patent falls outside the scope of Product Patents).
(b) The Parties will reasonably cooperate to [***] (“BicycleTx Other Constructs”). On a
Collaboration Target-by-Collaboration Target basis, after completion of the Lead Generation Phase for a Collaboration
Target, BicycleTx shall [***] BicycleTx Other Constructs. Notwithstanding anything herein to the contrary, on a
Collaboration Target-by-Collaboration Target basis, if any Patents are filed by or on behalf of BicycleTx after completion of
the Lead Generation Phase for a Collaboration Target [***], such Patents shall [***]. On a Collaboration Target-by-
Collaboration Target basis, if any BicycleTx Background Patents or BicycleTx Platform Patents exist prior to the delivery of
the LSR Go Data Package for a Collaboration Target [***]
- 56 -
[***] BicycleTx Other Constructs, BicycleTx [***] that (i) are [***] and/or (ii) [***] under this Agreement. For clarity,
[***]. All remaining Patents in the relevant Patent family shall be included as BicycleTx Collaboration Patents for all
purposes in the Agreement, including with respect to all prosecution, enforcement, extension, and other related provisions.
9.4.2 BicycleTx Collaboration Patents. BicycleTx shall (a) prior to Dev Go for a Collaboration
Program, have the obligation to prepare, file, prosecute, and maintain the applicable BicycleTx Product Patents [***]; and
(b) use good faith efforts to prepare, file, prosecute, and maintain the BicycleTx Collaboration Patents other than BicycleTx
Product Patents [***] in a manner consistent with BicycleTx’s standard practices with respect to its other Patents. Except as
set forth under Section 9.4.5 with respect to BicycleTx Product Patents following Dev Go for a given Collaboration
Program, in consultation with Genentech, BicycleTx shall have the sole right, through the use of internal counsel, or outside
counsel [***], to prepare, file, prosecute, and maintain the BicycleTx Collaboration Patents worldwide, at BicycleTx’s sole
cost and expense. BicycleTx shall keep Genentech fully informed of all material steps with regard to the preparation, filing,
prosecution, and maintenance of all BicycleTx Collaboration Patents, [***]. BicycleTx shall [***] the requests and
suggestions of Genentech with respect to such BicycleTx drafts and with respect to strategies for filing and prosecuting the
BicycleTx Collaboration Patents in the Territory. Notwithstanding the foregoing, BicycleTx shall promptly inform
Genentech of any adversarial patent office proceeding or sua sponte filing, including a request for, or filing of or declaration
of, any interference, opposition, Third Party observation, derivation proceeding, inter partes review, post grant review,
supplementary examination, reissue or inter parte or ex parte reexamination relating to a BicycleTx Collaboration Patent in
the Territory. The Parties shall thereafter consult and cooperate to determine a course of action with respect to any such
proceeding in the Territory and BicycleTx shall [***] all comments, requests and suggestions provided by
Genentech. BicycleTx shall not [***]. If BicycleTx decides not to prepare, file, prosecute, or maintain any BicycleTx
Collaboration Patent other than a BicycleTx Product Patent [***], BicycleTx shall provide reasonable prior written notice to
Genentech of such intention (which notice shall, in any event, be given no later than [***] prior to the next deadline for any
action that may be taken with respect to such BicycleTx Collaboration Patent other than a BicycleTx Product Patent [***]),
and Genentech may thereupon provide BicycleTx written notice to elect for BicycleTx to continue the preparation, filing,
prosecution, and maintenance of such BicycleTx Collaboration Patent other than a BicycleTx Product Patent [***], at
Genentech’s sole cost and expense. Upon BicycleTx’s receipt of such written notice, BicycleTx shall
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continue the preparation, filing, prosecution, and maintenance of such BicycleTx Collaboration Patent other than a
BicycleTx Product Patent [***], at Genentech’s sole cost and expense.
9.4.3 Genentech Background Patents. Genentech shall have the sole right, but not the obligation,
through the use of internal or outside counsel, to prepare, file, prosecute, and maintain the Genentech Background Patents
worldwide, at Genentech’s sole cost and expense.
9.4.4 Genentech Collaboration Patents and Joint Collaboration Patents. Genentech shall have the
first right, but not the obligation, through the use of internal counsel, or outside counsel reasonably acceptable to BicycleTx,
to prepare, file, prosecute, and maintain the Genentech Collaboration Patents and Joint Collaboration Patents worldwide, at
Genentech’s sole cost and expense. Genentech shall keep BicycleTx fully informed of all material steps with regard to the
preparation, filing, prosecution, and maintenance of Genentech Collaboration Patents and Joint Collaboration Patents,
[***]. Genentech shall [***] the requests and suggestions of BicycleTx with respect to such Genentech drafts and with
respect to strategies for filing and prosecuting the Genentech Collaboration Patents and Joint Collaboration Patents in the
Territory. If Genentech decides not to prepare, file, prosecute, or maintain a Genentech Collaboration Patent or Joint
Collaboration Patent in a country or other jurisdiction in the Territory, Genentech shall provide reasonable prior written
notice to BicycleTx of such intention (which notice shall, in any event, be given no later than [***] prior to the next deadline
for any action that may be taken with respect to such Genentech Collaboration Patent or Joint Collaboration Patent in such
country or other jurisdiction), and BicycleTx shall thereupon have the option, in its sole discretion, to assume the control and
direction of the preparation, filing, prosecution, and maintenance of such Genentech Collaboration Patent or Joint
Collaboration Patent at its sole cost and expense in such country or other jurisdiction. Upon BicycleTx’s written acceptance
of such option, BicycleTx shall assume the responsibility and control for the preparation, filing, prosecution, and
maintenance of such Genentech Collaboration Patent or Joint Collaboration Patent. In such event, Genentech shall
reasonably cooperate with BicycleTx with respect to such Genentech Collaboration Patent or Joint Collaboration Patent in
such country or other jurisdiction as provided under Section 9.4.6.
9.4.5 Product Patents Following Dev Go. On a Collaboration Program-by-Collaboration Program basis,
Genentech shall have the first right, but not the obligation, through the use of internal counsel, or outside counsel [***], to
prepare, file, prosecute, and maintain (a) the Genentech Product Patents, and (b) following Dev Go for a given Collaboration
Program, all BicycleTx Product Patents arising from such Collaboration Program, on a worldwide basis, at Genentech’s sole
cost and expense. Upon Genentech’s request following the delivery by Genentech of a Dev Go Notice for a given
Collaboration Program, BicycleTx shall promptly take all necessary steps to transfer to Genentech’s selected patent counsel
the prosecution files and materials for all BicycleTx Product Patents specifically relating to such Collaboration
Program. Genentech shall keep BicycleTx fully informed of all material steps with regard to the preparation, filing,
prosecution, and maintenance of Product Patents, [***]
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[***]. Genentech shall [***] the requests and suggestions of BicycleTx with respect to such Genentech drafts and with
respect to strategies for filing and prosecuting the Product Patents in the Territory. If Genentech decides not to prepare, file,
prosecute, or maintain a Product Patent in a country or other jurisdiction in the Territory, Genentech shall provide reasonable
prior written notice to BicycleTx of such intention (which notice shall, in any event, be given no later than [***] prior to the
next deadline for any action that may be taken with respect to such Product Patent in such country or other jurisdiction), and
BicycleTx shall thereupon have the option, in its sole discretion, to assume the control and direction of the preparation,
filing, prosecution, and maintenance of such Product Patent at its sole cost and expense in such country or other
jurisdiction. Upon BicycleTx’s written acceptance of such option, BicycleTx shall assume the responsibility and control for
the preparation, filing, prosecution, and maintenance of such specific Product Patent. In such event, Genentech shall
reasonably cooperate with BicycleTx with respect to such Product Patent in such country or other jurisdiction as provided
under Section 9.4.6.
9.4.6 Cooperation. The Parties agree to cooperate fully in the preparation, filing, prosecution, and
maintenance of the Product Patents and Collaboration Patents in the Territory under this Agreement. Cooperation shall
include:
(a) without limiting any other rights and obligations of the Parties under this Agreement,
cooperating with respect to the timing, scope and filing of such Patents to preserve and enhance the patent protection for
Compounds and Licensed Products, including the manufacture and use thereof;
(b) executing all papers and instruments, or requiring its employees or contractors to execute
such papers and instruments, so as to (i) effectuate the ownership of intellectual property set forth in Section 9.1.1 and
Section 9.1.2; (ii) enable the other Party to apply for and to prosecute Patent applications in the Territory; and (iii) obtain and
maintain any Patent extensions, supplementary protection certificates, and the like with respect to the Product Patents and
Collaboration Patents in the Territory, in each case ((i), (ii), and (iii)) to the extent provided for in this Agreement;
(c) consistent with this Agreement, assisting in any license registration processes with
applicable governmental authorities that may be available in the Territory for the protection of a Party’s interests in this
Agreement; and
may materially affect the preparation, filing, prosecution, or maintenance of any such Patents in the Territory.
(d) promptly informing the other Party of any matters coming to such Party’s attention that
9.4.7 CREATE Act. It is the intention of the Parties that this Agreement is a “joint research agreement”
as that phrase is defined in 35 USC § 102(c) (AIA) or 35 USC § 103(c) (pre-AIA). In the event that either Party to this
Agreement intends to overcome a rejection of a claimed invention within the Collaboration Patents or Product Patents under
this Agreement pursuant to the provisions of 35 USC § 102(c) or 35 USC § 103(c), such Party shall first obtain the prior
written consent of the other Party. Following receipt of such written consent, such Party shall limit any amendment to the
specification or statement to the patent office with respect to this Agreement to that which is strictly required by 35 USC §
102(c) or 35 USC § 103(c) and the rules and regulations promulgated thereunder and which is consistent with the terms and
conditions of this Agreement. If the Parties agree that, in order to overcome a rejection of a claimed invention within the
Collaboration Patents and/or Product Patents pursuant to the provisions of the CREATE Act, the filing of a terminal
disclaimer is required or advisable, the Parties shall first agree
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on terms and conditions under which the patent application subject to such terminal disclaimer and the patent or application
over which such application is disclaimed shall be jointly enforced, if and to the extent that the Parties have not previously
agreed to such terms and conditions. If Genentech enters into an agreement with a Third Party with respect to the further
research, development or commercialization of a Compound, a Development Candidate or Licensed Product, BicycleTx
shall, upon Genentech’s request, similarly enter into such agreement with such Third Party for the purposes of furthering the
Parties’ objectives under this Agreement, provided that such agreement is consistent with the rights of BicycleTx under this
Section 9.4.7 and does not place any material obligation on BicycleTx.
9.4.8 Patent Term Extension and Supplementary Protection Certificate. Genentech shall be
responsible for making decisions regarding patent term extensions, including supplementary protection certificates and any
other extensions that are now or become available in the future, wherever applicable, for Genentech Background Patents,
Genentech Collaboration Patents, Product Patents and Joint Collaboration Patents in any country or other jurisdiction and for
applying for any extension or supplementary protection certificate with respect to such Patents in the Territory. BicycleTx
shall provide prompt and reasonable assistance, as requested by Genentech, including by taking such action as patent holder
as is required under any Applicable Law to obtain such patent extension or supplementary protection certificate. Genentech
shall pay all expenses with respect to obtaining the extension or supplementary protection certificate in the Territory. In case
that Genentech desires that a patent term extension should be applied for a BicycleTx Platform Patent or a BicycleTx
Background Patent, BicycleTx and Genentech shall [***], provided that [***].
9.4.9 Patent Listings. Genentech will have the sole right to make all filings with Regulatory Authorities
in the Territory with respect to Genentech Background Patents, Genentech Collaboration Patents, Product Patents and Joint
Collaboration Patents, including as required or allowed under Applicable Law, provided that with respect to Joint
Collaboration Patents such right shall be solely with respect to Licensed Products. Genentech shall notify BicycleTx in
writing of any BicycleTx Background Patents and BicycleTx Platform Patents that it intends to list with Regulatory
Authorities related to the Licensed Products and, prior to filing any such listing, consult with and [***] the requests and
suggestions of BicycleTx regarding the same.
9.5 Patent Enforcement.
9.5.1 BicycleTx Background Patents, BicycleTx Platform Patents and BicycleTx Collaboration
Patents.
(a) Each Party shall promptly notify the other Party in writing of any alleged or threatened
infringement of a BicycleTx Background Patent or BicycleTx Collaboration Patent by a Third Party in the Territory of which
such Party becomes aware based on the development, commercialization, or an application to market a product containing a
Compound or any Licensed Product in the Territory (the “Product Infringement”).
(b) BicycleTx shall have the sole right, but not the obligation, to prosecute any Product
Infringement involving any claims of BicycleTx Background Patents, BicycleTx Platform Patents and BicycleTx
Collaboration Patents at its sole expense and BicycleTx shall retain control of the prosecution of such claim, suit or
proceeding.
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9.5.2 Genentech Background Patents, Genentech Collaboration Patents, Product Patents and Joint
Collaboration Patents.
(a) Each Party shall promptly notify the other Party in writing of any alleged or threatened
infringement of a Genentech Background Patent, Genentech Collaboration Patent, a Product Patent or a Joint Collaboration
Patent by a Third Party in the Territory of which such Party becomes aware (including alleged or threatened infringement
based on the development, commercialization, or an application to market a product containing a Compound or any
Licensed Product in the Territory).
(b) Genentech shall have the sole right, but not the obligation, to prosecute any such
infringement of Genentech Background Patents in the Territory at its sole expense, and Genentech shall retain control of the
prosecution of such claim, suit or proceeding.
(c) Genentech shall have the first right, but not the obligation, to prosecute any such
infringement of Genentech Collaboration Patents, Product Patents and Joint Collaboration Patents, in each case in the
Territory at its sole expense, and Genentech shall retain control of the prosecution of such claim, suit or proceeding. In the
event Genentech prosecutes any such infringement, BicycleTx shall have the right to join as a party to such claim, suit or
proceeding in the Territory and participate with its own counsel at its own expense; provided that Genentech shall retain
control of the prosecution of such claim, suit or proceeding. If Genentech does not take commercially reasonable steps to
prosecute the alleged or threatened infringement in the Territory with respect to any such Genentech Collaboration Patent,
Product Patent or Joint Collaboration Patent (i) within [***] following the first notice provided above with respect to such
alleged infringement, or (ii) [***] before the time limit, if any, set forth in appropriate laws and regulations for filing of such
actions, whichever comes first, then BicycleTx may prosecute the alleged or threatened infringement in the Territory at its
own expense.
9.5.3 Cooperation. The Parties agree to cooperate fully in any infringement action pursuant to this
Section 9.5. To the extent necessary for a Party to bring such an action, the other Party shall, where necessary, furnish a
power of attorney solely for such purpose or shall join in, or be named as a necessary party to, such action. Unless otherwise
set forth herein, the Party entitled to bring any patent infringement litigation in accordance with this Section 9.5 shall have
the right to settle such claim; provided that neither Party shall have the right to settle any patent infringement litigation under
this Section 9.5 in a manner that materially diminishes or has a material adverse effect on the rights or interest of the other
Party, or in a manner that imposes any costs or liability on, or involves any admission by, the other Party, without the express
written consent of such other Party. The Party commencing the litigation shall provide the other Party with copies of all
pleadings and other documents filed with the court and shall consider reasonable input from the other Party during the
course of the proceedings.
9.5.4 Recovery. Any recovery realized as a result of such litigation described in Section 9.5.1 or Section
9.5.2 (whether by way of settlement or otherwise) shall be first allocated to reimburse the Parties for their costs and expenses
in making such recovery (which amounts shall be allocated pro rata if insufficient to cover the totality of such
expenses). Any remainder after such reimbursement is made shall be [***]; provided, that [***].
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9.6 Infringement Claims by Third Parties. If the manufacture, sale, or use of a Discovery Construct or
Licensed Product in the Territory pursuant to this Agreement results in, or may result in, any claim, suit, or proceeding by a
Third Party alleging patent infringement by Genentech (or its Affiliates or Sublicensees), Genentech shall promptly notify
BicycleTx thereof in writing. Genentech shall have the first right, but not the obligation, to defend and control the defense
of any such claim, suit, or proceeding at its own expense, using counsel of its own choice. BicycleTx may participate in any
such claim, suit, or proceeding with counsel of its choice at its own expense. Without limitation of the foregoing, if
Genentech finds it necessary or desirable to join BicycleTx as a party to any such action, BicycleTx shall, at Genentech’s
expense, execute all papers and perform such acts as shall be reasonably required. If Genentech elects (in a written
communication submitted to BicycleTx within a reasonable amount of time after notice of the alleged patent infringement)
not to defend or control the defense of, or otherwise fails to initiate and maintain the defense of, any such claim, suit, or
proceeding, within such time periods so that BicycleTx is not prejudiced by any delays, BicycleTx may conduct and control
the defense of any such claim, suit, or proceeding at its own expense. Each Party shall keep the other Party reasonably
informed of all material developments in connection with any such claim, suit, or proceeding. Any recoveries by Genentech
of any sanctions awarded to Genentech and against a party asserting a claim being defended under this Section 9.6 shall be
applied first to reimburse each Party for its reasonable out-of-pocket costs of defending or participating in such claim, suit,
or proceedings, on a pro rata basis. The balance of any such recoveries shall be [***].
9.7 Invalidity or Unenforceability Defenses or Actions.
9.7.1 Notice. Each Party shall promptly notify the other Party in writing of any alleged or threatened
assertion of invalidity or unenforceability of any of the BicycleTx Background Patents, BicycleTx Platform Patents,
Genentech Background Patents, Genentech Collaboration Patents, Product Patents or Joint Collaboration Patents by a Third
Party, in each case in the Territory and of which such Party becomes aware.
9.7.2 BicycleTx Background Patents. BicycleTx shall have the sole right, but not the obligation, to
defend and control the defense of the validity and enforceability of the BicycleTx Background Patents at its own expense in
the Territory.
9.7.3 BicycleTx Platform Patents and BicycleTx Collaboration Patents. Subject to Section 9.7.5 with
respect to BicycleTx Product Patents following Dev Go for a given Collaboration Program, BicycleTx shall have the sole
right, but not the obligation, to defend and control the defense of the validity and enforceability of the BicycleTx Platform
Patents and BicycleTx Collaboration Patents at its own expense in the Territory. Genentech may participate in any such
claim, suit, or proceeding in the Territory with counsel of its choice at its own expense; provided that BicycleTx shall retain
control of the defense in such claim, suit, or proceeding.
9.7.4 Genentech Background Patents. Genentech shall have the sole right, but not the obligation, to
defend and control the defense of the validity and enforceability of the Genentech Background Patents at its own expense in
the Territory.
9.7.5
Genentech Collaboration Patents, Product Patents and Joint Collaboration
Patents. Genentech shall have the first right, but not the obligation, to defend and control the defense of the validity and
enforceability of the Genentech Collaboration Patents, Product Patents and Joint
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Collaboration Patents at its own expense in the Territory, provided that with respect to BicycleTx Product Patents,
Genentech shall have such rights only following Dev Go for the applicable Collaboration Program. BicycleTx may
participate in any such claim, suit, or proceeding in the Territory related to the Genentech Collaboration Patents, Product
Patents and Joint Collaboration Patents with counsel of its choice at its own expense; provided that Genentech shall retain
control of the defense in such claim, suit, or proceeding. If Genentech elects not to defend or control the defense of the
Genentech Collaboration Patents, Product Patents and Joint Collaboration Patents in a suit brought in the Territory, or
otherwise fails to initiate and maintain the defense of any such claim, suit, or proceeding, then BicycleTx may conduct and
control the defense of any such claim, suit, or proceeding, at its own expense; provided, that BicycleTx shall obtain the
written consent of Genentech prior to settling or compromising such defense.
9.7.6 Cooperation. Each Party shall assist and cooperate with the other Party as such other Party may
reasonably request from time to time in connection with its activities set forth in this Section 9.7, including by being joined
as a party plaintiff in such action or proceeding, providing access to relevant documents and other evidence, and making its
employees available at reasonable business hours. In connection with any such defense or claim or counterclaim, the
controlling Party shall consider in good faith any comments from the other Party, shall keep the other Party reasonably
informed of any steps taken, and shall provide copies of all documents filed, in connection with such defense, claim, or
counterclaim. In connection with the activities set forth in this Section 9.7, each Party shall consult with the other as to the
strategy for the defense of the BicycleTx Collaboration Patents, Genentech Collaboration Patents, Product Patents and Joint
Collaboration Patents.
9.8 Third Party Licenses. If, [***], the Development, Manufacture, or Commercialization of any Compound
or Licensed Product by Genentech, any of its Affiliates, or any of its or their Sublicensees would infringe or misappropriate
any Patent, trade secret, or other intellectual property right of a Third Party in any country or other jurisdiction in the
Territory, then Genentech shall have the sole right, but not the obligation, to negotiate and obtain a license from such Third
Party [***] for Genentech and its Affiliates, and its and their Sublicensees to Develop, Manufacture, and Commercialize a
Compound or Licensed Products in such country or other jurisdiction, and Genentech shall promptly provide BicycleTx with
written notice of any such license, including the identity of the counter-party and a description of the Patent, trade secret, or
other intellectual property right. For clarity, BicycleTx shall be solely responsible for obtaining, negotiating, maintaining
BicycleTx Future In-License Agreements and paying any payments due under such BicycleTx Future In-License
Agreements. Notwithstanding the foregoing, any Know-How, Regulatory Documentation, material, Patent, or other property
right to which rights are obtained by BicycleTx under any agreement entered into following the Effective Date other than a
BicycleTx Future In-License Agreement (collectively, “Future Rights”), and for which payments are or would be owed to a
Third Party for the Exploitation of such Future Rights in connection with a Compound or Licensed Product under this
Agreement, shall not be deemed to be included within BicycleTx Background Patents or BicycleTx Background Know-
How, or within the license granted to Genentech pursuant to Section 7.1, unless [***].
9.9 Product Trademarks. As between the Parties, Genentech shall own all right, title, and interest to the
Product Trademarks in the Territory, and shall be responsible for the registration, prosecution, maintenance and enforcement
thereof. All costs and expenses of registering, prosecuting, maintaining and enforcing the Product Trademarks shall be
borne solely by Genentech. BicycleTx shall provide all
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assistance and documents reasonably requested by Genentech in support of its prosecution, registration, maintenance and
enforcement of the Product Trademarks.
9.10 Inventor’s Remuneration. Each Party shall be solely responsible for any remuneration that may be due
such Party's inventors under any applicable inventor remuneration laws.
9.11 Common Interest. All information exchanged between the Parties regarding the prosecution, maintenance,
enforcement and defense of Patents under this ARTICLE 9 will be deemed to be Confidential Information of the disclosing
Party. In addition, the Parties acknowledge and agree that, with regard to such prosecution, maintenance, enforcement and
defense, the interests of the Parties as collaborators are to, for their mutual benefit, obtain patent protection and plan patent
defense against potential infringement activities by Third Parties, and as such, are aligned and are legal in nature. The
Parties agree and acknowledge that they have not waived, and nothing in this Agreement constitutes a waiver of, any legal
privilege concerning Patents under this ARTICLE 9, including privilege under the common interest doctrine and similar or
related doctrines. Notwithstanding anything to the contrary in this Agreement, to the extent a Party has a good faith belief
that any information required to be disclosed by such Party to the other Party under this ARTICLE 9 is protected by
attorney-client privilege or any other applicable legal privilege or immunity, such Party shall not be required to disclose such
information and the Parties shall in good faith cooperate to agree upon a procedure (including without limitation entering
into a specific common interest agreement or disclosing such information on a “for counsel eyes only” basis or similar
procedure) under which such information may be disclosed without waiving or breaching such privilege or immunity.
ARTICLE 10
PHARMACOVIGILANCE AND SAFETY
10.1 Pharmacovigilance. On a Licensed Product-by-Licensed Product basis, the Parties shall determine the
necessity and timing for the execution of a separate pharmacovigilance agreement specifying the procedure for the
information exchange of safety data and adverse events that may occur during the clinical Development of a Licensed
Product. Each such pharmacovigilance agreement shall be in a mutually agreed format and enable each Party to meet
reporting requirements with any applicable Regulatory Authority and include the set-up and maintenance of a global safety
database.
10.2 Notification requirements. During the Term, BicycleTx shall promptly notify Genentech of any safety
issues of which BicycleTx becomes aware that [***].
ARTICLE 11
CONFIDENTIALITY AND NON-DISCLOSURE
11.1 Confidentiality Obligations. At all times during the Term and for a period of [***] following termination
or expiration hereof in its entirety, each Party shall, and shall cause its officers, directors, employees and agents to, keep
confidential and not publish or otherwise disclose to a Third Party and not use, directly or indirectly, for any purpose, any
Confidential Information furnished or otherwise made known to it, directly or indirectly, by the other Party, except to the
extent such disclosure or use is expressly permitted by the terms of this Agreement or is reasonably necessary or useful for
the performance of, or the exercise of such Party’s rights under, this Agreement. Notwithstanding the foregoing, to the
extent the receiving Party can demonstrate by documentation or other competent proof, the confidentiality and non-use
obligations under this Section 11.1 with respect to any Confidential Information shall not include any information that:
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11.1.1 has been published by a Third Party or otherwise is or hereafter becomes part of the public domain
by public use, publication, general knowledge or the like through no wrongful act, fault or negligence on the part of the
receiving Party;
11.1.2 has been in the receiving Party’s possession prior to disclosure by the disclosing Party without any
obligation of confidentiality with respect to such information; provided that the foregoing exception shall not apply to Joint
Know-How;
11.1.3 is subsequently received by the receiving Party from a Third Party without restriction and without
breach of any agreement between such Third Party and the disclosing Party;
11.1.4 is generally made available to Third Parties by the disclosing Party without restriction on disclosure;
or
11.1.5 has been independently developed by or for the receiving Party without reference to, or use or
disclosure of, the disclosing Party’s Confidential Information; provided that the foregoing exception shall not apply to Joint
Know-How.
Specific aspects or details of Confidential Information shall not be deemed to be within the public domain or in the
possession of the receiving Party merely because the Confidential Information is embraced by more general information in
the public domain or in the possession of the receiving Party. Further, any combination of Confidential Information shall not
be considered in the public domain or in the possession of the receiving Party merely because individual elements of such
Confidential Information are in the public domain or in the possession of the receiving Party unless the combination and its
principles are in the public domain or in the possession of the receiving Party.
11.2 Permitted Use or Disclosures.
11.2.1 Each Party may disclose Confidential Information to the extent that such disclosure is, in the
reasonable opinion of the receiving Party’s legal counsel, required to be disclosed pursuant to law, regulation or a valid order
of a court of competent jurisdiction or other supra-national, federal, national, regional, state, provincial or local
governmental body of competent jurisdiction provided, that the receiving Party shall first have given prompt written notice
(and to the extent possible, at least [***] notice) to the disclosing Party and given the disclosing Party a reasonable
opportunity to take whatever action it deems necessary to protect its Confidential Information. If no protective order or
other remedy is obtained, or the disclosing Party waives compliance with the terms of this Agreement, the receiving Party
shall furnish only that portion of Confidential Information which the receiving Party is advised by counsel is legally required
to be disclosed; for clarity, disclosures required in the reasonable opinion of the receiving Party’s legal counsel to the U.S.
Securities and Exchange Commission (or equivalent foreign agency) shall be subject to the following Section 11.2.2.
11.2.2 The Parties acknowledge that either or both Parties (or its Affiliates) may be obligated to make one
or more filings (including to file a copy of this Agreement) with the U.S. Securities and Exchange Commission (or
equivalent foreign agency) or a governmental authority. Each Party will be entitled to make such a required filing, provided
that if such filing includes a copy of this Agreement it will (a) submit in connection with such filing a copy of this
Agreement in a form mutually agreed by the Parties in advance or, if, despite the reasonable efforts of BicycleTx, a form
mutually agreed by the Parties cannot be agreed in advance, redacted to the extent permitted by Applicable Law (the
“Redacted Agreement”), (b) request, and use reasonable efforts consistent with Applicable Laws to obtain confidential
treatment of
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all terms redacted from this Agreement, as reflected in the Redacted Agreement, [***], (c) to the extent consistent with
Applicable Law, promptly deliver to the other Party any written correspondence received by it or its representatives from the
U.S. Securities and Exchange Commission (or equivalent foreign agency) or a governmental authority with respect to such
confidential treatment request and promptly advise the other Party of any other material communications between it or its
representatives with the U.S. Securities and Exchange Commission (or equivalent foreign agency) or a governmental
authority with respect to such confidential treatment request, (d) upon the written request of the other Party, if legally
justifiable, request an appropriate extension of the term of the confidential treatment period, and (e) if [***] in the Redacted
Agreement, use reasonable efforts [***]. For clarity, following a request from a governmental authority to change the
redactions requested by a Party, [***] such Party shall provide the other Party with a notice of the required change and a
copy of the revised redactions. Each Party will be responsible for its own legal and other external costs in connection with
any such filing, registration or notification.
11.2.3 Each Party may disclose the terms and conditions of this Agreement and Confidential Information
of the other Party (a) on a need-to-know basis to its legal and financial advisors under appropriate conditions of
confidentiality, (b) under appropriate conditions of confidentiality in connection with an actual or potential (i) permitted
license or sublicense of its rights hereunder, (ii) debt, lease or equity financing of such Party, (iii) merger, Acquisition,
consolidation, share exchange or other similar transaction involving such Party and a Third Party, or (iv) co-funding or
financing arrangement, provided that in each (i) to (iv) the receiving Party provides prior written notice of such disclosure to
the disclosing Party and, to the extent practicable, takes reasonable and lawful actions to minimize the degree of such
disclosure, (c) to any Third Party that is or may be engaged to perform services in connection with the Development,
Manufacturing, or Commercialization of the Products as necessary to enable such Third Party to perform such services and
under appropriate conditions of confidentiality, (d) to any government agency or authority in connection with seeking
government, funding, support or grants, and (e) to the extent such disclosure is reasonably necessary in filing, prosecuting,
or enforcing patent, copyright and trademark rights, obtaining and maintaining Regulatory Approvals, or conducting
preclinical or clinical trials and (f) to Third Parties requesting clinical trial data information (in accordance with the then-
current data sharing policy of Genentech and its Affiliates; provided that prior to any such disclosures pursuant to (a)-(c),
any Third Party receiving such Confidential Information of the disclosing Party shall be contractually obligated to
substantially the same obligations of non-disclosure and non-use of the receiving Party as set forth in Section 11.1, and the
receiving Party shall be liable for any breach thereof by such Third Party.
11.3 Use of Name. Except as expressly provided herein, neither Party shall mention or otherwise use the name,
logo, or Trademark of the other Party or any of its Affiliates (or any abbreviation or adaptation thereof) in any publication,
press release, marketing and promotional material, or other form of publicity without the prior written approval of such other
Party in each instance. The restrictions imposed by this Section 11.3 shall not prohibit either Party from making any
disclosure identifying the other Party that, in the opinion of the disclosing Party’s counsel, is required by Applicable Law;
provided, that such Party shall submit the proposed disclosure identifying the other Party in writing to the other Party as far
in
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advance as reasonably practicable (and in no event less than [***] prior to the anticipated date of disclosure) so as to provide
a reasonable opportunity to comment thereon.
11.4 Press Releases. Genentech shall issue press releases in accordance with its internal policy that typically
does not issue a second press release until clinical proof of concept has been achieved for a Licensed Product. Genentech
shall provide BicycleTx with a copy of any draft press release related to the activities contemplated by this Agreement at
least [***] (or such shorter period as may be mandated by Applicable Law) prior to its intended publication for BicycleTx’s
review. [***]. Genentech shall consider BicycleTx's suggestions in issuing its press release. BicycleTx shall only issue press
releases related to the activities contemplated by this Agreement that either [***]. In all circumstances, BicycleTx shall
provide Genentech with a draft press release at least [***] (or such shorter period as may be mandated by Applicable Law)
prior to its intended publication for Genentech’s review. During such period, Genentech shall [***]. To ensure
communication alignment, responses (if any) to inquiries by media or other Third Parties after issuance of a permitted press
release by BicycleTx (solely or jointly with Genentech) shall consist solely of the press release language or shall follow the
response guidelines that may be mutually developed by the Parties.
11.5 Publications. During the Term, the following restrictions shall apply with respect to disclosure by any Party
of Confidential Information relating to the Licensed Product in any publication or presentation:
11.5.1 Both Parties acknowledge that it is their policy for the studies and results thereof to be registered
and published in accordance with their internal guidelines. Genentech, in accordance with its internal policies and
procedures, shall have the right to publish all studies and clinical trials conducted by or on behalf of Genentech (and results
thereof) on the clinical trial registries that are maintained by or on behalf of Genentech without BicycleTx’s review or
approval if no Confidential Information of BicycleTx is included. BicycleTx shall not publish any studies, clinical trials or
results thereof related to this Agreement on its clinical trial registry, provided however, that Genentech’s clinical trial registry
can be accessed via a link from Bicycle’s clinical trial registry.
11.5.2 A Party (“Publishing Party”) shall provide the other Party with a copy of any proposed publication
or presentation at least [***] prior to submission for publication so as to provide such other Party with an opportunity to
recommend any changes to the Publishing Party that it reasonably believes are necessary to continue to maintain such
Party’s Confidential Information in accordance with the requirements of this Agreement. The incorporation of such
recommended changes shall not be unreasonably refused; and if such other Party notifies (“Publishing Notice”) the
Publishing Party in writing, within [***] after receipt of the copy of the proposed publication or presentation, that such
publication or presentation in its reasonable judgment (a) contains an Invention, solely or jointly conceived and/or reduced
to practice by the other Party, for which the other Party reasonably desires to obtain patent protection or (b) could be
expected to have a material adverse effect on the commercial value of any Confidential Information disclosed by the other
Party to the Publishing Party, the Publishing Party
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shall prevent such publication or delay such publication for a mutually agreeable period of time. In the case of Inventions, a
delay shall be for a period reasonably sufficient to permit the timely preparation and filing of a patent application(s) on such
invention, and in no event less than [***] from the date of the Publishing Notice. Notwithstanding anything to the contrary
in this Section 11.5.2, [***].
11.6 Destruction of Confidential Information. Upon the effective date of the termination of this Agreement for
any reason, the Parties shall, with respect to Confidential Information (in the event of termination of this Agreement with
respect to one (1) or more Terminated Territories or Terminated Targets but not in its entirety, solely to the extent relating
specifically and exclusively to such Terminated Territories and/or Terminated Targets or Terminated Assets, as applicable) to
which such other Party does not retain rights under the surviving provisions of this Agreement, as soon as reasonably
practicable, destroy all copies of such Confidential Information in the possession of the other Party and confirm such
destruction in writing to the other Party, provided, that such other Party shall be permitted to retain one (1) copy of such
Confidential Information for the sole purpose of performing any continuing obligations hereunder, as required by Applicable
Law, or for archival purposes. [***] Notwithstanding the foregoing, such other Party also shall be permitted to retain such
additional copies of or any computer records or files containing such Confidential Information that have been created solely
by such Party’s automatic archiving and back-up procedures, to the extent created and retained in a manner consistent with
such other Party’s standard archiving and back-up procedures, but not for any other use or purpose.
ARTICLE 12
REPRESENTATIONS AND WARRANTIES
12.1 Mutual Representations and Warranties. BicycleTx and Genentech each represents and warrants to the
other, as of the Effective Date, as follows:
12.1.1 Organization. It is a corporation duly incorporated, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation, and has all requisite corporate power and authority, to execute, deliver, and
perform this Agreement.
12.1.2 Authorization. The execution and delivery of this Agreement and the performance by it of the
transactions contemplated hereby have been duly authorized by all necessary corporate action and do not violate (a) such
Party’s charter documents, bylaws, or other organizational documents, (b) in any material respect, any agreement,
instrument, or contractual obligation to which such Party is bound, (c) any requirement of any Applicable Law, or (d) any
order, writ, judgment, injunction, decree, determination, or award of any court or governmental agency presently in effect
applicable to such Party.
12.1.3 Binding Agreement. This Agreement is a legal, valid, and binding obligation of such Party
enforceable against it in accordance with its terms and conditions, subject to the effects of bankruptcy, insolvency, or other
laws of general application affecting the enforcement of creditor rights,
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judicial principles affecting the availability of specific performance, and general principles of equity (whether enforceability
is considered a proceeding at law or equity).
12.1.4 No Inconsistent Obligation. It is not under any obligation, contractual or otherwise, to any Person
that conflicts with or is inconsistent in any material respect with the terms of this Agreement or that would impede the
diligent and complete fulfillment of its obligations hereunder.
12.2 Additional Representations and Warranties of Bicycle. BicycleTx further represents and warrants to
Genentech, as of the Effective Date, as follows:
12.2.1 All BicycleTx Background Patents and BicycleTx Platform Patents existing as of the Effective Date
are listed on Schedule 12.2.1 (the “Existing Patents”).
12.2.2 There are no judgments, or settlements against, or amounts with respect thereto, owed by BicycleTx
or any of its Affiliates relating to the Existing Patents or the BicycleTx Background Know-How. No claim or litigation has
been brought or threatened in writing or any other form by any Person alleging, and BicycleTx has no knowledge of any
claim, whether or not asserted, that the Existing Patents are invalid or unenforceable.
12.2.3 To BicycleTx’s knowledge, no Person is infringing or threatening to infringe or misappropriating or
threatening to misappropriate the Existing Patents or the BicycleTx Background Know-How.
12.2.4 BicycleTx is the sole and exclusive owner of the entire right, title and interest in the Existing
Patents, and such Existing Patents are free of any encumbrance, lien, or claim of ownership by any Third Party. BicycleTx
is entitled to grant the licenses specified herein.
12.2.5 Neither BicycleTx nor any of its employees nor, to BicycleTx’s knowledge, agents performing
hereunder, have ever been, are currently, or are the subject of a proceeding that could lead to it or such employees or agents
becoming, as applicable, a Debarred Entity or Debarred Individual, an Excluded Entity or Excluded Individual or a
Convicted Entity or Convicted Individual or added to the FDA’s Disqualified/Restricted List. If, during the Term,
BicycleTx, or any of its employees or agents performing hereunder, become or are the subject of a proceeding that could
lead to a Person becoming, as applicable, a Debarred Entity or Debarred Individual, an Excluded Entity or Excluded
Individual or a Convicted Entity or Convicted Individual or added to the FDA’s Disqualified/Restricted List, BicycleTx shall
immediately notify Genentech, and Genentech shall have the right, exercisable upon written notice given by Genentech to
terminate this Agreement. This provision shall survive termination or expiration of this Agreement. For purposes of this
Agreement, the following definitions shall apply:
(a) A “Debarred Individual” is an individual who has been debarred by the FDA pursuant to
21 U.S.C. §335a (a) or (b) from providing services in any capacity to a person that has an approved or pending drug or
biological product application.
(b) A “Debarred Entity” is a corporation, partnership or association that has been debarred by
the FDA pursuant to 21 U.S.C. §335a (a) or (b) from submitting or assisting in the submission of any Drug Approval
Application, or a subsidiary or affiliate of a Debarred Entity.
applicable, who has been excluded, debarred, suspended or is otherwise ineligible to participate
(c) An “Excluded Individual” or “Excluded Entity” is (i) an individual or entity, as
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in federal health care programs such as Medicare or Medicaid by the Office of the Inspector General (OIG/HHS) of the U.S.
Department of Health and Human Services, or (ii) is an individual or entity, as applicable, who has been excluded, debarred,
suspended or is otherwise ineligible to participate in federal procurement and non-procurement programs, including those
produced by the U.S. General Services Administration (GSA).
(d) A “Convicted Individual” or “Convicted Entity” is an individual or entity, as applicable,
who has been convicted of a criminal offense that falls within the ambit of 21 U.S.C. §335a (a) or 42 U.S.C. §1320a - 7(a),
but has not yet been excluded, debarred, suspended or otherwise declared ineligible.
(e) “FDA’s Disqualified/Restricted List” is the list of clinical investigators restricted from
receiving investigational drugs, biologics, or devices who the FDA has determined have repeatedly or deliberately failed to
comply with regulatory requirements for studies or have submitted false information to the study sponsor or the FDA.
12.3 Additional Representations, Warranties and Covenants of Genentech. Genentech represents and
warrants to BicycleTx, as of the Effective Date, as follows:
12.3.1 that Genentech is entitled to grant BicycleTx the license as specified in Section 7.2 with regard to
Genentech Background Patents and Genentech Background Know-How Controlled by Genentech or any of its Affiliates on
the Effective Date.
12.3.2 Genentech covenants to BicycleTx that if it becomes aware that any employee or agent performing
activities in connection with a Collaboration Program is, at any time during the conduct of such Collaboration Program, a
Debarred Entity or Debarred Individual, an Excluded Entity or Excluded Individual or a Convicted Entity or Convicted
Individual or added to the FDA’s Disqualified/Restricted List, it shall immediately notify BicycleTx thereof. This provision
shall survive termination or expiration of this Agreement.
12.4 Covenants of Bicycle. BicycleTx covenants to Genentech as follows:
12.4.1 During the Term, neither BicycleTx nor any of its Affiliates shall encumber or diminish the rights
granted to Genentech hereunder with respect to the BicycleTx Patents, including by not (a) knowingly committing any acts
or knowingly permitting the occurrence of any omissions that would adversely affect the rights granted to Genentech
hereunder, (b) knowingly committing any acts or knowingly permitting the occurrence of any omissions that would cause
the breach or termination of any BicycleTx Future In-License Agreement, or (c) amending or otherwise modifying or
permitting to be amended or modified, any BicycleTx Future In-License Agreement, where such amendment or modification
would adversely affect the rights granted to Genentech hereunder. BicycleTx shall promptly provide Genentech with notice
of any alleged, threatened, or actual breach of any BicycleTx Future In-License Agreement.
12.4.2 In performing obligations under this Agreement, BicycleTx and its Affiliates will not knowingly
infringe or misappropriate any Patents or other intellectual property that are Controlled by Third Parties but are not
Controlled by BicycleTx or its Affiliates.
12.4.3 BicycleTx and its Affiliates will employ Persons with appropriate education, knowledge and
experience to conduct and to oversee the Discovery Research Activities.
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12.4.4 BicycleTx shall have obtained from each of its Affiliates, sublicensees, employees and agents who
are participating in the Exploitation of the Compounds or Licensed Products or who otherwise have access to any Genentech
Know-How or other Confidential Information of Genentech, rights to any and all Know-How that is reasonably necessary
for the Development or Commercialization of Compounds or Licensed Products, in each case prior to the performance of or
participation in such activities, such that Genentech shall, by virtue of this Agreement, receive from BicycleTx, without
payments beyond those required by ARTICLE 8, the licenses and other rights granted to Genentech hereunder.
12.5 DISCLAIMER OF WARRANTIES. EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH
HEREIN, NEITHER PARTY MAKES ANY REPRESENTATIONS OR GRANTS ANY WARRANTIES, EXPRESS OR
IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, AND EACH PARTY
SPECIFICALLY DISCLAIMS ANY OTHER WARRANTIES, WHETHER WRITTEN OR ORAL, OR EXPRESS OR
IMPLIED, INCLUDING ANY WARRANTY OF QUALITY, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR
USE OR PURPOSE OR ANY WARRANTY AS TO THE VALIDITY OF ANY PATENTS OR THE NON-
INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.
ARTICLE 13
INDEMNIFICATION; INSURANCE
13.1 Indemnification of Bicycle. Genentech shall indemnify, defend and hold harmless BicycleTx, its Affiliates
and its and their respective directors, officers, employees, and agents (the “BicycleTx Indemnitees”) from and against any
and all losses, damages, liabilities, penalties, settlements, costs, taxes (including penalties and interest) and expenses
(including reasonable attorneys’ fees and other expenses of litigation) (collectively, “Losses”) in connection with any and all
suits, investigations, claims, or demands of Third Parties (collectively, “Third Party Claims”) incurred by or rendered
against the BicycleTx Indemnitees arising from or occurring as a result of: (a) the breach by Genentech or its Affiliates of
this Agreement; (b) the negligence, recklessness or willful misconduct on the part of Genentech or its Affiliates or their
respective directors, officers, employees, and agents in performing its or their obligations under this Agreement; or (c) the
Exploitation of any Discovery Constructs or Licensed Products by Genentech or its Affiliates or Sublicensees; except, in the
case of clauses (a) through (c) above, to the extent BicycleTx has an obligation to indemnify Genentech pursuant to
Section 13.2.
13.2 Indemnification of Genentech. BicycleTx shall indemnify, defend and hold harmless Genentech, its
Affiliates and its and their respective directors, officers, employees, and agents (the “Genentech Indemnitees”) from and
against any and all Losses in connection with any and all Third Party Claims incurred by or rendered against the Genentech
Indemnitees arising from or occurring as a result of: (a) the breach by BicycleTx or its Affiliates of this Agreement; (b) the
negligence, recklessness or willful misconduct on the part of BicycleTx or its Affiliates or its or their respective directors,
officers, employees, and agents in performing its obligations under this Agreement; or (c) the Exploitation of any Discovery
Constructs by BicycleTx or its Affiliates pursuant to the practice of any Unblocking License following termination of this
Agreement; except, in the case of clauses (a) through (c) above, to the extent Genentech has an obligation to indemnify
BicycleTx pursuant to Section 13.1.
13.3 Notice of Claim. All indemnification claims in respect of a Party, its Affiliates, or its or their respective
directors, officers, employees and agents shall be made solely by such Party to this Agreement (the “Indemnified
Party”). The Indemnified Party shall give the indemnifying Party (the “Indemnifying Party”) prompt written notice (an
“Indemnification Claim Notice”) of any Losses or
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discovery of fact upon which such Indemnified Party intends to base a request for indemnification under this ARTICLE 13,
but in no event shall the Indemnifying Party be liable for any Losses that result from any delay by the Indemnified Party in
providing such notice. Each Indemnification Claim Notice must contain a description of the claim and the nature and
amount of such Loss (to the extent that the nature and amount of such Loss is known at such time). The Indemnified Party
shall furnish promptly to the Indemnitee copies of all papers and official documents received in respect of any Losses and
Third Party Claims.
13.4 Control of Defense. The Indemnifying Party shall have the right, but not the obligation, to conduct and
control, through counsel of its choosing, any action for which indemnification is sought, and if the Indemnifying Party elects
to assume the defense thereof, the Indemnifying Party shall not be liable to the Indemnified Party for any legal expenses of
other legal counsel or any other expenses subsequently incurred by such Indemnified Party in connection with the defense
thereof. The Indemnifying Party may settle any action, claim or suit for which the Indemnified Party is seeking
indemnification; provided that the Indemnifying Party shall first give the Indemnified Party advance written notice of any
proposed compromise or settlement and such Indemnified Party provides prior written approval, such approval not to be
unreasonably withheld or delayed. The Parties and their employees shall cooperate fully with each other and their legal
representatives in the investigation, defense, prosecution, negotiation, or settlement of any such claim or suit. Each Party’s
indemnification obligations under this ARTICLE 13 shall not apply to amounts paid by an Indemnified Party in settlement
of any action with respect to a Third Party claim, if such settlement is effected without the prior written consent of the
Indemnifying Party, which consent shall not be withheld unreasonably. In no event shall the Indemnifying Party settle or
abate any Third Party Claim in a manner that would diminish the rights or interests of the Indemnified Party, admit any
liability, fault or guilt by the Indemnified Party or obligate the Indemnified Party to make any payment, take any action, or
refrain from taking any action, without the prior written approval of the Indemnified Party.
13.5 Limitation of Liability. EXCEPT FOR DAMAGES PAYABLE FOR A PARTY’S BREACH OF ITS
OBLIGATIONS UNDER ARTICLE 11 (BASED ON REASONABLE WRITTEN EVIDENCE) OR REQUIRED TO BE
PAID PURSUANT TO A PARTY’S INDEMNIFICATION OBLIGATIONS UNDER THIS ARTICLE 13, NEITHER
PARTY NOR ANY OF ITS AFFILIATES SHALL BE LIABLE FOR INDIRECT, INCIDENTAL, SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, INCLUDING LOSS OF PROFITS OR BUSINESS
INTERRUPTION, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, WHETHER IN CONTRACT, TORT,
NEGLIGENCE, BREACH OF STATUTORY DUTY OR OTHERWISE IN CONNECTION WITH THIS AGREEMENT
OR THE EXERCISE OF ANY LICENSE GRANTED HERUNDER, EVEN IF ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES.
13.6 Insurance. Each Party shall obtain and carry in full force and effect the minimum insurance requirements
set forth herein. Such insurance (a) shall be primary insurance with respect to each Party’s own participation under this
Agreement, (b) shall be issued by a recognized insurer [***], (c) shall list the other Party as an additional named insured
thereunder, and (d) shall require [***] written notice to be given to the other Party prior to any cancellation, non-renewal or
material change thereof.
13.6.1 Types and Minimum Limits. The types of insurance, and minimum limits shall be:
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(a) [***].
(b) [***].
(c) [***].
13.6.2 Certificates of Insurance. Upon request by a Party, the other Party shall provide Certificates of
Insurance evidencing compliance with this Section 13.6 (including evidence of permitted self-insurance, as applicable). The
insurance policies shall be under an occurrence form, but if only a claims-made form is available to a Party, then such Party
shall continue to maintain such insurance after the expiration or termination of this Agreement for the longer of (a) a period
of [***] following termination or expiration of this Agreement in its entirety, or (b) with respect to a particular Party, last
sale of a Licensed Product (or but for expiration or termination, would be considered a Licensed Product) sold under this
Agreement by a Party.
13.6.3 Self-Insurance. Notwithstanding the foregoing in this Section 13.6, a Party may self-insure, in
whole or in part, the insurance requirements described above, provided that such Party (on a consolidated basis with its
Affiliates) [***], provides, upon request of the other Party, reasonable evidence thereof to such other Party.
ARTICLE 14
TERM AND TERMINATION
14.1 Term. This Agreement shall commence on the Effective Date and, unless earlier terminated in accordance
herewith, shall continue in force and effect on a Collaboration Program-by-Collaboration Program basis, until the later of (a)
the completion or termination of all Discovery Research Activities for such Collaboration Program without Genentech
delivering a Dev Go Notice for any Collaboration Program, or (b) if Genentech delivers a Dev Go Notice for such
Collaboration Program, the expiration of the Royalty Term for all Licensed Products for such Collaboration Program in the
Territory (such period, the “Term”); provided that, following the expiration of the Term under clause (b), on a Collaboration
Program-by-Collaboration Program and country-by-country basis, the license grant to Genentech in Section 7.1 shall
become non-exclusive, fully-paid, royalty-free and irrevocable.
14.2 Termination For Convenience. Genentech may terminate this Agreement in its entirety or on a
Collaboration Program-by-Collaboration Program basis and/or Major Market-by-Major Market basis, for any or no reason,
upon:
14.2.1 [***] prior written notice to BicycleTx if termination occurs prior to [***];
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14.2.2 [***] prior written notice to BicycleTx if termination occurs after [***]; and
14.2.3 [***] days prior written notice to BicycleTx if termination occurs after [***].
With regard to termination of the Agreement in its entirety pursuant to this Section 14.2, the notice period shall be the period
set forth in Section 14.2.1, Section 14.2.2 or Section 14.2.3 that is applicable to the Collaboration Program that is furthest
advanced at the time of such termination.
If Genentech terminates this Agreement pursuant to this Section 14.2, Genentech shall grant, and hereby grants to BicycleTx
and its Affiliates, as applicable, an Unblocking License for the applicable Terminated Target(s), and Section 14.6 shall apply.
14.3 Termination for Uncured Material Breach.
14.3.1 Material Breach. If either Party (the “Non-Breaching Party”) believes that the other Party (the
“Breaching Party”) has materially breached one (1) or more of its material obligations under this Agreement, then the Non-
Breaching Party may deliver notice of such material breach to the Breaching Party (a “Breach Notice”). If (a) the
Breaching Party does not dispute that it has committed a material breach of one (1) or more of its material obligations under
this Agreement, and (b) either (i) the Breaching Party fails to cure such breach within [***] after receipt of the Breach
Notice (“Breach Cure Period”), or (ii) a cure cannot be fully achieved within such Breach Cure Period and the Breaching
Party has failed to commence to cure or has failed to use diligent efforts to achieve a full cure within the Breach Cure Period
or as soon thereafter as is reasonably possible, then the Non-Breaching Party may terminate this Agreement in whole or in
part upon written notice to the Breaching Party, effective upon receipt by the Breaching Party. If the Breaching Party
disputes in good faith that it has materially breached one (1) or more of its material obligations under this Agreement or that
it has failed to timely or diligently cure such material breach, the Dispute shall be resolved pursuant to Section 15.7 and the
Breach Cure Period shall be tolled until such dispute is so resolved. Upon a determination of material breach or failure to
cure, the Breaching Party may have the remainder of the Breach Cure Period to cure such material breach. If such material
breach is not cured within the Breach Cure Period, then absent withdrawal of the Non-Breaching Party’s request for
termination, this Agreement shall terminate in whole or in part (i.e., for the Terminated Target or the Terminated Asset(s) in
the applicable Terminated Territories), effective as of the expiration of the Breach Cure Period.
14.3.2 Adverse Ruling. Furthermore, if as a result of the application Section 15.7, the Breaching Party is
determined to be in material breach of one (1) or more of its material obligations under this Agreement, such that the Non-
Breaching Party has the right to terminate this Agreement in whole (or in part under Section 14.3.3 or 14.3.4) (an “Adverse
Ruling”) and the Breaching Party fails to complete the actions specified in such Adverse Ruling, or to cure such material
breach within [***] after such Adverse Ruling, or such other period (which may be shorter) as the Arbitrator may provide in
such Adverse Ruling, then the Non-Breaching Party may terminate this Agreement in whole or in part upon written notice to
the Breaching Party.
14.3.3
Genentech’s Uncured Material Breach of Diligence Obligations Following Dev
Go. Notwithstanding Section 14.3.1, if the material breach and failure to cure contemplated by Section 14.3.1 is with
respect to Genentech’s Development or Commercialization diligence obligations under Section 5.1 or Section 6.2
respectively solely with respect to [***]
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[***]. For clarity, termination under this Section 14.3.3 may occur only on a Collaboration Program-by-Collaboration
Program basis.
14.3.4 Genentech’s Uncured Material Breach prior to Dev Go. Notwithstanding Section 14.3.1, if the
material breach and failure to cure contemplated by Section 14.3.1 is solely with respect to Genentech’s obligations under
this Agreement with respect to any single Collaboration Program prior to Dev Go, BicycleTx shall not have the right to
terminate this Agreement in its entirety, but shall have the right to terminate this Agreement solely with respect to such
Collaboration Program. For clarity, a termination of a single Collaboration Program under this Section 14.3.4 shall not affect
the rights and obligations of the Parties with regard to the use of Targeting Arms that were the subject of activities in the
terminated Collaboration Program, to the extent such Targeting Arms are the subject of activities in other then-ongoing
Collaboration Programs or activities outside this Agreement as permitted under this Agreement.
14.4 Termination for Insolvency. If either Party (a) files for protection under bankruptcy or insolvency laws,
(b) makes an assignment for the benefit of creditors, (c) appoints or suffers appointment of a receiver or trustee over
substantially all of its property that is not discharged within ninety (90) days after such filing, (d) is a party to any
dissolution or liquidation, (e) files a petition under any bankruptcy or insolvency act or has any such petition filed against it
that is not discharged within ninety (90) days of the filing thereof, or (f) admits in writing its inability generally to meet its
obligations as they fall due in the general course, then the other Party may terminate this Agreement in its entirety effective
immediately upon written notice to such Party.
14.5 Rights in Bankruptcy.
14.5.1 Applicability of 11 U.S.C. § 365(n). All rights and licenses (collectively, the “Intellectual
Property”) granted under or pursuant to this Agreement, including all rights and licenses to use improvements or
enhancements developed during the Term, are intended to be, and shall otherwise be deemed to be, for purposes of Section
365(n) of the United States Bankruptcy Code (the “Bankruptcy Code”) or any analogous provisions in any other country or
jurisdiction, licenses of rights to “intellectual property” as defined under Section 101(35A) of the Bankruptcy Code. The
Parties agree that the licensee of such Intellectual Property under this Agreement shall retain and may fully exercise all of its
rights and elections under the Bankruptcy Code, including Section 365(n) of the Bankruptcy Code, or any analogous
provisions in any other country or jurisdiction. All of the rights granted to either Party under this Agreement shall be
deemed to exist immediately before the occurrence of any bankruptcy case in which the other Party is the debtor.
14.5.2 Rights of non-Debtor Party in Bankruptcy. If a bankruptcy proceeding is commenced by or
against either Party under the Bankruptcy Code or any analogous provisions in any other country or jurisdiction, the non-
debtor Party shall be entitled to a complete duplicate of (or complete access to, as appropriate) any Intellectual Property and
all embodiments of such Intellectual Property, which, if not already in the non-debtor Party’s possession, shall be delivered
to the non-debtor Party within [***] of such request; provided, that the debtor Party is excused from its obligation to deliver
the
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Intellectual Property to the extent the debtor Party continues to perform all of its obligations under this Agreement and the
Agreement has not been rejected pursuant to the Bankruptcy Code or any analogous provision in any other country or
jurisdiction.
14.6 Effects of Termination.
14.6.1 Termination by Genentech for Convenience or by BicycleTx for Genentech’s Uncured
Material Breach or Genentech’s Insolvency. In the event of a termination of this Agreement in its entirety or in part by
Genentech pursuant to Section 14.2 or by BicycleTx pursuant to Section 14.3 or 14.4, then the following terms of this
Section 14.6.1 shall apply:
(a) Subject to Section 14.6.1(d), the rights and licenses granted by BicycleTx to Genentech
under this Agreement shall terminate with regard to all applicable Terminated Targets, Terminated Assets and/or Terminated
Territories, as of the effective date of termination. If such termination occurs [***], then, if [***] the applicable Terminated
Assets or Terminated Targets [***], the Parties shall [***] with regard to the applicable Terminated Targets and Terminated
Assets.
(b) In the case of termination after Dev Go for a given Collaboration Program, Genentech
shall, within [***] following the effective date of termination (or in the case of termination by Genentech for convenience,
no later than the effective date of termination) (“Initial Reversion Package Period”), provide copies to BicycleTx, [***],
of (i) a summary of [***] and (ii) a good faith estimate of [***] then available to Genentech (the “Initial Reversion
Package”). Within [***] following the delivery of the Initial Reversion Package, BicycleTx shall notify Genentech in
writing whether it wishes to conduct or not to conduct more extensive diligence in order to evaluate the BicycleTx Option
pursuant to Section 14.6.1(c). If BicycleTx provides timely notice for more extensive diligence, then the Parties shall discuss
in good faith and agree what additional information relating to the applicable Terminated Assets would be [***] for
BicycleTx to assess whether to exercise the BicycleTx Option (as defined below) and reasonably assess the value of the
program for the purposes of negotiating Reversion Terms (as defined below), taking into consideration what additional
information Genentech can reasonably provide, while [***], to facilitate BicycleTx’s evaluation (the “Secondary Reversion
Package”, and together with the Initial reversion Package, the “Reversion Packages”). Any such discussion and transfer of
the Secondary Reversion Package shall be completed within [***] of BicycleTx’s notice to Genentech under this Section
14.6.1(b) (“Secondary Reversion Package Period”). The Parties shall agree upon a procedure for BicycleTx to evaluate
[***]. BicycleTx shall have the right to use the Reversion Packages solely to evaluate whether to exercise the BicycleTx
Option below, and for no other purpose.
of the Reversion Packages from Genentech to BicycleTx (the “Option Period”),
(c) Commencing upon the date of termination and ending [***] following delivery of the last
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BicycleTx will have an option (the “BicycleTx Option”) to obtain from Genentech (i) a worldwide, royalty-bearing,
sublicensable (through multiple tiers) license to Exploit the applicable Terminated Asset(s) in the applicable Territory(ies)
under (A) Patents and Know How Controlled by Genentech ([***]) that are [***] to Exploit the applicable Terminated
Assets, (B) to the extent not assigned to BicycleTx under the following subclause (ii), Genentech’s interest in Joint
Collaboration Patents and Joint Collaboration Know-How, and (C) any Product Trademarks Controlled by Genentech, and
(ii) an assignment of Genentech’s interest in Joint Collaboration Patents and Joint Collaboration Know-How that (1) was
[***] for the Collaboration Program including such Terminated Assets, and (2) [***] the Exploitation of the Terminated
Assets in the applicable Territories [***], provided that for clarity, no assignment shall be required with respect to
Genentech’s interest in Joint Collaboration Patents and Joint Collaboration Know-How [***] for the applicable
Collaboration Program (collectively the rights, license and intellectual property in (i) and (ii), the “Reversion Rights”). In
the event of the foregoing assignment by Genentech of its interest in Joint Collaboration Patents and Joint Collaboration
Know-How, BicycleTx [***]. If BicycleTx does not exercise the BicycleTx Option, then [***]. If BicycleTx exercises the
BicycleTx Option, then the Parties shall [***] with regard to the applicable Terminated Targets and Terminated Assets.
(d) The Parties will negotiate commercially reasonable terms, taking into account the then
current stage of the applicable Terminated Assets in the applicable Terminated Territories (“Reversion Terms”), which shall
be negotiated in good faith by the Parties within [***] following the exercise of the BicycleTx Option by BicycleTx
(“Negotiation Period”) and contained in a written reversion agreement to be concluded and executed by and between the
Parties (“Reversion Agreement”).
the Negotiation Period, such Dispute shall be submitted for final resolution binding arbitration pursuant to Section 14.6.2.
(e) If the Parties are unable to agree on the Reversion Terms of a Reversion Agreement within
[***]
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[***]
- 78 -
[***]
14.6.3 Termination by Genentech for BicycleTx’s Uncured Material Breach or Insolvency. In the
event of a termination by Genentech pursuant to Section 14.3 for BicycleTx’s uncured material breach or Section 14.4 for
BicycleTx’s insolvency, all rights and licenses granted by one Party to the other Party under this Agreement shall terminate
on the effective date of termination, (i) prior to Dev Go, in their entirety or with respect to each Terminated Target, and (ii)
after Dev Go with respect to Terminated Assets in the applicable Terminated Territories, as applicable. In addition, the
following terms shall apply:
(a) BicycleTx will have no further obligations under this Agreement with respect to the
Terminated Targets or Terminated Assets, including any obligations under ARTICLE 5, other than, for clarity, any damages
resulting from BicycleTx’s breach that Genentech may be awarded in connection with any final resolution of a Dispute
under Section 15.7, regardless of whether Genentech has terminated the Agreement in its entirety or in part with regard to
the applicable Terminated Target or Terminated Asset, [***].
(b) Genentech will have no further obligations under this Agreement with respect to
Terminated Targets or Terminated Assets in the applicable Terminated Territories, including any obligations under ARTICLE
8.
14.7 Rights in Lieu of Termination. Following the delivery of an Dev Go Notice for a given Collaboration
Program, if Genentech has the right to terminate this Agreement in its entirety or with respect to a given Collaboration
Program pursuant to Section 14.3 (i.e. by mutual agreement of the Parties regarding a material breach by BicycleTx or as
may be finally determined in an Adverse Ruling following final resolution under Section 15.7), then within [***] following
the expiration of the relevant cure period, if any, Genentech may, by written notice to BicycleTx, and as its sole and
exclusive remedy in lieu of exercising its right under Section 14.3 with respect to such breach, and in lieu of any other
remedy, elect to continue this Agreement (in its entirety or with respect to the affected Collaboration Program) as modified
by this Section 14.7, in which case, effective as of the date Genentech delivers notice of such election to BicycleTx:
14.7.1 all rights and licenses granted by Genentech under the Agreement to BicycleTx shall immediately
terminate with respect to all affected Collaboration Programs;
14.7.2 all rights and licenses granted by BicycleTx shall survive;
14.7.3 BicycleTx’s obligations under this Agreement will remain in force, provided that BicycleTx will
have no further obligations under this Agreement with respect to the performance of Discovery Research Activities or in
connection with Development Candidates or Licensed Products relating to the affected Collaboration Programs;
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14.7.4 BicycleTx will continue to perform its obligations with respect to BicycleTx Background Patents
and BicycleTx Program Patents pursuant to Section 9.4; and
14.7.5 all provisions of this Agreement with respect to Genentech’s rights and obligations shall apply,
provided that, without limiting Section 13.5, and in lieu of damages to which Genentech may otherwise have been entitled as
a result of the Adverse Ruling as a consequence of BicycleTx’s material breach, the Parties will require that the arbitrator
include in any Adverse Ruling following final resolution under Section 15.7, or in the absence of such an arbitration
proceeding, the Parties [***] payable by Genentech to BicycleTx in connection with Development Candidates and Licensed
Products included in the affected Collaboration Programs, taking into consideration: [***], provided that if, despite good
faith discussions, the Parties are unable to agree on the equitable reduction, then the Dispute regarding the appropriate
reduction, if any, shall be resolved pursuant to Section 15.7.
14.8 Termination of Terminated Territory. In the event of a termination of this Agreement with respect to a
Terminated Territory (but not in the case of any termination of this Agreement in its entirety), the term “Territory” shall be
automatically amended to exclude the Terminated Territory and all rights and licenses granted by BicycleTx hereunder
(a) shall automatically be deemed to be amended to exclude, if applicable, the right to market, promote, detail, distribute,
import, sell, offer for sale, file any Drug Approval Application for, or seek any Regulatory Approval for Compounds or
Licensed Products in such Terminated Territory, and (b) shall otherwise survive and continue in effect in such Terminated
Territory solely for the purpose of furthering any Commercialization of the Compounds or Licensed Products in the Territory
other than the Terminated Territory or any Development or Manufacturing in support thereof.
14.9 Accrued Rights; Surviving Obligations.
14.9.1 Termination or expiration of this Agreement (either in its entirety or with respect to one (1) or more
Terminated Territories or with respect to a Terminated Target or Terminated Asset) for any reason shall be without prejudice
to any rights that shall have accrued to the benefit of a Party prior to such termination or expiration. Such termination or
expiration shall not relieve a Party from obligations that are expressly indicated to survive the termination or expiration of
this Agreement. Without limiting the foregoing, the following Articles and Sections of this Agreement shall survive the
termination or expiration of this Agreement for any reason: Articles 1 (Definitions), 11 (Confidentiality and Non-Disclosure;
excluding Section 11.5 [***]), 13 (Indemnification; Insurance), and 15 (Miscellaneous), and Sections 2.3.2(e)-2.3.2(i)
(Antigen Targets; Targeting Arms), 2.5.1(e) (LSR Go), 2.5.3 (Termination of Discovery Research Activities for a
Collaboration Program), 3.2.7 (Effects of Target Substitution), 5.3 (Transfer of CMC Materials prior to Dev Go), 5.6.3
(Records), 7.3 (Mutual Grants), 7.6 (Retention of Rights), 7.7 (No Implied Licenses), 8.14 (Audit), 8.15 (Audit Dispute),
8.16 (Confidentiality), 9.1 (Ownership of Intellectual Property), 9.3 (Assignment Obligation), 9.4.4 (Genentech
Collaboration Patents and Joint Collaboration Patents; solely with respect to Joint Collaboration Patents); 9.11 (Common
Interest), 14.1 (Term), 14.2 (Termination for Convenience), 14.5 (Rights in Bankruptcy), 14.6 (Effects of Termination), 14.8
(Termination of Terminated Territory), and 14.9 (Accrued Rights; Surviving Obligations). If this Agreement is terminated
with respect to a Terminated Territory or
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a Terminated Target but not in its entirety, then following such termination the foregoing provisions of this Agreement shall
remain in effect with respect to the Terminated Territory or Terminated Target, as applicable (to the extent they would
survive and apply in the event the Agreement expires or is terminated in its entirety), and all provisions not surviving in
accordance with the foregoing shall terminate upon termination of this Agreement with respect to the Terminated Territory,
Terminated Target or Terminated Asset, as applicable and be of no further force and effect (and, for purposes of clarity, all
provisions of this Agreement shall remain in effect with respect to all countries in the Territory other than the Terminated
Territory or with respect to the Collaboration Target other than the Terminated Target).
14.9.2 Notwithstanding the termination of Genentech’s licenses and other rights under this Agreement or
with respect to a particular Major Market or country or other jurisdiction or with respect to a Terminated Target, as the case
may be, if this Agreement is terminated in its entirety or in part by Genentech pursuant to Section 14.3 or 14.4, with
BicycleTx’s prior written consent, not to be unreasonably withheld, for up to [***] after the effective date of such
termination with respect to each Major Market or country or other jurisdiction or Terminated Target with respect to which
such termination applies, Genentech may continue to sell or otherwise dispose of all Licensed Product then in its inventory
and any in-progress inventory, in each case that is intended for sale or disposition in such Major Market or country or other
jurisdiction or, in the case of a Terminated Target, in the Territory, as though this Agreement had not terminated with respect
to such Major Market or country or other jurisdiction or Terminated Target, as applicable, and such sale or disposition shall
not constitute infringement of BicycleTx’s or its Affiliates’ Patent or other intellectual property or other proprietary
rights. For purposes of clarity, Genentech shall continue to make payments thereon as provided in ARTICLE 8 (as if this
Agreement had not terminated with respect to such Major Market or country or other jurisdiction or Terminated Target, as
applicable).
ARTICLE 15
MISCELLANEOUS
15.1 Force Majeure. Neither Party shall be held liable or responsible to the other Party or be deemed to have
defaulted under or breached this Agreement for failure or delay in fulfilling or performing any term of this Agreement when
such failure or delay is caused by or results from events beyond the reasonable control of the non-performing Party,
including fires, floods, earthquakes, hurricanes, embargoes, shortages, epidemics, quarantines, war, acts of war (whether war
be declared or not), terrorist acts, insurrections, riots, civil commotion, strikes, lockouts, or other labor disturbances (whether
involving the workforce of the non-performing Party or of any other Person), acts of God, or acts, omissions or delays in
acting by any governmental authority (except to the extent such delay results from the breach by the non-performing Party or
any of its Affiliates of any term or condition of this Agreement). The non-performing Party shall notify the other Party of
such force majeure within [***] after such occurrence by giving written notice to the other Party stating the nature of the
event, its anticipated duration, and any action being taken to avoid or minimize its effect. The suspension of performance
shall be of no greater scope and no longer duration than is necessary and the non-performing Party shall use commercially
reasonable efforts to remedy its inability to perform.
15.2 Export Control. This Agreement is made subject to any restrictions concerning the export of products or
technical information from the United States or other countries that may be imposed on the Parties from time to time. Each
Party agrees that it will not export, directly or indirectly, any technical information acquired from the other Party under this
Agreement or any products using such technical information to a location or in a manner that at the time of export requires
an export license or other
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governmental approval, without first obtaining the written consent to do so from the appropriate agency or other
governmental entity in accordance with Applicable Law.
15.3 Assignment. Neither Party shall sell, transfer, assign, delegate, pledge, or otherwise dispose of, whether
voluntarily, involuntarily, by operation of law or otherwise, this Agreement or any of its rights or obligations hereunder
without the prior written consent of the other Party, such consent not to be unreasonably withheld, conditioned or delayed;
provided, that either Party may make such an assignment without the other Party’s consent (a) to its Affiliate, provided that
if the entity to which this Agreement is assigned ceases to be an Affiliate of the assigning Party, this Agreement will be
automatically assigned back to the assigning Party or its successor or (b) to a successor, whether in a merger, sale of stock,
sale of assets or any other transaction, of the business to which this Agreement relates. Any attempted assignment or
delegation in violation of this Section 15.3 shall be void and of no effect. All validly assigned and delegated rights and
obligations of the Parties hereunder shall be binding upon and inure to the benefit of and be enforceable by and against the
successors and permitted assigns of BicycleTx or Genentech, as the case may be. The permitted assignee or transferee shall
assume all obligations of its assignor or transferor under this Agreement. Without limiting the generality of the foregoing,
the grant of rights set forth in this Agreement shall be binding upon any successor or permitted assignee of BicycleTx, and
the obligations of Genentech (including all payment obligations), shall run in favor of any such successor or permitted
assignee of BicycleTx’s benefits under this Agreement. Notwithstanding the foregoing, all rights to Know-How, Patents,
materials and other intellectual property Controlled by a Third Party permitted assignee of a Party (or any of such Third
Party’s affiliates immediately prior to the closing of such assignment) immediately prior to such assignment shall be
automatically excluded from the rights licensed or granted to the other Party under this Agreement.
15.4 Effects of a Change of Control. If there is a Change of Control of BicycleTx, then BicycleTx shall provide
written notice to Genentech at least [***] prior to the closing date of such Change of Control, subject to any confidentiality
or other legal obligations of BicycleTx then in effect (but in any event Bicycle shall notify Genentech within [***] after the
closing date of such Change of Control). Following the closing date of the Change of Control, the Change of Control Group
in connection with such Change of Control shall Segregate any Segregation Products (if any).
15.5 Severability. If any provision of this Agreement is held to be illegal, invalid, or unenforceable under any
present or future law, and if the rights or obligations of either Party under this Agreement will not be materially and
adversely affected thereby, (a) such provision shall be fully severable, (b) this Agreement shall be construed and enforced as
if such illegal, invalid, or unenforceable provision had never comprised a part hereof, (c) the remaining provisions of this
Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or
by its severance from this Agreement, and (d) in lieu of such illegal, invalid, or unenforceable provision, there shall be added
automatically as a part of this Agreement a legal, valid, and enforceable provision as similar in terms to such illegal, invalid,
or unenforceable provision as may be possible and reasonably acceptable to the Parties.
15.6 Governing Law, Jurisdiction and Service.
15.6.1 Governing Law. This Agreement or the performance, enforcement, breach or termination hereof
shall be interpreted, governed by and construed in accordance with the laws of the State of New York, United States
excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this
Agreement to the substantive law of another jurisdiction; provided, that all questions concerning (a) inventorship of Patents
under this Agreement shall be determined
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in accordance with Section 9.2 and (b) the construction or effect of Patents shall be determined in accordance with the laws
of the country or other jurisdiction in which the particular Patent has been filed or granted, as the case may be. The Parties
agree to exclude the application to this Agreement of the United Nations Convention on Contracts for the International Sale
of Goods.
15.6.2 Service. Each Party further agrees that service of any process, summons, notice or document by
registered mail to its address set forth in Section 15.8.2 shall be effective service of process for any action, suit, or
proceeding brought against it under this Agreement in any such court.
15.7 Dispute Resolution. Except as provided in Section 8.15, Section 14.6.2 and Section 15.7.2, any dispute
arising out of or relating to this Agreement that has not been resolved at the JRC or otherwise under the terms of this
Agreement, including the determination of the scope or applicability of this Section 15.7 and the agreement to arbitrate, or
any document or instrument delivered in connection herewith (a “Dispute”), it shall be resolved pursuant to this Section
15.7.
15.7.1 General. Any Dispute shall first be referred to the Alliance Managers who will seek to resolve the
issue within [***]. If no resolution is obtained, the issue will be elevated to the Senior Officers of the Parties, who shall
confer in good faith on the resolution of the issue. Any final decision mutually agreed to by the Senior Officers shall be
conclusive and binding on the Parties. If the Senior Officers are not able to agree on the resolution of any such issue within
[***] (or such other period of time as mutually agreed by the Senior Officers) after such issue was first referred to them,
then, except as otherwise set forth in Section 15.7.2, the Dispute shall be finally settled by arbitration as set forth in Section
15.7.3. Any dispute concerning the commencement of the arbitration shall be finally settled by the arbitrators.
15.7.2 Intellectual Property Disputes. If a Dispute arises with respect to the validity, scope,
enforceability, inventorship or ownership of any Patent, Trademark or other intellectual property rights, and such Dispute
cannot be resolved in accordance with Section 15.7.1, unless otherwise agreed by the Parties in writing, such Dispute shall
not be submitted to an arbitration proceeding in accordance with Section 15.7.3 and instead, either Party may initiate
litigation in a court of competent jurisdiction, notwithstanding Section 15.6, in any country or other jurisdiction in which
such rights apply. This notwithstanding, the Parties expressly waive any right to a jury trial in connection with disputes
under this Section 15.7.2. In case of a Dispute between the Parties with respect to inventorship, the Parties shall jointly
select a patent attorney registered before the United States Patent and Trademark Office and submit such Dispute to the
mutually-selected patent attorney for resolution by expert determination under the United States patent law. The decision of
such patent attorney with respect to inventorship shall be final, and the Parties agree to be bound by the decision and share
equally the expenses of such patent attorney. If, within [***] after the Senior Officers have failed to settle a Dispute
regarding inventorship the Parties have not been able to mutually agree on the selection of a patent attorney for such expert
determination, each Party shall appoint a patent counsel within [***] and both Party-appointed patent counsels shall, within
[***] following the last appointment of a patent counsel by a Party, nominate the patent counsel who will conduct the expert
determination under this Section 15.7.2.
15.7.3 Arbitration. Any arbitration shall take place in accordance with Schedule 15.7.3.
15.7.4 Adverse Ruling. Any determination pursuant to this Section 15.7 that a Party is in material breach
of its material obligations hereunder shall specify a (nonexclusive) set of actions to be taken to cure such material breach, if
feasible.
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15.7.5 Interim Relief. Notwithstanding anything herein to the contrary in this Section 15.7, in the event
that a Party reasonably requires relief on a more expedited basis than would be possible pursuant to the procedure set forth in
this ARTICLE 15, such Party may seek interim or provisional relief, including a temporary restraining order, preliminary
injunction or other interim equitable relief concerning a Dispute, if necessary to protect the interests of such Party. This
Section 15.7.5 shall be specifically enforceable.
15.7.6 Pending Dispute. Good Faith Performance of Activities. During a pending Dispute, where this
Agreement has not yet been terminated, each Party shall continue to perform in good faith its obligations under this
Agreement.
15.8 Notices.
15.8.1 Notice Requirements. Any notice, request, demand, waiver, consent, approval, or other
communication permitted or required under this Agreement shall be in writing, shall refer specifically to this Agreement and
shall be deemed given only if (a) delivered by hand, (b) sent by facsimile transmission (with transmission confirmed), or (c)
by internationally recognized overnight delivery service that maintains records of delivery, addressed to the Parties at their
respective addresses specified in Section 15.8.2 or to such other address as the Party to whom notice is to be given may have
provided to the other Party in accordance with this Section 15.8.1. Such notice shall be deemed to have been given as of the
date delivered by hand or transmitted by facsimile (with transmission confirmed) or on the second Business Day (at the
place of delivery) after deposit with an internationally recognized overnight delivery service. Any notice delivered by
facsimile shall be confirmed by a hard copy delivered as soon as practicable thereafter. This Section 15.8.1 is not intended
to govern the day-to-day business communications necessary between the Parties in performing their obligations under the
terms of this Agreement.
15.8.2 Address for Notice.
If to Genentech, to:
Genentech, Inc.
1 DNA Way
South San Francisco, CA 94080
Attn: Corporate Secretary
Facsimile: [***]
with a copy (which shall not constitute notice) to:
Genentech, Inc.
1 DNA Way
South San Francisco, CA 94080
Attn: Pharma Partnering, Alliance Management
Facsimile: [***]
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If to BicycleTx, to:
Bicycle Therapeutics Limited
Building 900
Babraham Research Campus
Cambridge, CB22 3AT
United Kingdom
Attention: Chief Operating Officer
with a copy (which shall not constitute notice) to:
Cooley LLP
3175 Hanover Street
Palo Alto, CA 94304
Attention: Laura Berezin
Facsimile: [***]
15.9 Entire Agreement; Amendments. This Agreement, together with the Schedules attached hereto, sets forth
and constitutes the entire agreement and understanding between the Parties with respect to the subject matter hereof and all
prior agreements, understandings, promises, and representations, whether written or oral, with respect thereto are superseded
hereby (including the Prior NDA). The foregoing shall not be interpreted as a waiver of any remedies available to either
Party as a result of any breach by the other Party (or its Affiliates) of its obligations under the Prior NDA, prior to the
Effective Date. Each Party confirms that it is not relying on any representations or warranties of the other Party except as
specifically set forth in this Agreement. No amendment, modification, release, or discharge with respect to this Agreement
shall be binding upon the Parties unless in writing and duly executed by authorized representatives of both Parties.
15.10 English Language. This Agreement shall be written and executed in, and all other communications under
or in connection with this Agreement shall be in, the English language. Any translation into any other language shall not be
an official version thereof, and in the event of any conflict in interpretation between the English version and such translation,
the English version shall control.
15.11 Waiver and Non-Exclusion of Remedies. Any term or condition of this Agreement may be waived at any
time by the Party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written
instrument duly executed by or on behalf of the Party waiving such term or condition. The waiver by either Party hereto of
any right hereunder or of the failure to perform or of a breach by the other Party shall not be deemed a waiver of any other
right hereunder or of any other breach or failure by such other Party whether of a similar nature or otherwise. The rights and
remedies provided herein are cumulative and do not exclude any other right or remedy provided by Applicable Law or
otherwise available except as expressly set forth herein.
15.12 No Benefit to Third Parties. Except as provided in ARTICLE 13, covenants and agreements set forth in
this Agreement are for the sole benefit of the Parties hereto and their successors and permitted assigns, and they shall not be
construed as conferring any rights on any other Persons.
15.13 Further Assurance. Each Party shall duly execute and deliver, or cause to be duly executed and delivered,
such further instruments and do and cause to be done such further acts and things, including the filing of such assignments,
agreements, documents, and instruments, as may be necessary or
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as the other Party may reasonably request in connection with this Agreement or to carry out more effectively the provisions
and purposes hereof, or to better assure and confirm unto such other Party its rights and remedies under this Agreement.
15.14 Relationship of the Parties. It is expressly agreed that BicycleTx, on the one hand, and Genentech, on the
other hand, shall be independent contractors and that the relationship between the Parties shall not constitute a partnership,
joint venture, or agency including for all tax purposes. Neither BicycleTx nor Genentech shall have the authority to make
any statements, representations, or commitments of any kind, or to take any action, which shall be binding on the other
Party, without the prior written consent of the other Party to do so. All persons employed by a Party shall be employees of
such Party and not of the other Party and all costs and obligations incurred by reason of any such employment shall be for
the account and expense of such Party. The Parties (and any successor, assignee, transferee, or Affiliate of a Party) shall (a)
use commercially reasonable efforts to structure the arrangement and activities contemplated by this Agreement to avoid the
arrangement contemplated by this Agreement being treated as a partnership that is engaged in a “United States trade or
business” for United States tax purposes and (b) not treat or report the relationship between the Parties arising under this
Agreement as a partnership for United States tax purposes, without the prior written consent of the other Party unless
required by a final “determination” as defined in Section 1313 of the United States Internal Revenue Code of 1986, as
amended.
15.15 Performance by Affiliates. Each Party may use one (1) or more of its Affiliates to perform its obligations
and duties hereunder and such Affiliates are expressly granted certain rights herein to perform such obligations and duties;
provided that each such Affiliate shall be bound by the corresponding obligations of such Party; and provided further that the
assigning Party, subject to an assignment to such Affiliate pursuant to Section 15.3, shall remain liable hereunder for the
prompt payment and performance of its obligations hereunder.
15.16 Counterparts; Facsimile Execution. This Agreement may be executed in two (2) counterparts, each of
which shall be deemed an original, but all of which together shall constitute one (1) and the same instrument. This
Agreement may be executed by facsimile or electronically transmitted signatures and such signatures shall be deemed to
bind each Party hereto as if they were original signatures.
15.17 References. Unless otherwise specified, (a) references in this Agreement to any Article, Section or
Schedule shall mean references to such Article, Section or Schedule of this Agreement, (b) references in any Section to any
clause are references to such clause of such Section, and (c) references to any agreement, instrument, or other document in
this Agreement refer to such agreement, instrument, or other document as originally executed or, if subsequently amended,
replaced, or supplemented from time to time, as so amended, replaced, or supplemented and in effect at the relevant time of
reference thereto.
15.18 Schedules. In the event of any inconsistencies between this Agreement and any schedules or other
attachments hereto, the terms of this Agreement shall control.
15.19 Construction. Except where the context otherwise requires, wherever used, the singular shall include the
plural, the plural the singular, the use of any gender shall be applicable to all genders and the word “or” is used in the
inclusive sense (and/or) unless the subjects of the conjunction are, or are intended to be, mutually exclusive. Whenever this
Agreement refers to a number of days, unless otherwise specified, such number refers to calendar days. The captions of this
Agreement are for convenience of reference only and in no way define, describe, extend, or limit the scope or intent of this
Agreement or the intent of any provision contained in this Agreement. The term “including,” “include,” or “includes” as
used
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herein shall mean “including, but not limited to,” and shall not limit the generality of any description preceding such
term. The language of this Agreement shall be deemed to be the language mutually chosen by the Parties and no rule of
strict construction shall be applied against either Party hereto. Each Party represents that it has been represented by legal
counsel in connection with this Agreement and acknowledges that it has participated in the drafting hereof. In interpreting
and applying the terms and provisions of this Agreement, the Parties agree that no presumption will apply against the Party
which drafted such terms and provisions.
[SIGNATURE PAGE FOLLOWS]
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THIS DISCOVERY COLLABORATION AND LICENSE AGREEMENT is executed by the authorized representatives
of the Parties as of the Effective Date.
BICYCLETX LIMITED
GENENTECH, INC.
By:
/s/ Kevin Lee
Name: Dr. Kevin Lee
Title: CEO
By:
/s/ Edward Harrington
Name: Edward Harrington
Title: CFO, Genentech
Schedule 1.60
Dev Go Criteria for the Initial Collaboration Targets
[***]
Schedule 1.66
Discovery Construct Threshold
[***]
Schedule 1.69
Initial Discovery Research Plan
[***]
Schedule 1.81
Existing Targeting Arms
[***]
Schedule 1.111
Genentech Reserved Targets
[***]
Schedule 1.113
Genentech Specified Countries
[***]
Schedule 1.120
Hit Success Criteria for the Initial Collaboration Targets
[***]
Schedule 1.128
Initial Collaboration Targets
[***]
Schedule 1.150
LSR Go Criteria for the Initial Collaboration Targets
[***]
Schedule 2.3.2
Part 1 - Genentech Targeting Arms of Interest
(cid:0) [***]
Part 2 – [***] Terms of the [***] License
[***]
Part 3 – Targeting Arm Criteria applicable to the [***] Targeting Arm
(cid:0) [***]
Schedule 12.2.1
Existing Patents
[***]
Schedule 15.7.3
Arbitration
1. Rules. Except as otherwise expressly provided in the Agreement (including under Section 15.7.2 of the
Agreement), any Dispute that is not resolved amicably pursuant to Section 15.7 of the Agreement shall be referred to and
finally resolved through arbitration administered by JAMS pursuant to its International Arbitration Rules and Procedures
(the “Rules”), except as modified herein.
2. Arbitrators; Seat. The arbitral tribunal shall be comprised of three arbitrators. Each Party shall select one
(1) arbitrator, and the two (2) arbitrators so selected shall choose a third arbitrator, who shall serve as president of the
tribunal, within [***] of the second arbitrator’s appointment. All three (3) arbitrators shall serve as neutrals, be impartial and
independent, and have at least [***]. If a Party fails to nominate its arbitrator, or if the Parties’ arbitrators cannot agree on
the third, the necessary appointments shall be made in accordance with the Rules. The seat, or legal place, of arbitration
shall be New York, New York, USA. The arbitration proceedings and all pleadings and written evidence shall be in the
English language. Any written evidence originally in another language shall be submitted in English translation
accompanied by the original or a true copy thereof.
3. Procedures; Awards. Each Party agrees to use reasonable efforts to make all of its current employees
available, if reasonably needed, and agrees that the arbitrators may determine any person as necessary. The arbitrators shall
be instructed to render a written, binding, non-appealable resolution and award on each issue that clearly states the basis
upon which such resolution and award is made. The written resolution and award shall be delivered to the Parties as
expeditiously as possible, but in no event more than [***] after conclusion of the hearing or the final written submissions,
whichever is later, unless otherwise agreed by the Parties or determined by the arbitrators. The award shall be final and
binding and the Parties undertake to carry out the award without delay. Judgment upon such award may be entered in any
competent court. Each Party agrees that, notwithstanding any provision of applicable law or of this Agreement, it will not
request, and the arbitrators shall have no authority to award, punitive or exemplary damages against any Party.
4. Costs. The prevailing Party, as determined by the arbitrators, shall be entitled to: (a) its share of fees and
expenses of the arbitrators; and (b) its reasonable attorneys’ fees and associated costs and expenses. In determining which
Party “prevailed,” the arbitrators shall consider: [***]. If the arbitrators determine that, given the scope of the arbitration,
neither Party “prevailed,” the arbitrators shall order that the Parties: (A) share equally the fees and expenses of the
arbitrators; and (B) bear their own attorneys’ fees and associated costs and expenses.
5. Interim Equitable Relief. Notwithstanding anything to the contrary in this Schedule 15.7.3, either Party
may seek a temporary injunction or other interim equitable relief in a court of competent jurisdiction pending the ability of
the arbitrators to review the decision under this Schedule 15.7.3. Such court shall have no jurisdiction or ability to resolve
Disputes beyond the specific issue of temporary injunction or other interim equitable relief.
6. Protective Orders; Arbitrability. At the request of either Party, the arbitrators shall enter an appropriate
protective order to maintain the confidentiality of information produced or exchanged in the course of the arbitration
proceedings. The arbitrators shall have the power to decide all questions of
arbitrability. Except for purposes of confirming or enforcing an award, court proceedings to obtain interim relief, or as may
be required by law, the existence of the Dispute, any settlement negotiations, the arbitration, any submissions (including
exhibits, testimony, proposed rulings, and briefs), any rulings and the award shall be deemed to be Confidential Information
of both Parties. The arbitrators shall have the authority to impose sanctions for unauthorized disclosure of Confidential
Information.
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Exhibit 23.1
We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333‑231718) of
Bicycle Therapeutics plc of our report dated March 10, 2020 relating to the financial statements, which appears in this
Form 10-K.
/s/ PricewaterhouseCoopers LLP
Cambridge, United Kingdom
March 10, 2020
Exhibit 31.1
I, Kevin Lee, certify that:
CERTIFICATION
1. I have reviewed this Annual Report on Form 10-K of Bicycle Therapeutics plc;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and
have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in
the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: March 10, 2020
By:/s/ Kevin Lee
Kevin Lee, Ph.D., MBA
Chief Executive Officer
Exhibit 31.2
CERTIFICATION
I, Lee Kalowski, certify that:
1. I have reviewed this Annual Report on Form 10-K of Bicycle Therapeutics plc;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and
have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in
the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: March 10, 2020
By:/s/ Lee Kalowski
Lee Kalowski, MBA
Chief Financial Officer and President
CERTIFICATION
Exhibit 32.1
Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, (the
“Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), Kevin
Lee, Chief Executive Officer of Bicycle Therapeutics plc (the “Company”), and Lee Kalowski, Chief Financial
Officer of the Company, each hereby certifies that, to the best of his knowledge:
1. The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, to which this
Certification is attached as Exhibit 32.1 (the “Annual Report”), fully complies with the requirements of
Section 13(a) or Section 15(d) of the Exchange Act; and
2. The information contained in the Annual Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
Dated: March 10, 2020
IN WITNESS WHEREOF, the undersigned have set their hands hereto as of the 10 day of March, 2020.
th
/s/ Kevin Lee
Kevin Lee, Ph.D., MBA
Chief Executive Officer
/s/ Lee Kalowski
Lee Kalowski, MBA
Chief Financial Officer
This certification accompanies the Form 10-K to which it relates, is not deemed filed with the Securities and
Exchange Commission and is not to be incorporated by reference into any filing of Bicycle Therapeutics plc under
the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made
before or after the date of the Form 10-K), irrespective of any general incorporation language contained in such
filing.